Kroger 2014 Annual Report Download - page 25

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23
CO M P E N S A T I O N P O L I C I E S A S T H E Y R E L A T E T O R I S K M A N A G E M E N T
As฀ part฀ of฀ the฀ Compensation฀ Committee’s฀ review฀ of฀ our฀ compensation฀ practices,฀ the฀ Committee฀
considers฀ and฀ analyzes฀ the฀ extent฀ to฀ which฀ risks฀ arise฀ from฀ such฀ practices฀ and฀ their฀ impact฀ on฀ Kroger’s฀
business.฀ As฀discussed฀above฀in฀ the฀Compensation฀Discussion฀and฀ Analysis,฀ our฀policies฀and฀ practices฀for฀
compensating฀employees฀are฀designed฀to,฀among฀other฀things,฀attract฀and฀retain฀high฀quality฀and฀engaged฀
employees.฀In฀this฀process,฀the฀Committee฀also฀focuses฀on฀minimizing฀risk฀through฀the฀implementation฀of฀
certain฀practices฀and฀policies,฀such฀as฀the฀executive฀compensation฀recoupment฀policy,฀which฀is฀described฀in฀
more detail on page 30.฀Accordingly,฀we฀do฀not฀believe฀that฀our฀compensation฀practices฀and฀policies฀create฀
risks฀that฀are฀reasonably฀likely฀to฀have฀a฀material฀adverse฀effect฀on฀Kroger.
TH E C O M M I T T E E ’S C O M P E N S A T I O N C O N S U L T A N T S A N D B E N C H M A R K I N G
As฀referenced฀earlier฀in฀this฀Compensation฀Discussion฀and฀Analysis,฀the฀Committee฀directly฀engages฀a฀
compensation฀consultant฀from฀Mercer฀Human฀Resource฀Consulting฀to฀advise฀the฀Committee฀in฀the฀design฀of฀
compensation฀for฀executive฀officers.
The฀ Mercer฀ consultant฀ conducts฀ an฀ annual฀ competitive฀ assessment฀ of฀ executive฀ positions฀ at฀ Kroger฀
for฀the฀ Committee.฀The฀ assessment฀ is฀one฀of฀several฀bases,฀ as฀described฀ above,฀on฀ which฀the฀ Committee฀
determines฀compensation.฀The฀consultant฀assesses:
•฀ Base฀salary;฀
•฀ Target฀annual฀performance-based฀bonus;฀
•฀ Target฀annual฀cash฀compensation฀(the฀sum฀of฀salary฀and฀annual฀bonus);฀
•฀ Annualized฀long-term฀incentive฀awards,฀such฀as฀stock฀options,฀restricted฀stock,฀and฀performance-based฀
long-term฀cash฀bonuses฀and฀performance-based฀equity฀awards;฀and฀
•฀ Total฀direct฀compensation฀(the฀sum฀of฀all฀these฀elements).฀
The฀consultant฀compares฀these฀elements฀against฀those฀of฀other฀companies฀in฀a฀group฀of฀publicly-traded฀
food฀and฀drug฀retailers.฀For฀2014,฀our฀peer฀group฀consisted฀of:฀
Costco฀Wholesale SuperValu
CVS฀Health,฀formerly฀CVS฀Caremark Target
Rite Aid Wal-Mart
Safeway Walgreen฀Boots฀Alliance,฀formerly฀Walgreen
This฀peer฀group฀is฀the฀same฀group฀as฀was฀used฀in฀2013.฀The฀make-up฀of฀the฀compensation฀peer฀group฀
is reviewed annually and modified as circumstances warrant. Industry consolidation and other competitive
forces฀will฀change฀the฀peer฀group฀used฀over฀time.฀The฀consultant฀also฀provides฀the฀Committee฀data฀from฀
companies฀ in฀ “general฀ industry,”฀ a฀ representation฀ of฀ major฀ publicly-traded฀ companies฀ of฀ similar฀ size฀ and฀
scope. These data serve as reference points, particularly for senior staff positions where competition for talent
extends฀beyond฀the฀retail฀sector.
From฀time฀ to฀time,฀the฀Committee฀will฀ engage฀an฀additional฀ compensation฀consultant฀to฀conduct฀ an฀
additional฀review฀of฀Kroger’s฀executive฀compensation,฀as฀it฀deems฀advisable.
Considering฀the฀size฀of฀Kroger฀in฀relation฀to฀other฀peer฀group฀companies,฀the฀Committee฀believes฀that฀
salaries฀ paid฀ to฀ our฀ named฀ executive฀ officers฀ should฀ be฀ at฀ or฀ above฀ the฀ median฀ paid฀ by฀ competitors฀ for฀
comparable฀positions.฀The฀Committee฀also฀aims฀to฀provide฀an฀annual฀bonus฀potential฀to฀our฀named฀executive฀
officers฀that,฀if฀the฀increasingly฀more฀challenging฀annual฀business฀plan฀objectives฀are฀achieved,฀would฀cause฀
total฀cash฀compensation฀to฀be฀meaningfully฀above฀the฀median.