Kroger 2012 Annual Report Download - page 22

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20
RE S U L T S O F 2 0 1 2 A D V I S O R Y V O T E T O A P P R O V E E X E C U T I V E C O M P E N S A T I O N
At฀the฀2012฀Annual฀ Meeting฀ of฀Shareholders,฀ we฀held฀our฀second฀annual฀advisory฀vote฀on฀ executive฀
compensation. Approximately 96% of the votes cast were in favor of the advisory proposal in 2012. The
Committee considered this overwhelmingly favorable outcome and believes it conveys our shareholders’
support of the Committee’s decisions and the existing executive compensation programs. As a result, the
Committee made no material changes in the structure of our compensation programs or pay for performance
philosophy.฀At฀the฀2013฀Annual฀Meeting฀of฀Shareholders,฀in฀keeping฀with฀our฀shareholders’฀request฀for฀an฀annual฀
advisory฀vote,฀we฀will฀again฀hold฀a฀vote฀to฀approve฀executive฀compensation฀(see฀page฀46).฀The฀Committee฀
will continue to consider the results from this year’s and future advisory votes on executive compensation.
ES T A B L I S H I N G E X E C U T I V E C O M P E N S A T I O N
The independent members of the Board have the exclusive authority to determine the amount of the
CEO’s salary; the bonus potential for the CEO; the nature and amount of any equity awards made to the
CEO; and any other compensation questions related to the CEO. In setting the annual bonus potential for
the CEO, the independent directors determine the dollar amount that will be multiplied by the percentage
payout under the annual bonus plan generally applicable to all corporate management, including the named
executive officers. The independent directors retain discretion to reduce the percentage payout the CEO
would฀otherwise฀receive.฀The฀independent฀directors฀thus฀make฀a฀separate฀determination฀annually฀concerning฀
both the CEO’s bonus potential and the percentage of bonus paid.
The Committee performs the same function and exercises the same authority as to the other named
executive officers. The Committee’s annual review of compensation for the named executive officers includes
the฀following:
•฀ A฀detailed฀report,฀ by฀officer,฀that฀describes฀current฀compensation,฀the฀ value฀of฀equity฀ compensation฀
previously awarded, the value of retirement benefits earned, and any severance or other benefits payable
upon a change of control.
•฀ An฀ internal฀ equity฀ comparison฀ of฀ compensation฀ at฀ various฀ senior฀ levels.฀ This฀ current฀ and฀ historical฀
analysis฀ is฀ undertaken฀ to฀ ensure฀ that฀ the฀ relationship฀ of฀ CEO฀ compensation฀ to฀ other฀ senior฀ officer฀
compensation, and senior officer compensation to other levels in the organization, is equitable.
•฀ A฀ report฀ from฀ the฀ Committee’s฀ compensation฀ consultants฀ (described฀ below)฀ comparing฀ named฀
executive officer and other senior executive compensation with that of other companies, primarily our
competitors, to ensure that the Committee’s objectives of competitiveness are met.
•฀ A฀ recommendation฀ from฀ the฀ CEO฀ (except฀ in฀ the฀ case฀ of฀ his฀ own฀ compensation)฀ for฀ salary,฀ bonus฀
potential, and equity awards for each of the senior officers including the other named executive officers.
The฀ CEO’s฀ recommendation฀ takes฀ into฀ consideration฀ the฀ objectives฀ established฀ by฀ and฀ the฀ reports฀
received by the Committee as well as his assessment of individual job performance and contribution to
our management team.
•฀ 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 C O M M I T T E E ’S C O M P E N S A T I O N C O N S U L T A N T S A N D B E 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.