Table of Contents
sectors in which we compete. The amounts are also established to induce retention, as the awards are the sole aspect of long-term compensation for our named executive officers. In 2016, the
committee approved the grant of approximately 353,466 incentive equity awards (representing approximately 0.4% of our current outstanding equity), including the awards relating to the 2016 management
incentive awards for our Chief Executive Officer and President but excluding awards to our non-employee directors.
Other Compensation. We may also provide employees with selected other benefits or perquisites in order to attract and retain highly skilled employees. With respect
to health and
welfare benefits, the committee believes that our employees should receive a meaningful benefit package commensurate with those of other automotive retailers, recognizing the increasing cost of those
benefits in recent years. We also provide our U.S. employees with company matching under our 401(k) plan. Our named executive officers and directors are also provided with an automobile allowance or
the use of a company vehicle. From time to time, we may provide other benefits to certain members of our senior management, such as payment for a country club membership or tax gross-ups for certain
items. We have valued these benefits in the following disclosure tables based on our cost except for situations where the employee or director has used a company owned vehicle, in which case we have
used Internal Revenue Service guidelines. We review these benefits on a case-by-case basis and believe, if limited in scope, such benefits can provide an incentive to long term performance and help
retain our valuable employees.
No Employment Agreements or Pre-arranged Severance Compensation. None of our current executive officers have been provided an employment agreement, nor are they
entitled to any pre-arranged severance compensation. We believe
our mix of short-term and long-term compensation provides a retention incentive that makes an employment contract unnecessary, while providing us flexibility with respect to managing the departure of
an executive officer. Our lack of pre-arranged severance compensation is consistent with our performance based compensation philosophy, and provides us the flexibility to enter into post-employment
arrangements based on circumstances existing upon departure. We have historically entered into varying types of severance arrangements with departing members of our senior management, which have
included vesting of restricted stock and consulting agreements, as we believe it may be important to have continuing access to these individuals' knowledge base and guidance. In the event we employ
consulting agreements, we have typically obtained a non-compete agreement with these individuals. With respect to a change in control, none of our current executive officers have been guaranteed any
change of control payments, however, certain of our outstanding restricted stock grants provide that in the event of a change of control, the award will vest.
Chief Executive Officer Compensation. Our compensation committee established 2016 performance targets for a performance based award for
Mr. Penske in February 2016. The award established a
threshold payout of $2.5 million (50% of target), a target payout of $5.0 million (100% of target) and a maximum potential payout of $7.5 million (150% of target) to be paid in
shares of restricted stock to be granted in 2017. Mr. Penske achieved 70.8% of the performance metrics noted below, which entitled him to approximately $4.5 million in shares of
restricted stock granted in February 2017 calculated by dividing the total award achieved by the average PAG stock price for each trading day in 2016 resulting in an award of 87,085 shares of
restricted stock, vesting over a four year period in accordance with the committee's equity award approval policy. Mr. Penske did not receive an annual cash bonus because he received this
restricted stock grant in lieu of a cash bonus. In addition, the compensation committee increased Mr. Penske's salary from $1.2 million to $1.4 million effective January 1,
2017 based on the factors noted above under "Base Salary."