Pottery Barn 2010 Annual Report Download - page 163

How is the Compensation Committee currently implementing this philosophy given recent conditions in the retail
industry?
The Compensation Committee remains committed to its pay-for-performance philosophy and for that reason, a
significant portion of executive compensation is tied directly to our company’s financial and operating
performance.
The Compensation Committee set performance goals at the beginning of fiscal 2010 and believed that these
goals, as applicable to named executive officers’ compensation, were achievable with significant effort even
given the volatile economic conditions impacting the retailing industry.
At the February 12, 2010 Compensation Committee meeting, the Compensation Committee began a review of
the base salaries and bonus targets for its named executive officers. At the March 22, 2010 Compensation
Committee meeting, the Compensation Committee approved increases to the base salaries and bonus targets for
its named executive officers for fiscal 2010 for the reasons discussed below under the questions “How are base
salaries determined?” and “What were the target bonus amounts established for fiscal 2010?”
What are the components of executive compensation?
The Compensation Committee considers three major elements of “direct” pay in the executive compensation
program:
• Base salary;
• Annual incentive opportunities; and
• Long-term incentives.
The Compensation Committee believes that offering the executive team a total compensation package with a
strong at-risk, pay-for-performance component helps achieve the company’s objective of creating value for its
shareholders. Each of the three major elements in the executive compensation program is discussed in detail
below, but in general, this means:
• Base salaries are competitive with comparable public retail companies with respect to similar positions, to
create an incentive for executives to join and remain with the company;
• Annual incentive opportunities are based principally on the company’s overall corporate performance and
the executive’s attainment of individual goals. This results in the company’s strongest performers
receiving greater compensatory rewards and lesser performers receiving lower compensatory rewards.
We believe the structure of our annual incentive opportunities fosters a performance-driven,
pay-for-performance culture; and
• Long-term incentives, such as equity compensation awards, are structured to encourage our executive
team to work toward long-term sustained growth and success from the perspective of owners of the
company, to reward executives and other key employees for maximizing long-term shareholder value and
to provide incentives to remain with the company.
The named executive officers also receive certain retirement and other benefits, as well as perquisites and other
personal benefits as described below. We consider these perquisites, described below, in addition to the major
elements of compensation, in determining if total compensation is reasonable and not excessive.
Does the Compensation Committee compare the company’s compensation practices to those of other companies?
Yes, the compensation practices of other companies within the retail industry are relevant to establishing the
company’s compensation programs and executive compensation for each year so that we can attract and retain
qualified executive and managerial talent in a competitive marketplace.
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