Kroger 2014 Annual Report Download - page 24
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Coveredindividualsareexpectedtoachievethetargetlevelwithinfiveyearsofappointmenttotheir
position.Iftherequirementshavenotbeenmet,directors,officersandkeyexecutives,includingthenamed
executiveofficers,musthold100%ofsharesreceivedupontheexerciseofstockoptionsoruponthevesting
ofrestrictedstock,exceptthosenecessarytopaytheexercisepriceoftheoptionsand/orapplicabletaxes,
andmustretainallKrogersharesunlessthedispositionisapprovedinadvancebytheCEO,orbytheBoard
orCompensationCommitteefortheCEO.
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
compensationofourexecutiveofficers,includingthenamedexecutiveofficers,withtheexceptionofthe
ChiefExecutiveOfficer.TheCommittee’sroleregardingtheCEO’scompensationistomakerecommendations
totheindependentmembersoftheBoard;thosemembersoftheBoardestablishtheCEO’scompensation.
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
TheindependentmembersoftheBoardhavetheexclusiveauthoritytodeterminetheamountofthe
CEO’s salary, the bonus potential for the CEO, the nature and amount of any equity awards made to the
CEO,andany other compensationdecisionsrelated to theCEO.In setting the annual bonuspotential for
theCEO,theindependentdirectorsdeterminethedollaramountthatwillbemultipliedbythepercentage
payoutundertheannualbonusplangenerallyapplicabletoallcorporatemanagement,includingthenamed
executive officers. The independent directors retain discretion to reduce the percentage payout the CEO
wouldotherwisereceive.Theindependentdirectorsthusmakeaseparatedeterminationannuallyconcerning
boththeCEO’sbonuspotentialandthepercentageofbonuspaid.
The Committeeperformsthesamefunctionandexercisesthesameauthorityastotheothernamed
executiveofficers.TheCommittee’sannualreviewofcompensationforthenamedexecutiveofficersincludes
thefollowing:
• Conductsanannualreviewofallcomponentsofcompensation,quantifyingtotalcompensationforthe
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
performanceunitcompensation;equity;accumulatedrealizedandunrealized stockoptiongainsand
restrictedstockandperformanceunitvalues;thevalueofanyperquisites;retirementbenefits;company
paidhealthandwelfarebenefits;bankedvacation;severancebenefitsavailableunderTheKrogerCo.
Employee Protection Plan; and earnings and payouts available under Kroger’s nonqualified deferred
compensation program.
• ConsidersinternalpayequityatKrogertoensurethattheCEOisnotcompensateddisproportionately.
TheCommitteehasdeterminedthatthecompensationoftheCEOandthatoftheothernamedexecutive
officersbearsareasonablerelationshiptothecompensationlevelsofotherexecutivepositionsatKroger
takingintoconsiderationperformanceanddifferencesinresponsibilities.
• ReviewsareportfromtheCommittee’scompensationconsultants(describedbelow)comparingnamed
executiveofficerandotherseniorexecutivecompensationwiththatofothercompanies,primarilyour
competitors,toensurethattheCommittee’sobjectivesofcompetitivenessaremet.
• TakesintoaccountarecommendationfromtheCEO(exceptinthecaseofhisowncompensation)for
salary, bonus potential, and equity awards for each of the senior officers including the other named
executiveofficers.TheCEO’srecommendationtakesintoconsiderationtheobjectives established by
andthereportsreceivedbytheCommitteeaswellashisassessmentofindividualjobperformanceand
contributiontoourmanagementteam.
• Reviews of historical information regarding salary, bonus, and equity compensation for a three
year period.
In consideringeachofthefactorsabove,theCommitteedoes notmakeuse ofaformula, butrather
subjectivelyreviewseachinsettingcompensation.