Big Lots 2011 Annual Report Download - page 59

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Tax and Accounting Considerations
The Committee reviews and considers the impact that tax laws and accounting regulations may have on the
executive compensation awards, including the deductibility of executive compensation under Section 162(m). In
doing so, the Committee relies on guidance from members of our finance and legal departments, as well as outside
accountants and attorneys.
Section 162(m) generally limits the tax deductions for compensation expense in excess of $1 million paid to our
CEO and our three other highest compensated executives (excluding the principal financial officer). Compensation
in excess of $1 million may be deducted if it is “qualified performance-based compensation” within the meaning
of Section 162(m). Except as discussed below, we believe that compensation paid under our equity and bonus
compensation plans is fully deductible for federal income tax purposes. However, in certain situations, the
Committee may approve compensation that will not meet these requirements in order to ensure competitive levels
of total compensation for our executives or to otherwise further our executive compensation philosophy and
objectives. When considering whether to award compensation that will not be deductible, the Committee compares
the cost of the lost deduction against the competitive market for executive talent and our need to attract, retain and
motivate the executive, as applicable.
For fiscal 2011, the Committee believes it has taken the necessary actions to preserve the deductibility of
all payments made under our executive compensation program, with the exception of a portion of the base
compensation paid to Mr. Fishman. If the IRC or the related regulations change, the Committee intends to take
reasonable steps to ensure the continued availability of deductions for payments under our executive compensation
program, while at the same time considering our executive compensation philosophy and objectives and the
competitive market for executive talent.
Our Executive Compensation Program for Fiscal 2012
In establishing executive compensation for fiscal 2012, the Committee engaged Towers Watson to provide
research, comparative compensation data and general executive compensation program guidance. Throughout this
engagement, Towers Watson advised the Committee on all principal aspects of executive compensation, including
the competitiveness of program design and award values. The Committee charged Towers Watson with assisting it
to meet the following primary objectives:
• review and validate, or recommend changes to, our executive compensation program;
• obtain better comparative compensation data by updating our retailer-only peer group; and
• compare the amount and form of executive compensation paid to our executives against the
compensation paid to similarly-situated executives at companies within the updated retailer-only
peer group.
At its meeting in February 2012, the Committee: (1) determined that a bonus was not payable for fiscal 2011 under
the 2006 Bonus Plan; (2) reviewed the tally sheets and compensation history for all EMC members; (3) reviewed
internal pay equity information; (4) discussed the executive compensation review prepared by Towers Watson
and approved a new retailer-only peer group for fiscal 2012; (5) reviewed the at-risk incentive compensation as
a percentage of the total executive compensation awarded for fiscal 2011 for each named executive officer; and
(6) formulated its recommendations to the other outside directors for fiscal 2012 executive compensation (including
the terms, financial measure, corporate performance amounts and payout percentages for bonuses, terms for the
amount of common shares underlying stock option and restricted stock awards, and the first and second triggers
for restricted stock awards). The Committee also reviewed drafts of this CD&A and the other compensation
disclosures required by the SEC.