Kroger 2014 Annual Report Download - page 27
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PE R F O R M A N C E - B A S E D A N N U A L C A S H B O N U S
Alargepercentageofouremployeesatalllevels,includingthenamedexecutiveofficers,areeligible
toreceiveaperformance-basedannualcashbonusbasedontheperformanceofKroger(inthecaseofthe
namedexecutiveofficers)orbusinessunit(inthecaseofemployeesinourbusinessunits).TheCommittee
establishesbonuspotentialsforeachnamedexecutiveofficer,otherthantheCEO,whosebonuspotentialis
establishedbytheindependentdirectors.Actualpayouts,whichcanexceed100%ofthepotentialamounts
butmaynotexceed200% ofthepotential amounts,representtheextentto whichperformancemeetsor
exceedsthethresholdsestablishedbytheCommittee.Actualpayoutsmaybeaslowaszeroifperformance
doesnotmeetthethresholdsestablishedbytheCommittee.
TheCommitteeconsidersseveralfactorsinmakingitsdeterminationorrecommendationastobonus
potentials. First, the individual’s level within the organization is a factor in that the Committee believes
thatmoreseniorexecutivesshouldhaveasubstantialpartoftheircompensationdependentuponKroger’s
performance.Second,theindividual’ssalary isafactorsothatasubstantial portionofa named executive
officer’stotalcashcompensationisdependentuponKroger’sperformance.Finally,theCommitteeconsiders
thereportofitscompensationconsultanttoassessthebonuspotentialofthenamedexecutiveofficersinlight
oftotalcompensationpaidtocomparableexecutivepositionsintheindustry.
TheannualcashbonuspotentialineffectfollowingtheannualreviewofcompensationinJuneforeach
namedexecutiveofficerisshownbelow.Actualbonuspayoutsareproratedtoreflectchanges,ifany,tobonus
potentials during the year.
Annual Bonus Potential
2012 2013 2014
W.RodneyMcMullen* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 $1,000,000 $1,500,000
J.MichaelSchlotman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 550,000 $ 550,000 $ 550,000
MichaelL.Ellis**. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 375,000 $ 800,000
KathleenS.Barclay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 550,000 $ 550,000 $ 550,000
MikeDonnelly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 425,000 $ 425,000 $ 550,000
DavidB.Dillon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500,000 $1,500,000 $1,230,000
* Mr. McMullen’s annual bonus potential increased to $1,600,000 effective upon his appointment as
ChairmanoftheBoardonJanuary1,2015.
** Mr.Ellisfirstbecameanamedexecutiveofficerin2013.
Over timethe Committee andour independentdirectors haveplacedan increased emphasis on our
strategicplanbymakingthetargets moredifficulttoachieve.Thebonusplanallowsforminimalorzero
bonustobeearned atrelativelylowlevelsofperformancetoprovideincentivefor achievingevenhigher
levels of performance.
The amount of bonus that the named executive officers earn each year is based upon Kroger’s
performancecomparedtotargetsestablishedbytheCommitteeandtheindependentdirectorsbasedonthe
businessplanadoptedbytheBoardofDirectors.In2014,30%ofthebonuswasbasedonatargetforidentical
saleswithoutsupermarketfuel;30%wasbasedonatargetforEBITDAwithoutsupermarketfuel;30%was
basedonimplementationandresultsofasetofmeasuresunderourstrategicplan,and10%wasbasedon
atargetfortotaloperatingcostsasapercentageofsales,excludingfuel.Anadditional5%wouldbeearned
ifKrogerachievedthreegoalswithrespecttoitssupermarketfueloperations:achievementofthetargeted
fuelEBITDAof$208.25million,anincreaseintotalgallonssoldof3%,andachievementof1,325fuelcenters
placedinservice.Thefuelbonusof5%isonlyavailableifallthreemeasuresaremet.Ifanyofthethreefuel
goalsarenotmet,thereisnopayoutunderthefuelmeasurement.Krogerexceededthethreegoalsand,asa
result,receivedthe5%fuelbonus.