Kroger 2012 Annual Report Download - page 30

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EX E C U T I V E C O M P E N S A T I O N R E C O U P M E N T P O L I C Y
If฀a฀material฀error฀of฀facts฀results฀in฀the฀payment฀to฀an฀executive฀officer฀at฀the฀level฀of฀Group฀Vice฀President฀
or higher of an annual bonus or a long-term bonus in an amount higher than otherwise would have been paid,
as determined by the Committee, then the officer, upon demand from the Committee, will reimburse Kroger
for the amounts that would not have been paid if the error had not occurred. This recoupment policy applies
to those amounts paid by Kroger within 36 months prior to the detection and public disclosure of the error.
In฀ enforcing฀ the฀ policy,฀ the฀ Committee฀ will฀ take฀ into฀ consideration฀ all฀ factors฀ that฀ it฀ deems฀ appropriate,฀
including:
•฀ The฀materiality฀of฀the฀amount฀of฀payment฀involved;
•฀ The฀ extent฀ to฀ which฀ other฀ benefits฀ were฀ reduced฀ in฀ other฀ years฀ as฀ a฀ result฀ of฀ the฀ achievement฀ of฀
performance levels based on the error;
•฀ Individual฀officer฀culpability,฀if฀any;฀and
•฀ Other฀factors฀that฀should฀offset฀the฀amount฀of฀overpayment.
SE C T I O N 1 6 2 ( M ) O F T H E I N T E R N A L R E V E N U E C O D E
Tax laws place a limit of $1,000,000 on the amount of some types of compensation for the CEO and the
next four most highly compensated officers reported in this proxy by virtue of being among the four highest
compensated฀officers฀(“covered฀employees”)฀that฀is฀tax฀deductible฀by฀Kroger.฀Compensation฀that฀is฀deemed฀
to be “performance-based” is excluded for purposes of the calculation and is tax deductible. Awards under
Kroger’s long-term incentive plans, when payable upon achievement of stated performance criteria, should
be considered performance-based and the compensation paid under those plans should be tax deductible.
Generally,฀compensation฀expense฀related฀to฀stock฀options฀awarded฀to฀the฀CEO฀and฀the฀next฀four฀most฀highly฀
compensated฀officers฀should฀be฀deductible.฀On฀the฀other฀hand,฀Kroger’s฀awards฀of฀restricted฀stock฀that฀vest฀
solely upon the passage of time are not performance-based. As a result, compensation expense for those
awards to the covered employees is not deductible, to the extent that the related compensation expense, plus
any other expense for compensation that is not performance-based, exceeds $1,000,000.
Kroger’s bonus plans rely on performance criteria, and have been approved by shareholders. As a result,
bonuses paid under the plans to the covered employees will be deductible by Kroger. In Kroger’s case, this
group of individuals is not identical to the group of named executive officers.
Kroger’s policy is, primarily, to design and administer compensation plans that support the achievement
of long-term strategic objectives and enhance shareholder value. Where it is material and supports Kroger’s
compensation philosophy, the Committee also will attempt to maximize the amount of compensation expense
that is deductible by Kroger.
CO M P E N S A T I O N C O M M I T T E E R E P O R T
The Compensation Committee has reviewed and discussed with management of the Company the
Compensation Discussion and Analysis contained in this proxy statement. Based on its review and discussions
with management, the Compensation Committee has recommended to the Company’s Board of Directors that
the Compensation Discussion and Analysis be included in the Company’s proxy statement and incorporated
by reference into its annual report on Form 10-K.
Compensation฀Committee:
Clyde฀R.฀Moore,฀Chair
John฀T.฀LaMacchia
Jorge฀P.฀Montoya
Susan฀M.฀Phillips
James A. Runde