UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934 (Amendment No.     )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

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

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to § 240.14a-12

 

HANESBRANDS INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1000 East Hanes Mill Road

Winston-Salem, North Carolina 27105

 

 

March 11, 2011

 

Dear Stockholder:

 

You are cordially invited to attend the Annual Meeting of Stockholders of Hanesbrands Inc., a Maryland corporation, which is being held on Tuesday, April 26, 2011, at 8:30 a.m., Eastern time, at Hanesbrands’ New York Design Center, 260 Madison Avenue, 14th floor, New York, New York 10016.

 

At this year’s Annual Meeting, you will be asked to (i) elect nine directors, (ii) ratify the appointment of PricewaterhouseCoopers LLP as Hanesbrands’ independent registered public accounting firm for our 2011 fiscal year, (iii) approve, by a non-binding advisory vote, executive compensation as disclosed in the Proxy Statement for our 2011 Annual Meeting, (iv) recommend, by a non-binding advisory vote, the frequency of future advisory votes regarding executive compensation and (v) transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

 

We are furnishing proxy materials to our stockholders over the Internet. We believe that this “e-proxy” process expedites stockholders’ receipt of proxy materials and lowers the costs and reduces the environmental impact of our Annual Meeting. On March 11, 2011, we mailed to our stockholders a Notice of Annual Meeting and Internet Availability containing instructions on how to access our Proxy Statement and Annual Report and authorize a proxy to vote their shares. The Proxy Statement and the Notice of Annual Meeting and Internet Availability also contain instructions on how you can receive a paper or e-mail copy of the Proxy Statement and Annual Report.

 

If you requested and received a paper copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. You can also authorize a proxy by telephone or over the Internet as described in the enclosed materials.

 

We appreciate your continued support and interest in Hanesbrands.

 

Sincerely yours,

 

 

Richard A. Noll

Chairman of the Board of Directors and

Chief Executive Officer

HANESBRANDS INC.

 

NOTICE OF THE 2011

ANNUAL MEETING OF STOCKHOLDERS

 

The 2011 Annual Meeting of Stockholders of Hanesbrands Inc., a Maryland corporation (“Hanesbrands”), will be held on Tuesday, April 26, 2011, at 8:30 a.m., Eastern time, at Hanesbrands’ New York Design Center, 260 Madison Avenue, 14th floor, New York, New York 10016 for the following purposes:

 

1. to elect nine directors to serve until Hanesbrands’ next annual meeting of stockholders and until their successors are duly elected and qualify;

 

2. to consider and vote upon a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our 2011 fiscal year;

 

3. to approve, by a non-binding, advisory vote, executive compensation as disclosed in the Proxy Statement for our 2011 Annual Meeting;

 

4. to recommend, by a non-binding, advisory vote, the frequency of future advisory votes regarding executive compensation; and

 

5. to transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

Stockholders of record at the close of business on February 17, 2011 are entitled to notice of, and to vote at, the Annual Meeting.

 

Whether or not you plan to attend the meeting, we urge you to authorize a proxy to vote your shares via the toll-free telephone number or over the Internet, as described in the enclosed materials. If you requested and received a copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided.

 

By Order of the Board of Directors

 

Joia M. Johnson

Chief Legal Officer, General Counsel and

  Corporate Secretary

 

March 11, 2011

Winston-Salem, North Carolina

 

ADMISSION TO THE 2011 ANNUAL MEETING

 

An admission ticket (or other proof of stock ownership) and some form of government-issued photo identification (such as a valid driver’s license or passport) will be required for admission to the Annual Meeting. Only stockholders who own Hanesbrands common stock as of the close of business on February 17, 2011 will be entitled to attend the Annual Meeting.

 

 

No cameras, recording devices or large packages will be permitted in the meeting room. Bags will be subject to a search.

 

TABLE OF CONTENTS

 

HANESBRANDS INC.
1000 EAST HANES MILL ROAD
WINSTON-SALEM, NORTH CAROLINA 27105

 

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 2011

 

 

 

Why did I receive this Proxy Statement?

 

You have received these proxy materials because the Board of Directors of Hanesbrands Inc., a Maryland corporation (“Hanesbrands”), is soliciting your proxy to vote your shares at Hanesbrands’ 2011 Annual Meeting of Stockholders (the “Annual Meeting”) and at any postponement or adjournment of the Annual Meeting. This Proxy Statement includes information that we are required to provide to you under the rules of the Securities and Exchange Commission and that is designed to assist you in voting your shares.

 

Will I receive a printed copy of this Proxy Statement?

 

You will not receive a printed copy of the Proxy Statement or our Annual Report to stockholders in the mail unless you request a printed copy. As permitted by the Securities and Exchange Commission, we are delivering our Proxy Statement and Annual Report via the Internet. On March 11, 2011, we mailed to our stockholders a Notice of Annual Meeting and Internet Availability containing instructions on how to access our Proxy Statement and Annual Report and authorize a proxy to vote your shares online or by telephone. If you wish to request a printed or e-mail copy of the Proxy Statement and Annual Report, you should follow the instructions included in the Notice of Annual Meeting and Internet Availability. The Notice of Annual Meeting and Internet Availability is not a proxy card or ballot.

 

When and where will the Annual Meeting be held?

 

The Annual Meeting will be held on April 26, 2011 at 8:30 a.m., Eastern time, at Hanesbrands’ New York Design Center, 260 Madison Avenue, 14th floor, New York, New York 10016. If you plan to attend the Annual Meeting and have a disability or require special assistance, please contact our Investor Relations department at (336) 519-4710.

 

What proposals will be voted on at the Annual Meeting?

 

At the Annual Meeting, stockholders will:

 

1. elect nine directors to serve until Hanesbrands’ next annual meeting of stockholders and until their successors are duly elected and qualify;

 

2. consider and vote upon a proposal to ratify the appointment of PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as our independent registered public accounting firm for our 2011 fiscal year;

 

3. approve, by a non-binding, advisory vote, executive compensation as disclosed in this Proxy Statement;

 

4. recommend, by a non-binding, advisory vote, the frequency of future advisory votes regarding executive compensation; and

 

5. transact such other business as may properly come before the Annual Meeting or any postponement or adjournment thereof.

The Board of Directors is not aware of any matter that will be presented at the Annual Meeting that is not described above. If any other matter is properly presented at the Annual Meeting, the persons named as proxies on the proxy card will, in the absence of stockholder instructions to the contrary, vote the shares for which such persons have voting authority in accordance with their discretion on any such matter.

 

Who is entitled to vote at the Annual Meeting?

 

If you were a stockholder of Hanesbrands at the close of business on February 17, 2011 (the “Record Date”), you are entitled to notice of, and to vote at, the Annual Meeting. Each share of Hanesbrands common stock (each, a “Share”) outstanding at the close of business on the Record Date has one vote on each matter that is properly submitted to a vote at the Annual Meeting, including Shares:

 

 

On the Record Date, there were 96,367,197 Shares outstanding and entitled to vote at the Annual Meeting, and there were 40,839 record holders of Shares. The Shares are the only outstanding class of voting securities of Hanesbrands.

 

Who may attend the Annual Meeting?

 

Only stockholders who owned Shares as of the close of business on the Record Date will be entitled to attend the Annual Meeting. An admission ticket (or other proof of stock ownership) and some form of government-issued photo identification (such as a valid driver’s license or passport) will be required for admission to the Annual Meeting.

 

 

No cameras, recording devices or large packages will be permitted in the meeting room. Bags will be subject to a search.

How many Shares must be present to hold the Annual Meeting?

 

The presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at the Annual Meeting constitutes a quorum for the transaction of business. Your Shares are counted as present at the Annual Meeting if you:

 

 

Abstentions and broker non-votes are counted for purposes of determining whether a quorum is present at the Annual Meeting.

 

If a quorum is not present when the Annual Meeting is convened, the Annual Meeting may be adjourned by the chairman of the meeting.

 

How many votes are required to approve each proposal?

 

Directors will be elected by a plurality of all the votes cast at the Annual Meeting, either in person or represented by a properly completed or authorized proxy. This means that the nine nominees who receive the highest number of “FOR” votes cast will be elected as directors. Stockholders cannot cumulate votes in the election of directors.

 

Approval of executive compensation (by a non-binding, advisory vote), recommendation of the frequency of future advisory votes regarding executive compensation (by a non-binding, advisory vote) and ratification of the appointment of PricewaterhouseCoopers as Hanesbrands’ independent registered public accounting firm each requires “FOR” votes from a majority of the votes cast at the Annual Meeting, either in person or represented by a properly completed or authorized proxy.

 

Because the votes on approval of executive compensation and recommendation of the frequency of future advisory votes regarding executive compensation are advisory, these votes will not be binding on us or our Board of Directors, overrule any decision made by the Board of Directors or create or imply any additional duty for the Board. We recognize, nonetheless, that our stockholders have a fundamental interest in Hanesbrands’ executive compensation practices. Thus, the Compensation Committee may take into account the outcome of these votes when considering future executive compensation arrangements and the frequency of future non-binding, advisory stockholder votes regarding Hanesbrands’ executive compensation.

 

If the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for our 2011 fiscal year is not ratified by the stockholders, the adverse vote will be considered a direction to the Audit Committee to consider another independent registered public accounting firm for next year. However, because of the difficulty in making any substitution of our independent registered public accounting firm so long after the beginning of the current year, the appointment for our 2011 fiscal year will stand, unless the Audit Committee finds other good reason for making a change.

 

What are broker non-votes?

 

If you have Shares that are held by a broker, you may give the broker voting instructions, and the broker must vote as you directed. If you do not give the broker any instructions, the broker may vote at its discretion on all routine matters (such as the ratification of our independent registered public accounting firm). For other matters (including the election of directors, the advisory vote regarding executive compensation and the advisory vote regarding the frequency of future advisory votes regarding executive compensation), however, the broker may not vote using its discretion. A broker’s failure to vote on a matter under these circumstances is referred to as a broker non-vote.

How are abstentions, withheld votes and broker non-votes counted?

 

Shares not voted due to withheld votes, abstentions or broker non-votes will not be counted as votes for or votes against and will have no effect on the outcome of the matters being voted upon at the Annual Meeting.

 

How do I vote?

 

You may vote in person at the Annual Meeting or you may authorize a proxy to vote on your behalf. There are three ways to authorize a proxy:

 

Internet:  By accessing the Internet at www.proxyvote.com and following the instructions on the proxy card or in the Notice of Annual Meeting and Internet Availability.

 

Telephone:  By calling toll-free 1-800-690-6903 and following the instructions on the proxy card or in the Notice of Annual Meeting and Internet Availability.

 

Mail:  If you requested and received your proxy materials by mail, by signing, dating and mailing the enclosed proxy card.

 

If you authorize a proxy to vote your shares over the Internet or by telephone, you should not return your proxy card. The Notice of Annual Meeting and Internet Availability is not a proxy card or ballot.

 

Each Share represented by a proxy properly authorized over the Internet or by telephone or by a properly completed written proxy will be voted at the Annual Meeting in accordance with the stockholder’s instructions specified in the proxy, unless such proxy has been revoked. If no instructions are specified, such Shares will be voted FOR the election of each of the nominees for director, FOR ratification of the appointment of PricewaterhouseCoopers as Hanesbrands’ independent registered public accounting firm for our 2011 fiscal year, FOR approval of executive compensation, FOR an annual vote on executive compensation and in the discretion of the proxy holder on any other business as may properly come before the Annual Meeting.

 

If you participate in one of the 401(k) Plans and have contributions invested in the Hanesbrands stock fund in that 401(k) Plan as of the close of business on the Record Date, you will receive a voting authorization form, which will serve as voting instructions for the trustee of the 401(k) Plans. You must return your voting authorization form to Broadridge Financial Solutions, Inc. (“Broadridge”) on or prior to April 21, 2011. If your voting authorization form is not received by Broadridge by that date, or if you sign and return your proxy card without instructions marked in the boxes, the trustee of the 401(k) Plans will vote Shares attributable to your investment in the Hanesbrands stock fund in the 401(k) Plan in which you participate in the same proportion as other Shares held in the Hanesbrands stock fund of that same 401(k) Plan for which the trustee received timely instructions. If, in any of the 401(k) Plans, no participants vote their Shares, then the trustee will not vote any of the Shares in that 401(k) Plan, even if the trustee votes Shares held in one or both of the other 401(k) Plans.

 

If you participate in the Employee Stock Purchase Plan, you will receive a voting authorization form, which will serve as voting instructions for the administrator of the Employee Stock Purchase Plan. Shares will be voted only at the direction of participants in the Employee Stock Purchase Plan. You must return your voting authorization form to Broadridge on or prior to April 21, 2011. If your voting authorization form is not received by Broadridge by that date or if you sign and return your proxy card without instructions marked in the boxes, your Shares held in the Employee Stock Purchase Plan will not be voted.

 

How can I revoke a previously submitted proxy?

 

You may revoke (cancel) a proxy at any time before the Annual Meeting by (i) giving written notice of revocation to the Corporate Secretary of Hanesbrands with a date later than the date of the previously submitted proxy, (ii) properly authorizing a new proxy with a later date by mail, Internet or telephone, or (iii) attending the Annual Meeting and voting in person, although attendance at the Annual Meeting will not, by itself, constitute revocation of a proxy. Any notice of revocation should be sent to: Hanesbrands Inc., 1000 East Hanes Mill Road, Winston-Salem, North Carolina 27105, Attention: Corporate Secretary.

What does it mean if I receive more than one Notice of Annual Meeting and Internet Availability?

 

If you receive more than one Notice of Annual Meeting and Internet Availability, it means your Shares are not all registered in the same way (for example, some are registered in your name and others are registered jointly with a spouse) and are in more than one account. In order to ensure that you vote all of the Shares that you are entitled to vote, you should authorize a proxy to vote all proxy cards or Internet or telephone proxy authorizations to which you are provided access.

 

How is the vote tabulated?

 

Hanesbrands has a policy that all proxies, ballots and votes tabulated at a meeting of stockholders shall be confidential, and the votes will not be revealed to any Hanesbrands employee or anyone else, other than to the non-employee tabulator of votes or an independent election inspector, except (1) as necessary to meet applicable legal requirements or (2) in the event a proxy solicitation in opposition to the election of the Board of Directors is filed with the Securities and Exchange Commission. Broadridge will tabulate votes for the Annual Meeting and will provide an Inspector of Election for the Annual Meeting.

 

How does the Board of Directors recommend that I vote?

 

The Board of Directors recommends that you vote FOR each of the director nominees, FOR ratification of the appointment of PricewaterhouseCoopers as Hanesbrands’ independent registered public accounting firm for our 2011 fiscal year, FOR approval of executive compensation and FOR an annual vote on executive compensation.

 

Under our charter, each of our directors is elected to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualified. If a nominee is unavailable for election, proxy holders may vote for another nominee proposed by the Board of Directors or, as an alternative, the Board of Directors may reduce the number of directors to be elected at the Annual Meeting. Each nominee has agreed to serve on the Board of Directors if elected. Set forth below is information as of February 17, 2011, regarding the nominees for election, which has been confirmed by each of them for inclusion in this Proxy Statement.

 

No family relationship exists among any of our director nominees or executive officers. To the best of our knowledge, there are no pending material legal proceedings to which any of our directors or nominees for director, or any of their associates, is a party adverse to us or any of our affiliates, or has a material interest adverse to us or any of our affiliates. Additionally, to the best of our knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no judgments, sanctions or injunctions that are material to the evaluation of the ability or integrity of any of our directors or nominees for director during the past ten years.

 

The nominees for election at the Annual Meeting possess experience and qualifications that our Governance and Nominating Committee believes will allow them to make substantial contributions to the Board. In selecting nominees to the Board, we seek to ensure that our Board collectively has a balance of experience and expertise, including chief executive officer experience, chief financial officer experience, international expertise, deep experience in the consumer products industry, corporate governance expertise as well as expertise in other functional areas that are relevant to our business.

 

All of our director nominees have served in senior leadership positions in large organizations and have experience with corporate management issues, including preparing or overseeing the preparation of financial statements. As current or former chief executive officers of Energizer Holdings, Avis Budget Group, Hanesbrands and R.J. Reynolds Tobacco Holdings, respectively, Mr. Mulcahy, Mr. Nelson, Mr. Noll and Mr. Schindler have experience in, and possess an understanding of, business issues applicable to the success of a large publicly-traded company. As current or former chief financial officers of Avis Budget Group and CDW

Corporation, respectively, Mr. Nelson and Ms. Ziegler possess financial acumen and an understanding of financial matters and the preparation and analysis of financial statements. Mr. Chaden, Mr. Griffin, Mr. Mulcahy and Mr. Noll have served in senior leadership positions with companies engaged in international business. As President of the Carnegie Endowment for International Peace, Ms. Mathews has practical experience in the international area, and serves in a policy-making role that is relevant to Hanesbrands’ international activities. Their experiences at Hanesbrands and Sara Lee Corporation (“Sara Lee”) have provided Mr. Chaden and Mr. Noll with extensive experience in the area of consumer products. Similarly, their experiences at Energizer Holdings, Avis Budget Group, R.J. Reynolds and Sara Lee have provided Mr. Mulcahy, Mr. Nelson, Mr. Schindler and Ms. Ziegler with extensive experience in the area of consumer products. As a result of their current or former employment with our company, Mr. Chaden and Mr. Noll have extensive knowledge of Hanesbrands’ business and the apparel industry. Through his role as Vice President, Corporate Secretary and Assistant General Counsel of The Boeing Company, Mr. Johnson has practical expertise in the area of corporate governance. Ms. Mathews has practical expertise in the areas of environmental policy, labor and human rights advocacy and non-governmental organization relationships through her experiences as Deputy to the Undersecretary of State for Global Affairs in the Department of State and as Director of the Washington Office of the Council on Foreign Relations. Mr. Chaden, Mr. Griffin, Mr. Johnson, Mr. Mulcahy, Mr. Nelson, Mr. Schindler and Ms. Ziegler have working experience in corporate governance through their experience serving as directors of other public companies. For more information about the process by which the Governance and Nominating Committee identifies candidates to election to the Board, please see “Process for Nominating Potential Director Candidates.” Below please find a more detailed discussion of the business experiences of all of the nominees to the Board.

 

 

Our Board of Directors unanimously recommends a vote FOR election of these nominees.

 

The Audit Committee has appointed PricewaterhouseCoopers as our independent registered public accounting firm for our 2011 fiscal year. While not required by law, the Board of Directors is asking the stockholders to ratify the selection of PricewaterhouseCoopers as a matter of good corporate practice. Representatives of PricewaterhouseCoopers are expected to be present at the Annual Meeting, will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions.

 

If the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for our 2011 fiscal year is not ratified by the stockholders, the adverse vote will be considered a direction to the Audit Committee to consider another independent registered public accounting firm for next year. However, because of the difficulty in making any substitution of our independent registered public accounting firm so long after the beginning of the current year, the appointment for our 2011 fiscal year will stand, unless the Audit Committee finds other good reason for making a change.

 

PricewaterhouseCoopers was first appointed as our independent registered public accounting firm for our fiscal year ended July 1, 2006. For additional information regarding our relationship with PricewaterhouseCoopers, please refer to the Audit Committee Report on page 19 and the Auditor Fees and Services disclosure on page 20.

 

Our Board of Directors unanimously recommends a vote FOR ratification of the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for our 2011 fiscal year.

 

Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”) requires a public company, such as Hanesbrands, to permit its stockholders to cast a non-binding, advisory vote on the company’s executive compensation, as disclosed under the Securities and Exchange Commission’s executive compensation disclosure rules. Accordingly, we are providing our stockholders at the Annual Meeting with the opportunity to cast a non-binding, advisory vote on the compensation of Hanesbrands’ named executive officers contained in this Proxy Statement through the following resolution:

 

“RESOLVED, that the holders of Hanesbrands’ common stock approve the compensation of Hanesbrands’ named executive officers as disclosed in the proxy statement for Hanesbrands’ 2011 Annual Meeting of Stockholders pursuant to the Securities and Exchange Commission’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the report of the Compensation Committee, and the executive compensation tables and related footnotes and narrative).”

 

Because this vote is advisory, it will not be binding on us or our Board of Directors, overrule any decision made by the Board of Directors or create or imply any additional duty for the Board. We recognize, nonetheless, that our stockholders have a fundamental interest in Hanesbrands’ executive compensation practices. Thus, the Compensation Committee may take into account the outcome of the vote when considering future executive compensation arrangements.

We believe that our executive compensation and compensation practices and policies have three essential characteristics. They are (1) reasonable in comparison to our peer group of companies, (2) focused on aligning senior management and stockholder interests in a simple, quantifiable, and unifying manner, and (3) are necessary to attract, retain and motivate the executive team to support the attainment of our business strategy and operating imperatives. Our commitment to these principles and to continually reviewing and updating our compensation practices in light of evolving best pay practices is evidenced by numerous recent changes, including:

 

 

The Board of Directors believes that Hanesbrands’ commitment to these responsible compensation principles justifies a vote by the stockholders for the resolution above.

 

Our Board of Directors unanimously recommends a non-binding, advisory vote FOR approval of the compensation of Hanesbrands’ named executive officers, as disclosed in this Proxy Statement for the Annual Meeting.

 

As discussed in “Proposal 3 — Non-Binding, Advisory Vote on Executive Compensation,” Section 14A of the Exchange Act requires Hanesbrands to give its stockholders a non-binding, advisory vote on the company’s executive compensation, as disclosed under the Securities and Exchange Commission’s executive compensation disclosure rules. Section 14A also requires a public company, such as Hanesbrands, to permit its stockholders to cast a non-binding, advisory vote on whether the company should hold the stockholder advisory vote on executive compensation every year, every two years, or every three years. Accordingly, we are providing our stockholders at the Annual Meeting with the opportunity to cast a non-binding, advisory vote on the frequency of stockholder advisory votes on the compensation of Hanesbrands’ named executive officers.

 

Because this vote is advisory, it will not be binding on us or our Board of Directors, overrule any decision made by the Board of Directors or create or imply any additional duty for the Board. However, we recognize that our stockholders have a fundamental interest in Hanesbrands’ executive compensation practices. Thus, the Compensation Committee may take into account the outcome of the vote when considering the frequency of future non-binding stockholder advisory votes regarding Hanesbrands’ executive compensation.

After careful consideration, our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for our company at this time, and therefore our Board of Directors recommends that you vote for an annual advisory vote on executive compensation. In formulating its recommendation, our Board of Directors considered that an annual advisory vote on executive compensation will provide more clarity regarding the nature of any concerns that our stockholders may have.

 

Our Board of Directors unanimously recommends that stockholders vote in favor of having an annual stockholder advisory vote on the compensation of Hanesbrands’ named executive officers. While the Board of Directors is in favor of an annual stockholder advisory vote on executive compensation, you may choose to vote in favor of any of three alternatives, i.e., every year, every two years, or every three years (or you may abstain from voting on this matter). You are not being asked to vote for or against the Board’s recommendation of having an annual stockholder advisory vote.

 

Hanesbrands is providing this section to allow stockholders to easily locate select information about our company that we believe is of interest to them.

 

Non-audit fees represented 9.5% of total fees for 2010. Our auditor has issued an unqualified opinion every year since we became an independent public company. We have not restated financials for any period. We have not made any late financial disclosure. No securities regulator has taken action against our company. We have not disclosed any material weaknesses in our internal controls.

 

All of the members of the Board are elected annually, and all of them were elected by stockholders. Eight of the nine directors up for election (88% of the Board) have been determined by our Board to be independent, under the New York Stock Exchange listing standards and our Corporate Governance Guidelines. All of the members of each of our Audit Committee, our Compensation Committee and our Governance and Nominating Committee are independent under these standards. All directors attended at least 75% of the Board meetings, and seven of our directors attended all of the Board meetings held in 2010. Our independent and non-employee directors held regularly scheduled executive sessions without management that were presided over by the Lead Director. We believe that the designation of an independent director as Lead Director, together with the combination of the positions of Chairman of the Board and Chief Executive Officer, contributes to a more efficient and effective corporate governance structure.

 

None of our directors received withhold or against votes of 50% or greater at the last annual meeting. We have a plurality vote standard for the election of directors and do not require that directors resign if they are not elected by a majority of votes cast. Our Chief Executive Officer does not serve on any outside boards, and none of our non-executive directors serve on more than three outside boards. None of our directors were involved in related person transactions with our company. We disclose our Corporate Governance Guidelines on our corporate website, www.hanesbrands.com, on the “Investors” page under the link “Corporate Governance.” The Board has not ignored any stockholder proposals that have received a majority of votes cast (or outstanding votes). Our charter and other governing documents do not require supermajority approval of votes entitled to be cast in connection with mergers and other business combinations. Instead, our charter and other governing documents only require approval by a majority of votes entitled to be cast for such transactions.

 

We disclose complete information on the performance measures, hurdle rates and target payout thresholds for our short-term cash incentive plan and our long-term cash incentive plan in the section of this Proxy

Statement titled “Details Regarding the Elements of Executive Compensation.” For those restricted stock grants made in the last fiscal year to executive officers that were performance-based, we also disclose the relevant performance measures. As discussed in the “Details Regarding the Elements of Executive Compensation” section of this Proxy Statement, executive stock options granted in the last year were not performance-based.

 

Stock options, stock appreciation rights, restricted stock and restricted stock units granted to executive officers may not fully vest over a period of less than three years. Executive officers must hold net shares received upon exercise of stock options or upon vesting of restricted stock or restricted stock units granted after December 1, 2010 for at least one year. Our Chief Executive Officer is subject to stock ownership guidelines that require him to retain 50% of any shares received (on a net after-tax basis) under our equity-based compensation plans until he holds shares with a value equal to six times his base salary; the parallel requirement for other executive officers is three times base salary. A non-employee director may not dispose of any shares of our common stock until such director holds shares of common stock with a value equal to at least five times the current annual equity retainer paid to directors, and may then only dispose of shares in excess of those with that value. All members of the Board with one or more years of service own our stock or hold equity awards that entitle them to receive stock upon vesting. We have a clawback policy, described under “Clawbacks and Recoupment,” pursuant to which employees are required to reimburse Hanesbrands for compensation paid that is predicated upon achieving financial results that were substantially the subject of a restatement and such employees otherwise would not have been paid such compensation.

 

Our Omnibus Plan prohibits repricing and cash buyouts of stock options and stock appreciation rights. We have not repriced options or exchanged them for shares, options or cash without stockholder approval. In the last fiscal year, we did not grant premium priced options. Our average annual burn rate over the past three fiscal years, which reflects equity awards granted (or earned in the case of performance awards), is 3.2%, which is within one standard deviation of the Institutional Shareholder Services mean applied to our industry. We have been focused on reducing our average annual burn rate, and we have reduced it from 6.8% in 2008 (when, as discussed below, the grants for both 2008 and 2009 were made) to 1.56% in 2009 and to 1.24% in 2010. Our Omnibus Plan permits share recycling for options and stock appreciation rights.

 

We have double trigger change-in-control agreements. The multiple of salary plus bonus in the change-in-control severance agreements for our Chief Executive Officer is three times; the multiple is two times for the other executive officers. The severance agreement with the Chief Executive Officer auto-renews every year. No executive officer is eligible for a multi-year guaranteed bonus. Executive officers are not given credit toward pension for years not worked. Our executive officers do not receive tax gross-up on their perks other than for relocation and other broad-based benefits. We provide excise tax gross-ups for change-in-control payments. We have not been the target of a stockholder proposal regarding “say-on-pay” that received majority support.

 

Our Board of Directors has adopted Corporate Governance Guidelines, which provide a framework for our corporate governance and cover topics including, but not limited to, composition of the Board of Directors and its committees, director qualifications and director responsibilities. The Governance and Nominating Committee is responsible for overseeing and reviewing the Corporate Governance Guidelines and reporting and recommending to the Board of Directors any changes to the Corporate Governance Guidelines.

 

Our directors are elected at the annual meeting of stockholders and will serve until our next annual meeting of stockholders and until their successors are duly elected and qualified. Our Board of Directors currently has nine members: Lee A. Chaden, Bobby J. Griffin, James C. Johnson, Jessica T. Mathews, J. Patrick Mulcahy, Ronald L. Nelson, Richard A. Noll, Andrew J. Schindler and Ann E. Ziegler. Other than Mr. Noll, all of our directors are independent under New York Stock Exchange listing standards and under our Corporate Governance Guidelines. Mr. Noll is our Chief Executive Officer.

Board Leadership Structure

 

Our Corporate Governance Guidelines provide that the Governance and Nominating Committee will from time to time consider whether the positions of Chairman of the Board and Chief Executive Officer should be held by the same person or by different persons. In accordance with these provisions, during 2008, the Board, upon recommendation of the Governance and Nominating Committee, determined that Mr. Noll, our Chief Executive Officer, also should serve as Chairman of the Board, effective January 1, 2009. In connection with that decision, the Board determined that the position of Presiding Director should be replaced with the newly created position of Lead Director, also effective January 1, 2009. Mr. Mulcahy has been serving as Lead Director since January 1, 2009.

 

We believe that Mr. Noll’s service as both Chairman of the Board and Chief Executive Officer puts him in the best position to execute our business strategy and business plans to maximize stockholder value. Because Mr. Noll has primary management responsibility with respect to the day-to-day business operations of our company, he is best able to ensure that regular meetings of the Board are focused on the most important issues facing us at any given time. These issues can be very diverse, relating to, for example, our global supply chain, broad range of brands or multiple distribution channels. Our board leadership structure also demonstrates to all of our stakeholders (stockholders, employees, communities and customers around the world) that we are under strong leadership, with Mr. Noll setting the tone and having primary responsibility for managing our worldwide operations.

 

Of course, the Lead Director and other independent directors actively oversee Mr. Noll’s management of our operations and execution of strategies set by the Board. They also take an active role in overseeing Hanesbrands’ management and key issues related to strategy, risk, integrity, compensation and governance. For example, only independent directors serve on the Audit Committee, Compensation Committee and Governance and Nominating Committee. Non-management and independent directors regularly hold executive sessions outside the presence of the Chief Executive Officer and other Hanesbrands employees. Finally, as detailed below, the Lead Director has many important duties and responsibilities that enhance the independent oversight of management.

 

The Lead Director chairs all meetings of the independent directors in executive session and also has other authority and responsibilities, including:

 

 

We believe our Board’s current leadership structure is best suited to the needs of our company at this time.

 

Risk Oversight

 

The Board as a whole is ultimately responsible for the oversight of our risk management function. The Board uses its committees to assist in its risk oversight function as follows:

 

 

Our Board of Directors maintains overall responsibility for oversight regarding the work of its various committees by receiving regular reports from the committee Chairs of the work performed by the various committees. In addition, discussions with the Board about the Company’s strategic plan, consolidated business results, capital structure, acquisition-related activities and other business include consideration of the risks associated with the particular item under consideration.

 

In 2010, our Board of Directors met five times and also held regularly scheduled executive sessions without management, presided over by the Lead Director. During 2010, our Audit Committee met seven times, our Compensation Committee met four times and our Governance and Nominating Committee met four times. In 2010, each incumbent director attended 75% or more of the meetings of the Board and of each committee during the periods that each such director served on the Board or such committee. Our Corporate Governance Guidelines provide that, except in extenuating circumstances, each director will be expected to attend all meetings of the Board of Directors and of committees to which he or she is appointed, and all annual meetings of stockholders. All of the members of the Board attended our 2010 annual meeting of stockholders.

 

Our Board of Directors has three standing committees: the Audit Committee, the Compensation Committee and the Governance and Nominating Committee. Below is a list of committee memberships, which is followed by a description of each committee. The directors who are nominated for election as directors at the Annual Meeting will, if re-elected, retain the committee memberships described below immediately following the Annual Meeting, and the chairs of the committees will also remain the same.

 

Committee Membership
(as of February 17, 2011)

 

 

 

Audit Committee

 

The Audit Committee currently is comprised of Mr. Griffin, Ms. Mathews, Mr. Nelson and Ms. Ziegler; Mr. Nelson is its chair. Each of the members of our Audit Committee is financially literate, as required under applicable New York Stock Exchange listing standards and is independent under those listing standards. In addition, the Board of Directors has determined that each of Mr. Nelson and Ms. Ziegler possesses the experience and qualifications required of an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission. No member of the Audit Committee serves on the audit committees of more than three public companies.

 

The Audit Committee is responsible for assisting the Board of Directors in fulfilling the oversight of:

 

 

The Audit Committee is also responsible for discussing policies with respect to risk assessment and risk management, including significant financial risk exposures and the steps our management has taken to monitor, control and report such exposures.

 

Under Securities and Exchange Commission rules and the Audit Committee’s charter, the Audit Committee must prepare a report that is to be included in our proxy statement relating to the annual meeting of stockholders or annual report filed on Form 10-K with the Securities and Exchange Commission. In addition, the Audit Committee must review and discuss our annual audited financial statements and quarterly financial statements with management and the independent auditor and recommend, based on its review, that the Board of Directors include the annual financial statements in our Annual Report on Form 10-K.

 

Compensation Committee

 

The Compensation Committee currently is comprised of Mr. Johnson, Mr. Mulcahy and Mr. Schindler, with Mr. Schindler serving as its chair. The Compensation Committee is responsible for assisting the Board of Directors in discharging its responsibilities relating to the compensation of our executive officers and the Chief Executive Officer performance evaluation process, and for preparing a report on executive compensation that is to be included in our proxy statement relating to the annual meeting of stockholders.

 

The Compensation Committee is also responsible for:

 

 

Governance and Nominating Committee

 

The Governance and Nominating Committee currently is comprised of Mr. Johnson, Mr. Mulcahy and Mr. Schindler; Mr. Johnson is its chair. The Governance and Nominating Committee is responsible for:

 

 

In order to assist our Board of Directors in making the independence determinations required by the New York Stock Exchange listing standards, the Board of Directors has adopted categorical standards of independence. These standards, which are contained in our Corporate Governance Guidelines, are included as Appendix A to this Proxy Statement and are also available on our corporate website, www.hanesbrands.com, on the “Investors” page under the link “Corporate Governance.” Eight of the nine current members of our Board of Directors, Mr. Chaden, Mr. Griffin, Mr. Johnson, Ms. Mathews, Mr. Mulcahy, Mr. Nelson, Mr. Schindler and Ms. Ziegler, are independent under New York Stock Exchange listing standards and under our Corporate Governance Guidelines. In determining director independence, the Board of Directors did not discuss, and was not aware of, any related person transactions, relationships or arrangements that existed with respect to any of these directors.

 

Our Audit Committee’s charter requires that the Audit Committee be composed of at least three members, all of whom must be independent under New York Stock Exchange listing standards and the rules of the Securities and Exchange Commission. Each of the members of our Audit Committee is an independent director under the New York Stock Exchange listing standards and meets the standards of independence applicable to audit committee members under applicable Securities and Exchange Commission rules.

 

Our Compensation Committee’s charter requires that all of the members of the Compensation Committee be independent under New York Stock Exchange listing standards, “non-employee directors” within the meaning of Securities and Exchange Commission Rule 16b-3 under the Exchange Act and “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and the regulations thereunder. Each of the members of our Compensation Committee is an independent director under the New York Stock Exchange listing standards, a non-employee director within the meaning of Rule 16b-3 under the Exchange Act and an outside director within the meaning of Section 162(m) of the Internal Revenue Code.

 

Our Governance and Nominating Committee’s charter requires that all of the members of the Governance and Nominating Committee be independent under New York Stock Exchange listing standards. Each of the members of our Governance and Nominating Committee is an independent director under the New York Stock Exchange listing standards.

 

Our Board of Directors has adopted a written policy setting forth procedures to be followed in connection with the review, approval or ratification of “related person transactions.” For purposes of this policy, the phrase “related person transaction” refers to any financial transaction, arrangement or relationship in which Hanesbrands or any of its subsidiaries is a participant and in which any director, nominee for director or executive officer, or any of their immediate family members, has a direct or indirect material interest.

 

Each director, director nominee and executive officer must promptly notify our Chief Executive Officer and our Corporate Secretary in writing of any material interest that such person or an immediate family member of such person had, has or will have in a related person transaction. The Governance and Nominating Committee is responsible for the review and approval or ratification of all related person transactions involving a director, director nominee or executive officer. At the discretion of the Governance and Nominating Committee, the consideration of a related person transaction may be delegated to the full Board of Directors, another standing committee or to an ad hoc committee of the Board of Directors comprised of at least three members, none of whom has an interest in the transaction.

 

The Governance and Nominating Committee, or other governing body to which approval or ratification is delegated, may approve or ratify a transaction if it determines, in its business judgment, based on its review of the available information, that the transaction is fair and reasonable to us and consistent with our best interests. Factors to be taken into account in making a determination of fairness and reasonableness may include:

 

 

If the Governance and Nominating Committee decides not to approve or ratify a transaction, the transaction may be referred to legal counsel for review and consultation regarding possible further action, including, but not limited to, termination of the transaction on a prospective basis, rescission of such transaction or modification of the transaction in a manner that would permit it to be ratified and approved by the Governance and Nominating Committee.

 

During 2010, there were no related person transactions, or series of similar transactions, involving us and our directors or executive officers.

 

The Governance and Nominating Committee believes that formalizing procedures for handling communications from stockholders is an important aspect of Hanesbrands’ corporate governance procedures. As a public company, Hanesbrands has an obligation to ensure that its communications with stockholders are prompt, accurate, credible, and in compliance with the applicable legal requirements to which Hanesbrands is subject, including the requirements of the Securities and Exchange Commission and the New York Stock Exchange. The Board has adopted a policy to govern the procedures for handling communications received from stockholders interested in communicating directly with the Board.

 

Stockholders may communicate with members of the Board by sending written communications directly to the Board or to specified individual members of the Board, including Hanesbrands’ Lead Director or any of Hanesbrands’ other non-management directors, by sending such communications to Hanesbrands Inc., 1000 East Hanes Mill Road, Winston-Salem, North Carolina 27105, Attention: Corporate Secretary. Stockholders also may communicate with members of the Board by sending an e-mail to our Corporate Secretary at corporate.secretary@hanesbrands.com. To ensure proper handling, any mailing envelope or e-mail containing a communication intended for the Board must contain a clear notation indicating that the communication is a “Stockholder/Board Communication.”

 

Although a communication to the Board may be submitted confidentially or anonymously, the Board encourages persons who wish to send communications to the Board to identify themselves so that a response

may be provided, if appropriate. In addition, any such communications should clearly identify whether the author is a stockholder and must state whether the communication is intended for all the members of the Board or only for certain specified individual directors.

 

Our General Counsel will review, with external legal counsel when appropriate, any communication from stockholders that is intended for the Board. Based on his or her judgment, the General Counsel will take the following actions with respect to such communication:

 

 

Our General Counsel has the authority (without providing a copy to the Board or advising the Board of the communication) to discard or take other appropriate actions with respect to: unsolicited marketing or advertising material or mass mailings; unsolicited newsletters, newspapers, magazines, books and publications; surveys and questionnaires; resumes and other forms of job inquiries; requests for business contacts or referrals; material that is unduly threatening or illegal; obscene materials; material that does not reasonably relate to Hanesbrands or its business; or similarly inappropriate or irrelevant materials.

 

In addition, our General Counsel may handle, at her discretion, any communication that can be described as an “ordinary business matter.” Such matters include routine questions, complaints and comments that can be appropriately addressed by management, as well as routine invoices, bills, account statements and related communications that can be appropriately addressed by management.

 

The Governance and Nominating Committee is responsible for screening potential director candidates and recommending qualified candidates to the full Board of Directors for nomination. The Governance and Nominating Committee will consider director candidates proposed by the Chief Executive Officer, by any director or by any stockholder. From time to time, the Governance and Nominating Committee also retains search firms to assist it in identifying and evaluating director nominees. In evaluating potential director candidates, the Governance and Nominating Committee seeks to present candidates to the Board of Directors who have distinguished records of leadership and success in their arena of activity and who will make substantial contributions to the Board of Directors. The Governance and Nominating Committee considers the qualifications listed in Hanesbrands’ Corporate Governance Guidelines, which include:

 

 

 

Although we do not have a standalone policy regarding diversity in the nomination process, as noted above, diversity is one of the criteria that our Corporate Governance Guidelines require that our Governance and Nominating Committee consider in identifying and evaluating director nominees. In applying this criteria, the Governance and Nominating Committee and the Board consider diversity to also include differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to an active, effective Board. The Governance and Nominating Committee evaluates the effectiveness of its activities under this policy through its annual review of Board composition, which considers whether the current composition of the Board adequately reflects the balance of qualifications discussed above, including diversity, prior to recommending nominees for election. In this regard, the Board believes that its efforts have been effective based on the current composition of the Board.

 

Any recommendation submitted by a stockholder to the Governance and Nominating Committee should include information relating to each of the qualifications outlined above concerning the potential candidate along with other information required by our bylaws. The Governance and Nominating Committee applies the same standards in evaluating candidates submitted by stockholders as it does in evaluating candidates submitted by other sources. Suggestions regarding potential director candidates, together with the required information described above, should be submitted in writing to Hanesbrands Inc., 1000 East Hanes Mill Road, Winston-Salem, North Carolina 27105, Attention: Corporate Secretary. Stockholders who want to nominate a director for consideration at next year’s annual meeting should refer to the procedures described in “Stockholder Proposals for Next Annual Meeting” on page 52.

 

On an annual basis, our Board plans for succession to the position of Chief Executive Officer, as well as to certain other senior management positions. To assist the Board, our Chief Executive Officer annually provides the Board with an assessment of executives holding those senior management positions and of their potential to succeed him. The Chief Executive Officer also provides the Board with an assessment of persons considered potential successors to those senior managers. The Board considers that information and their own impressions of senior management performance in planning for succession in key positions.

 

Our Global Code of Conduct, which serves as our code of ethics, applies to all directors and officers and other employees of our company and its subsidiaries. Any waiver of applicable requirements in the Global Code of Conduct that is granted to any of our directors, to our principal executive officer, to any of our senior financial officers (including our principal financial officer, principal accounting officer or controller) or to any other person who is an executive officer of Hanesbrands requires the approval of the Audit Committee. Any waiver of or amendment to the Global Code of Conduct will be disclosed on our corporate website, www.hanesbrands.com, on the “Investors” page, or in a Current Report on Form 8-K.

 

Copies of the written charters for the Audit Committee, Compensation Committee and Governance and Nominating Committee, as well as our Corporate Governance Guidelines, Global Code of Conduct and other

corporate governance information are available on our corporate website, www.hanesbrands.com, on the “Investors” page under the link “Corporate Governance.”

 

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 Securities and Exchange Commission, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), except to the extent that Hanesbrands specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.

 

Each of the members of our Audit Committee, which was established in accordance with Section 3(a)(58) of the Exchange Act, meets the standards of independence applicable to audit committee members under applicable Securities and Exchange Commission rules and New York Stock Exchange listing standards. The Audit Committee assists the Board of Directors in oversight of the integrity of the financial statements, financial reporting process and systems of internal accounting and financial controls of Hanesbrands Inc., a Maryland corporation (“Hanesbrands”), Hanesbrands’ compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence and the performance of Hanesbrands’ internal audit function and independent auditors. The Audit Committee operates under a written charter, a copy of which is available on our corporate website, www.hanesbrands.com, on the “Investors” page under the link “Corporate Governance.”

 

Management is primarily responsible for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”), the Audit Committee-appointed independent registered public accounting firm for the fiscal year ended January 1, 2011, is responsible for expressing an opinion on the conformity of Hanesbrands’ audited financial statements with accounting principles generally accepted in the United States of America. In addition, PricewaterhouseCoopers expresses its opinion on the effectiveness of Hanesbrands’ internal control over financial reporting.

 

In this context, the Audit Committee reviewed and discussed with management and PricewaterhouseCoopers the audited financial statements for the fiscal year ended January 1, 2011, management’s assessment of the effectiveness of Hanesbrands’ internal control over financial reporting and PricewaterhouseCoopers’ evaluation of Hanesbrands’ internal control over financial reporting. The Audit Committee met seven times (including telephone meetings) during the fiscal year ended January 1, 2011. The Audit Committee has discussed with PricewaterhouseCoopers the matters that are required to be discussed by AU Section 380 (Communication With Audit Committees), as modified or supplemented. In addition, the Audit Committee has discussed various matters with PricewaterhouseCoopers related to Hanesbrands’ financial statements, including critical accounting policies and practices used, alternative treatments for material items that have been discussed with management, and other material written communications between PricewaterhouseCoopers and management. The Audit Committee has also received written disclosures and the letter from PricewaterhouseCoopers required by Public Company Accounting Oversight Board Rule No. 3526 (Communications with Audit Committees Concerning Independence) and has discussed with PricewaterhouseCoopers its independence from Hanesbrands and its management. In addition, the Audit Committee has received written material addressing PricewaterhouseCoopers’ internal quality control procedures and other matters, as required by the New York Stock Exchange listing standards. The Audit Committee understands the need for PricewaterhouseCoopers to maintain objectivity and independence in its audit of our financial statements and internal control over financial reporting. The Audit Committee pre-approves all services, including both audit and non-audit services, provided by our independent registered public accounting firm.

 

Based on the considerations referred to above, the Audit Committee recommended to our Board of Directors that the audited financial statements for the fiscal year ended January 1, 2011 be included in our

Annual Report on Form 10-K for 2010 and selected PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending December 31, 2011.

 

By the members of the
Audit Committee consisting of:

 

Ronald L. Nelson (Chair)
Bobby J. Griffin
Jessica T. Mathews
Ann E. Ziegler

 

Auditor Fees and Services

 

The following table sets forth the fees billed to us by PricewaterhouseCoopers for services in the fiscal years ended January 1, 2011 and January 2, 2010:

 

 

In the above table, in accordance with applicable Securities and Exchange Commission rules, “Audit fees” include fees billed for professional services for the audit of our consolidated financial statements included in our Annual Report on Form 10-K and review of our financial statements included in our Quarterly Reports on Form 10-Q, fees billed for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements, fees related to services rendered in connection with securities offerings and fees for the audit of our internal control over financial reporting and consultations concerning financial accounting and reporting standards.

 

“Audit-related fees” are fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under the caption “Audit fees.” For the fiscal years ended January 1, 2011 and January 2, 2010, these fees primarily relate to social security audits and various other services.

 

“Tax fees” for the fiscal years ended January 1, 2011 and January 2, 2010 include consultation, preparation and compliance services for domestic and certain foreign jurisdictions.

 

Pre-Approval of Audit Services

 

Our Audit Committee pre-approves all services, including both audit and non-audit services, provided by our independent registered public accounting firm. For audit services (including statutory audit engagements as required under local country laws), the independent registered public accounting firm provides the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the year. The independent registered public accounting firm also submits an audit services fee proposal, which is approved by the Audit Committee before the audit commences. The Audit Committee may delegate the authority to pre-approve audit and non-audit engagements and the related fees and terms with the independent auditors to one or more designated members of the Audit Committee, as long as any decision made pursuant to such delegation is presented to the Audit Committee at its next regularly scheduled meeting. All audit and permissible non-audit services provided by PricewaterhouseCoopers to Hanesbrands during our past three fiscal years were pre-approved by the Audit Committee.

 

In 2010, we compensated each non-employee director for service on our Board of Directors as follows:

 

 

Directors who are also our employees receive no additional compensation for serving as a director.

 

The following table summarizes the compensation paid to our non-employee directors for the fiscal year ended January 1, 2011.

 

Director Compensation — 2010

 

 

 

 

In September 2009, after reviewing information about the compensation paid to non-employee directors at our benchmark companies (our benchmark companies are discussed below in “How the Compensation Committee uses Advisors and Benchmarking”), the Compensation Committee determined not to make any changes to compensation for non-employee directors for 2010. After a similar review conducted in December 2010, the Compensation Committee determined for 2011 to increase the annual cash retainer to $80,000, the additional annual cash retainer for the chair of the Audit Committee to $20,000 and the additional annual cash retainer for the chair of each of the Compensation Committee and the Governance and Nominating Committee to $15,000. We expect that the Compensation Committee will conduct a review of non-employee director compensation each year and may alter that compensation following any such review.

 

Under the Director Deferred Compensation Plan, a nonqualified, unfunded deferred compensation plan, our non-employee directors may defer receipt of all (but not less than all) of their cash retainers. At the election of the director, amounts deferred under the Director Deferred Compensation Plan will (i) earn a return equivalent to the return on an investment in an interest-bearing account earning interest based on the Federal Reserve’s published rate for five-year constant maturity Treasury notes at the beginning of the calendar year, which was 2.65% for 2010 and will be 2.02% for 2011, or (ii) be deemed to be invested in a stock equivalent account and earn a return based on our stock price. Receipt of awards of restricted stock or restricted stock units to non-employee directors may also be deferred under the Director Deferred Compensation Plan and invested in the stock equivalent account. Amounts deferred, plus any dividend equivalents or interest, will be paid in cash or in shares of our common stock, as applicable, with any shares of common stock being issued from the Omnibus Incentive Plan. The amount payable to participants will be payable either on the withdrawal date elected by the participant or upon the occurrence of certain events as provided under the Director Deferred Compensation Plan. A participant may designate one or more beneficiaries to receive any portion of the obligations payable in the event of death; however, neither participants nor their beneficiaries may transfer any right or interest in the Director Deferred Compensation Plan.

 

We believe that our directors who are not employees of Hanesbrands should have significant ownership stakes in Hanesbrands. Our non-employee directors receive a substantial portion of their compensation in the form of restricted stock units and also may elect to receive their cash retainers in the form of options to purchase our common stock or to defer receipt of such amounts under the Director Deferred Compensation Plan and have such deferred amounts deemed invested in a stock equivalent account. To promote such equity ownership and further align the interests of these directors with our stockholders, we have adopted share

ownership and retention guidelines for our non-employee directors. A non-employee director may not dispose of any shares of our common stock until such director holds shares of common stock with a value equal to at least five times the current annual equity retainer, and may then only dispose of shares in excess of those with that value. In addition to shares directly held by a non-employee director, shares held for such director in the Director Deferred Compensation Plan (including hypothetical share equivalents held in that plan) will be counted for purposes of determining whether the ownership requirements are met. The Compensation Committee reviewed the ownership requirements during the fiscal year ended January 1, 2011 and did not make any changes.

 

The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or “filed” or “incorporated by reference” in future filings with the Securities and Exchange Commission, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), except to the extent that Hanesbrands specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.

 

Mr. Schindler was the Chair and Mr. Johnson and Mr. Mulcahy served as members of the Compensation Committee during the fiscal year ended January 1, 2011. The Compensation Committee was at all times during the fiscal year ended January 1, 2011 comprised solely of non-employee directors each of whom was: (i) independent as defined under New York Stock Exchange listing standards, (ii) a non-employee director for purposes of Rule 16b-3 under the Exchange Act, and (iii) an outside director for purposes of Section 162(m) of the Internal Revenue Code, as amended.

 

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement.

 

Respectfully submitted,

 

Andrew J. Schindler, Chair

James C. Johnson

J. Patrick Mulcahy

 

The current members of the Compensation Committee are Mr. Schindler, Mr. Johnson and Mr. Mulcahy, and no other directors served on the Compensation Committee during the fiscal year ended January 1, 2011. No interlocking relationship exists between our Board of Directors or Compensation Committee and the Board of Directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

 

This compensation discussion and analysis provides information about our compensation objectives and principles for our principal executive officer, our principal financial officer and our three other most highly compensated executive officers (we refer to these officers as our “named executive officers”), who for the fiscal year ended January 1, 2011 were Richard A. Noll, our Chairman and Chief Executive Officer, E. Lee Wyatt Jr., our Chief Financial Officer, Gerald W. Evans Jr., our Co-operating Officer, President International, William J. Nictakis, our Co-operating Officer, President U.S., and Kevin W. Oliver, our Chief Human

Resources Officer. Also, we have voluntarily included information about Joia M. Johnson, our Chief Legal Officer, General Counsel and Corporate Secretary, so that we are providing information about each of our executive officers. We believe that such additional disclosure is helpful for stockholders because it provides complete visibility into the Compensation Committee’s compensation decisions for all executives at this critical management level. Our compensation discussion and analysis also contains analysis about how and why significant compensation decisions were made, and places in context the information contained in the tables that follow this discussion.

 

Hanesbrands reported earnings per share of $2.16 and sales of $4.327 billion for 2010, which represented growth over 2009 earnings per share, excluding actions, of 30.1% and growth over 2009 sales of 11.2%. As a result of this performance, our executive officers earned the maximum amount under the performance-based elements of their compensation, which increased the total compensation amounts earned for 2010 when compared to 2009. For example, in 2009 our executive officers earned annual incentive compensation at approximately 23.4% of their target amount, while for 2010 they earned 200% of their target amount. The increase in annual incentive compensation for 2010 compared to 2009 was the primary reason for the overall increase in compensation for each of our executive officers for 2010, including our Chief Executive Officer.

 

Our commitment to continually reviewing and updating our compensation practices in light of evolving best pay practices is evidenced by numerous recent changes, including:

 

 

Objectives

 

Our executive compensation program supports the objectives of the Hanesbrands executive compensation philosophy, which are to attract, retain and motivate the executive team to support the attainment of our business strategy and operating imperatives, as well as to guide the design and administration of the executive compensation and benefit plans.

 

Applicability

 

The executive compensation philosophy applies to senior leaders and key executive talent who directly impact the strategic direction and operating results of Hanesbrands: specifically the CEO, the other named

executive officers, and all other “executive officers” for the purposes of Section 16 under the Exchange Act (“Section 16 officers”).

 

Principles

 

The guiding principles underlying the executive compensation philosophy are to align senior management and stockholder interests and to be simple, quantifiable, and unifying.

 

More specifically:

 

 

Peer Group

 

Hanesbrands will compare its compensation to companies with whom it competes for talent, capital, consumers, and customers. Peers used for competitive pay comparisons as determined by the Compensation Committee will be similarly-sized public apparel companies, only supplemented by general consumer industry companies if too few apparel benchmarks exist.

 

Targeted Pay Posture

 

Senior management and the Compensation Committee will use judgment when making compensation decisions and review executive pay from a holistic perspective, including reference to compensation peer group pay practices and norms, general industry pay levels as gathered from publicly-available survey sources, individual performance, tenure and importance to Hanesbrands, and internal equity considerations.

 

The Compensation Committee will use Total Targeted Direct Compensation (TTDC), which refers to total base salary, annual incentive compensation and long-term incentive compensation at the target level, as the major metric for benchmark comparisons. Executive pay will be targeted between the market median and the top quartile to ensure engagement, motivation and retention.

 

Weight the mix among base salary, annual incentive (AIP), and long-term incentives (LTIP) to reward performance for above market median performance.

 

Benefits and perquisites, including pension plans and deferred compensation programs, are targeted at or below competitive median levels.

 

Authority

 

The Compensation Committee, advised by its compensation consultant, is responsible for overseeing and approving all elements of the executive compensation program for Section 16 officers. Hanesbrands’ senior management and human resources are responsible for the design and administration of the executive compensation program.

 

We believe that our executives should have significant ownership stakes in Hanesbrands. To promote such equity ownership and further align the interests of our executives with our stockholders, we have adopted share ownership and retention guidelines for our key executives, including our executive officers. Until the requirements of the stock ownership guidelines are met, an executive is required to retain 50% of any shares received (on a net after-tax basis) under our equity-based compensation plans.

 

The Compensation Committee reviewed the guidelines during the fiscal year ended January 1, 2011 and determined to increase the requirement for our Chief Executive Officer from four to six times his annual base salary; the requirements for the other executive officers continue to be three times the executive’s base salary.

 

Our executive officers and other key executives have a substantial portion of their incentive compensation paid in the form of our common stock. In addition to shares directly held by a key executive, shares held for such executive in the 401(k) Plan, the Hanesbrands Inc. Executive Deferred Compensation Plan (the “Executive Deferred Compensation Plan”), and the Hanesbrands Inc. Supplemental Employee Retirement Plan (the “SERP”), including hypothetical share equivalents held in the latter two plans, will be counted for purposes of determining whether the ownership requirements are met.

 

The Compensation Committee reviewed compliance by our executive officers as of the end of October 2010 and determined that Mr. Noll had achieved an ownership percentage of approximately 165% of the required number of shares set forth in the guidelines and that each of the executive officers other than Mr. Noll had achieved ownership of between approximately 60% and 224% of the required number of shares set forth in the guidelines.

 

In order to further align the interests of our executives with those of our stockholders, the Compensation Committee recently implemented a policy whereby all employees of our company, including our executive officers, are required to hold any net shares of Hanesbrands stock that they receive through the exercise of stock options or the vesting or lapse of restrictions on restricted stock units or other equity awards, in case each which are granted on or after December 1, 2010, for at least one year from the date of exercising, vesting or lapse, as applicable. The requirement does not apply to any employee whose employment terminates or who becomes totally disabled (as defined under the appropriate disability benefit plan, if applicable). For purposes of this policy, “net shares” means the number of shares obtained by the executive less any shares sold by the executive to cover the exercise price and brokerage costs of exercising an option or withheld to cover applicable income tax and employment tax withholding requirements.

 

Under our insider trading policy, directors and executive officers are required to clear in advance all transactions in Hanesbrands securities with Hanesbrands’ legal department. Further, no director, executive officer or other employee of Hanesbrands is permitted to engage in “short sales” or “sales against the box” or trade in puts, calls or other options on our securities. This policy also applies to shares subject to the one-year holding period described above. These provisions are part of our overall program to prevent any Hanesbrands directors, officers or employees from trading on inside information.

 

The Compensation Committee is responsible for overseeing and approving all elements of the executive compensation program for executive officers. The Compensation Committee has the authority to retain an independent executive compensation consultant to assist in the evaluation of compensation for our executive officers and to help ensure the objectivity and appropriateness of the actions of the Compensation Committee. The Compensation Committee has the sole authority to retain, at our expense, and terminate any such consultant, including the sole authority to approve such consultant’s fees and other terms of engagement. Frederic W. Cook & Co., or the Cook firm, serves as the Compensation Committee’s executive compensation consultant. The Cook firm assists in the development of compensation programs for our executive officers and our non-employee directors by providing information about compensation by our benchmark companies

(which are described below), relevant market trend data, information on current issues in the regulatory environment, recommendations for program design and best practices, and corporate governance guidance. The Cook firm does not provide any other services to Hanesbrands, and this independence was an important factor in the Compensation Committee’s selection of the Cook firm.

 

As noted above, one objective of our compensation program is to attract, retain and motivate the executive team to support the attainment of our business strategy and operating imperatives. We compare our compensation to that of companies with whom we compete for talent, capital, consumers and customers. Peers used for competitive pay comparisons as determined by the Compensation Committee will be similarly-sized public apparel companies, only supplemented by general consumer industry companies if too few apparel benchmarks exist. One of the ways in which the Cook firm assists the Compensation Committee is by providing information about compensation programs offered by the companies in our benchmark group. Our benchmark group, which was identified and selected with the assistance of the Cook firm, currently consists of nine similarly-sized public apparel companies, as well as ten general consumer industry companies selected for purposes of validation because of the relatively small number of apparel benchmark companies. Hanesbrands’ annual revenue is similar to the median revenue of the benchmark companies.

 

During 2010, the Compensation Committee considered the composition of our benchmark group and determined to make changes to the group. Our primary apparel peer companies are Limited Brands, Inc., V.F. Corporation, Jones Apparel Group, Inc., Collective Brands, Inc., Liz Claiborne, Inc., Phillips-Van Heusen Corporation, The Warnaco Group, Inc., Quiksilver, Inc. and Carter’s, Inc. Limited Brands, Inc. and Collective Brands, Inc. were added to the group in 2010. The validation peer companies are Fortune Brands, Inc., Newell Rubbermaid Inc., The Clorox Company, Mattel, Inc., The Hershey Company, Jarden Corporation, Hasbro, Inc., Energizer Holdings, Inc., Del Monte Foods Company and Stanley Black & Decker, Inc. Energizer Holdings, Inc. was added to the group in 2010, and two other companies, Brunswick Corporation and Hormel Foods Corporation, were removed from the group due to differences in their business models from that of Hanesbrands. In addition, during 2010 The Black & Decker Corporation became a wholly owned subsidiary of The Stanley Works; both of these companies were in our benchmark group and The Stanley Works, now known as Stanley Black & Decker, Inc., remains in our benchmark group.

 

To determine what constitutes a “competitive” compensation package, the Compensation Committee generally considers “total targeted direct compensation,” comprised of base salary, annual incentive compensation and long-term incentive compensation, as well as the allocation among those elements of compensation, at benchmarks determined by market rates of compensation paid by our benchmark companies. Executive pay will be targeted between the market median and the top quartile to ensure engagement, motivation and retention.

 

The compensation packages we offer our executive officers consist of the following elements, each of which is described in greater detail below:

 

 

The mix of elements that we offer is intended to further our goals of: balancing annual and long-term business objectives, using an appropriate mix of cash and equity; emphasizing a “pay-for-results” culture, establishing a link between a substantial percent of an executive’s compensation and stockholders’ value growth; effectively managing the cost of programs by delivering a meaningful portion of executive pay in

variable, at-risk compensation; and providing a balanced total compensation program to ensure senior management is not encouraged to take unnecessary and excessive risks that may harm our company.

 

The table below shows base salary, AIP and cash and equity LTIP compensation at the target level for each of our executive officers for 2011, 2010, 2009 and 2008. This table presents information that is supplemental to, and should not be considered a substitute for, the information contained in the Summary Compensation Table which appears below under “Summary of Compensation.” This table is not required by Securities and Exchange Commission rules, and we have chosen to include it to help investors better understand the total target direct compensation levels of our executive officers for the three years reflected in our Summary Compensation Table and for the current year. Amounts are target amounts and do not necessarily reflect amounts that were or will be paid or realized.

 

Total Target Direct Compensation

 

 

 

 

Targets and Measures for our Compensation Program

 

A significant portion of the compensation that our executive officers may earn is subject to the achievement of performance targets. This is consistent with our goals of emphasizing a “pay-for-results” culture, establishing a link between a substantial percent of an executive’s compensation and stockholders’ value growth, and effectively managing the cost of programs by delivering a meaningful portion of executive pay in variable, at-risk compensation. We believe that the performance of individual officers is best viewed through their contributions to our company’s performance as reflected by achievement of annual performance targets that are considered to be drivers of long-term stockholder value. We use quantifiable performance metrics that are easily calculated and easily understood and that reinforce teamwork and internal alignment.

For 2010, the elements of our program subject to the achievement of performance targets included:

 

 

For 2011, those elements will include:

 

 

For both 2010 and 2011, the measures and targets were the same for all of these elements. Opportunities exist for performance at a target level and at a maximum level. No opportunity exists for performance at or below a threshold level, but a pro-rated amount may be earned if performance is above the threshold level but below the target level.

 

The Compensation Committee selected measures and targets that have remained constant from year to year and that it considers to be key performance drivers that are most important to our stockholders. Although the measures and targets set by the Compensation Committee remained constant for 2010 and 2011, year over year improvement in performance was required in order for the targets to be met. Improved performance was also encouraged by setting the targets well above Hanesbrands’ historic performance levels. The amounts earned by our executive officers under the performance-based elements of our compensation program were based solely on Hanesbrands’ performance against the measures and targets. The Compensation Committee believes the selection of consistent measures and targets that incent our executive officers to achieve profitable business growth creates an incentive compensation program that rewards for continuous improvement and aligns most closely with growth in stockholder value.

 

The measures and targets for the elements of our program subject to the achievement of performance targets for 2010 and 2011 are as follows:

 

 

The earnings per share growth and sales growth targets for 2010 and 2011 are tied to our long-term growth objectives for these measures. In selecting earnings per share growth and sales growth as performance measures for our executive officers for 2010, the Compensation Committee considered the fact that our company’s restructuring efforts had largely been completed and concluded that earnings per share growth would be a better profit measure than operating profit, the measure that had previously been used, in aligning the performance of these officers with stockholder value as it incorporates aspects of growth, profitability and capital efficiency. The Compensation Committee weighted earnings per share more heavily than sales to further align senior management and stockholder interests.

 

As a result of the weighting assigned to these two measures, an executive officer would be eligible to receive, under the AIP for example, 25% of the target amount if sales increase at the target level over sales for the previous year, and would be eligible to receive 25% of the maximum amount if sales increase by the maximum level over such prior period sales.

 

Earnings per share growth for 2010 was determined by considering any increase in our earnings per share on an excluding actions basis for the fiscal year ended January 1, 2011 as compared to earnings per share on an excluding actions basis for the fiscal year ended January 2, 2010. Hanesbrands reported earnings per share of $2.16 and sales of $4.327 billion for 2010, which represented growth over 2009 of 30.1% and 11.2%, respectively. As a result of this performance, our executive officers earned the maximum amount under the performance-based elements of their compensation.

Base Salary

 

The base salaries for our executive officers are determined based on their experience and the scope of their responsibilities, both on an individual basis and in relation to the experience and scope of responsibilities of other executives. The Compensation Committee also considers the practices of the companies in our benchmark group. These factors result in different compensation levels among the executive officers. Base salaries are reviewed annually, and adjusted from time to time to reflect individual responsibilities, performance and experience, as well as market compensation levels.

 

For 2010, the Compensation Committee determined to increase Mr. Noll’s total target direct compensation opportunity by approximately 7.5%, from $6,600,000 to $7,100,000. In making its decision, the Compensation Committee considered Mr. Noll’s performance and that Mr. Noll’s total target direct compensation opportunity had not changed since 2007, and also considered the practices of the companies in our benchmark group. Further, the Compensation Committee decided to slightly change the mix among the elements of Mr. Noll’s compensation by increasing the base salary and cash compensation components of his compensation to be more consistent with the base salaries and cash compensation of chief executive officers of the benchmark companies. This was accomplished by increasing his base salary from $800,000 to $1,000,000 and maintaining his AIP opportunity as a percentage of his base salary at 150%, which with his new base salary would result a payment under the AIP of $1,500,000 at the target level.

 

For 2011, the Compensation Committee determined to increase the base salaries of our executive officers by approximately 1% to offset the elimination of the car allowance we ceased providing in 2011, which was equal to 4% of each officer’s base salary. The Compensation Committee also determined to increase the base salaries of Mr. Evans and Mr. Nictakis by an additional amount resulting in an increase of approximately 10% for Mr. Evans and Mr. Nictakis. In making its decision, the Compensation Committee considered the practices of the companies in our benchmark group, and also considered that the total target direct compensation opportunity of each of Mr. Evans and Mr. Nictakis had not changed in three years.

 

Annual Incentive Compensation (AIP)

 

The AIP is designed to motivate performance and to advance the interests of Hanesbrands by linking a portion of annual compensation to the achievement of financial objectives and key performance indicators, while contributing to increased long-term stockholder value. The design of the AIP is intended to make it easy for participants to understand what company performance is required, consistent with our operating principles of being simple, quantifiable, and unifying.

 

For 2010, the maximum level of AIP opportunity that may be earned pursuant to the AIP was increased for each of our executive officers from 150% to 200% of the target level of AIP opportunity. In making this decision, the Compensation Committee considered that a maximum level of AIP opportunity at this multiple of target level is consistent with the practices of our benchmark companies. Neither the threshold level nor the target level were changed for any of these officers. The chart below illustrates the 2010 AIP opportunity, expressed as percentages of base salary, for each of our executive officers at the threshold, target and maximum levels.

 

 

As discussed above in “Targets and Measures for our Compensation Program,” the measures for the AIP for 2010 were earnings per share growth and sales growth. As a result of Hanesbrands’ performance for the

fiscal year ended January 1, 2011, each of our executive officers received AIP payments at 200% of their target amounts.

 

As noted above, for 2011 the measures and targets for the AIP will be the same as those for 2010. In addition, the 2011 AIP opportunity, expressed as percentages of base salary, remained the same as for 2010 for each of our executive officers at the threshold, target and maximum levels.

 

Long-Term Incentive Program (LTIP)

 

The Omnibus Incentive Plan permits the issuance of equity and cash incentive awards to our employees, non-employee directors and employees of our subsidiaries to promote the interests of our company and our stockholders. The Omnibus Incentive Plan is designed to promote these interests by providing such individuals with a proprietary interest in pursuing the long-term growth, profitability and financial success of our company and aligning employee interest with that of our stockholders. For 2010 and 2011, the dollar value of Mr. Noll’s LTIP award was not changed from 2009. For 2010 and 2011, the values of the LTIP awards for each of the other executive officers, as a percentage of such officer’s base salary, were not changed from 2009.

 

For 2010 and 2011, three types of LTIP grants were awarded to our executive officers:

 

 

The performance measures and targets for the PSCAs are described above under “Targets and Measures for our Compensation Program.” Equity awards are approved as a dollar amount, which on the grant date is converted into a specific number of restricted stock units, stock options or other stock awards. The number of restricted stock units and other stock awards is determined by using the closing price of our common stock on the date of grant. The number of stock options is determined by a third party using a Black-Scholes option-pricing model, with the closing price of our common stock on the date of grant as one of the factors used. The exercise price of the stock options granted is the closing price of our common stock on the date of grant.

 

During 2010, the Compensation Committee amended the Omnibus Plan to provide that, subject to limited exceptions, stock options, stock appreciation rights, restricted stock and restricted stock units will vest over a period of at least three years, and no faster than on a pro rata basis over the vesting period. The Compensation Committee also amended the Omnibus Plan to prohibit, in addition to repricing of stock options and stock appreciation rights, cash buyouts of such awards.

 

2010 LTIP Awards

 

Stock options granted for 2010 comprised 40% of the LTIP award for each executive officer, and vest 33%, 33% and 34% on the first anniversary, second anniversary and third anniversary, respectively, of the date of grant, conditioned on continued employment with Hanesbrands, with vesting in the event of a qualifying termination of employment for death, disability, retirement or involuntary termination or a change in control as determined at the time of grant. We believe stock options provide one way to align the interests of our employees with those of our stockholders, because the stock options, with exercise prices equal to the closing price of our common stock on the date of grant, have value only if our share price increases after the date of grant. The stock option awards made to these officers for 2010 were granted in December 2009; as a result, these awards were reflected in our “Grants of Plan-Based Award Table” for 2009 and the full grant date value of these awards is included for 2009 in the “Summary Compensation Table” below.

 

Restricted stock units granted for 2010 comprised 40% of the LTIP award for each executive officer, and vest 33%, 33% and 34% on the first anniversary, second anniversary and third anniversary, respectively, of the date of grant, conditioned on continued employment with Hanesbrands, with vesting in the event of a qualifying termination of employment for death, disability, retirement or involuntary termination or a change in control as determined at the time of grant. We believe that restricted stock units provide another way to align the interests of our employees with those of our stockholders because the value of this element of

compensation increases or decreases with our stock price. The restricted stock unit awards made to these officers for 2010 were granted in December 2009; as a result, these awards were reflected in our “Grants of Plan-Based Award Table” for 2009 and the full grant date value of these awards is included for 2009 in the “Summary Compensation Table” below.

 

For 2010, the Compensation Committee added a PSCA, a form of LTIP award that had not previously been provided. The PSCA for 2010 is payable in cash and comprised 20% of the 2010 LTIP award for each executive officer. In making the decision to add the PSCAs, the Compensation Committee considered that more long-term incentive compensation being performance-based is consistent with the practices of our benchmark companies. Under these awards, cash payments will be made after the end of a three-year performance period ending December 29, 2012. For each year of the three-year period, our company’s performance for that year will impact the amount that will be paid to each of our executive officers after the end of the period. A target value was set for each award for the first year of the performance period at the time of grant, as well as a maximum value which is equal to 200% of the target value. Target values for subsequent years are to be determined immediately prior to or shortly after the beginning of the subsequent years during the period. The amounts to be paid will be equal to the average of the actual achievement levels over the performance period multiplied by the sum of the target award values over the performance period. The performance measures and targets for the PSCAs are described above under “Targets and Measures for our Compensation Program.” As discussed above in “Targets and Measures for our Compensation Program,” the measures for the PSCA for 2010 were earnings per share growth and sales growth. As a result of Hanesbrands’ performance for the fiscal year ended January 1, 2011, each of our executive officers earned amounts under the PSCA equal to 200% of their target amounts. The amounts calculated for each executive officer based on this performance are included in the “Summary Compensation Table” below, but no amounts will be paid until after the performance for each year in the performance period has been determined and the results are averaged as described above.

 

2011 LTIP Awards

 

For 2011, the Compensation Committee increased the percentage of LTIP awards tied to our company’s performance. For 2011, the portion of each named executive officer’s LTIP award comprised of a PSCA increased from 20% to 40%, with a corresponding decrease to the portion of the named executive officer’s LTIP allocated to stock options. The change was made to enhance the linkage between Company operating performance and named executive officer compensation.

 

Stock options granted for 2011 comprised 20% of the LTIP award for each executive officer, with the same vesting terms as the stock options granted for 2010. The exercise price of the stock options is the closing price of our common stock on the grant date. The stock option awards made to these officers for 2011 were granted in December 2010; as a result, these awards were reflected in our “Grants of Plan-Based Awards in 2010” table below and the full grant date value of these awards is included for 2010 in the “Summary Compensation Table” below. Restricted stock units granted for 2011 comprised 40% of these officers’ LTIP award with the same vesting terms as the restricted stock units granted for 2010. The restricted stock unit awards made to these officers for 2011 were granted in December 2010; as a result, these awards were reflected in our “Grants of Plan-Based Awards in 2010” table below and the full grant date value of these awards is included for 2010 in the “Summary Compensation Table” below.

 

Half of the value of the PSCA for 2011 consists of an award payable in cash and the other half consists of an award payable in stock. The cash portion of the PSCA will be paid after the third year of the cash portion of the program described above. The stock portion of the PSCA will vest three years after the grant date. For each PSCA, a target value was set for 2011, as well as a maximum value which is equal to 200% of the target value. The cash award is the award for the second year of the three-year period described above. The number of shares of common stock that will be received upon vesting of the stock award will range from 0% to 200% of the number of units granted based on our company’s achievement in 2011 of certain performance targets. The performance measures and targets for the PSCAs are described above under “Targets and Measures for our Compensation Program.”

Post-Employment Compensation

 

Our executive officers are eligible to receive post-employment compensation pursuant to the Hanesbrands Inc. Pension Plan, or the “Pension Plan,” and our defined contribution retirement program, which includes the 401(k) Plan and the SERP, and pursuant to Severance/Change in Control Agreements, or “Severance Agreements.” Each of these arrangements is discussed below.

 

Pension Plan

 

The Pension Plan is a defined benefit pension plan under which benefits have been frozen since December 31, 2005, intended to be qualified under Section 401(a) of the Internal Revenue Code, that provides the benefits that had accrued for any of our employees, including our executive officers, as of December 31, 2005 under a plan maintained by our former parent company prior to our becoming an independent public company. Because the Pension Plan is frozen, no additional employees became participants in the Pension Plan after December 31, 2005, and existing participants in the Pension Plan do not accrue any additional benefits after December 31, 2005.

 

Defined Contribution Retirement Program

 

Our defined contribution retirement program includes the 401(k) Plan and the SERP. Under the 401(k) Plan, our executive officers and generally all full-time domestic exempt and non-exempt salaried employees may contribute a portion of their compensation to the plan on a pre-tax basis and receive a discretionary matching employer contribution of up to a possible maximum of 4% of their eligible compensation not in excess of certain dollar limits mandated by the Internal Revenue Code. In addition, we may make an employer contribution to exempt and non-exempt salaried employees of up to an additional 4% of their eligible compensation.

 

The SERP is a nonqualified supplemental retirement plan that provides two types of benefits that we refer to collectively as the “Defined Contribution Component” of the SERP.

 

 

The SERP also provides benefits, which we refer to as the “Defined Benefit Component” of the SERP, consisting of those supplemental retirement benefits that had been accrued as of December 31, 2005 under a plan maintained by our former parent company prior to our becoming an independent public company.

 

As discussed below under “Nonqualified Deferred Compensation” and “Pension Benefits,” at the end of 2008, we provided all active participants in the SERP with an election to receive the accrued Defined Contribution Component and the accrued Defined Benefit Component, respectively, of their SERP benefit as of December 31, 2008 in the form of a lump sum payment in 2009 or 2010. Commencing January 1, 2009, we

distribute the vested portion of all SERP accruals directly to participants, including our executive officers, in cash on an annual basis. Any unvested portions are credited to the employee’s SERP account and distributed to the employee upon vesting.

 

Severance Agreements

 

We have entered into Severance Agreements with all of our executive officers. The Severance Agreements provide these officers with benefits upon the involuntary termination of their employment other than for wrongful behavior or misconduct. The Severance Agreements also contain change-in-control benefits for these officers to help keep them focused on their work responsibilities during the uncertainty that accompanies a potential change in control, to provide benefits for a period of time after a change-in-control transaction and to help us attract and retain key talent. We determined the levels of severance provided to these officers under the Severance Agreements by reference to market studies conducted prior to entering into the first Severance Agreements in connection with our spin off. We believe the levels of benefits offered by the Severance Agreements are appropriate and competitive. Compensation that could potentially be paid to our executive officers pursuant to the Severance Agreements is described below in “Potential Payments upon Termination or Change in Control.” Each agreement continues in effect unless we give at least 18 months’ prior written notice that the agreement will not be renewed. In addition, if a change in control occurs during the term of the agreement, the agreement will automatically continue for two years after the end of the month in which the change in control occurs.

 

Other Compensation

 

Plans and Arrangements

 

Our executive officers are eligible to participate in certain employee benefits plans and arrangements offered by our company. These include the Executive Deferred Compensation Plan, the Hanesbrands Inc. Executive Life Insurance Plan, or the “Life Insurance Plan,” and the Hanesbrands Inc. Executive Disability Plan, or the “Disability Plan.” Under the Executive Deferred Compensation Plan, a group of approximately 230 executives at the director level and above, including our executive officers, may defer receipt of cash and equity compensation. We offer the Executive Deferred Compensation Plan because programs of its kind are offered by some of our benchmark companies.

 

The Life Insurance Plan provides life insurance benefits to a group of approximately 75 employees at the level of vice president or above, including our executive officers, who contribute materially to the continued growth, development and future business success of Hanesbrands. The Life Insurance Plan, which includes both a death benefit and a cash value, provides life insurance coverage during active employment in an amount equal to three times annual base salary, and, depending on the performance of investments in the plan, may offer continuing coverage following retirement. The Life Insurance Plan also provides executives with the opportunity to make voluntary, after-tax contributions that may be allocated by the executive into a range of investment options. The Disability Plan provides long-term disability benefits for persons employed by Hanesbrands and its subsidiaries as eligible executives. The Disability Plan provides disability coverage for a group of approximately 75 employees at the level of vice president and above, including our executive officers. If an eligible employee becomes totally disabled, the program will provide a monthly disability benefit equal to 1/12 of the sum of (i) 75% of the employee’s annual base salary up to an amount not in excess of $500,000, and (ii) 50% of the three-year average of the employee’s annual short-term incentive payments up to an amount not in excess of $250,000. The maximum monthly disability benefit is $41,667 and is reduced by any disability benefits that an employee is entitled to receive under Social Security, workers’ compensation, a state compulsory disability law or another plan of Hanesbrands providing benefits for disability.

 

Perquisites

 

We have eliminated nearly all of the limited perquisites that we offered to our executive officers in the past. For example, beginning in 2011, we no longer provide an executive car allowance.

 

Role of the Chief Executive Officer in Setting the Compensation of Other Executive Officers

 

As noted above, our Compensation Committee, advised by their compensation consultant, is responsible for overseeing and approving all elements of the executive compensation program for executive officers. Our senior management and human resources are responsible for the design and administration of the executive compensation program. At the direction of the Compensation Committee, our management has worked with the Cook firm to prepare information about the compensation of our executive officers. Our Chief Executive Officer uses this information to make recommendations to the Compensation Committee regarding compensation of these officers, other than the Chief Executive Officer, and the Cook firm provides guidance to the Compensation Committee about those recommendations. The Cook firm makes independent recommendations to the Compensation Committee regarding the compensation of our Chief Executive Officer without the foreknowledge of management. The Compensation Committee uses this information and considers these recommendations in making decisions about executive compensation for all of our executive officers. All decisions regarding compensation of executive officers are made solely by the Compensation Committee.

 

Tax Gross-Ups

 

We do not increase payments to any executive officer to cover non business-related personal income taxes, other than the personal income taxes due on relocation reimbursements.

 

Clawbacks and Recoupment

 

To further align the interests of employees with the interests of our stockholders and strengthen the link between total compensation and our company’s performance, under the Omnibus Incentive Plan the Compensation Committee may make retroactive adjustments to, and employees, including our executive officers, would be required to reimburse the company for, any cash or equity-based incentive compensation paid to employees where such compensation was predicated upon achieving certain financial results that were substantially the subject of a restatement if, as a result of the restatement, it is determined that the employees otherwise would not have been paid such compensation, regardless of whether or not the restatement resulted from the employees’ misconduct. While the foregoing decision is made in the discretion of the Compensation Committee, the Omnibus Incentive Plan provides that Hanesbrands shall, to the extent permitted by governing law, require reimbursement of any cash or equity-based incentive compensation paid to any executive officer where: (i) the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a substantial restatement, and (ii) in the view of the Compensation Committee the executive officer engaged in fraud or misconduct that caused or partially caused the need for the substantial restatement. Payments made pursuant to the AIP are also subject to recoupment in the same circumstances as described above for the Omnibus Incentive Plan.

 

Tax Treatment of Certain Compensation

 

Section 162(m) of the Internal Revenue Code limits the tax deductibility of certain compensation paid to our chief executive officer and our three other named executive officers, other than our chief financial officer, with the highest total compensation. This provision disallows the deductibility of certain compensation in excess of $1 million per year unless it is considered performance-based compensation under the Internal Revenue Code. We have adopted policies and practices that are intended to take into account the maximum tax deduction possible under Section 162(m) of the Internal Revenue Code for our AIP payments, PSCAs and stock option awards; however, there can be no guarantee that the IRS will agree on the amount of those deductions. In addition, we may forgo any or all of the tax deduction if we believe it to be in the best long-term interests of our stockholders. Time-vested restricted stock units are not deemed “performance based,” and therefore are not tax deductible if the value at vesting, in combination with other non-performance-based compensation such as salary, exceeds $1 million for an executive officer. For 2010, we expect that the following compensation will not be deductible: Mr. Noll, $4,820,951; Mr. Evans, $658,272; and Mr. Nictakis, $1,482,143.

In making decisions about executive compensation, we also consider the impact of other regulatory provisions, including the provisions of Section 409A regarding non-qualified deferred compensation and the “golden parachute” provisions of Section 280G of the Internal Revenue Code. For example, we have attempted to structure the Severance Agreements so that they will not result in adverse tax consequences under Section 409A.

 

In making decisions about executive compensation, we also consider how various elements of compensation will impact our financial results. In this regard, we consider the impact of applicable stock compensation accounting rules, which determines how we recognize the cost of employee services received in exchange for awards of equity instruments.

 

The following table sets forth a summary of compensation earned by or paid to our executive officers, including our named executive officers, for the fiscal years ended January 1, 2011, January 2, 2010, and January 3, 2009.

 

Summary Compensation Table

 

 

 

 

		Grant Date Fair
		Value of Portion				Grant Date Fair				Total Grant Date
		of the PSCA				Value of Restricted				Fair Value of
		Payable in Stock				Stock Units				Stock Awards
Richard A. Noll		$	919,991			$	1,840,008			$	2,759,999
E. Lee Wyatt Jr.			262,393				524,812				787,205
Gerald W. Evans Jr.			262,393				524,812				787,205
William J. Nictakis			262,393				524,812				787,205
Kevin W. Oliver			151,390				302,807				454,197
Joia M. Johnson			151,390				302,807				454,197

 

 

						Amount Earned for
						2010 under the				Total Non-Equity
						Performance Cash				Incentive Plan
		AIP				Award Program				Compensation
Richard A. Noll		$	3,000,000			$	1,840,000			$	4,840,000
E. Lee Wyatt Jr.			1,300,000				520,000				1,820,000
Gerald W. Evans Jr.			1,200,000				480,000				1,680,000
William J. Nictakis			1,200,000				480,000				1,680,000
Kevin W. Oliver			750,000				300,000				1,050,000
Joia M. Johnson			750,000				300,000				1,050,000

 

 

 

The following table sets forth a summary of grants of plan-based awards to our executive officers, including the named executive officers, for the fiscal year ended January 1, 2011.

 

Grants of Plan-Based Awards in 2010