Big Lots 2011 Annual Report Download - page 39

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Compensation Discussion and Analysis
Overview of Our Executive Compensation Program
Introduction
This CD&A describes our executive compensation program for fiscal 2011 and certain elements of our executive
compensation program for fiscal 2012. We use our executive compensation 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 2011 were: (1) Mr. Fishman, our Chairman, CEO and President;
(2) Mr. Cooper, our Executive Vice President and Chief Financial Officer, and President, Big Lots Canada, Inc.;
(3) Ms. Bachmann, our Executive Vice President, Supply Chain Management and Chief Information Officer;
(4) Mr. Haubiel, our Executive Vice President, Legal and Real Estate, General Counsel and Corporate Secretary;
and (5) Mr. Martin, our Executive Vice President, Administration (Mr. Martin served as our Executive Vice
President, Merchandising until assuming his current position on April 17, 2011).
Executive Summary
Our executive compensation program is designed to:
• 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 group;
• motivate our executives to contribute to our long-term success and reward them for their performance;
and
• align the interests of our executives and shareholders through incentive-based compensation.
We believe that our executives should have a significant portion of their compensation tied to our performance
and that the proportion of the at-risk incentive compensation they receive should increase as the executive’s level
of responsibility increases. The emphasis that we place on “pay for performance” is evidenced by the fact that
85.7% of the total compensation awarded to our named executive officers for fiscal 2011 was at-risk incentive
compensation comprised of bonus opportunities and equity compensation. In some years, as was the case in fiscal
2011, our named executive officers may not realize significant portions of the at-risk incentive compensation
awarded to them. While we believe our results in fiscal 2011 were generally positive, including our increase in
earnings per share, continued focus on store growth in the United States and expansion into Canada, we did not
meet the operating profit amount required for our named executive officers to receive bonuses for fiscal 2011 under
the Big Lots 2006 Bonus Plan (“2006 Bonus Plan”). Accordingly, the named executive officers did not receive
bonuses for fiscal 2011.
In March 2010, the Committee and the other outside directors determined that Mr. Fishman’s continued leadership
and extraordinary contributions were important to our future performance due to our record growth and
shareholder return during his tenure with Big Lots and his vision for our future. Accordingly, the Committee and
the other outside directors believed it was in the best interests of Big Lots and our shareholders for Big Lots to enter
into the retention agreement with Mr. Fishman to better assure the continuing service of Mr. Fishman so that he
could continue to (1) strengthen our business performance and prospects for our continued growth, (2) return value
to our stockholders and (3) implement our succession plans. The retention agreement was structured so that the
compensation awarded thereunder is all at-risk incentive compensation, which strengthens the alignment between
Mr. Fishman’s pay and our performance. Under the terms of the retention agreement, Mr. Fishman’s fiscal 2010,
fiscal 2011 and fiscal 2012 equity awards are solely in the form of restricted stock and the number of common
shares underlying each restricted stock award is dependent on our performance relative to the prior fiscal year’s
operating profit, subject to the collars set forth in the retention agreement. As a result of our fiscal 2011 operating
profit performance, Mr. Fishman was awarded 240,000 common shares underlying his fiscal 2012 restricted stock
award, a reduction of 10,000 common shares from the restricted stock award granted to him in fiscal 2011.
Key components of our measurement of the performance of our named executive officers have been our operating
profit and earnings per share. We believe that our operating profit is an important financial measure, as it is a
reflection of both top line sales and expense control, and when used year-over-year, it has the effect of promoting