Dollar General 2006 Annual Report Download - page 113

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In April 2004, the Committee selected Hewitt Associates as its compensation consultant.
Hewitt, which was selected by the Committee after a thorough Committee-led interview process
that included other professional compensation consultants, reports directly to the Committee and
has the authority and the ability to contact Committee members directly. Committee members
also may contact Hewitt directly at any time, and the Committee has the opportunity at each
regularly scheduled Committee meeting to meet in private session with Hewitt.
Hewitt also provides consulting services to our human resources group, both with respect
to the work our management does in connection with NEO and director compensation (as
described in greater detail below under “Does management determine or recommend the amount
or form of executive or director compensation?”) and in general employee compensation and
benefits matters. Neither the Committee nor Hewitt believes that providing these services
undermines in any way the independence of the advice or information provided to the
Committee.
In fiscal 2006, the Committee approved a written letter of agreement with Hewitt. This
agreement describes the general terms of Hewitt’s working relationship with management and
the Committee. In particular, Hewitt performs executive compensation services as requested
from time to time by management or the Committee. The agreement sets forth a wide range of
potential work that Hewitt may be requested to perform, including competitive market pay
analysis, support with regard to relevant legal, regulatory and/or accounting considerations
impacting compensation programs, assistance with market data, trends, and competitive
practices, preparation for and attendance at selected management, Committee or Board meetings
and other miscellaneous work as requested.
Does the Committee use market benchmarking data in connection with its decisions
regarding NEO compensation?
Our compensation philosophy recognizes the need to pay compensation that is
competitive with the external talent market for senior executives in order to attract and retain
NEOs who we believe will enhance our overall long-term business results. The Committee relies
heavily on Hewitt Associates to analyze and present this market benchmarking information.
The Committee has determined that the primary talent market for NEO positions is retail
companies with revenues similar to ours. The Committee directs Hewitt to provide
compensation data on all elements of compensation and on total compensation from its
proprietary salary survey database as well as from the proxy statements of a group of 25 selected
retail companies that meet this approximate revenue criteria. We refer to this combined group
throughout this CD&A as the market comparator group. These companies are believed to
compete with Dollar General for NEO level talent and have executive positions that are similar
in breadth, complexity and scope of responsibility to those of our NEOs. The companies
included in this market comparator group in 2006 are AutoZone, Barnes & Noble, BJ’s
Wholesale Club, Circuit City, Dillard’ s, Family Dollar, Foot Locker, Kohl’ s, Limited Brands,
Long Drug Stores, Nordstrom, OfficeMax, Office Depot, RadioShack, Staples, TJX Companies,
J.C. Penney, The Gap, Federated Department Stores, Blockbuster, Big Lots, Ross Stores,
PetSmart, Retail Ventures and Payless ShoeSource. The list of companies in the market
comparator group is reviewed each year by the Committee and changes are made as appropriate.
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