Staples 2012 Annual Report Download - page 63

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54
APPROVAL, ON AN ADVISORY BASIS, OF NAMED EXECUTIVE OFFICER COMPENSATION
(Item 2 on the Proxy Card)
Our Board recognizes that it is appropriate to seek on an annual basis the views of stockholders on Staples' executive
compensation program. Our stockholders are being asked to approve, on an advisory basis, the compensation of our named
executive officers as disclosed in this proxy statement.
The primary objective of our compensation program is to align executive pay with long term stockholder value creation.
The "Executive Compensation" section of this proxy statement, including the "Compensation Discussion and Analysis" discussion,
describes in detail our executive compensation programs and the decisions made by the Compensation Committee with respect
to the 2012 fiscal year ended February 2, 2013. Following the 2011 advisory vote on executive compensation, the Committee
made certain changes that took effect in 2012. These changes included:
Revised long term cash incentive program goals from annual goals to a 3 year cumulative goal.
Decreased use of stock options and increased use of performance-based long term cash incentives.
Targeted market median rather than 75th percentile for long term incentives.
Included different measures of performance for annual and long term incentive goals.
Decreased stockholder dilution by replacing equity incentives with cash for associates below the director level.
Highlights from our executive compensation program include the following:
Over 61% of named executive officers' annual target compensation in 2012 was "at risk" based on performance.
Total CEO compensation for 2012 as reported in our summary compensation table decreased 27% as compared to 2011.
This decrease is due to lower payouts on performance-based compensation, including no payout for 2012 under the annual
and long term cash plans, and reduced option awards. The alignment between pay and performance in 2012 is attributable
to our emphasis on “at risk” pay.
For the three year 2009 - 2011 period, compensation decisions were aligned with the marketplace. We successfully
aligned compensation with short and long term business objectives. We motivated and retained executives during periods
of high volatility in the stock market, a strong market for talented executives and a challenging economic environment.
Our executive compensation governance includes many best practices, such as stock ownership guidelines, a policy
prohibiting hedging, an aggressive "clawback" policy and limited perquisites.
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 our new business strategy. The Committee challenged 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.