CORPORATE GOVERNANCE
AutoZone has a long-standing commitment to promoting the long-term interests of our customers, AutoZoners and shareholders. In furtherance of this commitment, the Board has adopted a comprehensive governance framework to allow it to provide effective oversight and make informed decisions relating to the business, strategy, risk, culture and more. The following section discusses key aspects of our corporate governance structure, policies and practices.
Governance Framework
Board leadership structure
We do not have an express policy on whether the roles of Board Chairman and Chief Executive Officer should be combined or separated. Instead, the Board prefers to maintain the flexibility to determine which leadership structure best serves the interests of our shareholders. If the positions of the Chairman of the Board and CEO are held by the same person, or if the Chairman is employed by or not independent of AutoZone, then the Board will select an independent director to serve as the Lead Independent Director.
Currently, our Board believes that having a combined Chairman and CEO, a Lead Independent Director, Independent Committee Chairs, Independent Committee members and 90% of Independent Board members provides the best Board structure for AutoZone. This structure, together with our other corporate governance practices, provides strong independent oversight of management while ensuring clear strategic alignment throughout the Company.
While we currently have a combined Chairman and CEO leadership structure, the Board intends to separate the positions of Chairman and CEO in connection with the previously announced CEO succession expected to occur in January 2024. The Board has regularly reevaluated this leadership structure as part of the Board evaluation and Board succession planning processes to ensure these important governance matters are considered thoroughly and holistically.
Lead Independent Director
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Earl G. Graves, Jr. Lead Independent Director | Our Lead Independent Director, Earl G. Graves, Jr., is a non-employee director who is elected by the Board annually. Our Corporate Governance Principles provide our Lead Independent Director with clearly defined responsibilities as follows: ● Presides at all executive sessions of the Board (without management present) at every regularly scheduled Board meeting; ● Chairs Board meetings when the Chairman is not present; ● Works with management to determine the information and materials to be provided to Board members; ● Approves Board meeting agendas, schedules, and other information to be provided to the Board; ● Consults with the Chairman on such other matters as are pertinent to the Board and the Company; ● Has the authority to call meetings of the independent directors; ● Is available for direct communication and consultation with major shareholders upon request; and ● Serves as a liaison between the Chairman and the independent directors. |
In addition, our Lead Independent Director, Mr. Graves, serves as Chairman of the Nominating and Corporate Governance Committee, which enables him to ensure the governance practices of the Board are best suited for the needs of the Company and its shareholders. In this capacity, Mr. Graves and the other independent
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members of the Nominating and Corporate Governance Committee oversee Board evaluations and Board refreshment, among other things.
Director independence
As stated in AutoZone’s Corporate Governance Principles, a substantial majority of the Board of Directors should be independent in accordance with the rules of the New York Stock Exchange (“NYSE”). The Board annually assesses each director’s independence after reviewing relevant relationships involving such director and AutoZone. As part of this review, the Nominating and Corporate Governance Committee and the Board considered all such relationships involving AutoZone’s non-employee directors, including the below matters.
Ordinary Course Transactions and Business Relationships. The Company routinely procures goods or services from various entities for which a director or his or her immediate family member may be affiliated. During FY23, all such transactions were conducted in the ordinary course of business and on an arms-length basis.
| ● | Ms. Soltau is a member of the board of directors of Southwest Airlines Co., from which AutoZone purchased airline tickets. |
| ● | Mr. Hannasch is the President and Chief Executive Officer of Alimentation Couche-Tard, which operates Circle K convenience stores, from whom AutoZone purchased miscellaneous goods. |
| ● | Mr. Jordan is the Chief Executive Officer and Chairman of the board of directors of First Horizon Corporation. First Horizon holds various AutoZone deposit accounts and participates in one of AutoZone’s supplier confirmed receivables programs (under which some AutoZone vendors are borrowers, but AutoZone is not a party to those agreements). |
| ● | Ms. King is a member of the board of directors of Unum Group, with whom AutoZone procured group insurance benefits. |
Current or Prior Employment of Immediate Family Member. Directors may have an immediate family member who is an employee of AutoZone. In FY23, all such employment relationships were in a non-officer capacity and all compensation-related decisions were made in a manner that is consistent with internal practices and policies.
Charitable Contributions or Event Sponsorships. The Company periodically makes donations to not-for-profit organizations or sponsors events with which Board members or their immediate family members may be affiliated. During FY23, all such contributions were conducted in the ordinary course of business and consistent with AutoZone’s charitable giving guidelines or otherwise in furtherance of a business purpose.
As such, the Board concluded that none of these transactions were, individually or cumulatively, material to AutoZone and also did not materially benefit any director, directly or indirectly. Accordingly, the Board affirmatively determined that none of Mses. Goodspeed, King, or Soltau or Messrs. George, Graves, Guimaraes, Hannasch, Jordan or Mrkonic has a material relationship with the Company other than in their capacity as a Board member and that all of them are independent within the meaning of the AutoZone Corporate Governance Principles, the NYSE listing standards and applicable law. The Board also determined that Mr. Rhodes is not independent since he is an employee of the Company.
COMMITTEES. AutoZone’s Board has three standing committees, each consisting solely of independent directors—the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Additional information about each of the Committees is included below.
GOVERNANCE DOCUMENTS. The key governance documents and policies adopted by the Board are:
| ● | Corporate Governance Principles; |
| ● | Charters for its Audit, Compensation, and Nominating & Corporate Governance Committees; |
| ● | Code of Conduct for all AutoZoners, including directors, officers and employees; |
| ● | Code of Ethical Conduct for Financial Executives; and |
| ● | Policy on Political Contributions and Lobbying Engagements. |
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The Board reviews these corporate governance documents and policies from time to time and revises them when it believes it serves the interests of the Company and its shareholders to do so, such as in response to changing governance practices or legal requirements. Each of these documents is available on our website at investors.autozone.com and is also available, free of charge, in print to any shareholder who requests it.
ENVIRONMENTAL, SOCIAL & GOVERNANCE REPORTS. As part of our commitment to continuous improvement and maximizing long-term shareholder value, the Company’s commitment to sustainability has expanded over time. AutoZone has published an ESG Report, and the most current version of this report covering the 2022 Fiscal Year is available on our website at investors.autozone.com.
Our website and the information contained therein or linked thereto are not intended to be incorporated into this Proxy Statement. Further, our ESG Report is not, and will not be deemed to be, a part of this Proxy Statement or incorporated by reference herein or into any of our other filings with the SEC.
Risk Oversight
Oversight of risk management is a responsibility of the Board and is an integral part of the Board’s oversight of AutoZone’s business. AutoZone’s management takes a variety of calculated risks in order to enhance Company performance and shareholder value. The primary responsibility for the identification, assessment and management of the various risks resides with AutoZone’s management. The Board is primarily responsible for ensuring that management has established and adequately resourced processes for identifying and preparing the Company to manage risks effectively.
Strategic Planning and Operating Risks
The Board reviews the Company’s principal strategic and operating risks as part of its regular discussion and consideration of AutoZone’s strategy and operating results. The Board also regularly reviews with the General Counsel legal matters that may have a material adverse impact on the Company’s financial statements, the Company’s compliance with laws, and any material reports received from regulatory agencies.
Financial Risks
The Audit Committee is involved in the Board’s oversight of risk management. At each of its regular meetings, the Audit Committee reviews the Company’s major financial exposures and the steps management has taken to identify, assess, monitor, control, remediate and report such exposures. The Audit Committee, along with management, also evaluates the effectiveness of the risk avoidance and mitigation processes in place.
Enterprise Risks
To assist with risk management and oversight, AutoZone has adopted the concept of Enterprise Risk Management (“ERM”) using the framework issued in 2004 by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s Vice President of Internal Audit, who reports directly to the Audit Committee, has been charged with leading the Company’s ERM processes with the assistance of Company management. The Vice President of Internal Audit presents to the Audit Committee a comprehensive review of the Company’s ERM processes quarterly. This presentation includes an overview of all significant risks that have been identified and assessed and the strategies developed by management for managing such risks. The Vice President of Internal Audit leads open discussions with the Audit Committee members to analyze the significance of the risks identified and seeks to verify that the list is all-inclusive. Company management is also involved in these discussions to ensure that the Board gains a full understanding of the risks and the strategies that management has implemented to manage the risks.
Information Security Risks
The Audit Committee, in connection with its oversight of the Company’s ERM processes described above, reviews and discusses the Company’s information security risks directly with the Company’s Chief Information Security Officer. This review takes place at each routine, quarterly committee meeting and includes a discussion of significant threats, risk mitigation strategies, any IT security program assessments and identified
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Board Composition
Personal Characteristics and Core Competencies
The Board believes each individual director should possess certain personal characteristics, and that the Board as a whole should possess certain core competencies. Such personal characteristics are integrity and accountability, informed judgment, financial literacy, mature confidence, high performance standards, and passion. They should also have demonstrated the confidence to be truly independent, as well as be business savvy, have an owner orientation and have a genuine interest in AutoZone. Core competencies of the Board as a whole, include accounting and finance, business judgment, management expertise, crisis response, industry knowledge, international markets, strategy and vision. These characteristics and competencies are set forth in more detail in AutoZone’s Corporate Governance Principles, which are available on AutoZone’s corporate website at investors.autozone.com.
DIRECTOR SKILLS
The Board believes it can be most effective in exercising its responsibilities when it is made up of individuals who collectively possess a diverse, yet balanced, set of skills, qualifications and expertise gained from different experiences and professional settings. As such, the Nominating and Corporate Governance Committee annually reviews the skills represented on the Board, which then provides a foundation for Board refreshment, Board succession planning and director nominations.
This past year, the Nominating and Corporate Governance Committee refreshed its method of reviewing and evaluating Board skills in an effort to (i) develop a more meaningful skills matrix that reflects each individual’s strengths and expertise and (ii) better communicate to shareholders the key qualifications that each director nominee brings to the Board. In doing so, the Committee identified a certain set of “core skills” which nearly all directors possess because these skills are integral to carrying out the Board’s responsibilities. In addition to these “core skills,” the Committee identified certain “distinct strengths” which our directors possess. These strengths allow our Board, as a whole, to offer a comprehensive set of experiences, perspectives and expertise to guide our decision making. In some instances, we have intentionally sought more candidates with a specific attribute, such as CEO experience or retail industry experience, because such experience is particularly relevant to our business and valuable to our Board. In other instances, we have considered a candidate as a whole and concluded that he or she presents a variety of strengths that add to the richness of our Board. As a result, we may have a larger number of Board members with a particular strength or attribute; but it is our belief that all of these skills and experiences are of value and together allow for more thoughtful dialog and more effective execution of Board responsibilities.
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Director Nominations by Shareholders
The Nominating and Corporate Governance Committee’s policy is to consider director candidate recommendations from shareholders if they are submitted in writing to AutoZone’s Secretary in accordance with the procedure set forth in Article III, Section 1 of By-Laws, including biographical and business experience, information regarding the nominee and other information required by such provision in the By-laws. Copies of the By-Laws will be provided upon written request to AutoZone’s Secretary and are also available on AutoZone’s corporate website at investors.autozone.com.
In addition to satisfying the foregoing requirements under AutoZone’s By-laws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than AutoZone’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) no later than October 21, 2024, or not later than the date that is 60 days prior to the one-year anniversary of the Annual Meeting if such meeting takes place on any day other than December 20, 2023.
Director Compensation
AutoZone’s current director compensation program became effective January 1, 2022 (the “Director Compensation Program”).
Annual Retainer Fees. Non-employee directors receive an annual retainer fee (the “Annual Retainer”). Furthermore, each director is eligible to receive an additional fee (“Additional Fee”), the amount of which varies depending on his or her role. The Additional Fees and the Annual Retainer, enumerated below, together comprise the “Director Compensation”. There are no meeting fees.
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Director Compensation Components | | ($) |
Annual Retainer | | 250,000 |
Additional Fees: | | |
Lead Director | | 35,000 |
Audit Committee Chair | | 30,000 |
Audit Committee Member | | 15,000 |
Compensation Committee Chair | | 25,000 |
Nominating & Corporate Governance Committee Chair | | 20,000 |
Under the 2020 Omnibus Incentive Award Plan (the “2020 Omnibus Incentive Plan”) and Director Compensation Program, non-employee directors receive Director Compensation in the form of immediately vested Restricted Stock Units (“RSUs”). A non-employee director may elect to receive a fixed portion of the Annual Retainer plus any Additional Fees in the form of cash, paid in quarterly installments (the “Cash Election”), with the remainder of the Annual Retainer paid in the form of RSUs. The Cash Election during calendar year 2023 was $100,000. All RSUs are granted on January 1 of the applicable calendar year.
If a non-employee director is elected to the Board, or assumes a different position, after January 1, he or she will receive the Annual Retainer and/or Additional Fees, prorated based on the number of days remaining in the calendar year, for RSUs, or the number of days remaining in the quarter, for cash, as applicable.
RSUs granted to non-employee directors are fully vested on the date of grant and become payable, or are settled, on the date on which the non-employee director ceases to be a director (the “Payment Date”), or at the director’s election, on the first or fifth anniversary of the grant date. Upon timely delivery of an election form, a non-employee director may elect to receive payment on the date on which he or she ceases to be a director. RSUs are payable in shares of AutoZone common stock no later than the fifteenth day of the third month following the end of the tax year in which such Payment Date occurs.
COMPENSATION-SETTING PROCESS. The Compensation Committee reviews the Board’s compensation on a biennial basis to ensure that non-employee directors are reasonably compensated in relation to AutoZone’s peer group companies (discussed in detail under Benchmarking) and to comparable U.S. companies in general. AutoZone’s 2020 Omnibus Incentive Plan contains a dollar limit of $750,000 on the total amount of annual compensation payable to its non-employee directors, provided that the Board may make exceptions to this limit under extraordinary circumstances.
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this requirement. As of the date of this Proxy Statement, each director meets or exceeds his or her obligations under the requirement.
OTHER PREDECESSOR PLANS. The AutoZone, Inc. Second Amended and Restated Director Compensation Plan was terminated in December 2002 and was replaced by the AutoZone, Inc. First Amended and Restated 2003 Director Compensation Plan (the “2003 Director Compensation Plan”) and the AutoZone, Inc. First Amended and Restated 2003 Director Stock Option Plan (the “2003 Director Stock Option Plan”). The 2003 Director Compensation Plan and the 2003 Director Stock Option Plan were terminated in December 2010 and replaced by the 2011 Equity Plan. The 2011 Equity Plan was terminated in December 2015 and replaced with the Amended 2011 Equity Plan. In December 2020, shareholders approved the 2020 Omnibus Incentive Plan and no further grants have been made under the Amended 2011 Equity Plan. However, grants made under those plans continue in effect under the terms of the grant made and are included in the aggregate awards outstanding shown above.
Shareholder Engagement
We value our relationships with our shareholders, and we have a long-standing practice of engaging with our shareholders on matters of Board governance, executive compensation, long-term strategy and corporate social responsibility. We believe our engagement efforts allow us to better understand the priorities, perspectives, and concerns of our shareholders, strengthen our relationships with our shareholders and make more informed decisions for the benefit of our shareholders.
Engagement Team. Our engagement team typically consists of our Chairman, President and Chief Executive Officer, CEO-Elect, Chief Financial Officer, General Counsel and Vice President of Investor Relations. However, depending on the specific topic that our investors may wish to discuss, we may have other members of our Executive Committee, internal subject-matter leaders or independent members of the Board participate.
Engagement Framework. Our engagement program has evolved over the years, consistent with the expectations of our investors. Historically, we have taken a more organic approach to shareholder engagement, in which discussions primarily focused on financial performance and long-term strategy. More recently, we invited shareholders to discuss governance or ESG topics with us, with the majority of these calls occurring “off-season,” not in connection with the annual meeting of shareholders. Today, we have a more intentional and proactive approach to shareholder engagement, in which we both invite and seek feedback and perspectives on a variety of topics during the year.
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| ✓ | Expanded discussion on our shareholder engagement program to better communicate how we engage with our shareholders and how we’ve responded to shareholder feedback. |
| ✓ | Amended Committee Charters to formalize Board oversight of corporate social responsibility matters. |
| ✓ | Included EEO-1 Compliant Data in our ESG Report. |
| ✓ | Communicated our Net Zero Ambition with short, medium and long-term goals across Scopes 1 and 2. |
| ✓ | Developed a regular ESG-reporting cadence with a commitment of publishing our annual ESG Report by April 15 of each calendar year. |
FY23 Shareholder Engagement Highlights. During the fourth quarter of fiscal 2023, we invited our top shareholders to discuss our corporate governance initiatives, any feedback or suggestions they might have and also the recently announced CEO transition plan.
| ● | Initial Outreach: We contacted 33 of our top shareholders representing approx. 59.9% of our shares outstanding. |
| ● | Meetings Scheduled: In response, 17 shareholders representing approx. 36.2% of our shares outstanding accepted our invitation to discuss. Our Chairman, President and CEO participated in all of these meetings. |
| ● | Topics Discussed: Board oversight of CEO Succession; shareholder engagement and outreach cadence; ESG Report and initiatives; compensation program; compensation determinations relating to leadership transition; Board composition; and strategy. |
Procedure for Communication with the Board of Directors
Shareholders and other interested parties may communicate with the Board by writing to the Board, to any individual director or to the non-management directors as a group c/o Corporate Secretary, AutoZone, Inc., 123 South Front Street, Dept. 8074, Memphis, Tennessee 38103. The Company’s General Counsel and Secretary will review all such correspondence and will forward correspondence that, in her opinion, deals with the function of the Board or that she otherwise determines requires the attention of any member, group or committee of the Board. Communications addressed to the Board or to the non-management directors as a group, and determined by the Company’s General Counsel and Secretary to merit their attention, will be forwarded to the Chair of the Nominating and Corporate Governance Committee, and communications addressed to a committee of the Board, and determined by the Company’s General Counsel and Secretary to merit their attention, will be forwarded to the chair of that committee.
Related Party Transactions
Our Board has adopted a Related Person Transaction Policy (the “Policy”) which requires the Audit Committee of the Board to conduct a reasonable prior review of, and approve or ratify, all Related Person Transactions. The Audit Committee considers the relevant facts and circumstances of each transaction, including but not limited to the benefits to the Company; the impact on a director’s independence in the event the Related Person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; the terms available to unrelated third parties generally and the existence of any potential conflicts of interest. The Policy further provides that the Audit Committee shall not approve or ratify any such transaction it determines to be inconsistent with the interests of the Company and its shareholders. Related Person Transactions must also comply with the policies and procedures specified in our Code of Conduct and Corporate Governance Principles, as described below.
The Policy also requires disclosure of all Related Person Transactions that are required to be disclosed in AutoZone’s filings with the SEC, in accordance with all applicable legal and regulatory requirements.
A “Related Person Transaction” is defined in the Policy as a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) that occurred since the beginning of the Company’s most recent fiscal year in which the Company (including any of its subsidiaries) was, is or will be a participant and the amount involved exceeds $120,000 and in which any Related Person had, has or will have a
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direct or indirect material interest. “Related Persons” include a director or executive officer of the Company, a nominee to become a director of the Company, any person known to be the beneficial owner of more than 5% of any class of the Company’s voting securities, any immediate family member of any of the foregoing persons, and any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.
Our Board has adopted a Code of Conduct (the “Code of Conduct”) that applies to the Company’s directors, officers and employees. The Code of Conduct prohibits directors and executive officers from engaging in activities that create conflicts of interest, taking corporate opportunities for personal use or competing with the Company, among other things. Our Board has also adopted a Code of Ethical Conduct for Financial Executives (the “Financial Code of Conduct”) that applies to the Company’s officers and employees who hold the position of principal executive officer, principal financial officer, principal accounting officer or controller as well as to the Company’s officers and employees who perform similar functions (“Financial Executives”). The Financial Code of Conduct requires the Financial Executives to, among other things, report any actual or apparent conflicts of interest between personal or professional relationships involving the Company’s management or any other Company employee with a role in financial reporting disclosures or internal controls. Additionally, our Corporate Governance Principles require each director who is faced with an issue that presents, or may give the appearance of presenting, a conflict of interest to disclose that fact to the Chairman of the Board and the Secretary, and to refrain from participating in discussions or votes on such issue unless a majority of the Board determines, after consultation with counsel, that no conflict of interest exists as to such matter.
We have concluded there are no material Related Party Transactions or agreements that were entered into during the fiscal year ended August 26, 2023, and through the date of this proxy statement requiring disclosure under these policies, except as follows: The daughter of Grant McGee, Senior Vice President, Commercial, has been employed by the Company since 2015 and currently serves as Manager, DIY Promotions and Cost Admin in our Merchandising department. She received aggregate compensation and benefits in fiscal 2023 in excess of $120,000 and at a level consistent with that provided to employees in comparable positions and tenure.
Audit Committee Report
The Audit Committee of the Board of AutoZone, Inc. has reviewed and discussed AutoZone’s audited financial statements for the year ended August 26, 2023, with AutoZone’s management. In addition, we have discussed with Ernst & Young LLP, AutoZone’s independent registered public accounting firm, the matters required to be discussed by the Statement on Auditing Standards No.1301, Communications with Audit Committees, as amended and as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T, the Sarbanes-Oxley Act of 2002, and the charter of the Audit Committee.
The Audit Committee also has received the written disclosures and letter from Ernst & Young LLP required by the applicable requirements of the PCAOB regarding the firm’s communications with the Audit Committee concerning independence, and we have discussed with Ernst & Young LLP their independence from the Company and its management. The Audit Committee has discussed with AutoZone’s management and the auditing firm such other matters and received such assurances from them as the Committee deemed appropriate.
As a result of our review and discussions, we have recommended to the Board the inclusion of AutoZone’s audited financial statements in the Annual Report on Form 10-K for the fiscal year ended August 26, 2023 for filing with the SEC.
While the Audit Committee has the responsibilities and powers set forth in its charter, the Audit Committee does not have the duty to plan or conduct audits or to determine that AutoZone’s financial statements are complete, accurate, or in accordance with generally accepted accounting principles (GAAP); AutoZone’s management and the independent auditor have this responsibility. Nor does the Audit Committee have the duty to assure compliance with laws and regulations and the policies of the Board.
Audit Committee of the Board of Directors
D. Bryan Jordan (Chair)
Michael A. George
Linda A. Goodspeed
George R. Mrkonic, Jr.
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THE PROPOSALS
PROPOSAL 1: Election of 10 Directors
DESCRIPTION OF PROPOSAL. Elect 10 director nominees. Each director shall serve for a 1-year term, until the next annual meeting of shareholders, or until his or her successor is duly elected and qualified, or until the director’s earlier resignation or removal.
VOTES REQUIRED. The election of directors at this 2023 Annual Meeting is an uncontested election. As such, a director nominee is elected to the Board if the number of votes cast FOR such nominee exceeds the number of votes cast AGAINST such nominee. Abstentions and broker non-votes are not considered votes cast or shares entitled to vote with respect to such matter and therefore will have no effect on the outcome of Proposal 1. If the number of nominees were to exceed the number of directors to be elected, for example in a contested election, directors would be elected by a plurality of the votes cast at the Annual Meeting.
IMPACT OF VOTE. Each of these nominees has consented to serve if elected. Should any nominee be unavailable to serve, your proxy will be voted for a substitute nominee recommended by the Board, or the Board may reduce the number of directors on the Board.
Pursuant to AutoZone’s Corporate Governance Principles, incumbent directors must agree to tender their resignation if they fail to receive more votes for, than votes against, their re-election. In such event, the Board will act within 90 days following certification of the shareholder vote to determine whether to accept the director’s resignation. These procedures are described in more detail in our Corporate Governance Principles, which are available on our corporate website at investors.autozone.com. The Board may consider any factors it deems relevant in deciding whether to accept a director’s resignation. If a director’s resignation offer is not accepted by the Board, that director will continue to serve until AutoZone’s next annual meeting of shareholders or until his or her successor is duly elected and qualified, or until the director’s earlier death, resignation, or removal.
Any director nominee who is not an incumbent director and who does not receive a majority vote in an uncontested election will not be elected as a director, and a vacancy will be left on the Board. The Board, in its sole discretion, may either fill a vacancy resulting from a director nominee not receiving a majority vote pursuant to the By-Laws or decrease the size of the Board to eliminate the vacancy.
In connection with the previously announced leadership transition plan, the Board intends to appoint Mr. Daniele to the role of President and Chief Executive Officer and to serve on the Board of Directors effective January 2024. Mr. Daniele is not currently a director nominee, and this proposal does not pertain to such appointment.
BOARD RECOMMENDATION. Each of the nominees named below was elected as a director at the 2022 annual meeting, and all currently serve as directors. As part of the Board’s determination to nominate these existing directors for reelection, the Board has determined that each of the directors have valuable experiences, skills and qualifications necessary to carry out their responsibilities effectively.
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| | | | The Board recommends that shareholders vote FOR each of the director nominees. | | |
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PROPOSAL 3: Advisory Vote on the Compensation of Named Executive Officers
DESCRIPTION OF PROPOSAL. In accordance with Section 14A of the Exchange Act, we are asking shareholders to approve the following advisory resolution on the compensation of our Principal Executive Officer, our Principal Financial Officer and our other three most highly paid executive officers (collectively, the “Named Executive Officers”) at the Annual Meeting:
“RESOLVED, that the compensation paid to AutoZone’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the accompanying compensation tables and the related narrative discussion, is hereby APPROVED.”
VOTES REQUIRED. This matter will be approved if the number of votes cast FOR the proposal exceeds the number of votes cast AGAINST the proposal. Abstentions and broker non-votes are not considered votes cast or shares entitled to vote with respect to this proposal and therefore will have no effect on the outcome of Proposal 3.
IMPACT OF VOTE. This advisory vote, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to endorse or express disapproval of our executive pay program. Because the vote on this proposal is advisory in nature, it is not binding on AutoZone, the Board or the Compensation Committee. The vote on this proposal will, therefore, not affect any compensation already paid or awarded to any Named Executive Officer nor will it overrule any decisions made by the Board or the Compensation Committee. Because we highly value the opinions of our shareholders, however, the Board and the Compensation Committee will consider the results of this advisory vote when making future executive compensation decisions.
BOARD RECOMMENDATION. The Board believes that AutoZone’s executive compensation program, as described in the Compensation Discussion and Analysis, is effective in achieving the Company’s goals of driving superior performance, retention and shareholder value. Our Board and Compensation Committee believe that there should be a strong relationship between pay and performance, and our executive compensation program reflects this belief. We urge you to read the Compensation Discussion and Analysis, as well as the compensation tables and narrative, beginning on the following page, which provide detailed information on our compensation philosophy, policies and practices and the compensation of our Named Executive Officers.
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| | | | The Board recommends that shareholders vote FOR the advisory vote on executive compensation. | | |
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ESTABLISHING COMPENSATION LEVELS
Chief Executive Officer
The Compensation Committee annually reviews and establishes the compensation level for the Chairman, President and Chief Executive Officer, in conjunction with a review of his individual performance by the non-management directors. As part of this review, the Committee considers all forms of compensation, including base salary, annual cash incentive, long-term equity incentives and other benefits provided. Mr. Rhodes is not a party to the deliberations regarding his own compensation. Instead, the Compensation Committee receives input from Pearl Meyer, as its independent compensation consultant, and discusses its recommendations directly with the Senior Vice President, Human Resources.
CEO Transition (Effective January 2024)
Executive Chairman. In determining compensation for Mr. Rhodes that will take effect when he is appointed Executive Chairman in January 2024, the Compensation Committee reviewed peer group data and found great variability in Executive Chairman pay, due to each Company’s unique facts and circumstances. The Committee wanted total compensation to be aligned appropriately with other leadership levels within the organization including the CEO successor, as well as incentivize Mr. Rhodes to remain focused on the overall health and long-term performance of the Company. Following the transition date, Mr. Rhodes shall receive an annual base salary of $150,000 with no annual bonus opportunity. Additionally, the Committee approved a long-term incentive award consisting of non-qualified stock options granted on October 6, 2023, with a grant date fair value of $4,850,000, based upon the Black-Scholes option pricing valuation model. Such award is scheduled to cliff-vest on October 15, 2028, with 50% of such award granted at an exercise price equal to 110% of the closing price of the Company’s common stock on the grant date and the remaining 50% granted at an exercise price equal to 100% of the closing price of the Company’s common stock on the grant date. All other terms of the long-term incentive award remain consistent with prior awards. In determining this compensation structure, the Committee believes a five-year cliff vesting shows commitment to the Company and its shareholders and reflects our philosophy of pay-for-long-term-performance. The premium-priced options were added to remain focused on the long-term success of the enterprise, knowing that Mr. Rhodes continues to have a strong belief in AutoZone and the future potential of this Company, which further aligns his interests with those of our shareholders.
CEO Successor. In determining compensation for Mr. Daniele that will take effect when he is appointed our Chief Executive Officer in January 2024, the Compensation Committee reviewed peer group data, Mr. Rhodes’ current compensation as CEO and Mr. Daniele’s specific experience. In particular, the Compensation Committee considered that Mr. Daniele will be new-in-position as a first-time CEO but also brings with him many years of relevant experience within AutoZone and the aftermarket automotive industry. Following such review, the Compensation Committee determined to set Mr. Daniele’s total compensation at a competitive level but below market median compared to the peer group. His base salary and target annual incentive compensation are relatively consistent with that of Mr. Rhodes’s, but his long-term incentive compensation is significantly less as Mr. Rhodes has served as CEO for more than 18 years. In connection with his appointment as Chief Executive Officer in January 2024, Mr. Daniele’s annual base salary will be increased to $1,000,000 with a bonus target of 130% of base salary. He is also expected to receive long-term incentive awards for fiscal year 2024 consisting of non-qualified stock options with an estimated grant date fair value of $7,200,000 with a portion granted on October 6, 2023, and the remaining non-qualified stock options granted as of the transition date. Consistent with existing practice, Mr. Daniele was not a party to the deliberations regarding his own compensation, however, the Compensation Committee received input from Pearl Meyer and Mr. Rhodes in establishing Mr. Daniele’s new compensation.
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2023 Proxy Statement | | 41 |
measured against pre-established financial goals. The following graphic illustrates the general design and structure of the MIP, or the annual incentive plan.
The Compensation Committee annually reviews the design and elements of our executive compensation program to ensure it continues to reflect our Guiding Principles. In addition, the Committee periodically engages in a deeper review as may be appropriate due to evolving best practices, macroeconomic circumstances or otherwise. For example, during FY23, the Compensation Committee reviewed historical annual plan attainment levels over the prior 20-year period to ensure plan design reflected the Guiding Principles of Drive Performance and Drive Shareholder Value. In particular, the Compensation Committee reviewed incentive plan payout levels and performance against planned targets. In the instances where the Company performed significantly greater than plan and executive officers earned significant incentive plan payouts, the Committee reviewed underlying factors driving the exceptional performance, the incremental cost to shareholders, the growth in AutoZone’s market capitalization, industry performance and industry-wide compensation practices. Based on this review, the Compensation Committee determined the MIP, or the annual incentive plan, is designed effectively and furthers all three Guiding Principles. As a result, the Compensation Committee has not made any significant changes to the plan design.
In FY23, the Compensation Committee established a maximum (above which no further bonus may be earned) of 300%. Looking at historical performance, the addition of a maximum payout was appropriate in the current environment.
Target Opportunity
As set forth in the table below, each executive officer’s annual incentive plan target opportunity is expressed as a percentage of base salary, which percentage is based on the individual’s level of seniority within the organization. As an individual’s level of seniority and management responsibility increases, his or her target opportunity as a percentage of base salary increases and therefore the portion of his or her total performance-based compensation similarly increases.
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| | Target | |
Role | | (% of Base Salary) | |
Chairman, President and Chief Executive Officer | | 130.0 | % |
Executive Vice President | | 75.0 | % |
Senior Vice President | | 60.0 | % |
Performance Goals and Payout Matrix
Actual payouts under our annual incentive plan are based upon performance against the matrix set forth on the following page. In developing the matrix, the Compensation Committee began with Economic Profit because it ensures that the Company is using capital to generate profitable earnings efficiently and in a manner that is sustainable for the future. In other words, Economic Profit ensures that growth, as well as the cost of growth, are balanced and achieved in a manner that maximizes the long-term interests of our shareholders. Furthermore, Economic Profit allows us to align short-term compensation goals to long-term value creation.
Accordingly, target Economic Profit, calculated by reference to the FY23 operating plan EBIT and ROIC, would result in target (or 100%) payout. Different levels of attainment of EBIT and ROIC result in varying levels of Economic Profit and payout is based upon actual Economic Profit against target Economic Profit. Accordingly, annual incentive payouts are driven by EBIT and ROIC and their corresponding impact to Economic Profit against target. For these reasons, we do not apply straight-line interpolation of our EBIT and ROIC as we focus on impact to Economic Profit instead.
The key metrics in developing the FY23 annual incentive plan are defined below. The Compensation Committee may (but is not required to) adjust for the effect of one-time charges and extraordinary events such as asset write-downs, litigation judgments or settlements, changes in tax laws, accounting principles or other laws or
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2023 Proxy Statement | | 45 |
on 100% of the first 3% of deferrals and 50% of the next 2% deferred, less the maximum value of the Company match available generally to participants in AutoZone’s 401(k) Plan.
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| | An AutoZoner always CARES ABOUT PEOPLE | | |
| | Treat people with dignity and respect. Recognize great work and provide frequent feedback. Demonstrate concern for others and your community. Create a safe environment. Own your development and help develop others. | | |
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Taking Care of People
Salary Continuation Death Benefit. In the unfortunate event an eligible full-time AutoZoner passes away, AutoZone will provide up to 12 weeks of the deceased AutoZoner’s pay to their named beneficiary. This new benefit was implemented in fiscal year 2022 and reflects our steadfast commitment to take care of our people, because their family is our family.
Matching Charitable Gift Program. At AutoZone, we encourage our AutoZoners to be active members of the communities in which they live, work and serve. Through our Matching Gift Program, we commit to match AutoZoner donations dollar-for-dollar, up to $500 per AutoZoner per fiscal year, to qualified charities of their choice. Our Matching Gift program is available to all full-time and part-time AutoZoners in the United States. For Vice Presidents, AutoZone will match dollar-for-dollar up to $10,000, and for Executive Officers, AutoZone will match dollar-for-dollar up to $50,000, in each case per individual per fiscal year to qualified charities of their choice.
Limited Perquisites. The Company provides limited perquisites and personal benefits to its executives in order to allow them to devote more time to their business responsibilities while also promoting health, wellness and safety.
●Company Aircraft. Senior executives may periodically use AutoZone’s private aircraft for personal travel pursuant to an agreement with the Company. Under the agreement, the Company must be reimbursed for the direct, incremental cost to the Company arising from the personal use of the aircraft. These expenses include the cost of fuel, aircraft maintenance plan costs related to the trip, ramp fees, pilot expenses (if contract pilots are used on the trip), any special insurance for the trip, and other direct costs to the Company. All of the fixed costs related to the use of the private aircraft, such as regular insurance premiums, hangar fees, depreciation and subscription costs, are paid by the Company, and reimbursement is not required for such costs.
●Other. The Company also provides its executive officers with home security system and/or monitoring services, airline club memberships and status upgrades, Company-paid spouse business-related travel, and Company-paid long-term disability insurance premiums.
Risk Assessment of Compensation Programs
Management has assessed our compensation programs and concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on AutoZone. This risk assessment included reviewing the design and operation of our compensation programs, identifying and evaluating situations or compensation elements that could raise more significant risks, and evaluating other controls and processes designed to identify and manage risk. The Compensation Committee reviewed the risk assessment and concurred with management’s conclusion.
Tax Considerations
Section 409A of the Code was created with the passage of the American Jobs Creation Act of 2004. These tax regulations create strict rules related to non-qualified deferred compensation earned and vested on or after January 1, 2005. The Internal Revenue Service periodically releases Notices and other guidance related to Section 409A, and AutoZone continues to take actions designed to comply with the Section’s applicable requirements.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed solely of independent, non-employee directors. None of the members of the Compensation Committee (i) was an officer or employee of the Company at any time during or prior to fiscal 2023 or (ii) is or was a participant in a “related person” transaction with the Company since the beginning of fiscal 2023. No executive officer of the Company serves, or in the past fiscal year has served, on the compensation committee or board of any company that has one or more of its executive officers serving as a member of the Company’s Compensation Committee or Board.
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2023 Proxy Statement | | 53 |
compensation and 50% of the next 2% deferred, less the maximum value of the Company match available generally to participants in AutoZone’s 401(k) Plan. Participants may select among various mutual funds in which to invest their deferral accounts. Participants may elect to receive distribution of their deferral accounts at retirement or starting in a specific future year of choice before or after anticipated retirement (but not later than the year in which the participant reaches age 75). If a participant’s employment with AutoZone terminates other than by retirement or death, the account balance will be paid in a lump sum payment six months after termination of employment. There are provisions in the EDCP for withdrawal of all or part of the deferral account balance in the event of an extreme and unforeseen financial hardship.
Potential Payments Upon Termination Or Change In Control
Our NEOs may receive certain benefits if their employment terminates under specified circumstances. These benefits derive from Company policies, plans, agreements and arrangements described below.
Agreement with Mr. Rhodes
In 2008, Mr. Rhodes and AutoZone entered into an agreement (the “Agreement”) providing that if Mr. Rhodes’ employment is terminated by the Company without cause, he will receive severance benefits consisting of an amount equal to 2.99 times his then-current base salary, a lump sum prorated share of any unpaid annual bonus incentive for periods during which he was employed, and AutoZone will pay the cost of COBRA premiums to continue his medical, dental and vision insurance benefits for up to 18 months to the extent such premiums exceed the amount Mr. Rhodes had been paying for such coverage during his employment. The Agreement further provides that Mr. Rhodes will not compete with AutoZone or solicit its employees for a three-year period after his employment with AutoZone terminates.
Executive Officer Agreements (Messrs. Jackson, Newbern, Daniele and Frazer)
AutoZone’s executive officers who do not have written employment agreements, including Messrs. Jackson, Newbern, Daniele and Frazer, have entered into agreements (“Severance and Non-Compete Agreements”) with the Company providing that if their employment is involuntarily terminated without cause, and if they sign an agreement waiving certain legal rights, they will receive severance benefits in the form of salary continuation for a period of time ranging from 12 to 24 months, depending on their length of service at the time of termination. Other than Mr. Jackson, the aforementioned executives all have greater than 5 years of service.
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Years of Service | | Severance Period |
Less than 1 | | 12 months |
1 – less than 5 | | 18 months |
5 or more | | 24 months |
The executives will also receive a lump sum prorated share of their annual bonus incentive when such incentives are paid to similarly-situated executives. Medical, dental and vision insurance benefits generally continue through the severance period up to a maximum of 18 months, with the Company paying the cost of COBRA premiums to the extent such premiums exceed the amount the executive had been paying for such coverage. An appropriate level of outplacement services may be provided based on individual circumstances.
The Severance and Non-Compete Agreement further provides that the executive will not compete with AutoZone or solicit its employees for a two-year period after his or her employment with AutoZone terminates.
Equity Plans
All outstanding, unvested stock options, including those held by the NEOs, will vest immediately upon the option holder’s death pursuant to the terms of the stock option agreements.
Unvested shares under our Executive Stock Purchase Plan, which normally are subject to forfeiture if a participant’s employment terminates prior to the first anniversary of their acquisition, will vest immediately if the termination is by reason of the participant’s death, disability, termination by the Company without cause, or retirement on or after the participant’s normal retirement date. The plan defines “disability,” “cause,” and “normal retirement date.”
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58 | | 2023 Proxy Statement |
| under a Company-paid individual long-term disability insurance policy. Life Insurance Benefits are benefits under a Company-paid life insurance policy. |
(2) | Severance Pay, Annual Incentive and Benefits Continuation amounts shown under the “Involuntary Termination Not for Cause” column reflect payments to Mr. Jackson, Mr. Newbern, Mr. Daniele and Mr. Frazer under the Severance and Non-Compete Agreements described above. Annual Incentive is shown at actual annual incentive amount for the 2023 fiscal year; it would be prorated if the triggering event occurred other than on the last day of the fiscal year. Benefits Continuation refers to medical, dental and vision benefits. In FY22, the company added 12 weeks of salary continuation for all full-time U.S. AutoZoners with one-year of service in the event of death. Unvested stock options are those outstanding, unvested stock options which will vest immediately upon the option holder’s death, as well as, under the stock option agreement beginning in October 2022 which states under retirement which is when the Participant has (i) attained age 55 and (ii) completed at least 15 years of service with the Company. Unvested stock awards are share options under the Executive Stock Purchase Plan, which vest upon involuntary termination not for cause, disability, or death. Disability Benefits are benefits under a Company-paid individual long-term disability insurance policy. Life Insurance Benefits are benefits under a Company-paid life insurance policy. |
PAY RATIO DISCLOSURE
Pursuant to Item 402(u) of Regulation S-K, we have conducted an analysis of our global employee population in order to estimate and disclose the total compensation paid to our median paid employee, not including our CEO, as well as the ratio of the total compensation paid to said median employee as compared to the total compensation paid to our CEO. The analysis, which is described below, yielded the following results:
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Total compensation for the median employee | | | |
for fiscal 2023 (not including the CEO): | | $ | 26,669 |
Total compensation for the CEO: | | $ | 18,796,822 |
Resulting CEO-to-median employee pay ratio: | | | 705:1 |
Measurement date. We identified the median employee from our population as of June 30, 2023.
Compensation measure. The regulations require us to use a “consistently applied compensation measure”, or CACM, to identify the median employee. Based on an analysis of the AutoZone workforce, we determined that fixed or guaranteed compensation, including overtime and earnings for paid time off, plus variable compensation (e.g., bonus or commission pay) closely approximate the annual total direct compensation of our employees. We converted the earnings paid in local (non-U.S.) currency to U.S. dollars using published exchange rates as of June 30, 2023. We did not apply pay adjustments allowed by the rules in order to ensure a conservative estimate (i.e., it is unlikely that the estimate could have been higher than that calculated).
Excluded population. We excluded from the analysis AutoZone employees in Brazil, Canada, China, Germany, India, Taiwan, Turkey and the United Kingdom, pursuant to the de minimis exemption under the rules. The 1,250 employees in these locations represent less than 5% of the total employee population of 116,170 as of June 30, 2023.
Pay versus Performance
The following table sets forth (i) total compensation paid to Mr. Rhodes, our principal executive officer (“PEO”) for all three fiscal years presented, as set forth in our Summary Compensation Table (“SCT”), (ii) Compensation Actually Paid (“CAP”) to our PEO, (iii) average total compensation paid to our other NEOs, excluding Mr. Rhodes, as set forth in the SCT for such fiscal year, (iv) average CAP to our other NEOs, in each case as calculated in accordance with Item 402(v) of Regulation S-K, and (v) certain Company and peer group performance measures for the periods indicated. CAP does not reflect value actually realized by the applicable executives or how the Compensation Committee evaluates compensation decisions.
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2023 Proxy Statement | | 61 |
GENERAL INFORMATION
Attending and Voting Information
During the Annual Meeting, the Company intends to answer questions that are pertinent to the Company and the official business of the Annual Meeting, subject to time constraints.
ELIGIBLE ATTENDEES OF THE ANNUAL MEETING. Only shareholders of record at the close of business on October 23, 2023 (the “Record Date”), or holders of a validly issued proxy, are entitled to attend and vote at the Annual Meeting. The only class of stock that can be voted at the Annual Meeting is our common stock, which is the only class of stock of AutoZone that is issued and outstanding. Each share of common stock is entitled to one vote on all matters that come before the Annual Meeting. At the close of business on the Record Date, we had 17,633,748 shares of common stock outstanding.
ANNUAL MEETING LOCATION. The Annual Meeting will be held at the J. R. Hyde III Store Support Center located at 123 S. Front St, Memphis, Tennessee 38103. You are encouraged to arrive early to allow sufficient time to secure parking and complete admission verification procedures.
ADMISSION REQUIREMENTS. To be admitted, you must present a government-issued photo identification, such as a driver’s license, state-issued ID card or passport, and proof of share ownership as of the Record Date. To prove ownership, shareholders of record will be verified against our list of registered shareholders, and beneficial shareholders, those who own their shares through an intermediary such as a bank or broker or other nominee, must show: an account statement showing their share ownership as of the Record Date; a copy of the voting instruction form or a valid legal proxy from the broker, trustee, bank or nominee holding the shares; a letter from a broker, trustee, bank or nominee holding the shares confirming the beneficial owner’s ownership as of the Record Date; or other similar evidence of ownership. We reserve the right to deny admittance to anyone who does not comply with these requirements as determined in our sole discretion. If you hold shares in a joint account, both owners can be admitted to the meeting if proof of joint ownership is provided and you both provide identification.
LIVE WEBCAST. A live, audio-only webcast and audio recording of the Annual Meeting will be available at investors.autozone.com for shareholders and interested guests.
HOW TO VOTE.
Prior to the Meeting: If you are a shareholder of record as of the record date, you can vote by telephone, on the Internet or by mail. We encourage you to vote by telephone or Internet, both of which are convenient, cost-effective, and reliable alternatives to returning your proxy card by mail.
On the Internet: | By Telephone: | By Mail: |
| You may vote on the Internet by following the instructions on the Notice or proxy card. If you vote on the Internet, you do not have to mail in your proxy card. |
| You may vote by telephone by following the instructions on the Notice or proxy card. If you submit your vote by telephone, you do not have to mail in your proxy card. |
| If you received printed proxy materials, you may vote by properly completing and signing the enclosed proxy card and returning it in the enclosed envelope. |
If your shares are held in a brokerage account, bank, trust or another nominee as custodian, you are considered the “beneficial owner” of shares and will receive materials and voting instructions directly from your broker, bank, trustee or other nominee.
During the Meeting: You may vote your shares in-person at the annual meeting. See above for important information regarding who is eligible to attend the meeting and meeting admission requirements. Even if you plan to attend the meeting, we recommend that you vote in advance so that your vote will be counted if you later decide not to attend the meeting or fail to comply with the stated admission requirements.
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2023 Proxy Statement | | 67 |
Multiple Notices and Voting Forms: If you hold shares in different formats (e.g. both as a “record holder” and a “beneficial owner”) or in multiple brokerage accounts, you will receive multiple notices or voting instruction forms. Please vote the shares represented by each notice, proxy card and/or voting instruction form you receive to ensure that all your shares are voted.
HOW VOTES ARE COUNTED. Your shares will be voted as you indicate on your proxy card. If you sign your card without indicating how you wish to vote, your shares will be voted FOR our nominees for director, FOR Ernst & Young LLP as independent registered public accounting firm, FOR the advisory vote on executive compensation, for holding the advisory vote on named executive officer compensation every ONE YEAR and in the proxies’ discretion on any other matter that may properly be brought before the Annual Meeting or any adjournment of the Annual Meeting. The votes will be tabulated and certified by our transfer agent, Computershare Inc. A representative of Computershare will serve as the inspector of election.
HOW TO CHANGE YOUR VOTE. You may revoke your proxy at any time before it is voted at the Annual Meeting by giving written notice to our Secretary that you have revoked the proxy, providing a valid later-dated proxy, providing a later-dated vote by telephone or Internet or by voting in person at the Annual Meeting. Any written notice should be sent to the Secretary at 123 South Front Street, Dept. 8074, Memphis, Tennessee 38103 and received no later than 5:00 p.m. Central Time on December 19, 2023. If you are a beneficial owner of shares, you may submit new voting instructions by contacting your bank, broker or other holder of record and following the instructions they’ve provided.
QUORUM REQUIREMENTS. Holders of a majority of the shares of the voting power of the Company’s common stock must be present in person or by proxy in order for a quorum to be present. Shares abstaining from voting and shares as to which a broker non-vote occurs are considered present for purposes of determining whether a quorum exists. If a quorum is not present at the scheduled time of the Annual Meeting, we may adjourn the Meeting, without notice other than announcement at the Annual Meeting, until a quorum is present or represented. Any business which could have been transacted at the Annual Meeting as originally scheduled can be conducted at the adjourned meeting.
BROKER NON-VOTES. Broker non-votes occur when shares held by a brokerage firm are not voted with respect to a proposal because the firm has not received voting instructions from the beneficial owner of the shares and the firm does not have the authority to vote the shares in its discretion.
MATTERS TO BE VOTED UPON. At the Annual Meeting, shareholders will be asked to vote on the following proposals:
Proposals | Board Recommendation | Voting Approval Standard | Abstentions | Broker Non-Votes |
1. | Election of 10 directors | FOR | More votes For than Against | No effect | No effect |
2. | Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2023 fiscal year | FOR | More votes For than Against | No effect | No effect |
3. | Approval of an advisory vote on the compensation of our named executive officers. | FOR | More votes For than Against | No effect | No effect |
4. | Approval of frequency of advisory vote on named executive officer compensation | 1 YEAR | Most votes for frequency | No effect | No effect |
Shareholders also will transact any other business that may be properly brought before the Annual Meeting.
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68 | | 2023 Proxy Statement |
The 2024 Annual Meeting
Shareholders proposals and director nominations for consideration at the 2024 Annual Meeting of Shareholders (the “2024 Annual Meeting”) must be submitted in writing and mailed to AutoZone, Inc., Attention: Secretary, Post Office Box 2198, Dept. 8074, Memphis, Tennessee 38101-2198. The information provided below is a summary. Additional detail as to requirements and other related matters can be found in our By-Laws and/or certain rules adopted by the SEC, as applicable.
Shareholder Proposals for Inclusion in Proxy Statement. In order to propose an item of business to be considered for inclusion in our proxy materials relating to the 2024 Annual Meeting, eligible shareholders must submit proposals that comply with Rule 14a-8 under the Exchange Act. Such proposal must be received by our Secretary by July 2, 2024.
Director Nominations for Inclusion in the Proxy Statement. In order to nominate a director candidate for inclusion in our proxy statement relating to the 2024 Annual Meeting, a shareholder or group of shareholders must comply with the “proxy access” provision set forth in Article II, Section 10 of AutoZone’s By-Laws. This section provides that an individual eligible shareholder, or group of up to 20 eligible shareholders, must own 3% or more of AutoZone’s outstanding common stock continuously for at least the previous three years, and may nominate up to the greater of two individuals or 20% of the Board for inclusion in our proxy statement. Requests to include shareholder-nominated director candidates in our 2024 Proxy Statement must be received by our Corporate Secretary not earlier than August 22, 2024, and not later than September 21, 2024. The nominating shareholder(s) must provide certain information and meet the other specific requirements of our By-laws, and each nominee must meet the qualifications required by our By-laws.
Business Not for Inclusion in the Proxy Statement. In accordance with Article II, Section 2 of AutoZone’s By-Laws, shareholder proposals received after August 22, 2024, but before September 21, 2024, may be presented at the Annual Meeting, but will not be included in the Proxy Statement. Any shareholder proposal received on or after September 21, 2024, will not be eligible to be presented for a vote to the shareholders in accordance with our By-Laws.
Universal Proxy Rules for Director Nominations
In addition to satisfying the foregoing requirements under AutoZone’s By-laws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than AutoZone’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act. Such notice must be postmarked or transmitted electronically no later than October 21, 2024 or not later than the date that is 60 days prior to the one-year anniversary of the Annual Meeting if such meeting takes place on any day other than December 20, 2023.
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70 | | 2023 Proxy Statement |
Pay vs Performance Disclosure - USD ($)
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12 Months Ended |
Aug. 26, 2023 |
Aug. 27, 2022 |
Aug. 28, 2021 |
Pay vs Performance Disclosure |
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Pay vs Performance Disclosure, Table |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value of Initial Fixed $100 | | | | | | | Fiscal Year | | | Summary Compensation Table Total for PEO | | | Compensation Actually Paid to PEO (1)(2) | | | Average Summary Compensation Table Total for Non- PEO NEOs (3) | | | Average Compensation Actually Paid to Non- PEO NEOs (2)(3)(4) | | | Total Shareholder Return | | | Peer Group Total Shareholder Return (5) | | | Net Income ($s in millions) | | | Economic Profit ($s in millions)(6) | 2023 | | $ | 18,796,822 | | $ | 37,562,328 | | $ | 5,404,080 | | $ | 10,077,359 | | $ | 206.32 | | $ | 98.08 | | $ | 2,528.4 | | $ | 2,432.0 | 2022 | | | 14,330,010 | | | 53,183,213 | | | 4,403,231 | | | 12,895,019 | | | 181.90 | | | 91.92 | | | 2,429.6 | | | 2,278.5 | 2021 | | | 14,838,996 | | | 33,457,070 | | | 3,943,435 | | | 6,034,162 | | | 130.22 | | | 110.88 | | | 2,170.3 | | | 1,984.4 |
(1) | Reconciliation of amounts shown in Summary Compensation Table to CAP to PEO. |
| | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year | | | Summary Compensation Table Total (SCT) | | | Value of Stock Awards and Option Awards Reported in SCT (deducted) | | | Year-End Value of Awards Granted in Fiscal Year (1) | | | Change in Fair Value of Prior Year Awards- Outstanding and Unvested (2) | | | Change in Fair Value (from Prior Year End) of Prior Year Awards- Vested (2) | | | Prior Year Fair Value of Prior Year Awards that Failed to Vest (2) | | | Total Adjustments | | | CAP | 2023 | | $ | 18,796,822 | | $ | (15,966,758) | | $ | 24,357,600 | | $ | 9,772,375 | | $ | 602,289 | | $ | — | | $ | 18,765,506 | | $ | 37,562,328 | 2022 | | | 14,330,010 | | | (10,370,249) | | | 20,198,760 | | | 26,351,061 | | | 2,673,630 | | | — | | | 38,853,203 | | | 53,183,213 | 2021 | | | 14,838,996 | | | (9,586,448) | | | 18,881,745 | | | 10,972,210 | | | (1,649,432) | | | — | | | 18,618,074 | | | 33,457,070 |
(2) | Stock options are valued based on the Black-Scholes option pricing model as of the applicable measurement date. Stock options valued on a date other than the grant date are valued using the stock price and updated assumptions (i.e., term, volatility, interest rate) on such measurement date. |
(3) | The Non-PEO NEOs are comprised of: Messrs. Jackson, Newbern, Daniele and Frazer for fiscal years 2023 and 2022; and Messrs. Jackson, Giles, Newbern and Finestone and Ms. Ohm for fiscal year 2021. |
(4) | Reconciliation of amounts shown in Summary Compensation Table to CAP to Non-PEO NEOs |
| | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year | | | Summary Compensation Table Total (SCT) | | | Value of Stock Awards and Option Awards Reported in SCT (deducted) | | | Year-End Value of Awards Granted in Fiscal Year (1) | | | Change in Fair Value of Prior Year Awards- Outstanding and Unvested (2) | | | Change in Fair Value (from Prior Year End) of Prior Year Awards-Vested (2) | | | Prior Year Fair Value of Prior Year Awards that Failed to Vest (2) | | | Total Adjustments | | | CAP | 2023 | | $ | 5,404,080 | | $ | (4,245,009) | | $ | 6,476,196 | | $ | 2,317,977 | | $ | 124,116 | | $ | — | | $ | 4,673,280 | | $ | 10,077,359 | 2022 | | | 4,403,231 | | | (2,886,928) | | | 5,633,491 | | | 5,210,600 | | | 534,626 | | | — | | | 8,491,789 | | | 12,895,019 | 2021 | | | 3,943,435 | | | (1,967,903) | | | 3,892,579 | | | 1,413,531 | | | (145,677) | | | (1,101,803) | | | 2,090,726 | | | 6,034,162 |
(5) | Represents the weighted peer group total shareholder return (“TSR”), weighted according to each of the companies’ respective market capitalizations at the beginning of each period for which a return is indicated. The Company's peer group is the S&P Retail Index as reflected in our Annual Report on Form 10-K for fiscal year 2023. |
(6) | Economic Profit was selected by the Company as the “most important” financial performance measure (that is not otherwise required to be disclosed in the table above) used to link CAP to Company performance for the most recently completed fiscal year, or the Company-Selected Measure. See page 46 of “Compensation Discussion and Analysis” for more information about how Economic Profit is calculated. |
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Company Selected Measure Name |
Economic Profit
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Named Executive Officers, Footnote |
(3) | The Non-PEO NEOs are comprised of: Messrs. Jackson, Newbern, Daniele and Frazer for fiscal years 2023 and 2022; and Messrs. Jackson, Giles, Newbern and Finestone and Ms. Ohm for fiscal year 2021. |
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Peer Group Issuers, Footnote |
(5) | Represents the weighted peer group total shareholder return (“TSR”), weighted according to each of the companies’ respective market capitalizations at the beginning of each period for which a return is indicated. The Company's peer group is the S&P Retail Index as reflected in our Annual Report on Form 10-K for fiscal year 2023. |
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PEO Total Compensation Amount |
$ 18,796,822
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$ 14,330,010
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$ 14,838,996
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PEO Actually Paid Compensation Amount |
$ 37,562,328
|
53,183,213
|
33,457,070
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Adjustment To PEO Compensation, Footnote |
(1) | Reconciliation of amounts shown in Summary Compensation Table to CAP to PEO. |
| | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year | | | Summary Compensation Table Total (SCT) | | | Value of Stock Awards and Option Awards Reported in SCT (deducted) | | | Year-End Value of Awards Granted in Fiscal Year (1) | | | Change in Fair Value of Prior Year Awards- Outstanding and Unvested (2) | | | Change in Fair Value (from Prior Year End) of Prior Year Awards- Vested (2) | | | Prior Year Fair Value of Prior Year Awards that Failed to Vest (2) | | | Total Adjustments | | | CAP | 2023 | | $ | 18,796,822 | | $ | (15,966,758) | | $ | 24,357,600 | | $ | 9,772,375 | | $ | 602,289 | | $ | — | | $ | 18,765,506 | | $ | 37,562,328 | 2022 | | | 14,330,010 | | | (10,370,249) | | | 20,198,760 | | | 26,351,061 | | | 2,673,630 | | | — | | | 38,853,203 | | | 53,183,213 | 2021 | | | 14,838,996 | | | (9,586,448) | | | 18,881,745 | | | 10,972,210 | | | (1,649,432) | | | — | | | 18,618,074 | | | 33,457,070 |
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Non-PEO NEO Average Total Compensation Amount |
$ 5,404,080
|
4,403,231
|
3,943,435
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Non-PEO NEO Average Compensation Actually Paid Amount |
$ 10,077,359
|
12,895,019
|
6,034,162
|
Adjustment to Non-PEO NEO Compensation Footnote |
(4) | Reconciliation of amounts shown in Summary Compensation Table to CAP to Non-PEO NEOs |
| | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year | | | Summary Compensation Table Total (SCT) | | | Value of Stock Awards and Option Awards Reported in SCT (deducted) | | | Year-End Value of Awards Granted in Fiscal Year (1) | | | Change in Fair Value of Prior Year Awards- Outstanding and Unvested (2) | | | Change in Fair Value (from Prior Year End) of Prior Year Awards-Vested (2) | | | Prior Year Fair Value of Prior Year Awards that Failed to Vest (2) | | | Total Adjustments | | | CAP | 2023 | | $ | 5,404,080 | | $ | (4,245,009) | | $ | 6,476,196 | | $ | 2,317,977 | | $ | 124,116 | | $ | — | | $ | 4,673,280 | | $ | 10,077,359 | 2022 | | | 4,403,231 | | | (2,886,928) | | | 5,633,491 | | | 5,210,600 | | | 534,626 | | | — | | | 8,491,789 | | | 12,895,019 | 2021 | | | 3,943,435 | | | (1,967,903) | | | 3,892,579 | | | 1,413,531 | | | (145,677) | | | (1,101,803) | | | 2,090,726 | | | 6,034,162 |
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Compensation Actually Paid vs. Total Shareholder Return |
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Compensation Actually Paid vs. Net Income |
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Compensation Actually Paid vs. Company Selected Measure |
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Total Shareholder Return Vs Peer Group |
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Total Shareholder Return Amount |
$ 206.32
|
181.90
|
130.22
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Peer Group Total Shareholder Return Amount |
98.08
|
91.92
|
110.88
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Net Income (Loss) |
$ 2,528,400,000
|
$ 2,429,600,000
|
$ 2,170,300,000
|
Company Selected Measure Amount |
2,432,000,000.0
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2,278,500,000
|
1,984,400,000
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PEO Name |
Mr. Rhodes
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Measure:: 1 |
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Pay vs Performance Disclosure |
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|
Name |
Economic Profit
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|
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Non-GAAP Measure Description |
(6) | Economic Profit was selected by the Company as the “most important” financial performance measure (that is not otherwise required to be disclosed in the table above) used to link CAP to Company performance for the most recently completed fiscal year, or the Company-Selected Measure. See page 46 of “Compensation Discussion and Analysis” for more information about how Economic Profit is calculated. |
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Measure:: 2 |
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Pay vs Performance Disclosure |
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Name |
Return on Invested Capital
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|
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Measure:: 3 |
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|
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Pay vs Performance Disclosure |
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|
|
Name |
Adjusted Earnings Before Interest and Taxes
|
|
|
Measure:: 4 |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Name |
Stock Price
|
|
|
PEO | Value of Stock Awards and Option Awards Reported in SCT |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
$ (15,966,758)
|
$ (10,370,249)
|
$ (9,586,448)
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PEO | Year-End Value of Awards Granted in Fiscal Year |
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|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
24,357,600
|
20,198,760
|
18,881,745
|
PEO | Change in Fair Value of Prior Year Awards- Outstanding and Unvested |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
9,772,375
|
26,351,061
|
10,972,210
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PEO | Change in Fair Value (from Prior Year End) of Prior Year Awards- Vested |
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|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
602,289
|
2,673,630
|
(1,649,432)
|
PEO | Total Adjustments |
|
|
|
Pay vs Performance Disclosure |
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|
|
Adjustment to Compensation, Amount |
18,765,506
|
38,853,203
|
18,618,074
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Non-PEO NEO | Value of Stock Awards and Option Awards Reported in SCT |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
(4,245,009)
|
(2,886,928)
|
(1,967,903)
|
Non-PEO NEO | Year-End Value of Awards Granted in Fiscal Year |
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|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
6,476,196
|
5,633,491
|
3,892,579
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Non-PEO NEO | Change in Fair Value of Prior Year Awards- Outstanding and Unvested |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
2,317,977
|
5,210,600
|
1,413,531
|
Non-PEO NEO | Change in Fair Value (from Prior Year End) of Prior Year Awards- Vested |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
124,116
|
534,626
|
(145,677)
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Non-PEO NEO | Prior Year Fair Value of Prior Year Awards that Failed to Vest |
|
|
|
Pay vs Performance Disclosure |
|
|
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Adjustment to Compensation, Amount |
|
|
(1,101,803)
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Non-PEO NEO | Total Adjustments |
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|
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Pay vs Performance Disclosure |
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Adjustment to Compensation, Amount |
$ 4,673,280
|
$ 8,491,789
|
$ 2,090,726
|