Kroger 2014 Annual Report Download - page 20

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18
BO A R D O V E R S I G H T O F E N T E R P R I S E R I S K
While฀ risk฀ management฀ is฀ primarily฀ the฀ responsibility฀ of฀ Kroger’s฀ management฀ team,฀ the฀ Board฀ is฀
responsible฀for฀the฀overall฀supervision฀of฀our฀risk฀management฀activities.฀The฀Board’s฀oversight฀of฀the฀material฀
risks฀faced฀by฀Kroger฀occurs฀at฀both฀the฀full฀Board฀level฀and฀at฀the฀committee฀level.
The฀ Audit฀ Committee฀ has฀ oversight฀ responsibility฀ not฀ only฀ for฀ financial฀ reporting฀ of฀ Kroger’s฀ major฀
financial฀exposures฀and฀the฀steps฀management฀has฀taken฀to฀monitor฀and฀control฀those฀exposures,฀but฀also฀for฀
the฀effectiveness฀of฀management’s฀processes฀that฀monitor฀and฀manage฀key฀business฀risks฀facing฀Kroger,฀as฀well฀
as฀the฀major฀areas฀of฀risk฀exposure฀and฀management’s฀efforts฀to฀monitor฀and฀control฀that฀exposure.฀The฀Audit฀
Committee฀also฀discusses฀with฀management฀its฀policies฀with฀respect฀to฀risk฀assessment฀and฀risk฀management.
Management,฀including฀our฀Chief฀Ethics฀and฀Compliance฀Officer,฀provides฀regular฀updates฀throughout฀
the฀year฀to฀the฀respective฀Board฀committees฀regarding฀the฀management฀of฀the฀risks฀they฀oversee,฀and฀each฀of฀
these฀committees฀reports฀on฀risk฀to฀the฀full฀Board฀at฀each฀regular฀meeting฀of฀the฀Board.
In฀addition฀to฀the฀reports฀from฀the฀committees,฀the฀Board฀receives฀presentations฀throughout฀the฀year฀
from฀various฀department฀and฀business฀unit฀leaders฀that฀include฀discussion฀of฀significant฀risks฀as฀necessary.฀At฀
each฀Board฀meeting,฀the฀Chairman฀and฀CEO฀addresses฀matters฀of฀particular฀importance฀or฀concern,฀including฀
any฀significant฀areas฀of฀risk฀that฀require฀Board฀attention.฀Additionally,฀through฀dedicated฀sessions฀focusing฀
entirely฀on฀corporate฀strategy,฀the฀full฀Board฀reviews฀in฀detail฀Kroger’s฀short-฀and฀long-term฀strategies,฀including฀
consideration฀ of฀ significant฀ risks฀ facing฀ Kroger฀ and฀ their฀ potential฀ impact.฀ The฀ independent฀ directors,฀ in฀
executive฀sessions฀led฀by฀the฀Lead฀Director,฀address฀matters฀of฀particular฀concern,฀including฀significant฀areas฀
of฀risk,฀that฀warrant฀further฀discussion฀or฀consideration฀outside฀the฀presence฀of฀Kroger฀employees.
We฀believe฀that฀our฀approach฀to฀risk฀oversight,฀as฀described฀above,฀optimizes฀our฀ability฀to฀assess฀inter-
relationships฀among฀the฀various฀risks,฀make฀informed฀cost-benefit฀decisions,฀and฀approach฀emerging฀risks฀in฀a฀
proactive฀manner฀for฀Kroger.฀We฀also฀believe฀that฀our฀risk฀structure฀complements฀our฀current฀Board฀leadership฀
structure,฀as฀it฀allows฀our฀independent฀directors,฀through฀the฀five฀fully฀independent฀Board฀committees,฀and฀
in฀executive฀ sessions฀ of฀ independent฀directors฀led฀by฀the฀Lead฀Director,฀ to฀ exercise฀effective฀oversight฀of฀
the฀actions฀of฀management,฀led฀by฀Mr.฀McMullen฀as฀Chairman฀of฀the฀Board฀and฀CEO,฀in฀identifying฀risks฀and฀
implementing฀effective฀risk฀management฀policies฀and฀controls.
BO A R D L E A D E R S H I P S T R U C T U R E A N D L E A D D I R E C T O R
The฀ Board฀ is฀ composed฀ of฀ ten฀ independent฀ non-employee฀ directors฀ and฀ one฀ management฀ director,฀
Mr.฀ McMullen,฀ the฀ Chairman฀ and฀ CEO.฀ The฀ Board฀ has฀ established฀ five฀ standing฀ committees฀ —฀ audit,฀
compensation,฀corporate฀governance,฀financial฀policy,฀and฀public฀responsibilities.฀Each฀committee฀is฀composed฀
solely of independent directors, each with a different independent director serving as committee chair.
In addition, as provided in the Guidelines on Issues of Corporate Governance,฀the฀Board฀has฀designated฀
one฀ of฀ the฀ independent฀ directors฀ as฀ Lead฀ Director.฀ The฀ Lead฀ Director฀ serves฀ a฀ variety฀ of฀ roles,฀ including฀
reviewing฀and฀approving฀Board฀meeting฀agendas,฀materials฀and฀schedules฀to฀confirm฀the฀appropriate฀topics฀
are฀reviewed฀and฀sufficient฀time฀is฀allocated฀to฀each;฀serving฀as฀liaison฀between฀the฀Chairman,฀management,฀
and฀the฀non-management฀directors;฀presiding฀at฀the฀executive฀sessions฀of฀independent฀directors฀and฀at฀all฀
other฀meetings฀of฀the฀Board฀at฀which฀the฀Chairman฀is฀not฀present;฀calling฀an฀executive฀session฀of฀independent฀
directors฀at฀any฀time฀and฀serving฀as฀the฀Board’s฀representative฀for฀any฀consultation฀and฀direct฀communication,฀
following฀a฀request,฀with฀major฀shareholders.฀Unless฀otherwise฀determined฀by฀the฀Board,฀the฀chair฀of฀the฀
Corporate฀Governance฀Committee฀is฀designated฀as฀the฀Lead฀Director.฀Robert฀Beyer,฀an฀independent฀director฀
and฀the฀chair฀of฀the฀Corporate฀Governance฀Committee,฀is฀currently฀the฀Lead฀Director.฀Mr.฀Beyer฀is฀an฀effective฀
Lead฀Director฀for฀Kroger฀due฀to,฀among฀other฀things,฀his฀independence,฀his฀deep฀strategic฀and฀operational฀
understanding฀of฀Kroger฀obtained฀while฀serving฀as฀a฀Kroger฀director,฀his฀insight฀into฀corporate฀governance฀
and฀his฀experience฀on฀other฀boards.