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TABLE OF CONTENTS

 

Notice of 2011 Annual Meeting of Shareholders	iii
Important Voting Information	iv
Important Notice Regarding the Availability of Proxy Materials	iv
Information Regarding Admission to the Annual Meeting	iv
Proxy Statement	1
General	1
Notice Only Delivery Method	1
Voting	1
Matters to be Acted Upon	2
n Item 1 - Election of Directors	2
Information Relating to Directors and Director Nominees	2
Information Relating to the Board of Directors and Committees	5
In General	5
Corporate Governance	6
Attendance at Board, Committee and Annual Meetings	8
Standing Committees	8
Corporate Governance and Nominating Committee	8
Audit Committee	10
Compensation Committee	11
Shareholder and Other Interested Party Communications with the Board	13
Security Ownership of Certain Beneficial Owners and Management	14
Transactions with Related Persons	17
Compensation of Directors and Executive Officers	19
Compensation Discussion and Analysis	19
Compensation Committee Report	40
2010 Summary Compensation Table	41
2010 All Other Compensation Table	42
2010 Grants of Plan-Based Awards Table	43
2010 Outstanding Equity Awards at Fiscal Year-End Table	44
2010 Option Exercises and Stock Vested Table	46
2010 Pension Benefits Table	47
2010 Nonqualified Deferred Compensation Table	48
Potential Payments on Termination or Change In Control	49
2010 Director Compensation Table	59
n Item 2 - Advisory Vote on Executive Compensation	61
n Item 3 - Advisory Vote on the Frequency of Future Advisory                                        Votes on Executive Compensation	62
n Item 4 – Ratification of the Selection of Deloitte & Touche LLP as Independent                                        Registered Public Accounting Firm For Fiscal 2011	64
In General	64
Principal Accountant Fees and Services	64
Pre-Approval Policies	64
Audit Committee Report	65
Securities Authorized for Issuance Under Equity Compensation Plans	66
n Item 5 – Approval of Second Amended and Restated 2008 Equity Incentive Plan	67
Section 16(a) Beneficial Ownership Reporting Compliance	70
Additional Information	70

 

NOTICE OF 2011 ANNUAL MEETING OF SHAREHOLDERS

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To the Shareholders:

 

The 2011 Annual Meeting of Shareholders of Stage Stores, Inc. (the “Company”) will be held at the offices of the Company, 10201 Main Street, Houston, Texas 77025 on Thursday, June 9, 2011, at 1:00 p.m. local time.  If you need directions to attend the Annual Meeting, they can be found on our website, www.stagestoresinc.com , under “Investor Relations”.  The shareholders will vote on the following matters:

 

1.

Election of seven Directors for a term of one year,

 

2.

Advisory Vote on Executive Compensation,

 

3.

Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation,

 

4.

Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2011,

 

5.

Approval of Second Amended and Restated 2008 Equity Incentive Plan, and

 

6.

Such other matters as may properly come before the Annual Meeting or any adjournment thereof.

 

The Board of Directors has fixed the close of business on April 12, 2011 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting.

 

 

	By Order of the Board of Directors
	Edward J. Record
	Chief Operating Officer
	and Secretary
April 29, 2011

 

 

 

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IMPORTANT VOTING INFORMATION   If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum, but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”).   If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under NYSE rules to vote your shares on the ratification of Deloitte & Touche LLP, even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on Items 1 (Election of Directors), 2 (Advisory Vote on Executive Compensation), 3 (Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation) and 5 (Approval of the Second Amended and Restated 2008 Equity Incentive Plan) without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on those matters. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares .   More Information Is Available   If you have any questions about the proxy voting process, please contact the broker, bank or other financial institution where you hold your shares. The Securities and Exchange Commission (“SEC”) also has a website ( www.sec.gov/spotlight/proxymatters.shtml ) with more information about your rights as a shareholder.   Additionally, you may contact our Investor Relations Department at www.stagestoresinc.com/investor-relations .

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 9, 2011.

 

The Company’s 2011 Proxy Statement, 2010 Annual Report and 2010 Annual Report on Form 10-K are available to review at http://bnymellon.mobular.net/bnymellon/ssi .

 

INFORMATION REGARDING ADMISSION TO THE ANNUAL MEETING

 

In accordance with the Company’s security procedures, all persons attending the Annual Meeting must present either their E-Notice, or the Admission Ticket found on their Proxy Card (if they requested and received a Proxy Card), or a brokerage statement or other proof of ownership of Stage Stores stock as of the Record Date, and picture identification.  If you are a shareholder of record and plan to attend the meeting in person, please bring your E-Notice or your Admission Ticket with you to the meeting.  For security purposes, briefcases, bags, purses, backpacks and other containers will be subject to search at the door.

 

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PROXY STATEMENT

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  GENERAL

 

This Proxy Statement is furnished in connection with the solicitation of proxies by Stage Stores, Inc. (the “Company”, “we”, “our” or “us”) on behalf of the Board of Directors (the “Board”) for the 2011 Annual Meeting of Shareholders (the “Annual Meeting”), which will be held at the principal executive offices of the Company, 10201 Main Street, Houston, Texas 77025, on Thursday, June 9, 2011, at 1:00 p.m. local time. This Proxy Statement and Proxy Card are first being made available to the shareholders on or about April 29, 2011.  The proxy will be voted at the Annual Meeting if the signer of the Proxy Card or the shareholder submitting their vote and proxy by mail, by telephone or by the Internet was a shareholder of record on April 12, 2011 (the “Record Date”).

 

NOTICE ONLY DELIVERY METHOD

 

We have adopted the “Notice Only Delivery Method” of distributing our Proxy Statement, Proxy Card and Annual Report to shareholders.  Therefore, we will mail a Notice of Internet Availability of Proxy Materials (“E-Notice”) to shareholders rather than paper copies of these documents.  If you would like to receive a paper copy of these documents, you must request one.  Instructions on how to request a copy by telephone, email or the Internet are contained in the E-Notice.

 

VOTING

 

           The holders of our common stock are entitled to one vote per share on all matters to be voted upon by the shareholders.  On the Record Date, there were 36,114,999 shares of our common stock, par value $0.01, outstanding. A list of the shareholders entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting for purposes relating to the Annual Meeting.

 

You can ensure that your shares are voted at the Annual Meeting by submitting your instructions by completing, signing, dating and returning your Proxy Card in the envelope provided (if you requested a paper copy of the Proxy Card) or by submitting your vote and proxy by telephone or by the Internet.  Submitting your instructions by Proxy Card, by telephone, or by the Internet will not affect your right to attend the Annual Meeting and vote.  A shareholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy, or by notifying the Inspectors of Election in writing of such revocation.

 

The representation in person or by proxy of a majority of the outstanding shares of our common stock entitled to a vote at the Annual Meeting is necessary to provide a quorum for the transaction of business at the Annual Meeting. Shares can only be voted if the shareholder is present in person or is represented by a properly signed Proxy Card or by a vote and proxy submitted by telephone or by the Internet.  Each shareholder’s vote is very important. Whether or not you plan to attend the Annual Meeting in person, please sign and promptly return the  Proxy Card (if you requested a paper copy of the Proxy Card) or submit your vote and proxy by telephone or by the Internet.  All signed and returned Proxy Cards and votes and proxies submitted by telephone or by the Internet will be counted towards establishing a quorum for the Annual Meeting, regardless of how the shares are voted.

 

A shareholder of record on the Record Date may vote in any of the following four ways:

 

·	by toll-free number at 1-866-540-5760; or

 

·	by the Internet at www.proxyvoting.com/ssi ; or

 

·	by completing and mailing a Proxy Card (if you requested a paper copy of the Proxy Card); or

 

·	by written ballot at the Annual Meeting.

 

If you vote by mail, by the Internet or by telephone, your vote must be received by 11:59 p.m. Eastern Time on Wednesday, June 8, 2011, the day before the Annual Meeting.  Your shares will be voted as you indicate.  If you return or otherwise complete your Proxy Card, but you do not indicate your voting preferences, the proxies will vote your shares FOR Items 1 (Election of Directors), 2 (Advisory Vote on Executive Compensation), 4 (Ratification of the Selection of Deloitte & Touche LLP) and 5 (Approval of Second Amended and Restated 2008 Equity Incentive Plan), for once every THREE years with respect to Item 3 (Advisory Vote on the Frequency of

 

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Future Advisory Votes on Executive Compensation), and in their discretion for Item 6 (such other matters as may properly come before the Annual Meeting or any adjournment thereof).

 

If your shares are held in a brokerage account (this is called “street name”), you should follow the voting directions provided by the broker.  You may complete and mail a voting instruction card to the broker or, in most cases, submit voting instructions by mail, by telephone or by the Internet. Your shares should be voted by the broker as you have directed.

 

If your shares are held in street name and you wish to have your shares voted for Item 1 (Election of Directors), Item 2 (Advisory Vote on Executive Compensation), Item 3 (Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation), and Item 5 (Approval of Second Amended and Restated 2008 Equity Incentive Plan) you must either (i) instruct your broker how to vote your shares, (ii) vote your shares by phone or the Internet, or (iii) bring a brokerage statement, written proxy from your broker, or other proof of ownership of the Company’s common stock as of the Record Date with you to the Annual Meeting.

 

We will pass out written ballots to any shareholder entitled to vote at the Annual Meeting.

 

For additional information concerning the manner of proxy solicitation and voting, please see “Additional Information” on page 70 of this Proxy Statement.

 

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ITEM 1 - ELECTION OF DIRECTORS

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INFORMATION RELATING TO DIRECTORS AND DIRECTOR NOMINEES

 

Cheryl Nido Turpin

 

On March 29, 2011, Cheryl Nido Turpin informed the Board of Directors that she would not be standing for re-election as a member of the Board of Directors at the Annual Meeting.  Due to the departure of Ms. Turpin, the Board is conducting a search for an additional Director.

 

New Directors

 

Earl Hesterberg.   On July 1, 2010, the Board of Directors appointed Earl J. Hesterberg to the Board, thereby increasing its membership to seven Directors.

 

Gabrielle Greene.   On September 21, 2010, the Board of Directors appointed Gabrielle E. Greene to the Board, thereby increasing its membership to eight Directors.

 

In General

 

To the extent required by the rules of the SEC, certain information concerning former Directors James Scarborough and Sharon Mosse, both of whom retired as Directors at the conclusion of the 2010 Annual Meeting, and Dr. Tom Mentzer, who passed away on February 26, 2010, is provided in this Proxy Statement.

 

At the Annual Meeting, seven Directors are to be elected to hold office until the 2012 Annual Meeting and until their successors have been elected and have qualified. Information concerning the seven nominees is set forth below.  All of the nominees are currently Directors.  The Board has determined that the following six Director nominees are Independent Directors, as independence is defined by the NYSE:  Alan J. Barocas, Michael L. Glazer, Gabrielle E. Greene, Earl J. Hesterberg, William J. Montgoris, and David Y. Schwartz.  Mr. Hall, the seventh Director nominee, is not an Independent Director as he is our President and Chief Executive Officer. The Board’s Corporate Governance and Nominating Committee recommended those current Directors for re-election.  The Board knows of no reason why any nominee may be unable to serve as a Director.  If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board may nominate.

 

 

Board Composition

 

Nominees for Director are selected on the basis of broad experience, diversity (differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity), wisdom, integrity, the ability to make independent analytical inquiries, an understanding of the Company’s business environment, and a willingness to devote adequate time to Board duties.

 

Below we identify and describe the specific experience, qualifications, attributes or skills (collectively, “Director Qualifications”)   our Directors bring to the Board that are important in light of our business. The specific Directors’ Qualifications that the Corporate Governance and Nominating Committee and the Board considered in each Director’s re-nomination follow their individual biographies.

 

·

Leadership experience . We believe that Directors with experience in significant leadership positions over an extended period, especially Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”) positions, provide the Company with special insights. These people generally possess extraordinary leadership qualities and the ability to identify and develop those qualities in others. They demonstrate a practical understanding of organizations, processes, strategy, risk management and the methods to drive change and growth.

 

·

Finance experience.   We believe that an understanding of finance and financial reporting processes is important for our Directors. The Company measures its operating and strategic performance by reference to financial targets. In addition, accurate financial reporting and vigorous auditing are critical to our success. We seek to have at least a majority of the members of our Audit Committee qualify as Audit Committee Financial Experts and we expect all of our Directors to be financially knowledgeable.

 

·	Industry experience . We seek to have Directors with experience as executives, directors, consultants, professionals or other capacities in the retail industry.

 

·	Marketing experience . As a retailer, marketing is critical to our success. Therefore, marketing expertise is very important to us.

 

·

Real estate experience . As of the end of our 2010 Fiscal Year (January 29, 2011), we operated 786 stores in 39 states.  In addition to opening new stores, the Company has continued to invest in the expansion, relocation and remodeling of its existing stores.  Therefore, real estate expertise is very important to us.

 

  The following information pertains to each nominee’s (i) age as of April 12, 2011, (ii) principal occupations for at least the past five years, and (iii) directorships in other public companies at any time during the past five years.

 

 

Mr. Barocas has been a Director since January 2007.  Since January 1, 2011, he has been Senior Executive Vice President of Leasing at General Growth Properties, Inc. located in Chicago. From May 2006 to January 1, 2011, Mr. Barocas was the principal of Alan J. Barocas and Associates, a real estate consulting firm.  From June 1981 to April 2006, he was employed by GAP, Inc.  His last position with GAP, Inc. was Senior Vice President of Real Estate.  He is a past Trustee of the International Council of Shopping Centers (ICSC).

 

 

Director Qualifications:

 

·

Leadership and Industry experience: current Senior Executive Vice President of a large public company engaged in commercial real estate; former Senior Vice President of Real Estate of a large public company in the retail industry; twenty-five years of experience with a large public company in the retail industry

 

·	Real estate experience:   more than thirty years of real estate experience, twenty-five of which were with a large public company in the retail industry

 

Mr. Glazer has been a Director since August 2001.  Since October 2009, he has served as President and CEO of Mattress Giant Corporation located in Addison, Texas.  From August 2005 to October 2009, Mr. Glazer served as Managing Director of Team Neu, located in Pittsfield, Massachusetts.  From May 1996 to August 2005, he served as President and Chief Executive Officer of KB Toys, Inc.  KB Toys, Inc. filed a petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware on January 14, 2004 and emerged from Chapter 11 in August 2005.  From April 1995 to January 1999, Mr. Glazer also served as President of Big Lots.  From March 1990 to January 1995, he served as President of the Bombay Company.  Mr. Glazer is also a Director of CPI Corporation.   He also formerly served on the boards of Brookstone and Big Lots.

 

Director Qualifications:

 

·	Leadership experience: current President and CEO of a privately held company in the retail industry with 1,000 employees; former President and CEO of three public companies in the retail industry

 

·	Industry experience:   thirty-six years of experience in the retail industry

 

Ms.  Greene was appointed a Director on September 21, 2010.  Since 2005, she has been a General Partner of Rustic Canyon/Fontis Partners, a later-stage private equity fund investing in high growth segments of emerging domestic markets, headquartered in Pasadena, California.  From 2002 to 2005, Ms. Greene was the Chief Financial Officer of Gluecode Software, Inc. headquartered in El Segundo, California.  From 2000 to 2002, she was the Chief Financial Officer of Crown Services Company headquartered in Fresno, California. From 1998 to 2000, Ms. Greene was a General Partner of Black Enterprise/Greenwich Street Growth Fund headquartered in New York, New York.  She also serves on the Board of Directors of Whole Foods Market, Inc., a NASDAQ listed company that pioneered the supermarket concept in health foods retailing.  From September 2006 to May 2008, Ms. Greene served on the Board of Directors of Bright Horizons Family Solutions Inc., a then NASDAQ listed leading provider of workplace services for employers and families headquartered in Watertown, Massachusetts.

 

Director Qualifications:

 

·

Leadership and Audit Committee experience:   Significant board experience; served on the boards of two public companies, one of which was in the retail sector; significant Audit Committee experience, having served on that committee for the entirety of her board service for both companies, as well as chairing the Whole Foods Audit Committee for the past three years

 

·	Finance experience:   Extensive financial experience; former CFO of two companies, one in the retail industry and one in the service industry; extensive experience in finance and investment analysis as a private equity investor

 

Mr. Hall joined the Company in February 2006 as President and Chief Operating Officer and assumed the position of President and Chief Executive Officer in November 2008.  He became a Director in March 2008.  Mr. Hall was employed by Foley’s, a Houston-based division of May Department Stores, Inc., from June 2002 to February 2006.  While at Foley’s, Mr. Hall served as Chief Financial Officer (June 2002 to April 2003) and as Chairman (May 2003 to February 2006).

 

Director Qualifications:

 

·	Leadership and Industry experience: current President and CEO of the Company;  former Chairman of Foley’s, a division of May Department Stores; eighteen years of experience in the retail industry

 

·	Finance experience:   Certified Public Accountant; former CFO of a division of a large public company in the retail industry

 

Mr.  Hesterberg was appointed a Director on July 1, 2010.  Since April 2005, he has been the President, CEO and a Director of Group 1 Automotive, Inc., a NYSE company headquartered in Houston, Texas.  From

 

 

·	Leadership experience: current President, CEO and a Director of a NYSE company in the automotive retail industry with 7,500 employees; former Executive Vice President and corporate officer of a NYSE listed global automotive manufacturer

 

·	Industry and Marketing experience: 36 years of sales, marketing and service experience in the automotive retail industry

 

Mr. Montgoris has been a Director since June 2004.  He retired from The Bear Stearns Companies, Inc. in June 1999.  From 1987 to 1999, Mr. Montgoris served in the following positions with Bear Stearns:  Chief Operating Officer (1996 to 1999), Chief Operating Officer and Chief Financial Officer (1993 to 1996) and Chief Financial Officer (1987 to 1993).  Mr. Montgoris is also a director of Carter’s, Inc. and OfficeMax Incorporated.  From June 1999 to March 2009, he served as a director of the Reserve Fund, a family of money market mutual funds.

 

Director Qualifications:

 

·

Leadership, Industry and Committee experience: former COO of a leading global investment banking, securities trading and brokerage firm; member of the Audit Committee of a large public company that is the largest branded marketer in the United States of apparel exclusively for babies and young children; member of the Audit and Compensation Committees of a large public company that is a leader in both business-to-business and retail office products distribution

 

·	Finance experience: accounting background; Certified Public Accountant; former CFO of a leading global investment banking, securities trading and brokerage firm

 

Mr. Schwartz has been a Director since July 2007.  Since June 1997, Mr. Schwartz has been a business advisor and consultant to various companies principally in the retail, distribution and services industries.  Prior to that, Mr. Schwartz spent thirty-five years with Arthur Andersen, LLP, from which he retired as a Senior Partner in June 1997.  While at Arthur Andersen, he served clients in various industries, primarily retailing, distribution and communications.  Mr. Schwartz is also a director of Walgreen Co. and Foot Locker, Inc. He retired as a director of True Value Company in April 2011.

 

Director Qualifications:

 

·

Leadership, Industry and Audit Committee experience: member of the Board of Directors of two large companies in the retail industry; Chairman of the Audit Committee of a public company in the retail industry and former Chairman of the Audit Committee of a private company in the wholesale distribution industry; Chairman of the Finance and Strategic Planning Committee of a large public company in the retail industry

 

·	Finance experience: Certified Public Accountant;  former partner with Arthur Andersen (partner in charge of Retail Industry Program and Managing Partner of the Chicago office’s Attest and Business Consulting Practice)

 

Your Board of Directors recommends a vote FOR each nominee for Director.

 

INFORMATION RELATING TO THE BOARD OF DIRECTORS AND COMMITTEES

 

In General

 

Our business is managed under the direction of our Board.  Our Board currently consists of eight Directors. Members of our Board are kept informed of our business through discussions with our CEO and other officers, by reviewing materials provided to them, by visiting our offices, stores and distribution centers, and by participating in meetings of the Board and its Committees.

 

 

Corporate Governance

 

Board Leadership Structure.   Andy Hall, our CEO, does not serve as the Chairman of our Board.  We believe that this leadership structure is appropriate for the Company because while it allows the CEO to speak for and lead the Company and communicate with other members of senior management, it provides for effective oversight by our Board, all of whose members are independent with the exception of Mr. Hall, and all of whom are highly qualified and experienced and, other than Mr. Hall, exercise a strong independent oversight function.  This oversight function is enhanced by the fact that all of the Board’s standing committees—Audit, Compensation, and Corporate Governance and Nominating—are comprised entirely of Independent Directors.

 

The Board’s Role in Risk Oversight.   The Board’s role in the risk oversight of the Company is administered directly and through its standing committees as follows:

 

·

The Audit Committee has primary responsibility for financial oversight. In that regard, the Audit Committee’s purpose is to assist in the Board’s oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s independent auditor’s qualifications, independence and work, and (iv) the performance of the Company’s internal audit function and independent auditors. The Committee acts independently as authorized and assists the Board in fulfilling its oversight responsibilities by reviewing certain financial information that is provided to the Board and others, the internal control structure, the audit process, and the adherence to applicable laws and regulations. Considering the size and complexity of the Company, the Committee must apply reasonable materiality standards to all of its activities. In addition, the Audit Committee has certain responsibilities with respect to our compliance program.  For additional information, please see “Information Relating to the Board of Directors and Committees—Audit Committee” and “Item 4—Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2011—Audit Committee Report” later in this Proxy Statement.

 

·

The Compensation Committee considers the risks associated with our compensation policies and practices for all employees, including non-executive officers, to ensure that they do not create risks that are reasonably likely to have a material adverse affect on the Company. For additional information, please see “Information Relating to the Board of Directors and Committees—Compensation Committee” later in this Proxy Statement.

 

·

The Corporate Governance and Nominating Committee assists the Board in fulfilling its corporate governance and oversight responsibilities by reviewing corporate governance issues that may be brought before the Board, by exercising oversight over the Company’s Corporate Governance Guidelines, by recommending qualified individuals for nomination as Directors and reviewing their performance, and by reviewing applicable laws and regulations related to corporate governance matters.  For additional information, please see “Information Relating to the Board of Directors and Committees—Corporate Governance and Nominating Committee” later in this Proxy Statement.

 

·	The Board is kept abreast of its Committees' risk oversight and other activities via reports of each Committee Chairman to the full Board. These reports are presented at every regular Board meeting and include discussions of Committee agenda topics, including matters involving risk oversight.

 

·	Members of management who supervise the day-to-day risk management responsibilities periodically provide reports to the Board as a whole and to the Committees if requested.

 

The Board considers specific risk topics, including risks associated with our strategic plan, our capital structure and our development activities. In addition, the Board receives detailed regular reports from the members of our senior management team, which consists of the heads of our principal business and corporate functions—that include discussions of the risks and exposures involved in their respective areas of responsibility. These reports are provided in connection with regular Board meetings and are discussed, as necessary, at Board meetings. Further, the Board is routinely informed of developments affecting the Company that could affect our risk profile or other aspects of our business.

 

Director Independence.   Seven of our eight Directors are Independent Directors, as independence is defined by the NYSE.   One of our Directors is not an Independent Director by virtue of the fact that he is our current President and CEO (Andy Hall). All members of the Board’s Audit, Compensation, and Corporate Governance and Nominating Committees are Independent Directors.  Members of the Audit Committee must also

 

 

satisfy, and they do satisfy, a separate SEC independence requirement, which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from us or any of our subsidiaries other than their Directors’ compensation.

 

Corporate Governance Guidelines.   The Board has adopted written Corporate Governance Guidelines (the “Governance Guidelines”) to assist it in the exercise of its corporate governance responsibilities.  The purpose of the Governance Guidelines is to provide a structure within which our Directors and our management can monitor the effectiveness of policy and decision making both at the Board and management level, with a view to enhancing shareholder value over the long term. The Governance Guidelines are available on our website at www.stagestoresinc.com.   They can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Corporate Governance Guidelines.”

 

Code of Ethics for Senior Officers.   In order to promote ethical conduct in the practice of financial management throughout the Company, the Board has adopted a Code of Ethics for Senior Officers (the “Code”).  We believe that in addition to the CEO, the Chief Operating Officer, the Chief Financial Officer and the Controller each holds an important and elevated role in corporate governance.  The Code is designed to deter wrongdoing and provides principles to which our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions are expected to adhere and advocate.  These principles embody rules regarding individual and peer responsibilities, as well as responsibilities to the shareholders, the public and others who have a stake in our continued success.  The Code is available on our website at www.stagestoresinc.com .  It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Code of Ethics for Senior Officers.”  We intend to disclose future amendments to certain provisions of the Code, or waivers of such provisions granted to Directors and executive officers, if any, on our website within four business days following the date of such amendment or waiver or as otherwise may be required by the SEC.

 

Code of Ethics and Business Conduct.   The Board has also adopted a Code of Ethics and Business Conduct (the “Code of Ethics”), which is the basic set of policies and procedures governing the behavior of all Directors, executive officers, and other employees of the Company (each employee an “Associate” and collectively the “Associates”) in conformance with Section 303A.10 of the NYSE Listed Company Manual.  It is our policy to adhere to the highest standards of business ethics in all our business activities.  When Associates are engaged in any activity concerning the Company, our customers, competitors, suppliers, other Associates, shareholders or the general public, they must maintain standards of uncompromising integrity and conduct themselves in a professional manner with a positive, supportive attitude about the Company. The Code of Ethics is available on our website at www.stagestoresinc.com .  It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Code of Ethics and Business Conduct.”  We intend to disclose future amendments to certain provisions of the Code of Ethics, or waivers of such provisions granted to Directors and executive officers, if any, on our website within four business days following the date of such amendment or waiver or as otherwise may be required by the NYSE or the SEC.

 

Non-Accounting Complaints.   We have established procedures to enable anyone who has a concern about a violation of the Code of Ethics or any other Company policy to report that concern through normal Company channels or anonymously.  An Anonymous Ethics Hotline is maintained by an independent third party and is available 24 hours a day, 7 days a week.

 

Accounting Complaints .    The Audit Committee has established procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.  These procedures, which are incorporated into the Code of Ethics, (i) set forth a statement about our commitment to comply with the laws; (ii) encourage employees to inform us of conduct amounting to a violation of the applicable standards; (iii) describe prohibited conduct; (iv) set forth compliance procedures that employees can easily use, including making anonymous complaints; and (v) provide assurances that there will be no retaliation for reporting suspected violations.

 

Policy on Poison Pills.   The term “Poison Pill” refers to a type of shareholder rights plan that some companies adopt to provide an opportunity for negotiation during a hostile takeover attempt.  The Board has not adopted a Poison Pill.  However, as we are a Nevada corporation, our Articles of Incorporation provide that we have expressly elected to be governed by Chapter 78 of the Nevada Revised Statutes (“NRS”) with respect to the acquisition of a controlling interest in the Company.  NRS 78 provides that a person who seeks to acquire a “Controlling Interest” (20% or greater) in a Nevada corporation will only obtain such voting rights in the shares acquired (the “Control Shares”) as are granted

 

 

by a vote of the holders of a majority of the remaining voting power of the Company at a special or annual meeting of the shareholders.  In addition, NRS 78 provides that the Company may redeem not less than all of the Control Shares at the average price of the Control Shares if the Control Shares are not granted full voting rights by the shareholders.

 

Attendance at Board, Committee and Annual Meetings

 

Board Meetings .   The Board held four regular meetings and four special meetings during our 2010 Fiscal Year.  During our 2010 Fiscal Year, no current Director attended fewer than 75% of the aggregate of the total number of meetings of the Board and of meetings held by committees of the Board on which he or she was a member during the time he or she was a Director.  In addition to regularly scheduled meetings, a number of Directors were involved in numerous informal meetings with management, offering valuable advice and suggestions on a broad range of corporate matters.

 

Executive Sessions (Meetings of Independent Directors).   As described in the Governance Guidelines, the Independent Directors meet in regularly scheduled executive sessions without employees and non-Independent Directors present.

 

Annual Meeting.   It is the Board’s policy that Directors should attend our annual meeting of the shareholders absent exceptional cause.  Last year, all Directors attended the annual meeting of shareholders except for Ms. Greene and Mr. Hesterberg, who were not Directors at the time.

 

 

(I)	The Director is an Independent Director.

(C)	The Director is the Chairman.

(ACFE)

The Director is an Audit Committee Financial Expert.

 

Corporate Governance and Nominating Committee

 

In General .   The members of the Corporate Governance and Nominating Committee are Michael Glazer (Chairman), Earl Hesterberg, David Schwartz and Cheryl Nido Turpin, all of whom are Independent Directors.  The Committee’s primary purposes are (i) to develop, maintain and review the Governance Guidelines and propose changes to the Governance Guidelines as corporate governance developments warrant, (ii) to consider any Director candidates recommended by shareholders, (iii) to identify, recruit and recommend potential candidates for nomination as Directors to the Board consistent with criteria approved by the Board, and to nominate Directors for membership on Board committees, (iv) to evaluate the overall performance of the Board, the committees of the

 

 

Board, the Directors and management, and (v) to report annually to the Board on the status of the Chief Executive Officer’s succession plan.  The Committee assists the Board in fulfilling its corporate governance and oversight responsibilities by reviewing corporate governance issues that may be brought before the Board, by exercising oversight over the Governance Guidelines, by recommending qualified individuals for nomination as Directors and reviewing their performance, and by reviewing applicable laws and regulations related to corporate governance matters.  Annually, the Committee evaluates the overall performance of the Board and the Governance Guidelines.  Periodically, the Committee reviews the compensation paid to the Directors.  An annual performance evaluation of the Committee is conducted by the Board and the members of the Committee. The Committee met four times during our 2010 Fiscal Year.

 

Corporate Governance and Nominating Committee Charter.   The Corporate Governance and Nominating Committee’s Charter is posted on our website at www.stagestoresinc.com . It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “CG&NC Charter”.

 

Evaluation of the Chairman, the Board, Board Committees and Individual Directors.   The Corporate Governance and Nominating Committee is responsible for establishing the evaluation criteria and implementing the process for the annual evaluation of the Chairman, the Board, the Board Committees and the individual Directors.  Each Director annually evaluates the Chairman, the Board, the Board Committees and the other Directors.  With respect to the Chairman, the Board and the Board Committees, the evaluations are of their overall performance as a whole and the Committee considers specific areas in which the Directors believe a better contribution could be made.  The results of the evaluations of the Chairman, the Board and the Board Committees are reported to the entire Board by the Chairman.  With respect to the evaluation of individual Directors, the purpose of the evaluation is to increase the corporate governance effectiveness of the Board, not to target individual Directors.  The results of the individual Director evaluations are communicated to the respective Directors by the Chairman or his designee and, in the case of the Chairman, by outside counsel.

 

Evaluation of the Guidelines, Committee Charters, Corporate Governance Policies and Related Party Transactions .  With input from the other Directors, the Corporate Governance and Nominating Committee reports annually to the Board on its evaluation of the Governance Guidelines, the Committee charters, any other corporate governance policies, and any related party transactions (transactions involving the Company and any executive officer, Director, employee or their affiliates and immediate family members).

 

Director Qualifications; Process for Identifying and Evaluating Nominees .   Nominees for Director must possess the following minimum qualifications: broad experience, diversity (differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity), wisdom, integrity, the ability to make independent analytical inquiries, an understanding of our business environment, and a willingness to devote adequate time to Board duties.  The Corporate Governance and Nominating Committee is responsible for assessing the appropriate balance of skills and qualifications required of Directors.  In identifying and evaluating nominees for Director, including nominees recommended by shareholders, the Corporate Governance and Nominating Committee will implement such processes as it deems appropriate including, in its sole discretion, retaining a third party or third parties to identify or evaluate or assist in identifying or evaluating potential nominees.  However, at a minimum, each nominee for Director must (i) meet the minimum qualifications set forth above, (ii) have at least one interview with the Corporate Governance and Nominating Committee and with any other Board member who requests an interview, and (iii) complete and sign a Director and Executive Officer Questionnaire in a form deemed appropriate by the Board prior to his or her nomination to the Board.  Each Director must no less than annually complete and sign a Director and Executive Officer Questionnaire in a form deemed appropriate by the Board.  In the event any information contained on a Director’s most recent Director and Executive Officer Questionnaire becomes incomplete or inaccurate, it is the responsibility of the Director to provide complete and accurate information to the Corporate Governance and Nominating Committee within thirty days. When formulating its Director recommendations, the Committee will also consider any advice and recommendations offered by our CEO and any other members of the Board.

 

Diversity.   The Board endeavors to have a Board representing a range of experience in business and in other areas that are relevant to the Company’s activities. The goal of the Corporate Governance and Nominating Committee is to achieve a Board that, as a whole, provides effective oversight of the management and business of the Company, through, among other things, diversity (differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity).  This policy with respect to the consideration of diversity in identifying Director nominees is implemented, and its effectiveness

 

 

assessed, annually by both the Board and the Corporate Governance and Nominating Committee as part of the Director nomination process.

 

Consideration of Shareholder Nominees.   When formulating its Director recommendations, the Corporate Governance and Nominating Committee will also consider any written recommendations received from our shareholders identifying the nominee and stating his or her qualifications.  The Committee evaluates all nominees for Director in the same manner regardless of the source of the recommendation.  For the Annual Meeting of Shareholders in 2012, recommendations for Director nominees must be submitted in writing by Friday, December 30, 2011 to the Corporate Governance and Nominating Committee, c/o Edward J. Record, Secretary, Stage Stores, Inc., 10201 Main Street, Houston, Texas 77025, and must include the names of such nominees, together with their qualifications for service as a Director of the Company.

 

Succession Planning.   The Governance Guidelines require (i) the Corporate Governance and Nominating Committee to make an annual report to the Board on emergency as well as expected CEO succession planning and (ii) the CEO to prepare, on a continuing basis, a short-term succession plan which delineates a temporary delegation of authority to certain officers of the Company, if all or a portion of the executive officers of the Company should unexpectedly become unable to perform their duties.  The short-term succession plan will be in effect until the Board has the opportunity to consider the situation and take action, when necessary.

 

Consultants.   The Corporate Governance and Nominating Committee has the authority to retain, from time to time and at our expense, search firms and other consultants to assist it in identifying and recruiting potential directors for nomination, in evaluating director compensation, and to otherwise carry out its responsibilities and duties and to approve the search firm or other consultant’s fees and other retention terms.

 

Engagement of Compensation Consultant-Director Compensation.   The Corporate Governance and Nominating Committee (i) has the authority to retain, from time to time and at our expense, a professional compensation consulting firm to review our Director compensation program, and (ii) has selected and engaged Hay Group, a leading human resource and compensation consulting firm, as its independent consultant to advise it on Director compensation.  Likewise, the decision to retain a consultant is at the sole discretion of the Corporate Governance and Nominating Committee and the consultant works at the direction of the Corporate Governance and Nominating Committee.  Since 2005, Hay Group has been engaged from time to time by both the Corporate Governance and Nominating Committee and management for professional compensation consulting with respect to compensation of our Directors.

 

Compensation of Directors; Role of Compensation Consultant in Determining or Recommending the Amount or Form of Director Compensation. It is the responsibility of our Corporate Governance and Nominating Committee to recommend to our Board alternative forms of Director compensation. Our management reports at least once a year to the Corporate Governance and Nominating Committee on the status of our Director compensation in relation to the compensation of directors of our Peer Group. With the assistance of Hay Group as its compensation consultant, the Corporate Governance and Nominating Committee periodically evaluates Director compensation to ensure that our Directors are compensated in a manner consistent with those of our Peer Group.  Changes in Director compensation, if any, are recommended by the Corporate Governance and Nominating Committee, but must be approved by our Board after a full discussion.

 

  The nature and role of Hay Group’s assignment with respect to Director compensation and its interaction with the Chairman of the Corporate Governance and Nominating Committee is essentially the same as it is with the Compensation Committee in the case of executive officer compensation.  However, Hay Group only attends meetings of the Corporate Governance and Nominating Committee that involve Director compensation, which is generally one meeting a year.

 

Audit Committee

 

In General .   The members of the Audit Committee are David Schwartz (Chairman), Alan Barocas, Gabrielle Greene and William Montgoris, all of whom are Independent Directors.  The Committee’s primary purposes are to (i) assist Board oversight of (a) the integrity of the Company’s financial statements, (b) the Company’s compliance with legal and regulatory requirements, (c) the Company’s independent auditor’s qualifications and independence, and (d) the performance of the Company’s internal audit function and independent auditors, and (ii) prepare an Audit Committee Report as required by the SEC to be included in the Company’s annual proxy statement.  The Committee’s primary responsibilities and duties are (i) to monitor the integrity of our financial process and systems of internal controls regarding finance, accounting and legal compliance, (ii) to select, retain, terminate, determine

 

 

compensation and oversee the work of our independent registered public accounting firm, (iii) to ensure the independence and monitor the performance of the our independent registered public accounting firm and the performance of our internal auditing department, (iv) to provide an avenue of communication between our independent registered public accounting firm and our internal auditing department, and (v) to provide an avenue of communication among the independent registered public accounting firm, our management, our internal auditing department and the Board. An annual performance evaluation of the Audit Committee is conducted by the Board and the members of the Committee.  The Committee met eleven times during our 2010 Fiscal Year.

 

Authority to Engage Advisors and to Conduct Independent Investigations .  The Audit Committee has the authority to engage, at the Company’s expense, independent counsel and other advisers it determines necessary to carry out its duties.  The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities and duties, and it has direct access to our independent registered public accounting firm as well as anyone in the Company.

 

Audit Committee Charter . The Audit Committee’s Charter is available on our website at www.stagestoresinc.com .  It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Audit Committee Charter.”

 

Audit Committee Financial Expert .   The Board has determined that Ms. Greene and Messrs. Montgoris and Schwartz are Audit Committee Financial Experts, as that term is defined by the SEC.