Hanesbrands (HBI)

 

The Omnibus Incentive Plan permits the issuance of equity incentive awards to our employees, non-employee directors and employees of our subsidiaries to promote the interests of our company and our stockholders. The Omnibus Incentive Plan is designed to promote these interests by providing such individuals with a proprietary interest in pursuing the long-term growth, profitability and financial success of our company. During 2008, the two types of grants awarded to our executive officers were stock options and time-vested restricted stock units. Restricted stock units and options vest according to schedules established at grant, conditioned on continued employment with Hanesbrands, with vestings in the event of a qualifying termination of employment for death, disability, retirement or involuntary termination or a change in control as determined at the time of grant. We believe stock options align the interests of our employees with those of our stockholders, because the stock options, with exercise prices equal to the closing price of our common stock on the date of grant, have value only if our share price increases after the date of grant. We believe that restricted stock units similarly align the interests of our employees with those of our stockholders because the value of this element of compensation increases or decreases with our stock price. Additional details regarding the awards made pursuant to the Omnibus Incentive Plan during the fiscal year ended January 3, 2009 are discussed below under “Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table.”

 

Equity awards to executive officers and other employees are approved as a dollar amount, which on the grant date is converted into a specific number of restricted stock units and, in the case of certain executive officers, including the named executive officers, stock options. The number of restricted stock units is determined by using the closing price of our common stock on the date of grant. The number of stock options is determined by a third party using a Black-Scholes option-pricing model, with the closing price of our common stock on the date of grant as one of the factors used. The exercise price of the stock options granted is the closing price of our common stock on the date of grant.

 

During 2008, after consultation with the Cook firm, the Compensation Committee determined to make decisions regarding 2009 compensation for executive officers at its meeting in December 2008, so that such decisions could be made prior to the January 1, 2009 effective date for any changes in total compensation opportunities rather than retroactively, and to approve equity grants simultaneously with those decisions. Regarding 2008 compensation, the Compensation Committee made decisions and approved equity grants at its meeting in January 2008. Therefore, two equity awards were made to the named executive officers and other employees during calendar year 2008. Both of these grants are reflected in the Summary Compensation Table and the Grants of Plan-Based Awards Table below.

 

Discussion of 2008 Long-Term Incentive Plan Grants.  Our executives with the most senior leadership positions within our organization have the greatest ability to influence our company’s performance. Therefore, the value of their long-term incentive awards as a percentage of their base salary is greater than that of our other employees.

 

The Omnibus Incentive Plan permits the issuance of equity incentive awards to our employees, non-employee directors and employees of our subsidiaries to promote the interests of our company and our stockholders. The Omnibus Incentive Plan is designed to promote these interests by providing such individuals with a proprietary interest in pursuing the long-term growth, profitability and financial success of our company. During 2007, the only types of grants awarded to our executive officers were stock options and time-vested restricted stock units. Restricted stock units and options vest according to schedules established at grant, conditioned on continued employment with Hanesbrands, with vestings in the event of a qualifying termination of employment for death, disability, retirement or involuntary termination or a change in control as determined as the time of grant. Awards of this type are generally consistent with the types of awards made by the Benchmark Companies. Additional details regarding the awards made pursuant to the Omnibus Incentive Plan during the fiscal year ended December 29, 2007 are discussed below under “Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table.”

 

We made equity grants to our named executive officers and other employees in September 2006 and February 2007. The September 2006 awards, including the date on which the awards were granted, were approved prior to our spin off from Sara Lee on September 5, 2006 and were made on the 15th trading date following the completion of the spin off, which we believe was a reasonable time period to permit the development of an orderly market for the trading of our common stock.

 

When the February 2007 grants were approved by the Compensation Committee, we had previously released earnings for only one quarter, during most of which we were not yet an independent company, and were preparing to release earnings for our first full quarter as an independent company. Because the trading history of our common stock was still relatively limited at that time, the Compensation Committee determined to make those grants on the second trading day following the day on which we released our earnings information for the prior fiscal period. The Compensation Committee did this to allow sufficient time for the market to absorb the impact of earnings information before the trading price of our common stock would be used to determine the number of restricted stock units and options that would be awarded, as well as the exercise price of any options awarded. Given the special circumstances surrounding our spin off, we believed that these delays in grant date were prudent. After consultation with the Cook firm, the Compensation Committee determined that the awards for 2008 would also be made on the second trading day following the day on which we release our earnings. In making this decision, we considered our relatively short history as an independent company and the proximity in time of the meeting at which the Compensation Committee determined to approve the equity awards to the planned date for the release of our earnings information for the fiscal year ended December 29, 2007.

 

Equity awards to executive officers and other employees are approved as a dollar amount, which on the grant date is converted into restricted stock units and, in the case of certain executive officers, including the named executive officers, stock options. The number of restricted stock units is determined by using the closing price of our common stock on the date of grant. The number of stock options is determined by a third party using a Black-Scholes option-pricing model, with the closing price of our common stock on the date of grant as one of the factors used. The exercise price of the stock options granted is the closing price of our common stock on the date of grant.

 

Analysis of 2007 Long-Term Incentive Plan Grants.  Our executives with the most senior leadership positions within our organization have the greatest ability to influence our company’s performance. Therefore, the value of their long-term incentive awards as a percentage of their base salary is greater than that of our other employees. As discussed above, in January 2007, the Compensation Committee, following a review of total compensation opportunities for Hanesbrands’ executive officers, including the named executive officers, and a comparison of such opportunities to those available to executive officers of the Benchmark Companies,