Pier 1 2008 Annual Report Download - page 91

Compensation Committee. The compensation committee oversees Pier 1 Imports’ administration of base
pay, short-term and long-term incentive compensation plans (including equity-based plans), perquisites, and
retirement plans for Pier 1 Imports’ executive officers. The committee has the authority to review and approve
corporate goals and objectives relevant to executive officer compensation programs, evaluate the performance
of executive officers in light of those goals and objectives, evaluate overall company performance and relative
shareholder return, and make recommendations to the board of directors on the establishment and amendment
of compensation programs for executive officers.
The compensation committee may, at any time, form and delegate authority to subcommittees of the
compensation committee with responsibility for establishing corporate goals and objectives relevant to
executive officer compensation programs and the design and administration of all elements of Pier 1 Imports’
compensation program. The committee may retain and/or terminate outside compensation consulting firms to
assist in the evaluation of executive officer compensation. The committee also may recommend to the board of
directors, at least every other year, compensation for service to Pier 1 Imports as a member of the board of
directors. The committee has the authority to obtain advice and assistance from internal or external legal,
accounting, and other advisors.
The compensation committee and board of directors believe that attracting, retaining and motivating Pier 1
Imports’ employees, and particularly Pier 1 Imports’ executive management, are essential to Pier 1 Imports’
performance and enhancing shareholder value. The committee will continue to administer and develop Pier 1
Imports’ compensation programs in a manner designed to achieve these objectives. The committee also
believes that the total compensation opportunity provided for the executive officers must be consistent with
compensation of comparable peer group companies and in the Dallas/Fort Worth labor market.
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 Imports’ chief executive officer, human resources compensa-
tion 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 may also, from time to time,
include survey data from a peer group of retail companies for the compensation committee’s consideration.
That data may include studies and recommendations from outside consultants. Generally, the compensation
committee and board of directors consider approval of the fiscal year compensation in March (the first month
of the fiscal year) of each year with a targeted effective date in April. Implementation of any equity grant
portion of the compensation for the year occurs after board of directors and compensation committee approval.
Pier 1 Imports’ management, from time to time, retains outside consultants for assistance and guidance in the
formulation of new compensation programs and the modification of existing compensation programs. In fiscal
2008, Pier 1 Imports retained Hewitt Associates LLC to provide management with market data for base pay
and short-term and long-term incentive comparisons from a peer group of retail companies. Market data
utilized for compensation decisions was adjusted by Hewitt to account for size differences among the
comparable companies through the use of regression analysis. Hewitt research, surveys and recommendations
were included in matters presented to the compensation committee through August 2007.
In August 2007, the compensation committee began the process of selecting a new executive compensa-
tion consultant. The committee interviewed three consulting firms and selected Towers, Perrin, Forster &
Crosby, Inc. In its role as committee consultant, Towers Perrin reports directly to and is accountable to the
committee, which has the authority to hire, retain, and dismiss its advisor. Towers Perrin recommended a new
peer group of companies for benchmarking executive compensation and pay to non-employee directors. The
new peer group represents a select group of specialty retailers, all of which are publicly traded. The change in
peer groups recommended by Towers Perrin was accepted by the committee because it was believed that the
previous peer group included several large retailers whose operations were not a relevant match to Pier 1
Imports’ scope of operations. Going forward Towers Perrin will provide consulting on matters similar to what
has been provided to the committee in prior years.
Executive Committee. The executive committee directs and manages Pier 1 Imports’ business and affairs
in the intervals between board of directors meetings. In doing so, the committee has all of the powers and
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