Pier 1 2010 Annual Report Download - page 127

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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 state that the board of directors believes that each non-employee director should acquire
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 shares beneficially owned directly or indirectly and DSU’s credited to the
non-employee director. Pier 1 Imports’ board of directors, upon the recommendation of the compensation
committee, has approved, beginning with fiscal 2011, stock ownership 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 three other most
highly compensated officers (not including the principal financial officer) 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 2010, the only officer
who received compensation that was not fully deductible was Mr. Smith.
Compensation Risk
Although the majority of potential compensation provided to our executive officers is performance-based, we
do not believe that Pier 1 Imports’ compensation policies, principles, objectives and practices are structured to
promote inappropriate risk taking by our executives. We believe that the focus of Pier 1 Imports’ overall
compensation program encourages management to take a balanced approach that focuses on returning the company
to profitability.
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