Kroger 2014 Annual Report Download - page 20
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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 is
responsiblefortheoverallsupervisionofourriskmanagementactivities.TheBoard’soversightofthematerial
risksfacedbyKrogeroccursatboththefullBoardlevelandatthecommitteelevel.
The Audit Committee has oversight responsibility not only for financial reporting of Kroger’s major
financialexposuresandthestepsmanagementhastakentomonitorandcontrolthoseexposures,butalsofor
theeffectivenessofmanagement’sprocessesthatmonitorandmanagekeybusinessrisksfacingKroger,aswell
asthemajorareasofriskexposureandmanagement’seffortstomonitorandcontrolthatexposure.TheAudit
Committeealsodiscusseswithmanagementitspolicieswithrespecttoriskassessmentandriskmanagement.
Management,includingourChiefEthicsandComplianceOfficer,providesregularupdatesthroughout
theyeartotherespectiveBoardcommitteesregardingthemanagementoftheriskstheyoversee,andeachof
thesecommitteesreportsonrisktothefullBoardateachregularmeetingoftheBoard.
Inadditiontothereportsfromthecommittees,theBoardreceivespresentationsthroughouttheyear
fromvariousdepartmentandbusinessunitleadersthatincludediscussionofsignificantrisksasnecessary.At
eachBoardmeeting,theChairmanandCEOaddressesmattersofparticularimportanceorconcern,including
anysignificantareasofriskthatrequireBoardattention.Additionally,throughdedicatedsessionsfocusing
entirelyoncorporatestrategy,thefullBoardreviewsindetailKroger’sshort-andlong-termstrategies,including
consideration of significant risks facing Kroger and their potential impact. The independent directors, in
executivesessionsledbytheLeadDirector,addressmattersofparticularconcern,includingsignificantareas
ofrisk,thatwarrantfurtherdiscussionorconsiderationoutsidethepresenceofKrogeremployees.
Webelievethatourapproachtoriskoversight,asdescribedabove,optimizesourabilitytoassessinter-
relationshipsamongthevariousrisks,makeinformedcost-benefitdecisions,andapproachemergingrisksina
proactivemannerforKroger.WealsobelievethatourriskstructurecomplementsourcurrentBoardleadership
structure,asitallowsourindependentdirectors,throughthefivefullyindependentBoardcommittees,and
inexecutive sessions of independentdirectorsledbytheLeadDirector, to exerciseeffectiveoversightof
theactionsofmanagement,ledbyMr.McMullenasChairmanoftheBoardandCEO,inidentifyingrisksand
implementingeffectiveriskmanagementpoliciesandcontrols.
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
The Board is composed of ten independent non-employee directors and one management director,
Mr. McMullen, the Chairman and CEO. The Board has established five standing committees — audit,
compensation,corporategovernance,financialpolicy,andpublicresponsibilities.Eachcommitteeiscomposed
solely of independent directors, each with a different independent director serving as committee chair.
In addition, as provided in the Guidelines on Issues of Corporate Governance,theBoardhasdesignated
one of the independent directors as Lead Director. The Lead Director serves a variety of roles, including
reviewingandapprovingBoardmeetingagendas,materialsandschedulestoconfirmtheappropriatetopics
arereviewedandsufficienttimeisallocatedtoeach;servingasliaisonbetweentheChairman,management,
andthenon-managementdirectors;presidingattheexecutivesessionsofindependentdirectorsandatall
othermeetingsoftheBoardatwhichtheChairmanisnotpresent;callinganexecutivesessionofindependent
directorsatanytimeandservingastheBoard’srepresentativeforanyconsultationanddirectcommunication,
followingarequest,withmajorshareholders.UnlessotherwisedeterminedbytheBoard,thechairofthe
CorporateGovernanceCommitteeisdesignatedastheLeadDirector.RobertBeyer,anindependentdirector
andthechairoftheCorporateGovernanceCommittee,iscurrentlytheLeadDirector.Mr.Beyerisaneffective
LeadDirectorforKrogerdueto,amongotherthings,hisindependence,hisdeepstrategicandoperational
understandingofKrogerobtainedwhileservingasaKrogerdirector,hisinsightintocorporategovernance
andhisexperienceonotherboards.