Pier 1 2009 Annual Report Download - page 143

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long-term incentive compensation for the year occurred after compensation committee and board of
directors approval.
Effects of Market Conditions on Compensation
The global financial and credit crisis has presented challenges for many companies, including
Pier 1 Imports. Our compensation committee has frozen fiscal 2010 salaries at fiscal 2009 levels for
executive officers. Additionally, the committee did not authorize long-term incentive awards of equity at
the beginning of fiscal 2010. Although the majority of potential compensation provided to our executive
officers is performance-based, we do not believe that it is structured to promote inappropriate risk
taking by our executives. We believe that the focus of Pier 1 Imports’ overall compensation philosophy
encourages management to take a balanced approach that focuses on returning the company to
profitability.
Pier 1 Imports’ Policy on Share Ownership
The Pier 1 Imports’ board of directors has adopted voluntary stock ownership guidelines for its
non-employee directors. These guidelines include acquiring ownership of 50,000 or more shares of
Pier 1 Imports’ common stock within five years of becoming a director. Shares counted toward
ownership include open market purchases, beneficial ownership, exercise of stock options, DSU’s, and
lapse of restrictions on restricted stock. Pier 1 Imports does not have equity or other security ownership
requirements or guidelines for its executive officers. Pier 1 Imports has a written insider trading policy
that among other things prohibits directors, officers and employees from selling short a Pier 1 Imports
security, or trading in options on a Pier 1 Imports security, including calls and puts.
Pier 1 Imports’ Policy on Section 162(m)
Pier 1 Imports considers the effect of limitations on deductibility of compensation for federal
income tax purposes. Section 162(m) of the Internal Revenue Code generally denies public companies
like Pier 1 Imports a federal income tax deduction for compensation paid to the chief executive officer
or any of the four other most highly compensated officers that exceeds $1,000,000 for each such 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 Imports 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 Imports 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.
Pier 1 Imports may approve elements of compensation for certain officers that are not fully deductible
by Pier 1 Imports. For fiscal 2009, the only officer who received compensation that was not fully
deductible was Mr. Smith.
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