UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
(Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | ||||
Preliminary Proxy Statement |
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
Definitive Proxy Statement |
Definitive Additional Materials |
Soliciting Material under |
GROUP 1 AUTOMOTIVE, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
No fee required. |
Fee paid previously with preliminary materials. |
Fee computed on table in exhibit required by Item 25(b) per Exchange Act | ||
April 8, 2020
Dear Fellow Shareholder
Dear Fellow Stockholder:
YouWe are cordially invitedpleased to invite you to attend Group 1 Automotive’s 20202022 Annual Meeting of StockholdersShareholders to be held at the Company’s Sterling McCall Lexus dealership, 10025 Southwest Freeway, Houston, Texas 77074,virtually on Wednesday, May 13, 2020,18, 2022, at 10:00 a.m. Central Daylight Saving Time. However, as you are aware,Please see the outbreakNotice of COVID-19 (coronavirus) has affected our business operationsAnnual Meeting for more information on how to attend and participate in eachthe Annual Meeting.
OVERVIEW
Fiscal year 2021 was another record year for Group 1 Automotive. Despite the ongoing pandemic and well documented supply-chain disruptions, we were able to achieve significant growth in most of our three global markets. Concerningfinancial metrics.
Key accomplishments included: (i) revenue of $13.8 billion, an increase of 27%, (ii) adjusted earnings per share of $35.02, an increase of 94%, (iii) adjusted net income of $642 million, an increase of 93%, and (iv) $755.5 million adjusted operating cash flow, an increase of 50%(1). These results were attributable to expanded margins in our Annual Meeting, we are currently anticipating that the Meeting will be held at the timenew and place described above. We will comply with all applicable federal, stateused vehicle sales, continued growth in our aftersales and local laws pertaining to social distancingfinance and limitations on group gatheringsinsurance businesses, and will make the appropriate accommodation to comply therewith. Additionally, should you not feel comfortable in attending our meeting in person, please feel free to submitstrong cost control. As a question by 5:00 p.m., CST, Tuesday, May 12, 2020 to our head of Investor Relations, Sheila Roth atir@group1auto.comand all efforts will made to respond by the close of business on the dayresult of our Annual Meeting.
The agenda for2021 financial performance, the 2020 Annual MeetingCompany generated strong cash flow which allowed us to grow the business by acquisitions as well as the repurchase of Stockholders includes a vote to: (i) approve the nominees forapproximately 6% of our board of directors named in the proxy statement; (ii) approve, on a non-binding advisory basis, our executive compensation; (iii) approve an amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan; and, (iv) approve Deloitte & Touche LLP as our independent registered public accountants for 2020. Management will also be available to review the Company’s business and financial performance.
shares.
The Company had a very good 2019, which included all-time record revenuecompleted major acquisitions in both our U.S. and U.K. markets in 2021, resulting in an increase in our total dealership count as of $12.0December 31, 2021 to 218 from 184 at year-end 2020. The Company increased its footprint in the northeast United States with the acquisition of 33 dealerships, further diversifying our geographic footprint in the United States. In the United Kingdom, the Company added additional scale with the acquisition of 7 dealerships. These transactions represented, in the aggregate, $2.5 billion and strong growth in earnings. This performance is more impressive when you take into context that bothof annualized revenues. The Company also announced the divesture of our key markets experienced slowing newBrazilian operations with an expected closing date in the second quarter of 2022.
INITIATIVES
In 2021, we continued our work to prepare for increasing sales volumes of alternative fuel and electric vehicles (“EV”) by working with local utility companies and auto manufacturers to increase vehicle sales volumes. The Company achieved these results by focusing on the controllable elementscharging capacity. We also made additional investments in EV service equipment and training for our employees.
In furtherance of our business model, including leveraging revenue growth, optimizing cost control, refining brand diversity, enhancing digital marketing,Human Capital initiatives, we appointed our first Chief Diversity Officer in May 2021 to continue the development and capitalizing on the experience and expertise within our overall management team.
As of this proxy statement’s record date, the Company has experienced significant stock price decline since the end of 2019, consistent with its peer companies and the broader industry, due largely to the COVID-19 (coronavirus) outbreak. As described further herein, the Company’s executive compensation programs are designed to strongly align realized compensation with the Company’s financial and operational goals. However, due to the virus outbreak, management has already taken certain steps to better align those compensation programs in anticipation of reduced performances in numerous aspectsexecution of our businesses, which are described withindiversity, equity, and inclusion (“DEI”) strategy throughout the CD&A below. We will continue to analyze the impactorganization. This new role integrates our DEI strategy into every aspect of the virus outbreak and will describe any additional outcomes and decisions that are made throughout the year in next year’s CD&A. Our Company has shown tremendous resilience in dealing with trying events such as September 11th, Hurricanes Katrina and Harvey and the recession of 2008, and we believe that through the strength and dedication of our employees we will guide the Company through the COVID-19 (coronavirus) virus.
employee lifecycle from recruitment to retention.
We hope you are ablelook forward to participateyour participation in theour 2022 virtual Annual Meeting, but if you cannot participate, we look forward to hearing your voice viasolicit your participation in votingto vote on the business items set forth in the attached notice. Regardless of the number of shares you own, your vote matters. We encourage you to sign and return your proxy card or use telephone or internet voting features prior to the meeting to assure that your shares are represented and voted at the meeting.
ThankOn behalf of our Board of Directors and all Group 1 Automotive team members, thank you for your continued dedication of timeinterest and interestsupport in Group 1. Our core values of integrity, transparency, professionalism, and teamwork promote success amongst our team, which includes our customers, our employees, and you, our stockholders.
1 Automotive, Inc.
Sincerely,
Stephen D. Quinn | ||
Chairman of the Board | Earl J. Hesterberg President & |
Adjusted earnings per common share, adjusted net income, and adjusted operating cash flow are non-GAAP financial measures. Information regarding these non-GAAP financial measures, including reconciliation to most directly comparable GAAP measures, is included in Appendix A. |
Wednesday, May 13, 2020
10:00 a.m.Central Daylight Saving Time
Sterling McCall Lexus, 10025 Southwest Freeway, Houston, Texas 77074
Notice of Annual Meeting of Shareholders
Matters to be voted on:
MATTERS TO BE VOTED ON:
1. | To elect the nine director nominees named in the proxy statement, each for a term expiring at the |
2. | To approve, on a non-binding advisory basis, our executive compensation; |
3. | |
To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for |
4. | |
To transact such other business as may be properly brought before the meeting. |
StockholdersShareholders of record at the close of business on March 17, 2020,21, 2022, will be entitled to notice of and to vote atduring the Annual Meeting and at any adjournments or postponements thereof. A list of stockholders will be available and may be inspected during normal business hours for a period of at least 10 days prior
We are pleased this year to conduct the Annual Meeting solely online via the Internet through a live webcast and online shareholder tools. We believe a virtual format facilitates shareholder attendance and participation by leveraging technology to allow us to communicate more effectively and efficiently with our shareholders. This format empowers shareholders around the world to participate at our offices at 800 Gessner, Suite 500, Houston, Texas 77024. The list of stockholders will also be available for your review atno cost. We have designed the Annual Meeting. Invirtual format to enhance shareholder access and participation and protect shareholder rights, as described in more detail in the event there are not sufficient votes for a quorum or to approve the foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies.
proxy statement.
The proxy materials, including this Notice of Annual Meeting, the proxy statement, a proxy card, and our Annual Report to Stockholders on Form 10-K for the fiscal year ended December 31, 20192021 are being distributed and made available beginning on April 8, 2020.
12, 2022.
Your vote is important. We urge you to review the accompanying materials carefully and to vote by telephone or internet as promptly as possible. Alternatively, you may complete, sign and return the proxy card, by mail.
Houston, Texas
April 8, 202012, 2022
By Order of the Board of Directors,
Beth Sibley
Corporate Secretary
Important Notice Regarding the Availability of Proxy Materials for the The Notice of Annual Meeting of for the Annual Meeting and our Annual Report year ended December 31, |
75 |
Proxy Statement 2022 | 1
Business and Financial Highlights
Despite the unique challenges of the coronavirus (“COVID-19”) pandemic, Group 1 Automotive, Inc. (“Group 1” or the “Company”) continued to deliver record-setting financial results and increased operational effectiveness in 2021. The Company achieved solid results by successfully expanding its omnichannel marketing, closing attractive acquisitions involving approximately $2.5 billion in acquired revenues, executing an aggressive cost reduction plan and reengineering its processes. Our 2021 financial results compared to 2020 included:
✓ All-time record GAAP EPS for 2021 was $30.11, a 94.1% increase; ✓ Adjusted EPS for 2021 was $35.02, a 93.9% increase; ✓ All-time record GAAP net income for 2021 was $552.1 million, a 92.7% increase; ✓ Adjusted net income for 2021 was $642.1 million, a 92.5% increase; ✓ Achieved all-time U.S. Finance and Insurance (“F&I”) performance record of $2,155 per retail unit; ✓ Increased same store used vehicle total gross profit by 71.0%; ✓ Increased same store parts and service gross profit by 15.5%; | ✓ Issued quarterly dividends totaling $1.33 per share for the full year; ✓ Repurchased 1,103,417 shares of common stock at an average price per share of $190.82, representing approximately 6% of total share float; ✓ GAAP operating cash flow of $1,259.6 million, a 56.4% increase; ✓ Generated record adjusted operating cash flow of $755.5 million, a 50.0% increase; ✓ Reduced SG&A as a % of gross profit from 65.6% in 2020 to ✓ Acquired approximately $2.5 billion in annual revenues, an all-time annual record for the Company. | |||
*Please see Appendix A for an explanation and reconciliation of these non-GAAP measures.
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Proxy Statement 2022 | 2 |
Proxy Statement 2022 | 3
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read this entire proxy statement carefully before voting.
This proxy statement is being distributed and made available beginning on April 8, 2020 in connection with the solicitation of proxies by the Board of Directors of Group 1 Automotive, Inc. for use at our 2020 Annual Meeting of Stockholders.
ANNUAL MEETING OF STOCKHOLDERS
VOTING
StockholdersShareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and each proposal. All elections of directors shall be decided by a majority of votes cast by stockholdersshareholders entitled to vote. All other matters submitted to the stockholdersshareholders shall be decided by vote of a majority of the shares present in persononline or represented by proxy.
COMPENSATION AND CORPORATE GOVERNANCE HIGHLIGHTS
VOTING MATTERS AND BOARD RECOMMENDATIONS
Management Proposals: | ||||||
Recommendation | Page (for more detail) | |||||
Election of Nine Director Nominees | FOR | |||||
Approval, on a Non-Binding Advisory Basis, of our Executive Compensation | FOR | |||||
Ratification of Deloitte & Touche LLP as Independent Registered Public Accounting Firm | FOR |
GOVERNANCE HIGHLIGHTS
Board Composition and Independence | Board and Committee Practices | Board Oversight of Risk Management | ||||||||||
✓ Separation of the Chair and CEO roles ✓ 7 of 9 director nominees are independent ✓ 100% independent Audit, Compensation and Governance Committees ✓ Mandatory retirement age ✓ Limits on Board member service on other public company boards | ✓ Annual Board and Committee evaluations ✓ Director orientation and continuing education ✓ Robust stock ownership guidelines ✓ Executive sessions provided for all quarterly Board and Committee meetings ✓ Philosophy of continuous Board refreshment to ensure a mix of skills, experience, tenure and diversity ✓ Board has significant interaction with senior management and access to other employees | ✓ Annual review of enterprise risk management program ✓ Quarterly review of Cybersecurity program ✓ Quarterly review of ESG and Health and Safety programs ✓ Quarterly review of DEI program ✓ Quarterly review of PAC and GPI foundation income (donations) and contributions |
SUSTAINABILITY HIGHLIGHTS
We strongly believe that our environmental, social and governance (“ESG”) actions will help our business operations positively impact the planet, the people whose lives we touch and our bottom line. In an effort to better inform our shareholders and the investment community of our current initiatives and the actions we’ve taken, we recently released our inaugural 2021 Sustainability Report which may be found at www.group1corp.com/ESG. The report reflects the ESG progress we’ve made through 2021 and the things we hope to achieve in the future. A summary of our current ESG priorities and our respective 2021 accomplishments follows:
Our ESG Priorities
FOSTER DIVERSITY, EQUITY AND INCLUSION Appointed our first Chief Diversity Officer for executive oversight of our DEI strategy and actions | ||
SUPPORT OUR EMPLOYEES AND COMMUNITIES Continued to encourage our employees to volunteer and to use our dealerships for community gatherings | ||
MAINTAIN STRONG GOVERNANCE PRINCIPLES Established the ESG Working Group that reports to the Governance & Corporate Responsibility Committee on a quarterly basis | ||
REDUCE THE ENVIRONMENTAL IMPACT OF OUR FACILITIES Installed an additional 800 solar panels to bring our current total to more than 6,400 panels | ||
CONDUCT BUSINESS IN A SUSTAINABLE MANNER Established a team responsible for improving our electric vehicle infrastructure |
Proxy Statement 2022 | |
Election of Directors (Proposal 1)
Proxy Statement 2022 | 5
DIRECTOR NOMINEES
The following table provides summary information about our nominees for election to the Board of Directors.Directors (the “Board”).(1)Additional information for all of our directors may be found beginning on page 27.17.
Committee Memberships | ||||||||||||||||
Directors | Director Since | Age | Other Public Directorships | Independent | Audit Committee | Compensation & Human Resources Committee | Finance/Risk Management Committee | Governance & Corporate Responsibility Committee | ||||||||
Carin M. Barth | 2017 | 59 | 2 | ✓ | ||||||||||||
Earl J. Hesterberg | 2005 | 68 | 0 | |||||||||||||
Steven C. Mizell1 | 2021 | 62 | 1 | ✓ | ||||||||||||
Lincoln Pereira Filho | 2013 | 62 | 12 | |||||||||||||
Stephen D. Quinn | 2002 | 66 | 1 | ✓ | ||||||||||||
Steven P. Stanbrook | 2019 | 64 | 1 | ✓ | ||||||||||||
Charles L. Szews | 2016 | 65 | 2 | ✓ | ||||||||||||
Anne Taylor | 2018 | 66 | 2 | ✓ | ||||||||||||
MaryAnn Wright | 2014 | 60 | 2 | ✓ |
Chair Member
Mr. Mizell joined the Board |
2 | Mr. Pereira serves on the Board of Boa Vista Serviços S.A.-SCPC, a public company listed on the Brazil Stock Exchange. |
Our Board of Directors Recommends a Vote “FOR” the Election of each of the Nominees for Director.
Advisory Vote on Executive Compensation (Proposal 2)
EXECUTIVE COMPENSATION
We are asking our stockholdersshareholders to approve, on a non-binding advisory basis, the compensation of our named executive officers.officers (“NEOs”). We believe that our compensation policies and practices are effective in achieving our Company’s goals of rewarding significant financial and operating performance, leadership excellence and aligning the executives’ long-term interests with those of our stockholders.shareholders. Our compensation philosophy is to set the fixed compensation of our named executive officers competitively for their demonstrated skills and industry experience. Our variable compensation, both annual and long-term, reflects the results of performance against a combination of quantitative and subjective measures. At last year’s Annual Meeting of Stockholders, our stockholders approvedShareholders, the compensation of our named executive officers was approved with a substantial majority of our stockholders (95%shareholders (97% of votes cast) voting in favor.
COMPENSATION COMPONENTS
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favor of our executive compensation program.
In evaluating this year’s “say-on-pay”“say-on-pay” proposal, we recommend that you review the section entitled “2019“2021 Compensation Discussion and Analysis” (“CD&A”) beginning on page 48,33, as well as the Summary Compensation Table and related compensation tables and narratives, which explainsexplain how and why the Compensation & Human Resources (“CHR”) Committee arrived at its executive compensation actions and decisions for 2019.
2019 SUMMARY COMPENSATION
Set forth below is a summary of the compensation granted or earned for each named executive officer during 2019, but which is not intended to replace the 2019 Summary Compensation Table included in the Executive Compensation section of this proxy statement:
Change in | ||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||
Restricted | Performance | Non-Equity | Deferred | |||||||||||||||||||||||||
Stock | Share | Incentive Plan | Compensation | All Other | ||||||||||||||||||||||||
Name and | Salary | Awards(1) | Awards(1) | Compensation(2) | Earnings(3) | Compensation(4) | Total | |||||||||||||||||||||
Principal Position | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
Earl J. Hesterberg | 1,150,000 | 2,700,022 | 900,007 | 2,127,500 | 361,583 | 685,290 | 7,924,402 | |||||||||||||||||||||
President and | ||||||||||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||
Daryl A. Kenningham | 655,200 | 841,525 | 280,467 | 982,800 | 164,068 | 177,153 | 3,101,213 | |||||||||||||||||||||
President, U.S. and | ||||||||||||||||||||||||||||
Brazilian Operations | ||||||||||||||||||||||||||||
John C. Rickel | 629,700 | 720,006 | 240,022 | 724,155 | 360,087 | 26,294 | 2,700,264 | |||||||||||||||||||||
Senior Vice President and | ||||||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||
Frank Grese, Jr. | 595,400 | 512,979 | 171,014 | 684,710 | 197,769 | 33,618 | 2,195,490 | |||||||||||||||||||||
Senior Vice President, | ||||||||||||||||||||||||||||
Human Resources, Training | ||||||||||||||||||||||||||||
and Operations Support | ||||||||||||||||||||||||||||
Peter C. DeLongchamps | 492,650 | 486,016 | 161,964 | 566,548 | 77,961 | 24,489 | 1,809,628 | |||||||||||||||||||||
Senior Vice President, | ||||||||||||||||||||||||||||
Manufacturer Relations, | ||||||||||||||||||||||||||||
Financial Services | ||||||||||||||||||||||||||||
and Public Affairs |
Our Board of Directors Recommends a Vote “FOR” the Non-Binding Advisory Approval of our Executive Compensation.
Approval of an Amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan (Proposal 3)
��
To align the compensation of our named executive officers withofficers.
2021 SUMMARY COMPENSATION
For more information, visit the attainment of our business goals and an increase in shareholder value, we award long-term equity incentive grants and performance share awards. We are asking our stockholders to approve an amendment to increase the number of shares available for issuance under the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan. We believe that long-term equity compensation is an important retention tool, and directly ties the interests of our executive officers and key employees to the interests of our stockholders. Additional details concerning our long-term equity compensation plan can be foundsection titled “Executive Compensation – 2021 Summary Compensation Table” on page 35.50.
Our Board of Directors Recommends a Vote “FOR” the amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan.
Ratification of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for 2020 (Proposal 4)
As a matter of good corporate governance, we are asking our stockholders to ratify the recent appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the year ending December 31, 2020.
Ernst & Young LLP (“Ernst & Young”) served as our independent registered public accounting firm for the year ended December 31, 2019. Set forth below is summary information with respect to Ernst & Young’s fees for services provided in 2018 and 2019.
Type of Fees | 2019 | 2018 | ||||||
Audit Fees | $ | 2,519,800 | $ | 2,594,000 | ||||
Audit Related Fees | — | — | ||||||
Tax Fees | 81,400 | 79,000 | ||||||
All Other Fees | — | 2,200 | ||||||
TOTAL | $ | 2,601,200 | $ | 2,675,200 |
Our Board of Directors Recommends a Vote “FOR” Ratification of the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2020.
Name and Principal Position | Salary ($) | Stock ($) | Non-Equity ($) | Change in ($) | All Other ($) | Total ($) | ||||||||||||||||||
Earl J. Hesterberg President and Chief Executive Officer | 1,240,000 | 3,799,959 | 2,480,000 | 849,078 | 208,220 | 8,577,257 | ||||||||||||||||||
Daryl A. Kenningham President, U.S. and Brazilian Operations | 760,000 | 1,999,994 | 1,121,000 | 342,173 | 174,355 | 4,397,522 | ||||||||||||||||||
Daniel McHenry Senior Vice President and Chief Financial Officer | 575,000 | 499,925 | 661,250 | 859 | 34,557 | 1,771,591 | ||||||||||||||||||
Frank Grese, Jr. Senior Vice President, Human Resources, Training and Operations Support | 633,450 | 699,807 | 715,799 | 373,425 | 32,605 | 2,455,086 | ||||||||||||||||||
Peter C. DeLongchamps Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs | 530,450 | 799,821 | 610,018 | 142,794 | 29,663 | 2,112,746 |
Proxy Statement 2022 | |
OUR CORE CORPORATE SOCIAL RESPONSIBILITY VALUES
Our core values, integrity, transparency, professionalism and teamwork, underlie our commitment to conduct our business in ways that are principled and accountable to key stakeholders and the communities in which we do business. We are committed to responsible business practices and continuous improvement of our operations and our relationships with our employees and the communities in which we live and work.Proxy Statement 2022 | 7
In an effort to better inform our shareholders and the investment community of the numerous activities of our corporate office and geographically dispersed dealerships, we have set up a constantly updated website that provides pertinent data on our corporate social responsibility. Please visit our website atwww.group1auto.com/group1cares, our web pages on LinkedIn and Facebook, or follow us on Twitter and Instagram, for more detailed information on our corporate social responsibility practices, including our charitable and philanthropic efforts in all three of our major markets.
Business and Financial Highlights
Group 1 operates in three regions – the U.S., the U.K. and Brazil. In 2019, Group 1 continued to deliver record setting financial results and increased operational effectiveness. 2022 ANNUAL MEETING DATE AND VIRTUAL LOCATION
Our 2019 results compared to 2018 included:
See “Reconciliation of Certain Non-GAAP Financial Measures” included in Exhibit 99.1 of our Current Report on Form 8-K filed February 5, 2020 with the SEC, for a reconciliation of the non-GAAP measures to the comparable GAAP measures.
800 Gessner, Suite 500Houston, TX 77024
This proxy statement is being furnished to you in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Group 1 Automotive, Inc. (“Group 1” or the “Company”) for use at our 20202022 Annual Meeting of StockholdersShareholders (the “Annual Meeting”) and at any adjournment or postponement thereof. Proxy materials were first sent to stockholders beginning on April 8, 2020.
2020 ANNUAL MEETING DATE AND LOCATION
Our Annual Meeting will be held virtually at Sterling McCall Lexus, 10025 Southwest Freeway, Houston, TX 77074,www.virtualshareholdermeeting.com/GPI2022, on Wednesday, May 13, 2020,18, 2022, at 10:00 a.m., Central Daylight Saving Time, or at such other time and place to which the meeting may be adjourned. However,
We have decided to conduct the Annual Meeting solely online via the Internet through a live webcast and online shareholder tools. We believe a virtual format facilitates shareholder attendance and participation by leveraging technology to allow us to communicate more effectively and efficiently with our shareholders. This format empowers shareholders around the world to participate at no cost. We have designed the virtual format to enhance shareholder access and participation and protect shareholder rights. Specifically,
We Encourage Questions. Shareholders have multiple opportunities to submit questions for the meeting. Shareholders may submit a question online in advance or live during the meeting, following the instructions below. During the meeting, we will answer as you are aware,many appropriate shareholder-submitted questions as time permits. Following the outbreak of COVID-19 (coronavirus) has affected our business operations in each of our three global markets. Concerning our Annual Meeting, we are currently anticipating thatwill publish an answer to each appropriate question we received on our Investor Relations website at www.group1corp.comas soon as practicable.
We Believe in Transparency. Although the live webcast is available only to shareholders at the time of the meeting, following completion of the Annual Meeting, a webcast replay, final report of the inspector of election, and answers to all appropriate questions asked by investors in connection with the Annual Meeting will be heldposted as soon as practicable to our Investor Relations website at www.group1corp.com.
We Proactively Take Steps to Facilitate Your Participation. During the timeAnnual Meeting, we will offer live technical support for all shareholders attending the meeting.
ATTENDING THE ANNUAL MEETING
To attend, vote and place described insubmit questions during the NoticeAnnual Meeting, shareholders of record must use their control number on their proxy card to log into www.virtualshareholdermeeting.com/GPI2022; beneficial shareholders who do not have a control number may gain access to the meeting by logging into their brokerage firm’s website and selecting the shareholder communications mailbox to link through to the Annual Meeting. WeMeeting; instructions should also be provided on the voting instruction card provided by their broker, bank, or other nominee.
Online access to the meeting will comply with all applicable federal, state and local laws pertainingbegin at 9:30 a.m., Central Daylight Saving Time. If you encounter any difficulties accessing the virtual meeting during the check-in or course of the Annual Meeting, a phone number will be posted on the website to social distancing and limitations on group gatherings and will make the appropriate accommodationconnect you to comply therewith. Additionally, should you not feel comfortable attending our meeting in person, please feel freetechnical support.
Shareholders who wish to submit a question in advance may do so either by emailing Investor Relations at ir@group1auto.comby 5:00 p.m., CST,Central Daylight Saving Time, Tuesday, May 12, 2020 to our head of Investor Relations, Sheila Roth atir@group1auto.comand all efforts will be made to respond by the close of business on the day of17, 2022, or visiting our Annual Meeting website, www.virtualshareholdermeeting.com/GPI2022. Shareholders also may submit questions live during the meeting. We plan to reserve some time for shareholder questions to be read and answered by Company personnel during the meeting. In submitting questions, please note that we will only address questions that are germane to the matters being voted on at our Annual Meeting.
References in this proxy statement to the Annual Meeting also refer to any adjournments, postponements or changes in location of the meeting, to the extent applicable.
DELIVERY OF PROXY MATERIALS
The proxy materials, including this proxy statement, the Notice of Annual Meeting, the form proxy card, and our Annual Report to Stockholders on Form 10-K for the fiscal year ended December 31, 2019 are being distributed and made available to stockholders of record beginning on April 8, 2020.
The proxy card provides instructions on how to inform us to send future proxy materials to you electronically by email. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy-voting site. Your election to receive proxy materials by email or printed form will remain in effect until you terminate it.
Choosing to receive future proxy materials by email will allow us to provide you with the information you need in a timelier manner, save us the cost of printing and mailing documents, to you, and conserve natural resources.
Proxy Statement 2022 | |
Proxy Statement 2022 | 9
Information about Our Board of
Directors and its Committees
Meetings of the Board of Directors and its Committees
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
In 2019,2021, the Board held fourten meetings, and acted by unanimous written consent fivenine times. The committees of the Board held a combined total of 2324 meetings. Each incumbentWith the exception of three directors that were unable to attend one ad hoc Board meeting, each director attended 100% of the aggregate of all of the meetings of the Board and the committees on which he or she served during the periods in which he or she served during 2019.2021. Under our Corporate Governance Guidelines, our directors are encouraged to attend the annual meeting of our stockholders.shareholders. All of our then-current directorsdirector nominees attended our 20192021 Annual Meeting of Stockholders. Mr. Stanbrook joined the Board in August 2019, and therefore was not present at the 2019 Annual Meeting.Shareholders.
BOARD PERFORMANCE PROCESS
Board Evaluation Process
As required by our Corporate Governance Guidelines, ourOur Board and each of its committees annually conduct a self-evaluation to assess and identify opportunities to improve their respective performance. The Governance & Corporate Responsibility (“GCR”) Committee (FKA Nominating/Governance Committee) is tasked with the oversight of the annual performance evaluation and to assist in designing and implementing such evaluations. The Governance & Corporate Responsibility (“GCR”) Committee has the authority to retain advisors or consultants and to provide for compensation to such consultants by the Company, as it shall deem appropriate.
In 2018, the GCR Committee reviewed and discussed the Board and Committee evaluation format and process and decided to add individual director performance evaluations. The GCR Committee and the Board elected to conduct the 2018 performance assessments through the use of electronic, written questionnaires. The GCR Committee elected to conduct the performance assessments electronically again in 2019. The 2019 board and committee evaluations process follows.
AWe engage a third party preparedto assist us by preparing the performance assessments for electronic delivery, compiledcompiling the responses, and aggregatedaggregating the results. Among other topics addressed, the Board and committee questionnaires solicitedevaluations solicit director opinions related to Board and committee effectiveness, director preparedness, strategic oversight, risk management, scope and content of presentations, access to management, and CEO and Board succession planning for the Board.planning.
Following completion by the directorsAs part of the performance assessments, the results were reviewed and aggregated by an independent third party. The third party provided a memorandum to the Chair of the GCR Committee summarizing the results ofevaluation process, the Board committee and individual director evaluations.
In early 2020, the Chair of the GCR Committee metmeets individually with each committee chair to discuss the results of his or her committee’s evaluation. The results of the committee evaluations wereare then reviewed by each committee chair with his or her committee members. The GCR chair also discussedBoard Chair then meets with each individual director the comments pertainingindividually to his or her director evaluation. Thediscuss the results of the Board evaluation. In addition, the results of the Board and committee evaluations were presented toare discussed at the Board.full Board and committee meetings.
Corporate GovernanceCORPORATE GOVERNANCE
We are committed to seeking excellence in corporate governance which includes the highest standards of professional and personal conduct. OurThe Board has adopted several governance documents to guide the operation and direction of our Board and its committees, which include our Corporate Governance Guidelines, Code of Ethics, Code of Conduct and charters for thea standing Audit Committee, CompensationCHR Committee, Governance & Corporate ResponsibilityGCR Committee (formerly known as the Nominating/Governance Committee) and Finance/Risk Management (“FRM”) Committee. Each committee may form and delegate some or all of these documents is available onits authority to subcommittees when it deems appropriate. Each committee also has the authority to obtain advice and assistance from internal or external legal, accounting or other advisors, to approve the fees and expenses of such outside advisors, and to cause the Company to pay the fees and expenses of such outside advisors. The CHR Committee additionally has the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of the compensation of our website atwww.group1auto.comsenior corporate officers and stockholders may obtain a printed copy, free of charge, by sending a written requestalso has the sole authority to Group 1 Automotive, Inc., 800 Gessner, Suite 500, Houston, TX 77024, Attn: Corporate Secretary.approve the consultant’s fees and other retention terms.
Board Leadership Structure
BOARD LEADERSHIP STRUCTURE
The Governance & Corporate Responsibility Committee’s charter provides that the committee willGCR Committee annually assessassesses and approveapproves the leadership structure of the Board. In 2019,2021, the GCR Committee conducted that assessment, and determined that having an independent director serve as non-executive Chairman of the Board Chair continues to be in the best interest of our stockholdersshareholders at this time. Our Chief Executive Officer is responsible for setting our strategic direction and providing day-to-day leadership, while the Chairman of the Board Chair sets the agenda for Board meetings, presides over meetings of the full Board and provides guidance to our Chief Executive Officer. We believe this structure at this time,currently ensures a greater role for the independent directors in the oversight of our Company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our Board. We discuss our directors’ qualifications and characteristics under “Proposal 1 — Election of Directors”.
Board DiversityDIRECTOR QUALIFICATIONS AND DIVERSITY CONSIDERATIONS
Our Governance & Corporate Responsibility Committee is responsible for identifying and recommending to our Board qualified individuals to be nominated to serve on our Board. Our Board’s objective is to select individuals that have a demonstrated record of integrity, sound business judgment, leadership, objectivity, independence of mind, and commitment. In selecting potential Board candidates, our Board seeks independent directors who represent a mix of backgrounds and experiences that will enhance the quality of our Board’s deliberations and decisions. Board membership should reflect diversity in its broadest sense, including persons diverse in perspectives, personal and professional experiences, geography, gender, and ethnicity. This process has resulted in a Board that is comprised of highly qualified directors that reflect diversity as we define it. The GCR Committee assesses the effectiveness of this approach as part of our Board’s annual self-evaluation process.
Independence of the Members of Our Board
The Board has analyzed the independence of each director. It has affirmatively determined that Mses. Barth, Taylor and Wright and Messrs. Adams, Quinn, Stanbrook, Szews and Watson (all of our non-employee directors) are independent directors under the listing standards of the New York Stock Exchange (“NYSE”). As part of its analysis, the Board determined that none of these directors has a material relationship with our Company. Mr. Hesterberg was determined not to be independent because he is our President and Chief Executive Officer, and Mr. Pereira, who was appointed to the Board following our acquisition of UAB Motors Participações, S.A. (“UAB”) in 2013, was determined not to be independent because he is our Regional Vice President, Brazil and the Chairman of UAB.
Charitable Contributions
We have in the past, and may, in the future, make donations to various charitable organizations. From time to time, some of our directors, officers and employees have been, and in the future may be, affiliated with such charities. During the annual independence review, our GCR Committee determined that any such affiliations did not impact the independence of our directors. We did not make any charitable donations to any organizations affiliated with our directors or officers in 2019.
Director Resignation Policy
Under our director resignation policy, in an uncontested election of directors, any nominee who receives a greater number of votes “against” than votes “for” his or her election will, promptly following the certification of the stockholder vote, tender his or her written resignation to the Board for consideration by the GCR Committee. The GCR Committee will consider the resignation and will make a recommendation to the Board concerning whether to accept or reject such resignation.
In determining its recommendation to the Board, the GCR Committee will consider all factors it considers relevant, which may include:
Under our director resignation policy, the Board will take formal action on the recommendation no later than 90 days following the certification of the results of the stockholders’ meeting. In considering the recommendation, the Board will consider the information, factors and alternatives considered by the GCR Committee and any additional information that the Board considers relevant. The Company will promptly disclose to the public the Board’s decision whether to accept or reject the director’s tendered resignation. If applicable, the Board will also disclose the reason or reasons for rejecting the tendered resignation.
Executive Sessions of Our Board
The independent directors meet in executive session at each regularly scheduled meeting of our Board. Mr. Quinn, our independent Chairman of the Board, presides over these meetings and is responsible for preparing an agenda for the meetings of the independent directors in executive session.
Risk Oversight
Our Board, as a whole and through its committees, has broad responsibility for the oversight of risk management with a focus on the most significant risks facing the Company, including strategic, operational, cyber, financial, legal and compliance risk. In its risk management role, our Board insures that our risk management processes and systems in place to identify and manage risks, are reasonable and functioning as designed. Our Board also has specific risk management oversight for governance, executive compensation and Chief Executive Officer succession planning.
Much of our Board’s oversight work is delegated to various committees, which meet regularly and report back to the full Board. All committees have significant roles in carrying out the risk oversight function. Each committee is comprised entirely of independent directors, except the Finance/Risk Management Committee, and is responsible for overseeing risks associated with its respective area of responsibility as further detailed below.
In addition to reports from its committees, our Board receives regular reports directly from the officers responsible for oversight of particular risks within our Company. Specifically, our officers report to our Board regarding the Enterprise Risk Management Program that management has implemented to assess, manage and monitor areas of risk that are significant to our business, including market and automotive technology risk, safety and property damage risk, strategic planning and operational risk, financial and accounting risk, information technology and cybersecurity risk, and governance, regulatory and legislative risk. Risk profiles are updated annually to ensure that all risks continue to be identified. Our officers also report to our Board on which risks management has assessed as the most significant, together with management’s plans to mitigate those risks. Further, outside counsel reports in person to our Board periodically on an as-needed basis to keep our directors informed concerning legal risks and other legal matters involving our Company. Finally, we have robust internal audit systems in place to review adherence to policies and procedures, which are supported by a separate internal audit department.
Cybersecurity and Information Security Risk Oversight
Our Board recognizes the importance of maintaining the trust and confidence of our customers, vendors, stockholders and employees, and devotes significant time and attention to oversight of cybersecurity and information security risk. The Board and Finance/ Risk Management Committee regularly receive presentations from our VP, Information Technology, on cybersecurity and information security risk, and on our cybersecurity initiatives. We also engage cybersecurity experts to review, evaluate and provide recommendations on our cybersecurity program. Additionally, to assure compliance with our policies and procedures, members of our internal audit department periodically visit our dealerships to ensure that our customer’s personal information is protected and secured appropriately. The results of those dealership audits are reported to the Audit Committee. In 2019, our Board, the Finance/Risk Management Committee and the Audit Committee received cybersecurity and information security risk reports at least quarterly.
Corporate Social Responsibility Oversight
At Group 1, we work to conduct our business in ways that are principled and accountable to key stakeholders and the communities in which we do business. Our Board and members of management recognize the importance of establishing an effective “tone at the top” with respect to giving back, and are actively involved in supporting various charitable organizations through their time and donations. In an effort to better inform our shareholders and the investment community of the numerous activities of our corporate office and dealerships, we have set up a constantly updated website that provides pertinent data on our corporate social responsibility. Through the leadership of our Board, management continues to place great emphasis on four principal areas that govern our corporate social responsibility: Community, Workplace, Environment and Safety and Governance, as more fully described on page 25.
Please visit our website atwww.group1auto.com/group1cares, our web pages on LinkedIn and Facebook, or follow us on Twitter and Instagram, for more detailed information on our corporate social responsibility practices, including our charitable and philanthropic efforts in all three of our major markets.
Committees of Our Board
Our Board has established four standing committees to assist it in discharging its responsibilities: the Audit Committee, the Compensation Committee, the Governance & Corporate Responsibility Committee and the Finance/Risk Management Committee. The following chart reflects the current membership of each committee:
Governance | ||||||||||
Finance/Risk | & Corporate | |||||||||
Audit | Compensation | Management | Responsibility | |||||||
Name | Board | Committee | Committee | Committee | Committee(3) | |||||
John L. Adams(1) | ||||||||||
Carin M. Barth | ||||||||||
Earl J. Hesterberg | ||||||||||
Lincoln Pereira | ||||||||||
Stephen D. Quinn | ||||||||||
Steven P. Stanbrook(2) | ||||||||||
Charles L. Szews | ||||||||||
Anne Taylor | ||||||||||
Max P. Watson, Jr. | ||||||||||
MaryAnn Wright | ||||||||||
MEETINGS HELD IN 2019 | 4 | 8 | 7 | 4 | 4 |
Each of the committee charters is available on our website atwww.group1auto.comand stockholders may obtain printed copies, free of charge, by sending a written request to Group 1 Automotive, Inc., 800 Gessner, Suite 500, Houston, TX 77024, Attn: Corporate Secretary.
AUDIT COMMITTEE
Pursuant to its charter, the purposes and responsibilities of our Audit Committee are to:
In addition to, and in connection with, the purposes and responsibilities described above, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm.
All members of the Audit Committee are independent as that term is defined in the NYSE’s listing standards and by Rule 10A-3 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”). Our Board has determined that each member of the Audit Committee is financially literate and that Ms. Barth has the necessary accounting and financial expertise to serve as Chairman.
Our Board has also determined that each of Ms. Barth and Messrs. Quinn and Szews is an “audit committee financial expert” following a determination that Ms. Barth and Messrs. Quinn and Szews met the criteria for such designation under SEC rules and regulations. For information regarding the business experience for Mses. Barth and Taylor and Messrs. Quinn, Stanbrook and Szews, please read “Proposal 1 — Election of Directors.” The Audit Committee held eight meetings during 2019, and acted by unanimous written consent twice. All individuals who were members of the Audit Committee at such time attended each meeting of the Audit Committee.
The Report of the Audit Committee is set forth on page 45 of this proxy statement.
COMPENSATION COMMITTEE
Pursuant to its charter, the purposes and responsibilities of our Compensation Committee are to:
In connection with these purposes, our Board has entrusted the Compensation Committee with the overall responsibility for establishing, implementing and monitoring the compensation for our senior corporate officers (our named executive officers and officers that report directly to our Chief Executive Officer).
The Compensation Committee works with the management team, our Chief Executive Officer and our Senior Vice President, Human Resources, Training and Operations Support, to implement and promote our executive compensation strategy; however, members of management do not participate in decisions regarding their own compensation.
Under its charter, the Compensation Committee has the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of the compensation of our senior corporate officers and also has the sole authority to approve the consultant’s fees and other retention terms.
The Compensation Committee has historically engaged Pearl Meyer & Partners, LLC (“PM&P”) to conduct a compensation analysis which involved the comparison of long-term, short-term and total compensation of our named executive officers with a selected group of peer companies. While we do not think it is appropriate to establish compensation based solely on market analysis, we believe that this practice is useful for two reasons.
First, our compensation practices must be competitive in order to attract and retain executives with the ability and experience necessary to provide leadership and to deliver strong performance to our stockholders. Second, reviewing market analysis allows us to assess the reasonableness of our compensation practices. This
process allows us to achieve one of our primary objectives of maintaining competitive compensation to ensure retention when justified and rewarding the achievement of Company objectives so as to align with stockholder interests. PM&P is an independent compensation consulting firm and does not provide any other services to us outside of matters pertaining to executive officer and director compensation. PM&P reports directly to the Compensation Committee, which is the sole party responsible for determining the scope of services performed by PM&P and the directions given to PM&P regarding the performance of such services.
In February 2020, the Compensation Committee considered the independence of PM&P in light of SEC rules and listing standards of the NYSE. The Compensation Committee requested and received a letter from PM&P addressing the consulting firm’s independence, including the following factors: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation Committee; (5) any company stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our named executive officers and the consulting firm or the individual consultants involved in the engagement. The Compensation Committee discussed these considerations, among other things, and concluded that the work of PM&P did not raise any conflict of interest.
All members of the Compensation Committee are independent as that term is defined in the NYSE’s listing standards, including the heightened standards applicable to compensation committee members. The Compensation Committee held seven meetings during 2019 and acted by unanimous written consent once. All individuals who were members of the Compensation Committee at such time attended each meeting of the Compensation Committee.
The Report of the Compensation Committee is set forth on page 58 of this proxy statement.
GOVERNANCE & CORPORATE RESPONSIBILITY COMMITTEE
Pursuant to its charter, the purposes and responsibilities of our Governance & Corporate Responsibility Committee (FKA Nominating/Governance Committee) are to:
In connection with these purposes, the GCR Committee actively seeks individuals qualified to become members of our Board, seeks to implement the independence standards required by law, applicable listing standards, our Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”), our Third Amended and Restated Bylaws (“Bylaws”) and our Corporate Governance Guidelines, and identifies the qualities and characteristics necessary for an effective Chief Executive Officer.
In considering candidates for our Board, the GCR Committee, which identifies and recommends board candidates to the full Board, will consider the entirety of each candidate’s credentials. There is currently no set of specific minimum qualifications that must be met by a nominee recommended by the GCR Committee, as different factors may assume greater or lesser significance at particular times and the needs of our Board may vary in light of its composition and the GCR Committee’s perceptions about future issues and needs. However, while the GCR Committee does not maintain a formal list of qualifications, in making its evaluation and recommendation of candidates, the GCR Committee may consider, among other factors, diversity, age, skill, experience in the context of the needs of our Board, independence qualifications, moral character and whether prospective nominees have relevant business and financial experience or have industry or other specialized expertise.
The GCR Committee may consider candidates for our Board from any reasonable source, including from a search firm engaged byconsiders the GCR Committee or stockholder recommendations, provided that the procedures set forth below are followed. The GCR Committee does not intend to alter the manner in which it evaluates candidates based on whether the candidate is recommended by a stockholder or not. However, in evaluating a candidate’s relevant business experience, the GCR Committee may consider previous experience as a member of our Board. Any invitation to join our Board must be extended by our Board as a whole, by the Chairmandiversity of the GCR CommitteeBoard when identifying director nominees in accordance with its charter. We believe board membership should reflect diversity in its broadest sense, including persons diverse in perspectives, personal and byprofessional experiences, geography, gender, race and ethnicity. This process has resulted in a Board that is comprised of highly qualified and diverse directors.
BOARD INDEPENDENCE
The Board determined that all non-employee directors are independent directors under the Chairmanlisting standards of the Board.
Stockholders or a groupNew York Stock Exchange (“NYSE”). As part of stockholders may recommend potential candidates for consideration byits analysis, the GCR Committee. For additional information on such requests and the applicable timing, please see “Stockholder Proposals for 2021 Annual Meeting.”
In addition to the purposes described above, our Board has entrusted the GCR Committee with the responsibility for establishing, implementing and monitoring the compensation for our directors. The GCR Committee establishes, reviews and approves the compensation of our directors and makes appropriate adjustments based on Company performance, duties and responsibilitiesdetermined that none of the directors have a material relationship with our Company. Each of Messrs. Hesterberg and competitive environment.Pereira was determined not to be independent because they are employees of Group 1.
The Board has determined that each of the members of the Audit Committee, CHR Committee and GCR Committee are independent under applicable NYSE and Securities and Exchange Commission (“SEC”) rules for committee memberships, and that each member of the Audit Committee also meets the additional independence criteria set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All members of the GCRFinance/Risk Management Committee, except for Messrs. Hesterberg and Pereira, are also independent as defined under the NYSE’s listing standards. The Board has also determined that each of Ms. Barth and Messrs. Quinn and Szews qualifies as an “audit committee financial expert” as that term is defined under SEC rules.
We have in the past, and may, in the future, make donations to various charitable organizations. From time to time, some of our directors, officers and employees have been, and in the future may be, affiliated with such charities. During the annual independence review, our GCR Committee determined that any such affiliations did not impact the independence of our directors. We did not make any charitable donations to any organizations affiliated with our directors or officers in 2021.
DIRECTOR RESIGNATION POLICY
Under our director resignation policy, in an uncontested election of directors, any nominee who receives a greater number of votes “against” than votes “for” his or her election will, promptly following the certification of the shareholder vote, tender his or her written resignation to the Board for consideration by the GCR Committee. The GCR Committee will consider the resignation, as well as all factors it considers relevant, and will make a recommendation to the Board concerning whether to accept or reject such resignation.
The Board will take formal action on the recommendation no later than 90 days following the certification of the results of the shareholders’ meeting. The Company will promptly disclose to the public the Board’s decision whether to accept or reject the director’s tendered resignation. If applicable, the Board will also disclose the reason or reasons for rejecting the tendered resignation.
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COMMITTEES OF OUR BOARD
Our Board has established four standing committees to assist it in discharging its responsibilities: the Audit Committee, the CHR Committee, the GCR Committee and the Finance/Risk Management Committee. Each committee is required to perform the key functions summarized below as well as other such functions set forth in its charter or assigned by our Board from time to time.
Audit Committee
Our Audit Committee assists the Board in oversight of Group 1’s:
financial statements and other financial information provided by us to any governmental body or the public;
compliance with legal and regulatory requirements;
the qualifications, performance and independence of our independent registered public accounting firm; and
the effectiveness and performance of our internal audit function.
In addition, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm.
The Audit Committee held nine meetings during 2021 and acted by unanimous written consent one time.
The Report of the Audit Committee is set forth on page 29 of this proxy statement.
Compensation & Human Resources Committee
Our CHR Committee’s responsibilities are to:
review, evaluate, and approve senior corporate officers’ compensation;
identify, manage and mitigate any potential risks in the Company’s executive compensation plans;
oversee all matters relating to the succession of the key corporate officers of the Company other than our Chief Executive Officer;
review and discuss with our management the CD&A to be included in our proxy statement for the Annual Meeting of Shareholders and to determine whether to recommend to our Board that the CD&A be included in the proxy statement, in accordance with applicable rules and regulations;
produce the Compensation & Human Resources Committee Report for inclusion in the proxy statement;
oversee the Company’s human capital resources management strategy, including the recruitment, development and retention of personnel, talent management, and diversity, equity and inclusion; and
otherwise discharge our Board’s responsibility relating to compensation of our senior corporate officers.
For additional information regarding the role of management in the CHR Committee process, please see “2021 Compensation Discussion and Analysis — Role of the Compensation & Human Resources Committee, its Consultant and Management.”
The CHR Committee held seven meetings during 2021 and acted by unanimous written consent one time.
The Report of the CHR Committee is set forth on page 49 of this proxy statement.
Governance & Corporate Responsibility Committee
Our GCR Committee’s responsibilities are to:
assist our Board by identifying individuals qualified to become members of our Board and recommend director nominees to our Board;
recommend to our Board the appropriate composition of our Board and its committees and Board committee membership and leadership;
advise our Board about and recommend to it appropriate corporate governance guidelines and practices and assist in implementing the same;
oversee the succession of our Chief Executive Officer;
review the Company’s policies governing political contributions and lobbying, and review Company and political action committee political contributions and expenditures;
review matters relating to the Company’s governance and corporate responsibility to confirm compliance with emerging best practices;
review ESG matters, including significant issues of corporate social and environmental responsibility and safety;
review the Company’s material community participation and charitable efforts, including matters relating to the Group 1 Foundation; and
establish, review and approve the compensation of our directors.
The GCR Committee held four meetings during 2019. All individuals who were members of the GCR2021.
Finance/Risk Management Committee at such time attended each meeting of the GCR Committee.
FINANCE/RISK MANAGEMENT COMMITTEE
Pursuant to its charter and other applicable policies, the purposes of ourOur Finance/Risk Management Committee are to:assists our Board in its oversight of corporate finance and risk management, including:
review, oversee, advise and report to our Board regarding our financial status and capital structure, debt and equity financings, cash management and other banking activities, compliance with covenants of material debt instruments, investor/shareholder relations, relationships with various financial constituents and securities repurchase activities, and authorize transactions related thereto within limits prescribed by our Board;
review return on investment for our shareholders through dividend and stock repurchase programs;
review and assess risk exposure, including cybersecurity and insurance related to our operations, and authorize transactions within limits prescribed by our Board; and
review capital expenditures and other capital spending plans, including significant acquisitions and dispositions of businesses or assets, and authorize transactions within limits prescribed by our Board.
The Finance/Risk Management Committee held five meetings during 2021 and acted by unanimous written consent one time.
RISK OVERSIGHT
We have a robust Enterprise Risk Management Program, designed to identify, assess, monitor, manage, and mitigate our significant business risks by concentrating primarily in five principal areas that are significant to our business:areas: (1) safety and property damage risk; (2) strategic planning and operational risk; (3) financial and accounting risk; (4) information technology and cybersecurity risk; and (5) governance, regulatory and legislative risk. Risk profiles are formally updated annually to ensure that alland as needed when significant risks continue to be identified.emerge like COVID-19 pandemic risks in 2020. Management updates the Finance/Risk Management Committee as new risks are identified, and on the steps taken to mitigate such risks. On an annual basis, management reviews results from tests of key risks with the full Board and the steps taken to mitigate new risks which have been identified.
Further, outside counsel advises our Board periodically on an as-needed basis to keep our directors informed concerning legal risks and other legal matters involving our Company. Finally, we have robust internal audit systems in place to help identify and mitigate risk and improve our internal controls, including reviewing our adherence to policies and procedures.
All
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Each Board committee has a significant role in assisting the Board in overseeing the risks that impact Group 1. Each committee is responsible for overseeing risks associated with its respective area of responsibility as further detailed below.
Committee | Responsibilities | |
Finance/Risk Management Committee | • Oversight of our operations risk, including quarterly reviews of cybersecurity and data protection, litigation management, and enterprise risk management strategies. • Monitors our finance-related activities and provides guidance to management and the Board concerning our capital structure, capital allocation and our long-range financial policies and objectives. • Oversees the formal process to identify risks company-wide, allocate them to the appropriate Board committee, and ensure that risk mitigation activities are being followed. | |
Audit Committee | • Oversight of risks relating to accounting matters, financial reporting and legal and regulatory compliance. • Meets with our management and independent registered public accounting firm regarding the adequacy of our financial controls and our compliance with legal, tax and regulatory matters, as well as our significant financial and accounting policies. • Meets with our vice president of internal audit and with other members of management, to review the identified risk areas and scope and results of the internal audits. • Audit Committee Chair routinely meets between formal Audit Committee meetings with our chief financial officer, general counsel, corporate controller, vice president of internal audit and our independent registered public accounting firm. | |
Compensation & Human Resources Committee | • Oversight of succession planning for our key corporate officers (except our Chief Executive Officer) and the associated risks. • Responsible for overseeing risks relating to employment policies, our compensation policies and programs, including the DEI Council, and our benefits systems. • Has retained its own compensation consultant and meets regularly with management to understand the financial, human resources and shareholder implications of compensation decisions being made. • A separate discussion regarding the risk considerations in our compensation programs, including the processes that are put in place by the CHR Committee and management to identify, manage and mitigate potential risks in compensation, can be found beginning on page 48 of this proxy statement. | |
Governance & Corporate Responsibility Committee | • Oversight of succession planning for our Chief Executive Officer and the associated risks. • Responsible for identifying diverse and qualified Board candidates and other matters related to Board succession planning. • Conducts a review of the performance of the Board and its committees and reviews and reassesses the adequacy of the corporate governance guidelines and recommends any proposed changes to the Board. • Reviews matters relating to the Company’s governance, corporate compliance, and corporate responsibility, including ESG. |
CYBERSECURITY AND INFORMATION SECURITY RISK OVERSIGHT
Our Board recognizes the importance of maintaining the trust and confidence of our customers, vendors, shareholders and employees, and devotes significant time and attention to oversight of cybersecurity and information security risk. At each of its meetings, the FRM Committee receives presentations from our VP, Information Technology, on cybersecurity and information security risk, and on our cybersecurity initiatives. We also engage cybersecurity experts to review, test, evaluate and provide recommendations on our cybersecurity program. Additionally, to assure compliance with our policies and procedures members of our internal audit department regularly visit our dealerships to ensure that our customers’ personal information is protected and secured appropriately. The results of those dealership visits are reported to the Audit Committee. In 2021, our Board, the Finance/Risk Management Committee except for Mr. Hesterberg, our President and Chief Executive Officerthe Audit Committee received cybersecurity and Mr. Pereira, our Regional Vice President, Brazil, are independent as defined under the NYSE’s listing standards. The Finance/Risk Management Committee held four meetings during 2019. All individuals who were members of the Finance/Risk Management Committeeinformation security risk reports at such time attended each meeting of the Finance/Risk Management Committee.least quarterly.
Communications with Directors
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TRANSPARENCY AND ENGAGEMENT
Governance Documents
Our key governance documents including our Corporate Governance Guidelines and committee charters are available on our Investor Relations website at www.group1corp.com and shareholders may obtain a printed copy, free of charge, by sending a written request to Group 1 Automotive, Inc., 800 Gessner, Suite 500, Houston, TX 77024, Attn: Corporate Secretary.
Communications With Directors
Our Board welcomes communications from our stockholdersshareholders and other interested parties. StockholdersShareholders and any other interested parties may send communications to our Board, to any committee of our Board, to the independent Chairman of the Board Chair (who presides over the executive sessions of our independent and non-management directors), or to any director in particular, to:
c/o Group 1 Automotive, Inc.
800 Gessner, Suite 500
Houston, Texas 77024
Attn: ChairmanChair of the Board
Any appropriate correspondence addressed to our Board, to any committee of our Board, to the independent Chairman of the Board Chair, or to any one of the directors in care of our offices will be forwarded to the addressee or addressees.
Each year, management interfaces with prospective investors, existing stockholders,shareholders, and buy-side and sell-side investment research analysts in a variety of event formats, to discuss the Company’s publicly disclosed performance, business strategy and outlook, and corporate governance. These events include earnings teleconferences; investor calls, meetings, and conference events; non-deal road trips; and occasionally site visits. Key topics include discussions regarding salescapital allocation, share repurchases, company growth through acquisitions, the impact of our inventory supply on new and used vehicles,use vehicle sales, market trends, parts and service strategies, successful implementation of our AccelerideAcceleRide® and Val-u-Line® vehicle sales programs, success with hiring technicians, the impact of Brexit in the U.K.,COVID-19 pandemic on our operations, our digital retail strategies, capital allocation, and profitability. We address these topics with slide data in our roadshows and talking points on our earnings calls, conferences, and investor meetings. This interaction ensures that management and the Board understand and consider the views of our stockholders,shareholders, perception of the investment community, and industry and economic outlook from the Company’s Wall Street covering analysts, while enabling the Company to dynamically operate in an evolving industry and economy with respect to maximizing return for our stockholders.shareholders.
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Corporate Social ResponsibilitySustainability
Corporate social responsibility is central
Our core values of integrity, transparency, professionalism, teamwork and respect underlie our commitment to conduct our business practices,in ways that are principled and accountable to key stakeholders, the continuous improvement of our operations, and our relationships with our employeesenvironment and the communities we call home.We have always focused on delivering strong financial results, and we remain committed to doing so in a way that respects the communities and environments in which we operate. That’s why we strongly consider environmental, social and governance (ESG) factors when making investment and operational decisions. Doing so helps ensure that our business operations have a positive impact on the planet, the people whose lives we touch and our bottom line. In an effort to better inform our shareholders and the investment community of the numerous activities of our corporate office and dealerships, we have set up a constantly updated website that provides pertinent data on our corporate social responsibility. Please visit our website atwww.group1auto.com/group1cares, our web pages on LinkedIn and Facebook, or follow us on Twitter and Instagram, for more detailed information on our corporate social responsibility practices, including our charitable and philanthropic efforts in all three of our major markets.
Community participation and charitable donations that enrich the communities we serve have always been a priority for Group 1, and are continuously encouraged and supported by our directors and senior management. We are proud of these efforts and our employees from our corporate office, business centers and dealerships around the world who generously give of their time and resources to benefit others.
Our employees are our greatest asset. We know that actively supporting the success and well-being of our employees is one of the best investments our company can make in its own sustainability. We also recognize the importance of training in the workplace to develop skills, promote best practices and support the success and advancement of our employees. Workplace satisfaction is key to attracting and retaining the best talent. To an increasing number of workers, job satisfaction has much to do with work/life balance, so scheduling is a primary consideration when making their decision to join or stay with a company. In 2017, Group 1 responded by piloting a flexible four-day schedule in four of our stores. Prior to the recent re-sizing of our business due to the outbreak of COVID-19 (coronavirus), more than 50% of our technicians and more than 80% of our advisors were on the four-day schedule. The goal is for the employees to work the same hours for the same pay, but do so in fewer days — giving them the personal and family time they value. The result is happier, more productive employees, as evidenced by a double-digit improvement in retention for both technicians and advisors.
Our commitment to sound corporate citizenship includes minimizing our impact on the environment, and doing what we can to contribute to a healthier planet. We also have an obligation to spend our shareholders’ money wisely. When constructing our various facilities and considering the nature of our operations, we carefully choose projects that are environmentally responsible, economically viable and good for the company’s long-term financial success. In 2019, we focused on energy-saving initiatives such as LED lighting and solar energy. We are eager to find more opportunities like these where good environmental stewardship improves our long-term financial results.business. We are committed to minimizingtransparency in sharing out sustainability progress. For updates on our environmental impactprogress and continually look for ways to reduceaccess our carbon footprint. We work to establish sound policies that support environmental and safety issues, including a robust recycling program.2021 Sustainability Report, please visit www.group1corp.com/ESG.
SUSTAINABILITY GOVERNANCE
We are committed to responsible business practices and continuous improvement of the sustainability of our operations and our relationships with our employees and the communities in which we live and work. Our core values - integrity, transparency, professionalism and teamwork - underlieWhile our commitment to conductGCR Committee oversees our business in ways that are principled and accountable to key stakeholders and the business community. Our Governance & Corporate Responsibility Committee advises the Board on appropriate corporate governance guidelinesESG policies and practices, other Board committees also play a role in our sustainability efforts, relating to cybersecurity, human capital management, health & safety and assistscorporate risk management. In addition, our Board in implementing those guidelinesmanagement team and practices.other employee subject matter experts are responsible for the implementation of our ESG strategy, initiatives and communications.
Group 1 Foundation
Group 1 Foundation, the 501(c)(3) charitable arm of our business, was formed in 2005 (in response to Hurricane Katrina) to provide guidance, emotional support and financial assistance to Group 1 employees and their immediate families who suffer hardship due to natural disasters, emergencies, extended illness, injury, fire, flood or other special situations beyond their control. Funds are made available through fundraisers and contributions from employees, Board members and vendors, and are distributed to help employees and their families with temporary, critical expenses. In 2017 and 2018, affected employees were provided temporary living and related expenses after Hurricanes Harvey and Michael. In 2019, we assisted employees in southeast Texas who were affected by Tropical Storm Imelda. Since 2017, we have disbursed over $1.3 million to 370 employees.
Proxy Statement 2022 | |
Our CertificateProxy Statement 2022 | 17
Election of Incorporation and Bylaws currently provide for annual elections of directors. Directors
Our Board of Directors has nominated nine directors for election at this Annual Meeting to hold officebe elected to serve on our Board until the next annual meeting and the election of their successors. All of the nominees are currently directors. With the exception of Mr. Stanbrook who joinedEach nominee was elected to our Board in August 2019, all of the nominees were elected directors by a vote of the stockholders at theour last annual meeting of stockholders which was held on May 16, 2019.12, 2021. Each nominee agreed to be named in this Proxy Statement and to serve if elected. All then-current directors attended
For more information on the 2019 Annual Meeting.director nominees, please see the section entitled “Qualifications of Our Board of Directors” beginning on page 19.
The following table sets forth certain information, as of the date of this proxy statement, regarding our director nominees.
Director | Position and Offices with Group 1 | Director Since | Age | |||
Carin M. Barth | Director | 2017 | 57 | |||
Earl J. Hesterberg | Director, President and Chief Executive Officer | 2005 | 66 | |||
Lincoln Pereira | Director, Regional Vice President, Brazil | 2013 | 60 | |||
Stephen D. Quinn | Director, Non-Executive Chairman of the Board | 2002 | 64 | |||
Steven P. Stanbrook | Director | 2019 | 62 | |||
Charles L. Szews | Director | 2016 | 63 | |||
Anne Taylor | Director | 2018 | 64 | |||
Max P. Watson, Jr. | Director | 2001 | 74 | |||
MaryAnn Wright | Director | 2014 | 58 |
We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, ifIf any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.
The number of directors on our Board is reviewed annually and fixedadjusted by our Board from time to time. We currently have ten directors serving on our Board. Effective as of the Annual Meeting, the Board size will be reduced to nine members as Mr. Adams has reached the Company’s mandatory retirement age for non-management directors. The Board will continue to evaluate the size of the Board and make adjustments as neededtime to meet the current and future needs of the Company.
Stockholders may not cumulate their votes in the election of our directors. Under Delaware law and our Bylaws, aA majority of votes cast by stockholdersshareholders entitled to vote in the election of directors is required for the election of directors. This means that director nominees who receive more “for” votes than “against” will be elected for that position. You may vote “for” or “against” with respect to the election of directors. Only votes “for” or “against” are counted in determining whether a majority has been cast in favor of a director. Abstentions are not counted for purposes of the election of directors.
OurPlease see “Director Resignation Policy” on page 10 for a description of our majority vote director resignation policy requires, in an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” to promptly tender his or her resignation following certification of the election results. The Governance & Corporate Responsibility Committee will promptly consider the resignation and a range of possible responses based on the circumstances that led stockholders to withhold votes, if known, and make a recommendation to the Board. The Board will act on the committee’s recommendation within 90 days following certification of the results of the election.policy.
Our Board of Directors
DIRECTOR SKILLS AND DEMOGRAPHICS
Our Board believes that each of our directors is highly qualified to serve as a member of our Board. Each of our directors has contributed to the mix of skills, core competencies and qualifications of our Board. Our directors are highly educated and have diverse backgrounds and talents and successful records of accomplishment in what we believe are highly relevant positions with well-regarded organizations. Our Board has also considered the fact that all ofexperience our directors have workedfrom working for, or servedserving on the boards of directors of, a variety of companies in a wide range of industries. Many of our directors also have served as directors of Group 1 for many years and benefit from an intimate knowledge of our operations and corporate philosophy. Our Board believes that through their varying backgrounds, our directors bring a wealth of experiences and new ideas to our Board.
Described on the following pages are the principal occupations, positions and directorships for at least the past five years of our director nominees, as well as certain information regarding their individual experience, qualifications, attributes and skills that led our Board to conclude that they should serve on our Board. There are no family relationships among any of our directors or named executive officers.
Skills and Qualifications of Our Board of DirectorsDemographic Matrix
The following table includes the breadth and variety of business experience that each of our director nominees brings to our Board.
Board Member | ||||||||||||||||||
Carin M. Barth | Earl J. Hesterberg | Lincoln Pereira | Stephen D. Quinn | Steven P. Stanbrook | Charles L. Szews | Anne Taylor | Max P. Watson, Jr. | MaryAnn Wright | ||||||||||
Experience/Knowledge: | ||||||||||||||||||
# of Other Public Company Boards Currently Serving On | 2 | 1 | – | 1 | 2 | 3 | 1 | – | 3 | |||||||||
President or Former CEO | ||||||||||||||||||
Public Company Executive Position | ||||||||||||||||||
Automotive | IB | |||||||||||||||||
Retail | IB | |||||||||||||||||
Engineering/Product Development | ||||||||||||||||||
Expertise: | ||||||||||||||||||
International | IB | |||||||||||||||||
Finance | ||||||||||||||||||
Human Resources/Cultural | ||||||||||||||||||
Legal | ||||||||||||||||||
Mergers & Acquisitions | ||||||||||||||||||
Accounting | IB | |||||||||||||||||
P&L/Income Statement Responsibility | ||||||||||||||||||
SOX Financial Expert | ||||||||||||||||||
Attributes: | ||||||||||||||||||
Technology | ||||||||||||||||||
Independent | ||||||||||||||||||
Diversity |
The following table includes the breadth and variety of business experience that each of our director nominees brings to our Board. | ||||||||||||||||||||
Experience / Knowledge | ||||||||||||||||||||
# of Other Public Company Boards Currently Serving On | 2 | - | 1 | 1* | 1 | 1 | 2 | 2 | 2 | |||||||||||
Former President or CEO | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ||||||||||||||
Public Company Executive Position | ⬛ | ⬛ | ⬛ | ⬛ | ||||||||||||||||
Automotive | ⬛ | ⬛ | IB | ⬛ | ⬛ | |||||||||||||||
Retail | ⬛ | ⬛ | ⬛ | IB | ⬛ | ⬛ | ||||||||||||||
Engineering/Product Development | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | |||||||||||||||
Expertise | ||||||||||||||||||||
International | ⬛ | ⬛ | ⬛ | IB | ⬛ | ⬛ | ⬛ | ⬛ | ||||||||||||
Finance | ⬛ | ⬛ | ⬛ | |||||||||||||||||
Human Resources/Cultural | ⬛ | ⬛ | ⬛ | ⬛ | ||||||||||||||||
Legal | ⬛ | |||||||||||||||||||
Mergers & Acquisitions | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | |||||||||||
Accounting | ⬛ | IB | ⬛ | |||||||||||||||||
P&L/Income Statement Responsibility | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ||||||||||||||
SOX Financial Expert | ⬛ | ⬛ | ⬛ | |||||||||||||||||
Technology | ⬛ | ⬛ | ⬛ | ⬛ | ||||||||||||||||
Attributes | ||||||||||||||||||||
Independent | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | ⬛ | |||||||||||||
Identity (self-identified in D&O Questionnaire) | ||||||||||||||||||||
Gender Identity (Male/Female) | F | M | M | M | M | M | M | F | F | |||||||||||
LGBTQ+ (Yes/No) | N | N | N | N | N | N | N | N | N | |||||||||||
Race/Ethnicity (White, African American/Black, Latino, Multiracial) | W | W | AA/B | W/L/M | W | W | W | W | W |
The lack of a⬛ for a particular item does not mean that the director does not possess that qualification, characteristic, skill or experience. We look to each director to be knowledgeable in these areas; however, the⬛ indicates that the item is a specific qualification, characteristic, skill or experience that the director brings to the Board.
IB – covered industry as Investment Banker
*Company is listed on the Brazilian Stock Exchange
Proxy Statement 2022 | |
CARIN M. BARTH
Age 57Proxy Statement 2022 | 19
Director Since: 2017DIRECTOR QUALIFICATION AND CONSIDERATIONS
Independent Director
Carin M. Barth has served as oneThe GCR Committee actively seeks individuals qualified to become members of our directors since February 2017. She is co-founder and PresidentBoard, seeks to implement the independence standards required by law, applicable listing standards, our Certificate of LB Capital, Inc., a private equity investment firm established in 1988. Ms. Barth serves on the Board of Directors of Enterprise Holdings, LLC, the General Partner of Enterprise Product Partners, L.P., one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, and Black Stone Minerals, L.P., one of the largest oil and gas mineral and royalty companies in the United States, where she serves as Chair of the Audit Committee. Ms. Barth also serves as Chair and a Trustee of the Welch Foundation, and as a Board member of the Ronald McDonald House in Houston, Texas. From 2012 through 2018, Ms. Barth served as Chair of the Investment Advisory Committee for Texas Tech University. From 2008 to 2014, she served as a Commissioner for the Texas Department of Public Safety. Ms. Barth previously served on the Board of Directors of Halcón Resources, an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the U.S. from April 2019 to October 2019. She also served on the Board of Directors of Bill Barrett Corporation where she served on the Compensation Committee and on the NominatingIncorporation, our Bylaws and Corporate Governance Committee from 2012 through 2016. From 2010 through 2017, she served onGuidelines. For more information, visit the board of directors of Strategic Growth Bancorp Incorporated, a privately held bank holding company located in El Paso, Texas, where she served as Chair of the Audit Committee, and Capital Bank, SSB, an affiliate of Strategic Growth Bancorp. Additional past board service includes Western Refining, Inc. from 2006 through 2016, where she served as Audit Committee Chair, Methodist Hospital Research Institute from 2007 through 2012, Encore Bancshares, Inc. from 2009 through 2012, Amegy Bancorporation, Inc. from 2006 through 2009, Texas Public Finance Authority from 2006 through 2008, and the Texas Tech University System Board of Regents from 1999 through 2005. Ms. Barth was also appointed by President George W. Bush to serve as Chief Financial Officer of the U.S. Department of Housing and Urban Development from 2004 to 2005. Ms. Barth received a B.S. from the University of Alabama and an M.B.A. from Vanderbilt University’s Owen Graduate School of Management.
Ms. Barth has extensive experience in a variety of financial matters, including as chief financial officer for several entities. She also has a history of corporate and civic governance which provides additional depth and financial expertise to our Board. Her experience with mergers and acquisitions, in operating a private equity company, her previous and currently held board positions on other publicly traded companies and her audit committee experience are key attributes, among others, that make her well qualified to serve on our Board. Ms. Barth qualifies as an “audit committee financial expert.”
EARL J. HESTERBERG
Age 66
Director Since: 2005
Earl J. Hesterberg has served as our President and Chief Executive Officer and as a director since April 2005. Prior to joining us, Mr. Hesterberg served as Group Vice President, North America Marketing, Sales and Service for Ford Motor Company, a global manufacturer and distributor of cars, trucks and automotive parts, since October 2004. From July 1999 to September 2004, he served as Vice President, Marketing, Sales and Service for Ford of Europe, and from 1999 until 2005, he served on the supervisory board of Ford Werke AG. Mr. Hesterberg has also served as President and Chief Executive Officer of Gulf States Toyota, an independent regional distributor of new Toyota vehicles, parts and accessories. He has also held various senior sales, marketing, general management, and parts and service positions with Nissan Motor Corporation in U.S.A. and Nissan Europe, both of which are wholly owned by Nissan Motor Co., Ltd., a global provider of automotive products and services. Mr. Hesterberg serves on the Board of Directors of Stage Stores, Inc., a national retail clothing chain with over 800 stores located in 42 states where he is a member of the Corporate Governance and Nominating Committee and Chairman of the Compensation Committee. He is a past member of the Board of Trustees of Davidson College. Mr. Hesterberg also serves on the Board of Directors of the Greater Houston Partnership, where he serves on the Executive Committee and is Chairman of the Business Issues Committee. Mr. Hesterberg received his B.A. in Psychology at Davidson College and his M.B.A. from Xavier University in 1978.
As our President and Chief Executive Officer, Mr. Hesterberg sets the strategic direction of our Company under the guidance of our Board. He has extensive senior executive management experience in the automotive industry. His successful leadership of our Company and extensive knowledge of the automotive industry provides our Board with a unique perspective on the opportunities and challenges we face, and makes him well qualified to serve on the Board.
LINCOLN PEREIRA
Age 60
Director Since: 2013
Lincoln Pereira has served as one of our directors since February 2013. Mr. Pereira has served as our Regional Vice President, Brazil since March 2013 and has served as Chairman of our subsidiary, UAB (which we acquired in February 2013), since 2007. From 1999 to 2005, Mr. Pereira served as a legal representative of United Auto do Brasil Ltda, a public auto group operating in São Paulo and controlled by United Auto Group. From 1995 through 2005, Mr. Pereira practiced law with Cunha Pereira Advogados, representing professional athletes and international racecar drivers. He founded Atrium Telecomunicações Ltda, a provider of local exchange telecommunication services. Atrium was sold to Telefonica of Spain in December 2004, and Mr. Pereira founded E-Vertical Tecnologia, a leading provider of high tech facilities management services to commercial properties. From 1978 through 1995, Mr. Pereira held numerous positions with various banks, both in Brazil and abroad. Mr. Pereira serves on the Board of Boa Vista Servicos S.A.-SCPC, the second largest credit bureau in Brazil, and on the Board of Tempo Telecomunicaçöes. He is a Vice President of the São Paulo Chamber of Commerce (ACSP), serves as a Director of the Associação Brasileira dos Concessionários BMW and Associação Brasileira do Distribuidores Toyota. Mr. Pereira received his LL.B. from Faculdade de Direito do Largo de São Francisco, and is an alumnus of London Business School.
Mr. Pereira has extensive automotive retailing and manufacturer relations experience, as well as legal, finance, business and management expertise. He also has a deep understanding of the Brazilian finance, trade and legal sectors. Mr. Pereira’s experience and expertise in the automotive industry make him well qualified to serve as a member of the Board.
STEPHEN D. QUINN
Age 64
Director Since: 2002
Independent Director
Stephen D. Quinn has served as our independent Chairman of the Board since May 2017, and as one of our directors since May 2002. Mr. Quinn joined Goldman, Sachs & Co., a full-service global investment banking and securities firm, in August 1981 where he specialized in corporate finance. From 1990 until his retirement in 2001, Mr. Quinn served as a General Partner and Managing Director of Goldman, Sachs. Mr. Quinn serves on the Audit Committee, the Nominating/Governance Committee, and as Lead Director of Zions Bancorporation, a large publicly traded bank holding company. Mr. Quinn holds degrees from Brigham Young University and Harvard University Graduate School of Business.
Mr. Quinn was selected to serve as a director on our Board due to his valuable financial expertise and extensive experience with capital markets transactions. His judgment in assessing business strategies and the accompanying risks is an invaluable resource for our business model. Mr. Quinn also has significant historical knowledge of our Company as a result of his role at Goldman Sachs, an underwriter for our initial public offering. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Mr. Quinn qualifies as an “audit committee financial expert.”
STEVEN P. STANBROOK
Age 62
Director Since: 2019
Independent Director
Steven P. Stanbrook has served as one of our directors since August 2019. Mr. Stanbrook is a seasoned business leader with over 30 years of experience operating across the global consumer packaged goods sector. In 2015, Mr. Stanbrook retired from S.C. Johnson, Inc., a global manufacturer and marketer of household products, following a distinguished 19-year career serving in various roles, including most recently as Chief Operating Officer, International Markets. Prior to his career with S.C. Johnson, Mr. Stanbrook served in a variety of senior leadership positions with both Sara Lee Corporation, including Chief Executive Officer of Sara Lee Bakery, and CompuServe, the leading, global Internet Service Provider. Mr. Stanbrook serves on the Board of Directors of Imperial Brands plc, a British multinational company listed on the London Stock Exchange and Cott Corporation, a water, coffee, tea, extracts and filtration service company, jointly listed on the New York and Toronto Stock Exchanges. Mr. Stanbrook previously served on the boards of Chiquita Brands International, Inc., the leading international value-added produce marketer and Hewitt Associates, Inc., a provider of human capital, management consulting and outsourcing services. Mr. Stanbrook holds an HNC in Business Studies from Thames Valley University, U.K. Mr. Stanbrook was identified as a potential Board candidate by a third-party search firm.
Mr. Stanbrook was selected to serve on our Board due to his extensive international operational experience and his background in business development. His previous and current board positions on other publicly traded companies, combined with his global operational experience in a variety of senior management positions, have provided him with a wealth of knowledge in dealing with complex strategic, business matters.
CHARLES L. SZEWS
Age 63
Director Since: 2016
Independent Director
Charles L. Szews has served as one of our directors since November 2016. In January 2016, Mr. Szews retired from Oshkosh Corporation, a leading global manufacturer of specialty vehicles and vehicle bodies serving access equipment, defense, fire and emergency, and commercial markets. He joined Oshkosh in 1996 as Vice President and CFO, was appointed Executive Vice President in October 1997, and President and Chief Operating Officer in October 2007. Mr. Szews was appointed Chief Executive Officer in January 2011. Prior to joining Oshkosh, he began his career with Ernst & Young, and was Vice President and Controller at Fort Howard Corporation during its leveraged buyout. From November 2006 through July 2013, Mr. Szews served as a director of Gardner Denver, Inc., a worldwide provider of industrial equipment technologies and related parts and services, where he also served as Chairman of the Audit Committee and on the Nominating and Corporate Governance Committee. Since 2014, Mr. Szews has served as a director and is the Chairman of the Audit Committee and on the Nominating and Corporate Governance Committee for Commercial Metals Company, an operator of mini- and micro-steel mills located in the Southern United States and Poland. In April 2018, Mr. Szews was appointed to the board of directors of Allegion plc, a provider of security products and solutions for homes, businesses, schools and other institutions, where he also serves on the Compensation and Corporate Governance and Nominating Committees. Mr. Szews served on the board of directors of Rowan Companies plc, a global provider of contract drilling services, from August 2016 until April 2019. Following the combination of Rowan Companies with Valaris plc in April 2019, Mr. Szews was appointed to the board of directors of Valaris, where he serves on the Audit Committee and as Chairman of the Finance Committee. Mr. Szews holds a degree in Business Administration from the University of Wisconsin – Eau Claire.
Mr. Szews was selected to serve on our Board due to his extensive operational and financial experience and his background in public accounting, auditing and risk management. His previous and current board positions on other publicly traded companies have provided many years of audit committee experience, including as chair. Mr. Szews’ extensive financial and audit experience in a variety of senior management positions, combined with his global operational experience in vehicle manufacturing and distribution, have provided him with a wealth of knowledge in dealing with complex strategic, financial and accounting matters. Mr. Szews qualifies as an “audit committee financial expert.”
ANNE TAYLOR
Age 64
Director Since: 2018
Independent Director
Anne Taylor has served as one of our directors since September 2018. In 2018, Ms. Taylor retired from Deloitte, a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services, where she served as Vice Chairman, and Managing Partner of the Houston office. During her 30-year career at Deloitte, she held numerous leadership roles, including Regional Managing Partner for the eight-state Mid-America region. Ms. Taylor was Deloitte’s first Chief Strategy Officer, taking on the role at the initiation of the Sarbanes-Oxley Act of 2002. Under her leadership, the resulting firm grew a portfolio business, along with integrated service offerings, and retained a management consulting business that grew from $3.0 billion in revenue in 2003 to the largest in the world today. She served as global e-business leader where she led Deloitte’s transformation to serve clients in the digital economy, which has evolved into the basis of Deloitte’s cyber-security practice. Additionally, Ms. Taylor was the strategic partner advisor to the World Economic Forum’s Technology Pioneer Program and became the first woman to serve on Deloitte’s US executive committee and the management committee of Deloitte Global. She has served on Deloitte’s Board of Directors, chairing the strategic review of the proposed transaction to separate Deloitte Consulting. She served on both the US and Global Nominating Committees, the CEO Evaluation Committee, chaired the Strategic Investment Committee and served on the Board of Directors of Deloitte Consulting LLP (Global). Ms. Taylor serves on the Board of Directors of Southwestern Energy Company, an independent energy company engaged in natural gas, natural gas liquids and oil exploration, development, production, gathering and marketing. Ms. Taylor also serves on the Board of Directors of Central Houston, Inc., and previously served as an executive board member of the Greater Houston Partnership and United Way of Greater Houston. Ms. Taylor received her B.S. and M.S. degrees in civil engineering from the University of Utah, and attended Princeton University, pursuing Ph.D studies in transportation engineering.
Ms. Taylor is financially literate and has participated in audit committee meetings of many Deloitte clients. She was selected to serve on our Board due to her management and leadership experience, extensive background in global technology, development and execution of business strategy, and corporate governance experience.
MAX P. WATSON, JR.
Age 74
Director Since: 2001
Independent Director
Max P. Watson, Jr. has served as one of our directors since May 2001. Mr. Watson served as President and Chief Executive Officer of BMC Software, Inc., a provider of enterprise management solutions, from April 1990 to January 2001. He served as Chairman of the Board of Directors of BMC from January 1992 until his retirement in April 2001. Mr. Watson serves on the Board of Trustees of Texas Children’s Hospital and as Chairman of the Quality, Service and Safety Committee. From January 2007 through December 2008, Mr. Watson served as Chairman of the Board of Trustees of Texas Children’s Hospital. He also serves on the Board of Directors of Scenic Houston, an organization dedicated to preserving and enhancing the visual character of Houston. Mr. Watson holds a Bachelor’s in Business Administration from Louisiana Tech University.
Mr. Watson’s extensive business and management expertise from his position with a large global publicly traded company makes him well qualified to serve as a member of our Board. As a former Chairman, president and chief executive officer, Mr. Watson is familiar with many of the business issues we face today, including financial and strategic planning, technology, compensation, management development, international acquisitions, capital allocation, and stockholder relations.
MARYANN WRIGHT
Age 58
Director Since: 2014
Independent Director
MaryAnn Wright has served as one of our directors since August 2014. Ms. Wright owns TechGoddess LLC, a technical consulting firm serving global Tier 1 automotive suppliers. From 2007 through 2017, she worked for Johnson Controls Power Solutions (“Johnson Controls”), the global leader in automotive lead-acid and advanced batteries, serving as Group Vice President of Engineering & Product Development from 2013 through 2017, and Vice President of Technology and Innovation from 2009 to 2013. She served as Vice President and General Manager for Johnson Controls Hybrid Systems business and as CEO of Johnson Controls-Saft from 2007 through 2009. Prior to joining Johnson Controls, Ms. Wright served as Executive Vice President Engineering, Product Development, Commercial and Program Management for Collins & Aikman Corporation. From 1988 through 2005, Ms. Wright served as Director, Sustainable Mobility Technologies and Hybrid Vehicle Programs at Ford Motor Company, and was the Chief Engineer of the 2005 Ford Escape Hybrid, the industry’s first full hybrid SUV and also led the launch of Ford’s first hydrogen-powered fuel cell fleet program. Ms. Wright serves on thesection titled “Information about Our Board of Directors and isits Committees – Director Qualifications and Diversity Considerations” on page 10.
The GCR Committee may consider candidates for our Board from any reasonable source, including from a search firm engaged by the ChairmanGCR Committee or shareholder recommendations. The GCR Committee will evaluate candidates recommended by shareholders using the same criteria as for other candidates recommended by its members, other members of the Nominating and Corporate Responsibility Committee of Maxim Integrated Products, Inc., a developer of innovative analog and mixed-signal products and technologies. She also servesBoard, or other persons. Any invitation to join our Board must be extended by our Board as a Director of Delphi Technologies, a leading provider of advanced vehicle propulsion solutions, where she is a member ofwhole, by the CompensationGCR Committee Chair and Human Resources Committee and Chairman of the Innovation and Technology Committee. In July 2019, Ms. Wright was appointed toby the Board Chair.
Shareholders or a group of Directors of Micron Technology, Inc., an industry leader in innovative memory and storage solutions where she also servesshareholders may recommend potential candidates for consideration by the GCR Committee. For additional information on the Compensation Committee and on the Governance and Sustainability Committee. Ms. Wright is also active in the community where she serves as Board Chair of the Friends for Animals of Metro Detroit. She previously served on the Board of Governors at Argonne National Laboratory,such requests and the University of Wisconsin-Milwaukee, and as Trustee at Lawrence Technological University. Ms. Wright received a B.A. in Economics and International Business and a Master of Science in Engineering from the University of Michigan and an M.B.A. from Wayne State University.applicable timing, please see “Shareholder Proposals for 2023 Annual Meeting.”
QUALIFICATIONS OF OUR BOARD OF DIRECTORS
CARIN M. BARTH Co-Founder and President of LB Capital, Inc., a private equity investment firm Audit Committee Chair Age 59 Director Since 2017 | Independent Director Audit Committee Financial Expert Other Current Directorships • Enterprise Products Holdings, LLC • Black Stone Minerals, L.P. Other Directorships Within the Last Five Years • BBVA USA Bancshares, Inc. • Halcón Resources Corporation • Strategic Growth Bancorp Inc. | Degrees B.S. in Economics, University of Alabama; M.B.A, Vanderbilt University’s Owen Graduate School of Management | ||
Career Highlights | ||||
• Co-Founder and President of LB Capital, Inc. since 1988 • Currently serves on the board of The Welch Foundation • Former board member and current Emeritus board member of Ronald McDonald House of Houston | • Commissioner of the Texas Department of Public Safety from 2008 to 2014 • Appointed by President George W. Bush to serve as Chief Financial Officer of the U.S. Department of Housing and Urban Development from 2004 to 2005 | |||
Ms. Barth has extensive experience in a variety of financial matters, including as chief financial officer for several entities. She also has a history of corporate and civic governance, which provides additional depth and financial expertise to our Board. Her experience with mergers and acquisitions, in operating a private equity company, her previous and currently held board positions on other publicly traded companies and her audit committee experience are key attributes, among others, that make her well qualified to serve on our Board. |
Ms. Wright was selected to serve on our Board because of her extensive experience and her knowledge of the automotive industry, having been named one of the “Leading 100 Women in the Automotive Industry” by Automotive News. Her unique business, manufacturing, engineering and technology background and her extensive global automotive experience make her well qualified to serve as a
EARL J. HESTERBERG President and Chief Executive Officer of Group 1 Age 68 Director Since 2005 | Other Current Directorships None Other Directorships Within the Last Five Years • Stage Stores, Inc. | Degrees B.A. in Psychology, Davidson College; M.B.A, Xavier University | ||
Career Highlights | ||||
• CEO and President of Group 1 since 2005 • Served as Group Vice President, North America Marketing, Sales and Service for Ford Motor Company since October 2004. From July 1999 to September 2004, he served as Vice President, Marketing, Sales and Service for Ford of Europe, and from 1999 until 2005, he served on the supervisory board of Ford Werke AG • Previously served as President and Chief Executive Officer of Gulf States Toyota, an independent regional distributor of new Toyota vehicles, parts and accessories | • Held various senior sales, marketing, general management, and parts and service positions with Nissan Motor Corporation in U.S.A. and Nissan Europe, both of which are wholly owned by Nissan Motor Co., Ltd. • Currently serves on the board of the Greater Houston Partnership • Past member of the Board of Trustees of Davidson College | |||
As our President and Chief Executive Officer, Mr. Hesterberg sets the strategic direction of our Company under the guidance of our Board. He has extensive senior executive management experience in the automotive industry. His successful leadership of our Company and extensive knowledge of the automotive industry provides our Board with a unique perspective on the opportunities and challenges we face and makes him well qualified to serve on our Board. |
STEVEN C. MIZELL Executive Vice President and Chief Human Resources Officer at Merck & Co., Inc., a multinational pharmaceutical company Age 62 Director Since 2021 | Independent Director
Other Current Directorships • Allegion plc Other Directorships Within the Last Five Years • Oshkosh Corporation | Degrees B.S. in Industrial Management, Georgia Institute of Technology; M.S. in Management, Carnegie Mellon University | ||
Career Highlights | ||||
• Responsible for all aspects of human resources at Merck & Co. since 2018, which has been recognized as one of the Top 10 Best Workplaces in Health Care and Biopharma by Fortune and Great Place to Work, Best Workplace for Innovators by Fast Company magazine, Best Companies for Multicultural Women by Working Mother magazine, Top Veteran-Friendly Companies by U.S. Veterans Magazine and Companies that Care by People Magazine • Joined Monsanto, a global leader in sustainable agriculture, as Senior Vice President, Chief Human Resources Officer in 2004; served as Executive Vice President, Chief Human Resources Officer from 2007 to 2018 | • Previously served as Senior Vice President and Chief Corporate Resources Officer for AdvancePCS, a pharmaceutical company • Currently serves on the board of the United Way Charmaine Chapman Society of St. Louis • Recognized as one of St. Louis’s most influential Diverse Business Leaders • National Association of Corporate Directors (NACD) Directorship Certified | |||
Mr. Mizell’s human resource management expertise from his position with an international, publicly traded company makes him well qualified to serve as a member of our Board. His extensive, global leadership experience and knowledge of human capital management provides our Board with valuable insights. Mr. Mizell was identified as a potential Board candidate by a current member of the Board. |
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LINCOLN PEREIRA FILHO Regional Vice President, Brazil of Group 1 Age 62 Director Since 2013 | Other Current Directorships • Boa Vista Serviços S.A.-SCPC • Tempo Telecomunicações • Associação Brasileira dos Concessionários BMW • Associação Brasileira dos Distribuidores Toyota Other Directorships Within the Last Five Years None | Degrees LL.B, Faculdade de Direito do Largo de São Francisco; London Business School | ||
Career Highlights | ||||
• Regional Vice President, Brazil of Group 1 since 2013 • Served as a legal representative of United Auto do Brasil Ltda, a public auto group operating in São Paulo and controlled by United Auto Group, from 1999 to 2005 • Previously practiced law with Cunha Pereira Advogados, representing professional athletes and international racecar drivers, from 1995 through 2005 • Founded Atrium Telecomunicações Ltda, a provider of local exchange telecommunication services, in 1999. Atrium was sold to Telefónica of Spain in December 2004 | • Founded E-Vertical Tecnologia, a leading provider of high tech facilities management services to commercial properties • Serves as Vice President of the São Paulo Chamber of Commerce (ACSP) • Held numerous positions with various banks, both in Brazil and abroad, from 1978 through 1995 | |||
Mr. Pereira has extensive automotive retailing and manufacturer relations experience, as well as legal, finance, business and management expertise. He also has a deep understanding of the Brazilian finance, trade and legal sectors. Mr. Pereira’s experience and expertise in the automotive industry make him well qualified to serve as a member of our Board. |
STEPHEN D. QUINN Former General Partner and Managing Director of Goldman, Sachs & Co. Non-Executive Chair of the Board Age 66 Director Since 2002 | Independent Director Audit Committee Financial Expert Other Current Directorships • Zions Bancorporation Other Directorships Within the Last Five Years None | Degrees B.S. in Economics, Brigham Young University; M.B.A., Harvard University Graduate School of Business | ||
Career Highlights | ||||
• Joined Goldman, Sachs & Co., a full-service global investment banking and securities firm, in August 1981, where he specialized in corporate finance | • Served as a General Partner and Managing Director of Goldman, Sachs & Co. from 1990 until his retirement in 2001 | |||
Mr. Quinn was selected to serve as a director on our Board due to his valuable financial expertise and extensive experience with capital markets transactions. His judgment in assessing business strategies and the accompanying risks is an invaluable resource for our business model. Mr. Quinn also has significant historical knowledge of our Company as a result of his role at Goldman Sachs, an underwriter for our initial public offering. The Board believes his experience and expertise in these matters make him well qualified to serve as a member and Chair of our Board. |
STEVEN P. STANBROOK Former Chief Operating Officer, International Markets of S.C. Johnson, Inc. Age 64 Director Since 2019 | Independent Director Other Current Directorships • Primo Water Corporation Other Directorships Within the Last Five Years • Chiquita Brands International, Inc. • Hewitt Associates, Inc. • Imperial Brands plc | Degrees HNC in Business Studies, Thames Valley University, U.K. | ||
Career Highlights | ||||
• Retired from S.C. Johnson, Inc., a global manufacturer and marketer of household products, in 2015, following a distinguished 19-year career serving in various roles, including most recently as Chief Operating Officer, International Markets • Previously held a variety of senior leadership positions with both Sara Lee Corporation, including Chief Executive Officer of Sara Lee Bakery, and CompuServe, the leading, global Internet Service Provider | • Over 30 years of experience operating across the global consumer package goods sector | |||
Mr. Stanbrook was selected to serve on our Board due to his extensive international operational experience and his background in business development. His previous and current board positions on other publicly traded companies, combined with his global operational experience in a variety of senior management positions, have provided him with a wealth of knowledge in dealing with complex strategic, business matters. |
CHARLES L. SZEWS Former Chief Executive Officer of Oshkosh Corporation FRM Committee Chair Age 65 Director Since 2016 | Independent Director Audit Committee Financial Expert Other Current Directorships • Commercial Metals Company • Allegion plc Other Directorships Within the Last Five Years • Rowan Companies plc • Valaris plc | Degrees B.B.A. in Comprehensive Public Accounting, University of Wisconsin – Eau Claire | ||
Career Highlights | ||||
• Joined Oshkosh Corporation, a leading global manufacturer of specialty vehicles and vehicle bodies serving access equipment, defense, fire and emergency, and commercial markets, as Vice President and CFO in 1996; appointed Executive Vice President in October 1997; appointed President and Chief Operating Officer in October 2007 | • Served as Chief Executive Officer at Oshkosh Corporation from January 2011 until his retirement in 2016 • Vice President and Controller at Fort Howard Corporation during its leveraged buyout • Began his career with Ernst & Young | |||
Mr. Szews was selected to serve on our Board due to his extensive operational and financial experience and his background in public accounting, auditing and risk management. His previous and current board positions on other publicly traded companies have provided many years of audit committee experience, including as chair. Mr. Szews’ extensive financial and audit experience in a variety of senior management positions, combined with his global operational experience in vehicle manufacturing and distribution, including autonomous and electric vehicles, have provided him with a wealth of knowledge in dealing with complex strategic, financial and accounting matters. |
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ANNE TAYLOR Former Vice Chairman and Managing Partner of the Houston office of Deloitte, LLP CHR Committee Chair Age 66 Director Since 2018 | Independent Director Other Current Directorships • Southwestern Energy Company • Whiting Petroleum Corporation Other Directorships Within the Last Five Years None | Degrees B.S. in Engineering, University of Utah; M.S. in Engineering, University of Utah; Attended Princeton University, pursuing Ph.D studies in Transportation Engineering | ||
Career Highlights | ||||
• Joined Deloitte, a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services in 1987, serving as Regional Managing Partner, Chief Strategy Officer and Global Leader for e-business; served as Vice Chairman and Managing Partner of the Houston office from 2013 until her retirement in 2018; chaired the strategic review of the proposed transaction to separate Deloitte Consulting while serving on Deloitte’s Board of Directors • Became the first woman to serve on Deloitte’s US executive committee and the management committee of Deloitte Global | • Currently serves on the board of Memorial Hermann Hospital System and Central Houston, Inc. and previously served on the boards of the Greater Houston Partnership and United Way of Greater Houston • President and sole owner of ATStrategies, LLC, a private consulting firm • Currently serves on the Board of Directors of Conway Mackenzie and as a consultant for Flynn Heath Leadership • Previously served as the strategic partner advisor to the World Economic Forum’s Technology Pioneer Program | |||
Ms. Taylor is financially literate and has participated in audit committee meetings of many Deloitte clients. She was selected to serve on our Board due to her management and leadership experience, extensive background in global technology, development and execution of business strategy, and corporate governance experience. |
MARYANN WRIGHT Former Group Vice President of Johnson Controls International GCR Committee Chair Age 60 Director Since 2014 | Independent Director Other Current Directorships • Micron Technology, Inc. • Brunswick Corporation Other Directorships Within the Last Five Years • Delphi Technologies • Maxim Integrated Products, Inc. | Degrees B.A. in Economics and International Business; M.S. in Engineering, University of Michigan; M.B.A., Wayne State University | ||
Career Highlights | ||||
• Worked for Johnson Controls Power Solutions, the global leader in automotive lead-acid and advanced batteries, from 2007 through 2017, served as Group Vice President of Engineering & Product Development from 2013 through 2017, and Vice President of Technology and Innovation from 2009 to 2013. She served as Vice President and General Manager for Johnson Controls Hybrid Systems business and as CEO of Johnson Controls-Saft from 2007 through 2009. • Previously served as Executive Vice President Engineering, Product Development, Commercial and Program Management for Collins & Aikman Corporation | • Served as Director, Sustainable Mobility Technologies and Hybrid Vehicle Programs at Ford Motor Company from 1988 through 2005; Chief Engineer of the 2005 Ford Escape Hybrid, the industry’s first full hybrid SUV; led the launch of Ford’s first hydrogen-powered fuel cell fleet program • Owner of TechGoddess, LLC, a technical consulting firm • Board Chair of the Friends of Animals for Metro Detroit | |||
Ms. Wright was selected to serve on our Board because of her extensive experience and her knowledge of the automotive industry, having been named one of the “Leading 100 Women in the Automotive Industry” by Automotive News. Her unique business, manufacturing, engineering and technology background and her extensive global automotive experience make her well qualified to serve as a member of our Board. |
Our Board of Directors Recommends a Vote “FOR”“FOR” the Election of each of the Nominees for Director.
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Pursuant toProxy Statement 2022 | 25
Advisory Vote on Executive
Compensation
In accordance with the requirements of Section 14A of the Exchange Act, our stockholders are entitledshareholders have the opportunity to cast an annual advisory vote at the Annual Meeting to approve, on a non-binding advisory basis, the compensation of our named executive officers, as disclosed in this proxy statement. As an advisory vote, this Proposal 2 is not binding on Group 1, our Board or the Compensation Committee, will not overrule any previous decisions made by our Board orCHR Committee. However, the Compensation Committee, or require our Board or the Compensation Committee to take any future or remedial action. Although the vote is non-binding, the CompensationCHR Committee will take into account the outcome of the vote when considering future compensation decisions regarding our named executive compensation decisions.
officers.
Our Board recognizes that executive compensation is an important matter for our stockholders.shareholders. As described in detail inyou consider this Proposal 2, we urge you to read the CD&A section of this proxy statement for additional details on executive compensation, including the Compensationmore detailed information about our compensation philosophy and objectives, the decisions made by the CHR Committee is taskedin 2021, and the tabular disclosures regarding our named executive officers’ compensation together with the implementationaccompanying narrative disclosures in the “Executive Compensation” section of this proxy statement.
As described in the CD&A, we believe our compensation program is effective, appropriate and strongly aligned with the long-term interests of our executiveshareholders and that the total compensation philosophy. The core of that philosophy has been and continuespackage provided to be to pay our named executive officers compensation that is competitive with amounts paid by our peer companies based on individual and Company performance. In particular, the Compensation Committee strives to attract, retain and motivate talented executives, to reward past performance measured against established goals and provide incentives for future performance, and to align executives’ long-term interests with the interests(including potential payouts upon a termination or change of our stockholders. To do so, the Compensation Committee uses a combination of short- and long-term incentive compensation to reward near-term performance and to encourage our executives’ commitment to our long-range, strategic business goals. It is always the intention of the Compensation Committee that our named executive officers be compensated competitively and in a manner thatcontrol) is consistent with market practice. We also believe our strategy, sound corporate governance principles,executive compensation is reasonable and stockholder interests and concerns. Our Board believes that our compensation policies and practices are effective in achieving our Company’s goals of rewarding sustained financial and operating performance, leadership excellence and aligning the executives’ long-term interests with those of our stockholders.
competitive.
We believe that it is appropriate to seek the views of our stockholdersshareholders on the design and effectiveness of our executive compensation program, and we value your opinion. Based on the stockholdershareholder vote on the frequency of an advisory vote on executive compensation that took place at our 2019 Annual Meeting of Stockholders,Shareholders, our Board determined to continue holding the vote on executive compensation annually until the next stockholdershareholder vote on the frequency of such advisory vote.
At our 20192021 Annual Meeting of Stockholders, 95%Shareholders, 97% of the shares voted on the say-on-pay vote (as defined below) were in favor of the compensation paid to our named executive officers. The CompensationCHR Committee believes this vote strongly endorses the compensation philosophy, policies and practices of the Company and, therefore, it did not make any significant changes in the structure of our executive compensation program as a result of this say-on-pay vote, other than the introduction of performance shares into the mix of long-term incentives in 2019, a best practice in executive compensation.
As described in the CD&A, we believe our compensation program is effective, appropriate and strongly aligned with the long-term interests of our stockholders and that the total compensation package provided to our named executive officers (including potential payouts upon a termination or change of control) is consistent with market practice. We also believe our executive compensation is reasonable and not excessive.
As you consider this Proposal 2, we urge you to read the CD&A section of this proxy statement for additional details on executive compensation, including the more detailed information about our compensation philosophy and objectives and the past compensation of our named executive officers, and to review the tabular disclosures regarding our named executive officers’ compensation together with the accompanying narrative disclosures in the “Executive Compensation” section of this proxy statement.
say-on-pay vote.
In light of these reasons, we are recommending that our stockholdersshareholders vote “FOR”“FOR” the following resolution:
“RESOLVED, that the compensation paid to our Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby Approved.”
Our Board of Directors Recommends a Vote “FOR”“FOR” the Non-Binding Advisory Approval of our Executive Compensation.
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The use of equity-based awards under the existing Group 1 Automotive, Inc. 2014 Long Term Incentive Plan (the “Existing LTIP”) continues to be a key component of our compensation program. The ability to grant equity-based compensation awards is critical to attracting and retaining highly qualified individuals, and we use stock awards in order to motivate employees and directors to achieve objectives related to our overall goal of increasing stockholder value. The Board believes that it is in the best interest of the Company and our stockholders for those individuals to have an ownership interest in the Company in recognition of their present and potential contributions, and to align their interests with those of our current and future stockholders. Additionally, equity compensation promotes a focus on long-term value creation because our equity compensation awards are subject to vesting criteria.
The Board has determined that the current number of shares available for grants under the Existing LTIP is not sufficient to meet the objectives of our compensation program going forward. Accordingly, the Board has adopted and proposes that our stockholders approve an amendment to the Existing LTIP to increase the number of shares of our common stock available for grant under the plan (including the number of shares available for awards of incentive stock units) by 1,000,000. At the Annual Meeting, our stockholders will be asked to approve the First Amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan (the “First Amendment,” and the Existing LTIP, as so amended, the “Amended LTIP”). If approved by our stockholders on the date of the Annual Meeting, the First Amendment will be effective as of such date. If the proposed First Amendment is not so approved by our stockholders, then the Existing LTIP will remain in effect in its present form.Proxy Statement 2022 | 27
Background and Purpose of the Proposal
The Existing LTIP authorizes awards to be granted covering up to 1,200,000 shares of common stock (plus the number of shares that remained available for issuance of future award grants under the Group 1 Automotive, Inc. 2007 Long Term Incentive Plan, as amended and restated effective as of March 11, 2010 (the “Prior Plan”), as well as the number of shares subject to outstanding awards previously granted under the Prior Plan, each as of the effective date of the Existing LTIP), subject to adjustment in accordance with the terms of the Existing LTIP upon certain changes in capitalization and similar events. As of March 17, 2020 there were approximately 427,126 shares of common stock available for new awards under the Existing LTIP.
On February 17, 2020, the Board determined that it is in the Company’s best interest to amend the Existing LTIP, subject to stockholder approval, to increase the number of authorized shares of common stock (including the number of shares available for awards of incentive stock units) by 1,000,000. The proposed increase in the number of shares authorized for issuance under the First Amendment is expected to provide flexibility to enable the continued use of the Amended LTIP for stock-based grants and awards consistent with the objectives of our compensation program for three or more years while attempting to minimize dilution to our stockholders.
The following table includes aggregated information regarding awards outstanding under the Existing LTIP as of March 17, 2020, the number of shares available for future awards under the Existing LTIP as of that date, and the proposed number of additional shares that would be issuable under the Amended LTIP:
For additional information regarding stock-based awards previously granted, please see Note 4 to Consolidated Financial Statements disclosed in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019. As of March 17, 2020, there were 18,108,921 shares of common stock outstanding. The closing price per share of common stock on the New York Stock Exchange as of March 17, 2020 was $38.44.
In 2017, 2018, and 2019, we granted awards (restricted stock, restricted stock units, and in 2019, performance shares) under the Existing LTIP covering 257,932 shares, 252,808 shares and 298,443 shares, respectively, of our common stock. Based upon the methodology used by Institutional Shareholder Services (ISS), which assigns a greater weight to full-value awards than to stock option awards, the compensation consultant to our Compensation Committee determined that our “burn rate” (which represents the rate at which our equity award grants under the Existing LTIP diluted our stockholders) for each of 2017, 2018, and 2019 was 2.73%, 3.17% and 3.74%, respectively, for an average three-year burn rate of 3.21%. Our ISS three-year average burn rate is lower than the three-year average burn rate for other companies within the Company’s Global Industry Classification Standard (GICS) (which companies had an average three-year burn rate of 3.40% based on the ISS methodology).
In determining the number of shares to request for approval under the First Amendment, our Compensation Committee worked with our management team and its compensation consultant to evaluate a number of factors, including our share usage under the Existing LTIP, the dilution of our stockholders that will occur if the First Amendment is adopted, and criteria expected to be used by institutional proxy advisory firms in evaluating our proposal for the Amended LTIP.
Based on our historic grant rates, we anticipate that the 427,126 shares that remained available for issuance as of March 17, 2020 for future award grants under the Existing LTIP would last for up to one year. We anticipate that the additional 1,000,000 shares requested in connection with approval of the First Amendment will last for up to an additional three years based on historic grant rates and that our total share reserve under the Amended LTIP would last for up to four years; however, these shares could last for a shorter period of time if actual grant rates exceed historic grant rates. As noted in “Summary of the Plan” below, our Compensation Committee would retain full discretion under the Amended LTIP to determine the number and amount of awards to be granted under the Amended LTIP, subject to the terms of the Amended LTIP, and future benefits or amounts that may be received by participants under the Amended LTIP are not determinable at this time. Since our last request for additional shares at our 2014 annual meeting, our Company has grown significantly. Future growth in the number of our dealerships and employees could impact the rate at which our Compensation Committee grants awards under the Amended LTIP.
We believe that we have demonstrated our commitment to sound equity compensation practices. We recognize that equity compensation awards dilute stockholder equity and, therefore, we have carefully managed our equity incentive compensation. Our equity compensation practices are targeted to be competitive and consistent with market practices, and we believe our historical share usage has been responsible and mindful of stockholder interests.
In evaluating this Proposal 3, stockholders should consider the factors set forth under the “Summary of the Plan” below.
The proposed First Amendment is included as Appendix A hereto. If our stockholders approve this proposal, we intend to file, pursuant to the Securities Act, a registration statement on Form S-8 to register the additional shares available for delivery under the Amended LTIP pursuant to the First Amendment.
Summary of the Plan
The following summary provides a general description of the material features of the Amended LTIP but is not a complete description of all provisions of the Amended LTIP and is qualified in its entirety by reference to the full text of (a) the Existing LTIP, which was attached to our definitive proxy statement filed with the SEC on April 10, 2014 as Appendix A, and (b) the First Amendment, which is attached to this proxy statement as Appendix A, which collectively comprise the terms of the Amended LTIP.
PURPOSE
The Amended LTIP is designed to align our employees’ and directors’ long-term interests with those of our stockholders by allowing these individuals the potential to develop and maintain a significant equity ownership position in the Company.
AWARDS
The Amended LTIP provides for the grant of any or all of the following types of awards:
Any stock option granted in the form of an incentive stock option must satisfy the applicable requirements of Section 422 of the Code. Awards may be made to the same person on more than one occasion and may be granted singly, in combination or in tandem as determined by the Compensation Committee.
PLAN HIGHLIGHTS
Key features of the Amended LTIP include:
ADMINISTRATION
The Amended LTIP is administered by the Compensation Committee. Subject to the terms of the Amended LTIP, the Compensation Committee has sole authority and discretion to:
ELIGIBILITY
Under the Amended LTIP, the Compensation Committee may only grant awards to persons who, at the time of grant, are our employees, employees of our affiliates, consultants who provide services to us or our affiliates and non-employee members of our Board. In light of the Compensation Committee’s discretion, the actual number of individuals who will receive an award under the Amended LTIP cannot be determined in advance. During our 2019 fiscal year, approximately 158 employees and eight non-employee directors participated in the Existing LTIP.
SHARES SUBJECT TO THE AMENDED LTIP
The maximum number of shares of our common stock that may be issued pursuant to the Amended LTIP is equal to (i) 2,200,000 shares, plus (ii) the number of shares that remain available for issuance for future award grants under the Prior Plan as of the effective date of the Existing LTIP, plus (iii) the number of shares subject to awards granted under the Prior Plan that were outstanding as of May 20, 2014 to the extent any such award lapses or terminates without all shares subject to that award being issued to the holder of such award or without such holder receiving a cash settlement of such award. To the extent an award granted under the Amended LTIP lapses or otherwise terminates without the delivery of shares of our common stock (or if any shares of common stock issued or delivered pursuant to an award granted under the Amended LTIP are forfeited by the holder of such award), then the shares of our common stock covered by such award (or portion thereof that lapses, terminates or is forfeited) will again be available for awards granted under the Amended LTIP. Common stock tendered or otherwise used in payment of the exercise price of an option, withheld to satisfy a tax withholding obligation or repurchased by us with proceeds from the exercise of an option will not be added to the maximum share limit under the Amended LTIP.
Subject to stockholder approval, the maximum number of shares of our common stock that may be subject to incentive stock options granted under the Amended LTIP is 2,200,000 shares. The following limitations apply with respect to awards granted under the Amended LTIP:
The number and kind of shares available under the Amended LTIP and the individual share limits under the Amended LTIP are subject to adjustment for stock dividends and stock splits and in certain other situations as further described in the Amended LTIP. Any shares of our common stock delivered pursuant to an award may consist, in whole or in part, of authorized and unissued shares or previously issued shares of our common stock reacquired by us. Awards granted under the Amended LTIP (other than incentive stock options, which are subject to special rules described below) may not be transferred other than (i) by will or the laws of descent and distribution, (ii) pursuant to a qualified domestic relations order or (iii) with the consent of the Compensation Committee. However, the Compensation Committee may not approve the transfer of any award granted under the Amended LTIP if the holder of the award is to receive any consideration in connection with the transfer.
STOCK OPTIONS
The Amended LTIP provides for two types of options: incentive stock options and non-statutory stock options. The Compensation Committee is authorized to grant options to eligible participants (which in the case of incentive stock options are only individuals who are employed by us or one of our subsidiaries at the time of grant), subject to the terms and conditions set forth below:
The purchase price per share of our common stock will be determined by the Compensation Committee. However, the purchase price per share of our common stock will not be less than the fair market value of a share of our common stock on the date of the grant of such option regardless of whether such option is an incentive stock option or a non-statutory stock option. Further, the purchase price of any incentive stock option granted to an employee who possesses more than 10% of the total combined voting power of all classes of our stock or of any of our subsidiaries within the meaning of Section 422(b)(6) of the Code must be at least 110% of the fair market value of a share of our common stock at the time such option is granted. The purchase price or portion thereof shall be paid in full in the manner prescribed by the Compensation Committee.
The Compensation Committee determines the term of each option; provided, however, that no option may have a term that exceeds 10 years and any incentive stock option granted to an employee who possesses more than 10% of the total combined voting power of all classes of our stock or of any of our subsidiaries within the meaning of Section 422(b)(6) of the Code must not be exercisable after the expiration of five years from the date of grant. The Compensation Committee also determines the time at which an option may be exercised in whole or in part, and the method by which payment of the exercise price with respect thereto may be made or deemed to have been made. Permitted forms of payment include cash, shares of our common stock, the withholding of shares that would otherwise be issued upon the exercise of the option, a combination of the foregoing or, to the extent permitted by law, by other methods as may be approved by the Compensation Committee, including “cashless exercise” procedures that permit a concurrent sale of option shares by the participant with proceeds sufficient to pay the exercise price and related taxes remitted to the Company.
Option awards may include the right to surrender the optioned shares in exchange for a payment in the amount of the fair market value of the shares for which the option is surrendered over the exercise price for such shares (a “stock appreciation right”). Stock appreciation rights granted in connection with incentive stock options are exercisable only when the fair market value of the common stock exceeds the exercise price therefore specified under the option. The term of each stock appreciation right may not exceed 10 years from the date of grant.
RESTRICTED STOCK AWARDS
The Compensation Committee is authorized to grant restricted stock awards to eligible individuals. Pursuant to a restricted stock award, shares of our common stock will be issued or delivered to the holder without any cash payment to us, except to the extent otherwise provided by the Compensation Committee or required by law; provided, however, that the shares will be subject to certain restrictions on the disposition thereof and certain obligations to forfeit the shares to us as may be determined in the discretion of the Compensation Committee. The forfeiture restrictions on a restricted stock award may lapse based upon achievement of performance criteria, continued service with the Company or its affiliates, the occurrence of an event or satisfaction of any other condition or any combination of the foregoing.
We retain custody of the shares of our common stock issued pursuant to a restricted stock award until the disposition and forfeiture restrictions lapse. The holder may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the shares until the expiration of the restriction period. However, upon the issuance to the holder of shares of our common stock pursuant to a restricted stock award, except for the foregoing restrictions, the holder will have all the rights of one of our stockholders with respect to the shares, including the right to vote the shares and to receive all dividends and other distributions paid with respect to the shares, provided that any dividends that are payable with respect to a performance-vested restricted stock award will be deferred and paid contingent upon satisfaction of the vesting criteria applicable to the underlying award.
PERFORMANCE AWARDS
The Compensation Committee may, in its sole discretion, grant performance awards under the Amended LTIP that may be paid in cash, shares of common stock, or a combination thereof as determined by the Compensation Committee. Performance awards may be based on one or more, or a combination, of the following metrics (which (i) may be absolute, relative to one or more other companies, relative to one or more indexes and may be contingent upon our future performance or the performance of any of our affiliates, divisions or departments, and (ii) may include relative or growth achievement regarding such metrics):
The Compensation Committee may also provide at grant for the payment of dividend equivalents with respect to performance awards, provided that payment of dividend equivalents shall in all cases be deferred and contingent upon vesting of the underlying performance award.
PHANTOM STOCK AWARDS
The Compensation Committee is authorized to grant phantom stock awards under the Amended LTIP, which may include grants of stock appreciation rights. These are awards of rights to receive shares of our common stock (or the fair market value thereof), or rights to receive amounts equal to share appreciation over a specific period of time. These awards vest over a period of time established by the Compensation Committee, without satisfaction of any performance criteria or objectives. The Compensation Committee may, in its discretion, require payment or other conditions of the recipient of a phantom stock award. A phantom stock award may include a stock appreciation right that is granted independently of a stock option. Payment of a phantom stock award may be made in cash, shares of our common stock, or a combination thereof. The Compensation Committee may also provide at grant for the payment of dividend equivalents with respect to phantom stock awards.
BONUS STOCK AWARDS
The Compensation Committee is authorized to grant bonus stock awards under the Amended LTIP. Bonus stock awards are unrestricted shares of our common stock that are subject to such terms and conditions as the Compensation Committee may determine and they need not be subject to performance criteria or objectives or forfeiture. The Compensation Committee determines the purchase price, if any, for awards of bonus stock.
ADJUSTMENTS
The number and kind of shares covered by outstanding awards under the Amended LTIP and, if applicable, the prices per share applicable thereto, are subject to adjustment in the event of merger, consolidation, liquidation, reorganization, recapitalization, reclassification, stock dividend, spin-off, split-up, stock split, reverse stock split or other distribution with respect to the shares of common stock, or any similar corporate transaction or event. The permitted adjustments are only those the Compensation Committee determines are appropriate to reflect the occurrence of the transaction or event, including but not limited to adjustments in the number and kind of securities reserved for issuance; in the award limits on individual awards; in the performance goals of any outstanding awards; to the number and kind of securities subject to outstanding awards; and, if applicable, to the grant amounts, or exercise prices of the awards. Any such adjustments will be made in a manner consistent with the requirements of Section 409A of the Code and, (i) in the case of incentive stock options, any such adjustments will be made in a manner consistent with the requirements of Section 424(a) of the Code, and (ii) in the case of performance-vested awards intended to qualify for exemption under 162(m), in a manner consistent with such provision.
CORPORATE CHANGE
Individual award agreements will set forth the treatment of awards granted under the Amended LTIP in the event of a corporate change. The Amended LTIP provides that, unless defined otherwise in an applicable award agreement, a corporate change occurs if:
ACCELERATED VESTING
Subject to Section 409A, the terms of awards granted under the Amended LTIP may include accelerated vesting or lapse of forfeiture restrictions, as applicable, including (1) by virtue of the retirement, death or disability of a participant or (2) in the event of a corporate change where either (A) within a specified period of time a participant is involuntarily terminated for reasons other than for cause or terminates his or her employment for good reason or (B) such awards are not assumed or converted into replacement awards in a corporate change in a manner described in the applicable award agreement. Subject to Section 409A of the Code, the Compensation Committee may also provide for accelerated vesting, lapse of forfeiture restrictions, and waiver of any performance, service, or other limitation with respect to any outstanding award granted under the Amended LTIP, including upon a termination of employment by reason of death, disability, retirement, or upon a corporate change.
TAX WITHHOLDING
A participant will be responsible for payment of any taxes required by law to be withheld from an award or an amount paid in satisfaction of an award, which will be paid by the participant on or prior to the payment or other event that results in taxable income in respect of an award. The award agreement will specify the manner in which the withholding obligation shall be satisfied with respect to the particular type of award; provided, that, if shares of common stock are withheld from delivery upon exercise of an option or a stock appreciation right, the fair market value of the shares withheld will not exceed the minimum amount of tax for which withholding is required.
AMENDMENT
Our Board in its discretion may terminate the Amended LTIP at any time with respect to any shares for which an award has not theretofore been made. Our Board has the right to alter or amend the Amended LTIP or any part thereof from time to time, and the Compensation Committee has the right to prospectively or retroactively amend the terms of any award; provided that no change in any award theretofore made may be made which would impair the rights of the recipient of the award without the consent of such recipient and provided, further, that our Board may not, without approval of our stockholders, amend the Amended LTIP to increase the maximum aggregate number of shares of our common stock that may be issued under the Amended LTIP or the benefits otherwise accrued to participants under the Amended LTIP, increase the maximum number of shares of common stock that may be issued under the Amended LTIP through incentive stock options, or change the class of individuals eligible to receive awards under the Amended LTIP or amend outstanding stock options or stock appreciation rights to lower the applicable purchase price or substitute cash or other awards for any such underwater stock option or stock appreciation right. Further, to the extent stockholder approval of an amendment to the Amended LTIP is necessary to satisfy the requirements of Rule 16b-3 or any securities exchange listing requirements of the New York Stock Exchange or other securities exchange on which the common stock is then listed, no amendment will be effective unless and until so approved by our stockholders.
NON-U.S. PARTICIPANTS
To facilitate grants under the Amended LTIP to participants who are foreign nationals or who provide services outside of the United States, the Compensation Committee may provide for special terms for awards to such participants as the Compensation Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. The Compensation Committee may also approve supplements to the Amended LTIP (including sub-plans) to govern such awards.
United States Federal Income Tax Aspects of the Amended LTIP
The following is a brief summary of some of the United States federal income tax consequences of certain transactions under the Amended LTIP based on current federal income tax laws, as in effect on January 1, 2020, which is subject to change (possibly retroactively). This summary, which is presented for the information of stockholders considering how to vote on this proposal and not for participants of the Amended LTIP, is not intended to be complete and does not describe federal taxes other than income taxes (such as Medicare and Social Security taxes), state, local or foreign tax consequences. The tax treatment for a participant in the Amended LTIP may vary depending on his or her particular situation and may, therefore, be subject to special rules not discussed below. In addition, certain awards that may be granted pursuant to the Amended LTIP could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder.
NON-STATUTORY STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
As a general rule, no federal income tax is imposed on the optionee upon the grant of a non-statutory stock option such as those under the Amended LTIP (whether or not including a stock appreciation right). Generally, upon the exercise of a non-statutory stock option, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the excess of the fair market value of the shares on the date of exercise over the option price paid for the shares. In the case of the exercise of a stock appreciation right, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the cash received plus the fair market value of the shares distributed to the optionee. Upon a subsequent disposition of the shares received upon exercise of a non-statutory stock option, any appreciation after the date of exercise should qualify as capital gain.
INCENTIVE STOCK OPTIONS
The incentive stock options under the Plan are intended to constitute “incentive stock options” within the meaning of Section 422 of the Code. Incentive stock options are subject to special federal income tax treatment. No federal income tax is imposed on the optionee upon the grant or the exercise of an incentive stock option if the optionee does not dispose of shares acquired pursuant to the exercise within the two-year period beginning on the date the option was granted or within the one-year period beginning on the date the option was exercised (collectively, the “holding period”). With respect to an incentive stock option, the difference between the fair market value of the stock on the date of exercise and the exercise price must be included in the optionee’s alternative minimum taxable income.
Upon disposition of the shares received upon exercise of an incentive stock option after the holding period, any appreciation of the shares above the exercise price should constitute capital gain. If an optionee disposes of shares acquired pursuant to his or her exercise of an incentive stock option prior to the end of the holding period, the optionee will be treated as having received, at the time of disposition, compensation taxable as ordinary income. The amount treated as compensation is the excess of the fair market value of the shares at the time of exercise (or in the case of a sale in which a loss would be recognized, the amount realized on the sale if less) over the exercise price. Any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as short-term or long-term capital gain, depending on the holding period of the shares.
RESTRICTED STOCK AWARDS
An employee who has been granted restricted stock under the Amended LTIP will not realize taxable income at the time of grant, assuming that the restrictions constitute a substantial risk of forfeiture for federal income tax purposes. Upon expiration of the forfeiture restrictions (i.e., as shares become vested), the holder will realize ordinary income in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for the shares. Dividends paid to the holder during the period that the forfeiture restrictions apply will also be compensation to the employee. Notwithstanding the foregoing, the recipient of restricted stock may elect to be taxed at the time of grant of the restricted stock based upon the fair market value of the shares on the date of the award, in which case:
PERFORMANCE AWARDS AND PHANTOM STOCK AWARDS
An individual who has been granted a performance award or a phantom stock award generally will not realize taxable income at the time of grant. Whether a performance award or phantom stock award is paid in cash or shares of our common stock, the individual will have taxable compensation. The measure of such income will be the amount of any cash paid and the fair market value of any shares of our common stock either at the time the performance award or the phantom stock award is paid or at the time any restrictions on the shares (including restrictions under Section 16(b) of the Exchange Act) subsequently lapse, depending on the nature, if any, of the restrictions imposed and whether the individual elects to be taxed without regard to any such restrictions.
BONUS STOCK AWARDS
An individual who has been granted a bonus stock award will realize taxable income at the time of the grant.
TAX CONSEQUENCES TO THE COMPANY OR ITS SUBSIDIARIES
To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code, and is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code. In this regard, certain types of awards under the Amended LTIP cannot qualify as performance-based awards under Section 162(m), and in other cases awards may fail to qualify if all requirements for qualification are not met in connection with such awards.
SECTION 162(M) OF THE CODE
The Existing LTIP was designed to comply with the requirements of applicable federal and state securities laws and the Code. Historically, the Company has structured its incentive compensation plans (including the Existing LTIP) with the intent that certain awards made thereunder may qualify as “performance-based compensation” in an effort to exempt such compensation from the deduction limitation under Section 162(m) of the Code (“Section 162(m)”). As a result of tax legislation that went into effect on December 22, 2017, this exception for performance-based compensation is no longer available for taxable years beginning after December 31, 2017, unless such compensation qualifies for transition relief contemplated in the new tax legislation for certain written binding contracts in place as of November 2, 2017. Therefore, the compensation associated with awards granted under the Existing LTIP that are not subject to the transition relief and that exceed the deduction limitation are not expected to be deductible by the Company.
New Plan Benefits
The specific individuals who will be granted awards under the Amended LTIP and the type and amount of any such awards will be based on the discretion of the Compensation Committee, subject to annual limits on the maximum awards that may be awarded to any individual as described above. Accordingly, future awards to be received by or allocated to particular individuals under the Amended LTIP are not presently determinable, and the New Plan Benefits Table is not provided.
Vote Required
This proposed First Amendment is contingent upon receiving the affirmative vote of the holders of a majority of our common stock cast with respect to the proposal. Abstentions will be counted as votes cast against the proposal, and broker non-votes will not be counted as votes cast with respect to the proposal under applicable rules of the New York Stock Exchange. See “How do I vote my shares?” on page 79.
The Board unanimously recommends a vote “FOR” the approval of the First Amendment.
Ratification of the Appointment of |
In early 2020, the Audit Committee performed its annual evaluation of the external auditor as part of its responsibilities. After careful consideration, the Audit Committee determined that a different perspective would be beneficial to the Company. The Audit Committee chose not to renew the engagement of Ernst & Young following the filing of the Company’s Annual Report on Form 10-K in February 2020.
Ernst & Young’s reports on the financial statements for fiscal years ended December 31, 2018 and December 31, 2019 did not contain any adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal years ended December 31, 2018 and December 31, 2019 and the subsequent period through February 14, 2020 (the date of Ernst & Young’s dismissal), (i) there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K) with Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, any of which, if not resolved to the satisfaction of Ernst & Young, would have caused Ernst & Young to make reference thereto in its reports on the consolidated financial statements for such fiscal years; and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K). Ernst & Young had been the Company’s auditor since 2002, and the Audit Committee would like to thank Ernst & Young for their many years of service to the Company.
Following extensive discussion, the Audit Committee appointed Deloitte & Touche LLP (“Deloitte”) as of February 14, 2020 as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2020. Our
Independent Registered Public Accounting Firm
The Audit Committee believes that the engagement ofhas reappointed Deloitte as the Company’s independent registered public accounting firm for 2020 is in the best interestand as auditors of the Company and its stockholders. We have been advised by Deloitte that the firm is independent and has no relationship with Group 1 or its subsidiaries other than that arising from the firm’s engagement as auditors, tax advisors and consultants.Company’s consolidated financials for 2022. The Audit Committee has also discussed Deloitte’s independence with Deloitte since its appointment. During fiscal years ended December 31, 2018 and December 31, 2019, neitherreviews the Company nor anyone on its behalf consulted with Deloitte regarding anyperformance of the matters or events set forth in Item 304(a) (2)(i) or (ii)independent registered public accounting firm annually. In making the determination to re-appoint Deloitte for 2022, the Audit Committee considered, among other factors, the independence and performance of Regulation S-K.Deloitte, and the quality and candor of Deloitte’s communications with the Audit Committee and management. Deloitte has served as the Company’s independent registered public accounting firm since 2020. Representatives of Deloitte will be present atduring the Annual Meeting and will have the opportunity to make a statement and respond to appropriate questions from stockholders. Representatives of Ernst & Young will be present at the Annual Meeting and will have the opportunity to make a statement and respond to appropriate questions from stockholders.shareholders.
The ratification of our Audit Committee’s appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2020 requires our receiving the affirmative vote of the holders of a majority of our common stock present in person or represented by proxy and entitled to vote on the proposal. Although ratification is not required, by our bylaws or otherwise, as a matter of good corporate governance, we are asking our stockholdersshareholders to approve the selection of Deloitte as our independent registered public accounting firm. The Board of Directors recommends that stockholders ratify the selection of Deloitte as the independent registered public accounting firm for the Company for 2020. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interest and the best interest of our stockholders.
shareholders.
Our Board of Directors recommends a vote “FOR”“FOR” Ratification of the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2020.2022.
Audit and Other FeesFEES PAID TO AUDITORS
Set forth below is a summary ofThe following table shows the fees paid for professional services provided by Ernst & Young, which has served as our independent registered public accounting firm since 2002,to Deloitte for services related to the fiscal years ended December 31, 20182020 and 2019.2021. In determining the independence of Ernst & Young,Deloitte, the Audit Committee considered whether the provision of non-audit services is compatible with maintaining Ernst & Young’sDeloitte’s independence.
Type of Fees | 2019 | 2018 | ||||||
Audit Fees(1) | $ | 2,519,800 | $ | 2,594,000 | ||||
Audit Related Fees(2) | — | — | ||||||
Tax Fees(3) | 81,400 | 79,000 | ||||||
All Other Fees(4) | — | 2,200 | ||||||
TOTAL | $ | 2,601,200 | $ | 2,675,200 |
Type of Fees | 2021 | 2020 | ||||||
Audit Fees1 | $ | 2,740,000 | $ | 2,125,000 | ||||
Audit Related Fees2 | 125,000 | 100,000 | ||||||
Tax Fees3 | 140,000 | 308,000 | ||||||
All Other Fees4 | — | — | ||||||
TOTAL | $ | 3,005,000 | $ | 2,533,000 |
Audit fees consisted of amounts accrued for services performed in association with the integrated audit of the Company’s consolidated financial statements for |
2 | Included in Audit Related Fees are amounts for services that are related to the performance of the audit or review of our financial statements, consisting primarily of statutory audits, services performed in connection with SEC registration statements, periodic reports and other documents filed with the SEC or |
Tax fees consisted of amounts billed in | |
4 | There were no other fees in 2020 or 2021. |
The Audit Committee considered whether the provision of these services was compatible with maintaining Ernst & Young’sDeloitte’s independence and has determined such services for fiscal 20182020 and 20192021 were compatible. All of the services described above were pre-approved by the Audit Committee pursuant to paragraph (c)(7) of Rule 2-01 of Regulation S-X under the Exchange Act.
The Audit Committee has established a policy requiring pre-approval by the Audit Committee of all services (audit and non-audit) to be provided to us by our independent registered public accounting firm. In accordance with this policy, the Audit Committee had given its annual approval for the provision of audit services by Ernst & Young,Deloitte for 2020 and 2021 and had also given its approval for up to a year in advance for the provision by Ernst & Young of particular categories or types of audit-related, tax and permitted non-audit services, in each case subject to a specific budget.
Any proposed services to be provided by the independent registered public accounting firm not covered by one of these approvals, including proposed services exceeding pre-approved budget levels, requires special pre-approval by the Audit Committee. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent registered public accounting firm to management. All of the services listed above were pre-approved pursuant to this policy.
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The Audit Committee is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities relating to our accounting policies, reporting policies, internal controls, compliance with legal and regulatory requirements, selection of the independent registered public accounting firm and the integrity of Group 1’s financial reports. The Board of Directors, upon the recommendation of its Governance & Corporate Responsibility Committee, has determined that each member of the Audit Committee has the requisite independence and other qualifications for audit committee membership under New York Stock Exchange corporate governance listing standards, the Sarbanes-Oxley Act of 2002, the Audit Committee Charter and the Group 1 Automotive, Inc. Corporate Governance Guidelines.
Each year, the Audit Committee reviews the work and status of its independent accounting firm with the Company. After careful consideration, the Audit Committee determined that a different perspective with in-depth auto retail experience would be beneficial to the Company. The Audit Committee reviewedhas the qualifications of the remaining public accounting firms with experienceduties and powers described in our industry and decided to interview Deloitte & Touche LLP. After several discussions between the Audit Committee, members of our senior management team and members of Deloitte who would service our account, the Audit Committee decided to retain the accounting services of Deloitte for the fiscal year beginning in 2020. Deloitte will also provide non-audit services, including among others, tax planning and advice and tax compliance.
The Audit Committee acts under aits written charter adopted and approved by the Board of Directors. The Audit Committee reviews and reassesses the adequacyA copy of the charter on an annual basis. Based on the recommendation of the Audit Committee, the Board approved the Audit Committee charter at a regularly scheduled meeting in February 2020. The Audit Committee charter is posted on our Investor Relations website,www.group1auto.comwww.group1corp.com, and you may obtain a printed copy of the Audit Committee charter by sending a written request to Group 1 Automotive, Inc., 800 Gessner, Suite 500, Houston, TX 77024, Attn: Corporate Secretary.
The Audit Committee assists the Board’s oversight and monitoring of the Company’s system of internal controls, including the internal audit function. The Audit Committee discussed with our internal auditors the overall scope and plans for the 20192021 audit. At each Audit Committee meeting, the Audit Committee is provided the opportunity to meet with the internal auditor with, and without, management present. During 2019,2021, management made updates to its internal control documentation for changes in internal control and completed its testing and evaluation of the Company’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee has kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received updates provided by management and the independent auditor at each regularly scheduled Audit Committee meeting and met in executive session separately with the internal and the independent auditor to discuss the results of their examinations, observations and recommendations regarding internal control over financial reporting.
The independent registered public accounting firm is accountable to the Audit Committee, and the Audit Committee has the ultimate authority and responsibility to select, evaluate and, where appropriate, replace the independent registered public accounting firm. The Audit Committee engages in an annual evaluation of the independent public accounting firm’s qualifications, assessing the firm’s quality of service, the firm’s sufficiency of resources, the quality of the communication and interaction with the firm, and the firm’s independence. The Audit Committee makes its selection based on the best interests of the Company and its stockholders.shareholders. The Audit Committee participates in the selection and annual evaluation of the leadLead Audit Partner (the “Lead Partner”) of the independent registered public accounting firm through its review of the Lead Partner’s professional qualifications, experience, and prior performance on the Company’s audit (if any);, through in-person meetings with the Lead Partner, and through discussion between the Audit Committee and management regarding the selection of the Lead Partner.
The Audit Committee has reviewed and discussed with management and Ernst & Young,Deloitte, our audited financial statements as of and for the year ended December 31, 2019.2021. The Audit Committee also discussed with Ernst & YoungDeloitte the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Commission.
Ernst & YoungDeloitte submitted to the Audit Committee the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the firm’s communications with the Audit Committee concerning its independence. The Audit Committee discussed with Ernst & YoungDeloitte such firm’s independence. The Audit Committee also considered whether the provision of non-audit services to our Company by Ernst & YoungDeloitte was compatible with maintaining their independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements referred to above be included in our Annual Report on Form 10-K for the year ended December 31, 2019,2021, for filing with the SEC.
Respectfully submitted by the Audit Committee of the Board of Directors of Group 1,
Carin M. Barth (Chair)
Carin Barth (Chairman)
Stephen D. Quinn
Steven P. Stanbrook
Charles L. Szews
Anne Taylor
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Except as described under the heading “Executive Compensation — Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table”, our named executive officers serve at the discretion of our Board. The following table setsbiographies set forth certain information as of the date of this proxy statement regarding our named executive officers:officers other than Mr. Hesterberg whose biography can be found on page 20:
DARYL A. | KENNINGHAM President, U.S. and Brazilian Operations | |||
Age 57 Appointed in 2019 | ||||
Mr. Hesterberg’s biographical information may be found on page 29 of this proxy statement.
Previous Group 1 Positions Held
• Regional Vice President • Regional Vice President | Degrees B.A. in Psychology, University of Michigan; M.B.A, University of Florida | ||
Experience • Prior to joining Group 1, • Held a variety of • Began his career at Nissan Motor Corporation |
Age 47 Appointed in | Previous Group 1 • U.K. Finance Director from 2007 to | Degrees BSc in Economics, Queens University Belfast; MSc in Accounting & Management, Southampton University | ||
Experience • Member of the • Joined Chandlers BMW in 2004 before its acquisition by Group 1 in 2007 • Prior to entering the | ||||
FRANK GRESE, JR.
Age 70 Appointed in 2022 | Previous Group 1 Positions Held • Senior Vice President, Human Resources, Training and Operations Support • Regional Vice President • Platform President of Group 1 Atlanta from | Degrees B.A. in Journalism, University of Georgia | ||
Experience • Immediately prior to joining Group 1 in 2004, he served as Director of Dealership Operations for a large, private dealer group • Previously held various executive positions, including Chief Operating Officer and District President, with large public and private dealer groups • Joined Nissan in 1982, where he ultimately served as National Dealer Advertising Manager until 1986 • Began his automotive career in the Ford Management Training Program in 1974 |
PETER C. DELONGCHAMPS
Age 61 Appointed in 2018 | Previous Group • Vice President, Manufacturer Relations, Financial Services and Public Affairs from • Vice President, Manufacturer Relations and Public Affairs from • Vice President, Manufacturer Relations from | Degrees B.B.A. in Marketing, Baylor University | ||
Experience • Prior to joining Group 1, he was President of Advantage BMW, a Houston-based automotive retailer, from 1997 to 2004 • Began his automotive retailing career in 1980, having • Serves on the Board of Directors of Junior Achievement of Southeast Texas, Houston Christian High School and the Texas | ||||
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2019 Compensation Discussion and Analysis
ThisProxy Statement 2022 | 33
and Analysis
Following the unprecedented events of 2020, Group 1 adapted, evolved, and emerged stronger as a Company in 2021. Our team worked tirelessly to navigate the unique challenges of the COVID-19 pandemic, especially supply chain disruptions, by maintaining strong cost control and preserving liquidity, while making significant investments to increase the size and improve the strength of our Company. As a result of these efforts, the Company achieved record sales and profits. Our strong performance was the result of an experienced, focused management team and dedicated employees that responded to the challenges we faced.
This CD&A provides a detailed description of our executive compensation philosophy, and programs, the compensation decisions the Compensation Committee has made under those programs and the factors considered in making those decisions.compensation determinations of the CHR Committee. As discussed in greater detail below, our compensation plans are designed to reward our named executive officers for the achievement of these results for our Company and our stockholders.results. The Compensation Discussion and AnalysisCD&A focuses on the compensation of our named executive officers as of December 31, 2019,2021, who were:
Earl J. Hesterberg
President and Chief Executive Officer;
Daryl A. Kenningham
President, U.S. and Brazilian Operations;
Daniel McHenry
Senior Vice President and Chief Financial Officer;
Frank Grese, Jr.
Senior Vice President, Human Resources, Training and Operations Support; and
Peter C. DeLongchamps
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs.
Compensation and Corporate GovernanceCOMPENSATION AND CORPORATE GOVERNANCE
The Committee continuously reviews best practices inOur executive compensation and has made several adjustmentsgovernance programs are designed to elements of our compensation programslink pay with operational performance and increases in long-term shareholder value while minimizing incentives that could lead to excessive risk-taking. We have adopted the following policies and practices over the past several yearstime to further align our executive compensation structure with our stockholders’ interests and current governance practices, including:accomplish such objectives:
Compensation Highlights | ||||||||||||
No Excise Tax Gross-Ups | No Single-Trigger Equity Vesting | Say-on-Pay Advisory Vote Conducted Annually | ||||||||||
Robust Stock Ownership Guidelines for Our Officers and Directors | Company Policy Prohibits Directors and Employees from Pledging or Hedging Group 1 Common Stock | Independent Compensation Consultant | ||||||||||
Performance-Based Shares | Clawback Provisions for Certain Restatements | Incentive Program Includes Both Financial and Mission-Based Goals | ||||||||||
ROLE OF THE COMPENSATION HIGHLIGHTS& HUMAN RESOURCES COMMITTEE, ITS CONSULTANT AND MANAGEMENT
Role of the CompensationThe CHR Committee its Consultant and Management
Our Board has entrusted the Compensation Committee (the “Committee”) with overall responsibility for establishing, implementing and monitoring our executive compensation program. Our Chief Executive Officer and Senior Vice President, of Human Resources, Training and Operations Support alsowork with the CHR Committee to implement and promote our executive compensation strategy and play a role in the implementation of the executive compensation process, by overseeing the performance and dynamics of the executive team and generally keepinginforming the Committee informed.CHR Committee. All final decisions regarding our named executive officers’ compensation remain with the CHR Committee, except in the case of our Chief Executive Officer. The CompensationBased on a performance evaluation, the CHR Committee determinesreviews and approvesrecommends the compensation for our Chief Executive Officer based on his performance evaluation, and after consultation withfor approval by the full Board, absentindependent members of the Chief Executive Officer.
Board.
The CHR Committee has historically engaged Pearl Meyer & Partners, LLC (“PM&P”), an executive compensation firm, to serve as its independent compensation consultant and to advise on executive compensation matters. In 2018, PM&P was engaged to conduct a competitive compensation analysis for the named executive officers, which was used in making 2019 compensation decisions. During that time, PM&P reviewedreviews compensation data for our peer companies (“Peer Companies”) in comparison to our current compensation practices and mademakes compensation recommendations to the CHR Committee. The Committee retainsBased on the analysis of PM&P, no changes were recommended to the Company’s current peer group of companies for 2021. PM&P attends certain meetings of the CHR Committee and has discussions with members of the CHR Committee or its Chair throughout the year to assist with the review and discussion of executive compensation matters.
PM&P is an independent compensation consulting firm and does not provide any other services to us outside of matters pertaining to executive officer and director compensation. PM&P reports directly althoughto the CHR Committee, which is the sole party responsible for determining the scope of services performed by PM&P and the directions given to PM&P regarding the performance of such services. However, in carrying out assignments PM&P may interact with our management when necessary and appropriate.
In February 2022, the CHR Committee considered the independence of PM&P doesin light of SEC rules and listing standards of the NYSE. The CHR Committee requested and received a letter from PM&P addressing the consulting firm’s independence, including the factors set forth in the listing standards of the NYSE. The CHR Committee discussed these considerations, among other things, and concluded that the work of PM&P did not provideraise any services to our Company other than executive compensation consulting services. The Committee has determined that no conflict of interest exists between PM&P and our Company. Please see “Information About our Board of Directors and its Committees — interest.
CALIBRATING OUR EXECUTIVE COMPENSATION
Compensation Committee” for additional information on the role of the Committee, its consultant and management in setting executive compensation.
Objectives of Our Executive Compensation Program
COMPENSATION PHILOSOPHY
Philosophy
The CHR Committee believes that the most effective executive compensation program is one designed to recruit, retainbe reasonable and motivate capable leadershipcompetitive, and rewardshould balance our goal of attracting, motivating, rewarding and retaining top-performing senior executives with our goal of aligning their interests with those individuals upon the achievement of their personal and functional objectives, as well as upon our Company’s achievement of specific annual, long-term and strategic goals.shareholders. The CHR Committee annually evaluates both market competitiveness, as well as individual and Company performance,our executive compensation program to ensure that we maintainit is consistent with our ability to attract, retainshort-term and motivate talented employeeslong-term goals. We provide short-term incentive compensation opportunities in key positions.the form of annual cash bonuses, which focus on our achievement of annual corporate goals. We also provide long-term incentive compensation opportunities in the form of equity awards, which have historically consisted primarily of restricted stock and performance-based shares, with time-based vesting provisions. By maintaining competitive compensation and rewarding for performance, the CHR Committee strives to support our overall business objectives and provide our stockholdersshareholders with a superioran attractive rate of return over time. As we continue to focus on delivering strong financial results, we remain committed to doing so in a way that respects the communities and environments in which we operate.
Our strategic business focus during the fiscal year ended December 31, 20192021, consisted of the following objectives:
increase total same store gross profit through focused efforts in the new vehicle, used vehicle, finance and insurance, parts, service and collision departments;
continue to | |
maintain a cost level that aligns with the anticipated level of business activity;
implement additional health and safety measures to protect our employees and customers in response to the COVID-19 pandemic;
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seek strategic acquisition and divestiture opportunities within the automotive retail market so that we can continue to optimize our business operations in the U.S. and the U.K.; and
maintain a balanced capital allocation strategy including share repurchases, dividends and effective capital spending.
Our named executive officers’ individual or functional goals for the fiscal year ended December 31, 20192021, generally consisted of one or more of the following criteria, which provide support for our business objectives:
sustain sales momentum;
STOCKHOLDER INPUT ON EXECUTIVE COMPENSATION MATTERSmaximize performance of recently acquired dealership operations;
In accordancecontinue to strengthen our processes and management for improved operating effectiveness and efficiency;
control costs and expenses as sales levels fluctuate;
dispose of underperforming dealerships and deploy the proceeds into other capital opportunities with applicable law and as described in more detail in Proposal 2 above, our stockholders havebetter returns;
drive the rightcapital allocation process, which seeks to vote, on an advisory non-binding basis, on the approval of the compensation of our named executive officers at specified intervals (the “say-on-pay vote”). Stockholders last voted on this matter at the 2019 Annual Meeting of Stockholders. In accordance with the frequency vote at the 2017 Annual Meeting of Stockholders we hold our say-on-pay vote every year. In 2019, 95% of the votes cast were in favor of our executive compensation program; therefore the Committee did not make any significant changesmaximize returns to our compensation program as a result of such a vote, other than the introduction of performance shares into the mix of long-term incentives in 2019, a best practice in executive compensation. The Committee will continue to consider on an annual basis the vote results for say-on-pay proposals when making compensation decisions for our named executive officers.shareholders; and
In addition to such consideration given to the results of the say-on-pay vote, at various times throughout the year the Committee considers any input it may receive from stockholdersidentify and other stakeholders, and more general developments in executive compensation principles, in the development and implementation of the Company’s executive compensation philosophy, policies and programs. For additional information on the say-on-pay vote with respect to the compensation paid to our named executive officers in 2019, see Proposal 2 above.successfully close acquisition targets.
Market Analysis
MARKET ANALYSIS
We engaged PM&P to conduct an independent market-based analysis of our executive compensation program in 2019. The&P’s market analysis process involvedinvolves the comparison of long-term, short-term andthe total compensation elements (base, annual incentive, long-term incentive and executive perquisites) with a selected group of peer companies (“Peer Companies”). Compensation data was compared at the 25th, 50thand 75thpercentiles of the market.
Companies.
While we do not think it is appropriate to establish compensation based solely on market analysis, we believe that the practice of comparing our compensation program to the programs of our peers can be useful for two reasons. First, our compensation practices must be competitive in order to attract and retain executives with the ability and experience necessary to provide leadership and to deliver strong performance to our stockholders.shareholders. Second, comparisoncomparative analysis allows us to assess the reasonableness of our compensation practices. This process allows us to achieve one of our primary objectivesobjective of maintaining competitive compensation, to ensure retention and assists inwhile aligning compensation with stockholdershareholder interests.
Our Peer Companies include all of the publicly traded automotive consolidators and specialty retailers associated with automotive sales, and automotive parts and service against whom we most directly compete for executive talent.compete. The list of our Peer Companies is periodically reviewed and updated by the Committee. Our 2019 Peer CompaniesThe Committee discussed the Company’s peer group with PM&P in 2021. Based on that discussion, no changes were made to the Company’s peer group of companies for 2021, which were:
•Advance Auto Parts, Inc. | •Lithia Motors, Inc. | ||
• | Asbury Automotive Group, Inc. | •LKQ Corporation | |
• | AutoNation, Inc. | •O’Reilly Automotive, Inc. | |
• | AutoZone, Inc. | •Penske Automotive Group, Inc. | |
• | CarMax, Inc. | •Rush Enterprises, Inc. | |
• | Genuine Parts Company | •Sonic Automotive, Inc. |
When evaluating the compensation data and making compensation decisions, the CHR Committee has taken into consideration the variance in revenue size among the entities comprising our Peer Companies. Additionally, when calculating a market value, the CHR Committee has considered other differences between our Peer Companies and us, such as corporate structure, tenure of officers, variance in scope of duties for each officer and other factors. This value is used as the basis of comparison of compensation provided by our Peer Companies and us. However, any application of market analysis data is tempered by our basic staffing philosophy, which is to remain as lean as practical. This guiding principle results in certain of our named executive officers having a broad range of job responsibilities, which, at certain of our Peer Companies, may be divided among multiple executive officers. The CHR Committee’s use of market analysis data for specific compensation components is described in more detail below.
Comprehensive Compensation Reviews
TALLY SHEETS
In 2019,The CHR Committee and PM&P reviewed a variety of data points and information when making 2021 executive compensation tally sheets fordecisions, including historical and estimated future compensation values, in order to get a thorough understanding of realizable pay in various circumstances. Our human resources department was able to prepare a historical compensation analysis of realizable compensation (rather than the grant date or accounting values that may have been presented in previous compensation tables) that our named executive officers were prepared by our human resources departmenthave received over the last year, as well as the hypothetical value of compensation and reviewed bybenefits that could become payable upon both voluntary and involuntary termination scenarios or upon a change in control event. This information assisted the Committee. This review consistsCHR Committee in determining whether the structure of a twelve month summarypay for the 2021 year would be market-based, fair and appropriate, as well as to determine the desired mix of cash compensation earned, employee benefits provided, stock granted (with value at grant), and value of stock released (with value at release). Total shares and present value of unvested equity awards are also presented for review. Information from these tally sheets was considered by the Committee in makingequity-based compensation decisions for the 2021 year.
Our shareholders have the right to vote, on an advisory non-binding basis, on the approval of the compensation of our named executive officers as well as guidingat specified intervals (the “say-on-pay vote”). In accordance with the designfrequency vote at the 2017 Annual Meeting of cash and non-cashShareholders we hold our say-on-pay vote every year. In 2021, 97% of the votes cast were in favor of our executive compensation and benefit programs.program; therefore, the CHR Committee did not make any significant changes to our compensation program or our general compensation philosophy following the vote. The Committee specifically used tally sheets inwill continue to consider on an annual basis the following contextsvote results for each named executive officer:
Our compensation program for our named executive officers includesand in setting our compensation goals and philosophy.
In addition to such consideration given to the results of the say-on-pay vote, at various times throughout the year the CHR Committee considers input from shareholders and other stakeholders as well as more general developments in executive compensation principles. The CHR Committee uses this information to develop and implement the Company’s executive compensation philosophy, policies and programs. For additional information on the say-on-pay vote with respect to the compensation paid to our named executive officers in 2021, see Proposal 2 above.
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Compensation Program Structure
Our executive compensation program consists of annual cash compensation and long-term equity-based compensation. Annual cash compensation consists of annual base salary and payments under ouran annual cash incentive plan. Our long-term equity-based compensation consists of both restricted stock and performance-based equity awards, made under our long-term incentive plan.
with time-based vesting parameters. In addition, our named executive officers are eligible to (i) participate in our health and welfare plans, our Employee Stock Purchase Plan and our retirement plans (401(k) Savings Plan and Deferred Compensation Plan), (ii) receive a vehicle allowance and/or demonstrator vehicle(s), depending on the position held, and (iii) receive limited perquisites and other personal benefits as described under “Other Benefits” below.
Named executive officer compensation is composed of four primary components:
BASE SALARY
Long-Term Incentive | ||||||||||||||||
Base Salary | + | Annual Cash Incentive Plan | + | Performance Shares | + | Restricted Stock | ||||||||||
Competitive pay to attract and retain talented executives | An opportunity to earn an annual cash award based on the Company’s financial performance and mission-based business objectives; there will be no payout unless a minimum financial goal is achieved | A mix of restricted stock and performance-based shares, with time-based vesting provisions, to align management’s interests with long-term shareholders’ interests | ||||||||||||||
DesignBase Salary
Design
We provide our named executive officers with ana competitive annual base salary to compensate them for services rendered during the year. Our goal is to set base salaries for our named executive officers at levels that are competitive with comparable companies for the skills, experience, and requirements of similar positions, using market analysis as previously discussed, in order to attract and retain top talent. In order toTo achieve this goal, we have generally sought to provideset base salaries that fall near the 50thpercentile of our Peer Companies. We believe this supports competitive compensation and ensures retention. In order to ensure that each officer is appropriately compensated, the Committee, when setting base salaries, considers individual performance, tenure and experience and our financial performance in addition to the compensation review of the Peer Companies. Individual base salary levels are generally reviewed each November and are adjusted as appropriate based on an analysis of current market salary levels at the Peer Companies, local market conditions, individual performance and experience, and our financial performance.
20192021 Results and Fiscal 20202022 Changes
Following the comprehensive compensation review, and considering certain economic conditions impacting the Company at that time, the CHR Committee approved a 3% increase to the base salaries for our named executive officers, except for Mr. Hesterberg whose increase was approved by the independent directors of the Board. The increases became effective January 1, 2021.
In November 2018,2021, after reviewing and discussing a competitive analysis prepared by PM&P, the tally sheets and certain economic conditions affecting the Company, theCHR Committee elected to increaseadjust the base salaries for our named executive officers, effective January 1, 20192022 to levels that remained near the 50th50th percentile compensation of our Peer Companies. Accordingly, the base salaries for our named executive officers were increasedadjusted as noted in the table below.
In November 2019, the Committee elected to increase the base salaries Mr. Grese’s salary for our named executive officers2022 reflects a change in his responsibilities, as effective January 1, 2020, to levels that remained near the 50thpercentile compensation of our Peer Companies. However, due to the recent economic and operational concerns over the anticipated negative implications of the COVID-19 (coronavirus) outbreak, our senior executive officers elected to take a voluntary decrease in their base salaries2022, he is no longer responsible for the foreseeable future. Accordingly, as of the date of this filing, the base salaries for our named executive officers have been decreased as follows: Mr. Hesterberg – 50%, Mr. Kenningham – 35%, and Messrs. Rickel, Grese and DeLongchamps – 20%, all as reflected in the table below.Human Resources.
Named Executive Officer | 2019 Base Salary ($) | 2020 Base Salary effective 01/01/2020 ($) | Adjusted 2020 Base Salary effective 04/01/2020 ($) | 2021 Base Salary ($) | 2022 Base Salary ($) | |||||||||||||||
Earl J. Hesterberg | 1,150,000 | 1,200,000 | 600,000 | 1,240,000 | 1,265,000 | |||||||||||||||
Daryl A. Kenningham | 655,200 | 720,000 | 468,000 | 760,000 | 775,000 | |||||||||||||||
John C. Rickel | 629,700 | 650,000 | 492,000 | |||||||||||||||||
Daniel McHenry | 575,000 | 620,000 | ||||||||||||||||||
Frank Grese, Jr. | 595,400 | 615,000 | 520,000 | 633,450 | 596,119 | |||||||||||||||
Peter C. DeLongchamps | 492,650 | 515,000 | 412,000 | 530,450 | 541,059 |
ANNUAL INCENTIVE COMPENSATION PLAN
Annual Incentive Compensation Plan
Annual cash incentive awards are intended to align our annual performance and results with the compensation paid to persons who are most responsible for such performance, and to motivate and reward achievement of Company and individual or functional performance objectives. Meaningful, performance-related goals are established so that attaining or exceeding the performance targets is not assured, requires significant effort by each of our named executive officers, and if accomplished, contributes to the ongoing overall improvement and success of the Company.
For 2019,2021, the annual incentive compensation plan was based upon achievement of financial and individual, or functional,mission-based, goals approved at the beginning of the year by the CHR Committee. The financial and mission-based portions of the annual incentive awards could be awarded independently so that achievement of one was not predicated on the achievement of the other. There is, however, a minimum earnings per share goallevel established by the CHR Committee at the beginning of each year which has tomust be achieved before any incentive award is paid.
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The following is a description of the 20192021 performance metrics under the annual incentive compensation plan:
Financial Goal
The CHR Committee meets in November to determine appropriate financial metrics for the upcoming year, and has a general compensation philosophy of setting challenging, yet attainable, performance goals. PM&P provides the CHR Committee with market data and other information about the Company’s peers, which the CHR Committee reviews in the context of the Company’s short-term and long-term strategy, along with the metrics used in previous years. The CHR Committee evaluates information and analyses provided by management and PM&P to assess which metrics are expected to properly motivate management to produce short-term and long-term value for its shareholders.
For 2019, theThe CHR Committee selected adjusted net income* as our financial goal portionfor the 2021 annual incentive compensation plan. In setting the 2021 annual incentive award performance goal, the Committee considered historical performance levels, industry trends and forecasts, and our strategic plan. The Committee believes that this financial performance measure is effective and appropriate because it reflects income statement performance, which is consistent with the interests of our shareholders. The Committee selected this metric to be transparent and to provide clarity and consistency in calculating the cash incentive award. When set, threshold was considered achievable, target was considered challenging yet attainable and maximum was considered possible, but not without significant effort.
Under the 2021 annual incentive compensation plan, was based on achievement of diluted earnings per share (“EPS”). Diluted earnings per share is generally defined as our net income available to diluted common shares divided by the sum of the weighted average number of common shares outstanding during the period plus those that would have been outstanding, assuming issuance for all dilutive potential common shares. Under the 2019 annual incentive compensation plan, theCHR Committee may, in its sole discretion, adjust the Company’s EPSadjusted net income when determining achievement of the financial goal metric for extraordinary or unusual items that would be included in our annual operating results, but not typically considered at the time the targets were set, such as certain asset impairments or extraordinary dilutive events which materially affect EPS.
The Committee believes that EPS is the best metric for our financial goal portion of the annual incentive compensation plan, because it incentivizes our named executive officers to maximize stockholder return and only rewards our named executive officers if our stockholders are rewarded.adjusted net income. Further, no payments are made under the financial goal portion of the award unless a threshold level of EPSadjusted net income is achieved. The threshold, target and maximum levels of performance for the EPSadjusted net income metric set by the CHR Committee for 20192021 were as follows:
Threshold ($) | Target ($) | Maximum ($) | |
EPS | 9.49 | 9.70 | 10.20 |
Threshold ($) | Target ($) | Maximum ($) | ||||
Adjusted Net Income* | 260.0 million | 280.0 million | 330.0 million |
* | Please see Appendix A for an explanation and reconciliation of these non-GAAP measures. |
Mission-based Goals
Mission-based goals typically include specific goals that are related to the individual’s functional area and are established at the beginning of each fiscal year jointly by the named executive officer and our Chief Executive Officer and reviewed by the CHR Committee, or in the case of the Chief Executive Officer, by the CHR Committee and the Board. These goals are integral toward achieving key business objectives, such as those listed on page 49pages 34-35 which help improve our financial performance, promote corporate efficiencies and contribute to the growth of our Company. In 2019,2021, the following mission-based goals were assigned to each of our named executive officers:
Name | Individual/Functional Performance Targets | ||
Earl J. Hesterberg | • Communicate corporate growth strategy to investment community and execution of same • Continued focus on technological excellence to improve effectiveness and efficiency of operations • Focus on human capital, including DEI goals and actions; training and development of recent additions to leadership team •Achieve meaningful | ||
• | |||
Evaluate strategic options for Brazilian operations • | Achieve selling, general and administrative cost reduction target | ||
Daryl A. Kenningham | |||
• | Achieve meaningful growth in U.S. used vehicle operations •Increase U.S. aftersales gross profit | ||
• | |||
Continued focus on technological excellence to improve effectiveness and efficiency of operations • | |||
Continued focus on corporate growth strategy and acquisition eligibility • | Focus on human capital, including DEI goals and actions; continued training and development of operations leadership •Achieve selling, general and administrative cost reduction target | ||
Daniel McHenry | |||
• | |||
update accounting controls framework through artificial intelligence • | • Develop funding support plan for strategic growth initiatives • Develop technological improvements at the business support center • Focus on human capital, including DEI goals and | ||
actions, in succession planning • | Achieve selling, general and administrative cost reduction target | ||
Frank Grese, Jr. | •Coordinate with procurement department to identify and achieve cost savings goal | ||
• | |||
Support greater employee engagement and development through employee recognition | |||
programs; development of DEI Council • | Achieve recruiting objectives for various dealership | ||
roles • | |||
recruit and develop SVP, Chief Human Resources Officer • | |||
assist in employee development • | Achieve selling, general and administrative cost reduction target | ||
Peter C. DeLongchamps | •Achieve F&I per retail unit target | ||
• | Maintain capital expenditure projects within budget while maintaining positive relationships with manufacturers | ||
• | |||
Focus on DEI and ESG initiatives; continued focus on corporate philanthropy efforts • | |||
Continued focus on communication and relationships with manufacturers and investment community | |||
• | Develop and launch online financial service compliance and training program •Achieve selling, general and administrative cost reduction target |
The CHR Committee determined that for 20192021 as long as earnings per shareadjusted net income was at least $8.25,$238.0 million, the mission-based portion of the award would be payable from 0% to 100% according to individual goal achievement levels. As a result, assuming all mission-based goals were attained, the following table sets forth the threshold, target and maximum annual incentive compensation plan potential payouts for 2019,2021, as a percentage of base salary. The target performance level was set such that, if attained, the total cash compensation paid to our named executive officers would approximate the median paid to named executive officers at our Peer Companies.
How the Annual Incentive is Paid (as a % of Salary) | ||||||||
Financial Based | Total Opportunity (Assumes 100% Payout on Mission Based) | |||||||
Named Executive Officer | Mission Based | Threshold | Target | Max | Threshold | Target | Max | |
Earl J. Hesterberg | 50.0% | 25.0% | 50.0% | 150.0% | 75.0% | 100.0% | 200.00% | |
Daryl A. Kenningham | 50.0% | 25.0% | 50.0% | 100.0% | 75.0% | 100.0% | 150.00% | |
John C. Rickel | 50.0% | 16.7% | 33.3% | 65.0% | 66.67% | 83.33% | 115.00% | |
Frank Grese, Jr. | 50.0% | 16.7% | 33.3% | 65.0% | 66.67% | 83.33% | 115.00% | |
Peter C. DeLongchamps | 50.0% | 16.7% | 33.3% | 65.0% | 66.67% | 83.33% | 115.00% |
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How the Annual Incentive is Paid (as a % of Salary) | ||||||||||||||||||||||||||||||||||||
Financial Based | Total Opportunity (Assumes 100% Payout on Mission Based) | |||||||||||||||||||||||||||||||||||
Named Executive Officer | Mission Based | Threshold | Target | Max | Threshold | Target | Max | |||||||||||||||||||||||||||||
Earl J. Hesterberg | 50.0 | % | 25.0 | % | 50.0 | % | 150.0 | % | 75.0 | % | 100.0 | % | 200.0 | % | ||||||||||||||||||||||
Daryl A. Kenningham | 50.0 | % | 25.0 | % | 50.0 | % | 100.0 | % | 75.0 | % | 100.0 | % | 150.0 | % | ||||||||||||||||||||||
Daniel McHenry | 50.0 | % | 16.7 | % | 33.3 | % | 65.0 | % | 66.7 | % | 83.3 | % | 115.0 | % | ||||||||||||||||||||||
Frank Grese, Jr. | 50.0 | % | 16.7 | % | 33.3 | % | 65.0 | % | 66.7 | % | 83.3 | % | 115.0 | % | ||||||||||||||||||||||
Peter C. DeLongchamps | 50.0 | % | 16.7 | % | 33.3 | % | 65.0 | % | 66.7 | % | 83.3 | % | 115.0 | % |
Results
For 2019,2021, we achieved the maximum level of our financial goal (EPS)(adjusted net income). Adjusted actual EPSnet income was $10.93$642.2 million, exceeding the maximum target performance level of $10.20.
$330.0 million.
In connection with its review of the performance of our Chief Executive Officer, the CHR Committee determined that Mr. Hesterberg had achieved 70%100% of his 20192021 mission-based goals, resulting in a 70%100% payment of the mission-based payout. Following extensive discussion with our Chief Executive Officer regarding his evaluation of the performance of our named executive officers, the CHR Committee determined that the mission-based goals for Messrs. Kenningham, Rickel, GreseMcHenry and DeLongchamps were met, or surpassed their individual and functional goals, resulting in 100% payout of the mission-based payout.payout, and Messrs. Kenningham and Grese had achieved a 95% and 96% payout, respectively, of their mission-based goals. In making these determinations, the CHR Committee specifically considered each named executive officer’s leadership in achieving each of the goals.
Based on the CHR Committee’s evaluation of the performance of each of our named executive officers, it determined the degree to which each named executive officer had achieved his goals and the following amounts of incentive compensation were paid with respect to the 20192021 year:
1 | The % of salary is based on employee salaries on December 31, 2021. |
Annual Incentive Compensation Plan Changes for Fiscal 2020
2022
In February 2020,January 2022, the CompensationCHR Committee with the help of PM&P, reviewed the performance metrics (mission-based and financial-based) under the Company’s Annual Incentive Compensation Plan. The CHR Committee continues to believe that the mission-based goals set for each of the Company’s named executive officers are integral toward achieving key business objectives and contribute to the growth of the Company. The Committee discussed whether earnings per share (“EPS”) continues to be an appropriate target for measuring achievement of financial-based goals. TheCHR Committee discussed a variety of financial metrics and determined that adjusted annual net income (as disclosed in the fourth quarter earnings release filed with the Securities & Exchange CommissionSEC following year-end), would continues to be an appropriate metric for aligning the management team’s financial-based goals with the Company’s success for 2020. Unfortunately,2022. In November 2021, the impactCHR Committee made changes to the annual incentive compensation program for our named executive officers to increase the portion of COVID-19 (coronavirus)the annual incentive program based on our business is increasingly negativefinancial goals from 50% to 70%, and could require a future reviewto reduce the portion of 2020 targets for reasonableness.the annual incentive program based on mission-based goals from 50% to 30%.
LONG TERM EQUITY INCENTIVE COMPENSATION
Long Term Equity Incentive Compensation
Design
To align the compensation of our named executive officers with the attainment of our business goals and an increase in stockholdershareholder value, we award long-term equity incentive grants to our named executive officers as part of our total compensation package. These awards have been made pursuant to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan, as amended (the “LTIP”).
We believe that restricted stock, subject to time-based vesting requirements, appropriately aligns management’s interests with those of our Company and our stockholders,shareholders, while helping to motivate and retain key members of our management team. Additionally, beginning in 2019, after extensive discussions between the CompensationCHR Committee and PM&P, the compensation consultant, the CompensationCHR Committee determined that the annual equity awards made to certain executive officers should include a performance-based award component. Accordingly, in 2021, 25% (increased to 50% in 2022, as discussed below) of each NEO’snamed executive officer’s equity compensation annual grants under the LTIP will bewere subject to performance-based criteria by grantingunder performance shares. These performance shares werehave been granted at the recommendation of our compensation consultantPM&P in order to better align our incentive compensation with the incentive compensation of our peers.
When determining the size of the awards, we typically consider amounts that would provide our named executive officers with long-term incentive opportunities that, when performance is above target, results in pay above the median of our peer companies.Peer Companies. We then take into account individual performance, the position and value of the named executive officer to our Company, experience and length of service to us, our desire to incentivize the officer to remain with our Company, and the amount of equity previously awarded to the officer.
Restricted Stock Awards
Vesting of equity-based awards are intended to facilitate retention, and the restricted stock shares vest over a five-year period with the restrictions relating to the awards lapsing 40% after two years and 20% in each year thereafter. Since 2008, our vesting provisions have been based on the passage of time. Under the terms of the current restricted stock award agreements, in the event of death or disability of any employee with unvested awards, all granted but unvested restricted stock awards will automatically vest.
In addition, Certain qualified retirements will also result in the eventacceleration of a “qualified retirement,” which is a retirement after a minimumvesting.
For more information on the potential vesting (or forfeiture) of ten years of service with our Company andoutstanding Restricted Stock Awards, please see the executive attaining the age of 63,section entitled “Executive Compensation — Potential Payments upon satisfaction of a two year non-compete and certain non-disclosure covenants, all unvested shares of restricted stockTermination or restricted stock units (grantedChange in prior years) held by the named executive officer as of his retirement date will vest. Provided, however, that beginning with the awards granted in 2018, any restricted stock granted to the executive must have been received at least six months prior to his notification of his intent to terminate his employment due to Qualified Retirement, and at least six months prior to the effective retirement date to be eligible for vesting as provided above.Control — GROUP 1 AUTOMOTIVE 2014 LONG TERM INCENTIVE PLAN.”
Performance Share Awards
We designed 50% of the performance shares or 12.5% (50% x 25%) of the total 2021 annual equity-based grant, to be based on Group 1’sthe Company’s return on invested capital (“ROIC”), and 50% of the performance shares of the equity award or 12.5% of the total annual equity-based grant to be based on the Company’s total shareholder return (“TSR”) relative to a comparator group of five domestic automotive retailers. Theretailers included in the Peer Companies.
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These performance criteria are to be measured over a two-year performance period is two fiscal years (2019 and 2020) butfrom the beginning of 2021 through the end of 2022. In addition, the 2021 performance share grants are subject to a three-year time-based vesting period for the performance shares is three years. The Committee will certify performance at the February 2021 meetingschedule. As a result, following the end of the two-year performance period, and anyat the February 2023 meeting the CHR Committee will assess performance. Any awards that became eligiblehave satisfied the performance-based criteria will then continue to vest as a result of performance will remainbe subject to athe time-based vesting requirement, until year-end. Full vesting of anywhich lapses at year end. Any 2021 performance shares earned will fully vest on December 31, 2021.
2023.
The 20192021 awards were generally designed to vest from 0% to 200% of the target award granted, based on performance.the ROIC and TSR performance achieved against our Peer Companies. However, the portion of the awards subject to TSR performance were also granted withsubject to a supplemental cap on the maximum fair market value rather thanof the awards that become earned. This maximum value cap would limit the upside value of each award in an environment where the stock price has increased substantially above the expected levels at the time of grant, limiting the number of shares that could become settled with respecteligible to be issued to the award. Notwithstanding the performance levels actually achieved during the performance period,recipient upon settlement. As a result, the maximum fair market value (determined as of the last day of the applicable performance period) of the shares (or restricted stock, as further described below) that may be issued with respect to the performance share award may not exceed four times the fair market value of the target number of shares subject to TSR performance originally granted to the named executive officer (the “Maximum Value”). The Maximum Value is calculated separately with respect to each half of the award that is subject to a separate performance measure. If the fair market value of the number of such shares (or restricted stock, as applicable) exceedstock) exceeds that Maximum Value, with respectthen the number of TSR-based shares eligible to one or both halves of the award, the sharesvest will be reduced to a number of whole shares that is equal to or less than the Maximum Value relating to that halfValue. However, if on the vesting date for the award, the aggregate fair market value of the award.shares payable to the individual is less than the Maximum Value, all or a portion of the number of share that were previously reduced due to the cap will become payable to the employee to the extent that the aggregate fair market value of the shares to be issued as of the vesting date does not exceed the Maximum Value.
For details regarding the potential vesting (or forfeiture of) the Performance Share Awards, please see the section entitled “Executive Compensation – Potential Payments upon Termination or Change in Control – GROUP 1 AUTOMOTIVE 2014 LONG TERM INCENTIVE PLAN.” The performance share agreements under the LTIP for our named executive officers providesprovide that upon a named executive officer’s termination due to death or disability, the performance shares will pay out following the performance period based on actual performance. If a named executive officer’s employment is terminated due to a planned retirement (generally defined as a mutually agreed upon retirement by the officer and the Company), the performance shares will convert to time-based restricted stock awards that will continue to vest, subject to the officer’s compliance with applicable restrictive covenants, until the second anniversary of the named executive officer’s termination of employment. Such a conversion will occur based on the actual performance achieved during the performance period. All other terminations of employment will result in a forfeiture of the performance shares without payment.
2019 Awards
2021 Awards
In February 2019,2021, the CHR Committee reviewed the tally sheets and the competitive analysis prepared by PM&P and the Company’s comprehensive compensation review to determine how each named executive officer’s base salary and total compensation compared to their peers and in order to assesspeers. The CHR Committee also assessed all elements of each executive’s pay relative to total compensation. TheWhen making the decision as to the size of the equity award for each named executive officer the CHR Committee also considered each executive’s current equity position for purposes of reward and retention and considered other factors, such as size of previous awards, contribution to corporate results, leadership and Company performance during the year when making the decision as to the size of the equity award for each named executive officer.year. Based on the analysis and review described above, on February 19, 2019,2021, the CHR Committee granted the following restricted stock and performance share awards to the named executive officers:
2021 Long Term Equity Incentive Compensation | ||||||||||||||||||||||||||||||
2019 Long Term Equity Incentive Compensation | ||||||||||||||||||||||||||||||
Named Executive Officer | Restricted Stock Awards (#) | Value ($) | Performance Share Awards (#) | Value ($) | Restricted Stock Awards (#) | Value1 ($) | Performance Share Awards (at Target) (#) | Value (at Target)1 ($) | ||||||||||||||||||||||
Earl J. Hesterberg | 43,860 | 2,700,022 | 14,620 | 900,007 | 19,377 | 2,849,969 | 6,459 | 949,990 | ||||||||||||||||||||||
Daryl A. Kenningham | 13,670 | 841,525 | 4,556 | 280,467 | 10,199 | 1,500,069 | 3,399 | 499,925 | ||||||||||||||||||||||
John C. Rickel | 11,696 | 720,006 | 3,899 | 240,022 | ||||||||||||||||||||||||||
Daniel McHenry | 2,550 | 375,054 | 849 | 124,871 | ||||||||||||||||||||||||||
Frank Grese, Jr. | 8,333 | 512,979 | 2,778 | 171,014 | 3,569 | 524,929 | 1,189 | 174,878 | ||||||||||||||||||||||
Peter C. DeLongchamps | 7,895 | 486,016 | 2,631 | 161,964 | 4,079 | 599,939 | 1,359 | 199,882 |
1 | Value of awards reflect market rates on date of grant. |
For more information on the 20192021 equity awards, please see the section entitled “Executive Compensation — Grants of Plan BasedPlan-Based Awards in 2019.2021.”
Compensation Changes for Fiscal 20202022
In November 2021, after reviewing a competitive analysis prepared by PM&P and following discussions with PM&P , the CHR Committee increased the mix of performance based long term incentive from 25% to 50%. The Committee made no material changesfinancial metrics remained the same, with 25% (50% x 50%) of the total annual equity-based grant, to our long-termbe based on Group 1’s ROIC, and 50% of the performance shares of the equity award or 25% of the total annual equity-based grant to be based on the Company’s TSR relative to a group of five domestic automotive retailers. The other fifty percent of the long term incentive, compensation strategy for fiscal 2020.
restricted stock awards, remains time vesting over five years.
401(K) PLAN
Plan
We maintain the Group 1 Automotive, Inc. 401(k) Savings Plan (the “401(k) Savings Plan”) to assist eligible employees in providing for their retirement. Matching contributions may be in the form of cash or shares of our common stock or a combination of both, as determined by the CHR Committee. All of our matches have been in cash for all employees. Amounts that we contributed to each named executive officer’s 401(k) Savings Plan account are disclosed within the Summary Compensation Table. Effective April 1, 2020, the Committee suspended matching contributions for the foreseeable future for all plan participants due to the recent economic and operational concerns over the anticipated negative implications of the COVID-19 (coronavirus) outbreak.
EMPLOYEE STOCK PURCHASE PLAN
Employee Stock Purchase Plan
Generally, under the Group 1 Automotive, Inc. Employee Stock Purchase Plan, all employees, including our named executive officers, are offered the opportunity to purchase up to $25,000 annually of our common stock at a 15% discount to market, provided that the maximum number of shares that may be purchased by an employee shall not exceed 3,000 shares of common stock per quarter. This is an additional equity incentive we offer to all of our employees to further promote their interest in enhancing stockholdershareholder value. These shares may not be sold by the employee for a minimum of six months following purchase.
DEFERRED COMPENSATION PLAN
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Deferred Compensation Plan
The Group 1 Automotive, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) is designed as a retention tool for our corporate and regional officers, dealership general managers, and other key employees and non-employee directors.employees. It allows participants the opportunity to accumulate additional savings for retirement on a tax-deferred basis. Participants can choose from various defined investment options in whichIn 2021, the deferred compensation is notionally invested. One investment option is a declared interest rate which was set by theCHR Committee at 8.0% for 2019. Pursuant toapproved an amendment and restatement of the Deferred Compensation Plan certain corporate officers, includingwhich eliminated all investment options except the declared rate option and a money-market fund, discontinued the ability of participants to elect and schedule in-service withdrawals, eliminated non-discretionary employer matching contributions and discontinued future participation by our named executive officers, may defer up to 50% of their base salary and up to 100% of their incentive compensation, and we may make contributions to the participants’ accounts.non-employee directors. For a more detailed discussion of the Deferred Compensation Plan, please see the section entitled “Executive Compensation — Nonqualified Deferred Compensation.”
Other Benefits
OTHER BENEFITS
Health and Welfare Benefits
Our named executive officers are eligible to participate in our standard medical, dental, vision, disability insurance and life insurance plans to meet their health and welfare needs. These benefits are provided so as to assure that we are able to maintain a competitive position in terms of attracting and retaining executive officers and other employees. This is a fixed component of compensation and the benefits are provided on a non-discriminatory basis to all of our full-time employees.
Vehicle Allowance
Under his employment agreement, our Chief Executive Officer is provided with two vehicles for his use. Our President, U.S. and Brazilian Operations also receives the use of two vehicles. Our Senior Vice President and Chief Financial Officer, our Senior Vice President, Human Resources, Training, and Operations Support and Employee Communications, and our Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs, as well as our other Senior Vice Presidents, receive a vehicle allowance of $15,000 per year and the use of one vehicle. Vice Presidents are provided with a vehicle allowance of $11,300 per year, or a vehicle, and in certain limited cases, both.
Other Limited Perquisites and Personal Benefits
We provide certain named executive officers with perquisites and other personal benefits that the CHR Committee believes are reasonable and consistent with our overall compensation programs and philosophy. These benefits are provided in order to enable us to attract and retain these executives. For example, we pay for club membership privileges that are used primarily for business but also for occasional personal purposes by our Chief Executive Officer, Mr. Hesterberg. In addition, we own a fractional interest in an aircraft which is primarily used for business purposes. However, we make a portion of our time available to Mr.Messrs. Hesterberg and Kenningham for personal use during the year. In 2019,2021, Mr. Hesterberg was allowed a maximum of 40 flight hours for personal use;use of the aircraft; however, his actual personal usage was 29.113.8 hours. In 2021, the CHR Committee approved 20 hours for personal use of the aircraft during the year for Mr. Kenningham. In 2021, Mr. Kenningham’s personal usage was 16.2 hours of personal flight time. Messrs. Hesterberg reimburses usand Kenningham reimburse the Company for his personal use based on the published standard industry fare level valuation method. We provide thisThis benefit is provided to Mr.Messrs. Hesterberg because it optimizesand Kenningham to optimize the use of histheir time and is consistent with similar benefits provided by our Peer Companies. In 2020, the Committee approved 20 hours for personal use during the year for Mr. Kenningham. Mr. Kenningham will also reimburse us for his personal use based on the published standard industry fare level valuation method.
Employment Agreements, Severance Benefits and Change in Control Provisions
EMPLOYMENT AGREEMENTS, SEVERANCE BENEFITS AND CHANGE IN CONTROL PROVISIONS
We maintain employment and other compensatory agreements with certain named executive officers to ensure they will perform their roles for an extended period of time. Certain provisions contained in these agreements, such as non-competition and non-solicitation provisions, as well as change in control severance payments, are essential to retaining our talent and protecting our stockholders.shareholders. We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. These agreements and our severance terminology are described in more detail elsewhere in this proxy statement.
Please read “Executive Compensation — Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table — Employment, Incentive Compensation and Non-Compete Agreements.” These agreements provide for severance compensation to be paid if the officer’s employment is terminated under certain conditions, such as following a corporate change, involuntary termination, termination by us for “cause,” death or disability, each as defined in the applicable executive’s agreement. The employment and other compensatory agreements between our Company and our named executive officers and the related severance provisions are designed to meet the following objectives:
CORPORATE CHANGE
Corporate Change
In certain limited scenarios, the potential for merger or being acquired may be in the best interests of our stockholders.shareholders. As a result, we provide severance compensation to certain named executive officers if the officer’s employment is terminated following a corporate change transaction. Our intent is to promote the ability of the officer to act in the best interests of our stockholdersshareholders even though his or her employment could be terminated as a result of the transaction. However, as previously discussed, we do not provide any excise tax gross-ups to any of our named executive officers.
TERMINATION WITHOUT CAUSE
Termination Without Cause
If we terminate the employment of certain named executive officers “without cause” as defined in the applicable agreement, we are obligated to pay the officer certain compensation and other benefits as described in greater detail in “Executive Compensation - Potential Payments Upon Termination or Change in Control.” We believe these payments are appropriate because the terminated officer is bound by confidentiality, non-solicitation and non-compete provisions ranging from one to two years after termination. Both partiesParties with existing agreements have mutually agreed to a severance package that would be in place prior to any termination event. This provides us with more flexibility to make a change in senior management if such a change is in the best interests of our Company and its stockholders.shareholders.
Hedging and Pledging Prohibitions
HEDGING AND PLEDGING PROHIBITIONS
Our Directorsdirectors and named executive officers, in addition to any of our employees or their designees, are prohibited from engaging in “short sales” of our stock or otherwise hedging the risk of ownership of our stock. Hedging is generally defined as purchasing a financial instrument that does, or is intended to, hedge or offset any decrease in the market value of our stock, regardless of the manner in which those individuals hold that stock (i.e., as an award from our LTIP, a gift, or from a direct purchase of the stock in the open market). We have also adopted a policy that prohibits our directors and officers from pledging their Company stock or engaging in any other transaction that has the effect of using Group 1 securities as collateral.
Policy on Payment or Recoupment of Performance-Based Cash Bonuses and Performance-Based Stock Bonuses in the Event of Certain Restatements
POLICY ON PAYMENT OR RECOUPMENT OF PERFORMANCE-BASED AWARDS
The CHR Committee has adopted a policy on payment or recoupment (or “clawback”) of performance-based cash bonuses and performance-based stock bonuses in the event of certain financial restatements, excluding those required by a change in generally accepted accounting principles, which provides that we will require the payment or reimbursement (to the extent permitted by governing law) of all or a portion of any performance-based cash or performance-based stock bonus where: (a) the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a material restatement and (b) a higher or lower payment would have been made to the employee based upon the restated financial results. In each of these instances, we will, to the extent practicable: (a) either make a payment of, or seek to recover, the cash amount by which the individual employee’s annual performance-based bonus was recalculated based on the restated financial results; provided that we will not pay or seek to recover bonuses paid more than three years prior to the date the applicable restatement is disclosed; (b) cause the award or cancellation of any performance-based stock awards; and (c) seek reimbursement of any unearned gains realized on the vesting of performance-based stock attributable to such awards.
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Our Stock Ownership Guidelines
Our Board has adopted Stock Ownership Guidelines that apply to our named executive officers, as well as other officers within our Company. The guidelines require our named executive officers to maintain a minimum number of shares of our common stock (CEO – 6x base salary; other named executive officers – 3x base salary) while they are employed by us. The guidelines reinforce the importance of aligning the longer-term interests of our named executive officers with the interests of our stockholdersshareholders and are expressed in terms of the dollar value of their equity holdings as a multiple of each named executive officer’s base salary.
The dollar value of stock ownership is based on base salary times a multiple divided by the previous 36-month average stock price as calculated on December 31stof each year. Unvested restricted stock awards or restricted stock units are counted towards each named executive officer’s ownership requirement. Unvested performance shares are not considered in this calculation. Stock ownership levels should be achieved by each officer within five years of the adoption of these guidelines, or within five years of the individual’s appointment as an officer. Each of our named executive officers was in compliance with current guidelines on December 31, 2019,2021, as indicated below:below.
Includes |
|
Tax Deductions for Compensation
TAX DEDUCTIONS FOR COMPENSATION
In conducting our executive compensation programs, prior to 2018 the CHR Committee considered the effects of Section 162(m) of the Internal Revenue Code (the “Code”), which denied publicly held companies a tax deduction for annual compensation in excess of $1 million paid to certain covered employees unless theiremployees. While the CHR Committee considers the deductibility of compensation was based on performance criteria. Section 162(m) of the Code was modified in connection with the Tax Cuts and Jobs Act, and beginning with the 2018 calendar year there is no longer an exception for performance-based compensation arrangements that are not deemedpaid to be grandfathered pursuant to the Tax Cuts and Jobs Act, therefore Section 162(m) of the Code did not have an impact on the compensation decisions that the Committee made in 2019. The Committee retains the ability to evaluate the performance of our named executive officers as one factor in its determinations, the CHR Committee will ultimately structure compensation in a manner that meets our business, retention and to pay appropriate compensation,incentive goals, even if some of it may be non-deductible, to ensure competitive levels of total compensation is paid to certain individuals.non-deductible.
RISK ASSESSMENT
We have reviewedannually review our compensation policies and practices for all employees, including our named executive officers, and have determined that our compensation programs are not reasonably likely to cause behaviors that would have a material adverse effect on our Company. Moreover, we believe that several design features of our compensation programs and policies reduce the likelihood of excessive risk-taking:
The program design provides a balanced mix of cash and equity, annual and longer-term incentives, and performance metrics. |
Annual and long-term incentive payouts are capped at industry standard levels. |
We currently do not grant stock options. |
The |
The compensation recovery policy (which extends to all employees participating in the incentive plan) allows our Company to “claw back” payments made using materially inaccurate financial results. |
Our named executive officers are subject to robust stock ownership guidelines. |
Compliance and ethical behaviors are integral factors considered in all performance assessments. |
We set the proper ethical and moral expectations through our policies, values and procedures and provide various mechanisms for reporting issues. |
We maintain an evaluation program, including periodic reviews and audits of our dealership sales, parts and service and finance departments, which enables us to verify that our compensation policies and practices are aligned with expectations. |
A cap is placed on the number of shares of common stock that may be awarded to an individual in any calendar year. |
We believe that, for all employees, our compensation programs do not encourage excessive risk and instead encourage behaviors that support sustainable value creation.creation aligned with our shareholders’ interests.
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Report of the Compensation & Human
Resources Committee
During the last fiscal year, and this year in preparation for the filing of this proxy statement with the SEC, the Compensation & Human Resources Committee:
reviewed and discussed the disclosure set forth under the heading “2019“2021 Compensation Discussion and Analysis” with management; and
based on the reviews and discussions referred to above, recommended to the Board of Directors that the disclosure set forth under the heading “2019“2021 Compensation Discussion and Analysis” be included in this proxy statement and incorporated by reference into Group 1 Automotive, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2021.
Respectfully submitted by the Compensation & Human Resources Committee of the Board of Directors,
Anne Taylor (Chair)
Max P. Watson, Jr. (Chairman)
John L. AdamsSteven C. Mizell
Stephen D. Quinn
Anne TaylorSteven P. Stanbrook
MaryAnn Wright
2019 Summary Compensation Table
2021 SUMMARY COMPENSATION TABLE
The following table summarizes, with respect to our named executive officers, information relating to the compensation granted or earned for services rendered in all capacities during 2019, 20182021, 2020 and 2017.2019. Our named executive officers consist of five senior corporate officers, including our Chief Executive Officer and our Chief Financial Officer.
Name and Principal Position | Year | Salary ($) | Stock Awards(1) ($) | Non-Equity Incentive Plan Compensation(2) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) ($) | All Other Compensation(4) ($) | Total ($) | |||||||||||||
Earl J. Hesterberg President and Chief Executive Officer | 2019 | 1,150,000 | 3,600,029 | 2,127,500 | 361,583 | 685,290 | 7,924,402 | |||||||||||||
2018 | 1,150,000 | 3,599,959 | 1,437,500 | 337,607 | 378,588 | 6,903,654 | ||||||||||||||
2017 | 1,100,000 | 1,999,966 | 485,833 | 322,320 | 203,550 | 4,111,669 | ||||||||||||||
Daryl A. Kenningham President, U.S. and Brazilian Operations | 2019 | 655,200 | 1,121,992 | 982,800 | 164,068 | 177,153 | 3,101,213 | |||||||||||||
2018 | 624,000 | 987,935 | 780,000 | 181,560 | 26,745 | 2,600,240 | ||||||||||||||
2017 | 533,333 | 962,312 | 645,296 | 169,653 | 31,310 | 2,341,904 | ||||||||||||||
John C. Rickel Senior Vice President and Chief Financial Officer | 2019 | 629,700 | 960,028 | 724,155 | 360,087 | 26,294 | 2,700,264 | |||||||||||||
2018 | 599,700 | 873,943 | 689,655 | 395,460 | 26,210 | 2,584,968 | ||||||||||||||
2017 | 583,500 | 845,799 | 389,000 | 379,516 | 25,338 | 2,223,153 | ||||||||||||||
Frank Grese, Jr. Senior Vice President, Human Resources, Training and Operations Support | 2019 | 595,400 | 683,993 | 684,710 | 197,769 | 33,618 | 2,195,490 | |||||||||||||
2018 | 572,500 | 683,955 | 658,375 | 193,206 | 31,914 | 2,139,950 | ||||||||||||||
2017 | 540,000 | 589,235 | 346,500 | 170,839 | 33,171 | 1,679,745 | ||||||||||||||
Peter C. DeLongchamps Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs | 2019 | 492,650 | 647,980 | 566,548 | 77,961 | 24,489 | 1,809,628 | |||||||||||||
2018 | 478,300 | 645,958 | 550,045 | 82,345 | 24,952 | 1,781,600 | ||||||||||||||
2017 | 456,300 | 651,610 | 182,520 | 82,239 | 22,418 | 1,395,087 |
Name and Principal Position | Year | Salary ($) | Stock Awards2 ($) | Non-Equity Incentive Plan Compensation3 ($) | Change in ($) | All Other Compensation5 ($) | Total ($) | |||||||||||||||||||||
Earl J. Hesterberg President and Chief Executive Officer | 2021 | 1,240,000 | 3,799,959 | 2,480,000 | 849,078 | 208,220 | 8,577,257 | |||||||||||||||||||||
2020 | 900,000 | 3,646,040 | 2,400,000 | 292,530 | 60,009 | 7,298,579 | ||||||||||||||||||||||
2019 | 1,150,000 | 3,600,029 | 2,127,500 | 361,583 | 685,290 | 7,924,402 | ||||||||||||||||||||||
Daryl A. Kenningham President, U.S. and Brazilian Operations | 2021 | 760,000 | 1,999,994 | 1,121,000 | 342,173 | 174,355 | 4,397,522 | |||||||||||||||||||||
2020 | 604,500 | 1,772,418 | 1,080,000 | 806,776 | 171,939 | 4,435,633 | ||||||||||||||||||||||
2019 | 655,200 | 1,121,992 | 982,800 | 164,068 | 177,153 | 3,101,213 | ||||||||||||||||||||||
Daniel McHenry Senior Vice President And Chief Financial Officer | 2021 | 575,000 | 499,925 | 661,250 | 859 | 34,557 | 1,771,591 | |||||||||||||||||||||
2020 | 375,317 | 450,026 | 349,506 | — | 13,607 | 1,188,456 | ||||||||||||||||||||||
Frank Grese, Jr.1 Senior Vice President, Human Resources, Training and Operations Support | 2021 | 633,450 | 699,807 | 715,799 | 373,425 | 32,605 | 2,455,086 | |||||||||||||||||||||
2020 | 558,625 | 708,927 | 707,250 | 157,112 | 34,764 | 2,166,678 | ||||||||||||||||||||||
2019 | 595,400 | 683,993 | 684,710 | 197,769 | 33,618 | 2,195,490 | ||||||||||||||||||||||
Peter C. DeLongchamps Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs | 2021 | 530,450 | 799,821 | 610,018 | 142,794 | 29,663 | 2,112,746 | |||||||||||||||||||||
2020 | 467,792 | 708,927 | 592,250 | 54,561 | 30,613 | 1,854,143 | ||||||||||||||||||||||
2019 | 492,650 | 647,980 | 566,548 | 77,961 | 24,489 | 1,809,628 |
Effective January 1, 2022, Mr. Grese was no longer responsible for Human Resources. |
2 | The amounts in the “Stock Awards” column reflects the required accounting expense for the restricted stock and performance share awards and do not correspond to the actual value that may be recognized by our named executive officers. These amounts represent the grant date fair value of awards computed in accordance with FASB ASC Topic 718 in connection with awards granted under the |
Annual cash incentive awards based upon the achievement of financial and mission-based goals. This is discussed further under |
Amounts reflect above-market earnings on the Deferred Compensation |
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5 | The following table contains a breakdown of the compensation and benefits included under “All Other Compensation” for |
Name | Year | 401(k) Savings Plan Matching Contribution ($) | Automobile Allowance ($) | Use of Demonstrator Vehiclea ($) | Airplane Useb ($) | Club Membership and Dues ($) | Total ($) | |||||||
Earl J. Hesterberg | 2021 | 8,700 | — | 29,431 | 150,404 | 19,685 | 208,220 | |||||||
Daryl A. Kenningham | 2021 | 8,700 | — | 23,475 | 142,180 | — | 174,355 | |||||||
Daniel McHenry | 2021 | 8,700 | 15,000 | 10,857 | — | — | 34,557 | |||||||
Frank Grese, Jr. | 2021 | 7,111 | 15,000 | 10,494 | — | — | 32,605 | |||||||
Peter C. DeLongchamps | 2021 | 8,700 | 15,000 | 5,963 | — | — | 29,663 |
a | ||
Name | Year | 401(k) Savings Plan Matching Contribution ($) | Automobile Allowance ($) | Use of Demonstrator Vehicle(a) ($) | Airplane Use(b) ($) | Club Membership and Dues ($) | Total ($) | |||||||||||||||||||||
Earl J. Hesterberg | 2019 | 8,400 | — | 26,290 | 638,259 | 12,341 | 685,290 | |||||||||||||||||||||
Daryl A. Kenningham | 2019 | 8,127 | — | 21,450 | 147,576 | — | 177,153 | |||||||||||||||||||||
John C. Rickel | 2019 | 8,400 | 15,000 | 2,894 | — | — | 26,294 | |||||||||||||||||||||
Frank Grese, Jr. | 2019 | 7,019 | 15,000 | 11,599 | — | — | 33,618 | |||||||||||||||||||||
Peter C. DeLongchamps | 2019 | 8,002 | 15,000 | 1,487 | — | — | 24,489 |
Represents the incremental cost for personal use of one or more Company demonstrator vehicles. The incremental cost is determined by multiplying the annual lease value of the vehicle by the percentage of personal use, which we track through travel logs. |
While we do not have formal arrangements regarding airplane use with our named executive officers other than Messrs. Hesterberg and Kenningham, in the event that the executives or their family members make use of the airplane they will reimburse |
Grants of Plan-Based Awards in 2019
GRANTS OF PLAN-BASED AWARDS IN 2021
The following table provides information concerning each grant of an award made to our named executive officers under our annual incentive compensation plan and 2014 Long Term Incentive Plan during 2019:2021:
Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Possible Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock | Grant Date Fair Value of Stock and Option |
Possible Payouts Under |
Possible Payouts Under | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#) | Awards ($) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||
Earl J. Hesterberg | — | 930,000 | 1,240,000 | 2,480,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2021 | — | — | — | — | — | — | 19,377 | 2,849,969 | ||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | 1,150,000 | 2,300,000 | — | — | — | — | — | 02/19/2021 | — | — | — | 3,230 | 6,459 | 12,918 | — | 949,990 | |||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | — | — | — | 43,860 | 2,700,022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | 7,310 | 14,620 | 29,240 | — | 900,007 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Daryl A. Kenningham | — | 570,000 | 760,000 | 1,140,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2021 | — | — | — | — | — | — | 10,199 | 1,500,069 | ||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | 655,200 | 982,800 | — | — | — | — | — | 02/19/2021 | — | — | — | 1,700 | 3,399 | 6,798 | — | 499,925 | |||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | — | — | — | 13,670 | 841,525 | ||||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | 2,278 | 4,556 | 9,112 | — | 280,467 | ||||||||||||||||||||||||||||||||||||||||||||||||||
John C. Rickel | — | — | 524,750 | 724,155 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | — | — | — | 11,696 | 720,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Daniel McHenry | — | 383,525 | 478,975 | 661,250 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2021 | — | — | — | — | — | — | 2,550 | 375,054 | ||||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2021 | — | — | — | 425 | 849 | 1,698 | — | 124,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | 1,950 | 3,899 | 7,798 | — | 240,022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Frank Grese, Jr. | — | — | 496,166 | 684,710 | — | — | — | — | — | — | 422,511 | 527,664 | 728,468 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | — | — | — | 8,333 | 512,979 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Frank Grese, Jr. | 02/19/2021 | — | — | — | — | — | — | 3,569 | 524,929 | |||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2021 | — | — | — | 595 | 1,189 | 2,378 | — | 174,878 | ||||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | 1,389 | 2,778 | 5,556 | — | 171,014 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Peter C. DeLongchamps | — | — | 410,542 | 566,548 | — | — | — | — | — | — | 353,810 | 441,865 | 610,018 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | — | — | — | 7,895 | 486,016 | ||||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2019 | — | — | — | 1,316 | 2,631 | 5,262 | — | 161,964 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Peter C. DeLongchamps | 02/19/2021 | — | — | — | — | — | — | 4,079 | 599,939 | |||||||||||||||||||||||||||||||||||||||||||||||||
02/19/2021 | — | — | — | 680 | 1,359 | 2,718 | — | 199,882 |
Estimated possible payouts under the |
These columns reflect the threshold, target and maximum numbers of performance share units granted in |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE
The following is a discussion of material factors we believe are necessary to an understanding of the information disclosed in the Summary Compensation Table and the Grants of Plan-Based Awards Table for 2019.2021.
EMPLOYMENT, INCENTIVE COMPENSATION AND NON-COMPETE AGREEMENTS
Employment, Incentive Compensation and Non-Compete Agreements
Earl J. Hesterberg
Effective May 19, 2015, we entered into anOur employment agreement with Mr. Hesterberg. On May 17, 2018, we entered into an amendment to employment agreement with Mr. Hesterberg. Under the terms of the employment agreement, as amended, the employment agreement was extended for a one-year term, and continuing through May 19, 2019, unless earlier terminated as provided therein. Following May 19, 2019, the agreement will continuecontinues in effect until terminated by either Group 1 or Mr. Hesterberg upon delivery of six-months advanced written notice of termination no later than six months prior to the date of termination set forth in such notice. Provisions of Mr. Hesterberg’s employment agreement, as amended, related to termination and change in control are discussed in “Potential Payments upon Termination or Change in Control” beginning on page 65 of this proxy statement.termination.
John C. Rickel
Daryl A. Kenningham
Effective January 1, 2009,June 6, 2011, we entered into an employmentincentive compensation, confidentiality, non-disclosure and non-compete agreement with Mr. Rickel. SubjectKenningham (the “Incentive Agreement”). The Incentive Agreement initially granted Mr. Kenningham 7,000 shares of restricted stock (which vested in full in 2016) in exchange for his agreement to certain non-competition restrictions and other customary restrictive covenants such as a confidentiality provision. The non-competition restriction within the Incentive Agreement is in effect during Mr. Kenningham’s employment and will continue in effect for a period of two years following his termination of employment for any reason.
Daniel McHenry
On June 1, 2020, we entered into an offer letter with Mr. McHenry (the “Offer Letter”), effective as of his appointment date. The Offer Letter provides that Mr. McHenry will receive an annual salary of $575,000 and will be eligible for an annual bonus opportunity equal to a maximum of 115% of his base salary. In connection with his promotion, and as an inducement to move to the termsU.S., on August 20, 2020, we entered into a “Retention, Confidentiality and conditionsNon-Compete Agreement with Mr. McHenry (the “Retention Agreement”). Pursuant to the Retention Agreement, Mr. McHenry was granted an initial restricted stock award of 2,067 shares, which was determined by dividing $200,000 by the closing price of our common stock on the date of grant. This initial restricted stock award will vest 40% on the second anniversary of the agreement, we agreeddate of grant, with an additional 20% vesting on each subsequent annual anniversary date thereafter. The Retention Agreement provides that Mr. McHenry will also be eligible to employ Mr. Rickel through December 31, 2010. Mr. Rickel’s employment agreement automatically renewsreceive future annual restricted stock awards, which will be based on his performance and subject to approval by the CHR Committee and which are expected to be granted at the same time and with similar vesting provisions as applicable for successive one-year periods unless either party prior to the expiration of the term provides 60 days prior written notice of termination to theour other party. Provisions of Mr. Rickel’s employment agreement related to termination and change in control are discussed in “Potential Payments upon Termination or Change in Control” beginning on page 65 of this proxy statement.executive officers.
Additional Information
Messrs. Hesterberg, Kenningham, Rickel, Grese and DeLongchamps are also entitled to participate, on the same basis generally as our other employees, in all general employee benefit plans and programs that are made available to all or substantially all of our employees. In addition, Messrs. Hesterberg and Kenningham are entitled to the use of two demonstrator vehicles of their choice, and Messrs. Rickel, Grese and DeLongchamps are each entitled to one demonstrator vehicle of their choice and a vehicle allowance totaling $1,250 per month.
All incentive compensation awards payable to Messrs. Hesterberg and Rickel will be determined by the Committee in its sole discretion in accordance with the terms of our annual incentive compensation program, and all payments pursuant to this program shall be made on or before March 15thof the year following the year of service to which the incentive compensation relates.
We have not entered into an employment or non-compete agreement with Mr. Kenningham, Mr. Grese or Mr. DeLongchamps. However, the equity-based compensation awards granted to our named executive officers could receive accelerated vesting in connection with certain qualifying terminations or change in control events. Please see the section below titled “Potential Payments upon Termination or Change in Control” beginning on page 65 of this proxy statement for more detailed information on our outstanding equity awards.
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Outstanding Equity Awards at DecemberOUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019
2021
The following table provides information concerning restricted stock awards and performance share awards for our named executive officers. As of December 31, 2019,2021 none of our named executive officers held any stock options.
Restricted Stock Awards(1) | Performance Share Awards(3) | |||||||||||||||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||||||||||||||||
Equity Incentive | Plan Awards: | |||||||||||||||||||||||||||||||||
Plan Awards: | Market Value | |||||||||||||||||||||||||||||||||
Market Value | Number of | of Unearned | ||||||||||||||||||||||||||||||||
of Shares or | Unearned Shares | Shares or | ||||||||||||||||||||||||||||||||
Number of Shares or | Units of Stock | or Units of Stock | Units of Stock | |||||||||||||||||||||||||||||||
Units of Stock That | That Have Not | That Have Not | Restricted Stock Awards1 | Performance Share Awards2 | ||||||||||||||||||||||||||||||
Have Not Vested | Vested(2) | Vested | Vested(2) | |||||||||||||||||||||||||||||||
Name | Grant Date | (#) | ($) | (#) | ($) | Grant Date | Number of Shares (#) | Market Value of Shares or Units of Stock That Have Not Vested3 ($) | Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares or Units of Stock That Have Not Vested3 ($) | ||||||||||||||||||||||||
Earl J. Hesterberg | 03/01/2017 | 5,088 | 993,279 | — | — | |||||||||||||||||||||||||||||
02/20/2018 | 18,949 | 3,699,224 | — | — | ||||||||||||||||||||||||||||||
02/19/2019 | 26,316 | 5,137,410 | — | — | ||||||||||||||||||||||||||||||
02/17/2020 | 40,532 | 7,912,657 | — | — | ||||||||||||||||||||||||||||||
02/24/2015 | 7,000 | 700,000 | — | — | 02/19/2021 | 19,377 | 3,782,778 | 6,459 | 1,260,926 | |||||||||||||||||||||||||
02/17/2016 | 14,000 | 1,400,000 | — | — | ||||||||||||||||||||||||||||||
03/01/2017 | 15,264 | 1,526,400 | — | — | ||||||||||||||||||||||||||||||
02/20/2018 | 47,371 | 4,737,100 | — | — | ||||||||||||||||||||||||||||||
02/19/2019 | 43,860 | 4,386,000 | 14,620 | 1,462,000 | ||||||||||||||||||||||||||||||
Daryl A. Kenningham | 02/28/2017 | 2,453 | 478,875 | — | — | |||||||||||||||||||||||||||||
02/20/2018 | 5,200 | 1,015,144 | — | — | ||||||||||||||||||||||||||||||
02/19/2019 | 8,203 | 1,601,390 | — | — | ||||||||||||||||||||||||||||||
02/17/2020 | 19,703 | 3,846,420 | — | — | ||||||||||||||||||||||||||||||
02/24/2015 | 1,600 | 160,000 | — | — | 02/19/2021 | 10,199 | 1,991,049 | 3,399 | 663,553 | |||||||||||||||||||||||||
02/17/2016 | 3,200 | 320,000 | — | — | ||||||||||||||||||||||||||||||
02/28/2017 | 7,359 | 735,900 | — | — | ||||||||||||||||||||||||||||||
02/20/2018 | 13,000 | 1,300,000 | — | — | ||||||||||||||||||||||||||||||
02/19/2019 | 13,670 | 1,367,000 | 4,556 | 455,600 | ||||||||||||||||||||||||||||||
John C. Rickel | 02/24/2015 | 2,886 | 288,600 | — | — | |||||||||||||||||||||||||||||
02/17/2016 | 5,772 | 577,200 | — | — | ||||||||||||||||||||||||||||||
02/28/2017 | 6,468 | 646,800 | — | — | ||||||||||||||||||||||||||||||
02/20/2018 | 11,500 | 1,150,000 | — | — | ||||||||||||||||||||||||||||||
Daniel McHenry | 02/28/2017 | 700 | 136,654 | — | — | |||||||||||||||||||||||||||||
02/20/2018 | 1,600 | 312,352 | — | — | ||||||||||||||||||||||||||||||
02/19/2019 | 2,400 | 468,528 | — | — | ||||||||||||||||||||||||||||||
02/17/2020 | 2,544 | 496,640 | — | — | ||||||||||||||||||||||||||||||
08/20/2020 | 2,067 | 403,520 | — | — | ||||||||||||||||||||||||||||||
02/19/2021 | 2,550 | 497,811 | 849 | 165,742 | ||||||||||||||||||||||||||||||
02/19/2019 | 11,696 | 1,169,600 | 3,899 | 389,900 | ||||||||||||||||||||||||||||||
Frank Grese, Jr. | 02/24/2015 | 1,600 | 160,000 | — | — | 02/28/2017 | 1,502 | 293,220 | — | — | ||||||||||||||||||||||||
02/17/2016 | 3,200 | 320,000 | — | — | ||||||||||||||||||||||||||||||
02/28/2017 | 4,506 | 450,600 | — | — | ||||||||||||||||||||||||||||||
02/20/2018 | 9,000 | 900,000 | — | — | ||||||||||||||||||||||||||||||
Frank Grese, Jr. | 02/20/2018 | 3,600 | 702,792 | — | — | |||||||||||||||||||||||||||||
02/19/2019 | 5,000 | 976,100 | — | — | ||||||||||||||||||||||||||||||
02/17/2020 | 7,880 | 1,538,334 | — | — | ||||||||||||||||||||||||||||||
02/19/2021 | 3,569 | 696,740 | 1,189 | 232,117 | ||||||||||||||||||||||||||||||
02/19/2019 | 8,333 | 833,300 | 2,778 | 277,800 | ||||||||||||||||||||||||||||||
Peter C. DeLongchamps | 02/24/2015 | 1,924 | 192,400 | — | — | 02/28/2017 | 1,661 | 324,260 | — | — | ||||||||||||||||||||||||
02/17/2016 | 4,000 | 400,000 | — | — | ||||||||||||||||||||||||||||||
02/28/2017 | 4,983 | 498,300 | — | — | ||||||||||||||||||||||||||||||
02/20/2018 | 8,500 | 850,000 | — | — | ||||||||||||||||||||||||||||||
02/19/2019 | 7,895 | 789,500 | 2,631 | 263,100 | ||||||||||||||||||||||||||||||
Peter C. DeLongchamps | 02/20/2018 | 3,400 | 663,748 | — | — | |||||||||||||||||||||||||||||
02/19/2019 | 4,738 | 924,952 | — | — | ||||||||||||||||||||||||||||||
02/17/2020 | 7,880 | 1,538,334 | — | — | ||||||||||||||||||||||||||||||
02/19/2021 | 4,079 | 796,302 | 1,359 | 265,304 |
Forfeiture restrictions on our restricted stock awards lapse over a five-year period: 40% of the award on the second anniversary of the grant date, and 20% on the third, fourth and fifth anniversaries of the grant date, respectively. | |
Performance shares are earned with respect to measures over a designated performance period, as described in more detail within the |
Calculated using value of our common stock at close of market on December 31, 2021 (the last trading day of the 2021 year) of $195.22. |
|
The following table provides information relating to the vesting of restricted stock during 20192021 on an aggregated basis for each of our named executive officers. Our named executive officers currently do not hold stock options and our performance shares were not eligible to vest in 2019.options.
Stock Awards | ||||||||||||||||||||||||
Number of Shares | ||||||||||||||||||||||||
Acquired on | Value Realized | Performance Shares | Restricted Stock Awards | |||||||||||||||||||||
Vesting(1) | on Vesting(2) | |||||||||||||||||||||||
Name | (#) | ($) | Number of Shares (#) | Value Realized ($) | Number of (#) | Value Realize on ($) | ||||||||||||||||||
Earl J. Hesterberg | 33,176 | 2,072,809 | 26,440 | 5,121,957 | 39,106 | 5,811,914 | ||||||||||||||||||
Daryl A. Kenningham | 9,106 | 566,161 | 8,239 | 1,596,059 | 12,120 | 1,799,709 | ||||||||||||||||||
John C. Rickel | 13,184 | 821,337 | ||||||||||||||||||||||
Daniel McHenry | — | — | 3,700 | 580,102 | ||||||||||||||||||||
Frank Grese, Jr. | 7,804 | 485,969 | 5,024 | 973,249 | 8,235 | 1,222,636 | ||||||||||||||||||
Peter C. DeLongchamps | 9,446 | 588,466 | 4,758 | 921,720 | 8,518 | 1,265,827 |
Represents the gross number of shares acquired upon vesting of restricted stock and performance shares, without taking into account any shares withheld to satisfy applicable tax obligations. |
Represents the value of the vested restricted stock and performance shares, calculated by multiplying (a) the number of vested shares of restricted stock by (b) the average of the high and low sales prices of our common stock on the vesting date, which is how we calculate market value for purposes of this table. |
Nonqualified Deferred Compensation
NONQUALIFIED DEFERRED COMPENSATION
The following table sets forth our named executive officers’ information regarding the Deferred Compensation Plan, including, with respect to each officer: (1) the aggregate contributions made by the officer, (2) the employer contribution, (3) the aggregate interest or other earnings accrued, and (4)(3) the total balance of the officer’s account.
Executive | Employer Match | Aggregate | Aggregate | |||||||||||||||||||||||||
Contributions | Contributions | Earnings | Balance | |||||||||||||||||||||||||
in Last FY(1) | in Last FY(2) | in Last FY(3) | at Last FYE(4) | |||||||||||||||||||||||||
Name | ($) | ($) | ($) | ($) | Executive Contributions in Last FY1 ($) | Aggregate Earnings in Last FY2 ($) | Aggregate Balance at Last FYE3 ($) | |||||||||||||||||||||
Earl J. Hesterberg | 1,489,250 | — | 679,813 | 9,053,776 | — | 1,043,265 | 13,809,565 | |||||||||||||||||||||
Daryl A. Kenningham | — | — | 322,140 | 4,203,828 | — | 425,470 | 5,552,241 | |||||||||||||||||||||
John C. Rickel | 125,940 | — | 707,114 | 9,286,635 | ||||||||||||||||||||||||
Daniel McHenry | 127,938 | 1,073 | 129,011 | |||||||||||||||||||||||||
Frank Grese, Jr. | — | — | 378,777 | 4,995,277 | — | 462,891 | 6,061,279 | |||||||||||||||||||||
Peter C. DeLongchamps | 14,779 | — | 151,597 | 1,993,956 | 34,214 | 177,413 | 2,324,689 |
Reported as compensation to the named executive officer in the Summary Compensation Table for |
The following portions of the aggregate earnings in the last fiscal year were reported in the |
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3 |
The following portions of the aggregate balance amounts for each of the following named executive officers were reported as compensation to the officer in the Summary Compensation Table in previous years: |
Earl J. | Daryl A. | John C. | Frank | Peter C. | ||||||||||||||||
Hesterberg | Kenningham | Rickel | Grese, Jr. | DeLongchamps | ||||||||||||||||
($) | ($) | ($) | ($) | ($) | ||||||||||||||||
2018 | 1,150,000 | — | — | 615,438 | 69,354 | |||||||||||||||
2017 | 340,083 | 451,707 | 466,814 | 443,250 | 13,689 | |||||||||||||||
2016 | 847,000 | — | 904,425 | 321,300 | 82,134 | |||||||||||||||
2015 | 924,000 | — | 636,015 | — | 82,134 | |||||||||||||||
2014 | 375,000 | — | 560,835 | — | 86,450 | |||||||||||||||
2013 | 66,667 | — | 385,000 | — | 44,400 | |||||||||||||||
2012 | 125,000 | — | 215,938 | — | 62,550 | |||||||||||||||
2011 | 100,000 | — | 462,000 | — | 25,120 | |||||||||||||||
2010 | — | — | 465,750 | — | — | |||||||||||||||
2009 | 500,000 | — | 561,630 | — | — | |||||||||||||||
2008 | 37,159 | — | 11,300 | — | — | |||||||||||||||
2007 | 39,509 | — | 7,852 | — | — | |||||||||||||||
2006 | 25,465 | — | 1,235 | — | — | |||||||||||||||
2005 | 12,019 | — | — | — | — |
Earl J. Hesterberg ($) | Daryl A. Kenningham ($) | Daniel McHenry ($) | Frank Grese, Jr. ($) | Peter C. DeLongchamps ($) | ||||||||||||||||
2020 | 1,972,530 | 806,776 | — | 473,581 | 86,363 | |||||||||||||||
2019 | 1,850,833 | 164,068 | — | 197,769 | 92,740 | |||||||||||||||
2018 | 1,487,607 | 181,560 | — | 808,644 | 151,699 | |||||||||||||||
2017 | 622,403 | 621,360 | — | 614,089 | 95,928 | |||||||||||||||
2016 | 1,084,057 | — | — | 450,932 | 148,501 | |||||||||||||||
2015 | 1,094,001 | — | — | — | 137,899 | |||||||||||||||
2014 | 494,519 | — | — | — | 127,009 | |||||||||||||||
2013 | 202,527 | — | — | — | 89,271 | |||||||||||||||
2012 | 233,611 | — | — | — | 97,419 | |||||||||||||||
2011 | 178,285 | — | — | — | — | |||||||||||||||
2010 | — | — | — | — | — | |||||||||||||||
2009 | 500,000 | — | — | — | — | |||||||||||||||
2008 | 147,159 | — | — | — | — | |||||||||||||||
2007 | 179,235 | — | — | — | — | |||||||||||||||
2006 | 525,465 | — | — | — | — | |||||||||||||||
2005 | 205,240 | — | — | — | — |
Pursuant to the Deferred Compensation Plan, certain corporate officers, including named executive officers, may defer up to 50% of their base salary and up to 100% of their incentive compensation. Deferral elections are to be made no later than the last day of the calendar year immediately preceding the calendar year in which such compensation is earned. Atearned, or the plan administrative committee’s discretion, deferral elections with respect to certain performance-based compensation may be made not later than six months prior to the endfirst day of the performance period in which such compensation is earned. In addition, for eachnext calendar year, we contribute an amount on behalf of each executive equal toquarter where the amount ofemployee becomes eligible during the employer match the executive forfeited under the 401(k) Savings Plan in order for the 401(k) Savings Plan to comply with the nondiscrimination requirements of the Internal Revenue Code.calendar year. Currently, 100% of each named executive officer’s account is vested. We may also make discretionary credits to an officer’s account from time to time, which credits will be subject to a vesting schedule established by us at the time of such credit. We did not make any discretionary contribution credits during the 20182019, 2020 or 2019 year. If no vesting schedule is established, the officer will be vested in a percentage of the discretionary employer deferral equal to the officer’s vested interest in his “employer contribution account” under the 401(k) Savings Plan. If we undergo a corporate change, the officer will become fully vested in his account under the Deferred Compensation Plan.
2021 calendar years.
Benefits under the Deferred Compensation Plan will be paid no earlier than upon the executive’s termination of service, or, for deferrals made prior to January 1, 2021, upon a certain date elected by the officer. Benefits will be paid, at the participant’s election, in a lump sum or in annual installments, although all distributions will be paid in cash. Payments upon an executive’s termination of service may be delayed for six months to the extent necessary to comply with the requirements of Section 409A of the Internal Revenue Code. Except in the event of unforeseeable financial emergencies, effective January 1, 2021, in-service withdrawals are generally not permitted in the Deferred Compensation Plan, although the necessary portion of a participant’s vested account balance may be distributed in order to satisfy certain employment, federal or state taxes. An unforeseeable financial emergency shall allow a participant to access vested funds in his accounts upon the occurrence of: (1) a severe financial hardship of the participant that results from an illness or accident of the participant, or the participant’s beneficiary, spouse or dependent; (2) loss of the participant’s or the beneficiary’s property due to casualty; or (3) a similar extraordinary and unforeseeable circumstance as described in Section 409A of the Internal Revenue Code arising as a result of events beyond the participant’s control.
Effective January 1, 2021, an annual contribution limit of $300,000 was implemented for all employee deferrals with an employee lifetime maximum contribution amount of $3.5 million.
Deferred amounts will be deemed to be notionally invested in such fund as the participants shall designate. Most of the funds are also available in the Group 1 401(k) Savings Plan except foreither the Group 1 Guaranteed Crediting Rate investment option which is the default investment option and only available in the Deferred Compensation Plan.or a money market fund. The Group 1 Guaranteed Crediting Rate investment option is a declared interest rate, which is set by the Committee annually. The deferred interest rate for 2019annually, and was set by the Committee at 8.0%. Effective April 1, 2020, for 2021.
Deferred Compensation Plan Changes for Fiscal 2022
In November 2021, the committee reducedCHR Committee reviewed a market analysis prepared by PM&P. Following extensive discussion between management, the CHR Committee and PM&P, the CHR Committee set the declared interest rate for the foreseeable future from 8.0% to 3.0% due toDeferred Compensation Plan at 6.5% for 2022. The 2022 rate reflects current interest rate changes and the recent economic and operational concerns over the anticipated negative implicationsCompany’s cost of the COVID-19 (coronavirus) outbreak.capital.
Potential Payments upon Termination or Change in Control
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
We believe providing certain senior corporate officers with severance payments and accelerated vesting of equity awards in certain circumstances are important retention tools. In addition, we believe that providing for double-trigger“double-trigger” (defined below) payments and equity award vesting to certain key executives in connection with a change in corporate control“corporate change” helps maximize stockholdershareholder value by encouraging our executives to objectively review any proposed transaction, whether or not that executive will continue to be employed. A “double-trigger” payment or benefit becomes due in the event of a qualifying event such as an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a corporate change. Executive officers at other companies in the general market against which we compete for executive talent commonly have equity compensation plans that provide for accelerated vesting upon a corporate change and post-termination payments, and we have consistently provided this benefit to certain senior corporate officers in order to remain competitive in attracting and retaining skilled professionals.
The discussionDisclosed below disclosesis the amount of compensation and/or other benefits that would be payable to each of our named executive officers in the event of termination of their employment under the following scenarios: death, disability, with and without cause, for certain constructive termination events, andin each case, following a corporate change. AllThese potential payments to the named executive officers upon termination of their employment or upon a corporate change that could have occurred on December 31, 2019 are governed by the 2014 Long Term Incentive Plan and the 2007 Long Term Incentive Plan pursuant to which various equity incentive awards were issued and, with respect to Messrs. Hesterberg, Kenningham, and Rickel,McHenry, the terms of employment agreements as described below.or other individual written arrangements. None of our named executive officers is entitled to an excise tax gross-up payment. For additional information regarding the employment agreements, see “2019“2021 Compensation Discussion and Analysis — Employment Agreements, Severance Benefits and Change in Control Provisions.”
Employment And Severance Agreements
EMPLOYMENT AGREEMENTS
We maintained employment agreements with Messrs. Hesterberg and Rickel during 2019. EachMr.Hesterberg’s Employment Agreement. Mr. Hesterberg’s agreement (the “Employment Agreement”) provides that in the event the executive is terminated due to an Involuntary Termination or the executive terminates his employment following a Constructive Termination Event, the executive will be entitled to the following:
a lump sum payment equal to the executive’s base salary divided by 12 and multiplied by a severance multiplier. The “severance multiplier” in the case of Mr. Hesterberg, is 12 months or the remaining months in the term of the employment agreement. The payment will be made on the first day of the seventh month following the termination of employment;
• | |
a pro rata bonus calculated in accordance with our Annual Incentive Compensation Plan, paid in a single lump sum payment at the later of (1) the first day of the seventh month following the executive’s separation from service, or (2) March 15thof the year following the release of earnings for the year in which the separation of service occurred; | |
immediate vesting of all unvested restricted stock awards or stock options, which will be exercisable as if the executive had continued to be employed by the Company for the full term of his employment agreement; and
the use of a demonstrator vehicle for a period of six months.
In the event that the executive terminates employment following an involuntary reduction of his salary or incentive compensation targets within six months after a Corporate Change, the executive will be entitled to the same payments and benefits as described in the first three bullets above, except the severance multiplier will be 30 months. Each agreement further provides that if the executive’s employment is terminated due to Death or Disability, then the executive is entitled to:
his pro rata salary through the date of such termination and a pro rata bonus (based on his termination date), calculated in accordance with our Annual Incentive Compensation Plan, paid in a single lump sum payment at
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the later of (1) the first day of the seventh month following the executive’s separation from service, or (2) March 15thof the year following the release of earnings for the year in which the separation of service occurred; | |
immediate vesting of all unvested restricted stock awards or stock options, which will be exercisable as if the executive had continued to be employed by us for the full term of his employment agreement; and
in the case of Disability, the use of a demonstrator vehicle for a period of six months, or in the event of the executive’s Death, the use of the vehicle would go to the surviving spouse, if any, for a period of twelve months.
Mr. Hesterberg’s agreement also provides that if he resigns at any time after May 18, 2018, all unvested equity awards held by Mr. Hesterberg will vest upon satisfaction of certain post-termination employment obligations set forth in his non-compete agreement (discussed below); provided, however, that beginning with the awards granted in 2018, any restricted stock awarded to the executive must have been granted at least six months prior to the date the executive provides notification of his intent to terminate his employment due to qualified retirement, and at least six months prior to his effective retirement date to be eligible for vesting as provided above. In addition, if Mr. Hesterberg’s employment is terminated for any reason, other than cause, after May 18, 2018, he will receive his pro rata bonus through the date of his termination, calculated in accordance with the annual incentive compensation plan and paid in a single lump sum payment.
In the event of a termination by the Company for Cause or a Voluntary Termination by the executive, all compensation and benefits will cease as of the respective date of termination. In these circumstances, the named executive officers would only receive base salary earned but not yet paid.
The employment agreements contain a covenant that the executives will not sue or lodge any claim against usthe Company based upon an Involuntary Termination for any payments in addition to those described above. In the event that the executive breaches this
covenant, we will be entitled to recover from that executive all sums we or any of our subsidiaries or affiliates have expended in relation to such action. We will also be entitled to offset any amounts expended in relation to defending such claim against any amounts owed to the executive prior to a final determination of the arbitration provisions provided for in the employment agreement.
The executives haveMr. Hesterberg has agreed not to disclose, during or at any time after their employment with us, any of our confidential information or trade secrets. The executivesexecutive will return all proprietary materials, and all copies thereof, to usthe Company upon a termination of employment for any reason, and all copyrighted works that the executive may have created during his employment relating to usthe Company or our business in any manner shall remain our property.
Mr.Kenningham’s Incentive Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement. The Incentive Agreement provides for certain potential severance payments and includes customary restrictive covenants. In the event that Mr. Kenningham is terminated by the Company without Cause or incurs an Involuntary Termination (generally defined as a termination by Mr. Kenningham due to the Company breaching any material provision of the Incentive Agreement, a Constructive Termination Event, or an involuntary reduction in his base salary or incentive compensation targets (other than a reduction in such target that is applied consistently to other executive officers to reflect changes in relative EPS projections as a result of such Corporate Change) within six months following a “Corporate Change” that is not cured by the Company within 30 days of written notice from Mr. Kenningham), the Company shall pay to Mr. Kenningham a cash payment equal to one year of base salary at the most recent rate of pay, subject to Mr. Kenningham’s compliance with certain restrictive covenants within the Incentive Agreement and Mr. Kenningham’s execution of a general release in the Company’s favor; in addition, upon such a qualifying termination, Mr. Kenningham shall also be entitled to accelerated vesting of outstanding restricted stock awards, which is conditioned upon his compliance with the terms of such awards, and a pro-rated bonus calculated in accordance with the Company’s annual incentive compensation plan. In the event that Mr. Kenningham incurs a Disability, he shall be paid his regular salary in effect at the start of such Disability up to the first 120-day period of his Disability.
TheseMr.McHenry’s Retention and Severance Agreement. The Retention Agreement provides for certain potential severance payments and includes customary restrictive covenants. In the event that Mr. McHenry incurs a “Qualifying Termination” (generally defined as a termination without Cause or due to Mr. McHenry’s death or Disability), the Company shall pay to Mr. McHenry a cash payment equal to the average annual base salary that
Mr. McHenry received over the 24-month period immediately preceding the date of the applicable termination, subject to Mr. McHenry’s compliance with certain restrictive covenants within the Retention Agreement and upon Mr. McHenry’s execution of a general release in the Company’s favor.
As used in the above-described agreements generally containfor Messrs. Hesterberg, Kenningham and McHenry, as applicable, the following terms except where noted otherwiseshall generally have the meaning provided below, and the following provisions thatwhich could impact the amount of compensation that the executives receiveexecutive receives at or following theirhis separation from service from us:
“Cause” shall mean, for purposes of the Employment Agreement and the Retention Agreement, any of the following: (1) conviction or plea of nolo contendere to a felony or a crime involving moral turpitude; (2) breach of any material provision of either an agreement with us or our Code of Conduct or certain other material policies; (3) the use, for his own benefit, of any confidential or proprietary information of ours, or willfully divulging for his benefit such information; (4) fraud or misappropriation or theft of any of our funds or property; (5) willful refusal to perform his duties; or (6) gross negligence; provided, however, that we, before terminating the executive under (2), (5), or (6) must first give written notice to him of the nature of the alleged breach or refusal and must provide him with a period of time (15-20 days) to correct the problem, unless correction is inherently impossible.
“Cause” shall mean, for purposes of the Incentive Agreement, any of the following: (1) indictment or conviction of any felony or any crime involving dishonesty, (2) participation in any fraud or act of dishonesty against the Company, (3) a violation of any Company policy that causes a material detriment to the Company, (4) a breach of the executive’s duties to the Company, including but not limited to unsatisfactory performance of job duties that is not corrected within 30 days after written notice, (5) intentional damage to any property of the Company, (6) conduct by the executive that demonstrates gross unfitness to serve, and (7) a material breach of the Incentive Agreement.
“Corporate Change” shall mean the first to occur of any of the following events: (1) any person acquires 50% or more of our common stock or voting securities, other than (a) any acquisition directly from or resulting from an acquisition of our shares by the Company, (b) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (c) any acquisition by any entity pursuant to a transaction which complies with clauses (a) or (b); (2) the occurrence of a merger, reorganization, consolidation or disposition of all or substantially all of our assets, unless our shareholders prior to such transaction hold more than 50% of the equity and voting power of the resulting entity or entity holding such assets, no person (other than benefit plans of such entity) holds 50% or more of the equity or voting power of such entity and at least a majority of the board of directors of such entity were members of the Incumbent Board; (3) our shareholders approve our complete liquidation or dissolution; or (4) under the Incentive Agreement, within any period of 24 consecutive months and subject to certain exceptions, a change in the composition of the board of directors of the Company such that the incumbent board ceases for any reason to constitute a least a majority of the Board.
“Constructive Termination Event” shall occur upon: (1) the failure by us to pay the executive’s compensation as provided in the applicable agreement; (2) relocation without his consent of his primary employment location of more than 50 miles; (3) our request that the executive perform any illegal activity or sign-off on any inappropriate financial statement or acknowledgement; (4) a material diminution in the executive’s position, duties, responsibilities, reporting status, or authority; or (5) a material negative reduction in base salary or incentive compensation targets within six months after a Corporate Change, except that before exercising his right to terminate the employment relationship pursuant to any of the previous provisions, he must first give written notice to our Board of the circumstances purportedly giving rise to his right to terminate and must provide us with a minimum of thirty days (fifteen days under the Incentive Agreement) to correct the problem, unless correction is inherently impossible.
“Disability” under the Employment Agreement and Retention Agreement shall mean the executive’s becoming incapacitated by accident, sickness or other circumstance that in the reasonable opinion of a qualified doctor approved by our Board, renders him mentally or physically incapable of performing the essential functions of the executive’s position, with or without reasonable accommodation, and that will continue, in the reasonable opinion of the doctor, for a period of no less than 180 days.
“Disability” under the Incentive Agreement means any ailment or condition that prevents the executive from actively carrying out his duties under the Incentive Agreement for a continuous period of 120 days.
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GROUP 1 AUTOMOTIVE 2014 LONG TERM INCENTIVE PLANProxy Statement 2022 | 59
The“Involuntary Termination” shall mean, for purposes of the Employment Agreement and Retention Agreement, a termination by the executive due to a Constructive Termination Event by itself or in relation to a Corporate Change, or by us for any reason without Cause, at the discretion of our Board; an “Involuntary Termination” also includes the nonrenewal of the executive’s employment agreement by the Board. Under the Incentive Agreement, an Involuntary Termination has the meaning defined in the description of such agreement above.
“Voluntary Termination” shall mean a termination by the executive other than for a Constructive Termination Event.
Group 1 Automotive 2014 Long Term Incentive Plan provides that, upon
Upon the occurrence of a Corporate Change, the CompensationCHR Committee may fully vest any restricted stock awards then outstanding and, upon such vesting, all restrictions applicable to the restricted stock will terminate. Further, the Committee may determine that the performance conditions are satisfied for the performance share awards upon a Corporate Change if the participant is also terminated without cause or for good reason in connection with the Corporate Change, or the participant’s award is not assumed or converted by the controlling entity following the Corporate Change.
The 2014 Long Term Incentive Plan provides that aA Corporate Change occurs if (1) we are dissolved and liquidated; (2) we are not the surviving entity in any merger or consolidation (or we survive only as a subsidiary of an entity); (3) we sell, lease or exchange all or substantially all of our assets to any other person or entity; (4) any person, entity or group acquires or gains ownership or control of more than 50% of the outstanding shares of our voting stock; or (5) after a contested election of directors, the persons who were directors before such election cease to constitute a majority of our Board of Directors.
Our named executive officers do not currently, and at December 31, 20192021 did not, hold any unvested stock options, and therefore there are no amounts to report with respect to acceleration of stock option awards by the CompensationCHR Committee in connection with a Corporate Change.
The award agreements for restricted stock under the Company’s 2014 Long Term Incentive Plan also establish vesting provisions applicable to termination of employment. The award agreement for all grants of restricted stock to our named executive officers,
provides for accelerated vesting if the named executive officer’s employment is terminated due to death or disability. The award agreements also provide for accelerated vesting in the case of death or disability and induring the case oftwo-year period following a qualified retirement. A “qualified retirement” iswith respect to the 2021 awards generally means a retirement after attaining the age of 63 and following the date on which the sum of the executive’s age and years of service equals or exceeds the age of 70, and so long as the executive has completed in aggregate, five years of service, and upon satisfaction of a two year non-compete and certain non-disclosure covenants. A “qualified retirement” with respect to awards granted prior to 2021 generally means a termination of employment on a date that is on or after the employee’s attainment of age 63 and following the employee’s completion of at least ten years of service with the Company and upon satisfaction of a two year non-compete and certain non-disclosure covenants. Additionally, awards granted during the year employment is terminated will vest, provided the executive received such award at least six months prior to termination.
The performance share agreements under the 2014 Long Term Incentive Plan for our named executive officers provides that upon a named executive’s officer’s termination due to death or disability, the performance shares will pay out following the performance period based on actual performance. If a named executive officer’s employment is terminated due to a “planned retirement” (generally defined as a mutually agreed upon retirement by the officer and the Company), the performance shares will convert to time-based restricted stock awards that will continue to vest, subject to the officer’s compliance with applicable restrictive covenants, until the second anniversary of the named executive officer’s termination of employment. Such a conversion will occur based on the actual performance achieved during the performance period. All other terminations of employment (other than as described above in connection with a Corporate Change) will result in a forfeiture of the performance shares without payment. TheAs described in the CD&A above, the 2021 performance shares were also granted with thea Maximum Value limitation. For performance share awards granted prior to 2021, a supplementalsimilar maximum payout formulavalue limitation applied, but that is described further within the Compensation Discussionlimitation applied to both TSR and Analysis above. The Maximum ValueROIC-based awards, to be calculated separately. These value limits could potentially alter the number of underlying common stockshares that could become payable pursuant to the award under any of the performance levels in connection with an acceleration or payment event.
NON-COMPETITION AGREEMENTS
Non-Competition Agreements
Along with their respective employment agreements, Mr. Hesterberg has entered into a Non-Compete Agreement and Mr. Rickel hasMessrs. Kenningham and McHenry have entered into an Incentive Compensation and Non-Compete Agreement with us,the Company, each of which provide that for a period of two years following the executive’s termination of employment, the executive will not compete with usthe Company or induce any of our employees to leave his or her employment with us or hire any of our employees.
If Mr. Hesterberg violates this agreement, he will also forfeit his rights to any restricted stock and stock options granted pursuant to his employment agreement, and we will have the right to refrain from making any further payments under that agreement, as well as to receive back from Mr. Hesterberg the full value of any payments which were made to him in the previous twelve months as well as the value of any restricted stock or stock options that may have vested during the past twelve months from the date of Mr. Hesterberg’s termination. If Mr. RickelMcHenry violates his agreement, we will have the right to demand forfeiture of any cash or equity award realized during the twelve months prior to the violation.
If Mr. Kenningham violates his agreement, we will have the right to refrain from making any further payments under his Incentive Agreement.
Messrs. Hesterberg and Grese are eligible for a “qualified retirement”, as previously described under “2019“2021 Compensation Discussion and Analysis — Long Term Equity Incentive Compensation,” and therefore would be subject to the two year non-compete agreement described therein. Messrs. Kenningham, RickelMcHenry and DeLongchamps currently arewere not eligible for a qualified retirement.retirement as of December 31, 2021.
Termination and Change in Control Tables for 2019
TERMINATION AND CHANGE IN CONTROL TABLES FOR 2021
The following tables summarizepresent for each named executive officer, the compensationestimated payments and other benefits that would have becomebeen payable to each named executive officer assumingas of the end of 2021 in the event of a termination of employment and a Corporate Change, as narratively described above.
These estimated amounts have been calculated as if the individual’s employment had been terminated, or a Corporate Change had occurred, onas of December 31, 2019, or his employment had terminated for2021, the reasons specified below on December 31, 2019, given, if applicable, the named executive officer’s base salary aslast business day of that date2021, and theusing a closing price of the Company’s common stock on December 31, 2019 (the last trading day of the year),2021 which was $100.00.
In addition,$195.22. The equity award calculations in the following tables summarize the compensation that would become payable to Messrs. Hesterberg and Rickel assuming that a Corporate Change of the Company coupled with an involuntary reduction of his salary or incentive compensation target had occurred on December 31, 2019. These calculationstable below do not include performance shares because the performance period has not been fulfilled.
Involuntary | Constructive | Corporate | Death and | |||||||||||||||||||||||||
Termination | Change | Disability | ||||||||||||||||||||||||||
Earl J. Hesterberg | ($) | Involuntary Termination ($) | Constructive Termination ($) | Corporate Change1 ($) | Death and Disability ($) | |||||||||||||||||||||||
Salary and Bonus | 3,277,500 | 3,277,500 | 5,002,500 | 2,127,500 | 3,720,000 | 3,720,000 | 5,580,000 | 2,480,000 | ||||||||||||||||||||
Equity Compensation(1) | 12,749,500 | 12,749,500 | 12,749,500 | 12,749,500 | ||||||||||||||||||||||||
Equity Compensation2 | 18,977,141 | 18,977,141 | 18,977,141 | 18,977,141 | ||||||||||||||||||||||||
Use of Vehicle | 10,227 | 10,227 | 10,227 | 20,454 | 17,574 | 17,574 | 17,574 | 35,148 | ||||||||||||||||||||
TOTAL | 16,037,227 | 16,037,227 | 17,762,227 | 14,897,454 | 22,714,715 | 22,714,715 | 24,574,715 | 21,492,289 | ||||||||||||||||||||
Daryl A. Kenningham | Involuntary Termination ($) | Constructive Termination ($) | Corporate Change1 ($) | Death and Disability ($) | ||||||||||||||||||||||||
Salary and Bonus | 1,881,000 | 1,881,000 | 1,881,000 | — | ||||||||||||||||||||||||
Equity Compensation | 7,694,206 | 7,694,206 | 7,694,206 | 7,694,206 | ||||||||||||||||||||||||
TOTAL | 9,575,206 | 9,575,206 | 9,575,206 | 7,694,206 | ||||||||||||||||||||||||
Daniel McHenry | Involuntary Termination ($) | Constructive Termination ($) | Corporate Change1 ($) | Death and Disability ($) | ||||||||||||||||||||||||
Salary and Bonus | 475,159 | 3 | — | — | 475,159 | |||||||||||||||||||||||
Equity Compensation | — | — | 2,315,504 | 2,315,504 | ||||||||||||||||||||||||
TOTAL | 475,159 | — | 2,315,504 | 2,790,663 |
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Frank Grese, Jr. | Involuntary Termination ($) | Constructive Termination ($) | Corporate Change1 ($) | Death and Disability ($) | ||||||||||||
Equity Compensation2 | — | — | 3,711,913 | 3,711,913 | ||||||||||||
TOTAL | — | — | 3,711,913 | 3,711,913 | ||||||||||||
Peter C. DeLongchamps | Involuntary Termination ($) | Constructive Termination ($) | Corporate Change1 ($) | Death and Disability ($) | ||||||||||||
Equity Compensation | — | — | 3,752,324 | 3,752,324 | ||||||||||||
TOTAL | — | — | 3,752,324 | 3,752,324 |
1 | For Messrs. Hesterberg and Kenningham, the amounts in this column reflect the |
2 | Although |
Involuntary | Constructive | Corporate | Death and | |||||||||
Termination | Termination | Change(2) | Disability | |||||||||
Daryl A. Kenningham | ($) | ($) | ($) | ($) | ||||||||
Equity Compensation(1) | — | — | 3,882,900 | 3,882,900 | ||||||||
TOTAL | — | — | 3,882,900 | 3,882,900 |
Death and Disability.
Involuntary | Constructive | Corporate | Death and | |||||||||
Termination | Termination | Change | Disability | |||||||||
John C. Rickel | ($) | ($) | ($) | ($) | ||||||||
Salary and Bonus | 1,353,855 | 1,353,855 | 2,298,405 | 724,155 | ||||||||
Equity Compensation(1) | 3,832,200 | 3,832,200 | 3,832,200 | 3,832,200 | ||||||||
Use of Vehicle | 1,447 | 1,447 | 1,447 | 2,894 | ||||||||
TOTAL | 5,187,502 | 5,187,502 | 6,132,052 | 4,559,249 |
Involuntary | Constructive | Corporate | Death and | |||||||||
Termination | Termination | Change(2) | Disability | |||||||||
Frank Grese, Jr. | ($) | ($) | ($) | ($) | ||||||||
Equity Compensation(1) | — | — | 2,663,900 | 2,663,900 | ||||||||
TOTAL | — | — | 2,663,900 | 2,663,900 |
Involuntary | Constructive | Corporate | Death and | |||||||||
Termination | Termination | Change(2) | Disability | |||||||||
Peter C. DeLongchamps | ($) | ($) | ($) | ($) | ||||||||
Equity Compensation(1) | — | — | 2,730,200 | 2,730,200 | ||||||||
TOTAL | — | — | 2,730,200 | 2,730,200 |
|
2019 Director Compensation Table
2021 DIRECTOR COMPENSATION TABLE
The following table sets forth a summary of the compensation we paid to our non-employee directors in 2019.2021. Directors who are our full-time employees, currently Messrs. Hesterberg and Pereira, receive no compensation for serving as directors. The only current employees serving as directors are Earl J. Hesterberg, our President and Chief Executive Officer, and Lincoln Pereira, Regional Vice President, Brazil, and Chairman of UAB. AllMr. Hesterberg’s compensation paid to Mr. Hesterberg as an employee may be found aboveis shown in the Summary Compensation Table and information regardingrelated tables above and Mr. Pereira’s compensation may be foundis discussed in the section titled “Certain Relationships and Related Transactions.”
Change in | |||||||||||||||||||||||||||||||||||
Pension Value | |||||||||||||||||||||||||||||||||||
Fees | and | ||||||||||||||||||||||||||||||||||
Earned | Nonqualified | ||||||||||||||||||||||||||||||||||
or | Deferred | ||||||||||||||||||||||||||||||||||
Paid in | Stock | All Other | Compensation | ||||||||||||||||||||||||||||||||
Cash | Awards(1)(2) | Compensation(3) | Earnings(4) | Total | |||||||||||||||||||||||||||||||
Name | ($) | Fees Earned or Paid in Cash1 ($) | Stock Awards2,3 ($) | All Other Compensation4 ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings5 ($) | Total ($) | |||||||||||||||||||||||||||||
John L. Adams | 52,500 | 189,997 | 19,248 | 130,888 | 392,636 | ||||||||||||||||||||||||||||||
Carin M. Barth | 71,503 | 189,997 | 17,600 | 2 | 279,102 | 70,021 | 199,979 | 20,000 | 11 | 290,011 | |||||||||||||||||||||||||
Steven C. Mizell6 | 37,698 | 167,598 | 16,722 | — | 222,018 | ||||||||||||||||||||||||||||||
Stephen D. Quinn | 156,503 | 189,997 | 17,600 | — | 364,100 | 158,771 | 199,979 | 20,000 | — | 378,750 | |||||||||||||||||||||||||
Steven P. Stanbrook(5) | 17,135 | 72,862 | 6,696 | — | 96,693 | ||||||||||||||||||||||||||||||
J. Terry Strange(6) | 32,503 | 189,997 | 8,800 | 21,614 | 252,914 | ||||||||||||||||||||||||||||||
Steven P. Stanbrook | 45,021 | 199,979 | 20,000 | — | 265,000 | ||||||||||||||||||||||||||||||
Charles L. Szews | 54,003 | 189,997 | 17,600 | — | 261,600 | 60,021 | 199,979 | 20,000 | — | 280,000 | |||||||||||||||||||||||||
Max P. Watson, Jr.7 | 22,521 | 199,979 | 10,000 | — | 232,500 | ||||||||||||||||||||||||||||||
Anne Taylor | 45,003 | 189,997 | 17,600 | — | 252,600 | 60,021 | 199,979 | 20,000 | 1,794 | 281,794 | |||||||||||||||||||||||||
Max P. Watson, Jr. | 60,003 | 189,997 | 17,600 | — | 267,600 | ||||||||||||||||||||||||||||||
MaryAnn Wright | 45,003 | 189,997 | 17,600 | 8 | 252,608 | 51,271 | 199,979 | 20,000 | 20 | 271,270 |
The amounts in this column include the cash value of a fractional share awarded as part of the equity-based compensation retainer as described in more detail in the narrative. |
2 | The amounts included in the “Stock Awards” column represent the grant date fair value of awards computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note |
Our directors are offered the option of taking their annual retainer in restricted stock or restricted stock units. In |
The amounts in this column reflect the |
Amounts reported reflect above-market earnings on the Deferred Compensation Plan. Amounts are reflective of earnings in excess of 120% of the applicable federal long-term rate, with compounding, of |
Mr. |
Mr. |
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RETAINERS AND FEES
The table below sets forth the compensation components we paid to our non-employee directors which governed the 20192021 compensation program:
Retainer and Meeting Fees1 | ($) | |||||
Annual | ||||||
Annual Cash Retainer | 45,000 | |||||
Equity Retainer2 | 200,000 | |||||
Additional Annual Retainers | ||||||
Non-Executive Chair of the Board3 | 100,000 | |||||
Audit Committee Chair | 25,000 | |||||
Compensation & Human Resources Committee Chair | 15,000 | |||||
Finance/Risk Management Committee Chair | 15,000 | |||||
Governance & Corporate Responsibility Committee Chair4 | 10,000 | |||||
Annual Vehicle Stipend | 20,000 |
All cash retainer amounts are paid quarterly. |
The equity portion of the retainer is paid annually in restricted stock or restricted stock units valued at approximately | |
3 | The annual retainer for the Non-Executive Chair of the Board was increased to $135,000, effective November 16, 2021. |
4 | The annual retainer for the GCR Committee Chair was increased to $15,000, effective November 16, 2021. |
EQUITY-BASED COMPENSATION
The equity portion of our non-employee directors’ retainers is paid annually in restricted stock or restricted stock units valued at approximately $190,000$200,000 at the time of the grant pursuant to the 2014 Long Term Incentive Plan. Directors canIn 2021, directors could elect whether to receive the equity retainer in restricted stock or restricted stock units. In 2019,2021, all of our then current Directorsdirectors elected to receive their annual retainer in restricted stock, except for Ms. Barth, Mr. Mizell, Ms. Taylor and Ms. Wright, who each elected to receive restricted stock units. The grant was effective January 2, 20194, 2021 and was determined based on the average of the high and low market price of our common stock on that date. Accordingly, each non-employee director received 3,5631,576 shares of restricted stock or restricted stock units in payment of the equity portion of the 20192021 annual retainer. Mr. StanbrookMizell was elected to the Board on August 14, 2019.March 1, 2021. Upon his election, he received a pro rata annual retainer of 9181,069 shares of restricted stock.stock units.
Prior to 2019, the forfeiture restrictions on restricted stock lapsed fully after six months. Beginning January 1, 2019, the restrictedRestricted stock or restricted stock units granted to our directors vest immediately upon issuance. All vested restricted stock unitsawards held by a director will settle upon the retirement, death or disability of the director. TheUnder grants of restricted stock units made prior to 2019, the vested restricted stock units held by a director are settled in cash or shares of our common stock upon the termination of the director’s membership on our Board of Directors. EffectiveBeginning with grants of restricted stock units made following January 1, 2019, all restricted stock units are settled in cash.
STOCK OWNERSHIP GUIDELINES
Our Board has adopted Stock Ownership Guidelines that apply to our non-employee directors. The guidelines currently requireIn November 2021, following discussion with PM&P, upon the recommendation of the GCR Committee, the Board approved updates to the Stock Ownership Guidelines. Under the updated Stock Ownership Guidelines, our non-employee directors are required to own and hold 10,000maintain stock ownership value of $450,000 (“Director Ownership Requirement”) within five years. Once the Director Ownership Requirement is achieved, directors may sell or otherwise dispose of any shares in excess of the $450,000 value. In the event a director’s stock ownership value falls below the Director Ownership Requirement because of a decline in stock price, the director is prohibited from selling or otherwise disposing of shares of ourthe Company’s common stock. The holding requirement was determined based on competitive stock until the Director Ownership Requirement is reestablished through open
market practice. Stock ownership levels should be achieved by eachpurchases or annual director within five yearsequity grants. Restricted stock granted to directors as part of first appointmentthe annual retainer counts toward the Director Ownership Requirement without regard to the Board.vesting or other liquidity provisions related thereto. Stock that applies toward satisfaction of these guidelines includes: (1) shares of common stock owned outright by the director and his or her immediate family members who share the same household, whether held individually or jointly and (2) awarded restricted stock and restricted stock unit shares. Each of our directors has met, or will meet within the applicable timeframe, our current stock ownership requirements for non-employee directors.Director Ownership Requirements.
NONQUALIFIED DEFERRED COMPENSATION
In November 2020, the CHR Committee approved an amendment and restatement to the Deferred Compensation Plan, effective January 1, 2021. Under the amended and restated plan, non-employee directors can no longer defer director compensation under the plan. However, previously deferred amounts remain deferred under the plan until the originally scheduled payment date. Please see the section entitled “Executive Compensation — Nonqualified Deferred Compensation
Messrs. Adams, Quinn and Strange have elected to participate inCompensation” for a more fulsome description of the Company’s Deferred Compensation Plan described in greater detail above. Theand the material changes approved under the amended and restated plan.
Prior to amending the Deferred Compensation Plan effective January 1, 2021, the plan providesprovided those directors who electelected to participate an opportunity to accumulate additional savings for retirement on a tax-deferred basis. The non-employee directors maycould defer any portion of the cash compensation (annual retainer or meeting fees) that he or she receivesreceived with respect to the services provided to our Board, including any committee services, and the director willwould be 100% vested in his account at all times. We have complete discretion over how the deferred funds are utilized and they represent our unsecured obligation to the participants.
COMPENSATION CHANGES FOR FISCAL 2022
Deferred amounts will be deemed to be notionally investedAs described above, in such fund as the participants shall designate. Most of the funds are also available in the Group 1 401(k) Savings Plan except for the Group 1 Guaranteed Crediting Rate investment option which is the default investment option and only available in the Deferred Compensation Plan. The Group 1 Guaranteed Crediting Rate investment option is a declared interest rate, which is set by the Compensation Committee annually. The deferred interest rate for 2019 was set at 8.0%. Effective April 1, 2020, the committee reduced the declared interest rate for the foreseeable future from 8.0% to 3.0% due to the recent economic and operational concerns over the anticipated negative implications of the COVID-19 (coronavirus) outbreak.
Ms. Barth, Ms. Taylor and Ms. Wright, while not elected plan participants, have the cash portionNovember 2021, following review of a marginal share from the annual equity retainer deferred into the Deferred Compensation Plan.
Compensation Changes for Fiscal 2020
In November 2019, the Governance & Corporate Responsibility Committee reviewed Board compensation trends for Scompetitive market analysis prepared by PM&P, 500 directors. The GCR Committee noted that the Board’s current total compensation for non-employee directors was lower than the average total compensation paid to S&P 500 directors. The GCR Committee also noted that the Board’s compensation had not changed since 2017. After extensive discussion, the GCR Committee recommended an increase in the annual retainers paid to the Non-Executive Chair of the Board and the Board approved, slight modifications toGCR Committee Chair. Accordingly, the Board’s annual compensation to bring it in line with current compensation levels for S&P 500 directors. The Board approved an increase in the equityannual retainer for the Non-Executive Chair of the Board from $190,000$100,000 to $200,000, an increase in$135,000 and for the vehicle stipendGCR Committee Chair from $17,600$10,000 to $20,000, and eliminated payment of meeting fees. However, due$15,000. The increases to the recent economic and operational concerns over the anticipated negative implications of the COVID-19 (coronavirus) outbreak, on March 24, 2020, the Board determined that it was appropriateannual retainers were approved in order to eliminate the chairman, committee chair and cash retainer fees for the foreseeable future. Accordingly, effective April 1, 2020, the cash component of the director compensation has been eliminated. The Board’s compensation for 2020 is set forth below:maintain market competitiveness.
2020 Board | 2020 Board | ||||||
Fees | Fees | ||||||
Effective | Effective | ||||||
01/01/2020 | 04/01/2020 | ||||||
Retainer and Meeting Fees(1) | ($) | ($) | |||||
Annual Retainer | |||||||
Annual Cash Retainer | 45,000 | — | |||||
Equity Retainer(2) | 200,000 | 200,000 | |||||
Additional Annual Retainers | |||||||
Non-Executive Chairman of the Board | 100,000 | — | |||||
Audit Committee Chair | 25,000 | — | |||||
Compensation Committee Chair | 15,000 | — | |||||
Finance/Risk Management Committee Chair | 15,000 | — | |||||
Governance & Corporate Responsibility Committee Chair | 10,000 | — | |||||
Vehicle Stipend | 20,000 | 20,000 |
Proxy Statement 2022 | |
Proxy Statement 2022 | 65
SEC regulations require that we provide a comparison of the annual total compensation of Earl Hesterberg, our Chief Executive Officer in 2019,2021, to the annual total compensation of an individual identified as our median compensated employee. For purposes2021, our last completed fiscal year:
Mr. Hesterberg’s annual total compensation was $8,577,257
Our median employee’s total compensation was $54,880
The ratio of providing the comparison in accordance with SEC regulations, we identified a “median employee” and compared Mr. Hesterberg’s annual total compensation to thatour median employee’s annual total compensation was 156 to 1.
SEC rules allow us to use the employee identified in 2020 for three years. However, this individual was on leave for a substantial part of 2021. Therefore, for 2021 we selected an employee with substantially similar compensation to the 2020 identified median employee. For 2019,
We identified our last completed2020 median compensated employee based on our population as of December 31, 2020. We used a consistently applied compensation measure which included total gross wages using our payroll records for fiscal year:2020. We converted the amount of compensation paid to non-U.S. employees to U.S. dollars using average foreign currency exchange rates for 2020. We annualized compensation for employees hired during 2020.
The methodology that weAnnual 2021 total compensation for the identified median employee and our CEO was calculated according to the SEC rules used to identify the median employee is described below. Annual total compensation is calculated in the same manner as the amount set forth incalculate the “Total” column in the 2019 Summary Compensation Table.
We believe the pay ratio information set forth above constitutes a reasonable estimate, calculated in a manner consistent with applicable SEC regulations.
Because other companies may use different methodologies to identify their median employees, the pay ratio set forth above may not be comparable to the pay ratios used by other companies.
SEC rules permit companies to identify the median paid employee once every three years as long as there has been no change in the company’s employee population or compensation arrangements that significantly impacts the pay ratio disclosure. Since 2017 we have completed several acquisitions in the U.K. The additional employees from the acquisitions are homogenously distributed in terms of level and compensation to the existing population resulting in immaterial changes in our organization. Therefore, we are employing the same methodology used last year, as described below, to identify the median employee.
Date Used to Determine Employee Population –For purposes of identifying the median employee, we selected December 31, 2017 to be the date as of which we would determine our employee population.
Composition of Employee Population –We determined that, as of December 31, 2017, we had three separate employee populations - Brazil, the U.K. and the U.S., with a total of 13,077 employees globally.
Given availability of payroll data, the size, composition and global diversity of these 13,077 employees, we employed statistical sampling to assist in identification of the median employee. We stratified the employee population based on similarity of characteristics such as geography into groups. We then took the natural log of compensation data for each employee within the group. This natural log of compensation provided us with the data used in the “consistently applied compensation measure (“CACM”) discussed below. From the log normal data, we calculated median, standard deviation and variance of each group for the purposes of deriving sample sizes that fairly represented the grouping. Using this methodology, we generated a random sample of 1,838 employees. The group medians were then weighted by total group headcount relative to Group 1’s 13,077 employees to derive the median employee.
Pay Data Used –To identify the median employee, we derived compensation information from our payroll records for fiscal 2017. We used a CACM which included total taxable income, or equivalent. We converted the amount of compensation paid to non-U.S. employees to U.S. dollars using average foreign currency exchange rates for 2017. We annualized compensation for full-time employees hired during 2017.
Using this methodology, there were several employees whose CACM aggregated around median. For consistency purposes, we chose to use the employee who was located in the U.S. with more consistent year over year compensation for purposes of the comparison to Mr. Hesterberg’s annual total compensation.
Certain Relationships and Related
Transactions
During fiscal year 20192021 we were not, and we are not currently, a party to a transaction or series of transactions in which the amount involved did or may exceed $120,000, in which any of our directors, executive officers, any holder of more than 5% of our common stock or any member of the immediate family of any of these persons had or will have a direct or indirect material interest, except as described below and the compensation arrangements (including with respect to equity compensation) described in “2019“2021 Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation.”
Information below pertains to certain related party transactions related to the operations of our subsidiary UAB, which we acquired in February 2013. All of the operations of UAB are in Brazil. The conversion of amounts expressed in Brazilian Reais to U.S. Dollars was calculated by using the average currency exchange rate for 2019,2021, as provided by Oanda. The applicable exchange rates are: R$3.942295.3950 = USD$1.00.
LINCOLN PEREIRA ANDLincoln Pereira and UAB
During 20192021 we paid Lincoln Pereira, a Director of our Company, R$950,589.001,107,778.00 (USD$241,126.10)205,334.20) cash compensation for his services as our Regional Vice President, Brazil and as Chairman of our Brazilian subsidiary, UAB, and R$143,373.60158,997.90 (USD$36,368.10)29,471.34) for health insurance.
Mr. Pereira’s brother, Ricardo Ribeiro da Cunha Pereira, serves as Commercial Vice President, Paraná.Honda’s General Manager. During 20192021 the Company paid Mr. Ricardo Pereira R$582,477.48706,650.55 (USD$147,751.05)130,982.49) in total compensation, consisting of R$509,074.60648,497.61 (USD$129,131.70)120,203.45) of cash compensation and R$73,402.8858,152.94 (USD$8,619.35)10,779.04) for health insurance.
Mr. Pereira’s brother, Andre Ribeiro, servesserved as Commercial Operations Director.Director until his death in May 2021. During 2019,2021, the Company paid Mr. Andre Ribeiro R$1,040,606.00653,320.69 (USD$263,959.78)121,097.44) in total cash compensation, and R$146,173.20228,290.92 (USD$37,078.25)42,315.28) for health insurance.
UAB leases office and retail space at market rates from Santorini Negócios Imobiliários Ltda. (“Santorini”), a real estate company which was co-founded by Mr. Pereira. The lease provides for monthly payments of R$156,172.00180,000 (USD$39,614.54)33,364.23) and is adjusted annually pursuant to the IGP-M/FGV index. The lease expires in February 2029 but can be terminated with one monthone-month prior notice, subject to a three month early-termination penalty payment. Current owners of Santorini include Mr. Pereira’s wife, Anna Luiza Flecha de Lima da Cunha Pereira, who also manages the property, Irene Maria Flecha de Lima, Mr. Pereira’s mother-in-law, and Andrea Maria Flecha da Lima, Mr. Pereira’s sister-in-law. Total payments to Santorini in 20192021 are R$1,874,064.002,387,193.40 (USD$475,374.47)442,482.55). Mr. Pereira holds no ownership interest in Santorini.
UAB also leases office space at market rates from Irene Maria Flecha de Lima, Mr. Pereira’s mother-in-law.mother-in-law, and managed by Anna Luiza Flecha de Lima da Cunha Pereira (Mr. Pereira’s wife) and Andrea Maria Flecha da Lima (Mr. Pereira’s sister-in-law). The lease provides for monthly payments of R$16,124.0017,302.66 (USD$4,090.01)3,207.16) and is adjusted annually pursuant to the IGP-M/FGV index. The lease expired in October 2015 but can be terminated at any time with one monthone-month prior notice. Total payments to Irene Maria Flecha de Lima in 20192021 are R$193,488.00211,512.68 (USD$49,080.10)39,205.32).
Mr. Pereira’s cousin, Joao Candido Cunha Pereira, represents UAB in legal court cases solely relating to the State of Paraná. These legal services are governed by a contractual relationship signed in January 2012 for an undetermined term and can be terminated at any time with 90 days’ notice. All legal rates are at or below the current market rate for such legal services. Total payments to Joao Candido Cunha Pereira in 20192021 are R$180,768.276,150 (USD$45,853.62)1,139.94). UAB previously was also represented in legal matters by Cunha Pereira Law Firm, which was controlled by Mr. Pereira and his father. Mr. Pereira closed the Cunha Pereira Law Firm in 2016.
UAB purchases newspaper and radio advertising space from RPC Comunicações (“RPC”), a communications group in the state of Parana owned by Therezinha Cunha Pereira, Guilherme Cunha Pereira and Ana Amelia Cunha Pereira, Mr. Pereira’s aunt and two cousins, respectively. The prices are negotiated based on a price list published by RPC. UAB’s marketing department purchases the advertising space directly from RPC without any involvement from Mr. Pereira, at or below current market rates for such services, on an “as-needed” basis. There were no payments to RPC in 2019.
Proxy Statement 2022 | |
Proxy Statement 2022 | 67
We review all relationships and transactions in which we and our directors and named executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our General Counsel’s office is primarily responsible for the development and implementation of written procedures and controls to obtain information from the directors and named executive officers with respect to related person transactions and for subsequently determining, based on the facts and circumstances disclosed to them, whether we or a related person has a direct or indirect material interest in the transaction. As required under the SEC’s rules, transactionsTransactions that are determined to be directly or indirectly material to us or a related person are disclosed as required in documents, including our proxy statement, filed with the SEC when required, and disclosed in our proxy statement.
SEC.
Our Code of Conduct discourages all conflicts of interest, requires disclosure and provides guidance on handling conflicts of interest. Under the Code of Conduct, conflicts of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of our Company. Our restrictions on conflicts of interest under the Code of Conduct include related person transactions.
We have multiple processes for reporting conflicts of interests, and related person transactions. Under the Code of Conduct, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to their supervisors and all related person transactions involving our regional or market executives must be communicated in writing as part of their quarterly representation letter. This information is then reviewed by our Internal Audit Department, General Counsel, Audit Committee, our Board or our independent registered public accounting firm, as deemed necessary, and discussed with management. As part of this review, the following factors are generally considered:
the nature of the related person’s interest in the transaction;
the material terms of the transaction, including, without limitation, the amount and type of transaction;
the importance of the transaction to the related person;
the importance of the transaction to a third party;
the importance of the transaction to us;
whether the transaction would impair the judgment of a director, named executive officer or employee to act in the best interest of our Company;
whether the transaction might affect the status of a director as independent under the independence standards of the NYSE; and
any other matters deemed appropriate with respect to the particular transaction.
Ultimately, all such transactions must be approved or ratified by our Board. Any member of our Board who is a related person with respect to a transaction is recused from the review of the transaction.
In addition, our legal staff annually distributes a questionnaire to our named executive officers and members of our Board requesting certain information regarding, among other things, their immediate family members, employment and beneficial ownership interests. This information is then reviewed for any conflicts of interest under the Code of Conduct. At the completion of the annual audit, our Audit Committee and the independent registered public accounting firm review with management, insider and related person transactions and potential conflicts of interest. In addition, our internal audit function has processes in place, under its written procedure policies, to identify related person transactions and potential conflicts of interest and report them to senior management and the Audit Committee.
We also have other policies and procedures to prevent conflicts of interest. For example, our Corporate Governance Guidelines require that our Board assess the independence of the non-management directors at least annually, including a requirement that it determine whether or not any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described under “Information about our Board and its Committees — Independence of the Members of our Board.Board Independence.”
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Security Ownership Information
Security Ownership of Certain Beneficial Owners and Management
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the amount of our common stock beneficially owned (unless otherwise indicated) by our directors and nominees, our named executive officers, our current directors and named executive officers as a group, and any stockholdersshareholders with over 5% of our common stock. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of, or to direct the disposition of, such security. A person is also deemed to be the beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial interest. Except as otherwise indicated, directors and named executive officers possessed sole voting and investment power with respect to all shares of common stock in the table. In addition, except as otherwise indicated, all information is as of March 17, 2020.21, 2022.
Name and Address of Beneficial Owner(1) | Aggregate Number of Shares Owned(2) | Percent of Class Outstanding(3) | ||||||
Earl J. Hesterberg | 294,088 | (4) | 1.6 | % | ||||
Daryl A. Kenningham | 61,886 | * | ||||||
John C. Rickel | 93,594 | * | ||||||
Frank Grese, Jr. | 35,007 | * | ||||||
Peter C. DeLongchamps | 44,923 | * | ||||||
John L. Adams | 58,370 | (5) | * | |||||
Carin M. Barth | 10,320 | * | ||||||
Lincoln Pereira | 213,122 | (6) | 1.2 | % | ||||
Stephen D. Quinn | 48,070 | * | ||||||
Steven P. Stanbrook | 2,912 | * | ||||||
Charles L. Szews | 10,872 | * | ||||||
Anne Taylor | 6,364 | * | ||||||
Max P. Watson, Jr. | 51,740 | * | ||||||
MaryAnn Wright | 13,860 | * | ||||||
All Directors and Named Executive Officers as a group (14 persons) | 945,128 | (7) | 5.2 | % | ||||
BlackRock, Inc. 55 East 52ndStreet New York, NY 10055 | 2,751,592 | (8) | 15.2 | % | ||||
The Vanguard Group, Inc. 100 Vanguard Boulevard Malvern, PA 19355 | 1,860,286 | (9) | 10.3 | % | ||||
Dimensional Fund Advisors LP. 6300 Bee Cave Road Austin, TX 78746 | 1,592,275 | (10) | 8.8 | % |
Name and Address of Beneficial Owner1 | Aggregate Number of Shares Owned2 | Percent of Class Outstanding3 | ||||||
Earl J. Hesterberg | 257,615 | 4 | 2.0 | % | ||||
Daryl A. Kenningham | 53,585 | 5 | * | |||||
Daniel McHenry | 20,118 | * | ||||||
Frank Grese, Jr. | 22,624 | * | ||||||
Peter C. DeLongchamps | 35,450 | * | ||||||
Carin M. Barth | 2,131 | * | ||||||
Steven C. Mizell | — | * | ||||||
Lincoln Pereira | 153,122 | 6 | * | |||||
Stephen D. Quinn | 50,676 | * | ||||||
Steven P. Stanbrook | 7,018 | * | ||||||
Charles L. Szews | 13,478 | * | ||||||
Anne Taylor | 807 | * | ||||||
MaryAnn Wright | — | * | ||||||
All Directors and Named Executive Officers as a group (13 persons) | 627,567 | 7 | 3.8 | % | ||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 2,983,695 | 8 | 17.9 | % | ||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 1,910,640 | 9 | 11.5 | % | ||||
Dimensional Fund Advisors LP 6300 Bee Cave Road Building One Austin, TX 78746 | 1,331,041 | 10 | 8.0 | % |
* | Represents less than 1% of the outstanding common stock. |
Except as otherwise indicated, the mailing address of each person or entity named in the table is Group 1 Automotive, Inc., 800 Gessner, Suite 500, Houston, Texas 77024. |
Includes restricted shares as to which the individual has voting, but not dispositive, power, as follows: Mr. Hesterberg |
Based on total shares outstanding of |
Includes |
Proxy Statement 2022 | 68 |
Proxy Statement 2022 | 69
5 | Includes |
Mr. Pereira has shared voting and dispositive power with respect to |
Includes |
As reported on Amendment No. |
As reported on Amendment No. 14 to Schedule 13G |
10 | As reported on Amendment No. 16 to Schedule 13G dated as of December 31, 2021 and filed with the SEC on February 8, 2022, Dimensional Fund Advisors LP, or certain of its subsidiaries (collectively, “Dimensional”) serve as investment manager to certain other commingled group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In its role as investment advisor, sub-adviser and/or manager, Dimensional possesses voting and/or investment power over shares of our common stock that are owned by the Funds, and may be deemed to be the beneficial owner of such shares held by the Funds. Dimensional has sole voting power as to |
Delinquent Section 16(a) Reports
Our named executive officers, directors and any person who owns more than 10% of our common stock are required by Section 16(a) of the Exchange Act to file reports regarding their ownership of our stock. To our knowledge, based solely on a review of the copies of these reports furnished to us and written representations from these individuals that no other reports were required, we believe that all reporting requirements of Section 16(a) were met, except a Form 4 for Mr. Grese which was due on November 1, 2019, was filed late on November 4, 2019.
Equity Compensation Plan Information
The following table sets forth certain information regarding our equity compensation plans as of December 31, 2019.
Supplemental Information on Equity Compensation Plans as of March 17, 2020
As of March 17, 2020, Group 1 had:
The following is provided in order to assist those who may wish to run a burn rate calculation. The numbers in this table relate to the total number of performance shares vested and time-vesting restricted stock units and director phantom shares granted in a year across our company and are not limited to grants made to named executive officers or directors.
Year | Options Granted | Performance Shares Vested | Time-Vested Restricted Stock Units Granted | Total | Weighted-Average Number of Common Shares Outstanding | |||||
2019 | — | 0 | 267,887 | 267,887 | 17,917,195 | |||||
2018 | — | 0 | 246,721 | 246,721 | 19,453,000 | |||||
2017 | — | 0 | 223,139 | 223,139 | 20,420,000 |
Questions and Answers about the
Annual Meeting
What is the purpose of the meeting?
At our Annual Meeting, stockholders will act upon the matters outlined in the notice of meeting, including the election of nine director nominees, the advisory vote to approve executive compensation, the approval of an amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan, the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020, and the consideration of any other matters properly presented at the meeting. In addition, senior management will be available to respond to questions regarding our business and financial performance during fiscal year 2019.
Who is entitled to vote at the meeting?
WHO IS ENTITLED TO VOTE AT THE MEETING?
Only our stockholdersshareholders as of 5:00 p.m., Central Daylight Saving Time, on March 17, 202021, 2022 (the record date) are entitled to receive notice of the Annual Meeting and to vote at the meeting. On March 17, 2020,21, 2022, there were 18,108,92116,672,323 shares of Group 1 common stock issued and outstanding and entitled to vote at the meeting.
How manyA list of shareholders will be available and may be inspected during normal business hours for a period of at least 10 days prior to the Annual Meeting at our offices at 800 Gessner, Suite 500, Houston, Texas 77024. The list of shareholders will also be available for your review during the Annual Meeting by accessing the meeting website during the Annual Meeting. In the event there are not sufficient votes may I cast?
You are entitledfor a quorum or to one vote for each share of Group 1 common stock you owned at 5:00 p.m., Central Daylight Saving Time, on March 17, 2020, on all matters presentedapprove the foregoing proposals at the meeting.time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies.
What is the difference between a stockholder of record and a beneficial owner or street name holder?
WHAT IS THE DIFFERENCE BETWEEN A SHAREHOLDER OF RECORD AND A BENEFICIAL OWNER OR STREET NAME HOLDER?
If your shares are registered directly in your name with our registrar and transfer agent, American Stock Transfer & Trust Company, LLC, you are considered a stockholdershareholder of record with respect to those shares.
If your shares are held in a brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of those shares, and your shares are held in street name.
If you hold common stock inBOTH street name and as a stockholdershareholder of record,YOU MUST VOTE SEPARATELY for each position of common stock.
How doHOW DO I vote my shares?
VOTE MY SHARES?
If you are a stockholdershareholder of record on the record date, you may vote in person atonline during the Annual Meeting or by proxy using any of the following methods:
Online — visit the website shown on the proxy card | ||
Telephone — within the United States (“U.S.”) or Canada, call the toll-free telephone number shown on the proxy card and follow the instructions at any time prior to 11:59 p.m., Eastern Daylight Saving Time, on May 12, | ||
Mail — if you receive a paper copy of the proxy materials, complete, sign and date the proxy card and return the proxy card in the prepaid envelope. Your proxy card must be received by the Company before the voting polls close |
If you vote by internet or telephone, do not return your proxy card. The telephone and internet voting procedures are designed to authenticate stockholders’shareholders’ identities, to allow stockholdersshareholders to give their voting instructions and to confirm that stockholders’shareholders’ instructions have been recorded properly.
Submitting your proxy by internet or telephone will not affect your right to vote in person online should you decide to attend the Annual Meeting.
If you want to vote in person atonline during the meeting, you must requesthave a ballot. For directions to thecontrol number and access our Annual Meeting visitat www.sterlingmccalllexus.comwww.virtualshareholdermeeting.com/GPI2022, scroll to the bottom of the page and enter your address for directions to the dealership.
.
If you hold your shares in street name, you will receive instructions from your broker, bank or other nominee describing how to vote your shares. Beneficial owners voting by telephone or internet are subject to the same deadlines as described above for holders of record. If you want to vote in person, you must obtain a legal proxy from your broker, bank or other nominee and bring ituse the information provided on the legal proxy to access the meeting.Annual Meeting.
Proxy Statement 2022 | 70 |
Can
Proxy Statement 2022 | 71
CAN I change my vote or revoke my proxy?
CHANGE MY VOTE OR REVOKE MY PROXY?
If you are a stockholdershareholder of record on the record date, you can revoke your proxy prior to the completion of voting atduring the Annual Meeting by:
delivering an executed, later-dated proxy that is received by the Corporate Secretary of the Company before the voting polls close during the Annual Meeting;
resubmitting your proxy by internet or telephone at any time prior to 11:59 p.m., Eastern Daylight Saving Time, on May 17, 2022;
delivering a written notice of revocation of the proxy to Beth Sibley, Corporate Secretary, Group 1 Automotive, Inc., 800 Gessner, Suite 500, Houston, Texas 77024 no later than May 17, 2022; or
voting in person online during the Annual Meeting.
Only your latest dated proxy that we receive prior to the Annual Meeting will be counted. Further, your attendance atduring the Annual Meeting will not automatically revoke your proxy.
If you are a street name stockholdershareholder you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. You may also vote in person atonline during the Annual Meeting if you obtain a legal proxy from your broker, bank or other nominee.
What is the effect of broker non-votes and abstentions and what vote is required to approve each proposal?
WHAT IS THE EFFECT OF BROKER NON-VOTES AND ABSTENTIONS AND WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
If you hold your shares in street name, you will receive instructions from your broker, bank or other nominee describing how to vote your shares. If you do not instruct your broker, bank or other nominee how to vote your shares, they may vote your shares as they decide as to each routine matter under the rules of the NYSE. Only Proposal No. 43 is considered a “routine” matter.
If you do not provide specific voting instructions to your broker on non-routine matters, your broker may not cast a vote on the proposal, resulting in a broker non-vote. Although any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, it would be treated as not entitled to vote with respect to “non-routine”“non-routine” matters. If you are a beneficial owner holding shares through a broker, bank or other nominee and you do not provide voting instructions on certain matters, your broker may cast a vote on your behalf for Proposal No. 4,3, but may not cast a vote on Proposals No. 1 2 or 3.2. Abstentions occur when stockholdersshareholders are present atduring the Annual Meeting but fail to vote or voluntarily withhold their vote for any of the matters upon which the stockholdersshareholders are voting.
The table below describes the vote required for approval of each matter to be brought before the meeting, as well as the treatment of abstentions and broker non-votes as to each matter.
Proposal | Treatment of Abstentions | Treatment of Broker Non-Votes | ||||
1 | Each nominee must receive the affirmative vote of a majority of votes cast by | No Effect | Not takeninto account | |||
2 | The affirmative vote of the holders of a majority of the shares present in person online orrepresented by proxy and entitled to vote on the matter | Count as a vote | Not takeninto account | |||
3 | ||||||
The affirmative vote of the holders of a majority of the shares present in person online orrepresented by proxy and entitled to vote on the matter | Count as a vote | Brokers havediscretion |
The Company’sWe have adopted a majority vote director resignation policy, requires any director nominee in an uncontested election who receives a greater number of votes “against” than votes “for” his or her election to tender his or her resignation promptly following the certification of the election results. The Governance & Corporate Responsibility Committee of the Board will consider all of the relevant facts and circumstances and make a recommendation to the Board with respect to whether to accept the resignation. Within 90 days, the Boardwhich is required to take action with respect to the recommendation and to promptly disclose its decision. The director resignation policy is more fully described in “Information about Our Board of Directors and Its Committees — Directorgreater detail under “Director Resignation Policy.”
Our Board has appointed Earl J. Hesterberg, our President and Chief Executive Officer, and John C. Rickel,Daniel McHenry, our Senior Vice President and Chief Financial Officer, as the management proxy holders for the Annual Meeting. If you are a stockholdershareholder of record, your shares will be voted by the management proxy holders in accordance with the
instructions on the proxy card you submit by mail, or the instructions provided for any proxy submitted by telephone or internet, as applicable. For stockholdersshareholders who have their shares voted by duly submitting a proxy by mail, telephone or internet, unless the stockholdershareholder appropriately specifies otherwise, the management proxy holders will vote all shares represented by such valid proxies as our Board recommends.
How does the Board recommend I vote?
Our Board of Directors recommends that you vote your shares“FOR” each of the director nominees;“FOR” the approval, on a non-binding advisory basis, of our executive compensation;“FOR” the amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan; and“FOR” the ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm for 2020.
What is a quorum?
WHAT IS A QUORUM?
There must be a quorum for the Annual Meeting to be held. A quorum will be present if the holders of a majority of the shares of common stock entitled to vote are present in person online or represented by proxy atduring the Annual Meeting. Our independent inspector of election, Broadridge Financial Solutions, will determine whether or not a quorum is present. There must be a quorum for the Annual Meeting to be held. Proxies received but marked as abstentions or broker non-votes will be included in the calculation of votes considered to be present atduring the Annual Meeting.
If less than a quorum is represented at the meeting, the ChairmanChair of the meeting or a majority of the shares so represented may adjourn the meeting from time to time without further notice, and the persons named as proxies will vote the proxies they have been authorized atduring the Annual Meeting in favor of such an adjournment.
In the event a quorum is present atduring the Annual Meeting but sufficient votes to approve any of the items proposed by our Board have not been received, the persons named as proxies may propose one or more adjournments of the meeting to permit further solicitation of proxies. A stockholdershareholder vote may be taken on one or more of the proposals in this proxy statement prior to such adjournment if sufficient proxies have been received and it is otherwise appropriate. If a quorum is present, the persons named as proxies will vote the proxies they have been authorized to vote on any other business properly brought before the meeting in favor of such an adjournment. If a quorum is initially established, but sufficient stockholdersshareholders withdraw such that the meeting is left with less than a quorum, the remaining stockholdersshareholders present atduring the meeting may continue to transact business until the meeting is adjourned or recessed.
Who will bear the cost of soliciting votes for the Annual Meeting?
WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE ANNUAL MEETING?
We have engaged Alliance Advisors to assist with the solicitation of proxies for a fee not to exceed $6,000, plus reimbursement for reasonable out-of-pocket expenses. We will bear all expenses of soliciting proxies. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of our common stock for their reasonable expenses in forwarding solicitation material to such beneficial owners. Directors, officers and employees of Group 1 may also solicit proxies in person or by other means of communication. Such directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation.
Who will count the votes?
WHO WILL COUNT THE VOTES?
We have engaged Broadridge Financial Solutions to tabulate the votes and to serve as inspector of election atduring the Annual Meeting for a fee of approximately $3,500. Broadridge will separately tabulate “For,” “Against” and “Withhold” votes, abstentions and broker non-votes. Broadridge will also certify the election results and perform any other acts required by the Delaware General Corporation Law.
Proxy Statement 2022 | 72 |
May I propose actions for consideration at next year’s Annual Meeting of Stockholders or nominate individuals to serve as directors?
You may submit proposals for consideration at future stockholder meetings, including director nominations. Please read “StockholderProxy Statement 2022 | 73
Shareholder Proposals for 2021 Annual Meeting” for information regarding the submission of stockholder proposals and director nominations for consideration at next year’s Annual Meeting.2023
Stockholder Proposals for 2021 Annual Meeting
Pursuant to the various rules promulgated by the SEC, stockholdersshareholders interested in submitting a proposal for inclusion in our proxy materials and for presentation at the 20212023 Annual Meeting of StockholdersShareholders may do so by following the procedures set forth in Rule 14a-8 under the Exchange Act. In general, to be eligible for inclusion in our proxy materials, stockholdershareholder proposals must be received by our Corporate Secretary no later than December 9, 202013, 2022 and meet the requirements of Rule 14a-8. No stockholdershareholder proposal was received for inclusion in this proxy statement.
As more specifically provided for in our Bylaws, in order for a nomination of persons for election to our Board or a proposal of business (other than through Rule 14a-8) to be properly brought before our Annual Meeting of Stockholders,Shareholders, it must be either specified in the notice of the meeting given by our Corporate Secretary or otherwise brought before the meeting by or at the direction of our Board or by a stockholdershareholder entitled to vote and who complies with the notice procedures set forth in our Bylaws. Subject to the exception described below, a stockholdershareholder making a nomination for election to our Board or a proposal of business for the 20212023 Annual Meeting of StockholdersShareholders must deliver proper notice to our Corporate Secretary no earlier than the close of business 120 days and no later than the close of business 90 days prior to the anniversary date of the 20202022 Annual Meeting of Stockholders.Shareholders. In other words, for a stockholdershareholder nomination for election to our Board or a proposal of business to be considered at the 20212023 Annual Meeting of Stockholders,Shareholders, it should be properly submitted to our Corporate Secretary no earlier than the close of business January 13, 202118, 2023 and no later than the close of business February 12, 2021.17, 2023. However, in the event that the date of an Annual Meeting is more than 30 days before or more than 60 days after the anniversary date of the preceding year’s Annual Meeting, the stockholdershareholder notice must be delivered not earlier than 120 days prior to such Annual Meeting and not later than 90 days prior to such Annual Meeting or, if the first public announcement of the date of such Annual Meeting is less than 100 days prior to the date of such Annual Meeting, the 10thday following the day on which public announcement of the date of such Annual Meeting is first made by the Company.
If we increase the number of directors to be elected at an Annual Meeting and do not make a public announcement naming all of the nominees for director and specifying the size of the increased Board at least 80 days prior to the first anniversary of the preceding year’s Annual Meeting, a stockholder’sshareholder’s notice regarding the nominees for the new positions created by the increase will be considered timely if it is delivered to our Corporate Secretary not later than the close of business on the 10thday following the day on which the public announcement is first made.
For each individual that a stockholdershareholder proposes to nominate as a director or propose other business (other than through Rule 14a-8) at the 20212023 Annual Meeting, the stockholder’sshareholder’s written notice to our Corporate Secretary must include the information required by and meet the detailed requirements set forth in our Bylaws. From time to time, the Governance & Corporate ResponsibilityGCR Committee may request additional information from the nominee or the stockholder.shareholder.
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2021, including the financial statements and the financial statement schedules, if any, but not including exhibits, will be furnished at no charge to each person to whom a proxy statement is delivered or made available upon the written request of such person addressed to 800 Gessner, Suite 500, Houston, TX 77024, Attn: Corporate Secretary.
We may send a single set of proxy materials, as applicable, and other stockholdershareholder communications to any household at which two or more stockholdersshareholders with the same last name reside, unless we have received contrary instructions from those stockholders.shareholders. This process is called “householding.” This reduces duplicate mailings and saves printing and postage costs as well as natural resources. The proxy materials and other stockholdershareholder communications may be householded based on your prior express or implied consent. StockholdersShareholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.
If you wish to opt out of householding, and would like to have separate copies of the proxy materials mailed to each stockholdershareholder sharing your address, or if you are receiving multiple copies and would like to receive a single copy, please contact Broadridge Financial Solutions, Inc., by calling 1-800-542-1061 or by writing Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Broadridge will promptly deliver the requested materials. Beneficial owners (street name stockholders)shareholders) sharing an address who are receiving multiple copies of the proxy materials, and other stockholdershareholder communications and who wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of such materials be mailed to all stockholdersshareholders at the shared address in the future.
However, please note that if you want to receive a paper proxy card or other proxy materials for purposes of this year’s meeting, you should follow the instructions included in the information that was sent to you.
As of the date of filing this proxy statement, our Board is not aware of any other business or nominee to be presented or voted upon atduring the Annual Meeting. If any other business or nominee is properly presented, the proxies solicited by our Board will provide the proxy holders with the authority to vote on those matters and nominees in accordance with such persons’ discretion. Where a stockholdershareholder has appropriately specified how a proxy is to be voted, it will be voted by the proxy holders in accordance with the specification.
By Order of the Board of Directors,
Beth Sibley
Corporate Secretary
Proxy Statement 2022 | |
Proxy Statement 2022 | 75
Appendix A — Non-GAAP Financial
Measures
In addition to reporting our financial information in our Annual Report on Form 10-K using U.S. Generally Accepted Accounting Principles (“GAAP”), certain non-GAAP financial measures are used with respect to our annual incentive compensation and to evaluate the Company’s financial performance. Such non-GAAP financial measures include (i) adjusted operating cash flow, (ii) adjusted EPS, and (iii) adjusted net income, each of which are described further below. The Company does not intend for the information to be considered in isolation or as a substitute for the related GAAP financial measures. Other companies may define and calculate the measures differently than we do, limiting the usefulness of the measures for comparison with other companies.
In addition to evaluating the financial condition and results of our operations in accordance with U.S. GAAP, from time to time our management evaluates and analyzes results and any impact on the Company of strategic decisions and actions relating to, among other things, cost reduction, growth, profitability improvement initiatives, and other events outside of normal, or “core,” business and operations, by considering alternative financial measures not prepared in accordance with U.S. GAAP. In our evaluation of results from time to time, we exclude items that do not arise directly from core operations, such as non-cash asset impairment charges, out-of-period adjustments, legal matters, gains and losses on dealership franchise or real estate transactions, and catastrophic events, such as hailstorms, hurricanes, and snow storms. Because these non-core charges and gains materially affect the Company’s financial condition or results in the specific period in which they are recognized, management also evaluates, and makes resource allocation and performance evaluation decisions based on, the related non-GAAP measures excluding such items. This includes evaluating measures such as adjusted selling, general and administrative expenses, adjusted net income, adjusted diluted earnings per share, and constant currency. These adjusted measures are not measures of financial performance under U.S. GAAP, but are instead considered non-GAAP financial performance measures. Non-GAAP measures do not have definitions under U.S. GAAP and may be defined differently by, and not be comparable to similarly titled measures used by, other companies. As a result, any non-GAAP financial measures considered and evaluated by management are reviewed in conjunction with a review of the most directly comparable measures calculated in accordance with U.S. GAAP. We caution investors not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures.
In addition to using such non-GAAP measures to evaluate results in a specific period, management believes that such measures may provide more complete and consistent comparisons of operational performance on a period-over-period historical basis and a better indication of expected future trends. Our management also uses these adjusted measures in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors, and industry analysts concerning financial performance. We disclose these non-GAAP measures, and the related reconciliations, because we believe investors use these metrics in evaluating longer-term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess operating performance. The exclusion of certain expenses in the calculation of non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. We anticipate excluding these expenses in the future presentation of our non-GAAP financial measures.
In addition, we evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than U.S. dollars using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures
should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP. The Same Store amounts presented include the results of dealerships for the identical months in each period presented in comparison, commencing with the first full month in which the dealership was owned by us and, in the case of dispositions, ending with the last full month it was owned by us. Same Store results also include the activities of our corporate headquarters.
Certain amounts in the financial statements may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented.
RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES — CONSOLIDATED
(Unaudited)
(In millions, except per share data)
Year Ended December 31, 2021 | ||||||||||||||||||||||||||||||||||||
U.S. GAAP | Loss on interest rate swaps | Catastrophic events | Dealership and real estate transactions | Acquisition costs | Legal matters | Asset impairments | Tax rate changes | Non-GAAP adjusted | ||||||||||||||||||||||||||||
SG&A expenses | $ | 1,477.2 | $ | — | $ | (2.8 | ) | $ | 4.4 | $ | (13.4 | ) | $ | 5.3 | $ | — | $ | — | $ | 1,470.7 | ||||||||||||||||
Asset impairments | $ | 1.7 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1.7 | ) | $ | — | $ | — | |||||||||||||||||
Income (loss) from operations | $ | 884.4 | $ | — | $ | 2.8 | $ | (4.4 | ) | $ | 13.4 | $ | (5.3 | ) | $ | 1.7 | $ | — | $ | 892.6 | ||||||||||||||||
Floorplan interest expense | $ | 27.6 | $ | (4.8 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 22.9 | |||||||||||||||||
Income (loss) before income taxes | $ | 800.9 | $ | 4.8 | $ | 2.8 | $ | (4.4 | ) | $ | 13.4 | $ | (5.3 | ) | $ | 1.7 | $ | — | $ | 813.9 | ||||||||||||||||
Less: Provision (benefit) for income taxes | 175.5 | 1.1 | 0.6 | (1.0 | ) | 3.0 | (1.2 | ) | 0.4 | 1.9 | 180.3 | |||||||||||||||||||||||||
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Net income (loss) from continuing operations | 625.4 | 3.7 | 2.2 | (3.4 | ) | 10.5 | (4.2 | ) | 1.3 | (1.9 | ) | 633.7 | ||||||||||||||||||||||||
Less: Earnings (loss) allocated to participating securities | 21.0 | 0.1 | 0.1 | (0.1 | ) | 0.4 | (0.1 | ) | — | (0.1 | ) | 21.3 | ||||||||||||||||||||||||
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Net income (loss) from continuing operations available to diluted common shares | $ | 604.4 | $ | 3.6 | $ | 2.1 | $ | (3.3 | ) | $ | 10.1 | $ | (4.0 | ) | $ | 1.3 | $ | (1.8 | ) | $ | 612.4 | |||||||||||||||
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Diluted earnings (loss) per common share from continuing operations | $ | 34.11 | $ | 0.20 | $ | 0.12 | $ | (0.19 | ) | $ | 0.57 | $ | (0.23 | ) | $ | 0.07 | $ | (0.10 | ) | $ | 34.55 | |||||||||||||||
Effective tax rate | 21.9 | % | 22.1 | % | ||||||||||||||||||||||||||||||||
SG&A as % gross profit1 | 60.5 | % | 60.3 | % | ||||||||||||||||||||||||||||||||
Operating margin2 | 6.6 | % | 6.6 | % | ||||||||||||||||||||||||||||||||
Pretax margin3 | 5.9 | % | 6.0 | % | ||||||||||||||||||||||||||||||||
Same Store SG&A expenses | $ | 1,415.9 | $ | — | $ | (2.8 | ) | $ | 2.1 | $ | (13.4 | ) | $ | 5.3 | $ | — | $ | — | $ | 1,407.1 | ||||||||||||||||
Same Store SG&A as % | 60.2 | % | 59.9 | % | ||||||||||||||||||||||||||||||||
Same Store income (loss) from operations | $ | 858.0 | $ | — | $ | 2.8 | $ | (2.1 | ) | $ | 13.4 | $ | (5.3 | ) | $ | 1.7 | $ | — | $ | 868.5 | ||||||||||||||||
Same Store operating margin2 | 6.6 | % | 6.7 | % |
Proxy Statement 2022 | 76 |
Proxy Statement 2022 | 77
U.S. GAAP | Non-GAAP adjustments | Non-GAAP adjusted | ||||||||||
Net (loss) income from discontinued operations | $ | (73.3 | ) | $ | 81.8 | $ | 8.5 | |||||
Less: (loss) earnings allocated to participating securities | (2.5 | ) | 2.8 | 0.3 | ||||||||
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Net (loss) income from discontinued operations available to diluted common shares | $ | (70.9 | ) | $ | 79.1 | $ | 8.2 | |||||
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Net income | $ | 552.1 | $ | 90.0 | $ | 642.1 | ||||||
Less: earnings allocated to participating securities | 18.5 | 3.0 | 21.6 | |||||||||
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Net income available to diluted common shares | $ | 533.6 | $ | 87.0 | $ | 620.6 | ||||||
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Diluted (loss) earnings per common share from discontinued operations | $ | (4.00 | ) | $ | 4.47 | $ | 0.46 | |||||
Diluted earnings per common share from continuing operations | 34.11 | 0.45 | 34.55 | |||||||||
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Diluted earnings per common share | $ | 30.11 | $ | 4.91 | $ | 35.02 | ||||||
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Adjusted SG&A as % of gross profit excludes the |
WHEREAS, GROUP 1 AUTOMOTIVE, INC. (the “Company”) has heretofore adopted theGROUP 1 AUTOMOTIVE, INC. 2014 LONG TERM INCENTIVE PLAN (the “Plan”); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of the date the stockholders of the Company approve this amendment (the “Amendment Effective Date”):
2 | Adjusted operating margin excludes the impact of SG&A reconciling items above and asset impairment charges. |
3 | Adjusted pretax margin excludes the impact of |
RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES — CONSOLIDATED
(Unaudited)
(In millions, except per share data)
Year Ended December 31, 2020 | ||||||||||||||||||||||||||||||||
U.S. GAAP | Dealership and real estate transactions | Severance costs | Legal matters | Out-of- period | Asset impairments | Loss on extinguishment of debt | Non-GAAP adjusted | |||||||||||||||||||||||||
SG&A expenses | $ | 1,138.2 | $ | 5.3 | $ | (1.2 | ) | $ | 2.7 | $ | (10.6 | ) | $ | — | $ | — | $ | 1,134.5 | ||||||||||||||
Asset impairments | $ | 26.7 | $ | — | $ | — | $ | — | $ | — | $ | (26.7 | ) | $ | — | $ | — | |||||||||||||||
Income (loss) from operations | $ | 495.7 | $ | (5.3 | ) | $ | 1.2 | $ | (2.7 | ) | $ | 10.6 | $ | 26.7 | $ | — | $ | 526.1 | ||||||||||||||
Loss on extinguishment of debt | $ | 13.7 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (13.7 | ) | $ | — | |||||||||||||||
Income (loss) before income taxes | $ | 380.8 | $ | (5.3 | ) | $ | 1.2 | $ | (2.7 | ) | $ | 10.6 | $ | 26.7 | $ | 13.7 | $ | 424.9 | ||||||||||||||
Less: Provision (benefit) for income taxes | 84.2 | (1.1 | ) | 0.2 | (0.6 | ) | 0.8 | 5.5 | 3.0 | 92.0 | ||||||||||||||||||||||
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Net income (loss) from continuing operations | 296.7 | (4.2 | ) | 1.0 | (2.1 | ) | 9.7 | 21.2 | 10.7 | 333.0 | ||||||||||||||||||||||
Less: Earnings (loss) allocated to participating securities | 10.6 | (0.2 | ) | — | (0.1 | ) | 0.3 | 0.8 | 0.4 | 11.9 | ||||||||||||||||||||||
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Net income (loss) from continuing operations available to diluted common shares | $ | 286.0 | $ | (4.0 | ) | $ | 1.0 | $ | (2.1 | ) | $ | 9.4 | $ | 20.4 | $ | 10.3 | $ | 321.0 | ||||||||||||||
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Diluted earnings (loss) per common share from continuing operations | $ | 16.06 | $ | (0.23 | ) | $ | 0.05 | $ | (0.12 | ) | $ | 0.53 | $ | 1.15 | $ | 0.58 | $ | 18.03 | ||||||||||||||
Effective tax rate | 22.1 | % | 21.6 | % | ||||||||||||||||||||||||||||
SG&A as % gross profit1 | 65.6 | % | 65.4 | % | ||||||||||||||||||||||||||||
Operating margin2 | 4.7 | % | 5.0 | % | ||||||||||||||||||||||||||||
Pretax margin3 | 3.6 | % | 4.0 | % | ||||||||||||||||||||||||||||
Same Store SG&A expenses | $ | 1,123.3 | $ | — | $ | (1.2 | ) | $ | 2.7 | $ | (10.6 | ) | $ | — | $ | — | $ | 1,114.2 | ||||||||||||||
Same Store SG&A as % gross profit1 | 65.7 | % | 65.1 | % | ||||||||||||||||||||||||||||
Same Store income (loss) from operations | $ | 493.8 | $ | — | $ | 1.2 | $ | (2.7 | ) | $ | 10.6 | $ | 21.9 | $ | — | $ | 524.7 | |||||||||||||||
Same Store operating margin2 | 4.7 | % | 5.0 | % |
U.S. GAAP | Non-GAAP adjustments | Non-GAAP adjusted | ||||||||||
Net (loss) income from discontinued operations | $ | (10.2 | ) | $ | 10.8 | $ | 0.6 | |||||
Less: (loss) earnings allocated to participating securities | (0.4 | ) | 0.4 | — | ||||||||
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Net (loss) income from discontinued operations available to diluted common shares | $ | (9.8 | ) | $ | 10.4 | $ | 0.6 | |||||
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Net income | $ | 286.5 | $ | 47.1 | $ | 333.5 | ||||||
Less: earnings allocated to participating securities | 10.3 | 1.7 | 12.0 | |||||||||
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Net income available to diluted common shares | $ | 276.2 | $ | 45.4 | $ | 321.6 | ||||||
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Diluted (loss) earnings per common share from discontinued operations | $ | (0.55 | ) | $ | 0.58 | $ | 0.03 | |||||
Diluted earnings per common share from continuing operations | 16.06 | 1.97 | 18.03 | |||||||||
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Diluted earnings per common share | $ | 15.51 | $ | 2.55 | $ | 18.06 | ||||||
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1 | ||
Adjusted SG&A as % of gross profit excludes the | ||
IN WITNESS WHEREOF, the undersigned has caused this First Amendment to be executed, effective for all purposes as provided above.
2 | Adjusted operating margin excludes the impact of SG&A reconciling items above and asset impairment charges. |
3 | Adjusted pretax margin excludes the impact of SG&A reconciling items above, asset impairment charges and a loss on extinguishment of debt. |
The following table reconciles cash flows on a GAAP basis to the corresponding adjusted amounts (in millions):
Years Ended | ||||||||
2021 | 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net cash provided by operating activities: | $ | 1,259.6 | $ | 805.4 | ||||
Change in Floorplan notes payable — credit facility and other, excluding floorplan offset and net acquisitions and dispositions | (491.5 | ) | (313.7 | ) | ||||
Change in Floorplan notes payable — manufacturer affiliates associated with net acquisitions and dispositions and floorplan offset activity | (12.7 | ) | 12.0 | |||||
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Adjusted net cash provided by operating activities | $ | 755.5 | $ | 503.7 | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Net cash used in investing activities: | $ | (1,251.7 | ) | $ | (74.7 | ) | ||
Change in cash paid for acquisitions, associated with Floorplan notes payable | 137.9 | — | ||||||
Change in proceeds from disposition of franchises, property and equipment, associated with Floorplan notes payable | (7.0 | ) | (8.6 | ) | ||||
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Adjusted net cash used in investing activities | $ | (1,120.8 | ) | $ | (83.3 | ) | ||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net cash used in financing activities: | $ | (74.0 | ) | $ | (668.1 | ) | ||
Change in Floorplan notes payable, excluding floorplan offset | 373.2 | 310.3 | ||||||
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Adjusted net cash provided by (used in) financing activities | $ | 299.2 | $ | (357.8 | ) | |||
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Proxy Statement 2022 | 78 |
GROUP 1 AUTOMOTIVE, INC. |
800 GESSNER ROAD |
SUITE 500 |
HOUSTON, TX 77024 |
VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above |
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on May 17, 2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
During The Meeting - Go towww.virtualshareholdermeeting.com/GPI2022 |
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. |
VOTE BY PHONE - 1-800-690-6903 |
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on May 17, 2022. Have your proxy card in hand when you call and then follow the instructions. |
VOTE BY MAIL |
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
KEEP THIS PORTION FOR YOUR RECORDS |
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | |||||||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR the following: | ||||||||||||||||||||||||||||||||||
☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
1. | Election of Directors | |||||||||||||||||||||||||||||||||
Nominees: | ||||||||||||||||||||||||||||||||||
01) Carin M. Barth | 02) Earl J. Hesterberg | 03) Steven C. Mizell | 04) Lincoln Pereira Filho | 05) Stephen D. Quinn | ||||||||||||||||||||||||||||||
06) Steven P. Stanbrook | 07) Charles L. Szews | 08) Anne Taylor | 09) MaryAnn Wright | |||||||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | |||||||||||||||||||||||||||||||
2. | Advisory Vote on Executive Compensation. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||
3. | Ratification of the appointment of Deloitte & Touche LLP as independent registered public accounting firm of the Company for the fiscal year ending December 31, 2022. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||
NOTE: In their discretion, such attorney-in-fact and proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. | ||||||||||||||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | ||||||||||||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report on Form www.proxyvote.com — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — |
GROUP 1 AUTOMOTIVE, INC. ANNUAL MEETING OF SHAREHOLDERS - MAY 18, 2022 THIS PROXY | The undersigned hereby revokes all prior proxies and appoints Earl J. Hesterberg and Daniel McHenry, and each of them, as proxies with full power of substitution, to represent and to vote all shares of common stock of Group 1 Automotive, Inc. which the undersigned is entitled to vote, at the Annual Meeting of Shareholders to be held on May 18, 2022 at 10:00 a.m., Central Daylight Saving Time, virtually at www.virtualshareholdermeeting.com/GPI2022, and at any adjournment or postponement thereof, on any matter properly coming before the meeting, and specifically the matters described on the reverse side hereof. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned. If no direction is given, this proxy will be voted FOR the nominees set forth in proposal 1, FOR proposal 2 and FOR proposal 3. This proxy also delegates discretionary authority to vote upon such other matters as may properly come before the 2022 Annual Meeting of Shareholders or at any adjournment or postponement thereof. Please see the accompanying proxy statement for additional details. | |
Continued and to be signed on reverse side |