BBY Definitive Proxy 2014

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )
 
 
 
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Definitive Proxy Statement
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Soliciting Material pursuant to §240.14a-12
 
BEST BUY CO., INC.
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BEST BUY CO., INC.
 
 
 
7601 Penn Avenue South
 
 
 
Richfield, Minnesota 55423
 
 
 
 
 
 

NOTICE OF 2014 REGULAR MEETING OF SHAREHOLDERS

Time:
 
9:30 a.m., Central Time, on Tuesday, June 10, 2014
Place:
 
Best Buy Corporate Campus — Theater
7601 Penn Avenue South
Richfield, Minnesota 55423
Internet:
 
Submit pre-meeting questions online by visiting www.proxyvote.com and view the live webcast of the Regular Meeting of Shareholders online at www.investors.bestbuy.com.
Items of Business:
 
1.
 
To elect the seven directors listed herein to serve on our Board of Directors for a term of one year.
 
 
2.
 
To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2015.
 
 
3.
 
To conduct a non-binding advisory vote to approve our named executive officer compensation.
 
 
4.
 
To approve the 2014 Omnibus Incentive Plan.
 
 
5.
 
To transact such other business as may properly come before the meeting.
Record Date:
 
You may vote if you were a shareholder of record of Best Buy Co., Inc., or if you held shares through a broker or other nominee as of the close of business on Monday, April 14, 2014.
Proxy Voting:
 
Your vote is important. You may vote via proxy as a shareholder of record:
 
 
1.
 
By visiting www.proxyvote.com on the Internet;
 
 
2.
 
By calling (within the U.S. or Canada) toll-free at 1-800-690-6903; or
 
 
3.
 
By signing and returning your proxy card, if you have received paper materials.
For shares held through a broker, bank or other nominee, you may vote by submitting voting instructions to your broker, bank or other nominee.
Regardless of whether you expect to attend the meeting in person, please vote your shares in one of the ways outlined above.
 
 
 
 
 
By Order of the Board of Directors
 
 
Richfield, Minnesota
 
Keith J. Nelsen
April 29, 2014
 
Secretary





 
BEST BUY CO., INC.
 
 
 
7601 Penn Avenue South
 
 
 
Richfield, Minnesota 55423
 
 
 
 
 
 



Dear Fellow Shareholders,

In my last letter to you I spoke about the ways in which the Best Buy Board of Directors had acted on behalf of shareholders by resolving difficult questions, making key hires and actively supporting the Company’s transformation plans.

I am pleased to say our commitment to doing the right thing for the Company and serving the best interests of our shareholders remains firm. Furthermore, the circumstances under which we are operating have improved significantly. We have a CEO who is in charge, delivering results and driving a new culture; an executive team filled with passion and unity of purpose; and an employee base highly engaged in improving the performance of Best Buy. Outside the four walls of the Company, our vendor relationships continue to grow stronger, our focus on core operations have been reinforced through key business divestitures and customer satisfaction is on the rise.    

As Chairman, I can say with confidence that we remain determined to work in a way that allows the Executive Team to run the business. We, of course, continue to be actively engaged by providing the governance and insight expected of an experienced Board. Our ability to consistently operate in a unified and cohesive manner has helped ensure the Company and its leaders can remain focused on the business priorities.

We have strengthened our Board through the addition of three sitting CEOs who understand the value that Best Buy offers - Russ Fradin of SunGard, David Kenny of The Weather Company and Tommy Millner of Cabela’s.

Russ offers the Company more than 20 years of experience in reducing operational complexity, eliminating costs and refining executive compensation. David has a long career in e-commerce and a proven track record of innovation. Tommy is a chief executive who has gone through a transformation and emerged as a successful multi-channel retailer.

As I close out another year on the Board, I am able to reflect on the honor it has been to serve this great company. I am further reminded that our guiding principle of always doing what is right remains a true source of strength for this Company, as our progress on the Renew Blue transformation clearly reflects.  

That progress includes the fact that we have exceeded our cost savings target, made progress on stabilizing our top and bottom lines, enhanced how we serve our customers and built key foundational capabilities that are critical to our future.

We proudly undertake this effort and do it on behalf of our employees, for the communities in which we work and live, for the vendors who rely on us to showcase their innovations and for the investors who believe Best Buy’s best days are ahead, just as I do.

Thank you for your continued support.

Respectfully,

Hatim A. Tyabji
Chairman of the Board
Best Buy Co., Inc.



IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
REGULAR MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 10, 2014:
This Notice of 2014 Regular Meeting of Shareholders and Proxy Statement and our Annual Report on
Form 10-K for the fiscal year ended February 1, 2014, are available at www.proxyvote.com.
Help us make a difference by eliminating paper proxy mailings to your home or business. As permitted by rules adopted by the U.S. Securities and Exchange Commission ("SEC"), we are furnishing proxy materials to our shareholders primarily via the Internet. On or about April 29, 2014, we mailed to our shareholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice of Internet Availability also includes instructions to access your form of proxy to vote via the Internet or by telephone. Other shareholders, in accordance with their prior requests, have received e-mail notification of how to access our proxy materials and vote via the Internet, or have been mailed paper copies of our proxy materials and proxy card.
Internet distribution of our proxy materials is designed to expedite receipt by our shareholders, lower the cost of the Regular Meeting of Shareholders and conserve precious natural resources. However, if you would prefer to receive paper proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive email notification with instructions to access these materials via the Internet unless you elect otherwise.



ATTENDING THE REGULAR MEETING OF SHAREHOLDERS


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Doors open at 9:00 a.m. Central Time

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Meeting starts at 9:30 a.m. Central Time

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If you wish to attend the meeting in person, we are requesting that you RSVP and print your registration confirmation at www.proxyvote.com - select the "request meeting admission" link. A printed registration confirmation together with photo identification will be requested in order to be admitted to the meeting

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You do not need to attend the meeting to vote if you submitted your proxy in advance of the meeting

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Security measures may include bag search, bag scan, metal detector and hand-wand search

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The use of cameras and recording devices is prohibited

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If you are unable to attend the meeting in person, you can view the meeting live via the Internet at www.investors.bestbuy.com. The webcast starts at 9:30 a.m. Central Time and a replay will be available until June 17, 2014







TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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BEST BUY CO., INC.
7601 Penn Avenue South
Richfield, Minnesota 55423
_______________________________________________________________________________

PROXY STATEMENT
_______________________________________________________________________________


REGULAR MEETING OF SHAREHOLDERS — JUNE 10, 2014


GENERAL INFORMATION

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors ("Board") of Best Buy Co., Inc. ("Best Buy," "we," "us," "our" or the "Company") to be voted at our 2014 Regular Meeting of Shareholders (the "Meeting") to be held on Tuesday, June 10, 2014, at 9:30 a.m., Central Time, at the Best Buy Corporate Campus — Theater, 7601 Penn Avenue South, Richfield, Minnesota, 55423 or at any postponement or adjournment of the Meeting. The proxy materials, including the proxy statement, our annual report and form of proxy, were either made available to you over the Internet or mailed to you beginning on or about April 29, 2014.

Background

What is the purpose of the Meeting?

At the Meeting, shareholders will vote on the items of business outlined in the Notice of 2014 Regular Meeting of Shareholders ("Meeting Notice") included as the cover page to this proxy statement. In addition, management will report on our business and respond to questions from shareholders.

Why did I receive this proxy statement and a proxy card or the Notice of Internet Availability?

You received this proxy statement and a proxy card or the Notice of Internet Availability because you owned shares of Best Buy common stock as of April 14, 2014, the record date for the Meeting, and are entitled to vote on the items of business at the Meeting. This proxy statement describes the items of business that will be voted on at the Meeting and provides information on these items so that you can make an informed decision.

Who may vote?

In order to vote at the Meeting, you must have been a shareholder of record of Best Buy as of April 14, 2014, which is the record date for the Meeting. If your shares are held in "street name" (that is, through a bank, broker or other nominee), you will receive instructions from the shareholder of record that you must follow in order for your shares to be voted as you choose.

When is the record date?

The Board has established April 14, 2014, as the record date for the Meeting.

How many shares of Best Buy common stock are outstanding?

As of the record date, there were 348,421,255 shares of Best Buy common stock outstanding. There are no other classes of capital stock outstanding.



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Voting Procedures

On what items of business am I voting?

You are being asked to vote on the following items of business:

1.
The election of the seven directors listed herein for a term of one year expiring in 2015;

2.
The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2015;

3.
The non-binding advisory vote to approve our named executive officer compensation;

4.
The approval of our 2014 Omnibus Incentive Plan to replace our expiring 2004 Omnibus Stock and Incentive Plan; and

5.
Such other business as may properly come before the Meeting.

How does the Board recommend that I vote?

Our Board recommends that you vote your shares:

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“FOR” the election and ratification of directors as set forth in this proxy statement;
 
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“FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2015;
·
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“FOR” the non-binding advisory vote to approve our named executive officer compensation; and
 
•
“FOR” the approval of our 2014 Omnibus Incentive Plan.
 
If you are a record holder and you sign and submit your proxy card without indicating your voting instructions, your shares will be voted as indicated above.

How do I vote?

If you are a shareholder of record (that is, if your shares are owned in your name and not in "street name"), you may vote:

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Via the Internet at www.proxyvote.com;

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By telephone (within the U.S. or Canada) toll-free at 1-800-690-6903;

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By signing and returning the enclosed proxy card if you have received paper materials; or

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By attending the Meeting and voting in person.

If your shares are held in a brokerage account by a broker, bank or other nominee, you should follow the voting instructions provided by your broker, bank or other nominee.

If you wish to vote by telephone or via the Internet, you must do so before 11:59 p.m., Eastern Time, on Monday, June 9, 2014. After that time, telephone and Internet voting will not be permitted, and a shareholder of record wishing to vote must submit a signed proxy card or vote in person during the Meeting. Shareholders of record will be on a list held by the inspector of elections. "Street name" shareholders, also known as beneficial owners, must obtain a proxy from the institution that holds their shares, whether it is their brokerage firm, a bank or other nominee, and present it to the inspector of elections with their ballot in order to vote at the Meeting. Voting in person by a shareholder at the Meeting will replace any previous votes submitted by proxy.

In accordance with the rules of the SEC, we are making available to all shareholders who have not affirmatively opted to receive paper materials, all of their proxy materials via the Internet. However, you may opt to receive paper copies of proxy

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materials, at no cost to you, by following the instructions contained in the Notice of Internet Availability that we have mailed to all shareholders. We encourage you to take advantage of the option to vote your shares electronically through the Internet or by telephone. Doing so will result in cost savings for the Company.

How are my voting instructions carried out?

When you vote via proxy, you appoint the Chairman of the Board, Hatim A. Tyabji, and the Secretary of the Company, Keith J. Nelsen, (collectively, the "Proxy Agents") as your representatives to vote at the Meeting. The Proxy Agents will vote your shares at the Meeting, or at any postponement or adjournment of the Meeting, as you have instructed them on the proxy card. If you return a properly executed proxy card without specific voting instructions, the Proxy Agents will vote your shares in accordance with the Board's recommendations as disclosed in this proxy statement. If you submit a proxy, your shares will be voted regardless of whether you attend the Meeting. Even if you plan to attend the Meeting, it is advisable to vote your shares via proxy in advance of the Meeting in case your plans change.

If an item properly comes up for vote at the Meeting, or at any postponement or adjournment of the Meeting, that is not described in the Meeting Notice, including adjournment of the Meeting and any other matters incident to the conduct of the Meeting, the Proxy Agents will vote the shares subject to your proxy in their discretion. Discretionary authority for them to do so is contained in the proxy.

How many votes do I have?

You have one vote for each share you own, and you can vote those shares for each item of business to be addressed at the Meeting.

How many shares must be present to hold a valid Meeting?

For us to hold a valid Meeting, we must have a quorum. In order to have a quorum, a majority of the outstanding shares of our common stock that are entitled to vote need to be present or represented by proxy at the Meeting. Your shares will be counted as present at the Meeting if you:

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Vote via the Internet or by telephone;

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Properly submit a proxy card (even if you do not provide voting instructions); or

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Attend the Meeting in person.

Broker non-votes, as defined below, will be included in determining the presence of a quorum at the Meeting so long as there is at least one routine matter which the broker, bank or other nominee can vote on, as is the case with the Meeting. In addition, abstentions on any matter are included in determining the presence of a quorum.

How many votes are required to approve an item of business and what are the effects of abstentions and broker non-votes on the voting results?

Pursuant to our Amended and Restated Articles of Incorporation and our Amended and Restated By-laws, each item of business to be voted on by the shareholders at the meeting, with the exception of Item 1, requires the affirmative vote of the holders of a majority of the voting power of the shares of Best Buy common stock present at a meeting and entitled to vote. Item 1, the election of directors, requires the affirmative vote of a majority of votes cast with respect to the director.

Under the rules of the New York Stock Exchange (“NYSE”), if you are a beneficial owner of shares and you do not provide your voting instructions to your broker, bank or nominee, that firm has discretion to vote your shares for certain routine matters. The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm is considered a routine matter under NYSE rules. On the other hand, your broker, bank or nominee does not have discretion to vote your shares for non-routine matters. The election of directors, the non-binding advisory vote related to executive compensation, and management's proposal to approve our 2014 Omnibus Incentive Plan are not considered routine matters under NYSE rules.

When a broker, bank or nominee votes a beneficial owner's shares on certain but not all of the proposals, because it is unable to vote due to the beneficial owner's failure to provide voting instructions on a matter as to which the broker, bank or nominee has no discretion to vote otherwise, the missing votes are referred to as “broker non-votes.”


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Abstentions will have the same effect as votes against Items 2, 3, and 4 described in this proxy statement, but will have no effect on Item 1. Broker non-votes will have no effect on Items 1, 3 and 4.

What if I change my mind after I vote via proxy?

If you are a shareholder of record, you may revoke your proxy at any time before your shares are voted by:

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Submitting a later-dated proxy prior to the Meeting (by mail, Internet or telephone);

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Voting in person at the Meeting (attendance will not, by itself, revoke a proxy); or

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Providing written notice of revocation to Best Buy's Secretary at our principal office at any time before your shares are voted.

If your shares are held in a brokerage account by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee.

Where can I find the voting results of the Meeting?

We plan to publish the final voting results in a Current Report on Form 8-K ("Form 8-K") filed within four business days of the Meeting. If final voting results are not available within the four business day timeframe, we plan to file a Form 8-K disclosing preliminary voting results within the required four business days, to be followed as soon as practicable by an amendment to the Form 8-K containing final voting results.

Proxy Solicitation

How are proxies solicited?

We expect to solicit proxies primarily by Internet and mail, but our directors, officers, other employees and agents may also solicit proxies in person, by telephone, through electronic communication and by facsimile transmission. We will request that brokerage firms, banks, other custodians, nominees, fiduciaries and other representatives of shareholders forward the Notice of Internet Availability and, as applicable, the proxy materials and annual reports on Form 10-K themselves, to the beneficial owners of our common stock. Our directors and employees do not receive additional compensation for soliciting shareholder proxies. We have retained Georgeson Inc. to act as our proxy solicitor for a fee estimated to be $30,000, plus reimbursement of out-of-pocket expenses.

Who will pay for the cost of soliciting proxies?

We pay all of the costs of preparing, printing and distributing our proxy materials and of our proxy solicitor, Georgeson, Inc., as described above. We will reimburse brokerage firms, banks and other representatives of shareholders for reasonable expenses incurred as defined in the NYSE schedule of charges.

How can multiple shareholders sharing the same address request to receive only one set of proxy materials and other investor communications?

You may elect to receive future proxy materials, as well as other investor communications, in a single package per address. This practice, known as "householding," is designed to reduce our paper use, and printing and postage costs. To make the election, please indicate on your proxy card under "Householding Election" your consent to receive such communications in a single package per address. Once we receive your consent, we will send a single package per household until you revoke your consent or request separate copies of our proxy materials by notifying our Investor Relations Department in writing at 7601 Penn Avenue South, Richfield, MN, 55423, or by telephone at 612-291-6147. We will start sending you individual copies of proxy materials and other investor communications following receipt of your revocation.

Can I receive the proxy materials electronically?

Yes. All shareholders may access our proxy materials electronically via the Internet. We encourage our shareholders to access our proxy materials via the Internet because it reduces the expenses for, and the environmental impact of, our shareholder meetings. You may opt to receive paper copies of proxy materials, including our Annual Report, proxy statement, and proxy card at no cost to you, by following the instructions on your Notice of Internet Availability.

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An electronic version of this proxy statement is posted on our website at www.investors.bestbuy.com — select the "SEC Filings" link or the "Annual Reports and Proxy Statements" link.

Additional Information

Where can I find additional information about Best Buy?

Our reports on Forms 10-K, 10-Q and 8-K, and other publicly available information should be consulted for other important information about Best Buy. You can find these reports and additional information about us on our website at www.investors.bestbuy.com.


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PROXY SUMMARY

Fiscal 2014 was the first full year of our Renew Blue transformation. We launched our Renew Blue transformation effort in the fall of 2012 by identifying the two problems we had to solve - declining comparable store sales and shrinking profit margins - and establishing five strategic pillars to address those problems:

(1) Reinvigorate and rejuvenate the customer experience;
(2) Attract, grow, engage and inspire transformational leaders and employees;
(3) Work with vendor partners to innovate and drive value;
(4) Increase our Return on Invested Capital; and
(5) Continue our leadership role in positively impacting our world.

As stated in the Company’s Annual Report on Form 10-K and our Chief Executive Officer's ("CEO") accompanying statement to shareholders (which is available on www.investors.bestbuy.com under "Financial Performance"), in 2014 we made significant progress in this transformation, including:

▪
Enhancing how we serve our customers and building key foundational capabilities for the future. For example:

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We increased our Net Promoter Score by more than 300 basis points, meaning that customers are more satisfied with their experience;
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We significantly increased our price competitiveness and implemented a “low price guarantee”;
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We implemented traffic-generating and customer experience initiatives that drove a 20% increase in domestic online sales;
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We rolled out the “ship-from-store” capability to more than 1,400 locations, allowing us to unlock retail inventory to better serve our online customers; and
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We re-launched our loyalty program, resulting in higher customer participation across channels.

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Strengthening our management team and improving employee engagement;

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Partnering with two of our top vendors to develop and launch 1,400 Samsung and 600 Windows “stores-within-a-store”, in a win-win-win arrangement that is benefiting our customers, our vendors and our shareholders; and

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Making progress in stabilizing our top-line despite industry softness, delivering cost reductions above our original target, and strengthening our balance sheet:

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Domestic comparable store sales were down (0.4%); however, when adjusted for the rationalization of non-core businesses and the short-term disruption from optimizing our retail floor space, Domestic comparable store sales were essentially flat.
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In a little more than a year, we exceeded our multi-year Renew Blue cost reduction target of $725 million by executing annualized total reductions of $765 million, of which $350 million were realized in fiscal 2014.
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While we have not yet stabilized our operating margin, cost savings and operational improvements offset the investments we made in pricing and other Renew Blue investments.
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We significantly strengthened our balance sheet through a renewed focus on our core businesses and a substantially more disciplined capital allocation process. In fiscal 2014, we (1) sold our interest in Europe, (2) sold mindSHIFT Technologies, (3) restructured our information technology infrastructure to accelerate strategic systems development and optimize cost, and (4) continued to aggressively optimize inventory.

In addition to these business results, our Board continued its work to improve our corporate governance practices and further strengthen our Board. Accomplishments in this area included:

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Declassification. This Meeting marks the first year in which the majority of our directors will stand for election to one-year terms. At our 2013 Regular Meeting of Shareholders, we implemented a shareholder proposal to declassify our Board and have all directors stand for election to a one-year term upon the conclusion of their prior terms. This year seven directors will stand for election. In 2015, the remaining directors will also stand for election to a one-year term, upon conclusion of their last two-year term of service.

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New Director Appointments. During fiscal 2014, the Board appointed three new directors to the Board. Russell P. Fradin was appointed in April 2013 and stood for ratification by shareholders at the 2013 Regular Meeting of

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Shareholders. David W. Kenny, Chairman and Chief Executive Officer of The Weather Company, joined our Board in September 2013 and Thomas L. Millner, Chief Executive Officer of Cabela's, Inc., joined our Board in January 2014. All three of these directors have extensive business leadership experience and each of them have already made valuable contributions to our Board. More information about their qualifications and background can be found in Item of Business No. 1: Election of Directors.

•
Executive Compensation. Creating a strong and consistent tie between executive pay and performance is a critical element of the Company’s transformation effort. In fiscal 2014, the Company continued its efforts to delayer the organization to achieve more impactful performance from its senior executives and further align executive compensation with enterprise business results.

Our Chairman has provided you with his insight and perspective on this past year in his letter to shareholders, which is included at the beginning of this proxy statement. Please review the Company's Annual Report on Form 10-K and the complete proxy statement for more information.

As the Company continues these efforts to advance our transformation and create value for our shareholders, we ask shareholders to consider and vote on the following shareholder items at this Meeting:

Item 1: Election of Directors
We have seven director nominees standing for election this year. You will find information about all of our directors' qualifications and experience within Item 1. All of our director nominees have unique skills, proven leadership, sound judgment and integrity. More importantly, they bring a wide diversity of backgrounds, experience and expertise necessary to our transformation.

Item 2: Ratification of Appointment of our Independent Registered Public Accounting Firm
We are asking our shareholders to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2015.

Item 3: Advisory Vote to Approve Named Executive Officer Compensation
For the fourth year, our shareholders have the opportunity to cast a non-binding, advisory vote on our executive compensation program, the "Say on Pay" vote, as set forth in Item 3. We have discussed in the Compensation Discussion & Analysis ("CD&A") section how we have engaged our shareholders over the past year and how we have considered and addressed concerns in this area. In evaluating this year's "Say on Pay" proposal, we recommend that you review our CD&A, which explains how and why the Compensation and Human Resources Committee arrived at its executive compensation decisions for fiscal 2014 (February 2013 - January 2014).

Item 4: Management Proposal to Adopt our 2014 Omnibus Incentive Plan
You are being asked to consider a proposal put forth by management to approve our 2014 Omnibus Incentive Plan. Our current plan, the 2004 Omnibus Stock and Incentive Plan, is scheduled to expire on June 23, 2014. This proposed plan would replace the expiring plan and provide a means to incent and reward our employees with equity-based compensation, which is an important element of our executive compensation that strengthens long-term focus on increasing shareholder value. The proposed plan also includes additional provisions not included in our current plan that are designed to further protect shareholder interests. More information regarding the proposal can be found in Item 4.





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CORPORATE GOVERNANCE AT BEST BUY

Our Board is elected by our shareholders to oversee our business and affairs. In addition, the Board counsels, advises and oversees management in the long-term interests of the Company and our shareholders regarding a broad range of subjects, including:

•
Selecting and evaluating the performance of our CEO;

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Reviewing and approving major financial, strategic and operating decisions and other significant actions;

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

•
Overseeing the processes for maintaining integrity with regard to our financial statements and other public disclosures, and compliance with legal and ethical standards; and

•
Planning for succession with respect to the position of CEO and monitoring management's succession planning for other senior executives.

Members of the Board monitor and evaluate our business performance through regular communication with our CEO and by attending Board meetings and Board committee meetings.

The Board values effective corporate governance and adherence to high ethical standards. As such, the Board has adopted Corporate Governance Principles for our directors and a Code of Business Ethics, both of which are posted on our website at www.investors.bestbuy.com — select the "Corporate Governance" link.

Board Structure and Declassification

Our Board is committed to having a sound governance structure that promotes the best interests of our shareholders. To that end, our Board has evaluated and actively continues to examine emerging corporate governance trends and best practices. Shareholder perspectives play an important role in that process. Some key points regarding our Board's governance structure and practices are as follows:

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Consistent with its commitment to strong corporate governance principles, the Board is in the process of implementing a declassified board structure. In 2013, shareholders approved management's proposal to amend our Amended and Restated By-laws to provide that each director shall be elected for a one-year term beginning with the directors standing for election at the 2014 Meeting. The implementation will be completed at our 2015 Regular Meeting of Shareholders when all directors will begin standing for re-election each year.

•
Our Board is predominantly independent. Of our eleven directors, only one, our CEO, is a Best Buy employee. Further, the Board has affirmatively determined that ten of our eleven directors are independent under SEC and NYSE corporate governance rules, as applicable.

•
Our Board is very active and engaged. Our directors attended, on average, over 95% of fiscal 2014 Board and Board committee meetings.

Board Leadership

We separate the roles of CEO and Chairman of the Board in recognition of the differences between the two roles. Our CEO is responsible for setting our strategic priorities, in collaboration with the Board, and focuses on the development and execution of our strategies. He is also responsible for our ongoing leadership and performance. The Chairman of the Board provides guidance to the CEO, and sets the agenda for and presides over meetings of the full Board. He also focuses on Board oversight responsibilities, risk management and strategic planning. In addition, our Chairman periodically represents the Company at public functions and actively engages with our employees at designated Company functions.

Consistent with NYSE rules, our Corporate Governance Principles require a Lead Independent Director to be named in the event our Chairman of the Board is not independent. Our Board established the position of Lead Independent Director to preside at all executive sessions of independent directors, as defined under the rules of the NYSE, in situations where the

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Chairman of the Board is not an independent director. In addition, any Lead Independent Director appointed in the absence of an independent Chairman is responsible for calling meetings of the independent directors as appropriate, serving as a stakeholder liaison on behalf of the independent directors and performing such other duties as may be requested from time to time by the Board, the independent directors, the CEO or the Chairman of the Board.

Currently, our independent Chairman of the Board is presiding over executive sessions of the independent directors and fulfilling the other functions that the Lead Independent Director would otherwise fulfill.

Board Composition

To ensure a diversity of perspectives, the Board seeks a wide range of experience and expertise. This combination of perspectives helps to ensure that we sustain a dynamic corporate culture, which is a cornerstone of our business legacy and a key competitive advantage.

In accordance with these interests and the principles of effective corporate governance, the Board established and has continued to exceed its goal to have at least 75% of our directors be independent. In addition, the Board carefully plans for the director skill sets required today and in the future, and for an orderly succession and transition of directors.

Pursuant to agreements entered into between the Company and Richard M. Schulze, our founder and beneficial owner of approximately 18% of the Company as of the date of filing, Mr. Schulze is entitled to nominate two directors for appointment to our Board until he reaches the age of 75 (which will occur in January 2016). In the event either of Mr. Schulze's nominated directors resigns from the Board or are forced to leave the Board due to death, disability or serious illness, or are not elected at the applicable meeting of shareholders by the requisite vote of shareholders, Mr. Schulze will have the right to designate their successor, subject to satisfaction of the Company’s director qualification standards and the Board’s approval, which shall not be unreasonably withheld. For more information regarding our agreements with Mr. Schulze, please see the Certain Relationships and Related Party Transactions section of this proxy statement, as well as the Current Reports on Form 8-K filed by the Company on August 26, 2012, December 14, 2012 and March 25, 2013.

Executive Sessions of Independent Directors

In order to promote open discussion among independent directors, the Board has a policy of conducting executive sessions of independent directors during each regularly scheduled Board meeting. During fiscal 2014, our independent Chairman, Hatim A. Tyabji, chaired the executive sessions of independent directors in accordance with our Corporate Governance Principles and NYSE requirements.

Board Meetings and Attendance

During fiscal 2014, the Board held three regular meetings instead of four as in prior years due to a mid-year shift in meeting dates to align the Board meeting calendar with the Company's current fiscal year. The Board also held three special meetings during fiscal 2014. Each incumbent director attended, in person or by telephone, at least 75% of the meetings of both the Board and Board committees on which he or she served. In fiscal 2014, the average attendance by our incumbent directors at Board and Board committee meetings exceeded 95%. Our Board requires director attendance at our Regular Meetings of Shareholders and 100% of the then-serving directors attended the 2013 meeting.

Committees of the Board

The Board has the following four committees:

•
Audit Committee;

•
Compensation and Human Resources Committee ("Compensation Committee");

•
Nominating, Corporate Governance and Public Policy Committee ("Nominating Committee"); and

•
Finance and Investment Policy Committee.

The charters for each of the Board committees are posted on our website at www.investors.bestbuy.com — select the "Corporate Governance" link. The charters include information regarding each committee's composition, purpose and responsibilities.


14



The Board has determined that all members of the Audit Committee, Compensation Committee and Nominating Committee are independent directors as defined under the SEC and NYSE corporate governance rules for such committees, and are "outside directors" for purposes of Internal Revenue Code section 162(m), as applicable. The Board has further determined that three of the four members of the Audit Committee qualify as financial experts under SEC rules.

Among other duties, the Board committees have the following responsibilities:

Audit Committee. This committee assists the Board with its oversight responsibility to our shareholders and the investment community regarding: (i) the integrity of our financial statements and financial reporting processes, (ii) our internal accounting systems and financial and operational controls, (iii) the qualifications and independence of our independent registered public accounting firm, (iv) the performance of our internal audit function and our independent registered public accounting firm, (v) the preparation of a report as required by the SEC to be included in this proxy statement, and (vi) our compliance and ethics programs, including our Code of Business Ethics, and legal, regulatory and risk oversight requirements.

Compensation Committee. This committee is responsible for executive officer and director compensation, including the establishment of our executive officer and director compensation philosophies, evaluating the performance of our CEO, approving CEO and executive officer compensation, and preparation of a report as required by the SEC to be included in this proxy statement. Oversight responsibilities of this committee include succession planning and compensation-related risk oversight. This committee also approves and oversees the development and evaluation of equity-based and other incentive compensation and certain other employee benefit plans of a compensatory nature.

Nominating Committee. This committee assists the Board with its responsibilities for general corporate governance, including Board organization, membership, training and evaluation. It also reviews and recommends corporate governance principles to the Board, screens and presents qualified individuals for election to the Board, and oversees the evaluation of the performance of the Board and its committees. Finally, this committee oversees matters of public policy and corporate responsibility and sustainability that affect us domestically and internationally. For additional information regarding our director nomination process, see Item of Business No. 1 – Election of Directors – Director Nomination Process.

Finance and Investment Policy Committee. This committee provides oversight of and advises the Board regarding our financial policies and financial condition to help enable us to achieve our long-range goals. It evaluates and monitors the: (i) protection and safety of our cash and investments; (ii) achievement of reasonable returns on financial assets within acceptable risk tolerance; (iii) maintenance of adequate liquidity to support our activities; (iv) assessment of the cost and availability of capital; and (v) alignment of our strategic goals and financial resources. It is responsible for ensuring we have adequate liquidity and approving certain significant contractual obligations.

The following table shows the date each committee was established, the number of meetings held in fiscal 2014 and the names of the directors serving on each committee as of February 1, 2014, our fiscal year end:
Committee
 
Number of Meetings
During Fiscal 2014(1)

 
Members
Audit
 
7

 
Hatim A. Tyabji*†
Russell P. Fradin
Gérard R. Vittecoq†
Compensation and Human Resources
 
7

 
Russell P. Fradin*
Lisa M. Caputo
Kathy J. Higgins Victor
Nominating, Corporate Governance and Public Policy
 
3

 
Kathy J. Higgins Victor*
Lisa M. Caputo
Sanjay Khosla
Finance and Investment Policy
 
3

 
Gérard R. Vittecoq*
Bradbury H. Anderson Sanjay Khosla Allen U. Lenzmeier
(1)
During fiscal 2014, each committee held three regular meetings instead of four as in prior years due to a mid-year shift in meeting dates to align the Board meeting calendar with the Company's current fiscal year.
*
Chair
†
Designated as an "audit committee financial expert" for fiscal 2014 per SEC rules.

15



    
On March 12, 2014, the Nominating Committee reviewed the Committee assignments and recommended changes to the Committee membership as presented below, including the appointment of Thomas L. Millner and David W. Kenny to their respective committees. The Board approved the recommended changes to Committee membership, effective March 13, 2014.
Committee
 
Members
Audit
 
Hatim A. Tyabji*†
Russell P. Fradin† Thomas L. Millner†
Gérard R. Vittecoq†
Compensation and Human Resources
 
Russell P. Fradin*
Lisa M. Caputo
Kathy J. Higgins Victor Sanjay Khosla
Nominating, Corporate Governance and Public Policy
 
Kathy J. Higgins Victor*
Lisa M. Caputo
David W. Kenny Thomas L. Millner
Finance and Investment Policy
 
Gérard R. Vittecoq*
Bradbury H. Anderson Sanjay Khosla Allen U. Lenzmeier
*
Chair
†
Designated as an "audit committee financial expert" for fiscal 2015 per SEC rules.
 
Board Risk Oversight

Our Board is responsible for oversight of enterprise risk. The Board considers enterprise risk factors as critical in its review of business strategy and performance and ensures that there is an appropriate balance of risk and opportunity. Management is responsible for the day-to-day risk management processes, including assessing and taking actions necessary to manage risk incurred in connection with the operation of our business. Management reviews significant enterprise risks and our general risk management strategy with the Board. We believe this division of responsibilities is the most effective approach for addressing the risks we face and that our Board leadership structure supports this approach.

In connection with the Board's oversight function, the Board committees have responsibility for reviewing and discussing with management those risk exposures either (i) specified in their charters, or (ii) identified from time to time by the committees themselves, as follows:

•
Our Audit Committee is responsible for oversight of risk associated with our financial controls and compliance activities. The Audit Committee also oversees management's processes to identify and quantify the material risks that we face. In connection with its risk oversight role, the Audit Committee meets privately with representatives of our independent registered public accounting firm, our internal audit staff and our legal staff. Our internal audit staff, who report directly to the Audit Committee at least quarterly, assists management in identifying, evaluating and implementing risk management controls and procedures to address identified risks.

•
Our Compensation Committee is responsible for oversight of risk associated with our compensation plans.

•
Our Nominating Committee is responsible for oversight of Board processes, corporate governance-related risk and activities in the public policy and social responsibility arenas.

•
Our Finance and Investment Policy Committee is responsible for oversight of risk associated with our investment portfolio and liquidity.

In connection with their oversight of compensation-related risks, Compensation Committee members periodically review the most important enterprise risks to ensure that compensation programs do not encourage risk-taking that is reasonably likely to have a material adverse effect on us. The review process identified our existing risk management framework and the key business risks that may materially affect us, reviewed all compensation plans and identified those plans that are most likely to impact these risks or introduce new risks, and balanced these risks against our existing processes and compensation program


16


safeguards. The review process also took into account mitigating features contained within our compensation plan design, which includes elements such as:

•
metric-based pay,
•
time matching performance periods,
•
payment for outputs,
•
goal diversification,
•
stock ownership guidelines,
•
payment caps, and
•
clawbacks.

The Compensation Committee also considered additional controls outside of compensation plan design which contribute to risk mitigation, including the independence of our performance measurement teams and our internal control environment.

Based upon the process we employed, the Compensation Committee determined that our compensation programs do not encourage risk-taking that is reasonably likely to result in a material adverse effect on us.

Director Orientation and Continuing Education

Our Nominating Committee oversees the orientation and continuing education of our directors. Director orientation familiarizes directors with our strategic plans; significant financial, accounting and risk management issues; compliance programs and other controls; policies; principal officers and internal auditors and our independent registered public accounting firm. The orientation also addresses Board procedures, directors' responsibilities, our Corporate Governance Principles and our Board committee charters.

We also offer continuing education programs and provide opportunities to attend commercial director education seminars outside of the Company to assist our directors in maintaining their expertise in areas related to the work of the Board and the directors' committee assignments.

Director Independence

Pursuant to its Corporate Governance Principles, the Board has established independence standards consistent with the requirements of the SEC and NYSE corporate governance rules, as applicable. To be considered independent under the NYSE rules, the Board must affirmatively determine that a director or director nominee does not have a material relationship with us (directly, or as a partner, shareholder or officer of an organization that has a relationship with us). In addition, each member of the Compensation Committee must meet a standard of “enhanced independence” such that the Board must consider the source of compensation of the director and whether the director is affiliated with us or one of our subsidiaries to determine whether there are any factors that would materially affect a director's ability to be independent specifically in regards to their duties as a compensation committee member. NYSE rules generally provide that no director or director nominee may be deemed independent if the director or director nominee:

— has in the past three years:

•
Received (or whose immediate family member has received as a result of service as an executive officer) more than $120,000 during any 12-month period in direct compensation from Best Buy, other than director and committee fees and certain pension payments and other deferred compensation;

•
Been an employee of Best Buy;

•
Had an immediate family member who was an executive officer of Best Buy;

•
Personally worked on (or whose immediate family member has personally worked on) our audit as a partner or an employee of our internal auditors or independent registered public accounting firm; or

•
Been (or whose immediate family member has been) employed as an executive officer of another company whose compensation committee at that time included a present executive officer of Best Buy; or




17



— is:

•
A partner or employee of our independent registered public accounting firm, or a director whose immediate family member is a partner of such firm or is employed by such firm and personally works on our audit; or

•
An employee (or has an immediate family member who is an executive officer) of another company that has made payments to Best Buy, or received payments from Best Buy, for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company's consolidated gross revenues.

Under our director independence standards described above, the Board has determined that each director who served during any part of fiscal year 2014 and each director nominee is independent, with the exception of Hubert Joly, our current CEO. The Board based these determinations primarily on a review of the responses of the directors to questions regarding employment and compensation history, affiliations, family and other relationships, and on discussions with our directors. As part of its determination of Mr. Anderson's and Mr. Lenzmeier's independence, the Board considered their past employment relationships with us and determined that Mr. Lenzmeier could be deemed independent as of February 2012 and that Mr. Anderson could be deemed independent as of November 2013, three years after the termination of his employment arrangement with the Company. Notwithstanding their independence under NYSE rules, the Board has determined not to place Mr. Anderson or Mr. Lenzmeier on independent committees of the Board in light of their past affiliations with the Company.

Shareholder Engagement

The Company regularly engages with shareholders on a variety of topics throughout the year to ensure we are addressing their questions and concerns, to seek input and to provide perspective on Company policies and practices. We have taken several actions in recent years as a direct result of our shareholder engagement approach, including: implementation of declassification of our Board, the determination to hold the advisory vote on our executive compensation on an annual basis, adjustments to the director appointments on our Board committees, the development of our corporate social responsibility program and reporting, and the appointment of a Lead Independent Director role and later, an independent Chairman. We also continue to facilitate direct shareholder communication with management members of our Board, the ability to attend and voice opinions at our Regular Meeting of Shareholders, and the ability to easily access and obtain information regarding our Company on our website at www.investors.bestbuy.com. Please see our Executive and Director Compensation - Introduction for more information regarding actions taken as a result of shareholder feedback received on our prior year's executive compensation decisions.

Public Policy

As a leading global retailer and corporate citizen, we believe that it is important to work with policymakers on issues impacting our customers, employees, businesses, shareholders and communities. We know that collaboration helps bring about change that better serves our communities where we live and work. Our public policy work directly aligns with our aspiration to be environmentally and socially accountable for our brands and business operations worldwide. In fiscal 2014, our public policy priorities included: marketplace fairness, connectivity, financial services, jobs and economic growth, and privacy. More information about these priorities, as well as our annual political activity reports and related policies can be found at www.bby.com - select the "Advocacy" link under "About Best Buy."

Anti-Hedging and Anti-Pledging Policies

We prohibit all employees and members of the Board from hedging Company securities, including by way of forward contracts, equity swaps, collars, exchange funds or otherwise. In addition, our executive officers and Board members are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, unless approved in advance by the Compensation Committee.

Director Stock Ownership

The Compensation Committee has established stock ownership guidelines requiring our non-management directors to own, indirectly or directly, 10,000 shares. We expect that until the ownership target is met, directors will retain: (i) 50% of the net proceeds received from the exercise of a stock option in the form of Best Buy common stock; and (ii) 50% of shares (net of taxes) issued in connection with the lapse of restrictions on restricted stock awards. The ownership target does not need to be met within a certain timeframe and our directors are considered in compliance with the guidelines as long as progress towards the ownership target is being made, consistent with the expectations noted above. In further support of director stock ownership, beginning in fiscal 2014 all equity grants to directors have a holding requirement through the conclusion of each


18


director's service on our Board. In fiscal 2014, all of our non-management directors were in compliance with the ownership guidelines.

Our stock ownership guidelines for executive officers are discussed in the Compensation Discussion and Analysis - Executive Compensation Elements - Other Compensation section.

Communications with the Board

Shareholders and interested parties who wish to contact the Board, any individual director, or the non-management or independent directors as a group, are welcome to do so in writing, addressed to such person(s) in care of:

Mr. Keith J. Nelsen
General Counsel and Secretary
Best Buy Co., Inc.
7601 Penn Avenue South
Richfield, Minnesota 55423

Mr. Nelsen will forward all written shareholder correspondence to the appropriate director(s), except for spam, junk mail, mass mailings, customer complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Mr. Nelsen may, at his discretion, forward certain correspondence, such as customer-related inquiries, elsewhere within the Company for review and possible response. Comments or questions regarding our accounting, internal controls or auditing matters will be referred to the Audit Committee. Comments or questions regarding the nomination of directors and other corporate governance matters will be referred to the Nominating Committee. Comments or questions regarding executive compensation will be referred to the Compensation Committee.

Corporate Governance Website

If you would like additional information about our corporate governance practices, you may view the following documents at www.investors.bestbuy.com - select the "Corporate Governance" link.

•
Amended and Restated Articles of Incorporation
•
Amended and Restated By-laws
•
Corporate Governance Principles
•
Audit Committee Charter
•
Compensation and Human Resources Committee Charter
•
Finance and Investment Policy Committee Charter
•
Nominating, Corporate Governance and Public Policy Committee Charter
•
Code of Business Ethics
•
Best Buy Co., Inc. 2004 Omnibus Stock and Incentive Plan, as amended


19



ITEM OF BUSINESS NO. 1 — ELECTION OF DIRECTORS

General Information

Our Amended and Restated By-laws provide that our Board consist of one or more directors and that the number of directors may be increased or decreased from time to time by the affirmative vote of a majority of the directors serving at the time that the action is taken. The number of directors on our Board is reviewed and set by our Board no less often than annually. In March 2014, the Board approved the number of directors serving on the Board to be eleven members, to be effective as of the date of the Meeting, in light of the number of continuing directors and director nominees standing for re-election at the Meeting. The Board will continue to evaluate the size of the Board and make adjustments as needed to meet the current and future needs of the Company.

At our 2013 Regular Meeting of Shareholders, our shareholders approved and the Company adopted amendments to our Amended and Restated By-laws to provide for the annual election of directors. This change impacts each newly appointed director immediately and each standing director upon the conclusion of his or her prior term. This year, seven directors will stand for election for a one-year term. In 2015, all directors will stand for election for a one-year term, upon the remaining directors concluding their last two-year term of service.

Director Qualification Standards

We only consider director candidates who embody the highest standards of personal and professional integrity and ethics and are committed to a culture of transparency and open communication at the Board level and throughout the Company. Successful candidates are dedicated to accountability and continuous improvement with a belief in innovation as a key business success factor. They are also actively engaged and have an innate intellectual curiosity and entrepreneurial spirit. Commitment to enhancing shareholder value and representing the interests of all shareholders is also required.

In evaluating candidates for nomination as a director, the Nominating Committee considers other criteria, including the candidate's history of achievement and superior standards, ability to think strategically, willingness to share examples based upon experience, policy-making experience, and ability to articulate a point-of-view, take tough positions, and constructively challenge management. Directors must also be committed to actively engaging in his or her Board roles, with sufficient time to carry out the duties of Board and Board committee membership. The Nominating Committee will also consider gender, ethnic and geographical diversity in evaluating candidates, along with independence and general criteria, such as an ability to provide informed and thoughtful counsel, mature judgment and listening skills.

Our Corporate Governance Principles specify that diversity on the Board be considered by the Nominating Committee in the director identification and nomination process. When considering candidates, the Nominating Committee seeks nominees with a broad range of experience from a variety of industries and professional disciplines, such as finance, academia, law and government, along with a diversity of gender, ethnicity, age and geographic location. The Nominating Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applied to all prospective nominees. The Board believes that diversity in the backgrounds and qualifications of Board members provides a significant mix of experience, knowledge and abilities that allows the Board to fulfill its responsibilities.

Finally, one or more of our directors must possess the education or experience required to qualify as an "audit committee financial expert" pursuant to SEC rules.



20


The grid below summarizes key qualifications, skills or attributes each of our directors possess that were most relevant to the decision to nominate him or her to serve on the Board. The lack of a mark does not mean the director does not possess that qualification or skill; rather a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Each director’s biography, below, describes these qualifications and relevant experience in more detail.
 
Anderson
Caputo
Fradin
Higgins Victor
Joly
Kenny
Khosla
Lenzmeier
Millner
Tyabji
Vittecoq
Academia / Education
 
ü
 
ü
 
 
ü
 
 
 
 
Business Operations
ü
 
ü
 
ü
ü
ü
ü
ü
ü
ü
Chief Executive Officer
ü
 
ü
ü
ü
ü
 
 
ü
ü
 
Corporate Governance
 
ü
 
ü
 
 
 
 
 
ü
 
Customer Engagement / Marketing
ü
ü
 
 
ü
ü
ü
 
ü
 
 
Digital /
e-Commerce
 
 
 
 
ü
ü
 
 
ü
ü
 
Finance
 
 
ü
 
ü
 
 
ü
ü
ü
ü
Government / Public Policy
 
ü
 
 
 
 
ü
 
 
 
ü
International
 
 
 
ü
ü
 
ü
 
 
ü
ü
Retail / Consumer Services
ü
 
 
ü
ü
ü
ü
ü
ü
 
 
Talent Management
 
 
ü
ü
 
 
 
 
 
 
 
Technology
 
 
ü
 
ü
ü
 
 
 
ü
 

Director Nomination Process

The Nominating Committee is responsible for screening and recommending to the full Board director candidates for nomination. The Nominating Committee often engages a third-party search firm to assist in identifying appropriate candidates to consider as additions to our Board. When the Board is seeking to fill an open director position, the Nominating Committee will also consider nominations received from our shareholders, provided that proposed candidates meet the requisite director qualification standards discussed above.

When the Board elects to add a director to the Board, the Nominating Committee will announce the search and post any additional search criteria on our website at www.investors.bestbuy.com — select the "Corporate Governance" link. Candidates recommended by shareholders, if qualified, will be considered in the same manner as any other candidate.

The Nominating Committee will then evaluate the resumes of any qualified candidates recommended by search firms or shareholders, as well as by members of the Board. All candidates are evaluated based on the qualification standards discussed above and the current and future needs of the Board.


21



Shareholder nominations must be accompanied by a candidate resume which addresses the extent to which the nominee meets the director qualification standards and any additional search criteria posted on our website. Nominations will be considered only if we are then seeking to fill an open director position. All nominations by shareholders should be submitted as follows:

Chair, Nominating, Corporate Governance and Public Policy Committee
c/o Mr. Keith J. Nelsen
General Counsel and Secretary
Best Buy Co., Inc.
7601 Penn Avenue South
Richfield, Minnesota 55423

Voting Information

You may vote for all, some or none of the nominees for election to the Board. However, you may not vote for more individuals than the number nominated. Each of the nominees has agreed to continue serving as a director if elected. However, if any nominee becomes unwilling or unable to serve and the Board elects to fill the vacancy, the Proxy Agents named in the proxy will vote for an alternative person nominated by the Board. Our Amended and Restated Articles of Incorporation prohibit cumulative voting, which means you can vote only once for any nominee. The affirmative vote of a majority of the votes cast with respect to the director is required to elect each director nominee.

PROXY CARDS THAT ARE PROPERLY SIGNED AND RETURNED WILL BE VOTED FOR THE ELECTION OF ALL OF THE NOMINEES UNLESS OTHERWISE SPECIFIED.

Board Voting Recommendation

The Board recommends that shareholders vote FOR the election of Lisa M. Caputo, Russell P. Fradin, Kathy J. Higgins Victor, Hubert Joly, David W. Kenny, Thomas L. Millner and Gérard R. Vittecoq for a term of one year. All of the nominees are currently members of the Board.

Nominees and Directors

The biographies of each of the nominees and continuing directors below includes information regarding the person's service as a director, business experience, public company director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings during the last ten years if any, and the experiences, qualifications, attributes or skills that caused the Nominating Committee and the Board to determine that the person should serve as a director.

There are no family relationships among the nominees or between any nominee and any director, executive officer or person chosen to become an executive officer. There are also no material proceedings to which any director, officer, affiliate of the Company, any 5% shareholder or any associate is a party adverse to the Company or its subsidiaries or has a material interest adverse to the Company or its subsidiaries.

On March 25, 2013, we announced the appointment of Bradbury H. Anderson and Allen U. Lenzmeier as directors to our Board. Mr. Anderson and Mr. Lenzmeier were nominated by Richard M. Schulze, our founder and beneficial owner of approximately 18% of the Company. Pursuant to an agreement entered into between the Company and Mr. Schulze, Mr. Schulze is entitled to nominate two directors for appointment to our Board until he reaches the age of 75 (which will occur in January 2016). In the event either of Mr. Schulze's nominated directors resigns from the Board or are forced to leave the Board due to death, disability or serious illness, or are not elected at the applicable meeting of shareholders by the requisite percentage of shareholders for approval, Mr. Schulze will have the right to designate their successor, subject to the satisfaction of the Company’s director qualification standards and the Board’s approval, which shall not be unreasonably withheld. For more information regarding our agreement with Mr. Schulze, please see the Certain Relationships and Related Party Transactions section of this proxy statement, as well as the Current Reports on Form 8-K filed by the Company on August 26, 2012, December 14, 2012 and March 25, 2013.





22


Directors Nominees - Terms expire in 2015:
(Ages and Committee roles as of March 13, 2014)
Lisa M. Caputo
Best Buy Committees:
Private Directorships:
Age:  50
 
l
Compensation & Human Resources Committee
 
l
J. William Fulbright Foreign Scholarship Board
Director Since:
 
l
Nominating, Corporate Governance & Public Policy Committee
 
l
New Visions for Public Schools
December 2009
 
 
 
l
The Creative Coalition
 
 
 
 
 
l
The Sesame Workshop
 
 
 
 
 
l
WNET Channel 13
Background: Executive Vice President and Chief Marketing and Communications Officer of The Travelers Companies, Inc., a property casualty insurer (2011-present); Managing Director and Senior Banker of the Public Sector Group of the Institutional Clients Group of Citigroup, Inc. (a financial services company (2010-2011); Global Chief Marketing Officer and Executive Vice President of Citigroup, Inc. (2007-2010).

What she brings to the Board: Ms. Caputo’s position as Executive Vice President of Marketing and Communications of The Travelers Companies makes her invaluable to Best Buy’s efforts to broaden its brand, rejuvenate the customer experience and transform its marketing efforts. She also spent 11 years at Citigroup, advising three chief executive officers on topics from marketing and communications to government affairs and community relations. Ms. Caputo has an exceptional track record of enhancing corporate social responsibility and employee engagement, key components of Best Buy’s Renew Blue initiative. She has also been a senior executive at the Walt Disney Company and at the CBS Corporation, and spent more than a decade in the public sector, serving as Deputy Assistant to President Bill Clinton and Press Secretary to First Lady Hillary Rodham Clinton. Ms. Caputo’s diverse public/private background lends an important voice to the Board deliberations, particularly those that involve the Company’s Renew Blue marketing initiatives.

Education: Ms. Caputo holds degrees from Brown University.

Russell P. Fradin
Best Buy Committees:
Private Directorships:
Age: 58
 
l
Audit Committee
 
l
SunGard Data Systems Inc.
Director Since:
 
l
Compensation & Human Resources Committee (Chair)
 
l
SunGard Capital Corp.
April 2013
 
 
 
l
SunGard Capital Corp. II
 
 
 
 
 
l
SunGard Holding Corp.
 
 
 
 
l
SunGard Holdco LLC
Background: Chief Executive Officer and President of SunGard, a leading software and technology services company (2011-present); Chairman and Chief Executive Officer of AonHewitt, a global provider of human resources consulting and outsourcing solutions (2010-2011); Chief Executive Officer of Hewitt Associates (2006-2010); President and Chief Executive Officer of The BISYS Group, Inc., a provider of outsourcing solutions for the financial services sector (2004-2006).

What he brings to the Board: With a 20-year career running some of the country’s leading services business, Mr. Fradin is in an ideal position to offer Best Buy’s executive team insight into the company’s efforts to rejuvenate its Geek Squad services business. At the same time, Mr. Fradin’s former role leading Hewitt Consulting and, ultimately, Aon Hewitt brings to the Best Buy Board of Directors a high degree of expertise regarding the Company’s Renew Blue transformation efforts, particularly those related to streamlining operations, reducing expenses and executive compensation and retention. Earlier in his career, Mr. Fradin ran the Global Employer Services business of Automatic Data Processing, Inc., where he nearly doubled revenues, significantly improved margins and diversified that business’s operations. He began his professional career at McKinsey and Company where, over 18 years, he rose to become a senior partner, specializing in offering Fortune 500 clients advice on new product and services innovations.

Education: Mr. Fradin holds a degree from the Wharton School of the University of Pennsylvania and from Harvard University.



23



Kathy J. Higgins Victor
Best Buy Committees:
Private Directorships:
Age: 57
 
l
Compensation & Human Resources Committee
 
l
University of St. Thomas Board of Trustees
 
 
 
 
 
Director Since:
 
l
Nominating, Corporate Governance & Public Policy Committee (Chair)
 
 
 
November 1999
 
 
 
 
 
 
 
 
 
 
 
Background: President and Founder of Centera Corporation, an executive development and leadership coaching firm (1994-present); Senior Vice President of Human Resources at Northwest Airlines, Inc., a global commercial airline now merged with Delta Air Lines (1991-1994).
  
What she brings to the Board: Ms. Higgins Victor, Founder and President of Centera Corporation, an executive development and leadership coaching firm, brings unmatched leadership to Best Buy’s goal of developing and retaining the industry’s best talent. She has extensive experience in executive development, human resources and succession planning. She led the Board’s efforts to recruit Company CEO, Hubert Joly, as well as several recent directors. Ms. Higgins Victor brings a global business perspective, having held international roles with Northwest Airlines, Inc. (now Delta Air Lines), where she was responsible for executive compensation, employee benefits and labor relations. Because of her expertise in corporate governance, organizational change management and global human resources, Best Buy relies on Ms. Higgins Victor to offer insight regarding its Renew Blue goal of building foundational capabilities necessary to unlock future growth strategies. This experience comes from a 30-year career advising senior executives among Fortune 100 companies.

Education: Ms. Higgins Victor holds a degree from the University of Avila.

Hubert Joly
 
Public Directorships:
Age: 54
 
 
 
 
l
Ralph Lauren Corporation
Director Since:
 
 
 
Private Directorships:
September 2012
 
 
 
 
l
Retail Industry Leaders Association
 
 
 
 
 
l
Minneapolis Institute of Arts
 
 
 
 
 
l
Minnesota Business Partnership
Background: President, Chief Executive Officer and a Director of Best Buy Co., Inc. (2012-present); President and Chief Executive Officer of Carlson, Inc., a worldwide hospitality and travel company (2008-2012); President and Chief Executive Officer of Carlson Wagonlit Travel, a business travel management company (2004-2008); senior executive positions with Vivendi S.A., a French multinational media and telecommunications company (1999-2004).

What he brings to the Board: Mr. Joly has a strong reputation as a turnaround and transformation expert, having begun his corporate career leading the struggling French division of Electronic Data Systems. In his three years with EDS, the company reversed its revenue slide, going from 1.3 billion French Francs to 2.1 billion, while significantly increasing profit margin. At Vivendi Universal, he helped lead the restructuring and growth of the company’s video game business, followed by the restructuring of the company itself. Prior to joining Best Buy, Mr. Joly was Chief Executive Officer of Carlson, where he led a renaissance across all its businesses, including its restaurant and hotel divisions. Before becoming Carlson's Chief Executive Officer, he led a subsidiary unit, Carlson Wagonlit Travel, growing its sales from $8 to $25 billion in four years. Mr. Joly serves on the boards of Ralph Lauren Corp., the Retail Industry Leaders Association, the Minnesota Business Partnership and as chair of the Minneapolis Institute of Arts. He began his career with McKinsey and Company, where he was a partner.

Education: Mr. Joly is a graduate of École des Hautes Études Commerciales de Paris (HEC Paris) and of the Institut d’Etudes Politiques de Paris.

 




24


David W. Kenny
Best Buy Committees:
Private Directorships:
Age: 52
l
Nominating, Corporate Governance & Public Policy Committee
 
l
The Weather Company
Director Since:
 
 
l
SessionM
September 2013
 
 
 
 
l
Teach for America
 
 
 
 
 
l
The Ad Council
Background: Chairman and Chief Executive Officer of The Weather Company, a leading provider of weather forecasts and information (2012-present); President of Akamai, a leading cloud platform technology company (2011-2012); Managing Partner of VivaKi, a provider of integrated strategy, technology and marketing solutions for internet-based ecommerce companies (2006-2010); Founder and Chief Executive Officer of Digitas, Inc., which was later merged with VivaKi (1997-2006).

What he brings to the Board: Mr. Kenny has an impressive track record of transforming companies, a valuable asset for Best Buy’s business imperatives. As Chairman and Chief Executive Officer of The Weather Company, which includes The Weather Channel and weather.com, Mr. Kenny has helped turn that organization into a media heavyweight that produces television programming, develops apps, publishes content and uses analytics to connect businesses to consumers through weather and climate-related content. Mr. Kenny uses those consumer centric and strategic skills to support Best Buy’s transformation efforts, including its goal of capturing online share and serving customers based on how, where, and when they want to be served. Mr. Kenny’s online leadership dates to 1997, when he founded Digitas, Inc., a provider of technology and marketing solutions for e-commerce and multi-channel companies. He has also served on the board of directors of The Corporate Executive Board, Akamai Technologies and Yahoo, where he played an essential role in that company’s transformation with the hiring of its current chief executive officer.

Education: Mr. Kenny holds degrees from the GM Institute (now Kettering University) and Harvard University.

Thomas L. "Tommy" Millner
Age: 60
Best Buy Committees:
Public Directorships:
l
Audit Committee
 
l
Cabela's Inc.
Director Since:
l
Nominating, Corporate Governance & Public Policy Committee
Private Directorships:
January 2014
 
 
l
Executive Committee of United States Sportmen’s Alliance
 
 
 
 
 
l
Cabela's Outdoor Fund
Background: President and Chief Executive Officer of Cabela’s, Inc., a leading omni-channel retailer of hunting, fishing and camping products (2009-present); President and Chief Executive Officer of Freedom Group, Inc. and its successor company, Remington Arms Company, Inc., a firearms and ammunition manufacturer (1999-2009).

What he brings to the Board: As the President and Chief Executive Officer of Cabela’s, Inc., Mr. Millner is a prominent presence in multi-channel retail. As the Chief Executive Officer of North America’s foremost outdoors retailer, Mr. Millner brings to the Best Buy board expertise in support of the Company’s Renew Blue strategic priorities, particularly those concerning effective merchandizing and multi-channel operations. He has experience leading a specialty retailer through a transformation; when he joined Cabela’s, the company’s market capitalization hovered near $500 million; five years later, it exceeded $5 billion. Before leading that remarkable growth, Mr. Millner was President and Chief Executive Officer of Remington Arms Company. Earlier in his career he was Chief Executive Officer and President of Pilliod Cabinet and held various leadership positions at Broyhill Furniture and Thomasville Furniture. Experience gained throughout his career complements Best Buy’s strategy for enhanced personalized consumer marketing. Mr. Millner has served on many non-profit boards and is a director and member of the Executive Committee of United States Sportsmen's Alliance and a director of Cabela's Outdoor Fund. 

Education: Mr. Millner holds a degree from Randolph Macon College.




25



Gérard R. Vittecoq
Best Buy Committees:
Private Directorships:
Age: 65
 
l
Audit Committee
 
l
Institutional Institute for Management Development Foundation
Director Since:
 
l
Finance & Investment Policy Committee (Chair)
 
 
September 2008
 
 
 
l
Ariel Compressors
 
 
 
 
 
l
Vanguard Logistics Services
 
 
 
 
 
l
Mantrac Group
Background: Group President and Executive Office Member of Catepillar, Inc., a manufacturer of construction and mining equipment (2004-2013); Vice President overseeing Europe-Africa-Middle East Product Development and Operations division of Catepillar, Inc. (2001-2004); Managing Director of Catepillar Belgium S.A. (1997-2001).

What he brings to the Board: Mr. Vittecoq’s global perspective and international business acumen are invaluable as the Company works to transform its business and improve operational efficiencies. As a Group President of Caterpillar, Inc., he was responsible for the development and implementation of Lean manufacturing, an effort that drove meaningful results for Caterpillar. Before he retired in 2013, Mr. Vittecoq led a strategic initiative to deliver world-class results for the company, focusing on customer expectations and driving competitive advantage, two elements crucial to Best Buy’s transformation. He is an innovator when it comes to supply chain and logistics and brings that creative, world-view thinking to Best Buy. Mr. Vittecoq serves on a variety of boards including the Swiss-American Chamber of Commerce and the Arteres Foundation of Geneva, Switzerland. He is an executive member of the World Business Council for Sustainable Development and a member of the Evian Group: Free Trade Think Tank.

Education: Mr. Vittecoq holds degrees from Ecole Superieure de Commerce in France and Laval University in Canada.



26



Directors Standing for Election in 2015:
(Ages and Committee roles as of March 13, 2014)
Bradbury H. Anderson
Best Buy Committees:
Public Directorships:
Age: 64
 
l
Finance and Investment Policy Committee
 
l
General Mills, Inc.
Director Since:
 
 
 
l
Waste Management, Inc.
March 2013
 
 
 
Private Directorships:
 
 
 
 
 
l
Carlson Inc.
 
 
l
Lighthaus Logic
 
 
 
 
 
l
American Film Institute
 
 
 
 
 
l
Minnesota Public Radio / American Public Media
Background: Chief Executive Officer of Best Buy Co., Inc. (2002-2009); President and Chief Operating Officer of Best Buy Co., Inc. (1991-2002).

What he brings to the Board: Mr. Anderson provides the perspective of a longtime Best Buy leader and an influential voice who has also shaped other highly regarded service organizations. He was Chief Executive Officer of Best Buy for seven years, having previously served as President and Chief Operating Officer. Having worked at Best Buy for more than 35 years, Mr. Anderson has deep insights into the company, its culture and its role in consumer electronics marketplace. That expertise is vital in supporting Best Buy’s mission of being the leading authority and destination for consumer electronics products and services. Mr. Anderson also serves on the board of General Mills, Inc., Carlson Inc., Lighthaus Logic, a retail customer intelligence company; and Waste Management Inc. Those companies have a strong record of leveraging their unique assets to create significant differentiation, which is one of the goals of Renew Blue.

Education: Mr. Anderson holds a degree from the University of Denver.

Sanjay Khosla
Best Buy Committees:
Public Directorships:
Age: 62
 
l
Compensation & Human Resources Committee
 
l
NIIT Ltd.
Director Since:
 
 
l
Zoetis
October 2008
 
l
Finance and Investment Policy Committee
Private Directorships:
 
 
 
 
l
Del Monte Foods
 
 
 
 
 
l
4C
 
 
 
 
 
l
Goodman Theatre (Chicago, IL)
Background: Senior Fellow at Kellogg School of Management, Northwestern University (2013-present); Senior Advisor to Boston Consulting Group, a global management consulting firm advising on business strategy (2013-present); President of Developing Markets of Mondelcz International, a global snacking and food brands company formerly of Kraft Foods, Inc. (2012-2013); Executive Vice President and President of Developing Markets at Kraft Foods, Inc., an international food and beverage company (2007-2012); Managing Director of Fonterra Co-operative Group Ltd., a multi-national dairy company based in New Zealand (2004-2006).

What he brings to the Board: With Best Buy’s transformation underway, Mr. Khosla provides deep experience in multi-national operations and transformational leadership. His deep knowledge of branding and consumer marketing is a great benefit to Best Buy, particularly in its Renew Blue merchandising and marketing initiatives. As President, Sanjay transformed Kraft developing markets from a $5 billion business to a $16 billion business in 6 years, while improving profitability by 50%. His leadership portfolio also includes a 27-year career with Unilever PLC, where he had a range of marketing and general management positions, giving him a deep understanding of consumer shopping behaviors.

Education: Mr. Khosla holds a degree from Indian Institute of Technology.

27



Allen U. Lenzmeier
Best Buy Committees:
Private Directorships:
Age: 70
 
l
Finance and Investment Policy Committee
 
l
American Telecare, Inc.
Director Since:
 
 
 
l
Envoy Medical Corporation
March 2013
 
 
 
 
l
Boys & Girls Clubs of America, Twin Cities Chapter
 
 
 
 
 
 
 
 
l
Micro Grants
 
 
 
 
 
l
Minnesota Orchestra Association
 
 
 
 
 
l
Richard M. Schulze Family Foundation
Background: Vice-Chairman of Best Buy Co., Inc. (2004-2009); President and Chief Operating Officer of Best Buy Co., Inc. (2002-2004); President of Retail Stores of Best Buy Co., Inc. (2001-2002); Executive Vice President and Chief Financial Officer of Best Buy Co., Inc. (1991-2001).

What he brings to the Board: Mr. Lenzmeier served Best Buy in various leadership capacities for more than 25 years, including President and Chief Operating Officer and President of Best Buy Retail Stores. His extensive retail experience and company knowledge are crucial to Renew Blue efforts, as are his organizational skills and expertise in operational performance and merchandising. At different points in the Company’s history, Mr. Lenzmeier played a critical role in guiding Best Buy through periods of great change, some of which are similar in scope to the current Renew Blue transformation. He currently serves on the boards of Envoy Medical Corp., a medical device company, and American TeleCare Inc., a tele-health industry company, as well as the Twin Cities branch of the Boys and Girls Clubs of America and the Minnesota Orchestra Association. He is also a trustee for the Pacer organization and previously served on the board of UTStarcom, Inc., a network solution company.

Education: Mr. Lenzmeier holds a degree from Minnesota State University.

Hatim A. Tyabji
Best Buy Committees:
Private Directorships:
Age: 69
 
l
Audit Committee (Chair)
 
l
Jasper Wireless (Chairman)
Director Since:
 
 
 
 
l
Touch Networks (Australia)
April 1998
 
 
 
l
Missile Defense Advocacy Alliance
(Appointed Chairman June 2012)
 
 
 
 
 
 
 
 
 
 
Background: Executive chairman of Bytemobile, Inc., a wireless Internet infrastructure provider (2001-2012); Chairman and Chief Executive Officer of Saraide, Inc., a provider of Internet and wireless data services (1998-2000); Chairman and Chief Executive Officer of VeriFone, Inc., a global transaction automation enterprise (1986-1998).

What he brings to the Board: With a decades-long record of founding, leading or revitalizing technology companies, Mr. Tyabji epitomizes Best Buy’s commitment to business transformation and highlights its focus on e-commerce. Most notably, during his time as Chairman and Chief Executive Officer of VeriFone, the company’s annual revenues grew from $31.2 million to $600 million and it merged with Hewlett-Packard in a $1.4 billion transaction. He is a visionary in combining wireless communications and the Internet and, in the late 1990s, was instrumental in leading the next phase of the mobile internet revolution, enabling the world’s leading carriers to deliver video, web and application services to billions of subscribers, with groundbreaking technologies. He continues to be active in this work as Chairman of Jasper Wireless and on the boards of Touch Networks and the Missile Defense Advocacy Alliance.

Education: Mr. Tyabji holds degrees from the College of Engineering in Poona, India, from the State University of New York, Buffalo, and from Syracuse University.


28


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information about the number of shares of our common stock beneficially owned at February 1, 2014 (unless otherwise indicated), by our CEO, our Chief Financial Officer ("CFO"), and our three other most highly compensated executive officers during the most recent fiscal year. The table provides similar information for each director and director nominee, all directors and executive officers as a group, and each person, or any group that we know who beneficially owns more than 5% of the outstanding shares of our common stock.
Name and Address(1)
 
Number of Shares
Beneficially Owned

 
 
 
Percent of Shares
Beneficially Owned

Hubert Joly, President, Chief Executive Officer and Director
 
479,820

 
(2
)
 
*

Sharon L. McCollam, Chief Administrative Officer and Chief Financial Officer
 
288,151

 
(3
)
 
*

Shari L. Ballard, President, International and Chief Human Resources Officer
 
570,237

 
(4
)
 
*

Jude C. Buckley, Chief Commercial Officer
 
160,143

 
(5
)
 
*

R. Michael Mohan, Chief Merchandising Officer
 
261,740

 
(6
)
 
*

Hatim A. Tyabji, Chairman of the Board of Directors
 
156,987

 
(7
)
 
*

Bradbury H. Anderson, Director
 
191,115

 
(8
)
 
*

Lisa M. Caputo, Director
 
28,827

 
(9
)
 
*

Russell P. Fradin, Director
 
6,327

 
(10
)
 
*

Kathy J. Higgins Victor, Director
 
68,307

 
(11
)
 
*

David W. Kenny, Director
 
2,304

 
(12
)
 
*

Sanjay Khosla, Director
 
39,707

 
(13
)
 
*

Allen U. Lenzmeier, Director
 
775,532

 
(14
)
 
*

Thomas L. Millner, Director
 
791

 
(15
)
 
*

Gérard R. Vittecoq, Director
 
40,917

 
(16
)
 
*

All current directors and executive officers, as a group (17 individuals)
 
3,396,524

 
(17
)
 
*

Richard M. Schulze, Founder and Chairman Emeritus 3033 Excelsior Blvd., Suite 525 Minneapolis, MN 55416
 
61,271,674

 
(18
)
 
17.67
%
Fidelity (FMR LLC)
82 Devonshire Street
Boston, MA 02109
 
42,537,949

 
(19
)
 
12.29
%
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
 
19,270,786

 
(20
)
 
5.56
%
*
Less than 1%.
 
(1)
The business address for all current directors and executive officers is 7601 Penn Avenue South, Richfield, Minnesota, 55423.
 
(2)
The figure represents: (a) 194,229 outstanding shares owned by Mr. Joly; and (b) 154,929 unvested restricted stock units subject to a time-based vesting schedule and holding requirement; and (c) 130,662 unvested shares of restricted stock subject to a time-based vesting schedule.
 
(3)
The figure represents: (a) 18,715 outstanding shares owned by Ms. McCollam; (b) 141,721 unvested restricted shares subject to a time-based vesting schedule; and (c) options to purchase 127,714 shares, which she could exercise within 60 days of February 1, 2014.
 
(4)
The figure represents: (a) 3,621 outstanding shares owned by Ms. Ballard; (b) 151,155 unvested restricted shares subject to a time-based vesting schedule; and (c) options to purchase 415,461 shares, which she could exercise within 60 days of February 1, 2014.
 
(5)
The figure represents: (a) 18,672 outstanding shares owned by Mr. Buckley; (b) 73,328 unvested restricted shares subject to a time-based vesting schedule; and (c) options to purchase 68,143 shares, which he could exercise within 60 days of February 1, 2014.
 
(6)
The figure represents: (a) 17,613 outstanding shares owned by Mr. Mohan; (b) 87,891 unvested restricted shares subject to a time-based vesting schedule; and (c) options to purchase 154,801 shares, which he could exercise within 60 days of February 1, 2014.
 
(7)
The figure represents: (a) 81,833 outstanding shares owned by Mr. Tyabji; (b) 12,654 unvested restricted stock units subject to a time-based vesting schedule and holding requirement; and (c) options to purchase 62,500 shares, which he could exercise within 60 days of February 1, 2014.
 
(8)
The figure represents: (a) 19,183 outstanding shares registered in the name of Mr. Anderson and a co-trustee, and held by them as trustees of a trust for the benefit of Mr. Anderson; (b) 95,517 outstanding shares registered in the name of Mr. Anderson's spouse and a co-trustee, and held by them as trustees

29



of a trust for the benefit of Mr. Anderson's spouse (Mr. Anderson has disclaimed beneficial ownership of these shares); (c) 35,494 outstanding shares held in a Grantor Retained Annuity Trust registered in the name of Mr. Anderson's spouse and co-trustees, and held by them as trustees for the benefit of Mr. Anderson's spouse (Mr. Anderson has disclaimed beneficial ownership of these shares); (d) 34,594 outstanding shares owned by the Anderson Family Foundation, of which Mr. Anderson is a director; and (e) 6,327 unvested restricted stock units subject to a time-based vesting schedule and holding requirement.
 
(9)
The figure represents: (a) 10,000 outstanding shares owned by Ms. Caputo; (b) 6,327 unvested restricted stock units subject to a time-based vesting schedule and holding requirement; and (c) options to purchase 12,500 shares, which she could exercise within 60 days of February 1, 2014.
 
(10)
The figure represents: 6,327 unvested restricted stock units subject to a time-based vesting schedule and holding requirement.
 
(11)
The figure represents: (a) 10,730 outstanding shares owned by Ms. Higgins Victor; (b) 6,327 unvested restricted stock units subject to a time-based vesting schedule and holding requirement; and (c) options to purchase 51,250 shares, which she could exercise within 60 days of February 1, 2014.
 
(12)
The figure represents: 2,304 unvested restricted stock units subject to a time-based vesting schedule and holding requirement.
 
(13)
The figure represents: (a) 690 outstanding shares owned by Mr. Khosla; (b) 11,440 outstanding shares registered in the name of Mr. Khosla and a co-trustee, and held by them as trustees of a trust for the benefit of Mr. Khosla; (c) 6,327 unvested restricted stock units subject to a time-based vesting schedule and holding requirement; and (d) options to purchase 21,250 shares, which he could exercise within 60 days of February 1, 2014.
 
(14)
The figure represents: (a) 40,913 outstanding shares held in a Grantor Retained Annuity Trust registered in the name of Mr. Lenzmeier and co-trustees, and held by them as trustees for the benefit of Mr. Lenzmeier; (b) 688,292 outstanding shares registered in the name of Mr. Lenzmeier and a co-trustee, and held by them as trustees of a trust for the benefit of Mr. Lenzmeier and his spouse; (c) 6,327 unvested restricted stock units subject to a time-based vesting schedule and holding requirement; and (d) options to purchase 40,000 shares, which he could exercise within 60 days of February 1, 2014.
 
(15)
The figure represents: 791 unvested restricted stock units subject to a time-based vesting schedule and holding requirement.
 
(16)
The figure represents: (a) 13,340 outstanding shares owned by Mr. Vittecoq; (b) 6,327 unvested restricted stock units subject to a time-based vesting schedule and holding requirement; and (c) options to purchase 21,250 shares, which he could exercise within 60 days of February 1, 2014.
 
(17)
The figure represents: (a) outstanding shares and options described in the preceding footnotes (2) thru (16); (b) 325,909 outstanding shares owned by executive officers not named in the table; (c) 107,115 unvested restricted shares, subject to a time-based vesting schedule, owned by executive officers not named in the table; (d) 4,991 outstanding shares registered in the name of the Trustee, and held by the Trustee in connection with the Retirement Savings Plan for the benefit of other executive officers; and (e) options granted to other executive officers to purchase 196,415 shares, which they could exercise within 60 days of February 1, 2014.
 
(18)
Mr. Schulze is our Founder and Chairman Emeritus, but no longer a member of our Board and is not considered an executive officer. He is listed here due to his status as a beneficial owner of more than 5% of the Company. The figure represents: (a) 1,732,500 outstanding shares owned by Mr. Schulze; (b) 43,293,086 outstanding shares registered in the name of Mr. Schulze and a co-trustee, and held by them as trustees of a trust for the benefit of Mr. Schulze, of which up to $150 million in aggregate value of shares have been pledged by the trust as collateral to secure a line of credit; (c) 10,425,053 outstanding shares registered in the name of Mr. Schulze and co-trustees, and held by them as trustees of Grantor Retained Annuity Trusts for the benefit of Mr. Schulze and his family; (d) 1,143,043 outstanding shares registered in the name of Mr. Schulze and a co-trustee, and held by them as trustees of the Sandra Schulze Grantor Retained Annuity Trust; (e) 950,169 outstanding shares held by a limited partnership of which Mr. Schulze is the sole general partner (Mr. Schulze has disclaimed beneficial ownership of these shares except to the extent of his pecuniary interest therein); (f) 252,312 outstanding shares held by a limited partnership of which a limited liability company owned by Mr. Schulze is the sole general partner; (g) 31,672 outstanding shares held by a limited partnership of which a limited liability company owned by Mr. Schulze is the sole general partner; (h) 13,909 outstanding shares registered in the name of Mr. Schulze's spouse and co-trustees, and held by them as trustees of trusts for the benefit of Mr. Schulze's spouse (Mr. Schulze has disclaimed beneficial ownership of these shares); (i) 183,726 outstanding shares registered in the name of Mr. Schulze and a co-trustee, and held by them as trustees of the Sandra Schulze Revocable Trust dated June 14, 2001 (Mr. Schulze has disclaimed beneficial ownership of these shares); (j) 2,061 outstanding shares held in Mr. Schulze's individual retirement account; (k) 3,166,972 outstanding shares owned by The Richard M. Schulze Family Foundation, of which Mr. Schulze is the sole director; (l) 77,171 outstanding shares registered in the name of the Trustee in connection with the Retirement Saving Plan for the benefit of Mr. Schulze; and (m) options to purchase 30,000 shares, which he could exercise within 60 days of February 1, 2014.
 
(19)
As reported on the owner's most recent Schedule 13G filed with the SEC on February 14, 2014. FMR LLC and certain related entities have sole voting power over 1,091,350 shares and sole dispositive power over 42,537,949 shares.
 
(20)
As reported on the owner's most recent Schedule 13G filed with the SEC on February 11, 2014. The Vanguard Group has sole voting dispositive power over 445,577 shares, sole dispositive power over 18,861,038 shares; and shared dispositive power of 409,748 shares.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and shareholders who beneficially own more than 10% of our common stock file initial reports of ownership with the SEC. They must also file reports of changes in ownership with the SEC. In addition, they are required by SEC regulations to provide us copies of all Section 16(a) reports that they file with the SEC. Based solely on a review of such Section 16(a) reports, management and the Board believe our directors, executive officers and shareholders who beneficially own more than 10% of our common stock complied with the Section 16(a) filing requirements during the fiscal year ended February 1, 2014, except that on December 12, 2013, an amended Form 4 was filed to correct the number of stock options granted on December 10, 2012 to Sharon L. McCollam, which were underreported due to an administrative error.


30


CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We have a written Related Party Transactions Policy that prohibits our participation in material related party transactions with officers, directors, controlling persons and other insiders unless the transaction provides us with a demonstrable incremental benefit and the terms are competitive with terms available from unaffiliated third parties.

Pursuant to our Related Party Transactions Policy, if a related party transaction (as defined by SEC rules and the policy) involving an amount greater than $120,000 is proposed, members of the Audit Committee who have no financial interest in the transaction review the transaction to determine whether the necessary incremental benefit is present and whether the transaction should be recommended to the Board for approval. Members of the Board who have no financial interest in the transaction then review and, if appropriate, approve the transaction. In addition, ongoing related party transactions are reviewed annually by the Audit Committee and the Board to ensure that such transactions continue to provide the necessary incremental benefit to us and have competitive terms. Each of the transactions discussed below were approved by the Audit Committee in February 2014 and the Board in March 2014, in accordance with our Related Party Transactions Policy.

We do not have any credit arrangements between our officers, directors, controlling persons and other insiders.

Richard M. Schulze

On March 25, 2013, we entered into a letter agreement with Mr. Schulze pursuant to which, among other things, Mr. Schulze was named to the lifetime honorary title of "Founder and Chairman Emeritus" of the Company, although he is not an executive and no longer a member of our Board. Under this letter agreement, we agreed to compensate Mr. Schulze in an amount not to exceed $2.125 million in connection with his preparation and ongoing consultation with regard to a business plan for Best Buy. We agreed to pay this sum in quarterly installments beginning on the three month anniversary of the signing of the letter agreement. In addition, we agreed to compensate Mr. Schulze an annual base salary of $150,000, and to provide lifetime medical benefits for him, his spouse and his eligible dependents in accordance with our plans, practices, programs and policies in effect generally for our executives and their dependents. We also agreed to provide office space and administrative support, and to reimburse Mr. Schulze for his costs and out of pocket expenses incurred in the performance of his duties as Chairman Emeritus. Mr. Schulze is also entitled, under the letter agreement, to nominate two directors for appointment to the Board of Directors. Messrs. Anderson and Lenzmeier have been elected to the Board and have been nominated for election for two-year terms to the Board at the Meeting. The letter agreement has an initial term which will last until Mr. Schulze reaches the age of 75 (which will occur in January 2016), except as specifically described above.

We leased two of our U.S. Best Buy former store locations from Mr. Schulze. We entered into both real estate leases with Mr. Schulze prior to 1990, and the Board approved the leases (with Mr. Schulze not voting). The Board relied on one or more of its members who had no financial interest in the properties to review market comparisons, look into alternative rental agreements and negotiate with Mr. Schulze. At the time of entering into these leases, the Board determined that they were in our best interest and had terms that were competitive with terms available from unaffiliated third parties. We closed both stores in May 2012; however, we continued to pay rent for both locations. During fiscal 2014, we paid aggregate rents of approximately $938,000 for the two store locations leased from Mr. Schulze. In March 2014, with Board approval, we entered into a lease termination agreement for one of the store locations, in which we agreed to pay a termination fee of approximately $800,000 in exchange for a release from our future rent and other obligations under the lease (which totaled approximately $3,000,000). The remaining store location lease includes escalation clauses and, depending upon our exercise of successive renewal options, runs through 2018. We are looking into options for use of the space or subtenancy of the remaining store location to mitigate our costs.

We purchase certain store fixtures from Phoenix Fixtures, Inc. ("Phoenix"), a company owned by Mr. Schulze's brother, Robert Schulze. Fixture contracts are submitted through a competitive bidding process in which Phoenix is free to participate. Payments made to Phoenix are pursuant to contracts awarded following the competitive bidding process. In light of Mr. Schulze's relationship with Phoenix, the Board reviewed our transactions with Phoenix and determined that the transactions were on fair terms to us and that Phoenix provides advantages with respect to service and delivery as compared with its competitors. Accordingly, the Board approved the transactions and our continued business dealings with Phoenix. The total amount paid to Phoenix during fiscal 2014 was approximately $5.6 million USD and $202,000 CAD, compared to approximately $7.5 million USD and $387,000 CAD paid in fiscal 2013. All transactions with Phoenix during fiscal 2014 were subject to the competitive bidding process discussed above to ensure fair prices and terms.

Susan S. Hoff, Mr. Schulze's daughter, was the Founder, Chairperson and Chief Executive Officer of the Best Buy Foundation (formerly known as The Best Buy Children's Foundation), for which she served as principal executive officer since the

31



inception of the foundation. In June 2014, Ms. Hoff left the Company. In conjunction with her departure, Ms. Hoff received a severance package that was negotiated based on her past positions and term of service with us. During fiscal 2014, Ms. Hoff received approximately $764,000 in total cash compensation, including her base salary up until her termination and her severance payment following her termination. Also during fiscal 2014, Ms. Hoff was awarded options to purchase 6,867 shares of Best Buy common stock at an exercise price of $23.66 per share, 2,389 shares of time-based restricted stock, and 2,124 shares of performance-based restricted stock. The stock options expire in June 2016 and the stock options and time-based restricted stock became fully vested upon her termination. Ms. Hoff forfeited her performance shares at the time of her termination.

Fidelity

FMR LLC ("Fidelity") filed an amended Schedule 13G in February 2014, stating that it holds 12.294% of the Company's common stock. As a result of beneficially owning more than 5% of our common stock, Fidelity is currently considered a “related party” under our Related Party Transactions Policy. Certain affiliates of Fidelity provide services to us in connection with the record keeping and administration of our stock plans (including the Employee Stock Purchase Plan and the Long-Term Incentive Plan). We paid these entities approximately $599,000 for these services for fiscal 2014. The administrative services contracts were initially entered into prior to Fidelity's Schedule 13G filing and 5% holder status. The contracts were negotiated at arm's length and there is no indication that the Company or Fidelity received preferential treatment as a result of the relationship.






32


AUDIT COMMITTEE REPORT

The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

In fiscal 2014, the Audit Committee was comprised of three members. The Audit Committee acts under a written charter adopted and approved by the Board. The Audit Committee's charter is posted on our website at www.investors.bestbuy.com - select the "Corporate Governance" link. All members of the Audit Committee meet the SEC and NYSE definitions of independence and financial literacy for audit committee members. In addition, the Board has determined that two of the three members of the Audit Committee who served during fiscal 2014 are "audit committee financial experts" for purposes of SEC rules. No member of the Audit Committee serves on the audit committee of more than three public companies.

During fiscal 2014, Mr. Tyabji continued to serve as Chair of the Audit Committee. Mr. Lenzmeier resigned from the Audit Committee following the Regular Meeting of Shareholders in June 2013, and Mr. Fradin was appointed as a member of the Audit Committee, effective June 20, 2013. Mr. Millner was appointed to the Audit Committee on March 13, 2014, and has been deemed an "audit committee financial expert" for purposes of SEC rules. As Mr. Millner did not serve on the Audit Committee during fiscal 2014, he has not signed off on this Audit Committee Report for that time period.

Committee Meetings

The Audit Committee met seven times, including four times via conference call, during fiscal 2014. The Audit Committee schedules its meetings to ensure it has sufficient time to devote appropriate attention to all of its tasks. The Audit Committee meetings include regular executive sessions with our independent registered public accounting firm, Deloitte & Touche LLP ("D&T"), our internal auditors and management. The Audit Committee also discusses with our internal auditors and D&T the overall scope and plans for their respective audits.

Recommendation Regarding Financial Statements

The Audit Committee, on behalf of the Board, reviewed and discussed with both management and D&T our annual audited consolidated financial statements for the fiscal year ended February 1, 2014, and our quarterly operating results for each quarter in such fiscal year, along with the related significant accounting and disclosure issues. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16 "The Auditor's Communication with Audit Committees."

The Audit Committee reviewed and discussed with D&T its independence from us and our management. As part of that review, the Audit Committee received from D&T the written disclosures and the letter required by applicable rules of the Public Company Accounting Oversight Board regarding the independent accountant's communications with audit committees concerning independence. In addition, the Audit Committee reviewed all services provided by and the amount of fees paid to D&T in fiscal 2014. In reliance on the reviews and discussions with management and D&T, the Audit Committee believes that the services provided by D&T were compatible with, and did not impair, its independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, that our annual audited consolidated financial statements be included in our Annual Report on Form 10-K for the period ended February 1, 2014, as filed with the SEC.

Pre-Approval Policy

Consistent with SEC rules regarding auditor independence, the Audit Committee is responsible for appointing, setting fees for and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility and in accordance with the Securities Exchange Act of 1934, it is the policy of the Audit Committee to pre-approve all permissible services provided by our independent registered public accounting firm except for minor audit-related engagements which in the aggregate do not exceed 5% of the fees we pay to our independent registered public accounting firm during a fiscal year.

Each year, prior to engaging our independent registered public accounting firm, management submits to the Audit Committee for approval a list of services expected to be provided during that fiscal year within each of the three categories of services described below, as well as related estimated fees, which are generally based on time and materials.

33



Audit services include audit work performed on the financial statements, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters and discussions surrounding the proper application of financial accounting and/or reporting standards.

Audit-related services include assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, statutory audits, employee benefit plan audits and special procedures required to meet certain regulatory requirements.

Tax services include compliance and other non-advisory services performed by the independent registered public accounting firm when it is most efficient and effective to use such firm as the tax service provider.

As appropriate, the Audit Committee then pre-approves the services and the related estimated fees. The Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the estimate periodically throughout the year by category of service. During the year, circumstances may arise when it becomes necessary to engage our independent registered public accounting firm for additional services not contemplated in the initial annual proposal. In those instances, the Audit Committee pre-approves the additional services and related fees before engaging our independent registered public accounting firm to provide the additional services.

AUDIT COMMITTEE

Hatim A. Tyabji (Chair)
Russell P. Fradin
Gérard R. Vittecoq



34


ITEM OF BUSINESS NO. 2 — RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THIS SECTION SHOULD BE READ IN CONJUNCTION WITH THE "AUDIT COMMITTEE REPORT"

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. As part of this oversight, the Audit Committee considers the firm’s independence, qualifications, performance, and whether the independent registered public accounting firm should be rotated, as well as the impact of such a rotation. The Audit Committee appointed Deloitte & Touche LLP ("D&T") as our independent registered public accounting firm for the fiscal year ending February 1, 2014. D&T has been retained as our independent registered public accounting firm since fiscal 2006. We will ask shareholders to ratify the appointment of D&T as our independent registered public accounting firm at the Meeting. Representatives of D&T are expected to be present at the Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Principal Accountant Services and Fees

The Audit Committee is responsible for the audit fee negotiations associated with the retention of our independent registered public accounting firm. For the fiscal years ended February 1, 2014, and February 2, 2013, D&T served as our independent registered public accounting firm. The following table presents the aggregate fees incurred for services rendered by D&T during fiscal 2014 and fiscal 2013, respectively. The fees listed below were pre-approved by our Audit Committee pursuant to the Audit Committee's pre-approval policy as described in the Audit Committee Report:
Service Type
 
Fiscal 2014

 
Fiscal 2013

Audit Fees(1)
 
$
3,079,000

 
$
3,826,000

Audit-Related Fees(2)
 
1,108,000

 
2,460,000

Tax Fees(3)
 
268,000

 
570,000

Total Fees
 
$
4,455,000

 
$
6,856,000

 
(1)
Consists of fees for professional services rendered in connection with the audits of our consolidated financial statements and the effectiveness of our internal control over financial reporting for the fiscal years ended February 1, 2014, and February 2, 2013; the reviews of the consolidated financial statements included in each of our Quarterly Reports on Form 10-Q during those fiscal years; consultations on accounting matters; and SEC registration statements.
 
(2)
Consists primarily of fees for statutory audit filings, as well as the audits of our retirement savings plans and foundations. Includes fees of $1,477,000 incurred for fiscal 2013 for statutory audits of Best Buy Europe, which we sold on June 26, 2013.
 
(3)
Consists primarily of tax compliance services based on time and materials.
 
It is our policy that our independent registered public accounting firm be engaged to provide primarily audit and audit-related services. However, pursuant to the policy, in certain circumstances and using stringent standards in its evaluation, the Audit Committee may authorize our independent registered public accounting firm to provide tax services when it determines that D&T is the most efficient and effective tax service provider.

Board Voting Recommendation

The members of the Audit Committee and the Board believe that the continued retention of D&T to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and our shareholders. The Board recommends that shareholders vote FOR the proposal to ratify the appointment of D&T as our independent registered public accounting firm for the fiscal year ending January 31, 2015.
 
The affirmative vote of a majority of the voting power of the shares present and entitled to vote at the Meeting is required to ratify D&T as our independent registered accounting firm.
 
Although ratification is not required pursuant to our By-laws or otherwise, the Board is submitting the selection of D&T to our shareholders for ratification because we value our shareholders' views on the Company's independent registered public accounting firm. If the appointment of D&T were not to be ratified by the shareholders, the Audit Committee would not be required to appoint another independent registered public accounting firm, but would give consideration to an unfavorable vote. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

35



EXECUTIVE AND DIRECTOR COMPENSATION

Introduction

The Compensation Discussion and Analysis below describes how the Compensation Committee of the Board ultimately decided to compensate the following individuals, all of whom are considered Named Executive Officers ("NEOs") of the Company under the SEC rules for fiscal 2014 (the titles below are as of February 1, 2014, the last day of fiscal 2014):

•
Hubert Joly, President and Chief Executive Officer;

•
Sharon L. McCollam, Chief Administrative Officer and Chief Financial Officer;

•
Shari L. Ballard, President, International and Chief Human Resources Officer;

•
Jude C. Buckley, Chief Commercial Officer; and

•
R. Michael Mohan, Chief Merchandising Officer.

Mr. Joly was appointed as our President and CEO in September 2012, and Ms. McCollam joined us as our Chief Administrative Officer and Chief Financial Officer in December 2012. In September 2013, upon the departure of our former Chief Human Resources Officer, Ms. Ballard assumed the responsibilities of the human resources function in addition to her responsibilities as President, International. In April 2014, Ms. Ballard assumed responsibility for all of our domestic retail operations and transitioned her international responsibilities to other executives. Mr. Buckley and Mr. Mohan became executive officers, and eligible to be considered NEOs, upon their promotions to Chief Commercial Officer and Chief Merchandising Officer, respectively, in January 2014.

Consideration of Last Year's “Say on Pay” Vote

At our Regular Meeting of Shareholders in June 2013, 83% of our shareholders voted for our “Say on Pay” proposal, which was a significant increase from the level of support we received in 2012 (when 38% of shareholders voted for our "Say on Pay" proposal) while navigating a series of unplanned leadership transitions.

We believe the level of support we received from shareholders last year was driven in part by the heightened shareholder outreach we conducted prior to our 2013 Regular Meeting of Shareholders. Throughout the year, we reached out to the majority of our top 50 shareholders (including a majority of our top 20 shareholders) offering to discuss any concerns regarding executive compensation practices and other governance issues. As a result of these outreach efforts, Compensation Committee members and senior management engaged in extended direct conversations with shareholders, including the majority of our top 20 shareholders, to answer their questions and provide commentary on the compensation decisions made during the year. We also provided additional disclosure to shareholders in the form of our Chairman’s letter submitted with our proxy statement and in our supplemental proxy filing in June 2013. Further, as discussed in the Corporate Governance at Best Buy — Shareholder Engagement section, we regularly engage with our shareholders throughout the year regarding their various priorities and we welcome their feedback on our practices and policies.

Shareholder feedback received during the outreach process was supportive of the decisions necessary to recruit the new CEO and CFO in the prior year and the Company’s increased focus on performance-based pay going forward. As discussed in greater detail below, in addition to considering last year's "Say on Pay" results, the Compensation Committee incorporated this direct shareholder feedback into our fiscal 2014 compensation decisions. In fiscal 2014, we emphasized continued delayering of our organization to optimize the performance of our executive team and further aligning pay with consistent business performance metrics applicable to all executives.

This focus resulted in the Compensation Committee increasing the performance share component of our CEO's long-term incentive award to 50% (from one third) and maintaining relative total shareholder return as the sole basis for measurement. The Compensation Committee also linked officer short-term incentive metrics to our current key Company Renew Blue strategy. Further, we continued to enhance our officer and non-officer incentive plans to be market-based and performance-driven and generally consistent across the officer population.



36


Summary of Executive Compensation Practices

Pay for Performance

ü
We tie pay to performance by setting clear financial goals and putting a majority of compensation at risk based on goal achievement and absolute and relative changes in our stock price.

ü
We have multiple performance targets that differ for the long-term and short-term plans.

ü
We use performance equity (50% for the CEO and one third for the other NEOs) as a large portion of our long-term incentive program and total compensation opportunity.

Risk Mitigators

ü
We review peer group market data when making executive compensation decisions.

ü
We have share ownership and trading guidelines for executive officers and Board members.

ü
We have anti-hedging and anti-pledging policies and clawback provisions to mitigate risk and discourage perverse behaviors.

ü
We have robust processes to identify risk.

Shareholder Engagement

ü
We have a shareholder engagement program that covers, among other things, executive compensation issues.

ü
We take investor concerns and input back to the Compensation Committee, which then takes the findings into account when reviewing executive compensation programs and policies.

ü
Our Compensation Committee uses an outside independent compensation consulting firm that performs no other services for the Company.

Prohibited Practices

û
We do not reprice underwater options or stock appreciation rights without shareholder approval.

û
We do not have tax gross-ups on change-in-control provisions.

û
We do not have supplemental executive retirement plans that provide extra benefits to the NEOs.

û
We do not pay dividends or dividend equivalents on unearned performance shares.

As stated in the Proxy Summary section, fiscal 2014 was the first full year of our Renew Blue transformation. In 2014, we made significant progress in this transformation, including:

•
Enhancing how we serve our customers and building key foundational capabilities for the future;

•
Strengthening our management team and improving employee engagement;

•
Partnering with two of our top vendors to develop and launch 1,400 Samsung and 600 Windows “stores-within-a-store,” in a win-win-win arrangement that is benefiting our customers, our vendors and our shareholders; and

•
Making progress in stabilizing our top-line despite industry softness, delivering cost reductions above our original target, and strengthening our balance sheet.


37



Key Fiscal 2014 Compensation Decisions

Our key compensation decisions for fiscal 2014, as explained in further detail within our Compensation Discussion and Analysis, are summarized here:

•
Base Salaries: We made no change to the existing NEOs' base salaries (Mr. Joly, and Mses. McCollam and Ballard). They remained at their fiscal 2013 levels. The new NEOs (Messrs. Buckley and Mohan) received salary increases due to increased responsibilities.

•
Short-Term Incentives: We made no change to the short-term incentive plan target payout percentages, other than an increase for Mr. Mohan in conjunction with his expanded role and responsibilities. Above-target performance resulted in payouts of 107% of target for our NEOs.

•
Long-Term Incentives: Our long-term incentive program changes were limited to an increased target and one-time award for Mr. Mohan in conjunction with his expanded role and responsibilities and a change in the CEO’s mix. The CEO’s long-term incentive mix was adjusted to place a greater emphasis on performance shares. Replacing the prior year’s one-third split, Mr. Joly's fiscal 2014 long-term incentive award consisted of 50% performance-based restricted shares, 20% stock options and 30% time-based restricted shares. Grants for all NEOs, except the CEO, consisted of one third performance-based restricted shares, one third stock options and one third time-based restricted shares.

•
Other Compensation: The NEOs continue to receive the same employee benefits, perquisites and other rewards generally offered to our U.S.-based officers. We do not provide special pension benefits or other non-performance-based entitlements to the NEOs that are inconsistent with our compensation philosophy.

Preview of Key Fiscal 2015 Compensation Decisions

•
Base Salaries: In fiscal 2015, we intend for base salaries to remain consistent with prior year levels.

•
Short-Term Incentives: The same metrics and weighting as used in fiscal 2014 will be used in 2015. Short-term incentive plan target payout percentages will remain consistent with prior levels.

•
Long-Term Incentives: For fiscal 2015, the long-term incentive program will continue to use the same structure as fiscal 2014. Long-term incentive plan awards will remain consistent with prior levels.
 
•
Other Compensation: NEOs will continue to receive the same employee benefits, perquisites and other rewards generally offered to our U.S.-based officers.



38


Compensation Discussion and Analysis

Compensation Philosophy, Objectives and Policies

The Company’s compensation philosophy is to align executive compensation with shareholders’ interests. To achieve this, the Compensation Committee works to ensure that base salaries are market competitive, and short- and long-term incentives are heavily weighted toward Company performance and are consistent with market practice.
We implement these objectives by using programs that are designed to align employee interests with Company goals and create a common vision of success without undue risk.

The following executive compensation policies and practices were in effect during fiscal 2014:

•
Pay-for-performance. We tie pay to performance. The majority of executive pay is not guaranteed and tied to performance metrics designed to drive shareholder value. If performance goals are not attained, no compensation is paid.

•
Mitigate undue risk. We mitigate undue risk, including utilizing caps on incentive award payments and vesting periods on potential equity payments, clawback provisions, restrictive covenants and multiple performance metrics. The Compensation Committee annually reviews our compensation risk profile to ensure that our compensation-related risks are not reasonably likely to have a material adverse effect on the Company.

•
Independent Compensation Committee and Committee Consultant. The Compensation Committee is comprised solely of independent directors. The Compensation Committee's independent compensation consultant is retained directly by the Compensation Committee and performs no other consulting or other services for the Company.

•
Shareholder engagement. We routinely engage with shareholders regarding executive compensation and related issues.

•
Re-pricing of stock options. Under the terms of both our existing and proposed Omnibus Plans, a stock option may not, without the approval of our shareholders, be: (i) amended to reduce its initial exercise price (except for adjustments in the case of a stock split or similar event); (ii) canceled and replaced by a stock option having a lower exercise price or (iii) cancelled and replaced with cash or other award payments.

•
Stock ownership and trading policies. We have stock ownership guidelines for our executive officers, including the NEOs. As of the end of fiscal 2014, each NEO was in compliance with the guidelines. We prohibit all employees, including the NEOs, and members of the Board from hedging Company securities. In addition, our executive officers and Board members are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, unless approved in advance by the Compensation Committee.

•
NEOs' benefits. Our executive officers, including the NEOs, generally receive the same employee benefits as other officers. We do not have an executive retirement plan that provides extra benefits to the NEOs.




39



Governance

The following table summarizes the roles of each of the key participants in the executive compensation decision-making process for our NEOs.
Key Participant
 
 
 
 
Compensation Committee
 
 
 
 
Role in Decision-Making Process
Establishes our compensation objectives.
 
Determines, approves and oversees executive compensation, including the design, competitiveness and effectiveness of our compensation programs. Also oversees the development, evaluation and approval of incentive compensation, equity-based pay and other material employee benefit plans for all employees, including the NEOs.
 
The Compensation Committee's charter is available on our website at www.investors.bestbuy.com — select the "Corporate Governance" link.
 
Compensation Committee's Independent Compensation Consultant
Role in Decision-Making Process
Reviews the recommendations of management with the Compensation Committee to ensure that the recommendations are aligned with our objectives and are reasonable when compared to our peer market for executive and director talent.
 
Assists in the design of the variable incentive plans, the determination of the overall compensation mix, the selection of performance metrics and the setting of the performance goals and ranges.
 
Assists in the setting of CEO compensation opportunity.
 
Reviews the results of the risk assessment with the Compensation Committee and identifies key takeaways.
 
Provides perspective on market practice.
 
The Compensation Committee has sole discretion and adequate funding to engage consultants in connection with compensation-related matters. Frederic W. Cook & Co., Inc. has served as the Compensation Committee's independent compensation consultant since the fall of 2012.
 
CEO
 
 
 
 
Role in Decision-Making Process
Creates and presents recommendations to the Compensation Committee for our other executive officers and provides his perspective. Does not participate in or otherwise influence recommendations regarding his own compensation.
 
 
 
 
 
Human Resources ("HR")
 
 
 
 
Role in Decision-Making Process
Provides the Compensation Committee with market analytics in support of the CEO's recommendations for our executive officers, other than the CEO. Management does not make recommendations on CEO compensation. As necessary, HR engages outside consultants to assist with its analytics and recommendations.
 
Finance
Role in Decision-Making Process
Provides the Compensation Committee with financial analytics in support of the short- and long-term program design and target setting.

Compensation Consultant Independence

The Compensation Committee reviewed the independence of Frederic W. Cook & Co., Inc. under the six factors promulgated by the SEC and incorporated into the NYSE listing standards for listed companies. Based on its review and information provided by Frederic W. Cook & Co., Inc. regarding the provision of its services, fees, policies and procedures, presence (if any) of any conflicts of interests, ownership of Best Buy stock, and other relevant factors, the Compensation Committee concluded that the work of Frederic W. Cook & Co., Inc. has not raised any conflicts of interest and it is deemed an independent consultant.



40


Factors in Decision-Making

Market Competitive Data. For fiscal 2014, each element of compensation and the level of total direct compensation for our NEOs was considered against market benchmarks and views of individual performance. Our Compensation Committee reviewed publicly available compensation data for our peer group of companies, Fortune 100 and survey data. We used available information and monitored actions taken by our peer group to evaluate market trends and to assess the long-term incentive and overall competitiveness of our executive compensation levels. We did not, however, seek to establish any specific element of compensation or total direct compensation that falls within a prescribed range relative to our peer group of companies or the Fortune 100.

Change in Peer Group for Fiscal 2013 and 2014. We review our peer group annually. The Compensation Committee strives to ensure that our peer group is an accurate reflection of our business strategy, represents the labor market for executive talent and includes external perspectives. Beginning in fiscal 2013 and continuing in fiscal 2014, the Compensation Committee prioritized criteria for potential peers, including the following:

•
Business strategy: combination of retailers, e-commerce retailers, digital companies, global companies and iconic brands;

•
Size: revenue and/or market capitalization similar to us;

•
Current peers: preference, but not obligation, toward consistency in an effort to maintain reliability from year to year in the results of our compensation analysis; and

•
Labor market consideration: companies that listed us as a peer.

For fiscal 2013 and fiscal 2014, our peer group included the following companies:
Amazon.com, Inc.
L Brands, Inc.
Staples, Inc.
Apple Inc.
Lowe's Companies Inc.
Target Corporation
Costco Wholesale Corporation
Macy’s, Inc.
Time Warner Cable Inc.
Dell Inc.
Microsoft Corporation
Wal-Mart Stores, Inc.
DIRECTV, Inc.
Nike, Inc.
Walgreen Co.
eBay Inc.
Nordstrom, Inc.
The Walt Disney Company
Google Inc.
Office Depot, Inc.
Yahoo! Inc.
The Home Depot, Inc.
Sears Holding Corporation
 

At the time of the analysis, relative to the 23 companies, the Company was competitive on revenue and earnings measures.



41



Executive Compensation Elements

Overview. Our NEOs' compensation in fiscal 2014 included the following ongoing elements (for additional details on specific awards, see the discussion below and the Compensation of Executive Officers - Summary Compensation Table section):
Compensation Component
 
Key Characteristics
 
Purpose
 
Principal Fiscal 2014 Actions
Base Salary
 
Cash. Reviewed annually and adjusted if and when appropriate.
 
Provide competitive, fixed compensation to attract and retain executive talent.
 
Base compensation increases limited to a 13% and 19% market adjustment upon role changes for Messrs. Buckley and Mohan, respectively.
Short-Term Incentive
("STI")


 
Cash. Variable compensation component. Performance-based award opportunity. Payable based on financial metrics.
 
Create a strong financial incentive for achieving or exceeding Company goals.
 
Financial metrics for fiscal 2014 included enterprise comparable sales, enterprise operating income, North America cost take-out, U.S. digital revenue growth and U.S. net promoter score.
The NEOs received payouts equal to 107% of target.
Long-Term Incentive
("LTI")
 
Performance-based restricted shares, stock options and time-based restricted shares.

 
Create a strong financial incentive for increasing shareholder value and encourage a significant equity stake in the Company and promote retention.

 
LTI changes limited to a change in the CEO’s mix (increasing the weight on performance shares to 50%) and an increased target and one-time award for Mr. Mohan based on increased responsibilities.
Health, Retirement and Other Benefits
 
Eligibility to participate in benefit plans generally available to our employees, including health, retirement, stock purchase, severance, paid time off, life insurance and disability plans.
 
Plans are part of our broad-based employee benefits program.
 
The NEOs continue to participate in generally the same benefits as our other employees.
Executive Benefits
 
Annual executive physical exam, supplemental long-term disability insurance, and tax planning/preparation services.
 
Provide competitive benefits to promote the health, well-being and financial security of our executive officers.
 
No material changes were made to the NEOs' benefits in fiscal 2014.

Fiscal 2014 Pay Mix. The Compensation Committee emphasizes variable performance-based pay when setting the target pay mix for our executive officers, but does not establish a set pay mix for them. The target pay mix for fiscal 2014 for our CEO and other NEOs, on average, is shown below. Actual salary levels, STI awards (discussed in further detail in the Short-Term Incentive section) and LTI awards (discussed in further detail in the Long-Term Incentive section) vary based on the market analysis described above. About 90% of the CEO’s pay, and on average, 80% of the other NEOs’ pay is variable.


42


Each element in the pay mix is discussed below and shown in the Summary Compensation Table as found in the Compensation of Executive Officers section.

Base Salary

In March 2013, the Compensation Committee reviewed the total compensation for each NEO, including their base salaries. Based on the assessment of each officer relative to market data, the Compensation Committee approved base salary increases for Messrs. Buckley and Mohan. Mr. Buckley’s increase was due to his expanded responsibilities assumed upon his appointment to lead the Connectivity Business Group. Mr. Mohan’s increase was to acknowledge expanded responsibilities upon his appointment to lead the Home Business Group. Together, their business groups represent about 94% of domestic revenue. The other NEO salaries remained the same.
Name
 
Fiscal 2014 Annual Base Salary

 
Fiscal 2013 Annual Base Salary

 
Percent Change
Mr. Joly
 
$
1,175,000

 
$
1,175,000

 
0%
Ms. McCollam
 
$
925,000

 
$
925,000

 
0%
Ms. Ballard
 
$
700,000

 
$
700,000

 
0%
Mr. Buckley
 
$
525,000

 
$
465,000

 
13%
Mr. Mohan
 
$
500,000

 
$
420,000

 
19%

Short-Term Incentive

Our executive compensation programs are designed to ensure that a significant percentage of total compensation is linked to Company performance. For fiscal 2014, the NEOs were eligible for performance-based, short-term incentive cash awards pursuant to our fiscal 2014 STI.

The fiscal 2014 STI is structured as a “plan within a plan,” pursuant to the 2011 shareholder approved Executive Short-Term Incentive Plan (“Executive STI Plan”). The Executive STI Plan sets the maximum award pool for the CEO and three other NEOs (excluding the CFO) at 5% of adjusted net earnings. Individual allocations of that pool are set annually. Specific performance goals are established such that the maximum payout potential does not exceed the maximum award pool or the individual allocations.
Fiscal 2014 STI Performance Criteria. In January 2013, the Compensation Committee approved the performance criteria in the form of metrics, and in March 2013, the Compensation Committee approved the target performance levels for each metric for the fiscal 2014 STI. The performance metrics were designed to support our fiscal 2014 Renew Blue priorities, specifically centering on operating income, stabilizing comparable sales (which historically were declining), online revenue growth, cost

43



reductions and customer experience. The weighting of the priorities placed the greatest emphasis on overall profit and top line revenue growth while also giving significant weight to Renew Blue strategic priorities. The metrics were:
STI Metric
 
Metric Weighting
 
Definition
Compensable Enterprise Operating Income
 
50%. Served as the minimum threshold for STI awards to be paid
 
Non-GAAP operating income from continuing operations as reported in the Company’s Annual Report on Form 10-K, adjusted for the impacts of: (1) unbudgeted changes in laws, regulations or accounting principles; (2) currency fluctuations from budgeted foreign exchange rates; and (3) unbudgeted mergers, acquisitions or divestures.
Enterprise Comparable Store Sales
 
20%
 
Enterprise revenue at websites, stores, and call centers operating for at least 14 full months, compared to revenue from similar channels open at least 14 full months in the prior fiscal year.
Renew Blue Priorities:
 
30%
 
 
North America Cost Takeout
 
10%
 
Total selling, general and administrative expense and cost of goods sold reduction initiatives approved and executed during the year, measured as an annualized value.
Domestic Online Revenue Growth
 
10%
 
Total fiscal 2014 domestic online revenue less fiscal 2013 domestic online revenue divided by total fiscal 2013 domestic online revenue.
U.S. Net Promoter Score
 
10%
 
Customer experience metric in which customers are asked how likely they are to recommend Best Buy to a friend, colleague or family member; the percent of those likely to recommend less the percent of those unlikely to recommend is Net Promoter Score.

Determination of Fiscal 2014 STI Target Payout. The Compensation Committee reviewed the target payout percentages for our NEOs under the fiscal 2014 STI plan as part of their review of the NEOs’ total fiscal 2014 target compensation. The Compensation Committee generally applies a tiered approach in determining the potential target payout ranging from 75% to 200% of eligible base salary based on each NEO's base salary as of the 15th day of each fiscal month. The specific target payout percentage for each NEO is determined based on external market data for equivalent roles, with emphasis placed on job value and internal pay equity among the NEOs.

For fiscal 2014, the tiered target payouts were 75% to 200% of salary, which remained the same as in fiscal 2013 for all NEOs except for Mr. Mohan, who received an increase in conjunction with his expanded roles and responsibilities. For each of the metrics, the NEOs could earn zero to two times their weighted target payout percentage for that metric, making the maximum fiscal 2014 STI payout 2.0 times their target payout percentage.
 
The following chart shows actual fiscal 2014 performance compared to the minimum, target and maximum goals:
Metric ($ in millions)
 
Minimum
 
Target
 
Max
 
Actual Result
 
Metric Score
Compensable Enterprise Operating Income (50%)(1)(2)
 
$1,136
 
$1,236
 
$1,539
 
$1,217
 
0.90
Enterprise Comparable Store Sales (20%)(3)
 
(1.0%)
 
0.0%
 
2.0%
 
(0.8%)
 
0.60
Renew Blue Priorities (30%):
 
 
 
 
 
 
 
 
 
 
North America Cost Take Out (10%)
 
$250
 
$300
 
$350
 
$580
 
2.00
U.S. Digital Revenue Growth (10%)
 
7.6%
 
10.0%
 
15.0%
 
19.8%
 
2.00
U.S. Net Promoter Score (10%)
 
32.5
 
34.0
 
37.0
 
34.1
 
1.00
Blended Score:
 
1.07
(1)
Actual performance for this metric had to be above the minimum threshold in order for STI payments to be made. A result lower than the minimum threshold would have resulted in an overall blended score of zero, and no STI payments.
(2)
The non-GAAP operating income from continuing operations of $1,171 million in our fiscal 2014 Annual Report on Form 10-K was adjusted for differences from budgeted foreign exchange rates and adjusted to include the impact of Best Buy Europe prior to the sale on June 26, 2013, to determine Compensable Enterprise Operating Income.
(3)
The goal of setting the target for this metric at 0.0% was to halt the historical decline into negative comparable store sales over the last several years.


44


The following chart shows fiscal 2014 STI payments as a dollar value and percent of salary:
Name
 
Target Payout
Percentage

 
Annual Target Payout Value,
based on Salary

 
Fiscal 2014 STI
Payment

 
Fiscal 2014 STI
Payment, as a
Percentage of
Salary

Mr. Joly
 
200
%
 
$
2,350,000

 
$
2,514,500

 
214
%
Ms. McCollam
 
150
%
 
$
1,387,500

 
$
1,484,625

 
161
%
Ms. Ballard
 
125
%
 
$
875,000

 
$
936,250

 
134
%
Mr. Buckley
 
75
%
 
$
390,000

 
$
417,300

 
80
%
Mr. Mohan
 
75
%
 
$
375,000

 
$
401,250

 
80
%

Fiscal 2015 STI Performance Criteria. In January 2014, the Compensation Committee approved the performance criteria in the form of metrics for the fiscal 2015 STI, and in March 2014, the Compensation Committee approved the target performance levels for each metric. The same metrics and weightings as used in fiscal 2014 will be used in fiscal 2015, as listed below:

•
Compensable Enterprise Operating Income - 50%
•
Enterprise Comparable Store Sales - 20%
•
Renew Blue Priorities - 30%
 
Long-Term Incentive

Awards of equity-based LTI compensation to our executive officers encourage a strong ownership stake in the Company and enhance the alignment of interests of the NEOs and our shareholders. All equity-based LTI incentive awards for our NEOs and directors must be approved by the Compensation Committee. During fiscal 2014, we made long-term incentive awards to our NEOs pursuant to our LTI Program, which was approved by the Compensation Committee in March 2013. LTI awards were made under our 2004 Omnibus Stock and Incentive Plan and were granted in April 2013.
The fiscal 2014 LTI featured a mix of performance shares, stock options and time-based restricted shares.
This results in a balanced portfolio of compensation rewards consisting of, for the CEO, 50% performance-based restricted shares (to reward performance), 20% stock options (to reward share price appreciation) and 30% time-based restricted shares (to promote retention), as shown below. The mix for the other NEOs was one third performance shares, one third stock options, and one third time-based restricted shares, also as shown below.


45



Form of Fiscal 2014 LTI Award. The performance shares are earned based on our Total Shareholder Return ("TSR") relative to the S&P 500 Index over a three-year period. TSR was used based on its prevalence in the market place and its direct link to shareholder value creation. The S&P 500 was used as a proxy for overall market performance. The metric for this is as follows:
Performance Level
 
Performance Achieved
 
Payout Percentages(1)
Below Threshold
 
Less than 30th percentile rank TSR
 
0%
At Threshold
 
30th percentile rank TSR
 
50-99%
At Target
 
50th percentile rank TSR
 
100-149%
At Maximum
 
70th or greater percentile rank TSR
 
150%
(1)
The payout percentage will be equal to a percentage interpolated on a linear basis for performance levels achieved in between threshold and target and target and maximum.

The NEOs receive a LTI grant once per year at a regularly scheduled Compensation Committee meeting, historically in the spring. In fiscal 2014, the prior month’s average trading price was used to convert the award dollar value to a number of units to prevent daily stock price volatility from materially impacting share usage.

The non-qualified stock options have a term of ten years and become exercisable over a three-year period at the rate of one third per year, beginning one year from the date of grant, subject to being employed on the vesting date. The exercise price for such options is equal to the closing price of our common stock on the grant date, as quoted on the NYSE. The time-based restricted shares also vest in equal installments of one third on the three successive anniversaries of the grant date. The number of restricted shares is determined using roughly a 3:1 (options to restricted shares) ratio. The final number of performance shares that are actually issued will not be known until performance has been measured following the performance period (which goes from April 1, 2013 through March 31, 2016).

Under the terms of both the current and proposed Omnibus Plans, we may not grant stock options at a discount to fair market value. Unless otherwise determined by the Compensation Committee, "fair market value" as of a given date is the closing price of our common stock as quoted on the NYSE on such date or, if the shares were not traded on that date, the most recent preceding date when the shares were traded.

Determination of Fiscal 2014 LTI Award Amounts. In March 2013, the Compensation Committee approved the executive leadership’s fiscal 2014 compensation, which included a LTI increase for Mr. Mohan in light of his increased responsibilities. The other NEOs' LTI targets were maintained at the same levels as the prior year.

LTI award amounts are determined based upon analysis of external market data, with overall compensation mix and external market data for equivalent roles being key factors in the determination of the award made to each NEO. The fiscal 2014 LTI awards for each NEO are set forth below:
Annual Fiscal 2014 Award Details
Name
 
# of Stock Options
 
# of Restricted Shares
 
Target # of Performance Shares
 
Grant Date Value
Mr. Joly
 
250,358
 
130,662
 
193,584
 
$10,167,573
Ms. McCollam
 
193,133
 
67,198
 
59,735
 
$4,674,587
Ms. Ballard
 
57,225
 
19,910
 
17,699
 
$1,384,242
Mr. Buckley
 
47,687
 
16,592
 
14,749
 
$1,154,205
Mr. Mohan
 
47,687
 
16,592
 
14,749
 
$1,154,205

In addition, based on market competitive analysis, Mr. Mohan received a one-time supplemental long-term incentive equity award in March 2013 consisting of the following to recognize the expansion in his role from the Customer Solutions Group to the Home Business Group:
One-Time Award Details
Name
 
# of Stock Options
 
# of Restricted Shares
 
Target # of Performance Shares(1)
 
Grant Date Value
Mr. Mohan
 
105,990
 
34,542
 
31, 038
 
$2,000,043
(1)
The performance period for this award aligns with the performance period of our fiscal 2013 long-term incentive awards (running from October 1, 2012 through September 30, 2015).


46


Fiscal 2015 LTI Program Design. For fiscal 2015, the LTI program will continue to use the same structure as fiscal 2014, with rewards consisting of:

•
For the CEO, 50% performance-based restricted shares (using TSR as the performance metric), 20% stock options and 30% time-based restricted shares.

•
For the other NEOs: one third performance shares (using TSR as the performance metric), one third stock options and one third time-based restricted shares.

Best Buy Mobile Cash-Based Long-Term Performance Incentive Plan. In December 2012, as a result of our purchase of Carphone Warehouse Group plc’s interest in the Best Buy Mobile profit share agreement, the Company effectively terminated the Best Buy Mobile Performance Incentive Plan (the “Mobile PIP”). The Mobile PIP was a multi-year cash-based plan, with awards based on the Economic Value Added created by Best Buy Mobile, which was originally scheduled to expire in March 2013. As part of the Mobile PIP termination, the Company entered into a termination agreement with Mr. Buckley, as disclosed in the Company's Annual Report on Form 10-K, under which the Company agreed to a settlement with Mr. Buckley regarding the final performance period. The settlement amount was based on historical and forecasted performance under the Mobile PIP and was paid to Mr. Buckley in March 2013 (provided he remained employed by the Company through that date). Additional information regarding the LTI awards granted to the NEOs in fiscal 2014 is included under the heading Compensation of Executive Officers - Grants of Plan-Based Awards.

Other Compensation

Benefits. Our executive officers, including our NEOs, are generally offered the same employee benefits offered to all U.S.-based officers, as summarized in the following table:
Benefit
 
All Full-Time
U.S.-Based Employees
 
Executive
Officers
Accidental Death & Dismemberment
 
Ÿ
 
Ÿ
Business Travel & Accident
 
Ÿ
 
Ÿ
— Executive Business Travel & Accident
 
 
 
Ÿ
Deferred Compensation Plan(1)
 
Ÿ
 
Ÿ
Employee Discount
 
Ÿ
 
Ÿ
Employee Stock Purchase Plan
 
Ÿ
 
Ÿ
Health Insurance
 
Ÿ
 
Ÿ
— Executive Physical Exam
 
 
 
Ÿ
Life Insurance
 
Ÿ
 
Ÿ
Long-Term Disability
 
Ÿ
 
Ÿ
— Executive Long-Term Disability
 
 
 
Ÿ
Retirement Savings Plan
 
Ÿ
 
Ÿ
Severance Plan
 
Ÿ
 
Ÿ
Short-Term Disability
 
Ÿ
 
Ÿ
Tax Planning and Preparation
 
 
 
Ÿ
(1)
Only highly compensated employees and directors are eligible to participate in the Deferred Compensation Plan, as described in the Compensation of Executive Officers - Non-Qualified Deferred Compensation - Deferred Compensation Plan section.

We provide the executive benefits noted above to compete for executive talent and to promote the health, well-being and financial security of our NEOs. A description of executive benefits, and the costs associated with providing them for the NEOs, are reflected in the "All Other Compensation" column of the Summary Compensation Table as found in the Compensation of Executive Officers section.

Severance Plan. We have a severance plan that complies with the applicable provisions of the Employee Retirement Income Security Act ("ERISA"). The purpose of the severance plan is to provide financial assistance to employees while they seek other employment, in exchange for a release of any claims. Although there are differences in benefits depending on the employee's job level, the basic elements of the plan are comparable for all eligible employees. The plan generally covers all full-time and part-

47



time U.S. employees of Best Buy Co., Inc. and Best Buy Stores, L.P. and their respective direct and indirect U.S.-domiciled subsidiaries, including the NEOs, except for those subject to a separate severance agreement or specifically excluded.

The plan covers involuntary terminations due to job elimination and discontinuation, office closing, reduction in force, business restructuring and other circumstances as we determine. Eligible terminated employees receive a severance payment ranging from six months to two years of base salary, with basic employee benefits such as medical, dental and life insurance continued for an equivalent period. Except as modified or replaced by individual employment agreements, the NEOs (other than Mr. Joly and Ms. McCollam who have employment agreements) are eligible for the following severance benefits:
•
Messrs. Buckley and Mohan, at an enterprise senior vice president level, are eligible for 18 months of salary, a payment of $10,000 in lieu of outplacement and other tax and financial planning assistance, and 18 months of Company-paid COBRA;

•
Ms. Ballard, at an enterprise executive vice president level, is eligible for two years of salary, a payment of $25,000 in lieu of outplacement and other tax and financial planning assistance, and a payment of 150% of the cost of 24 months of basic employee benefits such as medical, dental and life insurance.

See Compensation of Executive Officers - Potential Payments Upon Termination or Change-in-Control for more information regarding potential payments following an involuntary termination and for the severance provisions of Mr. Joly's and Ms. McCollam's employment agreements.

Stock Ownership, Tax and Other Policies

Executive Stock Ownership Guidelines. The Compensation Committee has established stock ownership guidelines to promote the alignment of officer and shareholder interests and to encourage behaviors that have a positive influence on stock price appreciation and total shareholder return. Under the guidelines, we expect our NEOs to acquire ownership of a fixed number of shares, based on their position. The stock ownership expectation generally remains effective for as long as the officer holds the position.

In addition to shares personally owned by each officer, the following forms of stock ownership count toward the ownership target:

•
Equivalent shares owned in the Best Buy Stock Fund within our Retirement Savings Plan;

•
50% of non-vested shares subject to performance conditions granted under our LTI program;

•
50% of non-vested shares subject to time-based conditions granted under our LTI program; and

•
50% of the intrinsic value of vested stock options granted under our LTI program.

We require that until the ownership target is met, NEOs will retain: (i) 50% of the net proceeds received from the exercise of a stock option in the form of Best Buy common stock; (ii) 50% of vested time-based restricted shares (net of taxes); and (iii) 50% of all performance shares (net of taxes) issued. The ownership target does not need to be met within a certain time frame, and our NEOs are considered in compliance with the guidelines as long as progress towards the ownership target is being made consistent with the expectations noted above.

The ownership targets and current ownership levels for our NEOs are shown below.
Name
 
Ownership Target
 
Current Ownership Using Guidelines
Mr. Joly
 
140,000 shares
 
      548,145 shares
Ms. McCollam
 
55,000 shares
 
      229,559 shares
Ms. Ballard
 
55,000 shares
 
       96,652 shares
Mr. Buckley
 
15,000 shares
 
      124,646 shares
Mr. Mohan
 
15,000 shares
 
       86,271 shares

In fiscal 2014, all NEOs were in compliance with the ownership guidelines.



48


Tax Deductibility of Compensation. Section 162(m) of the Internal Revenue Code ("Section 162(m)") limits the deductibility of compensation in excess of $1 million paid to the chief executive officer and each of our three most highly compensated executive officers (other than the chief financial officer), unless the compensation qualifies as "performance-based compensation." Among other things, in order to be deemed performance-based compensation, the compensation must be based on the achievement of pre-established, objective performance criteria and must be pursuant to a plan that has been approved by our shareholders. We believe that it is important to continue to be able to take available Company tax deductions with respect to the compensation paid to our NEOs. We do not, however, make compensation decisions based solely on the availability of a deduction under Section 162(m).

Clawback and Restrictive Covenant Provisions. Our senior management performance awards have typically included clawback provisions, particularly where it has been difficult to match the period of an employee's influence on business results. We may exercise our rights under such provisions if other strategies to mitigate unjust rewards are difficult to achieve. In September 2010, we adopted a new Clawback Policy to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act, with final policy language to be determined after the SEC adopts related rules. The Clawback Policy also expanded our prior policy to cover all executive officer incentive award agreements. In addition to the clawback provisions, we include confidentiality, non-compete, non-solicitation and in select situations, non-disparagement provisions.

Prohibition on Hedging and Pledging Company Securities. We prohibit all employees, including NEOs, and members of the Board from hedging Company securities, including by way of forward contracts, equity swaps, collars, exchange funds or otherwise. In addition, our executive officers and Board members are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, unless approved in advance by the Compensation Committee.

Compensation and Human Resources Committee Report on Executive Compensation

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis, above, with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014, and in this proxy statement.

COMPENSATION AND HUMAN RESOURCES COMMITTEE

Russell P. Fradin (Chair)
Lisa M. Caputo
Kathy J. Higgins Victor


49



Compensation of Executive Officers

Summary Compensation Table

The table below summarizes the total compensation earned by each of our NEOs during fiscal 2014 and the three preceding fiscal years. Fiscal 2013 was an 11-month fiscal year due to a change adopted by the Board changing our fiscal year-end to the Saturday closest to the end of January. Since the table below only includes 11 months of data for fiscal 2013 due to this change, fiscal 2011 has also been included, where applicable, in order to provide three complete fiscal years of data as required by the SEC.
Name and Principal Position
 
Year

 

Salary(1)

 
Bonus

 
Stock
Awards(2)

 
Option
Awards(2)

 
Non-Equity
Incentive Plan
Compensation(3)

 
All Other
Compensation(4)

 
Total

Hubert Joly(5)
President and
Chief Executive Officer
 
2014

 
$
1,175,000

 
$
—

 
$
8,167,213

(6) 
$
2,000,360

 
$
2,514,500

 
$
24,146

 
$
13,881,219

 
2013

 
492,596
 
3,500,000
 
11,801,306
 
3,750,002
 
—

 
6,788
 
19,550,692
Sharon L. McCollam(7)
Chief Administrative Officer and Chief Financial Officer
 
2014

 
$
925,000

 
$
—

 
$
3,131,454

(6) 
$
1,543,133

 
$
1,484,625

 
$
215,221

 
$
7,299,433

 
2013

 
142,308
 
731,250
 
2,666,672
 
1,333,334
 
—

 
38,618
 
4,912,182
Shari L. Ballard
President, International and Chief Human Resources Officer
 
2014

 
$
700,000

 
$
—

 
$
927,819

(6) 
$
457,228

 
$
936,250

 
$
17,131

 
$
3,038,428

 
2013

 
646,154
 
500,000
 
2,307,793
 
226,911
 
—

 
8,512
 
3,689,370
 
2012

 
713,462

 
—

 
2,087,692

 
517,850

 
420,000

 
56,961

 
3,795,965

 
2011

 
680,770

 
—

 
—

 
864,835

 
298,958

 
14,928

 
1,859,491

Jude C. Buckley(8)
Chief Commercial Officer
 
2014

 
$
519,231

 
$
3,713,190

(9) 
$
773,186

(6) 
$
381,019

 
$
417,300

 
$
276,659

 
$
6,080,585

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

R. Michael Mohan(10)
Chief Merchandising Officer
 
2014

 
$
498,462

 
$
—

 
$
2,106,552

(6) 
$
1,047,696

 
$
401,250

 
$
14,581

 
$
4,068,541

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
These amounts are before any deferrals under the Deferred Compensation Plan. We do not provide guaranteed, above-market or preferential earnings on compensation deferred under the Deferred Compensation Plan. The investment options available for notional investment of deferred compensation are similar to those available under the Retirement Savings Plan and can be found, along with additional information about deferred amounts, in the Non-Qualified Deferred Compensation section.
 
(2)
These amounts reflect the aggregate grant date fair value for stock-based awards granted to our NEOs for all fiscal years reflected. The fiscal 2014 amounts are explained in greater detail under the heading Grants of Plan-Based Awards. The amounts reported have not been adjusted to eliminate service-based forfeiture assumptions. The other assumptions used in calculating these amounts are set forth in Note 8, Shareholders' Equity, to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014.
 
(3)
These amounts reflect STI payments made for all fiscal years shown. The fiscal 2014 STI plan is described in the section Compensation Discussion and Analysis – Executive Compensation Elements – Short-Term Incentive.
 
(4)
For fiscal 2014, these amounts include All Other Compensation as described in the following table:
Name
 
Retirement Plan
Contribution(a)

 
Life Insurance
Premiums(b)

 
Long-Term Disability Insurance Premiums(c)

 
Other

 
Total

Mr. Joly
 
$
5,407

 
$
2,929

 
$
4,511

 
$
11,299

(d) 
$
24,146

Ms. McCollam
 
4,270

 
2,437

 
800

 
207,714

(e) 
215,221

Ms. Ballard
 
10,150

 
1,658

 
5,323

 
 
 
17,131

Mr. Buckley
 
—

 
585

 
2,508

 
273,566

(f) 
276,659

Mr. Mohan
 
10,569

 
978

 
1,774

 
1,260

(g) 
14,581

 
(a)
These amounts reflect our matching contributions to the NEOs' Retirement Savings Plan accounts.
(b)
These amounts reflect the portions of premiums paid by us for life insurance coverage exceeding $50,000.
(c)
These amounts reflect the portions of premiums paid by us for supplemental executive long-term disability insurance.
(d)
The amount includes: expenses associated with travel to France for Mr. Joly's green card ($10,850), green card fees ($405) and imputed income related to supplemental executive long-term disability insurance ($44).
(e)
The amount includes the following Company-paid items pursuant to the relocation provisions of Ms. McCollam's employment agreement: temporary housing ($119,321), a tax gross-up related to the temporary housing ($76,090), airfare for Ms. McCollam and her spouse between their home in San Francisco and Minneapolis ($8,140), a tax gross-up related to the airfare ($3,773) and the cost of shipping personal goods ($390).
(f)
The amount includes: a Company-paid executive physical ($9,253), United States social security taxes remitted ($264,303) to rectify an oversight by Carphone Warehouse Group plc, the entity which administered Mr. Buckley's payroll at the time, in withholding and paying these taxes on behalf of Mr. Buckley and the Company from 2009 to 2011 and imputed income related to supplemental executive long-term disability insurance ($10).
(g)
The amount reflected is a lump-sum payout of accrued vacation time.


50


(5)
Mr. Joly joined the Company during fiscal 2013 (September 4, 2012).

(6)
For each NEO, the amount reflected includes the grant date fair value of: 1) one or more time-based restricted share awards (described in greater detail in the Grants of Plan-Based Awards section) and 2) one or more performance-based share awards (valued at the probable outcome of the award as of the grant date) that will be earned depending on the performance of our stock's total shareholder return, relative to a peer group comprised of the S&P 500 Index, over a three-year period (also described in greater detail in the Grants of Plan-Based Awards section). The maximum value of the performance-based share awards as of the grant date, assuming the highest level of performance conditions, is noted in the following table:
Name
 
Probable Grant Date Fair Value of Performance-Based Awards
(reflected in
Stock Awards Column)

 
Target Performance Grant in Shares

 
Maximum Performance Grant in Shares

 
Maximum Grant Date Fair Value of Performance-Based Award

 
Grant Date Fair Value of Time-Based Awards
(reflected in Stock Awards Column)

 
Stock Awards Column Total

Mr. Joly
 
$
5,195,795

 
193,584

 
290,376

 
$
7,793,692

 
$
2,971,418

 
$
8,167,213

Ms. McCollam
 
1,603,287

 
59,735

 
89,603

 
2,404,931

 
1,528,167

 
3,131,454

Ms. Ballard
 
475,041

 
17,699

 
26,549

 
712,562

 
452,778

 
927,819

Mr. Buckley
 
395,863

 
14,749

 
22,124

 
593,795

 
377,323

 
773,186

Mr. Mohan*
 
666,696

 
31,038

 
46,557

 
1,000,044

 
1,043,993

}
2,106,552

 
395,863

 
14,749

 
22,124

 
593,795

 
 
*
Mr. Mohan received two performance-based share awards during fiscal 2014 as discussed under the heading: Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive.
 
(7)
Ms. McCollam joined the Company during fiscal 2013 (December 10, 2012).
 
(8)
Mr. Buckley became eligible to be an NEO during fiscal 2014 due to his promotion to Chief Commercial Officer in January 2014.
 
(9)
The amount represents a settlement payment related to the termination of the Mobile PIP that Mr. Buckley participated in (as described in greater detail under the heading Compensation Discussion and Analysis - Executive Compensation Elements - Best Buy Mobile Cash-Based Long-Term Performance Incentive Plan). The settlement payment amount was based on historical and forecasted performance under the Mobile PIP and was paid to Mr. Buckley in March 2013 (provided he remained employed by the Company through that date).
 
(10)
Mr. Mohan became eligible to be an NEO during fiscal 2014 due to his promotion to Chief Merchandising Officer in January 2014.

51



Grants of Plan-Based Awards

The table below summarizes the grants made to each of our NEOs during fiscal 2014 under the Best Buy Co., Inc. 2004 Omnibus Stock and Incentive Plan and Best Buy Co., Inc. Short-Term Incentive Plan:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All Other Stock Awards: Number of Shares of Stock or Units
(#)
 
All Other Option Awards: Number of Securities Underlying Options
(#)
 
Exercise or Base Price of Option Awards ($ / Sh)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grant Date Fair Value of Stock and Option Awards
($)(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated Future Payouts Under
 
Estimated Future Payouts Under
 
 
 
 
 
 
 
 
Non-Equity Incentive Plan Awards(1)
 
Equity Incentive Plan Awards