Harris Teeter 2011 Annual Report Download - page 86

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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 independent
directors for their 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.
At the 2011 Annual Meeting of Shareholders, the Shareholders provided an advisory vote with 98% of the
votes cast approving the compensation of the Company’s named executive officers for Fiscal 2010 (the “Advisory
Vote”). Subsequently, in its meeting held in November 2011 the Compensation Committee considered the results
of the Advisory Vote in determining compensation policies and decisions of the Company. The Advisory Vote
affected the Company’s executive compensation decisions and policies by reaffirming the Company’s pay-for-
performance philosophy, and the Compensation Committee will continue to use this philosophy and past practice
in determining future compensation decisions.
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 2011, base salaries of the NEOs were reviewed and, on average, increases of 9.0% were provided.
Base salary increases were based on the Compensation Committee’s determination to discontinue certain perquisites
as described below, and each NEO’s achievement of personal performance objectives and corporate operating results
during Fiscal 2011. 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 A&E, the Company’s textile subsidiary during Fiscal 2011) for the prior
year, Fiscal 2010. 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 2011 as
well as the foregoing factors, the Compensation Committee determined to increase the base salaries of the NEOs
for Fiscal 2011 as detailed in the Base Salary Adjustment table below. The target corporate operating results and
individual performance objectives for the NEOs from the prior year, Fiscal 2010, that were used to determine the
base salaries for Fiscal 2011 were as follows:
•For Mr. Dickson, the Fiscal 2010 target corporate operating results were achieving sales at Harris Teeter
of $4.11 billion (actual $4.10 billion) and operating profit of $164.5 million (actual $181.6 million), and
sales at A&E of $251 million (actual $301.1 million) and operating profit of $3.95 million (actual
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