Pep Boys 2013 Annual Report Download - page 14

9
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 executive officers are entirely based, and for the balance of our employees
are largely 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.)
• Our long-term incentive-based compensation is granted in the form of equity awards, which are subject to
time-based and performance-based vesting that is aligned to our corporate objective of creating value for our
shareholders. The nature of such awards discourages short-term risk taking. In addition, our officers are
subject to substantial share ownership requirements, thereby reinforcing their focus on Pep Boys’ long-term
success.
• We believe that our mix of fixed compensation and “at risk” compensation does not encourage inappropriate
risk-taking by our associates.
Personal Loans to Executive Officers and Directors. Pep Boys has no personal loans extended to its executive
officers or directors.
Director Attendance at the Annual Meeting. All Board members are expected and encouraged to attend the
Annual Meeting of Shareholders. All nominees then standing for election attended the 2013 Annual Meeting.
Communicating with the Board of Directors. Interested parties should address all communications to the full
Board or an individual director to the attention of our corporate Secretary. Our corporate Secretary reviews all such
communications to determine if they are related to specific products or services, are solicitations or otherwise relate
to improper or irrelevant topics. All such improper communications receive a response in due course. Any
communication directed to an individual director relating solely to a matter involving such director is forwarded to
such director. Any communication directed to an individual director relating to a matter involving both such
director and Pep Boys or the Board of Directors, as a whole, is forwarded to such director and the Chairman of the
Board. The balance of the communications are forwarded to the Chairman of the Board. Except for improper
communications, all interested party communications to the Board of Directors or an individual director received by
the corporate Secretary are kept in confidence from management. These procedures were adopted unanimously by
the independent directors.