Pier 1 2016 Annual Report Download - page 115

COMPENSATION
Independent Executive Compensation Consultant
Data for the fiscal 2016 peer group was provided by Willis Towers
Watson, the compensation committee’s independent executive
compensation consultant for fiscal 2016. Additionally, Willis
Towers Watson provided information and consulting to the
compensation committee on a variety of executive compensation
issues including base salaries, short-term incentive pay, long-term
incentive pay and plan design for short-term (cash) and long-term
(equity) incentive programs. Willis Towers Watson also provided
data from the Towers Watson 2014 Compensation Data Bank
(CDB) Retail/Wholesale Services Executive Database, as well as
data available from public sources such as proxy filings, in order
to provide additional information relating to total compensation,
cash compensation and equity trends in the broader retail
industry. These resources were used to ensure that Pier 1 Imports
maintains competitive compensation practices and packages
across the broader retail group.
Compensation Determinations and Role of
Executive Officers
Fiscal 2016 base salary, and short- and long-term incentive
compensation recommendations for the NEOs were presented to
the compensation committee at their meetings at the end of fiscal
2015 and during the first fiscal month of 2016. The presentations
included recommendations of Pier 1 Imports’ chief executive
officer and human resources compensation group on those
elements of compensation, plus recommended plan design
changes and a summary of all short- and long-term incentive
awards to eligible levels of management. The recommendations of
Pier 1 Imports’ chief executive officer do not include
recommendations on his own compensation. The compensation
committee considered survey data from a peer group of retail
companies and studies and recommendations from its
independent outside consultants, Willis Towers Watson, as
described above. The compensation committee approves the
fiscal year compensation in the first month of the fiscal year with
an effective date generally in April. Implementation of short- and
long-term incentive compensation for the year occurs after
approval by the compensation committee and board of directors.
Pier1Imports’PolicyonShareOwnership
The Pier 1 Imports’ board of directors believes it is critical for
executives and board members to be closely aligned with
shareholders’ interests over both the short- and long-term and
believes equity ownership accomplishes this linkage. The Pier 1
Imports’ board of directors has adopted stock ownership
guidelines for its non-employee directors to encourage direct
ownership in Pier 1 Imports. These guidelines state that the board
of directors believes that each non-employee director should,
within five years of becoming a member of the board of directors,
acquire ownership of shares of Pier 1 Imports common stock
equal in value to five times one-half of the non-employee director
annual retainer (i.e., 5 X $75,000). Shares counted toward
ownership include shares beneficially owned directly or indirectly
(other than shares which might be acquired by exercise of an
option or unvested restricted stock) and DSUs credited to the
non-employee director.
Pier 1 Imports’ board of directors also has adopted stock
ownership guidelines for officers of Pier 1 Imports and its
subsidiaries. These guidelines state that the following targeted
ownership level of shares of Pier 1 Imports common stock,
expressed as a number of shares of Pier 1 Imports common stock
equal in value to a multiple of base salary, should be acquired
within five years of March 1, 2010, or election as an officer of Pier
1 Imports or any of its subsidiaries if such election is later than
March 1, 2010:
Chief Executive Officer 6 times base salary
Senior Executive Vice President 3 times base salary
Executive Vice President 2.5 times base salary
Senior Vice President 2 times base salary
Vice President 1 times base salary
Shares counted toward ownership include shares beneficially
owned directly or indirectly (other than shares which might be
acquired by exercise of an option, or unvested restricted stock),
and any deferred stock units.
Pier 1 Imports’ Policy on Section 162(m)
Pier 1 Imports considers the effect of limitations on deductibility of
compensation for federal income tax purposes. Section 162(m) of
the Internal Revenue Code of 1986 generally denies public
companies like Pier 1 Imports a federal income tax deduction for
compensation paid to the chief executive officer or any of the
three other most highly compensated officers (not including the
principal financial officer) that exceeds $1,000,000 for each such
officer during the tax year. Qualifying performance-based
compensation paid pursuant to plans approved by shareholders is
not subject to this deduction limitation. Pier 1 Imports attempts to
preserve the federal tax deductibility of compensation to the
extent reasonably practicable when doing so is consistent with the
executive compensation objectives and goals mentioned above.
While Pier 1 Imports is aware of and understands the requirements
of Section 162(m), it does not believe that compensation decisions
should be based solely upon the amount of compensation that is
deductible for federal income tax purposes. Pier 1 Imports may
approve elements of compensation for certain officers that are not
fully deductible by Pier 1 Imports. For fiscal 2016, the only officer
who received compensation that was not fully deductible was
Mr. Smith.
PIER 1 IMPORTS, INC. | 2016 Proxy Statement 33