Harris Teeter 2010 Annual Report Download - page 98

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to the executives of other companies in similar sectors. No specific compensation decision for any individual was
based on or justified by any Compensation Survey.
The Compensation Committee reviews applicable market information and the Compensation Surveys relating
to all elements of compensation paid to each of the four named executive officers listed in the Summary
Compensation Table for 2010, which we refer to as “NEOs”. In its annual review of executive compensation, the
Compensation Committee meets with the Company’s Chief Executive Officer with regard to the compensation
packages of the Company’s executive officers other than the Chief Executive Officer. The Chief Executive Officer
recommends any compensation adjustments for these officers to the Compensation Committee for its review, with
changes in compensation being based upon the individual’s performance, the performance of the Company or its
subsidiaries, as applicable, and the individual’s level of responsibility. The Compensation Committee accepts,
rejects or modifies the Chief Executive Officer’s recommendations at its discretion. The Compensation Committee
then makes a recommendation to the Board of Directors for its approval. The Compensation Committee, along with
the Chairman of the Corporate Governance & Nominating Committee, performs the annual evaluation of the Chief
Executive Officer. The compensation for the Chief Executive Officer is approved by the independent directors upon
the recommendation of the Compensation Committee.
Elements of Compensation
Annual Cash Compensation. The Company’s annual cash compensation for its executives consists of base
salary and cash incentive bonuses.
The total annual cash compensation levels of the respective executives reflect the varying duties and
responsibilities of each individual executive’s position with the Company or a subsidiary, as appropriate, with
consideration given to the executive’s individual performance and the relative size and complexity of each business
unit, as well as the unit’s relative contribution to the consolidated financial condition and results of operation of
the Company. As a general rule, the total annual cash compensation of executives employed by the Company is
somewhat higher than cash compensation for executives of the subsidiary companies, primarily due to the higher
level of responsibilities of the holding Company executives for the Company’s total performance.
For Fiscal 2010, base salaries of the NEOs were reviewed and remained unchanged. The Compensation
Committee determined to leave base salaries unchanged in light of the uncertain economic environment. The
Compensation Committee traditionally considers each NEO’s achievement of personal performance objectives and
corporate operating results during the fiscal year and the Company did consider such objectives and results during
the Fiscal 2010 compensation process; however, the Compensation Committee ultimately determined to freeze base
salaries for the year in response to the unprecedented general economic conditions. The corporate operating results
considered were primarily return on invested capital during the fiscal year calculated as net operating profit after
tax divided by invested capital at the beginning of the fiscal year (“NOPAT Return”) and operating margins at each
of the Company’s subsidiaries. The personal performance objectives vary for each NEO as described in specific
detail below, and were primarily tied to the performance of the operating company by which such NEO was
employed (i.e., the Company, Harris Teeter, Inc. (“Harris Teeter”), the Company’s supermarket subsidiary, or
American & Efird, Inc. (“A&E”), the Company’s textile subsidiary) for the Company’s fiscal year ended
September 27, 2009 (“Fiscal 2009”). No particular weight was assigned to any particular performance goal, and
the personal performance objectives considered by the Compensation Committee may from year to year change,
depending on the needs of the Company. The Chief Executive Officer meets with the Compensation Committee
and presents a set of personal objectives for the Compensation Committee to consider. After discussion, the
Compensation Committee approves the personal objectives for the Chief Executive Officer. For all NEOs other
than the Chief Executive Officer, the performance objectives are generally discussed between the respective NEO
and the Chief Executive Officer, who then reviews them with the Compensation Committee. The Compensation
Committee does not determine the NEOs base salaries based on a formula or targeted performance.
Based upon the recommendations of management relating to management’s expectations for Fiscal 2010 in
light of the economic environment in which the Company operates and its impact on the Company’s customers,
the Compensation Committee determined to maintain the base salaries of the NEOs for Fiscal 2010 at their
respective Fiscal 2009 levels. The target corporate operating results and individual performance objectives for the
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