Pottery Barn 2013 Annual Report Download - page 125

In fiscal 2013, Cook & Co. provided the Compensation Committee with publicly disclosed proxy data related to
Named Executive Officer compensation. The Compensation Committee occasionally requests that Cook & Co.
attend its meetings and receives from Cook & Co., on an annual basis, an in-depth update on general and retail
industry compensation trends and developments.
In addition, in fiscal 2013, the Compensation Committee asked Cook & Co. to evaluate the risk inherent in our
executive and non-executive compensation programs. Their report concluded that, among other things:
• The company’s executive compensation program is designed to encourage behaviors aligned with the long-
term interests of stockholders;
• There is appropriate balance in short-term versus long-term pay, cash versus equity, recognition of corporate
versus business unit performance, financial versus non-financial goals, and use of formulas and discretion; and
• Policies are in place to mitigate compensation risk, such as stock ownership guidelines, insider trading
prohibitions and disclosure requirements, and independent Compensation Committee oversight.
After considering this evaluation, the Compensation Committee concluded that our compensation program does
not encourage executives to take on business and operating risks that are reasonably likely to have a material
adverse effect on the company.
Role of Market Data
The Compensation Committee, the Chief Executive Officer and management believe that knowledge of general
market practices and the specific compensation practices of our proxy peer group, listed below, is important in
assessing the design and competitiveness of our compensation package. When market data is reviewed, both the
50th percentile (median) and the 75th percentile are considered as reference points, rather than a fixed policy, for
compensation positioning and decision-making. We do not set compensation to meet specific benchmarks or
percentiles. Our executives’ target total direct compensation for fiscal 2013 is above the peer group median and
approaches the 75th percentile. The Compensation Committee determined that setting total direct compensation at
this level is appropriate given the complexity of our multi-channel business model and the comprehensive and
valuable experience of the executive team.
Actual total direct compensation may exceed our target levels relative to our peers’ actual compensation only
when performance goals are exceeded, and may be lower than our target levels when performance goals are not
achieved.
Our Proxy Peer Group
The Compensation Committee uses a peer group composed of public companies in the retail industry to review
competitive compensation data for the company’s executives. The Compensation Committee evaluates this proxy
peer group on an annual basis to ensure that the companies selected remain appropriate. The proxy peer group for
fiscal 2013 was selected by the Compensation Committee based on the guiding criteria described below, with
advice from Cook & Co. Certain proxy peer companies may not meet all selection criteria, but are included
because they are direct competitors of our business, direct competitors for our executive talent, have a
comparable business model, or for other reasons. The proxy peer group guiding criteria for fiscal 2013 are as
follows:
1. Company Classification in the Global Industry Classification Standard in one of the following:
• Home Furnishing Retail;
• Apparel Retail; or
• Department Stores;
2. Revenues between $1.8 billion and $7.3 billion;
3. Market capitalization greater than $800 million and less than $20 billion;
4. Between 14,000 and 56,000 employees; and
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Proxy