Big Lots 2007 Annual Report Download - page 34

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Our Executive Compensation Program for Fiscal 2007
The Committee takes the lead in establishing executive compensation annually, but seeks approval of
compensation decisions from the other outside directors. The Committee believes having all outside directors
approve executive compensation is consistent with best practices in corporate governance. The Committee also
requests performance evaluations and recommendations on compensation from our CEO, because of his direct
knowledge of each other executive’s performance and contributions. Additionally, the Committee consults with
management and independent compensation consultants to take advantage of their specialized expertise.
The process of evaluating our executives begins at our Board meeting in the second quarter of the fiscal year before
compensation adjustments will be made (e.g., in May 2006 for adjustments effective in fiscal 2007) and continues
quarterly with updates that our CEO delivers to the outside directors to keep them apprised of the performance of
each other EMC member. At our Committee and Board meetings in the first quarter of the fiscal year for which
compensation is being set (e.g., in March 2007 for fiscal 2007 compensation), our CEO provides the Committee
and the other outside directors with a thorough performance evaluation of each other EMC member and presents
his recommendations for their compensation. The Committee also conducts periodic executive sessions to discuss
our CEO’s performance, with the most detailed evaluation including all outside directors during our first quarter
Board meeting.
At its March 2007 meeting, the Committee:
• discussed the continued appropriateness of our executive compensation program, including the
underlying philosophy, objectives and policies;
• discussed our CEO’s performance, contributions and value to our business;
• considered our CEO’s performance evaluations and compensation recommendations for the other
EMC members;
• reviewed the comparative compensation data that it received through surveys conducted by its
independent compensation consultants;
• analyzed the total compensation earned by each EMC member during the immediately preceding two
fiscal years;
• analyzed the potential payments to each EMC member upon termination of employment and change in
control events;
• considered the parameters on executive compensation awards established by the terms of the
shareholder-approved plans under which bonus and equity compensation may be awarded and existing
employment agreements that we have with EMC members;
• prepared its recommendation on the compensation of each EMC member for fiscal 2007;
• determined that a bonus was payable under the 2006 Bonus Plan as a result of corporate performance in
fiscal 2006; and
• determined that the first trigger and second trigger for the fiscal 2006 restricted stock awards were each
achieved as a result of corporate performance in fiscal 2006.
The Committee then shared its recommendations on EMC members’ compensation, including the underlying
data and analysis, with the other outside directors for their consideration and approval. At the March 2007 Board
meeting, the outside directors discussed with the Committee the form and amount of, and rationale for, the
recommended compensation and finalized the compensation awards for the EMC members.
Except where we discuss the specifics of a named executive officer’s fiscal 2007 compensation, the evaluation and
establishment of the named executive officers’ fiscal 2007 compensation was substantially similar. Based on their
review of each component of executive compensation separately, and in the aggregate, the Committee and the other
outside directors determined that the named executive officers’ total compensation for fiscal 2007 was reasonable
and not excessive and consistent with our executive compensation philosophy and objectives.