Big Lots 2010 Annual Report Download - page 31

- 15 -
Compensation Discussion and Analysis
Overview of Our Executive Compensation Program
Introduction
This CD&A describes our executive compensation program for fiscal 2010 and certain elements of our executive
compensation program for fiscal 2011. We use this program to attract, motivate and retain those who lead our
business. In particular, this CD&A explains how the Board and the Compensation Committee of the Board (which
we refer to as the “Committee” throughout this CD&A) made its compensation decisions for our named executive
officers, who, for fiscal 2010 were: (i) Mr. Fishman, our Chairman, CEO and President; (ii) Mr. Cooper, our Executive
Vice President and Chief Financial Officer; (iii) Ms. Bachmann, our Executive Vice President, Supply Chain
Management and Chief Information Officer; (iv) Mr. Martin, our Executive Vice President, Merchandising; and
(v) Mr. Haubiel, our Executive Vice President, Legal and Real Estate, General Counsel and Corporate Secretary.
Philosophy and Objectives
We believe it is important to provide competitive compensation to attract and retain talented executives to lead
our business. We also believe an executive compensation program should encourage high levels of corporate and
individual performance by motivating executives to continually improve our business in order to promote sustained
profitability and enhanced shareholder value. This philosophy drives our executive compensation program.
Consistent with our philosophy, each of our named executive officer’s total compensation varies based on his or
her leadership, performance, experience, responsibilities and the achievement of financial and business goals. To
better ensure that our executive compensation program advances the interests of our shareholders, the value of
bonus opportunities and equity awards under the program depends upon our financial performance and/or the price
of our common shares. As a named executive officer’s level of responsibility and the potential impact that a named
executive officer could have on our operations and financial condition increase, the percentage of our named
executive officer’s compensation that is at risk through bonus and equity incentive compensation also increases.
The Board and the Committee periodically review our executive compensation philosophy and consider factors that
may influence a change in our executive compensation philosophy. Consistent with our executive compensation
philosophy, the Committee has identified the following key objectives for our executive compensation program:
• Attract and retain executives by paying them amounts and offering them elements of compensation that
are competitive with and comparable to those paid and offered by most companies in our peer groups.
We believe a key factor in attracting and retaining qualified executives is to provide total compensation
that is competitive with the total compensation paid by companies in our compensation “peer groups”
discussed in the “Comparative Compensation Data” section of this CD&A. In addition, we believe
most executives who consider changing employers expect to receive compensation elements that are
comparable to those offered by most companies in our peer groups and/or their current employer.
Accordingly, we generally do not structure our executive compensation program to be competitive with
the programs of companies outside of our peer groups (although we may do so to attract a particular
candidate whom we believe is well-suited for our business). We believe the amounts and elements of
compensation that we offer make us competitive within our peer groups, and offering competitive
packages has enabled us in recent years to attract and retain quality executives. We believe failing to
offer competitive amounts and elements of compensation to candidates and our executives would impair
our ability to attract and retain a high level of executive talent.
Each of the elements of compensation we provide serves a different role in attracting and retaining
executives. Salary serves as a short-term retention tool. Bonus under the Big Lots 2006 Bonus Plan (“2006
Bonus Plan”) is based on annual corporate financial performance and is designed primarily to retain
executives on a year-to-year basis. Stock options issued under the 2005 Incentive Plan vest over four years
in prorated annual increments and provide executives with an incentive to remain with us for up to the
seven-year term of the stock option. Restricted stock awarded to most executives under the 2005 Incentive
Plan encourages executives to remain with us for up to five years after the award date, as the restricted
stock generally vests only if (i) we meet a threshold corporate financial goal (“first trigger”) and (ii) either