AutoZone 2010 Annual Report Download - page 48

Download and view the complete annual report

Please find page 48 of the 2010 AutoZone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 172

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172

compensation program is designed to maximize the tax deductibility of compensation paid to executive
officers, where possible. However, the Compensation Committee may authorize payments which are not
deductible where it is in the best interests of AutoZone and its stockholders.
Plans or payment types which qualify as performance-based compensation include the EICP and stock
options. Neither base salaries, nor the Executive Stock Purchase Plan, qualify as performance-based under
162(m). The base salaries, and any awards under the Executive Stock Purchase Plan, for each executive officer
were fully deductible in 2010, because in no case did the sum of this compensation exceed $1 million.
Section 409A of the Internal Revenue Code was created with the passage of the American Jobs Creation
Act of 2004. These new tax regulations create strict rules related to non-qualified deferred compensation
earned and vested on or after January 1, 2005. AutoZone has conducted a thorough assessment of all affected
plans, and continues to take actions necessary to comply with the new requirements by the deadlines
established by the Internal Revenue Service.
Compensation Committee Report
The Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed
with management the Compensation Discussion and Analysis. Based on the review and discussions, the
Compensation Committee recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement.
Members of the Compensation Committee:
Earl G. Graves, Jr., Chair
Robert R. Grusky
George R. Mrkonic, Jr.
Theodore W. Ullyot
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board of Directors during the 2010 fiscal year are
listed above. The Compensation Committee is composed solely of independent, non-employee directors.
Compensation Program Risk Assessment
AutoZone’s management completed a broad assessment of the compensation plans and programs in place
during our fiscal year 2010 that apply throughout the Company, including those plans and programs in which
our executives participate. The assessment of the plans and programs was performed by key members of
AutoZone’s human resources, finance, operations, and legal teams, and entailed thorough discussions of each
plan’s or program’s design and operation. The team’s findings were reviewed by senior management prior to
being reviewed and discussed with the Compensation Committee.
Plan elements which were reviewed included participants, performance measures, performance and payout
curves or formulas, how target level performance is determined (including whether any thresholds and caps
exist), how frequently payouts occur, and the mix of fixed and variable compensation which the plan delivers.
The plans and programs were also reviewed from the standpoint of reasonableness (e.g., how target and above-
target pay levels compare to similar plans for similar populations at other companies, and how payout amounts
relate to the results which generate the payment), how well the plans and programs are aligned with
AutoZone’s goals and objectives, and from an overall standpoint, whether these plans and programs represent
an appropriate mix of short- and long-term compensation.
The purpose of these reviews was to determine whether the risks related to the design and operation of
these plans and programs, if present, are reasonably likely to have a material adverse effect on the company.
We believe that our compensation policies and practices do not encourage excessive risk-taking and are not
38
Proxy