Kroger 2012 Annual Report Download - page 26

24
In 2012, as in all years, the Committee retained discretion to reduce the bonus payout for all executive
officers, including the named executive officers, if the Committee determined for any reason that the bonus
payouts were not appropriate. The independent directors retained that discretion for the CEO’s bonus. Those
bodies also retained discretion to adjust the targets under the plan should unanticipated developments arise
during the year. No adjustments were made to the targets. The Committee, and the independent directors in
the case of the CEO, determined that the bonus payouts for the named executive officers should remain the
same as other participants.
The percentage paid for 2012 represented good performance that fell short of meeting all of our
business plan objectives. A comparison of bonus percentages for the named executive officers in prior years
demonstrates฀the฀variability฀of฀annual฀cash฀bonus฀incentive฀compensation:
Fiscal Year
Annual Cash Bonus
Percentage
2012 85.881%
2011 138.666%
2010 53.868%
2009 38.450%
2008 104.948%
2007 128.104%
2006 141.118%
2005 132.094%
2004 55.174%
2003 24.100%
The actual amounts of annual performance-based cash bonuses paid to the named executive officers
for 2012 are reported in the Summary Compensation Table under the heading “Non-Equity Incentive Plan
Compensation” and footnote 4. These amounts represent the bonus potentials for each named executive
officer multiplied by the 85.881% payout percentage earned in 2012. In no event can any participant receive
a performance-based annual cash bonus in excess of $5,000,000. The maximum amount that a participant,
including each named executive officer, can earn is further limited to 200% of the participant’s bonus
potential amount.
The performance-based annual cash bonus for 2013 will be determined based on Kroger’s performance
against the identical sales, EBITDA, and strategic plan objectives established by the Committee. Each of these
metrics will again be weighted the same to indicate to the organization the equal importance that each
measure has to Kroger’s overall strategy. The underlying strategy metrics have been revised from prior years
to focus on shorter-term measures, as the long-term bonus emphasizes long-term performance. The 2013 plan
also฀provides฀for฀an฀additional฀5%฀payout฀if฀our฀goals฀for฀supermarket฀fuel฀EBITDA,฀supermarket฀fuel฀gallons฀
sold, and targeted number of fuel centers in operation at the fiscal year end are achieved.
LO N G - T E R M I N C E N T I V E S
The Committee continues to believe in the importance of providing an incentive to the named executive
officers to achieve the long-term goals established by the Board of Directors by conditioning a significant
portion of compensation on the achievement of those goals.
In 2006, the Committee adopted the first in a series of long-term performance based plans designed
to reward participants for improving the long-term performance of Kroger. These earlier plans provided for
overlapping four year performance periods that allowed for the earning of a long-term cash bonus. In 2010,
Kroger’s long-term incentive program was redesigned to combine the total value of our long-term cash bonus
and equity programs into a cohesive, strategic reward for eligible executives at the Vice President level and
above. Approximately fifty percent of the plan value is performance-based, delivered in cash and performance
units, contingent on the achievement of certain strategic performance measures. The other fifty percent of
the฀value฀is฀time-based฀and฀delivered฀in฀stock฀options฀and฀restricted฀shares.฀Each฀component฀is฀described฀in฀
more detail below.