Dollar General 2007 Annual Report Download - page 121

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119
Use of Outside Advisors in Determining NEO Compensation. Prior to the Merger, the
Compensation Committee selected Hewitt Associates as its compensation consultant. Hewitt also
provides consulting services to our human resources group, both with respect to management’ s
work in connection with NEO compensation (as described below under “Management’ s Role in
Determining or Recommending 2007 NEO Compensation”) and in connection with general
employee compensation and benefits matters.
Prior to the Merger, the Committee approved a written agreement with Hewitt describing
the general terms of the working relationship. In particular, Hewitt may perform compensation
consulting services upon management or Committee request, which services may include
competitive market pay analyses, support regarding legal, regulatory or accounting
considerations impacting compensation programs, redesign of those programs, assistance with
market data, trends and competitive practices, meeting preparation and attendance and other
miscellaneous work.
Management’s Role in Determining or Recommending 2007 NEO Compensation. Prior to
the Merger, management assisted Hewitt in gathering and analyzing relevant competitive data
and identifying and evaluating various alternatives for 2007 compensation. Mr. Perdue (while he
served as CEO) and Ms. Challis Lowe regularly provided their recommendations in
Compensation Committee meetings regarding NEO compensation and assisted Hewitt in making
presentations to the Committee. Mr. Perdue participated fully with the Committee in assessing
NEO performance and made recommendations on the compensation level for each NEO pay
component prior to the Merger. No member of management attended the Committee’ s own
private session.
In connection with the Merger, NEOs were represented by legal counsel who negotiated
on their behalf with KKR and its legal counsel with respect to the terms of the new long-term
incentive plan. Such negotiations did not address the amounts or value of the grants to be given
under that plan upon the closing of the Merger. Messrs. Richard Dreiling and David Beré also
were represented by legal counsel in negotiations with respect to the terms of their employment
agreements and compensation.
While the Board and the Committee valued and welcomed the input of management,
Board and Committee members ultimately made all 2007 NEO compensation decisions.
Use of Market Benchmarking Data in Determining 2007 NEO Compensation. To attract
and retain NEOs who we believe will enhance our long-term business results, we must pay
compensation that is competitive with the external market for executive talent. We believe that
the primary NEO talent market consists of retail companies with revenues and business models
similar to ours because those companies have executive positions similar in breadth, complexity
and scope of responsibility to our NEO positions. For 2007, the Compensation Committee
directed Hewitt to provide data on total and individual compensation elements from its
proprietary salary survey database and from the proxy statements of selected retail companies
that met these criteria. We refer to this combined group as the market comparator group. In 2007,
this group consisted of Advance Auto Parts, AutoZone, Family Dollar, Kohl’ s, Limited Brands,
Long Drug Stores, Nordstrom, OfficeMax, Office Depot, RadioShack, Staples, J.C. Penney, The