Pep Boys 2008 Annual Report Download - page 24

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18
annual bonus equal to 75% of his base salary (such bonus being guaranteed for fiscal 2008), (iii) participation in the
Company’s other incentive and welfare and benefit plans made available to executives, (iv) an inducement grant of
25,000 RSUs and 100,000 stock options. This compensation package was designed by the Human Resources
Committee to be competitive with those of the chief financial officers of the Company’s peer group.
Former Executive Officers.
Mr. Rachor resigned from the Company effective April 23, 2008. Mr. Yanowitz resigned from the Company
effective May 1, 2008.
Tax and Accounting Matters.
We consider the tax and accounting impact of each type of compensation in determining the appropriate
compensation structure. For tax purposes, annual compensation payable to the named executive officers generally
must not exceed $1 million in the aggregate during any year to be fully deductible under Section 162(m) of the
Internal Revenue Code. The Stock Incentive Plans are structured with the intention that stock option grants will
qualify as “performance based” compensation that is not subject to the $1 million deduction limit under Section
162(m). In addition, bonuses paid to the named executive officers under the Annual Incentive Bonus Plan qualify
as “performance based” compensation that is not subject to the $1 million deduction limit under Section 162(m).
RSUs generally do not qualify as “performance based” compensation for this purpose and are therefore subject to
the $1 million deduction limit. In order to compete effectively for the acquisition and retention of top executive
talent, we believe that we must have the flexibility to pay salary, bonus and other compensation that may not be
fully deductible under Section 162(m). Accordingly, the Human Resources Committee retains the authority to
authorize payments that may not be deductible under Section 162(m) if it believes that such payments are in the best
interests of Pep Boys and our shareholders. All compensation paid to the named executive officers in fiscal 2008,
except for a portion paid to Mr. Cirelli (due to the payout of his vested benefit under the Legacy Plan) was fully
deductible.
Human Resources Committee Report
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management.
Based upon our review and discussion with management, we have recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy Statement and in Pep Boys’ Annual Report on
Form 10-K for the fiscal year ended January 31, 2009 filed with the SEC.
This report is submitted by: Peter A. Bassi; John T. Sweetwood; Nick White; and James A. Williams.