Pier 1 2014 Annual Report Download - page 111

EXECUTIVE COMPENSATION
Data for these companies was provided by Pay Governance LLC, the compensation committee’s independent executive
compensation consultant for fiscal 2014. Pay Governance provided information and consulting to the compensation committee
on a variety of executive compensation issues including base salaries, short-term incentive pay, long-term incentive pay and the
plan design information for short-term (cash) and long-term (equity) incentive programs. Pay Governance also provided data from
the 2012 Towers Watson Retail/Wholesale Survey in order to provide additional information relating to total compensation, cash
compensation and equity trends in the broader retail industry to ensure that Pier 1 Imports maintains competitive compensation
practices and packages across the broader retail group. For fiscal 2014, Pier 1 Imports removed Charming Shoppes, Inc., Cost
Plus, Inc., and The Talbots Inc. from its prior peer group and added Chico’s FAS Inc, Select Comfort Corporation and Stage
Stores Inc. As a part of Pier 1 Imports’ review of peer group compensation practices, effective for fiscal 2015 Dick’s Sporting
Goods, Inc., PetSmart, Inc., RadioShack Corporation, Ross Stores, Inc. and Tuesday Morning Corporation were removed from
the peer group and were replaced with ANN INC., DSW Inc., Haverty Furniture Companies Inc., Restoration Hardware Holdings,
Inc. and The Container Store Group, Inc., whose revenues and operating characteristics are considered by the compensation
committee to be more consistent with Pier 1 Imports.
Advisory Vote on Executive Compensation; Shareholder Engagement Efforts
Pier 1 Imports has determined that its shareholders should vote on a say-on-pay proposal each year, consistent with the
preference expressed by its shareholders at the 2011 annual meeting of shareholders.
Pier 1 Imports conducted an advisory vote on executive compensation at its 2013 annual meeting of shareholders. While this
vote was not binding on Pier 1 Imports, its board of directors or its compensation committee, Pier 1 Imports believes that it is
important for its shareholders to have an opportunity to vote on this proposal on an annual basis as a means to express their
views regarding Pier 1 Imports’ executive compensation philosophy, its compensation policies and programs, and its decisions
regarding executive compensation, all as disclosed in the proxy statement. Pier 1 Imports’ board of directors and its
compensation committee value the opinions of Pier 1 Imports’ shareholders and the compensation committee will consider
shareholder input and will evaluate whether any actions are necessary to address shareholder concerns.
At the 2013 annual meeting of shareholders, approximately 68% of the votes represented at the meeting and entitled to vote on
the advisory vote on executive compensation approved Pier 1 Imports’ NEO compensation as disclosed in the proxy statement.
For the 2011 and 2012 annual meetings of shareholders, approval percentages were 95% and 96%, respectively. While it was
clear that the majority of shareholders supported the executive compensation practices of Pier 1 Imports, the approval
percentage was not as high as it had been in past years. The board of directors and compensation committee were
disappointed by the results of the 2013 advisory vote, particularly in light of the outstanding performance of Pier 1 Imports’
common stock over the same period (one- and three-year TSR of 38% and 273%, respectively).
Given the fiscal 2013 say-on-pay results, the board of directors and management engaged in a series of substantial discussions
and deliberations about Pier 1 Imports’ compensation philosophy and executive compensation practices, exploring further
changes to the program. The board of directors encouraged management to expand its engagement with shareholders to better
understand their views on Pier 1 Imports’ executive compensation practices.
Management reached out to shareholders representing approximately 74% of the shares of Pier 1 Imports’ common stock to
seek their input and feedback on Pier 1 Imports’ executive compensation practices. The outreach efforts led to several
discussions with shareholders. Highlights of those discussions are summarized as follows:
•Shareholders are very interested in Pier 1 Imports’ alignment between executive compensation practices and business results,
expecting above-market pay for above-market performance and similar reductions to pay if Pier 1 Imports does not deliver
business results.
•Shareholders want to see a majority of pay packages based on performance metrics that translate into share price
performance.
•Shareholders prefer more than a single metric for awarding short- and long-term incentives.
•Shareholders are pleased with the recent changes, as noted below, which Pier 1 Imports has taken with respect to its
executive compensation programs.
•Shareholders were appreciative of the 3-year and 5-year TSR of Pier 1 Imports.
PIER 1 IMPORTS, INC. 2014 Proxy Statement 33