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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) ofthe Securities Exchange Act of 1934 (Amendment No. )
UNITED STATES | ||||||
SECURITIES AND EXCHANGE COMMISSION | ||||||
Washington, D.C. 20549 | ||||||
SCHEDULE 14A | ||||||
Proxy Statement Pursuant to Section 14(a) of | ||||||
Filed by the Registrant | ||||||
Filed by a Party other than the Registranto | ||||||
Check the appropriate box: | ||||||
o | Preliminary Proxy Statement | |||||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||||
x | Definitive Proxy Statement | |||||
o | Definitive Additional Materials | |||||
o | Soliciting Material |
DUKE ENERGY CORPORATION | |||||||
(Name of Registrant as Specified In Its Charter) | |||||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | |||||||
Payment of Filing Fee (Check the appropriate box): | |||||||
x | No fee required. | ||||||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||||||
(1) | Title of each class of securities to which transaction applies: | ||||||
(2) | Aggregate number of securities to which transaction applies: | ||||||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||||||
(4) | Proposed maximum aggregate value of transaction: | ||||||
(5) | Total fee paid: | ||||||
o | Fee paid previously with preliminary materials. | ||||||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||||||
(1) | Amount Previously Paid: | ||||||
(2) | Form, Schedule or Registration Statement No.: | ||||||
(3) | Filing Party: | ||||||
(4) | Date Filed: | ||||||
Welcome to the Shareholder Meeting |
March 20, 2014
Dear Fellow Shareholders:
March 17, 2011Dear Shareholder:
I am pleased to invite you to our annual shareholder meeting to be held on Thursday, May 5, 2011,1, 2014, at 10:00 a.m. in the O. J.O.J. Miller Auditorium located at our526 South Church Street in Charlotte, headquarters.North Carolina.
As explained in the enclosed proxy statement, at this year's meeting you will be asked to vote (i) for the election of directors, to ratify(ii) for the ratification of the selection of the independent public accountant, to make(iii) for the approval, on an advisory vote onbasis, of Duke Energy Corporation's named executive officer compensation, (iv) for the amendment to make an advisory vote on the frequencyDuke Energy Corporation's Amended and Restated Certificate of an advisory vote on executive compensation,Incorporation to vote on threeauthorize shareholder action by less than unanimous written consent, (v) against two shareholder proposals, and (vi) to consider any other business that may properly come before the meeting.
Later in the year, we will be sending you materials in which you will be asked to vote on several items requiring the approval of our shareholders in connection with our proposed merger with Progress Energy. This year's proxy statement relates solelyincludes certain items such as a proxy statement summary on page 6 and certain charts and illustrations to help better explain our corporate governance and compensation programs and objectives. With this document, our aim is to communicate with you the annual business of Duke Energy.matters to be addressed at the meeting in a way that is simple and straightforward.
Your vote is important – exercise your shareholder right and vote your shares right away.
Please turn to page 12 for the instructions on how you can vote your shares over the Internet, by telephone or by mail. It is important that all Duke Energy shareholders, regardless of the number of shares owned, participate in the affairs of the Company. At Duke Energy's last annual meeting, in May 2010,2013 Annual Shareholder Meeting, approximately 8384 percent of Duke Energy'sthe Company's outstanding shares were represented in person or by proxy.
We hope you will find it possible to attend this year's annual shareholder meeting and thank you for your continued interest in Duke Energy.
Sincerely, | ||
Lynn J. Good | ||
Vice Chairman, President and Chief Executive Officer |
PARTICIPATE IN THE FUTURE OF DUKE ENERGY;
CAST YOUR VOTE RIGHT AWAY
It is very important that you vote to play a part in the future of Duke Energy. New York Stock Exchange ("NYSE") rules state that if your shares are held through a broker, bank or other nominee, they cannot vote on your behalf on nondiscretionary matters.
Please cast your vote right away on all of the proposals listed below to ensure that your shares are represented.
Proposals That Require Your Vote
More information | Board recommendation | Broker non-votes | Abstentions | Votes required for approval | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
PROPOSAL 1 | Election of directors | Page 15 | FOR each nominee | Do not count | Do not count | Majority of votes cast, with a resignation policy | ||||||
PROPOSAL 2 | Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent public accountant for 2014 | Page 33 | FOR | Vote for | Vote against | Majority of shares represented | ||||||
PROPOSAL 3 | Approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation | Page 35 | FOR | Do not count | Vote against | Majority of shares represented | ||||||
PROPOSAL 4 | Approval of the amendment to Duke Energy Corporation's Amended and Restated Certificate of Incorporation to authorize shareholder action by less than unanimous written consent | Page 68 | FOR | Vote against | Vote against | Majority of outstanding shares entitled to vote | ||||||
PROPOSAL 5 | Shareholder proposal regarding shareholder right to call a special shareholder meeting | Page 69 | AGAINST | Do not count | Vote against | Majority of shares represented | ||||||
PROPOSAL 6 | Shareholder proposal regarding political contribution disclosure | Page 71 | AGAINST | Do not count | Vote against | Majority of shares represented | ||||||
Vote Right Away
Even if you plan to attend this year's meeting, it is a good idea to vote your shares now, before the meeting, in the event your plans change. Whether you vote by Internet, by telephone or by mail, please have your proxy card or voting instruction form in hand and follow the instructions.
By Internet using your computer | By telephone | By mailing your proxy card | ||
Visit 24/7 www.proxyvote.com | Dial toll-free 24/7 1-800-690-6903 or by calling the number provided by your broker, bank or other nominee if your shares are not registered in your name. | Cast your ballot, sign your proxy card and send free of postage. | ||
DUKE ENERGY – 2014 Proxy Statement 3
PARTICIPATE IN THE FUTURE OF DUKE ENERGY;
CAST YOUR VOTE RIGHT AWAY
Visit Our Website
Visit our website http://www.duke-energy.com/investors/news-events.asp | • Review and download this proxy statement and our annual report • Listen to a live audio stream of the meeting |
Attend Our 2014 Annual Shareholder Meeting
10:00 a.m. (EST) on Thursday, May 1, 2014 O.J. Miller Auditorium 526 South Church Street Charlotte, NC 28202 Directions to 526 South Church Street are provided on the inside back cover. 526 South Church Street Mint Street Parking Deck Bank of America Stadium |
4 DUKE ENERGY – 2014 Proxy Statement
Table of Contents
DUKE ENERGY – 2014 Proxy Statement 5
This proxy statement was first made available to shareholders on or about March 20, 2014.
Proxy Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider. You should read the entire proxy statement carefully before voting. Page references ("XX") are supplied to help you find further information in this proxy statement.
Eligibility to Vote (page 11)
You can vote if you were a shareholder of record at the close of business on March 3, 2014.
How to Cast Your Vote (page 12)
You can vote by any of the following methods:
By Internet using your computer | By telephone | By mailing your proxy card | In person | |||||
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Visit 24/7 www.proxyvote.com | Dial toll-free 24/7 1-800-690-6903 or by calling the number provided by your broker, bank or other nominee if your shares are not registered in your name. | Cast your ballot, sign your proxy card and send free of postage. | At the annual shareholder meeting: If you are a shareholder of record, you may be admitted to the meeting by bringing your notice, proxy card or, if your shares are held in the name of a broker, bank or other nominee, an account statement or letter from the nominee indicating your ownership as of the record date, along with some form of government-issued identification. | |||||
Business Highlights
Duke Energy's regulated utility operations provide electricity to 7.2 million customers located in six states in the Southeast and Midwest United States, representing a population of approximately 22 million people. Our nonregulated businesses own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the United States. Duke Energy operates in the United States, primarily through its direct and indirect wholly owned subsidiaries, Duke Energy Carolinas, LLC; Duke Energy Progress, Inc.; Duke Energy Florida, Inc.; Duke Energy Ohio, Inc.; Duke Energy Kentucky, Inc.; and Duke Energy Indiana, Inc., as well as in Latin America through Duke Energy International, LLC.
Governance of the Company (page 21)
6 DUKE ENERGY – 2014 Proxy Statement
Board Nominees (page 15)
| | | | Independent (Yes/No) | | | ||||||||||
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| | Director since | | Committee Memberships | Other Public Company Boards | |||||||||||
Name | Age | Occupation | Yes | No | ||||||||||||
G. Alex Bernhardt, Sr. | 70 | 1991 | Chairman, Bernhardt Furniture Company | X | • Nuclear Oversight • Regulatory Policy and Operations | None | ||||||||||
Michael G. Browning | 67 | 1990 | Chairman, Browning Investments, Inc. | X | • Audit • Corporate Governance • Finance and Risk Management | None | ||||||||||
Harris E. DeLoach, Jr. | 69 | 2006 | Executive Chairman, Sonoco Products Company | X | • Corporate Governance • Nuclear Oversight | • Sonoco Products Company • Goodrich Corporation | ||||||||||
Daniel R. DiMicco | 63 | 2007 | Retired Chairman, President and Chief Executive Officer, Nucor Corporation | X | • Corporate Governance • Nuclear Oversight | None | ||||||||||
John H. Forsgren | 67 | 2009 | Retired Vice Chairman, Executive Vice President and Chief Financial Officer, Northeast Utilities | X | • Finance and Risk Management • Nuclear Oversight | • The Phoenix Companies, Inc. | ||||||||||
Lynn J. Good | 54 | 2013 | Vice Chairman, President and Chief Executive Officer, Duke Energy Corporation | X | None | • Hubbell Incorporated | ||||||||||
Ann M. Gray | 68 | 1994 | Former Vice President, ABC, Inc. and former President, Diversified Publishing Group, ABC, Inc. | X | • Compensation • Corporate Governance • Finance and Risk Management | • The Phoenix Companies, Inc. | ||||||||||
James H. Hance, Jr. | 69 | 2005 | Retired Vice Chairman and Chief Financial Officer, Bank of America Corporation | X | • Audit • Compensation • Finance and Risk Management | • Cousins Properties Incorporated • Ford Motor Company • The Carlyle Group, LP | ||||||||||
John T. Herron | 60 | 2013 | Retired President, Chief Executive Officer and Chief Nuclear Officer, Entergy Nuclear | X | • Nuclear Oversight • Regulatory Policy and Operations | None | ||||||||||
James B. Hyler, Jr. | 66 | 2008 | Managing Director, Investors Management Corporation | X | • Audit • Finance and Risk Management • Regulatory Policy and Operations | None | ||||||||||
William E. Kennard | 57 | 2014 | Senior Advisor, Grain Management | X | • Finance and Risk Management | • MetLife, Inc. | ||||||||||
E. Marie McKee | 63 | 1999 | President, Corning Museum of Glass | X | • Audit • Compensation • Corporate Governance | None | ||||||||||
E. James Reinsch | 70 | 2009 | Retired Senior Vice President and Partner, Bechtel Group and past President, Bechtel Nuclear | X | • Finance and Risk Management • Nuclear Oversight | None | ||||||||||
James T. Rhodes | 72 | 2001 | Retired Chairman, President and Chief Executive Officer, Institute of Nuclear Power Operations | X | • Nuclear Oversight • Regulatory Policy and Operations | None | ||||||||||
Carlos A. Saladrigas | 65 | 2001 | Chairman, Regis HR Group, Concordia Healthcare Holdings, LLC | X | • Audit • Compensation • Regulatory Policy and Operations | • Advance Auto Parts, Inc. | ||||||||||
DUKE ENERGY – 2014 Proxy Statement 7
Named Executive Officers (page 36)
Name | Age | Occupation | Since | Previous occupation | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Lynn J. Good | 54 | Vice Chairman, President and Chief Executive Officer | 2013 | Chief Financial Officer of Duke Energy from July 2009 through June 2013; President, Commercial Businesses of Duke Energy from November 2007 through June 2009 | ||||||
Steven K. Young | 55 | Executive Vice President and Chief Financial Officer | 2013 | Vice President, Chief Accounting Officer and Controller of Duke Energy from July 2012 until August 2013; Senior Vice President and Controller of Duke Energy from December 2006 until July 2012 | ||||||
Marc E. Manly | 62 | Executive Vice President and President, Commercial Businesses | 2012 | Chief Legal Officer of Duke Energy from April 2006 until December 2012 | ||||||
Dhiaa M. Jamil | 57 | Executive Vice President and President, Duke Energy Nuclear | 2013 | Chief Nuclear Officer of Duke Energy from 2008 until March 2013; Chief Generation Officer of Duke Energy from July 2009 until March 2013; Senior Vice President, Nuclear Support of Duke Energy Carolinas, LLC from January 2007 to February 2008 | ||||||
Lloyd M. Yates | 53 | Executive Vice President, Regulated Utilities | 2012 | Executive Vice President, Customer Operations of Duke Energy from July 2012 until December 2012; President and Chief Executive Officer of Duke Energy Progress, Inc. from July 2007 until June 2012 | ||||||
Executive Compensation (page 36)
Principles and Objectives (page 36)
Our executive compensation program is designed to:
We meet these objectives through the appropriate mix of compensation, including:
8 DUKE ENERGY – 2014 Proxy Statement
2013 Executive Total Compensation Mix (page 37)
Independent Public Accountant (page 33)
As a matter of good corporate governance, we are asking our shareholders to ratify the selection of Deloitte & Touche LLP as our independent public accountant for 2014.
Voting Matters (page 11)
Board Vote Recommendation | Page Reference (for more detail) | ||||||
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Management Proposals | |||||||
Election of Directors | FOR each nominee | 15 | |||||
Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent public accountant for 2014 | FOR | 33 | |||||
Approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation | FOR | 35 | |||||
Amendment to Duke Energy Corporation's Amended and Restated Certificate of Incorporation to authorize shareholder action by less than unanimous written consent | FOR | 68 | |||||
Shareholder Proposals | |||||||
Shareholder proposal regarding shareholder right to call a special shareholder meeting | AGAINST | 69 | |||||
Shareholder proposal regarding political contribution disclosure | AGAINST | 71 | |||||
DUKE ENERGY – 2014 Proxy Statement 9
Notice of Annual Shareholder Meeting | ||
May 1, 2014
10:00 a.m.
O.J. Miller Auditorium
526 South Church Street
Charlotte, North Carolina 28202
We will convene the annual shareholder meeting of Duke Energy Corporation on Thursday, May 1, 2014, at 10:00 a.m. in the O.J. Miller Auditorium located at 526 South Church Street in Charlotte, North Carolina.
The purpose of the annual meeting is to consider and take action on the following:
Shareholders of record as of the close of business on March 3, 2014, are entitled to vote at the annual shareholder meeting. It is important that your shares are represented at this meeting.
This year we will again be using the Securities and Exchange Commission ("SEC") rule that allows us to provide our proxy materials to our shareholders overvia the internet.Internet. By doing so, most of our shareholders will only receive a notice containing instructions on how to access the proxy materials overvia the internetInternet and vote online, by telephone or by mail. If you would still like to request paper copies of the proxy materials, you may follow the instructions on the notice. If you receive paper copies of the proxy materials, we ask you to consider signing up to receive these materials electronically in the future by following the instructions contained in this proxy statement. By delivering proxy materials electronically, we can reduce the consumption of natural resources and the cost of printing and mailing our proxy materials.
Even if you plan to attend this year's meeting, it is a good idea to vote your shares now, before the meeting, in the event your plans change. This notice and proxy statement contains instructions on how you can vote your shares over the internet, by telephone or by mail. Whether you choose to vote by mail, telephone or internet, your response is greatly appreciated.
We hope you will find it possible to attend this year's annual meeting, and thank you for your continued interest in Duke Energy.
Duke Energy Corporation526 South Church StreetCharlotte, NC 28202-1802
NOTICE OF ANNUAL MEETING OF SHAREHOLDERSMay 5, 2011
March 17, 2011
We will convene the annual meeting of shareholders of Duke Energy Corporation on Thursday, May 5, 2011, at 10:00 a.m. in the O. J. Miller Auditorium located at our Charlotte headquarters at 526 South Church Street in Charlotte, North Carolina.
The purpose of the annual meeting is to consider and take action on the following:
Shareholders of record as of the close of business on March 10, 2011, are entitled to vote at the annual meeting. It is important that your shares be represented at this meeting.
Whether or not you expect to be present at the annual shareholder meeting, please take time to vote now. If you choose to vote by mail, you may do so by marking, dating and signing the proxy card and returning it to us. You may also vote by telephone or internet. Please follow the voting instructions that are included on your proxy card. Regardless of the manner in which you vote, we urge and greatly appreciate your prompt response.
Dated: March 20, 2014 | By order of the Board of Directors, | |
and Corporate Secretary |
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This proxy statement was first made available to shareholders on or about March 17, 2011.10 DUKE ENERGY – 2014 Proxy Statement
FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL SHAREHOLDER MEETING
On what am I voting?
information | Board recommendation | Broker non-votes | Abstentions | Votes required for approval | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
FOR each nominee | Do not count | Do not count | Majority of | ||||||||||||||
Ratification of Deloitte & Touche LLP | |||||||||||||||||
shares represented | |||||||||||||||||
PROPOSAL 3 | Page 35 | FOR | Do not count | Vote against | Majority of shares represented | ||||||||||||
PROPOSAL 4 | Page 68 | FOR | Vote against | Vote against | Majority of outstanding shares entitled to vote | ||||||||||||
PROPOSAL 5 | Page 69 | AGAINST | Do not count | Vote against | Majority of shares represented | ||||||||||||
PROPOSAL 6 | AGAINST | Do not count | Vote against | Majority of shares represented | |||||||||||||
Who can vote?
Holders of Duke Energy's common stock as of the close of business on the record date, March 3, 2014, are entitled to vote, either in person or by proxy, at the annual shareholder meeting. Each share of Duke Energy common stock has one vote.
DUKE ENERGY – 2014 Proxy Statement 11
FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL SHAREHOLDER MEETING
How do I vote?
By Proxy – Before the annual shareholder meeting, you can give a proxy to vote your shares of Duke Energy common stock in one of the following ways:
By Internet using your | By telephone | By mailing your proxy card | |||
---|---|---|---|---|---|
www.proxyvote.com | 1-800-690-6903 or by calling the | ||||
number provided | by your broker, bank are not registered in your name. | sign your proxy card and send free of | |||
The telephone and Internet voting procedures are designed to confirm your identity, to allow you to give your voting instructions and to verify that your instructions have been properly recorded. If you wish to vote by telephone or Internet, please follow the instructions that are included on your notice.
If you mail us your properly completed and signed proxy card or vote by telephone or Internet, your shares of Duke Energy common stock will be voted according to the choices that you specify. If you sign and mail your proxy card without marking any choices, your proxy will be voted:
We do not expect that any other matters will be brought before the annual shareholder meeting. However, by giving your proxy, you appoint the persons named as proxies as your representatives at the annual shareholder meeting.
In Person – You may come to the annual shareholder meeting and cast your vote there. You may be admitted to the meeting by bringing your notice, proxy card or, if your shares are held in the name of your broker, bank or other nominee, you must bring an account statement or letter from the nominee indicating that you were the owner of the shares on March 3, 2014, along with some form of government-issued identification.
May I change or revoke my vote?
Yes. You may change your vote or revoke your proxy at any time prior to the annual shareholder meeting by:
Will my shares be voted if I do not provide my proxy?
It depends on whether you hold your shares in your own name or in the name of a bank or brokerage firm. If you hold your shares directly in your own name, they will not be voted unless you provide a proxy or vote in person at the meeting.
Brokerage firms generally have the authority to vote their customers' unvoted shares on certain "routine" matters. If your shares are held in the name of a broker, bank or other nominee, such nominee can vote your shares for the ratification of Deloitte & Touche LLP as Duke Energy's independent public accountant for 2014 if you do not timely provide your proxy because this matter is considered "routine" under the applicable rules. However, no other items are considered "routine" and may not be voted by your broker without your instruction.
12 DUKE ENERGY – 2014 Proxy Statement
FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL SHAREHOLDER MEETING
If I am a participant in the Duke Energy Retirement Savings Plan or the Savings Plan for Employees of ContentsFlorida Progress Corporation, how do I vote shares held in my plan account?
If you are a participant in either of the plans listed above, you have the right to provide voting directions to the plan trustee, by submitting your proxy card, for those shares of Duke Energy common stock that are held by the plan and allocated to your account. Plan participant proxies are treated confidentially.
If you elect not to provide voting directions to the plan trustee, the plan trustee will vote the Duke Energy shares allocated to your plan account in the same proportion as those shares held by the plan for which the plan trustee has received voting directions from other plan participants. The plan trustee will follow participants' voting directions and the plan procedure for voting in the absence of voting directions, unless it determines that to do so would be contrary to the Employee Retirement Income Security Act of 1974.
The plan trustee for each of the respective plans is as follows:
Because the plan trustee must process voting instructions from participants before the date of the annual shareholder meeting, you must deliver your instructions no later than April 28, 2014, at 11:59 p.m.
What constitutes a quorum? As of the record date, 706,954,889 shares of Duke Energy common stock were issued and outstanding and entitled to vote at the annual shareholder meeting. In order to conduct the annual shareholder meeting, a majority of the shares entitled to vote must be present in person or by proxy. This is referred to as a "quorum." If you submit a properly executed proxy card or vote by telephone or on the Internet, you will be considered part of the quorum. Abstentions and broker "non-votes" will be counted as present and entitled to vote for purposes of determining a quorum. A broker "non-vote" is not, however, counted as present and entitled to vote for purposes of voting on individual proposals other than ratification of Deloitte & Touche LLP as Duke Energy's independent public accountant. A broker "non-vote" occurs when a bank, broker or other nominee who holds shares for another person has not received voting instructions from the owner of the shares and, under NYSE listing standards, does not have discretionary authority to vote on a matter. What vote is needed to approve the matters submitted?
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DUKE ENERGY – 2014 Proxy Statement 13
FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL SHAREHOLDER MEETING
Who conducts the proxy solicitation and how much will it cost?
Duke Energy is requesting your proxy for the annual shareholder meeting and will pay all the costs of Contentsrequesting shareholder proxies. We have hired Georgeson Inc. to help us send out the proxy materials and request proxies. Georgeson's fee for these services is $21,000, plus out-of-pocket expenses. We can request proxies through the mail or personally by telephone, fax or Internet. We can use directors, officers and other employees of Duke Energy to request proxies. Directors, officers and other employees will not receive additional compensation for these services. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of Duke Energy common stock.
14 DUKE ENERGY – 2014 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors
The Board of Directors of Duke Energy has nominated the following 1115 candidates to serve on the Board. We have a declassified Board of Directors, which means all of the directors are voted on every year at the annual shareholder meeting.
If any director is unable to stand for election, the Board of Directors may reduce the number of directors or designate a substitute. In that case, shares represented by proxies may be voted for a substitute director. We do not expect that any nominee will be unavailable or unable to serve. The Corporate Governance Committee, comprised of only independent directors, has recommended each of the following current directors as nominees for directorsdirector and the Board of Directors has approved their nomination for election:election. Two of our current directors, Messrs. Barnet and Sharp, will be retiring at our 2014 Annual Shareholder Meeting and therefore are not nominated for re-election.
DUKE ENERGY – 2014 Proxy Statement 15
PROPOSAL 1: ELECTION OF DIRECTORS
G. Alex Bernhardt, Sr. | ||||||||
Independent Director Nominee | ||||||||
Age: 70 | Qualifications: • Mr. Bernhardt's qualifications for election include his management experience and his knowledge and understanding of industry in Duke Energy's North Carolina service territory. |
Committees: • Nuclear Oversight Committee • Regulatory Policy and Operations Committee Other current public directorships: • None | ||||||
Mr. Bernhardt has been associated with Bernhardt Furniture Company, a furniture manufacturer, since 1965. He has served as Chairman since 1996 and a director since 1976. Previously he served as President from 1976 until 1996 and CEO from 1996 until 2011. Mr. Bernhardt is a director of Communities In Schools and a trustee of the North Carolina Nature Conservancy. | ||||||
Michael G. Browning | ||||||
Independent Director Nominee | ||||||
Age: 67 | •
| Committees: • Audit Committee • Corporate Governance Committee • Finance and Risk Management Committee Other current public directorships: • None | ||||
Mr. Browning has been Chairman | ||||||
Harris E. DeLoach, Jr. | ||||||
Independent Director Nominee | ||||||
Age: 69 | Skills and Qualifications: • Mr. | Committees: • Corporate Governance Committee • Nuclear Oversight Committee Other current public directorships: • Sonoco Products Company • Goodrich Corporation | ||||
16 DUKE ENERGY – 2014 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
Daniel R. DiMicco | ||||||||
Independent Director Nominee | ||||||||
Age: 63 | Qualifications: • Mr. DiMicco's qualifications for election include his management experience, including Chief Executive Officer of a Fortune 500 company and successfully operating a company serving many constituencies. In addition, Mr. DiMicco's experience as Chief Executive Officer of a large industrial corporation provides a valuable perspective on Duke Energy's industrial customer class. | Committees: • Corporate Governance Committee • Nuclear Oversight Committee Other current public directorships: • None | ||||||
Mr. DiMicco has served as Chairman Emeritus of Nucor Corporation, a steel company, since December 2013. From January 2013 until December 2013, Mr. DiMicco served as Executive Chairman of Nucor Corporation and as Chairman from May 2006 to December 2012, Chief Executive Officer from September 2000 to December 2012 and President from September 2000 to December 2010. He was a member of the Nucor Board of Directors from 2000 to 2013. Mr. DiMicco is a former chair of the American Iron and Steel Institute. | ||||||||
John H. Forsgren | ||||||||
Independent Director Nominee | ||||||||
Age: 67 | Qualifications: • Mr. Forsgren's qualifications for election include his prior management and financial experience as Vice Chairman and Chief Financial Officer of a large utility company and his extensive knowledge of the energy industry and insight on renewable energy. | Committees: • Finance and Risk Management Committee • Nuclear Oversight Committee Other current public directorships: • The Phoenix Companies, Inc. | ||||||
Mr. Forsgren has been Chairman of The Phoenix Companies, Inc. since 2013 and was Vice Chairman, Executive Vice President and Chief Financial Officer of Northeast Utilities from 1996 until his retirement in 2004. He is a former director of CuraGen Corporation and Neon Communications Group, Inc. | ||||||||
Non-Independent Director Nominee Vice Chairman of the Board | ||||||||
Age: 54 | Skills and Qualifications: • Ms. Good's qualifications for election include her experience as Chief Executive Officer and Chief Financial Officer of Duke Energy, her knowledge of the affairs of Duke Energy and its businesses, and her experience in the energy industry. | Committees: • None Other current public directorships: • Hubbell Incorporated | ||||||
Ms. Good has served as Vice Chairman, President, Chief Executive Officer and a member of the Board of Directors of Duke Energy since July 2013. She served as Executive Vice President and Chief Financial Officer of Duke Energy from July 2009 through June 2013. Prior to that she served as President, Commercial Businesses from November 2007 through June 2009. |
DUKE ENERGY – 2014 Proxy Statement 17
PROPOSAL 1: ELECTION OF DIRECTORS
Ann | ||||||
Independent Director Nominee Chairman of the Board | ||||||
Age: 68 | Qualifications: • Ms. Gray's qualifications for election include her business experience, both from a management perspective and as a result of her experience as a director at several public companies. Ms. Gray's public company experience has also given her in-depth knowledge of governance principles, which she utilizes on a variety of matters, including, among other things, succession planning, executive compensation and corporate governance. |
Committees: • Compensation Committee • Corporate Governance Committee • Finance and Risk Management Committee Other current public directorships: • The Phoenix Companies, Inc. | ||||||
Ms. Gray was President of Diversified Publishing Group of ABC, Inc., a television, radio and publishing company, from 1991 until 1997 and was a Corporate Vice President of ABC, Inc. and its predecessors from 1979 to 1998. Ms. Gray is a former director of Elan Corporation, plc and former trustee of JPMorgan Funds. | ||||||
James H. Hance, Jr. | ||||||
Independent Director Nominee | ||||||
Age: 69 | Qualifications: • Mr. Hance's qualifications for election include his management and financial experience as Vice Chairman and Chief Financial Officer of one of our nation's largest financial institutions, his broad background as a director of a number of large financial and industrial corporations, and his expertise in finance. | Committees: • Audit Committee • Compensation Committee • Finance and Risk Management Committee Other current public directorships: • Cousins Properties Incorporated • Ford Motor Company • The Carlyle Group, LP | ||||
Mr. Hance was Vice Chairman of Bank of America from 1994 until his retirement in 2005 and served as Chief Financial Officer from 1988 to 2004. Since retiring in 2005, Mr. Hance has served as a director for various public companies. He is a certified public accountant and spent 17 years with Price Waterhouse (now PricewaterhouseCoopers LLP). He is a former director of Bank of America, Rayonier Inc., Morgan Stanley and EnPro Industries, Inc. Mr. Hance also serves as an operating executive of The Carlyle Group, LP and is a member of its board of directors. | ||||||
Independent Director Nominee | ||||||
Age: 60 | Skills and Qualifications: • Mr. Herron's qualifications for election include his knowledge and extensive insight gained at a variety of nuclear energy facilities over more than three decades, as well as his previous management experience in the energy industry. | Committees: • Nuclear Oversight Committee • Regulatory Policy and Operations Committee Other current public directorships: • None | ||||
Mr. Herron was President, Chief Executive Officer and Chief Nuclear Officer of Entergy Nuclear from 2009 until his retirement on March 31, 2013. Mr. Herron joined Entergy Nuclear in 2001 and held a variety of positions. He began his career in nuclear operations in 1979 and has held positions at a number of nuclear stations across the country. Mr. Herron is a director of Ontario Power Generation and also has served on the Institute of Nuclear Power Operations' board of directors. |
18 DUKE ENERGY – 2014 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
James B. Hyler, Jr. | ||||||
Independent Director Nominee | ||||||
Age: 66 | Skills and Qualifications: • Mr. Hyler's qualifications for election include his understanding of Duke Energy's North Carolina service territory and his knowledge and expertise in financial services and corporate finance. | Committees: • Audit Committee • Finance and Risk Management Committee • Regulatory Policy and Operations Committee Other current public directorships: • None | ||||
Mr. Hyler is Managing Director of Investors Management Corporation, a firm which invests in and acquires companies in various industries, since December 2011. He retired as Vice Chairman and Chief Operating Officer of First Citizens Bank in 2008, having served in these positions from 1994 until 2008. Mr. Hyler was President of First Citizens Bank from 1988 to 1994, and was Chief Financial Officer of First Citizens Bank from 1980 to 1988. Prior to joining First Citizens Bank, Mr. Hyler was an auditor with Ernst & Young for 10 years. Mr. Hyler served as a director of First Citizens BancShares from 1988 until 2008. | ||||||
William E. Kennard | ||||||
Independent Director Nominee | ||||||
Age: 57 | Skills and Qualifications: • Mr. Kennard's qualifications for election include his considerable experience and knowledge of the regulatory arena as well as his financial knowledge and international perspective. | Committees: • Finance and Risk Management Committee Other current public directorships: • MetLife, Inc. | ||||
Mr. Kennard is Senior Advisor at Grain Management, a private equity firm, since October 2013. Prior to joining Grain Management, Mr. Kennard served as U.S. Ambassador to the European Union from 2009 to August 2013; Managing Director of The Carlyle Group from 2001 to 2009; and Chairman of the Federal Communications Commission from 1997 to 2001. | ||||||
E. Marie McKee | ||||||
Independent Director Nominee | ||||||
Age: 63 | Skills and Qualifications: • Ms. McKee's qualifications for election include her experience in human resources, which provides her with a thorough knowledge of employment and compensation practices. Her experience as President of Steuben Glass has also given her excellent operating skills and understanding of financial matters. | Committees: • Audit Committee • Compensation Committee • Corporate Governance Committee Other current public directorships: • None | ||||
Ms. McKee is President of the Corning Museum of Glass since 1998, and she served as Senior Vice President of Human Resources at Corning Incorporated, a manufacturer of components for high-technology systems for consumer electronics, mobile emissions controls, telecommunications and life sciences, from 1996 to 2010. Ms. McKee has over 30 years of experience at Corning, where she held a variety of management positions with increasing levels of responsibility, including President of Steuben Glass. |
DUKE ENERGY – 2014 Proxy Statement 19
PROPOSAL 1: ELECTION OF DIRECTORS
E. James Reinsch | ||||||
Independent Director Nominee | ||||||
Age: 70 | •
| Committees: • Finance and Risk Management Committee • Nuclear Oversight Committee Other current public directorships: • None | ||||
Mr. Reinsch was Senior Vice President and Partner of Bechtel Group from 2003 to 2008 and past president of Bechtel Nuclear from 2000 until his retirement in 2009. He has served on the boards of several international nuclear energy organizations, including the International Nuclear Energy Academy. He has also served on the U.S. Department of Energy's Hydrogen and Fuel Cell Technical Advisory Committee. |
James T. Rhodes | ||||||||
Independent Director Nominee | ||||||||
Age: 72 | Qualifications: • Dr. Rhodes' qualifications for election include his management experience as Chief Executive Officer of a large non-profit organization in the energy industry, as well as his in-depth knowledge of the energy and nuclear industry. | Committees: • Nuclear Oversight Committee • Regulatory Policy and Operations Committee Other current public directorships: • None | ||||||
Dr. Rhodes was Chairman and Chief Executive Officer of the Institute of Nuclear Power Operations, a nonprofit corporation promoting safety, reliability and excellence in nuclear plant operation, from 1998 to 1999 and Chairman, President and Chief Executive Officer from 1999 until his retirement in 2001. He served as President and Chief Executive Officer of Virginia Electric & Power Company, a subsidiary of Dominion Resources, Inc., from 1989 until 1997. Dr. Rhodes is a former member of the Advisory Council for the Electric Power Research Institute. | ||||||||
Independent Director Nominee | ||||||||
| Age: 65 | Skills and Qualifications: • Mr. |
Committees: • Audit Committee • Compensation Committee • Regulatory Policy and Operations Committee Other current public • Advance Auto Parts, Inc. | ||||||
Mr. Saladrigas is Chairman of Regis HR Group, which offers a full suite of outsourced human resources services to small and mid-sized businesses. He has served in this position since July 2008. Mr. Saladrigas also serves as Chairman of Concordia Healthcare Holdings, LLC, which specializes in managed behavioral health, since January 2011. He served as Vice Chairman, from 2007 to 2008, and Chairman, from 2002 to 2007, of Premier American Bank in Miami, Florida. Mr. Saladrigas served as Chief Executive Officer of ADP Total Source (previously the |
The Board of Directors Recommends a Vote "FOR" Each NomineeTHE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE.
.
20 DUKE ENERGY – 2014 Proxy Statement
INFORMATION ON THE BOARD OF DIRECTORS
Our Board Leadership
Our Board of Directors' Leadership Structure and Meeting Attendance
The BoardDirectors is currently combines the role ofstructured with an independent Chairman of the Board withand a separate Vice Chairman who is also our President and Chief Executive Officer. On January 1, 2014, Ann Gray, previously the Company's independent lead director, became Chairman of the Board. Our President and Chief Executive Officer, Lynn Good, assumed the role of Vice Chairman in July 2013.
The Board of Directors believes that the Company and its shareholders are best served by the Board retaining discretion to determine the appropriate leadership structure for the Company based on what it believes is best for the Company at a particular point in time, including whether the same individual should serve as both Chief Executive Officer. Combining theOfficer and Chairman and CEO roles fosters clear accountability, effective decision-making, and alignment on corporate strategy. To assure effective independent oversight,of the Board, has adopted a numberor whether the roles should be separate. In the event that the Board of governance practices, including havingDirectors determines that the same individual should hold the positions of Chief Executive Officer and Chairman of the Board, the Company's Principles for Corporate Governance provide for an independent lead director with the following responsibilities: (i) leading, in conjunction with the Corporate Governance Committee, the process for review of the Chief Executive Officer and Board, (ii) presiding at Board of Directors' meetings when the Chairman is not present, (iii) presiding at executive sessions of the non-management directors, (iv) assisting in the setting of the Board of Directors' meeting agendas with the Chairman, and (v) serving as a liaison betweento be appointed from among the independent directors and the Chairman and the Chief Executive Officer. Ms. Gray was appointed by the Board of Directors as lead independent director on April 4, 2006.directors.
Director Attendance
The Board of Directors of Duke Energy met 1110 times during 2010,2013 and has met 3 times so far in 2011. No2014. The overall attendance percentage for our directors was approximately 95% in 2013, and no director attended less than 75 percent75% of the total of the Board of Directors' meetings and the meetings of the committees upon which he or she served.served in 2013. Directors are encouraged to attend the annual meeting of shareholders.shareholder meeting. All members of the Board of Directors attended Duke Energy's last annual shareholder meeting of shareholders on May 6, 2010.2, 2013.
Risk Oversight
The Board of Directors is actively involved in the oversight of risks that could affect Duke Energy. This oversight is conducted primarily through the Finance and Risk Management Committee of the Board but also through the other committees of the Board, as appropriate. See below for descriptions of each of the committees. The Board and its committees, including the Finance and Risk Management Committee, satisfy thisits risk oversight responsibility through reports by each committee chair regarding the committee's considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within Duke Energy.
Independence of Directors
The Board of Directors may determine a director to be independent if the Board of Directors has affirmatively determined that the director has no material relationship with Duke Energy or its subsidiaries (references in this proxy statement to Duke Energy's subsidiaries shall mean its consolidated subsidiaries), either directly or as a shareholder, director, officer or employee of an organization that has a relationship with Duke Energy or its subsidiaries. Independence determinations are generally made on an annual basis at the time the Board of Directors approves director nominees for inclusion in the annual proxy statement and, if a director joins the Board of Directors in the interim, at such time.
The Board of Directors also considers its Standards for Assessing Director Independence, which set forth certain relationships between Duke Energy and directors and their immediate family members, or affiliated entities, that the Board of Directors, in its judgment, has deemed to be material or immaterial for purposes of assessing a director's independence. Duke Energy's Standards for Assessing Directors Independence are linked on our website at http://www.duke-energy.com/corporate-governance/board-of-directors/independence.asp. In the event a director has a relationship with Duke Energy that is not addressed in the Standards for Assessing Director Independence, the independent members of the Board of Directors determine whether such relationship is material.
The Board of Directors has determined that none of the directors, other than Mr. Rogers,Ms. Good, has a material relationship with Duke Energy or its subsidiaries, and all are, therefore, independent under the listing standards of the NYSE and the rules and regulations of the SEC. In arriving at this
determination, the Board of Directors considered all transactions and the materiality of any relationship with Duke Energy and its subsidiaries in light of all facts and circumstances.
The Board also considers its Standards for Assessing Director Independence which set forth certain relationships between Duke Energy and directors and their immediate family members, or affiliated entities, that the Board, in its judgment, has deemedDUKE ENERGY – 2014 Proxy Statement 21
INFORMATION ON THE BOARD OF DIRECTORS
Board of Directors'Directors Committees
The Board of Directors has the fivesix standing, permanent committees described below:
Audit Committee
8 meetings held in 2013
Committee Members | ||
Carlos A. Saladrigas, Chairperson Michael G. Browning James H. Hance, Jr. James B. Hyler, Jr. E. Marie McKee |
Carlos A. Saladrigas
TheAudit Committee selects and retains a firm of independent public accountants to conduct audits of the accounts of Duke Energy and its subsidiaries. It also reviews with the independent public accountantsaccountant the scope and results of their audits, as well as the accounting procedures, internal controls, and accounting and financial reporting policies and practices of Duke Energy and its subsidiaries, and makes reports and recommendations to the Board of Directors as it deems appropriate. The Audit Committee is responsible for approving all audit and permissible non-audit services provided to Duke Energy by its independent public accountants.accountant. Pursuant to this responsibility, the Audit Committee adopted the policy on Engaging the Independent Auditor for Services, which provides that the Audit Committee will establish detailed services and related fee levels that may be provided by the independent public accountantsaccountant and will review such policy annually. See page 2133 for additional information on the Audit Committee's pre-approval policy.
This committee met 9 times in 2010 and has met 2 times so far in 2011. During 2010 and currently, the Audit Committee was comprised of Mr. Browning (Chair), Mr. Bernhardt, Mr. Forsgren, Dr. Rhodes and Dr. Sharp.
financial literacy requirements for audit committee membership under the NYSE's rules and the rules and regulations of the SEC.
Compensation Committee
9 meetings held in 2013
Committee Members | ||
E. Marie McKee, Chairperson Ann M. Gray James H. Hance, Jr. Carlos A. Saladrigas |
E. Marie McKee
22 DUKE ENERGY – 2014 Proxy Statement
INFORMATION ON THE BOARD OF DIRECTORS
and approves changes to, compensation programs. This committee also makes recommendations to the Board of Directors on compensation for independent directors.
Corporate Governance Committee Overview
5 meetings held in 2013
Committee Members | ||
---|---|---|
Ann M. Gray, Chairperson Michael G. Browning Harris E. DeLoach, Jr. Daniel R. DiMicco E. Marie McKee |
Ann M. Gray
This committee met 6 times in 2010 and has met 2 times so far in 2011. During 2010 and currently,
TheDUKE ENERGYCompensation Committee – 2014 Proxy Statement establishes and reviews the overall compensation philosophy, reviews and approves the salaries and other compensation of certain employees, including all executive officers of Duke Energy, reviews and approves compensatory agreements with executive officers, approves equity grants and reviews the effectiveness of, and approves changes to, compensation programs. This committee also makes recommendations to the Board of Directors on compensation for outside directors.23
This committee met 7 times in 2010 and has met 4 times so far in 2011. During 2010, the Compensation Committee was comprised of Mr. Hance (Chair), Mr. DiMicco, Mr. Forsgren, Ms. Gray and Mr. Taft, until his retirement on May 6, 2010. Currently, the members are Mr. Hance (Chair), Mr. DiMicco, Mr. Forsgren, and Ms. Gray. All current members of the Compensation Committee are considered to be "independent" within the meaning of the NYSE's listing standards and the Company's categorical standards for independence, to be "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and, other than Mr. DiMicco, to be "non-employee directors" within the meaning of Rule 16b-3 of the Exchange Act.
The Compensation Committee Charter authorizes the Compensation Committee to engage advisors and compensation consultants. The Compensation Committee has engaged Frederic W. Cook & Company, Inc. to report directly to the Compensation Committee as its independent compensation consultant. Frederic W. Cook & Company, Inc. performs such tasks as the Compensation Committee or its Chairman may request. Management's role in the compensation-setting process is to recommend compensation programs and assemble information as requested by the Compensation Committee, which then exercises discretion in its decisions. The compensation consultant has been instructed that it shall provide completely independent advice to the Compensation Committee and is not permitted to
provide any services to Duke Energy other than consulting with the Compensation Committee and, with the consent of the Chairman of the Compensation Committee, the compensation consultant may meet with management to discuss strategic issues with respect to executive compensation. The roles of the compensation consultant and management are described in more detail in the Compensation Discussion and Analysis.INFORMATION ON THE BOARD OF DIRECTORS
Finance and Risk Management Committee Overview
5 meetings held in 2013
Committee Members | ||
---|---|---|
James H. Hance, Jr., Chairperson William Barnet, III Michael G. Browning John H. Forsgren Ann M. Gray James B. Hyler, Jr. William E. Kennard E. James Reinsch |
James H. Hance, Jr.
This committee met 7 times in 2010 and has met 1 time so far in 2011. During 2010, the Finance and Risk Management Committee was comprised of Mr. Barnet (Chair), Mr. Browning, Ms. Gray, Mr. Hance, Mr. Reinsch, and Mr. Taft, until his retirement on May 6, 2010. Currently the members are Mr. Barnet (Chair), Mr. Browning, Ms. Gray, Mr. Hance, and Mr. Reinsch.
7 meetings held in 2013
Committee Members | ||
---|---|---|
James T. Rhodes, Chairperson G. Alex Bernhardt, Sr. Harris E. DeLoach, Jr. Daniel R. DiMicco John H. Forsgren John T. Herron E. James Reinsch Philip R. Sharp |
James T. Rhodes
24 DUKE ENERGY – 2014 Proxy Statement
This committee met 4 timesINFORMATION ON THE BOARD OF DIRECTORS
Regulatory Policy and Operations Committee
6 meetings held in 20102013
Committee Members | ||
---|---|---|
Philip R. Sharp, Chairperson William Barnet, III G. Alex Bernhardt, Sr. John T. Herron James B. Hyler, Jr. James T. Rhodes Carlos A. Saladrigas |
Philip R. Sharp
Each committee operates under a written charter adopted by the Board of Directors. The charters are posted on our website athttp://www.duke-energy.com/corporate-governance/board-committee-charters.asp.
Board of Directors Committee Membership Roster (as of March 17, 2011)BOARD OF DIRECTORS COMMITTEE MEMBERSHIP ROSTER (AS OF MARCH 20, 2014)
Name | Audit | Compensation | Corporate Governance | Finance and Risk Management | Nuclear Oversight | Regulatory Policy and Operations | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
William Barnet, III | X | X | |||||||||||||||
G. Alex Bernhardt, Sr. | X | X | |||||||||||||||
Michael G. Browning | X | X | X | ||||||||||||||
Harris E. DeLoach, Jr. | X | X | |||||||||||||||
Daniel R. DiMicco | X | X | |||||||||||||||
John H. Forsgren | X | X | |||||||||||||||
Lynn J. Good | |||||||||||||||||
Ann | X | X | |||||||||||||||
James H. Hance, Jr. | X | X | X* | ||||||||||||||
John T. Herron | X | X | |||||||||||||||
James B. Hyler, Jr. | X | X | X | ||||||||||||||
William E. Kennard | X | ||||||||||||||||
E. Marie McKee | X | X* | X | ||||||||||||||
E. James Reinsch | X | X | |||||||||||||||
James T. Rhodes | |||||||||||||||||
| X* | X | |||||||||||||||
Carlos A. Saladrigas | X* | X | X | ||||||||||||||
Philip R. Sharp | X | X* | |||||||||||||||
Table of ContentsDUKE ENERGY
Director Compensation
Annual Retainer and Fees.– 2014 Proxy Statement During 2010, the retainer and meeting fees paid to our outside directors consisted of:25
| | Meeting Fees | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Type of Fee | Fee (Other Than for Meetings)($) | In-Person Attendance at Meetings Held in Conjunction With a Regular Board of Directors Meeting($) | In-Person Meetings Not Held in Conjunction With a Regular Board of Directors Meeting($) | Telephonic Participation in Meetings($) | |||||||||
Annual Board of Directors | 50,000 | ||||||||||||
Annual Board of Directors | 100,000 | ||||||||||||
Board of Directors Meeting Fees | 2,000 | 2,500 | 2,000 | ||||||||||
Annual Lead Director Retainer | 35,000 | ||||||||||||
Annual Audit Committee Chair Retainer | 20,000 | ||||||||||||
Annual Chair Retainer | 10,000 | ||||||||||||
Audit Committee | 3,000 | 2,500 | 2,000 | ||||||||||
Nuclear Oversight Committee | 4,000 | 2,500 | 2,000 | ||||||||||
Other Committee Meeting Fees | 2,000 | 2,500 | 2,000 |
Annual Stock Retainer for 2010. In 2010, each eligible director received the portion of his or her annual retainer that was payable in stock in the form of fully-vested shares granted under the Duke Energy Corporation 2006 Long-Term Incentive Plan. Each director received 6,068 shares of stock.
Deferral Plans and Stock Purchases. Directors may elect to receive all or a portion of their annual compensation, consisting of retainers and attendance fees, on a current basis, or defer such compensation under the Duke Energy Corporation Directors' Savings Plan (the "Directors' Savings Plan"). Deferred amounts are credited to an unfunded account for the director's benefit, the balance of which is adjusted for the performance of phantom investment options, including the Duke Energy common stock fund, as elected by the director. Each outside director will receive deferred amounts credited to his or her account generally following termination of his or her service from the Board of Directors, in accordance with his or her distribution elections.
Charitable Giving Program. The Duke Energy Foundation, independent of Duke Energy, maintains The Duke Energy Foundation Matching Gifts Program under which directors (and current
and retired employees) are eligible for matching contributions of up to $5,000 per director per calendar year to qualifying institutions. In addition, Duke Energy maintains a Directors' Charitable Giving Program. Eligibility for this program has been frozen and only Ms. Gray is eligible. Under this program, Duke Energy will make, upon the director's death, donations of up to $1,000,000 to charitable organizations selected by the director. Ms. Gray may request that donations be made under this program during her lifetime, in which case the maximum donation will be reduced on an actuarially-determined net present value basis. In 2010, no donations were made on behalf of Ms. Gray. Duke Energy maintains a life insurance policy on Ms. Gray to fund donations under this program.
Expense Reimbursement and Insurance. Duke Energy provides travel insurance to directors in the amount of $500,000, and reimburses directors for expenses reasonably incurred in connection with attendance and participation at Board of Directors and committee meetings and special functions.
Gifts. Duke Energy presented a 2010 holiday gift to each person who was an outside director as of December 31, 2010. Mr. Bernhardt returned his gift to the Company due to the fact that he already owned a similar item. The aggregate cost of the gifts to all directors was $6,712.
Stock Ownership Guidelines. Outside directors are subject to stock ownership guidelines, which establish a target level of ownership of Duke Energy common stock (or common stock equivalents). Currently each outside director is required to own shares with a value equal to at least five times the annual Board of Directors cash retainer (i.e., an ownership level of $250,000) or retain 50% of his or her vested annual equity retainer. All outside directors were in compliance with the guidelines as of December 31, 2010.
The following table describes the compensation earned during 2010 by each individual who served as an outside director during 2010.
Name | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
William Barnet, III | 117,500 | 100,000 | 0 | 5,971 | 223,471 | |||||||||||
G. Alex Bernhardt, Sr. | 114,000 | 100,000 | 11,012 | 5,225 | 230,237 | |||||||||||
Michael G. Browning | 146,000 | 100,000 | 0 | 11,266 | 257,266 | |||||||||||
Daniel R. DiMicco | 99,000 | 100,000 | 0 | 971 | 199,971 | |||||||||||
John H. Forsgren | 122,500 | 100,000 | 0 | 5,971 | 228,471 | |||||||||||
Ann Maynard Gray | 171,000 | 100,000 | 0 | 3,471 | 274,471 | |||||||||||
James H. Hance, Jr. | 117,500 | 100,000 | 0 | 5,971 | 223,471 | |||||||||||
E. James Reinsch | 105,000 | 100,000 | 0 | 5,971 | 210,971 | |||||||||||
James T. Rhodes | 132,500 | 100,000 | 0 | 5,671 | 238,171 | |||||||||||
Philip R. Sharp | 116,000 | 100,000 | 0 | 971 | 216,971 | |||||||||||
Dudley S. Taft(1) | 37,945 | 0 | 0 | 77 | 38,022 |
Name | Duke Energy Stock Options (#) | Spectra Energy Stock Options (#) | ||||||
---|---|---|---|---|---|---|---|---|
William Barnet, III | 0 | 0 | ||||||
G. Alex Bernhardt, Sr. | 8,000 | 4,000 | ||||||
Michael G. Browning | 0 | 0 | ||||||
Daniel R. DiMicco | 0 | 0 | ||||||
John H. Forsgren | 0 | 0 | ||||||
Ann Maynard Gray | 8,000 | 4,000 | ||||||
James H. Hance, Jr. | 0 | 0 | ||||||
E. James Reinsch | 0 | 0 | ||||||
James T. Rhodes | 8,000 | 4,000 | ||||||
Philip R. Sharp | 0 | 0 | ||||||
Dudley S. Taft | 0 | 0 |
*Duke Energy spun off its gas businesses effective January 2, 2007, to form Spectra Energy.
In addition, with respect to Mr. Browning, the amount of All Other Compensation includes the personal use of the corporate aircraft. Regarding use of corporate aircraft, directors are required to reimburse Duke Energy the direct operating costs of any personal travel which has been approved by the CEO. With respect to flights on a leased or chartered airplane, direct operating costs equal the amount that the third party charges Duke Energy for such trip. With respect to flights on the Company-owned airplane, direct operating costs include the amounts permitted by the Federal Aviation Regulations for non-commercial carriers. With permission of the CEO, directors are permitted to invite their spouse to accompany them on
business trips when space is available; however, in such events, the director is imputed income in accordance with IRS guidelines.
Name | Personal Use of Airplane ($) | Business Travel Accident Insurance ($) | Matching Charitable Contributions ($) | Holiday Gift ($) | Total ($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
William Barnet, III | 0 | 225 | 5,000 | 746 | 5,971 | |||||||||||
G. Alex Bernhardt, Sr. | 0 | 225 | 5,000 | 0 | 5,225 | |||||||||||
Michael G. Browning | 5,295 | 225 | 5,000 | 746 | 11,266 | |||||||||||
Daniel R. DiMicco | 0 | 225 | 0 | 746 | 971 | |||||||||||
John H. Forsgren | 0 | 225 | 5,000 | 746 | 5,971 | |||||||||||
Ann Maynard Gray | 0 | 225 | 2,500 | 746 | 3,471 | |||||||||||
James H. Hance, Jr. | 0 | 225 | 5,000 | 746 | 5,971 | |||||||||||
E. James Reinsch | 0 | 225 | 5,000 | 746 | 5,971 | |||||||||||
James T. Rhodes | 0 | 225 | 4,700 | 746 | 5,671 | |||||||||||
Philip R. Sharp | 0 | 225 | 0 | 746 | 971 | |||||||||||
Dudley S. Taft | 0 | 77 | 0 | 0 | 77 |
PROPOSAL 2: RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANT FOR 2011
Representatives of Deloitte are expected to be present at the annual meeting. They will have an opportunity to make a statement and will be available to respond to appropriate questions. Information on Deloitte's fees for services rendered in 2010 and 2009 follows:
Type of Fees | FY 2010 | FY 2009 | |||||
---|---|---|---|---|---|---|---|
Audit Fees(a) | $ | 8,500,000 | $ | 8,800,000 | |||
Audit-Related Fees(b) | 2,100,000 | 1,750,000 | |||||
Tax Fees(c) | 775,000 | 400,000 | |||||
All Other Fees(d) | 25,000 | 100,000 | |||||
Total Fees | $ | 11,400,000 | $ | 11,050,000 | |||
To safeguard the continued independence of the independent public accountants, the Audit Committee adopted a policy that provides that the independent public accountants are only permitted to provide services to Duke Energy and its subsidiaries that have been pre-approved by the Audit Committee. Pursuant to the policy, detailed audit services, audit-related services, tax services and certain other services have been specifically pre-approved up to certain categorical fee limits. In the event that the cost of any of these services may exceed the pre-approved limits, the Audit Committee must pre-approve the service. All other services that are not prohibited pursuant to the SEC's or other applicable regulatory bodies' rules or regulations must be specifically pre-approved by the Audit Committee. All services performed in 2010 and 2009 for Duke Energy by the independent public accountant were approved by the Audit Committee pursuant to its pre-approval policy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANT FOR 2011.
PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we provide our shareholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. This proposal, commonly referred to as a "say-on-pay" proposal, gives our shareholders the opportunity to express their views on the compensation of our named executive officers.
In connection with this proposal, the Board of Directors encourages shareholders to review in detail the description of the compensation program for our named executive officers that is set forth in the Compensation Discussion and Analysis section of this proxy statement, as well as the information contained in the compensation tables and narrative discussion in this proxy statement.
As described in more detail in the Compensation Discussion and Analysis section of this proxy statement, the guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of our executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results as compared to predetermined measures of success. A significant portion of our named executive officers' total direct compensation is directly contingent upon achieving specific results that are important to our long-term success and growth in shareholder value. We supplement our pay-for-performance program with a number of compensation policies that are aligned with the long-term interests of Duke Energy and its shareholders.
We are asking our shareholders to indicate their support for the compensation of our named executive officers as disclosed in this proxy statement by voting "FOR" the following resolution:
"RESOLVED, that the shareholders of Duke Energy approve, on an advisory basis, the compensation paid to Duke Energy's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion in Duke Energy's 2011 proxy statement."
Because your vote is advisory, it will not be binding on the Board of Directors, the Compensation Committee or Duke Energy. The Compensation Committee, however, will review the voting results and will take them into consideration when making future decisions regarding the compensation of our named executive officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
PROPOSAL 4: ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act also requires that we provide our shareholders with the opportunity to vote, on a nonbinding, advisory basis, for their preference as to how frequently we should seek future advisory say-on-pay votes on the compensation of our named executive officers. In particular, we are asking our shareholders to indicate, on a nonbinding, advisory basis, whether they would prefer an advisory say-on-pay vote on the compensation of our named executive officers to occur every one, two or three years. Shareholders also may, if they wish, abstain from casting a vote on this proposal.
Our Board of Directors has determined that an advisory say-on-pay vote on the compensation of our named executive officers that occurs on anannual basis is the most appropriate alternative for Duke Energy. Accordingly, our Board of Directors recommends that the advisory vote on the compensation of our named executive officers occurevery year. Our Board of Directors believes that an annual advisory say-on-pay vote will allow our shareholders to provide timely, direct input on Duke Energy's executive compensation philosophy, policies and practices as disclosed in the proxy statement each year.
You may cast your vote by choosing the option of one year, two years, three years or abstain from voting in response to the following resolution:
"RESOLVED, that the shareholders determine, on an advisory basis, whether the preferred frequency for holding an advisory vote on the compensation of Duke Energy's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion in the proxy statement, should be every year, every two years or every three years."
The option (i.e., one year, two years or three years) that receives the highest number of votes cast by shareholders will be considered to be the shareholders' preferred frequency for the advisory vote on the compensation of our named executive officers. Because the vote is advisory, however, it will not be binding on the Board of Directors, the Compensation Committee or Duke Energy. The Board of Directors may decide, in its sole discretion, that it is in the best interests of Duke Energy and its shareholders to hold an advisory say-on-pay vote on the compensation of our named executive officers more or less frequently than the option receiving the most votes cast by our shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE OPTION OF EVERY "1 YEAR" AS THE PREFERRED FREQUENCY FOR HOLDING AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.
Proposal 5, Proposal 6 and Proposal 7 are proposals we received from our shareholders. If the proponents of these proposals, or representatives who are qualified under state law, are present at our Annual Meeting and submit the proposals for a vote, then the proposals will be voted upon. The shareholder proposals, including any supporting statements, are included exactly as submitted to us by the proponents of these proposals. The Board of Directors recommends voting "against" each proposal. We will promptly provide you with the name, address and, to our knowledge, the number of voting securities held by the proponents of the shareholder proposals, upon receiving a written or oral request.
PROPOSAL 5: SHAREHOLDER PROPOSAL RELATINGTO PREPARATION OF A REPORT ON DUKE ENERGYCORPORATION'S GLOBAL WARMING-RELATEDLOBBYING ACTIVITIES
Resolved: The shareholder requests the Board of Directors prepare a report disclosing the Company's global warming-related lobbying activities. The report, prepared at a reasonable cost and omitting proprietary information, should be published by November 2011. The report should:
Supporting Statement
As long-term shareholders of Duke Energy, we support transparency and accountability regarding the Company's public policy activities.
Disclosure surrounding the company's lobbying activities is in the best interest of the company and its shareholders. Absent a system of accountability, company assets could be used in support of public policy objectives that are not in the Company's long-term interest.
According to the Charlotte Observer (10/9/09), "Duke Energy has spent more than $10 million to lobby Congress since 2008 as electric utilities ratchet up spending to help shape new laws on climate change and other issues."
CEO Jim Rogers has engaged in a high-profile lobbying effort to promote global warming-related cap-and-trade legislation by testifying in Congress, conducting media interviews, speaking at policy forums and appearing in a TV advertising campaign.
Duke Energy's support for cap-and-trade has been controversial, in part because economic studies report cap-and-trade would lead to an increase in energy prices, a decrease in economic growth and an increase in unemployment. These could be detrimental to shareholder interests.
Cap-and-trade could add significant costs to the Company's use of coal.
The Company has worked with non-profit organizations such as the National Resources Defense Council (NRDC) and Environmental Defense (ED) through its membership in the United States Climate Action Partnership—a lobbying coalition seeking cap-and-trade legislation.
NRDC and ED oppose coal use. The organizations have challenged Duke Energy's Cliffside coal-fired power plant in court. In response to the Company seeking air pollution permits, a NRDC attorney said in 2008, "Having already violated the law, Duke is now trying to issue itself a get out of jail free card." An official with ED opposed Duke Energy's Cliffside facility, saying in 2008, "It's hard to understand why Duke Energy believes clean air laws don't apply to them."
Duke Energy's global warming policy has interfered with the Company's relationship with trade associations. The Company ended its membership in the National Association of Manufacturers and the American Coalition for Clean Coal Electricity in part over policy differences on global warming.
The pending transfer of the U.S. House of Representatives from Democrat to Republican control in January 2011 reduces the likelihood that any cap-and-trade legislation will be adopted by Congress.
Disclosure of the Company's global warming-related activities will provide the transparency shareholders need to evaluate these public policy activities.
Opposing Statement of the Board of Directors:
Your Board recommends a vote "AGAINST" this proposal for the following reasons:
The Board of Directors believes this report is unnecessary as it is duplicative of information that Duke Energy already provides on its website.
There is a growing national consensus that steps should be taken to reduce greenhouse gas emissions. As an energy company, we will be greatly affected by any laws or regulations imposed by state and federal lawmakers, or regulatory bodies, on this issue. We believe it is in the best interest of our shareholders and customers that we participate in these discussions in order to
present our views on this important public policy issue. We participate in these discussions through a number of different means, including memberships in trade organizations, organizations focused on the science and research surrounding climate change, organizations whose focus is on the development of alternative energy sources and processes, and organizations whose focus is on addressing the issue of climate change as a whole. Our employees also participate through our voluntary, nonpartisan political action committee, DUKEPAC, which makes contributions to qualified candidates running for office based on, among other things, their positions on public policy issues, such as climate change. The procedure by which contributions are made by Duke Energy and DUKEPAC are disclosed on the Political Participation page of our website athttp://www.duke-energy.com/corporate-governance/politicalactivity.asp.
Accordingly, proponent's request that we disclose our policies and procedures regarding our lobbying activities and business associations and the benefits to our shareholders surrounding such activities are already readily available to the public and our shareholders on our website. Similarly, our business associations and coalitions are provided on our website athttp://www.duke-energy.com/environment/affiliations-partnerships.asp. Not only do we disclose our business associations, but we disclose more information than the proponent has requested by listing all DUKEPAC contributions through a link on the Political Participation page of our website.
Consequently, we believe that preparation of proponent's requested report would be duplicative and an unnecessary waste of Company resources. Indeed, as we review the proponent's supporting statement and based on previous discussions with the proponents, we believe the underlying issue is their disagreement with our public policy position in support of responsible legislation that would provide needed clarity on the country's policies involving greenhouse gas emissions. Although many individuals and organizations may disagree, we believe—and engage in lobbying activities accordingly—that responsible legislation will eliminate uncertainty, is preferable to other solutions under consideration, and is therefore in our shareholders' best interest.
The proponents submitted an identical proposal for vote at last year's annual meeting and our shareholders rejected the request with approximately 92% of the vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE SHAREHOLDER PROPOSAL RELATING TO PREPARATION OF A REPORT ON DUKE ENERGY CORPORATION'S GLOBAL WARMING-RELATED LOBBYING ACTIVITIES.
PROPOSAL 6: SHAREHOLDER PROPOSAL REGARDINGTHE ISSUANCE OF A REPORT ON CONTINUED RELIANCEON COAL
Whereas:
Electric utility companies that rely on coal face numerous challenges and uncertainty regarding environmental compliance costs, and the cost of carbon capture and storage for coal plants. Declining reserves of high quality central Appalachian coal, unprecedented price increases and coal price-volatility, versus abundant supplies and record low-prices for cleaner burning natural gas, and declining costs for wind and solar energy, make continued reliance on coal increasingly problematic.
Coal combustion for electricity is a major contributor to air pollution, accounting for one third of the nitrous oxides (NOx), 50% of the mercury, a hazardous air pollutant, and over 36% of the carbon dioxide (CO2) emitted in the U.S. The U.S. Environmental Protection Agency (EPA) is moving, in some cases pursuant to court order, to tighten regulation of the air, water and waste impacts of coal plants. Pending EPA regulations governing storage and disposal of coal combustion wastes will likely increase operating costs for coal plants. Industry analysts (Bernstein Research, Jeffries & Company, Standard & Poor's, Wood Mackenzie) have concluded that the cost of environmental control equipment may make it uneconomic to retrofit some coal plants.
This unprecedented combination of forces has led Duke Energy, which relies on coal for 62% of its electricity production, to replace some of its older coal plants. The $1.8 billion, 825-megawatt (MW) unit Duke is building in Cliffside, NC, will help replace about 1,000 MW of older, higher-emitting coal units. Nevertheless, even with these and other coal plant closures, by 2030 Duke will still depend on coal for 28% of its energy.
Although Duke has called for mandatory legislation to cap CO2 emissions, the lack of national climate policy setting limits on these emissions further adds to the economic uncertainty for coal plants.
Duke's 630-MW coal gasification plant under construction in Edwardsport, IN, could capture 18 percent of its CO2 within four or five years. Capturing the CO2 created when coal is turned into a fuel gas, could add 5 percent to 15 percent of the plant's initial $2.35 billion cost and Duke has sought regulatory approval to study a second step that could capture an additional 40% of the CO2 at a later stage.
According to some experts, however, "before new methods can be commercialized, projects need three to five years of planning and construction, followed by eight to 10 years of actual pumping from the U.S. Government Accountability Office, states that commercial deployment of carbon capture and storage technology for coal plants, is 10 to 15 years away and "would increase electricity costs by about 30 to 80 percent."
Resolved:
Shareowners request that Duke Energy's Board of Directors, at reasonable cost and omitting proprietary information, issue a report by November 2011 on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and cleaner energy, including an assessment of the cumulative costs of environmental compliance for coal plants compared to alternative generating sources.
Opposing Statement of the Board of Directors:
Your Board recommends a vote "AGAINST" this proposal for the following reasons:
Duke Energy is committed to finding new ways to confront our industry's biggest challenges, including CO2 emissions and other issues associated with coal plants. The risks associated with these issues, financial and otherwise, are examined by our Board and management on a regular basis. As a result, Duke Energy has been very active in investing in new technologies, expanding our use of energy efficiency and providing our customers with low carbon options, such as renewable energy, in order to meet the future energy demands of our customers. We have also been forthcoming on our website and in our public filings about all of the risks associated with the business. Accordingly, the Board of Directors believes this report is unnecessary as it is duplicative of information that Duke Energy already provides.
Duke Energy has a history of reporting metrics associated with our coal plants and carbon emissions and the associated risks in our annual Sustainability Report. Duke Energy also discloses the material risks related to climate change and carbon change in its Annual Report on Form 10-K filed with the SEC and provided to our shareholders every year. Furthermore, we respond annually to the Carbon Disclosure Project questionnaire which is sent out to thousands of the world's largest organizations.
A link to both the Sustainability Report and the Carbon Disclosure Project website is provided athttp://www.duke-energy.com/environment/reports.asp. Our Investor Response to the Carbon Disclosure Project discloses in detail how the board and our management reviews the risks related to climate change and carbon emissions. It also discusses the financial implications of those risks and the actions the company has taken to manage the associated risks, such as adding to our nuclear capacity, constructing the IGCC unit at Edwardsport, increasing our wind and solar power and instituting various energy efficiency programs.
Because of the Company's extensive disclosure on the risks associated with our business, including the costs and benefits associated with the alternative fuel sources we have to choose from, we believe that preparation of the proponent's requested report would be duplicative and an unnecessary waste of Company resources.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE SHAREHOLDER PROPOSAL REGARDING THE ISSUANCE OF A REPORT ON THE FINANCIAL RISKS OF CONTINUED RELIANCE ON COAL.
PROPOSAL 7: SHAREHOLDER PROPOSAL REGARDINGAN AMENDMENT TO OUR ORGANIZATIONAL DOCUMENTSTO REQUIRE MAJORITY VOTING FOR THE ELECTIONOF DIRECTORS
Resolved: That the shareholders of Duke Energy Corporation ("Company") hereby request that the Board of Directors initiate the appropriate process to amend the Company's governance documents (certificate of incorporation or bylaws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders, with a plurality vote standard retained for contested director elections, that is, when the number of director nominees exceeds the number of board seats.
Supporting Statement
Duke Energy's Board of Directors should establish a majority vote standard in director elections to provide shareholders a meaningful role in these important elections. The proposed majority vote standard requires that a director nominee receive a majority of the votes cast in an election in order to be formally elected. Under the company's current plurality vote standard, a board nominee can be elected with as little as a single affirmative vote, even if a substantial majority of the votes cast are "withheld" from the nominee. We believe that a majority vote standard in board elections establishes a challenging vote standard for board nominees, enhances board accountability, and improves the performance of boards and individual directors.
Over the past five years, a significant majority of companies in the S&P 500 Index has adopted a majority vote standard in company bylaws, articles of incorporation or charter. These companies have also adopted a director resignation policy that establishes a board-centered post-election process to determine the status of any director nominee that is not elected. This dramatic move to a majority vote standard is in direct response to strong shareholder demand for a meaningful role in director elections. However, Duke Energy has responded only partially to the call for change, simply adopting a post-election director resignation policy that sets procedures for addressing the status of director nominees that receive more "withhold" votes than "for" votes. The plurality vote standard remains in place.
Duke Energy's Board of Directors has not acted to establish a majority vote standard, retaining its plurality vote standard, despite the fact that many of its self-identified peer companies including American Electric Power, Ameren, Dominion Resources, CenterPoint Energy, Consolidated Edison, Constellation Energy, FPL Group and Exelon have adopted majority voting. The Board should take this critical first step in establishing a meaningful majority vote standard. With a majority vote standard in place, the Board can then act to fashion its director resignation policy to address the status of unelected directors. A majority vote standard combined with a post-election director resignation policy would establish a meaningful right for shareholders to elect directors at Duke Energy, while reserving for the Board an important post-election role in determining the continued status of an unelected director. We urge the Board to join the mainstream of major U.S. companies and establish a majority vote standard.
Opposing Statement of the Board of Directors:
Your Board recommends a vote "AGAINST" this proposal for the following reasons:
The Board of Directors agrees that sound corporate governance policies and practices are important to the success of the Company. However, after careful review of the proposal in comparison to our current director election policies, the Board recommends a vote against this proposal at this time for a number of reasons.
First, the shareholder proposal's characterization of the plurality voting standard, particularly the statement that a director could be elected with a single vote, is simply an unrealistic hypothetical. In the last 4 years since the merger of Duke Energy and Cinergy, no director nominee has received less than approximately 92 percent of the shares voted. As a result, the outcome of director elections in these years would not have been any different under a majority voting standard.
Not only have our Directors historically received very high levels of support, but we maintain a strong director nomination and election process which identifies and proposes qualified independent director nominees to serve the best interests of the Company and our shareholders. This nomination and election process has resulted in a Board that consists of highly-qualified Directors from diverse backgrounds who, except for our Chairman and CEO, all meet the definition of independence under the NYSE listing standards. Because our shareholders have a history of electing highly-qualified and independent directors using a plurality voting system, a change in the director election process is not necessary to improve our corporate governance. In fact, independent corporate governance agencies have recognized our strong corporate governance structure and initiatives. In 2010, RiskMetrics Group rated our Board Structure as being of Low Concern, their highest rating.
Second, in 2006, the Board amended our Principles for Corporate Governance to include a director resignation policy in order to address the type of concerns expressed in the proposal. The director resignation policy provides that a nominee for director who fails to receive a greater number of votes "for" his or her election than votes "withheld" from his or her election must tender his or her resignation. The Corporate Governance Committee must then recommend to the Board whether or not to accept such resignation. For further information on this policy, see the Report of the Corporate Governance Committee on page 35. We anticipate that any such resignation would be accepted absent unusual circumstances. Therefore, as a practical matter, the majority voting standard under this proposal and our existing director resignation policy would produce the exact same result—any director nominee who fails to obtain a majority of votes would not serve. Because our current director resignation policy already accomplishes the objective of the shareholder proposal, the adoption of a majority vote standard is unnecessary.
Finally, the majority vote standard advocated by the proponent is a relatively new practice which could lead to unintended or adverse consequences. For example, this standard could result in an entire slate of nominees being rejected, or an insufficient number of independent directors being elected to satisfy the NYSE listing standards or securities laws' requirements. In such events, we could be incapable of taking important corporate action until the situation was resolved. Given these issues and our history of having a Board that is highly qualified and consistently elected by an overwhelming majority of our shareholders, we do not believe it is in our shareholders' best interest to implement the proponent's voting standard at this time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE SHAREHOLDER PROPOSAL RELATING TO MAJORITY VOTING FOR THE ELECTION OF DIRECTORS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the amount of Duke Energy common stock beneficially owned by the current directors, the executive officers listed in the Summary Compensation Table under Executive Compensation (referred to as the named executive officers), and all directors and executive officers as a group as of March 10, 2011.
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The following table lists the beneficial owners of 5% or more of Duke Energy's outstanding shares of common stock as of December 31, 2010. This information is based on the most recently available reports filed with the SEC and provided to us by the companies listed.
Name or Identity of Beneficial Owner | Shares of common stock Beneficially Owned(1) | Percentage | |||||
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Capital World Investors 333 South Hope Street Los Angeles, CA 90071 | 76,604,172 | 5.8 | % |
The following is the report of the Audit Committee with respect to Duke Energy's audited financial statements for the fiscal year ended December 31, 2010.
The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" or "filed" or "incorporated by reference" in future filings with the Securities and Exchange Commission, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), except to the extent that Duke Energy specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.
The purpose of the Audit Committee is to assist the Board in its general oversight of Duke Energy's financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the committee and is available on our website athttp://www.duke-energy.com/corporate-governance/board-committee-charters/audit.asp.
The Audit Committee has reviewed and discussed the consolidated financial statements with management and Deloitte, the Company's independent public accountants. Management is responsible for the preparation, presentation and integrity of Duke Energy's financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting; and, evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Deloitte is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States ("GAAP"), as well as expressing an opinion on the effectiveness of internal control over financial reporting.
The Audit Committee reviewed the Company's audited financial statements with management and Deloitte, and met separately with both management and Deloitte to discuss and review those financial statements and reports prior to issuance. These discussions also addressed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. Management has represented, and Deloitte has confirmed, that the financial statements were prepared in accordance with GAAP.
In addition, management completed the documentation, testing and evaluation of Duke Energy's system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002, and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates provided by management and Deloitte at each regularly scheduled Audit Committee meeting. At the conclusion of the process, management provided the Audit Committee with, and the Audit Committee reviewed, a report on the effectiveness of the Company's internal control over financial reporting. The Audit Committee also reviewed the report of management contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2010 ("Form 10-K") filed with the SEC, as well as Deloitte's Report of Independent Registered Public Accounting Firm included in the Company's Form 10-K related to its audit of (i) the consolidated financial statements and financial statement schedules and (ii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company's efforts related to its internal control over financial reporting and management's preparations for the evaluation in fiscal 2010.
The Audit Committee has discussed with Deloitte the matters required to be discussed by professional and regulatory requirements, including, but not limited to, the standards of the Public Company Accounting Oversight Board regarding The Auditors' Communications with Those Charged with Governance. In addition, Deloitte has provided the Audit Committee with the written disclosures and the letter required by "Public Company Accounting Oversight Board Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence" that relates to Deloitte's independence from Duke Energy and its subsidiaries and the Audit Committee has discussed with Deloitte the firm's independence.
Based on its review of the consolidated financial statements and discussions with and representations from management and Deloitte referred to above, the Audit Committee recommended that the audited financial statements be included in Duke Energy's Form 10-K, for filing with the SEC.
REPORT OF THE CORPORATE GOVERNANCE COMMITTEE
The following is the report of the Corporate Governance Committee with respect to its philosophy, responsibilities and initiatives.
Philosophy and Responsibilities
We believe that sound corporate governance has three components: (i) Board of Directors' independence, (ii) processes and practices that foster solid decision-making by both management and the Board of Directors, and (iii) balancing the interests of all of our stakeholders—stakeholders – our investors, customers, employees, the communities we serve and the environment. The Corporate Governance Committee's charter is available on our website athttp://www.duke-energy.com/corporate-governance/board-committee-charters/corporate-governance.asp and is summarized below.
Membership. The Committee must be comprised of three or more members, all of whom must qualify as independent directors under the listing standards of the NYSE and other applicable rules and regulations.
Responsibilities. The Committee's responsibilities include, among other things: (i) implementing policies regarding corporate governance matters; (ii) assessing the Board of DirectorsDirectors' membership needs and recommending nominees; (iii) recommending to the Board of Directors those directors to be selected for membership on, or removal from, the various Board of Directors' committees and those directors to be designated as chairs of Board of Directors' committees; and (iv) sponsoring and overseeing performance evaluations for the various Board of Directors' committees, the Board of Directors as a whole, and the directors and management, including the Chief Executive Officer.
Investigations and Evaluations. The Committee may conduct or authorize investigations into or studies of matters within the scope of the Committee's duties and responsibilities, and may retain, at the Company's expense, and in the Committee's sole discretion, consultants to assist in such work as the Committee deems necessary. In addition, the Committee has the sole authority to retain or terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm's fees and other retention terms, such fees to be borne by the Company. Finally, the Committee conducts an annual self-evaluation of its performance.
In connection with the settlement by the Company with the North Carolina Utilities Commission following the Company's merger with Progress Energy, Inc., the Committee assigned the responsibility to search for a successor to our former CEO, Mr. Rogers, as well as for two additional directors to join the Board, to the Leadership Development Committee of the Board of Directors. The Leadership Development Committee was a temporary committee formed solely for this purpose, however, so the Corporate Governance Committee has retained its responsibility to identify director candidates and for succession planning. The Leadership Development Committee was disbanded in December 2013 following the appointments of Ms. Good as CEO and Messrs. Herron and Kennard to the Board of Directors.
Governance Initiatives
All of our Board of Directors committee charters, as well as our Principles for Corporate Governance, Code of Business Ethics for Employees and Code of Business Conduct & Ethics for Directors are available on our website athttp://www.duke-energy.com/investors/corporate-governance.asp. Any amendments to or waivers from our Code of Business Ethics for Employees with respect to executive officers or Code of Business Conduct & Ethics for directorsDirectors must be approved by the Board and will be posted on our website. During 20102013 our Board of Directors held 45 executive sessions with independent directors only.
Director Candidates
Profile. We look for the following characteristics in any candidate for nomineenomination to serve on our Board of Directors:
26 DUKE ENERGY – 2014 Proxy Statement
REPORT OF THE CORPORATE GOVERNANCE COMMITTEE
Nominees. The Committee may engage a third party from time to time to assist it in identifying and evaluating director-nominee candidates, in addition to current members of the Board of Directors standing for re-election. The Committee will provide the third party, based on surveys of the then-current Board of Directors members and the profile described above, the characteristics, skills and experiences that may complement those of our existing members. The third party will then provide recommendations for nominees with such attributes. The Committee considers nominees recommended by shareholders on a similar basis, taking into account, among other things, the profile criteria described above and the nominee's experiences and skills. In addition, the Committee considers the shareholder-nominee's independence with respect to both the Company and the nominatingrecommending shareholder. All of the nominees on the proxy card are current members of our Board of Directors and were recommended by the Committee.
Shareholders interested in submitting nominees as candidates for election as directors must provide timely written notice to the Corporate Governance Committee, c/o Corporate Secretary, Duke Energy Corporation, P.O. Box 1006,1321, Charlotte, NC 28201-1006.28201-1321. The notice must set forth, as to each person whom the shareholder proposes to nominate for election as director:
DUKE ENERGY – 2014 Proxy Statement 27
Resignation PolicyREPORT OF THE CORPORATE GOVERNANCE COMMITTEE
Our PrinciplesMajority Voting for Corporate Governance set forth our proceduresthe Election of Directors
In response to be followed ifsubstantial shareholder support for a director-nominee is elected, but receives ashareholder proposal at the 2013 Annual Shareholder Meeting regarding majority voting for the election of "withheld" votes. Indirectors, the Board of Directors adopted Amended and Restated By-Laws in October 2013 to provide for majority voting in uncontested director elections.
Under the Amended and Restated By-Laws, in an uncontested election any nominee for director who receivesat which a greaterquorum is present, a Director will be elected if the number of shares voted "for" the Director's election exceeds the number of votes "withheld" from that Director's election. In addition, the Company continues to maintain a resignation policy, which requires an incumbent Director who receives more "withhold" votes than votes "for" his or her election than votes "for" such election is required to tender his or her letter of resignation following certification offor consideration by the shareholder vote. The Corporate Governance Committee is then required to make a recommendation toof the Company's Board of Directors.
In contested elections, Directors with respectwill continue to any such letterbe elected by plurality vote. For purposes of resignation. The Boardthe Amended and Restated By-laws, a "contested election" is an election in which the number of Directorsnominees for director is requiredgreater than the number of directors to take action with respect to this recommendation and to disclose its decision-making process. Full details of this policy are set out in our Principles for Corporate Governance, which is posted on our website athttp://www.duke-energy.com/corporate-governance/principles.asp.be elected.
Communications with Directors
Interested parties can communicate with any of our directors by writing to our Corporate Secretary at the following address:
Corporate Secretary
Duke Energy Corporation
P.O. Box 10061321
Charlotte, NC 28201-100628201-1321
Interested parties can communicate with our lead directorindependent Chairman of the Board by writing to the following address:
Lead Director
Chairman of The Board
c/o Corporate Secretary
Duke Energy Corporation
P.O. Box 10061321
Charlotte, NC 28201-100628201-1321
Our Corporate Secretary will distribute communications to the Board of Directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Duke Energy Board of Directors has requested that certain items that are unrelated to the duties and responsibilities of the Board of Directors be excluded, such as: spam; junk mail and mass mailings; service complaints; resumes and other forms of job inquiries; surveys; and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, obscene or similarly unsuitable will be excluded. However, any communication that is so excluded remains available to any director upon request.
Corporate Governance Committee
Ann M. Gray(Chair)
Michael G. Browning
Harris E. DeLoach, Jr.
Daniel R. DiMicco
E. Marie McKee
28 DUKE ENERGY – 2014 Proxy Statement
DIRECTOR COMPENSATION
Annual Retainer and Fees. During 2013, the retainer and meeting fees paid to our independent directors consisted of:
| | Meeting Fees | |||||||||||
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Type of Fee | Fee (Other Than for Meetings) ($) | In-Person Attendance at Meetings Held in Conjunction With a Regular Board of Directors Meeting ($) | In-Person Meetings Not Held in Conjunction With a Regular Board of Directors Meeting ($) | Telephonic Participation in Meetings ($) | |||||||||
Annual Board of Directors Retainer (Cash) | 75,000 | ||||||||||||
Annual Board of Directors Retainer (Stock) | 125,000 | ||||||||||||
Board of Directors Meeting Fees | 2,000 | 2,500 | 2,000 | ||||||||||
Annual Board Chair Retainer | 100,000 | ||||||||||||
Annual Lead Director Retainer (if applicable) | 75,000 | ||||||||||||
Annual Audit Committee Chair Retainer | 25,000 | ||||||||||||
Annual Chair Retainer (Other Committees) | 15,000 | ||||||||||||
Audit Committee Meeting Fees | 3,000 | 2,500 | 2,000 | ||||||||||
Nuclear Oversight Committee Meeting Fees | 4,000 | 2,500 | 2,000 | ||||||||||
Other Committee Meeting Fees | 2,000 | 2,500 | 2,000 | ||||||||||
The compensation program is the same as in effect at the end of 2012, except for the addition of the annual Board Chair retainer of $100,000, which became effective on December 10, 2013.
Annual Stock Retainer for 2013. In 2013, each eligible director received the portion of his or her annual retainer that was payable in stock in the form of fully-vested shares granted under the Duke Energy Corporation 2010 Long-Term Incentive Plan.
Deferral Plans and Stock Purchases. Directors may elect to receive all or a portion of their annual compensation, consisting of retainers and attendance fees, on a current basis, or defer such compensation under the Duke Energy Corporation Directors' Savings Plan (the "Directors' Savings Plan"). Deferred amounts are credited to an unfunded account, the balance of which is adjusted for the performance of phantom investment options, including the Duke Energy common stock fund, as elected by the director, and generally are paid when the director terminates his or her service from the Board of Directors. In connection with the merger with Progress Energy, Duke Energy assumed the Progress Energy, Inc. Non-Employee Director Deferred Compensation Plan (the "Deferred Compensation Plan") and the Progress Energy, Inc. Non-Employee Director Stock Unit Plan (the "Stock Unit Plan"), each of which was merged into the Directors' Savings Plan effective at the end of 2013. Under the Deferred Compensation Plan, the former Progress Energy directors were provided the opportunity to elect to defer their annual retainer and board attendance fees. Any deferred fees are deemed to be invested in stock units. The number of units in each account is adjusted from time to time to reflect the payment of dividends on the number of shares of stock represented by the units. Payments from the plan are made in cash upon termination of service. Under the Stock Unit Plan, the number of units in each account is adjusted from time to time to reflect the payment of dividends on the number of shares of stock represented by the units. Payments from the plan are made in cash upon termination of service.
Charitable Giving Program. The Duke Energy Foundation, independent of Duke Energy, maintains The Duke Energy Foundation Matching Gifts Program under which directors are eligible to request matching contributions of up to $5,000 per director per calendar year to qualifying institutions. In addition, Duke Energy maintains a Directors' Charitable Giving Program. Eligibility for this program has been frozen and Ms. Gray is the only current director who is eligible. Under this program, Duke Energy will make, upon the director's death, donations of up to $1,000,000 to charitable organizations selected by the director. Ms. Gray may request that donations be made under this program during her lifetime, in which case the maximum donation will be reduced on an actuarially-determined net present value basis. In 2013, no donations were made on behalf of Ms. Gray. In addition, Duke Energy made a $1,000 donation to the Red Cross in December 2013 on behalf of each of the independent directors.
Expense Reimbursement and Insurance. Duke Energy provides travel insurance to directors in the amount of $500,000, and reimburses directors for expenses reasonably incurred in connection with attendance and participation at Board of Directors and committee meetings and special functions.
Stock Ownership Guidelines. Outside directors are subject to stock ownership guidelines, which establish a target level of ownership of Duke Energy common stock (or common stock equivalents). Currently each independent director is required to own shares with a value equal to at least five times the annual Board of Directors cash retainer (i.e., an ownership level of $375,000) or retain 50% of his or her vested annual equity retainer. All independent directors were in compliance with the guidelines as of December 31, 2013.
DUKE ENERGY – 2014 Proxy Statement 29
DIRECTOR COMPENSATION
The following table describes the compensation earned during 2013 by each individual who served as an independent director during 2013. Because Mr. Kennard joined the Board of Directors on January 1, 2014, he did not receive any compensation in 2013 and is not listed below.
Name | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
William Barnet, III | 128,000 | 125,000 | 0 | 6,412 | 259,412 | |||||||||||
G. Alex Bernhardt, Sr. | 136,500 | 125,000 | 14,843 | 6,412 | 282,755 | |||||||||||
Michael G. Browning | 159,500 | 125,000 | 0 | 6,412 | 290,912 | |||||||||||
Harris E. DeLoach, Jr. | 151,500 | 125,000 | 0 | 5,412 | 281,912 | |||||||||||
Daniel R. DiMicco | 141,000 | 125,000 | 0 | 1,412 | 267,412 | |||||||||||
John H. Forsgren | 128,000 | 125,000 | 0 | 4,412 | 257,412 | |||||||||||
Ann M. Gray | 254,500 | 125,000 | 0 | 6,412 | 385,912 | |||||||||||
James H. Hance, Jr. | 160,000 | 125,000 | 0 | 6,412 | 291,412 | |||||||||||
John T. Herron(1) | 141,000 | 146,291 | 0 | 1,385 | 288,676 | |||||||||||
James B. Hyler, Jr. | 160,000 | 125,000 | 0 | 1,412 | 286,412 | |||||||||||
E. Marie McKee | 164,000 | 125,000 | 0 | 6,412 | 295,412 | |||||||||||
E. James Reinsch | 134,000 | 125,000 | 0 | 6,412 | 265,412 | |||||||||||
James T. Rhodes | 160,500 | 125,000 | 0 | 6,412 | 291,912 | |||||||||||
Carlos A. Saladrigas | 177,500 | 125,000 | 0 | 6,412 | 308,912 | |||||||||||
Philip R. Sharp | 151,500 | 125,000 | 0 | 3,912 | 280,412 | |||||||||||
(1)
Effective March 1, 2013, Mr. Herron was appointed to the Board of Directors of Duke Energy.
(2)
Messrs. Bernhardt, DeLoach, DiMicco, Hyler and Reinsch and Ms. Gray and Dr. Rhodes elected to defer $136,500; $151,500; $141,000; $80,000; $67,000; $254,500; and $80,250, respectively, of their 2013 cash compensation under the Directors' Savings Plan.
(3)
This column reflects the grant date fair value of the stock awards granted to each eligible director during 2013. The grant date fair value was determined in accordance with the accounting guidance for stock-based compensation. See Note 20 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2013 ("Annual Report") for an explanation of the assumptions made in valuing these awards. In May 2013, each sitting director on the Duke Energy Board received 1,672 shares of stock. In addition, Mr. Herron received a prorated portion of the 2012-13 annual stock retainer, amounting to 307 shares, upon joining the Board of Directors on March 1, 2013. Messrs. Bernhardt, DeLoach, DiMicco, Forsgren, Hyler, Reinsch and Saladrigas and Ms. Gray and Dr. Rhodes elected to defer their 2013-14 stock retainer of Duke Energy shares under the Directors' Savings Plan.
(4)
Reflects above-market interest earned on a grandfathered investment fund previously provided under a predecessor plan to the Directors' Savings Plan. Participants can no longer defer compensation into the grandfathered investment fund but continue to be credited with interest at the fixed rate on amounts previously deferred into such fund.
(5)
As described in the following table, All Other Compensation for 2013 includes a business travel accident insurance premium that was prorated among the directors based on their service on the Board of Directors during 2013, contributions made in the director's name to charitable organizations, and a residential thermostat device.
Name | Business Travel Accident Insurance ($) | Charitable Contributions ($) | Residential Thermostat Device ($) | Total ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
William Barnet, III | 162 | 6,000 | 250 | 6,412 | |||||||||
G. Alex Bernhardt, Sr. | 162 | 6,000 | 250 | 6,412 | |||||||||
Michael G. Browning | 162 | 6,000 | 250 | 6,412 | |||||||||
Harris E. DeLoach, Jr. | 162 | 5,000 | 250 | 5,412 | |||||||||
Daniel R. DiMicco | 162 | 1,000 | 250 | 1,412 | |||||||||
John H. Forsgren | 162 | 4,000 | 250 | 4,412 | |||||||||
Ann M. Gray | 162 | 6,000 | 250 | 6,412 | |||||||||
James H. Hance, Jr. | 162 | 6,000 | 250 | 6,412 | |||||||||
John T. Herron | 135 | 1,000 | 250 | 1,385 | |||||||||
James B. Hyler, Jr. | 162 | 1,000 | 250 | 1,412 | |||||||||
E. Marie McKee | 162 | 6,000 | 250 | 6,412 | |||||||||
E. James Reinsch | 162 | 6,000 | 250 | 6,412 | |||||||||
James T. Rhodes | 162 | 6,000 | 250 | 6,412 | |||||||||
Carlos A. Saladrigas | 162 | 6,000 | 250 | 6,412 | |||||||||
Philip R. Sharp | 162 | 3,500 | 250 | 3,912 | |||||||||
30 DUKE ENERGY – 2014 Proxy Statement
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the amount of Duke Energy common stock beneficially owned by the current directors, the executive officers listed in the Summary Compensation Table under Executive Compensation (referred to as the named executive officers), and all directors and executive officers as a group as of March 3, 2014.
Name or Identity of Group | Total Shares Beneficially Owned(1) | Percent of Class | |||||
---|---|---|---|---|---|---|---|
William Barnet, III | 16,906 | * | |||||
G. Alex Bernhardt, Sr. | 43,013 | * | |||||
Michael G. Browning | 69,119 | * | |||||
Harris E. DeLoach, Jr. | 17,820 | * | |||||
Daniel R. DiMicco | 27,163 | * | |||||
John H. Forsgren | 10,235 | * | |||||
Lynn J. Good | 65,425 | * | |||||
Ann M. Gray | 37,641 | * | |||||
James H. Hance, Jr. | 34,671 | * | |||||
John T. Herron | 7,879 | * | |||||
James B. Hyler, Jr. | 5,912 | * | |||||
Dhiaa M. Jamil | 35,933 | * | |||||
William E. Kennard | 597 | * | |||||
Marc E. Manly | 16,560 | * | |||||
E. Marie McKee | 991 | * | |||||
E. James Reinsch | 17,011 | * | |||||
James T. Rhodes | 21,991 | * | |||||
James E. Rogers(2) | 1,087,080 | * | |||||
Carlos A. Saladrigas | 1,284 | * | |||||
Philip R. Sharp | 12,716 | * | |||||
Lloyd M. Yates | 47,237 | * | |||||
Steven K. Young | 37,595 | * | |||||
Directors and executive officers as a group (26) | 1,657,913 | * | |||||
*
Represents less than 1%.
(1)
Includes the following number of shares with respect to which directors and executive officers have the right to acquire beneficial ownership within sixty days of March 3, 2014: Mr. Barnet—123; Mr. Bernhardt—1,558; Mr. Browning—14,272; Mr. DeLoach—2,934; Mr. DiMicco—10,459; Mr. Forsgren—8,213; Ms. Good—0; Ms. Gray—432; Mr. Hance—0; Mr. Herron—0; Mr. Hyler—2,934; Mr. Jamil—0; Mr. Kennard—597; Mr. Manly—0; Ms. McKee—120; Mr. Reinsch—8,213; Dr. Rhodes—1,364; Mr. Rogers—42,834; Mr. Saladrigas—414; Dr. Sharp—0; Mr. Yates—6,606; Mr. Young—0; and all directors and executive officers as a group—104,246.
(2)
Provided as of the date of termination of retirement.
Ownership of Units Representing Common Stock
The table below shows ownership of other units (not listed in the table above) related to the common stock of Duke Energy under the Directors' Savings Plan and the plans that merged into the Directors' Savings Plan at the end of 2013 (i.e., the Director Deferred
DUKE ENERGY – 2014 Proxy Statement 31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Compensation Plan and the Stock Unit Plan). These units do not represent an equity interest in Duke Energy and possess no voting rights, but are equal in economic value to one share of the common stock of Duke Energy.
Name | Number of Units | |||
---|---|---|---|---|
William Barnet, III | 1,104 | |||
G. Alex Bernhardt, Sr. | 14,026 | |||
Michael G. Browning | 25,351 | |||
Harris E. DeLoach, Jr. | 25,399 | |||
Daniel R. DiMicco | 1,154 | |||
John H. Forsgren | 0 | |||
Ann M. Gray | 1,297 | |||
James H. Hance, Jr. | 0 | |||
John T. Herron | 0 | |||
James B. Hyler, Jr. | 9,756 | |||
William E. Kennard | 0 | |||
E. Marie McKee | 49,375 | |||
E. James Reinsch | 0 | |||
James T. Rhodes | 12,275 | |||
Carlos A. Saladrigas | 25,371 | |||
Philip R. Sharp | 0 | |||
The table below shows ownership of other units (not listed in the table on page 31) related to the common stock of Duke Energy under the Duke Energy Executive Savings Plan ("Executive Savings Plan"), as well as the plans that merged into the Executive Savings Plan at the end of 2013 (i.e., the Progress Energy, Inc. Management Deferred Compensation Plan; Progress Energy, Inc. Management Incentive Compensation Plan; and Progress Energy, Inc. Performance Share Sub-Plan). These units do not represent an equity interest in Duke Energy and possess no voting rights, but are equal in economic value to one share of the common stock of Duke Energy.
Name | Number of Units | |||
---|---|---|---|---|
Lynn J. Good | 63 | |||
Steven K. Young | 422 | |||
James E. Rogers | 80,372 | |||
Marc E. Manly | 0 | |||
Dhiaa M. Jamil | 1,593 | |||
Lloyd M. Yates | 9,695 | |||
The following table lists the beneficial owners of 5% or more of Duke Energy's outstanding shares of common stock as of December 31, 2013. This information is based on the most recently available reports filed with the SEC and provided to us by the company listed.
Name or Identity of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percentage | |||||
---|---|---|---|---|---|---|---|
BlackRock Inc. 40 East 52nd Street New York, NY 10022 | 40,598,419 | (1) | 5.80 | ||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 35,573,649 | 5.03 | |||||
(1)
According to the Schedule 13G/A filed by BlackRock Inc., these shares are beneficially owned by BlackRock Inc. which is the parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) to various investment companies, and has sole voting power with respect to 33,484,752 shares, 0 shares with shared voting power, sole dispositive power with regard to 40,598,419 shares and 0 shares with shared dispositive power.
(2)
According to the Schedule 13G filed by The Vanguard Group, these shares are beneficially owned by The Vanguard Group, which is the parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) to various investment companies, and has sole voting power with respect to 1,404,353 shares, 0 shares with shared voting power, sole dispositive power with regard to 34,496,724 shares and 1,076,925 shares with shared dispositive power.
32 DUKE ENERGY – 2014 Proxy Statement
PROPOSAL 2: RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY CORPORATION'S INDEPENDENT
PUBLIC ACCOUNTANT FOR 2014
Representatives of Deloitte & Touche LLP ("Deloitte") are expected to be present at the annual shareholder meeting. They will have an opportunity to make a statement and will be available to respond to appropriate questions. Information on Deloitte's fees for services rendered in 2013 and 2012 are listed below. These fees exclude accounting fees and services for Progress Energy paid prior to the Progress Energy merger.
Type of Fees | 2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Audit Fees(1) | $ | 11,600,000 | $ | 12,200,000 | |||
Audit-Related Fees(2) | 2,150,000 | 2,460,000 | |||||
Tax Fees(3) | 520,000 | 875,000 | |||||
All Other Fees(4) | 30,000 | 30,000 | |||||
| |||||||
TOTAL FEES: | $ | 14,300,000 | $ | 15,565,000 | |||
(1)
Audit Fees are fees billed, or expected to be billed, by Deloitte for professional services for the audit of Duke Energy's consolidated financial statements included in Duke Energy's annual report on Form 10-K and review of financial statements included in Duke Energy's quarterly reports on Form 10-Q for services that are normally provided by Deloitte in connection with statutory, regulatory or other filings or engagements or for any other service performed by Deloitte to comply with generally accepted auditing standards.
(2)
Audit-Related Fees are fees billed by Deloitte for assurance and related services that are reasonably related to the performance of an audit or review of Duke Energy's financial statements, including assistance with acquisitions and divestitures and internal control reviews.
(3)
Tax Fees are fees billed by Deloitte for tax return assistance and preparation, tax examination assistance, and professional services related to tax planning and tax strategy.
(4)
All Other Fees are fees billed by Deloitte for any services not included in the first three categories.
To safeguard the continued independence of the independent public accountant, the Audit Committee adopted a policy that provides that the independent public accountant is only permitted to provide services to Duke Energy and its subsidiaries that have been pre-approved by the Audit Committee. Pursuant to the policy, detailed audit services, audit-related services, tax services and certain other services have been specifically pre-approved up to certain categorical fee limits. In the event that the cost of any of these services may exceed the pre-approved limits, the Audit Committee must pre-approve the service. All other services that are not prohibited pursuant to the SEC's or other applicable regulatory bodies' rules or regulations must be specifically pre-approved by the Audit Committee. All services performed in 2013 and 2012 by the independent public accountant were approved by the Duke Energy Audit Committee and legacy Progress Energy Audit Committee pursuant to their pre-approval policies.
The Board of Directors Recommends a Vote "FOR" the Ratification of Deloitte & Touche LLP as Duke Energy Corporation's Independent Public Accountant for 2014.
DUKE ENERGY – 2014 Proxy Statement 33
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to Duke Energy's audited financial statements for the fiscal year ended December 31, 2013.
The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" or "filed" or "incorporated by reference" in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), except to the extent that Duke Energy specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.
The purpose of the Audit Committee is to assist the Board in its general oversight of Duke Energy's financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the committee and is available on our website athttp://www.duke-energy.com/corporate-governance/board-committee-charters/audit.asp.
The Audit Committee has reviewed and discussed the consolidated financial statements with management and Deloitte & Touche LLP ("Deloitte"), the Company's independent public accountant. Management is responsible for the preparation, presentation and integrity of Duke Energy's financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting; and, evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Deloitte is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States ("GAAP"), as well as expressing an opinion on the effectiveness of internal control over financial reporting.
The Audit Committee reviewed the Company's audited financial statements with management and Deloitte, and met separately with both management and Deloitte to discuss and review those financial statements and reports prior to issuance. These discussions also addressed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. Management has represented, and Deloitte has confirmed, that the financial statements were prepared in accordance with GAAP.
In addition, management completed the documentation, testing and evaluation of Duke Energy's system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002, and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates provided by management and Deloitte at each regularly scheduled Audit Committee meeting. At the conclusion of the process, management presented to the Audit Committee on the effectiveness of the Company's internal control over financial reporting. The Audit Committee also reviewed the report of management contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 ("Form 10-K") filed with the SEC, as well as Deloitte's Report of Independent Registered Public Accounting Firm included in the Company's Form 10-K related to its audit of (i) the consolidated financial statements and (ii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company's efforts related to its internal control over financial reporting and management's preparations for the evaluation in fiscal 2014.
The Audit Committee has discussed with Deloitte the matters required to be discussed by professional and regulatory requirements, including, but not limited to, the standards of the Public Company Accounting Oversight Board regarding The Auditors' Communications with Those Charged with Governance. In addition, Deloitte has provided the Audit Committee with the written disclosures and the letter required by "Public Company Accounting Oversight Board Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence" that relates to Deloitte's independence from Duke Energy and its subsidiaries and the Audit Committee has discussed with Deloitte the firm's independence.
Based on its review of the consolidated financial statements and discussions with and representations from management and Deloitte referred to above, the Audit Committee recommended that the audited financial statements be included in Duke Energy's Form 10-K, for filing with the SEC.
Audit Committee
Carlos A. Saladrigas(Chair)
G. Alex Bernhardt, Sr.
Michael G. Browning
John H. Forsgren
James B. Hyler, Jr.
James T. Rhodes
34 DUKE ENERGY – 2014 Proxy Statement
PROPOSAL 3: ADVISORY VOTE TO APPROVE DUKE ENERGY CORPORATION'S NAMED EXECUTIVE OFFICER COMPENSATION
At the 2011 Annual Shareholder Meeting, our shareholders recommended that our Board of Directors hold say-on-pay votes on an annual basis. As a result, we are providing our shareholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. This proposal gives our shareholders the opportunity to express their views on the compensation of our named executive officers.
In connection with this proposal, the Board of Directors encourages shareholders to review in detail the description of the compensation program for our named executive officers that is set forth in the Compensation Discussion and Analysis beginning on page 36, as well as the information contained in the compensation tables and narrative discussion in this proxy statement.
As described in more detail in the Compensation Discussion and Analysis section, the guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of our executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results as compared to predetermined measures of success. A significant portion of our named executive officers' total direct compensation is directly contingent upon achieving specific results that are important to our long-term success and growth in shareholder value. We supplement our pay-for-performance program with a number of compensation policies that are aligned with the long-term interests of Duke Energy and its shareholders.
We are asking our shareholders to indicate their support for the compensation of our named executive officers as disclosed in this proxy statement by voting "FOR" the following resolution:
"RESOLVED, that the shareholders of Duke Energy approve, on an advisory basis, the compensation paid to Duke Energy's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion in Duke Energy's 2014 proxy statement."
Because your vote is advisory, it will not be binding on the Board of Directors, the Compensation Committee or Duke Energy. The Compensation Committee, however, will review the voting results and take them into consideration when making future decisions regarding the compensation of our named executive officers.
The Board of Directors Recommends a Vote "FOR" the Approval of the Compensation of Our Named Executive Officers as Disclosed in this Proxy Statement.
DUKE ENERGY – 2014 Proxy Statement 35
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of Duke Energy has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and Duke Energy's Form 10-K and this proxy statement.for the year ended December 31, 2013.
Compensation Committee
E. Marie McKee(Chair) | James H. Hance, Jr. |
COMPENSATION DISCUSSION AND ANALYSIS
The purpose of this Compensation Discussion and Analysis is to provide information about Duke Energy's compensation objectives and policies for Messrs. Rogers, Turner*, Manly and Trentour named executive officers. Our named executive officers for 2013 include:
Name | Title | |
---|---|---|
Lynn J. Good(1) | Vice Chairman, President and Chief Executive Officer | |
Steven K. Young(2) | Executive Vice President and Chief Financial Officer | |
James E. Rogers | Former Chairman, President and Chief Executive Officer | |
Marc E. Manly | Executive Vice President and President, Commercial Businesses | |
Dhiaa M. Jamil | Executive Vice President and President, Duke Energy Nuclear | |
Lloyd M. Yates | Executive Vice President, Regulated Utilities | |
(1)
Ms. Good (collectively, the "named executive officers")served as Executive Vice President and give context for the numbersChief Financial Officer until her promotion effective July 1, 2013.
(2)
Mr. Young served as Vice President, Controller and narrative descriptions that follow.
Executive Summary
The guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results as compared to predetermined measures of success. As described below, the variable and equity-based components of our compensation program are the short-term incentives ("STI") and long-term incentives ("LTI").
A significant portion of our named executive officers' total direct compensation—which consists of base salary, STI and LTI—is directly contingent upon achieving specific results that are important to our long-term success and growth in shareholder value. For example:
The STI and LTI opportunities yield varying levels of compensation depending upon our stock price (and relative total shareholder return) and the extent to which predetermined corporate, operational and individual goals are achieved.
We supplement our pay for performance program with a number of compensation policies that are aligned with the long-term interests of Duke Energy and its shareholders. For example:
Objectives of the Compensation Program
Our executive compensation program is designed to:to achieve the objectives set forth below:
Objective | Description | |
---|---|---|
Pay-for-Performance | We emphasize performance-based compensation, which motivates executives and key employees to achieve strong financial, operational and individual performance in a manner that balances short-term and long-term results. | |
Retain Talented Leadership | We attempt to attract and retain talented executive officers and key employees by providing total compensation competitive with that of other executives and key employees of similarly sized companies and with similar complexity, whether within or outside of the utility sector. | |
Align Interests of Executives with Shareholders | We encourage a long-term commitment to Duke Energy and align the interests of executives with shareholders, by providing a significant portion of total compensation in the form of stock-based incentives and requiring target levels of stock ownership. | |
Pay-for-Performance Program
The guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results, as compared to predetermined measures of success.
As described below, the variable and equity-based components of our compensation program are the short-term incentives ("STI") and long-term incentives ("LTI"). Our STI opportunities are provided under an annual cash bonus plan, the payout of which is dependent on corporate, operational and individual performance. Our LTI opportunities are provided through a three-year equity based compensation plan (i.e., restricted stock units and performance shares), the payout of which is also dependent on corporate performance.
As a result, a significant portion of our named executive officers' total direct compensation – which consists of base salary as well as target STI and LTI opportunities – is directly contingent on achieving specific results that are important to our long-term success and growth in shareholder value. For example, approximately 85% of the total direct compensation opportunity (assuming target performance) for Ms. Good, and
36 DUKE ENERGY – 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
approximately 73% of the total direct compensation opportunity (assuming target performance) for our other named executive officers, other than Mr. Rogers, was provided as of December 31, 2013, in the form of STI and LTI.
The actual amount of compensation received by the named executive officers in connection with STI and LTI opportunities varies based on our stock price and the extent to which predetermined corporate, operational and individual goals are achieved. The following charts illustrate the components of the target total direct compensation opportunities provided to our named executive officers.
DUKE ENERGY – 2014 Proxy Statement 37
COMPENSATION DISCUSSION AND ANALYSIS
Align Interests of Named Executive Officers and Shareholders
We supplement our pay-for-performance program with a number of compensation policies intended to align the interests of management and our shareholders. Following are key features of our executive compensation program.
AT DUKE ENERGY WE... | AT DUKE ENERGY WE DO NOT... | |||||
---|---|---|---|---|---|---|
Tie a high ratio of the pay of our other executives to corporate and individual performance. Approximately 85% of the total direct compensation opportunity (assuming target performance) for Ms. Good, and approximately 73% of the total direct compensation opportunity (assuming target performance) for our other named executive officers, other than Mr. Rogers, was provided in the form of STI and LTI as of December 31, 2013. | Provide employment agreements to a broad group. Except for our Chief Executive Officer, no other executives are provided a comprehensive employment agreement (unless assumed in connection with the acquisition of another company). | |||||
Require significant stock ownership. We maintain aggressive guidelines to reinforce the importance of Duke Energy stock ownership. This is intended to align the interests of executives and shareholders and to focus the executives on our long-term success. Under these guidelines, each named executive officer must own Duke Energy shares in accordance with the following schedule: | Permit hedging or pledging of Duke Energy securities. We have a policy that prohibits employees (including the named executive officers) from trading in options, warrants, puts and calls or similar instruments in connection with Duke Energy securities, or selling Duke Energy securities "short." In addition, we prohibit the pledging of Duke Energy securities in margin accounts. |
Leadership Position | Value of Shares | |
---|---|---|
Chief Executive Officer | 5x Base Salary | |
Other Named Executive Officers | 3x Base Salary | |
Non-Employee Directors | 5x Annual Cash Retainer | |
Maintain a stock holding policy. Each named executive officer is required to hold 50% of all shares acquired under the LTI program (after the payment of any applicable taxes) and 100% of all shares acquired upon the exercise of stock options (after payment of the exercise price and taxes) until the applicable stock ownership requirement is satisfied. Each of our named executive officers and directors was in compliance with the stock ownership/stock holding policy during 2013. | Provide severance benefits upon a change in control. Our Change in Control Agreements provide cash severance only upon a "double trigger," meaning that change in control severance benefits are payable only if our named executive officers incur a qualifying termination of employment (i.e., a voluntary termination for "good reason" or an involuntary termination without "cause") and the termination occurs in connection with a change in control of Duke Energy. | |||||
Tie incentive compensation to a clawback policy. We maintain a "clawback policy," which would allow us to recover (i) certain incentive compensation based on financial results in the event those results were restated due at least partially to the recipient's fraud or misconduct or (ii) an inadvertent payment based on an incorrect calculation. | Provide Golden Parachute Tax Gross-Ups. We do not provide excise tax gross-ups for severance benefits received by our current Duke Energy named executive officers under the Change in Control Agreements or under the Duke Energy Corporation Executive Severance Plan ("Executive Severance Plan"). However, as a result of the Progress Energy merger, we assumed a change in control severance plan (i.e., the Progress Energy, Inc. Management Change-In-Control Plan) that provides golden parachute tax gross-up payments under certain circumstances, until the plan expires pursuant to its terms on July 2, 2014. This tax-gross up provision was adopted by Progress Energy prior to its merger with Duke Energy. | |||||
38 DUKE ENERGY – 2014 Proxy Statement
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AT DUKE ENERGY WE... | AT DUKE ENERGY WE DO NOT... | |||||
---|---|---|---|---|---|---|
Provide a consistent level of severance benefits. We maintain an Executive Severance Plan in order to provide a consistent approach to executive severance and to provide eligible employees, including our named executive officers (excluding Ms. Good, who is provided with severance protection through her employment agreement, and Mr. Yates), with certainty and security while they are focusing on their duties and responsibilities. Under this plan, severance benefits are payable only if our named executive officers incur a qualifying termination of employment (i.e., a voluntary termination for "good reason" or an involuntary termination without "cause"). | Encourage excessive or inappropriate risk-taking through our compensation program. Our plans focus on aligning Duke Energy's compensation policies with the long-term interests of Duke Energy and avoid rewards that could create unnecessary risks to the Company, as evidenced by the policies described on page 50. | |||||
Maintain a shareholder approval policy for severance agreements. We have a policy generally to seek shareholder approval for any future agreements with our named executive officers that provide severance benefits in excess of 2.99 times the executive's annual compensation or that provide for tax gross-ups in connection with a termination event. | Provide excessive perquisites. Our perquisites program is limited to an executive physical, an airline membership club to facilitate travel, limited personal use of corporate aircraft (subject to the requirement that the executive reimburse Duke Energy for the direct operating costs for such travel), financial planning and matching charitable contributions. See page 48 for additional details. | |||||
Comply with equity award granting policy. In recognition of the importance of adhering to specific practices and procedures in the granting of equity awards, the Compensation Committee has adopted a policy that applies to the granting of equity awards for employees and directors. Under this policy, annual grants to employees may be made at any regularly scheduled meeting, provided that reasonable efforts will be made to make such grants at the first regularly scheduled meeting of each calendar year, and annual grants to independent directors may be made by the Board of Directors at any regularly scheduled meeting, provided that reasonable efforts will be made to make such grants at the regularly scheduled meeting that is held in conjunction with the annual shareholder meeting each year. | ||||||
Use an independent compensation consultant. The Compensation Committee has engaged Frederic W. Cook & Company, Inc. to report directly to the Compensation Committee as its independent compensation consultant. The consultant has been instructed that it is to provide completely independent advice to the Compensation Committee and is not permitted to provide any services to Duke Energy other than at the direction of the Compensation Committee. | ||||||
Named Executive Officer Transitions
Effective July 1, 2013, Ms. Good, formerly our Executive Vice President and Chief Financial Officer, was appointed as President and Chief Executive Officer and was elected as a member of our Board of Directors and became our Vice Chairman. Ms. Good succeeds Mr. Rogers, who retired as President and Chief Executive Officer, effective July 1, 2013, and who stepped down as Chairman (and a member) of the Board of Directors at the end of 2013.
In connection with her promotion, Ms. Good received an increase in her annual base salary from $675,000 to $1,200,000, an increase in her STI opportunity from 80% to 125% of her annual base salary and an increase in her LTI opportunity from 200% to 450% of her annual base salary. These increases were effective only for the second half of 2013. Additionally, Ms. Good received a one-time promotion grant (70% of which was provided in performance shares and the remainder of which was provided in restricted stock units) under the 2013 Long-Term Incentive Plan valued at $2,025,000, which represented the difference between her prior LTI opportunity and her new opportunity for the portion of 2013 that followed her promotion. These adjustments were approved by the Compensation Committee and the independent members of the Board of Directors, after consulting with the Compensation Committee's independent compensation consultant regarding reasonable ranges of total compensation, given Ms. Good's experience and new role and responsibilities with Duke Energy. Ms. Good is also covered by an employment agreement, which is described in more detail on page 62.
Effective August 6, 2013, Mr. Young, formerly our Chief Accounting Officer and Controller, was appointed as Executive Vice President and Chief Financial Officer. In connection with his
DUKE ENERGY – 2014 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
promotion, Mr. Young received an increase in his annual base salary from $333,952 to $525,000, an increase in his STI opportunity from 50% to 70% of his annual base salary and an increase in his LTI opportunity from 100% to 150% of his annual base salary. These adjustments were approved by the Compensation Committee, after consulting with the Compensation Committee's independent compensation consultant regarding reasonable ranges of total compensation, given Mr. Young's experience and new role and responsibilities with Duke Energy.
Peer Groups
Competitive Compensation Practices
One of our core compensation objectives is to attract and retain talented executive officers through total compensation that generally is competitive with that of other executives and key employees of similarly-sizedsimilarly sized companies and with similar complexity, and lines of business, whether within or outside of the utility sector;
Setting Executive Compensation Levels
The Compensation Committee believes that it is important to consider an executive's accomplishments and performance over a period of several years when making compensation adjustments.sector. As a result, in December 2007, the Compensation Committee implemented a new approach for establishing thesetting 2013 compensation of executive officers who report directly to the Chief Executive Officer, including Ms. Good and Messrs. Turner, Manly and Trent. At that time, the Compensation Committee established the levels, for each component of the executives' total direct compensation.
The base salary amounts were intended to remain in effect for a three-year period (i.e., for 2008, 2009 and 2010), unless an earlier adjustment was warranted. It was contemplated that, during the three-year cycle, the Compensation Committee would exercise discretion when establishing each named executive officer's STI and LTI opportunities, which amounts would be determined based on each executive's current role, applicable performance and market compensation data.
The STI opportunities were established at a level intended to provide total cash compensation (i.e., base salary and STI opportunity) at the market median for individuals in comparable positions and markets in the event of the achievement of target performance and above the market median in the event of outstanding financial, operational and individual results. The LTI opportunities were established above the market median for individuals in comparable positions and markets if target performance is achieved and significant upside opportunity if outstanding results are achieved.
As part of its executive performance evaluation processes, in February 2010, the Compensation Committee reviewed the total direct compensation levels in light of each executive officer's individual performance. The Compensation Committee focused on skills, experience and other factors, such as developmental and rotational assignments, that may impact the competitiveness of compensation for a given year. It also considered each executive officer's strategic contributions and overall impact to Duke Energy's goals relative to those of other executive officers, including each executive's performance relative to the individual goals established under the STI plan, and, with respect to Mr. Rogers, under his performance shares, all as described in more detail below.
In addition, the Compensation Committee reviewed the total direct compensation levels for 2010 to confirm that they remained competitive. In this regard, the Compensation Committee considered market surveys comparingshowing each element of total compensation against comparable positions at comparable companies. For utility-specific positions, the market data sources were: (i) the Towers Watson CDB Energy Services Executive Compensation Database, which consists of the 9793 companies listed on Appendix A;A and (ii) the Philadelphia Utility Index. For general corporate positions, the market data source wassources also included the Towers Watson CDB General Industry Executive Compensation Database, which consists of the 9394 companies with revenues between $10 billion and $20greater than $12 billion, as listed on Appendix B.
The market surveys and data were used as a general reference point by the Compensation Committee. The Compensation Committee retains the flexibility to make adjustmentsalso developed a customized peer group in order to respond to market conditions, promotions, scope of responsibility, and internal equity. Based on its2013 for review of these factors,executive compensation levels and plan design practices. The peer group generally consists of similarly sized companies from the utility and general industry sectors that, as of the establishment of the peer group, had revenue and market capitalization between $12 billion–$72 billion and $20 billion–$100 billion, respectively, with the general industry companies also having satisfied at least one of the following characteristics: (i) operates in capital-intensive industry; (ii) operates in a highly regulated industry; (iii) has significant manufacturing operations; or (iv) has more than 50% of its revenue in the United States. The customized combined peer group consists of:
Compensation Peer Group | ||||||
---|---|---|---|---|---|---|
3M | Dominion Resources | FedEx | Monsanto | |||
American Electric Power | Dow Chemical | FirstEnergy | NextEra Energy | |||
CenturyLink | DuPont | General Dynamics | PG&E Corp. | |||
Colgate-Palmolive | Eaton | International Paper | Southern | |||
Consolidated Edison | Edison International | Lockheed Martin | UPS | |||
Deere & Co. | Exelon | Medtronic | ||||
The Compensation Committee reviewed data for this customized peer group when establishing the compensation of Ms. Good upon her promotion to Chief Executive Officer, effective July 1, 2013, and the compensation of Mr. Young upon his promotion to Chief Financial Officer, effective August 6, 2013.
At least once a year, the Compensation Committee determined that noreviews tally sheets for each named executive officer, which include a summary of compensation paid in prior years, compensation for the current year, the valuation (at various assumed stock prices) of all outstanding equity awards and a summary of amounts payable upon a termination of employment under various circumstances. This information allows the Compensation Committee to evaluate the total compensation package for each named executive officer, as well as adjustments to specific elements of the 2009 total direct compensation levels were warranted when establishingpackage. After reviewing this information: (i) the Compensation Committee was able to confirm that the 2013 target total direct compensation for the named executive officers for 2010.generally was within the competitive range of the market data and (ii) the Committee is able to better understand the relationship of various components of the total compensation program to each other.
The
Elements of Duke Energy's Compensation Program
As discussed in more detail below, during 2013, the principal reasonscomponents of compensation for the differencenamed executive officers were: base salary; short-term incentive compensation; long-term equity incentive compensation; retirement and welfare benefits and perquisites.
40 DUKE ENERGY – 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Following is a summary of each principal compensation component provided to the Duke Energy named executive officers during 2013.
Base Salary. The salary for each executive is based upon job responsibilities, level of experience, individual performance, comparisons to the salaries of executives in similar positions obtained from market surveys and internal comparisons. In light of these factors, in February 2013, the Compensation Committee increased the base salaries of Ms. Good and Messrs. Young, Jamil and Yates by approximately 8%, 3%, 18% and 10%, respectively. Additionally, Ms. Good and Mr. Young received base salary increases in connection with their respective promotions as described above. Mr. Rogers was paid substantially in the amountform of equity-based compensation and did not receive a base salary in 2013.
Short-Term Incentive Compensation. STI opportunities are provided to each executive officer are competitive market conditions and the individual performance of each executive officer. Other factors, however, are also relevant. For example, Mr. Rogers' compensation is higher than the compensation of the other executive officers because market conditions dictate that a chief executive officer with Mr. Rogers' unique skills and significant experience in the utility industry receive higher compensation than Duke Energy's other executive officers.
Management's Role in the Compensation-Setting Process
When establishing the compensation program for our named executive officers, other than Mr. Rogers, under the Duke Energy Corporation Executive Short-Term Incentive Plan ("STI Plan") to promote the achievement of annual performance objectives.
Each year, the Compensation Committee establishes the incentive opportunity for each participating named executive officer, which is based on a percentage of his or her base salary, along with the corporate, operational and individual goals that must be achieved to earn that incentive opportunity. Unless deferred, the earned STI opportunity is paid in cash. Aside from the increases in target annual incentive award opportunities for Ms. Good and Mr. Young as discussed above, no changes were made to the target annual incentive award opportunities of the named executive officers in 2013, each of which is listed below.
Name | Target Incentive Opportunity (as a % of base salary) | |
---|---|---|
Lynn J. Good | 125% | |
Steven K. Young | 70% | |
Marc E. Manly | 80% | |
Dhiaa M. Jamil | 80% | |
Lloyd M. Yates | 80% | |
DUKE ENERGY – 2014 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS
Corporate Objectives. During 2013, depending on actual performance, participating named executive officers were eligible to earn up to 183.75% of the amount of their STI target opportunity. This opportunity was based on several corporate objectives, including Duke Energy's achievement of an adjusted diluted earnings per share ("EPS") goal, an operations and maintenance ("O&M") expense control goal and a reliability goal, all of which had an aggregate weighting of 80%.
The Compensation Committee established the targets for each goal in February 2013. The 2013 corporate goals, which were selected to promote management actions beneficial to Duke Energy's various stakeholders, including investors and customers, as well as the actual performance results, were as follows:
Goal(1) | Weight | Threshold (50%) | Target (100%) | Maximum(2) | Result | Payout | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Adjusted Diluted EPS(3) | 50 | % | $ | 4.02 | $ | 4.32 | $ | 4.62 | $ | 4.35 | 110 | % | |||||||
O&M Expense Control | 20 | % | $ | 5.405B | $ | 5.300B | $ | 5.195B | $ | 5.331B | 85.3 | % | |||||||
Reliability(4) | 10 | % | |||||||||||||||||
Regulated Generation Commercial Availability | 87.06 | % | 87.92 | % | 88.65 | % | 85.68 | % | 0 | % | |||||||||
Nuclear Generation Capacity Factor | 91.00 | % | 93.25 | % | 95.50 | % | 92.81 | % | 90.2 | % | |||||||||
System Average Interruption Frequency Index (SAIFI) | 1.30 | 1.19 | 1.08 | 1.14 | 122.7 | % | |||||||||||||
System Average Interruption Duration Index (SAIDI) | 143 | 130 | 117 | 121 | 134.6 | % | |||||||||||||
Commercial Availability (Midwest and Renewables Yield) | 90.35 | % | 92.63 | % | 94.77 | % | 91.90 | % | 84 | % | |||||||||
International Equivalent Availability | 90.40 | % | 92.40 | % | 94.40 | % | 92.52 | % | 103 | % | |||||||||
(1)
For additional information about the calculation of the EPS and O&M expense control measures, see page 51.
(2)
A payout of up to 200% of the target opportunity is available for the adjusted diluted EPS goal and a payout of up to 150% of the target opportunity is available for the O&M and reliability goals.
(3)
If an adjusted diluted EPS performance level of at least $3.87 was not achieved, the participating named executive officers would not have received a payout under the 2013 STI Plan. The Compensation Committee adjusted the EPS performance levels (threshold, target and maximum), and the $3.87 minimum level, up by $0.02 to reflect earnings associated with assets that were not divested as of the date assumed in the 2013 business plan.
(4)
The reliability goals are calculated as described below. Each reliability goal contains a weighting of one-sixth of the aggregate weighting of 10%.
Reliability Metrics | Description | |
---|---|---|
Regulated Generation Commercial Availability | A measure of regulated fossil generation reliability, determined as the weighted percentage of time the regulated fossil generation units are available to generate electricity, where the availability each hour is weighted by the difference between market price and unit cost. | |
Nuclear Generation Capacity Factor | A measure of the amount of electricity produced by a nuclear generating unit relative to the amount of electricity the unit is capable of producing. | |
System Average Interruption Frequency Index (SAIFI) | A measure of the number of sustained outages (greater than five minutes in duration) experienced during the year per customer served from both transmission and distribution systems calculated in accordance with the applicable guidelines set forth in the IEEE Standard 1366-Guide for Electric Power Distribution Reliability Indices, including application of the "major event day" exclusions described therein. | |
System Average Interruption Duration Index (SAIDI) | A measure of the number of outage minutes experienced during the year per customer served from both distribution and transmission systems calculated in accordance with the applicable guidelines set forth in the IEEE Standard 1366-Guide for Electric Power Distribution Reliability Indices, including application of the "major event day" exclusions described therein. | |
Commercial Availability (Midwest and Renewables Yield) | A composite measure of (i) non-regulated fossil generation reliability, determined as the weighted percentage of time the non-regulated fossil generation units are available to generate electricity, where the availability each hour is weighted by the difference between market price and unit cost and (ii) a renewables energy yield metric, determined by comparing actual generation to expected generation, based on wind speed at the turbines and solar intensity. | |
International Equivalent Availability | A measure of the amount of electricity that potentially could be produced by an international generating unit relative to the amount of electricity the unit is actually producing. | |
42 DUKE ENERGY – 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Individual Objectives. The remaining 20% of each participating named executive officer's 2013 opportunity under the STI Plan was based on individual objectives. The individual goals, in the aggregate, could result in a payout with respect to the target opportunity equal to 50% in the event of threshold performance, 100% in the event of target performance and 150% in the event of maximum performance. As described below, the individual goals for each participating named executive officer consisted of a combination of strategic and operational objectives, which were measured based on a subjective determination.
Ms. Good's individual goals for the portion of 2013 (July 1, 2013 – December 31, 2013) during which she served as Chief Executive Officer were as follows:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Transition Plan | 10% | Develop and implement an effective transition plan while maintaining a focus on results for 2013. | |||
Regulatory Initiatives | 10% | Provide effective leadership and direction with respect to strategic priorities as well as key regulatory initiatives. | |||
Ms. Good's individual goals for the portion of 2013 (January 1, 2013 – June 30, 2013) during which she served as Chief Financial Officer were as follows:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Regulatory Initiatives | 10% | Provide effective leadership and strategic direction with respect to regulatory initiatives. | |||
Merger Integration | 10% | Deliver on the synergies related to the merger through integration efforts, as well as identification of additional, sustainable savings or operational performance enhancements. | |||
Mr. Young's 2013 individual goals for the portion of 2013 (August 6, 2013 – December 31, 2013) during which he served as Chief Financial Officer were as follows:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Transition Plan | 10% | Develop and implement a transition plan into CFO role. | |||
Regulatory Initiatives | 5% | Provide effective leadership and strategic direction with respect to regulatory initiatives. | |||
Merger Integration | 5% | Deliver on the synergies related to the merger through integration efforts, as well as identification of additional, sustainable savings or operational performance enhancements. | |||
Mr. Young's individual goals for the portion of 2013 (January 1, 2013 – August 5, 2013) during which he served as Chief Accounting Officer and Controller were as follows:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Merger Integration | 5% | Successfully achieve the 2013 merger integration plan. | |||
Financial Support | 5% | Provide financial support to operational and commercial functions. | |||
Regulatory Support | 5% | Provide support for the retail rate cases, settlements and related regulatory filings planned for 2013. | |||
Employee Development | 5% | Develop and implement an employee engagement and development program. | |||
Mr. Manly's 2013 individual goals were as follows:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Commercial Business | 8% | Confirm the business mix proportion for Duke Energy and the strategic direction of commercial businesses. | |||
Leadership Initiatives | 8% | Successfully lead Commercial Business team to execute on earnings commitments, growth and capital rotation opportunities. | |||
Employee Development | 4% | Lead Commercial Business team to build competitive advantage by strengthening employee development and engagement. | |||
DUKE ENERGY – 2014 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS
Mr. Jamil's 2013 individual goals were as follows:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Nuclear Generation | 5% | Improve safety, reliability and cost-efficiency (including a focus on fleet governance and alignment) of nuclear generation. | |||
Merger Integration | 5% | Implement the 2013 planned IT projects and functional area merger savings initiatives. | |||
Project Management | 5% | Implement Project Management Center of Excellence Principles across the enterprise. | |||
Crystal River 3 | 5% | Resolve uncertainty around Crystal River 3 and successfully manage the outcome of the decommission or repair decision and the mediation versus arbitration decision. | |||
Mr. Yates' 2013 individual goals were as follows:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Financial Objectives | 5% | Deliver on 2013 Regulated Utilities financial objectives (net income and capital). | |||
Regulatory Initiatives | 5% | Enhance relationships, trust and transparency with state and federal regulators and legislators to facilitate constructive public policy and financial results. | |||
Collaboration | 5% | Collaborate with functional leaders to achieve Regulated Utility and enterprise objectives with emphasis on operational efficiency and effectiveness. | |||
Integration | 5% | Achieve integration initiatives to promote and collaborate across business units delivering on utility merger synergies and initiatives. | |||
Safety Component. In order to encourage a continued focus on safety, the Compensation Committee included the following safety measures in the 2013 STI Plan:
Payouts. As a result of the aggregate corporate, operational and individual performance, each participating named executive officer earned bonuses under the 2013 STI Plan equal to:
Name | Payout | |||
---|---|---|---|---|
Lynn J. Good | $ | 1,103,411 | ||
Steven K. Young | $ | 265,840 | ||
Marc E. Manly | $ | 494,256 | ||
Dhiaa M. Jamil | $ | 528,048 | ||
Lloyd M. Yates | $ | 497,126 |
44 DUKE ENERGY – 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Long-Term Incentive Compensation
Opportunities under the LTI program are provided to our named executive officers to align executive and shareholder interests in an effort to maximize shareholder value. In this regard, each year the Compensation Committee reconsiders the design and amount of the LTI awards and generally grants equity awards at the Compensation Committee's first regularly scheduled meeting each year. Duke Energy's executive officers do not have a role in selecting the date on which LTI awards are granted. Because the closing price of Duke Energy's common stock is a key factor in determining the number of shares in each employee's LTI award, the Compensation Committee considers inputvolatility when determining the size of LTI plan awards.
2011-2013 Performance Shares under the Duke Energy 2011 LTI Program. The 2011 performance share cycle commenced on January 1, 2011, and recommendationsended on December 31, 2013. The performance shares generally vest only to the extent two equally weighted performance measures were satisfied. The first measure was based on Duke Energy's relative total shareholder return ("TSR") for the three-year period from management, includingJanuary 1, 2011 to December 31, 2013, as compared to the companies in the Philadelphia Utility Index, as follows:
Relative TSR Performance Percentile | Percent Payout of Target 2011-2013 Performance Shares | Result | Payout of Target | | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| |||||||||||
75th or Higher | 150 | % | 70.6th | 141.2 | % | ||||||
50th (Target) | 100 | % | |||||||||
25th | 50 | % | |||||||||
Below 25th | 0 | % | |||||||||
For purposes of the LTI program, TSR is calculated based on the change, expressed as a percentage, in the fair market value of an initial investment in common stock, over a specified period, with dividends reinvested.
The second measure was based on Duke Energy's adjusted return on equity ("ROE") for the three-year period from January 1, 2011 to December 31, 2013, as follows:
Adjusted Achieved ROE | Percent Payout of Target 2011-2013 Performance Shares | Result | Payout of Target | | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| |||||||||||
10.25% or Higher | 150 | % | 11.3 | % | 150 | % | |||||
9.75% or Higher (Target) | 100 | % | |||||||||
9.25% | 50 | % | |||||||||
Below 9.25% | 0 | % | |||||||||
For additional information about the calculation of the ROE measure, see page 51.
In the aggregate, this performance corresponds to a payout of 145.6% of the target number of 2011-2013 performance shares, plus dividend equivalents earned during the 2011-2013 performance period. The following table lists the number of 2011-2013 performance shares to which our named executive officers (other than Mr. Rogers, who attendsRogers) became vested at the non-executive sessionsend of the performance cycle:
Name | 2011-2013 Performance Shares | |||
---|---|---|---|---|
Lynn J. Good | 22,676 | |||
Steven K. Young | 5,835 | |||
Marc E. Manly | 22,676 | |||
Dhiaa M. Jamil | 19,841 | |||
Lloyd M. Yates | 11,992 | |||
2011-2013 Performance Shares for Mr. Yates. The performance shares listed above that Mr. Yates received from Progress Energy, prior to its merger with Duke Energy, for the 2011-2013 performance cycle, contained the following two equally-weighted performance measures:
In the aggregate, this performance corresponds to a payout of 100% of the target number of 2011-2013 performance shares, plus dividend equivalents earned during the 2011-2013 performance period.
2013 LTI Program. Aside from increases in LTI opportunities for Ms. Good and Mr. Young described above on page 39, the LTI opportunities for the remaining named executive officers remained the same as 2012 at 200% of base salary. No change was made because the LTI levels remain consistent with market
DUKE ENERGY – 2014 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS
practices and reflect our pay-for-performance culture. Under the 2013 LTI program, 30% of each participating named executive officer's LTI opportunity was provided in the form of restricted stock units and the remaining 70% was provided in the form of performance shares, as follows:
Name | Grant Date | Performance Shares (at Target Level) | Restricted Stock Units | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Lynn J. Good | 2/25/2013 | 13,674 | 5,860 | |||||||
Lynn J. Good | 8/26/2013 | 21,546 | 9,234 | |||||||
Steven K. Young | 2/25/2013 | 3,383 | 1,450 | |||||||
Marc E. Manly | 2/25/2013 | 12,155 | 5,209 | |||||||
Dhiaa M. Jamil | 2/25/2013 | 13,167 | 5,643 | |||||||
Lloyd M. Yates | 2/25/2013 | 11,446 | 4,905 | |||||||
In order to enhance our retention incentives, the 2013 restricted stock units generally vest in equal portions on each of the first three anniversaries of the grant date, provided the recipient continues to be employed by Duke Energy on each vesting date.
In order to emphasize pay-for-performance, the 2013 performance shares generally vest at the end of the three-year performance period only to the extent the TSR performance goal is satisfied. The TSR performance goal is based on Duke Energy's relative TSR for the three-year performance period from January 1, 2013 to December 31, 2015, as compared to the companies in the Philadelphia Utility Index, as follows:
TSR Percentile Ranking | Percent Payout of Target Performance Shares | ||||
---|---|---|---|---|---|
90th or Higher | 200 | % | |||
50th (Target) | 100 | % | |||
25th | 30 | % | |||
Below 25th | 0 | % | |||
In prior performance cycles, adjusted ROE was used as a measure in conjunction with TSR. In 2013, in connection with its review of the design of the compensation plans of Duke Energy and Progress Energy, the Compensation Committee meetings. Specifically,determined that it would utilize TSR as partthe sole performance measure for the 2013 LTI program in order to emphasize its importance in aligning the interests of executives and shareholders.
Compensation of Mr. Rogers
Mr. Rogers retired as President and Chief Executive Officer on July 1, 2013, but remained as the Chairman and a member of the annual compensation planning process for 2010:
Compensation Element | Description | |
---|---|---|
Stock Option | An annual stock option grant with a value of $1,600,000 which vests ratably in three annual installments. Mr. Rogers generally may not dispose of any shares acquired upon exercise of any such options until January 1, 2014, except to pay the exercise price of the option or related tax withholding. | |
Restricted Stock Units | An annual restricted stock unit award with a value of $2,000,000 which vests ratably in four annual installments. Dividend equivalents were paid in cash. | |
Annual Performance Shares | An annual performance share award based on annual performance metrics consistent with those established for the other named executive officers under the STI Plan, except that the maximum payment is equal to 199.5% of the target opportunity rather than 183.75%, with a target value of $2,000,000. Dividend equivalents are accumulated and paid only if the underlying performance shares become payable. | |
Long-Term Performance Shares | A long-term performance share award based on performance over a three-year performance period, with performance metrics consistent with those established for the other named executive officers under each year's LTI program, with a target value of $2,400,000. Dividend equivalents are accumulated and paid only if the underlying performance shares become payable. | |
Annual Performance Shares. For 2013, Mr. Rogers' annual performance shares covered 28,939 shares of Duke Energy common stock (at target performance). The performance criteria applicable to the annual performance of each ofshares were weighted 50%, 20%, and 10% and were based on the same adjusted diluted EPS goal, O&M expense control goal and reliability goal, respectively, as were
46 DUKE ENERGY – 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
applicable for the other named executive officers under the 2013 STI Plan (except for a different maximum payout as described above), and initially recommendedthe remaining 20% was based on the following individual goals:
Goal | Weight | Description | |||
---|---|---|---|---|---|
Regulatory Initiatives | 12.5 | % | Provide leadership and direction with respect to strategic and regulatory initiatives. | ||
Merger Integration | 7.5 | % | Deliver on the synergies related to the merger through integration efforts and foster and build the Duke Energy brand and reputation. | ||
The annual portion of Mr. Rogers' 2013 performance share opportunity was subject to the same 5% SIF-based safety penalty and 5% safety adder (in the event of no work-related employee or contractor fatality) that applied to the other participating named executive officers under the 2013 STI Plan. The penalty was not triggered due to the fact that Duke Energy's actual SIF rate was better than the pre-established target SIF rate. In addition, the Compensation Committee determined that the compensation levels establishedsafety adder was not achieved and would not increase the payout of Mr. Rogers' annual 2013 performance shares by 5%.
Based on the actual level of achievement of the corporate objectives and individual objectives, Mr. Rogers earned a payout of 31,363 annual performance shares for 2013, plus dividend equivalents.
Mr. Rogers also was granted long-term performance shares in 2011 with respect to 2009 should remain in effect without adjustment;
For 2013, the performance criteria applicable to the Compensation Committeelong-term portion of Mr. Rogers' performance shares was the same predetermined measure based on TSR as was applicable for 2010 corporate and individual performance objectives, along with their relative weightings,the other participating named executive officers under the STI plan for2013 LTI program, as measured over the 2013-2015 performance period.
Retirement and Welfare Benefits
Our named executive officers participate in the retirement and welfare plans generally available to other eligible employees. In addition, in order to attract and retain key executive talent, we believe that it is important to provide the executive officers, including our named executive officers;
Duke Energy provides the named executive officers with the same health and welfare benefits it provides to all other similarly situated employees, and at the same cost charged to all other eligible employees. The named executive officers also are entitled to the same post-retirement health and welfare benefits as those provided to similarly situated retirees.
Perquisites
In 2013, Duke Energy provided our named executive officers with certain other perquisites, which are disclosed in footnote 5 to the Summary Compensation Table on page 52. Duke Energy provides these perquisites as well as other benefits to certain executives in order to provide competitive compensation packages. The cost of perquisites and other personal benefits is not part of base salary and, therefore, do not affect the calculation of awards and benefits under Duke Energy's other compensation arrangements (e.g.,
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COMPENSATION DISCUSSION AND ANALYSIS
retirement and incentive compensation plans). Unless otherwise noted, each of our named executive officers received the perquisites and other benefits described in the following table.
Perquisite | Description | |
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Executive Physical | Each executive is entitled to the annual reimbursement of up to $2,500 for the cost of a comprehensive physical examination. | |
Airline Membership | Each executive is entitled to Chairman's Preferred Status at US Airways. | |
Personal Travel on Corporate Aircraft | Ms. Good may use corporate aircraft for personal travel in North America. With advance approval from the Chief Executive Officer, the other named executive officers may use the corporate aircraft for personal travel in North America. If Ms. Good or any other named executive officer uses the aircraft for personal travel, he or she must reimburse Duke Energy the direct operating costs for such travel. However, Ms. Good is not required to reimburse Duke Energy for the cost of travel to the executive physical described above or to meetings of the board of directors of other companies on whose board she serves. For additional information on the use of the corporate aircraft, see footnote 5 to the Summary Compensation Table. | |
Financial Planning and Tax Preparation Services | Each year, we reimburse each participating executive for expenses incurred for tax and financial planning services. This program is administered on a three-year cycle, such that participating executives can be reimbursed for up to $15,000 of eligible expenses during the three-year cycle. | |
Matching Charitable Contributions | The Duke Energy Foundation, independent of Duke Energy, maintains The Duke Energy Foundation Matching Gifts Program under which employees are eligible for matching contributions of up to $5,000 per calendar year to qualifying institutions. | |
Severance
Employment Agreement with Ms. Good. Effective July 1, 2013, Ms. Good was appointed President and Chief Executive Officer. Duke Energy entered into an employment agreement with Ms. Good that contains a three-year initial term and automatically renews for additional one-year periods at the end of the initial term unless either party provides 120 days advance notice. In the event of a change in control of Duke Energy, the term automatically extends to a period of two years.
Upon a termination of Ms. Good's employment by Duke Energy without "cause" or by Ms. Good for "good reason" (each as defined in her 2010 individual performance objectivesemployment agreement), the following severance payments and benefits would be payable: (i) a lump-sum payment equal to a pro rata amount of her annual bonus for the year;portion of the year that the termination of employment occurs during which she was employed, determined based on the actual achievement of performance goals; (ii) a lump-sum payment equal to 2.99 times the sum of her annual base salary and
Ms. Good is not entitled to any form of tax gross-up in connection with Sections 280G and 4999 of the LTI opportunity between performance shares and phantom shares grantedInternal Revenue Code of 1986, as amended (the "Code"). Instead, in 2010, along with the corporate goals and objectives forevent that the performance shares grantedseverance payments or benefits otherwise would constitute an "excess parachute payment" (as defined in Section 280G of the Code), the amount of payments or benefits would be reduced to the maximum level that would not result in an excise tax under Section 4999 of the Code if such reduction would cause Ms. Good to retain an after-tax amount in excess of what would be retained if no reduction were made.
Severance Plan. The Executive Severance Plan provides varying levels of severance protection to the named executive officers.
officers other than Ms. Good. The Compensation Committee exercisedbelieves that this plan is appropriate in order to provide a consistent approach to executive severance and to provide eligible executives with certainty and security while they are focusing on their duties and responsibilities. Severance payments and benefits would only be paid in the event that an eligible executive's employment is involuntarily terminated without "cause" or is voluntarily terminated for "good reason," and are subject to compliance with restrictive covenants (e.g., noncompetition). The severance payments and benefits that would be paid in the event of a qualifying termination of employment to those senior executives who are identified as "Tier I Participants," including Messrs. Young, Manly and Jamil, generally approximate two times their annual compensation and benefits. The Executive Severance Plan prohibits the payment of severance if an executive also would be entitled to severance payments and benefits under a separate agreement or plan maintained by Duke Energy, including the change in control agreements described below. The Executive Severance
48 DUKE ENERGY – 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Plan does not provide for golden parachute excise tax gross-up payments. The benefit levels under the Executive Severance Plan are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement.
Change in Control Agreements. Duke Energy has entered into Change in Control Agreements with the named executive officers other than Ms. Good. Under these agreements, each such named executive officer would be entitled to certain payments and benefits if (1) a change in control were to occur and (2) within two years following the change in control, (a) Duke Energy terminated the executive's employment without "cause" or (b) the executive terminates his employment for "good reason." The severance protection provided by Duke Energy is generally two times the executive's annual compensation and benefits and becomes payable only if there is both a change in control and a qualifying termination of employment. The Compensation Committee approved the two times severance multiplier after consulting with its discretionadvisors and reviewing the severance protection provided by peer companies. The Compensation Committee believes that the protection provided through these severance arrangements is appropriate in modifying recommended adjustmentsorder to diminish the uncertainty and risk to the executives' roles in the context of a potential or actual change in control. The benefit levels under the Change in Control Agreements are described in more detail under the "Potential Payments Upon Termination or Change in Control" section on page 62 of this proxy statement. The Change in Control Agreements do not provide for golden parachute excise tax gross-up payments.
Severance Protection for Mr. Yates. In connection with the merger with Progress Energy, Duke Energy assumed the Progress Energy, Inc. Management Change-In-Control Plan ("MCICP"), which provides the following severance protection to Mr. Yates in the event that, within two years of a change in control of Progress Energy (which included its merger with Duke Energy), there is an involuntary termination of the participant's employment without "cause" or the participant voluntarily terminates employment for "good reason": (1) 300% of base salary and the greater of the participant's average STI payment over the prior three years or his target STI payment, (2) up to three years' of continued health and welfare benefits, (3) 100% of the participant's target STI for the year of the termination, (d) full vesting of outstanding stock awards and (e) the participant shall be deemed to have met the minimum service requirements under the Progress Energy Supplemental Senior Executive Retirement Plan. The MCICP also provides a gross-up for executives. Ingolden parachute excise taxes. As indicated above, Duke Energy does not provide excise tax gross-ups for severance benefits provided under its change in control agreements or under its Executive Severance Plan, but as a result of the caseProgress Energy merger, we assumed the MCICP, which was adopted by Progress Energy prior to the merger and which provides golden parachute tax gross-up payments under certain circumstances. This plan will terminate pursuant to its terms on July 2, 2014, which is the second anniversary of the merger of Duke Energy and Progress Energy. Mr. Yates was provided a retention agreement on July 9, 2012 under which he will be entitled to $1,000,000 subject to him remaining continuously employed with Duke Energy until the second anniversary of the Progress Energy merger (i.e. July 2, 2014). Once earned, this amount will be credited to an unfunded account under the Executive Savings Plan, which will be adjusted with earnings and losses and will be paid in monthly installments over the seven-year period following Mr. Yates' termination of employment.
Retirement of Mr. Rogers. Effective July 1, 2013, Mr. James E. Rogers retired as President and Chief Executive Officer of Duke Energy, and effective December 31, 2013, Mr. Rogers retired as the Chairman (and a member) of the Board of Directors. Pursuant to the terms of his employment agreement, Mr. Rogers' then outstanding stock awards will continue to vest as if he remained employed, with the number of performance shares determined based on actual performance compared to previously established performance measures. For transition purposes, Duke Energy has agreed to provide Mr. Rogers with office space and administrative support for a period of three years after retirement.
Shareholder Approval Policy for Severance Agreements. The Compensation Committee has established Mr. Rogers'a policy pursuant to which it generally will seek shareholder approval for any future agreement with certain individuals (e.g., a named executive officer) that provides severance benefits in excess of 2.99 times the sum of the executive's base salary and annual bonus, plus the value of continued participation in welfare, retirement and equity compensation arrangement; however,plans determined as if the Corporate Governance Committee conducted Mr. Rogers' 2010 performance review.executive remained employed for 2.99 additional years. Under the policy, Duke Energy also will seek shareholder approval of any such agreement that provides for the payment of any tax gross-ups by reason of the executive's termination of employment, including reimbursement of golden parachute excise taxes.
Compensation Advisors
Compensation Committee Advisors
The Compensation Committee has engaged Frederic W. Cook & Company, Inc. to report directly to the Compensation Committee as its independent compensation consultant. Frederic W. Cook & Company, Inc. performs such tasks as the Compensation Committee or its Chairman may
request. The Compensation Committee's consultant provides advice to the Compensation Committee as follows:
DUKE ENERGY – 2014 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS
provide completely independent advice to the Compensation Committee and is not permitted to provide any services to Duke Energy other than consulting withat the direction of the Compensation Committee.
Additional Compensation Matters
Consideration of Results of Shareholder Advisory Votes on Executive Compensation
As required by the Dodd-Frank Act, we included a shareholder vote on executive compensation in last year's proxy statement. Because our shareholders supported the compensation of our named executive officers as disclosed in the 2013 proxy statement (i.e., 78% of the votes represented in person or by proxy), the Compensation Committee views the results of this advisory vote as confirmation that our compensation program, including our emphasis on pay-for-performance, is structured and designed to achieve our stated goals and objectives. As a result, we have continued to emphasize pay-for-performance alignment, and our 2013 compensation program, as previously described, continues to reflect this philosophy.
Risk Assessment of Compensation Policies and Practices
In consultation with the Compensation Committee, members of management from Duke Energy's Human Resources, Legal and Risk Management groups assessed whether Duke Energy'sour compensation policies and practices encourage excessive or inappropriate risk takingrisk-taking by our employees, including employees other than our named executive officers. This assessment included a review of the risk characteristics of Duke Energy's business and the design of our incentive plans and policies.
Management reported its findings to the Compensation Committee, and after review and discussion, the Compensation Committee concluded that theour plans and policies do not encourage excessive or inappropriate risk taking.risk-taking. Although a significant portion of our executive compensation program is performance-based, the Compensation Committee has focused on aligning
Duke Energy's compensation policies with the long-term interests of Duke Energy and avoiding rewards that could create unnecessary risks to Duke Energy,the Company, as evidenced by the following:
Elements of Duke Energy's Compensation Program and Why Each Element Was Chosen (How It Relatesalso entitles us to Objectives)
As discussed in more detail below, during 2010, the principal components of compensation for the named executive officers were:
Base Salary. The salary for each executive is based upon job responsibilities, level of experience, individual performance, comparisons to the salaries of executives in similar positions obtained from market surveys and internal comparisons. The base salaries for our named executive officers (other than Mr. Rogers) were established in December 2007 for the three-year period from 2008 to 2010, and no changes to base salary levels for the named executive officers were made during that three-year period except that when Ms. Good was promoted to the position of Group Executive and Chief Financial Officer on June 16, 2009, her base salary was increased from $500,000 to $575,000. The Compensation Committee conducted an annual performance review in February 2010 and determined at that time that the base salary levels established for 2009 for each of the named executive officers should remain in effect through 2010. As described below, Mr. Rogers is paid substantially in the form of equity-based compensation and does not receive a base salary.
Short-Term Incentive Compensation. STI opportunities are provided to the executive officers (other than Mr. Rogers) under the Duke Energy Corporation Executive Short-Term Incentive Plan ("STI Plan") to promote the achievement of annual performance objectives. Each year the Compensation Committee establishes the incentive opportunity for each participating executive officer, which isrecover inadvertent payments based on a percentage of his or her base salary, along with the individual and corporate goals that must be achieved to earn that incentive opportunity. The earned STI opportunity is paid in cash. Although Mr. Rogers does not participate in the STI Plan, as described below, his 2010 annual performance shares contained the same corporate financial targets that apply to the other executive officers under the STI Plan.
2010 Short-Term Incentives. During 2010, depending on actual performance, participants were eligible to earn up to 183.75% of the amount of their STI target opportunity. The Compensation Committee approved the same STI target opportunities for the named executive officers for 2010 as applied in 2009, which were as follows:
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This opportunity was based on several corporate objectives, including Duke Energy's achievement of an adjusted diluted EPS goal, an O&M expense control goal and a reliability goal, which had an aggregate weighting of 80%. The remaining 20% of each executive officer's 2010 opportunity under the STI Plan was based on individual objectives. Additionally, if an adjusted diluted EPS performance level of at least $1.17 was not achieved, participants in Duke Energy's Equity Incentive Plan ("EIP"), including the participating named executive officers, would not have received any payout under the 2010 STI Plan and the other STI Plan participants would only have received a payout under the 2010 STI Plan with respect to their individual goals. The STI Plan also contained two safety measures described in more detail below. Each of these goals (listed in the chart below, along with actual performance results) was selected to promote management actions beneficial to Duke Energy's various stakeholders, including shareholders and customers.
Goal | Weight | Threshold (50%) | Target (100%) | Maximum* | Result | Payout | ||||||||||||||
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Adjusted Diluted EPS | 50 | % | $ | 1.20 | $ | 1.27 | $ | 1.35 | $ | 1.43 | 200.00 | % | ||||||||
O&M Expense Control | 20 | % | $ | 3,450 | M | $ | 3,385 | M | $ | 3,320 | M | $ | 3,422 | M | 71.54 | % | ||||
Reliability | 10 | % | ||||||||||||||||||
Regulated Generation Commercial Availability | 86.89 | % | 88.27 | % | 89.49 | % | 88.65 | % | 115.57 | % | ||||||||||
Nuclear Generation Capacity Factor | 90.50 | % | 93.75 | % | 96.75 | % | 95.88 | % | 135.50 | % | ||||||||||
System Average Interruption Frequency Index (SAIFI) | 1.20 | 1.10 | 0.99 | 1.11 | 95.00 | % | ||||||||||||||
System Average Interruption Duration Index (SAIDI) | 153 | 139 | 125 | 144 | 82.14 | % | ||||||||||||||
Midwest Commercial Availability | 84.68 | % | 87.19 | % | 89.33 | % | 89.75 | % | 150.00 | % | ||||||||||
International Equivalent Availability | 92.00 | % | 94.00 | % | 96.00 | % | 95.42 | % | 135.50 | % |
The reliability goals listed above are calculated as follows:
The individual goals, in the aggregate, could result in a payout with respect to the target opportunity equal to 50% in the event of threshold performance, 100% in the event of target performance and 150% in the event of maximum performance. As described below, the individual goals of the named executive officers for 2010 consisted of a combination of strategic and operational objectives. Those goals listed below that do not contain objective metrics are measured based on a subjective determination. As a result of the aggregate corporate and individual performance, Ms. Good and Messrs. Turner, Manly and Trent earned bonuses under the 2010 STI Plan equal to $710,528; $656,309; $653,820; and $608,855, respectively.
Ms. Good's 2010 individual goals were as follows:
Mr. Turner's 2010 individual goals were as follows:
Mr. Manly's 2010 individual goals were as follows:
Mr. Trent's 2010 individual goals were as follows:
In order to encourage a continued focus on safety, the Compensation Committee included the following safety measures in the 2010 STI Plan:
2011 Short-Term Incentives. During 2011, each named executive officer, except Messrs. Rogers and Turner, participates in the STI Plan. The STI Plan in 2011 provides STI opportunities that are generally similar to those provided in 2010.
Long-Term Incentive Compensation. Opportunities under the LTI program are provided to the named executive officers (other than Mr. Rogers, who receives separate LTI awards based in part on the same performance measures that apply to the other named executive officers) to align executive and shareholder interests in an effort to maximize shareholder value. In this regard, each year the Compensation Committee reconsiders the design and amount of the LTI awards and generally grants equity awards at the Compensation Committee's first regularly-scheduled meeting each year. Duke Energy's executive officers do not have a role in selecting the date on which LTI awards are granted, and because the closing price of Duke Energy's common stock is a key factor in determining the number of shares in each employee's LTI award, at times when market volatility is high, the Compensation Committee considers price trends and volatility when determining the size of LTI plan awards.
2008-2010 Performance Shares under the 2008 Long-Term Incentive Program. The 2008 performance share cycle commenced on January 1, 2008, and ended on December 31, 2010. The performance shares generally vest only to the extent two equally-weighted performance measures are satisfied.
The first measure is based on Duke Energy's relative TSR for the three-year period from January 1, 2008 to December 31, 2010 as compared to the companies in the Philadelphia Utility Index, as follows:
Relative TSR Performance Percentile | Percent Payout of Target 2008-2010 Performance Shares | Result | Payout of Target | ||||||
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75th Percentile or Higher | 150 | % | 57.9th Percentile | 115.8 | % | ||||
50th Percentile (Target) | 100 | % | |||||||
25th Percentile | 50 | % | |||||||
Below 25th Percentile | 0 | % |
For purposes of the LTI program, "TSR" is calculated based on the change, expressed as a percentage, in the fair market value of an initial investment in common stock, over a specified period, with dividends reinvested.
The second measure is based on Duke Energy's CAGR with respect to adjusted diluted EPS, with adjusted diluted EPS being calculated in the same manner as under the STI Plan, as measured against a baseline of $1.15, as follows:
Achieved CAGR | Percent Payout of Target 2008-2010 Performance Shares | Result | Payout of Target | |||||||
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7% or Higher | 150 | % | 7.5 | % | 150 | % | ||||
6% (Target) | 100 | % | ||||||||
5% | 50 | % | ||||||||
Lower than 5% | 0 | % |
In the aggregate, this performance corresponds to a payout of 132.9% of the target number of 2008-2010 performance shares, plus dividend equivalents earned during the 2008-2010 performance period. The following table lists the number of 2008-2010 performance shares to which Ms. Good and Messrs. Turner, Manly and Trent became vested at the end of the performance cycle:
2010 Long-Term Incentive Program. The Compensation Committee approved the same LTI opportunity for each of the named executive officers for 2010 as applied in 2009. Such opportunity, expressed as a percentage of base salary, was 200% for each of Ms. Good and Messrs. Turner, Manly and Trent. Under the 2010 LTI program, 30% of each named executive officer's LTI
opportunity was provided in the form of phantom shares and the remaining 70% was provided in the form of performance shares, as follows:
| | 2010-2012 Performance Shares (at Target Level) | | ||||||||||
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Name | Grant Date | Based on Total Shareholder Return | Based on Adjusted ROE | Phantom Shares | |||||||||
Lynn J. Good | 2/22/2010 | 24,500 | 24,500 | 21,000 | |||||||||
James L. Turner | 2/22/2010 | 27,695 | 27,695 | 23,740 | |||||||||
Marc E. Manly | 2/22/2010 | 25,565 | 25,565 | 21,910 | |||||||||
B. Keith Trent | 2/22/2010 | 21,305 | 21,305 | 18,260 |
In order to enhance our retention incentives, the 2010 phantom shares generally vest in equal portions on each of the first three anniversaries of the grant date, provided the recipient continues to be employed by Duke Energy on each vesting date or his or her employment terminates by reason of retirement. In order to emphasize pay for performance, the 2010 performance shares generally vest at the end of the three-year performance period only to the extent two equally-weighted performance measures are satisfied. The first measure is based on Duke Energy's relative TSR for the three-year performance period from January 1, 2010 to December 31, 2012, as compared to the companies in the Philadelphia Utility Index, as follows:
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The second measure is based on Duke Energy's adjusted ROE over the three-year performance period from January 1, 2010 to December 31, 2012, as follows:
Achieved Adjusted ROE | Percent Payout of Target Performance Shares | |||
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10% or Higher | 150 | % | ||
9.5% (Target) | 100 | % | ||
9% | 50 | % | ||
Below 9% | 0 | % |
For purposes of the LTI program, adjusted ROE is calculated based on the average of the annual adjusted ROE, determined on a quarterly basis, earned by Duke Energy during the applicable performance period with each annual adjusted ROE being calculated by dividing adjusted net income by average shareholders' equity, which is calculated by reference to shareholders' equity as reported on Duke Energy's balance sheet, excluding goodwill and the impact if any, of the pre-funding of an acquisition. Under this calculation, adjusted net income is determined in a manner similar to the methodology used for calculating adjusted diluted EPS for purposes of the STI Plan.
The Compensation Committee chose to implement the adjusted ROE performance measure in 2010 in recognition of the capital intensive nature of Duke Energy's business. The Compensation Committee believes that this performance measure will provide an additional incentive to efficiently and effectively allocate capital and measure overall business performance.
2011 Long-Term Incentives. During 2011, each named executive officer, except Messrs. Rogers and Turner, participates in the LTI Plan, which provides LTI opportunities that are generally similar to those provided in 2010 (i.e., a target opportunity equal to 200% of base salary, with 30% of each named executive officer's LTI opportunity provided in the form of phantom shares and the remaining 70% provided in the form of performance shares).
Retirement and Welfare Benefits and Perquisites. Our named executive officers participate in the retirement and welfare plans that are generally available to other eligible employees. In addition, in order to attract and retain key executive talent, we believe that it is important to provide the executive officers, including our named executive officers, with certain limited retirement benefits that are offered only to a select group of management. The retirement plans that are provided to our named executive officers, including the plans offered generally to all employees and the plans offered only to a select group of management, are described below. These benefits are comparable to the benefits provided by peers of Duke Energy, as determined based on market surveys. Mr. Rogers does not participate in any of these employee benefit plans on a going-forward basis except: (i) with respect to the receipt of health and welfare benefits; and (ii) he can elect to defer his stock awards under the terms of the Duke Energy Corporation Executive Savings Plan, as described below. Mr. Rogers, however, maintains balances under certain of these plans reflecting previously accrued benefits.
The Duke Energy Retirement Savings Plan is a tax-qualified "401(k) plan" that is generally available to all Duke Energy employees, including each named executive officer. The plan provides a means for employees to save for retirement on a tax-favored basis and to receive an employer matching contribution. The employer matching contribution, for participants covered by the cash balance plan formula under the defined benefit pension plan (described below), is equal to 100% of the named executive officer's before-tax and Roth 401(k) contributions (excluding "catch-up" contributions) with respect to 6% of eligible pay. For employees covered by the final average pay formula under the defined benefit pension plan (described below), the matching contribution is equal to 100% of the named executive officer's before-tax and Roth 401(k) contributions (excluding "catch-up" contributions) with respect to 3% of eligible pay, plus 50% of such contributions on the next 2% of eligible pay, plus an incentive matching contribution of up to 1% of eligible pay. For this purpose, "eligible pay" includes base salary for all participants, but it includes short-term incentive compensation only for those participants who are covered by the cash balance plan formula under the defined benefit pension plan. Earnings on amounts credited to the Duke Energy Retirement Savings Plan are determined based on the performance of investment funds (including a Duke Energy Common Stock Fund) selected by each participant.
The Duke Energy Corporation Executive Savings Plan is a non-qualified deferred compensation plan that provides a select group of management, including each named executive officer, with the opportunity to defer compensation, and receive employer matching contributions (in accordance with the formulas described above), in excess of the limits of the Internal Revenue Code that apply to qualified retirement plans such as the Duke Energy Retirement Savings Plan. Earnings on amounts credited to the Duke Energy Corporation Executive Savings Plan are determined based on the performance of investment funds selected by each participant that are similar to those offered under the Duke Energy Retirement Savings Plan.
The Duke Energy Retirement Cash Balance Plan is a tax-qualified defined benefit pension plan that is generally available to all individuals who were employed by Duke Energy prior to its merger with Cinergy, including Mr. Trent, as well as certain employees hired thereafter. This plan provides a defined benefit for retirement, the amount of which is based on a participant's cash balance account, which increases with monthly pay and interest credits.
The Cinergy Corp. Non-Union Employees' Pension Plan is a tax-qualified defined benefit pension plan that is generally available to all individuals who were employed by Cinergy prior to its merger with Duke Energy, including Ms. Good and Messrs. Turner and Manly. This plan provides a defined benefit for retirement, the amount of which is based either on the participant's cash balance account, which increases with monthly pay and interest credits, or on a traditional final average pay formula. Ms. Good participates, and prior to his retirement Mr. Turner participated, in the plan's cash balance formula, which mirrors the benefit provided under the Duke Energy Retirement Cash Balance Plan. Mr. Manly earned benefits only under the plan's traditional final average pay formula until the end of 2010, after which he (and all other active non-union employees who were participating in the traditional final average pay formula) will begin to earn benefits only under the plan's cash balance formula.
The Duke Energy Corporation Executive Cash Balance Plan is a non-qualified defined benefit plan that generally operates as a restoration plan to provide a select group of management with the retirement benefits to which they would be entitled under the Duke Energy Retirement Cash Balance Plan but for certain limits contained in the Internal Revenue Code. Mr. Trent is the only named executive officer who earned additional benefits (other than interest) under this plan in 2010. In addition to operating as a restoration plan, supplemental credits have been made to this plan on behalf of certain executives when determined to be reasonable and appropriate. For example, supplemental credits were made to this plan on behalf of Ms. Good and Messrs. Turner and Manly to reflect the conversion of amounts they previously accrued under the legacy Cinergy nonqualified cash balance and final average pay retirement plans, and in lieu of any additional accruals (other than interest) under a nonqualified defined benefit plan until age 62. If Ms. Good or Mr. Manly continues in employment with Duke Energy past age 62, he or she would be eligible to commence earning additional benefits, in excess of those permitted under the limits of the Internal Revenue Code, with respect to employment and compensation that occurs after age 62.
Duke Energy provides the named executive officers with the same health and welfare benefits as it provides to all other similarly-situated employees, and at the same cost charged to all other eligible employees. The named executive officers also are entitled to the same post-retirement health and welfare benefits as those provided to similarly-situated retirees.
Additionally, in 2010, Duke Energy provided the named executive officers with certain other perquisites, which are disclosed in footnote 6 to the Summary Compensation Table. Duke Energy provides these perquisites, as well as other benefits to certain executives, in order to provide competitive compensation packages. The cost of perquisites and other personal benefits are not part of base salary and, therefore, do not affect the calculation of awards and benefits under Duke Energy's other compensation arrangements (e.g., retirement and incentive compensation
plans). Unless otherwise noted, each named executive officer receives the perquisites and other benefits described in the following table.
Severance. Duke Energy has entered into change in control agreements with Ms. Good and Messrs. Manly and Trent. Duke Energy also entered into a change in control agreement with Mr. Turner, but such agreement terminated upon his retirement without the payment of any amounts thereunder. Under these agreements, each such named executive officer would be entitled to certain payments and benefits if (1) a change in control were to occur and (2) within two years following the change in control, (a) Duke Energy terminated the executive's employment without "cause" or (b) the executive terminated his employment for "good reason." The severance protection provided by Duke Energy is generally two times the executive's annual compensation and becomes payable only if there is both a change in control and a qualifying termination of employment. The Compensation Committee approved the two times severance multiplier after
consulting with its advisors and reviewing the severance protection provided by peer companies. The Compensation Committee believes that the protection provided through these severance arrangements is appropriate in order to diminish the uncertainty and risk to the executives' roles in the context of a potential or actual change in control. The benefit levels under the change in control agreements are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement.
In connection with his retirement at the end of 2010, Mr. Turner entered into a Retirement Agreement with Duke Energy dated December 9, 2010. In exchange for Mr. Turner's agreement to comply with certain restrictive covenants (i.e., non-solicitation of employees, non-compete, non-disparagement and non-disclosure), his execution of a standard release, and in consideration of his 15 years of service, his outstanding phantom and performance share awards were modified. Specifically, Mr. Turner's performance share awards, which relate to the 2008-2010, 2009-2011 and 2010-2012 performance periods, were modified such that his payments will be calculated by reference to actual performance during the performance periods, but without regard to his termination of employment prior to the payment of each performance share award, and the outstanding phantom shares that were granted to Mr. Turner in 2008, 2009 and 2010 were modified so that they will continue to vest following his termination of employment.
In order to ensure that Duke Energy provides only reasonable severance benefits, the Compensation Committee has established a policy pursuant to which it generally will seek shareholder approval for any future agreement with certain individuals (e.g., a named executive officer) that provides severance benefits in excess of 2.99 times the sum of the executive's base salary and annual bonus, plus the value of continued participation in welfare, retirement and equity compensation plans determined as if the executive remained employed for 2.99 additional years. Under the policy, Duke Energy also will seek shareholder approval of any such agreement that provides for the payment of any tax gross-ups by reason of the executive's termination of employment, including reimbursement of golden parachute excise taxes.
Additional Actions Taken in 2011. On January 8, 2011, the Compensation Committee approved a new Executive Severance Plan, which provides varying levels of severance protection to certain senior executives. The Compensation Committee believes that this plan was appropriate and necessary in order to provide a consistent approach to executive severance, and to provide eligible executives with certainty and security while they are focusing on their duties and responsibilities. Severance payments and benefits would only be paid in the event that an eligible executive's employment is involuntarily terminated without "cause" or is voluntarily terminated for "good reason". The severance payments and benefits that would be paid in the event of a qualifying termination of employment to those senior executives who are identified as "Tier I Participants," including Ms. Good and Messrs. Manly and Trent, generally approximate two times their annual compensation. The Executive Severance Plan also provides payments and benefits to a broader group of "Tier II Participants," none of whom are named executive officers. The payments and benefits for Tier II Participants are generally the same as for Tier I Participants, except that the severance multiple is 1.5 times rather than two times annual compensation, and enhanced retirement benefits are not payable to Tier II Participants. The Executive Severance Plan prohibits the payment of severance if an executive would also be entitled to severance payments and benefits under a separate agreement or plan maintained by Duke Energy, including the change in control agreements described above. The benefit levels under the Executive Severance Plan are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement.
Compensation of the Chief Executive Officer
The Compensation Committee is responsible for establishing the compensation of the Chief Executive Officer. The Compensation Committee's objective in this regard is to motivate and retain a Chief Executive Officer who is committed to delivering sustained superior performance for all of Duke Energy's stakeholders. The Corporate Governance Committee, however, establishes the Chief Executive Officer's individual goals and, based upon input from all of the members of the Board of Directors, determines his performance with respect to those goals.
Duke Energy entered into an employment agreement with Mr. Rogers, effective February 19, 2009. Under this agreement, Mr. Rogers does not receive a base salary and he is generally not eligible to participate in Duke Energy's incentive compensation and benefit plans, including its cash bonus programs, but he is permitted to participate in Duke Energy's medical and dental plans if he pays the required premiums. Mr. Rogers also is entitled to certain fringe benefits, and he remains entitled to benefits under legacy plans and agreements of Cinergy.
Under the employment agreement, Mr. Rogers will be compensated, for 2009 and future years through 2013, primarily through annual grants of stock options, phantom shares and performance shares, as follows:
The equity awards for 2009 have a value of 75% of those for 2010-2013 in recognition of the fact that the equity awards made under his prior agreement were intended to compensate Mr. Rogers through April 3, 2009. The Compensation Committee believes that the equity awards called for under the agreement strike a balance between awards designed principally to reward continued employment (the phantom stock awards) and awards designed principally to reward both continued employment and stock price and operational performance (the stock options and performance share awards). Moreover, by linking the performance metrics under the performance shares to those applicable to Duke Energy's other named executive officers, the Compensation
Committee is ensuring that all of the named executive officers are focused on achieving the same goals, all of which are designed to increase shareholder value.
The agreement contains non-competition and non-solicitation obligations on Mr. Rogers. The non-competition obligations survive for one year following his termination of employment for any reason, and the non-solicitation obligations survive for two years following his termination of employment for any reason.
For 2010, the performance criteria applicable to the annual portion of Mr. Rogers' performance shares were weighted 50%, 20%, and 10% on the same adjusted diluted EPS goal, O&M expense control goal and reliability goal, respectively, as were applicable for the other named executive officers under the 2010 STI Plan, and the remaining 20% was based on the following individual goals:
Operations (weighting—7.5%). Review, re-evaluate and redefine the existing business models and the operational effectiveness of grid modernization, save-a-watt deployment, supply chain and generation modernization; lead initiative regarding hiring to promote developmental opportunities for high performers within Duke Energy's management team; and develop a culture that supports recent changes in Duke Energy's compensation plans that were made to create a more performance-oriented culture.
Public Policy and Regulatory (weighting—7.5%). Build support for state regulatory and legislative outcomes that will protect Duke Energy's investors and customers and allow Duke Energy to continue to provide affordable, reliable and clean electricity to our customers; also advance Federal policies supporting the international businesses.
Talent Development/Sourcing (weighting—5%). Threshold achievement required completion of two talent review sessions with each direct report, identification of rotational and/or development opportunities for high potential employees, ensuring 50% of employees on high potential list have development plans and development of a strategic sourcing plan to identify gaps and future needs for top talent. Target achievement required threshold performance and completion of a top 100 leadership meeting, identification of five rotational and/or development opportunities for high potential employees, ensuring 75% of employees on high potential list have development plans and implementation of a strategic sourcing plan. Maximum achievement required target performance and identification of seven rotational and/or development opportunities for high potential employees, ensuring 100% of employees on high potential list have development plans and implementation of an outstanding strategic sourcing strategy as evidenced by a more qualified and diverse talent pipeline.
The annual portion of Mr. Rogers' 2010 performance share opportunity was subject to the same 5% TICR-based safety penalty and 5% safety adder (in the event of no work-related employee or contractor fatality) that applied to the other named executive officers under the 2010 STI Plan. The penalty was not triggered due to the fact that Duke Energy's actual TICR was better than the pre-established target TICR level. In addition, the Compensation Committee determined that the safety adder was not achieved and would not increase the payout of Mr. Rogers' performance shares due to the occurrence of contractor fatalities during 2010. Mr. Rogers achieved performance that corresponded to a payout equal to 128%, 117% and 132.5% of target performance for the operations, public policy and regulatory and talent development/sourcing goals, respectively. Based on the actual level of achievement of the objectives related to Mr. Rogers' performance shares for
2010, Mr. Rogers earned approximately 151.22% of his 2010 target performance share opportunity, which covered 121,729 shares of Duke Energy, resulting in a payout of 184,079 shares, plus dividend equivalents.
For 2010, the performance criteria applicable to the long-term portion of Mr. Rogers' performance shares were the same two equally-weighted predetermined measures based on TSR and adjusted ROE as were applicable for the other named executive officers under the 2010 LTI program, as measured over the 2010-2012 performance period. If earned, such performance shares would be paid in early 2013.
Additional Actions Taken in 2011. Mr. Rogers entered into a term sheet with Duke Energy on January 8, 2011, in connection with the announcement of a merger agreement with Progress Energy, Inc. ("Progress"). The term sheet provides that Mr. Rogers' employment agreement will be amended in certain respects to reflect the changes to his duties and responsibilities in connection with the merger with Progress. In particular, the term sheet provides that following the merger, Mr. Rogers will serve as Executive Chairman of the Board of Directors of Duke Energy and will cease to be President and Chief Executive Officer. The term sheet also provides for Mr. Rogers' term of employment to end on the later of the second anniversary of the completion of the merger with Progress or December 31, 2013, and for Mr. Rogers' compensation arrangement to remain the same as under his current employment agreement through December 31, 2013.
Other Compensation Policies
Stock Ownership Policy. Duke Energy has adopted a stock ownership policy to reinforce the importance of stock ownership. This is intended to align the interests of the executive officers and shareholders, and to focus the executive officers on the long-term success of Duke Energy. In order to ensure that Duke Energy's stock ownership guidelines continue to be consistent with our peer group, general industry practices and governance best practices, the stock ownership guidelines are periodically reviewed and were last modified effective January 1, 2009, to apply to directors and the members of the ELT, including the named executive officers, as follows:
Each employee covered by the stock ownership guidelines is required to hold 50% of all shares of Duke Energy common stock in which they become vested under the LTI program (after the payment of any applicable taxes) until the applicable ownership requirement is satisfied.
Option Holding Policy. Duke Energy has adopted a policy that prohibits each executive officer, including each named executive officer, from selling shares of Duke Energy common stock acquired through the exercise of stock options until such executive officer is in compliance with Duke Energy's stock ownership requirements. An executive officer may, however, sell common stock acquired through an option exercise for the limited purpose of paying the exercise price of the stock option and any applicable tax liability.
Clawback Policy. Duke Energy has adopted a clawback policy whereby, to the extent permitted by law and if the Board of Directors determines it to be reasonable and appropriate under the circumstances, Duke Energy will require the reimbursement of the portion of any performance-based bonus or incentive compensation payment paid to any executive officer, where such portion of the payment was predicated upon the achievement of financial results that were subsequently the subject of a restatement caused or partially caused by such executive officer's fraud or misconduct.
Equity Award Granting Policy. As Duke Energy recognizes the importance of adhering to specific practices and procedures in the granting of equity awards, the Compensation Committee has adopted a policy that applies to the granting of all equity awards for employees and directors. Under this policy, the Compensation Committee or Board of Directors may grant equity awards only as follows:
The Compensation Committee has delegated authority to each of the Chairman of the Board of Directors and the Chairman of the Compensation Committee to grant equity awards, subject to certain limitations, to employees who are not executive officers. Equity awards made by delegated authority must be made on the first or second business day of an "open window period," as defined in Duke Energy's insider trading policy.
Tax and Accounting Implications
Deductibility of Executive Compensation. The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that Duke Energy generally may not deduct, for federal income tax purposes, annual compensation in excess of $1 million paid to certain employees. Performance-based compensation paid pursuant to shareholder-approvedshareholder approved plans is not subject to the deduction limit as long as such compensation is approved by "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code.Code and certain other requirements are satisfied.
Although the Compensation Committee generally intends to structure and administer executive compensation plans and arrangements so that they will not be subject to the deduction limit of Section 162(m) of the Internal Revenue Code, the Compensation Committee may, from time to time, approve payments that cannot be deducted in order to maintain flexibility in structuring
appropriate compensation programs in the interests of
50 DUKE ENERGY – 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
shareholders. For example, phantom sharerestricted stock unit awards received by certain employees, and amounts paid to certain employees under the STI Plan with respect to individual objectives, may not be deductible for federal income tax purposes, depending on the amount and other types of compensation received by such employees.
Accounting for Stock BasedStock-Based Compensation. Stock-based compensation represents costs related to stock-based awards granted to employees. Duke Energy recognizes stock basedstock-based compensation based upon the estimated fair value of the awards, net of estimated forfeitures.forfeitures at the date of issuance. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period or, for certain share-based awards, until the employee becomes retirement eligible, if earlier. Share-based awards, including stock options, but not performance shares, granted to employees that are already retirement eligible are deemed to have vested immediately upon issuance, and therefore, compensationCompensation cost for those awards is recognized on the date such awards are granted.as expense or capitalized as a component of property, plant and equipment.
Non-GAAP Financial Measures. As described previously in this Compensation Discussion and Analysis, Duke Energy uses various financial measures, including adjusted diluted EPS and O&M expense, in connection with short-term and long-term incentives. Adjusted diluted EPS is a non-GAAP financial measure as it represents diluted EPS from continuing operations attributable to Duke Energy common stockholders,shareholders, adjusted for the per share impact of special items and the mark-to-market impacts of economic hedges related to certain generation assets in the Commercial Power segment. Duke Energy's management also uses adjusted diluted EPS as an additionala measure to evaluate operations of the Company. The O&M expense measure used for incentive plan purposes also is a non-GAAP financial measure as it too isrepresents GAAP O&M adjusted primarily for the impact ofexpenses recovered through rate riders, certain of theseregulatory accounting deferrals, and applicable special items. Special items represent certain charges and credits whichthat management believes will not be recurring on a regular basis, although it is reasonably possible such charges and credits could recur. The impact of an asset impairment is a special item that generally is excluded from adjusted EPS. Mark-to-market adjustments reflect the mark-to-market impact of derivative contracts, which is recognized in GAAP earnings immediately as such derivative contracts do not qualify for hedge accounting or regulatory accounting treatment, used in Duke Energy's hedging of a portion of the economic value of its generation assets in the Commercial Power segment. The economic value of the generation assets is subject to fluctuations in fair value due to market price volatility of the input and output commodities (e.g., coal, power) and, as such, the economic hedging involves both purchases and sales of those input and output commodities related to the generation assets. Because the operations of the generation assets are accounted for under the accrual method, management believes that excluding the impact of mark-to-market changes of the economic hedge contracts from adjusted earnings until settlement better matches the financial impacts of the hedge contract with the portion of the economic value of the underlying hedged asset. The most directly comparable GAAP measures for adjusted diluted EPS and O&M expense measures used for incentive plan purposes are reported diluted EPS from continuing operations attributable to Duke Energy Corporation common stockholdersshareholders and reported O&M expense from continuing operations, which include the impact of special items and the mark-to-market impacts of economic hedges in the Commercial Power segment.
For purposes of the LTI program, adjusted ROE is calculated based on the average of the annual adjusted ROE, with equity determined on a quarterly basis, earned by Duke Energy during the applicable performance period with each annual adjusted ROE being calculated by dividing adjusted net income by average shareholders' equity, which is calculated by reference to shareholders' equity as reported on Duke Energy's consolidated balance sheet, excluding goodwill and the impact if any, of the pre-funding of an acquisition.goodwill. Under this calculation, adjusted net income is determined in a manner similar to the methodology used for calculating adjusted diluted EPS for purposes of the STI Plan.
DUKE ENERGY – 2014 Proxy Statement 51
EXECUTIVE COMPENSATION
The following table provides compensation information for our Chief Executive Officer (Ms. Good), our Chief Financial Officer (Mr. Young) and the three other most highly compensated executive officers who were employed on December 31, 2013 (Messrs. Manly, Jamil and Yates). The table also provides compensation information for Mr. Rogers, who served as our Chief Executive Officer for a portion of 2013. The table provides information for 2011 and 2012 only to the extent that each named executive officer was included in the Duke Energy Summary Compensation Table for those years.
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
James E. Rogers(7) | 2010 | 0 | 0 | 6,440,180 | 1,600,000 | 0 | 352,289 | 422,712 | 8,815,181 | |||||||||||||||||||
Chairman, President & | 2009 | 0 | 0 | 4,911,142 | 1,200,000 | 0 | 425,309 | 391,212 | 6,927,663 | |||||||||||||||||||
Chief Executive Officer | 2008 | 0 | 0 | 0 | 0 | 0 | 290,601 | 524,589 | 815,190 | |||||||||||||||||||
Lynn J. Good | 2010 | 575,000 | 0 | 1,163,575 | 0 | 710,528 | 437,235 | 77,000 | 2,963,338 | |||||||||||||||||||
Group Executive & | 2009 | 540,627 | 0 | 1,043,241 | 0 | 628,685 | 820,232 | 107,012 | 3,139,797 | |||||||||||||||||||
Chief Financial Officer | 2008 | 500,004 | 1,124,000 | 992,487 | 0 | 326,238 | 0 | 114,742 | 3,057,471 | |||||||||||||||||||
James L. Turner(8) | 2010 | 650,004 | 0 | 1,315,338 | 0 | 656,309 | 795,476 | 158,767 | 3,575,894 | |||||||||||||||||||
Group Executive, | 2009 | 650,004 | 0 | 1,356,195 | 0 | 744,970 | 1,484,478 | 116,621 | 4,352,268 | |||||||||||||||||||
President & Chief Operating Officer U.S. Franchised Electric & Gas | 2008 | 650,004 | 900,000 | 1,290,122 | 0 | 430,933 | 0 | 146,211 | 3,417,270 | |||||||||||||||||||
Marc E. Manly | 2010 | 600,000 | 0 | 1,214,108 | 0 | 653,820 | 567,171 | 49,341 | 3,084,440 | |||||||||||||||||||
Group Executive, | 2009 | 600,000 | 0 | 1,251,825 | 0 | 691,620 | 929,366 | 99,690 | 3,572,501 | |||||||||||||||||||
Chief Legal Officer and Corporate Secretary | 2008 | 600,000 | 860,000 | 1,190,910 | 0 | 405,342 | 0 | 84,374 | 3,140,626 | |||||||||||||||||||
B. Keith Trent | 2010 | 500,004 | 0 | 1,011,812 | 0 | 608,855 | 150,788 | 74,414 | 2,345,873 | |||||||||||||||||||
Group Executive & President Commercial Businesses | 2009 | 500,004 | 0 | 1,043,241 | 0 | 573,555 | 156,986 | 72,492 | 2,346,278 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lynn J. Good(6) | 2013 | 929,167 | 0 | 4,177,007 | 0 | 1,103,411 | 87,825 | 175,600 | 6,473,010 | |||||||||||||
Vice Chairman, President, | 2012 | 617,500 | 0 | 1,220,361 | 0 | 648,401 | 523,790 | 76,515 | 3,086,567 | |||||||||||||
and Chief Executive Officer | 2011 | 595,833 | 0 | 1,213,768 | 0 | 495,545 | 187,708 | 84,317 | 2,577,171 | |||||||||||||
Steven K. Young(7) | 2013 | 409,764 | 0 | 404,173 | 0 | 265,840 | 66,558 | 36,834 | 1,183,169 | |||||||||||||
Executive Vice President and | ||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||
James E. Rogers(8) | 2013 | 0 | 0 | 6,727,407 | 1,600,002 | 0 | 311,187 | 916,620 | 9,555,216 | |||||||||||||
Former Chairman, President | 2012 | 0 | 0 | 6,373,023 | 1,600,000 | 0 | 388,257 | 369,229 | 8,730,509 | |||||||||||||
and Chief Executive Officer | 2011 | 0 | 0 | 6,439,381 | 1,600,001 | 0 | 328,742 | 412,134 | 8,780,258 | |||||||||||||
Marc E. Manly | 2013 | 600,000 | 0 | 1,452,121 | 0 | 494,256 | 329,909 | 134,391 | 3,010,677 | |||||||||||||
Executive Vice President and | 2012 | 600,000 | 0 | 1,190,573 | 0 | 626,165 | 528,654 | 201,381 | 3,146,773 | |||||||||||||
President, Commercial Businesses | 2011 | 600,000 | 0 | 1,213,768 | 0 | 499,010 | 384,160 | 130,172 | 2,827,110 | |||||||||||||
Dhiaa M. Jamil | 2013 | 633,333 | 0 | 1,573,043 | 0 | 528,048 | 145,665 | 77,126 | 2,957,215 | |||||||||||||
Executive Vice President and | 2012 | 537,500 | 0 | 1,041,760 | 0 | 558,004 | 192,123 | 90,821 | 2,420,208 | |||||||||||||
President, Duke Energy Nuclear | 2011 | 520,833 | 0 | 1,062,092 | 0 | 415,669 | 135,802 | 68,619 | 2,203,015 | |||||||||||||
Lloyd M. Yates | 2013 | 559,673 | 0 | 1,367,408 | 0 | 497,126 | 59,944 | 177,764 | 2,661,915 | |||||||||||||
Executive Vice President, | ||||||||||||||||||||||
Regulated Utilities | ||||||||||||||||||||||
(1)
This column does not reflect the value of stock awards that were actually earned or received by the named executive officers during each of the years listed above. Rather, as required by applicable SEC rules, this column reflects the aggregate grant date fair value of the performance shares (based on the probable outcome of the performance conditions as of the date of grant) and phantom sharesrestricted stock units granted to our named executive officers in the applicable year. The aggregate grant date fair value listed above includes both phantom shares and performance shares; the aggregate grant date fair value of the performance shares granted in 20102013 to Messrs. Rogers, Turner, Manly and Trent, and Ms. Good and Messrs. Young, Rogers, Manly, Jamil and Yates, assuming that the highest level of performance would be achieved, is $7,589,990; $1,365,087; $1,260,099; $1,050,123;$4,868,108; $467,598; $7,590,023; $1,680,064; $1,819,943; and $1,207,605,$1,582,066, respectively. The aggregate grant date fair value of the awards was determined in accordance with the accounting guidance for stock-based compensation. See Note 20 of the Consolidated Financial Statements contained in our Annual Report for an explanation of the assumptions made in valuing these awards.
(2)
This column does not reflect the value of shares that were actually acquired upon the exercise of stock options by the named executive officersMr. Rogers during each of the years listed above. Rather, as required by applicable SEC rules, this column reflects the aggregate grant date fair value of the stock options granted to the named executive officersMr. Rogers in the applicable year. The aggregate grant date fair value was determined in accordance with the accounting guidance for stock-based compensation. See Note 20 of the Consolidated Financial Statements contained in our Annual Report for an explanation of the assumptions made in valuing these awards.
(3)
With respect to the applicable performance period, this column reflects amounts payable under the Duke Energy Corporation Executive Short-Term Incentive Plan. Unless deferred, the 20102013 amounts were paid in March 2011.
52 DUKE ENERGY – 2014 Proxy Statement
EXECUTIVE COMPENSATION
(4)
This column includes the amounts listed below. The amounts listed were earned over the 12-month period ending on December 31, 2010.
| James E. Rogers ($) | Lynn J. Good ($) | James L. Turner ($) | Marc E. Manly ($) | B. Keith Trent ($) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Change in Actuarial Present Value of Accumulated Benefit Under the Duke Energy Retirement Cash Balance Plan | 0 | 0 | 0 | 0 | 36,095 | ||||||||||||
Change in Actuarial Present Value of Accumulated Benefit Under the Duke Energy Corporation Executive Cash Balance Plan | 0 | 409,505 | 727,276 | 492,368 | 114,693 | ||||||||||||
Change in Actuarial Present Value of Accumulated Benefit Under the Cinergy Corp. Non-Union Employees' Pension Plan | 16,677 | 27,730 | 68,200 | 74,803 | 0 | ||||||||||||
Above-Market Interest Earned on Amounts Deferred Under the Deferred Compensation Agreement | 335,612 | 0 | 0 | 0 | 0 | ||||||||||||
Total | 352,289 | 437,235 | 795,476 | 567,171 | 150,788 |
| Good ($) | Young ($) | Rogers ($) | Manly ($) | Jamil ($) | Yates ($) | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Change in Actuarial Present Value of Accumulated Benefit Under: | ||||||||||||
Duke Energy Retirement Cash Balance Plan | 22,698 | 25,868 | (74,710 | ) | 13,704 | 29,459 | 0 | |||||
Duke Energy Executive Cash Balance Plan | 65,127 | 40,690 | 0 | 316,205 | 116,206 | 39,422 | ||||||
Progress Energy Pension Plan | 0 | 0 | 0 | 0 | 0 | 20,522 | ||||||
Above-Market Interest Earned on Amounts Deferred Under the Deferred Compensation Agreement for Mr. Rogers | 0 | 0 | 311,187 | 0 | 0 | 0 | ||||||
Total | 87,825 | 66,558 | 311,187 | * | 329,909 | 145,665 | 59,944 | |||||
*
As required by applicable SEC rules, the decrease in the actuarial present value of Mr. Rogers' benefit under the Duke Energy Retirement Cash Balance Plan is disregarded when determining the total for this column.
(5)
The All Other Compensation column includes the following for 2010:2013:
| James E. Rogers ($) | Lynn J. Good ($) | James L. Turner ($) | Marc E. Manly ($) | B. Keith Trent ($) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Matching Contributions Under the Duke Energy Retirement Savings Plan | 0 | 14,700 | 14,700 | 12,250 | 14,700 | ||||||||||||
Make-Whole Matching Contribution Credits Under the Duke Energy Corporation Executive Savings Plan | 0 | 53,300 | 59,300 | 17,750 | 49,714 | ||||||||||||
Payout of Unused Vacation | 0 | 0 | 75,000 | 0 | 0 | ||||||||||||
Personal Use of Airplane* | 398,484 | 0 | 2,038 | 13,200 | 0 | ||||||||||||
Airline Membership | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Charitable Contributions Made in the Name of the Executive** | 5,000 | 5,000 | 625 | 5,000 | 5,000 | ||||||||||||
Executive Physical Exam Program | 741 | 0 | 85 | 1,141 | 0 | ||||||||||||
Financial Planning Program | 0 | 4,000 | 7,019 | 0 | 5,000 | ||||||||||||
Expenses Incurred in Connection with Preparation of Employment Agreement | 18,487 | 0 | 0 | 0 | 0 | ||||||||||||
Total | 422,712 | 77,000 | 158,767 | 49,341 | 74,414 |
| Good ($) | Young ($) | Rogers ($) | Manly ($) | Jamil ($) | Yates ($) | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Matching Contributions Under the Duke Energy Retirement Savings | 15,300 | 15,300 | 0 | 15,300 | 15,300 | 15,300 | ||||||
Make-Whole Matching Contribution Credits Under the Duke Energy Corporation Executive Savings Plan | 79,354 | 20,099 | 0 | 58,270 | 56,180 | 19,588 | ||||||
Personal Use of Airplane* | 61,298 | 0 | 333,575 | 42,421 | 0 | 78,393 | ||||||
Airline Membership | 0 | 0 | 0 | 0 | 0 | 0 | ||||||
Residential Thermostat Device | 250 | 0 | 0 | 250 | 250 | 250 | ||||||
Charitable Contributions Made in the Name of the Executive** | 5,000 | 400 | 5,000 | 5,000 | 5,000 | 0 | ||||||
Executive Physical Exam Program | 0 | 0 | 1,122 | 2,500 | 0 | 1,650 | ||||||
Financial Planning Program | 5,900 | 1,035 | 0 | 10,650 | 396 | 8,000 | ||||||
Relocation Expenses | 0 | 0 | 0 | 0 | 0 | 54,583 | ||||||
Legal Fees | 8,498 | 0 | 0 | 0 | 0 | 0 | ||||||
Vacation Payout*** | 0 | 0 | 576,923 | 0 | 0 | 0 | ||||||
Total | 175,600 | 36,834 | 916,620 | 134,391 | 77,126 | 177,764 | ||||||
*
Regarding use of corporate aircraft, named executive officers are required to reimburse Duke Energy the direct operating costs of any personal travel. With respect to flights on a leased or chartered airplane, direct operating costs equal the amount that the third party charges Duke Energy for such trip. With respect to flights on the Company-owned airplane, direct operating costs include the amounts permitted by the Federal Aviation Regulations for non-commercial carriers. Named executive officers are permitted to invite their spouse or other guests to accompany them on business trips when space is available; however, in such events, the named executive officer is imputed income in accordance with IRS guidelines. The additional cost included in the table above is the amount of the IRS-specified tax deduction disallowance, if any, plus any additional carbon credits purchased with respect to the named executive officer's personal travel.
**
Certain charitable contributions made by the named executive officers are not eligible for reimbursementmatching under the Matching Gifts Program and therefore are not listed above.
***
Mr. Rogers' employment agreement grandfathered his right to payment of accrued unused vacation under a program previously maintained by Cinergy Corp.
(6)
Effective July 1, 2013, Ms. Good became Vice Chairman, President and Chief Executive Officer. Prior to her promotion, she served as Executive Vice President and Chief Financial Officer.
(7)
Effective August 6, 2013, Mr. Young became Executive Vice President and Chief Financial Officer. Prior to his promotion, he served as Vice President, Chief Accounting Officer and Controller.
(8)
Mr. Rogers retired effective December 31, 2013. He did not receive salary or bonus from Duke Energy during 2010.2011-2013. As previously described, he iswas covered under an employment agreement with Duke Energy that providesprovided compensation primarily through stock-based awards.
DUKE ENERGY – 2014 Proxy Statement 53
GRANTS OF PLAN-BASED AWARDS
| | | | | | | | | | All Other Option Awards: Number of Securities Underlying Options (#)(4) | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | | Grant Date Fair Value of Stock and Option Awards ($)(6) | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | | Grant Date Fair Value of Stock and Option Awards ($)(6) | ||||||||||||||||||||||||||||||||||||||||||||||
| | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | Grant Date Fair Value of Stock and Option Awards ($)(6) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Grant Date Fair Value of Stock and Option Awards ($)(6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Annual Perf. Shares | 2/22/2010 | 57,821 | 121,729 | 242,848 | 2,000,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Long-Term Perf. Shares | 2/22/2010 | 36,519 | 73,037 | 109,556 | 1,240,168 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Long-Term Perf. Shares | 2/22/2010 | 36,519 | 73,037 | 109,556 | 1,199,998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Phantom Shares | 2/22/2010 | 121,729 | 2,000,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Options | 2/22/2010 | 1,103,448 | 16.43 | 1,600,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lynn J. Good | Cash Bonus | 218,500 | 460,000 | 845,250 | Cash Bonus | 481,333 | 1,013,333 | 1,862,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lynn J. Good | Long-Term Perf. Shares | 2/22/2010 | 12,250 | 24,500 | 36,750 | 416,010 | Long-Term Perf. Shares | 2/25/2013 | 6,837 | 13,674 | 27,348 | 1,228,609 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lynn J. Good | Long-Term Perf. Shares | 2/22/2010 | 12,250 | 24,500 | 36,750 | 402,535 | Long-Term Perf. Shares | 8/26/2013 | 10,773 | 21,546 | 43,092 | 1,935,908 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lynn J. Good | Phantom Shares | 2/22/2010 | 21,000 | 345,030 | Restricted Stock Units | 2/25/2013 | 5,860 | 404,985 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James L. Turner | Cash Bonus | 247,002 | 520,003 | 955,506 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James L. Turner | Long-Term Perf. Shares | 2/22/2010 | 13,848 | 27,695 | 41,543 | 470,261 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James L. Turner | Long-Term Perf. Shares | 2/22/2010 | 13,848 | 27,695 | 41,543 | 455,029 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James L. Turner | Phantom Shares | 2/22/2010 | 23,740 | 390,048 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lynn J. Good | Restricted Stock Units | 8/26/2013 | 9,234 | 607,505 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven K. Young | Cash Bonus | 117,894 | 248,198 | 456,064 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven K. Young | Long-Term Perf. Shares | 2/25/2013 | 1,692 | 3,383 | 6,766 | 303,963 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven K. Young | Restricted Stock Units | 2/25/2013 | 1,450 | 100,210 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Annual Performance Shares | 2/25/2013 | 13,746 | 28,939 | 57,733 | 1,999,974 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Long-Term Perf. Shares | 2/25/2013 | 17,364 | 34,727 | 52,091 | 2,727,459 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Restricted Stock Units | 2/25/2013 | 28,939 | 1,999,974 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | Options | 2/25/2013 | 310,078 | 69.11 | 1,600,002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marc E. Manly | Cash Bonus | 228,000 | 480,000 | 882,000 | Cash Bonus | 228,000 | 480,000 | 882,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marc E. Manly | Long-Term Perf. Shares | 2/22/2010 | 12,783 | 25,565 | 38,348 | 434,094 | Long-Term Perf. Shares | 2/25/2013 | 6,078 | 12,155 | 24,310 | 1,092,127 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marc E. Manly | Long-Term Perf. Shares | 2/22/2010 | 12,783 | 25,565 | 38,348 | 420,033 | Restricted Stock Units | 2/25/2013 | 5,209 | 359,994 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marc E. Manly | Phantom Shares | 2/22/2010 | 21,910 | 359,981 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dhiaa M. Jamil | Cash Bonus | 240,667 | 506,667 | 931,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dhiaa M. Jamil | Long-Term Perf. Shares | 2/25/2013 | 6,584 | 13,167 | 26,334 | 1,183,055 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dhiaa M. Jamil | Restricted Stock Units | 2/25/2013 | 5,643 | 389,988 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lloyd M. Yates | Cash Bonus | 220,955 | 465,169 | 854,748 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lloyd M. Yates | Long-Term Perf. Shares | 2/25/2013 | 5,723 | 11,446 | 22,892 | 1,028,423 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lloyd M. Yates | Restricted Stock Units | 2/25/2013 | 4,905 | 338,985 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. Keith Trent | Cash Bonus | 190,002 | 400,003 | 735,006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. Keith Trent | Long-Term Perf. Shares | 2/22/2010 | 10,653 | 21,305 | 31,958 | 361,759 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. Keith Trent | Long-Term Perf. Shares | 2/22/2010 | 10,653 | 21,305 | 31,958 | 350,041 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. Keith Trent | Phantom Shares | 2/22/2010 | 18,260 | 300,012 |
(1)
Reflects the short-term incentiveSTI opportunity granted to our named executive officers (other than Mr. Rogers) in 20102013 under the Duke Energy Corporation Executive Short-Term Incentive Plan. The information included in the "Threshold," "Target,""Target" and "Maximum" columns reflects the range of potential payouts under the plan established by the Compensation Committee. The actual amounts earned by each executive under the terms of such plan are disclosed in the Summary Compensation Table.
(2)
Reflects the performance shares granted to our named executive officers in 20102013 under the Duke Energy Corporation 20062010 Long-Term Incentive Plan. The information included in the "Threshold," "Target,""Target" and "Maximum" columns reflects the range of potential payouts under the plan established by the Compensation Committee. Earned performance shares will be paid or, if elected, deferred, following the end of the 2010-20122013-2015 performance period (or, with respect to Mr. Rogers, following the 20102013 and 2010-20122013-2015 performance periods), based on the extent to which the performance goals have been achieved. Any shares not earned are forfeited. In addition, following a determination that the performance goals have been achieved, participants will receive a cash payment (which will be deferred if so elected by the participant) equal to the amount of cash dividends paid on one share of Duke Energy common stock during the performance period multiplied by the number of performance shares earned.
(3)
Reflects the phantom sharesrestricted stock units granted to our named executive officers in 20102013 under the Duke Energy Corporation 20062010 Long-Term Incentive Plan. The phantom sharesrestricted stock units generally vest in equal portions on each of the first three anniversaries of the grant date, provided the recipient continues to be employed by Duke Energy on each vesting date or his or her employment terminates by reasondate. The restricted stock units granted to Ms. Good on August 26, 2013, will vest on the first three anniversaries of retirement.February 25, 2013. The phantom sharesrestricted stock units granted to Mr. Rogers vestvested ratably in four equal quarterly installments following the grant. If dividends are paid during the vesting period, then the participants will receive a current cash payment equal to the amount of cash dividends paid on one share of Duke Energy common stock during the vesting period multiplied by the number of unvested phantom shares.
(4)
Reflects the number of shares that may be issued to Mr. Rogers on exercise of the stock option granted in 20102013 under the Duke Energy Corporation 20062010 Long-Term Incentive Plan. These optionsAs a result of Mr. Rogers' retirement on December 31, 2013, this option will continue to vest in three equal annual installments on January 1, 2011,2014, January 1, 20122015 and January 1, 2013, so long as Mr. Rogers remains employed2016, in accordance with Duke Energy or his employment terminates by reason of retirement.
(5)
Reflects the exercise price for the stock option granted to Mr. Rogers in 2010,2013, which equals the fair market value of the underlying shares on the date of grant.
(6)
Reflects the grant date fair value of each phantom share,restricted stock unit, performance share (based on the probable outcome of the performance conditions as of the date of grant) and stock option award granted to our named executive officers in 2010,2013, as computed in accordance with the accounting guidance for stock-based compensation.
54 DUKE ENERGY – 2014 Proxy Statement
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table shows the outstanding equity awards held by our named executive officers as of December 31, 2013. Pursuant to the terms of the merger agreement with Progress Energy, Duke Energy was required to assume the Progress Energy equity awards that were granted prior to the merger and convert them to Duke Energy equity awards of equivalent value and with the same terms and conditions.
| Option Awards | Stock Awards | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||
Lynn J. Good | 0 | ||||||||||||||||||||||||
Lynn J. Good | 21,210 | 1,463,702 | |||||||||||||||||||||||
Lynn J. Good | 10,217 | 705,041 | |||||||||||||||||||||||
Lynn J. Good | 6,811 | 470,027 | |||||||||||||||||||||||
Lynn J. Good | 70,440 | 4,861,064 | |||||||||||||||||||||||
Steven K. Young | 0 | ||||||||||||||||||||||||
Steven K. Young | 3,029 | 209,031 | |||||||||||||||||||||||
Steven K. Young | 2,642 | 182,290 | |||||||||||||||||||||||
Steven K. Young | 1,761 | 121,527 | |||||||||||||||||||||||
Steven K. Young | 6,766 | 466,922 | |||||||||||||||||||||||
James E. Rogers | 0 | 119,314 | 53.94 | 2/22/2021 | |||||||||||||||||||||
James E. Rogers | 0 | 226,468 | 63.21 | 2/27/2022 | |||||||||||||||||||||
James E. Rogers | 0 | 310,078 | 69.11 | 2/25/2023 | |||||||||||||||||||||
James E. Rogers | 0 | 0 | |||||||||||||||||||||||
James E. Rogers | 28,477 | 1,965,181 | |||||||||||||||||||||||
James E. Rogers | 18,985 | 1,310,120 | |||||||||||||||||||||||
James E. Rogers | 52,091 | 3,594,765 | |||||||||||||||||||||||
Marc E. Manly | 0 | ||||||||||||||||||||||||
Marc E. Manly | 11,230 | 774,982 | |||||||||||||||||||||||
Marc E. Manly | 9,967 | 687,805 | |||||||||||||||||||||||
Marc E. Manly | 6,645 | 458,537 | |||||||||||||||||||||||
Marc E. Manly | 24,310 | 1,677,633 | |||||||||||||||||||||||
Dhiaa M. Jamil | 0 | ||||||||||||||||||||||||
Dhiaa M. Jamil | 10,912 | 753,037 | |||||||||||||||||||||||
Dhiaa M. Jamil | 8,721 | 601,836 | |||||||||||||||||||||||
Dhiaa M. Jamil | 5,814 | 401,224 | |||||||||||||||||||||||
Dhiaa M. Jamil | 26,334 | 1,817,309 | |||||||||||||||||||||||
Lloyd M. Yates | 0 | ||||||||||||||||||||||||
Lloyd M. Yates | 12,897 | 890,022 | |||||||||||||||||||||||
Lloyd M. Yates | 4,541 | 313,380 | |||||||||||||||||||||||
Lloyd M. Yates | 4,541 | 313,380 | |||||||||||||||||||||||
Lloyd M. Yates | 22,892 | 1,579,777 | |||||||||||||||||||||||
(1)
Mr. Rogers previously received stock options each year per the terms of his February 2009 employment agreement. Following his retirement, these options continue to vest and become exercisable in three equal installments on January 1 of the following three years after grant.
(2)
Ms. Good and Messrs. Young, Manly and Jamil received restricted stock units on February 22, 2011, February 27, 2012, and February 25, 2013, which vest, subject to certain exceptions, in equal installments on the first three anniversaries of the date of grant. In addition, Ms. Good received restricted stock units on August 26, 2013, which vest, subject to certain exceptions, in equal installments on the first three anniversaries of February 25, 2013. Mr. Yates received restricted stock units on March 16, 2011, March 16, 2012, and February 25, 2013, which vest, subject to certain exceptions, in equal installments on the first three anniversaries of the date of grant. Mr. Yates also received a second grant of restricted stock units on March 16, 2011, which vest, subject to certain exceptions, on the third anniversary of the grant date. All restricted stock units held by Mr. Rogers vested on or before December 31, 2013.
(3)
Ms. Good and Messrs. Young, Rogers, Manly and Jamil received performance shares on February 27, 2012 and on February 25, 2013, that, subject to certain exceptions, are eligible for vesting on December 31, 2014 and December 31, 2015, respectively. Mr. Yates received performance shares on March 16, 2012 and on February 25, 2013, that, subject to certain exceptions, are eligible for vesting on January 1, 2015 and December 31, 2015, respectively. Pursuant to applicable SEC rules, (i) one-half of the performance shares (relating to the ROE performance measure) that were granted in 2012 are listed at the maximum number of shares; (ii) one-half of the performance shares (relating to the TSR performance measure and the ongoing EPS performance measure) that were granted in 2012 are listed at the target number of shares; and (iii) all of the performance shares granted in 2013 are listed at the maximum number of shares.
DUKE ENERGY – 2014 Proxy Statement 55
EXECUTIVE COMPENSATION
OPTION EXERCISES AND STOCK VESTED
| Option Awards | Stock Awards | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Duke Energy | Spectra Energy(1) | Duke Energy | ||||||||||||||||
Name | Number of Duke Energy Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(2) | Number of Spectra Energy Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(2) | Number of Duke Energy Shares Acquired on Vesting (#)(3) | Value Realized on Vesting ($)(4) | |||||||||||||
Lynn J. Good | 8,112 | 204,994 | 0 | 0 | 29,180 | 2,207,400 | |||||||||||||
Steven K. Young | 0 | 0 | 0 | 0 | 7,519 | 568,732 | |||||||||||||
James E. Rogers | 920,683 | 19,090,419 | 1,199,512 | 12,008,903 | 125,086 | 9,245,213 | |||||||||||||
Marc E. Manly | 0 | 0 | 0 | 0 | 29,235 | 2,211,189 | |||||||||||||
Dhiaa M. Jamil | 0 | 0 | 0 | 0 | 25,225 | 1,910,084 | |||||||||||||
Lloyd M. Yates | 0 | 0 | 0 | 0 | 16,586 | 1,148,918 | |||||||||||||
(1)
Effective on January 2, 2007, Duke Energy spun off its natural gas businesses to form Spectra Energy. Effective with the spin-off,spinoff, equitable adjustments were made with respect to then-outstanding stock options and outstanding equity awards relating to Duke Energy common stock. All such awards were adjusted into two separate awards, one relating to Duke Energy common stock and one relating to Spectra Energy common stock. The following two tables show eachOther than Mr. Rogers' option exercises listed above, no other named executive officer's Duke Energy andofficer held or exercised Spectra Energy stock options or equity awards that were outstanding as of December 31, 2010.
DUKE ENERGY CORPORATIONOUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Option Awards | Stock Awards | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||
James E. Rogers | 214,188 | 15.26 | 1/1/2015 | ||||||||||||||||||||||
James E. Rogers | 213,720 | 15.50 | 1/1/2016 | ||||||||||||||||||||||
James E. Rogers | 1,877,646 | 16.60 | 4/4/2016 | ||||||||||||||||||||||
James E. Rogers | 201,005 | 402,010 | 14.50 | 2/19/2019 | |||||||||||||||||||||
James E. Rogers | 1,103,448 | 16.43 | 2/22/2020 | ||||||||||||||||||||||
James E. Rogers | 0 | 0 | |||||||||||||||||||||||
James E. Rogers | 93,104 | 1,658,173 | |||||||||||||||||||||||
James E. Rogers | 93,104 | 1,658,173 | |||||||||||||||||||||||
James E. Rogers | 109,556 | 1,951,183 | |||||||||||||||||||||||
James E. Rogers | 109,556 | 1,951,183 | |||||||||||||||||||||||
Lynn J. Good | 4,555 | 12.50 | 7/22/2013 | ||||||||||||||||||||||
Lynn J. Good | 14,664 | 14.15 | 1/1/2014 | ||||||||||||||||||||||
Lynn J. Good | 15,132 | 15.26 | 1/1/2015 | ||||||||||||||||||||||
Lynn J. Good | 3,588 | 15.33 | 12/14/2015 | ||||||||||||||||||||||
Lynn J. Good | 24,336 | 15.50 | 1/1/2016 | ||||||||||||||||||||||
Lynn J. Good | 41,454 | 738,296 | |||||||||||||||||||||||
Lynn J. Good | 36,210 | 644,900 | |||||||||||||||||||||||
Lynn J. Good | 36,210 | 644,900 | |||||||||||||||||||||||
Lynn J. Good | 36,750 | 654,518 | |||||||||||||||||||||||
Lynn J. Good | 36,750 | 654,518 | |||||||||||||||||||||||
James L. Turner | 29,952 | 12.28 | 1/1/2012 | ||||||||||||||||||||||
James L. Turner | 29,952 | 12.37 | 1/1/2013 | ||||||||||||||||||||||
James L. Turner | 30,888 | 14.15 | 1/1/2014 | ||||||||||||||||||||||
James L. Turner | 30,888 | 15.26 | 1/1/2015 | ||||||||||||||||||||||
James L. Turner | 35,100 | 15.50 | 1/1/2016 | ||||||||||||||||||||||
James L. Turner | 52,170 | 929,148 | |||||||||||||||||||||||
James L. Turner | 47,070 | 838,317 | |||||||||||||||||||||||
James L. Turner | 47,070 | 838,317 | |||||||||||||||||||||||
James L. Turner | 41,543 | 739,872 | |||||||||||||||||||||||
James L. Turner | 41,543 | 739,872 | |||||||||||||||||||||||
Marc E. Manly | 4,936 | 11.54 | 12/4/2012 | ||||||||||||||||||||||
Marc E. Manly | 33,540 | 15.50 | 1/1/2016 | ||||||||||||||||||||||
Marc E. Manly | 48,223 | 858,852 | |||||||||||||||||||||||
Marc E. Manly | 43,448 | 773,800 | |||||||||||||||||||||||
Marc E. Manly | 43,448 | 773,800 | |||||||||||||||||||||||
Marc E. Manly | 38,348 | 682,969 | |||||||||||||||||||||||
Marc E. Manly | 38,348 | 682,969 | |||||||||||||||||||||||
B. Keith Trent | 12,700 | 17.72 | 7/1/2012 | ||||||||||||||||||||||
B. Keith Trent | 40,148 | 715,036 | |||||||||||||||||||||||
B. Keith Trent | 36,210 | 644,900 | |||||||||||||||||||||||
B. Keith Trent | 36,210 | 644,900 | |||||||||||||||||||||||
B. Keith Trent | 31,958 | 569,163 | |||||||||||||||||||||||
B. Keith Trent | 31,958 | 569,163 |
April 4, 2006. Ms. Good and Messrs. Turner, Manly and Trent received phantom shares on February 26, 2008, February 19, 2009, and February 22, 2010, which vest, subject to certain exceptions, in equal installments on the first three anniversaries of the date of grant. As described in more detail on page 56, Mr. Turner's phantom shares continue to vest following his retirement, subject to his agreement to comply with certain restrictive covenants.
SPECTRA ENERGY CORPOUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Option Awards | Stock Awards | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($) | |||||||||||
James E. Rogers | 46,735 | 21.39 | 1/1/2014 | |||||||||||||
James E. Rogers | 107,094 | 23.07 | 1/1/2015 | |||||||||||||
James E. Rogers | 106,860 | 23.43 | 1/1/2016 | |||||||||||||
James E. Rogers | 938,823 | 25.09 | 4/4/2016 | |||||||||||||
James E. Rogers | 0 | 0 | ||||||||||||||
Lynn J. Good | 7,566 | 23.07 | 1/1/2015 | |||||||||||||
Lynn J. Good | 1,794 | 23.17 | 12/14/2015 | |||||||||||||
Lynn J. Good | 12,168 | 23.43 | 1/1/2016 | |||||||||||||
Lynn J. Good | 613 | 15,319 | ||||||||||||||
James L. Turner | 14,976 | 18.57 | 1/1/2012 | |||||||||||||
James L. Turner | 14,976 | 18.70 | 1/1/2013 | |||||||||||||
James L. Turner | 15,443 | 21.39 | 1/1/2014 | |||||||||||||
James L. Turner | 15,444 | 23.07 | 1/1/2015 | |||||||||||||
James L. Turner | 17,550 | 23.43 | 1/1/2016 | |||||||||||||
James L. Turner | 1,718 | 42,933 | ||||||||||||||
Marc E. Manly | 1,480 | 17.44 | 12/4/2012 | |||||||||||||
Marc E. Manly | 1,866 | 23.07 | 1/1/2015 | |||||||||||||
Marc E. Manly | 16,770 | 23.43 | 1/1/2016 | |||||||||||||
Marc E. Manly | 1,621 | 40,509 | ||||||||||||||
B. Keith Trent | 6,350 | 26.78 | 7/1/2012 | |||||||||||||
B. Keith Trent | 1,330 | 33,237 |
OPTION EXERCISES AND STOCK VESTED
| Option Awards | Stock Awards | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Duke Energy | Spectra Energy | Duke Energy | Spectra Energy | |||||||||||||||||||||
Name | Number of Duke Energy Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Spectra Energy Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Duke Energy Shares Acquired on Vesting (#)(2)(3) | Value Realized on Vesting ($)(4) | Number of Spectra Energy Shares Acquired on Vesting (#)(5) | Value Realized on Vesting ($)(6) | |||||||||||||||||
James E. Rogers | 0 | 0 | 0 | 0 | 305,808 | 5,477,349 | 0 | 0 | |||||||||||||||||
Lynn J. Good | 0 | 0 | 9,608 | 35,935 | 67,521 | 1,310,787 | 613 | 14,001 | |||||||||||||||||
James L. Turner | 24,180 | 88,499 | 12,090 | 67,704 | 95,244 | 1,826,737 | 1,718 | 39,239 | |||||||||||||||||
Marc E. Manly | 0 | 0 | 0 | 0 | 88,187 | 1,690,660 | 1,621 | 37,024 | |||||||||||||||||
B. Keith Trent | 0 | 0 | 0 | 0 | 74,058 | 1,418,055 | 2,201 | 49,365 |
(3)
Includes vested restricted stock units and amount of vested Duke Energy stock awards pursuant to the Duke Energy Corporation Executive Savings Plan, which is described in more detail on page 75: 67,162 shares ($1,172,642).
(4)
The value realized upon vesting of stock awards was calculated based on the closing price of a share of Duke Energy common stock on the respective vesting date and includes the following cash payments for dividend equivalents on earned performance shares: Ms. Good: $189,458; Mr. Young: $48,751; Mr. Rogers: $134,378; Ms. Good: $130,870; Mr. Turner: $170,142;$614,189; Mr. Manly: $157,063;$189,458; and Mr. Trent: $130,870. OnlyJamil: $165,772. The value realized upon the vesting of the performance shares for Mr. Trent elected to defer these dividend equivalents pursuant toYates includes reinvested dividends through the Duke Energy Corporation Executive Savings Plan.fourth quarter of 2013. Dividend equivalents for the first quarter of 20112014 are not included above but were paid due to the fact that the vested performance shares were not distributed until after the certification of performance results on February 21, 2011.
Name | Plan Name | Number of Years Credited Service (#)(1) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (#)(1) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
James E. Rogers | Cinergy Corp. Non-Union Employees' Pension Plan | 16.77 | 606,771 | 0 | ||||||||||||||||||||
Lynn J. Good | Cinergy Corp. Non-Union Employees' Pension Plan | 7.67 | 101,524 | 0 | Duke Energy Retirement Cash Balance Plan | 10.67 | 183,242 | 0 | ||||||||||||||||
Lynn J. Good | Duke Energy Corporation Executive Cash Balance Plan | 7.67 | 4,265,583 | 0 | Duke Energy Corporation Executive Cash Balance Plan | 10.67 | 4,983,188 | 0 | ||||||||||||||||
James L. Turner | Cinergy Corp. Non-Union Employees' Pension Plan | 14.87 | 342,201 | 0 | ||||||||||||||||||||
James L. Turner | Duke Energy Corporation Executive Cash Balance Plan | 14.87 | 7,464,386 | 0 | ||||||||||||||||||||
Steven K. Young | Duke Energy Retirement Cash Balance Plan | 33.51 | 531,024 | 0 | ||||||||||||||||||||
Steven K. Young | Duke Energy Corporation Executive Cash Balance Plan | 33.51 | 467,892 | 0 | ||||||||||||||||||||
James E. Rogers | Duke Energy Retirement Cash Balance Plan | 16.77 | 580,826 | 0 | ||||||||||||||||||||
Marc E. Manly | Cinergy Corp. Non-Union Employees' Pension Plan | 8.17 | 303,177 | 0 | Duke Energy Retirement Cash Balance Plan | 11.17 | 448,826 | 0 | ||||||||||||||||
Marc E. Manly | Duke Energy Corporation Executive Cash Balance Plan | 8.17 | 7,567,307 | 0 | Duke Energy Corporation Executive Cash Balance Plan | 11.17 | 8,664,381 | 0 | ||||||||||||||||
B. Keith Trent | Duke Energy Retirement Cash Balance Plan | 8.66 | 168,654 | 0 | ||||||||||||||||||||
B. Keith Trent | Duke Energy Corporation Executive Cash Balance Plan | 8.66 | 397,832 | 0 | ||||||||||||||||||||
Dhiaa M. Jamil | Duke Energy Retirement Cash Balance Plan | 32.34 | 561,059 | 0 | ||||||||||||||||||||
Dhiaa M. Jamil | Duke Energy Corporation Executive Cash Balance Plan | 32.34 | 646,610 | 0 | ||||||||||||||||||||
Lloyd M. Yates | Progress Energy Pension Plan | 15.03 | 328,415 | 0 | ||||||||||||||||||||
Lloyd M. Yates | Duke Energy Corporation Executive Cash Balance Plan | 15.03 | 2,721,734 | 0 | ||||||||||||||||||||
(1)
Mr. Rogers' credited service is frozen as of April 3, 2006, which is the date of the merger of Duke Energy and Cinergy.
Duke Energy provides pension benefits that are intended to assist its retirees with their retirement income needs. A more detailed description of the plans that comprise Duke Energy's pension program follows.
56 DUKE ENERGY – 2014 Proxy Statement
EXECUTIVE COMPENSATION
Duke Energy Retirement Cash Balance Plan
Ms. Good and Executive Cash Balance Plan
Mr. TrentMessrs. Young, Jamil and Manly actively participatesparticipate in the Duke Energy Retirement Cash Balance Plan ("RCBP"), which is a noncontributory, defined benefit retirement plan that is intended to satisfy the requirements for qualification under Section 401(a) of the Internal Revenue Code. The RCBP generally covers employees of Duke Energy and affiliates, with certain exceptions for legacy Cinergy employeesindividuals previously employed with Progress Energy and who are covered under the CinergyProgress Plan (described below). The RCBP currently provides benefits under a "cash balance account" formula. Mr. Trent hasformula (described below are certain prior plan formulas). Ms. Good and Messrs. Young, Jamil and Manly have satisfied the eligibility requirements to receive his or her RCBP account benefit upon termination of employment. The RCBP benefit is payable in the form of a lump sum in the amount credited to a hypothetical account at the time of benefit commencement. Payment is also available in annuity forms based on the actuarial equivalent of the account balance.
The amount credited to the hypothetical account is increased with monthly pay credits equal to (i) for participants with combined age and service of less than 35 points, 4% of eligible monthly compensation, (ii) for participants with combined age and service of 35 to 49 points, 5% of eligible monthly compensation, (iii) for participants with combined age and service of 50 to 64 points, 6% of eligible monthly compensation, and (iv) for participants with combined age and service of 65 or more points, 7% of eligible monthly compensation. If the participant earns more than the Social Security wage base, the account is credited with additional pay credits equal to 4% of eligible compensation above the Social Security wage base. Interest credits are credited monthly, with themonthly. The interest rate determined quarterlyfor benefits accrued after 2012 is based on an annual interest factor of 4% and for benefits accrued before 2013 is based generally on the annual yield on the 30-year Treasury rate.rate (determined quarterly), subject to a minimum of 4% and a maximum of 9%.
For the RCBP, eligible monthly compensation is equal to Form W-2 wages, plus elective deferrals under a 401(k), cafeteria, or 132(f) transportation plan, and deferrals under the Duke Energy Corporation Executive Savings Plan. Compensation does not include severance pay (including vacation bank time and payment for unused vacation), expense reimbursements, allowances, cash or noncash fringe benefits, moving expenses, bonuses for performance periods in excess of one year, transition pay, long-term incentiveLTI compensation (including income resulting from any stock-based awards such as stock options, stock appreciation rights, phantomrestricted stock units or restricted stock), military leave of absence pay (including differential wage payments) and other compensation items to the extent described as not included for purposes of benefit plans or the RCBP. The benefit under the RCBP is limited by maximum benefits and compensation limits under the Internal Revenue Code.
Mr. Trent actively participates inEffective at the Duke Energy Corporation Executive Cash Balance Plan ("ECBP"), which is a noncontributory, defined benefit retirement plan that is not intended to satisfy the requirements for qualification under Section 401(a)end of the Internal Revenue Code. Benefits earned under the ECBP are attributable to (i) compensation in excess of the annual compensation limit ($245,000 for 2011) under the Internal Revenue Code that applies to the determination of pay credits under the RCBP, (ii) restoration of benefits in excess of a defined benefit plan maximum annual benefit limit ($195,000 for 2011) under the Internal Revenue Code that applies to the RCBP, and (iii) supplemental benefits granted to a particular participant. Generally, benefits earned under the RCBP and the ECBP vest upon completion of three years of service, and, with certain exceptions, vested benefits generally become payable upon termination of employment with Duke Energy.
Amounts were credited to an account established for each of Messrs. Turner and Manly and Ms. Good under the Duke Energy Corporation Executive Cash Balance Plan pursuant to an amendment to each of their prior employment agreements that was negotiated in connection with the merger of Cinergy and Duke Energy. Mr. Manly and Ms. Good will not earn any additional benefits under any nonqualified defined benefit plan (other than future interest credits under the Duke Energy Corporation Executive Cash Balance Plan) unless and until they continue employment with Duke Energy past age 62. Mr. Turner's benefit will commence following his retirement, which occurred on December 31, 2010.
Cinergy Corp. Non-Union Employees' Pension Plan
Mr. Rogers has an accrued benefit under2012, the Cinergy Corp. Non-Union Employees' Pension Plan ("Cinergy Plan") was merged into the RCBP. The balances that Ms. Good and Mr. Manly had under the Cinergy Plan's "cash balance account" formula at the end of 2012 were credited to their hypothetical accounts under the RCBP. Prior to 2011, the Cinergy Plan also provided benefits under the Traditional Program formula, which provides benefits based on service and final average monthly pay. After 2010, all non-union participants in the Traditional Program formula, including Mr. Manly, were moved into the Cinergy Plan's cash balance account formula with the retention of a frozen accrued benefit under the Traditional Program (i.e., the benefit is not increased for service and pay after 2010). Mr. Rogers has an accrued benefit under the Traditional Program, but his benefit was "frozen" on April 3, 2006 (i.e., it is not increased by Mr. Rogers' service and pay after April 3, 2006). Ms. Good and Mr. Manly currently participate in the Cinergy Plan, and Mr. Turner participated in the Cinergy Plan prior to his retirement. The Cinergy Plan is a tax-qualified defined benefit plan that generally covers legacy Cinergy non-bargaining
employees. The Cinergy Plan includes the following two program formulas: (i) a Traditional Program and (ii) the Duke Account Formula (which, in 2007, replaced the Balanced and Investor Programs). The Traditional Program formula is based on service and final average monthly pay. The Duke Account Formula (and the prior Balanced and Investor Programs) are "cash balance account" formulas. In 2007, participants were given the choice of continuing to accrue benefits under the Traditional Program or to retain their accrued benefit under the Traditional Program (with pay growth) and participate in the Duke Account Formula. Mr. Turner chose to retain his accrued benefit under the Traditional Program (with pay growth) and in the future participate in the Duke Account Formula, Mr. Manly chose to remain in the Traditional Program. Ms. Good has always participated in the Duke Account Formula. After 2010, any participant in the Traditional Program formula, which included Mr. Manly, was moved into the Duke Account Formula with the retention of his accrued benefit under the Traditional Program.Cinergy Plan's cash balance account formula.
Under the Cinergy Plan's Traditional Program, in which Mr. Rogers participated prior to April 3, 2006, and in which Mr. Turner participated prior to April 1, 2007 and in which Mr. Manly participated prior to 2011, each participant earns a benefit under a final average pay formula, which calculates pension benefits based on a participant's "highest average earnings" and years of plan participation. The Traditional Program benefit is payable following normal retirement at age 65, following early retirement at or after age 50 with three or more years of service (with reduction in the life annuity for commencement before age 62 in accordance with prescribed factors) and at or after age 55 with combined age and service of 85 points (with no reduction in the life annuity for commencement before normal retirement age). Mr. Rogers is eligible for an unreduced early retirement benefit. Messrs. Turner andMr. Manly areis eligible for an early retirement benefit, the amount of which would be reduced for early commencement. Payment is available in a variety of annuity forms, and for Mr. Turner is also available in a lump sum.forms.
The Traditional Program benefit formula is the sum of (a), (b), and (c), where (a) is 1.1% of final average monthly pay ("FAP") times years of participation (up to a maximum of 35 years),; where (b) is 0.5% times FAP in excess of monthly Social Security covered compensation times years of participation (up to a maximum of 35 years),; and where (c) is 1.55% of FAP times years of participation in excess of 35. The benefit under the Traditional Program will not be less than the minimum formula, which is the sum of (x) and (y), where (x) is the lesser of (i) 1.12% of FAP times years of participation (up to a maximum of 35 years) plus 0.5% times FAP in excess of monthly Social Security covered compensation times years of participation (up to a maximum of 35 years) or (ii) 1.163% of FAP pay times years of participation (up to a maximum of 35 years),; and where (y) is 1.492% of FAP times years of participation over 35 years. Social Security covered compensation is the average of the Social Security wage bases during the 35 calendar years ending in the year the participant reaches Social Security retirement age.
FAP is the average of the participant's total pay during the three consecutive years of highest pay from the last 10 years of participation. This is determined using the three consecutive calendar years or last 36 months of participation that yield the
DUKE ENERGY – 2014 Proxy Statement 57
EXECUTIVE COMPENSATION
highest FAP (determined without including banked vacation). AveragedFor Mr. Manly and other similarly situated participants, banked vacation as of December 31, 2010 (or, if less, at retirement) is then added to this amount to obtain the FAP. Prior to his retirement on December 31, 2010, Mr. Turner's FAP continued to be adjusted for future compensation, but his service after April 1, 2007 did not increase his accrued benefit under the Traditional Program. Mr. Manly's FAP was frozen on December 31, 2010, and will not be increased by compensation received thereafter, and his service after December 31, 2010 does not increase his accrued benefitthereafter.
Total pay under the Traditional Program.
Total payProgram includes base salary or wages, overtime pay, shift premiums, work schedule recognition pay, holiday premiums, unused banked vacation pay, service watch payments, performance lump sumlump-sum pay, annual incentive plan awards and annual performance cash awards. Total pay does not include reimbursements or other expense allowances, imputed income, fringe benefits, moving and relocation expenses, deferred compensation, welfare benefits, long-term performance awards and executive individual incentive awards. The benefit under the Cinergy PlanTraditional Program is limited by maximum benefits and compensation limits under the Internal Revenue Code.
As describedDuke Energy Corporation Executive Cash Balance Plan
Messrs. Young, Jamil and Yates actively participate in the Duke Energy Corporation Executive Cash Balance Plan ("ECBP"), which is a noncontributory, defined benefit retirement plan that is not intended to satisfy the requirements for qualification under Section 401(a) of the Internal Revenue Code. Benefits earned under the ECBP are attributable to (i) compensation in excess of the annual compensation limit ($260,000 for 2014) under the Internal Revenue Code that applies to the determination of pay credits under the RCBP and Progress Plan; (ii) restoration of benefits in excess of a defined benefit plan maximum annual benefit limit ($210,000 for 2014) under the Internal Revenue Code that applies to the RCBP and Progress Plan; and (iii) supplemental benefits granted to a particular participant. Generally, benefits earned under the RCBP, Progress Plan and the ECBP vest upon completion of three years of service, and, with certain exceptions, vested benefits generally become payable upon termination of employment with Duke Energy.
Amounts were credited to an account established for Ms. Good and Mr. Manly under the ECBP pursuant to an amendment to each of their prior employment agreements that was negotiated in connection with the merger of Cinergy Corp. and Duke Energy. Ms. Good and Mr. Manly will not earn any additional benefits under any nonqualified defined benefit plan (other than future interest credits under the ECBP) unless and until they continue employment with Duke Energy past age 62.
Effective as of July 2, 2012 (i.e., the closing of the Duke Energy/Progress Energy merger), the portion of the Supplemental Senior Executive Retirement Plan of Progress Energy, Inc. ("Progress Energy Supplemental Plan") relating to the ten active participants in the Progress Energy Supplemental Plan, including Mr. Yates, was merged into the ECBP, resulting in the nonqualified retirement benefits that were originally to be provided to the Progress Energy participants under the Progress Energy Supplemental Plan, to be instead provided pursuant to the ECBP. The ECBP provides that Mr. Yates will participate in the ECBP and, subject to the terms and conditions of the ECBP, be entitled to nonqualified retirement benefits equal to the greater of:
Mr. Yates participates in the Progress Energy Supplemental Plan formula of the ECBP and is fully vested in his benefit. Payments attributable to the Progress Energy Supplemental Plan formula generally are made in the form of an annuity, payable at age 65. The monthly payment is calculated using a formula that equates to 4% per year of service (capped at 62%) multiplied by the average monthly eligible pay (annual base salary and annual cash incentive award) for the highest completed 36 months of eligible pay within the preceding 120-month period. Benefits under the Progress Energy Supplemental Plan formula are fully offset by Social Security benefits and by benefits paid under the Progress Plan. An executive officer who is age 55 or older with at least 15 years of service may elect to retire prior to age 65 and his or her benefit generally will commence within 60 days of the first calendar month following retirement. The early retirement benefit will be reduced by 2.5% for each year the participant receives the benefit prior to reaching age 65. All service with Duke Energy and its affiliates is treated as eligible service for purposes of meeting the Progress Energy Supplemental Plan's eligibility requirements.
Progress Energy Pension Plan
Mr. Yates participates in the Progress Energy Pension Plan ("Progress Plan"), which is a noncontributory defined benefit pension plan sponsored by Progress Energy for eligible non-bargaining employees. The Progress Plan is a "cash balance" defined benefit plan. After 2013, the Progress Plan provides for cash balance benefits under the same formula as the RCBP. Prior to 2014, pay credits ranged from 3% to 7% depending on the participant's age at the beginning of each
58 DUKE ENERGY – 2014 Proxy Statement
EXECUTIVE COMPENSATION
plan year, plus an additional similar credit on eligible pay above effective April 1, 2007 until his retirement80% of the Social Security wage base. Interest credits for benefits accrued before 2014 are based on an annual interest credit rate of 4% and are added to cash balance accounts on December 31 2010, Mr. Turner participated inof each year based on account balances as of January 1. Generally, employees become vested under the Duke Account Formula, and effective January 1, 2011 Mr. Manly participates inProgress Plan on the Duke Account Formula. This featureearlier of the Cinergy Plan provides adate they complete three years of vesting service or the date they reach normal retirement age, which is age 65, while employed. At benefit substantially similar to that provided under the RCBP.commencement, an employee has several lump sum and annuity payment options.
Present Value Assumptions
The valuation method and assumptions usedBecause the pension amounts shown in determining the present value of the current accrued benefit for the Pension Benefits table isTable are the present values of current accrued retirement benefits, numerous assumptions must be applied. The values are based on the same assumptions as follows: (i)used in our Annual Report, except as required by applicable SEC rules. Such assumptions include a 4.7% discount rate and an interest crediting rate of 4.5% for Duke Energy cash balance accounts for benefits accrued before 2013 and 4% for benefits accrued after 2012 and 4% for the RCBP and ECBP, and for theProgress Plan cash balance accountaccounts. Cash balance accounts are assumed to be paid in the form of a lump sum. Annuity benefits underare assumed to be paid in the Cinergy Plan, the valueform of the cash balance account as of December 31, 2010either (i) a single life annuity or (ii) a 50% joint and survivor annuity. The post-retirement mortality assumption is projectedconsistent with that used in our Annual Report. Benefits are assumed to age 65 for Mr. Trent andcommence at age 62 for Ms. Good and Messrs. Turner and Manly at the assumed interest crediting rate of 4.5% and is then discounted back to December 31, 2010 using the assumed discount rate of 5.0%, and (ii) for the Cinergy Plan, the assumptions used by Duke Energy in its Annual Report are used, along with the assumption that Messrs. TurnerRogers and Manly and Ms. Good willat age 65 for Messrs. Young, Jamil and Yates, or the named executive officer's current age (if later), and each named executive officer is assumed to remain employed until age 62 (that age.
DUKE ENERGYi.e. – 2014 Proxy Statement, the earliest retirement date on which unreduced benefits can be paid). This assumption is required under applicable rules with respect to Mr. Turner despite the fact that he retired effective December 31, 2010. 59
NONQUALIFIED DEFERRED COMPENSATION
Name | Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($)(4) | Aggregate Balance at Last FYE ($)(5) | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(5) | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
James E. Rogers | 0 | 0 | 1,075,929 | 0 | 7,853,256 | ||||||||||||||||||||||||||||
Lynn J. Good | 74,333 | 79,354 | 88,320 | 0 | 715,661 | ||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
Steven K. Young | 14,731 | 20,099 | 104,117 | 0 | 521,271 | ||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
James E. Rogers | James E. Rogers | 0 | 0 | 717,120 | (801,000 | ) | 4,814,951 | (6) | 0 | 0 | 2,289,395 | 0 | 12,036,372 | ||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
Deferred Compensation Agreement | |||||||||||||||||||||||||||||||||
Lynn J. Good | 46,000 | 53,300 | 20,511 | 0 | 173,992 | ||||||||||||||||||||||||||||
Deferred Compensation Agreement | 0 | 0 | 664,928 | (3) | (801,000 | )(4) | 4,464,514 | (6) | |||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
James L. Turner | 52,000 | 59,300 | 141,181 | 0 | 1,084,807 | ||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
Marc E. Manly | Marc E. Manly | 169,455 | 17,750 | 87,786 | 0 | 691,017 | 65,655 | 58,270 | 403,445 | 0 | 1,940,041 | ||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
B. Keith Trent | 1,495,977 | 49,714 | 427,873 | 0 | 3,745,262 | ||||||||||||||||||||||||||||
Dhiaa M. Jamil | 105,610 | 56,180 | 278,269 | 0 | 1,916,343 | ||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
Lloyd M. Yates | 28,083 | 19,588 | 139,106 | 0 | 1,030,716 | ||||||||||||||||||||||||||||
Duke Energy Corporation Executive Savings Plan | |||||||||||||||||||||||||||||||||
(1)
Includes $46,000, $52,000, $6,000,$74,333, $4,098, $36,000, and $45,000$28,083 of salary deferrals credited to the plan in 20102013 on behalf of Ms. Good and Messrs. Turner,Young, Manly and Trent,Yates, respectively, which are included in the salary column of the Summary Compensation Table. Includes $163,455$10,634, $29,655, and $79,151$105,610 of short-term incentive deferrals earned in 20102013 and credited to the plan in 20112014 on behalf of Messrs. Young, Manly and Trent, respectively. Includes $1,371,826 of stock award deferrals and dividend equivalents credited to the plan on behalf of Mr. Trent with respect to 2010.
(2)
Reflects make-whole matching contribution credits made under the Duke Energy Corporation Executive Savings Plan, which are reported in the All Other Compensation column of the Summary Compensation Table.
(3)
Includes $335,612 of above-market interest as reportedof $311,187 for Mr. Rogers as reported in footnote 54 to the Summary Compensation Table on page 63.
(4)
Reflects a payment to Mr. Rogers pursuant to the terms of the Deferred Compensation Agreement that he entered into with PSI Energy, Inc. (subsequently renamed Duke Energy Indiana, Inc.) on December 16, 1992.
(5)
The aggregate balance as of December 31, 20102013, for each named executive officer includes the following aggregate amount of prior deferrals of base salary, short-term incentives and long-term incentives, as well as employer matching contributions and nonqualified deferred compensation earnings, that were previously earned and reported as compensation on the Summary Compensation Table for the years 2006 2007, 2008 and 2009:through 2012: (i) Ms. Good – $469,221; (ii) Mr. Rogers—$1,036,811; (ii) Ms. Good—
$166,104;Rogers – $2,021,836; (iii) Mr. Turner—$581,933;Manly – $1,238,262; and (iv) Mr. Manly—$628,293 and (v) Mr. Trent—$758,954.Jamil – $337,103. These amounts have since been adjusted, pursuant to the terms of the Duke Energy Corporation Executive Savings Plan for investment performance (e.g.,, earnings and losses), deferrals, contributions and distributions. The aggregate balance as of December 31, 2013 also includes amounts earned in 2013 but credited to the plan in 2014, including the amounts described in footnotes 1 and 2 above.
(6)
Reflects Mr. Rogers' interestaccrued benefit under the Deferred Compensation Agreement that he entered into with PSI Energy, Inc. (subsequently renamed Duke Energy Indiana, Inc.) on December 16, 1992. Except for earnings on previously deferred amounts, Mr. Rogers is not permitted
60 DUKE ENERGY – 2014 Proxy Statement
Back to earn any additional amounts under this plan.Contents
EXECUTIVE COMPENSATION
Duke Energy Corporation Executive Savings Plan
Under the Duke Energy Corporation Executive Savings Plan, participants can elect to defer a portion of their base salary and short-term incentive compensation and long-term incentivecompensation. Prior to 2013, participants could also defer certain LTI compensation (other than stock options). Participants also receive a company matching contribution in excess of the contribution limits prescribed by the Internal Revenue Code under the Duke Energy Retirement Savings Plan. Plan, which is the 401(k) plan in which the named executive officers participate.*
In general, payments are made following termination of employment or death in the form of a lump sum or installments, as selected by the participant. Participants may direct the deemed investment of base salary deferrals, short-term incentiveSTI deferrals and matching contributions among investmentsinvestment options available under the Duke Energy Retirement Savings Plan, including in the Duke Energy Common Stock Fund. Participants may change their investment elections on a daily basis. Deferrals of equity awards are credited with earnings and losses based on the performance of the Duke Energy Common Stock Fund. The benefits payable under the plan are unfunded and subject to the claims of Duke Energy's creditors.
Mr. Yates previously participated in the Progress Energy, Inc. Management Deferred Compensation Plan ("MDCP"), the Progress Energy, Inc. Management Incentive Compensation Plan ("MICP") and the Progress Energy, Inc. Performance Share Sub-Plan ("PSSP"), each of which permitted voluntary deferrals and was merged with and into the Executive Savings Plan effective as of the end of 2013. In addition to voluntary deferrals, the MDCP also provided for employer contributions of 6% of base salary over the limits prescribed by the Internal Revenue Code under the Progress Energy 401(k) Savings and Stock Ownership Plan. With respect to the plans that were merged into the Executive Savings Plan, participants are entitled to the same benefits, distribution timing and forms of benefit that were provided by the MDCP, MICP and PSSP immediately prior to January 1, 2014. These pre-2014 benefits generally are payable following termination of employment, or in certain cases on a date previously specified by the participant, in the form of a lump sum or installments, as selected by the participant.
Deferred Compensation Agreement for Mr. Rogers
In 1992, PSI Energy, Inc. (subsequently renamed Duke Energy Indiana, Inc.) entered into a deferred compensation agreement with Mr. Rogers. Except for earnings on amounts previously deferred, Mr. Rogers isdid not accruingaccrue any additional benefits under this agreement.agreement in 2013. The agreement provides Mr. Rogers with the right to receive two 15-year annual cash benefits. The two annual cash payments, in the amount of $554,000 and $247,000, respectively, commenced in 2010. The deferred payments accrue interest at an annual rate of 17.5%. The benefits payable under the agreement are unfunded and subject to the claims of Duke Energy's creditors.
*
The Duke Energy Retirement Savings Plan is a tax-qualified "401(k) plan" that provides a means for employees to save for retirement on a tax-favored basis and to receive an employer matching contribution. The employer matching contribution is equal to 100% of the named executive officer's before-tax and Roth 401(k) contributions (excluding "catch-up" contributions) with respect to 6% of eligible pay. For this purpose, "eligible pay" includes base salary and STI compensation. Earnings on amounts credited to the Duke Energy Retirement Savings Plan are determined based on the performance of investment funds (including a Duke Energy Common Stock Fund) selected by each participant. Effective as of the close of business on December 31, 2013, the 401(k) plan in which Mr. Yates previously participated (i.e.,the Progress Energy 401(k) Savings and Stock Ownership Plan) was merged with and into the Duke Energy Retirement Savings Plan, at which time Mr. Yates began to participate in the Duke Energy Retirement Savings Plan.
DUKE ENERGY – 2014 Proxy Statement 61
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Under certain circumstances, each named executive officer* would be entitled to compensation in the event his or her employment terminates or upon a change in control. The amount of the compensation is contingent upon a variety of factors, including the circumstances under which he or she terminates employment. The relevant agreements that each named executive officer has entered into with Duke Energy are described below, followed by a table that quantifies the amount that would become payable to each named executive officer as a result of his or her termination of employment.
The amounts shown assume that such termination was effective as of December 31, 20102013, and are merely estimates of the amounts that would be paid out to the named executive officers upon their termination. The actual amounts to be paid out can only be determined at the time of such named executive officer's termination of employment.
The table shown below does not include certain amounts that have been earned and whichthat are payable without regard to the named executive officer's termination of employment. Such amounts, however, are described immediately following the table.
Under each of the compensation arrangements described below for Messrs. Young, Manly and Jamil, "change in control" generally means the occurrence of one of the following: (a) the date any person or group becomes the beneficial owner of 30% or more of the combined voting power of Duke Energy's then outstanding securities; (b) during any period of two consecutive years, the directors serving at the beginning of such period or who are elected thereafter with the support of not less than2/3 of those directors cease for any reason other than death, disability or retirement to constitute at least a majority thereof; (c) the consummation of a merger, consolidation, reorganization or similar corporate transaction, which has been approved by the shareholders of Duke Energy, regardless of whether Duke Energy is the surviving company, unless Duke Energy's outstanding voting securities immediately prior to the transaction continue to represent at least 50% of the combined voting power of the outstanding voting securities of the surviving entity immediately after the transaction; (d) the consummation of a sale of all or substantially all of the assets of Duke Energy or a complete liquidation or dissolution, which has been approved by the shareholders of Duke Energy; or (e) under certain arrangements, the date of any other event that the Board of Directors determines should constitute a change in control.
Mr. James E. RogersEmployment Agreement with Ms. Good
Effective February 19, 2009,July 1, 2013, Duke Energy entered into an employment agreement with Mr. Rogers (the "February 2009 Agreement")Ms. Good that contains a three-year initial term, and automatically renews for additional one-year periods at the period ending December 31, 2013. The severance and change in control provisions under the February 2009 Agreement supersede those under his prior three-year agreement (the "April 2006 Agreement"), except that the equity awards made before adoptionend of the February 2009 Agreement continue in accordance with their terms. All of the equity awards that were made prior to the adoption of the February 2009 Agreement have
been earned or forfeited, except that certain of Mr. Rogers' stock options remain outstanding.initial term unless either party provides 120 days advance notice. In the event of a change in control of Duke Energy, the term automatically extends to a period of two years. Upon a termination of Ms. Good's employment by Duke Energy without "cause" or by Ms. Good for "good reason" (each as defined below), the following severance payments and benefits would be payable: (a) a lump-sum payment equal to a pro-rata amount of her annual bonus for the portion of the year that the termination of Mr. Rogers' employment his stock options would remain exercisableoccurs during which she was employed, determined based on the remainderactual achievement of their ten-year term, exceptperformance goals; (b) a lump-sum payment equal to 2.99 times the sum of her annual base salary and target annual bonus opportunity; (c) continued access to medical and dental benefits for 2.99 years, with monthly amounts relating to Duke Energy's portion of the costs of such options would remain exercisablecoverage paid by Duke Energy (reduced by coverage provided by future employers, if any) and a lump-sum payment equal to the cost of basic life insurance coverage for no more than 902.99 years; (d) one year of outplacement services; (e) if termination occurs within 30 days in the event that Mr. Rogers' employment is terminated for cause (as defined in the April 2006 Agreement).
The February 2009 Agreement makes no provision for cash payments upon a termination of employment, whether beforeprior to, or two years after a change in control of Duke Energy, vesting in unvested retirement plan benefits that would have vested during the two years following the change in control and a lump-sum payment equal to the maximum contributions and allocations that would have been made or allocated if she had remained employed for an additional 2.99 years; and (f) 2.99 additional years of vesting with respect to equity awards and an extended period to exercise outstanding vested stock options following termination of employment.
Ms. Good is not entitled to any form of tax gross-up in connection with Sections 280G and 4999 of the gross upInternal Revenue Code. Instead, in the event that the severance payments or benefits otherwise would constitute an "excess parachute payment" (as defined in Section 280G of "golden parachute"the Internal Revenue Code), the amount of payments or benefits would be reduced to the maximum level that would not result in an excise taxes. tax under Section 4999 of the Internal Revenue Code if such reduction would cause Ms. Good to retain an after-tax amount in excess of what would be retained if no reduction were made.
*
The February 2009 Agreement does provide forcompensation payable to Mr. Rogers upon his retirement from Duke Energy, effective December 31, 2013, is summarized under the treatmentsub-heading "Retirement of Mr. Rogers' outstanding equity awards upon terminationRogers" on page 66.
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Under Ms. Good's employment agreement, "cause" generally means, unless cured within 30 days, (a) a material failure by Ms. Good to carry out, or malfeasance or gross insubordination in carrying out, reasonably assigned duties or instructions consistent with her position; (b) the final conviction of Ms. Good of a felony or crime involving moral turpitude; (c) an egregious act of dishonesty by Ms. Good in connection with employment, or upon a changemalicious action by Ms. Good toward the customers or employees of Duke Energy; (d) a material breach by Ms. Good of Duke Energy's Code of Business Ethics; or (e) the failure of Ms. Good to cooperate fully with governmental investigations involving Duke Energy. "Good reason," for this purpose, generally means, unless cured within 30 days: (a) a material reduction in control.
UnderMs. Good's annual base salary or target annual bonus (exclusive of any across the February 2009 Agreement, if Mr. Rogers' employment terminates without causeboard reduction similarly affecting substantially all similarly situated employees); or (b) a material diminution in Ms. Good's positions (including status, offices, titles and reporting relationships), authority, duties or responsibilities or any failure by the Board of Directors to nominate Ms. Good for good reason (eachreelection as defined in the February 2009 Agreement) or by reason of his "retirement" (which requires approvala member of the Board of Directors), then (i) his stock optionsDirectors.
Ms. Good's employment agreement contains restrictive covenants related to confidentiality, mutual nondisparagement, noncompetition and phantom stock will continuenonsolicitation obligations. The noncompetition and nonsolicitation obligations survive for two years following her termination of employment.
Severance Protection for Mr. Yates
In connection with the merger with Progress Energy, Duke Energy assumed the MCICP, which provides the following severance protection to vest in accordance with their otherwise applicable schedule as if his employment had not terminated, (ii) his stock options will remain exercisable for their full ten-year term, and (iii) his performance shares will be payable (if at all) at the end of the cycle based on actual performance, again determined as if his employment had not terminated. If Mr. Rogers' employment terminates as a result of his death or disability, then his stock options and phantom stock will vest in full, the stock options (whether or not previously vested) will remain exercisable for their full ten-year term, and the performance shares will be pro-rated for actual service and will be payable (if at all) at the end of the cycle based on actual performance. If Mr. Rogers terminates his employment without good reason (as definedYates in the February 2009 Agreement) or retires without the approvalevent that, within two years of the Board of Directors, his unvested stock options, phantom stock and performance shares will expire immediately, and any previously vested options will expire 90 days after the termination of employment. If Mr. Rogers' employment is terminated for cause (as defined in the February 2009 Agreement), all stock options, phantom stock and performance shares (whether or not vested) granted to him pursuant to the February 2009 Agreement will expire immediately.
If a change in control of Progress Energy (which included its merger with Duke Energy), there is an involuntary termination of the participant's employment without "cause" (as defined in the MCICP) or the participant voluntarily terminates employment for "good reason" (as defined in the MCICP): (a) 300% of base salary and the greater of the participant's average STI payment over the prior three years or his target STI payment; (b) up to three years of continued health and welfare benefits; (c) 100% of the participant's target short-term incentive for the year of the termination; (d) full vesting of outstanding stock awards; and (e) the participant shall be deemed to have met the minimum service requirements under the Progress Energy Supplemental Senior Executive Retirement Plan. The MCICP also provides a gross-up for golden parachute excise taxes. Duke Energy occurs and Mr. Rogers' employment is terminated within two years afterdoes not provide excise tax gross-ups for severance benefits provided under the changeChange in control, by Duke Energy without causeControl Agreements or by Mr. Rogers for good reason or by reason of his retirement withunder the approvalExecutive Severance Plan, but as a result of the Board of Directors, then notwithstandingProgress Energy merger, we assumed the preceding paragraph,MCICP, which was adopted by Progress Energy prior to the stock options will vest immediatelymerger and the phantom stock and performance shares will immediately vest and be paid (in the case of performance shares, based on the target level of performance). If Mr. Rogers' employment terminates after the expiration of the term of the February 2009 Agreement but before vesting of all options and performance shares, each such award will bewhich provides golden parachute tax gross-up payments under certain circumstances. These severance benefits are subject to the treatment described above, but determined as if termination had occurred during the term of the February 2009 Agreement, and any termination by Mr. Rogers, other than in anticipation of a termination for cause, will be deemed a termination for good reason.
Under the February 2009 Agreement, "cause" generally means (i) if not cured, the willful and continued failure by Mr. Rogers to substantially perform his duties or to complycompliance with Duke Energy's rules or procedures, (ii) the breach of confidentiality, noncompetition and nonsolicitation obligations, or (iii) Mr. Rogers' convictionrestrictions. This plan will terminate pursuant to its terms on July 2, 2014, which is the second anniversary of a felony, including the entrymerger of a guilty or nolo contendere plea, or any willful or grossly negligent action or inaction by Mr. Rogers that has a materially adverse effect on Duke Energy and "good reason" generally means (a) the material reduction without Mr. Rogers' consent of his title, authority, duties, or responsibilities from those in effect immediately prior to the reduction, except in the event that Mr. Rogers ceases to serve as President of Duke Energy or, ifProgress Energy.
Duke Energy adopts a policy that its Chief Executive Officer shall no longer serve as Chairman of its Board of Directors, he ceases to serve as Chairman, (b) the failure by Duke Energy without Mr. Rogers' consent to nominate him for re-election to the Board of Directors, (c) a material adverse change in Mr. Rogers' reporting responsibilities, (d) any breach by Duke Energy of any other material provision of Mr. Rogers' agreement or (e) a failure by Duke Energy to require any successor entity to Duke Energy specifically to assume in writing all of Duke Energy's obligations under Mr. Rogers' agreement.
Other Named Executive Officers
Duke Energy originally entered into a changeChange in control agreementControl Agreement with Mr. TrentYoung effective as of July 1, 2005, and with Ms. Good and Mr. Manly effective as of April 4, 2006, and with Mr. Jamil effective as of February 26, 2008, all of which were amended and restated effective as of August 26, 2008, and subsequently amended effective as of DecemberJanuary 8, 2010.2011. The agreements have an initial term of two years commencing as of the original effective date, after which the agreements automatically extend, unless six monthsmonths' prior written notice is provided, on a month-to-month basis.
The changeChange in control agreementsControl Agreements provide for payments and benefits to the executive in the event of termination of employment within two years after a "change in control" by Duke Energy without "cause" or by the executive for "good reason" (each as defined below) as follows: (1)(a) a lump-sum cash payment equal to a pro-rata amount of the executive's target bonus for the year in which the termination occurs; (2)(b) a lump-sum cash payment equal to two times the sum of the executive's annual base salary and target annual bonus opportunity in effect immediately prior to termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting "good reason"; (3)(c) continued medical, dental and basic life insurance coverage for a two-year period or a lump sumlump-sum cash payment of equivalent value (reduced by coverage obtained by subsequent employers); and (4)(d) a lump-sum cash payment of the amount Duke Energy would have allocated or contributed to the executive's qualified and nonqualified defined benefit pension plan and defined contribution savings plan accounts during the two years following the termination date, plus the unvested portion, if any, of the executive's accounts as of the date of termination that would have vested during the remaining term of the agreement. If the executive would have become eligible for normal retirement at age sixty-five65 within the two-year period following termination, the two times multiple or two yeartwo-year period mentioned above will be reduced to the period from the termination date to the executive's normal retirement date. The agreements also provide for enhanced benefits (i.e., two years of additional vesting) with respect to equity awards.
DUKE ENERGY – 2014 Proxy Statement 63
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Under the changeChange in control agreements,Control Agreements, each named executive officer also is entitled to reimbursement of up to $50,000 for the cost of certain legal fees incurred in connection with claims under the agreements. In the event that any of the payments or benefits provided for in the changeChange in control agreementControl Agreement otherwise would constitute an "excess parachute payment" (as defined in Section 280G of the Internal Revenue Code), the amount of payments or benefits would be reduced to the maximum level that would not result in excise tax under Section 4999 of the Internal Revenue Code if such reduction would cause the executive to retain an after-tax amount in excess of what would be retained if no reduction were made. In the event a named executive officer becomes entitled to payments and benefits under a changeChange in control agreement,Control Agreement, he or she would be subject to a one-year noncompetition and nonsolicitation provision from the date of termination, in addition to certain confidentiality and cooperation provisions.
As previously discussed in the Compensation Discussion and Analysis on page 56, the Compensation Committee approved the Duke Energy Corporation Executive Severance Plan (the "Executive Severance Plan") on January 8, 2011. The Executive Severance Plan provides certain executives, including Messrs. Young, Manly and Trent and Ms. Good,Jamil, with severance payments and benefits upon a termination of employment under certain circumstances.
Pursuant to the terms of the Executive Severance Plan, "Tier I Participants," which include Duke'sDuke Energy's eligible named executive officers, would be entitled, subject to the execution of a waiver and release of claims, to the following payments and benefits in the event of a termination of employment by (i)(a) Duke Energy without "cause" (as defined below) or (ii)(b) the participant for "good reason" (as defined below): (1) a lump-sum payment equal to a pro-rata amount of the participant's annual bonus for the year that the termination of employment occurs, determined based on the actual achievement of performance goals under the applicable performance-based bonus plan; (2) a lump-sum payment equal to two times the sum of the participant's annual base salary and target annual bonus opportunity in effect immediately prior to termination of employment or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting "good reason"; (3) continued access to medical and dental insurance for a two-year period following termination of employment, with monthly amounts relating to Duke Energy's portion of the costs of such coverage paid to the participant by Duke Energy (reduced by coverage provided to the participant by future employers, if any) and a lump-sum payment equal to the cost of two years of basic life insurance coverage; (4) a lump-sum payment of the amount that Duke Energy would have allocated or contributed to the participant's qualified and nonqualified defined benefit pension plan and defined contribution savings plan accounts during the two years following the date of termination of employment, plus the vesting of the portion, if any, of the participant's accounts that would have vested during the two-year period following the date of termination of employment, but only if the termination occurs prior to the second anniversary of the adoption of the Executive Severance Plan; (5) one year of outplacement services; and (6)(5) two additional years of vesting with respect to equity awards and an extended period to exercise outstanding vested stock options following termination of employment.
The Executive Severance Plan also provides that, in the event any of the payments or benefits provided for in the Executive ServiceSeverance Plan otherwise would constitute an "excess parachute payment" (as defined in Section 280G of the Internal Revenue Code), the amount of payments or benefits would be reduced to the maximum level that would not result in an excise tax under Section 4999 of the Internal Revenue Code if such reduction would cause the executive to retain an after-tax amount in excess of what would be retained if no reduction were made. In the event a participant becomes entitled to payments and benefits under the Executive Severance Plan, he or she would be subject to certain restrictive covenants, including those related to noncompetition, nonsolicitation and confidentiality.
Duke Energy has the right to terminate any participant's participation in the Executive Severance Plan but must provide the participant with one year notice and the participant would continue to be eligible for all severance payments and benefits under the Executive Severance Plan during the notice period. Any employee who is eligible for severance payments and benefits under a separate agreement or plan maintained by Duke Energy (such as a changeChange of control agreement)Control Agreement) would receive compensation and benefits under such other agreement or plan (and not the Executive Severance Plan).
For purposes of the changeChange in control agreementsControl Agreements and the Executive Severance Plan, "cause" generally means, unless cured within 30 days, (i)(a) a material failure by the executive to
carry out, or malfeasance or gross insubordination in carrying out, reasonably assigned duties or instructions consistent with the executive's position, (ii)position; (b) the final conviction of the executive of a felony or crime involving moral turpitude, (iii)turpitude; (c) an egregious act of dishonesty by the executive in connection with employment, or a malicious action by the executive toward the customers or employees of Duke Energy, (iv)Energy; (d) a material breach by the executive of Duke Energy's Code of Business Ethics,Ethics; or (v)(e) the failure of the executive to cooperate fully with governmental investigations involving Duke Energy. "Good reason," for this purpose, generally means: (a) a material reduction in the executive's annual base salary or target annual bonus as in effect either immediately prior to the change in control or the termination under the Executive Severance Plan (exclusive of any across the boardacross-the-board reduction similarly affecting substantially all similarly situated employees); or (b) a material diminution in the participant's positions (including status, offices, titles and reporting relationships), authority, duties or responsibilities as in effect either immediately prior to the change in control or immediately prior to a Tier I participant's termination of employment under the Executive Severance Plan.
64 DUKE ENERGY – 2014 Proxy Statement
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Equity Awards—ConsequenceAwards – Consequences of Termination of Employment
As described above, each year Duke Energy grants long-term incentives to its executive officers, and the terms of these awards vary somewhat from year to year. The following table summarizes the consequences under Duke Energy's long-term incentiveLTI award agreements, without giving effect to Ms. Good's employment agreement, the changeChange in control agreements orControl Agreements, the Executive Severance Plan or the MCICP described above, that would generally occur with respect to outstanding equity awards in the event of the termination of employment of a named executive officer (other than Mr. Rogers, whose treatment is described above).Ms. Good and Messrs. Young, Manly, Jamil and Yates.
Event | Consequences | |
---|---|---|
Voluntary termination or involuntary termination | prorated portion of other awards vests Performance Shares – prorated portion of award vests based on actual performance | |
Voluntary termination (not | ||
Involuntary termination | Restricted Stock Units – immediate vesting change in control below | |
Death or Disability | Restricted Stock Units – immediate vesting Performance Shares – prorated portion of award vests based on actual | |
Change in Control | ||
Performance Shares – prorated portion of award vests based on target performance | ||
DUKE ENERGY – 2014 Proxy Statement 65
Table of ContentsPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR
A CHANGE IN CONTROL ("CIC")
Name and Triggering Event | Cash Severance Payment ($)(1) | Incremental Retirement Plan Benefit ($)(2) | Welfare and Other Benefits ($)(3) | Stock Awards ($)(4) | Option Awards ($)(5) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
James E. Rogers | ||||||||||||||||
• Voluntary termination with good reason | 0 | 0 | 0 | 5,601,824 | 2,853,411 | |||||||||||
• Involuntary termination without cause | 0 | 0 | 0 | 5,601,824 | 2,853,411 | |||||||||||
• Involuntary or good reason termination after a CIC | 0 | 0 | 0 | 5,127,662 | 2,853,411 | |||||||||||
• Death | 0 | 0 | 0 | 2,723,535 | 2,853,411 | |||||||||||
• Disability | 0 | 0 | 0 | 2,723,535 | 2,853,411 | |||||||||||
Lynn J. Good | ||||||||||||||||
• Voluntary termination | 0 | 0 | 0 | 37,614 | 0 | |||||||||||
• Involuntary termination without cause | 0 | 0 | 0 | 1,337,978 | 0 | |||||||||||
• Involuntary or good reason termination after a CIC | 2,070,000 | 170,056 | 45,498 | 2,603,052 | 0 | |||||||||||
• Death | 0 | 0 | 0 | 1,749,412 | 0 | |||||||||||
• Disability | 0 | 0 | 0 | 1,749,412 | 0 | |||||||||||
James L. Turner | ||||||||||||||||
• Voluntary termination(6) | 0 | 0 | 0 | 3,466,501 | 0 | |||||||||||
Marc E. Manly | ||||||||||||||||
• Voluntary termination | 0 | 0 | 0 | 2,094,439 | 0 | |||||||||||
• Involuntary termination without cause | 0 | 0 | 0 | 2,094,439 | 0 | |||||||||||
• Involuntary or good reason termination after a CIC | 2,160,000 | 174,956 | 25,132 | 2,976,366 | 0 | |||||||||||
• Death | 0 | 0 | 0 | 2,027,605 | 0 | |||||||||||
• Disability | 0 | 0 | 0 | 2,027,605 | 0 | |||||||||||
B. Keith Trent | ||||||||||||||||
• Voluntary termination | 0 | 0 | 0 | 0 | 0 | |||||||||||
• Involuntary termination without cause | 0 | 0 | 0 | 1,302,374 | 0 | |||||||||||
• Involuntary or good reason termination after a CIC | 1,800,014 | 279,458 | 39,060 | 2,479,239 | 0 | |||||||||||
• Death | 0 | 0 | 0 | 1,688,869 | 0 | |||||||||||
• Disability | 0 | 0 | 0 | 1,688,869 | 0 |
Name and Triggering Event | Cash Severance Payment ($)(1) | Incremental Retirement Plan Benefit ($)(2) | Welfare and Other Benefits ($)(3) | Stock Awards ($)(4) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lynn J. Good | |||||||||||||||
• | Voluntary termination without good reason | 0 | 0 | 0 | 0 | ||||||||||
• | Involuntary or good reason termination under Employment Agreement | 8,073,000 | 0 | 54,573 | 5,289,695 | ||||||||||
• | Involuntary or good reason termination after a CIC | 8,073,000 | 556,390 | 54,573 | 4,989,325 | ||||||||||
• | Death or Disability | 0 | 0 | 0 | 3,093,902 | ||||||||||
Steven K. Young | |||||||||||||||
• | Voluntary termination without good reason | 0 | 0 | 0 | 414,712 | ||||||||||
• | Involuntary or good reason termination under Executive Severance Plan | 1,785,000 | 0 | 36,504 | 757,327 | ||||||||||
• | Involuntary or good reason termination after a CIC | 1,785,000 | 293,950 | 36,504 | 712,324 | ||||||||||
• | Death or Disability | 0 | 0 | 0 | 481,217 | ||||||||||
Marc E. Manly | |||||||||||||||
• | Voluntary termination without good reason | 0 | 0 | 0 | 1,548,150 | ||||||||||
• | Involuntary or good reason termination under Executive Severance Plan | 2,160,000 | 0 | 32,158 | 2,795,775 | ||||||||||
• | Involuntary or good reason termination after a CIC | 2,160,000 | 357,700 | 32,158 | 2,630,495 | ||||||||||
• | Death or Disability | 0 | 0 | 0 | 1,785,959 | ||||||||||
Dhiaa M. Jamil | |||||||||||||||
• | Voluntary termination without good reason | 0 | 0 | 0 | 1,441,993 | ||||||||||
• | Involuntary or good reason termination under Executive Severance Plan | 2,340,000 | 0 | 40,958 | 2,721,343 | ||||||||||
• | Involuntary or good reason termination after a CIC | 2,340,000 | 388,300 | 40,958 | 2,557,196 | ||||||||||
• | Death or Disability | 0 | 0 | 0 | 1,703,763 | ||||||||||
Lloyd M. Yates | |||||||||||||||
• | Voluntary termination without good reason | 0 | 0 | 0 | 0 | ||||||||||
• | Involuntary or good reason termination after a CIC | 3,051,000 | 0 | 70,692 | 2,333,340 | ||||||||||
• | Death or Disability | 0 | 0 | 0 | 1,449,914 | ||||||||||
(1)
The amounts listed under "Cash Severance Payment" are payable under (a) the terms of the named executive officer'sMs. Good's employment agreement; (b) Messrs. Young, Manly and Jamil's Change in Control Agreement.
(2)
The amounts listed under "Incremental Retirement Plan Benefit" representsare payable under the terms of Ms. Good's employment agreement and Messrs. Young, Manly and Jamil's Change in Control Agreement. They represent the additional amount that would behave been contributed to the Duke Energy Retirement Cash Balance Plan, Cinergy Corp. Non-Union Employee's Pension Plan, Duke Energy Executive Cash Balance Plan, Duke Energy Retirement Savings Plan and the Duke Energy Executive Savings Plan in the event the named executive officer had continued to be employed by Duke Energy for (a) 2.99 years for Ms. Good or (b) two additional years.
(3)
The amounts listed under "Welfare and Other Benefits" include the amount that would be paid to each named executive officer in lieu of providing continued welfare benefits and basic life coverage. This continued coverage represents (a) 2.99 years for Ms. Good, (b) 24 months.
(4)
The amounts listed under "Stock Awards" do not include amounts attributable to the performance shares that vested on December 31, 2010;2013; such amounts are included in the Option Exercises and Stock Vested Table on page 69.
Retirement of December 31, 2010,Mr. Rogers
Effective July 1, 2013, Mr. James E. Rogers retired as President and without regard to any acceleration of vesting that would otherwise occur upon a triggering event, Messrs. Rogers, Turner, Manly and Trent and Ms. Good held vested stock options with respect to the following numberChief Executive Officer of Duke Energy, shares: 2,506,559; 156,780; 38,476; 12,700 and 62,275, respectively, and with respect to the following number of Spectra Energy shares: 1,199,512; 78,389; 20,116; 6,350 and 21,528, respectively.
For transition purposes, Duke Energy has agreed to provide Mr. Turner's terminationRogers with office space and administrative support for a period of employment prior to the end of the term of such awards.
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As a result, Mr. Turner will receive the amounts listed in the "voluntary termination" row, subject to compliance with applicable restrictive covenants,Assumptions and no other incremental amounts will be payable to Mr. Turner solely as a result of his retirement. Other Considerations
The amounts listed above include continued vesting of Mr. Turner's phantom shares and the applicable dividend equivalents, and payments with respect to performance shares that were calculated assuming target performance.
The amounts listed in the preceding table have been determined based on a variety of assumptions, including reasonable increaseswith respect to the limits on qualified retirement plan benefits under the Internal Revenue Code, and theCode. The actual amounts to be paid out can only be determined at the time of each named executive officer's termination of employment. The amounts described in the table do not include compensation to which each named executive officer would be entitled without regard to his or her termination of employment, including (i)including: (a) base salary and short-term incentives that have been earned but not yet paid; (b) amounts that have been earned, but not yet paid, under the terms of the plans listed under the Pension Benefits and Nonqualified Deferred Compensation tables on pages 7056 and 74, (ii)60; (c) unused vacation (including as indicated in the Summary Compensation table on page 52); and (iii)(d) the potential reimbursement of legal fees.
The amounts shown above do not reflect the fact that, under Ms. Good's employment agreement and under the Change in Control Agreements that Duke Energy has entered into with Messrs. Young, Manly and Trent and Ms. Good,Jamil, in the event that payments to any such executive in connection with a change in control otherwise would result in a golden parachute excise tax and lost tax deduction under Sections 280G and 4999 of the Internal Revenue Code, such amounts would be reduced to the extent necessary so that such tax would not apply under certain circumstances. Based on the level of severance payments that would be provided to Mr. Yates if he terminated employment on December 31, 2013 and was entitled to compensation under the MCICP, it is estimated that no golden parachute excise tax gross-up would be payable to Mr. Yates.
The amounts shown above with respect to stock awards and option awards were calculated based on a variety of assumptions, including the following: (i) the named executive officer terminated employment on December 31, 2010;2013; (ii) a stock price for Duke Energy common stock equal to $17.81 and $24.99 for Spectra Energy common stock,$69.01, which werewas the closing pricesprice on December 31, 2010 (the last trading day of 2010);2013; (iii) the continuation of Duke Energy's and Spectra Energy's dividend at the rate in effect forduring the first quarter 2011 payments;of 2014; and (iv) performance at the target level with respect to performance shares. Additionally, the amounts listed above with respect to Mr.Messrs. Young, Manly and Jamil reflect the fact that, upon termination for any reason, except death or disability, hethey would receive the full value of all unvested phantom sharesrestricted stock units granted prior to 2013 and the dividends that would be paid on such shares for the remainder of the original vesting period, subject to compliance with restrictive covenants contained in such awards, because he hasthey have attained the applicable retirement age.
Potential Payments Due Upon a Change in Control
Other than as described below, the occurrence of a change in control of Duke Energy would not trigger the payment of benefits to the named executive officers absent a termination of employment. If a change in control of Duke Energy occurred on December 31, 20102013, with respect to each named executive officers, the outstanding performance sharesshare awards granted by Duke Energy, including dividend equivalents, would be paid on a prorated basis assuming target performance. As of December 31, 2010,2013, the prorated performance shares that would be paid as a result of these accelerated vesting provisions, including dividend equivalents, would have had a value of $5,127,662; $2,077,006, $1,730,967$1,512,431, $255,113, $947,994, $889,695 and $1,849,437$271,929 for Messrs. Rogers, Manly and Trent and Ms. Good and Messrs. Young, Manly, Jamil and Yates, respectively.
DUKE ENERGY – 2014 Proxy Statement 67
PROPOSAL 4: AMENDMENT TO DUKE ENERGY CORPORATION'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE SHAREHOLDER ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENTOTHER INFORMATION
At the 2013 Annual Shareholder Meeting, Duke Energy's shareholders voted on a shareholder proposal requesting that our Board of Directors take the steps necessary to permit shareholder action by less than unanimous written consent. Duke Energy's current Amended and Restated Certificate of Incorporation allows shareholder action to be taken at a meeting or by unanimous written consent only. The shareholder written consent proposal was approved by approximately 67% of the votes cast. During the course of the Company's periodic outreach with its investors in 2013, the Company discussed the proposal with shareholders holding almost a quarter of Duke Energy's total shares who expressed concern that the proposal as written did not have certain procedural safeguards necessary to protect the best interests of Duke Energy and its shareholders from potential abuses; particularly the ability for an action to be approved without the knowledge and input of all of Duke Energy's shareholders.
Taking into consideration the vote of the shareholders at the 2013 Annual Shareholder Meeting, as well as our discussions with many of our shareholders, the Board of Directors is recommending the amendment to our Amended and Restated Certificate of Incorporation attached as Appendix C (the "Amendment"). This Amendment would permit action by less than unanimous written consent and subject to certain procedural requirements that would insure that any action taken by written consent followed a standard process and occurred with proper notice and information to all Duke Energy shareholders.
Procedural Safeguards:
If this proposal to approve the Amendment is adopted by the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote on the proposal, Article SIXTH(b) of our Amended and Restated Certificate of Incorporation will be amended as set forth in Appendix C upon the filing of the Amended and Restated Certificate of Incorporation with the Secretary of the State of the State of Delaware.
For the Above Reasons, the Board of Directors Recommends a Vote "FOR" Approval of the Amendment to our Amended and Restated Certificate of Incorporation.
68 DUKE ENERGY – 2014 Proxy Statement
SHAREHOLDER PROPOSALS
Proposals 5 and 6 are proposals we received from our shareholders. If the proponents of these proposals, or representatives who are qualified under state law, are present at our annual shareholder meeting and submit the proposals for a vote, then the proposals will be voted upon. The shareholder proposals, including any supporting statements, are included exactly as submitted to us by the proponents of these proposals. The Board of Directors recommends voting "against" each proposal. We will promptly provide you with the name, address and, to our knowledge, the number of voting securities held by the proponents of the shareholder proposals, upon receiving a written or oral request.
PROPOSAL 5: SHAREHOLDER PROPOSAL REGARDING SHAREHOLDER RIGHT TO CALL A SPECIAL SHAREHOLDER MEETING
Supporting Statement:
5 – Special Shareowner Meetings
Resolved, Shareowners ask our board to take the steps necessary unilaterally (to the fullest extent permitted by law) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 15% of our outstanding common the power to call a special shareowner meeting.
This includes that such bylaw and/or charter text will not have any exclusionary or prohibitive language in regard to calling a special meeting that apply only to shareowners but not to management and/or the board (to the fullest extent permitted by law). This proposal does not impact our board's current power to call a special meeting.
Special meetings allow shareowners to vote on important matters, such as electing new directors that can arise between annual meetings. Shareowner input on the timing of shareowner meetings is especially important when events unfold quickly and issues may become moot by the next annual meeting. This proposal topic won more than 70% support at Edwards Lifesciences and SunEdison in 2013.
This proposal should also be more favorably evaluated due to our Company's clearly improvable environmental, social and corporate governance performance as reported in 2013:
GMI Ratings, an independent investment research firm, rated our company D for its board. Three directors received significant no-votes: Daniel DiMicco, an inside-related director (13%), Ann Maynard Gray, Lead Director (14%) and James Hance, who was on the board of 3 other companies (22%). Three directors had long-tenure which detracts from independence: Ann Maynard Gray (19-years), Alex Bernhardt (22-years) and Michael Browning (23-years).
GMI said the Environmental, Social and Governance profile of Duke Energy Corporation reflected serious risk overall, highlighted by significant concerns related to Pay and Environmental and Social impacts. Duke's environmental impact disclosure practices were significantly worse than its sector peers. Duke Energy Corp was rated as having Very Aggressive Accounting & Governance Risk—indicating higher accounting and governance risk than 99% of companies.
GMI rated Duke F for accounting. There were forensic accounting ratios related to expense recognition that had extreme values either relative to industry peers or to the company's own history. Duke had a history of significant restatements, special charges or write-offs. There was $10 million for James Rogers and shareholders voted 22% against executive pay.
Returning to the core topic of this proposal from the context of our clearly improvable corporate governance, please vote to protect shareholder value:
Special Shareowner Meetings—Proposal 5
DUKE ENERGY – 2014 Proxy Statement 69
PROPOSAL 5: SHAREHOLDER PROPOSAL REGARDING SHAREHOLDER RIGHT TO CALL A SPECIAL SHAREHOLDER MEETING
Opposing Statement of the Board of Directors:
Your Board recommends a vote "AGAINST" this proposal for the following reasons:
The Board believes that adoption of this proposal would not be in the best interests of Duke Energy or its shareholders. Consistent with Delaware law, our Amended and Restated Certificate of Incorporation provides that a special meeting of shareholders may be called by the Board. This allows our Board, according to its fiduciary obligations, to exercise its business judgment to determine when it is in the best interests of shareholders to take the extraordinary step of convening a special meeting.
The Board does not believe it is appropriate to enable holders of only fifteen percent (a small minority of shareholders) of our common stock, regardless of how long they have held their shares, to have an unlimited ability to call special meetings for any purpose and at any time, including actions that are duplicative of other recent proposals on which the shareholders have voted or will vote. Enabling the holders of only fifteen percent of the Company's outstanding stock to call special meetings could subject the Company and the Board to disruption by shareholder activists or special interest groups with a self-serving agenda not in the long-term best interests of the Company and all of its shareholders. Additionally, special meetings could impose substantial administrative and financial burdens on the Company and could significantly disrupt the conduct of the Company's business.
We take shareholders' meetings very seriously and take steps to provide shareholders with access to our shareholders' meetings, including making our shareholders' meetings available via webcast. For a company with as many shareholders as Duke Energy, a special meeting of stockholders is a very expensive and time-consuming affair involving substantial planning, resources, and significant costs. Additionally, preparing for a shareholder meeting requires significant time and attention of the Board of Directors, members of senior management and other employees, diverting their attention away from performing their primary function, which is to operate the business of the Company in the best interests of our shareholders. Calling special meetings of shareholders is not a matter to be taken lightly, and special meetings should be extraordinary events that only occur when either fiduciary obligations or strategic concerns require that the matters to be addressed cannot wait until the next annual meeting or through an alternative means.
The Board also believes that the merits of this proposal should be viewed in light of our Company's high standards of corporate governance, as discussed in this proxy statement. Our Company is committed to good governance practices and has demonstrated accountability and responsiveness to the views and concerns of shareholders. These governance practices include, among other things, the annual election of all Board members and a majority vote standard for the election of our directors. A majority vote standard for election of directors was submitted to our shareholders at the 2013 Annual Meeting of Shareholders, and although it did not receive majority support, our Board recognized this was an important issue and meaningful governance policy to a great number of shareholders and, therefore, our Board decided to adopt the proposal. In addition to our strong corporate governance framework, including these governance policies, our Board is recommending today that shareholders approve amending the Company's Certificate of Incorporation to allow for shareholders to act by written consent, rather than wait until the next annual meeting, if circumstances necessitate more urgent action. This right to act by written consent will give shareholders the necessary means by which shareholders can take action outside of annual or special meetings called by the Board; therefore, this proposal to enable small, short-term shareholders to call special meetings is unnecessary. Management discussed this issue with a number of our shareholders and heard from a number of those shareholders that action by written consent and the ability to call special meetings were meant to achieve the same governance principle and implementing both initiatives would be redundant and unnecessary.
Finally, we should note that Delaware law already requires that special meetings be called so that shareholders have the ability to vote on significant corporate issues such as mergers, acquisitions, or the disposition of substantially all of the Company's assets. This requirement, combined with our Company's existing governance policies and practices that provide shareholders with access to the Board and members of senior management and offer ample opportunity for shareholders to express their views to management, and the ability for shareholders to take action by written consent, provides shareholders the means to be heard outside of the annual meeting context without providing additional expensive and time-consuming mechanisms that are prone for abuse such as proposed by this proposal.
For the Above Reasons, the Board of Directors Recommends a Vote "AGAINST" This Proposal.
70 DUKE ENERGY – 2014 Proxy Statement
PROPOSAL 6: SHAREHOLDER PROPOSAL REGARDING POLITICAL CONTRIBUTION DISCLOSURE
Resolved, that the shareholders ofDuke Energy ("Company") hereby request that the Company provide a report, updated semiannually, disclosing the Company's:
The report shall be presented to the board of directors or relevant board committee and posted on the Company's website.
Payments used for lobbying are not encompassed by this proposal.
Supporting Statement:
As long-term shareholders of Duke Energy, we support transparency and accountability in corporate spending on political activities. These include any activities considered intervention in any political campaign under the Internal Revenue Code, both direct and indirect.
Disclosure is in the best interest of the Company and its shareholders. The Supreme Court said in itsCitizens United decision: "[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages." Gaps in transparency and accountability may expose the Company to reputational and business risks that could threaten long-term shareholder value.
We note that our Company makes some information about its political activities available on its website. But the Company does not provide comprehensive and voluntary disclosure of its direct and indirect political expenditures. Indeed, the2013 CPA-Zicklin Index of Corporate Political Disclosure and Accountability rated Duke Energy near the bottom among the top 200 companies in the S&P 500, giving it just 19 points out of 100.
Relying on publicly available data does not provide a complete picture of the Company's political spending. The Company's payments to trade associations used for political activities are undisclosed and unknown. The proposal asks the Company to disclose all of its political spending, including payments to trade associations and other tax exempt organizations used for political purposes. This would bring our Company in line with a growing number of leading companies, includingNoble Energy, Exelon andConocoPhillips, that support political disclosure and accountability and present this information on their websites.
The Company's Board and shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.
Opposing Statement of the Board of Directors:
Your Board recommends a vote "AGAINST" this proposal for the following reasons:
Duke Energy is committed to adhering to the highest standards of ethics in engaging in any political activities and complying with the letter and spirit of all laws and regulations governing political contributions. As a utility, Duke Energy is highly regulated. As such, the Board of Directors believes that it is in Duke Energy's best interests to participate in the political process by engaging in a government relations program to educate and inform public officials about our position on issues significant to our business, as well as to participate in these discussions regarding potential laws and regulations through memberships in trade organizations.
Most Company-related political contributions, including all contributions to federal candidates, originate from funds that are voluntarily contributed by employees either directly to the campaign, or to Duke Energy's political action committee (DUKEPAC), and not from corporate funds. Duke Energy's Political Activity Policy governs the procedure by which contributions are made by Duke Energy at the federal level and is disclosed on the Corporate Governance page of our website athttp://www.duke-energy.com/corporate-governance/politicalactivity.asp. The activities of DUKEPAC are subject to
DUKE ENERGY – 2014 Proxy Statement 71
PROPOSAL 6: SHAREHOLDER PROPOSAL REGARDING POLITICAL CONTRIBUTION DISCLOSURE
regulation by the federal government, including detailed disclosure requirements. For example, as required by federal law, DUKEPAC files monthly reports with the Federal Election Commission (FEC) reporting all political contributions made to federal candidates, and also files pre-election and post-election FEC reports. In addition to these disclosures, all DUKEPAC contributions are disclosed through a link on the Political Participation page of our website athttp://www.duke-energy.com/corporate-governance/political-participation.asp. Additionally, all political contributions at the federal level over $200.00 are required to be disclosed and the identity of the donor and the recipient are available to any member of the public from the FEC. Links to these disclosures are also provided on Duke Energy's webpage below the Political Activity Policy.
Political contributions by DUKEPAC and from corporate funds are also subject to regulation at the state government level. Disclosure of our policies and procedures regarding our lobbying activities and business associations and the benefits to our shareholders surrounding such activities are already readily available to the public and our shareholders through the links on our website described above. Similarly, our major business associations and coalitions are provided on our website athttp://www.duke-energy.com/environment/affiliations-partnerships.asp. Accordingly, the Board of Directors believes that additional reports requested in the proposal would result in an unnecessary and unproductive use of the Company's resources. As a result of the disclosures mandated by federal and state laws as well as the voluntary disclosures provided by the Company, the Board has concluded that ample disclosure exists regarding Duke Energy's political contributions to alleviate the concerns cited in this proposal.
Because the Company is committed to complying with all applicable current and future political contribution and campaign finance laws and already publicly discloses its political contributions as required by law, your Board believes that the special report requested in this proposal is duplicative and unnecessary.
For the Above Reasons, the Board of Directors Recommends a Vote "AGAINST" This Proposal.
72 DUKE ENERGY – 2014 Proxy Statement
OTHER INFORMATION
Discretionary Voting Authority
As of the date this proxy statement went to press, Duke Energy did not anticipate that any matter other than the proposals set out in this proxy statement would be raised at the annual shareholder meeting. If any other matters are properly presented at the annual shareholder meeting, the persons named as proxies will have discretion to vote on those matters according to their best judgment.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Duke Energy's directors and executive officers, and any persons owning more than ten percent10% of Duke Energy's common stock,equity securities, to file with the SEC initial reports of beneficial ownership and certain changes in that beneficial ownership, with respect to thesuch equity securities of Duke Energy. We prepare and file these reports on behalf of our directors and executive officers. During 2010, a Form 4 reporting a transaction by Dr. Rhodes as well as a Form 4 for one of our executive officers, Dhiaa Jamil, were filed after their due dates. To our knowledge, all other Section 16(a) reporting requirements applicable to our directors and executive officers were satisfied and complied within a timely manner during 2010.2013.
Related Person Transactions
Related Person Transaction Policy. The Corporate Governance Committee adopted a Related Person Transaction Policy that sets forth our procedures for the identification, review, consideration and approval or ratification of "related person transactions." For purposes of our policy only, a "related person transaction" is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any "related person" are, were or will be participants and in which the amount involved exceedexceeds $120,000. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A "related person" is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, if a transaction has been identified as a related person transaction (including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation), our management must present information regarding the related person transaction to our Corporate Governance Committee (or, if Corporate Governance Committee approval would be inappropriate, to the Board of Directors) for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will, on an annual basis, collect information from each director, executive officer and (to the extent feasible) significant stockholdershareholders to enable us to identify any existing or potential related-personrelated person transactions and to effectuate the terms of the policy. In addition, under our Codecodes of Business
Conductbusiness conduct and Ethics,ethics, our employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our Corporate Governance Committee (or Board of Directors) will take into account the relevant available facts and circumstances including but not limited to:
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our Corporate Governance Committee (or Board of Directors) must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our shareholders, as our Corporate Governance Committee (or Board of Directors) determines in the good faith exercise of its discretion. Alljudgment. There were no related person transactions with any of the transactions described below were approvedour executive officers or directors in accordance with the policy.2013.
DUKE ENERGY Nucor Corporation.– 2014 Proxy Statement Duke Energy Indiana, a wholly-owned subsidiary of Duke Energy, and Nucor entered into an agreement pursuant73
In addition, from time to time, Duke Energy and/or its subsidiaries and contractors may purchase steel from Nucor.OTHER INFORMATION
Mr. DiMicco, a member of the Board of Directors, is also Chairman, President and Chief Executive Officer of Nucor and therefore may be deemed to have an interest in the transactions described above.
Proposals and Business by Shareholders
If you wish to submit a proposal for inclusion in the proxy statement for our 20122015 annual shareholder meeting, of shareholders, we must receive it by November 19, 2011.21, 2014.
In addition, if you wish to introduce business at our 20122015 annual meeting (besides that in the Notice of the meeting), you must send us written notice of the matter. Your notice must comply with the requirements of our bylaws,by-laws, and we must receive it no earlier than January 5, 2012,1, 2015, and no later than February 4, 2012.January 31, 2015. The individuals named as proxy holders for our 20122015 annual shareholder meeting will have discretionary authority to vote proxies on matters of which we are not properly notified and also may have discretionary voting authority under other circumstances.
Your proposal or notice should be mailed to Duke Energy's Corporate Secretary at P.O. Box 1006,1321, Charlotte, North Carolina 28201-1006.28201-1321.
Electronic Delivery of the 20112014 Annual Report and Proxy Materials
If you received a paper version of this year's proxy materials, please consider signing up for electronic delivery of next year's materials. Electronic delivery significantly reduces Duke Energy's printing and postage costs associated with paper publications and also reduces our consumption of natural resources. You will be notified immediately by e-mail when next year's annual report and proxy materials are available. E-delivery makes it more convenient for shareholders to cast their votes on issues that affect Duke Energy.
In order to enroll for electronic delivery, go tohttp://www.icsdelivery.com/duk and follow the instructions. You will need to enter a valid email address along with your social security number.
If you elect to receive your Duke Energy materials via the internet,Internet, you can still request paper copies by contacting Investor Relations at (800) 488-3853 or athttp://www.duke-energy.com/contactIR.
Householding Information
Duke Energy has adopted a procedure called "householding," which has been approved by the SEC, for shareholders of record on February 1, 2003.SEC. Under this procedure, a single copy of the annual report and proxy statement is sent to any household at which two or more shareholders reside, unless one of the shareholders at that address notifies us that they wish to receive individual copies. This procedure reduces our printing costs and fees. Each shareholder will continue to receive separate proxy cards, and householding will not affect dividend check mailings or InvestorDirect Choice Plan statement mailings in any way.
This year, we are seeking consent to householding from shareholders who became shareholders of record after February 1, 2003, and from shareholders whoIf you have previously revoked their consent but wish to participate in householding. If you provide consent this year or, if you have already consented, to householding, householding will continue until you are notified otherwise or until you notify Investor Relations by telephone at (800) 488-3853, atwww.duke-energy.com/contactIR, or by mail at P.O. Box 1005, Charlotte, NC 28201-1005, that you wish to continue to receive separate annual reports and proxy statements. You will be removed from the householding program within 30 days of receipt of your notice. If you received a householded mailing this year and you would like to have additional copies of our annual report and proxy statement mailed to you, please submit your request to Investor Relations at the number or address above. We will promptly send additional copies of the annual report and proxy statement upon receipt of such request.
A number of brokerage firms have instituted householding. If you hold your shares in "street name," please contact your bank, broker or other holder of record to request information about householding.
74 DUKE ENERGY – 2014 Proxy Statement
AppendixAPPENDIX A
CDB Energy Services Executive Compensation Database
AEI Services Allete Alliant Energy Ameren American Electric Power ATC Management Atmos Energy Avista Babcock & Wilcox Babcock Power BG US Services Black Hills Capital Power CenterPoint Energy Cheniere Energy CMS Energy Colorado Springs Utilities Consolidated Edison Dominion Resources Dynegy | Edison International El Paso Corporation El Paso Electric Enbridge Energy Energen Energy Future Holdings | Energy Northwest Entergy Exelon FirstEnergy Idaho Power Integrys Energy Group LG&E and KU Energy Lower Colorado River Authority MDU Resources | MGE Energy New York Power Authority Northeast Utilities NorthWestern Energy NRG Energy NSTAR NV Energy NW Natural OGE Energy Oglethorpe Power Ohio Valley Electric Omaha Public Power Pacific Gas & Electric Pepco Holdings | Pinnacle West Capital PNM Resources Portland General Electric PPL | Primary Energy Recycling Proliance Holdings Public Service Enterprise Group Puget Salt River Project SCANA Sempra Energy South Jersey Gas Southern Company Services Southern Union Company Spectra Energy STP Nuclear Operating Targa Resources TECO Energy Tennessee Valley Authority TransCanada UGI UIL Holdings UniSource Energy Unitil URENCO USA Vectren Westar Energy Williams Companies Wisconsin Energy Wolf Creek Nuclear Xcel Energy | |||||
DUKE ENERGY – 2014 Proxy Statement 75
AppendixAPPENDIX B
CDB General Industry Executive Compensation Database
ACH Food Agrium Air Liquide Air Products and Chemicals Amgen APL ARAMARK Arrow Electronics Atos IT Solutions and Services Automatic Data Processing Baxter International Boehringer Ingelheim CEVA Logistics Colgate-Palmolive ConAgra Foods CSX Cummins Daiichi Sankyo Dean Foods | Eaton EMC Freeport-McMoRan Copper & Gold GAP | Gavilon General Mills Illinois Tool Works Ingersoll Rand Jabil Circuit Jacobs Engineering KBR Kellogg Kyocera L-3 Communications | Land O'Lakes Lend Lease Limited Marriott International Medtronic MillerCoors Monsanto Mosaic Motorola Mobility Navistar International Neoris USA Newmont Mining Norfolk Southern Novo Nordisk Pharmaceuticals Office Depot | Parker Hannifin Performance Food Group Potash PPG Industries Praxair R.R. Donnelley Research in Motion Rolls-Royce North America S.C. Johnson & Son SAIC SCA Americas | Seagate Technology Sodexo Starbucks Textron Thermo Fisher Scientific Tomson Reuters Time Warner Cable Union Pacific Viacom Waste Management Whirlpool Xerox Yum! Brands | |||||
76 DUKE ENERGY – 2014 Proxy Statement
APPENDIX C
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DUKE ENERGY CORPORATION
DUKE ENERGY CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the corporation isDuke Energy Corporation. The name under which the corporation was originally incorporated was Deer Holding Corp. The name of the corporation was changed to Duke Energy Holding Corp. on June 21, 2005. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on May 3, 2005.
2. This Amended and Restated Certificate of Incorporation, having been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware (the "DGCL") and by theapproval of the stockholders of the Corporation in accordance with Section 211 of the DGCL, restates and integrates and further amends the provisions of theAmended and Restated Certificate of Incorporation as amended or supplemented heretofore. As so restated and integrated and further amended, the Amended and Restated Certificate of Incorporation (hereinafter, this "Certificate of Incorporation") reads as follows:
The name of the corporation is Duke Energy Corporation.
ARTICLE SECOND
Registered Office
The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the DGCL.
(a) The aggregate number of shares of stock that the Corporation shall have authority to issue is two billion forty-four million (2,044,000,000) shares, consisting of two billion (2,000,000,000) shares of Common Stock, par value $0.001 per share (the "Common Stock"), and forty-four million (44,000,000) shares of Preferred Stock, par value $0.001 per share (the "Preferred Stock").
(b) The Board of Directors of the Corporation shall have the full authority permitted by law, at any time and from time to time, to divide the authorized and unissued shares of Preferred Stock into one or more classes or series and, with respect to each such class or series, to determine by resolution or resolutions the number of shares constituting such class or series and the designation of such class or series, the voting powers, if any, of the shares of such class or series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of any such class or series of Preferred Stock to the full extent now or hereafter permitted by the law of the State of Delaware. The powers, preferences and relative, participating, optional and other special rights of each class or series of Preferred Stock and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other classes or series at any time outstanding.
(c) Subject to applicable law and the rights, if any, of the holders of any class or series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the payment of dividends, dividends may be declared and paid on the Common Stock at such times and in such amounts as the Board of Directors of the Corporation in its discretion shall determine. Nothing in this ARTICLE FOURTH shall limit the power of the Board of Directors to create a class or series of Preferred Stock with dividends the rate of which is calculated by reference to, and the payment of which is concurrent with, dividends on shares of Common Stock.
(d) In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, subject to the rights of the holders of any class or series of the Preferred Stock, the net assets of the Corporation available for distribution to stockholders of the Corporation shall be distributedpro rata to the holders of the Common Stock in accordance with their respective rights and interests. If the assets of the Corporation are not sufficient to pay the amounts, if any, owing to holders of shares of Preferred Stock in full, holders of all shares of Preferred Stock will participate in the distribution of assets ratably in proportion to the full amounts to which they are entitled or in such order or priority, if any, as will have been fixed in the resolution or resolutions providing for the issue
DUKE ENERGY – 2014 Proxy Statement 77
APPENDIX C
of the class or series of Preferred Stock. Neither the merger or consolidation of the Corporation into or with any other corporation, nor a sale, transfer or lease of all or part of its assets, will be deemed a liquidation, dissolution or winding up of the Corporation within the meaning of this paragraph, except to the extent specifically provided in any certificate of designation for any class or series of Preferred Stock. Nothing in this ARTICLE FOURTH shall limit the power of the Board of Directors to create a class or series of Preferred Stock for which the amount to be distributed upon any liquidation, dissolution or winding up of the Corporation is calculated by reference to, and the payment of which is concurrent with, the amount to be distributed to the holders of shares of Common Stock.
(e) Except as otherwise required by law, as otherwise provided herein or as otherwise determined by the Board of Directors as to the shares of any class or series of Preferred Stock, the holders of Preferred Stock shall have no voting rights and shall not be entitled to any notice of meetings of stockholders.
(f) Except as otherwise required by law and subject to the rights of the holders of any class or series of Preferred Stock, with respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of any outstanding shares of Common Stock shall vote together as a class, and every holder of Common Stock shall be entitled to cast thereon one vote in person or by proxy for each share of Common Stock standing in such holder's name on the books of the Corporation;provided, however, that, except as otherwise required by law, or unless provided in any certificate of designation for any class or series of Preferred Stock, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designations relating to any class or series of Preferred Stock) that relates solely to the terms of one or more outstanding classes or series of Preferred Stock if the holders of such affected class or series are entitled, either separately or together with the holders of one or more other such classes or series, to vote thereon pursuant to this Certificate of Incorporation (including any certificate of designations relating to any class or series of Preferred Stock) or pursuant to applicable law. Subject to the rights of the holders of any class or series of Preferred Stock, stockholders of the Corporation shall not have any preemptive rights to subscribe for additional issues of stock of the Corporation and no stockholder will be permitted to cumulate votes at any election of directors.
ARTICLE FIFTH
Board of Directors
(a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
(b) Except as otherwise fixed by or pursuant to provisions of ARTICLE FOURTH relating to the rights of the holders of any series of Preferred Stock, the number of directors of the Corporation shall not be less than nine (9) nor more than eighteen (18), as may be fixed from time to time by the Board of Directors.
(c) A director may be removed from office with or without cause;provided, however, that, subject to applicable law, any director elected by the holders of any series of Preferred Stock may be removed without cause only by the holders of a majority of the shares of such series of Preferred Stock.
(d) Except as otherwise fixed by or pursuant to provisions of ARTICLE FOURTH relating to the rights of the holders of any series of Preferred Stock, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office until the next succeeding annual meeting of stockholders and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
(e) Except as otherwise fixed by or pursuant to provisions of ARTICLE FOURTH relating to the rights of the holders of any series of Preferred Stock, the directors shall be elected by the holders of voting stock and shall hold office until the next annual meeting of stockholders and until their respective successors shall have been duly elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
(f) Election of directors need not be by written ballot unless the By-Laws so provide.
(g) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.
78 DUKE ENERGY – 2014 Proxy Statement
APPENDIX C
ARTICLE SIXTH
Action by Stockholders; Books of the Corporation
(a) Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the DGCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.
(b)Written Consent. Certain actions required or permitted to be taken by the stockholders of the Corporation at an annual or special meeting of the stockholders may be effected without a meeting by the written consent of the holders of common stock of the Corporation (a "Consent"), but only if such action is taken in accordance with the provisions of this Article Sixth, the Corporation's By-Laws and applicable law.
DUKE ENERGY – 2014 Proxy Statement 79
APPENDIX C
80 DUKE ENERGY – 2014 Proxy Statement
APPENDIX C
ARTICLE SEVENTH
Amendment of Certificate of Incorporation
The Corporation reserves the right to supplement, amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware and this Certificate of Incorporation, and all rights conferred upon stockholders, directors and officers herein are granted subject to this reservation. Notwithstanding the foregoing, this ARTICLE SEVENTH and sections (b) and (d) of ARTICLE FIFTH may not be supplemented, amended, altered, changed, or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such supplement, amendment, alteration, change or repeal is approved by the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of stock of all classes of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
ARTICLE EIGHTH
Amendment of By-Laws
In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors of the Corporation is expressly authorized to adopt, repeal, alter or amend the By-Laws of the Corporation. No By-Laws may be adopted, repealed, altered or amended in any manner that would be inconsistent with this Amended and Restated Certificate of Incorporation (as it may be adopted, repealed, altered or amended from time to time in accordance with ARTICLE SEVENTH).
ARTICLE NINTH
Limitation of Liability
Except to the extent elimination or limitation of liability is not permitted by applicable law, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty in such capacity. Any repeal or modification of this ARTICLE NINTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
ARTICLE TENTH
Liability of Stockholders
The holders of the capital stock of the Corporation shall not be personally liable for the payment of the Corporation's debts, and the private property of the holders of the capital stock of the Corporation shall not be subject to the payment of debts of the Corporation to any extent whatsoever.
This Amended and Restated Certificate of Incorporation is to become effective at a.m. on May , 2014.
IN WITNESS WHEREOF, THE UNDERSIGNED, being the Assistant Corporate Secretary, has executed this Amended and Restated Certificate of Incorporation as of the day of May, 2014, and DOES HEREBY CERTIFY under the penalties of perjury that the facts stated in this Amended and Restated Certificate of Incorporation are true.
By: | ||||
Name: | ||||
Title: | Assistant Corporate Secretary |
DUKE ENERGY – 2014 Proxy Statement 81
2011 Annual Meeting of Shareholders
2014 Annual Shareholder Meeting |
May 5, 2011 at 1, 2014,
10:00 a.m. local time
Duke Energy CorporationEnergy Center — O.J. Miller Auditorium
526 South Church Street
Charlotte, NC 28202
Directions to Annual Shareholder Meeting of Shareholders
From I-77 North:Take the Morehead Street exit - 10ATurn Left onto Morehead StreetTurn Left onto Mint StreetMint Street Parking Deck located adjacent to Bank of America Stadium
From I-77 South:Take the I-277/John Belk Freeway/US-74/Wilkinson Blvd. exit - 9BMerge onto I-277 N/US-74 E.Take the Carson Blvd. exit -
From I-77 North: Take the Morehead Street exit – 10A From I-77 South: Take the I-277/John Belk Freeway/US-74/Wilkinson Blvd. exit – 9B Free parking available in the Mint Street Parking Deck
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: DUKE ENERGY CORPORATION |
M67171-P47887-Z62458 Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The Notice, Proxy Statement and Annual Report are available at www.proxyvote.com. Directions to Annual Meeting of Shareholders Duke Energy |