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JACK IN THE BOX INC.

 

January 13, 2011

Dear Fellow Stockholder:

 

We invite you to attend the Jack in the Box Inc. 2011 Annual Meeting of Stockholders. The meeting will be held on Friday, February 18, 2011, at 8:30 a.m. (Pacific Standard Time) at the Marriott Courtyard, 8651 Spectrum Center Boulevard, San Diego, California 92123.

 

In the following pages, you will find the Notice of Annual Meeting of Stockholders as well as a Proxy Statement describing the business to be conducted at the meeting. We have also enclosed a copy of our Annual Report on Form 10-K for the fiscal year ended October 3, 2010, as amended, for your information.

 

To assure that your shares are represented at the meeting, please mark your choices on the enclosed proxy card, sign and date the card, and return it promptly in the postage-paid envelope provided. We also offer stockholders the opportunity to vote their shares over the Internet or by telephone. Please see the Proxy Statement and the enclosed proxy card for details about voting. If you hold your shares through an account with a broker, bank, or other financial institution, please follow the instructions you receive from them to vote your shares. If you are able to attend the meeting and wish to vote your shares in person, you may do so at any time before the proxy is voted at the meeting.

 

Sincerely,

 

Linda A. Lang

Chairman of the Board,

Chief Executive Officer and President

 

Important notice regarding the availability of proxy materials
for the Annual Meeting of Stockholders to be held on February 18, 2011

 

The Jack in the Box Inc. Proxy Statement and Annual Report on Form 10-K for the fiscal year ended October 3, 2010, as amended, are available electronically at www.jackinthebox.com/proxy

 

 

TABLE OF CONTENTS

 

JACK IN THE BOX INC.

9330 Balboa Avenue

San Diego, California 92123

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held February 18, 2011

 

The 2011 Annual Meeting of Stockholders of Jack in the Box Inc. will be held on Friday, February 18, 2011, at 8:30 a.m. Pacific Standard Time, at the Marriott Courtyard, 8651 Spectrum Center Boulevard, San Diego, California 92123 for the following purposes:

 

 

These matters are more fully described in the attached Proxy Statement, which is made a part of this notice.

 

Our Board of Directors recommends a vote “FOR” proposals 1 through 4. You are entitled to vote at the 2011 Annual Meeting of Stockholders (the “Annual Meeting”) only if you were a Jack in the Box stockholder as of the close of business on December 21, 2010. A complete list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder, for any purpose germane to the Annual Meeting, at the Annual Meeting, and for a period of ten days prior to the Annual Meeting, at our principal offices located at 9330 Balboa Avenue, San Diego, CA 92123.

 

Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares via the toll-free telephone number, over the Internet, or by signing, dating, and returning the enclosed proxy card as promptly as possible in the envelope provided.

 

By order of the Board of Directors,

 

 

Phillip H. Rudolph

Executive Vice President, General Counsel and Secretary

 

San Diego, California

January 13, 2011

 

INFORMATION REGARDING ADMISSION TO THE ANNUAL MEETING

 

Everyone attending the 2011 Annual Meeting of Stockholders will be required to present both proof of ownership of Jack in the Box Inc. Common Stock and valid picture identification, such as a driver’s license or passport. If your shares are held in the name of a bank, broker or other holder of record, you will need a recent brokerage statement or letter from a bank reflecting stock ownership as of the record date. If you do not have both proof of ownership of Jack in the Box Inc. stock and valid picture identification, you may not be admitted to the Annual Meeting.

 

Cameras and electronic recording devices are not permitted at the Annual Meeting.

JACK IN THE BOX INC.

9330 Balboa Avenue

San Diego, California 92123

 

 

PROXY STATEMENT

 

 

ANNUAL MEETING OF STOCKHOLDERS

 

February 18, 2011

 

 

Why am I receiving these materials?

 

We sent you these proxy materials because the Board of Directors (sometimes referred to as the “Board”) of Jack in the Box Inc. (sometimes referred to as the “Company,” “Jack in the Box,” “we,” “us,” and “our”) is soliciting your proxy to vote at the 2011 Annual Meeting of Stockholders (the “Annual Meeting,”) and at any postponements or adjournments of the Annual Meeting. The Annual Meeting will be held on February 18, 2011, at 8:30 a.m. Pacific Standard Time at the Marriott Courtyard, 8651 Spectrum Center Boulevard, San Diego, CA 92123. If you held shares of our Common Stock on December 21, 2010, (the “Record Date”), you are invited to attend the Annual Meeting and vote on the proposals described below under the heading “What am I voting on?” However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may complete, sign, date, and return the enclosed proxy card. You may also vote over the Internet or by telephone.

 

The Notice of Annual Meeting of Stockholders, Proxy Statement, the enclosed proxy card, and our Annual Report on Form 10-K for the fiscal year ended October 3, 2010, as amended, will be mailed to stockholders on or about January 13, 2011.

 

What am I voting on?

 

There are five proposals scheduled to be voted on at the Annual Meeting:

 

 

The proposal related to the Amended and Restated Annual Performance Incentive Plan is intended to obtain approval from our stockholders for purposes of Section 162(m) under the Internal Revenue Code of 1986, as amended. For more information regarding this proposal, see below under the heading “Proposal 2 — Approval of the Amended and Restated Annual Performance Incentive Plan.”

 

How does the Board recommend that I vote?

 

Our Board recommends that you vote your shares:

 

 

Who can vote at the Annual Meeting?

 

If you were a holder of Jack in the Box common stock (the “Common Stock,”) either as a stockholder of record or as the beneficial owner of shares held in street name as of the close of business on December 21, 2010, the Record Date for the Annual Meeting, you may vote your shares at the Annual Meeting. As of the Record Date, there were 51,637,741 shares of Jack in the Box Inc. Common Stock outstanding, excluding treasury shares. Company treasury shares will not be voted. Each stockholder has one vote for each share of Common Stock held as of the Record Date. As summarized below, there are some distinctions between shares held of record and those owned beneficially in street name.

 

What does it mean to be a “stockholder of record”?

 

If, on December 21, 2010, your shares were registered directly in your name with the Company’s transfer agent, BNY Mellon Shareowner Services, then you are a “stockholder of record.” As a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is counted.

 

What does it mean to beneficially own shares in “street name”?

 

If, on December 21, 2010, your shares were held in an account at a broker, bank, trust, or other agent, (we will refer to those organizations collectively as “broker”) then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that broker. The broker holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker on how to vote the shares in your account. As a beneficial owner, you are invited to attend the Annual Meeting. However, since you are not a stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your broker.

 

What if I return the proxy card to the Company but do not make specific choices?

 

If you return a signed, dated, proxy card to the Company without making any voting selections, the Company will vote your shares as follows:

 

 

The Company does not expect that any matters other than election of directors and the other proposals described in this Proxy Statement will be brought before the Annual Meeting. The persons appointed as proxies will vote in their discretion on any other matters that may properly come before the Annual Meeting or any postponements or adjournments thereof, including any vote to postpone or adjourn the Annual Meeting.

 

What does it mean if I received more than one proxy card?

 

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.

 

How are votes counted?

 

Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count “For,” “Against,” “Withheld,” abstentions and broker non-votes. A “broker non-vote” occurs when your broker submits a proxy card for your shares of Common Stock held in street name, but does not vote on a particular proposal because the broker has not received voting instructions from you and does not have the authority to vote on that matter without instructions. Under the rules that govern brokers who are voting shares held in street name, brokers have the discretion to vote those shares on routine matters but not on non-routine matters. The routine matters in this Proxy Statement include the ratification of the independent registered public accountants. Non-routine matters in this Proxy Statement are the election of directors,

approval of the Amended and Restated Annual Performance Incentive Plan, the advisory vote on the compensation of named executive officers, and the advisory vote on the frequency of advisory votes on the compensation of named executive officers. Therefore, if the Company receives a proxy card with a broker non-vote, your proxy will be voted FOR Proposal 3 and it will not be included as a vote FOR or AGAINST Proposals 1, 2, 4 and 5.

 

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

 

Proposal One — Election of Directors

 

In the election of directors, directors are elected by a plurality of the votes, which means that the director nominees receiving the highest number of “FOR” votes will be elected. Neither a vote to abstain nor a broker non-vote will count as a vote cast “FOR” or “AGAINST” a director nominee, and they will have no direct effect on the outcome of the election of directors.

 

Proposal Two — Approval of Amended and Restated Annual Performance Incentive Plan

 

The proposal to approve the Amended and Restated Annual Performance Incentive Plan requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions will be treated as a vote cast, and will have the same effect as a vote “AGAINST” the proposal. Broker non-votes will not count as a vote cast “FOR” or “AGAINST” the proposal, and will have no direct effect on the outcome of this proposal.

 

Proposal Three — Ratification of Appointment of KPMG LLP

 

The proposal to ratify the appointment of KPMG LLP requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions will be treated as a vote cast, and will have the same effect as a vote “AGAINST” this proposal.

 

Proposal Four — Advisory Vote on Executive Compensation

 

The proposal to approve, on an advisory basis, the compensation awarded to named executive officers for the fiscal year ended October 3, 2010 requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions and broker non-votes will not count as a vote cast “FOR” or “AGAINST” this proposal, and will have no direct effect on the outcome of this proposal.

 

Proposal Five — Advisory Vote on the Frequency of a Stockholder Vote on Executive Compensation

 

The proposal on whether advisory votes on executive compensation should be conducted annually, biennially or triennially will be determined by a plurality of votes, which means that the choice of frequency that receives the highest number of “FOR” votes will be considered the advisory vote of the Company’s stockholders. Abstentions and broker non-votes will not count as votes cast “FOR” or “AGAINST” any frequency choice, and will have no direct effect on the outcome of this proposal.

 

How many shares must be present or represented to conduct business at the Annual Meeting?

 

A quorum of stockholders is necessary to hold a valid annual meeting. A quorum will be present if the holders of at least a majority of the total number of shares of Common Stock entitled to vote are present, in person or by proxy, at the Annual Meeting. Abstentions and shares represented by broker non-votes are counted for the purpose of determining whether a quorum is present. If there are insufficient votes to constitute a quorum at the time of the Annual Meeting, we may adjourn the Annual Meeting to solicit additional proxies.

 

How do I vote my shares of Jack in the Box Common Stock?

 

If you are a stockholder of record, you can vote in the following ways:

 

 

 

May I change my vote or revoke my proxy?

 

Yes. If you are a stockholder of record, you may change your vote or revoke your proxy by:

 

 

The written statement or subsequent proxy should be delivered to Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123, Attention: Corporate Secretary, or hand delivered to the Corporate Secretary, before the taking of the vote at the Annual Meeting.

 

If you are a beneficial owner and hold shares through a broker, bank, or other nominee, you may submit new voting instructions by contacting your broker, bank, or other nominee. You may also change your vote or revoke your voting instructions in person at the Annual Meeting if you obtain a signed proxy from the broker, bank, or other nominee giving you the right to vote the shares.

 

Who will pay for the cost of soliciting proxies?

 

The Company will pay the cost of preparing, printing, and mailing the Notice and the proxy materials. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries, and custodians holding shares of Common Stock beneficially owned by others, to forward to such beneficial owners. The Company may reimburse persons representing beneficial owners of Common Stock for their costs of forwarding solicitation materials to the beneficial owners. If you choose to access proxy materials or vote over the Internet or by telephone, you are responsible for Internet or telephone charges. We have engaged Innisfree M&A Inc. (“Innisfree”), a proxy-soliciting firm, to provide advice with respect to the 2011 Annual Meeting of Stockholders and to assist us in the solicitation of proxies, for which the Company will pay a fee of $15,000 plus reimbursement of certain out-of-pocket expenses. In addition to solicitation by mail, proxies may be solicited personally, by telephone, or by Innisfree. They may also be solicited by directors, officers, or employees of the Company, who will receive no additional compensation for such services.

 

How can I find out the results of the Annual Meeting?

 

Preliminary voting results will be announced at the Annual Meeting. We will publish final results in a Current Report on Form 8-K that we expect to file with the Securities and Exchange Commission within four business days of the Annual Meeting. After the Form 8-K is filed, you may obtain a copy by visiting our website or contacting our Investor Relations Department by writing to Investor Relations Department, Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123 or by sending an email to Investor.relations@jackinthebox.com.

 

All of the directors of the Company are elected annually and serve until the next Annual Meeting and until their respective successors are elected and qualified. The current nominees for election as directors are set forth below. All of the nominees have indicated their willingness to serve, and have consented to be named in the Proxy Statement, but if any should be unable or unwilling to stand for election, the shares represented by proxies may be voted for a substitute designated by the Board, unless a contrary instruction is indicated in the proxy. Michael Alpert, who has served on the Company’s Board of Directors since 1992, will retire from the Board, as previously announced. Following the Annual Meeting, Mr. Alpert will no longer be a director of the Company.

 

Your vote may be cast in favor of each proposed director, or it may be withheld. A plurality of the votes cast at the meeting (assuming a quorum) will be sufficient to elect the directors. Accordingly, abstentions and withheld votes will have no effect on the election of directors. Stockholders may not cumulate votes in the election of directors. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal to elect the directors.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES.

 

Nominees for Director

 

The following table provides certain information about each nominee for director as of January 1, 2011.

 

 

 

 

Biographical information for director nominees is set forth below, including the key qualifications, attributes, and skills that the Board considered in their nomination.

 

Our Board includes individuals with strong backgrounds in executive leadership and management, and we believe that, as a group, they work effectively together in overseeing our business. We believe that our directors hold themselves to the highest standards of integrity and that they are committed to representing the long-term best interests of our Company. While we do not have a diversity policy, we believe that our directors’ diversity of backgrounds and experiences, which include the restaurant industry, franchising, finance, retail, manufacturing, engineering, media, and healthcare, results in different ideas and varying viewpoints that contribute to effective oversight of our business.

 

Mr. Goebel has been a director of the Company since December 2008. He has been a Faculty Member of the U.S. Faculty of Mentors for Merryck & Co. Limited, a worldwide business mentoring firm that offers

services exclusively for chief executive officers by chief executive officers since May 2008. In 2008, Mr. Goebel became the founding principal and President of Santoku, Inc., a private company that operates five sub and pasta shops under the name Mr. Goodcents and provides cafeteria and vending services in the Kansas City area. In July 2010, Mr. Goebel became President and CEO of Mr. Goodcents Subs and Pastas, a franchisor of the Mr. Goodcents restaurant chain of approximately 100 units. Mr. Goebel has more than 35 years of experience in the retail, food service, and hospitality industries. From August 2006 until November 2007, he served as President and Chief Executive Officer of Applebee’s International, Inc. which operated nearly 2,000 restaurants in the United States and internationally. Mr. Goebel joined Applebee’s in 2001, and there he held several positions, including Senior Vice President of Franchise Operations, Executive Vice President of Operations, Chief Operating Officer, and President, prior to becoming Chief Executive Officer in 2006. From 1998 to 2000, Mr. Goebel was President of Summit Management, Inc., a consulting group specializing in executive development and strategic planning. Previously, Mr. Goebel was the Chief Operating Officer of Finest Foodservice, LLC, a Boston Chicken/Boston Market franchise that he founded and co-owned. The company was responsible for developing 80 restaurants within a seven-state area from 1994 until 1998.

 

Qualifications:  Mr. Goebel’s qualifications to serve on our Board include his business, operational, management, and leadership development experience in the retail, food service, and hospitality industries, and as an executive consultant, including experience in restaurant operations, restaurant and concept development, franchising, executive development, succession planning, executive compensation and strategic planning. Additionally, both his current restaurant operating experience and his experience at Applebee’s International, provide Mr. Goebel with experience overseeing supply-chain functions and with risk assessment and risk management.

 

Mr. Hutchison has been a director of the Company since May 1998 and serves as Lead Director. He served 27 years as Chief Executive Officer and Chairman of International Technology Corp., a large publicly traded environmental engineering firm, until his retirement in 1997. Mr. Hutchison serves as a director of Cadiz Inc. (since 1998), a publicly traded company focused on land acquisition and water development, and Cardium Therapeutics, Inc. (since 2006), a publicly traded company focused on the acquisition and development of bio-medical products and businesses. Mr. Hutchison was a member of the Board of Directors of Texas Eastern Products Pipeline Co., LLC, from March 2005 to October 2009, and served as its Chairman of the Board from March 2006 to October 2009. Mr. Hutchison serves as Chairman of the Board of Huntington Hotel Corporation (since 1996), a privately held company, and as a director of The Olson Company (since 1996), a privately held homebuilder.

 

Qualifications:  Mr. Hutchison’s qualifications to serve on our Board include his business, management and leadership experience at public and private companies and his experience as a private investor, including experience in finance, executive compensation, real estate, and development. In addition, Mr. Hutchison’s service on several public and private boards, on audit committees, and as audit committee Chair, has provided him broad experience with financial oversight, risk assessment, risk management, and the financial and strategic issues facing public and private companies. In 2009, Mr. Hutchison was honored with a Director of the Year award by the Corporate Directors Forum for his service on the board of Jack in the Box Inc.

 

Ms. Lang has been a director of the Company since November 2003. Ms. Lang has been Chairman of the Board since October 2005, and is currently the Chair of the Executive Committee. She has been Chief Executive Officer of the Company since October 2005 and assumed the additional title of President in 2010. Ms. Lang was President and Chief Operating Officer of the Company from November 2003 to October 2005, and Executive Vice President from July 2002 to November 2003. From 1996 through July 2002, Ms. Lang held officer-level positions at the Company, with marketing or operations responsibilities. Ms. Lang has more than 20 years of experience with the Company in various marketing, finance and operations positions. Ms. Lang is a director on the board of WD-40 Company, a publicly traded company, and serves on the boards of San Diego State University’s College of Business Administration and the San Diego Regional Economic Development Corporation. Ms. Lang also serves on the California State University Board of Trustees.

 

Qualifications:  Ms. Lang’s qualifications to serve on our Board include her business, operational, management, marketing and financial experience in the restaurant industry gained during her tenure with our Company, including in her current position as Chairman, Chief Executive Officer and President. Her knowledge of our operations, competition and competitive positioning, marketing, research and development, and personnel, along with her deep understanding of our values and culture, bring an important Company perspective to the Board. Her experience as an independent director on the board of a public

company and on the boards of multiple civic and educational organizations brings a valuable perspective on strategy, governance, and community to the Board.

 

Mr. Murphy has been director of the Company since September 2002, and is currently Chair of the Compensation Committee. He has been President and Chief Executive Officer of Sharp HealthCare, San Diego’s largest integrated health system, since April 1996. Prior to his appointment to President and Chief Executive Officer, Mr. Murphy served as Senior Vice President of Business Development and Legal Affairs for Sharp HealthCare. He began his career at Sharp in 1991 as Chief Financial Officer of Grossmont Hospital before moving to a system-wide role as Vice President of Financial Accounting and Reporting.

 

Qualifications:  Mr. Murphy’s qualifications to serve on our Board include his business and management experience leading Sharp HealthCare, a large integrated healthcare delivery system with multiple facilities and more than 14,500 employees, his experience as a senior financial officer of Sharp HealthCare, and his experience as a Certified Public Accountant, and former partner at Deloitte. The Board benefits from Mr. Murphy’s extensive experience in accounting, finance, financial reporting, auditing, governance, labor relations, compensation, risk assessment and risk management, strategic planning and quality initiatives. As a result of quality and organizational initiatives implemented at Sharp HealthCare in 2007, they were recognized with the Malcolm Baldrige National Quality Award, the nation’s highest Presidential honor for quality and organizational performance excellence. Mr. Murphy serves on the boards of civic organizations and is actively involved with community-based health and social service organizations.

 

Mr. Myers has been a director of the Company since December 2010. Mr. Myers has served as President and Chief Executive Officer of PETCO Animal Supplies, Inc., a holding company for PETCO Animal Supplies Stores, a large specialty pet supplies retailer in the United States, since 2004. Prior to his appointment to President and Chief Executive Officer, Mr. Myers served as Chief Financial Officer for PETCO from 1998 to 2004. He began his career at PETCO as Vice President and Controller in 1990. Previously, Mr. Myers was a Certified Public Accountant (“CPA”) with KPMG LLP. Mr. Myers serves on the boards of John Carroll University and the Retail Industry Leaders Association. Mr. Myers served on the board of Provide Commerce, an e-commerce retailer and public company, from 2004-2006, when Provide Commerce was acquired. Mr. Myers served on the audit committee at Provide Commerce.

 

Qualifications:  Mr. Myers’ qualifications to serve on our Board include more than 25 years of financial and retail operations experience, including 10 years as a CPA and public company auditor with KPMG LLP and 16 years with PETCO, a national specialty retail chain with more than 1,000 stores in 50 states. Mr. Myers brings to the Board his experience on a public company board and audit committee, as well as experience with consumer brands, mergers and acquisitions, financial reporting, financial oversight, and the financial and strategic issues facing public and private companies.

 

Mr. Tehle has been a director since December 2004, and is currently Chair of the Audit Committee. He has been Executive Vice President and Chief Financial Officer of Dollar General Corporation, a large publicly traded company, since June 2004. Mr. Tehle served from 1997 to June 2004 as Executive Vice President and Chief Financial Officer of Haggar Corporation, a manufacturing, marketing, and retail corporation. From 1996 to 1997, he was Vice President of Finance for a division of The Stanley Works, one of the world’s largest manufacturer of tools, and from 1993 to 1996, he was Vice President and Chief Financial Officer of Hat Brands, Inc.

 

Qualifications:  Mr. Tehle’s qualifications to serve on our Board include his experience in senior financial management at public companies in the retail and manufacturing industries. As an active CFO, he is responsible for the overall financial management of a large retail organization. Mr. Tehle has experience in the oversight of strategic planning, finance, accounting, information systems, investor relations, treasury, internal audit and human resources functions. He brings valuable financial expertise and retail and management experience to the Board.

 

Ms. Webb has been a director of the Company since July 2008, and is currently Chair of the Nominating and Governance Committee. Ms. Webb has been managing director for Tennenbaum Capital Partners, LLC, a private investment firm, since January 2010. Prior to joining Tennenbaum Capital Partners, Ms. Webb served from April 2008 to January 2010 as Chief Communications and Investor Relations Officer and Senior Advisor for Ticketmaster Entertainment, Inc. Ms. Webb served from 1988 to 2008 with The Walt Disney Company, most recently as Executive Director for The Walt Disney Company Foundation. She also served as Senior Vice President of Investor Relations and Shareholder Services and oversaw the company’s global strategic financial communications. Including previous positions with PaineWebber Inc. and Lehman Brothers,

Ms. Webb has more than 25 years experience in treasury, corporate finance, institutional and retail investor relations, and capital markets.

 

Qualifications:  Ms. Webb’s qualifications to serve on our Board include her experience in senior management at global public and private companies in the entertainment, media, consumer brands, and Internet industries and her experience in the global financial services industry, including expertise in finance, investor relations, communications, media relations, treasury, corporate governance, corporate social responsibility, strategic planning, investment banking and capital markets. Ms. Webb brings valuable strategic and financial market insight and governance acumen to the Board.

 

Mr. Wyatt has been a director of the Company since May 2010. Mr. Wyatt has served as President of the Old Navy division of Gap Inc. since 2008. He joined Gap Inc. in 2006 as President of the company’s GapBody division, then was named President of the company’s Outlet division. From 2004 to 2006, Mr. Wyatt was President and CEO at Cutter & Buck Inc., a designer and marketer of upscale apparel, including serving on the publicly held company’s board of directors. From 2002 to 2004, he served as President of Warnaco Intimate Apparel, a global designer and manufacturer and from 1999 to 2002, he was Executive Vice President for Strategic Planning and eBusiness Strategies in the Saks family of companies. Additionally, Mr. Wyatt spent more than 20 years with Vanity Fair Corporation serving ultimately as President of Vanity Fair Intimates and Vanity Fair Intimates Coalition.

 

Qualifications:  Mr. Wyatt’s qualifications to serve on our Board include his experience in senior management for major consumer brands in large global retail companies, including strategy and business development, marketing and brand building, product development, supply chain, finance, labor relations, human resources, organizational development, succession planning and compensation. He brings extensive experience in growing consumer brands to the Board.

 

We operate within a comprehensive corporate governance structure that includes high standards of professional and personal conduct. Our Corporate Governance Principles and Practices, our ethics Code of Conduct, the charters for our Audit Committee, Compensation Committee, Finance Committee and Nominating and Governance Committee and other corporate governance information are available at www.jackinthebox.com/investors/corporategovernance. These materials are also available in print to any stockholder upon written request to the Company’s Corporate Secretary, 9330 Balboa Avenue, San Diego, CA 92123. The information on our website is not a part of this Proxy Statement and is not incorporated into any of our filings made with the Securities and Exchange Commission.

 

Directors’ Independence

 

The Board has analyzed the independence of each director. It has determined that Messrs. Alpert, Goebel, Hutchison, Murphy, Myers, Tehle, and Wyatt, and Ms. Webb, are independent directors under the NASDAQ Marketplace Rules, as well as the additional Director Independence Guidelines adopted by the Board, and that these directors have no material relationships with the Company. Ms. Lang was determined not to be independent because she is our Chief Executive Officer and President. The Jack in the Box Inc. Director Independence Guidelines are attached hereto as Exhibit A.

 

Board Meetings, Annual Meeting of Stockholders, and Attendance

 

The Board held five meetings in fiscal 2010. We expect each director to attend each meeting of the Board and of the committees on which he or she serves. We also expect them to attend the Annual Meeting of Stockholders. During the time each director served on the Board in fiscal 2010, each director attended more than 75% of the meetings of the Board and of the committees on which he or she served. All of the then-sitting directors attended the 2010 Annual Meeting. We currently expect all of our directors standing for election to be present at the 2011 Annual Meeting.

 

Determination of Current Board Leadership Structure

 

The Nominating and Governance Committee’s Charter provides that the Committee will annually assess the leadership structure of the Board and recommend a structure to the Board for approval. In September 2010, the Nominating and Governance Committee conducted that assessment, including assessing whether (i) our Chief Executive Officer and President (“CEO”), Ms. Lang, should continue to serve as Chairman of the Board and (ii) the Board should continue to have an independent Lead Director. The Committee

recommended to the Board, and the Board approved, that the current structure of combining the positions of Chairman and CEO and appointing a Lead Director is effective and appropriate for the Company at this time.

 

The Nominating and Governance Committee determined that combining the positions of Chairman and CEO continues to be in the best interests of the Company. The Committee determined that having one individual serve in both roles provides for clear, decisive leadership, accountability, and alignment on corporate strategy. The Committee believes that combining the roles of Chairman and CEO puts Ms. Lang in the best position to use her in-depth knowledge of our industry, our business and its challenges, and our stakeholders, including our major stockholders, employees, and franchisees, to provide the Board with the information and leadership needed to set agendas and direction for the Company. The Committee does not believe that having an independent Chairman would make the Board’s risk oversight processes more effective. The Committee noted that the Chairman and CEO has provided the Board with timely and relevant information regarding the Company’s business.

 

In reaching its recommendation, the Nominating and Governance Committee also considered:

 

 

Lead Director

 

The independent directors have appointed a Lead Director from among the independent directors serving on the Board. Our Corporate Governance Principles and Practices provide for the Lead Director to fulfill the following functions: (a) set agendas for the executive sessions of the Board, (b) preside at the executive sessions of the independent directors, (c) act as the main communication channel between the Board and the CEO, and (d) determine the format and adequacy of information flow to the Board. The Lead Director may perform other functions as the Board may direct, including advising management on the agenda for Board meetings. Mr. Hutchison currently serves as Lead Director.

 

Board Role in Risk Oversight

 

Management is responsible for the Company’s day-to-day risk management. The Board’s role is to provide oversight of the processes designed to identify, assess and monitor key risks and risk mitigation activities. The Board fulfills its risk oversight responsibilities through (i) reports directly from managers responsible for the management of particular business risks, and (ii) reports by each Committee Chair regarding the Committee’s oversight of specific risk topics.

 

The Board has delegated oversight of specific risk areas to Committees of the Board. For example, the Audit Committee discusses with management the Company’s major risk exposures and the steps management has taken to monitor and mitigate those exposures, including the processes for enterprise risk assessment and risk management. As another example, the Compensation Committee discusses with management and its independent consultant, the risks arising in connection with the design of the Company’s compensation programs and succession planning. The risk oversight responsibility of each Board Committee is described in its committee charter available at www.jackinthebox.com/investors/corporategovernance. A more detailed discussion of the Compensation Committee’s oversight of compensation risk is found at page 50.

Executive Sessions

 

Non-employee directors meet in executive session without management present at each regularly scheduled meeting of the Board. Mr. Hutchison is currently designated by the Board to act as the Lead Director for such executive sessions. The Audit Committee also holds executive sessions at each regularly scheduled meeting, and the other committees of the Board meet in executive session as they find appropriate.

 

Committees of the Board

 

The Board of Directors has five standing committees: Audit, Compensation, Nominating and Governance, Finance, and Executive. The authority and responsibility of each committee is summarized below. A more detailed description of the functions of the Audit, Compensation, Nominating and Governance, and Finance Committees is included in each committee charter available at www.jackinthebox.com/investors/corporategovernance.

 

Committee Member Independence.  The Board has determined that each member of the Audit, Compensation, Nominating and Governance, and Finance Committees is an independent director for purposes of NASDAQ listing rules as well as under the additional Independence Guidelines adopted by the Board. In addition, the members of the Audit Committee are all independent as required under Rule 10A-3(b)(1)(ii) under the Securities Exchange Act of 1934, and the members of the Compensation Committee are independent as required under Section 162(m) of the Internal Revenue Code.

 

Audit Committee.  As more fully described in its charter, the Audit Committee assists the Board of Directors with overseeing:

 

 

The Audit Committee has sole authority to select, evaluate, and when appropriate, replace the Company’s independent registered public accountants.

 

The Audit Committee meets at least each quarter with the Company’s independent registered public accountants, KPMG LLP (“KPMG”), the Company’s Director of Internal Audit, and management to review the Company’s annual and interim consolidated financial results before the publication of quarterly earnings press releases and the filing of quarterly and annual reports with the Securities and Exchange Commission (“SEC”). The Audit Committee also meets at least each quarter in private sessions with KPMG, management and the Director of Internal Audit. The Board of Directors has determined that each member of the Audit Committee qualifies as an “audit committee financial expert” as defined by SEC rules. Additional information regarding the Audit Committee is set forth in the Report of the Audit Committee on page 19. The Audit Committee held six meetings in fiscal 2010.

 

Compensation Committee.  As more fully described in its charter, the Compensation Committee assists the Board in discharging the Board’s responsibilities relating to director and executive officer compensation, and it oversees the evaluation of management. The Compensation Committee reviews and approves the Company’s compensation philosophy, each of the compensation components, equity and benefit plans, and the compensation of executive officers, including performance goals and objectives for performance-based executive compensation. The Compensation Committee discusses with management and reports to the Board regarding major risk exposures and the monitoring and mitigation activities undertaken by management in connection with the design and administration of the Company’s compensation programs and succession planning. The Committee approved the disclosures in the Company’s Compensation Discussion and Analysis beginning on page 30 of this Proxy Statement. The Compensation Committee held six meetings in fiscal 2010.

 

Executive Committee.  The Executive Committee is authorized to exercise all powers of the Board in the management of the business and affairs of the Company while the Board is not in session. The Executive Committee did not meet in fiscal 2010.

 

Finance Committee.  As more fully described in its charter, the Finance Committee assists the Board in advising and consulting with management concerning financial matters of importance to the Company. Topics considered by the Committee include the Company’s capital structure, financing arrangements, stock repurchase

programs, capital investment policies, oversight of the Company’s retirement plans, the budget process, and the financial implications of major acquisitions and divestitures. The Finance Committee discusses with management and reports to the Board regarding major risk exposures and the monitoring and mitigation activities undertaken by management in connection with the matters overseen by the Committee including proposed mergers, acquisitions, reorganizations and divestitures. The Finance Committee held five meetings in fiscal 2010.

 

Nominating and Governance Committee.  As more fully described in its charter, the Nominating and Governance Committee duties include identifying and recommending qualified candidates to be nominated for election as directors at the annual meeting or to be appointed by the Board to fill an existing or newly created vacancy on the Board; recommending members of the Board to serve on each Board committee; and annually reviewing and recommending the leadership structure of the Board. The Nominating and Governance Committee discusses with management and reports to the Board regarding major risk exposures in connection with matters overseen by the Committee. Its activities include:

 

 

All nominees for election as Directors currently serve on the Board of Directors and are known to the Nominating and Governance Committee in that capacity. The Nominating and Governance Committee held six meetings in fiscal 2010.

 

Policy Regarding Consideration of Candidates for Director.  The Nominating and Governance Committee has the responsibility to identify, screen, and recommend qualified candidates to the Board. In order to be evaluated in connection with the Nominating and Governance Committee’s established procedures, stockholder recommendations for candidates for the Board must be sent in writing to the following address at least 120 days prior to the first anniversary of the date of the previous year’s Annual Meeting of Stockholders:

 

Nominating and Governance Committee of the Board of Directors
c/o Office of the Corporate Secretary
Jack in the Box Inc.
9330 Balboa Avenue
San Diego, CA 92123

 

Any recommendation submitted by a stockholder to the Nominating and Governance Committee must include the same information concerning the potential candidate and the recommending stockholder as would be required under Article III, Section 3.16 of the Jack in the Box Inc. Bylaws if the stockholder wished to nominate the candidate directly. In evaluating director candidates, the Nominating and Governance Committee considers the qualifications listed in the Jack in the Box Inc. Corporate Governance Principles and Practices, which are available at www.jackinthebox.com in the “Investors” section under the link for “Corporate Governance.” The following are some of the factors considered by the Nominating and Governance Committee in evaluating director candidates:

 

 

 

The Nominating and Governance Committee may also consider such other factors as it may deem are in the best interests of the Company and its stockholders. The Committee considers all candidates regardless of the source of the recommendation. In addition to stockholder recommendations, the Committee considers recommendations from current directors, Company personnel and others. From time to time, the Nominating and Governance Committee retains a search firm to assist it in identifying and screening candidates, and conducting reference checks. During fiscal year 2010, at the Committee’s request, the Company engaged one such search firm, The Alexander Group, and paid approximately $23,000 in connection with identification of possible candidates. The Committee applies the same standards in evaluating candidates submitted by stockholders as it does in evaluating candidates submitted by other sources.

 

A candidate nominated by a stockholder for election at an Annual Meeting of Stockholders will not be eligible for election unless the stockholder proposing the nominee has provided timely notice of the nomination in accordance with the deadlines (at least 120 days and no more than 150 days prior to the first anniversary of the date of the previous year’s Annual Meeting of Stockholders) and other requirements set forth in the Company’s Bylaws.

 

Article III, Section 3.16 of the Company’s Bylaws provides that, in order to be eligible for election as a Director, a candidate must deliver to the Corporate Secretary statements indicating whether the candidate:

 

(a) is a party to any voting commitment that has not been disclosed to the Company;

 

(b) is a party to any voting commitment that could limit the nominee’s ability to carry out a director’s fiduciary duties;

 

(c) is a party to any arrangements for compensation, reimbursement, or indemnification in connection with service as a director and committing not to become a party to any such arrangement;

 

(d) will comply with the Company’s publicly disclosed policies and guidelines.

 

The foregoing is a summary of provisions of the Company’s Bylaws, and is qualified by reference to the actual provisions of Article III, Section 3.16.

 

Committee Assignments

 

In 2010, the Board of Directors approved the following Board Committee assignments and designated Murray Hutchison as the Lead Director. The Board of Directors considers new assignments and the designation of a new Lead Director each February:

 

 

 

 

Ethics Code of Conduct

 

In 1998, the Company adopted a code of ethics applicable to all Jack in the Box Inc. directors, officers, and employees. This Code is updated from time to time, most recently during fiscal 2009. The Code of

Conduct discusses our policies and our commitments pertaining to, among other things, safe workplaces, accurate business records, information security, confidentiality, securities trading, fairness in business practices, conflicts of interest, and antitrust laws. The Code of Conduct is available on the Company’s website www.jackinthebox.com, in the “Investors” section, under “Corporate Governance.” The Company also provides all franchisees and significant vendors with its Code of Conduct, and with procedures for communicating any ethics or compliance concerns.

 

We will disclose amendments to, or waivers of our Code of Conduct that are required to be disclosed under the securities rules, by posting such information on the Company’s website, www.jackinthebox.com. Any waiver of our Code of Conduct for directors or executive officers must be approved by the Board of Directors. The Company has not made any such waivers and does not anticipate making any such waiver.

 

Corporate Governance Principles and Practices

 

The Company has adopted Corporate Governance Principles and Practices (the “Principles and Practices”) which contain general principles regarding the function of the Board of Directors and the Board Committees. The Principles and Practices are reviewed regularly by the Nominating and Governance Committee and revised when appropriate. The full text of the Principles and Practices may be found at www.jackinthebox.com/investors/corporategovernance. The Principles and Practices address many of the items discussed above, and also include, among other things, the following items concerning the Board:

 

1. Limitation on Other Board Service.  The Company’s Corporate Governance Principles and Practices set forth the Board’s policy limiting non-employee directors to simultaneous service on the Boards of no more than four public companies, including Jack in the Box Inc. The Board has an approval process that generally limits each of our officers to serving on no more than one public company’s board outside of Jack in the Box Inc. The approval process considers both the time commitment and potential business conflicts inherent in such service, and is administered by the Nominating and Governance Committee.

 

2. Retirement Policy.  The Board has adopted a retirement policy under which directors may not stand for election or be appointed after age 73.

 

3. Board, Committee, and Individual Director Evaluations.  Each year the Directors complete an evaluation process focusing on an assessment of Board operations as a whole and the service of each director. Additionally, each of the Audit, Compensation, Finance, and Nominating and Governance Committees conducts a separate evaluation of its own performance and the adequacy of its Charter. The Nominating and Governance Committee coordinates the evaluation of individual directors and of the Board operations, and reviews and reports to the Board on the annual self-evaluations completed by the committees.

 

4. New-Director Orientation and Continuing Education.  The Board works with management to schedule new-director orientation programs and continuing education programs for directors. Orientation is designed to familiarize new directors with the Company and the restaurant industry as well as Company personnel, facilities, strategies and challenges. Continuing education programs may include in-house and third party presentations and programs.

 

Compensation Committee Interlocks and Insider Participation

 

No member of our Compensation Committee is an officer, former officer, or employee of the Company. During fiscal 2010, no member of the Compensation Committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. During fiscal 2010, no interlocking relationship existed between any of our executive officers or Compensation Committee members, on the one hand, and the executive officers or Compensation Committee members of any other entity, on the other hand.

 

Communications with the Board of Directors

 

Stockholders or others who wish to communicate any concern of any nature to the Board of Directors, any Committee of the Board, or any individual director or group of directors, may write to a director or directors in care of the Office of the Corporate Secretary, Jack in the Box Inc. 9330 Balboa Avenue, San Diego, CA 92123, or telephone 1-888-613-5225.

Your letter should indicate that you are a stockholder of the Company. Comments or questions regarding our accounting, internal controls or auditing matters will be referred to members of our Audit Committee. Comments or questions regarding the nomination of directors and other corporate governance matters will be referred to members of the Nominating and Governance Committee. For all other matters, our Corporate Secretary will, depending on the subject matter:

 

 

The Compensation Committee of the Board of Directors has the responsibility for recommending to the Board the form and amount of compensation for non-employee directors. As an employee of the Company, Ms. Lang receives no additional compensation for her role as a director. The following discussion of compensation and stock ownership guidelines applies only to non-employee directors and does not include Ms. Lang.

 

The Board believes that total compensation for directors should be competitive with that paid to directors in our Peer Group. Our Board members receive a combination of equity and cash to reflect a focus on both (i) compensation for the Board’s continuing oversight and corporate governance role, and (ii) long-term performance and stockholder value.

 

Annual Retainer

 

Each director receives an annual cash retainer of $50,000. The Lead Director of the Board receives an additional $10,000 retainer.

 

Total Direct Compensation

 

Total direct compensation for directors consists of all retainers and equity awards. Targeted total direct compensation is set to deliver compensation that approximates the 50th percentile of the same Peer Group used for our Executives. The Peer Group includes companies in the restaurant, retail, and hospitality industries.

 

Committee Chair and Committee Membership Retainer

 

In addition to the annual retainer, each director receives a retainer for their service as a committee chair or as a committee member in the amounts shown in the table below. In fiscal 2010, the Board of Directors approved an increase in the Compensation Committee Chair retainer from $18,750 to $25,000 to recognize the increased level of responsibility and time required in chairing this committee.

 

Committee Chair Retainer

 

(includes committee membership)

 

 

Committee Membership Retainer

 

 

When directors are elected to our Board, their retainers are paid in cash or are credited to the director’s Deferred Compensation Plan account on the first day of the month following the Annual Meeting. If a director is appointed to the Board at any time other than the Annual Meeting, prorated retainers are paid.

 

Deferred Compensation Plan

 

Directors may elect to defer receipt of all or a part of the annual or committee retainers in the form of Common Stock equivalent units under the Jack in the Box Inc. Deferred Compensation Plan for Non-Management Directors (the “Deferred Compensation Plan”). The number of Common Stock equivalents credited to a director’s account is based on a per share price equal to the average of the closing price of Jack in the Box Inc. stock on the NASDAQ Stock Market during the ten (10) trading days immediately preceding the date the deferred compensation is credited to the director’s account. The amount in a director’s account is

settled in an equal number of shares of Common Stock when the director retires or terminates service from the Board. The Deferred Compensation Plan is a non-qualified plan under the Internal Revenue Code.

 

Other Expenses

 

The Company reimburses directors for customary and usual travel and out-of-pocket expenses incurred in connection with attendance at Board and committee meetings.

 

Equity Awards

 

Equity grants for our non-employee directors are intended to compensate them for their role in corporate governance and strategic oversight, and are made in the form of restricted stock units (“RSUs”). The Company grants RSUs for the following reasons:

 

 

The Compensation Committee considers the following in determining the value of equity awards to directors:

 

 

The RSUs vest on the first business day 12 months from the date of grant. If the vest date occurs during a closed trading “window period,” (as specified in the Company’s Employee/Insider Trading Policy), then vesting will be deemed to occur on the first day of an open window period. Directors may make an election to defer the restricted stock units.

 

Initial Equity Grant for Newly Elected Non-Employee Directors

 

New directors are granted an initial equity award of RSUs when they join the Board. The number of RSUs in an initial grant to a new director is determined by doubling the number of RSUs awarded to directors in the most recent annual grant.

 

Director Stock Ownership Guidelines

 

The Board believes that all directors should have a meaningful ownership interest in Jack in the Box to align their interests with those of our stockholders. In fiscal 2007, the Board adopted ownership guidelines that require directors to acquire and hold $150,000 in Jack in the Box Common Stock (not including stock options) within three years of joining the Board. Direct or indirect holdings and stock equivalents in the Deferred Compensation Plan are considered in determining whether a director meets stock ownership guidelines.

The table below shows each non-employee director’s ownership value as of fiscal year end 2010 based on a closing stock price of $21.47. As of fiscal year end 2010, each of the non-employee directors met the stock ownership guidelines. Mr. Myers joined the Board after the end of fiscal 2010 and currently holds no Jack in the Box stock.

 

 

Fiscal 2010 Compensation

 

The following table provides information regarding compensation for each of the Company’s non-employee directors for fiscal 2010. Mr. Myers joined the Board after the end of fiscal year 2010 and did not receive any compensation during fiscal 2010.

 

 

 

 

 

The following is the report of the Audit Committee with respect to Jack in the Box Inc.’s audited consolidated financial statements for the fiscal year ended October 3, 2010.

 

The Audit Committee of the Board of Directors (the “Audit Committee”) is composed of the three directors named below, each of whom is an “independent director” as defined in the listing standards of the NASDAQ Stock Market. Our Board has determined that each of the members of the Audit Committee is an audit committee financial expert as defined by the Securities and Exchange Commission (“SEC”). The duties of the Audit Committee are summarized in this Proxy Statement under Committees of the Board on page 11 and are more fully described in the Audit Committee charter adopted by the Board of Directors. Each year, the Audit Committee reviews and assesses the adequacy of its charter and conducts a review and evaluation of the Committee’s operations. The Audit Committee charter can be found on the Company’s website at www.jackinthebox.com/investors/corporategovernance.

 

Management is responsible for the Company’s accounting and financial reporting principles; for establishing, maintaining, and evaluating the effectiveness of disclosure controls and procedures as well as internal controls over financial reporting; and for the preparation, presentation and integrity of the Company’s consolidated financial statements.

 

KPMG LLP, the Company’s independent registered public accounting firm, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with the Standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), and for issuing reports thereon.

 

Jack in the Box Inc. has an Internal Audit Department that reports to the Audit Committee and the Company’s General Counsel. The Internal Audit Department’s responsibilities include reviewing and evaluating the Company’s internal controls.

 

The function of the Audit Committee is not to duplicate the activities of management, or the internal or external auditors, but to serve a Board-level oversight role in which it provides advice, counsel and direction to management and the auditors. As more fully described in its charter, one of the Audit Committee’s primary responsibilities is to assist the Board in this general oversight of Jack in the Box Inc.’s financial reporting, internal controls, and audit functions. The Audit Committee has sole authority to select, evaluate, approve fees, and when appropriate, to replace the Company’s independent registered public accountants. The Audit Committee also pre-approves all services performed by the independent auditors. The Audit Committee has appointed KPMG as the Company’s independent registered public accountants for fiscal year 2011, and has requested stockholder ratification of its appointment.

 

During the course of fiscal 2010, the Audit Committee met and discussed with representatives of management, the Internal Audit Department staff, and the independent auditor, the matters over which the Audit Committee has oversight responsibility. The Audit Committee met regularly in separate private sessions with representatives of management, the Internal Audit Department staff, and the independent auditors. The Audit Committee reviewed and discussed with management and KPMG the disclosures made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2010. The Audit Committee reviewed and discussed management’s report on the effectiveness of the Company’s internal control over financial reporting and KPMG’s Report of Independent Registered Public Accounting Firm included in the Company’s Annual Report on Form 10-K related to its audit of (i) the consolidated financial statements, and (ii) the effectiveness of internal control over financial reporting.

 

The Committee discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61, “Communications with Audit Committees,” as amended, and PCAOB Auditing Standard No. 2, “An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.” In addition, the Audit Committee received the written disclosures and the letter from KPMG as required by professional and regulatory standards and discussed with KPMG its independence from the Company.

 

The Audit Committee has discussed with management and KPMG such other matters and received such assurances from them as the Audit Committee deemed appropriate.

Based on the reviews and discussions referred to above, and the reports of KPMG, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, the inclusion of the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2010, for filing with the SEC.

 

THE AUDIT COMMITTEE
David M. Tehle, Chair
Murray H. Hutchison
Michael W. Murphy

 

This report is not deemed to be incorporated by reference in any filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this report by reference.

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FEES AND SERVICES

 

The following table presents fees billed for professional services rendered by KPMG, the Company’s independent registered public accountants, for the fiscal years ended October 3, 2010, and September 27, 2009.

 

 

 

 

Registered Public Accountants’ Independence.  The Audit Committee has considered whether the provision of the above-noted services is compatible with maintaining KPMG’s independence, and has determined that the provision of such services has not adversely affected KPMG’s independence.

 

Policy on Audit Committee Pre-Approval.  The Company and its Audit Committee are committed to ensuring the independence of the independent registered public accountants, both in fact and in appearance. In this regard, the Audit Committee has established a pre-approval policy in accordance with applicable securities rules. The Audit Committee’s pre-approval policy is set forth in the Policy for Audit Committee Pre-Approval of Services, included as Exhibit B to this Proxy Statement.

 

APPROVAL OF AMENDED AND RESTATED ANNUAL PERFORMANCE INCENTIVE PLAN

 

The Compensation Committee of the Board of Directors of the Company originally adopted a Performance Bonus Plan in 2000. The stockholders of the Company approved the adoption of the Performance Bonus Plan in February 2001 and reapproved it in February 2006. In November 2010, the Compensation Committee approved an amended and restated version of the Performance Bonus Plan, now called the Amended and Restated Annual Performance Incentive Plan (the “Plan”).

 

The purpose of the Plan is to promote the interests of the Company and its stockholders by providing performance-based incentives to certain key employees and officers of the Company and its affiliates that qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code (“Section 162(m)”). The Plan is an unfunded, performance-based plan designed to tie compensation directly to achievement of the Company’s objectives. At the Annual Meeting, the stockholders are being asked to approve the Plan as amended and restated. The Plan, as amended and restated, among other things, expands the list of financial performance measures, adds certain operational performance measures, and provides that the Compensation Committee may use its discretion to reduce potential incentive payments payable to any participant.

 

Section 162(m) limits to $1 million per person annually the amount that may be deducted for compensation paid to a public corporation’s principal executive officer or any of the three highest compensated officers (other than the principal executive officer or principal financial officer) whose total compensation is required to be reported to the stockholders under the Securities Exchange Act of 1934. Section 162(m) provides an exemption from this limit for qualified performance-based compensation. The Plan is intended to qualify as a performance-based compensation plan for purposes of Section 162(m) to permit the Company to receive a federal income tax deduction for the payment of performance-based compensation to its executives.

 

The stockholders of the Company previously approved the Plan in 2001 and 2006. However, Section 162(m) requires that plans such as the Plan be approved by the stockholders of the Company every five years in order to meet the performance-based compensation exception to the limitation on deductions. Stockholder approval of the Plan serves the purpose of ensuring the tax deductibility of any incentive payments under the Plan.

 

Summary of the Plan

 

The following description summarizes the principle features of the Plan but is qualified in its entirety by reference to the full text of the Plan set forth as Exhibit C to this Proxy Statement.

 

Officers and other key employees of the Company and its affiliates selected by the Compensation Committee are eligible to participate in the Plan. To be eligible for any incentive payment under the Plan, the employee must be an active employee for 6 or more consecutive full accounting periods during the fiscal year, must be in a “director” position or above for at least one full accounting period during the fiscal year, must not be eligible to participate in any other Company annual performance incentive plan, and must be performing at a satisfactory level or higher at the time of the scheduled payment.

 

As of December 1, 2010, approximately 87 employees, including 9 executive officers, are eligible to participate in the Plan during fiscal 2011.

 

Administration

 

The Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee consists solely of non-employee directors who are outside directors within the meaning of Section 162(m). The Compensation Committee has the authority to, among other things, select eligible participants, determine the size and terms of incentive awards subject to the terms of the Plan, establish performance objectives, and determine whether such performance objectives were attained. The Compensation Committee is authorized to interpret the Plan, establish, amend and rescind any rules and regulations relating to the Plan, and make any other determinations that it deems necessary or desirable for the administration of the Plan. Any decision of the Compensation Committee in the interpretation and administration of the Plan is within the Compensation Committee’s sole and absolute discretion and will be final, conclusive and binding on all parties concerned.

The Board of Directors or Compensation Committee may terminate, alter, suspend or amend the Plan at any time pursuant to the terms of the Plan.

 

Performance Goals

 

At the beginning of each fiscal year, the Compensation Committee will establish performance goals with respect to one or more measures of business, financial, and/or operational performance (each, a “Performance Measure”). The ability to set performance goals with respect to operational measures, as described below, is new in the amended and restated Plan.

 

Performance Measures have the same meanings as used in the Company’s financial statements, or if such terms are not used in the Company’s financial statements, they have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry. Performance Measures are calculated with respect to the Company and each affiliate consolidated with the Company for financial reporting purposes or such division or other business unit as may be selected by the Compensation Committee. For purposes of the Plan, the Performance Measures are calculated before the effect of changes in accounting standards, restructuring charges and similar extraordinary items, determined according to criteria established by the Compensation Committee, occurring after the establishment of the performance goals.

 

Before the amendment and restatement of the Plan, the Performance Measures could be one or more of the following as determined by the Compensation Committee: earnings before taxes (EBT), earnings before interest, taxes, depreciation and amortization (EBITDA), net earnings, earnings per share (EPS), return on invested capital (ROIC), return on assets (ROA), or return on equity (ROE), or any other related financial measures.

 

The Performance Measures in the amended and restated Plan have been expanded and now may be one or more of the following, which now also include operational measures, as determined by the Compensation Committee: sales, revenue, gross margin, operating margin, operating income, pre-tax profit, earnings before taxes (EBT), earnings before interest, taxes, depreciation and amortization (EBITDA), net income, net earnings, cash flow, expenses, stock price, earnings per share (EPS), operating earnings per share, defined operating earnings per share, return on equity (ROE), return on capital, return on assets (ROA), return on invested capital (ROIC), economic value added, number of customers, market share, same-store sales, restaurant operating margin (ROM), return on investment, profit after tax, guest satisfaction, guest transactions, number of restaurants franchised, or number of restaurants remodeled or reimaged.

 

Based on one or more of the foregoing Performance Measures, the Compensation Committee will establish: (i) objective financial performance goals, and/or (ii) operational performance goals, and (iii) the formula to be followed in calculating any incentive payments with respect to the goals. At the end of the fiscal year and prior to any incentive payments made under the Plan, the Compensation Committee must certify the level of performance attained relative to financial performance goals and/or operational performance goals. Each participant may receive an incentive payment only for the specific performance level attained and approved by the Compensation Committee.

 

The Compensation Committee may exercise its discretion to reduce the potential incentive payments payable to any participant. The Compensation Committee may choose to exercise this discretion to reflect its assessment of the quality of achievement of financial or operational goals established by the Compensation Committee or to take into account additional factors that the Compensation Committee may deem relevant to the assessment of individual or corporate performance. The Compensation Committee does not have the discretion to increase the amount of any bonus payment that would otherwise be due upon the attainment of applicable performance criteria by a participant covered by Section 162(m).

 

The Compensation Committee established the performance goals for fiscal 2011 incentives based on defined operating EPS. The Committee intends to exercise its discretion to adjust potential incentive awards based on achievement of the defined operating EPS goal downward based on level of achievement of ROM goals set by the Compensation Committee and on its assessment of the quality of achievement of operational goals tied to the Company’s refranchising strategy and reimage program.

 

For fiscal 2011 incentives, no incentive payments will be made unless performance is above the threshold level of defined operating EPS established by the Compensation Committee. If the Committee has determined that the defined operating EPS threshold is achieved, then the maximum funded payout opportunity is 200% (CEO) or 90-150% (other executives). The Committee has the discretion to decrease

the maximum funded amount based on its assessment of achievement of defined operating EPS, ROM, and operational performance goals. The Annual Performance Incentive Plan is designed so that payments made under this plan qualify as performance-based pay for tax deductibility under Section 162(m).

 

The Compensation Committee believes that the specific goals and targets constitute confidential business information, the disclosure of which could adversely affect the Company. The Company believes that the amendments to the Plan will not materially affect the amount of annual incentive payments payable under the Plan.

 

Incentive Payments

 

Incentive payments under the Plan are paid in cash in a lump sum after the end of the performance year. Under the amended and restated Plan, awards will no longer be made in the form of restricted stock units. The maximum individual incentive in any fiscal year is $3 million.

 

In the event of a participant’s termination of employment during the fiscal year due to the participant’s death, disability, or retirement at age 55 or older with 10 years of service, the participant will remain eligible for a prorated incentive payment; however, the amount of any incentive will be based on actual Company performance for the fiscal year and attainment of goals. In all other cases, a participant whose employment terminates voluntarily or involuntarily prior to the end of the fiscal year will not be eligible to receive an incentive payment. If termination occurs after the end of the fiscal year, but before distribution of any incentive payment, the Compensation Committee reserves the right in its absolute discretion to determine if any payment will be made.

 

Since incentives under the Plan are based on performance objectives established for each fiscal year, the amount of incentives to be paid in the future to any of the executive officers cannot be determined at this time since the performance period has not yet been completed. Actual incentive payments will depend upon actual performance measured against the pre-established performance goals.

 

Required Vote and Board of Directors Recommendation

 

Approval of this proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present and entitled to vote at the Annual Meeting in person or by proxy (assuming a quorum). If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the effect of a negative vote. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.

 

The Board of Directors believes that it is in the best interests of the Company and its stockholders to approve the Plan and to enable the Plan to comply with the requirements of Section 162(m). If the stockholders fail to approve the Plan at the Annual Meeting, the Plan will not qualify as performance-based for purposes of Section 162(m). In the event that the Plan is not approved by the Company’s stockholders, any subsequent incentive payments in amounts which when combined with other non-exempt compensation exceed the limit set forth in Section 162(m) for the Company’s CEO or any of the three highest compensated officers (other than the principal executive officer or principal financial officer) would not be deductible under Section 162(m).

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED ANNUAL PERFORMANCE INCENTIVE PLAN.

 

RATIFICATION OF THE APPOINTMENT

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

 

The Audit Committee has appointed the firm of KPMG LLP as the Company’s independent registered public accountants for fiscal year 2011. Although action by stockholders in this matter is not required, the Audit Committee believes it is appropriate to seek stockholder ratification of this appointment.

 

KPMG has served as the Company’s independent auditor since 1986. One or more representatives of KPMG will be present at the Annual Meeting and will have the opportunity to make a statement and to respond to appropriate questions from stockholders. The following proposal will be presented at the Annual Meeting:

 

Action by the Audit Committee appointing KPMG LLP as the Company’s independent registered public accountants to conduct the annual audit of the consolidated financial statements of the Company and its subsidiaries for the fiscal year ending October 2, 2011, is hereby ratified, confirmed and approved.

 

Approval of this proposal requires the affirmative vote of a majority of the votes cast at the Annual Meeting (assuming a quorum). Abstentions will be treated as a vote cast, and will have the same effect as a vote “AGAINST” this proposal.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.

 

ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

The Board of Directors is providing stockholders with the opportunity to cast an advisory vote on the compensation of our named executive officers. This proposal, commonly known as a “Say on Pay” proposal, gives you, as a stockholder, the opportunity to endorse or not endorse our executive compensation programs and policies and the compensation paid to our named executive officers.

 

The Say on Pay vote is advisory, and therefore not binding on the Compensation Committee or Board of Directors. Although the vote is non-binding, the Compensation Committee and the Board will review the voting results, seek to determine the cause or causes of any significant negative voting, and take them into consideration when making future decisions regarding executive compensation programs.

 

We design our executive compensation programs to implement our core objectives of providing competitive pay, pay for performance, and alignment of management’s interests with the interests of long-term stockholders. Stockholders are encouraged to read the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement for a more detailed discussion of how our compensation programs reflect our core objectives.

 

We believe stockholders should consider the following when voting on this proposal.

 

Pay for Performance Orientation

 

Base Salaries.   In anticipation of a challenging economic environment in fiscal 2010, the Company froze fiscal 2010 base bay, excluding increases resulting from promotions.

 

Annual Incentives.  Because the Company’s performance did not meet established goals for fiscal 2010, the Compensation Committee did not approve annual incentive payments, with the exception of an annual incentive payment to the CEO of our subsidiary Qdoba, commensurate with Qdoba’s achievement of its EBITDA goal.

 

Long-Term Incentives.   In fiscal 2010, the Compensation Committee introduced “Performance Units” in lieu of stock options for 30% of executive long-term incentive compensation. For fiscal 2011, our long-term incentive compensation consists of three equity vehicles: (i) stock options that vest evenly over three years; (ii) Performance Units that may be earned in shares of stock at the end of three years, based on the achievement of financial and operational goals, and (iii) restricted stock units that vest evenly over five years and are subject to a holding requirement. We believe this mix of incentives motivates and rewards our executive officers for sustaining longer term financial and operational performance that should lead to increases in stockholder value.

 

Alignment with Long-Term Stockholder Interests

 

Our executive compensation is heavily weighted toward variable, at risk pay in the form of annual and long-term incentives, with a large portion of executive compensation tied to long-term performance.

 

In addition, the Company has adopted:

 

 

Competitive Pay

 

We target the value of base salary, total cash compensation, and total direct compensation offered to our executives around the 50th percentile of the market for performance that meets expectations, with the opportunity for above-market compensation only if performance exceeds expectations.

 

Our Compensation Committee is advised by an independent compensation consultant who does not perform any work for management.

 

The independent consultant and the Compensation Committee annually compare our executive compensation levels and elements with compensation levels and elements at other companies.

 

Beginning in fiscal 2011, the peer group used to compare the levels and elements of compensation has been expanded from 13 to 23 companies in the restaurant and retail/hospitality industries to provide a more robust perspective on pay levels and practices.

 

Recommendation

 

The Board believes the Company’s executive compensation programs use appropriate structures and sound pay practices that are effective in achieving our core objectives. Accordingly, the Board of Directors recommends that you vote in favor of the following resolution:

 

“RESOLVED, that Jack in the Box Inc. stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis and Executive Compensation sections of this Proxy Statement.”

 

Approval of the Say on Pay proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions and broker non-votes will not count as votes cast “FOR” or “AGAINST” the proposal, and will have no effect on the outcome of the proposals.

 

THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THIS PROPOSAL.

 

ADVISORY VOTE ON THE FREQUENCY OF A

STOCKHOLDER VOTE ON EXECUTIVE COMPENSATION

 

This proposal gives our stockholders the opportunity, through the following resolution, to advise our Board how often we should conduct an advisory Say on Pay vote on the compensation of our named executive officers:

 

“RESOLVED, that an advisory vote of the stockholders of Jack in the Box Inc. to approve the compensation of named executive officers as disclosed pursuant to the Securities and Exchange Commission’s compensation disclosure rules, shall be held at an annual meeting of stockholders, beginning with the 2011 Annual Meeting of Stockholders, (i) every 3 years, (ii) every 2 years, or (iii) every year.”

 

The enclosed proxy card gives you four choices for voting on this item. You can choose whether the Say on Pay vote should be conducted every 3 years, every 2 years, or every year. You may also abstain.

 

Factors to Consider in Voting on this Proposal

 

Our Board has reviewed the evolution of Say on Pay proposals and considerations regarding the frequency of such proposals, and has carefully studied the alternatives in an effort to determine the approach that would best serve Jack in the Box and its stockholders. Our Board has heard many arguments supporting an annual vote, and equally compelling arguments supporting a vote every three years. Each position has advantages and disadvantages.

 

Arguments favoring a vote no more frequently than every three years include the following:

 

 

Arguments favoring an annual Say on Pay vote include the following:

 

 

THE BOARD OF DIRECTORS’ RECOMMENDATION

 

We have presented a number of arguments in favor of a Say on Pay vote every three years, and in favor of an annual vote. The Board believes that the Company’s compensation practices are sound, and embody an appropriate long-term perspective. We therefore do not believe that an annual Say on Pay vote is necessary. We recognize, however, that some of our stockholders might welcome the opportunity to communicate more frequently with the Board and the Compensation Committee regarding the Company’s pay practices, and view the Say on Pay vote mechanism as the best way to do so. Because we are comfortable that we can effectively implement any frequency resolution that the plurality of our voting stockholders recommend, we will leave it to our stockholders to inform us at the 2011 Annual Meeting of Stockholders which frequency they would prefer we adopt.

 

Because your vote is advisory, it will not be binding upon the Board of Directors. However, our Board values the opinions that our stockholders express in their votes and will take into account the outcome of the vote when considering how frequently we should conduct an advisory Say on Pay vote on the compensation of our named executive officers.

 

The choice of frequency that receives the highest number of “FOR” votes will be considered the advisory vote of the stockholders. Abstentions and broker non-votes will not count as votes cast “FOR” or “AGAINST” any frequency choice, and will have no direct effect on the outcome of this proposal.

 

This Compensation Discussion and Analysis (“CD&A”) explains our compensation programs and the compensation paid to our Chairman, CEO & President, our Chief Financial Officer, and the three other highest paid executives in fiscal 2010. The sections of our CD&A are organized as follows:

 

 

Key terms used throughout this Compensation Discussion and Analysis

 

 

Fiscal 2010 Named Executive Officers — (“NEOs”)

 

 

I.  Executive Summary

 

At Jack in the Box our primary goal is to build long-term stockholder value. Our executive compensation and benefits programs are designed to deliver on this goal by using appropriate compensation structures and sound pay practices, without creating undue stockholder risk. The soundness of our programs is evidenced, in part, by the following characteristics and practices, which are addressed more fully throughout this discussion:

 

 

 

Fiscal Year 2010 Overview

 

 

 

Due to the change in the timing of equity grants to November, the equity that typically would have been granted in September 2009 as a part of long-term compensation for fiscal 2009, was instead granted in the first quarter of fiscal 2010. This resulted in an increase in total direct compensation for our Executives in fiscal 2010 compared to fiscal 2009, as disclosed under SEC rules. It is important to note that this increase in total direct compensation would not have occurred if we had not changed the grant date from the end of fiscal 2009 to the beginning of fiscal 2010.

 

Program Decisions for Fiscal Year 2011

 

In fiscal 2010, the Committee retained a new independent compensation consultant, Semler Brossy, to further assess and advise on the Company’s executive compensation programs. Consistent with the Committee’s belief in performance-based pay and stockholder alignment, Semler Brossy recommended program changes designed to increase the effectiveness and alignment of our compensation programs. These changes are described below and will be implemented in fiscal 2011.

 

 

 

 

Fiscal 2010 Targeted Total Direct Compensation and Pay for Performance Alignment

 

Due to the shift in timing of our annual equity grant as previously discussed, the compensation of our NEOs disclosed according to SEC rules does not accurately reflect the manner in which the Committee viewed NEO pay. The supplemental compensation table below shows how the Committee viewed total compensation values of our NEOs in 2010, 2009 and 2008. It is not intended to be a substitute for the Summary Compensation Table.

 

The primary differences between the “Supplemental Compensation Table — Total Direct Compensation” below and the “Summary Compensation Table” are (i) the fiscal year in which the equity grants are reported and (ii) in the “Supplemental Compensation Table — Total Direct Compensation” we have included (a) targeted values for Stock Awards/RSUs, Option Awards and Performance Units for fiscal 2010, and (b) the annual salary rate versus salary actually paid.

 

 

The table below shows the long-term incentive grants for the performance year to which they relate (i.e., as if there had been no change in the timing of grants from September to November). As illustrated in the supplemental table, the TDC for Ms. Lang and Mr. Rebel would have been lower in fiscal 2010 compared to fiscal 2009 if we had not changed the timing of equity grants.

 

Supplemental Compensation Table — Total Direct Compensation

 

 

 

 

The $917,028 “Stock Awards/RSUs” for 2010 for Mr. Comma consists of an equity grant under our Stock Ownership Program of 34,700 RSUs with a grant date fair value of $737,028 and $165,000 targeted RSU value under the long-term incentive program.

 

The chart below illustrates the targeted TDC for each named executive officer in fiscal 2010. As the chart illustrates, our executive compensation program is heavily weighted towards variable, at-risk pay in the form of annual and long-term incentives. This is aligned directly with our pay for performance objective. A large portion of compensation motivates and rewards for long-term performance.

 

2010 Total Direct Compensation Targets

 

CEO Pay for Performance Alignment

 

The following graphs show the relationship of our CEO’s compensation compared to our diluted earnings per share from continuing operations performance and cumulative total stockholder return performance in each of the last five fiscal years. The numbers assume that the value of the investment in the Company’s Common Stock and in the peer group was $100 on 9/30/2005 and tracks it through 10/03/2010. As illustrated, our CEO’s compensation is in alignment with Company performance results and our compensation objectives. Ms. Lang’s compensation has generally increased when performance was strong, and has decreased when performance has declined.

 

 

II.  Executive Compensation Philosophy and Objectives

 

A.  Compensation Philosophy

 

The Compensation Committee has established the following compensation philosophy for our NEOs and Executives. This philosophy also applies to other levels in the Company:

 

Competitive pay for expected performance
and exemplary pay for exemplary performance.

 

We define these concepts as:

 

 

B.  Compensation Objectives

 

The Committee has set the following objectives for compensating Executives of Jack in the Box, and considers these objectives in making compensation decisions:

 

 

 

a) Stock Options that provide value only if the market value of the Company’s stock increases;

 

b) Performance Units that are earned and payable in stock based on achievement of long-term financial and operational goals approved by the Committee at the beginning of the 3-year performance period; and

 

c) Beginning in fiscal 2011, RSUs that vest over five years and are subject to with a holding requirement.

 

 

III.  Key Elements of Total Compensation for Fiscal 2010

 

The key elements of total compensation for our Executives in fiscal 2010 were:

 

 

IV.  Executive Compensation Market Comparison

 

The Committee annually compares the levels and elements of compensation that we provide to our Executives, including our NEOs, with the levels and elements of compensation provided to executives in similar positions at other companies. The Committee uses this comparison data as a guide in its review and determination of base salaries, the value of annual incentive awards, and the value of long-term incentive compensation. Although we target compensation to approximate a reasonable range of the market median for base salary, target cash compensation, and target total direct compensation, the Committee has discretion to determine if it is in the Company’s best interest to provide one or more Executives with compensation that varies from this general principle.

 

The Committee’s compensation consultant provides the Committee with market data each year that is generally obtained from multiple sources:

 

 

A common statistical technique of regression analysis is used by the Consultant to adjust the data for differences in company size in the Towers Watson Executive Compensation Survey. Each executive position is matched to comparable positions in general industry as represented by the Towers Watson survey, as well as to companies in the restaurant industry as represented by the CRCA survey, and to the proxy data of Peer Group companies.

The Peer Group used to compare the levels and elements of compensation provided to our named executive officers in 2010 consisted of the restaurant companies listed below. These companies were selected because of their a) short and long term growth potential, b) relevant revenues and market cap to that of Jack in the Box, c) high level of brand recognition, and d) role as companies with whom we compete for business and executive talent.

 

2010 Peer Group (1)

 

 

 

 

During fiscal 2010, Semler Brossy recommended and the Committee approved revisions to the composition of our Peer Group for fiscal 2011. The Peer Group was expanded to include retail and hospitality companies with which we compete for executive talent and are of comparable size, economics, business model, and consumer focus to Jack in the Box. The changes to the Peer Group did not significantly change the market pay levels, but we believe the revised Peer Group will provide a more robust perspective on pay levels and practices for the Committee to consider when reviewing Jack in the Box pay programs. This change resulted in an increase in the Peer Group from 13 to 23 companies.

2011 Peer Group (1)

 

 

 

 

V.  Compensation Decision-Making Process

 

 

The Compensation Committee oversees executive compensation programs for our NEOs and all other Executives. The Committee is comprised entirely of independent directors. The Committee meets regularly, including in executive session without management present. The Committee Chair reports to the Board on the Committee’s actions at each regular meeting.

 

The Committee’s responsibilities include reviewing and approving the:

 

 

 

The Committee also recommends to the Board whether it is satisfied with the Compensation Discussion and Analysis disclosure, and whether it should therefore be included, or modified before such inclusion, in the Corporation’s Proxy Statement or Form 10-K.

 

B.  Role of the Independent Compensation Consultant

 

In January 2010, the Committee retained Semler Brossy as its independent compensation consultant. In this role, Semler Brossy advises the Committee on market practices and on executive compensation programs and practices. Semler Brossy reports directly to the Committee and its Chair and does not perform any work for the Company other than its work for the Committee. In the Committee’s opinion, Semler Brossy satisfies all independence requirements.

 

In fiscal 2010, the Committee’s prior Consultant, Towers Watson, attended one Committee meeting and Semler Brossy attended four meetings, in addition to consulting frequently with the Committee Chair between meetings. Semler Brossy reviewed this CD&A and the tables contained in this Proxy Statement.

 

C.  Role of the Chief Executive Officer in Compensation Decisions

 

In making decisions on executive compensation, the Committee considers input and recommendations from the Company’s CEO. Our CEO reviews the performance of the NEOs and other Executives with the Committee and provides her recommendations regarding their compensation.

 

Our CEO also provides her insight and perspectives to the Committee on the reports and recommendations of the Committee’s compensation consultant relating to compensation and benefit plan design and strategies, goal setting, payout structure, stock ownership requirements, and other related topics.

 

Our CEO does not provide input or recommendations with regard to her own pay. The Committee reviews and discusses pay decisions related to the CEO in executive session without the CEO or other members of management present.

 

D.  Tally Sheets

 

Each year as the Committee determines executive compensation, it reviews tally sheets prepared by the Company’s Compensation Department for each of our NEOs and Senior Executives. The tally sheets detail each element of total compensation for the most recent three fiscal years, including:

 

 

The tally sheets also reflect the current value of all outstanding equity grants, deferred compensation accounts, and estimated retirement benefit values as of the end of the fiscal year for each Senior Executive. The Committee uses the tally sheets to:

 

 

E.  How the Committee Determined Chief Executive Officer Compensation

 

The Committee, with input from the Lead Director and the Consultant, determines and approves changes to the CEO’s compensation based on its review of her performance, her pay relative to market, and her pay relative to others within the Company.

 

At its September 2009 meeting, the Board’s Consultant provided the Committee with information on CEO market pay and additional perspectives on CEO compensation. The Committee considered the competitiveness of Ms. Lang’s compensation package relative to the market. It also considered the Company’s financial and operational performance, and Ms. Lang’s individual performance in fiscal 2009. The discussion and decisions by the Committee on Ms. Lang’s compensation occurred during executive session when only independent Committee members and the Committee’s Consultant were present. Ms. Lang did not participate in this discussion.

 

Following these deliberations, the Committee determined the compensation package for Ms. Lang for fiscal 2010:

 

 

 

F.  Internal Pay Equity

 

Our compensation programs are designed so that potential compensation opportunities are set relative to the Executive’s level of responsibility and impact. The core structure of our programs is similar for all levels but the total compensation opportunity is higher for Executives with higher levels of responsibility. For fiscal 2010, our CEO’s total compensation, as reflected in the Summary Compensation Table, was approximately 2.9 times higher than the next highest paid Executive, the Executive Vice President, Chief Financial Officer.

 

VI. Fiscal 2010 Compensation Programs and Analysis

 

A.  Base Salary

 

The Committee reviews market data each year to determine the competitiveness of our Executives’ base salaries. Our CEO reviews the performance of the Executives, and in consultation with the Company’s compensation department, provides recommendations on changes in their salary to the Committee for its approval. Recommendations for salary changes are based on a number of considerations, including:

 

 

As explained earlier, a salary freeze was in effect in fiscal 2010 for our NEOs, Executives, and employees, except for our restaurant Team Leaders and Team Members. Mr. Rudolph and Mr. Comma received increases in their base salary due to promotions effective February 1, 2010. The amount of increase was approved by the Committee in consultation with our CEO, and targeted to increase pay to an appropriate level relative to the market midpoint of their new position responsibilities.

 

 

B.  Annual Incentive Compensation

 

Our 2010 annual incentive program provided the potential for our Executives and other key management and staff to earn a cash payment based on the achievement of annual Company performance goals. The Committee set Company-wide measures because it wanted all Executives, key management, and staff to be focused on the same goals and work together to achieve those goals. Our Executives are measured on Jack in the Box (“JIB”) performance and the CEO-Qdoba is measured on Qdoba performance. The performance metrics are described below.

 

2010 Annual JIB Incentive Compensation Metrics

 

 

2010 Annual Qdoba Incentive Compensation Metric

 

 

Setting Annual Incentive Performance Goals

 

In September 2009, the Committee approved the annual incentive performance goals for fiscal 2010 after the Board approved the Company’s operational plan and budget for fiscal 2010. When setting fiscal 2010 annual incentive goals, the Committee and our CEO discussed the current economic conditions and their anticipated impact on future sales and earnings levels. The Committee approved: (i) a threshold goal that represented challenging performance and accounted for the difficult macroeconomic environment; (ii) a target goal at budget, believing that this represented a reasonable stretch for the Company to achieve; and (iii) a maximum goal at a level the Committee believed would represent exemplary performance.

Fiscal 2010 Performance

 

The chart below shows the fiscal 2010 incentive payout percentages for the NEOs expressed as a percentage of annual base salary. The percentages are set by position level relative to market data and the Executive’s role in the Company.

 

Annual Incentive Payout Percentages

 

 

As approved by the Committee, our fiscal 2010 performance results and incentive payments were as follows:

 

Target and Actual Performance

 

 

 

 

 

The Committee considers the Company’s overall fiscal year performance, recommendations from the CEO, and input from the Consultant when determining the dollar value of equity grants for each Executive.

 

Determining Size of Equity Grants

 

After reviewing the annual executive compensation study provided by its previous Consultant Towers Watson at its September 2009 meeting, the Committee found that there was significant variability in long-term incentive practices and values among our Peer Group as a result of significant declines in stock prices due to the economic climate. The Committee considered a number of different methods to determine the appropriate level of equity grants, taking into consideration the incentive value to the executives, the number of shares in the share pool, and the anticipated future increase in the value of the grants once the economy recovered. After considerable discussion, and with input from its Consultant, the Committee elected to use the same fixed share grant guideline for the November 2009 equity grants as was used for the September 2008 equity grants. This approach sought to balance the changes in the monetary value of the long-term incentive with the increase in the number of shares that would have needed to be granted to meet appropriate target values due to unusually low stock prices. Although the number of shares granted in 2009 was the same as in 2008, the value of the November 2009 equity grant was less due to a lower stock price.

Date of Equity Grants

 

As previously disclosed in our fiscal 2009 proxy, in prior years our equity grants were made on the date of the Committee’s regularly scheduled meeting each September. In September 2009, with input from its Consultant, the Committee agreed that going forward its decisions on long-term incentive grants should occur at its November meeting. This change will give the Committee additional time each year to evaluate fiscal year performance of the Company and of the Executives before making equity grants. It also provides additional time to review competitive market data in the context of the final budget and long-term plan approved by the Board.

 

Due solely to the change in the timing of equity grants to November, the grant that would typically have been made in September 2009 to reflect long-term compensation for fiscal 2009, was instead granted in the Company’s first quarter of fiscal 2010 and reported as a 2010 grant, as required under SEC rules. This resulted in an increase in total direct compensation for Ms. Lang and Mr. Rebel in the Summary Compensation Table. It is important to note that this increase in total direct compensation is due solely to the change in the grant date from the end of fiscal 2009 to the beginning of fiscal 2010 (the November 2009 grant). If we had not changed the timing of the equity grants to November, there would have been a decrease in total direct compensation for fiscal 2010. We illustrated our view of compensation pertaining to fiscal 2010 in the Supplemental Compensation Table — Total Direct Compensation shown earlier in the section titled Fiscal 2010 Targeted Total Direct Compensation and Pay for Performance Alignment.

 

Our ongoing practice is to make our annual long-term incentive grants on the second business day of the “window period” opened in accordance with the Company’s Employee/Insider Trading Policy and after the release of the prior fiscal year end earnings. Fiscal year end earnings are generally released approximately one week following the date of the November Board meeting. Stock option grants have an exercise price equal to the closing price of Jack in the Box Common Stock on the effective date of grant.

 

2010 Equity Grants

 

The equity grants in fiscal 2010 consisted of stock options and Performance Units as explained below:

 

 

Performance Units

 

 

 

 

Qdoba Long-Term Incentive Compensation

 

The Committee believes it is important to incentivize and reward the CEO-Qdoba for performance directly attributed to increasing the value of our Qdoba brand. Therefore, the CEO-Qdoba participates in a long-term incentive compensation program that is structured like a phantom stock program, payable in cash. Grants of performance units are made annually, with overlapping three-year performance cycles.

 

The performance metric for determining the value of the performance units is net earnings. The Committee approved this metric because it is the best measure of overall Qdoba performance and most similar to earnings per share. Net earnings also includes interest cost associated with any Jack in the Box funding of Qdoba’s growth through purchasing or building new restaurants. Performance goals are established and approved by the Committee at the beginning of the three-year performance period.

 

Seventy percent (70%) of the long-term incentive value is based on unit value growth at the time of grant to the end of the three-year performance period similar to options, and thirty-percent (30%) of the long-term incentive value is based on actual unit value at the end of the three-year performance period, similar to time-based restricted stock.

 

Fiscal 2010 Equity Grants to NEOs

 

In fiscal 2010, we made the following grants of stock options and performance units to our NEOs:

 

 

 

 

Executive Stock Ownership Grants

 

In addition to our regular annual grants, we made grants to two executives under the executive stock ownership program which is described in more detail in this CD&A. We granted Mr. Rudolph 25,572 restricted stock units valued at $536,756 on September 23, 2010, and Mr. Comma 34,700 restricted stock units valued at $737,028 on February 9, 2010. The value of these grants will be offset against future long-term incentive grants.

VII.  Other Compensation Programs and Policies

 

 

Our Executives, including our NEOs, receive the same benefits as those generally available to other employees in the Company. Both Company-subsidized and voluntary benefit programs are provided and include medical, dental, vision, life insurance, and disability coverage.

 

Each year the Company assesses the benefit costs and the contribution levels for our health and welfare benefits. In fiscal 2010, we redesigned our programs to give more choice to our participants. We have a “base” plan that includes options for participants to elect to pay higher contributions to lower out-of-pocket expenses and/or increase levels of coverage under certain plan provisions. In addition to the standard benefits, in 2010 we provided some additional benefits to attract and retain top executive talent, as follows:

 

 

 

 

 

Our NEOs and other Executives receive limited perquisites that are common among the Peer Group. The Executives are responsible for paying the income taxes on these benefits — we do not gross up these perquisites. The Committee evaluates these perquisites regularly and believes they enable us to be competitive in attracting and retaining executive talent. As noted in our executive summary, beginning fiscal 2011 the perquisites below will be combined and provided in the form of an annual cash perquisite allowance.

 

 

 

The Company’s retirement plans are designed to provide our employees, including our NEOs, with some retirement income security. These plans reward for service and provide an additional incentive for our employees to build a long-term career at Jack in the Box.

 

 

 

 

In 2002, Jack in the Box adopted a stock ownership program and guidelines for all Senior Executives. The program and guidelines are intended to assure that Senior Executives take a proprietary interest in the Company and its results. The program also encourages retention of Senior Executives and aligns the long-term financial interests of these Senior Executives with those of our stockholders. We do not have a stock ownership guideline for our CEO-Qdoba. However, upon our acquisition of Qdoba Restaurants in 2003 the Committee approved a grant of 50,000 restricted shares to Mr. Beisler that will vest only upon termination with the Company, as prescribed under the executive stock ownership program.

 

Stock ownership guidelines are the lesser of a fixed number of shares or a multiple of salary.

 

 

Named Executive Officer Stock Ownership

 

Under the executive stock ownership program in effect for fiscal 2010, the Committee granted restricted stock units (“Ownership Shares”) to Senior Executives so that, in combination with shares directly owned by the Senior Executives, the applicable ownership guideline was met. Prior to fiscal 2009, the Committee made ownership grants in the form of restricted stock. Beginning fiscal 2009, ownership grants were made in the form of restricted stock units. Key features of the executive stock ownership program include:

 

 

As explained earlier in this Proxy Statement, beginning in fiscal 2011, Ownership Shares will no longer be granted to Senior Executives to facilitate meeting the Company’s stock ownership guidelines. Instead, restricted stock units will be added as an on-going component of the long-term incentive program for all Executives. Until the ownership guidelines are achieved, Jack in the Box Senior Executives will be required to hold 100% of the after-tax net shares until termination of service. All other Executives (and Senior Executives after meeting their stock ownership requirement) will be required to hold 50% of after-tax net shares until termination of service.

 

 

The Company prohibits certain derivative transactions in Company stock. Employees, including NEOs, other executives, and their families may not:

 

 

 

The Jack in the Box executive compensation recovery policy was adopted in fiscal 2008. The policy states that in the event Jack in the Box Inc. materially restates all or a portion of its financial statements due to fraud or intentional misconduct either committed by a Corporate Officer or knowingly permitted by a Corporate Officer, the Committee may take action to recover incentive cash compensation and performance-based equity awards that were based on the achievement of financial results that were subsequently restated. For purposes of this policy, a Corporate Officer is defined as an employee with the title of Corporate Vice President or above, and includes the CEO and COO of the Company’s subsidiary Qdoba Restaurant Corporation, as well as former Corporate Officers who were employed by the Company at the time of the fraud or intentional misconduct.

 

Executive compensation subject to recovery may include full or partial repayment of:

 

i) Any annual incentive or incentive cash compensation paid to the Corporate Officer, plus a reasonable rate of interest.

 

ii) Economic gains realized from the sale of shares awarded under a performance- based equity plan.

 

iii) Cancellation of restricted stock or units, deferred stock awards or units, and outstanding stock options to the extent vesting of such awards is performance-based.

 

The Committee has the sole discretion to determine what action to take in the event of a restatement, including soliciting recommendations from the Audit Committee and the full Board and retaining outside advisors to assist in making its determinations. Any actions taken by the Committee would be independent of consequences imposed by law enforcement agencies, regulators or other authorities.

 

 

None of the NEOs have employment or severance agreements, except in the event of a change in control as described in the Compensation and Benefits Assurance Agreements discussion in the next section. When an NEO terminates employment with the Company, the NEO will receive amounts according to the specific terms and provisions of each compensation plan or benefit plan as described below:

 

 

If eligible to retire under a Company-sponsored retirement plan, in addition to the above, under the terms of the award agreement, the NEO is entitled to the following:

 

 

If a NEO dies while employed by the Company, under the terms of the stock award agreement, all outstanding options and stock awards will become 100% vested on the date of his or her death.

 

The values of additional potential payments to the NEOs are provided in the section entitled “Potential Payments Upon Termination or Change in Control” in this Proxy Statement.

 

 

The Committee believes that Compensation & Benefits Assurance Agreements (otherwise known as a Change in Control or “CIC” Agreements) benefit stockholders by providing an important incentive to senior management to remain focused on running the business in the case of a pending or actual change in control event.

 

Accordingly, each of the NEOs, and all Senior Vice Presidents, a total of seven officers, have a CIC Agreement that provides compensation in the form of a lump sum payment and other benefits in the event of a qualifying termination within 24 months of the effective date of the change in control of the Company. Each agreement has a term of two years, and is subject to automatic extension for additional two-year terms unless either party to the agreement gives notice of intent not to renew. Further details are set forth in this proxy in the section entitled “Potential Payments Upon Termination or Change in Control.”

 

During fiscal 2009, the list of executives covered by a CIC Agreement was reviewed by the Committee. The Committee reviewed the terms and conditions of the CIC Agreements, and discussed the potential costs to the Company. With the assistance of its Consultant, the Committee reviewed the estimated cost to the Company (i) of each CIC Agreement and (ii) in the aggregate for all CIC Agreements. The estimates showed that both the costs for individual agreements and costs in the aggregate were reasonable and in line with market practices. Costs for some executives would also decline in the future as they vest in SERP benefits. However, the Committee determined that in order to further control costs, any CIC Agreement entered into

after May 7, 2009, would not provide for gross-up of any amounts payable to the executive under the CIC Agreement. Of the CIC Agreements currently in effect, four agreements provide for a gross-up and three are without any gross-up provision. The Committee continued to monitor costs and review the terms and conditions of CIC Agreements during fiscal 2010.

 

A detailed discussion of the provisions of the Compensation & Benefits Assurance Agreements and the associated monetary values is provided in this proxy in the section entitled Compensation & Benefits Assurance Agreements.

 

 

Internal Revenue Code Section 162(m)

 

The Committee and its Consultant consider the Internal Revenue Code Section 162(m) implications of all compensation decisions for Executives. Section 162(m) places a one million dollar limit on the amount of compensation that Jack in the Box can deduct in any one year for certain named executive officers. Performance-based pay is excluded from this limit. For the reasons discussed earlier, our compensation programs are designed to provide the largest portion of an Executive’s compensation through our annual cash incentive plan and long-term incentive plan in the form of stock options and Performance Units, both of which are considered performance-based compensation. Restricted stock awards are not considered performance-based under Section 162(m) and, accordingly, are subject to the $1.0 million deductibility limit.

 

Internal Revenue Code Section 409A

 

 

 

The Company administers the SERP, the EDCP and stock option awards consistent with Section 409A requirements.

 

 

The Company accounts for option expensing under the Financial Accounting Standards Board (“FASB”) authoritative guidance on stock compensation and uses a binomial valuation model prepared annually by AON Consulting to determine the “fair value” of our stock options at grant.

 

VIII.  Risk Analysis of Compensation Programs

 

The Committee has engaged in a risk analysis of our compensation plans, programs, policies, and practices for all employees. For the following reasons, the Committee believes that the design of our compensation programs, the governance of our programs, and our risk oversight process guard against unnecessary risk taking.

 

 

 

 

 

 

 

 

The Jack in the Box Compensation Committee is comprised solely of independent members of the Company’s Board of Directors. The Committee assists the Board in fulfilling its responsibilities regarding compensation matters, and is responsible under its charter to determine the compensation of Executives, including reviewing all components of pay. The Committee reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with its Consultant, with management and with the Board. Based on this review and discussion, the Committee, on behalf of the Board, has authorized that this Compensation Discussion and Analysis be included in this Proxy Statement for fiscal 2010, ended October 3, 2010.

 

THE COMPENSATION COMMITTEE
Michael W. Murphy, Chair
David L. Goebel
Murray H. Hutchison
John T. Wyatt

 

The Summary Compensation Table (“SCT”) summarizes the total compensation of our NEOs for the fiscal year ended October 3, 2010, and the prior two fiscal years to the extent required under the Securities and Exchange Commission rules.

 

Summary Compensation Table