AutoZone 2013 Annual Report Download - page 40

Proxy
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. The peer group companies listed below, which remained unchanged in
2013, were selected in 2010 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.
AutoZone Peer Group
Advance Auto Parts
Barnes & Noble
Bed Bath & Beyond
Brinker International
Darden Restaurants
Dick’s Sporting Goods
Dollar General
Dollar Tree
Family Dollar Stores
Foot Locker
Gamestop
Gap Stores
Genuine Parts
Limited Brands
O’Reilly Automotive
Pep Boys-Manny Moe & Jack
PetSmart
Radioshack
Ross Stores
Sherwin Williams
Starbucks
Yum! Brands
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 compensation
program is designed to maximize the tax deductibility of compensation paid to executive officers, where
possible. Plans or payment types which qualify as performance-based compensation include the EICP, PRSUs
and stock options. However, the Compensation Committee may authorize payments which are not deductible
where it is in the best interests of AutoZone and its stockholders.
Base salaries, restricted stock awards, Executive Stock Purchase Plan vested shares, and certain benefits
and perquisites do not qualify as performance-based under 162(m). For fiscal 2013, the compensation of the
Chief Executive Officer, as well as the other Named Executive Officers, was fully deductible in 2013, because
in no case did the sum of this compensation exceed $1 million.
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