Kroger 2011 Annual Report Download - page 21

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19
In keeping with our overall compensation philosophy, we endeavor to ensure that our compensation
practices conform to best practices when identified. In particular, over the past several years we have:
•฀ put in place significant stock ownership guideline levels to reinforce the link between the interests of
our named executive officers and those of our shareholders;
•฀ adopted claw-back policies under which the repayment of bonuses may be required in certain
circumstances;
•฀ eliminated tax gross-ups; and
•฀ adopted the recommendation of shareholders that they be permitted annually, on an advisory basis, to
vote on executive compensation.
The Compensation Committee of the Board has the primary responsibility for establishing the
compensation of Kroger’s executive officers, including the named executive officers, with the exception
of the Chief Executive Officer. The Committee’s role regarding the CEO’s compensation is to make
recommendations to the independent members of the Board; those independent Board members establish
the CEO’s compensation.
The following discussion and analysis addresses the compensation of the named executive officers, and
the factors considered by the Committee in setting compensation for the named executive officers and making
recommendations to the independent Board members in the case of the CEO’s compensation. Additional
detail is provided in the compensation tables and the accompanying narrative disclosures that follow this
discussion and analysis.
EX E C U T I V E CO M P E N S A T I O N – OB J E C T I V E S
The Committee has several related objectives regarding compensation. First, the Committee believes
that compensation must be designed to attract and retain those best suited to fulfill the challenging roles that
executive officers play at Kroger. Second, some elements of compensation should help align the interests of
the officers with your interests as shareholders. Third, compensation should create strong incentives for the
officers (a) to achieve the annual business plan targets established by the Board, and (b) to ensure that the
officers achieve Kroger’s long-term strategic objectives. In developing compensation programs and amounts
to meet these objectives, the Committee exercises judgment to ensure that executive officer compensation is
appropriate and competitive in light of Kroger’s performance and the needs of the business.
To meet these objectives, the Committee has taken a number of steps over the last several years, including
the following:
•฀ Consulted regularly with its independent advisor from Mercer Human Resource Consulting on the design
of compensation plans and on the amount of compensation that is necessary and appropriate for Kroger’s
senior leaders in light of the Committee’s objectives. From time to time, and most recently in 2009, the
Committee retains a second independent consultant to determine whether the compensation plans and
amounts comport with the Committee’s objectives and produce value for Kroger’s shareholders.
•฀ Conducted an annual review of all components of compensation, quantifying total compensation for the
named executive officers on tally sheets. The review includes an assessment for each named executive
officer, including the CEO, of salary; performance-based cash compensation, or bonus (both annual and
long-term); equity; accumulated realized and unrealized stock option gains and restricted stock and
performance unit values; the value of any perquisites; retirement benefits; severance benefits available
under The Kroger Co. Employee Protection Plan; and earnings and payouts available under Kroger’s
nonqualified deferred compensation program.
•฀ Considered internal pay equity at Kroger. The Committee is aware of reported concerns at other
companies regarding disproportionate compensation awards to chief executive officers. The Committee
has assured itself that the compensation of Kroger’s CEO and that of the other named executive officers
bears a reasonable relationship to the compensation levels of other executive positions at Kroger taking
into consideration performance and differences in responsibilities.