Pep Boys 2011 Annual Report Download - page 21
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15
Compensation Philosophy.
Pep Boys’ executive compensation program is designed to:
•Enable Pep Boys to attract, retain, and motivate key executives who are critical for current and long-term
success;
•Provide targeted compensation levels which are competitive with our customized peer group (discussed
below) as to base salary, annual incentives and long-term incentives, and which are reflective of current
and/or expected future company performance levels;
•Support Pep Boys’ long-range business strategy;
•Establish a clear linkage between individual performance objectives and corporate or business unit financial
performance objectives; and
•Align executive compensation with shareholder interests by linking long-term incentives to increasing
shareholder value, utilizing performance metrics where appropriate.
The Compensation Committee has also adopted the following more specific guidelines in formulating the detailed
elements of Pep Boys’ executive compensation program:
•Short term incentives will be structured in a manner which gives primary emphasis to meeting or exceeding
the company’s annual financial objectives;
•Long-term incentives will be designed to reward performance over a multi-year time frame, with vesting of
awards to occur over a corresponding time period;
•At the discretion of the Compensation Committee,
•Payout on any short term incentive component may be made contingent upon achievement of the
annual budget. This decision will be made annually, when targets are set for the ensuing year;
•If the long-term incentive plan includes more than one performance dimension, achievement of target
on any one element may be treated as a prerequisite to payout on other goals (i.e. as a ‘qualifier’),
whether or not threshold performance is achieved on those other dimensions;
•The Compensation Committee believes that requiring achievement of full target performance in order to
trigger any payout under the annual incentive plan is generally inappropriate due to the risk of incenting
poor decision making at the margin. The Compensation Committee will annually set a “threshold”
performance level which is below the target objective, at which point some amount of incentive
compensation will be paid;
•From time to time the Compensation Committee may decide to grant a discretionary, individual short or
long term incentive award based on a specific individual’s performance;
•In the spirit of encouraging over-performance against annual targets, performance above target may be
rewarded disproportionately; i.e. marginal rewards for over-performance may exceed the marginal penalty
for under-performance; and
•All payouts are subject to the discretion of the Compensation Committee even if targets are achieved.