Pep Boys 2008 Annual Report Download - page 20

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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, Monro Muffler & Brake, O’Reilly
Automotive, Border’s, Cost Plus, Dick’s Sporting Goods, Hibbett 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 SVP-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 SVP-Human Resources and the General
Counsel and in consultation with management consultants. To arrive at such recommendations, the chair of the
Human Resources Committee schedules and develops the agenda for committee meetings in consultation with the
SVP-Human Resources. The SVP-Human Resources is responsible for developing appropriate materials for the
Human Resources Committee’s review and consideration, including recommendations as to the amount and form of
executive compensation, and for reviewing these materials and recommendations with the chair of the Human
Resources Committee and our compensation consultants. Our CEO has input on the recommendations to the
Human Resources Committee with respect to the compensation of our named executive officers and other officers.
The Human Resources Committee considers, but is not bound to and does not always accept, management’s
recommendations with respect to executive compensation. The SVP-Human Resources, regularly, and the CEO, on
occasion, attend committee meetings, excluding portions of meetings where their own compensation is discussed.
In connection with establishing compensation levels for fiscal 2008, Towers Perrin advised the Human
Resources Committee on the then current competitiveness of program design and award values. The consultants
periodically attend committee meetings and also communicate with the chair of the Human Resources Committee
outside of meetings. The consultants work with management (including the CEO, SVP-Human Resources and
General Counsel) from time to time for purposes of gathering information and reviewing and providing input to
management on recommendations, proposals and materials that management may take to the Human Resources
Committee.