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GPS » Topics » Compensation Strategy Change in Fiscal 2005

This excerpt taken from the GPS DEF 14A filed Mar 28, 2005.

Compensation Strategy Change in Fiscal 2005

 

During fiscal 2004, we concluded an in-depth review of our compensation strategy. During this review, we worked closely with senior management to evaluate our compensation philosophy and the alignment of our programs with our objectives. Based on this assessment, we determined that, while the basic executive compensation principles described below remain valid, several changes were appropriate in order to more effectively promote retention and align our programs with the needs of employees, the Company’s short and long-term strategies, and the interests of our shareholders. These changes, which are generally effective beginning in fiscal 2005, include:

 

  n   A significant reduction in the number of stock options granted annually in order to: (i) reduce share dilution; (ii) create better alignment between individual and organization performance and overall compensation structure at each organization level; and (iii) help optimize compensation investments based on what employees at each level value most.

 

  n   The introduction of performance units, which will be paid in shares of our stock upon vesting. In general, for employees at the Senior Vice President level and above, we currently expect that performance units will be granted annually after the achievement of Company financial goals. After grant, awards will then be subject to a vesting period based on continued service with the Company. At lower organization levels, performance units generally will be granted based on management’s assessment of individual performance, potential, and retention importance. These units will vest based on continued service with the Company. We may also make discretionary grants of performance units at the Senior Vice President level and above in order to retain or recruit key executives.

 

  n   An increased annual incentive opportunity at certain levels in the organization, including executive officers, to help achieve competitive compensation levels and appropriate balance between short and long-term compensation at each organization level.

 

  n   Implementation of stock ownership requirements (described below) for executive officers and certain other senior executives (the Executive Leadership Team).

 

  n   An increased financial planning benefit to a total value of approximately $10,000 for senior executives to ensure their understanding of the value of our compensation program, to better enable long-term financial planning in light of the large proportion of compensation that is based on Company performance, and to facilitate compliance.

 

We are confident that these changes support our business strategies and strike the right balance between the interests of all of the Company’s stakeholders. The following information relates specifically to our compensation program for executive officers in fiscal 2004.

 

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