Neiman Marcus 2008 Annual Report Download - page 57

Table of Contents
ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis is designed to provide an understanding of our compensation philosophy, core
principles and arrangements that are applicable to the executive officers identified in the Summary Compensation Table on page 60
(referred to as the named executive officers).
Compensation Philosophy and Objectives. We are a premier luxury retailer that has been in business for over a century. Our
continued success depends on the skills of talented leaders who are dedicated to achieving solid financial performance, providing
outstanding service to customers, and managing the Company's assets wisely. Our compensation program is designed to meet the
following objectives:
— Recruit and retain executives who possess the exceptional ability, experience, and vision to sustain and promote our
preeminence in the marketplace.
— Encourage and reward the achievement of our short- and long-term goals and operating plans.
— Increase customer satisfaction, improve customer service, provide our customers with the high-end luxury merchandise they
have come to expect, and increase the amount of business our customers do with us.
— Align the interests of our executives with the financial and strategic objectives of our equity investors.
— Provide total compensation opportunities that meet the expectations of a highly skilled executive team, are aligned and
consistent with our fundamental performance and are competitive with the compensation practices and levels offered by
companies with whom we compete for talent.
Individual Compensation Components
Base Salary. Base salary is intended to provide a base level of compensation commensurate with an executive's job title,
role, tenure, and experience. We utilize base salary as a building block of our compensation program, establishing a salary range for
particular positions based on survey data and job responsibilities. Being competitive in base salary is a minimum requirement to
recruit and retain skilled executives. Specifically, base salary levels of the named executive officers are determined based on a
combination of factors, including our compensation philosophy, market compensation data, competition for key executive talent, the
named executive officer's experience, leadership, achievement of specified business objectives, individual performance, our overall
budget for merit increases, and attainment of our financial goals. Salaries are reviewed before the end of each fiscal year as part of our
performance and compensation review process as well as at other times to recognize a promotion or change in job responsibilities.
Merit increases are usually awarded to the named executive officers in the same percentage range as all employees and are based on
overall performance and competitive market data except in those situations where individual performance and other factors justify
awarding increases above or below this range. Merit increases typically range between two and eight percent. As a result of overall
company performance in fiscal year 2009, the Company implemented a broad salary decrease program that also applied to the named
executive officers. See discussion on "Base Salary" on page 55 of this section.
In addition, Mr. Tansky and Ms. Katz have employment agreements, described in more detail below, that set a minimum
salary upon execution of the agreement.
Annual Bonus. Annual bonus incentives keyed to short-term objectives form the second building block of our compensation
program and are designed to provide incentives to achieve certain financial goals of the Company and personal objectives. These
financial goals, which are used to determine annual bonus incentives for all employees, emphasize profitability and asset
management. The Compensation Committee believes that a significant portion of annual cash compensation for the named executive
officers should be at risk and tied to our operational and financial results. "Pay for performance" for the named executive officers has
been significantly enhanced in recent years by putting a larger percentage of their potential compensation at risk in the annual bonus
incentive program.
All named executive officers are eligible to be considered for annual bonus incentives. Threshold, target, and maximum
annual performance incentives, stated as a percentage of base salary, are established for each of the named executive officers at the
beginning of each fiscal year. The objectives set for Mr. Tansky and other senior officers with broad corporate responsibilities are
based on financial results of the overall company as well as individual performance objectives.
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