Pottery Barn 2011 Annual Report Download - page 137

Does the Compensation Committee have outside advisors?
The Compensation Committee Charter grants the Compensation Committee the sole authority to hire outside
advisors and compensation consultants for the Compensation Committee. Although the company pays their fees,
these advisors report directly to the Compensation Committee. Cook & Co., has been engaged as the independent
executive compensation consulting firm to assist the Compensation Committee in discharging its responsibility.
During fiscal 2011, Cook & Co. provided the Compensation Committee with peer group proxy and other
publicly disclosed data related to named executive officer and director compensation. Cook & Co. also provided
certain services on behalf of the Compensation Committee, primarily related to compiling market data and advice
regarding general compensation trends in the retail industry and among similarly situated companies. The
Compensation Committee may request that Cook & Co. attend its meetings and advise the Compensation
Committee either in person or by telephone. Cook & Co. participated in the February 23, 2011 and September 7,
2011 Compensation Committee meetings at the request of the Chairman, Adrian Bellamy.
What is management’s role in the compensation-setting process?
Although the Compensation Committee generally does not delegate any of its authority with respect to executive
officers and non-employee directors of the company, management does play a significant role in the
compensation-setting process for executive officers other than the Chief Executive Officer. In particular,
management assists the Compensation Committee with the following:
• Evaluating individual executive performance against established revenue and profitability targets for the
fiscal year, including business unit achievement of budget targets;
• Recommending appropriate business performance targets and objectives for the upcoming fiscal year; and
• Recommending salary and cash bonus levels and equity awards based on performance evaluations, a review
of peer group and additional relevant compensation data. Management considers the respective
responsibilities of the executive officers, the current combination of pay elements for each executive and
whether that combination is appropriate to provide incentives to achieve the desired results for the company.
Management considers the proportion of base salary to cash bonus levels and believes that a significant
portion of each executive’s total cash compensation should be at risk depending on whether the company
achieves certain levels of performance. In addition, management recognizes the Compensation Committee’s
view that equity awards should reflect each executive’s performance for the year and align the executive’s
financial reward with stockholder return. After considering these factors, management may recommend to
the Compensation Committee changes in the amount and type of each element of total compensation.
Management prepares information for each Compensation Committee meeting and works with the Committee
Chairperson to establish meeting agendas. Materials are provided to the Compensation Committee members
several days in advance of each meeting. The Compensation Committee considers, but is not bound by and does
not always accept, management proposals. The Chief Executive Officer also participates in Compensation
Committee meetings at the invitation of the Compensation Committee to provide:
• Background information regarding the company’s strategic objectives;
• Evaluations of the performance of senior executive officers; and
• Compensation recommendations as to senior executive officers (other than the Chief Executive Officer).
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.
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