Staples 2015 Annual Report Download - page 12

8 STAPLES Notice of Annual Meeting of Stockholders
i CORPORATE GOVERNANCE
HIGHLIGHTS
We are committed to leading corporate governance practices
that are in the best interests of our business and all of our
shareholders. For example, we have:
• Developed a successful shareholder outreach program.
• Demonstrated a consistent track record of listening and
responding thoughtfully to feedback.
• Pro-actively adopted many important governance
initiatives, such as majority voting, an enhanced political
contributions policy, a compensation recoupment policy
and our commitments to ethics, community and giving,
the environment and diversity and inclusion.
Shareholder Outreach Program
We have conducted a formal corporate governance
outreach program for many years. We solicit feedback from
our institutional investors regularly, including from asset
managers, public and labor union pension funds and allied
organizations and social responsibility investors. We seek
to hear perspectives on various governance matters, our
executive compensation program, sustainability and other
matters. Consistent with prior practice, during the last year,
we engaged in constructive dialogues with shareholders
representing nearly half of our outstanding shares. This year,
two of our directors participated in the outreach program
and heard directly from some of our shareholders. We share
the feedback we receive with our Nominating and Corporate
Governance Committee and Compensation Committee, as
well as with the entire Board.
Recent Corporate Governance
Enhancements
In response to feedback from our shareholders, our Board
made the following corporate governance enhancements over
the last year:
Limit Executive Severance – We adopted a policy that limits
severance benefits for senior executives. Based on the terms
of the new severance policy, Staples will not pay any severance
benefits under any existing or future employment agreement
or severance agreement with an executive officer that exceeds
2.99 times the sum of the executive’s base salary plus target
annual cash incentive award, without seeking shareholder
approval. The new policy excludes equity awards. In addition,
our CEO elected to amend his existing employment agreement
to comply with the policy.
Implemented Proxy Access at 3%/3 years – We worked
closely with our shareholders in developing a proxy access
framework that would be responsive but also protect the
interests of all shareholders. We have amended our by-laws to
include proxy access provisions that are effective for the 2016
Annual Meeting of Shareholders. Our proxy access by-laws:
• Permit shareholders (not to exceed a group of 25)
holding at least three percent of our outstanding
shares continuously for three years to nominate up to
two individuals or 20 percent of the directors serving,
whichever is greater;
• Include various other provisions consistent with, or
mirroring, the SEC-adopted proxy access rule, including
with regard to disclosure of conflicts of interest or control
intent and the eligibility of loaned shares for purposes of
satisfying the continuous ownership requirement; and
• Disqualify candidates who failed to garner a minimum of
15% of the votes within the previous two years.
Executive Compensation – In light of the level of support
we received for the 2015 say-on-pay vote, none of our NEOs
received an annual increase in base salary for 2016, and prior
to determination of the payout by the Board, our CEO elected
to forego his annual cash incentive award for 2015. In addition,
in direct response to shareholder feedback:
• We replaced the annual goals for our three-year
performance share awards with cumulative three-year
goals for 2016, while maintaining the three-year TSR
modifier linking pay outcomes more closely to share
price performance;
• We adjusted the metrics and increased the rigor of
the threshold goals for our 2016 annual cash incentive
awards, to drive greater alignment with shareholder
value; and
• We modified our peer group to include companies
that more closely match Staples’ revenue and
market capitalization.
In connection with the change to cumulative goals, we
maintained performance shares as 2/3 of our 2016 long-
term incentive awards, and introduced time-based restricted
stock units for the remaining 1/3 to bring us in line with
market practice and facilitate recruitment and retention. For
more information about shareholder outreach with respect to
compensation matters, see the “CD&A” section of this proxy
statement.