Pier 1 2007 Annual Report Download - page 112

In addition, pursuant to the employment agreement, Mr. Smith:
• received $500,000 as reimbursement for his lost benefits under the long-range performance incentive
plan of his former employer;
• will be able to participate in Pier 1’s welfare and fringe benefit plans under which Pier 1’s senior
executives are currently entitled to participate and receive benefits;
• will be able to participate in Pier 1’s Supplemental Retirement Plan at the same level as his accrued
benefits at present value under the supplemental executive retirement plan of his former employer, or
receive from Pier 1 replacement of those benefits; and
• will receive the perquisites described above for Pier 1’s executive officers plus an allowance of
$125,000 for moving, relocation and related expenses, including temporary housing, short-term automo-
bile rental or lease expenses and legal fees. In addition, Pier 1 paid all travel expenses for Mr. Smith
and his spouse from February 19, 2007 through May 19, 2007 for travel between Boston and
Fort Worth.
The employment agreement contains non-solicitation and non-competition agreements binding Mr. Smith
for one year following termination of employment.
Role of Executive Officers in Determining Compensation
Base pay, short-term incentive and long-term incentive compensation recommendations for the named
executive officers are presented to the compensation committee at their meeting in March of each year. The
presentation includes recommendations of Pier 1’s chief executive officer, human resources compensation
group, or both, on those elements of compensation, plus recommended plan design changes, if any, and a
summary of all awards to all eligible levels of management. That presentation also, from time to time, may
include survey data from a peer group of retail companies for the compensation committee’s consideration.
That data may include studies and recommendations from independent outside consultants. Generally, the
compensation committee and board approve the fiscal year compensation in March of each year with an
effective date in April. Implementation of the equity grant portion of the compensation for the year occurs
after compensation committee and board approval.
Pier 1’s Policy on Share Ownership
Pier 1 does not have equity or other security ownership requirements or guidelines. Pier 1 has a written
insider trading policy that among other things prohibits directors, officers and employees from selling short a
Pier 1 security, or trading in options on a Pier 1 security, including calls and puts.
Pier 1’s Policy on Section 162(m)
Pier 1 considers the effect of limitations on deductibility of compensation for federal income tax
purposes. Section 162(m) of the Internal Revenue Code generally prohibits public companies like Pier 1 from
deducting from corporate income all compensation paid to the chief executive officer or any of the four other
most highly compensated officers that exceeds $1,000,000 for each 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 attempts to preserve the federal tax deductibility of compensation to the extent
reasonably practicable when doing so is consistent with the executive compensation objective and goals
mentioned above. While Pier 1 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. Accordingly, Pier 1 reserves the right to approve elements of
compensation for certain officers that are not fully deductible. For fiscal 2007, the only officer who received
compensation that was not fully deductible was Mr. Girouard.
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