Restoration Hardware 2012 Annual Report Download - page 29

• recommending business performance targets and establishing objectives; and
• recommending salary levels, bonuses and stock awards.
Executive Compensation Components
For the fiscal year ended February 2, 2013, the principal components of compensation for the named
executive officers were:
• base salary;
• performance-based annual cash incentives;
• long-term equity incentive compensation; and
• perquisites and other personal benefits.
Base Salary
We provide our named executive officers with base salary to compensate them for services rendered during
the fiscal year. In setting base salaries, the compensation committee periodically reviews broad-based third-party
survey data for the industry as an informal “market check” for salary levels. The base salary for each of the
named executive officers is guided by the salary levels for comparable positions in the industry, as well as such
individual’s personal performance, responsibilities and internal alignment considerations. The relative weight
given to each factor is not specifically quantified and varies with each individual at the compensation
committee’s discretion.
Each named executive officer’s base salary is typically reviewed annually and is adjusted from time to time
on the basis of (i) the compensation committee’s evaluation of the executive officer’s personal performance for
the year, (ii) the recommendations of our Chief Executive Officer (other than with respect to the Chief Executive
Officer’s base salary), and (iii) the competitive marketplace for executives in comparable positions.
The performance and profitability of our Company also may be a factor in determining the base salaries for
the named executive officers, as well as increases in the base salaries for the executive officers. In addition,
increases in base salaries for an executive officer have been approved in the past by the compensation committee
as a result of an individual’s performance or increases in the executive officer’s responsibilities. Further, in
certain cases the compensation committee has approved, as part of an executive officer’s initial employment
arrangement with us, a pre-determined increase in the executive officer’s base salary in a later year. Mr. Alberini,
Ms. Boone and Mr. Dunaj received annual base salaries in 2012 of $1,100,000, $475,000 and $550,000,
respectively. We increased Mr. Alberini’s annual base salary from $1,000,000 to $1,100,000 in November 2012
in connection with the Company’s initial public offering. In addition, in May 2013 we increased Ms. Boone’s
annual base salary to $495,000, and we increased Mr. Dunaj’s annual base salary to $575,000.
As of October 20, 2012, Mr. Friedman tendered his resignation and terminated his employment agreement
with our Company and contemporaneously entered into an advisory services agreement pursuant to which he
receives an annual consulting fee of $1,100,000. Prior to his resignation, Mr. Friedman received an annual base
salary of $1,000,000.
Performance-Based Annual Cash Incentives
We have adopted a Management Incentive Plan, or “MIP,” which is a cash based-incentive compensation
program designed to motivate and reward annual performance for eligible employees, including our named
executive officers. The compensation committee considers at the beginning of each year whether MIP bonus
targets should be established for the year and, if so, approves the group of employees eligible to participate in the
MIP for that year. The MIP includes various incentive levels based on the participant’s position. Cash bonuses
under the MIP have the effect of linking a significant portion of the named executive officers’ total cash
compensation to our overall performance.
21
Proxy Statement