Pier 1 2012 Annual Report Download - page 116

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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 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 (other than shares which
might be acquired by exercise of an option, or unvested restricted stock) 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 subsidiaries. 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 subsidiaries 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 (other than shares which
might be acquired by exercise of an option, or unvested restricted stock), and any deferred stock units.
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, from trading in options on a Pier 1 Imports security,
including calls and puts, or from engaging in forms of hedging or monetization transactions, such as equity swaps,
exchange funds, collars or variable forwards, with respect to a Pier 1 Imports security.
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. 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 2012, the only officer
who received compensation that was not fully deductible was Mr. Smith.
Compensation Risk
Although the majority of potential maximum compensation 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 increasing and
sustaining Pier 1 Imports’ profitability.
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