Pep Boys 2009 Annual Report Download - page 20

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14
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction.
In June 2009, in accordance with our Committee Chair rotation policy, Ms. Atkins became the new chair of our
Compensation Committee. At the same time, due to changes in the makeup of our full Board, Messrs. Hotz and
Mitarotonda were appointed to the Compensation Committee. In recognition of this reconstitution of our
Compensation Committee, regulatory changes to executive compensation disclosures and the heightened public
scrutiny on executive compensation, the Compensation Committee commenced a full review of all of our executive
compensation policies and practices. This review resulted in certain modifications to our executive compensation
policies and practices (effective commencing in fiscal 2010), which are designed to continue to align executive
compensation with our short and long-term financial objectives and performance including, building shareholder
value. Enhancements made to our compensation polices and practices are detailed in this discussion and analysis
under the subheading “2010 Update.” Unless otherwise indicated, all other discussion and analysis relates to our
compensation policies and practices in place during, and compensation paid in consideration of service rendered in,
fiscal 2009.
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 health and welfare benefits. Our executive compensation program for fiscal 2009
was designed to attract and retain highly-qualified individuals and to reward such individuals for their efforts in
achieving our corporate objectives, and was 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 compensation 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.
For fiscal 2009, all program components were designed to be competitive with our peer group, with the
opportunity to earn more or less based on performance. Our 2009 peer group consisted 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 was designed to reflect market
competitiveness and job level responsibility. The Compensation Committee recommended to the full Board the
annual total compensation levels for all of the named executive officers (other than the Chief Executive Officer),
based on recommendations made by the Chief Executive Officer and the Senior Vice President - Human Resources
and in consultation with management consultants. The Compensation Committee recommended to the full Board the
annual total compensation level for the Chief Executive Officer, based on recommendations made by the Senior Vice
President - Human Resources and the General Counsel and in consultation with our compensation consultant Towers
Perrin. To arrive at such recommendations, the chair of the Compensation Committee scheduled and developed the
agenda for committee meetings in consultation with the Senior Vice President - Human Resources. The Senior Vice
President - Human Resources was responsible for developing appropriate materials for the Compensation
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 Compensation