Kroger 2014 Annual Report Download - page 33

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•฀ The฀ extent฀ to฀ which฀ other฀ benefits฀ were฀ reduced฀ in฀ other฀ years฀ as฀ a฀ result฀ of฀ the฀ achievement฀ of฀
performance฀levels฀based฀on฀the฀error;
•฀ Individual฀officer฀culpability,฀if฀any;฀and
•฀ Other฀factors฀that฀should฀offset฀the฀amount฀of฀overpayment.฀
HE D G I N G P O L I C Y
After฀considering฀best฀practices฀related฀to฀ownership฀of฀company฀shares,฀the฀Board฀adopted฀a฀policy฀
regarding฀hedging,฀pledging,฀and฀short฀sales฀of฀Kroger฀securities.฀Kroger฀directors฀and฀officers฀are฀prohibited฀
from฀engaging,฀directly฀or฀indirectly,฀in฀hedging฀transactions฀in,฀or฀short฀sales฀of,฀Kroger฀securities.฀In฀addition,฀
they฀are฀precluded฀from฀pledging฀Kroger฀securities฀as฀collateral฀for฀a฀loan,฀except฀to฀the฀extent฀that฀shares฀
so฀pledged฀are฀in฀excess฀of฀the฀number฀of฀shares฀the฀individual฀is฀required฀to฀maintain฀in฀accordance฀with฀
Kroger’s฀ share฀ ownership฀ guidelines฀ more฀ particularly฀ described฀ earlier฀ in฀ this฀ Compensation฀ Discussion฀
and Analysis.
SE C T I O N 1 6 2 ( M ) O F T H E I N T E R N A L R E V E N U E C O D E
Tax฀laws฀place฀a฀deductibility฀limit฀of฀$1,000,000฀on฀some฀types฀of฀compensation฀for฀the฀CEO฀and฀the฀
next฀four฀most฀highly฀compensated฀officers฀reported฀in฀this฀proxy฀because฀they฀are฀among฀the฀four฀highest฀
compensated฀officers฀(“covered฀employees”).฀In฀Kroger’s฀case,฀this฀group฀of฀individuals฀is฀not฀identical฀to฀the฀
group฀of฀named฀executive฀officers.฀Compensation฀that฀is฀deemed฀to฀be฀“performance-based”฀is฀excluded฀for฀
purposes฀of฀the฀calculation฀and฀is฀tax฀deductible.฀Awards฀under฀Kroger’s฀long-term฀incentive฀plans,฀when฀
payable฀upon฀achievement฀of฀stated฀performance฀criteria,฀should฀be฀considered฀performance-based฀and฀the฀
compensation฀paid฀under฀those฀plans฀should฀be฀tax฀deductible.฀Generally,฀compensation฀expense฀related฀to฀
stock฀options฀awarded฀to฀the฀CEO฀and฀the฀next฀four฀most฀highly฀compensated฀officers฀should฀be฀deductible.฀
On฀ the฀ other฀ hand,฀ Kroger’s฀ awards฀ of฀ restricted฀ stock฀ that฀ vest฀ solely฀ upon฀ the฀ passage฀ of฀ time฀ are฀ not฀
performance-based.฀ As฀ a฀ result,฀ compensation฀ expense฀ for฀ those฀ awards฀ to฀ the฀ covered฀ employees฀ is฀ not฀
deductible,฀to฀the฀extent฀that฀the฀related฀compensation฀expense,฀plus฀any฀other฀expense฀for฀compensation฀
that฀is฀not฀performance-based,฀exceeds฀$1,000,000.
Kroger’s฀ bonus฀ plans฀rely฀on฀performance฀criteria,฀ which฀have฀been฀ approved฀by฀ shareholders.฀As฀ a฀
result,฀bonuses฀paid฀under฀the฀plans฀to฀the฀covered฀employees฀should฀be฀deductible฀by฀Kroger.฀
Kroger’s฀policy฀is,฀primarily,฀to฀design฀and฀administer฀compensation฀plans฀that฀support฀the฀achievement฀
of฀long-term฀strategic฀objectives฀and฀enhance฀shareholder฀value.฀Where฀it฀is฀material฀and฀supports฀Kroger’s฀
compensation฀philosophy,฀the฀Committee฀also฀will฀attempt฀to฀maximize฀the฀amount฀of฀compensation฀expense฀
that฀is฀deductible฀by฀Kroger.
CO M P E N S A T I O N C O M M I T T E E R E P O R T
The฀ Compensation฀ Committee฀ has฀ reviewed฀ and฀ discussed฀ with฀ management฀ of฀ the฀ Company฀ the฀
Compensation฀Discussion฀and฀Analysis฀contained฀in฀this฀proxy฀statement.฀Based฀on฀its฀review฀and฀discussions฀
with฀ management,฀ the฀ Compensation฀ Committee฀ has฀ recommended฀ to฀ the฀ Company’s฀ Board฀ that฀ the฀
Compensation฀Discussion฀and฀Analysis฀be฀included฀in฀the฀Company’s฀proxy฀statement฀and฀incorporated฀by฀
reference฀into฀its฀Annual฀Report฀on฀Form฀10-K.
Compensation฀Committee:
Clyde฀R.฀Moore,฀Chair
Jorge฀P.฀Montoya
Susan฀M.฀Phillips
James฀A.฀Runde