To our members,
Your board of directors annually reports to you the details of the compensation of the co-op’s president and CEO and certain other executives. We explain the philosophy of compensation and disclose the actual compensation of the selected executives. We do this so that members can see the total compensation of the most highly paid leaders.
REI has a “pay for performance” philosophy and structures its compensation programs accordingly. Executive compensation is overseen by the board’s Compensation Committee and approved by the board.
The compensation we pay our executive leaders is determined with the advice of an independent consultant accountable directly to the Compensation Committee. We compare our compensation elements (base pay, annual and long-term incentive pay, and retirement contributions) to those offered by peer companies in the outdoor industry and in specialty retail. REI differs from the majority of peer companies, however, because as a co-op REI cannot provide stock options, performance shares, or other equity offerings typical of public companies.
Except for long-term incentive pay, which is set slightly below the market median, all elements of executive compensation are set at the median of the market.
Our disclosure of executive compensation for 2013 include two leaders who held the president and CEO role for a portion of the year. In early April 2013, former president and CEO Sally Jewell left REI to become the Secretary of the U.S. Department of the Interior. The board asked Brian Unmacht, REI’s COO, and Eric Artz, REI’s CFO, to assume additional responsibilities while we searched for a new CEO. To acknowledge their additional duties, we provided a base pay stipend to those leaders, which is included in their 2013 compensation and reflected in our disclosure this year.
In late September 2013, we welcomed Jerry Stritzke as REI’s new president and CEO. Ms. Jewell and Mr. Stritzke each served in the CEO role for only a portion of 2013 and we are disclosing their respective compensation accordingly.
Having a competitive compensation program is essential to attracting and retaining outstanding leaders who steward the co-op for the long-term. Our business results and our consistent ranking as a “100 Best Company” speak well to the quality of our co-op leaders and their ability to produce results.
Thank you for your continued support of REI. We look forward to supporting you in your next outdoor adventure.
John Hamlin, Board Chair
With 2013 sales of $2.0 billion, 11,000 plus employees, more than 130 retail stores in numerous states, a leading outdoor Web site www.rei.com, and over 5 million active members, REI is a large business that requires talented and skilled employees at all levels of the company.
REI is one of the country's largest and most successful outdoor retailers and is widely recognized as a leader in integrated multi-channel sales. Through its success, REI annually returns millions of dollars to co-op members through member refunds (more than $114 million for 2013) and also makes significant yearly contributions (more than $3 million in 2013) to support nonprofit programs that are actively taking care of the outdoors and ensuring natural spaces are available for future generations.
The Compensation Committee is composed of independent directors appointed from the board. The Compensation Committee directly employs the services of an independent compensation consultant to challenge, confirm and advise on compensation data developed by REI's Human Resources professionals.
As part of our commitment to good governance, REI's board of directors annually publishes information on the total compensation of REI's president and CEO and executive vice presidents. The Summary Compensation Table provides compensation data for the years 2011, 2012 and 2013. This information is updated annually.
While the board's annual compensation is set using the same process as that followed for all REI employees, the directors' cash compensation is set below the market median for companies of similar size and complexity. In determining compensation, the company uses surveys and comparative data sets for directors of equivalent-sized organizations, including companies in the retail industry. Current director compensation is $46,000 per year, with an additional fee of $1,000 per meeting. In recognition of the significant work and responsibilities associated in leading the board, the board's chair receives an additional $10,000 for this service to the co-op. The chairs of the Audit and Finance, Compensation, and Nominating and Governance Committees receive an additional $5,000 per year in recognition of the responsibilities of the positions. Directors are reimbursed for reasonable travel expenses in accordance with the company's travel policy, and receive the same discount privileges on products and services enjoyed by REI employees.
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