SCHEDULE 14A
(Rule14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Exchange Act of 1934 (Amendment No. )
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☒ Definitive Proxy Statement | ||
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☐ Soliciting Material Under Rule14a-12 |
UNITIL CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Unitil Corporation
2020 Proxy Statement
Notice of Annual Meeting of Shareholders
Annual Meeting ◆ Wednesday, April 29, 2020
11:30 a.m. EDT
Hampton, New Hampshire
March 20, 201731, 2020
Dear Fellow Shareholder,
I am pleased to invite you to attend theThe Unitil Corporation Annual Meeting of Shareholders. The meetingShareholders will be held on Wednesday, April 26, 2017,29, 2020, at 11:30 a.m., at the Company’sour corporate headquarters, 6 Liberty Lane West, Hampton, New Hampshire. This year, we are asking shareholders to vote on the election of fivethree directors, and on the ratification of the selection of independent registered public accountants. Also this year, shareholders will be presented with an advisory vote on executive compensation, and an advisory vote on the frequency of future advisory votes on executive compensation.
Your vote is very important. I encourage you to vote to ensure that your voice is represented at the meeting, and to play a part in the future of the Company.our future. The enclosed proxy materials provide important information about the Company to assist you with your voting decisions, as well as instructions to submit your vote.
I would like to thank you for choosing to invest in Unitil Corporation. The Company’sOur vision, statementmission and philosophyvalues reflect our deep commitment to our shareholders, customers, local communities and partners. We provide more than just electricity and gas services and products. Our talented and dedicated people are proud to provide for the necessities of life with the safe and reliable delivery of natural gas and electricity throughout New England.Energy for Lifelife is the statement of pride and commitment that we use to describe this philosophy.commitment.
On behalf of the directorsBoard of Directors and management of Unitil Corporation, thank you for your continued support and confidence in 2017.2020.
Sincerely,
Robert G. SchoenbergerThomas P. Meissner, Jr.
Chairman of the Board,
Chief Executive Officer and
President
Hampton, New Hampshire March |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Board of Directors and management of Unitil Corporation (the “Company”) is pleased to invite you to attend the 20172020 Annual Meeting of Shareholders which will be held at the office of the Company, 6 Liberty Lane West, Hampton, New Hampshire, on Wednesday, April 26, 2017,29, 2020, at 11:30 A.M.a.m. for the following purposes:
1. | Election of |
2. | Ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for |
3. | Approval, on an advisory basis, of the compensation of the Company’s named executive officers; and |
4. |
Transaction of any other business as may properly be brought before the meeting. |
The Board of Directors set February 21, 201720, 2020 as the date for determining holders of record of common stock who are entitled to notice of and to vote at the meeting or at any adjournments or postponements of the meeting. The Board of Directors has directed the Company to prepare this notice, the accompanying proxy statement, and the accompanying annual report, and to send them to you.
By Order of the Board of Directors,
Sandra L. Whitney
Corporate Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, APRIL 29, 2020 This notice, the accompanying proxy statement and the accompanying annual report to shareholders are available for shareholders to view atwww.proxydocs.com/UTL. |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, APRIL 26, 2017 This notice, the accompanying proxy statement and the accompanying annual report to shareholders are available for shareholders to view at www.proxydocs.com/UTL.
YOUR VOTE IS VERY IMPORTANT
Your vote is important. To ensure a quorum is present at the Annual Meeting of Shareholders, please be sure your shares are represented at the meeting.
You may vote in one of the following ways:
Shareholders of Record | Beneficial Owners | |||||||
By Mail
| Sign, date and return the enclosed proxy card (a self-addressed envelope is enclosed for your convenience)
| By Mail
| Direct your bank, broker or other nominee on how to vote your shares in accordance with the instructions provided to you | |||||
Via the Internet
|
Submit your proxy atwww.investorvote.com/UTL |
Via the Internet
| ||||||
In Person at the Meeting
Please see the Notice below. |
A meeting ballot will be provided for voting at the meeting |
In Person at the Meeting
Please see the Notice below. |
A legal proxy is required, which can be obtained from your bank broker or other nominee; a meeting ballot will be provided for voting at the meeting
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If for any reason you desire to revoke or change your proxy, you may do so at any time prior to the meeting by following the procedures described in the accompanying proxy statement or in person at the meeting.
| If for any reason you desire to revoke or change your voting instructions, you must contact your bank, broker or other nominee and follow its procedures for revoking or changing your voting instructions. |
ATTENDING THE ANNUAL MEETING OF SHAREHOLDERS
Please see the Notice below.
All shareholders who wish tomay attend the Annual Meeting of Shareholders in person are encouraged to do so.Shareholders. However, to ensure that the meeting remains orderly and secure, you must follow certain protocols for admittance. Shareholders of record will need to provide their admission ticket or their name and government-issued picture identification. Beneficial owners will need to provide a copy of an account statement from the bank, broker or nominee holding the shares as proof of ownership as of the Record Date, as well as government-issued picture identification.
NOTICE REGARDING CORONAVIRUS(COVID-19) GLOBAL PANDEMIC The World Health Organization has declaredCOVID-19 a global pandemic. We are required by the New Hampshire Business Corporation Act to hold our 2020 Annual Meeting. However, we believe encouraging a large group gathering at our meeting would not be prudent or socially responsible due to the evolving public health impact ofCOVID-19. For your safety and the safety of others, we respectfully request that you seriously consider the impactof COVID-19 in deciding whether to attend the meeting. We will report the voting results of the meeting in a press release or filing with the Securities and Exchange Commission. Unlike in recent years, this year only those officers who are essential to the business of the meeting will attend the meeting in person, and we will not provide a shareholder presentation after the formal business of the meeting. We encourage you to vote your shares using one of the methods described above to ensure that your voice is represented at the meeting. Your vote is very important. If you have any questions, please contact us atInvestorRelations@unitil.com or by calling toll free800-999-6501. |
PROXY STATEMENT
INFORMATION ABOUT THE ANNUAL MEETING | 1 | ||||
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SHARE OWNERSHIP | 9 | ||||
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54 | |||||||
Election of Three Directors in Class II for a Term of Three Years | |||||||
Approval, on an Advisory Basis, of the Compensation of the Company’s Named Executive Officers | |||||||
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Unitil Corporation
6 Liberty Lane West
Hampton, NH 03842-1720
March 20, 201731, 2020
PROXY STATEMENT
Unitil Corporation (“Unitil” or the “Company”) is providing this proxy statement and the accompanying annual report (which includes the Company’s Annual Report on Form10-K for fiscal year 2016)2019) to shareholders in connection with the Company’s 2017our 2020 Annual Meeting of Shareholders (the “Annual Meeting”). The Company’sUnitil’s Board of Directors (the “Board”) is soliciting your designation of a proxy to vote your shares at the Annual Meeting. As a shareholder of the Company,Unitil, you are invited to attend the Annual Meeting, as well as entitled and requested to vote (if you are a shareholder of record) or to provide voting instructions (if you beneficially own your shares in street name) on the proposals described in this proxy statement. This proxy statement provides information to assist you in voting your shares or in providing voting instructions with respect to your shares.
The CompanyUnitil has the following subsidiaries, which are referred to throughout this proxy statement: Fitchburg Gas and Electric Light Company (“Fitchburg”); Granite State Gas Transmission, Inc. (“Granite”); Northern Utilities, Inc. (“Northern”); Unitil Energy Systems, Inc. (“Unitil Energy”); Unitil Power Corp.; Unitil Realty Corp.; Unitil Resources, Inc.; and Unitil Service Corp.; and Usource, Inc. and Usource, LLC (collectively, “Usource”).
We may also refer to Unitil as “we” or “our” or “us” throughout this proxy statement.
INFORMATION ABOUT THE ANNUAL MEETING
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Date, Time and Place
The Annual Meeting will be held on Wednesday, April 26, 201729, 2020 at 11:30 A.M. at theour corporate office, of the Company, 6 Liberty Lane West, Hampton, New Hampshire.Hampshire 03842-1720.
Anticipated Mailing Date
The Company anticipatesWe anticipate first mailing definitive copies of this proxy statement, the accompanying proxy card, and the accompanying annual report to shareholders on or about March 20, 2017.
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MEETING SUMMARY
This year, we are seeking your vote on the following proposals:
1) | Election of |
2) | Ratification of the selection of Unitil’s independent registered public accounting firm, Deloitte & Touche LLP, for fiscal year |
3) | Approval, on an advisory basis, of the compensation of the Company’s named executive officers. The Board recommends a vote FOR this proposal. Information on Proposal No. 3 is included in the section entitledProposal 3: Approval, on an Advisory Basis, of the Compensation of the Company’s Named Executive Officers. |
4) |
Transaction of any other business that may properly be brought before the Annual Meeting. |
RECORD DATE & NUMBER OF SHARES OUTSTANDING
You are entitled to receive notice of and to vote at the Annual Meeting if you owned shares of the Company’s common stock as of the close of business on February 21, 2017 (the “Record Date”). As of the Record Date, the Company had 14,101,963
RECORD DATE & NUMBER OF SHARES OUTSTANDING | ||||||
You are entitled to receive notice of and to vote at the Annual Meeting if you owned shares of Unitil common stock as of the close of business on February 20, 2020 (the “Record Date”). As of the Record Date, there were 14,960,124 shares of common stock issued and outstanding and entitled to vote at the Annual Meeting. | Record Date February 20, 2020 Shares Outstanding 14,960,124 |
QUORUM & REQUIRED VOTE
A majority of the outstanding shares of common stock entitled to vote at the Annual Meeting must be present in person or represented by proxy to conduct the Annual Meeting. This is referred to as a quorum.
If a quorum is present, Directorsthe nominees standing for election as a Director will be elected by a plurality of the votes cast by the shareholders. Votes withheld and brokernon-votes will not be counted toward the achievement of a plurality. Additional information concerning the election of directors appears in the sectionsections entitled Corporate Governance – Resignation Policyand Proposal 1 – Election of Directors. With respect to all other matters that may come before the Annual Meeting, action on a matter is approved if the votes cast favoring the action exceed the votes cast opposing the action. Therefore, abstentions and brokernon-votes will have no effect on the other matters. Representatives of the Company’sour transfer agent will count the votes and certify the results.
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VOTING RIGHTS AND PROCEDURES
As an owner of Unitil common stock, it is your legal right to vote (or to provide instructions on voting)voting instructions) on all matters to be considered at a shareholder meeting. Unitil hopesWe hope you will exercise your legal right and fully participate as a shareholder in the Annual Meeting. You may cast one vote for each share of common stock that you own on all matters presented at the Annual Meeting.
The Board has selected and approved Robert G. Schoenberger and Mark H. Collin
You may cast one vote for each share of common stock that you own on all matters presented at the Annual Meeting. The Board has selected and approved Thomas P. Meissner, Jr. and Laurence M. Brock as proxies for the Annual Meeting to vote your shares in the manner that you specify on the proxy card or via the Internet, or if you do not give any specification on your proxy card or submitted proxy with respect to a matter, FOR such matter. Your designation of a proxy will not affect your right to attend the Annual Meeting and vote in person. Record Holders If your shares of common stock were registered directly in your name with our transfer agent as of the Record Date, then you are considered a shareholder of record of the shares (a “Record Holder”) and we have sent the proxy materials and the accompanying proxy card directly to you. | Record Holders You may vote your shares in one of the following ways: in person at the Annual Meeting by designating another person (the “proxy”) to vote on your behalf by delivering a properly completed proxy card or submitting a proxy via the Internet atwww.investorvote.com/UTL You may revoke your designation of a proxy at any time before the vote is taken at the Annual Meeting in one of the following ways: file with Unitil’s Corporate Secretary a later-dated written notice of revocation deliver to Unitil’s Corporate Secretary a properly completed, later-dated proxy card relating to the same shares submit a later-dated proxy via the Internet if the original designation of a proxy was made via the Internet attend the Annual Meeting and vote
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Beneficial Holders You may vote your shares in one of the following ways: in person at the Annual Meeting – but you must first obtain a properly completed legal proxy from your bank, broker or other nominee that will provide you with the right to vote the shares at the Annual Meeting direct your bank, broker or other nominee on how to vote your shares by following the instructions provided by the bank, broker or other nominee You may change how your bank, broker, or other nominee will vote your shares at any time before the vote is taken at the Annual Meeting: follow the procedures provided by your bank, broker or other nominee to make a change | Beneficial Holders If your shares of common stock were registered in the name of a bank, broker or other nominee as of the Record Date, then you are considered a beneficial owner (“Beneficial Holder”) of the shares that are registered in street name and your bank, broker or other nominee has sent this proxy statement and voting instructions to you. As a Beneficial Holder, your shares may be voted even if voting instructions are not provided. |
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Brokerage firms have the authority under New York Stock Exchange rules to vote shares for which their customers do not provide voting instructions on routine matters. The ratification of the selection of Unitil’sour independent registered public accounting firm, Deloitte & Touche LLP, for fiscal year 20172020 is considered a routine matter. When a proposal is not routine and the brokerage firm has not received voting instructions from its customers, the brokerage firm cannot vote the shares on that proposal. Those shares are considered “brokernon-votes.” Please note that, under the New York Stock Exchange’sExchange rules, this means that brokers may not vote your shares on Proposals 1 3 and 43 at the 20172020 Annual Meeting if you have not given specific instructions as to how to vote to the broker. Please be sure to give specific voting instructions to your broker so that your vote can be counted.
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A MESSAGE FROM THE CHAIRMAN AND CEO
This is a dynamic and exciting time for our industry, and the last 10 years have been truly transformational for both our Company and the industry as a whole. As a company, we are taking important steps to prepare for the future by aligning our strategies with the goals and aspirations of our stakeholders, as well as with our sustainability and corporate responsibility priorities. Our Vision isto transform the way people meet their evolving energy needs to create a clean and sustainable future.We fully support the transition to clean energy and believe this is the best way to position our company for true sustainability and long-term success.
The ongoing trend toward decarbonized energy solutions for the energy, heating and transportation sectors continues to create new policy initiatives that shape our business. Alignment of our strategies has provided an opportunity to find new ways to support the energy initiatives all around us. We believe that our ongoing efforts to implement decarbonization and electrification policies will create new opportunities for us as we move toward lower carbon alternatives.
While public attention has been focused on the idea of energy transformation, other important industry drivers like public safety, grid resiliency and cyber security remain at the forefront of our efforts as well. Our 2020 Strategic Plan outlines how our Mission, Vision and Values find opportunities within these industry drivers and outline both a path forward for our organization and important, attainable milestones for the coming year.
Working to ensure the core elements of our business, including safety, reliability andtop-tier customer service, remain sustainable is an important focus for our Company. Our industry is evolving, and our Strategic Plan is designed to help position ourselves as part of the solution to long term policy goals for our region. As we focus on these initiatives, we believe the Company will be ideally positioned to succeed today and thrive for years to come.
Over the last decade, Unitil has grown and prospered like never before in our Company’s history. As we enter the 2020s and beyond, I have confidence that the initiatives and actions we are taking now to achieve both our Mission and our Vision will shape the successes of tomorrow. It is truly an exciting time to be a part of the energy industry, and I’m glad you are here with us to share in this journey. If the last decade is any indicator, the future is indeed bright.
- | Thomas P. Meissner, Jr. |
March 31, 2020
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VISION, MISSION & VALUES |
VISION Our Vision is to transform the way | MISSION Our Mission is to safely and reliably |
VALUES Our values are grouped into four important components:Respect, Integrity, Stewardship and Excellence, otherwise known as “RISE”. Together, these value categories are central to assuring that customer experience, employee engagement and our corporate responsibilities support both our Vision and our Mission. |
ACTING ON OUR VALUES
As a company, our values are the guiding principles behind our actions, but they are only as good as they are meaningful and measurable. Our RISE values have long been part of our core identity, but renewed focus on their importance will guide our path to fulfillment of our commitment to deliver ‘energy for life’ and the achievement of our Vision of a clean and sustainable future for all of our stakeholders.
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On January 29, 2020, we announced that the Board appointed Winfield S. Brown as a new Director, effective as of January 29, 2020. The addition of Mr. Brown is part of the Board’s normal succession planning process in anticipation of upcoming retirements of four long-serving members of the Board following the Annual Meeting. Mr. Brown will serve on the Board until the Annual Meeting, at which time he will be presented to shareholders for election to the Board. Expanded biographical information for Mr. Brown is included in the section entitledProposal 1: Election of Directors.
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The table below shows Executive Officers’ biographical information as of the date of this proxy statement, including the Named Executive Officers, with the exception of Mr. Schoenberger. Biographical information for Mr. Schoenberger, who is a Director, as well as chairman of the Board, chief executive officer (“CEO”) and president of the Company, is included in the section entitledProposal 1: Election of Directors- Information About Directors With Continuing Terms of Office.Officers.
MANAGEMENT INFORMATION TABLE
Name and Principal Position
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Age
|
Description
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Thomas P. Meissner, Jr.
| Mr. Meissner has been Unitil’s chairman of the Board, chief executive officer and president since April 2018. Mr. Meissner served as Unitil’s senior vice president and chief operating officer | |||
Todd R. Black Senior Vice President,
| Mr. Black has been Unitil’s senior vice president, external affairs and customer relations, | |||
| ||||
Laurence M. Brock
| Mr. Brock has been Unitil’s | |||
Christopher J. LeBlanc Vice President, Gas Operations | 53 | Mr. LeBlanc has been Unitil’s vice president of gas operations since January 2017. Mr. LeBlanc joined Unitil in 2000 and served as director of gas operations from 2008 until January 2017, and in several other gas operations management positions from 2000 until 2008. | ||
Christine L. Vaughan(2) Senior Vice President, Chief Financial Officer & Treasurer | 53 | Ms. Vaughan has been Unitil’s senior vice president, chief financial officer and treasurer since March 2019. Ms. Vaughan joined Unitil in January 2019 as Senior Vice President of Financial and Regulatory Services of the Company’s subsidiary, Unitil Service Corp. Prior to joining Unitil, Ms. Vaughan served as Vice President, Rates and Regulatory and Treasurer for Eversource Energy in Massachusetts, where she had been employed since 2004. | ||
Sandra L. Whitney Corporate Secretary | Ms. Whitney has been Unitil’s corporate secretary and secretary of the Board since February 2003. Ms. Whitney joined Unitil in 1990 and has also |
NOTES:
(1) | Ms. Vaughan resigned as Senior Vice President, Chief Financial Officer & Treasurer of the Company on March 16, 2020. |
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The following table sets forth information on the beneficial ownership of the Company’sour common stock as of the Record Date, by (i) each person known to the Companyus to be the beneficial owner of more than five percent of itsour common stock, (ii) each Director and nominee for Director, of the Company, (iii) each executive officer named in the Summary Compensation Table in the section entitledCompensation -Compensation of Named Executive Officers (the “Named Executive Officers”) and (iv) all Directors and executive officers (“Executive Officers”) of the CompanyUnitil as a group. Except as otherwise indicated, to the Company’sour knowledge, the beneficial owners listed have sole voting and sole dispositive power with respect to the shares beneficially owned by them. The address of each of Unitil’s Directors and Executive Officersexecutive officers is c/o Unitil Corporation, 6 Liberty Lane West, Hampton, New Hampshire 03842-1720.
Name of Beneficial Owner | Common Stock | Restricted Stock Units | Percent of Class | ||||||||||||
5% Owners:
| |||||||||||||||
BlackRock, Inc.(1) | |||||||||||||||
55 East 52nd Street, New York, NY 10055
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| 1,211,445
|
|
| —
|
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| 8.10%
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Renaissance Technologies | |||||||||||||||
800 Third Avenue, New York, NY 10022
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| 937,600
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|
| —
|
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| 6.28%
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The Vanguard Group(3) | |||||||||||||||
100 Vanguard Boulevard, Malvern, PA 19355
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| 909,528
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|
| —
|
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| 6.09%
|
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Directors:(4) (5)
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Robert V. Antonucci
| 3,465 | 10,332 | * | ||||||||||||
Winfield S. Brown
| — | — | * | ||||||||||||
David P. Brownell
| 5,276 | 11,755 | * | ||||||||||||
Mark H. Collin
| 47,804 | — | * | ||||||||||||
Lisa Crutchfield
| — | 10,332 | * | ||||||||||||
Albert H. Elfner, III
| 9,088 | 12,171 | * | ||||||||||||
Suzanne Foster
| 1,101 | — | * | ||||||||||||
Edward F. Godfrey
| 4,691 | 10,332 | * | ||||||||||||
Michael B. Green
| 5,530 | 11,755 | * | ||||||||||||
Thomas P. Meissner, Jr.(6)
| 65,145 | — | * | ||||||||||||
Eben S. Moulton
| 20,801 | 11,755 | * | ||||||||||||
M. Brian O’Shaughnessy
| 16,619 | 11,755 | * | ||||||||||||
Justine Vogel
| 1,101 | — | * | ||||||||||||
David A. Whiteley
| — | 10,332 | * |
Name and Address of Beneficial Owner | Common Stock | Restricted Stock Units | Percent of Class | |||
5% Owners: | ||||||
BlackRock, Inc.(1) | ||||||
55 East 52nd Street, New York, NY 10055 |
1,059,442 |
— |
7.5% | |||
Frontier Capital Management Co., LLC(2) | ||||||
99 Summer Street, Boston, MA 02110 | 906,244 | — | 6.5% | |||
The Vanguard Group(3) | ||||||
100 Vanguard Boulevard, Malvern, PA 19355 | 764,682 | — | 5.4% | |||
Directors:(4) (5) | ||||||
Robert V. Antonucci | 3,465 | 6,155 | * | |||
David P. Brownell | 5,276 | 7,461 | * | |||
Lisa Crutchfield | — | 6,155 | * | |||
Albert H. Elfner, III | 9,088 | 7,461 | * | |||
Edward F. Godfrey | 4,691 | 6,155 | * | |||
Michael B. Green | 5,530 | 7,461 | * | |||
Eben S. Moulton | 20,801 | 7,461 | * | |||
M. Brian O’Shaughnessy | 15,923 | 7,461 | * | |||
Robert G. Schoenberger(6) | 138,646 | — | * | |||
Sarah P. Voll | 10,016 | — | * | |||
David A. Whiteley | — | 6,155 | * | |||
Named Executive Officers:(4) | ||||||
Robert G. Schoenberger(6) | 138,646 | — | * | |||
Mark H. Collin(7) | 42,918 | — | * | |||
Thomas P. Meissner, Jr.(8) | 35,131 | — | * | |||
Todd R. Black(9) | 24,056 | — | * | |||
George E. Long, Jr.(10) | 21,477 | — | * | |||
All Directors and Executive Officers as a Group (17 Persons)(4)(11) | 346,382 | 61,925 | 2.46% |
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Name of Beneficial Owner | Common Stock | Restricted Stock Units | Percent of Class | ||||||||||||
Named Executive Officers:(4)
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Thomas P. Meissner, Jr.(6)
| 65,145 | — | * | ||||||||||||
Christine L. Vaughan(7)(8)
| 6,020 | — | * | ||||||||||||
Todd R. Black(9)
| 27,985 | — | * | ||||||||||||
Laurence M. Brock(10)
| 13,584 | — | * | ||||||||||||
Christopher J. LeBlanc(11)
| 10,425 | — | * | ||||||||||||
Mark H. Collin
| 47,804 | — | * | ||||||||||||
All Directors and Executive Officers as a Group (19 Persons)(4)(12)
| 340,889 | 100,519 | 1.93% |
* | Represents less than 1% of the Company’s outstanding common stock. |
NOTES:
(1) | Information obtained from the Schedule 13G/A filed by BlackRock, Inc. on behalf of itself, BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Institutional Trust Company, |
(2) | Information obtained from the Schedule 13G/A jointly filed by |
(3) | Information obtained from the Schedule |
(4) | Based on information furnished to Unitil by its Directors and |
(5) | Restricted Stock Units (“RSUs”) are granted to the Directors who have elected to receive RSUs in lieu of common stock as the equity portion of the annual retainer for Board service. RSUs will settle as 70% stock and 30% cash upon retirement or other separation from the Board. RSUs were granted |
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(6) | Included are |
Ms. Vaughan resigned as Senior Vice President, Chief Financial Officer & Treasurer of the Company on March 16, 2020. |
(8) | Included are |
Included are |
(10) | Included are 3,853 shares of unvested restricted stock granted under the terms and conditions of the Stock Plan. |
(11) | Included are |
(12) | Included are 1,171 shares that are held in trust for the Executive Officers under the terms of Unitil’s 401(k) and |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) requires the Company’s Executive Officers,our executive officers, Directors, and persons who own more than ten percent of a registered class of the Company’sour equity securities to file certain reports of ownership and changes in share ownership with the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”). Based upon itsour review of such forms that were filed in 2016,2019, and written representations from certain reporting persons that such forms were not required to be filed by those persons for the reporting year 2016, the Company believes2019, we believe that all filing requirements applicable to itsour officers and Directors during 20162019 and through February 2017,March 2020, were met.
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TheUnitil’s Board and the Companymanagement are committed to comprehensive and effective corporate governance practices. The Board believes that good corporate governance is athe key to theour long-term success, ofand the Company, and essentialfoundation to ensureensuring that Unitilthe Company is operated in the best interest of shareholders and all other stakeholders. Accordingly, the Board has unconditionally adopted Corporate Governance Guidelines and Policies of the Board (the “Guidelines”), as described below, to assist Directors in the pursuit of superior Board function, effectiveness, communication and transparency in the governance of the Company. The Board and the Companymanagement believe that the ethical character, integrity and principles of the Board and senior management remain the most important safeguards of good corporate governance. Our RISE values indicate that solid governance practices are intrinsically woven into our Company culture and critical to long-term value creation and, ultimately, the sustainability of the Company.
The Guidelines represent the current view of the Board of Directors on governance and should not be viewed as rigid restraints. The CompanyWe will continue to monitor new developments and regulations, mandated by the SEC and by the NYSE, as well as emerging issues concerning corporate governance and financial disclosure, and will adopt changes and institute new policies, and procedures as appropriate. TheThese Guidelines are reviewed regularly and are subject to modification from time to time by the Board of Directors.Board. The Guidelines are available for review on the Corporate Governance page of the Investor Relations section of the Company’s website atwww.unitil.com/unitil.com/investors, and are available in print to any shareholder or other interested party free of charge upon request to the Corporate Secretary at1-800-999-6501 or at the address listed in the section entitledInformation about the Annual Meeting.
GOVERNANCE POLICIES OF THE BOARD
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ROLE OF THE BOARD The Board is elected by the shareholders to oversee the long-term health and overall success of | ||
Unitil’s ultimate decision-making body shareholders or committees of the Board. In the pursuit of excellence in corporate governance, all members of the Board are expected to adhere to a set of core |
EXPECTATIONS OF DIRECTORS fulfill fiduciary duties to the Company and its shareholders with proper oversight of the development of Company policy and strategy, and assessment of the Company’s operational effectiveness and financial strength; apply superior business judgment and leadership, and effectively exercise the duties of loyalty and care; avoid any conflict of interest; promote a high standard of personal integrity and adhere to the letter and spirit of Unitil’s Code of Ethics; and challenge management to commit to the highest attainable goals, and hold management accountable for its commitments.
CODE OF ETHICS
The Company’s Code of Ethics (the “Code of Ethics”) is a statement of the Company’s high standards for ethical behavior, legal compliance and financial disclosure, and is applicable to all Directors, officers and employees of the Company and its subsidiaries. The Board unanimously approved the Code of Ethics in 2004, and annually affirms understanding of, and agreement and compliance with, the Code of Ethics. The Nominating and Governance Committee reviews the Code of Ethics annually for any required or desirable revisions. Should the Board adopt any changes to, or waivers of, the Code of Ethics, those changes or waivers will be promptly disclosed and posted on the Company’s website at the address noted below, as required by law, rule or regulation. A copy of the Code of Ethics can be viewed on the Company’s website atwww.unitil.com/investors.
Unitil’sOur Guidelines stipulate that a majority of the members of the Board, and all members of the Audit, Compensation and Nominating and Governance Committees, must be independent (as defined in Section 303A.02 of the NYSE Listed Company Manual—Corporate Governance Standards). As a listed
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company on the NYSE, Unitilwe must adhere to the independence standards set forth by the NYSE, and the Board has formally adopted independence criteria corresponding to the NYSE rules for director independence. The NYSE Listed Company Manual includes additional independence requirements for Audit Committee and Compensation Committee members. In addition, Rule10A-3 of the Securities Exchange Act of 1934 (the “Exchange Act”) includes additional independence requirements for Audit Committee members.
Our Corporate Governance Guidelines, as well as the NYSE independence standards, require that the Board annually affirm the independent status ofnon-employee or “outside” Directors. The Board makes this affirmation annually in January, and based on its last comprehensive review on January 29, 2020, the Board determined at that time, with the exception of Mr. Meissner and Mr. Collin, all of the current Board members are independent.
During its annual independence review and affirmation, the | Affirmed as Independent January 29, 2020 ✓ RobertV. Antonucci ✓ WinfieldS. Brown ✓ DavidP. Brownell ✓ LisaCrutchfield ✓ AlbertH. Elfner, III ✓ SuzanneFoster ✓ EdwardF. Godfrey ✓ MichaelB. Green ✓ EbenS. Moulton ✓ M.Brian O’Shaughnessy ✓ JustineVogel ✓ David A. Whiteley Dr. Antonucci, Mr. Brownell, Mr. Elfner and Mr. O’Shaughnessy will retire from the Board on April 29, 2020, pursuant to the Retirement Policy of the Board. | |||
material changes in their relationships that may affect their independence status as determined by the Board. The obligation encompasses all relationships between Directors and Unitil and its subsidiaries and/or members of senior management. |
During its annual independence review and affirmation, the Board applies the independence standards set forth in the Company’s Guidelines and by the NYSE. Under these requirements, the members of the Board who qualify as independent must be free from any material relationship that would interfere with the exercise of independent judgment as a member of the Board. An independent Director is one for whom the Board has affirmatively determined that he or she, individually or through a member of his or her immediate family, does not have or has not had management responsibility with the Company or otherwise been affiliated with the Company for the past three years and who has no material relationship with the
AFFIRMED AS INDEPENDENT January 25, 2017 Robert V. Antonucci Michael B. Green David P. Brownell Eben S. Moulton Lisa Crutchfield M. Brian O’Shaughnessy Albert H. Elfner, III Sarah P. Voll Edward F. Godfrey David A. Whiteley
Company, either directly or as a partner, shareholder or officer of an organization with such a relationship with the Company. This definition generally leaves the Board the discretion to determine, on acase-by-case basis, what constitutes a “material relationship” with the Company. The Board exercises this discretion in a manner that is consistent with applicable NYSE and SEC regulations and standards. In addition, members of the Board are obligated to notify the full Board of any material changes in their relationships that may affect their independence status as determined by the Board. The obligation encompasses all relationships between Directors and the Company and its subsidiaries and/or members of senior management.
The Board is responsible for the oversight of management, the development of Company policy and strategy, and the business affairsongoing assessment of the Company,Company’s operational effectiveness and financial strength, which includes the oversight of risk. The Board’s ultimate goals are to ensure that Unitil continues as a successful and sustainable business, to optimize financial returns in light of the business risks, to increase shareholder value over time, and to protect the interests of all stakeholders.
The Company has
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We have a formal Enterprise Risk Management (“ERM”) program which is overseen byhas been in place since 2014. The Board has definitive oversight responsibility for the Board. ERM program in accordance with its fiduciary duty. Management provides the Board with a formal report annually, as well as with quarterly status updates, and any other updates as needed, which could include the identification of a new risk, or a change in risk velocity or mitigation strategy. The Board also receives a quarterly presentation on a specific risk topic selected from the ERM program for greater depth of understanding of the selected risk.
The ERM program is a foundation for risk management that is relevant, sustainable and scalable. The ERM program is designed to identify potential risks that may impact the Company,us, and to manage risks within the Company’sour risk appetite in order to sustain operations and achieve business and strategic objectives. In building the ERM program, the potential risks relating to the Company’sour business were defined using a comprehensive set of risk disclosures which are described inPart I, Item 1A. Risk Factors of the Company’sour 2019 Annual Report on Form10-K filed with the SEC on February 2, 2017.January 30, 2020.
The Board has assigned the Executive Committee the responsibility of assistingIn its oversight role, the Board in overseeing the overall risk management strategy of the Company. In order to assist the Board with overall risk management, the Executive Committee is supported by and oversees the Risk Managementand Compliance Committee which is comprised of the senior(the “RCC”), a multi-function management team. Together, these two committeescommittee created to provide recommendations on systems, policies and processes to achieve objectives, mitigate risk and ensure compliance. The RCC works with Mr. Meissner to evaluate and provide direction with respect to risk identification and assessment, and risk management and mitigation, including the specific guidelines and policies governing the process by which risk assessmentprocess. The RCC also works directly with functional managers on emerging risks and risk management are undertakenmitigation plans. The RCC provides quarterly reports on the status of the ERM program to the Board, as well as an annual report at the Company.strategic planning meeting.
Like all companies, Unitil faceswe face a variety of risks, both internal and external, and many factors work simultaneously to affect the Company’sour overall business risk. The Board recognizes that the Company’sour business risk is not static, and that it is not possible to mitigate all risk and uncertainty. The Board works within a climate of respect and candor, fostering a culture of open dialog between Board members and senior management.management, which includes comprehensive knowledge of Unitil’s many elements of risk. Overall, the Board believes that the ERM program has further defined and enhanced a systematic and proactive approach to properly oversee risk management has been defined and enhanced by the ERM program, which will continue to evolve through ongoing review and assessment of the existing and emerging risks facing the Company.
LEADERSHIP STRUCTURE
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The current leadership structure of the Board consists of a combined Chairman/CEO position which has been held by Mr. Schoenberger since 1997. At this time, the Board believes that as asmall-cap domestic
corporation, the combination of these two positions is the optimal structure to guide the Company and maintain the focus required to achieve the Company’s long-term business goals. Mr. Schoenberger is the direct link between senior management and the Board, and as a utility professional with over 35 years of industry experience, he
The current leadership structure of the Board consists of a combined chairman and chief executive officer (“CEO”) position which has been held by Mr. Meissner since April 2018. At this time, the Board believes that as asmall-cap domestic corporation, the combination of these two positions is the optimal structure to guide the Company and maintain the focus required to achieve our long-term strategic goals. The CEO and president is the direct link between senior management and the Board. As a utility professional with over 30 years of industry experience, Mr. Meissner provides critical insight and perception to the Board, as well as valuable feedback to senior management, through his comprehensive understanding of the issues at hand. In July 2019, the Boardre-appointed Mr. Green to serve as the lead independent director (the “Lead Director”) for the coming year. In his role as Lead Director, Mr. Green, who also serves as the chair of both the Audit Committee and the Executive Committee, presides at all meetings of the Board in executive session. The Lead Director Charter outlines the responsibilities and expectations of the Lead Director. The existence and activities of the Lead Director do not alter the traditional roles and responsibilities of the Board as a whole, or Unitil’s management. | Lead Director Responsibilities & Expectations Leadership: Provide leadership and guidance to the Board on the fulfillment of its fiduciary duties, as well as the organization’s mission, vision, corporate governance and strategic direction. Meeting Management: Chair all meetings of the Board in executive session, as well as Board meetings at which the Chairman is not present. Encourage meeting participation, information sharing, and candid discussion with the goal of prudent decision-making and efficient and effective meetings. Relationship Management: Provide independent advice and counsel to the Chairman and CEO with particular emphasis on Board relations and matters of strategic importance; provide a communication conduit between the Board and the Chairman and CEO, as needed or requested. Corporate Governance: Facilitate, with the assistance of the Corporate Secretary, the annual board evaluation on key Board and committee-related matters. Board Culture and Conduct: Promote the continuation of a collegial and mutually respectful Board culture. Intervene, when necessary, in instances involving conflict of interest, confidentially, director performance, and other Board policies. |
The Board also has selected Mr. Elfner as the lead independent Director. In his role as lead Director, Mr. Elfner, who also serves as the chairman of the Executive Committee and as a member ofis engaged in ongoing succession planning, which is led by the Nominating and Governance Committee, presides at all meetings of the Board in executive session. Mr. Elfner also provides leadership and guidance to the Board on the fulfillment of its fiduciary duties, as well as matters of corporate governance. Mr. Elfner facilitates, with the assistance of the Corporate Secretary, results reporting to the Board with regard to the annual board evaluation on key Board and committee-related matters, and promotes the continuation of a collegial and mutually respectful Board culture. The existence and activities of the lead Director do not alter the traditional roles and responsibilities of the Board of Directors as a whole, or the Company’s management. As lead director, Mr. Elfner shall undertake any other action or exercise such other powers, authority, duties, and obligations as necessary or appropriate or as otherwise required by the listing standards of the NYSE or other applicable laws, rules or regulations, or as shall otherwise be determined by the Board.
RETIREMENT POLICY
Committee. The Board has a retirement policy that provides noSuccession Plan addresses upcoming retirements, committee membership and rotation, class balancing, skill set requirements and gaps, and planning for unforeseen events. The Board Succession Plan is also linked to both new director recruitment actions and diversity goals.
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No Director may be nominated as a candidate or for reelection,re-election as part of the slate of Directors proposed for election by the Company,that we propose, nor may any person be nominated as a candidate for Director,election, after he or she has reached age 75. Directors are not, however, subject to specific term limits. Due to the complexity of the utility industry, the Company valueswe value the insight that a Director is able to develop over a period of time. The Board believes that tenure provides an enhanced contribution to the Board, including the benefits of valuable experience and familiarity, which is in the best interest of shareholders.
DIRECTORS’ STOCK OWNERSHIP AND RETENTION POLICY
The Board has a mandatory stock ownership policy that is applicable to all members of the Board. The Board is of the continuing beliefbelieves that its members should own a significant number of shares of the Company’sUnitil common stock to properly align their interests with those of the shareholders of the Company. Effective as of January 1, 2013, allour shareholders. Allnon-employee Directors must own shares of the Company’sUnitil common stock in the equivalent value of three times the current annual cash retainer for Board service. Shares of restricted stock and restricted stock units (“RSUs”) are counted towards this total. The ownership requirement is calculated annually on January 1, and as of January 1, 2017,2020, the ownership requirement wasis currently $195,000 in value. Currently, all Board membersDr. Antonucci, Mr. Brownell, Mr. Collin, Ms. Crutchfield, Mr. Elfner, Mr. Godfrey, Mr. Green, Mr. Moulton, Mr. O’Shaughnessy and Mr. Whiteley meet the stock ownership requirement. Any new Director who may joinjoins the Board in the future will havehas four years from the date of first election to the Board by shareholders to accumulate the required number of shares of common stock.
RESIGNATION POLICY
In October 2016,stock, which currently applies to Mr. Brown, who is standing for election at the Annual Meeting, as well as Ms. Foster and Ms. Vogel, both of whom were elected to the Board adoptedat the 2019 Annual Meeting. Additionally, all members of the Board are required to hold all forms of equity received from the Company until retirement or other separation from the Company. For Board members, this includes all forms of equity received as part of the annual retainer for Board service. The Board, in its sole discretion, may approve a waiver to this policy that requires aas circumstances may warrant. To date, no such waivers have been proposed or approved.
A Director is required to tender his or her resignation if he or she should receivereceives a “withhold” vote greater than 50% of the shares voted at the annual meeting of shareholders in an uncontested election. If an incumbent Director fails to receive the required vote forre-election, the Nominating and Governance Committee will act on an expedited basis to determine whether to recommend the acceptance of the Director’s resignation and will submit such recommendation for prompt consideration by the Board. The Director whose resignation is under consideration shall abstain from participating in any decision regarding that resignation. The Nominating and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a Director’s resignation.
Further, theThe Board shall nominatenominates for election orre-election as Directorto the Board only candidates who agree to tender, promptly following the annual meeting at which they are electedface election orre-electedre-election as Director, irrevocable resignations that will be effective upon (i) the failure to receive the required vote at the annual meeting at which they facere-election and (ii) Board acceptance of such resignation. In addition, the Board will fillfills board seat vacancies and new directorships only with candidates who agree to tender, promptly following their
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appointment to the Board, the same form of resignation tendered by other Directors in accordance with this policy.
ANNUAL EVALUATION
The Board conducts an annual evaluation on key Board- and committee-related issues, an exercise that has been practiced since 2002. The annual evaluation has proven All candidates proposed for election orre-election at the Annual Meeting have agreed in writing to be a beneficial tool in the process of continuous improvement in Board and committee functioning and communication. The evaluation is specifically designed to provide a platform for qualitative expression of thoughts and opinions, as well as a catalyst for candid discussion and open dialog on current and emerging issues facing the utility industry, the Board as a whole, any committee(s) served upon, matters of strategic importance to the Company, as well as self-evaluation with regard to skills and expertise. In 2016, all Directors participated in the annual evaluation, which was conducted in the fourth quarter. Responses were discussed in executive session in January 2017.abide by this policy.
MEETING ATTENDANCE
The Board isDirectors are expected to make a determined effort to attend all meetings of the Board and applicable committees upon which they serve. In 2016,2019, the Board held four meetings, and theits committees held 19 meetings. Overall, Directors attended 99%a total of the36 meetings, held in 2016.collectively. No Director attended less than 75% of the aggregate of the total number of meetings of the Board and applicable committees.
In 2019, the Directors achieved perfect attendance with all Directors attending 100% of the meetings held in 2019. Directors are encouraged to attend the Annual Meeting, although there is no formal requirement to attend. In 2016, all eleven2019, thirteen Directors attended the annual meeting of shareholders.
EXECUTIVE SESSIONS
Non-employee members of the Board have the opportunity to meet in executive session, without members of management present, either prior to the start or following the adjournment of each Board and committee meeting. During 2016,2019, the Board met in executive session on four occasionsoccasions. Mr. Green, the Lead Director, presided at all four meetings.
Our Code of Ethics (the “Code of Ethics”) is a statement of our high standards for ethical behavior, legal compliance and financial disclosure, and is applicable to all of our Directors, officers and employees. The Board unanimously approved the Code of Ethics in 2004, and along with all management personnel, annually affirms understanding of, and agreement and compliance with, the Code of Ethics. The Nominating and Governance Committee reviews the Code of Ethics annually for any required or desirable revisions. Should the Board adopt any changes to, or waivers of, the Code of Ethics, those changes or waivers will be promptly disclosed and posted on our website at the address noted below. To date, there have been no changes to or waivers requested or granted with regard to the Code of Ethics. A copy of the Code of Ethics can be viewed on our website atunitil.com/investors.
MANAGEMENT SUCCESSION PLANNING
Effective executive leadership is critical to our success. The Board oversees the senior management succession planning process to ensure that effective plans are in place for succession of the CEO, as well as other senior management positions. The succession plan addresses contingencies for retirement, resignation, death, disability, or other untimely departure of the CEO and/or other members of senior management for a smooth transition on both an interim and long-term basis. In 2019, the management
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succession plan was evaluated for gaps and other risk factors. As a result of that evaluation, in 2020, the management succession plan will be expanded and developed further to include middle management and other key positions, including long-serving employees nearing retirement.
EXECUTIVE COMPENSATION RECOVERY POLICY
In the event we are required to prepare an accounting restatement of our financial statements due to the material noncompliance with any financial reporting requirement under the securities laws, we shall be entitled to recover any excess performance-based compensation received by any current or former covered executive during the three-year period immediately preceding the date on which we are required to prepare an accounting restatement. To the extent allowed by applicable law and the lead Director, Mr. Elfner, presidedlisting standards of the New York Stock Exchange, we may seek to recover any such excess performance-based compensation at these meetings.the direction of the Compensation Committee after consideration of the costs and benefits of doing so, and as approved by Board.
“Performance-based compensation” includes all annual incentives andlong-term incentives (whether in cash, in equity, or otherwise) with performance features based on Unitil’s or a group’s performance, the award or size of the award of which was contingent upon such performance. The policy does not apply to restatements that the Board determines are required or permitted under generally accepted accounting principles in connection with the adoption or implementation of a new accounting standard or caused by our decision to change one or more accounting practices as permitted by applicable law. |
EXECUTIVE STOCK OWNERSHIP POLICY
Chairman, CEO and President | 4X | All Named Executive Officers are required to own shares of our common stock in the equivalent value of a multiple of base salary. All shares of our common stock that are owned directly | ||||||||
Chief Financial Officer | 3X | |||||||||
All Other Named Executive Officers | 2X |
or beneficially, shares of restricted stock that are awarded, whether vested or unvested, as well any shares of Unitil common stock held in the Tax Deferred Savings and Investment Plan will be counted towards the required total. Any newly appointed Named Executive Officer will have four years from the date of appointment to obtain the required shares of stock. The required equivalent value for all Named Executive Officers will be recalculated annually on January 1. Any executive officer who may regress into a shortfall position as a result of the January 1 recalculation after expiration of the initialphase-in period will have until December 31 of that calendar year to meet the new required equivalent value. All current Named Executive Officers as of the date of this proxy statement have met the ownership requirement.
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EXECUTIVE STOCK RETENTION POLICY
The Board believes that our executive officers should own a significant number of shares of our common stock to properly align their interests with those of the shareholders. All Named Executive Officers are required to hold all forms of equity received as compensationuntil retirement or other separation from the Company. The Board, in its sole discretion, may approve a waiver to this policy as circumstances may warrant. To date, no such waivers have been proposed or approved.
PROBITION ON HEDGING AND/OR PLEDGING COMPANY STOCK POLICY
All members of our Board and our executive officers are prohibited from engaging in short sales or engaging in any hedging transaction with respect to our common stock, as well as engaging in any transactions that result in pledging, or using as collateral, shares of our common stock in order to secure personal loans or other obligations, including any shares that may be a margin account.
COMMUNICATION WITH THE BOARD
Shareholders and other interested parties who desire to communicate with the Board, a committee of the Board, thenon-management or independent Directors as a group, or an individual member of the Board may do so in writing by sending a letter c/o Corporate Secretary, Unitil Corporation, 6 Liberty Lane West, Hampton, New Hampshire 03842-1720 or via email towhitney@unitil.com. The CompanyCorporate Secretary will screen suchall correspondence for security purposes. The Corporate Secretarypurposes, and will also determine whether the communication relates to business matters that are relevant to us. If the Company and, if so,correspondence meets these standards, it will be promptly forward the communicationforwarded to the appropriate Director(s).
NOMINATIONS
The Nominating and Governance Committee is responsible for recommending to the Board the slate of Director nominees for election by our shareholders. The Board reviews and, as appropriate, approves all Director nominees prior to annual proxy material preparation.be presented to our shareholders for election. As provided in Article III of the Company’sour Bylaws, any vacancy occurring in the Board, whether due to the death, resignation or other inability to serve of any Director previously elected may be filled by the affirmative vote of a majority of the remaining Directors. A Director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office.
General Nomination Process
The Nominating and Governance Committee determines the required selection criteria and qualifications of Director nominees based upon the needs of the Company at the time nominees are considered. See also the section entitledCorporate Governance PoliciesQualifications and Skills of the Board — Board DiversityDirectorsbelow. Director candidates will be selected based on input from Directors, Executive Officers,executive officers, and if the Committee deems appropriate, a third-party search firm. Minimum criteria for Director nominees are set forth below, as well as in the Corporate Governance
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Guidelines. A candidate must possess the ability to apply good business judgment and must be in a position to properly exercise his or her duties of loyalty and care. Candidates with potential conflicts of interest or who do not meet independence criteria will be identified and disqualified, as appropriate. In addition, to independence criteria, the Committee will consider criteria including integrity, judgment,independence, proven leadership capabilities, business experience, areas of expertise, availability for service, factors relating to the composition of the Board, such as size, and structure, and also the Company’s policies and principles concerning diversity. The Board seeks to include diversity of backgrounds, perspectives, experience and skills among its members. The Committee will consider these criteria for nominees identified by the Committee, by other Directors, by shareholders, or through another source. When current Board members are considered for nomination for reelection, the Committee also takes into consideration their prior Board contributions, performance, and meeting attendance records.
The Committee conducts a process of makingmakes a preliminary assessment of each proposed nominee based upon thehis or her resume and biographical information, an indication of the individual’shis or her willingness to serve and other background information. This information is evaluated against the criteria set forth above as well as theour specific needs ofat the Company at that time. Based upon a preliminary assessment of the candidate(s), those who appear best suited to meet theour needs of the Company may be invited to participate in a series of interviews, which are used for further evaluation. On the basis of information collected during this process, the Committee determines which nominee(s) to recommend to the Board for approval to submit for election at the next annual meeting of shareholders, or to fill vacancies on the Board that occur between shareholder meetings. The Committee uses the same process for evaluating all nominees, regardless of the source of the nomination. The Board may elect, at its discretion, to participate in an additional round(s) of interviews with one or all candidate(s) recommended by the Committee.
Director Candidate Identification and Selection Process in 2019
As part of the Board’s defined succession planning process, the Nominating and Governance Committee began a comprehensive search for a new Board member inmid-2019 with the primary directives of identifying qualified candidates with a connection to our local communities and service areas, proven senior leadership experience, financial acumen, and gender diversity. The Committee identified a reasonably large group of potential candidates with some or all of the desired characteristics using recommendations from the Board and also from senior management. The Committee reviewed the larger list for conflicts of interest and independence concerns, as well as to gauge the general interest of the potential candidate(s) in a seat on the Board, and based on the results of that exercise, narrowed the list to two candidates.
The Committee instructed Mr. Meissner to initiate contact with both candidates and to conduct preliminary interviews. Mr. Meissner produced a candidate assessment report for each candidate inmid-September for the Committee’s review. The Committee agreed, based on Mr. Meissner’s candidate assessment reports, that both candidates were well qualified by way of their own professional accomplishments, as well as possessed at least three of the four skills and attributes defined as primary directives. Formal interviews with the Committee and Mr. Meissner occurred in late October with both candidates, and a final candidate was identified to be recommended for election to the Board in January 2020.
In January 2020, the Board approved the Committee’s recommendation and elected Mr. Brown to the Board to stand for election by our shareholders at the Annual Meeting. Expanded biographical information for Mr. Brown is included in the section entitledProposal 1: Election of Directors.
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The Board believes the Committee’s dedicated actions and well-planned process produced an outstanding result with the identification and recommendation of a highly qualified candidate with varied and extensive experience in a number of important areas that will enhance and preserve the Board’s existing strong skill set. The Board is dedicated to the importance of diversity in all respects, including professional experience and unique skill sets, age, and gender for sustainability in the long-term and ongoing value creation for our shareholders.
Shareholder Nominations
Shareholders who wish to recommend a nominee for consideration by the Committee may do so by sending the following information to the Committee c/o the Corporate Secretary at the address listed in the section entitledCorporate Governance – Governance Policies of the Board—Communication with the Board: (1) the name of the candidate with brief biographical information and his or her resume; (2) contact information for the candidate and a document evidencing the candidate’s willingness to serve as a Director if elected; and (3) a signed statement as to the submitting shareholder’s current status as a shareholder and proof of ownership of the number of shares currently held.
Additionally, nominations of persons for election to the Board may be made by any shareholder of the Company by submitting a nomination in compliance with all procedures set forth in Article IV –Nomination of Directors of the Company’s
Additionally, nominations of persons for election to the Board may be made by any of our shareholders by submitting a nomination in compliance with all procedures set forth in Article IV –Nomination of Directors of our Bylaws. No candidates for Director nominees were submitted to the Committee by any shareholder in connection with the Annual Meeting. Our shareholders are entitled to certain rights by law as well as those granted in our Bylaws and Articles of Incorporation. | Shareholder Rights We do not have classes of stock with unequal voting rights. All shareholders are entitled to vote for all current director nominees. We do not have a poison pill in effect. No shareholder has a preemptive right. The Board is authorized to issue only shares of common stock, no par value; no preferred stock is authorized. Our Articles of Incorporation and ourby-laws may be amended by shareholders with a simple majority vote. Shareholder approval is required to materially modify our capital structure. |
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The Board believes there are general qualifications that all Directors must exhibit, and other qualifications, attributes, skills and experience that should be represented on the Board as a whole, but not necessarily by each Director.
Qualifications Required of All Directors
The Board requires that each Director be a person of high integrity and superior ethical character with a proven record of leadership and accomplishment in his or her chosen field. Each Director must demonstrate innovative and independent thinking, understand complex principles of business, finance, and utility regulation, and demonstrate familiarity with and respect for corporate governance requirements and practices. Directors must also comply unequivocally with the Code of Ethics, and be free of conflicts or potential conflicts of interest, and other than Mr. Schoenberger,a sufficient number of Directors must meet the requirements of independence as set forth by the NYSE, as appropriate. Directors must be willing and able to dedicate the proper amount of time and effort to service on the Board as necessary to fulfill his or her responsibilities to the Company,as a Director, and must not serve on more than two public company boards if currently holding a position of chief executive officer or an equivalent position, or on more than three public company boards if serving in an alternate role, or if retired.
Qualifications, Attributes, Skills and Experience to be Represented on the Board
The Board has identified particularcertain qualifications, attributes, skills, experience and experiencebackground that it believes are important to be represented on the Board as a whole.Board. The Nominating and Governance Committee is charged with the responsibility of tracking the Directors’ professional experience and skill sets with a board inventory matrix (the “Skills Matrix”). The Skills Matrix lists each Director and his or her professional experience and skill sets in categories considered by the Board and the Committee to be advantageous to the regulated utility business, as well as for a company of Unitil’s size and complexity. The Committee uses this information to assess overall Board composition and to identify existing and potential gaps in the skill sets of Directors. This information is also used for recruiting purposes when there is a vacancy, or an expected vacancy, on the Board. The Skills Matrix has proven to be a valuable tool in this assessment exercise. The Board strives to represent a meaningful cross-section of business and industry experience, education, and specialized skill sets with a group of diverse individuals who add the element of quality to the Company’s corporate governance framework, and who fairly and without compromise execute their fiduciary duty to serve the best interests of Unitil’s shareholders and all of the Company’s stakeholders.
responsibility of tracking the Directors’ professional experience and skill sets with a board inventory matrix (the “Skills Matrix”). The Skills Matrix | ||
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The Skills Matrix Summary outlines certain essential key qualifications and experience that the Board believes should be represented on the Board for optimal oversight of our business and the effective exercise of its fiduciary duty to shareholders. Directors standing for reelection are also evaluated by the Committee for recommendation to the Board using a set procedure based on the expectations of Board members, which is provided to all members of the Board and reviewed annually. The evaluation includes contribution to the Board and committees served upon; unique skills, expertise and attributes; attendance and preparedness; and willingness to continue serving. Overall continuity and chemistry of the Board are also considerations, as well as factors relating to the composition of the Board, such as size and structure, and also the diversity of backgrounds, perspectives, experience and skills among its members. Lengthy tenureTenure on the Board is considered to be a uniquely valuable qualification in the highly regulated utility industry.
In July 2019, the Nominating and Governance Committee conducted an exercise with the full Board to review and update the Skills Matrix. The exercise involved a self-evaluation by each Board member concerning what they perceive to be their own primary and secondary skills within the Skills Matrix. The findings of the exercise were evaluated and discussed by the Committee, and as a result, several new skills were added to the Skills Matrix. The exercise also defined the Board’s strongest skills sets asC-Suite experience, financial expertise, strategic planning, and utility operations and regulation.
Although the Board does not have a formal diversity policy, it does seek to maintain optimum Board heterogeneity through an appropriate balance of diversity of backgrounds, perspectives, tenure, professional experience and skills among its members. The Board believes that a variety of points of view and experiences contributes to a more effective decision-making process, and considers diversity of gender, age, competencies, and professional experience in the evaluation of all candidates for Board membership. The Board also considers how the experience and skill set of each Director nominee complements those of existing Directors and fellow Director nominees to create a balanced Board with diverse viewpoints and deep expertise.
Although the Board does not have a formal diversity policy, it believes that diversity, including gender diversity, is essential for a well-functioning board, the creation of shareholder value, and ultimately, the sustainability of Unitil over the long term. The Board seeks to maintain optimum Board heterogeneity | ||
through an appropriate balance of diversity of backgrounds, perspectives, tenure, professional experience and skills among its members. The Board feels strongly that a variety of points of view and experiences contribute to a more effective decision-making process, and considers diversity of gender, age, competencies, and professional | ||
experience in the evaluation of all candidates for Board membership. The Board also considers how the experience and skill set of this year’s new Director nominee complements those of existing Directors and fellow Director nominees to create a balanced Board with diverse viewpoints and deep expertise. The Board’s expected diversity profile following the Annual Meeting is illustrated above. |
Skills Matrix Summary Utility Operations CEO/Senior Leadership Experience High Level Financial Aptitude Utility Regulation Regional Knowledge/Expertise Public Policy
TRANSACTIONS WITH RELATED PERSONS
The Audit Committee is responsible for reviewing and approving, as appropriate, all Related Person Transactions (as defined below), in accordance with its charter (the “Audit Committee Charter”). As a result, the Audit Committee has adopted procedures for such review and approval and included such procedures in the Company’s our
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Corporate Governance Guidelines. The CompanyUnitil had no Related Person Transactions in 2016,2019, and there are no Related Person Transactions currently proposed for 2017.2020. A “Related Person Transaction” means any transaction for which disclosure is required under the terms of Item 404(a) of SEC RegulationS-K involving the Company and any Related Person. A “Related Person” is defined in Item 404(a) of SEC RegulationS-K.
Transactions between the CompanyUnitil or one or more of its subsidiaries and one or more Related Persons (as defined below) may present risks or conflicts of interest or the appearance of conflicts of interest. The Company’sOur Code of Ethics generally requires all employees, officers and Directors without exception, to avoid engagement in activities or relationships that conflict, or would be perceived to conflict, with the Company’sour interests or adversely affect itsour reputation. It is understood, however, that certain relationships or transactions may arise that would be deemed acceptable and appropriate upon full disclosure of the transaction, following review and approval to ensure there is a legitimate business reason for the transaction and that the terms of the transaction are no less favorable to the Companyus than could be obtained from an unrelated person.
RELATED PERSON TRANSACTIONS Review & Approval Procedure Requirements
◾ all Related Person Transactions and all material terms of the transactions shall be communicated to the Audit Committee for evaluation, including, but not limited to the approximate dollar value of the amount involved in the transaction, and all material facts as to the Related Person’s direct or indirect interest in, or relationship to, the Related Person Transaction ◾ each Related Person Transaction, and any material amendment or modification to any Related Person Transaction, must be reviewed and approved or ratified by the Audit Committee | RELATED PERSON TRANSACTIONS Basis for Audit Committee Evaluation of Transactions ◾ information provided by members of the Board during the required annual affirmation of independence, at which the members of the Audit Committee will be present ◾ applicable responses on Directors’ and Officers’ Questionnaires submitted by Directors and officers and provided to the Audit Committee by the Corporate Secretary or Internal Auditor ◾ background information on nominees for Director provided by the Nominating and Governance Committee ◾ any other applicable information provided by any Director or officer of the Company |
In connection with the review and approval or ratification, if appropriate, of any Related Person Transaction, the Audit Committee will consider whether the transaction will compromise the Company’sour professional standards included in its Code of Ethics. In the case of any Related Person Transaction involving an outside Director or nominee for Director, the Audit Committee will also consider whether the transaction
RELATED PERSON TRANSACTIONS Review & Approval Procedure Requirements all Related Person Transactions and all material terms of the transactions shall be communicated to the Audit Committee for evaluation, including, but not limited to, the approximate dollar value of the amount involved in the transaction, and all material facts as to the Related Person’s direct or indirect interest in, or relationship to, the Related Person Transaction each Related Person Transaction, and any material amendment or modification to any Related Person Transaction, be reviewed and approved or ratified by the Audit Committee RELATED PERSON TRANSACTIONS Basis for Audit Committee Evaluation of on Transactions information provided by members of the Board during the required annual affirmation of independence, at which the members of the Audit Committee will be present applicable responses on Directors’ and Officers’ Questionnaires submitted by Directors and officers and provided to the Audit Committee by the Corporate Secretary or Internal Auditor background information on nominees for Director provided by the Nominating and Governance Committee any other applicable information provided by any Director or officer of the Company
will compromise the Director’s status as an independent Director as prescribed in the NYSE Listed Company Manual, Section 303A, Independent Directors. The procedures followed by the Audit Committee to evaluate transactions with Related Persons are also available in the Corporate Governance portion of the Investor Relations section of the Company’sour website atwww.unitil.com/unitil.com/investors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The subsection entitledSection 16(a) Beneficial Ownership Reporting Compliance within theShare Ownership section of this proxy statement is incorporated herein by reference.
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A sustainable future requires engagement at all levels in order to ensure long-term value creation benefiting our customers, employees, investors and all stakeholders. Sustainability refers to our ability to achieve our mission and create value over the long term. It also refers to our ability to anticipate the need for change and to embrace new technology in order to meet the evolving expectations of our customers and investors. Embedding sustainability into our business strategies and using it as a lens to guide the direction of the Company is essential to achieving our long term operational and financial goals within a changing environmental and social landscape. We believe continued focus on our mission, vision, values and goals, and managing the critical success factors outlined in our strategic plan will ensure ongoing profitability and long-lasting growth for the benefit of our customers, employees, investors, and all stakeholders. |
Our Approach to Sustainability
Our approach to corporate sustainability reflects a broad set of objectives including superior customer service, affordable rates, service to our communities, environmental stewardship, a steadfast commitment to safety, and the growth and well-being of our employees. We integrate our RISE values (Respect, Integrity, Stewardship and Excellence) into our strategic planning process. Our values state clearly that sustainability initiatives are fundamental to and firmly rooted in our culture. Thistop-to-bottom emphasis on the very nature of sustainability assures long term benefits and value creation, and reflects our commitment to our corporate responsibilities to our investors, employees, customers, and society at large.
Sustainability Practices and Priorities
As part of our strategic planning process, we defined four key areas that we believe will be central to all utilities as the transition to a sustainable future continues. By looking closely at each of these areas, we’ve identified practices and priorities that demonstrate our commitment to sustainability in support of our stakeholders while simultaneously showcasing our corporate culture in action.
CUSTOMER ENGAGEMENT AND COMMUNITIES We have a responsibility to put the customer first and to be a vital part of the communities where we operate. Priorities in this area include superior customer service, community relations and charitable giving, energy affordability for our customers, and economic development in the communities we serve. Superior customer service is also tied directly to one of the metrics we measure for our Incentive Plan. | ||
SAFETY AND RELIABILITY Safety is in our DNA; we work to make sure we deliver safe and reliable service to our customers. Priorities in this area include system reliability and resiliency, integrity of gas delivery infrastructure, emergency preparedness, and data privacy and cyber security. System reliability is also tied directly to one of the metrics we measure for our Incentive Plan. |
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PEOPLE We fully recognize that the people who make up our workforce are what makes us special. Finding and retaining quality, highly motivated employees assures that our culture continues to thrive and our mission is successful. Priorities in this area include workplace safety, a sustainable workplace, employee development and engagement, and diversity and inclusion. | ||
ENERGY & THE ENVIRONMENT We believe that proactive energy resource planning with an emphasis toward lowering greenhouse gas emissions will be a central philosophy and a critical element in a sustainable future. Priorities in this area include facilitation of distributed energy resources and storage alternatives, support of utility-scale renewables and lower emissions, end use efficiency and demand, and environmental stewardship. |
Sustainability and Strategic Planning
We believe that ensuring the core elements of our business, including safety, reliability andtop-tier customer service, remain sustainable is an important focus. Our industry is evolving, and our strategic plan is designed to help us position ourselves as part of the solution to long term policy goals for our region.
As a central element of our strategic planning process, we have looked at the landscape of the energy industry, our role in that space today, and what we see as our role going forward into the future. As a result, we have identified key areas of focus within both our mission and vision. By setting and achieving milestones in each Mission focus area while also creating new initiatives closely aligned with our Vision, we believe that we will be ideally positioned to succeed today and thrive for years to come.
Mission Focus
Our mission is to safely and reliably deliver energy for life and provide our customers with affordable and sustainable energy solutions. In our 2020 Strategic Plan, we identified six key areas of focus that we believe drive our mission forward on a daily basis. Four out of the six are tied directly to our sustainability priorities and are central to our pursuit of a sustainable future.
Strategic Focus: Customer Engagement Safety & Reliability Energy Supply People Regulation Growth | Sustainability Priorities: Customer Engagement Safety & Reliability Energy Supply People |
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Vision Focus
Our vision is to transform the way people meet their evolving energy needs to create a clean and sustainable future. We see three key areas of focus within this vision statement, each of which represents avenues we must fully explore as we work to achieve the vision. Those focus areas include transformative customer solutions, evolving energy systems, and a clean energy future. Together, we believe concentration on these areas will help ensure our ability to achieve the mission and continue to create value on a long term basis for all stakeholders. We believe aSustainable Future for the company will be made possible by the initiatives we pursue within the context of all of our sustainability priorities, ultimately creating smarter energy solutions for all. |
Corporate Sustainability and Responsibility Report
In March 2019, we issued our Inaugural Corporate Sustainability and Responsibility Report in which we share our vision for sustainability as well as the values that are ingrained in all of our business practices. This report can be viewed in its entirety on our websiteunitil.com/company/sustainability. We anticipate issuing our 2020 Corporate Sustainability and Responsibility Report in October 2020, which will detail our internal efforts and progress made in 2019 in support of our sustainability initiatives and priorities. |
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The Board has the following standing committees: Audit Committee; Compensation Committee; Executive Committee; and Nominating and Governance Committee. The tables below provide a summary of each committee with respect to membership and primary responsibilities.
Audit Committee
Committee Members | Robert V. Antonucci | Edward F. Godfrey | Michael B. Green◆ | David A. Whiteley | Robert V. Antonucci | Edward F. Godfrey | Michael B. Green | Justine Vogel | David A. Whiteley | |||||||||
Independent | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | |||||||||
Financial Expert | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | |||||||||||
Meetings in 2016 | 4 | 4 | 4 | 4 | ||||||||||||||
Meetings in 2019 | 6 | 6 | 6 | 6 | 6 | |||||||||||||
Latest Charter Review | October 18, 2016 | October 22, 2019 | ||||||||||||||||
Primary Charter Directives | To provide independent and objective oversight of the Company’s accounting functions, internal controls and financial reporting | To provide independent and objective oversight of the Company’s accounting functions, internal controls and financial reporting | ||||||||||||||||
Appointment, compensation and oversight of the work of the Company’s independent registered public accounting firm | ||||||||||||||||||
Committee Chair |
Committee Chair |
Committee Chair◆
The Audit Committee is a separately-designated standing audit committee established in accordance with section 3(a)(58)(A) of the Exchange Act. Each member of the Audit Committee is financially literate, knowledgeable and qualified to review financial statements. The Audit Committee operates under a written charter, which it reviews annually, and adopts amendments, if necessary, to reflect changes governing financial reporting and accounting requirements or its responsibilities. The Audit Committee Report, which appears in the section entitledAudit Matters, more fully describes the activities and responsibilities of the Committee.
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Compensation Committee
Committee Members | David P. Brownell | Lisa Crutchfield | Eben S. Moulton◆ | Sarah P. Voll | Robert V. Antonucci | David P. Brownell | Lisa Crutchfield | Suzanne Foster | Eben S. Moulton | |||||||||
Independent | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | |||||||||
Meetings in 2016 | 7 | 7 | 7 | 7 | ||||||||||||||
Meetings in 2019 | 5 | 5 | 5 | 5 | 5 | |||||||||||||
Latest Charter Review | October 19, 2016 | October 23, 2019 | ||||||||||||||||
Primary Charter Directives | To establish objectives and interpret the terms of the Company’s compensation policies for base salary, incentive compensation, equity compensation, and benefits programs | To establish objectives and interpret the terms of the Company’s compensation policies for base salary, incentive compensation, equity compensation, and benefits programs | ||||||||||||||||
Annual Review of CEO performance (jointly with the Executive Committee) | Annual Review of CEO performance (jointly with the Executive Committee) | |||||||||||||||||
Approval of executive-level base salaries and approval and recommendation to the Board of base salaries for Named Executive Officers | Approval of executive-level base salaries and approval and recommendation to the Board of base salaries for Named Executive Officers | |||||||||||||||||
Administration of merit, incentive, and commission compensation plans for all appropriate personnel | Administration of merit and incentive compensation plans for all appropriate personnel | |||||||||||||||||
Review and approval of annual performance measures and approval of annual incentive compensation plan awards | Review and approval of annual performance measures and approval of annual incentive compensation plan awards | |||||||||||||||||
Committee Chair |
Committee Chair |
Committee Chair◆
NOTES:
The Compensation Committee operates under a written charter, which it reviews annually and, as appropriate, amends to reflect changes in its responsibilities. The specific activities and responsibilities of the Compensation Committee are described in greater detail in the section entitled Compensation Committee Operations.
Executive Committee
Committee Members | Albert H. Elfner, III ◆ | Edward F. Godfrey | Eben S. Moulton | M. Brian O’Shaughnessy | Robert G. Schoenberger | |||||
Independent | ∎ | ∎ | ∎ | ∎ | ||||||
Meetings in 2016 | 4 | 4 | 4 | 4 | 4 | |||||
Latest Charter Review | October 19, 2016 | |||||||||
Primary Charter Directives | To act on behalf of the Board when necessary between scheduled Board meetings | |||||||||
To assess key business risks and implement appropriate risk management policies, practices and plans to mitigate such risks to the Company | ||||||||||
Annual Review of CEO performance (jointly with the Compensation Committee) |
Committee Chair◆
Committee Members
| Lisa Crutchfield | Edward F. Godfrey | Michael B. Green | Thomas P. Meissner, Jr. | David A. Whiteley | |||||
Independent | ∎ | ∎ | ∎ | ∎ | ||||||
Meetings in 2019 | 1 | 1 | 1 | 1 | 1 | |||||
Latest Charter Review | January 28, 2020 | |||||||||
Primary Charter Directives | To act on behalf of the Board when necessary between scheduled Board meetings | |||||||||
Annual Review of CEO performance (jointly with the Compensation Committee) | ||||||||||
Committee Chair |
The Executive Committee operates under a written charter, which it reviews annually and, as appropriate, amends to reflect changes in its responsibilities.
Committee membership includes the Chairman of the Board, the lead director, and the chairs of the Audit, Compensation, and Nominating and Governance Committees of the Board, as well as any additional Board members appointed at the discretion of the Board.29
Nominating & Governance Committee
Committee Members | David P. Brownell◆ | Albert H. Elfner, III | M. Brian O’Shaughnessy | David A. Whiteley | David P. Brownell | Lisa Crutchfield | Albert H. Elfner, III | Michael B. Green | M. Brian O’Shaughnessy | David A. Whiteley | ||||||||||
Independent | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ∎ | ||||||||||
Meetings in 2016 | 4 | 4 | 4 | 4 | ||||||||||||||||
Meetings in 2019 | 4 | 4 | 4 | 2 | 4 | 4 | ||||||||||||||
Latest Charter Review | October 19, 2016 | October 22, 2019 | ||||||||||||||||||
Primary Charter Directives | The review and oversight of corporate governance standards | The review and oversight of corporate governance standards | ||||||||||||||||||
To coordinate suggestions or searches for potential nominees for Board members and to review and evaluate qualifications of potential Board members | To coordinate searches for potential nominees for Board members, review and evaluate qualifications of potential Board members, and recommend to the Board nominees for vacancies occurring from time to time on the Board | |||||||||||||||||||
To recommend to the Board nominees for vacancies occurring from time to time on the Board | To recommend committee membership for Board approval | |||||||||||||||||||
To review Board member performance prior to recommendation for nomination to stand for election to an additional term | To review Board member performance prior to recommendation for nomination to stand for election to an additional term | |||||||||||||||||||
The annual review and evaluation of Directors’ compensation and recommendation of any changes to the Board | The annual review and evaluation of Directors’ compensation and recommendation of any changes to the Board | |||||||||||||||||||
Committee Chair |
Committee Chair |
Committee Chair◆
NOTES:
(1) | Mr. Green joined the Nominating and Governance Committee in July 2019. |
The Nominating and Governance Committee operates under a written charter, which it reviews annually and, as appropriate, amends to reflect changes in its responsibilities.
All Committees
The existence and activities of all committees of the Board do not alter the traditional roles and responsibilities of the Company’sUnitil’s management. All committees may delegate authority to individuals or subcommittees when it deems appropriate.they deem appropriate, subject to applicable laws, rules or regulations. However, in delegating authority, a committee shall not be absolved from the responsibilities designated under the terms of its respective charter. All committees shall undertake any other action or exercise such other powers, authority, duties and responsibilities as necessary or appropriate to the discharge of the duties and responsibilities set forth in its chartertheir respective charters or the Company’sour Bylaws, or otherwise required by the listing standards of the NYSE or other applicable laws, rules or regulations, or as shall otherwise be determined by or assigned by the Board.
The charters for each of the standing committees are available in the Corporate Governance portionsection of the Investor Relations section of the Company’sour website atwww.unitil.com/unitil.com/investors, or in print to any shareholder or other interested party, free of charge upon request to the Office of the Secretary, Unitil Corporation, 6 Liberty Lane West, Hampton, NH 03842-1720; or toInvestorRelations@unitil.com; or by calling toll free800-999-6501.
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The following report is submitted by the Audit Committee of Unitil Corporation with respect to the Company’sUnitil’s audited financial statements for the fiscal year ended December 31, 2016.2019.
In discharging its oversight responsibility regarding the audit process, the Audit Committee has discussed with Deloitte & Touche LLP (“Deloitte”), the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2016,2019, the matters required to be discussed by the statement on Auditing StandardStandards No. 1301.61, as amended (AICPA, Professional Standards, Volume 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Committee has received the written disclosures and the letter from Deloitte required by applicable requirements of the PCAOBPublic Company Accounting Oversight Board regarding Deloitte’s communications with the Committee concerning independence and has discussed with Deloitte the firm’s independence with respect to the Company.Unitil.
During 2016,2019, the Audit Committee members received the Company’sUnitil’s quarterly financial information for review and comment prior to the filing of each of the Company’sUnitil’s Forms10-Q with the SEC. In fulfilling its responsibilities relating to the financial statements, the Committee also reviewed and discussed the Company’sUnitil’s significant accounting policies and the audited financial statements of the Company for the fiscal year ended December 31, 20162019, with management and Deloitte. Based on the review and discussions with management and Deloitte, the Committee recommended to the Board that the audited financial statements be included in the Company’sUnitil’s Annual Report on Form10-K for the fiscal year ended December 31, 2016,2019, for filing with the SEC.
Audit Committee Members
Dr. Robert V. Antonucci, Edward F. Godfrey, Michael B. Green (chairman)(chair), Justine Vogel and David A. Whiteley
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PRINCIPAL ACCOUNTANT FEES & SERVICES
The following table presents fees for professional services rendered by Deloitte, the Company’sUnitil’s independent registered public accounting firm, for the fiscal years ended December 31, 20162019 and 2015.2018.
Fiscal 2019 |
Fiscal 2018 | |||||||
Audit Fees | $ | 1,060,000 | $ | 793,000 | ||||
Audit-Related Fees | $ | 30,000 | $ | 0 | ||||
Tax Fees | $ | 0 | $ | 0 | ||||
All Other Fees | $ | 0 | $ | 0 | ||||
Total Fees
| $
| 1,090,000
|
| $
| 793,000
|
|
Audit Fees
In 20162019 and 2015,2018, this category includes fees incurred for professional services rendered by Deloitte for reviewing the quarterly financial statements included in the Company’sour Quarterly Reports on Form10-Q, auditing the Company’sour annual financial statements included in the Company’sour Annual Report on Form10-K, and auditing the Company’sour internal control over financial reporting.
Audit-Related Fees
In 20162019, this category includes fees incurred of approximately $30,000 for professional services rendered by Deloitte in connection with a registration statement we filed with the Securities and 2015,Exchange Commission. In 2018, Deloitte did not perform any audit-related services.
Tax Fees
In 20162019 and 2015,2018, Deloitte did not perform any tax services.
All Other Fees
In 20162019 and 2015,2018, Deloitte did not perform any services that are not included in the above categories.
AUDIT COMMITTEEPRE-APPROVAL POLICY
The Audit Committee has adopted a formal policy concerning approval of audit andnon-audit services to be provided by the independent registered public accounting firm engaged to audit the Company’sour consolidated financial statements. The policy requires that all services to be provided by the independent registered public accounting firm, including audit services and permitted audit-related andnon-audit services, must bepre-approved by the Committee. The Committeepre-approved all audit, audit-related, tax and all other services provided by Deloitte during fiscal 20162019 and 2015.
Fiscal 2016 Fiscal 2015 Audit Fees $692,000 $668,500 Audit-Related Fees $0 $0 Tax Fees $0 $0 All Other Fees $0 $0 Total Fees $692,000 $668,500
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COMPENSATION COMMITTEE OPERATIONS
The Compensation Committee is appointed annually by the Board and is responsible for oversight of the executive compensation program. The Committee has overall authority to establish goals and objectives and to interpret the terms of the Company’sour compensation policies, including base salary, incentive compensation, equity compensation, sales commissions, and benefits programs. The Committee discharges its oversight responsibilities by carrying out the specific functions outlined in its charter (the “Compensation Committee Charter”). See the section entitledCompensation - Compensation of Named Executive Officers - Compensation of Directorsfor information on the Nominating and Governance Committee’s work regarding Directors’ compensation.
The Committee has the authority to delegate some of its responsibilities to individuals or subcommittees of the Committee’s choice.choice, subject to applicable laws, rules or regulations. However, such delegation does not, and will not absolve the Committee from the responsibilities that it bears under the terms of the Compensation Committee Charter.
The Committee has the authority to invite Executive Officers,executive officers, members of management or other guests to attend its meetings, to perform research, or to provide relevant information or recommendations. AtIn 2019, at the Committee’s request, Mr. Schoenbergerthe CEO and Mr. Long servethe Vice President of People, Shared Services and Organizational Effectiveness served the Committee in a consultative capacity, providing data and analytical support, as well as management perspective and recommendations relative to employee compensation and benefits, including executive compensation. Mr. Long is excluded from deliberations and decisions regarding Executive Officer compensation. Mr. Schoenberger participates in the discussions and decisions regarding salaries and incentive compensation for the Executive Officers of the Company reporting directly to him. Mr. Schoenberger is excluded from deliberations and decisions regarding his own salary and incentive compensation.
The Committee also has the authority to retain or obtain the advice of outside counsel, compensation consultants or other advisors to advise the Committee as it deems appropriate or necessary in its sole discretion.necessary. The Committee is directly responsible for the appointment, retention terms (including compensation), and oversight of the work of any adviser it retains. Prior to retaining or obtaining advice from an adviser, the Committee will consider factors relevant to the adviser’s independence from management to the extent required by the NYSE listing standards.
Since 2009, theThe Committee has regularlyperiodically engaged a compensation consultant, Willis Towers Watson (“Willis Towers”), to provide the Committee with compensation study data, including data from selected peer companies and compensation marketplace survey analysis, as well as to provide various recommendations based on study findings and industry trends for the Committee’s consideration. Willis Towers is engaged by and reports directly to the Compensation Committee. Willis Towers receives compensation only for services related to executive compensation, employee benefits and general compensation issues,matters, and neither it nor any affiliated company provides any other services to the Company.us or our subsidiaries.
In 2014,March 2019, the Compensation Committee engaged Willis Towers to prepareconduct a comprehensive review and assessment of senior management compensation, analysisincluding the CEO and CFO compensation,non-union employee compensation, employee benefits, and directors’ compensation, (the “2014“2019 Compensation Analysis”), which included. The Committee requested Willis Towers to provide an in depth studyassessment of chief executive officercurrent levels of
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competitive compensation salary survey data and broad-based benefit programs to assist the Committee with its decisions concerning 2020 compensation. See the section entitledCompensation - Compensation Discussion and Analysisfor comparable industry executives and middle management, and benefits. The Compensation Committee usedadditional information on the information in the 20142019 Compensation Analysis for decisions concerning executive compensationand the Committee’s work in 2019 regarding compensation-related matters for the 20152020 compensation year.
In 2015,2019, we incurred total expenses of $144,097 for services rendered by Willis Towers. The services were approved by the Compensation Committee again engagedas part of the Willis Towers 2019 engagement.
In addition, we requested and received information from Willis Towers to assess the competitiveness of the compensation of the Named Executive Officers (the “2015 Assessment”) using the 2014 Compensation Analysis as a foundation with updated information from published compensation surveys, including base salary, total cash compensation (base plus annual incentives), and total direct compensation (base plus annual incentives plus long-term incentives). The Committee used the information from the 2015 Assessment as a reference point, or benchmark, upon which to base its compensation decisions for Named Executive Officers, including the CEO, for the 2016 compensation year.
The 2014 Compensation Analysis and the 2015 Assessment as well as the Committee’s use of the 2014 Compensation Analysis and 2015 Assessment are described in greater detail in the section entitledCompensation Discussion and Analysis.
In 2016, in order to prudently manage outside consulting expenses,assist the Committee decided to forego a yearin determining whether its work raised any conflict of special consulting work related to executive compensation, and to instead simply utilizeinterest. Based on the existing compensation programs which were previously found to be reasonable and competitive in design and operation. The Committee decided to next engageresponses provided by Willis Towers in a reviewits completed Conflict of executive compensation during 2017.Interest Questionnaire, there were no conflicts of interest in 2019.
COMPENSATION COMMITTEE INTERLOCKS & INSIDER PARTICIPATION
The current members of the Compensation Committee are not current or former officers or employees of the Company.Unitil. No member of the Committee has any relationship requiring disclosure under Item 404 ofRegulationS-K, Transactions with Related Persons. In addition, no Executive Officernone of the Company servesour executive officers serve on the board of directors or compensation committee of another company where an executive officer of the other company also serves on the Board or Compensation Committee.
RISK AND BROAD-BASED COMPENSATION PROGRAMS
After review and evaluation of the Company’sour compensation policies and practices, including the annual incentive award performance metrics, variable andnon-variable pay mix, and limitednon-performance payouts, the Compensation Committee determined, and management agreed, that the risks arising from the Company’sour compensation policies and practices are not likely to have a material adverse effect on the Companyus because (a) the Company’sour compensation program is designed with performance metrics sufficiently difficult to be balanced and not motivate management to strive for strong performance without encouraging imprudent or excessive risk-taking by Executive Officersexecutive officers or other employees, (b) the Company doeswe do not use incentives that encourage short-term, high-risk strategies at the expense of long-term performance and value, (c) the Compensation Committee has significant discretion in its determination of incentive
compensation awards, (d) the Compensation Committee considers distinct quantitative factors with regard to incentive compensation, (e) the Compensation Committee considers qualitative factors, such as the difficulty of achieving goals and challenges faced during the year, to encourage employees and Executive Officersexecutive officers to consider and balance all aspects of the Company’sour Strategic Plan, both short- and long-term, and (f) the variable andnon-variable pay mix is proportionally weighted for Executive Officersexecutive officers and all employees.
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COMPENSATION DISCUSSION AND ANALYSIS
Introduction2019 HIGHLIGHTS
In 2016, the Company2019, we continued to show strong operating and financial results, which have translated into greater returns for our shareholders. Selected highlights of 20162019 are outlined below.
We experienced another successful year in 2019, with record earnings continuing a string of improving performance and growth. Net income grew to
| (1) Unitil data provided by the Edison Electric Institute. S&P 500 and S&P 500 Utility Index data provided by Standard & Poor’s. | |
The chart above shows how a $100 investment in the Company’s |
For the five-year period ended December 31, 2016, Unitil’s total shareholder return (“TSR”) was 98%, a return that outperformed the Company’s peer group at 64% over the same period. Of the 44 investor-owned utilities that appear in the Edison Electric Institute’s Utility Index, Unitil’s TSR is in the top 10 for theone-year period ended December 31, 2016.
Unitil’s annual common stock dividend of $1.42 per share in 2016 provided a dividend yield of approximately 3.1%, based on the closing stock price of $45.34 per share on December 30, 2016. Unitil has paid an annual common stock dividend every year since trading on the open market began in 1984. In addition, on January 25, 2017, the Board of Directors voted to increase the annual dividend to $1.44 per share.
Comparative Five-Year Cumulative Total Returns (1) (1) Unitil data provided by the Edison Electric Institute. S&P 500 S&P 500 Utility Index data provided by standard & Poor’s. The chart above shows how a $100 investment in the Company’s Common Stock on December 31, 2011 would have grown to $198 on December 31, 2016,$197 on December 31, 2019, with dividends reinvested quarterly. The chart also compares the total shareholder return on the Company’s common stock to the same investment in the S&P 500 Index and the Company’s peer group, defined as the S&P Utility Index, over the same period, with dividends reinvested quarterly.
In 2019, we realized the seventh consecutive year of increased earnings and successfully met strategic and
operational goals. Our positive financial results are largely driven by continued electric and natural gas customer and sales growth, favorable impacts of weather, a successful regulatory agenda, and the region’s strong and growing economy.
In addition to strong financial results, our continued focus on superior customer service and operational performance will ensure the safe and reliable delivery of natural gas and electricity. Our service areas continue to benefit from robust growth with over $7.8 billion of new construction planned or underway, which indicates significant growth opportunities in the years ahead.
For the five-year period ended December 31, 2019, our total shareholder return was 97%, a return that outperformed our S&P Utilities Index peer group at 63% over the same period. In November 2019 we were
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recognized as the top performing company among small cap utilities in the EEI (Edison Electric Institute) Index, based on total shareholder return rankings among EEI Index companies for the five year period ending September 30, 2019.
Our annualized common stock dividend of $1.48 per share in 2019 provided a dividend yield of approximately 2.4%, based on the closing stock price of $61.82 per share on December 31, 2019. We have paid an annual common stock dividend every year since trading on the open market began in 1984. In addition, on January 29, 2020, the Board of Directors voted to increase the annualized dividend to $1.50 per share.
EXECUTIVE COMPENSATION POLICIES
EXECUTIVE COMPENSATION RECOVERY POLICY
In the event we are required to prepare an accounting restatement of our financial statements due to the material noncompliance with any financial reporting requirement under the securities laws, we are entitled to recover any excess performance-based compensation (all annual incentives and long-term incentives, whether in cash, in equity, or otherwise, with performance features based on Unitil’s or a group’s performance) received by any current or former covered executive during the three-year period immediately preceding the date on which we are required to prepare an accounting restatement. To the extent allowed by applicable law and the listing standards of the New York Stock Exchange, we may seek to recover any such excess performance-based compensation at the direction of the Compensation Committee after consideration of the costs and benefits of doing so, and as approved by Board.
EXECUTIVE STOCK OWNERSHIP POLICY
All Named Executive Officers of the Company are required to own shares of our common stock in the equivalent value of a multiple of base salary. Any newly appointed Named Executive Officer will have four years from the date of | Chairman, CEO and President | 4X | ||||||||||
Chief Financial Officer | 3X | |||||||||||
All Other Named Executive Officers | 2X |
appointment to obtain the required shares of stock. Additional information concerning the current share ownership of our Directors and officers can be found in the section entitled Share Ownership—Beneficial Ownership.
EXECUTIVE STOCK RETENTION POLICY
The Board believes that our executive officers should own a significant number of shares of our common stock to properly align their interests with those of our shareholders. All Named Executive Officers are required to hold all forms of equity received as compensation until retirement or other separation from the Company. The Board, in its sole discretion, may approve a waiver to this policy as circumstances may warrant. To date, no such waivers have been proposed or approved.
PROHIBITION ON HEDGING AND/OR PLEDGING COMPANY STOCK POLICY
All members of the Board and the executive officers are prohibited from engaging in short sales or engaging in any hedging transaction with respect to Unitil common stock, as well as engaging in any transactions that result in pledging, or using as collateral, shares of Unitil common stock in order to secure personal loans or other obligations, including any shares that may be a margin account.
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Compensation Philosophy and Administration
The Compensation Committee is responsible for oversight of theour executive compensation program. The Committee, the Board and the Company recognize the value and importance of sound principles for the development and administration of competitive compensation and benefit programs. The Company believesWe believe that its executive compensation program (i) is instrumental in the achievement of its short-term and long-term strategic and business objectives, (ii) provides appropriate rewards for the fulfillment of strong operational and financial performance and (iii) provides appropriate rewards for practicing the Company’s
our executive compensation program (i) is instrumental in the achievement of its short-term and long-term strategic and business objectives, (ii) provides appropriate rewards for the fulfillment of strong operational and financial performance and (iii) provides appropriate rewards for practicing our core values and principles, which creates lasting value for our shareholders and other stakeholders. The Compensation | ||||
Executive Compensation – Guiding Principles ◾ Annual compensation (currently defined as base salary, cash incentive and equity compensation for the Company’s employees, including the Executive Officers) should generally target the national market median, which is defined as the middle, or the 50th percentile, of the compensation marketplace. ◾ The compensation methodology for determining base pay increases should be the same for all executive positions including the CEO and other Named Executive Officers. ◾ The compensation methodology should include a consistent formula for determining each component of annual compensation based on both objective and verifiable market data and on attainment of selected performance measures from the Company’s approved strategic plan (the “Strategic Plan”). ◾ The compensation program for all employees should ensure pay equity for similar jobs across the organization. |
Committee utilizes a set of guiding principles for settingin the design and implementation of the Company’s executive compensation program, which are discussed below.outlined above. In 2019, the Committee conducted a review of the guiding principles with a particular focus on pay equity across similar positions in the Company. The Committee considers pay equity to be a key factor to be considered in the oversight of compensation policy, and subsequently amended the guiding principles to include this important element. Additional information concerning the processes and operational procedures followed by the Committee can be found in the section entitled Compensation—Compensation Committee Operations.
Compensation Policy & Process
The principal objective of Unitil’sour executive compensation program is to attract, motivate, retain and reward highly qualified employees who are committed to the achievement of solid financial performance, outstanding service to customers, and excellence in the management of the Company’sour assets. It is the Company’sour belief that a strong sense of teamwork and shared responsibility are vital components in the achievement of strong performance. The Company’sOur incentive compensation reflects and supports this philosophy with an appropriate balance of both financial and operational goals that apply to the entire management team. See the section entitledCompensation - Compensation Discussion and Analysis –Elements of Compensation for a discussion of the specific goals set, and results achieved, for 2016. The Company2019. We also believesbelieve that retention of talented and dedicated key executives will help ensure continued focus on the achievement of long-term growth in shareholder value and overall sustainability, which in turn will provide significant benefitbenefits to all of the Company’sour stakeholders, including shareholders, customers and employees.
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Compensation Policy – What We Do and What We Don’t Do
The guiding principles utilized by the Compensation Committee continuously strives to make improvements to our executive compensation policies. Below is a summary of what we do and what we do not do with respect to executive compensation, the totality of which the Committee and the Board believe aligns with the long-term interests of our shareholders as well as with today’s commonly accepted best practices in the design and implementation of the Company’s executive compensation program are outlined below.market.
WHAT WE DO ◾ Apply balanced performance metrics (financial, operations, customer satisfaction) ◾ Align performance metrics with management and shareholder interests ◾ Practice prudent goal setting aligned with Strategic Plan ◾ Ensure a majority of the CEO’s annual compensation is variable based on performance ◾ Enforce significant stock ownership and holding policy ◾ Adopted executive compensation recovery policy ◾ Allow only double-trigger change of control provisions ◾ Monitor pay equity across the Company | WHAT WE DON’T DO ◾ Provide tax gross ups of any kind ◾ Allow hedging, pledging or short sale transactions in Company stock ◾ Encourage unreasonable risk taking ◾ Grant equity awards discounted at values below 100% fair market value ◾ Allow Single-trigger change of control provisions ◾ Provide excessive executive prerequisites ◾ Allow new entrants into the SERP (the SERP was closed in 2018) |
EXECUTIVE COMPENSATION - GUIDING PRINCIPLES Annual compensation (currently definedThe Committee defines “annual compensation” in its Guiding Principles as base“base salary, cash incentive and equity compensation for the Company’s employees, including the Executive Officers) should generally target the national market median, which is defined as the middle, or the 50th percentile, of the compensation marketplace. The compensation methodology for determining base pay increases should be the same for all executive positions including the CEO and other Named Executive Officers. The compensation methodology should include a consistent formula for determining each component of annual compensation based on both objective and verifiable market data and on attainment of selected performance measures from the Company’s approved strategic plan (the “Strategic Plan”).compensation.”
Compensation Committee: Compensation Decisions
Historic Background: 2014 Comprehensive Compensation Analysis
To aid in its decision-making process, in both 2014 and 2015, the Compensation Committee engaged compensation consulting firm Willis Towers to prepare anin-depth analysis of executive compensation.
2014: 2015 Compensation Decisions
In 2014, Willis Towers provided the Committee a comprehensive compensation analysis (the “2014 Compensation Analysis”) which included chief executive officerCEO compensation, salary survey data for comparable industry executives and middle management, and benefits.
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The 2014 Compensation Analysis scope included an overall analysis of
| 2014 Compensation Analysis | |||
◾ | Detailed review of compensation for executives (including Named Executive Officers) – including defining the competitive marketplace and selected peer group, and assessing the competitiveness and mix of total compensation, appropriateness of cash and equity incentive programs, and competitiveness of key benefit programs. | |||
◾ | Competitive assessment ofnon-union cash compensation for 92 positions covering 145 incumbents in the general employee population – including cash compensation, appropriateness of salary structure, and analysis of incentive targets. | |||
◾ | Review of broad-based benefit program design to ensure competitiveness of total compensation. | |||
The Compensation Committee used | ||||
the information in the 2014 Compensation Analysis (a) to gain a general understanding of compensation practices, (b) as a reference point, or benchmark, upon which to base its compensation decisions and (c) to analyze each executive officer’s, including the CEO’s, compensation for 2015.
Willis Towers used two sources of data in the 2014 Compensation Analysis for assessment of the Company’sour position in the compensation marketplace:
Compensation Data from Published Compensation Surveys.
Compensation data from published compensation surveys focused on comparably sized organizations in the utility sector and general industry sector (for “cross industry” positions)1. Published survey data weresize-adjusted based on revenue, employee regression and/or scope parameters. Because the surveys are confidential, the specific data selected by Willis Towers did not indicate survey participants by company name.
2014 COMPENSATION ANALYSIS Nature & Scope Detailed review of compensation for executives (including Named Executive Officers) – including defining the competitive marketplace and selected peer group, and assessing the competitiveness and mix of total compensation, appropriateness of cash and equity incentive programs, and competitiveness of key benefit programs. Competitive assessment ofnon-union cash compensation for 92 positions covering 145 incumbents in the general employee population – including cash compensation, appropriateness of salary structure, and analysis of incentive targets. Review of broad-based benefit program design to ensure competitiveness of total compensation.
Compensation Data from Proxy Filings.
Compensation data was extracted from publicly available proxy filings for a selected group of 16 publicly traded utility companies with annual revenues between $81 million and $1.6 billion (the “2014 Peer Group”)2. The Compensation Committee used this data to analyze only the CEO’s compensation, with the objective of ensuring that the CEO’s total compensation was reasonable, competitive and consistent with pay practices at peer companies.
For the proxy-based market analysis, Willis Towers prepared a benchmarking assessment using position-specific market data to compare Unitil’s current compensation levels for the CEO with compensation levels for comparable positions in the 2014 Peer Group. Market data for total direct compensation elements were extracted for the 25th percentile, the median (50th percentile), and the 75th percentile.
Due to the fact that Unitil’s size (based on fiscalyear-end 2013 revenues and number of employees) was approximately equal to the 25th percentile of the 2014 Peer Group companies, the Compensation Committee targeted the 25th percentile within this data set.
For the published survey-based analysis, Willis Towers used benchmark matches for all positions (including the CEO) in its assessment. For all published survey-based data, market values reflected the size/scope of Unitil’s revenues and employee count through use of regression analysis (or tabular groupings where regression data were not available). Because the published survey databases cover a vast number of benchmark positions in the utility industry sector and general industry sector, Willis Towers advised the Compensation Committee that the median (50thpercentile) of the published survey-based data set approximated the 25th percentile of the smaller proxy-based data set. The Committee determined that the median (50th percentile) of the marketplace when using information from the published survey-based data set was an appropriate target.
The Compensation Committee used the information in the 2014 Compensation Analysis as a reference point, or benchmark, upon which to base its compensation decisions for the 2015 compensation year. The Committee also considered and discussed various recommendations from Willis Towers based on study findings and industry trends.
DIRECT COMPENSATION ELEMENTS Market Data Base salary Target annual incentive compensation Actual total cash compensation (base salary plus most recent actual annual incentive payment) Long-term incentive expected value granted during the most recent year Actual total direct compensation (actual total cash plus the expected value of long-term incentives)
2015: 2016 Compensation Decisions
In 2015, at the request of the Compensation Committee, Willis Towers prepared an assessment of the competitiveness of the compensation of the Named Executive Officers (the “2015 Assessment”) using the 2014 Compensation Analysis as a foundation with updated information from published compensation surveys, including base salary, total cash compensation (base plus annual incentives), and total direct compensation (base plus annual incentives plus long-term incentives). The Committee assessed the competitiveness of each Named Executive Officer’s compensation in the context of market practices and Unitil’s compensation philosophy, which is to target the national market median, or 50th percentile, of the compensation marketplace in the published compensation surveys. The Committee also used information from 2015 proxy statements of the Company’s utility company peer group, at the 25th percentile target, as a secondary source to assess CEO compensation competitiveness.
Compensation Data from Published Compensation Surveys
Compensation data from published compensation surveys focused on comparably sized organizations in the utility sector and general industry sector (for “cross industry” positions)1. Published survey data weresize-adjusted based on revenue, employee regression and/or scope parameters. Because the surveys are confidential, the specific data selected by Willis Towers did not indicate survey participants by company name.
Compensation Data from Proxy Filings
Compensation data was extracted from publicly available proxy filings for a selected group of 16 publicly traded utility companies with annual revenues between $81 million and $1.6 billion (the “2014 Peer Group”)2. The Compensation Committee used this data to analyze only the CEO’s compensation, with the objective of ensuring that the CEO’s total compensation was reasonable, competitive and consistent with pay practices at peer companies.
For the proxy-based market analysis, Willis Towers prepared a benchmarking assessment using position-specific market data to compare our current compensation levels for the CEO with compensation levels for comparable positions in the 2014 Peer Group. Market data for total direct compensation elements were extracted for the 25th percentile, the median (50th percentile), and the 75th percentile.
1 | The primary sources of data were the Willis Towers Watson CDB Executive Energy Services and General Industry Compensation Databases that provide market compensation data on over 1,000 U.S. organizations, as well as other published survey sources including Mercer’s Executive/IT/Finance, and Accounting and Legal Benchmark databases. |
2 | The 2014 selected group consisted of ALLETE, Inc., Black Hills Corp., Chesapeake Utilities Corp., CLECO Corp., Delta Natural Gas Company, Inc., El Paso Electric Company, Empire District Electric Company, Idacorp, Inc., ITC Holdings Corp., MGE Energy, Inc., Northwest Natural Gas Company, Northwestern Corp., Otter Tail Corp., PNM Resources, Inc., South Jersey Industries, Inc., and UIL Holdings Corp. |
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Direct Compensation Elements Market Data | Due to the fact that Unitil’s size (based on fiscalyear-end 2013 revenues and number of employees) was approximately equal to the 25th percentile of the 2014 Peer Group companies, the Compensation Committee targeted the 25th percentile within this data set. For the published survey-based analysis, Willis Towers used benchmark matches for all positions (including the CEO) in its assessment. For all published survey-based data, market values reflected the size/scope of Unitil’s revenues and employee count through use of regression analysis (or tabular groupings where regression data were not available). | |||||
◾ | Base salary | |||||
◾ | Target annual incentive compensation | |||||
◾ | Actual total cash compensation (base salary plus most recent actual annual incentive payment) | |||||
◾ | Long-term incentive expected value granted during the most recent year | |||||
◾ | Actual total direct compensation (actual total cash plus the expected value of long-term incentives) | |||||
Because the published survey databases cover a vast number of benchmark positions in the utility industry sector and general industry sector, Willis Towers advised the Compensation Committee that the median (50thpercentile) of the published survey-based data set approximated the 25th percentile of the smaller proxy-based data set. The Committee determined that the median (50th percentile) of the marketplace when using information from the published survey-based data set was an appropriate target.
2015 Compensation
The Compensation Committee used the information in the 2014 Compensation Analysis as a reference point, or benchmark, upon which to base its compensation decisions for the 2015 compensation year. The Committee also considered and discussed various recommendations from Willis Towers based on study findings and industry trends.
2016 and 2017 Compensation
In 2015, at the request of the Compensation Committee, Willis Towers prepared an assessment of the competitiveness of the compensation of the Named Executive Officers (the “2015 Assessment”) using the 2014 Compensation Analysis as a foundation with updated information from published compensation surveys, including base salary, total cash compensation (base salary plus annual incentives), and total direct compensation (base salary plus annual incentives plus long-term incentives). The Committee assessed the competitiveness of each Named Executive Officer’s compensation in the context of market practices and Unitil’s compensation philosophy, which is to target the national market median, or 50th percentile, of the compensation marketplace in the published compensation surveys. The Committee also used information from 2015 proxy statements of our utility company peer group, at the 25th percentile target, as a secondary source to assess CEO compensation competitiveness.
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Compensation Data from Published Compensation Surveys
Compensation data from published compensation surveys focused on comparably sized organizations in the utility sector and general industry sector (for “cross industry” positions). Published survey data weresize-adjusted based on revenue, employee regression and/or scope parameters. Because the surveys are confidential, the specific data selected by Willis Towers did not indicate survey participants by company name.
Compensation Data from Proxy Filings
Chief executive officer compensation data was obtained from publicly available proxy filings for a selected group of 15 publicly traded utility companies3 (the “2015 Peer Group”) with annual revenues between $86 million and $1.6 billion.
The Committee used the information from the 2015 Assessment as a reference point, or benchmark, upon which to base its compensation decisions for Named Executive Officers, including the CEO, for the 2016 and 2017 compensation years. The Committee also used information from the 2015 proxy statements of the Company’sour utility company peer group, at the 25th percentile target, as a secondary source to assess CEO compensation competitiveness.
2018 and 2019 Compensation
In 2016,2017, in order to prudently manage outside consulting expenses, the Committee decided to forego a year of special consulting work related to overall executive pay, and to instead simply utilize the information contained in the 2015 Assessment, as well as existing compensation programs which wereand policies previously found to be reasonable and competitive in design and operation. The Committee decidedused this information to next engageevaluate executive compensation for both the 2018 and 2019 compensation years, along with the 2018 Market Assessment (as discussed below) to evaluate the compensation package for Mr. Meissner upon his assumption of the position of CEO on April 25, 2018.
In January 2018, the Committee engaged Willis Towers inon a limited basis to conduct the 2018 Market Assessment, which included a review of executivecurrent competitive levels of CEO compensation during 2017.focused on base salary, total cash compensation (base salary plus annual incentives), and total direct compensation (base salary plus annual and long-term incentives). The purpose of the assessment was to confirm that the existing job description and the associated salary range and incentive compensation targets were consistent with the current competitive market of CEO compensation with regard to the initial compensation package for Mr. Meissner.
In addition to individual performance, the Company’s performance is a critical componentWillis Towers used both published compensation surveys and compensation data disclosed in the determinationmost recently filed proxy statements of how each individual executive is paid relative to the market median of the broad-based published compensation survey group, as described below. Accordingly, approximately 40.3% (for Mr. Schoenberger) and 31.5% (averagepeer companies for the other Named Executive Officers) of the 2016 annual compensation was incentive compensation directly related to the Company’s performance.2018 Market Assessment.
3 | The 2015 selected group |
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BaseCompensation Data from Published Compensation Surveys
Compensation data from published compensation surveys focused on comparably sized organizations in both the utility sector and general industry sector (for “cross industry” positions). Published survey data weresize-adjusted based on revenue, employee regression and/or scope parameters. Because the surveys are confidential, the specific data selected by Willis Towers did not indicate survey participants by company name.
Compensation Data from Proxy Filings
Compensation data was extracted from publicly available proxy filings for a selected group of 13 publicly traded utility companies with annual revenues between $400 million and $1.7 billion (the “2018 Peer Group”)4 This data was used to analyze the CEO’s compensation, with the objective of ensuring that the CEO’s total compensation was reasonable, competitive and consistent with pay practices at peer companies.
Willis Tower’s 2018 Market Assessment report on competitive base salary and incentive compensation levels confirmed the following:
◾ | the pay grade, salary range and incentive targets of our internal grade 28 for the CEO is fairly and equitably aligned with the market median of the published survey data; and, |
◾ | the pay grade, salary range and incentive targets of our internal grade 28 for the CEO is also fairly and equitably aligned with the 25th percentile of the 2018 Peer Group. |
The Committee assessed the compensation for Mr. Meissner in his new role as CEO in the context of the compensation philosophy, the salary administration policy, and Willis Tower’s 2018 Market Assessment report. The Committee also considered Mr. Meissner’s experience, proven skills and education when setting the starting base salary and incentive compensation targets. See the section entitledCompensation – Salary Administrationfor a detailed discussion of our salary administration policy and process.
4 | The 2018 selected group consisted of ALLETE, Inc., Avista Corporation, Black Hills Corp., Chesapeake Utilities Corp., El Paso Electric Company, MGE Energy, Inc., Northwest Natural Gas Company, Northwestern Corporation, ONE Gas, Inc., Otter Tail Corp., PNM Resources, Inc., Spire, Inc., and South Jersey Industries, Inc. |
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2019 Compensation Analysis - Summary
In March 2019, the Committee engaged Willis Towers to conduct a comprehensive review and assessment of senior management compensation, including the CEO and CFO compensation,non-union employee compensation, employee benefits, and Directors’ compensation, (the “2019 Compensation Analysis”). The Committee’s standard practice is to engage a compensation consultant to prepare a comprehansive study of all elements of compensation every five years, with updates on executive compensation annually or as needed. The last comprehensive analysis was performed in 2014, as described on the preceeding pages of this proxy statement. The 2019 Compensation Analysis scope included an overall analysis of our compensation as it relates to and supports our business strategy, alignment with the compensation philosophy, peer group identification, detailed information on executive,non-union staff and Directors’ compensation, as well as a review of the research methodology and process, key findings with regard to base salary and incentive compensation, program assessment, and several recommendations for the Committee’s consideration. Willis Towers employed the same methodology | 2019 Compensation Analysis Scope Review of Total Compensation Philosophy Senior Management Competitive Assessment: Detailed review of total direct compensation* for approximately 20 executive positions, including the CEO, CFO and other Named Executive Officers ◾ Confirmation of competitive marketplace and peer group ◾ Assessment of pay level competitiveness and mix of total compensation ◾ Competitiveness of cash and equity incentive levels Non-Union Staff Competitive Assessment: Competitive assessment ofnon-union staff cash compensation for 75 jobs covering approximately 150 incumbents ◾ Cash compensation ◾ Appropriateness of salary structure ◾ Analysis of incentive targets Directors’ Competitive Assessment: Competitive assessment of total direct compensation* for outside Board members ◾ Confirmation of peer group ◾ Assessment of pay elements including board and committee annual retainers, meeting fees, board and committee leadership premiums Broad Based Benefit Program Assessment: Review of program design to ensure competitiveness as an element of total compensation *for the purposes of this analysis, total direct compensation is defined as base salary, annual incentives and long term incentives. |
used in past analyses and study updates for assessment of our position in the compensation marketplace. Towers Watson used both compensation data from published compensation surveys focused on comparably sized organizations in the utility sector and general industry sector (for “cross industry” positions), and compensation data from proxy filings of our approved peer group of 13 publicly traded utility companies with annual revenues between $275 million and $1.6 billion (the “2019 Peer Group”).5
Willis Towers completed the the 2019 Compensation Analysis in July 2019, and provided the results of the assessment and associated recommendations where requested to the Committee and to management.
5 | The 2019 selected group consists of ALLETE, Inc., Avista Corporation, Chesapeake Utilities Corporation, El Paso Electric Company, Genie Energy, Ltd., MGE Energy, Inc., Northwestern Corporation, Northwest Natural Gas Company, ONE Gas, Inc., Otter Tail Corporation, PNM Resources, Inc., Pattern Energy Group, Inc., South Jersey Industries, Inc. |
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Results of the Directors’ competitive assessment were also provided to the Nominating and Governance Committee.Please see the section entitled Compensation – Compensation of Directorsfor additional information on the Nominating and Governance Committee’s actions concerning Directors’ compensation.
The Company utilizesCommittee used the Hay Methodinformation provided in the 2019 Compensation Analysis (a) to gain a general understanding of job evaluation,current compensation in the context of market practices, (b) as a reference point, or benchmark, upon which to base its compensation decisions starting in 2020, and (c) to analyze the competitiveness of each executive officer’s, including the CEO’s, overall compensation and alignment with the compensation philosophy. The Committee did not use any information provided in the 2019 Compensation Analysis for decisions or consideration relating to 2019 compensation.
Salary Administration
Our Salary Administration Policy has three objectives:
◾ | to provide a compensation program equal to or better than the median of compensation programs provided by geographically comparable businesses; |
◾ | to manage base salaries in a manner that recognizes and appropriately rewards performance within prescribed budgetary limits; and |
◾ | to provide base salary opportunities that are competitive with external pay practices for substantially comparable work. |
The Salary Administration Policy includes three important components:
Job Description Job Evaluation |
Market Analysis & Salary Range
Each year we participate in numerous salary market studies to ensure that the competitiveness of base salaries is a job grading process developed bymaintained. We adjust the Hay Group. This method results in a numeric job grade for each position that is equivalent to positions with comparable responsibilities at other companies that use this job evaluation system. The Company then sets base salary ranges for every job grade and positioneach year based upon basethe results of these surveys to ensure that we maintain our salary survey data providedranges at the median market level. Historically, the salary ranges are adjusted by Willis Towers.approximately 2% annually based on market survey
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data. The midpoint of the base salary range is set at the median level of the broad-based published compensation survey group when compared to similar positions at comparable companies. The minimum in the salary range is determined by multiplying the midpoint by 80%, and the maximum is determined by multiplying the midpoint by 120%. In general, the salary range minimum is commonly the lowest amount we will pay a new employee in the job, with the aim of employees reaching the midpoint of the range within five years. The midpoint is where we strive to pay fully trained, fully competent employees. The midpoint to maximum range is where high-performing employees and long-term employees tend to be paid. Exceptions are occasionally made based on experience, skills, education, and other factors.
Base Salary
We set base salary ranges for every job grade and position based upon salary survey data provided by Willis Towers and in accordance with the Salary Administration Policy described above. In relation to each Named Executive Officer, base salary is set within the salary range based upon individual experience, skills, and education, as well as performance relative to individual annual goals. This process is used for both executive andnon-executive positions.
Incentive Compensation – Cash Incentive
The Company setsWe set annual target cash incentive awards equal to the median of the broad-based published compensation survey group for the Executive Officers’executive officers’ target cash incentive awards at other comparable companies based on data provided by Willis Towers. The Committee also used information from the proxy statements of the Company’sour peer group, at the 25th percentile target, as a secondary source to set the CEO’s annual target cash incentive award. The Company has alsoWe have developed a “balanced score card” approach to setting goals for the annual incentive awards, which includes certain goals from the Strategic Plan that represent success in financial results, electric reliability, gas safety, customer service and distribution cost per customer. The Compensation Committee approves the quantitative goals, also referred to as performance metrics, for these awards annually. See the section entitledCompensation—Compensation Discussion and Analysis— Elements of Compensation for a discussion of thisthe balanced score card.
Incentive Compensation – Equity Compensation
The Company grantsWe grant shares of restricted stock to executive participants in the Stock Plan annually. The size of the annual restricted stock award is based upon our achievement of the Company’skey performance andmetrics, which are selected from the Strategic Plan. Each participant’s target award is based on market data for the median of the broad-based published compensation survey group size grant at peer group and other comparable companies, as calculated using data provided by Willis Towers. The Compensation Committee also useduses information from the proxy statements of the Company’sour peer group, at the 25th percentile target, as a secondary source to set the CEO’s annual restricted stock award. The shares of restricted stock vest over a period of four years, and the executive must request and receive approvalall Named Executive Officers are required to hold all forms of equity, vested or unvested,
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received as compensation until retirement or other separation from either the CEOUnitil. The Board, in its sole discretion, may approve a waiver to this policy as circumstances may warrant. However, to date, no such waiver has been requested or the Company’s Chief Financial Officer (“CFO”) to sell fully vested shares.
Shareholder Advisory Vote on Executive Compensation and Frequency of Advisory Votegranted.
Performance-Related Incentive Compensation In addition to individual performance, Unitil’s performance is a critical component in the determination of how each individual executive is paid relative to the market median of the broad-based published compensation survey group, as described above. For 2019, compensation directly related to our performance, or “at risk” compensation, for each Named Executive Officer, is shown in the table to the right. Mr. Collin was not included in this calculation due to his retirement on May 1, 2019. See also the section entitled Compensation – Compensation of Named Executive | Named Executive Officer | 2019 At Risk Compensation | ||
Mr. Meissner Ms. Vaughan Mr. Black Mr. Brock Mr. LeBlanc | 60.3% 41.5% 36.9% 37.5% 43.0% | |||
*At risk compensation is defined as incentive compensation as a percentage of salary plus incentive plus “all other compensation” as reported in Column I of the Summary Compensation Table. |
Officers – Proportional Compensation for additional information on performance-related compensation.
CEO Pay Ratio
Summary
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the Company held (i) its second advisory(non-binding) shareholder vote onSecurities and Exchange Commission adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer. Our principal executive officer is Mr. Meissner (the “CEO”).
We believe the compensation program and salary administration policy should be consistent and internally equitable to motivate all employees to perform in ways that enhance shareholder value. We also believe that our compensation philosophy and processes yield an equitable result for all employees, which is reflected in the resulting ratio.
Methodology
To reasonably identify the median employee, we prepared a list of all active employees (excluding the CEO) as of December 31, 2019. The list included part-time employees. As of December 31, 2019, we employed 513 people of which 345 werenon-union employees and 168 were union employees covered by a collective bargaining agreement.
Next, we extracted the taxable wages number reported in Box 1 of the
Company’s 2019 FormW-2 from our payroll records for each employee, excluding the CEO. We did not annualize wages and salaries for those employees that were not employed for the full year of 2019. The median employee was then identified as the employee corresponding with number 257. Once identified, we calculated the median employee’s total annual compensation in the same manner as the “Total Compensation” shown for the CEO in the Summary Compensation Table in the section entitledCompensation – Compensation of Named Executive Officers (commonly known.
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Results
The table below shows the information used for the calculation of the ratio of the estimated annual total compensation of the median employee identified using the methodology described above to the annual total compensation of Mr. Meissner as calculated for the Summary Compensation Table.
2019 PAY RATIO TABLE
| ||||||||||||||||||||||||||||
Year | Salary ($) | Stock Awards (1) | Non-Equity Incentive Plan Compensation (2) | Change in Pension | All Other Compensation (4) | Total | ||||||||||||||||||||||
Thomas P. Meissner, Jr.
|
|
2019
|
|
|
$572,000
|
|
|
$755,416
|
|
|
$527,926
|
|
|
$1,465,308
|
|
|
$271,428
|
|
|
$3,592,108
|
| |||||||
Median Employee
|
|
2019
|
|
|
$77,656
|
|
|
—
|
|
|
$10,626
|
|
|
—
|
|
|
$4,996
|
|
|
$93,279
|
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Ratio of Median Employee’s to Mr. Meissner’s Annual Total Compensation |
| 1:39 |
NOTES :
(1) | The value shown represents the grant date fair value, calculated in accordance with FASB ASC Topic 718, of the award of restricted stock granted under the Stock Plan on January 28, 2020 for results attained for 2019 performance. The grant date fair value is based on the closing price of Unitil common stock of $63.91 on January 28, 2020. See also the Summary Compensation Table in the section entitledCompensation of Named Executive Officers. |
(2) | The values shown include cash incentive awarded on January 28, 2020 for 2019 Management Incentive Plan results. See also the Summary Compensation Table in the section entitledCompensation - Compensation of Named Executive Officers. |
(3) | The values shown reflect the change in pension value plus the change in the SERP value for Mr. Meissner. The median employee does not participate in the Retirement Plan. See also the Summary Compensation Table in the section entitledCompensation - Compensation of Named Executive Officers. |
(4) | The value shown for Mr. Meissner for the year 2019 includes a vehicle allowance, the Company’s contributions to 401(k) and HSA accounts,non-preferential dividends earned in 2019 on the shares of restricted stock awarded in 2019, and the tax adjustment on the shares of restricted stock that vested for tax purposes in 2019 in accordance with the provisions of the Stock Plan. The value shown for the median employee includes the Company’s contribution to the 401(k) account, as well as the medical insuranceopt-out payment and the employee wellness benefit payment. See also the Summary Compensation Table in the section entitledCompensation - Compensation of Named Executive Officers. |
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Shareholder Advisory Vote on Executive Compensation As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), we must provide the opportunity for shareholders to vote, on an advisory basis, on the compensation of executives. The Dodd-Frank Act also requires that every six years we must provide the opportunity for shareholders to vote, on an advisory basis, on the frequency (commonly known as a“say-on-frequency” proposal) that thesay-on-pay advisory vote will be presented to shareholders. At the 2017 annual meeting of shareholders, our shareholders voted (on an advisory basis) to hold asay-on-pay advisory vote annually. In light of this voting result, the |
Board decided to hold a“say-on-pay”say-on-pay proposal), at its 2014 annual meeting of shareholders and (ii) its first shareholderadvisory vote annually until the next required vote on the frequency of suchsay-on-pay proposal, at its 2011 annual meeting of shareholders. As reported in the Company’s Form8-K, filed with the SECshareholder votes on April 24, 2014, 88% of shareholders approved by advisory vote the compensation of executives.
2019 Voting Result At the 2019 annual meeting of shareholders, we presented the requirednon-binding advisory shareholder vote on the compensation of our Named Executive Officers (commonly known as a“say-on-pay” proposal). As we reported in theForm 8-K, filed with the SEC on April 26, 2019, 95% of shareholders approved by advisory vote the compensation of our Named Executive Officers. The Compensation Committee believes the dramatic improvement in the results of the 2019say-on-pay advisory vote reflected the significant and important compensation and governance-related changes initiated following the 2018 Annual Meeting. Summary of Compensation Committee Actions In response to investor feedback at the 2018 Annual Meeting, the Compensation Committee committed to meeting the objective that our compensation policies and practices are | Compensation-Related Policies Adopted ◾ Removed excise tax gross up provision from all Change of Control Agreements (“COC”) ◾ Amended Mr. Meissner’s Employment Agreement with regard to references to his revised COC ◾ Adopted Executive Compensation Recovery Policy ◾ Adopted Executive Stock Ownership Policy ◾ Adopted Stock Retention Policy for Directors and Executives ◾ Adopted Anti-Hedging and/or Pledging of Company Stock Policy |
contemporary, transparent, meet shareholder expectations, and in line with corporate governance best practices. Upon the Company’s Named Executive Officers. Therecommendation of both the Compensation Committee consideredand the resultsNominating and Governance Committees, the Board approved six new compensation and governance-related policies. Details on all compensation and governance-related policies are outlined in the section of the advisory vote by shareholders on thesay-on-pay proposal presented to shareholders at the 2014 annual meeting of shareholders in its decision to make no direct changes to the Company’s executive compensation program in 2015 or 2016 as a result of the vote. The Company’s thirdthis proxy statement entitledCorporate Governance.
Our 2020say-on-pay proposal is included in this proxy statement asProposal 3: Approval, on an Advisory Basis, of the Compensation of the Company’s Named Executive OfficersOfficers..
At the 2011 annual meeting of shareholders, shareholders elected to hold asay-on-pay advisory vote every three years. The Dodd-Frank Act requires that every six years the Company provide the opportunity for shareholders to vote, on an advisory basis, on the frequency (commonly known as a“say-on-frequency” proposal) that thesay-on-pay advisory vote will be presented to shareholders. The Company’s secondsay-on-frequency proposal is included in this proxy statement asProposal 4: Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation.
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ELEMENTS OF COMPENSATION
Base Salary
Every employee is paid a base salary. The purpose of base salary is to reward employees for the expertise and value they bring to their jobs. Base salary is determined according to the Company’sour salary policy, which assigns each position a grade and a corresponding salary range. The Company setsWe set salary ranges for every position based upon comparative salary data provided by Willis Towers. The midpoint of the salary range is set at the median level of the broad-based published compensation survey group when compared to similar positions at other comparable companies. The minimum parameter in the salary range is determined by multiplying the midpoint by 80%, and the maximum parameter is determined by multiplying the midpoint by 120%. The salary range is then used to manage each employee’s salary, and an employee’semployee��s salary within the range is based on merit. For each employee (including Named Executive Officers), base salary is set within the salary range based upon individual performance relative to individual annual goals. The elements of individual performance differ depending on the individual position, but include: quantity and quality of work; successful completion of established goals; ability to initiate creative solutions; adaptability to change; and impact on performance of the Company.our overall performance. The salaries of all employees (including the Named Executive Officers) are reviewed annually, as well as at the time of a promotion or change in responsibilities.
Each position in the Company (including all Executive Officer
Each position (including all executive officer positions) has a job description that outlines the accountabilities and competencies required. Merit increases are considered at the end of the year based on the evaluation of each person’s performance as related to each accountability listed in the individual job description, as well as the achievement of individual goals established at the beginning of the year. Merit increases are generally effective as of January 1 of each year. Merit increases also are one of the methods used to reach one | Named Executive Officer | Cumulative 2019 | ||||
Mr. Meissner | 17.28% | |||||
Ms. Vaughan | N/A* | |||||
Mr. Black | 6.27% | |||||
Mr. Brock | 16.60% | |||||
Mr. LeBlanc | 4.39% | |||||
Mr. Collin | -65.67% | |||||
*Ms. Vaughan began her employment on January 2, 2019. |
of the year based on the evaluation of each person’s performance as related to each accountability listed in the individual job description, as well as the achievement of individual goals established at the beginning of the year. Merit increases generally are effective as of January 1 of each year. Merit increases also are one of the methods used to reach one of the Company’sour competitive compensation guiding principles, which is to ensure that employees are paid at or near the market median of the broad-based published compensation survey group. Merit increases may also be adjusted by the Compensation Committee to reflect the market value of a job when compared to similar positions at other companies within the Company’sour peer group, as recommended by Willis Towers.
The process followed to determine base salary increases for the Named Executive Officers begins with the CEO providing an annual evaluation of Unitil’s overall performance to the Board. The Compensation Committee and the Executive Committee meet jointly in executive session to discuss the evaluation of our performance, as well as to discuss the CEO’s performance in relation to the our performance for the year, taking into account both the quantitative and qualitative aspects of the performance of both the CEO and Unitil as a whole. The Compensation Committee uses the feedback gained in the joint meeting along with the market competitive salary information previously described to determine an appropriate base salary increase for the CEO based on both merit and market conditions. The CEO provides a recommendation to the Compensation Committee for base salary increases for the other Named Executive Officers. The Compensation Committee then reviews and recommends the base salaries of all of the Named Executive
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Officers to the full Board for discussion and approval. The recommendations are based on the performance evaluations and market information for each of the Named Executive Officers. For 2019, each Named Executive Officer 2016 Base Salary Increasereceived the base salary increase percentage set forth opposite his or her name in the table above. Mr. Schoenberger 4.6%Meissner’s 2019 salary increase of 17.28% from 2018 is due to his 2018 salary consisting of four months of his prior position’s salary of $357,000 as Senior Vice President and Chief Operating Officer and eight months of his salary of $550,000 as CEO, or $487,721. Mr. Collin 4.6%Meissner’s actual annualized salary percentage increase in 2019 was 4.00%. Mr. Meissner 4.6% Mr. Black 4.8% Mr. Long 5.2%Collin’s negative 2019 salary increase reflects only his salary for the period of employment prior to retirement in 2019, which was January 1 – May 1, 2019.
Incentive Compensation
Management Incentive Plan
The Unitil Corporation Management Incentive Plan (the “Management Incentive Plan”) provides annual cash incentive payments based upon the attainment of specified goals selected from the Strategic Plan. The Compensation Committee selects participants in the plan and establishes their individual target awards. All executives (including the Named Executive Officers) are participants in the Management Incentive Plan. The purpose of the Management Incentive Plan, which is consistent with the Company’s principal compensation objective, is to provide executives with significant incentives related to performance, thereby providing motivation to maximize efforts on behalf of all the Company’s stakeholders. The Management Incentive Plan is further intended to provide executives with competitive target levels of total compensation when considered with base salaries.
executives (including the Named Executive Officers) are | ||||
participants in the Management Incentive Plan. The purpose of the Management Incentive Plan, which is consistent with our principal compensation objective, is to provide executives with significant incentives related to performance, thereby providing motivation to maximize efforts on behalf of all of our stakeholders. The Management Incentive Plan is further intended to provide executives with competitive target levels of total compensation when considered with base salaries. | Named Executive | Target Award (% of Base Salary) | ||
Mr. Meissner | 65% | |||
Ms. Vaughan | 45% | |||
Mr. Black | 35% | |||
Mr. Brock | 35% | |||
Mr. LeBlanc | 30% | |||
Mr. Collin | 45% | |||
For the annual incentive awards, annual quantitative performance goals are established by the Compensation Committee. These goals, which relate to key performance metrics selected from the Strategic Plan, are the same for all employees (including Executive Officers), with the exception of Usource employees,executive officers) to ensure that employees are focused on common bottom-line business, customer service, and operational results. (Usource employees are rewarded using performance metrics that are directly related to the growth and success of Usource, also as established by the Committee.) These goals are discussed below in the sectionsubsection entitledIncentive CompensationPerformance Metrics and Goals. Under the Management Incentive Plan, Executive Officersexecutive officers receive a cash award if the quantitative goals that are set by the Committee are met. Each Executive Officer’sexecutive officer’s Management Incentive Plan target award is established as a percentage of base salary based on the market median of the broad-based published compensation survey group for his or her position when compared to other comparable companies, calculated using data provided by Willis Towers. The Committee also used information from the proxy statements of the Company’sour peer group, at the 25th25th percentile target, as a secondary source to set the CEO’s Management Incentive Plan target award. The table on the following pageabove shows the Management Incentive Plan target awards for 20162019 as a percentage of base salary for the Named Executive Officers.
Actual awards may be less than or greater than the target awards depending upon actual results achieved. In addition, the Committee has the authority to increase or decrease the annual incentive award under our incentive plans, including the Management Incentive Plan, and restricted stock awards under the Stock
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Plan. The Committee also has the freedom to decide to pay no award when one would otherwise be paid. The Committee has in the past exercised its discretion to both increase and decrease award payments when such calculation did not properly balance the interests of employees and shareholders. For awards for 2019 results, the Committee did not exercise any discretion to adjust the awards.
Second Amended and Restated 2003 Stock Plan
The Unitil Corporation Second Amended and Restated 2003 Stock Plan (as amended, the “Stock Plan”) was initially approved by shareholders at the 2003 annual meeting of shareholders, amended and restated on March 24, 2011, and again amended and restated, effective April 19, 2012. Participation in the Stock Plan is currently limited to Directors, Executive Officers
Stock Plan Objectives ◾ Optimize profitability and growth through incentives that link the personal interests of participants to those of shareholders through the ownership of Unitil common stock ◾ Provide participants with an incentive for excellence in individual performance ◾ Promote teamwork among participants ◾ Encourage stock ownership in the Company for all employee participants in the Stock Plan | The Unitil Corporation Second Amended and Restated 2003 Stock Plan (as amended, the “Stock Plan”) was initially approved by shareholders at the 2003 annual meeting of shareholders, amended and restated on March 24, 2011, and again amended and restated, effective April 19, 2012. Participation in the Stock Plan is currently limited to Directors, executive officers and other employees and consultants selected by the Compensation Committee. Restricted Stock and Restricted Stock Units (“RSUs”) may be issued to participants in the Stock Plan. The objectives of the Stock Plan are directly tied to the principal compensation objective. |
The Committee feels that equity-based compensation ensures that executive officers have a continuing stake in our long-term success. Executive officers are subject to both stringent stock ownership requirements as well as a retention requirement which stipulates that all forms of equity received as compensation from Unitil be held until retirement or other separation from the Company. The Committee believes that the retention requirement provides an additional element of incentive to increase shareholder | ||||
Named Executive Officer Mr. Meissner Ms. Vaughan Mr. Black Mr. Brock Mr. LeBlanc Mr. Collin | Stock Plan 2019 Target Award $634.846 $145,297 $80,951 $80,951 $80,951 $0 |
value over the long term. The details of the stock ownership and retention requirements are discussed in greater detail below.
Generally, in late January or early February of each year, the Company grantsCommittee approves annual awards in the form of restricted stock to current Executive Officersexecutive officers and employee participants in the Stock Plan based upon the attainment of the samea set of specified goals as those selected for the annual cash incentive awards discussed above. As with the annual cash incentive awards, target awards are established for each participant that generally vary based upon the job grade level of sucheach participant’s position in the Company in accordance with survey data provided by Willis Towers. The objectivesEach executive officer’s target restricted stock award is set by the Committee based upon recommendations from Willis Towers, with the goal of granting a target award with a value equal to the market median of the broad-based published compensation survey group at the time of grant, which translates to the Stock Plan which tie back totarget award value being set as the principal compensation objective, are to optimize profitability and growth through incentives that link the personal interests of participants to those of shareholders, to provide participants with an incentive for excellence in individual performance, to promote teamwork among participants, and to encourage stock ownership in the Company. Further, equity-based compensation ensures that Executive Officers have a continuing stake in the Company’slong-term success.
Named Executive Officer Target Award (% of Base Salary) Mr. Schoenberger 65% Mr. Collin 45% Mr. Meissner 45% Mr. Black 35% Mr. Long 35%
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Awards of restricted stock generally vest fully over a period of four years at a rate of 25% each year subject to continued employment with | ||
The value of each possible award extends from a minimum threshold of 50% of the target restricted stock award amount to a maximum of 150% of the target award amount. This award is then reduced for anticipated income taxes and Medicare taxes, with Stock Plan participants receiving the shares net of such taxes, subject to the |
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The value of each possible award extends from a minimum of 50% of the target restricted stock award amount to a maximum of 150% of the target award amount. This award is then reduced for anticipated income taxes and Medicare taxes, with Stock Plan participants receiving the shares net of such taxes, subject to the vesting schedule. As the shares vest, they become taxable income to the participant, and the taxes, previously accounted for, are credited back to participants. This procedure reduces both the dilutive effect of the Stock Plan by granting fewer shares than would otherwise be granted, and the volatility of the Company’s stock in the market by eliminating stock sales that would otherwise be completed to pay personal income taxes.
The net restricted stock award provides a market competitive award while minimizing both dilution and volatility. In addition, the Committee may exercise discretion to vary the size of the restricted stock award, but chose not to do so for the restricted stock awards for 2019 performance.
Stock Ownership and Holding Requirement for Executive Officers
Chairman, CEO and Chief Financial Officer All Other Named Executive Officers | 4X 3X 2X |
own shares of Unitil common stock in the equivalent value of a multiple of base salary. All shares of Unitil common stock that are owned directly or beneficially, shares of restricted stock that are awarded, whether vested or unvested, as well any shares of stock held in the Unitil Stock Fund of the Tax Deferred Savings and Investment Plan will be counted towards the required total. Any newly appointed Named Executive Officer will have four years from the date of appointment to obtain the required shares of stock. The required equivalent value for all Named Executive Officers is recalculated annually on January 1. Any executive officer who may regress into a shortfall position as a result of the January 1 recalculation after expiration of the initialphase-in period will have until December 31 of that calendar year to meet the new required equivalent value. All current Named Executive Officers as of the date of this proxy statement meet the ownership requirement.
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All Named Executive Officers are also required to hold all forms of equity received as compensation until retirement or other separation from the Company. The Board, in its sole discretion, may approve a waiver to this policy as circumstances may warrant. To date, no such waivers have been proposed or approved. Additional information concerning the share ownership of Named Executive Officers can be found in the section of this proxy statement entitledShare Ownership - Beneficial Ownership.
Incentive Compensation Performance Metrics and Goals
The Company hasWe have two compensation plans in which the Named Executive Officers participate where performance metrics and goals are integrally and directly linked to the compensation awarded—the Management Incentive Plan and the Stock Plan.
Named Executive Officer Stock Plan Target Award Mr. Schoenberger $598,230 Mr. Collin $136,917 Mr. Meissner $136,917 Mr. Black $76,282 Mr. Long $76,282 COMPENSATION COMMITTEE PROCEDURE: Annual Grant of Restricted Stock Tax Adjustment Calculation 1: Set the dollar amount of the stock award - the value of the target restricted stock award shall be equal The performance metrics and goals are also directly linked to the value ofStrategic Plan.
Selecting the market median award ofPerformance Metrics and Setting the broad-based published compensation survey group 2: Subtract the federal and Medicare tax impacts of the award to get the net award value 3: Divide the net award value by the current stock price to calculate a net award in sharesGoals
Performance metrics and goals are recommended by management annually as part of the Company annually instrategic planning process. In the Strategic Plan.Plan, performance metrics and goals are aligned with the strategies defined for the coming year. The Strategic Plan includes suggested targets for each performance metric, and iswhich are reviewed and approved by the Board each year. In connection with the responsibilities outlined in theThe Compensation Committee Charter,then selects the key performance metrics and goals are then selected byto be applied to the Compensation Committee each year,Management Incentive Plan and the Committee may also consider recommendations from Willis Towers. The Committee selects the target performance goals from the Strategic Plan and determines a minimum and maximum performance level for each performance metric. Additional credit, or “weight,” is not provided for performance that achieves values greater than the maximum determined by the Committee, and no credit is given for performance that fails to achieve the minimum determined by the Committee.Stock Plan.
The table on the following page shows the performance metrics and goals selected by the Compensation Committee for the 2016
When selecting the key performance metrics, the Committee considers a number of factors, including the appropriate mix of financial, operations, and customer centric metrics, as well as the obligation to meet the various state public utility regulatory requirements to include a certain percentage of operations and customer-focused metrics. The Committee also reviews prior years’ goals and results to ensure stretch goals are set, and may also consider recommendations from Willis Towers when selecting the optimal combination for the coming year. The Committee believes that a prudently set and balanced mix of key performance metrics provides the opportunity, and the incentive, for all employees to contribute to our measurements of success. The table below shows the performance metrics selected and goals set by the Committee for the |
2019 annual incentive awards under the Company’sour incentive plans, including the Management Incentive Plan and the Stock Plan, as well as the performance results calculated for 2016.
2016 PERFORMANCE METRICS, GOALS AND RESULTS
2019.
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2019 PERFORMANCE METRICS, GOALS AND RESULTS
Metric: 2019
| Award Category & Goals
| Result
| Weight
| Factor
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Weighted Performance
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Earnings Per Share | Threshold: $2.05 Target: $2.15 to $2.25 Maximum: $2.30
| $2.31 | 40% | 1.50 | 60% | |||||
Gas Safety | Threshold: 84% Target: 86% Maximum: 88%
| 86.4% | 10% | 1.10 | 11% | |||||
Electric Reliability | Threshold: 150 minutes Target: 118 minutes Maximum: 85 minutes
| 82 minutes | 10% | 1.50 | 15% | |||||
Customer Satisfaction | Threshold: 81% Target: 86% Maximum: 91%
| 87% | 10% | 1.10 | 11% | |||||
Cost Per Customer | Electric Threshold: $486 Target: $429 Maximum: $395
| $369 | 15% | 1.50 | 22.5% | |||||
Gas(6) Threshold: $2,272 Target: $852 Maximum: $1,265
| $483 | 15% | 1.50 | 22.5% | ||||||
TOTAL
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2019 Key Performance Metrics and Goals: Defined
Earnings Per Share (“EPS”)
The goals for the EPS metric are set as a target band based on the approved 2019 EPS budget of $2.20 with a $0.10 band greater than or less than the approved budget to reflect a margin for weather variability. The Compensation Committee set the target as a band of $2.15 to $2.25 because our overall earnings are partially dependent upon the weather, an element outside of
6 | The Gas Cost Per Customer metric threshold (lower than the most costly third) and maximum (within the least costly third) are both median-based calculations, which means the value in the middle of the range of each of the most costly third and the least costly third. The Target is set as an average of all peer company costs. For the 2019 threshold and maximum calculations, one of our defined peer companies experienced an extraordinary event that caused its O&M cost per customer to increase significantly above the other peer companies, which is why these two values are unusually high. However, when calculating peer-based metrics results, it is our policy to not exclude an extraordinary event that may occur, including our own, should that be the case. |
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management’s control. The Committee also considered the 2018 EPS of $2.23 as an element of the target band, as well as the required earnings to pay the dividend. The Committee agreed that a $0.15 range from the approved budget to the threshold, and a $0.10 range from the approved budget to the maximum was a reasonable stretch goal, resulting in an approximate increase of 5.7% in all EPS goals compared to those set for 2018 performance.
Gas Safety
Gas safety is measured as the percentage of the response time to natural gas odor calls answered within apre-set response time window. In 2019, the response time target is based on a best in class30-minute response standard, which was lowered significantly from the60-minute response standard in 2018. Similar to electric reliability, described below, the shorter the response time standard, the more rigorous the target. In defining the threshold, the Committee considered the minimum acceptable percentage to be not less than 84% and the maximum percentage to be at least 88% of the natural gas odor calls responded to in person be within 30 minutes.
Electric Reliability
Electric reliability is benchmarked using an industry standard index, SAIDI (System Average Interruption Duration Index). SAIDI represents the total length of time the average customer is without electric service during the year, measured in minutes. For added perspective on this metric, the lower the number of minutes (without electric service), the more stringent the target. The target for reliability performance is determined in accordance with SAIDI using a blend of Massachusetts Department of Public Utilities Service Quality Index, and the New Hampshire10-year performance history with IEEE (Institute of Electrical and Electronics Engineers) exclusionary rules. For 2019, our SAIDI was calculated as 82 minutes, anall-time low.
Customer Satisfaction
Customer satisfaction is measured using direct customer survey feedback to the question “How satisfied are you with the service, excluding price, you are receiving from Unitil?” as compared to the current national benchmark for residential customer satisfaction as compiled by Escalent, an independent human behavior and analytics firm. The national benchmark in 2019 is 86%, which was set as the target. In 2019, we ranked third nationally among the 112 participating utilities for customers believing we provide safe, reliable service, and sixth overall in our ability to restore service when an outage does occur. Compared to our defined utility peer group(mid-Atlantic and northeast utilities), we ranked first among utilities for customers believing we provide safe, reliable service, and in our ability to restore service when an outage does occur, as well as in being responsive to our customers’ needs, having friendly, courteous employees, being easy to partner with as a business, being a company you can trust, having bills that are easy to understand, and the overall value of our customer service programs.
Cost Per Customer
Distribution cost per customer is measured against same-year performance of the weighted average of peer group utility companies located in the northeastern United States, based on
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data reported in Federal Electric Regulatory Commission (“FERC”) and other state reports. Results are weighted 50% electric and 50% gas. The threshold is defined as a lower operations and maintenance (“O&M”) rate per customer than the most costly third of peer utility companies; target is defined as a lower O&M rate per customer than the peer average; maximum is defined as an O&M rate per customer within the least cost third of peer utility companies.7For the “peer utility companies” referenced in the table above,this metric, actual performance is compared to a select group of utility subsidiary companies that have service territory characteristics comparable to Unitil. This peer group is comprised of: Algonquin Power & Utilities Corp., Avangrid, Blackstone Gas Co., Emera, Inc., Eversource, Fortis, Inc., Gas Natural, Gaz Métro, National Grid, and NiSource, Inc.
The Role of the Compensation Committee
The Compensation Committee generally meets annually in late January or early February each year,the first fiscal quarter following certification of the previous fiscal year financial results by the Company’sour independent registered public accounting firm to review the performance metrics, results and to approve the payout of the annual cash incentive awards and to approve the annual grant of restricted stock awards under the Stock Plan. The Committee approved the 2017 annual cash incentive awards and the annual grant of restricted stock awards under the Stock Plan for 2019 performance on January 30, 2017.28, 2020.
Incentive Compensation Formulas
Performance Factor
For purposes of the restricted stock awards under the Stock Plan, the Performance Factor was determined based upon the Weighted Performance Factor as shown below.
The Weighted Performance Factor, as shown in the formulas |
“maximum” assigned a “factor” of 150%. Additional credit, or “weight,” is not provided for performance that achieves values greater than the maximum determined by the Committee, and no credit is given for performance that fails to achieve the threshold determined by the Committee.
7 | 2019 electric peer companies include Algonquin Power & Utilities Corp., Avangrid, Emera, Inc., Energir (formerly, Gaz Metro), Eversource Energy, Fortis, Inc., and National Grid. 2019 gas peer companies include Algonquin Power & Utilities Corp., Avangrid, Bangor Natural Gas, Blackstone Gas Co., Eversource Energy, Fortis, Inc., National Grid and Nisource, Inc. |
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As provided in the Compensation Committee Charter, the Committee has discretion to establish policies, objectives, rules, and other procedures necessary for the effective operation of our compensation plans and programs. This discretion includes the authority to increase or decrease the annual cash incentive award payments under our incentive plans, including the Management Incentive Plan and the restricted stock awards under the Stock Plan. The Committee also has the freedom to | Weighted Performance Factor 50% to 69% 70% to 89% 90% to 109% 110% to 129% 130% to 150% | Performance Factor 50% 75% 100% 125% 150% |
objectives, rules, and other procedures necessary for the effective operation of the Company’s compensation plans and programs. This discretion includes the authority to increase or decrease the annual cash incentive award payments under the Company’s incentive plans, including the Management Incentive
ANNUAL CASH INCENTIVE AWARD CALCULATION Plan Year Base Pay X Target Percent X Weighted Performance Factor = Incentive Cash Award Payment ANNUAL GRANT OF RETRICTED STOCK AWARD CALCULATION Target Restricted Stock Grant X Performance Factor = Actual Restricted Stock Grant WEIGHTED PERFORMANCE FACTOR PERFORMANCE FACTOR 50% to 69% 70% to 89% 90% to 109% 110% to 129% 130% to 150% 50% 75% 100% 125% 150%
Plan and the restricted stock awards under the Stock Plan. The Committee also has the freedom to decide to pay no award when one would otherwise be paid. The Committee has in the past exercised its discretion to both increase and decrease certain awards when such calculation did not properly balance the interests of the employees and the shareholders. For awards for 20162019 results, the Committee did not exercise any discretion to adjust the awards.
Other Benefits
Unitil Corporation Retirement Plan (the “Retirement Plan”)
The Retirement Plan is a traditional Defined Benefit Pension Plan covering certain employees of Unitil and its subsidiaries. Itour subsidiary companies that provides retirement income benefits based upon years of service, age at retirement and final five-year average salary. The Retirement Plan is closed to new participants, effective January 1, 2010. New employeesEmployees hired after January 1, 2010 participate in an enhanced 401(k) plan instead of the Retirement Plan. In addition, at the time of closure of the Retirement Plan, existing employee participants were offered aone-time opportunity to elect to remain an active participant in the Retirement Plan, or to accept a frozen Retirement Plan benefit and move to the enhanced 401(k) Plan.
Supplemental Executive Retirement Plan (“SERP”)
The purpose of the SERP is to provide enhanced retirement benefits to certain key executives selected by the Board in order to encourage continued service by these executives until retirement. Currently, Mr. Schoenberger, Mr. Collin, Mr. Meissner, Mr. Black and Mr. Long have been named by the Board to participate in the SERP.
The purpose of the SERP is to provide enhanced retirement benefits to certain key executives selected by the Board in order to encourage continued service by these executives until retirement. Currently, only Mr. Meissner and Mr. Black have been named by the Board to participate in the SERP. The SERP is closed to any new entrants. | SERP Enhancement of Retirement Plan Benefits ◾ all cash compensation towards the benefits formula is counted which provides a bypass to the compensation limits imposed by the Internal Revenue Service (the “IRS”) ◾ compensation received from the annual cash incentive awards in the benefits calculation is included ◾ a final three-year average of salary and annual cash incentive compensation is used to determine the benefits from the SERP |
See also the Pension Benefits Table in the section entitledCompensation - Compensation of Named Executive Officers for the present value of the accumulated benefit for each Named Executive Officer.
Change of Control Agreements
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Deferred Compensation Plan
The Unitil Corporation Deferred Compensation Plan (the “DC Plan”) is anon-qualified deferred compensation plan that provides a vehicle for participants to accumulatetax-deferred savings to supplement retirement income. The DC Plan, which was effective January 1, 2019, is open to senior management or other highly compensated employees as determined by the Board of Directors, and may also be used as a tool for recruitment and retention purposes for newly hired senior executives. The DC Plan design mirrors our Tax Deferred Savings and Investment Plan formula, but provides for contributions on compensation above the IRS limit, which will allow participants to defer up to 85% of base salary, and up to 85% of any cash incentive for retirement. We may also elect to make discretionary contributions on behalf of any participant in an amount determined by the Board. Currently, only Mr. Brock participates in the DC Plan. We anticipate that additional executive officers will participate in the DC Plan in the future.
Change of Control Agreements
We provide certain executives with protection from job loss due to a change of control in the Company in the form of Change of Control Agreements (“Change of ControlCOC Agreements”). This protection is primarily provided so that the executives will make decisions and take actions that are in the best interest of shareholders and not unduly influenced by the fear of job loss. The Company maintainsWe maintain bothtwo-year (executed(originally executed in 2001 and later) and three-year (executed(originally executed before 2001) Change of ControlCOC Agreements. Mr. Schoenberger,Black and Mr. Brock each have, and prior to his retirement on May 1, 2019, Mr. Collin and Mr. Black havehad, a three-year Change of Control Agreements,COC Agreement, and Mr. Meissner and Mr. LongLeBlanc each have, and prior to her resignation on March 16, 2020, Ms. Vaughan had, atwo-year Change of Control Agreements in place.COC Agreement.
SERP ENHANCEMENT OF RETIREMENT PLAN BENEFITS •all cash compensation towards the benefits formula is counted, thereby providing a bypass to the compensation limits imposed by the Internal Revenue Service (the “IRS”); •compensation received from the annual cash incentive awards in the benefits calculation is included; and•a final three-year average of salary and annual cash incentive compensation is used to determine the benefits from the SERP.
All existing Change of ControlCOC Agreements are “double trigger” agreements, meaning that two events must occur in order for payments to be made: (i) a change of control must occur; and (ii) an adverse employment action must occur, meaning that the Companywe must terminate the executive’s employment other than for cause or disability or the executive must terminate his or her employment for good reason. Double trigger agreements were chosen to protect the shareholders from executives choosing to leave the CompanyUnitil as result of a change of control where there is no adverse employment action. All ChangeNo existing COC Agreements contain any excise tax or other gross up provision of Controlany kind. We believe that all COC Agreements were amended effective June 30, 2008, with the objective of complyingcomply with the provisions of IRS Code Section 409A (“409A Amendment”).409A. See also the section entitledCompensation - Compensation of Named Executive Officers –Potential Payments Upon Termination or Change of Control for a full description of “change of control” as defined in the Change of ControlCOC Agreements.
Employment Agreement - Robert G. Schoenberger– Thomas P. Meissner, Jr.
The CompanyWe entered into an employment agreement (the “Employment Agreement”) with Mr. Schoenberger, which was effective November 1, 2015Meissner upon his transition to Chairman, CEO and President on April 25, 2018, for a term of three years, with an end date of October 31, 2018.years. For a detailed description of the Employment Agreement, see the sections entitledCompensation - Compensation of Named Executive Officers –Employment Agreement of the Chief Executive OfficerandCompensation - Compensation of Named Executive Officers –Potential Payments Upon Termination or Change of Control.
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Executive Perquisites
The Company limitsWe limit the use of perquisites as a method of compensation. In 2019, Mr. Schoenberger receives annual reimbursement forMeissner and Ms. Vaughan both received a club membershipmonthly automobile allowance, and is alsoMr. LeBlanc was provided with a CompanyCompany-owned automobile for both business and personal use. Please see the All Other Compensation column of the Summary Compensation Table in the section entitledCompensation - Compensation of Named Executive Officers. Both of theseThe perquisites were provided to Mr. SchoenbergerMeissner are pursuant to his Employment Agreement. No otheremployment agreement, and with the exception of Ms. Vaughan and Mr. LeBlanc as described above, no perquisites are provided to Mr. Schoenberger or any other Named Executive Officer.
INTERNAL REVENUE CODE SECTION 162(M)
In general, under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the Companywe cannot deduct, for federal income tax purposes, compensation in excess of $1,000,000 paid to the CEO, CFO and certain Executive Officers.executive officers. However, for prior to the 2018 tax year, this deduction limitation doesdid not apply to compensation that constitutesconstituted “qualified performance-based compensation” within the meaning of Section 162(m) of the Code and applicable regulations. The Compensation Committee considersregulations, as then in effect. In 2018, the limitations on deductions imposed by“qualified performance-based compensation” exception under Section 162(m) of the Code was eliminated, other than with respect to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017 and the exception for “qualified performance-based compensation.”is not materially modified after that date. The Committee reserves its right to authorize executive compensation that may or may not be subject to the deduction limitations of Section 162(m) of the Code when it believes that such compensation is appropriate and in the best interests of the CompanyUnitil and itsour shareholders.
STOCK OWNERSHIP REQUIREMENT FOR EXECUTIVE OFFICERS
The Company does not have a formal policy requiring stock ownership by Executive Officers. One of the key objectives of the Stock Plan is to promote ownership of the Company’s stock by members of management, including Executive Officers. The Stock Plan has been successful in this objective, with approximately 99% of the restricted stock granted to date that has vested being held by Executive Officers as unrestricted common stock.