SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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Chico’s FAS, Inc.

 

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CHICO’S FAS, INC.
11215 Metro Parkway
Ft. Myers, Florida 33966

 

May 5, 2011

 

TO OUR STOCKHOLDERS:

 

 

It is our pleasure to invite you to attend our 2011 Annual Meeting of Stockholders at 9:00 am local time on Thursday, June 23, 2011, at our National Store Support Center located at 11215 Metro Parkway, Fort Myers, Florida. The meeting will begin with a discussion and voting on the matters described in the attached Proxy Statement and Notice of Annual Meeting of Stockholders, followed by a report on Chico’s FAS, Inc.’s financial performance.

 

The attached Proxy Statement is a critical element of the corporate governance process. Its purpose is to answer your questions and to provide you with information about the Company’s Board of Directors and executive officers, and a discussion of proposals that require your vote.

 

Please read these materials so you will understand what business will be transacted and voted upon at the meeting. Also, please sign and return the accompanying proxy card to ensure that your shares will be voted as you direct even if you cannot attend the meeting.

 

Consistent with last year’s process, we are arranging to make our proxy materials available on the Internet to those stockholders who own their shares in “street name,” but will continue to furnish a full set of the proxy materials to each of our stockholders of record. On or about May 9, 2011, a Notice of Internet Availability of Proxy Materials will be mailed to those stockholders who own their shares in “street name.” The Notice of Internet Availability of Proxy Materials contains instructions on how “street name” holders can access our 2011 proxy statement and 2010 Annual Report on Form 10-K over the Internet. The Notice of Internet Availability also provides instructions on how such “street name” stockholders can request a paper copy of these documents if they so desire.

 

On behalf of the associates and directors of Chico’s FAS, Inc., we thank you for your continued support and confidence in our Company.

 

 

DAVID F. DYER
President and Chief Executive Officer

 

CHICO’S FAS, INC.
11215 Metro Parkway
Ft. Myers, Florida 33966

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD JUNE 23, 2011

 

To the Stockholders of Chico’s FAS, Inc.:

 

 

 

 

By Order of the Board of Directors,

 

A. Alexander Rhodes

Secretary

 

TABLE OF CONTENTS

 

CHICO’S FAS, INC.
11215 Metro Parkway
Ft. Myers, Florida 33966

PROXY STATEMENT

 

 

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 2011

 

May 5, 2011

 

To the Stockholders of

Chico’s FAS, Inc.:

 

These proxy materials are delivered in connection with the solicitation of proxies by the Board of Directors of Chico’s FAS, Inc. (“Chico’s,” the “Company,” “we,” or “us”), a Florida corporation, to be voted at our 2011 Annual Meeting of Stockholders and at any adjournments or postponements thereof.

 

You are invited to attend our Annual Meeting of Stockholders on June 23, 2011, beginning at 9:00 A.M., local time. The Annual Meeting will be held at our National Store Support Center located at 11215 Metro Parkway, Ft. Myers, Florida. Stockholders will be admitted beginning at approximately 8:30 A.M. The operation of cameras (including cellular phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the meeting.

 

It is important that proxies be returned promptly to avoid unnecessary expense to the Company. Therefore, regardless of whether you plan to attend the Annual Meeting or the number of shares of stock you own, please date, sign and return the enclosed proxy promptly.

 

What is the purpose of the meeting?

 

At the Annual Meeting, stockholders will act upon the matters outlined in the accompanying notice of meeting, including the election of directors, approval and ratification of our Second Amended and Restated 2002 Employee Stock Purchase Plan, ratification of the appointment of the Company’s independent certified public accountants, approval of an advisory resolution on executive compensation and an advisory vote on the frequency of future advisory votes on executive compensation. In addition, the Company’s management will report on the performance of the Company and respond to questions from stockholders.

 

When are these materials being mailed?

 

This proxy statement and the form of proxy, or the Notice of Internet Availability of Proxy Materials, if applicable, are being mailed starting on approximately May 9, 2011.

 

Why did I receive a notice of the Internet availability of Chico’s proxy materials (the “Notice of Internet Availability”), instead of a full set of printed proxy materials?

 

SEC rules allow us to provide access to our proxy materials over the Internet instead of mailing a full set of such materials to every stockholder. However, we have decided to provide our stockholders of record a full set of printed materials.

For stockholders who own their shares in “street name,” we have arranged to send you a Notice of Internet Availability. All of our stockholders may access our proxy materials over the Internet using the directions below under “How do I access Chico’s proxy materials online?” or by using the directions set forth in the Notice of Internet Availability. In addition, by following the instructions set forth at such Internet site or the instructions set forth in the Notice of Internet Availability, any stockholder may request that a full set of printed proxy materials be sent to them.

 

We have chosen to send the Notice of the Internet Availability to stockholders who own their shares in “street name,” instead of automatically sending a full set of printed copies to all stockholders, to reduce the impact of printing our proxy materials on the environment and to save on the costs of printing and mailing incurred by the Company.

 

How do I access Chico’s proxy materials online?

 

Chico’s 2011 proxy statement for the Annual Meeting and 2010 Annual Report may be accessed at https://materials.proxyvote.com/168615, which does not have “cookies” that identify visitors to the site.

 

How do I request a paper copy of the proxy materials?

 

If you are a stockholder and received the Notice of Internet Availability, paper copies of Chico’s proxy materials will be made available at no cost to you, but they will only be sent to you if you request them. To request a paper copy of the proxy materials, follow the instructions on the Notice of Internet Availability which you received. You will be able to submit your request for copies of the proxy materials by sending an email to the email address set forth in the Notice of Internet Availability, by going to the Internet address set forth in the Notice of Internet Availability or by calling the telephone number provided in the Notice of Internet Availability.

 

What is a proxy?

 

It is your legal designation of another person to vote on matters transacted at the annual meeting based upon the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. The form of proxy card included with this proxy statement designates each of David F. Dyer, Kent A. Kleeberger and A. Alexander Rhodes as proxies for the 2011 Annual Meeting.

 

What is a proxy statement?

 

It is a document that the SEC’s regulations require us to give you when we ask you to sign a proxy card designating individuals as proxies to vote on your behalf.

 

What is the difference between a stockholder of record and a stockholder who holds stock in street name?

 

If your shares are registered in your name, you are a stockholder of record. Owners of record receive their proxy materials directly from us. When you properly complete, sign and return your proxy card, you are instructing the named proxies to vote your shares in the manner you indicate on the proxy card.

 

If your shares are held in the name of your broker or other institution, which is usually the case if you hold your shares in a brokerage or similar account, your shares are held in “street name.” Your broker or other institution or its respective nominee is the stockholder of record for your shares. As the holder of record, only your broker, other institution or nominee is authorized to vote or grant a proxy for your

shares. Accordingly, if you wish to vote your shares in person, you must contact your broker or other institution to obtain the authority to do so. Street name holders can access their proxy materials through the Internet or can elect to receive their proxy materials directly from their broker or other institution by contacting their broker or other institution. When you properly vote in accordance with the instructions provided in the Notice of Internet Availability, you are giving your broker, other institution or nominee instructions on how to vote the shares they hold for you.

 

What is the record date and what does it mean?

 

The record date for the 2011 Annual Meeting is April 25, 2011. The record date is established by the Board of Directors as required by law and the Company’s Amended and Restated Articles of Incorporation and By-laws. Owners of record of common stock at the close of business on the “record date” are entitled to:

 

(a) receive notice of the meeting, and

 

(b) vote at the meeting and any adjournments or postponements of the meeting.

 

What constitutes a “quorum” for the meeting?

 

A certain minimum number of shares must be present or represented by proxy at a meeting before any stockholder vote at the meeting can be effective. A quorum is necessary to conduct business at the meeting. For the Annual Meeting, the quorum requirement will be satisfied if a majority of the outstanding shares of common stock is present and/or represented by proxy. You are part of the quorum if you have voted by proxy. Abstentions and broker non-votes count as “shares present” at the meeting for purposes of determining a quorum.

 

Who is entitled to vote and how many votes do I have?

 

If you are a common stockholder of record at the close of business on the record date, you can vote. For each matter presented for vote, you have one vote for each share you own. If you are a holder in street name at the close of business on the record date, you generally will have the right to instruct your broker or other holder of record how to vote your shares, although specific procedures depend on the terms of your account arrangement. As of the record date, there were 176,161,053 common shares outstanding. Each common share is entitled to one vote on each matter properly brought before the Annual Meeting. Shares of common stock, par value $.01 per share, are the only outstanding voting securities of the Company.

 

How do I vote my shares?

 

Stockholders of record can vote by:

 

 

 

If you hold your shares in street name, you can vote by following the instructions contained in the Notice of Internet Availability. If your shares are held in street name and you wish to cast your vote in person at the Annual Meeting, you must either (i) obtain a “legal proxy,” executed in your favor, from the bank, broker, or nominee, as the case may be, or (ii) obtain a proxy direction form from the bank, broker,

or nominee, as the case may be, and follow the instructions on the form so as to provide such bank, broker or nominee with your directions as to how you want such shares to be voted.

 

Can I vote by telephone or electronically?

 

The Company has not established procedures to allow telephone or electronic voting by record stockholders, but may do so for future stockholder meetings if we determine that the added convenience to our record stockholders would justify the additional costs to the Company associated with these voting methods.

 

Street name holders may vote by way of the Internet as explained in the Notice of Internet Availability.

 

Can I change my vote?

 

You may revoke your proxy or change your voting instructions before the time of voting at the meeting in several ways.

 

If you are a stockholder of record, you may revoke or change your proxy instructions at any time prior to the vote at the Annual Meeting. To do so:

 

 

If you hold your shares in street name, you may revoke or change your proxy instructions at any time prior to the vote at the Annual Meeting by submitting new voting instructions to your broker or other institution in accordance with the procedures and requirements applicable to your account.

 

If I submit a proxy, how will my shares be voted?

 

If you submit a properly executed proxy card, the individuals named on the card, as your proxies, will vote your shares in the manner you indicate.

 

If you sign and return the card without indicating your instructions, your shares will be voted for the election of the three nominees to serve three-year terms on our Board of Directors, for approval and ratification of the Chico’s FAS, Inc. Second Amended and Restated 2002 Employee Stock Purchase Plan, for ratification of the appointment of Ernst & Young LLP as the Company’s independent certified public accountants for the fiscal year ending January 28, 2012 (fiscal 2011), for approval of the advisory resolution on executive compensation, for 1 year on the advisory vote on the frequency of future advisory votes on executive compensation and otherwise as recommended by the Board of Directors.

 

Your vote is important. Whether or not you plan to attend the meeting, we encourage you to vote by proxy as soon as possible.

What are the Board’s recommendations?

 

The Board’s recommendations regarding the proposals to be considered at the Annual Meeting are set forth together with the descriptions of the proposals in this proxy statement. In summary, the Board recommends a vote:

 

 

With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion. At the date this proxy statement went to press, we did not know of any other matter to be raised at the Annual Meeting.

 

My shares are held in street name. How are my shares voted if I do not return voting instructions?

 

If your shares are held in the name of a brokerage firm, your shares may be voted even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under New York Stock Exchange (“NYSE”) rules to vote shares for which their customers do not provide voting instructions on certain “routine” matters. When a proposal is not a “routine” matter under NYSE rules and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.”

 

Proposal 3, the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2011, is a routine matter for which the brokerage firm who holds your shares can vote your shares even if it has not received instructions from you. All other proposals in this proxy statement are non-routine matters and accordingly the brokerage firm cannot vote your shares on those proposals without your instructions.

 

We only count broker non-votes in determining whether a quorum is present.

 

What vote is required to approve each item?

 

Election of Directors.  Our Board of Directors has instituted a majority vote standard for the election of directors in uncontested elections. This means that a director nominee will be elected if the number of votes cast “FOR” that nominee exceeds the number of votes cast “AGAINST” that nominee.

 

If you return a signed proxy card or otherwise complete your voting by proxy over the Internet but abstain from voting on any of the nominees, your shares will not be voted with respect to those nominees. Your shares will be counted for purposes of determining whether there is a quorum, but will have no effect on the election of those nominees.

Approval and Ratification of the Chico’s FAS, Inc. Second Amended and Restated 2002 Employee Stock Purchase Plan.  The Chico’s FAS, Inc. Second Amended and Restated 2002 Employee Stock Purchase Plan will be approved and ratified if the number of votes cast “FOR” approval and ratification of the amendments of such plan by holders entitled to vote exceeds the number of votes cast opposing the approval and ratification of the amendments of the plan.

 

Ratification of Appointment of Accountants.  The appointment of Ernst & Young LLP as the Company’s independent certified public accountants for fiscal 2011 will be ratified if the number of votes cast “FOR” ratification of the appointment by holders entitled to vote exceeds the number of votes cast opposing the ratification of the appointment.

 

Advisory Resolution on Executive Compensation.  The advisory resolution on executive compensation will be approved if the number of votes cast “FOR” approval of such advisory resolution by holders entitled to vote exceeds the number of votes cast opposing the approval of the advisory resolution. While the Board of Directors and its Compensation and Benefits Committee will carefully consider the stockholder vote, the final vote is advisory in nature and will not be binding on the Board or the Company.

 

Advisory Resolution on Frequency of Future Advisory Votes on Executive Compensation.  A plurality of votes cast means that the frequency option that receives the most votes of all the votes cast on the resolution is the frequency that will be deemed recommended by stockholders. While the Board of Directors and its Compensation and Benefits Committee will carefully consider the stockholder vote, the final vote is advisory in nature and will not be binding on the Board or the Company.

 

Other Items.  If any other item requiring a stockholder vote should come before the meeting, the item will be approved if the number of shares voting for the item is greater than the number of shares voting against the item.

 

What are abstentions and broker non-votes?

 

An abstention occurs when a stockholder of record (which may be a broker or other nominee of a street name holder) is present at a meeting (or deemed present) but fails to vote on a proposal or indicates that the stockholder abstains from voting on the election of directors or a proposal. A broker non-vote occurs when a broker or other nominee who holds shares for another does not vote on a particular item because the nominee does not have discretionary voting authority for that item and has not received instructions from the street name owner of the shares.

 

How are abstentions and broker non-votes counted when tabulating the vote?

 

Abstentions, that is, a properly executed proxy marked “ABSTAIN” and broker non-votes with respect to a particular matter do not count in any vote totals for or against any matter, even though the shares associated with such abstentions and broker non-votes are counted for purposes of determining whether there is a quorum present at the Annual Meeting. Accordingly, for purposes of any vote, abstentions and broker non-votes will have the same effect as does a share that is not present or otherwise not voted, as more specifically described below.

 

Election of Directors.  Abstentions and broker non-votes will have no effect on the outcome of the election of candidates for director as they do not count as either “FOR” or “AGAINST” votes.

 

Approval and Ratification of the Chico’s FAS, Inc. Second Amended and Restated 2002 Employee Stock Purchase Plan.  Because the proposal to approve and ratify the Chico’s FAS, Inc. Second Amended and Restated 2002 Employee Stock Purchase Plan is a matter on which brokers are not empowered to vote without instructions, there may be broker non-votes. For purposes of approval of such

Amended and Restated Plan, abstentions and broker non-votes will have no effect on the outcome of the approval as they do not count as either “FOR” or “AGAINST” votes.

 

Ratification of Appointment of Accountants.  Abstentions will have no effect on the outcome of the ratification of the appointment of the accountants. As for broker non-votes, the ratification of the appointment of the independent certified public accountants for fiscal 2011 is a matter on which a broker or other nominee is generally empowered to vote. Accordingly, no broker non-votes are expected to exist in connection with ratification of the appointment.

 

Advisory Resolution on Executive Compensation.  Abstentions and broker non-votes will have no effect on the outcome of the advisory resolution on executive compensation as they do not count as either “FOR” or “AGAINST” votes.

 

Advisory Vote on Frequency of Future Advisory Votes on Executive Compensation.  Abstentions and broker non-votes will have no effect on the outcome of the advisory vote on frequency of future advisory votes on executive compensation as they do not count as either “1 YEAR” or “2 YEARS” or “3 YEARS” votes.

 

Are votes confidential? Who counts the votes?

 

The votes of all stockholders are held in confidence from directors, officers and employees, except:

 

 

All votes will be tabulated by employees of The Registrar and Transfer Company, the Company’s transfer agent for its common stock, whose representatives will serve as one or more of the inspectors of election.

 

Where can I find the voting results of the Annual Meeting?

 

We will report the voting results on a Current Report on Form 8-K filed with the SEC within four business days of the 2011 Annual Meeting.

 

Who is paying for the preparation and mailing of the proxy materials and how will solicitations be made?

 

We will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees in person or by telephone, mail, electronic transmission, facsimile transmission or telegram. The Company will request brokerage houses and other custodians, nominees and fiduciaries to forward soliciting material to stockholders and the Company will reimburse such institutions for their out-of-pocket expenses incurred thereby. The Company has not engaged any outside service provider to assist in the solicitation of proxies.

Does each stockholder receive his or her own copy of the 2010 Annual Report and this proxy statement?

 

In some cases, for stockholders of record, we may send only one Annual Report and proxy statement to an address shared by two or more stockholders, unless we have received contrary instructions from one or more stockholders at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. If you are a stockholder of record residing at such an address and you wish to receive a separate copy of our 2010 Annual Report or this proxy statement, please contact Robert Atkinson, Vice President — Investor Relations by phone at (239) 277-6200 or in writing at 11215 Metro Parkway, Ft. Myers, Florida 33966 and we will promptly send you separate copies. If we have been sending only one annual report and/or proxy statement to your household but you or another stockholder in the household wishes to receive separate copies of annual reports and/or proxy statements in the future, please contact us in the same manner. Please also contact us if your household receives multiple copies of our annual report and/or proxy statement and you would prefer that we send only one copy for the entire household.

 

If you are a beneficial holder and hold your shares in “street name,” your broker, bank or other institution may be utilizing “householding” in sending you the annual report, the proxy statement and/or the Notice of Internet Availability. If you prefer to change the manner in which “householding” is being applied to these deliveries, you should directly contact your broker, bank or other institution.

 

What does it mean if I receive more than one package of proxy materials?

 

This means that you have multiple accounts holding Chico’s FAS, Inc. shares. These may include: accounts with our transfer agent, Registrar and Transfer Company, shares held by the administrator of our employee stock purchase plan, and accounts with a broker, bank or other holder or record. Please vote all proxy cards and voting instruction forms that you receive with each package of proxy materials to ensure that all of your shares are voted.

 

How do I contact the Board of Directors?

 

You can send written communications to one or more members of the Board, addressed to:

 

Chairman, Board of Directors

Chico’s FAS, Inc.

c/o Corporate Secretary

11215 Metro Parkway

Ft. Myers, Florida 33966

 

All such communications will be forwarded to the relevant director(s), except for solicitations or other matters unrelated to the Company.

 

How do I submit a stockholder proposal for the 2012 Annual Meeting?

 

The Company’s 2012 Annual Meeting is currently expected to be held on June 21, 2012. If a stockholder wishes to have a proposal considered for inclusion in next year’s proxy statement, he or she must submit the proposal in writing so that we receive it by January 3, 2012. Proposals should be addressed to the Company’s Corporate Secretary, 11215 Metro Parkway, Ft. Myers, Florida 33966. In addition, the Company’s Amended and Restated Articles of Incorporation also require certain advance notice to the Company of any stockholder proposal and of any nominations by stockholders of persons to stand for election as directors at a stockholders’ meeting. That notice must provide certain other information as described in the Company’s Amended and Restated Articles of Incorporation. See “Stockholder Proposals for Presentation at the 2012 Annual Meeting.”

 

The full Board is currently comprised of nine directors. The Board is divided into three classes with each class consisting of three directors.

 

Directors are elected for three-year terms.

 

The terms of the existing Class III directors, John W. Burden III, David F. Walker and John J. Mahoney, expire at the 2011 Annual Meeting. The Board has nominated Mr. Walker and Mr. Mahoney to continue serving as Class III directors. Mr. Burden, however, is not standing for reelection at the 2011 Annual Meeting and, as a result, he will no longer serve on the Board after the Annual Meeting. Stephen E. Watson, who the Board appointed as a Class I director in November 2010 with his term expiring at the 2011 Annual Meeting, has been nominated instead for election to serve a three-year term as a Class III director along with Mr. Walker and Mr. Mahoney.

 

The Class I directors, Ross E. Roeder and Andrea M. Weiss, serve until the Annual Meeting of stockholders in 2012. The Class II directors, Verna K. Gibson, Betsy S. Atkins and David F. Dyer, serve until the Annual Meeting of stockholders in 2013.

 

The election of the three Class III directors will take place at the 2011 Annual Meeting. At a Board meeting on February 22-23, 2011, the Board approved the recommendation of the Corporate Governance and Nominating Committee and nominated the following persons to stand for election at the 2011 Annual Meeting:

 

Class III Director Seats

 

David F. Walker

John J. Mahoney

Stephen E. Watson

 

The following information is supplied for each person that the Board nominated and recommended for election and is based upon our records and information furnished to us by the nominees. It includes the experience, qualifications, attributes or skills that caused the Corporate Governance and Nominating Committee and the Board to determine that the person should serve as one of our directors.

 

David F. Walker, 57, has been a director since 2005.  From 2002 through 2009, he was the Director of the Accountancy Program at the University of South Florida in St. Petersburg and led the school’s Program for Social Responsibility and Corporate Reporting. For approximately 27 years, through 2002, Mr. Walker was with the accounting firm of Arthur Andersen LLP, having served as a partner with the firm from 1986 until 2002, and most recently until 2002 as partner in charge of the firm’s assurance and business advisory services practice in the Florida/Caribbean region. Mr. Walker is a certified public accountant, certified fraud examiner, and holds a Masters of Business Administration degree from the University of Chicago Graduate School of Business. He currently also serves on the Board of Directors of CommVault Systems, Inc. and CoreLogic, Inc. Mr. Walker also served on the Boards of Directors of Paradyne Networks, Inc. from 2003 until 2005, First Advantage Corporation from 2003 until 2009 and Technology Research Corporation, Inc. from 2004 to 2010.

 

We believe that Mr. Walker’s distinguished role in academia, his service as a former partner at one of the global accounting firms, and his experience on other public company boards provide the Board

with significant public company accounting, disclosure and risk oversight experience and qualifies him to sit on our Board.

 

John J. Mahoney, 59, has been a director since 2007 and is currently the Vice Chairman and Chief Financial Officer for Staples, Inc., having served as Vice Chairman since January 2006 and as Chief Financial Officer since 1996. Prior to 1996, Mr. Mahoney was a partner at Ernst & Young LLP. Previously, Mr. Mahoney served on the boards of directors of Advo, Inc. from 2001 to 2007 and Tweeter Home Entertainment Group, Inc. from 2004 to 2007.

 

As Vice Chairman and Chief Financial Officer of a Fortune 500 retail company, Mr. Mahoney brings extensive experience in a number of important areas including finance and strategic planning, as well as a deep knowledge of the various issues that retail companies currently face which we believe qualifies him to sit on our Board.

 

Stephen E. Watson, 66, has been a director since November 2010. Mr. Watson brings to the Board nearly 40 years of executive and director experience in the retail industry, holding various executive officer positions with Dayton Hudson Corporation, including Chairman and Chief Executive Officer of Dayton Hudson Department Stores Co. and President of Dayton Hudson Corporation. Mr Watson retired in 2002 as President and Chief Executive Officer of Gander Mountain Company, a privately held retailer for outdoor sports and recreation activities. Mr. Watson currently also serves on the Board of Directors of Regis Corporation and Kohl’s Corporation. From 1997 through 2005, Mr. Watson was a director of Shopko Stores, Inc. From 2004 through 2007, Mr Watson was a director of Smart & Final, Inc. He also served on the Boards of Norwest Bank from 1990 to 1996, Target Corporation from 1991 to 1996, Retek, Inc. from 1999 to 2004 and Eddie Bauer Holdings, Inc. from 2005 to 2010.

 

We believe that Mr. Watson’s experience as a leading senior executive officer of several complex and specialty retail businesses, his experience as a director of other public retail companies and his broad knowledge of areas such as retail operations, corporate finance, accounting, marketing and merchandise procurement qualifies him to sit on our Board.

 

If elected, Mr. Walker, Mr. Mahoney and Mr. Watson, will continue their service on the Board beginning at the 2011 Annual Meeting and will serve on the Board until the Annual Meeting in 2014, or until their successors are duly elected and qualified, or until their earlier death, resignation or removal. Unless otherwise directed, the persons named in the enclosed form of proxy intend to vote such proxy “FOR” the election of Mr. Walker, Mr. Mahoney and Mr. Watson as Class III directors of the Company.

 

None of the nominees is related to another or to any other director or any executive officer of Chico’s FAS, Inc. by blood, marriage, or adoption.

 

Each of the proposed nominees for election as directors has consented to serve if elected. If, as a result of circumstances not now known or foreseen, any of the nominees becomes unable or unwilling to serve as a director, proxies may be voted for the election of such other person or persons as the Board of Directors may select. The Board of Directors has no reason to believe that any of the nominees will be unable or unwilling to serve.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THESE NOMINEES FOR ELECTION AS CLASS III DIRECTORS.

 

Directors whose present terms continue until 2012 (Class I directors):

 

Ross E. Roeder, 72, has been a director since 1997 and currently serves as the Chairman of the Board, having been appointed Chairman on January 8, 2009. Mr. Roeder is the former Chairman of Smart & Final, Inc., having held this position from 1999 and having also served as a director of SFI Corporation, the parent corporation of Smart & Final, from 1984 until his retirement in 2007. From 1999 until 2004, Mr. Roeder also held the position of Chief Executive Officer of Smart & Final, Inc. From 1986 to 1998, Mr. Roeder served as a director of Morgan-Kaufman Publishers, Inc., a publisher of computer science text and reference books, and from 1993 to 1998 served as its Chairman of the Board. From 1986 until February 1993, Mr. Roeder was President and Chief Executive Officer of Federal Construction Company. Mr. Roeder was also a director of Mercantile Bank from 1995 to 2006.

 

As the former chief executive officer of a retail company and our current Chairman, Mr. Roeder has many years of experience as a senior executive in the retail industry. We believe that Mr. Roeder’s extensive retail industry experience and executive leadership experience coupled with his 14 years as a Chico’s director, qualifies him to sit on our Board.

 

Andrea M. Weiss, 55, has been a director since February 2009. Ms. Weiss has extensive specialty retail experience having served in several senior executive positions with dELiA*s Inc., The Limited, Inc., Intimate Brands, Inc., Guess, Inc., and Ann Taylor Stores, Inc. She is the founder and current President and Chief Executive Officer of Retail Consulting, Inc., a boutique consulting practice focused on product and brand development, consumer contact strategies, operational improvements, and turnarounds, and has served as its President and Chief Executive Officer since its formation in October 2002. Ms. Weiss currently also serves on the boards of directors of Cracker Barrel Old Country Store, Inc. and GSI Commerce, Inc. Previously, Ms. Weiss served on the boards of directors of Ediets.com, Inc. from 2004 to 2009 and Brookstone, Inc. from 2002 to 2005.

 

In her various senior executive roles and as a consultant, Ms. Weiss has obtained significant marketing and consumer branding experience. We believe Ms. Weiss’ valuable expertise and insights in building brand awareness, proprietary brand development and consumer behavior qualify her to sit on our Board.

 

Directors whose present terms continue until 2013 (Class II directors):

 

Verna K. Gibson, 68, has been a director since 1993.  Ms. Gibson provided consulting services to the Company during most of fiscal 2010 including serving as Interim Brand President for Soma Intimates from November 2009 to May 2010 and thereafter assisting with the transition to a new Brand President for Soma. In fiscal 2010, Ms. Gibson’s consulting fees totaled $350,000.

 

From 1985 to 1991, Ms. Gibson was President and Chief Executive Officer of the Limited Stores Division of The Limited, Inc., a retail apparel specialty chain. From January 1991 through 1995, she served as President of Outlook Consulting Int., Inc. and in January 1999, she resumed the position of President of Outlook Consulting Int., Inc. From December 1994 to July 1996, Ms. Gibson was the Chairman of the Board of Petrie Retail, Inc. From 1993 to fall 1999, Ms. Gibson was a partner of Retail Options, Inc., a New York based retail consulting firm.

 

As a former Chief Executive Officer and retailing consultant, Ms. Gibson has many years of experience in the retail industry. We believe that her significant operational experience, leadership skills, and her understanding of the Company and our business as a result of her 18 years of past service on the Chico’s Board and her past assistance to the Company as a consultant, all qualify her to sit on our Board.

Betsy S. Atkins, 57, has been a director since 2004 and is the Chief Executive Officer of Baja Ventures, an independent venture capital firm focused on the technology, renewable energy and life sciences industry since 1994. Previously, Ms. Atkins was Chairman and Chief Executive Officer of NCI, Inc., a functional food/nutraceutical company from 1991 to 1993.

 

Ms. Atkins was a co-founder of Ascend Communications, Inc. in 1989, a member of their Board of Directors, and served as its Executive Vice President of Sales, Marketing, Professional Services and International Operations prior to its acquisition by Lucent Technologies in 1999. Ms. Atkins was recently named Chairman of the Board for Vantrix and currently also serves on the Boards of Directors of Polycom, Inc., SunPower Corporation, and a number of private companies. Previously, Ms. Atkins served on the boards of directors of McDATA Corporation from 2002 to 2005; UTStarcom, Inc. from 2002 to 2005; Human Genome Sciences from 2003 to 2005; Towers Watson, Inc. in 2010; Vonage Holdings Corp. from 2005 to 2007 and Reynolds American, Inc. from 2004 to 2010. Ms. Atkins was a Presidential-appointee to the Pension Benefit Guaranty Corporation advisory committee from 2001 to 2003, and has been a member of the Florida International University College of Medicine Health Care Network Faculty Group Practice, Inc. since February 2010.

 

Ms. Atkins has a strong skill set in many areas, including managerial and operational experience, particularly in the telecommunications industry. In addition, Ms. Atkins has extensive public board experience including with large multinational companies, and provides focused expertise relative to corporate governance matters. We believe that Ms. Atkins’ leadership and knowledge in corporate governance qualify her to sit on our Board.

 

David F. Dyer, 61, has been a director since 2007 and has been President and Chief Executive Officer of the Company since January 8, 2009. Mr. Dyer is the former President and Chief Executive Officer of Tommy Hilfiger Corporation where he served from August 2003 until his retirement in May 2006. Mr. Dyer was retired from May 2006 until January 2009. Prior to joining Tommy Hilfiger Corporation, Mr. Dyer served as President and Chief Executive Officer of Lands’ End from 1998 through 2002. From June 2002 until August 2003, Mr. Dyer also served as Executive Vice President of Sears and a member of its Management Executive Committee. In addition to his position as President and Chief Executive Officer of Lands’ End, his responsibilities included the Sears Direct businesses, both internet and catalog, and the Great Indoors Home division of Sears. Mr. Dyer previously served in various other roles at Lands’ End from 1989 to 1994, including as Vice Chairman and Director from 1991 to 1994. Mr. Dyer began his career with Burdines, a division of Federated Department Stores, and held various merchandising and marketing posts during his 17 years there. He later served as President and Chief Operating Officer of Home Shopping Network and was Acting President of J. Crew Catalog from 1997 to 1998. Mr. Dyer currently also serves on the Board of Directors of Zale Corporation. Previously, Mr. Dyer served on the boards of directors of Advo, Inc. from 1997 to 2007 and Tommy Hilfiger Corporation from 2003 to 2006.

 

As the former chief executive officer of two retail companies as well as serving as our current Chief Executive Officer, Mr. Dyer has extensive management and leadership experience and a deep knowledge of the complex financial and operational issues that retail companies encounter. We believe Mr. Dyer’s experience and success in the apparel industry, his leadership skills and his understanding of the Company and our business qualify him to sit on our Board.

 

Responsibility for Selection of Director Candidates

 

The Board is responsible for selecting director candidates. The Board has delegated the screening process to the Corporate Governance and Nominating Committee, with the expectation that other members of the Board and executives will be asked to take part in the process as appropriate. The Corporate Governance and Nominating Committee identify individuals qualified to become Board members and recommends such individuals to the Board for its consideration.

 

Director Criteria

 

The Corporate Governance and Nominating Committee is responsible for reviewing with the Board the requisite skills and characteristics of new Board candidates in the context of the then current composition of the Board. This assessment includes experience in industry, finance, administration, operations and marketing, as well as diversity.

 

The Company considers diversity broadly to include differences of viewpoint, professional experience, individual characteristics, personal background, and qualities and skills resulting in the ability to contribute naturally varying perspectives. The Committee does not have a formal policy with respect to diversity; however the Board and the Committee believe that diversity in experiences, qualifications, backgrounds, and personal characteristics is important to the effectiveness of the Board’s oversight of the Company.

 

Director candidates should be able to provide insights and practical wisdom based on their experience and expertise. Directors are expected to prepare for, attend and participate in Board meetings and meetings of the committees of the Board on which they serve, to ask direct questions and require straight answers, and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities and duties as directors. Each Board member is expected to ensure that other existing and planned future commitments do not materially interfere with the member’s service as a director. Service on other boards and other commitments are considered by such Committee when reviewing Board candidates.

 

The Board believes that each of its directors:

 

 

Based on the all of these factors, the Company believes that each of its directors is qualified to serve on its Board of Directors.

Identifying and Evaluating Nominees

 

In evaluating potential nominees to its Board of Directors, the Board considers, among other things, the following:

 

 

Candidates may come to the attention of the Corporate Governance and Nominating Committee through current Board members, current management, professional search firms, stockholders or other persons.

 

The Committee generally identifies nominees by first determining whether the current members of the Board continue to provide the appropriate mix of knowledge, skills, judgment, experience, diversity, differing view points and other qualities necessary to the Board’s ability to direct the Company. Furthermore, the Committee regularly engages in Board succession planning by assessing the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the prospective nominee can satisfy the applicable criteria for directors. In addition, when the Committee seeks a new candidate for directorship, it seeks qualifications from the individual that will compliment the attributes and perspectives of the other members of the Board. The Committee takes into consideration whether particular individuals satisfy the independence criteria set forth in the NYSE listing standards, together with any special criteria applicable to service on various committees of the Board.

 

Once the Committee has identified a prospective nominee, it will make an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others.

 

If the Committee determines, in consultation with the Chairman of the Board and other Board members, as appropriate, that additional consideration is warranted, it may ask Board members or engage third parties to gather additional information about the prospective nominee’s background and experience and to report the findings to the Committee. The Committee then evaluates the prospective nominee against the criteria set out in the Company’s Corporate Governance Guidelines. The Committee also considers such other relevant factors as it deems appropriate, including the backgrounds, qualifications and skills of existing Board members, the balance of management and independent directors, the need for Audit Committee expertise, and the Committee’s evaluation of other prospective nominees.

 

In connection with this evaluation, the Committee determines whether to interview the prospective nominee, and if warranted, the Chair of the Committee, one of the other independent directors, as well as the Chief Executive Officer, and others as appropriate, interview prospective nominees in person or by telephone. After completing these evaluations and interviews, the Committee

deliberates and makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Committee.

 

Stockholder Nominees

 

The policy of the Corporate Governance and Nominating Committee is to consider written recommendations from stockholders for positions on the Board of Directors. A stockholder who wishes to recommend a prospective nominee for the Board should notify the Corporate Secretary of the Company or any member of the Committee in writing with whatever supporting material the stockholder considers appropriate, including the nominee’s name and qualifications for Board membership. In evaluating the nominations, the Committee seeks to address the criteria set forth above. The Committee will also consider whether to nominate any person nominated by a stockholder pursuant to the provisions set forth in the Amended and Restated Articles of Incorporation of the Company relating to stockholder nominations. See “Stockholder Proposals for Presentation at the 2012 Annual Meeting” on page 69 for further information. The Company received no stockholder nominations in fiscal 2010.

 

General.  In recent years, the Company’s compensation consultants have assisted the Board in its review of director compensation, including conducting a total outside director compensation analysis in early 2008 and again in 2009 utilizing data for the Company’s peer group companies. These analyses were used in connection with implementing the compensation arrangements described below.

 

Indemnification.  We indemnify our directors and certain of our officers to the fullest extent permitted by law so that they will serve free from undue concern that they will not be indemnified. This is authorized under our By-laws, and accordingly we have signed agreements with each of those individuals contractually obligating us to provide this indemnification to them.

 

Base Compensation and Non-Equity Benefits.  During fiscal 2010, each non-employee director received an annual retainer of $60,000 per year. A non-employee director serving as Chairman of the Board received an additional annual retainer of $60,000. In addition, each non-employee director who served as a committee chair for the Audit and Compensation and Benefits Committees received an additional annual retainer of $20,000 and all other committee chairs received an additional annual retainer of $10,000. Beginning in fiscal 2011, the annual retainer for non-employee directors and the additional annual retainer for a non-employee director serving as Chairman of the Board will increase from $60,000 to $65,000 annually. Retainer amounts for committee chairs will remain unchanged.

 

All directors are entitled to reimbursement of their reasonable out-of-pocket expenses for attendance at board and committee meetings and non-employee directors also are entitled to elect to participate in the Company’s health insurance program with coverage provided for the director and his or her dependents and with the cost thereof paid by the Company. During the last fiscal year, Ms. Gibson and Mr. Walker participated in this health insurance program.

 

Stock Options and Restricted Stock.  As a result of an amendment and restatement of the Company’s 2002 Omnibus Stock and Incentive Plan (the “Omnibus Plan”) approved at the Company’s 2008 Annual Meeting, the Company’s non-employee directors no longer receive automatic awards of stock options under such plan. Instead, the Board has the discretion to make equity awards to non-employee directors.

 

In particular, at the time the amended and restated plan was adopted, it was anticipated that each year around the time of the Annual Meeting of stockholders, beginning with the 2008 Annual Meeting,

but at the discretion of the Board, each continuing non-employee director would be awarded a determined number of shares of restricted stock that would vest one year following the grant date. On June 24, 2010, Ms. Atkins, Mr. Burden, Ms. Gibson, Mr. Mahoney, Mr. Roeder, Mr. Walker and Ms. Weiss each received grants of 10,074 shares of restricted stock under the Omnibus Plan for their service as directors. Each such restricted stock grant vests 100% on June 24, 2011. Furthermore, on November 19, 2010, Mr. Watson and Ms. Weiss were granted 7,282 and 4,046 shares of restricted stock, respectively, under the Omnibus Plan for their service as directors from the period of their initial appointment through their formal election to the Board. These November 2010 awards vest 100% on June 23, 2011.

 

Under the current compensation arrangements, the Company’s continuing non-employee directors, Ms. Atkins, Ms. Gibson, Mr. Roeder, Mr. Walker, Mr. Mahoney, Mr. Watson and Ms. Weiss may occasionally receive additional option grants or restricted stock awards at the discretion of the Board of Directors under the Omnibus Plan.

 

Non-Employee Director Compensation Table

 

The following table provides information on the compensation for non-employee directors for the fiscal year ended January 29, 2011.

 

 

						Chairman
						of the				Total Fees
		Annual				Board and				Earned or
		Retainer				Committee				Paid in
Name		Fees				Chair Fees				Cash
		($)				($)				($)
Ross E. Roeder			60,000				70,000				130,000
Verna K. Gibson			60,000				10,000				70,000
John W. Burden, III			60,000				-				60,000
Betsy S. Atkins			60,000				10,000				70,000
David F. Walker			60,000				20,000				80,000
Stephen E. Watson			12,174				-				12,174
Andrea M. Weiss			60,000				-				60,000
John J. Mahoney			60,000				20,000				80,000

 

 

The Company has adopted Corporate Governance Guidelines that are available at www.chicosfas.com by first clicking on “Corporate Governance” and then “Corporate Governance Guidelines.” The “Corporate Governance Guidelines” are also available in print to any stockholder who requests them by contacting the Company’s Corporate Secretary, 11215 Metro Parkway, Ft. Myers, Florida 33966. These Guidelines were adopted by the Board to formalize its obligation to be independent from management, to adequately perform its function as the overseer of management, and to align the interests of the Board and management with the interests of the stockholders. The Guidelines have been updated from time to time since their initial adoption. The Guidelines, as adopted by the Board, meet the updated listing standards of the NYSE. The Company has completed its annual review of the Guidelines. Any revisions to the Guidelines continue to meet the applicable listing standards of the NYSE and have been posted on the Company’s website.

 

On an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire which, among other things, requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. As of March 31, 2011, other than compensation arrangements fully described elsewhere in this proxy, no such transactions have been disclosed.

 

The members of the Board of Directors on the date of this proxy statement, and the committees of the Board on which they currently serve, are identified below:

 

 

Governance Structure

 

Corporate governance is typically defined as the system that allocates duties and authority among a company’s stockholders, board of directors, and management. The stockholders elect the board and vote on extraordinary matters. The board is the Company’s governing body, responsible for hiring, overseeing and evaluating executive management, particularly the Chief Executive Officer, and management runs the Company’s day-to-day operations. Our Board of Directors currently consists of nine directors including seven independent directors (although Mr. Burden is not standing for reelection) and two individuals who are not considered independent directors, one being a member of the Company’s senior management and the other a former interim Brand President for the Soma Intimates brand. If all of the nominees for election are elected, the Board will be comprised of six independent directors and two non-independent directors.

 

Board Responsibilities

 

The primary responsibilities of the Board of Directors are to provide oversight, counseling, and direction to the Company’s executive management designed towards addressing the long-term interests of Chico’s and its stockholders. To the extent appropriate under Florida law, the Board, in carrying out its duties, also may consider the interests of other constituencies, which include employees, suppliers, customers and the communities in which it does business, and the economy of the state of Florida and the United States. The Board’s detailed responsibilities include: (a) selecting, regularly evaluating the performance of, and approving the compensation of the Chief Executive Officer and other senior executives; (b) planning for succession with respect to the position of Chief Executive Officer and monitoring management’s succession planning for other senior executives; (c) reviewing and, where appropriate, approving Chico’s major financial objectives, strategic and operating plans and actions; (d) overseeing the conduct of Chico’s business to evaluate whether the business is being properly managed and whether proper internal controls are in place and effective; and (e) overseeing the processes

for maintaining Chico’s integrity with regard to its financial statements and other public disclosures and compliance with law and ethics.

 

The Board of Directors has delegated to the Chief Executive Officer, working with Chico’s other executive officers, the authority and responsibility for managing the Company’s business in a manner consistent with the Company’s standards and practices, and in accordance with any specific plans, instructions or directions of the Board. The Chief Executive Officer and management are responsible for seeking the advice and, in appropriate situations, the approval of the Board and/or its various committees with respect to significant actions to be undertaken by Chico’s.

 

The Board and its committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time as appropriate. The Board of Directors held seven meetings during fiscal 2010 and each incumbent director attended at least 75% of the total number of Board meetings and meetings of committees on which he or she served. In fact, during fiscal 2010, our directors attended almost 100% of the Board and committee meetings.

 

During fiscal 2010, the non-employee directors of the Board met without the Chief Executive Officer or other members of management present at five of the seven Board meetings.

 

The Company does not have a formal policy regarding the separation of its Chairman and Chief Executive Officer positions. Currently, Ross E. Roeder, an independent member of the Board, serves as Chairman while David F. Dyer serves as President and CEO. The Company believes that separating the Chairman and CEO roles and having an independent Chair conforms to governance best practices and contributes to the independence of the Board from management.

 

Pursuant to the Corporate Governance Guidelines, the Board undertook a review of director and director nominee independence in February 2011. During this review, the Board considered transactions and relationships between each director or nominee or any member of his or her immediate family and the Company and its subsidiaries and affiliates. The Board also examined transactions and relationships between directors, nominees or their affiliates and members of the Company’s senior management or their affiliates. As provided in the Guidelines, the purpose of this review was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent. A director is considered independent only if the Board affirmatively determines that the director has no material relationship with the Company, either directly or indirectly. In accordance with the Guidelines and the NYSE listing standards, a director is not independent if:

 

 

 

As a result of this review, and based on information furnished by all members of the Board regarding their relationships with the Company and research conducted by management with respect to outside affiliations, the Board affirmatively determined that seven of the nine current directors, Mr. Roeder, Mr. Burden, Ms. Atkins, Mr. Walker, Mr. Mahoney, Mr. Watson and Ms. Weiss, are independent of the Company and its management under the independence standards set forth in the Guidelines, under the NYSE independence standards and under the independence standards set forth in Rule 10A-3 under the Securities Exchange Act of 1934. In its deliberations, the Board considered the position Mr. Burden’s son-in-law holds with the Company, as described under the heading “Certain Relationships and Related Party Transactions,” and determined that such relationship did not cause Mr. Burden to fail to meet the applicable independence standards. As a result of this review and this process, the Board also affirmatively determined that the Audit, Compensation and Benefits, and Corporate Governance and Nominating Committees are all comprised entirely of independent directors. In addition, members of the Compensation and Benefits Committee meet the additional standards applicable to “outside directors” under Internal Revenue Code Section 162(m) and qualify as “non-employee directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934.

 

Although he was considered an independent director until his appointment as President and Chief Executive Officer in January 2009, Mr. Dyer is considered a non-independent director because of his employment as a senior executive of the Company. The Board also determined that Ms. Gibson, who was formerly considered an independent director, is now considered a non-independent director because she recently provided consulting services to the Company and recently served as interim Brand President for Soma Intimates.

 

Our Board and its Committees play an important role in overseeing management’s identification, assessment, and mitigation of risks that are material to us. In particular, our Audit Committee assists the Board in fulfilling its oversight responsibility relating to the performance of our system of internal

controls, legal and regulatory compliance, our audit, accounting and financial reporting processes, and the evaluation of enterprise risk issues, particularly those risk issues not overseen by other committees. The Audit Committee also periodically reviews with our General Counsel legal matters, if any, that may have a material adverse impact on our financial statements, compliance with laws, and material reports, if any, received from regulatory agencies.

 

Our Compensation and Benefits Committee is responsible for overseeing the management of risks relating to our compensation programs. The Committee asked management to review our compensation policies and practices for all associates to identify general areas of risk and to communicate with the Committee’s independent compensation consultant concerning the design and structure of our executive compensation program. Management performed its review and did not identify any area of concern. As a result, management concluded that our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company because they include multiple incentives, balancing sales, earnings, margin, expense control and return on net assets and including certain compensation awards that are designed to encourage a longer term focus. In addition, the design and structure of our compensation programs are generally the same across all business units such that the compensation policies and practices throughout the organization do not vary significantly from the overall risk and reward structure of the Company as a whole. The Committee reviewed management’s assessments and conclusions and discussed them with management.

 

Our Corporate Governance and Nominating Committee oversees risks associated with corporate governance, business conduct, and ethics.

 

Our Merchant Committee oversees risks associated with the fashion, fit, and quality of our merchandise for each of our brands.

 

The Company has a Code of Ethics, which is applicable to all employees and directors of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer, and to all the directors. The Code of Ethics is available at the Company’s investor relations website (www.chicosfas.com) by clicking on “Corporate Governance.” The Company intends to post amendments to or waivers from its Code of Ethics (to the extent applicable to the Company’s chief executive officer, principal financial officer, principal accounting officer or its directors) at this location on its website. No waivers have been granted under the Code of Ethics.

 

Stockholders and other parties interested in communicating with the Chairman or with the other non-management directors as a group may do so by writing to: Chairman, Board of Directors, Chico’s FAS, Inc., c/o Corporate Secretary, 11215 Metro Parkway, Ft. Myers, Florida 33966. Letters addressed to the Chairman or any of the other non-management directors will be routed to the Corporate Secretary who will review all such correspondence, will keep a file with copies of such correspondence (including a log thereof), will regularly forward such correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board or committees thereof or that he otherwise determines requires their attention and may also provide each of the directors with summaries of all such correspondence. Directors may at any time review the file of such correspondence or the log of such correspondence and may request copies of any such correspondence.

 

A separate process has been established for dealing with concerns relating to accounting, internal controls or auditing matters. Stockholders, employees, and other parties interested in communicating about any of these particular matters may alternatively submit such communications by calling a third

party hotline that has been established by the Board of Directors (1-888-669-4911, ext. 2273) and such reports will immediately be brought directly to the attention of the chair of the Company’s Audit Committee and separately to the General Counsel and to the Vice President-Internal Audit. If a communication relating to accounting, internal controls or auditing matters is received in writing by the Company, the Corporate Secretary will promptly forward such written correspondence to the chair of the Company’s Audit Committee and separately to the General Counsel and to the Vice President-Internal Audit. These particular reports, whether received through the hotline or in writing, will be handled in accordance with procedures established by the Company’s Audit Committee.

 

The Company has no policy with regard to Board members’ attendance at stockholders’ annual meetings; however, it has been the custom for Chico’s directors to attend the annual meeting of stockholders. All eight of our directors then holding office attended the Annual Meeting in June 2010.

 

The Company’s Corporate Governance Guidelines are intended to provide a set of flexible guidelines for the effective functioning of the Board and are reviewed annually and revised as necessary or appropriate in response to changing regulatory requirements and evolving best practices. They are available at the Company’s investor relations website (www.chicosfas.com) by clicking on “Corporate Governance.” In addition to the Company’s Corporate Governance Guidelines, other information relating to corporate governance at Chico’s is available on the Corporate Governance section of the Company’s investor relations website, including:

 

 

Chico’s stockholders may obtain printed copies of these documents by writing to Chico’s FAS, Inc. Corporate Secretary, 11215 Metro Parkway, Ft. Myers, Florida 33966.

 

The Board of Directors has a standing Corporate Governance and Nominating Committee, Audit Committee, Compensation and Benefits Committee, Executive Committee, and Merchant Committee.

 

Corporate Governance and Nominating Committee

 

The Corporate Governance and Nominating Committee held three meetings during fiscal 2010. This Committee is responsible for developing and implementing policies and practices relating to corporate governance, including reviewing and monitoring implementation of the Company’s Corporate Governance Guidelines. In addition, its principal responsibilities from the perspective of its role as a nominating committee are to interview, evaluate, nominate, and recommend individuals for membership

on the Company’s Board of Directors and its committees. This Committee also prepares and supervises the Board’s annual review of director independence and the Board’s performance self-evaluation. All of the members of this Committee are independent within the meaning of the NYSE listing standards and the Company’s Corporate Governance Guidelines.

 

Audit Committee

 

The Audit Committee held six meetings during fiscal 2010. The Audit Committee’s principal responsibilities are to assist the Board in its general oversight of Chico’s financial reporting, internal controls, ethics compliance, and audit functions. This Committee is directly responsible for the appointment, compensation, and oversight of the work of the Company’s independent certified public accountants, reviews the annual financial results and the annual audit of the Company’s financial statements and approves the inclusion of the audited financial statements in the Form 10-K. The Committee also reviews the Company’s quarterly financial results and each Form 10-Q, and meets with the independent accountants and the Vice President-Internal Audit from time to time in order to review the Company’s internal controls and financial management practices. During each fiscal year, at least one (and usually more) of the meetings between this Committee and the independent accountants is held separately without management present. This Committee has established policies and procedures for the engagement of the independent accountants to provide permissible non-audit services, which includes pre-approval of all permissible non-audit services to be provided by the independent accountants.

 

All members of this Committee are independent within the meaning of the listing standards of the NYSE and the Company’s Corporate Governance Guidelines. Federal regulations also require the Board to determine if a member of its Audit Committee is an “Audit Committee Financial Expert.” According to these regulations, an audit committee member can be designated an Audit Committee Financial Expert only when the audit committee member satisfies five specified qualification requirements, including experience in (or “experience actively supervising” others engaged in) preparing, auditing, analyzing, or evaluating financial statements presenting a level of accounting complexity comparable to what is encountered in connection with the Company’s financial statements. The regulations further require such qualifications to have been acquired through specified means of experience or education. The Board has determined that Mr. Walker, the chair of this Committee, and Mr. Mahoney are each qualified as an Audit Committee Financial Expert within the meaning of the regulations of the SEC and that each of them has accounting and related financial management expertise within the meaning of the listing standards of the NYSE. Although the Board of Directors has determined that Mr. Walker and Mr. Mahoney each has the requisite attributes defined under the rules of the SEC, their respective responsibilities are generally the same as those of the other Audit Committee members. The Audit Committee members are not auditors or accountants for the Company, do not perform “field work” and are not full-time employees of any audit firm. The SEC has determined that an audit committee member who is designated as an Audit Committee Financial Expert will not be deemed to be an “expert” for any purpose as a result of being identified as an Audit Committee Financial Expert. See the Audit Committee Report on page 32 for further information.

 

Compensation and Benefits Committee

 

The Compensation and Benefits Committee held four meetings during fiscal 2010 and regularly acts by written consent. The principal responsibilities of this Committee are to review and make recommendations to the Board of Directors concerning the compensation of officers of the Company, to provide input and make recommendations to the Board on individuals elected to be executive officers of the Company, to review and make recommendations with respect to the Company’s existing and proposed

compensation and bonus plans, and to serve as the committee responsible for administering the Company’s existing compensation and benefits plans.

 

All of the members of this Committee are independent within the meaning of the listing standards of the NYSE and the Company’s Corporate Governance Guidelines. See the Compensation and Benefits Committee Report on page 36 for further information.

 

Executive Committee

 

The Executive Committee held three meetings during fiscal 2010 and from time to time acts by written consent. The Executive Committee serves primarily as a means for taking action requiring Board approval between regularly scheduled meetings of the Board. The Executive Committee is authorized to act for the full Board on matters other than those specifically reserved by Florida law to the Board. In practice, the Committee’s actions are generally limited to matters that the full Board specifically delegates to the Committee such as oversight of the Company’s stock repurchase program.

 

Merchant Committee

 

The Merchant Committee consults with and advises the Company on matters concerning the Company’s products for each of its brands. The Merchant Committee held three meetings during fiscal 2010.

 

Transactions and relationships that involve directors, executive officers or other related persons and that constitute a conflict with the Company’s interests require, in advance, a full disclosure to and review by the Company’s Audit Committee of all facts and circumstances concerning the transactions and relationships, all in accordance with our Code of Ethics. See “Certain Relationships and Related Party Transactions.”

 

 

The Company has sponsored an Employee Stock Purchase Plan (the “Plan”) since 2002. The Plan is qualified as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986 as amended (“Section 423”). The Plan provides a way for associates to purchase Company stock at a discount and offers associates a sense of ownership that is an incentive for continued employment.

 

The Plan, as amended and restated in 2004, was originally authorized to issue up to 1,100,000 shares of common stock. Shares issued under the Plan may be authorized and previously unissued shares or may be previously issued shares acquired in the open market or from other sources. After adjusting for splits and annual automatic increases in shares, as provided in the Plan, and reflecting the reduction for shares acquired since the 2004 amendment and restatement, as of April 1, 2011, there are 1,890,199 shares available for purchase under the Plan.

 

The last purchase period authorized by the Plan is September of 2011.

 

The eligibility waiting period for participation in the Plan is the first semi-annual Plan entry date following 12 months of employment.

The Plan limits purchases based on employee income and further limits annual share purchase to the lesser of $25,000 FMV or 800 shares.

 

The Company believes that the Plan is an important but underutilized part of the Company’s compensation mix. The Company further believes that certain changes, as outlined below, will allow the Plan to continue in place as a benefit program, should encourage greater participation amongst our associates, and aide Company officers in reaching their stock ownership guidelines.

 

These amendments to the Plan, which are subject to stockholder approval, will:

 

 

The full text of the Plan, including all such proposed amendments, appears as Appendix A to this proxy statement. The following is a summary of the principal provisions of the Plan, as proposed to be amended and restated, and is qualified in its entirety by reference to the full text of the Plan, as proposed to be amended and restated. Unless otherwise indicated in the following summary and in the remainder of this section of the proxy statement, all references to the Plan shall mean the Plan, as proposed to be amended and restated.

 

The Plan, as amended and restated in 2004, reserved an aggregate of 1,100,000 shares of common stock for issuance from and after the effective date of the amendment and restatement. This aggregate number of shares was decreased by purchases of 8,458 shares in September 2004, was automatically increased by an additional 67,216 shares at the end of fiscal 2004 and increased further as a result of the Company’s two for one stock split in February 2005. Since February 2005 through September 2010, the number of shares available has been decreased through purchases under the Plan aggregating 427,317 shares. Because in each year since 2005 it was believed that there were sufficient shares available under the Plan, the Board acted in each of those years to suspend that year’s automatic increase in the number of shares that would otherwise have been added at the end of the respective fiscal year. As of April 1, 2011, the aggregate number of shares available under the Plan was 1,890,199.

 

The aggregate number of shares that may be offered under the Plan will be increased automatically, without further action of the Board of Directors or the stockholders, at the beginning of each fiscal year of the Company occurring after April 1, 2011, by a number of shares equal to (i) one hundred twenty percent (120%) of the total number of shares acquired pursuant to the Plan during the immediately preceding fiscal year, (2) 75,000 or (3) such lesser number of shares as may be specified by the Board of Directors prior to the last day of such preceding fiscal year. The number of shares reserved under the Plan is also subject to automatic adjustment, without further action of the Board of Directors or the stockholders, in the event of a stock dividend, a stock split or certain other recapitalizations with respect to the Company’s stock.

 

Under the Plan, which is intended to qualify as an employee stock purchase plan under the provisions of Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”) eligible

associates are given the right to purchase shares of the common stock of the Company twice each year at a price equal to 85% of the fair market value of the stock immediately prior to the beginning of each offering period. The Plan also provides that the Compensation and Benefits Committee may, for any offering period and provided that action is taken at least one month before the beginning of such offering period, elect to utilize an alternative purchase price equal to 85% of the lesser of (a) the fair market value of the stock immediately prior to the beginning of the offering period or (b) the fair market value of the stock immediately prior to the last day of the offering period. The fair market value of a share of common stock on any date will be the closing price on the immediately preceding trading day of the common stock on the NYSE or, if the common stock is not still traded on the NYSE, as otherwise determined in accordance with the Plan. On April 15, 2011, the closing price of the Company’s common stock on the NYSE was $14.85.

 

Any associates of the Company and its subsidiaries, who are employed for at least one month prior to the first day of an offering period that commences following the person’s date of hire is eligible to participate in the Plan with respect to that offering period, except for those who customarily work five months or less per year, or own at least 5% of the Company’s stock. Rights to acquire stock are to terminate if the associate’s employment is terminated for any reason, and the rights are not to be transferable by the associate. No consideration will be received by the Company for the granting of the right to acquire stock under the Plan other than the services rendered to the Company by the associate in such capacity.

 

Offering periods will start on the first date and conclude on the last day of the months of March and September in each of the years 2011 through 2020, inclusive. During each such offering period, an eligible associate is entitled to purchase a maximum number of shares equal to $12,500 divided by the fair market value of the common stock as determined on the offering date. No eligible associate is entitled to purchase fewer than 10 shares in any offering period. Within these limits, an eligible associate is able to elect to purchase as many or as few shares in each offering period as he or she chooses.

 

During any offering period, an eligible associate desiring to become a participant in such offering period must enroll in a payroll deduction arrangement, electronically or telephonically, and meet the minimum payroll deduction requirement per payroll period as established by the Committee, in order to be eligible to purchase shares at the end of the following semiannual offering period. During the offering period, the eligible associate indicates the number of shares of common stock to be purchased and tender payment for the full purchase price of the shares in cash, in accordance with the processes established under the terms of the Plan. Payroll deductions may not exceed an aggregate of $25,000 in any calendar year.

 

The Committee may from time to time determine that any shares issued pursuant to the Plan will only be issued in certificated form and that such certificates will be held in safekeeping by the Company until two years after the date of issuance or, if earlier, the date on which such shares are sold or transferred by the employee.

 

The Plan will terminate upon the earlier of when all of the shares reserved for purposes of the Plan have been purchased or following the offering period in September 2020, provided that the Board of Directors in its sole discretion may terminate the Plan at any time. The Board may at any time amend the Plan in any and all respects, provided that without stockholder approval, the Board may not increase the number of shares reserved for under the Plan, change the formula by which the price at which the shares sold is determined, increase the maximum number of shares that an eligible associate may purchase, materially modify the requirements to become eligible to participate under the Plan, otherwise materially increase the benefits to associates under the Plan or remove the administration of the Plan from the Compensation and Benefits Committee.

 

The following is a summary of some of the more significant federal income tax consequences under present law of the acquisition of shares under the Plan.

 

Generally, no gain or loss is recognized until the stock is sold or otherwise disposed of by its owner.

 

If the disposition of shares acquired under the Plan is made two years after the beginning of the offering period for which the shares were purchased or one year after the date of acquisition, the associate will recognize ordinary income (as compensation) to the extent of the lesser of: (i) the amount by which the fair market value of the stock at the beginning of the offering period exceeded 85% of such fair market value or (ii) the amount by which the fair market value of the stock at the time of disposition exceeds the purchase price. Any further gain will be taxed as a capital gain. If the sales price is less than the purchase price, there will be no ordinary income; and the associate will recognize a long-term capital loss equal to the difference between the purchase price and the disposition price. The Company will not be entitled to an income tax deduction at any time.

 

If the disposition of shares is made before the date which is two years after the beginning of the offering period for which the shares were purchased or before one year of the date of acquisition, the associate will recognize in gross income (as compensation) in the year of disposition the amount by which the fair market value of the stock on the date of transfer exceeded the purchase price. Any difference between the fair market value of the stock on the date of transfer and the sales price upon disposition will be taxed as a capital gain or loss. The Company will be entitled to an income tax deduction in the year of disposition equal to the amount of ordinary income recognized by the associate.

 

The specific application and impact of the tax rules will vary depending on the specific personal situation of individual associates.

 

Participation in the Plan is entirely within the discretion of the eligible associates of the Company. As a result, the Company cannot determine the amount of shares that officers and other eligible associates may purchase.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE CHICO’S FAS, INC. SECOND AMENDED AND RESTATED 2002 EMPLOYEE STOCK PURCHASE PLAN.

 

 

Based on the recommendation of the Company’s Audit Committee, the Company has selected Ernst & Young LLP (“E&Y”) as its independent certified public accountants for the current fiscal year ending January 28, 2012 (fiscal 2011), subject to ratification of such appointment by the stockholders. Ratification of the Company’s independent certified public accountants is not required by the Company’s By-Laws or otherwise, but the Board of Directors has decided to seek such ratification as a matter of good corporate practice. E&Y has audited the accounts of the Company since first being engaged by the

Company effective July 1, 2002. Representatives of E&Y 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 are expected to be available to respond to appropriate questions by stockholders.

 

We have been advised by E&Y that neither the firm, nor any member of the firm, has any financial interest, direct or indirect, in any capacity in the Company or its subsidiaries.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE PERIOD SPECIFIED.

 

The following table presents fees for professional services rendered by E&Y for the audit of the Company’s annual financial statements for fiscal 2010 (ended January 29, 2011) and fiscal 2009 (ended January 30, 2010) and fees billed for audit-related services, tax services and all other services rendered by E&Y for fiscal 2010 and fiscal 2009.

 

 

Audit Fees

 

Fees for audit services include fees associated with the annual audits, the reviews of the Company’s quarterly reports on Form 10-Q and other SEC filings and audit consultations and the Sarbanes-Oxley Section 404 attestation.

 

Audit-Related Fees

 

Fees for audit-related services in fiscal 2010 and 2009 related to the use of E&Y’s online research tool.

 

Tax Fees

 

Fees for tax services in fiscal 2010 were principally related to state and local tax projects while fiscal 2009 tax fees were principally related to transfer pricing services.

 

All audit-related services, tax services and other services in fiscal 2010 were pre-approved by the Audit Committee, which concluded that the provision of such services by E&Y was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s outside auditor independence policy provides for pre-approval of audit, audit-related and tax services specifically described by the Audit Committee on an annual basis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policy authorizes the Committee to delegate to one or more of its members pre-approval authority with respect to permitted services.

 

The Company seeks your advisory vote on our executive compensation programs pursuant to Section 14A of the Securities Exchange Act (commonly referred to as “Say-on-Pay”). The Company asks that you support the compensation of our named executive officers (“NEOs”) as disclosed in the Compensation Discussion and Analysis section and the accompanying tables contained in this Proxy Statement on pages 37-58. While the Board of Directors (“Board”) and its Compensation and Benefits Committee (the “Committee”) will carefully consider the stockholder vote, the final vote is advisory in nature and will not be binding on the Board or the Company.

 

The Company has in the past sought and received stockholder approval for the incentive plans that we use to motivate, retain, and reward our executives. Those incentive plans include the Cash Bonus Incentive Plan, which the stockholders approved just last year, and the 2002 Omnibus Stock and Incentive Plan, as amended, which the stockholders most recently approved in 2008. These stockholder approved plans make up a majority of the pay that the Company provides to our NEOs.

 

Our current executive team has successfully managed our Company through the recent dramatic economic downturn. For fiscal 2010:

 

 

We believe that our executive compensation programs, as described more fully in the “Executive Compensation” section of this proxy statement, are structured (i) to promote a performance-based culture which links the interests of management and stockholders, (ii) to support our business objectives and (iii) to align our programs with recognized corporate governance best practices because:

 

 

 

Accordingly, the Board recommends that the stockholders approve the following advisory resolution:

 

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL.

 

The Company also seeks your input about the frequency of future stockholder advisory votes on our executive compensation program. In particular, we are asking for a non-binding advisory vote on whether the advisory say-on-pay vote should occur every year, every two years, or every three years. The Company asks that you support a frequency period of every year for future non-binding stockholder votes on compensation of our NEOs.

 

After careful consideration, the Company has determined that an annual advisory vote on executive compensation is the most appropriate choice because it gives stockholders a formal mechanism for providing their direct input on our compensation philosophy, policy and practices as disclosed in our proxy statement every year. An annual advisory vote is also consistent with our desire to constructively engage with our stockholders on important issues such as executive compensation.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR “1 YEAR” ON THE PROPOSAL.

 

The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this report by reference therein.

 

The Audit Committee consists of four directors and operates under a written charter adopted by the Board of Directors. This Committee’s charter is available at the Company’s investor relations website (www.chicosfas.com) by clicking on “Corporate Governance.” The current members of this Committee are David F. Walker (Chair), Ross E. Roeder, John J. Mahoney and Stephen E. Watson. Each member of the Committee is independent, in the judgment of the Company’s Board of Directors, as required by NYSE listing standards and as set forth in the Company’s Corporate Governance Guidelines. This Committee is responsible for selecting, engaging and negotiating fee arrangements with the Company’s independent certified public accountants (the independent accountants) with input from the Company’s Board and management. Management is responsible for the Company’s internal controls and the financial reporting process. The independent accountants are responsible for performing an audit of internal control over financial reporting that is integrated with an audit of the Company’s consolidated financial statements in accordance with auditing standards of the Public Company Accounting Oversight Board in the United States, and for expressing opinions thereon.

 

This Committee’s responsibility is to monitor and oversee these processes. In this context, this Committee has met and held discussions with management, the internal auditors and the independent accountants.

 

The Sarbanes-Oxley Act of 2002 and regulations issued thereunder added a number of provisions to federal law to strengthen the authority of, and increase the responsibility of, corporate audit committees. Related rules concerning audit committee structure, membership, authority and responsibility have been promulgated by the NYSE.

 

The members of this Committee are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the independent accountants, nor can this Committee certify that the independent accountants are “independent” under applicable rules. This Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management, internal auditors, and the independent accountants on the basis of several factors, including the information it receives, discussions with management, internal auditors, and the independent accountants, and the experience of this Committee’s members in business, financial and accounting matters.

 

As part of its oversight of the Company’s financial statements, this Committee reviews and discusses with both management and the Company’s independent accountants all annual and quarterly financial statements prior to their issuance. This Committee reviewed and discussed the audited consolidated financial statements of the Company as of and for the year ended January 29, 2011 (fiscal 2010), with management, the internal auditor and the Company’s independent accountants. With respect to fiscal 2010, management advised the Audit Committee that each set of the Company’s consolidated financial statements reviewed had been prepared in accordance with accounting principles generally accepted in the United States, and reviewed significant accounting and disclosure issues with this Committee. Discussions regarding the Company’s audited financial statements included the independent accountants’ judgments about the quality, not just the acceptability, of the Company’s accounting principles and underlying estimates used in the Company’s financial statements, as well as other matters, as required by Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T and by the Audit Committee’s

charter. The Committee annually assesses the independent accountant’s independence. To that end, the Company’s independent accountants provided the Committee the written disclosures and the letter required by applicable requirements of the PCAOB for independent auditor communications with Audit Committees concerning its independence and we discussed with the independent auditors their independence from the Company.

 

In addition, this Committee reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company’s internal and disclosure control structure. As part of this process, this Committee continued to monitor the scope and adequacy of the Company’s internal auditing program, reviewing staffing levels and steps taken to implement recommended improvements in internal procedures and control.

 

Based upon the Audit Committee’s discussion with management, the internal auditor, and the independent accountants, this Committee’s review of the representations of management, and the report of the independent accountants to this Committee, and subject to the limitations on the role and responsibilities of this Committee described above and in the Committee’s charter, this Committee recommended that the Board of Directors approve the inclusion of the Company’s audited consolidated financial statements in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission as of and for the fiscal year ended January 29, 2011.

 

MEMBERS OF THE AUDIT COMMITTEE

 

David F. Walker, Chair

Ross E. Roeder

John J. Mahoney

Stephen E. Watson

 

The following table sets forth certain information regarding the Company’s current executive officers.

 

 

*    Became an executive officer in January 2009; first elected a director in 2007.

**   Joined the Company in May 2010.

***  Joined the Company in July 2010.

 

Non-Director Executive Officers

 

Donna M. Colaco is Brand President-White House | Black Market for the Company, having joined the Company in August 2007. Ms. Colaco has over 25 years of experience in women’s specialty apparel. Prior to joining the Company, Ms. Colaco worked for Ann Taylor Corporation for more than 10 years in numerous capacities including, most recently serving as President of Ann Taylor LOFT. Prior to Ann Taylor, Ms. Colaco worked for the Lerner New York Division of Limited, Inc. and Petrie Stores Corporation.

 

Cynthia S. Murray is Brand President-Chico’s for the Company, having joined the Company in February 2009. Ms. Murray has over 30 years of experience in retail. Prior to joining the Company, Ms. Murray spent the previous five years with Stage Stores, Inc., most recently serving as its Executive Vice President and Chief Merchandising Officer. Prior to Stage Stores, Ms. Murray worked for Talbot’s, Saks Fifth Avenue / Saks Off 5th, and many other retailers.

 

Laurie Van Brunt is Brand President-Soma Intimates for the Company, having joined the Company in May 2010. Ms. Van Brunt has over 30 years of experience in retail. Prior to joining the Company, Ms. Van Brunt spent the previous five years with J.C. Penney Company, serving as its Marketing Vice President, Director of Brand Management and most recently as Vice President-Intimate Apparel. Prior to J.C. Penney, Ms. Van Brunt worked for the Lane Bryant Division of Limited Brands, Petite Sophisticates Division of Casual Corner/U.S. Shoe and May Company.

 

Lee Eisenberg is Executive Vice President-Chief Creative Officer of the Company, having been promoted to that position in November 2009. Mr. Eisenberg joined the Company in February 2009 as

Director of Creative Strategy. From 2004 to 2009, Mr. Eisenberg worked as a freelance author, publishing books on topics including financial planning and consumerism. From 1999 to 2004, Mr. Eisenberg served in various positions with Lands’ End including Executive Vice President and Creative Director and Chief Creative and Administrative Officer. Prior to that, Mr. Eisenberg was with Time Magazine as Editor/Creative Development. He began his career at Esquire magazine eventually serving as its editor-in-chief.

 

Gary A. King is Executive Vice President-Chief Information Officer for the Company. Mr. King joined the Company in October 2004 after five years at Barnes & Noble, Inc., where he most recently served as Vice President, Chief Information Officer. From 1988 to 1999, Mr. King held various positions with Avon Products, Inc. including Vice President, Global Information Technology. From 1982 to 1987, Mr. King held various system management positions with Unisys Corporation and Burroughs Corporation.

 

Kent A. Kleeberger is Executive Vice President-Chief Operating Officer and Chief Financial Officer, having joined the Company in November 2007. Mr. Kleeberger was appointed Chief Operating Officer in February 2011. From 2004 through October 2007, Mr. Kleeberger was the Senior Vice President-Chief Financial Officer for Dollar Tree Stores, Inc. From 1998 to 2004, he served in numerous capacities for Too Inc., subsequently known as Tween Brands, Inc., culminating in his appointment as Executive Vice President, Chief Operating Officer, Chief Financial Officer, Secretary and Treasurer. Prior to that, Mr. Kleeberger served in various financial positions with The Limited, Inc. Mr. Kleeberger currently also serves on the board of directors of Shoe Carnival, Inc.

 

Mori C. MacKenzie is Executive Vice President-Chief Stores Officer for the Company. Ms. MacKenzie has been with the Company since October 1995, when she was hired as the Director of Stores. From June 1999 until October 2001, she served as Vice President-Director of Stores. In October 2001, Ms. MacKenzie was promoted to Senior Vice President-Stores, and effective February 2004 she was promoted to the position of Executive Vice President-Chief Stores Officer. From January 1995 until October 1995, Ms. MacKenzie was the Vice President of Store Operations for Canadians Corporation. From August 1994 until December 1994, she was the Vice President of Store Development for Goody’s Family Clothing. From April 1992 until August 1994, Ms. MacKenzie was the Vice President of Stores for United Retail Group (“URG”) and from August 1991 until April 1992 she was employed by Conston Corporation, a predecessor of URG. In addition, Ms. MacKenzie was Vice President-Stores for Park Lane from November 1987 until July 1991, and was Regional Director of Stores for the Limited, Inc. from June 1976 until October 1987.

 

A. Alexander Rhodes is Executive Vice President-General Counsel, Chief Compliance Officer and Secretary for the Company. Mr. Rhodes joined the Company in January 2003 as its Intellectual Property Counsel, expanding his oversight of legal matters for the Company into several other areas until October 2004, when he was promoted to Vice President-Corporate Counsel and Secretary. In April 2006, Mr. Rhodes was promoted to Senior Vice President-General Counsel and Secretary, and in October 2009, Mr. Rhodes was promoted to Executive Vice President. Mr. Rhodes graduated from the Stetson University College of Law in 1994. From 1994 through December 2002, Mr. Rhodes was in private practice, working primarily in the areas of commercial litigation and intellectual property.

 

Sara K. Stensrud is Executive Vice President-Chief Human Resources Officer for the Company, having joined the Company in July 2010. Ms. Stensrud was previously employed with Shopko Stores, Inc. and spent the majority of her seven-year career there as Senior Vice President of Human Resources. Ms. Stensrud has over 20 years of experience in the retail industry, and prior to Shopko Stores, Inc. worked for Fred Meyer Stores, Inc. and Gottschalks Stores.

 

None of the executive officers or directors who currently serve or who served in such capacities during fiscal 2010 are related to one another. There are no arrangements or understandings pursuant to which any executive officer was elected to office. Executive officers are elected by and serve at the discretion of the Board of Directors.

 

The following report of the Compensation and Benefits Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this report by reference therein.

 

The Compensation and Benefits Committee (the “Committee”) evaluates and establishes compensation for executive officers and oversees the deferred compensation plan, the Company’s management equity compensation plans, and other management incentive, benefit and perquisite programs. Management has the primary responsibility for the Company’s financial statements and reporting process, including the disclosure of executive compensation. With this in mind, the Committee has reviewed and discussed with management the Compensation Discussion and Analysis found on pages 37-52 of this proxy statement. The Committee is satisfied that the Compensation Discussion and Analysis fairly and completely represents the philosophy, intent, and actions of the Committee with regard to executive compensation. We recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for filing with the Securities and Exchange Commission.

 

MEMBERS OF THE COMPENSATION
AND BENEFITS COMMITTEE

 

John J. Mahoney, Chair

Betsy S. Atkins

Andrea M. Weiss

Stephen E. Watson

 

EXECUTIVE SUMMARY

 

The Company’s compensation program is designed to attract and retain quality leaders with an emphasis on pay for performance and creating long-term sustainable and profitable growth. Our compensation elements seek to balance all aspects of an executive’s responsibilities: base salary for day-to-day responsibilities, cash incentive bonus for shorter-term returns linked to annual Company performance, and equity awards for aligning the executives’ focus with stockholder value and the long-term, future performance of the Company. The Company has received stockholder approval for the cash incentive bonus plan, which the stockholders approved just last year, and the 2002 Omnibus Stock and Incentive Plan, as amended and restated, which the stockholders approved most recently in 2008. These stockholder approved plans make up a majority of the pay that the Company provides to our NEOs.

 

We set the applicable performance goals for our cash incentive bonus program at the beginning of the fiscal year using challenging but realizable targets so that achievement of the goals is both uncertain and objective. These goals are based upon the annual financial plan approved by the Board. Our goal setting process is based on historical operating trends and requires improvement over our financial performance from the prior year.

 

Our current executive team has successfully managed the Company through the recent dramatic economic downturn. For fiscal 2010:

 

 

Based on these results, the Company’s performance was impressive when measured against both its retail peers and its own internal benchmarks.

Highlighted below are a summary of the direct compensation elements of our executive compensation programs and the key actions and decisions made with respect to each element for 2010.

 

 

In summary, the 2010 performance based compensation together with 2010 base salary levels appear well aligned with the Company performance for the year and the linkage between pay and performance is strong.

 

In addition to our core elements of base salary, cash incentives, and equity awards, our compensation program includes other standard benefits that are available to all employees, such as medical and dental insurance, life insurance, a 401(k) Savings Plan, and a qualified employee stock purchase plan. The Company has a deferred compensation plan available to all senior management; the Company has not made any contributions to this plan. Senior management can also participate in an annual executive physical program, among other benefits.

 

We also maintain various compensation policies that align our program with recognized corporate governance best practice:

 

 

 

Compensation Philosophy and Objectives

 

The goal of our executive compensation program is the same as our goal for the Company — to increase stockholder value over the long term. To this end, we have designed and implemented a compensation program intended to attract, motivate, and retain highly skilled executive officers and reward them for entrepreneurial activity that increases stockholder value through sustained, profitable financial performance and outstanding leadership that reflects our values and unique culture.

 

The Company’s Compensation and Benefits Committee (the “Committee”) is responsible for monitoring adherence with our compensation philosophy and for reviewing and approving the annual base salary, annual cash bonus, stock-based compensation, retirement plans, and health and welfare benefits for our senior officers, including the NEOs. For fiscal 2010, our NEOs were David F. Dyer, Chief Executive Officer, Kent A. Kleeberger, Chief Financial Officer, Donna M. Colaco, Brand President — White House | Black Market, Cynthia S. Murray, Brand President — Chico’s, and Jeffrey A. Jones, Chief Operating Officer.

 

 The Company bases its executive compensation programs and decisions on the same basic objectives that guide the Company in establishing all of its compensation programs:

 

 

Role of the Committee and the Executive Officers in Compensation Decisions

 

The Committee, in consultation with its independent compensation consultant, reviews, evaluates, and determines the various components of the compensation for the CEO, including establishing his base salary, the terms under which his cash incentive bonuses are paid, and deciding the extent to which he receives stock-based compensation awards. The Chief Human Resources Officer (“CHRO”) may assist the Committee with gathering relevant data, but does not participate in recommending or setting the CEO’s compensation. The Committee then recommends a compensation package for the CEO to the Board for its review, input, and approval.

 

The Committee also determines the amount and terms of the cash-based and stock-based compensation awards for the other NEOs and senior officers, taking into account recommendations on individual compensation levels and performance evaluation input from the CEO and CHRO. The CEO and CHRO have limited authority to make changes and adjustments to cash-based compensation, with the expectation that any adjustments would be in keeping with our overall compensation philosophy. No other NEO has an active role in the evaluation, design, or administration of the 2010 executive officer compensation program. Each NEO, however, provides input to the CEO and CHRO on individual compensation levels for the NEO’s direct reports.

 

Setting Executive Compensation — Comparative Data and Use of Compensation Experts

 

The Committee has engaged Frederic W. Cook & Co., Inc. (“Cook”), as its independent compensation consultant, to provide it with relevant market and comparative data and strategic alternatives to consider when making compensation decisions and recommendations for our NEOs. Cook provides compensation consulting services only to the Committee. Cook does no work for the Company unless it relates to executive or Board compensation and is approved by the Committee Chair, receives no compensation from the Company other than for its work advising the Committee, and maintains no other economic relationship with the Company.

 

The Committee and Cook also utilized benchmark data from Hay Group, another compensation consulting firm, to validate the comparative data Cook was providing to the Committee. The Cook and Hay Group comparative data were substantially similar.

 

In making compensation decisions, the Committee reviews all compensation components for the NEOs taking into account tally sheets showing overall compensation for each NEO. The Committee also compares each element of total compensation against a peer group of publicly-traded retailers (the “Compensation Peer Group”), which is periodically reviewed and updated. The Compensation Peer Group was selected because it consists of U.S. based publicly traded retailers of generally similar size and

scope to us and because we generally compete against these companies for talent and stockholder investment. The companies currently comprising the Compensation Peer Group are:

 

 

 

Principal Components of Executive Compensation

 

The principal components of our executive compensation program are: base salary, annual cash incentive bonuses (earned, guaranteed, and discretionary), long term stock-based incentive compensation, retirement plans, and health and welfare benefits.

 

Mix of Compensation Components

 

There is no pre-established policy or target for the allocation between either cash and non-cash incentive compensation or short-term and long-term incentive compensation. Rather, the Committee reviews information provided by Cook and other relevant information to determine the appropriate mix of salary and incentive compensation for our NEOs. The Committee believes, however, that a substantial portion of the annual and long-term compensation for our NEOs should be “at-risk.” We define at-risk compensation to include potential bonus payments under our executive cash bonus incentive plan and the targeted economic value of equity awards. This approach is designed to provide more upside potential and downside risk for the NEOs because they have greater influence on our performance as a whole. The following chart describes the percent of pay at-risk for our NEOs in 2010:

 

 

 

 ¹ While it is our expectation that Mr. Dyer would have the highest percentage of pay at-risk, the special retention grants of restricted stock to Mr. Kleeberger, Ms. Colaco and Ms. Murray, as discussed on page 47, resulted in a higher pay at-risk percentage for those NEOs compared to Mr. Dyer in fiscal 2010.

Components of Compensation

 

Base Salaries

 

We provide our NEOs and other employees with base salaries to compensate them for services rendered during the fiscal year. We generally try to target base salaries at the 50^th percentile of the Compensation Peer Group because we believe it is competitive and in line with our philosophy that increasing proportions of executive compensation should be tied to the Company’s performance. In fiscal 2010, however, based on our recruiting experience, we determined that to attract and retain high-caliber merchandising and design talent, we needed to target base salaries for these positions at the 75^th percentile of the Compensation Peer Group. Senior officers who were at or above the base salary target, including our NEOs, did not receive a merit-based salary increase in 2010; similar to the prior two years. A few officers, including one NEO, however, received promotional or market adjustments to their base salaries to bring them in line with targeted salary levels.

 

During its review of base salaries for our executives, the Committee also considers:

 

 

The Committee reviews the base salaries of our NEOs on an annual basis as well as at the time of any promotion or other material change in responsibilities.

 

Annual Cash Incentive Bonuses

 

An important component of potential total cash compensation consists of an incentive bonus opportunity, which is intended to make a significant portion of compensation dependent on our performance and to provide incentives to achieve our annual financial and strategic goals and work as a team in meeting objectives and overcoming challenges.

 

We target total cash compensation, where target performance goals are achieved, at or near the 75^th percentile because we believe this allows us to successfully compete for talent with the Compensation Peer Group. Variations to this target positioning may occur as dictated by the experience level of the individual and by other market factors. This target competitive positioning takes into account our expectations and desires that, over the long term, we will be able to generate stockholder returns in excess of the average of our peer group.

 

In fiscal 2010, bonuses were generally determined pursuant to our Cash Bonus Incentive Plan (the “Bonus Plan”). The performance metrics in the Bonus Plan were primarily designed to stimulate growth in sales and operating and merchandise margins, improve return on net assets, and grow earnings per share. These performance criteria and the weighting of a minimum of 3 metrics for each eligible participant are intended to motivate and reward all officers, including the NEOs, for improved financial performance of the Company year-over-year, which would be expected to lead to increased stockholder value. For fiscal 2010, the Committee reviewed and approved the performance metrics for the Bonus Plan and the approved metrics targeted an improvement in our financial performance over the prior year.

 

Under the Bonus Plan, each eligible associate has an assigned target bonus, expressed as a percentage of base salary, generally ranging from 15% to 100% of base salary, depending on the

participant’s position. The actual bonus awards can range from 0% to 175% of target, depending on the Company’s actual financial performance. In addition, the Company must attain the earnings per share threshold established by the Committee in the Bonus Plan before any payout under the Bonus Plan can be made.

 

Thus, if the Company failed to achieve the designated earnings per share threshold, then no performance based bonuses would be awarded to any eligible executive under the Bonus Plan. If the Company achieved or exceeded the threshold earnings per share goal but failed to achieve other performance goals, then only a portion of the performance based bonus would be awarded. On the other hand, if the Company’s performance exceeds the earnings per share threshold and some or all of the other performance goals, then the NEO may receive more than the targeted bonus, up to the maximum amount.

 

The bonus measures, targeted financial performance, targeted payout, and actual payouts for fiscal 2010 for each respective NEO are set forth below.

 

 

(1)   EPS means earnings per share. RONA means return on net assets, which we define as net income divided by net working capital less cash and marketable securities plus fixed assets. Comp store sales means sales from stores that were open for at least one year. Brand contribution means pre-tax earnings for each brand.

 

(2)   Percentage increase means an increase over the prior fiscal year’s actual performance for each metric.

 

(3)  The actual payout in fiscal 2010 represented an above target amount payable to each participant because our financial performance exceeded the target for each of the performance measures.

 

At the end of the performance period, the Committee has the option to award a discretionary bonus to reward individual productivity improvements even if certain performance metrics were not met. The Company did not award any discretionary bonus to any NEO or senior officer in 2010.

The bonuses paid for fiscal 2010 pursuant to the Bonus Plan appear in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column. Satisfactory individual performance is a condition to payment.

 

In fiscal 2010, the earned bonuses paid to all participants under the Bonus Plan were approximately 127% of target. Overall, for fiscal 2010, approximately 350 participants were awarded a total of approximately $23.4 million in incentive bonuses compared to fiscal 2009, with approximately 175 participants having been awarded $22.4 million in incentive bonuses.

 

The Amended and Restated Cash Bonus Incentive Plan, as amended and restated as of June 24, 2010 (“Amended and Restated Bonus Plan”) was approved by stockholders at the 2010 Annual Meeting and will be effective for bonus awards to be granted beginning in fiscal 2011.

 

Sign-On and “Guaranteed” Bonuses

 

The Company will, as necessary, pay sign-on and first year guaranteed bonuses at various levels in order to attract the management talent necessary to drive long term and sustainable growth. Executives we recruit from other companies are often required to give up a significant amount of compensation from their former company, in the form of lost bonus opportunities, unvested equity or a combination of both. Sign-on and first year guaranteed bonuses are a necessary and effective means of offsetting their losses. In those instances in which we have provided an executive with a sign-on bonus, we generally require the newly hired executive to pay back a pro rata portion of the sign-on bonus if they voluntarily leave the Company within a year after joining us. The Company did not pay any sign-on or guaranteed bonuses to NEOs in fiscal 2010.

 

Is the Bonus Plan Meeting Its Intended Objectives?

 

The current version of the Bonus Plan has been in place for the last two years. It is appropriate, then, to begin the process of assessing whether the Bonus Plan has been effective over that two year period in meeting its intended goals of, among other things, increasing sales, operating margins, and earnings per share and improving return on net assets. The following chart sets forth changes in each of these metrics over the relevant two year period:

 

 

While some of the improvement in these metrics is attributable to improvement in the overall economy since 2008, the significant increase in each of these metrics leads the Committee and the Company to the preliminary conclusion that the bonus plan is working as intended. The Committee and the Company will continue to assess the effectiveness of its bonus plan over time.

 

Long-Term Incentive Stock-Based Compensation

 

We believe that meaningful equity participation by our officers is one of the primary motivating factors that will result in significant long term and sustained increases in value and growth. This belief is reflected in our officer and director stock ownership guidelines and well as the aggregate awards of stock

options, restricted stock and restricted stock units that we have made to our executive officers. The stock ownership guidelines are described on page 50 and are available on the Company’s investor relations website at www.chicosfas.com.

 

We believe that providing executive officers stock-based compensation is the most effective way to align their interests with those of our stockholders. Stock options, restricted stock, and performance shares provide an incentive, beginning immediately upon grant, to officers to manage the Company from the perspective of an owner with an equity interest in the business. In addition, stock-based compensation has been and continues to be a key part of our program for motivating and rewarding key employees over the long term. Multi-year vesting of equity compensation provides a strong retention mechanism for key executive talent, which is critical to our long-term success. We intend to continue to have stock-based compensation serve as an important part of the compensation program for key employees.

 

The Committee, in consultation with Cook and with the approval of the Board, determines the stock-based compensation for the CEO. The Committee, upon the recommendation by the CEO and the CHRO, also makes final decisions regarding stock-based awards for all other eligible associates. While we have established guidelines for the amount of equity we grant, factors such as performance and responsibilities of individual officers and the management team as a whole, as well as general industry practices, play an integral role in the determination of the number of stock options, number of shares of restricted stock/restricted stock units, and number of performance shares/performance share units awarded to a particular recipient. In determining the size of the individual stock-based awards, the Committee also considers the amount of stock-based awards outstanding and previously granted, the amount of stock-based awards remaining available for grant under its Omnibus Plan, as amended and restated, the aggregate amount of current awards, and the amount of awards believed necessary to attract and retain qualified management. All stock-based awards vest over time as a means to encourage the recipient to remain in service with us.

 

Stock Options

 

Substantially all stock options granted to key employees have a ten-year term and vest in equal annual installments over a period of three years from the date of grant, but the Committee will consider and has previously provided for other vesting schedules, as appropriate. Stock option award levels are determined based on external market data and internal fairness considerations and vary among participants based on their positions within the Company. The option exercise price is the closing price on the date of grant. We grant stock options as an incentive for our executives to create stockholder value by encouraging a culture of ownership at the Company. For an executive to receive value from a stock option, the stock price must increase from the time of grant to the time of exercise.

 

We have not re-priced or replaced options in response to declining stock prices.

 

Restricted Stock and Restricted Stock Units

 

Awards of shares of restricted stock or restricted stock units are granted to key employees based on similar criteria as stock option grants. These whole-share awards generally vest in equal annual amounts over a three-year period from the date of grant, but the Committee has provided for other vesting schedules, as appropriate. Restricted stock and awards of restricted stock units encourage executives to not only create stockholder value, but also to preserve value. In other words, restricted stock has both upside potential and downside risk. We believe that whole-share awards such as restricted stock grants provide a balance with stock options and further align the interests of management and stockholders.

Performance Shares/Units

 

In 2010, the Company awarded Mr. Dyer a grant of performance shares. The performance share grant provided Mr. Dyer with the opportunity to earn between 0 and 133,333 shares (with a target of 100,000 shares) based on the achievement of the 2010 RONA goals in our 2010 Bonus Plan. Any shares earned under the performance share grant would vest two years from the date of grant. Based on our RONA performance in 2010, Mr. Dyer earned 133,333 of the performance shares, which will vest in March 2012, contingent on Mr. Dyer’s continued employment through that date.

 

Also in 2010, the Company awarded its Brand Presidents and Executive Vice Presidents performance-based restricted stock units. Participants in this award are eligible to earn from 0 up to a targeted number of shares, contingent upon the Company’s level of earnings per diluted share (“diluted EPS”) in fiscal 2011. If 2011 diluted EPS is less than $0.90, no shares will be earned; if 2011 diluted EPS is $0.90, 25% of the shares will be earned, and if 2011 diluted EPS is $1.00 all of the shares will be earned. Payout will be linearly interpolated for diluted EPS between $0.90 and $1.00. Any shares earned based on the achievement of such goals will vest two years from the date of grant.

 

The Committee provided the referenced performance shares/units for a number of reasons. First, the Committee wanted to tie equity compensation earned to the achievement of corporate performance objectives. Unlike time-based restricted stock, performance-based restricted stock/units vest based on certain operational achievements, in addition to continued service. That is, assuming the eligible associates remain employed, they will only receive the shares if the Company achieves the designated performance goal. In addition, the Committee believes performance awards improve the overall balance of the compensation program between short- and long-term operating performance as well a share price appreciation. Because the performance goals require improved financial performance over time, performance share awards tend to align our executives’ interests with our stockholders’ interests.

 

Retention Grants

 

On August 19, 2010, special restricted stock grants were awarded to certain members of the executive management team who were identified as key contributors to the entire organization and who made significant contributions to the Company’s rapid turnaround and financial success over the last 18-24 months. Included in this grant were Ms. Murray and Ms. Colaco, who each received 150,000 restricted shares and Mr. Kleeberger, who received 75,000 restricted shares. These grants vest over a 5-year period with no shares vesting in years 1 and 2, 20% vesting in each of year 3 and year 4 and 60% vesting in year 5.

 

The Committee believes that the size of the respective awards is an appropriate reward for the executive’s contributions to the Company and that the extended vesting schedules will foster long-term focus on, and commitment to, the Company.

 

Granting of Equity Awards

 

The Company has adopted a Policy on Granting Equity Awards. The complete Policy is available under the Corporate Governance tab at www.chicosfas.com. This Policy is designed to provide some measure of assurance that grant awards are not being manipulated to result in a price that is unreasonably favorable to the recipients of the grants. Since fiscal 2007, the annual equity grant date for all officers has been the date on which the trading window period first opens following the public release of year end earnings. This grant date is generally in late February or early March and is established by us well in advance. Because the Committee does not generally meet on this date, the Committee authorizes the grants at its meeting first preceding the grant date, usually several weeks in advance, specifying an

effective prospective grant date consistent with this policy. The exercise price for stock options is generally the closing price on the specified grant date, but in no event less than the closing price on the grant date. This grant date is driven by two principal considerations:

 

 

The Company also makes promotional, new hire, and out-of-cycle equity awards to executives, as appropriate. The grant date for such awards is the date on which the trading window opens following the date of promotion or hire. The exercise price for stock options is generally the closing price on the grant date, but in no event less than the closing date price.

 

In fiscal 2010, (i) a total of 1,170,800 stock options were granted to our employees and non-employee directors, including 240,000 stock options that were awarded to executive officers and (ii) a total of 1,547,993 shares of restricted stock/units (including performance-based awards) were awarded to our employees and non-employee directors including 810,002 shares of restricted stock/units (including performance-based awards) that were awarded to executive officers.

 

Retirement and Welfare Benefits

 

401(k) Plan

 

In 1992, the Company adopted a profit sharing plan to provide a means for all eligible employees at all levels of the Company to share in our profits and accumulate retirement savings. Effective January 1, 1999, we incorporated a 401(k) feature into our profit sharing plan as a further means for all eligible employees at all levels of the Company to accumulate retirement savings. Under the 401(k) aspect of the plan, eligible employees can elect to defer up to 100% of their respective compensation, subject to certain statutory limitations, and have it contributed to the plan. The Company has elected to match employee contributions at 50% on the first 6% of the employees’ compensation that is contributed and can elect to make additional contributions over and above the mandatory match, based on the amount it deems appropriate in light of our operating results for any given year. During the fiscal year ended January 29, 2011, our aggregate matching contributions, including both mandatory and additional matching contributions, were approximately $2.6 million, of which approximately $34,000 was contributed for the benefit of our executive officers.

 

Employee Stock Purchase Plan

 

In 2002, the Company adopted an employee stock purchase plan (replacing our 1993 employee stock purchase plan) to continue to provide all eligible employees at all levels an opportunity to become stockholders of the Company. As an inducement, eligible employees may purchase shares up to 400 shares of stock in the Company semiannually during specified periods at a 15% discount to the value of the stock. This plan was amended and restated in 2004 to address certain technical amendments. The executive officers are eligible to participate in this stock purchase plan. We are seeking stockholder approval to amend the plan, as described more fully on pages 24 to 27 of this Proxy.

Health and Welfare Benefits

 

Our executive officers are also eligible to participate in the health and dental coverage, life insurance, paid time off, and other programs that are generally available to all of our employees.

 

Perquisites and Other Benefits

 

We do not provide significant perquisites or personal benefits to NEOs. We provide competitive relocation benefits for any newly hired NEO in keeping with industry practices. We also offer to pay for an annual physical examination and offer supplemental disability income insurance for certain officers, including all NEOs. The costs of the annual physical and supplemental disability income insurance are immaterial and we believe the Company benefits from these perquisites. The annual physical helps to mitigate the risk of losing the services of a member of senior management due to otherwise undetected health issues. The Company believes that the financial security provided to executives through the supplemental disability income insurance is a good investment because it provides a useful tool in the retention of top talent. We value perquisites at their incremental cost to us in accordance with SEC regulations, and the NEOs are allowed to reimburse us for such perquisites at their incremental cost to us to the extent that limitations on personal use are exceeded. These amounts, if applicable, are reflected in the Summary Compensation Table below.

 

Deferred Compensation Plan

 

The Company has adopted two nonqualified plans that permit executive officers to defer current compensation, on a tax-deferred basis, for long term or retirement savings, one of which relates to deferrals made through December 31, 2004 and related earnings and the other of which relates to deferrals since January 1, 2005 and related earnings. Pursuant to the deferred compensation plans, participants have been allowed to defer all or a portion of their qualifying compensation. Under each plan, a book account is then maintained for each such executive officer in which there is an accounting of the amount of compensation deferred and deemed earnings on those amounts based upon the participant’s selection of various available investment options. The Company has not made any matching funds or other contribution to any participant’s account. In accordance with the terms of each of the plans, the deferral must be placed in a “rabbi” trust. This trust arrangement offers a degree of assurance for ultimate payment of benefits without causing constructive receipt of the deferral or earnings thereon for income tax purposes. The assets in the trust remain subject to the claims of our creditors and are not the property of the executive officer unless there is a change in control. This provides further incentive to the executive officer to drive future performance.

 

Section 409A of the Internal Revenue Code (the “Code”) imposes restrictions on the funding of, distributions made under, and elections to participate in, nonqualified deferred compensation arrangements. Although we believe that we are operating in compliance with the statutory provisions relating to Section 409A that are currently effective and have made appropriate modifications to the applicable plan, the statute and its regulations are complex and subject to further interpretation and uncertainty. Thus, it is possible that we will have to make additional adjustments to our nonqualified deferred compensation arrangements to comply with the applicable rules as further interpretations are issued.

 

Severance and Change in Control Benefits

 

Certain of the NEOs have employment agreements that provide for severance benefits in connection with certain employment terminations, with separate provisions that would govern a severance associated with a change in control. In particular, these contractual severance benefits are extended to David F. Dyer, the Chief Executive Officer and Jeffrey A. Jones, who served as Chief

Operating Officer during 2010 and through March 7, 2011. Because Mr. Jones retired voluntarily, these severance benefits were not triggered. The principal terms of Mr. Dyer’s and Mr. Jones’ employment agreement and the related provisions addressing severance benefits are described beginning on page 58 of this proxy statement.

 

The Company also offers reasonable severance benefits to all officers in order to attract and retain highly skilled management talent. Many other retailers offer comparable severance benefits. As a result, the Company has adopted a Vice President Severance Plan and an Executive Severance Plan which provide severance benefits upon certain terminations of employment. The plans are on file with the SEC, as required, and their material terms are summarized on page 62 of this proxy statement.

 

None of these severance benefits provide for payment of excise tax gross-ups.

 

Tally Sheets

 

With respect to fiscal 2010 compensation, the Committee utilized tally sheets for all compensation and maximum potential payouts when approving compensation matters. Through the use of such tally sheets, the Committee reviewed all components of the compensation of our CEO, CFO, and other NEOs, including base salary and annual cash incentive compensation as well as long term equity based incentive compensation and accumulated realized and unrealized equity award gains.

 

Other Matters

 

Share Retention Guidelines; Hedging Prohibition

 

The Company has adopted stock ownership guidelines for all officers and directors, including the NEOs. Compliance with the ownership guidelines are reviewed regularly by the Committee. The current guidelines require executives to hold Company stock equal to the following values: (i) CEO — ownership equal to three times the prior year’s salary; (ii) other covered officers — ownership equal to one to two times prior year’s salary; and (iii) non-employee directors — ownership equal to three times the base annual retainer. The Company has established a retention ratio that requires officers and directors to retain and hold on a net after tax basis at least 25% of shares obtained as a result of a stock option exercise or the vesting of restricted shares until such time as the officer or director is in compliance with the guidelines.

 

Shares counted toward this requirement are based on shares owned outright as well as shares otherwise beneficially owned by such officer or director (as beneficial ownership is defined by the SEC’s rules and regulations) and the value of the gain on vested but unexercised in-the-money options as determined based on a closing price as of a set date. Unvested restricted shares and unvested options awarded under our stock incentive plan are not counted for these purposes. Officers and directors are not permitted to hedge their economic exposures to the Company stock that they own.

 

Clawback Agreements

 

The Company has “Clawback” Agreements with the CEO and CFO. Under these Agreements, each executive is required to reimburse the Company for incentive compensation previously paid to the executive under any of the Company’s executive bonus programs if within two years from the date of payment of such incentive compensation, the Company is required to prepare an accounting restatement due to material noncompliance of the Company with any then applicable financial reporting requirement under the securities laws as a result of misconduct by the executive and/or gross negligence by the executive in failing to prevent the misconduct or if the executive is otherwise subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002. The Committee believes that the officers

who certify the Company’s financial reporting should not be unjustly enriched for prior reporting periods in the event of such a restatement.

 

Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code prohibits publicly held companies from deducting certain compensation to any one NEO, other than the CFO, in excess of $1,000,000 during the tax year. However, Section 162(m) provides that, to the extent that compensation is based on the attainment of performance goals set by the Committee pursuant to plans approved by our stockholders, the compensation is not included for purposes of arriving at the $1,000,000. For fiscal 2010, bonuses earned by the NEOs were paid out under the stockholder-approved Amended and Restated 2002 Omnibus Stock and Incentive Plan. Our Compensation Committee administered the bonus awards under the Omnibus Plan such that the payouts qualify for the “performance-based” exemption from the $1,000,000 limit. Thus, any bonus compensation paid to NEOs with respect to fiscal 2010 was fully tax-deductible. For fiscal 2011, bonus compensation will be paid out under the Amended and Restated Bonus Plan approved by stockholders at last year’s annual meeting.

 

Compensation realized from stock options granted under the Amended and Restated Chico’s FAS 2002 Omnibus Stock and Incentive Plan qualifies for the performance-based exemption under Section 162(m), and is, therefore, deductible. In addition, the Compensation Committee has administered the performance share awards to also qualify for the performance-based exemption; therefore, compensation realized from performance shares is deductible. Compensation realized from time-based vesting restricted stock grants, however, does not qualify for such an exemption. Thus, to the extent taxable compensation from restricted stock earnings in combination with salaries and certain other compensation elements for any NEO exceeds $1,000,000, such compensation will not be deductible.

 

The Company is permitted to and reserves the right to pay other amounts that are not tax deductible to meet the design goals of our executive compensation program. In any event, because of the uncertainties associated with the application and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact be deductible.

 

Fiscal 2011 Compensation Framework

 

For fiscal 2011, the Company implemented the following changes in compensation arrangements for its executive officers.

 

For the most part, senior Company officers did not receive annual merit-based salary increases in 2011 because comparative data indicated that officer salaries were at or above the targeted 50th or 75th percentile. This is the third straight year that senior officers who were at or above the targeted percentile did not receive any merit-based annual salary increases. Three senior officers whose salaries were below the targeted percentile did, however, receive an increase to their base salaries as part of a market adjustment to bring them in line with targeted salary levels.

 

The Company also reduced the bonus levels at the threshold, target, and maximum levels for certain senior officers, including one of the NEOs, in its continuing efforts to align total direct compensation with its target of being at the 75^th percentile of its Compensation Peer Group.

 

The Company awarded Mr. Dyer 100,000 performance shares of the Company’s stock in February 2011. The structure of this award is similar to the structure of Mr. Dyer’s 2009 and 2010 performance share awards. Under the 2011 performance share award, Mr. Dyer is eligible to earn from 0 to 133,333 shares, with a target of 100,000 shares, contingent upon the achievement of the 2011 RONA goals consistent with the Amended and Restated Bonus Plan. Any shares earned based on

the achievement of such goals will vest in March 2012, contingent on Mr. Dyer’s continued employment through that date.

 

The performance share grant was made because, as cited on page 47, it is believed to create incentives for operational excellence as well as enhanced stockholder value. It also has the effect of increasing the alignment of the CEO’s and stockholders’ interests, and is consistent with the Company’s philosophy that executive compensation should be tied to Company performance.

 

The Company also awarded Mr. Dyer with 100,000 shares of restricted stock with a grant date of February 24, 2011, consistent with the company’s Policy on Granting Equity Awards. The restricted shares will vest 1/3 on the first anniversary of the grant date, 1/3 on the second anniversary of the grant date, and the balance on the third anniversary of the grant date. The shares were awarded as recognition of Mr. Dyer’s leadership through the Company’s rapid turnaround and financial success over the last two years.

 

For the 2011 annual equity grants, the Company added a performance threshold for awards to associates at the Executive Vice President level and above. In particular, 50% of the restricted stock awards granted in fiscal 2011 are contingent on the attainment of the threshold earnings per share goal in the Company’s 2011 management bonus plan. If the earnings per share threshold is not met, then 50% of the restricted stock awarded will be forfeited. Thus, the equity awarded is tied to Company performance further aligning the executives’ interests with the stockholders.

 

Otherwise, all compensation programs are largely unchanged from fiscal 2010.

 

 

The following table includes information concerning compensation for fiscal years 2008, 2009 and 2010 in reference to the NEOs, which includes the Company’s principal executive officer during fiscal year 2010, the Company’s principal financial officer, and the three most highly compensated executive officers of the Company other than the principal executive officer and the principal financial officer. A description of the material terms of the employment agreements for each of the NEOs, including a description of potential post employment payments, appears below under the headings “Employment Agreements for Named Executive Officers” and “Potential Payments Upon Termination or Change in Control for Named Executive Officers.”

 

 

 

 

 

The following table sets forth certain information with respect to the equity and non-equity awards granted during or for the fiscal year ended January 29, 2011 to each of our executive officers listed in the Summary Compensation Table.