We are asking you to vote “FOR” the following candidates for election to our Board of Directors.

 

We are asking you to ratify the appointment by the Audit Committee of KPMG LLP (“KPMG”) as our independent auditors for fiscal 2018.2021. The following table summarizes the fees billed by KPMG for fiscal 20172019 and 2016.2020.

Proposal Three:

 

We are asking you to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. At our last two annual shareholders meetings, a significant majority of our shareholders supported our executive compensation program, with more than 96%approximately 98% and 97% of votes cast in 20162019 and 2015,2018, respectively, voting in favor of our program.

Net Earnings and CEO Target Total Direct Compensation

You will find additional information on our executive compensation program beginning on page 26.27.

Proposal Four:

We are asking that you vote onapprove amendments to the CarMax, Inc. Annual Performance-Based Bonus2002 Stock Incentive Plan, as amended and restated (the “Bonus“Stock Incentive Plan”) to approve amendments to(a) increase the performance criteria availablenumber of shares of the Company’s common stock reserved for issuance under the BonusStock Incentive Plan by 1,500,000 shares, and to preserve CarMax’s ability to take federal income tax deductions for performance awards made under(b) extend the Bonus Plan under Section 162(m)termination date of the Internal Revenue Code.Stock Incentive Plan from June 25, 2029 to June 23, 2030.

You will find additional information regarding the BonusStock Incentive Plan and the proposed amendments beginning on page 61.60.

Next Year’s Annual Shareholders Meeting

 

 

We are asking you to vote for the election of the thirteentwelve director nominees listed on the following pages. Our Board has nominated these individuals at the recommendation of our independent Nominating and Governance Committee. The Committee based its recommendation on, among other things, the results of an annual Board and peer evaluation process, as well as the integrity, experience, and skills of each nominee. All of the nominees are current directors who were elected by shareholders at our 20162019 annual meeting, except Mr. Standley,Mark F. O’Neil, who joined the Board in August 2016, October 2019.

Mr. Nash, who joinedFolliard, our Chair of the Board in September 2016,of Directors, first brought Mr. O’Neil to the Nominating and Ms. Chawla, who joinedGovernance Committee’s attention and the Board in April 2017. Rakesh Gangwal,Committee recommended his nomination to the Board. Mr. O’Neil brings a director since 2011, has decided not to stand for re-election.

Our Board is declassified and elected on an extensive searchannual basis. Accordingly, each director nominee is standing for a director with, among other qualities, chief executive and financial experience. We appointed Ms. Chawlaelection to the Board after conducting an extensive search for a director with, among other qualities, executive, operational and digital experience. Each search was led byhold office until our Nominating and Governance Committee with the assistance2021 annual meeting of outside search firms, which first brought Mr. Standley and Ms. Chawla to the Committee’s attention.shareholders.

 

Each nominee has consented to being named in this proxy statement and to serve if elected. If any nominee is not available to serve—for reasons such as death or disability—your proxy will be voted for a substitute nominee if the Board nominates one.

The following pages include information about the nominees. This information includes a summary of the specific experience, qualifications, attributes or skills that led to the conclusion that each person should serve as a CarMax director.

 

 

 

CarMax is committed to good corporate governance. In this section of the proxy statement we describe our governance policies and practices and the role our Board plays in shaping them.

 

Overview

 

Our business and affairs are managed under the direction of the Board in accordance with the Virginia Stock Corporation Act, our articles of incorporation and our bylaws. The standing committees of the Board are the Audit Committee, the Compensation and Personnel Committee, and the Nominating and Governance Committee.

 

These changes supplement longstanding good governance practices, such as maintaining a largely independent Board (12(10 of 14 directors)12 director nominees) and appointing a lead independent director to lead meetings of the independent directors and work alongside the chair.

Additional information concerningAlso, in December 2019, we published our first Responsibility Report, which addresses our ongoing commitment to our stakeholders – including our associates, customers, communities, and shareholders - while we seek to enhance our long-term and sustainable value. The Nominating and Governance Committee and the Board’s director selection process and refreshment can beginning on page 18.full Board reviewed the Responsibility Report prior to its release.

The Board has approved documents that memorialize our governance standards and practices. These documents include our bylaws, our corporate governance guidelines and a code of business conduct. These documents, each of which is described below, are available under the “Corporate Governance” link at investors.carmax.com. We will send you a printed copy of any of these documents, without charge, upon written request to our Corporate Secretary at CarMax, Inc., 12800 Tuckahoe Creek Parkway, Richmond, Virginia 23238.

 

We will send youorganize our approach to responsibility and sustainability around four main pillars: Putting People First, Caring for Our Communities, Protecting the Environment, and Ensuring Responsible Governance and Ethics.

A FORTUNE “100 Best Companies to Work For®” for sixteen consecutive years, we are committed to providing our associates with competitive compensation and benefits; access to engagement programs, training, and development; and a printed copysafe workplace.

As a company, we nurture a culture where innovation thrives and aspire for our workforce to reflect the communities where we live, work, and play. Our recently established Diversity and Inclusion Council is responsible for fostering diversity and inclusion in the areas of anycommunication and education, leadership development, and associate experience.

Operating under our three community involvement pillars - care, prepare, develop - we work to create vibrant communities, to help our associates and our communities in times of these documents, without charge, upon written requestemergencies, and to invest in programs that support a long-term talent pipeline in our communities.

Our fundamental principle of integrity is reflected in the way we serve our customers, treat each other, and deliver our products. We rely on our fair and responsible business practices, our Code of Conduct training, and constant benchmarking and improvements to our Corporate Secretarycompliance and ethics program to maintain our culture of integrity. This culture is a distinct competitive advantage and allows us to attract and maintain a high-performing workforce.

In December 2019, we published our first Responsibility Report, which is available at CarMax, Inc., 12800 Tuckahoe Creek Parkway, Richmond, Virginia 23238.socialresponsibility.carmax.com. While we have shared our responsibility story for several years on our website, the report marked our first time compiling the information into a single document. In preparing the Responsibility Report we considered various standards, frameworks, ratings, and rankings for responsibility and sustainability reporting. Several of the metrics and narrative disclosures in the report align with the guidance provided by the Sustainability Accounting Standards Board (“SASB”) for the Consumer Goods Sector.

Independence

 

Our Board, in consultation with the Nominating and Governance Committee, evaluates the independence of our directors and director nominees at least annually. The most recent evaluation took place in April 2017.2020. During this evaluation, the Board considered transactions between the directors (and their immediate family members) and the Company and its affiliates. The Board determined that all of our non-employeethe following directors (Mses. Chawla, Goodman and Shinder and Messrs. Blaylock, Colberg, Gangwal, Garten, Grafton, Grubb, Standley, Steenrod and Tiefel) are independent under the listing standards of the New York Stock Exchange (“NYSE”).:

The Board also determined that Mr. William Tiefel, who retired from our Board in fiscal 2020, was independent under NYSE listing standards during his period of service in fiscal 2020. Mr. Folliard is not independent because he was an executive officer of CarMax until 2016, and Mr. Nash is not independent because he is currently an executive officer of CarMax.

immediate family members), but also between CarMax and entities associated with the directors or their immediate family members. The Board’s review included the following transactions:following:

The Board determined that none of the relationships it considered impaired the independence of the non-employee directors.

Board Leadership Structure

 

Mr. Nash oversees the day-to-day affairs of CarMax and directs the formulation and implementation of our strategic plans. We believe that this leadership structure is currently the most appropriate for CarMax because it allows our CEO to focus primarily on our business strategy and operations while leveraging the experience of our chair to direct the business of the Board.

Mr. Tiefel,Steenrod, a director since 2002, served2011, was appointed as the independent chair of the Board from 2007 until 2016, when he was appointedBoard’s lead independent director.director in 2019. As lead independent director, Mr. TiefelSteenrod serves as the principal liaison between the independent, non-management directors and the CEO, and is responsible for setting the agendas for Board meetings, presiding over executive sessions of the independent directors, coordinating feedback from directors in connection with the evaluations of the CEO and each director, and acting as chair of any Board meeting when the non-executive chair is not present. The Board elects its lead independent director annually.

Our Board periodically reviews this structure and recognizes that, depending on the circumstances, a different leadership model might be appropriate. The Board has no fixed policy on whether the roles of chair and CEO should be separate or combined, which maintains flexibility based on CarMax’s needs and the Board’s assessment of the Company’s leadership. Our corporate governance guidelines do provide that the Board appoint a lead independent director in the event the CEO is elected chair or the chair otherwise does not qualify as independent.

Board Committees

 

The Board has three standing committees: Audit, Compensation and Personnel, and Nominating and Governance. Each committee is composed solely of independent directors as that term is defined in applicable rules of the U.S. Securities and Exchange Commission (“SEC”) and the NYSE.

Secretary at CarMax, Inc., 12800 Tuckahoe Creek Parkway, Richmond, Virginia 23238.

 

 

Board and Committee Meetings

During fiscal 2017,2020, our Board met fourfive times and our Board committees met a combined 22 times. Each incumbent director attended 78%80% or more of the total number of meetings of the Board and the committees on which he or she served. The average attendance of all of our incumbent directors in fiscal 20172020 was 97%. We expect our directors to attend the annual meeting of shareholders and all but twoone of our incumbent directors at the time of the 2016 annual meeting of shareholders did so.

 

Our independent directors meet in executive session, without management present, at least once during each regularly scheduled Board meeting. AsOur lead independent director Mr. Tiefel presides over these executive sessions. In addition, our non-management directors meet in executive session, also without management present, at least once during each regularly scheduled Board meeting. As chair, Mr. Folliard presides over these executive sessions.

 

The table below lists the number of Board and committee meetings in fiscal 20172020 and discloses each director’s attendance.

Selection of Directors

 

Although we do not have a written policy with respect to the consideration of diversity in identifying director nominees, we consider and value diversity in our director selection process. Our code of business conduct defines diversity as the celebration of all people and their individual talents and the embracing of new ideas and new ways of thinking to maximize the potential of the overall organization. Through its consideration of the factors listed above, the Nominating and Governance Committee seeks directors with diverse backgrounds to maximize the potential of the Board. We believe that the diverse backgrounds and experiences of our current directors demonstrate the Committee’s success.

The Nominating and Governance Committee screens and recommends candidates for nomination by the Board. The Committee may consider input from several sources, including Board members, shareholders, outside search firms, and management. The Committee evaluates candidates in the same manner regardless of the source of the recommendation, using the criteria summarized above. Shareholders may send their recommendations for director candidates to the attention of our Corporate Secretary at CarMax, Inc., 12800 Tuckahoe Creek Parkway, Richmond, Virginia 23238.

Our bylaws include proxy access amendments to our bylaws, enablingprovisions, which enable eligible CarMax shareholders to have their own director nominee included in the Company’s proxy materials along with candidates nominated by our board.Board. Our proxy access right permits an eligible shareholder, or a group of up to 20 shareholders, to nominate and include in CarMax’s proxy materials directors constituting up to 20% of the Board of Directors. To be eligible, the shareholder or shareholder group must have owned 3% or more of our outstanding capital stock continuously for at least three years and satisfy certain notice and other requirements set forth in our bylaws. Shareholders who wish to include director nominations in our proxy statement or nominate directors directly at an annual shareholders meeting must follow the instructions under “Shareholder Proposal Information” on page 73.76.

In connection with the annual election of directors and at other times throughout the year, the Nominating and Governance Committee considers whether our Board has the right mix of skills and experience to meet the challenges facing CarMax. In addition, as reflected in the 2019 amendments to our corporate governance guidelines, the Nominating and Governance Committee strives to ensure that the Board reflects a diversity of experience and background, including ethnic and gender diversity.

One of the processes that assists the Committee in its consideration is our Board’s annual evaluation process. The Board and each of its committees conducts a self-evaluation. In addition, the chair, lead independent director and the Committee preside over a peer evaluation process in which each individual director evaluates each other director. The results of these evaluations assist the Committee in determining both whether to nominate incumbent directors for reelection and whether to search for additional directors.

 

As part of its consideration, the Committee reviews both the age and tenure of incumbent directors. The average age of our directors is 60 and their average tenure on ourOur Board is 7.4 years. In fiscal 2015, the Boardhas adopted a mandatory director retirement policy providing that directors may not stand for reelectionre-election after reaching age 76. The Board may waive this limitation in appropriate circumstances and there is a limited grandfather period for directors serving prior to the adoption of this policy.circumstances.

As required byOur Board has undergone significant refreshment in the past several years, with six of our ten independent director retirement policy, Mr. Tiefel, Mr. Grafton and Mr. Grubb plan to retire fromnominees having joined the Board in 2018. Accordingly, the Nominating and Governance Committee has recently added four highly qualified, independent directors to the Board in Ms. Shinder, Mr. Colberg, Mr. Standley and Ms. Chawla.since 2017. The fresh perspectives and diversity of skills of thesethe directors recently added to the Board, coupled with the institutional knowledge of the continuingtenured independent directors, will provideprovides the Board with ample experience and leadership through these upcoming retirements.leadership.

Board’s Role in Succession Planning

 

The Board oversees the recruitment, development and retention of executive talent. As part of its oversight, the Board regularly reviews short- and long-term succession plans for the Chief Executive Officer and other senior managementexecutive officer positions. In assessing possible CEO candidates, the independent directors identify the skills, experience and other attributes they believe are required to be an effective CEO in light of CarMax’s business strategies, opportunities and challenges.

 

Board’s Role in Strategic Planning

Board’s Role in Risk Oversight

Our Board undertakes its responsibility to oversee risks to CarMax through a risk governance framework designed to:

 

The Board does not view risk in isolation. Rather, it considers risks in its business decisions and as part of CarMax’s business strategy. This consideration occurs in the ordinary course of the Board’s business and is not tied to any of the formal processes described below, although it is enhanced by those processes.

The following table describes the components of CarMax’s risk governance framework.

 

We believe that our Board leadership structure, discussed in detail beginning on page 15,17, supports the Board’s risk oversight function. Our chair, lead independent director and committee chairs set agendas and lead meetings to ensure strong risk oversight, while our CEO and his management team are charged with managing risk.

Related Person Transactions

Our Board has adopted a written Related Person Transactions Policy that applies to any transaction in which:

The Audit Committee will approve or ratify a related person transaction only if it determines that: (i) the transaction serves the best interests of CarMax and its shareholders; or (ii) the transaction is on terms reasonably comparable to those that could be obtained in arm’s length dealings with an unrelated third party.

We did not have any related person transactions in fiscal 2017.2020.

Shareholder Communication with Directors

Shareholders or other interested parties wishing to contact the Board or any individual director may send correspondence to CarMax, Inc., c/o Corporate Secretary, 12800 Tuckahoe Creek Parkway, Richmond, Virginia 23238, or may send an e-mail to chair@carmax.com, which is monitored by Eric M. Margolin, our Corporate Secretary. Mr. Margolin will forward to the Board or appropriate Board member any correspondence that deals with the functions of the Board or its committees or any other matter that would be of interest to the Board. If the correspondence is unrelated to Board or shareholder matters, it will be forwarded to the appropriate department within the Company for further handling.

 

 

We are asking you to ratify the Audit Committee’s appointment of KPMG LLP (“KPMG”) as CarMax’s independent registered public accounting firm for fiscal 2018.2021. KPMG has served as our independent registered public accounting firm continuously since our separation from Circuit City Stores, Inc. (“Circuit City”) in fiscal 2003, and also served as Circuit City’s independent registered public accounting firm from the incorporation of CarMax, Inc. in 1996 through the separation. KPMG has been appointed by the Audit Committee to continue as CarMax’s independent registered public accounting firm for fiscal 2018.2021. The members of the Audit Committee and the Board believe that the continued retention of KPMG to serve as CarMax’s independent registered public accounting firm is in the best interests of CarMax and its shareholders.

The Audit Committee is directly responsible for the appointment, compensation, retention, evaluation, and oversight of the independent registered public accounting firm retained to audit CarMax’s financial statements. The Audit Committee is also responsible for the audit fee negotiations associated with CarMax’s retention of KPMG. In accordance with the SEC-mandated rotation of the audit firm’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of KPMG’s lead engagement partner and were directly involved in the selection of KPMG’s current lead engagement partner, whose period of service began in fiscal 2016.2021. Furthermore, in order to ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm.

Although we are not required to seek shareholder ratification, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will reconsider its decision. Even if the appointment is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that a change would be in the best interests of CarMax and its shareholders.

 

We expect that representatives of KPMG will attend the annual shareholders meeting. They will be given the opportunity to make a statement if they desire to do so and to respond to appropriate questions.

 

 

The Audit Committee reports to and acts on behalf of CarMax’s Board of Directors by providing oversight of the integrity of the Company’s financial statements, the Company’s independent and internal auditors, and the Company’s compliance with legal and regulatory requirements. The Audit Committee operates under a written charter adopted by the Board, which is reviewed annually and is available under the “Corporate Governance” link at investors.carmax.com. The members of the Audit Committee meet the independence and financial literacy requirements of the NYSE and the SEC.

 

Management is responsible for the preparation, presentation and integrity of the Company’s financial statements and the establishment of effective internal control over financial reporting. KPMG, the Company’s independent registered public accounting firm, is responsible for auditing those financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) and expressing an opinion on the conformity of CarMax’s audited financial statements with generally accepted accounting principles and on the effectiveness of CarMax’s internal controls over financial reporting.

Management represented to the Committee that the Company’s fiscal 20172020 consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Committee reviewed and discussed the fiscal 20172020 consolidated financial statements with management and KPMG.

The Committee has discussed with KPMG the matters required to be discussed by applicable auditing standards and the SEC, including significant accounting policies and the quality, not just the acceptability, of the accounting principles utilized. The Committee has also received from KPMG the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee regarding independence, and the Audit Committee has discussed with KPMG the firm’s independence. The Audit Committee concluded that KPMG is independent from the Company and management.

 

In reliance on these reviews and discussions, the Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2017,29, 2020, for filing with the SEC.

 

AUDIT COMMITTEE

Auditor Fees and Services

 

The following table sets forth fees billed by KPMG for fiscal 20172019 and 2016.2020.

Approval of Auditor Fees and Services

 

The Audit Committee’s charter provides for pre-approval of audit and non-audit services to be performed by the independent auditors. The Committee typically pre-approves specific types of audit, audit-related and tax services, together with related fee estimates, on an annual basis. The Committee pre-approves all other services on an individual basis throughout the year as the need arises. The Committee has delegated to its chair the authority to pre-approve independent auditor engagements in an amount not to exceed $50,000 per engagement. Any such pre-approvals are reported to and ratified by the entire Committee at its next regular meeting.

 

All audit, audit-related and tax services in fiscal 20172020 were pre-approved by the Audit Committee or pre-approved by the Chairchair pursuant to his delegated authority and subsequently ratified by the Audit Committee. In all cases, the Audit Committee concluded that the provision of such services by KPMG was compatible with the maintenance of KPMG’s independence.

 

We are asking you to approve an advisory resolution approving the compensation of our named executive officers as disclosed in this proxy statement. This vote is commonly referred to as a “Say on Pay” vote and is required by Section 14A of the Securities Exchange Act of 1934. Although this resolution is not binding, we value your opinion and our Compensation and Personnel Committee will consider the outcome of this vote when making future decisions.

We believe our executive compensation program promotes the achievement of positive results for our shareholders, aligns pay and performance, and allows us to attract and retain the talented executives that drive our long-term financial success. We urge you to read the “Compensation Discussion and Analysis” section of this proxy statement beginning on page 26,27, which describes in more detail how our executive compensation program operates and how it is designed to achieve our compensation objectives. We also encourage you to review the “Summary Compensation Table” and other compensation tables and narratives, found on pages 43 through 57.56.

We currently have adopted a policy providing for an annual “Say on Pay” votes and, in Proposal Four (advisory vote on the frequency of future executive compensation advisory approvals), the Board recommends that shareholders approve an advisory resolution supporting continued annual “Say on Pay” votes.vote. Accordingly, we anticipate that the next advisory vote on the compensation of our named executive officers will occur in 2018.2021.

Our Board recommends that, on an advisory basis, shareholders vote in favor of the following resolution:

 

Overview

 

The Compensation and Personnel Committee (the “Committee”) oversees an executive compensation program that is intended to drive the creation of long-term shareholder value. This section describes that program and details the compensation earned by our CEO, our current CFO, our former CFO, and CFO, our three other most highly compensated executive officers and our former CEO.officers. We refer to these six individuals, listed below, as our “named executive officers” or “NEOs”:

Executive Summary

 

As disclosed in our 2019 proxy statement, the culminationCommittee re-instituted the grant of performance stock units, or “PSUs,” to our executive officers for fiscal 2020. The PSUs were granted instead of the restricted stock units, which we call “Market Stock Units” or “MSUs,” that were issued to executive officers in fiscal 2019. The Committee granted MSUs, which are tied directly to growth in our stock price over a multi-year management succession plan, three-year term, in fiscal 2019 to ensure shareholder alignment of executive pay in the face of the then-unknown impact of federal tax reform and returned to PSUs for fiscal 2020 with that uncertainty resolved.

Mr. NashMayor-Mora became our Senior Vice President and Chief ExecutiveFinancial Officer on September 1, 2016.October 25, 2019. At the time of his promotion, the Committee approved adjustments to Mr. Nash’sMayor-Mora’s compensation to provide a compensation opportunity commensurate with his responsibilities, as follows:

  

 

CarMax believes strongly in its pay-for-performance philosophy. In fiscal 2017,2020, an average of 81%82% of the target total direct compensation of our non-CEOCEO and other named executive officers was performance-based.attributable to annual incentive bonus and long-term equity award compensation and therefore directly tied to CarMax performance. Compensation mix is discussed in more detail on page 37.

How We Make Compensation Decisions

 

The Compensation and Personnel Committee oversees our executive and director compensation programs and determines all executive officer and director compensation.

CarMax has a pay-for-performance philosophy. The Committee believes that the best way to implement this philosophy is by tying a significant portion of our executives’ total direct compensation to the attainment of both annualour financial goals and multi-year stock price appreciation.

 

The Committee has established the following objectives for our executive compensation program:

The key elements of our executive compensation program are base salaries, annual incentive bonuses and long-term equity awards. The Committee generally makes determinations regarding long-term equity awards, base salaries and annual incentive bonuses at its March and April meetings. In fiscal 2017, the Committee also made certain compensation determinations concerning Mr. Nash’s promotion and Mr. Folliard’s retirement contemporaneously with those events. The Committee makes decisions regarding each element of pay to further the objectives described above. The specific ways in which each element of compensation supports these objectives are described beginning on page 31.

 

The Committee recognizes the impact that an adjustment to one element of compensation may have on other elements. For example, an increase in an officer’s base salary will result in a larger target annual incentive amount since that amount is determined as a percentage of base salary. Although the Committee considers these relationships between the various elements of compensation - and also considers each executive officer’s total compensation - decisions regarding any one element of compensation are not determinative of decisions regarding other elements.

 

The Committee considers, among other factors:

The Committee’s compensation consultant frequently attends Committee meetings and provides analysis and recommendations that inform the Committee’s decisions. FWCSBCG assisted the Committee in fiscal 20172020 by analyzing and providing recommendations with regard to total direct compensation for the Company’s CEO President and executive and senior vice presidents. FWCpresidents, including the other named executive officers. SBCG also advisedassisted the Committee in setting Mr. Nash’s compensation on his promotion to CEO, evaluating arrangements made in connection with Mr. Folliard’s retirement, and determining the compensation to be paid to Messrs. Wood, Hill and Margolin as a result of their respective promotions. FWC providedby providing general compensation advice, throughout fiscal 2017, including analysis related to long-term equity awards, our internal pay equity (that is, the relationship between the compensation of our CEO and our other named executive officers), the composition of our peer group and the appropriate performance criteria for the fiscal 2017 annual incentive bonus.non-employee director pay.

Although management does not have any decision-making authority regarding compensation of executive compensation,officers, management assists the Committee by recommending base salary levels, annual incentive bonus objectives and targets, and individual long-term equity awards for executives other than the CEO and, in fiscal 2017, the President.CEO. Management also assists the Committee with the preparation of meeting agendas and prepares materials for those meetings as directed by the Committee.

The Committee has not delegated any authority with respect to the compensation of our executive officers and directors. The Committee, however, has delegated limited authority to our CEO and CFO to grant long-term equity awards to our non-executive officersofficer employees between regularly scheduled Committee meetings in an amount not to exceed 75,000 shares or units. These awards are subject to our Employee Equity Grant Policy, which is available under the “Corporate Governance” link at investors.carmax.com. The Committee’s practice is to review and ratify any such grant at its next regularly scheduled meeting.

 

Notwithstanding the Committee’s use of outside advisers and management’s participation in the executive compensation process, the Committee makes all executive compensation decisions using its own independent judgment.

Each year, in consultation with the independent compensation consultant, the Committee reviews market compensation data provided by its independent consultant to determine whether the compensation opportunities of the named executive officers are appropriate and competitive.

 

The Committee used the following peer group of companies to benchmarkassess the market competitiveness of the fiscal 20172020 compensation disclosed in this proxy statement. The Committee selected this peer group in June 2015October 2017 based on an analysis by FWCSBCG and the Committee’s independent judgment. These peersThe Committee has not made any adjustments to the peer group since October 2017.

All of the peer group companies fell within a reasonable range (both above and below CarMax) of comparative factors such as revenue, market capitalization, net income, revenue growth, assets and one- and three-year total shareholder return. These peers are generally “big box” retailers, specialty autocomparable retailers or direct competitors.

In preparation for fiscal 2018 compensation decisions, the Committee re-evaluated this peer group in June 2016 based on an analysis by FWC and the Committee’s independent judgment. The Committee determined that the peer group remained appropriate, with the peers continuing to fall within a reasonable range (both above and below CarMax) of comparative factors such as revenue, market capitalization, net income, assets and one- and three-year total shareholder return. The Committee removed Family Dollar Stores, Inc. from the peer group following Family Dollar’s acquisition. The Committee also determined that it would continue to include eBay Inc. following the spin off of PayPal Holdings as eBay remains an appropriate peer based on the comparative factors referenced above and business comparability. PayPal Holdings was not added to the peer group due to differences in market capitalization and business focus. The Committee will continue to use this revised peer group to benchmark compensation practices for fiscal year 2018.2021.

The Committee considers a blend of peer group data and broader survey data in benchmarking compensation. For fiscal 2020, in addition to the peer group, the Committee considered three national compensation surveys produced by Equilar, Willis Towers Watson and Mercer with a focus on executives within retail/wholesale and automotive industries.

The Committee believes that this mix of data provides the most comprehensive view of executive compensation practices at companies against whom we compete for talent and allows the Committee to ensure that CarMax continues to provide appropriate and competitive compensation. This mix of data also allows the Committee to obtain broader market context with regard to certain positions that may not exist in a comparable form at every company in our peer group or that may not be classified as a named executive officer at every company in our peer group.

What We Pay and Why: Elements of Compensation

 

The key elements of compensation for our named executive officers are base salary, an annual incentive bonus and long-term equity awards. Together, these elements make up total direct compensation.

This section describes these elements and details the amounts of each earned by our named executive officers in fiscal 2017.2020.

 

We pay competitive base salaries to retain key officers and attract the new talent necessary for our long-term success. An executive officer’s base salary generally reflects the officer’s responsibilities, tenure and job performance, as well as the market for the officer’s services. The Committee reviews officer base salaries every year, generally in March, or April.and sets the base salary for newly appointed executive officers on their promotion. When the Committee reviews base salaries, it considers the reports and advice provided by FWC, its independent compensation consultant and the peer group and survey data described above, as well as the recommendations provided by our CEO and our President (except when setting the CEO’s and the President’s base salary).

At the beginning of fiscal 2017,2020, the Committee approved the following base salary adjustments.

On his promotion to CEO,CFO, effective September 1, 2016,October 25, 2019, the Committee increased Mr. Nash’sMayor-Mora’s base salary to $1,000,000.

The Committee made this determination in recognition of Mr. Nash’sMayor-Mora’s responsibilities as CEOCFO and in consultation with FWC, who analyzed the base salaries of new CEOs at comparable companies.SBCG. Consistent with our focus on performance-based pay, Mr. Nash’sMayor-Mora’s new base salary is below the median of the blended peer group and other benchmarkgroup/survey data, provided by FWC, which the Committee believed was appropriate in his first year as CEO.CFO.

We pay annual incentive bonuses to drive the achievement of CarMax’s financial goals. The amount of the annual incentive bonus depends on our performance as measured against objective performance goals established by the Committee at the beginning of each fiscal year. Bonuses are not guaranteed.

 

We calculate bonuses using the following formula:

Base salaries, which are the first component of this formula, are discussed above. The “target percentage of base salary” is an individual’s incentive bonus target expressed as a percentage of base salary. This percentage differs among our named executive officers depending on their level of responsibility and is set forth in a written agreement between each officer and the Company.responsibility. Each named executive officer’s target percentage is listed in the table on page 33.

 

The last component of the bonus formula – the “performance adjustment factor” – is a percentage representing the Company’s success in meeting the performance goals set by the Committee at the beginning of each fiscal year.

 

The following chart describes how the Committee applied this formula in fiscal 2017.2020.

The following table shows each named executive officer’s base salary, incentive target percentage of base salary, and target and maximum bonus amounts. The table also shows each officer’s actual fiscal 20172020 bonus.

At the beginning ofFor fiscal 2017,2020, the Committee madedetermined that no change to the 100% incentive target percentage it set for Mr. Nash on his February 2016 promotionpercentages of our continuing named executive officers was required to President. maintain a competitive and appropriate incentive structure.

The Committee then increased hisMr. Mayor-Mora’s incentive target percentage to 130%60%, generally consistent with the Company’s other senior vice presidents, at the time of his promotion to CEOCFO in recognition of the responsibilities he assumed on his appointment. The Committee kept Mr. Nash’s incentive target percentage below Mr. Folliard’s incentive target percentage of 150% to reflect his status as a newly appointed CEO.

The Committee determines all incentive bonuses in accordance with the CarMax, Inc. Annual Performance-Based Bonus Plan (“Bonus(the “Bonus Plan”). We adopted the Bonus Plan as a mechanism to provide annual incentive compensation and it is intended to preserve the deductibility of this compensation in accordance with Section 162(m) of the Internal Revenue Code. The Bonus Planplan provides that the maximum amount payable to any one individual in any one fiscal year is $5$10 million. InHowever, in fiscal 2017, however,2020, the Committee limited the maximum performance adjustment factor to 200%, ensuring that Mr. Nash’s bonus could not exceed $2,095,890 and that no other individual bonus could exceed $1,898,302.

We grant long-term equity awards to tie our executives’ long-term compensation directly to CarMax’s stock price and to drive the achievement of our strategic goals. We also believe that long-term equity awards are an important retention tool.

 

In fiscal 2017,2020, we granted our named executive officers, three kindsexcept for Mr. Mayor-Mora, two forms of long-term equity awards: stock options performanceand PSUs. Options accounted for 75% and PSUs accounted for 25% of the fair value awarded. Mr. Mayor-Mora was awarded stock options and restricted stock units, (“PSUs”)which we call “MSUs,” for both his annual and restricted stock. The grant of restricted stock was limited to the retention award to Mr. Wood, which is described in more detail below, and an award made to Mr. Folliard, following his retirement, as non-executive chair of the Board under our director compensation policies and consistent with all other non-management directors.promotion awards. All of our long-term equity grants were made pursuant to the CarMax, Inc. 2002 Stock Incentive Plan, as amended and restated (“Stock Incentive Plan”).