Hanesbrands (HBI)

 

As noted above, one objective of our compensation program is to attract and motivate highly qualified and talented employees through compensation packages that are appropriately competitive with compensation packages offered by other companies in the apparel and consumer products industries. To determine what constitutes a “competitive” compensation package for named executive officers, the Compensation Committee generally considers total compensation, comprised of base salary, annual incentive compensation (which we refer to as the annual bonus) and long-term equity compensation, as well as the allocation among those elements of compensation, at benchmarks determined by market rates of compensation paid by selected comparable companies. For these purposes, the Compensation Committee determines “market” rates by considering compensation paid by two groups of companies: Peer Benchmark Companies and Validation Benchmark Companies, which we refer to collectively as the “Benchmark Companies.” During 2008, the Compensation Committee reviewed the companies comprising the Peer Benchmark Companies and the Validation Benchmark Companies and did not make any changes, except that Kellwood Company was removed as a Peer Benchmark Company after it ceased being a publicly traded company in February 2008. The Benchmark Companies were identified and selected with the assistance of the Cook firm. Hanesbrands’ annual revenue is similar to the median revenue of the Benchmark Companies.

 

Peer Benchmark Companies.  Our primary peer benchmark companies, which we refer to collectively as the “Peer Benchmark Companies,” were selected due to their similarity to us primarily in terms of industry and to a lesser extent revenue size. Our Peer Benchmark Companies are V.F. Corporation., Jones Apparel Group, Inc., Liz Claiborne, Inc., Quiksilver, Inc., Phillips-Van Heusen Corporation, The Warnaco Group, Inc. and Carter’s, Inc.

 

Validation Benchmark Companies.  Twelve additional companies were selected for purposes of validation because of the relatively small number of Peer Benchmark Companies. These companies, which we refer to collectively as the “Validation Benchmark Companies,” are companies with revenue sizes similar to ours from the consumer durables and apparel, food and beverage and household and personal product groups. The Validation Benchmark Companies are Fortune Brands, Inc., The Black & Decker Corporation, Newell Rubbermaid Inc., Brunswick Corporation, Hormel Foods Corporation, Mattel, Inc., The Hershey Company, The Clorox Company, Jarden Corporation, The Stanley Works, Hasbro, Inc. and Del Monte Foods Company.

 

As one illustration of our use of benchmarking, we consider compensation information from the Benchmark Companies to set target total compensation for our named executive officers. We consider total compensation paid at the median level by the Benchmark Companies, as well as total compensation paid at the 25th and 75th quartile levels, with a goal of targeting total compensation opportunities for our named executive officers at levels that are reasonable in comparison to this range based upon the relative experience and scope of responsibilities of the named executive officers, the marketability of their experience and how critical their position is to our efforts to execute our consolidation and globalization strategy. While our preference is that total compensation opportunities for all of our executives, including our named executive officers, be near the median total compensation opportunities for similar officers at the Benchmark Companies, consideration of the foregoing factors in some circumstances requires us to set total compensation opportunities that are closer to the 75th percentile level. When we evaluate benchmark information on this basis, we refer to it as applying our “executive compensation benchmarking criteria.”

 

Once we have set total compensation in this manner, we consider the allocation of compensation among the various compensation elements by the Benchmark Companies in allocating the total compensation opportunities of our named executive officers among the elements of compensation that we offer. We also consider relative experience and scope of responsibilities of the named executive officers, the marketability of their experience and how critical their position is to our efforts to execute our consolidation and globalization strategy. After considering these other factors, we confirm that the result is reasonable by applying the executive compensation benchmarking criteria.

 

As noted above, one objective of our compensation program is to attract and motivate highly qualified and talented employees through compensation packages that are appropriately competitive with compensation packages offered by other companies in the apparel and consumer products industries. To determine what constitutes a “competitive” compensation package for named executive officers, the Compensation Committee generally considers total compensation, comprised of base salary, annual incentive compensation (which we refer to as the annual bonus) and long-term equity compensation, as well as the allocation among those elements of compensation, at benchmarks determined by market rates of compensation paid by selected comparable companies. For these purposes, the Compensation Committee determines “market” rates by considering compensation paid by two groups of companies: Peer Benchmark Companies and Validation Benchmark Companies, which we refer to collectively as the “Benchmark Companies.” During 2007, the Compensation Committee reviewed the companies comprising the Peer Benchmark Companies and the Validation Benchmark Companies and did not make any changes.

 

Peer Benchmark Companies.  With the assistance of the Cook firm, we have selected eight apparel companies as our primary peer benchmark companies, which we refer to collectively as the “Peer Benchmark Companies:” VF Corp., Jones Apparel Group Inc., Liz Claiborne Inc., Quiksilver Inc., Phillips-Van Heusen Corp., Kellwood Inc., Warnaco Group Inc. and Carter’s Inc. The Peer Benchmark Companies were selected due to their similarity to us primarily in terms of industry and to a lesser extent revenue size.

 

Validation Benchmark Companies.  Because we identified only eight apparel companies as Peer Benchmark Companies, we selected for purposes of validation an additional 12 companies with revenue sizes similar to ours from the consumer durables and apparel, food and beverage and household and personal product groups, which we refer to collectively as the “Validation Benchmark Companies:” Fortune Brands Inc., Black & Decker Corp., Newell Rubbermaid Inc., Brunswick Corp., Hormel Foods Corp., Mattel Inc., Hershey Co., Clorox Co., Jarden Corp., Stanley Works, Hasbro Inc. and Del Monte Foods Inc.

 

As one illustration of our use of benchmarking, we consider target compensation information from the Benchmark Companies to set target total compensation for our named executive officers, as well as the allocation of that compensation among the various compensation elements. We consider total compensation paid at the median level by the Benchmark Companies, as well as total compensation paid at the 25th and 75th quartile levels, with a goal of targeting total compensation opportunities for our named executive officers at levels that are reasonable in comparison to this range based upon the relative experience and scope of responsibilities of the named executive officers, the marketability of their experience and how critical their position is to our efforts to execute our consolidation and globalization strategy. While our preference is that total compensation opportunities for all of our executives, including our named executive officers, be near the median total compensation opportunities for similar officers at the Benchmark Companies, consideration of the foregoing factors in some circumstances requires us to set total compensation opportunities that are closer to the 75th percentile level. When we evaluate benchmark information on this basis, we refer to it as applying our “executive compensation benchmarking criteria.”

 

Once we have set total compensation in this manner, we consider the allocation of compensation among the various compensation elements by the Benchmark Companies in allocating the total compensation opportunities of our named executive officers among the elements of compensation that we offer. We also consider relative experience and scope of responsibilities of the named executive officers, the marketability of their experience and how critical their position is to our efforts to execute our consolidation and globalization strategy. After considering these other factors, we confirm that the result is reasonable by applying the executive compensation benchmarking criteria.