Pier 1 2009 Annual Report Download - page 137

EXECUTIVE COMPENSATION
Compensation Committee Report
The compensation committee has reviewed and discussed with management the Compensation
Discussion and Analysis below. Based on the review and discussion, the compensation committee has
recommended to the board of directors that the Compensation Discussion and Analysis be included in
Pier 1 Imports’ proxy statement.
COMPENSATION COMMITTEE
John H. Burgoyne, Chairman
Robert B. Holland, III
Karen W. Katz
Compensation Discussion and Analysis
The purpose of this Compensation Discussion and Analysis disclosure is to provide material
information about Pier 1 Imports’ compensation objectives and policies for its named executive officers
for fiscal 2009 and to put into perspective the tabular disclosures and related narratives that follow it.
Compensation Policies, Principles, and Objectives
Pier 1 Imports has established business priorities as part of our ongoing strategy to return our
business to profitability. Pier 1 Imports’ success in effectively and efficiently executing these business
priorities depends, in large part, on being able to successfully attract, motivate and retain a qualified
management team and employees. Sourcing qualified candidates to fill important positions within
Pier 1 Imports, especially executive management, in the highly competitive retail environment is
challenging, especially when coupled with our ongoing turnaround efforts. Accordingly, Pier 1 Imports’
overall compensation philosophy is that our executive compensation plan should be structured to attract
and retain highly skilled and motivated individuals who will lead Pier 1 Imports to successful
performance that is consistent with shareholders’ expectations. We accomplish this by creating total
compensation packages which are competitive in the retail industry, fair and equitable among the
executives, and which provide strong incentives for the long-term success and performance of Pier 1
Imports. Additionally, Pier 1 Imports provides both short-term and long-term incentives to its
executives for the effective management of major functions, teamwork, and effective expense control.
Success on these fronts leads to the overall success of Pier 1 Imports. Pier 1 Imports believes that as an
executive’s level of responsibility increases, a greater portion of that executive’s potential total
compensation should come from performance-based plans. This aligns management’s interests with
shareholders’ interests as the executive’s potential total compensation will only increase when Pier 1
Imports’ performance increases.
Putting this philosophy into operation results in a total compensation package for Pier 1 Imports’
executive officers approximately equal to the 50th percentile of Pier 1 Imports’ peer group when Pier 1
Imports achieves planned financial goals. Total compensation packages are designed to provide a
75th percentile opportunity when Pier 1 Imports’ results significantly exceed planned financial goals.
For fiscal 2009, Pier 1 Imports used a group of peer companies to benchmark executive
perquisites, the base salary, short-term incentive and long-term incentive elements of total
compensation and non-employee director compensation. That group included Bed Bath & Beyond Inc.,
Blockbuster Inc., Borders Group, Inc., Charming Shoppes, Inc., Cost Plus, Inc., Eddie Bauer
Holdings, Inc., Jo-Ann Stores, Inc., Kirkland’s, Inc., Liz Claiborne Inc., PetSmart, Inc., Restoration
Hardware, Inc., Ross Stores, Inc., Stein Mart, Inc., Tuesday Morning Corporation, Williams-
Sonoma, Inc., and Zale Corporation. Data for these companies was provided by Towers, Perrin,
Forster & Crosby, Inc., the executive compensation consultant to the compensation committee.
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