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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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		Donald E. Brandt Chairman of the Board, President &and Chief Executive Officer

Dear Fellow Shareholder:To Our Shareholders:

On behalf of our Board of Directors, management and employees, I invite you to attendparticipate in our 20152018 Annual Meeting of Shareholders.

The meeting will be held at10:30 a.m. (MST),Wednesday, May 20, 2015,16, 2018. Details regarding how to attend the meeting and the business to be conducted are in the accompanying Notice of Annual Meeting and Proxy Statement.

Pinnacle West achieved another year of outstanding performance as we continued to focus on delivering on our commitments to the customers who depend on us, the communities we serve, our dedicated team members, and the shareholders who trust us with their investment. Operational performance at our primary subsidiary, Arizona Public Service Company ("APS"), an electric utility that serves approximately 1.2 million customers throughout Arizona and operates the Heard Museum, located at 2301 N. Central Avenuelargest nuclear power plant in Phoenix, Arizona.the United States, was strong in 2017. Included in the Proxy Statement Summary you will see a number of our shareholder value creation and operational accomplishments. It is an impressive list, and one that I and the senior management team are proud to share with you. Here are just a few of those achievements:

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In 2014,addition to delivering exceptional financial performance, we continue to focus on our sustainability efforts, fostering diversity and supporting our communities. Our usage of reclaimed water is a prime example of a sustainable balance and exemplifies our focus on managing coststhe water-energy nexus. Thanks in large part to the Palo Verde Generating Station, reclaimed water accounted for 72% of the water used in our generating facilities in 2017.

Our Executive Diversity Council worked diligently in 2017 to continue improving our workforce diversity. Over 48% of candidates hired in 2017 were ethnically or gender diverse. As a Company we are committed to diversity, respect and creatinginclusion as core to our culture and essential to our success.

In 2017 we remained steadfast in our commitment to our communities. We contributed more than $9.8 million to our Arizona communities, with more than $1.4 million invested in science, technology, engineering and mathematics ("STEM") education. Our men and women pledged more than $2.4 million through our Company-sponsored charitable giving program, through which the Company provides a 50% match. This year our team members donated nearly 110,000 volunteer hours to a diverse and wide-range of organizations, including Habitat For Humanity, Treasures for Teachers, Phoenix Children's Hospital and St. Mary's Food Bank Alliance. These are only a few examples of how our men and women continuously demonstrate a commitment to excellence by living the values core to our culture. In addition, APS continued to partner with the Arizona Diamondbacks Foundation to build youth baseball fields in deserving neighborhoods. In 2017 we built our 35^th field. We are proud to support efforts that unite our communities and help them thrive.

As you know, in 2016 the Board of Directors adopted a Director Retirement Policy to provide for an orderly transition of our Board members. This year the first retirement under that policy will take place. Roy Herberger will retire from the Board effective at the Annual Meeting. Over my years at Pinnacle West, I always valued Roy's counsel, wisdom and guidance. On behalf of all of us, I extend our appreciation and thanks to Roy for his many years of contributions and dedicated service to our Company and to our shareholders.

I am both privileged and proud to lead Pinnacle West. Our men and women are working to shape a better, sustainable energy future for Arizona enabled us to meet or exceed our financial goals, thus marking another successful yearcustomers and our communities, and in that process, they are also building a more valuable company for Pinnacle West and your investment in our Company. Among these accomplishments:

•

total shareholder value increased $2 billion in 2014 alone, and $5 billion over the past five years;



•

for the third straight year, your Board increased the common dividend, raising it by 4.85% after two previous increases of 4.0%; and



•

Pinnacle West's share price increased 29.1% and hit 52-week highs 16 separate times. Our total return to shareholders — a combination of stock price appreciation and dividends paid — was 34.5%.

At this year's Annual Meeting, we will share additional updates with you on the Company's recent performance and operations. As explained in the attached Proxy Statement, we are asking you to: (1) elect ten Board of Director nominees; (2) consider and vote for an advisory resolution to approve executive compensation; (3) ratify the appointment of our independent public accounting firm for 2015; and (4) consider a shareholder proposal, if properly presented at the meeting.

Last, but not least, your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we encourage you to vote promptly. You may vote over the Internet; by telephone; by completing, signing, dating and returning a proxy card or voting instruction form; or by voting in person at the meeting.shareholders.

Thank you for the confidence you place in Pinnacle West through your investment. We look forward to seeing you at this year's Annual Meeting.

Sincerely,

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		Kathryn L. Munro Lead Director

Dear Fellow Shareholders,

On behalf of the Board, I would like to thank you for your investment in Pinnacle West. As we approach our 2018 Annual Meeting, I would like to take this opportunity to provide you with an update on how your Board is approaching and addressing key areas of shareholder interest, particularly with respect to our governance and compensation practices.

Driving Shareholder Value Creation and Promoting a Sustainable Energy Future

As directors of Arizona's largest and longest-serving electric company, we view operational excellence as paramount to long-term value creation for our shareholders, and our long-term strategy reflects this focus. Our management team continues to drive outstanding operational execution while growing our business and leveraging technology to promote a long-term sustainable energy future. These efforts have resulted in strong returns for our shareholders: annualized total shareholder return of 18.8% since May 1, 2009, which was when Don Brandt took over as CEO. This exceeds the annualized returns of the S&P 1500 Electric Utilities Index of 11.8% and the S&P 500 Index of 16.2%. We also continue to be recognized for our safety and sustainability leadership:

•

2017 was another successful year with regard to safety, with APS remaining in the top decile for safety performance in the U.S. electric utilities industry; and

•

We earned a "Leadership" rating from CDP, a not-for-profit entity that reports on environmental performance, for climate change and water management — one of only two U.S. utilities to earn the highest rating in both categories.

Board-Driven Shareholder Engagement

Pinnacle West has an established shareholder engagement program, which was further augmented during 2017 in response to what the Board considered a disappointing level of shareholder support for our annual advisory vote on compensation. Shareholder input is very valuable to the Board's decision-making, and we wanted to ensure we had the opportunity to engage directly with our shareholders on our compensation, governance and broader Board practices. As Lead Director and member of the Human Resources Committee, I participated on behalf of the independent directors in a number of the shareholder discussions during the fall of 2017. These conversations were valuable to our Board, spurred important discussions, and have resulted in changes and disclosure enhancements that you will see detailed in this Proxy Statement.

Shareholder-Informed Compensation Program Changes

As a Board, we are committed to an executive compensation program that establishes strong pay for performance alignment and supports our ability to attract and retain a talented and proven leadership team. We seek to design compensation programs that support our long-term goals, reward achievement of long-term performance and align with the interests and feedback of our shareholders. To this end, our compensation programs have evolved with our business,

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including several changes made in 2016. Following shareholder discussions in 2017, we have made further changes to our program that we believe will create even greater alignment between our executives and the performance of our Company, and changes to our program and disclosures that reflect the feedback we have received from our shareholders. These changes are detailed in the Compensation Discussion and Analysis of this Proxy Statement and include:

•

Increase in the proportion of performance shares in our CEO's and Executive Vice Presidents' 2018 long-term incentive awards from 60% to 70% (reducing the percent of restricted stock units from 40% to 30% as well);

•

Revised 2018 metrics in certain key business units to better align with our priorities and emphasize top-quartile or above performance;

•

Adoption of a formal clawback policy;

•

Enhanced CD&A disclosures;

•

Additional transparency into our metric setting practices;

•

Redesigned annual incentive disclosure; and

•

Additional detail on how we select our peer group.

These structural and disclosure enhancements are directly in response to feedback we received from our shareholders.

Thoughtful and Systematic Management Succession Planning Process

As you would expect for a company with a highly skilled and long-tenured management team, the Board is very engaged in succession planning to ensure we are building a sustainable leadership pipeline. CEO and senior leadership succession planning continues to be a focus for the Board, and we have been executing on a very deliberate succession and development plan. Our current management team, under the leadership of Don Brandt, has delivered very strong performance and the Board and its Committees are actively involved in our succession plans for our top talent to ensure we are providing development opportunities that will allow for smooth leadership transitions in the future.

Robust Board Refreshment and Succession Planning Practices

The Board has established strong practices to support regular Board evaluation and refreshment. In 2016, the Board adopted a Director Retirement Policy to facilitate an orderly transition of Board members and implemented a five-year plan to refresh the Board and its leadership. This five-year plan encompasses the following:

•

Development of a matrix of our Board members' current skills and experiences;

•

Evaluation of the skills and experience leaving our Board over the next five years;

•

Assessment of skills and experience needed to guide the company's future long-term plans;

•

Incoming committee chairs are identified one year in advance of assuming chair leadership to ensure proper transition — with Roy Herberger's retirement, Rick Fox will take over as the Chair of the Human Resources Committee effective at the Annual Meeting.

This process helps guide the Board in its recruitment efforts.

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On behalf of the Board, I want to thank our shareholders for their time and feedback. I am pleased to provide this additional window into the Board's activities in 2017 and express our commitment to running our business for the long-term value creation for our shareholders. We appreciate your support at our 2018 Annual Meeting.

Sincerely,

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April 2, 2015March 29, 2018

The 20152018 Annual Meeting of Shareholders (the "Annual Meeting") of Pinnacle West Capital Corporation ("Pinnacle West", "PNW", or the "Company") will be held at the Heard Museum, 2301 North Central Avenue, Phoenix, Arizona 85004, at 10:30 a.m., Mountain Standard Time, on Wednesday, May 20, 2015.16, 2018. The Annual Meeting may be accessed online at www.virtualshareholdermeeting.com/PNW. The purposes of the Annual Meeting are:

(1)

toTo elect ten directors to serve until the 20162019 Annual Meeting of Shareholders (Proposal 1);

(2)

toTo hold an advisory vote to approve executive compensation (Proposal 2); and

(3)

toTo ratify the appointment of our independent accountants for the year ending December 31, 20152018 (Proposal 3);

(4)

to consider a shareholder proposal, if properly presented at the Annual Meeting (Proposal 4); and

(5)

to transact such other business as may properly come before the Annual Meeting and at any adjournments or postponements thereof..

All shareholders of record at the close of business on March 12, 20159, 2018 are entitled to notice of and to vote at the Annual Meeting. Your vote is important. Whether or not you plan to attendparticipate in the Annual Meeting in person,or not, please promptly vote by telephone, over the Internet, by proxy card, or by voting instruction form.

By order of the Board of Directors,

DIANE WOOD Corporate Secretary
PINNACLE WEST CAPITAL CORPORATION Post Office Box 53999 Phoenix, Arizona 85072-3999

DIANE WOOD
Corporate Secretary

Executive Offices Address:
PINNACLE WEST CAPITAL CORPORATION
Post Office Box 53999
Phoenix, Arizona 85072-3999

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PAGE
LETTER FROM DONALD E. BRANDT
​	​	​
LETTER FROM DON BRANDTKATHRYN L. MUNRO
​	​	​
NOTICE OF THE 20152018 ANNUAL MEETING OF SHAREHOLDERS
​	​	​
PROXY STATEMENT SUMMARY		1
​	​	​
Annual Meeting of Shareholders		1
Voting Matters and Board of Directors ("Board") Recommendations		1
Our Director Nominees		2
2014 Executive Compensation		3
Executive Compensation Program Highlights		4
Performance Highlights		5
Auditors		5
Important Dates for the 2016 Annual Meeting of Shareholders		5
Corporate Governance Highlights		6
PROXY STATEMENT — GENERAL INFORMATION		78
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Place,Time, Date and TimePlace		78
Notice of Internet Availability		78
Record Date; Shareholders Entitled to Vote		79
Voting		79
Quorum.Quorum		810
Vote Required		810
Attendance at the Annual MeetingBoard Recommendations		910
Delivery of Annual Reports and Proxy Statements to a Shared Address;Address and Obtaining a Copy of the Annual Report		911
Shareholder Proposals or Director Nominations for the 20162019 Annual Meeting		1011
Proxy Solicitation		1012
INFORMATION ABOUT OUR BOARD AND CORPORATE GOVERNANCE		1113
​	​	​
Director IndependenceBoard Meetings and Attendance		1113
Board Meetings and Attendance		12
Board Committees		13
The Board's Leadership Structure		1519
Succession Planning and Board Evaluations		20
The Board's Role in Risk Oversight		1521
Director Qualifications;Resignation Policies		22
Director Retirement Policy		22
Shareholder Engagement and Communications with the Board		23
Codes of Ethics and APS Core Strategic Framework		24
Director Qualifications and Selection of Nominees for the Board		16
Director Resignation Due to a Substantial Change in their Primary Business Position		17
Communication with the Board		17
Codes of Ethics and Strategic Framework		1726
PROPOSAL 1 — ELECTION OF DIRECTORS		19
​	​	​
OWNERSHIP OF PINNACLE WEST STOCK		25
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE		26
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RELATED PARTY TRANSACTIONS		27
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REPORT OF THE HUMAN RESOURCES COMMITTEE		28
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Director Independence		38
STOCK MATTERS		40
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Ownership of Pinnacle West Stock		40
Section 16(a) Beneficial Ownership Reporting Compliance		41
RELATED PARTY TRANSACTIONS		42
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HUMAN RESOURCES COMMITTEE REPORT		43
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EXECUTIVE COMPENSATION		2844
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Compensation Discussion and Analysis ("CD&A")		2844
Named Executive Officers		44
Executive Summary		45
Our Philosophy and Objectives		53
Executive Compensation Components		53
Setting Executive Compensation		68
Other Considerations		72
Summary Compensation Table		5275
Grants of Plan-Based Awards		5577
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table		5678
Outstanding Equity Awards at Fiscal Year-End		5980
Option Exercises and Stock Vested		6282
Pension Benefits		6484
Discussion of Pension Benefits		6585
Nonqualified Deferred Compensation		6888
Discussion of Nonqualified Deferred Compensation		6989
Potential Payments upon Termination or Change of Control		7191
Pay Ratio		98
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION		7699
​	​	​
DIRECTORS' COMPENSATION		77100
​	​	​
Discussion of Directors' Compensation		78101
Director Stock Ownership Policy		79102
PROPOSAL 2 — ADVISORY VOTE ON EXECUTIVE COMPENSATION		80103
​	​	​
PROPOSAL 3 — RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY		81104
​	​	​
ACCOUNTING AND AUDITING MATTERS		82105
​	​	​
The Independent Accountants		82105
Benefits of a Long-Tenured Independent Accountant		105
Accountant's Independence Controls		106
Pre-Approval Policies		106
Audit Fees		82
Pre-Approval Policies		82107
REPORT OF THE AUDIT COMMITTEE		83108
​	​	​
PROPOSAL 4 — SHAREHOLDER PROPOSAL REGARDING A REPORT ON LOBBYINGHELPFUL RESOURCES		84109
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Proxy Statement Summary

This summary highlights certain information contained elsewhere in this Proxy Statement. As it is only a summary, please read the complete Proxy Statement and 20142017 Annual Report before you vote. The Proxy Statement and form of proxy are first being made available to shareholders on or about March 29, 2018.

Annual Meeting of ShareholdersTime, Date and Voting Matters

Who We Are

Strategic Framework

​	​	​
TheCore Date:is our strategic framework. It sets forth the basis from which we operate by defining our vision, mission, critical areas of focus, and values. The framework affirms our corporate values of safety, integrity and trust, respect and inclusion, and accountability. This is the foundation from which our long term strategy is built. For example, employees are an element of our Core and one of our greatest assets. The Core helps us focus on keeping them safe, fostering a healthy and balanced environment, supporting their development through training and mentoring and encouraging engagement. This culture not only benefits each individual employee, it also positions our Company for long-term sustainable success.		May 20, 2015

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Time:		10:30 a.m. Mountain Standard Time
Place:		Heard Museum 2301 North Central Avenue Phoenix, Arizona 85004
Record Date:		March 12, 2015
Admission to the Meeting:		Proof of stock ownership will be required to attend the Annual Meeting. See page 9 of this Proxy Statement under the heading "Attendance at the Annual Meeting" for admission requirements.
Delivery of Materials:Summary		Proxy Statement and form of proxy are first being made available to shareholders on or about April 2, 2015.

​

Strategic Priorities

TheCore continues to serve as the foundation for all strategic and business initiatives. In turn, our performance metrics reinforce our highest priorities, including operational excellence, financial strength and leveraging economic growth, in a tangible, measurable way, and allow us to monitor and enhance our progress.

Building on that foundation, the APS Strategic Business Plan is anchored by four themes that align with industry trends shaping our future and the way we do business:

•

Consumer Engagement — Deliver value-added programs and services that derive from consumer insights and strengthen our brand for the future

•

Flexible Resources — Develop new initiatives and businesses that leverage our core capabilities

•

Employees — Adopt sustainable programs to invest in our people today and in the future

•

Innovation — Integrate new technologies to enhance performance, reliability and the overall experience of our customers and employees

Voting Matters2017 Highlights and Board of Directors ("Board") RecommendationsAchievements

Shareholder Value

Our management team has delivered superior performance:

Financial and Operating Highlights

​
ü		PNWincreased its dividend for the 6th consecutive year, by 6%;
ü		Maintainedstrong credit ratings from all three rating agencies;
ü		APS spent$363 million with diverse suppliers;
ü		APS continued successful operation of the Palo Verde Generating Station, a nuclear energy facility that is the largestclean-air generator in the United States; and
ü		Achievedtop quartile distribution reliability metrics for 2017, and had the best summer reliability in 5 years.
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Proxy Statement Summary

Achievements

​
ü		Received theDistributech Renewable Integration Project of the Year award for the Solar Partner Program;
ü		Obtained "Leadership" rating from CDP for climate change and water management – one of only two U.S. utilities that earned the highest rating in both categories;
ü		Recognized as theCorporate Advocate of the Year by the National Center for American Indian Enterprise Development; and
ü		Recognized as aBest Corporation for Veteran's Business Enterprises by the National Veteran-Owned Business Association.
​

Community Engagement

​
ü		Contributed more than$9.8 million to our Arizona communities, with more than $1.4 million invested in STEM education;
ü		Employees pledged more than$2.4 million through our Company-sponsored charitable giving program, through which the Company provides a 50% match;
ü		Built our 35th baseball field in one of our Arizona neighborhoods together with the Arizona Diamondbacks Foundation; and
ü		Employees donated nearly110,000 volunteer hours to community organizations.
​

Sustainability

Our commitment to create a sustainable future for our Company and our customers will continue to light our way to success — not just today but for years to come. We continue to make progress on ourfive critical areas of sustainability:

​
		Carbon Management		• 50% of our diverse energy mix iscarbon-free • Plan toreduce carbon intensity by 23% over the next 15 years • MSCI Environmental Sustainability and GovernanceA rating (as of 10/27/17)
​		Energy Innovation		• More than 1,300 MW of installed solar capacity • Plan to add over500 MW of energy storage in the next 15 years
​		Safety & Security		• 70% reduction in Occupational Safety and Health Administration ("OSHA") recordable injuries over the past 10 years • Remain top decile for safety performance in the U.S. electric utilities industry
​		Water Resources		• 14% reduction in groundwater use since 2014 • 20 billion gallons of water recycled each year to cool Palo Verde Generating Station
​		People		• Averageemployee tenure of 13 years due to strong talent strategy • More than 20% of our employees areveterans • Palo Verde hosted a nuclearWomen in Leadership forum
​

To learn more about our sustainability efforts, please see our Corporate Responsibility Report located on our website (www.pinnaclewest.com).

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Proxy Statement Summary

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Governance Practices

Our Board remains committed to maintaining strong corporate governance practices. Our practices include:

​
ü		Adirector retirement policy at age 75;
ü		Proxy access rights allowing up to 20 shareholders owning 3% of our outstanding stock for at least 3 years to nominate up to 25% of the Board;
ü		Strong ongoing shareholder engagement program that expanded in 2017, including participation of the Lead Director in several shareholder meetings;
ü		Independent Lead Director role with clearly defined and robust responsibilities;
ü		Ten of our eleven current directors are independent and the members of all of the Board Committees are independent;
ü		Annual elections of all directors (see page 5 of this Proxy Statement Summary for a list of the nominees);
ü		Robust board and management succession planning;
ü		No poison pill plan or similar anti-takeover provision in place;
ü		No supermajority provisions in our Articles of Incorporation or Bylaws;
ü		Each of our directorsattended at least 90% of the Board meetings and any Board committee meeting on which he or she served; and
ü		Our directors and officers are prohibited from pledging or hedging our stock.
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Shareholder Engagement

We have an established shareholder engagement program to maintain a dialogue with our shareholders throughout the year, which was further augmented during 2017 in response to what our Board considered a disappointing level of shareholder support for our annual advisory vote on compensation. Each year we strive to respond to shareholder questions in a timely manner, conduct extensive proactive outreach to investors, and evaluate the information we provide to investors in an effort to continuously improve our engagement. In 2017, we contacted the holders of approximately 50% of the shares outstanding and met with the holders of approximately 40% of the shares outstanding. Our Lead Director and member of the Human Resources Committee, Kathryn Munro, participated in a number of the shareholder discussions providing shareholders with direct access to the Board.

What our shareholders think is important to us and we want to ensure we have the opportunity to engage directly with our shareholders. We seek to maintain a transparent and productive dialogue with our shareholders by:

ü

Providing clear and timely information,

ü

Seeking and listening to feedback, and

ü

Being responsive.

A detailed discussion of this outreach and the Board's response can be found on pages 23-24 and 48-49 of this Proxy Statement.

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Proxy Statement Summary

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Director Nominees, Their Skills and Experience

(1)

Directors' ages as of February 21, 2018.

(2)

Dr. Herberger is currently the Chairman of the Human Resources Committee and will be retiring effective at the Annual Meeting. Mr. Fox will take over as the Chair of the Human Resources Committee effective at the Annual Meeting.

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MATTERSBoard Diversity		BOARD RECOMMENDATIONS		PAGEDirectors' Key Skills and Experience Matrix
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Succession Planning

	​
ElectionDirector succession is overseen by the Corporate Governance Committee, which regularly assesses whether the composition of directorsthe Board reflects the knowledge, skills, expertise, and diversity appropriate to serve the needs of the Company. Since 2014 three new members have joined the Board. The Board adopted a Director Retirement Policy in 2016, which is described on page 22 of this Proxy Statement, to better facilitate board refreshment and transition.		üFOR each nominee		19
Advisory vote to approve executive compensation		üFOR		80
Ratification of Deloitte & Touche LLP ("D&T") as our     independent accountants for 2015		üFOR		81
Shareholder proposal, if properly presented at the     Annual Meeting		XAGAINST		84

Given our need for specialized experience, we also maintain strong management succession planning practices and are focused on developing and retaining talent within our Company. Our Board's focus on attracting, developing and retaining highly skilled and experienced executives is a core consideration in structuring our executive compensation programs. ​ 6 |      2018 Proxy Statement ​

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PROXY STATEMENT SUMMARY​

Our Director Nominees

Our director nominees are:

				DIRECTOR SINCE				COMMITTEE MEMBERSHIPS
NAME		AGE				INDEPENDENT		AC		CGC		FC		HRC		NOC
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Donald E. Brandt		60		2009		No — Company President and CEO		​		​		​		​		​
Denis A. Cortese, M.D.		70		2010		Yes		·						·		·
Richard P. Fox		67		2014		Yes		·		​		·		·		​
Michael L. Gallagher		70		1999		Yes				·
Roy A. Herberger, Jr., Ph.D.		72		1992		Yes		​		·		·				​
Dale E. Klein, Ph.D.		67		2010		Yes		·								·
Humberto S. Lopez		69		1995		Yes		·		​				·		​
Kathryn L. Munro*		66		2000		Yes						·		·
Bruce J. Nordstrom		65		2000		Yes				·		​		​		·
David P. Wagener		60		2014		Yes		·				·				·

AC Audit Committee		* Lead Director
CGC Corporate Governance Committee		C Chair=
FC Finance Committee		F Financial Expert=
HRC Human Resources Committee
NOC Nuclear and Operating Committee

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PROXY STATEMENT SUMMARY Summary

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2014 Executive Compensation

Total compensation, as reported in the Summary Compensation Table and calculated in accordance with the rules of the Securities and Exchange Commission (the "SEC"), is set forth below for Messrs. Brandt, Hatfield, Edington, Falck, and Schiavoni (the "Named Executive Officers"). The total compensation number includes a year-over-year change in pension value as determined under the SEC rules. The change in pension value is subject to many variables that are not related to Company or individual performance, such as interest rates. As such, we do not believe this number is helpful in evaluating executive compensation. We also note that the SEC rules require us to include in the stock award column the grant date fair value of equity grants given to our Named Executive Officers in 2014, even though the performance shares will not vest, if at all, until the end of a three-year performance period and then only to the extent the specified performance conditions are met, and the restricted stock units ("RSUs") will vest in installments each year through 2018.

NAME AND PRINCIPAL POSITION		SALARY ($)			BONUS ($)			STOCK AWARDS ($)			NON-EQUITY INCENTIVE PLAN COMPENSATION ($)			CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS ($)			ALL OTHER COMPENSATION ($)			TOTAL ($)
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Donald E. Brandt, Chairman of the Board, President and CEO of the Company and Arizona Public Service Company ("APS")		​	1,240,000		​	0		​	4,199,976		​	1,852,560		​	2,009,011		​	26,729		​	9,328,276
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James R. Hatfield, Executive Vice President and Chief Financial Officer of the Company and APS			570,000			0			750,320			502,603			465,143			24,050			2,312,116
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Randall K. Edington, Executive Vice President and Chief Nuclear Officer, APS		​	960,511		​	0		​	500,031		​	1,050,775		​	2,130,198		​	1,072,586		​	5,714,101
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David P. Falck, Executive Vice President and General Counsel of the Company and APS			522,000			0			750,320			423,697			419,745			278,991			2,394,753
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Mark A. Schiavoni, Executive Vice President and Chief Operating Officer, APS		​	563,958		​	0		​	750,320		​	558,031		​	424,749		​	27,419		​	2,324,477
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

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Executive Compensation Program Highlights

Highlights of our executiveOur compensation program include:

•

A programis designed to be straightforwardtransparent with a clear emphasis on rewarding performance by putting pay at risk and retaining key executives. Our executive compensation philosophy incorporatescenters on the following core principlesobjectives of maintaining alignment with shareholder interests and objectives:retaining key management.

Our incentive program structure and metrics are

•

Alignment with Shareholder Interests.designed to drive sustained value creation We structure our annual cash and long-term equityfor shareholders, with incentive compensation to put pay at risk and reward performance. Payouts under these plans are tied predominantly to the Company's total return to shareholders, stock price,TSR, earnings, and the achievement of measurable and sustainable business and individual goals, so that executives' interests are tied togoals. See the success of the Company and are aligned with those of our shareholders. Several of our performance highlights are set forth below.CD&A on page 44 for further details.

•

Key Management Retention.  We structure our program to provide compensation at levels necessary to attract, engage and retain an experienced management team who have the skill sets to succeed in our complex operating and regulatory environment, including operating the nation's largest nuclear power station, and to provide consistently strong operating and financial results.

•

A program with a few key elements. Our key compensation elements are simple and understandable: base salary; annual performance-based cash incentive; three-year performance-based equity grant; a retention-based equity grant that releases over a four-year period; pension and supplemental pension retirement benefits; and limited perquisites.

•

A program with strong shareholder support. Of the shareholder votes cast at our 2014 Annual Meeting of Shareholders (the "2014 Annual Meeting"), more than 93% were "FOR" the compensation of the executives as disclosed in our 2014 Proxy Statement, excluding abstentions.

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	​	Pay Element					​		​	Measurement Period	| ​		2015 Proxy Statement​	Performance Link	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
	​	Base Salary	​		​	Cash	​		​		​		​		​
​	​​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
	​	Annual	​		​	Cash	​		​	1 year	​		​	Earnings CEO: 62.5% NEOs(1): 50.0%	​
​	​​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
	​	Incentives	​		​		​		​		​		​	Business Unit Performance CEO: 37.5% NEOs(1): 50.0%	​
​	​​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
	​	​	​		​	Performance	​		​		​		​	Relative TSR 50%	​
​	​​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
	​	Long-Term Incentives	​		​	Shares 60%(2)	​		​	3 years	​		​	Relative Operational Performance 50%	​
​	​​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
	​	​	​		​	Restricted Stock Units 40%(2)	​		​	Vest ratably over 4 years	​		​	Stock Price	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

Named Executive Officers ("NEO") identified on page 44 of this Proxy Statement.

(2)

Long-term incentives award mix changed to 70% performance share awards and 30% restricted stock unit ("RSU") awards starting in 2018 for the CEO and Executive Vice Presidents.

2017 CEO Total Compensation 88% at risk	​	2017 Average for Other NEOs' Total Compensation 67% at risk
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PROXY STATEMENT SUMMARYProxy Statement — General Information

Performance HighlightsTime, Date and Place

In 2014, we delivered strong financial results and operational performance. Our results included:

•

total shareholder value increased $2 billion in 2014 alone, and $5 billion over the past five years;

•

the Company's stock price increased 29.1% for 2014, and set new all-time intraday and closing highs;

•

for the third straight year, the Company increased the common dividend, raising it by 4.85% after two previous increases of 4.0%;

•

the Palo Verde Nuclear Generating Station ("Palo Verde") had a capacity factor of 93.7%;

•

APS achieved another safe year, placing us within the top quartile in the electric utility industry; and

•

total shareholder return (stock price appreciation plus dividends) ("TSR") performance was solid. Our TSR performance is highlighted in the chart below.

TOTAL SHAREHOLDER RETURN

Auditors

We are asking our shareholders to ratify the appointment of D&T as our independent accountants for 2015. A summary of fees paid to D&T in 2013 and 2014 is set forth on page 82.

Important Dates for the 2016 Annual Meeting of Shareholders

Shareholder proposals submitted for inclusion in our 2016 Proxy Statement must be received by us no later than December 3, 2015. Notice of shareholder proposals to be raised from the floor of the 2016 Annual Meeting of Shareholders must be received by us no earlier than January 20, 2016 and no later than February 19, 2016.

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Corporate Governance Highlights

Highlights of our corporate governance include:

•

annual election of all directors;

•

nine of our ten directors are independent;

•

an independent Lead Director with significant responsibilities;

•

all of our committees of the Board are comprised solely of independent directors;

•

last year our directors received an average 97% shareholder vote in favor of their election and no director received a vote of less than 87%;

•

each director attended at least 75% of the Board meetings and any Board committee meetings on which he or she served;

•

directors and officers are prohibited from pledging or hedging our stock; and

•

director and officer stock ownership guidelines.

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Proxy Statement — General Information

Place, Date and Time

The Company's 20152018 Annual Meeting of Shareholders ("Annual Meeting") will be held at the Heard Museum, 2301 North Central Avenue, Phoenix, Arizona 85004, at 10:30 a.m., Mountain Standard Time, on Wednesday, May 20, 2015.16, 2018. The Annual Meeting will not be held at a physical location, but will instead be held virtually, where shareholders will participate by accessing a website using the Internet. The Annual Meeting will be accessed atwww.virtualshareholdermeeting.com/PNW. To participate in the Annual Meeting, you will need the 16-digit control number included on the proxy card, the Internet Notice or the voting instruction form. Online check-in will begin at 10:15 a.m. Mountain Standard Time, and you should allow ample time for the online check-in proceedings. We will have technicians standing by ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call: 855-449-0991. An audio broadcast of the Annual Meeting will be available by telephone toll-free at 877-328-2502 (domestic) or 412-317-5419 (international). Upon dialing in, you will need to provide your 16-digit control number.

We continue to believe that the virtual-only format, which we used for the first time last year, is in the best interests of our shareholders, given the time and expense of an in-person meeting compared to the shareholder participation at those meetings. The number of non-employee shareholders actually attending our Annual Meetings of Shareholders has significantly dwindled. For the past five in-person meetings, only about 30 shareholders attended each of the meetings. The meetings, on average, lasted less than 45 minutes, including the formal business portion of the meeting, the remarks by the CEO, a video highlighting the Company's performance, and the question and answer period. A virtual meeting allows all of our shareholders, regardless of location, the ability to participate in the Annual Meeting.

Our virtual meeting will be governed by our Rules of Conduct, which we use for both in-person and virtual meetings. Shareholders at the virtual-only meeting will have the same rights as at an in-person meeting, including the rights to vote and ask questions through the virtual meeting platform.

Notice of Internet Availability

Unless you elected to receive printed copies of the proxy materials in prior years, you will receive a Notice of Internet Availability of Proxy Materials by mail, or if you so elected, by electronic mail (the "Internet Notice"). The Internet Notice will tell you how to access and review the proxy materials. If you received an Internet Notice by mail and would like to receive a printed copy of the proxy materials, you should follow the instructions included on the Internet Notice.

The Internet Notice is first being sent to shareholders on or about April 2, 2015.March 29, 2018. The Proxy Statement and the form of proxy relating to the Annual Meeting are first being made available to shareholders on or about April 2, 2015.March 29, 2018.

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Record Date; Shareholders Entitled to Vote

All shareholders at the close of business on March 12, 20159, 2018 (the "record date""Record Date") are entitled to vote at the meeting. Each holder of outstanding Company common stock is entitled to one vote per share held as of the record date on all matters on which shareholders are entitled to vote, except for the election of directors, in which case "cumulative" voting applies (see "Vote Required — Election of directors"). At the close of business on the record date,Record Date, there were 110,746,055111,928,566 shares of common stock outstanding.

Voting

		Vote prior to the Annual Meeting by Internet. The website address for Internet voting is on the proxy card, the Internet Notice.Notice and the voting instruction form. Internet voting is available 24 hours a day.
		Vote prior to the Annual Meeting by telephone. The toll-free number for telephone voting is on yourthe proxy card.card, the Internet Notice and the voting instruction form. Telephone voting is available 24 hours a day.
		Vote prior to the Annual Meeting by scanning the QR code. The QR code is on the proxy card, the Internet Notice and the voting instruction form, and is available 24 hours a day.
		Vote prior to the Annual Meeting by mail. You may vote by mail by promptly marking, signing, dating, and mailing your proxy card or voting instruction form (a postage-paid envelope is provided for mailing in the United States).
		Vote in personduring the Annual Meeting over the Internet. YouTo participate in the Annual Meeting, you will need the 16-digit control number included on the proxy card, the Internet Notice or the voting instruction form. Shares held in your name or shares for which you are the beneficial owner but not the shareholder of record may come to and vote atbe voted electronically during the formal business portion of the Annual Meeting. Shares held in the Pinnacle West 401(k) Plan cannot be voted during the Annual Meeting. If you hold your shares in street name,the Pinnacle West 401(k) Plan, you must obtain a proxy, executed inwill need to submit your favor, fromvote to the holder of record if you wishplan trustee by May 13, 2018 to vote these shares at the meeting. Please also review the requirements for attending the Annual Meeting under the heading "Attendance at the Annual Meeting" on page 9.your shares.

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If you vote by telephone or Internet, DO NOT mail a proxy card.

You may change or revoke your vote at any time beforeby: re-voting by telephone; re-voting by Internet; or re-voting during the formal business portion of the Annual Meeting. For shares held in your name you may change your vote by re-submitting a signed proxy is exercised by:card. In addition, for shares held in your name, you may also revoke a previously submitted proxy card by filing with our Corporate Secretary either a written notice of revocation orrevocation. For shares for which you are the beneficial owner but not the shareholder of record, you may change your vote by re-submitting a signed proxy card bearing a later date; re-voting by telephone; or re-voting by Internet. Your proxy will be suspended with respectvoting instruction form to your broker. In addition, for shares for which you are the beneficial owner but not the shareholder of record, you should contact your broker if you attend the meeting in person and so request, although attendance at the meeting will not by itselfwould like to revoke a previously-granted proxy.your vote.

Your vote is confidential. Only the following persons have access to your vote: election inspectors; individuals who help with the processing and counting of votes; and persons who

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need access for legal reasons. All votes will be counted by an independent inspector of elections appointed for the Annual Meeting.

Quorum

The presence, in person or by proxy, of a majority of the outstanding shares of our common stock is necessary to constitute a quorum at the Annual Meeting. In counting the votes to determine whether a quorum exists, shares that are entitled to vote but are not voted at the direction of the beneficial owner (called abstentions) and votes withheld by brokers in the absence of instructions from beneficial owners (called broker non-votes) will be counted for purposes of determining whether there is a quorum. Shares owned by the Company are not considered outstanding or present at the meeting.

Vote Required

Election of directorsdirectors..    Individuals receiving the highest number of votes will be elected. The number of votes that a shareholder may, but is not required to, cast is calculated by multiplying the number of shares of common stock owned by the shareholder, as of the record date,Record Date, by the number of directors to be elected. Any shareholder may cumulate his or her votes by casting them for any one nominee or by distributing them among two or more nominees. Abstentions will not be counted toward a nominee's total and will have no effect on the election of directors. You may not cumulate your votes against a nominee. If you hold shares in your own name and would like to exercise your cumulative voting rights, you must do so by mail. If you hold shares beneficially through a broker, trustee or other nominee and wish to cumulate votes, you should contact your broker, trustee or nominee. If you would like to exercise your cumulativefollow the instructions on the voting rights, you must do so by mail. The Company's Bylaws provide that, in an uncontested election, a director nominee who receives a greater number of votes cast "withheld" for his or her election than "for" such election will promptly tender his or her resignation to the Corporate Governance Committee. The Corporate Governance Committee is required to evaluate the resignation, taking into account the best interests of the Company and its shareholders, and will recommend to the Board whether to accept or reject the resignation.instruction form.

Under the current rules of the New York Stock Exchange ("NYSE"), your broker is not able to vote on your behalf in any director election unless you give your broker specific voting instructions. We encourage you to provide instructions so that your shares will be counted in the election of directors.

Say-on-Pay vote..    The votes cast "for" must exceed the votes cast "against" to approve the advisory resolution on the compensation disclosed in this Proxy Statement of our Named Executive OfficersNEOs identified on page 44 — the Say-on-Paysay-on-pay vote. This resolution is not intended to address any specific item of compensation, but rather the overall compensation of the Named Executive OfficersNEOs and the

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compensation philosophy, policies and procedures described in this Proxy Statement. Because your vote is advisory, it will not be binding on the Board or the Company. However, theThe Board will review the voting results and take them into consideration when making future decisions regarding executive compensation. Abstentions and broker non-votes will have no effect on the outcome of this proposal. We will hold an advisory vote on Say-on-Paysay-on-pay on an annual basis until we next hold an advisory vote of shareholders on the frequency of such votes as required by law.

Ratification of the appointment of the independent accountants and approval of the shareholder proposalaccountants..    The votes cast "for" must exceed the votes cast "against" to ratify the appointment of the independent accountants for the year ending December 31, 2015 and for the approval of the shareholder proposal.2018. Abstentions and broker non-votes will have no effect on the outcome of these proposals.this proposal.

Board Recommendations.

The Board recommends a vote:

ü

FOR the election of the nominated slate of directors (Proposal 1);

ü

FOR the approval, on an advisory basis, of the resolution approving the compensation of our Named Executive Officers,NEOs, as disclosed in this Proxy Statement (Proposal 2); and

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ü

FOR the ratification of the appointment of D&T as the Company's independent accountants for the year ending December 31, 20152018 (Proposal 3); and.

XAGAINST the approval of the shareholder proposal (Proposal 4).

The Board is not aware of any other matters that will be brought before the shareholders for a vote. If any other matters properly come before the meeting, the proxy holders will vote on those matters in accordance with the recommendations of the Board or, if no recommendations are given, in accordance with their own judgment.

In order to attend the Annual Meeting, you will need to present a valid picture identification, such as a driver's license or passport, and either:

•

the Internet Notice or the top portion of your proxy card if you are a shareholder of record (each Internet Notice or proxy card admits up to two shareholders); or

•

a copy of a brokerage statement showing ownership of our stock as of the close of business on the record date if you hold your shares in street name (each brokerage statement admits up to two shareholders).

Please do not carry items such as large handbags and packages to the meeting, as we reserve the right to inspect any items brought into the meeting. Weapons are prohibited in the meeting. We also reserve the right to prohibit bringing cell phones, pagers, cameras, recording devices, and other items into the meeting room.

If you and one or more shareholders share the same address, it is possible that only one Internet Notice, Annual Report or Proxy Statement was delivered to your address. Registered

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shareholders at the same address who wish to receive separate copies of the Internet Notice, the Annual Report or Proxy Statement may:

•

callCall the Company's Shareholder Services Department at 1-602-250-5511;

•

mailMail a request to Shareholder Services at P.O. Box 53999, Mail Station 8602, Phoenix, AZArizona, 85072-3999; or

•

e-mailE-mail a request to: shareholderdept@pinnaclewest.com.

The Company will promptly deliver to you the information requested. Registered shareholders who share the same address but wish to receive one Internet Notice, Annual Report or Proxy Statement may contact the Company through the same methods listed above. Shareholders who own Company stock through a broker and who wish to receive single or separate copies of the Internet Notice, Annual Report or Proxy Statement should contact their broker.

You may access our Annual Report and Proxy Statement via the Internet. Copies of the Annual Report and Proxy Statement are available on the Company's website (www.pinnaclewest.com) and will be provided to any shareholder promptly upon request. Shareholders may request copies from Shareholder Services at the telephone number or addresses set forth above, or as described on the Internet Notice.

Shareholder Proposals.To be included in the proxy materials for the 20162019 Annual Meeting of Shareholders (the "2016"2019 Annual Meeting"), any shareholder proposal intended to be presented at that meeting must be received by our Corporate Secretary no later than December 3, 2015November 29, 2018 at the following address:

Corporate Secretary
Pinnacle West Capital Corporation
400 North Fifth Street, Mail Station 8602
Phoenix, Arizona 85004

A shareholder who intends to present a proposal at the 20162019 Annual Meeting, but does not wish it to be included in the 20162019 proxy materials, must submit the proposal no earlier than January 20, 201616, 2019 and no later than the close of business on February 19, 2016. Nominations15, 2019.

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Shareholder Nominations.    Shareholder nominations for a director to the Board must be received by the Corporate Secretary at the address set forth above by November 19, 2015. 16, 2018 ("Shareholder Nomination").

Proxy Access.    In February 2017, our Board amended the Bylaws to provide, among other things, that under certain circumstances a shareholder or group of shareholders may include director candidates that they have nominated in our annual meeting proxy statement — "proxy access." Under these provisions, a shareholder or group of up to 20 shareholders seeking to include director nominees in our annual meeting proxy statement must own 3% or more of our outstanding common stock continuously for at least the previous three years. Generally the number of qualifying shareholder-nominated candidates the Company will include in its annual meeting proxy materials will be limited to the greater of 25% of the Board or two candidates. Based on the current Board size of 11 directors, the maximum number of proxy access candidates we would be required to include in our proxy materials is two.

Nominees submitted under the proxy access provisions that are later withdrawn or are included in the proxy materials as Board-nominated candidates will be counted in determining whether the 25% maximum has been reached. If the number of shareholder-nominated candidates exceeds 25%, each nominating shareholder or group of shareholders may select one nominee for inclusion in our proxy materials until the maximum number is met. The order of selection would be determined by the amount (largest to smallest) of shares of our common stock held by each nominating shareholder or group of shareholders. Requests to include shareholder-nominated candidates under proxy access must be received by our Corporate Secretary at the address set forth above not earlier than the close of business on October 30, 2018 nor later than the close of business on November 29, 2018. The number of qualifying shareholder-nominated candidates the Company will include in its proxy materials under proxy access will be reduced on a one-for-one basis in the event the Company receives a Shareholder Nomination, but at least one qualifying shareholder-nominated proxy access nominee will be included in the proxy materials.

In all cases, shareholders and nominees must also comply with the applicable rules of the SECSecurities and Exchange Commission ("SEC") and the applicable sections of our Bylaws.Bylaws relating to qualifications of nominees and nominating shareholders and disclosure requirements.

The Board is soliciting the enclosed proxy. The Company may solicit shareholders over the Internet, by telephone or by mail. The Company has retained D.F. King & Co., Inc. to assist in the distribution of proxy solicitation materials and the solicitation of proxies for $10,000,$11,000, plus customary expenses. The costs of the solicitation will be paid by the Company. Proxies may also be solicited in person, by telephone or electronically by Company personnel who will not receive additional compensation for such solicitation. As required, the Company will reimburse brokerage houses and others for their out-of-pocket expenses in forwarding documents to beneficial owners of our stock.

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The Board has the following standing committees: Audit; Corporate Governance; Finance; Human Resources; and Nuclear and Operating. All of the charters of the Board's committees are publicly available on the Company's website (www.pinnaclewest.com). All of our committees conduct a formal review of their charters every other year and as often as any committee member deems necessary. In the years in which a formal review is not conducted, the Board has tasked management with reviewing the charters and recommending any changes management deems necessary or reflective of good corporate governance. The charters are also changed as needed to comply with any corresponding changes to any applicable rule or regulation.

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All of our committees are comprised of independent directors who meet the independence requirements of the New York Stock Exchange ("NYSE") rules, SEC rules, and the Company's Director Independence Standards, including any specific committee independence requirements. The duties and responsibilities of our committees are as follows:

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Lead Director.    Kathryn L. Munro serves as the Company's Lead Director and chairs the Corporate Governance Committee. The Lead Director performs the following duties and responsibilities as set forth in our Corporate Governance Guidelines:

•

Serves as a liaison between the Chairman of the Board (the "Chairman") and the independent directors;

•

Advises the Chairman as to an appropriate schedule of Board meetings, reviews and provides the Chairman with input regarding agendas for the Board meetings and, as appropriate or as requested, reviews and provides the Chairman with input regarding information sent to the Board;

•

Presides at all meetings at which the Chairman is not present, including executive sessions of the independent directors (which are regularly scheduled as part of each Board meeting) and calls meetings of the independent directors when necessary and appropriate;

•

Oversees the Board and Board committee self-assessment process;

•

Is available for appropriate consultation and direct communication with the Company's shareholders and other interested parties; and

•

Performs such other duties as the Board may from time to time delegate.

These duties and responsibilities do not, however, fully capture Ms. Munro's active role in serving as our Lead Director. For example, Ms. Munro has regular discussions with the CEO, other members of the senior management team and members of the Board between Board meetings on a variety of topics, and she serves as a liaison between the CEO and the independent directors. Ms. Munro focuses the Board on key issues facing our Company and on topics of interest to the Board. She takes the lead on director recruitment and has a formal annual call with each non-employee director to discuss the Board, its functions, its membership, the individual's plan with respect to his or her continuing Board service, and any other topic the individual desires to discuss with our Lead Director. Her leadership fosters a Board culture of open discussion and deliberation to support sound decision-making. She also encourages communication between management and the Board to facilitate productive working relationships.

Chairman and CEO Positions.    The Chairman is Donald E. Brandt, the Company's President and CEO. The independent directors believe that Mr. Brandt, as an experienced leader with extensive knowledge of the Company and our industry, serves as a highly effective conduit between the Board and management and that Mr. Brandt provides the vision and leadership to execute on the Company's strategy and create shareholder value. The Board believes that separating the roles of the CEO and Chairman and appointing an independent Board Chairman at this time would create an additional level of unneeded hierarchy that would only duplicate the activities already being vigorously carried out by our Lead Director.

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Management Succession.    Our Board places a high priority on senior management development and succession planning. While the Corporate Governance Committee has principal responsibility for overseeing CEO and other senior management succession planning, the full Board is actively involved in reviewing our senior management succession plans that will allow for smooth and thoughtful leadership transitions in the future.

Executive succession planning and senior management development were specific areas of focus for the Corporate Governance Committee in 2017. The Corporate Governance Committee engaged in thorough and thoughtful discussions regarding the development and evaluation of current and potential senior leaders, as well as the development of executive succession plans, including succession plans for our CEO position.

Board Succession.    Our Board has developed a robust process to refresh the Board and its leadership significantly over the next several years and beyond. The process is designed to continue to provide for a well-qualified, diverse and highly independent Board, with the requisite experience and skills to provide effective oversight. This process includes the identification of the current key skills and experience possessed by our members. A matrix of current key skills and experience possessed by our Board is on page 5 of this Proxy Statement. The identification of these skills and experiences, combined with a comprehensive Board evaluation process, provide visibility into the skills and experience leaving our Board in the future and allows for the identification of additional skills, experience or expertise needed to facilitate the Company's long-term strategy. This information is taken into account when identifying director nominees during the recruitment process.

Board Evaluations.    The Corporate Governance Committee has established a thorough evaluation process wherein each Director completes a Board evaluation as well as an individual self-evaluation annually. The Board evaluation allows each Director the opportunity to examine and evaluate the Board's composition and effectiveness, competency, accountability, deliberations and administration, and each committee, as well as the opportunity to identify any skills, experience or expertise the Director believes should be represented, or more fully represented, on the Board. The individual self-evaluation asks each Director to evaluate different areas of their performance as a Director, including independence, expertise, judgment and skills. The Board assessment results are reviewed both on a one-year standalone basis and on a three-year basis in order to identify any year-over-year trends. The assessment results are initially reviewed by the Lead Director. The Lead Director then has a formal annual call with each Director to discuss the Board, its functions, its membership, the individual's plan with respect to his or her continuing Board service, and any other topic the individual desires to discuss with our Lead Director. The results of the evaluations and calls are presented to the Corporate Governance Committee and full Board each February. This process provides the Board the ability to assess the overall functioning of the Board as a whole, and identify any skills, experience or expertise needed to continue to provide effective oversight of the Company's long-term strategy.

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Consistent with the requirements of the NYSE's corporate governance standards, the Audit Committee periodically reviews the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures. The Audit Committee also reviews the comprehensiveness of the Board's risk oversight activities and the Company's risk assessment process, and plays a coordinating role designed to ensure that no gaps exist in the coverage by the Board committees of risk areas.

The Executive Risk Committee is comprised of senior level officers of the Company and is chaired by the Chief Financial Officer. Among other responsibilities, this Committee is responsible for ensuring that the Board receives timely information concerning the Company's material risks and risk management processes. The Executive Risk Committee provides the Board with a list of the Company's top risks on an annual basis. The internal enterprise risk management group reports to the Vice President, Controller and Chief Accounting Officer, who reports to the Executive Vice President and Chief Financial Officer. The internal risk management group is responsible for (1) implementing a consistent risk management framework and reporting process across the Company, and (2) ensuring that the Executive Risk Committee is informed of those processes and regularly apprised of existing material risks and the emergence of additional material risks.

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Under the Company's Corporate Governance Guidelines, upon a substantial change in a director's primary business position from the position the director held when originally elected to the Board, a director is required to apprise the Corporate Governance Committee and to offer his or her resignation for consideration to the Corporate Governance Committee. The Corporate Governance Committee will recommend to the Board the action, if any, to be taken with respect to the tendered resignation.

Under the Company's Corporate Governance Guidelines, an individual shall not be eligible to be nominated for election or re-election as a member of the Board of the Company or APS if, at the time of the nomination, the individual has attained the age of 75 years. This policy shall apply regardless of the source of the nomination or whether the nomination was made at a meeting of the Board of Directors, at an Annual Meeting or otherwise.

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Our Goal.    What our shareholders think is important to us. We seek to maintain a transparent and productive dialogue with our shareholders by:

ü

Providing clear and timely information,

ü

Seeking and listening to feedback, and

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Being responsive.

Our Plan.    To accomplish this goal, we have an established shareholder engagement program designed to maintain a dialogue with our shareholders, which was further augmented during 2017 in response to what the Board considered a disappointing level of shareholder support for our annual advisory vote on compensation. Each year we strive to respond to shareholder questions in a timely manner, conduct extensive proactive outreach to investors, and evaluate the information we provide to investors in an effort to continuously improve our engagement. In 2017, we contacted the holders of approximately 50% of the shares outstanding and met with the holders of approximately 40% of the shares outstanding. Our Lead Director and member of the Human Resources Committee, Kathryn Munro, participated in a number of the shareholder discussions providing shareholders with direct access to the Board.

Our Results.    We listened to our shareholders. After considering their feedback, the Board in late 2017 and early 2018 made several changes in response:

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Increased the proportion of performance shares in our CEO's and Executive Vice Presidents' 2018 long-term incentive awards from 60% to 70%;

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Clarified how our performance metrics support and align with our long-term strategy;

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Revised 2018 metrics in certain key business units to better align with our priorities and emphasize top-quartile and above performance;