(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

 

770 Cochituate Road
Framingham, Massachusetts 01701

 

 

April 24, 2008

 

Dear Stockholder:

 

We cordially invite you to attend our 2008 Annual Meeting on Tuesday, June 3, 2008, at 9:00 a.m., to be held at Bank of America Hearst Tower, 12th Floor Auditorium, 214 North Tryon Street, Charlotte, North Carolina.

 

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 3rd.

 

 

 

Printed on Recycled Paper

The TJX Companies, Inc.

 

 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

June 3, 2008

 

 

 

The Annual Meeting of Stockholders of The TJX Companies, Inc. will be held at Bank of America Hearst Tower, 12th Floor Auditorium, 214 North Tryon Street, Charlotte, North Carolina, on Tuesday, June 3, 2008, at 9:00 a.m. to vote on:

 

 

Stockholders of record at the close of business on April 14, 2008 are entitled to notice of and to vote at the Annual Meeting and any adjournments.

 

To attend the Annual Meeting, you must demonstrate that you were a TJX stockholder as of the close of business on April 14, 2008 or hold a valid proxy for the Annual Meeting from such a stockholder and you must clear building security. You will need to present photo identification for both purposes. In addition, 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 the record date, such as a brokerage account statement showing your ownership on April 14, 2008 or similar evidence of such ownership. You will need to have your photograph taken for building security. Please allow additional time for these procedures. Directions to Hearst Tower appear on the inside back cover of this proxy statement.

 

By Order of the Board of Directors

 

Ann McCauley

Secretary

 

Framingham, Massachusetts

April 24, 2008

 

PLEASE VOTE ON THE INTERNET, BY TELEPHONE OR BY MAIL

 

 

The TJX Companies, Inc.

 

 

 

ANNUAL MEETING OF STOCKHOLDERS

 

June 3, 2008

 

PROXY STATEMENT

 

 

 

The Board of Directors of The TJX Companies, Inc., or TJX, is soliciting your proxy for the 2008 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 accurate. Street name holders may vote by Internet or telephone if their bank or broker makes those methods available, in which case the bank or broker 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, delivering a written revocation to the Secretary of TJX, or notifying the Secretary in person at the meeting or any adjournment that you are revoking your earlier vote and voting in person.

 

Stockholders of record at the close of business on April 14, 2008 are entitled to vote at the meeting. Each of the 425,279,898 shares of common stock outstanding on the record date is entitled to one vote.

 

This proxy statement, the proxy card and the Annual Report and Form 10-K for our fiscal year ended January 26, 2008 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 3, 2008: This proxy statement and Annual Report and Form 10-K for our fiscal year ended January 26, 2008 are available at http://bnymellon.mobular.net/bnymellon/tjx.

 

ELECTION OF DIRECTORS

 

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 2009 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, other than Mr. Alvarez and Mr. Bennett, who were elected by the Board. We do not anticipate that any nominee will become unavailable to serve.

 

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

 

José B. Alvarez, 44
Director since 2007

 

Mr. Alvarez has been President and Chief Executive Officer of Stop & Shop/Giant-Landover, a supermarket chain and division of Royal Ahold N.V., since 2006. Mr. Alvarez joined Stop & Shop in 2001, and served as Executive Vice President, Supply Chain and Logistics from 2004 to 2006, Senior Vice President, Logistics from 2002 to 2004 and Vice President, Strategic Initiatives prior to 2002. Mr. Alvarez began his career in supermarket retail management at American Stores Company and Shaw’s Supermarkets.

 

Alan M. Bennett, 57
Director since 2007

 

Mr. Bennett has been Interim Chief Executive Officer of H&R Block Inc., a tax services provider, since November 2007. He was Senior Vice President and Chief Financial Officer of Aetna, Inc., a diversified healthcare benefits company, from 2001 to April 2007, and previously held other senior financial management positions at Aetna since 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). He is also a director of Halliburton Company.

 

David A. Brandon, 55
Director since 2001

 

Mr. Brandon has been the Chairman, Chief Executive Officer and a director of Domino’s Pizza, Inc., a pizza delivery company, since 1999. Mr. Brandon was President and Chief Executive Officer of Valassis, Inc., a provider of marketing products and services, from 1989 to 1998 and Chairman of its Board from 1997 to 1998. Mr. Brandon is also a director of Burger King Holdings, Inc., Kaydon Corporation and Northwest Airlines Corporation.

 

Bernard Cammarata, 68
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.

 

David T. Ching, 55
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 the American Stores Companies from 1979 to 1993, and was the Senior Vice President of Information Systems in the last five years.

Michael F. Hines, 52
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 March 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.

 

Amy B. Lane, 55
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. She also serves as a director of Borders Group, Inc.

 

Carol Meyrowitz, 54
Director since 2006

 

Ms. Meyrowitz has been Chief Executive Officer of TJX since January 2007, a director since September 2006 and President since October 2005. 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 L.L.C., 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.

 

John F. O’Brien, 65
Director since 1996

 

Mr. O’Brien is the retired Chief Executive Officer and President of Allmerica Financial Corporation (now known as 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 a director of Cabot Corporation, LKQ Corporation and a family of mutual funds managed by BlackRock, an investment management advisory firm.

 

Robert F. Shapiro, 73
Director since 1974

 

Mr. Shapiro has been the Vice Chairman of Klingenstein Fields & Co., L.L.C., an investment advisory business, since 1997. Mr. Shapiro was also President of RFS & Associates, Inc., an investment and consulting firm, from 1988 to 2004 and was formerly Co-Chairman of Wertheim Schroder & Co. Incorporated and President of Wertheim & Co., Inc., investment banking firms. Mr. Shapiro is also a trustee of The Burnham Fund, Inc. and a director of Genaera Corporation.

 

Willow B. Shire, 60
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 is also a director of Vitesse Semiconductor Corporation.

Fletcher H. Wiley, 65
Director since 1990

 

Mr. Wiley has been a principal in and Executive Vice President and General Counsel of PRWT Services, Inc., a technology-oriented products and services firm, since 1996. Since 2003, Mr. Wiley has been of counsel to the law firm Bingham McCutchen LLP. Previously, Mr. Wiley was of counsel to the law firm Schnader Harrison Goldstein & Manello and a partner of the law firms Goldstein & Manello and Fitch, Wiley, Richlin & Tourse, P.C.

 

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 more rigorous than the requirements of the New York Stock Exchange, and are posted 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 any relationship or transaction was inconsistent with a determination that the director was independent. As a result of this review, our Board unanimously determined that ten directors of our 12-member Board (83.3%) 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, Robert F. Shapiro, Willow B. Shire and Fletcher H. Wiley. Previously, the Board also unanimously determined that Gail Deegan, who served as a director for part of fiscal 2008, was independent. Each of these directors and this former director met our categorical standards of independence. In addition, the Board considered a business relationship of Mr. Alvarez, a business relationship of Mr. Ching, a business relationship and a charitable relationship of Ms. Deegan, a charitable relationship of Mr. O’Brien and a business relationship of Mr. Wiley, each of which fell below our categorical standards. Our other two directors are not independent. Bernard Cammarata is the Chairman of TJX, and Carol Meyrowitz is the Chief Executive Officer and President of TJX. Richard Lesser, who served as a director for part of fiscal 2008, retired as an executive of TJX in January 2005 and was not independent.

 

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 had long-standing 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 Expertise and Diversity.  Our directors possess a wide range of talents and experience. Our Board reflects a range of talents, ages, skills, diversity and expertise to provide sound and prudent guidance with respect to our operations and interests. All of our directors are financially literate, and three 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 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 shareholders. The Corporate Governance Committee’s process for identifying and evaluating candidates,

including candidates recommended by shareholders, 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, shareholders and industry contacts, and engaging an outside search firm. The Corporate Governance Committee has adopted a policy with respect to submission by shareholders of candidates for director nominees which is available on our website at www.tjx.com. Any shareholder may submit in writing one candidate for consideration for each shareholder 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 shareholders 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 shareholders 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.

 

During fiscal 2008, the Corporate Governance Committee engaged Russell Reynolds Associates to assist in the process of identifying and evaluating potential director candidates. Russell Reynolds Associates identified Messrs. Alvarez and Bennett as director candidates, who were elected directors by the Board in September 2007.

 

Majority Voting.  Our Corporate Governance Principles, available at www.tjx.com, require any nominee for director who receives a greater number of votes “withheld” than “for” his or her election in an uncontested election to tender his or her resignation and such principles provide procedures for the consideration of such resignation by the Board. Within 90 days of the date of the annual meeting of shareholders, 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 shareholders, 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 shareholder vote.

 

Chairman; Lead Director.  Our Board annually elects the Chairman of the Board of Directors. Because our Chairman, Mr. Cammarata, is not an independent director, consistent with our Corporate Governance Principles, our independent directors have elected John F. O’Brien as Lead Director. In this role, among other duties, Mr. O’Brien meets at least quarterly with our Chief Executive Officer and with senior officers as necessary, attends quarterly 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 and of the non-management 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.

 

Attendance.  During fiscal 2008, our Board met 14 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 shareholders. All nominees and directors attended the 2007 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 2008:

 

 

 

 

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. Specifically, the ECC’s responsibilities include:

 

 

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 72 prior to or on the date of his or her election or re-election. However, in light of the number of new directors elected to the Board during calendar 2007, and given the continuity provided by Mr. Shapiro’s lengthy and dedicated service to TJX, the Board waived this policy to allow Mr. Shapiro to be re-nominated as a director candidate at this year’s Annual Meeting. Under our Corporate Governance Principles, directors with full-time jobs should not serve on more than three boards of public companies in addition to our Board, although we waived this policy for Mr. Brandon in recognition of his expertise and continued contributions to TJX; no director should serve on more than four boards of public companies in addition to our Board; and 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, Vice Chairman, Chief Administrative Officer, Chief Financial Officer, Principal Accounting 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.  It is our policy that at the time of his or her election, a director must own at least $10,000 of our common stock. Over time, a director must increase his or her stock ownership to hold shares of our common stock (or their equivalent) equal to at least $200,000 (including awards under the Deferred Stock Program for Non-Employee Directors under our Stock Incentive Plan). It is our policy that our Chief Executive Officer and President will attain stock ownership with a fair market value of at least five times his or her annual base compensation, and our Vice Chairman and each Senior Executive Vice President will attain stock ownership with a fair market value of at least three times his or her annual base compensation. For our executive officers, such ownership guidelines are reduced by 50% at age 62. It is expected that individuals who have not yet achieved the stock ownership levels provided by these guidelines will make steady progress towards meeting such levels. In addition, individuals who have not yet achieved the guideline ownership levels are expected to retain 50% of their shares (on an after-tax basis) resulting from the exercise of stock options, vesting of deferred stock or vesting of performance-based restricted stock. Once an individual satisfies and sustains the target stock ownership level, the executive is permitted to sell all future shares obtained through option exercises, the vesting of deferred stock or the vesting of performance-based restricted stock.

 

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.

Requests for Information.  Shareholders may request print copies 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 by writing to the Office of the Secretary at the above address. The current versions of these documents are also 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% shareholders 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 three of our members (Mr. Hines, Ms. Lane and Mr. Shapiro) are audit committee financial experts as defined by the rules of the SEC.

 

The Audit Committee met 12 times during fiscal 2008, including four meetings held with TJX’s Chief Financial Officer, Corporate Controller and PricewaterhouseCoopers LLP, 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 the independent registered public accounting firm required by Public Company Accounting Oversight Board (PCAOB) rules adopting Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees” and discussed with the independent registered public accounting firm their independence. We discussed with management, the internal auditors and the independent registered public accounting firm 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 discussed with the independent registered public accounting firm, management and the internal auditors the accounting and auditing implications of the unauthorized intrusion or intrusions into portions of TJX’s computer systems that process and store customer transactions. We reviewed with both the independent registered public accounting firm and internal auditors their audit plans, audit scope and identification of audit risks.

 

We discussed and reviewed with the independent registered public accounting firm communications required by the Standards of the PCAOB (United States), as described in Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees,” and, with and without management present, discussed and reviewed the results of the independent registered public accounting firm’s examination of TJX’s financial statements. We also discussed the results of the internal audit examinations.

The aggregate fees that TJX paid for professional services rendered by PricewaterhouseCoopers LLP for the fiscal years ended January 26, 2008 and January 27, 2007 were:

 

 

 

We pre-approve all audit services and all permitted non-audit services by the independent registered public accounting firm, 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 the independent registered public accounting firm 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 the independent registered public accounting firm for permitted non-audit services is compatible with maintaining the independence of the independent registered public accounting firm. We concluded that the independent registered public accounting firm’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 the fiscal year ended January 26, 2008 with management and the independent registered public accounting firm. Management has the responsibility for the preparation of TJX’s financial statements, and the independent registered public accounting firm has the responsibility for the audit of those statements.

Based on these reviews and discussions with management and the independent registered public accounting firm, we recommended to the Board that TJX’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended January 26, 2008 for filing with the SEC. We also have selected PricewaterhouseCoopers LLP as the independent registered public accounting firm for fiscal 2009, subject to ratification by TJX’s shareholders.

 

Audit Committee

 

Robert F. Shapiro, Chair

David T. Ching

Michael F. Hines

Amy B. Lane

Fletcher H. Wiley

 

Beneficial Ownership

 

The following table shows as of April 14, 2008 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 14, 2008 based on information filed with the SEC, persons known to 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 in September 2007, Mr. Bennett and Mr. Alvarez each filed an amended Form 4 to correct a prior timely filed report that had inadvertently misstated the vesting date of a grant of deferred shares.

 

EXECUTIVE COMPENSATION

 

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 the fiscal year ended January 26, 2008 for filing with the SEC.

 

Executive Compensation Committee

 

David A. Brandon, Chair

José B. Alvarez

John F. O’Brien

Willow B. Shire

 

Compensation Discussion and Analysis

 

Our compensation program is based on our philosophy that all of our associates are important to our success, with our executive officers and senior executives setting the direction of our business and having overall responsibility for driving our results. We have achieved significant success in our business over many years. But, like other retailers, we operate in a highly competitive and challenging economic environment. Accordingly, we have adopted a total compensation approach to accomplish several goals:

 

 

The Executive Compensation Committee of our Board of Directors, or the ECC, implements this compensation philosophy for our executives by providing:

 

 

Compensation Philosophy

 

For many years, our compensation philosophy for our key associates, including our named executive officers, has reflected pay for performance. A substantial portion of each executive’s compensation is incentive compensation. The amount of a named executive officer’s incentive compensation is directly tied to the objective performance of TJX and therefore directly linked with the interests of shareholders.

 

 

Total compensation for our executives is a combination of base salary, short-term and long-term cash incentives, and long-term equity-based incentives. In determining total compensation, the ECC takes into account individual performance, contractual obligations, historical compensation practices that in the ECC’s estimation have proven successful for TJX, compensation practices at peer group companies, compensation programs for TJX as a whole and any special considerations such as recruitment, new hires, promotions, organizational changes, relocations and transitional roles. In addition to base salary and incentive compensation, our executive officers receive retirement benefits, deferred compensation and limited perquisites. The availability of these benefits helps us maintain our competitive position in the market for executive talent but does not form part of the basis for the ECC’s determination of an executive officer’s total compensation for any year.

 

Compensation Consultant and Benchmarking

 

The ECC is advised by Frederic W. Cook & Co., Inc., or Cook, a compensation consultant, engaged by and reporting to the ECC. Cook advises the ECC with respect to the competitive positioning of base salary, annual bonus and long-term incentives for members of management, including our named executive officers.

 

The ECC benchmarks total compensation of our named executive officers and each of the elements of that compensation against a group of 12 peer companies that are large, publicly traded retailers selected by the ECC. Substantially the same peer group has been used over a number of years, and the ECC considers revisions each year to reflect changes in the peer group and TJX with the advice of the ECC’s compensation consultant and our management. The peer group for fiscal 2008 was Circuit City Stores, Inc., Dillard’s, Inc., Macy’s, Inc., The Gap, Inc., Kohl’s Corporation, Limited Brands, Inc., Nike, Inc., OfficeMax Incorporated, J.C. Penney Company, Inc., Ross Stores, Inc., Staples, Inc. and Target Corporation. Although the ECC uses peer group data to provide context for its own determinations, it does not calibrate compensation or any element of compensation for our named executive officers with any specified level at the peer group.

 

Total Compensation

 

In determining the overall level and components of executive compensation, the ECC focuses on total compensation. Generally, the ECC conducts a strategic review of the compensation policies for all management employees of TJX and its divisions, including the named executive officers. Utilizing the comparative benchmarking data provided by TJX’s compensation consultant, and in the case of our named executive officers, the ECC’s compensation consultant, the ECC assesses the overall competitiveness of our compensation programs. For each management level, the ECC then assesses the 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 long-range goals and employee retention. The ECC subsequently reviews and determines individual compensation components, including base salary, short-term and long-term cash incentive awards and equity grants.

 

Base Salary

 

Each of our named executive officers receives a base salary in cash during the fiscal year. Base salary levels are determined by the ECC taking into account contractual obligations, individual performance, responsibilities, past base salary, the limitation on income tax deductions imposed by Section 162(m) of the Internal Revenue Code, peer group data, the advice of Cook and recommendations by the supervising executive officers. The performance review of the Chief Executive Officer is performed each year by the Corporate Governance Committee as provided in its charter. The review includes both quantitative and qualitative factors, including the Chief Executive Officer’s achievement of performance objectives in addition to those provided in the Management Incentive Plan and the Long Range Performance Incentive Plan for the year. The Corporate Governance Committee does not make compensation recommendations. In the case of each other named executive officer, the executive to whom such officer reports undertakes the performance review and makes salary recommendations to the ECC. For fiscal 2008, the executive to whom each such other named executive reports was as follows: Ms. Meyrowitz in the case of Mr. Campbell, Mr. Barron and Mr. Herrman; Mr. Campbell in the case of Mr. Naylor; and Mr. Naylor in the case of Mr. Tripathy. Base

salary increases for our named executive officers, other than increases as a result of mid-fiscal year promotions or contractual obligations, are generally implemented effective in June each year.

 

In April 2007, effective as of the beginning of fiscal 2008, Ms. Meyrowitz’s base salary was increased as a result of her promotion to Chief Executive Officer, and on June 11, 2007, Mr. Tripathy’s base salary was set in connection with his joining us as Chief Financial Officer. In June 2007, the ECC increased the base salaries of Mr. Campbell, Mr. Barron, Mr. Naylor and Mr. Herrman as part of its annual performance appraisal.

 

Incentive Compensation

 

General.  A significant portion of each named executive officer’s compensation is cash and equity-based incentive compensation granted under plans approved by our stockholders. Our cash incentive plans compensate named executive officers based on achievement of corporate financial goals and on continued service. In this way, these plans provide incentives for these executives as well as other associates to achieve our targeted corporate performance in the short and long term while at the same time promoting retention. The equity-based awards are made under a stockholder-approved plan, and such awards to our named executive officers in fiscal 2008 consisted of options to acquire our stock and performance-based restricted stock. Stock options are subject to service-based vesting requirements and deliver value only if the market price of our stock increases. Vesting of the restricted stock awards depends on meeting both service and performance conditions. Our incentive compensation for our named executive officers in fiscal 2008 was intended to qualify for an exemption from the deduction limitation rules of Section 162(m) of the Internal Revenue Code.

 

The ECC does not apply a formula in determining the portion of total compensation payable in the form of cash incentive compensation or equity-based compensation. However, starting in fiscal 2006, based on input from our shareholders and a review of our equity grant practices, the ECC determined to reallocate the elements of long-term incentive compensation so that generally a larger proportion would be provided by our long-term cash incentive program and a smaller proportion would be provided by stock option grants.

 

Short-Term Cash Incentives.  Our short-term, annual cash incentive awards are made under our shareholder-approved Management Incentive Plan, or MIP. Our MIP is designed to encourage our key associates and managers, including our named executive officers, to achieve annual performance targets for each of our divisions. Each MIP award has a target award, which is a percentage of the participant’s base salary, and performance targets that are set by the ECC. MIP awards are paid in cash in an amount determined by measurement of actual performance against performance targets. If performance meets the performance targets, participants receive their target MIP awards. If performance exceeds the performance targets, participants are paid more than their target MIP awards based on the extent to which performance exceeds the performance targets (but, under the terms of the MIP, not more than two times the target award and not more than a maximum of $5 million per award). If performance does not meet the performance targets, the participants are paid no MIP awards or are paid awards below their target awards, based on the extent to which performance falls below the performance targets.

 

The annual MIP performance target for each division is a level of divisional pre-tax income excluding capitalized inventory costs and certain corporate allocations and including intercompany interest income/expense. Our divisional associates and, in fiscal 2008, Mr. Herrman, have only a divisional performance target, and their awards are determined solely by divisional performance of the division in which they work. Awards for our corporate associates, including our other named executive officers (other than Mr. Herrman, President of Marmaxx), include weighted performance targets for all our divisions (except Bob’s Stores due to its small size), and our corporate associates earn a portion of their MIP awards based on the performance of each of these divisions. For our corporate incentive award, Marmaxx is underweighted relative to its expected contribution to corporate pre-tax income in order to make performance at the smaller divisions more meaningful to the incentive award and thereby promote focus on their performance.

 

Divisional performance at the actual performance target results in payment at the target level of a divisional MIP award or the divisional portion of a corporate MIP award. If a division performs above or below its target performance, the amount of the divisional award or the divisional portion of the corporate award applicable to the division is adjusted in accordance with a predetermined percentage adjustment, or

slope adjustment. (Due to the lower profitability of A.J. Wright, instead of slope adjustments, the ECC has established predetermined step adjustments for above or below target performance.) The slope adjustments include a minimum level of divisional performance required to obtain any award with respect to each division and the maximum level of divisional performance beyond which the award will not be increased for each division. For fiscal 2008, the minimum performance level for each division (except A.J. Wright) ranged from 70% to 80% of the performance targets, and the maximum performance level ranged from 114% to 130% of the performance targets. The portions of the awards earned for each division are aggregated for the corporate MIP award.

 

The MIP performance target for each division for fiscal 2008 was derived from our Board-approved plan, was within the range of projections for the year that we provided to the public in February 2007 and reflected the pre-tax income needed from each division to generate the return on invested capital and earnings per share projected to the public at that time. Because these MIP performance targets reflected our plans for our divisions for fiscal 2008, we believed that the target performances were reasonably achievable. This is also true for the MIP performance target for each division for fiscal 2009.

 

The MIP award opportunities (as a percentage of base salary) for fiscal 2008 were: Ms. Meyrowitz 100% target, 200% maximum; Mr. Campbell 55% target, 110% maximum; Mr. Herrman 55% target, 110% maximum; Mr. Barron 55% target, 110% maximum; Mr. Naylor 55% target, 110% maximum; and Mr. Tripathy 45% target, 90% maximum. The ECC also awarded Ms. Meyrowitz a supplemental MIP award for fiscal 2008 to compensate her for the absence of a fiscal 2006-2008 LRPIP award due to her employment in fiscal 2006 in a consulting role. As with other aspects of compensation, the ECC reviewed short-term cash compensation as part of its overall review of compensation of our named executive officers and established MIP target award levels based on responsibilities, peer group data and input from the ECC’s compensation consultant.

 

Our MIP requires that performance be certified by the ECC before any payments can be made to named executive officers. For our named executive officers, our MIP permits the ECC to lower, but not to raise, the awards, if any, indicated by the certified level of performance. The ECC did not exercise this discretion for the awards for fiscal 2008.

 

For fiscal 2008, our MIP bonuses for our named executive officers were calculated as follows (except that Mr. Herrman’s fiscal 2008 MIP award was 110.92%, based solely on the Marmaxx division performance):

 

 

Long-Term Cash Incentives.  Our long-term cash incentive awards are made under our shareholder-approved Long Range Performance Incentive Plan, or LRPIP. Our LRPIP is designed to encourage our key associates and managers, including our named executive officers, to achieve cumulative multi-year performance targets for each of our divisions. All participants participate in the corporate LRPIP. Like the MIP, LRPIP awards are paid in cash in an amount determined by measurement of actual performance against performance targets. If cumulative performance meets the performance targets set by the ECC, participants receive their target LRPIP awards. If cumulative 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). If performance does not meet the performance targets, the participants are paid no LRPIP awards or awards below their target LRPIP awards, based on the extent to which performance falls below the performance targets. For the LRPIP award opportunities for fiscal 2008-2010 granted in fiscal 2008,

the minimum three-year performance level for an award was set at 33.33% of the performance targets and the level for maximum awards was set at 133.33% of the performance targets.

 

The ECC sets LRPIP performance targets for the cumulative pre-tax income of each division (other than Bob’s Stores due to its small size), excluding capitalized inventory costs and certain corporate allocations and including intercompany interest income/expense, for a multi-fiscal year period (generally three fiscal years). LRPIP awards include weighted performance targets for each of these divisions, and participants earn a portion of their LRPIP awards based on the performance of each of these divisions. The portion of the award allocated to each division is the same for both the LRPIP awards beginning in fiscal 2008 and the fiscal 2008 MIP corporate awards.

 

Payouts under the LRPIP for all awards are calculated in a similar manner to payouts under the corporate MIP except that performance is measured on a multi-year, generally three year, rather than a one-year basis. The award earned with respect to cumulative performance of each division for the multi-year period above or below target performance is determined by applying the pre-determined slope adjustments (except with respect to A.J. Wright Stores, as discussed previously). Amounts earned with respect to each division are aggregated for the corporate LRPIP award.

 

The ECC set LRPIP performance targets for fiscal 2008-2010 in April 2007, which were derived from our Board-approved plan, were within the range of projections that we provided to the public in February 2007, and reflected the pre-tax income needed from each division to generate the return on invested capital and earnings per share projected to the public at that time. Because these performance targets reflected our plans for our divisions, we expected the fiscal 2008-2010 performance targets to be reasonably achievable.

 

In April 2007 (and in June 2007 with respect to Mr. Tripathy), the ECC granted LRPIP awards for fiscal 2008-2010 to each participant in the LRPIP, including our named executive officers. The ECC reviews long-term and short-term cash compensation together and establishes LRPIP award levels by position, based on responsibilities, peer group data and input from the ECC’s compensation consultant. The LRPIP award opportunities for fiscal 2008-2010 were: Ms. Meyrowitz $1,400,000 target, $2,100,000 maximum; Mr. Campbell $700,000 target, $1,050,000 maximum; Mr. Herrman $700,000 target, $1,050,000 maximum; Mr. Barron $700,000 target, $1,050,000 maximum; Mr. Naylor $700,000 target, $1,050,000 maximum; and Mr. Tripathy $300,000 target, $450,000 maximum. In addition, the ECC awarded Mr. Tripathy an LRPIP opportunity for a two-year fiscal 2008-2009 cycle with a $300,000 target award with a maximum award of $450,000 to reflect the fact that he joined TJX during the fiscal 2007-2009 LRPIP cycle.

 

Under our LRPIP, the ECC must certify performance for a performance period before any payments can be made to named executive officers. Although LRPIP permits the ECC to decrease (but not increase) the payments otherwise earned under the program by our named executive officers, the ECC did not exercise that discretion with respect to awards becoming payable in April 2008.

 

For the fiscal 2006-2008 LRPIP cycle, our LRPIP bonuses for our named executive officers (other than Ms. Meyrowitz and Mr. Tripathy, who were not executive officers at the time of award and did not receive fiscal 2006-2008 LRPIP cycle awards) were calculated as follows:

 

Total Corporate LRPIP Award: 89.99% 

For the fiscal 2007-2008 supplemental cycle, our LRPIP bonuses for Messrs. Barron, Campbell and Naylor were calculated as follows:

 

 

Long-Term Equity-Based Compensation.  Long-term equity-based awards under our Stock Incentive Plan, or SIP, are an important part of our named executive officers’ total compensation. The ECC annually determines by management level the amount of equity grants and the allocations between stock options and performance-based restricted stock based on responsibilities, peer group data and input from the ECC’s compensation consultant. The ECC indexes the number of restricted shares and stock options actually granted based on the closing price of our common stock on the New York Stock Exchange on the grant date. For a given dollar change in the stock price, the ECC increases or decreases by a fixed percentage the number of shares or options awarded to each individual on the grant date. The purpose of indexing our equity awards is to normalize the underlying dollar value of our equity grants for fluctuations in our stock price. The ECC values each stock award based on the closing price of our common stock on the date of the award. For option awards, the ECC values the award based on the Black-Scholes option pricing formula.

 

In September 2007, the ECC made SIP awards of stock options to each of our named executive officers and an award of performance-based restricted stock to Mr. Campbell, and in April 2007, the ECC made SIP awards of performance-based restricted stock to Ms. Meyrowitz, Mr. Naylor, Mr. Barron and Mr. Herrman. The April 2007 restricted share award to Ms. Meyrowitz was related to her promotion to Chief Executive Officer during fiscal 2008. In general, stock options granted 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. All option awards are granted with an exercise price equal to the closing stock price on the New York Stock Exchange on the grant date.

 

The restricted stock grants have both service-based and performance-based vesting conditions, with exceptions for certain early terminations. In order to fully satisfy the performance-based conditions for the fiscal 2008 grants to Mr. Naylor, Mr. Barron and Mr. Herrman, our performance must result in a minimum payout of 67% of target for corporate LRPIP awards for the three year cycle for fiscal years 2008 to 2010. For performance entitling the named executive officers to awards of less than 67% of the corporate target LRPIP award, each executive will receive a partial vesting of shares, which would be reduced pro-rata to zero at a 0% LRPIP award. In order to fully satisfy the performance-based conditions for the fiscal 2008 grant to Ms. Meyrowitz, our performance must result in a minimum payout of 67% of target for corporate MIP awards for the 2008 fiscal year. For performance entitling the named executive officers to awards of less than 67% of the corporate target MIP award for the 2008 fiscal year, Ms. Meyrowitz would receive a partial vesting of shares, which would be reduced pro-rata to zero at a 0% MIP award. Mr. Tripathy received a performance based restricted stock award with vesting in fiscal 2008 and 2009, based on continued employment and fiscal year 2008 and 2009 MIP performance and another award based on continued employment and fiscal 2008-2010 LRPIP performance. If MIP performance is at 67% for these respective years, Mr. Tripathy will receive a full award (the award is prorated for lower levels of performance). Mr. Campbell’s fiscal 2008 restricted stock award provides for vesting on the date the ECC certifies performance results under our MIP applicable to executive officers for fiscal 2009 at a level at or above 67% of his target MIP award (with prorated vesting for lower levels of performance). Additionally, if Mr. Campbell retires with the ECC’s consent or is terminated without cause, unvested shares and options will be subject to the general performance conditions described above but will not automatically be forfeited by reason of his retirement or termination. The other restricted stock grants generally vest in equal increments over three years of continuous employment.

Stock options do not deliver value unless and to the extent that the value of our stock appreciates, thus linking the interests of our executive officers with those of our shareholders. The service-based vesting conditions to which both our stock options and our other equity-based awards are subject are important retention incentives. The performance conditions applicable to the restricted stock awards assure that these awards do not vest unless the minimum performance is obtained under our MIP or LRPIP, although we expect that performance will be achieved, and make it possible for those awards to qualify for the performance-based compensation exception under Section 162(m) of the Internal Revenue Code.

 

Other Elements of Compensation

 

Retirement Benefits.  We maintain a broad-based defined benefit pension plan under which each participant’s benefit, payable in general as an annuity, accrues based on the participant’s compensation and service, although the plan was closed to new participants as of February 1, 2006. We also maintain a Supplemental Executive Retirement Plan, or SERP, although the ECC has not offered primary SERP benefits to any new participants in a number of years and does not currently intend to do so in the future. Ms. Meyrowitz, Mr. Campbell and Mr. Barron participate in our primary SERP benefit program, under which the participant may receive an amount payable in installments, or in certain other forms, of actuarially equivalent value to the value of an annuity 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. Mr. Herrman and Mr. Naylor participate in the alternative SERP benefit program. Under this alternative benefit, participants whose regular pension benefits are affected by Internal Revenue Service benefit restrictions receive on a nonqualified basis, payable by us, the benefits lost by reason of those restrictions. The ECC’s general practice of not offering primary SERP benefits to new participants is in line with industry practices given the trend in the declining availability of supplemental executive retirement plans among large retail companies.

 

Deferred Compensation.  In fiscal 2008, we had two nonqualified elective deferred compensation plans, both of which were available to our named executive officers and others and pay market returns on amounts deferred. Under our General Deferred Compensation Plan, or GDCP, deferred amounts are credited to an account that earns notional interest until distributed at an annually adjusted rate based on U.S. Treasury securities. Under our Executive Savings Plan, or ESP, deferred amounts may be notionally invested in mutual funds or other investments, available on the market, as specified by the plan administrator. Participants in the ESP (other than those eligible for our primary SERP benefit) receive an employer match, subject to a vesting schedule, that may be similarly notionally invested. It has been our practice to purchase notional investments, thus realizing the actual return of the notional investments. Of our named executive officers, Mr. Naylor, Mr. Herrman and Mr. Tripathy are not eligible for primary SERP benefits and as a result, were eligible for an ESP match in fiscal 2008.

 

In December 2007, the ECC amended the ESP, effective January 1, 2008, to permit the deferral of up to 20% of base salary and up to 100% of any bonuses pursuant to any annual or long-term incentive plans. For associates at the level of executive vice president and above who are not eligible for primary SERP benefits, we will match 25% of the first 10% of their deferred base salaries, if they are younger than age 50 (or age 50 or older, if the 15 year maximum described below has been achieved), and 50% for executive vice presidents or 75% for division presidents, senior executive vice presidents and above of the first 10% of their deferred base salaries if they are age 50 or older (for up to 15 years), in each case if the MIP target is met. The amount of such match on the first 10% of their deferred base salaries will increase up to 40% for such employees who are younger than age 50, and up to 70% for executive vice presidents or 100% for division presidents, senior executive vice presidents and above who are age 50 or older (for up to 15 years), in each case if, and depending on the extent to which, such performance target is exceeded. With respect to amounts deferred under the ESP, participants may elect a distribution date earlier than retirement, but no earlier than January 1st of the second year following the year of the deferral, but absent such election would be eligible for distributions in respect of such amounts at retirement. Any matching contributions by us will be payable only at retirement. Because the GDCP was under-utilized, the ECC determined to accept no further deferrals into

the GDCP as of January 1, 2008, other than for incentive awards payable in April 2008 that had been previously elected to be deferred under the GDCP which will continue to be deferred under the GDCP.

 

Perquisites.  We make a limited amount of perquisites and other personal benefits available to our executive officers, all of which are detailed in footnote 6 to the Summary Compensation Table below: (i) an automobile benefit, (ii) a tax gross-up on the automobile benefit, (iii) financial and tax planning services, (iv) reimbursement of legal expenses for employment arrangements, (v) relocation expense reimbursement, (vi) employer contributions or credits under savings plans and (vii) payment of life insurance premiums. In connection with hiring Mr. Tripathy as Chief Financial Officer during fiscal 2008, we paid expenses related to Mr. Tripathy’s relocation to Massachusetts from out of state, including legal and financing fees and real estate transfer taxes and commissions.

 

CEO Employment Agreement.  On April 9, 2007, we entered into a new two-year employment agreement with Ms. Meyrowitz effective as of January 28, 2007 with respect to her employment as Chief Executive Officer. The ECC negotiated this agreement with Ms. Meyrowitz and was advised by Cook with respect to its terms. Under the agreement, Ms. Meyrowitz’s base salary is set at a minimum of $1,400,000 per year (subject to potential increases upon ECC review). In April 2008, the ECC determined to increase Ms. Meyrowitz’s base salary to $1,475,000. She continues to be eligible to participate in both the MIP and LRPIP at levels commensurate with her position and responsibilities and subject to such terms as are established by the ECC. Ms. Meyrowitz agreed to non-competition and non-solicitation provisions during the term of her employment and for 18 months thereafter. Ms. Meyrowitz was also awarded 42,500 shares of performance-based restricted stock under our SIP in April 2007, which shares related to her promotion.

 

CFO Employment Agreement.  Using an executive search firm, we conducted a national search for a new Chief Financial Officer in fiscal 2008. In connection with Mr. Tripathy’s appointment as Executive Vice President and Chief Financial Officer, the ECC, advised by Cook, negotiated an employment agreement with him, which was entered into and effective as of June 11, 2007. Mr. Tripathy’s compensation reflected the ECC’s assessment of competitive compensation for the job responsibilities. Under his employment agreement, Mr. Tripathy is entitled to an annual base salary of not less than $625,000 and participation in MIP and LRPIP at levels commensurate with his position and responsibilities and subject to such terms as are established by the ECC. In fiscal 2008, Mr. Tripathy was granted the MIP and LRPIP opportunities described above as provided in his employment contract. Mr. Tripathy was granted 35,200 shares of performance-based restricted stock under the SIP in connection with his hiring. A portion of this restricted stock grant was designed to compensate for incentives he forfeited by leaving his former employer. Mr. Tripathy received a sign-on bonus of $100,000. Mr. Tripathy agreed to non-competition and non-solicitation provisions during the term of his employment and for 12 months thereafter, in the case of the non-competition provisions, and 24 months thereafter, in the case of the non-solicitation provisions.

 

CAO Employment Agreement.  On April 5, 2008, we entered into a new employment agreement with Mr. Naylor with respect to his employment as Senior Executive Vice President, Chief Administrative and Business Development Officer. The ECC negotiated this agreement with Mr. Naylor. Under the agreement, Mr. Naylor’s base salary is set at a minimum of $700,000 per year (subject to potential increases upon ECC review). He continues to be eligible to participate in both the MIP and LRPIP at levels commensurate with his position and responsibilities and subject to such terms as are established by the ECC. Mr. Naylor agreed to a non-competition provision during the term of his employment and for 18 months thereafter and non-solicitation provisions during the term of his employment and for 24 months thereafter.

 

Other Employment and Change of Control Agreements.  During fiscal 2008, each of our named executive officers had an agreement that provided employment and 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 are summarized below. We provided these agreements 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.

Stock Ownership Guidelines.  We have a stock ownership policy that applies to all of our executive officers. Applicable provisions of this policy 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 shareholders and to encourage a long-term focus. Also, our policies prohibit our executives from engaging in hedging transactions with respect to TJX stock.

 

Tax and Accounting Considerations.  We structure incentive compensation arrangements to qualify as performance-based compensation exempt from the deduction limitations under Section 162(m) of the Internal Revenue Code, 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 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 nonperformance-based compensation in excess of $1 million. We also structure our compensation and benefit arrangements, where applicable, to qualify for an exemption under, or to satisfy the requirements of, the “nonqualified deferred compensation” rules under Section 409A of the Internal Revenue Code.

 

Equity Grant Practices.  Virtually all of our stock options and stock awards are granted at the same 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 in connection with new hires or promotions, the ECC approves or grants stock options and stock awards at other times during the year at pre-scheduled ECC meetings. 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.

 

Executive Compensation Committee Processes and Procedures

 

The ECC is responsible for overseeing executive compensation and benefits. The ECC has the authority, without Board or management approval, to retain and terminate all compensation consultants and to determine their fees and terms of engagement. In addition, the ECC may delegate its authority to a subcommittee and may establish formal procedures to govern its operation, as it deems appropriate.

 

In determining the compensation program for TJX and setting the compensation of our named executive officers, the ECC generally provides for total compensation and each of its elements by position level and individual performance. The ECC retained Cook in fiscal 2008 to provide the ECC with comparative compensation data. The ECC directly engaged Cook, setting the fees and the scope of the assignment. Cook assisted the ECC by assessing the competitiveness of our compensation levels for our named executive officers and other key senior managers. Cook utilized comparative data for a peer group of 12 publicly traded retail companies identified under “Compensation Discussion and Analysis” and benchmarked the total compensation levels of our named executive officers and the elements of that compensation, base salary, annual bonus and long-term incentive compensation, against those of the peer group. The ECC utilized this comparative data to assist it in determining the level and mix of compensation for our named executive officers.

The ECC reviews and approves compensation matters at various meetings during the year. The ECC generally acts as follows including with respect to our named executive officers:

 

 

Restricted stock awards to our named executive officers are both performance-based and service-based and are conditioned on achieving performance targets indexed to the targets of our MIP or LRPIP. Stock options and restricted stock awards are generally granted based on an employee’s position and job performance.

 

Our named executive officers play a limited role in the executive compensation process. Each named executive officer provides annual performance reviews of any named executive officers directly reporting to him or her. In addition, our Chief Executive Officer makes recommendations to the ECC regarding base salaries and other elements of compensation for the other named executive officers. The ECC then considers those performance reviews and recommendations in establishing base salaries, cash incentive awards and equity grants. The Corporate Governance Committee performs the annual performance review of our Chief Executive Officer, which the ECC considers in determining the compensation of our Chief Executive Officer.

 

Our named executive officers participate in our strategic planning process and recommend to the Board the annual plans for TJX and its divisions. These plans are the basis for the MIP and LRPIP performance targets and the restricted stock performance criteria, all of which are approved by the ECC. In addition, Mr. Campbell, Vice Chairman, assists the ECC in its administration of the MIP, LRPIP, SIP, SERP, GDCP and ESP and advises the ECC regarding the general design and structure of these incentive plans. Mr. Cammarata, Ms. Meyrowitz and Mr. Campbell regularly attended ECC meetings at the request of the ECC, although the ECC met in executive session at all regularly scheduled meetings.

Summary Compensation Table

 

The following table provides information concerning compensation for our principal executive officer, our principal financial officers during fiscal 2008 and our three other most highly paid executive officers during fiscal 2008 (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 benefits and limited perquisites. During fiscal 2008, each of our named executive officers had an employment agreement that provided for a base salary of not less than the amount of such officer’s current base salary. Effective March 13, 2006, each of our named executive officers agreed to a 10% salary reduction for his or her base salary and entered into amendments to his or her employment agreement permitting such a decrease. None of our named executive officers received a cash bonus outside of our MIP or LRPIP during fiscal 2007 or fiscal 2008 (other than Mr. Tripathy, who received a sign-on bonus). Our named executive officers were entitled under their employment agreements to participation in our SIP, MIP and LRPIP. Ms. Meyrowitz’s supplemental fiscal 2008 MIP award was granted to compensate her for the absence of a LRPIP award for fiscal 2006-2008 resulting from her employment in fiscal 2006 in a consulting role. Ms Meyrowitz, Mr. Campbell and Mr. Barron are fully vested in their respective accrued SERP benefits. The employment agreements of our named executive officers entitled them to an automobile benefit and participation in employee benefit and fringe benefit plans and programs made available to executives generally. For our executives, all other compensation items including perquisites comprise a small portion of overall total compensation. Mr. Tripathy’s total compensation was established to induce him to relocate and join TJX.

Grants of Plan-Based Awards in Fiscal 2008

 

The following table reports potential payouts under our incentive plans and all other stock and option awards that were granted during fiscal 2008 to our named executive officers.

 

 

 

 

A significant portion of each executive officer’s compensation is composed of cash and equity-based incentive compensation. Short-term cash incentives are granted under our MIP, and long-term cash incentives are granted under our LRPIP. As discussed in “Compensation Discussion and Analysis,” MIP awards are determined based on fiscal year performance targets for each of our divisions set annually by the ECC. For each participant, the target award is set as a percentage of base salary. If our performance meets the targeted performance, participants receive their target bonus. If our performance exceeds the targeted performance,

participants can earn up to the specified maximum, shown above, but not more than $5 million per award. If the performance target is less than targeted performance, the participants will receive no bonuses or bonuses below target, based on the extent of the deficiencies. Similarly, LRPIP awards are based on multi-year cumulative performance targets set by the ECC. Like our MIP, participants are paid performance awards under the LRPIP only to the extent that multi-year performance targets are achieved. LRPIP participants can earn up to the specified maximum, shown above, but not more than $5 million per award.

 

In fiscal 2008, we granted all equity incentives, including stock options and performance-based restricted stock, under our SIP. Generally, stock options have a maximum term of ten years and vest in equal annual installments over three years. Following a termination of employment 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. Following a retirement at or after age 65 with ten or more years of service, or a retirement at or after age 60 with 20 or more years of service, vested options generally remain exercisable for five years following termination and unvested options will continue to vest for the three year period following retirement. 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. All options, whether or not then vested, are forfeited on a termination for cause.

 

The restricted stock grants have both service-based and performance-based vesting conditions, with exceptions for some early terminations. Typically, the service-based conditions are satisfied by three years of continuous employment and the performance-based conditions are tied to the corporate performance target under our MIP. During fiscal 2006, based on input from our shareholders and a review of our equity grant practices, we revised our general approach to long-term compensation by decreasing the stock option incentives awarded to individuals and increasing their long-term cash incentive awards going forward, which impact is reflected in our fiscal 2008 grants of equity and non-equity incentive plan compensation.

Outstanding Equity Awards at 2008 Fiscal Year-End

 

The following table provides information on outstanding option and stock awards for named executive officers as of January 26, 2008:

 

 

 

 

 

 

Option Exercises and Stock Awards Vested during Fiscal 2008

 

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 2008:

 

 

 

 

Pension Benefits

 

We maintain a tax-qualified defined benefit plan, or the Retirement Plan, under which participants accrue a benefit payable as an annuity at retirement or, if vested, on 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 payable commencing at age 65, is 1% of eligible compensation (base salary and MIP awards) up to a periodically adjusted limit (currently $81,000) 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 in excess of another periodically adjusted limit, currently $230,000, however, is disregarded for these purposes.

 

Effective February 1, 2006, participation in the Retirement Plan was closed to future hires, and accordingly Mr. Tripathy does not participate. However, participants employed prior to the freeze date continue to accrue a benefit as described above. Benefits under the Retirement Plan vest, in general, after five years of

service. Each of our other named executive officers except Mr. Naylor has a fully vested benefit under the Retirement Plan. 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 at retirement or at age 55, if later.

 

We also maintain a Supplemental Executive Retirement Plan. For each officer designated by the ECC, which include Ms. Meyrowitz, Mr. Campbell and Mr. Barron, the SERP benefit is payable in installments, or in certain other forms, of actuarially equivalent value to the value of an annuity 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. In determining final average earnings, the SERP includes salary and short-term incentives for a year and takes into account the average for the five years over the preceding ten years that yields the highest average. Other key employees who participate in the pension plan, including Mr. Herrman and Mr. Naylor, are only eligible for an alternative SERP benefit under which participants whose regular pension benefits are affected by Internal Revenue Service benefit restrictions receive on a nonqualified basis, payable by us, the benefits lost by reason of those restrictions. Because she has not yet attained age 55, Ms. Meyrowitz is not eligible for early retirement under the Retirement Plan or the SERP, although she has a vested benefit under both.

 

We do not have a policy of granting extra years of credited service for purposes of these plans. The underlying valuation methodology and other material assumptions utilized in calculating the present value of the accumulated pension benefits (see table below) are disclosed in Note J to our audited financial statements filed with our Annual Report on Form 10-K for fiscal 2008.

 

The following table provides information on pension benefits for our named executive officers as of January 26, 2008, except for Mr. Tripathy who is not eligible for these pension benefits: