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23
The฀consultant฀compares฀these฀elements฀against฀those฀of฀other฀companies฀in฀a฀group฀of฀publicly-traded฀
food and drug retailers. For 2013, the group consisted of:
Costco Wholesale Supervalu
CVS/Caremark Target
Rite Aid Wal-Mart
Safeway Walgreens
This฀peer฀group฀is฀the฀same฀group฀as฀was฀used฀in฀2012.฀The฀make-up฀of฀the฀compensation฀peer฀group฀
is reviewed annually and modified as circumstances warrant. Industry consolidation and other competitive
forces will change the peer group used over time. The consultant also provides the Committee data from
companies฀in฀“general฀industry,”฀a฀representation฀of฀major฀publicly-traded฀companies.฀These฀data฀are฀reference฀
points,฀particularly฀for฀senior฀staff฀positions฀where฀competition฀for฀talent฀extends฀beyond฀the฀retail฀sector.
In 2009, the Committee directly engaged an additional compensation consultant to conduct a review
of฀ Kroger’s฀ executive฀ compensation.฀ This฀ consultant,฀ from฀ Frederic฀ W.฀ Cook฀ &฀ Co.,฀ Inc.,฀ examined฀ the฀
compensation฀philosophy,฀peer฀group฀composition,฀annual฀cash฀bonus,฀and฀long-term฀incentive฀compensation฀
including฀equity฀awards.฀The฀consultant฀concluded฀that฀Kroger’s฀executive฀compensation฀program฀met฀the฀
Committee’s฀objectives,฀and฀that฀it฀provides฀a฀strong฀linkage฀between฀pay฀and฀performance.฀The฀Committee฀
expects฀to฀engage฀an฀additional฀compensation฀consultant฀from฀time฀to฀time฀as฀it฀deems฀advisable.
Considering฀the฀size฀of฀Kroger฀in฀relation฀to฀other฀peer฀group฀companies,฀the฀Committee฀believes฀that฀
salaries฀paid฀to฀our฀executive฀officers฀should฀be฀at฀or฀above฀the฀median฀paid฀by฀competitors฀for฀comparable฀
positions.฀The฀committee฀also฀aims฀to฀provide฀an฀annual฀bonus฀potential฀to฀our฀executive฀officers฀that,฀if฀
the฀ increasingly฀ more฀ challenging฀ annual฀ business฀ plan฀ objectives฀ are฀ achieved,฀ would฀ cause฀ total฀ cash฀
compensation฀to฀be฀meaningfully฀above฀the฀median.
CO M P O N E N T S O F E X E C U T I V E C O M P E N S A T I O N A T K R O G E R
Compensation for our named executive officers is comprised of the following:
•฀ Salary;฀
•฀ Performance-Based฀Annual฀Cash฀Bonus฀(annual,฀non-equity฀incentive฀pay);
•฀ Performance-Based฀ Long-Term฀ Compensation฀ (long-term,฀ cash฀ and฀ performance฀ unit฀
incentive฀compensation);
•฀ Other฀Equity฀(non-qualified฀stock฀options฀and฀restricted฀stock);
•฀ Retirement฀and฀other฀benefits;฀and
•฀ Perquisites.฀
SA L A R Y
We฀provide฀our฀named฀executive฀officers฀and฀other฀employees฀a฀fixed฀amount฀of฀cash฀compensation฀–฀
salary฀–฀for฀their฀work.฀Salaries฀for฀named฀executive฀officers฀(with฀the฀exception฀of฀the฀CEO)฀are฀established฀
each฀year฀by฀the฀Committee,฀in฀consultation฀with฀the฀CEO.฀The฀CEO’s฀salary฀is฀established฀by฀the฀independent฀
directors.฀Salaries฀for฀the฀named฀executive฀officers฀were฀reviewed฀in฀June฀2013.
The฀amount฀of฀each฀executive’s฀salary฀is฀influenced฀by฀numerous฀factors฀including:
•฀ An฀assessment฀of฀individual฀contribution฀in฀the฀judgment฀of฀the฀CEO฀and฀the฀Committee฀(or,฀in฀the฀case฀
of฀the฀CEO,฀of฀the฀Committee฀and฀the฀rest฀of฀the฀independent฀directors);
•฀ Benchmarking฀with฀comparable฀positions฀at฀peer฀group฀companies;
•฀ Tenure;฀and
•฀ Relationship฀with฀the฀salaries฀of฀other฀executives฀at฀Kroger.฀