Big Lots 2011 Annual Report Download - page 43

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• Align the interests of executives and shareholders through incentive-based 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 LTIP 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 LTIP vests only if we achieve a threshold corporate
performance goal 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 market value of our common shares.
In fiscal 2011, 81.7% of the total compensation earned by our named executive officers was derived
from incentive compensation in the form of restricted stock and, except for Mr. Fishman, stock options,
as each is reflected in the Summary Compensation Table. As discussed above in the “Executive
Summary” section of this CD&A, our named executive officers did not receive bonuses for fiscal 2011
under the 2006 Bonus Plan (which are reported as non-equity incentive compensation 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 our 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 our 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 our named executive
officer upon award, as reflected in the Grants of Plan-Based Awards in Fiscal 2011 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.