Big Lots 2012 Annual Report Download - page 35

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awarded to Mr. Fishman pursuant to his retention agreement also requires that we achieve a corporate
financial goal; however, if that goal is not achieved for the year in which it was established, there is no
opportunity for that award to vest based on our performance in subsequent years or on Mr. Fishman’s
continued employment.
x 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 and 2012 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 and 2012 LTIP vests only if
we achieve a 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 2012, 80.6% of the total compensation of 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 2012
under the 2006 Bonus Plan and Mr. Fishman’s fiscal 2012 performance-based restricted stock award
did not vest and was forfeited. 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 2012 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.