Kroger 2014 Annual Report Download - page 29

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27
The฀actual฀amounts฀of฀annual฀performance-based฀cash฀bonuses฀paid฀to฀the฀named฀executive฀officers฀
for฀2014฀are฀reported฀in฀the฀Summary฀Compensation฀Table฀in฀the฀“Non-Equity฀Incentive฀Plan฀Compensation”฀
column฀and฀footnote฀4฀to฀that฀table.฀These฀amounts฀represent฀the฀bonus฀potentials฀for฀each฀named฀executive฀
officer฀multiplied฀by฀the฀121.5%฀payout฀percentage฀earned฀in฀2014.฀In฀no฀event฀can฀any฀participant฀receive฀
a฀performance-based฀annual฀cash฀bonus฀in฀excess฀of฀$5,000,000.฀The฀maximum฀amount฀that฀a฀participant,฀
including฀ each฀ named฀ executive฀ officer,฀ can฀ earn฀ is฀ further฀ limited฀ to฀ 200%฀ of฀ the฀ participant’s฀ bonus฀
potential amount.
LO N G - T E R M I N C E N T I V E S
The฀Committee฀believes฀in฀the฀importance฀of฀providing฀an฀incentive฀to฀the฀named฀executive฀officers฀to฀
achieve฀the฀long-term฀goals฀established฀by฀the฀Board฀by฀conditioning฀a฀significant฀portion฀of฀compensation฀
on the achievement of those goals.
In฀2006,฀the฀Committee฀adopted฀the฀first฀in฀a฀series฀of฀long-term฀performance฀based฀compensation฀plans฀
designed฀to฀reward฀participants฀for฀their฀contribution฀to฀the฀long-term฀performance฀of฀Kroger.฀These฀earlier฀
plans฀provided฀ for฀overlapping฀four฀year฀ performance฀periods฀that฀ allowed฀ for฀the฀earning฀ of฀a฀long-term฀
cash฀bonus.฀In฀2010,฀Kroger’s฀long-term฀incentive฀program฀was฀redesigned฀to฀combine฀the฀total฀value฀of฀our฀
long-term฀ cash฀ bonus฀ and฀ equity฀ programs฀ into฀ a฀ cohesive,฀ strategic฀ reward฀ for฀ eligible฀ executives฀ at฀ the฀
Vice฀President฀level฀and฀above.฀Approximately฀fifty฀percent฀of฀the฀plan฀value฀is฀performance-based,฀delivered฀
in cash and performance units, contingent on the achievement of certain strategic performance measures.
The฀other฀fifty฀percent฀of฀the฀value฀is฀time-based฀and฀delivered฀in฀stock฀options฀and฀restricted฀stock.฀Each฀
component฀is฀described฀in฀more฀detail฀below.฀
PE R F O R M A N C E B A S E D L O N G - T E R M C O M P E N S A T I O N
The฀ long-term฀ incentive฀ plan฀ originally฀ adopted฀ in฀ 2010฀ provides฀ the฀ model฀ for฀ our฀ combined฀ plan฀
structure.฀Each฀year฀we฀adopt฀a฀similar฀plan฀with฀the฀following฀characteristics:
•฀ Performance฀is฀measured฀over฀a฀three฀year฀period.
•฀ Between฀130฀and฀170฀executives,฀including฀the฀named฀executive฀officers,฀participate฀in฀each฀plan.฀
•฀ Awards฀include฀both฀cash฀and฀performance฀units.฀
Ø฀ The฀cash฀bonus฀base฀equals฀the฀executive’s฀salary฀at฀the฀end฀of฀the฀fiscal฀year฀preceding฀the฀plan฀
adoption date (or for those participants entering the plan after the commencement date, as of the
date฀of฀commencing฀participation฀in฀the฀plan).฀These฀cash฀awards฀are฀separate฀from฀awards฀under฀
our฀performance-based฀annual฀cash฀bonus฀plan.
Ø฀ A฀ fixed฀ number฀ of฀ performance฀ units฀ is฀ awarded฀ to฀ each฀ participant.฀ The฀ awards฀ are฀ paid฀ out฀
in฀ Kroger฀ common฀ shares,฀ along฀ with฀ a฀ cash฀ amount฀ equal฀ to฀ the฀ dividends฀ paid฀ during฀ the฀
performance฀period฀on฀the฀number฀of฀issued฀common฀shares.
•฀ Compensation฀under฀the฀plan฀is฀earned฀based฀on฀our฀performance฀against฀metrics฀established฀by฀the฀
Committee฀(or฀the฀independent฀directors)฀at฀the฀beginning฀of฀the฀performance฀period.฀
•฀ The฀payout฀percentage,฀based฀on฀the฀extent฀to฀which฀the฀performance฀metrics฀are฀achieved,฀is฀applied฀
to฀both฀the฀cash฀bonus฀base฀and฀the฀number฀of฀performance฀units฀awarded.฀
•฀ Actual฀ payouts฀ cannot฀ exceed฀ 100%฀ of฀ the฀ cash฀ bonus฀ base฀ or฀ 100%฀ of฀ the฀ number฀ of฀ performance฀
units awarded.
•฀ In฀no฀event฀can฀a฀cash฀bonus฀award฀exceed฀$5,000,000.