Pep Boys 2011 Annual Report Download - page 136

independent judgment as a director. In reaching such an opinion, the Board considers, among other
factors, the guidelines for independent directors promulgated by the NYSE. The independence of the
outside directors is reviewed annually by the full Board. In accordance with NYSE guidelines, our
Board consists of a majority of independent directors. In fact, all of our current directors, except our
President & Chief Executive Officer, Mr. Odell, are independent. All Committees of the Board consist
entirely of independent directors.
Executive Sessions of the Independent Directors. Our non-executive Chairman, Mr. Hotz, presides
over all such sessions, which are held, at a minimum, immediately following all regularly scheduled
Board meetings.
Board Leadership Structure and Role in Risk Oversight. Pep Boys currently separates the roles of
Chairman of the Board and Chief Executive Officer. Given the relatively short tenure of both our
current Chairman of the Board and President & Chief Executive Officer, the Board believes that the
separation of these roles currently allows the President & Chief Executive Officer to focus his efforts
primarily on the successful short and long-term operations of the Company for the benefit of all its
constituents, while allowing the Chairman of the Board to manage the operation of the Board in its
oversight of the President & Chief Executive Officer and Pep Boys’ strategic direction.
Pep Boys has adopted an enterprise risk oversight program pursuant to which management, lead
by Pep Boys’ Chief Financial Officer and General Counsel, together with the Audit Committee
identifies the most significant risks faced by the Company. On a quarterly basis, management assesses
the status of these risks and the Company’s mitigation efforts against them, which are reporting in
writing to the full Board and discussed in detail with the Audit Committee and in summary fashion
with the full Board.
Compensation Policies and Practices Risk. In connection with its annual review of Pep Boys’
compensation policies and practices, our Compensation Committee of the Board of Directors, together
with senior management and the Compensation Committee’s independent executive compensation
consultant, considered whether any of our compensation policies and practices has the potential to
create risks that are reasonably likely to have a material adverse effect on Pep Boys. The Compensation
Committee considered the risk profile of our business and the design and structure of our
compensation policies and practices. We concluded that the risks arising from our compensation
policies and practices are not reasonably likely to have a material adverse effect on Pep Boys based on
the following:
• Pep Boys is not engaged in speculative activities that have the potential for creating unusual
gains or losses.
• Our base salaries, retirement benefits, perquisites and generally available benefit programs
create little, if any, risk to Pep Boys.
• Except as provided below, all of our management employees who receive short-term incentive-
based compensation do so pursuant to the terms of our shareholder approved Annual Incentive
Bonus Plan. The bonus targets under such plan for Officers are entirely based, and for middle-
management are primarily based, upon the achievement of stated corporate-level financial
objectives, which are in alignment with our overall business plan. In particular, we do not place
disproportionate weight on any one metric, do not include an inordinate amount of metrics,
reasonably leverage the selected metrics and employ features to mitigate risks, including
limitations on annual cash payouts. Accordingly, we do not believe that the structure of the
Annual Incentive Bonus Plan encourages associates to take risks that are reasonably likely to
have a material adverse effect on Pep Boys. (The aforementioned exception is for store level
associates who have a separate bonus program and whose bonus compensation, individually or in
the aggregate, is of an amount that creates little, if any, risk to Pep Boys.)
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