UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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DSW Inc.

(Name of Registrant as Specified In Its Charter)

 

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DSW INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD

May 19, 2011

AND

PROXY STATEMENT

IMPORTANT

If you received a copy of the proxy card by mail, please complete, sign and date your proxy and
promptly return it in the enclosed envelope. No postage is necessary if mailed in the United States.

DSW INC.
810 DSW Drive
Columbus, Ohio 43219
(614) 237-7100

April 4, 2011

To Our Shareholders:

The 2011 Annual Meeting of Shareholders of DSW Inc. will be held at 810 DSW Drive, Columbus, Ohio on May 19, 2011, at 10:00 a.m., Eastern Daylight Savings Time, for the following purposes:

	1.		To elect three Class I directors, each to serve until the 2014 Annual Meeting of Shareholders and until their successors are duly elected and qualified;
	2.		To hold an advisory vote on the frequency of voting on the compensation of our named executive officers;
	3.		To hold an advisory vote relating to the compensation of our named executive officers; and
	4.		To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only the holders of record of Class A and Class B Common Shares at the close of business on March 22, 2011, our record date for the Annual Meeting, are entitled to notice of and to vote at the meeting. Each shareholder is entitled to one vote for each share of Class A common stock held as of the record date, and eight votes for each share of Class B common stock held as of the record date.

YOUR VOTE IS IMPORTANT

If you received a copy of the proxy card by mail, you are urged to date, sign and promptly return the enclosed form of proxy in the enclosed envelope to which no postage need be affixed if mailed in the United States. Voting your shares by the proxy does not affect your right to vote in person in the event you attend the meeting. You are cordially invited to attend the meeting. If you attend, you may revoke your proxy and vote in person if you wish, even if you have previously returned your proxy.

Contents

		Page
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT			1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			3
PROPOSAL 1 — ELECTION OF DIRECTORS			7
EXECUTIVE OFFICERS			11
OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION			13
AUDIT AND OTHER SERVICE FEES			18
AUDIT COMMITTEE REPORT			19
COMPENSATION DISCUSSION AND ANALYSIS			21
REPORT OF THE COMPENSATION COMMITTEE			29
COMPENSATION OF MANAGEMENT			30
PROPOSAL 2 — ADVISORY VOTE ON THE FREQUENCY OF VOTING ON THE COMPENSATION OF NAMED EXECUTIVE OFFICERS			41
PROPOSAL 3 — ADVISORY VOTE ON THE COMPENSATION PAID TO NAMED EXECUTIVE OFFICERS			42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			43
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS			51
OTHER MATTERS			51

DSW INC.
810 DSW Drive
Columbus, Ohio 43219
(614) 237-7100

PROXY STATEMENT

		This proxy is being solicited on behalf of our Board of Directors for use at our 2011 Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Daylight Savings Time, on Thursday, May 19, 2011, and any postponements or adjournments thereof (the “Annual Meeting”). The Annual Meeting will be held at our corporate office, 810 DSW Drive, Columbus, Ohio. This proxy statement, including the Notice of Meeting and our Annual Report on Form 10-K for the fiscal year ended January 29, 2011 (“fiscal 2010”), is being made available electronically on or about April 4, 2011.
		Pursuant to rules adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our shareholders of record and beneficial owners. All shareholders will have the ability to access the proxy materials on a website referred to in the Notice of Internet Availability or request to receive a printed set of the proxy materials, at no charge. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice of Internet Availability. In addition, shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis by following the instructions on the website referred to in the Notice of Internet Availability.
		We have two classes of securities outstanding and entitled to vote at the Annual Meeting, our Class A Common Shares, no par value, and our Class B Common Shares, no par value. Only shareholders of record at the close of business on March 22, 2011, our record date for the Annual Meeting, are entitled to notice of and to vote at the meeting or any adjournments thereof. The total number of outstanding Class A Common Shares entitled to vote at the meeting is 16,741,975 and the total number of Class B Common Shares entitled to vote at the meeting is 27,382,667. Each outstanding Class A Common Share is entitled to one vote with respect to each matter to be voted on at the meeting and each outstanding Class B Common Share is entitled to eight votes with respect to each matter to be voted on at the meeting. Class A Common Shares and Class B Common Shares vote together as a single class with respect to all matters submitted to a vote of shareholders.
		Prior to the completion of our initial public offering in July 2005, we were operated as a direct wholly-owned subsidiary of Retail Ventures, Inc. (Retail Ventures). As of March 22, 2011, Retail Ventures owned 27,382,667 of our Class B Common Shares, constituting all of our issued and outstanding Class B Common Shares, or approximately 62.1% of our total outstanding shares and approximately 92.9% of the combined voting power of our outstanding Common Shares. At our Annual Meeting, Retail Ventures has the power acting alone to approve any action requiring a vote of the majority of our voting shares, to elect all our directors, and to approve the advisory votes on executive compensation and the frequency of the advisory vote on executive compensation.
		Without affecting any vote previously taken, a proxy may be revoked by a shareholder by giving a written notice of revocation to us in writing (attention: William L. Jordan, Secretary). A shareholder may also change his or her vote by executing and returning to us a later-dated proxy or by giving notice of revocation in person at the meeting.
		All properly executed proxies received by the Board of Directors will be voted as directed by the shareholder. All properly executed proxies received by the Board of Directors which do not specify how shares should be voted will be voted “FOR” the election as directors of the nominees listed below under “Proposal 1 — Election of Directors,” “FOR 1 Year” under “Proposal 2 — Advisory Vote on the Frequency of Voting on the Compensation of Executive Officers,” “FOR” the compensation paid to our executive officers under “Proposal 3 — Advisory Vote on the Compensation Paid to Executive Officers,” and in the discretion of the proxies, on any other business properly brought before the meeting or any adjournments thereof.

		The presence, in person or by proxy, of a majority of the outstanding Common Shares is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum. Broker non-votes occur when brokers holding shares on behalf of beneficial owners do not receive voting instructions from the beneficial holders at least ten days before the meeting. If that happens, the broker may vote those shares only on matters deemed “routine” by the New York Stock Exchange, such as the advisory vote on executive compensation and the advisory vote on the frequency of the advisory vote on executive compensation. On non-routine matters, such as the election of directors, brokers cannot vote unless they receive voting instructions from beneficial holders, resulting in so-called “broker non-votes.”
		Solicitation of proxies may be made by mail, personal interview and telephone by our officers, directors and regular employees, and by the employees of our transfer agent, Computershare. We will bear the cost of the solicitation of proxies, including the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of shares.

Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

The following table sets forth information with respect to the only persons known to us to own beneficially more than five percent of our outstanding Class A or Class B Common Shares as of March 22, 2011, unless as otherwise specified:

																		Percentage of
																		Combined Voting
		Number of Shares								Percentage of Shares								Power of All
		Beneficially Owned								Beneficially Owned								Classes of Common
Name and beneficial owner		Class A				Class B				Class A				Class B				Stock
Retail Ventures, Inc.
4150 East Fifth Ave.
Columbus, Ohio 43219			—				27,382,667	(1)			—				100	%			92.9	%
Jay L. Schottenstein
4300 East Fifth Avenue
Columbus, Ohio 43219			2,115,975	(2)			—				12.3	%			—				0.9	%
SEI, Inc.
4300 East Fifth Avenue
Columbus, Ohio 43219			1,292,900	(2)			—				7.7	%			—				0.5	%
FMR LLC
82 Devonshire Street
Boston, Massachusetts 02109			2,339,152	(3)			—				14	%			—				1.0	%
Valinor Management, LLC
90 Park Avenue, 40th Floor
New York, New York 10016			1,634,361	(4)			—				9.8	%			—				0.7	%
Century Capital Management LLC
100 Federal Street 29th Floor
Boston, Massachusetts 02110			1,249,518	(5)			—				7.5	%			—				0.5	%
Invesco Ltd.
1555 Peachtree St. NE
Atlanta, Georgia 30309			874,091	(6)			—				5.2	%			—				0.4	%

The information with respect to beneficial ownership is based upon information furnished by the shareholder or information contained in filings made with the Securities and Exchange Commission.

Security Ownership of Management

The following table sets forth, as of March 22, 2011, information with respect to our Class A Common Shares owned beneficially by each director and director nominee individually, by the executive officers named in the Summary Compensation Table of this proxy statement and by all directors and executive officers as a group:

												Percentage of
		Number of Shares						Percentage of Shares				Combined Voting
		Beneficially						Beneficially				Power of All
		Owned(1)						Owned(2)				Classes of
Name		Class A				Class B		Class A		Class B		Common Shares
Elaine J. Eisenman			14,407			—		*		—		*
Deborah L. Ferrée			357,126			—		2.1%		—		*
Carolee Friedlander			23,749			—		*		—		*
Joanna T. Lau			13,310			—		*		—		*
Michael R. MacDonald			106,600			—		*		—		*
Roger S. Markfield			22,661			—		*		—		*
Philip B. Miller			29,232			—		*		—		*
Harris Mustafa			71,486			—		*		—		*
Douglas J. Probst			170,708			—		*		—		*
James D. Robbins (3)			26,680			—		*		—		*
Jay L. Schottenstein (4)			2,115,975			—		12.3%		—		*
Harvey L. Sonnenberg			20,796			—		*		—		*
Allan J. Tanenbaum			31,432			—		*		—		*
Heywood Wilansky			25,000			—		*		—		*
All directors and executive officers as a group (17 persons)			3,201,357			—		17.6%		—		1.3%

		Stock Options
		Exercisable within 60		Share Units Vesting
		days of		within 60 days of
Beneficial Owner		March 22, 2011		March 22, 2011
Elaine J. Eisenman		—		14,407
Deborah L. Ferrée		309,120		7,500
Carolee Friedlander		—		20,749
Joanna T. Lau		—		13,310
Michael R. MacDonald		91,600		—
Roger S. Markfield		—		22,661
Philip B. Miller		—		21,232
Harris Mustafa		60,960		3,000
Douglas J. Probst		150,960		4,000
James D. Robbins		—		19,680
Jay L. Schottenstein		144,060		—
Harvey L. Sonnenberg		—		18,796
Allan J. Tanenbaum		—		30,432
Heywood Wilansky		—		—
All directors and executive officers as a group (17 persons)		910,550		181,767

     The information with respect to beneficial ownership is based upon information furnished by each director, director nominee or executive officer, or information contained in filings made with the Securities and Exchange Commission.

PROPOSAL 1 — ELECTION OF DIRECTORS

		Our Board of Directors currently consists of eleven members and is divided into three classes, designated Class I, Class II and Class III. The members of the three classes are elected to serve for staggered terms of three years. Pursuant to Section 2.02 of our Code of Regulations, the number of directors constituting each class will, as nearly as practicable, be equal.
		At the Annual Meeting, three directors are nominated for election as Class I directors with a term to expire in 2014. Each of the nominees for director currently serves as a director of the Company.
		Heywood Wilansky, a current Class I Board member whose term ends on the date of the Annual Meeting, is not standing for re-election. Additionally, in connection with the Agreement and Plan of Merger entered into with Retail Ventures, our Board has determined, effective as of the effective time of the proposed merger with Retail Ventures with and into DSW MS LLC, a wholly owned subsidiary of DSW, to elect Henry L. Aaron to the board or directors of the Company. If the merger is completed, Mr. Aaron will serve as a Class III director, whose term will expire on the date of the 2013 annual meeting of shareholders.
		The names and ages of the “Nominees” and the “Continuing Directors,” their principal occupations during the past five years, and certain other information are listed below.

Nominees for Class I Directors for Term to Expire in 2014:

Name		Age				Our Directors and Their Positions with Us/ Principal Occupations / Business Experience		Director Since
Carolee Friedlander*			69			Ms. Friedlander serves as a founder and CEO of AccessCircles, a by-invitation global community of women providing connectivity, knowledge and information in the areas of health and wellness, financial expertise and life balance. Ms. Friedlander has held that position since August 2004. From July 2001 to August 2004, Ms. Friedlander served as Senior Vice President of Retail Brand Alliance, Inc., and as President and Chief Executive Officer of Carolee Designs, Inc., a subsidiary of Retail Brand Alliance. Prior to that, Ms. Friedlander served as President and Chief Executive Officer of Carolee Designs, a fashion accessory company she founded in 1973 and sold to Retail Brand Alliance in July 2001. Ms. Friedlander’s long term service as a CEO of a retail company brings strong leadership experience and in-depth knowledge of marketing and merchandising to our Board.			2005
Harvey L. Sonnenberg			69			Mr. Sonnenberg was a partner in the certified public accounting firm, Weiser, LLP from 1994 to 2009, and currently serves as a Senior Director to that firm. Mr. Sonnenberg has been active in a number of professional organizations, including the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants, and has long been involved in rendering audit and advisory services to the retail, apparel, and consumer products industries. Mr. Sonnenberg is a certified public accountant and was the partner-in-charge of his firm’s Sarbanes-Oxley and Corporate Governance practice. Mr. Sonnenberg has been a director of Retail Ventures (NYSE: RVI) since 2001. Mr. Sonnenberg’s strong accounting background, particularly in the retail industry, brings accounting and related financial management experience to the Board.			2005

Name		Age				Our Directors and Their Positions with Us/ Principal Occupations / Business Experience		Director Since
Allan J. Tanenbaum*			64			Mr. Tanenbaum has been General Counsel and Managing Partner of Equicorp Partners, LLC, an Atlanta-based private investment and advisory firm, since January 2006. From February 2001 to December 31, 2005, Mr. Tanenbaum served as Senior Vice President, General Counsel and Corporate Secretary for AFC Enterprises, Inc., a franchisor and operator of quick-service restaurants. From June 1996 to February 2001, Mr. Tanenbaum was a shareholder in Cohen Pollock Merlin Axelrod & Tanenbaum, P.C., an Atlanta, Georgia law firm, where he represented corporate clients in connection with mergers and acquisitions and other commercial transactions. With Mr. Tanenbaum’s legal background and services as a general counsel of a public company, Mr. Tanenbaum brings valuable board governance experience to our Board.			2005

Continuing Class II Directors for Term to Expire in 2012:

Name		Age				Our Directors and Their Positions with Us/ Principal Occupations / Business Experience		Director Since
Jay L. Schottenstein			56			Mr. Schottenstein has served as our Chairman of the Board of Directors since March 2005. Mr. Schottenstein previously served as our Chief Executive Officer from March 2005 to April 2009. He has been Chairman of the Board of Directors of Retail Ventures, Inc., American Eagle Outfitters, Inc. and SSC since March 1992 and was Chief Executive Officer of Retail Ventures from April 1991 to July 1997 and from July 1999 to December 2000. Mr. Schottenstein served as Vice Chairman of SSC from 1986 until March 1992 and as a director of SSC since 1982. He served in various executive capacities at SSC since 1976. Mr. Schottenstein has been a director of American Eagle Outfitters, Inc. (NYSE: AEO) since 1992, and Retail Ventures, Inc. (NYSE: RVI) since 1992. Mr. Schottenstein also serves as the manager of Schottenstein RVI, LLC. Mr. Schottenstein’s extensive experience as a chairman and CEO of numerous companies brings strong leadership skills to our Board. Additionally, Mr. Schottenstein’s tenure with DSW provides the Board with a strong background in the shoe industry.			2005
Michael R. MacDonald			59			Mr. MacDonald has served as our President and Chief Executive Officer since April 2009. Prior to joining DSW, Mr. MacDonald served as Chairman and Chief Executive Officer of Shopko Stores from May 2006 to March 2009. Prior to that time, Mr. MacDonald held executive positions at Saks Incorporated from 1998 to 2006, most recently as Chairman and Chief Executive Officer of the Northern Department Stores Group for six years. Prior to serving in that capacity, Mr. MacDonald held executive positions at Carson Pirie Scott, including the position of Chairman and Chief Executive Officer. With over 30 years of business experience in all phases of retail, including managing merchandising, marketing, stores, operations and finance functions, Mr. MacDonald brings strong leadership abilities and in-depth retail knowledge to our Board.			2009
Philip B. Miller*			72			Mr. Miller is the President of Philip B. Miller Associates, a consulting firm, and an Operating Director of Tri-Artisan Capital Partners, a privately held merchant bank, and has held those positions since July 2001. Mr. Miller also serves on the Board of Directors of St. John Knits, a position he has held since December 2002. Mr. Miller served on the Board of Directors of Kellwood until January 2008. Mr. Miller served as Chairman and Chief Executive Officer of Saks Fifth Avenue, Inc. from 1993 until January 2000 and continued as			2005

Name		Age				Our Directors and Their Positions with Us/ Principal Occupations / Business Experience		Director Since
						Chairman of that company until July 2001. From 1983 to 1990, Mr. Miller served as Chairman and Chief Executive Officer of Marshall Fields, Inc. Mr. Miller brings to the Board extensive experience in executive leadership and retail merchandising.
James D. Robbins*			64			Mr. Robbins currently holds a directorship in Huntington Preferred Capital, Inc. (NASDAQ:HPCCP), that he has held since November 2001. Mr. Robbins also serves as chairman of the audit committee of Huntington Preferred Capital, Inc. From 1993 until his retirement in June 2001, Mr. Robbins served as Managing Partner of the Columbus, Ohio office of PricewaterhouseCoopers LLP. Mr. Robbins was on the Board of Directors of Dollar General from April 2002 until July 2007, during which time he chaired the audit committee. Mr. Robbins is a certified public accountant (inactive). With a 33-year background in public accounting, Mr. Robbins has developed strong accounting skills and significant retail industry experience, which are valuable assets to our Board, particularly in relation to the Audit Committee.			2005

Continuing Class III Directors for Term to Expire in 2013:

Name		Age				Our Directors and Their Positions with Us/ Principal Occupations / Business Experience		Director Since
Elaine J. Eisenman*			61			Dr. Eisenman has served as Dean of Babson Executive Education since October 2005, the division of Babson College focused on providing education, consulting and applied research in innovation and leadership to corporations, executives, and educational and institutional non-profit enterprises. Dr. Eisenman also is responsible for the management of the Babson Executive Conference Center. Prior to that, Dr. Eisenman served as Senior Vice President — Human Resources and Administration of The Children’s Place Retail Stores, Inc. since September 2003. Dr. Eisenman has also held senior executive positions at American Express, Enhance Financial Services Co. and private companies such as PDI International, a global consulting firm. With a background in human resources, Dr. Eisenman brings experience in executive compensation and succession planning to our Board and Compensation Committee.			2008
Joanna T. Lau*			51			Ms. Lau currently serves as CEO of Lau Technologies, an executive consulting and investment company focused on providing debt and equity financing and consulting to mid-range companies. Ms. Lau founded Lau Technologies in 1990 and has been responsible for managing all aspects of the company from financing growth to the quality of the performance of the products previously sold by the company. Ms. Lau held leadership positions with Digital Equipment Corporation and General Electric before founding Lau Technologies. Ms. Lau is a member of the Board of Directors of ITT Education Services (NYSE:ESI) since 2003 and currently serves on the Audit Committee of ESI. Ms. Lau served as a director of TD Banknorth, Inc. until July 2007. Ms. Lau brings a strong background in technology and executive leadership to our Board.			2008
Roger S. Markfield			69			Mr. Markfield is Vice-Chairman and Executive Creative Director of American Eagle Outfitters (NYSE: AEO), a clothing retailer, and has served in this capacity since February 2009, and has served as a Director of AEO since March 1999. From February 2007 to December 2008, Mr. Markfield served AEO as a non-executive officer employee. He served AEO as Vice-Chairman from November 2003 to February 2007, as President from February 1995 to February 2006, and as Co-Chief Executive Officer from December 2002 to November			2008

Name		Age				Our Directors and Their Positions with Us/ Principal Occupations / Business Experience		Director Since
						2003. Mr. Markfield also served AEO and its predecessors as Chief Merchandising Officer from February 1995 to December 2002 and as Executive Vice President of Merchandising from May 1993 to February 1995. Prior to joining AEO, he served as Executive Vice President-General Merchandising Manager for the Limited Stores Division of Limited Brands from May 1992 to April 1993. As a chief merchant of a high profile brand, Mr. Markfield brings a strong merchandising and brand development background to the Board.
*   Independent Directors under New York Stock Exchange Rules.
Heywood Wilansky, a current Class I Board member whose term ends on the date of the Annual Meeting, is not standing for re-election.
Heywood Wilansky			63			Mr. Wilansky is the former President and Chief Executive Officer of Retail Ventures. Mr. Wilansky served as a member of the Retail Ventures’ Board of Directors until July 2009 and as a member of the Board of Directors of Bertucci’s until June 2009. Mr. Wilansky served as President and Chief Executive Officer of Retail Ventures from November 2004 through January 2009. Before joining Retail Ventures in November of 2004, he served as President and Chief Executive Officer of Filene’s Basement, a subsidiary of Retail Ventures, from February 2003 to November 2004. Mr. Wilansky was a professor of marketing at the University of Maryland business school from August 2002 to February 2003. From August 2000 to January 2003, he was President and Chief Executive Officer of Strategic Management Resources, LLC. From August 1995 to July 2000, he was President and Chief Executive Officer of Bon Ton Stores. Mr. Wilansky brings more than 30 years of retail experience to the Board, including in-depth knowledge of the challenges of managing an expanding store base, store operations, marketing and merchandising.			2005

		Unless otherwise directed, the persons named in the proxy will vote the proxies FOR the election of the above-named nominees as directors. While it is contemplated that all nominees will stand for election, in the event any person nominated fails to stand for election, the proxies will be voted for such other person or persons as may be designated by the directors. Management has no reason to believe that any of the above-mentioned persons will not stand for election or serve as a director.
		Under Ohio law and our Code of Regulations, the nominees receiving the greatest number of votes will be elected as directors. Shares as to which the authority to vote is withheld are not counted toward the election of directors or toward the election of the individual nominees specified on the proxy. A broker non-vote will have the same effect as a withhold and, therefore, will not affect the outcome of the vote.
		Your Board of Directors unanimously recommends a vote FOR each of the director nominees named above.

EXECUTIVE OFFICERS

The following persons are our executive officers. Our officers are elected annually by our Board and serve at the pleasure of the Board.

Jay L. Schottenstein, age 56, serves as our Executive Chairman of the Board of Directors. Mr. Schottenstein was appointed as our Chief Executive Officer in March 2005 and served in that role until April 2009. He became a director of DSW in March 2005. He has been Chairman of the Board of Directors of Retail Ventures, American Eagle Outfitters, Inc. and SSC since March 1992 and was Chief Executive Officer of Retail Ventures from April 1991 to July 1997 and from July 1999 to December 2000. Mr. Schottenstein served as Vice Chairman of SSC from 1986 until March 1992 and as a director of SSC since 1982. He served in various executive capacities at SSC since 1976. Mr. Schottenstein also serves as the manager of Schottenstein RVI, LLC.

Michael R. MacDonald, age 59, has served as our President and Chief Executive Officer since April 2009. Prior to joining DSW, Mr. MacDonald served as Chairman and Chief Executive Officer of Shopko Stores from May 2006 to March 2009. Prior to that time, Mr. MacDonald held executive positions at Saks Incorporated from 1998 to 2006, most recently as Chairman and Chief Executive Officer of the Northern Department Stores Group for six years. Prior to serving in that capacity, Mr. MacDonald held executive positions at Carson Pirie Scott, including the position of Chairman and Chief Executive Officer. Mr. MacDonald has over 30 years of business experience in all phases of retail, including managing merchandising, marketing, stores, operations and finance functions.

Deborah L. Ferrée, age 57, has served as our Vice Chairman and Chief Merchandising Officer since January 2006. Ms. Ferrée joined us in November 1997. She served as our President and Chief Merchandising Officer from November 2004 until January 2006. From March 2002 until November 2004, she served as Executive Vice President and Chief Merchandising Officer. Prior to that, she served as Senior Vice President of Merchandising beginning in September 2000, and Vice President of Merchandising beginning in October 1997. Prior to joining us, Ms. Ferrée worked in the retail industry for more than 30 years in various positions, including serving as Divisional Merchandising Manager of Shoes, Accessories and Intimate Apparel for Harris Department Store, women’s buyer for Ross Stores and Divisional Merchandise Manager of the May Company.

William L. Jordan, age 39, serves as our Executive Vice President, General Counsel and Secretary, a position he has held since March 2009. From May 2008 to March 2009 he was our Senior Vice President, General Counsel and Secretary. In January 2006, Mr. Jordan joined us as our Vice President, General Counsel and Secretary. Prior to joining us he had served as Corporate Counsel for Lancaster Colony Corporation since 2005, and was with the firm of Porter, Wright, Morris & Arthur LLP in Columbus, Ohio, from 1997 to 2005 where he specialized in Corporate Securities and Mergers & Acquisitions law.

Carrie McDermott, age 45, has served as our Executive Vice President, Stores and Operations since March 2011. Previously, Carrie served as our Senior Vice President, Stores and Operations since she joined DSW in February 2007. From October 2002 to November 2005, she served as the President and Chief Executive Officer of Cooper’s, Inc. Ms. McDermott also held various positions within Gap, Inc. including Vice President, Central Zone from April 2000 to October 2002, Zone Operations Manager from August 1998 to April 2000, and Regional Manager from March 1997 to August 1998. Ms. McDermott has over twenty-five years of experience working in the retail industry.

Harris Mustafa, age 57, serves as our Executive Vice President, Supply Chain and Merchandise Planning and Allocation. Prior to joining us in July 2006, Mr. Mustafa served as Executive Vice President, Private Brand and Product Development from August 2004 to June 2006 at Saks Department Store Group. Prior to serving in that capacity, he served as their Senior Vice President, Planning and Operations, Private Brand Group from October 2003 to August 2004. From May 2002 to March 2003, Mr. Mustafa served as Senior Vice President Business Planning for Williams-Sonoma, Inc. Prior to serving in that capacity, Mr. Mustafa served in various executive positions at Payless ShoeSource, Inc. from 1987 to 2001.

Douglas J. Probst, age 46, serves as our Executive Vice President and Chief Financial Officer. Mr. Probst joined DSW in March 2005. From April 1990 to February 2005, he held various positions with Too Inc., (now Tween Inc., a division of Dress Barn), including Vice President of Finance and Controller from May 2004 to February 2005, Vice President Finance from October 2003 to May 2004 and Vice President Financial Analysis and Store Control from December 1999 to October 2003. From August 1986 to March 1990, he was in the practice of public accounting with KPMG. Mr. Probst is a certified public accountant.

Derek Ungless, age 62, serves as our Executive Vice President and Chief Marketing Officer, a position he has held since June 2005. From April 2002 to May 2005, he was Executive Vice President of Marketing for Express, part of Limited Brands. Mr. Ungless was Senior Vice President and Head of Global Brand Design of the Estee Lauder brand, part of Estee Lauder Companies Inc. from September 2000 until November 2001 and was Executive Vice President and Creative Director of Brooks Brothers from October 1997 until September 2000.

OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION

General

A total of six meetings of the Board of Directors were held during fiscal 2010. Other than Mr. Markfield who attended less than 75% of Technology Committee meetings, no director attended less than 75% of the aggregate of (i) the total number of meetings of the Board of Directors held during the time in which such director was a member of the Board of Directors and (ii) the total number of meetings held by all committees of the Board of Directors on which that director served during the period each director served as a member of such committee.

There are no family relationships among our directors and executive officers.

Our Corporate Governance Principles provide that all incumbent directors and director nominees are encouraged to attend our Annual Meeting of Shareholders. All of our directors then in office attended our 2010 Annual Meeting of Shareholders.

Board Leadership Structure

Until the election of Mr. MacDonald as our President and CEO in April 2009, our Chairman, Mr. Schottenstein, held the positions of both Chairman and CEO. Mr. Schottenstein continues to serve as our Chairman. Mr. Schottenstein is not an independent member of the Board.

The Chairman is responsible for developing our agenda for Board meetings and presides at regular sessions of the Board. The Board does not have a lead or presiding director.

The Board of Directors meets in regularly scheduled executive sessions (without management present). The independent members of the Board also meet alone in regularly scheduled executive sessions. The Board of Directors does not have a designated director who leads executive sessions held by the independent directors. The non-management directors alternate as the chair of such executive sessions in alphabetical order by last name.

The Board believes that the current leadership structure, with a separated Chairman and CEO structure, provides the Company with the appropriate leadership structure. The current Board leadership allows the Chairman to focus on Board of Director responsibilities and the CEO to focus on the Company’s administrative and operating functions.

Corporate Governance Principles

In June 2005, the Board of Directors adopted Corporate Governance Principles that address Board structure, membership (including nominee qualifications), performance, operations and management oversight. The Corporate Governance Principles were last amended in November 2010. A current copy of our Corporate Governance Principles can be found at our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Our director independence standards are set forth in our Corporate Governance Principles, a copy of which can be found at our corporate and investor website at www.dswinc.com. The Corporate Governance Principles provide that the Board of Directors’ goal is that a majority of the directors should be independent directors. A director will be designated as independent if he or she:

	•		has no material relationship with us or our subsidiaries;
	•		satisfies the other criteria specified by New York Stock Exchange listing standards;
	•		has no business conflict with us or our subsidiaries; and
	•		otherwise meets applicable independence criteria specified by law, regulation, exchange requirement or the Board of Directors.

During its review of director independence, the Board considered whether there were any transactions or relationships between the Company and any director or any member of his or her immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder). As a result of this review, the Board of Directors has affirmatively determined that the following persons are independent under our independence standards:

Elaine J. Eisenman
Carolee Friedlander
Joanna T. Lau
Philip B. Miller
James D. Robbins
Allan J. Tanenbaum

Our Board of Directors has a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee, all of which are comprised solely of independent directors as defined under applicable Securities and Exchange Commission rules and the listing standards of the New York Stock Exchange. Our Board of Directors also has a Technology Committee comprised of a mixture of independent and non-independent directors.

Board’s Role in the Risk Management Process

Our Board and its committees play an important role in overseeing the identification, assessment and mitigation of risks that are material to us. In fulfilling this responsibility, the Board and its committees regularly consult with management to evaluate and, when appropriate, modify our risk management strategies. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed about such risks through committee reports.

We have adopted the concept of enterprise risk management (“ERM”). The Board charged management with the responsibility of creating an ERM program, which was implemented in fiscal 2010. Our CEO, who reports to our Board of Directors, is the sponsor of the ERM Program. As part of the ERM Program, management provides an annual report to the Board regarding our significant risks and what management is doing to mitigate risk. Management also updates the Board on significant new risks that are identified on a quarterly basis.

Additionally, our Audit Committee assists the Board in fulfilling its oversight responsibility relating to the performance of our system of internal controls, legal and regulatory compliance, our audit, accounting and financial reporting processes, and the evaluation of enterprise risk issues, particularly those risk issues not overseen by other committees. The Audit Committee also reviews periodically with our General Counsel legal matters that may have a material adverse impact on our financial statements, compliance with laws and any material reports received from regulatory agencies. Our Compensation Committee is responsible for overseeing the management of risks relating to our compensation programs. Our Nominating and Corporate Governance Committee manages risks associated with corporate governance and business conduct and ethics.

Nominating and Corporate Governance Committee

The members of our Nominating and Corporate Governance Committee are Mr. Tanenbaum (Chair) and Messes. Eisenman and Friedlander, each of whom is independent as discussed above. A current copy of our Nominating and Corporate Governance Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

The Nominating and Corporate Governance Committee met five times during fiscal 2010. Its functions include assisting the Board in determining the desired qualifications of directors, identifying potential individuals meeting those qualification criteria, proposing to the Board a slate of nominees for election by the shareholders and reviewing candidates nominated by shareholders. In addition, the Committee also reviews the Corporate Governance Principles, makes recommendations to the Board with respect to other corporate governance principles applicable to us, and oversees the annual evaluation of the Board and management.

The Nominating and Corporate Governance Committee meets to discuss, among other things, identification and evaluation of potential candidates for nomination as a director. Although there are no specific minimum qualifications that a director candidate must possess and the Committee has not adopted a specific policy with

regard to the consideration of diversity, potential candidates are identified and evaluated according to the qualification criteria set forth in the Board’s Corporate Governance Principles, including:

	•		independence;
	•		judgment;
	•		skill;
	•		diversity;
	•		strength of character;
	•		age;
	•		experience as an executive of, or advisor to, a publicly traded or private organization;
	•		experience and skill relative to other Board members;
	•		specialized knowledge or experience;
	•		service on other boards; and
	•		desirability of the candidate’s membership on the Board or any committees of the Board.

In considering diversity, the Nominating and Corporate Governance Committee may take into account various attributes, including background, skill set or viewpoint.

The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders for the 2012 Annual Meeting of Shareholders, provided that the names of such nominees are submitted in writing, not later than January 1, 2012, to DSW, 810 DSW Drive, Columbus, Ohio 43219, Attn: Corporate Secretary. Each such submission must include:

As to the nominee:

	•		name, age, business address and residence address;
	•		principal occupation or employment;
	•		the class and number of DSW shares beneficially owned; and
	•		any other information relating to the nominee that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act; and

As to the shareholder giving the notice:

	•		name and record address; and
	•		the class and number of our shares beneficially owned.

Such notice shall be accompanied by a consent signed by the nominee evidencing a willingness to serve as a director, if nominated and elected, and a commitment by the nominee to meet personally with the Nominating and Corporate Governance Committee members.

Other than the submission requirements set forth above, there are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates a nominee for director recommended by a shareholder.

Compensation Committee

The members of our Compensation Committee are Messrs. Miller (Chair) and Robbins and Messes. Eisenman and Friedlander. Each member of the Compensation Committee is independent as discussed above. None of the members of the Compensation Committee are present or former officers of our Company, nor are they or any of their affiliates, if any, parties to agreements with us.

A current copy of our Compensation Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Our Compensation Committee met nine times during fiscal 2010. The Compensation Committee’s functions include evaluating the Chief Executive Officer’s performance and, based upon these evaluations, setting the Chief Executive Officer’s annual compensation; reviewing and approving the compensation packages of our other executive officers; making recommendations to the Board with respect to our incentive compensation,

retirement and other benefit plans; making administrative and compensation decisions under such plans; and recommending to the Board the compensation for non-employee Board members. See the Compensation Discussion and Analysis below for a more complete description of the Compensation Committee’s deliberations and decisions relating to executive compensation, including the Committee’s retention of a compensation consultant and the role of our executive officers in determining executive compensation.

Pursuant to its Charter, the Compensation Committee has the sole authority to retain and terminate the services of any outside compensation consultants to the Committee. During fiscal 2010, the Compensation Committee retained Hay Group to provide advice to the Committee on general program design and best practices as well as to assist the Committee in ensuring officers and directors were competitive with a “Peer Group” of companies, as identified in the Compensation Discussion and Analysis below. Hay Group reported directly to the Committee. Hay Group also provided compensation services to DSW management. The amount of services was not material and DSW paid approximately $14,350 for these services in fiscal 2010. While Hay Group performed the general competitive review, as requested by the Committee, Hay Group did not determine or recommend any amount or form of compensation to the Committee with respect to DSW’s executive officers, except as requested by the Committee.

Audit Committee

The members of our Audit Committee are Messrs. Robbins (Chair), Miller and Tanenbaum and Ms. Lau. The Board of Directors has determined that each of them is independent and is financially literate in accordance with the applicable Securities and Exchange Commission rules and listing standards of the New York Stock Exchange. The Board has also determined that our Audit Committee’s Chairman, James D. Robbins, qualifies as an audit committee financial expert as such term is defined by the Securities and Exchange Commission under Item 407(d)(5) of Regulation S-K.

A current copy of our Audit Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Our Audit Committee met five times during fiscal 2010. The purpose of our Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities of:

	•		the integrity of our financial statements;
	•		compliance with legal and regulatory requirements;
	•		the independent auditor’s qualifications and independence; and
	•		performance of our internal audit function and independent auditor.

The Audit Committee is directly responsible for the appointment, compensation, retention, termination and oversight of the work of our independent auditor, including resolution of disagreements between management and the independent auditor regarding financial reporting.

No member of the Audit Committee is currently serving on the audit committees of more than three public companies.

Technology Committee

The members of our Technology Committee are Ms. Lau (Chair) and Messrs. Markfield, Robbins, and Sonnenberg. A current copy of our Technology Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Our Technology Committee met four times during fiscal 2010. The purpose of the Technology Committee is to ensure that technology endeavors are effectively managed and that technology performance meets the following objectives:

	•		aligns with our business strategy;
	•		enables the business to maximize benefits technology can provide;
	•		resources are used responsibly; and
	•		risks are managed appropriately.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who are beneficial owners of more than ten percent of our Common Shares (“reporting persons”) to file reports of ownership and changes of ownership with the Securities and Exchange Commission and the New York Stock Exchange. We assist our directors and executive officers in completing and filing those reports. Based upon a review of those reports furnished to us and representations of our directors and executive officers, we believe that, except for one late filing for Mr. Mustafa covering one transaction, all filing requirements applicable to our directors, executive officers and greater than ten percent beneficial owners were complied with during the last completed fiscal year.

Code of Ethics and Corporate Governance Information

We have adopted a code of ethics that applies to all our officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and an additional code of ethics that applies to senior financial officers. Additionally, the Board of Directors has adopted a Director Code of Conduct applicable to our Board members. These codes of ethics, designated as the “Code of Conduct,” the “Code of Ethics for Senior Financial Officers,” and the “Director Code of Conduct,” respectively, by us can be found on our investor website at www.dswinc.com and are available in print (without charge) to any shareholder upon request. We intend to disclose any amendment to, or waiver from, any applicable provision of the Code of Conduct, Code of Ethics for Senior Financial Officers, or Director Code of Conduct by posting such information on our corporate and investor website at www.dswinc.com.

AUDIT AND OTHER SERVICE FEES

Our Audit Committee has adopted a policy under which audit and non-audit services to be rendered by our independent registered public accounting firm are pre-approved. The pre-approval policy is designed to assure that the provision of such services does not impair the independence of our independent registered public accounting firm and is summarized below.

	•		Delegation — The Audit Committee may delegate pre-approval authority to one or more of its independent members provided that the member(s) to whom such authority is delegated promptly reports any pre-approval decisions to the other Audit Committee members. The Audit Committee has not delegated to management its responsibilities to pre-approve services performed by the independent registered public accounting firm.
	•		Audit Services — Annual audit, review and attestation engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Any changes in the terms, conditions or fees resulting from changes in the audit scope requires the Audit Committee’s approval.
	•		Other Services — Unless a type of service to be provided by the independent registered public accounting firm has received general pre-approval, it will require specific pre-approval by the Audit Committee.
	•		Tax Services — The Audit Committee believes that our independent registered public accounting firm can provide tax services to us such as tax compliance and certain tax advice without impairing its independence. In no event, however, will the independent registered public accounting firm be retained in connection with a transaction initially recommended by the independent registered public accounting firm, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations or similar regulations of other applicable jurisdictions.

No services were provided by the independent public accountants during fiscal 2010 or fiscal 2009 that were approved by the Audit Committee under Securities and Exchange Commission Regulation S-X Rule 2-01(c)(7)(i)(C) (which addresses certain services considered de minimis and may be approved by the Committee after such services have been performed).

The following table sets forth the aggregate fees for professional services rendered by Deloitte & Touche LLP, our independent registered accountants, for each of the last two fiscal years.

		2010				2009
Audit fees		$	835,300			$	985,300
Audit-related fees(1)		$	100,000				—
Tax fees(1)		$	100,000				—
All other fees			—				—
Total		$	1,035,300			$	985,300

AUDIT COMMITTEE REPORT

The members of our Audit Committee are Messrs. Robbins (Chair), Miller and Tanenbaum and Ms. Lau. The Board of Directors has determined that each of them is independent and is financially literate in accordance with the applicable Securities and Exchange Commission rules and listing standards of the New York Stock Exchange. The Board of Directors has also determined that our Audit Committee’s Chairman, James D. Robbins, qualifies as an audit committee financial expert as such term is defined by the Securities and Exchange Commission under Item 407(d)(5) of Regulation S-K. Although our Board of Directors has determined that Mr. Robbins is a financial expert as defined under Securities and Exchange Commission rules, his responsibilities are the same as those of other Audit Committee members. The Securities and Exchange Commission has determined that an audit committee financial expert will not be deemed an “expert” for any purpose as a result of being identified as an audit committee financial expert.

The Audit Committee operates under a written charter, which is available on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request. Under the charter, the Audit Committee’s responsibilities include:

	•		Review of our annual financial statements to be included in our Annual Report on Form 10-K and recommendation to the Board of Directors whether the audited financial statements should be included in our Annual Report on Form 10-K;
	•		Review of our quarterly financial statements to be included in our Quarterly Reports on Form 10-Q;
	•		Oversight of our relationship with our independent auditors, including:

	•		Appointment, termination and oversight of our independent auditors; and
	•		Pre-approval of all auditing services and permitted non-audit services by our independent auditors;

	•		Oversight of our internal controls;
	•		Oversight of the review and response to complaints made to us regarding accounting, internal accounting controls and auditing matters or other compliance matters;
	•		Oversight of our internal audit function; and
	•		Review and approval of related party transactions.

Our management is responsible for our internal controls and preparing our consolidated financial statements. Our independent registered public accounting firm, Deloitte & Touche LLP, is responsible for performing an independent audit of the consolidated financial statements and issuing a report thereon. Their audit is performed in accordance with the standards of the Public Company Accounting Oversight Board. The Audit Committee is responsible for overseeing the conduct of these activities. In performing its oversight function, the Audit Committee relies, without independent verification, on the information provided to it and on representations made by our management and our independent registered public accounting firm.

In conducting its oversight function, the Audit Committee discusses with our internal auditors and our independent registered public accounting firm, with and without management present, the overall scope and plans for their respective audits. The Audit Committee also reviews our programs and key initiatives to design, implement and maintain effective internal controls over financial reporting and disclosure controls. The Audit Committee has sole discretion, in its areas of responsibility and at our expense, to engage independent advisors as it deems appropriate and to approve the fees and retention terms of such advisors.

The Audit Committee meets with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their audits, the evaluations of our internal controls and the overall quality of our financial reporting. The Audit Committee has reviewed and discussed with management and Deloitte & Touche LLP the audited financial statements for the fiscal year ended January 29, 2011. The Audit Committee also reviewed and discussed with Deloitte & Touche LLP its report on our annual financial statements.

The Audit Committee discussed with Deloitte & Touche LLP the matters required to be discussed by Statement on Auditing Standards No. 114 (Communications with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received from Deloitte & Touche LLP the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.

Based on its review of the audited consolidated financial statements and discussions with management and Deloitte & Touche LLP referred to above, the Audit Committee recommended to the Board the inclusion of the audited financial statements for the fiscal year ended January 29, 2011 in our Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the material compensation decisions and elements for DSW’s executive team. As more fully described below, the Compensation Committee of DSW’s Board of Directors (the “Committee”) makes all compensation decisions for DSW’s executive officers, including the executive officers named in the Summary Compensation Table below (the “Named Executive Officers”) as follows:

	•		Jay L. Schottenstein — Executive Chairman of the Board;
	•		Michael R. MacDonald — President and Chief Executive Officer;
	•		Deborah L. Ferrée — Vice Chairman and Chief Merchandising Officer;
	•		Douglas J. Probst — Executive Vice President, Chief Financial Officer; and
	•		Harris Mustafa — Executive Vice President, Supply Chain and Merchandise Planning & Allocation.

Executive Compensation Philosophy & Objectives

The Committee believes that executive compensation packages should incorporate an appropriate balance of fixed versus variable compensation—as well as cash-based versus stock-based compensation—and reward performance that is measured against established goals that correspond to our short-term and long-term business plan and objectives.

DSW’s executive compensation program is designed to:

(1)

Attract and retain highly talented, experienced retail executives who can make significant contributions to our long-term business success. Specifically, we structure our compensation program to attract and keep executives we believe are critical to the implementation of our business strategy to:

	•		Anticipate the desires of our brand-, quality- and style-conscious customers who have a passion for footwear and accessories and provide them with a vast, exciting assortment of in-season styles combined with the convenience and value they desire;
	•		Create a distinctive store experience that satisfies both the rational and emotional shopping needs of our customers; and
	•		Execute on a growth strategy to increase total net sales through DSW store expansion, positive comparable store sales for DSW stores, increase in sales through leased business partners, and the expansion of dsw.com.
			At DSW, we believe we have assembled an experienced and talented executive team with a proven track record of delivering notable results.

Mr. Schottenstein, a seasoned retail industry executive, is our Executive Chairman of the Board, provides strategic guidance and insight to the DSW business, and helps our CEO oversee the operation of the business. Mr. MacDonald, our CEO, is an accomplished retail executive who provides leadership to DSW’s senior executive team. Ms. Ferrée, our Vice Chairman and Chief Merchandising Officer, leads our merchandising strategy and oversees a merchant team that is focused on continually delivering a broad assortment of fresh and current merchandise into our stores at price points that appeal to consumers from a broad range of socioeconomic and demographic backgrounds. Mr. Probst, our Chief Financial Officer, provides daily leadership to a Finance function that plays a critical role in ensuring the availability of the investment capital necessary to deliver on our growth strategy. Mr. Probst also leads our Leased Business Division. Mr. Mustafa leads our supply chain and merchandise planning and allocation functions. We believe that our current senior executive team possesses a proven ability to develop and execute merchandising, customer, real estate and infrastructure strategies. As a result, we believe our compensation program must incentivize and reward their efforts and also serve to keep their services with DSW, thus allowing us to compete in attracting and developing talent to support the continued development of DSW.

(2)    Reward executives for delivering superior performance. The Committee regularly reviews executive compensation packages to ensure a proper balance between fixed and variable compensation with more of the focus on, and potential reward to the executive for, achievement of short- and long-term performance goals. This was true for fiscal 2010 — in aggregate, the Named Executive Officer compensation opportunity consisted of approximately one-third fixed compensation (base salary) and approximately two-thirds variable compensation (annual cash incentive compensation and long-term equity compensation). The Committee believed this was an appropriate balance given the current focus and goals of the Company.

(3)    Create a strong link among the interests of shareholders, DSW’s financial performance and the total compensation of executives, and align executive incentives with shareholder value creation. The Committee believes targeting above-median long-term equity award levels (as discussed below) is appropriate for DSW during a critical growth phase. As a result, the Committee annually awards equity, generally in the form of stock options and restricted stock units, to the Named Executive Officers based, in part, on DSW’s financial performance. Such grants strongly align these officers’ interests with the interests of our shareholders as each are focused on the same result — value creation.

Setting Executive Compensation

Based on the objectives described above, the Committee has structured DSW’s executive compensation programs primarily to motivate executives to achieve the business goals established by DSW and reward executives for meeting those business goals, and perhaps more importantly, delivering superior performance as measured against those business goals. For 2010, the Committee engaged Hay Group, a global human resources consulting firm, to conduct a review of its total compensation program for the Named Executive Officers as well as for other company executives. As requested by the Committee, Hay Group provided the Committee with market data from proprietary databases and publicly available information to consider when making compensation decisions for our Named Executive Officers. While Hay Group was engaged directly by the Committee, Hay Group also provided similar input to company management to support compensation recommendations and decisions made for company executives who are not Named Executive Officers.

In making compensation decisions for executive officers in fiscal 2010, including the Named Executive Officers, the Committee compared each officer’s compensation against market compensation benchmarks drawn from a peer group of publicly-traded and privately-held retail industry companies (collectively, the “Survey Peer Group”). With input from Hay Group, the Committee ensured the Survey Peer Group generally consisted of retail companies with a focus on specialty retail and fashion similar to DSW. In addition, the Committee ensured the Survey Peer Group included companies against which the Committee believes DSW competes for talent and shareholder investment. The companies included in the Survey Peer Group for 2010 were:

		Abercrombie & Fitch		Aeropostale		American Eagle Outfitters
		Ann Taylor Stores		Big Lots		Bon-Ton Stores
		Brown Shoe Company		Chico’s FAS		Children’s Place
		Coach		Collective Brands		Express
		Foot Locker		J.C. Penney		J. Crew Group
		Kohl’s		Limited Brands		Limited Stores
		Macy’s		Michaels Stores		New York & Company
		Nordstrom		Stage Stores		Target
		Timberland		TJX Companies		Tween Brands

DSW’s revenue is slightly below the median revenue of the Survey Peer Group companies. However, Hay Group uses proprietary methodologies that allow for pay comparisons for the same job between companies of different sizes. As a result, pay comparisons may be made directly without adjusting for the difference in the size of the companies.

The pay elements used for comparison purposes are target total cash compensation (consisting of base salary and annual cash incentive compensation) and long-term equity incentive compensation. Generally, the Committee targets Named Executive Officer pay to fall between the 50th and 75th percentiles of Survey Peer Group data for total direct compensation (including both total cash compensation and long-term incentive compensation). This pay objective reflects the fact that DSW is a growth company and executives with the skills and experience necessary to deliver contributions that will significantly impact DSW’s long-term business

success and intended growth pattern command a premium in the marketplace. These objectives also recognize the Committee’s expectation that, over the long term, the Company will generate shareholder returns in excess of the average of its Survey Peer Group. Variations to this pay objective may occur as dictated by the experience level of the individual and market factors.

In addition, for Named Executive Officers where comparison data was available in 2010, the Committee also evaluates the actual pay of the Named Executive Officer with pay data drawn from proxy-disclosed pay information for the following publicly-traded companies (collectively, the “Proxy Peer Group”):

		Abercrombie & Fitch		Aeropostale		American Eagle Outfitters
		Ann Taylor Stores		Big Lots		Bon-Ton Stores
		Brown Shoe Company		Charming Shoppes		Coach
		Collective Brands		Dick’s Sporting Goods		Finish Line
		J. Crew Group		Limited Brands		New York & Company
		Pacific Sunwear		Skechers USA		Stein Mart
		Timberland		Tween Brands

For fiscal 2010, the compensation paid to Messrs. Schottenstein, MacDonald, Probst and Mustafa and Ms. Ferrée was reviewed pursuant to the Proxy Peer Group (in addition to the Survey Peer Group above). By looking at this proxy-disclosed information, as reviewed and summarized for the Committee by Hay Group, the Committee was able to analyze the relation between performance and the resulting pay delivered.

Finally, the Committee takes into consideration a review of each Named Executive Officer’s compensation relative to the other Named Executive Officers, taking into account each officer’s performance and impact on DSW’s business results.

Role of Executive Officers in Compensation Decisions

The Board of Directors determines Mr. Schottenstein’s compensation package. The Committee makes all compensation decisions for DSW’s Named Executive Officers based upon input provided by the Executive Chairman of the Board and certain members of company management, as discussed under “DSW’s 2010 Executive Compensation Elements” below, and the objective market data provided by Hay Group. The Committee can exercise its discretion and modify any recommendations that may be provided by company management and the independent compensation consultant. Company management does not provide input in determining the compensation of the Chief Executive Officer, which is determined solely by the Compensation Committee with input from the Executive Chairman of the Board and the independent compensation consultant.

DSW’s 2010 Executive Compensation Elements

For the fiscal year ended January 29, 2011, the total compensation opportunity for DSW’s executives (including the Named Executive Officers) was generally comprised of the following principal components:

	•		base salary;
	•		performance-based annual cash incentive compensation;
	•		long-term equity incentive compensation in the form of service-based stock options and restricted stock units; and
	•		retirement savings contributions through the 401(k) plan.

     Base Salary

While the Committee’s focus is on variable compensation based on performance, a clear objective of our executive compensation program is to pay a base salary that is competitive with the stated Survey Peer Group and Proxy Peer Group (where applicable) in order to retain our Named Executive Officers. The base salaries of all DSW executives (including the Named Executive Officers) are determined based on job responsibilities and individual contribution, and with reference to the considerations set forth below. Salary bands are designed so that the salary opportunity for a given position generally falls between 80% and 140% of the base salary midpoint established for that position. In the case of DSW’s executive team, the salary opportunity for a given position is targeted to be between the 50^th percentile and the 75^th percentile of Survey Peer Group market data for that position.

In March each year, the Committee determines the base salary of each Named Executive Officer for the next year. During its review, the Committee primarily considers:

	•		overall DSW financial performance during the prior year;
	•		the individual performance of the Named Executive Officer during the prior year;
	•		the target total cash compensation level of the appropriate benchmark position(s) as reflected in Survey Peer Group and Proxy Peer Group (where applicable) data;
	•		base salary data drawn from the Survey Peer Group and Proxy Peer Group (where applicable) information where available; and
	•		if relevant, compensation paid by a previous employer.

The Executive Chairman of the Board met with the Committee and reviewed the accomplishments and contributions made by Mr. MacDonald and Ms. Ferrée. In addition, the Chief Executive Officer reviewed with the Committee the accomplishments and contributions made by each of the Named Executive Officers under his supervision and provided his proposed base salary changes. After (i) discussing the performance of each named executive officer and (ii) reviewing the recommendations made by the Executive Chairman and the Chief Executive Officer, and based upon the Committee’s individual review and analysis of compensation paid by Survey Peer Group companies for the comparable position, the Committee approved the following salary changes for 2010:

				2009 Salary				2010 Salary				% Increase
		Mr. MacDonald		$	950,000			$	1,000,000				5.3	%
		Ms. Ferrée		$	850,000			$	900,000				5.9	%
		Mr. Probst		$	470,000			$	490,000				4.3	%
		Mr. Mustafa		$	540,000			$	565,000				4.6	%

     Performance-Based Annual Cash Incentive Compensation

In May 2009, the DSW Inc. 2005 Cash Incentive Compensation Plan (the “ICP”) was re-approved by DSW’s shareholders. The ICP gives the Committee the ability to foster and promote the financial success of the Company and increase shareholder value by providing cash incentives to the Named Executive Officers based on the achievement of specified annual business objectives. The ICP is designed to promote the achievement of annual performance goals and focuses the Named Executive Officers on short-term objectives which ultimately will contribute to the likelihood of achieving long-term business objectives and increase shareholder value. Under the ICP, Named Executive Officers earn annual cash incentives only when pre-established business objectives and targets are achieved. The Company currently has approximately 450 associates who are eligible to receive awards under the ICP. The Named Executive Officers are generally treated the same as all other eligible DSW associates under the ICP.

Generally, in the first quarter of each year, the Committee establishes the performance criteria that will be used to determine incentive compensation awards for that year. Company associates who participate in the plan have incentive levels that vary based on the individual’s position and contribution to business performance. Target award opportunities are established as a percentage of base salary and range from 50% to 100% of base salary for the Named Executive Officers. The target award opportunities for Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa were 100%, 100%, 80% and 50%, respectively, and were established based on market data provided by the independent compensation consultant and the scope of the leadership positions the executives occupy in the DSW business. Mr. Schottenstein was not a participant in the ICP during fiscal 2010.

For fiscal 2010, the Committee determined that 100% of each Named Executive Officer’s (excluding Mr. Schottenstein) annual cash incentive compensation award would be based upon DSW’s net income performance as reported in DSW’s financial statements. The Committee believed net income was the most relevant metric to DSW’s existing growth plan and best aligned with the growth objective shared with investors. Additionally, net income is publicly disclosed in the Company’s financial statements and provides transparency to all ICP participants.

In March 2010, the Committee established a target threshold performance level for fiscal 2010. Unless otherwise determined by the Committee, all associates who participated in the plan (including the Named Executive Officers) were to receive:

	•		no payment unless the Company achieved net income of $55.2 million (approximately 88% of the target net income level established);
	•		a payment of at least 50% but less than 100% of the target award opportunity if the Company achieved or exceeded $55.2 million of net income but did not achieve $62.8 million of net income (the target net income level established);
	•		a payment of at least 100% but less than 200% of the target award opportunity if the Company achieved or exceeded $62.8 million of net income but did not achieve $78.0 million of net income (approximately 124% of the target net income level established); and
	•		a payment of 200% of the target award opportunity if the Company achieved or exceeded $78.0 million of net income.

In making the annual determination of the minimum, target and maximum net income levels, the Committee may consider specific circumstances facing the company during the prior and subsequent years. In fiscal 2010, the Committee set the threshold net income level equal to prior year actual performance and set the target net income level equal to approximately 14% growth over the prior year. Generally, the Committee sets the minimum, target and maximum levels such that the relative difficulty of achieving the target level is reasonably consistent from year to year.

DSW’s fiscal 2010 performance led to a 200% payout for ICP participants, including each of the Named Executive Officers (other than Mr. Schottenstein). The bonuses paid to the Named Executive Officers (other than Mr. Schottenstein) for the fiscal year ending January 29, 2011 are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table below. For fiscal 2010, Mr. Schottenstein was not a participant in the ICP.

In March 2011, as a result of our financial results and Mr. Schottenstein’s contributions to the Company, the Committee determined to award a $500,000 cash bonus to Mr. Schottenstein. The bonus paid to Mr. Schottenstein is reflected in the Bonus column of the Summary Compensation Table below.

Long-Term Equity Incentive Compensation

Prior to our IPO in 2005, the DSW Inc. 2005 Equity Incentive Plan (the “Equity Plan”) was approved by our shareholders. The Equity Plan generally furthers the Committee’s objectives to retain its executives as well as build a link between executive compensation and shareholder interests and objectives. All equity awards are granted in respect to DSW’s Class A Common Stock.

DSW’s executive compensation philosophy generally calls for grants of both service-based stock options and restricted stock units to executives (Vice President and above) including the Named Executive Officers. As discussed above, in determining the value of annual long-term equity incentive grants for DSW executives, the Committee’s overall objective—consistent with its executive compensation philosophy—is to target the combined grant value of stock options and restricted stock units to fall between the 50th and 75th percentile of Survey Peer Group long-term incentive data. The Committee believes targeting above-median long-term incentive levels is appropriate for DSW as it seeks to create a compelling value proposition during a critical growth phase. Furthermore, the Committee believes that an above-median long-term equity incentive target is necessary to attract and retain executives with the skills and experience necessary to deliver contributions that will significantly impact DSW’s long-term business success and intended growth pattern.

In addition, long-term equity incentive grants to the Named Executive Officers are based on each individual’s (i) scope of job responsibilities, (ii) assessment of past performance and (iii) assessment of potential future contribution.

Historically, the value of long-term equity incentive awards has been delivered to executives 70% in stock options and 30% in restricted stock units. The Committee believes that delivery in this form provides an appropriate incentive to the leadership team to focus on long-term shareholder value creation and, at the same time, provides the Company with the retention value necessary in a competitive labor market. Prior to fiscal 2009, the targeted long-term incentive value delivered in stock options was converted to a number of shares

using the same fair value methodology the Company uses in determining accounting expense under Accounting Standard Codification 718 Compensation — Stock Compensation (ASC 718). The targeted long-term incentive value delivered in restricted stock units was determined by the grant date share price and adjusted based on an assumed forfeiture rate to calculate the total number of Common Shares to be delivered once all vesting requirements were satisfied.

In 2009, due to unprecedented stock market volatility as well as DSW’s severely depressed stock price that was trading at one-half of its historical average, the Company modified its approach to converting the targeted long-term incentive value into stock options and restricted stock units. Instead of using the fair value methodology noted above, the Company instead used a profit growth model that evaluated how the Company’s earnings were likely to grow over the applicable vesting period. The Company used the same methodology to determine grants made in 2010. Based on a $25.00 grant date stock price assumption, the Company converted the targeted long term incentive value to be delivered to each executive into a number of stock options valued at $13.00 per share and a number of restricted stock units valued at $35.00 per share.

Stock Options

Stock options provide executives with financial gain derived from the potential appreciation in the DSW share price between the award’s grant date and the date the executive elects to exercise the option. As a result, DSW’s long-term financial performance, as reflected in share price appreciation, ultimately determines the value of stock options. Because financial gain from stock options is only possible after the price of DSW common stock has increased, the Company believes grants encourage executives to focus on reasonable behaviors and actions that lead to an increase in the DSW share price, thus benefiting both company associates and shareholders. Generally, stock options vest annually in equal installments over the five years following the grant date.

Restricted Stock Units

Restricted stock units provide the Company with retention value vis-à-vis executives because, generally, they cliff vest 100% at the end of four years. In this way, executives are unable to realize the value of restricted stock units until a significant period of time has passed since the grant date. Additionally, since the restricted stock unit value is tied directly to the market value of DSW common stock, and not exclusively to the increase in the market value of DSW common stock, restricted stock units provide retention value even when the stock price is stable or declining. Thus, the Committee believes that restricted stock units are a key component of the long-term incentive portfolio in that they help retain executives and keep them focused on long-term value creation for shareholders. Dividend equivalents are not paid on restricted stock units granted to company executives, including those granted to the Named Executive Officers.

2010 Long-Term Equity Incentive Awards for the Named Executive Officers

In March 2010, the Committee granted long-term equity incentive awards to Named Executive Officers as part of the annual performance review process. The Committee considered various alternatives based on input from management and the independent compensation consultant which included different multiples of market competitive long-term incentive values based on Survey Peer Group data. The Committee considered alternative scenarios to effectively balance the delivery of cash and equity to the Named Executive Officers. Based upon the information provided, the Committee determined to deliver to each Named Executive Officer a long-term incentive award with a value reasonably consistent with market data for the Survey Peer Group companies at the 65^th percentile. In addition, the Committee determined to deliver the award 70% in stock options and 30% in restricted stock units to each Named Executive Officer consistent with the Committee’s typical practice for executives. The table below reflects the grants and applicable vesting schedule for each of the grants to the Named Executive Officers in 2010.

		#						Restricted Stock
		Of		Options Vesting		# of Restricted		Units Vesting
Name		Options		Schedule		Stock Units		Schedule
Mr. Schottenstein		57,700		20% per year		N/A		N/A
Mr. MacDonald		108,000		20% per year		17,100		100% on 4th anniversary of grant date
Ms. Ferree		65,000		20% per year		10,300		100% on 4th anniversary of grant date
Mr. Probst		24,000		20% per year		3,900		100% on 4th anniversary of grant date
Mr. Mustafa		16,000		20% per year		2,600		100% on 4th anniversary of grant date

     Equity Grant Practices

Under the Equity Plan, the Committee approves all equity awards and has not delegated to management the authority to approve equity awards. The Committee may not grant stock options at a discount to the closing price of DSW common stock on the grant date, nor may the Committee reduce the exercise price of outstanding stock options except in the case of a stock split or other similar event. All stock options granted under the Equity Plan have an exercise price that is equal to the closing market price of DSW common stock on the grant date. The grant date is the date of Compensation Committee approval, except in the case of prospective hires who meet the criteria outlined below.

The Committee also reviews and considers approval of off-cycle equity awards recommended by management at regularly scheduled Committee meetings (generally quarterly). These off-cycle equity awards reflect commitments made by DSW, subject to Committee approval, and are for current associates (generally in the case of promotion or retention), new hires who have already become employees of DSW or prospective hires who have agreed to a start date with DSW that will occur within the three weeks following the Committee meeting. The grant date for current associates and for new hires who have already become employees of DSW is the date the Committee approves the grant. The grant date for prospective hires is their future start date.

In March 2007, the Committee established a methodology to determine the grant date on which annual equity awards would be granted to eligible associates. The Committee determined that the annual equity grant date would be the seventh calendar day following DSW’s fiscal year-end earnings release. Prior to the establishment of this methodology, the Committee made annual equity grants on pre-established dates. The Committee does not backdate stock options or grant stock options retroactively. Additionally, the Committee does not coordinate equity grants so that they are made before announcement of favorable information or after announcement of unfavorable information.

401(k) Retirement Savings Contributions

DSW sponsors a tax-qualified 401(k) plan (the “Plan”) in which all DSW associates, including the Named Executive Officers (other than Mr. Schottenstein), are eligible to participate. Under the Plan, participants are able to contribute up to 50% of their total eligible cash compensation (including base salary and annual cash incentives) on a pre-tax or after-tax basis up to the limits imposed by the Internal Revenue Code. The maximum allowable per participant deferral in 2010 under the Internal Revenue Code was $16,500. DSW provides a 100% match on the first 3% contributed by a participant and an additional 50% match on the next 2% contributed by a participant. These matching contributions are not available to participants until they have completed at least one year of service with DSW. In light of the matching contribution for participants, and the Internal Revenue Code section 401(a)(17) annual compensation limit, the maximum allowable per participant company matching contribution in 2010 was $9,800. Participants choose to invest their account balances from an array of investment alternatives as selected by plan fiduciaries from time to time. A DSW stock fund is not among the investment alternatives available to plan participants. The Plan allows for distributions in a lump sum after termination of service. However, loans—and in-service distributions under certain circumstances such as a hardship, attainment of age 59-1/2 or a disability—are permitted.

Tax Considerations

Section 162(m) of the Internal Revenue Code limits deductibility of certain compensation paid to the chief executive officer and three other executive officers (exclusive of the Chief Financial Officer) who are the highest paid and employed at fiscal year-end to $1 million per year. The Committee annually considers the

impact of section 162(m) of the Internal Revenue Code in structuring DSW’s executive compensation program. In light of the competitive nature of the market for our executive talent, and our philosophy to pay and reward individual contributions to overall Company performance, the Committee reserves the discretion to reward significant contributions by the Named Executive Officers to building shareholder value, regardless of the tax deductibility limits of section 162(m).

Termination and Change in Control Arrangements

The Named Executive Officers (other than Mr. Schottenstein) have employment agreements that entitle them to receive certain benefits and payments if their employment terminates in specified separation scenarios. All of the Named Executive Officers are entitled to certain payments or benefits upon a change in control, including acceleration of the vesting of outstanding equity awards pursuant to the Equity Plan, which benefit is available to all Company associates. These arrangements are described under Potential Payments upon Termination and Change in Control below.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and its independent compensation consultant. Based on the Compensation Committee’s review and discussion with management and its independent compensation consultant, the Compensation Committee has recommended to the Board of Directors, and the Board of Directors has approved, that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the year ended January 29, 2011.

		Respectfully submitted,
		Compensation Committee
		Philip B. Miller, Chair
		Elaine J. Eisenman
		Carolee Friedlander
		James D. Robbins

COMPENSATION OF MANAGEMENT

The following table summarizes compensation awarded or paid to, or earned by, each of the named executive officers during fiscal 2010, fiscal 2009, and fiscal 2008. We follow a 52/53 week fiscal year that ends on the Saturday nearest to January 31 in each year. Fiscal 2010, 2009 and 2008 consisted of 52 weeks.

SUMMARY COMPENSATION TABLE

																										Changes in Pension
																										Value and
																										Non-Qualified
														Stock								Non-Equity				Deferred				All Other
Name and		Fiscal				Salary				Bonus				Award(s)				Option Award(s)				Incentive Plan				Compensation				Compensation ($)
Principal Position		Year				($)				($)				($)(1)				($) (2)				Compensation (3)				Earnings				(4)				Total
Jay L. Schottenstein			2010			$	500,000			$	500,000				—			$	776,342				—				—				—			$	1,776,342
Executive Chairman of the			2009			$	500,000			$	250,000				—				—				—				—				—			$	750,000
Board of Directors			2008			$	500,000				—				—			$	537,321				—				—				—			$	1,037,321
Michael R. MacDonald			2010			$	992,308			$	250,000			$	455,031			$	1,453,118			$	2,000,000				—			$	10,760			$	5,161,217
President and Chief			2009			$	730,769			$	250,000			$	489,150			$	576,723			$	1,900,000				—			$	19,730			$	3,966,372
Executive Officer(5)			2008				—				—				—				—				—				—				—				—
Deborah L. Ferrée			2010			$	892,308				—			$	274,083			$	874,562			$	1,800,000				—			$	10,760			$	3,851,713
Vice Chairman and Chief			2009			$	846,764				—			$	300,000			$	700,840			$	1,700,000				—			$	10,760			$	3,558,364
Merchandising Officer			2008			$	825,859			$	414,485			$	189,000			$	481,979				—				—			$	11,353			$	1,922,676
Douglas J. Probst			2010			$	486,923				—			$	103,428			$	320,448			$	784,000				—			$	10,735			$	1,705,534
Executive Vice President and			2009			$	465,385				—			$	160,000			$	390,468			$	752,000				—			$	10,694			$	1,778,547
Chief Financial Officer			2008			$	437,077			$	176,000			$	103,360			$	253,128				—				—			$	10,000			$	979,565
Harris Mustafa			2010			$	561,154				—			$	68,952			$	213,632			$	565,000				—			$	10,760			$	1,419,498
Executive Vice			2009			$	536,154				—			$	120,000			$	280,336			$	540,000				—			$	10,760			$	1,487,250
President, Supply Chain			2008			$	510,538			$	128,750			$	64,600			$	172,587				—				—			$	10,244			$	886,719
& Merchandise Planning & Allocation

		401(k) Matching				Life Insurance
Name		Contributions				Premium				Total
Michael R. MacDonald		$	9,800			$	960			$	10,760
Deborah L. Ferrée		$	9,800			$	960			$	10,760
Douglas J. Probst		$	9,800			$	935			$	10,735
Harris Mustafa		$	9,800			$	960			$	10,760

FISCAL YEAR 2010 GRANTS OF PLAN-BASED AWARDS

																		All Other Stock				All Other Option
						Estimated Possible Payouts Under												Awards: Number of				Awards: Number of				Exercise or Base				Grant Date Fair
						Non-Equity Incentive Plan Awards (1)												Shares of Stock or				Securities				Price				Value of Stock and
		Grant				Threshold				Target				Maximum				Units				Underlying Options				of Option Awards				Option Awards
Name		Date				($)				($)				($)				(#) (2)				(#) (2)				($/Sh)				($)
Jay L. Schottenstein			N/A				N/A				N/A				N/A				—				57,700			$	26.61			$	776,342
Michael R. MacDonald			3/24/2010			$	500,000			$	1,000,000			$	2,000,000				17,100				108,000			$	26.61			$	1,908,149
Deborah L. Ferrée			3/24/2010			$	450,000			$	900,000			$	1,800,000				10,300				65,000			$	26.61			$	1,148,645
Douglas J. Probst			3/23/2010			$	196,000			$	392,000			$	784,000				3,900				24,000			$	26.52			$	423,876
Harris Mustafa			3/23/2010			$	141,250			$	282,500			$	565,000				2,600				16,000			$	26.52			$	282,584

     

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2010

		Option Awards																Stock Awards
																																		Equity Incentive
										Equity Incentive																				Equity Incentive				Plan Awards: Market
		Number of				Number of				Plan Awards: Number																				Plan Awards: Number				or Payout Value of
		Securities				Securities				of Securities																Market Value of				of Unearned Shares,				Unearned Shares,
		Underlying				Underlying				Underlying												Number of Shares or				Shares or Units of				Units, or Other				Units, or Other
		Unexercised Options				Unexercised Options				Unexercised				Option Exercise								Units of Stock That				Stock That Have Not				Rights That Have				Rights That Have
		Exercisable				Unexercisable				Unearned Options				Price				Option Expiration				Have Not Vested				Vested				Not Vested				Not Vested
Name		(#)				(#)				(#)				($)				Date				(#)				($) (1)				(#)				($)
Jay L. Schottenstein			33,360				8,340	(2)			N/A			$	27.80				9/7/2016
			32,340				21,560	(3)			N/A			$	42.88				4/5/2017
			37,360				56,040	(4)			N/A			$	12.92				4/3/2018				—				—				N/A				N/A
			0				57,700	(5)						$	26.61				3/24/2020
Michael R. MacDonald			35,000				70,000	(6)			N/A			$	10.87				4/30/2019
			0				108,000	(5)			N/A			$	26.61				3/24/2020				62,100	(7)		$	2,066,688				N/A				N/A
Deborah L. Ferrée			150,000				0				N/A			$	19.00				6/28/2015
			32,040				21,360	(3)			N/A			$	42.88				4/5/2017
			31,600				47,400	(8)			N/A			$	13.50				4/23/2018				46,800	(10)		$	1,557,504				N/A				N/A
			28,000				112,000	(9)			N/A			$	10.00				4/1/2019
			0				65,000	(5)			N/A			$	26.61				3/24/2020
Douglas J. Probst			70,000				0				N/A			$	19.00				6/28/2015
			13,920				9,280	(3)			N/A			$	42.88				4/5/2017
			17,600				26,400	(4)			N/A			$	12.92				4/3/2018				23,900	(11)		$	795,392				N/A				N/A
			15,600				62,400	(9)			N/A			$	10.00				4/1/2019
			0				24,000	(5)			N/A			$	26.52				3/23/2020
Harris Mustafa			24,000				6,000	(12)			N/A			$	35.79				7/10/2016
			12,420				8,280	(3)			N/A			$	42.88				4/5/2017
			0				18,000	(4)			N/A			$	12.92				4/3/2018				16,600	(13)		$	552,448				N/A				N/A
			0				44,800	(9)			N/A			$	10.00				4/1/2019
			0				16,000	(5)			N/A			$	26.52				3/23/2020

FISCAL YEAR 2010 OPTION EXERCISES AND STOCK VESTED

Option Awards

Stock Awards

Number of Shares

Value Realized

Number of Shares

Value Realized

Name

Acquired on Exercise (#)

On Exercise ($)

Acquired on Vesting

on Vesting

Jay L. Schottenstein

N/A

N/A

N/A

N/A

Michael R. MacDonald

N/A

N/A

N/A

N/A

Deborah L. Ferrée

N/A

N/A

7,500

$

191,475

Douglas J. Probst

N/A

N/A

4,000

$

102,120

Harris Mustafa

23,200

385,808

8,500

$

202,595

Potential Payments Upon Termination and Change in Control

Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa have employment agreements with DSW that provide for limited payments and benefits following termination of their employment without “cause” or if the executive terminates employment for “good reason.” Additionally, our Equity Plan provides for acceleration of the vesting of outstanding equity awards upon a change in control for all Company associates, including the Named Executive Officers.

Employment Agreements with Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa

Generally, pursuant to each Named Executive Officer’s employment agreement, if DSW involuntarily terminates the officer’s employment without “cause” or if the officer voluntarily terminates employment for “good reason,” each of Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa are entitled to receive:

	(i)		salary continuation for at least a 12-month period based on the executive’s salary as of the date of termination;
	(ii)		a pro-rata share of any annual cash incentive bonus paid for performance in the fiscal year when termination occurs;
	(iii)		one year of accelerated vesting with respect to outstanding stock options and restricted stock units; and
	(iv)		continuing health coverage for at least 12 months.

		Also, pursuant to each officer’s employment agreement, if employment terminates as a result of death or disability, each of Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa are entitled to receive a pro-rata share of any annual cash incentive bonus paid for performance in the fiscal year when termination occurs.
		Each executive’s employment agreement also contains confidentiality and non-disparagement provisions effective through the term of the agreement, a non-competition provision effective through the longer of one year following termination of employment or the period of any salary continuation, and a non-solicitation provision effective through the longer of two years following termination of employment or the period of any salary continuation.
		For additional information about these employment agreements, see “Employment Agreements with Key Executives” (below).

Equity Plan

		Pursuant to our Equity Plan and any applicable award agreement, termination by reason of death, disability or retirement (defined as termination after reaching age 65 and completing at least five years of employment) entitles each Named Executive Officer to receive accelerated vesting with respect to all equity awards that are not vested as of the date of termination.
		Pursuant to the Equity Plan and any applicable award agreement, a change in control entitles all associates, including each Named Executive Officer, to receive accelerated vesting with respect to all equity awards that are not vested as of the date of the termination.

Potential Termination and Change in Control Payments

The estimated value of the benefits described above are presented in the table below and are calculated as if the respective termination or change in control event occurred on January 29, 2011 and our stock price was $33.28, the closing price of our Class A Common Shares on January 28, 2011, the last trading day of fiscal 2010, in the case of termination, and $39.93 in the case of change in control based on the calculation methodology specified in our Equity Plan. The amounts below assume each Named Executive Officer’s salary and annual incentive award is as set forth above in the Summary Compensation Table for fiscal 2010. The actual amounts to be paid will only be determinable at the time of actual payment.

		Involuntary
		Termination Without				Involuntary				Voluntary
		Cause or Voluntary				Termination				Termination
		Termination for Good				Because of Death				Because of				Change in
Named Executive Officer		Reason (1)				or Disability (2)				Retirement (2)				Control(2)
Jay L. Schottenstein Salary Continuation		$	0			$	0			$	0			$	0
Benefits Continuation		$	0			$	0			$	0			$	0
Accelerated Vesting of Equity		$	0			$	1,571,537			$	1,571,537			$	2,383,369
Total		$	0			$	1,571,537			$	1,571,537			$	2,383,369
Michael R. MacDonald Salary Continuation (3)		$	1,000,000			$	0			$	0			$	0
Benefits Continuation (4)		$	6,093			$	0			$	0			$	0
Accelerated Vesting of Equity		$	928,422			$	4,355,748			$	4,355,748			$	5,539,448
Total		$	1,934,515			$	4,355,748			$	4,355,748			$	5,539,448
Deborah L. Ferrée Salary Continuation (3)		$	900,000			$	0			$	0			$	0
Benefits Continuation (4)		$	2,715			$	0			$	0			$	0
Accelerated Vesting of Equity		$	1,300,674			$	5,535,986			$	5,535,986			$	7,028,246
Total		$	2,203,389			$	5,535,986			$	5,535,986			$	7,028,246
Douglas J. Probst Salary Continuation (3)		$	490,000			$	0			$	0			$	0
Benefits Continuation (4)		$	8,748			$	0			$	0			$	0
Accelerated Vesting of Equity		$	707,904			$	2,947,808			$	2,947,808			$	3,697,928
Total		$	1,206,652			$	2,947,808			$	2,947,808			$	3,697,928
Harris Mustafa Salary Continuation (3)		$	565,000			$	0			$	0			$	0
Benefits Continuation (4)		$	8,748			$	0			$	0			$	0
Accelerated Vesting of Equity		$	504,368			$	2,070,032			$	2,070,032			$	2,618,892
Total		$	1,078,116			$	2,070,032			$	2,070,032			$	2,618,892

(1)		The amount reported for “Accelerated Vesting of Equity” reflects the intrinsic value of unvested stock options and restricted stock units that would vest during the one year following the Named Executive Officer’s deemed date of termination.
(2)		The amount reported for “Accelerated Vesting of Equity” reflects the intrinsic value of unvested stock options and restricted stock units that would vest upon the Executive’s deemed date of termination or upon a change in control, as the case may be.
(3)		The amount reported reflects the continued payment of base salary for a period of 12 months at the rate in effect on the Executive’s deemed date of termination.
(4)		The amount reported reflects the cost of maintaining health care coverage for a period of 12 months at the coverage level in effect as of the Executive’s date of termination. The cost of maintaining health care coverage is calculated as the difference between (i) the company’s cost of providing the benefits and (ii) the amount the Executive paid for such benefits as of the Executive’s deemed date of termination.

Employment Agreements with Key Executives

Mr. Schottenstein

We have not entered into an employment agreement with Mr. Schottenstein, our Chairman. Mr. Schottenstein was appointed to this position on March 14, 2005.

Mr. MacDonald

We entered into an employment agreement with Mr. MacDonald, our President and Chief Executive Officer, in March 2009. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under “Potential Payments upon Termination and Change in Control” above. As of January 29, 2011, Mr. MacDonald’s base salary was $1,000,000. Mr. MacDonald also participates in our ICP with a target bonus opportunity of 100% of his base salary and a maximum annual bonus of 200% of base salary. In addition, Mr. MacDonald received a signing bonus of $500,000, $250,000 of which was paid on his date of hire, and $250,000 of which was paid on his first anniversary of employment. The agreement also provides for Mr. MacDonald’s participation in our 401(k) plan and welfare benefit plans.

Ms. Ferrée

We entered into an employment agreement with Ms. Ferrée, our Vice Chairman and Chief Merchandising Officer, in November 2004. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under “Potential Payments upon Termination and Change in Control” above. As of January 29, 2011, Ms. Ferrée’s base salary was $900,000, which is to be increased annually by a minimum of 2.5% over the previous year’s base salary. Ms. Ferrée also participates in our ICP with a target bonus opportunity of 100% of base salary and a maximum annual bonus of 200% of base salary. The agreement also provides for Ms. Ferrée’s participation in our 401(k) plan and welfare benefit plans.

Mr. Probst

We entered into an employment agreement with Mr. Probst, our Executive Vice President and Chief Financial Officer, in March 2005. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under “Potential Payments upon Termination and Change in Control” above. As of January 29, 2011, Mr. Probst’s base salary was $490,000. Mr. Probst also participates in our ICP with a target bonus opportunity of 80% of his base salary and a maximum annual bonus of 160% of base salary. The agreement also provides for Mr. Probst’s participation in our 401(k) plan and welfare benefit plans.

Mr. Mustafa

We entered into an employment agreement with Mr. Mustafa, our Executive Vice President, Supply Chain and Merchandise Planning and Allocation, in July 2006. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under “Potential Payments upon Termination and Change in Control” above. As of January 29, 2011, Mr. Mustafa’s base salary was $565,000. Mr. Mustafa also participates in our ICP with a target bonus opportunity of 50% of base salary and a maximum annual bonus of 100% of base salary. The agreement also provides for Mr. Mustafa’s participation in our 401(k) plan and welfare benefit plans.

Compensation Committee Review of the Relation of Compensation Design to Risk

The Compensation Committee has reviewed the design and operation of our compensation policies and practices, including incentive compensation arrangements for our Named Executive Officers and for all employees. The Compensation Committee has determined that the Company’s compensation policies and practices do not encourage our employees to take unnecessary or inappropriate risks that could reasonably be expected to materially threaten our value. Several factors contributed to this assessment, including the following:

	•		The Compensation Committee reviews the quality of our earnings prior to approving incentive payments;
	•		We provide a significant percentage of compensation based on performance, which is in turn based on annual and long-term incentives that require sustained value creation over several years to earn target incentives;
	•		For cash incentive payments made under our ICP, the Compensation Committee provides a maximum payout of 200% of target;
	•		We use the same financial metric—historically net income—to determine annual incentive payouts for all home office bonus eligible associates;
	•		Certain payments to our Named Executive Officers are subject to recovery if we restate a financial statement due to material noncompliance with any financial reporting requirement under the securities laws and such noncompliance is a result of misconduct; and
	•		The Compensation Committee has the discretion to adjust incentive payments based on key performance indicators that have a long-term financial impact, and an assessment of whether results are consistent with our values.

Compensation of Directors

Our Compensation Committee reviews director compensation and makes recommendations to our Board of Directors regarding director compensation.

Our current director compensation policies provide that each director who does not otherwise receive compensation (including severance) from DSW or Retail Ventures will receive:

	•		An annual cash retainer of $50,000;
	•		An annual equity retainer of $100,000; and
	•		An additional annual retainer for committee service for each committee on which such director serves (provided that the committee chairs do not receive such additional retainer) as follows:

	•		Audit Committee — $15,000
	•		Compensation Committee — $11,500
	•		Nominating and Corporate Governance Committee — $7,500
	•		Technology Committee — $7,500

The annual retainers are paid as follows:

	•		The annual cash retainer and the additional annual retainer for committee service are payable in quarterly installments on the last day of each fiscal quarter; and
	•		The annual equity retainer is payable on the date of each annual meeting of the shareholders for the purpose of electing directors, determined by dividing the amount of the retainer by the per-share market value of our Class A Common Shares on the grant date.

Directors do not receive any additional compensation for attending board meetings or board committee meetings. However, the chairmen of the Audit Committee, Nominating and Corporate Governance Committee, Compensation Committee, and Technology Committee each receive an additional $35,000, $20,000, $30,000, and $20,000 in cash or stock units (as they may elect) per year, respectively. We pay this compensation on a quarterly basis. All members of our Board of Directors are reimbursed for reasonable costs and expenses incurred in attending meetings of our Board of Directors and its committees.

During fiscal 2009, the Board of Directors established a special committee to review the proposed transaction with Retail Ventures. The members of the special committee are Messrs. Robbins (Chair), Miller and Tanenbaum, and Ms. Lau. The Board determined, upon a recommendation from the Compensation Committee, to pay Mr. Robbins a one-time retainer of $25,000 to chair the special committee. Additionally, each of the members of the special committee, and any independent board members who participate in a meeting, receive a meeting fee of $3,000 per meeting.

Non-management directors may elect to have any of the cash portion of their compensation paid in the form of stock units in lieu of cash.

Stock units issued to a director are fully vested on the date of grant, but will not be distributable to the director until the director leaves the board (for any reason). When the director leaves the board, the stock units owed to the director will be settled in DSW Class A Common Shares (with cash for any fractional shares), unless the director’s award agreement provides for a cash settlement. The stock units will be settled in a lump sum transfer, and the compensated director may not defer settlement or spread the settlement over a longer period of time.

Directors have no voting rights in respect to the stock units, but they will have the power to vote the DSW Class A Common Shares received upon settlement of the award. In general, directors have equivalent rights to receive dividends paid on DSW Class A Common Shares. Each director will be “credited” with the same dividend that would be issued if the stock unit was a DSW Class A Common Share. The amounts associated with the dividend equivalent rights will not be distributed until the director’s stock unit award is settled at the time that the director leaves the board. We will be entitled to a tax deduction when the award is settled, and the director will be taxed on the then fair market value of the award.

FISCAL YEAR 2010 DIRECTOR COMPENSATION

Change In Pension

Value and

Non-Equity

Nonqualified

Fees Earned or Paid

Incentive Plan

Deferred

All Other

in Cash

Stock Awards

Option Awards

Compensation

Compensation

Compensation

Name

($)(1)

($) (2)(3)

($)

($)

Earnings

($)

Total

Elaine J. Eisenman

$97,875

$100,000

None

None

None

None

$197,875

Carolee Friedlander

$94,875

$100,000

None

None

None

None

$194,875

Joanna T. Lau

$117,375

$100,000

None

None

None

None

$217,375

Roger S. Markfield(4)

None

$157,812

None

None

None

None

$157,812

Philip B. Miller

$124,375

$100,000

None

None

None

None

$224,375

James D. Robbins

$160,875

$100,000

None

None

None

None

$260,875

Harvey L. Sonnenberg

$57,812

$100,000

None

None

None

None

$157,812

Allan J. Tanenbaum

$117,375

$100,000

None

None

None

None

$217,375

Heywood Wilansky(5)

$25,000

None

None

None

None

None

$25,000