Dollar General 2006 Annual Report Download - page 118

• Executive Vice President, Human Resources, Challis M. Lowe: The Committee
reviewed with Mr. Perdue the objectives for Ms. Lowe, which included recruiting a
significant number of new executives and driving more analytical rigor in the human
resources group in its support of the Committee. The Committee was satisfied with
Mr. Perdue’ s evaluation of Ms. Lowe’ s performance, deeming her performance to be
satisfactory against her previously established goals and strategic initiatives and, in
accordance with base salary and short-term incentive policies, Ms. Lowe was eligible
in 2006 for both a base salary increase and participation in the short-term incentive
plan to the extent that we achieved our financial goals. The Committee awarded Ms.
Lowe a 9.3% base salary increase, raising her base salary from $375,000 to $410,000
effective April 1, 2006. The Committee made this decision as part of the normal
merit review process primarily based on a review of her performance versus
previously established goals and her impact on the organization. The Committee also
noted that the base salary increase better aligned her salary with other NEOs and the
competitive market for her position.
How does the short-term incentive plan work?
Our short-term incentive plan, called Teamshare, was established under the shareholder-
approved Annual Incentive Plan. Payouts are designed to be deductible under Section 162(m) of
the Internal Revenue Code.
The Committee believes the Teamshare plan serves to motivate NEOs and all participants
to achieve certain financial goals that are established by the Committee at the start of the fiscal
year. As with base salary increases discussed above, our NEOs are not eligible to receive a
Teamshare payout unless they perform satisfactorily against their individual performance goals,
even if our financial goals are attained. Accordingly, the Teamshare plan fulfills an important
part of our pay for performance philosophy, while at the same time aligning the interests of our
NEOs with those of our shareholders. It also provides compensation opportunities for our NEOs
that are consistent with the compensation opportunities prevalent in the market comparator group
and general industry, thus helping to meet the recruiting and retention objectives of our
compensation philosophy discussed above.
Teamshare authorizes the payment of cash bonuses based on our actual performance
measured against established business and/or financial performance measures. Within 90 days of
the start of each fiscal year, the Committee determines the employees who will be participants in
Teamshare and the performance goal or goals applicable to each chosen performance measure,
the relative weight of each performance measure if more than one is selected, and each
participant’ s target bonus percentage. No participant can receive a bonus under the plan in excess
of $2.5 million for any fiscal year.
Generally at its March Committee meeting, the Committee determines whether and to
what extent the performance goals have been satisfied for the prior year. No bonus can be paid
under the plan unless and until the Committee certifies in writing that the previously established
performance goals have been satisfied. The Committee may reduce or eliminate any bonus in its
discretion despite achievement of the performance goal or goals, but the Committee may not
increase the amount of bonus payable to an NEO under Teamshare. The plan does not limit the
116