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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantý | |||
Filed by a Party other than the Registranto | |||
Check the appropriate box: | |||
o | Preliminary Proxy Statement | ||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
ý | Definitive Proxy Statement | ||
o | Definitive Additional Materials | ||
o | Soliciting Material Pursuant to §240.14a-12 |
BEST BUY CO., INC. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box): | ||||||||
ý | No fee required. | |||||||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||||||
(1) | Title of each class of securities to which transaction applies: | |||||||
(2) | Aggregate number of securities to which transaction applies: | |||||||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||||||
(4) | Proposed maximum aggregate value of transaction: | |||||||
(5) | Total fee paid: | |||||||
o | Fee paid previously with preliminary materials. | |||||||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||||||
(1) | Amount Previously Paid: | |||||||
(2) | Form, Schedule or Registration Statement No.: | |||||||
(3) | Filing Party: | |||||||
(4) | Date Filed: |
BEST BUY CO., INC. 7601 Penn Avenue South Richfield, Minnesota 55423 |
NOTICE OF 20092010 REGULAR MEETING OF SHAREHOLDERS
Time: | 9:30 a.m., Central Time, on | |||||
Place: | Best Buy Corporate Campus — Theater 7601 Penn Avenue South Richfield, Minnesota 55423 | |||||
Internet: | Attend the Regular Meeting of Shareholders online, including submitting questions, atwww.proxyvote.com orwww.virtualshareholdermeeting.com/bby. | |||||
Items of Business: | 1. | To elect | ||||
2. | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February | |||||
3. | ||||||
To transact such other business as may properly come before the meeting. | ||||||
Record Date: | You may vote if you were a shareholder of record of Best Buy Co., Inc. as of the close of business on | |||||
Proxy Voting: | Your vote is important. You may vote via proxy: | |||||
1. | By visitingwww.proxyvote.com on the Internet; | |||||
2. | By calling (within the U.S. or Canada) toll-free at1-800-690-6903; or | |||||
3. | By signing and returning the enclosed proxy card. |
Regardless of whether you expect to attend the meeting in person, please vote your shares in one of the three ways outlined above.
By Order of the Board of Directors | ||||||
Minneapolis, Minnesota | Elliot S. Kaplan | |||||
May | Secretary |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE REGULAR MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 24, | ||||||
This Notice of 10-K for the fiscal year ended February | ||||||
Help us make a difference by eliminating paper proxy mailings to your home or business. As permitted by rules adopted by the U.S. Securities and Exchange Commission, we are pleased to make our proxy materials available electronically via the Internet. | ||||||
Internet distribution of our proxy materials is designed to expedite receipt by our shareholders, lower the cost of the Regular Meeting of Shareholders and conserve precious natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in | ||||||
ATTENDING THE REGULAR MEETING OF SHAREHOLDERS
Attending and participating via the Internet
GENERAL INFORMATION | ||||||
Background | 4 | |||||
Voting Procedure | 4 | |||||
Proxy Solicitation | 6 | |||||
Additional Information | 7 | |||||
CORPORATE GOVERNANCE AT BEST BUY | 8 | |||||
Board Structure | 8 | |||||
Board Composition | 9 | |||||
Director Independence | 9 | |||||
Board Leadership | 10 | |||||
Executive Sessions of Independent Directors | 11 | |||||
Board Meetings and Attendance | 11 | |||||
Committees of the Board | 11 | |||||
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Communications With the Board | ||||||
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ITEM OF BUSINESS NO. 1 — ELECTION OF DIRECTORS | ||||||
General Information | 15 | |||||
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Director Nomination Process | 15 | |||||
Board Diversity | 16 | |||||
Director Orientation and Continuing Education | 16 | |||||
Voting Information | 16 | |||||
Board Voting Recommendation | 16 | |||||
Nominees and Directors | 17 | |||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 22 | |||||
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 25 | |||||
EXECUTIVE AND DIRECTOR COMPENSATION | 26 | |||||
Compensation Discussion and Analysis | 26 | |||||
Compensation Philosophy, Objectives and Process | 26 | |||||
Compensation for Named Executive Officers | 32 | |||||
Other Compensation Matters | 43 | |||||
Compensation and Human Resources Committee Report on Executive Compensation | 48 | |||||
Compensation Committee Interlocks and Insider Participation | 48 | |||||
Compensation of Executive Officers | 49 | |||||
Summary Compensation Table | 49 | |||||
Grants of Plan-Based Awards | 52 | |||||
Outstanding Equity Awards at Fiscal Year-End | 53 | |||||
Options Exercised and Stock Vested | 55 | |||||
Non-Qualified Deferred Compensation | 56 | |||||
Potential Payments Upon Termination or Change-in-Control | 57 | |||||
Director Compensation | 60 | |||||
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS | ||||||
AUDIT COMMITTEE REPORT | ||||||
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ITEM OF BUSINESS NO. 2 — RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||||
Principal Accountant Fees and Services | 68 | |||||
Board Voting Recommendation | ||||||
68
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OTHER BUSINESS | ||||||
PROPOSALS FOR THE NEXT REGULAR MEETING | ||||||
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BEST BUY CO., INC.
7601 Penn Avenue South
Richfield, Minnesota 55423
PROXY STATEMENT
REGULAR MEETING OF SHAREHOLDERS — JUNE 24, 20092010
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board") of Best Buy Co., Inc. ("Best Buy," "we," "us," or "our") to be voted at our 20092010 Regular Meeting of Shareholders (the "Meeting") to be held on Wednesday,Thursday, June 24, 2009,2010, at 9:30 a.m., Central Time, at the Best Buy Corporate Campus — Theater, 7601 Penn Avenue South, Richfield, Minnesota, and on the Internet atwww.proxyvote.com orwww.virtualshareholdermeeting.com/bby, or at any postponement or adjournment of the Meeting. The proxy materials were either made available to you over the Internet or mailed to you beginning on or about May 12, 2009.11, 2010.
What is the purpose of the Meeting?
At the Meeting, shareholders will vote on the items of business outlined in the Notice of 20092010 Regular Meeting of Shareholders (the "Meeting Notice"), included as the cover page to this proxy statement. In addition, management will report on our business and respond to questions from shareholders.
Why did I receive a Notice of Internet Availability or why did I receive this proxy statement and a proxy card?
You received a Notice of Internet Availability or this proxy statement and a proxy card because you owned shares of Best Buy common stock as of April 27, 2009,2010, the record date for the Meeting, and are entitled to vote on the items of business at the Meeting. This proxy statement describes the items of business that will be voted on at the Meeting and provides information on these items so that you can make an informed decision.
Who may vote?
In order to vote at the Meeting, you must be a shareholder of record of Best Buy as of April 27, 2009,2010, which is the record date for the Meeting. If your shares are held in "street name" (that is, through a bank, broker or other nominee), you will receive instructions from the shareholder of record that you must follow in order for your shares to be voted as you choose.
When is the record date?
The Board has established April 27, 2009,2010, as the record date for the Meeting.
How many shares of Best Buy common stock are outstanding?
As of the record date, there were 416,280,233421,962,573 shares of Best Buy common stock outstanding. There are no other classes of capital stock outstanding.
On what items of business am I voting?
You are being asked to vote on the following items of business:
accounting firm for the fiscal year ending February 26, 2011; and
How do I vote?
If you are a shareholder of record (that is, if your shares are owned in your name and not in "street name"), you may vote:
If you wish to vote by Internet or telephone, you must do so before 11:59 p.m., Eastern Time, on Tuesday,Wednesday, June 23, 2009.2010. After that time, Internet and telephone voting will not be permitted, and a shareholder wishing to vote, or revoke an earlier proxy, must submit a signed proxy card or vote in person. Shareholders can vote in person or via the Internet during the Meeting. Shareholders of record will be on a list held by the inspector of elections. "Street name" shareholders, also known as beneficial holders, must obtain a proxy from the institution that holds their shares, whether it is their brokerage firm, a bank or other shareholder of record, and present it to the inspector of elections with their ballot. Shareholders attending via the Internet will need to follow the instructions atwww.proxyvote.com orwww.virtualshareholdermeeting.com/bby in order to vote or submit questions at the Meeting. Voting in person or via the Internet by a shareholder will replace any previous votes submitted by proxy.
In accordance with the rules of the U.S. Securities and Exchange Commission ("SEC"), we are sending all shareholders who have not affirmatively opted to receive paper materials, all of their proxy materials via the Internet. However, you may opt to receive paper copies of proxy materials, at no cost to you, by following the instructions contained in the Notice of Internet Availability.
"Street name" shareholders who wish to vote at the Meeting will need to obtain a proxy form from the institution that holds their shares of record.
How are my voting instructions carried out?
When you vote via proxy, you appoint Richard M. Schulze and Elliot S. Kaplan (the "Proxy Agents") as your representatives at the Meeting. The Proxy Agents will vote your shares at the Meeting, or at any postponement or adjournment of the Meeting, as you have instructed them on the proxy card. If you return a properly executed proxy card without specific voting instructions, the Proxy Agents will vote your shares in accordance with the Board's recommendations. With proxy voting, your shares will be voted regardless of whether you attend the Meeting. Even if you plan to attend the Meeting, it is advisable to vote your shares via proxy in advance of the Meeting in case your plans change.
If an item properly comes up for vote at the Meeting, or at any postponement or adjournment of the Meeting, that is not described in the Meeting Notice, the Proxy Agents will vote the shares subject to your proxy at their discretion.
How many votes do I have?
You have one vote for each share you own, and you can vote those shares for each item of business to be addressed at the Meeting.
How many shares must be present to hold a valid Meeting?
For us to hold a valid Meeting, we must have a quorum, which means that a majority of the outstanding shares of our common stock that are entitled to vote are present at the Meeting. Your shares will be counted as present at the Meeting if you:
How many votes are required to approve an item of business?
Pursuant to our Amended and Restated Articles of Incorporation and our Amended and Restated By-laws, each item of business to be voted on by the shareholders requires the affirmative vote of the holders of a majority of the shares of Best Buy common stock present at a meeting and entitled to vote.
The electionrules of directors and the ratification of the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm are considered "routine" matters under New York Stock Exchange ("NYSE") rules. The NYSE rules allow brokerage firms to vote their clients' shares on routine matters if the clients do not provide voting instructions at least 10 days prior to the shareholder meeting. The approvalratification of amendments tothe appointment of Deloitte & Touche LLP as our 2004 Omnibus Stock and Incentive Plan and Amended and Restated Articlesindependent registered public accounting firm is considered a routine matter under NYSE rules. The election of Incorporation aredirectors is not considered "non-routine" mattersa routine matter under NYSE rules. The NYSE rules do not allow brokerage firms to vote their clients' shares on non-routine matters, including the election of directors, in the absence of affirmative voting instructions.
If your brokerage firm votes your shares on routine matters because you do not provide voting instructions, your shares will be counted for purposes of establishing a quorum to conduct business at the Meeting and in determining the number of shares voted for or against the routine matter. If your brokerage firm lacks discretionary voting power with respect to an item that is not a routine matter and you do not provide voting instructions (a "broker non-vote"), your shares will be counted for purposes of establishing a quorum to conduct business at the Meeting, but will not be counted in determining the number of shares voted for or against the non-routine matter. Abstentions are counted as present and entitled to vote for purposes of determining a quorum and will have the same effect as votes against a proposal.
What if I change my mind after I vote via proxy?
You may revoke your proxy at any time before your shares are voted by:
Where can I find the voting results of the Meeting?
We will announce the preliminary voting results at the Meeting. We willplan to publish the final voting results in our Quarterlya Current Report on Form 10-Q for our second fiscal quarter ending August 29, 2009. Our Quarterly Report on 8-K ("Form 10-Q is required to be8-K") filed with the SEC within 40four business days of the end of our fiscal quarter.Meeting. If final voting results are not available within the four business day timeframe, we plan to file a Form 8-K disclosing preliminary voting results within the required four business days, to be followed as soon as practicable by an amendment to the Form 8-K containing final voting results.
How are proxies solicited?
We will request that brokerage firms, banks, other custodians, nominees, fiduciaries and other representatives of shareholders forward the Notice of Internet Availability and, as applicable, the proxy materials themselves, to the beneficial owners of our common stock. We expect to solicit proxies primarily by Internet and mail, but our directors, officers, other employees and agents of Best Buy may also solicit proxies in person, by telephone, through electronic transmission and by facsimile transmission. DirectorsOur directors and employees of Best Buy do not receive additional compensation for soliciting shareholder proxies.
Who will pay for the cost of soliciting proxies?
We pay all of the costs of preparing, printing and distributing proxy materials. We will reimburse brokerage firms, banks and other representatives of shareholders for reasonable expenses incurred as defined in the NYSE schedule of charges.
How can multiple shareholders sharing the same address request to receive only one set of proxy materials and other investor communications?
If you opt to continue to receive paper copies of our proxy materials, you may elect to receive future proxy materials, as well as other investor communications, in a single package per address. This practice, known as "householding," is designed to reduce our paper use, printing and postage costs. To make the election, please indicate on your proxy card under "Householding Election" your consent to receive such communications in a single package per address. Once we receive your consent, we will send a single package per household until you revoke your consent by notifying our Investor Relations Department at 7601 Penn Avenue South, Richfield, MN 55423, or by telephone at (612) 291-6147. We will start sending you individual copies of proxy materials
and other investor communications within 30 days of your revocation.
Can I receive the proxy materials electronically?
Yes. Shareholders who have not affirmatively opted to receive paper proxy materials through the mail will receive a Notice of Internet Availability and may access our proxy materials electronically via the Internet. Electronic delivery saves us the costs of printing and mailing these materials. We encourage our shareholders to access our proxy materials via the Internet because it reduces ourthe expenses for, and reduces the environmental impact of, our shareholder meetings. In 2008,2009, electronic delivery saved approximately 50 tons of paper that would otherwise have been consumed in the production of proxy materials. You may opt to receive paper copies of proxy materials, at no cost to you, by following the instructions we will provide in advance of the distribution of our 20092010 proxy materials.
An electronic version of this proxy statement is also posted on our Web site atwww.BestBuy.comwww.bby.com — select the "For Our Investors""Investor Relations" link and then either the "SEC Filings" link or the "Corporate Governance" link.
Where can I find additional information about Best Buy?
Our reports on Forms 10-K, 10-Q and 8-K, and other publicly available information should be consulted for other important information about Best Buy. You can also find additional information about Best Buyus on our Web site atwww.BestBuy.comwww.bby.com.
CORPORATE GOVERNANCE AT BEST BUY
Our Board is elected by theour shareholders to oversee our business and affairs. In addition, the Board counsels, advises and oversees management in the long-term interests of our company and our shareholders regarding a broad range of subjects including Best Buy strategiesincluding:
Members of the Board monitor and evaluate our business performance through regular communication with our Chief Executive Officer ("CEO")CEO and other members of management, and by attending Board meetings and Board committee meetings.
The Board values effective corporate governance and adherence to high ethical standards. As such, the Board has adopted Corporate Governance Principles for our directors and our Code of Business Ethics, both of which are posted on our Web site atwww.BestBuy.comwww.bby.com — select the "For Our Investors""Investor Relations" link and then the "Corporate Governance" link. Paper copies of these documents are available to shareholders free of charge upon request.
Our Board is committed to having a sound governance structure that promotes the best interests of our shareholders. To that end, our Board has evaluated and actively continues to examine emerging corporate governance trends and best practices. Shareholder perspectives play an important role in that process. Some key points regarding our board governance are as follows:
We believe our Board structure serves the interests of our shareholders by balancing Board continuity and the promotion of long-term thinking with the need for director accountability.
To ensure a diversity of perspectives, the Board seeks a balance of internal experience and external independent expertise. This combination of perspectives also helps to ensure that we sustain our corporate culture, which is a cornerstone of our business legacy and a key competitive advantage. In addition, the Board is diligently focused on the succession and development of our senior officers, as most recently exhibited during the June 2009 CEO transition with the internal promotion of Brian J. Dunn to the CEO position.
In accordance with these interests and the principles of effective corporate governance, in April 2009, the Board adopted a goal to have at least 75% of our directors be independent by June 2011. In addition, consistent with the Board's careful planning for the director skill sets required today and in the future, and in order to have an orderly succession and transition of directors, the Board determined that it is in the best interests of our company and shareholders that the incumbent non-independent directors complete the terms to which they have been elected.
The Board believes that the careful stewardship of our company and culture during a time of leadership transition merited a temporary increase in the total number of directors and the ratio of non-independent directors. Following the 2010 Regular Meeting of Shareholders, we anticipate that 75% of the Board will be considered independent, a full year ahead of our previously announced goal.
Pursuant to its Corporate Governance Principles, the Board has established independence standards consistent with the requirements of the SEC and NYSE corporate governance rules, as applicable. To be considered independent under the NYSE rules, the Board must affirmatively determine that a director or director nominee does not have a material relationship with Best Buy (directly, or as a partner, shareholder or officer of an organization that has a relationship with Best Buy). In addition, NYSE rules provide that no director or director nominee may be deemed independent if the director or director nominee
— has in the past three years:
— is:
Under our director independence standards described above, the Board has determined that each continuing
director, with the exception of Messrs. Dunn, Kaplan and Schulze, is independent. The Board based these determinations primarily on a review of the responses of the directors to questions regarding employment and compensation history, affiliations, and family and other relationships, and on discussions with our directors. The Board also reviewed our relationships with companies with which our directors are affiliated and determined that the relationships with affiliates of current directors Lisa M. Caputo, George L. Mikan III and Hatim A. Tyabji are not material and do not impair such directors' independence.
Ms. Caputo, a director since December 2009, is executive vice president, global marketing and corporate affairs at Citigroup, Inc. ("Citi"). Citi and/or its subsidiaries provide financial services to us. Citi is also a lender under our Revolving Credit Agreement ("Revolver"). We do not make direct payments to or receive direct loan proceeds from Citi under the Revolver, but Citi does receive interest payments through our lending agent from this relationship to the extent the agent has drawn down funds from Citi, as well as, fees for providing us access to funds through the Revolver. We entered into the Revolver and all other existing relationships with Citi prior to Ms. Caputo's consideration as a director and Ms. Caputo did not play any role in the negotiation of the Revolver.
Mr. Mikan, a director since April 2008, is executive vice president and chief financial officer of UnitedHealth Group Incorporated ("UnitedHealth"). Since 2003, we have had a health benefit services agreement with UnitedHealth. The amounts we have paid to UnitedHealth, most of which are for employee medical and pharmaceutical costs administered on our behalf by UnitedHealth, were an insignificant portion of the annual consolidated revenue of Best Buy and UnitedHealth for each of the past three fiscal years. In addition, Mr. Mikan did not influence or participate in negotiating or executing our agreement with UnitedHealth.
Mr. Tyabji, a director since 1998, has served as chairman of the board of directors of Jasper Wireless, Inc. ("Jasper") since November 2008. Through a services agreement with AT&T, we purchase wireless data connectivity services from Jasper for certain exclusive brand devices. We paid $1.1 million to Jasper in fiscal 2010, which represented a material portion of its recognized revenue for the year. Mr. Tyabji is not an employee of Jasper, nor did he influence or participate in negotiating our agreement for the purchase of Jasper services.
We separate the roles of CEO and Chairman of the Board in recognition of the differences between the two roles. Our CEO is responsible for setting our strategic priorities, in collaboration with the Board, and focuses on the development and execution of our strategies. He is also responsible for our ongoing leadership and performance. The Chairman of the Board provides guidance to the CEO, and sets the agenda for Board meetings and presides over meetings of the full Board. He focuses on Board oversight responsibilities, strategic planning and mentoring company officers. Our Chairman also periodically represents our company at public functions and actively engages with our employees at designated company functions.
Our Board has implemented the position of Lead Independent Director to preside at all executive sessions of independent directors, as defined under the rules of the NYSE. The Nominating Committee nominates an independent director to serve as the Lead Independent Director, the selection of whom is subject to ratification by the vote of a majority of the independent directors of the Board. In addition to presiding over executive sessions of the independent directors, the Lead Independent Director is responsible for calling meetings of the independent directors as appropriate, serving as a stakeholder liaison on behalf of the independent directors and performing such other duties as may be requested from time to time by the Board, the independent directors, the CEO or the Chairman of the Board.
Executive Sessions of Independent Directors
In order to promote open discussion among independent directors, the Board has a policy of conducting executive sessions of independent directors during each regularly scheduled Board meeting. These executive sessions have historically been chaired by independent directors on a rotating basis. However, beginning in June 2010, the executive sessions of independent directors will be chaired by the Lead Independent Director. The independent directors have elected Matthew H. Paull to serve as the initial Lead Independent Director.
The Board held four regular meetings and twoone special meetingsmeeting during the fiscal year ended February 28, 2009.27, 2010. Each incumbent director attended, in person or by telephone, at least 75% of the meetings of both the Board and Board committees on which he or she served. In fiscal 2009,2010, the average attendance by our incumbent directors at Board and Board committee meetings exceeded 95%. Our Board does not have a formal policy relating torequires director attendance at our regular meetings of shareholders; however, our directors generally attend the shareholders' meeting each year. Eachshareholders and 100% of the then-serving directors attended the 2008 Regular Meeting of Shareholders.2009 Meeting.
The Board has the following fourfive committees:
The charters for each of the Board committees are posted on our Web site atwww.BestBuy.comwww.bby.com — select the "For Our Investors""Investor Relations" link and then the "Corporate Governance" link. The charters include information
regarding the committees'each committee's composition, purpose and responsibilities. Paper copies of these documents are available to shareholders free of charge upon request.
The Board has determined that all members of the Audit Committee, Compensation and Human Resources Committee and Nominating Corporate Governance and Public Policy Committee are independent directors as defined under the SEC and NYSE corporate governance rules, as applicable. The Board has further determined that all members of the Audit Committee qualify as financial experts under SEC rules.
The Board committees have responsibilities as follows:
Audit Committee. This committee discharges the Board's oversight responsibility to Best Buy'sour shareholders and the investment community regarding: (i) the integrity of our financial statements and financial reporting processes; (ii) our internal accounting systems and financial and operational controls; (iii) the qualifications and independence of our independent registered public accounting firm; (iv) the performance of our internal audit function and our independent registered public accounting firm; and (v) our compliance with ethics programs, including our Code of Business Ethics, and legal, regulatory and regulatoryrisk oversight requirements.
In carrying out these duties, this committee maintains free and open communication between the Board, our independent registered public accounting firm, our internal auditors and management. This committee meets with management, our internal audit staff and our independent registered public accounting firm at least quarterly. In addition, this committee conducts quarterly conference calls with management and our independent registered public accounting firm prior to our earnings releases to discuss the results of our independent registered public accounting firm's quarterly reviews and fiscal year-end audit.
Compensation and Human Resources Committee. This committee discharges the Board's responsibilities related to executive officer and director compensation, including the establishment of our executive officer and director compensation philosophies, and evaluation of our CEO. Oversight responsibilities of this committee include succession planning and compensation-related risk oversight. This committee also oversees the development
and evaluation of, and approves, equity-based and other incentive compensation and other employee benefit plans of a compensatory nature, and oversees our human capital policies and programs.
Nominating, Corporate Governance and Public Policy Committee. This committee discharges the Board's responsibilities related to general corporate governance, including Board organization, membership, training and evaluation. It also reviews and recommends to the Board corporate governance principles, presents qualified individuals for election to the Board, and oversees the evaluation of the performance of the Board and its committees. Finally, this committee oversees matters of public policy and social responsibility that affect us domestically and internationally. For additional information regarding our director nomination process, seeDirector Nomination Process beginning on page 10.15.
Finance and Investment Policy Committee. This committee advises the Board regarding our financial policies and financial condition to help enable us to achieve our long-range goals. It evaluates and monitors the: (i) protection and safety of our cash and investments; (ii) achievement of reasonable returns on financial assets within acceptable risk tolerance; (iii) maintenance of adequate liquidity to support our activities; (iv) assessment of the cost and availability of capital; and (v) alignment of our strategic goals and financial resources.
Global Strategy Committee.Table This committee was established in January 2010, but did not have assigned members or meet during the fiscal year. The committee was created to provide insight, advice and counsel with respect to our strategic plans regarding connectivity, marketing, branding, customer centricity, and related enterprise initiatives. The committee will also provide an ongoing critical evaluation of, Contents
and accountability for performance within, our strategic plans and vision. The following table shows the date each committee was established, the number of meetings held in fiscal 20092010 and the names of the directors serving on each committee as of April 23, 2009:2010:
Committee | Date Established | Number of Meetings During Fiscal | Members | |||
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Audit | June 1, 1984 | Hatim A. Tyabji*† George L. Mikan Matthew H. Gérard | ||||
Compensation and Human Resources | February 13, 1997 | Frank D. Trestman* Kathy J. Higgins Victor Ronald James Hatim A. Tyabji | ||||
Nominating, Corporate Governance and Public Policy | February 13, 1997 | Kathy J. Higgins Victor* Ronald James Sanjay Khosla Rogelio M. Rebolledo | ||||
Finance and Investment Policy | September 13, 2006 | Elliot S. Kaplan* Allen U. Lenzmeier Matthew H. Paull Frank D. Trestman |
As previously announced, Committee membership is scheduled to change after the June 2010 Meeting as presented below:
Committee | Members | |
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Audit | Hatim A. Tyabji*† George L. Mikan III† Matthew H. Paull† Gérard R. Vittecoq† | |
Compensation and Human Resources | Ronald James* Kathy J. Higgins Victor George L. Mikan III Hatim A. Tyabji | |
Nominating, Corporate Governance and Public Policy | Kathy J. Higgins Victor* Sanjay Khosla Rogelio M. Rebolledo | |
Finance and Investment Policy | Elliot S. Kaplan* Ronald James Matthew H. Paull Gérard R. Vittecoq | |
Global Strategy Committee | Sanjay Khosla* Lisa M. Caputo Rogelio M. Rebolledo |
Our Board is responsible for oversight of enterprise risk. The Board considers enterprise risk factors as a critical element of its review of business strategy and performance and ensures that there is an appropriate balance of risk and opportunity. Management is responsible for the day-to-day risk management processes and their activities include assessing and taking actions necessary to manage risk incurred in connection with the operation of our business. Management reviews significant enterprise risks and our general risk management strategy with the Board. We believe this division of responsibilities is the most effective approach for addressing the risks we face and that our Board leadership structure supports this approach.
In connection with the Board's oversight function, each of the committees of the Board has principal responsibility for reviewing and discussing with management those risk exposures (i) specified in their charters, or (ii) identified from time to time by the committees themselves, as follows:
role, the Audit Committee meets privately with members of our independent registered public accounting firms, our internal audit staff and the legal staff.
In connection with their oversight of compensation-related risks, Compensation Committee members periodically review the most important enterprise risks to ensure that compensation programs do not encourage risk-taking that is reasonably likely to have a material adverse effect on us. With the help of the Compensation Committee's independent compensation consultant, in fiscal 2010, the Compensation Committee reviewed our compensation policies and practices for all employees, including executive officers. The review process identified our existing risk management framework and the key business risks that may materially affect us; reviewed all compensation plans and identified those plans that are most likely to impact these risks or introduce new risks; and balanced these risks against our existing processes and compensation program safeguards. The review process also took into account mitigating features contained within our compensation plan design which includes elements such as:
The Compensation Committee also considered other controls outside of compensation plan design which contribute to risk mitigation, including the weight placed on values in our performance management process, the independence of our performance measurement teams, and our internal control environment.
Based upon the process we employed, we determined that our compensation programs do not encourage risk-taking that is reasonably likely to result in a material adverse effect on us.
Shareholders and interested parties who wish to contact the Board, the Lead Independent Director, any other individual director, or the non-management or independent directors as a group, are welcome to do so in writing, addressed to such person(s) in care of:
Mr. Joseph M. Joyce
Senior Vice President, General Counsel and Assistant Secretary
Best Buy Co., Inc.
7601 Penn Avenue South
Richfield, Minnesota 55423
Mr. Joyce will forward all written shareholder correspondence to the appropriate director(s), except for spam, junk mail, mass mailings, customer complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Mr. Joyce may, at his discretion, forward certain correspondence, such as customer-related inquiries, elsewhere within our company for review and possible response. Comments or questions regarding our accounting, internal controls or auditing matters will be referred to the Audit Committee. Comments or questions regarding the nomination of directors and other corporate governance matters will be referred to the Nominating Committee. Comments or questions regarding executive compensation will be referred to the Compensation Committee.
ITEM OF BUSINESS NO. 1 — ELECTION OF DIRECTORS
Our Amended and Restated By-laws provide that the Board may consist of a maximum of 15 directors, eight of whom are designated as Class 1 directors and seven of whom are designated as Class 2 directors. Directors are elected for a term of two years, and the terms are staggered so that Class 1 directors are elected in even-numbered years and Class 2 directors are elected in odd-numbered years.
Director Qualification Standards
We only consider director candidates who embody the highest standards of personal and professional integrity and ethics and are committed to a culture of transparency and open communication at the Board level and throughout our company. Successful candidates are dedicated to accountability and continuous improvement with a belief in innovation as a key business success factor. They are also actively engaged, and have an innate intellectual curiosity and entrepreneurial spirit. Commitment to enhancing shareholder value and representing the interests of all shareholders is also required.
In evaluating candidates for nomination as a director, the Nominating Committee considers other criteria, including a history of achievement and superior standards, ability to think strategically, a willingness to share examples based upon experience, policy-making experience, and an ability to articulate a point of view, take tough positions, and constructively challenge management. In addition, the Nominating Committee may also consider gender, ethnic and geographical diversity; independence; and general criteria such as an ability to provide informed and thoughtful counsel, mature judgment, and listening skills.
Directors must also be committed to actively engaging in his or her Board roles, with sufficient time to carry out the duties of Board and Board committee membership.
Finally, one or more of our directors must possess the education or experience required to qualify as an "audit committee financial expert" pursuant to SEC rules.
The Nominating Corporate Governance and Public Policy Committee ("Nominating Committee") is responsible for screening and recommending to the full Board director candidates for nomination. The Nominating Committee will often engageengages a third-party search firm to assist in identifying appropriate candidates to consider as additions to our Board. When therethe Board is seeking to fill an opening on the Board,open director position, the Nominating Committee will also consider nominations received from our shareholders, provided that proposed candidates meet the requisite director qualification standards discussed below.above.
When the Board elects to fill a vacancy on the Board, the Nominating Committee will announce the open position and post any additional search criteria on our Web site atwww.BestBuy.comwww.bby.com — select the "For Our Investors""Investor Relations" link and then the "Corporate Governance" link. Candidates recommended by shareholders, if qualified, will be considered in the same manner as any other candidate.
The Nominating Committee will then evaluate the resumes of any qualified candidates recommended by a search firm or shareholders, as well as by members of the Board. Generally, in order to be considered for nomination, a candidate must have:
All candidates are evaluated based on thesethe qualification standards discussed above and the current needs of the Board.
Shareholder nominations must be accompanied by a candidate resume which addresses the extent to which the nominee meets the director qualification standards and any additional search criteria posted on our Web site. Nominations will be considered only if we are currentlythen seeking to fill an open director position. All nominations by shareholders should be submitted as follows:
Chairman, Nominating, Corporate Governance
and Public Policy Committee
c/o Mr. Joseph M. Joyce
Senior Vice President, General Counsel and
Assistant Secretary
Best Buy Co., Inc.
7601 Penn Avenue South
Richfield, Minnesota 55423
Director Independence
Board Diversity
Pursuant to itsOur Corporate Governance Principles specify that diversity on the Board has established independence standards consistent with the requirements of the SEC and NYSE corporate governance rules, as applicable. To be considered independent under the NYSE rules, the Board must affirmatively determine that a director or director nominee does not have a material relationship with Best Buy (directly, or as a partner, shareholder or officer of an organization that has a relationship with Best Buy). In addition, NYSE rules provide that no director or director nominee may be deemed independent if the director or director nominee
— has in the past three years:
— is:
Under our director independence standards described above, the Board has determined that each director (including former director Mary A. Tolan), with the exception of Messrs. Anderson, Kaplan, Lenzmeier and Schulze, is independent. The Board based these determinations primarily on a review of the responses of the directors to questions regarding employment and compensation history, affiliations, and family and other relationships, and on discussions with our directors. The Board also reviewed the relationships between Best Buy and companies with which our directors are affiliated and determined that the relationships with affiliates of current directors Messrs. Mikan, Trestman and Tyabji are
not material and do not impair the directors' independence. For additional information regarding these relationships, seeCertain Relationships and Related-Party Transactions on page 51.
Mr. Mikan, a director since April 2008, is executive vice president and chief financial officer of UnitedHealth Group Incorporated ("UnitedHealth"). Since 2003, we have had a health benefit services agreement with UnitedHealth. The amounts we have paid to UnitedHealth, most of which are for employee medical and pharmaceutical costs administered on our behalf by UnitedHealth, were an insignificant portion of the annual consolidated revenue of each of the companies for each of the past three fiscal years. In addition, Mr. Mikan did not participate in negotiating or executing our agreement with UnitedHealth.
Mr. Trestman has been a director since 1984. We lease retail space in a real estate development in which Mr. Trestman and his son-in-law have an interest. Their interest in the development was not deemed material to Mr. Trestman's independence because the amount of our annual lease payment is less than $1 million and the retail square-footage leased constitutes less than 15% of the total leasable square-footage in the development. In addition, Mr. Trestman did not participate in negotiating or executing our lease agreement.
Mr. Tyabji, a director since 1998, has served as chairman of the board of directors of Jasper Wireless, Inc. ("Jasper") since November 2008. We purchase wireless data connectivity services from Jasper for our private label mobile navigation devices. We paid $2 million to Jasper in fiscal 2009, which represented approximately 10% of its recognized revenue for the year. Mr. Tyabji is not an employee of Jasper, nor did he participate in negotiating or executing our agreement with Jasper.
Board Composition
The Board is committed to highly effective corporate governance that reflects the interests of our shareholders, customers and employees. To ensure a diversity of perspectives, the Board seeks a balance of internal experience and external independent expertise. This combination of perspectives also helps to ensure that we sustain our corporate culture, which is a cornerstone of our legacy and a key competitive advantage. In addition, the Board has diligently focused on the succession and development of our senior officers including, in particular, the internal candidates for our CEO, who also serves on the Board.
In accordance with these interests and the principles of effective corporate governance, in April 2009, the Board adopted a long-term goal recommended by the Nominating Committee to have at least 75% of our directors be independent. However, in the short-term, we expectdirector identification and nomination process. When considering candidates, the numberNominating Committee seeks nominees with a broad range of non-independent directorsexperience from a variety of industries and professional disciplines, such as finance, academia, law and government, along with a diversity of gender, ethnicity, age and geographic location. The Nominating Committee does not assign specific weights to increase dueparticular criteria and no particular criterion is necessarily applied to the likely appointment of the incoming CEO to the Board. In addition, consistent with the Board's careful planning for the director skill sets required today and in the future, and in order to have an orderly succession and transition of directors, the Board has determined that it is in the best interests of our company and shareholders that the incumbent non-independent directors complete the terms to which they have been elected or will likely be elected this year.
all prospective nominees. The Board believes that the careful stewardship of our company and culture during a time of leadership transition merits a temporary increasediversity in the total number of directorsbackgrounds and the ratio of non-independent directors. We expect that at least 75%qualifications of the directorsfull Board should provide a significant mix of experience, knowledge and abilities that will be independent following the 2011 regular meeting of shareholders.
Executive Sessions of Non-Management, Independent Directors
In order to promote open discussion among non-management directors,allow the Board has a policy of conducting executive sessions of independent directors during each regularly scheduled Board meeting. This session is chaired by the independent directors on a rotating basis.to fulfill its responsibilities.
Communications With the Board
Shareholders and interested parties who wish to contact the Board, any individual director, or the
non-management or independent directors as a group, are welcome to do so in writing, addressed to such person(s) in care of:
Mr. Joseph M. JoyceSenior Vice President, General Counsel and Assistant SecretaryBest Buy Co., Inc.7601 Penn Avenue SouthRichfield, Minnesota 55423
Mr. Joyce will forward all written shareholder correspondence to the appropriate director(s), except for spam, junk mail, mass mailings, customer complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Mr. Joyce may, at his discretion, forward certain correspondence, such as customer-related inquiries, elsewhere within Best Buy for review and possible response. Comments or questions regarding Best Buy's accounting, internal controls or auditing matters will be referred to members of the Audit Committee. Comments or questions regarding the nomination of directors and other corporate governance matters will be referred to members of the Nominating Committee. Comments or questions regarding executive compensation will be referred to members of the Compensation and Human Resources Committee ("Compensation Committee").
Director Orientation and Continuing Education
Our Nominating Committee oversees the orientation and continuing education of our directors. Director orientation familiarizes directors with our strategic plans;plans, significant financial, accounting and risk management issues;issues, compliance programs and other controls; policies;controls, policies, principal officers and internal auditors;auditors, and our independent registered public accounting firm. The orientation also addresses Board procedures, directors' responsibilities, our Corporate Governance Principles, and our Board committee charters.
We also offer continuing education programs to assist theour directors in maintaining their expertise in these areas. In addition, our directors have the opportunity to attend commercial director education seminars related to the director'stheir committee assignment(s) or to the work of the Board. In fiscal 2009,2010, we conducted an orientation for onetwo new membermembers of the Board andBoard. We also conducted one half-day continuing education session for the Board.
Director Compensation
OverviewBoard, facilitated by the National Association of Director Compensation
In April of each year, the Compensation Committee reviews the total compensation paid to non-management directors. The purpose of the review is to ensure that the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform the Board's duties, and to fairly compensate directors for their service. The review is comprehensive and includes consideration of qualitative and comparative factors. To ensure directors are compensated relative to the scope of their responsibilities, the Compensation Committee considers: (i) the time and effort involved in preparing for Board, committee and management meetings and the additional duties assumed by committee chairs; (ii) the level of continuing education required to remain informed of broad corporate governance trends, and material developments and strategic initiatives within Best Buy; and (iii) the risks associated with fulfilling fiduciary duties. To supplement the qualitative analysis, the Compensation Committee also considers the total value of the compensation as compared with director compensation at other Fortune 100 companies and our peer group of companies, which is described inHow We Determine Compensation on page 27.
Director Summary Compensation Table
The following table summarizes the compensation earned by our non-management directors and management directors that are not named executive officers (as described on page 26), during fiscal 2009:
Name | Fees Earned or Paid In Cash | (1) | Option Awards | (2) | Non-qualified Deferred Compensation Earnings | (3) | All Other Compensation | Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Kathy J. Higgins Victor | $ | 85,000 | $ | 100,575 | — | — | $ | 185,575 | |||||||||||||
Ronald James | 75,000 | 100,575 | — | — | 175,575 | ||||||||||||||||
Elliot S. Kaplan | 85,000 | 100,575 | — | — | 185,575 | ||||||||||||||||
Sanjay Khosla(4) | 9,478 | 40,425 | — | 49,903 | |||||||||||||||||
Allen U. Lenzmeier | — | 100,575 | — | 64,338 | (5) | 164,913 | |||||||||||||||
George L. Mikan III(6) | 56,250 | 106,350 | — | — | 162,600 | ||||||||||||||||
Matthew H. Paull | 75,000 | 100,575 | — | — | 175,575 | ||||||||||||||||
Rogelio M. Rebolledo | 75,000 | 100,575 | — | — | 175,575 | ||||||||||||||||
Richard M. Schulze | — | — | (7) | — | 164,654 | (8) | 164,654 | ||||||||||||||
Mary A. Tolan(9) | 52,953 | — | — | — | 52,953 | ||||||||||||||||
Frank D. Trestman | 90,000 | 100,575 | — | — | 190,575 | ||||||||||||||||
Hatim A. Tyabji | 90,000 | 100,575 | — | — | 190,575 | ||||||||||||||||
Gérard R. Vittecoq(10) | 8,510 | 40,425 | — | — | 48,935 |
Annual retainer | $ | 75,000 | |||
Annual committee chair retainer (Audit Committee or Compensation Committee) | 15,000 | ||||
Annual committee chair retainer (all other committees) | 10,000 |
The annual retainer and the annual committee chair retainer for non-management directors who serve during only a portion of a fiscal year are prorated. All annual retainers are paid in quarterly installments.
At February 28, 2009, the aggregate number of shares subject to outstanding stock option awards was: Ms. Higgins Victor — 45,000 shares; Mr. James — 45,000 shares; Mr. Kaplan — 101,250 shares; Mr. Khosla — 3,750 shares; Mr. Lenzmeier — 25,000 shares; Mr. Mikan — 7,500 shares; Mr. Paull — 45,000 shares; Mr. Rebolledo — 20,000 shares; Mr. Schulze — 1,736,250 shares; Mr. Trestman — 101,250 shares; Mr. Tyabji — 78,750 shares; and Mr. Vittecoq — 3,750 shares.
Employment Arrangement for Richard M. Schulze
In April 2007, we entered into an amended employment arrangement with Richard M. Schulze, a founder of Best Buy, our current Chairman of the Board and our former CEO. Mr. Schulze is responsible as Chairman for Board oversight, corporate strategic planning and mentoring company officers. Mr. Schulze also periodically represents Best Buy at public functions and actively engages with employees at designated company functions. Pursuant to our employment arrangement with Mr. Schulze, he received an annual salary of $150,000 for as long as he is physically and mentally proficient to act as Chairman, subject to his election as a director by our shareholders. The arrangement allows for annual increases based on the consumer price index. Mr. Schulze is not eligible to participate in our equity-based compensation programs for employees. However, he is eligible to receive options to purchase the same number of shares granted to non-management directors, as described inDirector Equity Awards below. In addition, we provided the following benefits to Mr. Schulze in fiscal 2009: (i) reimbursement of all business-related expenses, including travel, entertainment, room and board; (ii) eligibility for Mr. Schulze and his spouse to participate in health benefit programs generally available to our employees; (iii) office facilities at our corporate campus, including full administrative support services; and (iv) eligibility to participate in our Retirement Savings Plan and Deferred Compensation Plan.
Employment Arrangement for Allen U. Lenzmeier
In fiscal 2009, Allen U. Lenzmeier, a Vice Chairman, provided consulting services to us in connection with our international expansion projects. Pursuant to our employment arrangement with Mr. Lenzmeier, we paid Mr. Lenzmeier an annual salary of $60,000 to work on a part-time basis. Mr. Lenzmeier was not eligible to participate in our equity-based compensation programs for employees, except our 2008 Employee Stock Purchase Plan ("ESPP"). However, he received options to purchase the same number of shares granted to non-management directors, as described inDirector Equity Awards below. In addition, we provided the following benefits to Mr. Lenzmeier in fiscal 2009: (i) reimbursement of all business-related expenses, including travel, entertainment, room and board; (ii) office facilities at our corporate campus, including administrative support services; and (iii) eligibility to participate in our Retirement Savings Plan and Deferred Compensation Plan. Mr. Lenzmeier terminated his employment arrangement with us as of the end of fiscal 2009 but will continue to serve as a director for the remainder of his term through June 2010.
Director Equity Awards
A significant portion of director compensation is linked to our stock performance in the form of stock option grants. Each April, in connection with the Compensation Committee's annual review of director compensation, the Compensation Committee considers a stock option award for directors. On April 8, 2008, the Compensation Committee granted to each then-serving director, other than management directors who are eligible to participate in our equity-based compensation programs for employees, an option to purchase 7,500 shares of Best Buy common stock at an exercise price of $42.19 per share. Mr. Schulze requested that he not be granted a long-term incentive award and that
options to purchase the number of shares he would have received be contributed to a discretionary award pool to be distributed to our employees. The grants were made under the Omnibus Plan, vested immediately on the grant date and can generally be exercised over a 10-year period.
The Compensation Committee also considers stock option grants for new directors at the time they are appointed to the Board. Because annual director stock option grants are made in April, special appointment-based grants are prorated based on the number of months remaining prior to the time when the Compensation Committee expects to consider the next annual director grant.
Director Stock Ownership Guidelines
The Compensation Committee has established stock ownership guidelines for our non-management directors. Each non-management director is expected to own shares of our common stock equivalent in value to five times their annual cash retainer. Newly appointed directors have five years from their date of appointment to achieve the expected level of stock ownership.
Deferred Compensation Plan
Each calendar year, we offer directors the right to defer up to 100% of their annual and committee chair retainers under our Deferred Compensation Plan which is described inNon-Qualified Deferred Compensation Plan on page 48. No company contributions or matching contributions are made for the benefit of directors under the Deferred Compensation Plan.
Other Benefits
We reimburse all directors for travel and other necessary business expenses incurred in performance of their services for us. In addition, all directors are covered under a directors' and officers' indemnity insurance policy.
Table of ContentsCorporate Directors.
ITEM OF BUSINESS NO. 1 — ELECTION OF DIRECTORS
General Information
Our Amended and Restated By-laws provide that the Board may consist of a maximum of 13 directors, six of whom are designated as Class 1 directors and seven of whom are designated as Class 2 directors. Directors are elected for a term of two years, and the terms are staggered so that Class 1 directors are elected in even-numbered years and Class 2 directors are elected in odd-numbered years.
Board Structure
Our Board is committed to having a sound governance structure that promotes the best interests of all Best Buy shareholders. To that end, our Board has evaluated and actively continues to examine emerging corporate governance trends and best practices. Shareholder perspectives play an important role in that process. The level of importance afforded to shareholder perspectives by our Board is evident upon a closer review of the Board's governance structure. Some key points regarding that structure are as follows:
We believe our Board structure serves the interests of shareholders by balancing Board continuity and the promotion of long-term thinking with the need for director accountability.
Voting Information
You may vote for all, some or none of the nominees to be electedfor election to the Board. However, you may not vote for more individuals than the number nominated. Each of the nominees has agreed to continue serving as a director if elected. However, if any nominee becomes unwilling or unable to serve and the Board elects to fill the vacancy, the Proxy Agents named in the proxy will vote for an alternative person nominated by the Board. Our Amended and Restated Articles of Incorporation prohibit cumulative voting, which means you can vote only once for any nominee. The affirmative vote of a majority of the voting power of the shares present and entitled to vote at the Meeting is required to elect each director nominee.
IF YOU RETURN A PROXY CARDCARDS THAT ISARE PROPERLY SIGNED BUT YOU HAVE NOT MARKED YOUR VOTE, THAT PROXYAND RETURNED WILL BE VOTED TO ELECTFOR THE ELECTION OF ALL OF THE NOMINEES.NOMINEES UNLESS OTHERWISE SPECIFIED.
Management and the Board recommend that shareholders voteFOR the re-election of Ronald James,
Elliot S. Kaplan, George L. Mikan III, Matthew H. Paull, RichardLisa M. SchulzeCaputo, Brian J. Dunn, Kathy J. Higgins Victor, Rogelio M. Rebolledo, and Hatim A. TyabjiGérard R. Vittecoq as Class 21 directors. Management and the Board also recommend that shareholders voteFOR the election of Sanjay Khosla. If elected, each Class 21 director will hold office until the election of directors at our 20112012 Regular Meeting of Shareholders and until his or her
successor has been duly elected and qualified, or until his or her earlier death, resignation or removal.
The Board appointed Gérard R. Vittecoq as a Class 1 director, effective September 26, 2008. Mr. Vittecoq was recommended to the Board by an independent third-party search firm. Management and the Board recommend that shareholders voteFOR the ratification of Mr. Vittecoq's appointment as a Class 1 director at the Meeting. If his appointment is ratified, Mr. Vittecoq will hold office until the election of directors at the 2010 Regular Meeting of Shareholders and until his successor has been duly elected and qualified, or until his earlier death, resignation or removal.
All of the nominees are currently members of the Board.
The biographies of each of the nominees and continuing directors below contains information regarding the person's service as a director, business experience, public company director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings during the last ten years if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating Committee and the Board to determine that the person should serve as a director.
There are no family relationships among the nominees or between any nominees and any of our other directors.
ITEM OF BUSINESS NO. 1.11
Class 21 Director NomineesNominees:
(ages as of February 28, 2009)27, 2010)
Lisa M. Caputo, 46, has been a director since December 2009. Ms. Caputo is executive vice president and chief marketing officer for Citigroup Inc., a leading global financial services company. Since January 2000, she has been founder, chairman and chief | ||
executive officer of Citi's Women & Co. business, a membership service that provides financial education and services for women. As such, she is a driving force for women in leadership, an area of focus for us. From 1998 to 1999, Ms. Caputo was vice president, global communications and synergy for Disney Publishing Worldwide, the world's largest publisher of children's books and magazines. From 1996 to 1998, she was vice president of corporate communications for CBS Corporation, a mass media company. From 1992 to 1996, Ms. Caputo served in President Bill Clinton's administration, both as press secretary for First Lady Hillary Rodham Clinton, and as deputy assistant to the President. Ms. Caputo also serves on the boards of WNET Channel 13, The Sesame Workshop, New Visions for Public Schools and The Creative Coalition. She is a member of the International Steering Committee for FINCA International, The New York Presbyterian Sloane Hospital Advisory Committee, the Women@NBCU Advisory Board, the Council on Foreign Relations and the Financial Women's Association. With her broad background with various for-profit companies and non-profit organizations, Ms. Caputo brings to the Board extensive marketing expertise, global and corporate communications experience and political savvy. She is also a highly respected, well-connected leader and is credited for her comprehensive approach, intelligence and tenacity. |
Brian J. Dunn, 49, has been a director since June 2009 when he was also named our CEO. A 25-year veteran of our company, Mr. Dunn began his career with us as a store associate in 1985 when we operated only a dozen stores. From February 2006 until being | ||
named to his current position, Mr. Dunn served as President and Chief Operating Officer. Prior to that, he held numerous positions within our company, including President — Retail, North America, Executive Vice President, Senior Vice President, Regional Vice President, Regional Manager, District Manager and Store Manager. During his time with us, Mr. Dunn has made significant contributions to our market share growth, employee retention, vendor relationships and customer satisfaction scores. Mr. Dunn also serves on the board of Dick's Sporting Goods, Inc., a full-line sporting goods retailer, as well as on the board of The Best Buy Children's Foundation. Mr. Dunn plans to complete his term on the board of Dick's Sporting Goods, Inc., but will not stand for re-election at their June 2010 meeting. Mr. Dunn has established himself as a powerful representative of our brand, an advocate for our unique culture, and a decisive architect of organizational transformation. His personal involvement in the site selection and opening process of over five hundred stores provides him with valuable commercial real estate experience. In addition, Mr. Dunn's day-to-day leadership provides him with intimate knowledge of our operations. His reputation as a leader and success in retail, branding and market expansion are valuable assets to the Board as it looks to move forward in an ever-changing retail environment. | ||
Kathy J. Higgins Victor, 53, has been a director since November 1999. Since 1994, she has been president of Centera Corporation, an executive development and leadership coaching firm that she founded, located in Minneapolis, Minnesota. From 1991 to 1994, | ||
she was senior vice president of human resources at Northwest Airlines, Inc. (now Delta Air Lines), a commercial airline, and prior to that held senior executive positions at The Pillsbury Company (subsequently acquired by General Mills, Inc.), a producer of grain and other foodstuffs, and Burger King Corporation, which operates and franchises a worldwide system of Burger King restaurants. She is also on the board of trustees of the University of St. Thomas. Ms. Higgins Victor's roles with these strongly-branded public companies and academic institution give her extensive experience in the areas of established company cultures, executive compensation and human resources. Through her professional background, Ms. Higgins Victor brings to the Board large company leadership expertise, a dedication to continuous improvement and entrepreneurial experience. In addition, her experience in executive development, succession planning and leadership coaching continues to be a valuable asset to the Board. | ||
Rogelio M. Rebolledo, 65, has been a director since August 2006. In 2007, Mr. Rebolledo retired from his position as chairman of PBG Mexico, the Mexican operations of The Pepsi Bottling Group, Inc., a manufacturer and distributor of Pepsi-Cola beverages. He began | ||
his 30-year career with PepsiCo in 1976 at Sabritas, the salty snack food unit of Frito-Lay International in Mexico. He was responsible for the development of the international Frito-Lay business, first in Latin America and then in Asia. From 2001 to 2003, he was president and chief executive officer of Frito-Lay International, a producer of snack foods. He also served as president and chief executive officer of The Pepsi Bottling Group's Mexico operations from January 2004 until being named chairman. Mr. Rebolledo also serves on the board of Kellogg Company, a manufacturer and marketer of ready-to-eat cereal and convenience foods. He previously served on the boards of The Pepsi Bottling Group; Applebee's International, Inc., a restaurant chain (now DineEquity, Inc.); and ALFA Corporation, a manufacturer of high-tech aluminum engine heads and blocks based in Mexico. His experience in oversight responsibility for multi-national operations and international expansion at Pepsi and Frito-Lay is highly valuable to the Board as it makes decisions about our international expansion. Through his time with these companies, in addition to his board service at Kellogg, Applebee's and ALFA, he brings a wealth of knowledge and experience in large company leadership, marketing, branding, international business and global market entry — key elements of our strategic priorities. |
Gérard R. Vittecoq, 61, has been a director since September 2008. Since 2004, he has been a group president of Caterpillar, Inc., a manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines based in Peoria, | ||
Illinois. He has responsibility for the company's Europe-Africa-Middle East ("EAME"), CIS (EAME) Distribution Services division, EAME Operations division, Marine, Petroleum and Power division, Electric Power division, and for the Caterpillar Production Center of Excellence division. He joined Caterpillar in 1975 and has held various accounting and finance positions within the company. From 1987 to 1990, he was in charge of strategy projects and was appointed director of strategy & planning in 1990. From 1995 to 1997, he was managing director of Caterpillar France S.A. In 1997, he became managing director of Caterpillar Belgium S.A. He was elected a vice president in January 2001, overseeing the EAME Product Development & Operations division. Through Mr. Vittecoq's tenure with Caterpillar, he has gained international management experience, branding knowledge and financial expertise. He is a member of the IMD (International Institute for Management Development) Foundation board, a member of the Evian Group: Free Trade Think Tank, an executive member of the World Business Council for Sustainable Development and a vice president of the board of the Swiss-American Chamber of Commerce. Mr. Vittecoq's background as an accomplished business leader and his financial acumen, in addition to his political savvy, are valuable assets to the Board as it focuses on our further expansion in the global marketplace. |
Class 2 Directors — Terms expire in 2011
(ages as of February 27, 2010)
Ronald James | ||
cultures at the enterprise, community and global levels. From 1996 to 1998, he was president and chief executive officer of the Human Resources Group, a division of Ceridian Corporation, a business services company located in Minneapolis, Minnesota. From 1971 to 1996, he was with US West Communications, Inc. (now |
Elliot S. Kaplan | ||
owner and director of the Bank of Naples in Naples, |
Sanjay Khosla | ||
categories. Prior to joining Kraft, he was with Fonterra | ||
Co-operative Group Ltd., a | ||
George L. Mikan III | ||
of increasing responsibility from 1998 to the | ||
Matthew H. Paull | ||
for McDonald's Corporation, which develops, operates, franchises and services a worldwide system of McDonald's | ||
restaurants. He retired from that position in January 2008. At McDonald's, Mr. Paull acquired a background in strong branding and consumer trends, knowledge that is highly relatable to our company. Prior to joining McDonald's Corporation in 1993, he was a partner at Ernst & Young LLP, specializing in international tax. He also serves on the advisory board of Pershing Square Capital Management, a New York-based hedge fund. Mr. Paull previously served as a trustee of the Ravinia Festival Association, which offers concerts and other entertainment in suburban Chicago, Illinois, and as an advisory council member for the Federal Reserve Bank of Chicago. As a former executive professor in residence at the University of San Diego, Mr. Paull also possesses an understanding of the academic world. Because of his professional experience, Mr. Paull has significant financial acumen, knowledge of hedge funds and investments, broad experience in global operations and extensive experience in tax matters, all of which enable Mr. Paull to make valuable contributions to our Board. |
Richard M. Schulze | ||
executive officer for | ||
more than 30 years. He is on the board of trustees of the University of St. Thomas, chairman of its Executive and Institutional Advancement Committee, and a member of its Board Affairs Committee. Mr. Schulze is also chairman of the board of governors of the University of St. Thomas Business | ||
Hatim A. Tyabji | ||
ITEM OF BUSINESS NO. 1.2
Nominee for Ratification as Class 1 Director — Term expires in 2010(age as of February 28, 2009)
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information about the number of shares of Best Buy common stock beneficially owned at February 28, 2009,27, 2010, by our Chairman of the Board, our CEO, our Chief Financial Officer and each of our three other most highly compensated continuing executive officers during the most recent fiscal year. The table provides similar information for each director including the director nominees, all directors and executive officers as a group, and each person we know who beneficially owns more than 5% of the outstanding shares of Best Buy common stock.
Name and Address(1) | Number of Shares Beneficially Owned | Percent of Shares Beneficially Owned | |||
---|---|---|---|---|---|
Richard M. Schulze | 70,863,932 | (2) | 17.1% | ||
Bradbury H. Anderson | 3,826,219 | (3) | * | ||
James L. Muehlbauer | 148,172 | (4) | * | ||
Brian J. Dunn | 499,504 | (5) | * | ||
Robert A. Willett | 489,875 | (6) | * | ||
Shari L. Ballard | 177,259 | (7) | * | ||
Kathy J. Higgins Victor | 50,730 | (8) | * | ||
Ronald James | 48,504 | (9) | * | ||
Elliot S. Kaplan | 165,561 | (10) | * | ||
Sanjay Khosla | 3,750 | (11) | * | ||
Allen U. Lenzmeier | 2,479,034 | (12) | * | ||
George L. Mikan III | 7,500 | (13) | * | ||
Matthew H. Paull | 55,169 | (14) | * | ||
Rogelio M. Rebolledo | 20,000 | (15) | * | ||
Frank D. Trestman | 196,785 | (16) | * | ||
Hatim A. Tyabji | 126,750 | (17) | * | ||
Gérard R. Vittecoq | 3,750 | (18) | * | ||
All directors and executive officers, as a group (27 individuals) | 79,856,277 | (19) | 19.0% | ||
Capital Research Global Investors | 22,170,850 | (20) | 5.4% | ||
Capital World Investors | 40,486,680 | (21) | 9.8% |
Name and Address(1) | Number of Shares Beneficially Owned | Percent of Shares Beneficially Owned | ||
---|---|---|---|---|
Richard M. Schulze | 70,162,859(2) | 16.69% | ||
Brian J. Dunn | 603,712(3) | * | ||
James L. Muehlbauer | 187,449(4) | * | ||
Shari L. Ballard | 226,085(5) | * | ||
Michael A. Vitelli | 103,413(6) | * | ||
Scott Wheway | 0(7) | * | ||
Bradbury H. Anderson | 2,862,126(8) | * | ||
Lisa M. Caputo | 2,500(9) | * | ||
Kathy J. Higgins Victor | 46,980(10) | * | ||
Ronald James | 57,965(11) | * | ||
Elliot S. Kaplan | 148,061(12) | * | ||
Sanjay Khosla | 12,250(13) | * | ||
Allen U. Lenzmeier | 2,321,684(14) | * | ||
George L. Mikan III | 17,000(15) | * | ||
Matthew H. Paull | 62,669(16) | * | ||
Rogelio M. Rebolledo | 28,350(17) | * | ||
Frank D. Trestman | 193,085(18) | * | ||
Hatim A. Tyabji | 134,250(19) | * | ||
Gérard R. Vittecoq | 14,682(20) | * | ||
All directors and executive officers, as a group (26 individuals) | 77,875,199(21) | 18.37% |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and shareholders who own more than 10% of our common stock file initial reports of ownership with the SEC and the NYSE. They must also file reports of changes in ownership with the SEC and the NYSE. In addition, they are required by SEC regulations to provide us copies of all Section 16(a) reports that they file with the SEC. Based solely on a review of such Section 16(a) reports, management and the Board believe our directors, executive officers and shareholders who own more than 10% of our outstanding equity securities complied with the reporting requirements during the fiscal year ended February 28, 2009,27, 2010, except that (i) due to an administrative delay, a report was not filed in a timely manner for a purchase of common stock on October 22, 2008,April 2, 2009, by Richard M. Schulze, Chairman.Mr. James; (ii) due to administrative delay, a report was not filed in a timely manner for a grant of stock options on June 23, 2009, to the spouse of Michael J. Pratt, President and Chief Operating Officer — Best Buy Canada; and (iii) due to administrative delay, a report was not filed in a timely manner for several transfers of common stock on December 28, 2009, by Mr. Anderson.
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Our Compensation Discussion and Analysis describes the material elements of compensation for our "named executive officers" who are:
For fiscal 2009,2010, the named executive officers generally participated in the same compensation programs and were evaluated similarly. However,similarly, with the exception of Mr. Morrish voluntarily terminated his employment with usWheway's program which is tailored to our European business. Mr. Anderson retired from the position of CEO effective February 28,June 24, 2009, and is included as a named executive officer as a result of the payment he received pursuanthis former CEO status. Likewise, Mr. Willett retired from our company effective January 4, 2010, and Mr. Pershing left us on February 5, 2010. Based on SEC rules, we are required to include Messrs. Anderson, Pershing and Willett as named executive officers in this proxy statement. Hereinafter, Messrs. Dunn, Muehlbauer, Vitelli, Wheway and Ms. Ballard are referred to as our Voluntary Separation Program, as described below. In some instances, Mr. Morrish was evaluated under a different set of factors than the othercontinuing named executive officers. For ease of use, theour Compensation Discussion and Analysis is divided into three sections:
| Page | ||||
---|---|---|---|---|---|
Compensation Philosophy, Objectives and Process | 26 | ||||
A discussion of our compensation philosophy for all employees, the objectives of our compensation programs and policies, and the process we use to determine compensation for our named executive officers. | |||||
Compensation for Named Executive Officers | 32 | ||||
A discussion and analysis of individual compensation elements and the process used to determine fiscal | |||||
Other Compensation Matters | 43 | ||||
A discussion of programs and policies which are generally applicable to the named executive officers. |
Compensation Philosophy, Objectives and Process
"Total Rewards" Philosophy. We believe our success depends on employees at all levels using their unique strengths, experiences and ideas to foster innovation and build strong customer relationships. While our compensation and benefit programs are important tools in attracting and retaining talented employees, we also believe that non-monetary factors such as work environment, learning and development opportunities, and relationships between employees and managers are critical to provide a rewarding employee experience.
Collectively, these elements comprise our "Total Rewards" philosophy. We believe this company-wide approach to attracting, motivating and retaining talent iscreates a competitive advantage.
Our Total Rewards philosophy seeks to:
Our compensation philosophy drives both what wedo anddo not offer to our employees.
We implement the Total Rewards philosophy by employing broad-based programs that are designed to align employee interests with company goals and create a common vision of success.
Compensation Objectives. Our compensation program and policies serve the following objectives:
How We Determine Compensation. The Compensation Committee is responsible for determining and approving executive compensation. In addition, the Compensation Committee oversees the development, evaluation and approval of incentive compensation, equity-based pay and other material employee benefit plans for all employees, including our named executive officers. The Compensation Committee is authorized to delegate to management certain responsibilities regarding our employee compensation and benefit plans, as specified in the Compensation Committee's charter, which is posted on our Web site atwww.BestBuy.comwww.bby.com — select the "For Our Investors""Investor Relations" link and then the "Corporate Governance" link.
The Compensation Committee established and reviews our Total Rewards philosophy and our compensation objectives, and oversees the design, competitiveness and effectiveness of compensation programs for our executive officers. During the first quarter of each fiscal year, our Human Resources leadership team ("HR") provides the Compensation Committee with compensation recommendations for the executive officers. HR's presentation includes an analysis prepared in support of the recommendations. The analysis includes a summary of the results of our application of our "Executive Compensation Framework" to each of our executive officers. Our "Executive Compensation Framework" includes a varietyofficers of several internal and external factors, and is described in greater detail below.as set forth below, which we refer to as our "Executive Compensation Framework." The internal factors are generally applied and analyzed by HR. HR has engaged a third-party compensation consultant, Towers Perrin,Watson (formerly Towers Perrin), a global professional services firm, to assist in the development of compensation data that is used to facilitate the application and analysis of the external factors. The Compensation Committee reviews theHR's recommendations with The Delves Group, an independent compensation consulting firm retained by the Compensation Committee, and discusses them with HR. The Compensation Committee's review is comprehensive and considers factors such as: (i) the alignment of the proposed compensation with our Total Rewards philosophy; (ii) the alignment of the proposed compensation with our compensation objectives; (iii) the overall value of the compensation package, relative to internal factors and external benchmarks; and (iv) our decision not to offer supplemental compensation,certain benefits and perquisites and protections commonly extendedoffered to executive officers of other large companies.
The processCompensation Committee recently adopted Principles of Executive Compensation (the "Principles") intended to further assist the Compensation Committee in its review of HR's compensation proposals. Working with The Delves Group, HR and senior management, the Compensation Committee developed and approved the following principles and criteria for evaluatingdefining and implementing each principle:
Principle | Criteria | |
---|---|---|
Purpose | • Support the Company's mission and vision | |
• Support the Company's strategy and objectives | ||
• Reflect the Company's culture and values | ||
Alignment | • Ensure common financial interest with shareholders | |
• Ensure common financial interest throughout the company | ||
• Provide a balance between short- and long-term objectives | ||
Accountability | • Ensure financial interests align with the employee's area of impact | |
• Ensure the timing of performance periods align with the timing of the employee's impact | ||
• Articulate well defined metrics, goals, ranges, limits and results | ||
• Metrics focused primarily on delivery of outcomes rather than inputs to business processes | ||
• Maintain a consistent link between performance, rewards and consequences | ||
Engagement | • Attract and retain talent | |
• Create a sense of urgency | ||
• Motivate dedication, hard work and results | ||
• Inspire creativity and innovation | ||
• Clearly communicate the link between pay and performance | ||
Optimization | • Promote highly differentiated positive results | |
• Reward exceptional performance with exceptional pay | ||
On a going-forward basis, the namedCompensation Committee plans to use the Principles as a means to assess executive officers' compensation packages basedprograms and to provide guidance to management on internal factors, external benchmarks and the lack of supplementalCompensation Committee's expectations for overall executive compensation is described in greater detail below.structure.
Executive Compensation Framework. For fiscal 2009,2010, each element of compensation and the level of total direct compensation for each of our named executive officers (other than pursuant to our Voluntary Separation Program) was determined by referring toreferencing our Executive Compensation Framework to each individual.Framework. Our
Executive Compensation Framework consists of a set of internal and external factors that allow for a comprehensive, multi-faceted evaluation of total compensation based on each individual's personal attributes and talents, the internal "value" of their role, and objective external market data. The factors are not required to carry equal weight butand not all of the factors are all considered in determining the compensation recommendation for each individual. We believe that the diversity of the factors included in our Executive Compensation Framework and our flexibility in their application allows us to attribute appropriate value to each individual and enhances our ability to develop compensation packages that (i) further our compensation objectives, (ii) further one or more of our strategic initiatives, (iii) maximize each individual's perceived value of his or her total compensation and (iv)(iii) produce the highest return on our compensation investment.
For fiscal 2009,2010, the internal and external factors that comprised our Executive Compensation Framework were as follows:
Factor | Description | |||||
---|---|---|---|---|---|---|
Internal | Job Value | The internal value of the position relative to other executive officer positions, based on the primary job responsibilities, expected scope and nature of the job's impact — relative rank within the organization depends upon the extent to which the executive will be accountable for specific | ||||
Personal Attributes | The executive's industry and functional knowledge, intuition and insight, diversity of experience, entrepreneurial disposition and personal networks — in order to be considered for compensation purposes, these factors must be highly related to the success of the business strategies to be led by the executive. | |||||
Leadership/Values | The executive's demonstration of our values, and ability to inspire and influence others. | |||||
Talent Development | The executive's ability to cultivate talent that enhances business results, including succession planning. | |||||
Existing Compensation Arrangements | The executive's outstanding equity awards, performance-based incentives and compensation history. | |||||
External | Peer Group Observations | Includes publicly available information regarding actions taken by peer companies to attract and retain senior leadership talent. | ||||
Market Data | Includes compensation data for our peer group of companies (as determined by the Compensation Committee), the Fortune 100 companies and other salary surveys. |
We assessed the internal factors contained in the Executive Compensation Framework for each of the continuing named executive officers based on a review of executive profiles developed for succession planning purposes. The individual profiles were developed through a comprehensive process, which included discussions with the CEO, the individuals' peers, third-party executive coaches and each individual personally. The profiles contain analyses and information regarding factors similar to the internal factors contained in the Executive Compensation Framework. The internal factors were applied to Mr. Anderson based on an evaluation of his performance conducted by the Board.
We applied the external factors to each continuing named executive officer based on a review of publicly available compensation data for our peer group of companies, and the Fortune 100. We100 and, in some instances, we also considered actions taken by companies with which we compete for executive talent.consulted survey data.(1) We used available information and monitored actions taken by our peers to evaluate market trends and to assess the overall competitiveness of our executive compensation levels. We did not, however, seek to establish total direct compensation that falls within a prescribed range relative to our peer group of companies or the Fortune 100. In addition, the Compensation Committee may at times use our peer group of companies to evaluate:
The criteria we used to determine theour peer group of companies in fiscal 20092010 was unchanged from the criteria we used in fiscal 2008.2009. We continue to compare ourselves predominantly to companies with the following
attributes: (i) more than $5 billion in revenue, (ii) retail or wholesale operations, (iii) high growth rates, and (iv) significant revenue generated outside of the United States.U.S. We also used lists published byBusiness Week andFortune magazines to identify companies recognized as top employers, innovators and customer service providers, and other qualitative factors, for purposes of applying our selection criteria. Our peer group at the time compensation was determined for our named executive officers in fiscal 20092010 was comprised of the following companies:
In fiscal 2010, we plan to review and modify our peer group to ensure that we are including relevant comparable companies. As our company evolves, the challenge of identifying appropriate peers becomes increasingly difficult. Some of our competitors, most notably Circuit City, have been adversely affected by recent macro-economic conditions and are no longer appropriate peer group members. Other peers are significantly larger than us and/or have products and business models which are experiencing dramatically different growth patterns than ours.
Certain Benefits and Perquisites. In addition to our evaluation of total compensation under the Executive Compensation Framework, we also considered that many companies offer the following supplemental compensation, benefits, perquisites and protections to their executive officers:
During fiscal 2009, we did not provide these types of compensation, benefits and perquisites to our executive officers because they are contrary to our culture and are not consistent with our compensation objectives. Our decision not to provide them generally reduces the amount of total compensation received by our executive officers relative to other large companies, although we seek to compensate our executive officers utilizing our Executive Compensation Framework with elements of compensation that recognize them for their past and expected future contributions and performance. Additional information regarding the benefits and perquisites available to the named executive officers is included inBenefits and Perquisites on page 39.
Role of Independent Compensation Consultant in Determining Compensation. The Compensation Committee reviews HR's executive and director compensation recommendations with The Delves Group, an independent compensation consulting firm retained by the Compensation Committee. The Compensation Committee believes that this review helps ensure that HR's compensation recommendations are in linealigned with our stated objectives and are reasonable when compared to theour peer market for executive and director talent. In addition, the engagement of an independent consultant enhances the overall independence of the Compensation Committee's decision-making.decision-making and mitigates the potential for a conflict of interest involving the compensation consultant hired by HR. The Delves Group reports directly to the Compensation Committee and does not provide any consulting or other services to Best Buy.us.
Role of Management Compensation Consultant in Determining Compensation. HR has engaged a third-party compensation consultant, Towers Perrin,Watson, a global professional services firm, to assist in the development and analysis of external compensation data that is used to facilitate HR's executive and director compensation recommendations to the Compensation Committee. At the request of HR and with the consent of the Compensation Committee, a representative of Towers PerrinWatson regularly attends meetings of the Compensation Committee to address matters directly related to thetheir engagement, including questions regarding external market data and related analyses. Towers PerrinWatson reports directly to HR and does not engage with the Compensation Committee, except with regard to the aforementioned matters and at the request and under the direction of HR. Towers Watson also provides non-executive compensation consulting and other services to us expressly at the direction of HR and without the direct engagement of the Compensation Committee.
Role of Chief Executive Officer in Determining Compensation. Our CEO does not participate in or otherwise influence HR's compensation recommendations for himself. However, our CEO is generally is presentin attendance when HR presents compensation recommendations to the Compensation Committee for our other executive officers (except for recommendations regarding his own compensation) and provides his perspective regarding the recommendations. Our CEO's performance ratings of, and his comments about, his direct reports impact the compensation of his direct reports, but his input is only one of many factors considered in determining total compensation.compensation for those
individuals. Our other executive officers do not participate in the development of compensation recommendations or the approval process, although they may provide perspective on recommendations for their direct reports.
Summary of Compensation and Benefit Programs. We maintain a variety of compensation and benefit programs in which our executive officers and other selected employees participate. These programs include, but are not limited to, our 2004 Omnibus Stock and Incentive Plan, as amended ("Omnibus Plan"), our Executive Officer Short-Term Incentive Program ("Executive Officer STIP"), our Long-Term Incentive Program established under the Omnibus Plan ("LTIP"), our Deferred Compensation2008 Employee Stock Purchase Plan ("ESPP"), our Retirement Savings Plan and our ESPP.
Voluntary Separation Program. We believe that the most engagedFifth Amended and productive employees are those employees who are in the position they desire. Accordingly, and with the objective of reducing expense from our corporate payroll, we adopted a one-time Voluntary Separation Program in fiscal 2009. A voluntary separation offer was made to most of our corporate employees, including Ms. Ballard and Mr. Morrish. The offer was not extended to Messrs. Anderson, Muehlbauer, Dunn and Willett. Employees who agreed to leave received an enhanced separation package, based on their grade level. Employees meeting certain years of service and age criteria received an additional enhancement to the separation package. Mr. Morrish decided to accept the voluntary separation offer in January 2009. Additional information regarding the specific payout received by Mr. Morrish begins on page 38.Restated Deferred Compensation Plan ("Deferred Compensation Plan").
Compensation for Named Executive Officers
Elements of Compensation. The fiscal 20092010 compensation for our named executive officers included the following elements:
Element | Form(s) of Compensation | Purpose | Performance Metric(s) | |||
---|---|---|---|---|---|---|
Base Salary | Cash | Provide competitive, fixed compensation to attract and retain exceptional executive talent | Not performance-based | |||
Short-Term Incentive | Cash | Create a strong financial incentive for achieving or exceeding | ||||
Long-Term Incentive | Stock options | Create a strong financial incentive for increasing shareholder value and encourage a significant equity stake in our company | Best Buy common stock price | |||
| ||||||
Individual Recognition Restricted Stock Award | Restricted stock | Recognize superior performance rendered and retain exceptional executive talent | ||||
| ||||||
Health, Retirement and Other Benefits | Eligibility to participate in benefit plans generally available to our employees, including retirement, stock purchase, health, severance, life insurance and disability plans | Plans are part of our broad-based employee benefits program | Not performance-based | |||
Executive Benefits and Perquisites | Annual executive physical exam, supplemental long-term disability insurance, four weeks of paid vacation, expanded employee discount, stock ownership target planning and tax | Provide competitive benefits to promote the health, well-being and financial security of our executive officers | Not performance-based | |||
During fiscal 2010, special circumstances or events arose which resulted in unique compensation arrangements. Those arrangements for the named executive officers including Messrs. Muehlbauer, Dunn, Willett and Morrish and Ms. Ballard during fiscal 2009.
Analysis of Compensation Elements
Fiscal 2010 Target Compensation. The Compensation Committee does not establish a set pay mix for our executive officers. However, our executive compensation program does emphasize long-term compensation versus short-term compensation. As a result of the decisions the Compensation Committee made, the target pay mix for our CEO and
our other executive officers, on average, for fiscal year 2010 is shown below. Actual salary levels, short-term incentive awards and long-term incentive awards vary based on factors in the Executive Compensation Framework.
Each element in the target pay mix is discussed below and shown in theSummary Compensation Table on page 49.
Base Salary. The Compensation Committee generally determines base salary levels for the named executive officers and other executive officers early induring the first quarter of each fiscal year, with changes becoming effective during the first quarter of each fiscal year.such quarter. The base salaries for the named executive officers that became effective in the first quarter of fiscal 20092010 were established based on an assessment of each officer under our Executive Compensation Framework. For fiscal 2009,2010, the changes in base salaries at the end of fiscal 2010 and fiscal 2009, respectively, for the continuing named executive officers and the key factors considered were as follows:
Name | Fiscal 2009 Base Salary | Fiscal 2008 Base Salary | Percent Change | Key Factors | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Anderson | $ | 1,265,000 | $ | 1,172,995 | 7.8 | % | Internal Factors: | ||||||
• | Highest internal value of all senior officer positions | ||||||||||||
• | Built a talented "bench" of officers and provided them with aggressive new challenges to demonstrate readiness for succession | ||||||||||||
• | Continuous effort to reinvent our company by challenging current orthodoxies | ||||||||||||
• | High ethical conduct, exemplary values and visible role model for all other officers | ||||||||||||
External Factors: | |||||||||||||
• | Total direct compensation below median of Fortune 100 and between median and 75th percentile of the peer group range |
Name | Fiscal 2010 Ending Base Salary | Fiscal 2009 Ending Base Salary | Percent Change | Key Factors | ||||
---|---|---|---|---|---|---|---|---|
Mr. Dunn | $1,000,000 | $900,000 | 11% | Internal Factors: | ||||
• Promoted to highest ranking officer in our company in June 2009 | ||||||||
• Highly complex position responsible for balancing short- and long-term strategic and operational decisions | ||||||||
• Increased accountability for driving company growth in the connected world | ||||||||
• Strong motivator and leader; established record of building markets while living and teaching company values | ||||||||
External Factors: | ||||||||
• New salary and total direct compensation are below median of Fortune 100 and our peer group | ||||||||
• Initial salary increase is consistent with a Towers Watson report on pay practices for internal promotion to CEO versus external CEO hire |
Mr. Muehlbauer | 600,000 | 349,764 | 71.5 | % | Internal Factors: | ||||||||
• | Named Executive Vice President — Finance and Chief Financial Officer after serving as interim Enterprise Chief Financial Officer | ||||||||||||
• | Strong financial acumen and ability to connect company strategies with expected financial outcomes | ||||||||||||
External Factors: | |||||||||||||
• | Total direct compensation below median of peer group and Fortune 100 | ||||||||||||
• | Competitiveness of the market for financial executive talent | ||||||||||||
Mr. Dunn | 900,000 | 780,000 | 15.4 | % | Internal Factors: | ||||||||
• | Second-highest ranking role in our company | ||||||||||||
• | Highly complex position responsible for balancing short- and long-term strategic and operational decisions | ||||||||||||
• | Increased accountability for driving growth | ||||||||||||
• | Strong motivator and leader; established record of building markets while living and teaching company values | ||||||||||||
External Factor: | |||||||||||||
• | Total direct compensation below median of Fortune 100 and peer group |
Name | Fiscal 2010 Ending Base Salary | Fiscal 2009 Ending Base Salary | Percent Change | Key Factors | ||||
---|---|---|---|---|---|---|---|---|
Mr. Muehlbauer | $642,000 | $600,000 | 7% | Internal Factors: | ||||
• Strong aptitude for risk mitigation and process development | ||||||||
• Manages communication to investor community with transparency | ||||||||
• Able to execute against strategic opportunities | ||||||||
External Factors: | ||||||||
• Total direct compensation below median of Fortune 100, and between median and 75th percentile of our peer group | ||||||||
• High level of turnover among Fortune 100 chief financial officers | ||||||||
Ms. Ballard | $650,000 | $650,000 | 0% | Internal Factors: | ||||
• Strong internal advocate of customer focus | ||||||||
• Proven ability to rally teams around our philosophy and approach | ||||||||
• Ability to execute against strategic opportunities | ||||||||
External Factors: | ||||||||
• Total direct compensation below median of Fortune 100, and between median and the 75th percentile of our peer group | ||||||||
Mr. Vitelli | $600,000 | $478,950 | 25% | Internal Factors: | ||||
• Increased role for fiscal 2010 | ||||||||
• Extremely strong and deep industry knowledge and networks | ||||||||
• Manages communication to vendor community with high degree of authority and influence | ||||||||
• Routinely demonstrates exceptional levels of personal integrity, maturity and professionalism | ||||||||
External Factors: | ||||||||
• Total direct compensation below median of Fortune 100, and between median and the 75th percentile of our peer group |
Mr. Willett | 850,000 | 700,000 | 21.4 | % | Internal Factors: | ||||||||
• | Third-highest ranking role in our company, however, the role is multi-faceted and was deemed to have a higher strategic value than typical third-ranking executive role | ||||||||||||
• | Leader of key international operations needed to aggressively grow revenue over the next five years | ||||||||||||
• | Demonstrated strategic ability to create mutually beneficial relationships with third parties | ||||||||||||
• | Provides a critical global perspective based on retailing experience outside of the U.S., with understanding of social, political, and regulatory risks and opportunities | ||||||||||||
External Factors: | |||||||||||||
• | Total direct compensation between median and 75th percentile of Fortune 100 and peer group | ||||||||||||
• | More valuable role than most "Heads of International," due to the high strategic importance of the position, the aggressiveness of our international growth strategy relative to our peer group and Mr. Willett's dual role as chief international executive and chief information officer for our company | ||||||||||||
Ms. Ballard | 650,000 | 550,000 | 18.2 | % | Internal Factors: | ||||||||
• | Leader of our core domestic retail business | ||||||||||||
• | Directly responsible for deepening customer relationships to deliver growth across multiple channels | ||||||||||||
• | Strong motivator and powerful brand representative | ||||||||||||
• | Ultimate collaboration catalyst; brings individuals, functions and organizations together to accomplish things otherwise not possible | ||||||||||||
External Factor: | |||||||||||||
• | Total direct compensation below median of Fortune 100 and between median and 75th percentile of the peer group range |
Name | Fiscal 2010 Ending Base Salary | Fiscal 2009 Ending Base Salary | Percent Change | Key Factors | ||||
---|---|---|---|---|---|---|---|---|
Mr. Wheway | $711,392 | n/a | n/a | Internal Factors: | ||||
(£440,000 GBP)(1) | • Deep retail knowledge and insight in European market, with over twenty years of experience | |||||||
• Extensive international retail experience | ||||||||
External Factors: | ||||||||
• Total direct compensation consistent with similar U.K.-based positions at large, multi-national companies |
Prior to entering into his employment arrangement in June 2009, Mr. Morrish's baseAnderson's annual salary increased by 15.9% duringremained unchanged at $1,265,000 from fiscal 2009 to $478,950for the first four months of fiscal 2010. The employment arrangement for Mr. Anderson is discussed as part of Director Compensation on page 60 and as part ofSpecial Circumstances, beginning on page 40. The fiscal 2010 base salaries for Messrs. Pershing and Willett remained unchanged from $413,288. The increase was madefiscal 2009 at the time of Mr. Morrish's promotion from Senior Vice President — PC$414,000 and Mobility Solutions to Executive Vice President — Connected Digital Solutions. Mr. Morrish's compensation was determined through application of our Executive Compensation Framework, with emphasis on positioning his total compensation in line with the total compensation paid to other executive vice presidents with similar scopes of responsibility.$850,000, respectively.
Short-Term Incentive. For fiscal 2009,2010, the named executive officers, except for Mr. Wheway, were eligible for performance-based, short-term incentive awards pursuant to our Executive Officer STIP. From May 2009, through July 2009, Mr. Wheway was eligible for the International Leadership STIP. Beginning in August 2009, Mr. Wheway was eligible for a performance-based, short-term incentive award tailored to provide a balanced score card between Best Buy brand operations in Europe and CPW brand/operations in Europe. Mr. Wheway's fiscal 2010 short-term incentive award is described inSpecial Circumstances, beginning on page 40. Fiscal 2010 Executive Officer STIP payments were made in two installments, at the mid-point and end of the fiscal year.
Fiscal 2010 Executive Officer STIP awards were payable in cash and were expressed as a target payout percentage ranging from 125% to 200% of each eligible named executive officer's base
Table salary. The target payout percentages for each of Contents
salary, called the "Incentive Target Percentage."our eligible named executive officers fell within a range of 65% to 200%. The Incentive Target Percentagetarget payout percentage for each eligible named executive officer was determinedset within this range based on the application of our Executive Compensation Framework, with particular emphasis placed on the internal job ranking of each position.position and taking into consideration external market data factors for equivalent roles. We emphasized internal job ranking because we believe that it is important that a higher percentage of total cash compensation for higher ranking positions be linked to our performance. In addition, we considered the value of total cash compensation in light of the external factors described inBase Salary, above,beginning on page 33, to ensure that we remain competitive in the market for executive talent.
For fiscal 2010, our Executive Officer STIP was structured to support our fiscal 2010 business priorities: (i) increasing domestic market share, (ii) efficient and effective enterprise, (iii) connected world, and (iv) international growth. As a result, we measured our short-term incentive awards for our eligible named executive officers on the following weighted performance metrics:
The Compensation Committee established the target performance metrics for fiscal 2010 based on our historical performance and target setting practices, as well as investor and market expectations.
Under the fiscal 2010 Executive Officer STIP design, we measured the actual performance of each metric independently against targets, with achievement of one or all metrics to be additive to the individual's total short-term incentive award. Due to the uncertain economic challenges present at the beginning of fiscal 2010, the Compensation Committee elected to create a program with risk mitigating features, namely SG&A and domestic market share, thereby giving us the opportunity to be in the strongest possible position to take advantage of economic recovery long term, but not at the expense of operating income.
The fiscal 2010 Executive Officer STIP payment computation for eligible named executive officers was based on the weighted metrics described above, at target, as follows:
| Performance Metrics | | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating Income (40%) | | SG&A (30%) | | Domestic Market Share (30%) | | Total Target Payout as a % of Salary | ||||||||||||
Mr. Dunn(2) | 73.8 | % | + | 55.3 | % | + | 55.4 | % | = | 184.5 | % | ||||||||
Mr. Muehlbauer | 50 | % | + | 37.5 | % | + | 37.5 | % | = | 125 | % | ||||||||
Ms. Ballard | 50 | % | + | 37.5 | % | + | 37.5 | % | = | 125 | % | ||||||||
Mr. Vitelli(3) | 42 | % | + | 31.5 | % | + | 31.5 | % | = | 105 | % | ||||||||
Mr. Anderson(4) | 80 | % | + | 60 | % | + | 60 | % | = | 200 | % | ||||||||
Mr. Pershing | 26 | % | + | 19.5 | % | + | 19.5 | % | = | 65 | % | ||||||||
Mr. Willett | 50 | % | + | 37.5 | % | + | 37.5 | % | = | 125 | % |
Based on our actual performance compared with specific goals,for each of the metrics against the target performance for the metrics, respectively, an Executive Officer STIP score was derived and applied to the target payout percentages. Eligible named executive officers could earn zero to two times their Incentive Target Percentage. We call this factortarget payout percentage for each respective performance metric, making their maximum Executive Officer STIP payout two times their total target payout.
For fiscal 2010, the "Incentive Multiplier." The purpose of the Incentive Multiplier isoperating income, adjusted SG&A and domestic market share Executive Officer STIP targets and corresponding scores were as follows:
| Operating Income $'s in millions | Adjusted SG&A $'s in millions | Domestic Market Share Improvement | | | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| STI Score | | |||||||||||||||||||||
| LOW | HIGH | LOW | HIGH | LOW | HIGH | | ||||||||||||||||
| | ||||||||||||||||||||||
| $ | | $ | | | | | | |||||||||||||||
2,250 | >/= | 9,460 | </= | 2.00 | % | >/= | 2.0 | ||||||||||||||||
2,200 | 2,249 | 9,520 | 9,461 | 1.80 | % | 1.99 | % | 1.8 | |||||||||||||||
2,150 | 2,199 | 9,580 | 9,521 | 1.60 | % | 1.79 | % | 1.6 | |||||||||||||||
2,100 | 2,149 | 9,640 | 9,581 | 1.40 | % | 1.59 | % | 1.4 | |||||||||||||||
2,050 | 2,099 | 9,700 | 9,641 | 1.20 | % | 1.39 | % | 1.2 | |||||||||||||||
2,000 | 2,049 | 9,760 | 9,701 | 1.00 | % | 1.19 | % | 1.0 | <--Target | ||||||||||||||
1,900 | 1,999 | 9,820 | 9,761 | 0.80 | % | 0.99 | % | 0.8 | |||||||||||||||
1,800 | 1,899 | 9,880 | 9,821 | 0.60 | % | 0.79 | % | 0.6 | |||||||||||||||
1,700 | 1,799 | 9,940 | 9,881 | 0.40 | % | 0.59 | % | 0.4 | |||||||||||||||
</= | 1,699 | >/= | 9,941 | 0.00 | % | 0.39 | % | 0.0 |
For fiscal 2010, our operating income was $2,235 million, a 20% improvement compared to modify the incentive payout based on actual performance compared with targets approved by the Compensation Committee. The performance results are translated to company and team performance scores, which are then multiplied to determine the Incentive Multiplier. The formula below shows how the short-term incentive payments were determined for fiscal 2009:
Base Salary × Incentive Target Percentage × Incentive Multiplier(1) = Incentive Payout
The "Company Performance" score was determined based on our company's Economic Value Added, or EVA® ("EVA") performance for fiscal 2009 operating income of $1,870; our adjusted SG&A was $9,691 million; and our domestic market share improved by 2.60 percentage points compared with a target approved by the Compensation Committee. We believe the useto fiscal 2009.
Our adjusted SG&A of EVA as a primary incentive factor demonstrates our desire$9,691 million compared to link executive compensation with increasing shareholder value. EVA measures the amount by which our after-tax profits, afterreported SG&A of $9,873 million in fiscal 2010 includes certain adjustments exceed our costfor expenses that were likely to vary with volume and performance in an uncertain sales volume environment. Such adjustments were provided for in the plan target design. Accordingly, adjusted SG&A included the impact of capital. Certain unplanned events, such as acquisitionsrestructuring charges of $52 million not included in reported SG&A and was further adjusted for the effect of accounting changes, are excluded for purposes of determining EVA. The EVA target for fiscal 2009 was established based on historical companyfollowing: (i) higher incentive pay due to better than planned financial performance and target-setting practices, as well as investorhigher sales volume than planned that impacted store labor and market expectations.volume related transactional costs, $121 million, (ii) utilization of budgeted foreign exchange translation rates in our international businesses versus actual translation rates, $94 million, and (iii) greater investment gains than expected in fiscal 2010 on our deferred compensation assets, $19 million (an offset to which is recorded in investment income with no impact to net earnings). Based on an analysis of those factors, our fiscal 2009 EVA target was $476 million, equivalent to approximately 6.5% growth in diluted earnings per share. The potential EVA ranges and corresponding Company Performance score valuesthese results, the Executive Officer STIP scores for fiscal 2009the eligible named executive officers were as follows:
Score | |||||||
---|---|---|---|---|---|---|---|
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| |||||||
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| |||||||
|
For fiscal 2009, our actual EVA performance was $323 million, which resulted in a Company Performance score of 0.00.
For Messrs. Anderson, Muehlbauer, Dunn and Willett, the "Team Performance" score was determined based on the average of: (i) our enterprise comparable store sales growth rate, and (ii) our enterprise selling, general and administrative expenses ("SG&A") rate, excluding the acquisition of Best Buy Europe, but including restructuring charges. For Ms. Ballard and Mr. Morrish, the "Team Performance" score was determined based on the average of: (i) our domestic comparable store sales growth rate, and (ii) our enterprise SG&A rate, excluding the acquisition of Best Buy Europe, but including restructuring charges. Our fiscal 2009 performance against each of these metrics was compared with targets approved by the Compensation Committee. The Team Performance targets were derived from
The fiscal 2010 Executive Officer STIP payment computations, based on the overall EVA objectiveformula described above. For fiscal 2009, the enterprise and domestic comparable store sales and enterprise SG&A rate ranges, and corresponding Team Performance scoresabove, were as follows:
| ||||||
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| ||||||
|
For fiscal 2009, our enterprise comparable store sales rate was (1.3%), our domestic comparable store sales rate was (1.3%) and our adjusted enterprise SG&A rate was 19.4%.
Based on these results, the Team Performance score for Messrs. Anderson, Muehlbauer, Dunn and Willett was computed as follows:
Performance Metric | Result | Score | |||||
---|---|---|---|---|---|---|---|
Enterprise Comparable Store Sales Growth Rate | (1.3 | )% | 0.70 | ||||
Adjusted Enterprise SG&A Rate | 19.4 | % | 0.80 | ||||
Team Performance Score(1) | 0.75 |
| Performance Metrics | | | | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Payout as a % of Salary(1) | | | ||||||||||||||||||||||
| Operating Income | | Adjusted SG&A | | Domestic Market Share | | Eligible Earnings(2) | STIP Incentive Payment(3) | |||||||||||||||||
Mr. Dunn | 132.8 | % | + | 66.4 | % | + | 110.7 | % | = | 309.9 | % | $ | 966,669 | $ | 2,996,009 | ||||||||||
Mr. Muehlbauer | 90 | % | + | 45 | % | + | 75 | % | = | 210 | % | 624,500 | 1,311,450 | ||||||||||||
Ms. Ballard | 90 | % | + | 45 | % | + | 75 | % | = | 210 | % | 650,001 | 1,365,002 | ||||||||||||
Mr. Vitelli | 75.6 | % | + | 37.8 | % | + | 63 | % | = | 176.4 | % | 559,653 | 987,228 | ||||||||||||
Mr. Anderson | 144 | % | + | 72 | % | + | 120 | % | = | 336 | % | 421,668 | 1,416,806 | ||||||||||||
Mr. Pershing | 46.8 | % | + | 23.4 | % | + | 39 | % | = | 109.2 | % | 414,002 | 452,090 | ||||||||||||
Mr. Willett | 90 | % | + | 45 | % | + | 75 | % | = | 210 | % | 850,003 | 1,785,007 |
Based on the results above, the Team Performance score for Ms. Ballard and Mr. Morrish was computed as follows:
Performance Metric | Result | Score | |||||
---|---|---|---|---|---|---|---|
Domestic Comparable Store Sales Growth Rate | (1.3 | )% | 0.70 | ||||
Adjusted Enterprise SG&A Rate | 19.4 | % | 0.80 | ||||
Team Performance Score(1) | 0.75 |
To determine the Incentive Multiplier, the Company Performance and Team Performance scores are multiplied. Based on the actual Company Performance and Team Performance scores, the Incentive MultiplierMr. Anderson was eligible for fiscal 2009 was 0.00. Accordingly, no payments pursuant toa prorated portion of the Executive Officer STIP were made to any named executive officerfor the first four months of fiscal 2010 while he served as our Chief Executive Officer. Messrs. Pershing and Willett remained eligible for participation in the Executive Officer STIP without proration for fiscal 2009. The fiscal 2009 short-term incentive payment computation, as determined based on the formulas described above, was as follows:
| Base Salary X | Incentive Target Percentage = | Incentive Target X | Incentive Multiplier = | Incentive Payout | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Anderson | $ | 1,265,000 | 200 | % | $ | 2,530,000 | 0.00 | $ | 0.00 | ||||||
Mr. Muehlbauer | 600,000 | 125 | 750,000 | 0.00 | 0.00 | ||||||||||
Mr. Dunn | 900,000 | 150 | 1,350,000 | 0.00 | 0.00 | ||||||||||
Mr. Willett | 850,000 | 125 | 1,062,500 | 0.00 | 0.00 | ||||||||||
Ms. Ballard | 650,000 | 125 | 812,500 | 0.00 | 0.00 | ||||||||||
Mr. Morrish | 478,950 | 65 | 311,318 | 0.00 | 0.00 |
Table of Contents2010.
Long-Term Incentive. Pursuant to our LTIP, established under the Omnibus Plan,During fiscal 2010, we make annualmade long-term incentive awards to our named executive officers, except for Messrs. Anderson and Wheway (seeSpecial Circumstances, beginning on page 40), and other eligible employees (typically, manager level and above). For fiscal 2009, pursuant to our LTIP.
Compensation mix is an important factor in determining the LTIP award amounts for our named executive officers received their LTIP award in the form of stock options. However, Mr. Anderson requested that he not be granted a long-term incentive award and that his options to purchase shares that he would have received be contributed to a discretionary award pool to be distributed to employees who are not otherwise eligible to receive LTIP awards. For fiscal 2008, our named executive officers were able to select from among four long-term incentive mix choices, which included combinations of stock options, restricted stock and performance-based awards that are settled in stock or cash (our "LTIP Choice" feature). For fiscal 2009, we awarded our officers stock options only. We believe that stock options are the best way to align our officers' interests with our shareholders' interests and to drive performance intended to increase our stock price.officers. The LTIP award amounts for the named executive officers for fiscal 2010 were reviewed and approved by the Compensation Committee.Committee and were determined based upon the application of our Executive Compensation Framework. The stock options we issueannualized value of the fiscal 2010 LTIP award granted to each of our eligible named executive officers arewas below the median of both the Fortune 100 and our peer group.
For fiscal 2010, the LTIP awards made to our eligible named executive officers were in the form of non-qualified stock option awardsoptions that have a term of 10ten years and become exercisable over a four-year period at the rate of 25% per year, beginning one year from the date of grant. The stock option exercise price isfor such options was equal to the closing price of our common stock on the grant date, as quoted on the NYSE. In addition, for fiscal 2010, we changed the frequency and timing of our LTIP awards and granted awards in June, September and January. Beginning in fiscal 2011, the LTIP awards are being granted quarterly.
Our eligible named executive officers received their LTIP awards in the form of stock options because we believe stock options provide the maximum leverage and are the most efficient manner of focusing an executive officer's interests on long-term performance and shareholder value creation. Because our stock price is the performance measure, we believe that stock options are the best way to align our executive officers' interests with our shareholders' interests and to drive performance intended to increase our stock price over the four-year vesting period and ten-year option term. We believe there is greater incentive to drive
shareholder value by using stock options rather than restricted stock as our long-term executive officer incentive vehicle because of the potential for a great reward and the potential for no reward.
The stock options awarded pursuant to our LTIP to the eligible continuing named executive officers in fiscal 2010 and fiscal 2009 are shown below:
Name | Fiscal 2010 (number of shares subject to options) | Fiscal 2009 (number of shares subject to options) | Percent Change | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Mr. Dunn(1)(2) | 200,000 | 138,000 | +45 | % | ||||||
Mr. Muehlbauer | 80,000 | 80,000 | 0 | % | ||||||
Ms. Ballard | 66,251 | 66,250 | 0 | % | ||||||
Mr. Vitelli(2) | 66,251 | 40,000 | +66 | % |
Mr. Wheway did not receive a LTIP award in fiscal 2010. After his change in role to Chief Executive Officer — Best Buy Europe, we intended to include Mr. Wheway in a Best Buy Europe long-term incentive program to create better incentive alignment throughout our European business.
Mr. Pershing's LTIP award for fiscal 2010 was options to purchase 40,000 shares, also unchanged from fiscal 2009. He received three grants prior to his departure in February 2010, all of which were forfeited upon his departure.
Mr. Willett's LTIP award for fiscal 2010 was options to purchase 110,500 shares, unchanged from his LTIP award in fiscal 2009. During fiscal 2010, he received two grants: one in June 2009 (55,250 options) and one in September 2009 (27,625 options). He received these grants prior to his departure in January 2010, and as a qualified retiree, has one year from his departure date to exercise his options.
Additional information regarding LTIP awards granted to Messrs. Dunn, Muehlbauer, Willett and Morrish and Ms. Ballardthe named executive officers in fiscal 20092010 is included inGrants of Plan-Based Awards on page 45. Due to Mr. Morrish's voluntary separation from the company, his LTIP award was forfeited.
Enterprise Leadership Long-Term Incentive. In fiscal 2009, we granted enterprise leadership long-term incentive awards to 20 of our senior officers, including Messrs. Dunn, Muehlbauer, Willett and Morrish, and Ms. Ballard. The purpose of the award was to provide additional incentive to achieve specified revenue and profit growth for the company and to retain our key executives needed to deliver those results. This award was in the form of performance shares, with each performance share representing, at the time of vesting, the right to receive one share of common stock. The award is based on the following metrics:
There are two separate, but partially overlapping, performance periods covered by the awards. The first period began on June 1, 2008, and ends on February 26, 2011 (end of fiscal 2011). The second period also began on June 1, 2008, but ends on March 3, 2012 (end of fiscal 2012). One-half of the total award opportunity is available with respect to each performance period.
The number of performance shares earned at each vesting date, as set forth below, will be determined based on application of the following formula:
Award Percentage of Target × Comparable Store Sales Factor = Final Award
Award Percentage of Target will be determined based on the following table:
| Revenue Growth Rate | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Profit Growth Rate | <7% | 7% | 14% | 20% | |||||||||
24% | 0 | % | 135 | % | 165 | % | 200% | ||||||
17% | 0 | % | 80 | % | 100 | % | 120% | ||||||
7% | 0 | % | 0 | % | 20 | % | 25% | ||||||
<7% | 0 | % | 0 | % | 0 | % | 0% |
Comparable Store Sales Factor will be determined based on the following table:
Comparable Store Sales Growth Rate | Factor | |||
---|---|---|---|---|
8% or above | 1.25 | |||
6% | 1.00 | |||
4.5% | 0.80 | |||
3% or below | 0.60 |
TheAward Percentage of Target multiplied by theComparable Store Sales Factor will result in a final award equal to 0% to 250% of the target award. In order for any portion of a performance award to be earned, we must achieve a minimum of 7% compound annual revenue growth (coupled with a minimum 17% compound annual profit growth) or 7% compound annual profit growth (coupled with a minimum 14% compound annual revenue growth) during one of the performance periods.
The following table shows the target award in shares for each of our named executive officers, excluding Mr. Anderson, who was not eligible for this award:
| Performance Shares | |||
---|---|---|---|---|
| Target Award in Shares | Maximum Award in Shares | ||
Mr. Muehlbauer | 100,000 | 250,000 | ||
Mr. Dunn | 190,000 | 475,000 | ||
Mr. Willett | 190,000 | 475,000 | ||
Ms. Ballard | 82,750 | 206,875 | ||
Mr. Morrish | 27,000 | 67,500 |
The Compensation Committee approved target and maximum award sizes that would provide significant incremental reward potential beyond the value already available under existing incentive schemes for high levels of performance. Additional information regarding the special long-term incentive awards granted to Messrs. Dunn, Muehlbauer, Willett and Morrish and Ms. Ballard in fiscal 2009 is included inGrants of Plan-Based Awards on page 45. Due to Mr. Morrish's voluntary separation from the company, his enterprise leadership incentive award was forfeited.52.
Individual Recognition Restricted Stock Award. From time to time, we grant individual restricted stock awards to recognize superior performance. In fiscalMay 2009, weMr. Willett received the following retention awards, which were granted at a specialtime of CEO transition and after he had reached retirement age: (1) 25,000 shares of restricted stock, awardwith vesting to occur three years after the date of 20,000grant, and (2) as further incentive to drive operating income by delivering exceptional international results, 50,000 shares to Mr. Muehlbauer to recognize his strong performance as interim Enterprise Chief Financial Officer and to reinforce his importance to us in his new role as Executive Vice President — Finance and Chief Financial Officer. The Compensation Committee considered the impact of theperformance-based restricted stock, award's value on Mr. Muehlbauer's total compensation, relative to comparable positions within our peer group of companies and the Fortune 100, and deemed that Mr. Muehlbauer's total compensation was reasonable. The restricted shares awarded to Mr. Muehlbauer vested 25%with vesting based on the grant date, and will vest an additional 25% on eachachievement of the next three anniversaries of the grant date, providedcertain performance factors. He forfeited both awards when he has been continually employed with us through those dates.retired because they had not yet vested. Additional information regardingabout the special restricted stock award granted to Mr. Muehlbauer in fiscal 2009grants is included inGrants of Plan-Based Awards on page 45.52.
Voluntary Separation Benefits.Special Circumstances. During fiscal 2010, special circumstances or events arose which resulted in the unique compensation arrangements for the individuals named below.
Mr. Dunn. In June 2009, Mr. Dunn received options to purchase 300,000 shares as a special grant because of his promotion to CEO. This one-time grant was intended to increase his alignment with shareholders by having a greater portion of his compensation tied to shareholder value creation. The special grant stock options have the same terms as the LTIP stock options.
Mr. Wheway. Mr. MorrishWheway was onehired in May 2009 as Executive Vice President and Chief Operating Officer — International with a salary of £440,000 (or $711,392 based on the average exchange rate in fiscal 2010), a 65% International Leadership STIP target payout percentage, and a special new hire grant of options to purchase 50,000 shares that vest 25% on the first anniversary of the approximately 500 employees who acceptedaward and annually for three additional years. The performance metrics for the separation offer we made pursuantInternational Leadership STIP are Operating Income, SG&A, International Revenue and Individual Performance Appraisal. In August 2009, he was appointed to our Voluntary Separation Program. Mr. Morrish's age (51) and yearsthe position of service (10) qualified him for an additional 25% of base salary as part of his separation offer. By accepting the separation offer, Mr. Morrish received a one-time lump sum payment equal to 45 months of salary, or $1,796,063, paid in cash. Mr. Morrish may also opt to receive 18 months of COBRA continuation, 18 months of life insurance premiums and $5,000 for tax planning services relating to his termination.
Anticipated Fiscal 2010 NamedChief Executive Officer Compensation Structure Changes
For fiscal 2010, HR recommended— Best Buy Europe and, because of the Compensation Committee approved, certain changes to short- and long-term incentive awards that will impact our named executive officers as well as certain other employees eligible for short- and long-term incentive awards.
Short-Term Incentive. We are changing the short-term incentive plan structure to create an incentive plan thatin his
directly supports our fiscal 2010 business priorities: (i) taking market share, (ii), efficientduties and effective enterprise, (iii) connected digital solutions and (iv) international growth. We also want to ensure that our senior officers and other eligible employees have opportunities to be rewarded should performance improve during the fiscal year. As a result, we have opted to change the structure by which we measure ourscope of responsibility, his short-term incentive awards for our senior officersand LTIP opportunities were revised accordingly.
Mr. Wheway's appointment as Chief Executive Officer — Best Buy Europe was subject to be basedthe approval of the Best Buy-appointed directors of the Best Buy Europe board of directors pursuant to the terms of the Shareholders Agreement between The Carphone Warehouse Group PLC and us, dated June 30, 2008, which governs the operations of Best Buy Europe. The Best Buy-appointed directors on the following metrics:
In addition,Best Buy Europe board, with the approval of the Compensation Committee and after taking into consideration the recommendation of the full Best Buy Europe board, have the authority under such agreement to select, terminate and set the compensation of the Chief Executive Officer — Best Buy Europe.
Upon becoming Chief Executive Officer — Best Buy Europe, Mr. Wheway became eligible for a performance-based, short-term incentive plan designaward payable in cash and expressed as a target payout percentage of his base salary. Mr. Wheway's target payout percentage for fiscal 2010 we will measure each metric independently, with achievementwas 100%, which matches the incentive opportunity of one or all metrics to be additive tohis direct reports. There is no minimum guaranteed payout under the individual's totalapplicable short-term incentive award program, and earned regardlessMr. Wheway's maximum incentive payout is 200%.
Mr. Wheway's short-term incentive was tailored to align his compensation with his responsibility for the primary retail brands housed in Best Buy Europe. The performance metrics of the resultsincentive are split evenly between (i) the Best Buy retail operations in the U.K. ("Best Buy U.K.") and (ii) The Carphone Warehouse (including The Phone House) retail operations across Europe ("CPW"). The break-out of other metrics. We have made this changeMr. Wheway's target and maximum payout percentages for each brand are as follows:
Target Payout Percentage — Wheway
| Brand | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Best Buy U.K. | | CPW | | Payout as a % of Salary | |||||||||
Target | 50 | % | + | 50 | % | = | 100 | % | ||||||
Maximum | 100 | % | + | 100 | % | = | 200 | % |
The metrics for each brand were determined by identifying which key performance indicators are the most relevant and most strongly correlated to reward individuals for SG&A reductions and/or market share gains rather than have the awards earned be dependent onoverall business strategy of each brand. Both brands include customer-focused, employee-focused and financial metrics in order to incent a balanced approach to running the achievement of all of the metrics, which could potentially result in a zero payout if one metric is not achieved.
Long-Term Incentive. We are changing the timing of our long-term incentive plan to grant long-term incentive awards in June, September and January of fiscal 2010. Thereafter, in fiscal 2011, we plan to grant long-term incentives on a quarterly basis at the time of Board meetings. The decision to grant long-term incentive awards at multiple times each year addresses employee concerns regarding stock price volatility over the past few years.business. In addition, multiple grantseach brand's metrics include a metric from the other brand to ensure leverage across both brands.
The Best Buy U.K. brand metrics include opening plan, profit, cash (capital expenditures per store), employee engagement and earnings before interest and taxes ("EBIT") metrics. Metrics for the Best Best U.K. brand during fiscal 2010 were created with the anticipation that the brand would be in initial stages of store opening during the year and are gauged accordingly. These metrics have weights ranging between 15% and 40%. The CPW brand metrics include EBIT, customer satisfaction, customer complaint run rate, cash flow, employee engagement, trading margin, post pay connections, and opening plan (a cross-over metric from the Best Buy U.K. brand). These metrics have weights ranging between 5% and 7.5%, except for EBIT which is weighted at 50%. We believe disclosure of the specific metric target amounts and actual performance against the targets would cause us material competitive harm and, therefore, have not included such disclosure in this Proxy Statement.
In March 2010, the Compensation Committee approved a payment of 80% of Mr. Wheway's expected short-term incentive payout. This payment was comprised of a prorated 17% expected payout under the International Leadership STIP of £51,861 ($83,849 using the average exchange rate from May 2009
through the end of the fiscal year), a prorated 33% expected payout at target under the CPW brand metrics of £178,347 ($288,351) and a prorated 33% expected payout at target under the Best Buy U.K. brand metrics of £160,747 ($259,896). Because Best Buy Europe's fiscal year ends one month after ours, the final short-term incentive results and the remainder of Mr. Wheway's payout will likely be determined by the Compensation Committee in June 2010.
Mr. Anderson. Upon his retirement from the position of CEO in June 2009, Mr. Anderson entered into a part-time employment arrangement through the end of his elected term as Vice Chairman on June 2010. The continued board service and employment arrangement were designed to reinforceensure both a smooth transition for Mr. Dunn to the valueposition of long-termCEO and continuity for our customer centricity strategy. Mr. Anderson's annual salary was reduced to $75,000 effective June 24, 2009, and he remained eligible for the Executive Officer STIP in fiscal 2010, with proration, which resulted in an incentive payment of $1,416,806. He was not eligible for an LTIP award opportunities to participantsin fiscal 2010. In addition, though he does not receive director fees, he is eligible for stock options and expense reimbursement, as received by the other directors. SeeEmployment Arrangement with Bradbury H. Anderson on a more frequent basis.page 61.
Mr. Pershing. On February 5, 2010, Mr. Pershing left our company. In recognition of his 20 years of service, during which he served in many key capacities and was an influential voice within the executive team and for employee engagement, and for his efforts during a time of CEO transition, Mr. Pershing received a payment of $1,293,755, and remained eligible for the Executive Officer STIP for the remainder of fiscal 2010, without proration, which resulted in an incentive payment of $452,090. In addition, the service condition of a performance-based grant of 2,615 shares of restricted stock awarded to Mr. Pershing in October 2006 was waived, allowing Mr. Pershing to be eligible for the award which vested at 46%, or 1,203 shares. Finally, Mr. Pershing received $10,000 for routine tax planning and outplacement services, and coverage of COBRA life insurance, medical and dental benefit premiums for 18 months.
Mr. Willett. Mr. Willett, age 63, retired from our company effective January 4, 2010. In recognition of Mr. Willett's past contributions to our success and his efforts to ensure an orderly transition, his time-based restricted stock award granted in April 2007 was accelerated, and he became fully vested in 103,820 shares of Best Buy common stock. In addition, he remained eligible to participate in the Executive Officer STIP for the remainder of fiscal 2010, without proration, which resulted in an incentive payment of $1,785,007. Mr. Willett continued to be eligible to receive certain perquisites and benefits following his retirement, including an executive physical exam during 2010, approximately $20,000 for routine tax planning and retirement planning services, and coverage of COBRA life insurance, medical and dental benefit premiums for 12 months.
The programs and policies described below are generally applicable to all our named executive officers, unless otherwise noted.
Benefits and Perquisites. Our named executive officers are generally offered the same employee benefits and perquisites offered to all U.S.-based employees, as summarized in the table below:
Benefit or Perquisite | All Full-Time U.S.-Based Employees | Named Executive Officers | ||||||
---|---|---|---|---|---|---|---|---|
Deferred Compensation Plan | ü | (1) | ü(1) | |||||
Employee Discount | ü | ü | ||||||
— Expanded Employee Discount(2) | ü | |||||||
Employee Stock Purchase Plan | ü | ü | ||||||
Health Insurance | ü | ü | ||||||
— Executive Physical Exam | ü | |||||||
Life Insurance | ü | ü | ||||||
Long-Term Disability | ü | ü | ||||||
— Executive Long-Term Disability | ü | |||||||
Paid Time Off | ü | ü | ||||||
Retirement Savings Plan | ü | ü | ||||||
Severance Plan | ü | ü | ||||||
Short-Term Disability | ü | ü | ||||||
Stock Ownership Target Planning | ü | |||||||
Tax Planning and Preparation | ü |
We provide the executive benefits and perquisites denoted above to compete for executive talent and to promote the health, well-being and financial security of our named executive officers. A description of executive benefits and perquisites, and the costs associated with providing them for the named executive officers, are reflected in the "All Other Compensation" column of theSummary Compensation Table on page 43.49.
Deferred Compensation Plan. We sponsor an unfunded, unsecured Deferred Compensation Plan. We believe the plan provides a tax-deferred retirement savings vehicle that plays an important role in attracting and retaining executive talent. Additional information about our Deferred Compensation Plan is included inNon-Qualified Deferred Compensation Plan on page 56.
Employee Stock Purchase Plan. Our ESPP allows employees, including our named executive officers, to purchase Best Buy common stock at a discount. The stock purchase price is 85% of the lesser of the closing price on the NYSE at the beginning or at the end of a semi-annual purchase period. There is a maximum purchase value of $25,000 per calendar year for all plan participants.
Retirement Savings Plan. Our Retirement Savings Plan is intended to meet the requirements of Section 401(k) of the Internal Revenue Code of 1986 (the "Code"). All of our named executive officers are eligible to participate in the plan. The plan provides a safe harbor that allows U.S.-based employees to contribute pre-tax income and immediately vest in company matching contributions. The plan is expected to provide an
improved opportunity for such employees to achieve retirement income security. However, the plan is not expected to provide sufficient income replacement relative to our named executive officers' anticipated retirement needs. The potential retirement income gap for our U.S.-based named executive officers may be filled by other reward elements, including long-term incentives, or by the deferral of a portion of base salary or short-term incentive awards under our Deferred Compensation Plan. Under the Retirement Savings Plan, we match employee contributions, including those made by our U.S.-based named executive officers, at rates approved by the Compensation Committee. For fiscal 2009,2010, we matched 100% of the first 3% and 50% of the next 2% of eligible pre-tax earnings (up to IRS limits) contributed by plan participants.
Although we currently intend to continue the Retirement Savings Plan, as well as to make matching contributions, the
Compensation Committee may terminate the plan or discontinue the matching contributions at its sole discretion. If the Retirement Savings Plan were to be terminated, all company-matching funds would immediately vest. JPMorgan Chase Bank has served as the trustee for the Retirement Savings Plan since April 1, 2004. We do not sponsor any other retirement plans in which our named executive officers participate.
Deferred CompensationSeverance Plan. We sponsor an unfunded, unsecured Deferred Compensation Plan. We believehave adopted a severance plan for nearly all of our employees, including the named executive officers. Although there are differences in benefits depending on the employee's job level, the basic elements of the plan providesare comparable for all regular employees. The plan covers regular full-time and part-time U.S. employees of Best Buy Co., Inc., Best Buy Stores, L.P., Best Buy International Holdings, Inc. and Best Buy Enterprise Services, Inc., and their domestic subsidiaries, who have at least six months of continuous service, except for those with a tax-deferred retirement savings vehicle that plays an important roleseparate agreement. The plan covers involuntary terminations due to job elimination and discontinuation, office closing, reduction in attractingforce, business restructuring or other circumstances as we determine. Eligible terminated employees would receive a severance payment ranging from two weeks to 96 weeks base salary. Basic employee benefits such as medical, dental and retaininglife insurance would be continued for six months to up to 18 months. The named executive talent. Additional information about our Deferred Compensation Plan is included inNon-Qualified Deferred Compensation Plan on page 48.officers are eligible for 96 weeks of base salary and 18 months of benefit continuation.
Equity Award Grant PracticesPractices.
All equity-based incentive awards, including awards to our named executive officers and directors, must be approved by the Compensation Committee.
Timing of Awards. AnnualBeginning in June 2009, we changed the frequency and timing of our long-term incentive awards are grantedfor eligible employees from single annual grants to three grants in October of each year. This year there was also a special, non-recurring long-term incentive award grantedfiscal 2010 and quarterly grants starting in August.fiscal 2011. Special long-term incentive awards may be granted at any time, as deemed necessary for new hires, promotions, recognition or retention purposes. In April of each year, the Compensation Committee considers a stock option grant for directors. The Compensation Committee also considers stock option grants for new directors upon their appointment to the Board. We do not coordinate or time the release of material information around our grant dates in order to affect the value of the compensation. Our named executive officers do not play a role in the selection of grant dates.
Determination of Grant Date. The grant date is the date that the Compensation Committee approves the equity award.
Determination of Exercise Price. The exercise price for stock option awards is equal to the last reported sale price of our common stock, as quoted on the NYSE, on the grant date. Under the terms of the Omnibus Plan, we may not grant stock options at a discount to fair market value. Unless otherwise determined by the Compensation Committee, "fair market value" as of a given date is the closing sale price of our common stock as quoted on the NYSE on such date or, if the shares were not traded on that date, the most recent preceding date when the shares were traded.
Re-pricing of Stock Options. Under the terms of our Omnibus Plan, a stock option may not, without the approval of our shareholders, be: (i) amended to reduce its initial exercise price, except in the case of a stock split or similar event; or (ii) canceled and replaced by a stock option having a lower exercise price.
Executive Stock Ownership GuidelinesGuidelines.
The Compensation Committee has established stock ownership guidelines to promote the alignment of officer and shareholder interests and to encourage behaviors that have a positive influence on stock price appreciation and total shareholder return. The guidelines apply to all officers, including the named executive officers, and are part of an effort to encourage employee stock ownership. Under the guidelines, we expect our officers, including the named
executive officers, to acquire ownership of a fixed number of shares, based on their position, within five fiscal years of assuming their current position. The stock ownership expectation generally remains effective for as long as the officer holds the position. The guidelines
provide for stock ownership levels for our continuing named executive officers as follows:
Name | Ownership Target | (1) | ||
---|---|---|---|---|
Mr. | 140,000 shares | |||
Mr. Muehlbauer | 55,000 shares | |||
| ||||
| 55,000 shares | |||
| 55,000 shares | |||
Mr. Wheway | 35,000 shares |
The Compensation Committee reviews progress toward achievement of the ownership target at least annually. In addition to shares personally owned by each officer, the following forms of stock ownership count toward the ownership target:
Until the ownership target is met, we expect officers to retain: (i) 25% of the net proceeds received from the exercise of a stock option in the form of Best Buy common stock; and (ii) 100% of shares net of taxes issued in connection with the lapse of restrictions on restricted stock or performance share awards. In fiscal 2010, all continuing named executive officers were in compliance with the ownership guidelines.
Clawback Provisions. Our senior management performance awards typically include clawback provisions, particularly where it is difficult to match the period of an employee's influence on business results. We may exercise our rights under such provisions particularly when other mitigation strategies are difficult to achieve.
Tax and Other ConsiderationsConsiderations.
Tax Deductibility of Compensation. Section 162(m) of the Code limits the deductibility of compensation in excess of $1 million paid to the CEO or any of the three other most highly compensated executive officers, unless the compensation qualifies as "performance-based compensation." Among other things, in order to be deemed performance-based compensation, the compensation must be based on the achievement of pre-established, objective performance criteria and must be pursuant to a plan that has been approved by our shareholders. It is intended that all performance-based compensation paid in fiscal 20092010 to our named executive officers under the plans and programs described above will qualify for deductibility, either because the compensation is below the threshold for non-deductibility provided in Section 162(m), or because the payment of amounts in excess of $1 million qualify as performance-based compensation under the provisions of Section 162(m).
We believe that it is important to continue to be able to take available company tax deductions with respect to the compensation paid to our named executive officers. Therefore, we strive to take all actions that may be necessary under Section 162(m) to qualify for available tax deductions related to executive compensation. We do not, however, make compensation decisions based solely on the availability of a deduction under Section 162(m).
Accounting Treatment. We account for stock-based awards based on their grant date fair value, as determined under SFAS No. 123(R),Share-Based Payment.ASC Topic 718, Compensation — Stock Compensation. Compensation expense for these awards is recognized on a straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if earlier). If the award is subject to a performance condition, however, the cost will vary based on our estimate of the number of shares that will ultimately vest.
Towers Perrin U.S. CDB General Industry Executive Database 2009 Report
General Industry >$20B
Number of Participants: 107
3M 7-Eleven* Abbott Laboratories Accenture Alcoa Amazon.com American Airlines AstraZeneca AT&T BAE Systems* Bayer CropScience* Bayer* Benjamin Moore* Best Buy Boeing Cardinal Health Cargill Caterpillar Chrysler CHS CITGO Petroleum Coca-Cola Enterprises Continental Automotive Systems* CVS Caremark Daimler Trucks North America* Dannon* Delta Air Lines DIRECTV Dow Chemical DuPont Eli Lilly Fairchild Controls* Fluor Ford Freeport-McMoRan Copper & Gold Gavilon | Genentech* General Dynamics General Electric General Motors GlaxoSmithKline Goodyear Tire & Rubber Henkel of America* Hess Hitachi Data Systems* Hoffmann-La Roche* Honeywell IBM IKON Office Solutions* Intel International Paper Johns-Manville* Johnson & Johnson Johnson Controls Koch Industries Lafarge North America* Lockheed Martin McDonald's McKesson Medco Health Solutions MedImmune* Merck & Co. Microsoft Motorola Neoris USA* Nestle USA* Nokia Novartis Novartis Consumer Health* Occidental Petroleum Orange Business Services* Panasonic of North America* | PepsiCoPepsiCo Pfizer Pioneer Hi-Bred International* Raytheon Rio Tinto* Roche Diagnostics* Sanofi-Aventis* Sanofi-Pasteur* Schering-Plough Schlumberger Schneider Electric* Siemens* Sodexo USA* Sony Corporation of America* Sprint Nextel Staples Sunoco Target Time Warner Time Warner Cable T-Mobile USA* U.S. Foodservice Unilever United States* Union Pacific United Airlines United States Steel United Technologies Valero Energy Verizon Volvo Group North America* Walt Disney Whirlpool Wm. Wrigley Jr.* Wyeth Pharmaceuticals Xerox |
* Subsidiary
Towers Perrin U.S. CDB Retail/Wholesale Executive Database 2009 Report
Retail/Wholesale Database
Number of Participants: 41
7-Eleven A&P Abercrombie & Fitch Aeropostale Avon Best Buy Big Lots Blockbuster Brown Shoe Columbia Sportswear CVS Caremark Denny's Gap Hanesbrands | Hannaford Harry Winston J. Crew J.C. Penney Company Kenneth Cole Kohl's L.L. Bean Limited Mary Kay NIKE Office Depot Papa John's PetSmart Phillips-Van Heusen | School Specialty Staples Starbucks Target United Rentals Valero Energy VF Warnaco Wendy's/Arby's Group Whole Foods Market Williams-Sonoma Winn-Dixie Stores Zale |
Compensation and Human Resources Committee Report on Executive Compensation
The Compensation Committee has reviewed and discussed theCompensation Discussion and Analysis, above, with management. Based on this review and discussion, the Compensation Committee recommended to the Board that theCompensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2009,27, 2010, and in this Proxy Statement.
COMPENSATION AND HUMAN RESOURCES COMMITTEE
Frank D. Trestman, Chairman
Kathy J. Higgins Victor
Ronald James
Hatim A. Tyabji
Compensation Committee Interlocks and Insider Participation
Frank D. Trestman, Chairman of the Compensation Committee. The Avalon Group is a real estate development partnership in which Mr. Trestman and his son-in-law each own one-third interests. Mr. Trestman is the chairman of The Avalon Group, with the other partners responsible for operations. In fiscal 2007, we entered into a 10-year lease with Avalon-Timbercrest IV, LLC ("Avalon-Timbercrest") for a retail store located in a development in which The Avalon Group has an interest. Mr. Trestman and his son-in-law each own a 20% interest in the property we lease. Our real estate department has determined that the rental payments under the lease are competitive for the real estate market in the relevant geographic area. The payments required for the first five years of the term are $700,200 per year, with an increase in years six through 10 to $745,200 per year. In fiscal 2009,2010, we paid aggregate rents to Avalon-Timbercrest of $775,800.approximately $884,000. The Board determined that the lease is in our best interest and has terms that are competitive with terms available from unaffiliated third parties.
Compensation of Executive Officers
The table below summarizes the total compensation earned by each of our named executive officers during fiscal 2009:2010:
Name and Title | Fiscal Year | Base Salary | (1) | Bonus | (2) | Stock Awards | (3) | Option Awards | (4) | Non-Equity Incentive Plan Compensation | (5) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings | (6) | All Other Compensation | (7) | Total | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bradbury H. Anderson | 2009 | $ | 1,247,311 | $ | — | $ | 635,268 | $ | — | $ | — | $ | — | $ | 15,869 | $ | 1,898,448 | ||||||||||||||||||||||||||
Vice Chairman and | 2008 | 1,172,995 | — | 413,635 | — | 1,994,092 | — | 16,151 | 3,596,873 | ||||||||||||||||||||||||||||||||||
Chief Executive | 2007 | 1,172,995 | — | 1,289,219 | 453,605 | 2,650,969 | — | 30,116 | 5,596,904 | ||||||||||||||||||||||||||||||||||
Officer | |||||||||||||||||||||||||||||||||||||||||||
James L. Muehlbauer | 2009 | 551,878 | — | 501,507 | 493,487 | — | — | 16,541 | 1,563,413 | ||||||||||||||||||||||||||||||||||
Executive Vice | 2008 | 345,013 | 75,000 | (8) | 111,169 | 449,362 | 296,596 | — | 10,099 | 1,287,239 | |||||||||||||||||||||||||||||||||
President — | 2007 | 320,251 | — | 109,037 | 431,348 | 176,491 | — | 12,481 | 1,049,608 | ||||||||||||||||||||||||||||||||||
Finance and Chief Financial Officer | |||||||||||||||||||||||||||||||||||||||||||
Brian J. Dunn | 2009 | 876,926 | — | 571,745 | 1,910,536 | — | — | 15,140 | 3,374,347 | ||||||||||||||||||||||||||||||||||
President and Chief | 2008 | 774,231 | — | 405,841 | 1,692,097 | 988,125 | — | 11,980 | 3,872,274 | ||||||||||||||||||||||||||||||||||
Operating Officer | 2007 | 746,309 | — | 1,293,525 | 1,213,084 | 1,271,250 | — | 19,506 | 4,543,674 | ||||||||||||||||||||||||||||||||||
Robert A. Willett | 2009 | 821,157 | — | 1,412,092 | (9) | 1,191,190 | (9) | — | — | 44,047 | 3,468,486 | ||||||||||||||||||||||||||||||||
Chief Executive | 2008 | 685,577 | — | 1,481,914 | (9) | 1,749,882 | (9) | 730,469 | — | 29,893 | 4,677,735 | ||||||||||||||||||||||||||||||||
Officer — Best Buy | 2007 | 622,962 | — | 3,580,226 | (9) | 3,492,471 | (9) | 882,813 | — | 14,358 | 8,592,830 | ||||||||||||||||||||||||||||||||
International and Chief Information Officer | |||||||||||||||||||||||||||||||||||||||||||
Shari L. Ballard | 2009 | 630,770 | — | 585,741 | 870,011 | — | — | 12,329 | 2,098,851 | ||||||||||||||||||||||||||||||||||
Executive Vice | 2008 | 540,385 | — | 450,992 | 786,870 | 509,583 | — | 9,340 | 2,297,170 | ||||||||||||||||||||||||||||||||||
President — Retail | 2007 | 498,268 | — | 1,125,053 | 545,418 | 565,000 | — | 12,689 | 2,746,428 | ||||||||||||||||||||||||||||||||||
Channel Management | |||||||||||||||||||||||||||||||||||||||||||
David J. Morrish(10) | 2009 | 470,301 | — | 170,863 | 236,862 | — | — | 1,827,122 | 2,705,148 | ||||||||||||||||||||||||||||||||||
Executive Vice President — Connected Digital Solutions |
Name and Title | Fiscal Year | Base Salary | (1) | Bonus | (2) | Stock Awards | (3) | Option Awards | (4) | Non-Equity Incentive Plan Compensation | (5) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings | (6) | All Other Compensation | (7) | Total | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brian J. Dunn | 2010 | $ | 961,541 | $ | — | $ | — | $ | 6,220,000 | $ | 2,996,009 | — | $ | 54,510 | $ | 10,232,060 | |||||||||||||||||||||||||||
Chief Executive | 2009 | 876,926 | — | 0 | (8) | 1,487,640 | — | — | 15,140 | 2,379,706 | |||||||||||||||||||||||||||||||||
Officer | 2008 | 774,231 | — | — | 2,190,060 | 988,125 | — | 11,980 | 3,964,396 | ||||||||||||||||||||||||||||||||||
James L. Muehlbauer | 2010 | 622,616 | — | — | 1,012,000 | 1,311,450 | — | 12,145 | 2,958,211 | ||||||||||||||||||||||||||||||||||
Executive Vice | 2009 | 551,878 | — | 876,600 | (8) | 862,400 | — | — | 16,541 | 2,307,419 | |||||||||||||||||||||||||||||||||
President — | 2008 | 345,013 | 75,000 | — | 650,194 | 296,596 | — | 10,099 | 1,376,902 | ||||||||||||||||||||||||||||||||||
Finance and Chief | |||||||||||||||||||||||||||||||||||||||||||
Financial Officer | |||||||||||||||||||||||||||||||||||||||||||
Shari L. Ballard | 2010 | 650,001 | — | — | 838,075 | 1,365,002 | — | 67,090 | 2,920,168 | ||||||||||||||||||||||||||||||||||
Executive Vice | 2009 | 630,770 | — | 0 | (8) | 714,175 | — | — | 12,329 | 1,357,274 | |||||||||||||||||||||||||||||||||
President, | 2008 | 540,385 | — | — | 1,050,594 | 509,583 | — | 9,340 | 2,109,902 | ||||||||||||||||||||||||||||||||||
President — | |||||||||||||||||||||||||||||||||||||||||||
Americas | |||||||||||||||||||||||||||||||||||||||||||
Michael A. Vitelli | 2010 | 553,445 | — | — | 838,075 | 987,228 | — | 41,153 | 2,419,901 | ||||||||||||||||||||||||||||||||||
Executive Vice | 2009 | 474,278 | — | 0 | (8) | 431,200 | — | — | 13,649 | 919,127 | |||||||||||||||||||||||||||||||||
President, | 2008 | 471,160 | — | 182,399 | 166,397 | 226,205 | — | 16,056 | 1,062,217 | ||||||||||||||||||||||||||||||||||
President — | |||||||||||||||||||||||||||||||||||||||||||
Americas | |||||||||||||||||||||||||||||||||||||||||||
J. Scott Wheway(9) | 2010 | 547,225 | — | — | 622,000 | 632,096 | (10) | — | 4,618 | 1,805,939 | |||||||||||||||||||||||||||||||||
Chief Executive | 2009 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Officer — | 2008 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Best Buy Europe | |||||||||||||||||||||||||||||||||||||||||||
Bradbury H. | 2010 | 532,694 | — | — | — | 1,416,806 | — | 57,359 | 2,006,859 | ||||||||||||||||||||||||||||||||||
Anderson(11) | 2009 | 1,247,311 | — | — | — | — | — | 15,869 | 1,263,180 | ||||||||||||||||||||||||||||||||||
Vice Chairman | 2008 | 1,172,995 | — | — | — | 1,994,092 | — | 16,151 | 3,183,238 | ||||||||||||||||||||||||||||||||||
and former | |||||||||||||||||||||||||||||||||||||||||||
Chief Executive | |||||||||||||||||||||||||||||||||||||||||||
Officer | |||||||||||||||||||||||||||||||||||||||||||
John E. Pershing(12) | 2010 | 406,040 | — | — | 506,000 | 452,090 | — | 1,367,991 | 2,732,121 | ||||||||||||||||||||||||||||||||||
Former Executive | 2009 | 411,309 | — | 0 | (8) | 431,200 | — | — | 11,293 | 853,802 | |||||||||||||||||||||||||||||||||
Vice President — | 2008 | 286,668 | — | — | 160,684 | 129,391 | — | 9,730 | 586,473 | ||||||||||||||||||||||||||||||||||
Human Capital | |||||||||||||||||||||||||||||||||||||||||||
Robert A. Willett(13) | 2010 | 751,926 | — | 2,325,000 | (14) | 1,051,684 | 1,785,007 | — | 228,665 | 6,142,282 | |||||||||||||||||||||||||||||||||
Former Chief | 2009 | 821,157 | — | 0 | (8) | 1,191,190 | — | — | 44,047 | 2,056,394 | |||||||||||||||||||||||||||||||||
Executive Officer — Best Buy International | 2008 | 685,577 | — | 5,961,129 | 876,818 | 730,469 | — | 29,893 | 8,283,886 |
Name | Retirement Plan Contribution | (a) | Life and Long-Term Disability Insurance Premiums | (b) | Tax Services Reimbursement | (c) | Executive Physical | (d) | Other | Total | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bradbury H. Anderson | $ | 8,568 | $ | 5,824 | $ | 1,456 | $ | — | $ | 21 | (e) | $ | 15,869 | |||||||||||||||
James L. Muehlbauer | 11,135 | 1,788 | — | 3,618 | — | 16,541 | ||||||||||||||||||||||
Brian J. Dunn | 8,796 | 2,229 | 1,520 | 2,573 | 22 | (e) | 15,140 | |||||||||||||||||||||
Robert A. Willett | 7,738 | 8,043 | 7,725 | 5,367 | 15,174 | (f) | 44,047 | |||||||||||||||||||||
Shari L. Ballard | 8,828 | 1,659 | — | — | 1,842 | (g) | 12,329 | |||||||||||||||||||||
David J. Morrish | 9,262 | 2,268 | 2,000 | — | 1,813,592 | (h) | 1,827,122 |
Name | Retirement Plan Contribution | (a) | Life and Long-Term Disability Insurance Premiums | (b) | Tax Services Reimbursement | (c) | Executive Physical | (d) | Other | Total | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brian J. Dunn | $ | 9,127 | $ | 2,390 | $ | 1,930 | — | $ | 41,063 | (e) | $ | 54,510 | ||||||||||||||||
James L. Muehlbauer | 10,059 | 2,086 | — | — | — | 12,145 | ||||||||||||||||||||||
Shari L. Ballard | 8,625 | 1,505 | — | 4,740 | 52,220 | (f) | 67,090 | |||||||||||||||||||||
Michael A. Vitelli | 10,545 | 2,744 | 1,930 | — | 25,934 | (e) | 41,153 | |||||||||||||||||||||
J. Scott Wheway | — | 4,618 | — | — | — | 4,618 | ||||||||||||||||||||||
Bradbury H. Anderson | 2,176 | 7,555 | 2,000 | — | 45,628 | (e) | 57,359 | |||||||||||||||||||||
John E. Pershing | 9,909 | 1,083 | — | — | 1,356,999 | (g) | 1,367,991 | |||||||||||||||||||||
Robert A. Willett | 8,492 | 7,443 | 21,970 | — | 190,760 | (h) | 228,665 |
any, scheduled to vest by March 3, 2012. The maximum value of the performance-based award, assuming the highest level of performance conditions is as follows:
Name | Probable Grant Date Fair Value of Performance-Based Award | Target Grant in Shares | Maximum Grant in Shares | Maximum Grant Date Fair Value of Performance-Based Award | |||||
---|---|---|---|---|---|---|---|---|---|
Brian J. Dunn | $0 | 190,000 | 475,000 | $19,565,250 | |||||
James L. Muehlbauer | 0 | 100,000 | 250,000 | 10,297,500 | |||||
Shari L. Ballard | 0 | 82,750 | 206,875 | 8,521,181 | |||||
Michael A. Vitelli | 0 | 50,000 | 125,000 | 5,148,750 | |||||
John E. Pershing(a) | 0 | 50,000 | 125,000 | 5,148,750 | |||||
Robert A. Willett | 0 | 190,000 | 475,000 | 19,565,250 |
Targets for this award, which require material enterprise growth, were previously disclosed on Form 8-K filed with the SEC on August 8, 2008.
The table below summarizes grants under our long-term incentive programs to each of our named executive officers during fiscal 2009:2010:
| | | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | | | Exercise or Base Price of Option Awards ($/Sh) | | |||||||||||||||||||||||||||||||||
Name | Grant Date | Grant Date Fair Value | (1) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | (2) | (2) | ||||||||||||||||||||||||||||||
Bradbury H. Anderson(3) | — | $ | — | — | — | — | — | — | — | — | — | $ | — | |||||||||||||||||||||||||||||
James L. | 4/18/2008 | (4) | 876,600 | 20,000 | ||||||||||||||||||||||||||||||||||||||
Muehlbauer | 8/5/2008 | (5) | 4,119,000 | 75,000 | 100,000 | 250,000 | ||||||||||||||||||||||||||||||||||||
10/31/2008 | 862,400 | 80,000 | 26.88 | |||||||||||||||||||||||||||||||||||||||
Brian J. Dunn | 8/5/2008 | (5) | 7,826,100 | 142,500 | 190,000 | 475,000 | ||||||||||||||||||||||||||||||||||||
10/31/2008 | 1,487,640 | 138,000 | 26.88 | |||||||||||||||||||||||||||||||||||||||
Robert A. Willett | 8/5/2008 | (5) | 7,826,100 | 142,500 | 190,000 | 475,000 | ||||||||||||||||||||||||||||||||||||
10/31/2008 | 1,191,190 | 110,500 | 26.88 | |||||||||||||||||||||||||||||||||||||||
Shari L. Ballard | 8/5/2008 | (5) | 3,408,473 | 62,063 | 82,750 | 206,875 | ||||||||||||||||||||||||||||||||||||
10/31/2008 | 714,175 | 66,250 | 26.88 | |||||||||||||||||||||||||||||||||||||||
David J. | 8/5/2008 | (5) | 1,112,130 | 20,250 | 27,000 | 67,500 | ||||||||||||||||||||||||||||||||||||
Morrish(6) | 10/31/2008 | 431,200 | 40,000 | 26.88 |
| | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | | Exercise or Base Price of Option Awards ($/Sh) | | ||||||||||||||||||||||||||||||||
Name | Grant Date | Grant Date Fair Value | (1) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | (2) | (2) | |||||||||||||||||||||||||||||
Brian J. Dunn | 6/23/2009 | $ | 2,488,000 | — | — | — | — | — | — | — | 200,000 | $ | 32.98 | |||||||||||||||||||||||||||
6/23/2009 | (3) | 3,732,000 | 300,000 | 32.98 | ||||||||||||||||||||||||||||||||||||
James L. | 6/23/2009 | 497,600 | 40,000 | 32.98 | ||||||||||||||||||||||||||||||||||||
Muehlbauer | 9/17/2009 | 263,800 | 20,000 | 37.59 | ||||||||||||||||||||||||||||||||||||
1/13/2010 | 250,600 | 20,000 | 39.73 | |||||||||||||||||||||||||||||||||||||
Shari L. Ballard | 6/23/2009 | 412,075 | 33,125 | 32.98 | ||||||||||||||||||||||||||||||||||||
9/17/2009 | 218,466 | 16,563 | 37.59 | |||||||||||||||||||||||||||||||||||||
1/13/2010 | 207,534 | 16,563 | 39.73 | |||||||||||||||||||||||||||||||||||||
Michael A. Vitelli | 6/23/2009 | 412,075 | 33,125 | 32.98 | ||||||||||||||||||||||||||||||||||||
9/17/2009 | 218,466 | 16,563 | 37.59 | |||||||||||||||||||||||||||||||||||||
1/13/2010 | 207,534 | 16,563 | 39.73 | |||||||||||||||||||||||||||||||||||||
J. Scott Wheway | 6/23/2009 | (4) | 622,000 | 50,000 | 32.98 | |||||||||||||||||||||||||||||||||||
Bradbury H. | ||||||||||||||||||||||||||||||||||||||||
Anderson(5) | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
John E. Pershing(6) | 6/23/2009 | 248,800 | 20,000 | 32.98 | ||||||||||||||||||||||||||||||||||||
9/17/2009 | 131,900 | 10,000 | 37.59 | |||||||||||||||||||||||||||||||||||||
1/13/2010 | 125,300 | 10,000 | 39.73 | |||||||||||||||||||||||||||||||||||||
Robert A. Willett | 5/1/2009 | (7) | 930,000 | 25,000 | ||||||||||||||||||||||||||||||||||||
5/1/2009 | (8) | 1,395,000 | 12,500 | 37,500 | 50,000 | |||||||||||||||||||||||||||||||||||
6/23/2009 | (9) | 687,310 | 55,250 | 32.98 | ||||||||||||||||||||||||||||||||||||
9/17/2009 | (9) | 364,374 | 27,625 | 37.59 |
Outstanding Equity Awards at Fiscal Year-End
The following table provides a summary of equity awards outstanding for each of the named executive officers as of the end of fiscal 2009:2010:
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Option Grant Date | (1)(2) | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price | Option Expiration Date | Stock Award Grant Date | (1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Right That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | (3) | |||||||||||||||||||
Bradbury H. | 4/14/2003 | 11,250 | $ | 20.65 | 4/13/2013 | |||||||||||||||||||||||||||
Anderson | 1/16/2003 | 112,500 | 19.11 | 1/15/2013 | ||||||||||||||||||||||||||||
4/11/2002 | 348,750 | 34.18 | 4/10/2012 | |||||||||||||||||||||||||||||
4/27/2001 | 348,750 | 24.71 | 4/26/2011 | |||||||||||||||||||||||||||||
4/14/2000 | 371,250 | 31.17 | 4/13/2010 | |||||||||||||||||||||||||||||
4/16/1999 | 146,250 | 23.19 | 4/15/2009 | |||||||||||||||||||||||||||||
James L. | 10/31/2008 | 80,000 | $ | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 100,000 | $ | 2,882,000 | ||||||||||||||||||||||
Muehlbauer | 4/18/2008 | (5) | 15,000 | $432,300 | ||||||||||||||||||||||||||||
10/18/2007 | 10,242 | 30,728 | 47.84 | 10/17/2017 | ||||||||||||||||||||||||||||
10/23/2006 | 5,190 | 5,190 | 55.46 | 10/22/2016 | 10/23/2006 | (6) | 5,190 | 149,576 | ||||||||||||||||||||||||
6/20/2006 | (7) | 625 | 18,013 | |||||||||||||||||||||||||||||
11/8/2005 | 22,539 | 7,514 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||
10/11/2004 | 28,500 | 36.73 | 10/10/2014 | |||||||||||||||||||||||||||||
11/3/2003 | 25,500 | 39.59 | 11/2/2013 | |||||||||||||||||||||||||||||
1/16/2003 | 7,500 | 19.11 | 1/15/2013 | |||||||||||||||||||||||||||||
4/11/2002 | 16,875 | 34.18 | 4/10/2012 | |||||||||||||||||||||||||||||
3/4/2002 | 4,220 | 31.04 | 3/3/2012 | |||||||||||||||||||||||||||||
Brian J. Dunn | 10/31/2008 | 138,000 | $ | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 190,000 | $ | 5,475,800 | ||||||||||||||||||||||
10/18/2007 | 34,500 | 103,500 | 47.84 | 10/17/2017 | ||||||||||||||||||||||||||||
10/23/2006 | 69,000 | 69,000 | 55.46 | 10/22/2016 | ||||||||||||||||||||||||||||
11/8/2005 | 60,000 | 20,000 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||
10/11/2004 | 47,250 | 36.73 | 10/10/2014 | |||||||||||||||||||||||||||||
11/3/2003 | 51,750 | 39.59 | 11/2/2013 | |||||||||||||||||||||||||||||
1/16/2003 | 30,000 | 19.11 | 1/15/2013 | |||||||||||||||||||||||||||||
4/11/2002 | 65,588 | 34.18 | 4/10/2012 | |||||||||||||||||||||||||||||
4/27/2001 | 48,938 | 24.71 | 4/26/2011 | |||||||||||||||||||||||||||||
12/15/2000 | 4,923 | 11.11 | 12/14/2010 | |||||||||||||||||||||||||||||
4/14/2000 | 16,875 | 31.17 | 4/13/2010 | |||||||||||||||||||||||||||||
4/16/1999 | 16,875 | 23.19 | 4/15/2009 | |||||||||||||||||||||||||||||
Robert A. Willett | 10/31/2008 | 110,500 | $ | 26.88 | 10/31/2008 | |||||||||||||||||||||||||||
8/5/2008 | (4) | 190,000 | $ | 5,475,800 | ||||||||||||||||||||||||||||
10/18/2007 | 55,250 | 47.84 | 10/17/2017 | 10/18/2007 | (8) | |||||||||||||||||||||||||||
4/26/2007 | (9) | 103,820 | $2,992,092 | |||||||||||||||||||||||||||||
10/23/2006 | 110,500 | 55.46 | 10/22/2016 | |||||||||||||||||||||||||||||
11/8/2005 | 30,005 | 46.80 | 11/7/2015 | |||||||||||||||||||||||||||||
10/11/2004 | 45,000 | 36.73 | 10/10/2014 | |||||||||||||||||||||||||||||
4/23/2004 | 150,000 | 37.00 | 4/22/2014 | |||||||||||||||||||||||||||||
4/12/2002 | 11,250 | 34.44 | 4/11/2012 | |||||||||||||||||||||||||||||
Shari L. Ballard | 10/31/2008 | 66,250 | $ | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 82,750 | $ | 2,384,855 | ||||||||||||||||||||||
10/18/2007 | 16,550 | 49,650 | 47.84 | 10/17/2017 | ||||||||||||||||||||||||||||
10/23/2006 | 33,100 | 33,100 | 55.46 | 10/22/2016 | ||||||||||||||||||||||||||||
11/8/2005 | 22,503 | 7,502 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||
10/11/2004 | 19,350 | 36.73 | 10/10/2014 | |||||||||||||||||||||||||||||
11/3/2003 | 32,325 | 39.59 | 11/2/2013 | |||||||||||||||||||||||||||||
David J. Morrish | 10/31/2008 | 40,000 | $ | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 27,000 | $ | 778,140 | ||||||||||||||||||||||
10/18/2007 | 5,242 | 15,728 | 47.84 | 10/17/2017 | ||||||||||||||||||||||||||||
10/23/2006 | 10,380 | 10,380 | 55.46 | 10/22/2016 | ||||||||||||||||||||||||||||
7/5/2006 | (10) | 5,000 | $144,100 | |||||||||||||||||||||||||||||
11/8/2005 | 11,270 | 3,757 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||
10/11/2004 | 15,750 | 36.73 | 10/10/2014 | |||||||||||||||||||||||||||||
11/3/2003 | 9,375 | 39.59 | 11/2/2013 | |||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Option Grant Date | (1)(2) | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price | Option Expiration Date | Stock Award Grant Date | (1) | Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested | (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Right That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | (3) | |||||||||||||||||||||
Brian J. | 6/23/2009 | 200,000 | $ | 32.98 | 6/23/2019 | ||||||||||||||||||||||||||||||
Dunn | 6/23/2009 | 300,000 | 32.98 | 6/23/2019 | |||||||||||||||||||||||||||||||
10/31/2008 | 34,500 | 103,500 | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 190,000 | $ | 6,935,000 | ||||||||||||||||||||||||||
10/18/2007 | 69,000 | 69,000 | 47.84 | 10/17/2017 | |||||||||||||||||||||||||||||||
10/23/2006 | 103,500 | 34,500 | 55.46 | 10/22/2016 | |||||||||||||||||||||||||||||||
11/8/2005 | 80,000 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||||||
10/11/2004 | 47,250 | 36.73 | 10/10/2014 | ||||||||||||||||||||||||||||||||
11/3/2003 | 51,750 | 39.59 | 11/2/2013 | ||||||||||||||||||||||||||||||||
1/16/2003 | 30,000 | 19.11 | 1/15/2013 | ||||||||||||||||||||||||||||||||
4/11/2002 | 65,588 | 34.18 | 4/10/2012 | ||||||||||||||||||||||||||||||||
4/27/2001 | 48,938 | 24.71 | 4/26/2011 | ||||||||||||||||||||||||||||||||
12/15/2000 | 4,923 | 11.11 | 12/14/2010 | ||||||||||||||||||||||||||||||||
4/14/2000 | 16,875 | 31.17 | 4/13/2010 | ||||||||||||||||||||||||||||||||
James L. | 1/13/2010 | 20,000 | $ | 39.73 | 1/13/2020 | ||||||||||||||||||||||||||||||
Muehlbauer | 9/17/2009 | 20,000 | 37.59 | 9/17/2019 | |||||||||||||||||||||||||||||||
6/23/2009 | 40,000 | 32.98 | 6/23/2019 | ||||||||||||||||||||||||||||||||
10/31/2008 | 20,000 | 60,000 | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 100,000 | $ | 3,650,000 | ||||||||||||||||||||||||||
4/18/2008 | (5) | 10,000 | $ | 365,000 | |||||||||||||||||||||||||||||||
10/18/2007 | 20,485 | 20,485 | 47.84 | 10/17/2017 | |||||||||||||||||||||||||||||||
10/23/2006 | 7,785 | 2,595 | 55.46 | 10/22/2016 | |||||||||||||||||||||||||||||||
11/8/2005 | 30,053 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||||||
10/11/2004 | 28,500 | 36.73 | 10/10/2014 | ||||||||||||||||||||||||||||||||
11/3/2003 | 25,500 | 39.59 | 11/2/2013 | ||||||||||||||||||||||||||||||||
1/16/2003 | 7,500 | 19.11 | 1/15/2013 | ||||||||||||||||||||||||||||||||
4/11/2002 | 16,875 | 34.18 | 4/10/2012 | ||||||||||||||||||||||||||||||||
3/4/2002 | 4,220 | 31.04 | 3/3/2012 | ||||||||||||||||||||||||||||||||
Shari L. | 1/13/2010 | 16,563 | $ | 39.73 | 1/13/2020 | ||||||||||||||||||||||||||||||
Ballard | 9/17/2009 | 16,563 | 37.59 | 9/17/2019 | |||||||||||||||||||||||||||||||
6/23/2009 | 33,125 | 32.98 | 6/23/2019 | ||||||||||||||||||||||||||||||||
10/31/2008 | 16,562 | 49,688 | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 82,750 | $ | 3,020,375 | ||||||||||||||||||||||||||
10/18/2007 | 33,100 | 33,100 | 47.84 | 10/17/2017 | |||||||||||||||||||||||||||||||
10/23/2006 | 49,650 | 16,550 | 55.46 | 10/22/2016 | |||||||||||||||||||||||||||||||
11/8/2005 | 30,005 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||||||
10/11/2004 | 19,350 | 36.73 | 10/10/2014 | ||||||||||||||||||||||||||||||||
11/3/2003 | 32,325 | 39.59 | 11/2/2013 | ||||||||||||||||||||||||||||||||
Michael A. | 1/13/2010 | 16,563 | $ | 39.73 | 1/13/2020 | ||||||||||||||||||||||||||||||
Vitelli | 9/17/2009 | 16,563 | 37.59 | 9/17/2019 | |||||||||||||||||||||||||||||||
6/23/2009 | 33,125 | 32.98 | 6/23/2019 | ||||||||||||||||||||||||||||||||
10/31/2008 | 10,000 | 30,000 | 26.88 | 10/31/2018 | 8/5/2008 | (4) | 50,000 | $ | 1,825,000 | ||||||||||||||||||||||||||
10/18/2007 | 5,242 | 5,243 | 47.84 | 10/17/2017 | 10/18/2007 | (6) | 3,495 | 127,568 | |||||||||||||||||||||||||||
10/23/2006 | 17,598 | 5,867 | 55.46 | 10/22/2016 | |||||||||||||||||||||||||||||||
11/08/2005 | 15,027 | 46.80 | 11/07/2015 | ||||||||||||||||||||||||||||||||
10/11/2004 | 3,000 | 36.73 | 10/10/2014 | ||||||||||||||||||||||||||||||||
02/09/2004 | 19,125 | 35.73 | 02/08/2014 | ||||||||||||||||||||||||||||||||
J. Scott Wheway | 6/23/2009 | 50,000 | $ | 32.98 | 6/22/2019 | ||||||||||||||||||||||||||||||
Bradbury H. | 4/14/2003 | 11,250 | $ | 20.65 | 4/13/2013 | ||||||||||||||||||||||||||||||
Anderson | 1/16/2003 | 112,500 | �� | 19.11 | 1/15/2013 | ||||||||||||||||||||||||||||||
4/11/2002 | 348,750 | 34.18 | 4/10/2012 | ||||||||||||||||||||||||||||||||
4/27/2001 | 168,750 | 24.71 | 4/26/2011 | ||||||||||||||||||||||||||||||||
4/14/2000 | 92,250 | 31.17 | 4/13/2010 | ||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Option Grant Date | (1)(2) | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price | Option Expiration Date | Stock Award Grant Date | (1) | Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested | (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Right That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | (3) | |||||||||||||||||||||
John E. | 10/18/2007 | 5,062 | $ | 47.84 | 10/17/2017 | ||||||||||||||||||||||||||||||
Pershing(7) | 10/23/2006 | 3,922 | 55.46 | 10/22/2016 | |||||||||||||||||||||||||||||||
11/8/2005 | 6,147 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||||||
10/11/2004 | 5,434 | 36.73 | 10/10/2014 | ||||||||||||||||||||||||||||||||
11/3/2003 | 9,450 | 39.59 | 11/2/2013 | ||||||||||||||||||||||||||||||||
Robert A. | 9/17/2009 | 27,625 | $ | 37.59 | 9/17/2019 | ||||||||||||||||||||||||||||||
Willett(8) | 6/23/2009 | 55,250 | 32.98 | 6/23/2019 | |||||||||||||||||||||||||||||||
10/31/2008 | 110,500 | 26.88 | 10/31/2018 | ||||||||||||||||||||||||||||||||
8/5/2008 | (4)(9) | 190,000 | $ | 6,935,000 | |||||||||||||||||||||||||||||||
10/18/2007 | 55,250 | 47.84 | 10/17/2017 | 10/18/2007 | (6)(9) | 18,417 | 672,221 | ||||||||||||||||||||||||||||
10/23/2006 | 110,500 | 55.46 | 10/22/2016 | ||||||||||||||||||||||||||||||||
11/8/2005 | 30,005 | 46.80 | 11/7/2015 | ||||||||||||||||||||||||||||||||
10/11/2004 | 45,000 | 36.73 | 10/10/2014 | ||||||||||||||||||||||||||||||||
4/23/2004 | 150,000 | 37.00 | 4/22/2014 | ||||||||||||||||||||||||||||||||
4/12/2002 | 11,250 | 34.44 | 4/11/2012 |
director on April 14, 2003 — 11,250 shares; April 11, 2002 — 11,250 shares; April 27, 2001 — 11,250 shares; and April 14, 2000 — 11,250 shares; and April 16, 1999 — 11,250 shares.
Options Exercised and Stock Vested
The table below provides a summary of the value realized in connection with stock option awards exercised and stock awards vested for our named executive officers during fiscal 2009:2010:
| Option Awards | | Stock Awards | | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise | (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | (2) | ||||||||||
Bradbury H. Anderson | 195,000 | (3) | $ | 6,633,978 | 29,678 | (4) | $ | 855,320 | ||||||||
James L. Muehlbauer | — | — | 5,625 | (5) | 245,444 | |||||||||||
Brian J. Dunn | — | — | 26,709 | (4) | 769,753 | |||||||||||
Robert A. Willett | — | — | 28,693 | (6) | 826,933 | |||||||||||
Shari L. Ballard | — | — | 30,776 | (7) | 886,964 | |||||||||||
David J. Morrish | — | — | 22,480 | (8) | 701,724 |
| Option Awards | | Stock Awards | | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise | (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | (2) | ||||||||||
Brian J. Dunn | 16,875 | (3) | $ | 302,738 | — | $ | — | |||||||||
James L. Muehlbauer | — | — | 8,013 | (4) | 306,200 | |||||||||||
Shari L. Ballard | — | — | — | — | ||||||||||||
Michael A. Vitelli | — | — | 5,000 | (5) | 160,400 | |||||||||||
J. Scott Wheway | — | — | — | — | ||||||||||||
Bradbury H. Anderson | 605,250 | (6) | 8,076,995 | — | — | |||||||||||
John E. Pershing | 10,000 | (7) | 139,050 | 1,046 | (8) | 38,179 | ||||||||||
Robert A. Willett | — | — | 103,820 | (9) | 4,172,526 |
Number of Shares | Exercise Date | Exercise Price | Average Market Price | ||||
---|---|---|---|---|---|---|---|
50,000 | March 31, 2009 | $23.19 | $37.44 | ||||
50,000 | April 1, 2009 | $23.19 | $37.37 | ||||
46,250 | April 2, 2009 | $23.19 | $39.77 | ||||
31,000 | November 3, 2009 | $31.17 | $39.15 | ||||
30,000 | November 11, 2009 | $24.71 | $43.00 | ||||
31,000 | November 17, 2009 | $31.17 | $42.53 | ||||
60,000 | November 23, 2009 | $24.71 | $43.77 | ||||
31,000 | December 1, 2009 | $31.17 | $43.31 | ||||
90,000 | December 14, 2009 | $24.71 | $45.10 | ||||
31,000 | December 15, 2009 | $31.17 | $42.36 | ||||
31,000 | December 29, 2009 | $31.17 | $40.73 | ||||
31,000 | January 12, 2010 | $31.17 | $38.93 | ||||
31,000 | January 26, 2010 | $31.17 | $37.27 | ||||
31,000 | February 9, 2010 | $31.17 | $35.83 | ||||
31,000 | February 23, 2010 | $31.17 | $36.59 |
Non-Qualified Deferred Compensation
The following table shows the account balances at February 28, 2009,27, 2010, and the contributions and earnings during fiscal 2009,2010, for our named executive officers under our Deferred Compensation Plan, an unfunded unsecured plan. The Deferred Compensation Plan allows highly compensated employees, including the named executive officers, and directors to defer:
Name | Executive Contributions in Fiscal 2009 | (1) | Registrant Contributions in Fiscal 2009 | Aggregate Earnings (Losses) in Fiscal 2009 | Aggregate Withdrawals/ Contributions | Aggregate Balance at February 28, 2009 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bradbury H. Anderson | $ | — | $— | $ | (971,919 | ) | $— | $2,660,603 | ||||||
James L. Muehlbauer | 52,707 | — | (413,158 | ) | — | 550,799 | ||||||||
Brian J. Dunn | — | — | — | — | — | |||||||||
Robert A. Willett | — | — | — | — | — | |||||||||
Shari L. Ballard | 63,077 | — | (159,953 | ) | — | 412,337 | ||||||||
David J. Morrish | 59,492 | — | (279,205 | ) | — | 400,240 |
Name | Executive Contributions in Fiscal 2010 | (1) | Registrant Contributions in Fiscal 2010 | Aggregate Earnings (Losses) in Fiscal 2010 | Aggregate Withdrawals/ Contributions | Aggregate Balance at February 27, 2010 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brian J. Dunn | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
James L. Muehlbauer | — | — | 295,075 | — | 845,875 | |||||||||||||
Shari L. Ballard | 113,750 | — | 166,844 | — | 692,932 | |||||||||||||
Michael A. Vitelli | — | — | — | — | — | |||||||||||||
J. Scott Wheway | — | — | — | — | — | |||||||||||||
Bradbury H. Anderson | — | — | 1,009,428 | — | 3,670,031 | |||||||||||||
John E. Pershing | — | — | 6,626 | (21,067 | ) | 0 | ||||||||||||
Robert A. Willett | — | — | — | — | — |
Investments. Amounts deferred under and contributed to the Deferred Compensation Plan are credited or charged with the performance of investment options selected by the participants. The investment options are notional and do not represent actual
investments, but rather serve as a measurement of performance. The options available under the Deferred Compensation Plan and their rates of return for the calendar year ended December 31, 2008,2009, were as follows:
Investment | Rate of Return(1) | |
---|---|---|
NVIT Money Market | ||
PIMCO VIT Total Return | ||
PIMCO VIT High-Yield Bond | ||
Fidelity VIP II Asset Manager | ||
Vanguard VIF Diversified Value | ||
Vanguard VIF Equity Index | ||
MFS VIT Growth Series | ||
NVIT Multi-Manager | ||
Vanguard VIF Small Company Growth | ||
Vanguard VIF International |
Distributions. Participants who elect to defer compensation under the Deferred Compensation Plan also select when the deferred amounts will be distributed to them. Distributions may be made in a specific year, or at a time that begins at or after the participant's retirement. Distributions are paid in a lump sum or in quarterly installments at the participant's option. However, if a participant's employment ends prior to retirement, a distribution is made promptly in a lump sum or in quarterly installments, depending on the account balance.
Employer-Matching Contributions and Vesting. Prior to 2004, the Deferred Compensation Plan provided for employer-matching contributions. Since January 1, 2004, we do not provide employer-matching contributions for amounts deferred under the plan. Participants are fully vested in their contributions. Employer contributions vest according to a five-year schedule. If the Deferred Compensation Plan were to be terminated, the participants would immediately become fully vested in all of the employer-matching funds.and employer contributions made before 2004.
Potential Payments Upon Termination or Change-in-Control
We do not have employment severance or change-in-control agreements or arrangements with our domestic named executive officers. We do however have an ERISA severance plan that includes our named US-based executive officers and covers involuntary terminations due to job elimination and discontinuation, office closing, reduction in force, business restructuring or other circumstances as we determine at our discretion. For more details on the severance plan, seeBenefits and Perquisites on page 43. Mr. Wheway has an employment agreement which continues unless terminated by either party on a six-month written notice, or immediately upon termination for cause. In lieu of the notice period, we may terminate the agreement by paying Mr. Wheway's base salary for such period for up to six months.
As such, except for Mr. Wheway, the only contractual payments that would be received by our named executive officers upon termination of employment or a change-in-control would be in connection with the severance plan and with the equity-based incentive awards granted under our long-term incentive programs. The amounts reported below represent the in-the-money value of stock options and value of stock awards, calculated based on the closing price of our common stock on February 27, 2009,26, 2010, the last
last trading day in fiscal 2009.2010. The following table summarizes the potential value of payments made under the severance plan and long-term incentive awards for each named executive officer under various scenarios:
| | Termination | | | | | | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | | Involuntary | (1) | Voluntary | (2) | Following Change-in- Control | (3) | Death or Disability | (4) | Retirement | (5) | ||||||||||||||||
Bradbury H. Anderson | Stock options | — | $ | 3,441,038 | $ | 3,441,038 | $ | 3,441,038 | $ | 3,441,038 | |||||||||||||||||
Stock awards | — | — | 2,736,920 | 2,736,920 | 2,736,920 | ||||||||||||||||||||||
Total | — | $ | 3,441,038 | $ | 6,177,958 | $ | 6,177,958 | $ | 6,177,958 | ||||||||||||||||||
James L. Muehlbauer | Stock options | — | $ | 72,825 | $ | 228,025 | $ | 228,025 | $ | 228,025 | |||||||||||||||||
Stock awards | — | — | 7,804,588 | 7,804,588 | 7,354,576 | ||||||||||||||||||||||
Total | — | $ | 72,825 | $ | 8,032,613 | $ | 8,032,613 | $ | 7,582,601 | ||||||||||||||||||
Brian J. Dunn | Stock options | — | $ | 674,628 | $ | 942,348 | $ | 942,348 | $ | 942,348 | |||||||||||||||||
Stock awards | — | — | 16,152,745 | 16,152,745 | 16,152,745 | ||||||||||||||||||||||
Total | — | $ | 674,628 | $ | 17,095,093 | $ | 17,095,093 | $ | 17,095,093 | ||||||||||||||||||
Robert A. Willett | Stock options | — | $ | — | $ | 214,370 | $ | 214,370 | $ | 214,370 | |||||||||||||||||
Stock awards | — | — | 19,834,299 | 19,834,299 | 16,842,206 | ||||||||||||||||||||||
Total | — | $ | — | $ | 20,048,669 | $ | 20,048,669 | $ | 17,056,576 | ||||||||||||||||||
Shari L. Ballard | Stock options | — | $ | — | $ | 128,525 | $ | 128,525 | $ | 128,525 | |||||||||||||||||
Stock awards | — | — | 8,166,262 | 8,166,262 | 8,166,262 | ||||||||||||||||||||||
Total | — | $ | — | $ | 8,294,787 | $ | 8,294,787 | $ | 8,294,787 | ||||||||||||||||||
David J. Morrish(6) | Stock options | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Stock awards | — | — | — | — | — | ||||||||||||||||||||||
Total | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| | Termination | | | | | | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | | Involuntary | (1) | Voluntary | (2) | Following Change-in- Control | (3) | Death or Disability | (4) | Retirement | (5) | ||||||||||||||||
Brian J. Dunn | Cash | $ | 1,846,154 | $ | — | $ | 1,846,154 | $ | — | $ | — | ||||||||||||||||
Stock options | 1,797,672 | 1,797,672 | 4,553,342 | 4,553,342 | 4,553,342 | ||||||||||||||||||||||
Stock awards | — | — | 6,935,000 | 6,935,000 | 6,935,000 | ||||||||||||||||||||||
Total | $ | 3,643,826 | $ | 1,797,672 | $ | 13,334,496 | $ | 11,488,342 | $ | 11,488,342 | |||||||||||||||||
James L. Muehlbauer | Cash | $ | 1,185,231 | $ | — | $ | 1,185,231 | $ | — | $ | — | ||||||||||||||||
Stock options | 385,016 | 385,016 | 1,103,016 | 1,103,016 | 1,103,016 | ||||||||||||||||||||||
Stock awards | — | — | 4,015,000 | 4,015,000 | 3,650,000 | ||||||||||||||||||||||
Total | $ | 1,570,247 | $ | 385,016 | $ | 6,303,247 | $ | 5,118,016 | $ | 4,753,016 | |||||||||||||||||
Shari L. Ballard | Cash | $ | 1,200,000 | $ | — | $ | 1,200,000 | $ | — | $ | — | ||||||||||||||||
Stock options | 159,326 | 159,326 | 753,925 | 753,925 | 753,925 | ||||||||||||||||||||||
Stock awards | — | — | 3,020,375 | 3,020,375 | 3,020,375 | ||||||||||||||||||||||
Total | $ | 1,359,326 | $ | 159,326 | $ | 4,974,300 | $ | 3,774,300 | $ | 3,774,300 | |||||||||||||||||
Michael A. Vitelli | Cash | $ | 1,107,692 | $ | — | $ | 1,107,692 | $ | — | $ | — | ||||||||||||||||
Stock options | 110,926 | 110,926 | 516,126 | 516,126 | 516,126 | ||||||||||||||||||||||
Stock awards | — | — | 1,952,568 | 1,952,568 | 1,952,568 | ||||||||||||||||||||||
Total | $ | 1,218,618 | $ | 110,926 | $ | 3,576,386 | $ | 2,468,694 | $ | 2,468,694 | |||||||||||||||||
J. Scott Wheway | Cash | $ | 355,696 | (6) | $ | — | $ | 355,696 | (6) | $ | — | $ | — | ||||||||||||||
Stock options | 176,000 | — | 176,000 | 176,000 | 176,000 | ||||||||||||||||||||||
Stock awards | — | — | — | — | — | ||||||||||||||||||||||
Total | $ | 531,696 | $ | — | $ | 531,696 | $ | 176,000 | $ | 176,000 | |||||||||||||||||
Bradbury H. Anderson | Cash | $ | 138,462 | $ | — | $ | 138,462 | $ | — | $ | — | ||||||||||||||||
Stock options | 3,435,480 | 3,435,480 | 3,435,480 | 3,435,480 | 3,435,480 | ||||||||||||||||||||||
Stock awards | — | — | — | — | — | ||||||||||||||||||||||
Total | $ | 3,573,942 | $ | 3,435,480 | $ | 3,573,942 | $ | 3,435,480 | $ | 3,435,480 | |||||||||||||||||
John E. Pershing(7) | Cash | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Stock options | — | — | — | — | |||||||||||||||||||||||
Stock awards | — | — | — | — | — | ||||||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Robert A. Willett(8) | Cash | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Stock options | — | — | — | — | — | ||||||||||||||||||||||
Stock awards | — | — | — | — | — | ||||||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
termination may be exercised during a 60-day period beginning on the termination date and (iii) stock based awards with performance-based vesting criteria may vest, depending on the termination date. Upon involuntary termination for cause, all unvested stock options and unvested stock awards are immediately and irrevocably forfeited upon involuntary termination.
forfeited.
Overview of Director Compensation
In April of each year, the Compensation Committee reviews the total compensation paid to non-management directors. The purpose of the review is to ensure that the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform the Board's duties, and to fairly compensate directors for their service. The review is comprehensive and includes consideration of qualitative and comparative factors. To ensure directors are compensated relative to the scope of their responsibilities, the Compensation Committee considers: (i) the time and effort involved in preparing for Board, committee and management meetings and the additional duties assumed by committee chairs; (ii) the level of continuing education required to remain informed of broad corporate governance trends, and material developments and strategic initiatives within our company; and (iii) the risks associated with fulfilling fiduciary duties. To supplement the qualitative analysis, the Compensation Committee also considers the total value of the compensation as compared with director compensation at other Fortune 100 companies and our peer group of companies, which is described inHow We Determine Compensation beginning on page 27.
Director Summary Compensation Table
The following table summarizes the compensation earned during fiscal 2010 by our non-management directors, as well as by Messrs. Schulze and Anderson (management directors who were not our full-time employees in fiscal 2010):
Name | Fees Earned or Paid In Cash | (1) | Option Awards | (2) | Non-qualified Deferred Compensation Earnings | (3) | All Other Compensation | Total | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bradbury H. Anderson* | $ | — | $ | — | (4) | $ | — | $ | 2,006,859 | (5) | $ | 2,006,859 | ||||||||||
Lisa M. Caputo(6) | 15,833 | 37,775 | — | — | 53,608 | |||||||||||||||||
Kathy J. Higgins Victor | 85,000 | 123,075 | — | — | 208,075 | |||||||||||||||||
Ronald James | 75,000 | 123,075 | — | — | 198,075 | |||||||||||||||||
Elliot S. Kaplan | 85,000 | 123,075 | — | — | 208,075 | |||||||||||||||||
Sanjay Khosla | 75,000 | 123,075 | — | 198,075 | ||||||||||||||||||
Allen U. Lenzmeier* | 75,000 | 123,075 | — | — | 198,075 | |||||||||||||||||
George L. Mikan III | 75,000 | 123,075 | — | — | 198,075 | |||||||||||||||||
Matthew H. Paull | 75,000 | 123,075 | — | — | 198,075 | |||||||||||||||||
Rogelio M. Rebolledo | 75,000 | 123,075 | — | — | 198,075 | |||||||||||||||||
Richard M. Schulze | — | — | (7) | — | 164,716 | (8) | 164,716 | |||||||||||||||
Frank D. Trestman* | 90,000 | 123,075 | — | — | 213,075 | |||||||||||||||||
Hatim A. Tyabji | 90,000 | 123,075 | — | — | 213,075 | |||||||||||||||||
Gérard R. Vittecoq | 75,000 | 123,075 | — | — | 198,075 |
Annual retainer | $ | 75,000 | |||
Annual committee chair retainer (Audit Committee or Compensation Committee) | 15,000 | ||||
Annual committee chair retainer (all other committees) | 10,000 |
The annual retainer and the annual committee chair retainer for non-management directors who serve during only a portion of a fiscal year are prorated. All annual retainers are paid in quarterly installments. For fiscal 2011, the Lead Independent Director will receive additional cash compensation of $10,000 annually.
Employment Arrangement for Bradbury H. Anderson
In fiscal 2010, after completing his tenure as CEO in June 2009, Mr. Anderson, Vice Chairman, began providing consulting services to us in connection with our transition to a new CEO. Pursuant to our employment arrangement with Mr. Anderson, we paid him an annual salary of $75,000 to work in a consulting capacity. Mr. Anderson is not eligible to participate in our equity-based compensation programs for employees, except our ESPP. Mr. Anderson remained eligible to receive a pro-rated Executive Officer STIP for the period of time he was CEO during the fiscal year. Mr. Anderson is eligible to receive options to purchase the same number of shares granted to non-management directors, as described in theDirector Equity Awards, below. In addition, we provided the following benefits to Mr. Anderson in fiscal 2010: (i) reimbursement of all business-related expenses, including travel, entertainment, room and board; (ii) full administrative support services at our corporate campus; and (iii) eligibility to participate in our Retirement Savings Plan and Deferred Compensation Plan.
Employment Arrangement for Richard M. Schulze
In April 2007, we entered into an amended employment arrangement with Mr. Schulze, a founder of Best Buy, Chairman of the Board and our former CEO. Mr. Schulze is responsible for Board oversight, corporate strategic planning and mentoring company officers. Mr. Schulze also periodically represents our company at public functions and actively engages with our employees at designated company functions. Pursuant to our employment arrangement with Mr. Schulze, he receives an annual salary of $150,000 for as long as he is physically and mentally proficient to act as Chairman, subject to his election as a director by our
shareholders. The arrangement allows for annual increases based on the consumer price index. Mr. Schulze is not eligible to participate in our equity-based compensation programs for employees. However, he is eligible to receive options to purchase the same number of shares granted to non-management directors, as described inDirector Equity Awards below. In addition, we provided the following benefits to Mr. Schulze in fiscal 2010: (i) reimbursement of all business-related expenses, including travel, entertainment, room and board; (ii) eligibility for Mr. Schulze and his spouse to participate in health benefit programs generally available to our employees; (iii) office facilities at our corporate campus, including full administrative support services; and (iv) eligibility to participate in the Retirement Savings Plan and our Deferred Compensation Plan.
Director Equity Awards
A significant portion of director compensation is linked to our stock performance in the form of stock option grants. Each April, in connection with the Compensation Committee's annual review of director compensation, the Compensation Committee considers a stock option award for directors. On April 7, 2009, the Compensation Committee granted to each then-serving director, other than management directors who are eligible to participate in our equity-based compensation programs for employees, an option to purchase 7,500 shares of Best Buy common stock at an exercise price of $38.13 per share. The grants were made under the Omnibus Plan, vested immediately on the grant date and can generally be exercised over a ten-year period. Messrs. Schulze and Anderson requested that they not be granted a long-term incentive award and that options to purchase the number of shares they would have received be contributed to a discretionary award pool to be distributed to our employees.
The Compensation Committee also considers stock option grants for new directors at the time they are appointed to the Board. Because annual director stock option grants are made in April, special appointment-based grants are prorated based on the number of months remaining prior to the time when the Compensation Committee expects to consider the next annual director grant.
Director Stock Ownership Guidelines
The Compensation Committee has established stock ownership guidelines for our non-management directors. Each non-management director is expected to own shares of our common stock equivalent in value to five times their annual cash retainer. Newly appointed directors have five years from their date of appointment to achieve the expected level of stock ownership.
Deferred Compensation Plan
Each calendar year, we offer our directors the opportunity to defer up to 100% of their annual and committee chair retainers under our Deferred Compensation Plan which is described inNon-Qualified Deferred Compensation Plan on page 56. No company contributions or matching contributions are made for the benefit of directors under the Deferred Compensation Plan.
Other Benefits
We reimburse all directors for travel and other necessary business expenses incurred in performance of their services for us. In addition, all directors are covered under a directors' and officers' indemnity insurance policy.
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
It is our policy not to participate in material related-party transactions with officers, directors, controlling persons and other insiders unless the transaction provides us with a demonstrable incremental benefit and the terms are competitive with terms available from unaffiliated third parties. third-parties.
Pursuant to our Related-PartyRelated Party Transactions Policy, if a transaction with a related party transaction (as defined by SEC rules and the policy) involving an amount greater than $120,000 is proposed, members of the Audit Committee who have no financial interest in the transaction review the transaction to determine whether the necessary incremental benefit is present and whether the transaction should be recommended to the Board for approval. Members of the Board who have no financial interest in the transaction then review and, if appropriate, approve the transaction. In addition, ongoing related-party transactions are reviewed periodicallyannually by the Board to ensure that such transactions continue to provide the necessary incremental benefit to us.
We have a policy of not participating in real estate transactions with officers, directors, controlling persons and other insiders unless they are approved by the members of the Board who have no financial interest in the transaction. The Board must determine that any real estate transaction with an insider has terms that are competitive with terms available from unaffiliated third parties.third-parties.
We do not have any credit arrangements between our officers, directors, controlling persons and other insiders.
Elliot S. Kaplan, director and our Secretary, is a partner with the law firm of Robins, Kaplan, Miller & Ciresi L.L.P. ("RKMC"), which serves as our primary external general counsel. The Board reviews the fees we pay to RKMC annually to ensure that they are competitive with fees charged by other law firms comparable in size and expertise. We paid approximately $8.5 million in legal fees to RKMC during fiscal 2010. In light of Mr. Kaplan's relationship with RKMC, the Board approved the transactions with RKMC and our continued business dealings with the firm.
Jane K. Kirshbaum, Mr. Kaplan's daughter, is employed with us as Senior Corporate Counsel. Ms. Kirshbaum's base salary for fiscal 2010 was $159,000, and she was eligible for a short-term incentive award, payable in cash, with a target payout of 30% of her base salary. Ms. Kirshbaum's total cash compensation for fiscal 2010 was $233,669. Also during fiscal 2010, we awarded Ms. Kirshbaum options to purchase 1,388 shares of Best Buy common stock at an exercise price of $32.98 per share, options to purchase 347 shares of Best Buy common stock at an exercise price of $37.59 per share, and options to purchase 347 shares of Best Buy common stock at an exercise price of $39.73 per share. The stock options expire in June 2019, September 2019 and January 2020, respectively, and vest ratably over four years.
Michael J. Stillman, Mr. Kaplan's step-son, is employed by us as Vice President — Business Development. Mr. Stillman's base salary for fiscal 2010 was $214,000 and he was eligible for a short-term incentive award, payable in cash, with a target payout of 45% of his base salary. Mr. Stillman's total cash compensation for fiscal 2010 was $364,491. Also during fiscal 2010, we awarded Mr. Stillman options to purchase 4,250 shares of Best Buy common stock at an exercise price of $32.98 per share, options to purchase 2,125 shares of Best Buy common stock at an exercise price of $37.59 per share, and options to purchase 2,125 shares of Best Buy common stock at an exercise price of $39.73 per share. The stock options expire in June 2019, September 2019 and January 2020, respectively, and vest ratably over four years.
Mr. Kaplan's family members were compensated at levels comparable to the compensation paid to non-family members in similar positions at our company.
Michael J. Pratt is President and Chief Operating Officer — Best Buy Canada. Michelle K. Pratt, Mr. Pratt's wife, is employed with us in Canada as Director — Merchandising. During fiscal 2010, we paid Ms. Pratt total cash compensation of $203,911 CAD ($184,111 USD using the average exchange rate for fiscal 2010, 0.9029) and awarded her options to purchase 1,400 shares of Best Buy common stock at an exercise price of $32.98 per share, options to purchase 700 shares of Best Buy common stock at an exercise price of $37.59 per share, and options to purchase 700 shares of Best Buy common stock at an exercise price of $39.73 per share. The stock options expire in June 2019, September 2019 and January 2020, respectively, and vest ratably over four years. Ms. Pratt was compensated at levels comparable to the compensation paid to non-family members in similar positions at our company.
We lease two of our U.S. Best Buy stores from Richard M.Mr. Schulze, a founder of Best Buy and our Chairman of the Board. During fiscal 2009,2010, we paid aggregate rents of approximately $1.0 million for the two stores leased from Mr. Schulze of $1.1 million.Schulze. The leases include escalation clauses, and one provides for percentage rent based on gross sales. OneDepending upon our exercise of successive renewal options, the leases was scheduled to expire in 2008, but we exercised a renewal option in fiscal 2009 to continue to lease the store. The renewal options could extend the leaserun through 2021. The other lease expires in 20112021 and has renewal options that could extend the lease through 2023, at our option.respectively. We entered into both real estate leases with Mr. Schulze prior to 1990, and the Board negotiated and approved the leases (with Mr. Schulze not voting). The Board relied on one or more of its members who had no financial interest in the properties to review market comparisons, look into alternative rental agreements and negotiate with Mr. Schulze. The Board determined that these real estate leases were in our best interest and had terms that are competitive with terms available from unaffiliated third parties. Real estate lease renewalsthird-parties. Renewals of these leases are reviewed by the Audit Committee pursuant to our Related-PartyRelated Party Transactions Policy.
We also lease and charter, on a non-exclusive basis, airplanes from a corporationentities owned by the Richard M. Schulze Revocable Trust, under trust agreement dated June 14, 2001, as amended and restated, of which Mr. Schulze is a trustee. Periodically,Annually, the Board reviews the terms of the lease agreementand charter agreements to ensure that they are competitive with terms available from unaffiliated third parties.third-parties. We pay an hourly rate for use of the airplanes, without any required fractional ownership. Our senior management generally use the airplanes when it is more economical or practical than flying commercial airlines. The total amount paid to Mr. Schulze's corporationentities for use of the airplanes during fiscal 20092010 was $895,000.approximately $732,000. All extensions or renewals of lease agreements are subject to a competitive bidding process.
We purchase certain store fixtures from Phoenix Fixtures, Inc. ("Phoenix"), a company owned by Mr. Schulze's brother. Our decision to conduct business with Phoenix was based on both qualitative and quantitative factors including product quality, pricing, customer service and design flexibility. In light of Mr. Schulze's relationship with Phoenix, the Board reviewed our transactions with Phoenix and determined that the transactions were on fair terms to us and that Phoenix provides significant advantages with respect to service and delivery as compared with its competitors. Accordingly, the Board approved the transactions and our continued business dealings with Phoenix. The total
amount paid to Phoenix during fiscal 20092010 was $18 million.approximately $4 million USD and $199,000 CAD. All transactions with Phoenix during fiscal 2010 were subject to a competitive bidding process to ensure fair prices and terms.
Susan S. Hoff, Mr. Schulze's daughter, is Chairperson President and Chief Executive Officer of The Best Buy Children's Foundation, for which she has served as principal executive officer since the inception of the foundation. In addition, since October 2007, Ms. Hoff has served as a Vice President of our company. Ms. Hoff's base salary for fiscal 2010 was set in fiscal 2009 at $233,000$237,000 and she was eligible for a short-term incentive award, payable in cash, expressed aswith a target payout of 45% of her base salary. During fiscal 2009,2010, Ms. Hoff received $232,000$403,604 in total cash compensation. Also during fiscal 2009,2010, Ms. Hoff was awarded options to purchase 12,0006,000 shares of Best Buy common stock at an exercise price of $41.19$32.98 per share, and
options to purchase 12,0003,000 shares of Best Buy common stock at an exercise price of $26.88$37.59 per share, and options to purchase 3,000 shares of Best Buy common stock at an exercise price of $39.73 per share. The stock options expire in August 2018June 2019, September 2019 and October 2018,January 2020, respectively, and vest ratably over four years. Ms. Hoff's compensation was deemed reasonable by the Compensation Committee based upon the responsibilities encompassed by her role.
Elliot S. Kaplan
Elliot S. Kaplan, a director since 1971, is a partner with the law firm of Robins, Kaplan, Miller & Ciresi L.L.P. ("RKMC"), which serves as our primary external general counsel. The Board periodically reviews the fees paid to RKMC to ensure that they are competitive with fees charged by other law firms comparable in size and expertise. We paid $11 million in legal fees to RKMC during fiscal 2009. In light of Mr. Kaplan's relationship with RKMC, the Board approved the transactions with RKMC and our continued business dealings with the firm.
Jane K. Kirshbaum, Mr. Kaplan's daughter, is employed with us as Senior Corporate Counsel. Ms. Kirshbaum's base salary for fiscal 2009 was $154,000, and she was eligible for a short-term incentive award, payable in cash, expressed as 30% of her base salary. Ms. Kirshbaum's total cash compensation for fiscal 2009 was $154,000. Also during fiscal 2009, we awarded Ms. Kirshbaum options to purchase 2,700 shares of Best Buy common stock at an exercise price of $41.19 per share and she was awarded options to purchase 2,970 shares of Best Buy common stock at an exercise price of $26.88 per share. The stock options expire in August 2018 and October 2018, respectively, and vest ratably over four years.
Michael J. Stillman, Mr. Kaplan's step-son, is employed by us as Vice President — Business Development. Mr. Stillman's base salary for fiscal 2009 was $210,000 and he was eligible for a short-term incentive award, payable in cash, expressed as 45% of his base salary. Mr. Stillman's total cash compensation for fiscal 2009 was $195,000. Also during fiscal 2009, we awarded Mr. Stillman options to purchase 3,700 shares of Best Buy common stock at an exercise price of $41.19 per share and options to purchase 5,180 shares of Best Buy common stock at an exercise price of $26.88 per share. The stock options expire in August 2018 and October 2018, respectively, and vest ratably over four years.
Mr. Kaplan's family members were compensated at levels comparable to the compensation paid to non-family members in similar positions at Best Buy.
George L. Mikan III
George L. Mikan III, a director since April 2008, is executive vice president and chief financial officer of UnitedHealth Group Incorporated ("UnitedHealth"). We sponsor a self-insured health benefits program for our eligible U.S.-based employees, which is facilitated by an agreement with UnitedHealth. Under the agreement, UnitedHealth provides us with access to physician networks and other services, including claim processing and call center support. The agreement was established in 2003 and may be renewed annually. During fiscal 2009, we paid $175 million to UnitedHealth under the agreement. Of this amount, $14 million was for administrative and other services. The remaining $161 million was in the form of reimbursements for medical and pharmaceutical claims administered by UnitedHealth. In light of Mr. Mikan's relationship with UnitedHealth, the Board reviewed and approved our
continued business dealings with UnitedHealth when Mr. Mikan joined our Board.
Frank D. Trestman
The Avalon Group is a real estate development partnership in which Frank D. Trestman, a director since 1984, and Mr. Trestman's son-in-law each own one-third interests. Mr. Trestman is the chairman of The Avalon Group, with the other partners responsible for operations. In fiscal 2007, we entered into a 10-year lease with Avalon-Timbercrest for a retail store located in a development in which The Avalon Group has an interest. Mr. Trestman and his son-in-law each own a 20% interest in the property we lease. Our real estate department has determined that the rental payments under the lease are competitive for the real estate market in the relevant geographic area. The payments required for the first five years of the term are $700,200 per year, with an increase in years six through ten to $745,200 per year. In fiscal 2009,2010, we paid aggregate rents to Avalon-Timbercrest of $775,800.approximately $884,000. In light of Mr. Trestman's relationship with Avalon-Timbercrest, the Board determined that the lease is in our best interest and has terms that are competitive with terms available from unaffiliated third parties.
Hatim A. Tyabji
Hatim A. Tyabji, a director since 1998, has served as chairman of the board of directors of Jasper Wireless, Inc. ("Jasper") since November 2008. We purchase wireless data connectivity services from Jasper for our private label mobile navigation devices. We paid $2 million to Jasper in fiscal 2009, which represented approximately 10% of its recognized revenue for the year. Mr. Tyabji is not an employee of Jasper, nor did he participate in negotiating or executing our agreement with Jasper. In light of Mr. Tyabji's relationship with Jasper, the Board reviewed and approved our continued business dealings with Jasper.
Brian J. Dunn
Brian J. Dunn is our President and Chief Operating Officer. Mr. Dunn serves on the board of directors of Dick's Sporting Goods, Inc. ("Dick's"). Pursuant to an assignment of lease, we lease certain land and buildings to Dick's for its retail store in Richfield, Minnesota. We originally entered into the lease agreement with Galyan's Trading Co. in 2000, prior to Mr. Dunn joining Dick's board. The payments required for the term of the lease increase annually according to a prescribed schedule. The initial term of the lease expires in 2019, and the lease includes eight 5-year automatic renewals unless otherwise terminated. During fiscal 2009, we received $3.2 million in lease payments. Best Buy also made payments to Dick's in fiscal 2009 totaling $437,000 in connection with sports-related corporate sponsorships. In light of Mr. Dunn's relationship with Dick's, the Board determined that continuing these business relationships with Dick's is in our best interest and that the lease terms are competitive with terms available from unaffiliated third parties.
Jonathan E. Pershing
Jonathan E. Pershing is our Executive Vice President — Human Capital. Travis Cinco was employed with us as a Senior Director — Operating Development and shares a household with Mr. Pershing. During fiscal 2009, we paid Mr. Cinco total cash compensation of $149,000 and awarded him options to purchase 3,700 shares of Best Buy common stock at an exercise price of $41.19 per share and options to purchase 3,700 shares of Best Buy common stock at an exercise price of $26.88 per share. The stock options were scheduled to expire in August 2018 and October 2018, respectively, and vest ratably over four years. In February 2009, Mr. Cinco opted to terminate his employment pursuant to our Voluntary Separation Program, for which he received a one-time lump sum payment of $193,503, of which $3,700 is an outplacement credit. All unvested share awards granted to Mr. Cinco were irrevocably forfeited when he terminated employment with us. He is also eligible for up to 12 months of COBRA payments. Mr. Cinco was compensated at levels comparable to the compensation paid to non-family members in similar positions at Best Buy.
Michael J. Pratt
Michael J. Pratt is President — Best Buy Canada. Michelle K. Pratt, Mr. Pratt's wife, is employed with us in Canada as Director — Merchandising. During fiscal 2009, we paid Ms. Pratt total cash compensation of $158,000 and awarded her options to purchase 2,400 shares of Best Buy common stock at an exercise price of $41.19 per share and options to purchase 3,000 shares of Best Buy common stock at an exercise price of $26.88 per share. The stock options expire in August 2018 and October 2018, respectively, and vest ratably over four years. Ms. Pratt was compensated at levels comparable to the compensation paid to non-family members in similar positions at Best Buy.
The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Audit Committee is comprised of four members and acts under a written charter adopted and approved by the Board. The Audit Committee's charter is posted on our Web site atwww.BestBuy.comwww.bby.com — select the "For Our Investors""Investor Relations" link and then the "Corporate Governance" link. All members of the Audit Committee meet the SEC and NYSE definitions of independence and financial literacy for audit committee members. In addition, the Board has determined that George L. Mikan III, Matthew H. Paull and Gérard R. Vittecoq, independent directors andall members of the Audit Committee are audit"audit committee financial expertsexperts" for purposes of SEC rules. No member of the Audit Committee serves on the audit committee of more than three public companies.
The Audit Committee met ten times, including six times via conference call, during fiscal 2010. The Audit Committee schedules its meetings to ensure it has sufficient time to devote appropriate attention to all of its tasks. The Audit Committee meetings include regular executive sessions with our independent registered public accounting firm, Deloitte & Touche LLP ("D&T"), our internal auditors and management. The Audit Committee also discusses with our internal auditors and D&T the overall scope and plans for their respective audits.
Recommendation Regarding Financial Statements
The Audit Committee, on behalf of the Board, reviewed and discussed with both management and Deloitte & Touche LLP ("D&T"),&T our independent registered public accounting firm, the annual audited consolidated financial statements for the fiscal year ended February 28, 2009,27, 2010, and theour quarterly operating results for each quarter in such fiscal year, along with the related significant accounting and disclosure issues. These reviews included discussions with D&T of matters required to be discussed pursuant to Statement on Auditing Standards No. 114,The Auditor's Communication With Those Charged With Governance, and discussions with management about the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the consolidated financial statements.
The Audit Committee met 11 times, including eight times via conference call, during fiscal 2009. The Audit Committee schedules its meetings to ensure it has sufficient time to devote appropriate attention to all of its tasks. The Audit Committee meetings include regular executive sessions with D&T, our internal auditors and management. The Audit Committee also discusses with our internal auditors and D&T the overall scope and plans for their respective audits.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, that theour annual audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2009,27, 2010, as filed with the SEC.
Auditor Independence and Pre-Approval Policy
The Audit Committee reviewed and discussed with D&T its independence from us and our management. As part of that review, the Audit Committee received from D&T the written disclosures and the letter required by applicable rules of the Public Company Accounting Oversight Board regarding independent accountants' communications with audit committees concerning independence. In addition, the Audit Committee reviewed all services provided by and the amount of fees paid to D&T in fiscal 2010. In reliance on the reviews and discussions with management and D&T, the Audit Committee believes that the services provided by D&T were compatible with, and did not impair, its independence.
Consistent with SEC rules regarding auditor independence, the Audit Committee has responsibility for appointing, setting fees for and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, it is the policy of the Audit Committee to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm except for minor audit-related
engagements which in the aggregate do not exceed 5% of the fees we pay to our independent registered public accounting firm during a fiscal year.
Each year, prior to engaging our independent registered public accounting firm, management submits to the Audit Committee for approval a list of services expected to be provided during that fiscal year within each of the three categories of services described below, as well as related estimated fees.fees, which are based on time and materials, unless otherwise noted.
firm can reasonably be expected to provide, including comfort letters and discussions surrounding the proper application of financial accounting and/or reporting standards.
As appropriate, the Audit Committee then pre-approves the services and the related estimated fees. The Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the estimate periodically throughout the year by category of service. During the year, circumstances may arise when it may becomebecomes necessary to engage our independent registered public accounting firm for additional services not contemplated in the initial annual proposal. In those instances, the Audit Committee pre-approves the additional services and related fees before engaging our independent registered public accounting firm to provide the additional services.
Auditor Independence
The Audit Committee discussed with D&T its independence from management and Best Buy, and received the written disclosures and the letter from D&T as required by the Public Company Accounting Oversight Board's Ethics and Independence Rule 3526,Communication with Audit Committees Concerning Independence. In September 2008, D&T advised us in writing that it believed an advisory partner on D&T's audit engagement team had entered into trades involving our securities on multiple occasions during the period of D&T's engagement. SEC rules require that we file annual financial statements that are audited by an independent registered public accounting firm. SEC rules also provide that when a partner serving in a capacity such as that of this advisory partner has an investment in securities of an audit client, the audit firm is not considered independent with respect to that client.
This individual had served as the advisory partner on the audit engagement team from the commencement of D&T's engagement in fiscal 2006 until September 2008. The advisory partner is no longer an active partner at D&T. The audit partner heading the audit engagement team had responsibility for all substantive issues with respect to the planning, scope and conduct of D&T's audit of our company, while the former advisory partner was responsible for client relationship management, industry matters and service assessment.
The former advisory partner attended some, but not all, Audit Committee meetings. At these meetings, he reviewed with the committee reports of the annual inspection of D&T conducted by the Public Company Accounting Oversight Board as well as D&T's annual client service assessments. The former advisory partner also met occasionally with members of our management or the audit committee. His role was to advise on industry matters and to maintain the relationship between D&T and us. He did not review substantive audit matters with management or the committee. The former advisory partner attended our annual meetings of shareholders as one of the D&T representatives attending those meetings. Neither the former advisory partner nor any other D&T representatives spoke at any of these shareholder meetings and no questions were asked of D&T.
D&T reported to us the results of its investigation of the involvement of the former advisory partner in actual audit matters, including review of its audit-related files and logs and interviews of other members of the audit engagement team. D&T also reported to us the steps taken in its investigation and its conclusions and provided supporting materials to us. At the direction of the Audit Committee, we also conducted an investigation into the extent of any involvement of the former advisory partner in actual audit matters. We retained outside counsel to direct and assist in this
investigation. Internal counsel conducted interviews with members and certain former members of our senior management and Audit Committee that had contacts with the former advisory partner, including our Chief Financial Officer and our Chief Accounting Officer. Outside and internal counsel reviewed summaries of the interviews and related documentation, including the minutes of all of our Board of Directors and Board committee meetings in which the former advisory partner participated, our electronic records and communications identified as pertaining to the former advisory partner, and supporting materials provided by D&T.
Following these investigations, D&T and our management advised the Audit Committee that no evidence was discovered that indicated that the former advisory partner had any substantive responsibility for or role in the conduct of the audit. D&T delivered a letter to the audit committee stating that, despite the trades in our securities by their former advisory partner and the resulting violation of the SEC's independence rules, the former advisory partner had not exercised any influence over the conduct of the audit or its conclusions with respect to the audit or accounting consultations, that the objectivity of the persons responsible for the actual conduct of the audit had not been affected by the former advisory partner's actions, and that D&T's independence was not impaired.
Based on the foregoing and the Audit Committee's understanding of the application of the relevant SEC rules, the Audit Committee accepted D&T's conclusion and letter regarding its independence and unanimously concluded that, based on all of the facts and circumstances known to the Audit Committee, D&T's independence was not impaired with respect to any of our financial statements covering periods during which the former advisory partner was a member of D&T's audit engagement team, including fiscal 2009. D&T and we have reported our respective conclusions regarding this matter to the SEC.
The Audit Committee reviewed all services provided by and the amount of fees paid to D&T in fiscal 2009. In reliance on the reviews and discussions with management and D&T, including the matter described above, the Audit Committee believes that the services provided by D&T were compatible with, and did not impair, its independence.
AUDIT COMMITTEE
Hatim A. Tyabji, Chairman
George L. Mikan III
Matthew H. Paull
Gérard R. Vittecoq
ITEM OF BUSINESS NO. 2 — RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THIS SECTION SHOULD BE READ IN CONJUNCTION WITH THE "AUDIT COMMITTEE REPORT" ON PAGES 55-57.66-67.
The Audit Committee appointed Deloitte & Touche LLP ("D&T") as our independent registered public accounting firm for the fiscal year that began March 1, 2009.ending February 26, 2011. We will ask shareholders to ratify the appointment of D&T as our independent registered public accounting firm at the Meeting. Representatives of D&T are expected to be present at the Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Principal Accountant FeesServices and ServicesFees
For the fiscal years ended February 27, 2010, and February 28, 2009, and March 1, 2008, D&T served as our independent registered public accounting firm. The following table presents the aggregate fees incurred for services rendered by D&T during fiscal 20092010 and 2008,fiscal 2009, respectively. The fees listed below were pre-approved by our Audit Committee pursuant to the Audit Committee's pre-approval policy described on pages 55-56:66-67:
Service Type | Fiscal 2009 | Fiscal 2008 | |||||
---|---|---|---|---|---|---|---|
Audit fees(1) | $ | 4,687,000 | $ | 4,495,000 | |||
Audit-related fees(2) | 2,969,000 | 592,000 | |||||
Tax fees | 157,000 | — | |||||
All other fees | — | — | |||||
Total(3) | $ | 7,813,000 | $ | 5,087,000 | |||
Service Type | Fiscal 2010 | Fiscal 2009 | |||||
---|---|---|---|---|---|---|---|
Audit Fees(1) | $ | 3,702,000 | $ | 4,687,000 | |||
Audit-Related Fees(2) | 3,272,000 | 2,969,000 | |||||
Tax Fees(3) | 298,000 | 157,000 | |||||
All Other Fees | — | — | |||||
Total Fees | $ | 7,272,000 | $ | 7,813,000 | |||
It is our policy that our independent registered public accounting firm be engaged to provide onlyprimarily audit and audit-related services. However, pursuant to the policy, in certain circumstances and using stringent standards in its evaluation, the Audit Committee may authorize our independent registered public accounting firm to provide tax services when it would be inefficient or ineffective to use anotherdetermines that D&T is the most efficient and effective tax service provider. The Audit Committee's intention is to not engage our independent registered public accounting firm for tax advisory services.
In September 2008, D&T advised us that it believed an advisory partner on D&T's audit engagement team had entered into trades involving our securities on multiple occasions during the period of D&T's engagement. The individual had served as the advisory partner on D&T's audit engagement team from the commencement of D&T's engagement in fiscal 2006 until September 2008. The advisory partner's association with D&T was terminated in September 2008. See "Audit Committee Report" on pages 55-57 for further details including our conclusion that D&T's independence was not impaired with respect to any of our financial statements covering periods during which the former advisory partner was a member of D&T's audit engagement team. Both we and D&T have reported our respective conclusions regarding this matter to the SEC.
The Board recommends that shareholders voteFORthe proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year that began on March 1, 2009.ending February 26, 2011.
If the appointment of D&TDeloitte & Touche LLP were not to be ratified by the shareholders, the Audit Committee would not be required to appoint another independent registered public accounting firm, but would give consideration to an unfavorable vote.
ITEM OF BUSINESS NO. 3 — APPROVAL OF AMENDMENTS TO THE BEST BUY CO., INC. 2004 OMNIBUS STOCK AND INCENTIVE PLAN, AS AMENDED
Information About the Plan
What is the Omnibus Plan?
The Best Buy Co., Inc. 2004 Omnibus Stock and Incentive Plan was adopted by the Board of Directors on April 20, 2004, and approved by our shareholders on June 24, 2004. An amendment to the plan was adopted by the Board of Directors on May 1, 2007, and approved by our shareholders on June 25, 2007 (as amended in 2007, the plan is referred to as the "Omnibus Plan"). The Omnibus Plan is the means by which we provide long-term incentives to a broad range of our employees.
The Omnibus Plan permits the granting of stock options (including both incentive and non-qualified stock options); stock appreciation rights ("SARs"); restricted stock and restricted stock units; performance awards of cash, stock or property; dividend equivalents; and other stock grants. Eligible recipients under the Omnibus Plan include any employee, officer, consultant, advisor or director providing services to us or to any of our affiliates, who is selected by the Compensation Committee of the Board.
The Omnibus Plan is our only plan that provides for the issuance of shares of our common stock upon completion of future awards of equity-based compensation. Currently, the aggregate number of shares of our common stock that may be issued under all stock-based awards made under the Omnibus Plan is 38 million (representing the original 16 million authorized in 2004; the 3-for-2 stock split on August 3, 2005, which increased the initial authorized amount to 24 million; and the additional 14 million authorized by shareholders in 2007). The maximum number of shares of common stock that may be awarded under the Omnibus Plan pursuant to grants of restricted stock, restricted stock units and other stock awards is 9.75 million. Our non-employee directors, as a group, may not be granted awards in the aggregate of more than 5% percent of the shares of common stock available for awards under the Omnibus Plan. As context to our annual rate of equity-based awards, it is important to note that we completed an accelerated share repurchase in fiscal 2008 to acquire $3.0 billion in shares of common stock, thereby increasing the rate of grant and overhang.
As of February 28, 2009, approximately 4.1 million shares of our common stock remained available under the Omnibus Plan for awards in the aggregate, all of which would be available for grants of restricted stock, restricted stock units and other stock awards; and 1.4 million shares of common stock remained available for awards to non-employee directors. Since adoption of the Omnibus Plan, we have made equity-based awards at an annual rate of 1.3% to 1.7% of our outstanding common stock excluding the two large grants in August 2008 (as described below), and we expect to continue at those normal levels (based on our current assumptions and compensation strategies), assuming shareholder approval of the proposed amendments to the Omnibus Plan.
What is the purpose of the Omnibus Plan?
The purpose of the Omnibus Plan is to promote the interests of Best Buy and our shareholders by aiding us in motivating, attracting and retaining employees, officers, consultants, advisors and directors who we expect will contribute to our growth and financial performance. The Board believes that the combination of short-term and long-term incentive compensation is essential in attracting, retaining and motivating individuals to enhance the likelihood of our future success. The 2009 amendments to the Omnibus Plan will allow the types and specific terms of future awards to be based on our then-current objectives for aligning compensation with shareholder value. Shareholder approval of the amendments to the Omnibus Plan will allow us to continue to award short-term and long-term incentives that achieve these goals.
What is your long-term incentive compensation philosophy?
As a company, we believe the contributions provided by each employee, both individually and as part of a team, are key to our long-term success. Over our history, we have faced a series of challenges. The outcomes of these challenges have contributed to our growth and to our view of the role of long-term incentive compensation as a vehicle to help us overcome the challenges and to share in the success of our growth. In a company such as ours, where the growth trajectory can be uneven, innovation is the key ingredient of our ability to achieve our vision and mission. Historically, innovation has originated from many sources within our company — many of which are not top-level management. Innovative employees are not always the most highly compensated, but they typically feel a personal stake in making Best Buy a success. As we focus increasing attention on individual customer needs and aspirations, our conviction has grown that we excel in meeting the unique needs of our customers whenever we unleash the potential of all of our employees.
We use equity-based long-term incentives as one tool in inspiring our people, encouraging innovation and unleashing the individual talents of our employees. These incentives are in alignment with our Total Rewards Philosophy, which balances our strategy with cost and with what employees value. We believe that equity-based compensation can be highly effective in building an employee's personal stake in our success. Therefore, we have designed several programs, such as our Retirement Savings Plan, Employee Stock Purchase Plan, Chairman's Discretionary program and our Innovation Award program, to include equity components that continually reinforce the connections among our employees, customers and shareholders. Using equity-based compensation for a portion of total compensation aligns the dreams and aspirations of our employees and their families with our shareholders' interests.
In general, we have provided long-term incentives to a broader range of employees than most other large corporations have done. For example, our store managers receive long-term incentives to create a long-term ownership stake in our success. Including store managers in our long-term incentive program helps us ensure that they will act as owners and share in our long-term success as owners. In fact, if you consider grants made during our most recent fiscal year, over 90% of the recipients of long-term incentives were non-officers.
While we reward a broad base of employees, we also believe that equity-based compensation is a key component in well-designed executive compensation. Part of our long-term compensation philosophy is designed to ensure that those who perform strategic policy-making functions, and have greater responsibilities and accountability for the organization's financial success, have an ownership interest in the organization. Furthermore, when recruiting executive talent from external sources, we believe the leverage provided by equity-based compensation is an integral part of aligning the new executives' interests with the interests of our shareholders.
Why are you requesting additional shares under the Omnibus Plan now?
We believe that our equity-based incentive programs and our emphasis on employee stock ownership have been integral to our success in the past and are crucial to our ability to retain, recruit and motivate participants to achieve our corporate performance goals in the years ahead. Over the past year, economic and competitive conditions have combined to create new challenges and opportunities that will shape our future. In the past nine months, the Compensation and Human Resources Committee, in consultation with management, decided to build the equity leverage of our employees and bind their personal lives and aspirations more tightly to our future opportunities. In August 2008, we launched an ambitious performance-based restricted stock unit incentive for 20 instrumental leaders. The incentive used 2.4 million of the shares of common stock available for grant under our Omnibus Plan. The aggressive performance targets for these incentives were designed to require a near doubling in the size of our company, and significant increases to our profitability, by the end of March 2012, for vesting to occur. We believed these
targets were stretch goals, where outsized rewards were very appropriate.
Our leadership team was also acutely aware that the key ideas, energy and effort for our success have come from many avenues. To encourage innovation beyond the top 20 leaders, concurrent with the grant to top management in August 2008, we issued a special non-routine equity-based grant to 3,700 employees to increase their personal stake in our success. This grant utilized another 6.8 million of the available shares of common stock under our Omnibus Plan.
Together, these two grants increased key measures of equity-based compensation beyond our historical norms and those of the retail industry. The grants came at a time before the current economic crisis, when we had already perceived significant and unusual challenges within the consumer electronics retailing sector as well as great opportunities for growth. We believe that these grants were crucial steps to challenge our employees to drive growth for the coming years especially during times of economic uncertainty.
At this point, we are requesting a 13.5 million share increase in the number of shares of common stock available under the Omnibus Plan. This request is being made one year in advance of our normal rhythm, due to the significant grants made in August 2008. It is critical that we have the ability to replenish our long-term incentive program to keep our people focused on the opportunities in the next few years. We believe that the ability to motivate talented employees using our equity-based incentive programs is critical to our long-term performance and shareholder returns. The amended Omnibus Plan will allow us the flexibility to implement our current long-term incentive philosophy in future years and will better align the interests of executives, employees and shareholders.
How are you proposing to amend the Omnibus Plan?
On April 7, 2009, the Board adopted amendments for the Omnibus Plan, subject to the approval of our shareholders, to:
On the same date, the Board also adopted other amendments to the Omnibus Plan, which are not subject to the approval of our shareholders, to:
Has the Board approved the amendments to the Omnibus Plan?
Yes. The Board of Directors approved the amendments to the Omnibus Plan on April 7, 2009, although the amendments increasing the maximum number of shares of common stock and the annual dollar limit on payment of performance awards are subject to the approval of our shareholders. We are now asking you to approve these amendments to the Omnibus Plan. Upon shareholder approval, these amendments to the Omnibus Plan will become effective. As amended in 2009, the plan is referred to as the "amended Omnibus Plan."
What are the key features of the amended Omnibus Plan?
The material terms of the amended Omnibus Plan are summarized below. The amended Omnibus Plan has
been designed to meet the requirements of Section 162(m) of the Code regarding the deductibility of executive compensation and to minimize the risk of premature income taxes and related penalties on participating employees under Section 409A of the Code.
The following summary is qualified in its entirety by reference to the full text of the amended Omnibus Plan. A copy of the amended Omnibus Plan may be obtained from us free of charge upon written request and is also available on our Web site atwww.BestBuy.com — under "Company Information," after selecting the "For Our Investors" link.
Who is eligible to receive awards under the amended Omnibus Plan?
Eligible recipients under the amended Omnibus Plan include any employee, officer, consultant, advisor or director providing services to us or to any of our affiliates, who is selected by the Compensation Committee of the Board. As of February 28, 2009, approximately 120,000 employees were eligible to participate in the amended Omnibus Plan.
What is the term of the amended Omnibus Plan?
Unless discontinued or terminated by the Board, the amended Omnibus Plan will expire on June 23, 2014. No awards may be made after that date. However, unless otherwise expressly provided in an applicable award agreement, any award granted under the amended Omnibus Plan, and before expiration of the plan, may extend beyond the end of such period through the award's normal expiration date.
How is the amended Omnibus Plan administered?
The Compensation Committee will administer the amended Omnibus Plan and will have full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the amended Omnibus Plan. In addition, the Compensation Committee can specify whether, and under what circumstances, awards to be received under the amended Omnibus Plan may be deferred automatically or at the election of either the holder of the award or the committee, if any such deferral complies with or is exempt from Code Section 409A. Subject to the provisions of the amended Omnibus Plan, the committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The Compensation Committee has authority to interpret the amended Omnibus Plan and to establish rules and regulations for the administration of the plan. In addition, the Board may exercise the powers of the committee at any time, except with respect to the grant of awards to our executive officers.
How many shares will be available for issuance under the amended Omnibus Plan?
The aggregate number of shares of our common stock that may be issued under all equity-based awards made under the amended Omnibus Plan will be 51.5 million. Certain awards under the amended Omnibus Plan will be subject to further limitations as follows:
under the amended Omnibus Plan, whether paid in cash, shares or other property, with that dollar amount to increase after 2009 by 5% per year.
The Compensation Committee may adjust the number of shares of common stock and share limits described above in the case of a stock dividend or other distribution, including a stock split, merger or other similar corporate transaction or event, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the amended Omnibus Plan.
If any shares of our common stock subject to any award or to which an award relates are forfeited or are reacquired by us, or if any award terminates without the delivery of any shares, the shares previously set aside for such awards will be available for future awards under the amended Omnibus Plan.
What types of awards can be issued under the amended Omnibus Plan?
The amended Omnibus Plan permits the granting of:
Under the amended Omnibus Plan, awards may be granted alone, in addition to, in combination with or in substitution for, any other award granted under the amended Omnibus Plan or any other compensation plan. Awards can be granted for no cash consideration or for cash or other consideration as determined by the Compensation Committee or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of our common stock or other securities, or property, or any combination of these in a single payment, in installments or on a deferred basis. The exercise price per share of common stock under any stock option and the grant price of any SAR may not be less than the fair market value of a share of common stock on the date of grant of such option or SAR, except to satisfy legal requirements of foreign jurisdictions or if the award is in substitution for an award previously granted by an entity acquired by us. Determinations of fair market value under the amended Omnibus Plan will be made in accordance with methods and procedures established by the Compensation Committee and intended to comply with or be exempt from Code Section 409A. The term of awards will not be longer than 10 years from the date of grant.
Stock Options. The holder of an option will be entitled to purchase a number of shares of our common stock at a specified exercise price during a specified time period, all as determined by the Compensation Committee. The option exercise price may be payable either in cash or, at the discretion of the Compensation Committee, in other securities or other property having a fair market value on the exercise date equal to the exercise price. Those securities may include shares of common stock already held by the person exercising the option or, in the case of non-qualified option, shares to be received upon exercise of the option.
Stock Appreciation Rights. The holder of a SAR is entitled to receive the excess of the fair market value (calculated as of the exercise date or, at the Compensation Committee's discretion, as of any time during a specified period before or after the exercise date) of a specified number of shares of our common stock over the grant price of the SAR. SARs vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee.
Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of our common stock subject to restrictions imposed by the Compensation Committee (including, for example, restrictions on the right to transfer or vote the restricted shares or to receive any dividends with respect to the shares) for a specified time period determined by the Compensation Committee. The holder of restricted stock units will have the right, subject to any restrictions imposed by the Compensation Committee, to receive shares of our common stock, or a cash payment equal to the fair market value of those shares, at some future date determined by the Compensation Committee. The minimum vesting period for these awards is over a period of at least three years from the date of grant, unless the award is conditioned on personal performance, or our performance or that of our affiliates, in which case the award must vest over a period of at least one year from the date of grant. The Compensation Committee also may permit accelerated vesting in the case of a participant's death, disability or retirement, or a change in control of Best Buy. If the participant's employment or service as a director terminates during the vesting period for any other reason, the restricted stock and restricted stock units will be forfeited, unless the Compensation Committee determines that it would be in our best interest to waive the remaining restrictions.
Performance Awards. Performance awards granted under the amended Omnibus Plan are intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, and to comply with or be exempt from Section 409A of the Code. Performance awards give participants the right to receive payments in cash, stock or property based solely upon the achievement of certain performance goals during a specified performance period. The Compensation Committee must designate all participants for each performance period, and establish performance goals and target awards for each participant no later than 90 days after the beginning of each performance period (or if earlier, within the first 25% of the performance period) and within the parameters of Section 162(m) of the Code. Performance goals must be based solely on one or more of the following business criteria:
The measure of performance may be set by reference to an absolute standard or a comparison to specified companies or groups of companies, or other external measures, and may be applied at individual or organizational levels. In any calendar year, the maximum aggregate amount payable under performance awards to any employee covered by Code Section 162(m) will be $10 million in value under the amended Omnibus Plan, whether paid in cash, shares or other property, with that dollar amount to increase after 2009 by 5% per year.
Dividend Equivalents. The holder of a dividend equivalent award will be entitled to receive payments (in cash, shares of our common stock, other securities or other property) equivalent to the amount of cash dividends paid by us to our shareholders, with respect to the number of shares of common stock determined by the Compensation Committee. Dividend equivalents will be subject to other terms and conditions determined by the Compensation Committee.
Other Stock Awards. The Compensation Committee may grant unrestricted shares of our common stock, subject to terms and conditions determined by the Compensation Committee and the amended Omnibus Plan limitations.
May awards be transferred?
Unless otherwise provided by the amended Omnibus Plan, no award (other than shares of unrestricted stock) granted under the amended Omnibus Plan, and no right under any such award, will be transferable by a participant either (a) for any consideration or (b) without consideration except by will or by the laws of descent and distribution.
May awards be re-priced?
Without the approval of our shareholders, no option or SAR may be amended to reduce its initial exercise or grant price, and no option or SAR may be canceled and replaced with an option, SAR or other award having a lower exercise price, except in connection with a stock dividend or other distribution, including a stock split, merger or other similar corporate transaction or event, in order to prevent dilution or enlargement of the benefits, or potential benefits intended to be provided under the amended Omnibus Plan.
May the amended Omnibus Plan be amended further?
Yes. The Board of Directors may amend, alter, suspend, discontinue or terminate the amended Omnibus Plan at any time, except that prior shareholder approval will be required for any amendment to the amended Omnibus Plan that:
Subject to the provisions of the amended Omnibus Plan or an award agreement, the Compensation Committee may not amend any outstanding award agreement without the participant's consent, if the action would adversely affect the participant's rights.
What are the federal income tax consequences of awards under the amended Omnibus Plan?
Grant of Options and SARs. The grant of a stock option or SAR is not expected to result in any taxable income for the recipient.
Exercise of Options and SARs. When the holder of a non-qualified stock option exercises the option, the holder must recognize ordinary income equal to the excess of the fair market value of the shares of our common stock acquired on the date of exercise over the exercise price, and we will generally be entitled at that time to an income tax deduction for the same amount. The holder of an incentive stock option generally will have no taxable income upon exercising the option (except that an alternative minimum tax liability may arise), and we will not be entitled to an income tax deduction. Upon exercising a SAR, the amount of any cash received and the fair market value on the exercise date of any shares of our common stock received are taxable to the recipient as ordinary income and generally deductible by us.
Disposition of Shares Acquired Upon Exercise of Options and SARs. The tax consequence upon a person's disposition of shares of common stock acquired through the exercise of an option or SAR will depend on how long the shares have been held, and whether the shares were acquired by exercising an incentive stock option or by exercising a non-qualified stock option or SAR. Generally, there will be no tax consequence to us in connection with a person's disposition of shares of common stock acquired under an option or SAR, except that we may be entitled to an income tax deduction in the case of the disposition of shares acquired under an incentive stock option before the applicable incentive stock option holding periods set forth in the Code have been satisfied.
Awards Other Than Options and SARs. As to other awards granted under the Omnibus Plan that are payable either in cash or shares of our common stock that are either transferable or not subject to substantial risk of forfeiture, the holder of the award must recognize ordinary income equal to (a) the amount of cash received or, as applicable; (b) the excess of (i) the fair market value of the shares received (determined as of the date of receipt) over (ii) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.
As to an award that is payable in shares of our common stock that are restricted from transfer and subject to substantial risk of forfeiture unless a special election is made by the holder of the award under the Code, the holder must recognize ordinary income equal to the excess of (i) the fair market value of the shares received (determined as of the first time the shares become transferable or not subject to substantial risk of forfeiture, whichever occurs earlier) over (ii) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.
Our Income Tax Deduction. Subject to the usual rules concerning reasonable compensation, and assuming that, as expected, performance awards paid under the amended Omnibus Plan are "qualified performance-based compensation" within the meaning of Section 162(m) of the Code, we will generally be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the amended Omnibus Plan. However, we will not receive any income tax deduction when a participant recognizes capital gain income upon disposition of shares of common stock received pursuant to an incentive stock option or any other form of award.
Delivery of Shares for Tax Obligation. Under the amended Omnibus Plan, the Compensation Committee may permit participants receiving or exercising awards, subject to the discretion of the Compensation Committee and upon such terms and conditions as it may impose, to deliver to us shares of common stock
(either shares received upon the receipt or exercise of the award, or shares previously owned by the holder of the option) to satisfy federal and state income tax obligations.
Section 409A of the Code. The Compensation Committee will administer and interpret the amended Omnibus Plan and all award agreements in a manner intended to satisfy the requirements of Section 409A of the Code, so as to minimize the risk of any adverse tax results thereunder to a holder of an award. If any provision of the amended Omnibus Plan or any award agreement would result in such adverse consequences, the Compensation Committee may amend that provision or take other reasonably necessary action to minimize the participants' risk of any adverse tax results; no such action shall be deemed to impair or otherwise adversely affect the rights of an holder of an award under the amended Omnibus Plan.
What future awards will be granted under the amended Omnibus Plan?
The number and types of awards that will be granted in the future under the amended Omnibus Plan are not determinable, as the Compensation Committee will make these determinations in its sole discretion. The closing price of a share of our common stock as reported on the NYSE on May 1, 2009, was $37.20. No awards granted under the Omnibus Plan before the date of the 2009 Annual Meeting of Shareholders have been made subject to shareholder approval of the amended Omnibus Plan.
Equity Compensation Plan Information
The following table provides information about Best Buy common stock that may be issued under our equity compensation plans as of February 28, 2009:
Plan Category | Securities to Be Issued Upon Exercise of Outstanding Options | Weighted Average Exercise Price | (1) | Securities Available for Future Issuance | (2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders(3) | 42,954,756 | (4) | $ | 38.37 | 10,369,619 | ||||||||
Equity compensation plans not approved by security holders(5) | 11,250 | 34.44 | NA | ||||||||||
Total | 42,966,066 | $ | 38.37 | 10,369,619 | |||||||||
Board Voting Recommendation
Upon the recommendation of management, the Board adopted the amendments to the Best Buy Co., Inc. 2004 Omnibus Stock and Incentive Plan (as previously amended in 2007), which (a) increase the number of shares of common stock subject to the plan, (b) increase the number of shares of common stock subject to grants of restricted stock, restricted stock units and other stock awards, and (c) increase the maximum aggregate amount payable annually under performance awards to any employee covered by Code Section 162(m); the Board recommends to the shareholders that they voteFORthe approval of these amendments.
The affirmative vote of the holders of a majority of the voting power of the shares of our common stock present, in person or by proxy, and entitled to vote
(excluding broker non-votes), is required to approve the amendments to the Best Buy Co., Inc. 2004 Omnibus Stock and Incentive Plan that are being presented for shareholder approval.
IT IS INTENDED THAT, UNLESS OTHERWISE INSTRUCTED, THE SHARES REPRESENTED BY THE PROXY (OTHER THAN BROKER NON-VOTES) WILL BE VOTED "FOR" APPROVAL OF THE AMENDMENTS TO THE BEST BUY CO., INC. 2004 OMNIBUS STOCK AND INCENTIVE PLAN REGARDING THE NUMBERS OF SHARES THAT MAY BE ISSUED PURSUANT TO THE PLAN AND THE ANNUAL AMOUNTS PAYABLE UNDER PERFORMANCE AWARDS TO CERTAIN EMPLOYEES.
ITEMS OF BUSINESS NOS. 4 TO 9 — APPROVAL OF AMENDMENTS TO OUR AMENDED AND RESTATED ARTICLES OF INCORPORATION
We are proposing six amendments to our Amended and Restated Articles of Incorporation (the "Current Articles"). Each proposed amendment eliminates or decreases certain existing supermajority voting provisions. Four of the amendments are included in Article IX,Regulation of Certain Events, and two of the amendments are included in Article X,Stock Repurchases from Certain Shareholders. For simplicity, our descriptions of the proposed amendments are grouped by Article.
This summary does not contain all the information that may be important to you. The complete text of the Amended and Restated Articles of Incorporation as they are proposed to be amended (the "Amended Articles") is included in Appendix A-1 to this Proxy Statement. The following summary is qualified in its entirety by reference to the text of the Amended Articles. You are urged to read the Amended Articles in their entirety.
Information About the Four Amendments to Article IX
The Board, in its continuing review of best practices in corporate governance, has evaluated the supermajority voting provisions in Article IX of the Current Articles. Pursuant to Article IX, the affirmative vote of at least 80% of the then-outstanding voting power is required for the approval of certain "Business Combinations" (as defined therein), the amendment of Article IX, the removal of directors without cause, and the amendment of the classified board provision of our Amended and Restated By-laws. Management is proposing to amend Article IX to (i) provide an approval requirement that is substantially similar to the approval required for business combinations under the Minnesota Business Corporation Act, (ii) decrease the shareholder approval required to amend Article IX, (iii) eliminate the supermajority approval requirement to remove a director without cause, and (iv) decrease the shareholder approval required to amend the provision in our Amended and Restated By-laws providing for a classified board. If one or more of the proposed amendments to Article IX is approved by our shareholders at the Meeting, they will be effective following the Meeting.
Business Combinations. The Board has concluded that it is in the best interests of Best Buy and its shareholders to eliminate the supermajority shareholder vote required to approve certain Business Combinations. Under the provisions of Article IX, a Business Combination generally is defined to include certain mergers, consolidations, share exchanges, asset transfers, issuances of equity securities, acquisitions of equity securities and reclassifications of equity securities in which a 5% or greater shareholder of Best Buy (or one of its affiliates or associates) is a party. Subject to certain exceptions, including exceptions based on the price being paid in the transaction or the approval of a majority of the "Continuing Directors" (as defined in Article IX), a Business Combination with such a shareholder requires the affirmative vote of 80% of the then-outstanding shares entitled to vote and at least 662/3% of the shares held by persons other than the 5% or greater shareholder that is involved in the transaction.
Under the provisions of the Minnesota Business Corporation Act, an "interested shareholder" (defined generally as a shareholder owning at least 10% of the outstanding voting shares) cannot enter into a "business combination" (defined generally to include the same or similar transactions as those described above in the definition of Business Combination under the Current Articles) with the corporation for four years after becoming an interested shareholder, unless prior to the transaction by which the shareholder becomes an interested shareholder, a committee composed solely of one or more "disinterested" (defined generally as a person who has not been an officer or employee of the corporation or a related organization during the preceding five years) directors or, if there are no such
disinterested directors, by a committee of three or more disinterested persons who are not directors, approves either the business combination or the transaction by which the shareholder becomes an interested shareholder. Management believes that it is in the best interests of the shareholders to amend Article IX to require the type of approval for Business Combinations that is substantially similar to the approval requirements set forth in the Minnesota Business Combinations Act, as described above. As a result, in the event we are involved in a transaction that constitutes a Business Combination under the Amended Articles, the provisions of the amended Article IX will operate in a way that is substantially similar to the provisions for approval of business combinations set forth in the Minnesota Business Corporation Act. Any differences between the proposed amendment described herein and the provisions for approval of business combinations set forth in the Minnesota Business Corporation Act are not intended to result in any substantive differences.
Amendment of Article IX. The Board has concluded that it is in the best interests of Best Buy and its shareholders to reduce the shareholder vote required to amend, alter or repeal Article IX. As a result of this proposed amendment, under certain circumstances, the affirmative vote of at least 662/3% of the then-outstanding shares entitled to vote and at least 662/3% of the shares held by shareholders other than the interested shareholder that is involved in the Business Combination would be required to amend, alter or repeal Article IX. In the event we are involved in a transaction that constitutes a business combination under the Minnesota Business Corporation Act, the provisions of Article IX, as amended or altered, and the provisions of the statute would govern. If Article IX has been repealed pursuant to the amendment procedures set forth above, only the statute would govern.
Removal of Directors. The Board has concluded that it is in the best interests of Best Buy and its shareholders to delete the provisions in Article IX relating to the removal of a director without cause. As a result, in the event the shareholders seek to remove a director without cause, the provisions of the Minnesota Business Corporation Act relating to the removal of directors without cause would govern, requiring the affirmative vote of a majority of the then-outstanding voting power.
Amendment of Classified Board By-law Provision. The Board has concluded that it is in the best interests of Best Buy and its shareholders to reduce the shareholder vote required to amend Section 1 of Article III of our Amended and Restated By-laws, which provides for, among other things, a classified board of directors. As a result of this proposed amendment, under most circumstances, the affirmative vote of 662/3% of the then-outstanding shares entitled to vote would be required to amend Section 1 of Article III of the Amended and Restated By-laws.
Potential Anti-Takeover Effect
Notwithstanding the proposed amendments, certain provisions of the amended Article IX could continue to have an anti-takeover effect by, in certain circumstances, creating an impediment which may frustrate or delay persons seeking to effect a takeover or otherwise gain control of our company. These provisions are:
Board Voting Recommendation
The Board approved each of the four amendments to Article IX of our Amended and Restated Articles of Incorporation described above, and recommends that shareholders voteFOR each of the amendments.
The affirmative vote of at least a majority of the voting power of the shares present, in person or by proxy, and entitled to vote (excluding broker non-votes) is required to approve each of the four amendments.
IT IS INTENDED THAT, UNLESS OTHERWISE INSTRUCTED, THE SHARES REPRESENTED BY THE PROXY (OTHER THAN BROKER NON-VOTES) WILL BE VOTED "FOR" EACH OF THE FOUR PROPOSALS TO AMEND ARTICLE IX OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION.
Information About the Two Amendments to Article X
The Board has also evaluated the supermajority voting provisions in Article X of the Current Articles. Pursuant to Article X, the affirmative vote of at least 80% of the then-outstanding shares held by shareholders other than a "substantial shareholder" (defined in Article X as a shareholder holding at least 10% of the outstanding voting shares) is required to approve certain repurchases of stock from the substantial shareholder, as well as to amend Article X. Management is proposing to amend Article X to (i) provide an approval requirement that is substantially similar to the approval required for repurchases of stock from certain shareholders under the Minnesota Business Corporation Act, and (ii) decrease the shareholder approval required to amend Article X. If one or more of the proposed amendments to Article X is approved by our shareholders at the Meeting, they will be effective following the Meeting.
Anti-Greenmail. The Board has concluded that it is in the best interests of Best Buy and its shareholders to eliminate the supermajority shareholder vote required to approve certain "greenmail" transactions. Under the provisions of Article X, our repurchase of stock from a substantial shareholder requires the affirmative vote of 80% of the then-outstanding shares held by shareholders other than the substantial shareholder if the purchase price exceeds 105% of the market value of the shares, the substantial shareholder has owned the shares for less than three years, and all other holders of the same class or series of shares are not offered a price for their shares substantially as favorable.
Under the Minnesota Business Corporation Act, a majority of the then-outstanding shares entitled to vote must approve the purchase of stock by a corporation from a shareholder owning more than 5% of the outstanding voting shares if the purchase price exceeds the market value of the shares, the shareholder has owned the shares for less than two years, and all other holders of the same class or series of shares are not offered at least equal value for their shares. Management believes that it is in the best interests of the shareholders to amend Article X to conform to the provisions of the Minnesota Business Combination Act governing certain share repurchases.
Amendment of Article X. The Board has concluded that it is in the best interests of Best Buy and its shareholders to reduce the shareholder vote required to amend, alter or repeal Article X. As a result of this proposed amendment, under certain circumstances, the affirmative vote of at least 662/3% of the then-outstanding shares entitled to vote would be required to amend, alter or repeal Article X.
Potential Anti-Takeover Effect
Notwithstanding the proposed amendments, certain provisions of the amended Article X could continue to have an anti-takeover effect by, in certain circumstances, creating an impediment which may frustrate or delay persons seeking to effect a takeover or otherwise gain control of our company. These provisions are:
Board Voting Recommendation
The Board approved each of the two amendments to Article X of our Amended and Restated Articles of Incorporation described above, and recommends that shareholders voteFOR each of the amendments.
The affirmative vote of at least a majority of the voting power of the shares present, in person or by proxy, and entitled to vote (excluding broker non-votes) is required to approve each of the two amendments.
IT IS INTENDED THAT, UNLESS OTHERWISE INSTRUCTED, THE SHARES REPRESENTED BY THE PROXY (OTHER THAN BROKER NON-VOTES) WILL BE VOTED "FOR" EACH OF THE TWO PROPOSALS TO AMEND ARTICLE X OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION.
Management and the Board are not aware of any other item of business that will be addressed at the Meeting. If any other item of business is properly brought before the Meeting, the Proxy Agents will vote the shares they represent as the Board recommends.
PROPOSALS FOR THE NEXT REGULAR MEETING OF SHAREHOLDERS
Any shareholder proposal intended to be presented for consideration at our 20102011 Regular Meeting of Shareholders and to be included in our proxy statement for that meeting must be received no later than January 11, 2010,2011, at our principal executive office, addressed as follows:
Mr. Joseph M. Joyce
Senior Vice President, General Counsel and Assistant Secretary
Best Buy Co., Inc.Attn: Legal Department B6
7601 Penn Avenue South
Richfield, Minnesota 55423
Any shareholder proposal received after that date and intended to be presented for consideration at our 20102011 Regular Meeting of Shareholders, though not included in our proxy statement for that meeting, will be considered untimely if received after March 29, 2010.23, 2011. In the event of an untimely proposal, our designated proxy agents may have discretionary authority to vote on such proposal.
By Order of the Board of Directors | ||
Elliot S. Kaplan | ||
Secretary | ||
May |
BEST BUY CO., INC.
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee ("Committee") of Best Buy Co., Inc. ("Company") is appointed by the Board of Directors ("Board") to discharge the Board's responsibilities relating to oversight of the following: 1) the integrity of the Company's financial statements and financial reporting processes, 2) the Company's internal accounting systems, financial and operational controls, 3) the qualifications and independence of the independent auditor, 4) the performance of the Company's Internal Audit function and the independent auditor, and 5) management's efforts to ensure Company compliance with its ethics programs, including its Code of Business Ethics, and legal and regulatory requirements. In so doing, the Committee will maintain free and open communication between the Board, the independent auditor, Internal Auditors and management of the Company.
Committee Membership
The Committee will be composed of at least three directors, each of whom shall meet the independence and experience requirements of the Securities and Exchange Commission ("SEC") as defined by the New York Stock Exchange listing standards. All Committee members will be financially literate and will have sufficient knowledge of financial matters to enable them to carry out the responsibilities of the Committee. At least one member of the Committee will be designated as the "financial expert," as defined by applicable rules and regulations. In addition, members of the Committee may not accept any consulting, advisory, or other compensatory fee from the Company (other than in their capacity as a member of the Board or one or more of the Board's committees) and may not be affiliated persons of the Company or its subsidiaries. The Committee members and Chairperson will be appointed by the Board pursuant to the recommendations of the nominating committee of the Board and may be removed by the Board in its discretion. No Committee member will simultaneously serve on the audit committees of more than two other public companies. The Committee will have authority to delegate any of its responsibilities to subcommittees as the Committee may deem appropriate, provided the subcommittees are composed entirely of independent directors.
Meetings
The Committee will meet at least four times a year, with authority to convene additional meetings, as circumstances require. All Committee members are expected to attend each meeting, in person or via tele- or video-conference. A majority of the Committee will comprise a quorum when all Committee members are unable to attend a meeting. The Committee may request that other Board members, or officers or other employees of the Company, or any other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide pertinent information. The Committee may exclude from its meetings any persons it deems inappropriate. Periodically, the Committee may meet in executive session separately without management, with internal auditors and with the Company's independent auditor. If practicable, meeting agendas will be prepared in advance of the meeting and distributed to members, along with appropriate briefing materials.
Committee Authority
The Committee will have the authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:
Committee Responsibility
The following represent the primary recurring duties of the Committee in carrying out its oversight responsibilities:
auditing standards. Following completion of the annual audit, the Committee will review the independent auditor's recommendations to management as well as the results of procedures performed.
The Committee will also undertake such additional activities as the Committee may from time to time determine or as may otherwise be required by law, the company's articles or by-laws or directive of the Board.
The Committee will make regular reports to the Board and will recommend any proposed actions to the Board for approval as necessary. The Committee will review and reassess the adequacy of this Charter at least annually and recommend any proposed changes to the Board for approval and cause the Charter to be approved at least once every three years in accordance with the regulations of the SEC.
The Committee will at least annually evaluate its own performance to determine whether it is functioning effectively.
The primary responsibility of the Committee is to oversee the Company's financial reporting process and report the results of its activities to the Board. Management is responsible for preparing the Company's financial statements and the independent auditor is responsible for auditing those financial statements. In carrying out its oversight responsibilities, the Committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and with the objective of assessing whether the Company's accounting and financial reporting practices are in accordance with all requirements and are of the highest quality.
BEST BUY CO., INC.
2004 OMNIBUS STOCK AND INCENTIVE PLAN
(As amended June , 2009)
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BEST BUY CO., INC.
2004 OMNIBUS STOCK AND INCENTIVE PLAN
Section 1. Purpose and Background
The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, advisors and directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company's business and to compensate such persons through various stock-based arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning the interests of such persons with the Company's shareholders.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set forth below:
Section 3. Administration
Section 4. Shares Available for Awards
Performance Award Limit"). The Annual Performance Award Limit does not apply to any Award subject to the limitation contained in Section 4(d)(i) of the Plan. Further, the Annual Performance Award Limit applies only to Performance Awards granted under this Plan; and shall apply to any Performance Award that was granted under this Plan before the effective date of this Section 4(d)(ii), as amended in 2009, only to the extent provided in the Award Agreement evidencing that Performance Award. Any limitations on awards granted to the Participant under any other executive incentive plan maintained by the Company (a "Non-Plan Award") will be governed solely by the terms of such other plan; provided, however, that, if any amount is payable to the Participant during a given year under a Non-Plan Award that is subject to Code Section 409A, and the terms of the Non-Plan Award permit or require the Company or any Affiliate (or its delegate) to delay beyond that year the payment of any portion of such Non-Plan Award to comply with Section 162(m), the Company shall cause payment of such portion to be delayed for that purpose.
If the Committee reasonably anticipates, on or before any date on which a Performance Award (or portion thereof) is payable to a Participant, that the Participant will be a Covered Employee for the taxable year in which that amount is payable, the Committee will apply the Annual Performance Award Limit to that amount and any other Performance Award amount otherwise payable to the Participant during that year; provided, however, that if the Committee determines at any later time during the year that the Participant is not a Covered Employee for that year, due to a termination of employment or for any other reason, the Committee will direct payment to the Participant of any portion of a Performance Award or Performance Awards that would have been payable during that year or any prior year, but was deferred to comply with the Annual Performance Award Limit, as set forth in this Section 4(d)(ii); and such payment of deferred Performance Award amounts shall be made no later than the last day of the Participant's first taxable year for which the Participant is not a Covered Employee, unless that payment is delayed beyond that year under Section 7(b) of this Plan, to the extent permitted by or as required to comply with Code Section 409A.
Section 5. Eligibility
Any Eligible Person shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full-time or part-time employees (which term as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision.
Section 6. Awards
under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as determined by the Committee, which grant price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right; provided, however, that the Committee may designate a per-share grant price below Fair Market Value on the date of grant (A) to the extent necessary or appropriate, as determined by the Committee, to satisfy applicable legal or regulatory requirements of a foreign jurisdiction; or (B) if the Stock Appreciation Right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate. Except as otherwise provided in Section 6(g)(viii), any Award Agreement granting Stock Appreciation Rights with a per-share grant price below Fair Market Value shall contain provisions that are intended to allow the Stock Appreciation Rights to satisfy the requirements of (or be exempt from) Code Section 409A and any applicable provisions of Section 6(g)(viii) of this Plan. Subject to the terms of the Plan, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions (including conditions or restrictions on the exercise thereof) of any Stock Appreciation Right shall be as determined by the Committee.
Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units.
Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof); and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents with respect to installment or deferred payments. Except as otherwise provided in Section 6(g)(viii), any change in the timing of payment of an Award shall satisfy the requirements of (or be exempt from) Code Section 409A and any applicable provisions of Section 6(g)(viii) of this Plan.
Section 7. Amendment and Termination; Adjustments
intent. In this regard, if any provision of the Plan or an Award Agreement would result in adverse tax consequences under Section 409A of the Code, the Committee may amend that provision (or take any other action reasonably necessary) to avoid any adverse tax results and no action taken to comply with Section 409A of the Code shall be deemed to impair or otherwise adversely affect the rights of any holder of an Award or beneficiary thereof.
Section 8. Income Tax Withholding
In order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, local or foreign payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of applicable taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes.
Section 9. General Provisions
affect in any way the right of the Company or an Affiliate to terminate a Participant's employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement.
Section 10. Effective Date of the Plan
The Plan became effective on April 19, 2004, upon its adoption by the Board, and was approved by the shareholders of the Company at the annual meeting of shareholders of the Company held on June 24, 2004.
Section 11. Term of the Plan
The Plan shall terminate at midnight on June 23, 2014, unless terminated before then by the Board. Awards may be granted under the Plan until the Plan terminates or until all Shares available for Awards under the Plan have been purchased or acquired; provided, however, that Incentive Stock Options may not be granted following the 10-year anniversary of the Board's adoption of the Plan on April 19, 2004. The Plan shall remain in effect as long as any Awards are outstanding.
Adopted by the Board of Directors on April 19, 2004, and approved by the shareholders of the Company on June 24, 2004.
Amended by the Board of Directors on May 1, 2007, and approved by the shareholders of the Company on June 25, 2007.
Amended by the Board of Directors on April 8, 2009, and approved by the shareholders of the Company on June [ ], 2009.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BEST BUY CO., INC.
ARTICLE INAME
The name of this corporation shall be Best Buy Co., Inc.
ARTICLE IIREGISTERED OFFICE; REGISTERED AGENT
The registered office of this corporation is located at 100 South Fifth Street, Suite 1075, Minneapolis, Minnesota 55402. Its registered agent at such address is CT Corporation System.
ARTICLE IIISHAREHOLDER VOTING
Except with respect to the election of directors, the shareholders shall take action at a meeting of shareholders by the affirmative vote of a majority of the voting power of the shares present and entitled to vote, except where a larger proportion is required by law or these Articles of Incorporation. Subject to the rights, if any, of the holders of one or more classes or series of Preferred Stock voting separately by class or series to elect directors in accordance with the terms of such Preferred Stock, each director shall be elected at a meeting of shareholders by the vote of a majority of the votes cast with respect to the director.
ARTICLE IVCAPITAL
The aggregate number of shares of all classes of stock which this corporation shall have the authority to issue is One Billion Four Hundred Thousand (1,000,400,000) shares consisting of:
The holders of shares of Common Stock shall have one vote for each share of Common Stock held of record on each matter submitted to the holders of shares of Common Stock.
ARTICLE VCLASSES AND SERIESOF STOCK
The shares of the Preferred Stock may be issued from time to time by the Board of Directors in one or more series with such designations, relative rights, preferences, limitations, dividends, rights, redemption prices, liquidation prices,
conversion rights, sinking or purchase fund rights or other privileges as the Board of Directors may establish, fix or determine.
ARTICLE VIBOARD ACTIONWITHOUT A MEETING
Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting by written action signed by a majority of the Board of Directors then in office, except as those matters which require shareholder approval, in which case the written action shall be signed by all members of the Board of Directors then in office.
ARTICLE VIICUMULATIVE VOTING
No shareholder of this corporation shall be entitled to any cumulative voting rights.
ARTICLE VIIIPREFERENTIAL RIGHTS
No shareholder of this corporation shall have any preferential, pre-emptive, or other rights of subscription to any shares of any class or series of stock of this corporation allotted or sold or to be allotted or sold whether now or hereafter authorized, or to any obligations or securities convertible into any class or series of stock of this corporation.
ARTICLE IXREGULATION OF CERTAIN EVENTS
Section 1. Definitions. As used in this Article IX (and, in some cases, Article X, hereof) the following terms and phrases shall have the respective meanings hereinafter set forth.
(a) The term "Affiliate" means a Person that directly or indirectly Controls, is Controlled by, or is under common Control with, a specified Person.
(b) The term "Associate," when used to indicate a relationship with any Person, means any of the following:
(1) any organization of which the Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of any class or series of shares entitled to vote or other equity interest; or
(2) any trust or estate in which the Person has a substantial beneficial interest or as to which the Person serves as trustee or executor or in a similar fiduciary capacity; or
(3) any relative or spouse of the Person, or any relative of the spouse, residing in the home of the Person.
(c) "Beneficial Owner," when used with respect to shares or other securities, includes, but is not limited to, any Person who, directly or indirectly, through any written or oral agreement, arrangement, relationship, understanding or otherwise, has or shares the power to vote, or direct the voting of, the shares or securities or has or shares the power to dispose of, or direct the disposition of, the shares or securities, except that:
(1) a Person shall not be deemed the Beneficial Owner of shares or securities tendered pursuant to a tender or exchange offer made by the Person or any of the Person's Affiliates or Associates until the tendered shares or securities are accepted for purchase or exchange; and
(2) a Person shall not be deemed the Beneficial Owner of shares or securities with respect to which the Person has the power to vote or direct the voting arising solely from a revocable proxy given in response to a proxy solicitation required to be made and made in accordance with the applicable rules and regulations under the Securities Exchange Act of 1934 and is not then reportable under that act on a Schedule 13D or comparable report, or, if this corporation is not subject to the rules and regulations under the Securities Exchange Act of 1934, would have been required to be made and would not have been reportable if this corporation had been subject to such rules and regulations.
"Beneficial ownership" includes, but is not limited to, the right to acquire shares or securities through the exercise of options, warrants or rights, or the conversion of convertible securities, or otherwise. The shares or securities subject to the options, warrants, rights or conversion privileges held by a Person shall be deemed to be outstanding for the purpose of computing the percentage of outstanding shares or securities of the class or series owned by the Person, but shall not be deemed to be outstanding for the purpose of computing the percentage of the class or series owned by any other Person. A Person shall be deemed the Beneficial Owner of shares and securities Beneficially Owned by any relative or spouse of the Person or any relative of the spouse, residing in the home of the Person, any trust or estate in which the Person owns ten percent (10%) or more of the total beneficial interest or serves as trustee or executor or in a similar fiduciary capacity, any organization in which the Person owns ten percent (10%) or more of the equity, and any Affiliate of the Person.
When two or more Persons act or agree to act as a partnership, limited partnership, syndicate or other group for the purposes of acquiring, owning or voting shares or other securities of a corporation, all members of the partnership, syndicate or other group are deemed to constitute a "Person" and to have acquired Beneficial Ownership, as of the date they first so act or agree to act together, of all shares or securities of the corporation Beneficially Owned by the Person.
(d) The phrase "Business Combination" means any of the following:
(1) any merger of this corporation or any Subsidiary of this corporation with (a) a Related Person or (b) any other organization (whether or not itself a Related Person) that is, or after the merger would be, an Affiliate or Associate of a Related Person, but excluding (i) the merger of a wholly owned Subsidiary of this corporation into this corporation, (ii) the merger of two or more wholly owned Subsidiaries of this corporation, or (iii) the merger of an organization, other than a Related Person or an Affiliate or Associate of a Related Person, with a wholly owned Subsidiary of this corporation pursuant to which the surviving organization, immediately after the merger, becomes a wholly owned Subsidiary of this corporation; or
(2) any exchange of shares or other securities of this corporation or any Subsidiary of this corporation or money or other property for shares, other securities, money or property of (a) a Related Person or (b) any other organization (whether or not itself a Related Person) that is, or after the exchange would be, an Affiliate or Associate of a Related Person, but excluding the exchange of shares of a domestic or foreign corporation, other than a Related Person or an Affiliate or Associate of a Related Person, pursuant to which the domestic or foreign corporation, immediately after the exchange, becomes a wholly owned Subsidiary of this corporation; or
(3) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in a single transaction or a series of transactions), other than sales of goods or services in the ordinary course of business or redemptions pursuant to Minnesota Statutes, Section 302A.671, subdivision 6, to or with a Related Person or any Affiliate or Associate of a Related Person, other than to or with this corporation or a wholly owned Subsidiary of this corporation, of assets of this corporation or any Subsidiary of this corporation (a) having an aggregate market value equal to ten percent (10%) or more of the aggregate market value of all the assets, determined on a
consolidated basis, of this corporation, (b) having an aggregate market value equal to ten percent (10%) or more of the aggregate market value of all the outstanding shares of this corporation, or (c) representing ten percent (10%) or more of the earning power or net income, determined on a consolidated basis, of this corporation except a cash dividend or distribution paid or made pro rata to all shareholders of this corporation; or
(4) the issuance or transfer by this corporation or any Subsidiary of this corporation (in a single transaction or a series of transactions) of any shares of, or other ownership interests in, this corporation or any Subsidiary of this corporation that have an aggregate market value equal to five percent (5%) or more of the aggregate market value of all the outstanding shares of this corporation to a Related Person or any Affiliate or Associate of a Related Person, except pursuant to the exercise of warrants or rights to purchase shares offered, or a dividend or distribution paid or made, pro rata to all shareholders of this corporation other than for the purpose, directly or indirectly, of facilitating or effecting a subsequent transaction that would have been a Business Combination if the dividend or distribution had not been made; or
(5) the adoption of any plan or proposal for the liquidation or dissolution of this corporation, or any reincorporation of this corporation in another state or jurisdiction, proposed by or on behalf of, or pursuant to any written or oral agreement, arrangement, relationship, understanding or otherwise with, a Related Person or any Affiliate or Associate of a Related Person; or
(6) any reclassification of securities (including without limitation any share dividend or split, reverse share split or other distribution of shares in respect of shares), recapitalization of this corporation, merger of this corporation with any Subsidiary of this corporation, exchange of shares of this corporation with any Subsidiary of this corporation, or other transaction (whether or not with or into or otherwise involving a Related Person), proposed by or on behalf of, or pursuant to any written or oral agreement, arrangement, relationship, understanding or otherwise with, a Related Person or any Affiliate or Associate of a Related Person, that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of shares entitled to vote, or securities that are exchangeable for, convertible into, or carry a right to acquire shares entitled to vote, of this corporation or any Subsidiary of this corporation that is, directly or indirectly, owned by a Related Person or any Affiliate or Associate of a Related Person, except as a result of immaterial changes due to fractional share adjustments; or
(7) any receipt by a Related Person or any Affiliate or Associate of a Related Person of the benefit, directly or indirectly (except proportionately as a shareholder of this corporation), of any loans, advances, guarantees, pledges or other financial assistance, or any tax credits or other tax advantages provided by or through this corporation or any Subsidiary of this corporation.
(e) The term "Control" and all words derived therefrom mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. A Person's beneficial ownership of ten percent (10%) or more of the voting power of this corporation's outstanding shares entitled to vote in the election of directors creates a presumption that the Person has control of this corporation. Notwithstanding the foregoing, a Person is not considered to have Control of this corporation if the Person holds voting power, in good faith and not for the purpose of avoiding this Article IX, as an agent, bank, broker, nominee, custodian or trustee for one or more beneficial owners who do not individually or as a group have Control of this corporation.
(f) The term "Disinterested" describes any director of this corporation or any other individual that is neither an officer nor an employee, nor has been an officer or employee within five (5) years immediately prior to the formation of the Disinterested Committee, of this corporation or of a Related Organization of this corporation.
(g) The phrase "Disinterested Committee" means a committee formed by the Board of Directors that is composed of (1) one or more Disinterested directors, or (2) if there are no Disinterested directors, three (3) or more Disinterested individuals.
(h) The term "Person" means any individual, firm, corporation or other entity.
(i) The phrase "Related Organization" of a specified corporation, means:
(1) a parent or Subsidiary of the specified corporation; or
(2) another Subsidiary of a parent of the specified corporation; or
(3) a limited liability company owning, directly or indirectly, more than fifty percent (50%) of the voting power of the shares entitled to vote for directors of the specified corporation; or
(4) a limited liability company having more than fifty percent (50%) of the voting power of its membership interests entitled to vote for members of its governing body owned directly or indirectly by the specified corporation; or
(5) a limited liability company having more than fifty percent (50%) of the voting power of its membership interests entitled to vote for members of its governing body owned directly or indirectly either (i) by a parent of the specified corporation or (ii) a limited liability company owning, directly or indirectly, more than fifty percent (50%) of the voting power of the shares entitled to vote for directors of the specified corporation; or
(6) a corporation having more than fifty percent (50%) of the voting power of its shares entitled to vote for directors owned directly or indirectly by a limited liability company owning, directly or indirectly, more than fifty percent (50%) of the voting power of the shares entitled to vote for directors of the specified corporation.
(j) The phrase "Related Person" means any Person that is (1) the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the voting power of this corporation's outstanding shares entitled to vote or (2) an Affiliate or Associate of this corporation that, at any time within the four (4) year period immediately prior to the date in question, was the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the voting power of this corporation's then outstanding shares entitled to vote; provided, however, that if a Person who has not been a Beneficial Owner of ten percent (10%) or more of the voting power of this corporation's outstanding shares entitled to vote immediately prior to a repurchase of shares by, or recapitalization of, this corporation or similar action shall become a Beneficial Owner of ten percent (10%) or more of the voting power solely as a result of the share repurchase, recapitalization or similar action, the Person shall not be deemed to be the Beneficial Owner of ten percent (10%) or more of the voting power for purposes of the foregoing, unless:
(i) the repurchase, recapitalization, conversion or similar action was proposed by or on behalf of, or pursuant to any agreement, arrangement, relationship, understanding or otherwise (whether or not in writing) with, the Person or any Affiliate or Associate of the Person; or
(ii) the Person thereafter acquires Beneficial Ownership, directly or indirectly, of this corporation's outstanding shares entitled to vote and, immediately after the acquisition, is the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the voting power of this corporation's outstanding shares entitled to vote.
Notwithstanding the foregoing, "Related Person" does not include:
(1) this corporation or any of its Subsidiaries;
(2) a savings, employee stock ownership, or other employee benefit plan of this corporation or any of its Subsidiaries, or a fiduciary of the plan when acting in a fiduciary capacity pursuant to the plan; or
(3) a licensed broker/dealer or licensed underwriter who:
(i) purchases shares of this corporation solely for purposes of resale to the public; and
(ii) is not acting in concert with a Related Person.
For purposes of this definition, shares Beneficially Owned by a plan, or by a fiduciary of a plan pursuant to the plan, as described in (2), above, are not deemed to be Beneficially Owned by the Person who is a fiduciary of the plan.
(k) The phrase "Share Acquisition Date," with respect to any Person, means (1) the date that the Person first becomes a Related Person, or (2) if the Person becomes, on one or more dates, a Related Person, but thereafter ceases to be a Related Person, and subsequently again becomes a Related Person, the date on which the Person most recently became a Related Person.
(l) The term "Subsidiary" of a specified organization means an organization having more than fifty percent (50%) of the voting power of its shares or other ownership interests entitled to vote for directors or other members of the governing body of the organization owned directly, or indirectly through Related Organizations, by the specified organization.
Section 2. Business Combinations. Except as set forth in Section 4 of this Article IX, and notwithstanding any other provision seemingly to the contrary in law, these Articles of Incorporation or the By-laws of this corporation, this corporation may not engage in any Business Combination, or vote, consent or otherwise act to authorize a Subsidiary of this corporation to engage in any Business Combination, with, with respect to, proposed by or on behalf of, or pursuant to any written or oral agreement, arrangement, relationship, understanding or otherwise with, any Related Person or any Affiliate or Associate of a Related Person for a period of four (4) years following the Related Person's Share Acquisition Date.
Section 3. Procedure. Upon receipt of a good faith, definitive written proposal relating to a Business Combination or an acquisition of shares pursuant to which a Person will become a Related Person, the Board of Directors shall promptly form a Disinterested Committee to consider and take action on the proposal. The Disinterested Committee shall respond in writing within thirty (30) days after receipt of the proposal, setting forth its decision regarding the proposal.
Section 4. When Inapplicable. The provisions of Section 2 of this Article IX shall not be applicable to a Business Combination, and such Business Combination shall require only such affirmative vote as may otherwise be required by law or otherwise, if:
(a) the Business Combination or the acquisition of shares made by the Related Person on the Related Person's Share Acquisition Date is approved before the Related Person's Share Acquisition Date, or on the Related Person's Share Acquisition Date but prior to the Related Person becoming a Related Person on the Related Person's Share Acquisition Date, by the affirmative vote of a majority of the members of the Disinterested Committee; or
(b) the Business Combination is with, with respect to, proposed by or on behalf of, or pursuant to any written or oral agreement, arrangement, relationship, understanding or otherwise with any Related Person whose Share Acquisition Date is either before the effective date of this Article IX, or on the effective date, but prior to the effective time of this Article IX.
Section 5. Disinterested Committee. The Disinterested Committee shall not be subject to any direction or control by the Board of Directors with respect to the committee's consideration of, or any action concerning, a Business Combination or acquisition of shares pursuant to this Article IX.
Section 6. Fiduciary Duty. Nothing contained in this Article IX shall be construed to relieve any Related Person of any fiduciary obligation imposed upon it by law.
Section 7. Powers of Board. A majority of the voting power of the entire Board of Directors shall have the power and duty to determine on the basis of the definitions provided in Section 1 of this Article IX and the information then known to them, whether (a) any Person is a Related Person, (b) any Person is an Affiliate or Associate of another, and (c) any director or individual is Disinterested. Any such determination made in good faith by a majority of the voting power of the entire Board of Directors shall be conclusive and binding for all purposes of this Article IX.
Section 8. Duties. The fact that any action or transaction complies with the provisions of this Article IX shall not be construed to waive or satisfy any other requirements of law, these Articles of Incorporation or the By-laws of this corporation, or to impose any fiduciary duty, obligation or responsibility in connection with the approval of such action or transaction or the recommendation to the shareholders of this corporation of its adoption or approval, nor shall such compliance limit, prohibit or otherwise restrict in any manner the evaluations of or actions and responses taken with respect to such action or transaction. All relevant factors, including without limitation, the social and economic effects on the employees, customers, suppliers and other constituents of this corporation and its Subsidiaries and on the communities in which this corporation and its Subsidiaries operate or are located, may be considered when evaluating any Business Combination.
Section 9. Amendment of Article IX. The foregoing provisions of this Article IX may be amended, altered or repealed only at a meeting of shareholders by the affirmative vote of (a) the holders of at least sixty-six and two-thirds percent (662/3%) of this corporation's outstanding shares entitled to vote on amendments to these Articles of Incorporation; and, in addition, (b) the holders of at least sixty-six and two-thirds percent (662/3%) of this corporation's outstanding shares entitled to vote that are Beneficially Owned by shareholders other than Related Persons;provided,however, that the provisions of this Section 9 shall not apply to any such amendment, alteration or repeal that shall have been approved and recommended to the shareholders for approval by the affirmative vote of a majority of the voting power of the entire Board of Directors.
Section 10. Amendment of By-Laws. The provisions of Section 1 of Article III of this corporation's By-Laws may be amended, altered or repealed only at a meeting of shareholders, called for such purpose, by the affirmative vote of the holders of at least sixty-six and two-thirds percent (662/3%) of this corporation's outstanding shares entitled to vote;provided,however, that, notwithstanding the foregoing requirement, the Board of Directors may amend such Section 1 to increase the number of directors in the manner prescribed by law.
ARTICLE XSTOCK REPURCHASES FROM CERTAIN SHAREHOLDERS
Section 1. Definitions. As used in this Article X, the following terms and phrases shall have the respective meanings hereinafter set forth.
(a) The term "Affiliate" has the same meaning as provided in Subsection 1(a) of Article IX of these Articles of Incorporation.
(b) The term "Associate" has the same meaning as provided in Subsection 1(b) of Article IX of these Articles of Incorporation.
(c) The phrases "Beneficial Owner" and "Beneficially Owned" have the same meanings as provided in Subsection 1(c) of Article IX of these Articles of Incorporation.
(d) The term "Person" has the same meaning as provided in Subsection 1(i) of Article IX of these Articles of Incorporation.
(e) The phrase "Public Transaction" means any (1) purchase of voting securities offered pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, or (2) open market purchase of voting securities if, in either such case, the price and other terms of sale are not negotiated by the purchaser and seller of the legal or beneficial interest in such voting securities.
(f) The term "Subsidiary" has the same meaning as provided in Subsection 1(k) of Article IX of these Articles of Incorporation.
(g) The phrase "Substantial Shareholder" means any Person or group of two or more Persons who have agreed to act together for the purpose of acquiring, holding, voting or disposing of voting securities of this corporation who, (1) individually or together with its or their Associates or Affiliates, in the aggregate, is or are the Beneficial Owner(s) of securities of this corporation, or securities convertible into securities of this corporation, representing five percent (5%) or more of this corporation's outstanding shares entitled to vote, or (2) is or are assignee(s) of or has or have otherwise succeeded as, directly or indirectly, the Beneficial Owner(s) of any voting securities, or securities convertible into voting securities, of this corporation which were at any time within the three (3) year period immediately prior to the date in question Beneficially Owned by a Substantial Shareholder or any of its Associates or Affiliates, unless such assignment or succession shall have occurred pursuant to any Public Transaction or series of Public Transactions;provided,however, that the term "Substantial Shareholder" shall not include any benefit plan or trust now or hereafter established by this corporation or any of its Subsidiaries for the benefit of the employees of this corporation and/or any of its Subsidiaries or any trustee, agent or other representative of any such plan or trust.
(h) The phrase "Unaffiliated Director" means a director who is not a Substantial Shareholder, its Affiliate or Associate, or is not otherwise related thereto;provided,however, that no director shall be considered to be an Unaffiliated Director unless such director became a director of this corporation prior to the transaction or transactions in which such Substantial Shareholder or Substantial Shareholders became such, or was nominated, appointed or elected as a director of this corporation with the approval of at least two-thirds (2/3) of the Unaffiliated Directors in office at the time of such director's nomination, appointment or election.
Section 2. Vote of Shareholders. Notwithstanding any provision seemingly to the contrary in law, these Articles of Incorporation or the By-laws of this corporation, the affirmative vote of holders of a majority of this corporation's outstanding shares entitled to vote shall be required to approve the purchase or other acquisition by this corporation of shares of capital stock of this corporation if:
(a) such shares of capital stock are purchased from any Substantial Shareholder, its Affiliates or Associates at a price more than the average closing price for shares of capital stock of the same class (as the shares of capital stock being purchased from the Substantial Shareholder, its Affiliates or Associates), in the principal public market in which such shares of capital stock are actively traded, during the most recent five (5) trading days during which such shares have been traded preceding such purchase, or, if earlier, during the most recent five (5) trading days during which such shares have been traded preceding the date upon which this corporation and the Substantial Shareholder, its Affiliates or Associates enter into a binding agreement for such purchase; or if such shares are of a class or series not traded in a public market, then at a price more than the redemption price, if any, pertaining to such shares; or, if there is no such redemption price, at a price more than the liquidation preference, if any, pertaining to such shares; or, if there is
no such liquidation preference, at a price more than the price(s) paid by such Substantial Shareholder, its Affiliates or Associates in acquiring such shares, determined on a first-in, first-out basis; and
(b) the Substantial Shareholder, its Affiliates or Associates has Beneficially Owned the shares of capital stock being purchased or any of them for less than two (2) years; and
(c) all other holders of shares of capital stock of the same class or series are not contemporaneously afforded the opportunity to sell to this corporation or any other Person, on terms and at a price determined by a majority of the Unaffiliated Directors of this corporation to be substantially as favorable as those afforded to the Substantial Shareholder, its Affiliates or Associates, the same percentage of such shares of capital stock held by them as equals that percentage of the shares of capital stock Beneficially Owned by the Substantial Shareholder which are to be purchased from the Substantial Shareholder, its Affiliates or Associates by this corporation.
Section 3. Determinations By Unaffiliated Directors. In the context of any transaction described in Section 2 of this Article X, the majority of the directors who are Unaffiliated Directors with respect to such transaction shall have the exclusive power and duty to determine, on the basis of information known to them after reasonable inquiry, whether a Person is (a) a Substantial Shareholder, (b) an Affiliate or Associate of a Substantial Shareholder, and (c) an Unaffiliated Director. Any such determination of a majority of the Unaffiliated Directors shall be final and binding in the absence of fraud or gross negligence by such Unaffiliated Directors.
Section 4. Amendment of Article X. The provisions of this Article X may be amended, altered or repealed only at a meeting of shareholders by the affirmative vote of the holders of at least sixty-six and two-thirds percent (662/3%) of this corporation's outstanding shares entitled to vote on amendments to these Articles of Incorporation;provided,however, that the provisions of this Section 4 shall not apply to any such amendment, alteration or repeal that shall have been approved and recommended to the shareholders for approval by a majority of Unaffiliated Directors.
ARTICLE XILIMITATION OF DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director;provided,however, that this Article XI shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 302A.559 or Section 80A.76 of the Minnesota Statutes, (iv) for any transaction from which the director derived an improper personal benefit, or (v) for any act or omission occurring prior to the effective date of this Article XI. If, after the effective date of this Article XI, the Minnesota Business Corporation Act is amended to authorize the further elimination or limitation of the liability of directors, then, in addition to the limitation on personal liability provided herein, the liability of a director of the corporation shall be limited to the fullest extent permitted by such amended Act. Any repeal or modification of this Article XI by the shareholders of the corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification.
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M25363-P90088 How To Vote Please Choose One of the Following Voting Methods Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the Meeting you | ||
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
BEST BUY CO., INC.
This Proxy, when properly executed and returned to Best Buy, will be voted in the manner directed herein by the undersignedshareholder(s). If no direction is made, this proxy will be voted FOR Proposals 1, 2, 3, 4, 5, 6, 7, 8 and 9.
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Voting Items M25364-P90088 2. | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year |
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| Five Class I Directors 3. In their discretion, the Proxy Agents are authorized to vote upon such other business as may properly come before the Meeting. |
M25365-P90088 |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date BEST BUY CO., INC. M25113-P90088 7601 PENN AVENUE SOUTH RICHFIELD, MN 55423 To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. For Against Abstain For address changes and/or comments, please check this box and write them on the back where indicated. | ||||||||
For All Withhold All For All Except 0 0 0 0 0 0 0 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m., Eastern Time, on Wednesday, June 23, 2010. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/bby You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m., Eastern Time, on Wednesday, June 23, 2010. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o |
Broadridge, 51 Mercedes Way, Edgewood, NY 11717. 2. Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 26, 2011. 01) Lisa M. Caputo 02) Brian J. Dunn 03) Kathy J. Higgins Victor 04) Rogelio M. Rebolledo 05) Gérard R. Vittecoq This Proxy, when properly executed and returned to Best Buy, will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, this proxy will be voted FOR Proposals 1 and 2. 1. Election of Five Class I Directors If you vote by mail, please date and sign exactly as your name appears and return this card promptly in the accompanying postage-paid envelope. If shares are held by joint tenants or as community property, both shareholders must sign. 3. In their discretion, the Proxy Agents are authorized to vote upon such other business as may properly come before the Meeting. |
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BEST BUY CO., INC.
REGULAR MEETING OF SHAREHOLDERS
9:30 a.m., Central Time, on Wednesday, June 24, 2009
Dear Best Buy Shareholder:
Your vote is important! We encourage you to vote promptly and to take advantage of Internet or telephone voting, both of which are available 24 hours a day, seven days a week.
Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) M25114-P90088 Important Notice Regarding Availability of Proxy Materials for the Regular Meeting of Shareholders to be held on June 24, 2010: Our Notice and Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended February 27, 2010, are available at www.proxyvote.com. BEST BUY CO., INC. REGULAR MEETING OF SHAREHOLDERS 9:30 a.m., Central Time, on Thursday, June 24, 2010 Dear Best Buy Shareholder: Your vote is important! We encourage you to vote promptly and to take advantage of Internet or telephone voting, both of which are available 24 hours a day, seven days a week. Vote by Internet: | Go to www.proxyvote.com or www.virtualshareholdermeeting.com/bby and follow the prompts. | |
Vote by Telephone: | Call 1-800-690-6903 if you are in the U.S. or Canada, and follow the prompts. |
(If you vote by Internet or by telephone, please do not mail your proxy card.)
Receive Investor Communications Electronically:
Help us make a difference by eliminating paper mailings to your home or business. We will provide all future proxy materials and annual reports to you electronically, unless you indicate otherwise. You can, of course, change your preference and choose to receive paper copies of these materials at any time.
(If you vote by Internet or by telephone, please do not mail your proxy card.) Receive Investor Communications Electronically: Help us make a difference by eliminating paper mailings to your home or business. We will provide all future proxy materials and annual reports to you electronically, unless you indicate otherwise. You can, of course, change your preference and choose to receive paper copies of these materials at any time. YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING. | ||
Important Notice Regarding the Availability of Proxy Materials for the Regular Meeting of Shareholders to be held on June 24, 2009:
Our Notice and Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended February 28, 2009 are available at www.proxyvote.com.
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL |
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BEST BUY CO., INC. 7601 Penn Avenue South This Proxy is Solicited on Behalf of the Board of Directors | |||||
2010 The undersigned appoint(s) Richard M. Schulze and/or Elliot S. Kaplan, each with the power of substitution, as his or her proxies | |||||
IF NO OTHER INDICATION IS MADE ON THE REVERSE SIDE OF THIS PROXY CARD, THE PROXY AGENTS WILL VOTE FOR PROPOSALS 1 | |||||
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