Pier 1 2013 Annual Report Download - page 122

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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 2013, the only officer
who received compensation that was not fully deductible was Mr. Smith.
Compensation Risk
Pier 1 Imports does not believe that its compensation policies, principles, objectives and practices are
structured to promote inappropriate risk taking by its executives nor inappropriate risk taking by its employees
whose behavior would be most affected by performance-based incentives. Pier 1 Imports believes that the focus of
its overall compensation program encourages its employees to take a balanced approach that focuses on increasing
and sustaining Pier 1 Imports’ profitability.
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