Kroger 2013 Annual Report Download - page 23

Download and view the complete annual report

Please find page 23 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

21
In฀addition,฀beginning฀in฀2010,฀fifty฀percent฀of฀the฀time-based฀equity฀awards฀that฀otherwise฀would฀have฀
been฀granted฀to฀the฀named฀executive฀officers฀as฀restricted฀stock฀have฀been฀replaced฀with฀performance฀units฀
that฀are฀earned฀only฀to฀the฀extent฀that฀performance฀objectives฀are฀achieved.฀Equity฀compensation฀awards฀
continue฀to฀play฀an฀important฀role฀in฀rewarding฀named฀executive฀officers฀for฀the฀achievement฀of฀long-term฀
business฀objectives฀and฀providing฀incentives฀for฀the฀creation฀of฀shareholder฀value.฀
The following discussion and analysis addresses the compensation of the named executive officers, and
the฀factors฀considered฀by฀the฀Committee฀in฀setting฀compensation฀for฀the฀named฀executive฀officers฀and฀making฀
recommendations฀ to฀ the฀ independent฀ Board฀ members฀ in฀ the฀ case฀ of฀ the฀ CEO’s฀ compensation.฀ Additional฀
detail฀is฀provided฀in฀the฀compensation฀tables฀ and฀the฀accompanying฀narrative฀disclosures฀ that฀follow฀this฀
discussion and analysis.
EX E C U T I V E C O M P E N S A T I O N – OB J E C T I V E S
The฀ Committee฀has฀several฀related฀objectives฀regarding฀compensation.฀ First,฀the฀Committee฀believes฀
that฀compensation฀must฀be฀ designed฀to฀attract฀and฀retain฀those฀best฀suited฀to฀fulfill฀the฀challenging฀ roles฀
that฀executive฀officers฀play฀at฀Kroger.฀Second,฀some฀elements฀of฀compensation฀should฀help฀align฀the฀interests฀
of the officers with your interests as shareholders. Third, compensation should create strong incentives for
the฀ officers฀ (a)฀ to฀ achieve฀ the฀ annual฀ business฀ plan฀ targets฀ established฀ by฀ the฀ Board,฀ and฀ (b)฀ to฀ achieve฀
Kroger’s฀ long-term฀strategic฀objectives.฀In฀developing฀ compensation฀programs฀ and฀amounts฀ to฀meet฀these฀
objectives,฀the฀Committee฀exercises฀judgment฀to฀ensure฀that฀executive฀officer฀compensation฀is฀appropriate฀
and฀competitive฀in฀light฀of฀Kroger’s฀performance฀and฀the฀needs฀of฀the฀business.
SH A R E O W N E R S H I P G U I D E L I N E S
To฀ more฀ closely฀ align฀ the฀ interests฀ of฀ the฀ officers฀ with฀ your฀ interests฀ as฀ shareholders,฀ the฀ Board฀ of฀
Directors฀has฀adopted฀stock฀ownership฀guidelines.฀These฀guidelines฀require฀non-employee฀directors,฀officers฀
and฀some฀other฀key฀executives฀to฀acquire฀and฀hold฀a฀minimum฀dollar฀value฀of฀Kroger฀common฀shares.฀The฀
guidelines฀ require฀ the฀ CEO฀ to฀ acquire฀ and฀ maintain฀ ownership฀ of฀ Kroger฀ shares฀ equal฀ to฀ five฀ times฀ his฀
base฀salary;฀the฀Chief฀Operating฀Officer฀at฀four฀times฀his฀base฀salary;฀Executive฀Vice฀Presidents,฀Senior฀Vice฀
Presidents฀and฀non-employee฀directors฀at฀three฀times฀their฀base฀salaries฀or฀annual฀base฀cash฀retainers;฀and฀
other฀officers฀and฀key฀executives฀at฀two฀times฀their฀base฀salaries.฀Covered฀individuals฀are฀expected฀to฀achieve฀
the฀target฀level฀within฀five฀years฀of฀appointment฀to฀their฀position.฀Kroger฀ shares,฀including฀equity฀awards฀
from฀Kroger,฀may฀not฀be฀sold฀by฀covered฀individuals฀prior฀to฀achieving฀holdings฀required฀by฀the฀guidelines฀
(other฀than฀to฀pay฀for฀the฀exercise฀price฀of฀options฀and฀the฀taxes฀associated฀with฀equity฀awards),฀without฀the฀
approval of Kroger’s CEO.
RE S U L T S O F 2 0 1 3 A D V I S O R Y V O T E T O A P P R O V E E X E C U T I V E C O M P E N S A T I O N
At฀ the฀ 2013฀ Annual฀ Meeting฀ of฀ Shareholders,฀ we฀ held฀ our฀ third฀ annual฀ advisory฀ vote฀ on฀ executive฀
compensation.฀Over฀97%฀of฀the฀votes฀cast฀were฀in฀favor฀of฀the฀advisory฀proposal฀in฀2013.฀The฀Committee฀
considered฀this฀overwhelmingly฀favorable฀outcome฀and฀believes฀it฀conveys฀our฀shareholders’฀support฀of฀the฀
Committee’s decisions and the existing executive compensation programs. As a result, the Committee made
no material changes in the structure of our compensation programs or pay for performance philosophy. At the
2014฀Annual฀Meeting฀of฀Shareholders,฀in฀keeping฀with฀our฀shareholders’฀request฀for฀an฀annual฀advisory฀vote,฀
we will again hold a vote to approve executive compensation (see page 55).฀The฀Committee฀will฀continue฀to฀
consider the results from this year’s and future advisory votes on executive compensation.
RO L E O F C O M P E N S A T I O N C O M M I T T E E
The฀ Compensation฀ Committee฀ of฀ the฀ Board฀ has฀ the฀ primary฀ responsibility฀ for฀ establishing฀ the฀
compensation of Kroger’s executive officers, including the named executive officers, with the exception
of฀ the฀ Chief฀ Executive฀ Officer.฀ The฀ Committee’s฀ role฀ regarding฀ the฀ CEO’s฀ compensation฀ is฀ to฀ make฀
recommendations฀to฀the฀independent฀members฀of฀the฀Board;฀those฀independent฀Board฀members฀establish฀
the CEO’s compensation.