Pottery Barn 2010 Annual Report Download - page 172

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.
Management is considering recommending a stock ownership policy for our executive officers in fiscal 2011. We
currently expect the Compensation Committee to consider any such recommendation at a future Compensation
Committee meeting.
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. Further, we will implement any recovery policies required by applicable law.
What leadership changes occurred in fiscal 2010?
Howard Lester retired as Chairman and Chief Executive Officer on May 26, 2010, the date of the company’s
2010 Annual Meeting. Following his retirement, Mr. Lester provided consulting and advisory services to assist
with the transition to a new Chief Executive Officer until his death in November 2010.
Upon Mr. Lester’s retirement, the company’s Board appointed Laura J. Alber as the company’s President and
Chief Executive Officer.
How was Mr. Lester compensated?
On January 25, 2010, the company and Mr. Lester entered into a Retirement and Consulting Agreement.
Pursuant to the terms of the Retirement and Consulting Agreement, Mr. Lester retired as the company’s
Chairman of the Board and Chief Executive Officer on May 26, 2010, the date of the company’s 2010
shareholder’s meeting. Mr. Lester provided consulting and advisory services to the company to assist in the
transition to the new Chief Executive Officer and, following his retirement, Mr. Lester had the title of Chairman
Emeritus. When approving Mr. Lester’s Retirement and Consulting Agreement, the Compensation Committee
and the independent members of the company’s Board considered the value of the services that Mr. Lester was
expected to provide during the consulting period and the fact that his more than 30 years of experience with our
company enabled him to provide unique services for which the independent directors believed the compensation
under the Retirement and Consulting Agreement was reasonable and appropriate. For example, the directors
envisioned that Mr. Lester was able to provide valuable and unique services in negotiating and working with
major real estate lessors, particularly since a significant number of our real estate leases were scheduled to expire
in the next year. In addition, Mr. Lester received benefits in connection with his retirement, which are described
under “Employment Contracts and Termination of Employment and Change-of-Control Arrangements”
beginning on page 56 and were approved in recognition of his retirement and his significant contributions to the
company.
As compensation for the consulting services Mr. Lester provided to the company, he received an annual fee of
$500,000, plus a one-time award representing the right to receive 125,000 restricted stock units, and cash
payments representing the value of 125,000 shares of our common stock (including dividend equivalent rights
that were payable at the same time that the shares subject to the related restricted stock units were delivered), in
each case which vested monthly over the consulting period. Mr. Lester also received a lump sum payment of
$175,000 (which represented the estimated costs of health benefits through the end of his Retirement and
Consulting Agreement) and continued lifetime employee discount privileges. Upon his death in November 2010,
the Retirement and Consulting Agreement ended and his grants ceased vesting.
76