DEF 14A 1 a2012proxystatementdefinit.htm 2012 Proxy Statement (Definitive)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
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Soliciting Material under §240.14a-1

Staples, Inc.
(Name of Registrant as Specified In Its Charter)
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STAPLES, INC.
500 Staples Drive
Framingham, Massachusetts 01702
______________________________________________________________________

Notice of Annual Meeting of Stockholders to be held
on June 4, 2012
______________________________________________________________________

The Annual Meeting of Stockholders of Staples, Inc. will be held at The Ritz Carlton, 181 Wellington Street West, Toronto, Ontario, Canada on June 4, 2012 at 4:00 p.m., local time, to consider and act upon the following matters:
(1)
To elect twelve members of the Board of Directors to hold office until the next Annual Meeting of Stockholders or until their respective successors have been elected or appointed.

(2)
To approve an Amendment to the Company's Restated Certificate of Incorporation to allow stockholder action by majority written consent, as described in the accompanying proxy statement.

(3)
To approve, on an advisory basis, named executive officer compensation.

(4)
To approve the Company's Amended and Restated Long Term Cash Incentive Plan.

(5)
To approve the Company's Amended and Restated Executive Officer Incentive Plan.

(6)
To approve the Company's 2012 Employee Stock Purchase Plan.

(7)
To ratify the selection by the Audit Committee of Ernst & Young LLP as Staples' independent registered public accounting firm for the current fiscal year.

(8)
To act on a stockholder proposal, if properly presented.

(9)
To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on April 9, 2012 will be entitled to notice of and to vote at the meeting or any adjournment thereof.
 
 
By Order of the Board of Directors,
 
 
 
 
Cynthia Pevehouse, Corporate Secretary
Framingham, Massachusetts
April 23, 2012
 
 
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SUBMIT YOUR PROXY (1) OVER THE INTERNET, (2) BY TELEPHONE OR (3) BY MAIL. FOR SPECIFIC INSTRUCTIONS, PLEASE REFER TO THE QUESTIONS AND ANSWERS BEGINNING ON THE FIRST PAGE OF THE PROXY STATEMENT AND THE INSTRUCTIONS ON THE PROXY CARD RELATING TO THE ANNUAL MEETING.
"STREET NAME" HOLDERS WHO PLAN TO ATTEND THE MEETING WILL NEED TO BRING A COPY OF A BROKERAGE STATEMENT REFLECTING THEIR STOCK OWNERSHIP IN STAPLES, INC. AS OF THE RECORD DATE.



Table of Contents
 
Page
 
 








STAPLES, INC.
500 Staples Drive
Framingham, Massachusetts 01702
______________________________________________________________________

PROXY STATEMENT
For the Annual Meeting of Stockholders on June 4, 2012
______________________________________________________________________

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors ("Board") of Staples, Inc. ("we," "Staples" or the "Company") for use at the Annual Meeting of Stockholders ("2012 Annual Meeting" or the "Annual Meeting") to be held on June 4, 2012 beginning at 4:00 p.m., local time, at The Ritz Carlton, 181 Wellington Street West, Toronto, Ontario, Canada and at any adjournment or postponement of that meeting. On or about April 23, 2012, we are either mailing or providing notice and electronic delivery of these proxy materials together with an annual report, consisting of our Annual Report on Form 10-K for the fiscal year ended January 28, 2012 (the "2011 fiscal year") and other information required by the rules of the Securities and Exchange Commission (the "2011 Annual Report").
______________________________________________________________________

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
For the Annual Meeting of Stockholders on June 4, 2012
        This proxy statement and our 2011 Annual Report are available for viewing, printing and downloading at www.proxyvote.com.
        You may request a copy of the materials relating to our annual meeting, including the proxy statement, form of proxy for our 2012 Annual Meeting and the 2011 Annual Report, at www.proxyvote.com, or by sending an email to our Investor Relations department at investor@staples.com or by calling (800) 468-7751.
______________________________________________________________________


INFORMATION ABOUT THE ANNUAL MEETING, VOTING AND OTHER STOCKHOLDER MATTERS

What is the purpose of the Annual Meeting?
At our Annual Meeting, stockholders will act upon the matters outlined in the accompanying notice of meeting, including:
•to elect directors;
•
to approve an Amendment to our Restated Certificate of Incorporation to allow stockholder action by majority written consent;
•to approve, on an advisory basis, named executive officer compensation;
•to approve our Amended and Restated Long Term Cash Incentive Plan;
•to approve our Amended and Restated Executive Officer Incentive Plan;
•to approve our 2012 Employee Stock Purchase Plan;
•
to ratify our independent registered public accounting firm; and
•
to consider a stockholder proposal, if properly presented.
Stockholders may also consider such other business as may properly come before the meeting.


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Who is entitled to vote?
Only stockholders of record at the close of business on the record date, April 9, 2012, are entitled to receive notice of the Annual Meeting and to vote their shares of our common stock at the meeting, or any postponement or adjournment of the meeting. Holders of shares of our common stock are entitled to one vote per share and all votes will be confidential.
Who can attend the meeting?
All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Please note that if you hold your shares in "street name" (through a bank, broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership in Staples as of the record date to be allowed into the meeting. You may obtain directions to the location of our 2012 Annual Meeting by writing, emailing or calling our Investor Relations department at 500 Staples Drive, Framingham, Massachusetts 01702, email: investor@staples.com, or telephone: (800) 468-7751.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of a majority of the shares of our common stock outstanding on the record date will constitute a quorum, permitting business to be conducted at the meeting. As of the record date, 691,935,236 shares of our common stock were outstanding and entitled to vote. Proxies that are received and marked as abstentions and broker non-votes (where a broker or nominee does not exercise discretionary authority to vote on a matter) will be included in the calculation of the number of shares considered to be represented at the meeting.
How do I vote?
If you received a paper copy of these proxy materials, included with such copy is a proxy card or a voting instruction card from your bank, broker or other nominee for the Annual Meeting. If you received a notice of Internet availability of proxy materials, the notice will contain instructions on how to access and review the proxy materials online and how to obtain a paper or electronic copy of the materials, which will include the proxy statement, the 2011Annual Report and a proxy card or voting instruction card, as well as instructions on how to vote either at our Annual Meeting, over the Internet, by telephone or by mail.
If you are a stockholder as of the record date and attend the meeting, you may personally deliver your completed proxy card or vote in person at the meeting. If you complete, sign and return your proxy card, it will be voted as you direct. If the shares you own are held in "street name" by a bank, broker or other nominee, that person, as the record holder of your shares, is required to vote your shares according to your instructions. Your bank, broker or other nominee will send you directions on how to vote those shares.
What if I sign and return my proxy or instruction form but do not provide voting instructions?
If no choice is specified on a signed proxy card, the persons named as proxies will vote:
•
"FOR" the election of all director nominees (and any substitute nominees selected by our Board if any present nominees should withdraw);
•
"FOR" the approval of the Amendment to our Restated Certificate of Incorporation to allow stockholder action by majority written consent;
•
"FOR" the approval, on an advisory basis, of named executive officer compensation;
•
"FOR" the approval of our Amended and Restated Long Term Cash Incentive Plan;
•
"FOR" the approval of our Amended and Restated Executive Officer Incentive Plan;
•
"FOR" the approval of our 2012 Employee Stock Purchase Plan;
•
"FOR" the ratification of Ernst &Young as our independent registered public accounting firm;
•
"AGAINST" the stockholder proposal; and
•
On any other matters properly brought before the Meeting, in accordance with the best judgment of the named proxies.
If the shares you own are held in "street name" as noted above, under applicable stock exchange rules, if you do not give instructions to your bank, broker or other nominee, it will still be able to vote your shares with respect to certain "discretionary" items, but will not be allowed to vote your shares with respect to certain "non-discretionary" items. In the case of "non-discretionary" items, the shares that do not receive voting instructions will be treated as "broker non-votes." The only item at the 2012 Annual Meeting that is "discretionary" is the ratification of Ernst &Young as our independent registered public accounting firm. The other items are "non-discretionary."
Can I submit a proxy over the Internet or by telephone?
If you are a registered stockholder (meaning you hold your stock in your own name), you may submit a proxy over the Internet by following the instructions at www.proxyvote.com or by telephone by calling (800) 690-6903. Proxy submissions over

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the Internet or by telephone are valid under Delaware law. If your shares are held in "street name," you will need to contact your bank, broker or other nominee to determine whether you will be able to submit a proxy over the Internet or by telephone.
Can I change my proxy after I return my proxy card?
Yes. Any proxy may be revoked by a stockholder at any time before it is exercised at the Annual Meeting by delivering to our Corporate Secretary a written notice of revocation or a duly executed proxy bearing a later date, or by voting in person at the meeting.
What is the vote required to approve each matter?
Election of Directors.    A nominee will be elected as a director at the Annual Meeting if the votes cast "for" such nominee exceed the votes cast "against" such nominee, as long as the only director nominees are those individuals set forth in this proxy statement.
Amendment to the Company's Restated Certificate of Incorporation to Allow Stockholder Action by Majority Written Consent.    The affirmative vote of a majority of the outstanding shares of our common stock as of the close of business on April 9, 2012 is required to approve the Amendment to our Restated Certificate of Incorporation to allow stockholder action by majority written consent. Accordingly, abstentions and broker non-votes will have the effect of a vote “Against” this proposal.
Named Executive Officer Compensation.    The affirmative vote of the holders of shares of our common stock representing a majority of the votes cast on the matter is required to approve the named executive officer compensation. This proposal is an advisory vote and is non-binding. Although no action is required to be taken, even if approved by a majority of votes cast, our Compensation Committee of our Board of Directors considers the results of the voting in making future compensation decisions for our named executive officers.
Amended and Restated Long Term Cash Incentive Plan.    The affirmative vote of the holders of shares of our common stock representing a majority of the votes cast on the matter is required to approve the Amended and Restated Long Term Cash Incentive Plan.
Amended and Restated Executive Officer Incentive Plan.    The affirmative vote of the holders of shares of our common stock representing a majority of the votes cast on the matter is required to approve the Amended and Restated Executive Officer Incentive Plan.
2012 Employee Stock Purchase Plan.    The affirmative vote of the holders of shares of our common stock representing a majority of the votes cast on the matter is required to approve the 2012 Employee Stock Purchase Plan.
Independent Registered Public Accounting Firm.    The affirmative vote of the holders of shares of our common stock representing a majority of the votes cast on the matter is required for the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the current fiscal year. This proposal is non-binding.
Non-Binding Stockholder Proposal to Require Senior Executives to Hold 75% Net After-Tax Shares Acquired Through Compensation Plans and Prohibition on Hedging of Held Shares. The affirmative vote of the holders of shares of our common stock representing a majority of the votes cast on the matter is required to approve the non-binding stockholder proposal regarding a requirement for senior executives to hold at least 75% net after-tax shares acquired through compensation plans and prohibition on hedging of held shares. Because the stockholder proposal is a non-binding resolution, we will not be required to take the requested action if the proposal is approved; however, we will reevaluate our recommendation if such proposal is approved.
A “majority of votes cast” means the number of “FOR” votes exceeds the number of “AGAINST” votes. Therefore, other than the proposal to approve the Amendment to our Restated Certificate of Incorporation to allow stockholder action by written consent discussed above, a proxy marked “Abstain” with respect to any proposal will not have any effect on the outcome of the vote on that proposal and, similarly, broker non-votes will not be counted as votes cast with respect to such proposal and therefore will have no effect on the outcome of the vote on that proposal.
Are there other matters to be voted on at the meeting?
As of the date of this proxy statement, our Board does not know of any other matters which may come before the meeting, other than the matters described in this proxy statement. Should any other matter requiring a vote of our stockholders arise and be properly presented at the Annual Meeting, the proxy for the Annual Meeting confers upon the persons named in the proxy and designated to vote the shares discretionary authority to vote, or otherwise act, with respect to any such matter in accordance with their best judgment.


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        Our Board encourages stockholders to attend the Annual Meeting. Whether or not you plan to attend, you are urged to submit your proxy. Prompt response will greatly facilitate arrangements for the meeting and your cooperation is appreciated. Stockholders who attend the Annual Meeting may vote their stock personally even though they have sent in their proxies.
Solicitation
All costs of soliciting proxies will be borne by Staples. D.F. King & Co., Inc. has been retained to assist in soliciting proxies at a fee of $13,000, including expenses. We also have engaged Broadridge Investor Communication Solutions to serve as the inspector of elections and to assist us with planning and organizational matters, along with certain ministerial services, in connection with the proxy solicitation process at a cost of approximately $5,000. In addition to solicitations by mail, our directors, officers and employees, without additional remuneration, may solicit proxies by telephone, electronic communication and personal interviews. Brokers, custodians and fiduciaries will be requested to forward proxy soliciting material to the owners of stock held in their names, and we will reimburse them for their related out-of-pocket expenses.

Stockholder Proposals
Other than the stockholder proposal set forth in this proxy statement, we did not receive any other stockholder proposals or nominations for director candidates that must be presented at our 2012 Annual Meeting. The proposal was received prior to December 27, 2011, the deadline for stockholders who wished to present proposals and wanted such proposals to be included in the proxy materials. In accordance with our by-laws, in order for a stockholder to present a proposal or nominate a director candidate for election at our 2012 Annual Meeting but not have such proposal included in the proxy materials, the stockholder must have provided us with advance written notice by March 9, 2012. If a stockholder gives us notice of a proposal or nomination after the March 9, 2012 deadline, the stockholder will not be permitted to present the proposal or nomination to the stockholders for a vote at the 2012 Annual Meeting.
Stockholders who intend to present proposals at our 2013 Annual Meeting and want us to include such proposals in our proxy materials relating to that meeting should contact our Corporate Secretary. Such proposals must be received at our principal corporate offices at 500 Staples Drive, Framingham, Massachusetts 01702 not later than December 24, 2012 and must be in compliance with applicable laws and Rule 14a-8 under the Securities Exchange Act of 1934 in order to be considered for possible inclusion in the proxy statement and form of proxy for our 2013 Annual Meeting.
If a stockholder wishes to present a proposal or nominate a director candidate for election at our 2013 Annual Meeting and the proposal or nomination is not intended to be included in our proxy statement for such meeting, the stockholder must give us advance notice and provide the information required by our by-laws, including but not limited to, information regarding the identity of the stockholder or beneficial owner, their holdings in Staples securities, agreements or compensation relating to such nomination or matter, and any derivatives or other arrangements to mitigate risk or change voting power. If a stockholder gives notice of such a proposal or nomination after the applicable deadline, the stockholder will not be permitted to present the proposal or nomination to the stockholders for a vote at the meeting. For our 2013 Annual Meeting, our Corporate Secretary generally must receive such a notice at 500 Staples Drive, Framingham, Massachusetts 01702 not later than 90 days and no earlier than 120 days prior to the first anniversary of our 2012 Annual Meeting. However, if the date of our 2013 Annual Meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the stockholder must be received not earlier than 120 days prior to the 2013 Annual Meeting and not later than the later of (i) the 90th day prior to the 2013 Annual Meeting and (ii) the tenth day following the day on which public announcement of the date of the 2013 Annual Meeting is made or notice for the 2013 Annual Meeting was mailed, whichever occurs first.

Householding of Annual Meeting Materials
Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements, annual reports and notices of Internet availability of proxy materials. This means that only one copy of our proxy statement, annual report or notice of Internet availability of proxy materials may be sent to multiple stockholders in a household, which helps us reduce our printing costs and postage fees and helps the environment by using less paper. However, we will promptly deliver a separate copy of these documents to you if you write, email or call our Investor Relations department at 500 Staples Drive, Framingham, Massachusetts 01702, email: investor@staples.com, or telephone: (800) 468-7751. If you want to receive separate copies of the proxy statement, annual report or notice of Internet availability of proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address, email or phone number.

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Electronic Delivery of Stockholder Communications
If you received a hard copy of your Annual Meeting materials by mail, we encourage you to conserve natural resources, as well as help us reduce our printing and mailing costs, by signing up to receive or access your stockholder communications via e-mail. To sign up for electronic delivery or access, visit www.proxyvote.com. Your electronic delivery or access enrollment will be effective until you cancel it, which you may do at any time by following the procedures described at the web site listed above. If you have questions about electronic delivery or access, please write, email or call our Investor Relations department at 500 Staples Drive, Framingham, Massachusetts 01702, email: investor@staples.com, or telephone: (800) 468-7751.

Securities and Exchange Commission Filings
We file annual, quarterly and current reports, as well as other information with the Securities and Exchange Commission. You may read and copy any document that we file with the Securities and Exchange Commission at its Internet website at www.sec.gov or at its Public Reference Room at 100 F Street, N.E., Washington, DC 20549. If you would like to receive a copy of our Annual Report on Form 10-K for our 2011 fiscal year, or any of the exhibits listed therein, please call or submit a request in writing to Investor Relations, Staples, Inc., 500 Staples Drive, Framingham, MA 01702, telephone (800) 468-7751, and we will provide you with the Annual Report without charge, or any of the exhibits listed therein upon the payment of a nominal fee (which fee will be limited to the expenses we incur in providing you with the requested exhibits).


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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership of our common stock held as of April 9, 2012 by each person who is known by us based on schedule 13G filings to beneficially own more than 5% of the outstanding shares of our common stock, and as of April 9, 2012 by (1) each current director and nominee for director; (2) each of the named executive officers listed in the Summary Compensation Table included elsewhere in this proxy statement; and (3) by all current directors and executive officers as a group:

Name of beneficial owner
 
Number of
Shares
beneficially
owned (1)
 
 
 
Number of
shares
acquirable
within 60
days (2)
 
Percentage of
common
stock
beneficially
owned (3)
5% Stockholders (4)
 
 
 
 
 
 
 
 

BlackRock, Inc. (5)
40 East 52nd Street New York, NY100222
 
35,977,011

 
 
 
—

 
5.20
%
Directors, Nominees for Director and Named Executive Officers
 
 
 
 
 
 
Basil L. Anderson
 
188,725

 
(6
)
 
91,367

 
*

Arthur M. Blank
 
104,735

 
 
 
136,367

 
*

Mary Elizabeth Burton
 
68,729

 
 
 
181,367

 
*

Joseph G. Doody
 
370,513

 
 
 
680,354

 
*

Drew G. Faust
 
—

 
 
 
—

 
—

Justin King
 
34,183

 
 
 
82,367

 
*

John J. Mahoney
 
427,272

 
(7
)
 
1,514,071

 
*

Carol Meyrowitz
 
42,003

 
 
 
77,867

 
*

Michael A. Miles, Jr. 
 
403,447

 
 
 
1,589,071

 
*

Rowland T. Moriarty
 
428,499

 
(8
)
 
136,367

 
*

Robert C. Nakasone
 
298,426

 
(9
)
 
181,367

 
*

Demos Parneros
 
406,935

 
(10
)
 
830,354

 
*

Ronald L. Sargent
 
2,021,063

 
(11
)
 
4,027,959

 
*

Elizabeth A. Smith
 
38,636

 
 
 
41,954

 
*

Robert E. Sulentic
 
80,837

 
(12
)
 
82,367

 
*

Vijay Vishwanath
 
43,087

 
 
 
86,867

 
*

Paul F. Walsh
 
172,034

 
(13
)
 
181,367

 
*

All current directors and executive officers as a group (18 persons)
 
5,230,054

 
 
 
10,052,805

 
2.18
%

*Less than 1%

(1) Each person listed has sole investment and/or voting power with respect to the shares indicated, except as otherwise noted. The inclusion herein of any shares as beneficially owned does not constitute an admission of beneficial ownership. Amounts listed in this column do not reflect shares issuable upon the exercise of stock options available on April 9, 2012 or within 60 days thereafter.
(2) Reflects shares issuable upon the exercise of stock options available on April 9, 2012 or within 60 days thereafter.
(3) Number of shares deemed outstanding includes 691,935,236 shares of our common stock outstanding as of April 9, 2012 and any options for shares that are exercisable by such beneficial owner on April 9, 2012 or within 60 days thereafter.
(4) Ownership percentages were obtained from Schedule 13G filings and reflect the number of shares of common stock held as of December 31, 2011.

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(5) As set forth in a Schedule 13G filed on February 9, 2012, BlackRock, Inc. had, as of December 31, 2011, sole dispositive power and sole voting power with respect to all of the shares.
(6) Includes 12,000 shares owned by Mr. Anderson's wife.
(7) Includes 33,848 shares owned by the John Mahoney 2008 Irrevocable Trust
(8) Includes 25,235 shares owned by Dr. Moriarty's children, of which Dr. Moriarty disclaims beneficial ownership.
(9) Includes 165,085 shares owned by the Robert C. Nakasone Trust and 98,814 shares owned by Nakasone Capital LLC.
(10) Includes 2,610 shares that may be distributed from a 401(k) plan account.
(11) Includes 43,577 shares owned by Sargent Family LLC, 2,910 shares owned by Ronald L. Sargent 2007 Grantor Retained Annuity Trust, 49,598 shares owned by Ronald L. Sargent Revocable Trust, 19,313 shares owned by Jill Sargent Irrevocable Trust, 19,313 shares owned by Ronald L. Sargent Irrevocable Trust, 619,174 shares owned by Sargent Partners LLC and 204,000 shares owned by Ronald L. Sargent 2011 Grantor Retained Annuity Trust. Includes 5,506 shares owned by Sargent Family Foundation of which Mr. Sargent disclaims beneficial ownership. Also includes 2,707 shares that may be distributed from a 401(k) plan account.
(12) Includes 300 shares held by Mr. Sulentic's daughter.
(13) Includes 247 shares held by Paul F. Walsh, IRA and 160,415 shares held by the Walsh Family Trust.



CORPORATE GOVERNANCE

Highlights
We have a long history of being committed to following the best practices of corporate governance that are in the best interests of our business and all of our stockholders. We have a consistent track record of listening and being thoughtfully responsive to our stockholders. This year, we further demonstrated this commitment by taking the following actions:
•
Corporate Governance Outreach Program. In 2011, we conducted our third annual corporate governance outreach program, during which we solicited feedback from our larger institutional investors, labor unions, pension funds, corporate social responsibility investors and proxy advisory groups. We approached stockholders representing approximately 75% of our shares and engaged in a constructive dialogue with stockholders representing more than 25% of our shares to hear their perspectives on various governance matters, as well as our executive compensation program. The results were shared with our Nominating and Corporate Governance Committee and Compensation Committee, as well as with the entire Board of Directors. We believe that the outreach program is very beneficial to our understanding of the issues that are important to our stockholders and also highlights for us the divergent opinions among our stockholders.
•
Stockholder Action by Majority Written Consent. At the 2012 Annual Meeting, stockholders will be able to vote on a proposal recommended by our Board to amend our certificate of incorporation to allow stockholders to act by majority written consent. As discussed in the "Approval of Amendment to our Restated Certificate of Incorporation to Allow Stockholder Action by Majority Written Consent" section of this proxy statement, this amendment represents a thoughtful response to the votes of stockholders at our 2010 and 2011 annual meetings in favor of a stockholder proposal requesting this right, and incorporates valuable stockholder input, including on appropriate procedural safeguards, received in the course of our corporate governance outreach program.
•
Changes to our Executive Compensation Program. As discussed in the "Compensation Discussion and Analysis" section of this proxy statement, in accordance with our commitment to sound executive compensation governance practices, and in response to last year's advisory vote on executive compensation and the feedback from our corporate governance outreach program, we made changes to the 2012 executive compensation program. Specifically, we have revised the goals in our long term cash incentive program from annual goals to a three year cumulative goal, revised pay mix to decrease the use of stock options and increase the use of performance based long term cash incentives, revised long term incentives to target market median rather than 75th percentile and revised annual and long term incentive goals to include different measures of performance.
•
Enhanced Disclosures Under our Political Contributions Policy. In March 2012, in response to increasing general interest in corporate political activities, our Board proactively revised our political contributions policy to provide for enhanced disclosure of the political activities of trade associations with which we are affiliated and our lobbying activities. We have historically provided an annual report on monetary political contributions from corporate funds on our website and the additional information required by our revised policy will appear on our website in early 2013 in our political contributions annual report covering fiscal year 2012.
You can learn more about our current corporate governance principles and review our Corporate Governance Guidelines, committee charters, Corporate Political Contributions Policy Statement, Code of Ethics and other significant policies at

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www.staples.com in the Corporate Governance section of the Investor Information portion of our web site. We comply with the corporate governance requirements imposed by the Sarbanes-Oxley Act, Securities and Exchange Commission and NASDAQ Stock Market. We will continue to modify our policies and practices to meet ongoing developments in this area. While we have discussed many features of our corporate governance principles in other sections of this proxy statement, some of the highlights are:
•
Annual Election of Directors.  Our directors are elected annually for a term of office to expire at the next Annual Meeting (subject to the election and qualification of their successors).
•
Majority Voting.  Under our by-laws, in uncontested elections, our directors are elected if the votes cast "for" the director's election exceed the votes cast "against" the director's election. If an incumbent director in an uncontested election does not receive the required number of votes "for" his or her election, our Corporate Governance Guidelines provide that such incumbent director must tender his or her resignation from our Board.
•
No Stockholder Rights Plan.  We do not currently have a stockholder rights plan in effect and are not considering adopting one. Our Board has adopted a stockholder rights plan policy under which we will adopt a stockholder rights plan only if the plan has been approved by stockholders either in advance or within 12 months of its adoption by our Board.
•
No Supermajority Provisions in our Certificate of Incorporation.  We have no supermajority voting requirements under our certificate of incorporation.
•
25% Threshold for Stockholders to Call Special Meetings.  Our by-laws provide that stockholders who own in the aggregate 25% or more of our outstanding stock may call special meetings.
•
Annual Review of Board Leadership Structure.  As described in more detail below, every year our Board evaluates its leadership structure and based on a recommendation from the Nominating and Corporate Governance Committee determines whether there should be an independent Chairperson of the Board or an independent Lead Director.
•
Strong Lead Director Role.  Among many other responsibilities, our independent Lead Director ensures that independent directors meet in executive sessions, coordinates the annual performance review of our Chief Executive Officer, and works with the Chairperson of the Board to establish the agenda for each Board meeting. Additional information about the responsibilities of our independent Lead Director can be found under the section of this proxy statement called "Board Leadership Structure".
•
Succession Planning Process.  As required by our Corporate Governance Guidelines, our Nominating and Corporate Governance Committee continually reviews succession planning as it relates to the Chief Executive Officer.   To assist in this process, the Chief Executive Officer prepares an annual report on succession planning for himself and other key senior leadership positions.  The report is part of a proactive enterprise wide annual talent management process.  In addition, on a continuing basis, the Chief Executive Officer is required to provide recommendations regarding his successors should he become disabled unexpectedly.
•
Independent Board.  Our Board is comprised of all independent directors, except for our Chief Executive Officer.
•
Independent Board Committees.  All members of our Audit, Compensation, Finance and Nominating and Corporate Governance Committees are independent directors, and none of such members receives compensation from us other than for service on our Board of Directors or its committees.
•
Committee Authority to Retain Independent Advisors.  Each of the Audit, Compensation, Finance and Nominating and Corporate Governance Committees has the authority to retain independent advisors, with all fees and expenses to be paid by Staples.
•
Independent Compensation Consultant. Under the Compensation Committee's charter, we are prohibited from engaging any independent compensation advisor that performs other services for the Company.
•
Audit Committee Policies and Procedures.  Under its charter, the Audit Committee's prior approval is required for all audit services and non-audit services (other than de minimis non-audit services as defined by the Sarbanes-Oxley Act) to be provided by our independent registered public accounting firm. In conjunction with the Audit Committee, we have adopted policies prohibiting (1) executive officers from retaining our independent registered public accounting firm to provide personal accounting or tax services and (2) Staples, without first obtaining the Audit Committee's approval, from filling an officer level position in the finance department with a person who was previously employed by our independent registered public accounting firm.
•
Recoupment Policy.  We have a recoupment policy whereby we provide for forfeiture and recovery of undeserved cash, equity and severance compensation from an employee who engages in harmful or unethical behavior such as intentional deceitful acts resulting in improper personal benefit or injury to the company, fraud or willful misconduct that significantly contributes to a material financial restatement, violation of our Code of Ethics or breach of employee agreements.
•
Stock Ownership Guidelines.  Our stock ownership guidelines require our non-employee directors to own a minimum level of equity in Staples worth at least five times the annual Board cash retainer (currently $75,000), or $375,000. These guidelines also require minimum equity ownership levels for the named executive officers listed in this proxy statement, including our Chief Executive Officer, who must own equity in Staples worth at least five times his annual salary.



8



Director Independence
Our Board of Directors, in consultation with our Nominating and Corporate Governance Committee, determines which of our directors, including new nominees, are independent. Our Corporate Governance Guidelines provide that directors are "independent" if they (1) meet the definition of "independent director" under the NASDAQ listing standards (subject to any further qualifications required of specific committee members under the NASDAQ listing standards) and (2) in our Board's judgment, do not have a relationship with Staples that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Nominating and Corporate Governance Committee reviews the standards for independence set forth in our Corporate Governance Guidelines periodically and recommends changes as appropriate for consideration and approval by our Board.
In accordance with our Corporate Governance Guidelines, our Board has determined that all of our directors and our new nominee are independent except Mr. Sargent, who is employed as our Chief Executive Officer. In determining independence, our Board considered all the available relevant facts and circumstances, including the following:
•
Neither we nor any of our subsidiaries has employed or otherwise compensated the independent directors or new nominee other than for service on our Board and its committees during the past three years.
•
We have not employed or otherwise compensated any family members (within the meaning of the NASDAQ listing standards) of the independent directors or new nominee during the past three years.
•
None of the independent directors, the new nominee or their family members is a partner of our independent registered public accounting firm or was a partner or employee of such firm who worked on our audit during the past three years.
•
None of our executive officers is on the compensation committee of the board of directors of a company that has employed any of the independent directors, our new nominee or their family members during the past three years.
•
No family relationships exist between any of our directors, our new nominee or executive officers.
•
During the past three years, none of our directors, our new nominee or executive officers has had a material direct or indirect business relationship with us or a "related party transaction" as described below.


Certain Related Business Transactions and Other Disclosures
Our written Code of Ethics sets forth the general principle that our directors, executive officers and other associates should avoid any situation that could be perceived as a conflict of interest, regardless of the dollar amount involved. This principle is also reflected in our written Corporate Governance Guidelines ("Guidelines") and the written materials that we use to educate associates about conflict of interest guidelines. For example, under the Guidelines, if an actual or potential conflict of interest develops for any reason, including, without limitation, because of a change in business operations of the Company or because of a director's circumstances, the director should immediately report the matter to our General Counsel, who should then report the matter to the Nominating and Corporate Governance Committee ("Committee") for review and determination. In the event there is a significant conflict, the director must resign or the conflict must be resolved. Additionally, under the Guidelines, any director who wishes to join the board of directors of another company must provide written notice to the chairperson of the Committee. The chairperson of the Committee, after consultation with our General Counsel, will then respond to the director with a resolution. We also ask each of our executive officers and directors to fill out questionnaires every year to help enable us to identify if a potential conflict of interest exists. Our Code of Ethics, Guidelines and the charters for all the committees of our Board are available at www.staples.com in the Corporate Governance section of the Investor Information webpage.
There may be times when a commercial relationship involving our directors, executive officers or their family members is beneficial to us and is not likely to raise material conflict of interest issues. Our Code of Ethics provides the following guidelines for certain types of commercial relationships:
•
Executive officers cannot serve as a director for one of our customers or suppliers unless (1) the supplier's or customer's annual business with Staples is less than 5% of such company's annual revenues, (2) the executive officer agrees not to participate or influence, directly or indirectly, any matter affecting the business relationship or transactions between Staples and the supplier or customer, and (3) the executive officer obtains written approval from our Chief Executive Officer ("CEO") or, if the executive officer is the CEO, written approval from the Committee.
•
Executive officers and directors must not make or hold financial investments in a company that is one of our suppliers or customers unless (1) the annual sales to or purchases from us are less than 5% of such company's annual revenues or (2) if such person's ownership interest is both passive and insignificant and (3) for a private company, such person obtains written approval from our CEO or, if a board member, written approval from the Committee.
•
Executive officers and directors must not make or hold financial investments in a company that is one of our competitors

9


unless the investment in publicly held competitors is insignificant (less than 1% of the company's stock).
•
Non-employee directors may work or consult for or serve on the board of a company that is one of our suppliers or customers if (1) such company's annual sales to or purchases from us are less than 5% of such company's annual revenues, (2) the director discloses the position to our General Counsel and the Committee and (3) the director agrees not to participate or influence, directly or indirectly, any matter affecting the business relationship or transactions between Staples and such company.
For fiscal year 2011, there were no exceptions to our Code of Ethics for our directors or executive officers.
Pursuant to the written charter of the Committee, the Committee is responsible for reviewing, approving or ratifying any "related party transactions." These are transactions which exceed $120,000 and in which (i) Staples and any of our directors, director nominees, executive officers, 5% stockholders and their immediate family members are participants, and (ii) such participants had or will have a direct or indirect material interest. In the course of reviewing whether or not the participants should be deemed to have a direct or indirect material interest, the Committee reviews the presence of standard prices, rates, or terms consistent with arms-length dealings with unrelated third parties; the materiality of the transaction to each party; the reasons for entering into the transaction; the potential effect of the transaction on the status of a independent director; and any other factors the Committee may deem relevant. If a transaction is deemed to be a related party transaction, the procedures for approval or ratification of such transaction for Staples, our directors, executive officers and 5% stockholders are the same as those listed above for actual or potential conflicts of interests involving directors under the Guidelines.
For fiscal year 2011, although we did not have any "related party transactions," we did provide office supply products or related services, such as copying, branding of promotional products or technology services, to companies or organizations affiliated with our directors, our new nominee and our executive officers. Below is a list of companies and institutions with which our independent directors and our new nominee were affiliated in 2011 and for which we received greater than $120,000 for providing our supplies or services:
 
Bain & Company
 
Emory University
 
OSI Restaurant Partners, LLC
 
Becton Dickinson & Company
 
Harvard University
 
PGA Tour Superstore
 
Bimbo Bakeries, USA
 
High Performance Physical Therapy
 
TJX Companies, Inc.
 
CB Richard Ellis Group
 
Moody's Corporation
 
United Natural Foods, Inc.
 
Cox Enterprises
 
 
 
 
The amounts received by us in 2011 for the sale of office supplies and related services to these companies range from approximately $120,000 to approximately $3.9 million and the median amount received from such sales was approximately $660,000. In each case, the amount was immaterial to the company purchasing the goods and services, as well as immaterial to Staples. The largest amount of approximately $3.9 million represents 0.016% of our revenues based on sales for fiscal year ended January 28, 2012 of approximately $25 billion.
In addition, in 2011 we also leased certain facilities from CB Richard Ellis for approximately $380,000. We also paid approximately $650,000 for employee background check services from a privately held company for which one of our directors serves as the Chairman of such company's board of directors and approximately $600,000 to Wright Express Corporation for fleet services.
In all instances, whether we provided the products/services, received the services or leased a facility, no director or executive officer of the affiliated company participated in the negotiation of the transaction and the products, services or lease were provided on arm's length terms and conditions and in the ordinary course of business. No director or executive officer had a direct or indirect material interest in the transaction. The Committee determined that none of these transactions were "related party transactions" and that such transactions would not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Paul F. Walsh was the Chief Executive Officer of Clareon Corporation, a privately held electronic payments provider, from March 2000 to September 2002. In October 2002, to facilitate its acquisition by Fleet Boston Corp., Clareon Corporation filed for Chapter 11 bankruptcy protection.

Board Leadership Structure
Our Board of Directors determines its leadership structure on an annual basis based on a recommendation of the Committee. The Board believes that it should not have a predetermined policy as to whether the Board should be led by an independent

10


Chairperson or independent Lead Director, but rather it is best for the Board to evaluate the structure and determine what is best for Staples based on a number of factors such as the size of the Board, the number of independent directors, the established process for and record of Board and management interaction, the qualifications and skills of the individual directors considered for the roles and company performance. For this year, the Board determined that it was appropriate that Ronald Sargent, our Chief Executive Officer, should remain as Chairperson of the Board and that Arthur Blank should continue in his role as independent Lead Director. The Board believes that its current leadership structure assures the appropriate level of management oversight and independence. The Board felt that Mr. Sargent's knowledge of Staples and the office products industry uniquely positions him to lead the Board particularly as it focuses on strategic issues and risks facing the company. Mr. Blank's leadership in fulfilling his role as independent Lead Director counterbalances any potential conflict of interest arising from having our Chief Executive Officer serve as the Board's Chairperson.
Our Lead Director has the following responsibilities:
•
Assure that meetings with the independent directors are held in executive sessions typically, as was the case this year, after every Board meeting, but in all circumstances at least twice a year;
•
Facilitate communications and serve as a liaison between independent directors and the Chairperson of the Board;
•
Coordinate the annual performance review of our Chief Executive Officer;
•
Work with the Chairperson of the Board in the preparation of the agenda for each board meeting and approve such agenda;
•
Call, if needed, meetings of independent directors;
•
Preside at all meetings of the Board where the Chairperson is not present, including executive sessions of the independent directors;
•
Represent the independent directors if a meeting is held with a major stockholder; and
•
Otherwise consult with the Chairperson of the Board on matters relating to corporate governance and Board performance.

Meetings and Committees of our Board
Our Board of Directors held a total of four meetings during our 2011 fiscal year. The number of meetings held by each of the committees of our Board during our 2011 fiscal year is set forth below under the description of each committee. During our 2011 fiscal year, each incumbent director attended at least 75% of the combined Board meetings held while such person was a director and committee meetings held while such person was a member of such committee. Our Corporate Governance Guidelines provide that directors are encouraged to attend the Annual Meeting, and all of our directors attended our 2011 Annual Meeting.
Our Board has five standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, the Finance Committee and the Executive Committee. The chair of each committee, as a matter of regular practice and to the extent possible, reviews committee meeting materials with management in advance of each Board committee meeting. Each of our standing Board committees operates under a written charter adopted by our Board, a copy of which is available at www.staples.com in the Corporate Governance section of the Investor Information webpage.
Committee membership as of April 9, 2012 was as follows:
Audit Committee
Robert Sulentic, Chairperson
Basil L. Anderson
Justin King
Elizabeth A. Smith
 
Compensation Committee
Carol Meyrowitz, Chairperson
Mary Elizabeth Burton
Robert C. Nakasone
Paul F. Walsh
Nominating and Corporate Governance Committee
Vijay Vishwanath, Chairperson
Arthur M. Blank
Rowland T. Moriarty
 
Finance Committee
Rowland T. Moriarty, Chairperson
Basil L. Anderson
Paul F. Walsh
Executive Committee
Ronald L. Sargent, Chairperson
Arthur M. Blank
Rowland T. Moriarty
Robert C. Nakasone
 
 


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Audit Committee
The Audit Committee assists our Board in overseeing our compliance with legal and regulatory requirements, the integrity of our financial statements, our independent registered public accounting firm's qualifications and independence, and the performance of our internal audit function and our independent registered public accounting firm through receipt and consideration of certain reports from our independent registered public accounting firm. In addition, the Audit Committee assists the Board of Directors in its oversight of the Company's policies and practices with respect to risk assessment and risk oversight, including discussing with management the Company's major financial risk exposures and the steps that have been taken to monitor and control such exposures.The Audit Committee is directly responsible for appointing, compensating, evaluating and, when necessary, terminating our independent registered public accounting firm, and our independent registered public accounting firm reports directly to the Audit Committee. The Audit Committee also prepares the Audit Committee Report required under the rules of the Securities and Exchange Commission, which is included elsewhere in this proxy statement. The Audit Committee has established escalation and oversight procedures for the treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for confidential and anonymous submission by our associates of concerns regarding questionable accounting, internal accounting controls or auditing matters. The Audit Committee meets independently with our independent registered public accounting firm, management and our internal auditors. The members of the Audit Committee are independent directors, as defined by its charter and the rules of the Securities and Exchange Commission and NASDAQ Stock Market. The Audit Committee met four times in person and six times by telephone during our 2011 fiscal year. Our Board has determined that Mr. Sulentic is an audit committee financial expert under the rules of the Securities and Exchange Commission and is independent as defined by NASDAQ listing standards.
Compensation Committee
The Compensation Committee's responsibilities include setting the compensation levels of executive officers, including our Chief Executive Officer, reviewing, approving and providing recommendations to our Board regarding compensation programs, administering our equity incentive, stock purchase and other employee benefit plans and authorizing awards under our equity incentive plans. The Committee may delegate its authority to management as it deems appropriate and may also delegate its authority relating to ministerial matters. The members of the Compensation Committee are independent directors, as defined by its charter and the rules of the NASDAQ Stock Market. The Compensation Committee met four times in person and one time by telephone during our 2011 fiscal year. For more information about the responsibilities of our Compensation Committee, see the "Compensation Discussion and Analysis" section of this proxy statement.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee's responsibilities include providing recommendations to our Board regarding nominees for director, membership on our Board committees, and succession matters for our Chief Executive Officer. An additional function of the Nominating and Corporate Governance Committee is to develop and recommend to our Board our Corporate Governance Guidelines and to assist our Board in complying with them. The Nominating and Corporate Governance Committee also oversees the evaluation of our Board and our Chief Executive Officer, reviews and resolves conflict of interest situations, reviews and approves related party transactions and interprets and enforces our Code of Ethics. The Nominating and Corporate Governance Committee also oversees our political contributions and recommends to our Board any proposed revisions to our Corporate Political Contributions Policy Statement. The members of the Nominating and Corporate Governance Committee are independent directors, as defined by its charter and the rules of the NASDAQ Stock Market. The Nominating and Corporate Governance Committee met four times in person during our 2011 fiscal year.
Finance Committee
The Finance Committee's responsibilities include being available, as needed, to evaluate and consult with and advise our management and our Board with respect to capital structure and capital policies, events and actions that could impact capital structure, payment of dividends, share repurchases, borrowing practices, debt or equity financings, credit arrangements, investments, mergers, acquisitions, joint ventures, divestitures and other similar transactions. The Finance Committee met two times in person during our 2011 fiscal year.
Executive Committee
The Executive Committee is authorized, with certain exceptions, to exercise all of the powers of our Board in the management and affairs of Staples. It is intended that the Executive Committee will take action only when reasonably necessary to expedite our interests between regularly scheduled Board meetings. A quorum can only be established by the presence of both a majority of the members of the Executive Committee and two non-management members of the Executive Committee. The Executive Committee did not meet during our 2011 fiscal year.

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Risk Oversight by the Board of Directors
Our Board of Directors is ultimately responsible for reviewing and approving our risk management strategy and framework and key risk parameters. In terms of overseeing the broader enterprise risk management ("ERM") program, the Audit Committee, under powers delegated by the Board, is responsible for the approval and establishment of our risk management framework and ensuring that appropriate policies and practices are in place for risk assessment and management, including that all risk areas are being monitored by senior management, reported to the Board or appropriate Board committee by senior management and addressed as needed. At each quarterly Board meeting, the Audit Committee reports to the Board on all of its specific activities.

Our most senior executives are responsible for collaborating with the Audit Committee to provide oversight to the risk management process and prioritize and validate key risks. Management, through its Enterprise Risk Committee, is then responsible for implementing the Board and Board committee approved risk management strategy and for developing policies, controls, processes and procedures to identify and manage risks. Our Enterprise Risk Committee is composed of leaders from the functional areas of Staples and meets quarterly to coordinate information sharing and mitigation efforts for all types of risks. The Audit Committee stays apprised of significant actual and potential risks faced by Staples and the effectiveness of its risk assessment and management process in part through detailed presentations at least twice a year from the Vice President of Internal Audit as the representative of the Enterprise Risk Committee. During these reports in 2011, management presented to the Audit Committee the results of its enterprise wide review of the major financial, operational and legal risks facing the company and steps that have been taken to monitor and control such exposures. In doing so, management reviewed its ERM methodologies for identifying and prioritizing financial, operational and legal risks and discussed the top level risks and related risk management.

Independent of the ERM process, the Audit Committee is made aware of risks as a result of being briefed in person regularly by our Vice President of Internal Audit, as well as an annual briefing and quarterly reports by our Vice President of Global Business Conduct & Ethics. The Audit Committee also regularly meets in executive session alone with the Vice President of Internal Audit. The Audit Committee uses the results of its discussions with our Vice President of Internal Audit to inform its overall view of risk and approve the proposed audit schedule for the internal audit group. Our internal audit group identifies, assesses and assists management in addressing and managing risks by using the Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission, also known as COSO framework. Our Vice President of Global Business Conduct & Ethics also provides quarterly reports to the Audit Committee on compliance and ethics matters.

The Audit Committee administers its risk oversight role through the Board committee structure as well. Each Board committee is responsible for monitoring and reporting on the material risks associated with its respective subject matter areas of responsibility. The Audit Committee oversees risks related to our accounting and financial reporting processes and the integrity of our financial statements, the Finance Committee oversees risks related to capital policies and practices and financial transactions, the Nominating and Corporate Governance Committee oversees risks related to corporate governance, including director independence and related party transactions, and as discussed in the “Compensation Discussion and Analysis” section of this proxy statement, the Compensation Committee oversees risks related to our compensation programs, including an annual review and risk assessment of the Company's compensation policies and practices for all associates and a risk assessment in connection with any changes to our compensation program.

In addition, the Board and the Audit Committee receive presentations throughout the year from management regarding specific potential risks and trends as necessary. At each Board meeting, the Chairman and CEO addresses in a directors only session matters of particular importance or concern, including any significant areas of risk requiring Board attention. Annually, our full Board reviews in detail the Company's short- and long-term strategies, including consideration of significant risks facing the Company and their potential impact. We believe that the practices described above facilitate effective Board oversight of our significant risks.

Diversity
Diversity has always been very important to us. It comprises one of the four pillars of what we call Staples' Soul. We strive to offer an inclusive business environment that offers diversity of people, thought, experience, and suppliers. This also holds true for our Board of Directors. Although we have no formal separate written policy, pursuant to our Corporate Governance Guidelines, the Board annually reviews the appropriate skills and characteristics of the Board members in light of the current composition of the Board, and diversity is one of the factors used in this assessment. Additionally, the Board is provided with an annual report on diversity initiatives and Staples' approach and progress on such initiatives.


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Director Candidates
The process followed by the Nominating and Corporate Governance Committee to identify and evaluate director candidates includes requests to Board members and others for recommendations, engaging a professional recruiting firm to help identify and recruit potential candidates, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating and Corporate Governance Committee and our Board.
Drew G. Faust has been nominated for election as a director at our Annual Meeting.   In the late fall of 2011, our Chairman became aware that Dr. Faust might be interested in serving on a corporate board.  After subsequent discussions of the Nominating and  Corporate Governance Committee and the Board in December 2011, the Chair of our Nominating and  Corporate Governance Committee reached out to Dr. Faust, and our Chairman and members of the Nominating and Corporate Governance Committee interviewed her.  In March 2012, after consideration of her experience, qualifications, attributes and skills, the Nominating and Corporate Governance Committee recommended, and our Board approved, the nomination of Dr. Faust to be a director on our Board.
Stockholders may recommend an individual to the Nominating and Corporate Governance Committee for consideration as a potential director candidate by submitting the following information: (1) the candidate's name; (2) appropriate biographical information and background materials regarding the candidate; and (3) a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made. Such information should be submitted to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Staples, Inc., 500 Staples Drive, Framingham, Massachusetts 01702. Assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate stockholder recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.
Stockholders also have the right under our by-laws to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or our Board, by following the relevant procedures summarized in this proxy statement under the caption "Stockholder Proposals."
Communicating with our Board
Our Board will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by the committee charters, the Chairperson of the Board (if an independent director), or the Lead Director (if one is appointed), or otherwise the Chairperson of the Nominating and Corporate Governance Committee, with the advice and assistance of our General Counsel, is primarily responsible for monitoring communications from stockholders and other interested parties and for providing copies or summaries of such communications to the other directors as he or she considers appropriate.
Under procedures approved by our independent directors and subject to the advice and assistance from our General Counsel, communications are forwarded to the Chairperson of the Board (if an independent director), the Lead Director (if one is appointed), or otherwise the Chairperson of the Nominating and Corporate Governance Committee, who monitor communications from stockholders and other interested parties. Copies or summaries of such communications are provided to all directors, if such persons consider it important and appropriate for all directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications. In addition, as provided by our Corporate Governance Guidelines, if a meeting is held between a major stockholder (including institutional investors) and a representative of the independent directors, the Lead Director will serve, subject to availability, as such representative of the independent directors.
Stockholders who wish to send communications on any topic to our Board should address such communications to The Board of Directors, c/o Corporate Secretary, Staples, Inc., 500 Staples Drive, Framingham, Massachusetts 01702.



14


ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)

The members of our Board are elected for a term of office to expire at the next annual meeting (subject to the election and qualification of their successors or the earlier of their death, resignation or removal). In considering whether to recommend any particular candidate for inclusion in our Board's slate of recommended director nominees, the Nominating and Corporate Governance Committee applies the assessment criteria set forth in our Corporate Governance Guidelines. These criteria include diversity, age and skills such as understanding of the office products market, the retail industry, finance, accounting, marketing, technology, risk management, international business and other operational and business knowledge needed to oversee a global multi-channel business. The principal qualification of a director is the ability to act effectively on behalf of all of our stockholders. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria, and no particular criterion is a prerequisite for any prospective nominee. We believe that the specific skills, qualifications and experience of our directors, considered as a group, should provide a mix of knowledge and abilities that will allow our Board to fulfill its responsibilities.
We believe each nominee in the slate presented below, through their own personal accomplishments and dedication to their profession and community, has demonstrated strong intellectual acumen, solid business judgment, strategic vision, integrity and diligence. After evaluating the performance and experience of each of the current directors and the composition of the full Board, the Nominating and Corporate Governance Committee has recommended one new nominee for election, Dr. Drew Faust, and eleven of the twelve current Board members for re-election. The eleven nominees that are current directors include five directors who joined the Board within the last five years and three nominees with over fifteen years of service on the Board, including two nominees who have served on the Board since our inception. Each of the current directors consistently has demonstrated their strong work ethic and dedication to Staples, including coming prepared to meetings, asking insightful questions, focusing on long term business strategy, analyzing challenges, evaluating solutions and overseeing implementation. We believe that the composition of the Board, including our new nominee, combines institutional knowledge and understanding of our business model, products and services and historical growth strategies and is balanced with an influx of new ideas and exposure to alternative approaches to business process, which promotes lively Board discussion and effective oversight and problem solving.
Many of the nominees are either current or former chief executive officers, chairmen or vice chairmen of other large international corporations. As such, they have a deep understanding of, and extensive experience in, many areas that are critical to our operation and success. For the purposes of our analysis, we have determined that nominees who have served in these roles have extensive experience with financial statement preparation, compensation determinations, regulatory compliance (if their businesses are or were regulated), corporate governance, public affairs and legal matters. Set forth below is biographical information of each of the nominees, highlighting the particular experience, qualifications, attributes or skills of each nominee that supports the conclusion of the Nominating and Corporate Governance Committee that these individuals should serve as directors of Staples.

 
 
 
 
 
 
 
 
 
Served as a
Director
Since
 
Basil L. Anderson, age 67
Served as an independent director of Staples since 1997 until we asked him to become our Vice Chairman from September 2001 until his retirement in March 2006. Mr. Anderson is also a director of Hasbro, Inc., Becton, Dickinson and Company, and Moody's Corporation. He served as a director of CRA International, Inc. until January 2011. Among his many qualifications, Mr. Anderson has extensive executive experience in corporate finance gained in part from his position as Chief Financial Officer of Campbell Soup Company and, prior to that, Scott Paper Company. Mr. Anderson also brings to the Board valuable insight into oversight of financial reporting and the audit process based on his experiences serving on the audit committees of multiple boards. Mr. Anderson also has strategic planning expertise, as well as international business experience.
 
1997

15


 
 
 
 
 
 
 
 
 
Served as a
Director
Since
 

Arthur M. Blank, age 69
Owner and Chairman of the Atlanta Falcons Football Club, LLC, a National Football League team, since February 2002.  Mr. Blank also serves as Chairman, President and Chief Executive Officer of AMB Group, LLC,  since February 2001, which is the parent company for Mr. Blank's for-profit businesses.  These businesses include Atlanta Falcons Physical Therapy Centers, which provide physical therapy and rehabilitation services, PGA TOUR Superstores, a privately held retailer of golf and tennis products, and Mountain Sky Guest Ranch, an upscale guest ranch resort.  Mr. Blank co-founded The Home Depot, Inc., a home improvement retailer, in 1978 and retired as Co-Chairman of the Board in May 2001.   Mr. Blank also serves as chairman of The Arthur M. Blank Family Foundation, a charitable organization.  Among many qualifications, Mr. Blank is a successful entrepreneur with extensive operational knowledge of the retail industry. Mr. Blank also has wide-ranging experience in merchandising and customer service.


 
2001
 

Drew G. Faust, age 64
President of Harvard University since 2007.  As President, Dr. Faust is responsible for all aspects of Harvard's academic and administrative activities, which include operations and research and teaching activities across the globe.  Dr. Faust also serves on the board of Harvard Management Company, which is responsible for investing Harvard's endowment and related financial assets to produce long term results to support the education and research goals of the university.  Dr. Faust led the transformation of Harvard's governance structures.  Among many qualifications, Dr. Faust brings to the board extensive leadership and management experience and skills related to recruiting top talent, capital planning, financial oversight, risk management, technology and strategy.  


 
 
 
 
Justin King, age 50
Chief Executive Officer of J Sainsbury plc, a food and non-food retailer, since March 2004, where he is also Chairman of the Operating Board. Prior to joining J Sainsbury plc, he was an Executive Director of Marks and Spencer Group plc from September 2002 to March 2004. Mr. King has significant retail experience having held a number of senior positions at ASDA/Wal-Mart in Trading, HR and Retail, as Managing Director of Häagen Dazs UK and having spent much of his early career with Mars Confectionery and Pepsi International. He also serves on the Prime Minister's Business Advisory Group since November 2010. Mr. King brings to the Board both strategic sales and marketing expertise, as well as an understanding of the complexities of operating international businesses.
 

2007

16


 
 
 
 
 
 
 
 
 
Served as a
Director
Since
 
Carol Meyrowitz, age 58
Chief Executive Officer of The TJX Companies, Inc., a retailer of apparel and home fashions, since 2007 and a director since 2006. Ms. Meyrowitz was President of TJX from October 2005 to January 2011. Prior to that, Ms. Meyrowitz was President of The Marmaxx Group, the largest division of TJX, from January 2001 to January 2005, and was employed in an advisory role for TJX from January 2005 to October 2005 and consulted for Berkshire Partners L.L.C., a private equity firm, from June 2005 to October 2005. Ms. Meyrowitz is also a director of The TJX Companies, Inc. and Amscan Holdings, Inc. Previous directorships include Yankee Candle Company from 2004 until 2007. Among many qualifications, Ms. Meyrowitz brings to the Board extensive experience in all aspects of retail operations and management, including real estate, ecommerce, supply chain and logistics, marketing and customer service.
 
2007
 
 
 
 
 
  
 
Rowland T. Moriarty, age 65
Chairman of the Board of CRA International, Inc., a worldwide economic and business consulting firm, since May 2002. He has been President and Chief Executive Officer of Cubex Corporation, a privately-held consulting company, since 1992. From 1981 to 1992, Dr. Moriarty was a professor of business administration at Harvard Business School where he taught, among other subjects, marketing. Dr. Moriarty is also a director of Wright Express Corporation and Virtusa Corporation. Until 2006, Dr. Moriarty served as a director of Trammel Crow Company, which contributed to his comprehensive understanding of real estate matters. Among many qualifications, Dr. Moriarty brings to the Board extensive international experience and has also developed extensive skills and expertise in corporate governance matters having chaired eight governance committees of various public and private boards.
 

1986
 
 
 
 
 
  
 
Robert C. Nakasone, age 64
Chief Executive Officer of NAK Enterprises, a family-owned investment and consulting company, since January 2000. Prior to that, Mr. Nakasone served as Chief Executive Officer of Toys "R" Us, Inc. from 1998 to 1999 and in other positions at that company from 1985 to 1998. While serving as Vice-Chairman, Worldwide Toy Stores and President and Chief Operating Officer, Mr. Nakasone led the company's international expansion into 27 countries throughout Europe, Asia and the Middle East. Mr. Nakasone is also a director of Hormel Foods Corporation. Previously, Mr. Nakasone served as a director of eFunds Corporation from 2003 until the sale of the company to Fidelity National Information Services in 2007. Among many qualifications, Mr. Nakasone brings to the Board extensive executive level public company experience, international business development expertise, as well as strategic planning and skills relating to compensation and corporate governance matters.
 

1986

17



 
 
 
 
 
 
 
 
 
Served as a
Director
Since
 

Ronald L. Sargent, age 56
Chief Executive Officer of Staples, Inc. since February 2002 and Chairman of the Board of Directors of Staples since March 2005. Prior to that, Mr. Sargent served in various positions at Staples since joining the company in 1989. Mr. Sargent is also a director of The Kroger Co. and The Home Depot. Previous directorships include Yankee Candle Company from 1999 to 2007, Aramark Corp. from 2002 until 2007 and Mattel, Inc. from 2004 to 2011. At Staples, Mr. Sargent has led worldwide operations, retail superstores and the delivery business, and also brings to the Board much experience in supply chain management, merchandising and marketing initiatives. Mr. Sargent's experience with respect to human resources matters is also highly valued.

 
1999
 
Elizabeth Smith, age 48
Chief Executive Officer of OSI Restaurant Partners, LLC since November 2009 and Chairman since January 2012. Previously, she served as Avon Products, Inc.'s President from September 2007 through October 2009. Prior to that, Ms. Smith served as Avon's Executive Vice President Marketing from September 2005 to September 2007, as well as Avon's Executive Vice President and Brand President from January 2005 to September 2005. Prior to joining Avon, she was with Kraft Foods,  Inc. as Group Vice President and President U.S. Beverages and Grocery Sectors from January 2004 to November 2004. Previous directorships include Carter's Inc. from 2004 to 2008. Among many qualifications, Ms. Smith brings to the Board deep experience in strategy, marketing and sales, as well as significant experience in corporate finance and financial reporting developed in her executive level roles where her responsibilities have included direct financial oversight of multinational companies with multiple business units. Ms. Smith also has experience in compensation matters, as well as wide-ranging operational management of all product-to-market processes.
 


2008
















18


 
 
 
 
Served as a Director
Since
 
Robert E. Sulentic, age 55
President of CB Richard Ellis Group, Inc., a global commercial real estate services company, since March 2010, and the President of the company's Development Services business from December 2006 to April 2011. Mr. Sulentic previously served as Chief Financial Officer of CB Richard Ellis Group from March 2009 and Group President from July 2009, each until March 2010. Mr. Sulentic was a member of CB Richard Ellis Group's Board and Group President of Development Services, Asia Pacific and Europe, Middle East and Africa from December 2006 through March 2009. Mr. Sulentic was a director of Trammell Crow Company from December 1997 through December 2006, and served as its Chairman of the Board from May 2002 through December 2006. He was President and Chief Executive Officer of Trammell Crow Company from October 2000 through December 2006 and prior to that served as its Executive Vice President and Chief Financial Officer from September 1998 to October 2000. Among many qualifications, Mr. Sulentic has extensive executive level management experience and currently oversees all day to day operations of the public company's five business units. Mr. Sulentic also brings to the Board a significant financial background that qualifies him as an audit committee financial expert. His insight with respect to doing business globally is also highly valued.
 
2007
 
 
 
 
 
 
Vijay Vishwanath, age 52
Partner at Bain & Company, a management consulting firm, since 1993. Mr. Vishwanath first joined Bain in 1986 and leads its consumer products practice. Prior to joining Bain, Mr. Vishwanath worked at Procter & Gamble. Mr. Vishwanath previously served as a director of Yankee Candle Company from 2005 to 2007. Among many qualifications, Mr. Vishwanath brings to the Board expertise in consumer products and brands, as well as marketing, gained in his position at Bain & Company counseling numerous Fortune 500 companies and, previously, at Procter & Gamble. In addition, Mr. Vishwanath has valuable experience in strategic planning and corporate governance.
 

2007
 
 
 
 
 
 
Paul F. Walsh, age 62
Served as Chairman and Chief Executive Officer of eFunds Corporation, a transaction processing and risk management company, from September 2002 until eFunds was acquired by Fidelity National Information Services in September 2007. Mr. Walsh also has been the owner and Chief Executive Officer of PFW Management, LLC, a consulting company, since February 2008. PFW Management, LLC does business as Calera FinTech Advisors and targets investments in the financial services and business services industry in concert with Calera Capital. Among many qualifications, Mr. Walsh brings to the Board extensive knowledge relating to risk oversight and management, compliance and regulatory matters. In addition, Mr. Walsh's executive level management brings valuable experience in process excellence, capital markets and corporate finance.
 

1990



19


Unless contrary instructions are provided, the persons named as proxies will, upon receipt of a properly executed proxy, vote for the election of Basil L. Anderson, Arthur M. Blank, Drew G. Faust, Justin King, Carol Meyrowitz, Rowland T. Moriarty, Robert C. Nakasone, Ronald L. Sargent, Elizabeth A. Smith, Robert E. Sulentic, Vijay Vishwanath and Paul F. Walsh as directors for a term expiring at our 2013 Annual Meeting. Proxies cannot be voted for a greater number of persons than the number of nominees named. Eleven of the twelve nominees are currently members of our Board. All of the nominees have indicated their willingness to serve if elected, but if any should be unable or unwilling to stand for election, proxies may be voted for a substitute nominee designated by our Board.
        OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE NOMINEES AS DIRECTORS.


DIRECTOR COMPENSATION

The Compensation Committee is responsible for reviewing and making recommendations to our Board with respect to the compensation paid to our non-employee directors ("Outside Directors"). Our Outside Directors are predominantly compensated through equity awards, reflecting the Compensation Committee's philosophy that director pay should be aligned with the interests of our stockholders. In addition, the Outside Directors receive a cash retainer.
It is the Compensation Committee's goal to maintain a level of Outside Director compensation above the median of companies both within our peer group as well as similarly-sized companies in general industry. The Compensation Committee annually reviews an extensive analysis of marketplace practices for outside director pay conducted by management and reviewed by the Compensation Committee's independent advisor. Consistent with our equity program for associates, the Outside Director compensation program also reflects a value-based approach to equity grants in which the amount of the awards made to Outside Directors is based on a fixed value rather than a fixed number of shares.
In March 2011, our Board elected to reduce the amount of its total compensation by $50,000 by eliminating the annual grant of stock options valued at $112,500 and increasing the value of the annual grant of shares of restricted stock from $112,500 to $175,000. The shares of restricted stock for the annual grant vest after one year and may be sold upon vesting. The Board also increased the stock ownership guideline from four to five times the annual Board cash retainer. All Outside Directors are subject to the stock ownership guideline and have five (5) years after joining the Board to meet such ownership guideline. Each Outside Director continues to receive a quarterly cash payment of $18,750 and is reimbursed for reasonable expenses incurred in attending meetings of our Board. The chairperson of the Audit Committee received an additional quarterly cash payment of $3,750.
During fiscal year 2011, on the second business day following the first regularly scheduled Board meeting, each of our Outside Directors received an annual grant of  shares of restricted stock with a value of $175,000 that vest after one year. In addition, on the same day the annual grant was awarded, (a) the Lead Director was granted restricted stock units with a value of $40,000, (b) each chairperson of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee was granted restricted stock units with a value of $32,000 and (c) the chairperson of the Finance Committee was granted restricted stock units with a value of $8,000. In each case, the restricted stock units vest on the date of each of the four regularly scheduled quarterly Board meetings that such Lead Director or chairperson holds such position and are paid in shares on the one year anniversary of the award. The number of shares of restricted stock or restricted stock units to be granted is determined by dividing the fixed value by the closing price of our common stock on the date of grant. Upon a change-in-control of Staples or upon a director leaving our Board after reaching the age of 72, all of such director's outstanding restricted stock would fully vest and the restricted stock units would fully vest and be paid out.







20


The table below sets forth certain information concerning our 2011 fiscal year compensation of our Outside Directors.

DIRECTOR COMPENSATION FOR 2011 FISCAL YEAR
Name*
 
Fees earned or
paid in cash
($)
 
Stock
Awards
($) (1)(2)
 
All Other
Compensation
($) (3)
 
Total
($)
Basil L. Anderson
 
75,000

 
175,007

 
—

 
250,007

Arthur M. Blank
 
75,000

 
215,012

 
—

 
290,012

Mary Elizabeth Burton
 
75,000

 
175,007

 
—

 
250,007

Justin King
 
75,000

 
175,007

 
—

 
250,007

Carol Meyrowitz
 
75,000

 
207,023

 
—

 
282,023

Rowland T. Moriarty
 
75,000

 
183,016

 
—

 
258,016

Robert C. Nakasone
 
75,000

 
175,007

 
—

 
250,007

Elizabeth A. Smith
 
75,000

 
175,007

 
1,203

 
251,210

Robert E. Sulentic
 
90,000

 
207,023

 
—

 
297,023

Vijay Vishwanath
 
75,000

 
207,023

 
—

 
282,023

Paul F. Walsh
 
75,000

 
175,007

 
—

 
250,007

______________________________________________________________________
*Excludes Mr. Sargent, our Chief Executive Officer, who does not receive compensation for his services as director and whose compensation as a named executive officer is reported in the Summary Compensation Table included in this proxy statement.

(1)
The amounts shown in the Stock Awards column represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 for awards granted during our 2011 fiscal year, not the actual amounts paid to or realized by our Outside Directors during our 2011 fiscal year.
(2)
The aggregate fair value of these awards is based on the market price of our common stock on the date of grant. Fractional shares are rounded up to the nearest whole share. Awards made during 2011 represent:
•
Annual grant of shares of restricted stock to each director with a grant date fair value of $175,007;
•
For Mr. Blank, our Lead Director for fiscal year 2011, restricted stock units with a grant date fair value of $40,005;
•
For Messrs. Sulentic and Vishwanath, chair of our Audit Committee and chair of our Nominating and Corporate Governance Committee, respectively, for fiscal year 2011, restricted stock units with a grant date fair value of $32,016 each;
•
For Dr. Moriarty, chair of our Finance Committee for fiscal year 2011, restricted stock units with a grant date fair value of $8,009; and
•
For Ms. Meyrowitz, chair of our Compensation Committee for fiscal year 2011, restricted stock units with a grant date fair value of $32,016.
(3)
Reflects payments of dividend equivalents on unvested restricted stock. Beginning with awards granted after January 2009, dividend equivalents are not paid on unvested restricted stock.











21


OUTSTANDING DIRECTOR AWARDS
The table below supplements the Director Compensation table above by providing (1) the number of restricted shares and restricted stock units awarded to our directors during our 2011 fiscal year and (2) the total number of stock options, unvested restricted shares and outstanding restricted stock units held by our directors as of January 28, 2012, the end of our 2011 fiscal year.
Name
 
Grant Date
 
Award
Type
 
Number of
Shares/Units
Awarded in
FY 2011
 
Total Options, Unvested Restricted Shares and Restricted Stock Units as of 2011 FYE (1)(2)(3)
Basil L. Anderson
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
 
 
OP
 
—

 
94,742

Arthur M. Blank
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
3/10/2011
 
RSU
 
1,978

 
1,978

 
 
 
 
OP
 
—

 
145,367

Mary Elizabeth Burton
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
 
 
OP
 
—

 
203,867

Justin King
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
 
 
OP
 
—

 
82,367

Carol Meyrowitz
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
3/10/2011
 
RSU
 
1,583

 
1,583

 
 
 
 
OP
 
—

 
77,867

Rowland T. Moriarty
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
3/10/2011
 
RSU
 
396

 
396

 
 
 
 
OP
 
—

 
136,367

Robert C. Nakasone
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
 
 
OP
 
—

 
203,867

Elizabeth Smith
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
 
 
OP
 
—

 
41,954

Robert E. Sulentic
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
3/10/2011
 
RSU
 
1,583

 
1,583

 
 
 
 
OP
 
—

 
82,367

Vijay Vishwanath
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
3/10/2011
 
RSU
 
1,583

 
1,583

 
 
 
 
OP
 
—

 
86,867

Paul F. Walsh
 
3/10/2011
 
RS
 
8,653

 
8,653

 
 
 
 
OP
 
—

 
203,867


RS = Restricted stock, RSU = Restricted stock unit, OP = Stock option

(1)
Restricted stock awards made after 2008 vest in full on the first anniversary of the grant date, provided that the director then serves on our Board. The shares of restricted stock granted in 2011 may be sold upon vesting; however, awards made from 2008 through 2010 may be sold only upon leaving our Board. The shares of restricted stock awarded to a director will fully vest upon retirement or resignation should such director leave our Board after reaching the age of 72. Restricted stock awards made prior to 2008 vested in full on the third anniversary of the grant date.
(2)
Restricted stock units awarded during 2011 to our Lead Director and each chairperson of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Finance Committee vest ratably on the date of each of the four regularly scheduled quarterly Board meetings that such Lead Director or chairperson held such position and are paid on the one year anniversary of the award.
(3)
Stock options awarded during 2008, 2009 and 2010 vest in full on the first anniversary of the grant date, provided that the director then serves on our Board. The stock options awarded to a director will fully vest upon retirement or resignation, should such director leave our Board after reaching the age of 72. Stock option awards made prior to 2008 represent stock option grants that vest ratably on an annual basis over a four-year vesting period, provided that the director then serves on our Board.


22


APPROVAL OF AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO ALLOW STOCKHOLDER ACTION BY MAJORITY WRITTEN CONSENT
(Item 2 on the Proxy Card)

We are seeking stockholder approval of an amendment to our Restated Certificate of Incorporation to allow stockholder action by written consent in lieu of a meeting. In March 2012, in response to the votes of stockholders at our 2010 and 2011 annual meetings seeking the right to act by majority written consent and input from our stockholders during the course of our corporate governance outreach program about how to implement a meaningful right of written consent while ensuring fundamental fairness to all stockholders, our Board unanimously approved, subject to stockholder approval, the Amendment to our Restated Certificate of Incorporation, which we refer to as the Certificate of Amendment, attached to this proxy statement as Appendix A.
Currently, our Restated Certificate of Incorporation prohibits action by written consent. If this proposal is approved by stockholders at the 2012 Annual Meeting, any action required or permitted to be taken at a meeting of stockholders may instead be taken, without a meeting and without a vote, by the written consent of stockholders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote were present and voted.
The proposed Certificate of Amendment permits stockholders to act by written consent if the written consent is solicited by our Board of Directors or by a stockholder of record who has complied with certain procedural requirements. We believe the Certificate of Amendment implements stockholder action by written consent in a clear, straightforward and meaningful manner that also provides fundamental fairness to all stockholders. Accordingly, action by majority written consent initiated by a stockholder of record is subject to the basic requirements set forth below that we believe help ensure accurate information, full transparency and fairness to all stockholders:
•
A stockholder of record must first request that our Board of Directors set a record date determining which stockholders are entitled to act by majority written consent and provide certain information about the action and the requesting stockholder. The required information is the same as would be required if a stockholder wished to present a matter to a vote at a meeting of stockholders.

•
Our Board of Directors will have 30 days after receipt of the stockholder's request to establish a record date. The purpose of a record date is to provide certainty regarding which stockholders are entitled to submit written consents.

•
A stockholder must use reasonable efforts to solicit consents from all stockholders. The purpose of this provision is to provide each stockholder with an opportunity to consider and act on the proposed action. The Certificate of Amendment provides that the Company will reasonably cooperate with the stockholder who is seeking to take action by written consent in connection with this requirement.

Any action by written consent initiated by a stockholder of record would take effect once the requisite number of written consents are certified in accordance with our By-Laws and would not relate back to the date the written consents were delivered to the Company. Any stockholder seeking to take action by written consent must also comply with all requirements of applicable law, with respect to such action.
If this proposal is approved by stockholders at the 2012 Annual Meeting, the Certificate of Amendment would become effective upon filing of an appropriate certificate with the Secretary of State of the State of Delaware, which we expect to file shortly after the 2012 Annual Meeting. In addition, our Board of Directors will adopt corresponding amendments to our by-laws. The By-Laws will provide that any record date fixed by the Board with respect to a proposed action by written consent may not precede, or be more than 10 days after, the date of the Board's resolution fixing the record date and will provide for the appointment of an independent inspector of elections to perform a ministerial review of the validity of consents and revocations.
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF AN AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO ALLOW STOCKHOLDER ACTION BY MAJORITY WRITTEN CONSENT.

23


EXECUTIVE COMPENSATION

Compensation Discussion and Analysis ("CD&A")
Executive Summary
The Compensation Committee (the "Committee") of our Board of Directors (the "Board"), which is comprised entirely of independent directors, oversees our executive compensation program and determines all compensation for our executive officers. This section of the proxy statement focuses on the compensation program for our Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO") and three other most highly compensated executive officers, whom we refer to collectively as our "named executive officers" ("NEOs").
Our current executive compensation program is heavily weighted to incentive compensation that is "at risk." The principal elements of our program are as follows:
Performance Based Features
General Policy Highlights
Ÿ Over 62% of NEO annual target compensation "at risk" based on performance
Ÿ Double trigger change in control provisions in severance agreements
Ÿ Over 67% of NEO annual target compensation long term, with 70% of this amount performance based (including options)
Ÿ No tax gross up payments in future agreements

Ÿ Policy prohibiting hedging
Ÿ Cumulative three year long term performance goal in long term cash incentive plan
Ÿ Stock ownership guidelines
Ÿ Different metrics in long term and annual plans
Ÿ Limited perks
Ÿ Committee can decrease but not increase cash awards under our cash incentive programs
Ÿ Aggressive "clawback" policy
 
Ÿ Independent compensation consultant hired by the Committee performs no other services for the Company
   
Changes to 2012 Compensation Program
    In accordance with our commitment to sound executive compensation governance practices, and in response to last year's advisory vote on executive compensation and the feedback from our stockholder outreach program, the Compensation Committee, in consultation with its independent consultant Exequity LLP, decided to make the below changes to our compensation program. For more information about our 2011 outreach program, see the discussion in the “Corporate Governance” section of this proxy statement on page 7.
Summary of Changes to 2012 Compensation Program

Ÿ Revised the goals used in our long term cash incentive program from annual goals to a 3 year cumulative goal.
Ÿ Revised pay mix for all officers to decrease use of stock options and increase use of performance based long term cash incentives.
Ÿ Revised long term incentives to target market median rather than 75th percentile.
Ÿ Revised annual and long term incentive goals to include different measures of performance.
Ÿ Revised pay mix for associates below the director level to replace equity incentives with cash.
       


24



Review of 2011 Executive Compensation
Our executive compensation program is designed to meet three principal objectives:
•
Attract, retain and reward executive officers who contribute to our long term success.
•
Align compensation with short and long term business objectives.
•
Motivate and reward high levels of individual and team performance.
These objectives collectively seek to link compensation to overall company performance, thereby ensuring that the interests of our executives are aligned with the interests of our stockholders. Throughout this CD&A, we refer to the sum of base salary, performance based annual cash bonuses and long term incentives (long term cash incentives, restricted stock and stock options) as "total direct compensation" ("TDC"), and we refer to the sum of base salary and performance based annual cash bonuses as "total cash compensation."
Our pay mix emphasizes "at risk" performance based compensation
To align our NEOs' compensation with the interests of our stockholders, a substantial portion of compensation is "at risk" and performance based, with over 64% of our NEOs' 2011 target compensation being "at risk." As indicated at the beginning of this CD&A, for fiscal year 2012, we have changed the long term incentives mix for our NEOs to place more emphasis on our performance based Long Term Cash Incentive Plan ("Long Term Cash Plan") and less emphasis on stock options.
The chart below highlights the extent to which the total pay opportunity is characterized by "at risk" performance based compensation by illustrating the percentage of each element at target and showing the "at risk" portion of total direct compensation for each of our NEOs for 2011.
* - The long term cash component of the long term incentive portfolio and the cash bonus earned under our Executive Officer Incentive Plan are performance based plans and represent "at risk" compensation since minimum levels of performance must be attained in order for any payout to occur. Similarly, we view the stock option component of our long term equity incentives as performance based and "at risk" since the stock price at exercise must exceed the original fair market value grant price in order to provide any value to the executive.

CEO pay has been aligned with long term performance
On a three year basis, CEO pay has been aligned with performance. In 2011, total CEO compensation as reported in our summary compensation table decreased by 42% due to lower payouts on performance based compensation and no special equity awards.
The following table which the Committee reviewed reflects, relative to our peer group, the alignment between our CEO's base salary, total cash compensation, TDC and the Company's performance as measured by total shareholder return, earnings per share growth and return on invested capital over the 2008-2010 period. When the Committee performed the review, proxy based compensation data was only available through 2010, so the Committee's analysis was limited through such period. In reviewing each of the components of compensation, the Committee placed greatest emphasis on sustained performance and on realizable TDC over the three year period, as opposed to the annual TDC reported in our proxy statement, since the compensation program

25


is designed to promote long term sustained performance and realizable TDC reflects the real value of the equity awards and increases and decreases as the share price changes. The percentiles in the tables show, relative to our peer group, the CEO's or Staples' position with respect to each compensation element and with respect to each performance measure.


    
(1)
For the above table, realizable TDC is the sum of base salary, cash bonus paid and the realizable value of equity, which is the sum of the market value on October 14, 2011 (the date of the analysis) of restricted stock grants awarded over the relevant period and the value of stock options awarded over the relevant period as determined by subtracting the grant price from the closing price of $14.87 on October 14, 2011.
(2)
Includes the impact of special equity awards.
 
Our executive compensation program is aligned with long term performance
In December 2011, the Committee performed a broad based review of our executive compensation program. As part of this review, to assess whether our compensation program was aligned with our performance relative to our peer group, the Committee analyzed our NEOs' compensation against our overall performance on both a one year and three year basis. In addition to 2010 and 2008 - 2010 proxy data, the Committee also considered 2011 year to date performance at the time of the review. While the Committee believes financial performance should be the most significant driver of compensation, other factors that drive long term value for stockholders are also taken into account by the Committee, including achievement of operational, strategic and qualitative objectives.
Based on the above 2011 review of executive compensation, the Committee concluded that:
•
For the three year 2008 - 2010 period, compensation decisions were aligned with the marketplace. We successfully aligned compensation with short and long term business objectives and motivated and retained executives during periods of high volatility in the stock market and a down economic environment.
•
Overall individual compensation was appropriate in view of relative and absolute performance primarily based on the 2008 - 2010 realizable TDC for the CEO approximating the median.
•
Each of the NEOs had challenging and wide ranging responsibilities commensurate with their overall pay package.
Performance against 2011 key objectives.    Some of our 2011 performance highlights include:
•
Grew EPS and sales in a difficult environment:
•
EPS: Diluted EPS, on a GAAP basis, increased 16% to $1.40 from the $1.21 achieved in fiscal year 2010. Adjusted diluted earnings per share increased 8% to $1.37 from the $1.27 achieved in fiscal year 2010. These adjusted results exclude a $21 million cash tax refund, or $0.03 per diluted share, during the second quarter of 2011 and pre-tax integration and restructuring expense of $58 million, or $0.06 per diluted share net of tax, in

26


2010.
•
Sales: Total company sales increased 2% to $25 billion compared to fiscal year 2010.
•
Continued to invest in strategic initiatives, including technology products and services, copy and print services and facilities and breakroom supplies, to drive our long term success. In 2011, each of these initiatives generated in excess of $1 billion in annual revenues.
•
Generated operating cash flow of $1.6 billion and invested $384 million in capital expenditures, resulting in free cash flow of $1.2 billion, our fourth consecutive year of generating more than $1 billion in free cash flow.
•
Allowed us to increase our first quarter 2012 dividend by 10% to $0.11, reflecting an annualized dividend increase of 10% to $0.44. This is the third consecutive year that we have increased our dividend.

Description of Overall Executive Compensation Program

Pay Philosophy and Mix
We seek to achieve our executive compensation objectives by relying on the compensation philosophy articulated below and through the use of the five compensation components which are summarized in the table that follows. The Committee relies upon its judgment and not upon rigid guidelines or formulas in determining the amount and mix of compensation elements for each NEO.
Pay Philosophy
The Committee periodically reviews its pay philosophy. Our current pay philosophy is as follows:
        Our executive compensation philosophy is that a significant portion of compensation should be directly linked to Staples' overall performance, specifically:
•
Base salaries are targeted to approximate median salary levels of executives in our peer group.
•
Annual cash incentive opportunities are targeted to approximate the median of target annual incentive levels in our peer group.
•
Long term incentives are targeted to approximate the median target levels within our peer group. These incentives represent a significant portion of total compensation and are largely linked to Staples' overall performance. Top quartile company performance would likely result in delivery of top quartile total compensation.
Pay Mix
The table below summarizes the core elements of our annual compensation program for our NEOs.
 

27


 
 
 
 
 
Compensation
Component
 
Principal Contributions to
Compensation Objectives
 
Highlights
Base salary
 
•       Attracts, retains and rewards talented executives with annual salary that reflects the executive's performance, skill set and value in the marketplace.
 
•       Targeted to approximate median of comparable peer group positions.
 
 •       The only fixed component of compensation.

•       In 2011, the CEO, CFO and COO received 2.5% base salary increases consistent with the salary increase budget for all salaried associates. The Presidents of USR and NAD each received salary increases of 10% reflecting a market adjustment.
 
 
 
 
 
Performance based annual cash bonus
 
•       Focuses executives on annual financial and operating results.
 
 •       Links compensation to stockholder interests.

•       Enables total cash compensation to remain competitive within the marketplace for executive talent.


 
•       Targeted to approximate median of comparable peer group positions.

•       The average annual cash bonus payout, as a percentage of salary, to the current NEOs over the past three fiscal years (2009-2011) has been 75%.

 •       In 2012, performance goals were changed to operating income, EPS and sales to provide greater diversity in performance objectives and differentiate the annual goals from long term goals.



 
 
 
 
 
Long term incentives
 
•       Rewards achievement of long term business objectives that benefit our stockholders through equity and long term cash plans.

•       Retains successful and tenured management team.
 
•       Targeted to approximate median of comparable peer group positions.

• 2011 fiscal year long term incentive portfolio was stock options (42%), tenure-based restricted stock (27%), and a long term performance based cash incentive (31%).

•       2012 fiscal year long term incentive portfolio is stock options (30%), tenure-based restricted stock (30%), and a long term performance based cash incentive (40%).

•       In 2012, the performance goal for our Long Term Cash Plan was revised from annual goals to a 3 year cumulative return on net assets ("RONA") goal, with RONA not used as a metric in any other plans.

 
 
 
 
 
Retirement and other benefits
 
•       Helps to attract and retain talented executives with benefits that are comparable to those offered by companies in our peer group and other companies with whom we compete for talent.
 
•       The Company does not have a pension plan for NEOs. Includes a limited Company match, up to 4% of salary and bonus, to a supplemental executive retirement plan, which is otherwise fully funded by the executive.
 
 
 
 
 
Executive perquisites
 
•       We offer limited executive perquisites.
 
•       We provide limited reimbursement for tax, estate and financial planning services. The amounts reimbursed are not grossed up for taxes.



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Base Salary
The Committee generally sets base salaries for the NEOs at approximately the median (50th percentile) of comparable positions in our peer group. Changes in base salary are typically considered based on individual performance during our annual performance review process, as well as in the event of a promotion or change in responsibilities. In March 2011, the CEO recommended a 2.5% increase in base salary for the CFO and COO and a 10% increase for the Presidents of NAD and USR which included a market adjustment for retention purposes and based on benchmarking data showing that base salaries for these executives, as a group, were well below the median of comparable peer group positions. The Committee approved his recommendation and also decided to increase the CEO's salary by 2.5%, effective May 1, 2011. As a result of the Committee's action, the CEO's base salary approximated the median of base salaries for Chief Executive Officers in our peer group. The CEO's base salary is 11% of his annual target TDC and is 65% greater than the base salary of the next highest paid NEO. In general, the Committee allocates a greater percentage of the CEO's TDC to performance based and equity incentives because the CEO is uniquely situated to influence our short and long term performance.
Performance Based Annual Cash Bonus (Executive Officer Incentive Plan)
Each of the NEOs was eligible to participate in our Executive Officer Incentive Plan during our 2011 fiscal year. Under the terms of the Executive Officer Incentive Plan, each NEO has a target bonus award for each plan year. Target bonus awards were set between 80% and 150% of the actual base salary paid to the NEO. The target bonus percentages are determined by the Committee based upon an analysis of annual cash incentive opportunities for similar positions in the peer group companies. The Committee generally selects target bonus percentages for the NEOs such that target total cash compensation approximates the median of comparable positions in our peer group.
Within 90 days after the beginning of fiscal year 2011, the Committee established EPS, RONA dollars, and sales performance objectives for the payment of bonus awards. The Committee may determine that special one-time or extraordinary gains or losses should or should not be included in determining whether such performance objectives have been met. The Committee believes that it is appropriate to vary the performance objectives over time since each fiscal year's objectives should be important in that year to drive sustainable growth and increase stockholder value.
For purposes of our 2011 Executive Officer Incentive Plan and our 2011 Long Term Cash Incentive Plan (see "Long Term Incentives"), the performance objectives are calculated as follows:
•
EPS — EPS is calculated using the amounts set forth in our financial statements.
•
RONA — Return on net asset dollars are calculated as net operating profit after tax ("NOPAT") for the most recent 12 months less a capital charge. The capital charge is calculated as the average of the most recent 13 months' net asset balance, multiplied by 11.7%, which is an estimate of our long-term cost of capital. To more accurately reflect the nature and performance of our business, we make certain adjustments to the amounts set forth in our financial statements to calculate RONA dollars. To calculate NOPAT, we begin with our business unit income, add back rent and deduct taxes on adjusted income. To calculate net assets, we begin with our balance sheet net assets, add back interest bearing debt, net capitalized rent and implied goodwill and deduct corporate cash. RONA dollar objectives exclude the difference between the actual and budgeted impact of foreign currency exchange as well as stock-based compensation expense and one time restructuring expenses.
•
Sales —  based on the amounts set forth in our financial statements.
For each plan year, a specified percentage of each bonus award is based upon each of the performance objectives selected by the Committee for that plan year. For each of the performance objectives that are met, a corresponding portion of the bonus award is paid. Each performance objective has an associated threshold level that must be achieved for any of the bonus award associated with such objective to be paid and there are also target and maximum levels that are set with increased payouts for better than expected performance. Bonuses are not paid unless we achieve minimum EPS.
In March 2011, the Committee selected three performance objectives for our 2011 fiscal year which on a company-wide basis were:
•
EPS target of $1.50, representing 19% growth in EPS, which was weighted at 40% of the targeted bonus award.
•
RONA dollars target of $73 million, representing a $138 million improvement over our 2010 RONA dollars, which was weighted at 30% of the targeted bonus award.
•
Sales goal of $25.7 billion, representing a 4.7% increase over actual 2010 sales, which was weighted at 30% of the targeted bonus award.
 



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The RONA dollars and sales goals are business unit specific for Messrs. Doody and Parneros and reflect total Company performance for Messrs. Sargent, Mahoney and Miles. Mr. Doody's RONA dollar goal was $168 million for North American Delivery, representing a 53% improvement over 2010 North American Delivery RONA dollars. Mr. Parneros' RONA dollar goal (which related to the U.S. portion of our North American Retail segment) is not disclosed because it would cause us competitive harm. The undisclosed RONA dollar goal was set at a level of difficulty comparable to that of the RONA dollar goals for other executives as disclosed above. During the past four years, the undisclosed RONA dollar goal has been achieved above the target level on one occasion and below the target level on three occasions.
All of the performance goals were based on the financial plan for our 2011 fiscal year so that achievement would result in the target payout. The Committee believed that all of the goals were set at a level that would be challenging to achieve given the uncertain economy, particularly since the minimum EPS required for any bonus payout was set at 85% of target for fiscal year 2011. The maximum payout of twice the target award could only be achieved if we achieved at least 115% of all of our goals.
The tables below illustrate the structure and results under our Executive Officer Incentive Plan in 2011 relative to the targets for each component of the plan for our NEOs, with Staples' overall and business unit performance below target.
Based on the actual performance under the 2011 Executive Officer Incentive Plan, the payments for Messrs. Sargent, Mahoney, and Miles were $724,284, $292,395, and $292,395, respectively.
Based on the actual performance under the 2011 Executive Officer Incentive Plan, the payment for Mr. Doody was $294,142.

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Based on the actual performance under the 2011 Executive Officer Incentive Plan, the payment for Mr. Parneros was $270,199.
Changes to the 2012 Performance Based Annual Cash Bonus
Beginning in fiscal 2012, we plan to substitute operating income for RONA as a performance objective for the Executive Officer Incentive Plan, resulting in a change of performance objectives from EPS, RONA and sales to EPS, operating income and sales. RONA will now become our single metric for our Long Term Cash Plan, thereby creating separate and distinct metrics between our short term and long term incentive plans. In addition, in our efforts to drive cross channel collaboration between retail and e-commerce, associates in the US Retail business will have a Staples.com sales bonus goal and associates in Staples.com will have a US Retail sales bonus goal. As part of their annual cash incentive plan, 50% of Mr. Doody's sales goal will be tied to US Retail sales and 50% of Mr. Parneros' sales goal will be tied to Staples.com sales.
Long Term Incentives
Our long term equity and cash incentives reward the achievement of long term business objectives that benefit our stockholders and help us retain a successful and tenured management team. With respect to the NEOs, the Committee relied upon a portfolio approach to long term incentives in 2011 that included a mix of long term cash incentive awards (31% of long term compensation target value), stock options (41-42% of total long term compensation target value), and tenure-based restricted stock (27-28% of long term compensation target value). We compare our long term incentives at target to ensure that we are competitive with our peer group, with a focus on approximating the median of target levels within our peer group. In the Committee's view at the time of grant in 2011, the chosen mix of long term equity awards and long term cash struck the right balance in providing performance based incentives that were aligned with stockholder interests and supported retention of our talented senior executive team in a challenging economic environment.
The Committee granted annual equity awards to all eligible associates, including the NEOs, on July 1, 2011, pursuant to our policy that the annual grant date for the annual equity grant is the first business day after June 30. One of the reasons for having a formal policy of setting the date for the annual equity grant is to avoid any perception that the stock option grants are timed in coordination with the release of material non-public information. Our annual grants of stock options and tenure-based restricted stock awards are awarded midyear around the mid-point of our fiscal year (after our prior year performance appraisal and bonus award processes have been completed) to serve as an additional recognition event that may drive current year and future performance. The stock options were granted at the closing price on July 1 and vest ratably over a four-year period. The tenure-based restricted stock vests 50% on the second anniversary of the grant date and 50% on the third anniversary of the grant date. Equity awards were issued to approximately 8,600 equity eligible associates in 22 countries. The long term cash incentive awards were also awarded on July 1.
For 2011, the Committee granted awards under our Long Term Cash Plan. The Committee set annual company-wide performance based goals and relative weightings, along with the general payout structure, to track the total company portion of the 2011 Executive Officer Incentive Plan. See "Performance Based Annual Cash Bonus" section above for more detail. As with the 2010 awards, recognizing the difficulty of setting appropriate long term incentive targets, the company-wide performance goals were or will be set at the beginning of each of the three years of the three year performance cycle (2011-2013), with actual payout determined at the end of the three year performance cycle and no payouts (except in the event of death) to be made until the Committee certifies results in March 2014. As described below under "Changes to the 2012 Performance Based Long Term Cash Plan," in 2012, the awards will be based on a cumulative three year RONA goal, as opposed to a series of annual goals.

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For the 2010 and 2011 awards, one third of the target award is applied as a target amount for each of the three fiscal years within the performance cycle, and at the end of the performance cycle, the Committee, upon the certification of the results, will determine the amount of the payment to be made to a participant by adding the amounts earned in each component year of the performance period, with each year's payment reflecting proven performance in relation to the goals achieved for that 12 month period. In March 2011, the Committee determined that in the aggregate the performance objectives for fiscal year 2010 had been achieved at 95.8% of target. In March 2012, the Committee determined that in the aggregate the performance objectives for fiscal year 2011 had been achieved at 41.4% of target.
Changes to the 2012 Performance Based Long Term Cash Plan
Beginning in fiscal 2012, the performance objectives for our Long Term Cash Plan will change from EPS, RONA and sales to a single performance objective, RONA. In addition, and in response to shareholder feedback, rather than setting annual goals each year over the three year performance period, a cumulative three year RONA goal will be set at the beginning of the performance period. Results based on the cumulative three year RONA performance will be measured and determined by the Committee at the end of the three year period. RONA is one of the best measures of long term value creation and is therefore an appropriate long term incentive metric.

Long Term Cash Plan — Performance Objectives and Weightings
2011*
EPS 40%*
RONA$ 30%*
Sales 30%*
2012
 
RONA$ 100%
(based on cumulative 3 years)
 
*Single year performance goals. The 2012 performance objectives under the previously granted 2010 and 2011 Long Term Cash Plan awards will change to EPS (40%), Operating Income ( 30%) and Sales (30%).
Prior Year Equity Awards
2008 Performance Share Awards:    The minimum EPS 2010 goal of $1.79 was not achieved for our 2008 performance share awards; therefore, in March 2011, the Board, based on the Committee's recommendation, determined that no payout would be awarded. The unearned compensation amount represented a sizeable portion (30%) of the total target long term incentive opportunity that was extended to each NEO in 2008. The aggregate value of unearned shares returned to the available share pool under the Amended and Restated 2004 Stock Incentive Plan ("Stock Plan") was $8.5 million.
2010 Performance Share Awards: Each award recipient is eligible to receive shares following the satisfaction of certain performance objectives over a three year performance cycle which includes fiscal years 2010, 2011 and 2012. No shares will be awarded until the Board, upon the recommendation of the Committee certifies on the date of its first regularly scheduled meeting following the end of the performance cycle (the "March 2013 Board Meeting Date") whether, and to what extent, the performance objectives have been achieved. Shares awarded upon certification by the Board will vest as follows: 33% on the March 2013 Board Meeting Date, 33% on the first anniversary of the March 2013 Board Meeting Date and 34% on the second anniversary of the March 2013 Board Meeting Date. In March 2011, the Committee determined that in the aggregate the performance objectives for fiscal year 2010 had been achieved at 93.25% of target. In March 2012, the Committee determined that in the aggregate the performance objectives for fiscal year 2011 had been achieved at 58.1% of target.
Administration of Incentive Plans
The Board and the Committee, through delegated powers, have broad discretion in administering the cash and stock incentive plans. This discretion includes the authority to grant awards, determine target awards, and select performance objectives and goals, along with the ability to adopt, amend and repeal such administrative rules, guidelines and practices as deemed advisable. In addition, the Committee has broad discretion to modify awards and determine goal attainment and the payment of awards under each plan. The Committee may determine to what extent, if any, specific items are to be counted in the relevant financial measures for any particular business and whether special one-time or extraordinary gains and/or losses and/or extraordinary events should or should not be included or considered in the calculation of goals. For the cash incentive plans, the Committee can decrease but not increase cash awards.



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Retirement and Other Benefits
We do not have a defined benefit pension plan in which our NEOs participate; however, our NEOs are eligible to participate in defined contribution plans. These retirement plans include a standard 401(k) qualified plan and a Supplemental Executive Retirement Plan ("SERP"), both which are otherwise fully funded by the NEOs and only supported by Staples through limited matching contributions. Additionally, the NEOs are eligible to participate in standard health and welfare programs, such as medical, dental, vision, disability, and supplemental life insurance, on the same basis as our other salaried associates. They are also eligible to participate in our 401(k) qualified plan on the same basis as our other salaried associates; however, their contributions are limited to 2% of eligible compensation. Due to the limitations on our officers' ability to contribute to our 401(k) plan, we have the SERP, which is a non-qualified deferred compensation plan generally intended to provide comparable benefits above the applicable limits of our 401(k) qualified plan. Under the SERP, officers of Staples may defer a total of up to 100% of their base salary, bonus, and long term cash incentive awards and receive matching contributions up to a maximum of 4% of base salary and bonus.
We also have an Executive Benefits Program consisting of life insurance, long term care insurance, supplemental long term disability, a survivor benefit plan and an executive physical and registry program. This program was implemented to enhance our retirement and benefit offerings for senior management and to further support our efforts to attract and retain top talent. All senior officers of Staples, including the NEOs, are eligible to participate in this program. For each plan or policy described above that requires payment of periodic premiums or other contributions, we generally pay such premiums or other contributions for the benefit of each NEO.
Executive Perquisites
Our executive compensation program is relatively free of perquisites, and the Committee views our limited executive perquisites as reasonable and very limited compared to our peer group companies. To reinforce this position, as explained in more detail below, the Committee has in past years adopted formal policies regarding personal use of our leased aircraft and reimbursement for tax planning services for senior officers. Most recently, as described below, the Committee adopted a policy prohibiting any future compensation, severance or employment related agreement from providing for a gross up payment to cover taxes triggered by a change in control.
Aircraft Policy.    Under our aircraft policy, our CEO is permitted to use our leased aircraft for personal use so long as the incremental cost to Staples is treated as compensation income to our CEO. Subject to prior approval by our CEO and similar compensation treatment, other NEOs may also use our leased aircraft for personal use. There was no personal use of our leased aircraft during our 2011 fiscal year.
Tax Services Reimbursement Program.    We reimburse each NEO, other than our CEO, up to $5,000 each year for tax, estate or financial planning services or advice from a pre-approved list of service providers that must not include our outside auditors. Our CEO is reimbursed up to $50,000 each year for these services. The Committee annually reviews the amounts paid under this policy for compliance. The reimbursements are not grossed up for taxes.
Policy against reimbursement of excise tax on change in control payments.    In March 2011, the Committee adopted a policy that, unless required by law, prohibits Staples from entering into any future compensation, severance or employment related agreement that provides for a gross up payment to cover taxes triggered by a change in control, including taxes payable under Section 280G of the U.S. Internal Revenue Code. Under the terms of Mr. Sargent's long standing severance benefits agreement, we would reimburse Mr. Sargent for any excise tax due under Section 280G of the U.S. Internal Revenue Code incurred in connection with a termination without cause or resignation for good reason following a change in control of Staples. Mr. Sargent is the only executive with this benefit.
The Committee's Processes
The Committee has established a number of processes to help ensure that our executive compensation program meets the objectives, and is consistent with the pay philosophy, described at the beginning of this CD&A.
Independent Compensation Consultant
Our Committee charter authorizes the Committee to engage independent legal and other advisors and consultants as it deems necessary or appropriate to carry out its responsibilities and prohibits the Committee's compensation consultants from serving as Staples' regular advisors and consultants. Accordingly, in our 2011 fiscal year, the Committee continued to use, pursuant to a written agreement, Exequity LLP as an independent advisor reporting to the Committee to advise on and assist with executive compensation matters. Under the terms of Exequity's agreement, Exequity is responsible for, among other matters:
•
Reviewing total compensation strategy and pay levels for executives.
•
Performing competitive analyses of outside board member compensation.
•
Examining all aspects of executive compensation programs to ensure that they support the business strategy.

33


•
Preparing for and attending selected Committee and Board meetings.
•
Supporting the Committee in staying current on the latest legal, regulatory and other industry considerations affecting executive compensation and benefit programs.
•
Providing general counsel and advice to the Committee with respect to all compensation decisions pertaining to the CEO and all compensation recommendations submitted by management.
During our 2011 fiscal year, the independent consultant advised, and frequently made recommendations to, the Committee on compensation matters for all officers and directors as requested by management or the Committee, advised on and made recommendations on all matters pertaining to compensation of our CEO, and met with the Committee in executive session without the presence of management. Consistent with the terms of the written agreement and the Committee charter, Exequity has, with the knowledge and consent of the Committee, provided advice and expertise to management on matters to be presented by management to the Committee, but Exequity has not performed services for Staples that were unrelated to Committee related matters. During 2011, Exequity assisted management by performing Section 280G calculations and providing experience based executive market data related to executive and non-executive positions. Most of the data reviewed by the Committee is generated by management and reviewed and advised upon by the compensation consultant. The principal consultant from Exequity attended four of the five the Committee meetings during our 2011 fiscal year. Exequity was paid $40,330 for services rendered during 2011.
Benchmarking
In March 2011, the Committee set compensation for the NEOs based on its September 2010 review of 2007-2009 compensation, its assessment of our 2010 performance and general consideration of the totality of the data, advice and information provided by management and Exequity.
In December 2011, the Committee evaluated the competitiveness of our NEOs' compensation relative to marketplace norms and practices by analyzing current proxy statement data from our peer group. During the course of this analysis, the Committee focused on whether Staples' pay practices were aligned with performance. This analysis was intended to inform the Committee as to whether any changes to the executive compensation program were needed.
The Committee evaluated, relative to the 2010 and three year (2008-2010, CEO, CFO and Chief Operating Officer ("COO") only) proxy statement data for the peer group, the competitiveness of base salary, total cash compensation (base salary plus annual cash bonus) and TDC, with a focus on total cash compensation and TDC. The Committee then analyzed its findings in relation to Company performance as measured by one year and three year TSR, EPS, and ROIC.
TDC was reviewed in two ways. First, to provide a view of the "realizable TDC" in 2010, the value of TDC was analyzed by, at the date the data was analyzed (October 14, 2011, when our stock price was $14.87), taking the sum of the base salary, annual cash bonus paid, "in the money" value of annual stock option grants, and the value of restricted stock awards or other long term incentives. Second, to provide the value of the "as reported" overall TDC at grant, the value of TDC was analyzed by taking the sum of base salary, annual cash bonus, value of annual stock options as reported in our proxy statement, value of the restricted stock awards as reported in the proxy statement, and the value of long term incentive grants at target.
Peer Group
The Committee plans to review our peer group every three years, with the most recent comprehensive review of our peer group having been performed in June and September 2011. The peer group analysis was conducted by the Committee's independent consultant. The current peer group was analyzed using a proprietary model to compare the “fit” of each of the peer group companies to Staples' profile based on industry, company size, market valuation and performance. The composition of our peer group goes beyond just retailers and business to business competitors. The Committee compared the scores of the peer group companies to the scores of fifteen other potential peer companies that fit the profile. Based on a quantitative and qualitative assessment, the Committee decided not to make any changes to the current peer group shown below.
Amazon.com, Inc.
 
Kohl's Corporation
 
Starbucks Corp.
Best Buy Co., Inc.
 
Limited Brands, Inc.
 
Sysco Corporation
Costco Wholesale Corporation
 
Lowe's Companies, Inc.
 
Target Corporation
FedEx Corporation
 
Macy's, Inc.
 
The TJX Companies, Inc.
Gap Inc.
 
Office Depot, Inc.
 
Walgreen Co.
Home Depot, Inc.
 
OfficeMax Incorporated
 
Xerox Corporation
J.C. Penney Company, Inc.
 
Safeway Inc.
 
 


34


2010 and 2008-2010 Compensation Findings
Based on its review of the data, the Committee's key findings for the 2011 NEOs are summarized in the two tables below. Our findings for our CEO's benchmarking review are presented earlier in the Executive Summary. The first table below reflects our findings, relative to our peers, of how our CEO, CFO, North American Delivery ("NAD") and US Retail ("USR") Presidents' base salary, total cash compensation, realizable TDC and TDC as reported in our proxy statement compared, over the 2010 period, to TSR, EPS growth and ROIC percentage. The second table below presents similar information over the 2008-2010 period for our CFO, with the performance metrics being compounded growth rate in EPS and TSR, along with the three year average percent ROIC. Similar data for our CEO is displayed on page 26. The Presidents of NAD and USR were not included in the second table, and our COO is not included in either table, because of insufficient comparable data. In the tables below, EPS is adjusted for all years to exclude special items, such as integration and restructuring costs, retail wage and hour settlements and special tax charges.


    

35


(1)
For both of the above tables, realizable TDC is the sum of base salary, annual cash bonus paid and the realizable value of equity, which is the sum of the market value on October 14, 2011 (the date of the analysis) of restricted stock grants awarded over the relevant period and the value of stock options awarded over the relevant period as determined by subtracting the grant price from the closing price of $14.87 on October 14, 2011.
(2)
Includes the impact of special equity awards.
(3) See page 26 for CEO information.
Analysis and Conclusions
In December 2011, the Committee reviewed the 2010 and 2008-2010 compensation levels of our NEOs in view of this data and determined that overall compensation was appropriate in view of relative and absolute performance based primarily on the three year realizable TDC for the CEO and CFO. The Committee also took into consideration, in comparison to the peer data, the officers' respective roles and responsibilities within the Company and in comparison to other similarly situated executives. The Committee's key findings were:
•
Our three year performance and total cash and realizable TDC all were generally aligned and approximated the median for the CEO and CFO.
•
The three year realizable TDC is below median for the CEO, and the CFO's three year realizable TDC is at the 57th percentile, which was justified as the CFO also serves as the Company's Vice Chairman and managed several other departments and had added responsibilities that were not related to finance.
•
On an "as reported" basis, three year TDC for the CEO is below the 75th percentile.
•
For all of our NEOs, the realizable TDC is lower than the "as reported" values.
Accordingly, the Committee did not make any material changes to the compensation packages of our NEOs.
Tally Sheets/Termination Scenarios
For our NEOs, the Committee reviews all components of compensation, including salary, bonus, current vested and unvested long term incentive compensation, the current value of owned shares, and cost to us of all perquisites and benefits. In addition, the Committee periodically reviews similar information for other senior executives. The Committee also reviews the projected payout obligations under potential retirement, termination, severance, and change-in-control scenarios to fully understand the financial impact of each of these scenarios to Staples and to the executive. Documentation detailing the above components and scenarios with their respective dollar amounts was prepared by management for each of our NEOs and reviewed by the Committee in March 2011. This information was prepared based on compensation data as of the end of fiscal 2010 and assumed that the

36


various scenarios occurred at the end of fiscal 2010. Similar termination scenario information with respect to our 2011 fiscal year is presented under the heading "Potential Payments upon Termination or Change-in-Control." Based on this review and the views of the Committee's independent compensation consultant, the Committee found the total compensation for each of our NEOs under these various scenarios to be reasonable after taking into account many factors, including, but not limited to, the contributions of the executive to Staples, the financial performance of Staples, the marketplace, the particular contemplated scenario and the guidance provided by the compensation consultant.
Input from Management
Certain officers within our Human Resources department regularly attend Committee meetings to provide information and recommendations regarding our executive compensation program, including the Executive Vice President of Human Resources and Vice President of Compensation and Benefits. Among other things, these officers present our CEO's recommendations regarding any change in the base salary, bonus, equity compensation, goals related to performance based cash or equity compensation and other benefits of other senior executives, and these officers also compile other relevant data at the request of the Committee. The CEO's recommendations are based in part on the results of annual performance reviews of the other executives. The Committee is not bound by such recommendations but generally takes them into consideration before making final determinations about the compensation of such executives other than our CEO. The CEO, at the discretion of the Committee, may be invited to attend all or part of any Committee meeting to discuss compensation matters pertaining to the other executives, and in fiscal 2011, he attended three of the five meetings of the Committee. The Committee generally meets in executive sessions with its independent compensation consultant without any member of management present when discussing compensation matters pertaining to our CEO.
The Board has delegated authority to the Chairman and CEO to grant stock options, restricted stock units and restricted stock to non-executive employees out of an annual pool of 600,000 shares. No awards from the annual pool were granted by the Chairman and CEO in fiscal 2011. The annual pool is designed to be used between quarterly Committee meetings to facilitate making new hire and retention grants and to reward special accomplishments and achievements of associates. Awards from the annual pool are granted on the earlier of the first business day of the month that follows appropriate approval or two business days after the Committee's ratification of the award.
Related Policies and Considerations
Risk Assessment
In December 2011, the Committee conducted its annual risk assessment of our executive officer compensation programs. The evaluation included an analysis of the appropriateness of our peer group, compensation mix, performance metrics, performance goals and payout curves, payment timing and adjustments, equity incentives, stock ownership guidelines/trading policies, performance appraisal process and leadership/culture. In addition, the Committee reviewed the major compensation plans with regard to the number and type of associates covered, performance measures, total cost at target of each program and risk mitigators attributable to each of the programs. The risk mitigators included the balanced mix of cash and equity incentives, the mix and quality of the performance metrics, the stock ownership guidelines and an aggressive recoupment policy. The Committee also considered and reviewed the executive compensation issues raised by the participants in the Company's corporate governance outreach program and the changes made to the executive compensation program as described earlier in this CD&A. Based on its evaluation, recognizing all compensation programs are inherently risk laden, the Committee determined that the level of risk within our compensation programs was appropriate and did not encourage excessive risk taking by our executives. Accordingly, the Committee concluded that our compensation programs will not have a material adverse effect on the Company.
Recoupment Policy
We have a formal principles based recoupment policy statement and have recoupment provisions in our annual and long term cash incentive plans, our equity award agreements and severance arrangements.
Our principles based policy statement is as follows:
        We view recoupment as a risk management and asset recovery tool for dealing with certain particularly harmful or unethical behaviors such as intentional deceitful acts resulting in improper personal benefit or injury to the Company, fraud or willful misconduct that significantly contributes to a material financial restatement, violation of the Code of Ethics and breach of key associate agreements. Accordingly, in our annual bonus plans, long term incentive plans and/or agreements and severance arrangements, we provide for forfeiture and recovery of undeserved cash, equity and severance compensation from any associate that engages in such misconduct.
In connection with the Dodd-Frank Act's requirement that we implement a policy providing for the recovery of erroneously paid incentive based compensation following a required accounting restatement, we plan to revise our recoupment policy and related

37


implementing provisions soon after final rules are issued by the Securities and Exchange Commission.
Employment, Termination of Employment and Change-In-Control Agreements
We have not entered into any employment agreements with any of our NEOs. We have entered into severance benefit agreements with each of our NEOs, which are described under the heading "Potential Payments upon Termination or Change-in-Control" later in this proxy statement.
Severance benefits agreements have historically been offered to our NEOs in order to address competitive concerns when the NEOs were recruited, by providing those individuals with a fixed amount of compensation that would offset the potential risk of leaving their prior employer or foregoing other opportunities in order to join Staples. Each of our NEOs has executed a Non-Competition and Non-Solicitation Agreement and a Confidentiality Agreement that covers the two year period subsequent to termination of their employment.
Stock Ownership Guidelines and Policy Prohibiting Hedging
Prior to five years after becoming an executive officer, each executive officer must hold shares of our common stock equal in value to at least a defined multiple of his or her salary as follows:
Position
 
Ownership Level
CEO
 
5×salary
CFO or COO
 
4×salary
President, NAD
 
3×salary
President, USR
 
3×salary
Other executive officers
 
2×salary
All shares owned outright, unvested restricted stock and vested stock options are taken into consideration in determining compliance with these ownership guidelines. The value of stock options for this purpose is the excess of the market price of the underlying stock over the exercise price. Each of our NEOs met our stock ownership guidelines in our 2011 fiscal year.
Our Insider Trading Policy prohibits, among many other actions, our associates and directors from entering into derivative transactions such as puts, calls, or hedges with our stock. We also provide training and distribute quarterly reminders to our associates regarding this policy.
Tax and Accounting Implications
Under Section 162(m) of the Internal Revenue Code, certain executive compensation in excess of $1 million paid to our CEO and to our three most highly compensated officers (other than the CEO and CFO) whose compensation is required to be disclosed to our stockholders under the Securities Exchange Act of 1934, is not deductible for federal income tax purposes unless the executive compensation is awarded under a performance based plan approved by stockholders. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Committee has not adopted a policy that all compensation must be deductible. The Committee intends, to the extent practicable, to preserve deductibility under the Internal Revenue Code of compensation paid to our executive officers while maintaining compensation programs that support attraction and retention of key executives.
Cash bonuses paid under the Executive Officer Incentive Plan for our 2008 through 2012 fiscal years, which was approved by stockholders at our 2008 Annual Meeting, stock options awarded under our stock option plans, which were also approved by stockholders, long term cash awards awarded under our Long Term Cash Incentive Plan, which was approved by stockholders at our 2010 Annual Meeting, and the performance share awards granted in 2009 and 2010 are all performance based and are potentially deductible for us. Time-based restricted stock does not qualify for the performance based exception to Section 162(m), but the Committee believes that the retention benefit derived from such awards outweighs any tax benefit to us.
The compensation that we pay to our NEOs is expensed in our financial statements as required by U.S. generally accepted accounting principles. As one of many factors, the Committee considers the financial statement impact in determining the amount of, and allocation among the elements of, compensation. Stock-based compensation is accounted for as required under FASB ASC Topic 718.


38




Compensation Committee Report
The Compensation Committee of Staples' Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on this review and discussion, recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

 
 
 
 
 
Compensation Committee:
 
 
Carol Meyrowitz, Chairperson
Mary Elizabeth Burton
Robert Nakasone
Paul F. Walsh



SUMMARY COMPENSATION TABLE

The following table sets forth, at the end of our 2011 fiscal year, certain information concerning the compensation of our Chief Executive Officer, our Chief Financial Officer, and the three other most highly compensated executive officers, who we refer to collectively as the "named executive officers."

Name and Principal Position
 
Year
 
Salary ($)
 
Stock
Awards
($) (1)(2)
 
Option
Awards
($) (1)(3)
 
Non-Equity
Incentive Plan
Compensation
($) (4)
 
All Other
Compensation
($) (5)
 
Total ($)
Ronald L. Sargent
 
2011
 
1,174,035

 
2,272,908

 
3,401,201

 
1,427,996

 
584,964

 
8,861,104

Chairman & Chief Executive Officer
 
2010
 
1,145,400

 
7,692,604

 
3,401,201

 
2,448,010

 
477,978

 
15,165,193

 
2009
 
1,112,000

 
3,953,922

 
3,954,992

 
1,344,291

 
393,796

 
10,759,001

John J. Mahoney
 
2011
 
710,940

 
996,103

 
1,552,601

 
613,615

 
201,620

 
4,074,879

Vice Chairman & Chief Financial Officer*
 
2010
 
693,600

 
2,923,105

 
1,552,603

 
1,031,242

 
138,529

 
6,339,079

 
2009
 
673,400

 
1,804,905

 
1,805,368

 
488,442

 
131,901

 
4,904,016

Michael A. Miles, Jr. 
 
2011
 
710,940

 
996,103

 
1,552,601

 
613,615

 
72,785

 
3,946,044

President & Chief Operating Officer
 
2010
 
693,600

 
2,923,105

 
1,552,603

 
1,031,242

 
81,291

 
6,281,841

 
2009
 
673,400

 
1,804,905

 
1,805,368

 
488,442

 
72,899

 
4,845,014

Joseph G. Doody
 
2011
 
591,910

 
577,606

 
909,401

 
482,312

 
164,948

 
2,726,177

President, North American Delivery
 
2010
 
538,100

 
1,733,818

 
909,403

 
643,060

 
92,345

 
3,916,726

 
2009
 
522,400

 
1,057,205

 
1,057,480

 
233,615

 
89,534

 
2,960,234

Demos Parneros
 
2011
 
591,910

 
577,606

 
909,401

 
458,369

 
142,909

 
2,680,195

President, US Retail
 
2010
 
538,100

 
1,733,818

 
909,403

 
668,773

 
81,443

 
3,931,537

 
2009
 
522,400

 
1,057,205

 
1,057,480

 
433,151

 
66,152

 
3,136,388


* Effective February 1, 2012, Ms. Christine T. Komola succeeded Mr. Mahoney as Chief Financial Officer. Mr. Mahoney continues to serve as Vice Chairman.



39


(1)
The amounts shown in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, not the actual amounts paid to or realized by the named executive officers during our 2011, 2010 and 2009 fiscal years. An explanation of the vesting of restricted stock awards and option awards, as well as the methodology for payouts under the 2010 Special Performance and Retention Awards granted in 2010, is discussed in the footnotes to the Grants of Plan-Based Awards for 2011 Fiscal Year and Outstanding Equity Awards at 2011 Fiscal Year End tables below.
(2)
The fair value of these awards, which constitute restricted stock awards, is based on the market price of our common stock on the date of grant. For 2010, the amounts also include the 2010 Special Performance and Retention Awards, for which the fair value is calculated at the target share payout as of the grant date.
(3)
The fair value of each stock option award is estimated as of the date of grant using a binomial valuation model. Additional information regarding the assumptions used to estimate the fair value of all stock option awards is included in Note J in the Notes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for our 2011 fiscal year.
(4)
Includes amounts earned in fiscal 2011 under our Executive Officer Incentive Plan equal to $724,284, $292,395, $292,395, $294,142, and $270,199, for Messrs. Sargent, Mahoney, Miles, Doody, and Parneros, respectively. In connection with our Long Term Cash Incentive Plan, also includes for each of (i) the first year of the performance cycle covering fiscal years 2011, 2012 and 2013 and (ii) the second year of the performance cycle covering fiscal years 2010, 2011 and 2012, $351,856, $160,610, $160,610, $94,085 and $94,085 for Messrs. Sargent, Mahoney, Miles, Doody, and Parneros, respectively, representing amounts earned based on performance objectives determined by the Compensation Committee to be achieved at 41.4% of target. Earned amounts are not paid out until the Compensation Committee certifies achievement of the objectives and the payouts at the end of the three year performance cycle.
(5)
Includes the following items, as applicable to each named executive officer:

•
Contributions made on a matching basis pursuant to the terms of our 401(k) plan and Supplemental Executive Retirement Plan ("SERP");
•
Dividend equivalents paid on shares of restricted stock granted prior to January 2009;
•
Premiums paid under our executive life insurance and long-term disability plans, reimbursement of taxes owed with respect to such premiums, and premiums paid under our long-term care plan. In fiscal year 2011, annual premiums paid under our executive life insurance plan for Messrs. Sargent, Mahoney, Doody and Parneros were $100,000, $55,000, $50,000, and $30,000, respectively. There was no annual premium paid for Mr. Miles in 2011. Mr. Miles' life insurance coverage is in the form of Death Benefit Only, providing for Staples to pay his beneficiary upon his death. In fiscal year 2011, annual premiums paid under our long-term disability plans for Messrs. Sargent, Mahoney, Miles and Parneros were $16,836, $5,140, $3,697 and $3,569, respectively.
•
Tax preparation services; and
•
Executive physical and registry program.
The table below sets forth the dollar amounts that we paid for each applicable item listed above.
All Other Compensation
Name
 
Year
 
401(k)
 
SERP
 
Dividend
Equivalents
 
Executive
Life
Insurance
 
Long-Term
Disability
 
Long-Term
Care
 
Tax
Services
 
Physical
Ronald L. Sargent
 
2011
 
$
2,450

 
$
111,925

 
$
167,813

 
$
222,318

 
$
28,903

 
$
1,555

 
$
50,000

 
$
—

 
 
2010
 
2,450

 
99,142

 
173,654

 
121,030

 
30,147

 
1,555

 
50,000

 
—

 
 
2009
 
2,450

 
44,480

 
145,378

 
121,030

 
28,903

 
1,555

 
50,000

 
—

John J. Mahoney
 
2011
 
2,450

 
54,587

 
9,208

 
119,667

 
8,825

 
1,883

 
5,000

 
—

 
 
2010
 
2,450

 
47,012

 
15,507

 
59,039

 
7,638

 
1,883

 
5,000

 
—

 
 
2009
 
2,450

 
26,936

 
17,633

 
69,174

 
8,825

 
1,883

 
5,000

 
—

Michael A. Miles, Jr. 
 
2011
 
2,450

 
54,587

 
3,195

 
—

 
6,347

 
1,206

 
5,000

 
—

 
 
2010
 
2,450

 
47,012

 
16,652

 
2,499

 
6,472

 
1,206

 
5,000

 
—

 
 
2009
 
2,450

 
26,936

 
25,819

 
3,264

 
6,348

 
1,206

 
3,300

 
3,576

Joseph G. Doody
 
2011
 
2,450

 
39,971

 
5,252

 
106,850

 
—

 
1,796

 
5,000

 
3,629

 
 
2010
 
2,450

 
30,659

 
9,035

 
39,776

 
—

 
1,796

 
5,000

 
3,629

 
 
2009
 
2,450

 
20,896

 
11,061

 
46,481

 
—

 
1,796

 
5,000

 
1,850

Demos Parneros
 
2011
 
2,450

 
40,999

 
1,871

 
85,255

 
6,128

 
1,206

 
5,000

 
—

 
 
2010
 
2,450

 
38,641

 
10,145

 
17,749

 
6,252

 
1,206

 
5,000

 
—

 
 
2009
 
2,450

 
20,896

 
16,221

 
15,149

 
5,230

 
1,206

 
5,000

 
—



40



GRANTS OF PLAN-BASED AWARDS FOR 2011 FISCAL YEAR

The following table sets forth summary information regarding grants of plan-based awards made to the named executive officers for our 2011 fiscal year.
 
 
 
 
 
 
Estimated Possible
Payouts Under Non-Equity
Incentive Plan Awards*
 
All Other
Stock Awards:
 
All Other
Option Awards:
 
 
 
 
Name
 
Grant
Date
 
Committee
Approval
Date
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Number of
Shares of
Stock or
Units
(#) (1)*
 
Number of
Securities
Underlying
Options
(#) (2)*
 
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant Date
Fair Value
of Stock
and Option
Awards (3)
Ronald L. Sargent
 
 
 
(4
)
 
176,105

 
1,761,053

 
3,522,105

 
 

 
 

 
 

 
 

 
 
 
 
(5
)
 
255,090

 
2,550,900

 
5,101,800

 
 

 
 

 
 

 
 

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
142,681

 
 

 
 

 
2,272,908

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
 

 
863,012

 
15.93

 
3,401,201

John J. Mahoney
 
 
 
(4
)
 
71,094

 
710,940

 
1,421,880

 
 

 
 

 
 

 
 

 
 
 
 
(5
)
 
116,450

 
1,164,500

 
2,329,000

 
 

 
 

 
 

 
 

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
62,530

 
 

 
 

 
996,103

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
 

 
393,953

 
15.93

 
1,552,601

Michael A. Miles, Jr. 
 
 
 
(4
)
 
71,094

 
710,940

 
1,421,880

 
 

 
 

 
 

 
 

 
 
 
 
(5
)
 
116,450

 
1,164,500

 
2,329,000

 
 

 
 

 
 

 
 

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
62,530

 
 

 
 

 
996,103

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
 

 
393,953

 
15.93

 
1,552,601

Joseph G. Doody
 
 
 
(4
)
 
47,353

 
473,528

 
947,056

 
 

 
 

 
 

 
 

 
 
 
 
(5
)
 
68,210

 
682,100

 
1,364,200

 
 

 
 

 
 

 
 

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
36,259

 
 

 
 

 
577,606

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
 

 
230,749

 
15.93

 
909,401

Demos Parneros
 
 
 
(4
)
 
47,353

 
473,528

 
947,056

 
 

 
 

 
 

 
 

 
 
 
 
(5
)
 
68,210

 
682,100

 
1,364,200

 
 

 
 

 
 

 
 

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
36,259

 
 

 
 

 
577,606

 
 
7/1/2011
 
6/6/2011

 
 

 
 

 
 

 
 

 
230,749

 
15.93

 
909,401

*
Equity awards were granted pursuant to our Amended and Restated 2004 Stock Incentive Plan. Non-equity awards were granted pursuant to our Executive Officer Incentive Plan and our Long Term Cash Incentive Plan.

(1)
Unless otherwise noted, restricted stock vests 50% on the second anniversary of the date of grant and 50% on the third anniversary of the date of grant. The vesting of these restricted stock awards is accelerated in the circumstances described under the caption "Accelerated Vesting of Awards" below. For awards granted in 2011, no dividends will be paid on shares of unvested restricted stock. Named executive officers are not subject to additional holding periods after equity awards vest.
(2)
Stock options vest 25% per year after the date of grant. The exercisability of the options is accelerated in the circumstances described under the caption "Accelerated Vesting of Awards" below. Named executive officers are not subject to additional holding periods after such equity awards vest. The stock options expire on July 1, 2021, ten years from the date of grant.
(3)
The grant date fair value of the restricted stock granted on July 1, 2011 is $15.93 per share. The grant date fair value of the stock options granted on July 1, 2011 is $3.94 per share.
(4)
In March 2011, the Compensation Committee established the performance objectives for fiscal year 2011 under the Executive Officer Incentive Plan, as well as the threshold, target and maximum payment levels. Based on the level of performance objectives achieved, the Compensation Committee approved in March 2012 payments of $724,284, $292,395, $292,395, $294,142, and $270,199, for Messrs. Sargent, Mahoney, Miles, Doody, and Parneros, respectively.
(5)
The amounts shown reflect potential cash payments pursuant to awards under our Long Term Cash Incentive Plan granted on July 1, 2011 for the three year performance cycle covering fiscal years 2011, 2012, and 2013. Actual cash payouts will be determined at the end of the performance cycle based on the extent to which the performance objectives for each of the three fiscal years are achieved. Our Compensation Committee will certify the results and determine the amount of the payment to be made to a participant by adding the amounts earned in each plan year of the performance cycle. The target cash award remains fixed for the balance of the performance cycle. One-third of the target award is applied as a target amount for each of the fiscal years within the performance cycle. For each of the three performance measures, the threshold payout is 25% of the annual target and maximum payout is 200% of overall target.

41


Performance below a threshold level for each measure results in no payout for that measure, with no payout whatsoever if the minimum earnings per share threshold (weighted at 40%) is not achieved. The Compensation Committee reviewed the results for 2011 and determined, that, in the aggregate, the performance objectives had been achieved at 41.4% of target. The fiscal year 2012 plan year of this award is contingent on stockholder approval of the Amended and Restated Long Term Cash Incentive Plan, as discussed in the "Approval of our Amended and Restated Long Term Cash Incentive Plan" section of this proxy statement.

Accelerated Vesting of Awards
Equity Awards.    Under certain circumstances the vesting or payout of restricted stock, performance share awards and stock options may be accelerated as described below.
•
Rule of 65.  If the named executive officer retires or resigns and the requirements of the "Rule of 65" have been satisfied, then all restricted stock and stock option awards vest in full. Once the named executive officer meets the age and service requirements of our Rule of 65, a number of unvested shares of restricted stock that is sufficient to satisfy any tax obligations triggered by such event will vest. For awards granted after June 30, 2004, but prior to fiscal year 2010, the Rule of 65 is met if the sum of the named executive officer's age (minimum age of 55) and years of service equals or exceeds 65. Effective the first day of fiscal year 2010, we changed the Rule of 65 in all restricted stock awards for associates in North America and replaced it with a purely age 65 based retirement provision.
•
Death or Disability.  All restricted stock, performance shares and stock options vest in full upon the named executive officer's death or disability. Any payouts under any outstanding performance share awards will be based on actual results at the end of the applicable performance period as if the named executive officer were employed throughout such period.
•
Change-in-Control.  Under our standard form of non-qualified stock option agreement, a change-in-control would result in a partial vesting acceleration of outstanding options and a termination without cause (or resignation for good reason) within one year after a change-in-control would result in acceleration of vesting of all outstanding options. Under our standard form of restricted stock award agreement, a change-in-control would result in acceleration of vesting of all outstanding restricted shares if (1) the change-in-control results in the named executive officer not being offered employment by the surviving corporation under certain conditions or (2) within one year following the change-in-control, the named executive officer's employment is terminated without cause (or the officer resigns for good reason). Under our performance share award agreements, a change-in-control would entitle the named executive officer at the end of the performance period to the greater of the number of shares equal to target or the number of shares earned based on actual achievement of the performance objectives if (a) the named executive officer does not accept employment with the surviving corporation upon the change-in-control or (b) within one year following the change-in-control, the named executive officer's employment is terminated without cause (or the officer resigns for good reason).
•
Termination of employment by Staples.  The 2010 Special Performance and Retention Share Award agreements provide that, if the named executive officer is terminated by Staples other than for "cause" (as defined in the award agreement), the named executive officer is eligible for a prorated award based on completed years while employed during the performance cycle, provided that the prorated awards will only be paid out if the Compensation Committee certifies achievement of the objectives and the payouts at the end of the three year performance cycle. If the named executive officer is terminated by Staples for "cause", then he is not eligible for any award payment.
Cash Awards.    Payments of awards under the Executive Officer Incentive Plan and the Long Term Cash Incentive Plan also may be accelerated as described below.
•
Rule of 65.  If the named executive officer terminates his employment before the end of the performance period and if the sum of the named executive officer's age (minimum age of 55) and years of service equals or exceeds 65, then the named executive officer is eligible for (i) a prorated award under the Executive Officer Incentive Plan based on the number of days the named executive officer was employed during the plan year; and (ii) a prorated award under the Long Term Cash Incentive Plan based on the number of days employed during the particular year of the performance cycle, if the performance goals and target award have been established, and any completed years of the performance cycle. In each case of eligibility for a prorated award, will only be paid out if the Compensation Committee certifies achievement of the objectives and the payouts at the end of the three year performance cycle.
•
Death.  Upon the named executive officer's death before the end of any plan year or performance cycle, awards will be paid at 100% of the target award, regardless of the amount that would have been earned based upon achievement of the performance goals.
•
Disability.  If the named executive officer's employment is terminated due to disability before the end of any plan year or performance cycle, then the named executive officer is eligible for a prorated award based on the number of days employed during the plan year or performance cycle, as applicable. In each case of eligibility for a prorated award, such prorated award will only be paid out if the Compensation Committee certifies achievement of the objectives and the payouts at the end of the three year performance cycle.
•
Change-in-Control.  Under our Long Term Cash Incentive Plan, a change-in-control would entitle the named executive

42


officer at the end of the performance cycle to an award payment equal to the greater of 100% of the target award or the amount earned based on actual achievement of the performance objectives if (1) the named executive officer does not accept employment by the surviving corporation upon the change of control or (2) within one year following the change-in-control, the named executive officer's employment is terminated without cause (or the officer resigns for good reason).
•
Termination of employment.  Under the Long Term Cash Incentive Plan, named executive officers that terminate employment before the end of the performance cycle, but have not met the requirements of the Rule of 65, are eligible for a prorated award based on completed plan years. If the named executive officer is terminated by Staples other than for "cause" (as defined in the Long Term Cash Incentive Plan), the named executive officer is eligible for a prorated award based on the number of days employed during the particular year of the performance cycle, if the performance goals and target award have been established prior to termination, and any completed years of the performance cycle. Prorated awards will only be paid out if the Compensation Committee certifies achievement of the objectives and the payouts at the end of the three year performance cycle. If the named executive officer is terminated by Staples for "cause", then he is not eligible for any award payment.


OUTSTANDING EQUITY AWARDS AT 2011 FISCAL YEAR END

The following table sets forth summary information regarding the outstanding equity awards held by each of the named executive officers as of the end of our 2011 fiscal year.

43


 
 
 
 
Option Awards
 
Stock Awards
Name
 
Grant Date/
Performance
Share Period
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable (1)
 
Option
Exercise
Price ($)
 
Option
Expiration
Date (2)
 
Number of
Shares or
Units of Stock
That Have Not
Vested (#) (3)
 
 
Market
Value of
Shares or
Units of Stock
That Have
Not Vested
($) (4)
 
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have Not
Vested (#) (5)
 
 
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That Have Not
Vested ($) (4)
Ronald L. Sargent
 
7/1/2011
 
—

 
863,012

 
15.93

 
7/1/2021
 
142,681

 
 
2,284,323

 
 
 
 
 
 
7/1/2010
 
161,395

 
484,188

 
19.27

 
7/1/2020
 
117,951

 
 
1,888,396

 
 

 
 
 

 
 
7/1/2009
 
324,712

 
324,712

 
20.12

 
7/1/2019
 
22,894

 
 
366,533

 
 

 
 
 

 
 
7/1/2008
 
452,949

 
150,983

 
24.3

 
7/1/2018
 
 
 
 
 
 
 

 
 
 

 
 
7/2/2007
 
557,653

 
 
 
24.42

 
7/2/2017
 
 

 
 
 

 
 

 
 
 

 
 
3/8/2007
 
 

 
 

 
 

 
 
 
375,000

(9
)
 
6,003,750

 
 

 
 
 

 
 
7/3/2006
 
431,250

 
 

 
24.5

 
7/3/2016
 
 

 
 
 

 
 

 
 
 

 
 
6/30/2005
 
525,000

 
 

 
21.29

 
6/30/2015
 
 

 
 
 

 
 

 
 
 

 
 
7/1/2004
 
525,000

 
 

 
19.12

 
7/1/2014
 
 

 
 
 

 
 

 
 
 

 
 
7/1/2003
 
525,000

 
 

 
12.88

 
7/31/2013
 
 

 
 
 

 
 

 
 
 

 
 
8/1/2002
 
525,000

 
 

 
10.6266

 
8/31/2012
 
 

 
 
 

 
 

 
 
 

 
 
3/1/2002
 
37,500

 
 

 
13.46

 
3/31/2012
 
 

 
 
 

 
 

 
 
 

 
 
1/30/2010 –
2/2/2013
 
 

 
 

 
 

 
 
 
 

 
 
 

 
281,250

(7
)
 
4,502,813

 
 
1/31/2009 –
1/30/2010
 
 

 
 

 
 

 
 
 
87,883

(6
)
 
1,407,007

 
 

 
 
 

 
 
2/3/2007 –
1/28/2012