Nordstrom (JWN)

Base Salary

Our Approach and Decisions

Typically, the President and Committee begin their review of base salary for the Named Executive Officers by comparing our pay levels to similar roles in our broad retail peer group. The President provides further input by describing the previous year’s expectations and achievements of each executive, their pay history and pay equity with other internal roles.

The result of the review is that our Named Executive Officers do not necessarily receive increases in base salary every year. When they do, the changes are effective April 1 of the new fiscal year following their Annual Performance Review, which includes a discussion about individual results against defined expectations.

This year, the Committee supported the President’s recommendation to maintain 2007 base salary levels for the Named Executive Officers in fiscal year 2008. While these Officers performed well on an individual basis in fiscal

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year 2007, their total compensation package was within our desired market position. For this reason, the decision was made not to change base salary, but instead to focus on the potential value that these executives might gain through the performance-based bonus and long-term incentives.

Base Salary

Analysis

Each year, the Committee begins its review of base salary for the Named Executive Officers by comparing our pay levels to similar roles in our broad retail peer group. Our President contributes to the discussion by describing the expectations and resulting achievements of each executive throughout the previous fiscal year, and other relevant factors including the executive’s time in the position, pay history and pay equity with other internal positions.

Our Named Executive Officers do not necessarily receive increases in base salary every year. When they do, the changes are effective April 1 of the new fiscal year following their Annual Performance Review, a discussion about individual results against defined expectations.

Decisions

At the recommendation of the President, the Committee approved 2007 base salary increases for the Named Executive Officers, as shown in the following table. The Committee supported the President’s request to maintain his base salary established in fiscal year 2003 and focus instead on the potential value to be gained through the performance-based bonus and long-term incentives that pay solely on performance.

Base salary increases for the Chief Financial Officer and Chief Administrative Officer in 2007 were higher than the average increase of 5.7% for the Executive Management Group based on the executives’ superior performance and the Committee’s desire to improve their market position. Their increases were also higher than the increases these Named Executive Officers received in the previous fiscal year, for the same reasons.

Increases for the President – Merchandising and President – Stores were significantly higher than previous years to recognize their contribution to Company results and improve their position to market. Even with these increases, base salaries for the President – Merchandising and President – Stores are still below competitive levels.

Base Salary

Each year, the Committee begins its review of base salary for the Named Executive Officers and others in the Executive Management Group by identifying pay levels for similar roles in other organizations. Our President contributes to the discussion by describing the expectations and resulting achievements of each executive throughout the fiscal year, and any other relevant factors described in the prior Market Position section (i.e., executive’s time in the position, pay history, pay equity with other internal positions and the extent to which our role matches other companies in the competitive analysis).

Our executives do not necessarily receive increases in base salary every year. When they do, the changes are effective April 1 of the new fiscal year following the Annual Performance Review, a process where management and employees at all levels of the Company meet to discuss expectations and results. Promotional increases for our executives take place when new roles are assumed.

Base Salary Decisions for Fiscal Year 2006

Pay decisions for fiscal year 2006 base salary for the Named Executive Officers are shown on the following table. The Committee supported the President’s request to maintain his base salary at the fiscal year 2005 level and focus instead on the potential value to be gained through the performance-based bonus and long-term incentives that pay solely on performance.

At the recommendation of the President, the Committee approved base salary increases for the Named Executive Officers to achieve these objectives:

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Based on these objectives, base salary increases for the Named Executive Officers were generally higher than the average increase for the Executive Management Group and the base salary increases that the Named Executive Officers received in the previous fiscal year.