Big Lots 2009 Annual Report Download - page 31

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Plan may vest. We believe imposing a performance requirement in the form of a corporate financial
goal, which is established by the Committee at a time when achievement of the goal is substantially
uncertain, encourages positive performance and protects our shareholders from dilution in the absence
of our performance. As discussed above, restricted stock awarded to our executives vests on an
accelerated basis if we achieve the second trigger. The second trigger is established when the award is
made, and is typically based on a projected multi-year corporate operating plan.
• Align the interests of executives and shareholders through incentive-based executive compensation.
We pay bonuses to executives under the 2006 Bonus Plan only if we meet or exceed corporate
performance goals. Stock options awarded under the 2005 Incentive Plan are valuable only if the
market price of our common shares exceeds the exercise price during the period in which the stock
options may be exercised. Restricted stock awarded under the 2005 Incentive Plan vests only if we
achieve a threshold corporate performance goal (i.e., the first trigger) and its value is determined by the
market price of our common shares. Accordingly, the realization and value of each of these elements of
compensation is dependent upon our performance and/or the appreciation in the value of our common
shares.
In fiscal 2009, 79.7% of the total compensation earned by the named executive officers was derived
from incentive compensation in the form of bonuses (non-equity incentive plan compensation), stock
options and restricted stock, as each is reflected in the Summary Compensation Table. We believe
this demonstrates that our executive compensation program is closely aligned with the interests of
our shareholders. We do not apply a specific formula or set a specific percentage at which incentive
compensation is targeted or awarded for the named executive officers individually or as a group. Rather,
the amount of total compensation that may be earned by each named executive officer through these
forms of incentive compensation is subjectively determined based on each named executive officer’s
level of responsibility and potential impact on our operations and financial condition. The percentage
of total compensation that a named executive officer may earn through these forms of incentive
compensation generally increases as the executive’s level of responsibility and impact on our business
increases.
Following the end of each fiscal year, we calculate and review the “at-risk incentive compensation”
awarded to each named executive officer in that fiscal year as a percentage of the “total executive
compensation awarded” to the named executive officer in that fiscal year to evaluate how effectively
our incentive compensation programs address our objective of aligning executive compensation with the
interests of our shareholders. We compute this calculation as follows:
At-Risk
Incentive
Compensation
as a
Percentage of
Total
Executive
Compensation
Awarded
=
At-Risk
Incentive
Compensation =
Grant date
fair value of
stock
awards
+Grant date fair value
of option awards +Maximum possible payout under non-equity incentive plan awards
Total
Executive
Compensation
Awarded
=Salary +
Change in pension
value and
nonqualified
deferred
compensation
earnings
+All other
compensation +At-Risk
Incentive
Compensation
The components of at-risk incentive compensation are the potential values to the named executive
officer upon award, as reflected in the Grants of Plan-Based Awards in Fiscal 2009 table following
this CD&A. The components of the total executive compensation awarded (other than at-risk incentive
compensation) are the amounts actually earned by the named executive officer, as reflected in the
Summary Compensation Table following this CD&A.