This excerpt taken from the DLTR DEF 14A filed May 9, 2005.
Report of the Compensation Committee
Our policy is to offer a competitive total compensation package to attract and retain key personnel. We encourage broad-based employee ownership of Dollar Tree stock through the Employee Stock Purchase Plan. We also grant stock options to employees at many levels within the company, aligning the financial interests of our employees with those of our stockholders.
The compensation of our executive officers typically consists of:
The Compensation Committee annually reviews and approves individual executive officers' base salaries. In determining salary levels, the Committee takes into account the company's operating performance, the skills, experience and responsibilities of the executives, as well as the salary practices of comparable retail companies.
The Compensation Committee also reviews and approves the annual incentive compensation of the company's executive officers. These incentive bonuses are currently tied to the attainment of both the company's annual earnings per share target and clearly defined individual goals. The bonuses are expressed as a percentage of base salary. The committee believes they are competitive when compared to the retail industry.
Officers and non-officers are granted stock options, typically on an annual basis, which the Compensation Committee approves. The exercise price is the fair market value per share of Common Stock on the grant date. The fair market value is the last per share sale price of the common stock reported on the NASDAQ Stock Market on the grant date. Options granted to executive officers vest over three to five years and may not be exercised during the first year of the grant. When determining the number of options to grant, the Compensation Committee takes into account the base salary, level of responsibility and individual performance of the executive, and stock compensation practices of comparable retail companies.
The Compensation Committee reviews and approves the compensation of Dollar Tree's Chief Executive Officer. Bob Sasser was elected to the position of President and Chief Executive Officer at the beginning of 2004; his base salary was increased to $650,000 at that time. In addition, the committee established certain operational and managerial goals for Mr. Sasser for the fiscal year ending January 29, 2005. In recognition of his achievement of these goals and the company's performance relative to established quantitative and qualitative targets, Mr. Sasser received a bonus of $201,043 under the Annual Management Incentive Compensation Program. In fiscal 2004, the Committee granted him the option to purchase 60,000 shares of common stock under the 2003 Equity Incentive Plan, taking into account the same considerations as discussed under "Compensation Policy." Last year, the shareholders of the company approved the 2004 Executive Officer Equity Plan and the 2004 Executive Officer Cash Bonus Plan, under which committee may make future grants to the Chief Executive Officer and certain selected other executive officers.
Macon F. Brock was Chief Executive Officer until December 31, 2003, and continues as Chairman of the Board and a key employee whose responsibilities include long-term and strategic planning. For fiscal 2004, Mr. Brock's base salary was $400,000. At the beginning of the fiscal year, the Compensation Committee established certain operational and managerial goals for Mr. Brock. In recognition of his achievement of these goals and the company's performance in 2004, Mr. Brock received a bonus of $128,219 under the Annual Management Incentive Compensation Program. In fiscal 2004, the committee granted him the option to purchase 40,000 shares of common stock under the 2003 Equity Incentive Plan.
Section 162(m) of the Internal Revenue Code imposes a limitation on the deductibility of non-performance-based compensation in excess of $1 million paid to executive officers, unless certain requirements are met. In general, the Compensation Committee strives to manage our executive compensation program to preserve federal income tax deductions. However, our policies do not restrict the committee from exercising discretion in approving compensation packages even though that flexibility may result in certain non-deductible compensation expenses. The 2004 Executive Officer Equity Plan and the 2004 Executive Officer Cash Bonus Plan contain provisions allowing performance-based awards that are exempt from the Section 162(m) limitation on deductibility.
SUBMITTED BY THE COMPENSATION COMMITTEE