Bed Bath & Beyond (BBBY)

How have the Company's past compensation policies reflected shareholder interests?

        The Board believes it is critical to provide incentive to our executives to maximize long and short-term shareholder interests. To further these goals, we have historically awarded equity compensation in the form of stock options to executives with at least an 8 year duration that typically only fully vest over a period ranging from five to seven years from the date of grant. Our lengthy vesting periods result in executives usually having a larger interest in unvested equity compensation than vested, which serves to align the executives' interests with the long-term interests of the Company and further helps to retain the executive.

        Perhaps unintentionally, the data provided in support of this proposal further supports the Company's position in this regard. The potential future values of the options granted to the Company's CEO and President reported in the proposal, drawn from the Company's last proxy statement, reflect the following assumptions: first, a 5% or 10% annual appreciation in the Company's stock price, benefiting all shareholders, over a period of 10 years; and second, the CEO and President will hold all options for their full 10 year term. The proposal also fails to mention the obvious fact that, should these long-term results not follow, the stock options could be worth significantly less, or even nothing at all.

        We are speaking here of more than a mere hypothetical. Since going public in 1992, the Company has put together a record of thirteen years of revenue and earnings growth that few, if any, public companies can match, regardless of industry. The value of the stock options held by senior management, and any amount gained on exercise, reflects the market's response to the long-term success of the Company: over the last 10 years, the average annual increase in the Company's stock price has exceeded 25%, benefiting all shareholders. The alignment benefits touted by the Company are being realized.