Staples 2015 Annual Report Download - page 47

EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS
www.staplesannualmeeting.com STAPLES 43
Benchmarking
In March 2015, the Committee set compensation for the
NEOs based on its December 2014 review of 2011-2013
compensation, its assessment of our 2014 performance,
stockholder feedback and results of 2014 Say-on-Pay
advisory vote, and general consideration of the totality of
the data, advice, and information provided by management
and Exequity.
In November 2015, 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 2014 and
also over the three-year period 2012-2014. 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 return on
invested capital 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 compensation
at target 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 last such review was conducted in 2012. The
Committee therefore conducted a detailed review of our peer
group over two committee meetings in 2015. The Committee
reviewed analysis of our peer group and potential alternative
peers provided by both management and the Committee’s
independent consultant. The analysis used a proprietary
model to compare the “fit” of each of our current peer group
companies to Staples’ profile based on industry, company
size, market valuation, and performance, and compared the
fit of the peer group companies to the fit of other potential
peer organizations that closely matched Staples’ profile. The
Committee also took into account shareholder feedback
received during our outreach discussions and the changing
dynamics of our business and the marketplace.
Subsequent to its review and analysis, in November 2015
the Compensation Committee determined to retain twelve
of the existing peer group companies* and to include six
new companies in the peer group (new companies are
shown shaded):
Bed Bath & Beyond Kohl’s Corporation Office Depot, Inc.
Best Buy Co., Inc. Limited Brands, Inc. Publix Super Markets, Inc.
CarMax, Inc. Lowe’s Companies, Inc. Rite Aid Corporation
FedEx Corporation Macy’s, Inc. Sysco Corporation
Gap Inc. NIKE, Inc. The TJX Companies, Inc.
J.C. Penney Company, Inc. Nordstrom, Inc. Xerox Corporation
* Since the last extensive review in 2012, two of the peers selected at that time have ceased to be peers (OfficeMax, having been acquired
by Office Depot and Safeway Inc., having merged with Albertson’s and no longer being publicly traded). Removed Amazon.com, Costco
Wholesale, The Home Depot, Starbucks, Target and Walgreens Boots Alliance.
Given the proposed acquisition of Office Depot, the
Committee constructed a second peer group for use upon
completion of the acquisition and as a secondary data source
for the purposes of evaluating our executive compensation.
In constructing the second peer group, the Committee
considered the increase in Staples’ projected revenue if the
acquisition is completed, and determined to retain thirteen
of the existing peer group companies (new companies are
shown shaded):
AutoNation, Inc. Kohl’s Corporation Sysco Corporation
Best Buy Co., Inc. Lowe’s Companies, Inc. Target Corporation*
Costco Wholesale Corporation* Macy’s, Inc. The TJX Companies, Inc.
FedEx Corporation NIKE, Inc. Walgreen Boots Alliance*
Gap Inc. Publix Super Markets, Inc. Xerox Corporation
The Home Depot, Inc.* Rite Aid Corporation
* While these companies are not part of our standalone peer group, they would remain as peers assuming the acquisition of Office Depot given the
increased size of our company.