Pier 1 2011 Annual Report Download - page 122

award bonuses which have been earned but not paid because the entire performance period has not ended, or (2) a
severance amount equal to one full year of Mr. Smith’s then-existing base salary, and any and all long-term
incentive cash award bonuses which have been earned but not paid because the entire performance period has not
ended. Upon a non-renewal of the employment agreement by Pier 1 Imports, Mr. Smith will be paid the amount
stated in (2) above, and any and all of Mr. Smith’s outstanding restricted stock that has been granted and has not
vested will vest.
Compensation Determinations and Role of Executive Officers
Fiscal year base pay, short-term incentive and long-term incentive compensation recommendations for the
named executive officers were presented to the compensation committee at their meetings in February and March of
2010. The presentation included recommendations of Pier 1 Imports’ chief executive officer and human resources
compensation group on those elements of compensation, plus recommended plan design changes, and a summary of
all short- and long-term incentive awards to eligible levels of management. From time to time, these types of
presentations may include survey data from a peer group of retail companies for the compensation committee’s
consideration. That data may include studies and recommendations from independent outside consultants.
Generally, the compensation committee approves the fiscal year compensation in March (which is the first fiscal
month of the fiscal year) of each year with an effective date in April. Implementation of short- and long-term
incentive compensation for the year occurs after compensation committee and board approval.
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.
Also, the Pier 1 Imports’ board of directors has adopted voluntary stock ownership guidelines for officers of
Pier 1 Imports and its affiliates. These guidelines state that the following level of shares of Pier 1 Imports’ common
stock should be acquired within five years of March 1, 2010 or election as an officer of Pier 1 Imports or any of its
affiliates if such election is later than March 1, 2010:
Chief Executive Officer 500,000 shares
Executive Vice President 100,000 shares
Senior Vice President 75,000 shares
Vice President 30,000 shares
Shares counted toward ownership include shares beneficially owned directly or indirectly.
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 objectives and goals mentioned above (see PROPOSAL NO. 2 above under the caption “Items of
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