Big Lots 2010 Annual Report Download - page 34

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Elements of In-Service Executive Compensation
The primary compensation elements for our named executive officers consist of salary, bonus opportunities under
the 2006 Bonus Plan and equity awards made under the 2005 Incentive Plan. In addition, our 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 in the “Elements of In-Service Executive Compensation – Employment Agreements”
section of this CD&A. 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 our 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 our
named executive officers’ employment agreements.
The lowest level at which we will pay a bonus under the 2006 Bonus Plan is referred to as the “floor.”
A bonus is not paid under the 2006 Bonus Plan if we do not achieve at least the corporate performance
amount that earns a floor bonus. The level at which we generally plan our performance and the associated
payout under the 2006 Bonus Plan is referred to as the “target.” The maximum level at which we will pay a
bonus under the 2006 Bonus Plan is referred to as the “stretch.” If our performance in a fiscal year exceeds
the minimum corporate performance amount that earns a floor bonus, there is a corresponding increase
in the amount of the bonus (up to a maximum at the stretch bonus level). Bonuses paid to our named
executive officers under the 2006 Bonus Plan are considered “Non-Equity Incentive Plan Compensation”
in the Summary Compensation Table. See the “Bonus and Equity Plans” disclosure that follows the
Summary Compensation Table for more information concerning the 2006 Bonus Plan.
• Equity
All equity awards granted to our named executive officers since January 1, 2006 have been issued under
the 2005 Incentive Plan. Although the 2005 Incentive Plan allows us to issue various types of equity
awards, we have granted only stock options and restricted stock under the 2005 Incentive Plan. The
stock options vest based on the passage of time or, if earlier, upon the executive’s death or disability
(provided such event occurs at least six months after the grant date). The restricted stock awarded
to Mr. Fishman pursuant to his retention agreement vests based on the achievement of a corporate
financial goal. The restricted stock awarded to the other named executive officers vests based on the
achievement of the first trigger and then the achievement of the second trigger, the passage of time,
or the executive’s death or disability. See the “Bonus and Equity Plans” disclosure that follows the
Summary Compensation Table for more information concerning the 2005 Incentive Plan and the terms
under which we have granted equity awards.