Best Buy 2010 Annual Report Download - page 64

Revocable Trust, under trust agreement dated June 14,
Michael J. Pratt
2001, as amended and restated, of which Mr. Schulze
Michael J. Pratt is President and Chief Operating is a trustee. Annually, the Board reviews the terms of the
Officer — Best Buy Canada. Michelle K. Pratt, lease and charter agreements to ensure that they are
Mr. Pratt’s wife, is employed with us in Canada as competitive with terms available from unaffiliated third-
Director — Merchandising. During fiscal 2010, we paid parties. We pay an hourly rate for use of the airplanes,
Ms. Pratt total cash compensation of $203,911 CAD without any required fractional ownership. Our senior
($184,111 USD using the average exchange rate for management generally use the airplanes when it is more
fiscal 2010, 0.9029) and awarded her options to economical or practical than flying commercial airlines.
purchase 1,400 shares of Best Buy common stock at an The total amount paid to Mr. Schulze’s entities for use
exercise price of $32.98 per share, options to purchase of the airplanes during fiscal 2010 was approximately
700 shares of Best Buy common stock at an exercise $732,000. All extensions or renewals of lease
price of $37.59 per share, and options to purchase agreements are subject to a competitive bidding
700 shares of Best Buy common stock at an exercise process.
price of $39.73 per share. The stock options expire in
We purchase certain store fixtures from Phoenix Fixtures,
June 2019, September 2019 and January 2020,
Inc. (‘‘Phoenix’’), a company owned by Mr. Schulze’s
respectively, and vest ratably over four years. Ms. Pratt
brother. Our decision to conduct business with Phoenix
was compensated at levels comparable to the
was based on both qualitative and quantitative factors
compensation paid to non-family members in similar
including product quality, pricing, customer service and
positions at our company.
design flexibility. In light of Mr. Schulze’s relationship
with Phoenix, the Board reviewed our transactions with
Richard M. Schulze
Phoenix and determined that the transactions were on
We lease two of our U.S. Best Buy stores from fair terms to us and that Phoenix provides significant
Mr. Schulze, a founder of Best Buy and our Chairman of advantages with respect to service and delivery as
the Board. During fiscal 2010, we paid aggregate rents compared with its competitors. Accordingly, the Board
of approximately $1.0 million for the two stores leased approved the transactions and our continued business
from Mr. Schulze. The leases include escalation clauses, dealings with Phoenix. The total amount paid to Phoenix
and one provides for percentage rent based on gross during fiscal 2010 was approximately $4 million USD
sales. Depending upon our exercise of successive and $199,000 CAD. All transactions with Phoenix
renewal options, the leases run through 2021 and during fiscal 2010 were subject to a competitive bidding
2023, respectively. We entered into both real estate process to ensure fair prices and terms.
leases with Mr. Schulze prior to 1990, and the Board
Susan S. Hoff, Mr. Schulze’s daughter, is Chairperson
negotiated and approved the leases (with Mr. Schulze
and Chief Executive Officer of The Best Buy Children’s
not voting). The Board relied on one or more of its
Foundation, for which she has served as principal
members who had no financial interest in the properties
executive officer since the inception of the foundation. In
to review market comparisons, look into alternative
addition, since October 2007, Ms. Hoff has served as a
rental agreements and negotiate with Mr. Schulze. The
Vice President of our company. Ms. Hoff’s base salary
Board determined that these real estate leases were in
for fiscal 2010 was $237,000 and she was eligible for
our best interest and had terms that are competitive with
a short-term incentive award, payable in cash, with a
terms available from unaffiliated third-parties. Renewals
target payout of 45% of her base salary. During fiscal
of these leases are reviewed by the Audit Committee
2010, Ms. Hoff received $403,604 in total cash
pursuant to our Related Party Transactions Policy.
compensation. Also during fiscal 2010, Ms. Hoff was
We also lease and charter, on a non-exclusive basis, awarded options to purchase 6,000 shares of Best Buy
airplanes from entities owned by the Richard M. Schulze common stock at an exercise price of $32.98 per share,
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