The Compensation Committee (the "Committee") of O'Reilly Automotive, Inc. (the "Company") is appointed by, and generally acts on behalf of, the Board of Directors of the Company (the "Board"). The Board has established the governing principles of the Committee through the adoption of this charter (the "Charter").
The Compensation Committee's principal purposes shall be: (1) to discharge the Board's responsibilities relating to compensation of the Company's executives; (2) to produce an annual report on executive compensation for inclusion in the Company's proxy statement; and (3) to oversee and advise the Board on the adoption of policies that govern the Company's compensation programs, including stock and benefit plans.
The Committee shall be composed of three or more directors. Each member of the Committee shall meet the independence and experience requirements of the federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") and the Nasdaq National Market ("Nasdaq"), as such requirements may change from time to time.
The members of the Committee shall be appointed by the Board. The Board shall designate one member of the Committee to serve as Chairperson. If the Chairperson is absent from a meeting, another member of the Committee may act as Chairperson. Members of the Committee will be appointed for a one-year term and shall serve until their resignation, retirement, or removal by the Board or until their successors shall be appointed. The Board may fill vacancies on the Committee and remove a member of the Committee at any time with or without cause. No member of the Committee shall be removed except by majority vote of the independent directors of the Board then in office, provided that a member that no longer serves as a director of the Company shall be deemed automatically removed without any further action by the Board.
The Committee will have the resources and authority necessary to discharge its duties and responsibilities, including the authority to retain and oversee outside counsel or other experts or consultants at the company's expense, as it deems appropriate. The Committee is responsible for considering conflicts of interest and independence factors before selecting outside counsel, other experts or consultants.
Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.
Subject to the provisions of the Company's Corporate Governance Principles, the principal responsibilities and functions of the Compensation Committee are as follows:
1. Review the competitiveness of the Company's executive compensation programs to ensure (a) the attraction and retention of corporate officers, (b) the motivation of corporate officers to achieve the Company's business objectives, and (c) to align the interest of key leadership with the long-term interests of the Company's shareholders.
2. Review trends in management compensation, oversee the development of new compensation plans and, when necessary, approve the revision of existing plans.
3. Review the performance of executive management.
4. Review and approve the goals and objectives of the Chairman and Chief Executive Officer, evaluate the performance of the Chairman and Chief Executive Officer in light of these corporate objectives, and set the compensation level of the Chairman and Chief Executive Officer consistent with Company philosophy. The Chief Executive Officer may not be present during voting or deliberation on his or her compensation.
5. Approve the salaries, bonus and other compensation for all corporate officers.
6. Review and approve compensation packages for new corporate officers and termination packages for corporate officers as requested by management.
7. Periodically review, consider and recommend to the Board the total compensation program for all non-employee directors of the Company for service on the Board and its committees.
8. Review and approve the awards made under any executive officer bonus plan, and provide an appropriate report to the Board.
9. Review and discuss with the Board and senior officers plans for officer development and corporate succession plans for the Chief Executive Officer and other senior officer.
10. Review and make recommendations concerning long-term incentive compensation plans, including the use of stock options and other equity-based plans. Except as otherwise delegated by the Board, the Committee will act on behalf of the Board as the "Committee" established to administer equity-based and employee benefit plans, and as such will discharge any responsibilities imposed on the Committee under those plans, including making and authorizing grants, in accordance with the terms of those plans.
11. Annually evaluate the Committee's performance and this Charter.
12. Monitor the Company's compliance with the requirements of the Sarbanes-Oxley act of 2002 and other applicable laws, regulations and rules relating to compensation arrangements for directors and executive officers.
13. Review and discuss the Compensation, Discussion and Analysis ("CD&A") required to be included in the Company's proxy statement and annual report on Form 10K by the rules and regulations of the SEC with management, and, based on such review and discussion, determine whether or not to recommend to the Board that the CD&A be so included.
The Committee shall meet when, where and as often as it may deem necessary and appropriate in its judgment, but in no event less than four (4) times per year, either in person or telephonically. A majority of the members of the Committee shall constitute a quorum. The Chairman of the Board, the Chairman of the Committee, or the Company's Lead Director shall have the right to call a special meeting of the Committee. The Committee may request that any directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Committee, attend any meeting to provide such information as the Committee requests.
The Committee shall fix its own rules of procedure, which shall be consistent with the Amended and Restated Bylaws of the Company and this Charter. A member of the Committee or the Corporate Secretary shall keep written minutes of Committee meetings, which minutes shall be maintained with the books and records of the Company. The Committee may delegate authority to one or more members of the Committee when appropriate, but no such delegation shall be permitted if the authority is required by law, regulation or listing standard to be exercised by the Committee as a whole.