Penske Automotive (PAG) PRE 14APreliminary proxy

We are a diversified international transportation services company and one of the world’s premier automotive and commercial truck retailers. 2022 was a record year for our business, driven in part by the diversification provided by our investments across the transportation sector.

As we look toward the future, we will continue to focus on innovation and transformational opportunities and driving further sustainability initiatives across our business. We will enhance our employee diversity, continue supporting vehicle electrification, and adapt to the changes in consumer engagement patterns.

We will once again hold our annual meeting exclusively by remote means this year. We encourage you to participate in the meeting, following the instructions within this proxy statement. We ask that you cast your vote as soon as possible to assure your shares are represented at the meeting.

Our success is driven by our nearly 27,000 team members and their unwavering dedication and commitment. They focus relentlessly on driving repeat and referral business by exceeding the expectations of our customers through best-in-class customer service and the highest level of integrity.

Your vote is very important. Whether or not you plan to attend the Annual Meeting virtually, please vote at your earliest convenience by following the instructions in the Notice of Internet Availability of Proxy Materials, the proxy card or voting instruction form you received in the mail. You may revoke your proxy at any time before it is voted. Please refer to the “Questions about the Meeting” section of the proxy statement for additional information. On March   , 2023, we expect to release the proxy materials to our stockholders and to send stockholders (other than those stockholders who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including our proxy statement and our fiscal year 2022 Annual Report, and how to vote through the Internet or by telephone.

Our proxy statement, proxy card and fiscal year 2022 Annual Report are available at: https://www.penskeautomotive.com/investors/financials/annual-reports/default.aspx

By order of the Board of Directors:

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.

The following table provides summary information about each director nominee. Each director is elected annually by a majority of votes cast.

The State of Delaware, which is our state of incorporation, recently enacted legislation that enables Delaware companies like us to limit the liability of certain of their officers in limited circumstances under Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”). In light of this legislation, we are proposing to amend our Restated Certificate of Incorporation (the “Certificate of Incorporation”) to provide for exculpation of certain of our officers from liability in specific circumstances, as permitted by Delaware law. The new Delaware legislation only permits, and our proposed amendment would only permit, exculpation for direct claims (as opposed to derivative claims made by stockholders on behalf of the Company) and would not apply to breaches of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit. The rationale for so limiting the scope of liability is to strike a balance between stockholders’ interest in accountability and their interest in our being able to attract and retain quality officers to work on such stockholders’ behalf. Our Certificate of Incorporation currently provides for the exculpation of directors, but does not include a provision that allows for the exculpation of officers. Additional information about the proposed Amended and Restated Certificate of Incorporation, including the Board’s rationale for recommending that stockholders vote FOR the adoption thereof, is set forth on page 7.

As a matter of good corporate governance, we ask that our stockholders ratify the selection of Deloitte & Touche LLP as our independent auditor for 2023. Set forth below is summary information with respect to 2022 auditor fees paid to Deloitte & Touche LLP.

As a leading international, diversified transportation services company, we recognize it’s our responsibility to ensure we contribute to a healthy environment, economic opportunity, and social equity in the communities where we operate around the world. We recognize we are accountable to key stakeholders and the communities in which we do business. We are committed to responsible business practices, continuous improvement of our operations and the strengthening of relationships with our stakeholders.

We focus our ESG efforts where we can have the most positive impact on our business and society, including issues related to:

This important work is driven by our core values and ensures that we enrich our communities, minimize our environmental impact, protect the health and safety of our team members and customers, and provide a diverse and inclusive workplace – all while creating value for our stakeholders. The most important investments we make are in our people. Everything we aspire to be as a company builds on our ability to come together as one team. We provide our team members a supportive work environment that empowers them to do meaningful work while fulfilling their passions and balancing work goals with life goals.

We are pleased to have published our 2022 ESG Report last Fall which highlights the Company's environmental, social, and governance (ESG) strategies, activities, progress, metrics, and performance for 2021, which is available on our website under the tab “ESG”. Our 2022 ESG Report is responsive to the Sustainability Accounting Standards Board (SASB) Multiline & Specialty Distributors sector standard and includes additional disclosures responsive to the framework established by the Task Force on Climate-related Financial Disclosures. We are committed to regular, transparent communication of our progress and look forward to bringing our stakeholders along with us on this journey.

We ask that our stockholders annually approve on an advisory basis our named executive officer compensation. The Board of Directors recommends a FOR vote because it believes that our compensation policies and practices are effective in achieving the Company’s goals of rewarding sustained financial and operating performance and leadership excellence, aligning the executives’ long-term interest with those of our stockholders and motivating our executives to remain with us for long and productive careers. In 2022, over 98% of the votes cast by our stockholders approved our 2021 named executive officer compensation.

The first proposal to be voted on at the annual meeting will be the election of our thirteen director nominees. Our Nominating and Corporate Governance Committee and Board of Directors recommend approval of each of the nominees outlined below. If elected, each will serve until the next annual meeting of stockholders and until their successor has been elected and qualified or until their earlier resignation or removal. Pursuant to a stockholders agreement, certain of our stockholders affiliated with Roger Penske and Mitsui & Co., Ltd. have agreed to vote together to elect members of our Board of Directors. See “Related Party Transactions” for a description of this stockholders agreement.

We appointed Greg Penske as our Vice Chair effective January 1, 2023. We previously disclosed in last year’s proxy statement that Penske Corporation informed us that it intended to recommend one of Mr. Penske’s sons, Roger Penske, Jr., to the Nominating and Corporate Governance Committee for nomination as a candidate for election in 2023, 2024 and 2025. However, Penske Corporation subsequently determined to recommend Roger Penske, Jr. as Vice Chair of the Advisory Board of Penske Transportation Solutions (PTS) effective January 1, 2023 and continue to recommend Greg Penske as a director in this proxy statement.

The State of Delaware, which is our state of incorporation, recently enacted legislation that enables Delaware companies like us to limit the liability of certain of their officers in limited circumstances under Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”). In light of this legislation, we are proposing to amend Article X of our Restated Certificate of Incorporation (the “Certificate of Incorporation”) to provide for exculpation of certain of our officers from liability in specific circumstances, as permitted by Delaware law. The new Delaware legislation only permits, and our proposed amendment would only permit, exculpation for direct claims (as opposed to derivative claims made by stockholders on behalf of the Company) and would not apply to breaches of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit. The rationale for so limiting the scope of liability is to strike a balance between stockholders’ interest in accountability and their interest in our being able to attract and retain quality officers to work on such stockholders’ behalf. Our Certificate of Incorporation currently provides for the exculpation of directors, but does not include a provision that allows for the exculpation of officers.

The Board of Directors believes it is appropriate for us as a public company to have exculpation clauses in our Certificate of Incorporation. The nature of the role of directors and officers often requires them to make decisions on crucial matters. Frequently, directors and officers must make decisions in response to time-sensitive opportunities and challenges, which can create substantial risk of investigations, claims, actions, suits or proceedings seeking to impose liability on the basis of hindsight, especially in the current litigious environment and regardless of merit. Limiting concern about personal risk would empower both directors and officers to best exercise their business judgment in furtherance of stockholder interests. The Company expects a number of industry participants to adopt exculpation clauses that limit the personal liability of officers in their charters and failing to adopt the amendment could impact our recruitment and retention of exceptional officer candidates that conclude that the potential exposure to liabilities, costs of defense and other risks of proceedings exceeds the benefits of serving as an officer of the Company.

For the reasons stated above, we believe it is in the best interests of the Company and its stockholders that the Amended and Restated Certificate of Incorporation be approved. A complete copy of the proposed Amended and Restated Certificate of Incorporation is set forth on Annex A. The proposed amendment would better position us to attract top officer candidates and retain our current officers and enable the officers to exercise their business judgment in furtherance of the interests of our stockholders without the potential for distraction posed by the risk of personal liability. Additionally, it will align the protections for our officers with those protections afforded to our directors. Accordingly, we ask our stockholders to vote on the following resolution:

“RESOLVED, that our stockholders approve an Amended and Restated Certificate of Incorporation, including to amend and restate our Article X, which shall read in its entirety as follows:

To the fullest extent permitted by the DGCL, as the same presently exists or may hereafter be amended, no director or officer shall be personally liable to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director or officer, except for any matter in respect of which (a) such director shall be liable under Section 174 of the DGCL or any amendment thereto or successor provision thereto, (b) such officer shall be liable in any action by or in the right of the Corporation, or (c) such director or officer shall be liable by reason that, in addition to any and all other requirements for liability, that person (A) shall have breached their duty of loyalty to the Corporation or its stockholders, (B) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (C) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (D) shall have derived an improper personal benefit.

Our Audit Committee has selected Deloitte & Touche LLP, the member firm of Deloitte Touche Tohmatsu Limited, and their respective affiliates (collectively referred to as “Deloitte”) as our principal independent auditing firm for 2023. We have determined to submit the selection of auditors to stockholder ratification, even though it is not required by our governing documents or Delaware law. If the selection of Deloitte as our independent auditor is not ratified by our stockholders, our Audit Committee will re-evaluate its selection, taking into consideration the stockholder vote on the ratification and the advisability of selecting new auditors prior to completion of the 2023 audit.

Our Audit Committee is solely responsible for selecting, engaging and terminating our independent auditing firm, and may do so at any time at its discretion. It is anticipated that a representative of Deloitte will be present at the annual meeting with the opportunity to make a statement and to answer appropriate questions.

We annually seek a non-binding advisory vote on our named executive officer compensation. Because your vote is advisory, it will not be binding upon the Compensation and Management Development Committee (which we also refer to as our compensation committee), however, the committee will take the outcome of the vote into account when making future executive compensation decisions. Last year, our stockholders approved the compensation of our named executive officers as described under “Compensation Discussion and Analysis” and “Executive Compensation” with over 99% of the votes cast by our stockholders voting in favor. As we evaluated our compensation programs and practices, we were mindful of this strong shareholder support in deciding to maintain the overall framework of our compensation program and the majority of our compensation practices unchanged from last year.

Our compensation program is designed to motivate our executive officers to enhance long-term stockholder value and to attract and retain the highest quality executive and key employee talent available. We believe our executive compensation is aligned with increasing the value of our common stock and promoting our key strategies, values and long-term financial and operational objectives. In this regard, we note that:

“RESOLVED, that the compensation paid to the 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.

As described in Proposal 4 above, our stockholders are being provided the opportunity to cast an advisory vote on our named executive officer compensation program. The advisory vote on executive compensation described in Proposal 4 above is referred to as a “Say-on-Pay” vote. As required under Section 14A of the Securities Exchange Act, this Proposal 5 affords you the opportunity to cast a non-binding advisory vote on how often we should include a Say-on-Pay vote in our proxy materials in the future. Under this Proposal 5, stockholders may vote to have the Say-on-Pay vote every year, every two years, every three years or may abstain from voting. The next advisory vote regarding this matter will occur at the 2029 annual meeting of stockholders.

We believe that Say-on-Pay votes should be conducted every year so that stockholders may annually express their views on our executive compensation program. Our Compensation and Management Development Committee, which administers our executive compensation program, values the opinions expressed by stockholders in these votes, and even though they are non-binding, will continue to consider the outcome of these votes in making its decisions on executive compensation.

“RESOLVED, that future stockholder advisory votes regarding the compensation paid to the Company's named executive officers be conducted annually is APPROVED.”

Our Lead Director is H. Brian Thompson. You may communicate with the Lead Director by writing to us, c/o Corporate Secretary and General Counsel, 2555 Telegraph Road, Bloomfield Hills, MI 48302. All correspondence will be reviewed by our Corporate Secretary’s office, and all (other than frivolous correspondence) will be forwarded to the Lead Director. Any written communications to the independent directors as a group or the entire Board of Directors may be sent care of the Corporate Secretary as well. These communications (other than frivolous correspondence) will also be forwarded to the Lead Director.

For a director to be considered independent under our corporate governance guidelines, the Board of Directors must determine that the director does not have any direct or indirect material relationship with us. In addition to applying these guidelines, the Board of Directors considers relevant facts and circumstances in making the determination of independence, and not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. The Board considers the transactions, relationships and arrangements between the Company, and its affiliates such as Penske Corporation, Penske Racing, Penske Entertainment and Penske Transportation Solutions and affiliates of the director, including those described under “Related Party Transactions” and elsewhere in the proxy statement, in its independence determination. The Board also considers ownership of our or our affiliates’ securities by the directors and their affiliates, ownership by our management team of any securities of affiliates of directors, and sponsorships of Penske Racing or other Penske affiliated racing entities by any of our or our directors’ affiliates.

At least quarterly, our senior leadership team prepares a comprehensive summary of certain key risks facing the Company (the “Risk Report”). The Risk Report includes feedback from multiple constituencies within the Company. Identified risks are each assigned to members of senior management or designated management committees who are tasked with monitoring such risks and, where appropriate, implementing risk mitigation efforts. The Risk Report also clarifies Board oversight of each risk and is shared and discussed at least quarterly with the Audit Committee and periodically with the full Board, with certain specified risks and mitigation efforts reported to the Board or designated standing committees on a more frequent basis, as appropriate.

Director Advisors are entitled to cash compensation of $60,000 per year payable in cash or Company stock at the director’s election, a charitable match opportunity and use of a Company vehicle or a $20,000 stipend, as well as reimbursement of Company expenses and travel to our meetings. We have not designated any Director Advisors for 2022 or 2023.

As a leading international, diversified transportation services company, we recognize it is our responsibility to ensure that we contribute to a healthy environment, economic opportunity, and social equity in the communities where we operate around the world. We recognize we are accountable to key stakeholders and the communities in which we do business. We are committed to responsible business practices, continuous improvement of our operations and strengthening relationships with our stakeholders. We focus our ESG efforts where we can have the most positive impact on our business and society and are driven by our core values that ensures we enrich our communities, minimize our environmental impact, protect the health and safety of our team members and customers, and provide a diverse and inclusive workplace – all while creating value for our stakeholders. The most important investments we make are in our people. Everything we aspire to be as a company builds on our ability to come together as one team. We provide our team members a supportive work environment that empowers them to do meaningful work while fulfilling their passions and balancing work goals with life goals.

We encourage the sale and use of EVs and are actively placing charging stations across our network to facilitate a reliable infrastructure for their use. As of December 31, 2022, our network of EV charging stations across the U.S. and the U.K. totaled over 1,600, including a combination of Level 1 (standard), Level 2 (240V), and Level 3 (fast charging) capabilities. We expect to install additional charging stations to support EVs as our manufacturer partners introduce more of these products to the marketplace. We estimate that approximately 23% of our new vehicles sold in 2022 in the U.S. and U.K. combined were either electric or hybrid electric vehicles.

We are committed to reducing the environmental impact of waste produced at our facilities. We deploy several strategies to ensure the efficient use of resources and responsible disposal of waste, including hazardous waste, and use third parties to manage, collect and process recycling for many of the materials that go through our service departments. Other strategies to reduce pollution and waste include recycling worn-out tires collected from participating U.S. retail dealerships and eliminating the use of paper for internal communications and customer documentation.

We are committed to building a diverse and skilled workforce while providing a work environment that promotes equity and is free from any form of discrimination on the basis of race, color, creed, religion, sex (including breast feeding and related medical conditions), pregnancy, sexual orientation, gender identity and expression, marital status, national origin, ancestry, citizenship status, uniform service member and veteran status, age, genetic information, protected medical condition, disability, or any other protected status in accordance with all applicable federal, state, and local laws.

The Audit Committee of the Board of Directors is responsible for providing independent, objective oversight of our accounting functions and internal controls as more fully discussed above under “Our Corporate Governance.” The Audit Committee has the sole authority to retain and terminate our independent auditing firm, and is responsible for recommending to the Board of Directors that our financial statements be included in our annual report on Form 10-K.

The Audit Committee took a number of steps in making this recommendation for our 2022 annual report. The Audit Committee discussed with our independent auditing firm those matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC, including information regarding their independence and the scope and results of their audit. These communications and discussions were intended to assist the Audit Committee in overseeing the financial reporting and disclosure process. The Audit Committee also discussed the independent auditing firm’s independence and received the letters and written disclosures from the independent auditing firm required by the PCAOB. Finally, the Audit Committee reviewed and discussed the annual audited financial statements with our management and the independent auditing firm in advance of the public release of operating results, and before the filing of our annual and quarterly reports with the SEC.

Based on the foregoing, and other matters deemed relevant and appropriate by the Audit Committee, the Audit Committee recommended to the Board of Directors that our audited financial statements be included in our 2022 annual report on Form 10- K as filed with the SEC on February 21, 2023.

Deloitte & Touche LLP is our principal independent registered public accounting firm. We paid Deloitte & Touche LLP the fees described below in 2022 and 2021, all of which services were approved by our Audit Committee:

The Audit Committee has considered the nature of the above-listed services provided by Deloitte and determined that they are compatible with their provision of independent audit services under relevant guidance. The Audit Committee has discussed these services with Deloitte and management and determined that they are permitted under the Code of Professional Conduct of the American Institute of Certified Public Accountants, the auditor independence requirements of the Public Company Accounting Oversight Board, and the laws and regulations administered by the Securities and Exchange Commission.

Our named executive officers, whose compensation we describe below, are Messrs. Denker, Kurnick, Penske and Spradlin and Ms. Hulgrave. Each of our named executive officers was elected by the Board of Directors and will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal from office. Biographies of Messrs. Kurnick and Penske are set forth above. Biographies of our other named executive officers are provided below:

The Compensation and Management Development Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis set forth below with management. Based on this review and these discussions with management, the committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

The responsibilities of the compensation committee and committee member independence are described under “Our Corporate Governance” beginning on page 12.

Non-employee board members are required to own common stock equal to ten times our annual retainer (currently, $60,000 x 10 = $600,000). Directors and officers have five years from appointment to reach the minimum ownership level, though our policy allows extensions at the discretion of the Chair and Lead Director. These guidelines exclude any shares that are pledged by any of our directors and officers, and also include any shares of restricted stock held by the officer or director.

The committee reviews salary adjustments with a view to maintaining external compensation competitiveness. We annually benchmark competitiveness of our total compensation against a group of publicly traded automotive retailers which in 2022 consisted of Asbury Automotive Group, AutoNation, CarMax, Group 1 Automotive, Lithia Motors and Sonic Automotive. While we benchmark our compensation, we do not target a specific quartile of pay for our NEOs as compared to our peers.

In addition to the above-mentioned factors, the level of compensation that we pay to Messrs. Denker and Kurnick reflect that each devotes a percentage of his time to affiliated companies for which they receive additional compensation from Penske Corporation. Specifically, Mr. Kurnick serves as Penske Corporation’s Vice Chair and Mr. Denker serves as the President of Penske Corporation. Our committee does not track the exact percentage of time spent on Penske Automotive versus affiliated matters, recognizing that the amount varies from year to year, but it is generally expected that each will spend approximately 75% of his time on Penske Automotive matters. We were reimbursed approximately four percent of Mr. Spradlin’s base salary by Penske Corporation to reflect his efforts on behalf of Penske Corporation. The full amount of Mr. Spradlin’s base salary is shown in the table below.

The committee also considers our Company-wide performance in the prior year and general economic factors when setting base salary levels for each of the NEOs. The items of corporate performance that are considered for our NEOs are the same as those with respect to the award detailed below under “Long-Term Incentive Plans.” Our compensation committee uses these factors in a subjective evaluation to gauge Company performance, keeping in mind the impact of the general performance of the automotive retail industry. Beginning January 1, 2022, we increased the annual base salaries of Messrs. Kurnick and Penske by $100,000 and $200,000, respectively, based on the committee’s review of these factors. Beginning December 1, 2022, Ms. Hulgrave’s annual base salary was increased by $100,000, and beginning January 1, 2023, Messrs. Denker and Spradlin’s annual base salaries were each increased by $25,000, in each case based on the Committee’s review of these factors.

The items of Company-wide performance that are considered for our NEOs are the same as those detailed below under “Long-Term Incentive Plans.” Our compensation committee uses these factors to evaluate Company performance, keeping in mind the impact of the overall performance of the business sectors in which we compete. The evaluation of the individual’s performance and the performance of the individual’s business unit is based on the committee’s perception of that performance, based in part on input from our Chief Executive Officer and the factors noted above under “Determination of Compensation Amounts.”

In 2022, each of our NEOs other than Ms. Hulgrave received restricted stock awards resulting from achievement of the long-term incentive plan awards discussed below as well. Ms. Hulgrave received a discretionary award in 2022 as she was named Chief Financial Officer in 2021 after the long-term incentive awards for the other officers had been implemented. In total in 2022, the committee approved the grant of 304,626 equity incentive awards under our equity plans (representing approximately 0.4% of our current outstanding equity), including all of the awards to our NEOs. Awards were granted under our 2020 Equity Incentive Plan which originally provided up to five million shares for equity awards. In February 2023, each of our NEOs received restricted stock awards resulting from achievement of the long-term incentive plan awards discussed below.

Our NEOs 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. We have valued these benefits in the “All Other Compensation” column of the “Summary Compensation” table below based on our cost. 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.

For each of the NEOs, the amount of restricted stock noted below granted in February 2023 and vesting over a four-year period was calculated by dividing the total award achieved and accepted by our average closing stock price for each trading day in 2022 ($108.55). Messrs. Kurnick and Penske do not receive cash bonuses. Their performance bonuses are paid only in shares of restricted stock as a result of the long-term incentive plans.

In February 2023, the committee established similar performance-based awards for our NEOs in the amounts specified below to be paid in shares of restricted stock to be granted in 2024 calculated by dividing the resulting total award achieved by the average PAG closing stock price for each trading day in 2023.

The following table contains information concerning 2022 annual and long-term compensation for our Chief Executive Officer, Chief Financial Officer and each of our three other most highly compensated executive officers, collectively referred to as the “named executive officers” or “NEOs”.” For a discussion of our methodology in valuing the items set forth under “All Other Compensation,” see “Compensation Discussion & Analysis – Other Compensation.”

The Penske Automotive Group, Inc. Amended and Restated Deferred Compensation Plan (“DCP”) allows qualifying individuals, including our NEOs, to defer on a pre-tax basis up to 50% of their base salary and/or up to 95% of their annual bonus for a specified period of time, and/or until their retirement or separation from the Company. The deferred assets are held in a rabbi trust and are invested notionally on behalf of the participants. In the event of termination of employment, all balances would be paid in either a lump sum or up to ten annual installments, according to the participant’s prior election. We do not provide any matching contributions and we do not guarantee a minimum return on these amounts. We believe the DCP is an important tool for recruiting key employees and assists in employee retention. The table below reflects the contributions, earnings, withdrawals, distributions during 2022, and account balances as of December 31, 2022 for each NEO.

The following tables show the relationship between (1) compensation “actually paid” to our CEO and the other NEOs to (2) each of total shareholder return, net income and EBITDA. We have produced record earnings for our Company in the past two years as net income and EBITDA have increased 154% and 120%, respectively. Compensation “actually paid” has increased over that time as well, most significantly due to the increase in value of the NEOs’ restricted stock holdings, which vest over four years with 70% of any award vesting in the third and fourth years. Our stock price has increased from $50.22 on December 31, 2019 to $114.93 on December 30, 2022, representing an increase in shareholder value based on our December 30, 2022 outstanding shares of over $4.5 billion. Excluding the increase in the value of unvested restricted stock, compensation “actually paid” for our CEO, and the other NEOs (consisting of salary, bonus, other compensation and the vesting of restricted stock) increased 211%, and 89%, respectively, over the three year period, as compared to an increase of total shareholder return of 242%.

As noted in the table above, our total shareholder return over the last three years increased 242% as compared to a 174% increase by our Peer Group. We believe we trailed our peer group in our 2020 shareholder return given our large exposure to the U.K. economy, which experienced more prolonged dealerships closures than the U.S. in response to the COVID-19 pandemic. Over the last two years, however, our total shareholder return was among the highest in the Peer Group, we believe, due in part to our diversification strategy and record financial performance.

We are required under SEC rules to also disclose the most important financial performance measures that link compensation “actually paid” to our NEOs (which amounts are shown in the table above using the SEC’s methodology) to Company performance. We believe those metrics are as follows:

We selected these measures because we believe our compensation “actually paid” is most influenced by two factors: (1) the amount of restricted stock granted to our NEOs under the annual performance plans over the relevant period and (2) the change in our stock price over time (see footnote 1 to the Pay Verses Performance Table above). The largest components of our performance plans are EBITDA, EPS, operating margin and stock price performance, which collectively represent up to two-thirds of the total amount available under the plans. We believe the change in our stock price over time is correlated most closely to the financial performance measures EBITDA, EPS and net income.

Pursuant to SEC rules, we are permitted to calculate our CEO pay ratio for the year ended December 31, 2022 using the same median employee that we identified in 2020 because we do not believe that there have been any changes to our employee population or employee compensation arrangements during 2022 that would have a significant impact on our pay ratio disclosure.

We identified our median employee in 2020 as of December 31, 2020, when our worldwide employee population consisted of approximately 24,192 individuals. In identifying the median employee, we excluded from our employee population all of the employees in the following jurisdictions as permitted by SEC rules and interpretations based on the small number of employees located in each: Canada (220), New Zealand (144) and Italy (445). To identify our 2020 median employee from our employee population, we then compared the amount of U.S. gross taxable wages or equivalent foreign metric of our employees as reflected in our payroll records.

Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2022 in accordance with the SEC’s requirements, resulting in annual total compensation of $55,966. With respect to the annual total compensation of Mr. Penske, we used the total amount reported in the above Summary Compensation Table for 2022.

The Board of Directors receives a mix of cash and equity compensation with the option to receive certain compensation in the form of equity and to defer certain compensation until separation from service. The Board of Directors approves changes to director compensation only upon the recommendation of the Compensation and Management Development Committee, which is composed solely of independent directors. Although all of our directors are eligible for our charitable donation matching program discussed below, only those directors who are not our employees are eligible for director compensation.

Our directors serving in 2022 who were also our employees (Messrs. Kurnick and Penske) as well as Kota Odagiri received no additional