This website provides easy-to-access information about our 2017 Annual Meeting, including how you can vote. We encourage you to review this website, but we urge you also to read the Proxy Statement for the Annual Meeting before you vote. The Proxy Statement contains important information, including information required by the Securities and Exchange Commission, that does not appear on this website and could influence how you vote.
Our Compensation Discussion and Analysis (“CD&A”) describes how we design and manage our compensation program, provides an overview of our business performance and progress in 2016 with our Staples 20/20 strategy and most importantly, demonstrates the strong link between pay and performance for our Named Executive Officers (“NEOs”).
We also present a summary of shareholder feedback, the positive changes our Board has made to address this feedback, and describe how we established the compensation structure for our new CEO, appointed in September 2016.
The CD&A is structured as follows:
The Committee believes that executive compensation should be directly linked to performance and the creation of long-term value for our shareholders.
Based on this principle, as well as consultation with shareholders, the Committee has developed annual and longterm incentive programs that are tied to objective, quantifiable, and rigorous performance metrics. The metrics we use in our incentive programs support the long-term alignment of pay with performance.
The structure of our executive compensation program is intended to enable the company to attract, retain and motivate a talented management team to drive our business objectives of both top line and bottom line results, as well as attractive returns on capital. We believe our overall program, and in particular our focus on granting performance-based awards, is consistent with current best practices in compensation design.
Staples is a world-class provider of products and services that primarily serve the needs of business customers of all sizes in seven countries. The overwhelming majority of our revenue is generated in North America. We are committed to providing superior value to our customers through a broad selection of products, easy to use websites and mobile platforms, a differentiated salesforce, an integrated retail and online shopping experience and a wide range of print and marketing and technology services. With the disposition of our European business, at the end of fiscal year 2016 we operated two business segments, North American Delivery and North American Retail.
Our vision is we help businesses succeed. This reflects a multiyear effort to evolve our company to become the product and service destination for businesses in a rapidly evolving and competitive marketplace. In May 2016, we introduced our Staples 20/20 strategic plan with four key priorities to transform Staples and get our company back to sustainable sales and earnings growth. We are extremely focused on allocating more resources to the businesses where we have our strongest competitive advantages, and deemphasizing our underperforming businesses. We’re also prioritizing innovation as a key catalyst to further differentiate Staples from our competitors.
Our priorities are to:
Our North American Delivery segment (58% of total company sales in 2016) consists of the U.S. and Canadian businesses, including Staples Advantage, Staples.com, Staples.ca, and Quill.com, that sell and deliver products and services directly to businesses and consumers. Our strategies for North American Delivery focus on driving increased customer acquisition, retention and share of wallet through our customized contract offerings, our membership programs and expanding categories beyond office supplies, with a particular focus on the midmarket customer segment. We are also focused on serving our customers by evolving our team-based contract selling model to be more unified and collaborative. We are driving growth in categories beyond core office supplies by adding specialists who have expertise in selling products like facilities and break room supplies, furniture, promotional products and technology products.
Our North American Retail segment (37% of total company sales in 2016) consists of 1,255 stores in the United States and 304 stores in Canada at year end. Our strategies for North American Retail focus on offering easy-to-shop stores with products that are readily available and easy to find, and knowledgeable sales associates to support customers while preserving profitability through increased customer conversion, cost reductions and growing our services businesses. Our goals are to continue to be a destination for core office supply categories like ink, toner and paper as well as products and services beyond office supplies, such as print and marketing services, facilities and break room supplies and technology products and services.
2016 was a transformational year at Staples:
For several years, Staples has conducted a comprehensive shareholder outreach program. Our Board values the opportunity to engage directly with our shareholders to hear their thoughts, better understand their views and represent their interests. As a result of this program, over the past several years, the Board has made significant enhancements to our corporate governance and compensation programs including proactive adoption of key governance initiatives and restructuring compensation to increase alignment between pay and performance.
In 2016, our Say-on-Pay proposal received support from 94% of shares voted at our annual meeting of shareholders.
In 2016, we reached out to the top 200 institutional investors, representing 86% of shares outstanding. As we reached out, we provided shareholders and proxy advisory firms with an update of Staples’ governance and compensation practices. We ultimately held discussions with investors representing approximately 40% of our shares outstanding. Our Chair of our Compensation Committee and our Chair of our Nominating and Governance Committee participated in some of the discussions and played an important role in our outreach program.
A summary of shareholder’s perspectives related to executive compensation and the Board’s response is provided below. Our other robust corporate governance practices that have developed in response to shareholder feedback are described elsewhere in this proxy statement.
We received overwhelmingly positive feedback from our discussions with shareholders. They were appreciative of the Committee’s recent enhancements to the executive compensation program which included the following:
All enhancements to the executive compensation program were the direct result of shareholder feedback and based on the Committee’s careful deliberation with input from management and the independent compensation consultant. Shareholders also applauded the changes made to our executive compensation program for the new CEO and appreciated the continued responsiveness to shareholder feedback. CEO compensation is discussed more fully on page 33, but highlights of the program developed based on shareholder feedback are listed below.
We did not receive any shareholder proposals for inclusion in this year’s proxy statement. Although the shareholder feedback on our executive compensation program was very positive, the Committee will continue to monitor the sentiments of our shareholders through our outreach program.
The Committee will also remain vigilant to ensure that the goals in our incentive plans remain rigorous and our peer group is composed of companies that appropriately reflect the evolving markets which our company operates in, and the changing composition of our company.
Our NEOs for fiscal year 2016 were:
|Christine T. Komola||Executive Vice President and CFO|
|Mark Conte||Senior Vice President and Corporate Controller|
|Joseph G. Doody||Vice Chairman|
|Michael Williams2||Executive Vice President and Chief Legal Officer|
|Ronald L. Sargent3||CEO and Chairman|
|John Wilson4||President International Operations and Head of Global Transformation|
|1||Ms. Goodman served as President, North American Commercial until her appointment as interim CEO on June 14, 2016 and permanent CEO on September 25, 2016.|
|2||Mr. Williams’ title was Executive Vice President and General Counsel until January 2017.|
|3||Mr. Sargent stepped down from the CEO position on June 14, 2016 and left Staples on January 28, 2017.|
|4||Mr. Wilson left Staples on October 31, 2016.|
Messrs. Conte and Williams qualified as NEOs for 2016 due to the review of our management structure as part of Ms. Goodman’s transition to her new role as CEO.
In 2016, our executive compensation program had three elements: (1) base pay, (2) annual performance-based cash incentive and (3) long term incentive(s); for our CEO, from 2017 the long term incentive is 100% performance-based. For the other NEOs (excluding Mr. Conte), the long term incentive is 2/3rd performance-based and 1/3 time-based (Restricted Stock Units). The first chart below illustrates how our CEO’s target compensation in structured; the second chart shows the (average) target structure of NEOs other than the CEO (excludes Mr. Conte and NEOs who left Staples during 2016):
|Component||Fixed or Variable||2016 Benchmark/Metrics|
|Annual Cash Award||100% Performance based||
|Performance Share Award||100% Performance based||
|Restricted Stock Unit Award||100% Time based||
The Committee sets rigorous financial metrics tied directly to the success of our strategy and the creation of long-term shareholder value in a highly competitive industry.
Both our annual cash award and our performance share awards for 2016 were 100% tied to objective and rigorous financial goals. We set our goals for our incentive programs within the first 90 days of the fiscal year. Target performance goals are generally based on our fiscal year operating plan and outlook for the coming year.
The following tables set out our results against our predetermined, rigorous performance goals, under our incentive award plans for which there was a payout opportunity in 2016.
|Realized Value as
% of Target
|Christine T. Komola||$621,154||$291,942||47%|
|Joseph G. Doody||$593,635||$279,008||47%|
|Ronald L. Sargent||$1,873,812||$880,692||47%|
|1||Mr. Conte is not a member of Staples leadership team and was eligible for a different bonus plan in 2016 than the other NEOs.|
|*||Mr. Wilson was not eligible to receive a payment under the Annual Cash Incentive Award as he left Staples on October 31, 2016.|
In March 2017, performance shares were earned and released for the 2014-2016 performance cycle.
Performance Share Award, 2014 – 2016
|Realized Value as
% of Target
|1||Target shares calculated on share price of $13.40 on March 5, 2014 grant date and rounded up to the nearest full share.|
|2||Value based on closing price of $8.78 of Staples stock on date of release (March 7, 2017).|
|3||Mr. Conte is not eligible to receive Performance Share Awards.|
|4||Target shares calculated on share price of $13.40 on March 5, 2014 grant date and $14.43 on December 3, 2014 grant date, rounded up to the nearest full share.|
|5||Mr. Wilson’s award was pro-rated to reflect the fact that he left Staples on October 31, 2016.|
Total shareholder return (TSR) Notwithstanding our progress on key Staples 20/20 objectives, we believe total shareholder return on a 1-year basis was negatively affected by the U.S. District Court for the District of Columbia ruling in May, 2016 granting the Federal Trade Commission’s request for a preliminary injunction to block Staples’ acquisition of Office Depot, as well as yearover- year declines in total company sales and non-GAAP earnings per share during fiscal years 2014 – 2016. Our stock prices on the first and last day of fiscal 2016 were $8.92 and $9.16 respectively.
|Total Shareholder Return||Staples||S&P Retail
In 2016, Staples transitioned our CEO position from Mr. Sargent to Ms. Goodman, who was appointed to the role of interim CEO on June 14, 2016, and permanent CEO on September 25, 2016. The Committee engaged its independent compensation consultant, Exequity, to provide data and analysis to support the Committee’s decision-making process in agreeing an appropriate target compensation structure and value for the new CEO.
In reaching its decision, the Committee considered many factors, including peer group CEO compensation, tenure of each of the CEOs, and the revenue and market capitalization of the peer group companies. The analysis also took into account whether the role of CEO at the peer companies was a combined CEO / Chair role or whether the peer group company had separate CEO and independent Chair roles.
Ms. Goodman’s total target annual compensation as CEO is at the 25th percentile of our peer group companies
The Committee determined that the following target total compensation was appropriate:
Taking these changes together, this represents a reduction in target annual compensation for our CEO in excess of $1.3M or 11.8%, as set out in the table below.
|Target Annual Compensation as CEO|
|Mr. Sargent||Ms. Goodman||Difference,
vs. Mr. Sargent
|Target Annual Cash Incentive||150%||$1,873,812||150%||$1,650,000|
|Total Target Annual Cash||$3,123,020||$2,750,000||-$373,020|
|Long Term Incentives|
|Target Value - Performance Shares||$5,483,333||$7,250,000|
|Grant Date Value - Restricted Stock Units||$2,741,667||0|
|Long Term Incentives - Total Target Value||$8,225,000||$7,250,000||-$975,000|
|Total Target Annual Compensation||$11,348,020||$10,000,000||-$1,348,020|