William C. Rhodes, III
AUTOZONEAbout William C. Rhodes, III
Executive Chairman (transitioning to non‑executive Chairman in January 2026), former President & CEO (2005–2024), age 60, director since 2005. Background includes 30+ years at AutoZone across leadership roles and prior experience as a manager at Ernst & Young LLP . AutoZone’s 20‑year annualized TSR is ~20.8% with top‑tier performance versus indices; FY25 revenue was $18.9B, and the company returned $1.5B via buybacks in FY25 and $38.5B since 1998 as store count reached 7,657 globally . Governance structure separates Chair and CEO, with a Lead Independent Director and fully independent standing committees; Rhodes will move from Executive Chairman to Chairman in January 2026 to further enhance independent oversight .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| AutoZone | President & CEO | 2005–2024 | Led long-term value creation, international and DC/Mega Hub expansion, and disciplined capital allocation supporting ~20% annualized TSR over 20 years . |
| AutoZone | Executive Chairman | 2024–2025 | Advised CEO, supported succession, maintained strategic continuity under split Chair/CEO model . |
| AutoZone | Chairman of the Board | 2007–present (non‑exec from Jan 2026) | Board leadership; transitions to non‑executive Chairman Jan 2026 to strengthen independence . |
| AutoZone | Various leadership roles | 1994–2005 | Progressively senior operational/financial roles before CEO appointment . |
| Ernst & Young LLP | Manager | Pre‑1994 | Public accounting/financial expertise . |
External Roles
| Organization | Role | Years | Strategic impact / committees |
|---|---|---|---|
| Regions Financial Corporation | Director | 2024–present | Adds financial services oversight; complements Audit/risk perspectives for AZO . |
| Dollar General Corporation | Director | 2009–2023 | Provided retail operating/merchandising insights . |
Fixed Compensation
| Metric | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Base Salary ($) | 1,050,000 | 467,885 | 150,000 |
| Target Annual Bonus % | N/A (as CEO; see payout below) | 130% while CEO portion of year; none as Exec Chair thereafter | No annual bonus opportunity as Executive Chairman |
| Annual Incentive (Actual) | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Company MIP Attainment (% of Target) | — | 99.31% | 96.75% |
| Rhodes MIP Payout ($) | 1,539,720 | 474,454 (CEO portion) | 0 (not bonus‑eligible as Executive Chairman) |
Notes: FY24 CEO to Exec Chair transition led to pro‑rata CEO bonus and then no bonus eligibility as Executive Chairman . In FY25, executives’ MIP was driven by Economic Profit (via EBIT and ROIC), with 90% hurdle and 300% cap; payout was 96.75% of target on 41.55% ROIC and $3,762.4M adjusted EBIT .
Performance Compensation
| Component | Structure | Key design details | FY 2024 outcome | FY 2025 outcome |
|---|---|---|---|---|
| Annual Incentive (MIP) | Economic Profit matrix (EBIT, ROIC); 90% hurdle; cap 300% | Above‑target payout requires exceeding EBIT target; FX excluded above threshold from FY25; eliminated individual modifier starting FY25 . | 99.31% of target payout on $3,748.7M adj. EBIT and 48.76% adj. ROIC . | 96.75% of target payout on $3,762.4M adj. EBIT and 41.55% adj. ROIC . |
| Long‑Term Incentive | 100% stock options; fixed share run‑rate approach | For Exec Chair, 50% options at FMV and 50% premium‑priced (110% strike) with 5‑year cliff vest; general vesting modified from FY25 to 50% at year 2 / 25% at years 3 & 4; no sub‑FMV grants . | Granted 4,699 options (split into two tranches on 10/6/2023), grant date value $4,850,336 . | Granted 1,941 options (926 at $3,129.78 FMV; 1,015 at $3,442.76 premium) on 10/11/2024; grant date value $2,349,237 . |
Detailed LTIP grants to Rhodes:
- FY24 grant (for FY24 cycle): two option lines on 10/6/2023: 2,453 options at $2,803.94 (100% cliff vest in year 5) and 2,246 options at $2,549.04; total grant date fair value $4,850,336 .
- FY25 grant (for FY25 cycle): two option lines on 10/11/2024: 926 options at $3,129.78 (FMV) and 1,015 options at $3,442.76 (premium 110%); total grant date fair value $2,349,237 .
Equity Ownership & Alignment
| Ownership/awards | As of FY25 year‑end |
|---|---|
| Beneficial ownership (shares) | 12,385 shares |
| Options exercisable within 60 days | 77,940 options (total; includes exercisable and those vesting within 60 days) |
| Total beneficial ownership (shares + options counted under SEC rules) | 90,325; <1% of outstanding |
| Options outstanding (status) | 56,200 exercisable; 21,740 unexercisable (by grant schedule) |
| FY25 option exercises | 54,000 options exercised; value realized $134,589,636 (per SEC definition) |
| Unvested option acceleration values (illustrative) | Unvested options value upon death: $41,891,805; upon retirement: $28,518,428 (as of 8/30/2025) |
| Ownership guidelines | Executives subject to robust ownership multiples; unvested/unexercised equity excluded; majority in compliance |
| Hedging/pledging | Prohibited (no pledging as collateral; no hedging or short sales) |
| Insider plan participation | Significant EDCP balance ($39,602,771 at FY25 year‑end), indicating deferred comp alignment |
Implications:
- Significant FY25 exercises suggest potential supply from option monetization; however, anti‑pledging and long holding behavior historically align interests with TSR .
Employment Terms
| Provision | Key terms |
|---|---|
| Employment agreement (2008; still referenced) | If terminated without cause: cash severance = 2.99x then‑current base salary, pro‑rated unpaid annual bonus, and COBRA premium cost for up to 18 months; 3‑year non‑compete and non‑solicit . |
| Illustrative severance amounts (as of 8/30/2025) | Involuntary termination not for cause: $448,500 severance (2.99x $150,000), $41,858 benefits continuation; total $490,358 (excludes equity), per termination table . |
| Change‑in‑control | No separate cash change‑in‑control payout disclosed for Rhodes in the termination table (column shows no amount) . |
| Equity treatment | Unvested options vest on death; retirement eligibility affects retention/exercise; unvested ESPP/XSPP matched shares vest on certain terminations . |
| Clawback | Mandatory recovery for 3‑year lookback on financial restatements; discretionary recovery for willful misconduct . |
| Perquisites/tax gross‑ups | Limited perquisites (e.g., charitable match up to $50,000, home security, club memberships); no tax gross‑ups except relocation‑related items . |
Board Governance
- Role and independence: Rhodes is not independent as Executive Chairman; Board structure includes a Lead Independent Director and fully independent Audit, Compensation, and Nominating & Governance Committees .
- Transition: Board approved Rhodes’ transition from Executive Chairman to non‑executive Chairman effective January 2026, further mitigating dual‑role concerns .
- Committee roles: No committee service listed for Rhodes as a management director .
- Attendance: All directors attended ≥75% of Board/committee meetings in FY25 .
- Director compensation (forward look): From Jan 2, 2026, Rhodes will be compensated as a non‑employee director: annual director retainer $270,000 plus Chairman fee $250,000, typically delivered as immediately vested RSUs per program .
Director Compensation (for reference on future role)
| Component | Amount |
|---|---|
| Annual Director Retainer ($) | 270,000 (paid in RSUs unless elected up to $100,000 cash) |
| Chairman Fee ($) | 250,000 (RSUs; applies when non‑employee Chairman in 2026) |
| Committee fees | Audit Chair $30,000; Comp Chair $25,000; Audit Member $15,000; Lead Director $35,000 (not applicable to Rhodes) |
| Director stock ownership guideline | 7x cash portion of annual retainer within five years . |
Compensation Structure Analysis
- Mix and risk: Rhodes’ Exec Chairman pay is heavily long‑term and at‑risk (options), with no annual bonus—aligning with long‑term TSR and capital allocation discipline . The Compensation Committee cut his package by 50% in October 2024 following a successful CEO transition and added premium‑priced, 5‑year cliff‑vesting options to emphasize durable value creation .
- Program refinements: In response to investor feedback, AZO eliminated the MIP individual modifier from FY25, froze NEO option grant values YoY for FY25 (reducing share counts), introduced 110% premium‑priced options for a portion of top awards, and shifted option vesting to 0%/50%/25%/25% from FY25 to strengthen retention and reduce early liquidity .
- Say‑on‑pay: Support improved to >89% of votes cast in 2025 after engagement and program calibrations (from 78% in 2023) .
- Peer benchmarking: AZO uses a retailer/industrial peer set; Exec Chairman pay varies widely across peers; CEO was intentionally set below median during initial tenure; run‑rate for equity remains ~0.9% of shares .
Performance & Track Record
| Measure | Evidence / context |
|---|---|
| Growth and returns | FY25: $18.9B revenue; global stores 7,657; continued DC and Mega Hub expansion; $1.5B repurchases in FY25 and $38.5B since 1998; 20‑year annualized TSR ~20.8% . |
| Management execution | FY25 acceleration in new store openings (304 vs 213 in FY24), two new DCs, Mega Hub expansion; commercial growth reacceleration; disciplined capital allocation . |
| Pay vs performance | CAP and TSR trends align; option‑centric design ties realized pay to TSR; long holding behavior (~6–8 years to exercise) supports long‑term orientation . |
Other Directorships & Interlocks / Related Parties
- External public boards: Regions Financial (current), Dollar General (prior) .
- Related party transactions: Board reports no material related party transactions in FY25; ordinary‑course relationships reviewed for director independence .
Equity Vesting Schedules and Potential Selling Pressure
- Vesting cadence: From FY25, most options vest 50% at year 2, 25% at years 3 & 4; CEO and Exec Chair also receive premium‑priced tranches with 5‑year cliff vesting; first vesting occurs more than one year after grant .
- FY25 exercises: Rhodes exercised 54,000 options with $134.6M value realized, indicating liquidity events that can create near‑term supply, balanced by strong anti‑hedging/pledging rules and ownership culture .
Employment Contracts, Severance, and Change‑of‑Control Economics
| Trigger | Cash/benefits | Equity | Restrictive covenants |
|---|---|---|---|
| Termination without cause | 2.99x base salary; pro rata bonus; up to 18 months COBRA cost coverage (illustrative total $490,358 at FY25 base) | As per award agreements/plan terms (death/retirement accelerators shown in table) | 3‑year non‑compete and non‑solicit |
| Change‑in‑control | No separate cash payout disclosed in table for Rhodes | As per plans/awards | As above |
Investment Implications
- Alignment: Rhodes’ compensation is overwhelmingly long‑term, equity‑based, with premium‑priced, 5‑year cliff options and no annual bonus as Executive Chairman—amplifying alignment with TSR and long‑horizon value creation .
- Overhang/supply: Significant vested options (56.2k) and FY25 exercises (54k, $134.6M realized) introduce potential selling pressure; however, anti‑pledging/hedging policies and culture of long option holds mitigate misalignment risk .
- Retention/stability: Strong non‑compete (3 years), robust ownership guidelines, and option vesting changes bolster retention of institutional knowledge during leadership transition to a non‑executive Chairman model .
- Governance quality: Board separation of Chair/CEO, empowered Lead Independent Director, fully independent key committees, and improved say‑on‑pay (>89%) reduce dual‑role/independence concerns and lower governance risk premium .
- Pay discipline trajectory: After investor engagement, AZO froze NEO LTI values for FY25 and reduced Rhodes’ pay package by ~50% in October 2024, while retaining option‑centric design that has historically correlated with superior TSR—supportive for long‑term investors seeking alignment without undue dilution .