ABG » Topics » Elements of Compensation

This excerpt taken from the ABG DEF 14A filed Mar 31, 2009.

Elements of Compensation

With respect to compensation paid to our named executive officers in 2008, each such officer received compensation composed of the following four elements: (i) base salary; (ii) other benefits; (iii) an annual cash bonus; and (iv) an equity grant under the Company’s 2002 Equity Incentive Plan, which is referred to in this CD&A as our long-term equity incentive plan.

The base salary of each named executive officer was established at the point of his or her hire or promotion, taking into account the executive’s experience, skills, level in the organization and scope of responsibilities. Increases in base salary for the named executive officers (other than for the CEO) are recommended to the Committee by the CEO. For a further discussion of the 2008 salary increases for the named executive officers, please see the discussion under “Base Salaries” below.

Our named executive officers are eligible to participate in benefit plans that are of the same design and cost for other employees in our corporate office. Furthermore, each named executive officer receives an auto allowance. In addition, Charles R. Oglesby, our Chief Executive Officer, is granted additional benefits. For a further discussion of the benefits provided to our named executive officers, see the discussion under “Other Benefits” on page 24, and in the footnotes to the Summary Compensation Table, which begins on page 34. We do not provide a defined benefit or a supplemental retirement plan for our named executive officers or other employees, and our Wealth Accumulation Plan, which is a deferred compensation plan, does not include a company-funded match for the named executive officers.

The 2008 annual cash bonus plan for the named executive officers was based entirely on a pre-established net operating income from continuing operations metric, as the Committee believed that for 2008 this would be the best measure of our performance. For further discussion of the 2008 annual cash bonus plan please see the discussion under “Annual Cash Bonus Plan” below.

The 2008 equity grants to the named executive officers were generally in the form of (i) performance shares based on the payout of performance units that were previously granted, (ii) additional grants of performance shares, which are to be paid out in 2011 for the 2008, 2009 and 2010 performance periods, and (iii) restricted stock. In addition, one of our named executive officers also received an equity grant in the form of stock options. Each of these forms of equity was issued to the named executive officers pursuant to our long-term equity incentive plan.

The performance share grant contained performance goals relating to income from continuing operations and the performance of each of our four revenue sources: (i) new vehicle revenue growth vs. peers; (ii) used vehicle revenue growth vs. peers; (iii) finance and insurance revenue growth; and (iv) parts ands service gross profit. The Committee believes that performance shares provide an incentive for management to build long-term value in our stock for our stockholders. The Committee also believes that grants of restricted stock, which vest

 

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100% three years after the date of issue, promote the retention of our named executive officers and align the interests of our executives and our stockholders. For further discussion of the equity grants issued to the named executive officers under the long-term equity incentive plan in 2008, please see the discussion under “Equity-Based Compensation” below.

The Committee has adopted a peer group as one point of reference to evaluate executive compensation. The peer group adopted by the Committee was comprised of 15 companies (the “Peer Group”); however, due to the acquisition of CSK Auto, Inc. by AutoZone, the Peer Group has been reduced to the following 14 companies:

 

   

five similarly-sized public automotive retailers: Carmax Inc., Group One Automotive, Inc., Lithia Motors Inc., Penske Automotive Group, Inc. and Sonic Automotive Inc.;

 

   

four specialty automotive retailers that are of similar size: Advanced Auto Parts Inc., AutoZone Inc., O’Reilly Automotive, Inc. and Pep Boys Manny Moe and Jack; and

 

   

five specialty retailers that are of similar size: Barnes and Noble, Inc., BJ’s Wholesale Club, Inc. Borders Group, Inc., Dick’s Sporting Goods, Inc. and Office Max, Inc.

The Committee considers the competitive median levels using the proxy statement disclosures of the Peer Group as an important point of reference; a pre-established target for total compensation or for each element of compensation has not be adopted by the Committee. In cases in which proxy statement data from the Peer Group does not provide appropriate matches to the positions held by our named executive officers, the Committee considers the competitive median of general compensation survey data provided by Frederic Cook as a point of reference. When setting targeted compensation levels, the Committee uses its judgment in considering competitive data, an executive’s performance, potential for promotion, and level of experience, and our financial health. By using performance-based equity plans and bonus plans, the Committee expects that when our performance exceeds targeted performance levels, total compensation for our named executive officers may be above competitive median levels.

This excerpt taken from the ABG DEF 14A filed Mar 20, 2008.

Elements of Compensation

With respect to compensation paid to the named executive officers in 2007, each such officer received compensation composed of the following four elements: (i) base salary; (ii) benefits and perquisites; (iii) an annual cash bonus; and (iv) an equity grant under the Company’s long-term equity incentive plan.

The base salary of each named executive officer was established at the point of his or her hire or promotion, taking into account the executive’s experience, skills, level in the organization and scope of responsibilities. Increases in base salary for the named executive officers (other than for the CEO), are recommended to the Committee by the CEO. For a further discussion of the 2007 salary increases for the named executive officers, please see the discussion under “Base Salaries” below.

The named executive officers are eligible to participate in benefit plans that are of the same design and cost for other employees in our corporate office. Furthermore, each named executive officer receives an auto allowance. In addition, Kenneth B. Gilman, our former Chief Executive Officer, and Charles R. Oglesby, our current Chief Executive Officer, were granted additional perquisites. For a further discussion of the benefits and perquisites provided to our named executive officers, see the discussion under “Benefits and Perquisites” on page 23, and in the footnotes to the Summary Compensation Table on pages 30 and 31, below. We do not provide a defined benefit or a supplemental retirement plan for the named executive officers or other employees, and our Wealth Accumulation Plan, which is a deferred compensation plan, does not include a company-funded match for the named executive officers.

The 2007 annual cash bonus paid to the named executive officers was based entirely on a pre-established net income before taxes (“NIBT”) metric, as the Committee believes this is the best measure of the Company’s performance. Prior to 2007, for named executive officers (excluding the CEO whose bonus is based 100% upon NIBT), the annual bonus plan included a subjective bonus element for personal performance. This personal performance element was 25% of the targeted annual bonus. For 2007, the Committee decided that since the CEO and our corporate executives are ultimately responsible for the overall financial performance of the Company, the annual bonus for all named executive officers and other corporate executives should be determined in the same manner as that of the CEO. For further discussion of the 2007 annual cash bonus plan please see the discussion under “Annual Cash Bonus Plan” below.

The 2007 equity grants in the form of performance units were issued to the named executive officers pursuant to the Company’s 2002 Equity Incentive Plan, which is referred to as our long-term equity incentive plan in this CD&A. The performance unit grant contained performance goals relating to income from continuing operations and the performance of each of our four revenue sources: (i) new vehicle revenue growth vs. peers; (ii) used vehicle revenue growth vs. peers; (iii) finance and insurance revenue growth; and (iv) fixed operations (parts ands service) gross profit. The Committee believes that performance units provide an incentive for management to build long-term value in our stock for our stockholders and to align executives’ and stockholders’ interests. For further discussion of the grants issued to the named executive officers under the long-term equity incentive plan in 2007, please see the discussion under “Equity-Based Compensation” below.

 

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This excerpt taken from the ABG DEF 14A filed Mar 30, 2007.

Elements of Compensation

The total compensation for the Company’s named executive officers is primarily comprised of three components:

 

   

base salary;

 

   

annual cash bonus; and

 

   

equity-based compensation under the Company’s 2002 Equity Incentive Plan, referred to in this CD&A as the “long-term equity plan.”

The Company does not provide a defined benefit or a supplemental retirement plan for the named executive officers or other employees, and the Company’s Wealth Accumulation Plan, which is a deferred compensation

 

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plan, does not include a company-funded match. Since each compensation element rewards different aspects of individual and company performance, the Committee evaluates each element separately.

In its evaluation of executive officer compensation, the Compensation Committee has not adopted a formal peer driven compensation philosophy. Because the Company has a small number of peers of similar size and life cycle, the usefulness of formal peer compensation comparisons is limited. While the named executive officers have between three and seven years of employment with the Company, each individual has joined the Company from other successful companies. The initial compensation package for each named executive officer was based upon the compensation required to secure the services of each such executive. As a result, the mix of compensation is different for each executive. On November 3, 2006, the Committee retained Frederic W. Cooke Co. to provide advice concerning market compensation data for executive officers. However, to ultimately determine the compensation package for each named executive officer, the Committee exercises its judgment.

For 2006, the Committee reviewed and determined the compensation for Mr. Gilman, the Company’s CEO, and submitted a recommendation concerning his compensation to the Board. The Board made the final decision as to the amount and mix of compensation that would be awarded to Mr. Gilman. The Committee received recommendations from Mr. Gilman concerning the compensation of the other named executive officers, deliberated on such recommendations and then decided on what amount and what mix of compensation each named executive officer would receive.

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