Kroger 2012 Annual Report Download - page 23

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The฀ Mercer฀ consultant฀ conducts฀ an฀ annual฀ competitive฀ assessment฀ of฀ executive฀ positions฀ at฀ Kroger฀
for the Committee. The assessment is one of several bases, as described above, on which the Committee
determines฀compensation.฀The฀consultant฀assesses:
•฀ Base฀salary;
•฀ Target฀annual฀performance-based฀bonus;
•฀ Target฀annual฀cash฀compensation฀(the฀sum฀of฀salary฀and฀annual฀bonus);
•฀ Annualized฀long-term฀incentive฀awards,฀such฀as฀stock฀options,฀restricted฀shares,฀and฀performance-based฀
long-term cash bonuses and performance-based equity awards; and
•฀ Total฀direct฀compensation฀(the฀sum฀of฀all฀these฀elements).
•฀ The฀consultant฀compares฀these฀elements฀against฀those฀of฀other฀companies฀in฀a฀group฀of฀publicly-traded฀
food฀and฀drug฀retailers.฀For฀2012,฀the฀group฀consisted฀of:
Costco Wholesale Supervalu
CVS/Caremark Target
Rite Aid Wal-Mart
Safeway Walgreens
This฀peer฀group฀is฀the฀same฀group฀as฀was฀used฀in฀2011.฀The฀make-up฀of฀the฀compensation฀peer฀group฀
is reviewed annually and modified as circumstances warrant. Industry consolidation and other competitive
forces will change the peer group used over time. The consultant also provides the Committee data from
companies in “general industry,” a representation of major publicly-traded companies. These data are reference
points, particularly for senior staff positions where competition for talent extends beyond the retail sector.
In 2009, the Committee directly engaged an additional compensation consultant to conduct a review
of฀ Kroger’s฀ executive฀ compensation.฀ This฀ consultant,฀ from฀ Frederic฀ W.฀ Cook฀ &฀ Co.,฀ Inc.,฀ examined฀ the฀
compensation philosophy, peer group composition, annual cash bonus, and long-term incentive compensation
including equity awards. The consultant concluded that Kroger’s executive compensation program met the
Committee’s฀objectives,฀and฀that฀it฀provides฀a฀strong฀linkage฀between฀pay฀and฀performance.฀The฀Committee฀
expects to engage an additional compensation consultant from time to time as it deems advisable.
Considering the size of Kroger in relation to other peer group companies, the Committee believes that
salaries paid to our executive officers should be at or above the median paid by competitors for comparable
positions. The committee also aims to provide an annual bonus potential to our executive officers that, if
the increasingly more challenging annual business plan objectives are achieved, would cause total cash
compensation to be meaningfully above the median.
CO M P O N E N T S O F E X E C U T I V E C O M P E N S A T I O N A T K R O G E R
Compensation฀for฀our฀named฀executive฀officers฀is฀comprised฀of฀the฀following:
•฀ Salary;
•฀ Performance-Based฀Annual฀Cash฀Bonus฀(annual,฀non-equity฀incentive฀pay);
•฀ Performance-Based฀ Long-Term฀ Compensation฀ (long-term,฀ cash฀ and฀ performance฀ unit฀ incentive฀
compensation);
•฀ Other฀Equity฀(non-qualified฀stock฀options฀and฀restricted฀stock);
•฀ Retirement฀and฀other฀benefits;฀and
•฀ Perquisites.