Office Depot 2011 Annual Report Download - page 52

Fiscal 2011 Annual Cash Bonus payout
Due to the company’s 2011 financial performance, the NEOs (except for Mr. Brown and Ms. Vanderlinde)
received a bonus at 86% of target as detailed below:
2011 Bonus Metrics
Award
Weighting
Threshold
Parameter
(25% Payout)
Target
Parameter
(100%
Payout)
2011 Actual
Performance
Payout
Percentage
EBIT* ............................ 50% $ 105million $140 million $ 122 million 32%
Free Cash Flow* .................... 25% $ 33million $ 42 million $ 57 million 34%
Gross Profit Dollars* ................ 25% $3.297 billion $3.47 billion $3.422 billion 20%
* As adjusted. See “2011 Key Management Objectives and NEO Compensation- Annual Cash Bonus” for
more details on the adjustments.
•Fiscal 2011 Long-Term Incentive Program grant: In May 2011, the Compensation Committee approved the
annual long-term incentive grant to the NEOs (excluding Mr. Austrian, who was the Interim Chair and CEO at
the time) which was delivered 50% in non-qualified stock options and 50% in restricted stock with all equity
vesting one-third on each of the first, second, and third anniversaries of the grant date; provided that, each
NEO remains in the company’s employment until each anniversary date. For 2011, all of the non-qualified
stock options were granted at a 25% premium over the exercise price, which is the fair market value on the
grant date.
•Termination of Executive Medical Plan beginning in 2012: The Compensation Committee approved
terminating coverage of all executives, including the NEOs, under the Executive Medical Plan beginning in
2012 after reviewing the Peer Group (described in the “Competitive Benchmarking” section later in this
CD&A) and determining that an executive medical benefit is no longer necessary for a competitive executive
compensation program and in response to the escalating cost of health care under the Executive Medical Plan.
As of January 1, 2012, the executives are now eligible to participate in the medical, dental, vision, and
pharmacy benefit programs available to the company’s broad-based full-time employees.
•Enhancing Stock Ownership Guidelines: In October 2011, the Compensation Committee enhanced the
company’s stock ownership guidelines for the executives, including the NEOs, to more closely reflect the
ownership guidelines of the company’s competitors and peers and current corporate governance trends. Under
the enhanced guidelines, the Chair and CEO is expected to hold company stock equal to at least either:
700,000 shares, or a multiple equal to five times his annual base salary, to be satisfied within five years of
assuming his position. Under the enhanced guidelines, the other NEOs are expected to hold company stock
equal to at least either: 250,000 shares, or a multiple equal to three times each individual’s annual base salary,
to be satisfied within five years of becoming a Section 16(b) officer of the company. The amount of stock
required to satisfy the ownership requirement must be held by each NEO until termination of employment with
the company. The Compensation Committee also adopted a restriction on an NEO’s right to sell stock during
the initial five year period prior to such individual satisfying the required ownership. The restriction requires
that the NEO retain 50% of the net shares (after shares are disposed of to pay for taxes upon acquisition).
•Risk assessment review: In December 2011, the Compensation Committee reviewed a risk assessment of the
company’s global incentive plans and had a joint review meeting with the Audit Committee in February 2012
as part of the Compensation Committee’s oversight of risk in incentive compensation paid to employees,
including the NEOs.
•Severance arrangements with former Executive Officers: In September 2011, in connection with Mr. Brown’s
termination and pursuant to the terms of his previously negotiated Executive Employment Agreement,
Mr. Brown received a severance payment of $4,401,209, which included a retention bonus that the
50