Pottery Barn 2010 Annual Report Download - page 140

PROPOSAL 4
ADVISORY VOTE ON EXECUTIVE COMPENSATION
What is this proposal?
This is a proposal asking shareholders to approve, on an advisory basis, the compensation of our named
executive officers as disclosed in this Proxy Statement in accordance with the recently enacted Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010, or the “Dodd-Frank Act,” and the applicable SEC rules.
This proposal is commonly known as a “say-on-pay” proposal, and gives our shareholders the opportunity to
express their views on the compensation of our named executive officers.
Compensation Program and Philosophy
As described in detail under the headings “Information Concerning Executive Officers” and “Compensation
Discussion and Analysis,” our executive officer compensation program is designed to attract, retain and motivate
highly qualified personnel who are critical to our success while maintaining strong and direct links between
executive pay, individual performance, the company’s financial performance and shareholder returns. The
Compensation Committee believes that the company’s executive compensation programs should support the
company’s objective of creating value for its shareholders.
Accordingly, the Compensation Committee believes that executive officers should have a significant interest in
the company’s stock performance, and compensation programs should link executive compensation to
shareholder value. One of the ways that the company has sought to accomplish these goals is by making a
significant portion of individual compensation directly dependent on the company’s achievement of financial
goals which in turn enhances long-term shareholder return while encouraging executives to build an equity
interest in the company.
Fiscal 2010 Compensation
To align our executive compensation packages with our executive compensation philosophy, the following
compensation actions were approved by the Compensation Committee for fiscal 2010:
Adjustments to Base Salary and Bonus Target Amounts: The base salaries and bonus targets as a percentage of
base salary of our named executive officers, other than W. Howard Lester, our former Chairman of the Board and
Chief Executive Officer, were increased for fiscal 2010 to bring target total cash compensation for our named
executive officers from generally below the 50th percentile to generally between the 50th percentile and the 75th
percentiles compared to the company’s proxy peer group and relevant market data as described under
“Compensation Discussion and Analysis” in this Proxy Statement. In addition, a special bonus of $350,000 was
awarded to the company’s President and Chief Executive Officer, Laura Alber, in recognition of her outstanding
performance and the company’s results for fiscal 2010.
Performance-Based Cash Bonus: Performance-based cash bonuses were paid for performance in fiscal 2010 as a
result of the achievement of positive net cash by operating activities, exceeding earnings per share goals set by
the Compensation Committee for fiscal 2010 and outstanding leadership and individual performance by our
named executive officers in fiscal 2010.
Performance- and Time-Based Equity: The company granted our named executive officers (other than
Mr. Lester) a mixture of performance-based and time-based equity awards in fiscal 2010. Restricted stock units
that vest on the fourth anniversary of the grant date only if positive net cash by operating activities is achieved
provide both retention value and incentives to achieve the company’s financial goals, while stock appreciation
rights that vest in equal installments over four years also encourage our named executive officers to stay with the
company and to increase shareholder value by increasing our stock price.
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