Kroger 2014 Annual Report Download - page 25
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CO M P E N S A T I O N P O L I C I E S A S T H E Y R E L A T E T O R I S K M A N A G E M E N T
As part of the Compensation Committee’s review of our compensation practices, the Committee
considers and analyzes the extent to which risks arise from such practices and their impact on Kroger’s
business. Asdiscussedabovein theCompensationDiscussionand Analysis, ourpoliciesand practicesfor
compensatingemployeesaredesignedto,amongotherthings,attractandretainhighqualityandengaged
employees.Inthisprocess,theCommitteealsofocusesonminimizingriskthroughtheimplementationof
certainpracticesandpolicies,suchastheexecutivecompensationrecoupmentpolicy,whichisdescribedin
more detail on page 30.Accordingly,wedonotbelievethatourcompensationpracticesandpoliciescreate
risksthatarereasonablylikelytohaveamaterialadverseeffectonKroger.
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
AsreferencedearlierinthisCompensationDiscussionandAnalysis,theCommitteedirectlyengagesa
compensationconsultantfromMercerHumanResourceConsultingtoadvisetheCommitteeinthedesignof
compensationforexecutiveofficers.
The Mercer consultant conducts an annual competitive assessment of executive positions at Kroger
forthe Committee.The assessment isoneofseveralbases, asdescribed above,on whichthe Committee
determinescompensation.Theconsultantassesses:
• Basesalary;
• Targetannualperformance-basedbonus;
• Targetannualcashcompensation(thesumofsalaryandannualbonus);
• Annualizedlong-termincentiveawards,suchasstockoptions,restrictedstock,andperformance-based
long-termcashbonusesandperformance-basedequityawards;and
• Totaldirectcompensation(thesumofalltheseelements).
Theconsultantcomparestheseelementsagainstthoseofothercompaniesinagroupofpublicly-traded
foodanddrugretailers.For2014,ourpeergroupconsistedof:
CostcoWholesale SuperValu
CVSHealth,formerlyCVSCaremark Target
Rite Aid Wal-Mart
Safeway WalgreenBootsAlliance,formerlyWalgreen
Thispeergroupisthesamegroupaswasusedin2013.Themake-upofthecompensationpeergroup
is reviewed annually and modified as circumstances warrant. Industry consolidation and other competitive
forceswillchangethepeergroupusedovertime.TheconsultantalsoprovidestheCommitteedatafrom
companies in “general industry,” a representation of major publicly-traded companies of similar size and
scope. These data serve as reference points, particularly for senior staff positions where competition for talent
extendsbeyondtheretailsector.
Fromtime totime,theCommitteewill engageanadditional compensationconsultanttoconduct an
additionalreviewofKroger’sexecutivecompensation,asitdeemsadvisable.
ConsideringthesizeofKrogerinrelationtootherpeergroupcompanies,theCommitteebelievesthat
salaries paid to our named executive officers should be at or above the median paid by competitors for
comparablepositions.TheCommitteealsoaimstoprovideanannualbonuspotentialtoournamedexecutive
officersthat,iftheincreasinglymorechallengingannualbusinessplanobjectivesareachieved,wouldcause
totalcashcompensationtobemeaningfullyabovethemedian.