AutoZone 2010 Annual Report Download - page 47

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Executive Officer’s compensation; however, Compensation Committee discussions of specific pay actions
related to the Chief Executive Officer are held outside his presence.
Does AutoZone use compensation consultants?
Neither AutoZone management nor the Compensation Committee hired executive compensation consult-
ants during fiscal 2010. Although historically we have hired consultants to provide services from time to time,
it is not our usual practice, and as discussed previously, AutoZone does not regularly engage consultants as
part of our annual review and determination of executive compensation. The Compensation Committee has
authority, pursuant to its charter, to hire consultants of its selection to advise it with respect to AutoZone’s
compensation programs, and it may also limit the use of the Compensation Committee’s compensation
consultants by AutoZone’s management as it deems appropriate.
What are AutoZone’s peer group and compensation benchmarking practices?
AutoZone reviews publicly-available data from a peer group of companies to help us ensure that our
overall compensation remains competitive. The peer group data we use is from proxy filings and other
published sources — it is not prepared or compiled especially for AutoZone.
We periodically review the appropriateness of this peer group. It typically has changed when such events
as acquisitions and spin-offs have occurred. During 2010, we determined that more significant changes were
warranted. The revised peer group was selected using the following criteria:
• Direct competitors;
• Companies with which we compete for talent, customers and capital; and
• Companies with revenues ranging between 50% and 200% of AutoZone’s revenues.
The table below lists the companies in the revised peer group (companies which have been added are
noted with an asterisk), as well as which companies have been removed.
Revised Peer Group Company List Former Peer Group Companies
ADVANCE AUTO PARTS INC GENUINE PARTS CO BEST BUY CO INC
BARNES & NOBLE INC LIMITED BRANDS INC BORDERS GROUP INC
BED BATH & BEYOND INC O REILLY AUTOMOTIVE INC GAP INC
BRINKER INTERNATIONAL INC* PEP BOYS MANNY MOE & JACK HOME DEPOT INC
DARDEN RESTAURANTS INC* PETSMART INC LOWES COMPANIES INC
DICKS SPORTING GOODS INC* RADIOSHACK CORP OFFICE DEPOT INC
DOLLAR GENERAL CORP* ROSS STORES INC STAPLES INC
DOLLAR TREE INC* SHERWIN WILLIAMS CO TJX COMPANIES INC
FAMILY DOLLAR STORES INC* STARBUCKS CORP WILLIAMS SONOMA INC
FOOT LOCKER INC* YUM BRANDS INC* ZALE CORP
GAMESTOP CORP. *
We do not use information from the peer group or other published sources to set targets or make
individual compensation decisions. AutoZone does not engage in “benchmarking,” such as targeting base
salary at peer group median for a given position. Rather we use such data as context in reviewing AutoZone’s
overall compensation levels and approving recommended compensation actions. Broad survey data and peer
group information are just two elements that we find useful in maintaining a reasonable and competitive
compensation program. Other elements that we consider are individual performance, Company performance,
individual tenure, position tenure, and succession planning.
What is AutoZone’s policy concerning the taxation of compensation?
The Compensation Committee considers the provisions of Section 162(m) of the Internal Revenue Code
which allows the Company to take an income tax deduction for compensation up to $1 million and for certain
compensation exceeding $1 million paid in any taxable year to a “covered employee” as that term is defined
in the Code. There is an exception for qualified performance-based compensation, and AutoZone’s
37
Proxy