| | | From our Lead Independent Director | | On behalf of the independent members of our Board, thisThis letter highlights some of the ways theour Board works togetherof Directors is working to provide independent oversight of management and stewardship of your interests.
Shareholder Engagement: Lithia and its Board greatly value engagement with our shareholders. Beyond interacting with our shareholders through our Annual Shareholder Meeting and Investor Relations representatives, Lithia also maintains a robust schedule of other communications with shareholders. In the past year, the Company engaged with shareholders representing 80% of our top 50 shareholders, on a variety of topics, including our executive compensation program. This type of engagement has led to historically strong say-on-pay support, including 97% of votes cast in favor in 2022. Finally, all our directors are elected annually, and we have adopted proxy access permitting eligible shareholders to nominate director candidates.
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Independent Board Oversight: The Board’s independence is particularly important to our governance philosophy given our origins as a family business. This perspective best enables us to oversee Lithia’s strategic and operational conduct. All of our directors except for the CEO and Chairman are independent and each of our three committees is made up entirely of independent directors. Our Lead Independent Director is responsible for facilitating meaningful dialogue among management and all directors on major business issues, transactions, and opportunities. This dialogue is further advanced by our Lead Independent Director’s responsibility to help plan the Board’s agenda, regularly meet with the other independent directors without management present, and preside over independent director executive sessions and over Board meetings in which non-independent Board members may have a real or perceived conflict.
Board Renewal and Diversity: In accordance with our independent director tenure and age limits, Susan Cain and Kenneth Roberts will retire from service on our Board at our upcoming Annual Shareholder Meeting. Both Ms. Cain and Mr. Roberts have served our board with skill and distinction, and we are grateful for their service. We are committed to reviewingintentional board succession and renewal on an ongoing basis. As Lithia grows in scope, complexity, and impact, we seekorder to maintain an exceptionala team of directors with the skills and backgrounds necessary to oversee Lithia’s success in each new stage of its development. For this reason, we appointedand in anticipation of Ms. Cain and Mr. Roberts’s final year on our Board, James Lentz toand Stacy Loretz-Congdon joined our Board in October of 2022 and are proposing that our shareholders elect Stacy Loretz-Congdon toApril of 2023, respectively. This timing allowed our Board atto integrate Mr. Lentz and Ms. Loretz-Congdon’s new and important skills with the benefit of Ms. Cain and Mr. Roberts’s institutional knowledge. This transition period has been a success, ensuring the Board’s ongoing capability to provide the oversight necessary for Lithia’s continued growth. With this same purpose in mind, we are planning to grow the size of our upcoming Annual board, and further diversify its membership in keeping with best-demonstrated practice. Shareholder Meeting. Following his appointment,Engagement: In 2023, we invited our Board immediately benefited from Mr. Lentz’s experience at onetop ten shareholders (representing over 50% of our capital stock) to engage with our Lead Independent Director and Compensation Committee Chair regarding our compensation philosophy and enhanced compensation program of which four have agreed to meet prior to the filing of this proxy statement, as described further on page 38 in the Compensation Discussion and Analysis. As of the top names infiling of this proxy statement, we have met with four such investors. These meetings were productive. We will continue this type of outreach regularly and continue to report on our industry. Likewise,integration of the feedback we expect that Ms. Loretz-Congdon’s financial and operational success in both the C-suite and board room will be an important addition to Board-level discussions and oversight. These additions to our team would grow our critical mass of relevant Board expertise, and increase our gender diversity to three women and one ethnically diverse directors.receive. Our People, Our Mission: At Lithia, our people are at the heart of our mission and key to our success. At the executive level, our Compensation Committee lives out this mission in two ways. First, the committee ensures that our executives’ compensation incents the creation of shareholder value. It alsoSecond, the committee reviews our executivemanagement’s succession planplans to nurture leadership for future growth. Additionally,In 2023, the Compensation Committee overseesfuture evolved our compensation program by extending the critical elementslong-term incentive plan performance period to three years and adding relative TSR which further encourages the long-term growth of our employees’ experience, including employee safety, and training and development, as describedcompany. This compensation program is discussed in greater detail in our Corporate Social Responsibility section and in our the Compensation Discussion and Analysis below. section of this proxy statement. Corporate Social Responsibility: Responsible, sustainable growth is at the foundation of our business philosophy and strategy, and, therefore, an increasing emphasisever-increasing focus of our Board. Our review of Lithia’s sustainability policies and practices is an integral component of how we oversee the business. In 2024, 10% of our executives’ short-term incentive plan will be based on progress toward our corporate responsibility goals. Our commitmentcommitments to the environment, the communities in which we do business, our employees’ rights,employees, and the most effective methods of corporate governance ispractices are essential to our long-term success. You can access the details of this commitment in our Corporate Social Responsibility Report, which can be found at investors.lithiadriveway.com. TABLE OF CONTENTS
Strategic Oversight and Risk Management: While we are focused on growth, we actively seek to manage and minimize strategic and operational risk within our organization to promote the long and short-term interests of our stakeholders. Our Board oversees our risk management strategies, and regularly considers major challenges and growth opportunities, capital allocations, and other strategic initiatives, particularly within our omnichannel and growing international strategies. The Board oversees our cybersecurity and data protection strategy and has designated our fellow director, Shauna McIntyre, to lead that oversight effort, as discussed in more detail below. Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and other relevant policies are available on our website at investors.lithiadriveway.com.
Our Commitment to Strong Governance Standards: In 2022, the Board met fourteen times and its three committees met a total of twenty times. We review our governance practices annually to maintain our independence, resilience, and effectiveness. Our Board and its committees perform self-evaluations on an annual basis, where an independent third-party conducts a review of the performance of each director, each Board committee, and the Board as a whole. In addition, an independent third party annually facilitates a “360 degree” review of our Chief Executive with the other Board members and the Company’s senior-most officers. The results of these reviews are discussed between the Chairman of the Compensation Committee, the Lead Independent Director, and our Chief Executive, and amongst the Board as a whole. These discussions influence our decisions regarding current and future Board and company goals.
The Board is absolutely committed to serving and protecting your interests as Lithia continues to implement its short and long-term objectives. David J. Robino
Lead Independent Director | | | Annual election of directors by majority voting in uncontested elections. | | | | Our Lead Independent Director is responsible for helping plan board agendas, regularly meeting with the other independent directors without management present, presiding over independent director executive sessions and over Board meetings in which non-independent Board members may have a real or perceived conflict. | | | | Independent directors may not serve longer than 15 years or past the age of 79. | | | | Regular board meetings and executive sessions, including 15 board meetings and 17 formal committee meetings in 2023. | | | | Annual review of director, committee and board effectiveness, facilitated by a third-party. | | | | Annual 360-degree review of CEO effectiveness, facilitated by a third-party. | | | | Our Board has designated one of our directors to lead our cybersecurity oversight efforts. | | | | Robust stock ownership and anti-hedging and pledging policies applicable to directors and executives. | | | | Board-initiated shareholder engagement. | | | | The Board has adopted proxy access permitting eligible shareholders to nominate director candidates. |
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TABLE OF CONTENTS Director Qualifications and Nominations The Nominating and Governance Committee is responsible for identifying and evaluating potential director nominees for election to our Board of Directors each year. The committee seeks a selection of directors who as a group will possess diverse skills and knowledge, including in such area as finance, marketing, management, and technology, as well as automotive retailing, that will contribute to the Board'sBoard’s overall effectiveness and the Company'sCompany’s overall corporate goals and responsibility to its shareholders.  Identifying and recommending individuals for appointment or elections to our Board are core responsibilities of the Nominating and Governance Committee. The committee carries out this responsibility through a year-round process described below: Evaluation of Board Composition: Each year the Nominating and Governance Committee evaluates the size and composition of the Board to assess whether they are appropriate in light of the Company’s evolving needs. In this evaluation, the committee considers the Company’s strategic direction, current director qualifications, the results of Board and committee self-assessments, and legal and investor relations review. As part of the nomination process, the Nominating and Governance Committee annually reviews and evaluates the skills, talents, other characteristics and contributions of the current directors in the context of the desired composition of our Board, our operating requirements and the interests of our shareholders. The committee also reviews and interviews candidates for our Board of Directors whose background and experience suggest the candidates may be valuable to board members considering the current Board composition. The Nominating and Governance Committee may propose to nominate current Board members or replaceadd new Board members, either as additional directors or add newin transition of current Board members. Potential candidates may be suggested by various sources, including management, Board members, shareholders, business leaders and other industry executives and directors. We may from time-to-time engage a director search firm. The Russell Group was engaged in connection with the appointment of Mr. Lentz and the nomination of Ms. Loretz-Congdon. Specifically, the Nominating and Governance Committee evaluates potential director nominee candidates based on broad criteria that include the individual’s skills, experience and other factors in the context of the current composition of our Board of Directors, including the Board’s overall diversity. Among other aspects, the Nominating and Governance Committee evaluates the following factors when evaluating director nominees: business experience, other directorships, business and personal relationships with management, educational background, expertise in finance and accounting, knowledge of financial reporting and the business of the Company, and industry experience. In this context, diversity encompasses differences of viewpoint, personal and professional experience, education, skill,expertise in specific areas, and other individual qualities and backgrounds, such as gender, race and ethnicity. The Nominating and Governance Committee believes that gender, racial, ethnic and similar diversity on the Board is important and will specifically consider those factors in connection with the continuing composition of Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 03: Corporate Governance - Board Leadership and Structure 23 |
TABLE OF CONTENTS the Board and any new director nominees. At a minimum, director nominees must have the ability to dedicate sufficient time to Board activities, and independent director nominees must meet applicable NYSE independence standards and not have any conflicts of interest with the Company. The Nominating and Governance Committee reviews its effectiveness in balancing these criteria when assessing the composition of our Board. TABLE OF CONTENTS
Directors are not considered independent if they have been on the Board for 15 or more years, and no person may serve as an independent director after attaining the age of 79. If a director is an active member of the board of directors of more than three other public companies, then the Nominating and Governance Committee, when performing its annual review of the composition of the Board, will take into consideration the competing time requirements of the director in fulfilling the directors'directors’ duties as a member of theour Board. We require all of our directors to annually sign an acknowledgment of their confidentiality obligations and obligations under our insider trading policy and other applicable policies to reinforce their commitment to protect our confidential information and our business reputation and to comply with applicable securities laws. We seek to attract and retain qualifiedhigh-quality candidates for Board membership regardless of the origin of the recommendation to consider any particular candidate, and there are no differences in the manner in which the Nominating and Governance Committee evaluates nominees for director based on whether the nominee is recommended by a shareholder or the committee itself. The Nominating and Governance Committee will consider potential nominees recommended by any record or beneficial shareholder. See “Shareholder and Other Interested Party Communications-Shareholder“2024 Shareholder Proposals or Nominations - Shareholder Director Recommendations”Recommendations” below. Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 03: Corporate Governance - Board Leadership and Structure 24 |
TABLE OF CONTENTS Our Board’s Risk Oversight Role Our Board of Directors monitors the risks facing our business by evaluating our risk management processes, including the processes established to monitor how management reports material risks to our Board of Directors and how our executive team manages the various risks that our businessCompany faces. Our Board of Directors annually reviews the potential risks we face, including cyber risks, environmental risks and the potential impact of new laws and industry and competitive developments on our business, and the potential severity and likelihood of the risk. It considers immediate or short-term risks, while also evaluating and monitoring risks that could develop in severity or likelihood overtime. Our Board of Directors collaborates with management on developing the Company'sCompany’s annual risk management plan and, as part of that process, helps management ensure that those risks and uncertainties are considered in ongoing operations and in the Company’s risk management plan. Our Board of Directors has delegated responsibility for certain areas of its risk oversight to its standing committees. The Compensation Committee, together with our Board of Directors reviews and manages our compensation policies and programs to ensure they do not encourage excessive risk-taking by our executives and employees. The Compensation Committee reviews a summary and assessment of such risks at least annually and in connectionBoard committees are charged with the discussion or review of individual elements of compensation. In light of these features, we conclude that the risks arising from our executive and employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.following risk oversight responsibilities. The Audit Committee reviews our material financial risk exposures and the process by which management assesses and manages financial risks. The Audit Committee also meets with management to discuss the steps management has taken to assess, monitor and mitigate risks that the Company faces.
While our Board of Directors oversees risk management, our management is charged with managing risk through effective internal controls and processes, which facilitate the identification and management of risks, and managementrisks. Management regularly discusses risk management with our Board of Directors.Directors, which requests and receives presentations from internal subject matter experts on topics of risk. Management will retainalso retains advisors or experts, as necessary, who can provide meaningful assistance in determining, accessing or managing areas of risk, beyond the Company’s own capabilities. 22
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TABLE OF CONTENTS We are committed to maintaining robust cybersecurity practices and proactively work to protect the privacy of our customers, ensure the confidentiality, integrity and secure their personal information and data. We also focus on the integrityavailability of our technologyoperation, and information systems and preventingprevent cyber crimes against us. We operate with an internal policy and control framework for data protection, which is compliant with regulatory requirements and employs advanced technology and resources for cyber protection. This includes continuous monitoring, intrusion detection systems, and anomaly detection mechanics to promptly identify unusual activities or security breaches. Our Board of Directors oversees our cybersecurity and data protection strategy and appoints a director to lead the Board’s efforts. That Director is Shauna McIntyre, and she attends educationeducational programs and otherwise becomes familiar with developments and practices in cybersecurity, better enabling Ms. McIntyre, and therefore the Board, to oversee the Company’s cybersecurity strategy. Management regularly reports risk exposures to the Board as well as the steps taken to monitor and control them. That includes direct interaction between individuals in chargethe risks, including quarterly reports on our cybersecurity posture, current and future risks, and potential incidents or vulnerabilities. As part of that review, George Hines, our Chief Innovation and Technology Officer, leads our information technology and cyber protection strategy, and theinteracts directly with our Board of Directors. With the involvement of the designated director, we also obtain reports, evaluations and recommendations regarding our policies and systems from third parties with cybersecurity and information technology expertise. Currently, our Board of Directors believes assigning a director to lead the Board of Director’s cybersecurity risk oversight and thereby reviewing cyber risks and security amongst the full Board of Directors, better serves its oversight responsibility than assigning cyber risk oversight to a committee. Code of Business Conduct and Ethics We adopted a Code of Business Conduct and Ethics that applies to all of our officers, directors and employees, including our principal executive, financial and accounting officers. A complete copy of our Code of Business Conduct and Ethics is available on our website at www.investors.lithiadriveway.com.investors.lithiadriveway.com. You may request a copy by mail from our Investor Relations Department, Lithia Motors, Inc., 150 N. Bartlett Street, Medford, Oregon 97501. We intend to publicly disclose any amendment to and any waiver of the Code of Business Conduct and Ethics on our website. Compensation of Directors Non-Employee Director Compensation Our directors serve from election at each Annual Meeting of Shareholders until the following annual meeting or until the director’s successor is elected and qualified. The Compensation Committee annually reviews non-employee director compensation and recommends any applicable changes to our Board of Directors. The Compensation Committee engages independent consultants to review the market competitiveness of the compensation paid to the non-employee directors compared to Company peers. The Compensation Committee engaged Pay Governance in 20222023 to help review and assess non-employee director compensation for the 2022-20232023–2024 Board service year. Pay Governance recommended, and the Board of Directors approved, changes to the director compensation program to retain competitive positioning for the 2022-20232023–2024 Board service year. The changes include an increase to the cash retainer amounts and equity grants, as noted below.set forth below, and places the compensation at the median compared to Company peers, which are the same companies in the peer group used for executive compensation comparisons. The changes in the director compensation program are effective for the 2022-20232023–2024 service year. Accordingly, the actual compensation paid to a non-employee director in the 2022-20232023 calendar year is earned under two separate compensation programs. Except for Sidney B. DeBoer, directors who are employees of the Company are not compensated separately for their service as directors. As noted in the Non-Employee Director Compensation Table, for his services as a director, Sidney B. DeBoer receives the same compensation, in the same form, as the Company pays to its non-employee directors. TABLE OF CONTENTS
Separately, Sidney B. DeBoer receives payments for his prior services rendered as an employee that are described below under “ Certain Relationships and Related Transactions with Related Personsand Director Independence.” on page 7377. Executive officers of the Company do not recommend or determine non-employee director compensation. Our non-employee directors arefor the 2023-2024 Board service year were Mses. Cain, Loretz-Congdon and McIntyre and Messrs. Lentz, Miramontes, Roberts and Robino. Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 03: Corporate Governance - Board Leadership and Structure 26 |
TABLE OF CONTENTS We pay a majority of our non-employee directors’ compensation as equity awards. The Compensation Committee believes that paying a majority of the annual compensation in equity provides non-employee directors with a vested interest in our long-term financial success and aligns their interests with those of our shareholders. The compensation structure for our non-employee directors for the 2022-20232023–2024 Board service year was as follows:
$100,000 cash (no increase from the 2021-2022 calendar2022–2023 Board service year) plus an additional $25,000 cash to each committee chair, and $35,000 cash ($5,000 increase from the 2021-2022 calendar2022–2023 Board service year) to each director for each committee chair position the director holds and $30,000 cash (no increase from the 2021-2022 calendar year) to each director who serves as a Lead Independent Director or as chairman of the Board.Director. In each case, cash amounts are paid in 12 monthly installments over the service period. An award for a number of restricted stock units (RSUs)(“RSUs”), which are settled in shares of our common stock, with a value of $170,000$180,000 ($10,000 increase from the 2021-2022 calendar2022–2023 Board service year). The number of RSUs awarded is based on the average closing share price for the 40 trading days prior to the award grant date. | • | RSU awards to our non-employee directors are granted immediately after our annual shareholder meeting and vest over one year, with 25% vesting on the first business day of the month after each regularly scheduled quarterly meeting of our Board of Directors if the director continues to serve on that day. All equity grants to non-employee directors are subject to our stock ownership policy. See “Non-Employee Director Stock Ownership Policy; Hedging and Pledging Restrictions”below. |
20222023 Director Compensation Non-Employee Director Compensation Table The following table summarizes compensation paid or granted to non-employee directors and to our Chairman during calendar year 2022,2023, which amounts represent the 20222023 portion of both the 2021-20222022–2023 Board term and the 2022-20232023–2024 Board term: | | Sidney B. DeBoer(4) | | | $146,667 | | | $152,201 | | | $— | | | $298,868 | | | | Susan O. Cain | | | $123,333 | | | $152,201 | | | $338 | | | $275,873 | | | | James E. Lentz | | | $16,667 | | | $83,511 | | | $— | | | $100,178 | | | | Shauna F. McIntyre | | | $100,000 | | | $152,201 | | | $— | | | $252,201 | | | | Louis P. Miramontes | | | $133,333 | | | $152,201 | | | $— | | | $285,534 | | | | Kenneth E. Roberts | | | $100,000 | | | $152,201 | | | $4,780 | | | $256,981 | | | | David J. Robino | | | $143,333 | | | $152,201 | | | $— | | | $295,534 | |
Sidney B. DeBoer4 | | | $158,333 | | | $171,971 | | | $— | | | $330,304 | Susan O. Cain | | | $125,000 | | | $171,971 | | | $— | | | $296,971 | James E. Lentz | | | $100,000 | | | $171,971 | | | $— | | | $271,971 | Stacy C. Loretz-Congdon | | | $66,667 | | | $171,971 | | | $— | | | $238,638 | Shauna F. McIntyre | | | $100,000 | | | $171,971 | | | $— | | | $271,971 | Louis P. Miramontes | | | $125,000 | | | $171,971 | | | $— | | | $296,971 | Kenneth E. Roberts | | | $100,000 | | | $171,971 | | | $— | | | $271,971 | David J. Robino | | | $158,333 | | | $171,971 | | | $— | | | $330,304 |
(1)
| The fees reflected in the column “Fees Earned or Paid in Cash” in the above table are the actual fees earned in calendar year 2022.2023. |
(2)
| The amounts set forth in this column reflect the grant date fair value of all awards granted in 20222023 calculated in accordance with FASB ASC Topic 718 and excluding the effects of any forfeitures. (See Note 13 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20222023 for the valuation and assumptions and other information related to our stock awards). |
(3)
| Amounts paid by us on behalf of our Board members for long-term care insurance premiums. |
(4)
| DoesThis amount reflects the fees the Board has agreed to pay Mr. DeBoer for his service as a director under his Director Service Agreement, and does not include the amounts paid to Mr. DeBoer under thehis September 14, 2015 Transition Agreement, which are described under “ Certain Relationships and Related Transactions with Related Personsand Director Independence” on page 7377. |
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TABLE OF CONTENTS The following table sets forth
all unvested restricted stock
units held by each non-employee
director as of December 31, 2022:2023: | Sidney B. DeBoer | | | 133194
| | | Susan O. Cain | | | 133194
| | | James E. Lentz | | | 195194
| Stacy C. Loretz-Congdon | | | | 194 | Shauna F. McIntyre | | | 133194
| | | Louis P. Miramontes | | | 133194
| | | Kenneth E. Roberts | | | 133194
| | | David J. Robino | | | 133194
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Deferred Compensation Agreements with Non-Employee Directors. We offer our non-employee directors the opportunity to defer receipt of their compensation by entering into a Deferred Compensation Agreementdeferred compensation agreement with the Company. Under this agreement, participants who elect to defer compensation may defer receipt of all or a portion of their cash compensation and any stock award. Louis MiramontesNone of our non-employee directors elected to defer his stockany of their compensation for all of 2022.awarded in 2023. Non-Employee Director Stock Ownership Policy; Hedging and Pledging Restrictions We expect our non-employee directors to acquire and hold a sufficient number of shares of our common stock to meaningfully participate in the risks and rewards of ownership with our shareholders and to appropriately align the interests of directors with our long-term goals. Accordingly, under our Stock Ownership Policy for Directors, non-employee directors are required to own and maintain shares of our common stock having a market value equal to at least five times the annual base cash compensation paid to the director within five years after the director’s initial appointment to our Board of Directors. (IfIf a director does not or ceases to comply with the policy, the director is expected to retain 100% of the net after-taxafter- tax shares received upon the settlement of any equity incentive award and not otherwise transfer any shares until the stock ownership minimums are attained).attained. In determining compliance with the policy, share ownership includes (1) shares beneficially owned by the director, (2) shares underlying time-vesting only RSUs subject to time-vesting and indirect share ownership.other vested RSUs and similar awards and (3) shares held under any retirement plan. Our Insider Trading Policy and our Stock Ownership Policy for directors specify that they may not (1) engage in hedging or monetization transactions, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds or (2) hold Company securities in a margin account or otherwise pledge Company securities as collateral for a loan. 25
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TABLE OF CONTENTS 04 CORPORATE RESPONSIBILITYCorporate ResponsibilityOur Commitment to all Stakeholders Lithia's corporate responsibilityIntroductionLithia’s sustainability goals include improving the quality of life for our team and customers. We are committed to improving constantly Improving Constantly and reducing our environmental impact through continuous innovation and teamwork. We recognize that responsible growth is critical to our company'scompany’s future success. As a result, our long-term value creation strategy goes beyond financial metrics to consider the needs of all stakeholders in Lithia'sLithia’s operations. Our environmental and social initiatives are listed below, and our goodstrong governance highlights are mentioned above in the letter from our Lead Independent Director. | | | | Goal 1: Public Education
1
Public Education
Increase sustainability education
and engage the public on the
benefits of environmentally-sustainable
electric and hybrid vehicles via our GreenCars initiatives. | | |
| | | | Goal 6
Employee Health & Well-Being
Provide avenues for employee health and well-being. | | | | Goal 2: EV-Charging Network
2
Expand EV-charging network toElectric Vehicle Charging Network
Expand electric vehicle (EV) charging stations to alleviate range anxiety. | | |
| | | | Goal 7
Training & Professional Development
Encourage internal promotions, expand training, and promote professional growth opportunities. | | | | Goal 3: Green Dealer Programs3
Green Experiences
Grow sustainable business practices. | | | | | | | Goal 8
Diversity & Inclusion
Continue to reflect the diversity of our customers within our workforce. | | | | Goal 4: Bright Ideas
4
Bright Ideas
Develop employee knowledge,
creativity, and participation
surrounding sustainability efforts. | | | | | | | | Goal 5: Energy Efficiency
9
Support facilities in applying for
energy-efficient standards.
| | | | | | | |
Social Goals
| | | | | | | | Goal 6: Employee Well-Being
Encourage internal promotions and employee health and well-being.
| | | | | | | | Goal 7: Training & Professional Development
Increase the scope of annual
training per employee to promote
professional growth opportunities.
| | | | | | | | Goal 8: Diversity & Inclusion
Continue to reflect the diversity
of our customers within our
workforce.
| | | | | | | | Goal 9: Diverse Leadership
Increase the diversity of our leadership teams to better reflect a variety of experiences and perspectives. | | | | | | | Goal 5
Energy Efficiency
Support facilities in applying for energy- efficient standards. | | | | | | | Goal 10: Community Commitment10
Community Involvement
Increase nonprofit volunteerism and financial support. |
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04: Corporate Responsibility - Our Commitment to all Stakeholders 29
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TABLE OF CONTENTS EnvironmentalSelling More Sustainable VehiclesWe report our environmental activities based on the framework of SASB and GRI. Complete reporting, as well as our environmental and social initiatives, may be found on our corporate responsibility website: lithiacorporateresponsibility.com.
Our environmental strategy prioritizes areas over which we can have the most positive impact, such as the transition to more environmentally-sustainable vehicles. As a result, we created and launched the GreenCars brand to encourage consumers to investigate environmentally friendly
| | | | transportation options. GreenCars aspires to lay the groundwork for a more sustainable world and the potential transition to electromobility throughout the Lithia & Driveway ecosystem. We want consumers to feel confident and supported when exploring the world of sustainable mobility. Whether it's a comparison grid to compare features or in-depth guides on how electricSelling cars and hybrids work, GreenCars.com hosts a growing suite of resources to educate our customers. Unique visitors to GreenCars.com increased 744% in 2022 relative to the prior year. GreenCars also offers a growing nationwide electric vehicle charging network. The total number of charging stations across Lithia & Driveway's 296-store network has grown from 602 in 2021 to 896 in 2022. An interactive map of these locations can be found on GreenCars.com.
Sustainability is an important principle throughout our Company, and our stores are encouraged to participate in sustainable business programs. For example, we project that 2022 retrofits will reduce energy consumption by 3.9M KW/h. Further, OEMs, Honda and Acura have implemented Green Dealer programs and, in 2022, the majority of our Honda and Acura stores were enrolled in these programs, demonstrating their commitment towards enhancing environmentally responsible business operations. Additionally, we expanded our annual Green Week initiative nationwide, which promotes and celebrates sustainable practices across our company. As an example, we hosted EV test drive events to increase engagement in our Trees for Test Drives Program, with the goal of helping reforest the Florida Panhandle while fostering EV education.
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Manyrelated automotive products is what we do, so selling sustainable vehicles is how we make an impact. Our GreenCars brand is dedicated to educating and empowering consumers in their search for sustainable mobility. Whether it’s a grid to compare features or in-depth guides on how electric cars and hybrids work, GreenCars.com hosts a growing suite of resources to educate our locations have committedcustomers. Unique visitors to GreenCars.com increased 92% in 2023 relative to the prior year. In 2023, our network sold over 16,000 zero-emissions vehicles, marking a significant stride towards our commitment to reducing our carbon footprint and implemented extensive recycling programs, thus living the core valuecontributing to Take Personal Ownership. Our dealerships have developed creative ways to reduce and recycle waste, such as recycling used engine oil for in-house fuel heaters. This effort offsets energy costs while recycling an otherwise wasted product.
A portion of our dealerships are also recycling used antifreeze, lead acid batteries, metal scraps, used tires, paper waste and many other waste streams produced at the dealerships that would otherwise end up in landfills. We continue to develop practices and programs to recycle and reduce our waste streams.
TABLE OF CONTENTS
At2023 marked the first year that vehicle dealerships became eligible for ENERGY STAR certification. Lithia our mission is to provide a competitive diverse benefit package that supports the physical, financial, and work-life wellness of our employees and their families. Our dealerships represented 10was honored with three out of the top 100 bestinaugural seven ENERGY STAR Awards granted to vehicle dealerships in the United States. Receiving ENERGY STAR certification as a building owner is impactful, as it shows commitment to work forexceptional energy efficiency and demonstrates dedication to sustainable operations, ultimately leading to reduced operating costs and a positive environmental impact. In 2023, our portfolio of existing and under contract solar projects will generate an estimated 1.3 million kilowatt-hours of renewable energy per year.
Extend the Lives of Vehicles Value autos, or vehicles with over 80,000 miles, play an integral part to our business model. The resale and servicing of used vehicles plays a crucial role in 2022, as ratedfostering a circular economy by Automotive News. The Employee Assistance Program is paid for by Lithiaextending the lifespan of automobiles and is available to help employees through the pressures of day-to-day living. Employeesreducing waste. By offering refurbished vehicles and their families haveaffordable servicing options, individuals gain access to unlimited consultationsreliable transportation at a fraction of the cost, thus promoting inclusivity and upsustainable mobility solutions within communities. Engaging in volunteering and community outreach is vital for our business because it strengthens our bonds with the community, uplifts employee spirits, and promotes teamwork. These efforts contribute to three face-to-face counseling sessions per year.a positive workplace culture and demonstrate our dedication to making a positive impact. In 20222023, Lithia & Driveway also paid out $1,246,900 to employees for completing their wellness exam. In 2022, LAD and Southern Oregon University announced acontinued its historic partnership through the Lithia & GreenCars Momentum Fund. Serving as the largest single gift in the university’s history thisat over $12 million dollars, this commitment is designed to invest in people and programs to move forward a shared vision of sustainability and diversity. A significant portion of this fund is reserved for a scholarship program to recruit and retain first-generation and/or minoritized populations traditionally underrepresented in higher educationeducation.
AtEncouraging and enabling employee health and wellness is crucial as it ensures our team members feel supported in their personal well-being journey, leading to happier, healthier and more fulfilled lives. Providing resources and support for physical and mental well-being reduces illness and drug reliance, and fosters a positive work environment where employees can thrive both professionally and personally. In addition to providing a broad-based benefit package, in 2023, Lithia we recognize that diversity and inclusion can provide a competitive edge, and we strivepaid out over $1,100,000 to employees for our workforce to reflect the communities in which we live and operate. In 2022, our workforce was comprised of approximately 20% female employees and approximately 47.2% racial and ethnic minority employees. Our management consisted of approximately 20% females and approximately 37% racial and ethnic minorities in leadership positions.
We have also expanded our Lithia Women LEAD (Learn, Explore, Achieve, Develop) program to include live streams to our stores across the nation, designed to teach how we can all improve and create inclusive environments while continuing to foster networking and development opportunities for women across our operational scope.completing their wellness exam.
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TABLE OF CONTENTS 
| | | | | Introduction | | | | | | Compensation Decision Making Process | | | | | | | Executive Summary | | | | | | Executive Compensation Governance Components | | | | | | | Compensation Philosophy | | | | | | Compensation Committee Report | | | | | | | Compensation Components | | | | | | Compensation Committee Interlocks | | | | | | | 2022 Compensation Program Design & Results | | | | | | & Insider Participation | |
At Lithia, we cultivate a culture of high performance, where internal promotion serves as a pathway to advancement, personal development, and acknowledgment of employees’ dedication. This approach not only empowers individuals to excel but also ignites their passion for realizing their aspirations, fostering a dynamic environment where opportunities for personal and professional fulfillment thrive. To that end, we sponsor a variety of programs design to unlock our employees’ potential. For example, our DART (Develop, Analyze, Research, and Transform) Program grows our talent through rotational cross-functional training. We also prepare high-performers for leaderships roles beyond general manager with our AMP (Accelerate My Potential) Program. Our Women LEAD (Learn, Explore, Achieve, and Develop) Program further offers a platform for women within the organization to connect, learn, and grow together. Our learning and development initiatives are dedicated to promoting employee growth through curated content paths, specialized curriculums, and tuition reimbursement programs covering up to 75% of undergraduate or graduate tuition costs. Additional programs provide Master Automotive Service Excellence (ASE) training and certification, along with Original Equipment Manufacturer training for technicians. As of December 31, 2023, our subsidiaries employed over 27,000 persons on a full-time equivalent basis in our global network of over 340 retail locations. Our total workforce was comprised of approximately 21% female employees and approximately 45% of minorities. Our management consisted of approximately 21% females and approximately 36% minorities in leadership positions. In 2023, we conducted a culture poll across our workforce which saw a response rate of over 80% and measured employee engagement across a variety of categories (including measures of commitment to and pride in our company, and quality of work execution). Of the measured metrics, 9 out of 10 ranked above benchmark averages, with 8 out of 10 ranking above the averages for the Fortune 500. When given the opportunity to select any word that describes our culture, our employees’ top selected descriptors were “fun”, “family” and “friendly”. The larger list of top descriptors is included below, and demonstrates our commitment to our fundamental mission “Growth Powered by People”. Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 04: Corporate Responsibility - Our Commitment to all Stakeholders 31 |
TABLE OF CONTENTS 05 Compensation Discussion and Analysis (CD&A) Table of Contents
| 05 Compensation Discussion
and Analysis (CD&A)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 06 Compensation Tables
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This Compensation Discussion and Analysis discusses Lithia’s compensation program for its Chief Executive Officer, Chief Financial Officer, and next three highest paid executives (named executive officers or NEOs)“NEOs”), including its philosophy, objectives and how our 20222023 performance drove compensation for the 20222023 calendar year. Our current named executive officers are: | | Bryan B. DeBoer
| | | 56 | | | Bryan B. DeBoer has been our Chief Executive Officer (CEO) and President since 2012. | | | | | | Tina H. Miller
| | | 42 | | | Tina H. Miller is our Senior Vice President, Chief Financial Officer (CFO), leading the accounting, tax, corporate finance, financial planning & analysis, risk management and treasury functions, and has served in this role since August 2019. | | | | Christopher S. Holzshu
| | | 49 | | | Christopher S. Holzshu is our Executive Vice President and Chief Operating Officer (COO), a role he has served in since November 2019. | | | | | | Scott A. Hillier
| | | 60 | | | Scott A. Hillier is our Senior Vice President of Operations and has served in this role since 2008, overseeing store leadership. | | | | George N. Hines
| | | 50 | | | George Hines is our Senior Vice President, Chief Innovation and Technology Officer (CITO) and has served in this role since July 2019. | | | | | | | | | | | | | |
| Bryan B. DeBoer, 57
Current Position(s): Bryan B. DeBoer has been our Chief Executive Officer (CEO) and President since 2012. |
| Christopher S. Holzshu, 50
Current Position(s): Christopher S. Holzshu is our Executive Vice President and Chief Operating Officer (COO), a role he has served in since November 2019. |
| George N. Hines, 51
Current Position(s): George Hines is our Senior Vice President, Chief Innovation and Technology Officer (CITO) and has served in this role since July 2019. |
| Tina H. Miller, 43
Current Position(s): Tina H. Miller is our Senior Vice President, Chief Financial Officer (CFO), leading the accounting, tax, corporate finance, financial planning & analysis, risk management and treasury functions, and has served in this role since August 2019. |
| Scott A. Hillier, 61
Current Position(s): Scott A. Hillier is our Senior Vice President of Operations and has served in this role since 2008, overseeing store leadership. |
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TABLE OF CONTENTS As described in greater detail below, 2023 was a year of strong financial and strategic performance, and we made solid progress on our strategic plan as we continue to profitably consolidate one of the largest retail sectors, automotive retail, through acquisitions and our omnichannel and customer-centric strategy. We are now among the leading retail companies in our expanded peer group, and we have updated our compensation philosophy and program, and target levels of compensation, to match. During the course of the year, we reviewed best practices, received feedback from proxy advisors, and our Lead Independent Director and the Chair of our Compensation Committee engaged with our top ten leading investors regarding our compensation plan, four of which met with our directors and discussed the changes outlined below. 2023 Compensation Program Design Restructure We extensively redesigned our executive compensation plan in 2023 to align with the acceleration of our growth, size, and scope, keeping in mind Lithia’s commitment to a pay-for-performance philosophy that links real pay delivery to the achievement of our operational objectives and long-term strategy, and the enhancement of shareholder value. BelowAs discussed in more detail below, in 2023: We no longer use earnings per share (EPS) in both our cash-based short-term incentive plan and equity-based long-term incentive plan. We substituted profit growth for EPS in our short term incentive plan to provided a more predictable line of sight incentive to executives and we removed EPS from our long term incentive plan. We incorporated relative metrics into both of our plans, including a relative total shareholder return (TSR) modifier in our long-term incentive plan (LTIP). We updated our long-term incentive plan from last year’s structure, which consisted entirely of performance share units (PSUs) with a 1-year performance period followed by 3-year service-based vesting, to a more long-term and performance focused structure, 75% of which consists of PSUs which vest after a 3-year performance period and 25% of which consists of RSUs which service-vest annually over three-years. The particulars of these changes are certainoutlined below: Short-Term Incentive Plan: Our new short-term incentive plan utilizes relative operating profit growth measured against our six automotive peers within our expanded retail peer group. 2022 Design | | | 2023 Design | Absolute Metrics
•Adjusted EPS (50%)
• Absolute Revenue (30%)
• Strategic (20%)
| | | Absolute and Relative Metrics
•Relative Quarterly Operating Profit Growth (compared to Auto Peers) (40%)
• Absolute Revenue (40%)
• Strategic (20%) | Performance Period
• 1-year | | | Performance Period
• 1-year |
 Deleted  AddedLithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 33 |
TABLE OF CONTENTS Long-Term Incentive Plan: Compared to our 2022 long-term incentive plan, which used absolute metrics and a 1-year performance period followed by 3 years of service-based vesting, the 2023 long-term incentive plan uses a PSU/RSU mix, with PSUs incorporating a 3-year performance period based on our revenue growth relative to our expanded retail peers, a relative TSR modifier, and an operating margin governor which sets the upper and lower bounds of any payout. 2022 Design | | | 2023 Design | Absolute Metrics
•Adjusted EPS (75%)
•Revenue (25%) | | | Relative Metrics (compared to full peer group)
•Relative Revenue Growth Ranking with 2 modifiers:
i. Relative TSR Modifier (+/- up to 25% on base attainment)
ii.Operating Margin Governor (sets upper and lower bounds of payout) | 100% PSUs with Performance and Service-Based Vesting
•100% PSUs w/ 1-year performance period followed by 3 years of service-based vesting. | | | 75% PSUs with Performance Vesting
•3-year performance period and no subsequent service-based vesting.
25% RSUs with Service-Based Vesting
•3-year service-based vesting. |
Deleted Added CEO Target Total Direct Compensation Increase In 2023, we increased our CEO’s target total direct compensation from $10.8 million to $14 million, as detailed in the below table. This increase, the vast majority of which is attributable to performance-equity that is subject to the achievement of rigorous performance goals after 3 years, was recommended by our independent compensation consultant in order to keep our CEO’s target total direct compensation competitive. The following considerations support this change. the appropriate level of compensation in our expanded retail peer group, which reflects our new growth, scale and scope; our CEO’s leading performance and industry stature; the fact that our CEO was among the lowest compensated CEO’s in the Fortune 500 relative to his value creation; and the structural changes to our compensation highlights for 2022program described above which make our long-term incentive program more challenging to achieve, including the expansion of our performance period from one to three years and the addition of a TSR modifier. The following table outlines the year-over-year increases in our CEO’s target compensation. We believe that $14M in target CEO total direct compensation represents a reasonable degree of alignment between our Peer Group CEO compensation and TSR. Salary | | | • Increase of 4% | | | $1.25M | | | $1.30M | | | $0.05M | Short-Term Incentive Plan | | | • Increase from 128% of salary to 150% + design changes described above | | | $1.60M | | | $1.95M | | | $0.35M | Long-Term Incentive Plan | | | • Increase of 35% + design changes described above | | | $7.95M | | | $10.75M | | | $2.8M | | | | Total: | | | $10.8M | | | $14.0M | | | $3.2M |
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TABLE OF CONTENTS The PSUs and RSUs granted to our CEO in 2023 had a target value of $10.75M. However, the value reported in the summary compensation table, as dictated by the applicable accounting and SEC rules, is $15.3M, principally due to a value premium attached to the TSR- linked PSUs, a 1-month delay in grant as we implemented our new design (during which time we saw an outperforming 46% increase in stock price), and our using a 40-day average to determine the number of shares and to measure relative TSR. Our CEO’s PSUs, which make up most of the 2023 long-term incentive plan awards, vest only after positive performance over 3 years and include a relative TSR modifier. As a result, real pay delivery is dependent on generating positive shareholder outcomes over 3 years, and is not tied to the point-in-time value assessed by the accounting rules. 2024 and Future Compensation We are committed to reviewing our compensation plan against best practice and, in 2024, we refined on our design with the particular aim of arriving at a glance.competitively positioned long-term incentive plan which incents our executives to drive outperforming growth. Accordingly, in 2024, we implemented the following adjustments: | • | CEO Target Compensation: After increasing our CEO target compensation in 2023 to reflect our CEO’s performance and seniority in the role, we kept our CEO’s target compensation flat year over year. |
| ○ | Given the limited availability of comparable auto retailers, our position as a leading automobile retailer and competitive retailer of automobile related products and services, and the multifaceted and multi-product nature of our customer’s retail experience which is akin to other retail industries, we believe it is important to measure growth against the larger retail industry, and structure compensation to reward positive relative financial and stock-performance results. Accordingly, we synchronized our long-term and short-term incentive plans so that both use our expanded 20-company Peer Group, which incorporates automotive and broader retail peers. We also implemented all relative metrics to assess financial performance. |
| ○ | As we enter the execution phase of our growth strategy, we also increased the weighting of financial metrics in our short-term incentive plan from 80% to 90%, with the last 10% contingent on achieving progress toward corporate responsibility instead of broader strategic initiatives. In addition, we removed the operating margin governor from our long-term incentive plan and added a relative net income multiplier alongside the existing relative revenue multiplier and relative TSR modifier, which more directly incentivizes peer leading long-term profitable growth. |
| ○ | In order to manage the variance between reportable grant-date accounting values and target grant date values in our long-term incentive plan, we returned to our historical practice of granting executive equity in early January. Notwithstanding this change, due to an unexpected substantial increase in the Company’s stock price in December 2023, the expected grant date accounting value of our CEO’s 2024 equity was estimated to be materially in excess of target. In advance of the grant date of our CEO’s equity, our Compensation Committee, in conjunction with its advisors, discussed various updated designs and modeled several alternatives to manage that variance. Taking that feedback into account, the Compensation Committee decided to shorten the averaging period used for measuring relative TSR, and for determining the number of shares granted, from 40 days to 20 days. As a result, the accounting value of the 2024 grants is more in-line with the target value. The Compensation Committee’s advisors highlighted that this change could also be beneficial for future grants. |
Following successful shareholder engagement in early-2024 regarding our executive compensation structure, we heard feedback regarding the metrics in our incentive plans, and continue to evaluate possible changes to those metrics, including a possible return to EPS as measure of profitability. Clawback Policy In 2023, Lithia adopted a Dodd-Frank compliant clawback policy in accord with the NYSE’s new listing standards. This clawback policy layers on top of our existing and more expansive clawback mechanisms which cover instances of misconduct resulting in reputational harm, as described later in this Compensation Discussion and Analysis. Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 35 |
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*
| Expected annualized revenue from key acquisitions |
In 2022,One of our strategic goals is to be one of the best performing retailers, not only among our automotive peers, but also among our expanded retail Peer Group. Lithia experienced strong results acrossmade strides toward that goal in 2023, with another successful year of outpaced growth and strategic diversification, and the solidification of the key components of our business lines, while navigatinglong-term growth strategy. Our financial position, combined with the current environment, integrating a steady streamdiversity and reach of acquisitionsour network and continuingcomplementary adjacencies, positions Lithia to grow Driveway, GreenCarscontinue to drive this distinctive growth strategy and Driveway Finance Corporation. 2022return capital to shareholders. Specifically, in 2023, revenue increased 23.6%increase to a record $28.2$31 billion, from $22.8up 10.1% year over year and we acquired $3.8 billion in 2021 and adjusted earnings per share (EPS) increased 11%expected annualized revenues, bringing total acquired revenues to $44.42 from $40.03 for 2021. These results directly reflect the team's outstanding track record$17.7 billion since announcing our strategic plan in July of operational excellence and integrating acquisitions, while building a strong finance portfolio under our captive finance company, and a strong e-commerce business. Our operating results performed ahead of our 2025 Plan, giving us the opportunity to invest further in our network, expand our adjacencies to grow earnings and leverage our omnichannel competitive advantages. We are excited about our progress toward that plan and leading the consolidation of our industry. Our balanced approach towards building our business is grounded in our customers’ evolving needs. As we continue to consolidate retail mobility, we deliver returns to our shareholders through a combination of acquisitions, building complementary business lines, dividends and share repurchases.2020.
Performance Impact on Compensation 30
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TABLE OF CONTENTS 20222023 Short-Term Incentive
Management’s strong operational and strategic performance, which drove the growth of operating profit relative to our EPSautomotive peers and absolute revenue, resulted in our short-term incentive plan paying out at 127.9%136.7% for Bryan B. DeBoer,B.DeBoer, Christopher S. Holzshu, Tina H. Miller, and George N. Hines. Our short-term incentive plan for Scott A. Hillier also incorporated adepends on achieving store profits, component and a manufacturer approvability, component,and strategic goals and paid out at 142.1%155% following strong profitability. 20222023 Long-Term Incentive
There were two kindsOur executives received 25% of equity awardstheir compensation under our 20222023 long-term incentive plan. Oneplan in the form of RSUs that vest in annual installment over 3 years and 75% in the form of PSUs that vest only after a 3-year performance period based on satisfactionour revenue growth relative to our expanded retail Peer Group, a relative TSR modifier, and an operating margin governor, which sets the upper and lower bounds of EPS-any payout. The 2023 PSUs will vest and revenue- basedpay out, subject to performance, and another based on Driveway-based performance. Both had time-based vesting and satisfiedafter the end of their performance criteria as follows:
period on December 31, 2025. 31
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TABLE OF CONTENTS Listening to Our Compensation Practices Benefit our Shareholders Our executive compensation programs have strong governance components that further strengthen our pay-for- performance compensation philosophy, including the following:  Align pay and performance, with significant percentages of target total direct compensation (TDC) based expressly on performance (91% for the CEO and 78% for the other NEOs)
Rigorous financial, strategic and relative performance goals, including relative TSR, with audited attainment determinations
3-year performance periods on long-term incentives
Meaningful stock ownership guidelines for directors and executives
Clawback policies covering cash incentives and stock awards due to financial restatement or misconduct resulting in reputational harm
Double-trigger change in control provisions
Entirely independent Compensation Committee
Independent compensation consultant
Annual compensation program and policies risk assessment
Ability to exercise negative discretion on earned bonus amounts
| | |  No “golden parachute” gross-ups
No hedging/pledging/short-sales of company stock
No dividends paid on unvested shares
No perquisites beyond life and injury/disability related insurance coverage
No options/SARs (which we do not currently grant) with below FMV exercise price
No repricing of options (which we do not currently grant) without shareholder approval
No excessive severance
No guaranteed salary increases, bonuses, or long-term incentive awards
No adjustment or modification of any outstanding cash or long-term equity incentive in response to COVID-19 pandemic and recent volatile market conditions |
| | | Lithia’s Compensation Committee prioritizes listening to the views offeedback on our shareholders.compensation approach. We rely on regular shareholder outreach and engagement activities conducted by our CEO and other members of our management team, as well asand board level engagement, including both informal outreach and more formal listening channels, including the opportunity for shareholders to cast asuch as our shareholders’ annual non-binding advisory vote regarding executive compensation at Lithia’s annual shareholder meeting.compensation. These communications provide an important platform to receive feedback from investors, promote transparency between the Board and our shareholders and help build informed and productive relationships. | | |
| As a result of these efforts, our shareholders have overwhelmingly supported say-on-pay, with average support in excess of 97% over the past 5 years and 96% in 2023. Following historically successful shareholder outreach and athis strong 2022 say-on-pay vote with 97%showing of votes castsupport, in favor, in 2022,2023, we engaged with shareholders representing 80%over 60% of our top 50 shareholders,outstanding capital stock, on a variety of topics, including our executive compensation program. TheseIn addition, as part of our new board of director initiated shareholder outreach program, our Lead Independent Director and the Chair of our Compensation Committee invited our top 5010 shareholders, collectively ownrepresenting over 75%50% of the Company’s outstanding capital stock.stock, to discuss and provide feedback on our enhanced compensation program, of which four investors holding collectively over 19% of the Company's outstanding capital stock, engaged prior to the filing this proxy statement, leading to productive discussions regarding our governance and compensation strategies. Our Board expects to continue these types of engagements going forward. | 
| |
We adjusted our compensation program for 2022 to incorporate the following compensation governance best practices:
Short-term incentive plan – The strategic element of our short-term incentive plan (which generally accounts for 20% of the plan) is designed to provide management with flexibility and latitude to be innovative within our overall company strategy and, where appropriate, to create stretch goals and expand upon portions of our strategic plan. This structure incentivized performance on annual EPS and revenue, while allowing management to simultaneously drive success on medium and long-term goals over two to four year time periods. To provide greater transparency into and ability to measure the components of the strategic plan, Lithia evaluates strategic goals and CSR (Corporate Sustainability & Responsibility) initiatives based on our progress on the following:
○ | Our 2025 Plan that targets revenues of $50 billion and $55-$60 EPS through growth in our core business, network development, captive finance company and e-commerce channels. |
○ | Diversity and inclusion, employee promotion and well-being, energy efficiency and public education goals. |
Long-term incentive plan – In an effort to achieve our 2025 Plan, a portion of the fiscal year 2022 performance restricted stock (PRSUs) included RSUs with multiyear performance goals relating to the online sale of vehicles through our Driveway channel and multiyear time vesting. These PRSUs are earned based on vehicle sales goals in three equal tranches with vesting and settlement occurring after each tranche is earned during a three year performance period.
Clawback policy – In order to align with market-based best practices, the Compensation Committee expanded Lithia’s clawback policy in December of 2021 beyond financial restatements to include forfeiture of cash incentives and stock awards in the event of misconduct that results in reputational harm to Lithia. Lithia will further amend its clawback policy to comply with the new NYSE listing rules when such rules are effective.
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2023 Compensation Approach
In being mindful of the input from our shareholders and the proxy advisors, our compensation program for 2023 will involve the following:
Short-term incentive plan – Operating profit growth relative to automotive peers will replace adjusted EPS, with relative profit growth weighted at 40%, revenue growth weighted at 40%, and strategic objectives weighted at 20%.
Long-term incentive plan –
○ | The two tranches of the 2022 Driveway RSUs remain outstanding, and will serve as a performance catalyst for Driveway through 2024. |
○ | PRSUs will be earned over a 3-year performance period, based on revenue growth, profitability and relative TSR performance. |
○ | With the introduction of a three-year performance period, PRSUs will be weighted at 75%, with time-based RSUs comprising 25% of the long-term incentive plan program. |
Our Compensation Practices Benefit our ShareholdersOur executive compensation programs have strong governance components that further strengthen our pay-for-performance compensation philosophy, including the following:
| ✔
| | | Align pay05: Compensation Discussion and performance, with significant percentages of target total direct compensation (TDC) based expressly on performance (88% for the CEO and 77% for the other NEOs)
| | | ✗No “golden parachute” gross-ups
✗No hedging/pledging/short-sales of company stock
✗No dividends paid on unvested shares
✗No perquisites beyond life and injury/disability related
insurance coverage
✗No options/SARs granted below FMV
✗No repricing of options (which we do not currently grant)
without shareholder approval
✗No excessive severance
✗No guaranteed salary increases, bonuses, or long-term
incentive awards
✗No adjustment or modification of any outstanding cash or long-term equity incentive in response to COVID-19 pandemic and recent volatile market conditions
| | | ✔
| | | Rigorous financial and strategic performance goals, with audited strategic attainment determinations
| | | ✔
| | | Meaningful stock ownership guidelines for directors and executives
| | | ✔
| | | Clawback policy covering cash incentives and stock awards due to financial restatement or misconduct resulting in reputational harm
| | | ✔
| | | Double-trigger change in control provisions
| | | ✔
| | | Entirely independent Compensation Committee
| | | ✔
| | | Independent compensation consultant
| | | ✔
| | | Annual compensation program and policies risk assessment
| | | ✔
| | | Ability to exercise negative discretion on earned bonus amounts
| | | ✔
| | | Long term incentives subject to both performance- and time-based vesting criteria.
| |
Compensation decisions and other details are discussed in the remainder of this section “Compensation Discussion and Analysis”.
TABLE OF CONTENTS Our vision guides our mission, and our mission drives our business strategy and our compensation philosophy. All four of these areas are informed by our values.  Who We Are The pragmatic disruptor with a proven multifaceted success strategy, competitively leading the modernization of personal transportation by providing consumers solutions, wherever, whenever, and however, they desire. Our Mission Our mission, Growth Powered by People, focuses on our customers and team to create a competitive advantage. We are a growth company and the continued development of our team is critical to our long-term success. Our entrepreneurial culture is the foundation of our business strategy. This culture drives our team to create simple, customer-centered experiences. Trust in each other is key to making decisions that will be in the best interests of the Company and its stakeholders. We strive for high customer retention and strong market share, while controlling costs, to yield exceptional profit performance. Our Business Strategy We are a growth company focused on profitably consolidating the largest retail sector by providing personal transportation solutions, wherever, whenever, and however, consumers desire. Compensation Philosophy Lithia’s compensation program is designed to support the Company’s vision, mission, and values and align appropriate incentives and rewards with the execution of our business strategy, all while attracting, motivating, rewarding, and retaining high-performing employees who influence and drive the Company’s long-term success. Lithia strives to do this by providing a market competitive-salary and performance-based short and long-term incentive compensation. Our Values Within our entrepreneurial and high-performance culture, we implement a human capital policy that supports a diverse and energized workforce with career advancement, role mobility opportunities, and strong health, safety, and wellness initiatives. Our values guide us beyond producing financial returns to serving our customers and communities, developing our people, reaching our potential and growing our company: 34
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TABLE OF CONTENTS The three major elements of our executive officers’ regular total direct compensation (TDC) are: (i) base salary, (ii) aawards under our cash-based short-term incentive plan, and (iii) anawards under our equity-based long-term incentive plan. While performance drives all aspects of our compensation, for 2022, 88%2023, 91% of target annual TDC for the CEO was expressly performance-based and approximately 77%78% of the target annual TDC for theour other named executive officers was expressly performance-based, reflecting Lithia’s pay-for-performance philosophy. 20222023 Target Compensation Mix
35
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TABLE OF CONTENTS 20222023 Compensation Program Design & Results We provide base salaries to our executive officers to compensate them for their services rendered during the year and to provide them with a level of competitive and stable fixed compensation. The Compensation Committee approves the 20222023 base salary for our CEO based on competitive market factors, the CEO’s duties and responsibilities, comparison of relative CEO pay within the Peer Group mentioneddescribed below, the CEO’s performance and the relative pay of our senior management team. The base salaries of all other NEOs are developed by the CEO and our independent compensation consultant based on similar factors and are analyzed and approved by the Compensation Committee. As partAccordingly, annual merit-based increases were approved for each of the annual salary review process, all the NEOs received a competitiveour executive officers. In particular, Ms. Miller’s and merit based increaseMr. Hines’s increases in base salary. Ms. Miller’s increase was alsosalary were based on the competitive data for hertheir tenure and expertise in the role. | | Bryan B. DeBoer | | | 1,106,000 | | | 1,250,000 | | | 13.02% | | | | Tina H. Miller | | | 420,000 | | | 525,000 | | | 25.00% | | | | Christopher S. Holzshu | | | 720,000 | | | 800,000 | | | 11.11% | | | | Scott A. Hillier | | | 500,000 | | | 525,000 | | | 5.00% | | | | George N. Hines | | | 450,000 | | | 480,000 | | | 6.67% | |
Bryan B. DeBoer | | | 1,250,000 | | | 1,300,000 | | | 4.0% | Tina H. Miller | | | 525,000 | | | 750,000 | | | 42.9% | Christopher S. Holzshu | | | 800,000 | | | 900,000 | | | 12.5% | Scott A. Hillier | | | 525,000 | | | 550,000 | | | 4.8% | George N. Hines | | | 480,000 | | | 600,000 | | | 25.0% |
Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 41 |
TABLE OF CONTENTS Short-Term Incentive Plan Consistent with prior years andWe refreshed our short-term incentive plan to incorporate relative metrics that differ from our long-term incentive plan. Specifically, the advice of our independent compensation consultant, the 20222023 short-term incentive plan rewards executives for attaining pre-determined, objective goals relatedbased on our operating profit growth relative to earnings per share (EPS);our automotive peers; our revenue growth, which is a useful measurement of our overall company health; and execution of our strategic development plan, based on revenue and EPS growth which focusesincorporates our focus on acquisitions, multi-channel innovation, CSRcorporate social responsibility and other initiatives; and store profits, as applicable.
How our 20222023 Short-Term Incentive Plan Works In 2022,2023, our short-term incentive plan compensated executives for achieving annual performance goals in each of the above criteria. Each NEO had a target cash bonus potential based on a market competitive percentage of base salary ranging from approximately 63%67% to 128%150%, which iswas paid out according to the attainment of the above referenced performance goals. Each executive’s target bonus, expressed as a percentage of salary, and their weighted performance goals, arewere as follows: Bryan B. DeBoer | | | |  | | | | | | | | | | | |  | | | — | Tina H. Miller | | | 85% | | Christopher S. Holzshu | | | 120% | | George N. Hines | | | 67% | | Scott A. Hillier | | | 80% | | | — | | | — | | | | | | | | | | |
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 |
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Establishment of 20222023 Targets and Actual Cash Payouts We believe using metrics that promote high performance and profitable growth are critical. These performance criteria are approved annually by the Compensation Committee and are designed to reward both short-term and long-term value creation, support growth in profitability, maximize our capital deployment strategies and increase share value. Management provides the Compensation Committee with a quarterly review of the short-term incentive plan attainment pacing. Short-termShort- term incentive plan payouts are calculated based on straight-line interpolation between the threshold, target, and maximum payout percentages. If we do not achieve threshold performance, then no short-term incentive plan is earned or paid. The Compensation Committee has discretion to reduce awards under the short-term incentive plan. | • | Adjusted EPS GoalsRelative Operating Profit Growth: In lightBryan B. DeBoer, Christopher S. Holzshu, Tina H. Miller, and George N. Hines’s short-term incentive plan payouts depended on our quarterly operating profit growth relative to the average quarterly operating profit growth amongst certain of our automotive peers for the four consecutive quarters ending before December 15, 2023. Quarterly operating profit growth is calculated by determining the percentage growth of a company’s operating income in each quarter over the corresponding quarter from the prior year, and summing that quarterly operating profit growth percentage for each of the expected dynamic environment where vehicle profits (which help drive EPS) were reaching unprecedented levels, the Compensation Committee established a range of adjusted EPS3 targets tied directly to expected high GPUs and lower historical GPU levels as illustratedfour quarters in the following chart:performance period, with payouts as shown below.
|
Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 42 |
TABLE OF CONTENTS Maximum | | | 15% | | | 200% | Target | | | (5%)–5% | | | 100% | Threshold | | | (15)% | | | 50% |
ABG | | | Asbury Automotive Group, Inc. | AN | | | AutoNation, Inc. | KMX | | | CarMax, Inc. | GPI | | | Group 1 Automotive, Inc. | PAG | | | Penske Automotive Group, Inc. | SAH | | | Sonic Automotive, Inc. |
| | EPS Maximum | | | $27.75 | | | $33.20 | | | $51.65 | | | 200% | | | | EPS Target | | | $22.95-$25.35 | | | $27.40-$30.30 | | | $42.65-$47.15 | | | 100% | | | | EPS Threshold | | | $18.10-$12.25 | | | $21.65 | | | $33.70 | | | 25% | |
Adjusted EPSOur operating profit growth for the year was achieved at target this year, reaching $44.42 diluted per share which fell within0.06 percentage points over the average for our applicable target goal of $42.65 and $47.15 based on achievement of GPU of $4,123.automotive peers. Accordingly, this portion of each executive’s 20222023 short-term incentive plan award paid out at 100%.
| • | Revenue Growth: Bryan B. DeBoer, Christopher S. Holzshu, Tina H. Miller, and George N. Hines’Hines’s short-term incentive plan payouts also depend on attainment of specific revenue goals. The revenue growth goals for 20222023 were set based upon the Company’s Board approved business plan. For 2022,2023, the target range of $26.1$29 billion to $27.2$30 billion was higher than 2021our 2022 results of $22.80$28.2 billion and in line with our 2025 Planstrategic plan. |
| Maximum
| | | 29.5B
| | | 30%
| | | 200%
| | | Target
| | | 26.1B - $27.2B
| | | 15% - 20%
| | | 100%
| | | Threshold
| | | 22.7B
| | | —%
| | | 25%
| |
Maximum | | | 31.5B | | | 7% | | | 200% | Target | | | 29B–30B | | | 11%–10% | | | 100% | Threshold | | | 26.5B | | | 17% | | | 50% |
Revenue Growth wasWe achieved above target$31.0 billion in revenue this year, reaching $28.2 billion and exceededexceeding our target goal of $27.2$30 billion by $999 million.$1 billion. Accordingly, this portion of each executive’s 20222023 short-term incentive plan award paid out at 142.9%166.8%.
TABLE OF CONTENTS
| • | Strategic Objectives: Bryan B. DeBoer, Christopher S. Holzshu, Tina H. Miller, and George N. Hines’ and Scott Hillier’s short-term incentive plan payouts also depend on attainment of specific strategic objectives. Our 20222023 strategic objectives focused on progress toward our overall strategic plan through key acquisitions, including global expansion, innovation in and diversification of our revenue streams and CSRCorporate Sustainability & Responsibility (CSR) goals. These goals are rigorous and intended to focus management on integration of new and past acquisitions, exploration of new products and services, strategic leadership hires and development, capital market progress, relative price-to-earnings ratio, and progress towardstoward our CSR initiatives. Each year, management determines the extent to which strategic objectives are accomplished, which is then presented to the Compensation Committee for approval. Payout percentages are as follows: |
Lithia Motors, Inc. 2024 Proxy Statement | | | | Strategic | | 05: Compensation Discussion and Analysis (CD&A) 43 |
TABLE OF CONTENTS | Significantly Above Target | | | 200% | | | Above Target | | | 150% | | | Target | | | 100% | | | Below Target | | | 25%50%
| |
We successfully executed on our strategic objectives this year, as shown below. Accordingly, these results, as approved, warranted a payout of this portion of each executive’s 20222023 short-term incentive plan award schedule at 175%150% based on achievement of our goals, including: | • Reached 95% of U.S. consumers within 235 miles.
• Acquired 31 stores & revenue of $3.5 billion.
• Successfully integrated acquired businesses, with 2021 acquisitions achieving 30% ROI (v. 15% ROI target).
• Retained over 95% of employee’s post acquisition.
• Divested 13 stores & recovered $212M in capital for future acquisitions.
| | | • Driveway and GreenCars generated $862 million in revenue.
• Achieved average of over 2 million unique visitors each month in Q4.
• Reached over 1,200 SHOP transactions in December.
| | | | Driveway Finance Corporation
(200% Achievement)165% attainment) | | | GreenCars
(175% Achievement)
| | | • Grew portfolio of outstanding loans from $700 million Acquired $3.8 billion in December 31, 2021 to $2.1 billion.expected annualized revenues; 55 stores and 2 new franchises across 7 transactions
• Originated 19,200 loans worth $605 million Strategically divested 7 stores, recovering $90mm+ creating more capital for acquisitions
• Expanded internationally with Jardine Motors UK Limited (Q1) and further with Arden BMW Mini Motorrad (Q3), adding combined 40 dealerships and 15 franchises in fourth quarter becoming Lithia’s #1 lender with a 13.4% penetration rate.the United Kingdom
• Completed second ABS issuance, raising nearly $300M.
Extended our US presence into 3 new markets: Honda in San Antonio, TX (Q3), Virginia Beach and Roanoke, VA as part of • Reduced credit risk by raising the portfolio’s average FICO score to 732.Priority Acquisition (Q2)
| | | • Serves Grew portfolio from $2.1 billion to nearly $3.2 billion as leading educational resource for sustainable vehicles.of December 31, 2023
• Monthly unique visitors grew to over 500,000 Originated 70,000 loans totaling, $2.1 billion in December 2022,2023 and finished as our #1 lender with 1.3 million unique visitors11% penetration rate
• Completed four ABS offerings during the year with combined proceeds of $1.9 billion
• Achieved average FICO of 732 and APR of 9.64% on loans originated in Q4.2023 | Driveway
(50% attainment) | | | | Corporate Sustainability & Responsibility
(200% Achievement)100% attainment) | • Over 33 million MUVs in 2023; +62% from 2022
• Incremental Driveway transactions -35% YTD from 2022 to 2023 (DW SHOP transactions +18% YoY)
• Total Driveway revenue over $627 million YTD in 2023, which is down 16% overall from 2022 (DW Shop revenue +16% YoY). | | | | • Public Education – 7.4 million unique visitors to GreenCars.com increased 744% YOY.in 2023, 91% increase YoY
• Energy Efficiency – projected annual savings of 3,873,688 KW/h from completed 2022 retrofits. 12,833 GreenCars influenced sales in 2023. 20% increase in Q4
• Employee promotion & well-being – Management promotions at 36% 364,000 organic unique visitors in 2022 compared to 8%2023; 14% increase in 2021.Q4
• DE&I – percentage 15 GreenCars brand activations led by stores in 2023
• 13,500 GreenCars newsletter subscribers, 60% increase in Q4
• 1,700 YouTube subscribers, up 8,400% in 2023 from 20 subscribers
• # of minority employeeEV Charging Ports up 3 percentage points YOY. | |
• # of AMP promotions increased 68.42% YoY
38
• Corporate Responsibility Website Unique visitors up 14.2% YoY
|
TABLE OF CONTENTS
| • | Store Profit Goals: Scott A. Hillier’s short-term incentive plan payouts also dependdepended on attainment of specific store profits goals in key markets, which, for competitive reasons, we do not disclose on a separate basis, as we consider it competitively harmful to make that information public. Our objective is to set challenging performance goals for our executives throughout the Company, and we believe that achieving these challenging performance goals in theseour markets is demanding. This portion of an executive’s short-term incentive plan award is calculated based on a percentage of goals attainment, with a maximum possible attainment of 200%. Store profit goals were achieved at 179%. in 2023. |
| • | Manufacturer Approvability Goals: Scott A. Hillier’s short-term incentive plan payouts also dependdepended on the aggregate year-end manufacturer approvability points achieved. This component is new for 2022 and is critical to our ability to grow through acquisition of new vehicle franchises. Manufacturer approvability points are based on two considerations: (1) Meeting the metrics outlined in our manufacturer framework agreements and (2) the relationship status with the manufacturer and ability to purchase additional stores. Payout percentages are as follows: |
| | Maximum | | | 17.5 | | | 200% | | | | Target | | | 13.5 | | | 100% | | | | Threshold | | | 9 | | | 25% | |
Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 44 |
TABLE OF CONTENTS of new vehicle franchises. Manufacturer approvability points are based on two considerations: (1) Meeting the metrics outlined in our manufacturer framework agreements and (2) the relationship status with the manufacturer and ability to purchase additional stores. Payout percentages are as follows: Maximum | | | 19 | | | 200% | Target | | | 14 | | | 100% | Threshold | | | 10 | | | 25% |
Manufacturer approvability goals were achieved at 150%.120% in 2023. 20222023 Actual Bonus
Based on 20222023 attainment of thesethe goals described above, the 20222023 short-term incentive plan payouts were as follows: | | Bryan B. DeBoer | | | 128% | | | 127.9% | | | 2,045,920 | | | | Tina H. Miller | | | 81% | | | 127.9% | | | 543,448 | | | | Christopher S. Holzshu | | | 94% | | | 127.9% | | | 959,025 | | | | Scott A. Hillier | | | 80% | | | 142.1% | | | 596,620 | | | | George N. Hines | | | 63% | | | 127.9% | | | 383,610 | |
Bryan B. DeBoer | | | 150% | | | 136.7% | | | 2,666,040 | Tina H. Miller | | | 85% | | | 136.7% | | | 875,008 | Christopher S. Holzshu | | | 120% | | | 136.7% | | | 1,476,576 | Scott A. Hillier | | | 80% | | | 155.0% | | | 681,997 | George N. Hines | | | 67% | | | 136.7% | | | 546,880 |
Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 45 |
TABLE OF CONTENTS Our equity-basedIn 2023, we adopted a new structure for our long-term incentive plan leverages Lithia’s public company status to reward employees for achieving quantitative financial performance and revenue growth objectives approved annually byunder which we issue awards primarily in the Compensation Committee. The useform of metrics that promote high performance and profitable growth is critical. Performance targets are determined by considering forecasted EPS, revenue growth, and analyst estimates. EPS isPSUs, with a useful measurement of our overall profitability and is strongly correlated with changes in our stock price and revenue growth and is a useful measurement of our overall company health.
service-based RSU component. We believe issuing performancethis PSU and time-vested RSUs rather than stock optionsRSU mix better aligns our executive team with our shareholders compared to a stock option-based plan because restricted stock unitsPSUs are directly tied to performance outcomes and both PSUs and RSUs experience the upside as well as the downside of stock price changes. EPSThis structure leverages Lithia’s public company status to reward employees for achieving financial performance that exceeds our peers, drives our stock price upward, and revenue vesting criteria link realized valueremains tied to the achievement of critical operational and financial objectives and delivering superior long-term shareholder returns. Additional time-based vesting criteria support retention and align the interestsfundamental profitability of our executive officers with those ofbusiness. In addition, relative metrics informed by our shareholders over the long-term, while promoting a culture of ownership. The amounts of unvested equity for each of our executive officers in ouroperational goals and financials objectives link pay for performance table below are designed to be appropriate holding power to support our employee retention and stock ownership goals. TABLE OF CONTENTS
How our 2022 Long-Term Incentive Plan Works
In 2022, the Compensation Committee approved long-term incentive awards for our executive officers consisting of PRSUs subject to both performance- and time-based vesting criteria, as set forth in the table below. The Compensation Committee approved the PRSUs awarded to NEOs and other key employees after considering, among other things, peer comparisons, Company financial performance and absolute and relative total shareholder return, awards granted in prior years, the percentage of total compensation and targets determined based upon the Company’s Board approved business plan, and the recommendation of our independent compensation consultant. Our CEO’s target increased to be competitive based on our scale and complexity. The 2022 PRSUs were subject to three performance goals - adjusted EPS, revenue growth, and Driveway online vehicle sales.
| | Bryan B. DeBoer | | | 5,250,000 | | | 17,632 | | | 1,750,000 | | | 5,878 | | | 950,000 | | | 3,191 | | | 7,950,000 | | | 26,701 | | | | Tina H. Miller | | | 675,000 | | | 2,267 | | | 225,000 | | | 756 | | | 200,000 | | | 672 | | | 1,100,000 | | | 3,695 | | | | Christopher S. Holzshu | | | 1,725,000 | | | 5,794 | | | 575,000 | | | 1,932 | | | 750,000 | | | 2,519 | | | 3,050,000 | | | 10,245 | | | | Scott A. Hillier | | | 487,500 | | | 1,638 | | | 162,500 | | | 546 | | | 600,000 | | | 2,016 | | | 1,250,000 | | | 4,200 | | | | George N. Hines | | | 375,000 | | | 1,260 | | | 125,000 | | | 420 | | | 300,000 | | | 1,008 | | | 800,000 | | | 2,688 | |
Each year, the Compensation Committee approves the degree to which an executive’s long-term incentive award satisfies the applicable performance vesting criterion. The PRSUs satisfying the adjusted EPS and revenue growth criteria time vest in three equal parts on the 2nd, 3rd, and 4th anniversary of date of grant. The PRSUs subjectoutcomes to the Driveway goals vest in three equal tranches on the vesting date applicable to the tranche achieved consistingattainment of January 1, 2023, 2024, or 2025.
The executives’ weighted performance goals for 2022 are as set forth in the table below.market leading results.
| Named Executive
Officer
| | | Weighting of Performance Factors
| | | Adjusted EPS
| | | Revenue GrowthThe amounts of unvested equity for each of our executive officers, as seen in in our Pay Versus Performance table, are designed to create strong shareholder alignment and appropriate holding power to support our employee retention and stock ownership goals.
| | |
How Our 2023 Long-Term Incentive Plan Works Bryan B. Deboer Tina H. Miller
Christopher S. Holzshu
Scott A. Hillier
George N. Hines
| | |
In 2023, the Compensation Committee approved long-term incentive awards for our executives consisting of PSUs and RSUs, as set forth in the table below. The Compensation Committee approved the PSUs and RSUs awarded to NEOs and other key employees after considering, among other things, peer comparisons, Company financial performance and absolute and relative total shareholder return, awards granted in prior years, the percentage of total compensation and targets determined based upon the Company’s Board approved business plan, and the recommendation of our independent compensation consultant.
|
Bryan B. DeBoer | | | 8,062,500 | | | 2,687,500 | | | 10,750,000 | Tina H. Miller | | | 1,350,000 | | | 450,000 | | | 1,800,000 | Christopher S. Holzshu | | | 3,712,500 | | | 1,237,500 | | | 4,950,000 | Scott A. Hillier | | | 637,500 | | | 212,500 | | | 850,000 | George N. Hines | | | 712,500 | | | 237,500 | | | 950,000 |
| *
| 
| |
In addition, in the event of the retirement of an NEO or, in certain cases, termination of employment other than for cause, and to the extent the NEO (i) meets certain retirement eligibility criteria described in the award agreement (which criteria differ for individual executives and award years but require, at a minimum, that an individual’s combined age and service must equal at least 65) and (ii) complies with certain post-retirement assistance requirements and covenants, all PRSUsPSUs and RSUs will continue to vest as if the executive continue their employment with the Company (i.e., subject to any performance requirements and in accord with any earned PRSUs, based on the satisfaction of the performance metrics, will be settled in shares following the satisfaction of their timeservice-based vesting requirements. schedule). Lithia believes that the retirement vesting feature of all PRSUs is appropriate and motivating because it provides protection to long-tenured NEOs considering the PRSU vesting and performance period and is a prevalent practice among theother companies within the Peer Group that grant performance-based RSUs.Group. Further, PRSUsPSUs will be forfeited and provide no value to its holder to the extent a NEO violates specific post-retirement covenants. 40
Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 05: Compensation Discussion and Analysis (CD&A) 46 |
TABLE OF CONTENTS Due to our refreshed long-term incentive plan design, the 2023 PSUs pay out formulaically after the completion of 2022 Targetsa 3-year performance period based on the ranking of our revenue growth relative to our Peer Group, with a relative TSR modifier that can increase or decrease payouts by up to 25%, and Actual PRSU Vestingan operating margin governor which sets the upper and lower bounds of any payout. This structure leverages Lithia’s public company status to reward employees for generating high-quality and profitable revenue that exceeds our peers and links executive pay outcomes to stock price performance. 2023 PSU Design Overview | •Performance Period: 2023–2025 | •Metric: relative revenue growth, subject to 2 modifiers: | ° Relative TSR modifier (up to +/- 25%) | ° Operating Margin Governor which sets the upper and lower payout limits | •Incentive: drive high-quality and profitable revenue that outperforms our peers; link pay outcomes to stock price performance. |
2023 PSU Payout Formula The 2023 PSUs use a performance period that ends on December 31, 2025, after which the Compensation Committee will certify performance and any appropriate payout based on the following formula: (Relative Revenue Growth * Relative TSR Modifier) adjusted by an Operating Margin Governor |
Relative Revenue Growth:
Our revenue growth1 rank relative to our full Peer Group is the core metric of the 2023 PSUS, with attainment measured as follow. • Adjusted EPS Goals: The adjusted EPS4 goals for 2022 long-term incentive awards were set in conjunction with EPS goals for the short-term incentive plan, described above. Long-term incentive awards performance-vest based on straight-line interpolation between the threshold, target, and maximum payout percentages. If we do not achieve floor performance for adjusted EPS, then no awards vest. In light of the expected dynamic environment where vehicle profits (which help drive EPS) were reaching unprecedented levels, the Compensation Committee established a range of adjusted EPS targets tied directly to expected high GPUs and lower historical GPU levels as illustrated in the following chart:
|
| | EPS Maximum | | | $27.75 | | | $33.20 | | | $51.65 | | | 150% | | | | EPS Target | | | $22.95 - $25.35 | | | $27.40 - $30.30 | | | $42.65 - $47.15 | | | 100% | | | | EPS Threshold | | | $18.10 | | | $21.65 | | | $33.70 | | | 75% | | | | EPS Floor | | | $0.01 - $18.09 | | | $0.01 - $21.64 | | | $0.01 - $33.69 | | | 50% | |
Adjusted EPS was achieved at target this year, reaching $44.42 diluted per share which fell within our applicable target goal of $42.65 and $47.15 based on achievement of GPU of $4,123. Accordingly, this portion of each executive’s 2022 long-term incentive plan will performance vest at 100% of target.
• | Revenue Growth: The revenue growth goals for 2022 long-term incentive awards were set in conjunction with revenue growth goals for the short-term incentive plan, described above, based upon the Company’s Board approved business plan. Long-term incentive awards performance-vest based on straight-line interpolation between the threshold, target, and maximum payout percentages. If we do not achieve floor performance, then no awards vest. For 2022, the target of $26.1 billion was higher than 2021 results of $22.8 billion and in line with our 5-year revenue growth plan, as follows:
|
1st to 5th | | | % of Payout175%
| | | Maximum6th
| | | 29.5 B160%
| 7th | | | 150%145%
| | | Target8th
| | | 26.1-27.2 B130%
| 9th | | | 115% | 10th | | | 100% | | | Threshold11th
| | | 22.7 B100%
| 12th | | | 75%80%
| | | Floor13th
| | | 0-22.69 B70%
| 14th | | | 60% | 15th | | | 50% | |
Revenue Growth was achieved above target this year, reaching $28.2 billion and exceeded our target goal of $27.2 billion by $999 million. Accordingly, this portion of each executive’s 2022 long-term incentive plan will performance vest at 121.5% of target.
Based on 2022 attainment of the Adjusted EPS and Revenue Growth goals, each PRSU under the 2022 long-term incentive plan will performance vest at 105.4% of target and shall time vest in equal parts over the next three years. RSUs that did not satisfy their performance criteria shall be forfeited without consideration.
2022 Long-Term Incentive – Driveway-Based Performance
| • Driveway Sales Goals: The Driveway vehicle sales goals for the 2022 long-term incentive plan award are split into three tranches as described below. Upon achievement of the performance goal for each tranche, the Driveway RSUs will vest in portions corresponding with such tranche on the specified vesting date. If the performance goals for a given tranche are not satisfied by the applicable date, then the portions of RSUs associated with such tranche shall be forfeited without consideration.16th to 20th
| | | 0% |
Relative TSR Modifier:
The attainment percentage determined by our relative revenue growth is then multiplied by an adjustment factor determined by our TSR ranking relative to our full Peer Group, as follows: 1st to 5th | | | 1.25 | 6th | | | 1.20 | 7th | | | 1.15 | 8th | | | 1.10 | 9th | | | 1.05 | 10th | | | 1.0 | 11th | | | 1.0 | 12th | | | 0.95 | 13th | | | 0.90 | 14th | | | 0.85 | 15th | | | 0.8 | 16th to 20th | | | 0.75 |
Operating Margin Governor:
Finally, the payout determined via multiplying our revenue growth attainment by our TSR adjustment factor is subject to a maximum and minimum set by our operating margin, as shown below: >4.5% | | | 219% to 60% | 4.0% to 4.5% | | | 200% to 50% | 3.5% to <4.0% | | | 175% to 40% | 3.0% to <3.5% | | | 150% to 30% | 2.0% to <3.0% | | | 125% to 20% | <2.0% | | | 125% to 0% |
4(1)
| A reconciliation to GAAP EPSThis relative revenue growth rank is found on p. 34determined by averaging quarterly growth in revenue for each of the most recent 12 consecutive quarters ending before December 15, 2025,and ranking that revenue growth against the revenue growth figures for each company in our 2022 10-K.full retail Peer Group. Quarterly revenue growth is measured as the percentage change in reported revenue between a given quarter, and the corresponding quarter from the prior year. |
41
Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 05: Compensation Discussion and Analysis (CD&A) 47 |
TABLE OF CONTENTS | | 1 | | | Driveway Shop to sell 1,000 units by 6/30/2022 and
maintain an average of 1,000 units for the 3 months after
the month of attainment | | | 33% | | | 1/1/2023 | | | | 2 | | | Driveway Shop to sell 5,000 units by 6/30/2023 and
maintain an average of 5,000 units for the 3 months after
the month of attainment | | | 33% | | | 1/1/2024 | | | | 3 | | | Driveway Shop to sell 10,000 units by 6/30/2024 and
maintain an average of 10,000 units for the 3 months after
the month of attainment | | | 34% | | | 1/1/2025 | |
In 2022, we awarded PSUs which vest (if at all) in three tranches based upon the attainment of Driveway vehicle sales goals. Each tranche of these Driveway PSUs vest on a specific vesting date, subject to the attainment of that tranche’s sales goal, as indicated below. If the performance goals for a given tranche are not satisfied by the applicable date, then the portions of PSUs associated with such tranche shall be forfeited without consideration. 1 | | | Driveway Shop to sell 1,000 units by 6/30/2022 and maintain an average of
1,000 units for the 3 months after the month of attainment | | | 33% | | | 1/1/2023 | 2 | | | Driveway Shop to sell 5,000 units by 6/30/2023 and maintain an average of
5,000 units for the 3 months after the month of attainment | | | 33% | | | 1/1/2024 | 3 | | | Driveway Shop to sell 10,000 units by 6/30/2024 and maintain an average of
10,000 units for the 3 months after the month of attainment | | | 34% | | | 1/1/2025 |
The target for the first tranche has beenwas achieved and the Driveway RSUs under the 2022 long-term incentive plan performance vested at 33% on January 1, 2023. The target for the second tranche was not achieved by June 30, 2023 and was forfeited. The final tranche remains outstanding. Consistent with our pay-for-performance compensation philosophy, we believe perquisites for executive officers should be limited in scope and value, and should only be offered when they provide necessities or conveniences that allow our executive officers to focus on and optimally perform in their role with Lithia. We provide our NEOs with insurance premiums for long-term care assistance, long-term disability and life and accidental death and dismemberment on their behalf. Compensation Decision Making Process The Compensation Committee begins its process of deciding how to compensate Lithia’s named executive officers by considering the competitive market data provided by its independent compensation consultant and the Human Resources Department.department. Competitive market data consists of peer group and pay information from surveys collected by our compensation consultant (e.g. where there may be little data for a role amongst our peers). Peer Group and Benchmarking As Lithia continued to grow organically and through acquisitions,In 2022, the Compensation Committee asked Pay Governance to review the Peer Group for its appropriateness, in March 2021 with the objective of:
Revising the Peer Groupof including 15 to include20 companies that are broadlyfit the following criteria:
Broadly representative of Lithia’s key characteristics including(e.g., size, profitability, retail, and directdirect-to-consumer models) Potential to consumer, and that might operate in Lithia’s labor market for executive and director talent.talent Ensuring theCreate a Peer Group median for revenue, market capitalization, and pre-tax profit that is close to Lithia’s size scope.scope
Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 48 |
TABLE OF CONTENTS Given the limited number of direct auto retail competitors Pay Governance determinedand that the peer selection field should be expanded to include other specialty retail companies. After reviewing Pay Governance’s analysis, the Compensation Committee determined that eight companies from the Peer Group continue to be representative of the markets in which we compete. Six companies of smaller size were removed from the Peer Group and substituted with nine new companies with similar size, profitability, and other characteristics. As a result, the Compensation Committee approved the following seventeen companiesfact that we believe were similarly situated for purposes of the executive officer compensation for 2022. TABLE OF CONTENTS
| KMX
| | | CarMax Inc.
| | | | | | TJX*
| | | The TJX Companies, Inc.
| | | AN
| | | AutoNation, Inc.
| | | | | | DLTR*
| | | Dollar Tree, Inc.
| | | AAP
| | | Advance Auto Parts Inc.
| | | | | | GPC*
| | | Genuine Parts Company
| | | PAG
| | | Penske Automotive Group, Inc.
| | | | | | GPS*
| | | The Gap, Inc.
| | | GPI
| | | Group 1 Automotive, Inc.
| | | | | | LKQ*
| | | LKQ Corporation
| | | ORLY
| | | O'Reilly Automotive Inc.
| | | | | | BBBY*
| | | Bed Bath & Beyond Inc.
| | | AZO
| | | AutoZone, Inc.
| | | | | | TSCO*
| | | Tractor Supply Company
| | | DKS
| | | Dick's Sporting Goods Inc.
| | | | | | WSM*
| | | Williams-Sonoma, Inc.
| | | DG*
| | | Dollar General Corp
| | | | | | * New peer group companies as of March 2021.
| |
In 2022, the Compensation Committee again asked Pay Governance to review the Peer Group for its appropriateness based on the 2021 objectivessell automotive related products and the following new objectives:
Right-sizing the peer group to align with Lithia’s growth.
Revising the Peer Group to include 15 to 20 companies that are broadly representative of Lithia’s key characteristics.
services, Pay Governance determined that the peer selection field should be expanded to include broader retail companies that are included as peers by some of Lithia’s larger peers. After reviewing Pay Governance’s analysis, and given the Compensation Committee determined that fifteen companies from the Peer Group continuemultifaceted nature of our customers' retail experience which is akin to be representative of the markets in which we compete. The two smallest companies, Bed Bath & Beyond Inc. and Williams-Sonoma, Inc., were removed from the Peer Group due to Lithia’s outpaced growth relative to those peers. Three new companies were also added, which more appropriately match our size, profitability, and other characteristics. As a result,retail industries, the Compensation Committee approved the following eighteen companies that we believe are similarly situated for purposes of the non-employee director compensation for the 2022-20232022–2023 Board service year and executive officer compensation for 2023:5 | AAP | | | Advance Auto Parts, Inc. | AN | | | AutoNation, Inc. | AZO | | | AutoZone, Inc. | BBY | | | Best Buy Co., Inc. | KMX | | | CarMax, Inc. | DKS | | | Dick’s Sporting Goods, Inc. | DG | | | Dollar General Corporation | DLTR | | | Dollar Tree, Inc. | GPS | | | The Gap, Inc. |
GPC | | | Genuine Parts Company | | | AN
| | | AutoNation, Inc.
| | | | | | GPI | | | Group 1 Automotive, Inc. | | | AZO
| | | AutoZone, Inc.
| | | | | | LKQ | | | LKQ Corporation | | | BBY*
| | | Best Buy Co., Inc.
| | | | | | LOW*LOW
| | | Lowes Companies, Inc. | | | KMX
| | | CarMax, Inc.
| | | | | | ORLY | | | O'ReillyO’Reilly Automotive, Inc.
| | | DKS
| | | Dick's Sporting Goods, Inc.
| | | | | | PAG | | | Penske Automotive Group, Inc. | | | DG
| | | Dollar General Corporation
| | | | | | SYY*SYY
| | | Sysco Corporation | | | DLTR
| | | Dollar Tree, Inc. Genuine Parts
| | | | | | TJX | | | The TJX Companies, Inc. | TSCO | | | Tractor Supply Company |
In January 2023, in connection with establishing our new compensation design (including 3-year performance periods and a relative TSR modifier on our LTIP and relative metrics throughout), the Compensation Committee updated the peer group to remove Dick’s Sporting Goods and include more directly aligned auto retailers, i.e., Asbury Automotive Group, Inc. and Sonic Automotive, Inc., as follows: AAP | | | Advance Auto Parts, Inc. | ABG | | | Asbury Automotive Group, Inc. | AN | | | Autonation, Inc. | AZO | | | Autozone, Inc. | BBY | | | Best Buy Co., Inc. | KMX | | | Carmax, Inc. | DG | | | Dollar General Corporation | DLTR | | | Dollar Tree, Inc. | GPC | | | Genuine Parts Company | GPI | | | Group 1 Automotive, Inc. |
LKQ | | | LKQ Corporation | LOW | | | Lowe's Companies, Inc. | ORLY | | | O'Reilly Automotive, Inc. | PAG | | | Penske Automotive Group, Inc. (PAG) | SAH | | | Sonic Automotive, Inc. | SYY | | | Sysco Corporation | GPS | | | The Gap, Inc. | TJX | | | The TJX Companies, Inc. | | | TSCO | | | Tractor Supply Company | | | * New peer group companies
| |
TABLE OF CONTENTS
How We Use the Peer Group The positions of our named executive officers were compared to their counterpart positions in our Peer Group, and the compensation levels for comparable positions in the Peer Group were examined for guidance in determining: base salaries; cash awards under our short-term incentive plan; and the amount and mix of equity awards under our long-term incentive plan. Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 49 |
TABLE OF CONTENTS The Compensation Committee approves base salaries, short-term incentive plan awards and long-term incentive awards on a case-by-case basis for each named executive officer, taking into account, among other things, individual and company performance, role expertise and experience and the competitive market, advancement potential, recruiting needs, internal equity, retention requirements, unrealized equity gains, succession planning, and best compensation governance practices. The Compensation Committee does not tie individual compensation to specific target percentiles. How the Compensation Committee Makes Decisions and Policies The Compensation Committee has the final responsibility to approve all matters of compensation and benefits for executive officers, and from time to time it seeks input and recommendations from the CEO and the Human Resources Department.department. The Compensation Committee also meets privately with its independent compensation consultant, and considers the Board’s input and advice, when establishing the CEO’s compensation. Our independent compensation consultant has worked directly with and on behalf of the Compensation Committee to assist the Compensation Committee in satisfying its responsibilities; and willdoes not undertake no projects for management, except atwith the approval of the Compensation Committee chair. The Compensation Committee reports to the Board of Directors on the major items covered at each Compensation Committee meeting. The Compensation Committee assessed the independence of its compensation consultant during 20222023 and believes that there are no conflicts of interest. In reaching this conclusion, the Compensation Committee considered applicable SEC rules and regulations and the corresponding New York Stock Exchange independence factors regarding compensation advisor independence. In determining executive compensation, the Compensation Committee also considers, among other factors, the possible tax consequences to Lithia and to its executives. The Compensation Committee may consider the accounting consequences to Lithia of different compensation decisions and the impact on shareholder dilution. However, neither of these factors by themselves will compel particular compensation decisions. The Compensation Committee annually grants equity-based long-term incentive awards to executive officers after the close of the prior year and the review and evaluation of each executive officer’s performance,performance. The Compensation Committee’s policy is to generally grant long-term incentive awards only during open trading windows and to establish grant dates in advance, generally with grantestablishing those dates near the beginning of each fiscal year. TABLE OF CONTENTS
Executive Compensation Governance Components Stock Ownership Guidelines CEO | | | 5 | | | 7 | EVP | | | 3 | | | 7 | SVP | | | 2 | | | 7 | VP | | | 1 | | | 7 |
NEOs and non-NEO Vice Presidents are expected to own and maintain shares of our common stock having a market value equal to a multiple of their annual base cash salary, as indicated in the table below, paidto the left, within seven years of service in their position. Our stock ownership policy more closely aligns the interests of our NEOs with the interests of our shareholders and exposes our NEOs to downside equity performance risk. A Stock Ownership Compliance review is performed quarterly, and a policy reminder is sent to employees on an annual basis. | | CEO | | | 5 | | | 7 | | | | EVP | | | 3 | | | 7 | | | | SVP | | | 2 | | | 7 | | | | VP | | | 1 | | | 7 | |
As of December 31, 2022,2023, all of our executive officers were exceeding the minimum stock ownership requirements. Lithia Motors, Inc. 2024 Proxy Statement | | | | | | 05: Compensation Discussion and Analysis (CD&A) 50 |
TABLE OF CONTENTS Recoupment (or “Clawback”) PolicyPolicies Our Compensation paid based on performance,Committee has adopted two clawback policies applicable to performance-based compensation, including awards under our short-term and long-term incentive plans, isplans. Our Dodd-Frank Recoupments Policy complies with the SEC and NYSE required clawback rules and requires that the Compensation Committee, subject to our recoupment (“clawback”) policy. Incertain exceptions permitted under those rules, recoup certain types of excess incentive-based compensation received by current and former executive officers in the event of a restatement of incorrect financial results, thisrestatement. Our Dodd-Frank Recoupment Policy became effective October 2, 2023 and applies to our performance-based cash and equity incentive compensation received on and after that date. This policy enableswas attached as an exhibit to our most recently filed Annual Report on Form 10-K. In addition, under our recoupment policy originally adopted in 2022, the Compensation Committee, if it determines appropriate and subject to applicable laws, tomay seek reimbursement from executive officers of: (1)1.
| cashCash paid to executive officers under our short-term incentive plan to the degree overpaid based on the restated financial results; and |
(2)2.
| theThe incremental shares of Lithia common stock settled for any RSUs in excess of the shares of Lithia common stock that would have been settled for such RSUs based on the restated financial results, or the value of such incremental shares to the extent an executive officer sells any incremental shares. |
In the event the Compensation Committee reasonably determines that an executive engaged in misconduct that resulted in reputational harm to Lithia, this clawback policy also enables the Compensation Committee, if it determines appropriate and subject to applicable laws, to seek reimbursement from executive officers of: (1)1.
| allAll or a portion of cash paid to executive officers under our short-term incentive plan; and |
(2)2.
| returnReturn any shares acquired by the executive pursuant to a stock award. |
Lithia will incorporate SEC clawback policy requirements once the NYSE listing rules are effective.
Anti-Hedging and Pledging Policy Our insider trading policy for all employees and our stock ownership policy for executive officers specify that they may not (1) engage in hedging or monetization transactions, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds or (2) hold Company securities in a margin account or otherwise pledge Company securities as collateral for a loan. 45
Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 05: Compensation Discussion and Analysis (CD&A) 51 |
TABLE OF CONTENTS Compensation Risk Management Each year our Compensation Committee reviews whether our compensation policies and practices encourage executives or other employees to take unnecessary or unreasonable risks that could threaten the long-term value of the Company, or that are reasonably likely to have a material adverse effect. The Compensation Committee believes that our practices adequately manage this risk because: we limit the amount of fixed compensation in the form of base salary based on data from our market survey; the primary criteria we use for performance compensation components are measures such as net profitrevenue and adjusted EPS,operating margin, which we believe are less susceptible to manipulation for short-term gain; cash payments are capped under our short-term incentive plan; the incentive plans for executive management have the flexibility to put weight on Company-wide or divisionalline-of-business performance measures; our short-term incentive plan preserves discretion to permit the Compensation Committee to elect not to pay otherwise achieved amounts for any reason; a meaningful component of compensation is long-term incentive plan equity grants with extended vesting periods designed to ensure that our executives value and focus on the Company'sCompany’s long-term performance; and NEOs have equity positions in Lithia and are subject to stock ownership policies, which we believe increases their focus on long-term shareholder value. The Company'sCompany’s insider trading policy applicable to all directors and employees prohibits insider trading when the person is aware of material nonpublic information and restricts directors and executive officers and certain other employees determined to have potential access to insider information from trading in Company stock during predetermined closed periods. In addition, executive officers and directors are required to pre-clear any trades. TABLE OF CONTENTS
Compensation Committee Report The Committee has reviewed and discussed the “Compensation“Compensation Discussion and Analysis,” included elsewhere in this proxy statement, with management, and, based on such review and discussions, the Committee recommended to the Board of Directors that the “Compensation“Compensation Discussion and Analysis”Analysis” be included in this proxy statement and incorporated by reference in Lithia'sLithia’s Annual Report on Form 10-K. Submitted by the Compensation Committee of the Board of Directors:
Louis P. Miramontes (Chair)
Susan O. Cain
Shauna F. McIntyre
David J. Robino
JimJames E. Lentz
Compensation Committee Interlocks & Insider ParticipationThe following directors served on the Compensation Committee during 2022: Susan Cain, James Lentz, Shauna McIntyre, Louis Miramontes and David Robino, none of whom was a Company officer or employee during 2022, was formerly a Company officer or had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. During 2022, none of our executive officers served as a member of a board of directors or as a member of a compensation committee of any entity that has one or more executive officers serving as a member on our Board or any committee of our Board.
47
Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 05: Compensation Discussion and Analysis (CD&A) 52 |
TABLE OF CONTENTS 06 Summary Compensation Table The following table provides certain information concerning compensation for each of our 20222023 NEOs. | | Bryan B. DeBoer | | 2022 | | $1,250,000 | | $7,822,865 | | $2,045,920 | | $— | | $6,932 | | $11,125,717 | | | | | President and Chief
Executive Officer | | | 2021 | | td,106,000 | | $6,146,047 | | td,996,000 | | $77,320 | | td06,992 | | td0,532,359 | | | | | 2020 | | td,106,000 | | $3,856,830 | | td,996,000 | | $85,338 | | td06,243 | | $8,250,411 | | | | | Tina H. Miller | | 2022 | | $525,000 | | $1,082,879 | | $543,448 | | $— | | $56,387 | | $2,207,715 | | | | | Chief Financial Officer | | | 2021 | | $420,000 | | $594,378 | | $600,000 | | $5,425 | | $56,448 | | $1,676,251 | | | | | 2020 | | $384,000 | | $299,596 | | $384,000 | | $4,726 | | $55,699 | | $1,128,021 | | | | | Christopher S. Holzshu | | 2022 | | $800,000 | | $3,003,340 | | $959,025 | | $— | | $105,979 | | $4,868,343 | | | | | Chief Operating Officer | | | 2021 | | $720,000 | | td,843,814 | | td,440,000 | | $32,359 | | td06,039 | | $4,142,212 | | | | | 2020 | | $720,000 | | td,179,721 | | td,440,000 | | $35,143 | | td05,290 | | $3,480,154 | | | | | Scott A. Hillier | | 2022 | | $525,000 | | $1,232,572 | | $596,620 | | $— | | $82,377 | | $2,436,568 | | | | | Senior Vice President
of Operations | | | 2021 | | $500,000 | | $666,039 | | $800,000 | | $30,774 | | $82,437 | | $2,079,250 | | | | | 2020 | | $500,000 | | $589,861 | | $770,000 | | $34,127 | | $66,688 | | $1,960,676 | | | | | George N. Hines(4) | | 2022 | | $480,000 | | $788,463 | | $383,610 | | $— | | $57,589 | | $1,709,662 | | | | | Senior Vice President,
Chief Information Officer | | 2021 | | $450,000 | | $384,309 | | $500,000 | | $3,016 | | $57,649 | | $1,394,974 | | | Name and
Principal Position | | | Year | | Salary | | Stock
Awards(1) | | Non-Equity
Incentive Plan
Compensation | | Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings(2) | | All Other
Compensation(3) | | Total | Bryan B. DeBoer
President and Chief
Executive Officer | | | | 2023 | | td,300,000 | | td5,312,692 | | td,666,040 | | $— | | $7,258 | | td9,285,990 | | | 2022 | | td,250,000 | | $7,822,865 | | td,045,920 | | $— | | $6,932 | | td1,125,717 | | | 2021 | | td,106,000 | | $6,146,047 | | td,996,000 | | $77,320 | | td06,992 | | td0,532,359 | Tina H. Miller
Chief Financial Officer | | | | 2023 | | $750,000 | | td,564,125 | | $875,008 | | $— | | $56,714 | | $4,245,847 | | | 2022 | | $525,000 | | td,082,879 | | $543,448 | | $— | | $56,387 | | td,207,715 | | | 2021 | | $420,000 | | $594,378 | | $600,000 | | $5,425 | | $56,448 | | td,676,251 | Christopher S. Holzshu
Chief Operating Officer | | | | 2023 | | $900,000 | | $7,051,236 | | td,476,576 | | $— | | td06,305 | | $9,534,117 | | | 2022 | | $800,000 | | $3,003,340 | | $959,025 | | $— | | td05,979 | | $4,868,343 | | | 2021 | | $720,000 | | td,843,814 | | td,440,000 | | $32,359 | | td06,039 | | $4,142,212 | Scott A. Hillier
Senior Vice President of Operations | | | | 2023 | | $550,000 | | td,211,100 | | $681,997 | | $— | | $82,703 | | td,525,800 | | | 2022 | | $525,000 | | td,232,572 | | $596,620 | | $— | | $82,377 | | td,436,568 | | | 2021 | | $500,000 | | $666,039 | | $800,000 | | $30,774 | | $82,437 | | td,079,250 | George N. Hines
Senior Vice President,
Chief Information Officer | | | | 2023 | | $600,000 | | td,353,357 | | $546,880 | | $— | | $57,915 | | td,558,152 | | | 2022 | | $480,000 | | $788,463 | | $383,610 | | $— | | $57,589 | | td,709,662 | | | 2021 | | $450,000 | | $384,309 | | $500,000 | | $3,016 | | $57,649 | | td,394,974 |
(1)
| These amounts reflect the grant date fair value for performance and time-vesting RSUs granted in the year, computed in accordance with FASB ASC Topic 718 and excluding any estimated forfeitures. These amounts are not paid to or realized by the executive. If the maximum level of performance were to be achieved for the awards granted in 2022,2023, the grant date value for those awards would be $11,264,946$29,568,021 for Mr. DeBoer, $1,525,477$4,396,918 for Ms. Miller, $4,134,500$12,091,888 for Mr. Holzshu, $1,552,332$2,076,765 for Mr. Hillier, and $1,034,432$2,320,877 for Mr. Hines. The fair value of the PSUs was calculated using a Monte Carlo simulation model, assuming (i) a volatility of 53.24%, (ii) an expected life, in years, of 2.91, (iii) a risk-free interest rate of 3.75%, and (iv) a dividend yield of 0.57%. For each type of RSU award,the PSUs, the attainment levels used in the calculation of the grant date fair value was based on the probable outcomes at the time of grant. For a more detailed discussion of the assumptions used to determine the grant date fair values and other related information, see Notes 1 and 13 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.2023. |
(2)
| For 2021, and 2020, these amounts are the above-market interest earned in the applicable year on contributions to our Executive Management Non-Qualified Deferred Compensation and SERP. For 2022 we are payingand 2023, earnings were below market interest. |
(3)
| All Other Compensation in 20222023 consisted of the following: |
| | Bryan B. DeBoer | | | $2,125 | | | $4,807 | | | $— | | | $6,932 | | | | Tina H. Miller | | | $2,125 | | | $4,262 | | | $50,000 | | | $56,387 | | | | Christopher S. Holzshu | | | $2,125 | | | $3,854 | | | $100,000 | | | $105,979 | | | | Scott A. Hillier | | | $2,125 | | | $5,252 | | | $75,000 | | | $82,377 | | | | George N. Hines | | | $2,125 | | | $5,464 | | | $50,000 | | | $57,589 | |
Bryan B. DeBoer | | | $2,500 | | | $4,758 | | | $— | | | $7,258 | Tina H. Miller | | | $2,500 | | | $4,214 | | | $50,000 | | | $56,714 | Christopher S. Holzshu | | | $2,500 | | | $3,805 | | | $100,000 | | | $106,305 | Scott A. Hillier | | | $2,500 | | | $5,203 | | | $75,000 | | | $82,703 | George N. Hines | | | $2,500 | | | $5,415 | | | $50,000 | | | $57,915 |
(a)
| Insurance premiums include amounts paid by us on behalf of the executive for short-term disability insurance, long-term
|
disability insurance, long term care insurance and life insurance policies. (4)
| 2021 was Mr. Hines first year as a Named Executive Office. |
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Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 06: Compensation Tables 53 |
TABLE OF CONTENTS Grants of Plan-Based Awards Table for 20222023| | Bryan B. DeBoer | | | 1/3/2022 | | 12/14/2021 | | 400,000 | | 1,600,000 | | 3,200,000 | | 11,756 | | 23,510 | | 35,266 | | $6,884,162 | | | | | 1/3/2022 | | 12/14/2021 | | | | | | | | | | 3,191(4) | | | | $938,703 | | | | | Tina H. Miller | | | 1/3/2022 | | 12/14/2021 | | 106,250 | | 425,000 | | 850,000 | | 1,513 | | 3,023 | | 4,536 | | $885,196 | | | | | 1/3/2022 | | 12/14/2021 | | | | | | | | | | 672(4) | | | | $197,684 | | | | | Christopher S. Holzshu | | | 1/3/2022 | | 12/14/2021 | | 187,500 | | 750,000 | | 1,500,000 | | 3,864 | | 7,726 | | 11,590 | | td,262,320 | | | | | 1/3/2022 | | 12/14/2021 | | | | | | | | | | 2,519(4) | | | | $741,019 | | | | | Scott A. Hillier | | | 1/3/2022 | | 12/14/2021 | | 105,000 | | 420,000 | | 840,000 | | 1,094 | | 2,184 | | 3,278 | | $639,520 | | | | | 1/3/2022 | | 12/14/2021 | | | | | | | | | | 2,016(4) | | | | $593,051 | | | | | George N. Hines | | | 1/3/2022 | | 12/14/2021 | | 75,000 | | 300,000 | | 600,000 | | 841 | | 1,680 | | 2,521 | | $491,937 | | | | | 1/3/2022 | | 12/14/2021 | | | | | | | | | | 1,008(4) | | | | $296,526 | | | Name | | | | | Grant
Date(1) | | | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(3) | | Estimated Future Payouts Under Equity
Incentive Plan Awards
(# of shares) | | | Grant Date
Fair Value
of Stock
and Option
Awards ($)(4) | | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | Bryan B. DeBoer | | | | 2023 STIP | | 02/02/2023 | | 975,000 | | 1,950,000 | | 3,900,000 | | — | | — | | — | | — | | | 2023 PSU | | 02/02/2023(1) | | — | | — | | — | | 13,595 | | 36,252 | | 79,301 | | 12,004,487 | | | 2023 RSU | | 02/02/2023(2) | | — | | — | | — | | — | | 12,084 | | — | | 3,308,205 | Tina H. Miller | | | | 2023 STIP | | 02/02/2023 | | 320,000 | | 640,000 | | 1,280,000 | | — | | — | | — | | — | | | 2023 PSU | | 02/02/2023(1) | | — | | — | | — | | 2,276 | | 6,070 | | 13,278 | | 2,010,020 | | | 2023 RSU | | 02/02/2023(2) | | — | | — | | — | | — | | 2,024 | | — | | 554,105 | Christopher S. Holzshu | | | | 2023 STIP | | 02/02/2023 | | 540,000 | | 1,080,000 | | 2,160,000 | | — | | — | | — | | — | | | 2023 PSU | | 02/02/2023(1) | | — | | — | | — | | 6,260 | | 16,693 | | 36,516 | | 5,527,720 | | | 2023 RSU | | 02/02/2023(2) | | — | | — | | — | | — | | 5,565 | | — | | 1,523,516 | Scott A. Hillier | | | | 2023 STIP | | 02/02/2023 | | 220,000 | | 440,000 | | 880,000 | | — | | — | | — | | — | | | 2023 PSU | | 02/02/2023(1) | | — | | — | | — | | 1,075 | | 2,867 | | 6,272 | | 949,378 | | | 2023 RSU | | 02/02/2023(2) | | — | | — | | — | | — | | 956 | | — | | 261,722 | George N. Hines | | | | 2023 STIP | | 02/02/2023 | | 200,000 | | 400,000 | | 800,000 | | — | | — | | — | | — | | | 2023 PSU | | 02/02/2023(1) | | — | | — | | — | | 1,202 | | 3,204 | | 7,009 | | 1,060,973 | | | 2023 RSU | | 02/02/2023(2) | | — | | — | | — | | — | | 1,068 | | — | | 292,384 |
(1)
| The Compensation Committee establishesThese amounts reflect PSUs which are earned based on our relative revenue growth, with a TSR modifier and an operating margin governor, the performance criteria and applicable achievement percentages. (See the discussionmaterial terms of which are further described under “Compensation“Compensation Discussion and Analysis – 20222023 Compensation Program Design & Result - Long-Term Incentive Plan” above. |
(2)
| These amounts reflect time-based RSUs which vest in three equal annual installments over three years. |
(3)
| These amounts reflect the threshold, target, and maximum amounts payable under our Short-Term Incentive Plan, referenced above as the “2023 STIP”, for the 2023 performance year, as further described in the discussion under “Compensation Discussion and Analysis – 2023 Compensation Program Design & Result - Short-Term Incentive Plan” and “Compensation Discussion and Analysis – 2022Plan”. The actual amount paid for 2023 is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Program Design & Result - Long-Term Incentive Plan” above). |
(2)
| See paragraph below for discussion related to Target amounts. |
(3)
| Performance and time-vesting RSU award, which includes a performance condition and a continuing service condition.Table. |
(4)
| 3-Year Driveway Performance RSU award, which includes a performance condition and a continuing service condition. There is no threshold and maximum amount. |
(5)
| These amounts reflect the grant date fair value for awards granted under the 2013 Amended and Restated Stock Incentive Plan. The grant date fair value is computed in accordance with FASB ASC Topic 718 for PSUs and RSUs granted during the applicable year. The attainment level used to calculate the grant date fair value for the performance and time-vesting grants was 100% based on the probable outcome at the time of grant. For a more detailed discussion of the assumptions used to determine the grant date fair value and other related information, see footnote 1 to the Summary Compensation Table, above, and Notes 1 and 13 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.2023. |
The amounts shown under “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” represent the threshold, target and maximum amounts payable under the Short-Term Incentive Plan. The actual amount paid for 2022 is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The Cash Short-Term Incentive Plan is structured such that the total amount earned each period is tied directly to our performance for the period. To see the performance criteria used in 2022 and for additional discussion about the Short-Term Incentive Plan, see “Compensation Discussion and Analysis - 2022 Compensation Program Design & Result- Short-Term Incentive Plan” above.
The amounts shown under “Estimated Future Payouts Under Equity Incentive Plan Awards” represent the threshold, target and maximum amounts payable pursuant to performance and time-based restricted stock units granted under our Stock Incentive Plan and are subject to forfeiture depending on whether we achieve specified performance criteria over a four-year period. To see the performance criteria used for the 2022 grants and for additional discussion about the awards, see “Compensation Discussion and Analysis - 2022 Compensation Program Design & Result – Long-Term Incentive Plan.”
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Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 06: Compensation Tables 54 |
TABLE OF CONTENTS Outstanding Equity Awards at 20222023 Fiscal Year-End The following table sets forth the outstanding equity awards held by our NEOs as of December 31, 2022:2023: | | Bryan B. DeBoer | | | 1/1/2019 | | 23,028 (4) | | 4,714,753 | | | | — | | | | | 1/1/2020 | | 27,014 (5) | | 5,530,846 | | | | — | | | | | 1/1/2021 | | 31,905 (6) | | 6,532,230 | | | | — | | | | | 1/3/2022 | | 24,828 (7) | | 5,083,285 | | | | — | | | | | 1/3/2022 | | 1,054 (4) | | 215,796 | | 2,137 (8)(9) | | 437,529 | | | | | Tina H. Miller | | | 1/1/2019 | | 432 (4) | | 88,448 | | | | — | | | | | 8/1/2019 | | 1,368 (4) | | 280,084 | | | | — | | | | | 1/1/2020 | | 2,097 (5) | | 429,340 | | | | — | | | | | 1/1/2021 | | 3,087 (6) | | 632,032 | | | | — | | | | | 1/3/2022 | | 3,192 (7) | | 653,530 | | | | — | | | | | 1/3/2022 | | 222 (4) | | 45,452 | | 450 (8)(9) | | 92,133 | | | | | Christopher S. Holzshu | | | 1/1/2019 | | 7,136 (4) | | 1,461,025 | | | | — | | | | | 1/1/2020 | | 8,262 (5) | | 1,691,562 | | | | — | | | | | 1/1/2021 | �� | | 9,572 (6) | | 1,959,771 | | | | — | | | | | 1/3/2022 | | 8,159 (7) | | 1,670,474 | | | | — | | | | | 1/3/2022 | | 832 (4) | | 170,344 | | 1,687 (8)(9) | | 345,396 | | | | | Scott A. Hillier | | | 1/1/2019 | | 4,218 (4) | | 863,593 | | | | — | | | | | 1/1/2020 | | 4,132 (5) | | 845,986 | | | | — | | | | | 1/1/2021 | | 3,459 (6) | | 708,196 | | | | — | | | | | 1/3/2022 | | 2,307 (7) | | 472,335 | | | | — | | | | | 1/3/2022 | | 666 (4) | | 136,357 | | 1,350 (8)(9) | | 276,399 | | | | | George N. Hines | | | 1/1/2019 | | 1,082 (4) | | 221,529 | | | | — | | | | | 1/1/2020 | | 1,907 (5) | | 390,439 | | | | — | | | | | 1/1/2021 | | 1,996 (6) | | 408,661 | | | | — | | | | | 1/3/2022 | | 1,774 (7) | | 363,209 | | | | — | | | | | 1/3/2022 | | 333 (4) | | 68,178 | | 675 (8)(9) | | 138,200 | | | Name | | | Grant Date | | Number of Shares
or Units of Stock
That Have Not
Vested (#)(1) | | Market Value of
Shares or Units of
Stock That Have
Not Vested ($)(2) | | Equity Incentive Plan
Awards: Number of
Unearned Shares, Units
or Other Rights That
Have Not Vested (#)(3) | | Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares,
Units or Other Rights That
Have Not Vested ($)(2) | Bryan B.
DeBoer | | | | 1/1/2020 | | 13,707 | | (4) | | 4,513,441 | | — | | | | — | | | 1/1/2021 | | 21,375 | | (5) | | 7,038,360 | | — | | | | — | | | 1/3/2022 | | 24,774 | | (6) | | 8,157,583 | | — | | | | — | | | 1/3/2022 | | — | | | | — | | 1,083 | | (7) | | 356,610 | | | 2/2/2023 | | 12,084 | | (6) | | 3,979,020 | | — | | | | — | | | 2/2/2023 | | — | | | | — | | 79,301 | | (8) | | 26,112,233 | Tina H.
Miller | | | | 1/1/2020 | | 1,062 | | (4) | | 349,695 | | — | | | | — | | | 1/1/2021 | | 2,068 | | (5) | | 680,951 | | — | | | | — | | | 1/3/2022 | | 3,186 | | (6) | | 1,049,086 | | — | | | | — | | | 1/3/2022 | | — | | | | — | | 228 | | (7) | | 75,076 | | | 2/2/2023 | | 2,024 | | (6) | | 666,463 | | — | | | | — | | | 2/2/2023 | | — | | | | — | | 13,278 | | (8) | | 4,372,180 | Christopher S.
Holzshu | | | | 1/1/2020 | | 4,191 | | (4) | | 1,380,012 | | — | | | | — | | | 1/1/2021 | | 6,413 | | (5) | | 2,111,673 | | — | | | | — | | | 1/3/2022 | | 8,141 | | (6) | | 2,680,668 | | — | | | | — | | | 1/3/2022 | | — | | | | — | | 855 | | (7) | | 281,534 | | | 2/2/2023 | | 5,565 | | (6) | | 1,832,443 | | — | | | | — | | | 2/2/2023 | | — | | | | — | | 36,516 | | (8) | | 12,023,988 | Scott A.
Hillier | | | | 1/1/2020 | | 2,096 | | (4) | | 690,171 | | — | | | | — | | | 1/1/2021 | | 2,317 | | (5) | | 762,942 | | — | | | | — | | | 1/3/2022 | | 2,302 | | (6) | | 758,003 | | — | | | | — | | | 1/3/2022 | | — | | | | — | | 684 | | (7) | | 225,228 | | | 2/2/2023 | | 956 | | (6) | | 314,792 | | — | | | | — | | | 2/2/2023 | | — | | | | — | | 6,272 | | (8) | | 2,065,244 | George N.
Hines | | | | 1/1/2020 | | 966 | | (4) | | 318,084 | | — | | | | — | | | 1/1/2021 | | 1,337 | | (5) | | 440,247 | | — | | | | — | | | 1/3/2022 | | 1,771 | | (6) | | 583,155 | | — | | | | — | | | 1/3/2022 | | — | | | | — | | 342 | | (7) | | 112,614 | | | 2/2/2023 | | 1,068 | | (6) | | 351,671 | | — | | | | — | | | 2/2/2023 | | — | | | | — | | 7,009 | | (8) | | 2,307,924 |
(1)
| All shares are related to restricted stock unitsRSUs subject to time-vesting restrictions. |
(2)
| Assumes a stock price of $204.74,$329.28, the closing price of our common stock on December 30, 2022.29, 2023. |
(3)
| All shares are related to restricted stock unitsRSUs subject to performance conditions and time-vesting restrictions.conditions. |
(4)
| Vests 100% on January 1, 2023.2024. |
(5)
| Vests 50% on January 1, 20232024 and 50% on January 1, 2024. |
(6)
| Vests 33% on January 1, 2023 and 2024 and 34% on January 1, 2025. |
(7)(6)
| Vests 33% on January 1, 2024 and 2025 and 34% on January 1, 2026.2026 |
(8)(7)
| Driveway/GreenCars awards if 5,000 units sold by 06/30/2023 then 50% vest on January 1, 2024. |
(9)
| Driveway/GreenCars awardswhich, if 10,000 units are sold by 06/30/2024, then 50%100% vest on January 1, 2025. |
(8)
| PSUs are earned following the completion of their performance period on December 31, 2025, subject to (i) our relative revenue growth performance (ii) an operating margin governor and (iii) a relative TSR modifier. The number of shares and the value for the PSUs reflects payout at maximum because our performance under the metrics mentioned in the prior sentence for the first year of the three-year performance period exceeded target levels. |
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Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 06: Compensation Tables 55 |
TABLE OF CONTENTS Stock Vested for 20222023The following table summarizes shares acquired on vesting of RSUs during 20222023 for each NEO: | | Bryan B. DeBoer | | | 44,242 | | | 13,137,662 | | | | Tina H. Miller | | | 2,981 | | | 885,208 | | | | Christopher S. Holzshu | | | 13,916 | | | 4,132,356 | | | | Scott A. Hillier | | | 7,952 | | | 2,361,346 | | | | George N. Hines | | | 2,728 | | | 810,080 | |
Bryan B. DeBoer | | | 47,919 | | | 9,810,936 | Tina H. Miller | | | 4,076 | | | 834,520 | Christopher S. Holzshu | | | 15,198 | | | 3,111,639 | Scott A. Hillier | | | 8,062 | | | 1,650,614 | George N. Hines | | | 3,015 | | | 617,291 |
(1)
| Equals the value of the shares acquired based on the closing price of our common stock on the vesting date. |
Non-Qualified Deferred Compensation The table below reflects the contributions, earnings, withdrawals and distributions during 20222023 and the account balances as of December 31, 20222023 for each NEO under our Non-Qualified Deferred Compensation and SERP. | | Bryan B. DeBoer | | | $749,863 | | | $— | | | $359,446 | | | $— | | | $7,508,386 | | | | Tina H. Miller | | | $120,690 | | | $50,000 | | | $17,383 | | | $— | | | $381,555 | | | | Christopher S. Holzshu | | | $— | | | $100,000 | | | $63,727 | | | $— | | | $1,317,889 | | | | Scott A. Hillier | | | $— | | | $75,000 | | | $59,667 | | | $— | | | $1,232,309 | | | | George N. Hines | | | $— | | | $50,000 | | | $7,841 | | | $— | | | $165,424 | |
Bryan B. DeBoer | | | $512,105 | | | $— | | | $406,057 | | | $— | | | $8,426,548 | Tina H. Miller | | | $108,690 | | | $50,000 | | | $26,502 | | | $— | | | $566,747 | Christopher S. Holzshu | | | $— | | | $100,000 | | | $72,105 | | | $— | | | $1,489,993 | Scott A. Hillier | | | $— | | | $75,000 | | | $66,558 | | | $— | | | $1,373,866 | George N. Hines | | | $— | | | $50,000 | | | $10,800 | | | $— | | | $226,224 |
(1)
| The executive contributions amount in this column is included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table above. |
(2)
| The registrant contributionscontribution amounts in this column are included in the All Other Compensation columns of the Summary Compensation Table above. |
(3)
| A portion of these amounts are related to above-market earnings on compensation that is deferred and is reported in Change in Pension Value and Non-Qualified Deferred Compensation Earnings in the Summary Compensation Table above. |
Our Non-Qualified Deferred Compensation and SERP permits us to contribute awards for participants that will have deferred payout. Under this plan, senior executives may defer receipt of portions of their compensation (up to 50% of base salary, and 100% of variable compensation) in any given year, with all deferred amounts earning interest at an annual rate set by the Compensation Committee. (See “Compensation Discussion and Analysis – Pay Mix, Performance Metric and Goal Setting – Non-Qualified Deferred Compensation and Supplemental Executive Retirement Plan (SERP)”). Potential Payments Upon Termination or Change in Control Potential Payments Upon Termination of Employment In certain circumstances, such as in connection with succession planning or the death or disability of our senior executive officers, it is appropriate to provide severance payments, accelerated vesting of RSUs and certain other limited payments to those executives. 51
Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 06: Compensation Tables 56 |
TABLE OF CONTENTS Benefits payable to NEOs upon death, disability or retirement For all RSUs and PSUs granted to NEOs in 2022,2023, if the NEO becomes disabled while employed by us, the RSUsawards continue to vest as scheduled for so long as the NEO remains disabled. If death or qualified retirement occurs, the RSUsawards continue to vest as in accordance with their terms. For this purpose, the criteria for a qualified retirement differs for individual executives and award years but requires, at a minimum, that an individual’s combined age and service must equal at least 65 and as of December 31, 2022,2023, only Mr. DeBoer, Mr. Holzshu and Mr. Hillier satisfied such requirements. For all SERP contributions granted to NEOs in 2022,2023, if the NEO becomes disabled or passes away while employed by us, the contribution becomes 100% vested. If qualified retirement occurs, the contributions will continue to vest in accordance with their terms. For this purpose, a qualified retirement means the NEO voluntarily terminates employment and is at least 55 years of age and has completed 10 years of service at the time of such termination and as of December 31, 2022,2023, only Mr.DeBoerMr. DeBoer and Mr. Hillier satisfied such requirements. The following table sets forth the estimated benefits that would have been payable to our NEOs who were in office at the end of the year under the RSUsrelevent equity awards and Non-Qualified Deferred Compensation and SERP Plan if each NEOsNEO's employment had been terminated on December 31, 20222023 because of death, disability or retirement, and the price per share of our common stock is the closing market price on the last trading day of the year, December 30, 202229, 2023 (i.e., $204.74)$329.28). | | Bryan B. DeBoer | | | $16,777,829 | | | $22,066,264 | | | $16,777,829 | | | | Tina H. Miller | | | $1,429,904 | | | $2,127,863 | | | $— | | | | Christopher S. Holzshu | | | $5,112,358 | | | $6,950,104 | | | $5,112,358 | | | | Scott A. Hillier | | | $2,417,775 | | | $3,025,443 | | | $2,417,775 | | | | George N. Hines | | | $1,020,629 | | | $1,451,402 | | | $— | |
*
| Includes all outstanding and unvested awards that would be paid out. |
Potential Payments Upon Change in Control Change in Control and Severance Agreements Lithia believes our executives should be appropriately compensated if the completion of a change in control transaction results in a loss of their job, and that providing severance payments, accelerating the vesting of RSUsequity awards and certain other limited payments mitigate executives’ potential personal concerns and appropriately align their interests with those of our shareholders in the context of a potential change in control transaction. Each of our CEO, Executive Vice President, Senior Vice Presidents and Vice Presidents has a change in control agreement with the Company. If we are facing a potential change in control transaction and the proposed transaction would likely negatively affect one or more of our senior executives, we believe it is risky to assume that those senior executives will work against their financial interest, even if the proposed transaction would be in the best interest of our shareholders. We believe that, in such case, our executives should not be motivated by financial self-interest but rather should be appropriately compensated if the completion of the transaction results in a loss of their job. Accordingly, we believe that providing “double-trigger” severance payments, accelerating the vesting of RSUsequity awards and certain other limited payments are an appropriate means of achieving alignment between the interests of our senior executives and our shareholders in the context of a potential transaction that would result in a change in control. 52
Lithia Motors, Inc. 2024 Proxy Statement
| | | | | | 06: Compensation Tables 57 |
TABLE OF CONTENTS Change in Control Agreements We are party to double-trigger Change in Control Agreements with Bryan B. DeBoer, Tina H. Miller, Christopher S. Holzshu, Scott A. Hillier, and George N. Hines. Under those agreements, if, after a change in control, the executive is terminated without cause or resigns for good reason, each as defined below, we will pay the executive: | Bryan B. DeBoer | | | President and Chief
Executive Officer | | | 24 months | | | 2 years | | | Accelerated
vesting | | | Accelerated vesting based on previous 3 years average
| | | Accelerated vesting at highest level
| | | Tina H. Miller | | | Senior Vice President and
Chief Financial Officer | | | 24 months | | | 2 years | | | Accelerated
vesting | | | Accelerated vesting based on previous 3 years average
| | | Accelerated vesting at highest level
| | | Christopher S. Holzshu | | | Executive Vice President and Chief Operating Officer | | | 24 months | | | 2 years | | | Accelerated
vesting | | | Accelerated vesting based on previous 3 years average
| | | Accelerated vesting at highest level
| | | Scott A. Hillier | | | Senior Vice President of Operations | | | 24 months | | | 2 years | | | Accelerated
vesting | | | Accelerated vesting based on previous 3 years average
| | | Accelerated vesting at highest level
| | | George N. Hines | | | Senior Vice President and
Chief Marketing Officer | | | 24 months | | | 2 years | | | Accelerated
vesting | | | Accelerated vesting based on previous 3 years average
| | | Accelerated vesting at highest level
| | | Continuing Change in Control Benefits
| | | Continuing
|
In addition, our executives would be eligible to receive continuing long-term care insurance premiums for 24 months after the separation date; and continuing health insurance benefits until the earlier of (a) 18 months after the separation date, (b) the full COBRA period required by law or (c) when the executive becomes eligible for employer-sponsored health insurance from a subsequent employer. | |
