Kroger 2010 Annual Report Download - page 22

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20
The Board’s Audit Committee has oversight responsibility not only for financial reporting of Kroger’s
major financial exposures and the steps management has taken to monitor and control those exposures,
but also for the effectiveness of management’s processes that monitor and manage key business risks facing
Kroger, as well as the major areas of risk exposure and management’s efforts to monitor and control that
exposure. The Audit Committee also discusses with management its policies with respect to risk assessment
and risk management.
Management provides regular updates throughout the year to the respective committees regarding
the management of the risks they oversee, and each of these committees reports on risk to the full Board
at each regular meeting of the Board.
In addition to the reports from the committees, the Board receives presentations throughout the year
from various department and business unit leaders that include discussion of significant risks as necessary.
At each Board meeting, the Chairman and CEO addresses matters of particular importance or concern,
including any significant areas of risk that require Board attention. Additionally, through dedicated
sessions focusing entirely on corporate strategy, the full Board reviews in detail Kroger’s short- and long-
term strategies, including consideration of significant risks facing Kroger and their potential impact. The
independent directors, in executive sessions led by the Lead Director, address matters of particular concern,
including significant areas of risk, that warrant further discussion or consideration outside the presence of
Kroger employees.
We believe that our approach to risk oversight, as described above, optimizes our ability to assess
inter-relationships among the various risks, make informed cost-benefit decisions, and approach emerging
risks in a proactive manner for Kroger. We also believe that our risk structure complements our current
Board leadership structure, as it allows our independent directors, through the five fully independent
Board committees, and in executive sessions of independent directors led by an independent Lead Director,
to exercise effective oversight of the actions of management, led by Mr. Dillon as Chairman and CEO, in
identifying risks and implementing effective risk management policies and controls.
BO A R D LE A D E R S H I P ST R U C T U R E
Our Board is composed of twelve independent directors and two management directors, Mr. Dillon,
the Chairman of the Board and Chief Executive Officer, and Mr. McMullen, President and Chief Operating
Officer. In addition, as provided in our Guidelines on Issues of Corporate Governance, the Board has
designated one of the independent directors as Lead Director. The Board has established five standing
committees — audit, compensation, corporate governance, financial policy, and public responsibilities.
Each of the Board committees is composed solely of independent directors, each with a different
independent director serving as committee chair. We believe that the mix of experienced independent
and management directors that make up our Board, along with the independent role of our Lead Director
and our independent Board committees, benefits Kroger and its shareholders.
The Board believes that it is beneficial to Kroger and its shareholders to designate one of the directors
as a Lead Director. The Lead Director serves a variety of roles, including reviewing and approving Board
agendas, meeting materials and schedules to confirm the appropriate topics are reviewed and sufficient
time is allocated to each; serving as liaison between the Chairman of the Board, management, and the
non-management directors; presiding at the executive sessions of independent directors and at all other
meetings of the Board of Directors at which the Chairman of the Board is not present; and calling an
executive session of independent directors at any time. Bobby Shackouls, an independent director and the
chair of the Corporate Governance Committee, is currently our Lead Director. Mr. Shackouls is an effective
Lead Director for Kroger due to, among other things, his independence, his deep strategic and operational