Pottery Barn 2009 Annual Report Download - page 150

Does the company have a stock ownership policy for its executive officers?
We do not currently have a stock ownership policy for our executive officers. However, all of our named
executive officers own shares of the company’s common stock or vested, but unexercised, equity awards.
Does the company have a policy regarding recovery of past awards or payments in the event of a financial
restatement?
Although we do not currently have a formal policy regarding recovery of past awards or payments in the event of
a financial restatement, we support the review of performance-based compensation following a restatement that
impacts the achievement of performance targets relating to that compensation, followed by appropriate action.
These actions may include recoupment of cash or other incentives, as well as employment actions including
termination.
How is the Chief Executive Officer compensated?
Mr. Lester’s fiscal 2009 compensation package was based on:
• A review of the compensation paid to chief executive officers of comparable companies (based on the
process described above);
• Company performance; and
• Our general compensation philosophy as described above.
The Compensation Committee reviewed Mr. Lester’s fiscal 2009 base salary at its meeting in March 2009.
Although the Compensation Committee was satisfied with Mr. Lester’s performance, the company’s overall
results had not met expectations. After a discussion and a review of Mr. Lester’s total compensation and that of
other Chief Executive Officers in our proxy peer group, the Compensation Committee determined that
Mr. Lester’s base salary was approximately at the median base salary level for the proxy peer group and made no
adjustment to Mr. Lester’s base salary for fiscal 2009.
At its March 23, 2010 meeting, the Compensation Committee discussed bonuses for fiscal 2009. During that
meeting, the Compensation Committee met in executive session to discuss Mr. Lester’s performance for fiscal
2009. Mr. Lester’s performance was assessed against objectives delivered to the Board of Directors at the
beginning of fiscal 2009. The objectives against which Mr. Lester’s performance was judged included: the
development and execution of a succession plan; his successful management of the company and its financial
performance, particularly in light of the improvements in retail operations; the advancement of the company’s
international strategies; and the strategic expansion of the company’s e-commerce capabilities. Using the same
analysis of business conditions and review process of company and individual performance that it applied to the
other named executives, the Compensation Committee determined that Mr. Lester’s performance was strong in
this challenging economic period, and that he would receive a bonus under the Bonus Plan in the amount of
$2,000,000 for fiscal 2009.
Mr. Lester also makes personal use of our corporate aircraft as described in the “Other Annual Compensation
from Summary Compensation” table on page 35.
On January 25, 2010, the company and Mr. Lester entered into a Retirement and Consulting Agreement (the
“Consulting Agreement”). Pursuant to the terms of the Consulting Agreement, Mr. Lester will retire as the
company’s Chairman and Chief Executive Officer and as a member of the Board on the date of the company’s
2010 shareholder’s meeting. Mr. Lester will provide consulting and advisory services to the company so as to
assist in the transition of the new Chief Executive Officer and, following his retirement, Mr. Lester will have the
title of Chairman Emeritus. In approving this agreement, the Compensation Committee and the independent
members of the Board considered the value of the services that Mr. Lester is expected to provide during the
consulting period and the fact that his more than 30 years of experience with our company enables him to provide
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