Big Lots 2011 Annual Report Download - page 75

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PROPOSAL THREE: APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO
ITEM 402 OF REGULATION S-K, INCLUDING THE CD&A, COMPENSATION TABLES AND THE
NARRATIVE DISCUSSION ACCOMPANYING THE TABLES
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we provide our shareholders with
the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive
officers as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. The
following summary of our executive compensation program describes our compensation philosophy and the key
objectives identified by our Compensation Committee to implement our compensation philosophy.
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. Consistent with this philosophy, the Compensation Committee
has identified the following key objectives that drive the design of the policies and practices of 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. Each of the elements of compensation we provide serves a different role in attracting and
retaining executives.
• Motivate executives to contribute to our success and reward them for their performance. We use the
bonus and equity elements of our executive compensation program as the primary tools to motivate
our executives to continually improve our business in order to promote sustainable profitability and
enhanced shareholder value. These compensation elements provide executives with meaningful
incentives to meet or exceed the corporate financial goals set by our Board each year. 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 our long-term financial
health. While we believe that our results in fiscal 2011 were generally positive, including our record
income from continuing operations, 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. Accordingly, our named executive officers did not receive a bonus for
fiscal 2011. We believe that this supports our goal of rewarding our named executive officers only when
we achieve the financial goals set by our board each year.
• Align the interests of executives and shareholders through incentive-based executive compensation.
The realization and value of bonus opportunities under the 2006 Bonus Plan and equity awarded under
the 2005 LTIP are dependent upon our performance and/or the appreciation in the value of our common
shares. We believe that awarding a significant percentage of the total compensation of our named
executive officers as at-risk incentive compensation (85.7% in fiscal 2011) exemplifies the emphasis
of our executive compensation program on pay for performance and demonstrates that our executive
compensation program is closely aligned with the interests of our shareholders. In some years, as was
the case in fiscal 2011, our named executive officers may not realize a significant portion of the at-risk
incentive compensation awarded to them, as our named executive officers did not receive a bonus in
fiscal 2011. We believe this shows that our pay practices are designed to effectively incentivize our
executives to dedicate themselves fully to creating value for our shareholders.
• Manage executive compensation costs. We compare the compensation paid to our executives with the
compensation paid to similarly-situated executives at companies within our peer groups, which provides
a market check on the compensation we pay to our executives and supports our belief that we do not
overpay our executives and we effectively manage our executive compensation costs.
• Focus on corporate governance. We seek the approval of the five additional outside directors who do
not serve on the Compensation Committee before finalizing annual executive compensation to provide
an additional check on the appropriateness of the amounts awarded.