Dollar General 2006 Annual Report Download - page 115

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Where does the Committee target NEO compensation relative to the competitive market?
The Committee believes that the median of the competitive market is the appropriate
target for an NEO’ s total compensation. However, the target for each of the components of
compensation relative to the competitive market varies.
In determining each NEO’ s specific compensation, the Committee starts with the
competitive median. The Committee then considers any unique job responsibilities of any of our
NEOs, the importance of that role to Dollar General, and our specialized niche in the retail
sector. The Committee, working with Hewitt, tries to fairly account for these unique
circumstances not reflected in the market benchmarking data.
The Committee then adjusts that compensation element upward or downward based on a
variety of factors, including the NEO’ s prior experience, length of service, compensation history
and performance, and the relation of the NEO’ s compensation to other executives and NEOs.
Further, competition for talent of a specific NEO position may occasionally require total
compensation, or any component of total compensation, to vary from the target.
Does management determine or recommend the amount or form of executive or director
compensation?
As discussed above, the Committee retains sole authority to determine executive officer
compensation (other than the CEO’ s compensation which is approved by the independent
directors of the Board upon the Committee’ s recommendation). The Committee also
recommends director compensation to the Board. The Committee does, however, generally
request that management assist Hewitt Associates in gathering and preliminarily analyzing
relevant competitive data and identifying and preliminarily evaluating various compensation
alternatives. The Committee also requests that management provide various coordination and
administrative services, such as preparing the agenda, scheduling the meetings and distributing
meeting materials. In addition, the EVP of Human Resources normally meets with the
Committee chairperson prior to each meeting to discuss the agenda and meeting materials.
The EVP and VP of Human Resources regularly attend and participate in the Committee
meetings and the CEO attends part of most meetings. Other Dollar General employees also may
attend these meetings, typically to make a special presentation, record the meeting minutes or
provide advice regarding legal requirements or implications. None of these officers or
employees attend the Committee’ s private sessions or the Committee’ s private session with
Hewitt (unless the Committee requests a joint private session with Hewitt and select members of
management).
The CEO participates fully with the Committee in assessing the performance of the
executive officers and in making recommendations on the level of compensation for each pay
component. However, the CEO is not present for any discussions concerning his own
compensation.
While the Committee welcomes and values the input of Dollar General employees, all
decisions are made exclusively by the Committee members and with the sole goal of managing
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