Pottery Barn 2010 Annual Report Download - page 175

Do we provide perquisites to the executive officers?
The company provides executive officers, including the named executive officers, with perquisites and other
personal benefits that the company and the Compensation Committee believe are reasonable and enable the
company to attract and retain superior employees for key positions. The company provides certain perquisites to
its named executive officers, including premiums for term life insurance in excess of $50,000, a matching
contribution for investments in our 401(k) plan and a $500 monthly car allowance. Some of these perquisites are
also provided to other employees. In addition, Mr. Lester occasionally made personal use of the corporate
aircraft. The value of all of these benefits to each of the named executive officers is detailed in the “Other Annual
Compensation from Summary Compensation” table on page 51. The Compensation Committee believes these
perquisites to be customary for comparable professionals in our industry with comparable management and retail
industry experience. There are no tax gross-ups to named executive officers on any imputed income relating to
any non-business related benefits or perquisites.
The named executive officers who contribute to our 401(k) plan received matching contributions from the
company. In fiscal 2010, these matching contributions were limited to $6,125 for the named executive officers
and for all participating employees earning over $245,000. The company suspended deferrals into the
nonqualified deferred compensation plan for all associates beginning in January 2010 and will continue to
evaluate the benefit program in the future to ensure that it is providing the best value to associates and the
company.
How does the Compensation Committee address Internal Revenue Code Section 162(m)?
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, and regulations adopted under it by
the Internal Revenue Service, publicly held companies may be precluded from deducting certain compensation
paid to certain executive officers in excess of $1,000,000 in a year. The regulations exclude from this limit
various forms of performance-based compensation, stock-settled stock appreciation rights and stock options,
provided certain requirements, such as shareholder approval, are satisfied. The company believes that awards
granted under the company’s equity incentive plans qualify as performance-based compensation and can
therefore be excluded from the $1,000,000 limit, with the exception of restricted stock units that vest solely based
on continued service. The company believes that bonuses awarded to date under the Bonus Plan also qualify as
performance-based compensation and are excluded from calculating the limit. Bonuses awarded outside of the
Bonus Plan, such as the special bonus awarded to Ms. Alber for fiscal 2010, do not qualify as performance-based
compensation for purposes of Section 162(m) and therefore count toward the $1,000,000 limit. While the
Compensation Committee cannot predict how the deductibility limit may impact its compensation program in
future years, the Compensation Committee intends to maintain an approach to executive compensation that
strongly links pay to performance.
COMMITTEE REPORTS
The sections indicated below by an asterisk (*) shall not be deemed to be (i) “soliciting material,” (ii) “filed”
with the SEC, (iii) subject to Regulations 14A or 14C of the Securities Exchange Act of 1934, as amended, or
(iv) subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be
deemed incorporated by reference into any of our other filings under the Securities Exchange Act of 1934, as
amended, or the Securities Act of 1933, as amended, except to the extent we specifically incorporate them by
reference into such filing.
Compensation Committee Report *
Who serves on the Compensation Committee?
The Compensation Committee consisted of Adrian D.P. Bellamy, Richard T. Robertson, Anthony A. Greener and
Ted W. Hall during fiscal 2010. Mr. Bellamy serves as Chairman of the Compensation Committee. The Board
for fiscal 2010 determined that each member of the Compensation Committee was independent under the NYSE
rules as currently in effect, was an outside director as such term is defined with respect to Section 162(m) of the
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