Kroger 2015 Annual Report Download - page 39

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The Compensation Committee performs the same function and exercises the same authority as to
the other NEOs. In its annual review of compensation for the NEOs the Compensation Committee:
• Conducts an annual review of all components of compensation, quantifying total compensation for
the NEOs on tally sheets. The review includes a summary for each NEO of salary; performance-
based annual cash bonus; long-term performance-based cash and performance unit compensation;
stock options; restricted stock; accumulated realized and unrealized stock option gains and
restricted stock and performance unit values; the value of any perquisites; retirement benefits;
company paid health and welfare benefits; banked vacation; severance benefits available under
KEPP; and earnings and payouts available under Kroger’s nonqualified deferred compensation
program.
• Considers internal pay equity at Kroger to ensure that the CEO is not compensated
disproportionately. The Compensation Committee has determined that the compensation of the
CEO and that of the other NEOs bears a reasonable relationship to the compensation levels of
other executive positions at Kroger taking into consideration performance and differences in
responsibilities.
• Reviews a report from the Compensation Committee’s compensation consultants comparing
NEO and other senior executive compensation with that of other companies, including both our
peer group of competitors and a larger general industry group, to ensure that the Compensation
Committee’s objectives of competitiveness are met.
• Takes into account a recommendation from the CEO (except in the case of his own compensation)
for salary, annual cash bonus potential and long-term compensation awards for each of the senior
officers including the other NEOs. The CEO’s recommendation takes into consideration the
objectives established by and the reports received by the Compensation Committee as well as his
assessment of individual job performance and contribution to our management team.
In considering each of the factors above, the Compensation Committee does not make use of a
formula, but rather quantitatively reviews each factor in setting compensation.
Advisory Vote to Approve Executive Compensation
At the 2015 annual meeting, we held our fifth annual advisory vote on executive compensation.
Over 95% of the votes cast were in favor of the advisory proposal in 2015. The Compensation Committee
believes it conveys our shareholders’ support of the Compensation Committee’s decisions and the
existing executive compensation programs. As a result, the Compensation Committee made no material
changes in the structure of our compensation programs or our pay for performance philosophy.
At the 2016 annual meeting, in keeping with our shareholders’ request for an annual advisory
vote, we will again hold an advisory vote to approve executive compensation (see page 56). The
Compensation Committee will continue to consider the results from this year’s and future advisory votes
on executive compensation in their evaluation and administration of our compensation program.
Stock Ownership Guidelines
To more closely align the interests of our officers and directors with your interests as shareholders,
the Board has adopted stock ownership guidelines. These guidelines require non-employee directors,
executive officers, and other key executives to acquire and hold a minimum dollar value of Kroger
common shares as set forth below:
Position Multiple
Chief Executive Officer 5 times base salary
Vice Chairman, President and Chief Operating Officer 4 times base salary
Executive Vice Presidents and Senior Vice Presidents 3 times base salary
Other Key Executives 2 times base salary
Non-employee Directors 3 times annual base cash retainer