Big Lots 2008 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2008 Big Lots annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

- 18 -
The significant portion of total executive compensation awarded to the named executive officers as
at-risk incentive compensation exemplifies the emphasis of our executive compensation program on
“pay for performance.” In rewarding performance through at-risk incentive compensation, we align the
interests of our executives with those of our shareholders.
• Manage executive compensation costs.
As we discuss in greater detail in the “Comparative Compensation Data” section of this CD&A, we
compare the compensation paid to our executives with the compensation paid to similarly-situated
executives at companies within our peer groups. While this comparison is not a determinative factor for
setting compensation for our executives, we believe our review of the peer group data provides a market
check and supports our belief that we do not overpay our executives and we effectively manage our
executive compensation costs.
• Focus on corporate governance.
Although the compensation committee at some companies makes all compensation decisions with
respect to their executives, we believe it is consistent with best practices in corporate governance to
reach a consensus among all outside directors when establishing executive compensation each year.
While the Committee takes the lead in formulating executive compensation, we believe seeking the
approval of our five additional outside directors before finalizing annual executive compensation
provides an additional check on the appropriateness of the amounts awarded.
Elements of In-Service Executive Compensation
The primary compensation elements for the named executive officers consist of salary, bonus opportunities under
the 2006 Bonus Plan, and equity awards made under the 2005 Incentive Plan. In addition, the named executive
officers are entitled to certain personal benefits and perquisites. We believe each of these elements and the
mix of elements is necessary to provide a competitive executive compensation program, is consistent with our
compensation philosophy and furthers our compensation objectives.
The Committee reviews each element at least annually. Individual and corporate performance directly impacts
the elements and amount of compensation paid to our named executive officers. For instance, a named executive
officer’s failure to meet individual goals may lead to a reduction in his or her compensation, a failure to receive
equity awards, or the termination of his or her employment. Conversely, excellent corporate performance may lead
to greater bonus payouts and, possibly, to the achievement of financial goals that accelerate restricted stock vesting.
The Committee and the other outside directors also have discretion, subject to the limitations contained in our
bonus and equity plans and the executives’ employment agreements, in setting named executive officers’ salary,
bonus opportunities and equity awards.
• Salary
Salary is cash compensation and is established annually for each named executive officer. A minimum
salary for each named executive officer is set forth in his or her respective employment agreement, as
described below. Salary adjustments are subjectively determined and are not formally tied to specific
performance criteria. The Committee has not adopted any specific schedule of salary increases and
makes adjustments to the named executive officers’ respective salaries without regard to adjustments in
the salaries of other executives.
• Bonus
Each named executive officer has the opportunity to earn an annual cash bonus under the 2006 Bonus
Plan. Bonus payouts correspond to a percentage of each named executive officer’s salary (“payout
percentage”) and are based on whether we achieve certain corporate performance amounts under one or
more financial measures. The corporate performance amounts and financial measures are set annually
at the discretion of the Committee and the other outside directors in connection with the Board’s
approval of our annual corporate operating plan, subject to the terms of the 2006 Bonus Plan and the
named executive officers’ employment agreements.