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.)
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
☐Preliminary Proxy Statement
☐Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒Definitive Proxy Statement
☐Definitive Additional Materials
☐Soliciting Materials under §240.14a-12
Black Hills 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): | ||||
☒ | No fee required. | |||
☐ | ||||
Fee paid previously with preliminary materials. |
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: |
(This page left blank intentionally.)
BLACK HILLS CORPORATION
Notice of 2023
Annual Meeting of Shareholders
and Proxy Statement
(This page left blank intentionally.)
BLACK HILLS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WHEN: | WHERE: | |||
Horizon Point | ||||
Tuesday, April | Company’s Corporate Headquarters | |||
9:30 a.m., local time | 7001 Mount Rushmore Road | |||
Rapid City, South Dakota 57702 |
We are pleased to invite you to attend the annual meeting of shareholders of Black Hills Corporation.
In the event it is not possible to attend our annual meeting in person, we encourage you to listen to the meeting by calling in: 605-782-9484, Conference ID: 744 233 731#. The presentation for this meeting can be located at www.blackhillscorp.com by clicking on "Events and Presentations" in the "Investor Relations" section. The presentation will be posted on the website before the call. Please note, if you attend by calling in, you will not be able to vote your shares or submit questions. Accordingly, it is important that you vote your shares as instructed below.
Proposals:
Record Date:
The Board of Directors set March 2, 20206, 2023 as the record date for the meeting. This means that our shareholders as of the close of business on that date are entitled to receive this notice of the meeting and vote at the meeting and any adjournments or postponements of the meeting.
How to Vote:
Your vote is very important. You may vote your shares by telephone, by the Internet or by returning the enclosed proxy. If you own shares of common stock other than the shares shown on the enclosed proxy, you will receive a proxy in a separate envelope for each such holding. Please vote each proxy received. To make sure that your vote is counted if voting by mail, you should allow enough time for the postal service to deliver your proxy before the meeting.
Sincerely, | |
/s/ AMY K. KOENIG | |
Amy K. Koenig | |
Vice President - Governance, Corporate Secretary and Deputy General Counsel |
PROXY SUMMARY
BLACK HILLS CORPORATION
We are a customer-focused energy solution provider that invests in our communities’ safety, sustainability and growth with a mission of Improving Life with Energy and a vision to be the Energy Partner of Choice. The Company’s core mission – and our primary focus – is to provide safe, reliable and cost-effective electric and natural gas service to 1.3 million utility customers in over 800 communities in eight states, including Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota 57702
Items of Business to be Considered at the Annual Meeting
Proposal |
| Board Recommendation | Page |
1 | Election of Directors | þ FOR each Director Nominee | 6 |
2 | Ratification of Deloitte & Touche LLP to Serve as Independent Registered Public Accounting Firm for 2023 | þ FOR | 21 |
3 | Advisory Vote to Approve Executive Compensation | þ FOR | 24 |
4 | Advisory Vote on the Frequency of the Advisory Vote on our Executive Compensation | þ 1 YEAR | 51 |
BOARD OF DIRECTORS
Director Nominees
Our Board of Directors ("Board") is committed to oversight that promotes the long-term interests of our shareholders and other stakeholders. We believe this is best achieved with directors who bring a diverse and relevant set of skills, expertise, experiences and perspectives. Our Board is nominating three individuals for election at this annual meeting.The following table provides summary information about the nominees:
Name | Age | Director Since | Independent | Committee Membership | Other Public Boards |
Scott M. Prochazka | 57 | 2020 | X | Compensation | Li-Cycle Holdings Corp. Peridot Acquisition Corp. II |
Rebecca B. Roberts | 70 | 2011 | X | Compensation Governance (Chair) | AbbVie, Inc. MSA Safety, Inc. |
Teresa A. Taylor | 59 | 2016 | X | Compensation (Chair) Governance | T-Mobile USA, Inc. |
Proxy Summary ‖ 1
Director Skills and Demographics
| Evans | Granger | Jensen | McAllister | Mills | Otto | Prochazka | Roberts | Schober | Taylor |
Skills and Experience |
|
|
|
|
|
|
|
|
|
|
Business Operations | X | X | X | X | X |
| X | X |
| X |
Customer Service | X |
|
|
|
|
| X |
|
| X |
Cybersecurity/Technology |
|
|
| X |
| X |
|
|
|
|
ESG/Sustainability | X |
|
| X |
|
|
| X |
|
|
Financial Acumen |
| X | X | X | X | X | X | X | X |
|
Government/Regulatory | X | X |
|
|
| X | X |
| X | X |
Health and Safety | X | X | X | X |
| X | X | X |
|
|
Human Capital Management/Compensation |
|
| X |
|
|
| X | X |
| X |
Legal/Governance/Compliance | X | X | X | X |
|
|
|
|
|
|
Mergers and Acquisitions | X |
| X | X | X |
|
|
| X | X |
Risk Management | X | X | X | X | X | X | X | X | X | X |
Strategic Planning | X | X | X | X | X | X | X | X | X | X |
Utility Industry | X |
|
|
|
|
| X |
| X |
|
Board Tenure |
|
|
|
|
|
|
|
|
|
|
Years | 4 | 2 | 3 | 3 | 11 | 6 | 2 | 11 | 7 | 6 |
Age |
|
|
|
|
|
|
|
|
|
|
Years Old | 60 | 63 | 60 | 58 | 67 | 63 | 57 | 70 | 67 | 59 |
Gender |
|
|
|
|
|
|
|
|
|
|
Female |
|
|
| X |
|
|
| X |
| X |
Male | X | X | X |
| X | X | X |
| X |
|
Race/Ethnicity |
|
|
|
|
|
|
|
|
|
|
African American/Black |
| X |
|
|
|
|
|
|
|
|
White/Caucasian | X |
| X | X | X | X | X | X | X | X |
OUR COMMITMENT TO SUSTAINABILITY
Our mission of Improving Life with Energy means we must be ready to make tomorrow even better than today. That is why we are committed to creating a cleaner energy future which builds upon our responsibility to provide the safe, reliable and cost-effective energy that improves our customers’ lives. By investing in the success of our employees, continually innovating, thoughtfully utilizing resources and keeping people at the core of our decision-making, we are dedicated to the sustainability of our Company, communities and planet.
Environmental, Social and Governance (ESG) Strategy and Oversight
We are excited to announce significant advancements in our decarbonization journey. We are building upon our success of delivering cost-effective energy for customers and strong returns for investors by seeking renewable energy growth opportunities, minimizing risk and responding to stakeholders’ evolving expectations. ESG and sustainability are inherently connected throughout our business and our ESG management is structured accordingly. Our Board oversees ESG, with management leadership from our CEO and executive steering committee, our dedicated department and our cross functional sustainability working group.
Proxy Summary ‖ 2
Responsibly Reducing Greenhouse Gas Emissions
In November 2020, we announced clean energy goals to reduce greenhouse gas (GHG) emissions intensity for our Electric Utilities of 40% by 2030 and 70% by 2040 and achieve GHG reductions of 50% by 2035 for our Gas Utilities. In August 2022, we announced a new "Net Zero by 2035" target for our Gas Utilities, which doubles the previous target of a 50% reduction by 2035. Net Zero will be achieved through pipeline material and main replacements, advanced leak detection, third-party damage reduction, expanding the use of renewable natural gas (RNG) and hydrogen, and utilizing carbon credit offsets.
Electric Utilities Goals(1)(2) | Natural Gas Utilities Goals(1)(3) | |||||
â | 40% by 2030 | â | Net Zero by 2035 | |||
â | 70% by 2040 |
We are proud of our sustainability efforts and continue to pursue initiatives to enable the transition to a cleaner energy future, including:
We will continue executing our strategy of investing in cost-effective renewables and new technologies to further reduce our environmental impact across all states in which we operate, while continuing to deliver safe, reliable and cost effective energy to customers.
For additional information on our commitment to sustainability, you can review the following 2021 ESG reports on our website at www.blackhillsenergy.com/our-company/commitment-sustainability/sustainability-and-esg-reports:
Proxy Summary ‖ 3
EXECUTIVE COMPENSATION
We have an Executive Compensation Philosophy that establishes the framework our Compensation Committee applies in structuring compensation for our executive officers ("Named Executive Officers" or "NEOs"). The components of our executive pay program consist of a base salary, a short-term incentive plan, and long-term incentives. Our executive pay program aligns the interest of our Named Executive Officers with our stakeholders by tying incentive pay to achievement of performance metrics.
Variable | 78 | % |
| Variable | 63 | % |
Linked to Share Value | 57 | % |
| Linked to Share Value | 40 | % |
*Percentages may differ from above due to rounding.
The performance measures for our incentive compensation plans are discussed in greater detail on page 28 of the Proxy Statement. We also require our executive officers to hold a significant amount of our common stock (between 3 and 6 times the base salary) to further align their performance with the interest of our stakeholders.
Our compensation practices and policies demonstrate the alignment between executive compensation and the interests of our stakeholders. Our shareholders share our confidence in our compensation philosophy as reflected by the support of shareholders owning 95 percent of the shares who voted to approve our 2021 executive compensation at last year's annual meeting.
The following table summarizes our 2022 performance metrics and results for incentive plans that ended in 2022.
Pay Element | Performance Measure | 2022 Results | ||||||
Short-term Incentive: Payout of 71.48% of Target | ||||||||
70 Percent | EPS from ongoing operations, as adjusted, target set at $4.05; threshold set at $3.77 | $3.97 per share for incentive plan purposes | ||||||
7.5 Percent | System Average Interruption Duration Index (SAIDI), target set at 65.80; threshold set at 74.40 | SAIDI:70.14 | ||||||
7.5 Percent | Hits Per Thousand (HPT), target set at 2.05; threshold set at 2.16 | HPT: 2.26 | ||||||
7.5 Percent | Total Case Incident Rate (TCIR), target set at 1.00; threshold set at 1.25 | TCIR: 1.39 | ||||||
7.5 Percent | Diversity Training | Diversity Training: 100% of Target | ||||||
Long-term Incentive (2020-2022 Plan): Payout of 26.98% of Target | ||||||||
Performance Share Award | Total Shareholder Return (TSR) relative to our Performance Peer Group measured over a three-year period | TSR: 0.14% | ||||||
26th Percentile Ranking in Performance Peer Group |
Proxy Summary ‖ 4
2022 ACCOMPLISHMENTS AND PERFORMANCE | |||
Black Hills Corporation reported excellent operational performance in 2022. Earnings per share for the year increased 6% compared to 2021. Consistent execution of our strategy focusing on our customer's needs, cultivating growth, and achieving fair and timely regulatory recovery successfully offset the impact of higher interest rates and inflation in 2022. Significant accomplishments for the year included: | |||
Ÿ | Provided the safe and reliable service our communities and customers depend on and achieved several notable operations performance metrics: | ||
* | Achieved top-quartile reliability metrics by our three electric utilities | ||
* | Achieved a safety performance total case incident rate of 1.39 compared to a 2020 American Gas Association second quartile reported average of 1.52 | ||
* | Achieved a safety performance preventable motor vehicle incident rate of 1.33 compared to a 2020 American Gas Association reported top quartile average of 1.56 | ||
* | Served ongoing demand growth through 11 new summer or winter electric demand peaks | ||
* | Wyodak received its CORESafety Certification through the National Mining Association | ||
* | Energy Star Partner of the Year for sustained excellence in Arkansas | ||
Ÿ | Completed financing activity to accomplish our long-term objective of investing to meet the needs of our customers, including: | ||
* | Issued 1.3 million shares of new common stock for net proceeds of $90 million under our at-the-market equity offering program | ||
* | Grew our dividend for the 52nd consecutive year with a 5.2 percent increase in calendar year 2022 over 2021 | ||
Ÿ | Invested in our utility infrastructure and systems: | ||
* | Deployed $598 million in capital projects | ||
* | Secured adequate liquidity to serve customers through compounding impacts of Winter Storm Uri in 2021, Storm Elliot and high natural gas prices in 2022 | ||
Ÿ | Executed a number of regulatory accomplishments: | ||
* | Successfully completed rate review requests for Arkansas Gas and Wyoming Electric | ||
* | All Winter Storm Uri regulatory recovery plans approved; more than 33% of $546 million of fuel costs recovered to date | ||
* | Reached a constructive settlement for Colorado Electric's Clean Energy Plan which, if approved, will result in nearly 70% of the electricity to meet customers' needs being generated by carbon-free sources by 2030 | ||
* | Received a Certificate of Public Convenience and Necessity for the Ready Wyoming 260-mile multi-phase transmission expansion project | ||
Ÿ | Continued our focus on sustainability, including: | ||
* | Announced a new commitment to achieve Net Zero emission by 2035 for our natural gas distribution system | ||
* | Issued an updated sustainability report and EEI, AGA, SASB, and NGSI disclosures, and provided new TCFD disclosures | ||
* | Our electric utilities surpassed the one-third reduction of GHG emission mark and achieved a nearly 10% reduction in emissions intensity since announcing our goals | ||
Proxy Summary ‖ 5
BLACK HILLS CORPORATION
7001 Mount Rushmore Road
Rapid City, South Dakota 57702
PROXY STATEMENT | ||||
ü | A proxy in the accompanying form is solicited by the Board | |||
ü | The enclosed form of proxy, when executed and returned, will be voted as set forth in the proxy. Any shareholder signing a proxy has the power to revoke the proxy in writing, addressed to our secretary, or in person at the meeting at any time before the proxy is exercised. | |||
ü | ||||
This proxy statement and the accompanying form of proxy are to be first mailed on or about March |
VOTING RIGHTS AND PRINCIPAL HOLDERS | ||||
ü | Only our shareholders of record at the close of business on March | |||
ü | Each outstanding share of our common stock is entitled to one vote. Cumulative voting is permitted in the election of directors in the same class. | |||
1
TABLE OF CONTENTS
Page | |
Commonly Asked Questions and Answers About the Annual Meeting Process | 3 |
6 | |
12 | |
15 | |
17 | |
19 | |
Proposal 2 - Ratification of Appointment of Independent Registered Public Accounting Firm | 21 |
Fees Paid to the Independent Registered Public Accounting Firm | 22 |
23 | |
Proposal 3 - Advisory Vote on Our Executive Compensation | 24 |
25 | |
25 | |
36 | |
37 | |
38 | |
39 | |
40 | |
40 | |
42 | |
43 | |
47 | |
47 | |
Proposal 4 - Advisory Vote on the Frequency of the Advisory Vote on our Executive Compensation | 51 |
52 | |
52 | |
53 | |
53 | |
53 | |
2
COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING PROCESS
Who is soliciting my proxy?
The Board of Directors of Black Hills Corporation is soliciting your proxy.
Where and when is the annual meeting?
The annual meeting is at 9:30 a.m., local time, April 28, 202025, 2023 at Horizon Point, the Company’s corporate headquarters, 7001 Mount Rushmore Road, Rapid City, South Dakota.
Who can vote?
Holders of our common stock as of the close of business on the record date, March 2, 2020,6, 2023, can vote at our annual meeting. Each share of our common stock has one vote for Proposals 2, 3, and 3.4. Related to Proposal 1, Election of Directors, cumulative voting is permitted in the election of directors in the same class.
How do I vote?
There are three ways to vote by proxy:
You
may be able to vote by telephone or over the Internet if your shares are held in the name of a bank or broker. If this is the case, you will need to follow their instructions.What constitutes a quorum?
Shareholders representing at least 50 percent of our common stock issued and outstanding as of the record date must be present at the annual meeting, either in person or by proxy, for there to be a quorum. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or nominee does not have discretionary voting power and has not received instructions from the beneficial owner.
3
What am I voting on and what is the required vote for the proposals to be adopted?
The required vote and method of counting votes for the various business matters to be considered at the annual meeting are described in the table below. If you sign and return your proxy card without indicating your vote, your shares will be voted in accordance with the Board recommendations as set forth below.
Item of Business | Board Recommendation | Voting Approval Standard | Effect of Abstention | Effect of Broker Non-Vote | ||
Proposal 1: | FOR election of each director nominee | The | No effect | No effect | ||
Election of Directors | ||||||
If a nominee receives more "WITHHOLD AUTHORITY" votes than "FOR" votes, the nominee must submit a resignation for consideration by the Governance Committee and final Board decision. | ||||||
Proposal 2: | FOR | The | No effect | Not applicable; broker may vote shares without instruction | ||
Ratification of Appointment of Independent Registered Public Accounting Firm | ||||||
Proposal 3: | FOR | The | No effect | No effect | ||
Advisory Vote to Approve Executive Compensation | ||||||
This advisory vote is not binding on the Board, but the Board will consider the vote results when making future executive compensation decisions. | ||||||
Proposal 4: | 1 YEAR | The frequency receiving the greatest number of votes will be considered by the advisory vote of the shareholders. This advisory vote is not binding on the Board, but the Board will consider the vote result when determining the frequency of the say on pay vote. | No effect | No effect | ||
Advisory Vote on the Frequency of the Advisory Vote to Approve Executive Compensation | ||||||
Is cumulative voting permitted for the election of directors?
In the election of directors, you may cumulate your vote. Cumulative voting allows you to allocate among the director nominees in the same class, as you see fit, the total number of votes equal to the number of director positions to be filled multiplied by the number of shares you hold. For example, if you own 100 shares of stock, and there are three directors to be elected in a class at the annual meeting, you could allocate 300 “For” votes (three times 100) among as few or as many of the three nominees to be voted on at the annual meeting as you choose.
If you choose to cumulate your votes, you will need to submit a proxy card or a ballot and make an explicit statement of your intent to cumulate your votes, either by indicating in writing on the proxy card or by indicating in writing on your ballot when voting at the annual meeting. If you hold shares beneficially in street name and wish to cumulate votes, you should contact your broker, trustee or nominee.
4
How will my shares be voted if they are held in a broker’s name?
If you hold your shares through an account with a bank or broker, the bank or broker may vote your shares on some matters even if you do not provide voting instructions. Brokerage firms have the authority under the New York Stock Exchange ("NYSE") rules to vote shares on certain matters (such as the ratification of auditors) when their customers do not provide voting instructions. However, on most other matters when the brokerage firm has not received voting instructions from its customers, the brokerage firm cannot vote the shares on that matter and a “broker non-vote” occurs.
This means that brokers may not vote your shares on the election of directors,What should I do now?
You should vote your shares by telephone, byover the Internet or by returning your signed and dated proxy card in the enclosed envelope as soon as possible so that your shares will be represented at the annual meeting.
Who will count the vote?
Representatives of our transfer agent, Equiniti Trust Company, will count the votes and serve as judges of the election.
Who conducts the proxy solicitation and how much will it cost?
We are asking for your proxy for the annual meeting and will pay all the costs of asking for shareholder proxies. We have hired Georgeson LLC to help us send out the proxy materials and ask for proxies. Georgeson LLC’s fee for these services is anticipated to be $8,500$12,250 plus out-of-pocket expenses. We can ask for proxies through the mail, or by telephone fax, or in person. We can use our directors, officers and employees to ask for proxies. These people do not receive additional compensation for these services. We will reimburse brokers and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of our common stock.
Can I revoke my proxy?
Yes. You can change your vote in one of four ways at any time before your proxy is used. First, you can enter a new vote by telephone or Internet. Second, you can revoke your proxy by written notice. Third, you can send a later dated proxy changing your vote. Fourth, you can attend the meeting and vote in person.
Who should I call with questions?
If you have questions about the annual meeting, you should call Amy K. Koenig, Vice President - Governance, Corporate Secretary and Deputy General Counsel, at (605) 721-1700.
5
PROPOSAL 1 | ELECTION OF DIRECTORS |
Our Board is nominating fivethree individuals for election as directors at this annual meeting. All of the nominees are currently serving as our directors. In accordance with our Bylaws and Article VI of our Articles of Incorporation, members of our Board of Directors are elected to three classes of staggered terms consisting of three years each, and until their successors are duly elected and qualified. At this annual meeting, one director will be elected to Class I for a term of two years until our annual meeting in 2022, three directors will be elected to Class II for a term of three years until our annual meeting in 2023, and one director will be elected to Class III to complete the remainder of the term expiring at our annual meeting in 2021.
Nominees for director at the annual meeting are Tony A. Jensen, Kathleen S. McAllister,Scott M. Prochazka, Rebecca B. Roberts, and Teresa A. Taylor and John B. Vering.Taylor. Our Bylaws require a minimum of nine directors. TheCurrently, the Board has set the size of the Board at 10 directors effective at the annual meeting in connection with two director retirements occurring at that time.
Pursuant to our Bylaws, directors must resign from the Board at the annual meeting followingafter attaining 72 years of age. Accordingly, Mr. Zeller, who turned 72 in 2020, will resign effective at our annual meeting. We expect Mr. Madison,Ms. Roberts, who will turn 72 prior to our 20212025 annual meeting, willis required to resign effective at thatour 2025 annual meeting and therefore serve his three-year term. Additionally, we expect Mr. Vering, who will turn 72 prior to our 2022 annual meeting, will resign effective at that annual meeting and therefore serve only two years of hisher term. As previously announced, Mr. Emery is not standing for re-election and plans to retire as an officer and employee of the company effective May 1, 2020.
If, at the time of the annual meeting, any of such nominees are unable to stand for election, the Board of Directors may designate a substitute or reduce the number of directors to no less than nine. In that case, shares represented by proxies may be voted for a substitute director nominated by the Board. We do not expect that any nominee will be unavailable or unable to serve.
The Board and the Governance Committee believe that the combination of the various qualifications, skills and experiences of the directors contribute to an effective and well-functioning Board, and that, individually and as a whole, the directors possess the necessary qualifications to provide effective oversight of the business and quality advice to the Company’s management. Included in each director’s biography below is an assessment of the specific qualifications, attributes, skills and experience that have led to the conclusion that each individual should serve as a director in light of our current business and structure.
The Board of Directors recommends a vote
Director Nominee | Class | Year Term Expiring |
Scott M. Prochazka | II | 2026 |
Rebecca B. Roberts | II | 2026 |
Teresa A. Taylor | II | |
2026 |
6
DIRECTOR BIOGRAPHIES
| ||||
Linden R. Evans | Outside Directorships: | |
President and Chief Executive Officer of the Company | None | |
Director since:2018 | ||
Director Class:III, term expiring in 2024 | ||
Age:60 | ||
Summary: | ||
Mr. Evans has been President and Chief Executive Officer of the Company since January 1, | ||
Skills Relevant to BHC: | ||
As CEO of Black Hills Corporation, Mr. Evans brings historic institutional knowledge of the Company and |
| Barry M. Granger | Standing Board Committees: |
Managing Partner and Co-Founder of Vonbar Investments LLC | Audit Committee | |
Director since:2020 | ||
Director Class:III, term expiring in 2024 | Outside Directorships: | |
Age:63 | None | |
Summary: | ||
Mr. Granger has over 35 years of experience in the chemical, materials and industrial markets. He is the Managing Partner of Vonbar Investments LLC, a consulting firm he founded in 2018. He held roles as Vice President of Government Marketing and Government Affairs at DuPont from 2010 to 2017 and Vice President and General Manager, Tyvek® from 2007 to 2010. Early in his career, he served as the Executive Assistant to the Chairman and CEO of DuPont. He has held a variety of leadership positions with increasing responsibilities in operations, product management, sales and marketing. | ||
Skills Relevant to BHC: | ||
Mr. Granger’s leadership roles in the areas of governmental affairs and operations offer the Board insight regarding oversight of operations, regulatory affairs, and safety. |
7
| Tony A. Jensen | Standing Board Committees: |
Retired Director, President and Chief Executive Officer of Royal Gold, Inc. | Compensation Committee | |
Director since:2019 | ||
Director Class:III, term expiring in 2024 | Outside Directorships: | |
Age:60 | None | |
Summary: | ||
Mr. Jensen has over 35 years of experience in the international mining and | ||
including Director, | ||
Skills Relevant to BHC: | ||
As a former CEO of a publicly traded precious metals stream and royalty company, Mr. Jensen brings business, leadership, governance, and financial expertise that assists Board in evaluating the Company’s financial risks and strategy and capital deployment. |
| Kathleen S. McAllister | Standing Board Committees: |
Retired Director, President and Chief Executive Officer | ||
Audit Committee | ||
Director since:2019 | ||
Director Class:I, term expiring in 2025 | Outside Directorships: | |
Age:58 | Silverbow Resources, Inc. (since 2023) TMC The Metals Company Inc. (since 2022) | |
Summary: | ||
Ms. McAllister has over 30 years of experience in diverse leadership roles with global, capital intensive companies in the energy value chain. She served as Director, President and | ||
Skills Relevant to BHC: | ||
As a former CEO, CFO and Treasurer of publicly traded companies, Ms. McAllister's broad business perspective, financial acumen and experience in capital raising and allocation contributes to the Board's oversight of strategy and risk. Her experience serving as a corporate director and audit and risk committee chair on other public company boards provides a valuable perspective on the Board's role in management oversight and corporate governance. |
8
| Steven R. Mills | Standing Board Committees: |
Chairman of the Retired Public Company Financial Executive | Governance Committee | |
Director | ||
Director term expiring in 2024 | Outside Directorships: | |
Age:67 | Amyris, Inc. (since 2018) | |
Summary: | ||
Mr. Mills has more than 40 years of experience in the fields of accounting, corporate finance, strategic planning, risk management, and mergers and acquisitions. | ||
Skills Relevant to BHC: | ||
Mr. Mills brings to the Board executive leadership and |
| Robert P. Otto | Standing Board Committees: |
Owner of Bob Otto Consulting LLC | Audit Committee | |
Director since:2017 | ||
Director Class:I, term expiring in 2025 | Outside Directorships: | |
Age:63 | None | |
Summary: | ||
Since 2017, Mr. Otto has provided strategic planning and advisory services in | ||
Skills Relevant to BHC: | ||
Mr. Otto’s experience in cybersecurity and intelligence through his lengthy career with the U.S. Air Force provide the Board information technology and cybersecurity expertise. His leadership and oversight of a large workforce |
9
| Scott M. Prochazka | Standing Board Committees: |
Former Board Member, President and Chief Executive Officer of CenterPoint Energy | Compensation Committee | |
Director since:2020 | ||
Director Nominee Class:II, term expiring in 2026 | Outside Directorships: | |
Age:57 | Peridot Acquisition Corp. II (since 2021) Li-Cycle Holdings Corp. (since 2021) | |
Summary: | ||
Mr. Prochazka served as Board Member, President and Chief Executive Officer of CenterPoint Energy, a public energy delivery company with electric transmission and distribution, power generation and natural gas distribution operations, from 2014 until his retirement in 2020. Prior to that he was Chief Operating Officer from 2012 to 2013, Senior Vice President of Electric Business from 2011 to 2012, and Vice President of Gas Business Unit from 2009 to 2011. He held other management positions including Vice President Customer Care and Support Services and Vice President Texas Gas Region. Before his time at CenterPoint Energy, Mr. Prochazka held roles of increasing responsibility at Dow Chemical. Mr. Prochazka was a Board Member of Enable Midstream Partners, LP from 2014 to 2020, and Chairman from 2015 to 2017. Mr. Prochazka was previously a Board Member of Peridot Acquisition Corporation, from 2020 to 2021, where he served on the Audit and Compensation Committees. He is a Board Member of Peridot Acquisition Corp. II where he serves on the Audit and Compensation Committees, and Li-Cycle Holdings Corp. (successor to Peridot Acquisition Corp.) where he chairs the Audit Committee and serves on the Nominating/Governance Committee and the Compensation Committee. | ||
Skills Relevant to BHC: | ||
Mr. Prochazka’s executive experience as a former CEO of a publicly traded electric and gas utility company, with a market cap more than four times that of Black Hills Corporation, and leadership experience as COO of both gas and electric utility divisions, provides a valuable perspective regarding utility business operations, regulatory and governmental affairs, safety, capital deployment and risk management. |
| Rebecca B. Roberts | Standing Board Committees: |
Retired President of Chevron Pipe Line Company | Compensation Committee Governance Committee (Chair) | |
Director | ||
Director Nominee term expiring in 2026 | Outside Directorships: | |
Age:70 | AbbVie, Inc. (since 2018) MSA Safety, Inc. (since 2013) | |
Summary: | ||
Ms. Roberts has over 35 years of experience in the energy industry, including managing pipelines in North America and global pipeline projects, and managing a portfolio of power plants in the United States, Asia, and the Middle East. From 2006 until her retirement in 2011, Ms. Roberts served as the President of Chevron Pipe Line Company, a pipeline company transporting crude oil, refined petroleum products, liquefied petroleum gas, natural gas, and chemicals within the United States. From 2003 until 2006, she was the President of Chevron Global Power Generation. She | ||
Skills Relevant to BHC: | ||
Ms. Robert’s executive experience overseeing natural gas pipelines and |
10
| Mark A. Schober | Standing Board Committees: |
Retired Senior Vice President and Chief Financial Officer of ALLETE, Inc. | Audit Committee (Chair) Governance Committee | |
Director since:2015 | ||
Director Class:I, term expiring in 2025 | Outside Directorships: | |
Age:67 | None | |
Summary: | ||
Mr. Schober has more than 35 years of experience in the utility and energy industry. From 2006 until his retirement in 2014, Mr. Schober served as the Senior Vice President and Chief Financial Officer of ALLETE, Inc., a public | ||
Skills Relevant to BHC: | ||
Mr. Schober brings to the Board business and leadership experience as a former executive of a public company, regulated utility experience as a former executive of a publicly traded Midwest based energy company, and financial expertise having served as a CFO. He also provides insight to the Company regarding potential exposures and risks in these areas. |
| Teresa A. Taylor | Standing Board Committees: |
Chief Executive Officer of Blue Valley Advisors, LLC | Compensation Committee (Chair) Governance Committee | |
Director since:2016 | ||
Director Nominee Class:II, term expiring in 2026 | Outside Directorships: | |
Age:59 | T-Mobile USA, Inc. (since 2013) | |
Summary: | ||
Ms. Taylor has over 30 years of experience in the technology, media, and telecom sectors. She has been the Chief Executive Officer of Blue Valley Advisors, LLC, | ||
Skills Relevant to | ||
Ms. Taylor’s broad range of experience over her three decades-long career, including in the fields of human resources, customer support, information technology systems, and |
11
CORPORATE GOVERNANCE
Corporate Governance Guidelines
Our Board of Directors has adopted corporate governance guidelines titled “Corporate Governance Guidelines of the Board, of Directors,” which guide the operation of our Board and assist the Board in fulfilling its obligations to shareholders and other constituencies. The guidelines lay the foundation for the Board’s responsibilities, operations, leadership, organization and committee matters. The Governance Committee reviews the guidelines annually, and the guidelines may be amended at any time, upon recommendation by the Governance Committee and approval of the Board. These guidelines can be found in the “Governance” section of our website (
Board Leadership Structure
On May 1, 2020, Steven R. Mills, an independent director, was appointed Executive Chairman of the Board of Directors, effective January 1, 2019.Board. As Chairman, Mr. Evans, who had been President and Chief Operating Officer since 2016, was named President and CEO effective January 1, 2019.
As provided in our Corporate Governance Guidelines, of the Board does not have a policy on whether or not the roles of Directors, becauseChairman and CEO should be separate or combined. The Governance Committee annually reviews the appropriate leadership structure for the Company and recommends a Chairman for Board approval. While our Executive Chairman is not independent, our Board annually appoints an independent Lead Director,Bylaws and has done so since 2001. Steven R. Mills is our current Lead Director and has served in this role since May 2019. As provided in the Corporate Governance Guidelines the primary responsibilities of the Lead Director are to chair executive sessions of the independent directors,do not require that our Chairman and in conjunction with the Executive Chairman, communicate the Board’s annual evaluation of the CEO. The Lead Director, together with the independent directors, establishes the agenda for executive sessions, which areCEO positions be held at each regular Board meeting. The Lead Director serves as a liaison between the independent members ofby separate individuals, the Board believes that having separate positions and having an independent director serve as Chairman is the Executive Chairman, and the CEO, and discusses, to the extent appropriate matters raised by the independent directors in executive session. The Lead Director also consults with the Executive Chairman, and the CEO, as appropriate, regarding meeting agendas and presides over regular meetings of the Board in the absence of the Executive Chairman. This leadership structure provides consistent and effective oversight offor the Company at this time because it allows our managementCEO to focus on business operations and our Company.
Risk Oversight
Our Board oversees an enterprise risk management ("ERM") approach to risk management that supports our operational and strategic objectives. The Corporate Governance GuidelinesIt fulfills its oversight responsibilities through receipt of thequarterly reports from management regarding material risks involving strategic planning and execution, operations, physical and cybersecurity, environmental, social and governance ("ESG"), financial, legal, safety, regulatory, and human resources risks. While our full Board of Directors provide that the Board will review major risks facing our Company and the optionsretains responsibility for risk mitigation presented by management. Our Boardoversight, it delegates oversight of certain risk considerations to its committees within each of their respective areas of responsibility; however, the full Board monitors risk relating to strategic planning and execution,responsibility as well as executive succession. Financial risk oversight falls within the purview of our Audit Committee. Our Compensation Committee oversees compensation and benefit plan risks. Each committee reports to the full Board.
Our management is responsible for day-to-day risk management and operates under anour ERM program that addresses strategic, operational, financial and complianceenterprise risks. The ERM program includes practices to identify risks, assessesassess the impact and probabilitylikelihood of occurrence, and developsdevelop action plans to prevent the occurrence or mitigate the impact of the risk. The ERM program includes regular reporting to our senior management team, quarterly reporting to our Board, and includes monitoring and testing by the Chief Risk Officer and Risk Management, Compliance and Internal Audit groups.
Sustainability Oversight
We are committed to creating a cleaner energy future that builds upon our responsibility to provide the safe, reliable and economic energy that improves our customers' lives. The Chief Risk Officer reviewsBoard oversees management's execution of our sustainability objectives and receives quarterly updates from management regarding sustainability matters. Under the overall ERM program withoversight of the Board, we published our 2021 Corporate Sustainability Report in the third quarter of Directors2022. In addition to announcing significant advancements in our decarbonization journey, the Report announced a goal for our natural gas distribution system to achieve net zero emissions by 2035 and shared our progress towards our goal to reduce electric utility emission intensity 40 percent by 2030 and 70 percent by 2040. Also in the third quarter of 2022, we issued updated Edison Electric Institute and American Gas Association ESG disclosures, Natural Gas Sustainability Initiative (NGSI) disclosures, Sustainability Accounting Standards Board (SASB) disclosures, and new disclosures under the Task Force on Climate Related Financial Disclosure Index.
Cyber and Physical Security Oversight
Our Board retains oversight of cyber and physical security. Our Chief Information Officer provides the Board quarterly reports that summarize material security risks and the measures that have been put in place to mitigate the associated risks. These reports address a variety of topics including updates on strategic initiatives, industry trends, threat vulnerability assessments, and efforts to prevent, detect and respond to internal and external critical threats.
12
Human Capital Management Oversight
Primary responsibility for oversight of human capital management rests with our Compensation Committee. As part of its oversight, the Committee reviews regular basis.
Succession Planning Oversight
Our Board is actively engaged in succession planning for our key executive positions to ensure a strong bench of future leaders. To assist the divisionBoard, our CEO and our Senior Vice President - Chief Human Resources Officer perform talent reviews and discuss succession planning and leadership development. Semi-annually, their assessment of risk management responsibilities described above is an effective approachsenior executive talent, including potential of such talent to succeed our CEO or other executive officers, readiness for addressing the risks facingsuccession and development opportunities are presented to our Company.
Director Nominees
The Governance Committee uses a variety of methods for identifying and evaluating nominees for director. The Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event vacancies are anticipated, or otherwise arise, the Governance Committee considers various potential candidates for director. Board candidates are considered based upon various criteria, including diversity;diversity of gender, race and ethnicity; business, administrative and professional skills or experiences; an understanding of relevant industries, technologies and markets; financial literacy; independence status; the ability and willingness to contribute time and special competence to Board activities; personal integrity and independent judgment; and a commitment to enhancing shareholder value. The Governance Committee considers these and other factors as it deems appropriate, given the needs of the Board. Our goal is a balanceddiverse, talented, and diversehighly engaged Board, with members whose skills, background and experience are complementary and, together, cover the spectrum of areas that impact our business currently and in the future. The Governance Committee considers candidates for Board membership suggested by a variety of sources, including current or past Board members, the use of third-party executive search firms, members of management, and shareholders. Any shareholder may make recommendations for consideration by the Governance Committee for membership on the Board by sending a written statement of the qualifications of the recommended individual to the Corporate Secretary. There are no differencesThe Committee evaluates all director candidates in the same manner by whichusing the Committee evaluates director candidates recommended by shareholders from those recommended by other sources.
Shareholders who intend to nominate persons for election to the Board of Directors must provide timely written notice of the nomination in accordance with Article I, Section 9 of our Bylaws. Generally, our Corporate Secretary must receive the written notice at our executive offices at 7001 Mount Rushmore Road, P.O. Box 1400, Rapid City, South Dakota 57709, not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of shareholders. For the 20212024 shareholder meeting, those dates are January 28, 202126, 2024 and December 29, 2020.27, 2023. The notice must set forthinclude at a minimum the information set forth in Article I, Section 9 of our Bylaws, including the shareholder’s identity, and status, contingent ownership interests, description of any agreement made with others acting in concert with respect to the nomination, specific information about the nominee and certain representations by the nominee to us.
Board Independence
In accordance with NYSE rules, the Board through its Governance Committee, affirmatively determines the independence of each director and director nominee in accordance with guidelines it has adopted, which include all elements of independence set forth in the NYSE listing standards. These guidelines are contained in our Policy for Director Independence, which can be found in the "Governance" section of our website (www.blackhillscorp.com/investor-relations/corporate-governance). Based on these standards, the Governance Committee determined that each of the following non-employee directors is independent and has no relationship with us, except as a director and shareholder: Barry M. Granger, Tony A. Jensen, Kathleen S. McAllister, Steven R. Mills, Robert P. Otto, Scott M. Prochazka, Rebecca B. Roberts, Mark A. Schober, and Teresa A. Taylor. In addition, based upon these standards, the Governance Committee determined that Mr. Evans is not independent because he is an officer of the Company.
Director Resignation Policies
The Corporate Governance Guidelines require members of the Board to submit a letter of resignation for consideration by the Board in certain circumstances. The Corporate Governance Guidelines include a plurality plus voting policy. Pursuant to the policy, any nominee for election as a director in an uncontested election who receives a greater number of votes “Withheld” from his or her election than votes “For” his or her election will promptly tender his or her resignation as a director to the Chairman of the Board following certification of the election results. Broker non-votes will not be deemed to be votes “For” or “Withheld” from a director’s election for purposes of the policy. The Governance Committee (without the participation of the affected director) will consider each resignation tendered under the policy and recommend to the Board whether to accept or reject it. The Board will then take the appropriate action on each tendered resignation, taking into account the Governance Committee’s recommendation. The Governance Committee in making its recommendation, and the Board in making its decision, may consider any factors or other information that it considers appropriate, including the reasons why the
13
Governance Committee believes shareholders “Withheld” votes for election from such director and any other circumstances surrounding the “Withheld” votes, any alternatives for curing the underlying cause of the “Withheld” votes, the qualifications of the tendering director, his or her past and expected future contributions to us and the Board, and the overall composition of the Board, including whether accepting the resignation would cause us to fail to meet any applicable SEC or NYSE requirements. The Board will publicly disclose its decision and rationale by filing a Form 8-K with the SEC on Form 8-K its decision and, if applicable, its rationale within 90 days after receipt of the tendered resignation.
The Corporate Governance Guidelines also require members of the Board to tender a letter of resignation in the event of a change in professional responsibilities that may directly or indirectly impact that boardBoard member’s ability to fulfill directorship obligations. The Board is not obligated to accept suchthat resignation. The Governance Committee will review the affected member’s service and qualifications and recommend to the Board the continued appropriateness of Board membership under the circumstances.
Codes of Lone Mountain Investments, Inc., effective December 31, 2019,Business Conduct and submitted a letter of resignation
The Governance Committee determined Mr. Vering’s change in employment status would not impact his ability to perform his duties as a director and recommended the Board not accept his tendered resignation. Acting on the Committee’s recommendation, the Board declined to accept Mr. Vering’s resignation.
Certain Relationships and Related Party Transactions
We recognize related party transactions can present potential or actual conflicts of interest and create the appearance that decisions are based on considerations other than the best interests of us and our shareholders. Accordingly, as a general matter, it is our preference to avoid related party transactions. Nevertheless, we recognize that there are situations where related party transactions may be in, or may not be inconsistent with, the best interests of us and our shareholders, including but not limited to situations where we may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources or when we provide products or services to related parties on an arm’s length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally.
Therefore, our Board of Directors has adopted a policy for the review of related party transactions. This policy requires directors and officers to promptly report to our General CounselVice President - Governance all proposed or existing transactions in which the Company and they, or persons related to them, are parties or participants. Our General CounselVice President - Governance presents those transactions to our Governance Committee those transactions that may require disclosure pursuant to Item 404 of Regulation S-K (typically, those transactions that exceed $120,000).Committee. Our Governance Committee reviews the material facts presented and either approves or disapproves entry into the transaction. In reviewing the transaction, the Governance Committee considers the following factors, among other factors it deems appropriate: (i) whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; (ii) the extent of the related party’s interest in the transaction; and (iii) the impact on a director’s independence in the event the related party is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer. There were no reportable related party transactions in 2019.
Communications with the Board
We value the views and input of our shareholders and believe that fostering productive dialogue with our shareholders contributes to our long-term success. Shareholders and others interested in communicating directly with the Lead Director,Chairman, with the independent directors as a group, or the Board of Directors may do so in writing to the Lead Director,Chairman, Black Hills Corporation, 7001 Mount Rushmore Road, P.O. Box 1400, Rapid City, South Dakota 57709.
14
MEETINGS AND COMMITTEES OF THE BOARD
THE BOARD OF DIRECTORS
Our Board of Directors held four in-personnine meetings and one telephonic meeting during 2019.2022. Each regularly scheduled meeting of the Board includes an executive session of only independent directors. We encourage our directors to attend the annual shareholders’ meeting. During 2019,2022, each current director attended at least 75 percent of the combined total of Board meetings and Committee meetings on which the director served andserved. In addition, all directors then serving attended the 20192022 annual meeting of shareholders.
COMMITTEES OF THE BOARD
Our Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. TheThose standing committees are currently the Audit Committee, the Compensation Committee and the Governance Committee. In accordance with the NYSE listing standards and our Corporate Governance Guidelines, the Audit, Compensation and Governance Committees are comprised solely of independent directors. Each committee operates under a charter, which is available on our website at
AUDIT COMMITTEE | ||||
Committee Chair: | ||||
Mark A. Schober | Total Meetings Held | |||
Additional Committee Members: | In-Person | Telephonic | ||
Steven R. Mills, Robert P. Otto, John B. Vering | 4 | 5 | ||
Primary Responsibilities | ||||
© | assist the Board in fulfilling its oversight responsibility to our shareholders relating to the quality and integrity of our accounting, auditing and financial reporting practices; | |||
© | oversee the integrity of our financial statements, financial reporting process, systems of internal controls and disclosure controls regarding finance, accounting and legal compliance; | |||
© | review areas of potential significant financial risk to us; | |||
© | review consolidated financial statements and disclosures; | |||
© | appoint an independent registered public accounting firm for ratification by our shareholders; | |||
© | monitor the independence and performance of our independent registered public accountants and internal auditing department; | |||
© | pre-approve all audit and non-audit services provided by our independent registered public accountants; | |||
© | review the scope and results of the annual audit, including reports and recommendations of our independent registered public accountants; | |||
© | review the internal audit plan, results of internal audit work and our process for monitoring compliance with our Code of Business Conduct and other policies and practices established to ensure compliance with legal and regulatory requirements; and | |||
© | periodically meet, in private sessions, with our Chief Auditor, Chief Financial Officer, Chief Compliance Officer, other management, and our independent registered public accounting firm. |
COMPENSATION COMMITTEE | ||||
Committee Chair: | ||||
Michael H. Madison | Total Meetings Held | |||
Additional Committee Members: | In-Person | Telephonic | ||
Rebecca B. Roberts, Teresa A. Taylor, Thomas J. Zeller | 2 | 3 | ||
Primary Responsibilities | ||||
© | discharge the Board of Directors’ responsibilities related to executive and director compensation philosophy, policies and programs; | |||
© | perform functions required of directors in the administration of all federal and state laws and regulations pertaining to executive employment and compensation; | |||
© | consider and recommend for approval by the Board all executive compensation programs including executive benefit programs and stock ownership plans; and | |||
© | promote an executive compensation program that supports the overall objective of enhancing shareholder value. | |||
Audit Committee | Primary Responsibilities | |
9 Meetings in 2022 | ©Assist the Board in fulfilling its oversight responsibility to our shareholders relating to the quality and integrity of our accounting, auditing and financial reporting processes; | |
Members: Mark A. Schober (Chair) Barry M. Granger Kathleen S. McAllister Robert P. Otto | ©Oversee the integrity of our financial statements, financial reporting systems of internal controls and disclosure controls regarding finance, accounting and legal compliance; | |
©Review areas of potential significant financial risk to us; | ||
© Review consolidated financial statements and disclosures; | ||
©Appoint an independent registered public accounting firm for ratification by our shareholders; | ||
© Monitor the independence and performance of our independent registered public accountants and internal auditing department; | ||
©Pre-approve all audit and non-audit services provided by our independent registered public accountants; | ||
©Review the scope and results of the annual audit, including reports and recommendations of our independent registered public accountants; | ||
©Review the internal audit plan results of internal audit work and our process for monitoring compliance with our Code of Business Conduct and other policies and practices established to ensure compliance with legal and regulatory requirements; and | ||
Independence: 100% | ||
©Periodically meet, in private sessions, with our VP - Internal Audit, Chief Financial Officer, Chief Compliance Officer, other management, and our independent registered public accounting firm. | ||
Committee Report: Page 23 of this Proxy Statement | In accordance with the rules of the NYSE, all of the members of the Audit Committee are financially literate. In addition, the Board determined that Ms. McAllister and Mr. Schober have the requisite attributes of an “audit committee financial expert” as provided in regulations promulgated by the SEC, and that such attributes were acquired through relevant education and/or experience. |
15
Compensation Committee | Primary Responsibilities | |
5 Meetings in 2022 Members: Teresa A. Taylor (Chair) Tony A. Jensen Scott M. Prochazka Rebecca B. Roberts Independence: 100% Committee Report: Page 36 of this Proxy Statement | ©Discharge the Board's responsibilities related to executive and director compensation philosophy, policies and programs; | |
©Perform functions required of directors in the administration of all federal and state laws and regulations pertaining to executive employment and compensation; | ||
©Consider and recommend for approval by the Board all executive compensation programs including executive benefit programs and stock ownership plans; | ||
©Promote an executive compensation program that supports the overall objective of enhancing shareholder value; and | ||
© Provide oversight of Company culture, diversity and inclusion, human rights, pay equity, and employee engagement. | ||
The Compensation Committee has authority under its charter to retain compensation consultants and other advisors as the Committee may deem appropriate in its sole discretion. The Committee engaged Meridian Compensation Partners, LLC (Meridian), an independent consulting firm, to conduct an annual review of our 2022 total compensation program for executive officers. The Committee reviewed the independence of Meridian and the individual representatives of Meridian who served as consultants to the Committee, in accordance with the SEC and NYSE requirements. The Compensation Committee concluded that Meridian was independent and Meridian’s performance of services raised no conflict of interest. The Committee’s conclusions were based in part on a report that Meridian provided to the Committee intended to reveal any potential conflicts of interest and a schedule of the type and amount of non-executive compensation services provided by Meridian to the Company. During 2022, the cost of these non-executive compensation services was less than $25,000. | ||
Compensation Committee Interlocks
. None of our executive officers serve as a member of a board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board or on our Compensation Committee.GOVERNANCE COMMITTEE | ||||
Committee Chair: | ||||
Rebecca B. Roberts | Total Meetings Held | |||
Additional Committee Members: | In-Person | Telephonic | ||
Michael H. Madison, Steven R. Mills, John B. Vering, Thomas J. Zeller | 3 | 1 | ||
Primary Responsibilities | ||||
© | assess the size of the Board and membership needs and qualifications for Board membership; | |||
© | identify and recommend prospective directors to the Board to fill vacancies; | |||
© | review and evaluate director nominations submitted by shareholders, including reviewing the qualifications and independence of shareholder nominees; | |||
© | consider and recommend existing Board members to be renominated at our annual meeting of shareholders; | |||
© | consider the resignation of an incumbent director who makes a principal occupation change (including retirement) or who receives a greater number of votes "Withheld" than votes "For" in an uncontested election of directors and recommend to the Board whether to accept or reject the resignation; | |||
© | establish and review guidelines for corporate governance; | |||
© | recommend to the Board for approval committee membership and chairs of the committees; | |||
© | recommend to the Board for approval an independent director to serve as a Lead Director; | |||
© | review the independence of each director and director nominee; | |||
© | administer an annual evaluation of the performance of the Board and each Committee and a biennial evaluation of each individual director; and | |||
© | ensure that the Board oversees the evaluation and succession planning of management. |
Governance Committee | Primary Responsibilities | |
3 Meetings in 2022 Members: Rebecca B. Roberts (Chair) Steven R. Mills Teresa A. Taylor Mark A. Schober Independence: 100% | ©Assess the size of the Board and qualifications for Board membership; | |
©Identify and recommend prospective directors to the Board to fill vacancies; | ||
©Review and evaluate director nominations submitted by shareholders, including reviewing the qualifications and independence of shareholder nominees; | ||
©Consider and recommend existing Board members to be renominated at our annual meeting of shareholders; | ||
© Consider the resignation of an incumbent director who makes a principal occupation change (including retirement) or who receives a greater number of votes "Withheld" than votes "For" in an uncontested election of directors and recommend to the Board whether to accept or reject the resignation; | ||
©Establish and review guidelines for corporate governance; | ||
© Recommend to the Board for approval committee membership and chairs of the committees; | ||
©Recommend to the Board for approval a Chairman or an independent director to serve as a Lead Director; | ||
©Review the independence of each director and director nominee; | ||
© Administer an annual evaluation of the performance of the Board and each Committee and a biennial evaluation of each individual director; | ||
© Ensure that the Board oversees the evaluation and succession planning of management; | ||
© Oversee the reporting framework the Company utilizes to track and monitor progress associated with ESG activities; and | ||
© Oversee company political engagement. |
16
DIRECTOR COMPENSATION
DIRECTOR FEES
Compensation to our non-employee directors consists of cash retainers for Board members, Committee members, the Lead DirectorBoard Chairman and Committee Chairs. In addition,Prior to January 1, 2022, the Board members receivereceived their equity compensation in the form of common stock equivalents that are deferred until after they leave the Board. Effective January 1, 2022, the Board adopted a new Non-Employee Director Equity Compensation Plan that provides equity compensation to our Board members in the form of restricted stock units and changed the date of the annual equity grant to May to better align with the timing of director elections. For the period of January 1, 2022 through April 30, 2022, the Board members received a pro rata amount of equity compensation in the form of restricted stock units. On May 1, 2022, Board members received an annual equity award of restricted stock units that will vest at the 2023 annual meeting. Dividend equivalents accrue on the common stock equivalents.equivalents and restricted stock units. We do not pay meeting fees.
In setting non-employee director compensation, the Compensation Committee recommends the form and amount of compensation to the Board, of Directors, which makes the final determination. In considering and recommending the compensation of non-employee directors, the Compensation Committee considers such factors as it deems appropriate, including historical compensation information, level of compensation necessary to attract and retain non-employee directors meeting our desired qualifications and market data. In the review of director compensation in 2019, the Compensation Committee reviewed the NACD 2018-2019 Director Compensation Report and proxy2022, Meridian completed a market compensation review of our peer group data to provide market information on non-employeecompanies' director compensation including compensation structure, annual board and committee retainers, committee chair fees, and stock-based compensation.fees. Based on this review, the cash retainer wasand equity pay were increased effective JanuaryMay 1, 20202022, to more closely align with the median director compensation for our peer utility companies. The fee structure for director fees in 2019 and the new fees effective January 1, 2020 are2022 is as follows:
2019 Fees | Fees Effective January 1, 2020 | |||||
Cash | Common Stock Equivalents | Cash | Common Stock Equivalents | |||
Board Retainer | $80,000 | $105,000 | $85,000 | $105,000 | ||
Lead Director Retainer | $25,000 | $25,000 | ||||
Committee Chair Retainer | ||||||
Audit Committee | $15,000 | $15,000 | ||||
Compensation Committee | $10,000 | $10,000 | ||||
Governance Committee | $7,500 | $7,500 | ||||
Committee Member Retainer | ||||||
Audit Committee | $10,000 | $10,000 | ||||
Compensation Committee | $7,500 | $7,500 | ||||
Governance Committee | $7,500 | $7,500 |
|
| Fees Effective |
|
| Fees Effective |
| ||||||||||
|
| Cash |
|
| Restricted Stock Units |
|
| Cash |
|
| Restricted Stock Units |
| ||||
Board Retainer |
| $ | 85,000 |
|
| $ | 105,000 |
|
| $ | 95,000 |
|
| $ | 120,000 |
|
Board Chairman |
| $ | 100,000 |
|
|
|
|
| $ | 100,000 |
|
|
|
| ||
Committee Chair Retainer |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Audit Committee |
| $ | 15,000 |
|
|
|
|
| $ | 15,000 |
|
|
|
| ||
Compensation Committee |
| $ | 12,500 |
|
|
|
|
| $ | 12,500 |
|
|
|
| ||
Governance Committee |
| $ | 10,000 |
|
|
|
|
| $ | 10,000 |
|
|
|
| ||
Committee Member Retainer |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Audit Committee |
| $ | 10,000 |
|
|
|
|
| $ | 10,000 |
|
|
|
| ||
Compensation Committee |
| $ | 7,500 |
|
|
|
|
| $ | 7,500 |
|
|
|
| ||
Governance Committee |
| $ | 7,500 |
|
|
|
|
| $ | 7,500 |
|
|
|
|
The Committee did not recommend a change to director compensation for 2023.
17
DIRECTOR COMPENSATION FOR 20192022 AND COMMON STOCK EQUIVALENTS OUTSTANDING AS OF DECEMBER 31, 2019
Name(2) |
| Fees Earned or Paid in Cash | Stock Awards(3) | Total | Number of Common Stock Equivalents Outstanding at December 31, 2022(4) |
Barry M. Granger |
| $101,667 | $146,250 | $247,917 | 4,410 |
Tony A. Jensen |
| $99,167 | $146,250 | $245,417 | 12,392 |
Kathleen A. McAllister |
| $101,667 | $146,250 | $247,917 | 10,780 |
Steven R. Mills |
| $199,167 | $146,250 | $345,417 | 39,515 |
Robert P. Otto |
| $101,667 | $146,250 | $247,917 | 13,710 |
Scott M. Prochazka |
| $99,167 | $146,250 | $245,417 | 4,410 |
Rebecca B. Roberts |
| $116,667 | $146,250 | $262,917 | 26,904 |
Mark A. Schober |
| $121,667 | $146,250 | $267,917 | 18,375 |
Teresa A. Taylor |
| $119,167 | $146,250 | $265,417 | 13,548 |
John B. Vering(5) |
| $34,167 | $26,250 | $60,417 | — |
Name(2) | Fees Earned or Paid in Cash | Stock Awards(3) | Total | Number of Common Stock Equivalents Outstanding at December 31, 2019(4) | |||||||||||||
Tony A. Jensen(5) | $13,333 | $17,500 | $30,833 | 115 | |||||||||||||
Michael H. Madison | $105,000 | $105,000 | $210,000 | 12,718 | |||||||||||||
Kathleen A. McAllister (5) | $13,333 | $17,500 | $30,833 | 115 | |||||||||||||
Steven R. Mills | $116,667 | $105,000 | $221,667 | 14,104 | |||||||||||||
Robert P. Otto | $90,000 | $105,000 | $195,000 | 4,431 | |||||||||||||
Rebecca B. Roberts | $102,500 | $105,000 | $207,500 | 15,152 | |||||||||||||
Mark A. Schober | $100,000 | $105,000 | $205,000 | 6,595 | |||||||||||||
Teresa A. Taylor | $87,500 | $105,000 | $192,500 | 4,918 | |||||||||||||
John B. Vering | $105,833 | $105,000 | $210,833 | 28,007 | |||||||||||||
Thomas J. Zeller | $95,000 | $105,000 | $200,000 | 33,310 |
DIRECTOR STOCK OWNERSHIP GUIDELINES
Each member of our Board of Directors is required to apply at least 50 percent of his or her annual cash retainer toward the purchase ofhold shares of common stock, until the director has accumulated shares of common stock or common stock equivalents, or restricted stock units equal to five times the annual cash Board retainer. Currently, all of our directors have met the stock ownership guideline except for Mr. JensenMessrs. Granger and Ms. McAllister,Prochazka, who have been on the Board for less than a year.
18
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following tables settable sets forth the beneficial ownership of our common stock as of February 25, 202024, 2023 for each director, each executive officer named in the Summary Compensation Table, all of our directors and executive officers as a group and each person or entity known by us to beneficially own more than five percent of our outstanding shares of common stock. Beneficial ownership includes shares a director or executive officer has or shares the power to vote or transfer. There were no stock options outstanding for any of our directors or executive officers as of February 25, 2020.
Except as otherwise indicated by footnote below, we believe that each individual or entity named has sole investment and voting power with respect to the shares of common stock indicated as beneficially owned by that individualindividual.
Name of Beneficial Owner (1) |
| Shares of |
|
| Directors |
|
| Total |
|
| Percentage | |||
Outside Directors |
|
|
|
|
|
|
|
|
|
|
| |||
Barry M. Granger |
|
| 2,382 |
|
|
| 2,028 |
|
|
| 4,410 |
|
| * |
Tony A. Jensen |
|
| 8,700 |
|
|
| 3,692 |
|
|
| 12,392 |
|
| * |
Kathleen S. McAllister |
|
| 7,089 |
|
|
| 3,692 |
|
|
| 10,781 |
|
| * |
Steven R. Mills |
|
| 20,318 |
|
|
| 19,197 |
|
|
| 39,515 |
|
| * |
Robert P. Otto |
|
| 5,230 |
|
|
| 8,480 |
|
|
| 13,710 |
|
| * |
Scott M. Prochazka |
|
| 2,382 |
|
|
| 2,028 |
|
|
| 4,410 |
|
| * |
Rebecca B. Roberts |
|
| 6,546 |
|
|
| 20,358 |
|
|
| 26,904 |
|
| * |
Mark A. Schober |
|
| 7,499 |
|
|
| 10,877 |
|
|
| 18,375 |
|
| * |
Teresa A. Taylor |
|
| 4,529 |
|
|
| 9,019 |
|
|
| 13,548 |
|
| * |
|
|
|
|
|
|
|
|
|
|
|
| |||
Named Executive Officers |
|
|
|
|
|
|
|
|
|
|
| |||
Linden R. Evans |
|
| 141,373 |
|
|
| - |
|
|
| 141,373 |
|
| * |
Brian G. Iverson |
|
| 39,704 |
|
|
| - |
|
|
| 39,704 |
|
| * |
Erik D. Keller |
|
| 8,083 |
|
|
| - |
|
|
| 8,083 |
|
| * |
Richard W. Kinzley |
|
| 51,828 |
|
|
| - |
|
|
| 51,828 |
|
| * |
Jennifer C. Landis |
|
| 20,237 |
|
|
| - |
|
|
| 20,237 |
|
| * |
All directors and executive officers as a group (14 persons) |
|
| 325,899 |
|
|
| 79,371 |
|
|
| 405,270 |
|
| * |
* Represents less than one percent of the common stock outstanding.
Name of Beneficial Owner(1) | Shares of Common Stock Beneficially Owned(2) | Directors Common Stock Equivalents(3) | Total | Percentage | |||||||||
Outside Directors | |||||||||||||
Tony A. Jensen | 176 | 115 | 291 | * | |||||||||
Michael H. Madison | 15,506 | 12,718 | 28,224 | * | |||||||||
Kathleen S. McAllister | 176 | 115 | 291 | * | |||||||||
Steven R. Mills | 13,127 | 14,104 | 27,231 | * | |||||||||
Robert P. Otto | 2,095 | 4,431 | 6,526 | * | |||||||||
Rebecca B. Roberts | 4,691 | 15,152 | 19,843 | * | |||||||||
Mark A. Schober | 3,241 | 6,595 | 9,836 | * | |||||||||
Teresa A. Taylor | 2,201 | 4,918 | 7,119 | * | |||||||||
John B. Vering | 11,022 | 28,007 | 39,029 | * | |||||||||
Thomas J. Zeller | 10,684 | 33,310 | 43,994 | * | |||||||||
Named Executive Officers | |||||||||||||
Scott A. Buchholz | 40,131 | 40,131 | * | ||||||||||
David R. Emery | 101,346 | 101,346 | * | ||||||||||
Linden R. Evans | 119,684 | 119,684 | * | ||||||||||
Brian G. Iverson | 28,730 | 28,730 | * | ||||||||||
Richard W. Kinzley | 44,365 | 44,365 | * | ||||||||||
All directors and executive officers as a group (18 persons) | 438,697 | 119,466 | 558,163 | 1.0% |
19
PRINCIPAL SHAREHOLDERS
Set forth in the table below is information about the number of shares held by persons we know to be the beneficial owners of more than 5% of the issued and outstanding Common Stock.
Name and Address |
| Shares of Common Stock Beneficially Owned |
|
| Percentage | |
|
|
|
|
|
| |
BlackRock, Inc.(1) |
|
|
|
|
| |
55 East 52nd Street |
|
| 10,877,391 |
|
| 16.7% |
New York, NY 10055 |
|
|
|
|
| |
|
|
|
|
|
| |
State Street Corporation(2) |
|
|
|
|
| |
State Street Financial Center |
|
| 7,517,054 |
|
| 11.6% |
One Lincoln Street |
|
|
|
|
| |
Boston, MA 02111 |
|
|
|
|
| |
|
|
|
|
|
| |
The Vanguard Group Inc.(3) |
|
|
|
|
| |
100 Vanguard Blvd. |
|
| 6,969,311 |
|
| 10.9% |
Malvern, PA 19355 |
|
|
|
|
|
Name and Address | Shares of Common Stock Beneficially Owned | Percentage |
BlackRock, Inc.(1) | ||
55 East 52nd Street | 8,582,829 | 14.0% |
New York, NY 10055 | ||
The Vanguard Group Inc.(2) | 6,771,694 | 11.1% |
100 Vanguard Blvd. | ||
Malvern, PA 19355 | ||
State Street Corporation(3) | 4,998,712 | 8.1% |
State Street Financial Center | ||
One Lincoln Street | ||
Boston, MA 02111 | ||
Wellington Management Group LLP(4) | ||
280 Congress Street | 3,076,006 | 5.0% |
Boston, MA 02210 |
20
PROPOSAL 2 | RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The firm of Deloitte & Touche LLP, independent registered public accountants, conducted the audit of Black Hills Corporation and its subsidiaries for 2019.2022. Representatives of Deloitte & Touche LLP will be present at our annual meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.
Our Audit Committee has appointed Deloitte & Touche LLP to perform an audit of our consolidated financial statements and those of our subsidiaries for 20202023 and to render their reports. In determining whether to recommend to the full Board the reappointment of Deloitte & Touche LLP as our independent auditor, the Audit Committee considered the following:
The Board of Directors recommends ratification of the Audit Committee’s appointment of Deloitte & Touche LLP. The appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 20202023 will be ratified if the votes cast “For” exceed the votes cast “Against.” Abstentions will have no effect on such vote. If shareholder approval for the appointment of Deloitte & Touche LLP is not obtained, the Audit Committee will reconsider the appointment.
The Board of Directors recommends a vote
to serve as our independent registered public accounting firm for 2020.
21
FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following chart setscharts set forth the aggregate fees for services provided to us for the years ended December 31, 20192022 and 20182021 by our independent registered public accounting firm, Deloitte & Touche, LLP:
Audit Fees
Fees for professional services rendered for the audits of our financial statements, review of the interim financial statements included in quarterly reports, opinions on the effectiveness of our internal control over financial reporting, and services that generally only the independent auditor can reasonably provide, such as comfort letters, statutory audits, consents and assistance with and review of documents filed with the SEC.
Audit-Related Fees
Fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits and certain regulatory audits.
Tax Compliance Fees
Fees for services related to federal and state tax compliance planning and advice and review of tax returns.
Tax Planning and Advisory Fees
Fees for planning and advisory services primarily related to partnership restructuring and jurisdictional simplification and consolidation related to prior acquisitions.
The services performed by Deloitte & Touche LLPD&T were pre-approved in accordance with the Audit Committee’s pre-approval policy whereby the Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accountants. The Audit Committee will generally pre-approve a list of specific services and categories of services, including audit, audit-related, tax and other services, for the upcoming or current year, subject to a specified cost level. Any service that is not included in the approved list of services must be separately pre-approved by the Audit Committee.
22
AUDIT COMMITTEE REPORT
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities to shareholders relating to the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements regarding financial reporting, the independent auditors’ qualifications and independence, and the performance of the Company’s internal and independent auditors.
Management has the primary responsibility for the completeness and accuracy of the Company’s financial statements and disclosures, the financial reporting process, and the effectiveness of the Company’s internal control over financial reporting.
Our independent auditors, Deloitte & Touche LLP, are responsible for auditing the Company’s consolidated financial statements and expressing an opinion as to whether they are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States.
In fulfilling its oversight responsibilities for 2019,2022, the Audit Committee, among other things:
Based upon the reviews and discussions referred to above, the Audit Committee recommended to the Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 20192022 filed with the SEC. The Audit Committee also recommended and the Board reappointed Deloitte & Touche LLP as our independent registered public accounting firm for 2020.2023. Shareholders are being asked to ratify that selection at the 20202023 Annual Meeting.
THE AUDIT COMMITTEE
Mark A. Schober, Chair
Barry M. Granger
Kathleen S. McAllister
Robert P. Otto
23
PROPOSAL 3 | ADVISORY VOTE ON OUR EXECUTIVE COMPENSATION |
We are providing shareholders with an annual advisory, non-binding vote on the executive compensation of our Named Executive Officers (commonly referred to as “say on pay”). Accordingly, shareholders will vote on approval of the following resolution:
RESOLVED, that the shareholders approve, on an advisory basis, the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section, the accompanying compensation tables and the related narrative disclosure in this proxy statement.
This vote is non-binding. The Board and the Compensation Committee expect to consider the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results. At our 2022 annual meeting, shareholders owning 95 percent of the shares that were voted in this matter approved our executive compensation.
As described at length in the Compensation Discussion and Analysis section of this proxy statement, we believe our executive compensation program is reasonable, competitive and strongly focused on pay for performance. The compensation of our Named Executive Officers varies depending upon the achievement of pre-established performance goals, both individual and corporate. Our short-term incentive is tied to earnings per share, safety performance targets, and diversity training participation targets that reward our executives when they deliver targeted results. Our long-term incentive performance shares or units vest based upon the level of achievement of certain pre-established performance goals over a three-year performance period as described in the Compensation Discussion and Analysis. Through stock ownership guidelines, equity incentives and clawback provisions, we align the interests of our executives with those of our shareholders and our long-term interests. Our executive compensation policies have enabled us to attract and retain talented and experienced senior executives who can drive financial and strategic growth objectives that are intended to enhance shareholder value. We believe that the 2022 compensation of our Named Executive Officers was appropriate and aligned with our 2022 results and positions us for long-term growth.
Shareholders are encouraged to read the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosures to better understand the compensation of our Named Executive Officers.
The advisory resolution to approve executive compensation is non-binding. However, our Board will consider shareholders to have approved our executive compensation if the number of votes cast “For” the proposal exceeds the number of votes cast “Against” the proposal. Abstentions and broker non-votes will have no effect on such vote.
The Board recommends a vote FOR the advisory vote on executive compensation.
24
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTION
This Compensation Discussion and Analysis describes our overall executive compensation policies and practices and specifically explains the compensation-related actions taken with respect to 20192022 compensation for our executive officersNamed Executive Officers included in the Summary Compensation Table (our “Named Executive Officers”). Our Named Executive Officers, based on 2019 positions and compensation levels, are:
Our Named Executive Officers, based on 2022 positions and compensation levels, are:
Named Executive Officers | Title | Reference | ||
Linden R. Evans | President and Chief Executive Officer |
Evans, CEO | ||||
Richard W. Kinzley | Sr. Vice President and Chief Financial Officer | Kinzley, CFO | ||
Brian G. Iverson | Sr. Vice President, General Counsel and |
Iverson, GC | ||||
Erik D. Keller | Sr. Vice President - Chief Information Officer | Keller, CIO | ||
Jennifer C. Landis | Sr. Vice President - Chief Human Resources Officer | Landis, CHRO |
KEY EXECUTIVE COMPENSATION OBJECTIVES
Overall, our goal is to target total direct compensation (the sum of base salary, short-term incentive at target and long-term incentive at target) atto be around the median of the appropriate market when our operating results approximate average performance in relation to our peers.
Variable | 75 | % | Variable | 61 | % | |
Linked to Share Value | 50 | % | Linked to Share Value | 38 | % |
BEST PRACTICES IN EXECUTIVE COMPENSATION
Our executive compensation program reflects the following best practices, which ensure effective compensation governance and align the interests of our shareholders and executives.
What we do: | What we do not do: | ||
ü | A significant portion of executive pay is at risk by granting incentive awards that are based on continuing annual and long-term metrics tied to performance. | X | No employment agreements with executives. |
ü | Short-Term incentive plan awards are capped at 200% of target number of shares granted. | X | No change in control cash severance payments that exceed three times base salary and target bonus. |
ü | Long-Term incentive plan awards are capped at 200% of target. | X | No excise tax gross-ups for executives. |
ü | Beginning with 2023 grants, non-vested equity awards are not accelerated after a change in control unless the executive is: (1) terminated without cause or good reason; or (2) the award is not assumed or substituted by the successor company | X | No hedging or pledging of Company stock. |
ü | Executives and directors are subject to stock ownership guidelines and retentional requirements. | X | No excessive perquisites for executives. |
25
2022 COMPENSATION PRACTICE CHANGES
Our corporate financial, safety and diversity goals are used as measures to determine awards under our variable pay programs. The Compensation Committee engaged Meridian Compensation Partners, LLC (Meridian) to review our executive compensation plans and practices. Based on this review and recommendations from Meridian, the Compensation Committee made the following changes to our executive compensation practices for 2022:
Prior Executive Compensation Practice | Revised Executive Compensation Practice | Rationale for Change | ||||
Short-Term Incentive | Four performance measures including: 70% EPS from ongoing operations, as adjusted 10% Total Case Incident Rate (TCIR) 10% Preventable Motor Vehicle Incident (PMVI) 10% Employee Safety & Wellness Engagement | Five performance measures including: 70% EPS from ongoing operations, as adjusted 7.5% System Average Interruption Duration Index (SAIDI) 7.5% Hits Per Thousand (HPT) 7.5% Total Case Incident Rate (TCIR) 7.5% Diversity Training | A diversity metric was added to demonstrate our commitment to building a diverse and well-rounded employee team. The addition of the diversity goal resulted in a change to the weight of all non-financial goals. HPT was added to measure our progress in reducing stray emissions and improving pipeline safety through a reduction in the number of gas line hits. SAIDI was added as a measure of the reliability of our electric delivery to customers. | |||
Long-Term Incentive | 50% Performance Share Units and 50% Restricted Stock Awards | 60% Performance Share Awards and 40% Restricted Stock Awards | A higher performance based percentage of the long-term incentive drives long-term focus/behaviors/actions on the performance measures. |
*Beginning with our 2021-2023 Performance Share Plan
SETTING EXECUTIVE COMPENSATION
Based upon our compensation philosophy, the Committee structures our executive compensation to motivate our officersexecutives to achieve specified business goals and to reward them for achieving such goals. The key steps the Committee follows in setting executive compensation are to:
« | Analyze executive compensation market data to ensure market competitiveness |
« | ||||
Review the components of executive compensation, including base salary, short-term incentive, long-term incentive, retirement, and other benefits |
« | ||||
Review total compensation |
« | ||||
Review executive officer performance, responsibilities, experience, and other factors cited above to determine individual compensation levels |
26
EXECUTIVE COMPENSATION PROGRAM DESIGN OBJECTIVES | ||||
Attract, retain, motivate, and encourage the development of highly qualified executives | Provide competitive compensation | Promote the relationship between pay and performance | Promote corporate performance that is linked to our shareholders’ interests | Recognize and reward individual performance |
Market Compensation Analysis
The market for our senior executive talent is national in scope and is not focused on any one geographic location, area or region of the country. As such, our executive compensation should be competitive with the national market for senior executives. It should also reflect the executive’s responsibilities and duties and align with the compensation of executives at companies or business units of comparable size and complexity. The Committee gathers market information for our corporate executives from the electric and gas utility industry and also reviews general industry data as an additional reference.
The Committee selects and retains the services of an independent consulting firm to periodically:
« | Provide information regarding practices and trends in compensation programs |
« | ||||
Review and evaluate our compensation program as compared to compensation practices of other companies with similar characteristics, including size, complexity, and type of business |
« | ||||
Review and assist with the establishment of a peer group of companies |
« | ||||
Provide a compensation analysis of the executive positions |
The Committee used the services of Willis Towers WatsonMeridian to evaluate 20192022 compensation. Willis Towers WatsonIt gathered data from nationally recognized survey providers, as well as specific peer companies through public filings, which included:
The 2320 peer companies ranged in annual revenue size from approximately $563$567 million to $6.6$7.3 billion, with the median at $2.0$2.2 billion. The Company’s 20182022 revenue was $1.7$2.6 billion. The survey data was adjusted for our relative revenue size using regression analysis. Our compensation peer companies included in the analysis for 20192022 compensation decisions were:
ALLETE Inc. | IDACORP Inc. | ONE Gas, Inc. | ||
Alliant Energy Corporation | MGE Energy Inc. | Pinnacle West Capital Corp. | ||
Ameren Corporation | New Jersey Resources Corp. | PNM Resources, Inc. | ||
Atmos Energy Corp. | NiSource, Inc. | Portland General Electric Co. | ||
Avista Corp. | Northwest Natural | South Jersey Industries, Inc. | ||
CMS Energy Corp. | NorthWestern Corp. | Spire, Inc. | ||
Hawaiian Electric Ind., Inc. | OGE Energy Corp. |
Meridian validated that the above peer companies were chosen by the Compensation Committee as the Compensation Peer Group after engaging Willis Towers Watson to do an extensive review. Approximately 70 percent ofremains credible, includes size-appropriate peers, and reflects the above companies are a subset of the Edison Electric Institute (EEI) Index, our Performance Peer Group, and were chosen because they were within our revenue range of 0.3x - 4.0x our sizeCompany's industry, complexity and market capitalization range of 0.40x - 2.5x our size. The EEI Index is comprised of electric utilities and combination gas and electric utilities. In addition, approximately 30 percent of the peer companies above were added to provide a mix of gas utilities.
The salary surveys are one of several factors the Committee uses in setting appropriate compensation levels. Other factors include Company performance, individual performance and experience, the level and nature of the executive’s responsibilities, internal equity considerations and discussions with the CEO related to the other senior executive officers.
27
Components of Executive Compensation
The primary components of our executive compensation program consist of a base salary, a short-term incentive plan, and long-term incentives. In addition, we provide retirement and other benefits.
The majority of the executives’ total compensation is granted as incentive compensation. Incentive compensation is intended to motivate and relatedencourage our executives to drive performance and achieve superior results for our shareholders and align realized pay with stock performance. The Committee periodically reviews information provided by its compensation consultant to inform its determination of the appropriate level and mix of total compensation. The Committee believes that a significant portion of total target compensation should be comprised of variable compensation. In order to reward long-term executive succession plan, Mr. Emery was named Executive Chairman and Mr. Evans was named President and CEO. The changes in duties were reflected in corresponding changes ingrowth while still encouraging focus on short-term results, the Committee establishes incentive targets that emphasize long-term compensation at a greater level than short-term compensation.
Base Salary.
Base salaries for all2018 Base Salary | 2019 Base Salary | |
Emery, Chair | $820,000 | $1,300,000 |
Evans, CEO | $530,000 | $750,000 |
Kinzley, CFO | $381,000 | $420,000 |
Iverson, GC | $350,000 | $375,000 |
Buchholz, CIO | $320,000 | $340,000 |
| Base Salary |
| ||||
| 2021 |
| 2022 |
| ||
Evans, CEO | $ | 825,000 |
| $ | 860,000 |
|
Kinzley, CFO | $ | 454,000 |
| $ | 472,000 |
|
Iverson, GC | $ | 400,000 |
| $ | 416,000 |
|
Keller, CIO | $ | 340,000 |
| $ | 354,000 |
|
Landis, CHRO | $ | 316,000 |
| $ | 348,000 |
|
Short-Term Incentive.
Our Short-Term Incentive Plan is designed to recognize and reward the contributions of individual executives as well as the contributions that group performance makes to overall corporate success.2022 Short-Term Incentive Metrics | ||||||
Metric | Weighting | Definition | Rationale | |||
EPS from ongoing operations, as adjusted | 70% | GAAP earnings per share adjusted for unique one-time non-budgeted events (similar to those items adjusted for when reporting non-GAAP earnings for external purposes), including external acquisition costs, impairments, transaction financing costs, unique tax transactions, and other items the Committee deems not reflective of ongoing operations and the value created for shareholders | EPS As-adjusted is a prevalent growth metric that aligns with shareholder interests and is well understood by the executive team. | |||
Total Case Incident Rate (TCIR) | 7.5% | Injuries per 200,000 hours worked | TCIR measures occupational health and safety performance over a period of time and reinforces BHC's commitment to sending our workforce home safely every day. | |||
Electric Reliability (SAIDI) | 7.5% | System average interruption duration index | SAIDI measures average annual outage time of our electric utility segment and demonstrates our commitment to providing safe, reliable electricity to our customers. | |||
Gas Distribution Damage Prevention (HPT) | 7.5% | Hits per thousand | HPT provides a customer-focused metric for our gas utilities and is measured by gas line hits per 1,000 line locates performed. HPT is aligned with our system safety efforts and supports our environmental goals and climate strategy of achieving net-zero natural gas emissions by 2035. | |||
Diversity Training Participation | 7.5% | 95% manager level and above completion of worldview training and 100% senior management team participation in a reverse mentorship program or Employee Resource Group sponsorship | Diversity training contributes to our culture of inclusion through education, awareness, and fostering meaningful connections. |
28
2022 Short-Term Incentive Goals | ||||||
|
| Goals | ||||
Incentive |
| Threshold |
| Target |
| Maximum |
EPS from ongoing operations, as adjusted |
| $3.77 |
| $4.05 |
| $4.33 |
Total Case Incident Rate (TCIR) |
| 1.25 |
| 1.00 |
| 0.85 |
Electric Reliability (SAIDI) |
| 74.40 |
| 65.80 |
| 54.20 |
Gas Distribution Damage (HPT) |
| 2.16 |
| 2.05 |
| 1.94 |
Diversity Training Participation |
|
|
|
|
|
|
Payout percentage of target for each metric |
| 50% |
| 100% |
| 200% |
The Committee believes that these performance measures closely align interests with shareholders and foster teamwork and cooperation withinmeet the officer team. objectives of the plan, including:
« | Align the interests of the plan participants and the shareholders |
« | Motivate employees to strive to achieve superior operating results |
« | Provide an incentive reflective of core operating performance |
« | Ensure “buy-in” from participants with easily understood metrics |
« | Meet the performance objectives of the plan to achieve over time an average payout equal to market competitive levels |
The short-term incentive, after applicable tax withholding, is distributed to the officer in the form of 50 percent stock and 50 percent cash, unless the officer has met his or her stock ownership guideline, in which case he or she may elect to receive the total award in cash, after deductions and applicable tax withholding.cash. Target award levels are established as a percentage of each participant’s base salary. A target award is typically comparable toset around the averagebenchmark 50th percentile short-term incentive target award of the Performance Peer Group at the 50
The Committee approves the target level for each officer in January, which applies to performance in the upcoming plan year. Target levels are derived in part from competitivemarket data provided by the compensation consultant and in part by the Committee’s judgment regarding internal equity, retention and an individual executive’s expected contribution to the achievement of our strategic objectives. As Executive Chairman, Mr. Emery does not participate in the Company’s Short-Term Incentive Plan. The target levels for the positions held by our other Named Executive Officers are shown below:
Short-Term Incentive Target | ||||
2018 | 2019 | |||
% Amount | $ Amount | % Amount | $ Amount | |
Emery, Chair | 110% | $902,000 | — | — |
Evans, CEO | 70% | $371,000 | 100% | $750,000 |
Kinzley, CFO | 60% | $228,600 | 65% | $273,000 |
Iverson, GC | 55% | $192,500 | 60% | $225,000 |
Buchholz, CIO | 50% | $160,000 | 50% | $170,000 |
Short-Term Incentive Target |
| |||||||||||||||
|
| 2021 |
|
| 2022 |
| ||||||||||
|
| % of Base Salary |
|
| $ Amount |
|
| % of Base Salary |
|
| $ Amount |
| ||||
Evans, CEO |
|
| 100 | % |
| $ | 825,000 |
|
|
| 100 | % |
| $ | 860,000 |
|
Kinzley, CFO |
|
| 70 | % |
| $ | 317,800 |
|
|
| 70 | % |
| $ | 330,400 |
|
Iverson, GC |
|
| 60 | % |
| $ | 240,000 |
|
|
| 60 | % |
| $ | 249,600 |
|
Keller, CIO |
|
| 50 | % |
| $ | 170,000 |
|
|
| 50 | % |
| $ | 177,000 |
|
Landis, CHRO |
|
| 50 | % |
| $ | 158,000 |
|
|
| 60 | % |
| $ | 208,800 |
|
The threshold, target and maximum payout levels for our Named Executive Officers under the 20192022 Short-Term Incentive Plan are shown in the Grants of Plan BasedPlan-Based Awards in 20192022 table on page 41,38, under the heading “Estimated Future Payouts Under Non-Equity Incentive Plan Awards.”
Early in the first quarter, the Committee evaluates actual performance in relation to the prior year’s targets and approves the actual payment of awards related to the prior plan year. The Committee reserves the discretion to adjust any award, and will review and take into account individual performance, level of contribution, and the accomplishment of specific project goals that were initiated throughout the plan year. The Committee also reserves discretion with respect to any payout related to safety goals if we experience an employee or contractor fatality during the plan period.
2019 Short-Term Incentive Metrics | |||||
Guidelines | |||||
Incentive | Value | Threshold | Target | Maximum | |
EPS from ongoing operations, as adjusted | 80% | $3.10 | $3.44 | $3.78 | |
Total Case Incident Rate (TCIR) | 10% | 1.3 | 1.1 | 0.9 | |
Preventable Motor Vehicle Incidents (PMVI) | 10% | 2.0 | 1.7 | 1.4 | |
Payout percentage of target for each metric | 50% | 100% | 200% | ||
29
On January 28, 2020,24, 2023, the Committee approved a payout of 10771.48% percent of target under the 20192022 Short-Term Incentive Plan. The incentive plan payout was based for incentive plan purposes on the attainment of the following:
Incentive | 2022 Results | Goal Payout | % of Award | Payout |
EPS from ongoing operations, as adjusted | $3.97 | 86.44% | 70% | 60.51% |
Total Case Incident Rate (TCIR) | 1.39 | 0% | 7.5% | 0.00% |
Electric Reliability (SAIDI) | 70.14 | 74.77% | 7.5% | 5.61% |
Gas Distribution Damage (HPT) | 2.26 | 0% | 7.5% | 0.00% |
Diversity Training Participation | Satisfied | 71% | 7.5% | 5.36% |
Total Payout |
|
| 100% | 71.48% |
Earnings per share were $3.53 per share, which was above our target earnings per share goal, resulting in a payout of 126 percent for 80 percent of the target incentive.
Payouts under the Short-Term Incentive Plan have varied over the last 10 years as shown in the graph below.
Actual awards made to each of our Named Executive Officers under the Short-Term Incentive Plan for 20192022 are included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 39.
For the 2023 Short-Term Incentive Plan, we are maintaining our commitment to financial performance with EPS As Adjusted, are expanding our safety metric to include a slate of proactive metrics (timeliness of incident reporting and safety event reporting) and outcome-based metrics (TCIR and PMVI), adding a slate of customer experience metrics including customer perception (JD Power for Natural Gas and Electric) and customer interaction (Customer Effort and Net Promoter Score), deepening our commitment to diversity by adding metrics for diverse candidate pools and diverse interview panels, and including system reliability metrics (SAIDI) and safety metrics (Gas Pipeline Hits per Thousand) which support of our natural gas emissions reduction goal of net zero by 2035. The addition and expansion of our metrics for customer experience, diversity, and system safety and reliability to our 2023 Short-Term Incentive goals demonstrate our ongoing focus to improve our social and environmental ESG performance.
Long-Term Incentive.
« | Promote achievement of corporate goals by linking the |
« | ||||
Provide participants with an incentive for excellence in individual performance |
« | ||||
Promote teamwork among participants |
« | ||||
Motivate, retain, and attract the services of participants who make significant contributions to our success by allowing participants to share in such success |
« | ||||
Meet the performance objectives of the plan to achieve |
30
The Committee overseesapproved the administration of the Omnibus Incentive Plans with full power and authority to determine when and to whom awards will be granted, along with the type, amount and other terms and conditions of each award. metrics for our Long-term incentive plans as follows:
Long-Term Incentive Plan Metrics | |||
Plan | Metrics | Definition | Rationale |
2020-2022 Plan | TSR | Total shareholder return | Executive pay under a long-term, capital accumulation program should mirror performance in shareholder return |
60% TSR | Total shareholder return | Executive pay under a long-term, capital accumulation program should mirror performance in shareholder return | |
2021-2023 Plan and 2022-2024 Plan | 20% EPS | Diluted earnings per share calculated in accordance with GAAP, adjusted for material, non-recurring events that are approved by the Company's Audit Committee (such as impairment charges, one-time tax events, changes to accounting rules, etc.) | Aligns with long-term performance growth |
20% Average Cost to Serve | Non-fuel operations and maintenance (O&M) expense divided by gross margin calculated in accordance with GAAP, adjusted for material, non-recurring events that are approved by the Company's Audit Committee (such as impairment charges, one-time tax events, changes to accounting rules, etc.) | Drives growth goals while balancing capital deployment with increasing customer rates |
The long-term incentive compensation component is currently composed of performance sharesshare units and restricted stock.stock that vests ratably over three years. The Committee chose these components because linking executive compensation to stock price appreciation and total shareholder return is an effective way to align the interests of management with those of our shareholders. The Committee selected total shareholder return as the performance goal for thesplit between performance shares because it believes executive pay under a long-term, capital accumulation program should mirror our performance in shareholder return as compared to our Performance Peer Group of companies.
The value of long-term incentives awarded is based primarily on competitive market-based data presented by the compensation consultant to the Committee, the impact each position has on our shareholder return, executive performance, and internal pay relationships. The actual amount realized will vary from the awarded target award amounts. The Committee approved the target long-term incentive compensation level for each officer in January 2019. As Executive Chair, Mr. Emery does not participate in our long-term incentive plan.2022. The 20192022 long-term incentive was adjusted from 2021 levels for the balancesome of the Named Executive Officers to increase competitiveness within the market median compensation levels.
NEO Long-Term Incentive Target Compensation | ||
2018 | 2019 | |
Emery, Chair | $1,900,000 | — |
Evans, CEO | $840,000 | $1,500,000 |
Kinzley, CFO | $480,000 | $510,000 |
Iverson, GC | $375,000 | $390,000 |
Buchholz, CIO | $240,000 | $240,000 |
2019 NEO Long-Term Incentive Compensation as a Percentage of Base Salary | |||||
Emery, Chair | Evans, CEO | Kinzley, CFO | Iverson, GC | Buchholz, CIO | |
% of Base Salary | - | 200% | 121% | 104% | 71% |
NEO Long-Term Incentive Target Compensation |
| |||||
|
|
|
|
| ||
| 2021 |
| 2022 |
| ||
Evans, CEO | $ | 2,150,000 |
| $ | 2,300,000 |
|
Kinzley, CFO | $ | 625,000 |
| $ | 625,000 |
|
Iverson, GC | $ | 490,000 |
| $ | 600,000 |
|
Keller, CIO | $ | 250,000 |
| $ | 300,000 |
|
Landis, CHRO | $ | 275,000 |
| $ | 325,000 |
|
31
Performance shares are used to deliver 50 percent of the long-term incentive award amounts, with the remaining 50 percent delivered in the form of restricted stock that vests ratably over three years. The actual shares of performance shares and restricted stock granted in 2019 are reflected in the tables in the
Vesting of performance sharesshare units associated with TSR is based on our total shareholder return over designated performance periods as measured against our Performance Peer Group. The final value of the performance shares is based upon the number of shares of common stock that are ultimately granted, based upon our performance in relation to the performance criteria.
A summary of the TSR performance criteria for each three-year plan period is summarized in the table below.
Performance Share Plans | ||||||
Percentile Ranking for Threshold Payout of 25% of Target Shares | Percentile Ranking for Target Payout of 100% of Target Shares | Percentile Ranking for Maximum Payout Level | Possible Payout Range of Target | |||
25th percentile | 50th percentile | 90th percentile | 0-200% |
Our plans provide: (i) a threshold payout if relative TSR performance is below threshold but our TSR is at least 35 percent or higher;for the performance period; and (ii) the performance share plan payout is capped at 100 percent of target if TSR is negative. The additional provisions are intended to reduce the impact of one peer company’s performance on the relative TSR, plan, and also increase accountability and expectations related to the Company’s performance.
Vesting of shares associated with Earnings Per Share and Average Cost to Serve performance is determined based upon the Company's performance against established performance goals. The final value of the performance shares is based upon the number of shares of common stock that are ultimately earned, based upon our performance in relation to the performance criteria.
Threshold performance under the plan results in a payout of 25 percent of the target share award. Target performance results in a payout of the target share award. Maximum performance results in a payout of 200 percent of the target share award.
The performance awards and dividend equivalents, if earned, are paid 50 percent in cash and 50 percent in common stock. All payroll deductions and applicable tax withholding related to the award are withheld from the cash portion. Performance share target grant valuesawards are pro-rated for new performance periods are approved in Januarythe period of each year.
January 1, 2018 to December 31, 2020 Performance Period | January 1, 2019 to December 31, 2021 Performance Period | |||||||
Emery, Chair | 16,074 | — | ||||||
Evans, CEO | 7,107 | 11,524 | ||||||
Kinzley, CFO | 4,061 | 3,918 | ||||||
Iverson, GC | 3,173 | 2,996 | ||||||
Buchholz, CIO | 2,030 | 1,844 |
Restricted Stock.
Restricted stock awarded as long-term incentivesPayouts under the Performance Share Plan have varied significantly over the last 10 years, as shown in the eventgraph below. Each performance period extends for three years. For the recently completed performance period, January 1, 2020 to December 31, 2022, our total shareholder return was 0.14 percent, which ranked at the 26th percentile of our Performance Peer Group, resulting in a change in control.
32
The number of shares ofperformance share units and restricted stock awardedgranted in 2019 for each2022 are reflected in the tables in the Performance Share Units and Restricted Stock sections that follow.
The 2023 Long-Term Incentive plan retains our current three metrics and adds a new environmental metric measuring our progress in replacing high emitting pipeline to reduce fugitive emissions in support of our Named Executive Officers is shown below2035 net zero natural gas emissions goal.
Board and is includedManagement Roles in the Grants of Plan Based Awards in 2019 table under the heading “All Other Stock Awards: Number of Shares of Stock or Units” and “Grant Date Fair Value of Stock Awards” on page 41.
Role of Executive Officers in Compensation Decisions.
In 2022, the Senior Vice President - Chief Human Resources Officer, with the support of an external compensation consultant, reviewed all compensation programs to ensure that the programs do not encourage unnecessary risk-taking and instead encourage behaviors that support the values and operations of the Company. This review determined that the compensation programs of the Company do not encourage excessive risk-taking or have an adverse effect on the Company.The CEO annually reviews the performance of each of our senior executive officers. Based upon these performance reviews, market analysis conducted by compensation consultants and discussions with our Senior Vice President - Chief Human Resources Officer, the CEO recommends the compensation for this group of officers to the Committee.
Role of the Committee and Board in Setting Executive Compensation.
The Committee reviews and establishes the Company’s financial targets and the CEO’s goals and objectives for the year. After the end of each year, the Committee evaluates the CEO’s performance in light of established goals and objectives, with input from the other independent directors. Based upon the Committee’s evaluation and recommendation, the independent directors of the Board set the CEO’s annual compensation, including salary, short-term incentive, and long-term incentiveThe Committee reviews the CEO’s recommended compensation levels for our senior executive officers. The Committee may approve the CEO’s compensation recommendations for this group of officers or exercise its discretion inby modifying any of the recommended compensation and award levels in its review and approval process. The Committee is required to approve all decisions regarding equity awards to our officers.
Summary
In total, the Committee a Chief Executive Officer benchmarking reportbelieves that regressed the proxy data of2022 compensation actions, decisions and outcomes strongly reflect and reinforce our Compensation Peer Group. The compensation consultant also advisedphilosophy and, in particular, emphasize the Committee that pay for a new Chief Executive Officer normally starts at the lower end of the competitive rangealignment between compensation and increases to the middle of the range within a few years, depending onboth performance and experience; and Executive Chairman compensation should take into account the change in roles and responsibilities and the level of support expected to be provided to the new Chief Executive Officer, while also maintaining stability and consistency at the board level during the transition. The Committee recommended and the Board approved the following compensation packages, effective January 1, 2019:
33
Governance Best Practices
We have several governance programs in place to align our executive compensation with shareholder interests and to mitigate risks in our plans. These programs include stock ownership guidelines, clawback provisions in our short-term and long-term incentive award agreements, and the prohibition of hedging or pledging of Company stock.
STOCK OWNERSHIP GUIDELINES
The Committee has implemented stock ownership guidelines that apply to all officers based upon their level of responsibility. We believe it is important for our officers to hold a significant amount of our common stock to further align their performanceinterests with the interestinterests of our shareholders. A “retention ratio” approach to stock ownership is incorporated into the guidelines. Officers are required to retain 100 percent of all shares owned, including shares awarded through our incentive plans (net of share withholding for taxes and, in the case of cashless stock option exercises, net of the exercise price and withholding for taxes) until specific ownership goals are achieved.
The guidelines are shown below.
Stock Ownership Value as | ||
Position | Multiple of Base Salary | |
CEO | 6X | |
CFO | 4X | |
Other Senior Officers | 3X |
At least annually, the Compensation Committee reviews common stock ownership to confirm the officers have met or are progressing toward their stock ownership guidelines. Generally, an officer may not sell common stock unless he or she owns common stock in excess of 110 percent of the applicable stock ownership guideline. AllWith the exception of Mr. Keller, who has been in his role less than three years, all of our Named Executive Officers have exceeded their stock ownership guidelines.
CLAWBACK OF EXECUTIVE COMPENSATION
Our incentive compensation award agreements for restricted stock and performance shares include clawback provisions whereby the participant may be required to repay all income or gains previously realized in respect of such awards if his or her: (1) employment is terminated for cause; (2) if within one year following termination of employment, the Board determines that the participant engaged in conduct prior to his or her termination that would have constituted the basis for a termination of employment for cause; (3) if the participant makes a public statement that is materially detrimental to the interests or reputation of the Company; (4) if the employee violates in any material respect any policy or any code of ethics; or (5) if the participant engages in any fraudulent, illegal or other misconduct.
Additionally, our 2015 Amended and Restated Omnibus Incentive Plan states that clawback of compensation is subject to any policy adopted by the Board, including in response to the requirements of Section 10D of the Exchange Act, the SEC final rules thereunder, or any listing rules. We expect to amend our clawback policy and provisions in 2023 to align with the final rules adopted by the SEC and NYSE.
HEDGING POLICY
Our directors, executive officers, and employees are prohibited from engaging in hedging transactions involving, and from pledging, Company stock, including holding our stock in a margin account. This prohibition extends to all hedging transactions, including zero cost collars and forward sale contracts.
2022 BENEFITS
Retirement Benefits.
We maintain a variety of employee benefit plans and programs in which our executive officers may participate. We believe it is important to provide post-employment benefits to our executive officers and the benefits we provide approximate retirement benefits paid by other employers to executives in similar positions. The Committee periodically reviews the benefits provided, with assistance from its compensation consultant, to maintain a market-based benefits package. None of our Named Executive Officers received any pension benefit payments inSeveral years ago, we adopted a defined contribution plan design as our primary retirement plan and amended our Defined Benefit Pension Plan (“Pension Plan”) for all eligible employees to incorporate a partial freeze in which the accrual of benefits ceased for certain participants while other participants were allowed an election to continue to accrue benefits. Messrs. Emery and Buchholz areNone of our only Named Executive Officers who met the age and service requirement allowingrequirements to allow them to continue to accrue benefits under the
34
Pension Plan. Employees who no longer accrue benefits under the Pension Plan now receive Company Retirement Contributions (“Retirement Contributions”) in the Retirement Savings Plan. The Retirement Contributions are an age and service points-based calculation.
The 401(k) Retirement Savings Plan is offered to all our eligible employees and we provide matching contributions for certain eligible participants. All of our Named Executive Officers are participants in the 401(k) Retirement Savings Plan and received matching contributions in 2019.2022. The matching contributions and the Retirement Contributions are included as “All Other Compensation” in the Summary Compensation Table on page 39.
We also provide nonqualified plans to certain officers because of Internal Revenue Code limitations imposed onexecutives as approved by the qualified plans.Compensation Committee. The level of retirement benefits provided by the Pension Plan and Nonqualified Plans for each of our Named Executive Officers is reflected in the Pension Benefits for 20192022 table on page 45.40. Our contributions to the Nonqualified Deferred Compensation Plan are included in the All Other Compensation column of the Summary Compensation Table on page 3937 and the aggregate Nonqualified Deferred Compensation balance at December 31, 20192022 is reported in the Nonqualified Deferred Compensation for 20192022 table on page 48.42. These retirement benefits are explained in more detail in the accompanying narrative to the tables.
Other Personal Benefits.
We provide the personal use of a Company vehicle, executive health services, and limited reimbursement of financial planning services as benefits to our executiveCHANGE IN CONTROL PAYMENTS
Our Named Executive Officers may also receive severance benefits in the event of a change in control. We have no employment agreements with our Named Executive Officers. However, change in control agreements are common among our Compensation Peer Group and the Committee and our Board of Directors believebelieves providing these agreements to our corporate and select subsidiary officers protects our shareholder interests in the event of a change in control by helping assure management focus
In 2022, our Compensation Committee approved revised form of incentive award agreements that require a "double trigger" before accelerated equity compensation will be paid to our Named Executive Officers. The double trigger provides benefits in association with:
(1) | a change in control, and | |
(2) | (i) | a termination of employment other than by death, disability or by us for cause, or |
(ii) | a termination by the employee for good reason. |
Our change in control agreements have expiration dates and our Board of Directors conducts a thorough review of the change in control agreements at each renewal period. Our current change in control agreements expire November 15, 2022.2025. In general, our change in control agreements provide a severance payment of up to 2.99 times average compensation for Mr. Evans, and up to two times average compensation for the other Named Executive Officers, with the exception of Mr. Emery whose change in control agreement expired on November 15, 2019.Officers. The change in control agreements do not provide for excise tax gross-ups and contain a “double trigger,” providing benefits in association with:
See the Potential Payments upon Termination or Change in Control table on page 5043 and the accompanying narrative for more information regarding our change in control agreements and estimated payments associated with a change in control.
TAX AND ACCOUNTING IMPLICATIONS
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, limits the tax deductibility byplaces a corporation of compensation in excesslimit of $1 million paidin compensation per year on the amount public companies may deduct with respect to certain of itsexecutive officers. Section 162(m) as in effect prior to the enactment of tax reform legislation in December 2017 generally disallowed a tax deduction to public companies for compensation of more than $1 million paid in any taxable year to each “covered employee,” consisting of the CEO and the three other highest paid executive officers employed at the end of the year (other than the CFO). Performance-based compensation was exempt from this deduction limitation if the Company met specified requirements set forth in the Code and applicable Treasury Regulations.
35
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE |
Teresa A. Taylor, Chair |
Tony A. Jensen |
Scott M. Prochazka |
Rebecca B. Roberts |
36
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid or earned by each of our Named Executive Officers for the years ended December 31, 2019, 20182022, 2021 and 2017.2020. We have no employment agreements with our Named Executive Officers.
Name and | Year | Salary | Stock Awards(1) | Non-Equity Incentive Plan Compensation(2) | Changes in Pension Value and Nonqualified Deferred Compensation Earnings (3) | All | Total |
Linden R. Evans | 2022 | $854,167 | $2,394,776 | $610,559 | $— | $627,046 | $4,486,548 |
President and Chief | 2021 | $819,167 | $2,238,529 | $708,252 | $— | $674,960 | $4,440,908 |
Executive Officer | 2020 | $783,333 | $1,820,599 | $936,632 | $79,100 | $601,450 | $4,221,114 |
Richard W. Kinzley | 2022 | $469,000 | $650,723 | $234,669 | $— | $268,377 | $1,622,769 |
Sr. Vice President and | 2021 | $454,000 | $650,687 | $274,770 | $— | $282,323 | $1,661,780 |
Chief Financial Officer | 2020 | $448,333 | $538,547 | $348,447 | $51,945 | $263,528 | $1,650,800 |
Brian G. Iverson | 2022 | $413,333 | $624,682 | $177,270 | $— | $164,183 | $1,379,468 |
Sr. Vice President, General Counsel and | 2021 | $397,667 | $510,213 | $206,294 | $— | $170,934 | $1,285,108 |
Chief Compliance Officer | 2020 | $384,167 | $425,583 | $275,609 | $23,339 | $157,216 | $1,265,914 |
Erik D. Keller (5) | 2022 | $351,667 | $312,337 | $125,686 | $— | $109,753 | $899,443 |
Sr. Vice President - Chief Information Officer | 2021 | $338,333 | $260,251 | $146,261 | $— | $146,667 | $891,512 |
Jennifer C. Landis (6) | 2022 | $342,667 | $338,378 | $146,963 | $— | $104,278 | $932,286 |
Sr. Vice President - Chief Human Resources Officer |
|
|
|
|
|
|
|
Name and Principal Position | Year | Salary | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | Changes in Pension Value and Nonqualified Deferred Compensation Earnings (4) | All Other Compensation(5) | Total | ||||||||||
David R. Emery(1) | 2019 | $1,220,000 | $— | $— | $4,123,060 | $112,009 | $5,455,069 | ||||||||||
Executive Chairman | 2018 | $820,000 | $1,943,679 | $1,196,503 | $523,260 | $140,256 | $4,623,698 | ||||||||||
2017 | $812,000 | $1,942,843 | $560,232 | $2,155,930 | $92,930 | $5,563,935 | |||||||||||
Linden R. Evans(1) | 2019 | $713,333 | $1,541,811 | $800,400 | $110,158 | $473,600 | $3,639,302 | ||||||||||
President and Chief Executive Officer | 2018 | $530,000 | $859,369 | $492,132 | $— | $306,330 | $2,187,831 | ||||||||||
2017 | $523,333 | $818,045 | $230,428 | $59,631 | $385,948 | $2,017,385 | |||||||||||
Richard W. Kinzley | 2019 | $413,500 | $524,220 | $291,346 | $68,631 | $254,366 | $1,552,063 | ||||||||||
Sr. Vice President and Chief Financial Officer | 2018 | $381,000 | $491,036 | $303,238 | $— | $195,249 | $1,370,523 | ||||||||||
2017 | $378,000 | $465,256 | $141,983 | $36,599 | $250,572 | $1,272,410 | |||||||||||
Brian G. Iverson | 2019 | $370,833 | $400,825 | $240,120 | $31,927 | $156,990 | $1,200,695 | ||||||||||
Sr. Vice President and General Counsel | 2018 | $350,000 | $383,678 | $255,351 | $— | $123,852 | $1,112,881 | ||||||||||
2017 | $346,667 | $357,856 | $97,823 | $17,736 | $145,405 | $965,487 | |||||||||||
Scott A. Buchholz | 2019 | $336,667 | $246,720 | $181,424 | $756,325 | $134,089 | $1,655,225 | ||||||||||
Sr. Vice President and Chief Information Officer | 2018 | $320,000 | $245,514 | $212,240 | $38,765 | $111,285 | $927,804 | ||||||||||
2017 | $317,500 | $235,193 | $99,376 | $366,235 | $133,407 | $1,151,711 |
The Pension Plan and PRB were frozen effective January 1, 2010 for participants who did not satisfy the age 45 and 10 years of service eligibility. Messrs. Evans, Kinzley and Iverson and Ms. Landis did not meet the eligibility choice criteria and their Defined Pension and PRB benefits were frozen.
Our Named Executive Officers receive employer contributions into a Nonqualified Deferred Compensation Plan (“NQDC”). The NQDC employer contributions are reported in the All Other Compensation column.
| Year | Defined |
|
| PRB |
|
| Total Change in |
| |||
| 2022 | $ | (76,130 | ) |
| $ | (63,285 | ) |
| $ | (139,415 | ) |
Linden R. Evans | 2021 | $ | (7,574 | ) |
| $ | (7,745 | ) |
| $ | (15,319 | ) |
| 2020 | $ | 43,576 |
|
| $ | 35,524 |
|
| $ | 79,100 |
|
| 2022 | $ | (91,619 | ) |
| $ | (5,842 | ) |
| $ | (97,461 | ) |
Richard W. Kinzley | 2021 | $ | (11,125 | ) |
| $ | (833 | ) |
| $ | (11,958 | ) |
| 2020 | $ | 48,872 |
|
| $ | 3,073 |
|
| $ | 51,945 |
|
| 2022 | $ | (40,857 | ) |
| $ | - |
|
| $ | (40,857 | ) |
Brian G. Iverson | 2021 | $ | (4,089 | ) |
| $ | - |
|
| $ | (4,089 | ) |
| 2020 | $ | 23,339 |
|
| $ | - |
|
| $ | 23,339 |
|
Erik D. Keller | 2022 | $ | - |
|
| $ | - |
|
| $ | - |
|
| 2021 | $ | - |
|
| $ | - |
|
| $ | - |
|
Jennifer C. Landis | 2022 | $ | (22,421 | ) |
| $ | - |
|
| $ | (22,421 | ) |
37
|
| Year |
| 401(k) |
|
| Defined |
|
| NQDC |
|
| Dividends on |
|
| Other Personal |
|
| Total Other |
| ||||||
Linden R. Evans |
| 2022 |
| $ | 15,894 |
|
| $ | 24,400 |
|
| $ | 494,238 |
|
| $ | 70,379 |
|
| $ | 22,135 |
|
| $ | 627,046 |
|
Richard W. Kinzley |
| 2022 |
| $ | 18,300 |
|
| $ | 22,200 |
|
| $ | 191,442 |
|
| $ | 19,870 |
|
| $ | 16,565 |
|
| $ | 268,377 |
|
Brian G. Iverson |
| 2022 |
| $ | 16,982 |
|
| $ | 23,518 |
|
| $ | 93,487 |
|
| $ | 17,186 |
|
| $ | 13,010 |
|
| $ | 164,183 |
|
Erik D. Keller |
| 2022 |
| $ | 18,300 |
|
| $ | 12,437 |
|
| $ | 45,176 |
|
| $ | 16,181 |
|
| $ | 17,659 |
|
| $ | 109,753 |
|
Jennifer C. Landis |
| 2022 |
| $ | 15,601 |
|
| $ | 18,300 |
|
| $ | 48,353 |
|
| $ | 9,153 |
|
| $ | 12,871 |
|
| $ | 104,278 |
|
Year | Defined Benefit Plan | PRB | PEP | Total Change in Pension Value | ||||||||||||||
David R. Emery | 2019 | $333,850 | $2,621,203 | $1,168,007 | $4,123,060 | |||||||||||||
2018 | ($33,492 | ) | $377,323 | $179,429 | $523,260 | |||||||||||||
2017 | $235,056 | $1,281,606 | $639,268 | $2,155,930 | ||||||||||||||
Linden R. Evans | 2019 | $59,664 | $50,494 | $— | $110,158 | |||||||||||||
2018 | ($19,607 | ) | ($15,074 | ) | $— | ($34,681 | ) | |||||||||||
2017 | $33,178 | $26,453 | $— | $59,631 | ||||||||||||||
Richard W. Kinzley | 2019 | $64,428 | $4,203 | $— | $68,631 | |||||||||||||
2018 | ($23,542 | ) | ($1,394 | ) | $— | ($24,936 | ) | |||||||||||
2017 | $34,487 | $2,112 | $— | $36,599 | ||||||||||||||
Brian G. Iverson | 2019 | $31,927 | $— | $— | $31,927 | |||||||||||||
2018 | ($10,523 | ) | $— | $— | ($10,523 | ) | ||||||||||||
2017 | $17,736 | $— | $— | $17,736 | ||||||||||||||
Scott A. Buchholz | 2019 | $396,434 | $359,891 | $— | $756,325 | |||||||||||||
2018 | ($42,215 | ) | $80,980 | $— | $38,765 | |||||||||||||
2017 | $226,019 | $140,216 | $— | $366,235 |
Year | 401(k) Match | Defined Contributions | NQDC Contributions | Dividends on Restricted Stock | Other Personal Benefits | Total Other Compensation | |||
David R. Emery | 2019 | $16,800 | $— | $— | $35,317 | $59,892 | $112,009 | ||
Linden R. Evans | 2019 | $14,600 | $22,400 | $379,960 | $37,260 | $19,380 | $473,600 | ||
Richard W. Kinzley | 2019 | $16,800 | $20,200 | $186,257 | $16,220 | $14,889 | $254,366 | ||
Brian G. Iverson | 2019 | $16,800 | $20,200 | $98,420 | $12,519 | $9,051 | $156,990 | ||
Scott A. Buchholz | 2019 | $16,800 | $— | $92,879 | $7,907 | $16,503 | $134,089 |
GRANTS OF PLAN BASED AWARDS IN 2019
Name | Grant Date | Date of Compensation Committee Action | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | All Other Stock Awards: Number of Shares of Stock or Units(4) (#) | Grant Date Fair Value of Stock Awards(5) ($) | ||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||
David R. Emery | ||||||||||||||||||
Linden R. Evans | $375,000 | $750,000 | $1,500,000 | |||||||||||||||
1/29/19 | 1/29/19 | 2,881 | 11,524 | 23,048 | $791,814 | |||||||||||||
2/11/19 | 1/29/19 | 10,667 | $749,997 | |||||||||||||||
Richard W. Kinzley | $136,500 | $273,000 | $546,000 | |||||||||||||||
1/29/19 | 1/29/19 | 980 | 3,918 | 7,836 | $269,206 | |||||||||||||
2/11/19 | 1/29/19 | 3,627 | $255,014 | |||||||||||||||
Brian G. Iverson | $112,500 | $225,000 | $450,000 | |||||||||||||||
1/29/19 | 1/29/19 | 749 | 2,996 | 5,992 | $205,855 | |||||||||||||
2/11/19 | 1/29/19 | 2,773 | $194,970 | |||||||||||||||
Scott A. Buchholz | $85,000 | $170,000 | $340,000 | |||||||||||||||
1/29/19 | 1/29/19 | 461 | 1,844 | 3,688 | $126,701 | |||||||||||||
2/11/19 | 1/29/19 | 1,707 | $120,019 |
|
|
|
|
|
| Estimated Future Payouts |
|
| Estimated Future Payouts |
|
| Maximum |
|
| Threshold |
| ||||||||||||||||||||
Name |
| Grant |
| Date of Compensation Committee Action |
| Threshold |
|
| Target |
|
| Maximum |
|
| Threshold |
|
| Target |
|
| Maximum |
|
| All Other Stock Awards: Number of Shares of Stock or Units(4) |
|
| Grant Date |
| ||||||||
|
|
|
|
|
| $ | 430,000 |
|
| $ | 860,000 |
|
| $ | 1,720,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Linden R. Evans |
| 1/25/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
| 5,057 |
|
|
| 20,226 |
|
|
| 40,452 |
|
|
|
|
| $ | 1,474,801 |
| ||||
|
| 2/11/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,801 |
|
| $ | 919,975 |
| ||||||
|
|
|
|
|
| $ | 165,200 |
|
| $ | 330,400 |
|
| $ | 660,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Richard W. Kinzley |
| 1/25/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
| 1,374 |
|
|
| 5,496 |
|
|
| 10,992 |
|
|
|
|
| $ | 400,748 |
| ||||
|
| 2/11/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,750 |
|
| $ | 249,975 |
| ||||||
|
|
|
|
|
| $ | 124,800 |
|
| $ | 249,600 |
|
| $ | 499,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Brian G. Iverson |
| 1/25/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
| 1,319 |
|
|
| 5,276 |
|
|
| 10,552 |
|
|
|
|
| $ | 384,706 |
| ||||
|
| 2/11/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,600 |
|
| $ | 239,976 |
| ||||||
|
|
|
|
|
| $ | 88,500 |
|
| $ | 177,000 |
|
| $ | 354,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Erik D. Keller |
| 1/25/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
| 660 |
|
|
| 2,638 |
|
|
| 5,276 |
|
|
|
|
| $ | 192,349 |
| ||||
|
| 2/11/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,800 |
|
| $ | 119,988 |
| ||||||
|
|
|
|
|
| $ | 104,400 |
|
| $ | 208,800 |
|
| $ | 417,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Jennifer C. Landis |
| 1/25/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
| 715 |
|
|
| 2,858 |
|
|
| 5,716 |
|
|
|
|
| $ | 208,391 |
| ||||
|
| 2/11/22 |
| 1/25/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,950 |
|
| $ | 129,987 |
|
38
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 20192022(1)
Name | Stock Awards | |||||||
Number of Shares or Units of Stock That Have Not Vested(2) (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(2) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||
David R. Emery | 17,228 | $1,353,087 | 42,036 | $3,290,605 | ||||
Linden R. Evans | 18,176 | $1,427,543 | 41,425 | $3,248,955 | ||||
Richard W. Kinzley | 7,912 | $621,408 | 18,326 | $1,436,708 | ||||
Brian G. Iverson | 6,107 | $479,644 | 14,159 | $1,110,066 | ||||
Scott A. Buchholz | 3,857 | $302,929 | 8,945 | $701,215 |
Stock Awards |
| |||||||||||||||
Name |
| Number of Shares |
|
| Market Value |
|
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights |
|
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights |
| ||||
Linden R. Evans |
|
| 29,203 |
|
|
| 2,054,139 |
|
|
| 59,318 |
|
|
| 4,171,104 |
|
Richard W. Kinzley |
|
| 8,245 |
|
|
| 579,953 |
|
|
| 16,876 |
|
|
| 1,186,706 |
|
Brian G. Iverson |
|
| 7,131 |
|
|
| 501,595 |
|
|
| 14,206 |
|
|
| 998,932 |
|
Erik D. Keller |
|
| 6,714 |
|
|
| 472,263 |
|
|
| 6,788 |
|
|
| 477,468 |
|
Jennifer C. Landis |
|
| 3,798 |
|
|
| 267,151 |
|
|
| 7,740 |
|
|
| 544,280 |
|
(2) Vesting dates for restricted stock, |
Name | Unvested Restricted Stock | Unvested and Unearned Performance Shares | |||
# of Shares | Vesting Date | # of Shares | Vesting Date | ||
David R. Emery | 5,144 | 02/03/20 | 9,888 | 12/31/19 | |
6,042 | 02/05/20 | 32,148 | 12/31/20 | ||
6,042 | 2/5/2021(1) | ||||
Linden R. Evans | 2,166 | 02/03/20 | 4,163 | 12/31/19 | |
2,671 | 02/05/20 | 14,214 | 12/31/20 | ||
3,555 | 02/11/20 | 23,048 | 12/31/21 | ||
2,672 | 02/05/21 | ||||
3,556 | 02/11/21 | ||||
3,556 | 02/11/22 | ||||
Richard W. Kinzley | 1,232 | 02/03/20 | 2,368 | 12/31/19 | |
1,526 | 02/05/20 | 8,122 | 12/31/20 | ||
1,209 | 02/11/20 | 7,836 | 12/31/21 | ||
1,527 | 02/05/21 | ||||
1,209 | 02/11/21 | ||||
1,209 | 02/11/22 | ||||
Brian G. Iverson | 948 | 02/03/20 | 1,821 | 12/31/19 | |
1,193 | 02/05/20 | 6,346 | 12/31/20 | ||
924 | 02/11/20 | 5,992 | 12/31/21 | ||
1,193 | 02/05/21 | ||||
924 | 02/11/21 | ||||
925 | 02/11/22 | ||||
Scott A. Buchholz | 623 | 02/03/20 | 1,197 | 12/31/19 | |
763 | 02/05/20 | 4,060 | 12/31/20 | ||
569 | 02/11/20 | 3,688 | 12/31/21 | ||
764 | 02/05/21 | ||||
569 | 02/11/21 | ||||
569 | 02/11/22 |
|
| Unvested Restricted Stock |
| Unvested and Unearned Performance Shares | ||||
Name |
| # of Shares |
| Vesting Date |
| # of Shares |
| Vesting Date |
|
| 3,503 |
| 02/10/23 |
| 3,396 |
| 12/31/22 |
|
| 5,949 |
| 02/11/23 |
| 35,696 |
| 12/31/23 |
Linden R. Evans |
| 4,600 |
| 02/11/23 |
| 20,226 |
| 12/31/24 |
|
| 5,950 |
| 02/11/24 |
|
|
|
|
|
| 4,600 |
| 02/11/24 |
|
|
|
|
|
| 4,601 |
| 02/11/25 |
|
|
|
|
|
| 1,036 |
| 02/10/23 |
| 1,004 |
| 12/31/22 |
|
| 1,729 |
| 02/11/23 |
| 10,376 |
| 12/31/23 |
Richard W. Kinzley |
| 1,250 |
| 02/11/23 |
| 5,496 |
| 12/31/24 |
|
| 1,730 |
| 02/11/24 |
|
|
|
|
|
| 1,250 |
| 02/11/24 |
|
|
|
|
|
| 1,250 |
| 02/11/25 |
|
|
|
|
|
| 819 |
| 02/10/23 |
| 794 |
| 12/31/22 |
|
| 1,356 |
| 02/11/23 |
| 8,136 |
| 12/31/23 |
Brian G. Iverson |
| 1,200 |
| 02/11/23 |
| 5,276 |
| 12/31/24 |
|
| 1,356 |
| 02/11/24 |
|
|
|
|
|
| 1,200 |
| 02/11/23 |
|
|
|
|
|
| 1,200 |
| 02/11/25 |
|
|
|
|
|
| 692 |
| 02/11/23 |
| 4,150 |
| 12/31/23 |
|
| 600 |
| 02/11/23 |
| 2,638 |
| 12/31/24 |
Erik D. Keller |
| 3,530 |
| 08/05/23 |
|
|
|
|
|
| 692 |
| 02/11/24 |
|
|
|
|
|
| 600 |
| 02/11/24 |
|
|
|
|
|
| 600 |
| 02/11/25 |
|
|
|
|
|
| 326 |
| 02/10/23 |
| 316 |
| 12/31/22 |
|
| 761 |
| 02/11/23 |
| 4,566 |
| 12/31/23 |
Jennifer C. Landis |
| 650 |
| 02/11/23 |
| 2,858 |
| 12/31/24 |
|
| 761 |
| 02/11/24 |
|
|
|
|
|
| 650 |
| 02/11/24 |
|
|
|
|
|
| 650 |
| 02/11/25 |
|
|
|
|
39
OPTION EXERCISES AND STOCK VESTED DURING 2019
Name | Stock Awards(2) | ||||||
Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||
David R. Emery | 50,203 | $3,302,667 | |||||
Linden R. Evans | 18,149 | $1,197,059 | |||||
Richard W. Kinzley | 11,070 | $730,294 | |||||
Brian G. Iverson | 9,193 | $606,018 | |||||
Scott A. Buchholz | 7,270 | $479,054 |
Stock Awards(2) |
| |||||||
Name |
| Number of Shares Acquired on Vesting |
|
| Value Realized |
| ||
Linden R. Evans |
|
| 18,076 |
|
| $ | 1,214,575 |
|
Richard W. Kinzley |
|
| 5,697 |
|
| $ | 383,045 |
|
Brian G. Iverson |
|
| 4,418 |
|
| $ | 296,986 |
|
Erik D. Keller |
|
| 691 |
|
| $ | 46,062 |
|
Jennifer C. Landis |
|
| 2,036 |
|
| $ | 136,756 |
|
_______________
PENSION BENEFITS FOR 2019
Several years ago, we adopted a defined contribution plan design as our primary retirement plan and amended our Pension Plan and Nonqualified Pension Plans for all eligible employees to incorporate a partial freeze in which the accrual of benefits ceased for certain participants while other participants were allowed an election to continue to accrue benefits. Employees eligible to elect continued participation were those employees who were at least 45 years old and had at least 10 years of eligible service with us as of January 1, 2010. Messrs. Emery and Buchholz wereNone of our only Named Executive Officers who met the age and service requirement andnecessary to continue to accrue benefits under the Pension Plan and the Pension Restoration Plan. BenefitsRather, benefits under the Pension Plan and Pension Restoration Plan were frozen for Messrs. Evans, Kinzley and Iverson. In addition,Iverson and Ms. Landis. Mr. Emery received supplemental pension benefits underKeller joined the Grandfathered Pension Equalization Plan, which wasCompany after the plans were frozen effective December 31, 2004, and therefore does not participate in the 2005 Pension Equalization Plan.plans. None of our Named Executive Officers received any pension benefit payments during the fiscal year ended December 31, 2019.
The present value accumulated by each Named Executive Officer from each plan is shown in the table below:
Name |
| Plan Name |
| Number of Years of |
| Present Value of |
Linden R. Evans |
| Pension Plan |
| 8.58 |
| 275,496 |
|
| Pension Restoration Benefit |
| 8.58 |
| 219,813 |
Richard W. Kinzley |
| Pension Plan |
| 10.50 |
| 236,011 |
|
| Pension Restoration Benefit |
| 10.50 |
| 14,461 |
Brian G. Iverson |
| Pension Plan |
| 5.83 |
| 146,630 |
|
| Pension Restoration Plan |
| N/A |
| - |
Erik D. Keller |
| Pension Plan |
| N/A |
| - |
|
| Pension Restoration Plan |
| N/A |
| - |
Jennifer C. Landis |
| Pension Plan |
| 7.00 |
| 33,141 |
|
| Pension Restoration Plan |
| N/A |
| - |
Name | Plan Name | Number of Years of Credited Service(1) (#) | Present Value of Accumulated Benefit(2) ($) | ||||
David R. Emery | Pension Plan | 30.33 | $1,449,354 | ||||
Pension Restoration Benefit | 30.33 | $9,675,816 | |||||
Grandfathered Pension Equalization Plan | 24.00 | $954,414 | |||||
2005 Pension Equalization Plan | 24.00 | $4,771,612 | |||||
Linden R. Evans | Pension Plan | 8.58 | $315,624 | ||||
Pension Restoration Benefit | 8.58 | $255,319 | |||||
Richard W. Kinzley | Pension Plan | 10.50 | $289,883 | ||||
Pension Restoration Benefit | 10.50 | $18,063 | |||||
Brian G. Iverson | Pension Plan | 5.83 | $168,237 | ||||
Scott A. Buchholz | Pension Plan | 40.17 | $1,841,227 | ||||
Pension Restoration Plan | 40.17 | $1,579,132 |
40
DEFINED BENEFIT PENSION PLAN
Our Pension Plan is a qualified pension plan in which all of our Named Executive Officers are included.plan. As discussed above, several years ago we amended our Pension Plan to incorporate a partial freeze in which the accrual of benefits ceased for certain participants while other participants were allowed an election to continue to accrue benefits. Messrs. Emery and Buchholz were the only Named Executive Officers who met the age and service requirement and elected to continue with the existing plan.
The Pension Plan provides benefits at retirement based on length of employment service and average compensation levels during the highest five consecutive years of the last ten years of service. For purposes of the benefit calculation, earnings include wages and other cash compensation received from us, including any bonus, commission, unused paid time off or incentive compensation. It also includes any elective before-tax contributions made by the employee to a Company-sponsored cafeteria plan or 401(k) plan. However, it does not include any expense reimbursements, taxable fringe benefits, moving expenses or moving/relocation allowances, nonqualified deferred compensation, non-cash incentives, stock options and any
The benefit formula for the Named Executive Officers in the plan is the sum of (a) and (b) below.
(a) Credited Service after January 31, 2000 |
0.9% of average earnings (up to covered compensation), multiplied by credited service after January 31, 2000 minus the number of years of credited service before January 31, 2000 | Plus | 1.3% of average earnings in excess of covered compensation, multiplied by credited service after January 31, 2000 minus the number of years of credited service before January 31, 2000 |
Plus
Credited Service before January 31, 2000 |
1.2% of average earnings (up to covered compensation), multiplied by credited service before January 31, 2000 | Plus | 1.6% of average earnings in excess of covered compensation, multiplied by credited service before January 31, 2000 |
Pension benefits are not reduced for social security benefits. The Internal Revenue Code places maximum limitations on annual benefit amounts that can be paid under qualified pension plans. In 2019,2022, the maximum benefit payable under qualified pension plans was $225,000.$245,000. Accrued benefits become 100 percent vested after an employee completes five years of service.
Normal retirement is defined as age 65 under the plan. However, a participant may retire and begin taking unreduced benefits at age 62 with five years of service. Participants who have completed at least five years of credited service can retire and receive defined benefit pension benefits as early as age 55. However, the retirement benefit will be reduced by five percent for each year of retirement before age 62. Messrs. Emery, Evans, Iverson and BuchholzAll our Named Executive Officers who are eligible for pension benefits, with the exception of Ms. Landis, are currently age 55 or older and are entitled to early retirement benefits under this provision.
PENSION RESTORATION BENEFIT
We also have a Grandfathered Pension Equalization Plan, a 2005 Pension Equalization Plan and a Pension Restoration Benefit. These areThis is a nonqualified supplemental plans,plan, in which benefits are not tax deductible until paid. The plans areplan is designed to provide the higher paid executive employee a retirement benefit which, when added to social security benefits and the pension to be received under the Pension Plan, will approximate retirement benefits being paid by other employers to their employees in similar executive positions. The employee’s pension from the qualified Pension Plan is limited by the Internal Revenue Code. The 20192022 pension limit was set at $225,000$245,000 annually and the compensation taken into account in determining contributions and benefits could not exceed $280,000$305,000 and could not include nonqualified deferred compensation. The amount of deferred compensation paid under nonqualified plans is not subject to these limits.
As a result of the change in the Pension Plan discussed above, the benefits for certain officers (including Messrs. Evans Kinzley and Iverson)Kinzley) under the Nonqualified Pension Plans were significantly reduced because the nonqualified benefit calculations were linked to the benefits earned in the Pension Plan. The Compensation Committee amended the Nonqualified Deferred Compensation Plan to provide non-elective nonqualified restoration benefits to those affected officers who were not eligible to continue accruing benefits under the Pension Plan and Nonqualified Pension Plans.
41
Pension Restoration Benefit.
In the event that at the time of a participant’s retirement, the participant’s salary level exceeds the qualified Pension Plan annual compensation limitation ($NONQUALIFIED DEFERRED COMPENSATION FOR 2019
We have a Nonqualified Deferred Compensation Plan for a select group of management or highly compensated employees. Eligibility to participate in the plan is determined by the Compensation Committee and primarily consists of only corporate officers.
A summary of the activity in the plan and the aggregate balance as of December 31, 20192022 for our Named Executive Officers is shown in the following table. Our Named Executive Officers received no withdrawals or distributions from the plan in 2019.2022.
Name |
| Executive Contributions |
|
| Company |
|
| Aggregate Earnings in Last Fiscal |
|
| Aggregate Balance |
| ||||
Linden R. Evans |
| $ | — |
|
| $ | 494,238 |
|
| $ | (1,066,930 | ) |
| $ | 5,032,553 |
|
Richard W. Kinzley |
| $ | — |
|
| $ | 191,442 |
|
| $ | (339,072 | ) |
| $ | 2,471,582 |
|
Brian G. Iverson |
| $ | — |
|
| $ | 93,487 |
|
| $ | (257,377 | ) |
| $ | 990,144 |
|
Erik D. Keller |
| $ | 88,580 |
|
| $ | 45,176 |
|
| $ | (18,005 | ) |
| $ | 195,762 |
|
Jennifer C. Landis |
| $ | 51,277 |
|
| $ | 48,353 |
|
| $ | (109,501 | ) |
| $ | 578,513 |
|
_______________
Name |
| Supplemental Matching Contribution |
|
| Supplemental Retirement Contribution |
|
| Supplemental Target Contribution |
|
| Total |
| ||||
Linden R. Evans |
| $ | 75,345 |
|
| $ | 106,744 |
|
| $ | 312,149 |
|
| $ | 494,238 |
|
Richard W. Kinzley |
| $ | 26,298 |
|
| $ | 35,065 |
|
| $ | 130,079 |
|
| $ | 191,442 |
|
Brian G. Iverson |
| $ | 18,842 |
|
| $ | 25,122 |
|
| $ | 49,522 |
|
| $ | 93,487 |
|
Erik D. Keller |
| $ | 6,233 |
|
| $ | 6,233 |
|
| $ | 32,710 |
|
| $ | 45,176 |
|
Jennifer C. Landis |
| $ | 7,186 |
|
| $ | 7,186 |
|
| $ | 33,981 |
|
| $ | 48,353 |
|
Name | Executive Contributions | Company Contributions in Last Fiscal Year(1) | Aggregate Earnings in Last Fiscal Year(2) | Aggregate Balance at Last Fiscal Year End(3) | |||||||||||||||
David R. Emery | $— | $— | $— | $— | |||||||||||||||
Linden R. Evans | $— | $379,960 | $711,987 | $3,543,643 | |||||||||||||||
Richard W. Kinzley | $— | $186,257 | $277,096 | $1,549,260 | |||||||||||||||
Brian G. Iverson | $— | $98,420 | $120,298 | $624,021 | |||||||||||||||
Scott A. Buchholz | $— | $92,879 | $146,375 | $980,520 |
Name | Supplemental Matching Contribution | Supplemental Retirement Contribution | Supplemental Target Contribution | Total Company Contributions | ||||||||||||||||
David R. Emery | $— | $— | $— | $— | ||||||||||||||||
Linden R. Evans | $57,169 | $76,226 | $246,565 | $379,960 | ||||||||||||||||
Richard W. Kinzley | $26,144 | $34,859 | $125,254 | $186,257 | ||||||||||||||||
Brian G. Iverson | $20,733 | $27,644 | $50,043 | $98,420 | ||||||||||||||||
Scott A. Buchholz | $16,104 | $— | $76,775 | $92,879 |
Eligible employees may elect to defer up to 50 percent of their base salary, up to 100 percent of their Short-Term Incentive Plan award, and up to 100%100 percent of the cash portion of their Performance Share Plan award. In addition, the Nonqualified Deferred Compensation Plan was amended to provide certain officers whose Pension Plan benefit and Nonqualified Pension Plans’Plan benefits were frozen with non-elective supplemental matching contributions equal to 6 percent of eligible compensation in excess of the Internal Revenue Code limit plus matching contributions, if any, lost under the 401(k) Retirement Savings Plan due to nondiscrimination test results and provides non-elective supplemental age and service points-based contributions that cannot be made to the 401(k) Retirement Savings Plan due to the Internal Revenue Code limit (“Supplemental Matching and Retirement Contributions”). It also provides supplemental target contributions equal to a percentage of compensation that may differ by executive, based on the executive’s current age and length of service with us, as determined by the plans’ actuary (“Supplemental Target Contributions”). Messrs. Evans, Kinzley, Iverson, and BuchholzKeller and Ms. Landis received Supplemental Target Contributions of 20 percent, 17.5 percent, 8 percent, 8 percent, and 148 percent respectively.
42
The deferrals are deposited into hypothetical investment accounts where the participants may direct the investment of the deferrals as allowed by the plan. The investment options are the same as those offered to all employees in the 401(k) Retirement Savings Plan except for a fixed rate option, which was set at 3.912.26 percent in 2019.2022. Investment earnings are credited to the participants’ accounts. Upon retirement, we will distribute the account balance to the participant according to the participant's distribution election filed with the Compensation Committee.election. The participants may elect either a lump sum payment to be paid within 30 days of retirement (requires a six-month deferral for benefits not vested as of December 31, 2004), or annual or monthly installments over a period of years designated by the participant, but not to exceed 10 years. As of January 1, 2020,2023, Messrs. Evans, Kinzley, and Iverson and BuchholzMs. Landis are 100 percent vested in the plan.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table describes the potential payments and benefits under our compensation and benefit plans and arrangements to which our Named Executive Officers would be entitled upon termination of employment. Except for (i) certain terminations following a change in control (“CIC”), as described below, (ii) pro-rata payout of incentive compensation and the acceleration of vesting of equity awards upon retirement, death or disability, and (iii) certain pension and nonqualified deferred compensation arrangements described under Pension Benefits for 20192022 and Nonqualified Deferred Compensation for 20192022 above, there are no agreements, arrangements or plans that entitle the Named Executive Officers to severance, perquisites, or other enhanced benefits upon termination of their employment. Any agreements to provide other payments or benefits to a terminating executive officer would be in the discretion of the Compensation Committee.
The amounts shown below assume that such termination was effective as of December 31, 2019,2022, and thus includes estimates of the amounts that would be paid out to our Named Executive Officers upon their termination. The table does not include amounts such as base salary, short-term incentives and stock awards that the Named Executive Officers earned due to employment through December 31, 20192022 and distributions of vested benefits such as those described under Pension Benefits for 20192022 and Nonqualified Deferred Compensation for 2019.2022. The table also does not include a value for outplacement services because this would be a de minimis amount. The actual amounts to be paid can only be determined at the time of such Named Executive Officer’s separation from us.
|
| Cash |
|
| Incremental |
|
| Continuation |
|
| Acceleration |
|
| Total Benefits |
| |||||
Linden R. Evans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Retirement |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1,648,704 |
|
| $ | 1,648,704 |
|
Death or disability |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 3,702,843 |
|
| $ | 3,702,843 |
|
Involuntary termination |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
CIC (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Involuntary or good reason termination after CIC(2) |
| $ | 5,107,919 |
|
| $ | 1,806,000 |
|
| $ | 79,800 |
|
| $ | 3,128,961 |
|
| $ | 10,122,680 |
|
Richard W. Kinzley |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Retirement |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 469,737 |
|
| $ | 469,737 |
|
Death or disability |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1,049,691 |
|
| $ | 1,049,691 |
|
Involuntary termination |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
CIC (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Involuntary or good reason termination after CIC(2) |
| $ | 1,594,600 |
|
| $ | 521,560 |
|
| $ | 34,600 |
|
| $ | 882,870 |
|
| $ | 3,033,630 |
|
Brian G. Iverson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Retirement |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 392,295 |
|
| $ | 392,295 |
|
Death or disability |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 893,889 |
|
| $ | 893,889 |
|
Involuntary termination |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
CIC (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Involuntary or good reason termination after CIC(2) |
| $ | 1,322,666 |
|
| $ | 292,864 |
|
| $ | 31,400 |
|
| $ | 763,080 |
|
| $ | 2,410,010 |
|
Erik D. Keller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Retirement |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 198,783 |
|
| $ | 198,783 |
|
Death or disability |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 671,045 |
|
| $ | 671,045 |
|
Involuntary termination |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
CIC (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Involuntary or good reason termination after CIC(2) |
| $ | 1,055,001 |
|
| $ | 112,158 |
|
| $ | 56,300 |
|
| $ | 604,326 |
|
| $ | 1,827,785 |
|
Jennifer C. Landis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Retirement |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Death or disability |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Involuntary termination (3) |
| $ | 438,600 |
|
| $ | — |
|
| $ | 27,000 |
|
| $ | — |
|
| $ | 480,600 |
|
CIC (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Involuntary or good reason termination after CIC(2) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Cash Severance Payment | Incremental Retirement Benefit (present value)(2) | Continuation of Medical/ Welfare Benefits (present value)(3) | Acceleration of Equity Awards(4) | Total Benefits | ||||||||||||||||
Linden R. Evans | ||||||||||||||||||||
• | Retirement | — | — | — | $886,207 | $886,207 | ||||||||||||||
• | Death or disability | — | — | — | $2,293,751 | $2,293,751 | ||||||||||||||
• | Involuntary termination | — | — | — | — | — | ||||||||||||||
• | CIC | — | — | — | $1,709,190 | $1,709,190 | ||||||||||||||
• | Involuntary or good reason termination after CIC(1) | $4,485,000 | $1,530,000 | $78,900 | $1,709,190 | $7,803,090 | ||||||||||||||
Richard W. Kinzley | ||||||||||||||||||||
• | Retirement | — | — | — | $433,480 | $433,480 | ||||||||||||||
• | Death or disability | — | — | — | $1,054,889 | $1,054,889 | ||||||||||||||
• | Involuntary termination | — | — | — | — | — | ||||||||||||||
• | CIC | — | — | — | $781,598 | $781,598 | ||||||||||||||
• | Involuntary or good reason termination after CIC(1) | $1,386,000 | $436,590 | $80,700 | $781,598 | $2,684,888 | ||||||||||||||
Brian G. Iverson | ||||||||||||||||||||
• | Retirement | — | — | — | $337,189 | $337,189 | ||||||||||||||
• | Death or disability | — | — | — | $816,832 | $816,832 | ||||||||||||||
• | Involuntary termination | — | — | — | — | — | ||||||||||||||
• | CIC | — | — | — | $602,856 | $602,856 | ||||||||||||||
• | Involuntary or good reason termination after CIC(1) | $1,200,000 | $264,000 | $47,200 | $602,856 | $2,114,056 | ||||||||||||||
Scott A. Buchholz | ||||||||||||||||||||
• | Retirement | — | — | — | $214,047 | $214,047 | ||||||||||||||
• | Death or disability | — | — | — | $516,976 | $516,976 | ||||||||||||||
• | Involuntary termination | — | — | — | — | — | ||||||||||||||
• | CIC | — | — | — | $383,901 | $383,901 | ||||||||||||||
• | Involuntary or good reason termination after CIC(1) | $1,020,000 | $204,000 | $52,100 | $383,901 | $1,660,001 |
43
(5) Welfare benefits include medical coverage, dental coverage, life insurance, short-term disability coverage and long-term disability coverage. The calculation assumes that the Named Executive Officer does not take employment with another employer following termination, elects continued welfare benefits until age 55 or, if later, the end of the two year benefit continuation period (three years for Mr. Evans) and elects retiree medical benefits thereafter. Retirement is assumed to occur at the earliest eligible date. (6) In the event of death or disability, the acceleration of equity awards represents the acceleration of unvested restricted stock and the assumed payout of the pro-rata share of the performance shares for the January 1, 2021 to December 31, 2023 and January 1, 2022 to December 31, 2024 performance periods. In the event of retirement, all unvested restricted stock is |
In the event of a change in control without an involuntary or good reason termination after a change in control, the acceleration of equity awards only occurs if the awards are not assumed or replaced by the successor entity.
In the event of a change in control or an involuntary or good reason termination after a change in control, the acceleration of equity awards represents the acceleration of unvested restricted stock and the payout of the pro-rataperformance share of the performance sharesunits calculated as if the performance period ended on December 31, 20192022 for the January 1, 20182021 to December 31, 20202023, and January 1, 20192022 to December 31, 20212024 performance periods.
The valuation of the restricted stock was based upon the closing price of our common stock on December 31, 2019,2022, and the valuation of the performance sharesshare units was based on the average closing price of our common stock for the last 2010 trading days of 2019.2022. Actual amounts to be paid out at the time of separation from us may vary significantly based upon the market value of our common stock at that time.
Payments Made Upon Termination.
Regardless of the manner in which a Named Executive Officer’s employment terminates,Payments Made Upon Retirement.
In the event of retirement of a Named Executive Officer, in addition to the items identified above,Payments Made Upon Death or Disability.
In the event of death or disability of a Named Executive Officer, in addition to the items identified above for payments made upon termination,Payments Made Upon Involuntary Termination without Cause. We do not have a general severance policy applicable to executive officers, and any severance for an executive officer in connection with an involuntary termination of employment without cause requires approval by our Compensation Committee. In connection with the involuntary termination of Ms. Landis’ employment without cause, the Compensation Committee approved the terms of a separation arrangement pursuant to which we agreed to pay Ms. Landis cash severance equal to $438,600, to be paid in equal installments over a period of one year following her termination of employment, which amount approximates one year of her base salary and her 2023 target short-term incentive award prorated for the three months of 2023 when she was employed, plus $38,400. We will pay Ms. Landis $1,500 per month for 18 months (for a total of $27,000) to cover continued health care benefits and provide outplacement benefits through 2023 of up to $15,000 (which amount is included in Ms. Landis’ Total Benefits in the table above). Ms. Landis has agreed to be available for a period of one year following termination of her employment to provide information to assist in the transition of her responsibilities. In addition, all of the payments and benefits are subject to Ms. Landis’ execution of a general release and her compliance with certain post-termination restrictive covenants.
44
Payments Made Upon a Change in Control.
A change in control is defined in the agreements as:
- | a merger, consolidation, or reorganization; |
- | liquidation or dissolution; or |
- | an agreement for sale or other disposition of all or substantially all of our assets, with exceptions for transactions which do not involve an effective change in control of voting securities or Board |
In the change in control agreements, a good reason for termination that triggers payment of benefits includes:
Upon a change in control, an employment contract with Mr. Evans will have an employment contractbecome effective for a three-year period and for a two-year period for the other Named Executive Officers (NEOs) will have an employment contract for a two-year period.Officers. During this time, the executive will receive annual compensation at least equal to the highest rate in effect at any time during the one-year period preceding the change in control and will also receive employment welfare benefits, pension benefits and supplemental retirement benefits on a basis no less favorable than those received prior to the change in control. Annual compensation is defined to include amounts which are includable in the gross income of the executive for federal income tax purposes, including base salary, targeted short-term incentive, targeted long-term incentive grants and awards, and matching contributions or other benefits payable under the 401(k) Retirement Savings Plan, but exclude restricted stock awards, performance units or stock options that become vested or exercisable pursuant to a change in control.
If a Named Executive Officer’s employment is terminated prior to the end of the covered time by us for cause or disability, by reason of the Named Executive Officer’s death, or by the Named Executive Officer without good reason, the Named Executive Officer will receive all amounts of compensation earned or accrued through the termination date. If the Named Executive Officer’s employment is terminated because of death or disability, the Named Executive Officer or histheir beneficiaries will also receive a pro rata bonus equal to 100 percent of the target incentive for the portion of the year served.
45
If Mr. Evans’ employment is terminated during the employment term (other than by reason of death) (i) by us other than for cause or disability, or (ii) by Mr. Evans for a good reason, then Mr. Evans is entitled to the following benefits:
If any other NEO’s employment is terminated during the employment term (other than by death) (i) by us other than for cause or disability, or (ii) by the NEO for a good reason, then the NEO is entitled to the following benefits:
The change in control agreements do not contain a benefit to cover any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986. The executive must sign a waiver and release agreement in order to receive the severance payment.
46
PAY RATIO FOR 2019
We are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Linden Evans, our Chief Executive Officer, in 2019.
Based on the information below for the fiscal year 20192022 and calculated in a manner consistent with Item 402(u) of Regulation S-K, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was 39:1.
Name |
| Year |
| Salary |
|
| Stock |
|
| Non-Equity |
|
| Change in |
|
| All Other |
|
| Total |
| ||||||
Linden R. Evans |
| 2022 |
| $ | 854,167 |
|
| $ | 2,394,776 |
|
| $ | 610,559 |
|
| $ | — |
|
| $ | 627,046 |
|
| $ | 4,486,548 |
|
Median Employee (1) |
| 2022 |
| $ | 98,082 |
|
| $ | — |
|
| $ | 2,823 |
|
| $ | — |
|
| $ | 14,754 |
|
| $ | 115,659 |
|
Name | Year | Salary | Stock Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value(2) | All Other Compensation(3) | Total | ||||||||||||
Linden R. Evans | 2019 | $713,333 | $1,541,811 | $800,400 | $110,158 | $473,600 | $3,639,302 | ||||||||||||
Median Employee (1) | 2019 | $80,684 | $— | $7,319 | $— | $5,626 | $93,629 |
PAY VERSUS PERFORMANCE
In accordance with rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officer (“PEO”) and Non-PEO NEOs and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
|
|
|
|
|
|
|
|
| Value of initial Fixed $100 Investment Based on: |
|
|
| Company-Selected Performance Measure |
|
| ||||||||||
| Summary Compensation Table Total for Linden R. Evans (1) |
| Compensation Actually Paid to Linden R. Evans (1) (2) (3) |
| Average Summary Compensation Table Total for Non-PEO NEOs (1) |
| Average Compensation Actually Paid to Non-PEO NEOs (1) (2) (3) |
| Total Shareholder Return |
| Peer Group Total Shareholder Return (4) |
| Net income (GAAP), in millions |
| EPS from ongoing operations, as adjusted (non-GAAP) |
| (5) | ||||||||
2022 | $ | 4,486,548 |
| $ | 4,506,289 |
| $ | 1,208,492 |
| $ | 1,224,584 |
| $ | 99.15 |
| $ | 101.15 |
| $ | 270.8 |
| $ | 3.97 |
|
|
2021 | $ | 4,440,908 |
| $ | 5,151,457 |
| $ | 1,318,764 |
| $ | 1,453,664 |
| $ | 96.19 |
| $ | 117.12 |
| $ | 251.3 |
| $ | 3.74 |
|
|
2020 | $ | 4,221,114 |
| $ | 3,055,790 |
| $ | 1,565,573 |
| $ | 1,003,991 |
| $ | 80.92 |
| $ | 98.84 |
| $ | 242.8 |
| $ | 3.73 |
|
|
_______________
2020 | 2021 | 2022 |
Richard W. Kinzley | Richard W. Kinzley | Richard W. Kinzley |
Brian G. Iverson | Brian G. Iverson | Brian G. Iverson |
Stuart A. Wevik | Stuart A. Wevik | Erik D. Keller |
Scott A. Buchholz | Erik D. Keller | Jennifer C. Landis |
47
Year |
| Summary Compensation Table Total for Linden R. Evans |
|
| Exclusion of Change in Pension Value for Linden R. Evans |
|
| Exclusion of Stock Awards for Linden R. Evans |
|
| Inclusion of Pension Service Cost for Linden R. Evans |
|
| Inclusion of Equity Values for Linden R. Evans |
|
| Compensation Actually Paid to Linden R. Evans |
| ||||||
2022 |
| $ | 4,486,548 |
|
| $ | - |
|
| $ | (2,394,776 | ) |
| $ | - |
|
| $ | 2,414,517 |
|
| $ | 4,506,289 |
|
2021 |
| $ | 4,440,908 |
|
| $ | - |
|
| $ | (2,238,529 | ) |
| $ | - |
|
| $ | 2,949,078 |
|
| $ | 5,151,457 |
|
2020 |
| $ | 4,221,114 |
|
| $ | (79,100 | ) |
| $ | (1,820,599 | ) |
| $ | - |
|
| $ | 734,375 |
|
| $ | 3,055,790 |
|
Year |
| Average Summary Compensation Table Total for Non-PEO NEOs |
|
| Average Exclusion of Change in Pension Value for Non-PEO NEOs |
|
| Average Exclusion of Stock Awards and Option Awards for Non-PEO NEOs |
|
| Average Inclusion of Pension Service Cost for Non-PEO NEOs |
|
| Average Inclusion of Equity Values for Non-PEO NEOs |
|
| Average Compensation Actually Paid to Non-PEO NEOs |
| ||||||
2022 |
| $ | 1,208,492 |
|
| $ | - |
|
| $ | (481,530 | ) |
| $ | - |
|
| $ | 497,622 |
|
| $ | 1,224,584 |
|
2021 |
| $ | 1,318,764 |
|
| $ | (37,453 | ) |
| $ | (478,922 | ) |
| $ | 9,128 |
|
| $ | 642,147 |
|
| $ | 1,453,664 |
|
2020 |
| $ | 1,565,573 |
|
| $ | (304,177 | ) |
| $ | (405,174 | ) |
| $ | 33,347 |
|
| $ | 114,422 |
|
| $ | 1,003,991 |
|
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
Year |
| Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Linden R. Evans |
|
| Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Linden R. Evans |
|
| Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Linden R. Evans |
|
| Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Linden R. Evans |
|
| Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Linden R. Evans |
|
| Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for Linden R. Evans |
|
| Total - Inclusion of Equity Values for Linden R. Evans |
| |||||||
2022 |
| $ | 2,543,388 |
|
| $ | 157,935 |
|
| $ | - |
|
| $ | (286,806 | ) |
| $ | - |
|
| $ | - |
|
| $ | 2,414,517 |
|
2021 |
| $ | 2,919,069 |
|
| $ | 80,463 |
|
| $ | - |
|
| $ | (50,454 | ) |
| $ | - |
|
| $ | - |
|
| $ | 2,949,078 |
|
2020 |
| $ | 1,183,535 |
|
| $ | (259,008 | ) |
| $ | - |
|
| $ | (190,152 | ) |
| $ | - |
|
| $ | - |
|
| $ | 734,375 |
|
Year |
| Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs |
|
| Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs |
|
| Average Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs |
|
| Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs |
|
| Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs |
|
| Average Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for Non-PEO NEOs |
|
| Total - Average Inclusion of Equity Values for Non-PEO NEOs |
| |||||||
2022 |
| $ | 511,412 |
|
| $ | 30,488 |
|
| $ | - |
|
| $ | (44,278 | ) |
| $ | - |
|
| $ | - |
|
| $ | 497,622 |
|
2021 |
| $ | 624,512 |
|
| $ | 23,290 |
|
| $ | - |
|
| $ | (5,655 | ) |
| $ | - |
|
| $ | - |
|
| $ | 642,147 |
|
2020 |
| $ | 263,362 |
|
| $ | (68,513 | ) |
| $ | - |
|
| $ | (80,427 | ) |
| $ | - |
|
| $ | - |
|
| $ | 114,422 |
|
A non-GAAP reconciliation to GAAP EPS is shown below:
EPS from ongoing operations, as adjusted (Non-GAAP Measure) |
|
|
|
|
|
| |||
| Year Ended December 31, |
| |||||||
| 2022 |
| 2021 |
| 2020 |
| |||
EPS available for common stock (GAAP) | $ | 3.97 |
| $ | 3.74 |
| $ | 3.65 |
|
Impairment of investment |
| — |
|
| — |
|
| 0.08 |
|
EPS from ongoing operations, as adjusted (Non-GAAP) | $ | 3.97 |
| $ | 3.74 |
| $ | 3.73 |
|
Relationship between Pay and Performance
The charts shown below present a graphical comparison of compensation actually paid to the PEO and the average compensation actually paid to the other NEOs set forth in the Pay Versus Performance table above, as compared against the following Company performance measures: (1) Total shareholder return (TSR); (2) Peer group TSR; (3) Net income; and (4) EPS from ongoing operations, as adjusted. As presented, the first chart below compares the Company's TSR and peer group TSR, assumes an initial investment of $100 on December 31, 2019, assumes all dividends were reinvested and depicts performance at the end of each applicable year.
48
49
Financial Performance Measures
The following table presents the financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to our PEO and other NEOs for 2022 to Company performance. The measures in this table are not ranked.
Most Important Performance Measures |
EPS from ongoing operations, as adjusted (non-GAAP) |
Net income |
Total Shareholder Return |
50
PROPOSAL 4 |
ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON OUR EXECUTIVE COMPENSATION |
Every six years, the Company is required to seek an advisory, non-binding shareholder vote on the frequency of submission to shareholders of the advisory vote on executive compensation once every year, every two years or every three years. We are providinglast submitted to our shareholders witha vote on the frequency of future say on pay votes in 2017.
The Board recognizes the importance of receiving regular input from our shareholders on important issues such as executive compensation and has been asking shareholders to provide their advisory vote on executive compensation since that time. The Board believes that an annual advisory non-binding vote on the executive compensation is consistent with the Company's policy of seeking input from, and engaging in discussions with, our Named Executive Officers (commonly referredshareholders on corporate governance matters. As such, the Board recommends that shareholders approve holding a say on pay vote every year.
Although the Board is recommending shareholders vote for a frequency of every year, for purposes of this proposal, shareholders are entitled to as “say on pay”). Accordingly, shareholders will vote on approvalfor any of the following resolution:
The frequency of the say on pay vote receiving the greatest number of votes cast in favor of such frequency will be the frequency of the say on pay vote that shareholders are deemed to have approved. Although the shareholders approve, on anoutcome of this advisory basis, the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section, the accompanying compensation tables and the related narrative disclosure in this proxy statement.
The Board recommends a vote for the option of "1 YEAR" as the frequency with which shareholders will have an advisory, non-binding vote on executive compensation.
51
TRANSACTION OF OTHER BUSINESS
Our Board of Directors does not intend to present any business for action by our shareholders at the meeting except the matters referred to in this proxy statement. If any other matters should be properly presented at the meeting, it is the intention of the persons named in the accompanying form of proxy to vote thereon in accordance with the recommendations of our Board of Directors.
Shareholder proposals intended to be presented at our 20212024 annual meeting of shareholders and considered for inclusion in our proxy materials must be received by our Corporate Secretary in writing at our executive offices at 7001 Mount Rushmore Road, P.O. Box 1400, Rapid City, South Dakota 57709, on or prior to November 13, 2020.16, 2023. Any proposal submitted must be in compliance with Rule 14a-8 of Regulation 14A of the Securities and Exchange Commission.
Additionally, a shareholder may submit a proposal or director nominee for consideration at our 20212024 annual meeting of shareholders, but not for inclusion of the proposal or director nominee in our proxy materials, if the shareholder gives timely written notice of such proposal in accordance with Article I, Section 9 of our Bylaws. In general, Article I, Section 9 provides that, to be timely, a shareholder’s notice must be delivered to our Corporate Secretary in writing not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of shareholders.
Our 20202023 annual meeting is scheduled for April 28, 2020.25, 2023. Ninety days prior to the first anniversary of this date will be January 28, 2021,26, 2024, and 120 days prior to the first anniversary of this date will be December 29, 2020.27, 2023. For business to be properly requested by the shareholder to be brought before the 20212024 annual meeting of shareholders, the shareholder must comply with all of the requirements of Article I, Section 9 of our Bylaws, not just the timeliness requirements set forth above.
52
In accordance with a notice sent to eligible shareholders who share a single address, we are sending only one annual report and proxy statement to that address unless we receive instructions to the contrary from any shareholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if a shareholder of record residing at such an address wishes to receive a separate annual report or proxy statement in the future, he or she may contact Shareholder Relations at the below address.
Shareholder Relations
Black Hills Corporation
7001 Mount Rushmore Road
P.O. Box 1400
Rapid City, SD 57709
(605) 721-1700
Eligible shareholders of record receiving multiple copies of our annual report and proxy statement can request householding by contacting us in the same manner. Shareholders who own shares through a bank, broker or other nominee can request householding by contacting the nominee.
We hereby undertake to deliver promptly, upon written or oral request, a separate copy of the annual report to shareholders, or proxy statement, as applicable, to our shareholders at a shared address to which a single copy of the document was delivered.
Please vote your shares by telephone, by the Internet or by promptly returning the accompanying form of proxy, whether or not you expect to be present at the annual meeting.
ANNUAL REPORT ON FORM 10-K
A copy of our Annual Report on Form 10-K (excluding exhibits) for the year ended December 31, 2019,2022, which is required to be filed with the Securities and Exchange Commission, will be made available to shareholders to whom this proxy statement is mailed, without charge, upon written or oral request to Shareholder Relations, Black Hills Corporation, 7001 Mount Rushmore Road, P.O. Box 1400, Rapid City, SD 57709, Telephone Number: (605) 721-1700. Our Annual Report on Form 10-K also may be accessed through our website at
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON APRIL 28, 2020
Shareholders may view this proxy statement, our form of proxy and our 20192022 Annual Report to Shareholders over the Internet by accessing our website at
By | Order of the Board, | |||
/s/ AMY K. KOENIG | ||||
Amy K. Koenig | ||||
Vice President - Governance, Corporate Secretary and Deputy General Counsel | ||||
Dated: March 15, 2023 |
Year Ended | ||||||
Dec. 31, 2019 | Dec. 31, 2018 | |||||
EPS from continuing operations (GAAP) | $ | 3.28 | $ | 4.78 | ||
Adjustments: | ||||||
Impairment of investment | 0.32 | — | ||||
Legal restructuring - income tax benefits | — | (1.31 | ) | |||
Tax reform | — | 0.07 | ||||
Total adjustments | 0.32 | (1.24 | ) | |||
Tax on adjustments: | ||||||
Impairment of investment | (0.07 | ) | — | |||
Total adjustments, net of tax | 0.25 | (1.24 | ) | |||
EPS from continuing operations, as adjusted (Non-GAAP) | $ | 3.53 | $ | 3.54 |
53
(This page left blank intentionally.)
BLACK HILLS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 28, 2020
9:30 a.m., Local Time
Horizon Point
Company’s Corporate Headquarters
7001 Mount Rushmore Road
Rapid City, SD 57702
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and our 20192022 Annual Report to Shareholders are available at
____________________________________________________________________________________________________
Black Hills Corporation | ||
7001 Mount Rushmore Road, Rapid City, SD 57702 | PROXY |
This proxy is solicited by the Board of Directors for use at the Annual Meeting on April 28, 2020.
The undersigned hereby appoints Linden R. Evans, Brian G. Iverson and Richard W. Kinzley, and each of them, with full power of substitution, to vote all shares of the undersigned at the Annual Meeting of Shareholders to be held at 9:30 a.m., local time, April 28, 2020,25, 2023, at Horizon Point, the Company’s corporate headquarters, 7001 Mount Rushmore Road, Rapid City, SD 57702, and at any adjournment thereof, upon all subjects that may properly come before the meeting, including the matters described in the Proxy Statement furnished herewith.
Your vote is important! Ensure that your shares are represented at the meeting.
Either (1) submit your proxy by touchtone telephone, (2) submit your proxy by Internet, or (3) mark, date, sign, and return this proxy in the envelope provided.
If no directions are given, properly executed proxies will be voted in accordance with theSee reverse for voting instructions.
COMPANY # |
VOTE BY INTERNET, TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
Your phone or Internet vote authorizes the named Proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
VOTE BY INTERNET/MOBILE —
www.proxypush.com/bkhUse the Internet to vote your proxy until 11:59 p.m. (CT) on April 27, 2020.
VOTE BY PHONE— 1-866-883-3382
Use a touch-tone telephone to vote your proxy until 11:59 p.m. (CT) on April 27, 2020.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope provided.
If you vote your proxy by internet or by phone, you do NOT need to mail back your Proxy Card.
The Board of Directors Recommends a Vote FOR the Nominees in Item 1, and FOR Items 2 and 3.
and ONE (1) YEAR for Item 4.
1. | Election of Directors: | 01 Scott M. Prochazka | Vote FOR¨ | Vote WITHHELD¨ | ||||
02 Rebecca B. Roberts | all nominees | from all nominees | ||||||
03 Teresa A. Taylor | (except as marked) |
(Instructions: To cumulate votes for any indicated nominee for election to the | ||
nominee's class, write the number(s) of the nominee(s) and the number of shares | ||
for such nominee in the box provided to the right.) |
For | Against | Abstain | ||||||||||||
2. | ||||||||||||||
Ratification of the appointment of Deloitte & Touche LLP to serve as Black Hills Corporation’s independent registered public accounting firm for | ||||||||||
For | Against | Abstain | ||||||||
3. | Advisory resolution to approve executive compensation. |
1 Year | 2 Years | 3 Years | Abstain | ||||||||||
4. | Advisory vote on the frequency of the advisory vote on our executive compensation. | ||||||||||||
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR THE NOMINEES IN ITEM 1,Address change? Mark Box | ¨ | ||||
Indicate changes below: | Date |
Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy.