Staples 2012 Annual Report Download - page 33

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24
Changes to Our Compensation Program
2013 Changes. In March 2013, the Committee engaged in a series of discussions focused on potential changes to the
compensation program, including a strategic review of executive compensation with its independent executive compensation
consultant in light of the new business strategy. The Committee, after receiving feedback from the stockholders and the independent
compensation consultant, challenged the prior program design assumptions and focused on evaluating the performance metrics
for each pay element and how those metrics worked together to incent management to execute on the Company's reinvention plan
and drive long term stockholder value. As part of this assessment, the Committee considered the complexity of the business,
historical regression analysis previously discussed with management, the independent compensation consultant's input on current
market practices and prior years' say-on-pay votes, with a desire to create a stronger link between pay and performance and simplify
our executive compensation program.
The Committee made the following changes to our 2013 executive compensation program:
To support our growth strategy, our annual cash bonus plan performance metrics will be 50% earnings per share (EPS)
and 50% sales. The sales component is weighted 25% total company sales and 25% sales beyond office supplies. For
purposes of calculating this metric, the Company defines “office supplies” as paper, ink, toner and core office products
(writing, folders, paperclips, etc.).
To emphasize long term stockholder value creation, our long term awards will be in the form of performance shares
with performance metrics of 50% return on net asset percentage (RONA%) and 50% sales growth. These long term
awards will be subject to a three year performance period, with goals set annually for each year of the cycle. In addition,
any award earned based on performance against these metrics will be increased or decreased by 25% based on the
Company's cumulative total shareholder return (TSR) over the three year performance period relative to the S&P 500.
To ensure pay for performance alignment, we eliminated annual grants of time-based restricted stock awards and stock
options, resulting in a 100% performance-based long term program.
To simplify the program, the long term incentive program will be comprised solely of performance shares.
As a result of these changes, beginning in 2013, “at risk” performance-based compensation increases to an average of
82%, with 100% of long term incentive compensation “at risk.” The chart below shows each element at target, as well as the "at
risk" portion of total direct compensation.
* The new performance shares and the annual cash bonus awards represent "at risk" compensation since minimum levels of performance must be attained in
order for any payout to occur.