Corporate Governance Principles

Responsibilities of the Board of Directors

The primary responsibility of the Board of Directors (the “Board”) of O’Reilly Automotive, Inc. (“O’Reilly” or the “Company”) shall be the oversight and direction of the business and affairs of O’Reilly in the interest and for the benefit of O’Reilly’s shareholders. The Board’s detailed responsibilities include:

• Delegating authority to management in order to achieve the goals outlined in the Mission Statement.
• The review by the independent directors of the Board of the performance of the Chief Executive Officer and other named executive officers of O’Reilly annually via the Human Capital and Compensation Committee, followed by a report to the full Board.
• Planning for the succession to the position of Chief Executive Officer in order to protect O’Reilly and its shareholders in case of the Chief Executive Officer’s separation, either voluntary or involuntary. The full Board shall review the succession plan annually.
• Recommending and nominating candidates to the shareholders for election to the Board, and to fill vacancies on the Board that may occur between annual meetings of shareholders.
• Reviewing and, where appropriate, approving O’Reilly’s major financial objectives and strategic and operating plans.
• Reviewing and evaluating the performance of management.
• Overseeing the processes for maintaining the integrity of O’Reilly with regard to its financial statements and other public disclosures, and compliance with law and ethics.

Members of the Board shall act at all times in accordance with the requirements of O’Reilly’s Code of Business Conduct and Ethics, which shall be applicable to each director in connection with his or her activities relating to O’Reilly. This obligation shall at all times include, without limitation, adherence to O’Reilly’s policies with respect to conflicts of interest, corporate opportunities, confidentiality, protection and proper use of O’Reilly’s assets, ethical and fair conduct in business dealings and respect for and compliance with all applicable laws, rules and regulations. Any waiver of the requirements of the Code of Business Conduct and Ethics shall be made only by a resolution of O’Reilly’s independent directors.

Director Criteria and Requirements

Personal and Business Ethics A director must possess unquestionable business ethics and personal integrity. He or she must demonstrate consistent application of these ethical standards in his or her dealings at O’Reilly and all other business environments.

Financial Literacy Financial oversight of O’Reilly is a key function of the Board. Directors, therefore, should possess a broad financial knowledge to effectively read and understand financial statements, ratios and other performance measures. Directors should maintain familiarity with current business legal and regulatory developments.

Broad-Based Business Experience A director’s background should include sufficient business experience and education to be able to provide guidance and direction to management on a wide variety of topics. This experience must be applicable to O’Reilly’s industry segment, such as related fields of retail, distribution, automotive aftermarket, financial, legal or other similar fields.

Track Record of Success Due to the competitive nature of O’Reilly’s business, it is critical that a director have a demonstrated record of achievement. A director must possess high expectations for performance from the management team to continue O’Reilly’s own track record of success.

Commitment Directors should be personally and professionally committed to the ongoing success of O’Reilly, exhibiting pride and enthusiasm in their capacity and responsibility as a member of the Board. They should take initiative and play an active role in Board discussions and decision-making.

Stock Ownership Directors are required to be stockholders and have a financial stake in the Company. The board has specified the level of share ownership in the Company to be at least five (5) times the director’s salary/retainer.

Age Requirements Directors must be at least 35 years of age due to the maturity and business experience that only time can provide. No director having attained the age of 78 years shall be nominated for re-election or reappointment to the Board. However, the Board may determine to waive this policy in individual cases.

Annual Election of All Directors - As provided in the Company’s Bylaws, all directors are elected annually until the next annual meeting of the Board of Directors.

Outside Directorships Directors may serve on the boards of directors of privately-owned companies at their discretion. However, O'Reilly directors who currently serve as a Named Executive Officer (as defined by Securities and Exchange Commission rules) of a publicly traded company may serve on no more than two boards of directors of publicly traded companies (including O’Reilly) and other O'Reilly directors may serve on no more than four boards of directors of publicly traded companies (including O’Reilly).

Attendance Directors are required to attend at least 75% of scheduled Board meetings each year. This requirement may be waived if the Board, in its discretion, determines a director’s absence excused. Telephonic or video conference attendance of in person meetings is acceptable when necessary.

Director Education Directors are required to keep abreast of current business trends and regulations.

Change in Status/Resignation O’Reilly directors are required to submit any change in their employment status to the full Board for review. If the change results in their ineligibility to perform the function of Board director, they must submit their resignation in writing to the full Board.

Board Composition and Effectiveness

The Board of Directors of O’Reilly shall be comprised of a majority of independent directors.

Independent Directors

O’Reilly defines “independent” director in accordance with legal and stock exchange rules and requirements. To be considered independent, the Board must determine that the director has no material relationship with O’Reilly or its affiliates or any executive officer of O’Reilly and qualifies as independent under Nasdaq listing standards. A relationship shall be considered “material” if it would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

The Board shall use legal and stock exchange rules and requirements to determine director independence.

Where a relationship is not covered by legal and stock exchange requirements, the determination of whether the relationship is material, and therefore whether the director is independent, shall be made by the Board’s current independent directors.

Independent Lead Director

The Board shall designate an independent director as the Independent Lead Director. The responsibilities of the Independent Lead Director include, but are not limited to:

• Serving as a liaison among other directors, with O’Reilly’s management, between Board committees and the Board;
• Presiding at Board meetings in the absence of the Chairman of the Board, or at the request of the Chairman of the Board;
• Ensuring Board leadership in the absence or incapacitation of the Chairman of the Board;
• Chairing executive sessions involving only the independent directors, developing the agenda for executive sessions to ensure that independent directors have adequate opportunities for these meetings to be held and adequate time to discuss issues, and communicating the results of the executive sessions with O’Reilly’s management, as appropriate;
• Consulting with the Chairman of the Board as to the appropriate schedules and agendas of Board meetings to ensure there is sufficient time available for serious discussion of appropriate topics proposed by the independent directors;
• Advising the Chairman of the Board on the conduct of Board meetings to facilitate teamwork and communication among independent and non-independent directors;
• Together with the Chairman of the Board, collaborating with O’Reilly’s management to determine the information and materials provided to the directors, so that the independent directors have adequate resources, especially by way of full, timely and relevant information, to support their decision-making responsibilities;
• Being entitled to request materials from and receive notice of, and attend, all meetings of Board committees;
• Being available to advise committee chairs in fulfilling their designated roles and responsibilities to the Board;
• Collaborating with the Board to guide O’Reilly’s management on strategic issues and long-term planning;
• Consulting with the Chairman of the Board on such matters as are pertinent to the Board and O’Reilly;
• Working with the Corporate Governance/Nominating Committee Chair to analyze the annual Board self-assessment results;
• Collaborating with the Chairman of the Board and Corporate Governance/Nominating Committee on Board succession planning;
• Acting as the focal point on the Board concerning issues such as corporate governance and suggestions from independent directors and monitoring and coordinating with O’Reilly’s management on corporate governance issues and developments;
• Collaborating with the Human Capital and Compensation Committee to ensure a succession plan is in place for O’Reilly’s Chief Executive Officer;
• Being available for direct communication and consultation with shareholders, upon request through Board approved procedures; and
• Performing such other duties as the Board or Chairman of the Board may delegate, from time to time.

Other

Director Orientation New directors shall participate in an orientation program that includes discussions with management, visits to our facilities, and review of business plans, organizational structure, financial statements and other financial reporting, governance, other key policies and procedures and additional background materials regarding the business and its operations.

Board and Committee Evaluations The Corporate Governance/Nominating Committee oversees an annual assessment of the Board of Directors, the committees and individual directors.

Board Compensation. Directors who are employees of the Company shall not receive additional compensation for service as a director. The Human Capital and Compensation Committee will 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.

Board Committees

The Board shall at all times have an Audit Committee, a Human Capital and Compensation Committee and a Corporate Governance/Nominating Committee. The Board may, by resolution of a majority of the Board, create such other committees as it deems advisable for the purposes of fulfilling its primary responsibilities. The Corporate Governance/Nominating Committee, in consultation with the Chairman of the Board, will review and recommend committee assignments and committee chair positions to the Board on at least an annual basis. Each committee shall perform its duties as assigned by the Board in compliance with its committee Charter and any applicable laws, rules or regulations.

Audit Committee

The Audit Committee shall be composed of three or more independent directors. The Audit Committee Charter details the responsibilities and duties of the Audit Committee, as well as further independence and financial literacy requirements of the members. The primary responsibilities of the Audit Committee include, but are not limited to:

• Review reports of the Company’s financial results, audits and internal controls and communicate the results of those evaluations to management;
• Review the Company’s financial policies and procedures and direct changes as appropriate;
• Direct and oversee the performance of the Company’s internal audit function;
• Review of information security and cybersecurity risks;
• Recommend the engagement of the Company’s independent auditors;
• Confer with the independent auditors regarding the adequacy of the Company’s financial controls and fiscal policy in accordance with generally accepted auditing standards;
• Oversee the development of the annual corporate risk assessment and review quarterly high-risk updates;
• Review the independent auditor’s procedures for ensuring its independence with respect to the services performed for the Company;
• Review the Company’s compliance program annually, including the whistleblower program’s quarterly updates; and
• Review all related party transactions.

The Audit Committee shall meet at least four times annually.

Corporate Governance/Nominating Committee

The Corporate Governance/Nominating Committee shall be composed of three or more independent directors. The Corporate Governance/Nominating Committee Charter shall detail the responsibilities and duties of the Governance/Nominating Committee as deemed advisable by the Board. The primary responsibilities of the Corporate Governance/Nominating Committee include, but are not limited to:

• Establish criteria for the selection of directors, identify any additional skills sets or attributes necessary to fill gaps on the current Board and to recommend to the Board the nominees for director in connection with the Company’s Annual Meeting of Shareholders;
• Consider changes in principal employment of directors and new directorships by directors to ensure there are no conflicts of interest or loss of skill set;
• Take a leadership role in shaping the Company’s corporate governance policies and to issue and implement the Corporate Governance Principles of the Company;
• Develop and coordinate annual evaluations of the Board, its committees and its members;
• Advise the Board regarding long-term Board succession;
• Adhere to all legal standards required by the SEC and Nasdaq; and
• Review and assess the Company’s environmental, sustainability, social and governance policies, goals and programs, and make recommendations to management based on their review and assessment.

Human Capital and Compensation Committee

The Human Capital and Compensation Committee shall be composed of three or more independent directors. The Human Capital and Compensation Committee Charter shall detail the responsibilities and duties of the Human Capital and Compensation Committee as deemed advisable by the Board. The primary responsibilities of the Human Capital and Compensation Committee include, but are not limited to:

• Act on behalf of the Board with respect to the establishment and administration of the policies governing the annual compensation of the Company’s executive officers;
• Define and articulate the Company’s overall executive compensation philosophy and to administer and approve all elements of compensation for the Company’s executive officers and senior management;
• Review and approve the corporate goals and objectives relevant to the Chairman of the Board and CEO’s compensation;
• Evaluate the Chairman of the Board and CEO’s performance based on those goals and objectives;
• Work with, and receive recommendations from, the Company’s Human Resources Department regarding the Company’s executive officers’ total compensation;
• Oversee the awards and related actions under the Company’s various equity plans; and
• Provide oversight and guidance on all human capital management development efforts, including succession planning, recruiting and retention, and diversity and inclusion.

Meeting Attendance/Communication

The Board of Directors meets quarterly every year, and the directors also attend O’Reilly’s Annual Meeting of Shareholders. Additionally, special meetings may be called from time to time, and telephonic or virtual meetings are occasionally arranged. The Board receives a monthly packet relative to O’Reilly’s financial performance and is kept abreast of new operational issues, such as major acquisitions or procedural changes. Information and materials that are important to the Board’s understanding of the agenda items and other topics to be considered at a Board meeting should, to the extent practicable, be distributed sufficiently in advance of the meeting to permit prior review by the directors.

The independent directors shall meet in executive session independent of the CEO and other executive officers at least twice annually.

The Board believes that management speaks for the Company. In accordance with this philosophy and given their obligations respecting confidentiality, directors should defer initially to O’Reilly’s investor relations Senior Vice President (or Vice President in the event there is no Senior Vice President) or its General Counsel when requested to make any comments regarding O’Reilly or its business. If comments from the Board are appropriate, they should, in most circumstances, come from the Chairman, the Independent Lead Director or committee chair following consultation with the Chief Executive Officer and others in Executive Management, as needed.

Independent Auditor

The selection of O’Reilly’s independent auditor shall be ratified by shareholders at O’Reilly’s Annual Meeting of Shareholders held each May.