UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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o | Preliminary Proxy Statement |
o | CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY |
☑ | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Under Rule 14a-12 |
South Jersey Industries, Inc. |
(Name of Registrant as Specified In Its Charter) |
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
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 | South Jersey Industries, Inc. 1 South Jersey Plaza Folsom, New Jersey 08037 Tel. (609) 561-9000 Fax (609) 561-7130 |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: | April |
TIME: | 9:00 a.m. |
PLACE: | |
ONLINE: | www.virtualshareholdermeeting.com/SJI2020 |
To the Shareholders of South Jersey Industries
NOTICE IS HEREBY GIVEN that South Jersey Industries, Inc.’s (“Company” or “SJI”) 2020 Annual Meeting of Shareholders (the “Annual Meeting”) will be held at Hard Rock Hotel & Casino Atlantic City, BrightonThe Westin Mount Laurel, The Grand Ballroom, 1000 Boardwalk, Atlantic City, New Jersey 08401555 Fellowship Road, Mount Laurel, ,NJ 08054and online at: www.virtualshareholdermeeting.com/SJI2020 on April 26, 2019,24, 2020, at 9:00 a.m., Eastern Time, for the following purposes:
| 1. | To elect 10 director nominees who are |
| 2. | To hold an advisory vote to approve executive compensation |
| 3. | To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for |
| 4. | To transact other business that may properly come before the |
Voting can be completed in one of | |||||
 | returning the proxy card by mail |  | online at www.proxyvote.com |  | Attend the meeting online at: www.virtualshareholdermeeting.com/SJI2020 |
 | through the telephone at 1-800-690-6903 |  | attending the meeting to vote IN PERSON | ||
The Board of Directors has fixed the close of business on February 25, 201924, 2020 as the record date (the “Record Date”) for determining shareholders entitled to notice of, and to vote at, the Annual Meeting. Accordingly, only shareholders of record on that date are entitled to notice of, and to vote at, the meeting.Annual Meeting.
You are cordially invited to attend the meeting.meeting in person or online meeting at: www.virtualshareholdermeeting.com/SJI2020. Attendance at the Annual Meeting will be limited to shareholders as of therecord date, Record Date, their authorized representatives and guests of SJI. Guests of shareholders will not be admitted unless they arealso shareholders as of the record date.Record Date. If you plan to attend the meetingAnnual Meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. Annual Meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket.
Although we intend to hold our annual meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to attend our annual meeting in person, we encourage you to attend online at www.virtualshareholdermeeting.com/SJI2020. If you attend online, you will be able to vote your shares and submit questions by following the instructions on the website. We reserve the right to convert to a virtual only meeting format should meeting in person become unsafe as a result of COVID-19. If we convert to a virtual only online meeting we will post a notification at www.sjindustries.com as soon as possible.
Whether or not you expect to attend the meeting,Annual Meeting, we urge you to vote your shares now. Please complete and sign the enclosed proxy card and promptly return it in the envelope provided or, if you prefer, you may vote by telephone or on the Internet. Please refer to the enclosed proxy card for instructions on how to use these options. Should you attend the meeting,Annual Meeting, you may revoke your proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
Corporate Secretary
Folsom, NJ
March 15, 201913, 2020
YOUR VOTE IS IMPORTANT. PLEASE VOTE, SIGN, DATE, AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE OR VOTE BY TELEPHONE OR ON THE INTERNET.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on April 26, 2019.24, 2020. The Proxy Statement, the Proxy Card and the 20182019 Annual Report are also available to view at www.sjindustries.com by clicking on Investors > Financial ReportingReporting.
This summary highlights information contained elsewhere in this proxy statement.Proxy Statement. This summary does not contain all the information you should consider, and you should read the entire proxy statementProxy Statement carefully before voting.
Annual Meeting of Shareholders
Date: | April | |
Time: | ||
9:00 a.m. - meeting begins | ||
10:00 a.m. - meeting adjourns | ||
Place: | The Westin Mount Laurel | |
Mount Laurel, New Jersey | ||
Online: | www.virtualshareholdermeeting.com/SJI2020 | |
Admission to the meeting: | Attendance at the Annual Meeting will be limited to shareholders as of the | |
Although we intend to hold our annual meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to attend our annual meeting in person, we encourage you to attend online at www.virtualshareholdermeeting.com/SJI2020. If you attend online, you will be able to vote your shares and submit questions by following the instructions on the website. We reserve the right to convert to a virtual only meeting format should meeting in person become unsafe as a result of COVID-19. If we convert to a virtual only online meeting we will post a notification at sjindustries.com as soon as possible. Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken by South Jersey Industries at the | ||
Record Date: | February | |
Agenda: | • | Election of 10 |
• | ||
• | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for | |
• | Transaction of any other business that may properly come before the meeting | |
Voting: | Shareholders as of the | |
Voting Matters and the Board’s Recommendation
The following table summarizes the items that will be brought for a vote of our stockholdersshareholders at the meeting, along with the Board’s recommendation as to how shareholders should vote on each of them.
Proposal No. | Description of Proposal | Board’s Recommendation |
1 | Election of 10 director candidates nominated by the Board, each to serve a one-year term | FOR |
2 | FOR | |
3 | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for | FOR |
In addition to these matters, shareholders may be asked to vote on such other business as may properly be brought before the meeting or any adjournment or postponement of the meeting.thereof.
South Jersey Industries, Inc. - | 1 |
Proxy Statement Summary
The table below summarizes the votes required for approval of each matter to be brought before the annual meeting,Annual Meeting, as well as the treatment of abstentions and broker non-votes.
Proposal No. | Description of Proposal | Vote Required for Approval | Abstentions | Broker Non-Votes |
1 | Election of directors | Majority of votes cast | No effect | Not taken into account |
2 | Executive compensation | Majority of votes cast | No effect | Not taken into account |
3 | Ratification of independent registered public accounting firm | Majority of votes cast | No effect | Not applicable |
The Board is currently comprised of 10 directors: 9 independent directors; and SJI President and Chief Executive Officer. The following table provides summary information about each of the 10 director nominees, including whether the Board considers the
nominee to be independent under the New York Stock Exchange’s independence standards and SJI Corporate Governance Guidelines. Each director is elected annually by a majority of votes cast.
Name | Age | Director Since | Occupation | Independent | Positions/Committee Memberships |
Sarah M. Barpoulis | 54 | 2012 | Owner of Interim Energy Solutions, LLC | Yes | 1*, 2, 3, 7 |
Thomas A. Bracken | 71 | 2004 | President, New Jersey Chamber of Commerce | Yes | 3, 4*, 5, 7 |
Keith S. Campbell | 64 | 2000 | Chairman of the Board, Mannington Mills, Inc. | Yes | 2, 5, 6 |
Victor A. Fortkiewicz | 67 | 2010 | Of Counsel, Cullen and Dykman, LLP | Yes | 4, 5*, 6 |
Sheila Hartnett-Devlin, CFA | 60 | 1999 | Retired, Senior Vice President, American Century Investments | Yes | 1, 4, 7 |
Walter M. Higgins III | 74 | 2008 | Chairman (non-executive) of South Jersey Industries | Yes | 3* As Chairman of the Board, serves as an ex-officio member of all committees |
Sunita Holzer | 57 | 2011 | Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. | Yes | 2*, 3, 5, 6 |
Michael J. Renna | 51 | 2014 | President and CEO, South Jersey Industries | No | 3 |
Joseph M. Rigby | 62 | 2016 | Retired, Chairman, President and CEO, Pepco Holdings, Inc. | Yes | 1, 2, 7* |
Frank L. Sims | 68 | 2012 | Chairman of the Board, Atlanta Pension Fund, Retired, Corporate Vice President and Platform Leader, Cargill, Inc. | Yes | 1, 3, 4, 6* |
 |  |  |  |  |
Key to Committee MembershipsWhy am I being provided with these materials?
This statement is furnished on behalf of SJI’s Board of Directors to solicit proxies for use at its 2019 Annual Meeting of Shareholders.and at any adjournments or postponements thereof. The meeting is scheduled for Friday, April 26, 2019,24, 2020, at 9:00 a.m. at Hard Rock Hotel & Casino, BrightonThe Westin Mount Laurel, 555 Fellowship Road, The Grand Ballroom, 1000 Boardwalk, Atlantic City,Mount Laurel, New
Jersey. The approximate date proxy materials will
be made available to shareholders is March 15, 2019.13, 2020. Copies of this Proxy Statement, the proxy statement, proxy card and 20182019 Annual Report are available on our website at www.sjindustries.com under the heading “Investors”.“Investors.”
Proxy Solicitation
The Company bears the cost of this solicitation, which is primarily made by mail. However, the Corporate Secretary or companyCompany employees may solicit proxies by phone, fax, e-mail or in person, but they will not be separately compensated for these services. The Company maywill also use a proxy-soliciting firmD. F. King at a cost not expected to exceed
expected to exceed $15,000,$12,500, plus expenses, to distribute to brokerage houses and other custodians, nominees, and fiduciaries additional copies of the proxy materials and 20182019 Annual Report for beneficial owners of our stock.
Record DateWho is entitled to vote?
Only shareholders of record, meaning those holders whose shares of our common stock, are registered directly with our transfer agent, Broadridge at the close of business on February 25, 201924, 2020 may vote at the meeting.
If you are a beneficial owner, meaning you hold shares in our Company in “street name” (i.e., through a broker, bank or other nominee), you cannot vote your shares directly and must instead instruct your broker, bank or other nominee on how to vote your shares.
On that date,the Record Date, the Company had 92,333,12392,447,637 shares of Common Stockcommon stock outstanding.
Shareholders are entitled to one vote per share on each matter to be acted upon.
QuorumHow do I vote my shares without attending the 2020 Annual Meeting?
If you are a shareholder of record, you may vote by granting a proxy. Specifically, you may vote:
| • | by internet—you may submit your proxy by going to www.proxyvote.com and following the instructions on how to complete an electronic proxy card. You will need the 16-digit number included on your notice or proxy card in order to vote by internet. |
| • | by telephone—you may submit your proxy by using a touch-tone telephone to dial 1-800-690-6903 and following the recorded instructions. You will need the 16-digit number included on your notice or proxy card in order to vote by telephone. |
| • | by mail—you may vote by mail by requesting a proxy card from us, indicating your vote by completing, signing and dating the |
card where indicated and Vote Required meeting’sby mailing or otherwise returning the card in the envelope that will be provided to you. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity, you must indicate your name and title or capacity.
| • | online—www.virtualshareholdermeeting.com/SJI2020. Follow the instructions on the website to vote your shares. |
If you are a beneficial owner holding your shares in “street name,” you may vote by submitting voting instructions to your bank, broker or other nominee. In most instances, you will be able to do this on the internet, by telephone or by mail as indicated above. Please refer to information from your bank, broker or other nominee on how to submit voting instructions.
What constitutes a quorum?
A quorum is necessary to conduct the business. This means holders of at least a majority of the outstanding shares of Common Stockcommon stock entitled to vote must be present at the meeting, either by proxy or in person. Shareholders elect Directors by a majority vote of all votes cast at the meeting. The other actions proposed herein require the affirmative vote of a majority of the votes cast at the meeting. The vote required to approve any other matter that may be properly brought before the Annual Meeting will be determined in accordance with the New Jersey Business Corporation Act.
Abstentions and broker non-votes“broker non-votes” (as discussed below) will be treated as present to determine a quorum.
In the absence of a quorum, but will not be deemed to be cast and, therefore, will not affect the outcome of anya majority of the shareholder questions. shareholders present or in person by proxy may vote to adjourn the 2020 Annual Meeting from time to time, without notice other than by oral announcement at the meeting, until the time that a quorum is present.
2 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Proxy Statement Summary
What is a “broker non-vote” and how does it affect voting on each proposal?
A broker non-vote“broker non-vote” occurs when a bank, broker or other nominee holding shares for a beneficial owner in “street name” does not vote on a particular proposal, because the bank, broker or other nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial
owner. See “Proxy Statement Summary—Votes Required for Approval” for a discussion of which proposals do and do not permit discretionary voting by brokers and the effect of a “broker non-vote.”
VotingWhat am I voting on, how many votes are required to approve each proposal, how are votes counted and how does the Board of Proxies and RevocationDirectors recommend I vote?
See “Proxy Statement Summary—Votes Required for Approval” and “Proxy Statement Summary—Voting Matters and the Board’s Recommendation” for this information.
What if I receive more than one notice or proxy card about the same time?
It generally means you hold shares registered in more than one account. To ensure that all your shares are voted, please sign and return each proxy card, or, if you vote by Internet or telephone, vote once for each notice or proxy card you receive.
What will be the result if I submit my proxy card without making specific instructions?
Properly signed proxies received by the Company will be voted at the meeting. If a properly signed proxy contains a specific instruction about any matter to be acted on, the shares represented by the proxy will be voted according to those instructions. IfConversely, if you sign and return your proxy but do not indicate
how to vote for a particular matter, your shares will be voted as the Board of Directors recommends. A shareholder who returns aSee “Proxy Statement Summary—Voting Matters and the Board’s Recommendation” for information on the Board of Directors’ voting recommendations.
May I revoke my proxy may revoke it at any time before it isor change my vote?
Yes. Whether you have voted by submittingInternet, telephone or mail, if you are a later-dated proxy or by voting by ballot at
the meeting. Ifshareholder of record, you attend the meeting and wish tomay revoke your proxy you must notifyor change your vote by:
| • | sending a written statement to that effect to the attention of our Corporate Secretary, 1 South Jersey Plaza, Folsom, New Jersey 08037, provided such statement is received no later than April 23, 2020,or, in the case of voting of shares held through the Company’s 401(k) plan, no later than April 21, 2020; |
| • | submitting a properly signed proxy card with a later date that isreceived no later than April 23, 2020, or, in the case of voting of shares held through the Company’s equity incentive plans, no later than April 21, 2020; or |
If anyyou are a beneficial owner holding your shares in “street name”, you may submit new voting instructions by contacting your bank, broker or other mattersnominee. You may also change your vote or motions properly comerevoke your proxy in person at the 2020 Annual Meeting if you obtain a signed proxy from the record holder (bank, broker or other nominee) giving you the right to vote the shares in person.
What do I need to be admitted to the 2020 Annual Meeting?
See “Proxy Statement Summary—Annual Meeting of Shareholders” for this information.
Where can I find the results of the 2020 Annual Meeting?
We will disclose the final voting results on a current report on Form 8-K within four business days after the 2020 Annual Meeting.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 3 |
Any proposal that a qualified shareholder of the Company wishes to include in the Company’s Proxy Statement and form of proxy for the Company’s 2021 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Exchange Act must be received by the Company at its principal executive offices by November 13, 2020. To be included, proposals should be mailed to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037. To be a qualified shareholder, a shareholder must have owned at least $2,000 in market value of the Company’s securities for at least one year before the meeting, including any matters dealingdate of the proposal’s submission to the Company.
Additionally, a shareholder of the Company may wish to nominate a director or have other business presented at the 2021 Annual Meeting of Shareholders, but not to have such proposal included in the Company’s Proxy Statement and form of proxy relating to that meeting. In compliance with the conductCompany’s bylaws, notice of any
such proposal must be received by the Company at its principal executive offices between January 24, 2021 and February 23, 2021. However, if we hold our 2021 Annual Meeting of Shareholders more than 30 days before or after the anniversary date of the 2020 Annual Meeting of Shareholders, such notice must be received by us no later than the tenth day after the date on which we publicly disclose or send notice regarding the date of the meeting (whichever is earlier). All such nominations and other proposals should be mailed to the persons namedCorporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037 and must satisfy the informational requirements set forth in our bylaws. If a nomination or proposal for other business is not received during this period, such proposal shall be deemed “untimely” for purposes of Rule 14a-4(c) under the accompanying proxy card intendExchange Act, and, therefore, the proxies will have the right to voteexercise discretionary voting authority with respect to such proposal.
Other Proposed Action for the proxy according to their judgment. 2020 Annual Meeting of Shareholders
The Board of Directors is not awareknows of any suchno matters other than those describedset forth in this proxy statement.the Notice of Annual Meeting of Shareholders to come before the 2020 Annual Meeting. However, if any other business should properly be presented at the meeting, the proxies will be
voted in accordance with the judgment of the person or persons holding the proxies pursuant to Rule 14a-4(c) under the Exchange Act.
Under rules adopted by the SEC, we are permitted to deliver a single copy of the proxy materials, including the Notice of Annual Meeting of Shareholders, this Proxy Statement and the 2019 Annual Report, to any household at which two or more shareholders reside if we believe the shareholders are members of the same family. This process, called “householding,” allows us to reduce the number of copies of these materials we must print and mail. Even if householding is used, each shareholder will continue to be entitled to submit a separate proxy or voting instructions.
Certain banks, brokers, broker-dealers and other similar organizations acting as nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this proxy statement and the Company’s 2018 Annual Report may have been sent to multiple shareholders in your household.materials. If you are a beneficial owner of our shares and would prefer to receive separate copies of a proxy statementProxy Statement or annual report for other shareholders in your household, either now or in the future, please
contact your bank, broker, broker-dealer or other similar organization serving as your nominee.
Upon written or oral request to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037, the Company will promptly provide separate copies Beneficial owners of the 2018 Annual Report and/or this proxy statement. Shareholdersour shares sharing an address who are receiving multiple copies of this proxy statementour Proxy Statement and/or the 2018 Annual Reportour annual report and who wish to receive a single copy of these materials in the future will need to contact their bank, broker, broker-dealer or other similar organization serving as their nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
General Information
Other Matters
Any proposal that a qualified shareholder of the Company wishesIf you consent to includehouseholding, your election will remain in the Company’s proxy statement to be sent to shareholders in connection with the Company’s 2020 Annual Meeting of Shareholders that is received by the Company after November 16, 2019 will not be eligible for inclusion in the Company’s proxy statement and form of proxy for that meeting. To be included, proposals can be mailedeffect until you revoke it. Upon written or oral request to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037. To be a qualified shareholder, a shareholder must have owned at least $2,000 in market value of the Company’s securities for at least one year before the date of the proposal’s submission to the Company. A shareholder of08037, the Company may wish to have a proposal presented at the 2020 Annual Meetingwill promptly provide separate copies of Shareholders, but not to have such proposal included in the Company’s proxy statement
and form of proxy relating to that meeting. In compliance with the Company’s bylaws, notice of any such proposal must be received by the Company between January 27, 2020 and February 26, 2020. If it is not received during this period, such proposal shall be deemed “untimely” for purposes of Rule 14a-4(c) under the Exchange Act, and, therefore, the proxies will have the right to exercise discretionary voting authority with respect to such proposal. Any such proposal must be submitted in writing to the Corporate Secretary at the address previously provided in this section.
The Board of Directors knows of no matters other than those set forth in the Notice of Annual Meeting of Shareholders to come before the 2019 Annual Meeting.Report and/or this Proxy Statement.
4 | | South Jersey Industries, Inc. - |
At the Annual Meeting, 10 directors are to be elected to the Board of Directors to hold office for a one-year term. The Board nominated the following persons: Sarah M. Barpoulis, Thomas A. Bracken, Keith S. Campbell, Victor A. Fortkiewicz, Sheila Hartnett-Devlin, WalterG. Edison Holland Jr., Sunita Holzer, Kevin M. Higgins III, Sunita Holzer,O’Dowd, Michael J. Renna, Joseph M. Rigby and Frank L. Sims. We do not anticipate that, if elected, any of the nominees will be unable to serve. If any should be unable to accept the nomination or election, the persons designated as proxies on the proxy card may vote for a substitute nominee selected by the Board of Directors. Current directors, Walter M. Higgins, III and Thomas A. Bracken are not being nominated as nominees to the Board at the Annual Meeting. Mr. Higgins will continue to serve as the non-executive Chairman of SJI’s Board of Directors until his retirement on April 24, 2020. At that time the Board of Directors will elect a new independent non-executive Chairman. The Board is grateful to Mr. Higgins and Mr. Bracken for all they have done for our Company, our shareholders and our employees. Accordingly, after the Annual Meeting the size of our Board will be reduced to 10 members.
In accordance with its Charter, the Governance Committee reviewed the education, experience, judgment, diversity and other applicable and relevant skills of each nominee and determined that
each nominee possesses skills and characteristics that support the Company’s strategic vision. The Governance Committee determined that the key areas of expertise include: corporate governance; cybersecurity/IT; enterprise leadership; environmental, social, governance (ESG); financial expertise (including accounting, finance, and “financial experts” as defined by the SEC); governmental and regulatory; human resources; public/shareholder relations; risk assessment/management; strategy formation/execution; and technical/industry. The Governance Committee concluded that the nominees possess expertise and experience in these areas, and the Board approved the slate of nominees. Based on their expertise and experience, the Board, upon recommendation of the Governance Committee, determined the following directors should be electednominated for re-election to the Board at the Annual Meeting to serve for the 20192020 - 20202021 term:
South Jersey Industries, Inc. - 2020 Proxy Statement | | 5 |
Proposal 1 Director Elections
Highlights of Director Nominees
  | Sarah M. Barpoulis |   | |||
Age: | Age: | ||||
Director since:2012 | Director since: | ||||
Owner of Interim Energy Solutions, LLC, Potomac, MD | |||||
 |   | Victor A. Fortkiewicz |  | Sheila Hartnett-Devlin, CFA | |
Age: | Age: | ||||
Director since: | Director since: | ||||
Of Counsel, Cullen and Dykman, LLP, New York, NY | Retired, Senior Vice President, American Century Investments, New York, NY | ||||
  |   | ||||
Age: | Age: | ||||
Director since: | Director since: | ||||
Retired, | |||||
  |   | Michael J. Renna | |||
Age: | Age: | ||||
Director since: | Director since:2014 | ||||
President and CEO, South Jersey Industries, Folsom, NJ | |||||
  | Joseph M. Rigby |   | Frank L. Sims |
Age: | Age: | ||
Director since:2016 | Director since:2012 | ||
Retired, Chairman, President and CEO of Pepco Holdings, Inc., Washington, D.C. | Chairman of the Board, Atlanta Pension Fund, Atlanta, GA |
The Board of Directors unanimously recommends a vote “FOR” each of the above nominees.
6 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Our executive compensation program is designed to keep our senior leadership team focused on the seamless execution of the Company’s strategic plan and on delivering shareholder value over the long term. During 2019, our senior leadership team achieved critical financial objectives and continued to execute on our Business Transformation Plan by driving forward the strategic initiatives that reinforce our focus on reliable, repeatable earnings that complement regulated growth.
During 2019, we increased the focus and intensity of our shareholder engagement efforts. The Board of Directors reached out to approximately 35 of our largest shareholders, aggregating approximately 66% of our outstanding shares.
Members of the Board, including the Chairman and Compensation Committee Chairman, met with nine of our ten top shareholders, representing approximately 30% of our shares outstanding. Through these efforts, we learned that our investors are highly supportive of our overall program design and its significant emphasis on performance-based pay. However, in response to some common concerns about one-time recognition awards to current NEOs and the notion that the existing connection between pay and performance could be enhanced, we took immediate action — the details of which are outlined in our Compensation Discussion and Analysis (“CD&A”) beginning on page 29 of this Proxy statement.
Our compensation philosophy continued to be supported by the following principal pay elements for 2019:
Pay Element | Description | Rationale |
Salary | Fixed cash opportunity | Provides stable market based compensation for role, level of responsibility and experience. Forms basis for other pay elements |
Annual Incentive Plan (“AIP”) | Annual cash compensation with variable payout based on achievement of pre-determined corporate/business unit economic earnings goals and individual balanced scorecard objectives (other strategic non-earnings goals) for the fiscal year | Drives and incentivizes annual performance across key financial and individual performance measures |
Long-Term Incentives (“LTI”) | LTI is granted 70% in performance-based restricted stock units (“PBRSUs”), based on 3-year relative Total Shareholder Return (“TSR”) vs. peers and 3-year economic earnings growth, and 30% in time-based restricted stock units (“TBRSUs”) | PBRSU portion of awards, representing significant majority of total LTI opportunity, requires achievement of threshold level of performance for any payout; Combination of PBRSUs and TBRSUs drives long-term financial performance, shareholder value and executive retention |
We note that pursuant to SEC regulations, the Summary Compensation Table on page 45 shows total compensation for our NEOs, including not only the valuation of the major elements of our program listed above, but also other numbers that we do not consider to be a significant driver of our overall pay philosophy. For example, the Summary Compensation Table includes a column for the change in pension value and nonqualified compensation earnings which is an actuarily determined year over year change in the value of a pension balance and clearly not reflective of Committee thought process and decision making within the scheme of our compensation philosophy. For this reason, we included an additional and separate column in the Summary Compensation Table that reflects total compensation minus the change in pension value and nonqualified compensation earnings for our NEOs. For the following reasons, among others, we believe this number is more representative of actual compensation, as it pertains to the 2017 through 2019 fiscal years:
South Jersey Industries, Inc. - | 7 |
Proposal 2 Advisory Vote To Approve Executive Compensation
The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our shareholders and executives:
What We Do | What We Don’t Do | ||
✔ | Seventy (70) percent of LTI awards are performance-based for the NEOs | ✘ | No excise tax gross ups |
✔ | Three-year performance periods under our LTI awards | ✘ | No repricing or exchange of equity awards without shareholder approval |
✔ | Use a mix of absolute and relative financial performance metrics (including relative TSR) in the incentive plans, to avoid duplication of incentives across AIP and LTI plans. | ✘ | No employment agreements |
✔ | Caps on incentive awards | ✘ | No hedging or pledging of Company stock for employees or directors |
✔ | Use of ESG Metrics in AIP | ✘ | No tax gross ups for perquisites |
✔ | Change-in-control “double-trigger” for equity award vesting and severance benefits | ||
✔ | Robust claw-back policy applying to all incentive awards | ||
✔ | Limited number of perquisites | ||
✔ | Independent compensation consultant | ||
✔ | Robust stock ownership guidelines | ||
Pursuant to Section 14A(a)(1) of the Exchange Act, SJI is required to provide shareholders with a separate non-binding vote to approve the compensation of our named executive officers, including the CD&A, the compensation tables, and any other narrative disclosure in this Proxy statement. Such a proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive compensation policies and procedures as described in this Proxy statement. Shareholders may also abstain from voting.
Accordingly, shareholders are being asked to approve the following non-binding resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
Because your vote is advisory, it will not be binding on the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee values the opinions expressed by shareholders and expects to take into account the outcome of the vote when considering future executive compensation decisions.
The Board of Directors unanimously recommends a vote “FOR” the non-binding resolution approving the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the CD&A, compensation tables and narrative discussion.
8 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
The Audit Committee is responsible for recommending the appointment of the independent registered public accounting firm to the Board and is directly responsible for the compensation and oversight of the independent auditor.
Annually, prior to making its recommendation, the Audit Committee considers the audit firm’s capabilities, effectiveness, industry experience, and use of technology and data analytics in its audits; knowledge of the Company including its personnel, processes, accounting systems and risk profile; tenure serving the Company; and independence, and other firms with comparable professional qualifications.
Deloitte & Touche LLP (“Deloitte”) is a top accounting firm with expertise in public utility accounting. Deloitte has been the Company’s, or its predecessor Company’s, auditor since 1948 giving it a unique understanding of Company’s businesses and personnel. The Audit Committee considered the impact of tenure on Deloitte’s independence and determined Deloitte remains independent as, among other factors, the lead engagement partner is required to rotate off the Company’s audit every 5 years. The current lead engagement partner will rotate off after the 2023 audit. Further, the Audit Committee pre-approves all audit and non-audit services and related compensation and monitors the potential impact on independence. Finally, the Company has a policy restricting hiring certain persons formerly associated with Deloitte into an accounting or financial reporting oversight role to help ensure Deloitte’s continuing independence.
During 2019, the audit services performed for the Company consisted of (1) audits of the Company’s and its subsidiaries’ financial statements and the effectiveness of the Company’s
internal control over financial reporting, as required by the Sarbanes-Oxley Act of 2002, Section 404 and the preparation of reports based on such audits related to filings with the Securities and Exchange Commission; and (2) services performed in connection with financing transactions.
The Audit Committee evaluates the quality of Deloitte’s services annually, considering the quality of their audit services, industry knowledge from an audit and tax perspective, continued independence, information from PCAOB inspection reports, and the Audit Committee’s discussions with management about Deloitte’s performance.
After considering all factors, the Audit Committee and the Board believe that the continued retention of Deloitte to serve as the Company’s Independent Registered Public Accounting Firm for 2020 is in the best interest of the Company and its shareholders. Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of Deloitte to our shareholders for ratification because we value the views of our shareholders on the Company’s Independent Registered Public Accounting Firm. If our shareholders fail to ratify the selection of Deloitte, it will be considered notice to the Board and Audit Committee to consider the selection of a different firm. Representatives of Deloitte will be at the meeting to respond to appropriate questions and make a statement if they wish.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the reappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 9 |
Proposal 1 Director Elections
HIGHLIGHTS OF DIRECTOR NOMINEES
Our Director nominees possess skills and experience aligned to our current and future strategy and business needs. Annual Board evaluations also include an assessment of whether the Board has an appropriate mix of skills, experience and other characteristics.
All Director Nominees Have:
• | A reputation of high integrity | • | |
An ability to exercise sound judgement |
Our Director nominees exhibit an effective mix of diversity, experience and fresh perspective
| South Jersey Industries, Inc. - |
Proposal 1 Director Elections
Our Director nominees exhibit an effective mix of diversity, experience and fresh perspective
South Jersey Industries, Inc. - 2020 Proxy Statement | | 11 |
Proposal 1 Director Elections
The Board of Directors recommends a vote “FOR”
each of the following nominees:
Sarah M. Barpoulis
 Age: Director since:2012 Owner of Interim Energy Solutions, LLC, Potomac, MD | Skills and Qualifications: | |
• | Director Barpoulis’ areas of expertise include corporate governance; enterprise leadership; environmental, social, governance (ESG); financial expertise; risk assessment/ | |
• | Director Barpoulis is a financial expert as defined by the | |
• | Director Barpoulis is a National Association of Corporate Directors Board Leadership Fellow. | |
SJI Boards and Committees: | ||
• | Chairman of the Audit Committee | |
• | Compensation Committee | |
• | Executive Committee | |
• | Strategy & Finance Committee | |
Since 2003, Ms. Barpoulis has provided asset management and advisory services to the | ||
Thomas A. Bracken
 | ||
Proposal 1 Director Elections
Keith S. Campbell
 Age: Director since:2000 Chairman of the Board, Mannington Mills, Inc., Salem, NJ | Skills and Qualifications: | |
• | Director Campbell’s areas of expertise include corporate governance, cybersecurity/IT, enterprise leadership, | |
SJI Boards and Committees: | ||
• | Compensation Committee | |
• | Corporate Responsibility Committee | |
• | Risk Committee | |
Mr. Campbell has served as chairman of the board for Mannington Mills, Inc. since 1995, as director of the Federal Reserve Bank of Philadelphia from 2008 to 2013 and as a director of Skytop Lodge, Inc. from 2000 to 2015. | ||
12 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Proposal 1 Director Elections
Victor A. Fortkiewicz
 Age: Director since:2010 Of Counsel, Cullen and Dykman, LLP, New York, NY | Skills and Qualifications: | |
• | Director Fortkiewicz’ areas of expertise include corporate governance; enterprise leadership; environmental, social, governance | |
SJI Boards and Committees: | ||
• | Chairman of the Corporate Responsibility | |
• | Risk Committee | |
Mr. Fortkiewicz has been Of Counsel, Cullen and Dykman, LLP since October 2011. He served as executive director, New Jersey Board of Public Utilities from 2005 to 2010. | ||
Sheila Hartnett-Devlin, CFA
 Age: Director since: 1999 Retired, Senior Vice President, American Century Investments, New York, NY | Skills and Qualifications: | |
• | Director Hartnett-Devlin’s areas of expertise and experience include corporate governance; enterprise leadership; environmental, social, governance | |
• | Director Hartnett-Devlin is a financial expert as defined by the SEC. | |
SJI Boards and Committees: | ||
• | Audit Committee | |
• | Governance Committee | |
• | Strategy & Finance Committee | |
• | ||
Executive Committee member, SJI Midstream, LLC; South Jersey Energy Solutions, LLC | ||
Ms. Hartnett-Devlin serves as a member of the board of Mannington Mills, Inc. Ms. Hartnett-Devlin formerly served as senior vice president, American Century Investments. She is a member of the NY Society of Security Analysts. | ||
13 |
Proposal 1 Director Elections
Walter M. Higgins IIIG. Edison Holland, Jr.
 Age: Director since: Retired, EVP Southern Company Services, | Skills and Qualifications: | |
• | Director | |
SJI Boards and Committees: | ||
• | ||
• | ||
• | ||
Mr. | ||
Sunita Holzer
 Age: Director since: 2011 Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp., Madison, NJ | Skills and Qualifications: | |
• | Director Holzer’s areas of expertise include corporate governance, enterprise leadership, | |
SJI Boards and Committees: | ||
• | Chairman of the Compensation Committee | |
• | Corporate Responsibility Committee | |
• | Executive Committee | |
• | Risk Committee | |
Ms. Holzer has served as Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. since March 2015; served as president, Human Capital Insight, LLC from June 2014 to February 2015; served as executive vice president and chief human resources officer, CSC, from June 2012 to May 2014; and served as executive vice president, chief human resources officer, Chubb Insurance Company from 2003 to June 2012. Ms. Holzer is formerly an advisory board member of Re: Gender. Ms. Holzer serves on the Human Resource Management Department Advisory Board at Rutgers School of Management and Labor Relations. She speaks and writes regularly about human resource management and leadership issues and is the author of Wednesday Wisdom, a weekly LinkedIn blog. She is a past member of the board for Jersey Battered Women’s Service and in 2009 was recognized as a Woman Who Makes a Difference by the National Organization for Research on Women. | ||
14 | | South Jersey Industries, Inc. - |
Proposal 1 Director Elections
Kevin M. O’Dowd
| Age: 47 Director since: 2020 Co-President/CEO of Cooper University Health Care, Camden, NJ | Skills and Qualifications: | |
• | Director O’Dowd’s areas of expertise include cybersecurity/IT; enterprise leadership; environmental, social, governance (ESG); governmental and regulatory; human resources; and strategy formation/execution. | |
SJI Boards and Committees: | ||
Mr. O’Dowd currently serves as the Co-President/CEO of Cooper University Health Care. Mr. O’Dowd joined Cooper University Health Care in 2015 as Senior Executive Vice President/Chief Administrative Officer and served in that position until 2018. Before joining Cooper, Mr. O’Dowd served in the Cabinet of New Jersey Governor Chris Christie, including as Chief of Staff from 2012 to 2014. Mr. O’Dowd also served as a federal prosecutor in the U.S. Attorney’s Office for the District of New Jersey from 2003-2010 most recently as Chief of the Securities and Healthcare Fraud Unit, prior to that he served as a Deputy Attorney General for the State of New Jersey. Mr. O’Dowd holds a Juris Doctor from St. John’s University School of Law. | ||
Michael J. Renna
 Age: Director since: 2014 President and CEO, South Jersey Industries, Folsom, NJ | Skills and Qualifications: | |
• | Director Renna’s areas of expertise include enterprise leadership, financial expertise, governmental and regulatory, human resources, risk assessment/management, strategy formation/execution and technical/industry. | |
SJI Boards and Committees: | ||
• | Chairman of the Board, Energy & Minerals, Inc. | |
• | Chairman of the Board, R&T Group, Inc. | |
• | Chairman of the Board, South Jersey Energy Company | |
• | Chairman of the Executive Committee, | |
Mr. Renna has been President and Chief Executive Officer of South Jersey Industries, Inc. since May 1, 2015. | ||
South Jersey Industries, Inc. - 2020 Proxy Statement | | 15 |
Proposal 1 Director Elections
Joseph M. Rigby
 Age: Director since:2016 Retired, Chairman, President and CEO of Pepco Holdings, Inc., Washington, D.C | Skills and Qualifications: | |
• | Director Rigby’s areas of expertise include corporate governance, cyber | |
• | Director Rigby is a financial expert as defined by the SEC. | |
SJI Boards and Committees: | ||
• | Audit Committee | |
• | Compensation Committee | |
• | Chairman of the Strategy & Finance Committee | |
• | Director of SJI Utilities, Inc.; South Jersey Gas Company; Elizabethtown Gas Company; and Elkton Gas Company | |
Mr. Rigby served as | ||
Proposal 1 Director Elections
Frank L. Sims
 Age: Director since: 2012 Chairman of the Board, Atlanta Pension Fund, Atlanta, GA | Skills and Qualifications: | |
• | Director Sims’ areas of expertise include corporate governance, enterprise leadership, financial expertise, human resources, risk assessment/management, and | |
• | Director Sims is a financial expert as defined by the SEC. | |
SJI Boards and Committees: | ||
• | Audit Committee | |
• | Governance Committee | |
• | Executive Committee | |
• | Chairman of the Risk Committee | |
Mr. Sims currently serves as the Chairman of the Board for the Atlanta Pension Fund. He has served as the Corporate Vice President and Platform Leader at Cargill, Inc. from 2002 to 2007. He also served as | ||
The Board of Directors unanimously recommends a vote “FOR” each of the above nominees.
The Company’s executive compensation policies and procedures are designed to attract and retain highly qualified named executive officers while linking Company performance to named executive officer compensation. The Compensation Committee has a strong pay for performance philosophy; and, as a result, the compensation paid to our named executive officers is designed to be aligned with the Company’s performance on both a short-term and a long-term basis. Our recent performance provides evidence that our executive compensation policies and procedures were effective in furthering these objectives. The financial performance in 2018 for SJI corporate results was at maximum, and therefore, the portion of the annual incentive plan payouts tied to SJI results was earned at maximum. After considering overall Company performance, including the Company’s stock price performance, the Committee applied negative discretion to the final total AIP payout for the CEO and all but one of the NEOs. SJI’s recent stock performance has been below our peer group, and our long-term incentive plans for the performance cycle ended fiscal 2017 paid out well below target. Historically, our financial performance in 2015 was below threshold goals, resulting in annual incentive payouts well below target, while our financial performance in fiscal 2016 exceeded target goals, resulting in payouts above target. Further, our long-term incentive plan for the performance cycle ended fiscal 2015 did not pay out, while the performance cycle ended fiscal 2016 paid out well below target.
For 2018, the executive compensation policies and procedures for our named executive officers consisted of three parts: base salary, annual incentive awards and long-term incentive compensation. The annual incentive awards and long-term incentive compensation were again directly linked to the achievement of predefined short-term and long-term performance as follows:
These components of compensation for SJI’s named executive officers provide the proper incentives to align compensation with
the Company’s performance while enhancing shareholder value. Specifically, if the Company’s performance results meet or exceed pre-established performance targets, named executive officers have an opportunity to realize significant additional compensation through annual incentive awards and long-term equity awards. In addition, the Company’s stock ownership guidelines require our named executive officers to own shares of Company stock, which aligns with shareholder interests. We believe this pay for performance philosophy is integral to the Company’s performance and will drive shareholder value over the long term.
Please see the “Compensation Discussion and Analysis” beginning on page 25 of this Proxy statement for a more detailed discussion of executive compensation policies and procedures for our named executive officers.
Pursuant to Section 14A(a)(1) of the Exchange Act, SJI is required to provide shareholders with a separate non-binding shareholder vote to approve the compensation of our named executive officers, including the “Compensation Discussion and Analysis”, the compensation tables, and any other narrative disclosure in this Proxy statement. Such a proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive compensation policies and procedures as described in this Proxy statement. Shareholders may also abstain from voting.
Accordingly, shareholders are being asked to approve the following non-binding resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
Because your vote is advisory, it will not be binding on the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee values the opinions expressed by shareholders and expects to take into account the outcome of the vote when considering future executive compensation decisions.
The Board of Directors unanimously recommends a vote “FOR” the non-binding resolution approving the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.
| South Jersey Industries, Inc. - |
The Audit Committee and the Board of Directors, subject to the approval of the shareholders, reappointed Deloitte & Touche LLP, as the Company’s independent registered public accounting firm for 2019. Unless otherwise directed, proxies will be voted “FOR” approval of this appointment. If the shareholders do not ratify this appointment by the affirmative vote of a majority of the votes cast at the meeting, other auditors will be considered by the Audit Committee.
Deloitte & Touche LLP served as the Company’s independent registered public accounting firm during 2018. During 2018, the audit services performed for the Company consisted of audits of the Company’s and its subsidiaries’ financial statements and attestation of management’s assessment of internal control, as required by the Sarbanes-Oxley Act of 2002, Section 404
and the preparation of various reports based on those audits, services related to filings with the Securities and Exchange Commission and the New York Stock Exchange, and audits of employee benefit plans as required by the Employee Retirement Income Security Act. A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and will have the opportunity to make a statement, if such representative desires to do so, and to respond to appropriate questions from shareholders.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the reappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.
The following table sets forth certain information with respect to the beneficial ownership of our common stock, as of February 25, 2019,24, 2020, of: (a) each current director and nominee for director; (b) our principal executive officer, principal financial officer, the three other
most highly compensated executive officers during 20182019 collectively, the “Named Executive Officers” (NEOs); and (c) all of the directors and executive officers as a group.
Number of Shares of Common Stock (1) | Percent of Class | Number of Shares of Common Stock (1) | Percent of Class | |||||||||||
Sarah M. Barpoulis | 24,873 | (2 | ) | * | 28,965 | (2 | ) | * | ||||||
Thomas A. Bracken | 61,101 | (2 | ) | * | 65,675 | (2 | ) | * | ||||||
Keith S. Campbell | 54,148 | (2 | ) | * | 59,254 | (2 | ) | * | ||||||
Stephen H. Clark | 35,405 | * | ||||||||||||
Victor A. Fortkiewicz | 33,645 | (2 | ) | * | 37,702 | (2 | ) | * | ||||||
Sheila Hartnett-Devlin | 22,458 | (2 | ) | * | 26,546 | (2 | ) | * | ||||||
Cielo Hernandez | 0 | (3 | ) | * | 2,392 | (3 | ) | * | ||||||
Walter M. Higgins III | 42,520 | (2 | ) | * | 47,940 | (2 | ) | * | ||||||
Sunita Holzer | 29,482 | (2 | ) | * | 33,685 | (2 | ) | * | ||||||
Kenneth Lynch | 11,664 | * | ||||||||||||
G. Edison Holland, Jr. | 4,214 | (2 | ) | * | ||||||||||
Kenneth A. Lynch | 16,928 | * | ||||||||||||
Kathleen A. McEndy | 15,021 | * | 25,377 | (3 | ) | * | ||||||||
Kevin M. O’Dowd | 2,863 | (2 | ) | * | ||||||||||
Melissa J. Orsen | 0 | * | 2,029 | (3 | ) | * | ||||||||
Michael J. Renna | 87,595 | * | 120,560 | (3 | ) | * | ||||||||
Joseph M. Rigby | 11,770 | (2 | ) | * | 15,466 | (2 | ) | * | ||||||
David Robbins, Jr. | 34,364 | * | 43,557 | (3 | ) | * | ||||||||
Frank L. Sims | 82,658 | (2 | ) | * | 86,745 | (2 | ) | * | ||||||
All directors, nominees for director and executive officers as a group (16 persons) | 546,704 | |||||||||||||
All directors, nominees for director and executive officers as a group (17 persons) | 619,898 | |||||||||||||
* Less than 1%.
| (1) | Based on information furnished by the Company’s directors and executive officers. Unless otherwise indicated, each person has sole voting and dispositive power with respect to the Common Stock shown as owned by him or her. |
| (2) | Includes shares awarded to each director under a Restricted Stock Program for directors. Per the Restricted Stock Agreements, directors do not have voting rights on restricted stock awards. |
| (3) |
17 |
Security Ownership
The Board of Directors believes significant ownership of Company Common Stockcommon stock better aligns the interests of management with those of the Company’s shareholders. Therefore, in 2001, the Board of Directors enacted the stock requirements listed below for officers which were effective through 2014 and were increased effective 2015 as outlined below and on page 38:43:
As of December 31, 2018,2019, the CEO and all NEOs are in compliance with the ownership guidelines.
plan for purposes of determining compliance with the stock ownership requirement for officers. Current officers will have a
period of six years fromIn November 2019, the original date of adoption and newly elected or promoted officers will have a period of six years following their election or promotion to a new position as an officer to meet these minimum stock ownership requirements; andrequirements was eliminated. All officers of the Company are required to retain at least 50 percent of vested and/or earned shares, net of taxes, until their new stock ownership guideline have been met.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers to file reports with the SEC relating to their ownership of, and transactions in, the Company’s Common Stock. Based on our records and other information, the Company believes that all Section 16(a) filing requirements were met for the year ended December 31, 2018, except for a late filing by each of Ms. McEndy, Ms. Orsen and2019,
Messrs. Renna, Clark, Robbins and Lynch who inadvertently filed a lateexcept for Form 4 filed by Mr. Robbins on March 5,June 10, 2019 reporting two late transactions, the grantsale of 35 shares that occurred on May 13, 2019 and the forfeiture of shares to cover tax withholdings in connection with the vesting of Performance Restricted Stock Units that occurred on March 1, 2018; and for a late filing by each of Ms. McEndy and Mr. Robbins who inadvertently filed a later Form 4 on March 5, 2019 reporting the grant of Restricted Stock Units that occurred on June 7, 2018.2019.
The following table sets forth certain information, as of February 25, 2019,24, 2020, as to each person known to the Company, based on filings with the SEC, who beneficially owns 5 percent or more of the
Company’s Common Stock.common stock. Based on filings made with the SEC, each shareholder named below has sole voting and investment power with respect to such shares.
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Class | Shares Beneficially Owned | Percent of Class | ||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 12,765,638 | 14.9% | 14,260,418 | 15.5.% | ||||
The Vanguard Group 100 Vanguard Blvd Malvern, PA 19355 | 9,293,313 | 10.86% | 10,501,841 | 11.4% | ||||
Macquarie Investment Management Business Trust 2005 Market Street Philadelphia, PA 19103 | 4,809,229 | 5.2% | ||||||
18 | | South Jersey Industries, Inc. - |
Effective May 1, 2015, the Board of Directors decided to separate the Chairman and CEO roles, with Mr. Renna assuming the role of President and CEO, and Walter M. Higgins III, becoming the non-executive Chairman of SJI’s Board of Directors. Mr. Higgins will continue to serve as the non-executive Chairman of SJI’s Board of Directors until his retirement on April 24, 2020. At that time the Board of Directors will elect a new independent non-executive Chairman.
InThe non-executive Chairman of SJI’s Board of Directors performs the role, Mr. Higgins:following roles:
The Board adopted Corporate Governance Guidelines that require the Board to be composed of a majority of Directors who are “Independent Directors” as defined by the rules of the New York Stock Exchange. No Director will be considered “Independent” unless the Board of Directors affirmatively determines that the Director has no material relationship with the Company. When making “Independence” determinations, the Board considers all relevant facts and circumstances, as well as any other facts and considerations specified by the New York Stock Exchange, by law or by any rule or regulation of any other regulatory body or self-regulatory body applicable to the Company. As part of its
Corporate Governance Guidelines, the Board established a policy that Board members may not serve on more than four other boards
of publicly traded companies. SJI’s Corporate Governance Guidelines are available on our website at www.sjindustries.com under the heading “Investors”.
For 2018,2019, the Board determined that Directors Barpoulis, Bracken, Campbell, Fortkiewicz, Hartnett-Devlin, Higgins, Holzer, Rigby, and Sims, constitutinghas all of the non-employeeits current Directors, meet the New York Stock Exchange standards and our own standards noted above for independence and are, therefore, considered to be Independent Directors. Accordingly, all but one of the Company’s Directors was considered to be “Independent.”other than Mr. Renna who is not considered independent by virtue of his employment with the Company.
Mr. Campbell is Chairman of Mannington Mills, Inc., which purchases natural gas from Company subsidiaries. Commencing January 2004, as a result of winning a competitive bid, another Company subsidiary operates a cogeneration facility that provides electricity to Mannington Mills, Inc. Payments made to our Company’s subsidiary by Mannington Mills, Inc. were less than 1% of each of Mannington Mills, Inc. and the Company’s annual consolidated gross revenues during the last completed fiscal year.
Mr. Fortkiewicz is Of Counselof counsel at Cullen and Dykman, LLP, whicha law firm that provides legal representation to SJI
our subsidiary Elizabethtown Gas Company. This is an arm’s length long standing relationship that has existed since 1986 prior to our acquisition of
Elizabethtown Gas Company in July 2018. Mr. Fortkiewicz is not a partner, officer or employee of Cullen and Dykman LLP and he does not provide legal services on any matters relating to Elizabethtown Gas Company.Company, and he did not receive any compensation as a result of the firm’s representation. Payments made by the Company to Cullen and Dykman LLP were less than 1% of Cullen and Dykman LLP’s annual consolidated gross revenues during its last completed fiscal year. Mr. Fortkiewicz does not serve on our Audit, Compensation or Governance committees of the Board even though he is independent under the NYSE listing standards.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 19 |
Corporate Governance
The Company has adopted codes of conductConduct for all employees, Officers and Directors, which include the codesand a Code of ethicsEthics for our principal executive officer and principal financial officer within the meaning of the SEC regulations adopted pursuant to the Sarbanes-Oxley Act of 2002.2002 (collectively the “Codes”). Additionally, the Company established a hotline and website for employees to anonymously report suspected violations.
Copies of the codes of ethicsCodes are available on the Company’s website at www.sjindustries.com under Investors > Corporate Governance. Copies of our codes of conductCodes are also available at no cost to any
shareholder who requests them in writing at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037, Attention: Corporate Secretary. If the Company were to ever amend or waive any provision of its Code of Ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, the Company intends to satisfy its disclosure obligations, if any, with respect to any such waiver or amendment by posting such information on its website set forth above rather than by filing a Current Report on Form 8-K.
Corporate Governance
Communication with Directors
You may communicate with the Chairman of the Board and chairmen of the Audit, Compensation, Corporate Responsibility Governance, Risk and Strategy & Finance Committees by sending an e-mail to chairmanoftheboard@sjindustries.com, auditchair@sjindustries.com, compchair@sjindustries.com, govchair@sjindustries.com, corpresp@sjindustries.com, StratandFinChair@sjindustries.com or riskchair@sjindustries.com respectively, or you may communicate with our outsidenon-employee
Independent Directors as a group by sending an e-mail to sjidirectors@sjindustries.com. The Charters and scope of responsibility for each of the Company’s committees are located on the Company’s website at www.sjindustries.com. You may also address any correspondence to the Chairman of the Board, chairmen of the committees or to the Independentnon-employee Directors at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 0803708037.
Shareholders can see the Company’s Corporate Governance Guidelines and Profile, Charters of the Audit Committee, Compensation Committee, Corporate Responsibility Committee, Executive Committee, Governance Committee, Risk Committee, and Strategy & Finance Committee, and Codes of Ethics on the Company’s website at www.sjindustries.com under Investors >
Investors>Corporate Governance. Copies of these documents, as well as additional copies of this Proxy Statement, are available to shareholders without charge upon request to the Corporate Secretary at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Governance Committee is responsible for implementingimplements the Board Evaluation Process on an annual basis as a method of evaluating the effectiveness of the Board and Committees and to identify opportunities for Board enhancement. The 360° Third-Party Board Effectiveness Evaluation is conducted on an annual basis. The Governance Committee engages an independent, third-party facilitator and uses surveys and interviews to ensure robust feedback. The third-party facilitator is reevaluated periodically to ensure that the feedback that can be used to enhance Board processes.remains robust. The goal of the process is to gather anonymous input from Directors regarding Board composition and processes, and compliance with corporate governance best practices. Covered areas include essential aspects of Board leadershipthe performance and effectiveness of
the Board, the Board Committees, and individual Directors by evaluating the contribution of individual directors, overall group dynamics,Board and whether the experienceCommittee culture, Committee roles and skillsetsresponsibilities and an evaluation of the alignment of members are well alignedskill sets with SJI’s current and future strategic needs. In 2018,The Executive Team participates in the process includedassessment and interview process. Following the evaluationassessment, the Governance Committee and the Chairman of the Board and its committees. In addition to the Directors, the Executive Officers participated in the process. The Governance Committee isare responsible for implementing the recommendations generated from the evaluation results.
Meetings of the Board of Directors and its Committees
 |  |  |  |  |  |
The Board of Directors met | Each Director attended 75 percent or more of the total number of Board meetings and the Board committee meetings on which he or she | Each Director attended the 2019 Annual Meeting of Shareholders | It is the Board’s policy that the Independent Directors meet in Executive Session at every in-person meeting of the Board or its Committees. | During | Topics of these Full Board sessions included CEO and Officer Performance and Compensation, Succession Planning, Director Tenure, Retirement Age, Strategy and Discussions of Corporate Governance. Director Higgins, Chairman of the Board, chaired the meetings of the Independent Directors. |
20 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Corporate Governance
Corporate Governance
Age | Director Since | Audit Committee | Compensation Committee | Corporate Responsibility Committee | Executive Committee | Governance Committee | Risk Committee | Strategy & Finance Committee | |||||
Sarah Barpoulis | 55 | 2012 | Xc | X | X | X | |||||||
Thomas Bracken | 72 | 2004 | X | X | Xc | X | |||||||
Keith Campbell | 65 | 2000 | X | X | X | ||||||||
Victor Fortkiewicz | 68 | 2010 | Xc | X | |||||||||
Sheila Hartnett-Devlin | 61 | 1999 | X | X | X | ||||||||
Walter M. Higgins* | 75 | 2008 | |||||||||||
G. Edison Holland, Jr. | 66 | 2019 | X | X | X | ||||||||
Sunita Holzer | 58 | 2011 | Xc | X | X | X | |||||||
Kevin M. O’Dowd** | 47 | 2020 | |||||||||||
Michael Renna | 52 | 2014 | X | ||||||||||
Joseph Rigby | 63 | 2016 | X | X | Xc | ||||||||
Frank Sims | 69 | 2012 | X | X | X | Xc | |||||||
| c | Committee chaiman |
| * | Walter Higgins is and will continue to serve as an ex-officio member of the each of the Board Committees until his retirement on April 24, 2020. At that time the Board of Directors will elect a new independent non-executive Chairman who will also be appointed as an ex-officio member of the Committee. |
| ** | The Company expects that Mr. O’Dowd will be appointed to committees by the Board following the Company’s 2020 Annual Meeting of shareholders. |
The Board’s Audit Committee, which met eight times during 2018, was2019, is comprised of five “Independent” Directors: Sarah M. Barpoulis, ChairmanChairman; Sheila Hartnett-Devlin; G. Edison Holland, Jr. appointed as of September 12, 2019; Joseph M. Rigby; and Frank L. Sims. Walter M. Higgins III isserves as an ex-officio member of the Committee. The Board determined that no member of the Audit Committee has a material relationship that would jeopardize such member’s ability to exercise independent judgment. The Board of Directors designated each member of the Audit Committee as an “audit committee financial expert” as defined by applicable Securities and Exchange Commission rules and regulations. The Audit Committee: (1) annually engages and evaluates an independent registered public accounting firm for appointment, subject to Board approval and shareholder approval,ratification, as auditors of the Company and has the authority to unilaterally retain, compensate and terminate the Company’s independent registered public accounting firm; (2) reviews with the independent registered public accounting firm the scope and results of each annual audit; (3) reviews with the independent registered public accounting firm, the Company’s internal auditors and management, the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget, and staffing; and (4)
(4) establishes policies and procedures for engaging the independent registered public accounting firm to provide audit and permitted non-audit services and (5) considers the possible effect on the objectivity and independence of the independent registered public accounting firm of any non-audit services to be rendered to the Company. The Audit Committee members meet in Executive Session with Internal Audit and the independent accounting firm at each in-person meeting.
The Audit Committee is also responsible for reviewing the Company’s major financial risk exposures and the steps Management has taken to monitor and control these exposures and reviewing the guidelines and policies that govern the process by which risk assessment and management is undertaken by the Board and Management.
The Audit Committee established policiesmembers meet in Executive Session with Internal Audit and procedures for engaging the independent registered public accounting firm to provide audit and permitted non-audit services.at each in-person meeting.
The Committee Charter is available on our website at www.sjindustries.com, under the heading “Investors”. You may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Corporate Governance
Compensation Committee
The Board’s Compensation Committee, which met seven times during 2018, was2019, is comprised of five “Independent” Directors in 2018:the following directors who are independent under SEC and NYSE rules: Sunita Holzer, Chairman; Sarah M. Barpoulis; Keith S. Campbell; and Joseph M. Rigby. Walter M. Higgins III isserves as an ex-officio member of the Committee. Each member of the Compensation Committee met the enhanced independence standards under NYSE rules for committee membership. The Compensation Committee carries out the responsibilities delegated by the Board relating to the review and determination of executive
determination of executive compensation as well as the structure and performance of significant, long-term employee defined benefits and defined contribution plans.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
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Corporate Governance
No member of the Compensation Committee has ever been an Officer or employee of the Company, or any of its subsidiaries or affiliates. During the last fiscal year, none of the Company’s
Executive Officers served on a compensation committee or as a Director for any other publicly traded company.
The Board’s Corporate Responsibility Committee, which met four times during 2018, was2019, is comprised of five “Independent” Directors: Victor A. Fortkiewicz, Chairman; Thomas A. Bracken; Keith S. Campbell; and Sunita Holzer. Walter M. Higgins III isserves as an ex-officio member of the Committee. The Committee provides oversight, monitoring and guidance of environmental and social related matters related toincluding safety, corporate and social citizenship, public and legal policy, work force initiatives, corporate culture, environmental stewardship and compliance, political and regulatory activities, sustainability, employee work life, and economic and social vitality in the communities and markets in which the Company operates.
The Committee also oversees the production of the Company’s annual Corporate SustainabilityEnvironmental, Social and Governance (ESG) Report, which conveys how the Company links the business with sustainable practices. The ESG at report is available on https://www.sjindustries.com/esg/Home.
Management presents an update of the Company’s Environmental, Social and Governance (ESG) activities at each Corporate
Responsibility Committee meeting. In 2018, reporta board appointed ESG management Committee was created to develop and implement the Company’s key ESG and corporate social responsibility strategies, initiatives and policies and to assist the Board in its oversight, monitoring and guidance of SJI’s key environmental, social and sustainability areas. This includes oversight of SJI’s commitment to safety, environmental, health, human rights, employee relations, governance and community support strategies. The ESG Committee includes cross-functional members of management from key areas of the Company such as human resources, legal, risk management, communications, safety, and environment.
The Corporate Responsibility Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Board’s Executive Committee meeting, management presents an updateis comprised of the Company’s Environmental, SocialChairman of the Board, the CEO and the Chairs of the Audit, Compensation, Governance and Risk Committees. The Executive Committee acts as directed by or on behalf of the Board of Directors during intervals between the meetings of the Board of Directors in the event a quorum of the Board is not available and, if at the discretion of the Chairman of the Board, immediate action is needed. The Committee also: reviews and investigates other matters as directed by the Board of Directors; reviews and recommends to the Board the organizational structure of the Company; reviews and recommends to the Board the Officers of the Company and its direct subsidiaries; reviews and recommends to the Board the
Governance (ESG) activities. The Company has an internal ESG management Committee that reportscomposition and leadership of the Management Risk and Trust committees; monitors and/or implements the review or investigation of matters related to or involving the Company’s Officers; and takes action on such matters delegated to the Board Corporate Responsibility Committee at least quarterly. The ESG Committee, established in 2018, is responsible forby the development and implementation of the Company’s key ESG, sustainability and social responsibility strategies, initiatives and policies. This includes oversight of SJI’s commitment to safety, environmental, health, human rights, employee relations, governance and community support strategies. The Committee assists the Board in its oversight, monitoring and guidance of SJI’s key environmental, sustainability, and corporate and social citizenship areas. Annually, the Board approves the ESG Committee members which include management from key areas of the Company such as human resources, procurement, communications, safety, and environment.Board.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Board’s Governance Committee, which met sevensix times during 2018, was2019, is comprised of five “Independent” Directors:“the following directors who are independent under NYSE rules: Thomas A. Bracken, Chairman; Victor A. Fortkiewicz;Fortkiewicz through April 15, 2019; Sheila Hartnett-Devlin; G. Edison Holland, Jr. as of September 12, 2019; and Frank L. Sims. Walter M. Higgins III isserves as an ex-officio member of the Committee. Each Committee member satisfies the New York Stock Exchange’s independence requirements. Among its functions, the Governance Committee: (1) maintains a list of prospective candidates for Director, including those recommended by shareholders; (2) reviews the qualifications of candidates for Director (to review minimum qualifications for Director candidates, please see the Company’s Corporate Guidelines available on our website at www.sjindustries.com under the heading “Investors”. These guidelines include consideration of education, experience, judgment, diversity and other applicable and relevant skills as determined by an assessment of the Board’s needs when an opening exists); (3) makes recommendations to the Board of Directors to fill vacancies and for nominees for election to be voted on by the shareholders; and (4) is responsible for monitoring the implementation of the Company’s Corporate Governance Policy.Guidelines.
The Governance Committee reviews with the Board, on an annual basis, the appropriate skills and characteristics required of Board
members in the context of the current Board make-up and the Company’s strategic forecast. This assessmentThe criteria that the Governance Committee assesses includes issues of industry experience, education, general business and leadership experience, judgment, diversity, age, and other applicable and relevant skills as
determined by anthe Governance Committee’s assessment of the Board’s current needs. The Governance Committee also conducts a diversity assessment which includes a review of Board composition with regard to race, gender, age and geography.
In conjunction with the Board’s self-evaluation process and its review of the cumulative Board’s Skills Matrix (see page 10) the Governance Committee identified the criteria that it believed was most relevant for the Board’s composition in the foreseeable future. The criteria identified were (1) experience and responsibility for the strategic direction and day-today operation of a large organization; (2) experience and responsibility for strategic oversight and organizational development; (3) extensive utility industry experience (4) regulatory experience and (5) legal experience. Members of the Board and members of the Company’s Senior Executive team were asked to make recommendations for potential director nominees. Each of the recent Board appointed nominees, Messrs. Holland and O’Dowd were identified and recommended by a Board member and an Executive Officer of the Company respectively.
The Governance Committee will consider nominees for the Board of Directors recommended by shareholders and submitted in compliance with the Company’s bylaws, in writing, to the Corporate Secretary of the Company. The Governance Committee uses the same criteria for evaluating nominees regardless of the source of referral. Any shareholder wishing to propose a nominee should submit a recommendation in writing to the Company’s Corporate Secretary
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Corporate Governance
at 1 South Jersey Plaza, Folsom, New Jersey 08037, indicating the nominee’s qualifications and other relevant biographical information and providing confirmation of the nominee’s consent to serve as a Director.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may
obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Executive Committee
The Board’s Executive Committee is comprised of the Chairman of the Board, the CEO and the Chairs of the Audit, Compensation, Governance and Risk Committees. The current members are: Walter M. Higgins III, Chairman; Michael J. Renna; Sarah M.
Barpoulis; Thomas A. Bracken; Sunita Holzer; and Frank L. Sims. The Executive Committee acts as directed by or on behalf of the Board of Directors during intervals between the meetings of the Board of Directors in the event a quorum of the Board is not
Corporate Governance
available and, if at the discretion of the Chairman of the Board, immediate action is needed. The Committee also: reviews and investigates other matters as directed by the Board of Directors; reviews and recommends to the Board the organizational structure of the Company; reviews and recommends to the Board the Officers of the Company and its direct subsidiaries; reviews and recommends to the Board the composition and leadership of the Management Risk and Trust committees; monitors and/or implements the review or investigation of matters related to or
involving the Company’s Officers; and takes action on such matters delegated to the Committee by the Board.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Risk Committee
The Risk Committee met four times in 2018.2019. The committee wasis comprised of five “Independent” directors: Frank L. Sims, Chairman; Keith S. Campbell; Victor A. Fortkiewicz; G. Edison Holland, Jr. as of September 12, 2019; and Sunita Holzer. Walter M. Higgins III isserves as an ex-officio member of the Committee. The purpose of the Risk Committee is to assist the Board of Directors in fulfilling its oversight responsibilities with regard to the risks inherent in the business of SJI and the control processes with respect to such risks.
The Risk Committee of the Board monitors major strategic risks and the potential impact on the execution of the Company’s strategic plans and oversees and reviews the Company’s risk assessment process, and risk management strategy and programs. The committee also analyzesreviews the guidelines and policies that management uses to assess and manage exposure to risk and analyzesit reviews major financial risk exposures andas well as the steps management has taken to monitor and control such exposure. The Committee presents its findings to the full Board, which is charged with approving the Company’s risk appetite.
At each Risk Committee meeting, management presents an update of the Company’s risk management activities. The Company has two internal Risk Management Committees that report to the Board Risk Committee at least quarterly. The SJI Risk Management Committee
(RMC), established 1998, is responsible for overseeing the energy transactions and the related risks for all of the SJI companies. The SJI Utilities, Inc. RMC is responsible for gas supply risk management. Annually, the Board approves the RMC members. Committee members which include management from key Company areas such as finance, risk management, legal and business operations.
Enterprise Risk Management (ERM) is a company-wide systematic approach to identify, assess, monitor, and mitigate potential risks as well as seize strategic opportunities. A risk management Committee made up of members of senior management conducts Quarterly meetings with business area leaders to identify and assess the likelihood, criticality, and financial impact of each risks. The RMC establishes a general framework for measuringresults are then analyzed and monitoring business risks related to both financial and physical energy transactions, approves all methodologies used in risk measurement, ensures that objective and independent controls are in place, and presents reportsreported to the Risk Management Committee reflecting risk management activity.
A South Jersey Gas Company(RMC) via an ERM Dashboard. In addition, a monthly Risk Dashboard Report; including Key Risk Indictors and Strategic Risks is distributed to the RMC. The quarterly meetings conducted with the RMC is responsible for gas supply risk management. Annually,and Risk Management Committee of the Board, approvesinclude discussions around the RMC members. Committee members include management from key Company areas such as finance, risk management, legalERM process, its purpose, mitigation strategies, and gas supply. This RMC meets at least quarterly.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Strategy & Finance Committee
The Strategy & Finance Committee met seven times in 2018.The committee was comprised of five “Independent” directors: Joseph M. Rigby, Chairman; Sarah M. Barpoulis; Thomas A. Bracken; and Sheila Hartnett-Devlin. Walter M. Higgins III is an ex-officio member of the Committee. The purpose of the Strategy & Finance Committee is to assist the Board of Directors in fulfilling its oversight of the Company’s strategic, financial and financing plans.
The Strategy & Finance Committee provides input and support to Management in the development of the Company’s long-term strategic, operating, capital and financing plans.opportunities.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
South Jersey Industries, Inc. - |
Corporate Governance
TheIn addition to the Risk Committee, the Board has allocated its risk oversight duties as follows:to various committees of the Board:
Risk Areas | Board Responsibility | |
Corporate: | ||
• | Strategic and Financing | Strategy & Finance Committee |
• | Capital Allocation/Requirements | |
• | Enterprise Wide Risk Management | Risk Committee |
• | Major Financial Risk Exposures | Audit Committee |
Operational: | ||
• | Markets/Competition | Risk Committee & Strategy & Finance Committee |
• | Regulatory/Legislative | Risk Committee |
• | Supplier | |
• | Operations | |
• | Information Technology | |
• | Cybersecurity | |
Financial: | Audit Committee | |
• | Guidelines and Policies for Risk Assessment and Management | |
• | Major Financial Risk | |
• | Financial Reporting | |
• | Financial Disclosure | |
• | Financial Controls | |
• | Accounting/Taxes | |
Corporate Responsibility: | Corporate Responsibility Committee | |
• | Legal | |
• | Ethical | |
• | Corporate and Social Citizenship | |
• | Environmental | |
• | Safety | |
• | Sustainability Culture and Human Capital | |
Compensation | Compensation Committee | |
• | Compensation Program | |
• | Retirement Plans | |
The Strategy & Finance Committee met eleven times in 2019.The committee was comprised of “Independent” directors: Joseph M. Rigby, Chairman; Sarah M. Barpoulis; Thomas A. Bracken; and Sheila Hartnett-Devlin. Walter Higgins serves as an ex-officio member of the Committee. The purpose of the Strategy & Finance Committee is to assist the Board of Directors in fulfilling its oversight of the Company’s strategic, financial and financing plans.
The Strategy & Finance Committee advises the Board of Directors and provides input and support to Management in the development of the Company’s long-term strategic, operating, capital and financing plans.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
| South Jersey Industries, Inc. - |
Corporate Governance
The Board’s Audit Committee comprises fiveIt is the Company’s intention to set director compensation levels at or near the market median relative to directors eachat companies of whom is independent as defined under the listing standards of the New York Stock Exchange and satisfies the additional independence criteria applicable to Audit Committee members, including the Chairman of the Board of Directors, as an ex-officio member. The Board has determined that each member of the Committee is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission. The Audit Committee’s activitiescomparable size, industry, and scope of operations in order to ensure directors are paid competitively for their time commitment and responsibilities. A market competitive package is important because it enables us to attract and retain highly qualified directors who are critical to our long-term success.
In 2019, the Governance Committee engaged Pearl Meyer as its responsibilities are set forth in a written charter adopted byindependent consultant to review the Company’s Director Compensation Program (Program) to ensure that the Board attracts and is posted onretains highly qualified Directors. For the Company’s website at www.sjindustries.com under the heading “Investors”.
In accordance with its Charter adopted by the Board of Directors, the Audit Committee, among other things, assists the Board in fulfilling its responsibility2019 study, we considered market data for oversightdirectors of the quality and integritysame set of the Company’s accounting, auditing and financial reporting practices. Management is responsiblepeer companies considered for preparing the Company’s financial statements and for assessing the effectiveness of the Company’s internal control over financial reporting. The independent registered public accounting firm, Deloitte & Touche LLP is responsible for examining those financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee also discussed with Deloitte and Touche, with and without management, the quality of the financial statements, clarity of the related disclosures, effectiveness of internal control over financial reporting
and other items required under Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 1301, Communications with Audit Committees. Additionally, the Audit Committee received and reviewed the written disclosures and letter from Deloitte & Touche LLP regarding its independence from the Corporation required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence. The Audit Committee has also discussed with Deloitte & Touche LLP matters affecting its independence from the Corporation.
Based on the above-mentioned review and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Company’s audited financial statements and management assessment of the effectiveness of the Company’s internal controls over financial reporting be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for filing with the Securities and Exchange Commission.
Audit CommitteeSarah M. Barpoulis, ChairmanWalter M. Higgins III, Ex-Officio MemberSheila Hartnett-DevlinJoseph M. RigbyFrank L. Sims
Corporate Governance
Fees Paid to the Independent Registered Public Accounting Firm
As part of its duties, the Audit Committee also considered whether the provision of services other than the audit services by the independent registered public accountants to the Company is compatible with maintaining the accountants’ independence. In accordance with its charter, the Audit Committee must pre-approve all services provided by Deloitte & Touche LLP. The Audit Committee discussed these services with the independent registered public accounting firm and Company management to determine that they are permitted under the rules and regulations
concerning auditor independence promulgated by the U.S. Securities and Exchange Commission to implement the Sarbanes-Oxley Act of 2002,our executive compensation programs, as well as the American InstituteNACD Director Compensation Report. Directors who are employees of Certified Public Accountants.
The fees for all services provided by the independent registered public accounting firm to the Company during 2018or its affiliates do not receive separate compensation for their Board activities. The study revealed that the Program is aligned with market median practices, as is the design and 2017are as follows:pay mix between cash and equity.
FY 2018 | FY 2017 | ||||||||||||
Audit Fees (a) | $ | 3,713,000 | Audit Fees (a) | $ | 2,270,100 | ||||||||
Audit-Related Fees (b) | — | Audit-Related Fees (b) | — | ||||||||||
Tax Fees (c) | 525,415 | Tax Fees (c) | 242,000 | ||||||||||
All Other Fees | — | All Other Fees | — | ||||||||||
Total | $ | 4,238,415 | Total | $ | 2,512,100 | ||||||||
Cash—Annual Retainer for Board Service | $ | 65,000 | |
Restricted Stock—awarded in January (1) | $ | 105,000 | |
Independent Subsidiary Chairman Retainer (2) | $ | 8,000 | |
Non-Executive Chairman—stock and cash retainer (3) | $ | 80,000 | |
Annual Committee Chair Fees (4): | |||
Audit | $ | 15,000 | |
Compensation | $ | 12,500 | |
Corp. Resp. | $ | 7,500 | |
Governance | $ | 8,750 | |
Risk | $ | 7,500 | |
Strategy & Finance | $ | 7,500 | |
Annual Committee Member Fees (4) | |||
Audit | $ | 15,000 | |
Compensation | $ | 10,000 | |
Corp. Resp. | $ | 5,000 | |
Governance | $ | 7,500 | |
Risk | $ | 5,000 | |
Strategy & Finance | $ | 7,500 | |
Non-Executive Chairman | $ | 25,000 |
Corporate Governance
2018*There were no changes in Director Compensation Programprogram for 2020.
Cash—Annual Retainer for Board and Committee Service | $ | 65,000 | |
Restricted Stock—awarded in January(1) | $ | 95,000 | |
Independent Subsidiary Chairman Retainer(2) | $ | 8,000 | |
Non-Executive Chairman—stock and cash retainer(3) | $ | 80,000 | |
Annual Committee Chair Fees(4): | |||
Audit | $ | 15,000 | |
Compensation | $ | 12,500 | |
Corp. Resp. | $ | 7,500 | |
Governance | $ | 8,750 | |
Risk | $ | 7,500 | |
Strategy & Finance | $ | 7,500 | |
Annual Committee Member Fees(4) | |||
Audit | $ | 15,000 | |
Compensation | $ | 10,000 | |
Corp. Resp. | $ | 5,000 | |
Governance | $ | 7,500 | |
Risk | $ | 5,000 | |
Strategy & Finance | $ | 7,500 | |
Meeting Fees | |||
Each Audit Committee Meeting in Excess of ten per year | $ | 1,500 | |
Each Other Standing Committee in Excess of six per year | $ | 1,500 |
| (1) | The value of the shares is based on the daily average share price for the period July 1 through December 31 of the prior year. |
| (2) | The annual retainer for the Independent Subsidiary Chairman is payable monthly. The Chairman of the Board of Directors and non-independent directors are not eligible to receive the Independent Subsidiary Chairman annual retainer. |
| (3) | The Non-Executive Chairman retainer is comprised of 50% stock and 50% cash. The cash |
| (4) | Committee Chair fees and Committee Member Fees are payable monthly. |
| (5) | Meeting Fees were eliminated in February 2019. |
Directors are reimbursed for their travel expenses, upon request. In addition to the above compensation program, Directors who joined the Board before April 2011 are eligible for group life insurance.
South Jersey Industries, Inc. - |
Corporate Governance
Independent Director Compensation for Fiscal Year 20182019
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (2) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (2) | Total ($) | ||||||||||||||||||||||||||||
Sarah M. Barpoulis | 115,500 | 95,000 | — | — | — | 108 | 210,608 | 112,500 | 86,075 | — | — | — | 106 | 198,681 | ||||||||||||||||||||||||||||
Thomas A. Bracken | 96,750 | 95,000 | — | — | — | 378 | 192,128 | 93,750 | 86,075 | — | — | — | 400 | 180,225 | ||||||||||||||||||||||||||||
Keith S. Campbell | 86,500 | 95,000 | — | — | — | 378 | 181,878 | 85,000 | 86,075 | — | — | — | 400 | 171,475 | ||||||||||||||||||||||||||||
Victor A. Fortkiewicz | 91,500 | 95,000 | — | — | — | 378 | 186,878 | 90,000 | 86,075 | — | — | — | 400 | 176,475 | ||||||||||||||||||||||||||||
Sheila Hartnett-Devlin | 96,500 | 95,000 | — | — | — | 378 | 191,878 | 95,000 | 86,075 | — | — | — | 400 | 181,475 | ||||||||||||||||||||||||||||
Walter M. Higgins III | 130,000 | 135,000 | — | — | — | 378 | 265,378 | 130,000 | 118,854 | — | — | — | 400 | 249,254 | ||||||||||||||||||||||||||||
G. Edison Holland | 26,979 | 30,555 | — | — | — | — | 57,534 | |||||||||||||||||||||||||||||||||||
Sunita Holzer | 99,000 | 95,000 | — | — | — | 108 | 194,108 | 97,500 | 86,075 | — | — | — | 106 | 183,681 | ||||||||||||||||||||||||||||
Joseph M. Rigby | 108,000 | 95,000 | — | — | — | 108 | 203,108 | 105,000 | 86,075 | — | — | — | 106 | 191,181 | ||||||||||||||||||||||||||||
Frank L. Sims | 101,500 | 95,000 | — | — | — | 108 | 196,608 | 100,000 | 86,075 | — | — | — | 106 | 186,181 | ||||||||||||||||||||||||||||
| (1) | Per the |
| (2) | Represents payments made by SJI for group life insurance and accident protection insurance. |
| (3) | Mr. Holland was granted 933 shares of restricted stock valued at approximately $30,625 using the daily closing prices for the last two quarters of 2018. His annual restricted stock award was pro-rated because he was appointed to the Board on September 12, 2019. The above chart reflects the aggregate grant date fair value of restricted common stock awards granted in the respective fiscal year, calculated in accordance with FASB Accounting Standards Codification Topic 718, Compensation - Stock Compensation, which requires that the grant be measured at the grant date fair value. |
Review and Approval Policies and Procedures for Related Party Transactions
Pursuant to a policy adopted by the Company’s Governance Committee, the Company’s executive officers, directors, and principal stockholders,shareholders, including their immediate family members and affiliates, are not permitted to enter into a related party transaction with the Company without the Governance Committee’s or other independent Board committee’s prior consent, in cases in which it is inappropriate for the Governance Committee to review the transaction due to a conflict of interest.
In approving or rejecting the proposed transaction, the Governance Committee shall consider the facts and circumstances available and deemed relevant to the Committee. The Governance Committee shall approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, the Company’s best interests, as the Governance Committee determines in the good faith exercise of its discretion.
| South Jersey Industries, Inc. - |
Corporate Governance
We have reviewedThe Board’s Audit Committee comprises six directors, each of whom is independent as defined under the following Compensation Discussionlisting standards of the New York Stock Exchange. The Board has determined that each member of the Audit Committee is an “audit committee financial expert” as defined by the rules of the Securities and AnalysisExchange Commission. The Audit Committee’s activities and scope of its responsibilities are set forth in a written charter adopted by the Board, and is posted on the Company’s website at www.sjindustries.com under the heading “Investors.”
In accordance with management. its Charter, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s financial statements and financial reporting practices. Management has the primary responsibility for preparing the Company’s financial statements and for assessing the effectiveness of the Company’s internal control over financial reporting. The Audit Committee is responsible for the appointment, compensation and oversight of the independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”). Deloitte is responsible for independently examining the Company’s financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting and issuing a report thereon.
In performing its oversight, the Audit Committee monitors financial results and discusses the Company’s accounting practices and areas requiring significant management estimates or judgement with management and Deloitte. The Audit Committee reviews with Deloitte all communications required by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and, with and without management present, reviews and discusses the quality of the financial statements, clarity and completeness of the related disclosures, and the effectiveness of internal control over financial reporting. The Audit Committee receives and discusses reports from the Company’s internal audit department on the effectiveness of internal control over financial reporting and any changes to the Company’s internal controls. The Committee then periodically consults separately with the head of internal audit, out of the presence of management, about internal control over financial reporting, and reviews any recommendations and management’s response.
The Audit Committee has received from Deloitte the written disclosures and letter regarding its independence from the Company as required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence. The Audit Committee requires that all services of Deloitte be pre-approved by the Audit Committee or the Audit Committee Chair. The Audit Committee has considered whether Deloitte’s provision of non-audit services to the Company and the total fees paid for non-audit services relative to fees paid for audit services are compatible with maintaining Deloitte’s independence. On the basis of its review, the Audit Committee determined that Deloitte has the requisite independence.
Based on our reviewthe above-mentioned reviews and discussion, wediscussions with management, internal audit and Deloitte, the Audit Committee recommended to the Board of Directors that the Compensation DiscussionCompany’s audited financial statements and Analysismanagement’s assessment of the effectiveness of the Company’s internal control over financial reporting be included in the Company’s proxy statement,its Annual Report on Form 10-K and Annual Report for the fiscal year ended December 31, 2018.
COMPENSATION COMMITTEE2019, for filing with the Securities and Exchange Commission.
Sunita Holzer, ChairAudit Committee
Sarah M. Barpoulis, Chairman
Walter M. Higgins III, Ex OfficioEx-Officio MemberSarah M. BarpoulisSheila Hartnett-DevlinKeith S. CampbellG. Edison Holland (appointed September 2019)
Joseph M. Rigby
Frank L. Sims
Compensation Discussion & Analysis
Introduction
This Compensation Discussion and Analysis (“CD&A”) explains the executive compensation program for the following executive officers, who are referred to as the “Named Executive Officers” (“NEOs”):
Mr. Clark, Executive Vice President, SJI was named President and Chief Operating Officer of South Jersey Energy Solutions and SJI Midstream and resigned his role as Chief Financial Officer effective August 17, 2018. Mr. Lynch assumed the responsibilities of the principal financial officer from August 17, 2018 to January 14, 2019. Cielo Hernandez was hired as Senior Vice President and Chief Financial Officer effective January 14, 2019. Due to applicable SEC reporting rules, Ms. Hernandez is not classified as a NEO for the 2018 fiscal year. Mr. Clark accepted the Early Retirement Incentive Program (“ERIP”) offered by the Company and retired effective February 28, 2019. Further details are provided under “Change in Control Agreements and Other Potential Post-Employment Payment.”
Executive Summary
Fiscal 2018 Business Highlights
Key business and operational highlights for 2018 are as follows:
Growing regulated focus.In July 2018, SJI acquired the assets of Elizabethtown Gas and Elkton Gas from a subsidiary of Southern Company Gas, furthering the company’s commitment to growing earnings from regulated assets and investments. As a result of the acquisition, SJI‘s total utility customer base increased to more than 691,000 customers across New Jersey and Maryland.
Infrastructure Modernization.The current phase of the South Jersey Gas Storm Hardening and Reliability program was approved in May and authorizes investment of $100.3 million from 2018-2021 for four projects to enhance the safety, redundancy and resiliency of the distribution system along our coastal communities. Investment also continued under the second phase of our South Jersey Gas Accelerated Infrastructure Replacement Program (AIRP), which authorized the investment of $302.5 million from 2016-2021 for infrastructure replacement and upgrades. Additionally, in October, Elizabethtown Gas filed a proposal for a five-year, $518.0 million Infrastructure Investment Program with the New Jersey Board of Public Utilities.
Business Transformation Initiatives.In June 2018, SJI entered into an agreement to sell its portfolio of solar energy projects, and in November 2018, the company completed the sale of its retail gas assets. SJI also brought three new fuel supply management contracts on-line in 2018, further reflecting the refined strategic focus and business transformation efforts that will support long term growth from high-quality, repeatable earnings.
Growth from Core Non-Regulated Operations.Our wholesale natural gas business, South Jersey Resources Group, benefited from extreme cold weather in early January and an overall colder-than-average winter, delivering record Economic Earnings of $35.0 million, compared to $15.8 million in 2017. Additionally, after bringing three new fuel supply management contracts on-line during 2018, this business ended the year with nine contracts being served and an additional two contracts executed and pending service.
South Jersey Industries, Inc. - |
Corporate Governance
The Audit Committee is responsible for compensating the independent registered public accountants for services performed, including both audit and non-audit services. To ensure the provision of services to the Company is compatible with maintaining the accountants’ independence, in accordance with its charter, the Audit Committee must pre-approve all services provided by Deloitte. Prior to approving, the Audit Committee discussed these services with management and Deloitte to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the U.S. Securities and Exchange Commission to implement Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.
The fees for all services provided by the independent registered public accounting firm to the Company during 2019 and 2018 are contained in the table below. The Audit Committee believes these fees to be reasonable in light of the Company’s activity. Tax fees
were higher in 2018 due to the implementation of the Tax Cuts and Jobs Act. 2019 audit fees reflect additional audit work related to the acquisition of Elizabethtown Gas Company and Elkton Gas Company during 2018. Specifically, the 2019 audit fees reflect the inclusion of management’s implementation of internal controls associated with the acquired entities in the independent registered public accounting firm’s audit of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. In addition, the 2019 audit fees include audit work related to the implementation of new systems necessary to complete the integration of the acquired companies in anticipation of the end of the transition services provided by Southern Company, along with a public debt offering completed in 2019.
The fees for all services provided by the independent registered public accounting firm to the Company during 2019 and 2018 are as follows:
FY 2019 | FY 2018 | ||||||||||||
Audit Fees (a) | $ | 4,711,025 | Audit Fees (a) | $ | 3,718,000 | ||||||||
Audit-Related Fees (b) | — | Audit-Related Fees (b) | — | ||||||||||
Tax Fees (c) | 250,562 | Tax Fees (c) | 525,415 | ||||||||||
All Other Fees (d) | 2,021 | All Other Fees | — | ||||||||||
Total | $ | 4,963,608 | Total | $ | 4,243,415 | ||||||||
| (a) | Fees for audit services billed or expected to be billed relating to fiscal 2019 and 2018 include audits of the Company’s annual financial statements, evaluation and reporting on the effectiveness of the Company’s internal controls over financial reporting, reviews of the Company’s quarterly financial statements, comfort letters, consents and other services related to Securities and Exchange Commission matters. |
| (b) | SJI did not incur any fees for audit-related services during fiscal 2019 and 2018. |
| (c) | Fees for tax services provided during fiscal 2019 and 2018 consisted of tax compliance and compliance-related research. Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred to document, compute, and obtain government approval for amounts to be included in tax filings and Federal, state and local income tax return assistance. |
| (d) | Other fees billed by Deloitte for research tools and subscription services. |
28 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
This year’s Compensation Discussion and Analysis (CD&A) reviews the objectives and elements of SJI’s executive compensation program and discusses the 2019 compensation of our Named Executive Officers (“NEOs”) listed below. It also explains the actions
the Compensation Committee (“the Committee”) took based on its ongoing commitment to consider investor feedback and ensure our senior leadership team remains focused on creating long-term shareholder value. During 2019, we:
Conducted a shareholder outreach campaign, with a significant focus on executive compensation matters | ➢ | Reached out to approximately 35 of our top shareholders, representing more than approximately 66% of shares outstanding |
➢ | Members of the Board of Directors, including the Chairman of the Board and the Chairman of the Committee, met in person/telephonically with nine of our 10 top shareholders, representing approximately 30% of shares outstanding | |
Engaged a new independent compensation consultant | ➢ | Retained Pearl Meyer to gain further insight on pay practices and ensure that our program effectively balances competitive market practices, investor expectations, best-practice governance standards and our business strategy |
Prior to understanding from our shareholders and ISS in March, 2019, of their disagreement/disapproval of our late 2018/early 2019 use of enhancements of the Non-Qualified Employee Retirement Plan (“SERP”) to facilitate a corporate restructuring and downsizing of the senior executive roles, we had used that vehicle to make these changes. After that it was never used again. | ➢ | Determined that the SERP will not be used to provide enhanced future benefits under any circumstances. In addition, the SERP was frozen in 2016 for the enrollment of new participants. |
Did not grant any Special Recognition Awards to the NEOs | ➢ | Discontinued the use of one-time special cash awards and equity grants to current NEOs (referred to as Special Recognition Awards) and to all NEOs in the future* |
Did not increase base salaries for the NEOs | ➢ | There will be no base salary increase for the incumbent NEOs for 2020. |
Made changes to our Annual Incentive Plan (“AIP”) to improve line-of-sight between performance and payout results | ➢ | For 2019, added a Company Balanced Scorecard with pre-determined, quantifiable safety, diversity and inclusion, and employee engagement objectives |
➢ | For 2020, implemented a new AIP design that creates better alignment to relative Total Shareholder Return (“TSR”) and prioritizes corporate goals in line with shareholder interests. For example, AIP payout will be capped at 100% if the Company’s one-year relative TSR does not achieve the 25th percentile, and is otherwise capped at 150%. | |
Strengthened the link between pay and performance in our Long-Term Incentive (“LTI”) Plan and better aligned the design provisions with those of our peer group | ➢ | For 2019, adjusted relative TSR threshold performance level and payout opportunities to align better with market practices and shareholder expectations |
➢ | For grants starting in 2020, approved a relative Total Shareholder Return (“TSR”) threshold performance trigger. If SJI does not achieve 3-year relative, threshold TSR, there will be no payout on the TSR portion of the award and the EPS portion will be capped at 50% of target, regardless of EPS performance | |
Updated our Clawback Policy to be more robust | ➢ | Extended clawback to apply to material violations of Code of Ethics and other company policies (in addition to instances of material negative financial restatement due to fraud, negligence, or intentional misconduct) |
Modified the treatment of equity vesting under certain termination scenarios | ➢ | Effective 1/1/2020, eliminated full vesting of unvested TBRSU shares if an executive terminates from SJI (without Cause under the Officer Severance Plan) and PBRSU shares upon a change-in-control to better align with market practice of providing a pro-rated payment based on termination date |
| * | Inducement bonuses and equity grants for newly hired NEOs and/or pay adjustments (i.e., base salary and/or target incentive award opportunity increases) related to internal promotions are not considered Special Recognition Awards |
During 2019, our senior leadership team achieved critical financial objectives and continued to execute on our Business Transformation Plan by driving forward the strategic initiatives that reinforce our focus on reliable, repeatable earnings that complement regulated growth. We also successfully executed on our Chief Financial Officer (CFO) leadership transition plan, by seamlessly onboarding Ms. Cielo Hernandez into the CFO role early in the year.
More details about our shareholder outreach efforts, our 2019 business achievements and the resulting compensation actions taken by the Compensation Committee are in the following pages of our CD&A.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 29 |
Compensation Discussion & Analysis
Progress Towards Our Goals:2019 Named Executive Officers
Name | Position as of December 31, 2019 |
Michael J. Renna | President and Chief Executive Officer |
Cielo Hernandez(1) | Senior Vice President and Chief Financial Officer |
David Robbins Jr. | Senior Vice President and President of SJI Utilities, Inc. |
Kathleen A. McEndy(2) | Senior Vice President and Chief Administrative Officer |
Melissa J. Orsen | Senior Vice President and General Counsel |
Kenneth A. Lynch(1) | Former Senior Vice President and Chief Accounting and Risk Officer and Principal Financial Officer |
| (1) | Ms. Hernandez replaced Mr. Lynch as principal financial officer upon her appointment as Senior Vice President and Chief Financial Officer on January 14, 2019. Mr. Lynch retired from the Company on March 31, 2019. See “Change in Principal Financial Officer” below. |
SJI continues to focus on driving shareholder value through investments in expanding and modernizing our utility infrastructure. In collaboration with our regulators, we remain focused on delivering safe, reliable, affordable natural gas service to our customers. The company has also prioritized investments in long-term contracted energy infrastructure that will help make the
region more affordable for families and competitive for businesses. Additionally, we continue to leverage our industry expertise to provide essential services to utilities, power generators and industrial customers through wholesale marketing, fuel management and consulting services.
2018 Performance.
| (2) | Ms. McEndy retired from the Company on January 31, 2020. |
management contracts on-line, and ended the year with 10 operating contracts. We also divested our retail gas business during the fourth quarter due to extremely thin margins availableChange in Principal Financial Officer. Ms. Cielo Hernandez joined SJI in the retail market.role of Senior Vice President and Chief Financial Officer, effective January 14, 2019. In her role, Ms. Hernandez is responsible for maintaining the organization’s fiscal strength, enabling profitable operation through effective strategic planning and oversight of financial activities. Effective with her appointment on January 14, 2019, Ms. Hernandez replaced Mr. Kenneth A.
Lynch, our Senior Vice President and Chief Accounting and Risk Officer who had assumed the role of $0.6 millionprincipal financial officer on August 17, 2018. Following replacement by Ms. Hernandez, Mr. Lynch continued to serve as compared to a loss of $2.7 million forour Senior Vice President and Chief Accounting and Risk Officer until he retired from the prior year. Results reflected the agreement to sell our existing solar portfolio, which was partially offset by our development of a solar project that we sold to a third party.Company on March 31, 2019.
We periodically meet with our investment. These benefits were lower than prior yearshareholders to discuss business topics, seek feedback on our performance, and address other matters such as executive compensation. We increased the focus and intensity of our shareholder engagement as a result of our most recent say-on-pay vote, which yielded approximately 45% support for our executive compensation program (well below our historically strong support of greater than 95%, the modified Penn East capital structure that resultedaverage of results from fiscal years 2014 to 2018). The Board took this result as a FERC order in 2018.
*Annex A includes a reconciliationstrong indicator to increase its shareholder engagement efforts and, as such, reached out to approximately 35 of our income from continuing operationslargest shareholders, aggregating approximately 66% of our outstanding shares. Members of the Board of Directors, including the Chairman of the Board and earnings per share from continuing operationsthe Chairman of the Compensation Committee, met with nine of our ten top shareholders (eight meetings were in person), representing approximately 30% of our shares
outstanding. Our largest shareholder, which cast a vote in favor of our most recent say-on-pay vote, did not accept our invitation for an engagement meeting.
A key objective of our 2019 outreach efforts was to Economic Earningslisten to our shareholders and Economic Earnings per share (in thousands, except per share data). Income from continuing operationsbetter understand their perspectives on our executive compensation program and earnings per share from continuing operations areany concerns that motivated the most directly comparable measures reported under accounting principles generally accepted inlower level of support for our 2019 say-on-pay proposal. As part of this process, the United States (“GAAP”).Committee also retained Pearl Meyer, a leading independent compensation consulting firm, to gain further insight on current pay practices and ensure that our approach going forward effectively balances competitive market practices, shareholder expectations, best-practice governance standards and our business strategy.
Fiscal 2018 Compensation Highlights and Key Decisions
Consistent with prior years, the Compensation Committee (the “Committee”) made compensation decisions for the NEOs based on SJI’s executive compensation principles, as described further in a following section. The Committee uses the peer group 50th percentile as a reference point when assessing NEO target compensation levels but does not target a specific percentile.
Based on the Committee’s review of the executive compensation program in late 2017, we determined that for FYE 2017, NEO target total pay positioning vs. market varied by individual from below the 25th percentile to slightly above market median. Overall, compensation decisions made for fiscal 2018 brought target total pay positioning for our CEO slightly above the 25th percentile of our peers, while target total pay positioning for our other NEOs varied by individual from 25th percentile to slightly above median of our peers. Ms. Orsen joined the Company in 2018, and her 2018 target total pay positioning was significantly below the 25th percentile.
The executive compensation program for fiscal 2018 was consistent with the 2017 program other than a few minor changes, given that the program continues to align with the Company’s short-term and long-term business objectives. Changes were intended to comply with new tax laws and help improve the alignment of company performance with executive pay. The Committee made the following changes to the program design for fiscal 2018:
The compensation program for the NEOs during fiscal 2018 consisted of the following pay elements:
| South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
Our investors are highly supportive of our overall program design and its significant emphasis on performance-based pay – 70% of our LTI awards are granted using performance-based equity. However, there were some common concerns about one-time recognition (“Special Recognition Award”) awards to then current NEOs and most agreed that the existing connection between pay
Factoringand performance could be enhanced. We also gained a better understanding of where we could be more transparent as shareholders sought more clarity in market positioning as one input, in additionour executive compensation program disclosures. In response, we have taken multiple steps to consideration of other relevant factors such as an individual’s performance and potential, the breadth, scope and complexity of the role, internal equity and succession planning and retention objectives, the Committee approved compensation increases for
Mr. Renna and all other NEOs except Ms. Orsen who joined the Company in 2018, as further describedaddress investor concerns, which are summarized below. For further details on NEO target compensation in 2018, refer to the section in this CD&A entitled “Detailed Discussion and Analysis.”
Shareholder Feedback | Committee Response | ||
SERP | Shareholders were concerned that SJI provided severance and additional service credits under the SERP to certain NEOs during 2018 and early 2019. | The SERP was closed to new participants in 2016 and will no longer be used to provide enhanced future benefits under any circumstances. Any additional credits received by NEOs during 2018 and early 2019 were part of the Board’s succession planning and leadership transition strategy and were granted in accordance with the Company’s Business Transformation Plan. No NEO will ever receive additional SERP credits at any time in the future. | |
One-Time Awards | Shareholders were concerned that SJI provided Special Recognition Awards to certain then current NEOs during 2018 | The Committee did not provide any one-time Special Recognition Awards to current NEO’s during 2019 and will discontinue the use of such awards to all NEOs in the future.* | |
Pay for Performance Alignment | Shareholders sought a stronger link between pay and stock price performance | With LTI grants starting in 2020, performance-based equity awards will be based on pre-determined relative TSR and absolute cumulative economic earnings growth (weighted equally). However, if the Company does not achieve the threshold relative TSR goal, there will be no payout on the TSR portion of the award and the EPS portion will be capped at 50% of target, regardless of EPS performance. In addition, to better align the design of the LTI plan with market practices and shareholder expectations, starting with 2020 grants, the Committee: | |
• | Adjusted the relative TSR threshold performance level from the 35th percentile to the 25th percentile; and | ||
• | Lowered potential award payout at threshold to 40% from 50% of target, which is slightly below the peer average. | ||
AIP | Shareholders wanted to better understand the mechanics of our annual incentive plan | For 2020, we are continuing to create greater uniformity in the AIP’s structure/mechanics, prioritize corporate goals in line with shareholder interests and strengthen the goal-setting process (see 2020 Annual Incentive Plan Design chart on following page): | |
• | Awards for all NEOs will be weighted: (i) 70% on the satisfaction of certain pre-determined financial metrics; and (ii) 30% on the achievement of certain pre-determined stakeholder metrics measuring corporate performance and set forth in a Company Balanced Scorecard (including customer and other strategic objectives that drive long-term shareholder value). There will not be variation in weightings among the NEOs. | ||
• | The Committee will have the discretion to modify award payouts downward or upward to differentiate and reward individual contributions, based on the accomplishment of certain objectives like those in the Individual Business Unit Balanced Scorecard. | ||
• | Annual Incentive payout will be capped at 100% if the Company’s one-year relative TSR does not achieve the 25th percentile, and is otherwise capped at 150%. | ||
• | The plan will not contain a pool funding component. | ||
Environmental, Safety and Governance (ESG) Metrics | Shareholders would like to see more materiality focused ESG/Corporate Culture metrics in the AIP | The Company Balanced Scorecard under the AIP includes quantifiable safety, diversity and inclusion and employee engagement objectives (see page 39). We also invite you to review our ESG Report, which is available on the Company’s website at http://www.sjindustries.com/esg/home. | |
Executive Compensation Disclosure | Shareholders felt our disclosure could be clearer | We have reorganized our CD&A to better align with best-practice narratives and refreshed the language to enhance readability. | |
CEO Compensation Decisions* Inducement bonuses and Target Compensation
At the beginning of 2018, Mr. Renna, in his role as President and Chief Executive Officer, received an increase in hisequity grants for newly hired NEOs and/or pay adjustments (i.e., base salary from $700,000and/or target incentive award opportunity increases) related to $750,000 and an annual LTI increase as a percentage of salary from 200% to 225% effective January 1, 2018. For FYE 2017, Mr. Renna’s compensation was below the 25th percentile of the peers. These changes were intended to enhance the alignment
of his pay with performance, and increase his alignment with stockholder interests, as well as recognize his individual performance and relative target total pay positioning vs. market. These increases brought his 2018 target total pay positioning slightly above the 25th percentile of our peers.
All Other NEOs Compensation Decisions and Target Compensation
The Committee approved compensation increases for all other NEOs except Ms. Orsen who joined the Company in 2018 in the way of salary adjustments. Mr. Clark, Ms. McEndy, and Mr. Lynch received salary increases of approximately 3%, with these changes intended to recognize each NEO’s individual
performance in his or her role. Mr. Robbins received a larger salary increase of 13.2%, which was intended to bring his target total compensation closer to the peer median and reflect additional responsibilities.
Total Compensation Mix
While the Committee hasinternal promotions are not set a specific formula for the mix of pay elements, the Committee is oriented around placing greater weighting on at-risk compensation elements over fixed pay for all the NEOs.
considered Special Recognition Awards
South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
Pay for Performance2020 Annual Incentive Plan Design
Actual compensation received in Fiscal 2018 reflects the Company’s performance:
considering overall Company performance in 2018, including the Company’s stock price performance.WHAT GUIDES OUR PROGRAM
The Company and the Compensation Committee regularly monitor best practices and emerging trends in executive compensation and determine what enhancements should be made to strengthen the compensation program. Below is a list of the compensation practices that are (or, where noteworthy, are not) incorporated into the current executive compensation program which are aligned with stockholders’ interests.
Shareholder Say-on-Pay Vote and Company Response
At the Company’s Annual Meeting of Shareholders held in May 2018, shareholders were presented with a vote to approve, on an advisory basis, the compensation paid to the NEOs as disclosed in the “Compensation Discussion and Analysis” section of the proxy statement relating to that meeting (referred to as a “say-on-pay” proposal). Ninety-eight percent of the votes cast on the say-on-pay proposal voted in favor of the proposal, which was the same as in
2017, indicating continued strong shareholder support of the executive compensation program. Consistent with the Company’s commitment to stockholders’ interests and SJI’s pay-for-performance approach, the Compensation Committee continued to examine the compensation program and make changes where warranted.
Detailed Discussion & Analysis
Executive Compensation Principles
The Company’s executive compensation program applies to all Company Officers, including NEOs and is designed to aid in achievingkeep our senior leadership team focused on the seamless execution of the Company’s strategic plan while increasingand deliver shareholder value. Executivevalue over the long term. As such, executive compensation program decisions were made based onare grounded in the following principles:
| • | Alignment with Shareholder Interests. Our executive compensation program should emphasize variable compensation, with a focus on equity-based compensation, as a valuable means of aligning the interests of our NEOs with those of our shareholders. |
| • | Accountability for Performance. Our executive compensation program should directly and measurably link pay to business and individual performance with a substantial portion of compensation designed to create incentives for superior performance and meaningful consequences for below target performance. |
| • | Support our Business Goals. Our executive compensation program should drive short- and long-term financial, operational and strategic objectives and reward NEOs for performance relative to the businesses for which they are responsible as well as for overall Company performance. |
| • | Competition Among Peers. Our executive compensation program should enable us to attract and retain key executives by providing a total compensation program that is competitive with the market in which we compete for executive talent. |
Compensation Discussion & Analysis
2018 Compensation Components
The Company’s executive compensation structure consists of base salary, AIP and LTI. The AIP is directly linked to achieving predefined short-term and long-term performance goals, and LTI is directly
linked to achieving predefined long-term performance goals and/or stock price performance. Descriptions of each component of the compensation program for the NEOs are set forth below:
Pay Element | Description | Rationale |
Salary | Fixed cash | Provides stable market based compensation for role, level of responsibility and experience. Forms basis for other pay |
Annual Incentive Plan (“AIP”) | Annual cash compensation with variable payout based on achievement of pre-determined corporate/business unit economic earnings goals and individual balanced scorecard objectives (other strategic non-earnings goals) for the fiscal year | Drives and |
Long-Term Incentives (“LTI”) | LTI is granted 70% in performance-based restricted stock units (“PBRSUs”), based on 3-year relative Total Shareholder Return (“TSR”) vs. peers and 3-year economic earnings growth, and 30% in time-based restricted stock units (“TBRSUs”) | PBRSU portion of awards, representing significant majority of total LTI opportunity, requires achievement of threshold level of performance for any |
Pursuant
32 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Discussion & Analysis
We note that pursuant to SEC regulations, the Summary Compensation Table on page 4045 shows total compensation for our NEOs, including not only the valuation of the major elements of our program listed above, but also other numbers that we do not consider to be a significant driver of our overall pay philosophy. For example, the Summary Compensation Table includes a column for the change in pension value and nonqualified compensation earnings. Theearnings which is an actuarily determined year over year change in the value of a pension balance and clearly not reflective of Committee thought process and decision making within the scheme of our compensation philosophy. For this reason, we included an additional and separate column in the Summary Compensation Table that reflects total compensation minus the change in pension value and nonqualified compensation earnings for our NEOs. For the following reasons, among others, we believe this number is more representative of actual compensation, as it pertains to the 2017 through 2019 fiscal years:
Pension Value and Nonqualified Compensation Earnings Column each year will reflect only one year of service. We believeservice for each NEO.
The charts below show the target total direct compensation of our CEO and theour other NEOs for 2019*. These charts illustrate that a majority of NEO total direct compensation is at-risk (76% for our CEO and an average of 62% for our other NEOs).
* Mr. Lynch is excluded from all other NEOs in the tables above, because he retired from the Company April 1, 2019 and, as we believe this number is more representativea result did not receive 12 months of actual compensation.compensation for 2019. See “2019 Executive Compensation Program Elements – Base Salary” for further information.
South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our shareholders and executives:
What We Do | What We Don’t Do | ||
✔ | Seventy (70) percent of LTI awards are performance-based for the NEOs | ✘ | No excise tax gross ups |
✔ | Three-year performance periods under our LTI awards | ✘ | No repricing or exchange of equity awards without shareholder approval |
✔ | Use a mix of absolute and relative financial performance metrics (including relative TSR) in the incentive plans, to avoid duplication of incentives across AIP and LTI plans. | ✘ | No employment agreements |
✔ | Caps on incentive awards | ✘ | No hedging or pledging of Company stock for employees or directors |
✔ | Use of ESG Metrics in AIP | ✘ | No tax gross ups for perquisites |
✔ | Change-in-control “double-trigger” for equity award vesting and severance benefits | ||
✔ | Robust claw-back policy applying to all incentive awards | ||
✔ | Limited number of perquisites | ||
✔ | Independent compensation consultant | ||
✔ | Robust stock ownership guidelines | ||
The Compensation Committee oversees the executive compensation program for our NEOs and operates pursuant to a charter that complies with SEC rules and the corporate standards of the New York Stock Exchange (NYSE). The Committee is comprised of independent, non-employee members of the Board. The Committee works very closely with its independent consultant and senior management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Committee’s authority and responsibilities are specified in its charter, which may be accessed on our website at https://southjerseyindustries.gcs-web.com/committee-details/ compensation-committee.
The Role of the Compensation Committee. The Compensation Committee has the power and authority to oversee our compensation policies and programs and makes all compensation-related decisions for our NEOs. The Committee takes into account recommendations from its independent compensation consultant as well as the CEO (other than with respect to his own compensation); however, the Committee ultimately has final approval over all compensation decisions for all of our executive officers other than the CEO. The CEO does not participate in the deliberations of the Committee regarding his own compensation. Independent members of the Board make all final determinations regarding CEO compensation.
The Compensation Committee seeks to ensure that the total compensation paid to our NEOs is aligned with shareholder interests, is fair, reasonable and competitive, provides an appropriate balance of base pay and short-term and long-term incentives, and does not cause unnecessary risk-taking. All performance goals for the NEOs’ AIP awards are established at the beginning of each year for use in the performance evaluation process.
SpecificThe Role of the CEO. The CEO annually reviews the performance of, and makes recommendations regarding, each of our NEOs (other than himself) to the Committee. The conclusions reached and recommendations based upon these reviews, including with respect to salary adjustment and annual and long-term incentive compensation plan target and actual payout amounts and performance metrics, are presented to the Committee. The Committee has the discretion to modify any recommended grant sizes and performance targets and, within the confines of the annual and long-term incentive compensation plans, the payouts to our executive officers.
The Role of the Independent Consultant. The Compensation Committee has the authority to engage and retain an independent compensation consultant to provide independent counsel and advice. At least annually, the Committee formally conducts an evaluation as to the effectiveness of the independent compensation consultant and periodically runs a request for proposal process to ensure the independent compensation consultant is meeting its needs. For 2019, the Committee continued its engagement with Clearbridge Compensation Group, LLC (“ClearBridge”) as the independent compensation consultant for matters related to executive compensation, including the determination of 2019 salaries and the making of 2019 annual and long-term incentive grants in April 2019. ClearBridge was retained through May 2019, at which time the Committee retained the services of Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant for the remainder of 2019.
Pearl Meyer was engaged to support the Compensation Committee’s efforts to conduct a comprehensive analysis of the current executive compensation program, which was in direct response to shareholder feedback following the Company’s 2019 Annual Meeting of Shareholders. Pearl Meyer was selected as the independent consultant after an extensive review process conducted by the Committee.
34 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Discussion & Analysis
The following services were provided by the independent compensation consultants in 2019:
Consultant | Services Provided | |
ClearBridge | • | Review and recommendation regarding the compensation peer group for use in 2019 |
• | Annual competitive market assessment and recommendations for 2019 compensation decisions | |
• | Review, design and recommendations for the 2019 annual and long-term incentive plans, including all grants thereunder | |
• | Other ad-hoc requests related to executive compensation market practices | |
Pearl Meyer | • | Review and recommendation regarding the peer group for use in 2020 executive compensation determinations |
• | Annual competitive market assessment and recommendations for 2020 compensation decisions | |
• | Review, design and recommendations for the 2020 annual and long-term incentive plans | |
• | Other ad-hoc requests related to executive compensation market practices | |
The Compensation Committee also reviews indirect compensation (non-qualified retirement plan and other benefits and change in control agreements) on a three-year cycle, or more frequently, if warranted, based on market conditions and the recommendation of the independent benefits consultant. During November of 2018, in connection with its review of SJI’s executive benefit programs, the Committee retained an independent benefits consultant, Pinnacle Financial Group (“Pinnacle”) to examine all components of
the executive benefits program and provide an analysis of how the benefits compare with peers and the broad market.
The Compensation Committee reviewed its engagements with ClearBridge, Pearl Meyer and Pinnacle, including based on the factors set forth in the corporate governance standards of the New York Stock Exchange, and determined that there are no conflicts of interest between these firms and the Committee.
2019 Compensation Peer Group. Along with reviewing the executive compensation program, the Committee reviews and determines the appropriate peer group companies for benchmarking purposes. Consistent with the goal of providing competitive compensation, the executive compensation programs are compared to those programs in place at identified peer
companies. For the purposes of setting 2019 compensation levels, the Committee, in consultation with its independent consultant, ClearBridge, selected a peer group that was comprised of 14 similarly sized gas and other utility companies with comparable revenue and market capitalization. The peer group consists of the following companies:
Atmos Energy Corp. | Avista Corp. | Black Hills Corporation |
National Fuel Gas Co. | New Jersey Resources Corp. | Northwest Natural Gas Co. |
NorthWestern Corp. | ONE Gas, Inc. | PNM Resources, Inc. |
Portland General Electric Co. | Southwest Gas Corp. | Spire, Inc. |
Vectren Corp.* | WGL Holdings, Inc.* |
| * | Vectren Corp. was acquired by CenterPoint Energy on February 1, 2019; WGL Holdings, Inc. was acquired by AltaGas Ltd. on July 6, 2018 |
This peer group was consistent with the peer group used in 2018, except that Atmos Energy Corp. was added given its size and business relevance.
The Company used the above peer group for purposes of benchmarking salary, AIP, LTI, total direct compensation (salary plus AIP and LTI opportunities) and executive benefits.
The Committee believes that the peer group data and industry compensation studies give the Committee an independent view of the market “value” of each position on a comparative basis. While the Company does not target any particular percentile at which to align pay, decisionsthe Committee uses the peer group median as a reference point when assessing compensation levels. Actual levels of pay depend on a variety of factors such as experience and individual and Company performance.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 35 |
Compensation Discussion & Analysis
2019 financial performance is summarized below:
*Annex A includes a reconciliation of our income from continuing operations and earnings per share from continuing operations to
Economic Earnings and Economic Earnings per share (in thousands, except per share data). Income from continuing operations and earnings per share from continuing operations are the most directly comparable measures reported under accounting principles generally accepted in the United States (“GAAP”)
Other key business and operational highlights for 2019 are as follows:
Regulatory Initiative Growth. SJI continued to focus efforts in 2019 on growing earnings from regulated assets and investments. In June, Elizabethtown Gas received authorization from the New Jersey Board of Public Utilities (NJBPU) for a $300M, five-year infrastructure investment program. Additionally, in November the NJBPU approved a base rate change for Elizabethtown Gas – reflecting substantial capital investments made to enhance system safety, reliability and resiliency. With this settlement, annual revenues from Elizabethtown Gas base rates are expected to increase by $34 million.
Reshaping SJI. In December 2019, SJI entered into agreements to sell both its Marina Thermal Facility, in Atlantic City, NJ and Elkton Gas, in Elkton, MD. These asset sales support our strategic plan – focusing investments, energy and resources on our core utilities while also helping strengthen our balance sheet in support of further opportunities for innovation and growth. Also of note, SJI continued developing the business intelligence and data resources vital to streamlining business operations and ensuring that needed process improvements and efficiencies are identified and pursued.
Business Integration. In our first full year operating Elizabethtown Gas, we’ve worked to position the business for success as transition service agreements approach their end, including significant efforts to integrate our people, processes and technologies. We’ve also successfully increased the number of customer service representatives based in New Jersey, built an Elizabethtown Gas dispatch team, built the space and technology demanded for them to help keep customers safe and made notable progress in system development projects that will allow this business to stand on its own without transition services in early 2020.
New Energy Investments. As part of our commitment to sustainability, SJI invested in new, sustainable energy sources in 2019. In August, South Jersey Gas entered into a renewable natural gas environmental attributes-based supply agreement and in November, South Jersey Gas began using certified responsible natural gas in its system. As part of the renewable natural gas agreement, South Jersey Gas is displacing traditional natural gas dispensed at its owned and operated CNG stations with renewable natural gas sourced from an out of state landfill biogas project. The renewable natural gas supply will further reduce greenhouse gas emissions for all CNG fleets using the stations, including the South Jersey Gas fleet. Additionally, our certified responsible natural gas, provides us with a solution to deliver the same quality of service to our customers while reducing our environmental impact. The product is certified and rated based on factors such as emissions, well integrity and community engagement. These investments reinforce the foundation for a sustainable business and energy future for the region.
36 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Discussion & Analysis
The Compensation Committee determines base salaries for the NEOs each year taking into accountaccounting for multiple factors, including but not limited to individual’s performance and potential, breadth, scope and complexity of the role, internal equity, succession planning and retention objectives, as well as market positioning.positioning and budget. The Committee also considers the analyses provided by our independent compensation consultants who reaffirmed that for FYE 2017, target total pay positioning was slightly below the 25th percentile of the peer group for our CEO and varied from below the 25th percentile to slightly above market median for our other NEOs.consultant.
At the beginning of 2018,2019, the Compensation Committee approved a salary increase for Mr. Renna of 7.1% effective January 1, 2018 intended to recognize him for his individual performance in his role as President and CEO, as well as his relative target total pay positioning vs. market. The Committee also approved salary increases for Mr. Clark,Renna, Mr. Robbins and Ms. McEndy of approximately 2% to continue to align better their base salaries with the market and recognize their individual performance in their roles. Ms. Orsen received a 22.4% increase to her base salary that reflected her additional responsibilities she assumed including overseeing internal audit, corporate secretary and government affairs. Ms. Orsen is also responsible for managing outside counsel relationships. Mr. Lynch was eligible to receive certain compensation for his service through March 31, 2019, including (i) a pro-rated salary of $91,873, (ii) a pro-rated cash grant under our Annual Incentive Plan which paid out in 2020 in the amount of $45,152, (iii) his company car, 401(k) match and certain group life insurance premium payments, (iv) a pro-rated payout of all outstanding TBRSUs and PBRSUs, based on actual performance achieved and (v) certain medical, SERP and other retirement benefits, each as further described in the “Executive Compensation Tables—Summary Compensation Table,” “Executive Compensation Tables—Grants of Plan-Based Awards,” “Executive Compensation
Tables—Change in Control Agreements and Other Potential Post-Employment Payments—Retirement” and “Executive Compensation Tables—All Other Compensation Table.” The determination to provide Mr. Lynch of approximately 3% intended to recognize each NEO’s individual performancewith the compensation described above upon his retirement from the Company was made in his or her role,March 2019 and as well aspart of a larger reorganization that provided the company with a significant and sustained reduction in O&M. After contemplating the results of last years “say-on-pay” vote, and conducting extensive shareholder outreach, the Compensation Committee determined that it would no longer provide its executive officers with Early Retirement Incentive Program equivalent benefits or enhanced retiree medical care upon retirement from the Company.
Ms. Cielo Hernandez. In addition to Ms. Hernandez’s regular total direct compensation (base salary increaseand target annual and long-term incentive opportunities) package described in the tables below, she received a sign-on package as an inducement to forfeit certain compensation from her previous employer, which included: (i) a inducement bonus of 13.2% for Mr. Robbins,$75,000 which was intendedsubject to bring his target total compensation closerforfeiture if she voluntarily terminated her employment or was terminated from SJI for Cause before January 2, 2020; (ii) an inducement restricted stock grant valued at $100,000 vesting in two equal installments on the first and second anniversaries of hire; and (iii) up to median and reflect additional responsibilities. The approved salary increases were effective on January 1, 2018.
In the case of NEOs other than the CEO, the Committee also took into consideration the recommendations of the CEO. Following the salary increases, as well as an increase to the CEO’s LTI opportunity, as described in a following section, the CEO’s target total pay positioning was slightly above the 25th percentile of the peers. The other NEOs’ target total pay positioning varied by individual from 25th percentile to slightly above median, except$75,000 for Ms. Orsen who joined therelocation, consistent with our Company in 2018 and whose 2018 target total pay positioning was significantly below 25th percentile.policy.
Named Executive Officer | Annual Base Salary at FYE 2017 $Value | Annual Base Salary Effective 1/1/2018 $Value | Percent Increase From 2017 | |||||||||||
NEO | Annual Base Salary at FYE 2018 | Annual Base Salary Effective January 1, 2019 | Percent Increase (Approximate) | |||||||||||
Michael J. Renna | 700,000 | 750,000 | 7.1% | $ | 750,000 | $ | 765,000 | 2.0% | ||||||
Stephen H. Clark | 410,000 | 422,300 | 3.0% | |||||||||||
Cielo Hernandez(1) | n/a | $ | 390,000 | n/a | ||||||||||
David Robbins Jr. | 340,000 | 385,000 | 13.2% | $ | 385,000 | $ | 392,700 | 2.0% | ||||||
Kathleen A. McEndy | 360,000 | 371,000 | 3.1% | $ | 371,000 | $ | 378,500 | 2.0% | ||||||
Kenneth A. Lynch | 300,000 | 309,000 | 3.0% | |||||||||||
Melissa J. Orsen | NA | 290,000 | NA | $ | 290,000 | $ | 355,000 | 22.4% | ||||||
| (1) | Ms. Hernandez was hired as Senior Vice President and Chief Financial Officer on January 14, 2019. See “CD&A at-a-Glance—2019 Named Executive Officers—Onboarding Ms. Hernandez.” |
The Compensation Committee also determined that there would be no annual base salary increases for any of the NEOs for 2020.
Target Opportunities. Target annual incentive opportunities under the AIP are expressed as a percentage of base salary and are established based on the NEO’s level of responsibility and ability to impact the Company’s overall results. The Committee also considers market data in setting target award amounts. Actual AIP
Each NEO had a pre-established AIP opportunity for 2018. The Committee determines target AIP opportunities each year taking into account multiple factors including, but not limited to individual’s performance and potential, breadth, scope and complexity of the role, internal equity, succession planning and retention objectives, as well as market positioning. For 2018, the Committee did not
make any changes to the NEOs’ target AIP opportunities except as reflected by salary increases. Actual AIP awards can range from 00% to 150 percent150% of each NEO’s target AIP opportunity (subject to a threshold of 50%) based on the achievement of the performance metricscriteria discussed below. The 20182019 target AIP award opportunity for each Named Executive isopportunities are set forth below:
2019 Target AIP Award | ||||||
NEO | % of Salary | $ Value | ||||
Michael J. Renna | 100 | % | $ | 765,000 | ||
Cielo Hernandez | 60 | % | $ | 234,000 | ||
David Robbins Jr. | 70 | % | $ | 274,890 | ||
Kathleen A. McEndy | 60 | % | $ | 227,100 | ||
Melissa J. Orsen | 60 | % | $ | 213,000 | ||
Target
South Jersey Industries, Inc. - 2020 Proxy Statement | | 37 |
Compensation Discussion & Analysis
As described below, actual (final) AIP Awardsawards for each NEO in 2019 were driven by a comprehensive analysis of financial performance of the NEOsCompany and individual performance of the NEO tied to certain strategic goals. Specific financial and individual metrics and weightings varied in 2019 by the individual NEO based on role and responsibility. Additionally, for 2019, NEO awards under the AIP were designed to be paid out of a larger cash pool. Following the
2017 Target AIP Awards | 2018 Target AIP Awards | |||||||||||
Named Executive Officer | % of Salary | $ Value | % of Salary | $ Value | ||||||||
Michael J. Renna | 100 | % | 700,000 | 100 | % | 750,000 | ||||||
Stephen H. Clark | 70 | % | 287,000 | 70 | % | 295,610 | ||||||
David Robbins Jr. | 70 | % | 238,000 | 70 | % | 269,500 | ||||||
Kathleen A. McEndy | 60 | % | 216,000 | 60 | % | 222,600 | ||||||
Kenneth A. Lynch | 60 | % | 180,000 | 60 | % | 185,400 | ||||||
Melissa J. Orsen | NA | NA | 60 | % | 174,000 | |||||||
close of the 2019 fiscal year, the Compensation Committee determined the total amount to be allocated to the final AIP pool based on its assessment of achievements relative to certain pre-established financial goals and certain strategic corporate (rather than individual) goals set forth in a Company Balanced Scorecard. The below graphic shows the design of the AIP for 2019.
2019 Financial Performance Metrics. The primary metric by which financial performance for determining the AIP pool was economic earnings. Local Distribution Companies with significant wholesale marketing businesses, such as SJI, typically use a non-GAAP financial measure because such a measure eliminates unrealized gains and losses from our derivative and storage activities, as well as certain transactions that could make period-to-period comparisons confusing. We believe that economic earnings provide investors with a clear picture of operating performance and profitability and that such a non-GAAP measure is both commonly used and widely accepted by institutional investors, rating agencies and equity analysts. A schedule reconciling non-GAAP economic earnings to GAAP Earnings is available in Annex A.
Why Economic Earnings? | |
✔ | It is tracked and well understood by investors, rating agencies and equity analysts in their valuations of our business |
✔ | It reinforces our objectives for sustained long-term performance and shareholder value creation |
✔ | It provides our management team with clear line of sight to long-term financial results and allows us to effectively manage our business |
| South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
The AIP drivesDefinition of Economic Earnings. We employ a hedging strategy related to our non-regulated lines of business including gas storage and rewards short-term performance. The performance metrics used forgas transportation derivative trading. Economic earnings exclude the NEOs for 2018 were basedmark to market valuation of the derivative side of our gas storage and gas transportation hedging activities. Only considering the change in market value of the derivative and not the physical gas can lead to large variations on various metrics, including SJI economicour actual earnings South Jersey Gas (“SJG”) economicbetween periods. Economic earnings South Jersey Energy Solutions (“SJES”) economic earnings and individual balanced scorecard objectives (other strategic non-earnings goals by individual). For 2018,also exclude the financial performance metric for the AIP was changed from core earningsimpact of transactions, contractual arrangements or other events where management believes period to economic earnings, as core earnings (definedperiod comparison of SJI’s
as economic earnings less investment tax creditsoperations could be difficult or potentially confusing. Examples of amounts excluded are impairment charges, the impact of pricing disputes with third parties, costs to acquire Elizabethtown Gas Company and adjusted for non-operational events) will be equivalentElkton Gas Company, costs to economic earnings starting in 2018. Performanceprepare to exit the Transaction Services Agreement (TSA) with Southern Company Gas, costs incurred and resulting payouts for each metric were assessed independently. Specific metrics and weightings vary by individual based on role and responsibility. Specifically, the NEOs’ weightings were determined basedgains recognized on the areassale of assets, customer credits related to the business for which each NEO is responsible, as set forth below:acquisition of ETG and ELK, ERIP costs, severance and other employee separation costs and the impact of Tax Cuts and Jobs Act (Tax Reform). For further information see Annex A.
Economic Earnings | |||||||||||||||||
Named Executive Officer | SJI | South Jersey Gas (“SJG”) | South Jersey Energy Solutions (“SJES”) | Balanced Scorecard | |||||||||||||
Michael J. Renna | 75 | % | 25 | % | |||||||||||||
Stephen H. Clark* | 42 | % | 8 | % | 50 | % | |||||||||||
David Robbins Jr. | 25 | % | 25 | % | 50 | % | |||||||||||
Kathleen A. McEndy | 50 | % | 50 | % | |||||||||||||
Kenneth A. Lynch | 50 | % | 50 | % | |||||||||||||
Melissa J. Orsen | 50 | % | 50 | % | |||||||||||||
2018 Economic Earnings Pay/Financial Performance Scales and Actual ResultsMetrics
The annual incentiveeconomic earnings goals and payout scales are set at the beginning of the fiscal year, based on expected levels of performance for that coming year. No payment is made to our Named Executive Officers for theThe economic earnings component of the annual incentive plan unless threshold performance is met. For 2018, economic earnings goals were set excluding the projected impact of the Elizabethtown/Elkton acquisitions. The threshold economic earnings performance level for SJI and SJG in 2018 was set above actual economic earnings in 2017. Therefore, economic earnings performance significantly above prior year actual performance was required for any payout for our SJI and SJG economic earnings components. The threshold economic earnings performance level for SJES in 2018 was set just below actual SJES economic earnings in 2017. For 2018, the calculation of financial
results at the end of the performance period excluded both the dilutive and accretive impact of the Elizabethtown/Elkton acquisitions.
We used $126.0 million as SJI economic earnings when determining 2018 AIP payouts against the SJI economic earnings goals. This differs from the SJI economic earnings of $116.2 million reported to investors due to adjustments made to exclude the impact of the Elizabethtown/Elkton acquisitions.
For SJI economic earnings, the goals and payout scales, and actual results for 20182019 were as follows. follows:
Performance Range (Millions) | ||||||||||||||||||
Payout as a % of Target (2) | Below Threshold 0% | Threshold 50% | Target 100% | Maximum 150% | Actual Results ($) | Actual Payout (as a % of Target) | ||||||||||||
SJI Economic Earnings(1) | $ | <91.8 | $ | 91.8 | $ | 102.0 | $ | 112.2 | $ | 103.0 | 105 | % | ||||||
SJIU Economic Earnings | $ | <108.8 | $ | 108.8 | $ | 114.5 | $ | 120.2 | $ | 122.2 | 150 | % | ||||||
| (1) | If SJI Economic Earnings does not meet its target performance level, then the Company Balanced Scorecard will not be funded above 100%. |
| (2) | Actual results are determined based on straight line interpolation between threshold and maximum. There is no payout on the financial performance portion of the AIP award if performance results are below threshold. |
2019 Company Balanced Scorecard. The Company Balanced Scorecard was introduced in 2019 to strengthen our focus on quantifiable ESG-related metrics in our incentive plan — with an emphasis on safety and corporate culture. Below are the scorecard goals and actual results for 2019.
Goal | ||||||||||||||||||
Company Balanced Scorecard Metrics | Weight | Below Threshold | Threshold | Target | Stretch | Actual Results | ||||||||||||
Safety | ||||||||||||||||||
Days Away, Restrictions & Transfers (DART) Injury Rate | 20 | % | >10 | 10 | 8 | ≤6 | 10 | |||||||||||
Customer Growth | ||||||||||||||||||
Customer Additions – SJG & ETG | 20 | % | <9,300 | 9,300 | 9,705 | ≥9,900 | 9,517 | |||||||||||
Customer Satisfaction | ||||||||||||||||||
Achieve top tier ranking as measured by JD Power CSI scores for SJG & ETG | 20 | % | <725 | 725 | 730 | ≥735 | 743 | |||||||||||
System Reliability Investment | ||||||||||||||||||
Replace 200 miles of pipe by 12/31/2019 | 20 | % | <190 | 190 | 200 | ≥210 | 207 | |||||||||||
Culture & Communication | ||||||||||||||||||
Deepen Commitment to Diversity and Inclusion as measured by participant impact survey following Unconscious Bias Training | 10 | % | <3 | 3 | 3.5 | >4 | 4.73 | |||||||||||
Raise Level of Employee Engagement as measured by improvement in key survey targets | 10 | % | <10 | % | 10 | % | 25 | % | ≥50 | % | 70 | % | ||||||
Payout as a % of Target | 0 | % | 50 | % | 100 | % | 150 | % | 112.5 | % | ||||||||
2019 Final AIP Pool Funding for NEOs. Based on the actual financial performance and Company Balanced Scorecard results described above, the payouts are determinedAIP pool for NEOs was initially funded at 109.7% of target. The Compensation Committee could use its business judgment to adjust the AIP pool funding based on straight line interpolation betweena
qualitative assessment of Company performance (including, strategic initiatives, customer satisfaction, safety performance leadership, or any other factors the levels set forth below:Committee deems appropriate). However, for 2019, the Committee did not adjust the AIP pool funding for the NEOs.
SJI Economic Earnings Pay/Performance Scale | ||||||||
Performance Level | SJI Economic Earnings $ Value ($M) | Payout as a % of Target | ||||||
Maximum | ≥ 126.0 | 150% | ||||||
Target | 120.5 | 100% | ||||||
Threshold | 110.0 | 50% | ||||||
Below Threshold | <110.0 | 0% | ||||||
Actual Performance | 126.0 | 150% | ||||||
SJI economic earnings of $126.0 million reflects adjustments to exclude both the dilutive and accretive impact of the Elizabethtown/Elkton acquisitions.
South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
For SJG economic earnings, the goals and payout scales, and actual results for 2018 were as follows. Actual performance and the payouts are determined based on a step function between the levels set forth below:
SJG Economic Earnings Pay/Performance Scale | ||||||||
Performance Level | SJG Economic Earnings $ Value ($M) | Payout as a % of Target | ||||||
Maximum | ≥89.4 | 150% | ||||||
Target | 86.4 | 100% | ||||||
Threshold | 82.4 | 50% | ||||||
Below Threshold | <82.4 | 0% | ||||||
Actual Performance | 82.9 | 61% | ||||||
For SJES economic earnings, the goals and payout scales, and actual results for 2018 were as follows. Actual performance and the payouts are interpolated based on a step function between the levels set forth below:
SJES Economic Earnings Pay/Performance Scale | ||||||||
Performance Level | SJES Economic Earnings $ Value ($M) | Payout as a % of Target | ||||||
Maximum | ≥33.7 | 150% | ||||||
Target | 24.1 | 100% | ||||||
Threshold | 18.0 | 50% | ||||||
Below Threshold | <18.0 | 0% | ||||||
Actual Performance | 41.9 | 150% | ||||||
20182019 Individual Balanced Scorecard Summary ObjectivesScorecards.
In addition to being evaluated against the financial performance components used to determine the AIP awardsmetrics described above, awardsNEOs were able to NEOs areearn a portion of their AIP award based on individual balanced scorecard performance. An individual balanced scorecard (“BSC”) is a strategic performance management toolachieved against Individual Balanced Scorecard objectives. Each NEO had his or her own Individual Balanced Scorecard with specific measures tied to overall objectives in the following four categories that has four quadrants that may be usedwere weighted equally and directly linked to measure financialour business strategy and non-financial goals. The BSC measures may include strategic, customer, internal process and learning and growth.
The CEO’s performance highlights for the year included the following: Achieved a culture of safety and exceptional customer service, executed business transformation to ensure an organization committed to operational efficiency and continuous improvement, continued to execute the long-term strategy, achieved strategic growth milestones, and expanded talent and leadership development efforts.
Fiscal 2018 performance highlights for the other NEOs included the following: Provided leadership for Elizabethtown Gas and Elkton Gas acquisition and oversaw seamless transition, successfully implemented divestiture activities, delivered timely regulatory approvals on key regulatory initiatives, managed capitalization and liquidity in support of strategic goals, optimized and implemented improvements for customer experience, furthered thereinforce our commitment to sustainability:
Category | Weight |
Financial/Strategic: focus on creating long-term shareholder value through strategic actions that improve the quality of earnings, strengthen the balance sheet, and maintain a low to moderate risk profile | 25% |
Customer: drive customer satisfaction through investment in expanding and modernizing our utility infrastructure and regulatory innovation that provides safety, reliability, value and certainty to our customers | 25% |
Internal Process: improve business process and results through operational efficiency, continuous improvement and thoughtful investments in technology, people and communications — with safety and security underpinning everything we do | 25% |
Culture: expand and develop managerial and leadership competencies and build a sustainable pipeline of leadership talent, while deepening our commitments to Diversity & Inclusion, employee engagement and social/environmental responsibility | 25% |
Individual Balanced Scorecards for each NEO were developed and achieved 2018 safety goals, improvedapproved by the monitoring and reporting of emerging and strategic risks and aligned talent with business transformation initiatives.
BSC objectives are predefinedCompensation Committee at or close to the beginning of 2019. Specific measures in the calendar year in which they are to be performed. The objectives are tied to applicable business plans or policies forNEOs’ scorecards were based on their roles, responsibilities and area of operation. At the applicable year. The Compensation Committee approves the objectives for the CEO at the beginningend of the year, the NEOs were evaluated individually and assesses his performance at the close of the calendar year based on a review of his performance in
comparisonrelative to histheir specific goals. The BSCmeasures. Award recommendations for the other NEOs is(other than the CEO) were determined based on the CEO’s
review of each entity’s business initiativesunits’ achievements and individual performance assessments that are then ratifiedassessments. The Compensation Committee reviewed the CEO’s recommendations and approved the associated payouts for each NEO. The CEO’s performance was assessed, and his award level was approved by the Compensation Committee. The Compensation Committee approves the BSC achievement and payout for each NEO.
Payment for achieving balanced scorecard objectives range from 0% at below threshold, 50% at threshold, 100% at target to 150% at maximum. Payment for achieving results between these levels is interpolated.
The level of performance achieved for each BSC objective is dependent upon the terms of the objective itself, relative to each NEO’s performance. his Individual Balanced Scorecard.
For 2018, our NEOs’ BSC payouts reflect2019, individual performance achievements reflected each NEO’s performance versus their individual BSC objectivesIndividual Balanced Scorecard in each of the categories as described above, as well as our Company’s overall achievements over the year versus our strategic initiatives. Based on the performance level achieved, our CEO earned a formulaic payout of 125% on the individual BSC portion of the AIP (weighted 25% of his total AIP payout). Individual BSC formulaic payouts for our other NEOs, weighted 50% of their total AIP payouts, were as follows: 150% for Mr. Robbins, Ms. McEndy, and Ms. Orsen, 125% for Mr. Clark, and 110% for Mr. Lynch.above.
NEO | Summary of Key Individual Balanced Scorecard Achievements | Individual Results (as a % of Target) | |
Michael J. Renna President and Chief Executive Officer | • | Led strategic transformation efforts by leveraging people, process and technology to reduce costly redundancies, inefficiencies and misalignment resulting in a leaner, more efficient and lower cost organization | 112.5% |
• | Redirected strategy and repositioned SJI to best align with New Jersey and the region’s Energy Policy | ||
• | Led SJI through significant transition and uncertainty to performance at the high end of our guidance and above consensus | ||
Cielo Hernandez Senior Vice President and Chief Financial Officer | • | Improved monthly Operating Results Reviews to monitor and drive financial performance | 116% |
• | Aligned talent with business requirements by strengthening the Finance Business Partner model | ||
• | Automated several key Financial processes to support operational efficiency goals | ||
David Robbins Jr. Senior Vice President and President SJI Utilities, Inc. | • | Improved key customer satisfaction metrics | 116% |
• | Led organizational structure at SJG to support Business Transformation | ||
• | Improved Manager Effectiveness related scores on the Employee Engagement Survey | ||
Kathleen A. McEndy Senior Vice President and Chief Administrative Officer | • | Strengthened procurement RFP process resulting in significant savings | 105% |
• | Launched an HR self-service technology resulting in approved reporting | ||
• | Completed inaugural talent development programs for high potential employees | ||
Melissa J. Orsen Senior Vice President and General Counsel | • | Significantly reduced external legal fees | 118% |
• | Assisted in completion of divestitures | ||
• | Educated state and local officials about our customer and business needs | ||
In the cases of all NEOs except for Ms. Orsen, the Committee applied negative discretion to their total AIP payout after considering overall Company performance in 2018 (independent of the achievement of economic earnings goals and BSC objectives), including the Company’s stock price performance. In the case of Ms. Orsen, the Committee maintained the formulaic outcome of her total AIP payout in recognition of her increased scope of responsibility and her exceptional individual performance and contributions in 2018.
| South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
The 20182019 AIP target opportunity,Final Award Payouts. Based on the initial formulaic payout, reflecting actual economic earningsfinal AIP pool funding and individual BSC results, and the actualperformance achievements described above, final payout following the application of Committee discretion are set forth belowAIP award payouts for each NEO:of the NEOs were as follows:
Initial Formulaic Payout | Final Payout | |||||||||||||||||
Named Executive Officer | Target AIP Opportunity ($) | Economic Earnings Weighted % Payout | BSC Objectives Weighted % Payout | Initial Formulaic Total Payout as a % of Target | Final Total Payout as a % of Target | Total AIP Award Received for 2018 Performance ($) | ||||||||||||
Michael J. Renna | 750,000 | 150 | % | 125 | % | 143.75 | % | 125 | % | 937,500 | ||||||||
Stephen H. Clark | 295,610 | 150 | % | 125 | % | 137.5 | % | 125 | % | 369,513 | ||||||||
David Robbins Jr. | 269,500 | 105.5 | % | 150 | % | 127.75 | % | 125 | % | 336,875 | ||||||||
Kathleen A. McEndy | 222,600 | 150 | % | 150 | % | 150 | % | 135 | % | 300,510 | ||||||||
Kenneth A. Lynch | 185,400 | 150 | % | 110 | % | 130 | % | 125 | % | 231,750 | ||||||||
Melissa J. Orsen | 174,000 | 150 | % | 150 | % | 150 | % | 150 | % | 261,000 | ||||||||
CEO | AIP Target Award Opportunity ($) | SJI Financial Payout 75% Weighting | Individual Payout 25% Weighting | Final Award Payout ($) | Final Award Payout (%) (as a % of Target) | ||||||||||
(AIP Target x Weighting x Results) | (AIP Target x Weighting x Results) | (Financial + Individual) | |||||||||||||
Michael J. Renna | $ | 765,000 | $ | 602,438 | $ | 215,156 | $ | 817,594 | 106.9 | % | |||||
Other Corporate NEOs | AIP Target Award Opportunity ($) | SJI Financial Payout 50% Weighting | Individual Payout 50% Weighting | Final Award Payout ($) | Final Award Payout (%) ( as a % of Target) | ||||||||||
(AIP Target x Weighting x Results) | (AIP Target x Weighting x Results) | (Financial + Individual) | |||||||||||||
Cielo Hernandez | $ | 234,000 | $ | 122,850 | $ | 135,720 | $ | 258,570 | 110.5 | % | |||||
Kathleen A. McEndy | $ | 227,100 | $ | 119,228 | $ | 119,227 | $ | 238,455 | 105.0 | % | |||||
Melissa J. Orsen | $ | 213,000 | $ | 111,825 | $ | 125,670 | $ | 237,495 | 111.5 | % | |||||
SJIU NEO | AIP Target Award Opportunity ($) | SJI Financial Payout 50% Weighting | Individual Payout 50% Weighting | Final Award Payout ($) | Final Award Payout (%) (as a % of Target) | |||||||||||||
(AIP Target x Weighting x Results) | (AIP Target x Weighting x Results) | (Financial + Individual) | ||||||||||||||||
SJI (25%) | SJIU (25%) | |||||||||||||||||
David Robbins Jr. | $ | 274,890 | $ | 72,159 | $ | 103,084 | $ | 159,436 | $ | 334,679 | 121.8 | % | ||||||
For a discussion of the one-time signing cash bonus made to Ms. Hernandez in 2019 in connection with her appointment as our new CFO, please see “2019 Executive Compensation Program Elements—Base Salary—Ms. Cielo Hernandez”. For changes
made to the design of our AIP for 2020 awards, including the cap on AIP payout based on the Company’s one-year relative TSR performance, see “Board Responsiveness to Shareholder Feedback—What We Heard and How We Responded—AIP.”
For 2018, Equity compensation directly aligns the standard LTI componentinterests of the executive compensation program for NEOs consistswith those of 70% performance-based restricted stock units (“PBRSUs”) and 30% time-based restricted stock units (“TBRSUs”).our shareholders. In previous years, TBRSU grants were subject to a performance condition intended to satisfy2019, the conditions for tax-deductibility under Section 162(m) ofCompany granted long-term equity incentives as follows:
Type of Equity Award | Weight | Description |
Performance-Based Restricted Stock Units (PBRSUs) | 70% | 50% vest based on 3-year relative TSR (vs. peers); 50% vest based on 3-year Earnings Per Share (EPS) growth Promotes continued focus on both short- and long-term performance. |
Time-Based Restricted Stock Units (TBRSUs) | 30% | Vest ratably (1/3rd) over three years; TBRSUs support the Company’s leadership retention objectives and foster a culture of ownership |
the Code. This performance condition was removed for the 2018 awards as a result of the changes to Section 162(m) under the Tax Cuts and Jobs Act. Mr. Robbins and Ms. McEndy also received one-time recognition awards to recognize them for additional responsibilities during the year.
Fiscal 2018 Standard LTI Award Opportunities
The Compensation Committee considered the data provided by the independent compensation consultants, which reaffirmed the Compensation Committee’s understanding that, for FYE 2017, total compensation for the CEO was below the 25th percentile of market. In particular, his LTI target opportunity was also below 25th percentile for 2017. At the beginning of 2018, the Committee
approved an increase to Mr. Renna’s standard LTI target opportunity for 2018 as set forth below, which was intended to enhance the alignment of his pay with performance and increase his alignment with shareholder interests, as well as recognize his relatively low market pay position.
2017 Standard Target LTI | 2018 Standard Target LTI | |||||||||||
Named Executive Officer | % of Salary | $ Value | % of Salary | $ Value | ||||||||
Michael J. Renna | 200 | % | 1,400,000 | 225 | % | 1,687,500 | ||||||
Stephen H. Clark | 100 | % | 410,000 | 100 | % | 422,300 | ||||||
David Robbins Jr. | 100 | % | 340,000 | 100 | % | 385,000 | ||||||
Kathleen A. McEndy | 85 | % | 306,000 | 85 | % | 315,350 | ||||||
Kenneth A. Lynch | 85 | % | 255,000 | 85 | % | 262,650 | ||||||
Melissa J. Orsen | NA | NA | 85 | % | 246,500 | |||||||
South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
The standard targetFiscal 2019 LTI opportunity consists of 70% PBRSU grants (with 50%Award Opportunities. Target long-term equity incentive awards are expressed as a total dollar value based on 3-year relative total shareholder return (“TSR”)a percentage of the NEO’s base salary. For awards granted in 2019, the specified percentage of each NEO’s base salary used for purposes of determining the amount of long-term equity incentive awards granted and 50% based on 3-year economic earnings growth) and 30% TBRSU grants as set forththe corresponding dollar values are shown in the table below.
Details with respect to the number of shares, stock prices on the date of grant and grant date values for the NEOs’ 20182019 LTI grants are provided in the “Grants of Plan-Based Awards and Outstanding Equity Awards” tables.
2018 PBRSU Award
NEO | 2019 Target LTI Awards ($ Value) | |||||||||||
% of Salary | PBRUs | TBRSUs | Total | |||||||||
Michael J. Renna | 225 | % | $ | 1,204,875 | $ | 516,375 | $ | 1,721,250 | ||||
Cielo Hernandez(1) | 100 | % | $ | 273,000 | $ | 117,000 | $ | 390,000 | ||||
David Robbins Jr.(2) | 125 | % | $ | 343,613 | $ | 147,262 | $ | 490,875 | ||||
Kathleen A. McEndy | 85 | % | $ | 225,208 | $ | 96,517 | $ | 321,725 | ||||
Melissa J. Orsen | 85 | % | $ | 211,225 | $ | 90,525 | $ | 301,750 | ||||
| (1) | In conjunction with Ms. Hernandez’s new-hire arrangement (see page 29 of this CD&A), she also received a $100,000 inducement equity grant of TBRSUs, which is not included in the table above. |
| (2) | The Compensation Committee approved a 25% increase to Mr. Robbins Jr.’s target award opportunity as a percentage of salary for 2019 in recognition of the increased scope of his responsibilities following the acquisition of Elizabethtown Gas and Elkton Gas and his promotion to President of SJIU. Further, the increase in Mr. Robbins’ equity compensation more directly aligns his compensation with our shareholders as the regulated utility businesses he oversees represents more than 75% of our earnings. |
A Closer Look at 2019 PBRSUs.PBRSU awards are earned based on the followingachievement of certain financial performance measures:measures earned upon the completion of a three-year performance period, with vesting occurring once at the end of the three-year period. These measures are determined at the beginning of the three-year period and are as follows:
Relative TSR directly ties to shareholder return, and economic earningsEPS growth is a financial measure that links awards to longer-term operating performance and financial goals. The relative TSR goals are set at levels consistent with market practice for similar relative TSR based long-term performance awards and reflect rigorous performance hurdles.
The economic earningsEPS growth goals are set at levels that requireconsistent with our long-term growth for any payouts to be received for these
components.financial plan and guidance. For the 20182019 awards, the EPS growth is measured based on SJI’s economic earnings goals included projectedper average diluted shares outstanding. For a discussion of economic earnings, from the Elizabethtown/Elkton acquisitions. When calculating financial results at the endsee “2019 Executive Compensation Program Elements—Annual Incentives— Funding of the performance period, SJI will include both the dilutive and accretive impact of the acquisitions.2019 AIP Pool.”
The PBRSU goals and payout scales are set at the beginning of the three-year performance period. The Committee has developed a schedule to determine the actual amount of the LTI awards earned, evaluated for each measure separately, as shown below. Specific performance and the resulting payout will beare interpolated on a straight-line basis between the levels indicated below. PBRSUs can be earned from 50% of target shares granted if threshold performance is met and up to 200% of target shares granted if maximum performance is met. No shares are earned for performance below threshold performance level and any performance over the maximum will result in a 200% payout. Provided below are the pay-and-performance scales for the 2019 PBRSU awards:
Performance Measure | <Threshold | Threshold | Target | Stretch | Maximum |
3-Year TSR Ranking v. Peers | <35th percentile | 35th percentile | 50th percentile | 80th percentile | 99th percentile |
3-Year EPS Growth | <5.5% | 5.5% | 8% | 9% | 10% |
Payout as a % of Target | 0% | 50% | 100% | 150% | 200% |
Payouts on 2017 PBRSU Awards. The LTI goals and payout scales are set prior to the applicable three-year performance cycle. For the LTI performance cycle ended in fiscal 2019, goals were set prior to the beginning of fiscal 2017 and were based 50% on three-year TSR vs. the peer group and 50% on 3-year compound annual economic earnings. The goals, payout scales and actual results for the 2017-2019 PBRSU awards were as follows:
Performance Measure | <Threshold | Threshold | Target | Stretch | Maximum |
3-Year TSR Ranking v. Peers | <35th percentile | 35th percentile | 50th percentile | 80th percentile | 99th percentile |
3-Year Economic Earnings Growth | <3% | 3% | 9% | 12% | 15% |
Payout as a % of Target | 0% | 50% | 100% | 150% | 200% |
For the 2017-2019 performance period, the Company achieved the 0th percentile with respect to relative TSR, resulting in a 0% payout. Results for 3-year economic earnings growth were 0.1%, resulting in a 0% payout.
The total weighted payout based on the performance above was 0% of target. The NEOs who were granted PBRSUs in 2017 received no payouts of the Fiscal 2017 PBRSUs. Ms. Hernandez
and Ms. Orsen were not with the Company in 2017 and did not receive a 2017 PBRSU award. We believe that these payouts reflect our disciplined approach to executive compensation and balanced pay-for-performance philosophy and the demanding nature of the performance metrics thoughtfully set by our Committee.
| South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
Provided below are the pay-and-performance scales for the 2018 PBRSU awards:
NEO | Shares Granted at Target (#)(1) | Actual Shares Vested (#) | ||||
Michael J. Renna | 29,089 | 0 | ||||
David Robbins Jr. | 7,064 | 0 | ||||
Kathleen A. McEndy | 6,358 | 0 | ||||
Compound Annual Economic Earnings Growth | ||||||||
Performance Level | SJI’s 3-Year Compound Annual Economic Earnings Growth | Payout as a % of Target | ||||||
Maximum | ≥15 | % | 200% | |||||
Stretch | 12 | % | 150% | |||||
Target | 9 | % | 100% | |||||
Threshold | 3 | % | 50% | |||||
Below Threshold | <3 | % | 0% | |||||
2018 TBRSU Award
TBRSU grants made in 2018 vest in three equal installments in March 2019, January 2020 and January 2021. The Committee elected to continue granting TBRSUs in 2018 to promote retention and align the interests of executives with stockholders. In previous years, TBRSU grants were subject to a performance condition
intended to satisfy the conditions for tax-deductibility under Section 162(m) of the Code. This performance condition was removed for the 2018 awards as a result of the changes to Section 162(m) under the Tax Cuts and Jobs Act.
One-Time Recognition Awards
Due to the acquisition of Elizabethtown Gas and Elkton Gas, the departure of SJI’s General Counsel and Corporate Secretary, and the Company’s business transformation efforts, certain NEOs took on additional responsibilities during 2018 without promotion, grade change, or an increase in salary. The Committee approved special one-time LTI awards to these NEOs in order to recognize them for
these additional responsibilities. Specifically, Mr. Robbins and Ms. McEndy each received a grant of 1,532 shares of time-based restricted stock units on June 7, 2018, with a target grant value of $50,000. The awards vest in three equal installments on the grant date and the first two anniversaries of the grant date.
Fiscal 2016 LTI Grant Payout
The LTI goals and payout scales are set prior to the applicable three-year performance cycle. Specifically, for the LTI performance cycle ended in fiscal 2018, goals were set prior to the beginning of fiscal 2016 and were based 50% on three-year TSR vs. the peer group and 50% on 3-year compound annual economic earnings.
The LTI goals were set at appropriate levels that fully supported the pay-for-performance philosophy. In addition, the relative goals are designed to be consistent with typical market practices among companies also setting LTI goals relative to peers.
For relative TSR, the goals and payout scales, and actual results for 2018 were as follows:
Compensation Discussion & Analysis
For economic earnings growth, the goals and payout scales, and actual results for 2018 were as follows:
Performance Level | SJI Economic Earnings CAGR | Payout as a % of Target | ||
Maximum | ≥15.0 | % | 200% | |
Target | 9.0 | % | 100% | |
Threshold | 3.0 | % | 50% | |
Below Threshold | <3.0 | % | 0% | |
Actual Performance – Economic Earnings CAGR | 5.5 | % | 70.8% | |
For the three-year performance cycle ended December 31,2018 (Fiscal 2016 PBRSU award), the total weighted payout based on the performance above is 69.3% of target. The NEOs received
payouts of the Fiscal 2016 PBRSUs as set forth below. Actual payouts shown below do not include accrued dividends on vested shares. Ms. Orsen was not with the Company in 2016 and did not receive a 2016 PBRSU award.
Named Executive Officer | 2016 PBRSUs: Number of Shares Granted at Target | 2016 PBRSUs: Number of Shares: Actual Payout | ||||
Michael J. Renna | 30,610 | 21,213 | ||||
Stephen H. Clark | 9,740 | 6,750 | ||||
David Robbins Jr. | 8,036 | 5,569 | ||||
Kathleen A. McEndy | 8,348 | 5,785 | ||||
Kenneth A. Lynch | 6,830 | 4,733 | ||||
Benefits and Perquisites
Each of the NEOs is eligible for other employee benefit plans generally available to all employees (e.g., qualified pension plan, deferred compensation plan, major medical and health insurance,
disability insurance, 401(k) Plan) on the same terms as all other employees. In addition to those benefits, NEOs are eligible for the following benefits:
Non-Qualified Supplemental Retirement Plan (the “SERP”)
base salary plus annual incentives. See Pension Benefits Table section for further detail. In 2016, the plan was closed to new participants.
Non-Qualified Defined Contribution Retirement Plan (the “DCRP”)
annual performance metric hurdle for the annual Employer Credit was removed as a result of the changes to Section 162(m) under the Tax Cuts and Jobs Act. DCRP account balances are not vested until age 50. Plan participants that terminate (voluntarily or involuntarily) prior to age 50 forfeit their entire account balance.
Supplemental Saving Plan Contributions
the amount of Company contributions that may not be made because of this limitation. Amounts paid pursuant to this policy are included in the Summary Compensation Table.
Disability Insurance
maximum benefit of $10,000. Due to limitations in the group LTD benefits, in 2017, a supplemental LTD plan was implemented to cover up to 60% of salary and cash bonus up to a monthly maximum benefit of $25,000.
Group Life Insurance
for resultant federal, state or local income taxes. Amounts paid pursuant to this policy are included in the Summary Compensation Table.
Compensation Discussion & Analysis
Supplemental Survivor’s Benefit
amounts of six months base salary for 10-15 service years; nine months base salary for 15-25 service years; and 12 months base salary for 25+ service years. Such payment is offset by proceeds from the NEOs’ retirement plans in the year of death.
Other Benefits and Perquisites
Approach for Developing the Executive Compensation Program
Role of the Compensation Committee
SJI’s executive compensation program is administered by the Committee. The Committee members meet the New York Stock Exchange’s independence standards. In determining the independence of members of the Compensation Committee, the Board considers all factors specifically relevant to determining whether the director has a relationship to the Company that is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including: (i) the source of the director’s compensation, including any consulting, advisory or other compensation fees;Practices and (ii) any affiliate relationships between the director and the Company or any of its subsidiaries. In accordance with its charter, the Committee sets the principles and strategies that guide the design of the employee compensation and benefit programs for the NEOs.Policies
The Committee annually evaluates the CEO’s performance. Taking performance into consideration, along with recommendations from the compensation consultant (discussed below), the Committee then establishes and approves and recommends to the Board for
approval compensation levels for the CEO, including annual base salary and AIP and long-term stock incentive awards. The Committee also reviews recommendations from the CEO regarding the CEO’s evaluation of, and pay recommendations for, the other NEOs. The Committee evaluates and approves the recommendations, as appropriate. All performance goals for the NEOs’ AIP awards are established at the beginning of each year for use in the performance evaluation process. The Committee reviews direct compensation (base salary, AIP and long-term incentives) annually. The Committee meets regularly in executive sessions without members of management present to evaluate the executive compensation program and reports regularly to the Board of Directors on its actions and recommendations.
The Committee reviews indirect compensation (non-qualified retirement plan and other benefits and change in control agreements) on a 3-year cycle, or more frequently, if warranted, based on market conditions and the recommendation of the independent compensation and benefits consultant.
Role of Independent Consultants
To assist the Committee in its evaluation of the executive compensation program for 2018, the Committee retained an independent compensation consultant, ClearBridge Compensation Group, LLC (“ClearBridge”). ClearBridge’s role as independent advisor to the Committee includes:
During 2018, in connection with its review of SJI’s executive benefit programs, the Committee also retained an independent benefits consultant, Pinnacle Financial Group (“Pinnacle”). Pinnacle examined all components of the executive benefits program and provided an analysis of how the benefits compare with peers and the broad market.
The Committee reviewed its engagement with ClearBridge and Pinnacle and believes there are no conflicts of interest between these firms and the Committee. In reaching this conclusion, the Committee considered the factors regarding compensation advisor independence set forth in applicable SEC and NYSE rules.
Compensation Discussion & Analysis
Role of the Compensation Peer Group
Along with reviewing the executive compensation program, the Committee reviews and determines the appropriate peer group companies for benchmarking purposes. Consistent with the goal of providing competitive compensation, the executive compensation programs are compared to those programs in place at identified
peer companies. For 2018, the Committee, in consultation with its independent consultant, ClearBridge, selected a peer group that was comprised of 13 similarly sized gas and other utility companies with comparable revenue and market capitalization. The peer group consists of the following companies:
This peer group was consistent with the peer group used in 2017, with the following exceptions: National Fuel Gas, Inc., PNM Resources, Inc., and Portland General Electric Co. were added given their size and business relevance, Piedmont Natural Gas Co. was removed following its acquisition by Duke Energy, and Questar Corp. was removed following its acquisition by Dominion Resources. For fiscal 2019, the peer group was further revised to add Atmos Energy Corp. given its size and business relevance.
The Company used the above peer group for purposes of benchmarking salary, AIP, LTI, and total direct compensation (“TDC”). The Committee relied on the peer group for all formal benchmarking. The Committee believes that the peer group data
and industry compensation studies give the Committee an independent and accurate view of the market “value” of each position on a comparative basis. While the Company does not target any particular percentile at which to align pay, the Committee uses the peer group 50th percentile (median) as a reference point when assessing compensation levels. The purpose of referencing the 50th percentile is to inform the Company of the relevant competitive market when making pay decisions and enable the Company to attract and retain qualified executives while at the same time protecting shareholder interests. Although the 50th percentile is used as a reference point, actual levels of pay depend on a variety of factors such as experience and individual and Company performance.
Severance/Change in Control Agreements
SJI has not entered into separate employment agreements with any employee, including any of the NEOs. Instead, the Company has an Officer Severance Plan to provide certain benefits to Company Officers, including the NEOs, upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control. The Company has also adopted separate Change in Control (“CIC”) agreements which provide the Company’s executive officers, including the NEOs, with certain severance benefits upon a qualifying termination following a change in control. Further details regarding the severance and change in control benefits are provided under the “Change in Control Agreements and Other Potential Post-Employment Payments” section.
Equity award agreements provide for “double trigger” vesting upon a change in control. Further, under the 2015 Omnibus Equity Compensation Plan, in the event of a termination by the Company without Cause, or if the employee terminates employment for Good Reason, in either case within 12 months following a change in control, outstanding awards will become fully vested as of the date of such termination. However, if the vesting of any such award is based on performance, the applicable Award Agreement specifies how the award will become vested. See the “Change in Control Agreements and Other Potential Post-Employment Payments” section for further details.
The Company has stock ownership guidelines in place for NEOs to reinforce alignment with shareholders.
CEO stock ownership guideline is 5five (5) times the CEO’s annual base salary. All other NEOs are required to own shares of Company common stock with a market value equal to a minimum of 2two (2) times their annual base salary. NEOs have six years to achieve their
ownership guidelines. As of December 31, 2018, allAll the NEOs are in compliance with the ownership guidelines.
Additionally, a stock holding period was introduced in 2015 that requires all of the NEOsrequired to retain at least 50 percent of vested and/or earned shares, net of taxes, until their new stock ownership guideline has been met. In November 2019,
Compensation Committee approved the elimination of the provision that NEOs have six (6) years to achieve their ownership guidelines. As of December 31, 2019, Mr. Robbins has met his ownership guidelines. Mr. Renna and Ms. McEndy continue to accumulate shares and are on track to meet their guidelines in 2020. Ms. Hernandez and Ms. Orsen were recently hired and continue to accumulate shares to meet their guidelines.
The Company has a clawbackclaw-back policy that applies to all annual incentive awards and long-term equity awards held by officers including our NEOs. The policy allows for the recoupment of incentive compensation in the event of a material negative financial
restatement due to fraud, negligence, or intentional misconduct. ForIn 2019, the policy was amended to also allow for recoupment of incentives in the event of a material violation of the Company’s Code of Ethics or any other material Company policy.
Anti-Hedging, and Anti-Pledging PoliciesPolicy
The Company has anti-hedging and anti-pledging policies that prohibit the Officersall employees and directors from engaging without exception in any hedging, pledging or other monetization transactions with respect to the Company’s securities.
Accounting for Share-Based Compensation
Share-based compensation including restricted stock, restricted stock units and performance share awards are accounted for in
accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), Compensation – Stock Compensation.
Compensation Discussion & Analysis
Impact of Tax Treatment on Compensation
Section 162(m) of the Internal Revenue Code limits the deduction allowable for compensation paid to certain NEOs over $1 million. The Tax Cuts and Jobs Act, enacted in December 2017, eliminated the 162(m) exemption for qualified performance-based compensation for tax years beginning in 2018, unless such compensation qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. While the Company generally
attempts to preserve the federal income tax deductibility of compensation paid, to the extent consistent with its business goals, the Committee weighs the benefits of full deductibility with the other objectives of the executive compensation program and reserves the right to pay the Company’s employees, including NEOs, amounts which may or may not be deductible under Section 162(m) or other provisions of the Internal Revenue Code.
Risk Assessment
The Committee reviews its compensation programs in order to help mitigate the effects of excessive risk-taking. Through a combination of incentive compensation that has a short and long-term focus, the Company tries to establish an appropriate balance between achieving short-term and long-term goals. In addition, the Committee utilizes multiple metrics to help ensure that there is not undue focus on any particular financial result to the detriment of other aspects of the business. Payout schedules related to the metrics are measured after the completion of the appropriate time horizon to help ensure a full assessment of the metric. Finally, in formulating and reviewing the executive compensation policies, the Committee considers whether the policy’s design encourages excessive risk-taking and attaches specific measurable objectives to the extent possible.
During 2018,2019, the Company, consisting of a team from the Human Resources and Risk Management departments, conducted a comprehensive assessment of the compensation programs administered by the Company and each of its subsidiaries. These evaluations focused on potential risks inherent in the compensation programs. Having reviewed the extensive risk assessment conducted by the Company, the Committee determined that the compensation programs are not reasonably likely to have a material adverse effect upon the Company and do not encourage unnecessary or excessive risk.
Each of the NEOs is eligible for other employee benefit plans generally available to all employees (e.g., qualified pension plan, deferred compensation plan, major medical and health insurance, disability insurance, 401(k) Plan) on the same terms as all other employees. NEOs and certain other employees may also be eligible for the following:
Non-Qualified Supplemental Retirement Plan (the “SERP”). Employees who became officers prior to April 30, 2016 are covered by a supplemental retirement plan (the “SERP”) upon attaining age 50. Compensation under the SERP is considered as base salary plus annual incentives. See Executive Compensation Tables-Pension Benefits Table for further detail. In 2016, the SERP was closed to new participants.
Non-Qualified Defined Contribution Retirement Plan (the “DCRP”). Beginning May 1, 2016, newly appointed Officers may participate in the DCRP. Each year, officers in the DCRP may receive an “Employer Credit” which is a company contribution that is a percentage of annual cash compensation ranging from
8%-12% of annual cash compensation (base salary and AIP payout) based on the individual’s age. DCRP account balances are not vested until age 50. Plan participants that terminate (voluntarily or involuntarily) prior to age 50 forfeit their entire account balance.
Supplemental Saving Plan Contributions. The Internal Revenue Code limits the contributions that may be made by, or on behalf of, an individual under defined contribution plans such as the Company’s 401(k) Plan. Eligible employees are reimbursed the amount of Company contributions that may not be made because of this limitation. Amounts paid pursuant to this policy are included in the All Other Compensation Table that serves as a supplement to the 2019 Summary Compensation Table.
Disability Insurance. Certain employees, including the NEOs, are eligible for short-term disability benefits equal to 100% of the NEO’s base salary for a certain period of time depending on years of service. Long-term disability (LTD) begins upon the expiration of temporary disability benefits and is generally paid at a rate of 60% of the NEO’s base salary up to a monthly maximum benefit of
South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
$10,000. Due to limitations in the group LTD benefits, in 2017, a supplemental LTD plan was implemented to cover up to 60% of salary and cash bonus up to a monthly maximum benefit of $25,000.
Group Life Insurance. Officers, including the NEOs, are provided with both group life insurance and 24- Hour Accident Protection coverage. The insurance premiums for these benefits are paid by the Company and the NEO is responsible for resultant federal, state or local income taxes. Amounts paid pursuant to this policy are included in the All Other Compensation Table that serves as a supplement to the 2019 Summary Compensation Table.
Other Benefits and Perquisites. We offer limited perquisites and other personal benefits to our NEOs at competitive levels with those provided by our Peer Group companies, as well as the larger group of companies within the general industry that are similar in overall size and relative performance. We believe the other benefits we provided to our NEOs were necessary to help us attract and retain our senior executive team and the values of these benefits were reasonable, competitive, and consistent with the overall executive compensation program. For more information on the perquisites and certain other benefits provided to the NEOs in 2019, see the All Other Compensation Table that serves as a supplement to the 2019 Summary Compensation Table.
SJI has not entered into separate employment agreements with any employee, including any of the NEOs. Instead, the Company has an Officer Severance Plan to provide certain benefits to Company Officers, including the NEOs, upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control. The Company has also adopted separate Change in Control (“CIC”) agreements which provide the Company’s executive officers, including the NEOs, with certain severance benefits upon a qualifying termination following a change in control. Effective January 1, 2019, CIC agreements are in effect for three years with successive one-year extensions until the Board affirmatively decides not to renew the agreement. Further details regarding the severance and change in control benefits are provided under the “Executive Compensation Tables-Change in Control Agreements and Other Potential Post-Employment Payments” section.
Equity award agreements provide for “double trigger” vesting upon a change in control. Further, under the 2015 Omnibus Equity Compensation Plan, in the event of a termination by the Company without Cause, or if the employee terminates employment for Good Reason, in either case within 12 months following a change in control, outstanding awards will become fully vested as of the date of such termination. However, if the vesting of any such award is based on performance, the applicable Award Agreement specifies how the award will become vested. See the “Executive Compensation Tables- Change in Control Agreements and Other Potential Post-Employment Payments” for further details.
We consider the impact of various tax and accounting rules in implementing our compensation program. We have historically structured incentive compensation arrangements with a view toward qualifying them as performance-based compensation exempt from the deduction limitations under Section 162(m) of the Internal Revenue Code, although we have viewed and continue to view the availability of a tax deduction as only one relevant consideration. The Compensation Committee believes that its primary responsibility is to provide a compensation program that is consistent with its compensation philosophy and supports the achievement of its compensation objectives.
Federal tax legislation enacted in December 2017 eliminated the Section 162(m) performance-based compensation exemption prospectively and made other changes to Section 162(m), but with a transition rule that preserves the performance-based compensation exemption for certain arrangements and awards in place as of November 2, 2017. We intend to continue to administer arrangements and awards subject to this transition rule with a view toward preserving their eligibility for the performance-based compensation exemption to the extent practicable and consistent with the non-tax compensation program objectives noted above.
We have reviewed the Compensation Discussion and Analysis with management. Based on our review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement, Form 10-K and Annual Report for the year ended December 31, 2019.
COMPENSATION COMMITTEE
Sunita Holzer, Chair
Sarah M. Barpoulis
Keith S. Campbell
Joseph M. Rigby
Walter M. Higgins III (ex-officio)
44 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards (1) | Non-Equity Incentive Plan Compensation ($) (2) | Change in Pension Value and Nonqualified Compensation Earnings ($) (3) | All Other Compensation (4) | Totals ($) | Totals Without Change in Pension Value and Nonqualified Compensation Earnings ($) (5) | |||||||||||||||||||||
Michael J. Renna President and Chief Executive Officer | 2018 | 748,077 | — | 1,684,078 | 937,500 | 1,261,000 | 33,939 | 4,664,594 | 3,403,594 | |||||||||||||||||||||
2017 | 696,346 | — | 1,377,914 | 708,750 | 5,476,000 | 28,016 | 8,287,026 | 2,811,026 | ||||||||||||||||||||||
2016 | 603,096 | — | 1,013,354 | 604,244 | 107,000 | 24,680 | 2,352,374 | 2,245,374 | ||||||||||||||||||||||
Stephen H. Clark Former Executive Vice President, SJI and President and Chief Operating Officer of South Jersey Energy Solutions and SJI Midstream and Former Chief Financial Officer | 2018 | 421,827 | — | 421,472 | 369,513 | 1,557,000 | 29,024 | 2,798,836 | 1,241,836 | |||||||||||||||||||||
2017 | 409,038 | — | 403,533 | 301,350 | 1,320,000 | 25,007 | 2,458,928 | 1,138,928 | ||||||||||||||||||||||
2016 | 383,789 | — | 322,436 | 255,833 | 1,116,000 | 23,323 | 2,101,381 | 985,381 | ||||||||||||||||||||||
David Robbins Sr. Vice President and President of SJI Utilities | 2018 | 383,269 | — | 434,262 | 336,875 | 921,000 | 18,917 | 2,094,323 | 1,173,323 | |||||||||||||||||||||
2017 | 337,308 | — | 334,631 | 318,325 | 1,343,000 | 14,804 | 2,348,068 | 1,005,068 | ||||||||||||||||||||||
Kathleen A. McEndy Senior Vice President and Chief Administrative Officer | 2018 | 370,577 | — | 364,729 | 300,510 | 717,000 | 32,916 | 1,785,732 | 1,068,732 | |||||||||||||||||||||
2017 | 358,846 | — | 301,174 | 253,800 | 329,000 | 26,569 | 1,269,389 | 940,389 | ||||||||||||||||||||||
2016 | 328,961 | — | 276,367 | 237,600 | 286,000 | 23,925 | 1,152,853 | 866,853 | ||||||||||||||||||||||
Kenneth A. Lynch Sr. Vice President and Chief Accounting & Risk Officer and Principal Financial Officer | 2018 | 308,654 | — | 262,115 | 231,750 | 1,564,000 | 22,891 | 2,389,410 | 825,410 | |||||||||||||||||||||
Melissa J. Orsen Sr. Vice President and General Counsel | 2018 | 277,731 | — | 246,002 | 261,000 | 0 | 11,703 | 796,436 | 796,436 | |||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards (1) | Non-Equity Incentive Plan Compensation ($) (2) | Change in Pension Value and Nonqualified Compensation Earnings ($) (3) | All Other Compensation (4) | Totals ($) | Totals Without Change in Pension Value and Nonqualified Compensation Earnings ($) (5) | |||||||||||||||||||||
Michael J. Renna President and Chief Executive Officer | 2019 | 764,365 | — | 1,745,743 | 817,594 | 2,966,000 | 53,261 | 6,346,963 | 3,380,963 | |||||||||||||||||||||
2018 | 748,077 | — | 1,684,078 | 937,500 | 1,261,000 | 33,939 | 4,664,594 | 3,403,594 | ||||||||||||||||||||||
2017 | 696,346 | — | 1,377,914 | 708,750 | 5,476,000 | 28,016 | 8,287,026 | 2,811,026 | ||||||||||||||||||||||
Cielo Hernandez Senior Vice President and Chief Financial Officer | 2019 | 360,000 | 75,000 | 494,570 | 258,570 | 0 | 60,440 | 1,248,580 | 1,248,580 | |||||||||||||||||||||
David Robbins Jr. Senior Vice President and President of SJI Utilities | 2019 | 392,374 | — | 497,839 | 334,679 | 1,722,000 | 26,824 | 2,973,716 | 1,251,716 | |||||||||||||||||||||
2018 | 383,269 | — | 434,262 | 336,875 | 921,000 | 18,917 | 2,094,323 | 1,173,323 | ||||||||||||||||||||||
2017 | 337,308 | — | 334,631 | 318,325 | 1,343,000 | 14,804 | 2,348,068 | 1,005,068 | ||||||||||||||||||||||
Kathleen A. McEndy Senior Vice President and Chief Administrative Officer | 2019 | 378,183 | — | 326,259 | 238,455 | 374,000 | 37,633 | 1,354,530 | 980,530 | |||||||||||||||||||||
2018 | 370,577 | — | 364,729 | 300,510 | 717,000 | 32,916 | 1,785,732 | 1,068,732 | ||||||||||||||||||||||
2017 | 358,846 | — | 301,174 | 253,800 | 329,000 | 26,569 | 1,269,389 | 940,389 | ||||||||||||||||||||||
Melissa J. Orsen Senior Vice President and General Counsel | 2019 | 352,250 | — | 306,001 | 237,495 | 0 | 76,958 | 972,704 | 972,704 | |||||||||||||||||||||
2018 | 277,731 | — | 246,002 | 261,000 | 0 | 11,703 | 796,436 | 796,436 | ||||||||||||||||||||||
Kenneth A. Lynch Former Senior Vice President and Chief Accounting & Risk Officer and Principal Financial Officer | 2019 | 91,873 | — | 0 | 45,152 | 343,000 | 531,777 | 1,011,802 | 668,802 | |||||||||||||||||||||
2018 | 308,654 | — | 262,115 | 231,750 | 1,564,000 | 22,891 | 2,389,410 | 825,410 | ||||||||||||||||||||||
| (1) | Represents the full grant date fair value of awards in connection with the grants of performance-based restricted stock units (PBRSUs) and time-based restricted stock units (TBRSUs), calculated in accordance with FASB ASC Topic 718. See Footnote 2 of the Company’s financial statements for additional information, including valuation assumptions used in calculating the fair value of the award. For |
| (2) | This amount represents the aggregate annual incentive awards paid out to each Named Executive with respect to |
| (3) | Amounts in this column represent the aggregate change in the actuarial present value of each NEO’s accumulated benefit in the SERP and Retirement Plan for Employees of South Jersey Industries, Inc. The SERP covers officers of South Jersey Industries who became officers prior to April 30, 2016 and are eligible to participate once they have attained age 50. All of the NEOs are currently eligible |
| (4) | Includes employer contributions to the Company’s 401(k) Plan, reimbursement for 401(k) contributions not permitted under Internal Revenue Code, employer contributions to the Defined Contribution Retirement Plan (DCRP) for Ms. Hernandez and Ms. Orsen, the value of group life insurance and other perquisites. The |
| (5) |
45 |
Executive Compensation Discussion & AnalysisTables
As of Fiscal Year End 2018Year-End 2019
Michael J. Renna | Stephen H. Clark | David Robbins | Kathleen A. McEndy | Kenneth A. Lynch | Melissa J. Orsen | Michael J. Renna | Cielo Hernandez | David Robbins Jr. | Kathleen A. McEndy | Melissa J. Orsen | Kenneth A. Lynch(e) | |||||||||||||||||||||||||
401(k) Plan | $ | 6,962 | $ | 7,953 | $ | 4,835 | $ | 9,250 | $ | 9,135 | $ | 0 | $ | 13,209 | $ | 0 | $ | 9,046 | $ | 12,358 | $ | 11,968 | $ | 4,594 | ||||||||||||
401(k) Reimbursement | $ | 12,790 | $ | 4,171 | $ | 2,019 | $ | 3,554 | $ | 1,154 | $ | 0 | $ | 24,218 | $ | 4,000 | $ | 5,619 | $ | 4,909 | $ | 3,613 | $ | 0 | ||||||||||||
Defined Contribution Retirement Plan | $ | 49,486 | $ | 47,180 | ||||||||||||||||||||||||||||||||
Group Life Insurance | $ | 3,972 | $ | 6,438 | $ | 3,663 | $ | 10,359 | $ | 1,568 | $ | 538 | $ | 4,082 | $ | 775 | $ | 3,814 | $ | 10,812 | $ | 786 | $ | 2,451 | ||||||||||||
Perquisites(a) | $ | 10,215 | $ | 10,462 | $ | 8,400 | $ | 9,753 | $ | 11,034 | $ | 11,165 | ||||||||||||||||||||||||
Severance(a) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 490,200 | ||||||||||||||||||||||||
Perquisites(b) | $ | 9,252 | $ | 5,329 | $ | 8,345 | $ | 9,554 | $ | 10,578 | $ | 34,532 | ||||||||||||||||||||||||
Perquisites(c) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,833 | $ | 0 | ||||||||||||||||||||||||
Perquisites(d) | $ | 2,500 | $ | 850 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||
Total Value | $ | 33,939 | $ | 29,024 | $ | 18,917 | $ | 32,916 | $ | 22,891 | $ | 11,703 | $ | 53,261 | $ | 60,440 | $ | 26,824 | $ | 37,633 | $ | 76,958 | $ | 531,777 | ||||||||||||
| (a) | Mr. Lynch retired from the Company on March 31, 2019. For more information, see “Change in Control Agreements and Other Potential Post-Employment Payments. |
| (b) | The amounts of the perquisites reflect the value of the Company-provided automobile for each NEO and for Mr. Lynch it also includes $31,941 for his company owned vehicle, laptop and cell phone transferred to him upon his retirement. |
| (c) | The amounts of the perquisites reflect the value of |
| (d) | The amounts of the perquisites reflect the Financial Planning/Tax Preparation Reimbursement. |
| (e) | The determination to provide Mr. Lynch with the compensation described above upon his retirement from the Company was made in March 2019 and as part of a larger reorganization that provided the company with a significant and sustained reduction in O&M. After contemplating the results of last years “say-on-pay” vote, and conducting extensive shareholder outreach, the Compensation Committee determined that it would no longer provide its executive officers with Early Retirement Incentive Program equivalent benefits or enhanced retiree medical care upon retirement from the Company. |
The following table sets forth certain information concerning the grant of awards made to the Named Executive Officers during the year ended December 31, 2018.2019.
Grants of Plan-Based Awards - 20182019
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts of Shares Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Exercise or Base Price of Option Awards ($ / Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts of Shares Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
Michael J. Renna | 1/1/2018 | (5) | 375,000 | 750,000 | 1,125,000 | — | — | — | — | — | — | 1/1/2019 | (5) | 382,500 | 765,000 | 1,147,500 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/1/2018 | (6) | — | — | — | 18,912 | 37,824 | 75,648 | — | — | 1,177,840 | 4/22/2019 | (6) | — | — | — | 19,198 | 38,396 | 76,792 | — | 1,231,360 | |||||||||||||||||||||||||||||||||||||
1/1/2018 | (7) | — | — | — | — | — | — | 16,210 | — | 506,238 | 4/22/2019 | (7) | — | — | — | — | — | — | 16,455 | 514,383 | |||||||||||||||||||||||||||||||||||||
Stephen H. Clark | 1/1/2018 | (5) | 147,805 | 295,610 | 443,415 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Cielo Hernandez | 1/1/2019 | (5) | 117,000 | 234,000 | 351,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
1/1/2018 | (6) | — | — | — | 4,733 | 9,466 | 18,932 | — | — | 294,772 | 4/22/2019 | (6) | — | — | — | 4,350 | 8,699 | 17,398 | — | 278,977 | |||||||||||||||||||||||||||||||||||||
1/1/2018 | (7) | — | — | — | — | — | — | 4,057 | — | 126,700 | 4/22/2019 | (7) | — | — | — | — | — | — | 3,728 | 116,537 | |||||||||||||||||||||||||||||||||||||
David Robbins | 1/1/2018 | (5) | 134,750 | 269,500 | 404,250 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
1/1/2018 | (6) | — | — | — | 4,315 | 8,630 | 17,260 | — | — | 268,738 | 1/14/2019 | (8) | — | — | — | — | — | — | 3,404 | 99,056 | |||||||||||||||||||||||||||||||||||||
David Robbins Jr. | 1/1/2019 | (5) | 137,445 | 274,890 | 412,335 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
1/1/2018 | (7) | — | — | — | — | — | — | 3,698 | — | 115,489 | 4/22/2019 | (6) | — | — | — | 5,475 | 10,950 | 21,900 | — | 351,167 | |||||||||||||||||||||||||||||||||||||
6/7/2018 | (8) | — | — | — | — | — | — | 1,532 | — | 50,035 | 4/22/2019 | (7) | — | — | — | — | — | — | 4,692 | 146,672 | |||||||||||||||||||||||||||||||||||||
Kathleen A. McEndy | 1/1/2018 | (5) | 111,300 | 222,600 | 333,900 | — | — | — | — | — | — | 1/1/2019 | (5) | 113,550 | 227,100 | 340,650 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/1/2018 | (6) | — | — | — | 3,534 | 7,068 | 14,136 | — | — | 220,098 | 4/22/2019 | (6) | — | — | — | 3,588 | 7,176 | 14,352 | — | 230,134 | |||||||||||||||||||||||||||||||||||||
1/1/2018 | (7) | — | — | — | — | — | — | 3,029 | — | 94,596 | 4/22/2019 | (7) | — | — | — | — | — | — | 3,075 | 96,125 | |||||||||||||||||||||||||||||||||||||
Melissa J. Orsen | 1/1/2019 | (5) | 106,500 | 213,000 | 319,500 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
4/22/2019 | (6) | — | — | — | 3,366 | 6,731 | 13,462 | — | 215,847 | ||||||||||||||||||||||||||||||||||||||||||||||||
6/7/2018 | (8) | — | — | — | — | — | — | 1,532 | — | 50,035 | 4/22/2019 | (7) | — | — | — | — | — | — | 2,884 | 90,154 | |||||||||||||||||||||||||||||||||||||
Kenneth A. Lynch | 1/1/2018 | (5) | 92,700 | 185,400 | 278,100 | — | — | — | — | — | — | 1/1/2019 | (5) | 94,560 | 189,120 | 283,680 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/1/2018 | (6) | — | — | — | 2,944 | 5,887 | 11,774 | — | — | 183,322 | 4/22/2019 | (6) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
1/1/2018 | (7) | — | — | — | — | — | — | 2,523 | — | 78,793 | 4/22/2019 | (7) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Melissa J. Orsen | 1/1/2018 | (5) | 87,000 | 174,000 | 261,000 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
1/1/2018 | (6) | — | — | — | 2,763 | 5,525 | 11,050 | — | — | 172,049 | |||||||||||||||||||||||||||||||||||||||||||||||
1/1/2018 | (7) | — | — | — | — | — | — | 2,368 | — | 73,953 | |||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Amounts represent potential cash awards payable to our NEOs determined by the level of performance achieved against the |
46 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Tables
| (2) | Represents the possible payout of shares of the performance-based restricted stock unit grants to each NEO. |
| (3) | Represents the time-based restricted stock unit grants to each |
| (4) | Represents the full grant date fair value of the grants of restricted stock units calculated in accordance with FASB ASC Topic 718. See Footnote 2 of the financial statements for additional information, including valuation assumptions used in calculating the fair value of the awards. |
| (5) | Represents potential payouts under the |
| (6) | Represents performance-based restricted stock unit grants with a performance period from |
| (7) | Represents standard time-based restricted stock unit grants subject to the participant remaining employed. The Compensation Committee approved the compensation and equity program on |
| (8) | Represents |
| (9) | RSUs are calculated and granted using day prior grant date closing price. This table reflects grant date fair value. (see footnote above for details regarding grant date fair value) |
South Jersey Industries, Inc. - |
Executive Compensation Discussion & AnalysisTables
Equity Awards
The following table sets forth certain information concerning outstanding restricted stock unit awards for the Named Executive Officers as of December 31, 2018.2019.
Outstanding Equity Awards at Fiscal Year-End - 20182019
Stock Awards
Name | Year | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | Year | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | ||||||||||||||||||||
Michael J. Renna | 2018 | (4) | — | 37,824 | 1,051,507 | 2019 | (4) | — | — | 39,435 | 1,300,562 | |||||||||||||||||||
2018 | (5) | 16,210 | 450,638 | — | — | 2019 | (5) | 16,900 | 557,369 | — | — | |||||||||||||||||||
2017 | (6) | — | — | 29,089 | 808,674 | 2018 | (6) | — | — | 40,653 | 1,340,744 | |||||||||||||||||||
2017 | (7) | 8,311 | 231,046 | — | — | 2018 | (7) | 11,615 | 383,075 | — | — | |||||||||||||||||||
2016 | (8) | — | — | 30,610 | 850,958 | 2017 | (8) | — | — | 32,283 | 1,064,710 | |||||||||||||||||||
2016 | (9) | 4,373 | 121,569 | — | — | 2017 | (9) | 4,611 | 152,080 | — | — | |||||||||||||||||||
Stephen H. Clark | 2018 | (4) | — | — | 9,466 | 263,155 | ||||||||||||||||||||||||
Cielo Hernandez | 2019 | (4) | — | — | 8,934 | 294,655 | ||||||||||||||||||||||||
2018 | (5) | 4,057 | 112,785 | — | — | 2019 | (5) | 3,829 | 126,276 | — | — | |||||||||||||||||||
2017 | (6) | — | — | 8,519 | 236,828 | 2019 | (11) | 3,528 | 116,343 | — | — | |||||||||||||||||||
2017 | (7) | 2,434 | 67,665 | — | — | 2018 | (6) | — | — | — | — | |||||||||||||||||||
2016 | (8) | — | — | 9,740 | 270,772 | 2018 | (7) | — | — | — | — | |||||||||||||||||||
2016 | (9) | 1,392 | 38,698 | — | — | 2017 | (8) | — | — | — | — | |||||||||||||||||||
David Robbins | 2018 | (4) | — | — | 8,630 | 239,914 | ||||||||||||||||||||||||
2017 | (9) | — | — | — | — | |||||||||||||||||||||||||
David Robbins Jr. | 2019 | (4) | — | — | 11,246 | 370,902 | ||||||||||||||||||||||||
2018 | (5) | 3,698 | 102,804 | — | — | 2019 | (5) | 4,819 | 158,929 | — | — | |||||||||||||||||||
2018 | (10) | 1,021 | 28,384 | — | — | 2018 | (6) | — | — | 9,276 | 305,907 | |||||||||||||||||||
2017 | (6) | — | — | 7,064 | 196,379 | 2018 | (7) | 2,649 | 87,377 | — | — | |||||||||||||||||||
2017 | (7) | 2,019 | 56,128 | — | — | 2018 | (10) | 543 | 17,901 | — | — | |||||||||||||||||||
2016 | (8) | — | — | 8,036 | 223,401 | 2017 | (8) | — | — | 7,840 | 258,555 | |||||||||||||||||||
2016 | (9) | 1,148 | 31,914 | — | — | 2017 | (9) | 1,121 | 36,968 | — | — | |||||||||||||||||||
Kathleen A. McEndy | 2018 | (4) | — | — | 7,068 | 196,490 | 2019 | (4) | — | — | 7,370 | 243,068 | ||||||||||||||||||
2018 | (5) | 3,029 | 84,206 | — | — | 2019 | (5) | 3,158 | 104,157 | — | — | |||||||||||||||||||
2018 | (10) | 1,021 | 28,384 | — | — | 2018 | (6) | — | — | 7,597 | 250,539 | |||||||||||||||||||
2017 | (6) | — | — | 6,358 | 176,752 | 2018 | (7) | 2,170 | 71,567 | — | — | |||||||||||||||||||
2017 | (7) | 1,817 | 50,513 | — | — | 2018 | (10) | 543 | 17,901 | — | — | |||||||||||||||||||
2016 | (8) | — | — | 8,348 | 232,074 | 2017 | (8) | — | — | 7,056 | 232,714 | |||||||||||||||||||
2016 | (9) | 1,192 | 33,138 | — | — | 2017 | (9) | 1,009 | 33,271 | — | — | |||||||||||||||||||
Melissa J. Orsen | 2019 | (4) | — | — | 6,913 | 227,995 | ||||||||||||||||||||||||
2019 | (5) | 2,962 | 97,688 | — | — | |||||||||||||||||||||||||
2018 | (6) | — | — | 5,938 | 195,844 | |||||||||||||||||||||||||
2018 | (7) | 1,697 | 55,971 | — | — | |||||||||||||||||||||||||
2017 | (8) | — | — | — | — | |||||||||||||||||||||||||
2017 | (9) | — | — | — | — | |||||||||||||||||||||||||
Kenneth A. Lynch | 2018 | (4) | — | — | 5,887 | 163,659 | 2019 | (4) | — | — | — | — | ||||||||||||||||||
2018 | (5) | 2,523 | 70,139 | — | — | 2019 | (5) | — | — | — | — | |||||||||||||||||||
2017 | (6) | — | — | 5,298 | 147,284 | 2018 | (6) | — | — | 2,627 | 86,631 | |||||||||||||||||||
2017 | (7) | 1,514 | 42,089 | — | — | 2018 | (7) | — | — | — | — | |||||||||||||||||||
2016 | (8) | — | — | 6,830 | 189,874 | 2017 | (8) | — | — | 4,403 | 145,216 | |||||||||||||||||||
2016 | (9) | 975 | 27,105 | — | — | 2017 | (9) | — | — | — | — | |||||||||||||||||||
Melissa J. Orsen | 2018 | (4) | — | — | 5,525 | 153,595 | ||||||||||||||||||||||||
2018 | (5) | 2,368 | 65,830 | — | — | |||||||||||||||||||||||||
Compensation Discussion & Analysis
| (1) | Represents grants of time-based restricted stock |
| (2) | Market value of Company common stock at December 31, |
48 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Tables
| (3) | Represents grants of performance-based restricted stock units at target |
| (4) | These awards consist of performance-based restricted stock units that would vest in March |
| (5) | These awards consist of time-based restricted stock units. The awards will vest in three installments |
| (6) | These awards consist of performance-based restricted stock units that would vest in March |
| (7) | These awards consist of time-based restricted stock |
| (8) | These awards consist of performance-based restricted stock units that would vest in March |
| (9) | These awards consist of time-based restricted stock units with a 1-year performance condition. The performance criteria has been satisfied, and the awards will vest in three equal installments with the first two portions having vested in March |
| (10) | These awards consist of time-based restricted stock units. The awards will vest in three equal installments with the first portion having vested |
| (11) | This award consists of time-based restricted stock units. The award will vest in |
| (12) | Shares reflected in this table include accumulated dividend equivalent shares earned from grant through December 31, 2019. |
The following table sets forth certain information concerning the vesting of restricted stock for the Company’s Named Executive Officers during the year ended December 31, 2018.2019. No options are outstanding, and none were exercised by the NEOs during the year ended December 31, 2018.2019. The number of shares acquired on vesting shown below includes accrued dividends on vested shares.
Stock Vested – 20182019 Stock Awards
Name | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) (2) | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) (2) | ||||||||
Michael J. Renna | 15,949 | 457,876 | 38,408 | 1,139,299 | ||||||||
Stephen H. Clark | 4,839 | 139,201 | ||||||||||
David Robbins | 4,160 | 120,644 | ||||||||||
Cielo Hernandez | 0 | 0 | ||||||||||
David Robbins Jr. | 10,332 | 308,026 | ||||||||||
Kathleen A. McEndy | 4,523 | 131,348 | 10,281 | 306,822 | ||||||||
Melissa J. Orsen | 818 | 24,205 | ||||||||||
Kenneth A. Lynch | 2,851 | 82,371 | 8,427 | 251,353 | ||||||||
Melissa J. Orsen | 0 | 0 | ||||||||||
| (1) | This column represents the portion of the time-based restricted stock unit awards granted in |
| (2) | The dollar value is calculated by multiplying the number of shares that vested by the market value of the Company’s common stock on the respective vesting date. The closing prices on the vesting dates of January 1, |
| (3) | For shares underlying equity awards that vested upon Ms. McEndy’s retirement in 2020, see Executive Compensation - Change in Control Agreements and Other Potential Post-Employment Payments. |
South Jersey Industries, Inc. - |
Executive Compensation Discussion & AnalysisTables
Name | Plan Name (1) (2) | Number of Years Credited Service Under Plan at FAS Measurement Date | Present Value of Accumulated Benefit (3) | Payments During Last Fiscal Year | Plan Name (1) (2) | Number of Years Credited Service Under Plan at FAS Measurement Date | Present Value of Accumulated Benefit (3) | Payments During Last Fiscal Year | ||||||||||||
Michael J. Renna | Retirement Plan for Employees of SJI | 20 | $ | 653,000 | $ | 0 | Retirement Plan for Employees of SJI | 21 | $ | 861,000 | $ | 0 | ||||||||
SJI Supplemental Executive Retirement Plan | 21 | $ | 6,627,000 | $ | 0 | SJI Supplemental Executive Retirement Plan | 22 | $ | 9,385,000 | $ | 0 | |||||||||
Stephen H. Clark | Retirement Plan for Employees of SJI | 21 | $ | 1,010,000 | $ | 0 | ||||||||||||||
SJI Supplemental Executive Retirement Plan | 25 | $ | 5,136,000 | $ | 0 | |||||||||||||||
David Robbins | Retirement Plan for Employees of SJI | 22 | $ | 928,000 | $ | 0 | ||||||||||||||
SJI Supplemental Executive Retirement Plan | 23 | $ | 3,393,000 | $ | 0 | |||||||||||||||
Cielo Hernandez | Retirement Plan for Employees of SJI | N/A | N/A | N/A | ||||||||||||||||
SJI Supplemental Executive Retirement Plan | N/A | N/A | N/A | |||||||||||||||||
David Robbins Jr. | Retirement Plan for Employees of SJI | 23 | $ | 1,155,000 | $ | 0 | ||||||||||||||
SJI Supplemental Executive Retirement Plan | 24 | $ | 4,888,000 | $ | 0 | |||||||||||||||
Kathleen A. McEndy | Retirement Plan for Employees of SJI | Retirement Plan for Employees of SJI | N/A | N/A | N/A | |||||||||||||||
SJI Supplemental Executive Retirement Plan | 9 | $ | 1,944,000 | $ | 0 | SJI Supplemental Executive Retirement Plan | 10 | $ | 2,318,000 | $ | 0 | |||||||||
Melissa J. Orsen | Retirement Plan for Employees of SJI | N/A | N/A | N/A | ||||||||||||||||
SJI Supplemental Executive Retirement Plan | N/A | NA | NA | |||||||||||||||||
Kenneth A. Lynch | Retirement Plan for Employees of SJI | Retirement Plan for Employees of SJI | N/A | N/A | N/A | |||||||||||||||
SJI Supplemental Executive Retirement Plan | 19 | $ | 3,119,000 | $ | 0 | SJI Supplemental Executive Retirement Plan | 19 | $ | 3,462,000 | $ | 134,000 | |||||||||
Melissa J. Orsen | Retirement Plan for Employees of SJI | |||||||||||||||||||
SJI Supplemental Executive Retirement Plan | N/A | NA | NA | |||||||||||||||||
| (1) | Employees who became an officer prior to April 30, 2016 will be eligible for the South Jersey Industries, Inc. Supplemental Executive Retirement Plan (the “SERP”) once they have attained age 50. A participant is eligible for a normal retirement benefit under the SERP after having attained age 60. We base the normal retirement benefit on two percent of the participant’s “final average compensation” multiplied by years of credited service (up to 30 years), plus an additional 5 percent of final average compensation. “Final average compensation” is the average of the participant’s base pay plus annual incentive award for the highest three years in the final six years of employment. A participant is eligible for an early retirement benefit under the SERP after having attained age 55. A participant’s early retirement benefit equals his or her normal retirement benefit reduced by 2 percent per year. The SERP benefit for officers hired on or after July 1, 2003 reflects a reduction for the annuity equivalent of the employer provided benefit under the Company’s 401(k) Plan. The SERP’s normal form of payment is a life annuity with six years guaranteed. |
| (2) | The Retirement Plan for Employees of South Jersey Industries, Inc. (the “Retirement Plan”) provides benefits to non-bargaining employees who were hired before July 1, 2003. Eligibility for the Retirement Plan for Employees of SJI began after one year of service. The plan defines Normal Retirement Age as age 65. A Participant is eligible for a non-reduced benefit under the Retirement Plan after having attained age 60 with 5 years of service. We base the normal retirement benefit on the sum of (a) the participant’s accrued benefit as of September 30, 1989 increased 5 percent per year thereafter, and (b) 1.00 percent of the participant’s “final average compensation” plus 0.35 percent of the participant’s final average compensation in excess of covered compensation, multiplied by years of credited service after September 30, 1989 (up to 35 years less credited service as of September 30, 1989). “Final average compensation” is the average of the participant’s base pay plus commissions for the highest three years of the final six years of employment immediately preceding retirement, as defined by the plan. A participant is eligible for an early retirement benefit under the Retirement Plan after having attained age 55 and completed five years of service. A participant’s early retirement benefit equals his or her normal retirement benefit reduced by 2 percent per year prior to age 60. The Retirement Plan’s normal form of payment is a life annuity with six years guaranteed. |
| (3) | We base present values for participants on a |
| South Jersey Industries, Inc. - |
Executive Compensation Discussion & AnalysisTables
The following table sets forth certain information regarding the Company’s Restricted Stock Deferral Plan and Non-Qualified Deferred Compensation Plan. The Restricted Stock Deferral Plan permits the deferral of fully vested restricted stock units earned by the Company’s NEOs pursuant to previously issued performance-based, restricted stock unit grants. The Company does not make contributions to the plan, and all earnings referenced in the table represent dividends paid on outstanding shares of common stock.
Beginning July 2017, the company implemented a Non-Qualified Deferred Compensation Plan which offers NEOs and other highly compensated employees the ability to defer pretax base compensation and AIP awards in excess of the maximum benefits that may be provided under the Saving Plan as a result of limits imposed by the Code. Generally, NEOs may elect to defer up to 75 percent of salary and up to 100 percent of AIP. Deferral elections are made annually by eligible participants in respect to compensation to be earned for the following year.
Name | Plan Name | Executive Contribution in Last FY($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals Distribution ($) | Aggregate Balance in Last FYE ($) | Plan Name | Executive Contributions in Last FY($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals Distribution ($) | Aggregate Balance in Last FYE ($) | ||||||||||||||||||||
Michael J. Renna | Restricted Stock Deferral Plan | Restricted Stock Deferral Plan | ||||||||||||||||||||||||||||||
Non-Qualified Deferred Compensation plan | Non-Qualified Deferred Compensation plan | |||||||||||||||||||||||||||||||
Stephen H. Clark | Restricted Stock Deferral Plan | |||||||||||||||||||||||||||||||
Cielo Hernandez | Restricted Stock Deferral Plan | |||||||||||||||||||||||||||||||
Non-Qualified Deferred Compensation plan | Non-Qualified Deferred Compensation plan | |||||||||||||||||||||||||||||||
David Robbins | Restricted Stock Deferral Plan | 36,613 | (1) | 3,707 | (2) | 103,012 | (3) | |||||||||||||||||||||||||
David Robbins Jr. | Restricted Stock Deferral Plan | 3,001 | (1) | 38,688 | 86,522 | (2) | ||||||||||||||||||||||||||
Non-Qualified Deferred Compensation plan | Non-Qualified Deferred Compensation plan | |||||||||||||||||||||||||||||||
Kathleen A. McEndy(4) | Restricted Stock Deferral Plan | Restricted Stock Deferral Plan | ||||||||||||||||||||||||||||||
Non-Qualified Deferred Compensation plan | 150,255 | (4) | 1,673 | (5) | 278,828 | (6) | Non-Qualified Deferred Compensation plan | 119,228 | (3) | 20,111 | (4) | 299,184 | (5) | |||||||||||||||||||
Melissa J. Orsen | Restricted Stock Deferral Plan | |||||||||||||||||||||||||||||||
Non-Qualified Deferred Compensation plan | ||||||||||||||||||||||||||||||||
Kenneth A. Lynch | Restricted Stock Deferral Plan | Restricted Stock Deferral Plan | ||||||||||||||||||||||||||||||
Non-Qualified Deferred Compensation plan | Non-Qualified Deferred Compensation plan | |||||||||||||||||||||||||||||||
Melissa J. Orsen | Restricted Stock Deferral Plan | |||||||||||||||||||||||||||||||
Non-Qualified Deferred Compensation plan | ||||||||||||||||||||||||||||||||
| (1) | These amounts are not reported in the Summary Compensation Table as they represent dividends earned on the deferred common stock. Dividends are payable on all outstanding shares of the Company’s common stock. |
| (2) | The amounts for the aggregate balance in the Restricted Stock Deferral |
| The amount reported in this column represents interest earned on the executive contributions and are not reported in the |
South Jersey Industries, Inc. - |
Executive Compensation Discussion & AnalysisTables
All Named Executive Officers are party to a Change in Control Agreement (“CIC Agreement”) that provides for severance benefits upon a qualifying termination following a change in control. A summary of the CIC Agreement terms are set below:
| South Jersey Industries, Inc. - |
Executive Compensation Discussion & AnalysisTables
Below is an estimate of the amounts payable to each NEO assuming various termination of employment scenarios on December 31, 2018.2019.
TerminationAs of Fiscal Year End 2018
Executive Benefits and Payments Upon Termination | Retirement ($) | Termination by the Company for Cause ($) | Termination by the NEO for Good Reason or by the Company without Cause following a CIC ($) | Termination by the NEO for Good Reason or by the Company without Cause without a CIC ($) | ||||||||
Michael J. Renna | ||||||||||||
Cash Compensation | 0 | 0 | 4,520,536 | 781,368 | ||||||||
Equity Compensation | 0 | 0 | 3,514,393 | 803,253 | ||||||||
Total Compensation | 0 | 0 | 8,034,929 | 1,584,622 | ||||||||
Stephen H. Clark* | ||||||||||||
Cash Compensation | 662,921 | n/a | n/a | n/a | ||||||||
Equity Compensation | 295,840 | n/a | n/a | n/a | ||||||||
Total Compensation | 958,761 | n/a | n/a | n/a | ||||||||
David Robbins Jr. | ||||||||||||
Cash Compensation | 0 | 0 | 1,467,053 | 416,368 | ||||||||
Equity Compensation | 474,073 | 0 | 878,925 | 219,231 | ||||||||
Total Compensation | 474,073 | 0 | 2,345,978 | 635,599 | ||||||||
Kathleen A. McEndy | ||||||||||||
Cash Compensation | 0 | 0 | 1,411,694 | 397,747 | ||||||||
Equity Compensation | 250,895 | 0 | 801,557 | 196,240 | ||||||||
Total Compensation | 250,895 | 0 | 2,213,252 | 593,987 | ||||||||
Kenneth A. Lynch | ||||||||||||
Cash Compensation | 0 | 0 | 1,142,837 | 340,368 | ||||||||
Equity Compensation | 0 | 0 | 640,151 | 139,334 | ||||||||
Total Compensation | 0 | 0 | 1,782,987 | 479,702 | ||||||||
Melissa J. Orsen | ||||||||||||
Cash Compensation | 0 | 0 | 754,000 | 290,000 | ||||||||
Equity Compensation | 0 | 0 | 219,425 | 65,830 | ||||||||
Total Compensation | 0 | 0 | 973,425 | 355,830 | ||||||||
Involuntary Termination/ Good Reason | ||||||||||||||||||
Retirement ($) | For Cause ($) | Following a CIC(1) ($) | Without a CIC(2) ($) | Death ($) | Disability ($) | |||||||||||||
Michael Renna | ||||||||||||||||||
Cash Compensation(3) | 0 | 0 | 5,402,767 | 795,758 | 817,594 | 817,594 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 4,545,494 | 765,000 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 0 | 0 | 765,000 | 0 | 817,594 | 817,594 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 92,273 | 30,758 | 0 | 0 | ||||||||||||
Equity Compensation(5) | 0 | 0 | 4,798,539 | 1,092,524 | 3,733,830 | 3,733,830 | ||||||||||||
Performance-based Restricted Stock Units | 0 | 0 | 3,706,015 | 0 | 2,641,306 | 2,641,306 | ||||||||||||
Time-based Restricted Stock Units | 0 | 0 | 1,092,524 | 1,092,524 | 1,092,524 | 1,092,524 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 1,530,000 | 0 | ||||||||||||
Total Compensation | 0 | 0 | 10,201,306 | 1,888,282 | 6,081,424 | 4,551,424 | ||||||||||||
David Robbins | ||||||||||||||||||
Cash Compensation(3) | 334,679 | 0 | 1,687,715 | 423,458 | 334,679 | 334,679 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 1,351,800 | 392,700 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 334,679 | 0 | 274,400 | 0 | 334,679 | 334,679 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 61,515 | 30,758 | 0 | 0 | ||||||||||||
Equity Compensation(5) | 478,806 | 0 | 1,236,538 | 301,174 | 977,983 | 977,983 | ||||||||||||
Performance-based Restricted Stock Units | 327,273 | 0 | 935,364 | 0 | 676,809 | 676,809 | ||||||||||||
Time-based Restricted Stock Units | 151,533 | 0 | 301,174 | 301,174 | 301,174 | 301,174 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 785,400 | 0 | ||||||||||||
Total Compensation | 813,485 | 0 | 2,924,253 | 724,632 | 2,098,062 | 1,312,662 | ||||||||||||
Cielo Hernandez | ||||||||||||||||||
Cash Compensation(3) | 0 | 0 | 1,538,273 | 418,137 | 258,570 | 258,570 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 1,248,000 | 390,000 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 0 | 0 | 234,000 | 0 | 258,570 | 258,570 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 56,273 | 28,137 | 0 | 0 | ||||||||||||
Equity Compensation(5) | 0 | 0 | 537,274 | 242,619 | 537,274 | 537,274 | ||||||||||||
Performance-based Restricted Stock Units | 0 | 0 | 294,655 | 0 | 294,655 | 294,655 | ||||||||||||
Time-based Restricted Stock Units | 0 | 0 | 242,619 | 242,619 | 242,619 | 242,619 | ||||||||||||
Life Insurance Death Benefits | 0 | 0 | 0 | 0 | 780,000 | 0 | ||||||||||||
Total Compensation | 0 | 0 | 2,075,547 | 660,756 | 1,575,844 | 795,844 | ||||||||||||
Kathleen McEndy | ||||||||||||||||||
Cash Compensation and Other Benefits(4) | 450,399 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Cash Lump Sum | 378,500 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 19,235 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Property Transfers | 45,164 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Financial and Tax Prep Services | 7,500 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Equity Compensation(6) | 260,942 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Performance-based Restricted Stock Units | 244,480 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Time-based Restricted Stock Units | 16,462 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Total Compensation | 711,341 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Melissa Orsen | ||||||||||||||||||
Cash Compensation(3) | 0 | 0 | 1,445,000 | 355,000 | 237,495 | 237,495 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 1,232,000 | 355,000 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 0 | 0 | 213,000 | 0 | 237,495 | 237,495 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 0 | n/a | 0 | 0 | ||||||||||||
Equity Compensation(5) | 0 | 0 | 577,497 | 153,658 | 577,497 | 577,497 | ||||||||||||
Performance-based Restricted Stock Units | 0 | 0 | 423,839 | 0 | 423,839 | 423,839 | ||||||||||||
Time-based Restricted Stock Units | 0 | 0 | 153,658 | 153,658 | 153,658 | 153,658 | ||||||||||||
Life Insurance Death Benefits | 0 | 0 | 0 | 0 | 710,000 | 0 | ||||||||||||
Total Compensation | 0 | 0 | 2,022,497 | 508,658 | 1,524,992 | 814,992 | ||||||||||||
South Jersey Industries, Inc. - |
Executive Compensation Discussion & AnalysisTables
Involuntary Termination/ Good Reason | ||||||||||||||||||
Retirement ($) | For Cause ($) | Following a CIC(1) ($) | Without a CIC(2) ($) | Death ($) | Disability ($) | |||||||||||||
Kenneth Lynch | ||||||||||||||||||
Cash Compensation and Other Benefits(4) | 567,293 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Cash Lump Sum | 490,200 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 45,152 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Property Transfers | 31,941 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Financial and Tax Prep Services | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Equity Compensation(6) | 97,608 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Performance-based Restricted Stock Units | 84,188 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Time-based Restricted Stock Units | 13,420 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Total Compensation | 664,901 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
| (1) | Amounts in this column represent the benefits the named executive officers would be entitled to receive in the event a transaction had occurred on December 31, 2019 that constituted a change in control (“CIC”) under the terms of the Officer ClC Agreements, 2015 Ominibus Equity Compensation Plan, equity award agreements, and other compensation plans. |
| (2) | Amounts in this column represent the benefits the named executive officers would be entitled to receive in the event of a qualifying termination under the terms of the Officer Severance Plan, the 2015 Omnibus Equity Compensation Plan, equity award agreements, and other compensation plans. |
| (3) | Amounts in this row represent cash payments for (a) lump sum severance, (b) pro-rated annual bonuses for the year of termination, and (c) COBRA reimbursements. Severance amounts in connection with a CIC are equal to three times (for Mr. Renna), and two-times (for other executives), the executive’s year end salary and average bonus paid for fiscal years 2016, 2017, and 2018; since Ms. Hernandez was hired in 2019, we used her target annual bonus to estimate her CIC severance. Severance amounts not in connection with a CIC are equal to one year of the executive’s year end salary. The pro-rated bonus amount in the CIC scenario is based on target performance results; in the retirement, death and disability scenarios, the bonus is based on actual performance through December 31, 2019. Assumes 36 months (for the CEO) and 24 months (for other executives) of COBRA reimbursements in the CIC Scenario; for involuntary terminations not in connection with a CIC assumes 12 months of COBRA reimbursements. |
| (4) | Amounts in this row represent the cash payments, pro-rated bonus, perquisites, and other property items paid in connection with the executive’s retirement from the Company as further described on pages 45 and 46. |
| (5) | Amounts in this row represent the value of accelerated or continued vesting of time and performance-based restricted stock units under the terms of the Officer CIC Agreements, Severance Plan, the 2015 Omnibus Equity Compensation Plan and equity award agreements. Awards, including accumulated dividend equivalent shares, have been valued using the closing sales price per share of the Company’s common stock on the NYSE on 12/31/2019 of $32.98. Values assume full vesting of all of the executive’s unvested time-based restricted stock units for involuntary/good reason terminations, and in the event of retirement, death and permanent disability. For performance-based restricted stock units, assumes full vesting at target performance levels for terminations in connection with a CIC and continued vesting in the retirement, death and permanent disability scenarios assuming no amounts would be earned for the 2017 awards and that the 2018 and 2019 grants will pay out at 100% of the target levels. |
| (6) | Amounts in this row represent the estimated value of accelerated or continued vesting of time and performance-based restricted stock units payable in connection with the executive’s retirement from the Company. Awards, including accumulated dividend equivalent shares, have been valued using the closing sales price per share of the Company’s common stock on the NYSE on the date of retirement from the Company, or $30.80 (as of 01/31/2020) for Ms. McEndy, and $32.05 (as of 04/01/2019) for Mr. Lynch. All unvested time-based restricted stock units vested in full on their respective termination dates and their performance-based restricted stock awards will remain outstanding and be settled at the end of the performance cycle. Assumes no amounts were earned for the 2017 performance-based awards and that the 2018 and 2019 grants will pay out at 100% of the target levels. PBRSUs can be earned from 50% of target shares granted if threshold performance is met and up to 200% of target shares granted if maximum performance is met. No shares are earned for performance below threshold performance level and any performance over the maximum will result in a 200% payout. |
| (7) | Reflects amounts payable through life insurance policies equal to 2 times the executive’s base salary. |
54 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Tables
Below is a description of the additional assumptions that were used in determining the payments in the tables above upon termination as
of December 31, 2018:2019:
NEOs are entitled to pro-rated vesting of PBRSUs upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRSU
awards upon retirement, based on the applicable 3-year vesting period and achievement of the performance condition for 2016/2017. The amounts for Mr. Robbins represent the pro-rated value of outstanding shares from the 2016, 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2016, 2017 and 2018 TBRSU awards. The 2016 PBRSU awards have been included based on actual performance. The amounts for Ms. McEndy represent the pro-rated value of outstanding shares from the 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2017 and 2018 TBRSU awards, per the award agreement. The amounts for Mr. Robbins and Ms. McEndy also include the pro-rated value of the 2018 one-time recognition awards.
Midstream effective February 28, 2019. Under the ERIP, Mr. Clark received a severance payment of 1x base salary, an enhanced SERP benefit as described in the Pension Benefits Table, and an enhanced Retiree Medical benefit.
In connection with his retirement, Mr. Clark was also entitled to (i) a pro-rated payout of his 2019 Annual Incentive Plan award based on actual performance (shown above based on target performance), (ii) his company car, phone, and computer, with an aggregate fair market value of $28,696, and (iii) a pro-rated payout of all outstanding shares of restricted stock, based on his service during the applicable performance period and the actual performance achieved. Assuming a pro-rated payout at target level for the 2017 and 2018 outstanding PBRS awards, a pro-rated payout for the 2017 and 2018 TBRS awards, and using the market value of the Company’s common stock as of February 28, 2019 of $28.95, the value of the outstanding restricted stock awards would be $295,840. Mr. Clark is also entitled to certain pension benefits as described under the Pension Benefits Table.conditions.
Change in Control (CIC)
A change in control generally means any of the following:
Termination Following a Change in Control (Good Reason or Without Cause) – The CIC Agreements include a modified cutback if any payments under the agreements (including any other agreements) would otherwise constitute a parachute payment under Section 280G of the Code so that the payments will be
limited to the greater of (i) the dollar amount which can be paid to the NEO without triggering an excise tax under Section 4999 of the Code or (ii) the greatest after-tax dollar amount after taking into account any excise tax incurred under Section 4999 of the Code with respect to such parachute payments.
Retirement – NEOs are entitled to pro-rated vesting of PBRSUs upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRSU awards upon retirement, based on the applicable 3-year vesting period (and achievement of the performance condition for 2016 and 2017 awards). The amounts for Mr. Robbins represent the pro-rated value of outstanding shares from the 2016, 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2016, 2017 and 2018 TBRSU awards. The 2016 PBRSU awards have been included based on actual performance. The amounts for Ms. McEndy represent the pro-rated value of outstanding shares from the 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2017 and 2018 TBRSU awards, per the award agreement. The amounts for Mr. Robbins and Ms. McEndy also include the pro-rated value of the 2018 one-time recognition awards.conditions.
Change in Control – Upon a qualifying termination following a change in control, the award agreements currently provide that all
unvested PBRSU awards that are outstanding vest and pay at target level performance. TBRSU awards that are outstanding will
fully vest. A qualifying termination includes an involuntary termination without cause by the Company or a resignation for good reason by the NEO, each following a change in control. The amounts disclosed represent the value of outstanding 2016, 2017 and 2018 PBRSU awards based on target level of performance and the value of 2016, 2017 and 2018 TBRSU awards, as well as the value of the 2018 one-time recognition awards.
Termination Without a Change in Control – Under the Officer Severance Plan, upon an NEO’s qualifying termination, TBRSU awards that are outstanding will fully vest. PBRSU awards that are outstanding are forfeited, in accordance with the terms of the award agreements. A qualifying termination includes an involuntary termination without cause for the Company or a resignation for good reason by the NEO, absent a change in control.
Stock Price – Assumed to be $27.80 based on the market value of the Company’s common stock as of December 31, 2018.
Compensation Discussion & Analysis
CEO Pay Ratio
The ratio of our CEO’s compensation to our median employee’s compensation was calculated as required by the SEC pursuant to Item 402(u) of Regulation S-K. The SEC rules allow companies to omit the employees of a newly-acquired entity from their pay ratio calculation for the fiscal year in which the acquisition occurs. As a result, when calculating our 2018 pay ratio, we excluded 355 employees added in 2018 as part of our acquisition of Elizabethtown Gas/Elkton Gas. We used the same median employee as identified in our calculation of the 2017 pay ratio, as we determined there was no other significant change in our employee population. As disclosed last year, we determined our median employee based on 20172019 W-2 gross earnings for all individuals who were employed by the Company as of December 31, 2017,2019, excluding our CEO. This included all full-time and
part-time employees of the Company aside from the CEO. Compensation was annualized for employees hired or on leaves of absence during the year. Consistent with the applicable rules we used reasonable estimates in the methodology used to identify our median employee.
We calculated the median employee’s total 20182019 compensation in the same way as calculated for our NEOs in the Summary Compensation Table included in this Proxy Statement. Calculated in this manner, our median employee compensation was $93,202.$92,730. Our CEO’s total 20182019 compensation, as set forth in the Summary Compensation Table was $4,664,594.$6,346,963. Therefore, our CEO to median employee pay ratio was 5068 to 1.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 55 |
Executive Compensation Tables
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 20182019 relating to equity compensation plans of the Company pursuant to which grants of restricted stock, restricted stock units, options or other rights to acquire shares may be made from time to time.
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | (b) Weighted average exercise price of outstanding options, warrants and rights ($) (1) | (c) Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) (#) | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | (b) Weighted average exercise price of outstanding options, warrants and rights ($) (1) | (c) Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) (#) | ||||||||||||
Equity compensation plans approved by security holders (2) | 422,683 | — | 1,882,310 | 720,043 | — | 1,370,001 | ||||||||||||
Equity compensation plans not approved by security holders | — | — | — | — | — | — | ||||||||||||
Total 2015 Omnibus Equity Compensation Plan | 422,683 | — | 1,882,310 | 720,043 | — | 1,370,001 | ||||||||||||
| (1) |
| (2) | These plans include those used to make awards of |
56 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
The Audit Committee is responsible for recommending the appointment of the independent registered public accounting firm to the Board and is directly responsible for the compensation and oversight of the independent auditor. Annually, prior to making its recommendation, the Audit Committee considers the audit firm’s capabilities, effectiveness, industry experience, and use of technology and data analytics in its audits; knowledge of the Company including its personnel, processes, accounting systems and risk profile; tenure serving the Company; and independence, and other firms with comparable professional qualifications.
Deloitte & Touche LLP (“Deloitte”) is a top accounting firm with expertise in public utility accounting. Deloitte has been the Company’s, or its predecessor Company’s, auditor since 1948 giving it a unique understanding of Company’s businesses and personnel. The Audit Committee considered the impact of tenure on Deloitte’s independence and determined Deloitte remains independent as, among other factors, the lead engagement partner is required to rotate off the Company’s audit every 5 years. The current lead engagement partner will rotate off after the 2023 audit. Further, the Audit Committee pre-approves all audit and non-audit services and related compensation and monitors the potential impact on independence. Finally, the Company has a policy restricting hiring certain persons formerly associated with Deloitte into an accounting or financial reporting oversight role to help ensure Deloitte’s continuing independence.
During 2019, the audit services performed for the Company consisted of (1) audits of the Company’s and its subsidiaries’ financial statements and the effectiveness of the Company’s internal control over financial reporting, as required by the Sarbanes-Oxley Act of 2002, Section 404 and the preparation of
reports based on such audits related to filings with the Securities and Exchange Commission; and (2) services performed in connection with financing transactions.
The Audit Committee evaluates the quality of Deloitte’s services annually, considering the quality of their audit services, industry knowledge from an audit and tax perspective, continued independence, information from PCAOB inspection reports, and the Audit Committee’s discussions with management about Deloitte’s performance.
After considering all factors, the Audit Committee and the Board believe that the continued retention of Deloitte to serve as the Company’s Independent Registered Public Accounting Firm for 2020 is in the best interest of the Company and its shareholders. Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of Deloitte to our shareholders for ratification because we value the views of our shareholders on the Company’s Independent Registered Public Accounting Firm. If our shareholders fail to ratify the selection of Deloitte, it will be considered notice to the Board and Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee may select a different Independent Registered Public Accounting Firm at any time during the year if it determines such change would be in the best interests of the Company and our shareholders. Representatives of Deloitte will be at the meeting to respond to appropriate questions and make a statement if they wish.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the reappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.
South Jersey Industries, Inc. - |
A copy of the Company’s 20182019 Annual Report accompanies this proxy statement.Proxy Statement. The 20182019 Annual Report is not proxy-soliciting material or a communication by which any solicitation is made.
Upon written request of any person who on the record dateRecord Date for the Annual Meeting was a record owner of the Common Stock, or who represents in good faith that he or she was on that date a beneficial
owner of such stock and is entitled to vote at the Annual Meeting, the Company will send to that person, without charge, a copy of its 20182019 Annual Report. Requests for this report should be directed to Edythe Nipper, Corporate Secretary, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
By Order of the Board of Directors,
Corporate Secretary
March 15, 201913, 2020
| South Jersey Industries, Inc. - |
Annex A – Non-GAAP Measures
Reconciliation of Non-GAAP Measures (Unaudited)Economic Earnings and Economic Earnings per share
We define Economic Earnings as: Income from continuing operations, (i) less the change in unrealized gains and plus the change in unrealized losses on all derivative transactions; (ii) less realized gains and plus realized losses on all commodity derivative transactions attributedinventory injection hedges, which relate to expected purchases of gas in storage to match the recognition of these gains and losses with the recognition of the related cost of the gas in storage in the period of withdrawal; and (iii) less the impact of transactions, contractual arrangements or other events where management believes period to period comparisons of SJI's operations could be difficult or potentially confusing. With respect to part (iii) of the definition, several items are excluded from Economic Earnings, including impairment charges, the impact of pricing disputes with third parties, costs to acquire ETG and ELK, costs to prepare to exit the Transaction Services Agreement (TSA), costs incurred and gains recognized on the sale of assets, customer credits related to the acquisition of ETG and ELK, Employee Retirement Incentive Program (ERIP) costs, severance and other employee separation costs and the impact of Tax Reform. See (A)-(H) in the table below.
Economic Earnings is a significant performance metric used by our management to indicate the amount and timing of income from continuing operations that we expect to earn after taking into account the impact of derivative instruments on the related transactions, contractual arrangements and other events that management believes make period to period comparisons of SJI's operations difficult or potentially confusing. Specifically regarding derivatives, we believe that this financial measure indicates to investors the profitability of the entire derivative related transaction and not just the portion that is subject to mark-to-market valuation under GAAP. We believe that considering only the change in market value on the derivative side of the transaction can produce a false sense as to the ultimate profitability of the total transaction as no change in value is reflected for the nonderivative portion of the transaction.
The following table presents a reconciliation of our income from continuing operations and earnings per share from continuing operations to Economic Earnings and Economic Earnings per share (in thousands, except per share data):
2018 | 2017 | 2016 | 2019 | 2018 | 2017 | |||||||||||||
Income (Loss) from Continuing Operations | $ | 17,903 | $ | (3,404 | ) | $ | 119,061 | $ | 77,189 | $ | 17,903 | $ | (3,404 | ) | ||||
Minus/Plus: | ||||||||||||||||||
Unrealized Mark-to-Market (Gains) Losses on Derivatives | (35,846 | ) | 14,226 | (27,550 | ) | 14,546 | (35,846 | ) | 14,226 | |||||||||
Realized Losses on Inventory Injection Hedges | — | 332 | 683 | — | — | 332 | ||||||||||||
Loss on Property, Plant and Equipment (A) | 105,280 | 91,299 | — | 10,745 | 105,280 | 91,299 | ||||||||||||
Net Losses from Legal Proceedings (B) | 5,910 | 56,075 | — | 2,336 | 5,910 | 56,075 | ||||||||||||
Acquisition/Sale Costs (C) | 34,674 | 19,564 | — | 3,468 | 34,674 | 19,564 | ||||||||||||
Customer Credits (D) | 15,333 | — | — | — | 15,333 | — | ||||||||||||
ERIP and OPEB (E) | 6,733 | — | — | — | 6,733 | — | ||||||||||||
Other (F) | — | 2,227 | (165 | ) | 4,179 | — | 2,227 | |||||||||||
Income Taxes (G) | (33,753 | ) | (70,834 | ) | 10,813 | (9,423 | ) | (33,753 | ) | (70,834 | ) | |||||||
Additional Tax Adjustments (H) | — | (11,420 | ) | — | — | — | (11,420 | ) | ||||||||||
Economic Earnings | $ | 116,234 | $ | 98,065 | $ | 102,842 | $ | 103,040 | $ | 116,234 | $ | 98,065 | ||||||
Earnings (Loss) per Share from Continuing Operations | $ | 0.21 | $ | (0.04 | ) | $ | 1.56 | $ | 0.84 | $ | 0.21 | $ | (0.04 | ) | ||||
Minus/Plus: | ||||||||||||||||||
Unrealized Mark-to-Market (Gains) Losses on Derivatives | (0.42 | ) | 0.18 | (0.36 | ) | 0.16 | (0.42 | ) | 0.18 | |||||||||
Realized Losses on Inventory Injection Hedges | — | — | 0.01 | — | — | — | ||||||||||||
Loss on Property, Plant and Equipment (A) | 1.24 | 1.14 | — | 0.12 | 1.24 | 1.14 | ||||||||||||
Net Losses from Legal Proceedings (B) | 0.07 | 0.70 | — | 0.02 | 0.07 | 0.70 | ||||||||||||
Acquisition/Sale Costs (C) | 0.41 | 0.25 | — | 0.04 | 0.41 | 0.25 | ||||||||||||
Customer Credits (D) | 0.18 | — | — | — | 0.18 | — | ||||||||||||
ERIP and OPEB (E) | 0.08 | — | — | — | 0.08 | — | ||||||||||||
Other (F) | — | 0.03 | — | 0.04 | — | 0.03 | ||||||||||||
Income Taxes (G) | (0.39 | ) | (0.89 | ) | 0.13 | (0.10 | ) | (0.39 | ) | (0.89 | ) | |||||||
Additional Tax Adjustments (H) | — | (0.14 | ) | — | — | — | (0.14 | ) | ||||||||||
Economic Earnings per Share | $ | 1.38 | $ | 1.23 | $ | 1.34 | $ | 1.12 | $ | 1.38 | $ | 1.23 | ||||||
| (A) | Represents impairment charges taken as follows: in 2019 on solar generating facilities along with the agreement to sell MTF and ACB, which were both driven by the expected purchase prices being less than the carrying value of the assets; in 2018 on solar generating facilities, |
South Jersey Industries, Inc. - 2020 Proxy Statement | | 59 |
| (B) | Represents net losses from three separate legal proceedings: (a) charges in 2017, 2018 and |
| (C) | Represents costs incurred on the agreement to acquire the assets of ETG and ELK, including legal, consulting and other professional |
| (D) | Represents credits to ETG and ELK customers that were required as part of the Acquisition. |
| (E) | Represents costs incurred on the |
| (F) | Represents severance and other employee separation costs taken in 2019. Included in this amount in 2017 are amendments made to an existing interest rate derivative linked to unrealized losses previously recorded in |
| (G) | Determined using a combined average statutory tax rate of approximately |
| (H) | Represents one-time tax adjustments, most notably for |
| South Jersey Industries, Inc. - |
Please note the meeting location!
Directions to Hard Rock Hotel & Casino Atlantic CityThe Westin Mount Laurel
for the Annual Meeting of Shareholders
Hard Rock Hotel & Casino Atlantic City, BrightonThe Westin Mount Laurel, The Grand Ballroom,1000 Boardwalk, Atlantic City,555 Fellowship Road, Mount Laurel, New Jersey 08054
8:15 a.m. - doors will open to shareholders for continental breakfast 9:00 a.m. - meeting begins10:00 a.m. - meeting adjourns
| Time: | 9:00 a.m. - meeting begins 10:00 a.m. - meeting adjourns |
Admission to the Meeting:
Attendance at the Annual Meeting will be limited to shareholders as of the record date,Record Date, their authorized representatives and guests of SJI. Guests of shareholders will not be admitted unless they are also shareholders as of the record date.Record Date. If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket.
Although we intend to hold our annual meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to attend our annual meeting in person, we encourage you to attend online at www.virtualshareholdermeeting.com/SJI2020. If you attend online, you will be able to vote your shares and submit questions by following the instructions on the website. We reserve the right to convert to a virtual only meeting format should meeting in person become unsafe as a result of COVID-19. If we convert to a virtual only online meeting we will post a notification at sjindustries.com as soon as possible.
Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken by South Jersey Industries at the 20192020 Annual Shareholders’ Meeting may be used by South Jersey Industries. By attending the 20192020 Annual Shareholders’ Meeting, you will be agreeing to South Jersey Industries’ use of those photographs and waive any claim or rights with respect to those photographs and their use.
Directions to Hard Rock Hotel & Casino Atlantic CityFrom East
From Philadelphia
Cross the Benjamin Franklin Bridge or Walt Whitman Bridge and follow the North-South Freeway (Route 42) to the Atlantic City Expressway. At the base ofFollow the Atlantic City Expressway turn leftWest to Exit 31, New Jersey 73 toward Winslow/Blue Anchor. Merge onto Arctic Avenue. Continue to Virginia Avenue.NJ 73 North. Go through one roundabout. Turn right onto Virgina Avenue to Hard Rock Hotel & Casino Atlantic City.Fellowship Road. The hotel entrance is on the left.
From New YorkWest
Follow New Jersey 73 South toward the New Jersey Turnpike/Marlton/Berlin. Turn right onto Fellowship Road. The hotel entrance is on the left.
From Philadelphia Airport
Proceed on PA-291 East toward Valley Forge. Continue on PA-291/Penrose Avenue. Merge onto Penrose Avenue. Take I-76 East toward Walt Whitman Bridge. Take Exit 1B to I-295 North toward Trenton/New Jersey Turnpike. Continue on Trenton/New Jersey Turnpike and take RT 73 South. Turn right onto Fellowship Road. The hotel entrance is on the left.
From Delaware (South)
Follow Interstate 295, which becomes the New Jersey Turnpike. Take Exit 4, New Jersey 73 toward Camden / Philadelphia. Merge onto NJ 73 North. Turn right onto Fellowship Road. The hotel entrance is on the left.
From North
Follow the New Jersey Turnpike to the Garden State Parkway (Exit 11). Proceed south on the ParkwaySouth to Exit 38 (Atlantic City Expressway). Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to Virginia Avenue.4, New Jersey 73. Turn right onto Virginia Avenue to Hard Rock Hotel & Casino Atlantic City.
From Baltimore/Washington D.C.
Take I-95 North across the Delaware Memorial Bridge and follow Route 40 East to the Atlantic City Expressway. Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to Virginia Avenue.NJ 73 North. Turn right onto Virginia Avenue to Hard Rock Hotel & Casino Atlantic City.Fellowship Road. The hotel entrance is on the left.
