Pottery Barn 2011 Annual Report Download - page 118

PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
What is this proposal?
This is a proposal asking stockholders to approve, on an advisory basis, the compensation of our named
executive officers as disclosed in this Proxy Statement in accordance with the 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 stockholders 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 direct links between executive pay,
individual performance, the company’s financial performance and stockholder returns. The Compensation
Committee believes that the company’s executive compensation programs should support the company’s
objective of creating value for its stockholders.
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
stockholder 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 stockholder return while encouraging executives to build an equity
interest in the company. In 2011, the Compensation Committee also retained Frederic W. Cook & Co., Inc. to
evaluate the risk in the company’s compensation programs.
Fiscal 2011 Compensation
To align our executive compensation packages with our executive compensation philosophy, the following
compensation actions were approved by the Compensation Committee for fiscal 2011:
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 were increased for fiscal 2011 to bring target total cash compensation
for our named executive officers from generally between the 50th percentile and the 75th percentile to generally
above the 75th percentile compared to the company’s proxy peer group and relevant market data as described
under “Compensation Discussion and Analysis” in this Proxy Statement.
Performance-Based Cash Bonus: Performance-based cash bonuses were paid for performance in fiscal 2011 as a
result of the achievement of positive net cash flow by operating activities, exceeding earnings per share goals set
by the Compensation Committee for fiscal 2011 and outstanding leadership and individual performance by our
named executive officers in fiscal 2011.
Performance- and Time-Based Equity: The company granted our named executive officers a mixture of
performance-based and time-based equity awards in fiscal 2011. Restricted stock units that vest on the second
anniversary and the fourth anniversary of the grant date, in each case, only if positive net cash flow 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 stockholder value by increasing our stock price.
In addition to the above summary, stockholders are urged to read the “Compensation Discussion and Analysis”
section of this Proxy Statement for detail about our executive compensation programs, including information
about the fiscal 2011 compensation of our named executive officers.
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