Harris Teeter 2012 Annual Report Download - page 88

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analyses and are compiled from information from a number of companies. The Compensation Committee uses the
Compensation Surveys as a tool to compare the overall compensation of its own executives to the executives of
other companies in similar sectors. No specific compensation decision for any individual was based on or justified
by any Compensation Survey.
In its annual review of executive compensation, the Compensation Committee meets with the Company’s Chief
Executive Officer with regard to the compensation packages of the Company’s executive officers other than the
Chief Executive Officer. The Chief Executive Officer recommends any compensation adjustments for these officers
to the Compensation Committee for its review, with changes in compensation being based upon the individual’s
performance, the performance of the Company, and the individual’s level of responsibility. The Compensation
Committee accepts, rejects or modifies the Chief Executive Officer’s recommendations at its discretion. The
Compensation Committee then makes a recommendation to the independent directors for their approval. The
Compensation Committee, along with the Chairman of the Corporate Governance & Nominating Committee,
performs the annual evaluation of the Chief Executive Officer. The compensation for the Chief Executive Officer
is approved by the independent directors upon the recommendation of the Compensation Committee.
Shareholder Say-on-Pay Vote
At the 2012 Annual Meeting of Shareholders, the Shareholders provided an advisory vote with 96% of the
votes cast approving the compensation of the Company’s named executive officers for Fiscal 2011 (the “Advisory
Vote”). Subsequently, in its meeting held in November 2012 the Compensation Committee considered the results
of the Advisory Vote in determining compensation policies and decisions of the Company. The Advisory Vote
affected the Company’s executive compensation decisions and policies by reaffirming the Company’s pay-for-
performance philosophy, and the Compensation Committee will continue to use this philosophy and past practice,
as well as results of future say-on-pay proposals, in determining future compensation decisions.
The Board has determined that the Company’s shareholders should vote on a say-on-pay proposal each year,
consistent with the preference expressed by the shareholders at the 2010 Annual Meeting of Shareholders.
Accordingly, at the Annual Meeting, shareholders will again have the opportunity to indicate their views on NEO
compensation. For additional information, see “Proposal 3: Advisory (Non-Binding) “Say On Pay” Vote Approving
Executive Compensation” in this Proxy Statement.
Elements of Compensation
Annual Cash Compensation. The Company’s annual cash compensation for its executives consists of base
salary and cash incentive bonuses. The total annual cash compensation levels of the respective executives reflect
the varying duties and responsibilities of each individual executive’s position with the Company, with consideration
given to the executive’s individual performance, as well as the consolidated financial condition and results of
operation of the Company.
For Fiscal 2012, base salaries of the current NEOs were reviewed and, on average, increases of 3.8% were
provided. Mr. Jackson separated from the Company prior to the Compensation Committee’s determination of Fiscal
2012 base salaries. Base salary increases were based on each current NEO’s achievement of personal performance
objectives and operating results during Fiscal 2011. The operating results considered were primarily return on invested
capital during the fiscal year calculated as net operating profit after tax divided by invested capital at the beginning
of the fiscal year (“NOPAT Return”) and operating margin. The personal performance objectives vary for each current
NEO as described in specific detail below, and were primarily tied to the performance of the Company for the prior
year, Fiscal 2011. No particular weight was assigned to any particular performance goal, and the personal performance
objectives considered by the Compensation Committee may from year to year change, depending on the needs of the
Company. The Chief Executive Officer meets with the Compensation Committee and presents a set of personal
objectives for the Compensation Committee to consider. After discussion, the Compensation Committee approves the
personal objectives for the Chief Executive Officer. For all current NEOs other than the Chief Executive Officer, the
performance objectives are generally discussed between the respective current NEO and the Chief Executive Officer,
who then reviews them with the Compensation Committee. The Compensation Committee does not determine the
current NEOs’ base salaries based on a formula or targeted performance.
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