Kroger 2014 Annual Report Download - page 31
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During2014,Krogerawarded446,288performanceunitstoapproximately178employees,includingthe
namedexecutiveofficers.TheCommitteeconsidersseveralfactorsindeterminingtheamountofperformance
unitsawardedtothenamedexecutiveofficersor,inthecaseoftheCEO,recommendingtotheindependent
directorstheamountawarded.ThesefactorsaredescribedintheEquityAwardssectionbelow.
Equity Awards
Awards based on Kroger’s common shares are granted periodically to the named executive officers
and a large number of other employees. Equity participation aligns the interests of employees with your
interest as shareholders, and Kroger historically has distributed equity awards widely. The plans include
bothstockoptionsandrestrictedstock.In2014,Krogergranted4,226,855stockoptionstoapproximately
8,514employees,includingthenamedexecutiveofficers.TheoptionspermittheholdertopurchaseKroger
commonsharesatanoptionpriceequaltotheclosingpriceofKrogercommonsharesonthedateofthegrant.
OptionsaregrantedonlyononeofthefourdatesofCommitteemeetingsconductedafterKroger’spublic
releaseofitsquarterlyearningsresults.During2014,Krogerawarded3,023,711sharesofrestrictedstockto
approximately21,299employees,includingthenamedexecutiveofficers.UnderKroger’slong-termincentive
plans,theCommitteedeterminesthevestingscheduleforstockoptionsandrestrictedstock.During2014,the
Committeegrantedtothenamedexecutiveofficers:(a)stockoptionswithafiveyearvestingschedule;and
(b)restrictedstockwithathreeorfiveyearvestingschedule(withtheexceptionofoneaward,whichhasa
oneyearvestingschedule).
As discussed earlier under Stock Ownership Guidelines, covered individuals, including the named
executiveofficers,musthold100%ofthesharesreceivedupontheexerciseofstockoptionsoruponthe
vestingofrestrictedstock,exceptthosenecessarytopaytheexercisepriceoftheoptionsand/orapplicable
taxes,untilapplicablestockownershipguidelinesaremet,unlessthedispositionisapprovedinadvanceby
theCEO,orbytheBoardorCompensationCommitteefortheCEO.
TheCommitteeconsidersseveralfactorsindeterminingtheamountofoptions,restrictedstock,and
performanceunitsawardedtothenamedexecutiveofficersor,inthecaseoftheCEO,recommendingtothe
independentdirectorstheamountawarded.Thesefactorsinclude:
• The compensation consultant’s benchmarking report regarding equity-based and other long-term
compensationawardedbyourcompetitors;
• Theofficer’slevelintheorganizationandtheinternalrelationshipofequity-basedawardswithinKroger;
• Individualperformance;and
• TherecommendationoftheCEO,forallnamedexecutiveofficersotherthantheCEO.
TheCommitteehaslongrecognizedthattheamountofcompensationprovidedtothenamedexecutive
officers through equity-based pay is often below the amount paid by our competitors. Relatively lower
equity-basedawardsforthenamedexecutiveofficersandotherseniormanagementpermitabroaderbaseof
Krogeremployeestoparticipateinequityawardsandfurtheremphasizesthepayforperformancephilosophy.
Amountsofequityawardsissuedandoutstandingforthenamedexecutiveofficersaresetforthinthe
tablesthatfollowthisdiscussionandanalysis.
RE T I R E M E N T A N D O T H E R B E N E F I T S
Krogermaintainsadefinedbenefitandseveraldefinedcontributionretirementplansforitsemployees.
Thenamedexecutiveofficersparticipateinoneormoreoftheseplans,aswellasoneormoreexcessplans
designedtomakeuptheshortfallinretirementbenefitscreatedbylimitationsundertheInternalRevenue
Code on benefits to highly compensated individuals under qualified plans. Additional details regarding
retirementbenefitsavailabletothenamedexecutiveofficerscanbefoundinthe2014PensionBenefitstable
and the accompanying narrative description that follows this discussion and analysis.
Krogeralsomaintainsanexecutivedeferredcompensationplaninwhichsomeofthenamedexecutive
officersparticipate.Thisplanisanonqualifiedplanunderwhichparticipantscanelecttodeferupto100%
of their cash compensation each year. Compensation deferred bears interest, until paid out, at the rate