Kroger 2012 Annual Report Download - page 51

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49
SH A R E H O L D E R P R O P O S A L
( I T E M N O. 5 )
We have been notified by a shareholder, the name and shareholdings of which will be furnished promptly
to any shareholder upon written or oral request to Kroger’s Secretary at Kroger’s executive offices, that it
intends฀to฀propose฀the฀following฀resolution฀at฀the฀annual฀meeting:
IN D E P E N D E N T B O A R D C H A I R
RESOLVED:฀The฀shareholders฀of฀Kroger฀(the฀“Company”)฀urge฀the฀Board฀of฀Directors฀to฀adopt฀a฀policy฀
that the Board’s chairman be an independent director. The policy should be implemented so as not to violate
any฀contractual฀obligation฀and฀should฀specify:฀(a)฀how฀to฀select฀a฀new฀independent฀chairman฀if฀a฀ current฀
chairman฀ceases฀to฀be฀independent฀during฀the฀time฀between฀annual฀meetings฀of฀shareholders;฀and,฀(b)฀that฀
compliance with the policy is excused if no independent director is available and willing to serve as chairman.
SUPPORTING STATEMENT: It is the responsibility of the Board of Directors to protect shareholders’
long-term interests by providing independent oversight of management. By setting agendas, priorities and
procedures,฀the฀position฀of฀Chairman฀is฀critical฀in฀shaping฀the฀work฀of฀the฀Board.
In฀our฀opinion,฀a฀board฀of฀directors฀is฀less฀likely฀to฀provide฀rigorous฀independent฀oversight฀of฀management฀
the Chairman is the CEO, as is the case with our Company. CEO David B. Dillon has served as both Chairman
and CEO since 2004.
We believe that having a board chairman who is independent of the Company and its management is a
governance practice that will promote greater management accountability to shareholders and lead to a more
objective evaluation of management.
According฀ to฀ the฀ Millstein฀ Center฀ for฀ Corporate฀ Governance฀ and฀ Performance฀ (Yale฀ School฀ of฀
Management),฀“The฀independent฀chair฀curbs฀conflicts฀of฀interest,฀promotes฀oversight฀of฀risk,฀manages฀the฀
relationship between the board and CEO, serves as a conduit for regular communication with shareowners,
and฀is฀a฀logical฀next฀step฀in฀the฀development฀of฀an฀independent฀board.”฀(Chairing฀the฀Board:฀The฀Case฀for฀
Independent฀Leadership฀in฀Corporate฀North฀America,฀2009)
An NACD Blue Ribbon Commission on Directors’ Professionalism recommended several years ago that
an independent director should be charged with “organizing the board’s evaluation of the CEO and provide
ongoing฀ feedback;฀ chairing฀ executive฀ sessions฀ of฀ the฀ board;฀ setting฀ the฀ agenda฀ and฀ leading฀ the฀ board฀ in฀
anticipating and responding to crises.” A blue-ribbon report from The Conference Board echoed that sentiment
a few years later.
A number of institutional investors believe that a strong, objective board leader can best provide the
necessary฀ oversight฀ of฀ management.฀ Thus,฀ the฀ California฀ Public฀ Employees’฀ Retirement฀ System’s฀ Global฀
Principles฀of฀Accountable฀Corporate฀Governance฀recommends฀that฀a฀company’s฀board฀should฀generally฀be฀
chaired by an independent director, as does the Council of Institutional investors.
We thus believe that an independent director serving as chairman can help ensure the functioning of an
effective board. We urge you to vote FOR this resolution.
TH E B O A R D O F D I R E C T O R S R E C O M M E N D S A V O T E A G A I N S T T H I S P R O P O S A L F O R T H E
FO L L O W I N G R E A S O N S :
Kroger’s Board is structured to provide the best governance on behalf of shareholders. That structure
also eliminates all of the concerns raised in the proponent’s supporting statement.
Kroger’s Board is comprised of an overwhelming majority, 87%, of independent directors. Each of these
directors is elected annually by the shareholders. And although not addressed in the proposal, Kroger’s Board
is led by a strong independent Lead Director who serves the same functions and provides safeguards against
mismanagement฀ that฀the฀proposal฀seeks.฀In฀particular,฀Kroger’s฀Lead฀ Director฀serves฀in฀a฀variety฀ of฀roles,฀
including reviewing and approving all Board meeting agendas, meeting materials and schedules to ensure that
the appropriate topics are reviewed and that sufficient time is allocated to each; serving as a liaison between