NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

TO THE OWNERS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK OF POLO RALPH LAUREN CORPORATION:

 

The 2007 Annual Meeting of Stockholders of Polo Ralph Lauren Corporation, a Delaware corporation (the “Company”), will be held at the St. Regis Hotel, 20th Floor Penthouse, 2 East 55th Street, New York, New York, on Thursday, August 9, 2007, at 9:30 a.m., local time, for the following purposes:

 

1. To elect twelve directors to serve until the 2008 Annual Meeting of Stockholders;

 

2. To amend the Executive Officer Annual Incentive Plan;

 

3. To ratify the appointment of Deloitte & Touche LLP as independent auditors of the Company for the fiscal year ending March 29, 2008; and

 

4. To transact such other business as may properly come before the meeting and any adjournments or postponements thereof.

 

Stockholders of record at the close of business on June 25, 2007 are entitled to notice of, and to vote at, the Annual Meeting of Stockholders and any adjournments or postponements thereof.

 

By Order of the Board of Directors

 

JONATHAN D. DRUCKER

Senior Vice President, General Counsel and Secretary

 

New York, New York

July 3, 2007

 

EACH STOCKHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY. IN THE EVENT A STOCKHOLDER DECIDES TO ATTEND THE MEETING, IT, HE OR SHE MAY, IF SO DESIRED, REVOKE THE PROXY BY VOTING THE SHARES IN PERSON AT THE MEETING.

 

 

PROXY STATEMENT

 

 

FOR ANNUAL MEETING OF STOCKHOLDERS

 

To Be Held On August 9, 2007

 

This proxy statement is furnished to the stockholders of Polo Ralph Lauren Corporation, a Delaware corporation, in connection with the solicitation by the Company’s Board of Directors of proxies for the 2007 Annual Meeting of Stockholders of the Company to be held at the St. Regis Hotel, 20th Floor Penthouse, 2 East 55th Street, New York, New York on Thursday, August 9, 2007, at 9:30 a.m., local time, and at any adjournments or postponements thereof. This proxy statement and the accompanying proxy are being mailed to the Company’s stockholders on or about July 6, 2007. In this proxy statement, we refer to Polo Ralph Lauren Corporation as the “Company”, “we” or “us”.

 

A proxy delivered pursuant to this solicitation may be revoked by the person executing the proxy at any time before it is voted by giving written notice to the Secretary of the Company, by delivering a later dated proxy, or by voting in person at the Annual Meeting of Stockholders. The address of the Company’s principal executive offices is 650 Madison Avenue, New York, New York 10022.

 

Only holders of record of shares of the Company’s Class A Common Stock and Class B Common Stock (together, the “Common Stock”) at the close of business on June 25, 2007, the record date for the Annual Meeting of Stockholders, are entitled to notice of, and to vote at, the Annual Meeting of Stockholders and adjournments or postponements thereof. The presence, in person or by proxy, of the holders of one-third of the total number of shares of Common Stock outstanding on the record date will constitute a quorum for the transaction of business at the Annual Meeting of Stockholders. Each owner of record of Class A Common Stock on the record date is entitled to one vote for each share. Each owner of record of Class B Common Stock on the record date is entitled to ten votes for each share. On June 25, 2007, there were 60,748,668 outstanding shares of Class A Common Stock and 43,280,021 outstanding shares of Class B Common Stock. Except for the election of directors, the Class A Common Stock and Class B Common Stock vote together as a single class on all matters presented for the consideration of the stockholders of the Company.

 

The Company’s Board of Directors has by resolution fixed the number of directors at twelve. Two directors (the “Class A Directors”) will be elected by plurality vote of the shares of Class A Common Stock present in person or by proxy at the Annual Meeting of Stockholders and eligible to vote, and ten directors (the “Class B Directors”) will be elected by plurality vote of the shares of Class B Common Stock present in person or by proxy at the Annual Meeting of Stockholders and eligible to vote. The approval of the amendment to the Company’s Executive Officer Annual Incentive Plan (the “EOAIP”) and the ratification of the appointment of Deloitte & Touche LLP (“Deloitte & Touche”) as the Company’s independent auditors will each require the affirmative vote of a majority of the total votes cast on that proposal by the shares of Common Stock present in person or by proxy at the Annual Meeting of Stockholders and eligible to vote. The Class A Common Stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “RL”; the Class B Common Stock is owned by Ralph Lauren and entities owned by, or established for the benefit of, Mr. Lauren or members of his family.

 

All properly executed proxies delivered pursuant to this solicitation and not revoked will be voted at the Annual Meeting of Stockholders in accordance with the directions given in such proxies. With respect to the election of directors to serve until the 2008 Annual Meeting of Stockholders, holders of either class of Common Stock may vote in favor of all nominees for election by that class, withhold their votes as to specific nominees, or withhold their votes as to all nominees for election by that class. With respect to the approval of the amendment of the EOAIP, stockholders may vote in favor of approval, vote against approval, or abstain from voting. With respect to the ratification of the appointment of Deloitte & Touche as the Company’s independent auditors for the fiscal year ending March 29, 2008, stockholders may vote in favor of ratification, vote against ratification, or abstain from

voting. Stockholders should specify their choices on the enclosed form of proxy. If no specific instructions are given with respect to the matters to be acted upon, the shares represented by a properly signed proxy will be voted FOR the election of all nominees for election as directors in the applicable class (Proposal 1), FOR the proposal to amend the Company’s EOAIP (Proposal 2) and FOR the proposal to ratify the appointment of Deloitte & Touche as the Company’s independent auditors (Proposal 3).

 

Abstentions will be counted as votes cast on proposals presented to stockholders, but broker non-votes will not be considered votes cast. Shares represented by broker non-votes with respect to any proposal will be considered present but not eligible to vote on such proposal. Abstentions and broker non-votes will have no effect on the election of directors, which is by plurality vote, but abstentions will, in effect, be votes against the amendment of the Company’s EOAIP and the ratification of the appointment of independent auditors.

 

(PROPOSAL 1)

 

ELECTION OF DIRECTORS

 

The Company’s Amended and Restated By-laws provide that its Board of Directors may fix the number of directors constituting the entire Board between six and twenty. The Board has currently fixed the number of directors constituting the entire Board of Directors at twelve. The Company’s Board of Directors is presently divided into two classes, with all directors being elected annually. Pursuant to the Company’s Amended and Restated Certificate of Incorporation, the two Class A Directors will be elected by the holders of Class A Common Stock and the ten Class B Directors will be elected by the holders of Class B Common Stock, each to serve until the 2008 Annual Meeting of Stockholders and until his or her successor is elected and qualified.

 

The Board appointed John R. Alchin and Jackwyn L. Nemerov on February 6, 2007 and Robert C. Wright on May 23, 2007 to serve as Class B directors until the 2007 Annual Meeting of Stockholders. Mr. Alchin, Ms. Nemerov and Mr. Wright have been nominated for election as Class B directors at the Annual Meeting of Stockholders.

 

Each of the Company’s current directors have been nominated for re-election at the 2007 Annual Meeting of Stockholders. Joel L. Fleishman and Frank A. Bennack, Jr. have been nominated for election as Class A Directors, and Ralph Lauren, Roger N. Farah, Jackwyn L. Nemerov, John R. Alchin, Arnold H. Aronson, Joyce F. Brown, Judith A. McHale, Steven P. Murphy, Terry S. Semel and Robert C. Wright, have been nominated for election as Class B Directors. The Company knows of no reason why any nominee would be unable or unwilling to serve. If any nominee becomes unable or unwilling to serve for any reason, the Board, based on the recommendation of the Nominating & Governance Committee, may either reduce the number of directors or designate a substitute nominee. If a substitute nominee is designated, the persons named in the enclosed proxy will vote all proxies that would otherwise be voted for the named nominee or nominees for the election of such substitute nominee or nominees.

 

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR EACH NOMINEE AS A DIRECTOR TO HOLD OFFICE UNTIL THE 2008 ANNUAL MEETING OF STOCKHOLDERS AND UNTIL HIS OR HER SUCCESSOR IS ELECTED AND QUALIFIED. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXIES THAT AUTHORITY IS WITHHELD AS TO ONE OR MORE NOMINEES.

CLASS A DIRECTOR NOMINEES FOR ELECTION

 

 

CLASS B DIRECTOR NOMINEES FOR ELECTION

 

 

The Company’s Board of Directors held five meetings during its 2007 fiscal year, which ended on March 31, 2007. Each director attended more than 75% of the meetings held by the Board of Directors and its committees on which he or she served except for Terry S. Semel. The Company’s Board of Directors and its committees also act from time to time by unanimous written consent in lieu of meetings.

 

CORPORATE GOVERNANCE

 

The Company’s Board of Directors and management are committed to sound corporate governance. The Company has in place a comprehensive corporate governance framework which incorporates the corporate governance requirements of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission (the “SEC”) and the NYSE. Consistent with the Company’s commitment to corporate governance, the Company does not rely on the exceptions from certain of the NYSE’s corporate governance listing requirements available to majority controlled companies. The key components of the Company’s corporate governance framework are set forth in the following documents:

 

 

Each of the above documents is available on the Company’s investor relations website at http://investor.polo.com by clicking on “Corporate Governance”. Copies of these documents are available to stockholders without charge upon written request to the Company’s Investor Relations Department, 625 Madison Avenue, New York, New York 10022. Only the Board of Directors may grant a waiver under the Company’s codes of ethics to any director or executive officer, and any such waiver will be promptly posted on the Company’s website.

 

Director Independence

 

The Company’s Board of Directors believes that a majority of its directors should be independent, and has determined that all of its non-management directors, Mr. John R. Alchin, Mr. Arnold H. Aronson, Mr. Frank A. Bennack, Jr., Dr. Joyce F. Brown, Mr. Joel L. Fleishman, Ms. Judith A. McHale, Mr. Steven P. Murphy, Mr. Terry S. Semel and Mr. Robert C. Wright, are independent in accordance with the guidelines established under the Company’s Corporate Governance Policies and the NYSE’s corporate governance listing standards. The Company’s guidelines for determining directors’ independence are set forth as Appendix A to this proxy statement.

 

Independent Committees of the Board

 

The Company’s Board of Directors has established three committees consisting solely of independent directors — the Audit Committee, the Compensation Committee and the Nominating & Governance Committee.

 

The current members of the Audit Committee are Frank A. Bennack, Jr. (Chair), John R. Alchin, Dr. Joyce F. Brown and Judith A. McHale. The Audit Committee appoints the Company’s independent auditors, and approves in advance all audit and permitted non-audit services performed by them and the scope and cost of their annual audits. The Audit Committee reviews (i) the results of the independent auditors’ annual audits and quarterly reviews, (ii) management’s compliance with the Company’s major accounting and financial reporting policies, (iii) the adequacy of the Company’s financial organization and management’s procedures and policies relating to its internal control over financial reporting, and (iv) the Company’s compliance with applicable laws relating to accounting practice. The Audit Committee met five times in fiscal 2007. The Board has determined that each member of the Audit Committee is financially literate and that at least two members of the Audit Committee, Mr. Bennack, its Chair, and Mr. Alchin are audit committee financial experts, as defined by the SEC. The Audit Committee has adopted a formal policy for the approval of the performance of all audit and non-audit services of the independent auditors. This policy is described under “(PROPOSAL 3) RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.”

The current members of the Compensation Committee are Joel L. Fleishman (Chair), Frank A. Bennack, Jr. and Terry S. Semel. The Compensation Committee reviews and approves compensation plans and arrangements with respect to the Company’s executive officers and administers the employee benefit plans in which executive officers may participate, including the Company’s Amended and Restated 1997 Long-Term Stock Incentive Plan (the “1997 Stock Incentive Plan”) and its EOAIP. The Compensation Committee met five times in fiscal 2007.

 

The current members of the Nominating & Governance Committee are Dr. Joyce F. Brown (Chair), Arnold H. Aronson, Joel L. Fleishman and Steven P. Murphy. The Nominating & Governance Committee identifies individuals qualified to become directors, recommends director nominees to the Board, develops and recommends corporate governance policies to the Board, exercises oversight of the evaluation of the Board members and committees, as well as that of senior management, and recommends to the Board policies and principles for Chief Executive Officer succession, selection and performance reviews. The Nominating & Governance Committee met four times in fiscal 2007.

 

Non-Management Director Meetings

 

The Company’s non-management directors met four times in fiscal 2007 without any management representatives present. Pursuant to the Company’s Corporate Governance Policies, the leader of meetings of the non-management directors is chosen from among the chairs of the Audit, Compensation and Nominating & Governance Committees based on the topics to be discussed. The session leader can retain independent consultants and schedule meetings. Pursuant to the Company’s Corporate Governance Policies, an executive session consisting of only those non-management directors who qualify as independent is held at least once a year.

 

Director Nominating Procedures

 

The Nominating & Governance Committee identifies and evaluates candidates for nomination as directors and submits its recommendations to the full Board for its consideration. The Committee, guided by the membership criteria established by the Board in the Company’s Corporate Governance Policies, seeks highly qualified candidates who combine a broad spectrum of experience and expertise with a reputation for integrity. The Company’s Board selects director nominees based upon contributions they can make to the Board and management regardless of gender or race, and seeks to maintain a majority of independent directors. The Committee solicits and receives suggestions for, as well as comments upon, director candidates from other directors, including the Chairman of the Board, and usually engages third parties either to assist in the search for director candidates or to assist in gathering information regarding director candidates’ background and experience. If the Committee engages a third party to assist it, the Committee approves the fees that the Company pays for these services.

 

The Nominating & Governance Committee will consider candidates recommended by the Company’s directors, members of management and stockholders, and will evaluate candidates recommended by stockholders on the same basis as other candidates. Candidates should have experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Upon receiving a stockholder recommendation, the Committee will initially determine the need for additional or replacement Board members and then evaluate the candidate based on the information the Committee receives with the stockholder recommendation or that it may otherwise acquire, and may, in its discretion, consult with the Chairman and other members of the Company’s Board. If the Committee determines that a more comprehensive evaluation is warranted, the Committee may obtain additional information about the director candidate’s background and experience, including by means of interviews with the candidate.

 

The Company’s stockholders may recommend candidates at any time, but the Nominating & Governance Committee requires recommendations for election at an annual meeting of stockholders to be submitted to the Committee no later than 120 days before the first anniversary of the date of the proxy statement sent to stockholders in connection with the previous year’s annual meeting of stockholders in order to be considered for nomination by the Committee. The Nominating & Governance Committee believes this deadline is appropriate and in the best interests of the Company and the Company’s stockholders because it ensures that the Committee has sufficient time to evaluate properly all proposed candidates. Therefore, to submit a candidate for consideration for nomination at

the 2008 Annual Meeting of Stockholders, a stockholder must submit the recommendation, in writing, by March 8, 2008. The written notice must include:

 

 

Recommendations must be sent to the Nominating & Governance Committee, Office of the Secretary, Polo Ralph Lauren Corporation, 650 Madison Avenue, New York, New York 10022.

 

The Company’s stockholders may directly nominate an individual for election as a director at an annual meeting of stockholders by complying with the nominating procedures set forth in the Company’s Amended and Restated By-laws, which are described below under the caption “ADDITIONAL MATTERS — Stockholder Proposals for the 2008 Annual Meeting of Stockholders”.

 

Director Communications

 

Stockholders and interested parties may contact any of the Company’s directors, including the Chairman of the Board, the Chairs of the Board’s independent Committees, any Committee of the Board, the Board’s non-management directors as a group or the entire Board, by writing to them as follows: [Name(s)/Title(s)], Office of the Secretary, Polo Ralph Lauren Corporation, 650 Madison Avenue, New York, New York 10022. Communications received in this manner will be handled in accordance with the procedures approved by the Company’s independent directors, who have requested that certain items that are unrelated to the duties and responsibilities of the Board should be excluded, such as:

 

 

In addition, material that is threatening, illegal or similarly unsuitable will be excluded, with the provision that any communication that is filtered out will be available to any non-management director upon request.

 

Audit Committee Communications

 

Complaints and concerns relating to accounting, internal control over financial reporting or auditing matters may be communicated to the Audit Committee, which consists solely of non-employee directors, through the Office of the Secretary as described above under “Director Communications”. Any such communication may be anonymous.

 

All complaints and concerns will be reviewed by the Audit Committee or a designated member of the Audit Committee. If the Committee or its member designee determines that a reasonable basis exists for conducting a

formal investigation, the Audit Committee will direct and supervise the investigation, and may retain independent legal counsel, accountants and other advisors as it deems necessary. Confidentiality will be maintained to the fullest extent consistent with the need to conduct an adequate review. Prompt and appropriate corrective action will be taken when and as warranted in the judgment of the Audit Committee.

 

The Company will not discharge, demote, suspend, threaten, harass or in any manner discriminate against any employee in the terms and conditions of his or her employment based upon any lawful actions of such employee with respect to good faith reporting of complaints regarding accounting, internal controls or auditing matters.

 

Director Attendance at Annual Meetings

 

As provided in the Company’s Corporate Governance Policies, directors are expected to attend Annual Meetings of Stockholders. All of the nine directors then constituting the entire Board attended the 2006 Annual Meeting of Stockholders.

 

Required Certifications

 

As of the mailing date of this proxy statement, the Company’s Chief Executive Officer and Chief Financial Officer have timely delivered the certifications required under applicable rules of the SEC. The Chairman and Chief Executive Officer’s fiscal 2006 annual certification which was provided to the NYSE in September 2006 regarding the NYSE’s corporate governance listing standards did not contain any qualification with respect to the Company’s compliance with such standards.

 

Audit Committee Report

 

The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to the Company’s consolidated financial statements, the Company’s compliance with legal and regulatory requirements, the Company’s system of internal control over financial reporting and the qualifications, independence and performance of its internal and independent auditors. We have the sole authority and responsibility to select, evaluate and, when appropriate, replace the Company’s independent auditors. The Committee currently is composed of four independent directors and operates under a written charter adopted by the Audit Committee and ratified by the Board.

 

Management is responsible for the Company’s financial reporting process, including the Company’s internal control over financial reporting, and for the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles. Deloitte & Touche, as the Company’s independent auditors, is responsible for auditing those financial statements and management’s assessment of internal control over financial reporting and expressing its opinion as to the fairness of the financial statement presentation in accordance with generally accepted accounting principles, the fairness of management’s assessment of the Company’s internal control over financial reporting, and the effectiveness of the Company’s internal control over financial reporting. Our responsibility is to oversee and review these processes. We are not, however, professionally engaged in the practice of accounting or auditing and do not provide any expert or other special assurance as to such financial statements concerning compliance with laws, regulations or generally accepted accounting principles or as to auditor independence. We rely, without independent verification, on the information provided to us and on the representations made by management and the independent auditors.

 

In this context, we have met and held discussions with management and Deloitte & Touche, the Company’s independent auditors for the fiscal year ended March 31, 2007. Management represented to us that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and we have reviewed and discussed with management, the Company’s internal auditors and Deloitte & Touche the Company’s consolidated financial statements for the fiscal year ended March 31, 2007 and the Company’s internal control over financial reporting. We also discussed with Deloitte & Touche the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees). Deloitte & Touche provided to us the written disclosures required by Independence Standards Board Standard No. 1, as amended (Independence Discussions with Audit Committees), and we discussed their independence with them. In determining Deloitte & Touche’s independence, we considered whether their provision of non-audit services to the

Company was compatible with maintaining independence. We received regular updates on Deloitte & Touche’s fees and the scope of audit and non-audit services it provided. All such services were provided consistent with applicable rules and our pre-approval policies and procedures.

 

Based on our discussions with management, our internal auditors and Deloitte & Touche and our review of the representations of management and Deloitte & Touche, and subject in all cases to the limitations on our role and responsibilities referred to above and set forth in the Audit Committee Charter, we recommended to the Board of Directors that the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2007 be included in the Company’s Annual Report on Form 10-K. We also approved, subject to stockholder ratification, the selection of Deloitte & Touche as the Company’s independent auditors for the fiscal year ending March 29, 2008.

 

Members of the Audit Committee

 

Frank A. Bennack, Jr. (Chair)

John R. Alchin

Dr. Joyce F. Brown

Judith A. McHale

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of June 25, 2007 by: (i) each stockholder who is known by the Company to beneficially own in excess of five percent of any class of the Company’s voting securities, (ii) each director, (iii) each of the executive officers whose names appear in the summary compensation table under the heading “SUMMARY COMPENSATION TABLE” below (the “named executive officers”) and (iv) all directors and executive officers as a group. Except as otherwise indicated, each stockholder listed below has sole voting and investment power with respect to the shares beneficially owned by such person. The rules of the SEC consider a person to be the “beneficial owner” of any securities over which the person has or shares voting power or investment power. In addition, a person is deemed to be the beneficial owner of securities if that person has the right to acquire beneficial ownership of such securities within 60 days, including through conversion or exercise of an option or other right. Unless otherwise indicated below, the address of each shareholder is 650 Madison Avenue, New York, New York 10022.

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers to file initial reports of ownership and reports of changes in ownership of the Company’s Class A Common Stock with the SEC and to provide copies of these reports to the Company. These filing requirements also apply to certain beneficial owners of more than ten percent of the Company’s Class A Common Stock. To the Company’s knowledge, based solely on the Company’s review of the copies of Section 16(a) reports furnished to the Company during the fiscal year ended March 31, 2007 and on written representations from certain reporting persons that no Form 5s were required to be filed by such persons, all reportable transactions during that fiscal year were reported on a timely basis.

 

DIRECTOR COMPENSATION

 

On August 10, 2006, the Nominating & Governance Committee of the Company approved changes to the annual compensation provided to non-employee directors for the first time since 2003. The changes were made upon the recommendation of the Compensation Committee and were ratified by the Board of Directors. The fee changes for annual retainers became effective on August 11, 2006 and the changes for annual equity awards become effective for fiscal 2008. The changes in compensation for non-employee directors are as follows:

 

 

The fee paid to non-employee directors for each meeting of a Committee of the Board of Directors that a director attends remained unchanged at $2,000 per Committee meeting. A non-employee director also continues to receive a grant of options to purchase 7,500 shares of the Company’s Class A Common Stock at the time that the director joins the Board of Directors of the Company. These options will vest over three years in equal annual installments and the stock option exercise term is seven years.

 

The annual retainer and attendance fees are paid to the non-employee directors in quarterly installments in arrears. The annual equity award to non-employee directors is awarded at the beginning of each fiscal year to those non-employee directors who have served as directors for at least half of the preceding fiscal year.

 

The Company reimburses its non-employee directors for reasonable travel expenses to attend Board and Committee meetings. Non-employee directors are also provided with a 50% merchandise discount on most Company products.

 

DIRECTOR COMPENSATION TABLE

 

The following table provides information concerning the compensation of the Company’s non-employee directors for fiscal 2007. Directors who are employees of the Company receive no compensation for their services as directors and do not serve on Board Committees.

 

DIRECTOR COMPENSATION FISCAL YEAR 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Compensation Policy

 

Compensation Philosophy and Objectives

 

The Company’s compensation philosophy is designed to attract, motivate and retain qualified executives and to support a performance-oriented environment that rewards achievement of the Company’s short-term and long-term goals. The Company seeks to establish and maintain a compensation program that guides and reinforces sound decision-making, the achievement of targeted goals, and leadership behavior. This philosophy is reflected in the following guiding principles:

 

 

Process for Determining Compensation for Executives

 

Role of Compensation Committee and Management’s Role.  The Compensation Committee of the Company’s Board of Directors is responsible for evaluating the performance of and determining the compensation payable to Ralph Lauren, the Chief Executive Officer (“CEO”) and Roger N. Farah, the Chief Operating Officer (“COO”) of the Company. The CEO and the COO evaluate the performance of the three other named executive officers and the Compensation Committee considers proposals from the CEO and the COO to approve increases with respect to the compensation payable to the three other named executive officers. The Compensation Committee regularly reviews the design and structure of the Company’s compensation programs to ensure that management’s interests are closely aligned with stockholders’ interests and that the compensation programs are designed to further the Company’s strategic priorities.

 

Role of Compensation Consultant.  The Compensation Committee has retained the services of an independent advisor to provide guidance in association with significant executive compensation decisions. For most of fiscal 2007, the Compensation Committee relied on the services of Hewitt Associates Inc. for this advice. In March 2007, the Compensation Committee approved the selection of Exequity LLP to provide ongoing advisory services with respect to executive compensation when the Compensation Committee’s lead outside consultant who was extremely knowledgeable with respect to the Company’s executive compensation program left Hewitt Associates to join Exequity. The Compensation Committee periodically solicits from its compensation advisors market information on compensation trends, along with perspectives on the design and administration of specific pay programs which the Company uses to motivate its employees and to fulfill its corporate, strategic and business objectives. The Compensation Committee retains sole responsibility for engaging Exequity or any other compensation advisor, and meets frequently with its advisor in executive sessions. From time to time, and in response to Compensation Committee directives, the compensation advisor has conducted specific projects for the Company, all of which have

been connected with matters pertaining to the operation and administration of the Company’s executive compensation program. Neither Hewitt Associates nor Exequity provided any services to the Company other than those directly relating to its role as executive compensation advisor to the Compensation Committee during fiscal 2007.

 

Performance Evaluation.  Performance is evaluated for all employees on an annual basis following the end of each fiscal year. Messrs. Lauren and Farah evaluate the performance of the other three named executive officers (listed in the Summary Compensation Table) and report to the Compensation Committee with respect thereto and the Compensation Committee evaluates the performance of Messrs. Lauren and Farah.

 

Employment Agreements.  The Company has a longstanding practice of entering into employment agreements with its corporate officers and senior management. The Company believes that employment agreements provide greater assurance of continuity and retention of critical creative and operating talent and other expertise in a highly competitive industry. Employment agreements for the CEO and the COO are developed and approved by the Compensation Committee in consultation with the Compensation Committee’s independent compensation advisor. Employment agreements for the other three named executive officers are established by Mr. Lauren and Mr. Farah in consultation with and subject to the approval of the Compensation Committee. The guidelines for salary, bonus and certain other compensation components for each named executive officer are set forth in his or her respective employment agreement. See “Executive Employment Agreements” and “Summary Compensation Table” below.

 

The Company renewed the employment agreement of its Senior Vice President and Chief Financial Officer, Ms. Tracey T. Travis, effective March 26, 2007, and the employment agreement of its Senior Vice President for Human Resources and Legal, Mr. Mitchell A. Kosh, effective April 30, 2007. Their initial annual salaries under these agreements are equivalent to the annual salaries that they each received for fiscal year 2007 and their bonuses and other compensation arrangements are identical to those set forth in their prior employment agreements. See “Executive Employment Agreements” and “Summary Compensation Table” below. In addition, on June 12, 2007, the Company renewed Mr. Lauren’s employment agreement for an additional five-year period commencing on March 30, 2008. See “Executive Employment Agreements” and “Potential Payments Upon Termination or Change in Control” for key changes between Mr. Lauren’s current employment agreement and his renewed employment agreement.

 

Components of Executive Compensation

 

The Company’s compensation structure consists primarily of an annual base salary, annual cash incentive bonus and long-term equity-based incentive awards generally in the form of stock options, restricted stock awards, and restricted performance share units (RPSUs). The Company also provides deferred compensation and perquisites for certain executives. These components of compensation are reviewed from time to time internally and externally relative to companies that compete with the Company for business and/or executive and creative talent. In establishing compensation structures and programs, the Company generally considers competitive market compensation, particularly annual base salaries and annual bonus or incentive payments, paid by other companies in the areas of branded apparel, luxury goods and retail, including those in the New York region, nationally or internationally, as appropriate. While the Compensation Committee is from time to time provided with information regarding such competitive market compensation from publicly available sources or third party survey sources, the Company does not seek to maintain a certain target percentile within any specific peer group, or otherwise place significant emphasis on executive compensation approaches taken by other branded apparel, luxury goods or retail companies.

 

Base Salary.  Base salaries for the named executive officers are set forth in their respective employment agreements. Periodically, however, the Compensation Committee considers proposals from the Company’s management to approve increases to the base salaries for named executive officers other than Mr. Lauren and Mr. Farah. When considering whether to approve these adjustments, the Compensation Committee takes into account a number of factors, including:

 

 

In fiscal 2007, in conjunction with the Company’s annual performance review process, the Compensation Committee approved annual base salary increases for a number of its senior executives in recognition of their contributions to the Company’s strong performance during the preceding fiscal year. Ms. Tracey T. Travis, the Company’s Senior Vice President and Chief Financial Officer, and Mr. Mitchell A. Kosh, the Company’s Senior Vice President of Human Resources and Legal, received annual salary increases of approximately 8% and 4%, respectively, which increases were comparable to those annual increases provided to a number of other senior management employees of the Company.

 

Annual Cash Incentive Bonuses.  The Company has two cash incentive bonus plans, the Executive Incentive Plan (“EIP”) and the Executive Officer Annual Incentive Plan (“EOAIP”). Each plan is designed to promote executive decision making and achievement that supports the realization of key overall Company financial goals. For fiscal 2007, the participants in the Company’s EOAIP consisted of each of the Company’s five named executive officers.

 

Executive Incentive Plan.  Eligible EIP participants are those employees who are in positions of Senior Director level and above (“Executives”) and who make important leadership contributions to achieve the Company’s annual objectives. Executives designated as corporate participants are eligible to receive a bonus based primarily on the Company’s overall corporate performance while Executives designated as division participants are eligible to receive a bonus based on a combination of the Company’s overall corporate performance and the particular Executive’s division’s performance. In fiscal 2007, under the EIP, Executives had target bonus opportunities ranging from 15% to 50% of fiscal year salary earnings, depending on position level and responsibility, with larger bonus opportunities provided to those with greater responsibility.

 

The Compensation Committee establishes the guidelines under which the EIP is administered, including financial performance goals and payout schedules. The goals reflect the Company’s performance using performance measures such as the following (each as determined in accordance with generally accepted accounting principles as consistently applied by the Company):

 

 

If so determined by the Compensation Committee at the beginning of the applicable fiscal period, performance relative to goals may also be adjusted to omit the effects of, among other things, extraordinary items, any gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles.

 

The EIP provides payouts based on different levels of achievement:

 

 

For achievement between Threshold and Maximum, bonus payouts are interpolated to reflect the level of results achieved. Bonuses for EIP participants are capped at 100% of their fiscal year salary earnings.

 

Executive Officer Annual Incentive Plan.  The Company maintains a separate plan, similar to the EIP, for a select group of its corporate officers. Under the EOAIP, the Compensation Committee determines the EOAIP participants from among the Company’s executive officers. The Compensation Committee has the discretion to reduce or eliminate, but not increase, the bonus amounts payable under the plan. The EOAIP is proposed to be amended, subject to stockholder approval. See “Proposal 2 — Proposal to Amend the Polo Ralph Lauren

Corporation Executive Officer Annual Incentive Plan.” For fiscal 2007, the participants in the Company’s EOAIP consisted of each of the Company’s five named executive officers.

 

While the EOAIP is similar to the EIP, the Company believes that maintaining a separate EOAIP for the Company’s corporate officers provides the Compensation Committee with the flexibility to maintain an incentive plan for these officers that is closely aligned with the officers’ significant roles and broad responsibilities within the Company and reflects their contributions to the overall success of the Company. In fiscal 2007, the key differences between the EIP and the EOAIP are:

 

 

The EOAIP incorporates the same current levels of achievement as provided in the EIP, which consist of Threshold, Target and Maximum levels. However, the employment agreement for Mr. Lauren provides for achievement levels of Minimum, Threshold, Target and Maximum. See “Executive Employment Agreements — Ralph Lauren’s Employment Agreement”. Performance measures under the EOAIP may vary from period to period and from corporate officer to corporate officer. If so determined by the Compensation Committee at the beginning of the fiscal year, performance relative to goals may also be adjusted, to the extent permitted under Section 162(m) of the Code, to omit, among other things, the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles.

 

Fiscal 2007 Cash Incentive Bonuses.  Each year, the Company engages in an extensive and deliberate process to establish its budget, performance measures and performance targets which are then presented to the Compensation Committee. The Compensation Committee and the Company then determine the annual cash incentive bonuses for each named executive officer based strictly on the Company’s achievement against pre-determined financial goals, established budget figures, performance measures and performance targets, without any discretionary performance factors taken into consideration. All bonuses under the EOAIP are capped. The specific application of these caps is subject to the respective employment agreements of each of the named executive officers. Mr. Farah, Ms. Nemerov, Ms. Travis and Mr. Kosh have their bonuses adjusted by plus or minus 10% based upon achievement against strategic financial goals established by the Compensation Committee. For the past seven years, the Company has successfully used this process to motivate and stretch the performance of the Company’s senior management team.

 

For fiscal 2007, under the EOAIP, the financial goal performance measure selected was net income before taxes and the strategic goal performance measure selected was Company selling, general and administrative expenses as a percentage of net revenues. The Company believes that net income before taxes is a comprehensive indicator of the Company’s annual performance and that reducing selling, general and administrative expenses as a percentage of net revenues is an important part of the Company’s ongoing strategic objectives. Since disclosure of specific targets under the EOAIP could benefit competitors of the Company by providing information that the Company would not otherwise disclose, the Company is not disclosing these specific targets. The Company’s future performance is inherently uncertain and can be significantly affected by factors such as levels of consumer spending, interest rates, employment levels, currency fluctuations and other variables that are difficult to predict at the time that it is establishing its budget figures, performance measures and performance targets. At the time the targets were set, the Company believed that the specific targets for fiscal 2007 incorporated an appropriate level of difficulty and required significant ongoing performance improvements on the part of the Company in order to be achieved. The targets for fiscal 2008 have been established with the same goal on a similar basis.

 

While the bonus payment for Mr. Lauren pursuant to his employment agreement is based solely on the performance measure of net income before taxes and is not adjusted for the strategic goal of Company selling, general and administrative expenses as a percentage of net revenues, the bonus payments for the other four named executive officers are subject to the strategic goal. In addition, performance relative to Company selling, general

and administrative expenses as a percentage of net revenues could increase or decrease the bonuses otherwise payable to such four other named executive officers based on net income before taxes by up to 10%. In calculating the bonuses, results for fiscal 2007 were adjusted in accordance with the rules established by the Compensation Committee at the start of the fiscal year.

 

Mr. Lauren’s employment agreement provides for an annual bonus in fiscal 2007 with a target of $11,000,000 and a maximum of 150% of target, or $16,500,000. In fiscal 2007, Mr. Lauren was eligible for a bonus once the Company reached 50% of the net income before taxes target established by the Compensation Committee. The other four named executive officers of the Company were eligible for a bonus in fiscal year 2007 when the Company reached 80% of the net income before taxes target established by the Compensation Committee. Based on the Company’s achievement of performance goals relative to the net income before taxes target established by the Compensation Committee, for fiscal 2007 Mr. Lauren received an incentive bonus of $16,500,000, representing his maximum bonus opportunity.

 

In fiscal 2007, similar to past practice and in compliance with their respective employment agreements, Mr. Farah had a target bonus of 200% of his base salary, Ms. Nemerov had a target bonus of 100% of her base salary and each of Ms. Travis and Mr. Kosh had a target bonus of 50% of their respective base salaries. Based on the Company’s achievement of performance goals relative to the net income before taxes target established by the Compensation Committee and the Company’s achievement of its strategic goal relative to the selling, general and administrative expenses of the Company as a percentage of net revenues established by the Compensation Committee, for fiscal 2007 Mr. Farah received an incentive bonus of $2,970,000; Ms. Nemerov received an incentive bonus of $1,980,000; Ms. Travis received an incentive bonus of $742,500; and Mr. Kosh received an incentive bonus of $687,500, representing their respective maximum bonus opportunities.

 

The EOAIP is proposed to be amended, subject to stockholder approval. See “Proposal 2 — Proposal to Amend the Polo Ralph Lauren Corporation Executive Officer Annual Incentive Plan.”

 

Long-Term Equity-Based Incentives.  The Company maintains a program of long-term equity-based incentives that are intended to align executive and shareholder interests and thereby encourage executive decision making that maximizes share value creation over time. By making long-term equity-based incentives a significant part of compensation, the Company maintains an executive compensation program that emphasizes long range goal achievement which is consistent with the Company’s compensation philosophy.

 

The Compensation Committee establishes guidelines annually for determining long-term equity-based incentive grants to Executives under the Company’s 1997 Stock Incentive Plan. These guidelines generally provide that the type of awards and the number of shares to be granted to employees are based on their position levels within the Company. Messrs Lauren’s and Farah’s long-term equity based incentive awards are each provided under their respective employment agreements. In fiscal 2007, Mr. Lauren received restricted stock units and stock options and Mr. Farah received RPSUs. Mr. Farah recommends annual equity awards for the three other named executive officers, which are approved by the Compensation Committee. In fiscal 2007, for the three named executive officers other than Messrs. Lauren and Farah, the Company issued three types of long-term equity awards — Stock Options, Cliff RPSUs and Pro-Rata RPSUs.

 

As determined by the Committee in any given year, awards granted may also include restricted stock units and performance-based stock awards (as described below under “Fiscal 2007 Long-Term Equity-Based Incentive Awards”).

 

Stock Options.  The Company grants non-qualified stock options that vest ratably over a three-year period subject to continued employment. Stock options are granted at an exercise price equal to the fair market value (calculated as the average of the high and low stock prices on the NYSE) of the Company’s Class A Common Stock on the grant date. The Company has not issued stock options with accelerated vesting features except as specified in certain employment agreements. In addition, the Company has not re-priced or re-issued stock options.

 

The vast majority of stock options are granted to eligible Executives, including the Company’s named executive officers, at regular Compensation Committee meetings which are usually scheduled five times per year and often as far as one year in advance of the actual meeting dates. Thus, stock options are typically granted at such regularly scheduled meetings rather than in conjunction with the disclosure of material non-public information or

the occurrence of a significant corporate event or transaction. Prior to fiscal 2008, the Company granted these annual awards in conjunction with the Compensation Committee’s regularly scheduled May and June meetings. To better align with other aspects of the Company’s compensation administration, in February 2007, the Compensation Committee decided to set the grant date for these annual awards approximately three weeks before the Company’s first fiscal quarter earnings release date, making the grants effective in mid-July rather than earlier in the year as such grants had historically been made. In addition to the annual awards, grants may be made to certain newly hired or promoted Executives. Such awards are typically granted and priced as of the last business day of each fiscal quarter immediately following the hiring or promotion of an Executive.

 

Restricted Performance Share Units (RPSUs).  The Company issues Cliff RPSUs and Pro-Rata RPSUs both of which provide a recipient with the opportunity to receive shares of the Company’s Class A Common Stock based on the achievement by the Company of performance goals over a specified period. Achievement of performance goals is subject to adjustment to exclude the effect of certain events and transactions as permitted under the 1997 Stock Incentive Plan in accordance with the rules established by the Compensation Committee at the start of the fiscal year in which any such grants are made.

 

The performance measures for each kind of RPSU are set by the Compensation Committee at the time of grant, and may include one or more of the following factors:

 

 

Cliff RPSUs.  Cliff RPSUs granted to Executives vest in full at the end of a three-year performance period, subject to continued employment. The grant provides a target number of shares that will vest and be paid out subject to achievement of pre-established financial goals. Three levels of achievement are used to determine vesting, which are Threshold, Target and Maximum. The Threshold level, which is 70% of the financial goal, must be achieved in order for any shares to be provided to recipients at the end of the applicable three-year vesting period. If performance is at the Threshold level, 75% of the target number of shares will vest and be paid out. If performance is at the Target level, which is 100% of the financial goal, then 100% of the target number of shares will vest and be paid out. If performance is at the Maximum level, which is 110% or more of the financial goal, then 150% of the target shares will vest and be paid out. In fiscal 2007, an award granted in fiscal 2005 vested based upon the achievement of pre-established financial goals at the Maximum level. As a result, 150% of the target shares which were granted in fiscal 2005 vested and were paid out. For the reasons set forth under “Fiscal 2007 Cash Incentive Bonuses” above, the Company is not disclosing specific targets. In establishing the targets for the Cliff RPSUs, the Company required ongoing performance improvement and believed that the targets would be difficult but achievable with significant effort. For performance between Threshold and Maximum, the shares vested and paid out will be determined based on interpolation to reflect the level of performance achieved. Once an award is granted in any fiscal year, the prevailing performance measures, performance goals, vesting schedule or payout schedule will not be modified for that grant, unless otherwise approved by the Compensation Committee of the Board of Directors of the Company, during the applicable three-year performance term. Cliff RPSUs granted in fiscal 2007 will vest after the end of fiscal 2009 based on cumulative net earnings of the Company for the three fiscal year period 2007 — 2009. The Company believes that net earnings is an appropriate performance measure for an extended period such as a three-year period, since it is a comprehensive measure that assesses the overall performance of the Company over a significant uninterrupted period of time and is aligned with measures often used by the investment community.

 

Pro-Rata RPSUs.  Pro-Rata RPSUs issued in fiscal 2007 vest ratably on an annual basis over a three-year period, with vesting of each one-third of the award subject to an annual corporate performance goal and continued employment. As a result, one third of the Pro-Rata RPSUs granted in fiscal 2007 will be eligible to vest after each of

the end of fiscal 2007, the end of fiscal 2008 and the end of fiscal 2009. For fiscal 2007, the performance measure for Pro-Rata RPSUs was net income before taxes. Similar to the performance measure in the Company’s EIP, the Company believes that the use of net income before taxes as a measure for the award of Pro-Rata RPSUs is a comprehensive indicator of the Company’s annual performance. The performance level that must be achieved in order for each one-third of the fiscal 2007 Pro-Rata RPSUs to vest is the Threshold level, which is 80% of the Target level of net income before taxes for that year. Unlike Cliff RPSUs, the Pro-Rata RPSUs do not provide for payouts above or below the 100% Target level. In establishing the targets for the Pro-Rata RPSUs, the Company required ongoing performance improvement and believed that the targets would be achievable if the Company met its performance expectations.

 

Restricted Stock.  The Company also grants restricted stock units to certain of its senior executives. Restricted stock units entitle the holder to receive a specified number of shares of Class A Common Stock at the end of a vesting period. In addition, holders of restricted stock units are entitled to receive dividend equivalent units in connection with the payments of dividends on the Company’s Class A Common Stock. Generally, grants of restricted shares of stock vest over a five-year period of time, subject to the holder’s continuing employment with the Company.

 

Fiscal 2007 Long-Term Equity-Based Incentive Awards.  In fiscal 2007, each of the named executive officers received the following long-term equity grants:

 

 

 

 

Employee Benefits.  The Company provides a number of benefit plans to all eligible employees, including its named executive officers. These benefits include programs such as medical, dental, life insurance, short and long-term disability coverage, and a 401(k) plan. The Company’s senior management and its named executive officers are also eligible for an executive medical plan covering such executives and their eligible dependents, an annual executive physical, financial counseling, and an annual car allowance.

 

Other Benefits.  The Company provides its named executive officers with other benefits, reflected in the All Other Compensation column in the Summary Compensation Table, that it believes are reasonable, competitive and consistent with the Company’s overall executive compensation program. The Company believes that these benefits generally allow its executives to work more efficiently, promote the Company’s brand and are legitimate business expenses, but it also recognizes that these costs can be viewed as personal benefits. The costs of these benefits constitute only a small percentage of each named executive officer’s total compensation. The Company provides to certain of its named executive officers the use of an automobile and driver, personal security and use of the Company’s aircraft for personal travel on a limited basis. The Company also provides a merchandise discount on most Company products in the amount of 50% to its named executive officers.

Deferred Compensation.  The Company provides a Supplemental Executive Retirement Plan (“SERP”) to certain of its executives, generally for those who had a title of Vice President and above when they were admitted to such plan. In October 2004, the Company ceased admitting new participants in the SERP. For those executives still participating in the SERP, the Company provides annual contributions equal to 5% of his or her fiscal year salary earnings (as defined in the Executive Incentive Plan). Prior to fiscal 2006, contributions were equal to 5% of fiscal year salary earnings and bonus. This contribution, together with interest at the then- current mid-term Applicable Federal Rate published by the Internal Revenue Service, is credited to a participant’s account on or before September 1st of the succeeding fiscal year, effective as of the preceding April 1st. A participant generally vests in his or her SERP account over the first five years of his or her participation in the SERP. A participant’s account balance is payable to the participant upon retirement at age 65, disability or termination of employment. Upon retirement, a participant will be paid his or her balance in monthly installments over a 15 year period. Upon disability, a participant may choose to have his or her balance paid (i) in monthly installments over a 10 or 15 year period, (ii) in equal increments over a five year period or (iii) in a lump-sum. Upon termination of employment prior to retirement (other than for death or disability), the Company will pay the participant his or her vested balance in annual installments as follows:

 

 

Certain Tax Matters.  Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to the corporation’s CEO and its other named executive officers. Qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. The Company’s EOAIP and 1997 Stock Incentive Plan are designed to permit the deductibility of awards payable to the Company’s named executive officers for Federal income tax purposes even if the compensation paid to any such officer exceeds $1,000,000. Under Mr. Ralph Lauren’s new employment agreement commencing on March 30, 2008, a portion of his annual base salary will not be deductible since it will exceed $1,000,000. See “Executive Employment Agreements.”

 

In assessing compensation proposals with respect to executive officers, the Compensation Committee considers the deductibility of executive compensation, but reserves the right to compensate named executive officers in a manner commensurate with performance and the competitive environment for executive and creative talent. As a result, some portions of the compensation paid to a named executive officer whose compensation is subject to the deduction limits described above may not be deductible by the Company.

 

Accounting Matters.  Each element of the compensation that the Company pays to its executives is expensed in the Company’s financial statements as required by U.S. generally accepted accounting principles. The financial statement impact of various compensation awards is an important factor that the Company considers in determining the amount, form, and design of each pay component for its executives.

 

Adjustment or Recovery of Awards.  The Company has not previously adopted a formal or informal policy regarding the adjustment or recovery of awards in connection with a restatement or adjustment of its financial statements that would otherwise have resulted in a reduction in the size of the award or payment. The Company has not experienced any situations or occasions that would have resulted in an adjustment to the size of the award or payment if such policy were in place. If the Company does experience such an adjustment in the future, the Compensation Committee would assess the circumstances relating to the adjustment and take such legally permissible actions as it believes to be appropriate in its discretion at such time. As set forth in Proposal 2, the Company is recommending the amendment of the EOAIP to permit the Company to seek repayment, in the reasonable discretion of the Compensation Committee, of bonuses paid to executives based upon the occurrence of various events such as termination of employment for cause, a material violation of material written policies of the Company, a breach of any restrictive covenants, or where the executive’s gross negligence or intentional misconduct results in the Company having to prepare an accounting restatement due to material noncompliance with applicable

SEC requirements. See “Proposal 2 — Proposal to Amend the Polo Ralph Lauren Corporation Executive Officer Annual Incentive Plan.”

 

Compensation Committee Report

 

The Compensation Committee, composed entirely of independent directors, reviewed and discussed the above Compensation Discussion and Analysis (CD&A) with the Company’s management and with the other members of the Board of Directors. Based on these reviews and discussions, the Compensation Committee recommended to the Company’s Board of Directors that the CD&A be included in the Company’s Annual Report on Form 10-K and this Proxy Statement.

 

Members of the Compensation Committee:

 

Joel L. Fleishman (Chair)
Frank A. Bennack, Jr.
Terry S. Semel

 

SUMMARY COMPENSATION TABLE

 

The following table sets forth a summary of all compensation awarded or paid to or earned by the Company’s chief executive officer, the Company’s chief financial officer and the Company’s three other executive officers serving as of March 31, 2007, the end of the Company’s 2007 fiscal year (the “named executive officers”), for services rendered in all capacities to the Company (including its subsidiaries) for the fiscal year ended March 31, 2007.

 

SUMMARY COMPENSATION TABLE

 

 

 

 

GRANTS OF PLAN-BASED AWARDS

 

The following table provides information concerning the annual performance bonus and long-term incentive awards made to each of the named executive officers in fiscal 2007.

 

 

 

Executive Employment Agreements

 

Ralph Lauren’s Employment Agreement.  Ralph Lauren is employed as the Company’s Chairman of the Board and CEO pursuant to an amended and restated employment agreement dated as of June 23, 2003 (the “Current Employment Agreement”). On June 12, 2007, the Company renewed Mr. Lauren’s employment agreement for an additional five-year period commencing on March 30, 2008 (the “New Employment Agreement”). The key terms of Mr. Lauren’s Current Employment Agreement are indicated below. Unless otherwise noted, the key terms of Mr. Lauren’s New Employment Agreement remain the same as those under his Current Employment Agreement.

 

 

 

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change of control payments payable to Mr. Lauren under Mr. Lauren’s employment agreement.

 

Roger N. Farah’s Employment Agreement.  Roger Farah is employed as the Company’s President and COO pursuant to an employment agreement, as amended and restated as of July 23, 2002 and further amended as of July 1, 2004. The key terms of Mr. Farah’s employment agreement are:

 

 

In connection with the amendment and restatement of his employment agreement on July 23, 2002, Mr. Farah was granted an additional 300,000 shares of restricted stock and options to purchase an additional 400,000 shares of the Company’s Class A Common Stock. The shares of restricted stock vested in equal annual installments on the first five anniversaries of the date of grant. The options have an exercise term of ten years and vested in equal annual installments on the second, third and fourth anniversaries of the date of grant. The exercise price of the options was $18.22 per share.

 

Mr. Farah’s employment agreement also provides for certain additional grants of restricted stock units that will vest, subject to the Company’s performance over multi-year performance periods ending during the term of his employment agreement. Mr. Farah received grants of 187,500 restricted stock units on each of June 15, 2005, June 15, 2006 and June 15, 2007. Each of these grants will vest, subject to the satisfaction of applicable performance criteria at the end of a three year performance period, with the first vesting at the end of fiscal 2008, the second vesting at the end of fiscal 2009, and the third vesting at the end of fiscal 2010, subject to Mr. Farah’s continued employment with the Company. The performance criteria for these awards were set by the Compensation Committee on their respective grant dates.

 

With respect to each restricted stock unit he receives, Mr. Farah is entitled to dividend equivalents in the form of additional restricted stock units in connection with the payment of cash dividends on the Company’s Common Stock. In the event of the Company’s termination of Mr. Farah’s employment without cause (as defined in his employment agreement), Mr. Farah’s termination of his employment for good reason (as defined in his employment agreement) or Mr. Farah’s death or disability, all of the outstanding awards that are not performance-based will immediately vest and a pro rata portion of the then outstanding performance-based awards will immediately vest, based upon the elapsed portion of the performance period. Upon the termination by the Company for cause or a voluntary resignation by Mr. Farah without good reason, all outstanding unvested restricted stock units will be immediately cancelled and forfeited to the Company.

 

 

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change of control payments payable to Mr. Farah under Mr. Farah’s employment agreement.

 

Jackwyn L. Nemerov’s Employment Agreement.  Jackwyn L. Nemerov is employed as the Company’s Executive Vice President pursuant to an employment agreement dated as of September 9, 2004. The key terms of her employment agreement are:

 

 

 

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change of control payments payable to Ms. Nemerov under Ms. Nemerov’s employment agreement.

 

Tracey T. Travis’ Employment Agreement.  Tracey T. Travis is employed as the Company’s Senior Vice President and Chief Financial Officer pursuant to an employment agreement effective as of March 26, 2007. The key terms of her employment agreement are:

 

 

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change of control payments payable to Ms. Travis under Ms. Travis’ employment agreement.

 

Mitchell A. Kosh’s Employment Agreement.  Mitchell A. Kosh is employed as the Company’s Senior Vice President, Human Resources and Legal, pursuant to an employment agreement, as amended and restated as of April 30, 2007. The key terms of his employment agreement are:

 

 

 

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change of control payments payable to Mr. Kosh under Mr. Kosh’s employment agreement.

 

OUTSTANDING EQUITY AWARDS

 

The following table provides information concerning the unexercised stock options outstanding and unvested stock awards for each of the named executive officers of the Company as of the end of fiscal 2007.

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2007 YEAR-END

 

 

 

 

 

OPTION EXERCISES AND STOCK VESTED

 

The following table provides information concerning the exercises of stock options and vesting of stock awards during fiscal 2007 on an aggregated basis for each of the named executive officers of the Company.

 

OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2007