Definitive Proxy Statement
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  ¨

 

Check the appropriate box:

 

¨

   Preliminary Proxy Statement
¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

   Definitive Proxy Statement

¨

   Definitive Additional Materials

¨

   Soliciting Material Pursuant to §240.14a-12

 

NORDSTROM, INC.

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

x  No fee required.

 

¨  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)  Title of each class of securities to which transaction applies:

 

  

 

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  (3)  Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  

 

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  (5)  Total fee paid:

 

  

 

 

¨  Fee paid previously with preliminary materials.

 

¨  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

  (1)  Amount Previously Paid:

 

  

 

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LOGO

 

March 31, 2011

 

Dear Shareholder:

 

On behalf of the Board of Directors and all of us on the management team, we invite you to attend the 2011 Annual Meeting of Shareholders on Wednesday, May 11, 2011, at 11:00 a.m., Pacific Daylight Time. The meeting will be held in the John W. Nordstrom Room, Downtown Seattle Nordstrom, 1617 Sixth Avenue, 5th Floor, Seattle, Washington 98101-1707.

 

In addition to the topics described in the Notice of Annual Meeting and the Proxy Statement, we will update you on the business and there will be an opportunity to ask questions of interest to you as a valued shareholder and customer.

 

It is important that your shares be represented and voted, regardless of the size of your holdings. Accordingly, whether or not you plan to attend the Annual Meeting, please cast your vote, whether by executing and returning a printed proxy card, over the Internet, or by telephone voting. This will ensure that your shares are represented at the Annual Meeting. The proxy is revocable at any time before it is voted and will not affect your right to vote in person if you attend the Annual Meeting.

 

Sincerely,

 

LOGO

   LOGO    LOGO

Blake W. Nordstrom

   Peter E. Nordstrom    Erik B. Nordstrom

President

   EVP and President – Merchandising    EVP and President – Stores

 

1617 Sixth Avenue, Seattle, Washington 98101-1707


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Table of Contents

 

  

Notice of Annual Meeting of Shareholders

     1   

Commonly Asked Questions and Answers About the Annual Meeting

     3   

Proposals to Be Voted Upon

     9   

Proposal 1: Election of Directors

     9   

Proposal 2: Approval of the Amendment to the Nordstrom, Inc. Employee Stock Purchase Plan

     13   

Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm

     15   

Proposal 4: Advisory Vote on Executive Compensation

     16   

Proposal 5: Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation

     17   

Other Matters

     18   

Corporate Governance

     19   

Board Responsibilities, Leadership Structure and Role in Risk Oversight

     19   

Management Succession Planning

     20   

Director Independence

     20   

Board Committees and Charters

     20   

Board Meetings and Attendance

     23   

Attendance at the Annual Meeting of Shareholders

     23   

Chairman of the Board and Presiding Director

     23   

Director Nominating Process

     23   

Director Compensation

     25   

Compensation Committee Interlocks and Insider Participation

     28   

Communications with Directors

     28   

Director Elections

     28   

Codes of Business Conduct and Ethics

     28   

Corporate Social Responsibility

     28   

Web Site Access to Corporate Governance Documents

     29   

Audit Committee Report

     29   

Executive Officers

     31   

Compensation of Executive Officers

     34   

Compensation Discussion and Analysis

     34   

Compensation Committee Report

     44   

Summary Compensation Table

     45   

Grants of Plan-Based Awards in Fiscal Year 2010

     48   

Outstanding Equity Awards at Fiscal Year End 2010

     51   

Option Exercises and Stock Vested in Fiscal Year 2010

     54   

Pension Benefits

     54   

Fiscal Year 2010 Pension Benefits Table

     55   

Nonqualified Deferred Compensation

     56   

Fiscal Year 2010 Nonqualified Deferred Compensation Table

     57   


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Potential Payments Upon Termination or Change in Control

     57   

Compensation Risk Assessment

     63   

Equity Compensation Plans

     64   

Security Ownership of Certain Beneficial Owners and Management

     65   

Stock Ownership and Guidelines

     65   

Beneficial Ownership Table

     65   

Section 16(a) Beneficial Ownership Reporting Compliance

     68   

Certain Relationships and Related Transactions

     69   

Appendix A: Nordstrom, Inc. Employee Stock Purchase Plan (2011 Restatement)

     A-1   

Appendix B: Nordstrom, Inc. Audit Committee of the Board of Directors Charter

     B-1   


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LOGO

1617 Sixth Avenue, Seattle, Washington 98101-1707

 

Notice of Annual Meeting of Shareholders   

To the Shareholders of Nordstrom, Inc.:

 

The 2011 Annual Meeting of Shareholders (“Annual Meeting”) of Nordstrom, Inc. (the “Company”) will be held on Wednesday, May 11, 2011, at 11:00 a.m., Pacific Daylight Time, in the John W. Nordstrom Room, Downtown Seattle Nordstrom, 1617 Sixth Avenue, 5th Floor, Seattle, Washington 98101-1707.

 

The meeting will be held for the following purposes:

 

1. To elect twelve directors (“Directors”) to the Company’s Board of Directors (the “Board”) to hold office until the 2012 Annual Meeting of Shareholders and until their successors are duly elected and qualified;

 

2. To approve the amendment to the Nordstrom, Inc. Employee Stock Purchase Plan;

 

3. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 28, 2012;

 

4. To conduct an advisory vote on compensation of our Named Executive Officers;

 

5. To conduct an advisory vote on the frequency of future advisory votes on compensation of our Named Executive Officers; and

 

6. To transact such other business as may properly come before the meeting and at any convening or reconvening of the meeting following a postponement or adjournment of the meeting.

 

The Board recommends that shareholders vote “FOR” proposals 1, 2, 3, and 4 and for “1 Year” under proposal 5 as outlined in the accompanying Proxy Statement.

 

Holders of shares of Nordstrom Common Stock (“Common Stock”) of record at the close of business on March 11, 2011 (the “record date”) are entitled to notice of, and to vote on, the matters that will be presented at the meeting. There were 218,078,190 shares of Common Stock issued and outstanding as of March 11, 2011.

 

Shareholders are invited to attend the 2011 Annual Meeting of Shareholders in person. Those who are hearing impaired or require other assistance should contact the Company at 206-373-3033, so that we may facilitate your participation at the meeting.

 

A live webcast of the 2011 Annual Meeting of Shareholders will be provided from the Company’s Investor Relations web site at www.nordstrom.com. Select Investor Relations, then select the Webcast icon and follow the instructions given. Additionally, the recorded webcast will be available on the Investor Relations web site for a period of 30 days following the 2011 Annual Meeting of Shareholders.

 

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On or about March 31, 2011, we will mail to our shareholders either: (i) a copy of our Proxy Statement, a proxy card and an Annual Report, or (ii) a Notice of Internet Availability of Proxy Materials, which will indicate how to access the proxy materials on the Internet. We are pleased to once again furnish proxy materials to our shareholders on the Internet. We believe this approach provides our shareholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of getting these materials to you in connection with our Annual Meeting.

 

YOUR VOTE IS VERY IMPORTANT. Whether or not you intend to be present at the meeting, you are encouraged to vote.

 

By order of the Board of Directors,

 

LOGO

Robert B. Sari

Secretary

Seattle, Washington

March 31, 2011

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2011 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 11, 2011

 

The accompanying Proxy Statement and the 2010 Annual Report on Form 10-K are available at

http://investor.nordstrom.com

 

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Commonly Asked Questions and Answers About the Annual Meeting

 

 

1.   Why am I receiving these materials?

 

You are receiving these materials because you are a shareholder of Nordstrom, Inc. as of March 11, 2011, and are entitled to receive notice of the 2011 Annual Meeting of Shareholders and to vote on matters that will be presented at the meeting.

 

2.   What items will be voted on at the Annual Meeting?

 

Shareholders will vote on the following matters at the Annual Meeting:

 

   

to elect the twelve nominees named in this Proxy Statement to the Board (Proposal No. 1);

 

   

to approve the amendment to the Nordstrom, Inc. Employee Stock Purchase Plan (Proposal No. 2);

 

   

to ratify the appointment of our Independent Registered Public Accounting Firm (Proposal No. 3);

 

   

to conduct an advisory vote on compensation of our Named Executive Officers (Proposal No. 4);

 

   

to conduct an advisory vote on the frequency of future advisory votes on compensation of our Named Executive Officers (Proposal No. 5); and

 

   

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

 

3.   What are the Board’s voting recommendations?

 

   

“FOR” each of the nominees to the Board of Directors (Proposal No. 1);

 

   

“FOR” approval of the amendment to the Nordstrom, Inc. Employee Stock Purchase Plan (Proposal No. 2);

 

   

“FOR” ratification of the Appointment of Independent Registered Public Accounting Firm (Proposal No. 3);

 

   

“FOR” approval, on an advisory basis, of the compensation of our Named Executive Officers (Proposal No. 4); and

 

   

“1 YEAR” for the frequency of the holding of future advisory votes on executive compensation (Proposal No. 5).

 

4.   Where is the Annual Meeting being held?

 

The Annual Meeting is being held in the John W. Nordstrom Room, which is located in the Downtown Seattle Nordstrom Store, 1617 Sixth Avenue, 5th Floor, Seattle, Washington, 98101-1707.

 

5.   What is a proxy?

 

If you designate another person to vote your stock, that other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. If you complete the enclosed proxy card to give us your proxy, you will have designated Blake W. Nordstrom, our President, and Robert B. Sari, an Executive Vice President and our General Counsel and Secretary, as your proxies to vote your shares as directed.

 

6.   What is the purpose of this Proxy Statement?

 

This Proxy Statement provides information about the matters to be voted on by shareholders at the Annual Meeting, along with other information regarding the governance of Nordstrom, including our Board Committee structure and executive compensation.

 

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

 

This means that you have multiple accounts holding Nordstrom shares. These may include: accounts with our transfer agent, The Bank of New York Mellon; shares held in Nordstrom’s 401(k) Plan & Profit Sharing or

 

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Employee Stock Purchase Plan; and accounts with a broker, bank or other holder of 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.

 

8.   Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of printed proxy materials?

 

Under rules adopted by the U.S. Securities and Exchange Commission (“SEC”), access to our proxy materials is available over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Availability Notice”) to some of our shareholders of record. If you received an Availability Notice by mail, you will not receive a printed copy of the proxy materials unless you request one. The Availability Notice will tell you how to access and review the proxy materials over the Internet at www.proxyvote.com. The Availability Notice also tells you how to access your proxy card to vote on the Internet. If you received an Availability Notice by mail and would like to receive a printed copy of our proxy materials, please follow the instructions included in the Availability Notice.

 

9.   When is the record date for the 2011 Annual Meeting of Shareholders and what does it mean?

 

The record date for the 2011 Annual Meeting of Shareholders is March 11, 2011. Owners of Common Stock at the close of business on the record date are entitled to receive notice of, attend and vote at the Annual Meeting.

 

10.   Who can vote on matters that will be presented at the Annual Meeting?

 

You can vote if you were a shareholder of record or street name shareholder of Nordstrom at the close of business on the record date of March 11, 2011.

 

11.   Is there a minimum number of shares that must be represented in person or by proxy to hold the Annual Meeting?

 

Yes. A quorum is the number of shares that must be present to conduct business at the Annual Meeting. For the Annual Meeting, we must have a quorum of at least a majority of the outstanding shares of Common Stock as of the record date. Your shares will be counted toward the number needed for a quorum if you: (i) submit a valid proxy card or voting instruction form, (ii) give proper instructions over the telephone or on the Internet, or (iii) in the case of a shareholder of record, attend the Annual Meeting in person.

 

12.   What is the difference between a shareholder of record and a street name shareholder?

 

Many Nordstrom shareholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own names. As summarized below, there are some distinctions between shares held as a shareholder of record and those held in street name.

 

   

Shareholders of record: If your shares are registered directly in your name with Nordstrom’s transfer agent, The Bank of New York Mellon, you are considered the “shareholder of record” or a “registered shareholder,” and these proxy materials are being sent directly to you by the Company. As the shareholder of record, you have the right to grant your voting proxy directly to Nordstrom or to vote in person at the Annual Meeting.

 

   

Street name shareholders: If your shares are held in a stock brokerage account or by a bank, trustee or nominee, you are considered the beneficial owner of shares held in “street name”, and these proxy materials are being forwarded to you by your broker, bank or other holder of record who is considered the shareholder of record. As the street name shareholder you have the right to direct your broker, bank or other holder of record on how to vote your shares and you are invited to attend the Annual Meeting. Your broker, bank, trustee or nominee is obligated to provide you with a voting instruction form for you to use.

 

13.   How many votes am I entitled to per share?

 

Each share of Common Stock is entitled to one vote on each matter properly presented at the Annual Meeting.

 

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14.   Who will count the vote?

 

Broadridge Investor Communication Services was appointed by the Board to tabulate the vote and act as Inspector of Election. Information about Broadridge is available at www.broadridge.com. Proxies and ballots that identify the votes of individual shareholders are kept confidential from the Company’s management and Directors. Only Broadridge, as the proxy tabulator and the Inspector of Election, has access to the ballots, proxy forms and voting instructions. Broadridge will disclose information taken from the ballots, proxy forms and voting instructions only in the event of a proxy contest or as otherwise required by law.

 

15.   How do I cast my vote?

 

   

Shareholders of record: You may vote by telephone, on the Internet or by mail as described below.

 

   

Street name shareholders: You may vote by the method explained on the proxy card or the information you receive from the bank, broker or other record holder.

 

We encourage you to vote by telephone or on the Internet. It is convenient, and it saves us significant postage and processing costs. In addition, when you vote by telephone or on the Internet, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted.

 

The telephone and Internet voting procedures are designed to verify that you are a shareholder of record by using a control number and allowing you to confirm that your voting instructions have been properly recorded. If you vote by telephone or on the Internet, please do not return your proxy card. Telephone and Internet voting facilities for shareholders of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Daylight Time on May 10, 2011.

 

   

Voting by Telephone. You may vote by telephone by using the toll-free number listed on your proxy card. Voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.

 

   

Voting on the Internet. You may vote on the Internet by using the voting portal found at www.proxyvote.com. As with telephone voting, you can confirm that your instructions have been properly recorded.

 

   

Voting by Mail. You may vote by signing, dating and returning your proxy card.

 

The method by which you vote your proxy card will not limit your right to vote at the Annual Meeting if you decide to attend in person. Our Board recommends that you vote using one of the other voting methods since it is not practical for most shareholders to attend the Annual Meeting. If you are a street name shareholder, you must obtain a proxy, executed in your favor, from the bank, broker or other holder of record to be able to vote in person at the Annual Meeting.

 

   

Shareholders holding shares invested in the Company’s 401(k) Plan & Profit Sharing: If you participate in the Company’s 401(k) Plan & Profit Sharing, the number of shares of Common Stock in your account as of the record date are reflected on your proxy notice and may be voted as described above for shareholders of record. However, if your vote on those shares is not received by 11:59 p.m. Eastern Daylight Time on May 8, 2011, then the Nordstrom, Inc. Retirement Committee will vote those shares in the same proportion as all other 401(k) Plan & Profit Sharing shares that have been voted.

 

   

Shareholders holding shares purchased through the Company’s Employee Stock Purchase Plan: If you hold Common Stock that you acquired through the Company’s Employee Stock Purchase Plan, you are the beneficial owner of those shares and your shares may be voted as described above for street name shareholders.

 

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16.   What is the voting requirement to approve each of the proposals?

 

Proposal   Vote Required   Discretionary
Voting
Allowed?

Election of Directors

  Majority of Votes Cast   No

Approval of the Amendment to the Nordstrom, Inc. Employee Stock

Purchase Plan

  Majority of Votes Cast*   No

Ratification of the Appointment of Independent Registered Public

Accounting Firm

  Majority of Votes Cast   Yes

Advisory Vote on Executive Compensation

  Majority of Votes Cast   No

Advisory Vote on Frequency of Future Advisory Votes on Executive

Compensation

  Plurality of Votes Cast**   No

 

*Under the New York Stock Exchange (“NYSE”) rules, votes cast on this proposal must also exceed 50% of the Company’s outstanding shares; see “Approval of the Amendment to the Nordstrom, Inc. Employee Stock Purchase Plan ” below.

**Shareholders will be deemed to have selected the alternative that receives the most votes, even if that alternative is less than a majority of votes cast.

 

Under Washington corporation law and our Articles of Incorporation and Bylaws, the approval of any corporate action taken at a shareholder meeting is based on votes cast. “Votes cast” means votes actually cast “for” or “against” a particular proposal, whether by proxy or in person. Broker non-votes (broker non-votes and discretionary voting are explained in the answer to Question 18) are not considered “votes cast” and have no effect on the proposals.

 

   

Election of Directors; Majority Vote Policy: In the election of directors, the Company has adopted a majority voting standard as described in more detail on page 28 under “Director Elections.” Because this is an uncontested election, an incumbent director nominee will be elected if the votes cast “for” the nominee’s election exceed the votes cast “against” the director nominee. If a director nominee does not receive the requisite votes, that director’s term will end on the date on which an individual is selected by the Board to fill the position held by such director or ninety (90) days after the date the election results are determined, whichever occurs first.

 

   

Approval of the Amendment to the Nordstrom, Inc. Employee Stock Purchase Plan: NYSE rules require that the total votes cast on this proposal must represent greater than 50% of all the shares entitled to vote on this proposal (the “Outstanding Shares”). That is, the total number of votes cast “for” and “against” the proposal (collectively, the “Shares Voted”) must exceed 50% of the Outstanding Shares. For purposes of this proposal, the NYSE considers an abstention as a vote against approval. Because your bank, broker or other holder of record does not have discretionary voting authority to vote your shares on this proposal absent specific instructions from you, broker non-votes could create a situation where the Shares Voted do not exceed 50% of the Outstanding Shares. It is therefore important that you vote, or direct the holder of record to vote, on this proposal.

 

   

Ratification of the Appointment of Independent Registered Public Accounting Firm: Under the Company’s Bylaws, the votes cast “for” must exceed the votes cast “against” to approve the Ratification of Appointment of Independent Registered Public Accounting Firm.

 

   

Advisory Vote on Executive Compensation: The votes cast “for” must exceed the votes cast “against” to approve, on an advisory basis, the Company’s executive compensation plan. You may vote ”for”, “against” or “abstain” on this proposal.

 

   

Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation: A plurality of votes cast means the highest number of “for” votes will be the advisory vote of the shareholders. You may vote “1 Year,” “2 Years,” “3 Years,” or abstain.

 

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17.   Can I change my mind after I vote?

 

Yes, if you vote by proxy, you may revoke that proxy at any time before it is voted at the Annual Meeting. You may do this by:

 

   

voting again on the Internet or by telephone prior to the Annual Meeting;

 

   

signing another proxy card with a later date and mailing it to Broadridge Investor Communication Services, 51 Mercedes Way, Edgewood, NY 11717, prior to the Annual Meeting; or

 

   

attending the Annual Meeting in person and delivering your proxy or casting a ballot.

 

18.   What if I do not return my proxy card or voting instruction form or do not provide voting instructions?

 

   

Shareholders of record: If you are a registered shareholder and do not return your voted proxy card or vote by phone or the Internet, your shares will not be voted. If you submit your proxy card with an unclear voting designation or no voting designation at all, your shares will be voted by the proxies “FOR” Proposals 1, 2, 3, and 4 and for “1 Year” on Proposal 5. If any additional proposals are properly presented at the Annual Meeting of Shareholders and any adjournment thereof, the proxies will vote your shares on those additional proposals in accordance with their discretion.

 

   

Street name shareholders: Your shares may be voted if they are held in the name of a broker, bank or other intermediary, even if you do not provide the holder with voting instructions. Brokerage firms and banks generally have the discretion, under NYSE rules, to vote uninstructed shares on certain “routine” matters for which their customers do not provide voting instructions. Proposal 3 – Ratification of the Appointment of Independent Registered Public Accounting Firm, is considered a routine matter. Proposals 1, 2, 4 and 5, and any other matter presented at the meeting (see Other Matters, on page 18), will not be considered routine. When a proposal is not a routine matter and the institution holding the shares has not received voting instructions from the beneficial owner of the shares with respect to the proposal, discretionary voting by your bank or broker is not allowed on that proposal. This is called a “broker non-vote.” In tabulating the voting result for any particular proposal, shares that constitute broker non-votes will not be included in vote totals and will have no effect on the outcome of any vote.

 

   

Shareholders with shares invested in the Company’s 401(k) Plan & Profit Sharing: If your vote of shares held through the Company’s 401(k) Plan & Profit Sharing is not received by 11:59 p.m. Eastern Daylight Time on May 8, 2011, then the Company’s Retirement Committee will vote your shares in the same proportion as shares that have been voted in the 401(k) Plan & Profit Sharing. If you submit your proxy card with an unclear voting designation or no voting designation at all, your shares will be voted by the Retirement Committee “FOR” Proposals 1, 2, 3, and 4 and for “1 Year” for Proposal 5. If any additional proposals are properly presented at the Annual Meeting of Shareholders and any adjournment thereof, the Retirement Committee will vote on the additional proposals in accordance with their discretion.

 

19.   Will abstentions or broker non-votes affect the voting results?

 

If you abstain from voting on a proposal, or if a broker or bank indicates it does not have discretionary authority to vote on a proposal, the shares will be counted for the purpose of determining if a quorum is present, but will not be included in the vote totals with respect to the proposal. Furthermore, any abstention or broker non-vote will have no effect on the proposals to be considered at the Annual Meeting since these actions do not represent votes cast by shareholders. An abstention will not represent a vote cast with respect to the election of directors, the amendment to the Nordstrom, Inc. Employee Stock Purchase Plan, the ratification of the appointment of the Company’s Independent Auditors, the advisory vote on executive compensation or the advisory vote on the frequency of future advisory votes on executive compensation.

 

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

 

We intend to announce preliminary voting results at the Annual Meeting and publish final results on a current report on Form 8-K within four business days of the 2011 Annual Meeting of Shareholders. The Form 8-K will be available online at www.nordstrom.com. Select Investor Relations, then select SEC Filings.

 

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21.   How does a shareholder propose actions for consideration at next year’s Annual Meeting of Shareholders?

 

For your proposal to be considered for inclusion in our proxy statement for next year’s Annual Meeting, we must receive your written proposal no later than December 1, 2011. You should be aware that your proposal must comply with SEC regulations regarding inclusion of shareholder proposals in company-sponsored proxy materials.

 

In addition, in order for you to raise a proposal (including director nominations) from the floor during next year’s meeting, we must receive written notice of the proposal between January 11, 2012 and February 10, 2012, and it must contain information required by the Company’s Bylaws. With respect to director nominations, shareholders must also comply with our Director Nominating Process, described on page 23 of this Proxy Statement.

 

Please mail your proposals by U.S. mail, postage prepaid, to the attention of the Secretary, 1700 Seventh Avenue, Seattle, Washington 98101-4407.

 

22.   Can I receive future proxy materials online?

 

Yes. If you choose this option, you will not receive paper copies of the Proxy Statement and Annual Report in the mail. We encourage you to help us save the printing and mailing costs and reduce the environmental impact of delivering paper proxy materials to shareholders by signing up to receive all of your future proxy materials electronically. We intend to furnish proxy materials over the internet to more of our shareholders in the coming years.

 

You may sign up to receive future proxy materials online at www.nordstrom.com. Select Investor Relations, then select Electronic Delivery of Materials. If you are both a registered shareholder and a street name shareholder you must sign up for each category. Your choice to receive Internet distribution of your proxy materials will remain in effect until you revoke it by returning to the site and selecting the Change/Cancel Existing Enrollment link.

 

You can also review copies of the Proxy Statement and Annual Report online on the Company’s Investor Relations homepage at http://investor.nordstrom.com.

 

23.   Who will bear the cost of this proxy solicitation?

 

Nordstrom will bear the cost of this proxy solicitation, including reimbursing banks and brokers for reasonable expenses of sending out proxy materials to street name shareholders.

 

24.   What if I have additional questions that are not addressed here?

 

You may call Investor Relations at 206-303-3200, e-mail Investor Relations at invrelations@nordstrom.com, or call the Office of the Secretary at 206-303-2542.

 

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Proposals To Be Voted Upon

 

 

Proposal 1
Election of Directors
  

The Board recommends a vote FOR each nominee.

 

A Board of twelve Directors will be elected at the Annual Meeting, each to hold office until the 2012 Annual Meeting of Shareholders and until their successors

have been duly elected and qualified. With the exception of Michelle M. Ebanks, all of the nominees listed below are currently Directors of the Company.

 

Unless otherwise directed, the persons named in the proxy intend to vote all proxies FOR the election of the nominees listed below. If any nominee becomes unavailable for any reason, or if a vacancy should occur before the election, the persons named as proxies (see Question 5 on page 3) may vote for a person to be selected by the Board.

 

Director Qualifications and Experience

 

The Board, acting through the Corporate Governance and Nominating Committee, seeks a Board that, as a whole, possesses the experience, skills, backgrounds and qualifications appropriate to function effectively in light of the Company’s current and evolving business circumstances. The Corporate Governance and Nominating Committee reviews the size of the Board, the tenure of our Directors and their skills, backgrounds and experiences in determining the slate of nominees and whether to seek one or more new candidates. The Committee seeks directors with established records of significant accomplishments in business and areas relevant to our strategies. With respect to the nomination of continuing Directors for re-election, the individual’s contributions to the Board are also considered.

 

All of our Directors bring to our Board a wealth of executive leadership experience derived from their service as executives and, in most cases, chief executive officers, of large corporations. As a group, they also bring extensive board experience. The process undertaken by the Corporate Governance and Nominating Committee in recommending qualified director candidates is described in the Director Nominating Process section on page 23. Information related to the director nominees as of March 31, 2011 is set forth below, including age, and the particular experience, qualifications, attributes or skills that led the Board to conclude that the person should serve as a Director for the Company:

 

Phyllis J. Campbell, 59

Director since 2004

   Chairman of the Pacific Northwest Region of JPMorgan Chase since 2009. President and Chief Executive Officer of The Seattle Foundation, a community-based philanthropic organization, from 2003 to 2009. President and Chief Executive Officer of US Bank of Washington, a division of US Bancorp, from 1993 to 2001. Ms. Campbell held various other management positions of increasing responsibility with US Bank of Washington from 1989 to 1993. Ms. Campbell has been a director of Alaska Air Group, Inc. since 2002 and served as a director of Safeco Corporation from 1994 to 2006, Puget Energy, Inc., from 1999 to 2009 and as a director of its subsidiary, Puget Sound Energy, Inc. from 1993 to 2009. Ms. Campbell’s roles at JP Morgan Chase and US Bank provide her with extensive experience in the financial sector and its retail applications, including marketing, accounting and risk management. Further, Ms. Campbell’s prior role with The Seattle Foundation has provided her senior leadership skills as chief executive officer and her prior and current board experience at Alaska Air Group, Safeco and Puget Energy and its subsidiary has provided her key skills in working with directors, understanding board processes and functions and overseeing management.

Michelle M. Ebanks, 49

New Director Nominee

   President of Essence Communications, a media and communications company and subsidiary of Time Inc., since 2005, and Group Publisher since 2001. Prior to that, Ms. Ebanks served as Senior Vice President and Chief Operating Officer of Time and Essence Magazines Partnership from 1999 to 2001. Ms. Ebanks was General Manager of Time, Inc.’s Money Magazine from 1998 to 1999 and Financial Director from 1996 to

 

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     1998. From 1985 to 1996, Ms. Ebanks held a number of management and financial positions of increasing responsibility with Conde Nast Publications, including Corporate Business Manager from 1993 to 1996. Ms. Ebanks has spent her career in media, publishing and communications businesses and her experiences at Essence Communications, Time, Inc. and Conde Nast Publications provide her key executive management, finance, operations, media and communications skills. Ms. Ebanks is considered an authority on marketing to and effectively reaching multi-cultural audiences, bringing a unique perspective to the Board.

Enrique Hernandez, Jr., 55

Director since 1997

   President and Chief Executive Officer of Inter-Con Security Systems, Inc., a worldwide security and facility support services provider, since 1986 and Executive Vice President and Assistant General Counsel from 1984 to 1986. Prior to joining Inter-Con Security Systems, Mr. Hernandez, who is a licensed attorney, practiced law with the firm of Brobeck, Phleger & Harrison in Los Angeles. Mr. Hernandez is principal partner of Interspan Communications, a television broadcasting company serving Spanish-speaking audiences, which he co-founded in 1988. Mr. Hernandez has been a director of McDonald’s Corporation since 1996, Wells Fargo & Company since 2003 and Chevron Corporation since 2008. Mr. Hernandez served as a director of the Tribune Company from 2001 to 2007. Mr. Hernandez’s role at Inter-Con Security Systems provides him executive, operational, executive compensation and legal experience with a regulated business with a large number of employees in the United States and abroad. Mr. Hernandez’s role with Interspan Communications gives him key marketing skills which are invaluable in an evolving consumer market. Further, Mr. Hernandez’s significant board experience at McDonald’s, Wells Fargo, Chevron and the Tribune Company and his role as Nordstrom’s lead director from 2000 to 2006 and as Chairman of the Board since 2006 has provided him extensive experience in corporate governance matters and working with diverse boards of directors, overseeing management, assessing risk and responding to complex financial, operational and strategic challenges.

Robert G. Miller, 66

Director since 2005

   Chief Executive Officer of Albertson’s, LLC, a retail grocery chain, since 2006. Prior to joining Albertson’s, Mr. Miller was Chief Executive Officer of Rite Aid Corporation, a retail pharmacy chain, from 1999 to 2003, and Chairman of the Board from 1999 to 2007. Mr. Miller was Vice Chairman and Chief Operating Officer of The Kroger Co., a grocery supermarket company, during 1999, Vice Chairman of the Board and Chief Executive Officer of Fred Meyer, Inc., a grocery supermarket company, from 1998 to 1999 and Chairman of the Board and Chief Executive Officer of Fred Meyer, Inc. from 1991 to 1998. He has been a director of Rite Aid Corporation since 1999 and has served as a director of Harrah’s Entertainment, Inc. from 1999 to 2008 and Wild Oats Markets, Inc. from 2004 to 2006. Mr. Miller’s experiences at Fred Meyer, Rite Aid and Albertson’s, which operate multi-store retail businesses in a highly competitive marketplace, provide him with financial, accounting, strategic and operational skills and experience acquiring and divesting assets. Mr. Miller’s extensive experience in the consumer products and retail industries enables him to provide insights that are invaluable to the Board. Further, Mr. Miller’s broad board experience at Rite Aid, Kroger, Fred Meyer, Harrah’s and Wild Oats Markets has provided him key skills in working with directors, understanding board processes and functions, responding to complex financial, operational and strategic challenges and overseeing management.

Blake W. Nordstrom, 50

Director since 2005 (a)

   President of the Company since August 2000. Mr. Nordstrom previously served as Executive Vice President and President of Nordstrom Rack from February 2000 to August 2000, and as Co-President of the Company from 1995 to February 2000. Mr. Nordstrom has held various other management and sales positions of increasing responsibility since 1975 when he joined the Company. He also served as a director of the Federal Reserve Bank of Seattle from 2004 to 2007 and has served as a director of the Federal Reserve Bank of San Francisco since 2007. Mr. Nordstrom’s significant and diverse managerial experience with the Company for more than 25 years, including executive and operational roles, gives him unique insights in retailing and into the Company’s challenges, opportunities and operations.

 

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Erik B. Nordstrom, 47

Director since 2006 (a)

   Executive Vice President and President – Stores since February 2006. From August 2000 to February 2006, Mr. Nordstrom served as Executive Vice President – Full-Line Stores. Mr. Nordstrom previously served as Executive Vice President and Northwest General Manager from February 2000 to August 2000, and as Co-President of the Company from 1995 to February 2000. He has held various other management and sales positions of increasing responsibility since 1979 when he joined the Company. Mr. Nordstrom’s significant managerial experience with the Company for more than 25 years, including executive and operational roles, gives him unique insights in retailing and into the Company’s challenges, opportunities and operations.

Peter E. Nordstrom, 49

Director since 2006 (a)

   Executive Vice President and President – Merchandising since February 2006. From September 2000 to February 2006, Mr. Nordstrom served as Executive Vice President and President of Full-Line Stores. Mr. Nordstrom previously served as Executive Vice President and Director of Full-Line Store Merchandise Strategy from February 2000 to September 2000, and as Co-President of the Company from 1995 to 2000. He has held various other management and sales positions of increasing responsibility since 1978 when he joined the Company. Mr. Nordstrom’s significant managerial experience with the Company for more than 25 years, including executive and operational roles, gives him unique insights in retailing and into the Company’s challenges, opportunities and operations.

Philip G. Satre, 61

Director since 2006

   A private investor since 2005. Mr. Satre was Chief Executive Officer of Harrah’s Entertainment, Inc., a provider of branded casino entertainment, from 1994 to 2003 and a director of Harrah’s from 1988 to 2005, serving as Chairman of the Board from 1997 to 2005. Mr. Satre has held various other positions of increasing responsibility with Harrah’s since 1980 when he joined the company as Vice President, General Counsel and Secretary, to his retirement in 2005. Prior to joining Harrah’s, Mr. Satre practiced law with the firm of Vargas & Barlett in Reno, Nevada. He has been a director of Rite Aid Corporation since 2005, International Game Technology since January 2009 and its Chairman since December 2009, NV Energy, Inc. since 2005 and its Chairman since 2008. Mr. Satre served as a director of Tabcorp Holdings, Ltd. (Australia) from 2000 to 2007. Mr. Satre’s roles at Harrah’s Entertainment provide him legal experience, senior leadership skills as chief executive officer and experience overseeing customer loyalty and service programs. Further, Mr. Satre’s substantial board experience at Rite Aid, International Game Technology, NV Energy, Tabcorp and his role as Chairman of Harrah’s Entertainment, which under his leadership became one of the world’s largest gambling companies, provide him with extensive experience responding to complex financial, operational and strategic challenges, experience with corporate governance matters and key skills in working with directors, understanding board processes and functions, assessing risk and overseeing management.

Felicia D. Thornton, 47

Director since 2010

   Chief Executive Officer/U.S. of Knowledge Universe, a global education company, since 2006. Prior to joining Knowledge Universe, Ms. Thornton was Chief Financial Officer and Executive Vice President of Albertsons, a retail grocery chain, from 2001 to 2006. From 1999 to 2001, Ms. Thornton was Group Vice President, Retail Operations for The Kroger Co., a grocery supermarket company. Before joining The Kroger Co., Ms. Thornton held positions of increasing responsibility at Proctor & Gamble, Paramount Pictures, Stride Rite and Ralphs Grocery Company (Ralphs), including Group Vice President, Finance and Administration, at Ralphs. Ms. Thornton’s role as U.S. Chief Executive Officer at Knowledge Universe, which operates multiple business lines, provides her senior leadership skills and experience in strategic planning and operations. Additionally, Ms. Thornton’s experiences at Albertson’s, The Kroger Co., Stride Rite and Ralphs, which operate multi-store retail businesses in a highly competitive marketplace, provide her with financial, accounting, and process improvement skills and experience with corporate development.

 

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B. Kevin Turner, 45

Director since 2010

   Chief Operating Officer of Microsoft Corporation, the worldwide leader in software, services and solutions, since 2005. In his capacity as Chief Operating Officer, Mr. Turner’s areas of responsibility include global/worldwide sales, marketing, services, operations, customer service and support, worldwide licensing and pricing, corporate public relations, corporate information technology, worldwide partner channel management and the retail stores division. Mr. Turner served as Chief Executive Officer and President of Sam’s Club, a Wal-Mart subsidiary corporation from 2002 to 2005. Between 1985 and 2002, Mr. Turner held a number of positions of increasing responsibility with Wal-Mart Stores, Inc., including Executive Vice President and Global Chief Information Officer from 2001 to 2002. Mr. Turner’s experience at Microsoft and Wal-Mart have provided him with strategic and operational leadership skills and expertise in online worldwide sales, global operations, supply chain, merchandising, branding, marketing, information technology and public relations.

Robert D. Walter, 65

Director since 2008

   A private investor since 2008. Mr. Walter was founder and former Chairman and CEO of Cardinal Health, Inc. Mr. Walter retired from Cardinal Health in June 2008. Prior to his retirement, he served as Executive Director from November 2007 to June 2008; Executive Chairman of the Board from April 2006 to November 2007; and Chairman and Chief Executive Officer from 1971 to April 2006. Mr. Walter has been a director of American Express Company since 2002 and YUM! Brands, Inc. since 2008. He served as a director of Cardinal Health (and its predecessors) from 1971 to November 2008, and CBS Corporation (and its predecessor Viacom, Inc.) from 2000 to 2006. Mr. Walter’s roles at Cardinal Health, which under his leadership grew from a small regional business to become one of the largest distributors of pharmaceuticals, health and beauty products and hospital supplies in the United States, provide him executive, operational, accounting and executive compensation experience, leadership and strategic skills and significant experience acquiring and developing businesses and building management teams. Further, Mr. Walter’s proven financial and business acumen and significant board experience at American Express, YUM! Brands and CBS Corporation give him background and experience working with directors, overseeing management and assessing risk.

Alison A. Winter, 64

Director since 2001

   Chief Executive Officer of Braintree Holdings, LLC, a private investments and consulting services firm, a company she founded in 2003. Ms. Winter has been a senior advisor and consultant to Northern Trust Corporation, a provider of banking and trust services for individuals, institutions and corporations, since 2007. Ms. Winter, who is a Chartered Financial Analyst, was Northern Trust Corporation’s Founding President and Chief Executive Officer for Personal Financial Services – Northeast from 2003 to 2006, Co-President, Personal Financial Services from 2002 to 2003 and a member of the Management Committee from 2002 to 2006. She held various other positions of increasing responsibility with Northern Trust Corporation since 1971 when she joined the company. Ms. Winter’s roles at Northern Trust, which is a consumer and business-facing financial service company, have provided her significant executive and operational experience, leadership skills, an understanding of the consumer and financial experience.

 

(a)  Blake, Peter and Erik Nordstrom are brothers, great grandsons of the Company’s founder and the second cousins of James F. Nordstrom, Jr., an Executive Vice President of the Company.

 

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Proposal 2

Approval of the

Amendment to the Nordstrom, Inc. Employee

Stock Purchase Plan

  

The Board of Directors recommends a vote FOR this proposal.

 

General

 

At the Annual Meeting, Shareholders will be asked to approve an amendment to the Nordstrom, Inc. Employee Stock Purchase Plan (the “Stock Purchase Plan”). Shareholder approval of this amendment to the Stock Purchase Plan will:

 

 

increase the maximum number of shares of Common Stock authorized for issuance under the Stock Purchase Plan by 3,200,000 shares; and

 

 

modify the procedure used by the Compensation Committee to designate Company subsidiaries as participating subsidiaries in the Stock Purchase Plan.

 

The Stock Purchase Plan offers eligible employees the opportunity to acquire a stock ownership interest in the Company through periodic payroll deductions that are applied towards the purchase of Nordstrom Common Stock at a discount from the then-current market price.

 

The Stock Purchase Plan was originally adopted by the Board of Directors in November 1999 and was approved by our Shareholders in May 2000. In February 2005, in order to mitigate the financial impact to the Company of the accounting rules in Statement of Financial Accounting Standards No. 123(R) (currently Financial Accounting Standards Board Accounting Standards Codification 718, Stock Compensation (“ASC 718”), the Compensation Committee approved an amendment to the Stock Purchase Plan effective for offering periods commencing on and after April 1, 2005, which removed the look-back feature for establishing the purchase price and which reduced the stock purchase discount from 15% to 10%. In February 2006, at the recommendation of the Compensation Committee, the Board of Directors approved the adoption of an amendment to the Stock Purchase Plan and in May 2006 the Shareholders approved the amendment, which increased the aggregate number of shares of Nordstrom Common Stock that may be purchased under the Stock Purchase Plan as of March 15, 2006 by 2,400,000 shares, to a total of 9,400,000 shares. In February 2011, at the recommendation of the Compensation Committee, the Board of Directors approved the amendment that is the subject of this Proposal and, if approved by the Shareholders, will increase the aggregate number of shares of Nordstrom Common Stock that may be purchased under the Stock Purchase Plan as of the Record Date by 3,200,000 shares, to a total of 12,600,000 shares. As of March 11, 2011, out of the authorization of 9,400,000 shares, there were 1,161,920 shares available for future purchase under the Stock Purchase Plan.

 

The primary purpose of the amendment is to ensure that Nordstrom will have a sufficient reserve of Common Stock available under the Stock Purchase Plan to provide eligible employees of the Company and its participating subsidiaries with the continuing opportunity to acquire an ownership interest in the Company through participation in the Stock Purchase Plan. In addition, the amendment modifies how the Compensation Committee designates participating affiliates in the Stock Purchase Plan. Under the current plan, if the Company owns, or in the future acquires, stock possessing at least 50% of the voting power of a subsidiary (an “Eligible Subsidiary”), the Eligible Subsidiary automatically becomes a participating subsidiary in the Stock Purchase Plan, unless the Compensation Committee determines that the Eligible Subsidiary should not be a participating subsidiary. After adoption of the amendment, the Compensation Committee will have to take definitive action to designate an Eligible Subsidiary as a participating subsidiary, and in the absence of such action by the Compensation Committee, the Eligible Subsidiary would not participate in the Stock Purchase Plan. The amendment does not change the definition of Eligible Subsidiaries; it changes only the process by which participation of Eligible Subsidiaries is determined. The Board of Directors also approved amendments to the Stock Purchase Plan to simplify how beneficiaries are determined if a participant dies without a designated beneficiary, and approved other minor editorial amendments. These administrative changes do not require shareholder approval.

 

The following is a summary of the principal features of the Stock Purchase Plan. This summary is qualified in all respects by reference to the full text of the Stock Purchase Plan, which has been filed with the SEC, in amended and restated form, as Appendix A to this Proxy Statement.

 

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Summary of the Plan

 

Shares of Common Stock are offered under the Stock Purchase Plan through a series of consecutive offering periods, each with a maximum duration of six months. Offering periods commence each April 1 and October 1. Purchases occur on the last trading day of each March and September.

 

With certain exceptions, any eligible employee of the Company or of a participating subsidiary on February 1 who remains an employee through April 1 may participate in the offering period commencing April 1, and any employee of the Company or a participating subsidiary on August 1 who remains an employee through October 1 may participate in the offering period commencing October 1. The price at which the employee may purchase the Common Stock is 90% of the closing price for the Common Stock as reported by the New York Stock Exchange on the day the offering period terminates. An employee may elect to have up to 10% of his or her compensation withheld for the purpose of purchasing Common Stock under the Stock Purchase Plan. As of the last day of each offering period, each participant is deemed to have been granted an option to purchase up to the lesser of (i) 1,000 shares or (ii) that whole number of shares determined by dividing the amount of the participant’s compensation withheld during the offering period by 90% of the fair market value of the Common Stock as determined at the end of the offering period.

 

Unless the participant elects to withdraw prior to the end of an offering period, each participant who continues to be employed as an employee by the Company or a participating subsidiary as of the end of an offering period is deemed to have exercised the option and purchased on such date the number of shares as may be purchased with the amount of his or her payroll deductions at the offering price (subject to the maximum number covered by his or her option). If employees subscribe to purchase more than the number of shares of Common Stock available during any offering, the available shares are allocated on a pro rata basis to subscribing employees.

 

The Board of Directors of the Company may at any time amend, suspend or terminate the Stock Purchase Plan. However, except in connection with certain reorganizations or recapitalizations of the Company, any increase in the aggregate number of shares of Common Stock issuable under the Stock Purchase Plan is subject to approval by a vote of the Shareholders. Moreover, the Stock Purchase Plan will automatically terminate on the date on which all shares available for issuance thereunder are sold pursuant to exercised purchase rights.

 

The Stock Purchase Plan is administered by the Compensation Committee, which is authorized to make rules and guidelines regarding the administration and interpretation of the Stock Purchase Plan and to determine which subsidiaries of the Company may participate in the Stock Purchase Plan. All costs and expenses incurred in plan administration are paid by the Company without charge to participants.

 

Federal Income Tax Consequences

 

The Stock Purchase Plan is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), which provides that the employee does not have to pay federal income tax with respect to shares purchased under the Stock Purchase Plan until he or she sells the shares.

 

If the employee has owned the shares for more than one year and sells or otherwise disposes of them at least two years after the day the offering period commenced, the employee will recognize ordinary income in the year of sale or disposition equal to the lesser of (i) ten percent (10%) of the market price of the shares on the date the offering period commenced or (ii) the excess of the amount realized on the disposition over the price paid. Any additional gain upon the sale or disposition will be taxed as a long-term capital gain. The Company will not be entitled to an income tax deduction with respect to such sale or disposition.

 

If an employee sells or otherwise disposes of the shares before he or she has owned them for more than one year or before the expiration of a two-year period commencing on the day the offering period commenced, that employee will recognize ordinary income in the year of sale or disposition equal to the difference between the purchase price and the fair market value of the shares on the date of purchase, and the Company will be entitled to an income tax deduction for the same amount for the taxable year in which such disposition occurs. Any additional gain or loss recognized on the sale or disposition of the stock will be short-term or long-term capital gain or loss, depending on how long the employee owned the stock.

 

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New Plan Benefits

 

Participation in the Stock Purchase Plan is entirely within the discretion of the eligible employees of the Company. As a result, the Company cannot forecast the extent of future participation. Therefore, the Company has omitted the tabular disclosure of the benefits or amounts allocated under the Stock Purchase Plan.

 

Recommendation of the Board of Directors

 

The Board of Directors believes that it is in the best interests of the Company and its Shareholders to amend the Stock Purchase Plan in order to provide current and prospective employees of the Company and participating subsidiaries with the continuing opportunity to acquire an equity interest in the Company through the Stock Purchase Plan and to require affirmative action of the Compensation Committee to designate participating subsidiaries in the Plan. Therefore, the Board of Directors believes that this amendment to the Stock Purchase Plan will advance the interests of the Company’s shareholders. Absent the approval of this Proposal 2, it is anticipated that the reserve of Common Stock available for purchase under the Stock Purchase Plan may be exhausted by 2013, which would, at that time, result in the termination of the Stock Purchase Plan.

 

Proposal 3

Ratification of the

Appointment of

Independent

Registered Public

Accounting Firm

  

The Board recommends a vote FOR this proposal

 

The Audit Committee, consistent with the NYSE and SEC rules, has appointed Deloitte & Touche LLP (“Deloitte”) to be the Company’s independent registered public accounting firm for the fiscal year ending January 28, 2012. Deloitte and its predecessors have served as the Company’s independent registered public accounting firm for over thirty-five years, including the fiscal year ended January 29, 2011.

 

As a matter of good corporate practice to provide shareholders an avenue to express their views on this matter, the Board has determined to seek shareholder ratification of Deloitte’s appointment at this time. If the shareholders do not ratify the appointment of Deloitte, the Board will reconsider the appointment of the independent registered public accounting firm. A representative of Deloitte will be present at the Annual Meeting, will have the opportunity to make a statement if he or she so desires, and will be available to respond to questions.

 

Audit Fees. The following table summarizes fees billed or expected to be billed to the Company by Deloitte in connection with services for the fiscal years ended January 29, 2011 and January 30, 2010:

 

      

Fiscal Year
Ended

January 29, 2011

      

Fiscal Year
Ended

January 30, 2010

 
Type of Fee      ($)        (%)        ($)        (%)  

Audit Fees (a)

       1,828,875           91           1,832,500           90   

Audit-Related Fees (b)

       152,090           7           144,828           7   

Tax Fees (c)

       32,537           2           55,000           3   

All Other Fees (d)

       2,409           0           2,000           0   

Total

       2,015,911           100           2,034,328           100   

 

(a)   Audit fees primarily included services for (i) auditing the consolidated financial statements of the Company and the separate financial statements of one of the Company’s wholly-owned subsidiaries, Nordstrom fsb; (ii) reviewing the interim financial information of the Company included in its Form 10-Qs; and (iii) auditing the Company’s internal control over financial reporting. Substantially all of Deloitte’s work on these audits was performed by full-time, regular employees and partners of Deloitte and its affiliates.

 

(b)   Audit-related fees are fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and internal control over financial reporting.

 

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(c)   Tax fees include various tax planning projects and miscellaneous compliance matters.

 

(d)   All other fees consist of an accounting research tool subscription fee.

 

Pre-Approval Policy

 

Consistent with SEC policies regarding auditor independence, the services performed by Deloitte for the fiscal years ended January 29, 2011 and January 30, 2010 were pre-approved in accordance with the pre-approval policy and procedures adopted by the Audit Committee. This policy is periodically reviewed and updated. It describes the permitted audit, audit-related, tax and other services that Deloitte may perform. Normally, pre-approval is provided at regularly scheduled Audit Committee meetings. However, the authority to grant specific pre-approval between meetings, as necessary, has been assigned to the Chair of the Audit Committee. The Chair is responsible to update the Audit Committee at the next regularly scheduled meeting of any services that were pre-approved between meetings.

 

The Audit Committee approves fees up to a specified amount associated with each proposed service. Providing for fees up to a specified amount for a service incorporates appropriate oversight and control of the Deloitte relationship, while permitting the Company to receive immediate assistance from Deloitte when time is of the essence.

 

The Committee also reviews on a regular basis:

 

 

a listing of approved services since its last review;

 

 

a report summarizing the year-to-date services provided by Deloitte, including fees paid for those services; and

 

 

a projection for the current fiscal year of estimated fees.

 

The policy prohibits the Company from engaging the independent registered public accountants for services billed on a contingent fee basis and from hiring current or former employees of the independent auditor who have not satisfied the statutory cooling-off period for certain positions.

 

Proposal 4

Advisory Vote on Executive Compensation

  

The Board recommends a vote FOR this proposal

 

In accordance with recent legislation, the Company is providing shareholders with an advisory (nonbinding) vote on the compensation programs of our Named Executive Officers as disclosed in this Proxy Statement.

 

As described in detail under the heading “Compensation of Executive Officers – Compensation Discussion and Analysis,” the fundamental philosophy for our compensation programs is pay for performance. Under these programs, our Named Executive Officers are rewarded for results when defined performance milestones are achieved and when value is created for our shareholders. Our Compensation Committee and our Board of Directors believe that our compensation programs are effective in implementing our executive compensation philosophy and establishing a solid link between compensation and shareholder interest. Highlights of our compensation programs that support our executive compensation philosophy of pay for performance and create alignment with shareholder interests include the following:

 

 

We deliver the majority of compensation through a pay-for-performance framework where incentives are based on results. Over three-quarters of the value of the targeted compensation package for our Named Executive Officers is weighted toward pay for performance and variable compensation to reinforce our philosophy of compensating our executives when they and the Company are successful in ways that support shareholder interests.

 

 

Within our pay for performance philosophy, the Compensation Committee has expressed a desired competitive position for fixed compensation elements, such as base salary, to be approximately at the 50th percentile ranking among our peer group, and variable compensation elements focused on performance-based bonus targets and long-term incentive value at grant, to be approximately between the 50th – 75th percentile to underscore our pay for performance philosophy and align compensation with variability in results.

 

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Each year, the Compensation Committee establishes the performance measures to focus executives on the most important Company objectives. In 2010, Named Executive Officers each had the following measures:

 

  -  

ROIC to capture how well the Company utilized its capital resources. The measure is expressed as a threshold that must be met before any payout can be made on EBIT results to ensure our executives are rewarded after earnings generate a meaningful return for our shareholders.

 

  -  

EBIT to emphasize the importance of earnings improvement and its role in driving shareholder value. The measure represented 100% of each executive’s performance-based bonus.

 

 

We maintain meaningful executive stock ownership guidelines so that our executives’ interests, as shareholders, are aligned with our broader shareholder base.

 

 

We have an executive compensation recovery policy that applies to performance-based compensation.

 

 

We have not participated in a practice of stock option grant repricing or backdating, nor have we granted options below 100% of fair market value.

 

 

Our Compensation Committee has retained and directs an independent compensation consultant.

 

 

We do not have employment agreements with our executives.

 

 

We do not have tax gross-ups, except those related to relocation expenses.

 

Please read the “Compensation Discussion and Analysis” beginning on page 34 for additional details about our executive compensation programs, including information about the fiscal year 2010 compensation of our Named Executive Officers.

 

We are asking our shareholders to indicate their support for our Named Executive Officers’ compensation as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on the compensation of our Named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we will ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:

 

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosure in this Proxy Statement.”

 

As an advisory vote, this proposal is not binding on the Company. However, our Compensation Committee and Board of Directors value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions regarding the Company’s Named Executive Officers.

 

Proposal 5

Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation

  

The Board recommends shareholders select “1 YEAR” for Proposal 5.

 

In addition to providing shareholders with the opportunity to cast an advisory vote on executive compensation, we are providing shareholders with an advisory vote on how frequently we should seek an advisory vote on the compensation of our Named Executive Officers.

 

By voting on this Proposal 5, shareholders may indicate whether they would prefer an advisory vote on Named Executive Officer compensation once every 1, 2, or 3 years.

 

The Board of Directors has determined that holding an advisory vote on executive compensation every year is the most appropriate policy for the Company at this time, and recommends that shareholders vote for future advisory votes on executive compensation to occur every year. Many elements of our executive compensation program are reviewed and determined annually, including base salary, performance-based cash awards under the Company’s Executive Management Bonus Plan, and long-term incentive grants under the 2004 and 2010 Equity Incentive Plans. Holding an annual advisory vote on executive compensation would more closely coincide with

 

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these decisions, promote corporate transparency and shareholder awareness of the Company’s compensation policies and practices and also provides the Company with more direct and immediate feedback on our compensation disclosures and practices.

 

Shareholders will be able to specify one of four choices for this proposal on the proxy card: 1 year, 2 years, 3 years, or abstain. Shareholders are not being asked to approve or disapprove the Board of Director’s recommendation, but rather to indicate their own choice from among the frequency options. The option of 1 year, 2 years or 3 years that receives the highest number of votes cast by shareholders will be the frequency for future advisory votes on executive compensation that has been selected by shareholders. Because this vote is advisory, it is not binding on the Board of Directors or the Company. However, the Board of Directors value the opinions of our shareholders and will consider the outcome of the vote when setting the frequency of future advisory votes on executive compensation.

 

Other Matters    The Board knows of no other matters that will be presented at the 2011 Annual Meeting of Shareholders. However, if any other matters are properly presented

at the Annual Meeting or any convening or reconvening of the Annual Meeting upon an adjournment or postponement of the Annual Meeting, it is the intention of the persons named as proxies to vote in accordance with their best judgment.

 

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Corporate Governance

 

 

Board Responsibilities,

Leadership Structure and Role in Risk Oversight

   The Board oversees, counsels and directs management in the long-term interests of the Company and our shareholders. The Board’s responsibilities include:

 

 

selecting and evaluating the performance of the President and senior executives;

 

 

planning for succession with respect to the position of the President and monitoring management’s succession planning for other senior executives;

 

 

reviewing and approving our major financial objectives and strategic and operational plans and other significant actions;

 

 

overseeing the conduct of our business and the assessment of our business risks to evaluate whether the business is being properly managed; and

 

 

overseeing the processes for maintaining our integrity with regard to our financial statements and other public disclosures, and compliance with law and ethics.

 

At this time, the Board believes that different people should hold the positions of Chairman of the Board and President, as this may strengthen corporate governance and aid in the Board’s oversight of management. Currently, Enrique Hernandez, Jr. serves as Chairman of the Board and Blake W. Nordstrom serves as President. The President is responsible for day to day leadership and performance of the Company while the Chairman of the Board provides guidance to the President and presides over the full Board. The duties of our Chairman of the Board are more fully described in the Chairman of the Board and Presiding Director section on page 23. The Board believes that this leadership structure also aids in the Board’s oversight of risk and strengthens risk management.

 

The full Board has primary responsibility for oversight of risk management, and has assigned to the Board’s standing committees the specific focus of the risks inherent in their respective areas of oversight. The full Board:

 

 

considers and reviews the Company’s risk appetite, which is the amount of risk the organization is willing to accept;

 

 

oversees management’s implementation of an appropriate system to manage risks (i.e., to identify, assess, mitigate, monitor, and communicate about these risks) and monitors improvements in this process as the business environment changes;

 

 

provides risk oversight through the Board’s committee structure and oversight processes; and

 

 

manages directly certain risks that only the Board is positioned to manage and in particular the risks associated with the Company’s strategic direction, which are reviewed at an annual strategy planning session and periodically throughout the year.

 

The Company has a comprehensive, structured approach to managing risks, which are identified, assessed, prioritized and managed at all levels within the Company through an enterprise risk management process which is aligned with the Company’s strategy. This starts at the business process and functional levels. Risks are then consolidated at the business unit level, assessed and prioritized by the Company’s risk management committee and validated with senior management, which includes the Company’s President. Executive management is responsible for assessing and managing the Company’s exposure to risks and for discussing with the Board or committees the various risks confronting the Company. The risks are classified into four major categories, Strategic, Compliance, Operational and Financial, and mapped for the appropriate management and Board (and committee) oversight.

 

Through the risk oversight process, the Board: (i) obtains an understanding of the risks inherent in the Company strategy and management execution of the strategy within the agreed risk appetite, (ii) accesses useful

 

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information from internal and external sources about the critical assumptions underlying the strategy, (iii) is alert for possible organizational dysfunctional behavior that can lead to excessive risk taking, (iv) provides input to executive management regarding critical risk issues on a timely basis, and (v) encourages open communication and appropriate escalation of reporting of risk throughout the enterprise, striving to ensure that risk management is part of the corporate culture. The Board’s leadership structure and the collective knowledge and experience of its members promotes a broad perspective, open dialogue and useful insights regarding risk, thereby increasing the effectiveness of the Board’s role in risk oversight.

 

Management Succession Planning   

The Board believes that one of its primary responsibilities is to ensure that the Company has the appropriate leadership capability to effectively deliver upon

its business commitments. The Board annually conducts a detailed review of

the talent strategies for the entire organization and reviews succession plans for senior leadership positions, including that of the President. The Board reviews high-potential employees, evaluates plans to develop their management and leadership capabilities and sanctions the strategies used to deploy these individuals most effectively. In addition to the annual review, succession is regularly discussed in executive sessions of the Board and in Board Committee meetings, as applicable. Directors become familiar with potential successors for key leadership positions through various means, including the comprehensive annual talent and succession review, Board meeting presentations and less formal interactions throughout the course of the year.

 

Our entire Board, with the oversight of our Corporate Governance and Nominating Committee, is responsible for implementing succession procedures for the President. We believe that the Board, led by our Chairman, should collaborate with the President on the critical aspects of the succession planning process, including establishing selection criteria, identifying and evaluating candidates and making management succession decisions. The Board has procedures in place to respond to an unexpected vacancy in the President’s position, including a detailed review of the succession plan annually by the Corporate Governance and Nominating Committee. It is the Board’s practice to be prepared for a planned or unplanned change in leadership in order to ensure the stability of the Company.

 

Director Independence    A Director is considered independent when our Board affirmatively determines that he or she has no material relationship with the Company, other than as a

Director. Our Board makes this determination in accordance with the standards set forth in our Corporate Governance Guidelines, which are consistent with the listing standards of the NYSE and SEC rules. In making this determination, the Board considered existing relationships between the Company and Directors, whether directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. The Board has affirmatively determined that the following director nominees are independent within the meaning of SEC rules, the listing standards of the NYSE and the Company’s Corporate Governance Guidelines, and that none of these director nominees have a material relationship with the Company.

 

Phyllis J. Campbell

   Robert G. Miller    B. Kevin Turner

Michelle M. Ebanks

   Philip G. Satre    Robert D. Walter

Enrique Hernandez, Jr.

   Felicia D. Thornton    Alison A. Winter

 

Board Committees

and Charters

   The Board has a standing Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Finance Committee. Each Committee has a Board-approved Charter which is reviewed annually by

the respective Committee. Recommended changes, if any, are submitted to the Corporate Governance and Nominating Committee and Board for approval. The Board makes Committee and Committee Chair assignments annually at its meeting immediately following the Annual Meeting of Shareholders, although further changes to Committee assignments are made from time to time as deemed appropriate by the Board. The Board has determined that the Chairs and all committee members are independent under the applicable NYSE and SEC rules. Committee Charters and current Committee membership are posted on our web site at www.nordstrom.com.

 

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To view these documents on our web site, select Investor Relations, then select Corporate Governance. The Chairs and members of the committees as of the date of this Proxy Statement are identified in the following table.

 

Director   

Audit

Committee

  

Compensation

Committee

  

Corporate

Governance and

Nominating

Committee

  

Finance

Committee

 

Phyllis J. Campbell

   Chair                ü   

Enrique Hernandez, Jr.

        ü    ü         

Robert G. Miller

   ü                Chair   

Felicia D. Thornton

   ü                ü   

B. Kevin Turner

        ü           ü   

Philip G. Satre

        ü    Chair         

Robert D. Walter

        Chair    ü         

Alison A. Winter

   ü         ü         

 

Audit Committee. As more fully described in its Charter included as Appendix B, the primary responsibility of the Audit Committee is to assist the Board in fulfilling its oversight responsibility by reviewing and appraising the following:

 

 

the integrity of the Company’s financial statements;

 

 

the accounting, auditing and financial reporting processes of the Company;

 

 

the management of business and financial risk and the internal controls environment;

 

 

the Company’s compliance with legal and regulatory requirements and ethics programs as established by management and the Board, which shall be in conjunction with any recommendations by the Corporate Governance and Nominating Committee with respect to the corporate governance standards;

 

 

reports resulting from the performance of audits by the independent auditor and the internal auditor;

 

 

the qualifications, independence and performance of the Company’s independent auditors; and

 

 

the performance of the Company’s internal audit function.

 

The Audit Committee meets regularly with the independent registered public accounting firm and management, including the Vice President – Internal Audit, to review accounting, auditing, enterprise risk management and financial reporting matters, and compliance with laws and regulations. The Audit Committee also meets privately and separately with the independent registered public accounting firm, the EVP and Chief Financial Officer and the Vice President – Internal Audit.

 

In addition to meeting the independence requirement for audit committee members, each current member of the Audit Committee also meets the financial literacy and experience requirements contained in the corporate governance listing standards of the NYSE. The Board has determined that all Audit Committee members qualify as “audit committee financial experts” under the regulations of the SEC. Although all members of the Audit Committee meet the current NYSE regulatory requirements for accounting or related financial management expertise and the Board has determined that each of them qualifies as an “audit committee financial expert,” members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not technical experts in auditing or accounting.

 

Compensation Committee. As more fully described in its Charter, the primary responsibilities of the Compensation Committee are to:

 

 

conduct an annual evaluation of the Executive Management Group members’ performance in light of the Company’s goals and objectives. (The Executive Management Group is referenced on page 31 and includes the Named Executive Officers shown in the Summary Compensation Table on page 45 and other business unit presidents and Company executives over major organizational functions reporting to the President or other senior executives);

 

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review management’s annual performance evaluations of the Company’s Executive Management Group members;

 

 

establish guiding principles for compensating our executives;

 

 

review and approve executives’ cash and equity-based compensation plans; and

 

 

review and approve any benefit plans, retirement and deferred compensation or other perquisites offered to the Executive Management Group members and other eligible employees.

 

The Committee has the sole authority to retain consultants and advisors as it may deem appropriate and to approve related fees and other retention terms. The Committee has retained Semler Brossy Consulting Group, LLC, an independent compensation consulting firm, to advise the Committee on executive compensation and benefit matters. Semler Brossy is retained by, and reports directly to, the Committee, provides services only as directed by the Committee and has no other relationship with the Company. There were no fees paid to Semler Brossy for services that were not related exclusively to executive or Director compensation during 2010.

 

A consultant from Semler Brossy attends Committee meetings in person or by phone and supports the Committee’s role by providing independent expertise on market practices and trends in executive compensation representing the general industry and the peer group defined for such purposes. Additionally, the consultant provides advice regarding management’s analysis of peer group practices for base salary, performance-based bonus, long-term incentives and other compensation elements, including advice on management’s proposed levels of executive compensation. Semler Brossy also advises the Company on compensation program design including stock ownership guidelines, regulatory requirements related to executive compensation, plans submitted to shareholders for approval, governance responsibilities, and such other matters as assigned by the Committee from time to time as necessary to carry out its responsibilities under its charter.

 

Corporate Governance and Nominating Committee. As more fully described in its Charter, the primary responsibilities of the Corporate Governance and Nominating Committee are to:

 

 

review and recommend individuals to the Board for nomination as members of the Board and its committees;

 

 

review possible conflicts of interest of Board members and the Company’s executive officers;

 

 

develop and review the Company’s Corporate Governance Guidelines;

 

 

review the corporate governance standards of the Company’s Codes of Business Conduct and Ethics;

 

 

review the policies and practices of the Company in the area of corporate governance;

 

 

review the Committee’s new Director orientation program and continuing Director education programs;

 

 

produce and provide to the Board an annual performance evaluation of the Board and each committee of the Board;

 

 

establish succession procedures in the case of an emergency or the retirement of the President;

 

 

recommend to the Board the form and amount of Director compensation; and

 

 

review the overall performance of the President on an annual basis.

 

Finance Committee. As more fully described in its Charter, the primary responsibilities of the Finance Committee are to:

 

 

assist the Board in fulfilling its oversight responsibilities with respect to the Company’s capital structure, financial policies, capital investments, business and financial planning and related matters;

 

 

review and appraise the Company’s dividend payment and share repurchase strategies, banking relationships and borrowing facilities and cash management; and

 

 

monitor the rating assigned by rating agencies to the Company’s long-term debt.

 

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Board Meetings and Attendance   The Board held five meetings during the past fiscal year, one of which was devoted principally to Company strategy. During the past fiscal year, the Audit Committee held twelve meetings, the Compensation Committee held four

meetings, the Corporate Governance and Nominating Committee held four meetings and the Finance Committee held four meetings. Each Director attended more than 75% of the aggregate of all meetings of the Board and the Committees on which he or she served during the year and overall attendance at the meetings, on a combined basis, was 99%. Independent members of the Board met at each quarterly meeting of the Board in executive session without management present.

 

Attendance at the Annual Meeting of Shareholders   Although all members of the Board are expected to attend each Annual Meeting of Shareholders, the Company has not adopted a formal policy on Board member attendance. All members of the Board have indicated their intent to attend the 2011 Annual Meeting of Shareholders. Shareholders are encouraged to direct

any questions that they may have to the Directors or management at that time. All directors attended the 2010 Annual Meeting of Shareholders, except Felicia D. Thornton and B. Kevin Turner, who were appointed to the Board in November 2010, and Michelle M. Ebanks who is nominated for election to the Board in May 2011.

 

Chairman of the Board

and Presiding Director

  The Company has a Chairman of the Board who is also an independent Director and who serves as the Presiding Director within the meaning of the listing standards of the NYSE. Currently, Enrique Hernandez, Jr. serves as the Company’s Chairman of the Board.

 

The Chairman of the Board is appointed annually by the Board. As described in the Company’s Bylaws, Corporate Governance Guidelines and Charter of the Corporate Governance and Nominating Committee, the Chairman of the Board:

 

 

presides at all meetings of the Board;

 

 

assists in establishing the agenda for each Board and Board Committee meeting;

 

 

serves as the Presiding Director to lead regular executive sessions of the Board in which only independent Directors participate;

 

 

calls special meetings of the Board and/or the shareholders;

 

 

provides input and support to the Chair of the Corporate Governance and Nominating Committee on nominees to fill vacant Board seats;

 

 

provides input and support to the Chair of the Corporate Governance and Nominating Committee on the selection of Committee Chairpersons and membership on Board committees;

 

 

advises the President and other members of the Executive Management Group on such matters as strategic direction, corporate governance and overall risk assessment; and

 

 

performs other duties that the Board may from time to time delegate to assist the Board in the fulfillment of its responsibilities.

 

Director Nominating Process   The Corporate Governance and Nominating Committee is responsible for identifying and recommending to the Board the nominees to stand for election as directors at each Annual Meeting of Shareholders or, if applicable, at a special meeting of shareholders.

 

In nominating director candidates, the Committee considers such factors as it deems appropriate, including whether there are any evolving needs of the Board with respect to a particular field, skill or experience. These factors may include judgment, skill, experience with businesses and other organizations, the candidate’s

 

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experience relative to the experience of other members of the Board and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board. In addition to these factors, the Committee may also consider a director candidate’s diversity of background during the evaluation and selection process of director candidates. In this context, diversity is being broadly construed to mean varied skills, backgrounds and experiences, which includes gender and ethnicity, as well as other differentiating characteristics, all in the context of the requirements and needs of the Board at that point in time. The Committee, however, does not have a formal policy specifying how diversity of background should be applied in identifying or evaluating director candidates, and a director candidate’s background, while important, does not necessarily outweigh other attributes or factors the Committee may consider in evaluating any particular director candidate. The goal of the Committee is to assist the Board in attracting competent individuals with the requisite management, financial, and other expertise who will act as directors in the best interests of the Company and its shareholders.

 

The Corporate Governance and Nominating Committee will consider the qualifications of director candidates recommended by shareholders, and evaluate each of them using the same criteria the Committee uses for incumbent candidates. Director candidate recommendations by shareholders must be made by notice in writing delivered or mailed by first class U.S. mail, postage prepaid, to the Chair of the Corporate Governance and Nominating Committee, in care of the Secretary of the Company, 1700 Seventh Avenue, Seattle, Washington 98101-4407. Please indicate on the envelope “Corporate Governance and Nominating Committee”.

 

As required by the Company’s Bylaws, the notice must be received by the Secretary not less than 90 days nor more than 120 days prior to the anniversary of the immediately preceding Annual Meeting of Shareholders called for the election of directors (between January 11, 2012 and February 10, 2012 for the 2012 Annual Meeting of Shareholders). However, if the Annual Meeting is called for a date that is not within 30 days before or after the anniversary date, or no annual meeting was held in the immediately preceding year, notice by the shareholder in order to be timely must be received no later than the close of business on the tenth (10th) day following the day on which the notice of the Annual Meeting date was mailed to shareholders.

 

The notice must provide the following information for each proposed nominee who is not an incumbent Director that the shareholder wishes to nominate:

 

 

the name, age, business address and residence address of the proposed nominee;

 

 

the principal occupation or employment of the proposed nominee;

 

 

the number of shares of Common Stock which are owned beneficially or of record by the proposed nominee;

 

 

a description of any agreement, arrangement or understanding (including any derivative, swap or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the shareholder’s notice by, or on behalf of the proposed nominee or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, the proposed nominee or any of its affiliates or associates with respect to shares of stock of the Company, and a representation that the shareholder will notify the Company in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting of shareholders at which the shareholder intends to nominate the proposed nominee promptly following the later of the record date or the date notice of the record date is first publicly disclosed; and

 

 

any other information relating to the proposed nominee that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, as amended, and related rules and regulations promulgated thereunder.

 

The notice must also provide the following information about the shareholder giving the notice:

 

 

the name and record address of the shareholder;

 

 

the number of shares of Common Stock which are owned beneficially or of record by the shareholder;

 

 

a reasonably detailed description of all agreements, arrangements or understandings between the shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by the shareholder;

 

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a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person named in its notice;

 

 

a description of any agreement, arrangement or understanding (including any derivative, swap or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the shareholder’s notice by, or on behalf of, the shareholder or any of the shareholder’s affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of the shareholder or any of the shareholder’s affiliates or associates with respect to shares of stock of the Company, and a representation that the shareholder will notify the Company in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting of shareholders at which the shareholder intends to nominate the proposed nominee promptly following the later of the record date or the date notice of the record date is first publicly disclosed;

 

 

a representation whether the shareholder intends to solicit proxies from shareholders in support of the nomination;

 

 

any performance related fees (other than an asset based fee) that such shareholder is entitled to based on any increase or decrease in the price or value of shares of any class or series of the Company, and

 

 

any other information relating to the shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and applicable SEC rules and regulations.

 

The notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected.

 

Felicia D. Thornton and B. Kevin Turner were appointed to the Board of Directors in November 2010 on the recommendation of the Corporate Governance and Nominating Committee, in consultation with our Chairman of the Board. Ms. Thornton was recommended for consideration by the Corporate Governance and Nominating Committee by Robert G. Miller, an independent director and Mr. Turner was recommended for consideration by the Corporate Governance and Nominating Committee by Blake Nordstrom, our President. The Corporate Governance and Nominating Committee, in consultation with our Chairman of the Board, selected Michelle M. Ebanks from the candidates recommended by a search firm retained by the Committee to assist it in identifying and evaluating potential nominees. No director candidates were recommended by our shareholders for election at the 2011 Annual Meeting of Shareholders.

 

Director Compensation

  The Company’s pay philosophy for Director compensation reflects the Board’s belief that payment of a portion of Director fees in the form of Common Stock aligns the interests of Directors with the interests of the Company’s shareholders

and enhances Director compensation when the Company performs well. The Board believes that the Director fees paid by the Company should be competitive with other companies of similar size and performance.

 

Employee Directors of the Company are not paid any fees for serving as members of the Board or any Board Committee. Nonemployee Director compensation consists of the following elements:

 

Annual Component   

Amount

($)

 

Cash Retainer

     50,000   

Audit Committee Chair Retainer

     15,000   

Compensation Committee Chair Retainer

     12,500   

Corporate Governance and Nominating Committee Chair Retainer

     10,000   

Finance Committee Chair Retainer

     10,000   

Committee Member Retainer, including Committee Chair (per Committee)

     10,000   

Common Stock having a value of:

     100,000   

 

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The compensation for nonemployee Directors was last adjusted in fiscal 2007. Compensation paid to nonemployee Directors of the Company for 2011 will be revised as follows: the $10,000 committee member annual retainer will be eliminated and the annual cash retainer will be increased by $10,000, the annual Common Stock award will be increased by $40,000, the annual retainer for each committee chair will be increased by $5,000, and an annual retainer of $5,000 will be paid to the audit committee member attending meetings of the Nordstrom fsb Board.

 

Chairman of the Board Compensation. In addition to the amounts set forth above, and in recognition of the significant time and attention in performing the duties required of the office, the Chairman of the Board is annually awarded, on the date of the Company’s Annual Meeting of Shareholders, Common Stock having a value of $250,000.

 

Travel and Education Reimbursement. Nonemployee Directors are reimbursed for reasonable travel expenses or flown, without charge, on the Company’s aircraft, to attend Board and Board Committee meetings. On limited occasions, the Company may determine that it is appropriate for nonemployee Directors to be accompanied by their spouses in connection with the Annual Meeting of Shareholders, store openings or other significant Company events. In these circumstances, the Company also reimburses the spouses’ reasonable travel expenses or they are flown, without charge, on the Company’s aircraft to attend such events. In addition, the Company reimburses Directors for attending director continuing education programs.

 

Merchandise Discounts. All Directors and their spouses and eligible children may participate in the Company’s merchandise discount program. The program provides a 20% discount for eligible non-management employees and eligible retirees, and up to a 33% discount for eligible management and high-performing non-management employees, eligible retirees, Directors and eligible retired Directors. These discounts vary somewhat by source and type of merchandise.

 

Deferred Compensation Program. Nonemployee directors may elect to defer all or a part of their fee and stock awards under the Nordstrom Directors Deferred Compensation Plan (“Directors Plan”). Directors are required to make advance elections to defer the receipt of fees or stock awards, and all deferral elections generally are irrevocable. Directors are also required to make advance elections for the form and timing of distribution of their deferred cash fees or stock awards.

 

Cash deferrals may be directed among 16 deemed investment alternatives, and gains and losses for cash deferrals are posted to the Director’s account daily based on their investment elections. Deferred stock awards are credited to the Director’s account as units. Each unit in the Directors Plan is equal in value to the price of one share of Common Stock. Each deferred unit is credited with dividends, in the form of additional units, to the same extent as a share of Common Stock.

 

During the fiscal year ended January 29, 2011, Enrique Hernandez, Jr., and Robert D. Walter elected to defer 100% of their stock awards, and Enrique Hernandez, Jr. elected to defer 100% of his cash Directors fee into the Directors Plan.

 

Director Summary Compensation Table. During the fiscal year ended January 29, 2011, nonemployee Directors of the Company received the following compensation for their services:

 

Name     

Fees Earned
or Paid in
Cash

($)

      

Stock
Awards

($)

      

All Other
Compensation

($)

      

Total

($)

 

Phyllis J. Campbell (a)

       85,000           99,984           24,068           209,052   

Enrique Hernandez, Jr. (b)

       70,000           349,962           28,131           448,093   

Robert G. Miller (c)

       90,000           99,984           14,456           204,440   

Philip G. Satre (d)

       90,000           99,984           4,572           194,556   

Felicia D. Thornton (e)

       35,000           49,998           1,332           86,330   

B. Kevin Turner (f)

       35,000           49,998           4,040           89,038   

Robert D. Walter (g)

       82,500           99,984           5,951           188,435   

Alison A. Winter (h)

       80,000           99,984           6,536           186,520   

 

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(a)   Ms. Campbell’s compensation includes:
   

fees earned or paid in cash: $50,000 (annual cash retainer), $35,000 (Audit Committee Chair annual retainer, and Audit Committee and Finance Committee Member annual retainers),

   

annual stock award: 2,627 shares of Common Stock having a fair value at the date of grant of $99,984; and

   

all other compensation: $24,068 (merchandise discount).

 

(b)   Mr. Hernandez’ compensation includes:
   

fees earned or paid in cash: $50,000 (annual cash retainer); $20,000 (Compensation Committee and Corporate Governance and Nominating Committee Member annual retainers);

   

annual stock awards: 9,195 shares of Common Stock (2,627 shares having a fair value at the date of grant of $99,984, and 6,568 shares for serving as Chairman of the Board having a fair value at the date of grant of $249,978); and

   

all other compensation: $27,986 (merchandise discount) and $145 (imputed value in connection with personal use of Company aircraft by Mr. Hernandez’ wife to attend the Company’s 2010 Annual Meeting of Shareholders, calculated in accordance with Internal Revenue Code rules).

 

(c)   Mr. Miller’s compensation includes:
   

fees earned or paid in cash: $50,000 (annual cash retainer); $40,000 (Finance Committee Chair annual retainer, and Audit Committee, Compensation Committee and Finance Committee Member annual retainers);

   

annual stock award: 2,627 shares of Common Stock having a fair value at the date of grant of $99,984; and

   

all other compensation: $14,456 (merchandise discount).

 

(d)   Mr. Satre’s compensation includes:
   

fees earned or paid in cash: $50,000 (annual cash retainer); $40,000 (Corporate Governance and Nominating Committee Chair annual retainer, and Audit Committee, Corporate Governance and Nominating Committee and Finance Committee Member annual retainers);

   

annual stock award: 2,627 shares of Common Stock having a fair value at the date of grant of $99,984; and

   

all other compensation: $4,416 (merchandise discount) and $156 (imputed value in connection with personal use of Company aircraft by Mr. Satre’s wife to attend the Company’s 2010 Annual Meeting of Shareholders, calculated in accordance with Internal Revenue Code rules).

 

(e)   Ms. Thornton’s compensation, prorated for service beginning November 2010, includes:
   

fees earned or paid in cash: $25,000 (annual cash retainer); $10,000 (Audit Committee and Finance Committee Member annual retainers);

   

annual stock award: 1,233 shares of Common Stock having a fair value at the date of grant of $49,998; and

   

all other compensation: $1,332 (merchandise discount).

 

(f)   Mr. Turner’s compensation, prorated for service beginning November 2010, includes:
   

fees earned or paid in cash: $25,000 (annual cash retainer); $10,000 (Compensation Committee and Finance Committee Member annual retainers);

   

annual stock award: 1,233 shares of Common Stock having a fair value at the date of grant of $49,998; and

   

all other compensation: $4,040 (merchandise discount).

 

(g)   Mr. Walter’s compensation includes:
   

fees earned or paid in cash: $50,000 (annual cash retainer); $32,500 (Compensation Committee Chair annual retainer, and Audit Committee and Compensation Committee Member annual retainers);

   

annual stock award: 2,627 shares of Common Stock having a fair value at the date of grant of $99,984; and

   

all other compensation: $5,951 (merchandise discount).

 

(h)   Ms. Winter’s compensation includes:
   

fees earned or paid in cash: $50,000 (annual cash retainer), $30,000 (Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee Member annual retainers);

 

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annual stock award: 2,627 shares of Common Stock having a fair value at the date of grant of $99,984; and

   

all other compensation: $6,247 (merchandise discount) and $289 (imputed value in connection with personal use of Company aircraft by Ms. Winter’s husband to attend the Company’s 2010 Annual Meeting of Shareholders, calculated in accordance with Internal Revenue Code rules).

 

Compensation Committee Interlocks and Insider Participation   During the fiscal year ended January 29, 2011, no member of the Compensation Committee was an employee, officer or former officer of the Company or any of its subsidiaries, and no executive officer of the Company served on the board of directors or compensation committee of any entity that has one or more directors or compensation committee of any entity that has

one or more executive officers serving as a member of the Company’s Board or Compensation Committee.

 

Communications with Directors   Shareholders and other interested parties may communicate with Directors by contacting the Office of the Secretary at 206-303-2540 or by mail at 1700 Seventh Avenue, Seattle, Washington 98101-4407. The Secretary will relay the question or message to the specific Director with whom the shareholder or interested party wishes to communicate. If no specific Director is requested,

the Secretary will relay the question or message to the Chairman of the Board. Certain items that are unrelated to the duties and responsibilities of the Board, such as business solicitations, advertisements, junk mail and other mass mailings will not be relayed to Directors.

 

The Audit Committee has established procedures to respond to possible concerns about ethics and accounting-related practices. To report your concerns, you may use the Company’s confidential Whistleblower Hotline by calling 1-888-832-8358 or by accessing the web site at www.ethicspoint.com. Your concerns will be investigated and communicated to the Company’s Audit Committee, as necessary.

 

Director Elections   The Company’s Bylaws provide that, in an uncontested election, a Director nominee will be elected if the number of votes cast for the nominee’s election exceeds the number of votes cast against the nominee’s election. An incumbent Director nominee who fails to receive the requisite votes for election will continue to serve as a Director until the earlier of: (i) 90 days from the date

on which the voting results of the election are determined, or (ii) the date on which an individual is selected by the Board to fill the position held by such Director. In any election which is a contested election (meaning that the number of director nominees exceed the number of directors to be elected), the standard for election of directors is a plurality of the votes cast by holders of shares entitled to vote in the election at a meeting at which a quorum is present.

 

Codes of Business

Conduct and Ethics

  We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. We have also adopted a Directors’ Code of Business Conduct and Ethics that applies to all of our Directors. Any grant of a waiver from a provision of the

codes requiring disclosure under applicable SEC rules, if any, will be disclosed on our web site at www.nordstrom.com.

 

Corporate Social

Responsibility

 

Nordstrom is committed to upholding the highest standards of corporate governance. Our goal is to operate our business with the utmost integrity and serve our customers, employees and shareholders in a way that is deserving of their support and trust. Social responsibility is something we take pride in ensuring every day. We actively pursue solutions to reduce our environmental

impact, contribute to the communities we serve, and protect the rights of workers who create our products. We believe that both transparency and collaboration are key to progress in all of these areas. As such, we will

 

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continue to work with and learn from interested parties. Recently, we discussed our existing and future efforts around water use in our supply chain with one such group, Investor Voice, working on behalf of Newground Social Investment. In those discussions we reaffirmed that we will provide transparent and open communication around our current and future water conservation and cleanliness efforts and the challenges we face in this regard, and recommitted to continuing our work in these areas through partnerships with our industry and manufacturing partners. More information can be found on this and other subjects at www.nordstrom.com/nordstromcares.

 

Web Site Access to Corporate Governance Documents   The charters for each of the standing committees of the Board, the Company’s Corporate Governance Guidelines, the Employee Code of Business Conduct and Ethics, and the Directors’ Code of Business Conduct and Ethics, as well as all Company filings made with the SEC, may be accessed through our web site at www.nordstrom.com. Select Investor Relations, then select Corporate Governance.

 

Audit Committee

Report

  The following Report of the Company’s Audit Committee of the Board 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.

 

The Audit Committee operates under a written charter adopted by the Board. The charter contains a detailed description of the scope of the Audit Committee’s responsibilities and how they will be carried out. The Audit Committee’s charter is available on our web site at www.nordstrom.com under the Investor Relations tab, then select Corporate Governance. A copy of the Audit Committee’s charter is also attached to this Proxy Statement as Appendix B.

 

The Board determined that each member of the Audit Committee is independent from the Company as such term is defined in Sections 303.01(B)(2)(a) and (3) of the NYSE’s listing standards at all times during the fiscal year and that each member was an “audit committee financial expert” within the meaning of Item 407 of Regulation S-K under the Securities Exchange Act of 1934.

 

The Audit Committee serves in an oversight capacity and is not part of the Company’s managerial or operational decision-making process. Management is responsible for the Company’s internal controls and the financial reporting process. Deloitte & Touche LLP (“Deloitte”), the Company’s independent registered public accounting firm, reports to the Company’s Audit Committee, and is responsible for performing an integrated audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with auditing standards generally accepted in the United States of America.

 

Deloitte and the Company’s internal auditors have full access to the Audit Committee. The auditors meet with the Audit Committee at each of the Audit Committee’s regularly scheduled meetings, with and without management being present, to discuss appropriate matters. The Audit Committee has the sole authority to engage, evaluate and terminate the Company’s independent auditors. The Audit Committee also pre-approves all auditing services, internal control-related services and permitted non-audit services to be performed by the Company’s independent auditors.

 

The Audit Committee recommended to the Board that the audited consolidated financial statements for the fiscal year ended January 29, 2011 be included in the Company’s Annual Report on Form 10-K for such fiscal year, based on the following actions by the Committee:

 

 

review and discussion of the Company’s audited consolidated financial statements with management;

 

 

review of the unaudited interim financial statements and Forms 10-Q prepared each quarter by the Company;

 

 

review of the Company’s Disclosure Committee practices and the certifications prepared each quarter in accordance with Sections 302 and 906 of the Sarbanes-Oxley Act of 2002;

 

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discussions with management regarding the critical accounting estimates on which the financial statements are based, as well as its evaluation of alternative accounting treatments;

 

 

receipt of management representations that the Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America;

 

 

discussions with management, the internal auditors, and Deloitte regarding management’s assessment of the effectiveness of the Company’s internal control over financial reporting and Deloitte’s evaluation of the Company’s internal control over financial reporting;

 

 

discussions with legal counsel regarding contingent liabilities;

 

 

receipt of the written disclosures and letter from Deloitte required by the Public Company Accounting Oversight Board Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence; and

 

 

discussions with Deloitte regarding their independence, the audited consolidated financial statements, the matters required to be discussed by Statement on Auditing Standards (“SAS”) No. 61 Communication with Audit Committees, as amended, and other matters, including Rule 2-07 of SEC Regulation S-X.

 

AUDIT COMMITTEE

 

Phyllis J. Campbell, Chair

Robert G. Miller

Felicia D. Thornton

Alison A. Winter

 

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Executive Officers

 

 

The names and ages of the Company’s Executive Officers (collectively, the “Executive Management Group”), and their positions, terms of office, family relationships and business experience are listed below. All information is as of March 31, 2011. The officers are appointed annually by the Board following each year’s Annual Meeting of Shareholders. Officers serve at the discretion of the Board.

 

Name    Age      Title   Officer
Since

Laurie M. Black

     52       Executive Vice President and General Merchandise Manager - Cosmetics Division   1997

Robert E. Campbell

     55       Treasurer and Vice President - Investor Relations   1997

James A. Howell

     45       Vice President - Finance   2007

Kevin T. Knight

     55       Executive Vice President, Chairman and Chief Executive Officer - Nordstrom fsb, and President - Nordstrom Credit, Inc.   1998

Michael G. Koppel

     54       Executive Vice President and Chief Financial Officer   1999

Daniel F. Little

     49       Executive Vice President and Chief Administrative Officer   2003

Anne E. Martin-Vachon

     49       Executive Vice President and Chief Marketing Officer   2010

Scott A. Meden

     48       Executive Vice President and General Merchandise Manager - Shoe Division   2006

Margaret Myers

     64       Executive Vice President and General Merchandise Manager - Accessories and Women’s Specialized Divisions   2005

Blake W. Nordstrom (a)(b)

     50       President   1991

Erik B. Nordstrom (a)(b)

     47       Executive Vice President and President - Stores   1995

James F. Nordstrom, Jr. (c)

     38       Executive Vice President and President - Nordstrom Direct   2005

Peter E. Nordstrom (a)(b)

     49       Executive Vice President and President - Merchandising   1995

Robert B. Sari

     55       Executive Vice President, General Counsel and Secretary   2009

Loretta Soffe

     44       Executive Vice President and General Merchandise Manager - Women’s Apparel Division   2005

Delena M. Sunday

     50       Executive Vice President - Human Resources and Diversity Affairs   1998

Geevy S. K. Thomas

     46       Executive Vice President and President - Nordstrom Rack   1998

Mark J. Tritton

     47       Executive Vice President and President - Nordstrom Product Group   2009

David M. Witman

     52       Executive Vice President and General Merchandise Manager - Men’s Apparel   2005

Kenneth J. Worzel

     46       Executive Vice President – Strategy and Development   2010

 

(a)   The biographical information for Blake, Peter and Erik Nordstrom is provided in the section identifying the director nominees beginning on page 9.

 

(b)   Brothers and second cousins of James F. Nordstrom, Jr., an Executive Vice President of the Company.

 

(c)   Second cousin of Blake, Peter and Erik Nordstrom, each an Executive Officer of the Company.

 

 

Laurie M. Black was named Executive Vice President and General Merchandise Manager – Cosmetics Division, in February 2006. She previously served as Executive Vice President and President – Nordstrom Rack from December 2001 to March 2006, as Vice President and Corporate Merchandise Manager from May 2000 to December 2001, and as Vice President and Northwest Divisional Merchandise Manager from 1999 to 2000. Ms. Black has been employed by the Company since 1978.

 

 

Robert E. Campbell was appointed Treasurer and Vice President – Investor Relations in March 2009. From March 2003 to February 2009 he served as Vice President – Finance Full-Line Stores, and from May 1999 to February 2003 he served as Treasurer and Vice President – Strategy and Planning and also was responsible for the Company’s investor relations. He has been employed by the Company since February 1997.

 

 

James A. Howell was named Vice President – Finance, upon joining the Company in August 2007. Mr. Howell also functions as the Company’s Principal Accounting Officer. From July 2003 to August 2007, Mr. Howell was employed at Blockbuster Inc., most recently as Senior Vice President and Corporate Controller. From 2002 to 2003, Mr. Howell worked for CAE SimuFlite, Inc., a provider of training for the civil aviation industry, after spending twelve years with PricewaterhouseCoopers serving clients in both the retail and financial services industries.

 

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Kevin T. Knight was named Executive Vice President of the Company in September 2000. Since joining the Company in 1998, he has served as Chairman and Chief Executive Officer – Nordstrom fsb and as President – Nordstrom Credit, Inc. He previously served as Vice President from 1998 to September 2000.

 

 

Michael G. Koppel was named Executive Vice President and Chief Financial Officer in May 2001. From 1999 to 2001, he served as Vice President, Corporate Controller and Principal Accounting Officer. Mr. Koppel previously served as Chief Operating Officer of CML Group, a specialty retail holding company, and as Chief Financial Officer of Lids Corporation, a mall-based specialty retailer from 1997 through 1998.

 

 

Daniel F. Little was named Executive Vice President and Chief Administrative Officer in March 2003. From July 2002 until March 2003, he served as Vice President – Supply Chain Strategy. Prior to joining the Company in July 2002, Mr. Little held various positions with Colgate-Palmolive from April 1993 through June 2002, most recently as Manufacturing General Manager for Personal Care Products in Europe.

 

 

Anne E. Martin-Vachon joined Nordstrom in April 2010 and since then has served as Executive Vice President and Chief Marketing Officer. Prior to joining the Company, she was the President and Chief Executive Officer of Lise Watier Cosmetiques Inc. since September 2008. From August 2006 to August 2008, she served as Chief Marketing Officer for Bath & Body Works, a division of Limited Brands. Ms. Martin-Vachon served as Vice President, P&G Total Beauty Marketing from 2003 to 2006, and General Manager, Global Cosmetics Marketing and Innovation from 1999 to 2003 for Procter & Gamble. Ms. Martin-Vachon served in marketing and brand management roles of increasing responsibility at Procter & Gamble since 1985.

 

 

Scott A. Meden was named Executive Vice President and General Merchandise Manager – Shoe Division in February 2010. He previously served as Executive Vice President and President – Nordstrom Rack from February 2006 to February 2010, as Divisional Merchandise Manager from September 2002 to January 2006, as Director of Business Planning and Analysis from 2001 to September 2002, and as Financial Manager – Shoes from 1999 to 2001. He has been employed by the Company since 1985.

 

 

Margaret Myers was named Executive Vice President and General Merchandise Manager – Accessories and Women’s Specialized Divisions, in November 2005. She previously served as Vice President and Corporate Merchandise Manager from 2001 to November 2005, as Product Market Leader from 2000 to 2001, and as Divisional Merchandise Manager from 1998 to 2000. Ms. Myers has been employed by the Company since 1984.

 

 

James F. Nordstrom, Jr. was named Executive Vice President of the Company and President – Nordstrom Direct in February 2005. He previously served as Corporate Merchandise Manager – Children’s Shoes, from May 2002 to February 2005, and as a project manager for the design and implementation of the Company’s inventory management system from 1999 to May 2002. Mr. Nordstrom is a great-grandson of the Company founder and has been employed by the Company since 1986.

 

 

Robert B. Sari was named Executive Vice President, General Counsel and Secretary upon joining the Company in April 2009. Prior to joining the Company, he served as Executive Vice President, General Counsel and Secretary of Rite Aid Corporation (“Rite Aid”) since October 2005. Mr. Sari also served as Rite Aid’s Senior Vice President, General Counsel and Secretary from 2002 to 2005 and as Senior Vice President, Deputy General Counsel and Secretary from 2000 to 2002. Mr. Sari served in other roles for Rite Aid since 1997. Prior to joining Rite Aid in 1997, Mr. Sari was Vice President – Legal Affairs for Thrifty PayLess, Inc.

 

 

Loretta Soffe was named Executive Vice President and General Merchandise Manager – Women’s Apparel Division, in November 2005. She previously served as Vice President and Corporate Merchandise Manager from April 2001 to November 2005, as Corporate Merchandise Manager from January 2001 to April 2001, as Product Market Leader from 2000 to January 2001, and as National Buyer from 1999 to 2000. Ms. Soffe has been employed by the Company since 1987.

 

 

Delena M. Sunday was named Executive Vice President – Human Resources and Diversity Affairs in November 2002. She previously served as Executive Vice President – Diversity Affairs from 2000 to November 2002, and as Vice President – Diversity Affairs from 1998 to 2000. Ms. Sunday has been employed by the Company since 1980.

 

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Geevy S. K. Thomas was named Executive Vice President and President – Nordstrom Rack, in February 2010. He previously served as Executive Vice President and South Regional Manager from November 2001 to February 2010, as Executive Vice President and General Merchandise Manager – Full-Line Stores from February 2001 to November 2001, and as Executive Vice President – Full-Line Stores and Director of Merchandising Strategy from February 2000 to February 2001. Prior to February 2000, Mr. Thomas held various merchandise strategy, store and regional management positions with the Company. He has been employed by the Company since 1983.

 

 

Mark J. Tritton joined Nordstrom in June 2009, and since then has served as Executive Vice President and President – Nordstrom Product Group. Prior to joining the Company, he served as Group Vice President, Global Casual/Gear Footwear and Apparel, for Timberland since 2006. Mr. Tritton also served as Timberland’s Vice President, Global Apparel from 2004 to 2006. Prior to joining Timberland, Mr. Tritton was Nike’s General Manager, Europe, Middle East & Africa Apparel, from 2002 to 2004, Global Merchandise Director Apparel from 2001 to 2002 and Retail Director, Pacific Region from 1999 to 2001.

 

 

David M. Witman was named Executive Vice President and General Merchandise Manager – Men’s Apparel, in November 2005. He previously served as Divisional Vice President and Corporate Merchandise Manager from 2001 to November 2005, and as Divisional Vice President and Menswear Product Market Leader from 1999 to 2001. Mr. Witman has been employed by the Company since 1987.

 

 

Kenneth J. Worzel joined Nordstrom in March 2010, and since then has served as Executive Vice President of Strategy and Development. Prior to joining the Company, he was a partner with McKinsey & Company, a global management consulting firm, from 2009 to 2010. While at McKinsey, Mr. Worzel provided the Company and other clients with management strategy and organizational services. Prior to joining McKinsey, Mr. Worzel was a managing partner at Marakon Associates, an international strategy consulting firm, from 1992 to 2008. As a partner at Marakon Associates, Mr. Worzel provided consulting services to the Company from 1997 to 2008.

 

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Compensation of Executive Officers

 

 

Compensation

Discussion and

Analysis

   The following describes our executive compensation program and the 2010
fiscal year compensation decisions made for our Named Executive Officers
identified in the Summary Compensation Table on page 45.

 

Executive Summary

 

Company Results Exceeded Our Expectations

 

Our 2010 performance reflected significant achievements in multi-channel execution, merchandising and inventory management, technology and systems enhancements, and, most importantly, our commitment to continuously improving the customer experience. We significantly increased same-store sales 8.1% following a decrease of 4.2% in 2009 and achieved solid earnings improvement over the prior year. We turned in some of our best performances on a number of other fronts including record sales of $9.3 billion and the fastest inventory turn we have ever had at 5.56. We crossed another milestone surpassing 200 total stores by opening three Nordstrom full-line stores and 17 Nordstrom Racks.

 

Fiscal Year 2010 Financial Performance Highlights

 

       FY 2010
Actual
       FY 2009
Actual
       Change
from
FY 2009
 

Net Sales

       $9,310M           $8,258M           +12.7%   

Full Year Same-Store Sales

       8.1%           -4.2%           12.3   

Earnings Before Interest and Taxes

       $1,118M           $834M           +33.9%   

Return on Invested Capital

       13.6%           12.1%           1.5   

 

Our positive financial results also translated to value creation for our shareholders. Our stock price improved by more than 18% during fiscal year 2010, and our total shareholder return outperformed the median of our retail peer group for the three-year performance period concluding fiscal year end 2010.

 

We begin 2011 in a strong position and are gaining market share in a competitive retail industry where our customer-driven model enables us to adapt quickly to the changing consumer environment. We continue to operate under a solid financial framework focused on creating a superior shopping experience for our customers and producing high returns for our shareholders. Looking forward, we are encouraged about the opportunities that lie ahead.

 

Our Compensation Program Is Closely Aligned with Our Performance

 

Our compensation program is founded on a robust pay-for-performance philosophy which is guided by the following principles:

 

 

Motivate and reward our people to achieve meaningful results that support our strategic goals and shareholder interests;

 

 

Attract and keep the best talent through programs that reflect our values and consider, but are not dictated by, market practice;

 

 

Manage the cost of our programs while maintaining their purpose and benefit;

 

 

Keep things simple to promote understanding for our employees and transparency for our shareholders; and

 

 

Be attuned to regulatory compliance, trends and new ideas to support our programs and diverse workforce.

 

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In accordance with our pay-for-performance philosophy, the compensation program for our Named Executive Officers emphasizes variable pay over fixed pay, with more than three-quarters of their target compensation linked to our financial or market results. The program also balances the importance of Named Executive Officers achieving critical short-term objectives and long-term strategic priorities. These concepts are illustrated in the following graphs.

 

LOGO   LOGO

 

Under this pay-for-performance design, payouts to the Named Executive Officers in fiscal year 2010 were closely aligned with results for their variable pay components:

 

 

Performance-based bonuses paid out at approximately 200% of target due to above threshold Return on Invested Capital (“ROIC”) of 13.6% and above target Earnings Before Interest and Taxes (“EBIT”) of $1,118M; and

 

 

Performance share units granted under the long-term incentive plan vested at a rate of 85% based on our 66th percentile rank for total shareholder return (“TSR”) among our retail peer group over the 2008-2010 fiscal year performance cycle. The TSR calculation for performance share units is defined on page 40.

 

Payouts for variable compensation have been closely aligned with Company results for prior years, as well. The following graphs show historical performance-based payouts to President Blake Nordstrom relative to EBIT and TSR over the past five years. This pattern of pay-for-performance is consistent for all the Named Executive Officers receiving payouts during these periods.

 

LOGO   LOGO

 

Our Compensation Program is Supported by Effective Corporate Governance

 

Corporate governance of our compensation program for the Named Executive Officers is demonstrated by:

 

 

formal stock ownership guidelines;

 

 

an executive compensation recovery policy applied to performance-based compensation (clawback);

 

 

active and engaged oversight and risk management systems including those related to compensation-related risk;

 

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detailed and transparent financial reporting to provide strong, timely insight into the performance of the Company;

 

 

the Compensation Committee’s engagement of its own independent consultant;

 

 

accelerated vesting for equity after a change in control only if an executive is involuntarily terminated (double trigger);

 

 

no equity grant repricing; no grants below 100% fair market value; cash dividends paid only on stock;

 

 

no tax gross-ups, except those related to relocation expenses; and

 

 

no employment agreements.

 

The specifics of our executive compensation program and details of the compensation decision-making process are discussed in the following sections.

 

Context for Decision Making

 

Roles in Determining Compensation are Well Defined

 

Our Compensation Committee oversees the development and delivery of our guiding principles and compensation plans for the Named Executive Officers as summarized on page 21 and more fully described in the Committee Charter on our website at www.nordstrom.com.

 

The Committee’s external executive compensation consulting firm, Semler Brossy Consulting Group LLC, is retained by, and reports directly to, the Committee. A consultant from that firm attends the Committee meetings and supports the Committee’s role by providing independent expertise on market practices, compensation program design and related subjects as described on page 22. Semler Brossy provides services only as directed by the Committee and has no other relationship with the Company. There were no fees paid to Semler Brossy for services that were not related exclusively to executive and Director compensation during fiscal year 2010.

 

Our President provides input to the Committee on the level and design of compensation elements for the Named Executive Officers and others in the Executive Management Group defined on page 31. Our EVP and Chief Financial Officer and EVP – Human Resources and Diversity Affairs join the President in Compensation Committee meetings to provide perspective and expertise relevant to the agenda. Management supports the Committee’s activity by providing analyses and recommendations developed internally or with the assistance of external consulting firms other than the Committee’s consulting firm. During fiscal year 2010, technical guidance to management on executive compensation came primarily from the professional services firm, Towers Watson.

 

Market Data Provides a Reference Point for Compensation Targets

 

Management and the Committee believe that knowledge of market practices, particularly those of our peers, is helpful in assessing the design and targeted level of our executive compensation package. The information provides a reference point rather than strict policy for reviewing competitiveness and is an important component within our guiding principles for attracting and retaining the best talent. In referencing market data, the Committee recognizes that pay levels and compensation mix can vary significantly across peer companies based on their compensation philosophy and pay plan designs.

 

Each year, the Committee reviews the appropriateness of our peer group. The companies represent prominent retail brands that are relevant to Nordstrom, compete for our customer dollars without necessarily having an exact match in product offerings and meet the following selection criteria:

 

 

subject to similar market pressures and have a track record of sustainability;

 

 

general compatibility with our compensation strategy through a competitive offering of the primary pay elements of base salary, performance-based bonus and long-term incentives;

 

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some overlap with our industry group as defined by institutional shareholders and shareholder service organizations; and

 

 

collective representation of our primary business areas including our Nordstrom full-line and Rack stores, online business, private label products and others.

 

As a result of the Committee’s review in 2010, our peer group remained the same as the prior year, as follows:

 

Abercrombie & Fitch Co.

   J.C. Penney Company, Inc.    The Talbots, Inc.

AnnTaylor Stores Corporation

   Kohl’s Corporation    Target Corporation

Belk, Inc.

   Limited Brands, Inc.    The TJX Companies, Inc.

Chico’s FAS, Inc.

   Macy’s, Inc.    Tiffany & Co.

Coach, Inc.

   Neiman Marcus, Inc.    Urban Outfitters, Inc.

Dillard’s, Inc.

   Saks Incorporated    VF Corporation

The Gap, Inc.

   Sears Holdings Corporation     

 

In preparation for this year’s market comparison, management worked with consulting firm, HayGroup, to collect data from our peer group on base salary, performance-based bonus and long-term incentives. The results of the market comparison provide data for the Committee to help make compensation decisions. During the year, the Committee also reviews general information from published and private surveys, which may include some of our peer group companies, to keep current on trends and practices. No specific actions were taken in 2010 directly as a result of this reference information.

 

Our Market Position Focuses on Variable Compensation

 

Within our pay-for-performance philosophy, the Committee has expressed a desired competitive position for the Named Executive Officers’:

 

 

fixed compensation elements, such as base salary, to be approximately at the 50th percentile ranking among our peer group; and

 

 

variable compensation elements of annual performance-based bonus and long-term incentives to be approximately between the 50th – 75th percentile ranking among our peer group for bonus target opportunity and value at grant. In this way, the majority of total direct compensation (base salary + performance-based bonus + long-term incentives) is at risk and executives get rewarded only when the Company achieves defined performance milestones.

 

Actual market competitiveness of the Named Executive Officers’ target total direct compensation varies by role based on individual circumstances. Blake Nordstrom is somewhat below the competitive range of our peer group and the remaining Named Executive Officers are within the competitive range of our peer group. Our pay-for-performance approach to compensation provides the Named Executive Officers with the opportunity to improve their relative positioning through the variable compensation elements.

 

Elements of Compensation

 

2010 Decisions are Consistent with Our Compensation Philosophy

 

Our compensation philosophy is reflected in the following elements of the Named Executive Officers’ compensation program:

 

 

Base salary;

 

 

Performance-based annual cash bonus;

 

 

Long-term incentives, consisting of stock options and performance share units through the annual grant; and

 

 

Broad-based, leadership and retirement benefits.

 

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On an annual basis, the Compensation Committee reviews base salary, performance-based bonus target opportunity and long-term incentive grant value for each of the Named Executive Officers to consider changes for the upcoming fiscal year. Benefits are reviewed less frequently and changes are made less often. Committee decisions for fiscal year 2010 changes are summarized below, followed by a description of our approach to each element. The Committee believes these elements and the overall compensation program are meeting the expectations for our pay-for-performance philosophy and guiding principles.

 

Fiscal Year 2010 Compensation Changes

 

    

Base Salary

($) (a)

   

Performance-Based Bonus

(Target Opportunity as % of

Base Salary) (b)

  

Long-Term Incentives

(Grant Value as % of

Base Salary) (c)

     2009        2010     2009   2010    2009   2010

Blake W. Nordstrom

     700,000           same      100     150    150     200

Peter E. Nordstrom

     650,000           same      100     150    150     200

Erik B. Nordstrom

     650,000           same      100     150    150     200

Michael G. Koppel

     480,000           530,000        80   same    150   same

Anne E. Martin-Vachon

               460,000        —       80      —     150

 

(a)   While Blake, Peter and Erik Nordstrom had strong personal performance, the Committee elected to maintain current base salary levels and focus compensation on the potential value that can be realized through performance-based bonus and long-term incentives. Michael Koppel received an increase to recognize his strong performance and to improve his competitive position relative to market. Anne Martin-Vachon joined the Company in April 2010.

 

(b)   Target bonus opportunity increased for Blake, Peter and Erik Nordstrom to raise the potential for total cash compensation to a more competitive level through our pay-for-performance philosophy. Target bonus opportunity for Michael Koppel and Anne Martin-Vachon is already in line with our desired market position.

 

(c)   Long-term incentive value at grant increased for Blake, Peter and Erik Nordstrom to improve the overall competitiveness of their pay packages when Nordstrom stock price increases and shareholders also receive value. As noted on page 45, Anne Martin-Vachon received a grant of restricted stock units as part of her new hire compensation package upon hire in April 2010. Anne also received a cash payment and relocation benefits as part of that package as described on pages 45 and 48.

 

Base Salary

 

The Committee begins its annual review of base salary for the Named Executive Officers and others within the Executive Management Group by comparing our pay levels to similar roles in our peer group. The President provides input by describing the previous year’s expectations and achievements of each executive, their pay history and pay equity with other internal roles.

 

Named Executive Officers do not necessarily receive increases in base salary every year. When they do, the changes are effective April 1 following their annual performance review, which includes a discussion about individual results against defined expectations.

 

Performance-Based Annual Cash Bonus

 

The opportunity for annual performance-based cash awards under the Executive Management Bonus Plan is designed to focus the Named Executive Officers on the alignment between annual operating performance and long-term business strategy. In support of our guiding principles, the performance-based bonus awards pay out only when pre-determined performance milestones are achieved. The Committee establishes the following criteria in developing the annual bonus arrangements for the Named Executive Officers:

 

 

Target bonus opportunity: Annual target bonus opportunity for the Named Executive Officers is defined as a percentage of base salary as shown on the Fiscal Year 2010 Compensation Changes table above. In

 

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establishing the target percentage, the Committee takes into account market pay information for similar roles within our peer group, our desired competitive positioning across compensation elements, and the internal relationship between roles within the Company.

 

In support of our pay-for-performance philosophy, the maximum bonus payout, which is associated with superior performance, is 2.5 times the executives’ target bonus opportunity. This maximum is higher than is common among our retail peers to continue encouraging and paying rewards when we achieve truly superior results.

 

 

Performance measures: The Committee establishes the performance measures that support the Company’s annual and long-range strategic goals to focus executives on the most important Company objectives. For fiscal year 2010, the Named Executive Officers all had the following measures:

 

  -  

ROIC to capture how well the Company utilized its capital resources. The measure is expressed as a threshold that must be met before any payout can be made on EBIT results to ensure our executives are rewarded after earnings generate a meaningful return for our shareholders.

 

  -  

EBIT to emphasize the importance of earnings improvement and its role in driving shareholder value. The measure represented 100% of each executive’s performance-based bonus.

 

 

Performance measure milestones: The Committee defines financial milestones for the performance measures that relate to varying percentages of bonus payout. The difficulty level in achieving the milestones reflects a balance in the Committee’s consideration for executive pay opportunity, reinvestment in the Company and return to shareholders.

 

  -  

The ROIC threshold is set at a level consistent with the minimum EBIT milestone to ensure that an appropriate return on our invested capital is achieved before any bonus is paid out. The 2010 ROIC achievement of 13.6% exceeded the established threshold of 12.0%.

 

  -  

The minimum EBIT performance milestone is established based on growth assumptions for sales and earnings, and is set no lower than the previous year’s EBIT results. The minimum performance milestone must be achieved before any payout may be made. The target performance milestone is aligned with growth in the annual operating plan, our historical performance trends, market conditions and current external projections for the Company. The superior performance milestone takes into consideration earlier periods of strong earnings, the competitive landscape and earnings growth needed to support our long-term strategic goals.

 

These achievements in ROIC and EBIT resulted in a bonus payout of 200.35% of each executive’s target bonus opportunity. The fiscal year 2010 EBIT performance milestones, actual results and related bonus payout levels are shown below.

 

Fiscal Year 2010 Results for EBIT

 

LOGO

 

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The bonus payout calculation for each Named Executive Officer is shown below. The payout amounts are also shown in the Summary Compensation Table on page 45 in column (e) “Non-Equity Incentive Plan Compensation”. The range of possible payouts for fiscal year 2010 performance under the Executive Management Bonus Plan is shown in the Grants of Plan-Based Awards in Fiscal Year 2010 table, column (b), on page 49.

 

Fiscal Year 2010 Payout for Performance-Based Bonus

 

   

Target
Bonus
Opportunity

(%)

  x   

Base
Salary

($)

     =   

Target
Bonus
Payout

($)

     x      

Payout of
Target Bonus

Opportunity

(%)

    =   

Bonus

Payout

($)

 

Blake W. Nordstrom

  150   x      700,000       =      1,050,000       x   LOGO            =      2,103,675   

Peter E. Nordstrom

  150   x      650,000       =      975,000       x             =      1,953,413   

Erik B. Nordstrom

  150   x      650,000       =      975,000       x       200.35      =      1,953,413   

Michael G. Koppel

    80   x      530,000       =      424,000       x             =      849,484   

Anne E. Martin-Vachon (a)

    80   x      460,000       =      368,000       x             =      565,119   

 

(a)   Anne Martin-Vachon was hired in April 2010. Her bonus payout was prorated from $737,288 to $565,119 to reflect her partial year of employment.

 

Long-Term Incentives

 

Annual grants of stock options and performance share units under the 2004 and 2010 Equity Incentive Plans provide the Named Executive Officers with an incentive to create shareholder value and receive financial rewards. The long-term incentive value that determines the size of the annual grant to Named Executive Officers is expressed as a percentage of base salary as shown on the Fiscal Year 2010 Compensation Changes table on page 38.

 

In establishing the long-term incentive value at grant for each Named Executive Officer, the Committee considers market pay information for similar roles within our peer group, our desired competitive positioning across compensation elements, our annual share usage and dilution, and internal equity of grant size by role.

 

The grant value of the equity awarded to Named Executive Officers in the fiscal year 2010 annual grant consisted of 75% stock options and 25% performance share units. Stock options provide motivation for creating increased value while aligning management and shareholder interests in our growth. Performance share units focus the executives on relative performance compared to our peer group. The Committee believes the relationship between these equity vehicles represents the right balance of both absolute and relative performance.

 

 

Stock options vest and become exercisable in four equal annual installments beginning one year from the date of grant and have a 10-year term. None of our equity incentive plans permit repricing, grant prices below 100% of the fair market value of Common Stock on the date of grant or cash dividend payments on options.

 

 

Performance share units are earned after a three-year performance cycle only when the Company’s TSR is positive and outperforms more than 50% of the peer group companies listed on page 37. The performance share unit vesting schedule is shown on the following page. For the 2010 grant, the peer group excluded Belk and Neiman Marcus, for which public data on the performance measurement of TSR is not available. The Committee believes relative TSR is a meaningful measure for performance share units as it aligns with shareholder interests and complements the measures established for executives under the performance-based bonus plan.

 

For purposes of determining the TSR percentile rank, the share price of our Common Stock and the share prices of the companies in the peer group are based on a 30 trading-day closing price average that is established both prior to the beginning of the performance cycle and prior to the end of the performance cycle.

 

 

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In keeping with our pay-for-performance philosophy, our approach to performance share units intentionally requires high standards of performance before any payout may be earned. In addition, our design provides less upside potential than some other large employers with similar programs. These parameters recognize the importance of relative performance while balancing against volatility within the peer group. Given the potential leverage that we offer through the performance-based bonus plan and the value that could be realized from stock options, the Committee believes this is the appropriate way to reward for what are truly superior results.

 

Performance Share Unit Vesting Schedule

 

Nordstrom Percentile Rank

Among Peer Group (a)

      

Performance Share

Units at Payout

as % of Grant

(If Nordstrom Total Shareholder Return Is Positive)

(%)

>85th

       125

>75th

       100

>65th

       85

>50th

       75

£50th

         0

 

(a)   This schedule applies even if there are changes in the number of peer companies due to mergers, acquisitions, dissolutions or other industry consolidation. The performance share units are earned on the last day of the three-year performance cycle if performance criteria have been met, and become vested when the results have been certified by the Compensation Committee.

 

The performance share units that vested in fiscal year 2010 had the following results and were paid out as shown in the Option Exercises and Stock Vested in Fiscal Year 2010 table on page 54. Vested performance share units are settled in shares of Common Stock or cash at the election of the executive. Prior to vesting, the Named Executive Officers may also elect to defer their vested units into the Executive Deferred Compensation Plan described on page 56.

 

Fiscal Year 2010 Vesting Results for Performance Share Units

 

3-Year

Performance Cycle

  Percentile Rank
Among our Peers (a)
  Positive
Shareholder Return
 

Performance Share
Unit Payout

as % of Grant

  Settlement by Named
Executive Officers in
Stock or Cash

2/3/2008 –1/29/2011

  66th   Yes   85%   Cash

 

(a)   At the time of grant in 2008, our peer group included the companies listed on page 37 excluding Neiman Marcus, for which public data on the performance measurement of TSR is not available, and Belk, Coach, TJX Companies and VF Corporation, as these companies were added in a subsequent year.

 

Broad-based, Leadership and Retirement Benefits

 

Nordstrom offers to the Named Executive Officers:

 

 

a comprehensive program of broad-based health and financial programs to be market competitive and support healthy lifestyles;

 

 

a limited number of leadership benefits to be market competitive; and

 

 

contribution to health coverage and financial security upon retirement to encourage executives to stay with the Company throughout their careers, and reward sustained and significant contribution to Company success.

 

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These benefits are regularly reviewed for consistency with our guiding principles, organizational culture and market practices. Additional information on each benefit is provided as noted.

 

     Benefit    Additional Information

Broad-based

(for all employees)

   Company contribution to medical, dental and vision coverage; short- and long-term disability; life insurance; adoption assistance; and employee referral assistance. Employee access to accident and long-term care insurance, and health and dependent care flexible spending accounts. Employee Stock Purchase Plan, merchandise discount   

For merchandise discount, see All Other Compensation in Fiscal Year 2010, page 47

Leadership

   Salary continuance; long-term disability coverage; life insurance    For life insurance, see All Other Compensation in Fiscal Year 2010, page 47
   Reimbursement for financial, tax and estate planning; reimbursement of qualifying out-of-pocket medical expenses; contribution to parking    See All Other Compensation in Fiscal Year 2010, page 47
     Executive Deferred Compensation Plan    See Nonqualified Deferred Compensation on page 56
   Leadership Separation Plan    See Potential Payments Upon Termination or Change in Control at Fiscal Year End 2010 on page 62

Retirement

   401(k) match and profit sharing    See All Other Compensation in Fiscal Year 2010 on pages 47 and 48
   Retiree health care    See Potential Payments Upon Termination or Change in Control at Fiscal Year End 2010 on page 62
   Supplemental Executive Retirement Plan    See Pension Benefits on page 54

 

Additional Information

 

Employment Agreements

 

Nordstrom does not have individual employment agreements with any Nordstrom employee including the Named Executive Officers.

 

Under our Leadership Separation Plan, the eligible Named Executive Officers receive benefits upon involuntary termination of employment by the Company, other than for cause, to assist in the transition from active employment. Plan provisions are provided in the Potential Payments Upon Termination or Change in Control at Fiscal Year End 2010 on page 62.

 

As described under Change in Control in the Potential Payments Upon Termination or Change in Control section on page 57, the Named Executive Officers are not entitled to any payment or accelerated benefit in connection with a change in control of the Company, unless the Committee exercises discretion.

 

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Stock Ownership Guidelines

 

Ownership of Common Stock by our Named Executive Officers is encouraged by management and the Board to align their interests with those of our shareholders. Stock ownership guidelines were formally established in 2004. Under the current guidelines, the Named Executive Officers have a five-year period, from February 1, 2009 through February 1, 2014, to accumulate shares of Common Stock that meet the first achievable of either a share or value target as defined below. This variable approach helps us maintain the objectives for stock ownership while allowing some flexibility for changes in stock price.

 

 

Share target is the number of shares equal to a multiple of base salary designated for an executive / fixed stock price. This target does not change over the five-year period.

 

 

Value target is the value in stock equal to a multiple of base salary designated for an executive. This target fluctuates with changes in our stock price.

 

For purposes of determining stock ownership, ownership shares are made up of all forms of Common Stock including vested performance share units that are either deferred or paid out in Common Stock. Ownership shares do not include unvested or vested stock options and unvested performance share units.

 

The multiple of base salary to be directly or indirectly owned in Common Stock by the Named Executive Officers depends on the executive’s role in the Company, as shown below. The Committee has assigned these particular multiples to match or exceed market practice, and to represent a significant portion of the overall compensation package to reinforce the alignment of management’s decision making with shareholder interests.

 

Stock Ownership Multiples of Base Salary

 

     Multiple of Base Salary
to be Held by End of
Ownership Period

President

       10x  

EVP and President – Merchandising

       10x  

EVP and President – Stores

       10x  

EVP and Chief Financial Officer

       4x  

EVP and Chief Marketing Officer

       3x  

 

Under our guidelines, Blake, Peter and Erik Nordstrom and Michael Koppel are required to arrange for stock transactions in accordance with an SEC Rule 10b5-1 trading plan. These plans predetermine the timing, number of shares and price at which an executive may buy or sell Company shares. These executives must also achieve and maintain a holding minimum of 100% of their ownership targets before they may sell Nordstrom stock.

 

The Committee regularly reviews stock ownership status for the Named Executive Officers. As of the end of fiscal year 2010, all of the Named Executive Officers had exceeded their ownership targets with the exception of Anne Martin-Vachon, who joined the Company in April 2010, and has time remaining in the ownership period to meet her target.

 

Tax and Accounting Considerations

 

The Committee recognizes the tax and regulatory factors that can influence the structure of executive compensation programs, including:

 

 

Section 162(m) of the Internal Revenue Code which disallows a tax deduction to public corporations for compensation over $1 million paid to any Named Executive Officer except the Chief Financial Officer, who is not subject to Section 162(m). The statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. The Company’s shareholder-approved 2004 and 2010 Equity Incentive Plans and Executive Management Bonus Plan are expected to comply with those requirements. We will pay non-deductible compensation when necessary to achieve our guiding principles for pay. For 2010, the

 

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following elements of compensation were not designed to qualify as performance-based and therefore could be subject to the Section 162(m) deduction limit: base pay, new hire cash payment, time-based vesting restricted stock units and certain other compensation. Anne Martin-Vachon received a new hire cash payment and time-based restricted stock units as part of a new hire compensation package.

 

 

FASB Accounting Standards Codification 718, Stock Compensation (“ASC 718”), (formerly Statement of Financial Accounting Standards No. 123(R) (“SFAS 123(R)”)), where stock options and performance share units are accounted for based on their grant date fair value (see Note 1 and Note 11 in the Notes to Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended January 29, 2011, filed with the SEC on March 18, 2011). The Committee regularly considers the accounting implications of our equity-based awards, including the variable accounting treatment of the performance share units.

 

 

Section 409A of the Internal Revenue Code, the limitations of which primarily relate to the deferral and payment of benefits under the Executive Deferred Compensation Plan and Supplemental Executive Retirement Plan. The Committee continues to consider the impact of changes to Section 409A and in general, the evolving tax and regulatory landscape in which its compensation decisions are made.

 

Executive Compensation Clawback Policy

 

In February 2008, the Board adopted a formal executive compensation recovery policy, also known as a clawback, that applies to any performance-based bonus, equity, equity equivalent or other incentive compensation awarded to an executive officer, beginning in fiscal year 2008. Under that policy, in the event of a material restatement of the Company’s financial results, the Board will review the circumstances that caused the restatement and consider accountability to determine whether an executive officer was negligent or engaged in misconduct. If so, and the amount or vesting of an award would have been less had the financial statements been correct, the Board will seek to recover compensation from the executive officer as it deems appropriate. This policy is in addition to any requirements which might be imposed pursuant to applicable law.

 

Compensation

Committee Report

  The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. As a result, the Committee believes the Compensation Discussion and Analysis represents the intent and actions of the Committee with regard to executive compensation and has recommended to the Board that it be included in this Proxy Statement for filing with the SEC.

 

COMPENSATION COMMITTEE

 

Enrique Hernandez, Jr.

Philip G. Satre

B. Kevin Turner

Robert D. Walter, Chair

 

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Summary

Compensation

Table

   The following table summarizes the total compensation paid or accrued by the Company for services provided by the Named Executive Officers for the fiscal years ended January 29, 2011, January 30, 2010 and January 31, 2009.

 

Name and Principal

Position

  

Fiscal

Year

    

Salary

($) (a)

    Bonus
($) (b)
   

Stock

Awards

($) (c)

   

Option
Awards

($) (d)

   

Non-Equity

Incentive Plan

Compensation

($) (e)

   

Change in

Pension Value
and

Nonqualified

Deferred

Compensation

Earnings

($) (f)

   

All Other

Compensation

($) (g)

   

Total

($)

 

Blake W. Nordstrom

     2010         696,111               346,690        1,049,719        2,103,675        1,691,038        63,852        5,951,085   

President

     2009         700,000               257,631        787,830        1,161,090        1,386,298        47,360        4,340,209   
       2008         696,111               321,782        790,148                      65,676        1,873,717   

Michael G. Koppel

     2010         518,722               178,303        539,856        849,484        1,441,214        42,215        3,569,794   

EVP and Chief Financial

     2009         480,000               176,659        540,226        636,941        1,654,697        41,321        3,529,844   

Officer

     2008         477,333               220,642        541,828        108,000        99,876        31,697        1,479,376   

Peter E. Nordstrom

     2010         646,389               321,919        974,748        1,953,413        1,919,375        47,659        5,863,503   

EVP and President –

     2009         650,000               239,229        731,554        1,078,155        1,880,835        28,627        4,608,400   

Merchandising

     2008         646,389               298,788        733,715               5,792        25,420        1,710,104   

Erik B. Nordstrom

     2010         646,389               321,919        974,748        1,953,413        1,716,796        80,151        5,693,416   

EVP and President –

     2009         650,000               239,229        731,554        1,078,155        1,690,132        51,307        4,440,377   

Stores

     2008         646,389               298,788        733,715                      50,732        1,729,624   

Anne E. Martin-Vachon

     2010         351,308        414,000        1,080,018               565,119        142,702        350,090        2,903,237   

EVP and Chief Marketing

     2009                                                            

Officer

     2008                                                            

 

(a)   Salary: The amounts shown represent base salary earned during the fiscal year. The numbers for fiscal years 2010 and 2008 vary somewhat from annual base salaries due to the timing of fiscal year end. Michael Koppel’s base salary increased in April 2010 and Anne Martin-Vachon’s salary was prorated for a partial year of employment as she joined the Company in April 2010.

 

Four of the Named Executive Officers contributed a portion of their base salary earned during fiscal year 2010 to the 401(k) component of the 401(k) Plan & Profit Sharing. Their contributions were as follows: $14,000 for Blake Nordstrom, $16,750 for Michael Koppel, $15,666 for Peter Nordstrom and $15,663 for Erik Nordstrom.

 

(b)   Bonus: Anne Martin-Vachon received a cash payment of $414,000 as part of her new hire compensation package when she joined the Company in April 2010.

 

(c)   Stock Awards: The amounts reported for Blake Nordstrom, Michael Koppel and Peter and Erik Nordstrom reflect the grant date fair value of performance share units granted during the fiscal year. This is not the value received. The actual value the Named Executive Officers may receive will depend on whether the performance criteria are met and Nordstrom stock price at the end of the performance cycle. The amounts reported are calculated in accordance with FASB Accounting Standards Codification 718, Stock Compensation (“ASC 718”) (formerly Statement of Financial Accounting Standards No. 123(R) (“SFAS 123(R)”)). The amounts are calculated by multiplying the number of performance share units awarded by the closing price of Common Stock on the date of grant. The 2008 amounts have been revised from a previous proxy disclosure to reflect the change in the SEC disclosure rules. See column (c) of the Grants of Plan-Based Awards in Fiscal Year 2010 table on page 49 for the number of performance share units granted in fiscal year 2010.

 

The amount reported for Anne Martin-Vachon reflects the fair value at date of grant of the restricted stock units granted as part of her new hire compensation package. The actual value she may receive will depend on whether the vesting criteria have been met and Nordstrom stock price at the end of the period. The amount reported is in accordance with ASC 718 and is calculated by multiplying the number of restricted

 

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stock units granted by the closing price of Common Stock on the date of grant. The units vest and convert to shares of Common Stock equally over three years, on the anniversary date of the award. See column (d) of the Grants of Plan-Based Awards in Fiscal Year 2010 table on page 49 for the number of restricted stock units granted in fiscal year 2010.

 

       Assumptions used in the calculation of these amounts for fiscal years 2010, 2009 and 2008 are included in Note 11 to the Company’s audited financial statements for the fiscal year ended January 29, 2011, included in the Company’s Form 10-K filed with the SEC on March 18, 2011.

 

(d)   Option Awards: The amounts reported reflect the grant date fair value of stock options granted during the fiscal year. This is not the value received. The Named Executive Officers can only realize value from stock options if the market price of Nordstrom stock increases above the grant price. The amounts reported are calculated in accordance with ASC 718. The 2008 amounts have been revised from a previous proxy disclosure to reflect the change in the SEC disclosure rules. See column (e) of the Grants of Plan-Based Awards in Fiscal Year 2010 table on page 49 for the number of stock options granted in fiscal year 2010.

 

       Assumptions used in the calculation of these amounts for fiscal years 2010, 2009 and 2008 are included in Note 11 to the Company’s audited financial statements for the fiscal year ended January 29, 2011, included in the Company’s Form 10-K filed with the SEC on March 18, 2011.

 

(e)   Non-Equity Incentive Plan Compensation: The amounts reported reflect the annual performance-based cash awards under the Executive Management Bonus Plan, which is addressed on page 38 in the Compensation Discussion and Analysis. The amounts of the cash awards for fiscal year 2010, approved by the Compensation Committee at its February 23, 2011 meeting, were paid out in March 2011. None of the Named Executive Officers elected to defer their cash awards for fiscal year 2010 into the Executive Deferred Compensation Plan.

 

(f)   Change in Pension Value and Nonqualified Deferred Compensation Earnings: The amounts reported reflect the change in actuarial present value from fiscal year-end 2009 to fiscal year-end 2010 of each Named Executive Officer’s benefit under the Supplemental Executive Retirement Plan. The present value of the benefit is affected by current earnings, credited years of service, the discount rate used to determine the present value of the benefit, the executive’s age, time until retirement and the age of the executive’s spouse as the potential beneficiary. Because these factors vary by individual, the present value of the benefit increased more for some of the Named Executive Officers than for others. The primary reason for the change in pension value for the Named Executive Officers was an increase in earnings used to calculate the benefit resulting from the performance-based bonus payouts for fiscal year 2010. See the Pension Benefits section on page 54 for more information about the Supplemental Executive Retirement Plan.

 

       The amounts reported were calculated using the same interest rate and mortality rate assumptions as those used in the Company’s financial statements to calculate the Company’s obligations under the Plan. Assumptions used in the calculation of these amounts are included in Note 6 to the Company’s audited financial statements for the fiscal year ended January 29, 2011, included in the Company’s Form 10-K filed with the SEC on March 18, 2011.

 

       Michael Koppel had an account balance in the Executive Deferred Compensation Plan in fiscal year 2010, as described on page 56. The Company does not offer above market-rate or preferential earnings on deferred compensation, so no amounts for these types of earnings are included in the table.

 

(g)   All Other Compensation: A detailed description of all other compensation paid to the Named Executive Officers is shown in the table following this section.

 

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All Other Compensation in Fiscal Year 2010

 

The following table shows each component of “All Other Compensation” for fiscal year 2010, reported in column (g) of the Summary Compensation Table on page 45, calculated at the aggregate incremental cost to the Company.

 


    Leadership Benefits

    Broad-
Based
Benefits


    Retirement
Benefits


    Other

       
Name  

Financial
Planning
Reimburse-

ment

($) (a)

   

Parking

($) (b)

   

Premium

on
Additional
Medical
Insurance

($) (c)

 

Premium

on Life
Insurance
($) (d)

   

Merchandise
Discount

($) (e)

   

401(k)
Plan
Company
Match

($) (f)

   

Profit
Sharing

($) (g)

   

Aircraft

Use

($) (h)

   

Expenses in
Connection
with Relo-

cation

($) (i)

   

Tax Reim-

bursement
($) (j)

    Total
($)
 

Blake W. Nordstrom

                5,482     370        38,828        9,800        7,350        2,022                      63,852   

Michael G. Koppel

    2,450        2,760      5,482     275        14,098        9,800        7,350                             42,215   

Peter E. Nordstrom

                5,482     343        20,434        9,800        7,350        4,250                      47,659   

Erik B. Nordstrom

                5,482     343        54,368        9,800        7,350        2,808                      80,151   

Anne E. Martin-Vachon

           2,070      4,143     176        26,531                             278,217        38,953        350,090   

 

(a)   Financial Planning Reimbursement: The Company offers reimbursement to the Named Executive Officers for tax preparation and financial and estate planning expenses, up to an annual limit of $4,000.

 

(b)   Parking: The Company offers to pay up to $230 per month toward parking expenses for the Named Executive Officers.

 

(c)   Premium on Additional Medical Insurance: The Company provides health coverage that pays 100% of qualifying out-of-pocket medical, dental and vision expenses that are not reimbursed by other Company-sponsored health plans for the Named Executive Officers and their dependents. The Named Executive Officers are reimbursed up to a calendar year maximum of $10,000 per covered family. The amounts reported are the annual Company-paid premiums for this additional coverage.

 

(d)   Premium on Life Insurance: The Company provides life insurance to the Named Executive Officers in an amount equal to approximately 1.25 times their base salary. The amounts reported are the annual premiums, which vary based on base salary.

 

(e)   Merchandise Discount: The Company provides a merchandise discount to the Named Executive Officers of 33% for purchases at Nordstrom full-line stores, nordstrom.com and through our catalogs, and 20% for purchases at Nordstrom Racks and our restaurants. A 40% discount is available at certain times of the year on specified merchandise. The merchandise discount provided to the Named Executive Officers is the same level as for all other eligible management and high-performing non-management employees of the Company. The amounts reported are the total discounts the Named Executive Officers received on their Nordstrom purchases during the fiscal year ended January 29, 2011.

 

(f)   401(k) Plan Company Match: The Company offers a matching contribution on employee 401(k) contributions under the 401(k) Plan & Profit Sharing to the Named Executive Officers. They may defer up to 15% of their eligible pay (i.e., base salary, performance-based bonus and other taxable wages) into the 401(k) component of the Plan, subject to Internal Revenue Code limits. Footnote (a) to the Summary Compensation Table on page 45 notes the amounts the Named Executive Officers contributed to their 401(k) accounts in fiscal year 2010.

 

       Although the matching contribution is discretionary and subject to change, the Company currently matches the executive’s contributions for the Plan year, dollar for dollar, up to 4% of eligible pay. The 2010 calendar year compensation limit for eligible pay was $245,000, as set by the Internal Revenue Service (“IRS”). The maximum Company contribution for each of the Named Executive Officers who participated in the 401(k) Plan & Profit Sharing was $9,800 (4% x $245,000), as reported above. Anne Martin-Vachon was not enrolled in the 401(k) Plan & Profit Sharing in fiscal year 2010 and was not eligible for a Company matching contribution.

 

       Contributions under the Plan may be directed to any of 12 investment alternatives, including Common Stock.

 

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(g)   Profit Sharing: Each year, the Board has discretion to make a contribution to the Profit Sharing component of the 401(k) Plan & Profit Sharing. Although the contribution is discretionary, the Board’s target annual Profit Sharing contribution is between 1% and 3% of a participant’s eligible pay (i.e., base salary, performance-based bonus and other taxable wages), depending on the participant’s length of service with the Company. The 2010 calendar year compensation limit for eligible pay was $245,000, as set by the IRS. Based on their years of service, Blake Nordstrom, Michael Koppel and Peter and Erik Nordstrom were eligible for a Profit Sharing contribution equal to 3% of eligible pay. Anne Martin-Vachon did not meet the eligibility requirements for 2010, so she did not receive a profit sharing contribution.

 

(h)   Aircraft Use: The Company owns two aircraft which it uses for business purposes. On rare occasions, a Named Executive Officer’s guest or family member accompanies the executive on a business trip on the Company’s aircraft as an additional passenger or the executives may make a non-business related stop during the trip. Only the direct variable costs (i.e., costs the Company incurs solely as a result of the passenger being on the aircraft or the non-business related stop) are included in determining the aggregate incremental cost to the Company. When the travel does not meet the IRS standard for business travel, the cost of the travel is imputed as income to the executive. The Company does not reimburse the Named Executive Officers for taxes incurred as a result of the imputed income.

 

       In fiscal year 2010, Blake, Peter and Erik Nordstrom were accompanied by a family member or made a non-business related stop on a business trip. The costs reported are the total direct variable costs associated with the family member or non-business related travel and include meals and the tax deductions the Company was not able to take as a result of the nondeductible portion of the aircraft operating costs.

 

(i)   Expenses in Connection with Relocation: The Company provides relocation assistance to eligible employees who have changed their place of residence to accept a position with Nordstrom. The type and amount of assistance varies by leadership level. Anne Martin-Vachon received the standard relocation benefits under our guidelines for an executive vice president when she moved from Canada to the Company’s headquarters in Seattle. The amount reported is the cost incurred by the Company and includes home finding, temporary living and final travel expenses, transportation of household goods and new home closing costs. It also includes carrying costs, closing costs and loss on the sale of Anne Martin-Vachon’s home in Canada. The Company engaged a relocation service provider to purchase and sell Anne Martin-Vachon’s home in Canada. The relocation service provider purchased the home in June 2010 and resold it in August 2010, resulting in a loss to the Company of $61,502.

 

(j)   Tax Reimbursement: The Company provides reimbursement of all taxes incurred on taxable moving expenses to employees who have changed their place of residence to accept a position with Nordstrom. The amount reported is the tax reimbursement received by Anne Martin-Vachon in fiscal year 2010.

 

Grants of Plan-Based Awards in Fiscal

Year 2010

  



The following table discloses the potential range of payouts for:

 

 

non-equity incentive plan awards granted in fiscal year 2010. These awards are performance-based cash bonuses granted under the Executive Management Bonus Plan as described in the Compensation Discussion and Analysis on page 38; and

 

 

equity incentive plan awards granted in fiscal year 2010. These awards are performance share units granted under the 2004 Equity Incentive Plan as described in the Compensation Discussion and Analysis on page 40.

 

The table also discloses:

 

 

the number and value of restricted stock units granted under the 2010 Equity Incentive Plan in fiscal year 2010;

 

 

the number, price and grant date fair value of stock options granted under the 2004 Equity Incentive Plan in fiscal year 2010; and

 

 

the grant date fair value of performance share units granted under the 2004 Equity Incentive Plan in fiscal year 2010.

 

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Name and Award  

Grant

Date

(a)

   

Approval

Date

    Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards
(b)


    Estimated Future
Payouts Under
Equity Incentive
Plan Awards
(c)


   

All
Other

Stock

Awards:

Number
of

Shares
of

Stock
or

Units

(#) (d)

   

All

Other

Option

Awards:

Number of
Securities

Underlying

Options

(#) (e)

   

Exercise
or
Base
Price

of

Option

Awards

($/Sh) (f)

   

Grant
Date
Fair
Value
of
Stock
and
Option
Awards

($) (g)

 
     

Thres-
hold

($)

   

Target

($)

   

Maxi-
mum

($)

   

Thres-
hold

(#)

   

Target

(#)

   

Maxi-
mum

(#)

         

Blake W. Nordstrom

  

                                                                               
Executive Management Bonus                     262,500        1,050,000        2,625,000                                                           

Performance Share

Unit Award

    2/24/2010        2/24/2010                                7,106.25        9,475.00        11,843.75                                346,690   
Stock Option Award     2/26/2010        2/24/2010                                                                78,046        36.94        1,049,719   

Michael G. Koppel

  

                                                                               
Executive Management Bonus                     106,000        424,000        1,060,000                                                           
Performance Share Unit Award     2/24/2010        2/24/2010                                3,654.75        4,873.00        6,091.25                                178,303   
Stock Option Award     2/26/2010        2/24/2010                                                                40,138        36.94        539,856   

Peter E. Nordstrom

  

                                                                               
Executive Management Bonus                     243,750        975,000        2,437,500                                                           
Performance Share Unit Award     2/24/2010        2/24/2010                                6,598.50        8,798.00        10,997.50                                321,919   
Stock Option Award     2/26/2010        2/24/2010                                                                72,472        36.94        974,748   

Erik B. Nordstrom

  

                                                                               
Executive Management Bonus                     243,750        975,000        2,437,500                                                           
Performance Share Unit Award     2/24/2010        2/24/2010                                6,598.50        8,798.00        10,997.50                                321,919   
Stock Option Award     2/26/2010        2/24/2010                                                                72,472        36.94        974,748   

Anne E. Martin-Vachon

  

                                                                               
Executive Management Bonus                     70,516        282,066        705,165                                                           
Restricted Stock Unit Award     5/20/2010        5/18/2010                                                        28,986                        1,080,018   

 

(a)   Grant Date: The grant date for stock options and restricted stock units is the first open-window trading day that falls on or after the Compensation Committee’s approval of the grant. The grant date for performance share units is the approval date.

 

(b)   Estimated Future Payouts Under Non-Equity Incentive Plan Awards: The amounts shown report the range of possible cash payouts for fiscal year 2010 associated with established levels of performance under the Executive Management Bonus Plan. The amounts shown in the “Threshold,” “Target” and “Maximum” columns reflect the payout opportunity associated with established levels of performance, as indicated in the Fiscal Year 2010 Results for EBIT table on page 39. No payout is made if minimum performance criteria are not met.

 

       Although the column heading refers to future payouts, the performance-based bonuses have already been earned and paid to the Named Executive Officers. These cash payments are reported in the Summary Compensation Table on page 45, in column (e), “Non-Equity Incentive Plan Compensation.”

 

(c)   Estimated Future Payouts Under Equity Incentive Plan Awards: The numbers shown report the range of potential performance share unit payouts for the three-year performance cycle of the 2010 grant, beginning January 31, 2010 and ending February 2, 2013. Payouts are shown in units at 75%, 100% and 125% of the number of performance share units granted.

 

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(d)   All Other Stock Awards: Number of Shares of Stock or Units: The number shown is the number of restricted stock units granted to Anne Martin-Vachon as part of her new hire compensation package.

 

(e)   All Other Option Awards: Number of Securities Underlying Options: The numbers shown report the number of stock options granted in fiscal year 2010 to the Named Executive Officers. These stock options vest and become exercisable in four equal annual installments beginning one year from the date of grant. For more information about long-term incentive grant practices, see the Compensation Discussion and Analysis on page 40.

 

       Under the 2004 and 2010 Equity Incentive Plans, the Compensation Committee may grant different types of equity, including stock options, stock appreciation rights, unrestricted shares, restricted shares, restricted stock units and performance share units. In fiscal year 2010, Blake Nordstrom, Michael Koppel and Peter and Erik Nordstrom were granted stock options and performance share units, and Anne Martin-Vachon was granted restricted stock units.

 

(f)   Exercise or Base Price of Option Awards: The exercise price of the stock options granted in fiscal year 2010 of $36.94 is the fair market value at the closing price of Common Stock on the grant date, February 26, 2010.

 

(g)   Grant Date Fair Value of Stock and Option Awards: The grant date fair value of the stock options, performance share units and restricted stock units is calculated in accordance with ASC 718.

 

       The value for performance share units is calculated by multiplying the number of performance share units granted by the closing price of Common Stock on the date of grant, which was $36.59. This is not the value received. The actual value the Named Executive Officers may receive will depend on whether the performance criteria are met and Nordstrom stock price at the end of the performance cycle.

 

       The value for stock options is calculated by multiplying the number of options awarded by the fair value of an option for the fiscal year 2010 grant, which was $13.45. The Named Executive Officers will only realize value from the stock options if Nordstrom stock price increases above the grant price of $36.94. The actual value received by the Named Executive Officers will be the difference between the stock price at a future date when the stock options are exercised, and the grant price of $36.94.

 

       The value for restricted stock units is calculated by multiplying the number of restricted stock units granted by the closing price of Common Stock on the date of grant, which was $37.26. The actual value received by the Named Executive Officer is determined based on Nordstrom stock price at the end of the period and will depend on whether the vesting criteria have been met.

 

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Outstanding Equity Awards at Fiscal Year End 2010    The following table provides information on the current holdings of stock options and stock awards by the Named Executive Officers as of the fiscal year ended January 29, 2011. The table includes unexercised and unvested stock options, performance share units with remaining years in their three-year performance cycles, and unvested restricted stock units. The vesting schedule
for outstanding stock options and additional information about the outstanding performance share units is shown following this table. Information about the amount of Common Stock beneficially owned by the Named Executive Officers is shown in the Beneficial Ownership Table on page 65.

 

    Option Awards

    Stock Awards

 
Name         Number of
Securities
Underlying
Unexercised
Options
(#)
   

Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#) (a)

    Option
Exercise
Price
($)
    Option
Expiration
Date
   

Number

of

Shares
or Units
of Stock

That
Have Not
Vested

(#) (b)

   

Market
Value

of
Shares

or
Units of
Stock

That
Have Not
Vested

($) (c)

   

Equity

Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units

or Other

Rights
That Have
Not
Vested

(#) (d)

   

Equity
Incentive
Plan

Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

($) (e)

 
  Grant
Date
    Exercisable     Unexercisable                

Blake W. Nordstrom

    2/25/2002        106,466                       12.68        2/25/2012                                   
      3/5/2003        87,500                       8.85 (f)      3/5/2013                                   
      2/25/2004        80,522                       19.56        2/25/2014                                   
      2/23/2005        67,502                       26.01        2/23/2015                                   
      2/22/2006        49,048                       40.27        2/22/2016                                   
      3/1/2007        30,009        10,002                53.63        3/1/2017                                   
      2/28/2008        25,924        25,923                38.02        2/27/2018                                   
      2/27/2009        29,707        89,121                13.47        2/27/2019                                   
      2/26/2010               78,046                36.94        2/26/2020                                   
                                                                      26,594.25        1,087,971   

Michael G. Koppel

    2/25/2002        57,670                       12.68        2/25/2012                                   
      2/18/2003        87,214                       8.85        2/18/2013                                   
      2/25/2004        44,286                       19.56        2/25/2014                                   
      2/23/2005        37,126                       26.01        2/23/2015                                   
      2/22/2006        28,728                       40.27        2/22/2016                                   
      3/1/2007        18,863        6,287                53.63        3/1/2017                                   
      2/28/2008        17,776        17,777                38.02        2/27/2018                                   
      2/27/2009        20,370        61,112                13.47        2/27/2019                                   
      2/26/2010               40,138                36.94        2/26/2020                                   
                                                                      17,017.75        696,196   

Peter E. Nordstrom

    2/25/2002        52,106                       12.68        2/25/2012                                   
      2/25/2004        46,012                       19.56        2/25/2014                                   
      2/23/2005        40,984                       26.01        2/23/2015                                   
      2/22/2006        31,531                       40.27        2/22/2016                                   
      3/1/2007        21,006        7,001                53.63        3/1/2017                                   
      2/28/2008        24,072        24,072                38.02        2/27/2018                                   
      2/27/2009        27,585        82,755                13.47        2/27/2019                                   
      2/26/2010               72,472                36.94        2/26/2020                                   
                                                                      24,694.50        1,010,252   

Erik B. Nordstrom

    2/25/2002        31,230                       12.68        2/25/2012                                   
      2/18/2003        93,444                       8.85        2/18/2013                                   
      2/25/2004        46,012                       19.56        2/25/2014                                   
      2/23/2005        40,984                       26.01        2/23/2015                                   
      2/22/2006        31,531                       40.27        2/22/2016                                   
      3/1/2007        21,006        7,001                53.63        3/1/2017                                   
      2/28/2008        24,072        24,072                38.02        2/27/2018                                   
      2/27/2009        27,585        82,755                13.47        2/27/2019                                   
      2/26/2010               72,472                36.94        2/26/2020                                   
                                                                      24,694.50        1,010,252   

Anne E. Martin-Vachon

    5/20/2010                                            28,986        1,185,817                 

 

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(a)   Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options: The Company does not have any outstanding performance-based stock options. Therefore, nothing is reported in this column.

 

(b)   Number of Shares or Units of Stock That Have Not Vested: The number reported is the number of unvested restricted stock units related to Anne Martin-Vachon’s new hire compensation package when she joined the Company in April 2010. These units vest and convert to shares of Common Stock equally over three years, on the anniversary of the date of the award.

 

(c)   Market Value of Shares or Units of Stock That Have Not Vested: The value reported is the number of unvested restricted stock units multiplied by $40.91, the closing price of Common Stock on January 29, 2011, the last day of the fiscal year.

 

(d)   Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested: The numbers reported are the outstanding performance share units granted in fiscal years 2009 and 2010. Both of these grants have remaining years in their three-year performance cycles. If the performance cycles for these grants had ended as of the close of fiscal year 2010, 85% of the number of performance share units granted in fiscal year 2009 would have been earned, and 0% of the number granted in fiscal year 2010 would have been earned.

 

       As required to be disclosed, the number of estimated shares reported for the 2009 grant is based on achieving the target level of performance, which pays out at 100% of the number granted. The number of estimated shares reported for the 2010 grant is based on achieving the threshold level of performance, which pays out at 75% of the number granted, as shown in the Performance Share Unit Vesting Schedule on page 41. See the Outstanding Equity Awards: Performance Share Units table on page 53 for detailed information about these awards.

 

(e)   Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested: The amounts reported relate to the outstanding performance share units granted in fiscal years 2009 and 2010. Both of these grants have remaining years in their three-year performance cycles. If the performance cycles for these grants had ended as of the close of fiscal year 2010, 85% of the number of performance share units granted in fiscal year 2009 would have been earned, and 0% of the number granted in fiscal year 2010 would have been earned.

 

       As required to be disclosed, the payout values reported are based on achieving the target level of performance for the 2009 grant, which pays out at 100% of the number granted, and the threshold level of performance for the 2010 grant, which pays out at 75% of the number granted. The value of estimated payouts has been calculated using the closing price of Common Stock on January 29, 2011, the last day of the fiscal year, of $40.91. See the Outstanding Equity Awards: Performance Share Units table on page 53 for detailed information about these awards.

 

(f)   2003 Annual Grant for Blake Nordstrom: The Company’s normal practice is for all annual grants to be approved by the Compensation Committee at regularly scheduled Committee meetings. However, the 2003 annual grant for Blake Nordstrom was approved after the regularly scheduled Committee meeting, as the Compensation Committee required additional time to finalize his 2003 compensation package. So that Blake Nordstrom would not receive any advantage with respect to exercise price, his grant was approved with an exercise price equal to the greater of the closing price of Common Stock on the Committee approval date of March 5, 2003, or on February 18, 2003, the date of the annual grant for all other eligible employees. The closing price was higher on February 18, 2003, so the exercise price of Blake Nordstrom’s 2003 annual grant was the same as for all other eligible employees.

 

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Table of Contents

Outstanding Equity Awards: Stock Option Vesting Schedule

 

The following table shows the grant date, vesting schedule and expiration date for all unvested stock options as of the fiscal year ended January 29, 2011. All stock option grants have a four-year vesting schedule of 25% per year and a 10-year term.

 

Grant Date      Vesting Schedule    Expiration Date  

3/1/2007

     25% per year with a remaining vesting date of 3/1/2011      3/1/2017   

2/28/2008

     25% per year with remaining vesting dates of 2/28/2011 and 2/28/2012      2/27/2018   

2/27/2009

     25% per year with remaining vesting dates of 2/27/2011, 2/27/2012 and 2/27/2013      2/27/2019   

2/26/2010

     25% per year with vesting dates of 2/26/2011, 2/26/2012, 2/26/2013 and 2/26/2014      2/26/2020   

 

Outstanding Equity Awards: Performance Share Units

 

The following table shows the detail for the outstanding performance share units that were granted in fiscal years 2009 and 2010 under the 2004 Equity Incentive Plan and are shown in columns (d) and (e) of the Outstanding Equity Awards at Fiscal Year End 2010 table on page 51. These 2009 and 2010 performance share unit grants have one and two years remaining in their three-year performance cycles, respectively. More information about performance share units and long-term incentive grant practices is provided in the Compensation Discussion and Analysis on page 40.

 

    

Three Year

Performance
Cycle

(a)

    

Estimated Shares
(at 100% of the Number
Granted for the 2009 Grant
and 75% of the Number
Granted for the 2010 Grant)

(#) (b)

     Value of
Estimated
Payout
($) (c)
Name             

Blake W. Nordstrom

      
 
2/1/2009 – 1/28/2012
1/31/2010 – 2/2/2013
 
 
        

 

19,488.00

7,106.25

 

 

        

 

797,254

290,717

 

 

Michael G. Koppel

      
 
2/1/2009 – 1/28/2012
1/31/2010 – 2/2/2013
 
 
        

 

13,363.00

3,654.75

 

 

        

 

546,680

149,516

 

 

Peter E. Nordstrom

      
 
2/1/2009 – 1/28/2012
1/31/2010 – 2/2/2013
 
 
        

 

18,096.00

6,598.50

 

 

        

 

740,307

269,945

 

 

Erik B. Nordstrom

      
 
2/1/2009 – 1/28/2012
1/31/2010 – 2/2/2013
 
 
        

 

18,096.00

6,598.50

 

 

        

 

740,307

269,945

 

 

 

(a)   Performance Cycle: The performance share units are earned on the last day of the three-year performance cycle if performance criteria have been met and become vested when the results have been certified by the Compensation Committee.

 

(b)   Estimated Shares: Both of these grants have remaining years in their three-year performance cycles. If the performance cycles for these grants had ended as of the close of fiscal year 2010, 85% of the number of performance share units granted in fiscal year 2009 would have been earned, and 0% of the number granted in fiscal year 2010 would have been earned.

 

As required to be disclosed, the number of estimated shares reported for the 2009 grant is based on achieving the target level of performance, which pays out at 100% of the number granted, and the number of estimated shares reported for the 2010 grant is based on achieving the threshold level of performance, which pays out at 75% of the number granted.

 

(c)   Value of Estimated Payout: The value of estimated performance share unit payouts is calculated using the closing price of Common Stock on January 29, 2011, the last day of the fiscal year, of $40.91, and a payout at 100% of the number granted for the 2009 grant and 75% of the number granted for the 2010 grant. The payout estimate does not include estimated dividend amounts as the Company does not pay dividends on unvested performance share units.

 

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Option Exercises and Stock Vested in Fiscal Year 2010    The following table provides information for the Named Executive Officers on:

 

 

the number of shares of Common Stock acquired and value realized from stock option exercises in fiscal year 2010; and

 

 

the number of shares of Common Stock acquired and value realized from performance share units that vested in fiscal year 2010.

 

     Option Awards

   Stock Awards

Name   

Number of Shares

Acquired on Exercise

(#)

  

Value Realized on
Exercise

($) (a)

  

Number of Shares

Acquired on Vesting

(#) (b)

  

Value Realized on
Vesting

($) (c)

Blake W. Nordstrom

       163,158          5,500,431          7,850.60          321,168  

Michael G. Koppel

       36,358          1,222,578          5,383.05          220,221  

Peter E. Nordstrom

       90,804          2,790,325          7,289.60          298,218  

Erik B. Nordstrom

       41,684          1,280,512          7,289.60          298,218  

Anne E. Martin-Vachon

                                   

 

(a)   Value Realized on Exercise: The amount realized equals the aggregate difference between the fair market value of Common Stock on the dates of exercise and the grant prices, multiplied by the number of shares acquired on exercise.

 

(b)   Number of Shares Acquired on Vesting: The performance share units granted in 2008 vested at 85% of target based on Nordstrom total shareholder return relative to other companies in its peer group, as described in the Compensation Discussion and Analysis on page 41. The number of shares acquired on vesting is equal to the number of shares granted multiplied by 85%.

 

(c)   Value Realized on Vesting: The amount realized equals the number of shares of Common Stock acquired at vesting, multiplied by $40.91, the closing price of Common Stock on January 29, 2011, the last day of the three-year performance cycle. Vested performance share units are paid in shares of Common Stock or cash at the election of the executives. Prior to vesting, in accordance with the requirements of Internal Revenue Code Section 409A, executives may also elect to defer their vested performance share units into the Executive Deferred Compensation Plan. All of the Named Executive Officers who received the 2008 performance share unit grant elected to receive 100% of their payouts in cash.

 

Pension Benefits    The Supplemental Executive Retirement Plan (“SERP”) is designed to encourage designated executives to stay with Nordstrom throughout their careers and to reward their significant and sustained contribution to the Company’s success by adding to their financial security upon retirement. The Named Executive Officers are eligible for a full SERP benefit at age 58. The full

retirement benefit is equal to 1.6% multiplied by final average pay and the executive’s years of credited service, up to a maximum of 25 years. Executives may retire early, between the ages of 53 and 57 with at least 10 years of credited service and prior approval by the Board, and receive a reduced benefit. The early retirement benefit is reduced 10% for each year that the retirement age is less than 58.

 

Final average pay is the average base salary and annual performance-based cash bonus of the highest 36 months over the longer of:

 

 

the most recent five years of service; or

 

 

the entire period of service after the executive’s 53rd birthday.

 

There is no offset or reduction in the Named Executive Officers’ SERP benefit for Social Security or other Company retirement benefits such as the 401(k) Plan & Profit Sharing.

 

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The annual SERP benefit is paid upon retirement for the remaining life of the executive with a 50% annuity paid to a surviving spouse or life partner after the executive’s death. A surviving spouse or life partner also receives a 50% survivor benefit if the executive dies before retiring. The amount of this benefit depends on the executive’s age and years of credited service at the time of death.

 

The Compensation Committee has discretion to discontinue payment of benefits under the SERP if the retired executive is found to have engaged in misconduct or in competitive behavior against the Company.

 

Information about payment of the SERP benefit related to change in control is provided in footnote (b) to the Potential Payments Upon Termination or Change in Control at Fiscal Year End 2010 table on page 61.

 

The SERP is a non-qualified deferred compensation plan. Unlike qualified retirement plans, which are subject to strict funding rules, the Company is not obligated to fund the SERP. However, the Company does set aside funds to assist in the payment of future benefit obligations. See Note 6 in the Company’s Form 10-K filed with the SEC on March 18, 2011 for a discussion of the benefit obligation and funded status.

 

Fiscal Year 2010 Pension Benefits Table

The following table shows the present value of accumulated SERP benefits payable to each of the Named Executive Officers, based on the number of years of service credited under the Plan to each Named Executive Officer and actuarial assumptions consistent with those used in the Company’s financial

statements to calculate the Company’s obligations under the Plan. See Note 6 in the Company’s Form 10-K filed with the SEC on March 18, 2011 for a discussion of the benefit obligation, funded status and assumptions used.

 

Name    Plan Name   

Number of Years

Credited Service

(#) (a)

  

Present Value

of Accumulated

Benefit

($) (b)

  

Payments During Last

Fiscal Year

($)

Blake W. Nordstrom

   Supplemental Executive
Retirement Plan
   25 years    8,540,713   

Michael G. Koppel

   Supplemental Executive
Retirement Plan
   21 years    4,736,592   

Peter E. Nordstrom

   Supplemental Executive
Retirement Plan
   25 years    7,346,874   

Erik B. Nordstrom

   Supplemental Executive
Retirement Plan
   25 years    6,456,852   

Anne E. Martin-Vachon

   Supplemental Executive
Retirement Plan
   1 year       142,702   

 

(a) Number of Years Credited Service: The number of years of credited service under the SERP is capped at 25. At one time, the Compensation Committee granted additional years of service to select executives hired mid-career so that they could earn the full 25 years of service by the time they reached the retirement age of 58. Michael Koppel received this grant of additional years of service and will earn the equivalent of 25 years of service at a retirement age of 58, if he stays with the Company until that time. Ten of Michael Koppel’s 21 years are additional years of service. This practice of granting additional years of service was discontinued in 2005.

 

(b) Present Value of Accumulated Benefit: The amounts shown are based on a retirement age of 58. Blake, Peter and Erik Nordstrom and Anne Martin-Vachon are not currently entitled to receive any amounts because such amounts are not vested and the executives are not the minimum retirement age of 53. Michael Koppel has met the minimum retirement age of 53 with at least 10 years of service and would be eligible for early retirement with prior approval from the Board. If the Board approved early retirement, he would be entitled to receive a reduced SERP benefit with a present value as of the end of the fiscal year of $3,778,191, as reported in the Potential Payments Upon Termination or Change of Control table on page 58.

 

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Nonqualified Deferred

Compensation

   The Company offers the Executive Deferred Compensation Plan (“EDCP”) to designated leadership-level employees, including the Named Executive Officers, with a minimum base salary of $85,000. Under this Plan, a participant may defer up to 100% of base salary in excess of $50,000, up to 100% of any vested performance share units (less applicable payroll taxes).

 

Deferral elections generally are irrevocable and are made in compliance with Section 409A of the Internal Revenue Code. If a participant’s EDCP deferrals cause a reduction in the Company’s 401(k) match or Profit Sharing contribution, the Company may deposit a make-up contribution into the participant’s EDCP account. No other Company contributions or matches are made. The participating Named Executive Officer did not receive a make-up contribution in the fiscal year ended January 29, 2011, because the Company’s contribution to his 401(k) Plan & Profit Sharing was not reduced due to any deferrals into the EDCP.

 

Plan participants may direct their cash deferrals to any of 16 deemed investment alternatives and may change their investment allocations daily. The deemed investment alternatives do not include Common Stock. Gains and losses for cash deferrals are credited to participant accounts daily, based on their investment elections. The value of deferred performance share units is based on the price of Common Stock. The following table shows the investment choices available under the Plan and annual rates of return for the Plan year ended December 31, 2010, as reported by the third-party administrator of the Plan.

 

Deemed Investment Choices and Returns Under the EDCP

 

Asset Class   Fund Name   

One Year Annualized

Average Return for the
Plan Year Ended
December 31, 2010

(%)

Core Bonds

 

PIMCO VIT Total Return – Administrative Shares

     8.12
International Developed Markets  

AllianceBernstein VPS International Value – Class A Shares

Fidelity VIP Overseas – Initial Class

Invesco V.I. International Growth – Series I Shares

     4.59

13.11

12.86

Large Cap Blend

 

Davis Value

Fidelity VIP Index 500 – Initial Class

   12.76

15.02

Large Cap Growth  

Janus Aspen Series Forty – Institutional Shares

     6.75

Mid Cap Blend

 

MainStay VP Mid Cap Core – Initial Class

   23.64
Mid Cap Growth  

Janus Aspen Series Enterprise – Institutional Shares

   25.85

Money Market

 

Fidelity VIP Money Market – Initial Class

     0.28
Multi-Asset Domestic  

Janus Aspen Series Balanced – Institutional Shares

     8.39

Sector

 

MFS VIT Utilities Series – Initial Class

Dreyfus IP Technology Growth – Initial Shares

   13.81

29.93

Small Cap Blend  

Royce Small Cap – Investment Class

   20.52

Small Cap Growth

 

LVIP Baron Growth Opportunities – Service Class

   26.38
Specialty Bonds  

MainStay VP High Yield Corporate Bond – Initial Class

   12.67

 

Participants in the EDCP may elect to receive scheduled in-service distributions, and annual installments or lump sum distributions at retirement. The distribution elections are made in compliance with Section 409A of the Internal Revenue Code. If participants separate from the Company prior to retirement, their account balances are paid out in a lump sum at termination. In certain types of unforeseeable financial emergencies, such as illness or casualty losses, hardship distributions may be allowed after review by the Plan’s internal Administrative Committee. There have been no hardship distributions since the Plan has been in place.

 

If a participant dies while employed by the Company, the beneficiary receives in a lump sum:

 

 

the participant’s undistributed account balance; and

 

 

two times any deferrals, excluding any earnings on the deferrals, made by the participant through December 31, 2007.

 

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The death benefit of two times deferrals was an EDCP provision that was originally added to supplement an executive’s life insurance benefit. All eligible employees, including those eligible for the EDCP, have the opportunity to purchase additional life insurance during open enrollment for the Company’s group term life insurance plan. As a result, in 2006 the Board approved a change to discontinue the death benefit of two times deferrals for any deferrals made after December 31, 2007.

 

The EDCP is a non-qualified deferred compensation plan. Unlike qualified retirement plans, which are subject to strict funding rules, the Company is not obligated to fund the EDCP. However, the Company has set aside funds to pay for future benefit obligations.

 

Fiscal Year 2010 Nonqualified Deferred Compensation Table   The following table discloses information on the nonqualified deferred compensation for the Named Executive Officers under the Company’s EDCP for the fiscal year ended January 29, 2011. The Company’s SERP is also a nonqualified plan. Information regarding benefits payable to Named Executive Officers under the SERP is provided on page 54.

 

Name   

Executive
Contributions in
Last Fiscal Year

($) (a)

  

Registrant
Contributions
in Last Fiscal
Year

($) (b)

  

Aggregate

Earnings in

Last Fiscal Year

($) (c)

  

Aggregate

Withdrawals /

Distributions

($) (d)

  

Aggregate
Balance at

Last Fiscal
Year-End

($) (e)

Blake W. Nordstrom

                                            

Michael G. Koppel

                         354,315                   1,979,064  

Peter E. Nordstrom

                                            

Erik B. Nordstrom

                                            

Anne E. Martin-Vachon

                                            

 

(a) Executive Contributions in Last Fiscal Year: None of the Named Executive Officers elected to contribute to the EDCP during the fiscal year ended January 29, 2011.

 

(b) Registrant Contributions in Last Fiscal Year: The Company did not make any make-up contributions to the Named Executive Officers’ EDCP accounts during the fiscal year ended January 29, 2011.

 

(c) Aggregate Earnings in Last Fiscal Year: The amount includes the total interest or other earnings accrued on the entire EDCP account balance, including deferred performance share units, during the fiscal year ended January 29, 2011.

 

(d) Aggregate Withdrawals/Distributions: Michael Koppel did not have any withdrawals or distributions from his EDCP account during the fiscal year ended January 29, 2011.

 

(e) Aggregate Balance at Last Fiscal Year-End: The amount shown is the total EDCP balance, including earnings on deferrals, as of January 29, 2011. Excluding earnings on deferrals, the amount shown has been previously disclosed in the Summary Compensation Table in our prior Proxy Statements.

 

Potential Payments
Upon Termination or Change In Control
  The information on the following pages describes and quantifies certain amounts that would become payable under existing compensation plans if the Named Executive Officers’ employment had terminated on January 29, 2011, the last day of the fiscal year. The amounts are based on each executive’s compensation and years of service as of that date and, if applicable, based on

the closing price of Common Stock on that date of $40.91. The estimates are based on all relevant plans effective at the end of the fiscal year and information available at that time. Actual values would reflect specific circumstances at the time of any termination, the plans and provisions effective if and when a termination event occurs and any other applicable factors.

 

Employment Agreements

 

The Company does not have individual employment agreements with any Nordstrom employees, including the Named Executive Officers. Except as described on the following pages, there are no agreements, arrangements or plans that entitle the Named Executive Officers to enhanced benefits upon termination of their employment.

 

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Termination Scenarios

 

The following table shows various termination scenarios that would trigger payments under the Company’s compensation plans.

 

Potential Payments Upon Termination or Change in Control at Fiscal Year End 2010

 

Name and Potential Payment   

Death

($)

    

Disability

($)

    

Retirement

($)

    

Termination
without
Cause

($)

    

Change
in
Control

($)

 

Blake W. Nordstrom

                                            

Continued or Accelerated Vesting of Equity Awards (a)

     3,282,018         3,282,018                           

Vested SERP Benefit (b)

     2,918,089                                   

Executive Deferred Compensation Plan Survivor Benefit (c)

                                       

Life Insurance Proceeds (d)

     876,000                                   

Retiree Health Care Benefit (e)

                                       

Separation Benefit (f)

                                       

Executive Management Bonus (g)

                                       

Total Value of Incremental Benefits

     7,076,107         3,282,018                           

Michael G. Koppel

                                            

Continued or Accelerated Vesting of Equity Awards (a)

     2,197,434         2,197,434         2,197,434         2,197,434           

Vested SERP Benefit (b)

     1,873,930                 3,778,191         3,778,191           

Executive Deferred Compensation Plan Survivor Benefit (c)

     2,026,920                                   

Life Insurance Proceeds (d)

     663,000                                   

Retiree Health Care Benefit (e)

     165,190         386,080         386,080         386,080           

Separation Benefit (f)

                             258,109           

Executive Management Bonus (g)

                                       

Total Value of Incremental Benefits

     6,926,474         2,583,514         6,361,705         6,619,814           

Peter E. Nordstrom

                                            

Continued or Accelerated Vesting of Equity Awards (a)

     3,047,587         3,047,587                           

Vested SERP Benefit (b)

     2,585,526                                   

Executive Deferred Compensation Plan Survivor Benefit (c)

                                       

Life Insurance Proceeds (d)

     813,000                                   

Retiree Health Care Benefit (e)

                                       

Separation Benefit (f)

                                       

Executive Management Bonus (g)

                                       

Total Value of Incremental Benefits

     6,446,113         3,047,587                           

Erik B. Nordstrom

                                            

Continued or Accelerated Vesting of Equity Awards (a)

     3,047,587         3,047,587                           

Vested SERP Benefit (b)

     2,166,720                                   

Executive Deferred Compensation Plan Survivor Benefit (c)

                                       

Life Insurance Proceeds (d)

     813,000                                   

Retiree Health Care Benefit (e)

                                       

Separation Benefit (f)

                                       

Executive Management Bonus (g)

                                       

Total Value of Incremental Benefits

     6,027,307         3,047,587                           

Anne E. Martin-Vachon

                                            

Continued or Accelerated Vesting of Equity Awards (a)

     1,185,817         1,185,817                           

Vested SERP Benefit (b)

     65,280                                   

Executive Deferred Compensation Plan Survivor Benefit (c)

                                       

Life Insurance Proceeds (d)

     576,000                                   

Retiree Health Care Benefit (e)

                                       

Separation Benefit (f)

                             247,276           

Executive Management Bonus (g)

                                       

Total Value of Incremental Benefits

     1,827,097         1,185,817                 247,276           

 

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(a)   Continued or Accelerated Vesting of Equity Awards: As of the end of fiscal year 2010, the Named Executive Officers had outstanding equity awards under the 1997 Stock Option Plan and the 2004 and 2010 Equity Incentive Plans. Treatment of the awards under various termination scenarios is described below.

 

Stock Options

 

Death, Disability or Retirement

 

Except as noted below for the 2009 and 2010 stock option grants, the stock option agreements under the 1997 Stock Option Plan and the 2004 Equity Incentive Plan provide that if a participant’s employment is terminated by reason of death, disability or retirement, stock options granted more than six months prior to termination will continue to vest and may be exercised during the period ending four years after termination, provided the 10-year term of the grant has not expired.

 

Beginning with the 2009 stock option grant, the stock option agreements provide that if a participant’s employment is terminated by reason of death or disability, stock options granted more than six months prior to the termination event will immediately vest and may be exercised during the period ending four years after termination, provided the 10-year term of the grant has not expired.

 

The amounts shown in the table for the Death and Disability termination scenarios include the values, as of the end of fiscal year 2010, of unvested stock options that would continue to vest or immediately vest and be exercisable during the period ending four years after termination.

 

The amount shown in the table for the Retirement termination scenario for Michael Koppel includes the value, as of the end of fiscal year 2010, of unvested stock options that would continue to vest and be exercisable during the period ending four years after termination. Michael Koppel is the only Named Executive Officer who would qualify for this continued vesting upon retirement as of the end of the fiscal year since he has reached the minimum retirement age of 53 with at least 10 years of service.

 

Beginning with the 2008 stock option grant, if, during the term of any outstanding grant, the executive engages in any business competitive with the Company or divulges or improperly uses any confidential or proprietary information of the Company, then the post-separation vesting and exercise rights will cease immediately and all outstanding vested and unvested options under such grants will be automatically forfeited.

 

Change in Control

 

Although the Named Executive Officers are not entitled to any payment or ac