Kroger 2014 Annual Report Download - page 24

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22
Covered฀individuals฀are฀expected฀to฀achieve฀the฀target฀level฀within฀five฀years฀of฀appointment฀to฀their฀
position.฀If฀the฀requirements฀have฀not฀been฀met,฀directors,฀officers฀and฀key฀executives,฀including฀the฀named฀
executive฀officers,฀must฀hold฀100%฀of฀shares฀received฀upon฀the฀exercise฀of฀stock฀options฀or฀upon฀the฀vesting฀
of฀restricted฀stock,฀except฀those฀necessary฀to฀pay฀the฀exercise฀price฀of฀the฀options฀and/or฀applicable฀taxes,฀
and฀must฀retain฀all฀Kroger฀shares฀unless฀the฀disposition฀is฀approved฀in฀advance฀by฀the฀CEO,฀or฀by฀the฀Board฀
or฀Compensation฀Committee฀for฀the฀CEO.
RO L E O F C O M P E N S A T I O N C O M M I T T E E
The฀ Compensation฀ Committee฀ of฀ the฀ Board฀ has฀ the฀ primary฀ responsibility฀ for฀ establishing฀ the฀
compensation฀of฀our฀executive฀officers,฀including฀the฀named฀executive฀officers,฀with฀the฀exception฀of฀the฀
Chief฀Executive฀Officer.฀The฀Committee’s฀role฀regarding฀the฀CEO’s฀compensation฀is฀to฀make฀recommendations฀
to฀the฀independent฀members฀of฀the฀Board;฀those฀members฀of฀the฀Board฀establish฀the฀CEO’s฀compensation.
ES T A B L I S H I N G E X E C U T I V E C O M P E N S A T I O N
The฀independent฀members฀of฀the฀Board฀have฀the฀exclusive฀authority฀to฀determine฀the฀amount฀of฀the฀
CEO’s฀ salary,฀ the฀ bonus฀ potential฀ for฀ the฀ CEO,฀ the฀ nature฀ and฀ amount฀ of฀ any฀ equity฀ awards฀ made฀ to฀ the฀
CEO,฀and฀any฀ other฀ compensation฀decisions฀related฀ to฀ the฀CEO.฀In฀ setting฀ the฀ annual฀ bonus฀potential฀ for฀
the฀CEO,฀the฀independent฀directors฀determine฀the฀dollar฀amount฀that฀will฀be฀multiplied฀by฀the฀percentage฀
payout฀under฀the฀annual฀bonus฀plan฀generally฀applicable฀to฀all฀corporate฀management,฀including฀the฀named฀
executive฀ officers.฀ The฀ independent฀ directors฀ retain฀ discretion฀ to฀ reduce฀ the฀ percentage฀ payout฀ the฀ CEO฀
would฀otherwise฀receive.฀The฀independent฀directors฀thus฀make฀a฀separate฀determination฀annually฀concerning฀
both฀the฀CEO’s฀bonus฀potential฀and฀the฀percentage฀of฀bonus฀paid.
The฀ Committee฀performs฀the฀same฀function฀and฀exercises฀the฀same฀authority฀as฀to฀the฀other฀named฀
executive฀officers.฀The฀Committee’s฀annual฀review฀of฀compensation฀for฀the฀named฀executive฀officers฀includes฀
the฀following:
•฀ Conducts฀an฀annual฀review฀of฀all฀components฀of฀compensation,฀quantifying฀total฀compensation฀for฀the฀
named฀ executive฀ officers฀ on฀ tally฀ sheets.฀ The฀ review฀ includes฀ a฀ summary฀ for฀ each฀ named฀ executive฀
officer฀ of฀ salary;฀ annual฀ performance-based฀ cash฀ bonus;฀ long-term฀ performance-based฀ cash฀ and฀
performance฀unit฀compensation;฀equity;฀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฀The฀Kroger฀Co.฀
Employee฀ Protection฀ Plan;฀ 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฀Committee฀has฀determined฀that฀the฀compensation฀of฀the฀CEO฀and฀that฀of฀the฀other฀named฀executive฀
officers฀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฀Committee’s฀compensation฀consultants฀(described฀below)฀comparing฀named฀
executive฀officer฀and฀other฀senior฀executive฀compensation฀with฀that฀of฀other฀companies,฀primarily฀our฀
competitors,฀to฀ensure฀that฀the฀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,฀ bonus฀ potential,฀ and฀ equity฀ awards฀ for฀ each฀ of฀ the฀ senior฀ officers฀ including฀ the฀ other฀ named฀
executive฀officers.฀The฀CEO’s฀recommendation฀takes฀into฀consideration฀the฀objectives฀ established฀ by฀
and฀the฀reports฀received฀by฀the฀Committee฀as฀well฀as฀his฀assessment฀of฀individual฀job฀performance฀and฀
contribution฀to฀our฀management฀team.฀
•฀ Reviews฀ of฀ historical฀ information฀ regarding฀ salary,฀ bonus,฀ and฀ equity฀ compensation฀ for฀ a฀ three฀
year period.
In฀ considering฀each฀of฀the฀factors฀above,฀the฀Committee฀does฀ not฀make฀use฀ of฀a฀formula,฀ but฀rather฀
subjectively฀reviews฀each฀in฀setting฀compensation.