Kroger 2014 Annual Report Download - page 22

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20
CO M P E N S A T I O N D I S C U S S I O N A N D A N A L Y S I S
EX E C U T I V E C O M P E N S A T I O N – OV E R V I E W
As฀one฀of฀the฀largest฀retailers฀in฀the฀world,฀our฀executive฀compensation฀philosophy฀remains฀to฀attract฀
and฀retain฀the฀best฀management฀talent฀and฀to฀motivate฀these฀employees฀to฀achieve฀our฀business฀and฀financial฀
goals.฀We฀believe฀our฀strategy฀creates฀value฀for฀shareholders฀in฀a฀manner฀consistent฀with฀our฀focus฀on฀our฀core฀
values:฀honesty,฀integrity,฀respect,฀inclusion,฀diversity,฀and฀safety.
To฀achieve฀our฀objectives,฀the฀Compensation฀Committee฀seeks฀to฀ensure฀that฀compensation฀is฀competitive฀
and฀that฀there฀is฀a฀direct฀link฀between฀pay฀and฀performance.฀To฀do฀so,฀it฀is฀guided฀by฀the฀following฀principles:
•฀ A฀ significant฀ portion฀ of฀ pay฀ should฀ be฀ performance-based,฀ with฀ the฀ percentage฀ of฀ total฀ pay฀ tied฀ to฀
performance฀increasing฀proportionally฀with฀an฀executive’s฀level฀of฀responsibility;฀
•฀ Compensation฀ should฀ include฀ incentive-based฀ pay฀ to฀ drive฀ performance,฀ providing฀ superior฀ pay฀ for฀
superior฀performance,฀including฀both฀a฀short-฀and฀long-term฀focus;฀
•฀ Compensation฀policies฀should฀include฀an฀opportunity฀for,฀and฀a฀requirement฀of,฀equity฀ownership;฀and฀
•฀ Components฀of฀compensation฀should฀be฀tied฀to฀an฀evaluation฀of฀business฀and฀individual฀performance฀
measured฀against฀metrics฀that฀align฀with฀our฀business฀strategy.฀
This฀ Compensation฀ Discussion฀ and฀ Analysis฀ provides฀ a฀ discussion฀ and฀ analysis฀ of฀ our฀ compensation฀
program฀for฀the฀executive฀officers.฀For฀the฀fiscal฀year฀ended฀January฀31,฀2015,฀the฀named฀executive฀officers฀were:
Name Title
W.฀Rodney฀McMullen . . . . . . . . . . . . . . . . . . . Chairman฀and฀Chief฀Executive฀Officer
J.฀Michael฀Schlotman . . . . . . . . . . . . . . . . . . . Senior฀Vice฀President฀and฀Chief฀Financial฀Officer
Michael฀L.฀Ellis . . . . . . . . . . . . . . . . . . . . . . . . President฀and฀Chief฀Operating฀Officer
Kathleen฀S.฀Barclay . . . . . . . . . . . . . . . . . . . . . Senior฀Vice฀President฀of฀Human฀Resources
Michael฀J.฀Donnelly . . . . . . . . . . . . . . . . . . . . . Senior฀Vice฀President฀of฀Merchandising
David฀B.฀Dillon . . . . . . . . . . . . . . . . . . . . . . . . Former฀Chairman
The฀ compensation฀ of฀ our฀ named฀ executive฀ officers฀ in฀ fiscal฀ year฀ 2014฀ reflects฀ the฀ above฀ principles.฀
Total฀compensation฀for฀the฀year฀is฀an฀indicator฀of฀how฀well฀Kroger฀performed฀compared฀to฀our฀business฀plan,฀
reflecting฀how฀our฀compensation฀program฀responds฀to฀business฀challenges฀and฀the฀marketplace.฀We฀continue฀
to deliver sales growth and positive earnings results.
•฀ A฀ key฀ metric,฀ identical฀ supermarket฀ sales,฀ excluding฀ supermarket฀ fuel,฀ increased฀ 5.2%฀ from฀ 2013.฀
Through฀fiscal฀2014,฀we฀have฀achieved฀45฀consecutive฀quarters฀of฀positive฀identical฀sales฀growth.฀
•฀ Net฀earnings฀per฀diluted฀share฀were฀$3.44฀which฀exceeded฀our฀guidance฀range.฀
•฀ In฀September฀2014,฀the฀Board฀raised฀the฀quarterly฀cash฀dividend฀by฀12%,฀to฀$0.185฀per฀share.฀
The฀ Committee฀ believes฀ our฀ management฀ produced฀ outstanding฀ results฀ in฀ 2014,฀ measured฀ against฀
increasingly฀aggressive฀business฀plan฀objectives฀for฀sales,฀net฀earnings,฀operating฀costs฀and฀our฀strategic฀plan.฀
The฀compensation฀paid฀to฀our฀named฀executive฀officers฀reflected฀this฀fact฀as฀the฀annual฀performance-based฀
cash฀bonus฀paid฀out฀at฀121.5%฀of฀bonus฀potentials.฀The฀strong฀link฀between฀pay฀and฀performance฀is฀illustrated฀
by฀a฀comparison฀of฀past฀years’฀annual฀cash฀bonus,฀such฀as฀2012,฀2010฀and฀2009฀with฀payouts฀of฀less฀than฀
100%.฀In฀those฀years,฀we฀did฀not฀achieve฀all฀of฀our฀business฀plan฀objectives.฀In฀2014,฀all฀of฀our฀business฀plan฀
goals฀were฀exceeded฀(with฀the฀exception฀of฀a฀set฀of฀measures฀under฀our฀strategic฀plan฀goal,฀which฀fell฀short),฀
resulting฀in฀an฀annual฀bonus฀payout฀that฀exceeded฀100%฀of฀potentials.
In฀ keeping฀ with฀ our฀ overall฀ compensation฀ philosophy,฀ we฀ endeavor฀ to฀ ensure฀ that฀ our฀ executive฀
compensation฀practices฀conform฀to฀best฀practices.฀In฀particular,฀over฀the฀past฀several฀years฀we฀have:
•฀ established฀significant฀stock฀ownership฀guideline฀levels฀to฀reinforce฀the฀link฀between฀the฀interests฀of฀
our฀named฀executive฀officers฀and฀those฀of฀our฀shareholders;฀