AutoZone 2013 Annual Report Download - page 38

Proxy
Employee Stock Purchase Plan Executive Stock Purchase Plan
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-based 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 options and other stock-based 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 recommendations
of the Chief Executive Officer. The Compensation Committee also approves awards of other stock-based
compensation.
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 Committee
members (a total of 11 individuals at the end of fiscal 2013). Covered executives must attain a specified
minimum level of stock ownership, based on a multiple of their base salary, within 5 years of 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.
To encourage full participation in our equity plans, all AutoZone stock acquired under those plans is
included in the executive’s holdings for purposes of calculating his or her ownership. This includes vested stock
options and vested shares which have restrictions on sale.
Key features of the stock ownership requirement are summarized in the table below:
Ownership Requirement • Chief Executive Officer
• Executive Vice President
• Senior Vice President
5 times base salary
3 times base salary
2 times base salary
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