Pottery Barn 2011 Annual Report Download - page 138

The Compensation Committee believes that offering the executive team a total compensation package with a
significant pay-for-performance component helps achieve the company’s objective of creating value for its
stockholders. 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 superior 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 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 stockholder 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.
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.
The Compensation Committee strives to ensure that the company’s total compensation packages and executive
compensation are aligned with market pay levels and practices. In order to achieve such goals, the Compensation
Committee takes into account the relationships among base salary, short-term incentive compensation and long-
term equity compensation at other companies considered to be comparable each year, collectively referred to as
“comparable companies” or our “proxy peer group.”
Our proxy peer group was determined for fiscal 2011 by the Compensation Committee based on the following
criteria, which reflects the company’s profile at the time it was selected:
1. Company Classification in the Global Industry Classification Standard (GICS) in one of the following:
• Home Furnishing Retail;
• Apparel Retail; and
• Department Stores;
2. Revenues between $1 billion and $12 billion;
3. Market capitalization greater than $1 billion; and
4. More than 15,000 employees.
Based on these criteria, for fiscal 2011, our peer group consisted of 14 public companies: Abercrombie & Fitch,
American Eagle Outfitters, Ann Taylor Stores, Barnes & Noble, Bed Bath & Beyond, Foot Locker, The Gap,
Limited Brands, Men’s Wearhouse, Nordstrom, Pier 1 Imports, Ross Stores, Saks and Tiffany & Co. Gymboree,
which is no longer a publicly traded company, was removed from our peer group.
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