DEF 14A 1 staples3185121-def14a.htm DEFINITIVE PROXY STATEMENT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant Filed by a Party other than the Registrant      

CHECK THE APPROPRIATE BOX:
  Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
  Definitive Additional Materials
Soliciting Material Under Rule 14a-12

Staples, Inc.

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS


Framingham, Massachusetts
April 20, 2017

Dear Shareholders,

The Annual Meeting of Shareholders of Staples, Inc. will be held at the Teaneck Marriott at Glenpointe, 100 Frank W. Burr Boulevard, Teaneck, New Jersey, on June 12, 2017 at 4:00 p.m., local time, to consider and act upon the following matters:

(1) To elect ten members of the Board of Directors to hold office until the 2018 Annual Meeting of Shareholders or until their respective successors have been elected or appointed.
 
(2) To approve, on an advisory basis, named executive officer compensation.
 
(3) To hold an advisory vote on the frequency of future executive compensation advisory votes.
 
(4) To approve the Company’s Amended and Restated Executive Officer Incentive Plan.
 
(5) To ratify the selection by the Audit and Finance Committee of Ernst & Young LLP as Staples’ independent registered public accounting firm for the current fiscal year.
 
(6) To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Shareholders of record at the close of business on April 17, 2017 will be entitled to notice of and to vote at the meeting or any adjournment or postponement thereof.

By order of the Board of Directors


Michael T. Williams

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

For the Annual Meeting of Shareholders on June 12, 2017

This proxy statement and our 2016 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 card for our 2017 Annual Meeting and the 2016 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.

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VOTING ROADMAP

YOUR VOTE IS VERY IMPORTANT

All shareholders are cordially invited to attend the 2017 Annual Meeting in person.

Admission

A government-issued photo identification such as a driver’s license, state-issued ID card or passport, will be required to attend in person. Please note that if you are a beneficial owner, you will also 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.

Voting Matters

Item       Board
Recommendation
      Further
Information
(page)
(1) To elect ten members of the Board of Directors to hold office until the 2018 Annual Meeting of Shareholders or until their respective successors have been elected or appointed. FOR each
director nominee
18
(2) To approve, on an advisory basis, named executive officer compensation. FOR 56
(3) To hold an advisory vote on the frequency of future executive compensation advisory votes. Frequency of
1 YEAR
56
(4) To approve the Company’s Amended and Restated Executive Officer Incentive Plan. FOR 57
(5) To ratify the selection by the Audit and Finance Committee of Ernst & Young LLP as Staples’ independent registered public accounting firm for the current fiscal year. FOR 60

Meeting Information

Date       Time
June 12, 2017   4:00 p.m., local time
 
Location
Teaneck Marriott at Glenpointe 100 Frank W. Burr Boulevard, Teaneck, New Jersey

How To Vote

Advance Voting Methods

       

Internet

www.proxyvote.com

 

Toll-free Telephone

Mail

1-800-690-6903

Follow instructions on your voting form


Our Annual Meeting Website

Staples 2017 Annual Meeting materials are available in one place at www.staplesannualmeeting.com. There, you can download electronic copies of our Proxy Statement and 2016 Annual Report, and use the link to vote.

Scan this QR code with your mobile device to access our 2017 Annual Meeting website.


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PROXY STATEMENT SUMMARY


This summary highlights certain information that is covered elsewhere in the Proxy Statement. You are encouraged to read our complete Proxy Statement before voting.

DIRECTOR NOMINEE HIGHLIGHTS

Name, Primary Occupation       Age       Independent       Director
since
      Other Public
Company Boards
Drew Faust
President, Harvard University
69 YES 2012
Curtis Feeny
Managing Director, Voyager Capital
59 YES 2016 1
Paul-Henri Ferrand
Vice President, Google, Inc.
53 YES 2015
Shira Goodman
CEO, Staples, Inc.
56 NO 2016 1
Deborah Henretta
Senior Advisor, SSA & Company and General Assembly
55 YES 2016 3
Kunal Kamlani
Pr
esident, ESL Investments, Inc.
44 YES 2015 1
John Lundgren
Former Chairman and CEO, Stanley Black & Decker, Inc.
65 YES 2016 1
Robert Sulentic
President and CEO, CBRE Group, Inc.
60 YES 2007 1
Vijay Vishwanath
Partner, Bain & Company
57 YES 2007
Paul Walsh
Senior Managing Director, Calera Capital
67 YES 1990

Developing an Effective Board

The Staples Board of Directors (the “Board”) has strong governance practices and is dedicated to continuous improvement. We seek to achieve an effective balance of relevant skills, experience, qualifications and personal qualities in Board composition, and have significantly refreshed our Board in the past two years. Our priority is to bring areas of expertise together in the Staples boardroom for the benefit of Staples and the creation of sustainable long-term shareholder value. We seek to ensure that the Board and its committees are high-functioning, including through annual rigorous Board and committee evaluations.

           
     

Relevant Skills

Our Board nominees bring together extensive experience in e-commerce/marketing, M&A / integrations, retail, international operations, strategy and other areas. See page 18 for an overview of the Board’s experience as a whole, and individual director biographies beginning on page 19, to learn more about our nominees’ respective skills and qualifications.

     

Director Tenure Balance

     

Experience

Our Board nominees have broad leadership experience serving in senior roles in corporations, academia and on public and private boards.

Personal Qualities

Our Board nominees exhibit high integrity, self-awareness, respect, independence of mind, and have the capacity to function effectively in challenging situations.

Board Independence

  

Diversity

Our Board nominees bring diversity in its broadest sense – not merely diversity of background and skills, but also diversity of age, gender, and ethnicity to offer and understand multiple perspectives.

         

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PROXY STATEMENT SUMMARY

BOARD AND CORPORATE GOVERNANCE DEVELOPMENTS

The Staples Board is committed to highly effective corporate governance that is responsive to shareholders, and on seeing to it that the Company delivers on its strategy.

Shareholder Outreach

For many years, Staples has conducted a formal shareholder outreach program to listen to investor perspectives on corporate governance, our executive compensation program, sustainability and other matters. Twice yearly, we formally solicit feedback from institutional investors including asset managers, public and labor union pension funds, and social responsibility investors. In 2016, we engaged in constructive dialogues over the course of the year with shareholders representing approximately 40% of our shares outstanding, and with proxy advisory firms, with direct involvement from two of our directors.

Timeline of Selected Corporate Governance Events

2017 >          

Threshold to call special shareholder meeting reduced from 25% to 15% of outstanding shares

Elected an independent Chairman of the Board, in line with our Independent Chair Policy

2016 >

Executive Compensation – In response to shareholder feedback, changed the award structure for our performance share awards to three-year cumulative goals instead of annual performance goals over a three-year period. In connection with this change, adjusted the long-term incentive pay mix to be 2/3 performance share awards, and 1/3 restricted stock unit awards that vest over three years, to bring us in line with market practice and facilitate recruitment and retention

2015 >

Implemented proxy access at 3%/3 years, through a by-law amendment to allow shareholder director nominations

Adopted a formal severance policy to limit executive severance to 2.99 times base salary plus target annual cash incentive award. The policy does not include equity awards

Adopted Independent Chair Policy to require that we have an independent Chair of the Board, whenever possible

2013 >

Restructured our executive compensation program to increase performance-based elements in response to shareholder feedback on compensation and to strengthen alignment with reinvention strategy

2012 >

Shareholder right to act by written consent implemented

Enhanced transparency on political contributions and government activities

2009 >

Shareholder right to call special meetings implemented with 25% threshold

2008 >

Adopted a majority vote standard for the election of directors with a plurality carve-out for contested elections

Eliminated supermajority vote requirement for mergers and other matters from company charter

2007 >

Declassified board to establish annual elections of all directors

Additional corporate governance features are highlighted beginning on page 8 of this proxy statement.

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PROXY STATEMENT SUMMARY

CORPORATE RESPONSIBILITY HIGHLIGHTS

Staples recognizes the close connection between our success and our ability to make a positive impact on society, our associates and the planet. Giving back to communities, embracing a culture of diversity and inclusion, sustaining the environment, and practicing sound ethics aren’t just the right thing to do. These efforts help make us an employer and neighbor of choice, differentiate our brand, and support profitable and responsible growth. For more information, visit www.staples.com/responsibility.

    Community             Diversity & Inclusion    
● Enabling associates globally to direct funds to organizations they care about through the 2 Million & Change grant program
● Helping communities impacted by disasters, including support through Staples Emergency Education Fund with Save the Children
● Supporting associate participation in community volunteer activities
● Inspiring customers to donate through cause marketing and disaster relief campaigns
● Focusing on building an inclusive and diverse, high-performing workforce that reflects all segments of our society
● Emphasizing a culture that empowers associates and encourages collaboration, flexibility and fairness
● Leveraging Associate Resource Groups to promote our Employer of Choice strategy, create awareness and increase business value
● Increasing the number of diverse companies we work with and expanding our product portfolio from diverse businesses
 

Environment

   

Ethics

 
● Aligning our efforts with global sustainability strategy and 20/20 performance goals to benefit the environment, our customers and our business
● Offering customers eco-responsible products and providing free recycling and other environmental services
● Improving operational environmental footprint by increasing energy efficiency and renewable energy use, and eliminating waste
 
● Supporting our culture of high integrity by continually promoting our Code of Conduct and Ethics and Compliance Program
● Training associates to ensure familiarity with relevant laws and company policies
● Auditing suppliers of own brand products for adherence to our Supplier Code of Conduct to support ethical sourcing practices

EXECUTIVE COMPENSATION

In May 2016, we launched our Staples 20/20 strategic plan with four key priorities to transform Staples and get our company back to sustainable sales and earnings growth. The Compensation Committee of the Board sets rigorous financial metrics tied directly to the success of our strategy and the creation of long-term shareholder value.

For more information about our strategy and 2016 highlights, see “Business Overview” in the “CD&A” section of this proxy statement.

We are committed to an executive compensation program that is consistent with current best practices:

Things We Do Things We Don’t Do
● Strong alignment of pay and performance
● 89% of CEO compensation is “at risk”
● Both short- and long-term programs include performance goals
● Rigorous, objective financial metrics on annual and performance-based long-term awards that are closely tied to business strategy
● Cumulative three-year goals in the long-term incentive program
● 3-year relative TSR modifier in performance-based long–term awards
● Strong stock ownership guidelines (5x salary for CEO, up to 4x for other NEOs)
● Double trigger change in control provisions in severance agreements
● Policy requiring shareholder approval for executive severance in excess of certain limits
● Clawback policy
● Anti-hedging policy
● No employment agreements
● No excise tax gross-ups in executive severance agreements
● No pension plan
● No private plane
● Minimal executive perquisites

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TABLE OF CONTENTS


          page
CORPORATE GOVERNANCE 8
Highlights 8
Director Independence 9
Certain Relationships and Related Party Transactions 10
Board Leadership Structure 11
Meetings and Committees of Our Board 11
Risk Oversight by the Board of Directors 14
Strategy 15
Diversity 15
Sustainability 16
Evaluation 16
Director Candidates 16
Communicating with Our Board 17
 
ELECTION OF DIRECTORS (ITEM 1 ON THE PROXY CARD) 18
Director Biographies 19
 
DIRECTOR COMPENSATION 24
2016 Compensation 24
Outstanding Director Awards 26
 
EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS 27
Executive Summary 27
2016 Compensation Program 34
Compensation Process 40
Other Matters 42
Compensation Committee Report 44
Executive Compensation Tables 45
Equity Compensation Plan Information at 2016 Fiscal Year End 55
Compensation Committee Interlocks and Insider Participation 55
Section 16(a) Beneficial Ownership Reporting Compliance 55
 
APPROVAL, ON AN ADVISORY BASIS, OF NAMED EXECUTIVE OFFICER COMPENSATION (ITEM 2 ON THE PROXY CARD) 56
 
ADVISORY VOTE ON THE FREQUENCY OF FUTURE EXECUTIVE COMPENSATION ADVISORY VOTES (ITEM 3 ON THE PROXY CARD) 56
 
APPROVAL OF AMENDED AND RESTATED EXECUTIVE OFFICER INCENTIVE PLAN (ITEM 4 ON THE PROXY CARD) 57
 
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 5 ON THE PROXY CARD) 60
Report of the Audit and Finance Committee of the Board of Directors 60
Independent Registered Public Accounting Firm’s Fees 61
 
BENEFICIAL OWNERSHIP OF COMMON STOCK 62
 
INFORMATION ABOUT THE ANNUAL MEETING, VOTING AND OTHER SHAREHOLDERS MATTERS 64
 
APPENDIX A: AMENDED AND RESTATED EXECUTIVE OFFICER INCENTIVE PLAN A-1

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STAPLES, INC.
500 Staples Drive
Framingham, Massachusetts 01702

PROXY STATEMENT
For the Annual Meeting of Shareholders on June 12, 2017

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (“Board”) of Staples, Inc. (“we,” “us,” “Staples” or the “Company”) for use at the Annual Meeting of Shareholders (“2017 Annual Meeting” or the “Annual Meeting”) to be held on June 12, 2017 beginning at 4:00 p.m., local time, at the Teaneck Marriott at Glenpointe, 100 Frank W. Burr Boulevard, Teaneck, New Jersey and at any adjournment or postponement of that meeting. On or about April 28, 2017, we are mailing these proxy materials together with an annual report, consisting of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (the “2016 fiscal year”) and other information required by the rules of the Securities and Exchange Commission (the “2016 Annual Report”).

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CORPORATE GOVERNANCE


HIGHLIGHTS

We are committed to leading corporate governance practices that are in the best interests of our business and all of our shareholders. For example, we have:

Developed a successful shareholder outreach program.
 

Demonstrated a consistent track record of listening and responding thoughtfully to feedback.
 

Pro-actively adopted many important governance initiatives, such as majority voting, an enhanced political contributions policy, a compensation recoupment policy and our commitments to ethics, community and giving, the environment and diversity and inclusion.


Shareholder Outreach Program

We have conducted a formal corporate governance outreach program for many years. We solicit feedback from our institutional investors regularly, including from asset managers, public and labor union pension funds and allied organizations and social responsibility investors. We seek to hear perspectives on various governance matters, our executive compensation program, sustainability and other matters. Consistent with prior practice, during the last year, we engaged in constructive dialogues with shareholders representing approximately 40% of our outstanding shares. The Chair of our Nominating and Corporate Governance Committee and Chair of our Compensation Committee participated in the outreach program and heard directly from some of our shareholders and proxy advisory firms. We share the feedback we receive with our Nominating and Corporate Governance Committee and Compensation Committee, as well as with the entire Board.

Recent Corporate Governance Enhancements

In response to feedback from our shareholders, our Board made the following corporate governance enhancements over the last year:

Reduced Threshold to Call Special Shareholder Meeting – At our 2016 Annual Meeting of Shareholders, a majority of our shareholders voted for a shareholder proposal to reduce the percentage of outstanding stock required for shareholders to call a special meeting from 25% to 15%. We reached out to our shareholders in the fall of 2016 to hear their feedback on the proposal. In response to the shareholder vote and related feedback, we amended our by-laws to reduce the threshold from 25% to 15%.

Elected Independent Chair of the Board – We have a policy to require that we have an independent Chair of the Board whenever possible, which would apply once Ronald Sargent, our former Chairman and CEO, retired or no longer served as Chairman of the Board. Mr. Sargent left at the end of the 2016 fiscal year and our Board elected Robert Sulentic, our then-serving Independent Lead Director, as Independent Chairman of the Board.

Executive Compensation – We received positive shareholder feedback in 2016 for our recent enhancements to our executive compensation program. In particular in 2016:

We implemented 3-year cumulative goals in our long-term incentive program in direct response to shareholder feedback. At the same time we introduced restricted stock units vesting over three years as 1/3 of our long-term incentive pay mix to bring us in line with market practice and facilitate recruitment and retention.
 

We set our new CEO’s total target compensation at the 25th percentile of our peer group companies, with the long-term incentive arrangement to be 100% performance-based.


For more information about shareholder outreach with respect to compensation matters, see the “CD&A” section of this proxy statement.

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CORPORATE GOVERNANCE

You can learn more about our current corporate governance program and review our Corporate Governance Guidelines (“Guidelines”), committee charters, Corporate Political Contributions and Government Activity Policy Statement, Code of Conduct and other significant policies at http://investor. staples.com/phoenix.zhtml?c=96244&p=irol-govhighlights. The information at such website and the other websites mentioned in this proxy statement is not incorporated by reference herein. We also recognize that corporate governance is not static, and we continue to evaluate our policies and practices to meet ongoing developments in this area. Some highlights of our corporate governance policies and practices are set forth below.

  
  

Shareholder Rights

           ●  Proxy Access (3%/3 years)   
           ●  Annual election of directors
●  Majority voting in uncontested director elections
●  No rights plan without shareholder approval
●  No supermajority voting requirements
●  Shareholders can call special meetings (15% ownership threshold)
●  Shareholders can act by majority written consent

Board Features

●  All independent directors (other than CEO)
●  Diverse board
●  Independent Board Chair, in line with Independent Chair policy
●  Annual CEO evaluation by independent directors
●  Robust annual board self-evaluation and succession planning process

Other Features

●  Transparent reporting of political contributions and lobbying and trade association activities
●  Recognized leader in sustainability matters
●  Responsible ethical sourcing program
  

DIRECTOR INDEPENDENCE

Our Board of Directors, in consultation with our Nominating and Corporate Governance Committee, determines which of our directors are independent. Our Guidelines provide that directors are “independent” if they (1) meet the definition of “independent director” 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 their responsibilities. Our Nominating and Corporate Governance Committee periodically reviews the independence standards in our Guidelines and recommends changes as appropriate.

In accordance with our Guidelines, our Board has determined that all of our directors and nominees are independent except Ms. Goodman, who is our CEO. In determining independence, our Board considered all the available relevant facts and circumstances, including the following:

Neither we nor any subsidiary has employed or otherwise compensated the independent directors 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 during the past three years.
 

None of the independent directors 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 or their family members during the past three years.
 

No family relationships exist between any of our directors or executive officers.
 

During the past three years, none of our directors or executive officers has had a material direct or indirect business relationship with us or engaged in a “related party transaction” as described below.


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CORPORATE GOVERNANCE

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our written Code of Conduct 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 Guidelines and the written materials that we use to educate associates about conflicts of interest. 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 for review and determination. In the event there is a significant conflict, the director should 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 Nominating and Corporate Governance Committee. The chair of the Nominating and Corporate Governance 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 Conduct, 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.

The Nominating and Corporate Governance Committee is responsible for reviewing, approving or ratifying any related party transactions. We define “related party transactions” as transactions with a value of more than $120,000 and in which (i) Staples and any of our directors, director nominees, executive officers, 5% shareholders and their immediate family members are participants, and (ii) such participants 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 Nominating and Corporate Governance 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 an independent director; and any other factors the Nominating and Corporate Governance Committee deems relevant. If a transaction is deemed to be a related party transaction, the procedures for approval or ratification of such a transaction are the same as for actual or potential conflicts of interests involving directors and are set forth in the Guidelines.

  
   For fiscal year 2016:
 
  
●  We had no related-party transactions.
 
●  There were no transactions that affected our directors’ independence.
 
●  There were no violations or waivers of our Code of Conduct with respect to our directors or executive officers.
  

In an effort to provide greater transparency to our shareholders, we provide the following additional information about sales of office supply products or related services, such as copying, branding of promotional products or technology services, to companies or organizations affiliated with our current independent directors. All transactions reported with director-affiliated companies were in the ordinary course of business, without involvement of the director and on arm’s length business terms. Below is a list of companies and institutions with which our current independent directors were affiliated in fiscal year 2016 and from which we received greater than $120,000 for providing our supplies or services:

Bain & Company
 

Briad Group 
 

BritishAmerican Business
 

Bryn Mawr College
 

CBRE Group, Inc.
 

Corning, Inc.
 

F.C. Stone
 

Google, Inc.
 

Joslin Diabetes Center
 

Meritage Homes
 

Schnitzer Steel Industries
 

Sears Holdings Corporation
 

TJX Companies, Inc.
 

University of Washington


The amounts received by us in fiscal year 2016 for the sale of office supplies and related services to these companies range from approximately $127,000 to approximately $24.9 million and the median amount received from such sales was approximately $590,000. In each case, the amount was immaterial to both Staples and the company purchasing the goods and services. The largest amount of approximately $24.9 million represents approximately 0.001% of our revenues based on sales for the fiscal year ended January 28, 2017 of approximately $18.2 billion. The largest amount includes approximately $22 million of purchases under a global corporate service agreement that benefited and provided for purchases by third parties.

In addition, in 2016 we paid approximately $70 million to Google, Inc. for marketing, IT services and products that we purchase for re-sale. We also purchased products and services from CBRE Group, Inc. and Rochester Institute of Technology for approximately $4.3 million and $257,000, respectively.

In all instances, whether we provided or received the products or services, no director or executive officer had a direct or indirect material interest in the transaction. The Nominating and Corporate Governance 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.

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CORPORATE GOVERNANCE

BOARD LEADERSHIP STRUCTURE

Our Board of Directors determines its leadership structure annually based on a recommendation of the Nominating and Corporate Governance Committee. In January 2017, Ronald Sargent retired as Chairman of the Board and we elected Robert Sulentic, our then-serving Independent Lead Director, as Independent Chairman of the Board, in accordance with our policy to require that we have an independent Chair of the Board whenever possible. The Board believes that its current leadership structure assures the appropriate level of management oversight and independence, and that Mr. Sulentic’s election as Independent Chairman will serve to enhance the role he played as Independent Lead Director.

Our Independent Chairman has the following responsibilities:

Authority to call meetings of independent directors.
 

Presides at all meetings of the Board, including executive sessions of the independent directors.
 

Assures that meetings with the independent directors are held in executive sessions, typically after every Board meeting, but in all circumstances at least twice a year.
 

Provides leadership to the Board, including in the event of a crisis.
 

Facilitates communications and serves as a liaison between independent directors and the CEO.
 

Collaborates with the CEO to prepare the agenda for each board meeting and approves the schedules, agendas and information provided to the Board for each meeting.
 

Coordinates the annual performance review of the CEO.
 

Serves as representative of the independent directors for consultation and direct communication, if requested by a major shareholder.
 

Authority to retain independent advisors on behalf of the Board.
 

Works with the Nominating and Corporate Governance Committee on matters relating to corporate governance, Board performance and succession planning.


MEETINGS AND COMMITTEES OF OUR BOARD

Our Board of Directors held a total of eleven meetings during our 2016 fiscal year. The number of meetings held by each of the committees of our Board during our 2016 fiscal year is set forth below under the description of each committee. During our 2016 fiscal year, all of the directors attended at least 75% of the aggregate number of Board meetings and meetings of committees on which they served. Our Guidelines provide that directors are encouraged to attend the Annual Meeting, and all of our current directors attended last year’s annual meeting.

Our Board has four standing committees: the Audit and Finance Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, and the Executive Committee. In June 2016, we combined our separate Finance Committee (which met twice in 2016) with the Audit Committee to form the Audit and Finance 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.

In 2016, the Board also formed an Ad Hoc Committee to assist the Nominating and Corporate Governance Committee by overseeing CEO succession planning, and considering internal and external candidates for the position. Drew Faust chaired the Ad Hoc Committee, whose other members were Kunal Kamlani and Carol Meyrowitz. From March 2016 to September 2016, when we announced the appointment of Shira Goodman as our new, permanent CEO, the Ad Hoc Committee met 15 times.

Our Executive Committee did not meet in 2016. Robert Sulentic, our independent Chairman, chairs the Executive Committee, whose other members are Curtis Feeny, Shira Goodman, Paul Walsh and Vijay Vishwanath, our CEO and the Chairs of our other standing Board committees. The Executive Committee is authorized to exercise all of the powers of our Board in the management and affairs of Staples, with certain exceptions. A quorum can be established by the presence of a majority of the members of the Executive Committee. It is intended that the Executive Committee will take action only when reasonably necessary to expedite our interests between regularly scheduled Board meetings, and shall report to the full Board as soon as practicable following any actions taken.

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CORPORATE GOVERNANCE

Audit and Finance Committee

Curtis Feeny*
Chairperson

The Audit and Finance Committee’s focus on risk management is a critical element of guiding the Company through its strategic transformation.

Other Committee
Members
Paul-Henri Ferrand
Kunal Kamlani*
John Lundgren*

Meetings in 2016
4 in person, 7
telephonic

Introduction

The Audit and Finance Committee meets separately with our independent registered public accounting firm, management and our internal auditors. The members of the Audit and Finance Committee are independent directors, as defined by its charter and the rules of the SEC and NASDAQ Stock Market.

Key Objective

The Audit and Finance Committee assists our Board in overseeing our accounting and financial reporting processes, the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent registered public accounting firm’s qualifications and independence, and the performance of audits by our internal audit team and our independent registered public accounting firm. The Audit and Finance Committee also assists in overseeing our capital structure and related policies, including our financings and uses of capital.

Further Areas of Responsibility

✓ Oversees our internal controls, including our disclosure controls and procedures and internal control over financial reporting, on behalf of the Board.

✓ Assists the Board in its oversight of our policies and practices with respect to risk assessment and risk oversight, including discussing and approving the risk management framework used in the Company’s enterprise risk management (“ERM”) program.

✓ Reviews and discusses risk related to technology and cybersecurity and reviews and oversees our response to significant data security incidents.

✓ Establishes 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.

✓ Monitors the function of our ethics program, including compliance with our Code of Ethics.

✓ Prepares the Audit and Finance Committee Report required under the rules of the SEC.

✓ Reviews financial transactions, entry into swaps, dividend policy, hedging policy and share repurchase program.

2016 Highlights

The 2016 Report of the Audit and Finance Committee of the Board of Directors is included in the Ratification of Selection of Independent Registered Public Accounting Firm section of this proxy statement. In 2016, in connection with its quarterly earnings review, the Audit and Finance Committee focused on our 20/20 strategy and the related estimates, charges and guidance. As part of the ERM process, the Committee continued its oversight of the Company’s information security enhancements being implemented by the Global Technology team. The Committee also provided oversight of management in connection with its quarterly review of our internal controls. In addition, the Committee played an integral role in overseeing the renewal of our revolving credit facility, as well as the execution of a definitive agreement for divestiture of our European business operations, and other merger and acquisition activity in 2016.

* Audit committee financial expert under the rules of the SEC


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CORPORATE GOVERNANCE

Compensation Committee

Paul Walsh
Chairperson

Our executive compensation policies are designed to be tightly linked to performance and the creation of long-term value for our shareholders. We have a track record of soliciting and responding to investor feedback as evidenced by changes to our compensation program in recent years.

Other Committee
Members
Deborah Henretta
Carol Meyrowitz

Meetings in 2016
4 in person, 2
telephonic

Introduction

The members of the Compensation Committee are independent directors, as defined by its charter and the rules of the SEC and NASDAQ Stock Market. For more information about the responsibilities of our Compensation Committee, see the “CD&A” section of this proxy statement.

Key Objective

The Compensation Committee’s responsibilities include recommending to the Board our compensation philosophy and policies for senior management and aligning our compensation with business objectives, individual performance and the interests of our shareholders. The Compensation Committee sets the compensation levels of executive officers, including our CEO, establishes and administers our equity and cash incentive plans and authorizes awards under such incentive plans.

Further Areas of Responsibility

✓ Establishes and oversees the administration of our employee stock purchase plans, retirement plans and other employee benefit plans (other than ERISA-governed broad-based benefit plans where administration is otherwise provided in the governing plan document).

✓ Oversees risks associated with the company’s compensation policies and practices and evaluates the compensation program to help ensure that it does not encourage excessive risk-taking.

✓ Reviews and makes recommendations with respect to non-management Board compensation.

✓ Administers our clawback policy.

✓ Prepares the Compensation Committee Report required under the rules of the SEC.

2016 Highlights

The 2016 Compensation Committee Report is included in the Compensation Committee Report section of this proxy statement. In addition, in 2016, the Compensation Committee conducted its annual pay for performance alignment analysis, peer benchmarking and risk assessment. In response to shareholder feedback, the Compensation Committee dedicated significant time to implementing cumulative 3-year goals in our long-term incentive program in 2016, that are tied to our 20/20 strategy and the creation of long-term shareholder value. In 2016, the Compensation Committee also engaged in a detailed analysis of our new CEO’s compensation package to ensure alignment with shareholder interests.


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CORPORATE GOVERNANCE

Nominating and Corporate Governance Committee

Vijay Vishwanath
Chairperson

Our top priority is to align the skills and experience of our directors and our Board leadership structure to support our strategic reinvention and the best interests of shareholders over the long-term.

Other Committee
Members
Drew Faust
Robert Sulentic

Meetings in 2016
4 in person, 1
telephonic

Introduction

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.

Key Objective

The Nominating and Corporate Governance Committee’s responsibilities include providing recommendations to our Board regarding leadership structure, nominees for director, membership on our Board committees, and succession matters for our CEO. 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.

Further Areas of Responsibility

✓ Oversees the self-evaluation of our Board and committees to assess whether they are functioning effectively.

✓ Coordinates the formal evaluation of our Chairman, the CEO and other specified officers.

✓ Reviews and resolves conflict of interest situations and related party transactions.

✓ Oversees our political contributions and recommends to our Board any proposed revisions to our Corporate Political Contributions Policy Statement.

2016 Highlights

The Nominating and Corporate Governance Committee spent significant time in 2016 managing board succession planning and the recruitment process for the three new directors elected in 2016. The Committee considered the overall diversity of our Board and met to discuss the qualifications, feedback, references and other items regarding these directors, and other potential director candidates. The Committee also coordinated with the Ad Hoc Committee with respect to CEO succession. In addition, the Committee focused on investor feedback and developing responsive strategies to benefit all of the shareholders, as well as ways to enhance our director education practices.


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 ERM program, the Audit and Finance Committee, under powers delegated by the Board, is responsible for the review and approval 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. The Audit and Finance Committee also provides oversight with respect to risks relating to the Company’s accounting and financial reporting processes, the integrity of the Company’s financial statements, and cybersecurity, including our response to significant data security incidents. At each quarterly Board meeting, the Audit and Finance Committee reports to the Board on all of its specific activities.

Our most senior executives are responsible for collaborating with the Audit and Finance Committee to provide oversight of the risk management process and prioritize and validate key risks. Management 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.

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CORPORATE GOVERNANCE

Senior members of management make up our Enterprise Risk Committee, which meets regularly to coordinate information sharing and mitigation efforts for all types of risks. The Audit and Finance 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. In 2016, management presented to the Audit and Finance Committee the results of its enterprise wide review of the major financial, operational and legal risks facing the company. For the most important risks, the CFO and Vice President of Internal Audit presented their mitigation strategies, which had been reviewed by the Enterprise Risk Committee. Management also reviewed with the Audit and Finance Committee its ERM methodologies for identifying and prioritizing financial, operational and legal risks and discussed the top level risks and related risk management.

In 2016, as part of the ERM process, significant attention was given to implementation of the Company’s information security strategy. The Audit and Finance Committee provides oversight to management with respect to network security enhancements and other projects underway by the Global Technology team.

Independent of the enterprise risk management process, the Audit and Finance 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 Director of Global Compliance on compliance and ethics matters. These reports also are provided to the Board. The Audit and Finance Committee also meets regularly with the General Counsel and at least quarterly, in executive session, alone with the Vice President of Internal Audit. The Audit and Finance 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 (2013), also known as the COSO framework.

The Audit and Finance 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 and Finance Committee oversees risks related to our accounting and financial reporting processes, the integrity of our financial statements, 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 “CD&A” 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 and Finance 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. We believe that the practices described above facilitate effective Board oversight of our significant risks.

STRATEGY

At its regularly-scheduled meeting in June of each year, our full Board reviews the Company’s near- and long-term strategies in detail. The meeting is typically held off-site and includes presentations by and discussions with senior management regarding strategic initiatives. The Board remains involved in strategic planning throughout the year, engaging with management to review progress of and challenges to the Company’s strategy, and to approve specific initiatives. In 2016, our Board and Committees devoted significant additional time throughout the year to review and discuss the Staples 20/20 strategy and related initiatives. Individual Board committees also consider strategic matters that fall within their areas of focus, such as our Audit and Finance Committee’s involvement in the divestitures of our European and Australian operations as part of our strategic priority to focus on North America, and report to the full Board at regularly scheduled quarterly meetings. Our independent directors also meet in regularly scheduled executive sessions without management present, at which strategy is discussed.

DIVERSITY

Diversity has always been very important to us. We strive to offer an inclusive business environment that offers diversity of people, thought and experience, as well as diverse suppliers. This also holds true for our Board of Directors. Our Board is committed to seek out highly qualified women and individuals from diverse groups to include in the candidate pool of Board nominees, as reflected in our Guidelines. Additionally, 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. Not only does the Board view diversity of experience, industry, skills and tenure as important, but also of age, gender and ethnic backgrounds. Since 2012, we have added eight new directors to our Board. These new directors include three women, one Hispanic, and one Asian. The Board is also provided with an annual report on diversity initiatives and Staples’ approach and progress on such initiatives.

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CORPORATE GOVERNANCE

SUSTAINABILITY

In addition to our governance best practices, we have integrated leading environmental and social initiatives and programs in all facets of our operations. We are a recognized leader in environmentally-friendly business practices and have a long history of sourcing and selling eco-conscious products, providing recycling and green services, maximizing our energy efficiency and renewable use energy, and eliminating waste. We believe these efforts differentiate our brand, provide us with a competitive advantage, and support our Staples 20/20 strategic priorities which include accelerating mid-market growth in North America, rationalizing excess capacity and preserving profitability in North American Retail, and driving profit improvement and cost reduction across our company.

In 2016, we sold over $4 billion in products with environmental features. Staples has a growing portfolio of sustainable products, including Staples Brand. These products help meet the changing needs of our customers. Today, Staples offers more than 13,000 eco-conscious products across our delivery and retail businesses. Our strategic account leaders and dedicated sustainable solutions managers can help develop and execute sustainability programs for our Staples Business Advantage customers. Our Sustainability Center on staples.com helps raise awareness about how to identify eco-responsible products and makes it easy for customer to directly shop for those products.

We were the first company in our industry to offer a national electronics recycling program. Last year, we helped our customers recycle more than 25 million pounds of office technology and 50 million ink cartridges globally across our markets.

With a large portfolio of facilities and vehicles, Staples recognizes the significance of the energy usage and carbon emissions impacts of our operations. Reducing these impacts has been a cornerstone of our long-term sustainability initiatives. In 2016, we ended the year with 643 buildings certified to the ENERGY STAR standard, which represents 51% of active buildings in the US. By 2020, our goal is to reduce electrical intensity by 25% and total carbon emissions by 50% from 2010 levels.

We also partner directly with more than 2,200 suppliers, both large and small, to support a large, complex and geographically diverse supply chain. For years, Staples has worked with suppliers to advance and improve our offerings of greener products. We recently implemented smart-size packaging to improve our customer experience and reduce our carbon footprint to provide customized packaging tailored for individual orders. This allows us to reduce corrugate use by approximately 15% and void fill use by approximately 60% across our entire US network.

EVALUATION

We are committed to maintaining an effective Board that represents the best interests of the Company and our shareholders. We have an annual director self-evaluation process administered by our outside counsel to assess director performance, Board dynamics and the effectiveness of the Board and its committees. As part of the process, a written survey is developed with input from the Independent Chairman and each Board Committee Chair. Each director completes the survey and provides suggestions and feedback to our outside counsel, who then summarizes the results of the assessment and provides recommendations for improvements, to our Independent Chairman and to each Board Committee Chair. This process allows directors to anonymously provide feedback on, among other things, (1) Board information, planning, and oversight, (2) Board structure and operation, (3) the Board’s relationship with the CEO and management, (4) Committee structure and operations, and (5) director qualifications, preparedness and engagement. The Nominating and Corporate Governance Committee, as well as the full Board, discusses these results in executive session and uses them in determining the appropriate mix and skill set for Board composition and the nomination process, as well as addressing areas where the Board feels it can improve.

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. The Nominating and Corporate Governance Committee also considers the results of our robust Board self-evaluation process.

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CORPORATE GOVERNANCE

Shareholder-Recommended Director Candidates

Shareholders 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 shareholder or group of shareholders 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 shareholder recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.

Shareholder-Nominated Director Candidates

Our proxy access by-law allows a shareholder, or a group of up to 25 shareholders, owning 3% or more of our outstanding common stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to two individuals or 20% of the Board (whichever is greater), provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in Article I, Section 7.4 of our by-laws. Notice of any such nomination must be received by the Corporate Secretary of Staples at 500 Staples Drive, Framingham, Massachusetts 01702, not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, prior to the first anniversary of the preceding year’s annual meeting. For the 2018 Annual Meeting, notice of proxy access nominations must be received no earlier than February 12, 2018 and no later than March 14, 2018. However, if the date of our 2018 Annual Meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the shareholder must be received no earlier than 120 days prior to the 2017 Annual Meeting and not later than the later of (i) the 90th day prior to the 2017 Annual Meeting and (ii) the tenth day following the day on which public announcement of the date of the 2018 Annual Meeting is made or notice for the 2018 Annual Meeting was mailed, whichever occurs first.

In addition, shareholders 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 and without such candidates being included in the Company’s proxy materials, by following the relevant procedures summarized in this proxy statement under the caption “Shareholder Proposals.”

COMMUNICATING WITH OUR BOARD

Our Board will give appropriate attention to written communications that are submitted by shareholders, 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 Independent 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 shareholders 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 Independent Lead Director (if one is appointed), or otherwise the Chairperson of the Nominating and Corporate Governance Committee, who monitors communications from shareholders and other interested parties. Copies or summaries of such communications are provided to all directors, if such person considers 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, in accordance with our Guidelines, if a meeting is held between a major shareholder (including institutional investors) and a representative of the independent directors, the independent Chairman will serve, subject to availability, as such representative of the independent directors.

Shareholders 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.

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 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). Ten directors, constituting our entire Board, are to be elected at the Annual Meeting. One of our current directors, Carol Meyrowitz, is not standing for reelection at the Annual Meeting and our Board therefore determined to reduce the size of the Board from eleven to ten upon her departure.

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, e-commerce, finance, accounting, marketing, technology, risk oversight, 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.

     
   

Director Qualifications, Skills and Experience

   

   

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.

Each of the current directors consistently has demonstrated their strong work ethic and dedication to Staples, including coming prepared to meetings, asking insightful questions, challenging management’s assumptions, focusing on long term business strategy, analyzing challenges, evaluating solutions and overseeing implementation.

We believe that the composition of the Board, including the varied tenure of our directors, combines institutional knowledge and understanding of our business model, products and services and historical growth strategies with fresh perspectives and exposure to alternative approaches to business process, which promotes lively Board discussion and effective oversight and problem solving.

       

Director Tenure Balance

 

All of our nominees are current or former chief executive officers, chairpersons, directors or senior executives of large sophisticated corporations, educational institutions, or investors in a broad range of corporations. As such, they have a deep understanding of, and extensive experience in, many areas that are critical to our operation and success. We have determined that nominees who have served in these roles have extensive experience with one or more of financial statement preparation, compensation determinations, compliance, corporate governance, risk oversight, public affairs and legal matters.

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.

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ELECTION OF DIRECTORS (ITEM 1 ON THE PROXY CARD)

DIRECTOR BIOGRAPHIES

Drew Faust
Age: 69
Director Since: 2012
Current Staples Board Committees
Nominating and Corporate Governance
Skills and Experience
Corporate Governance
Leadership and Management
International Operations
IT Management and Security
Risk Oversight
Strategy
Selected Other Positions
Director, Harvard Management Company
Director, Broad Institute
Director, Ragon Institute
Education
M. A. and Ph.D., American Civilization, University of Pennsylvania
B.A., History, Bryn Mawr College, magna cum laude with honors
 
Career Highlights
Dr. Faust is the 28th President of Harvard University. Leading up to her appointment as President in 2007, Dr. Faust served as the Founding Dean of the Radcliffe Institute for Advanced Study charged with integrating the former Radcliffe College into Harvard University following the merger in 1999. Before Harvard, Dr. Faust served as the Annenberg Professor of History at the University of Pennsylvania, where she was a member of the faculty for 25 years. As President of Harvard, 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.

Curtis Feeny
Age: 59
Director Since: 2016
Current Staples Board Committees
Audit and Finance, Executive
Skills and Experience
Audit, Financial Expertise
Business Sales
IT Management and Security
Leadership and Management
Real Estate
Strategy
Public Company Boards
Current
CBRE Group, Inc.
Prior
Trammell Crow Company (2000-2006)
Selected Other Positions
Board Director, Stanford Federal Credit Union
Education
M.B.A., Harvard Business School
B.S., mechanical engineering, Texas A&M University, magna cum laude
 
Career Highlights
Mr. Feeny has been a Managing Director of Voyager Capital, a venture capital firm, since January 2000. Mr. Feeny has invested in enterprise software, data center systems, wireless infrastructure and Smart Grid technologies, and represents Voyager on the boards of several of its privately held portfolio companies. In 2001, Curtis was appointed by President George W. Bush to the Board of Directors of the Presidio Trust, where he served until 2006. From 1992 through 1999, Mr. Feeny served as Executive Vice President of Stanford Management Co., which manages the Stanford University endowment. He was responsible for investing and managing real estate and other asset classes including private equity and venture capital.

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ELECTION OF DIRECTORS (ITEM 1 ON THE PROXY CARD)

Paul-Henri Ferrand 
Age: 53
Director Since: 2015
Current Staples Board Committees
Audit and Finance
Skills and Experience
Consumer and Business Sales
Ecommerce/Marketing
International Operations
IT Management and Security
Strategy
Education
École Nationale Supérieure des Télécommunications (ENST)
Lycée du Parc
 
Career Highlights
Mr. Ferrand has served as Vice President and Sector Lead, U.S. Services and Distribution Sector, of Google, Inc., a global provider of internet related services and products, since May 2014. In his role as the head of Google’s largest customer sector, Mr. Ferrand leads performance-based advertising sales and related analytics. Before joining Google, Mr. Ferrand was President, Dell North America, at Dell, Inc., a global technology company, from August 2012 to March 2014, where he was responsible for leading Dell’s business across all of North America, covering all segments (consumer and business). Mr. Ferrand previously held other positions at Dell, including Global Vice President & GM, Software and Peripherals from September 2011 to August 2012, President Dell Asia-Pacific-Japan from July 2010 to September 2011, Chief Marketing Officer, Dell Consumer, Small and Medium Business from January 2009 to September 2011, and President Dell APACs from March 2004 to December 2008. Before Dell, Mr. Ferrand served in various management positions at Nokia, Alcatel-Lucent and AT&T.

Shira Goodman 
Age: 56
Director Since: 2016
Current Staples Board Committees
Executive
Skills and Experience
Consumer and Business Sales
Corporate Governance
Ecommerce/Marketing
Leadership and Management
Strategy
Supply Chain/Logistics
Public Company Boards
Current
CarMax Inc.
Prior
The Stride Rite Corporation (2002-2007)
Education
J.D., Harvard Law School
S.M., Management Science, Massachusetts Institute of Technology
B.A., Economics and Near Eastern Studies, Princeton University
 
Career Highlights
Ms. Goodman has served as President and Chief Executive Officer since September 2016. Ms. Goodman served in roles with increasing responsibility at Staples since joining the company in 1992, including President and interim Chief Executive Officer from June 2016 to September 2016, President, North American Operations from January 2016 to June 2016, and President, North American Commercial since February 2014. Prior to that, she served as Executive Vice President of Global Growth since February 2012, Executive Vice President of Human Resources since March 2009, Executive Vice President of Marketing since May 2001, and in various other management positions. Ms. Goodman has been a key architect of the Staples 20/20 strategy. Before Staples, Ms. Goodman worked at Bain & Company for six years in project design, client relationships and case team management.

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ELECTION OF DIRECTORS (ITEM 1 ON THE PROXY CARD)

Deborah Henretta 
Age: 55
Director Since: 2016
Current Staples Board Committees
Compensation
Skills and Experience
Audit, Financial Expertise
Consumer and Business Sales
E-Commerce/Marketing
International Operations
Leadership and Management
Retail
Risk Oversight
Strategy
Supply Chain/Logistics
Public Company Boards
Current
Corning Incorporated
Meritage Homes Corporation
NiSource, Inc.
Education
M.A., Syracuse University
B.A., St. Bonaventure University, summa cum laude
 
Career Highlights
Ms. Henretta currently serves as Senior Advisor to SSA & Company, an executive decision strategy consulting firm. Ms. Henretta also serves as Senior Advisor to General Assembly, a pioneer in innovative education and career transformation. Ms. Henretta has over 30 years of business leadership experience across both developed and developing markets, as well as expertise in brand building, marketing, philanthropic program development and government relations. She joined Procter & Gamble (“P&G”) in 1985. In 2005, she was appointed President of P&G’s business in ASEAN, Australia and India. She was appointed group president, P&G Asia in 2007, group president of P&G Global Beauty Sector in June 2013, and group president of P&G E-Business in February 2015. She retired from P&G in June 2015. Ms. Henretta also was a member of Singapore’s Economic Development Board (EDB) from 2007 to 2013. In 2008, she received a U.S. State Department appointment to the Asia-Pacific Economic Cooperation’s Business Advisory Council. In 2011, she was appointed chair of this 21-economy council, becoming the first woman to hold the position.

Kunal S. Kamlani 
Age: 44
Director Since: 2015
Current Staples Board Committees
Audit and Finance
Skills & Experience
Audit, Financial Expertise
Consumer Sales
Marketing
M&A/Integration
Leadership and Management
Risk Oversight
Public Company Boards
Current
Sears Holdings Corp
Education
M.B.A., Columbia University
B.A., Economics and Political Science, Colgate University
 
Career Highlights
Mr. Kamlani is President of ESL Investments, Inc., a hedge fund sponsor, and has served in this position since March 2016. Prior to ESL, he was Chief Executive Officer of CASP Advisors, an independent advisory firm founded in 2015, which focuses on brand extension strategies, infrastructure development and mergers & acquisitions in the global cruise industry. Mr. Kamlani previously served as President and Chief Operating Officer of Prestige Cruise Holdings, the parent company of Oceania Cruises and Regent Seven Seas Cruises, from August 2011 until December 2014. Mr. Kamlani had previously served as Chief Financial Officer from August 2009 to March 2010 and was recruited back to Prestige Cruise Holdings in 2011. From March 2010 to May 2011, Mr. Kamlani served as head of the Global Investment Solutions division of Bank of America/Merrill Lynch where he was responsible for the Wealth Management Platform including managed accounts, mutual funds, stocks, bonds, new issues, insurance, alternatives and structured investments. Mr. Kamlani also served as Managing Director and Chief Operating Officer of Citi Smith Barney from 2006 until 2009 and in various other capacities at Citigroup since 2001.

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ELECTION OF DIRECTORS (ITEM 1 ON THE PROXY CARD)

John F. Lundgren
Age: 65
Director Since: 2016
Current Staples Board Committees
Audit and Finance
Skills and Experience
Audit, Financial Expertise
Consumer and Business Sales
International Operations
Leadership and Management
M&A/Integration
Retail
Strategy
Supply Chain/Logistics
Public Company Boards
Current
Callaway Golf Company
Prior
Stanley Black & Decker, Inc. (2004-2016)
Education
M.B.A., Stanford University
B.A., Dartmouth College
 
Career Highlights
Mr. Lundgren retired in 2016 as Chairman and Chief Executive Officer of Stanley Black & Decker, Inc., the successor entity following the merger of The Stanley Works and Black and Decker in March 2010. Prior to the merger, Mr. Lundgren served as Chairman and Chief Executive Officer of The Stanley Works, a worldwide supplier of consumer products, industrial tools and security solutions for professional, industrial and consumer use. Prior to joining The Stanley Works in 2004, Mr. Lundgren served as President — European Consumer Products, of Georgia Pacific Corporation and also held various positions in finance, manufacturing, corporate development and strategic planning with Georgia Pacific and its predecessor companies, namely James River Corporation from 1995 to 1997 and Fort James Corporation from 1997 to 2000. Mr. Lundgren began his business career in brand management at the Gillette Corporation. Mr. Lundgren is also a former member of the board of directors of the National Association of Manufacturers.


Robert Sulentic
Age: 60
Director Since: 2007
Current Staples Board Committees
Executive, Nominating and Corporate Governance
Skills and Experience
Audit, Financial Expertise
International Operations
Leadership and Management
M&A/Integration
Real Estate
Risk Oversight
Strategy
Public Company Boards
Current
CBRE Group, Inc.
Prior
Trammell Crow Company (2002-2006)
Selected Other Positions
British American Business Council
Director, Baylor Healthcare System Foundation
Education
M.B.A., Harvard Business School
B.S., Computer Science, Iowa State University
 
Career Highlights
Mr. Sulentic has served as Chief Executive Officer of CBRE Group, Inc., a global commercial real estate services company, since 2012 and President since 2010. Mr. Sulentic also has been a member of the CBRE Board since 2012. He previously served as President of the Development Services business from 2006 to 2011 and as Chief Financial Officer and Group President, each from 2009 until 2010. In addition, Mr. Sulentic was a member of CBRE’s Board and Group President of Development Services, Asia Pacific and Europe, Middle East and Africa from 2006 through 2009. Before CBRE, Mr. Sulentic served as President and Chief Executive Officer of Trammell Crow Company from 2000 through 2006, and was also Chairman of the Board from 2002 through 2006. He previously served as its Executive Vice President and Chief Financial Officer from September 1998 to October 2000.

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ELECTION OF DIRECTORS (ITEM 1 ON THE PROXY CARD)

Vijay Vishwanath
Age: 57
Director Since: 2007
Current Staples Board Committees
Executive, Nominating and Corporate Governance
Skills and Experience
Consumer and Business Sales
Corporate Governance
E-commerce/Marketing
International Operations
M&A/Integration
Strategy
Public Company Boards
Prior
Yankee Candle Corporation (2005-2007)
Education
M.B.A., Harvard Business School
B.S., Chemical Engineering, University of Texas, Austin
 
Career Highlights
Mr. Vishwanath has been a Partner at Bain & Company, a management consulting firm, since 1993 and is a leader in Bain’s consumer products practice. Mr. Vishwanath first joined Bain in 1986, after working at Procter & Gamble. In his position at Bain, Mr. Vishwanath has counseled numerous Fortune 500 companies on consumer product and brand strategy, as well as marketing. Additionally, he advises CEOs and management teams of the leading global consumer companies on matters of strategy, organization, mergers and performance improvement, including growth, pricing, market spending and optimization, trade and channel management, and cost reduction across the entire value chain. Mr. Vishwanath also has valuable experience in corporate governance. Mr. Vishwanath has published several articles on a variety of consumer product issues, and has spoken to audiences around the world on the topic of growth and brand strategy.


Paul F. Walsh
Age: 67
Director Since: 1990
Current Staples Board Committees
Compensation, Executive
Skills and Experience
Audit, Financial Expertise
Consumer and Business Sales
E-commerce/Marketing
International Operations
IT Management and Security
Leadership and Management
M&A/Integration
Retail
Risk Oversight
Strategy
Public Company Boards
Prior
eFunds Corporation (2002-2007)
Incon, Inc. (1995-1998)
Selected Other Positions
Current
Chairman, United Dental Partners
Director, Transaction Services Group
Prior
Chairman, Sterling Backcheck Inc. (2010-2015)
Director, Competitor Group Inc. (2013-2015)
Trustee, Thunderbird School of Management (2009-2013)
Education
M.B.A., Boston University, with honors
B.S., Engineering, Tufts University
 
Career Highlights
Mr. Walsh has served as a Senior Managing Director of Calera Capital, a private equity firm, since September 2015, and was an Operating Partner of, and outside resource to, Calera Capital since 2008. Mr. Walsh serves on the board of directors of Transaction Services Group, a Calera Capital portfolio company. Before Calera, Mr. Walsh was the Chairman and CEO of eFunds Corporation from 2002 to 2007, a leading provider of risk management, electronic funds transfer services, prepaid card processing, and global outsourcing solutions to more than 10,000 financial services companies in more than 80 countries. eFunds also provides point-of-sale fraud prevention solutions to retailers and electronic benefits processing services to government entities. Additionally, in 2002, Mr. Walsh founded Clareon, which built one of the premiere B2B payment solutions in the U.S., utilizing technology co-developed with the U.S. Treasury. Clareon was later acquired by Fleet/Bank of America.

OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE NOMINEES AS DIRECTORS.

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DIRECTOR COMPENSATION


The Compensation Committee (“the Committee”) is responsible for 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 Committee’s philosophy that director pay should be aligned with the interests of our shareholders.

It is the Committee’s goal to maintain a level of Outside Director compensation at the median of companies both within our peer group as well as similarly-sized companies in our general industry. The Committee annually reviews an extensive analysis of marketplace practices for Outside Director pay conducted by management and reviewed by the 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.

2016 COMPENSATION

Each Outside Director receives an annual equity grant equal to $175,000 in the form of restricted stock units. The annual grants vest after one year. In addition, the following Outside Directors receive additional annual equity grants: (a) the Independent Lead Director receives restricted stock units with a value of $40,000; (b) each chairperson of the Audit and Finance Committee, Compensation Committee and Nominating and Corporate Governance Committee receives restricted stock units with a value of $32,000. In each case, these additional grants vest on the date of each of the four regularly scheduled quarterly Board meetings that such Independent Lead Director or chairperson holds such position and are paid in shares on the one year anniversary of the award. In addition, each Outside Director receives 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 and Finance Committee receives an additional quarterly cash payment of $3,750.

New Outside Directors receive a one-time initial grant of restricted stock units equal to $150,000, which vests after three years. Mr. Feeny, Ms. Henretta and Mr. Lundgren received this initial grant in 2016, on the second business day following the 2016 Annual Meeting.

During fiscal year 2016, on the second business day following the 2016 Annual Meeting, each of our Outside Directors elected at the meeting received their annual restricted stock unit grants. The number of shares of 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 restricted stock units would fully vest and be paid out.

In March 2016, each then-serving Outside Director voluntarily declined half of the quarterly cash payment of $18,750 for the next four quarters of their service as a director, in response to the pressures on our share price in fiscal year 2015. Each such director therefore temporarily received a reduced quarterly cash payment of $9,375 in June, September, and December of 2016, and March of 2017.

2017 COMPENSATION

On January 29, 2017, in line with the Company’s previously announced Independent Chair policy, Mr. Sulentic was elected to the role of Independent Chairman of the Board. Mr. Sulentic has served as a Board Member since 2007 and in the role of Lead Director since 2015.

The Committee, in consultation with the independent compensation consultant, reviewed the change in role in light of compensation practices for the Independent Chair at peer group and S&P 500 companies. The Committee determined that an increase to Mr. Sulentic’s compensation would be appropriate based on benchmarking data, but at the request of Mr. Sulentic, did not proceed to recommend any adjustments to his current pay as Lead Director.

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DIRECTOR COMPENSATION

The following table summarizes our current compensation structure for Outside Directors.

  Cash Retainer Restricted Stock Unit Awards (1)
Role       Standard       Role-Related       Standard       Role-Related       Total $
Independent Chairman $ 75,000 $ 175,000 $ 40,000 $ 290,000
  Audit and Finance $ 75,000 $ 15,000 $ 175,000 $ 32,000 $ 297,000
Chair        Nominating and Corporate Governance $ 75,000 $ 175,000 $ 32,000 $ 282,000
  Compensation $ 75,000 $ 175,000 $ 32,000 $ 282,000
Director $ 75,000 $ 175,000 $ 250,000

(1)

New Outside Directors also receive a one-time initial grant of Restricted Stock Units equal to $150,000.

The table below sets out the 2016 fiscal year compensation received by our Outside Directors.

DIRECTOR COMPENSATION FOR 2016 FISCAL YEAR

Name*       Fees earned or
paid in cash
($)
      Stock1
Awards ($)
      Option
Awards
($)
      All Other
Compensation
($)
      Total
($)
Basil L. Anderson 2 35,625 0 0 0 35,625
Drew Gilpin Faust 46,875 175,001 0 0 221,876
Curtis Feeny 63,750 357,013 0 0 420,763
Paul-Henri Ferrand 46,875 175,001 0 0 221,876
Deborah A. Henretta 56,250 325,006 0 0 381,256
Kunal Kamlani 46,875 175,001 0 0 221,876
John F. Lundgren 56,250 325,006 0 0 381,256
Carol Meyrowitz 46,875 175,001 0 0 221,876
Rowland T. Moriarty 2 28,125 0 0 0 28,125
Robert E. Sulentic 46,875 215,003 0 0 261,878
Raul Vazquez 2 28,125 0 0 0 28,125
Vijay Vishwanath 46,875 207,008 0 0 253,883
Paul F. Walsh 46,875 207,008 0 0 253,883

* Excludes Mr. Sargent and Ms. Goodman, who each served as CEO for a portion of 2016 and did not receive separate compensation for their services as director. Each of their 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 2016 fiscal year, not the actual amounts paid to or realized by our Outside Directors during our 2016 fiscal year. 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 2016 represent:
● Annual grant of restricted stock units to each director;
● For Mr. Sulentic, our Independent Lead Director for fiscal year 2016, restricted stock units with a grant date fair value of $40,000;
● For Messrs. Feeny, Vishwanath and Walsh, chair of our Audit and Finance Committee, chair of our Nominating and Corporate Governance Committee and chair of our Compensation Committee, respectively, for fiscal year 2016, restricted stock units with a grant date fair value of $32,000 each;
● For Messrs. Feeny, Henretta and Lundgren, who joined our Board in fiscal year 2016, restricted stock units with a grant date fair value of $150,000, granted in connection with the director’s initial election to the Board and which vest after three years.
(2) Messrs. Anderson, Moriarty and Vazquez did not stand for reelection to the Board at the 2016 Annual Meeting.

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DIRECTOR COMPENSATION

OUTSTANDING DIRECTOR AWARDS

The table below supplements the Director Compensation table above by providing (1) the number of restricted stock units awarded to our directors during our 2016 fiscal year and (2) the total number of outstanding stock options and restricted stock units held by our directors as of January 28, 2017, the end of our 2016 fiscal year.

Name       Grant Date       Award
Type
      Number of
Shares
Awarded in
FY 2016
      Grant Date
Fair Value
($)
      Total
Options and
Unvested
Restricted
Shares as of
2016 FYE
Drew Gilpin Faust 6/16/2016 RSU 20,115 175,001 20,115
Paul-Henri Ferrand 6/16/2016 RSU 20,115 175,001 29,173
Kunal Kamlani 6/16/2016 RSU 20,115 175,001 29,173
Carol Meyrowitz 6/16/2016 RSU 20,115 175,001 20,115
OP 0 0 77,867
Robert E. Sulentic 6/16/2016 RSU 24,713 215,003 24,713
OP 0 0 82,367
Vijay Vishwanath 6/16/2016 RSU 23,794 207,008 23,794
OP 0 0 86,867
Paul F. Walsh 6/16/2016 RSU 23,794 207,008 23,794
OP 0 0 68,867
New Directors in 2016
Curtis Feeny 6/16/2016 RSU 41,036 357,013 41,036
Deborah A. Henretta 6/16/2016 RSU 37,357 325,006 37,357
John F. Lundgren 6/16/2016 RSU 37,357 325,006 37,357

RSU = Restricted stock unit, OP = Stock option

(1) Restricted stock unit awards granted in connection with the annual director grant vest in full on the first anniversary of the grant date, provided that the director then serves on our Board. Restricted stock unit awards made upon initial election as a director vest in full on the third anniversary of the grant date.
(2) Restricted stock units awarded to our Independent Lead Director and each chairperson of the Audit and Finance Committee, Compensation Committee, Nominating and Corporate Governance 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 vested in full on the first anniversary of the grant date, provided that the director served on our Board. Stock option awards made prior to 2008 vested ratably on an annual basis over a four-year vesting period, provided that the director then served on our Board.

Stock Ownership by Directors

All Outside Directors are subject to a stock ownership guideline of five times the annual Board cash retainer and have five years after joining the Board to meet such ownership guideline. In 2016, all directors met the guidelines.

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❯ EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Discussion and Analysis (“CD&A”) describes how we design and manage our compensation program, provides an overview of our business performance and progress in 2016 with our Staples 20/20 strategy and most importantly, demonstrates the strong link between pay and performance for our Named Executive Officers (“NEOs”).

We also present a summary of shareholder feedback, the positive changes our Board has made to address this feedback, and describe how we established the compensation structure for our new CEO, appointed in September 2016.

The CD&A is structured as follows:

An executive summary, including our business performance and shareholder engagement in 2016 (p.27)
 

A presentation of compensation earned by our NEOs as a result of this performance (p.31)
 

A detailed discussion of our 2016 compensation program (p.34) followed by the processes we use in designing and managing compensation (p.40)
 

Additional material relating to governance of our compensation program such as policies relating to stock ownership and recoupment (p.42)


 I    EXECUTIVE SUMMARY

Guiding Principles of Our Compensation Program

The Committee believes that executive compensation should be directly linked to performance and the creation of long-term value for our shareholders.

Based on this principle, as well as consultation with shareholders, the Committee has developed annual and long-term incentive programs that are tied to objective, quantifiable, and rigorous performance metrics. The metrics we use in our incentive programs support the long-term alignment of pay with performance.

The structure of our executive compensation program is intended to enable the company to attract, retain and motivate a talented management team to drive our business objectives of both top line and bottom line results, as well as attractive returns on capital. We believe our overall program, and in particular our focus on granting performance-based awards, is consistent with current best practices in compensation design.

Business Overview

Staples is a world-class provider of products and services that primarily serve the needs of business customers of all sizes in seven countries. The overwhelming majority of our revenue is generated in North America. We are committed to providing superior value to our customers through a broad selection of products, easy to use websites and mobile platforms, a differentiated salesforce, an integrated retail and online shopping experience and a wide range of print and marketing and technology services. With the disposition of our European business, at the end of fiscal year 2016 we operated two business segments, North American Delivery and North American Retail.

Our vision is we help businesses succeed. This reflects a multi-year effort to evolve our company to become the product and service destination for businesses in a rapidly evolving and competitive marketplace. In May 2016, we introduced our Staples 20/20 strategic plan with four key priorities to transform Staples and get our company back to sustainable sales and earnings growth. We are extremely focused on allocating more resources to the businesses where we have our strongest competitive advantages, and deemphasizing our underperforming businesses. We’re also prioritizing innovation as a key catalyst to further differentiate Staples from our competitors.

Our priorities are to:

Accelerate mid-market growth in North America
 

Narrow our geographic focus to North America
 

Rationalize and preserve profitability of our North American Retail stores
 

Drive profit improvement and cost reduction across the company

Our North American Delivery segment (58% of total company sales in 2016) consists of the U.S. and Canadian businesses, including Staples Advantage, Staples.com, Staples.ca, and Quill.com, that sell and deliver products and services directly to businesses and consumers. Our strategies for North American Delivery focus on driving increased customer acquisition, retention and share of wallet through our customized contract offerings, our membership programs and expanding categories beyond office supplies, with a particular focus on the mid-market customer segment. We are also focused on serving our customers by evolving our team-based contract selling model to be more unified and collaborative. We are driving

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EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS

growth in categories beyond core office supplies by adding specialists who have expertise in selling products like facilities and break room supplies, furniture, promotional products and technology products.

Our North American Retail segment (37% of total company sales in 2016) consists of 1,255 stores in the United States and 304 stores in Canada at year end. Our strategies for North American Retail focus on offering easy-to-shop stores with products that are readily available and easy to find, and knowledgeable sales associates to support customers while preserving profitability through increased customer conversion, cost reductions and growing our services businesses. Our goals are to continue to be a destination for core office supply categories like ink, toner and paper as well as products and services beyond office supplies, such as print and marketing services, facilities and break room supplies and technology products and services.

    Staples 20/20 Strategic Priorities

2016 Staples 20/20 Accomplishments

   
Accelerate mid-market growth in North America

Realigned our operating structure to better serve our customers by aligning our delivery businesses and mid-market customers within one business unit 

Strengthened our differentiated approach to serving mid-market customers by combining the strength of our sales force with our digital expertise 

Began scaling our membership programs, ending the year with significantly increased numbers of mid-market contract membership customers and small business membership customers who shop on Staples.com and Quill.com 

Achieved double digit growth in sales beyond office supplies in the mid-market contract business 

Narrow geographic focus to North America

Entered into an agreement to sell a controlling interest in our remaining European operations to Cerberus Capital Management during the fourth quarter of 2016 and this transaction closed in early 2017 

Sold our UK retail business and operations to Hilco 

Acquired Capital Office Products, one of the largest independent office products dealers in the U.S.

Partnered with Managed by Q to provide mid-market contract customers in New York City, Chicago, San Francisco and Los Angeles with an expanded offering of office services 

Rationalize and preserve profitability of our North American Retail stores

Continued to rationalize excess capacity in retail network through 48 store closures and reduce risk by shortening the average remaining lease life per store in North America 

 

Increased customer conversion in both U.S. Stores and Canadian Stores 

 

Drove growth in print and marketing services 

Continued to simplify the operating environment for our retail associates so that they can spend more time engaging with customers 

Drive profit improvement and cost reduction across the company

After eliminating approximately $750 million of annualized pre-tax costs from 2013 – 2015, launched a plan to eliminate an additional $300 million of annualized pre-tax costs from 2016 – 2018 

 

Achieved goal of eliminating $100 million of annualized pre-tax costs in 2016 

Developed detailed plans to further reduce product costs, evolve our product stocking and promotional strategies, drive savings in our supply chain, eliminate fixed costs in our retail stores, and generate additional efficiency savings across the company in 2017 and 2018

 

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EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS

2016 was a transformational year at Staples:

Four new Directors joined our Board – three Outside Directors from a variety of different industries and our new CEO, Ms. Goodman

We transitioned to separate CEO and Chairman roles pursuant to our previously announced Independent Chair policy

Ms. Goodman simplified her management team from 15 to 10 roles that serve on Staples leadership team

Ms. Goodman’s target compensation as CEO is significantly at risk – 89% of Ms. Goodman’s compensation is performance-based while Mr. Sargent’s 2016 target compensation was 65% performance-based

Ms. Goodman’s total target compensation as CEO is at the 25th percentile of our peer group companies

We eliminated many legacy executive perquisites in 2016 and plan to execute additional changes in 2017


Governance Outreach Program & Response to Shareholder Feedback

Robust Twice-Yearly Shareholder Engagement Program

For several years, Staples has conducted a comprehensive shareholder outreach program. Our Board values the opportunity to engage directly with our shareholders to hear their thoughts, better understand their views and represent their interests. As a result of this program, over the past several years, the Board has made significant enhancements to our corporate governance and compensation programs including proactive adoption of key governance initiatives and restructuring compensation to increase alignment between pay and performance.

In 2016, our Say-on-Pay proposal received support from 94% of shares voted at our annual meeting of shareholders.

In 2016, we reached out to the top 200 institutional investors, representing 86% of shares outstanding. As we reached out, we provided shareholders and proxy advisory firms with an update of Staples’ governance and compensation practices. We ultimately held discussions with investors representing approximately 40% of our shares outstanding. Our Chair of our Compensation Committee and our Chair of our Nominating and Governance Committee participated in some of the discussions and played an important role in our outreach program.

Shareholder Feedback and Board Response

A summary of shareholder’s perspectives related to executive compensation and the Board’s response is provided below. Our other robust corporate governance practices that have developed in response to shareholder feedback are described elsewhere in this proxy statement.

We received overwhelmingly positive feedback from our discussions with shareholders. They were appreciative of the Committee’s recent enhancements to the executive compensation program which included the following:

Adopting 3-year cumulative goals for the long-term incentive program

Adopting a policy limiting executive severance to 2.99 times the sum of the executive’s base salary plus target annual cash incentive award, unless shareholder approval is obtained

Ensuring that the performance goals in our incentive plans remain appropriately rigorous and are aligned with our business objectives

Modifying our peer group to provide better comparisons with Staples

All enhancements to the executive compensation program were the direct result of shareholder feedback and based on the Committee’s careful deliberation with input from management and the independent compensation consultant. Shareholders also applauded the changes made to our executive compensation program for the new CEO and appreciated the continued responsiveness to shareholder feedback. CEO compensation is discussed more fully on page 33, but highlights of the program developed based on shareholder feedback are listed below.

Ms. Goodman’s total target compensation as CEO is at the 25th percentile of our peer group companies

Ms. Goodman’s target total compensation was approximately 12% less than Mr. Sargent’s target compensation

to better align pay with Staples’ historical performance

to reflect the fact that Ms. Goodman is a first-time CEO, and does not serve as the Chair of the Board of Directors

100% of the new CEO’s long-term incentive award is performance-based shares, which results in 89% of the new CEO’s total compensation package being performance-based. In 2016, Mr. Sargent’s compensation was 65% performance-based

No additional awards or one-time long-term incentives were offered to the new CEO

Ms. Goodman also declined an increase in tax services reimbursement that was traditionally reserved for the CEO. The Company will be eliminating the executive tax services reimbursement program in 2017


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We did not receive any shareholder proposals for inclusion in this year’s proxy statement. Although the shareholder feedback on our executive compensation program was very positive, the Committee will continue to monitor the sentiments of our shareholders through our outreach program. The Committee will also remain vigilant to ensure that the goals in our incentive plans remain rigorous and our peer group is composed of companies that appropriately reflect the evolving markets which our company operates in, and the changing composition of our company.

Committed to Compensation Best Practices

Things We Do        Things We Don’t Do
● Strong alignment of pay and performance
● 89% of CEO compensation is “at risk”
● Both short- and long-term programs include performance goals
● Rigorous, objective financial metrics on annual and performance-based long-term awards that are closely tied to business strategy
● Cumulative three-year goals in the long-term incentive program
● 3-year relative TSR modifier in performance-based long–term awards
● Strong stock ownership guidelines (5x salary for CEO and up to 4x for other NEOs)
● Double trigger change in control provisions in severance agreements
● Policy requiring shareholder approval for executive severance in excess of certain limits
● Clawback policy
● Anti-hedging policy
● No employment agreements
● No excise tax gross-ups in executive severance agreements
● No pension plan
● No private plane
● Minimal executive perquisites

Plan Design & Components of Executive Compensation

Our NEOs for fiscal year 2016 were:

NEO   Title
Shira Goodman1 CEO
Christine T. Komola Executive Vice President and CFO
Mark Conte Senior Vice President and Corporate Controller
Joseph G. Doody Vice Chairman
Michael Williams2 Executive Vice President and Chief Legal Officer
 
Ronald L. Sargent3 CEO and Chairman
John Wilson4 President International Operations and Head of Global Transformation

1 Ms. Goodman served as President, North American Commercial until her appointment as interim CEO on June 14, 2016 and permanent CEO on September 25, 2016.
2 Mr. Williams’ title was Executive Vice President and General Counsel until January 2017.
3 Mr. Sargent stepped down from the CEO position on June 14, 2016 and left Staples on January 28, 2017.
4 Mr. Wilson left Staples on October 31, 2016.

Messrs. Conte and Williams qualified as NEOs for 2016 due to the review of our management structure as part of Ms. Goodman's transition to her new role as CEO.

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EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS

In 2016, our executive compensation program had three elements: (1) base pay, (2) annual performance-based cash incentive and (3) long term incentive(s); for our CEO, from 2017 the long term incentive is 100% performance-based. For the other NEOs (excluding Mr. Conte), the long term incentive is 2/3rd performance-based and 1/3 time-based (Restricted Stock Units). The first chart below illustrates how our CEO’s target compensation in structured; the second chart shows the (average) target structure of NEOs other than the CEO (excludes Mr. Conte and NEOs who left Staples during 2016):

CEO Target Opportunity Mix
 
 

NEO Average (excluding Mr. Conte & CEO) Target Opportunity Mix

 

Component       Fixed or Variable       2016 Benchmark/Metrics
Base Salary Fixed
● Based on median of peers
Annual Cash Award 100% Performance based
● 50% Earnings Per Share
● 25% Total Gross Profit Dollars
● 25% Total Sales
Performance Share Award 100% Performance based
● 50% Return on Net Asset (RONA) %
● 50% Operating Income Growth %
● +/- 25% based on 3-year Relative Total Shareholder Return (TSR)
Restricted Stock Unit Award 100% Time based
● Vest ratably over 3 years (1/3, 1/3, 1/3)
Benefits Fixed
● Broad-based plans and limited executive perquisites

2016 Compensation Results

The Committee sets rigorous financial metrics tied directly to the success of our strategy and the creation of long-term shareholder value in a highly competitive industry.

Both our annual cash award and our performance share awards for 2016 were 100% tied to objective and rigorous financial goals. We set our goals for our incentive programs within the first 90 days of the fiscal year. Target performance goals are generally based on our fiscal year operating plan and outlook for the coming year.

The following tables set out our results against our predetermined, rigorous performance goals, under our incentive award plans for which there was a payout opportunity in 2016.


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Annual Cash Incentive Award

      Target
Value $
      Actual
Value $
      Realized Value as
% of Target
Shira Goodman $1,244,291 $584,817 47%
Christine T. Komola $621,154 $291,942 47%
Mark Conte1 $189,609 $120,378 63.5%
Joseph G. Doody $593,635 $279,008 47%
Michael Williams $271,802 $127,747 47%
 
Ronald L. Sargent $1,873,812 $880,692 47%

1 Mr. Conte is not a member of Staples leadership team and was eligible for a different bonus plan in 2016 than the other NEOs.
* Mr. Wilson was not eligible to receive a payment under the Annual Cash Incentive Award as he left Staples on October 31, 2016.

Performance Share Award

In March 2017, performance shares were earned and released for the 2014-2016 performance cycle.

The target value and target number of shares were determined at the start of the performance period

The realized value is a function of the number of shares earned, adjusted for relative total shareholder return and the stock price when shares are released

For the 3-year performance period from 2014 – 2016, cumulative total shareholder return fell in the bottom one-third of the S&P 500, resulting in a 25% reduction in shares earned

As a result, the realized value of performance share awards was 53.925% of target value

Performance Share Award, 2014 – 2016

Name       Target
Value $
      Target
Shares
1
      Shares
Awarded
      Actual
Value $2
      Realized Value as
% of Target
Shira Goodman $2,169,112 161,874 87,291 $766,415 53.925%
Christine Komola $2,169,112 161,874 87,291 $766,415 53.925%
Mark Conte3
Joseph Doody $2,169,112 161,874 87,291 $766,415 53.925%
Michael Williams4 $406,271 30,019 16,189 $142,139 53.925%
 
Ronald Sargent $8,225,000 613,806 330,996 $2,906,145 53.925%
John Wilson5 $2,169,112 161,874 82,289 $722,497 50.835%

1 Target shares calculated on share price of $13.40 on March 5, 2014 grant date and rounded up to the nearest full share.
2 Value based on closing price of $8.78 of Staples stock on date of release (March 7, 2017).
3 Mr. Conte is not eligible to receive Performance Share Awards.
4 Target shares calculated on share price of $13.40 on March 5, 2014 grant date and $14.43 on December 3, 2014 grant date, rounded up to the nearest full share.
5 Mr. Wilson’s award was pro-rated to reflect the fact that he left Staples on October 31, 2016.

Total shareholder return (TSR) Notwithstanding our progress on key Staples 20/20 objectives, we believe total shareholder return on a 1-year basis was negatively affected by the U.S. District Court for the District of Columbia ruling in May, 2016 granting the Federal Trade Commission’s request for a preliminary injunction to block Staples’ acquisition of Office Depot, as well as year-over-year declines in total company sales and non-GAAP earnings per share during fiscal years 2014 – 2016. Our stock prices on the first and last day of fiscal 2016 were $8.92 and $9.16 respectively.

Total Shareholder Return       Staples       S&P Retail
Index
      S&P 500
1-year +8% +18% +20%
3-year -21% +67% +36%

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New CEO Compensation

In 2016, Staples transitioned our CEO position from Mr. Sargent to Ms. Goodman, who was appointed to the role of interim CEO on June 14, 2016, and permanent CEO on September 25, 2016. The Committee engaged its independent compensation consultant, Exequity, to provide data and analysis to support the Committee’s decision-making process in agreeing an appropriate target compensation structure and value for the new CEO.

In reaching its decision, the Committee considered many factors, including peer group CEO compensation, tenure of each of the CEOs, and the revenue and market capitalization of the peer group companies. The analysis also took into account whether the role of CEO at the peer companies was a combined CEO / Chair role or whether the peer group company had separate CEO and independent Chair roles.

Ms. Goodman’s total target annual compensation as CEO is at the 25th percentile of our peer group companies

The Committee determined that the following target total compensation was appropriate:

Base Salary        Annual Cash Incentive        Long Term Incentive
● Ms. Goodman’s annual base pay was increased from $700,000 to $1,100,000 with effect from her appointment as CEO
● Ms. Goodman served as interim CEO between June 14 and September 24, 2016. During this time, Ms. Goodman received a monthly stipend allowance of $30,500 to recognize her additional responsibilities as interim CEO, in addition to her base pay of $700,000. This stipend ceased on her appointment to the CEO role on September 25, 2016
● The base salary of $1,100,000 represents an 11.9% reduction in base salary compared to the base salary of Mr. Sargent, the previous CEO
● Ms. Goodman’s annual cash incentive target as a percentage of base pay was increased from 85% to 150% on her appointment as interim CEO on June 14, 2016. The calculation of bonus earned took into account base pay and the monthly stipend she received to recognize her role as interim CEO
● The 150% target is in line with Mr. Sargent’s target opportunity as CEO and is in line with target percentages of peer group companies
● On the change of incumbent in the CEO role, the Committee determined that it would be appropriate for the CEO long term incentive to be 100% performance-based
● The Committee also determined that the target value of the CEO long term incentive should be reduced
● The Committee’s guiding principle in moving from a Long Term Incentive (“LTI”) practice of 2/3rds Performance Shares, 1/3rd time-based Restricted Stock Units was to reinforce our pay for performance philosophy and to more fully align our CEO’s interests with those of our shareholders
● Consequently, Ms. Goodman’s first long term incentive grant as CEO was granted 100% in performance shares, with a target value of $7,250,000
● This represents a reduction of $975,000 or 11.8% of the target LTI value of the previous CEO, Mr. Sargent

Taking these changes together, this represents a reduction in target annual compensation for our CEO in excess of $1.3M or 11.8%, as set out in the table below.

Target Annual Compensation as CEO
            Mr. Sargent             Ms. Goodman       Difference,
Ms. Goodman
vs. Mr. Sargent
Base Salary $1,249,208 $1,100,000 -$149,208
Target Annual Cash Incentive 150% $1,873,812 150% $1,650,000
Total Target Annual Cash $3,123,020 $2,750,000 -$373,020
Long Term Incentives
Target Value - Performance Shares $5,483,333 $7,250,000
Grant Date Value - Restricted Stock Units $2,741,667 0
Long Term Incentives - Total Target Value $8,225,000 $7,250,000 -$975,000
Total Target Annual Compensation $11,348,020 $10,000,000 -$1,348,020

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 II    2016 COMPENSATION PROGRAM

Overview

The Committee’s compensation decisions in 2016 were intended to drive the highest level of executive team engagement to lead the organization through its strategic objectives, and to attract and retain world-class executive talent. In the course of its review, the Committee considered the complexity of the business, input on current market practices from the Committee’s independent compensation consultant and management, the highly competitive environment for talent and prior years’ Say-on-Pay votes.

Staples’ compensation philosophy is to target market median for base salary, annual cash and long-term incentive opportunities

For 2016, the annual cash incentive was 100% performance based and the long term incentive was 2/3 performance-based (in the form of performance shares) and 1/3 time-based (in the form of restricted stock units)

For 2017, the CEO’s long term incentive will be delivered 100% in the form of performance shares, such that 89% of the total target compensation for the CEO will be performance-based. In 2016, Mr. Sargent’s compensation was 65% performance-based.


Ms. Goodman - Total Compensation at Risk       Mr. Sargent - Total Compensation at Risk

Pay Elements

The table below summarizes the core elements of our 2016 compensation program for our NEOs.

         Base Salary        +      Annual Cash Incentive Awards        +      Performance Shares

Principal Contribution to Compensation Objectives

Attracts, retains and rewards talented executives with annual salary that reflects the executive’s performance, skill set and value in the marketplace

● Focuses executives on annual financial and operating results
● Links compensation to strategic plan
● Enables total cash compensation to remain competitive within the marketplace for executive talent
● Rewards achievement of long-term business objectives and stockholder value creation
● Propels engagement in long-term strategic vision, with upside for superior performance
● Retains successful and talented management team

Performance Metrics

● EPS, Gross Profit Dollars and Total Sales Growth
● RONA %, Sales Growth %

Base Salary

Base salaries are reviewed and established annually or upon promotion / following a change in job responsibilities. Management makes recommendations based on market data, internal pay equity and each executive’s level of responsibility, experience, expertise and performance.

In March 2016, our senior leadership team (including the NEOs, other than our Senior Vice President and Corporate Controller) elected not to receive any base salary increase. The Committee agreed, and also decided that Ms. Komola, our CFO, would not receive at the time, the second tranche of her salary increase previously approved in November 2015. Our Senior Vice President and Corporate Controller, while an

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executive officer, is not a member of our senior leadership team and received a base salary increase of 1.5%, effective May 1, 2016, in line with our merit budget for associates other than the senior leadership team. In June 2016, Ms. Komola received her increase of 7.1%, which had been approved in November 2015 in order to more appropriately position her salary compared to peer group CFOs. Ms. Goodman’s salary was increased in connection with her promotion to CEO as described in the “Executive Summary – New CEO Compensation” section of this CD&A.

Annual Cash Incentive Plan

The NEOs are eligible to earn cash awards based on Company performance under the Amended and Restated Executive Officer Incentive Plan (other than Mr. Conte, who participates in our Annual Performance Award plan instead). Target awards are granted as a percentage of base salary.

The table below sets out the target % for 2016:

NEO        Target %
Shira Goodman1 150%
Christine T. Komola 85%
Mark Conte 50%
Joseph G. Doody 85%
Michael Williams 50%
 
Ronald L. Sargent 150%
John Wilson2 Not applicable

1 Ms. Goodman’s annual cash incentive target as a percentage of base was increased from 85% to 150% on her appointment as interim CEO on June 14, 2016.
2 Mr. Wilson left Staples during 2016 and was not eligible to receive a payment under our annual cash incentive plan as a result.

Financial Performance Metrics

In March 2016, the Committee selected three performance metrics for the 2016 annual cash incentive awards:

EPS (50%)

Gross Profit Dollars (25%)

Total Sales Growth (25%)

While EPS remained the same, Gross Profit Dollars and Total Sales Growth replaced our 2015 metrics of Gross Margin Dollars and Beyond Office Supplies Sales Growth, respectively. Gross Profit Dollars includes distribution, delivery, rent and other occupancy expense, and the Committee believed this was a more appropriate metric given our initiatives to reduce cost and improve efficiency in our supply chain and retail store network. The Committee also believed that Total Sales Growth better aligned with our 2016 business objectives of growing mid-market sales in our delivery business, and driving traffic in stores and online across all categories. Our performance metrics are calculated on a non-GAAP basis.

Each performance objective was assigned an associated threshold achievement level below which no portion of the bonus attributable to that measurement was to be paid. Additionally, target and maximum levels are set with increased payouts for better than expected performance, with a maximum payout of 200% of target.

The Committee, working with its independent compensation consultant, employed statistical modeling and exercised judgment to assess the degree of difficulty of hitting various levels of performance to ensure the goals were robust yet attainable in the context of our business environment and progress to date on the reinvention strategy.

No portion of any bonus is payable in the event the company fails to achieve the threshold EPS

2016 Annual Cash Incentive Plan - Goals & Metrics

      Target
Value $
      Actual
Value $
      Realized
Value as % of Target
Shira Goodman $1,244,291 $584,817 47%
Christine T. Komola $621,154 $291,942 47%
Mark Conte1 $189,609 $120,378 63.5%
Joseph G. Doody $593,635 $279,008 47%
Michael Williams $271,802 $127,747 47%
 
Ronald L. Sargent $1,873,812 $880,692 47%

1 Mr. Conte is not a member of Staples leadership team and was eligible for a different bonus plan in 2016 than the other NEOs. While the metrics were the same, the goals for Total Gross Profit $ and Total Sales Growth under this plan excluded our European and US Retail business units, resulting in an additional payout under the Total Gross Profit $ metric.

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Metric Weighting Threshold Target Maximum Actual Achievement to
Target
Contribution to
Total Payout
Earnings Per Share      50%      $0.86      $0.91      $0.96      $0.906      99%      47%
Total Gross Profit $ 25% $5,305M $5,491M $5,677M $5,191M 94% 0%
Total Sales Growth 25% (0.6%) 1.4% 3.5% (1.6%) 95% 0%
Total Payout % 47%

Earnings per Share (EPS) - Earnings per share is calculated based on figures reported in our financial statements, adjusted to remove certain non-recurring or non-cash charges. EPS is a funding mechanism for our annual cash incentive program and minimum performance must be attained for any payment to be earned. EPS generally is deemed to be a measure of financial success and its maximization is a prime indicator of operational health. The target goal was $0.91, which reflected an increase of $0.02 versus the target goal in 2015. In addition, the gap between threshold and target goals was set at just $0.05. This increased the difficulty of achieving the minimum EPS required to earn any annual incentive from 2015 and 2014, where the gap between threshold and target was $0.10 and $0.15, respectively.

Total Gross Profit $ - Gross profit $ is defined as sales, net of direct product costs (including the impact of vendor rebates or other promotional income), reserves for returns and allowances, and charges/credits for obsolescence, shrink, other margin additives, logistics and rent & occupancy (excluding the impact of foreign exchange fluctuations).

Total Sales Growth - Sales is defined as net sales of all product categories across both our core office products and beyond office supplies categories (excluding the impact of foreign exchange fluctuations).

For 2017, we simplified the annual bonus plan for our NEOs to be 50% based on our North American Retail results and 50% based on our North American Delivery results, with no bonus payable if a threshold EPS goal is not achieved. The metric selected for our North American Retail plan was Operating Income (100%). The metrics selected for our North American Delivery plan were Operating Income (50%) and Sales Growth (50%). These changes to the annual cash incentive plan reinforce our Staples 20/20 strategy, align with our focus to North America and the core deliverables of accelerating growth in our North American Delivery business and preserving profit in our North American Retail business.

Long Term Incentive Plan Awards

The 2016 long-term incentive awards for our NEOs (excluding Mr. Conte, who is not eligible to receive performance shares) for 2016 were granted 2/3 as performance shares and 1/3 as time-based Restricted Stock Units (“RSUs”), as authorized under our 2014 Stock Incentive Plan.

RSUs

The Committee includes RSUs in the long-term incentive mix to be in line with typical practice among our peer group and the broader market.
 

The Committee based its determination on feedback from shareholders, consultations with its independent compensation consultant, the need to remain competitive in the marketplace in recruiting top talent and other factors relating to each equity vehicle’s impact on both the participants and the company.
 

The RSUs vest in three equal annual installments, such that they are fully vested on the third anniversary of the grant date.

Performance Shares

The performance shares were subject to a three-year performance period, with cumulative three-year goals. The Committee also set goals for the third year of our 2014-2016 long-term awards and second year of our 2015-2017 long-term awards, which had one-year goals set annually for the three-year performance periods.
 

With respect to the performance shares, the award will be increased or decreased by 25% based on the company’s three-year total shareholder return relative to the returns generated by the S&P 500 companies.
 

As of January 28, 2017, our total shareholder return over the 2014-2016 performance period was at the 10th percentile of the S&P 500. Therefore, any awards earned for the 2014-2016 long-term awards were reduced by 25%.

2016 Plan Year Goals & Metrics

For 2016, the last year of the 2014 – 2016 performance cycle and the second year of the 2015-2017 performance cycle, the Committee selected Return on Net Assets (“RONA”) % and Sales Growth %, each weighted at 50%, as the performance metrics. These were the same metrics as used in 2014 and 2015 and were selected because they were linked to the execution of our reinvention strategy and are indicators of stockholder value enhancement. The fiscal 2016 goals were as follows:

Metric      Weighting      Threshold      Target      Maximum      Actual      Payout %
RONA % 50% 9.00% 9.19% 9.38% 9.19% 100%
Sales Growth % 50% (0.6%) 1.4% 3.5% (1.6%) 0%
Total Plan Payout 50%

RONA % - RONA is calculated as net operating profit after taxes (operating profit, add rent expense) as a percentage of net assets (total assets, add interest bearing debt, add net capitalized rent, add implied goodwill).

Sales Growth % - Sales Growth is based on sales figures reported in our financial statements of 2016 compared to 2015.

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Performance Share Award 2014 – 2016

The tables below set forth for each NEO the target award for the three-year performance period 2014-2016, actual shares earned, and the level of goal achievement for fiscal years 2014-2016.

Name Target
Value$
Target
Shares
1
Shares
Awarded
Actual
Value$2
Realized Value
as % of Target
Shira Goodman      $2,169,112      161,874      87,291      $766,415      53.925%
Christine Komola $2,169,112 161,874 87,291 $766,415 53.925%
Mark Conte3
Joseph Doody $2,169,112 161,874 87,291 $766,415 53.925%
Michael Williams4 $406,271 30,019 16,189 $142,139 53.925%
 
Ronald Sargent   $8,225,000   613,806   330,996   $2,906,145   53.925%
John Wilson5   $2,169,112   161,874   82,289   $722,497   50.835%

1 Target shares calculated on share price of $13.40 on March 5, 2014 grant date and rounded up to the nearest full share.
2 Value based on closing price of $8.78 of Staples stock on date of release (March 7, 2017).
3 Mr. Conte is not eligible to receive performance share awards and instead receives his long-term incentive solely in the form of RSUs.
4 Target shares calculated on share price of $13.40 on March 5, 2014 grant date and $14.43 on December 3, 2014 grant date, rounded up to the nearest full share. Mr. Williams received a second tranche of performance shares in 2014 in connection with his promotion from Senior Vice President to Executive Vice President.
5 Mr. Wilson’s award was pro-rated to reflect the fact that he left Staples on October 31, 2016.

3 Year Performance Period Achievement
(2014 – 2016)

FY14 FY15 FY16
RONA %      Actual Results      8.95%      9.03%      9.19%
  Target Goal 8.90% 9.16% 9.19%
Weighting 50% 50% 50%
Payout % 103.55% 90.85% 100%
 
Sales Growth % Actual Results -0.61% -2.22% (1.6%)
Target Goal 2.29% 1.2% 1.4%
Weighting 50% 50% 50%
Payout % 70.97% 66.02% 0.00%
Plan Year Payout % 87.26% 78.44% 50.00%
Total Payout % for three-year cycle (87.26% + 78.44% + 50.00% / 3) = 71.90%
Actual payout % after -25% TSR modifier applied (71.90% x 75%) 53.925%

Performance Share Award 2015 – 2017
(three-year performance period, annual goals)

The goal achievement for 2015 and 2016 will also be applied to the corresponding annual goals for our 2015-2017 performance share awards granted in March 2015 (subject to the TSR modifier), as set out below:

3 Year Performance Period Achievement
(2015 - 2017)

Name  
Target
Value$
Target
Shares
Christine Komola       $2,169,109       130,748
Mark Conte1
Joseph Doody $2,169,109 130,748
Michael Williams $575,009 34,660
 
Ronald Sargent2 $8,225,007 495,781
John Wilson2 $2,169,109 130,748
2015
(RONA% and
Sales Growth%)
78.44%
      2016
(RONA% and

Sales Growth%)
50.00%
      2017
(RONA% and

Sales Growth%)
TBD


1

Mr. Conte is not eligible to receive performance shares and receives his long-term incentive solely in the form of RSUs.

2

Messrs. Sargent and Wilson’s awards will be pro-rated to reflect the fact that they left Staples on January 28, 2017 and October 31, 2016, respectively.

*

Achievement against 2017 goals will be determined by the Committee in March 2018.


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Performance Share Award 2016 – 2018
(three-year performance period, three-year cumulative goals)

In response to shareholder feedback in 2016, the Committee adopted three-year cumulative goals for the 2016-2018 performance period. The Committee selected Return on Net Assets (RONA) % and Operating Income Growth ($M), each weighted at 50% as the performance metrics. Operating Income Growth ($M) replaced Sales Growth % as one of the two metrics to include our initiatives related to sales growth and operating efficiency in our long-term incentive plan.

The table below sets forth the target award for each NEO for 2016-2018:

3 Year Performance Period Achievement
(2016 - 2018)

Name  
Target
Value$*
Target
Shares
Shira Goodman1       $1,446,071       137,721
Christine Komola $1,446,071 137,721
Mark Conte2
Joseph Doody $1,446,071 137,721
Michael Williams $383,334 36,508
 
Ronald Sargent3 $5,483,342 522,223
John Wilson3 $1,446,071 137,721

The 2016 – 2018 performance cycle was the first performance cycle where we set 3-year cumulative goals. Achievement against those 3-year cumulative goals will be determined by the Compensation Committee in March 2019.



* Reflects move to 2/3 performance shares and 1/3 RSUs for the 2016-2018 performance cycle.
1 Ms. Goodman received her grant prior to her promotion to CEO.
2 Mr. Conte is not eligible to receive performance shares and receives his long-term incentive solely in the form of RSUs.
3 Messrs. Sargent and Wilson’s awards will be pro-rated to reflect the fact that they left Staples on January 28, 2017 and October 31, 2016, respectively.

2016 Restricted Stock Unit Grant

The table below sets forth for each NEO the target award for the annual Restricted Stock Unit grant made on April 22, 2016:

Name       Grant Date Value $*       Shares Granted
Shira Goodman $723,041 68,861
Christine Komola $723,041 68,861
Mark Conte1 $275,004 31,109
Mark Conte2 $300,003 33,937
Joseph Doody $723,041 68,861
Michael Williams $191,667 18,254
 
Ronald Sargent3 $2,741,676 261,112
John Wilson3 $723,041 68,861

* Reflects move to 2/3 performance shares and 1/3 RSUs for the 2016 -2018 performance cycle.
1 Mr. Conte is not a member of our senior leadership team and received his annual grant of restricted stock units in July, along with Staples’ other eligible associates.
2 Mr. Conte received an additional special equity grant in July 2016.
3 Messrs. Sargent and Wilson’s awards were forfeited upon their respective departures from Staples.

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Setting Performance Goals

The table below highlights our history of setting challenging performance goals.

 
    Goal Attainment % Payout %    
  Annual Cash Incentive % %
2016        96.7%        47.0%
2015 69.5% 33.1%
2014 99.5% 87.0%  
 
Performance Share Award for 2014-2016 % %
2016 50.00%
2015 78.44%   *53.925%
2014 87.26%
71.90%
 

*

Payout reflects downward adjustment related to relative TSR for the respective three-tier period.


Executive Benefits & Perquisites

Retirement Benefits

We do not have a pension plan in which our NEOs participate. However, our NEOs are eligible to participate in defined contribution retirement income plans that are fully funded by the NEOs and supported by Staples through limited matching contributions.
 

Our NEOs are 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 maintain the Supplemental Executive Retirement Plan (“SERP”), which is a non-qualified deferred compensation plan 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 90% of their base salary and bonus and receive matching contributions up to a maximum of 4% of base salary and bonus.

Health and Welfare Benefits

Our NEOs are eligible to participate in standard health and welfare programs on the same basis as our other salaried associates. These programs include medical, dental, vision, disability, and supplemental life insurance. We also have an Executive Benefits Program for all senior officers of Staples, including the NEOs, consisting of life insurance, long-term care insurance, a survivor benefit plan, and an executive physical program; as well as a legacy supplemental long term disability benefit in which Ms. Goodman is the only NEO who continues to participate. Ms. Goodman was provided this benefit before she was appointed CEO. 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. 
 

In December 2016, the Committee scaled back the Executive Benefits Program by eliminating the nonstandard life insurance, long-term care insurance and executive physical benefits for employees hired on or after January 1, 2017, and reducing the amount of the benefit available to them under the survivor benefit plan. For current employees, the Committee (i) froze the amount of the benefit available to them under the non-standard life insurance benefit and the survivor benefit plan as of December 31, 2016, (ii) eliminated the executive physical benefit as of May 2017, and (iii) eliminated the company reimbursement for their long-term care insurance benefit as of July 2017 (with some exceptions for employees over 65 years of age).

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Expatriate Benefits

Mr. Wilson received certain expatriate benefits in connection with his assignment to the Netherlands.

For more information about retirement and other benefits, see the “All Other Compensation” table” in this proxy statement.

Minimal Executive Perquisites

Our executive compensation program is almost completely free of perquisites.

Policy against reimbursement of excise tax on change in control payments. We maintain a policy that prohibits Staples from entering into any 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 Sections 280G and 4999 of the U.S. Internal Revenue Code.
 

Aircraft Policy. During 2016, Staples terminated its leased aircraft agreement and the policy of personal use of our leased aircraft. There was no personal use of our leased aircraft during our 2016 fiscal year before the termination of the policy.
 

Tax Services Reimbursement Program. We reimburse some of our NEOs up to $5,000 each year for tax, estate, or financial planning services from a pre-approved list of service providers that must not include our independent registered public accounting firm. The reimbursements are not grossed up for taxes. The program allows for our CEO to be reimbursed up to $50,000 each year. On her appointment to the role of CEO, Ms. Goodman declined to accept the increase in tax service reimbursement from $5,000 to $50,000. The company plans to phase out this program during 2017.


III   COMPENSATION PROCESS

Pay Philosophy

It is the company’s philosophy that:

Pay should be performance-based, so that excellent results yield relatively high pay and poor results yield relatively low pay
 

Salaries and incentives should be referenced to median peer group practices, but when making decisions about compensation levels, the Committee relies upon its judgment and not on rigid guidelines or formulas


The Compensation Committee’s Process

The Committee has established a number of processes to help ensure that our executive compensation program meets its objectives and is consistent with the pay philosophy described above. These processes also helped to inform the design of the 2016 Compensation Program described above.

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. In our 2016 fiscal year, the Committee continued to use Exequity LLP as an independent advisor to advise on and assist the Committee with executive compensation matters. Under the terms of its written agreement, Exequity is responsible for, among other matters:

Reviewing total compensation strategy and pay levels for executives
 

Performing competitive analyses of outside board member and CEO compensation
 

Examining all aspects of executive compensation programs to assess whether they support the business strategy

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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 advice to the Committee with respect to all compensation decisions pertaining to the CEO and all compensation recommendations submitted by management

During our 2016 fiscal year, the independent consultant performed these responsibilities and met with the Committee in executive session without the presence of management. Exequity was also engaged to support the Compensation Committee with analysis and recommendations with respect to appropriate target annual compensation for Ms. Goodman on her appointment to the role of CEO.

Consistent with the terms of the written agreement and the Committee charter, Exequity has, with the knowledge and consent of the Committee, provided input to management on matters to be presented by management to the Committee. Exequity has not performed services for Staples that were unrelated to Committee matters. During 2016, with the Committee’s approval, Exequity assisted management by providing compensation 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 each of the four Committee meetings during our 2016 fiscal year. Exequity was paid $87,861 for all services rendered during 2016. In September 2016, the Committee performed a conflict of interest assessment with respect to Exequity and no conflict of interest was identified.

Benchmarking

The Committee’s typical practice is to review NEO compensation on an annual basis at its regularly scheduled meeting in December of each year, ahead of the beginning of the new fiscal year. The Committee typically benchmarks each NEO’s compensation against data and analysis provided by management and the independent compensation consultant based on current proxy statement data from our peer group, and taking into account the Company’s performance, shareholder feedback, and the results of our Say-on-Pay advisory vote.

In 2016, the Committee met in executive session and engaged the independent compensation consultant to provide benchmarking analysis and recommendations with respect to Ms. Goodman’s target compensation in connection with her appointment to the CEO role on an interim basis in June, and a permanent basis in September, as described in the “Executive Summary – New CEO Compensation” section of this CD&A. Given the departures of Messrs. Sargent and Wilson in 2016, the expectation that Ms. Goodman would be reviewing our management structure as part of her transition to the new role, the Committee’s previous extensive analysis of current NEO compensation, and the fact that our Senior Vice President and Corporate Controller and Executive Vice President and Chief Legal Officer were not expected to be NEOs going forward, the Committee did not make any changes to the executive compensation for our other NEOs and determined that its typical benchmarking would not be productive.

Instead, in December 2016 the Committee focused on the competitiveness of base salary, total cash compensation (base salary plus annual cash bonus) and total long-term incentive compensation levels that would potentially be associated with Ms. Goodman’s new management structure.

Peer Group

The Committee reviews our peer group extensively every three years, the last review being conducted in 2015.

The peer group analysis was conducted by the Committee’s independent compensation consultant, 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.

Based on a quantitative and qualitative assessment, the Committee retained twelve of the then peer group companies and included six new peer group companies. These changes were designed to ensure the overall peer group was more appropriately aligned with Staples from a revenue and market capitalization perspective.

The new companies selected at that time are shaded in the table below:

             
    Bed Bath & Beyond Kohl’s Corporation Office Depot, Inc.    
Best Buy Co., Inc. L Brands, Inc. Publix Super Markets, Inc.  
  CarMax, Inc.* Lowe’s Companies, Inc. Rite Aid Corporation
FedEx Corporation   Macy’s, Inc.   Sysco Corporation
Gap Inc. NIKE, Inc. The TJX Companies, Inc.  
J.C. Penney Company, Inc. Nordstrom, Inc. Xerox Corporation
 

* CarMax, Inc. will be removed from the peer group as our new CEO, Ms. Goodman, serves on the CarMax, Inc. Board.

We will again review our peer group in 2017 to ensure appropriate alignment for industry, revenue and capitalization following the divestiture of our European business and our geographic focus to North America, in addition to our strategic shift to B2B and delivery.

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Compensation Analysis & Conclusions

This section describes the Committee’s analysis and conclusions relating to the overall level of compensation for our CEO and other named executive officers.

CEO Compensation

Please refer to the “Executive Summary – Shareholder Feedback and Board Response” and “New CEO Compensation” sections of this CD&A for a full description of how Ms. Goodman’s total target compensation as CEO was determined.

Compensation at Target - Based on the analysis of peer group CEO compensation provided by the independent compensation consultant, the Committee set target compensation for Ms. Goodman at the 25th percentile of our peer group companies.

Other NEO Compensation

As discussed in the “Compensation Process – Benchmarking” section of this CD&A, the Committee had previously been provided with extensive analysis with respect to the compensation of our other NEOs over the preceding years, and did not engage in further detailed benchmarking in 2016. The Committee had previously taken steps to align Ms. Komola’s target compensation more closely with the 50th percentile of the peer group.

As Ms. Goodman finalized the management structure for 2017, the Committee were asked by management at the December meeting to instead review the appropriate target compensation for two expected executive officer roles: (i) the role of Vice Chairman and Chief Administrative Officer, which was filled in January 2017 by an external candidate, and (ii) the President, North American Delivery role, which was filled by an internal candidate at the beginning of fiscal 2017.

Conclusions

The Committee reviewed and established the target compensation for our CEO, appointed in September 2016 and determined that the overall target compensation was appropriate, given the target compensation agreed was a significant reduction versus the target compensation of the prior CEO and that it aligned with the 25th percentile of Staples peer group companies. The Committee also determined that the 2016 compensation for the other NEOs continued to be appropriate.

IV   OTHER MATTERS

Termination Scenarios

The Committee regularly reviews all compensation components for our NEOs, including salary, bonus, current vested and unvested long term incentive compensation, the current value of owned shares, and cost of all perquisites and benefits. In addition, the Committee periodically examines 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 executives.

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 2017. This information was prepared based on compensation data as of the end of fiscal year 2016 and assumed that the various scenarios occurred at the end of fiscal year 2016. Similar termination scenario information with respect to our 2016 fiscal year is presented under the heading “Potential Payments upon Termination or Change-in-Control.”

Based on this review, the Committee found the total compensation for each of our NEOs under these various scenarios to be reasonable. Many factors were considered, including, but not limited to, the contributions of the executive to Staples, the financial performance of Staples, the marketplace and the particular contemplated scenario.

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.

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. 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.

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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. In fiscal 2016, Mr. Sargent attended the regularly scheduled compensation committee meetings in March and June.

Ms. Goodman attended the regularly scheduled meetings in June and December. When discussing compensation matters pertaining to our CEO, the Committee generally meets in executive sessions with its independent compensation consultant without any member of management present.

Administration of Incentive Plan

The Board and the Committee, through delegated powers, have broad discretion in administering the cash and stock incentive plans under which new awards may be made. 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 our current plans.

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. The Committee can decrease but not increase incentive awards for NEOs.

The Board has delegated authority to the Chairman and CEO to grant stock options and restricted stock units and, in his capacity as Chairman, restricted stock to non-executive employees out of an annual pool of 600,000 shares. Given our appointment of an independent Chairman in 2017, the Board expects to revisit this delegation.

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. Awards from this pool cannot be granted to executive officers.

Risk Assessment

At the December 2016 meeting, 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 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 a broad recoupment policy. The Committee also considered and reviewed the input from participants in our corporate governance outreach program.

Based on its evaluation and recognizing that 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 are not reasonably likely to have a material adverse effect on the Company.

Stock Ownership

Within five years of becoming an officer of the Company, our senior executives must attain minimum ownership of Staples common stock equal in value to no less than a defined multiple of their salary. The applicable multiples for Company officers are:

CEO: 5x Salary
 

CFO: 4x Salary
 

Presidents: 3x Salary
 

Other Executive Officers: 1 - 2x Salary1

As of January 28, 2017, all senior executives had achieved the minimum ownership except for Ms. Goodman and Ms. Komola, who were both within their phase-in period. Ms. Komola subsequently satisfied the minimum ownership requirement in March 2017.

1 The stock ownership guidelines do not apply to Mr. Conte as he is not a member of our senior leadership team.

Recoupment Policy

Our annual cash bonus plans, long term incentive plans and agreements and severance arrangements provide for forfeiture and recovery of undeserved cash, equity and severance compensation from any associate that engages in 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.

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Hedging and Pledging Company Securities

Hedging. 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.

Pledging. Our Insider Trading Policy prohibits the use of Staples’ securities as collateral in margin accounts. However, in limited circumstances, pledging of Staples’ securities for bona fide loans which may require such securities as collateral may be allowed, provided such pledge is cleared with the General Counsel. In the past five years, the General Counsel has not cleared, or been asked to clear, any pledge of Staples’ securities.

Tax and Accounting Implications

Under Section 162(m) of the U.S. 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 reviews the impact of Section 162(m) and intends, to the extent it determines to be practicable, to preserve deductibility under the Internal Revenue Code of compensation paid to our executive officers when consistent with our goal of utilizing compensation programs that attract and retain key executives and align with stockholder interests.

All annual cash incentive awards and performance shares awarded to our NEOs are paid pursuant to plans approved by our stockholders and are potentially deductible by us. Time-based restricted stock does not qualify for the performance-based exception to Section 162(m), but the Committee has determined that the retention benefit derived from such awards outweighs any potential 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.

COMPENSATION COMMITTEE REPORT

The Committee’s objective was to maintain a strong link between pay and performance and to continue to motivate our executives to execute on the key priorities of the strategic plan. The Committee reaffirmed its commitment to pay for performance and the compensation philosophy established in 2013.

The Compensation Committee of the Company 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
 
Paul Walsh, Chair
Deborah Henretta
Carol Meyrowitz

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EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The following table sets forth certain information concerning the compensation of our CEO, our former CEO, our CFO, our three other most highly compensated executive officers serving as of the end of our 2016 fiscal year, and one other executive officer who left Staples during 2016, whom we refer to collectively as the “NEOs.”

        Year       Salary
($)
      Stock
Awards
($) (1)
      Bonus       Option
Awards
($)
      Non-Equity
Incentive Plan
Compensation
($) (2)
      All Other
Compensation
($) (3)
      Total
($)
Shira Goodman 2016 942,028 2,169,111 584,817 77,938 3,773,894
Chief Executive Officer
Christine T. Komola 2016 730,769 2,169,111 291,942 72,637 3,264,460
EVP, Chief Financial Officer 2015 646,384 2,169,109 181,860 78,100 3,075,453
2014 584,063 2,169,112 495,347 59,142 3,307,664
Mark Conte 2016 379,219 575,007 120,378 24,630 1,099,233
SVP, Corporate Controller    
Joseph G. Doody 2016 698,394 2,169,111 279,008 140,866   3,287,380
Vice Chairman 2015 694,229 2,169,109 195,321 146,416 3,205,075
2014 678,020   2,169,112   755,188 115,799 3,718,119
Michael Williams 2016 543,604 575,001 127,747 37,081 1,283,433
EVP, Chief Legal Officer    
Ronald L. Sargent 2016 1,249,208 8,225,018 880,692 309,134 10,664,052
CEO and Chairman 2015 1,249,208 8,225,007   0 389,360 9,863,575
2014 1,249,208 8,225,000 2,591,478 325,851 12,391,537
John Wilson 2016 529,904 2,169,111 86,359 598,854 3,384,228
President, Intl Operations (4) 2015 693,233 2,169,109 195,041 419,360 3,476,743
2014 668,000 2,169,112 495,292 326,725 3,659,129

(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, not the actual amounts paid to or realized by the NEOs during our 2016, 2015 and 2014 fiscal years. An explanation of vesting of restricted stock unit awards, as well as the methodology for payouts under performance share awards is discussed in the footnotes to the “Grants of Plan-Based Awards for 2016 Fiscal Year” and “Outstanding Equity Awards at 2016 Fiscal Year End” tables below.
The amounts shown in the Stock Awards column in 2016 represent the grant date fair value of the 2016-2018 performance share awards granted under the 2014 Stock Incentive Plan. The fair value of these awards is based on the closing price of our common stock ($10.50) on April 22, 2016 (grant date) and is calculated at the target share payout for the three-year performance period. For information about the threshold and maximum payout amounts under these awards, see the “Grants of Plan-Based Awards for 2016 Fiscal Year” table below.
For our three-year performance share awards in 2016, actual shares earned are based on achievement of goals established for the three-year period. In addition, any award that is earned based on performance will be increased or decreased by 25% based on Staples’ three-year TSR relative to the returns generated by the S&P 500 over the same period.
(2) The Non-Equity Incentive Plan Compensation column includes amounts earned under the annual cash incentive award, and in 2014 also includes amounts earned under the legacy long term cash awards. NEOs no longer receive long term cash awards.
(3) The All Other Compensation column represents the following amounts, as applicable for each NEO:
● Contributions made on a matching basis pursuant to the terms of our 401(k) plan and SERP.
● 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 2016, annual premiums paid under our executive life insurance plan for Mr. Sargent, Ms. Komola, and Mr. Doody were $100,000, $19,304, and $50,000, respectively. Messrs. Conte, Williams and Wilson’s and Ms. Goodman’s life insurance coverage was in the form of Death Benefit Only, providing for Staples to pay their beneficiary upon their death, and taxes were not reimbursed with respect to those premiums. There was no annual premium paid for Mr. Williams in 2016 because the Company had already fully funded his policy through premiums paid in prior years. In fiscal year 2016, annual premiums paid under our long-term disability plans for Mr. Sargent and Ms. Goodman were $16,836 and $3,570, respectively.
● Tax preparation services.
● Executive physical and registry program.
● Cash payments described in the “All Other Compensation” table below.

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(4) Mr. Wilson received monthly severance payments in 2016 equal to his monthly base salary rate in effect upon his departure from Staples on October 31, 2016, plus one-twelfth of his average annual cash award over the prior three years. The amounts representing salary are included in the “All Other Compensation” column and the amounts representing his average annual cash award are included in the “Non-equity Incentive Plan Compensation” column. In connection with his departure from Staples we also agreed to make a contingent termination payment in 2017, which is not included in the table and which represented the amount Mr. Wilson would have otherwise received under our Amended and Restated Executive Officer Incentive Plan had he remained employed through the end of fiscal year 2016, pro-rated to account for the time he was actually employed. Mr. Wilson received $211,697 in 2017 pursuant to this contingent termination payment.

All Other Compensation

The table below sets forth the dollar amounts that we paid for each applicable item listed above.

          401(k)      SERP      Executive Life
Insurance
     Long-Term
Disability
     Long-Term
Care
     Tax
Services
     Physical      Cash
Payments
     Totals
Shira Goodman 2016 2,650 43,593 21,553 6,400 1,242 2,500 0 0 $77,938
2016 2,650 36,313 28,577 0 1,022 1,075 3,000 0 $72,637
Christine T. Komola 2015 2,650 42,229 28,599 0 1,022 1,050 2,550 0 $78,100
2014 2,600 23,100 28,620 0 1,022 1,050 2,750 0 $59,142
Mark Conte 2016 0 0 21,035 0 3,595 0 0 0 $24,630
2016 2,650 27,936 103,484 0 1,796 5,000 0 0 $140,866
Joseph G. Doody 2015 2,650 47,570 86,550 0 1,796 5,000 2,850 0 $146,416
2014 2,600 27,076 79,327 0 1,796 5,000 0 0 $115,799
Michael Williams 2016 2,650 25,321 0 0 3,810 5,000 300 0 $37,081
2016 2,650 49,968 188,857 12,754 1,555 50,000 3,350 0 $309,134
Ronald L. Sargent 2015 2,650 114,293 189,036 31,826 1,555 50,000 0 0 $389,360
2014 2,600 50,625 189,215 31,856 1,555 50,000 0 0 $325,851
2016 2,650 31,649 41,691 0 5,304 0 0 517,560 $598,854
John Wilson (1) 2015 0 47,199 0 0 5,304 3,053 0 363,804 $419,360
2014 0 26,720 0 0 5,064 18,200 0 276,741 $326,725

(1) Mr. Wilson’s payments reflect his expatriate assignment from the U.S. to the Netherlands. The total shown for tax services is the actual cost of Mr. Wilson’s tax preparation services. The total shown for cash payments includes (i) $172,652 in 2016 representing severance payments made to Mr. Wilson following his departure from Staples, (ii) the cost of secondary housing while on assignment and following Mr. Wilson’s departure from Staples, and (iii) a cost of living differential allowance, school fees, automobile and home leave costs while on assignment.

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Grants of Plan-Based Awards for 2016 Fiscal Year

The following table sets forth summary information regarding grants of plan-based awards made to the NEOs for our 2016 fiscal year.

Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards (1)
All Other
Stock
Awards
(2)
Name      Grant
Date
     Committee
Approval
Date
     Threshold
($)
     Target
($)
     Maximum
($)
     Threshold
(#)
     Target
(#)
     Maximum
(#)
     Number
of Shares
of Stock
or Units
     Grant Date
Fair Value
of Stock
Awards
Shira (3) 155,536 1,244,291 2,488,582
Goodman 4/22/2016 4/20/2016 68,861 $723,041
4/22/2016 4/20/2016 34,430 137,721 275,442 $1,446,071
Christine T. (3) 77,644 621,154 1,242,308  
Komola 4/22/2016 4/20/2016   68,861   $723,041
  4/22/2016 4/20/2016 34,430 137,721 275,442 $1,446,071
Mark Conte (3)   23,701 189,609 379,218
7/1/2016 65,046 $575,007
Joseph G. (3) 74,204 593,635 1,187,270  
Doody 4/22/2016 4/20/2016       68,861 $723,041
4/22/2016 4/20/2016   34,430 137,721 275,442 $1,446,071
Michael (3)   33,975 271,802 543,604      
Williams 4/22/2016 4/20/2016 9,127 36,508 73,016 $383,334
Ronald L. (3) 234,227 1,873,812 3,747,624
Sargent 4/22/2016 4/20/2016 261,112 $2,741,676
4/22/2016 4/20/2016     130,556 522,223 1,044,446 $5,483,342
John Wilson (3)   74,524 596,190 1,192,380
4/22/2016 4/20/2016 68,861 $723,041
4/22/2016 4/20/2016 34,430 137,721 275,442 $1,446,071

(1) On April 20, 2016, the Compensation Committee established the threshold, target and maximum payout levels for the 2016- 2018 performance share awards granted pursuant to our 2014 Stock Incentive Plan. Amounts earned under performance share awards and shown in the table may be increased or decreased by 25% based on Staples’ three-year TSR relative to the returns generated by the S&P 500 over the same period.
 
The grant date fair value of these awards is based on the closing price of our common stock ($10.50) on April 22, 2016 (grant date) and the target payout amount. The table below provides additional information about the value of the awards based on threshold and maximum payout levels for all three years of the performance period, excluding any increase or decrease based on TSR performance:

            NEO        2016-2018
Threshold
($)
       2016-2018
Target
($)
       2016-2018
Max
($)
Shira Goodman $361,518 $1,446,071 $2,892,141
Christine T. Komola $361,518   $1,446,071   $2,892,141
Mark Conte  
  Joseph G. Doody $361,518 $1,446,071 $2,892,141
Michael Williams $95,834 $383,334 $766,668
Ronald L. Sargent $1,370,835 $5,483,342 $10,966,683
John Wilson $361,518 $1,446,071 $2,892,141

For our three-year performance share awards, actual shares earned are based on achievement of goals established for the three-year performance period.
(2) Restricted Stock Units granted pursuant to our 2014 Stock Incentive Plan as part of our long-term incentive pay mix in 2016, vesting in three equal installments over a three-year period. The grant date fair value of these awards is based on the closing price of our common stock ($10.50) on April 22, 2016 (grant date).
(3) On March 1, 2016, the Compensation Committee established the performance objectives for the 2016 annual cash incentive awards under the Amended and Restated Executive Officer Incentive Plan, as well as the threshold, target and maximum payment levels. See “CD&A” for information about 2016 goal achievement.

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Vesting Provisions of Plan-Based Awards

2016 Compensation Program:

Annual Cash Incentive Plan Awards. Payments of annual cash incentive plan awards under the Executive Officer Incentive Plan are determined based on achievement of performance goals and continued service to Staples. In addition, the following provisions apply:

Retirement. If a NEO terminates his employment before the end of a performance period and if the NEO has satisfied the “Rule of 65” requirements (attainment of age 55 plus years of service to Staples is equal to or greater than 65), then the NEO is eligible for a prorated award based on the number of days the NEO was employed during the plan year. 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 plan year.
 

Death. Upon a NEO’s death before the end of the plan year, annual cash incentive plan awards will be paid out at 100% of the target award, regardless of the amount that would have been earned based upon achievement of the performance goals.
  

Disability. If a NEO’s employment is terminated due to disability before the end of the plan year, then the NEO is eligible for a prorated award based on the number of days the NEO was employed during the plan year. Prorated awards will only be paid out if the Compensation Committee certifies achievement of the objectives and the payouts at the end of the plan year.
 

Termination of Employment. Other than as described above, all annual cash incentive plan awards are forfeited upon termination of employment.

Performance Shares. Performance share awards are earned based on achievement of performance objectives for each year of the performance period, but do not fully vest until the three-year performance period is completed. In addition, the following provisions apply:

Termination of Employment by Staples, Retirement or Resignation. If a NEO is terminated other than for “cause” (as defined in the award agreement) or the NEO retires or resigns and the age and years of service requirements of our Rule of 65 have been satisfied, then the NEO may be eligible to receive (i) shares earned for completed fiscal years within the performance period and, for partial fiscal years during which the named executive officer was employed by Staples, a pro rata portion based on the days employed by Staples, as adjusted by (ii) the TSR multiplier. Prorated awards will only be paid out if the Compensation Committee certifies achievement of the objectives and the payouts will be made at the end of the applicable performance period.
 

Termination for “Cause” by Staples. All performance shares are forfeited if a NEO is terminated for cause.
 

Death or Disability. In the event of a NEO’s death or disability, performance shares will vest and be paid out at the end of the performance period, to the extent the performance objectives are met, as if the NEO were employed on such date.
  

Change-in-Control. If, in connection with a change-incontrol, (a) the NEO does not accept employment with the surviving corporation upon the change-in-control or (b) within one year following the change-in-control, the NEO’s employment is terminated without cause (or the NEO resigns for good reason), the NEO is entitled to receive the greater of the target number of shares or the shares earned based on achievement of the performance objectives and TSR multiplier.

Restricted Stock Units. Restricted Stock Units vest in three equal installments over a three-year period, with one-third of the underlying shares vesting on each anniversary of the grant date. In addition, the following provisions apply:

Termination of Employment. All unvested Restricted Stock Units are forfeited if a NEO ceases to be an employee of, or consultant to, Staples, except in connection with retirement under certain circumstances described below.
 

Death, Disability or Retirement. In the event of a NEO’s death, disability or retirement after reaching the age of 65, any unvested Restricted Stock Units shall vest in full.
 

Change-in-Control. If within one year following a change-in-control, a NEO’s employment is terminated without cause (or the NEO resigns for good reason), any unvested Restricted Stock Units shall vest in full.

Option Awards. Under certain circumstances, the time-based vesting of stock options, which were granted to NEOs prior to 2013, may be accelerated or the awards may be forfeited as described below.

Retirement or Resignation. If a NEO retires or resigns and (i) the age of 65 has been attained, or (ii) the age and years of service requirements of our Rule of 65 have been satisfied, then all stock option awards vest in full.
 

Termination of Employment by Staples. All unvested stock options are forfeited if a NEO is terminated by Staples, regardless of whether such termination was for cause.
 

Death or Disability. All stock options vest in full upon a NEO’s death or disability.
 

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 remaining options.

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Outstanding Equity Awards at 2016 Fiscal Year End

The following table sets forth summary information regarding the outstanding equity awards held by each of the NEOs as of the end of our 2016 fiscal year.

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)
Shira Goodman 4/22/2016 68,861 $630,767
1/31/2016-2/2/2019  (6)     137,721 $1,261,524
2/1/2015-2/3/2018  (7) 130,748 $1,197,652
2/2/2014-1/28/2017  (8)       161,874 $1,482,766
7/2/2012 155,262 13.03 7/2/2022
7/1/2011 159,551 15.93 7/1/2021
7/1/2010 119,353 19.27 7/1/2020  
  7/1/2009 120,061 20.12 7/1/2019
7/1/2008 111,651 24.30 7/1/2018  
7/2/2007 103,095 24.42   7/2/2017  
Christine T. Komola 4/22/2016   68,861 $630,767
1/31/2016-2/2/2019  (6)   137,721 $1,261,524
2/1/2015-2/3/2018  (7)     130,748 $1,197,652
2/2/2014-1/28/2017  (8)   161,874 $1,482,766
7/2/2012 60,516 13.03 7/2/2022
7/1/2011 39,406 15.93 7/1/2021
7/1/2010 29,478 19.27 7/1/2020
7/1/2009 29,653 20.12 7/1/2019
7/1/2008 18,736 24.30 7/1/2018
7/2/2007 17,300 24.42 7/2/2017
Mark Conte 7/1/2016 31,109 $284,958
7/1/2016 33,937 $310,863
9/16/2015 3,595 $32,930
7/1/2015 11,790 $107,996
Joseph G Doody 4/22/2016 68,861 $630,767
1/31/2016-2/2/2019  (6) 137,721   $1,261,524
2/1/2015-2/3/2018  (7) 130,748 $1,197,652
2/2/2014-1/28/2017  (8) 161,874 $1,482,766
7/2/2012 217,314 13.03 7/2/2022
7/1/2011 230,749 15.93 7/1/2021
7/1/2010 172,614 19.27 7/1/2020
7/1/2009 173,642 20.12 7/1/2019
7/1/2008 161,478 24.30 7/1/2018
7/2/2007 149,104 24.42 7/2/2017
Michael Williams 4/22/2016 18,254 $167,207
1/31/2016-2/2/2019  (6) 36,508 $334,413
2/1/2015-2/3/2018  (7) 34,660 $317,486
2/2/2014-1/28/2017  (8) 30,019 $274,974
12/3/2014 41,581 $380,882

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          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 4/22/2016 261,112     $2,391,786
1/31/2016-2/2/2019 (6) 522,223 $4,783,563
2/1/2015-2/3/2018 (7) 495,781 $4,541,354
2/2/2014-1/28/2017 (8) 613,806 $5,622,463
7/2/2012 824,068 13.03 7/2/2022
  7/1/2011 863,012 15.93 7/1/2021
7/1/2010 645,583 19.27 7/1/2020
7/1/2009 649,424 20.12 7/1/2019
7/1/2008 603,932 24.30 7/1/2018
7/2/2007 557,653 24.42 7/2/2017
John Wilson 1/31/2016-2/2/2019 (6) 34,337 $314,527
2/1/2015-2/3/2018 (7) 76,389 $699,723
2/2/2014-1/28/2017 (8) 148,533 $1,360,562
10/1/2012 426,812 11.61 4/30/2017
(1) 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 “Vesting Provisions of Plan-Based Awards” following the “Grants of Plan-Based Awards for 2015 Fiscal Year” table above.
(2) The expiration date for stock options is typically the tenth anniversary of the date of grant.
(3) The shares in this column represent Restricted Stock Units. Restricted Stock Units vest in three equal installments over a three-year period, with one-third of the underlying shares vesting on each anniversary of the grant date. The exercisability of the Restricted Stock Units is accelerated in the circumstances described under the caption “Vesting Provisions of Plan-Based Awards” following the “Grants of Plan-Based Awards for 2016 Fiscal Year” table above.
(4) Based on the fair market value of our common stock on January 28, 2017 ($9.16 per share).
(5) The shares in the Equity Incentive Plan Awards column represent performance share awards based on target share payout.
(6) Performance share awards vest based on achievement of performance objectives over the performance period covering fiscal years 2016 through 2018. For our three-year performance share awards granted in 2016, actual shares earned are based on achievement of goals established for the three-year period. In addition, any award that is earned based on performance will be increased or decreased by 25% based on Staples’ three-year TSR relative to the returns generated by the S&P 500 over the same period.
(7) Performance share awards vest based on achievement of performance objectives over the performance period covering fiscal years 2015 through 2017. For our three-year performance share awards granted in 2015, one-third of the three-year target award is applied as a target amount for each of the fiscal years within the performance period. Actual shares earned are based on achievement of goals established for each year. In addition, any award that is earned based on performance will be increased or decreased by 25% based on Staples’ three-year TSR relative to the returns generated by the S&P 500 over the same period. See the “CD&A” section of our proxy statement for information about 2016 goal achievement.
(8) Performance share awards vest based on achievement of performance objectives over the performance period covering fiscal years 2014 through 2016. For our three-year performance share awards granted in 2014, one-third of the three-year target award is applied as a target amount for each of the fiscal years within the performance period. Actual shares earned are based on achievement of goals established for each year. In addition, any award that is earned based on performance will be increased or decreased by 25% based on Staples’ three-year TSR relative to the returns generated by the S&P 500 over the same period. See the “CD&A” section of our proxy statement for information about 2016 and 2015 goal achievement.

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Option Exercises and Stock Vested During 2016 Fiscal Year

The following table summarizes the option exercises and vesting of stock awards for each of the NEOs during our 2016 fiscal year:

Option Awards Stock Awards
         Number of
Shares Acquired
on Exercise
(#)
        
Value Realized
Upon Exercise
($)
         Number of
Shares Acquired
Upon Vesting
(#)
         Value Realized
on Vesting
($) (1)
Shira Goodman 0 0 63,382 614,805
Christine T. Komola 0 0 63,382 614,805
Mark Conte 0 0 7,692 67,638
Joseph G. Doody 0 0 88,710 860,487
Michael T. Williams   0 0 15,247 147,896
Ronald L. Sargent 0 0 336,372 3,262,808
John Wilson 0 0 62,101 602,380
(1) Represents the fair market value of the stock award on the date of vesting.

Non-Qualified Deferred Compensation for 2016 Fiscal Year

The following table sets forth summary information with respect to each of the NEOs regarding contributions to our Supplemental Executive Retirement Plan (“SERP”) for our 2016 fiscal year:

         Executive
Contributions in
Last FY
($)
         Company
Contributions in
Last FY
($)*
         Aggregate Earnings
in Last FY
($)
         Aggregate
Withdrawals/
Distributions
($)
         Aggregate Balance
at Last FYE
($)*
Shira Goodman 224,120 43,593 361,567 0 3,518,401
Christine T. Komola 71,067 36,313 224,123 0 1,311,439
Mark Conte 0 0 0 0 0
Joseph G. Doody 324,485 27,936 929,403 0 8,816,551
Michael Williams 25,322 25,321 19,297 0 168,929
Ronald L. Sargent 224,857 49,968 988,868 0 8,001,095
John Wilson 29,491 31,649 6,304 0 218,052
* Company contribution amounts in 2016 are included in the All Other Compensation column of the Summary Compensation Table included in this proxy statement. In addition, amounts reported in the aggregate balance that were previously included in the Summary Compensation Table in prior years can be found in the All Other Compensation Table included in this proxy statement.

Our SERP is a non-qualified deferred compensation plan which is generally intended to provide an additional retirement account option above the applicable limits of our 401(k) qualified plan. Our SERP provides participants with a range of diversified investment options similar to our 401(k) plan. Eligible executives, including the named executive officers, may contribute up to 100% of their base salary and annual cash bonus and will receive matching contributions in cash equal to 100% of each dollar saved, up to a maximum of 4% of base salary and bonus. For employees hired prior to January 1, 2017, the matching contributions generally vest 20% per year during the first two years of service based on hours worked during a calendar year, with the remainder vesting in full after three years of service. For employees hired after December 31, 2016, the matching contributions generally vest in full after three years of service. All of our named executive officers are fully vested in their SERP balances. Benefits generally are paid to the participant in accordance with a predefined distribution schedule based on the requirements of Section 409A under the Internal Revenue Code.

Potential Payments Upon Termination or Change-in-Control

The tables below show the estimated incremental value transfer to each current named executive officer under various scenarios relating to a termination of employment. The tables below and the discussion that follows assume that such termination occurred on January 28, 2017. The actual amounts that would be paid to any named executive officer can only be determined at the time of an actual termination of employment and would vary from those listed below. The estimated amounts listed below are in addition to any retirement, welfare and other benefits that are available to associates generally.

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Fiscal 2016 Termination Scenarios

        Retirement or
Resignation
        Termination
for Cause
        Termination
Without
Cause
        Resignation
for Good
Reason
        Termination
Following
Change-in-
Control
        Change-in-
Control Only
        Death or
Disability
Shira Goodman *
Cash Severance Payment $0 $0 $3,025,162 $3,025,162 $3,781,453 $0 $0
Value of Accelerated Vesting of
Incentive Compensation $0 $0 $0 $0 $2,577,184 $0 $2,291,511
Continuation of Benefits $0 $0 $36,713 $36,713 $55,367 $0 $0
Life Insurance Payout $0 $0 $0 $0 $0 $0 $3,300,000
Survivor Death Benefit Payout $0 $0 $0 $0 $0 $0 $7,150,000 (1)
Total $0 $0 $3,061,875 $3,061,875 $6,414,004 $0 $12,741,511
 
Christine Komola *
Cash Severance Payment $0 $0 $1,049,616 $0 $1,574,424 $0 $0
Value of Accelerated Vesting of
Incentive Compensation $0 $0 $0 $0 $2,577,184 $0 $2,291,511
Continuation of Benefits $0 $0 $28,577 $28,577 $42,866 $0 $0
Life Insurance Payout $0 $0 $0 $0 $0 $0 $0
Survivor Death Benefit Payout $0 $0 $0 $0 $0 $0 $3,412,500 (1)
Total $0 $0 $1,078,193 $28,577 $4,194,474 $0 $5,704,011
 
Mark Conte *
Cash Severance Payment $0 $0 $235,923 $0 $471,845 $0 $0
Value of Accelerated Vesting of
Incentive Compensation $0 $0 $0 $0 $736,748 $0 $736,748
Continuation of Benefits $0 $0 $36,195 $36,195 $54,590 $0 $0
Life Insurance Payout $0 $0 $0 $0 $0 $0 $1,141,875
Survivor Death Benefit Payout $0 $0 $0 $0 $0 $0 $1,332,188 (1)
Total $0 $0 $272,118 $36,195 $1,263,183 $0 $3,210,810
 
Joseph Doody *
Cash Severance Payment $0 $0 $1,024,105 $0 $1,536,157 $0 $0
Value of Accelerated Vesting of
Incentive Compensation $0 $0 $0 $0 $2,577,184 $0 $2,291,511
Continuation of Benefits $16,807 $16,807 $132,459 $132,459 $190,524 $0 $0
Life Insurance Payout $0 $0 $0 $0 $0 $0 $0
Survivor Death Benefit Payout $0 $0 $0 $0 $0 $0 $3,177,693 (1)
Total $16,807 $16,807 $1,156,564 $132,459 $4,303,866 $0 $5,469,204
 
Michael Williams *
Cash Severance Payment $0 $0 $690,562 $0 $1,035,843 $0 $0
Value of Accelerated Vesting of
Incentive Compensation $0 $0 $0 $0 $1,064,053 $0 $988,337
Continuation of Benefits $0 $0 $51,405 $51,405 $59,282 $0 $0
Life Insurance Payout $0 $0 $0 $0 $0 $0 $1,630,811
Survivor Death Benefit Payout $0 $0 $0 $0 $0 $0 $1,902,613 (1)
Total $0 $0 $741,967 $51,405 $2,159,178 $0 $4,521,760
(1) Includes one year payout at target under the Amended and Restated Executive Officer Incentive Plan (or, in the case of Mr. Conte, the Annual Performance Award Plan) in addition to any Survivor Death Benefit Payout.
*

Payouts subject to 409A regulations.

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See below for additional explanation of the terms of these payments and our assumptions calculating them. Each of these payments complies with our policy adopted in October 2015, limiting severance benefits payable under a NEO’s employment or severance agreement (excluding equity awards) to 2.99 times the sum of an executive’s salary and target annual cash incentive award, under all scenarios other than death or disability. In addition, please see the “CD&A” section of this proxy statement.

Retirement or Resignation

The “Retirement or Resignation” column includes:

Continuation of Benefits. The continuation of benefits for Mr. Doody represents the provision of long-term care coverage beginning at age 65 under a group long-term care insurance plan.

Termination for Cause

The “Termination for Cause” column includes:

Continuation of Benefits. The continuation of benefits for Mr. Doody represents the provision of long-term care coverage beginning at age 65 under a group long-term care insurance plan.

Termination without Cause or Resignation for Good Reason

In addition to our equity and cash incentive award agreements that provide for the acceleration of vesting upon a termination without cause, we have entered into severance benefits agreements with each of the NEOs that provide compensation following a termination without cause or resignation for good reason. The circumstances constituting cause or good reason are specifically described in the severance benefits agreements for the named executive officers, which are listed as exhibits to our most recent Annual Report on Form 10-K and our cash and equity incentive plans, if applicable. In general, under the severance benefit agreements and our incentive plans:

a termination will be for cause if the NEO has willfully failed to perform his or her duties, breached any confidentiality or non-compete agreement with us, or engaged in misconduct that harms us; and
 

the NEO will have good reason to resign if we materially diminish his or her authority or responsibilities, reduce his or her salary or eligibility for bonus and other benefits, or require that he or she relocate their office more than an additional 50 miles from the NEO’s primary residence following a change-in-control of Staples.

The “Termination without Cause” and “Resignation for Good Reason” columns include:

Cash Severance Payments. Amounts represent the continuation of salary and bonus for 24 months for Ms. Goodman, 6 months for Mr. Conte, and 12 months for the other NEOs.
 

Continuation of Benefits. The continuation of benefits represents health, dental and vision insurance coverage for the severance period, as well as executive life insurance. For Mr. Doody, amounts also include the provision of long-term care coverage beginning at age 65 under a group long-term care insurance plan. The amounts listed are estimates based on the current policies in place after applying a reasonable benefit cost trend.

Termination Following Change-in-Control

Under our severance benefits agreements with the NEOs, if we terminate the NEO’s employment without cause or the NEO resigns for good reason within two years following a change-in-control of Staples, the NEO would receive payments in addition to those triggered by a termination without cause or resignation for good reason. The circumstances constituting a change-in-control of Staples are specifically described in the severance benefits agreements for the NEOs, which are listed as exhibits to our most recent Annual Report on Form 10-K. In general, a change-in-control will occur if:

another person becomes the owner of 30% or more of the combined voting power of our stock,
 

there is a change in a majority of the members of the then-incumbent Board, or
 

our shareholders approve a merger with another entity in which our shareholders fail to own more than 75% of the combined voting power of the surviving entity.

The “Termination Following Change-in-Control” column includes:

Cash Severance Payments. Amounts represent the continuation of salary and bonus for 30 months for Ms. Goodman, 12 months for Mr. Conte, and 18 months for the other NEOs.
 

Value of Accelerated Vesting of Incentive Compensation. Amounts represent the target value of the 2016-2018, 2015-2017 and 2014-2016 performance share awards.
 
 

Continuation of Benefits. The continuation of benefits represents health, dental and vision insurance coverage for the severance period, as well as executive life insurance. For Mr. Doody, amounts also include the provision of long-term care coverage beginning at age 65 under a group long-term care insurance plan. The amounts listed are estimates based on the current policies in place after applying a reasonable benefit cost trend.

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Death or Disability

The “Death or Disability” column includes:

Value of Accelerated Vesting of Incentive Compensation. Amounts represent the target value of the 2016-2018, 2015-2017, and 2014-2016 performance share awards, minus amounts earned for completed plan years.
 

Life Insurance Payout. Amounts represent payouts of three times base salary. Not included in the table above are the payouts from insurance policies for Ms. Komola and Mr. Doody because those are paid directly to the beneficiary by the insurer, unlike the death-benefit only coverage for Ms. Goodman and Messrs. Conte and Williams, which is collected by Staples from the insurer and paid to the beneficiary along with reimbursement of taxes owed with respect to such payout. Payouts under Ms. Komola and Mr. Doody’s policies would be $2,250,000 and $2,095,182, respectively. In addition, Staples has agreed to continue executive life insurance premiums to age 65 for Ms. Komola and Mr. Doody regardless of the reason for their termination of employment with Staples, and because Ms. Goodman previously met certain age and service requirements, Staples agreed to continue her death-benefit only coverage for life.
 

Survivor Death Benefit Payout. Amounts represent payouts of 100% of base salary and target bonus for the first year and 50% of base salary and target bonus for the second and third years, made monthly over a period of three years.

If the termination is due to the NEO’s disability, he or she would be entitled to receive a distribution from our SERP, generally in accordance with the plan provisions and any predefined distribution schedule based on the requirements of Section 409A of the Internal Revenue Code. The NEO would also be entitled to receive disability payments from our disability carriers, if the named executive officer has enrolled in such policy. Disability coverage is generally designed to replace 60% of the NEO’s compensation up to $600,000 for each of the named executive officers. The disability benefit payouts from disability insurance policies for which the named executive officer pays the premiums are not included in the table above.

Agreements Affecting Payments

We provide for forfeiture and recovery of undeserved cash, equity and severance compensation from any associate that engages in misconduct. We also view recoupment as a risk management and asset recovery tool for dealing with 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. For instance, each of the named executive officers has executed a Proprietary and Confidential Information Agreement that covers the two year period subsequent to termination of his employment. Violation of any of the terms of these agreements entitles us to recover any severance payments and value received in connection with any equity awards.

Former Executive Officers

Actual termination payments to our NEOs who left Staples in 2016 are as follows.

Mr. Sargent stepped down as Chief Executive Officer on June 14, 2016, and received (or will receive) pursuant to a letter agreement with Staples (i) $792,767 representing continued salary and bonus opportunity, as then in effect, through January 28, 2017 when he stepped down as Chairman of the Board, (ii) monthly payments of $166,740 for 24 months following January 28, 2017, and (iii) continuation of benefits estimated to be in the amount of $875,000, which represents: (a) health insurance coverage for Mr. Sargent and his family until he reaches age 65; (b) continued payment of the premiums for Mr. Sargent’s existing life insurance policy and long-term care insurance policy until Mr. Sargent reaches age 65, as required by the terms of the policies; and (c) specified secretarial and tax preparation assistance.
 

Mr. Wilson left Staples on October 31, 2016, and received under his severance agreement and pursuant to a separate agreement with Staples (i) a cash severance payment in the amount of $1,109,644, which represents the continuation of salary and bonus for 12 months, (ii) continuation of benefits estimated to be in the amount of $21,787, which represents health, dental and vision insurance coverage for the severance period, (iii) a contingent termination payment of $211,697 representing the amount he would have otherwise received under our Amended and Restated Executive Officer Incentive Plan if he had remained employed through the end of fiscal year 2016, pro-rated to account for the time he was actually employed, and (iv) a monthly housing allowance of Euro 12,500 per month plus reasonable utility expenses for the period beginning the day after his last day of employment and ending on February 28, 2017.

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EQUITY COMPENSATION PLAN INFORMATION AT 2016 FISCAL YEAR END

Equity Compensation Plan Information At 2016 Fiscal Year End
Plan Category            Number of Securities to
be Issued upon Exercise
of Outstanding Options,
Warrants and Rights
(a) (1)
           Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b) (2)
           Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (excluding
securities reflected in
column (a))
(c) (3)
Equity compensation plans approved
by security holders
27,299,012 $21.10 36,197,738
Equity compensation plans not approved
by security holders
0 0 0
Total 27,299,012 $21.10 36,197,738
(1) Includes the maximum number of shares issuable under performance share awards (including the potential 25% increase as a result of relative TSR performance), as described in the “CD&A” section of this proxy statement, and restricted stock units, in each case outstanding as of fiscal year end.
(2) Weighted-average exercise price calculation excludes outstanding performance share awards and restricted stock units, which do not have an exercise price.
(3) Includes 28,154,245 shares available for issuance under our 2014 Stock Incentive Plan as well as 8,043,493 shares available for issuance under our 2012 ESPP. Does not include shares that may become available for issuance, as provided in the 2014 Stock Incentive Plan, through the expiration, termination, surrendering, cancellation, forfeiture or settlement of awards granted under our 2014 Stock Incentive Plan or our Amended and Restated 2004 Stock Incentive Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During our 2016 fiscal year, Ms. Henretta, Mr. Kamlani, Ms. Meyrowitz and Mr. Walsh served on the Compensation Committee and were independent directors during such service. None of our executive officers has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served on our Compensation Committee or our Board of Directors.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely on our review of copies of reports filed during fiscal year 2016 by the directors, executive officers and beneficial owners of more than 10% of our common stock required to file such reports pursuant to Section 16(a) of the Securities Exchange Act of 1934, and a review of written certifications provided by them to the Company, we believe that all of our directors and executive officers complied with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, except that Shira Goodman’s initial Form 3 filed in February 2014, and nine subsequent Form 4s, omitted 30,235 shares of common stock from the direct ownership total, which error was corrected by an amended Form 3 filing in March 2017.

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❯ APPROVAL, ON AN ADVISORY BASIS, OF NAMED EXECUTIVE OFFICER COMPENSATION (ITEM 2 ON THE PROXY CARD)

Our Board recognizes that it is appropriate to seek on an annual basis the views of shareholders on Staples’ executive compensation program. Our shareholders are being asked to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement.

The primary objective of our compensation program is to align executive pay with long term shareholder value creation. The “Executive Compensation” section of this proxy statement, including the “CD&A”, describes in detail our executive compensation programs and the decisions made by the Compensation Committee with respect to the 2016 fiscal year ended January 28, 2017.

In accordance with Section 14A of the Exchange Act, our Board is asking shareholders to approve, on an advisory basis, Staples’ named executive officer compensation by approving the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in this proxy statement is hereby APPROVED.”

As an advisory vote, this proposal is not binding upon Staples. The Compensation Committee considers the results of the voting in making future compensation decisions for our named executive officers.

OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF OUR NAMED EXECUTIVE OFFICER COMPENSATION.


❯ ADVISORY VOTE ON THE FREQUENCY OF FUTURE EXECUTIVE COMPENSATION ADVISORY VOTES (ITEM 3 ON THE PROXY CARD)

As described in proposal 2 above, stockholders are provided an opportunity to cast an advisory vote on Staples’ executive compensation. In accordance with Section 14A of the Exchange Act, this proposal 3 provides stockholders with an opportunity to cast a non-binding advisory vote regarding the frequency of future executive compensation advisory votes. Stockholders may vote for a frequency of every one, two or three years, or may abstain from casting a vote.

The Board believes that advisory votes on executive compensation should be conducted every year so that stockholders may annually express their views on Staples’ executive compensation program.

This is consistent with management’s and the Compensation Committee’s annual review of our executive compensation program, and with our current practice based on the results of our previous advisory vote on frequency in 2011. The Board also believes that an annual vote will facilitate more direct stockholder input about executive compensation, as well as, reflect Staples’ generally open and responsive attitude towards stockholders’ concerns.

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR A FREQUENCY OF 1 YEAR FOR FUTURE EXECUTIVE COMPENSATION ADVISORY VOTES.

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❯ APPROVAL OF AMENDED AND RESTATED EXECUTIVE OFFICER INCENTIVE PLAN (ITEM 4 ON THE PROXY CARD)

We are seeking stockholder approval of our amended and restated Executive Officer Incentive Plan, which we refer to as the Annual Cash Plan, in order to obtain favorable corporate tax treatment for payments earned under this plan. The Annual Cash Plan is designed to provide opportunities for participants to earn financial rewards for their role in ensuring that the Company meets its annual performance targets and to align the interests of the participants with those of our stockholders. The Annual Cash Plan was last approved by stockholders in 2012. For more information about our annual cash incentive award program for our executive officers, see the "Compensation Discussion and Analysis" section of this proxy statement.

Requirement for Stockholder Approval. Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), certain executive compensation in excess of $1 million per year paid to some of our executive officers would generally not be deductible for federal income tax purposes unless such compensation is paid under a performance-based plan that is approved by our stockholders and satisfies certain other criteria. Our Board is therefore submitting the Annual Cash Plan for stockholder approval in order to avail itself of the performance based compensation exception to the deduction limitations under Section 162(m) of the Code. The Board believes that it is important for stockholders to approve the amended and restated Annual Cash Plan.

Proposed Changes to the Annual Cash Plan. The Annual Cash Plan is substantially similar to the plan approved by our stockholders in 2012, and pursuant to which our annual incentive plan awards to executive officers have been made from 2012 to 2016. The Compensation Committee determined to make the following changes in connection with the amendment and restatement of the Annual Cash Plan:

Extended the term of the Annual Cash Plan through fiscal year 2021.
 

Provided flexibility in setting the length of performance periods under the Annual Cash Plan. Rather than only having the full fiscal year available as a performance period, the Compensation Committee may now set multiple, shorter periods of time to constitute the performance periods in any given fiscal year.
 

Clarified that performance goals under the Annual Cash Plan may be calculated on a Generally Accepted Accounting Principles (GAAP) or non-GAAP basis.
 

Provided flexibility for the Compensation Committee to set differing minimum performance goals in any given performance period by removing the requirement to always have a minimum Earnings Per Share goal.

In fiscal 2017, the Compensation Committee took advantage of the flexibility afforded by the Annual Cash Plan, as amended and restated, in setting performance periods to divide the fiscal year into two six-month periods, and established goals for awards under the Annual Cash Plan for the first half of fiscal 2017 subject to stockholder approval, as further described below under “Annual Cash Plan Awards.” If stockholders do not approve the Annual Cash Plan, then no payment will be made with respect to such awards.

Description of the Annual Cash Plan (as Proposed to be Amended and Restated)

The following is a brief summary of the material terms of the Annual Cash Plan as proposed to be amended and restated. The following summary is qualified in all respects by reference to the Annual Cash Plan, which is attached as Appendix A to this proxy statement.

Term of Plan. The Annual Cash Plan will cover five fiscal years (or portions thereof), beginning with our 2017 fiscal year and ending with our 2021 fiscal year. We refer to each such fiscal year or portion of a fiscal year in which performance is measured as a "Plan Period."

Administration. The Annual Cash Plan will be administered by the Compensation Committee of our Board of Directors. The Compensation Committee will have broad authority to determine target bonuses, select performance objectives, adopt rules and regulations relating to the Annual Cash Plan, and make decisions and interpretations regarding the provisions of the Annual Cash Plan.

Eligibility. Each of our executive officers, within the meaning of the rules and regulations promulgated by the Securities and Exchange Commission, will be eligible to participate in the Annual Cash Plan. We currently have 8 executive officers. An executive officer whose employment terminates before the end of a Plan Period, other than as a result of permanent disability, death or retirement, will not be eligible to receive a bonus award under the Annual Cash Plan for that Plan Period.

Determination of Bonus Awards. Each executive officer will have a target bonus award (a "Target Award") for each Plan Period. Target Awards will be expressed as a percentage of the actual base salary paid to the executive officer during that Plan Period. The percentages will be determined by the Compensation Committee based upon the executive officer’s job level and responsibilities and may vary for different officers and business units.

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APPROVAL OF AMENDED AND RESTATED EXECUTIVE OFFICER INCENTIVE PLAN (ITEM 4 ON THE PROXY CARD)

Within the earlier of (i) 90 days after the beginning of each Plan Period and (ii) the first 25% of the Plan Period, the Compensation Committee will establish specific performance objectives for the payment of bonus awards for that Plan Period. The performance objectives for each Plan Period will be based on one or more of the following measures which may be determined in accordance with GAAP or on a non-GAAP basis: sales, earnings per share, return on net assets, return on equity, adjusted operating profit, free cash flow, total shareholder return, net income, operating income and customer service levels. The Compensation Committee may determine that special one-time or extraordinary gains or losses, including without limitation as a result of certain acquisitions or divestitures and changes in accounting principles, should or should not be included in determining whether such performance objectives have been met.

For each Plan Period, a specified percentage of each Target Award will be based upon each of the performance objectives selected by the Compensation Committee for that Plan Period. For each of the performance objectives, a specified percentage of the portion of the Target Award that is based on that particular performance objective will be paid based on the level of performance achieved. Each performance objective has a threshold performance level that must be achieved for any of the bonus award to be paid for such objective. If an executive officer dies before the end of a Plan Period, however, a bonus award based on target performance will be paid within 60 days of the executive officer’s death, and will be annualized if the Plan Period does not cover the entire fiscal year.

The maximum bonus award payable to any executive officer for any fiscal year will be $4 million, with such amount proportionally allocated among all Plan Periods within such fiscal year. In addition, the Compensation Committee presently intends to limit bonus awards to 200% of an executive officer’s Target Award.

Amendments and Termination. The Annual Cash Plan may be amended or terminated by either our Board or the Compensation Committee, provided that (1) no amendment or termination of the Annual Cash Plan after the end of a Plan Period may adversely affect the rights of executive officers with respect to their bonus awards for that Plan Period and (2) no amendment which would require stockholder approval under Section 162(m) of the Code may be effected without such stockholder approval.

Recoupment; Dodd-Frank Clawback. If the Compensation Committee determines during the course of a participant’s employment or during a period of time following termination of employment, that a participant engaged in certain harmful or unethical behavior, the Compensation Committee may, in addition to terminating the participant’s participation in the Annual Cash Plan and requiring forfeiture of outstanding awards, require repayment by the participant of certain amounts paid under the Annual Cash Plan. In addition, in accordance with any requirements of the Dodd-Frank Act and any policy adopted by the Company with respect thereto, if the Company is required to prepare an accounting restatement due to material noncompliance of the Company with any financial reporting requirement under the securities laws, then the Company shall require the participants to return to the Company, or forfeit if not yet paid, the amount of any award received under the Annual Cash Plan during the three-year period preceding the date on which the Company is required to prepare the accounting restatement in excess of what would have been paid to the participant under the accounting restatement as determined by the Compensation Committee.

Annual Cash Plan Awards

The grant of awards under the Annual Cash Plan is discretionary. Other than as described below, the Company cannot now determine the number or type of awards to be granted in the future to any particular participant or group.

2017 First Half Awards. The Compensation Committee approved in March 2017, subject to stockholder approval, awards under the Annual Cash Plan for the first half of fiscal 2017 (the “2017 First Half Awards”). The target compensation under the 2017 First Half Awards represents one-third of the total target compensation payable under the Annual Cash Plan to each executive officer, with the other two-thirds to be payable in connection with the awards for the second half of fiscal 2017. We typically collect a higher proportion of our annual revenue in the second half of our fiscal year.

The 2017 First Half Awards include sales and operating income performance goals for the first half of fiscal year 2017. As described above, the payment of any amount under the 2017 First Half Awards is contingent on stockholders approving the Annual Cash Plan. In addition, no payments pursuant to the 2017 First Half Awards will be made unless the applicable performance goals are satisfied, and Staples achieves a minimum EPS threshold amount for the full fiscal year to be determined by the Compensation Committee.

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APPROVAL OF AMENDED AND RESTATED EXECUTIVE OFFICER INCENTIVE PLAN (ITEM 4 ON THE PROXY CARD)

The table below shows the threshold, target and maximum amounts payable under the 2017 First Half Awards.

Name of Individual and Title/Position or Identification of Group       Threshold
($)
      Target
($)
      Maximum
($)
Shira Goodman 34,375 550,000 1,100,000
Chief Executive Officer
Christine T. Komola 13,635 218,167 436,333
Executive Vice President and Chief Financial Officer
Mark Conte 4,044 64,706 129,413
Senior Vice President and Corporate Controller
Joseph G. Doody 7,434 118,940 237,881
Vice Chairman
Michael Williams 5,998 95,964 191,928
Executive Vice President and Chief Legal Officer
All current executive officers, as a group 96,418 1,542,682 3,085,363
All current directors, who are not executive officers, as a group*
All employees, including all current officers, who are not executive officers, as a group**

* Non-employee directors are not eligible to participate in the Annual Cash Plan.
** No employees, other than executive officers, participate in the Annual Cash Plan. Employees that are not executive officers and eligible for annual cash incentives participate in the Company’s Annual Performance Award Plan.

Federal Income Tax Consequences. The following generally summarizes the United States federal income tax consequences that will arise with respect to the Annual Cash Plan, but it is not a detailed or complete description of all U.S. federal tax laws or regulations that may apply, and does not address any local, state or foreign laws. Therefore, no one should rely on this summary for individual tax compliance, planning or decisions. Participants in the Annual Cash Plan should consult their own professional tax advisors concerning tax aspects of participating in the Annual Cash Plan.

Payments received by executive officers under the Annual Cash Plan will be income subject to tax at ordinary income rates when received. Since the Annual Cash Plan is intended to comply with the requirements of Section 162(m) of the Code, if the Annual Cash Plan is approved by stockholders at the Annual Meeting, then bonus payments made in accordance with the terms of the Annual Cash Plan will be deductible for the Company and will not be subject to disallowance under Section 162(m) of the Code.

OUR BOARD RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDED AND RESTATED EXECUTIVE OFFICER INCENTIVE PLAN.

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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 5 ON THE PROXY CARD)

The Audit and Finance Committee is directly responsible for appointing, compensating, overseeing, evaluating and, when necessary, terminating our independent registered public accounting firm, and our independent registered public accounting firm reports directly to the Audit and Finance Committee. The Audit and Finance Committee of our Board has appointed the firm of Ernst & Young LLP as our independent registered public accounting firm for the current fiscal year. Ernst & Young LLP has served as our independent auditor since our inception. The Audit and Finance Committee evaluates the performance of our independent auditors, including the senior audit engagement team, each year and determines whether to reengage the current independent auditors or consider other audit firms. Further, in conjunction with the mandated rotation of the audit firm's lead engagement partner, the Audit and Finance Committee and its chairman are directly involved in the selection of Ernst & Young's new lead engagement partner. The members of the Audit and Finance Committee and the Board believe that the continued retention of Ernst &Young LLP to serve as our independent auditor is in the best interests of our shareholders.

Although shareholder approval of the Audit and Finance Committee’s selection of Ernst & Young LLP is not required by law, our Board believes that it is advisable to give shareholders an opportunity to ratify this selection. If this proposal is not approved at the Annual Meeting, the Audit and Finance Committee may reconsider its selection.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and will also be available to respond to appropriate questions from shareholders.

OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL YEAR.

REPORT OF THE AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS

The Audit and Finance Committee of the Board of Directors is composed of four members and acts under a written charter, as amended and restated on June 14, 2016, a copy of which is available in the Corporate Governance section of our Investor Information webpage at www.staples.com. The members of the Audit and Finance Committee are independent Directors, as defined by its charter and the rules of the Rule 10A-3 of the Securities Exchange Act of 1934 and the applicable rules of the NASDAQ Global Select Market.

The Audit and Finance Committee provides independent, objective oversight of Staples’ financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the preparation, presentation and integrity of Staples’ consolidated financial s