Herman Word
ADVANCE AUTO PARTSAbout Herman Word
Herman L. Word, Jr. is Executive Vice President, Professional, Independents and Canada at Advance Auto Parts (AAP). He joined Advance in February 2003 and has held a series of operational leadership roles, including EVP U.S. Stores & Carquest Independents (Sep 2022–Nov 2024) and Division President, Carquest North America (Jun 2019–Sep 2022). He has served in his current role since November 2024 and is age 50. Earlier in his career, he worked at Goodyear Tire & Rubber Company. Company-level pay-versus-performance disclosures show weak shareholder returns over 2022–2024 (Company TSR indexed value $30.67 at FY2024), which drove zero payout for 2022 PSUs and a de minimis STI payout for 2024 outside of individual goals.
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Advance Auto Parts | Executive Vice President, Professional, Independents and Canada | Nov 2024–present | Oversees Pro, Independents, and Canada businesses; 2024 objectives included profit per store improvement and execution of independent store initiatives |
| Advance Auto Parts | EVP, U.S. Stores & Carquest Independents | Sep 2022–Nov 2024 | Led U.S. stores and independents network |
| Advance Auto Parts | Division President, Carquest North America | Jun 2019–Sep 2022 | Led independent business across North America |
| Advance Auto Parts | Regional Vice President | Jun 2014–Jun 2019 | Multi-region field operations leadership |
| Advance Auto Parts | Earlier roles (Asset Protection Manager, District Manager, Store GM) | Dates not disclosed | Front-line and field leadership foundation |
External Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Goodyear Tire & Rubber Company | Early career roles | Not disclosed | Entry into automotive industry; operating foundation |
Fixed Compensation
| Component | 2024 value | Notes |
|---|---|---|
| Base salary | $600,000 | Unchanged vs 2023; market competitive for responsibilities |
| Target annual bonus (% of salary) | 85% | Same target formula as other NEOs excluding CEO |
| Actual annual incentive paid (NEIP) | $51,000 | Company financial metrics paid 0%; 10% payout driven by individual performance component |
Performance Compensation
2024 Short-Term Incentive (AIP) design and outcome
| Metric | Weight | Threshold | Target | Maximum | 2024 payout |
|---|---|---|---|---|---|
| Operating Income | 65% | $346m | $432–$454m | $519m | 0% |
| Comparable Store Sales | 25% | —% | 1.8% | 5.0% | 0% |
| Individual performance | 10% | 50%–150% payout curve | Target 100% | 150% at above-target | Paid at 100% for all NEOs, yielding aggregate 10% STI payout |
- Mr. Word’s 2024 individual objectives focused on improving profit per store and executing independent store initiatives .
Long-Term Incentive (LTI) design and targets
| Vehicle | Share of target LTI | Vesting/term | Performance/holding mechanics |
|---|---|---|---|
| PSUs (RTSR vs S&P 500) | 50% | Cliff at end of 3-year performance period | Threshold/Target/Max at 35th/55th/80th percentile; capped at 100% if absolute TSR is negative; 1-year post-vesting holding period |
| RSUs (time-based) | 25% | Ratably over 3 years | Retention and alignment |
| Stock options | 25% | Vest ratably over 3 years; 10-year term | Purely contingent on stock price appreciation; canceled 90 days after employment ends |
- 2024–2025 target LTI value for Mr. Word: increased from $1,150,000 (2023) to $1,250,000 (2024), up 8.7% to align with market for the role .
- 2022–2024 PSU cycle paid 0% (Company RTSR below threshold, 2nd percentile), reinforcing pay-for-performance .
Equity awards granted since 2023 (select details)
| Grant date | Award type | Shares/units | Exercise price | Expiration/vesting |
|---|---|---|---|---|
| 3/14/2024 | PSUs (2024–2026) | Thr: 2,751; Tgt: 7,859; Max: 15,718 | N/A | Vest based on 3-year RTSR; holding period post-vest |
| 3/14/2024 | Options | 9,705 | $79.53 | 10-year term; vest 1/3 annually; option expiration 3/14/2034 |
| 3/14/2024–3/17/2025 window | RSUs (time-based) | 22,004 (cumulative awards since plan inception) | N/A | Vest ratably over 3 years |
| 3/4/2025 | PSUs (2025–2027) | Thr: 6,327; Tgt: 18,075; Max: 54,225 | N/A | Vest based on 3-year RTSR |
| 3/6/2023 | Options | 2,708 ex.; 5,418 unex. | $135.13 | Option expiration 3/6/2033; vesting 1/3 annually |
| 2/28/2022 | Options | 1,236 ex.; 618 unex. | $204.48 | Option expiration 2/28/2032; vesting 1/3 annually |
| 3/8/2021 | Options | 1,407 ex. | $176.50 | Option expiration shown as 3/8/2031 |
Note on option moneyness at FY2024 year-end: Company closing price was $47.29 on Dec 31, 2024; 2021–2024 option strikes ($79.53, $135.13, $176.50, $204.48) were above this level, implying no intrinsic value as of that date .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total beneficial ownership | 16,998 shares; less than 1% of outstanding (59,833,137) |
| Exercisable options within 60 days (as of 3/17/2025) | 12,004 |
| RSUs vesting within 60 days | None listed for Mr. Word |
| Ownership guidelines | EVPs must hold stock valued at 2x base salary |
| Guideline compliance | “All executives have satisfied or are projected to satisfy” by requisite dates |
| Hedging/pledging policy | Hedging prohibited; pledging prohibited unless stringent requirements are met |
Employment Terms
| Provision | Mr. Word terms |
|---|---|
| Employment agreement term | One-year term with automatic one-year renewals unless 90 days’ notice given |
| Covenants | Confidentiality, non-competition and non-solicitation obligations apply |
| Good Reason (summary) | Includes material diminution in total direct compensation; authority/duties; benefits plan termination/reduction; relocation >60 miles; other material breaches (non-CEO terms summarized) |
| Severance (without Due Cause or for Good Reason, non-CIC) | Cash termination payment equals base salary plus average bonus over prior 3 years; for Mr. Word, cash severance estimated at $928,639 as of 12/28/2024 |
| Change-in-control severance (double-trigger) | 2x base salary + 2x target bonus; for Mr. Word, cash severance $2,220,000 as of 12/28/2024 |
| Equity on termination/CIC | Pro rata vesting of PSUs for death, disability, retirement (subject to conditions); time-based RSUs vest on death/disability; upon CIC, if not assumed, time-based RSUs vest; PSUs vest at amount earned through CIC; otherwise pro rata if terminated without Cause within 24 months post-CIC (assumes target in tabulation) |
| Other benefits with severance | Health coverage at employee rates for 12 months and $15,000 outplacement (Mr. O’Kelly 18 months health); Mr. Word “Other Benefits” estimated $50,033 (non-CIC and CIC) |
Potential payments table (as of Dec 28, 2024):
| Scenario | Cash severance | Stock incentives | Other benefits | Total |
|---|---|---|---|---|
| Disability | $690,000 | $529,028 | — | $1,219,028 |
| Death | $1,110,000 | $529,028 | — | $1,639,028 |
| Involuntary (non-CIC) | $928,639 | $236,646 | $50,033 | $1,215,318 |
| Involuntary (CIC) | $2,220,000 | $869,216 | $50,033 | $3,139,249 |
Performance & Track Record
- Company-level outcomes driving 2024 pay: Operating Income target range $432–$454m and comp-store sales target 1.8% were not achieved (both paid 0%); individual performance components paid at 100% for all NEOs, yielding a 10% STI payout .
- Long-term alignment: 2022–2024 PSU cycle paid 0% as RTSR ranked below threshold (2nd percentile) .
- Pay-versus-performance context: company TSR index value fell to $30.67 in 2024, GAAP operating income −$713m, and comp-store sales −0.7% (company-selected measures), consistent with low incentive outcomes .
Additional Compensation Details
| Item | 2024 | 2023 | 2022 |
|---|---|---|---|
| Salary | $600,000 | $595,192 | $465,193 |
| Stock awards (grant-date fair value) | $1,202,976 | $862,535 | $799,986 |
| Option awards (grant-date fair value) | $312,501 | $287,498 | $100,079 |
| Non-equity incentive (AIP) | $51,000 | — | $408,525 |
| All other compensation | $17,585 | $10,925 | $7,213 |
| Total | $2,184,062 | $1,756,150 | $1,780,996 |
Governance, Ownership Guidelines, and Policies
- Compensation Committee members: Jeffrey J. Jones II (Chair), Douglas A. Pertz, Sherice R. Torres, A. Brent Windom; program assessed for risk and aligned to long-term performance .
- Ownership guidelines: EVP/SVP at 2x base salary; executives have satisfied or are projected to satisfy; hedging prohibited and pledging restricted .
- Beneficial ownership: Mr. Word 16,998 shares; options exercisable within 60 days: 12,004; less than 1% of shares outstanding .
Investment Implications
- Pay-for-performance alignment: 2024 AIP paid only 10% (individual component) and 2022–2024 PSUs paid 0%, indicating strong downside sensitivity of pay to financial/TSR underperformance. This reduces near-term cash incentive risk-taking and aligns with shareholder outcomes in a turnaround context .
- Selling pressure assessment: A significant portion of Word’s equity is in time-vested RSUs and options that vest over three years; as of 12/31/2024, option strikes ($79.53/$135.13/$176.50/$204.48) exceeded the stock price ($47.29), limiting monetization and likely tempering insider selling pressure near term. Ownership guidelines also require ongoing retention of shares .
- Retention and CIC incentives: Non-CIC severance approximates one year of salary plus average bonus; CIC terms provide 2x salary and 2x target bonus with equity vesting mechanics, creating standard market-aligned protections that could incrementally increase management openness to strategic alternatives if value-destructive scenarios persist .
- Alignment and skin-in-the-game: Beneficial ownership is modest at 16,998 shares with compliance to 2x salary guideline projected; LTI mix (50% PSUs with RTSR and 25% options) maintains upside tied to sustained performance and share price recovery, while policy restrictions on hedging/pledging support alignment .