Kroger 2015 Annual Report Download - page 28

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The amounts shown below reflect the salaries of the NEOs effective at the end of each fiscal year.
Salary
2013 2014 2015
W. Rodney McMullen(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,000 $1,200,000 $1,240,000
J. Michael Schlotman(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 735,000 $ 760,000 $ 840,000
Michael J. Donnelly(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 643,560 $ 662,900 $ 750,000
Christopher T. Hjelm(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 700,000
Frederick J. Morganthall II(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . $ 670,000
(1) Mr. McMullen was named CEO of Kroger as of January 1, 2014 and Chairman of the Board as of
January 1, 2015.
(2) Messrs. Schlotman, Donnelly, Hjelm and Morganthall were each promoted to the position of
Executive Vice President effective September 1, 2015.
(3) Messrs. Hjelm and Morganthall became NEOs in 2015.
Annual Compensation – Performance-Based Annual Cash Bonus
The NEOs, along with approximately 13,000 of their fellow Kroger associates, participate in a
performance-based annual cash bonus plan. Approximately 7,000 of those associates are eligible for
the same plan as the NEOs. The remaining associates are eligible for an annual cash bonus plan of
which 40% is based on the Kroger corporate plan and 60% is based on the metrics and targets for their
respective supermarket division or operating unit of the Company.
Over time, the Compensation Committee and our independent directors have placed an increased
emphasis on our strategic plan by making the targets more difficult to achieve. The annual cash bonus
plan is structured to encourage high levels of performance. A threshold level of performance must be
achieved before any payouts are earned, while a payout of up to 200% of target can be achieved for
superior performance.
The amount of annual cash bonus that the NEOs earn each year is based upon Kroger’s
performance compared to targets established by the Compensation Committee and the independent
directors based on the business plan adopted by the Board of Directors.
The annual cash bonus plan is designed to encourage decisions and behavior that drive the
annual operating results and the long-term success of the Company. Kroger’s success is based on a
combination of factors, and accordingly the Compensation Committee believes that it is important to
encourage behavior that supports multiple elements of our business strategy.
Establishing Annual Cash Bonus Potentials
The Compensation Committee establishes annual cash bonus potentials for each NEO, other than
the CEO, whose annual cash bonus potential is established by the independent directors. Actual payouts,
which can exceed 100% of the potential amounts but may not exceed 200% of the potential amounts,
represent the extent to which performance meets or exceeds the goals established by the Compensation
Committee. Actual payouts may be as low as zero if performance does not meet the goals established by
the Compensation Committee.
The Compensation Committee considers multiple factors in making its determination or
recommendation as to annual cash bonus potentials:
• The individual’s level within the organization, as the Compensation Committee believes that more
senior executives should have a more substantial part of their compensation dependent upon
Kroger’s performance;
• The individual’s salary, as the Compensation Committee believes that a significant portion of a
NEO’s total cash compensation should be dependent upon Kroger’s performance;