Pep Boys 2012 Annual Report Download - page 21

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17
•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.
Peer Group.
In order to maintain a competitive total compensation program, Pep Boys compares itself with a custom peer
group comprising key competitors in the automotive service and retail business,as well as comparably-sized
companies in the broader hardlines retail industry. The peer group is reviewed annually by the Compensation
Committee, together with its compensation consultant, to ensure that it remains relevant. The peer group utilized to
establish the fiscal 2012 executive compensation program included: Aarons, Advance Auto Parts, Autozone, Big 5
Sporting Goods, Cabela’ s, Conn’ s, Dick’ s Sporting Goods, hhgregg, Midas, Monro Muffler & Brake, O’ Reilly
Automotive, PetSmart, RadioShack, Rent-A-Center, Tractor Supply and West Marine. In some cases, Pep Boys
analyzes competitive pay practices in the general industry for positions where incumbents may typically be recruited
from outside of the hardlines retailing sector.
Update. In order to provide a more robust data set and utilize companies with average revenues, market
capitalization and employee count closer to that of Pep Boys, for fiscal 2013,the Compensation Committee has
revised the peer group to add Asbury Automotive, Finish Line, Hibbett Sports, Lithia Motors, Pier 1 Imports,
Williams Sonoma and Zale Corporation and remove Dick’ s Sporting Goods and PetSmart, resulting in an expanded
peer group of 20 companies.
The Compensation Process.
For fiscal 2012, the Compensation Committee recommended to the full Board the annual total compensation
levels for all of the named executive officers (other than the President & Chief Executive Officer), based on
recommendations made by the President & Chief Executive Officer and the Senior Vice President -Human
Resources, and in consultation with Pay Governance, the Compensation Committee’ s compensation consultant. The
Compensation Committee recommended to the full Board the annual total compensation level for the President &
Chief Executive Officer after consulting with Pay Governance.Our President & CEO was not involved in
formulating recommendations as to his own compensation.
To arrive at its recommendations for compensation to be paid to our President & CEO and other named executive
officers, the chair of the Compensation Committee scheduled and developed the agenda for committee meetingsin
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 and
for reviewing these materials and recommendations with the chair of the Compensation Committee and Pay
Governance prior to their presentation to the Compensation Committee. Our President & Chief Executive Officer
was principally responsible for recommendations made to the Compensation Committee with respect to the
compensation of our named executive officers (other than himself) and other officers of the corporation. The
Compensation Committee considered, but wasnot bound to and did not always accept, management’s
recommendations with respect to executive compensation. The President & Chief Executive Officer, Senior Vice
President –Human Resources and Senior Vice President –General Counsel & Secretary attended all committee
meetings, excluding portions of meetings where their own compensation was discussed, and excluding the regular
executive sessions held at the conclusion of each regularly-scheduled meeting of the Committee.