Staples 2007 Annual Report Download - page 54

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In September 2007, for our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, the
Compensation Committee compared each element of compensation to the peer group and general industry data, with
a focus on total direct compensation and total cash compensation. Total direct compensation was reviewed in two
ways. First, the paper value of total direct compensation was analyzed by, at the date the data was analyzed, taking the
sum of the base salary, annual cash bonus, ‘‘in the money’’ value of annual stock option grants, and the value of
restricted stock awards or other long term incentives. Second, the Black Scholes value of total direct compensation
was analyzed by taking the sum of base salary, annual cash bonus, Black Scholes value of annual stock options as
reported by Equilar, the value of the restricted stock awards as reported by Equilar, and the value of long term
incentive grants at target as reported by Equilar. In addition, the Compensation Committee reviewed the 2006
compensation levels of the Presidents of North American Delivery and U.S. Retail by comparing their total direct
compensation and total cash compensation to salary survey data.
Based on its review of 2006 data, the Compensation Committee determined that:
• Our Chief Executive Officer’s total direct compensation for 2006 was between the 59th and 82nd percentiles
across our peer groups and general industry group, and his total cash compensation for 2006 approximated the
market median for our peer groups and was at the 33rd percentile of our general industry group.
• Our Chief Financial Officer’s total direct compensation was between the 76th and 87th percentiles across our
peer groups and general industry group, and his total cash compensation approximated the market median for
our peer groups and general industry group.
• Our Chief Operating Officer’s total direct compensation was between the 47th and 77th percentiles across our
expanded peer group and general industry group, and his total cash compensation was below the 25th percentile
across our peer groups and general industry group.
• Our Presidents of North American Delivery and U.S. Retail had total direct compensation that exceeded the
75th percentile and total cash compensation that approximated the median for the applicable survey data.
To ensure that our relative market performance was taken into account, the Compensation Committee also
evaluated our three year (2004-2006) performance in terms of earnings per share compound annual growth rate
(CAGR), average return to stockholders and return on invested capital (ROIC) compound annual growth rate against
our peer groups. The following table illustrates, on a percentile basis, Staples’ performance relative to the core peer
group and expanded peer group over the three year period.
3-Year EPS 3-Year Avg 3-Year ROIC
CAGR Return CAGR
Staples ....................................... 19.5% 13.8% 50.0%
Percentile relative to Core Peer Group (8) ............. 48 66 >90
Percentile relative to Expanded Peer Group (13) ......... 54 49 79
The Compensation Committee reviewed the 2006 compensation levels of the Chief Executive Officer, Chief
Financial Officer and Chief Operating Officer in view of these findings and determined that such levels were
consistent with our three year performance data relative to our peer groups, particularly given our compensation
program’s focus on median based cash compensation and pay for performance driven total direct compensation.
Specifically, the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer all received total direct
compensation that was generally between the median and 75th percentile of the peer groups and general industry
group. The Compensation Committee took into consideration that, in comparison to the market data, our Chief
Financial Officer’s role is generally more significant and broader in scope due to his wide ranging duties and role as
Vice Chairman. The Compensation Committee also took into account that the data related to the Chief Operating
Officer position is limited, with only four matches against our expanded peer group, and that the more relevant data is
provided by the survey of general industry companies with annual revenues of between $15 and $30 billion. In terms of
total cash compensation, the fact that this amount approximated the median for both the Chief Executive Officer and
Chief Financial Officer was generally to be expected given our compensation program design, and the below median
standing for the Chief Operating Officer was also expected given the limited comparable data, his limited tenure with
Staples and in his recently expanded role and the responsibilities of his position within Staples and in comparison to
other chief operating officers.
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