Pep Boys 2007 Annual Report Download - page 22

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14
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Summary.
The compensation provided to the executives listed in the Summary Compensation Table, whom we refer to as
our named executive officers, consists of base salaries, short-term cash incentives, long-term equity incentives,
retirement plan contributions and heath and welfare benefits. Long-term incentives consist of stock options and
restricted stock units, or RSUs. Our executive compensation program is designed to attract and retain highly-
qualified individuals and to reward such individuals for their efforts in achieving our corporate objectives, and is
based upon four principles:
• Performance-oriented. Ensuring the alignment of shareholder, corporate and individual goals.
• Value-oriented. Ensuring optimum value creation, while considering tax effectiveness, accounting impact,
overhang and dilution considerations.
• Fairness. Ensuring an executive team orientation, where future value is equitable relative to an
individual’s role and contribution.
• Corporate Ownership. Building executive stock ownership to demonstrate commitment to and faith in
the future of Pep Boys.
All program components are designed to be competitive at the market median of our peer group, with the
opportunity to earn more or less based on performance. Our peer group consists of the following competitors and
comparably-sized specialty retailers: AutoZone, Advance Auto Parts, CSK Auto, Monro Muffler & Brake, O’Reilly
Automotive, Border’s, Cost Plus, Dick’s Sporting Goods, Hibbitt Sports, Jo-Ann Stores, PetSmart and Williams-
Sonoma. The compensation mix as a percentage of total compensation is designed to reflect market
competitiveness and job level responsibility. The Human Resources Committee recommends to the full Board of
Directors the annual total compensation levels for all of the named executive officers (other than the CEO), based
on recommendations made by the CEO and the head of Human Resources and in consultation with management
consultants. The Human Resources Committee recommends to the full Board of Directors the annual total
compensation level for the CEO, based on recommendations made by the head of Human Resources and the
General Counsel and in consultation with management consultants.
The current executive compensation program structure was originally adopted in 2004 following a
comprehensive consulting engagement by the Hay Group. Since its adoption in 2004, we have made annual
adjustments to the component compensation levels based upon consultation with the Hay Group and Towers Perrin
and benchmarking analysis conducted against the compensation levels of our Peer Group.
The Human Resources Committee and the Board of Directors consider our overall compensation levels for the
named executive officers to be reasonable and appropriate.
Please note that the “Components of Compensation” discussion that follows is generally applicable to all named
executive officers who served as executive officers during fiscal 2007. Each of Messrs. Cirelli and Yanowitz,
served as executive officers during the entirety of fiscal 2007. Messrs. Rachor, Odell and Webb joined the
Company during fiscal 2007. See the discussion that follows under, “New Executive Officers.” Messrs. Smith and
Page left the employment of the Company during fiscal 2007. See the discussion that follows under, “Former
Executive Officers.” Mr. Leonard, served as our Interim CEO from July 18, 2006 through March 25, 2007. See the
discussion that follows under, “Interim Chief Executive Officer.”
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