AutoZone 2008 Annual Report Download - page 29

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Drive long-term stockholder results. AutoZone’s compensation program is intended to support long-term
focus on stockholder results, so it emphasizes long-term rewards. At target levels, the majority of an executive
officer’s total compensation package each year is the potential value of his or her stock options.
The table below illustrates how AutoZone’s compensation program weights the “at-risk” components of
its named executive officers’ 2008 total compensation (here defined as actual base salary + annual cash
incentive target + Black-Scholes value of fiscal 2008 stock option grant):
Position Base Salary Annual Incentive Stock Options
Chairman, President & CEO 20% 20% 60%
All Other Named Executive Officers (“NEOs”) 23% 14% 63%
Who participates in AutoZone’s executive compensation programs?
The Chief Executive Officer and the other named executive officers, as well as the other senior executives
comprising AutoZone’s Executive Committee, participate in the compensation program outlined in this
Compensation Discussion and Analysis. The Executive Committee consists of the Chief Executive Officer and
officers with the title of senior vice president or executive vice president. However, many elements of the
compensation program also apply to other levels of AutoZone management. The intent is to ensure that
management is motivated to pursue, and is rewarded for achieving, the same financial, operating and
stockholder objectives.
What are the key elements of the company’s overall executive compensation program?
The table below summarizes the key elements of AutoZone’s executive compensation program and the
objectives they are designed to achieve. More details on these elements follow throughout the Compensation
Discussion and Analysis and this Proxy Statement, as appropriate.
Pay Element Description Objectives
Base salary • Annual fixed cash
compensation.
• Attract and retain talented
executives.
• Recognize differences in
relative size, scope and
complexity of positions as well
as individual performance over
the long term.
Annual cash incentive (bonus) • Annual variable pay tied to the
achievement of key Company
financial and operating
objectives. The primary
measures are:
• Earnings before interest and
taxes, and
• Return on invested capital.
• Actual payout depends on the
results achieved. Potential
payout is not capped; however,
payout may be zero if threshold
targets are not achieved.
• The Compensation Committee
may reduce payouts in its
discretion when indicated by
individual performance, but
does not have discretion to
increase payouts.
• Communicate key financial and
operating objectives.
• Drive high levels of
performance by ensuring that
executives’ total cash
compensation is linked to
achievement of financial and
operating objectives.
• Support and reward consistent,
balanced growth and returns
performance (add value every
year) with demonstrable links
to stockholder returns.
• Drive cross-functional
collaboration and a total-
company perspective.
19
Proxy