CHESAPEAKE

Dollar Tree Inc., the retailer that specializes in merchandise selling for $1 an item, has proposed making it easier for its shareholders to approve a merger and remove directors.

However, Chesapeake-based Dollar Tree said it will ask shareholders to vote down a pension fund's recommendation to scrap staggered, three-year terms for its directors.

California Public Employees' Retirement System, the Dollar Tree shareholder that has campaigned in recent years for changing some of the retailer's bylaws, says abolishing staggered terms would enhance directors' accountability and improve corporate governance.

In its preliminary proxy statement filed with the Securities and Exchange Commission, Dollar Tree said it recommends scaling back the percentage of shareholder votes needed to approve a merger to a majority of the votes entitled to be cast. The company's bylaws now require approval by two-thirds. The proposed change also would reduce the percentage of votes needed to remove a director.

For the proposal to take effect, at least two-thirds of shareholder votes will have to be cast in favor at Dollar Tree's 2008 annual meeting June 19.

A similar measure by CalPERS, as the pension fund is known, to scrap Dollar Tree's "super majority" voting requirement won a majority of shareholder votes at the company's 2007 annual meeting but failed to take effect. CalPERS and other activist investors have sought to overturn so-called "super majority" requirements for merger votes, contending that they blunt shareholder opportunities to vote on merger offers.

Dollar Tree said it also will ask shareholders to approve three compensation plans - an employee stock option plan, equity incentive plan and executive officer equity plan - that are already in place for employees and officers of Dollar Tree Stores.

In March, Dollar Tree Stores became a subsidiary of the newly created holding company Dollar Tree Inc. All shares of Dollar Tree Stores became shares of the new parent company and continue to trade on the Nasdaq Global Select Market under the symbol DLTR.

Dollar Tree said it was seeking shareholder approval so employees of the new holding company are covered by the compensation plans. The proposals being put to a shareholder vote will not expand or change the benefits in these plans, the company said.

Total compensation for Dollar Tree Chief Executive Officer Bob Sasser increased

59 percent last year to $2.59 million from $1.63 million because of greater stock awards, option awards and an increase in compensation from a non-equity incentive plan, according to the company's proxy filing. Compensation for Macon Brock, its chairman and former CEO, declined 41 percent to $706,575 from $1.19 million in 2006.

When their holdings are combined, Dollar Tree's 16 executive officers and directors control 4 percent of the company's shares.

The largest single stockholder, Barclays Group, has an 8.6 percent stake in the company. Barclays Group is a San Francisco investment subsidiary of London-based Barclays Bank.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com