This excerpt taken from the BBBY DEF 14A filed Jun 1, 2009.
RE-APPROVAL OF PERFORMANCE GOALS UNDER THE BED BATH & BEYOND INC. 2004 INCENTIVE COMPENSATION PLAN (PROPOSAL 5)
Shareholders are being asked to re-approve the performance goals under the Bed Bath & Beyond Inc. 2004 Incentive Compensation Plan (the 2004 Plan). The 2004 Plan was initially adopted by the Board of Directors on May 13, 2004 and was thereafter approved by our shareholders at the 2004 Annual Meeting of Shareholders.
The purpose of asking shareholders to re-approve the performance goals under the 2004 Plan is so that certain incentive awards granted thereunder may qualify as exempt performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code). Section 162(m) of the Code generally disallows the corporate tax deduction for certain compensation paid in excess of $1,000,000 annually to each of the chief executive officer and the three other most highly paid executive officers (other than the chief financial officer) of publicly-held companies, unless compensation is performance-based or satisfies other conditions. To satisfy the performance-based exception, Section 162(m) of the Code generally requires such performance goals to be approved by shareholders every five years.
We are not proposing any amendment to the terms of the 2004 Plan at this time. These performance goals must be shareholder approved to preserve, to the extent possible, our tax deduction for certain awards made under the 2004 Plan in accordance with the terms of Section 162(m) of the Code and related regulations.
The Board recommends that shareholders re-approve the performance goals under the 2004 Plan. If the requisite shareholder approval of the performance goals is not obtained, we may continue to grant awards under the 2004 Plan in accordance with its current terms. However, certain awards under the Plan may not constitute performance-based compensation under Section 162(m) of the Code, and accordingly, may not be tax deductible by the Company depending on the facts and circumstances.
The following description of the 2004 Plan is a summary of its principal provisions and is qualified in its entirety by reference to the 2004 Plan. The 2004 Plan is incorporated by reference from our definitive 2004 Proxy Statement on Schedule 14A filed with the SEC on May 28, 2004.