Kroger 2012 Annual Report Download - page 52

50
the chairman of the Board, management, and the non-management directors; presiding at the executive
sessions฀of฀independent฀directors฀(held฀after฀each฀Board฀meeting)฀and฀at฀all฀other฀meetings฀of฀the฀Board฀at฀
which the chairman is not present; calling an executive session of the independent directors at any time; and
serving as the Board’s representative for any consultation and direct communication, following a request, with
major shareholders. These roles are set forth in the Board’s Guideline’s on Issues of Corporate Governance,
published฀on฀our฀website฀at฀ir.kroger.com.
The Board routinely reviews Kroger’s leadership structure. This review includes a discussion of Kroger’s
performance, the impact that the leadership has on that performance, and the structure that best serves the
interests of shareholders.
Contrary to the assertions in the proponent’s supporting statement, there is no established consensus that
separating the roles of the chairman and the CEO is a best practice or that such a separation enhances returns for
shareholders. The authors of a 2004 Wharton School of Business article entitled “Splitting Up the Roles of CEO
and฀ Chairman:฀ Reform฀ or฀ Red฀ Herring?”฀ (http://knowledge.wharton.upenn.edu/article.cfm?articleid=987)฀
concluded that there is no evidence that separating the positions of chairman and CEO improves corporate
performance.฀ In฀ “Corporate฀ Governance฀ Update:฀ Analyzing฀ Aspects฀ of฀ Board฀ Composition,”฀ David฀ A฀ Katz฀
and฀Laura฀A.฀McIntosh,฀New฀York฀Law฀Journal,฀January฀26,฀2012,฀the฀authors฀concluded฀that฀from฀a฀board฀
effectiveness perspective, there is no need to separate the roles of chairman and CEO so long as there is
an effective lead director in place. In addition, the majority of U.S. companies have not implemented the
structure recommended by the proposal.
While there may be circumstances in which shareholders of corporations would be best served by
having an independent Board chair, those circumstances simply do not currently exist at Kroger. There have
been times in Kroger’s past in which the positions of chairman of the Board and CEO have been separated,
but current circumstances do not warrant a separation. The Board will continue to review Kroger’s leadership
structure to ensure that the structure best addresses Kroger’s evolving and dynamic business. For the foregoing
reasons, the Board recommends a vote AGAINST this proposal.
SH A R E H O L D E R P R O P O S A L
( I T E M N O. 6 )
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:
WHEREAS฀product฀packaging฀is฀a฀significant฀consumer฀of฀natural฀resources฀and฀energy,฀and฀a฀major฀
source฀of฀waste฀and฀greenhouse฀gas฀(GHG)฀emissions.฀More฀than฀half฀of฀U.S.฀product฀packaging฀is฀discarded฀
in฀landfills฀or฀burned฀rather฀than฀recycled.฀Only฀12%฀of฀plastic฀packaging฀is฀recycled.
Paper฀ and฀ packaging฀ comprise฀ 44%฀ of฀ U.S.฀ landfill฀ waste.฀ Nestle฀ Waters฀ North฀ America฀ says฀ plastic฀
bottles฀are฀the฀largest฀contributor฀to฀it฀carbon฀footprint;฀Coca-Cola฀Co.฀reports฀packaging฀is฀the฀largest฀part฀
of the carbon footprint of several products. A recent analysis of U.S. Environmental Protection Agency data
estimates฀that฀the฀ energy฀ needed฀ to฀produce฀ and฀ dispose฀ of฀products฀and฀packaging฀ accounts฀for฀44%฀of฀
total฀U.S.฀GHG฀emissions.฀Decaying฀paper฀packaging฀in฀landfills฀forms฀methane,฀whose฀greenhouse฀warming฀
potential฀is฀72฀times฀more฀potent฀than฀CO2.฀Metal,฀paper฀and฀plastic฀packaging฀have฀large฀embodied฀energy฀
and emissions profiles because of the high costs of processing raw materials.
For generations taxpayers have subsidized solid waste disposal and recycling in the U.S. Extended
Producer฀Responsibility฀(EPR)฀is฀a฀corporate฀and฀public฀policy฀that฀shifts฀accountability฀for฀collection฀and฀
recycling from taxpayers and governments to producers. Coca-Cola and Nestle Waters have endorsed such
“Make฀ It฀ Take฀ It”฀ policies฀ for฀ financing฀ the฀ recycling฀ of฀ packaging฀ if฀ other฀ producers฀ also฀ pay฀ their฀ fair฀
share.฀When฀all฀producers฀pay฀fees฀based฀on฀the฀amount฀of฀packaging฀used,฀no฀company฀should฀have฀to฀pay฀
disproportionate฀cost.฀Unilever฀has฀set฀goals฀to฀increase฀recovery฀of฀its฀used฀packaging฀15%฀by฀2020.
In฀ many฀ other฀ countries,฀ consumer฀ brands฀ that฀ put฀ packaging฀ on฀ the฀ market฀ are฀ already฀ financially฀
responsible฀for฀its฀recycling.฀More฀than฀have฀of฀Organization฀for฀Economic฀Cooperation฀and฀Development฀
members฀ have฀ some฀ form฀ of฀ producer-financed฀ packaging฀ systems฀ in฀ place.฀ EPR฀ programs฀ in฀ Denmark,฀
Belgium,฀Netherlands฀and฀Germany฀recover฀far฀higher฀rates฀of฀packaging฀than฀the฀U.S.