Kroger 2011 Annual Report Download - page 29

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•฀ Individual performance; and
•฀ The recommendation of the CEO, for all named executive officers other than in the case of the CEO.
The Committee has long recognized that the amount of compensation provided to the named executive
officers through equity-based pay is often below the amount paid by our competitors. Lower equity-based
awards for the named executive officers and other senior management permit a broader base of Kroger
employees to participate in equity awards.
Amounts of equity awards issued and outstanding for the named executive officers are set forth in the
tables that follow this discussion and analysis.
RE T I R E M E N T A N D OT H E R BE N E F I T S
Kroger maintains a defined benefit and several defined contribution retirement plans for its employees.
The named executive officers participate in one or more of these plans, as well as one or more excess plans
designed to make up the shortfall in retirement benefits created by limitations under the Internal Revenue
Code on benefits to highly compensated individuals under qualified plans. Additional details regarding
retirement benefits available to the named executive officers can be found in the 2011 Pension Benefits table
and the accompanying narrative description that follows this discussion and analysis.
Kroger also maintains an executive deferred compensation plan in which some of the named executive
officers participate. This plan is a nonqualified plan under which participants can elect to defer up to 100%
of their cash compensation each year. Compensation deferred bears interest, until paid out, at the rate
representing Kroger’s cost of ten-year debt in the year the rate is set, as determined by Kroger’s CEO prior to
the beginning of each deferral year. In 2011, that rate was 4.78%. Deferred amounts are paid out only in cash,
in accordance with a deferral option selected by the participant at the time the deferral election is made.
We adopted The Kroger Co. Employee Protection Plan, or KEPP, during fiscal year 1988. That plan was
amended and restated in 2007. All of our management employees and administrative support personnel whose
employment is not covered by a collective bargaining agreement, with at least one year of service, are covered.
KEPP provides for severance benefits and extended Kroger-paid health care, as well as the continuation of
other benefits as described in the plan, when an employee is actually or constructively terminated without
cause within two years following a change in control of Kroger (as defined in the plan). Participants are
entitled to severance pay of up to 24 months’ salary and bonus. The actual amount is dependent upon pay
level and years of service. KEPP can be amended or terminated by the Board at any time prior to a change
in control.
Stock option and restricted stock agreements with participants in Kroger’s long-term incentive plans
provide that those awards “vest,” with options becoming immediately exercisable and restrictions on restricted
stock lapsing, upon a change in control as described in the agreements.
None of the named executive officers is party to an employment agreement.
PE R Q U I S I T E S
The Committee does not believe that it is necessary for the attraction or retention of management talent
to provide the named executive officers a substantial amount of compensation in the form of perquisites. In
2011, the only perquisites available to our named executive officers were:
•฀ premiums paid on life insurance policies,
•฀ premiums paid on accidental death and dismemberment insurance;
•฀ premiums paid on long-term disability insurance policies; and
•฀ an achievement award.
In addition, in connection with Mr. Donnelly’s relocation to Cincinnati to become an executive officer,
he received relocation assistance under Kroger’s relocation policy and forgiveness of a loan. Pursuant to the
Sarbanes-Oxley Act of 2002 that loan could not be maintained to an executive officer.