Pier 1 2010 Annual Report Download - page 121

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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
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 2010 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, particularly 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 our 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 improves.
Putting this philosophy into operation results in a total compensation package for Pier 1 Imports’ executive
officers that targets the 50th percentile of Pier 1 Imports’ peer group when Pier 1 Imports achieves planned financial
goals. Total compensation packages are designed to provide pay that targets the 75th percentile opportunity when
Pier 1 Imports’ results significantly exceed planned financial goals.
For fiscal 2010, Pier 1 Imports used a group of peer companies to benchmark 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 Watson & Co., the executive compensation consultant to the
compensation committee.
Executive Compensation Components
In addition to base salary, short-term incentives, and long-term incentives, Pier 1 Imports’ compensation
program in fiscal 2010 included retirement plans and a renewal and extension of Mr. Smith’s employment
agreement, which is discussed separately below under the caption “Employment Agreements.”
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