Kroger 2010 Annual Report Download - page 61

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59
(1) The total number of securities reported includes the maximum number of common shares, 355,525,
that may be issued under performance units granted under one or more long-term incentive plans.
The nature of the awards is more particularly described in the Equity section of the Compensation
Discussion and Analysis. The weighted-average exercise price in column (b) does not take these
performance unit awards into account. Based on historical data, the Company’s best estimate of the
number of securities that will be issued under the performance unit agreements is approximately
96,000.
(2) The plans include initial limitations on the number of shares that can be issued as incentive shares or
restricted stock. The Company may increase this amount by decreasing the total number of securities
that can be issued by four for each stock share issued in excess of the stated initial limitation.
AD V I S O R Y VO T E O N EX E C U T I V E CO M P E N S A T I O N
(IT E M NO. 3)
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, and Section
14A of the Securities Exchange Act require that we give our shareholders the right to vote to approve, on
a nonbinding, advisory basis, the compensation of our named executive officers as disclosed earlier in this
proxy statement in accordance with the SEC’s rules.
As discussed earlier in our Compensation Discussion and Analysis, our compensation philosophy is
to:
•฀ make฀a฀significant฀portion฀of฀compensation฀performance-based;
•฀ include฀opportunities฀for฀and฀requirement฀of฀equity฀ownership฀as฀part฀of฀compensation;
•฀ use฀incentive฀compensation฀to฀help฀drive฀performance฀by฀providing฀superior฀pay฀for฀superior฀results;฀
and
•฀ tie฀components฀of฀compensation฀to฀our฀evaluation฀of฀business฀and฀individual฀performance฀measured฀
against metrics that align with our business strategy.
Furthermore, as previously disclosed, an increased percentage of total potential compensation
is performance-based as opposed to time-based as half of the compensation previously awarded to the
named executive officers as restricted stock (and earned based on the passage of time) is now only earned
to the extent that performance goals are achieved. In addition, annual and long-term cash bonuses are
performance-based and earned only to the extent that performance goals are achieved. In tying a large
portion of executive compensation to achievement of short-term and long-term strategic and operational
goals, we seek to closely align the interests of our named executive officers with the interests of our
shareholders.
The vote on this resolution is not intended to address any specific element of compensation. Rather,
the vote relates to the compensation of our named executive officers as described in this proxy statement.
The vote is advisory. This means that the vote is not binding on Kroger. The Compensation Committee of
our Board of Directors is responsible for establishing executive compensation. In so doing that Committee
will consider, along with all other relevant factors, the results of this vote.
The affirmative vote of a majority of the shares present and represented in person or by proxy is
required to approve this proposal. Broker non-votes and abstentions will have no effect on the outcome of
this vote.