O'Reilly Automotive (ORLY) DEF 14ADefinitive proxy

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 No.  )

​

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

​

Check the appropriate box:

​

​

O’REILLY 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):

​

​

​

​

​

​

​

​

March 30, 2022

​

Dear Shareholder:

​

You are cordially invited to attend the 2022 Annual Meeting of Shareholders of O’Reilly Automotive, Inc. to be held in a virtual-only format via live audio webcast at www.virtualshareholdermeeting.com/ORLY2022  on Thursday, May 12, 2022, at 9:00 a.m. Central Time.  We have designed the format of the Annual Meeting to ensure that shareholders are afforded similar rights and opportunities to participate as they would at an in-person meeting.

​

Details of the business to be conducted at the Annual Meeting are given in the attached Notice of Annual Meeting of Shareholders and Proxy Statement.

​

It is important that your shares be represented at the meeting.  Whether or not you plan to attend via the live audio webcast, please complete, sign, date and return the enclosed proxy card in the envelope provided at your earliest convenience or vote via telephone or Internet using the instructions on the proxy card.  

​

Greg Henslee

Executive Chairman of the Board

​

​

​

​

O’REILLY AUTOMOTIVE, INC.

233 South Patterson Avenue

Springfield, Missouri 65802

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 12, 2022

​

​

​

​

The Board of Directors has fixed the close of business on March 3, 2022, as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.  A list of all shareholders entitled to vote at the Annual Meeting, arranged in alphabetical order and showing the address of and number of shares held by each shareholder, will be available during usual business hours at the office of the Corporate Secretary, Julie Gray, at 455 South Patterson Avenue, Springfield, Missouri 65802, to be examined by any shareholder for any purpose reasonably related to the Annual Meeting for ten days prior to the date thereof.  The list will also be electronically available for examination throughout the course of the meeting.

​

Your vote is important to ensure a quorum at the meeting.  Even if you own only a few shares, and whether or not you expect to virtually attend the meeting, we request you mark, date, sign and mail the enclosed proxy card in the postage-paid envelope provided or vote your shares by telephone or Internet as directed on the enclosed proxy card.  Telephone and Internet voting for shareholders of record will be available 24 hours a day and will close on Wednesday, May 11, 2022, at 11:59 p.m. Eastern Time.

​

A copy of the Company’s Annual Shareholders’ Report for fiscal year 2021 accompanies this notice.

​

By Order of the Board of Directors,

Julie Gray

Secretary

​

​

​

​

​

TABLE OF CONTENTS

​

​

​

​

1

​

O’REILLY AUTOMOTIVE, INC.

233 South Patterson Avenue

Springfield, Missouri 65802

​

PROXY STATEMENT

​

The enclosed proxy is solicited by the Board of Directors (the “Board”) of O’Reilly Automotive, Inc. (the “Company” or “O’Reilly”), for use at the Annual Meeting of Shareholders (“Annual Meeting”) to be held in a virtual only format via live audio webcast at www.virtualshareholdermeeting.com/ORLY2022 on Thursday, May 12, 2022, at 9:00 a.m., Central Time, and at any adjournments thereof.  

​

Whether or not you expect to virtually attend the meeting, please return your executed proxy card in the enclosed postage-paid envelope or vote via telephone or Internet, using the instructions discussed below and on the proxy card, and the shares represented thereby will be voted in accordance with your instructions.  References to the Company’s website and the contents thereof do not constitute incorporation by reference of the information contained on the Company’s website, and such information is not part of this proxy statement.  The proxy statement and the accompanying proxy card is expected to first begin mailing to shareholders on or about March 30, 2022.

​

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

​

What is the purpose of the Annual Meeting?

At the Annual Meeting, shareholders will act upon the matters described in the accompanying notice of meeting.

​

When and where will the 2022 Annual Meeting be held?

The Annual Meeting will be held in a virtual only format via live audio webcast at www.virtualshareholdermeeting.com/ORLY2022 on Thursday, May 12, 2022, at 9:00 a.m. Central Time.  To access the virtual Annual Meeting, you must enter the 16-digit control number found on your proxy card, voting instruction form or Important Notice Regarding the Availability of Proxy Materials.  If you do not have a control number, you may access the Annual Meeting as a guest.  Online access to the live audio webcast of the Annual Meeting will open 15 minutes prior to the start of the Annual Meeting.  We encourage you to access the meeting in advance of the designated start time.  

​

How will the Annual Meeting be conducted and will there be a question and answer session?

We have designed the format of the Annual Meeting to ensure that our shareholders are afforded similar rights and opportunities to participate as they would at an in-person meeting.  All of our board members are expected to join the Annual Meeting and will be available to respond to questions germane to the business matters presented during the meeting.  We intend to answer questions submitted during the meeting that are germane to business matters of the meeting, and in accordance with our Rules for Conduct, which will be able to be viewed on the day of and during the Annual Meeting.  Questions will be grouped by topic, and substantially similar questions will be answered only once.  Questions should be succinct and cover only one topic per question.  To promote fairness, efficient use of the Company’s resources and ensure all shareholder questions are able to be addressed, we will respond to no more than three questions from any single shareholder.  If there are any matters of individual concern to a shareholder or if a question posed was not otherwise answered, we will provide an opportunity for shareholders to contact us separately after the Annual Meeting through our Investor Relations website, http://corporate.oreillyauto.com/contact-us, or by contacting us at (417) 829-5878.

​

What if I need technical assistance during the Annual Meeting?

If you encounter difficulties accessing or hearing the virtual Annual Meeting audio webcast, please contact the technical support number that will be posted on the Annual Meeting website log-in page for assistance.  We encourage attendees to log in to the virtual Annual Meeting 15 minutes ahead of time.  

​

If I cannot participate in the live Annual Meeting webcast, can I listen to it later?

An audio replay of the Annual Meeting, including the questions answered during the meeting, will be available approximately 24 hours after completion of the meeting, will remain available for 12 months, and can be accessed through the Company’s website at http://corporate.oreillyauto.com/corporate-information-news-room.

​

Who may vote?

Any shareholder of record as of the record date is entitled to vote their shares at the Annual Meeting.

2

​

​

What is a “shareholder of record”?

A shareholder of record is a shareholder whose ownership of the Company’s common stock is reflected directly on the books and records of the transfer agent, Computershare Trust Company, N.A. (“Computershare”).

​

What is the record date for the Annual Meeting?

The record date is March 3, 2022.  Shareholders of record at the close of business on March 3, 2022, will be entitled to vote at the Annual Meeting.  Each share of common stock will have one vote on each matter to be voted upon.

​

Which O’Reilly shares are included in the proxy card I received?

The proxy card you received covers the number of common shares to be voted in your account as of the record date.

​

What is the difference between holding shares as a registered shareholder and as a beneficial owner?

A registered shareholder owns shares that are registered directly in their name with the Company’s transfer agent, Computershare.  A beneficial owner owns shares held in a stock brokerage account or by a bank.  If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the beneficial owner of shares held in “street name.”  If you are a beneficial owner but not a shareholder of record, you should follow the instructions provided by your broker, bank or other record holder to direct your broker, bank or other holder on how to vote your shares.

​

Why would I receive more than one proxy card?

You may receive more than one proxy card if you owned shares in more than one account.  You should vote the shares on each of your proxy cards.

​

What matters will be voted on at the Annual Meeting?

At the Annual Meeting, shareholders will be asked to vote on three proposals that were solicited by the Board (Proposals 1 through 3), as well as a shareholder proposal (Proposal 4), if properly presented at the Annual Meeting:

​

How do I vote my shares?

You may vote your share by proxy or during the meeting:

​

If you choose to vote on the Internet or by telephone, please note voting will close at 11:59 p.m. Eastern Time, on Wednesday, May 11, 2022.  The Board encourages you to vote your shares promptly.

​

May I change my vote after I submit my proxy?

You may change your vote after submitting a proxy card.  If, after sending in your proxy, you desire to revoke your proxy for any reason, you may do so by notifying the Secretary of the Company in writing to the principal executive office at any time prior to the voting of

3

​

the proxy.  The Company’s principal executive office is located at 455 South Patterson Avenue, Springfield, Missouri 65802, the mailing address for which is O’Reilly Automotive, Inc., 233 South Patterson Avenue, Springfield, Missouri 65802, Attention: Secretary.

​

Are my votes confidential?

All shareholder meeting proxies and tabulations that identify the vote of a particular shareholder will be kept confidential, except as necessary to allow the inspectors of election to certify the voting results or to meet legal requirements.  Representatives of Broadridge Financial Solutions (“Broadridge”) will act as the inspector of election and will count the votes.

​

How will my vote be counted?

All votes will be tabulated by Broadridge.  All properly executed proxies received by the Board pursuant to this solicitation will be voted in accordance with the shareholder’s directions specified in the proxy card.  If no such directions have been specified by marking the appropriate squares in the signed and returned proxy card, the shares will be voted by the persons named in the enclosed proxy card as follows:

​

The Board is not aware of any matter to be presented for action at the Annual Meeting other than the matters set forth herein.  The Company’s shareholders have no dissenter’s or appraisal rights in connection with any of the proposals described herein.

​

No nominee has indicated that he or she would be unable or unwilling to serve as a Director, if elected.  However, should any nominee become unable or unwilling to serve for any reason, it is intended that the persons named in the proxy will vote for the election of such other persons in their stead as may be designated by the Board.  The Board is not aware of any reason that might cause any nominee to be unavailable to serve as a Director.

​

How does the Board recommend I vote?

The Board recommends a vote “FOR” each of the nominees for Director named in this proxy statement.  The Board recommends a vote “FOR” the approval, by an advisory (non-binding) vote, of the 2021 compensation of the Company’s Named Executive Officers.  The Board recommends a vote “FOR” the ratification of the selection of Ernst & Young LLP, as the Company’s independent auditors for the year ending December 31, 2022.  The Board recommends a vote “AGAINST” the shareholder proposal entitled “Special Shareholder Meeting Improvement,” if properly presented.  

​

What constitutes a quorum?

On March 3, 2022, there were 66,296,391 shares of common stock outstanding, which constitutes all of the outstanding shares of the Company’s voting capital stock.  A majority of the outstanding shares entitled to vote at the Annual Meeting, represented virtually or by proxy, will constitute a quorum at the meeting.

​

4

​

What are the standards for determining whether an item has been approved?

​

Broker non-votes occur when shares held by a brokerage firm are not voted with respect to a proposal because the firm has not received voting instructions from the beneficial owner of the shares, and the firm does not have the authority to vote the shares in its discretion.

​

How can I get electronic access to the Notice, proxy statement and Annual Report?

The Notice, proxy statement and Annual Report are available at www.proxyvote.com.  The required control number can be found on your proxy card.  These materials are also available on our website at http://corporate.oreillyauto.com/investor-relations-financials.

​

Where may I find the voting results of the Annual Meeting?

The Board plans to announce the preliminary voting results at the Annual Meeting.  The Company plans to publish the final results in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (the “SEC”) within four business days following the Annual Meeting, if final voting results are available at that time.  If the final voting results are not available within that time, the Company will report preliminary results in a Current Report on Form 8-K within four business days following the Annual Meeting and will report final voting results in an amended Current Report on Form 8-K when available.

​

Will a proxy solicitor be used?

No, the Company has not engaged a third party to assist in the solicitation of proxies for the Annual Meeting.

​

What are the deadlines for consideration of shareholder proposals or director nominations for the 2023 Annual Meeting of Shareholders?

Shareholder proposals intended to be presented at the 2023 Annual Meeting of Shareholders and included in the Company’s proxy materials relating to that meeting pursuant to Rule 14a-8 under the Exchange Act must be received by the Company at the Company’s principal executive offices by November 30, 2022.  The Company’s Amended and Restated Bylaws (the “Bylaws”) require that shareholder proposals made outside of Rule 14a-8 be submitted not later than February 11, 2023, and not earlier than January 12, 2023.

​

What are the deadlines for submitting director nominations for inclusion in the Company’s proxy materials?

Under the Bylaws, a shareholder (or a group of up to 20 shareholders) owning three percent or more of the Company’s outstanding shares of common stock continuously for at least three years may nominate and include in the Company’s proxy materials candidates for up to 20% of the Board (rounded down, but not less than two).  Nominations must comply with the requirements and conditions of the Bylaws, including the delivery of proper notice to the Secretary of the Company at the Company’s address appearing on the first page of this proxy statement not later than November 30, 2022, and not earlier than October 31, 2022.

​

​

5

​

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

​

The following table summarizes information as of December 31, 2021, with respect to each person or other entity (other than management) known to the Company to be the beneficial owner of more than five percent (5%) of its outstanding shares of common stock.

​

​

​

6

​

SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT

​

The following table summarizes, as of March 3, 2022, the beneficial ownership of the Company’s outstanding shares of common stock for each current Director of the Board, each of the Company’s current Named Executive Officers and all Directors and executive officers as a group.  Unless otherwise indicated, the Company believes that the beneficial owners set forth in the following table have sole voting and dispositive power.

​

Officer and Director Stock Ownership Guidelines

​

The Board adopted stock ownership requirements for the Company’s independent Directors, executive officers and executive and senior vice presidents to further align their interests with those of the Company’s shareholders.  The Human Capital and Compensation Committee reviews the stock ownership guidelines and reviews progress toward meeting ownership requirements quarterly.  The Human Capital and Compensation Committee has discretion to waive these guidelines; however, it has never done so.

​

As of December 31, 2021, the Company’s independent Directors are required to own shares of the Company’s common stock valued at a minimum of $150,000 within five years of the date they first become a Director.  For purposes of the guidelines, common stock ownership includes shares owned by the Director, directly or indirectly, and vested stock options granted to the Director, but excludes

7

​

unvested restricted share awards.  As of December 31, 2021, the total stockholdings of each of the independent directors, who has been serving as a Director for at least five��years, satisfied their respective stock ownership requirement.

​

The Company’s executive officers and executive and senior vice presidents are required to own shares of the Company’s common stock valued at the minimum of a specified multiple of their base salary within five years of first assuming their respective positions.  For purposes of the guidelines, common stock ownership includes shares owned by the officer directly, shares held by the officer in the Company’s Employee Stock Purchase Plan, shares held by the officer in the Company’s Profit Sharing and Savings Plan and the tax affected intrinsic value of the officer’s vested stock options granted under the Company’s incentive plans.  Individuals who do not achieve the required level of ownership within the prescribed period of time may, at the discretion of the Human Capital and Compensation Committee, be required to hold 50% of net after-tax shares issued upon the exercise of any of their stock options and may not be allowed to sell any other shares of the Company that they may own.  The stock ownership requirement does not apply after the executive officer or executive or senior vice president reaches age 62.  The Human Capital and Compensation Committee may waive these guidelines at its discretion; however, it has never done so.  As of December 31, 2021, each of the Company’s executive officers and executive and senior vice presidents, who had been in their positions for at least five years, satisfied the stock ownership requirement applicable to each of them.

​

The following table identifies the executive officers’ and executive and senior vice presidents’ ownership requirement as of December 31, 2021:

​

​

​

​

​

8

​

PROPOSAL 1 – ELECTION OF DIRECTORS

​

Information about the Director Nominees

​

The Company’s Bylaws and Amended and Restated Articles of Incorporation provide for the annual election of Directors.  The Board has nominated Greg Henslee, David O’Reilly, Larry O’Reilly, Jay D. Burchfield, Thomas T. Hendrickson, John R. Murphy, Dana M. Perlman, Maria A. Sastre, Andrea M. Weiss and Fred Whitfield as Directors for a one-year term expiring at the Company’s 2023 Annual Meeting of Shareholders.

​

The following identifies

​

Each of the below nominees’ current term expires in 2022.

​

​

Greg Henslee

Affiliated Director and Executive Chairman of the Board

Age:  61

Director since:  2017

Board committees:  None.

​

​

Experience  

Mr. Henslee has served as a member of the Board since November 2017 and Executive Chairman of the Board since May 2021.  Mr. Henslee served as Executive Vice Chairman of the Board from May 2018 until May 2021.  Mr. Henslee served as Chief Executive Officer from February 2005 until May 2018.  Mr. Henslee served O’Reilly as President from December 2012 to February 2017; Co-President from 1999 to 2012; Senior Vice President of Information Systems, Inventory Control, Customer Service, Computer Operations, Pricing and Loss Prevention from 1998 to 1999; Vice President of Store Operations from 1995 to 1998; and Director of Computer Operations and Loss Prevention from 1993 to 1995.

Qualifications and Skills  

Mr. Henslee is being nominated as a Director because, among his other qualifications, he possesses over 40 years of experience in the automotive aftermarket industry and 37 years of experience and expertise in the Company’s operations, strategic planning and leadership development, as well as holds leadership positions on various automotive aftermarket organizations and associations.

​

​

David O’Reilly

Affiliated Director and Executive Vice Chairman of the Board

Age:  72

Director since:  1972

Board committees:  None.

​

​

Experience

Mr. O’Reilly has served as Executive Vice Chairman of the Board since May 2021.  Mr. O’Reilly served as Executive Chairman of the Board from February 2005 until May 2021.  Mr. O’Reilly served as Co-Chairman of the Board from August 1999 to February 2005;

9

​

Chief Executive Officer from March 1993 to February 2005; President of the Company from March 1993 to August 1999; and Vice President of the Company from 1975 to March 1993.

Qualifications and Skills  

Mr. O’Reilly is being re-nominated as a Director because, among his other qualifications, he possesses over 45 years of experience and expertise in the Company’s operations and strategic business development and has held leadership roles in numerous automotive aftermarket industry organizations and associations, as well as having served on several bank boards and charitable organization boards.

​

​

Larry O’Reilly

Affiliated Director and Vice Chairman of the Board

Age:  75

Director since:  1969

Board committees:  None.

​

​

Experience  

Mr. O’Reilly has served as Vice Chairman of the Board since February of 2005.  Mr. O’Reilly served as Co-Chairman of the Board from August 1999 to February 2005; Chief Operating Officer from March 1993 to February 2003; President from March 1993 to August 1999; and Vice President from 1975 to March 1993.  Mr. O’Reilly retired from active Company management in February of 2003.  Mr. O’Reilly has served as Chairman and Director of Mercy Hospital Springfield since January 2000; Board Member of the Missouri Sports Hall of Fame since January 2003; and Trustee of the Lance Armstrong Endowment Board since December 2005.

Qualifications and Skills  

Mr. O’Reilly is being re-nominated as a Director because, among his other qualifications, he possesses over 50 years of experience and expertise in the Company’s operations, in the automotive aftermarket industry and strategic business development.

​

​

Jay D. Burchfield

Independent Director of the Board

Age:  76

Director since:  1997

Independent Lead Director since:  2018

Board committees:  Audit Committee and Human Capital and Compensation Committee

​

Experience  

Mr. Burchfield has served as a Director, Chairman of the Compensation Committee, and Member of the Audit, Executive and Nominating and Wealth Committees of Simmons First National Corporation since May 2015; Chairman of the Board and Director of Trust Company of the Ozarks from April 1998 until his retirement in October 2015; Senior Principal of SilverTree Companies, a real estate company, since January 2010.  Mr. Burchfield’s career has spanned more than 40 years in the banking and financial services industry.

Qualifications and Skills  

Mr. Burchfield is being re-nominated as a Director because, among his other qualifications, he possesses experience and expertise in the banking industry, strategic business development, executive compensation and leadership development.

Current Public Directorships

​

​

10

​

Thomas T. Hendrickson

Independent Director of the Board

Age:  67

Director since:  2010

Board committees:  Audit Committee (Chair) and Corporate Governance/Nominating Committee

​

​

Experience  

Mr. Hendrickson has served as a Director and Audit Committee Chairperson for Ollie’s Bargain Outlet Holdings, Inc. since 2015; Chief Administrative Officer, Chief Financial Officer and Treasurer for The Sports Authority, Inc., the parent of retailer “Sports Authority,” from 2003 until his retirement in February of 2014; Executive Vice President and Chief Financial Officer, and Treasurer of Gart Sports Company, from 1998 until its merger with Sports Authority in 2003; and Vice President of Finance, Senior Vice President, and Executive Vice President and Chief Financial Officer of Sportmart, Inc., from 1993 to 1997.  Mr. Hendrickson is a Certified Public Accountant and has over 32 years of retail business experience.

Qualifications and Skills  

Mr. Hendrickson is being re-nominated as a Director because, among his other qualifications, he possesses experience and expertise in the retail industry and the areas of risk assessment, accounting and finance, including experience as a chief financial officer.

Current Public Directorships

​

​

John R. Murphy

Independent Director of the Board

Age:  71  

Director since:  2003

Board committees:  Audit Committee and Human Capital and Compensation Committee (Chair)

​

​

Experience

Mr. Murphy has served as a Director, Audit Committee Chairman, and Member of the Nominating and Governance Committee of Apria, Inc. (“Apria”) since 2021; Mr. Murphy also served as a Director and the Audit Committee Chairman of Apria Healthcare Group, Inc. from 2019 until Apria became a publicly traded company in February 2021.  Mr. Murphy also serves as a director and the Audit Committee Chairman of Summit Materials, Inc. (“Summit”) since 2012, he is also a member of the Governance and Nominating Committee.  In 2013, Mr. Murphy served as Summit’s Interim Chief Financial Officer.  In addition, Mr. Murphy served as a director and the Audit Committee Chairman of Alight Solutions from 2019 until 2021.  In 2012, Mr. Murphy was named a director and Audit Committee Chairman of DJO Global, Inc., he served in that capacity until 2019.  In 2011, Mr. Murphy served as a director, Audit Committee and Special Committee member of Graham Packaging, Inc. until September of that year.  Mr. Murphy served as Senior Vice President and Chief Financial Officer of Smurfit-Stone Container Corporation (“Smurfit-Stone”) from 2009 to 2010, where he led the financial restructuring of Smurfit-Stone during its Chapter 11 reorganization.  Mr. Murphy was President and Chief Executive Officer of Accuride Corporation, Inc. (“Accuride”) and a member of its board of directors until October 2008.  Mr. Murphy served as Accuride’s President and Chief Operating Officer from January 2007 to October 2007; he served as President and Chief Financial Officer from February 2006 to December 2006 and as Executive Vice President and Chief Financial Officer from March 1998 to January 2006.  Mr. Murphy is a Certified Public Accountant.  

Qualifications and Skills

Mr. Murphy is being re-nominated as a Director because, among his other qualifications, he possesses experience and expertise in the automotive aftermarket industry, in the accounting and finance areas, including experience as a chief financial officer, and he possesses experience in restructuring and mergers and acquisitions.

Current Public Directorships

Prior Public Board Service

11

​

​

​

Dana M. Perlman

Independent Director of the Board

Age:  41  

Director since:  2017

Board committees:  Audit Committee and Corporate Governance/Nominating Committee (Chair)

​

​

Experience  

Ms. Perlman has served as Chief Strategy Officer and Treasurer of PVH Corp. (“PVH”) since 2021, where she is a key partner to the Chief Executive Officer and a member of Executive Leadership, responsible for leading PVH’s global strategy, transformation and business development, including defining, activating and managing PVH’s strategic vision and priorities to deliver key targets, spearheading mergers and acquisitions, integrations, strategic partnerships and value-enhancing projects across PVH.  Ms. Perlman is also responsible for PVH’s treasury and investor relations functions.  Prior to her role as Chief Strategy Officer and Treasurer of PVH, Ms. Perlman served as Senior Vice President, Treasurer, Business Development and Investor Relations of PVH since 2011.  Prior to joining PVH, Ms. Perlman served as Director of Retail Investment Banking at Barclays Capital.  Prior to her role at Barclays Capital, Ms. Perlman held positions with Lehman Brothers and Credit Suisse First Boston.

Qualifications and Skills  

Ms. Perlman is being re-nominated as a director because, among her other qualifications, she possesses over 20 years of experience and expertise in the global retail industry and the areas of strategy, finance, investment banking, business development, acquisitions, risk management, corporate and employer branding, investor communications and environmental, sustainability and governance communication.

​

​

Maria A. Sastre

Independent Director of the Board

Age:  66

Director since:  2020

Board committees:  Audit Committee and Corporate Governance/Nominating Committee

​

​

Experience  

Ms. Sastre served as President and Chief Operating Officer of Signature Flight Support Corporation (“Signature”), the world’s largest network of fixed-based operations and support services for business, government and private aviation, from 2013 until her retirement in 2018.  Ms. Sastre joined Signature in 2010 as its Chief Operating Officer.  Prior to joining Signature, Ms. Sastre was President and Chief Executive Officer of Take Stock in Children, Inc. from 2009 to 2010, a senior executive with Royal Caribbean Cruises LTD from 2000 to 2008, where she held the positions of Vice President, International, Asia, Latin America & Caribbean and Vice President of Hotel Operations, and, prior to 2000, she held numerous domestic and international executive and leadership positions with United Airlines, Inc., Continental Airlines, Inc. and Eastern Airlines, Inc.  Ms. Sastre currently serves on several private and non-profit boards, including Guidewell Mutual Holding Corporation since 2016, where she serves as Chair of the Talent & Compensation Committee, and Miramar Services Corporation since 2019.  Ms. Sastre also previously served as Chair of the Finance Committee of Darden Restaurants, Inc.

Qualifications and Skills

Ms. Sastre is being re-nominated as a director because, among her other qualifications, she possesses experience in global operations, marketing, mergers and acquisitions and e-commerce and over 20 years of public company board experience, including audit, finance, corporate governance and compensation committees.

Current Public Directorships

Prior Public Board Service

​

​

12

​

Andrea M. Weiss

Independent Director of the Board

Age:  67  

Director since:  2019

Board committees:  Audit Committee and Human Capital and Compensation Committee

​

​

Experience  

Ms. Weiss is the founder of and serves as President and Chief Executive Officer of Retail Consulting, Inc. since 2002.  Ms. Weiss is also the founder of The O Alliance, LLC, a global consulting practice focused on retail, e-commerce and consumer companies.  Prior to founding Retail Consulting, Inc., Ms. Weiss was President of dELiA*s, Inc., President of Guess?, Inc., Executive Vice President, Chief Stores Officer of L Brands, Inc., Senior Vice President of Ann Inc., and Director of Merchandising of The Walt Disney Company.  Ms. Weiss is also a board member for Cracker Barrel Old Country Store, Inc. since 2003, RPT Realty since 2018 and Bed Bath & Beyond Inc. since 2019.  Ms. Weiss currently serves on several private advisory boards.  Ms. Weiss served on the board of directors of GSI Commerce from 2006 to 2011, Chico’s FAS, Inc. from 2009 to 2018, The Pepboys - Manny, Moe & Jack from 2013 to 2016 and Nutrisystem, Inc. from 2013 to 2019.  Ms. Weiss holds a Masters of Administrative Science from The Johns Hopkins University and a Bachelor of Fine Arts from Virginia Commonwealth University.  Ms. Weiss also completed post-graduate studies at Harvard Business School and The Kellogg School at Northwestern University.

Qualifications and Skills  

Ms. Weiss is being re-nominated as a director because, among her other qualifications, she possesses over 30 years of experience in the retail industry and the areas of marketing, consumer branding, proprietary brand development, consumer behavior, global retail and e-commerce operations and board governance.

Current Public Directorships

Prior Public Board Service

​

​

Fred Whitfield

Independent Director of the Board

Age:  63

Director since:  2021

Board committees:  Audit Committee

​

​

Experience  

Mr. Whitfield has served as President, Vice Chairman, Alternate Governor and Minority Owner of Hornets Sports & Entertainment (“HSE”) since 2018.  Mr. Whitfield joined HSE in 2006 as its President, Chief Operating Officer and Alternate Governor, and during his tenure with HSE, he has overseen all areas of business operations and strategy for the Charlotte Hornets and Spectrum Center, including sales, marketing, public relations, legal, finance and human resources.  Along with serving as an Alternate Governor on the National Basketball Association Board of Governors, Mr. Whitfield also currently serves as a member of the National Basketball Association Global Diversity and Inclusion Council.  Prior to joining HSE, Mr. Whitfield was Director of Business/Legal Affairs of Jordan Brand (a division of NIKE, Inc.); Director of Player Personnel and Assistant Legal Counsel of the Washington Wizards; numerous positions with NIKE, Inc., the last being Director of Player Development, Basketball Sports Marketing; and Senior Partner of Whitfield & Blackmon, Attorneys at Law, LLP.  Additionally, Mr. Whitfield is the founder of HoopTee Charities, Inc., which supports a number of non-profit organizations and initiatives.  Mr. Whitfield holds a Juris Doctorate from North Carolina Central University, as

13

​

well as a Bachelor of Business Administration in economics and a Masters of Business Administration in marketing, both from Campbell University.

Qualifications and Skills  

Mr. Whitfield is being nominated as a director because, among his other qualifications, he possesses experience and expertise in areas of the law and legal compliance, brand management and strategies, business development, and diversity and inclusion.

​

​

​

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE ELECTED NOMINEES.

 ​

 ​

​

14

​

INFORMATION CONCERNING THE BOARD OF DIRECTORS

​

Director Independence

​

Rules of the Nasdaq Stock Market (“Nasdaq”) require that a majority of the Board be “independent.”  Under the Nasdaq rules, a director or director nominee is independent if he or she is not an officer or employee of the Company and does not have any relationship with the Company which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  The Board has reviewed the independence of its Directors and director nominee under the Nasdaq rules.  During this review, the Board considered transactions and relationships between each Director or any member of his or her family and the Company during 2021.  Please see discussions in “Affiliated Relationships” and “Certain Relationships and Related Transactions” sections for further descriptions, by specific category and type, of the transactions and relationships reviewed.  Consistent with these considerations, the Board has determined that Messrs. Burchfield, Hendrickson, Murphy and Whitfield, and Mss. Perlman, Sastre and Weiss (“independent Directors”) are independent under the Nasdaq rules.

​

Affiliated Relationships

​

Greg Henslee, Director of the Board, served as the Company’s Chief Executive Officer from 2005 through 2018.  Greg Henslee also serves as Executive Chairman of the Board of the Company.  David O’Reilly and Larry O’Reilly, Directors of the Board, are siblings.  David O’Reilly also serves as Executive Vice Chairman of the Board of the Company.    

​

Leadership Structure

​

The Company’s leadership structure, within its Board, consists of a Chairman of the Board, two Vice Chairmen of the Board, an Independent Lead Director, an Audit Committee, a Corporate Governance/Nominating Committee and a Human Capital and Compensation Committee.  The Independent Lead Director also serves on the Audit Committee and the Human Capital and Compensation Committee.  All Committee members satisfy the independence requirements under the Nasdaq rules.  The Company’s Bylaws permit the positions of Chairman of the Board and Chief Executive Officer to be held by the same person; however, the Board believes these roles and their attendant responsibilities should be separate and fulfilled by two separate individuals.  The Company believes having separate roles allows its Board to effectively provide guidance to and oversight of its management.  As a result, Greg Henslee serves in the role of Chairman of the Board and Gregory D. Johnson serves in the role of Chief Executive Officer.

​

Independent Lead Director

​

From time to time, in the interest of sound corporate governance, the Board may appoint an Independent Lead Director.  The Board believes that the designation of an Independent Lead Director improves the functionality of the Board and its Committees and aids in the fiduciary obligations each Director has to the Company and its shareholders.  In May of 2018, the Corporate Governance/Nominating Committee nominated, and the Board approved, Jay D. Burchfield to serve as Independent Lead Director.  Mr. Burchfield has served as Independent Lead Director since that time.

​

The responsibilities of the Independent Lead Director include, but are not limited to, the following:

15

​

​

Meeting Attendance

​

During 2021, four regularly scheduled meetings of the Board were held.  During the year, each current Director attended 100% of the total number of meetings of the Board during his or her term of service.  During 2021, each independent Director attended 100% of the total number of meetings held by all committees of the Board for which he or she served, with the exception of Ms. Sastre who attended 90% of the total number of meetings held by all committees of the Board for which she served.  

​

Time is allotted at each Board meeting for an executive session involving only the independent Directors.  The Company’s independent Directors held four closed-session meetings during 2021, and each current independent Director attended all meetings during his or her term of service.

​

The Company encourages, but does not require, the members of its Board to attend the Annual Meeting.  Each director then serving on the Board attended the Company’s 2021 Annual Meeting.

​

Committees of the Board

​

The Board has three standing committees, the Audit Committee, the Human Capital and Compensation Committee and the Corporate Governance/Nominating Committee.  Each committee is governed by a written charter and is comprised solely of independent Directors in accordance with the Nasdaq Listing Qualifications.  Charters for each committee are available on the Company’s website at www.OReillyAuto.com and can be obtained free of charge by written request to the attention of the Secretary at the Company’s address appearing on the first page of this proxy statement or by telephone at (417) 874-7161.

​

Because Greg Henslee, David O’Reilly and Larry O’Reilly do not qualify as independent Directors, they do not participate on any committees of the Board.

​

Audit Committee

Purpose and Functions:

The purpose of the Audit Committee is to

16

​

​

The Board has determined that each member of the Audit Committee is “independent” pursuant to the Nasdaq rules, as well as the independence requirements for audit committee members under Rule 10A-3 promulgated under the Exchange Act.  In addition, the Board has determined that Mr. Hendrickson, Chair of the Audit Committee, is qualified as an audit committee financial expert, as that term is defined in the rules of the SEC.  The Company’s Audit Committee Charter may be viewed on its website at www.OReillyAuto.com.

​

Human Capital and Compensation Committee

Purpose and Functions:

The purpose of the Human Capital and Compensation Committee is to

​

Because the Company’s executive leadership is of critical importance to the Company’s success, the succession planning process is led by the Human Capital and Compensation Committee.  This committee reviews the Company’s succession planning practices and procedures and makes recommendations to the Board concerning succession developments, while ensuring the appropriate succession plans are in place for key executive positions.

​

The Committee has the authority to retain consultants and advisors, as it may deem appropriate in its discretion.  The Committee has, from time to time, historically utilized third party compensation survey data and/or outside consultant advisors in order to achieve its goal of attracting and retaining executive officers who contribute to the long-term success of the Company.  During 2021, the Company engaged Meridian Compensation Partners, LLC, an outside consultant advisor, for compensation advisory services.  The Company’s Human Capital and Compensation Committee Charter may be viewed on its website at www.OReillyAuto.com.

​

Corporate Governance/Nominating Committee

Purpose and Functions:

The purpose of the Corporate Governance/Nominating Committee is to

17

​

​

The Corporate Governance/Nominating Committee conducts an annual Board evaluation process to determine the effectiveness of the Board and as a tool to aid in continuous improvement.  The Chair of the Corporate Governance/Nominating Committee, in partnership with the Company’s outside counsel, provides questionnaires to the Board, which are completed and returned directly to the Company’s outside counsel who compiles the responses and reports the results on an anonymous basis to the Corporate Governance/Nominating Committee Chair for evaluation and discussion with the Board’s Lead Independent Director and the Chairman of the Board.  Topics in the questionnaire include:

​

In recent years, the Board’s self-evaluation process has contributed to improve Board diversity, changes in Board committee membership and committee Chairs, increased focus on Board succession planning and Board refreshment and an increased focus and reporting on the Company’s environmental, sustainability, social and governance policies and programs, including enhanced shareholder outreach.

​

The Company’s Corporate Governance Principles may be viewed along with the Corporate Governance/Nominating Committee Charter on its website at www.OReillyAuto.com.

​

The Corporate Governance/Nominating Committee does not have a written policy on the consideration of Director Candidates recommended by shareholders.  It is the view of the Board that all candidates, whether recommended by a shareholder or the Corporate Governance/Nominating Committee, shall be evaluated based on the same established criteria for persons to be nominated for election to the Board and its committees.  The established criteria for persons to be nominated for election to the Board and its committees, taking into account the composition of the Board as a whole, at a minimum, includes

​

The Corporate Governance/Nominating Committee regularly engages and considers director succession for the members of its Board, committees and committee chairs to ensure a mix of knowledge and abilities, expertise and tenure that promote and support the Company’s long-term success, while giving consideration to evolving skills, perspective and experience needed on the Board to perform its corporate governance role.  In addition, when the Corporate Governance/Nominating Committee seeks a new candidate for directorship, it seeks qualifications from the individual that satisfy the established criteria for a person to be nominated and a candidate

18

​

that will complement the attributes and perspective of the other members of the Board.  As the Company’s strategic priorities and the composition of the Board evolve, the priorities and emphasis of qualifications the Corporate Governance/Nominating Committee is seeking in a candidate will change from time to time.  Individuals identified by the Corporate Governance/Nominating Committee as qualified to become directors are then recommended to the Board for nomination, and the Board determines the nominees for election after considering the recommendation and report of the Corporate Governance/Nomination Committee.

​

In November of 2021, the Board increased the size of the Board from nine to 10 members.  An independent Director of the Board of Directors of the Company recommended a qualified candidate, Fred Whitfield, to the Corporate Governance/Nominating Committee, to which the Corporate Governance/Nominating Committee extensively researched, interviewed and recommended, as a very well qualified candidate, Mr. Whitfield to the Board as part of Board’s continuous improvement to augment its existing competency strengths and diversity.  In November of 2021, the Board accepted the nomination and appointed Mr. Whitfield to serve as a Director for a term expiring at the 2022 Annual Meeting of Shareholders.  In connection with Mr. Whitfield’s appointment, the Board appointed Mr. Whitfield to serve on the Audit Committee.

​

Finding qualified candidates interested in serving as director is of the highest level of importance to the Corporate Governance/Nominating Committee.  As such, the Corporate Governance/Nominating Committee may use any and all appropriate methods at its disposal for identifying candidates for election.  The Corporate Governance/Nominating Committee’s methods for identifying candidates for election to the Company’s Board include the solicitation of possible candidates from a number of sources, including engaging with outside search firms, from members of its Board, its executives and other research.  Shareholders wishing to recommend a candidate for nomination as a director are requested to send the recommendation in writing to O’Reilly Automotive, Inc. Corporate Governance/Nomination Committee, attention to Julie Gray, at 233 South Patterson Avenue, Springfield, Missouri 65802.  The Board believes it is best qualified to evaluate candidates based on its knowledge of the Company’s business structure, and the Corporate Governance/Nominating Committee may retain one or more third-party search firms to identify suitable candidates.  

​

Shareholder Nominations

​

A shareholder who desires to nominate one or more persons for election as director(s) shall deliver “timely notice” (as defined in Section 12, Article II of the Company’s Bylaws) of the shareholder’s intent to make such nomination or nominations, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company at the Company’s address appearing on the first page of this proxy statement.  In accordance with Section 13, Article II of the Bylaws, such notice shall set forth

​

The presiding officer of a meeting may, if the facts warrant, determine at the meeting that a nomination was not made in accordance with the foregoing procedure, and if he or she should make that determination, he or she shall so declare at the Annual Meeting, and the defective nomination shall be disregarded.

​

Risk Oversight

​

It is management’s responsibility to assess and manage the Company’s exposure to various risks and bring the Company’s most material risks to the Board’s attention.  The Board has oversight responsibility for the processes established to report and monitor systems for material risks applicable to the Company.  In its oversight role, the Board annually reviews the Company’s strategic plan, which addresses, among other things, the risks and opportunities facing the Company.

​

A quarterly risk overview is provided to the Board by the Company’s General Counsel and the Company’s Senior Vice President of Information Technology, which details the Company’s current and potential risk exposure to litigation, self-insurance, information security and cybersecurity.  In addition, quarterly operational updates and risk assessments are provided by Senior Vice Presidents of selected operational areas, including store operations, distribution operations, finance and real estate.

​

19

​

The Board has delegated certain risk management oversight responsibility to the Board committees, as detailed below.  Each committee regularly reports to the full Board.

​

Audit Committee Risk Oversight

The Audit Committee provides risk management oversight for areas including economic, financial (such as accounting, credit, liquidity and tax), legal, compliance and regulatory risks.  As part of its responsibilities as set forth in its charter, the Audit Committee is responsible for discussing with management the Company’s major financial risk exposures and the steps management has taken to monitor and control those exposures, including the Company’s risk assessment and risk management policies.  Specific risk assessment areas include reviews of the Company’s Annual Corporate Risk Assessment, which uses the ISO 31000 framework, quarterly high risk scenario updates, quarterly information security and cybersecurity risk updates and a Management Status Report (which identifies the material strategic and operational Company business risks and the controls that respond to and mitigate those risks), the Company’s Code of Conduct and Ethics program compliance, related party transactions, insider trading policy compliance, the Company’s TIPS Hotline activity, the appropriate interpretation and application of new accounting standards, the internal auditor’s comprehensive audit plan and the external auditor’s independence and audit effectiveness.  The Audit Committee reviews, with management, the Company’s financial performance and financing arrangements and meets with the Company’s internal and external auditors to review the Company’s compliance with all applicable financial reporting and Sarbanes-Oxley requirements.  The Audit Committee also reviews, with management, the status of the Company’s information security and cybersecurity programs and initiatives, business continuity planning and PCI compliance.

​

Human Capital and Compensation Committee Risk Oversight

The Human Capital and Compensation Committee provides risk management oversight for areas including compensation, retention, human capital management and diversity and inclusion risks.  Specific risk assessment areas include reviews of executive officer succession planning, senior management development plans and approval of hiring, promotions and total compensation for the Company’s executives and senior management, including base salary, incentive compensation, benefits and perquisites to ensure they are market competitive and consistent with the Company’s compensation philosophy and ensures that these compensation plans and arrangements do not create inappropriate risks.  In addition, the Human Capital and Compensation Committee assesses risks for non-executive human capital management, including diversity and inclusion and recruiting and retention.

​

Corporate Governance/Nominating Committee Risk Oversight

The Corporate Governance/Nominating Committee provides risk management oversight for areas including director succession planning and skills assessment, operations, business, competitive and reputation risks.  Specific risk assessment areas include reviews of the Company’s corporate governance guidelines and their implementation, the Company’s Code of Conduct and Ethics program compliance, the Board committee charters, the Company’s Corporate Governance Principles, updates on shareholder activism and the Company’s environmental, social and governance policies and disclosures.  

​

Under the oversight and direction of the Corporate Governance/Nominating Committee, the Company issues its annual Sustainability, Social, & Governance Report, which illustrates the Company’s approach to human capital management, workforce diversity and inclusion, labor practices, environmental consciousness and governance initiatives.  The Report is available on the Company’s website at www.OReillyAuto.com.

​

20

​

Board Diversity

​

In selecting a Director nominee, the Corporate Governance/Nominating Committee focuses on a diverse skill set, viewpoints, experience and background that would complement the existing Board.  While the Board does not have a formal policy on Board diversity as it relates to the selection of nominees for the Board, the Corporate Governance/Nominating Committee does consider diversity in knowledge, experience, employment, ethnicity, gender and geography among other factors.  Decisions by the Board regarding nomination of Directors are made based on expected contributions to the Board in furtherance of the interests of shareholders.

​

21

​

Director Skills and Composition Matrix

​

The Corporate Governance/Nominating Committee reviewed the core competencies that it believes should be represented on our Board and believes that the qualifications and skills set below reflect the appropriate mix of experiences that, taken together, provide the variety and depth of knowledge necessary for effective oversight, direction and vision for the Company.  The following table highlights specific information concerning each Director nominee and the key experience, qualifications and skills they bring to our Board; their diversity, age, independence and tenure are included as well.  A particular Director may possess additional experience, qualifications, attributes or skills, even if not expressly indicated.  

​

Compensation of Directors

​

Independent Directors

Independent Directors are paid an annual fee for service to the Board.  The Independent Lead Director is paid an additional annual fee for service on the Board.  Each Committee Chair is paid an additional annual fee for service as chair of each respective Committee.

22

​

​

To assist the Company in recruiting and retaining qualified Directors, the Company also awards each independent Director an annual restricted share award that vests in one installment after a one-year period, except for awards issued prior to May 2020, which vest in three equal annual installments.  Upon resignation from the Board for any reason other than retirement, death or disability, all outstanding, unvested equity awards are immediately forfeited.  The Board makes an annual determination of the number of restricted shares to be awarded to each independent Director.

​

The following table summarizes the compensation paid to the independent Directors, including stock awards, for the year ended December 31, 2021:

​

Independent Director fees in the aggregate amount of $685,000 were paid during 2021 and independent Director restricted stock awards with an aggregate fair value of $978,611 were granted in 2021.

​

Affiliated Directors

The Affiliated Director compensation plan provides for an annual cash retainer of $260,000 for service to the Board, this includes Larry O’Reilly.  Affiliated Directors are not paid any other fee amounts and are not granted equity awards in their capacity as directors.

​

Greg Henslee and David O’Reilly do not receive any additional compensation for services they provide as Directors and are compensated solely for the services they provide as executive officers.

​

The following table summarizes the compensation paid to all Directors for the year ended December 31, 2021, other than Greg Henslee and David O’Reilly whose compensation is fully reflected in the “Summary Compensation Table” portion of this proxy statement:

23

​

​

In addition, all Directors are reimbursed for appropriate travel and other out-of-pocket expenses incurred in connection with attendance at Board meetings.

​

Human Capital and Compensation Committee Interlocks and Insider Participation

​

No member of the Human Capital and Compensation Committee is now, nor has ever been, an officer or an employee of the Company or any of its subsidiaries.  None of the Company’s executive officers served as a director or as a member of a compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served as a director of the Company or a member of the Human Capital and Compensation Committee during 2021.  

  ​

24

​

COMPENSATION OF EXECUTIVE OFFICERS

​

Compensation Discussion and Analysis

​

This section describes the compensation packages of the Company’s principal executive officer, principal financial officer, and three other most highly compensated officers, as well as the Executive Chairman of the Board and Executive Vice Chairman of the Board, who were employed by the Company on December 31, 2021 (such individuals are referred to as the “Named Executive Officers” or “NEOs” in this proxy statement).  The NEOs and their positions are identified below:

​

Executive summary

The Human Capital and Compensation Committee of the Board is responsible for reviewing the performance of the Company’s NEOs, Executive Vice Presidents and Senior Vice Presidents (collectively, its “executive officers”), recommending to the Board compensation packages and specific compensation levels for its executive officers and other management team members, establishing policies and guidelines for other benefit programs and administering the award of stock options and other stock-based incentives under the Company’s incentive plans.

​

At the 2021 Annual Meeting, over 90% of the votes cast in the advisory vote on executive compensation, which were present and entitled to vote on the matter, were in favor of the compensation of the Company’s NEOs as disclosed in the 2021 proxy statement.  The Board believes that the outcome of this proposal evidences the commitment of the Human Capital and Compensation Committee to open dialogue with the Company’s shareholders regarding the Company’s executive compensation program, and the Human Capital and Compensation Committee has and will continue to consider these voting results and shareholder sentiments generally as it formulates and implements an executive compensation program designed to align the long-term interests of the Company’s executive officers with the interests of its shareholders.

​

The policies and procedures of the Human Capital and Compensation Committee are designed to assist the Board in its oversight of the implementation and effectiveness of its policies and strategies regarding the investment in the Company’s most important asset:  its employees (whom the Company refers to as “Team Members”).  These strategies and policies include, but are not limited to:

​

Compensation objectives and philosophy

The main objective of the Company’s compensation philosophy is to provide its executive officers and management with a total compensation package that is competitive and equitable, and which encourages and rewards performance based in part upon the Company’s performance in terms of increases in long-term shareholder value.  The Company’s compensation objectives include both long-term, share-based incentives and short-term, cash incentives.  The Company believes that aligning the interests of its executives and management with those of its shareholders further promotes the success of not only the Company, but also its Team Members.

​

Risk assessment of compensation programs

The Human Capital and Compensation Committee has reviewed the potential effects of the various components of the Company’s executive officers’ compensation and benefits programs on individual and collective behavior and, ultimately, on the Company’s risk

25

​

profile and overall approach to risk management.  The Human Capital and Compensation Committee focuses on the Company’s short-term incentives, long-term incentives, and change in control benefits as having the greatest potential to create incentives for individual or collective risk taking.  Following a thorough review of these and the other components of the Company’s compensation and benefits programs, the Human Capital and Compensation Committee has determined that the programs do not create any incentives with respect to individual or collective behavior that are likely to have a material adverse effect upon either the Company’s risk profile or overall approach to risk management.

​

Additionally, the Company’s non-executive officer and management compensation policies and practices do not excessively incentivize inappropriate risk-taking by its Team Members, and therefore, it is not reasonably likely that the current compensation policies and practices would have a material adverse effect on the Company.

​

Overview of compensation programs

The key elements of the compensation packages for the Company’s executive officers, including the NEOs, are base salary, annual cash incentive compensation and long-term, share-based incentives.  In determining the composition of elements in each compensation package, the Human Capital and Compensation Committee aims to create a balanced set of rewards, utilizing market-driven influences and external compensation benchmarks.  To ensure that the Company thrives in the competitive talent market, the Human Capital and Compensation Committee reviews industry resources, references and other benchmark reports to determine competitive market ranges and reasonable levels of compensation and, when appropriate, will utilize third party compensation survey data and/or outside consultant advisors to achieve this objective, which are used for context in reviewing the overall compensation levels and maintaining a reasonable and competitive compensation program.

​

In reviewing the compensation packages of each of the Company’s executive officers and management, the Human Capital and Compensation Committee tallies the aggregate dollar value of each element of an individual’s compensation, including salary, incentive compensation, unrealized share-based compensation gains, the dollar value of all perquisites and other personal benefits and the potential impact of several severance and change-in-control scenarios.  For new appointments to senior executive management, the Company’s management presents compensation recommendations to the Human Capital and Compensation Committee for consideration.

​

Competitive assessments

The Company’s Human Resources Department, utilizing both publicly available and third-party compiled data, provides the Human Capital and Compensation Committee with industry benchmark information and compensation survey data from the companies in its peer group, including peer salary, bonus, incentive compensation, share-based compensation and other compensation.  The group of peer companies is reviewed annually by the Human Capital and Compensation Committee to ensure that the comparisons are meaningful.  The Human Capital and Compensation Committee evaluates retail peers that conduct business outside of the automotive aftermarket industry based on criteria such as revenue, operating margin, net income, market capitalization, team member count and one and three year total shareholder returns, as applicable.  In addition to these key financial and operational metrics, the Human Capital and Compensation Committee also evaluates potential peers based on competition for team member recruitment and companies whose general customer demographics are similar to those of the Company.

​

The Human Capital and Compensation Committee considers the Company’s relative performance compared with the established group of peer companies in the automotive aftermarket industry and other specialty retailers and considers broad-based survey data compiled by a third-party, Equilar, Inc., including total compensation for top management at companies with total revenues comparable to the total revenues of the Company.  The Human Capital and Compensation Committee does not use this data or peer group data to set specific compensation benchmarks for a position or for any element of compensation but, rather, to evaluate the overall performance of the Company and the individual performance of management to set compensation at reasonable and competitive levels.

​

Based on its annual review using the previously described criteria, the Human Capital and Compensation Committee removed two companies from the prior year’s peer group and added two companies to the Company’s 2021 peer group.  The companies added and removed from the peer group are identified in the following table:

​

26

​

The Company’s 2021 peer group members are identified in the following table:

​

The range, mean and median revenue and market capitalization of the Company’s 2021 peer group, as well as those metrics for O’Reilly, for the twelve months ended December 31, 2021, or of the most recently completed period end, are identified in the following table (in billions):

​

Base salary

The Company provides competitive annual base salaries to its executive officers and management in recognition of their job responsibilities and performance.  In determining annual base salary, it is the Human Capital and Compensation Committee’s goal to bring the salaries of the Company’s executive officers and management in line with base compensation being paid by its peer group.  The Human Capital and Compensation Committee specifically reviews compensation information from the publicly traded automotive aftermarket companies in its peer group and compensation surveys and data from the other specialty retailers in its peer group.  The Human Capital and Compensation Committee believes that the Company’s principal competitors for its executive officers are not necessarily the same companies that would be included in a peer group compiled for purposes of comparing shareholder returns.  Consequently, the companies that are reviewed for such compensation purposes may not be the same as the companies comprising the indices included in the Annual Report of the Company for 2021 that accompanies this proxy statement.  The Human Capital and Compensation Committee increased base salary levels in 2021 for the Company’s NEOs to maintain compensation at competitive levels and to reflect Company performance and the individual performance of each of its NEOs.

​

Incentive compensation plan

The Company provides competitive annual incentive compensation as a percent of base salary based on achievement of certain objective performance goals established by the Human Capital and Compensation Committee each year in order to motivate attainment of short-term goals, link annual cash compensation to achievement of annual priorities and reward individual performance and contributions.

​

At the beginning of each year a comprehensive operating plan is developed, which contains estimates for the Company’s projected performance for the year, by reviewing the Company’s historical performance, trends in the automotive aftermarket and retail industry, the performance of industry peers and general economic conditions.  The targets for the incentive compensation plans set by the Human Capital and Compensation Committee generally correspond to this operating plan.  The comprehensive operating plan for the 2021 fiscal year was approved by the Board in February of 2021 and reflects the projected results for the 2021 fiscal year.  The Company’s actual performance in each of the target areas is compared to the individual targets predetermined by the Human Capital and Compensation Committee to determine the incentive amount, if any, earned by each executive officer.  Upon achievement of such performance goals, executive officers receive incentive compensation based upon a percentage of their respective base salaries for the attainment of a defined performance goal.

​

The overall potential compensation varies depending upon the executive’s position; however, under the Company’s 2017 Incentive Award Plan, the maximum aggregate amount of cash compensation that may be paid to any one participant in any year is $10,000,000.  For 2021, the Company’s Chief Executive Officer, Mr. Johnson, and Chief Operating Officer, Mr. Shaw, had targets of 100% of their individual base salaries, and its Executive Vice President of Store Operations and Sales, Mr. Beckham, Executive Vice President of Supply Chain, Mr. Kirby, and Chief Financial Officer, Mr. McFall, had targets of 80% of their individual base salaries, which were, in

27

​

each case, the same position level salary targets applicable in 2020, except for Mr. Kirby, whose target was 50%.  The Board sets performance target achievement levels for its executives that are challenging enough to require strong and consistent effort by the executives to be achieved and such that the Company’s actual performance above projections would result in payouts above target levels and would likely also result in an increase in total shareholder value.  Over the last five years, annual incentive payouts under the executive incentive compensation plan have been below target one time and exceeded target four times, ranging from 15% to 765% of target during this period of time, and over that same period, the value of the Company’s stock, and associated shareholder value, increased 154%.

​

The performance metrics, weighting, targets, actual results and achievement levels utilized by the Human Capital and Compensation Committee for calculating the incentive compensation payable to each of the NEOs for the year ended December 31, 2021, are identified in the table below:

​

The following table summarizes the 2021 performance incentive compensation plan salary targets and the resulting payouts for each of the Company’s NEOs who participated in the plan:

​

Greg Henslee and David O’Reilly, in consultation with the Human Capital and Compensation Committee, are excluded from participation in the annual cash incentive compensation plan pursuant to their responsibilities of providing strategic direction and guidance to the Company and their more limited role in the Company’s day-to-day operational activities.

​

Long-term, stock-based incentives

The Company offers long-term incentives for executive officers and management in the form of stock option and restricted stock awards.  Stock options and restricted stock may be awarded to the Company’s NEOs, upper- and middle-managers and other key personnel.

​

The Company believes that its stock-based incentive programs are an important component of compensation to drive long-term corporate performance.  The Human Capital and Compensation Committee has determined that the annual award of restricted stock or grant of stock options to the Company’s executive officers is a key component of each executive officer’s total compensation package based on their duties.  The amounts of such restricted stock awards and/or stock option grants are determined by the Human Capital and

28

​

Compensation Committee annually in conjunction with performance reviews and salary adjustments during the February Human Capital and Compensation Committee meeting.  In determining how many restricted stock awards and/or stock options should be granted, the Human Capital and Compensation Committee considers the responsibilities and level of each of the executive officers, as well as the Company’s financial performance and other factors as it deems appropriate, consistent with its compensation philosophy and policies.  The restricted stock awards and stock options awarded by the Human Capital and Compensation Committee in 2021, as reflected in the “Grants of Plan Based Awards” table, include an annual award of restricted stock or grant of stock options, as the case may be, determined by the Human Capital and Compensation Committee in consideration of the factors described above.

​

In the past, the Human Capital and Compensation Committee has reviewed and considered using other equity-based incentives for the long-term compensation component.  After a thorough analysis, including an analysis of the equity grant practices of our peer group companies, stock options and restricted stock awards were determined to be the most effective methods of aligning management interests with those of the Company’s shareholders.

​

The Human Capital and Compensation Committee has also established specific stock option awards to be granted upon the achievement of certain defined advancements in position.  These position grants occur on the date of promotion or appointment to such positions with an option price equal to the closing market value of the common stock underlying the option on such date.  It is the Company’s belief that these position-related grants significantly increase the retention, motivation and overall performance of its executives, management and other Team Members.  In furtherance of this belief, the Company also has a Team Member stock purchase plan that enables Team Members to purchase O’Reilly common stock at a discount through payroll deductions, and Team Members are also able to invest in the Company’s common stock through its 401(k) plan.  

​

Other

The Company sponsors a 401(k) Profit Sharing and Savings Plan (the “401(k) Plan”) that allows Team Members to make plan contributions on a pre-tax basis.  The Company matches 100% of the first 2% of the Team Member’s compensation, and 25% of the next 4% of the Team Member’s compensation.

​

Although executives are eligible to participate in the 401(k) Plan, the application of the annual limitations on contributions under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”) prevents highly compensated employees, as defined by the Code, from participating at the same levels as non-highly compensated employees.  The Company has established the O’Reilly Automotive Deferred Compensation Plan (the “Deferred Compensation Plan”), which is intended to restore contributions lost because of the application of the annual limitations under the Code that are applicable to the 401(k) Plan.  The Deferred Compensation Plan provides executives whose participation in the 401(k) Plan is limited with the opportunity to defer the full 6% of covered compensation, including salary and incentive based compensation, by making contributions to the Deferred Compensation Plan that are then matched by the Company as if they had been made under the 401(k) Plan.  This benefit, which assists executives in accumulating funds for retirement, is consistent with observed competitive practices of similarly situated companies.

​

Section 162(m) (“Section 162(m)”) of the Code generally disallows a tax deduction to publicly held companies for compensation paid to certain executive officers, to the extent that compensation exceeds $1 million per officer in any year.  The Human Capital and Compensation Committee believes that in establishing the cash and equity incentive compensation programs for the Company’s executive officers, the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole governing factor.  Accordingly, the Human Capital and Compensation Committee may provide one or more executive officers with the opportunity to earn compensation, whether through base salary, cash incentive based compensation programs tied to the Company’s financial performance or share-based awards in the form of restricted stock or stock options, which may be in excess of the amount deductible by reason of Section 162(m) or other provisions of the Code.  The Company believes it is important to maintain incentive compensation at the requisite level to attract and retain the executive officers essential to the Company’s financial success, even if a portion of that compensation may not be tax deductible by reason of the Section 162(m) limitation.

​

In addition, the Company provides its executive officers with certain perquisites, which the Human Capital and Compensation Committee believes are reasonable and consistent with the objectives of attracting and retaining superior talent, as well as maintaining a competitive total compensation package for the executive officers.  Perquisites can include personal use of a Company automobile, reimbursement for health and country club memberships and reimbursements under the Company’s executive management medical reimbursement benefit plan.  Perquisite amounts for the Company’s NEOs are included in the “Summary Compensation Table” in the column “All Other Compensation.”

​

The Company has entered into change in control severance agreements with its NEOs.  These are described in the “Potential Payments on Termination or Change in Control” and “Employment Arrangements with Executive Officers” sections of the narrative disclosure to the “Summary Compensation Table.”

29

​

​

Compensation mix

The following table summarizes the Company’s actual compensation mix that resulted in 2021 from the compensation programs and practices described above, which includes base salary, restricted stock awards or stock options, non-equity incentive compensation and/or other benefits, for each of its NEOs:

​

Clawback policy

The Board is dedicated to maintaining and enhancing a culture that is focused on integrity and accountability while tying compensation to the Company’s performance.  The Board, following a recommendation by the Human Capital and Compensation Committee, adopted an incentive compensation clawback policy (the “Policy”) in 2014.  Each of the Company’s NEOs has signed an acknowledgement agreeing to comply with the provisions of the Policy.  The Policy is intended to provide an appropriate and effective incentive compensation recoupment program.

​

The adopted Policy specifically provides that if the Board or the Human Capital and Compensation Committee determines that incentive compensation of a current or former NEO was overpaid as a result of a restatement of the reported financial results of the Company due to material non-compliance with financial reporting requirements that resulted from the fraud or willful misconduct of the covered employee, then the Board or the Human Capital and Compensation Committee will review the incentive compensation paid, granted, vested or accrued based on the prior inaccurate results.  The Policy also provides that, to the extent practicable, and as permitted by applicable law, the Board or Human Capital and Compensation Committee will determine whether to seek to recover or cancel the difference between any incentive compensation that was based on having met or exceeded performance targets that would not otherwise have been met based upon accurate financial data and the incentive compensation that would have been paid or granted or that would have vested had the actual payment, granting or vesting been calculated based on the accurate data or restated results, as applicable.

​

The Policy applies to all incentive compensation granted, paid or credited after the Policy’s adoption by the Board, except to the extent prohibited by applicable law or any other legal obligation of the Company.  “Incentive compensation” means performance bonuses and incentive awards (including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares or other stock-based awards) paid, granted, vested or accrued under any Company plan or agreement in the form of cash or Company common stock.

​

Prohibition on Pledging and Hedging Company Securities

The Company’s Insider Trading Policy specifically prohibits Directors and Named Executive Officers from hedging or pledging Company securities.  These covered persons may not enter into hedging or monetization transactions with respect to Company securities, and they cannot hold Company securities in a margin account or pledge Company securities as collateral for a loan.  The Board believes this policy further ensures the interests of these covered persons will remain aligned with those of the Company’s security holders and these individuals will continue to be incentivized to execute the Company’s long-term plans and achieve the performance for which their equity awards are intended.  

​

​

30

​

HUMAN CAPITAL AND COMPENSATION COMMITTEE REPORT

​

The Human Capital and Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management.  Based on its review and discussion with management, the Human Capital and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in O’Reilly Automotive, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021.

​

Respectfully submitted,

​

THE HUMAN CAPITAL AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF O’REILLY AUTOMOTIVE, INC.

​

John R. Murphy

Chair of the Human Capital and Compensation Committee

​

Jay D. Burchfield

Member of the Human Capital and Compensation Committee

​

Andrea M. Weiss

Member of the Human Capital and Compensation Committee

​

​

​

​

31

​

EXECUTIVE COMPENSATION TABLES

​

The following table summarizes the annual compensation paid to or earned by the Company’s NEOs for the fiscal years ended December 31, 2021, 2020 and 2019: