Carmax Inc

This advisory proposal asks shareholders to approve the compensation paid to CarMax’s named executive officers as disclosed in the proxy statement (a non-binding “say on pay” vote). Management seeks shareholder approval to validate its pay programs which emphasize pay-for-performance through a mix of base salary, annual incentive bonuses, and long-term equity awards tied to multi-year outcomes; the Compensation and Personnel Committee points to alignment with shareholder interests, retention needs, and recent redesigns (e.g., moving toward PSUs and MSUs). The vote occurs against a backdrop of a CEO transition in fiscal 2026 (involuntary termination and severance for the former CEO, an interim CEO, and the appointment of a new CEO with sign‑on and modified equity arrangements), and the Committee reports prior strong shareholder support (≈88% in 2025). While the vote is advisory, the Committee states it will consider the outcome when making future compensation decisions and has instituted governance features—clawback policy, stock ownership guidelines, majority voting, and limits on option usage—that it argues mitigate risk and align incentives. Key contentious elements a sophisticated analyst should note include severance and termination payments associated with the leadership change, the shift in long-term incentive mix (replacement of options with MSUs to reduce share usage and dilution), and the sizable equity grants and sign-on awards tied to CEO attraction. The Committee also emphasizes metrics, disclosure (Compensation Discussion & Analysis, pay-versus-performance, and tables), and process (independent consultant, peer benchmarking) to support its recommendation. An analyst should weigh the Board’s governance reforms and stated risk controls against dilution and realized pay outcomes, the effect of leadership turnover on pay and performance alignment, and shareholder historical support when assessing the merits of the recommendation.

This management proposal requests shareholder approval to amend the 2002 Stock Incentive Plan by adding 1,842,000 shares (≈1.30% of shares outstanding as of Feb. 28, 2026), instituting a standard one‑year minimum vesting requirement (subject to a 5% carve‑out and customary acceleration for retirement, death, disability or change‑in‑control), prohibiting dividends/dividend equivalents on unvested awards, and extending the plan termination date to June 23, 2036. Management argues these changes preserve the Company’s ability to attract and retain talent via equity incentives while strengthening governance features that reduce short‑term extraction (no dividends on unvested awards) and promote retention (minimum vesting). The Committee supports the request after modeling share usage metrics: recent three‑year averages show annual dilution ≈1.13%, burn rate ≈1.23%, and overhang ≈9.08%; the requested increase would raise overhang to ~10.72%, and management points to substantial share repurchases that have affected these percentages. The Revised Plan contains guardrails, including a 3,000,000‑share-per‑participant annual limit and a $1.0 million per‑year aggregate limit for non‑employee directors, and preserves shareholder protections (no repricing without shareholder approval and adjustments on corporate transactions). A sophisticated analyst should weigh the modest incremental dilution and the Company’s continued repurchase activity against the need for competitive long‑term incentives (especially given recent leadership turnover and CEO sign‑on awards) and the governance improvements that align with market practice. The Board’s recommendation reflects the Committee’s view that the increase and conforming changes are in shareholders’ long‑term interest, but shareholders should consider equity plan efficiency metrics, the Company’s award practices, and how the plan interacts with broader capital allocation priorities when evaluating the proposal.