Code of Conduct
Our Board of Directors represents our shareholders' interest of optimizing long-term financial return. To ensure that we remain a leader in the automotive aftermarket, the Board monitors the effectiveness of our management policies and decisions and the execution of corporate strategies.
Membership Criteria The Nominating and Governance Committee of the Board of Directors is responsible for reviewing with the full Board, on an annual basis, the appropriate skills and characteristics required of Directors in the context of the current make-up of the Board. This assessment includes issues of judgment, diversity, age and professional background and experience.
Selection and Orientation of New Directors The Nominating and Governance Committee considers, interviews, screens and recommends, with direct input from the full Board and management, potential new Directors for the Board to consider as nominees for election by our shareholders. New Directors are exposed to a complete orientation process that includes the distribution of background material about Pep Boys, meetings with members of senior management and visits to Pep Boys Store Support Center and retail locations.
Number of Members The Board shall consist of between four and twelve members.
Independent Directors An independent Director is one that is independent from management and is free from any relationship with Pep Boys that, in the opinion of the Board, would interfere in the exercise of independent judgment as a Director. When forming such opinion, the Board considers, among other factors, the guidelines for independent Directors promulgated by the New York Stock Exchange (NYSE). The independence of the outside Directors is reviewed annually by the full Board.
In accordance with NYSE guidelines, our Board consists of a majority of independent Directors. All Committees of the Board currently consist entirely of independent Directors.
Former Chief Executive Officer's Board Membership The Board believes that this is a matter to be decided in each individual instance. It is assumed that when a Chairman or Chief Executive Officer resigns from that position, he/she should submit his/her resignation from the Board at the same time. Whether the individual continues to serve on the Board is a matter for discussion at that time with the new Chairman or Chief Executive Officer and the Board.
Directors Who Change Their Present Job Responsibility When a Director's principal occupation or business association changes substantially from the position he or she held when originally invited to join the Board, the Director shall notify the Nominating Committee. The Nominating and Governance Committee will review whether the occupation change of the Director is consistent with the specific rationale for originally selecting that individual as a Director and the guidelines for board membership and if any action needs to be taken as a result thereof.
Outside Directors are encouraged to limit the number of other boards (excluding non-profit) on which they serve, taking into account potential board attendance, participation and effectiveness on these boards. Outside Directors should advise the Lead Independent Director and Chief Executive Officer in advance of accepting an invitation to serve on another board.
Chief Executive Officer's Service on the Board of Directors of Another Entity. The Chief Executive Officer's service on the Board of Directors of another entity is subject to approval by the full Board of Directors of Pep Boys and shall be limited to one public Board and one non-profit Board.
Term Limits The Board does not believe it should establish term limits. While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of losing the contribution of Directors who have been able to develop, over a period of time, increasing insight into Pep Boys and its operations and, therefore, provide an increasing contribution to the Board as a whole.
As an alternative to term limits, the Lead Independent Director and Chief Executive Officer formally review each Director's continuation on the Board every five years. This will also allow each Director the opportunity to confirm his/her desire to continue as a member of the Board.
Retirement Age The Board has established a current retirement age of 72.
Chairman of the Board The Board is free to make this selection in any way that seems best for Pep Boys at that point in time.
Lead Independent Director If the Chairman of the Board is an independent Director, then the Chairman of the Board shall also serve as the Lead Independent Director. Otherwise, the independent directors will appoint a Lead Independent Director. The Lead Independent Director chairs executive sessions of the independent Directors.
Committee Chairs The full Board appoints the Chairman of each Committee of the Board.
Selection of Agenda Items for Board Meetings The Chairman of the Board establishes the agenda for each Board meeting. At the beginning of each year, he issues a schedule of foreseeable agenda subjects to be discussed during the ensuing year. Each Director is free to suggest items to be included on the agenda.
Board Materials Distributed in Advance Information that is important to the Board's understanding of a matter to be discussed or acted upon is distributed to the Board in advance of the discussion or proposed action.
Number, Structure and Independence of Committees The Board shall always have standing Audit, Compensation and Nominating and Governance Committees, each of which shall be composed entirely of independent Directors. Each such standing Committee acts pursuant to a written charter. From time to time, the Board may form a new special committee or disband a current special Committee depending upon the circumstances.
Audit Committee The Audit Committee reviews Pep Boys' consolidated financial statements and makes recommendations to the full Board on matters concerning the audits of Pep Boys' books and records. In accordance with NYSE guidelines, each member of the Audit Committee must be financially literate and at least one member must have accounting or related financial management expertise.
Compensation Committee The Compensation Committee oversees Pep Boys executive compensation practices including - base salaries, bonuses, incentive compensation plans (stock options) and pension plans. The Compensation Committee recommends the compensation for all of Pep Boys' officers including the Chief Executive Officer.
Nominating and Governance Committee The Nominating and Governance Committee makes recommendations to the full Board concerning the qualifications and selection of candidates for election to the Board, is responsible for the oversight and evaluation of the Board's and each Director's performance and oversees Pep Boys' corporate governance activities.
Assignment and Rotation of Committee Members The full Board is responsible, upon the recommendation of the Chairman of the Board and with consideration of the desires of individual Board members, for the assignment of Board members to various committees. The Board considers rotating Committee members periodically at about a five year interval, but has not mandated such a rotation as policy.
Frequency and Length of Committee Meetings Each Committee Chairman, in consultation with committee members, determines the frequency and length of the Committee meetings.
Committee Agenda Each Committee Chairman, in consultation with the other Committee members and management, develops the Committee's agenda. At the beginning of each year, each Committee Chairman issues a schedule of foreseeable agenda subjects to be discussed for the ensuing year.
Executive Sessions of Independent Directors The independent Directors meet in executive session several times each year. Executive sessions are chaired by the Lead Independent Director.
Compensation and Performance
Board Compensation Director fees, which include an annual fee, fees for Committee participation and formulaic equity grants, are the only compensation paid by Pep Boys to its outside Directors. Board compensation is reviewed annually by the Chief Executive Officer and the Nominating and Governance Committee in relation to the Directors' duties and the compensation provided by similarly situated companies.
Assessing the Board's Performance The Nominating and Governance Committee reports annually to the full Board regarding an assessment of the Board's and each Director's individual performance. This assessment addresses the Board's contribution as a whole and specifically reviews areas in which the Board and/or management believes a better contribution could be made. The assessment's purpose is to increase Board effectiveness, not to target individual Board members.
Assessing the Chief Executive Officers Performance The independent Directors evaluate the Chief Executive Officer annually with the Lead Independent Director responsible for reviewing such evaluation with the Chief Executive Officer. The evaluation is based on objective criteria including performance of the business, accomplishment of long-term strategic objectives, development of the management team, etc. The evaluation is used by the Human Resources Committee in the course of its deliberations when considering the compensation of the Chief Executive Officer.
Succession Planning The Chief Executive Officer reports annually to the Board on succession planning for the senior management team. On a continuing basis, the Chief Executive Officer maintains a recommendation for a successor should he be unexpectedly be unable to perform his duties.
Board Relationship to Senior Management
Board Access to Management Directors have complete access to Pep Boys' management. From time to time, members of management attend Board meetings to provide additional insight into the items being discussed and/or to expose those managers with future senior management potential to the Board.
Board's Interaction with Outsiders The Board believes that management speaks for Pep Boys. Individual Board members may, from time to time at the request of management, meet or otherwise communicate with various constituencies that are involved with Pep Boys. If comments from the Board are appropriate, in most circumstances, they come from the Chairman.
This Code of Conduct was last modified on June 17, 2010.