Kroger 2010 Annual Report Download - page 35
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33
• The extenttowhichotherbenefitswerereducedin otheryearsas aresultoftheachievementof
performance levels based on the error;
• Individualofficerculpability,ifany;and
• Otherfactorsthatshouldoffsettheamountofoverpayment.
SE C T I O N 162(M) O F T H E IN T E R N A L RE V E N U E CO D E
Tax laws place a limit of $1,000,000 on the amount of some types of compensation for the CEO and the
next four most highly compensated officers that is tax deductible by Kroger. Compensation that is deemed
to be “performance-based” is excluded for purposes of the calculation and is tax deductible. Awards under
Kroger’s long-term incentive plans, when payable upon achievement of stated performance criteria, should
be considered performance-based and the compensation paid under those plans should be tax deductible.
Generally, compensation expense related to stock options awarded to the CEO and the next four most
highly compensated officers should be deductible. On the other hand, Kroger’s awards of restricted stock
that vest solely upon the passage of time are not performance-based. As a result, compensation expense
for those awards to the CEO and the next four most highly compensated officers is not deductible, to
the extent that the related compensation expense, plus any other expense for compensation that is not
performance-based, exceeds $1,000,000.
Kroger’s bonus plans rely on performance criteria, and have been approved by shareholders. As a
result, bonuses paid under the plans to the CEO and the next four most highly compensated officers will
be deductible by Kroger. In Kroger’s case, this group of individuals is not identical to the group of named
executive officers.
Kroger’s policy is, primarily, to design and administer compensation plans that support the achievement
of long-term strategic objectives and enhance shareholder value. Where it is material and supports Kroger’s
compensation philosophy, the Committee also will attempt to maximize the amount of compensation
expense that is deductible by Kroger.
CO M P E N S A T I O N CO M M I T T E E RE P O R T
The Compensation Committee has reviewed and discussed with management of the Company
the Compensation Discussion and Analysis contained in this proxy statement. Based on its review and
discussions with management, the Compensation Committee has recommended to the Company’s Board
of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement
and incorporated by reference into its annual report on Form 10-K.
Compensation Committee:
John T. LaMacchia, Chair
Robert D. Beyer
Jorge P. Montoya
Clyde R. Moore
James A. Runde