Kroger 2014 Annual Report Download - page 31

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29
During฀2014,฀Kroger฀awarded฀446,288฀performance฀units฀to฀approximately฀178฀employees,฀including฀the฀
named฀executive฀officers.฀The฀Committee฀considers฀several฀factors฀in฀determining฀the฀amount฀of฀performance฀
units฀awarded฀to฀the฀named฀executive฀officers฀or,฀in฀the฀case฀of฀the฀CEO,฀recommending฀to฀the฀independent฀
directors฀the฀amount฀awarded.฀These฀factors฀are฀described฀in฀the฀Equity฀Awards฀section฀below.
Equity Awards
Awards฀ based฀ on฀ Kroger’s฀ common฀ shares฀ are฀ granted฀ periodically฀ to฀ the฀ named฀ executive฀ officers฀
and฀ a฀ large฀ number฀ of฀ other฀ employees.฀ Equity฀ participation฀ aligns฀ the฀ interests฀ of฀ employees฀ with฀ your฀
interest฀ as฀ shareholders,฀ and฀ Kroger฀ historically฀ has฀ distributed฀ equity฀ awards฀ widely.฀ The฀ plans฀ include฀
both฀stock฀options฀and฀restricted฀stock.฀In฀2014,฀Kroger฀granted฀4,226,855฀stock฀options฀to฀approximately฀
8,514฀employees,฀including฀the฀named฀executive฀officers.฀The฀options฀permit฀the฀holder฀to฀purchase฀Kroger฀
common฀shares฀at฀an฀option฀price฀equal฀to฀the฀closing฀price฀of฀Kroger฀common฀shares฀on฀the฀date฀of฀the฀grant.฀
Options฀are฀granted฀only฀on฀one฀of฀the฀four฀dates฀of฀Committee฀meetings฀conducted฀after฀Kroger’s฀public฀
release฀of฀its฀quarterly฀earnings฀results.฀During฀2014,฀Kroger฀awarded฀3,023,711฀shares฀of฀restricted฀stock฀to฀
approximately฀21,299฀employees,฀including฀the฀named฀executive฀officers.฀Under฀Kroger’s฀long-term฀incentive฀
plans,฀the฀Committee฀determines฀the฀vesting฀schedule฀for฀stock฀options฀and฀restricted฀stock.฀During฀2014,฀the฀
Committee฀granted฀to฀the฀named฀executive฀officers:฀(a)฀stock฀options฀with฀a฀five฀year฀vesting฀schedule;฀and฀
(b)฀restricted฀stock฀with฀a฀three฀or฀five฀year฀vesting฀schedule฀(with฀the฀exception฀of฀one฀award,฀which฀has฀a฀
one฀year฀vesting฀schedule).฀
As฀ discussed฀ earlier฀ under฀ Stock฀ Ownership฀ Guidelines,฀ covered฀ individuals,฀ including฀ the฀ named฀
executive฀officers,฀must฀hold฀100%฀of฀the฀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,฀until฀applicable฀stock฀ownership฀guidelines฀are฀met,฀unless฀the฀disposition฀is฀approved฀in฀advance฀by฀
the฀CEO,฀or฀by฀the฀Board฀or฀Compensation฀Committee฀for฀the฀CEO.
The฀Committee฀considers฀several฀factors฀in฀determining฀the฀amount฀of฀options,฀restricted฀stock,฀and฀
performance฀units฀awarded฀to฀the฀named฀executive฀officers฀or,฀in฀the฀case฀of฀the฀CEO,฀recommending฀to฀the฀
independent฀directors฀the฀amount฀awarded.฀These฀factors฀include:
•฀ The฀ compensation฀ consultant’s฀ benchmarking฀ report฀ regarding฀ equity-based฀ and฀ other฀ long-term฀
compensation฀awarded฀by฀our฀competitors;
•฀ The฀officer’s฀level฀in฀the฀organization฀and฀the฀internal฀relationship฀of฀equity-based฀awards฀within฀Kroger;
•฀ Individual฀performance;฀and
•฀ The฀recommendation฀of฀the฀CEO,฀for฀all฀named฀executive฀officers฀other฀than฀the฀CEO.฀
The฀Committee฀has฀long฀recognized฀that฀the฀amount฀of฀compensation฀provided฀to฀the฀named฀executive฀
officers฀ through฀ equity-based฀ pay฀ is฀ often฀ below฀ the฀ amount฀ paid฀ by฀ our฀ competitors.฀ Relatively฀ lower฀
equity-based฀awards฀for฀the฀named฀executive฀officers฀and฀other฀senior฀management฀permit฀a฀broader฀base฀of฀
Kroger฀employees฀to฀participate฀in฀equity฀awards฀and฀further฀emphasizes฀the฀pay฀for฀performance฀philosophy.
Amounts฀of฀equity฀awards฀issued฀and฀outstanding฀for฀the฀named฀executive฀officers฀are฀set฀forth฀in฀the฀
tables฀that฀follow฀this฀discussion฀and฀analysis.
RE T I R E M E N T A N D O T H E R B E N E F I T S
Kroger฀maintains฀a฀defined฀benefit฀and฀several฀defined฀contribution฀retirement฀plans฀for฀its฀employees.฀
The฀named฀executive฀officers฀participate฀in฀one฀or฀more฀of฀these฀plans,฀as฀well฀as฀one฀or฀more฀excess฀plans฀
designed฀to฀make฀up฀the฀shortfall฀in฀retirement฀benefits฀created฀by฀limitations฀under฀the฀Internal฀Revenue฀
Code฀ on฀ benefits฀ to฀ highly฀ compensated฀ individuals฀ under฀ qualified฀ plans.฀ Additional฀ details฀ regarding฀
retirement฀benefits฀available฀to฀the฀named฀executive฀officers฀can฀be฀found฀in฀the฀2014฀Pension฀Benefits฀table฀
and the accompanying narrative description that follows this discussion and analysis.
Kroger฀also฀maintains฀an฀executive฀deferred฀compensation฀plan฀in฀which฀some฀of฀the฀named฀executive฀
officers฀participate.฀This฀plan฀is฀a฀nonqualified฀plan฀under฀which฀participants฀can฀elect฀to฀defer฀up฀to฀100%฀
of฀ their฀ cash฀ compensation฀ each฀ year.฀ Compensation฀ deferred฀ bears฀ interest,฀ until฀ paid฀ out,฀ at฀ the฀ rate฀