Neiman Marcus 2014 Annual Report Download - page 67

Table of Contents
• Base salaries are determined by an industry peer group analysis and on the overall experience of each individual. Merit increases are based on
financial as well as individual performance and are generally kept within a specified percentage range for all employees, including the named
executive officers.
• We grant long-term incentive awards in the form of stock option grants to align the interests of participants with those of our equity investors.
• Annual incentive bonus awards are based on our Plan Earnings (as defined below under the heading "2015 Executive Officer Compensation")
and sales. For Bergdorf Goodman, annual incentive bonus awards are based on Plan Earnings and sales of both the Company as a whole and
Bergdorf Goodman specifically. The annual incentive bonus awards are all set at the beginning of each fiscal year based on the achievement of
goals that the Compensation Committee believes will be challenging. Maximum target payouts are capped at a pre-established percentage of
base salary.
The Compensation Committee has discretionary authority to adjust incentive plan payouts and the granting of stock option awards, which may
further reduce any business risk associated with such plan payouts and stock option grants. The Compensation Committee also monitors compensation
policies and programs to determine whether risk management objectives are being met.
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Process for Evaluating Executive Officer Performance
Role of the Compensation Committee. The Compensation Committee is responsible for determining the compensation of our named executive
officers and for establishing, implementing and monitoring adherence to our executive compensation philosophy. The Compensation Committee charter
authorizes the committee to retain and terminate compensation consultants to provide advice with respect to compensation of the named executive officers.
The Compensation Committee is further authorized to approve the fees the Company will pay, and terms of engagement of, any consultant it may retain.
The Compensation Committee considers input from our CEO and compensation consultants in making determinations regarding our executive
compensation program and the individual contribution of each of our named executive officers. The CEO does not play a role in decisions affecting her own
compensation. The CEO’s performance and compensation are reviewed and determined solely by the Compensation Committee.
In developing and reviewing the executive incentive programs, the Compensation Committee considers the business risks inherent in program
designs to ensure that they do not incentivize executives to take unacceptable levels of business risk for the purpose of increasing their incentive plan
awards. The Compensation Committee intends for the plan design to be conservative in this respect and that the compensation components provide
appropriate checks and balances to encourage executive incentives to be consistent with the interests of our equity investors. The Compensation Committee
believes that the mix of compensation components used in the determination of our named executive officers’ total compensation does not encourage our
named executive officers to take undesirable risks relating to the business. For further information, see “Risk Assessment of Compensation Policies and
Programs” above.
Role of Management. As part of our annual planning process, the CEO, with assistance from external consultants, develops and recommends a
compensation program for all executive officers. Based on performance assessments, the CEO attends a meeting of the Compensation Committee held for the
purpose of considering each individual executive’s annual compensation and recommends the base salary and any incentive bonus awards or long-term
incentive awards, if applicable, for each of the executive officers, including the other named executive officers. The CEO does not participate in the portion
of the Compensation Committee meeting during which her own compensation is discussed and does not provide recommendations with respect to her own
compensation package.
Role of the Compensation Consultants. The Compensation Committee generally retains services of compensation consultants for limited purposes.
Management retains an independent compensation consultant, Hay Group, to provide comparative market data regarding executive compensation to assist
the Compensation Committee in establishing reference points for the base salary, annual incentive and long-term incentive components of our compensation
package. They also provide information regarding general market trends in compensation, compensation practices of other retail companies and regulatory
and compliance developments. The Company also engaged W.T. Haigh and Company, Inc. (Haigh and Company) in a limited capacity in fiscal year 2015 to
provide peer company information. The fees paid to Hay Group and Haigh and
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