UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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The TJX Companies, Inc.

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770 Cochituate Road
Framingham, Massachusetts 01701

 

 

April 28, 2011

 

Dear Stockholder:

 

We cordially invite you to attend our 2011 Annual Meeting on Tuesday, June 14, 2011, at 11:00 a.m. (local time), to be held at our offices, 770 Cochituate Road, Framingham, Massachusetts. Please enter through the Northeast Entrance.

 

The proxy statement accompanying this letter describes the business we will consider at the meeting. Your vote is important regardless of the number of shares you own. Please read the proxy statement and vote your shares. Instructions for Internet and telephone voting are attached to your proxy card. If you prefer, you can vote by mail by completing and signing your proxy card and returning it in the enclosed envelope.

 

We hope that you will be able to join us on June 14th.

 

 

 

Printed on Recycled Paper

The TJX Companies, Inc.

 

 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

June 14, 2011

 

 

 

The Annual Meeting of Stockholders of The TJX Companies, Inc. will be held at our offices, 770 Cochituate Road, Framingham, Massachusetts, on Tuesday, June 14, 2011, at 11:00 a.m. (local time) to vote on:

 

 

Stockholders of record at the close of business on April 18, 2011 are entitled to notice of, and entitled to vote at, the Annual Meeting and any adjournments or postponements thereof.

 

To attend the Annual Meeting, you must demonstrate that you were a TJX stockholder as of the close of business on April 18, 2011, or hold a valid proxy for the Annual Meeting from such a stockholder. If you are not a stockholder of record but hold shares through a broker, trustee or nominee, you will need to bring proof of your beneficial ownership as of April 18, 2011, such as a brokerage account statement showing your ownership on that date or similar evidence of such ownership. All stockholders will need to have their photographs taken and receive visitor badges for building security. Please allow additional time for these procedures.

 

By Order of the Board of Directors

 

Ann McCauley

Secretary

 

Framingham, Massachusetts

April 28, 2011

 

PLEASE VOTE ON THE INTERNET, BY TELEPHONE OR BY MAIL

 

 

The TJX Companies, Inc.

 

 

 

ANNUAL MEETING OF STOCKHOLDERS

 

June 14, 2011

 

PROXY STATEMENT

 

 

 

The Board of Directors of The TJX Companies, Inc., or TJX, is soliciting your proxy for the 2011 Annual Meeting. A majority of the shares outstanding and entitled to vote at the meeting is required for a quorum for the meeting.

 

You may vote on the Internet, using the procedures and instructions described on the proxy card and other enclosures. You may vote by telephone using the toll-free telephone number on the proxy card. Both Internet and telephone voting provide easy-to-follow instructions and have procedures designed to authenticate your identity and permit you to confirm that your voting instructions are accurately reflected. Street name holders may vote by Internet or telephone if their banks or brokers make those methods available, in which case the banks or brokers will enclose the instructions with the proxy statement. All stockholders may vote by signing and returning the enclosed proxy card.

 

You may revoke your proxy at any time before it is voted by voting later by telephone or Internet, returning a later-dated proxy card, or delivering a written revocation to the Secretary of TJX.

 

Stockholders of record at the close of business on April 18, 2011 are entitled to vote at the meeting. Each of the 387,304,668 shares of common stock outstanding on the record date is entitled to one vote.

 

This proxy statement, the proxy card and the Annual Report to Stockholders for our fiscal year ended January 29, 2011 (fiscal 2011) are being first mailed to stockholders on or about the date of the notice of meeting. Our address is 770 Cochituate Road, Framingham, Massachusetts 01701.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting To Be Held on June 14, 2011: This proxy statement and Annual Report and Form 10-K for fiscal 2011 are available at http://bnymellon.mobular.net/bnymellon/tjx.

 

PROPOSAL 1

 

ELECTION OF DIRECTORS

 

We seek nominees with established strong professional reputations, sophistication and experience in the retail and consumer industries. We also seek nominees with experience in substantive areas that are important to our business such as international operations; marketing and brand management; sales, buying and distribution; accounting, finance and capital structure; strategic planning and leadership of complex organizations; human resources and development practices; and strategy and innovation. Our nominees hold or have held senior executive positions in large, complex organizations or in businesses related to important substantive areas, and in these positions have also gained experience in core management skills and substantive areas relevant to our business. Our nominees also have experience serving on boards of directors and board committees of other public companies, and each of our nominees has an understanding of corporate governance practices and trends. In addition, all of our nominees have prior service on our Board, which has provided them with significant exposure to both our business and the industry in which we compete. We believe that all our nominees possess the professional and personal qualifications necessary for board service, and we have highlighted particularly noteworthy attributes for each director in the individual biographies below.

 

The individuals listed below have been nominated and are standing for election at this year’s Annual Meeting. If elected, they will hold office until our 2012 Annual Meeting of Stockholders and until their successors are duly elected and qualified. All of our current directors were elected to the Board by stockholders.

 

Your Board of Directors unanimously recommends that you vote FOR the election of each of the nominees as director.

 

 

José B. Alvarez, 47

Director since 2007

 

Mr. Alvarez has been a member of the faculty of the Harvard Business School since 2009. From August 2008 through December 2008, Mr. Alvarez was the Global Executive Vice President for Business Development for Ahold, a global supermarket retail company. From 2001 to August 2008, he held various executive positions with Stop & Shop/Giant-Landover, Ahold’s U.S. subsidiary, including President and Chief Executive Officer of Stop & Shop/Giant-Landover from 2006 to 2008 and Executive Vice President, Supply Chain and Logistics from 2004 to 2006. Previously, he served in executive positions at Shaw’s Supermarkets, Inc. and began his career at the Jewel Food Stores subsidiary of American Stores Company in 1990. Mr. Alvarez is also a director of United Rentals, Inc. Mr. Alvarez’s long career in retail has given him broad experience in large retail chain management, including store management, supply chain, logistics, distribution and strategy.

 

Alan M. Bennett, 60

Director since 2007

 

Mr. Bennett has been the Chief Executive Officer of H&R Block Inc., a tax services provider since July 2010 and was previously Interim Chief Executive Officer from November 2007 through August 2008. He was Senior Vice President and Chief Financial Officer and a Member of the Office of the Chairman of Aetna, Inc., a diversified healthcare benefits company, from 2001 to 2007, and previously held other senior financial management positions at Aetna after joining in 1995. Mr. Bennett held various senior management roles in finance and sales/marketing at Pirelli Armstrong Tire Corporation, formerly Armstrong Rubber Company, from 1981 to 1995 and began his career with Ernst & Ernst (now Ernst & Young LLP). Mr. Bennett is also a director of Halliburton Company and H&R Block Inc. and was a director of Bausch & Lomb, Inc. from 2004 to 2007. Mr. Bennett’s senior leadership roles in two significant financial businesses provide him with executive experience in managing very large businesses and change management as well as financial expertise including financial management, taxes, accounting, controls, finance and financial reporting.

Bernard Cammarata, 71

Director since 1989

 

Mr. Cammarata has been Chairman of the Board of TJX since 1999. Mr. Cammarata served as Acting Chief Executive Officer of TJX from September 2005 to January 2007. He also led TJX and its former TJX subsidiary and T.J. Maxx Division from the organization of the business in 1976 until 2000, including serving as Chief Executive Officer and President of TJX, Chairman and President of TJX’s T.J. Maxx Division and Chairman of The Marmaxx Group. As the founder of TJX, Mr. Cammarata has participated in the leadership of TJX’s successful strategy and development from the beginning to its current position as the world’s largest off-price retailer and offers deep expertise in all aspects of TJX’s business, including management, operations, marketing, buying, distribution and financial matters.

 

David T. Ching, 58

Director since 2007

 

Mr. Ching has been Senior Vice President and Chief Information Officer for Safeway Inc., a food and drug retailer, since 1994. Previously, Mr. Ching was the General Manager for British American Consulting Group, a software and consulting firm focusing on the distribution and retail industry. He also worked for Lucky Stores Inc., a subsidiary of American Stores Company from 1979 to 1993, including serving as the Senior Vice President of Information Systems. Mr. Ching was a director of Petco Animal Supplies, Inc. from 2005 to 2007. Mr. Ching’s strong technological experience and related management positions in the retail industry provide Mr. Ching expertise including information systems, information security and controls, technology implementation and operation, reporting and distribution in the retail industry.

 

Michael F. Hines, 55

Director since 2007

 

Mr. Hines served as Executive Vice President and Chief Financial Officer of Dick’s Sporting Goods, Inc., a sporting goods retailer, from 1995 to 2007. From 1990 to 1995, he held management positions with Staples, Inc., an office products retailer, most recently as Vice President, Finance. Mr. Hines spent 12 years in public accounting, the last eight years with the accounting firm Deloitte & Touche LLP. Mr. Hines is also a director of GNC Holdings, Inc. and was a director of The Yankee Candle Company, Inc. from 2003 to 2007. Mr. Hines’ experience as a financial executive and certified public accountant provides him with expertise in the retail industry including accounting, controls, financial reporting, tax, finance, risk management and financial management.

 

Amy B. Lane, 58

Director since 2005

 

Ms. Lane was a Managing Director and Group Leader of the Global Retailing Investment Banking Group at Merrill Lynch & Co., Inc., from 1997 until her retirement in 2002. Ms. Lane previously served as a Managing Director at Salomon Brothers, Inc., where she founded and led the retail industry investment banking unit. Ms. Lane was also a director of Borders Group, Inc. from 1995 to 1999 and from 2001 to 2009. Ms. Lane’s experience as the leader of two investment banking practices covering the global retailing industry has given her substantial experience with financial services, capital markets, finance and accounting, capital structure, acquisitions and divestitures in that industry as well as management, leadership and strategy.

 

Carol Meyrowitz, 57

Director since 2006

 

Ms. Meyrowitz has been Chief Executive Officer of TJX since January 2007, a director since September 2006 and was President from October 2005 to January 2011. She served as Senior Executive Vice President of TJX from 2004 until January 2005, Executive Vice President of TJX from 2001 to 2004 and President of The Marmaxx Group from 2001 to January 2005. From January 2005 until October 2005, she was employed in an advisory role for TJX and consulted for Berkshire Partners LLC, a private equity firm. From

1987 to 2001, she held various senior management positions with The Marmaxx Group and with Chadwick’s of Boston and Hit or Miss, former divisions of TJX. Ms. Meyrowitz is also a director of Amscan Holdings, Inc. and Staples, Inc. and was a director of The Yankee Candle Company, Inc. from 2004 to 2007. As Chief Executive Officer of the Company, and through the many other positions Ms. Meyrowitz has held with TJX since joining in 1987, Ms. Meyrowitz has a deep understanding of TJX and broad experience in all aspects of off-price retail, including innovation, strategy, buying, distribution, marketing, real estate, finance and accounting, and international operations.

 

John F. O’Brien, 68

Director since 1996

 

Mr. O’Brien is the retired Chief Executive Officer and President of Allmerica Financial Corporation (now The Hanover Insurance Group, Inc.), an insurance and diversified financial services company, holding those positions from 1995 to 2002. Mr. O’Brien previously held executive positions at Fidelity Investments, an asset management firm, including Group Managing Director of FMR Corporation, Chairman of Institutional Services Company and Chairman of Brokerage Services, Inc. Mr. O’Brien serves as our Lead Director. Mr. O’Brien is also non-executive Chairman and a director of Cabot Corporation, a director of LKQ Corporation and a director of a family of 35 registered investment companies managed by BlackRock, Inc., an investment management advisory firm. Mr. O’Brien has substantial executive experience with two financial services businesses, giving him expertise including general management and oversight with respect to strategy, financial planning, insurance, operations, finance and capital structure.

 

Willow B. Shire, 63

Director since 1995

 

Ms. Shire has been an executive consultant with Orchard Consulting Group since 1994, specializing in leadership development and strategic problem solving. Previously, she was Chairperson for the Computer Systems Public Policy Project within the National Academy of Science. She also held various positions at Digital Equipment Corporation, a computer hardware manufacturer, for 18 years, including Vice President and Officer, Health Industries Business Unit. Ms. Shire was a director of Vitesse Semiconductor Corporation from 2007 to 2009. Through her consulting experience and prior business experience, Ms. Shire brings expertise in leadership development, talent assessment, change management, human resources and development practices, cultural assessment and strategic problem solving.

 

CORPORATE GOVERNANCE

 

Board Independence.  Our Corporate Governance Principles provide that at least two-thirds of the members of our Board will be independent directors. The Board evaluates any relationships of each director and nominee with TJX and makes an affirmative determination whether or not each director and nominee is independent. To assist it in making its independence determination, the Board has adopted categorical standards, which are available on our website at www.tjx.com.

 

As part of the Board’s annual review of director independence, the Board considered the recommendation of our Corporate Governance Committee and reviewed any transactions and relationships between each non-management director or any member of his or her immediate family and TJX. The purpose of this review was to determine whether there were any such relationships or transactions and if so, whether they were inconsistent with a determination that the director was independent. As a result of this review, our Board unanimously determined that nine directors of our 11-member Board (81.8%) are independent, with the independent directors being José B. Alvarez, Alan M. Bennett, David A. Brandon, David T. Ching, Michael F. Hines, Amy B. Lane, John F. O’Brien, Willow B. Shire and Fletcher H. Wiley. Each of these directors met our categorical standards of independence. Bernard Cammarata, as Chairman, and Carol Meyrowitz, as Chief Executive Officer, are employees of TJX. Mr. Brandon and Mr. Wiley are not standing for re-election at the Annual Meeting.

Integrity has been a core tenet of TJX since its inception. We seek to perform with the highest standards of ethical conduct and in compliance with all laws and regulations that relate to our businesses. We have Corporate Governance Principles, a Code of Conduct for our associates, a Code of Ethics for TJX Executives, written charters for our Board committees and a Code of Business Conduct and Ethics for Directors. The current versions of these documents and other items relating to our governance can be found at www.tjx.com.

 

Board’s Role in Risk Oversight.  It is management’s responsibility to manage risk and bring to the Board’s attention risks that are material to TJX. The Board has oversight responsibility for the systems established to report and monitor the most significant risks applicable to TJX. The Board administers its risk oversight role directly and through its committee structure and the committees’ regular reports to the Board at Board meetings. The Board reviews strategic, financial and execution risks and exposures associated with the annual plan and multi-year plans, major litigation and other matters that may present material risk to the Company’s operations, plans, prospects or reputation, acquisitions and divestitures and senior management succession planning. The Audit Committee reviews risks associated with financial and accounting matters, including financial reporting, accounting, disclosure, internal controls over financial reporting, ethics and compliance programs, compliance with orders and data security. The Executive Compensation Committee reviews risks related to executive compensation and the design of compensation programs, plans and arrangements. The Corporate Governance Committee deals with risks related to performance evaluations and management succession (as discussed later in this section). The Finance Committee is responsible for risks related to financing, investment, capital structure, liquidity, and investment performance, asset allocation strategies and funding of our benefit plans.

 

Board Expertise and Diversity.  We seek to have a Board that represents diversity as to experience, gender and ethnicity/race, but we do not have a formal policy with respect to diversity. We also seek a Board that reflects a range of talents, ages, skills, viewpoints, professional experience, educational background and expertise to provide sound and prudent guidance with respect to our operations and interests. All of our directors are financially literate, and two members of our Audit Committee are audit committee financial experts.

 

Board Annual Performance Reviews.  We have a comprehensive review process for evaluating the performance of our Board and our directors. Our Corporate Governance Committee oversees the annual performance evaluation of the entire Board, our Chairman, our Lead Director, each of our committees and its chair, and each of our individual directors.

 

Board Nominees.  The Corporate Governance Committee recommends to the Board individuals as director nominees who, in the opinion of the Corporate Governance Committee, have high personal and professional integrity, who have demonstrated ability, perspective and judgment and who will be effective, in conjunction with the other nominees to and members of the Board, in collectively serving the long-term best interests of our stockholders. In evaluating the suitability of individual Board nominees, the Corporate Governance Committee takes into account many factors, including general understanding of disciplines relevant to the success of a large publicly traded company in today’s business environment, understanding of our business and industry, professional background and leadership experience, experience on the boards of other large publicly traded companies, personal accomplishment, independence and geographic, gender, age, ethnic and racial diversity. The Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of our business and represent stockholder interests through the exercise of sound judgment using its diversity of experience. In addition, the Corporate Governance Committee considers, in light of our business, each director nominee’s experience, qualifications, attributes and skills that are identified in the biographical information contained under “Election of Directors.”

 

The Corporate Governance Committee’s process for identifying and evaluating candidates, including candidates recommended by stockholders, includes actively seeking to identify qualified individuals by various means which may include reviewing lists of possible candidates, such as chief executive officers of public companies or leaders of finance or other industries, considering proposals from sources, such as the Board of Directors, management, employees, stockholders and industry contacts, and engaging an outside search firm.

The Corporate Governance Committee has adopted a policy with respect to submission by stockholders of candidates for director nominees which is available on our website at www.tjx.com. Any stockholder may submit in writing one candidate for consideration for each stockholder meeting at which directors are to be elected by not later than the 120th calendar day before the first anniversary of the date that we released our proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be sent to the Secretary of TJX, c/o Office of the Secretary of The TJX Companies, Inc., 770 Cochituate Road, Framingham, Massachusetts 01701. A recommendation must include specified information about, and consents and agreements of, the candidate. The Corporate Governance Committee evaluates candidates for the position of director recommended by stockholders or others in the same manner. The Corporate Governance Committee will determine whether to interview any candidates and may seek additional information about candidates from third-party sources.

 

Majority Voting.  Our by-laws provide for the election of directors in an uncontested election by a majority of the shares properly cast at the meeting. Our Corporate Governance Principles, available at www.tjx.com, require any nominee for director to provide an irrevocable contingent resignation, effective only if such director fails to receive the requisite majority vote in an uncontested election, and the Board accepts such resignation. Our Corporate Governance Principles provide procedures for the consideration of such resignation by the Board. Within 90 days of the date of the annual meeting of stockholders, the Board, with the recommendation of the Corporate Governance Committee, will act upon such resignation. In making its decision, the Board will consider the best interests of TJX and its stockholders, and take what it deems to be appropriate action. Such action may include accepting or rejecting the resignation or taking further measures to address those concerns that were the basis for the underlying stockholder vote.

 

Board Leadership Structure.  Our Board annually elects a Chairman of the Board of Directors. The Board has chosen to separate the roles of Chairman and Chief Executive Officer. Because our current Chairman, Bernard Cammarata, is not an independent director, consistent with our Corporate Governance Principles, our independent directors have elected a Lead Director, John F. O’Brien. In this role, among other duties, Mr. O’Brien meets at least quarterly with Carol Meyrowitz, our Chief Executive Officer, and with senior officers as necessary, attends regular management business review meetings, schedules meetings of the independent directors, presides at meetings of the Board at which the Chairman is not present, including meetings of the independent directors, serves as a liaison between the independent directors and the Chairman and Company management, approves meeting schedules and agendas, attends the meetings of each Board committee and undertakes other responsibilities designated by the independent directors. The Board believes that the separate roles of Mr. Cammarata, Ms. Meyrowitz and Mr. O’Brien are in the best interests of TJX and its stockholders. Mr. Cammarata has wide-ranging, in-depth knowledge of our business arising from his many years of service to TJX and, as a result, provides effective leadership for the Board and support for Ms. Meyrowitz and other management. The structure permits Ms. Meyrowitz to devote her attention to leading TJX and focus on its business strategy. Mr. O’Brien provides independence in TJX’s Board leadership as provided in the Corporate Governance Principles through his review and approval of meeting agendas, his participation in management business review meetings and his leadership of the independent directors.

 

Attendance.  During fiscal 2011, our Board met ten times. Each director attended at least 75% of all meetings of the Board and committees of which he or she was a member. At each regularly scheduled Board meeting, the independent directors met separately. It is our policy that all nominees and directors standing for re-election are expected to attend the annual meeting of stockholders. All nominees and directors who stood for re-election attended the 2010 Annual Meeting.

 

Board Committees.  The Board of Directors has five standing committees: Audit, Corporate Governance, Executive, Executive Compensation and Finance. Each committee’s charter is available on our website at www.tjx.com.

 

All members of the Audit, Corporate Governance, Finance and Executive Compensation Committees are independent directors. While each committee has designated responsibilities, the committees act on behalf of the entire Board. The committees regularly report on their activities to the entire Board.

The table below provides information about these committees during fiscal 2011:

 

 

 

 

Audit Committee.  The Audit Committee is responsible for the annual appointment of the independent registered public accounting firm and oversight of the financial reporting process. Each member of the Audit Committee is a non-employee director and meets the independence standards adopted by the Board in compliance with New York Stock Exchange listing standards. The Audit Committee operates under the terms of a written charter which is reviewed by members of the committee annually. Specifically, the Audit Committee’s responsibilities include:

 

 

Executive Compensation Committee.  The Executive Compensation Committee, or the ECC, is responsible for overseeing executive compensation and benefits. Each member of the ECC is a non-employee director and meets the independence standards adopted by the Board in compliance with New York Stock Exchange listing standards. The ECC operates under the terms of a written charter which is reviewed by the members of the committee annually. Pursuant to its charter, the ECC may delegate its authority to a subcommittee or to such other person that the ECC determines is appropriate and is permitted by law.

Specifically, the ECC’s responsibilities include:

 

 

The ECC also reviewed our compensation policies and practices for our employees to confirm that they do not give rise to risks which are reasonably likely to have a material adverse effect on the Company.

 

Corporate Governance Committee.  The Corporate Governance Committee is responsible for recommending nominees for directors to the Board and for our corporate governance practices. Each member of the Corporate Governance Committee is a non-employee director and meets the independence standards adopted by the Board in compliance with New York Stock Exchange listing standards. The Corporate Governance Committee operates under the terms of a written charter which is reviewed by the members of the committee annually. Specifically, the Corporate Governance Committee’s responsibilities include:

 

 

Executive Committee.  The Executive Committee meets at such times as it determines to be appropriate and has the authority to act for the Board on specified matters during the intervals between meetings of the Board.

 

Finance Committee.  The Finance Committee is responsible for reviewing and making recommendations to the Board relating to our financial activities and condition. The Finance Committee operates under the terms of a written charter which is reviewed by the members of the committee annually. Specifically, the Finance Committee’s responsibilities include:

 

 

Policies Relating to Directors.  It is our policy that no director shall be nominated who has attained the age of 75 prior to or on the date of his or her election or re-election. Under our Corporate Governance Principles, directors who are CEOs of public companies should not serve on more than two boards of public companies besides their own; no director should serve on more than five boards of public companies; and under our Audit Committee Charter, members of the Audit Committee should not serve on more than two audit committees of other companies. When a director’s principal occupation or business association changes during his or her tenure as a director, our Corporate Governance Principles provide that the director is required to tender his or her resignation from the Board, and the Corporate Governance Committee will recommend to the Board any action to be taken with respect to the resignation.

 

Code of Conduct.  We have a Code of Conduct for our associates designed to ensure that our business is conducted with integrity. Our Code of Conduct covers professional conduct, including employment policies, conflicts of interest, intellectual property and the protection of confidential information, as well as adherence to laws and regulations applicable to the conduct of our business. Information concerning our Code of Conduct is available on our website at www.tjx.com.

 

Code of Ethics for TJX Executives and Code of Business Conduct and Ethics for Directors.  We have a Code of Ethics for TJX Executives governing our Chairman, Chief Executive Officer, President, Chief Financial Officer and other senior operating, financial and legal executives. The Code of Ethics for TJX Executives is designed to ensure integrity in our financial reports and public disclosures. We also have a Code of Business Conduct and Ethics for Directors which promotes honest and ethical conduct, compliance with applicable laws, rules and regulations and the avoidance of conflicts of interest. Both of these codes of conduct are published on our website at www.tjx.com. We intend to disclose any future amendments to, or waivers from, the Code of Ethics for TJX Executives or the Code of Business Conduct and Ethics for Directors within four business days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the Securities and Exchange Commission, or SEC.

 

Stock Ownership Guidelines.  Our Corporate Governance Principles provide that a director is expected to acquire initially at least $10,000 of our common stock outright and to attain stock ownership with a fair market value equal to at least five times the annual retainer paid to the directors within five years of initial election to the Board. Our Chief Executive Officer is expected to attain stock ownership with a fair market value equal to at least five times annual base compensation, and our President and each Senior Executive Vice President is expected to attain stock ownership with a fair market value of at least three times annual base compensation. Such ownership guidelines for our executive officers are reduced by 50% at age 62. Executives are expected to make steady progress toward these ownership guidelines and to attain them within five years from their respective dates of hire for or promotion to the above positions. It is expected that executives who have not yet achieved these guidelines will retain 50% of their shares (on an after-tax basis) resulting from the exercise of stock options and vesting of deferred and restricted stock.

 

Sustainability.  As part of our commitment to corporate responsibility, TJX has long been pursuing solutions to sustainability challenges that both preserve natural resources and improve profitability. We continue to be committed to environmentally sound business practices throughout our operations, including energy and water conservation as well as recycling and waste reduction. We have discussed our efforts with shareholder groups over the years and understand the importance to our business, shareholders, associates, customers and communities of strong, sustainable business practices.

 

Communications with Directors.  Security holders and other interested parties may communicate directly with the Board, the non-management directors or the independent directors as a group, specified individual directors or the Lead Director by writing to such individual or group c/o Office of the Secretary, The TJX Companies, Inc., 770 Cochituate Road, Framingham, Massachusetts 01701. The Secretary will forward such communications to the relevant group or individual at or prior to the next meeting of the Board.

 

Online Availability of Information.  The current versions of our Corporate Governance Principles, Code of Conduct for Associates, Code of Ethics for TJX Executives, Code of Business Conduct and Ethics for Directors, and charters for our Audit, Corporate Governance, Executive, Executive Compensation and Finance Committees are available on our website at www.tjx.com.

Transactions with Related Persons

 

Under the Corporate Governance Committee’s charter, the Committee is responsible for reviewing and approving or ratifying any transaction in which TJX and any of our directors, director nominees, executive officers, 5% stockholders and their immediate family members are participants and in which such persons have a direct or indirect material interest as provided under SEC rules. In the course of reviewing potential related person transactions, the Committee considers the nature of the related person’s interest in the transaction; the presence of standard prices, rates or charges or terms otherwise consistent with arms-length dealings with unrelated third parties; the materiality of the transaction to each party; the reasons for TJX entering into the transaction with the related person; the potential effect of the transaction on the status of a director as an independent, outside or disinterested director or committee member; and any other factors the Committee may deem relevant. Our General Counsel’s office is primarily responsible for the implementation of processes and procedures for screening potential transactions and providing information to the Corporate Governance Committee.

 

Audit Committee Report

 

We operate in accordance with a written charter adopted by the Board and reviewed annually by the Committee. We are responsible for overseeing the quality and integrity of TJX’s accounting, auditing and financial reporting practices. The Audit Committee is composed solely of members who are independent, as defined by the New York Stock Exchange and TJX’s Corporate Governance Principles. Further, the Board has determined that two of our members (Mr. Hines and Ms. Lane) are audit committee financial experts as defined by the rules of the SEC.

 

The Audit Committee met 12 times during fiscal 2011, including four meetings held with TJX’s Chief Financial Officer, Corporate Controller, Corporate Internal Audit and PricewaterhouseCoopers LLP (PwC), TJX’s independent registered public accounting firm, prior to the public release of TJX’s quarterly and annual earnings announcements in order to discuss the financial information contained in the announcements.

 

We took numerous actions to discharge our oversight responsibility with respect to the audit process. We received the written disclosures and the letter from PwC pursuant to Rule 3526, Communication with Audit Committees Concerning Independence, of the Public Company Accounting Oversight Board (“PCAOB”) concerning any relationships between PwC and TJX and the potential effects of any disclosed relationships on PwC’s independence and discussed with PwC its independence. We discussed with management, the internal auditors and PwC, TJX’s internal control over financial reporting and management’s assessment of the effectiveness of internal control over financial reporting and the internal audit function’s organization, responsibilities, budget and staffing. We reviewed with both PwC and our internal auditors their audit plans, audit scope and identification of audit risks.

 

We discussed and reviewed with PwC communications required by the Standards of the PCAOB (United States), as described in PCAOB AU Section 380, “Communication with Audit Committees,” and, with and without management present, discussed and reviewed the results of PwC’s examination of TJX’s financial statements. We also discussed the results of the internal audit examinations with and without management present.

 

The aggregate fees that TJX paid for professional services rendered by PwC for fiscal 2011 and the fiscal year ended January 30, 2010 (fiscal 2010) were:

 

 

We pre-approve all audit services and all permitted non-audit services by PwC, including engagement fees and terms. We have delegated the authority to take such action between meetings to the Audit Committee chair, who reports the decisions made to the full Audit Committee at its next scheduled meeting.

 

Our policies prohibit TJX from engaging PwC to provide any services relating to bookkeeping or other services related to accounting records or financial statements, financial information system design and implementation, appraisal or valuation services, fairness opinions or contribution-in-kind reports, actuarial services, internal audit outsourcing, any management function, legal services or expert services not related to the audit, broker-dealer, investment adviser, or investment banking services or human resource consulting. In addition, we evaluate whether TJX’s use of PwC for permitted non-audit services is compatible with maintaining PwC’s independence. We concluded that PwC’s provision of non-audit services, which we approved in advance, was compatible with their independence.

 

We reviewed the audited financial statements of TJX as of and for fiscal 2011 with management and PwC. Management has the responsibility for the preparation of TJX’s financial statements, and PwC has the responsibility for the audit of those statements.

 

Based on these reviews and discussions with management and PwC, we recommended to the Board that TJX’s audited financial statements be included in its Annual Report on Form 10-K for fiscal 2011 for filing with the SEC. We also have selected PwC as the independent registered public accounting firm for fiscal 2012, subject to ratification by TJX’s stockholders.

 

Audit Committee

 

Michael F. Hines, Chair

José B. Alvarez

David T. Ching

Amy B. Lane

Fletcher H. Wiley

 

Beneficial Ownership

 

The following table shows, as of April 18, 2011, the number of shares of our common stock beneficially owned by each director, each director nominee, each executive officer named in the Summary Compensation Table and all directors and executive officers as a group:

 

 

 

 

As of April 18, 2011, based on information filed with the SEC, persons known by us to beneficially own 5% or more of our outstanding common stock are as follows:

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers to file reports of holdings and transactions in our common stock with the SEC and the New York Stock Exchange. To facilitate compliance, we have undertaken the responsibility to prepare and file these reports on behalf of our officers and directors. Based on our records and other information, all reports were timely filed, except that on April 23, 2010, Mr. Naylor filed a Form 4 two days late relating to the withholding of shares in payment of a tax liability arising from the vesting of shares. The failure to report this transaction on time was inadvertent and was corrected promptly upon discovery.

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Executive Summary

 

Fiscal 2011 was another outstanding year for TJX.  Our Board and ECC looked at these factors, among others, in assessing the performance of our management for fiscal 2011:

 

 

 

 

 

Our executives’ fiscal 2011 compensation reflects our outstanding performance.

 

 

Our compensation program is designed to pay for performance.  Our compensation program for our executives is heavily weighted to incentive compensation that is at risk. Of the four principal elements of our compensation program, only base salary is fixed. The other elements are variable: performance-based awards under our short and long-term cash incentive plans and our performance-based restricted stock are earned based on the achievement of objective metrics, and stock options have value only to the extent the value of our stock increases. This table reflects the correlation between our performance and our CEO’s compensation over the last five fiscal years.

 

 

 

 

Our incentive compensation program is transparent for our associates and has been consistent over many years.  The metrics required to earn incentive awards and performance-based restricted stock are clear, objective and within the control of our executives and other associates. We have used the same metrics — adjusted pre-tax profit — to determine performance under our short and long-term cash incentive plans and

performance-based restricted stock for many years. We use adjusted pre-tax profit as the basis to measure the performance of our associates because it directly relates to the operating performance of our businesses and therefore can be directly influenced by the performance of our associates. We allocate our bonus opportunities between short-term incentives measured against one year of adjusted pre-tax income and long-term incentives measured against three years of cumulative adjusted pre-tax income. As a result, each year’s results form the basis of a one-year incentive and part of three successive three-year awards, providing our associates an incentive to achieve both our short- and long-term goals.

 

Our compensation program aligns our executives and our organization to the same goals as well as to our shareholders’ interests.  The targets in our incentive plans are derived from our Board-approved business plans. Performance for divisional level associates is measured based on targets taken from the divisional business plans, and performance for our executives and other corporate associates is measured against an aggregation of the divisional targets, focusing our executives and our organization on the same objectives throughout the Company. These business plans also form the basis for the projections of performance (which include our adjusted EPS goals) that we give to investors at the beginning of each fiscal year. As a result, our incentive targets drive the performance that we need to achieve our projections and align the interests of our associates and those of our shareholders.

 

We believe that this philosophy has contributed to our strong overall performance over many years in all types of business environments and serves to align management’s interests with those of shareholders. Our total stockholder return significantly exceeded the performance of the general market (S&P 500) and our industry index (Dow Jones U.S. Apparel Retailers Index) over the past three- and five-year fiscal periods.

 

TJX Total Stockholder Return Growth vs.
Market and Retail Indexes

 

 

We maintain shareholder friendly pay practices.

 

 

 

Compensation Program Objectives

 

We have a total compensation approach focused on performance-based incentive compensation that seeks to:

 

 

Elements of Compensation

 

Incentive compensation comprises a substantial portion of each executive’s compensation opportunity. These incentives directly tie the amount of each named executive officer’s incentive compensation to objective performance achieved by TJX and its stock and thereby directly link executive compensation with the interests of our stockholders. The key elements of our compensation program are shown below:

 

 

We allocate our cash bonus opportunities between short-term incentives measured against one year of adjusted pre-tax profit and long-term incentives measured against three years of cumulative adjusted pre-tax profit. As a result, each year’s results form the basis of a one-year incentive and part of three successive three-year awards, providing our associates a financial interest in both our short- and long-term results.

As shown in the following charts, performance-based compensation (equity incentives and short- and long-term cash incentives) constituted a significant portion of our named executive officers’ direct annual compensation at target in fiscal 2011.

 

 

How Compensation Decisions Are Made

 

The Executive Compensation Committee (ECC), an independent committee of our Board of Directors, is responsible for compensation design and for determination of compensation for our executive officers. The ECC has the authority, without Board or management approval, to retain and terminate its compensation consultants and to determine their fees and terms of engagement. The ECC reviews and approves compensation matters at various meetings during the year.

 

The ECC has used the same compensation design for many years: total compensation competitive with our peers, heavily weighted toward objective, performance-based incentives. In determining the overall level of executive compensation and the allocation of its components, the ECC considers various factors. The ECC reviews the performance of TJX as well as the individual performance of the executives, including both quantitative and qualitative performance factors. In setting targets and evaluating performance, the ECC reviews, among other factors, adjusted EPS. The Corporate Governance Committee of the Board provides the ECC with a review of the performance of our CEO for the year, including her achievement of performance objectives set by the Corporate Governance Committee in addition to those provided in our incentive plans, but does not make salary recommendations. Our named executive officers play a limited role in the executive compensation process. Our named executive officers participate in our strategic planning process and recommend to the Board for its review and approval the annual and multi-year business plans for TJX and its divisions. These approved plans are the basis for the short- and long-term incentive performance targets and the restricted stock performance criteria, all of which are approved by the ECC. Additionally, our CEO provides an annual self-assessment and annual performance reviews of the other named executive officers and makes recommendations to the ECC regarding the base salaries and other elements of compensation for those executives. The ECC then considers those performance reviews and recommendations in establishing base salaries, cash incentive awards and equity grants.

 

The ECC also reviews data from compensation consultants to assess the overall competitiveness of our compensation programs as well as of individual compensation. For fiscal 2011 compensation, the ECC reviewed peer group data provided by Pearl Meyer & Partners, LLC (PM&P), its independent compensation consultant, with respect to the named executive officers. The ECC received advice from PM&P on contracts with executives. The ECC may also receive input from PM&P on other matters for which the ECC requests advice.

 

The ECC considers the effects on retention and succession at the executive officer and other management levels when determining the levels and design of compensation. The ECC takes into account contractual obligations, historical compensation practices believed successful and the limitation on income tax deductions imposed by Section 162(m) of the Internal Revenue Code (Section 162(m)). The ECC also considers matters such as recruitment, new hires, promotions, organizational changes, relocations and transitional roles.

The ECC uses all of this information to determine the overall level and appropriate mix of short-term versus long-term incentives and cash versus equity-based compensation to provide a competitive mix and at the same time encourage achievement of short- and long-range goals and employee retention and succession. The ECC then separately determines individual compensation components at its various meetings throughout the year.

 

The ECC also uses this information to determine the appropriate level of retirement benefits, deferred compensation opportunities and limited perquisites. These help us maintain our competitive position and retain our executives.

 

ECC Compensation Consultant and Peer Group Information

 

The ECC engaged PM&P to serve as the independent compensation consultant to the ECC for fiscal 2011. PM&P did not perform any services for TJX other than work for the ECC and for the Corporate Governance Committee with respect to compensation of directors. PM&P reported to the ECC, which determined PM&P’s engagement and fees. PM&P advised the ECC with respect to the competitive positioning of base salary, annual bonus and long-term incentives for our named executive officers and other senior management, including terms of employment agreements.

 

The ECC uses a peer group to provide context for its compensation decision-making for our named executive officers. Each year, the ECC considers revisions to the peer group. In fiscal 2011, the ECC undertook a comprehensive review of the composition of the peer group with the advice of PM&P. PM&P recommended a list of comparable companies for compensation comparisons primarily based on the following pre-defined selection criteria:

 

 

As a result of this review, the ECC deleted two companies and added eight companies, creating a peer group of 17 companies that are large, publicly traded consumer-oriented companies. The ECC believes the revised peer group more accurately reflects TJX’s global reach and the scale of its operations. For fiscal 2011, the peer companies were:

 

Fiscal 2011 Peer Group Companies

 

 

Although the ECC uses peer group data to provide context for its own determinations, it does not target compensation or any element of compensation for our named executive officers by reference to any specified level at the peer group.

Compensation Design

 

Base Salary

 

Each of our named executive officers receives a base salary in cash during the fiscal year. Base salary contributes to our overall compensation approach by attracting and retaining talented individuals at a salary level that reflects the executive’s performance, experience and value in the marketplace.

 

Incentive Compensation

 

A significant portion of each named executive officer’s compensation is equity-based and cash incentive compensation granted under awards requiring an increase in the value of our stock or achievement of performance goals, at levels specified by the ECC, based on performance measures approved by our stockholders. Our equity-based and cash incentive compensation for our U.S.-based named executive officers in fiscal 2011 was intended to qualify for an exemption from the deduction limitation rules of Section 162(m).

 

The ECC does not apply a formula in determining the portion of total compensation payable in the form of cash incentive compensation, equity-based compensation or other benefits. Performance is certified by the ECC before any payments are made to our named executive officers under our cash incentive plans.

 

Short-Term Cash Incentives (MIP).  Our annual cash incentive awards are made under our Management Incentive Plan (MIP) and are designed to motivate our named executive officers and other key associates to achieve or exceed a performance target or targets for the fiscal year. Each MIP award has a target award opportunity based on achievement of this target. The amount of a MIP award is determined by measurement of actual performance against the performance target. If performance meets the performance target, participants receive their target MIP awards. If performance exceeds the performance target, participants are paid more than their target MIP awards based on the extent to which performance exceeds the performance targets (but not more than two times the target award, and not more than $5 million per award for any participant whose compensation is expected to be subject to the limits on deductibility under Section 162(m)). If performance does not meet the performance target, the MIP awards are not paid or are paid below their target awards, based on the extent to which performance falls below the performance targets. MIP performance targets, award opportunities and amounts payable at different levels of performance (including any objective factors, the occurrence of which would result in automatic adjustments to the targets) are pre-established by the ECC for the fiscal year. Performance results must be certified by the ECC, which has the authority to reduce but not increase the MIP awards to our named executive officers. The MIP and our long-range plan (LRPIP) described below both contain provisions for automatic adjustments to the targets upon the occurrence of certain significant financial events. As a result, under the terms of the MIP and the LRPIP, the performance targets for fiscal 2011 were automatically adjusted to exclude A.J. Wright for the fiscal 2011 MIP targets and the fiscal 2009-2011, 2010-2012 and 2011-2013 LRPIP targets.

 

Long-Term Cash Incentives (LRPIP).  Our long-term cash incentive awards are made under our Long Range Performance Incentive Plan (LRPIP) and are designed to motivate our named executive officers and other key associates to achieve or exceed cumulative multi-year performance targets. Each LRPIP award has a target award opportunity based on achievement of these targets. Like the MIP, the amount of LRPIP awards is determined by measurement of actual performance against the pre-established performance targets. Performance at target levels results in payment of the target LRPIP awards. If performance exceeds the performance targets, participants are paid more than their target LRPIP awards based on the extent to which performance exceeds the performance targets (but, under the terms of the LRPIP, not more than 150% of the target award, subject to a maximum of $5 million per award for any participant whose compensation is expected to be subject to the limits on deductibility under Section 162(m)). If performance does not meet the performance targets, LRPIP awards are not paid or are paid below their target awards, based on the extent to which performance falls below the performance targets. LRPIP performance targets, award opportunities and amounts payable at different levels of performance (including any objective factors, the occurrence of which would result in automatic adjustments to the targets) are pre-established by the ECC for each performance cycle. Performance results must be certified by the ECC, which has the authority to reduce but not increase the LRPIP awards to our named executive officers.

Equity-Based Compensation.  Equity-based awards are made under our Stock Incentive Plan, or SIP. The ECC grants each stock option with an exercise price equal to the closing price of our common stock on the date of grant. Stock options do not deliver value unless the value of our stock appreciates and then only to the extent of such appreciation, thus linking the interests of our executive officers with those of our stockholders. Performance-based restricted stock awards vest only to the extent of achievement of the performance criteria provided for those awards. Both stock options and performance-based restricted stock awards also have service-based vesting conditions that provide important retention incentives.

 

Other Elements of Compensation

 

Retirement Benefits.  All of our U.S.-based named executive officers participate in a broad-based pension plan for U.S. associates under which benefits are accrued based on compensation and service. They are also eligible to participate in our 401(k) plan. Because Mr. Sweetenham is a resident of the U.K., he participates in the retirement plan for U.K. associates under which participants may defer earnings and receive an employer match and invest their funds to purchase benefits at retirement. We also maintain a Supplemental Executive Retirement Plan, or SERP. Ms. Meyrowitz and Mr. Rossi participate in our primary SERP benefit program, and Mr. Herrman and Mr. Naylor participate in our alternative SERP benefit program.

 

Deferred Compensation.  Our U.S.-based named executive officers can defer compensation under our Executive Savings Plan, or ESP, an elective deferred compensation plan. Amounts deferred are notionally invested in mutual funds or other market investments. Participants in the ESP (other than those eligible for our primary SERP benefit) receive an employer match, subject to a vesting schedule, that is similarly notionally invested. Of our named executive officers in the U.S., Mr. Naylor and Mr. Herrman were eligible and elected to participate in the ESP and receive this match. In fiscal 2011, the ECC increased the ESP match, including the performance-based portion of the match, for Mr. Herrman and Mr. Naylor. The ECC also approved a similar performance-based deferred compensation benefit in the U.K. for Mr. Sweetenham. These performance-based benefits are provided only if performance under MIP for the relevant fiscal year produces a payout of at least 90% of the target corporate award opportunities.

 

Some of our named executive officers also have amounts previously deferred under our General Deferred Compensation Plan, or GDCP, now closed to new deferrals. Under this plan, deferrals are credited to an account that earns notional interest until distributed at an annually adjusted rate based on U.S. Treasury securities. Our deferred compensation plans for named executive officers are discussed below under “Nonqualified Deferred Compensation Plans.”

 

Perquisites.  In fiscal 2011, we provided a limited amount of perquisites and other personal benefits to our named executive officers, all of which are detailed in footnote 5 to the Summary Compensation Table below. These perquisites consisted of (i) an automobile benefit; (ii) financial and tax planning services; (iii) employer contributions or credits under our qualified and nonqualified savings plans; (iv) payment of life insurance premiums and (v) payment of legal fees associated with the negotiation of the employment agreement for Ms. Meyrowitz. None of these perquisites is grossed up for taxes. In addition, Mr. Sweetenham, a U.K. resident who worked in the U.S. for a portion of fiscal 2011, received a U.S. housing benefit which was grossed up for taxes. As Mr. Sweetenham’s responsibilities have been refocused on Europe, he no longer receives this housing benefit.

 

Fiscal 2011 Compensation

 

Fiscal 2011 MIP.  The fiscal 2011 MIP performance target for corporate associates, including our named executive officers, was the sum of target levels of pre-tax income for each of our divisions, excluding capitalized inventory, results of start-up businesses, and intercompany, imputed, direct and fixture interest income and expense (“adjusted pre-tax income”). The corporate MIP performance target was derived from our Board-approved business plans for these divisions and was used to derive the performance we projected publicly at the beginning of the year. As a result, in setting the target, the ECC believed that the corporate MIP target was challenging but reasonably achievable.

 

For fiscal 2011, the target MIP award opportunities (as a percentage of base salary) were 100% for Ms. Meyrowitz, 65% for Mr. Herrman, 55% for Mr. Naylor and Mr. Sweetenham and 50% for Mr. Rossi. The potential payout of these award opportunities ranged between 0% to 200% for performance ranging from 80%

to 114.3% and above of the corporate performance target. Except for Mr. Sweetenham, the MIP awards for fiscal 2011 were earned as follows:

 

Fiscal 2011 MIP Results

 

 

Although all of the named executive officers were granted a corporate MIP award opportunity for fiscal 2011, Mr. Sweetenham, who oversees TJX Europe, requested that he receive no MIP payout for fiscal 2011 because TJX Europe employees received no divisional MIP payout due to divisional performance of TJX Europe. Accordingly, the ECC did not award Mr. Sweetenham any MIP payout for fiscal 2011, although the ECC determined that, for purposes of his performance-based deferred compensation benefit, Mr. Sweetenham should be treated as having received the corporate MIP award.

 

Completion of Fiscal 2009-2011 LRPIP Award Cycle.  Fiscal 2011 completed the performance cycle for the fiscal 2009-2011 LRPIP awards. These award opportunities were based on cumulative targets for adjusted pre-tax income (which included intercompany, imputed, direct and fixture interest income and expense) for each of our divisions for the three fiscal years. The divisional portions of the award were determined by comparing actual divisional performance for the cycle to the divisional targets and adjusting the resulting divisional payout percentage according to pre-established weightings. (The weightings make performance at the smaller divisions more meaningful to the LRPIP award and are intended to promote focus on their performance.) The resulting divisional percentages were added together to determine the overall award percentage. The LRPIP divisional performance targets for fiscal 2009-2011 were derived from our Board-approved divisional business plans for the fiscal years at the time of grant and were used to derive the performance we projected publicly at the beginning of fiscal 2009. As a result, in setting the targets, the ECC believed that they were challenging but reasonably achievable.

 

For the fiscal 2009-2011 LRPIP cycle, our named executive officers’ target award opportunities were: Ms. Meyrowitz, $1.4 million, Mr. Herrman, Mr. Naylor and Mr. Sweetenham, $700,000, and Mr. Rossi, $375,000. Their actual awards for this cycle shown in the Summary Compensation Table were earned on the following basis:

 

Fiscal 2009-2011 LRPIP Results

 

 

Mr. Sweetenham’s target award opportunities for the fiscal 2009-2011 and fiscal 2010-2012 cycles were adjusted by the ECC to the same level as those for Mr. Herrman and Mr. Naylor.

 

Satisfaction of Performance-Based Vesting Conditions for Restricted Stock Awards.  Each named executive officer held performance-based restricted stock awards with performance-based vesting criteria that were satisfied based on fiscal 2011 MIP performance or fiscal 2009-2011 LRPIP performance in 2011.

 

 

 

Grant of Fiscal 2011-2013 LRPIP Award Opportunities.  The LRPIP target award opportunities for the fiscal 2011-2013 cycle for our named executive officers are: Ms. Meyrowitz, $1,405,000; Mr. Herrman, $850,000; Mr. Naylor and Mr. Sweetenham, $700,000; and Mr. Rossi, $375,000. The minimum level for any payout is 33.33% of the performance targets, and the maximum payout level is 133.33% of the performance target.

 

Grant of Stock Options in Fiscal 2011.  The ECC determined the number of stock options granted to our named executive officers and other associates in September 2010 by setting a fixed dollar value by executive and/or position and dividing this value by the stock price on the grant date. All options were granted with an exercise price equal to the closing stock price on the New York Stock Exchange on the grant date, and in general, have a maximum term of ten years, vest over three years and, to the extent vested, are exercisable for a limited period following termination of employment.

 

Allocation of Performance-Based Restricted Stock Awards to Years of Intended Compensation.  Under SEC rules, the entire value of a performance-based restricted stock award is shown in the Summary Compensation Table in the year of grant. As a result, some of the equity compensation of our named executive officers shown in the Summary Compensation Table for a particular year reflects awards intended by the ECC to compensate the executives for service and performance in different years.

 

As a result, in determining the performance-based restricted stock component of Ms. Meyrowitz’s compensation for fiscal 2011, the ECC and its independent compensation consultant considered $4,954,750 of performance-based restricted stock rather than $12,559,150 shown in the Summary Compensation Table. Most of Ms. Meyrowitz’s performance-based restricted stock awards included in the Summary Compensation Table for fiscal 2011 are intended by the ECC to compensate Ms. Meyrowitz for future fiscal years, with vesting conditions requiring service and performance in those future fiscal years, while a performance-based restricted stock award included in the Summary Compensation Table for fiscal 2010 related to fiscal 2011 compensation, with vesting conditions requiring service and performance in fiscal 2011. The following table shows Ms Meyrowitz’s performance-based restricted stock awards allocated to the year for which service and performance are required:

 

Performance-Based Restricted Stock Awards

 

 

 

 

Related Policies and Considerations

 

Employment Agreements.  Our named executive officers are parties to individual employment agreements that set their terms of employment, including compensation and benefits, as well as certain termination and change of control provisions discussed below under “Severance and Change of Control Provisions.” Under the

agreements, each named executive officer is entitled to a minimum level of base salary. Our named executive officers are also entitled under their agreements to continue to be eligible to participate in specified benefit programs, including SIP, MIP and LRPIP, at levels commensurate with their positions and responsibilities and subject to the terms established by the ECC.

 

In January 2011, we entered into new employment agreements with Ms. Meyrowitz, Chief Executive Officer, Mr. Herrman, President, and Jeffrey G. Naylor, Senior Executive Vice President, Chief Financial and Administrative Officer, that replaced each named executive officer’s then-existing employment agreement with TJX. Each new or amended agreement was effective on January 30, 2011 and, unless earlier terminated in accordance with its terms, continues until February 2, 2013 for Ms. Meyrowitz and Mr. Herrman and until February 1, 2014 for Mr. Naylor. The ECC negotiated the new employment agreement with Ms. Meyrowitz, and was advised by PM&P with respect to the terms of each new or amended agreement. In setting the level of compensation for Ms. Meyrowitz, the ECC took into account the understanding, reflected in the new agreement, that during the term of her agreement Ms. Meyrowitz will be able to delegate more of her day-to-day responsibilities and reduce her overall time commitment while retaining responsibility for all executive functions associated with her role as Chief Executive Officer. The new or amended agreements provide for a minimum annual base salary of $1,320,000 for Ms. Meyrowitz, $1,100,000 for Mr. Herrman and $790,000 for Mr. Naylor. Ms. Meyrowitz’s agreement provides for new MIP awards with a target of at least 150% of her base salary and new LRPIP awards with a target of at least 100% of her base salary, and adjusted her existing target awards for open LRPIP cycles to reflect her base salary. The agreements also entitle the executives to participate in TJX’s fringe benefit and deferred compensation plans, including, for Ms. Meyrowitz, specified interest rate assumptions for determining her primary benefit under SERP if more favorable than existing plan terms.

 

Severance and Change of Control Provisions.  During fiscal 2011, the employment agreements for each of our named executive officers provided severance terms, including in connection with a change of control, and non-competition and non-solicitation undertakings. Provisions of these agreements relating to termination and change of control, and related provisions of our deferred compensation plans and equity awards granted under our SIP, are summarized below under “Potential Payments upon Termination or Change of Control.” We provided these terms because we believe that it is important to define the relative obligations of TJX and our named executive officers, including obtaining protection against competition and solicitation, and that severance and change of control protections assist in attracting and retaining high quality executives and in keeping them focused on their responsibilities during any period in which a change of control may be contemplated or pending. The severance and change of control provisions in new and amended employment agreements that became effective in fiscal 2012, as summarized below, seek to achieve these objectives consistent with our shareholder-friendly pay practices, taking into account contractual obligations and current market practice, among other considerations.

 

Stock Ownership Guidelines.  We have stock ownership guidelines that apply to all of our executive officers, which are summarized in more detail above under “Stock Ownership Guidelines” in the “Corporate Governance” section. These guidelines are designed to align our executives’ interests with those of our stockholders and to encourage a long-term focus. Also, our policies prohibit our executives from engaging in hedging transactions with respect to TJX stock. Each of our named executive officers is in compliance with our stock ownership guidelines and policies.

 

Tax and Accounting Considerations.  We generally structure U.S. incentive compensation arrangements to qualify as performance-based compensation exempt from the deduction limitations under Section 162(m), but we view the availability of a tax deduction as only one relevant consideration. We continue to emphasize performance-based compensation for executives and thus generally minimize the effect of Section 162(m). However, the ECC believes that its primary responsibility is to provide a compensation program that attracts, retains and rewards the executive talent necessary for our success. Consequently, the ECC authorizes compensation in excess of $1 million that is not exempt from the deduction limitations under Section 162(m).

 

Equity Grant Practices.  All of our equity awards are made under our stockholder-approved SIP. Virtually all of our stock options and other equity-based awards are granted at regularly scheduled ECC meetings held on approximately the same dates each year. The specific dates of the meetings are set by the

Board, along with its determination of all regularly scheduled Board and committee meetings, generally about two years in advance. In limited circumstances, typically at regularly scheduled ECC meetings and in connection with new hires or promotions, the ECC approves or grants stock options and stock awards at other times during the year. The ECC does not have any programs, plans or practices of timing these equity grants in coordination with the release of material non-public information. The exercise price of each stock option grant is the closing stock price on the New York Stock Exchange on the grant date. The SIP prohibits, without stockholder approval, any repricing requiring stockholder approval under applicable NYSE rules.

 

Compensation Program Risk Assessment

 

As part of our regular enterprise risk assessment process overseen by the Board and described above under “Corporate Governance — Board’s Role in Risk Oversight,” TJX reviews the risks associated with its compensation plans and arrangements. In fiscal 2011, the ECC reviewed TJX’s employee compensation policies and practices and determined that they do not give rise to risks that are reasonably likely to have a material adverse effect on TJX. The ECC’s assessment considered (a) what risks could be created or encouraged by our executive and broad-based compensation plans and arrangements worldwide, (b) how those potential risks are monitored, mitigated and managed and (c) whether those potential risks are reasonably likely to have a material adverse effect on TJX. The assessment was led by our Chief Compliance Officer and Director of Enterprise Risk, whose responsibilities include leadership of our enterprise risk management process, and included consultation with and input by, among others, executive officers, senior human resources and financial executives, the ECC’s independent compensation consultant and internal and external legal counsel.

 

This process included:

 

 

Compensation Committee Report

 

We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on these reviews and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and in the Annual Report on Form 10-K for fiscal year ended January 29, 2011.

 

Executive Compensation Committee

 

David A. Brandon, Chair

José B. Alvarez

John F. O’Brien

Willow B. Shire

 

Summary Compensation Table

 

The following table provides information concerning compensation for our principal executive officer, our principal financial officer and our three other most highly paid executive officers during fiscal 2011 (collectively, our named executive officers):

 

 

 

 

 

 

 

 

 

Total compensation for our named executive officers is composed of base salary, short-term and long-term cash incentives, long-term equity-based incentives, retirement and deferred compensation benefits and limited perquisites. Our named executive officers were entitled under their employment agreements to participate in our SIP, MIP and LRPIP, and received cash and equity incentives only pursuant to these plans during fiscal 2011. Ms. Meyrowitz and Mr. Rossi participated in our primary SERP benefit and Mr. Herrman and Mr. Naylor participated in our alternative SERP benefit. All of our U.S.-based named executive officers participated in our tax-qualified defined benefit plan and were eligible to make deferrals to our 401(k) plan and our ESP. Mr. Naylor and Mr. Herrman were eligible to receive, and received, matching credits under the ESP during all or part of fiscal 2011. As discussed below under “Nonqualified Deferred Compensation Plans,” Mr. Sweetenham, as a resident of the U.K., participated in a retirement plan for U.K. associates under which participants may defer salary and bonus and receive an employer match, and is entitled to performance-based matching credits on his U.K. retirement plan deferrals based on performance under MIP. Our named executive officers were entitled to receive an automobile benefit and participation in fringe benefit plans and programs made available to executives generally.

Grants of Plan-Based Awards in Fiscal 2011

 

The following table reports potential payouts under our incentive plans and all other stock and option awards that were granted during fiscal 2011 to our named executive officers:

 

 

 

 

Non-Equity Incentive Plan amounts above reflect short-term cash incentives granted under our MIP and long-term cash incentives granted under our LRPIP. Our MIP and LRPIP are discussed above in “Compensation Discussion and Analysis.”

 

In fiscal 2011, we granted all equity incentives, including stock options and performance-based restricted stock, under our SIP. Stock options have a maximum term of ten years, and generally vest in equal annual

installments over three years, upon a change of control and in the event of certain terminations of employment. In the event a named executive officer’s employment is terminated by reason of death, disability, or retirement at or after age 65 with five or more years of service, vested options generally remain exercisable for five years following termination, unless the option terminates on an earlier date pursuant to its terms. Following a retirement at or after age 65 with ten or more years of service, or a retirement at or after age 60 with twenty or more years of service, vested options generally remain exercisable for five years following termination and unvested options continue to vest for the three year period following retirement on the same basis as if the named executive officer had not retired and remain exercisable for an extended period, unless the option terminates on an earlier date pursuant to its terms. In the event of any other termination, other than a termination for cause, vested options for our named executive officers generally remain exercisable for six months following termination (or such other period of up to three years as the ECC determines at or after the grant date), unless the option terminates on an earlier date pursuant to its terms. All options, whether or not then vested, are forfeited on a termination for cause.

 

The restricted stock awards have both service-based and performance-based vesting conditions, except that awards fully vest upon a change of control and, for Ms. Meyrowitz, in the event of her death or disability. For performance-based restricted stock granted to our named executive officers in fiscal 2011, the service-based conditions are satisfied by continuous employment through the scheduled vesting date (or, for certain awards, through the end of the fiscal year immediately preceding the vesting date or earlier involuntary termination or termination due to death or disability), and the performance-based conditions are tied to the corporate performance target under our LRPIP or MIP. At such time as a participant’s shares of restricted stock vest, the participant is entitled to any dividends paid on the shares while they were restricted.

 

Outstanding Equity Awards at Fiscal Year End

 

The following table provides information on outstanding option and stock awards for named executive officers as of January 29, 2011:

 

 

 

 

 

 

Option Exercises and Stock Awards Vested during Fiscal 2011

 

The following table provides information relating to option exercises and stock award vesting of performance-based restricted stock for our named executive officers during fiscal 2011.

 

 

 

 

Pension Benefits

 

In the U.S., we have a tax-qualified defined benefit plan, or Retirement Plan, and a nonqualified Supplemental Executive Retirement Plan, or SERP. We do not have a policy of granting extra years of credited service for purposes of these plans. Our Retirement Plan was closed to new participants as of February 1, 2006, although participants employed prior to that date continue to accrue benefits. We have not offered primary SERP benefits to any new participants in a number of years and do not currently intend to do so in the future, although we continue to offer an alternative SERP benefit.

 

Under our Retirement Plan, participants accrue a benefit payable as an annuity at retirement or, if vested, following an earlier termination of employment. The amount accrued each year once participation commences after an initial one-year eligibility period, expressed as a life annuity commencing at age 65, is 1% of eligible compensation (base salary and MIP awards) up to a periodically adjusted limit ($94,000 in calendar 2010 and $99,000 in calendar 2011) and 1.4% of eligible compensation in excess of that limit. For years of service in excess of 35, the accrual rate is 1% per year of eligible compensation. Compensation for any year in excess of another periodically adjusted limit, currently $245,000, however, is disregarded for these purposes. Eligible participants are also entitled to supplemental credits. Benefits under the Retirement Plan vest, in general, after five years of service. A vested participant who retires or whose employment terminates prior to age 65 with at least ten years of service may elect to receive a reduced annuity benefit commencing at age 55 or later.

 

Under our SERP, the primary benefit provides participants who retire at or after age 55 with at least ten years of service a benefit equal to the value of an annuity commencing at age 65 providing annual payments up to a maximum of 50% of the participant’s final average earnings, less other employer-provided retirement benefits and social security benefits. This benefit, before offsets, accrues at the rate of 2.5% of final average earnings for each year of service not in excess of 20 until age 65. In view of his continued service beyond age 65, Mr. Rossi is entitled to additional retirement benefit accruals based on his earnings and service after age 65 if more favorable than his primary benefit under existing SERP terms. In determining final average earnings, the SERP includes base salary and MIP, but not LRPIP, and uses the highest average of five years over the preceding ten years. The primary SERP benefit is payable in installments, or in certain other forms of actuarially equivalent value. The alternative benefit provides participants whose Retirement Plan benefits are affected by Internal Revenue Code benefit restrictions with the amount of the benefits lost by reason of those restrictions. Participants who are eligible for the primary benefit are eligible to receive the alternative benefit in lieu of the primary benefit if it provides a greater benefit at the time of retirement or other termination of employment.

The following table provides information on pension benefits for our named executive officers eligible for these benefits as of January 29, 2011:

 

 

 

 

Nonqualified Deferred Compensation Plans

 

We have an Executive Savings Plan, or ESP, which is a nonqualified deferred compensation plan available to key employees. Under the ESP, our U.S.-based named executive officers and other eligible employees can elect to defer up to 20% of base salary and up to 100% of any MIP and LRPIP awards, our directors can elect to defer retainers and meeting fees, and our U.S.-based named executive officers not eligible for primary SERP benefits (currently Mr. Herrman and Mr. Naylor) are eligible to receive matching credits on base salary deferrals of up to 10% of base salary, with an enhanced level of matching credits for up to 15 years. For calendar 2010, the potential match for Mr. Herrman and Mr. Naylor was 100% of their eligible deferrals, plus, if our MIP performance resulted in a payout of between 90% and 125% of the target corporate award opportunities for fiscal 2011, an additional match ranging from 50% to 150% of eligible deferrals. Matching employer credits are 50% vested after five years of plan participation and are 100% vested after ten years of plan participation, at age 55, or upon a change of control or separation from service by reason of death or disability. All amounts deferred or credited to a participant’s account under the ESP are notionally invested in mutual funds or other investments available on the market. Although not required by the ESP, it is our practice to purchase the investments notionally invested under the participants’ accounts, thus realizing the actual return of the notional investments.

 

Under the ESP, amounts deferred are generally distributed following termination of employment unless the participant has elected an earlier distribution date, which may be no earlier than January 1st of the second year following the year of the deferral. Vested employer matching credits are distributed before age 55 upon death or separation from service due to disability, at age 55 if a participant has separated for any other reason, or upon a separation from service after age 55. Distributions are generally made in a lump sum payment; however, a participant may elect to be paid in annual installments over a period of not more than ten years in the event that his or her employment terminates after age 55. Amounts vested under the ESP prior to January 1, 2005 (and earnings on those amounts) can be distributed at the participant’s request prior to termination of employment in a lump sum distribution of 85% of the vested account, with the remaining 15% forfeited.

Mr. Sweetenham, a resident of the U.K., is entitled to receive annual performance-based matching credits similar to those provided under the ESP to our eligible U.S.-based named executive officers. Mr. Sweetenham is eligible for matching credits ranging between 50% and 150% on his U.K. retirement plan deferrals of up to 8% of his base salary and 8% of his MIP bonus, for up to 20 years, if performance under MIP for the relevant fiscal year produces a payout of between 90% and 125% of the target corporate award opportunities. Based on our fiscal 2011 corporate MIP performance, although Mr. Sweetenham requested that he receive no MIP bonus, Mr. Sweetenham was eligible for the maximum performance-based match because the ECC determined to treat Mr. Sweetenham as having received and deferred 8% of his corporate MIP bonus for this purpose. Mr. Sweetenham’s deferred compensation benefit is reflected in an account that is an unfunded obligation of TJX UK and is notionally invested in mutual funds or other market investments. The vesting, distribution, and other terms of Mr. Sweetenham’s deferred compensation account are designed to follow the terms that apply to employer credit accounts of our U.S-based named executive officers under the ESP.

 

Through December 31, 2007, we offered eligible employees, including our named executive officers, and directors the opportunity to participate in the General Deferred Compensation Plan, or GDCP, another nonqualified deferred compensation plan. Under the GDCP, participants could defer all or a portion of base salary and MIP and LRPIP awards and, in the case of directors, retainers and meeting fees and be credited amounts on deferrals based on a rate for Treasury securities that is adjusted annually. For calendar 2010, this rate was 3.28%. No further deferrals were permitted beginning with fiscal 2009 compensation, but previously deferred amounts continue to be credited with interest amounts.

 

Amounts deferred under the GDCP on or after January 1, 2005 (and earnings on those amounts) that had not been distributed prior to January 1, 2009 are distributed under the terms of the ESP, as described above. Amounts deferred under the GDCP prior to January 1, 2005 (and earnings on those amounts credited prior to that date) are distributed in a lump sum at termination of service or upon an event or at a date (no later than the tenth anniversary of termination of service) and in a lump sum or in monthly installments as elected by the participant. Upon a change of control, each participant receives the entire amount credited to his deferred account in a lump sum payment.

 

The following table provides information on nonqualified deferred compensation plans for our named executive officers as of January 29, 2011: