Pottery Barn 2011 Annual Report Download - page 142

The Compensation Committee believes that achieving individual goals and objectives is important to the overall
success of the company and will adjust bonuses paid to reflect performance in these areas. For example, if the
company or an executive officer fails to fully meet some or all of the company or individual objectives, the
executive’s award may be significantly reduced or even eliminated. Conversely, if the objectives are
overachieved, awards may be subject to less or no reduction from the maximum available awards.
In determining final bonus amounts, if any, the Compensation Committee verifies the company’s actual
performance for each performance period, reviews management’s recommendation for the resulting aggregate
bonus awards and approves an aggregate award amount. The Compensation Committee also reviews and
approves the individual bonuses payable, if any, to each of the company’s named executive officers under the
Bonus Plan. The Compensation Committee decides the bonus amount, if any, for the Chief Executive Officer in
an executive session in which the Chief Executive Officer is not present.
Why did the Compensation Committee choose earnings per share as the secondary performance goal under the
Bonus Plan?
The Compensation Committee chose earnings per share as the secondary performance goal for fiscal 2011
because it believes that earnings per share is a significant measure of performance and is the measure most
closely aligned to long-term stockholder value.
What were the target bonus amounts established for fiscal 2011?
At its March 22, 2011 meeting, the Compensation Committee established the incentive targets under the Bonus
Plan for each named executive officer for fiscal 2011. The target bonuses under the Bonus Plan were set after
reviewing the responsibilities of the named executive officers, the bonus targets set by our comparable
companies, the current combinations of pay elements for each named executive officer and whether such
combinations were appropriate to provide incentives for achieving desired results for the company.
The adjustments in Ms. Alber’s base salary and target bonus level (together, “target total cash compensation”)
followed an assessment by the Compensation Committee of our proxy peer group data for chief executive
officers. The adjustments result in target total cash compensation for Ms. Alber between the 50th and 75th
percentile. For the remaining named executive officers, the increases in base salaries as well as increases in the
target bonus levels result in target total cash compensation for fiscal 2011 at or above the 75th percentile
compared to the company’s proxy peer group and relevant market data as described above. The Compensation
Committee believes that delivering a greater percentage of total cash compensation through incentive
compensation reinforces the company’s pay-for-performance philosophy and aligns executive pay with
stockholder interests by limiting the growth of fixed base salaries and increasing incentive pay.
The target bonuses under the Bonus Plan for fiscal 2010 and 2011 are listed below for each named executive
officer:
Named Executive Officer
Fiscal 2010
Target Bonus
(as a Percentage
of Base Salary)
Fiscal 2011
Target Bonus
(as a Percentage
of Base Salary)
Laura J. Alber ...................... 150% 150%
Sharon L. McCollam ................ 125% 125%
Patrick J. Connolly .................. 75% 100%
Richard Harvey .................... 75% 100%
Sandra Stangl ...................... 75% 100%
What were the results for fiscal 2011 under the Bonus Plan?
Under the stockholder-approved Bonus Plan, no amounts were payable for fiscal 2011 unless the primary
performance goal was achieved. As mentioned above, during fiscal 2011, the Company did achieve the primary
performance goal of positive net cash flow provided by operating activities, which resulted in a maximum bonus
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