This excerpt taken from the AN DEF 14A filed Apr 28, 2006.
Compensation of the Chief Executive Officer
For fiscal year 2005, Mr. Jacksons annual base salary was $1,150,000, the amount established under the employment agreement Mr. Jackson signed with the company in December 2004. The agreement provides for the continuation of Mr. Jacksons base salary of $1,150,000 per year, subject to future increases as determined by the Committee or the Subcommittee. In setting Mr. Jacksons base salary, we considered the factors described above and the quality of his leadership in executing the companys business strategy and optimizing the companys long-term business performance and stockholder value.
In addition to his annual base salary, Mr. Jackson was awarded a $1,317,747 bonus for 2005 under the AutoNation, Inc. Senior Executive Incentive Bonus Plan. As described above, payment of the bonus was based on company achievement against predetermined performance goals relating to operating income per share (75% weight) and operating income as a percentage of gross profit (25% weight). This bonus structure was designed to incentivize company management to improve operating performance and deploy capital productively. As part of our retention efforts with respect to Mr. Jackson, receipt of $329,404 of the bonus payable to Mr. Jackson for 2005 will be deferred (without interest) until February 2007, subject to certain terms and conditions.
In August 2005, the Subcommittee approved an annual grant to Mr. Jackson of options to purchase 292,000 shares of the companys common stock exercisable at $21.59 per share. In approving the grant of stock options to Mr. Jackson, we considered our desire to properly motivate him to focus on optimizing the companys long-term business performance and stockholder value and the other factors outlined above, while carefully considering the cost to AutoNation and the stockholders of the issuance of the options, including common stock dilution. The options have a ten-year term (subject to earlier termination in certain circumstances), vest over four years and are not presently exercisable.
Mr. Jackson is entitled to the perquisites and other benefits that generally are available to AutoNations executive officers as described above, in addition to limited personal use of our corporate aircraft under the terms of his amended employment agreement.
We believe that Mr. Jacksons compensation, as described above, is fair for his services as our Chairman and Chief Executive Officer and is properly designed to motivate and reward Mr. Jackson for optimizing long-term business performance, deploying capital productively and increasing long-term stockholder value.