AutoZone 2010 Annual Report Download - page 39

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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 (a total of 12 executives for fiscal
2010). 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 • 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. Individual
potential payout is capped at $4
million; however, payout is
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.
Stock options • Senior executives receive a mix
of non-qualified stock options
(NQSOs) and incentive stock
options (ISOs).
• All stock options are granted at
fair market value on the grant
date (discounted options are
prohibited).
• AutoZone’s stock option plan
prohibits repricing and does not
include a “reload” program.
• Align long-term compensation
with stockholder results.
Opportunities for significant
wealth accumulation by
executives are tightly linked to
stockholder returns.
• ISOs provide an incentive to
hold shares after exercise, thus
increasing ownership and
further reinforcing the tie to
stockholder results.
29
Proxy