Kroger 2013 Annual Report Download - page 20

Download and view the complete annual report

Please find page 20 of the 2013 Kroger annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

18
BO A R D O V E R S I G H T O F E N T E R P R I S E R I S K
While฀ risk฀ management฀ is฀ primarily฀ the฀ responsibility฀ of฀ Kroger’s฀ management฀ team,฀ the฀ Board฀ of฀
Directors฀is฀responsible฀for฀the฀overall฀supervision฀of฀our฀risk฀management฀activities.฀The฀Board’s฀oversight฀of฀
the฀material฀risks฀faced฀by฀Kroger฀occurs฀at฀both฀the฀full฀Board฀level฀and฀at฀the฀committee฀level.฀
The฀Board’s฀Audit฀Committee฀has฀oversight฀responsibility฀not฀only฀for฀financial฀reporting฀of฀Kroger’s฀
major฀ financial฀ exposures฀ and฀ the฀ steps฀ management฀ has฀ taken฀ to฀ monitor฀ and฀ control฀ those฀ exposures,฀
but฀also฀for฀the฀effectiveness฀of฀management’s฀processes฀that฀monitor฀and฀manage฀key฀business฀risks฀facing฀
Kroger,฀ as฀well฀as฀the฀major฀areas฀ of฀risk฀exposure฀ and฀management’s฀efforts฀to฀monitor฀and฀ control฀ that฀
exposure.฀The฀Audit฀Committee฀also฀discusses฀with฀management฀its฀policies฀with฀respect฀to฀risk฀assessment฀
and฀risk฀management.
Management,฀ including฀ Kroger’s฀ Chief฀ Ethics฀ and฀ Compliance฀ Officer,฀ provides฀ regular฀ updates฀
throughout฀the฀year฀to฀the฀respective฀committees฀regarding฀the฀management฀of฀the฀risks฀they฀oversee,฀and฀
each฀of฀these฀committees฀reports฀on฀risk฀to฀the฀full฀Board฀at฀each฀regular฀meeting฀of฀the฀Board.
In฀addition฀to฀the฀reports฀from฀the฀committees,฀the฀Board฀receives฀presentations฀throughout฀the฀year฀from฀
various฀department฀and฀business฀unit฀leaders฀that฀include฀discussion฀of฀significant฀risks฀as฀necessary.฀At฀each฀
Board฀meeting,฀the฀Chairman฀and฀the฀CEO฀address฀matters฀of฀particular฀importance฀or฀concern,฀including฀any฀
significant฀areas฀of฀risk฀that฀require฀Board฀attention.฀Additionally,฀through฀dedicated฀sessions฀focusing฀entirely฀
on฀ corporate฀ strategy,฀ the฀ full฀ Board฀ reviews฀ in฀ detail฀ Kroger’s฀ short-฀ and฀ long-term฀ strategies,฀ including฀
consideration฀ of฀ significant฀ risks฀ facing฀ Kroger฀ and฀ their฀ potential฀ impact.฀ The฀ independent฀ directors,฀ in฀
executive฀sessions฀led฀by฀the฀Lead฀Director,฀address฀matters฀of฀particular฀concern,฀including฀significant฀areas฀
of฀risk,฀that฀warrant฀further฀discussion฀or฀consideration฀outside฀the฀presence฀of฀Kroger฀employees.
We฀ believe฀ that฀ our฀ approach฀ to฀ risk฀ oversight,฀ as฀ described฀ above,฀ optimizes฀ our฀ ability฀ to฀ assess฀
inter-relationships฀ among฀the฀various฀ risks,฀make฀informed฀cost-benefit฀ decisions,฀and฀ approach฀ emerging฀
risks฀ in฀ a฀ proactive฀ manner฀ for฀ Kroger.฀ We฀ also฀ believe฀ that฀ our฀ risk฀ structure฀ complements฀ our฀ current฀
Board฀leadership฀structure,฀as฀it฀allows฀our฀independent฀directors,฀through฀the฀five฀fully฀independent฀Board฀
committees,฀ and฀ in฀ executive฀ sessions฀ of฀ independent฀ directors฀ led฀ by฀ an฀ independent฀ Lead฀ Director,฀ to฀
exercise฀effective฀oversight฀of฀the฀actions฀of฀management,฀led฀by฀Mr.฀McMullen฀as฀CEO,฀in฀identifying฀risks฀
and฀implementing฀effective฀risk฀management฀policies฀and฀controls.
BO A R D L E A D E R S H I P S T R U C T U R E A N D L E A D D I R E C T O R
Our฀Board฀is฀composed฀of฀eleven฀independent฀non-employee฀directors,฀and฀two฀management฀directors,฀
Mr.฀Dillon,฀the฀Chairman฀of฀the฀Board฀and฀our฀former฀Chief฀Executive฀Officer,฀and฀Mr.฀McMullen,฀our฀Chief฀
Executive Officer. In addition, as provided in our Guidelines on Issues of Corporate Governance,฀the฀Board฀
has฀designated฀one฀of฀the฀independent฀directors฀as฀Lead฀Director.฀The฀Board฀has฀established฀five฀standing฀
committees฀—฀audit,฀compensation,฀corporate฀governance,฀financial฀policy,฀and฀public฀responsibilities.฀Each฀
Board฀committee฀is฀composed฀solely฀of฀independent฀directors,฀each฀with฀a฀different฀independent฀director฀
serving฀as฀committee฀chair.฀The฀mix฀of฀experienced฀independent฀and฀management฀directors฀that฀make฀up฀
our฀Board,฀along฀with฀the฀independent฀role฀of฀our฀Lead฀Director฀and฀our฀independent฀Board฀committees,฀
benefits฀Kroger฀and฀its฀shareholders.
The฀ Board฀ designates฀one฀of฀the฀independent฀directors฀as฀a฀Lead฀Director.฀ The฀Lead฀Director฀serves฀
a฀ variety฀ of฀ roles,฀ including฀ reviewing฀ and฀ approving฀ Board฀ agendas,฀ meeting฀ materials฀ and฀ schedules฀ to฀
confirm฀the฀appropriate฀topics฀are฀reviewed฀and฀sufficient฀time฀is฀allocated฀to฀each;฀serving฀as฀liaison฀between฀
the฀ Chairman฀ of฀ the฀ Board,฀ management,฀ and฀ the฀ non-management฀ directors;฀ presiding฀ at฀ the฀ executive฀
sessions฀of฀independent฀directors฀and฀at฀all฀other฀meetings฀of฀the฀Board฀of฀Directors฀at฀which฀the฀Chairman฀
of฀the฀Board฀is฀not฀present;฀calling฀an฀executive฀session฀of฀independent฀directors฀at฀any฀time฀and฀serving฀as฀
the฀Board’s฀representative฀for฀any฀consultation฀and฀direct฀communication,฀following฀a฀request,฀with฀major฀
shareholders.฀Unless฀otherwise฀determined฀by฀the฀Board,฀the฀chair฀of฀the฀Corporate฀Governance฀Committee฀
is฀ designated฀as฀ the฀Lead฀Director.฀ Robert฀ Beyer,฀ an฀independent฀director฀ and฀the฀ chair฀of฀the฀ Corporate฀
Governance฀Committee,฀is฀currently฀our฀Lead฀Director.฀Mr.฀ Beyer฀is฀an฀effective฀Lead฀Director฀for฀Kroger฀
due to, among other things, his independence, his deep strategic and operational understanding of Kroger
obtained฀ while฀ serving฀as฀a฀ Kroger฀ director,฀his฀insight฀into฀corporate฀governance฀and฀his฀experience฀on฀
other฀boards.