Staples 2014 Annual Report Download - page 47

EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS
www.staplesannualmeeting.com STAPLES 43
Base Salary
Base salaries are reviewed and established annually, upon
promotion, or following a change in job responsibilities, based
on market data, internal pay equity and each executive’s level
of responsibility, experience, expertise and performance.
In March 2014, the Committee approved:
• A 2% and 5% increase for the Vice Chairman (Mr. Doody)
and President NAS&O (Mr. Parneros), respectively. Prior
to these increases, the base salaries of Mr. Doody and
Mr. Parneros were at the 25th percentile of our peer
group. The salary for the President Europe (Mr. Wilson)
did not increase since no merit increases were awarded in
Europe other than those legally required in each country.
• A 15% promotion increase for the Chief Financial Officer
(Ms. Komola) and a change in grade level recognizing her
second full year in the role and overall pay position relative
to the market. Ms. Komola’s salary remains below the
median of the peer group.
The Committee recommended and the Board approved
a 2.5% salary increase for the Chief Executive Officer.
Mr. Sargent subsequently declined this salary increase
and his 2014 salary remained the same as the prior year.
Annual Cash Incentive Plan Awards
The NEOs are eligible to earn cash awards under the Amended and Restated Executive Officer Incentive Plan (EOIP) based on
Company performance.
Funding
Staples funds an annual incentive plan pool based on
performance against pre-established financial targets
and certain qualitative criteria described below. Funding
is expressed as a percentage of target. The better our
performance in relation to targets, the higher the percentage of
incentive pool funding; the weaker our performance, the lower
the percentage of incentive pool funding. When performance
for the year equates to target, the incentive pool is funded at
100% of target.
Financial Performance Metrics
The Committee selected three performance metrics for the
2014 annual cash incentive awards: EPS (50%), Total Sales
(25%) and Beyond Office Supplies Sales Growth (25%).
The Committee set threshold requirements for payment of
awards, and a maximum payout of 200% of target payout.
The Committee, working with its independent compensation
consultant, employed statistical modeling and judgment
to assess the degree of difficulty of hitting various levels of
performance to ensure the goals were robust yet attainable in
the context of our business environment and progress to date
on the reinvention strategy.
1) Earnings per Share (EPS) - Earnings per share is
calculated based on figures reported in our financial
statements, adjusted to remove certain non-recurring
or non-cash charges. EPS is a funding mechanism
for our annual cash incentive program and minimum
performance must be attained for any payment to
be earned. EPS generally is deemed to be a measure
of financial success and its maximization is a prime
ingredient in communicating operational health. The
target goal was $1.01 per share, in line with the
Company’s 2014 financial budget.
2) Total Company Sales - Total Sales is calculated based
on figures reported in our financial statements, adjusted
for the impact of foreign exchange rates and unplanned
store closures. Inclusion of a sales measure motivates
and directs associates to drive a central measure of
organization growth. The target goal was $23,338
million, in line with the Company’s financial budget.
3) Beyond Office Supplies Sales Growth (BO$$) -
Beyond Office Supplies Sales Growth is calculated as
sales in categories other than traditional office supplies
as compared to fiscal 2013 Beyond Office Supplies
Sales Growth and encourages our strategy of expanding
our product assortment, accelerating growth online and
generally growing sales beyond our core categories. The
target goal was $200 million which was an increase of
250% over 2013 results.
2014 Annual Cash Incentive Plan - Goals & Metrics
EPS Sales (millions) BO$$ (millions)
Threshold $0.86 $21,611 $61
Target $1.01 $23,338 $200
Maximum $1.21 $24,715 $500
Actual Result $0.981 $22,670 $210
Each performance objective was assigned an associated
threshold achievement level below which no portion of the
bonus attributable to that measurement was to be paid.
Additionally, target and maximum levels are set with increased
payouts for better than expected performance. No portion of
any bonus is payable in the event the company fails to achieve
the threshold EPS.
Annual Cash Incentive Awards – NEOs
Target awards for the annual cash incentive are granted as
a percentage of base salary. For 2014, the target awards for
Mr. Sargent, and Messrs. Doody, Parneros and Wilson were
150%, and 85% of base salary, respectively. In March 2014,
Ms. Komola’s target percentage was increased from 60% to
85% in connection with her grade level change, individual
performance and to bring her total target cash more in line
with market practice for the CFO role.