Staples 2014 Annual Report Download - page 45

EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS
www.staplesannualmeeting.com STAPLES 41
II 2014 COMPENSATION PROGRAM
Overview
The Committee’s compensation decisions in 2014 were
intended to drive the highest level of executive team
engagement to lead the organization through its strategic
reinvention, and to attract and retain world class executive
talent. In the course of its review, the Committee considered
the complexity of the business, historical regression analysis
of relevant performance metrics, input on current market
practices from the Committee’s independent compensation
consultant and management, the highly competitive
environment for talent and prior years’ Say-on-Pay votes.
The Committee’s objective was to create a stronger link
between pay and performance and to simplify our executive
compensation program. To continue to motivate our executives
to execute on the key priorities of the strategic plan, the
Committee reaffirmed its commitment to pay for performance
and the compensation philosophy established in 2013.
 2014 Action
Support our growth strategy • Annual cash incentive plan performance metrics:
º 50% Earnings Per Share (EPS)
º 50% Sales
 25% Total Sales
 25% Beyond Office Supplies Sales Growth
• For purposes of calculating beyond office supplies, “office supplies” is defined as paper,
ink, toner and core office products (writing, folders, paperclips, etc.)
Emphasize long term
stockholder value creation • Long-term awards are 100% in the form of performance shares
• Performance share metrics:
º 50% Return on Net Asset percentage (RONA%)
º 50% Sales Growth %
• Three year performance period, with goals set annually for each year
• Award earned may be increased or decreased by 25% based on the company’s
cumulative total shareholder return (TSR) over three year performance period relative to
the S&P 500
• Staples’ compensation philosophy is to target market
median for base salary, annual cash incentive and
long-term incentive opportunities.
• Both annual and long-term incentives for our NEOs are
100% performance based, with base salary as the only
guaranteed element of total pay.
• For our CEO, 89% of total target pay is performance
based.
Setting Performance Goals
We set our goals for our incentive programs within the first
90 days of the fiscal year. Target performance goals generally
are based on our fiscal year operating plan and outlook for
the upcoming year. Our 2014 goals for Earnings per Share,
Total Sales and Beyond Office Supplies Sales Growth,
which would have resulted in 100% payout if achieved, were
$1.01 per share, $23.3 billion, and $200 million, respectively.
The table below highlights our history of setting challenging performance goals.
Performance Award
Payout/Achievement
2011 2012 2013 2014
Annual Cash Incentive Awards Average 78%
achievement of
target 2009-2011
No achievement No achievement 87% achievement of
target
2011-2013 Long-Term Cash Awards
(1 year goals over 3 year performance period) 41.38% achievement No achievement 14.34% achievement
Payout of 18.57% of
target in March 2014
−
2012-2014 Long-Term Cash Awards
(3 year goal) − − − No payout
2013-2014 Long-Term Cash Awards − − 49.74% achievement 87.26% achievement
Payout of 68.5% of
target in March 2015
2013-2015 Performance Share Awards
(1 year goals over 3 year performance period) − − 49.74% achievement 87.26% achievement
2014-2016 Performance Share Awards
(1 year goals over 3 year performance period) − − − 87.26% achievement