Lululemon 2015 Annual Report Download - page 30

Table of Contents
Risk Considerations in Determining Compensation
The Compensation Committee annually reviews the various design elements of our compensation program to determine whether any of its aspects encourage
excessive or inappropriate risk-taking. Following the risk evaluation, the Compensation Committee concluded that our compensation policies and practices do not
create risks that are reasonably likely to have a material adverse effect on the company.
Tax Considerations in Determining Compensation
We consider the tax treatment of various forms of compensation and the potential for excise taxes to be imposed on our executive officers which might have
the effect of hindering the purpose of their compensation. While we do not design our compensation programs solely for tax purposes, we do design our plans to be
tax efficient for the company where possible and where the design does not add a layer of complexity to the plans or their administration. This requires us to
consider several provisions of the Internal Revenue Code. While we endeavor to use tax-efficient compensation structures when feasible, the Compensation
Committee has the discretion to deliver non-deductible forms of compensation.
Compensation Changes for Fiscal 2016
Following its annual review of the target compensation levels of the executive officers and the Chief Executive Officer's assessment of each officer's
performance and individual contributions, the Compensation Committee approved increases to the base salaries of Mr. Haselden, Mr. Stump, Mr. Almeida, and
Mr. Holman. Following its annual review of the target compensation of the Chief Executive Officer and an assessment of his performance, the Compensation
Committee approved an increase in Mr. Potdevin's base salary designed to align his compensation closer to the median of the company's peer group and to
recognize his significant contributions and leadership. The table below sets forth the base salary set by the Compensation Committee for fiscal 2016 and fiscal
2015 for each of our current executive officers:
Name
Fiscal 2016 Base Salary
Fiscal 2015 Base Salary
Laurent Potdevin
USD$1,025,000
USD$1,000,000
Stuart Haselden
USD$645,000
USD$575,000
Scott Stump
USD$570,000
USD$550,000
Miguel Almeida
USD$570,000
USD$550,000
Lee Holman (1)
USD$550,000
USD$500,000
_________
(1) Mr. Holman's base salary for fiscal 2015 represents his base salary as of October 26, 2015, the effective date of him beginning service in the role of Executive
Vice President, Creative Director.
During fiscal 2015, the Compensation Committee, with the assistance of management and its independent advisor, reviewed our incentive compensation
programs to evaluate whether they were appropriately aligned with our strategic direction. As a result of that review, the Compensation Committee determined that
for fiscal 2016 the performance-based cash awards for executive officers will continue to be based entirely on our achievement of financial performance goals and
weighted 60% on operating income, 20% on revenue, and 20% on gross margin. For fiscal 2016, the overall weighted average maximum bonus opportunity will
remain at 200% of target, but the maximum payout opportunity for the achievement of revenue and gross margin measures will shift to 150% of target (up from
125% in fiscal 2015), and the maximum for operating income measure will shift to 233% of target (down from 250% in fiscal 2015). The Compensation
Committee believes this formula will continue to focus the executive team on the achievement of these three key financial goals, with an emphasis on delivering
quality earnings.
In addition, the Compensation Committee determined that vesting of performance-based restricted stock units will continue to be based on both earnings and
revenue and weighted 70% on operating income and 30% on revenue. Starting with awards made in fiscal 2016, the calculation of the number of shares of common
stock that would be payable on the settlement date has been modified such that one third of the total number of shares that would be payable is to be based on the
achievement of performance measures in each of the three separate fiscal years included in the performance period. The targets for all three fiscal years of the
performance period are determined at the time of grant. The vesting of performance-based restricted stock units continues to be at the end of three years.
Beginning in fiscal 2016, the Chief Executive Officer's equity-based compensation will consist of 50% stock options and 50% performance-based restricted
stock units, and will not include restricted stock units like the other executive officers.
The Compensation Committee also determined that beginning in fiscal 2016, annual stock option awards would be granted once per year, rather than our
historical practice of granting half the annual stock option awards in March and the rest in September.
27