Kroger 2010 Annual Report Download - page 27

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25
•฀ Historical฀information฀regarding฀salary,฀bonus฀and฀equity฀compensation฀for฀a฀3-year฀period.
In considering each of the factors above, the Committee does not make use of a formula, but rather
subjectively reviews each in making its compensation determination.
TH E CO M M I T T E E ’S CO M P E N S A T I O N CO N S U L T A N T S A N D BE N C H M A R K I N G
As referenced earlier in this proxy statement, the Committee directly engages a compensation
consultant from Mercer Human Resource Consulting to advise the Committee in the design of compensation
for executive officers.
The Mercer consultant conducts an annual competitive assessment of executive positions at Kroger
for the Committee. The assessment is one of several bases, as described above, on which the Committee
determines compensation. The consultant assesses:
•฀ Base฀salary;
•฀ Target฀annual฀performance-based฀bonus;
•฀ Target฀cash฀compensation฀(the฀sum฀of฀salary฀and฀bonus);
•฀ Annualized฀long-term฀incentive฀awards,฀such฀as฀stock฀options,฀restricted฀shares,฀and฀performance-
based long-term cash bonuses and performance-based equity awards; and
•฀ Total฀direct฀compensation฀(the฀sum฀of฀all฀these฀elements).
•฀ The฀ consultant฀compares฀these฀elements฀ against฀those฀of฀other฀companies฀ in฀ a฀group฀of฀publicly-
traded food and drug retailers. For 2010, the group consisted of:
Costco Wholesale Supervalu
CVS Target
Great฀Atlantic฀&฀Pacific฀Tea Walgreens
Rite Aid Wal-Mart
Safeway
This peer group is the same group as was used in 2009.
The make-up of the compensation peer group is reviewed annually and modified as circumstances
warrant. Industry consolidation and other competitive forces will change the peer group used over time.
The consultant also provides the Committee data from companies in “general industry,” a representation
of major publicly-traded companies. These data are reference points, particularly for senior staff positions
where competition for talent extends beyond the retail sector.
In 2009, the Committee directly engaged an additional compensation consultant to conduct a review
of฀ Kroger’s฀ executive฀ compensation.฀ This฀ consultant,฀ from฀ Frederic฀ W.฀ Cook฀ &฀ Co.,฀ Inc.,฀ examined฀
the compensation philosophy, peer group composition, annual cash bonus, and long-term incentive
compensation including equity awards. The consultant concluded that Kroger’s executive compensation
program met the Committee’s objectives, and that it provides a strong linkage between pay and performance.
The Committee expects to engage an additional compensation consultant from time to time as it deems
advisable.