Kroger 2013 Annual Report Download - page 24

Download and view the complete annual report

Please find page 24 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

22
ES T A B L I S H I N G E X E C U T I V E C O M P E N S A T I O N
The฀independent฀members฀of฀the฀Board฀have฀the฀exclusive฀authority฀to฀determine฀the฀amount฀of฀the฀
CEO’s฀ salary;฀ the฀ bonus฀ potential฀ for฀ the฀ CEO;฀ the฀ nature฀ and฀ amount฀ of฀ any฀ equity฀ awards฀ made฀ to฀ the฀
CEO;฀and฀any฀ other฀compensation฀questions฀related฀ to฀the฀CEO.฀In฀setting฀the฀annual฀bonus฀potential฀for฀
the฀CEO,฀the฀independent฀directors฀determine฀the฀dollar฀amount฀that฀will฀be฀multiplied฀by฀the฀percentage฀
payout฀under฀the฀annual฀bonus฀plan฀generally฀applicable฀to฀all฀corporate฀management,฀including฀the฀named฀
executive officers. The independent directors retain discretion to reduce the percentage payout the CEO
would฀otherwise฀receive.฀The฀independent฀directors฀thus฀make฀a฀separate฀determination฀annually฀concerning฀
both฀the฀CEO’s฀bonus฀potential฀and฀the฀percentage฀of฀bonus฀paid.
The Committee performs the same function and exercises the same authority as to the other named
executive officers. The Committee’s annual review of compensation for the named executive officers includes
the following:
•฀ Conducts฀an฀annual฀review฀of฀all฀components฀of฀compensation,฀quantifying฀total฀compensation฀for฀the฀
named executive officers on tally sheets. The review includes a summary for each named executive officer
of฀salary;฀annual฀performance-based฀cash฀bonus;฀long-term฀performance-based฀cash฀and฀performance฀
unit฀compensation;฀equity;฀accumulated฀realized฀and฀unrealized฀stock฀option฀gains฀and฀restricted฀stock฀
and฀ performance฀ unit฀ values;฀ the฀ value฀ of฀ any฀ perquisites;฀ retirement฀ benefits;฀ severance฀ benefits฀
available฀under฀The฀Kroger฀ Co.฀ Employee฀Protection฀ Plan;฀ and฀earnings฀ and฀payouts฀ available฀under฀
Kroger’s฀nonqualified฀deferred฀compensation฀program.
•฀ Considers฀internal฀pay฀equity฀at฀Kroger฀to฀ensure฀that฀the฀CEO฀is฀not฀compensated฀disproportionately.฀
The Committee has assured itself that the compensation of Kroger’s CEO and that of the other named
executive฀officers฀bears฀a฀reasonable฀relationship฀to฀the฀compensation฀levels฀of฀other฀executive฀positions฀
at฀Kroger฀taking฀into฀consideration฀performance฀and฀differences฀in฀responsibilities.
•฀ Reviews฀a฀report฀from฀the฀Committee’s฀compensation฀consultants฀(described฀below)฀comparing฀named฀
executive officer and other senior executive compensation with that of other companies, primarily our
competitors,฀to฀ensure฀that฀the฀Committee’s฀objectives฀of฀competitiveness฀are฀met.
•฀ Takes฀into฀account฀a฀recommendation฀from฀the฀CEO฀(except฀in฀the฀case฀of฀his฀own฀compensation)฀for฀
salary,฀ bonus฀ potential,฀ and฀ equity฀ awards฀ for฀ each฀ of฀ the฀ senior฀ officers฀ including฀ the฀ other฀ named฀
executive฀officers.฀The฀CEO’s฀recommendation฀takes฀into฀consideration฀the฀objectives฀ established฀by฀
and฀the฀reports฀received฀by฀the฀Committee฀as฀well฀as฀his฀assessment฀of฀individual฀job฀performance฀and฀
contribution฀to฀our฀management฀team.฀
•฀ Looks฀at฀historical฀information฀regarding฀salary,฀bonus,฀and฀equity฀compensation฀for฀a฀3-year฀period.฀
In฀ considering฀each฀of฀the฀factors฀above,฀the฀Committee฀does฀not฀ make฀use฀of฀a฀ formula,฀but฀rather฀
subjectively฀reviews฀each฀in฀setting฀compensation.
TH E C O M M I T T E E ’S C O M P E N S A T I O N C O N S U L T A N T S A N D B E N C H M A R K I N G
As referenced earlier in this compensation discussion and analysis, the Committee directly engages a
compensation฀consultant฀from฀Mercer฀Human฀Resource฀Consulting฀to฀advise฀the฀Committee฀in฀the฀design฀of฀
compensation for executive officers.
The฀ Mercer฀ consultant฀ conducts฀ an฀ annual฀ competitive฀ assessment฀ of฀ executive฀ positions฀ at฀ Kroger฀
for฀the฀ Committee.฀The฀ assessment฀is฀ one฀ of฀ several฀bases,฀as฀ described฀ above,฀on฀which฀the฀ Committee฀
determines compensation. The consultant assesses:
•฀ Base฀salary;
•฀ Target฀annual฀performance-based฀bonus;
•฀ Target฀annual฀cash฀compensation฀(the฀sum฀of฀salary฀and฀annual฀bonus);
•฀ Annualized฀long-term฀incentive฀awards,฀such฀as฀stock฀options,฀restricted฀shares,฀and฀performance-based฀
long-term฀cash฀bonuses฀and฀performance-based฀equity฀awards;฀and
•฀ Total฀direct฀compensation฀(the฀sum฀of฀all฀these฀elements).