Pep Boys 2013 Annual Report Download - page 23

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18
Compensation Philosophy.
In 2010, the Compensation Committee adopted the following statement, which has guided our actions since
then, and which still reflects our underlying principles for Pep Boys’ compensation program.
Pep Boys’ executive compensation program is designed to:
• Enable Pep Boys to attract, retain, and motivate key executives critical to current and long-term success;
• Provide targeted compensation levels that are competitive with our customized peer group 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; 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 that gives primary emphasis to meeting or exceeding
the Company’s annual financial objectives;
• Long-term incentives will be designed to reward both absolute and relative 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;
•Ifthelong-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;
• 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;
• 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; and
• All payouts are subject to the discretion of the Compensation Committee even if targets are achieved.