Big Lots 2009 Annual Report Download - page 36

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The severance provisions of the employment agreements are intended to address competitive concerns by
providing the executives with compensation that may alleviate the uncertainty associated with foregoing other
opportunities and, if applicable, leaving another employer. The change in control provisions of the employment
agreements dictate that the executive receives certain cash payments and other benefits only if there is a change in
control and the executive is terminated in connection with the change in control. This “double trigger” is intended
to allow us to rely upon each named executive officer’s continued employment and objective advice, without
concern that the named executive officer might be distracted by the personal uncertainties and risks created by an
actual or proposed change in control. These potential benefits provide the named executive officers with important
protections that we believe are necessary to attract and retain executive talent.
While the Committee considers the potential payments upon termination or change in control annually when it
establishes compensation for the applicable year, this information is not a primary consideration in setting salary,
bonus payout percentages or equity compensation. We believe that the objectives of attracting and retaining
qualified executives and providing incentives for executives to continue their employment with us would not be
adequately served if potential payments to a named executive officer upon termination or change in control were a
determinative factor in awarding current compensation.
See the “Potential Payments Upon Termination or Change in Control” narrative disclosure and tables following
this CD&A for a discussion of compensation that may be paid to the named executive officers in connection with a
change in control or the termination of their employment with us.
Indemnification Agreements
Each named executive officer is party to an indemnification agreement with us. Each indemnification agreement
provides the named executive officer with a contractual right to indemnification from us in the event the executive
becomes subject to a threatened or actual claim or lawsuit arising out of his or her service to us, unless the act
or omission of the executive giving rise to the claim for indemnification was occasioned by his or her intent to
cause injury to us or by his or her reckless disregard for our best interests, and, in respect of any criminal action
or proceeding, he or she had reasonable cause to believe his or her conduct was unlawful. The indemnification
agreements are intended to allow us to rely upon each named executive officer’s objective advice, without concern
that the named executive officer might be distracted by the personal uncertainties and risks created by a threatened
or actual claim or lawsuit. We believe that providing the named executive officers with the important protections
under the indemnification agreements is necessary to attract and retain executive talent.
Retirement Plans
We maintain four retirement plans: (i) a tax-qualified, funded noncontributory defined benefit pension plan
(“Pension Plan”); (ii) a non-qualified, unfunded supplemental defined benefit pension plan (“Supplemental Pension
Plan”); (iii) a tax-qualified defined contribution plan (“Savings Plan”); and (iv) a non-qualified supplemental
defined contribution plan (“Supplemental Savings Plan”). We believe that the Savings Plan and Supplemental
Savings Plan are generally commensurate with the retirement plans provided by companies in our peer groups, and
that providing these plans allows us to better attract and retain qualified executives. Participation in the Pension
Plan and Supplemental Pension Plan, which we do not believe are material elements of our executive compensation
program, is limited to certain employees whose hire date precedes April 1, 1994. Mr. Waite is the only named
executive officer eligible to participate in the Pension Plan or Supplemental Pension Plan. See the narrative
disclosure accompanying the Pension Benefits and Nonqualified Deferred Compensation tables following this
CD&A for a discussion of our retirement plans.
Our Executive Compensation Program for Fiscal 2009
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 from our CEO performance evaluations and recommendations on the compensation of the other EMC
members because of his direct knowledge of each other executive’s performance and contributions. Additionally, as
discussed in more detail below in the “Role of Management” and “Independent Compensation Consultant” sections
of this CD&A, the Committee consults with management and may engage independent compensation consultants
to take advantage of their specialized expertise.