AutoZone 2010 Annual Report Download - page 45

The table below can be used to compare and contrast the stock purchase plans.
Employee Stock Purchase Plan Executive Stock Purchase Plan
Contributions After tax, limited to lower of
10% of eligible compensation
(defined above) or $15,000
After tax, limited to 25% of
eligible compensation (defined
above)
Discount 15% discount based on lowest
price at beginning or end of the
quarter
15% discount based on quarter-
end price
Vesting None; 1-year holding period Shares granted to represent 15%
discount restricted for 1 year; 1-
year holding period for shares
purchased at fair market value
Taxes — Individual Ordinary income in amount of
spread; capital gains for
appreciation; taxed when shares
sold
Ordinary income when
restrictions lapse (83(b) election
optional)
Taxes — Company No deduction unless
“disqualifying disposition”
Deduction when included in
employee’s income
How does the Compensation Committee consider and determine executive and director compensation?
Chief Executive Officer. The Compensation Committee establishes the compensation level for the Chief
Executive Officer, including base salary, annual cash incentive compensation, and stock option awards. The
Chief Executive Officer’s compensation is reviewed annually by the Compensation Committee in conjunction
with a review of his individual performance by the non-management directors, taking into account all forms of
compensation, including base salary, annual cash incentive, stock option awards, and the value of other
benefits received.
Other Executive Officers. The Compensation Committee reviews and establishes base salaries for
AutoZone’s executive officers other than the Chief Executive Officer based on each executive officer’s
individual performance during the past fiscal year and on the recommendations of the Chief Executive Officer.
The Compensation Committee approves the annual cash incentive amounts for the executive officers, which
are determined by objectives established by the Compensation Committee at the beginning of each fiscal year
as discussed above. The actual incentive amount paid depends on performance relative to the target objectives.
The Compensation Committee approves awards of stock options to many levels of management, including
executive officers. Stock options are granted to executive officers upon initial hire or promotion, and thereafter
are typically granted annually in accordance with guidelines established by the Compensation Committee as
discussed above. The actual grant is determined by the Compensation Committee based on the guidelines and
the performance of the individual in the position. The Compensation Committee considers the recommenda-
tions of the Chief Executive Officer.
Management Stock Ownership Requirement. To further reinforce AutoZone’s objective of driving long-
term stockholder results, AutoZone maintains a stock ownership requirement for all executive officers (a total
of 12 individuals in fiscal 2010), including the named executive officers. Covered executives must attain a
specified minimum level of stock ownership, based on a multiple of their base salary, within 5 years of the
adoption of the requirement or the executive’s placement into a covered position. Executives who are promoted
into a position with a higher multiple will have an additional 3 years to attain the required ownership level. In
order to calculate whether each executive meets the ownership requirement, we total the value of each
executive’s holdings of whole shares of stock and the intrinsic (or “in-the-money”) value of vested stock
options, based on the fiscal year-end closing price of AutoZone stock, and compare that value to the
appropriate multiple of fiscal year-end base salary.
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