Kroger 2014 Annual Report Download - page 33
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• The extent to which other benefits were reduced in other years as a result of the achievement of
performancelevelsbasedontheerror;
• Individualofficerculpability,ifany;and
• Otherfactorsthatshouldoffsettheamountofoverpayment.
HE D G I N G P O L I C Y
Afterconsideringbestpracticesrelatedtoownershipofcompanyshares,theBoardadoptedapolicy
regardinghedging,pledging,andshortsalesofKrogersecurities.Krogerdirectorsandofficersareprohibited
fromengaging,directlyorindirectly,inhedgingtransactionsin,orshortsalesof,Krogersecurities.Inaddition,
theyareprecludedfrompledgingKrogersecuritiesascollateralforaloan,excepttotheextentthatshares
sopledgedareinexcessofthenumberofsharestheindividualisrequiredtomaintaininaccordancewith
Kroger’s share ownership guidelines more particularly described earlier in this Compensation Discussion
and Analysis.
SE C T I O N 1 6 2 ( M ) O F T H E I N T E R N A L R E V E N U E C O D E
Taxlawsplaceadeductibilitylimitof$1,000,000onsometypesofcompensationfortheCEOandthe
nextfourmosthighlycompensatedofficersreportedinthisproxybecausetheyareamongthefourhighest
compensatedofficers(“coveredemployees”).InKroger’scase,thisgroupofindividualsisnotidenticaltothe
groupofnamedexecutiveofficers.Compensationthatisdeemedtobe“performance-based”isexcludedfor
purposesofthecalculationandistaxdeductible.AwardsunderKroger’slong-termincentiveplans,when
payableuponachievementofstatedperformancecriteria,shouldbeconsideredperformance-basedandthe
compensationpaidunderthoseplansshouldbetaxdeductible.Generally,compensationexpenserelatedto
stockoptionsawardedtotheCEOandthenextfourmosthighlycompensatedofficersshouldbedeductible.
On the other hand, Kroger’s awards of restricted stock that vest solely upon the passage of time are not
performance-based. As a result, compensation expense for those awards to the covered employees is not
deductible,totheextentthattherelatedcompensationexpense,plusanyotherexpenseforcompensation
thatisnotperformance-based,exceeds$1,000,000.
Kroger’s bonus plansrelyonperformancecriteria, whichhavebeen approvedby shareholders.As a
result,bonusespaidundertheplanstothecoveredemployeesshouldbedeductiblebyKroger.
Kroger’spolicyis,primarily,todesignandadministercompensationplansthatsupporttheachievement
oflong-termstrategicobjectivesandenhanceshareholdervalue.WhereitismaterialandsupportsKroger’s
compensationphilosophy,theCommitteealsowillattempttomaximizetheamountofcompensationexpense
thatisdeductiblebyKroger.
CO M P E N S A T I O N C O M M I T T E E R E P O R T
The Compensation Committee has reviewed and discussed with management of the Company the
CompensationDiscussionandAnalysiscontainedinthisproxystatement.Basedonitsreviewanddiscussions
with management, the Compensation Committee has recommended to the Company’s Board that the
CompensationDiscussionandAnalysisbeincludedintheCompany’sproxystatementandincorporatedby
referenceintoitsAnnualReportonForm10-K.
CompensationCommittee:
ClydeR.Moore,Chair
JorgeP.Montoya
SusanM.Phillips
JamesA.Runde