Kroger 2015 Annual Report Download - page 32

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30
under the plan should unanticipated developments arise during the year. No adjustments were made to
the goals in 2015. The Compensation Committee, and the independent directors in the case of the CEO,
determined that the annual cash bonus payouts earned appropriately reflected the Company’s strong
performance in 2015 and therefore should not be adjusted.
The actual annual cash bonus percentage payout for 2015 represented excellent performance that
exceeded our business plan objectives, with the exception of operating costs as a percentage of sales,
without fuel. The strong link between pay and performance is illustrated by a comparison of earned
amounts under our annual cash bonus plan in previous years, such as 2009, 2010 and 2012, when
payouts were less than 100%. In those years, we did not achieve all of our business plan objectives. A
comparison of actual annual cash bonus percentage payouts in prior years demonstrates the variability
of annual cash bonus incentive compensation and its strong link to our performance:
Fiscal Year
Annual Cash Bonus
Payout Percentage
2015 126.7%
2014 121.5%
2013 104.9%
2012 85.9%
2011 138.7%
2010 53.9%
2009 38.5%
2008 104.9%
2007 128.1%
2006 141.1%
As described above, the annual cash bonus payout percentage is applied to each NEO’s bonus
potential, which is determined by the Compensation Committee, and the independent directors in the
case of the CEO. The actual amounts of performance-based annual cash bonuses paid to the NEOs for
2015 are reported in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation”
column and footnote 4 to that table.
Long-Term Compensation
The Compensation Committee believes in the importance of providing an incentive to the NEOs
to achieve the long-term goals established by the Board. As such, a majority of compensation is
conditioned on the achievement of the Company’s long-term goals and is delivered via four long-term
compensation vehicles: long-term cash bonus, performance units, stock options and restricted stock.
Long-term compensation promotes long-term value creation and discourages the over-emphasis of
attaining short-term goals at the expense of long-term growth.
The Compensation Committee considers several factors in determining the target value of long-
term compensation awarded to the NEOs or, in the case of the CEO, recommending to the independent
directors the amount awarded. These factors include:
• The compensation consultant’s benchmarking report regarding long-term compensation awarded by
our peer group;
• The officer’s level in the organization and the internal relationship of long-term compensation
awards within Kroger;
• Individual performance; and
• The recommendation of the CEO, for all NEOs other than the CEO.