Staples 2004 Annual Report Download - page 53

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Review of All Components of Compensation
The Committee has reviewed all components of Mr. Sargent’s and the other Senior Executives’ compensation,
including salary, bonus, current value of all stock options and restricted shares outstanding, the dollar value and cost
to the Company of all perquisites and benefits and the actual projected payout obligations under the Company’s
supplemental executive retirement plan and under potential termination, severance and change in control scenarios.
A tally sheet detailing the above components and possible scenarios with their respective dollar amounts was prepared
by management for each Senior Executive and reviewed by the Committee. Based on this review, and taking into
consideration the amount each executive officer would receive from accelerated vesting of equity grants in each of the
relevant scenarios, the Committee found the total compensation under these various scenarios to be reasonable.
Tax Considerations
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, certain executive compensation in
excess of $1 million paid to a public company’s chief executive officer and four other most highly-paid executives is not
deductible for federal income tax purposes unless the executive compensation is awarded under a performance-based
plan approved by the stockholders. To maintain flexibility in compensating executive officers in a manner designed to
promote varying corporate goals, the Committee has not adopted a policy that all compensation must be deductible.
The Committee intends, to the extent practicable, to preserve deductibility under the Internal Revenue Code of
compensation paid to its Senior Executives while maintaining compensation programs that support attraction and
retention of key executives.
Cash bonuses paid under the Bonus Plan, which was approved by stockholders at the 2003 Annual Stockholders
Meeting, and stock options awarded under the Company’s stock option plans, which were also approved by
stockholders, are performance-based and, accordingly, comply with Section 162(m) and are potentially deductible for
the Company. While the Company’s PARS program has a significant performance component, it cannot be qualified
under 162(m) without compromising valuable executive incentives which the Committee believes outweigh any tax
benefit to the Company.
Compensation Committee:
Richard J. Currie, Chairman
Brenda C. Barnes
Arthur M. Blank
Martin Trust (Chairman through March 2, 2004)
Compensation Committee Interlocks and Insider Participation
The Compensation Committee was entirely comprised of independent Directors during fiscal year 2005.
Messrs. Blank, Currie and Trust served on the Compensation Committee until March 2, 2004, and Ms. Barnes and
Messrs. Blank and Currie served on the Compensation Committee for the remainder of the fiscal year ended
January 29, 2005. None of our executive officers has served as a director or member of the compensation committee
(or other committee serving an equivalent function) of any other entity whose executive officers served as a Director
or member of our Compensation Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on our review of copies of reports filed by the Directors and the executive officers required to file
such reports pursuant to Section 16(a) under the Securities and Exchange Act of 1934, we believe that all of our
Directors and executive officers complied with the reporting requirements of Section 16(a) of the Securities and
Exchange Act of 1934, with the following exceptions: the sale on April 2, 2004 of 37,968 shares by Mr. Walsh, which
was reported on February 11, 2005; the transfer on August 11, 2004 of 56,013 shares by Christine Komola, our
Corporate Controller, to the Christine T. Komola Trust, which was reported on February 11, 2005; and the purchase
on December 22, 2004 by Mr. Blank of 15,000 shares, which was reported on December 29, 2004.
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