Pier 1 2010 Annual Report Download - page 118

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Mr. Liu has presented the proposal and supporting statement below, and we are presenting the proposal and
supporting statement as they were submitted to us. While we take issue with a number of the statements contained
in the proposal and the supporting statement, we have limited our response to the most important points and have
not attempted to address all the statements with which we disagree. The proposal is substantially similar to the
proposals that Mr. Liu’s predecessor submitted for consideration at the last three annual meetings of Pier 1 Imports.
On each prior occasion, the shareholders of Pier 1 Imports rejected and did not approve the substantially similar
proposal.
If properly presented at the meeting, the affirmative vote of a majority of the shares of common stock present
in person or represented by proxy at the annual meeting and entitled to vote on this proposal is required for approval
of the proposal. Abstentions will be counted as represented and entitled to vote on this proposal and will have the
effect of a vote “AGAINST” the proposal. Broker non-votes will not be considered entitled to vote on this proposal
and will not be counted in determining the number of shares necessary for approval of the proposal.
The board of directors unanimously recommends a vote “AGAINST” this proposal.
Shareholder Proposal:
Resolved: That the shareholders of Pier 1 Imports, Inc. (the “Company”) request that the Board of Director’s
Executive Compensation Committee establish a pay-for-superior-performance standard in the Company’s executive
compensation plan for senior executives (“Plan”), by incorporating the following principles into the Plan:
1. The annual incentive or bonus component of the Plan should utilize defined financial performance criteria
that can be benchmarked against a disclosed peer group of companies, and provide that an annual bonus is
awarded only when the Company’s performance exceeds its peers’ median or mean performance on the
selected financial criteria;
2. The long-term compensation component of the Plan should utilize defined performance criteria that can be
benchmarked against a disclosed peer group of companies. Options, restricted shares, or other equity or
non-equity compensation used in the Plan should be structured so that compensation is received only when
the Company’s performance exceeds its peers’ median or mean performance on the selected performance
criteria; and
3. Plan disclosure should be sufficient to allow shareholders to determine and monitor the pay and
performance correlation established in the Plan.
Supporting Statement: We feel it is imperative that compensation plans for senior executives be designed and
implemented to promote long-term corporate value. A critical design feature of a well-conceived executive
compensation plan is a close correlation between the level of pay and the level of corporate performance relative to
industry peers. We believe the failure to tie executive compensation to superior corporate performance; that is,
performance exceeding peer group performance, has fueled the escalation of executive compensation and detracted
from the goal of enhancing long-term corporate value.
We believe that common compensation practices have contributed to excessive executive compensation.
Compensation committees typically target senior executive total compensation at the median level of a selected peer
group, then they design any annual and long-term incentive plan performance criteria and benchmarks to deliver a
significant portion of the total compensation target regardless of the company’s performance relative to its peers.
High total compensation targets combined with less than rigorous performance benchmarks yield a pattern of
superior-pay-for-average-performance. The problem is exacerbated when companies include annual bonus
payments among earnings used to calculate supplemental executive retirement plan (SERP) benefit levels,
guaranteeing excessive levels of lifetime income through inflated pension payments.
We believe the Company’s Plan fails to promote the pay-for-superior-performance principle. Our Proposal
offers a straightforward solution: The Compensation Committee should establish and disclose performance criteria
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