Staples 2014 Annual Report Download - page 51

EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS
www.staplesannualmeeting.com STAPLES 47
Benchmarking
In March 2014, the Committee set compensation for the
NEOs based on its December 2013 review of 2010-2012
compensation, its assessment of our 2013 performance,
stockholder feedback and results of 2013 Say-on-Pay advisory
vote, and general consideration of the totality of the data,
advice, and information provided by management and Exequity.
In December 2014, the Committee evaluated the
competitiveness of our NEOs’ compensation relative to
marketplace norms and practices by analyzing current proxy
statement data from our peer group. During the course of
this analysis, the Committee focused on whether Staples’
pay practices were aligned with performance. In addition, the
Committee considered input from the Company’s shareholder
outreach process during the preceding fall. This analysis was
intended to inform the Committee as to whether any changes
to the executive compensation program were needed.
The Committee evaluated the competitiveness of base salary,
total cash compensation (base salary plus annual cash
bonus) and total direct compensation levels being extended
to our CFO, President NAS&O, President NAC, and President
Europe. The Committee’s review extended to pay in 2013 and
also over the three year period 2011-2013. The Committee
then analyzed its findings with respect to pay competitiveness
in relation to the Company’s performance measured by one
year and three year TSR, EPS, revenue growth, and ROIC
relative to peer company results.
The principal consultant from Exequity met with the Committee
in executive session, without the presence of management,
to review CEO compensation. The Committee examined an
assessment of our CEO’s total target compensation relative
to peer group standards, pay mix relative to peers, pay
relationships between CEOs and other NEOs and actual
compensation realized relative to shareholder return, each
over one and three years.
Peer Group
The Committee reviews our peer group extensively every three
years. The most recent comprehensive review of our peer
group was performed in September 2012. The peer group
analysis was conducted by the Committee’s independent
consultant. The current peer group was analyzed using a
proprietary model to compare the “fit” of each of the peer group
companies to Staples’ profile based on industry, company
size, market valuation, and performance. The composition
of our peer group goes beyond just retailers and business to
business competitors. The Committee compared the fit of the
peer group companies to the fit of fifteen other potential peer
organizations that closely matched Staple’s profile. Based
on a quantitative and qualitative assessment, the Committee
determined not to make any changes to the existing peer
group. The companies in our peer group are set forth below.
Amazon.com, Inc* Kohl’s Corporation Starbucks Corp.
Best Buy Co., Inc. Limited Brands, Inc. Sysco Corporation
Costco Wholesale Corporation Lowe’s Companies, Inc. Target Corporation
FedEx Corporation Macy’s, Inc. The TJX Companies, Inc.
Gap Inc. Office Depot, Inc. Walgreen Co.
Home Depot, Inc. Safeway Inc. Xerox Corporation
J.C. Penney Company, Inc.*
* The Committee excluded from consideration in its benchmarking analysis data pertaining to CEOs at Amazon.com Inc. and J.C. Penney Company,
Inc. Amazon.com, Inc.’s information is excluded because of the irregular character of the compensation paid to its CEO, Jeffrey Bezos, who owns
19% of the company. J.C. Penney Company, Inc.’s information is excluded because of its pattern of irregular compensation due to CEO turnover.
The Committee intends to conduct a comprehensive review of our peer group in June 2015 in light of the changing dynamics of
the marketplace and our business and based on shareholder feedback received during our 2014 outreach discussions.
Compensation Findings, Analysis & Conclusions
This section describes the Committees’ decision process, analysis and rationale relating to compensation for our CEO and other
named executive officers.
CEO Compensation
Total CEO compensation for 2014 as reported in our Summary
Compensation Table was $12,391,537, including the grant
date fair value of the performance shares (66% of total 2014
compensation), which are earned over the fiscal 2014-2016
period and paid only if the performance goals are achieved.
In addition, total CEO compensation includes the amounts
earned in 2014 under the 2013-2014 long term cash plan.
We are required under Summary Compensation Table rules
to report grant date value for performance shares, and
amounts actually earned for cash awards, so the change in
long-term incentive compensation design makes year over
year comparisons within the Summary Compensation Table
more difficult.