| | |
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| | |
| | | | | |
| | | | We Do NOT Have This Practice | |
| | | | | |
✓
| ✔ | | | Incentive award metrics that are objective and tied to key company performance measures | | ✓
| X | | | Repricing of options without stockholder approval | |
| ✔ |
✓
| | Share ownership guidelines applicable to executive officers and independent directors | | ✓
| X | | | Hedging or pledging transactions or short sales by executive officers or directors | |
| ✔ |
✓
| | Compensation recoupment policy | | ✓
| X | | | Taxgross-ups for Named Executive Officers (other thangross-ups that are available to all employees who receive relocation benefits) | |
| ✔ |
✓
| | Limited perquisites | | ✓
| X | | | Automatic single-trigger equity vesting upon achange-in-control | �� |
| ✔ |
✓
| | Prohibition against pledging unearned shares in our long-term incentive plan | | ✓
| X | | | Excise taxgross-ups underchange-in-control agreements | |
| ✔ |
✓
| | Double-trigger severance benefits upon achange-in-control | | ✓
| X | | | Excessive pension benefits or defined benefit supplemental executive retirement plan | |
| ✔ |
✓
| | One-year minimum vesting for equity awards | | ✓
| X | | | Excessive use ofnon-performance based compensation | |
| ✔ |
✓
| | Significant portions of the executive compensation opportunity that are entirely contingent on performance againstpre-established performance goals | | ✓
| X | | | Excessive severance benefits | |
| ✔ |
✓
| | Independent compensation consultant | | ✓
| X | | | Dividend equivalent rights or dividends on unvested performance shares or restricted stock units granted to executive officers | |
| ✔ |
✓
| | AnnualSay-on-Pay vote by stockholders | | |
| | | | | | | | | | | Stock Symbol : NI Stock Exchange: NYSE
Registrar and Transfer Agent: Computershare Investor Services
State of Incorporation: Delaware
Corporate Headquarters: 801 E. 86th Avenue, Merrillville, Indiana 46410
Corporate Website: www.nisource.com
| | | | | | BUSINESS AND STRATEGYNiSource is
| | | | | | We are an energy holding company under the Public Utility Holding Company Act of 2005 whose subsidiaries are fully regulated natural gas and electric utility companies serving customers in seven states. NiSource generatesWe generate substantially all of itsour operating income through these rate-regulated businesses.NiSource’sbusinesses which are summarized for financial reporting purposes into two primary reportable segments: Gas Distribution Operations and Electric Operations.
| | | | | | Our goal is to develop strategies that benefit all stakeholders as it addresseswe address changing customer conservation patterns, developsdevelop more contemporary pricing structures and embarksembark on long-term infrastructure investment programs. These strategies are intended to improve reliability and safety, enhance customer servicesservice, and reduce emissions, while generating sustainable returns. Additionally, NiSource continues to pursue regulatory and legislative initiatives that will allow residential customers not currently on NiSource’s system to obtain gas service in a cost effective manner. | | | | | | Our directors possess the necessary breadth and depth of skills and experience to oversee the Company’sour business operations and long term strategy as set forth in “Proposal 1 – Election of Directors – Biographical Information and Skills.” | | | | |
TABLE OF CONTENTS The accompanying proxy is solicited on behalf of the Board for the Annual Meeting to be held at the Hyatt Rosemont, 6350 North River Road, Rosemont, Illinois 60018 on Tuesday, May 8, 2018,19, 2020, at 10:1:00 a.m., local time.p.m. Central Time, in a virtual format only via live audio webcast at www.virtualshareholdermeeting.com/NI2020. The common stock, $.01 par value per share, of the Company represented by the accompanying proxy will be voted as directed. If you return a signed proxy card without indicating how you want to vote your shares, the shares represented by the accompanying proxy will be voted as recommended by the Board “FOR”Board: “FOR” all of the nominees for director; “FOR” “FOR” advisory approval of the compensation of the Company’s named executive officers (the “Namedour Named Executive Officers”); “FOR”Officers; “FOR” the ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for 2020; “FOR” approval of the Company’s independent auditor for 2018;NiSource Inc. 2020 Omnibus Incentive Plan; and “AGAINST” “AGAINST” the stockholder proposal regarding stockholder right to act by written consent. This proxy statement and the accompanying proxy card are first being sent to stockholders on April 6, 2018.13, 2020. We will bear the expense of this mail solicitation, which may be supplemented by telephone, facsimile, email and personal solicitation by our officers, employees and agents. To aid in the solicitation of proxies, we have retained D.F. King for a fee of $9,500, plus reimbursement of expenses. We may incur additional fees if we request additional services. We will also request brokerage houses and other nominees and fiduciaries to forward proxy materials, at our expense, to the beneficial owners of stock held as of 5:00 p.m. Eastern Time on March 13, 2018,24, 2020, the record date for voting. We use the terms “NiSource,” the “Company,” “we,” “our” and “us” in this Proxy Statementproxy statement to refer to NiSource Inc.
Holders of shares of common stock as of the close of business on March 13, 2018,24, 2020, are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of March 13, 2018, 337,567,01524, 2020, 382,683,443 shares of common stock were issued and outstanding. Each share of common stock outstanding on that date is entitled to one vote on each matter presented at the Annual Meeting.
If you are a “stockholder of record” (that is, if your shares of common stock are registered directly in your name on the Company’s records), you may vote your shares by proxy in advance of the Annual Meeting using any of the following methods: Telephoning the toll-free number listed on the proxy card; Using the Internet website listed on the proxy card;card: www.proxyvote.com; or Marking, dating, signing and returning the enclosed proxy card. All votes must be received by the proxy tabulator by 11:59 p.m. Eastern Time on May 7, 2018.18, 2020. If your shares are held in a brokerage account or by a bank, broker, trust or other nominee (herein referred to as a “Broker”), you are considered a “beneficial owner” of shares held in “street name.” As a beneficial owner, you will receive proxy materials and voting instructions from the stockholder of record that holds your shares. You must follow the voting instructions in order to have your shares of common stock voted.
Discretionary Voting by Brokers and “Broker Non-Votes”If your shares are held in street name and you do not provide the Broker with instructions as to how to vote such shares, your Broker will only be able to vote your shares at its discretion on certain “routine” matters as permitted by New York Stock Exchange (“NYSE”) rules. The proposal to ratify the appointment of our independent auditorregistered public accounting firm is the only proposal considered a routine matter and, accordingly, at the Annual Meeting, Brokers will only have discretionary authority to vote your shares with regard to Proposal No. 3, the ratification of the appointment of Deloitte as our independent auditorregistered public accounting firm for 2018.2020. A “brokernon-vote” occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial owner as to how the beneficial owner would like the shares to be voted. Brokers will not have discretionary authority to vote your shares with respect to the election of directors,other proposals to be presented at the advisory approval of Named Executive Officer compensation or consideration of the stockholder proposal regarding stockholder right to act by written consent, if such proposal is properly presented.Annual Meeting. Therefore, it is important that you instruct your Broker or other nominee how to vote your shares. If Brokers exercise thistheir discretionary voting authority on Proposal No. 3, such shares will be considered present at the Annual Meeting for quorum purposes and brokernon-votes will occur as to each of the other proposals presented at the Annual Meeting, which are considered“non-routine. “non-routine.”
Voting Shares Held in the Company’sOur 401(k) Plan If you hold your shares of common stock in theour 401(k) Plan, those shares are held in the name of Fidelity Management Trust Company (“Fidelity”), the administrator of the 401(k) Plan. You will receive a proxy card that includes the number of shares of our common stock held in the 401(k) Plan. You should instruct Fidelity how to vote your shares by completing and returning the proxy card or by voting your shares by Internet or by telephone, as detailed above under “Voting Your Proxy.” If you do not instruct Fidelity how to vote your shares, or if you sign the proxy card with no further instructions as to how to vote your shares, Fidelity will vote your shares in the same proportion as the shares for which it receives instructions from all other participants, to the extent permitted under applicable law. To allow enough time for Fidelity to vote your shares in accordance with your direction, your voting instructions must be received by Fidelity no later than 11:59 p.m. Eastern Time on May 3, 2018.14, 2020.
TABLE OF CONTENTS Attending and Voting During the Virtual Annual Meeting Format of Meeting. In light of public health concerns regarding the coronavirus (“COVID-19”) outbreak, this year’s Annual Meeting will be conducted in PersonYou also may comea virtual format only in order to assist in protecting the health and well-being of our stockholders and employees and to provide access to our stockholders regardless of geographic location. There is no in-person meeting for you to attend. We designed the format of this year's Annual Meeting to ensure that our stockholders who attend the Annual Meeting will be afforded similar rights and voteopportunities to participate as they would at an in-person meeting.
Attending the Meeting. You are entitled to attend and participate in the Annual Meeting if you were a stockholder of record as of the close of business on March 24, 2020, the record date, or hold a legal proxy for the Annual Meeting provided by your Broker as described below.To attend and participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/NI2020 and enter your 16-digit control number, which can be found on your proxy card, voting instruction form or email you received with your proxy materials. If your shares in personare held by obtaininga Broker and submittingyou do not have a ballotcontrol number, please contact your Broker as soon as possible so that willyou can be available atprovided with a control number. Voting During the Meeting. You may vote during the Annual Meeting. However, ifMeeting by following the instructions available on the meeting website during the meeting. If your shares are held in street name by a Broker, then, in order to be able to vote at the Annual Meeting, you must obtain an executed legal proxy from the Broker indicating that you were the beneficial owner of the shares on March 13, 2018,24, 2020, the record date for voting, and that the Broker is giving you its proxy to vote the shares.If your shares are held in the 401(k) Plan, you will not be able to vote your shares at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described above under “Voting Your Proxy.” Votes cast in personat the Annual Meeting or represented by proxy at the Annual Meeting will be tabulated by the inspectorsinspector of election. If
Technical Assistance. The Annual Meeting will begin promptly at 1:00 p.m. Central Time. We encourage you plan to attendaccess the Annual Meeting approximately 15 minutes in advance to allow ample time for you to log in to the meeting and test your computer audio system. We recommend that you carefully review the above procedures needed to gain admission in advance. Technicians will be ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please so indicate when you return your proxy card, socall the technical support number that we may send you an admission ticket and makewill be posted on the necessary arrangements. Stockholders who plan to attendmeeting login page at www.virtualshareholdermeeting.com/NI2020. Submitting Questions During the Meeting. As part of the Annual Meeting, must present valid, government-issued photo identification alongwe will hold a live question and answer session during which we intend to answer questions submitted during the meeting that are relevant to the purposes of the meeting and the Company's business in accordance with an admission ticket or evidence of beneficial ownership.the Annual Meeting procedures posted on the meeting website, as time permits. Questions may be submitted by stockholders that have used 16-digit control numbers to enter the meeting at www.virtualshareholdermeeting.com/NI2020. Questions and answers may be grouped by topic and substantially similar questions may be grouped and answered once. You may revoke your proxy at any time before a vote is taken or the authority granted is otherwise exercised. To revoke a proxy, you may send a letter to the Company’sour Corporate Secretary (which must be received before a vote is taken) indicating that you want to revoke your proxy, or you can supersede your initial proxy by submitting a duly executed proxy bearing a later date, voting by telephone or through the Internet on a later date, or attending the virtual Annual Meeting and voting in person.during the meeting. Attending the virtual Annual Meeting will not in and of itself revoke a proxy.
A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the outstanding shares of common stock, present in personduring the virtual Annual Meeting or represented by proxy, will constitute a quorum at the Annual Meeting. The inspectors of election appointed for the Annual Meeting will determine whether or not a quorum is present. Abstentions are counted for purposes of determining whether a quorum is present. As explained above under “Discretionary Voting by Brokers and ‘BrokerNon-Votes,” if Brokers exercise their discretionary voting authority on Proposal No. 3, such shares will be considered present at the meeting for quorum purposes and brokernon-votes will occur as to each of the other proposals presented at the Annual Meeting. PROPOSAL 1 — ELECTION OF DIRECTORS At the recommendation of the Nominating and Governance Committee, the Board has nominated the persons listed below to serve as directors, each for a one-year term, beginning at the Annual Meeting on May 8, 2018,19, 2020, and expiring at the 20192021 annual meeting of the Company’sour stockholders (the “2019“2021 Annual Meeting”) and until their successors are duly elected or appointed and qualified. The nominees include nineeleven independent directors, as defined in the applicable rules of the NYSE, and our President and Chief Executive Officer (“CEO”). The Board does not anticipate that any of the nominees will be unable to serve, but if any nominee is unable to serve, the proxies will be voted in accordance with the judgment of the person or persons voting the proxies. All of the nominees currently serve on the Board. The following chart provides Set forth below is information regarding all of our nominees (each of whom has consented to being named in the Proxy Statement and to serving, if elected).
In order to be elected, a nominee must receive more votes cast in favor of his or her election than against election. Abstentions by those present or represented by proxy will not be counted as a vote cast either “for” or “against” with respect to the election of directors and, therefore, will have no effect on the outcome. Brokers will not have discretionary authority to vote on the election of directors. Accordingly, there could be broker non-votes which will have no effect on the vote. Under our Corporate Governance Guidelines, each nominee will tender a conditional resignation prior to the Annual Meeting, effective only if both (a) the votes “against” a nominee’s election exceed the votes “for” election (a “failed re-election”) and (b) such resignation is subsequently accepted by the Board. Any failed re-election will be referred to the Nominating and Governance Committee, which will make a recommendation to the Board as to whether to accept or reject the resignation. The Board will make a determination and publicly disclose its decision, the rationale for the decision and the directors who participated in the process within 90 days after the election. The Board expects the director who has had a failedre-electionnot been re-elected to abstain from participating in the Nominating and Governance Committee or Board discussion or vote regarding whether to accept his or her resignation offer. A director who has had a failed re-election may participate in discussions or votes with respect to other directors who have had a failed re-election.Biographical Information and Skills Biographical information regarding each director nominee and his or her qualifications to serve as a director is set forth on the succeeding pages. Our director nominees possess the necessary breadth and depth of skills and experience to oversee the Company’sour business operations and long-term strategy as shown below: *✔ | | | Industry Experience | ✓ Industry Experience
| | | • | | | Gas Distribution or Transmission (50%) | | | | • | | | Electricity Distribution, Transmission or Generation (50%) | | | | • | | | Energy Markets or Technology (70%(67%) ✓
| ✔ | | | Other Operations / Customer Service (90%(92%) ✓
| ✔ | | | Government and Regulatory (90%(92%) ✓
| ✔ | | | Public Company Board (80%(75%) ✓
| ✔ | | | Financial or Capital Markets (90%(83%) ✓
| ✔ | | | |
✔ | | ✓
| | ✔ | | | | ✔ | | | Environmental, Sustainability, Corporate Responsibility and Ethics (100%) ✓
| ✔ | | | Non-Profit Board / Community Service (100%(92%) ✓
| ✔ | | | CEO (Current or Prior) (70%(83%) ✓
| ✔ | | | Strategic Planning (100%) ✓
| ✔ | | | Financial Literacy and Expertise (100%) ✓
| ✔ | | | Talent Management (Executive Compensation and Benefits, and Talent Development) (100%) |
*Percentages shown represent the portion of the Board with the indicated skill or experience.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW. | | | | Peter A. Altabef | PETER A. ALTABEF
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| | | Director Since: 2017Age:58
| | | Standing Board Committees: | | | | | | | | Environmental, Safety and Sustainability Committee | | | | | • | | | Finance Committee (Chair) | | | | | • | | | Nominating and Governance Committee
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Executive Experience: Mr. Altabef currently serves as PresidentChairman and CEO of Unisys Corporation, a global information technology company, and is a member of its board of directors, a position he has held since January 2015.2015 (becoming Chairman in April 2018). He also served as President from January 2015 through March 2020. Prior to his current role, he served as president and CEO of MICROS Systems, Inc., a provider of integrated software and hardware solutions to the hospitality and retail industries, from 2013 to 2014, when it was acquired by Oracle Corporation. Before that, he served as president and CEO of Perot Systems Corporation from 2004 to 2009, when it was acquired by Dell Inc. Following that transaction, Mr. Altabef served as president of Dell Services, the information technology services and business process solutions unit of Dell Inc. until his departure in 2011.
Outside Board and Other Experience: Mr. Altabef is a memberChairman of the board of directors of Unisys Corporation. He is also a member of the President’s National Security Telecommunications Advisory Committee, a board member of EastWest Institute, and a member of the advisory board of Merit Energy Company, LLC and of the board of directors of Petrus Trust Company, LTA. He has previously served as a senior advisor to 2M Companies, Inc., in 2012, and as a director of MICROS Systems, Perot Systems Corporation and Belo Corporation. He is also active in community service activities, having served on the boards and committees of several cultural, medical, educational and charitable organizations and events.
Skills and Qualifications:Mr. Altabef has experience leading large organizations as CEO and a strong background in strategic planning, financial reporting, risk management, business operations and corporate governance. He also has more than 20 years of senior leadership experience at some of the world’s leading information technology companies. As a result, he has a deep understanding of the cybersecurity issues facing businesses today. His overall leadership experience and his cybersecurity background provide the Board with valuable perspective and insight into significant issues faced by the Company.that we face.
| | | | Theodore H. Bunting, Jr. | ERIC L. BUTLER
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| | | Director Since: 2017 2018Age:57
| | | Standing Board Committees: | | | | | • Finance | | | | | | | | • | | | Compensation Committee | | | | | • | | | Environmental, Safety and Sustainability Committee
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Executive Experience: Mr. Bunting most recently served as group president, utility operations, at Entergy Corporation (“Entergy”), an integrated energy company, from 2012 until his retirement in 2017. Before that, he was senior vice president and chief accounting officer at Entergy from 2007 to 2012, and chief financial officer of several subsidiaries from 2000 to 2007. He held other management positions of increasing responsibility in accounting and operations at Entergy since joining the company in 1983. Outside Board and Other Experience: Mr. Bunting has been a director of Unum Group since 2013 and is currently chairman of its regulatory compliance committee and a member of its human capital committee. He previously served as a director of Imation Corp., a global data storage and information security company. He also serves on the board of Foundation for the Mid South and previously served on the board of Hendrix College. Skills and Qualifications: Mr. Bunting's utility industry knowledge, including his experience in customer service, safety and regulatory relations, are valuable to us as we continue to execute on our robust long-term utility infrastructure investment plans. He also brings additional public company experience in the areas of strategic finance, accounting, auditing, and capital and risk management to the Board. He is a certified public accountant.
TABLE OF CONTENTS Eric L. Butler | | | | Director Since: 2017 | | | Standing Board Committees: | | Age: 59
| | | • | | | Audit Committee | | | | | • | | | Compensation Committee (Chair) | | | | | • | | | Nominating and Governance Committee
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Executive Experience:Mr. Butler currently is President and CEO of Aswani-Butler Investment Associates, a private equity investment firm. Previously he served in a number of executive leadership roles at Union Pacific Corporation (“Union Pacific”), a transportation company located in Omaha, Nebraska, until his retirement in February 2018. He began his career at Union Pacific in 1985 and held leadership roles in financial planning and analysis and in marketing, sales and commercial, including as Executive Vice President and Chief Marketing Officer from March 2012 to December 2016. He also held leadership roles in supply, procurement and purchasing, including as Vice President and General Manager – Industrial Products from April 2005 to March 2012. Most recently, he was Senior Vice President of Union Pacific from December 2017, Executive Vice President and Chief Administrative Officer from December 2016 through November 2017, and Corporate Secretary from February 2017 through November 2017.
Outside Board and Other Experience: Mr. Butler was appointed to the Federal Reserve Bank of Kansas City’s Omaha Branch Board in 2015 and, in 2018, was elected chairman. Additionally, he serves on the board of the Omaha Airport Authority, which he joined in 2007.
Skills and Qualifications: Mr. Butler developed and led strategic and financial planning, marketing, sales, commercial; and supply, procurement and purchasing for one of the largest transportation companies in the world, Union Pacific. He most recently led the corporate governance, human resources, labor relations and administration functions at Union Pacific. His knowledge of the railroad transportation industry and the challenges in maintainingtop-tier safety, customer service and risk management standards while providing an important part of the nation’s infrastructure provides him with unique skills and insights that are valuable to the Board. In addition, he has experience in the purchase of fuel and energy materials and equipment. As a result, Mr. Butler has an understanding of the aging infrastructure, safety, organizational and regulatory issues facing utilities today and provides a fresh viewpoint from an industry that is similarly positioned. His overall leadership experience and his regulated public company background provides the Board with another perspective on significant issues faced by the Company.that we face. | | | | Aristides S. Candris | ARISTIDES S. CANDRIS
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| | | Director Since: 2012Age:66
| | | Standing Board Committees: | | | | | • | | | Environmental, Safety and Sustainability Committee (Chair) | | | | | • | | | Finance Committee (Chair) | | | | | • Compensation Committee•
| | | Nominating and Governance Committee
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Executive Experience:Dr. Candris was President and CEO of Westinghouse Electric Company (“Westinghouse”), Pittsburgh, Pennsylvania, a nuclear engineering company, which was a unit of Tokyo-based Toshiba Corp., from July 2008 until his retirement in March 2012. During his 36 years of service at Westinghouse, Dr. Candris served in various positions, including as Senior Vice President, Nuclear Fuel, from September 2006 to July 2008, and continued to serve on the board of Westinghouse until October 2012.
Outside Board and Other Experience:Dr. Candris is an advisory board member of Atomos Nuclear and Space Corporation. He is also a member of the advisory boards of the Carnegie Institute of Technology and the Wilton E. Scott Institute for Energy Innovation at Carnegie Mellon University. He also serves on the boards of trustees of Transylvania University and the Hellenic-American University and the board of directors of The Hellenic Initiative. He previously served on the boardboards of Westinghouse.Westinghouse, and Kurion Inc.
Skills and Qualifications:Dr. Candris is a nuclear scientist and engineer, and has significant experience leading a global nuclear power company. His knowledge of the electric industry gives him significant insight to the issues impacting the electric utility industry. His experience managing highly technical engineering operations, and particularly his extensive experience and expertise in risk assessment and safety management systems, as well as process optimization methodologies (such as Lean/Six Sigma), are of great value as we build and maintain facilities to address increasing environmental regulations and make long-term strategic decisions on electric power generation and gas and electric delivery. His technical and management skills are helpful as we continue to build and modernize both our transmission and distribution systems. Dr. Candris has great insight from his experience developing customer focused programs and attaining excellence in business processes and behaviors, which will assist us to better meet the increasing expectations of customers and regulators. TABLE OF CONTENTS | | | | Wayne S. DeVeydt | WAYNE S. DEVEYDT
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| | | Director Since: 2016Age:48
| | | Standing Board Committees: | | Age: 50 | | | • | | | | | | | | • | | | Compensation Committee | | | | | • | | | Finance Committee • Compensation Committee
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Executive Experience: Mr. DeVeydt has been serving as Chief Executive Officer and memberChairman of the board of directors of Surgery Partners, Inc., a healthcare services company, since January 2018. Previously,2020. He previously served as Chief Executive Officer and member of the board of directors of Surgery Partners, Inc. from January 2018 to January 2020. Before that, he served as a Senior Advisor to the Global Healthcare division of Bain Capital, located in Boston, Massachusettsa global multi-asset alternative asset firm, from January 2017 to January 2018, and as Executive Vice President and Chief Financial Officer (“CFO”) at Anthem, Inc., a health insurance company and an independent licensee of the Blue Cross and Blue Shield Association, from May 2007 until his retirement in June 2016. He also served as Senior Vice President and Chief Accounting Officer at Anthem, Inc. beginning in 2005 and Chief of Staff to the Chairman and Chief Executive Officer from 2006 to 2007. Prior to joining Anthem, Inc., Mr. DeVeydt was a partner at PricewaterhouseCoopers LLP from 1996 to 2005, where he served in many roles in the financial services industry.
Outside Board and Other Experience: Mr. DeVeydt is a memberExecutive Chairman of the board of directors of Surgery Partners, Inc., where he currently serveshas served on the board since January 2018. He served as Chief Executive Officer.a member of the board of directors of Grupo Notre Dame Intermedica from December 2016 until December 2019 and was chair of its audit committee. He also servesserved as a director of Myovant Sciences Ltd. (“Myovant”), where he isfrom 2016 until July 2018 and served as its lead independent director, chair of its audit committee, and a member of the audit andits compensation committees. Mr. DeVeydt has notified the Myovant board that he does not intend to stand for reelection at Myovant’s 2018 annual general meeting of shareholders. His term as director at Myovant will, therefore, expire at such annual meeting.committee. Mr. DeVeydt is an active leader in his community through his charitable activities.
Skills and Qualifications:Mr. DeVeydt’s positions as CEO and CFO at public companies in regulated industries and as a partner at PricewaterhouseCoopers LLP provide him with strong financial acumen along with a deep understanding of regulated industry operations and extensive leadership skills, particularly in the areas of accounting and finance. His significant experience in internal controls, capital markets, corporate governance, risk management and strategic planning from both a public company and public accounting perspective make him an asset to the Board.
| | | | Joseph Hamrock | JOSEPH HAMROCK
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| | | Director, President and Chief Executive Officer Director Since:2015
Age:54
| | | Standing Board Committees: NoneNone
| | Director Since: 2015 | | | | | Age: 57
| | | |
Executive Experience: Mr. Hamrock has been our President and CEO since July 2015. From May 2012 to June 2015, he was Executive Vice President and Group CEO for NiSource’s Gas Distribution Operations, comprised of local gas distribution companies in Kentucky, Maryland, Massachusetts, Ohio, Pennsylvania and Virginia. Prior thereto, he served in a variety of senior executive positions with American Electric Power (“AEP”), an electrical service public utility holding company in Columbus, Ohio, including as President and Chief Operating Officer (“COO”) of AEP Ohio from January 2008 to May 2012. He also served in leadership roles in engineering, transmission and distribution operations, customer service, marketing and information technology.
Outside Board and Other Experience: Mr. Hamrock is currently first vice chaira member of the board of the American Gas Association, a gas industry trade association. He is also a board member of OhioHealth, anot-for-profit healthcare system in central Ohio, and A Kid Again, which supports families caring for children with life-threatening illnesses.
Skills and Qualifications:Mr. Hamrock has extensive knowledge of our industry from his more than 30 years of experience in a variety of positions at AEP and the Company. He began his career in the energy industry as an electrical engineer in transmission and distribution planning, and progressed to work in commercial and industrial customer services, earning a leadership role in commercial marketing, customer services, and strategic development, among other executive roles, before becoming CEO at NiSource. Consequently, he has a firm understanding of the needs of our customers and is uniquely qualified to lead a focused utility company to meet our customer commitments. Additionally, he has a solid understanding of our organization through his leadership of our gas distribution operations, where he led financial, operational, regulatory and commercial performance for the Columbia gas business. This significant industry experience provides Mr. Hamrock with a unique perspective into the Company’sour operations, our markets, our people and the strategic vision needed to meet our long-term safety, customer value, business, financial and technology performance goals. In addition, he has been, and continues to be, an active supporter of educational, charitable and utility industry organizations.
TABLE OF CONTENTS | | | | Deborah A. Henretta | DEBORAH A. HENRETTA
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| | | Director Since: 2015Age:56
| | | Standing Board Committees: | | | | | • Finance | | | | | | | | • | | | Environmental, Safety and Sustainability Committee | | | | | • Compensation | | | Finance Committee
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Executive Experience: Ms. Henretta currently serves asis a partner at G100 Companies, an executive decision strategy consulting firm,a C-suite learning and development company, where she works in a senior advisory capacity and spearheadsserves as Senior Advisor spearheading digital transformation servicespractice for SSA & Company, one of thea G100 companies.Company. She retired from Procter & Gamble Co. (“P&G”) in 2015, where she served as Group President of Globale-Business. Prior to her appointment as Group President of Globale-Business in January 2015, she held various senior positions throughout several P&G sectors, including as Group President of Global Beauty from 2012 to 2015 and as Group President of P&G Asia from 2007 to 2012. Prior to her appointment as Group President of P&G Asia, she was President Asia from 2005 to 2007 and President of Global Baby, Toddler and Adult Care from 2004 to 2005. She joined P&G in 1985.
Outside Board and Other Experience:Ms. Henretta has been a director at American Eagle Outfitters, Inc. since 2019. She has been a director at Corning Incorporated since 2013, and currently serves on its audit and corporate relations committees. She is also a director ofat Meritage Homes Corporation, andwhere she serves on itsthe nominating and corporate governance committees.committee. Ms. Henretta served as a director of Staples, Inc. from June 2016 until September 2017 and served on its compensation committee. Additionally, she serves on the board of trustees for Xavier University and St. Bonaventure University.
Skills and Qualifications: Ms. Henretta has over 30 years of business leadership experience with P&G in a multi-jurisdictional regulatory and competitive business environment. She has experience across many markets, including P&L responsibility for multi-billion dollar businesses at P&G and responsibility for strategic planning, sales, marketing,e-business, government relations and customer service. Ms. Henretta led a dynamic business segment and is, therefore, keenly aware of the delicate balance of keeping pace with customer expectations in a changing environment, as well as maximizing the benefits that inclusion and diversity can provide. Because of this experience, Ms. Henretta brings valuable insights to the Board and strategic leadership to the Companyus as it operateswe operate in multiple regulatory environments and developsdevelop products and customer service programs to meet our customer commitments. In her partner role at G100 Companies, she assisted in establishing a Board Excellence Program, which provides board director education on board oversight and governance responsibilities, including in the areas of digital transformation and cyber security.cybersecurity. | | | | Deborah A. P. Hersman | MICHAEL E. JESANIS
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| | | Director Since: 2008 2019Age:61
| | | Standing Board Committees: | | | | | • Audit Committee (Chair)•
| | | Environmental, Safety and Sustainability Committee | | | | | • | | | Finance Committee
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Executive Experience: Ms. Hersman has served as a consultant at Waymo LLC, the self-driving car technology subsidiary of Alphabet Inc., since April 2020 after serving as chief safety officer from January 2019 to April 2020. In this role, she is responsible for consulting on systems safety, field safety and safety management systems across the company’s extensive testing and development programs. From 2014 to 2019, she served as president and chief executive officer of the National Safety Council, a nonprofit organization focused on eliminating preventable deaths at work, in homes and communities, and on the road through leadership, research, education and advocacy. Outside Board and Other Experience: From 2004 to 2014, she served as a board member and then as chair at the National Transportation Safety Board (the “NTSB”). Previously, she served in a professional staff role for the U.S. Senate Commerce, Science and Transportation Committee, where she played key roles in crafting the Pipeline Safety Improvement Act of 2002 and legislation establishing a new modal administration focused on bus and truck safety. Skills and Qualifications: Ms. Hersman is a seasoned safety executive, having previously served as the chief executive officer of the National Safety Council and as the chair and chief executive at the NTSB. She has a successful track record running complex safety-focused organizations with numerous stakeholders. A widely respected safety spokesperson driven by mission and a passion for preserving human life, Ms. Hersman also has expertise in the details of navigating crises and strong experience with safety policy legislation and advocacy. Ms. Hersman's extensive safety experience is of great value to the Board as we continue to implement our safety management system and meet our safety commitments to our customers and stakeholders. TABLE OF CONTENTS Michael E. Jesanis | | | | Director Since: 2008 | | | Standing Board Committees: | | Age: 63 | | | • | | | Audit Committee (Chair) | | | | | • | | | Compensation Committee | | | | | • | | | Nominating and Governance Committee
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Executive Experience: Mr. Jesanis is aco-founder and, since July 2013, has been Managing Director of HotZero, LLC, a firm formed to develop hot water district energy systems in New England. Since November 2007, Mr. Jesanis has also been a principal with Serrafix, Boston, Massachusetts, a firm that provides energy efficiency consulting and implementation services, principally to municipalities. Mr. Jesanis has served as an advisor to several startups in energy-related fields. From July 2004 through December 2006, Mr. Jesanis was President and CEO of National Grid USA, a natural gas and electric utility, and a subsidiary of National Grid plc, of which Mr. Jesanis was also an Executive Director. Prior to that position, Mr. Jesanis was COO and CFO of National Grid USA from January 2001 to July 2004 and CFO of its predecessor utility holding company from 1998 to 2000.
Outside Board and Other Experience: Mr. Jesanis previously served as a director for several electric and energy companies, including Ameresco, Inc. Mr. Jesanis is the former chair of the board of a college and a past trustee (and past chair of the audit committee) of a university.
Skills and Qualifications: By virtue of his former positions as President and CEO, COO and, prior thereto, CFO, of a major electric and gas utility holding company as well as his current role with an energy efficiency consulting firm, Mr. Jesanis has extensive experience with regulated utilities. He has strong financial acumen and extensive managerial experience, having led modernization efforts in the areas of operating infrastructure improvements, customer service enhancements and management team development. Mr. Jesanis also demonstrates a commitment to education as the former chair of the board of a college and a past trustee (and past chair of the audit committee) of a university. As a result of his former senior managerial roles and hisnon-profit board service, Mr. Jesanis also has particular expertise with board governance issues.
| | | | Kevin T. Kabat | KEVIN T. KABAT
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| | Vice Chairman
Director Since:2015
Age:61 | Chairman of the Board | | | Standing Board Committees: | | | | | • Finance Committee• Compensation Committee (Chair)
•
| | | Nominating and Governance Committee | | Age: 63 | | |
| |
Executive Experience: From April 2007 to November 2015, Mr. Kabat was CEO of Fifth Third Bancorp, a bank holding company. He continued to serve as Vice Chairman of the board of directors of Fifth Third Bancorp until his retirement in April 2016. Before becoming CEO, he served as Fifth Third Bancorp’s President from June 2006 to September 2012 and as Executive Vice President from December 2003 to June 2006. Additionally, he was previously President and CEO of Fifth Third Bank (Michigan). Prior to that position, he was Vice Chairman and President of Old Kent Bank, which was acquired by Fifth Third Bancorp in 2001.
Outside Board and Other Experience: Mr. Kabat has been a director of Unum Group since 2008 and is currently chairman of the board and chair of its governance committee. In 2016, Mr. Kabat became the lead independent director of E*Trade Financial Corporation and is a member of its bank board and its compensation and governance committees. He has also held leadership positions on the boards and committees of local business, educational, cultural and charitable organizations and campaigns.
Skills and Qualifications:Mr. Kabat has significant leadership experience as a CEO in a regulated industry at a public company. As a result, he has a deep understanding of operating in a regulatory environment and balancing the interests of many stakeholders. His extensive experience in strategic planning, risk management, financial reporting, internal controls and capital markets makes him an asset to the Board, as he is able to provide unique strategic insight, financial expertise and risk management skills. In addition, he has broad corporate governance skills and perspective gained from his service in leadership positions on the boards of other publicly traded companies.
TABLE OF CONTENTS | | | | Carolyn Y. Woo | RICHARD L. THOMPSON
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| | Chairman
| Director Since: 2004 1998Age:78
| | | Standing Board Committees: | | | | | • | | | Audit Committee | | | | | • | | | Environmental, Safety and Sustainability Committee | | | | | • | | | Nominating and Governance Committee (Chair)
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Mr. Thompson has been our independent Chairman of the Board since May 2013.
Executive Experience: Prior to his retirement in 2004, Mr. Thompson was Group President of Caterpillar Inc., Peoria, Illinois, a leading manufacturer of construction and mining equipment, diesel and natural gas reciprocating engines and industrial gas turbine systems, since 1995. Prior thereto, he held various leadership positions in the areas of customer service, gas turbine systems and worldwide engines at Caterpillar Inc., and in marketing, strategic planning, research and operations at manufacturers of electrical distribution products and systems, including RTE Corporation, which was acquired by Cooper Industries, and General Electric Company. He also held leadership roles in finance and treasury at Wilsey & Ham, an engineering, consulting and construction management firm.Outside Board and Other Experience:In May 2015, Mr. Thompson retired as lead director of Lennox International Inc., (“Lennox”), a global provider of climate control solutions for the heating, air conditioning and refrigeration markets, a position he held since May 2012 following his service as Chairman of the Board from
June 2006 to May 2012, and as Vice Chairman from February 2005 to June 2006. He began his service on the board of Lennox in 1993. Additionally, he served on the board of Gardner Denver Inc., a worldwide provider of industrial equipment, technologies and related parts and services, from November 1998 to July 2013. He has also served on the boards of a hospital, and charitable and church organizations.
Skills and Qualifications:In his prior role as Group President of a large, publicly traded manufacturing company, Mr. Thompson had responsibility for its gas turbine systems and reciprocating engine businesses, as well as research and development activities. He gained significant experience in product design and employee safety management as a leader of a multi-billion dollar business with global manufacturing operations and several thousand employees. By virtue of his prior positions, Mr. Thompson possesses significant experience in energy issues generally, and gas turbine electric power generation and natural gas pipeline compression in particular, including technical development and interaction with senior government agency officials in the areas of environmental regulatory compliance, sustainability and emissions reductions. He is a graduate electrical engineer with experience in electrical transmission system design and generation system planning. This experience provides Mr. Thompson with a valuable understanding of the technical issues faced by the Company.
| | | | | CAROLYN Y. WOO
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| | Director Since:1998
Age:63
| | Standing Board Committees:
• Audit Committee
• Environmental, Safety and Sustainability Committee (Chair)
• Nominating and Governance Committee
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Executive Experience:Dr. Woo was President and CEO of Catholic Relief Services, an international humanitarian agency serving over 100 countries, from January 2012 until her retirement in December 2016. Prior thereto, Dr. Woo was dean and a professor of Entrepreneurial Studies at the Mendoza College of Business, University of Notre Dame in Notre Dame, Indiana.
Outside Board and Other Experience: In addition to serving on the Company’sour Board,Dr. Woo has been a director at AON plc since 1998, and currently serves on its audit, compliance, and organization and compensation committees. She is also on the board of Arabesque. Since July 2019, she also serves on the International Advisory Group of Equinor ASA. She has previously served on the boards of directors of four additional public companies: Circuit City, St. Joseph Capital Bank, Arvin Industries and Bindley-Western Industries. She is also a current and past board member of severalnon-profit organizations, including an international relief organization, a globallarge multi-hospital health system, business school accreditation organization, leadership development organizations and an educational organization.
Skills and Qualifications:Dr. Woo’s experience as President and CEO of an international organization provides her with knowledge and experience in managing a large organization. From her experiences at Aon and Catholic Relief Services, she is also familiar with trends and approaches related to global risks. Her experience as the dean of a major business school and her experienceresearch as a professor of entrepreneurship provides her with a deep understanding of business principles and extensive expertise with management and strategic planning issues. Through her current and previous service on the boards of directors, audit committees and compensation committees of public companies, including a global reinsurance and risk management consulting company, a pharmaceutical distribution company, an international automotive manufacturer and a financial institution, Dr. Woo has developed an excellent understanding of corporate governance, internal control, financial and strategic analysis and risk management issues. Dr. Woo is a leader in the areas of corporate social responsibility, sustainability and ethics, which adds an important perspective to the Company.Board. In 2017, she was named to the Top 100 Most Influential in Business Ethics by the Ethisphere Institute. Dr. Woo’s commitment to social and educational organizations provides her with an important perspective on the various community and social issues confronting the Companyus in the communities that we serve. Lloyd M. Yates | | | | Director Since: 2020 | | | Standing Board Committees: | | Age: 59
| | | None
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Executive Experience: Mr. Yates retired in 2019 from Duke Energy Corporation (“Duke Energy”), where he most recently served as Executive Vice President, Customer and Delivery Operations, and President, Carolinas Region, since 2014. In this role, he was responsible for aligning customer-focused products and services to deliver a personalized end-to-end customer experience to position Duke Energy for long-term growth, as well as for the profit/loss, strategic direction and performance of Duke Energy’s regulated utilities in North Carolina and South Carolina. Previously, he served as Executive Vice President of Regulated Utilities at Duke Energy, overseeing Duke Energy’s utility operations in six states, federal government affairs, and environmental and energy policy at the state and federal levels, as well as Executive Vice President, Customer Operations, where he led the transmission, distribution, customer services, gas operations and grid modernization functions for millions of utility customers. He held various senior leadership roles at Progress Energy, Inc., prior to its merger with Duke Energy, from 2000 to 2012. Outside Board and Other Experience: Mr. Yates currently serves on the board of directors of American Water Works Company, serves.Inc., Marsh & McLennan Companies, Inc. and Sonoco Products Company. Skills and Qualifications: Mr. Yates brings significant energy and regulated utility experience to our Board. He has over 38 years in the energy industry, including in the areas of profit/loss management, customer service, nuclear and fossil generation and energy delivery. At Duke Energy, he used his operational experience to improve safety, reliability and the overall customer experience for millions of customers. He has expertise overseeing regulated utility operations, working with state regulators, and managing consumer and community affairs. He also has experience managing gas and grid modernization functions, which is valuable to our Board as we execute our business strategies. In addition, his experience as a director for other prominent public companies will benefit our Board by bringing additional perspective to a variety of important areas of governance and strategic planning. Under our Corporate Governance Guidelines, a majority of the Board must be comprised of “independent directors.” In order to assist the Board in making its determination of director independence, the Board has adopted categorical standards of independence consistent with the standards contained in Section 303A.02 of the NYSE Listed Company Manual. The Board also has adopted an additional independence standard providing that a director who is an executive officer or director of a company that receives payments from the Companyus in an amount which exceeds 1% of such other company’s consolidated gross revenues is not “independent” until three years after falling below such threshold. A copy of our Corporate Governance Guidelines is posted on our website at https://www.nisource.com/investors/governance. The Board has affirmatively determined that, with the exception of Mr. Hamrock, all of the members of the Board and all nominees are “independent directors” as defined in Section 303A.02 of the NYSE Listed Company Manual and meet the additional standard for independence set by the Board.
Policies and Procedures with Respect to Transactions with Related Persons We have established policies and procedures with respect to the review, approval and ratification of any transactions with related persons. Under its Charter,charter, the Nominating and Governance Committee reviews reports and disclosures of insider and related person transactions. Under the Company’sour Code of Business Conduct, the following situations may present a conflict of interest and must be reviewed by the Nominating and Governance Committee to determine if they involve a direct or indirect interest of any director, executive officer or employee (including immediate family members) or otherwise present a conflict of interest: owning more than a 10% equity interest or a general partner interest in any entity that transacts business with the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000; selling anything to the Company or buying anything from the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000; consulting for or being employed by a competitor of the Company; and being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member employed by the Company. Related person transactions are annually reviewed and, if appropriate, ratified by the Nominating and Governance Committee. Directors, individuals subject to Section 16 (“Section 16 Officer(s)”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and senior executive officers are expected to raise any potential transactions involving a conflict of interest that relate to them with the Nominating and Governance Committee so that they may be reviewed in a prompt manner. The son of Jim L. Stanley, our former Executive Vice President and COO, is employed by the Company in anon-executive officer position and received total compensation of less than $150,000 in 2017. His compensation was established by the Company in accordance with its compensation practices applicable to employees with comparable qualifications and responsibilities who hold similar positions. In addition, Jim L. Stanley did not have direct responsibility for directing or reviewing his son’s work and did not have influence over his employment at the Company. The Nominating and Governance Committee reviewed and approved this employment relationship.
There were no other transactions between the Company and any officer, director or nominee for director, or any affiliate of or person related to any of them, since January 1, 2017,2019, of the type or amount required to be disclosed under the applicable Securities and Exchange Commission (“SEC”) rules. Executive Sessions ofNon-Management Directors
To promote open discussion among thenon-management directors, the Board schedules regular executive sessions at meetings of the Board and each of its committees. Thenon-management members met separately
from management four times in 2017. The independent Chairman of the Board presided at all these executive sessions. All of thenon-management members are “independent directors” as defined under the applicable NYSE and SEC rules.
Communications with the Board andNon-Management Directors Stockholders and other interested persons may communicate any concerns they may have regarding the Company as follows: Communications to the Board may be made to the Board generally, any director individually, thenon-management directors as a group, or the Chairman of the Board, by writing to the following address: NiSource Inc. Attention: Board of Directors, or any Board member, ornon-management directors, or Chairman
of the Board
c/o Corporate Secretary
801 East 86th Avenue
Merrillville, Indiana 46410
| • | | The Audit Committee has approved procedures with respect to the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters. Communications regarding such matters may be made by contacting the Company’s Ethics and Compliance Officer atethics@nisource.com, calling the business ethics hotline at1-800-457-2814, or writing to:
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The Audit Committee has approved procedures with respect to the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters. Communications regarding such matters may be made by contacting our Ethics and Compliance Officer at ethics@nisource.com, calling the business ethics hotline at 1-800-457-2814, or writing to: NiSource Inc. Attention: Director, Corporate Ethics
801 East 86th Avenue
Merrillville, Indiana 46410
TABLE OF CONTENTS We are committed to engaging with our stockholders and soliciting their views and input on important governance, environmental, social, executive compensation and other matters. Our Nominating and Governance Committee is responsible for overseeing the stockholder engagement process and the periodic review and assessment of stockholder input. In 2017, management initiated stockholder conversations on a variety of corporate governance topics, including Board composition, the Board’s annual evaluation process, executive compensation and other matters. The information obtained from these stockholders was shared with our Chairman of the Board and our Nominating and Governance Committee. We intend to continue stockholder engagementinput on governance each year outside of the proxy season.matters. Our independent directors are available to engage in dialogue with stockholders on matters of significance in order to understand stockholders’ views. In addition, management regularly participates in investor and industry conferences throughout the year to discuss performance and share its perspective on the Company and industry developments.
Code of Business Conduct The Company has adopted
We have a Code of Business Conduct to promote: (i) ethical behavior, including the ethical handling of conflicts of interest; (ii) full, fair, accurate, timely and understandable financial disclosure; (iii) compliance with applicable laws, rules and regulations; (iv) accountability for adherence to our code; and (v) prompt internal reporting of violations of our code. Our Code of Business Conduct satisfies applicable SEC and NYSE requirements and applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer and controller), as well as to our employees of the Company and itsour affiliates. A copy of our Code of Business Conduct is available on our website at https://www.nisource.com/investors/governanceand also is available to any stockholder upon written request to our Corporate Secretary at the address noted above under the heading “Communications with the Board and Non-Management Directors.” Any waiver of our Code of Business Conduct for any director, executive officer or Section 16 Officer or senior executive officer may be made only by the Audit Committee of the Board and must be promptly disclosed to the extent and in the manner required by the SEC or the NYSE and posted on our website. No such waivers have been granted. Corporate Governance Guidelines The Nominating and Governance Committee is responsible for annually reviewing and reassessing the Corporate Governance Guidelines and submitting any recommended changes to the Board for its approval. A copy of the Corporate Governance Guidelines can be found on our website at https://www.nisource.com/investors/governance and is also available to any stockholder upon written request to the Company’sour Corporate Secretary.
Board Leadership Structure Our Corporate Governance Guidelines state that the Companywe should remain free to configure leadership of the Board in the way that best serves the Company’sour interests at the time and, accordingly, the Board has no fixed policy with respect to combining or separating the offices of Chairman and CEO. If the Chairman is not an independent director, an independent lead directorLead Director will be chosen annually by the Board, taking into account the recommendation of the Nominating and Governance Committee. The Chairman or, if the Chairman is not an independent director, the lead directorLead Director will serve as chair of the Nominating and Governance Committee and asbe the presiding director of executive sessions of the Board. To promote open discussion among the non-management directors, the Board for purposesschedules regular executive sessions at meetings of the NYSE rules.Board and each of its committees. Since late 2006, the offices of Chairman and CEO of the Company have been held by different individuals, with the Chairman being an independent director. The duties of the Chairman of the Board are as follows: providing leadership to the Board and management, and monitoring the discharge of their duties; presiding at meetings of stockholders and the Board, including executive sessions of the Board and meetings of the independent directors; serving as a liaison between the independent directors and management; in consultation with the CEO, setting agendas for the meetings of the Board, and developing annual Board meeting schedules for approval by the Board; ensuring proper flow of information to the Board; having the authority to call special meetings of the Board and independent directors; being available for consultation and direct communication with stockholders and other key stakeholders, as appropriate; and having such other responsibilities and perform such duties as may from time to time be assigned to him or her by the Board. The Board periodically reviews the structure and the division of responsibilities between the role of independent Chairman and CEO. The structure and division of responsibilities is intended to maintain the integrity of the oversight function of the Board by providing a separate framework of responsibilities for the independent Chairman as set forth above.
The Board takes an active role in monitoring and assessing the Company’sour strategic, compliance, operational and financial risks, as well as cybersecurity risks. The Board administers its oversight function through utilization of its various committees. The Company’sOur Risk Management Committee, which consists of members of our senior management, is responsible for oversight of the Company’sour risk management process. Senior management regularly provides reports on our risks to the Board, the Audit Committee and the Board committees that oversee the applicable risks. Additionally, the Audit Committee discusses with management and the independent auditorregistered public accounting firm the effect of regulatory and accounting initiatives on the Company’sour financial statements and is responsible
TABLE OF CONTENTS for review and evaluation of the Company’sour major risk exposures, including cyber securitycybersecurity and supplier risks, and the steps management has taken to monitor and control such exposures. The Audit Committee reviews and assesses the adequacy of the Company’s Risk Management Committee Charter annually, amending it as appropriate. In addition, the Compensation Committee, the Environmental, Safety and Sustainability (“ESS”) Committee, the Finance Committee and the Nominating and Governance Committee are each charged with overseeing the risks associated with their respective areas of responsibility. Meetings and Committees of the Board The Board met eight19 times during 2017.2019. Each incumbent director attended at least 75%89% of the total number of meetings of the Board and of the committees of the Board on which he or she served, and in each case, during the periods that he or she served. Pursuant to our Corporate Governance Guidelines, directors are expected to attend all Board meetings, to spend the time needed to discharge their responsibilities as directors, and to attend the annual meeting of stockholders. All then-serving directors attended the 20172019 annual meeting of stockholders. Pursuant to our Corporate Governance Guidelines, the Board expects that our senior officers of the Company will regularly attend Board and Committee meetings, present proposals and otherwise assist in the work of the Board. Members of the Board have direct access to all of the Company’sour employees, outside advisors and independent auditor.registered public accounting firm. The Board has established five standing committees to assist the Board in carrying out its duties: the Audit Committee, the Compensation Committee, the ESS Committee, the Finance Committee and the Nominating and Governance Committee. Beginning in 2015, theThe Board also established a Search Committee, an ad hoc committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. The Search Committee met three timesdid not meet during 2017.2019. The Board evaluates the structure and membership of its committees on an annual basis, appoints the independent members of the Board to serve on the committees and elects committee chairs following the annual meeting of stockholders. The following table shows the composition of each standing Board committee as of the date of this Proxy Statement.proxy statement. Mr. Hamrock does not serve on any committee, but is invited to attend various committee meetings. Mr. Thompson, who isKabat, Chairman of the Board, also serves as the Chair of the Nominating and Governance Committee and is invited to attend all meetings of each of the committees. Board Committee Composition Director | | Audit | | Compensation | | ESS | | Finance | | Nominating and Governance | | Richard A. Abdoo | | ✓ | | | | ✓ | | | | | Peter A. Altabef | | | | | | ✓ | | ✓ | ✔ | | | ✔* | | | ✔ | | | Theodore H. Bunting, Jr.(1) | | | ✔ | | | ✔ | | | ✔ | | | | | | | | | Eric L. Butler (1) | | | ✔ | | | ✓✔* | | ✓ | | | | | | | ✔ | | | Aristides S. Candris | | | | ✓ | | | | ✓* | ✔* | ✓ | | ✔ | | | ✔ | | | Wayne S. DeVeydt(1) | | ✓ | ✔ | ✓ | | ✔ | | ✓ | | | | ✔ | | | | | | Deborah A. Henretta | | | | ✓ | | ✓✔ | | ✓ | ✔ | | | ✔ | | | | | | Deborah A. P. Hersman | | | | | | | | | ✔ | | | ✔ | | | | | | Michael E. Jesanis (2)(1) | | ✓* | ✔* | | | ✓✔ | | | | ✓ | | | | | ✔ | | | Kevin T. Kabat(2) | | | | ✓* | | | | ✓ | | ✓ | | | | | ✔ | | Richard L. Thompson (3) | | | | | | | | | | ✓* | Carolyn Y. Woo | | ✓ | ✔ | | | ✓* | | | ✔ | ✓ | | | | | ✔* | | | Lloyd M. Yates | | | | | | | | | | | | | | | | |
(1)
| (1) | Mr. Butler was appointed to the Board on July 10, 2017 and the Finance and ESS committees on September 6, 2017.
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| (2) | Audit Committee Financial Expert, as defined by SEC rules. |
(2)
| (3) | Independent Chairman of the Board. |
The summaries below are qualified by reference to the entire charter for each of the Audit, Compensation, ESS, Finance and Nominating and Governance Committees; each of which can be found on our website athttps://www.nisource.com/investors/governanceand is also available to any stockholder upon written request to
the Company’s our Corporate Secretary. Additionally, any committee may perform other duties and responsibilities, consistent with their respective charters, our Amended and Restated Bylaws (our “Bylaws”), governing law, the rules and regulations of the NYSE, the federal securities laws and such other requirements applicable to the Company,us, delegated to any committee by the Board, or in the case of the Compensation Committee, under any provision of any Companyof our benefit or compensation plan.plans.
TABLE OF CONTENTS The Audit Committee met eightnine times in 2017.2019. Our Audit Committee is responsible for the oversight of our internal audit function and financial reporting process. The Audit Committee has the sole authority to appoint, retain or replace theour independent auditorregistered public accounting firm and is responsible for, among other things: reviewing theour independent auditor’sregistered public accounting firm’s qualifications and independence and compensating theour independent auditor; registered public accounting firm;overseeing the performance of the Company’sour internal audit function and theour independent auditor; registered public accounting firm;reviewing and discussing with management and theour independent auditorregistered public accounting firm our annual and quarterly financial statements before earnings announcements; reviewing and discussing with management our annual and quarterly earnings press releases; reviewing and discussing with management and theour independent auditorregistered public accounting firm major issues regarding accounting principles and financial statement presentations, adequacy of internal controls, and any critical judgments or accounting estimates made in connection with the preparation of financial statements; reviewing and evaluating the Company’sour major risk exposures, including cybersecurity and supplier risks, and the steps management has taken to monitor and control such exposures, including discussion of the Company’sour risk assessment and risk management policies; and overseeing the Company’sour compliance with legal and regulatory requirements. The Board has determined that all of the members of the Audit Committee are independent as defined under the applicable NYSE and SEC rules, including the additional independence standard for audit committee members, and meet the Company’sour additional independence standard set forth in theour Corporate Governance Guidelines. The Audit Committee has reviewed and approved the independent auditor, both for 2017 and 2018, and the fees relating to audit services and other services performed by them.For more information regarding the Audit Committee, see “Audit Committee Report” andReport,” “Proposal 3 — Ratification of Independent Auditor”Registered Public Accounting Firm” and “Independent Registered Public Accounting Firm Fees” below.
The Compensation Committee met six times in 2017.2019. The Compensation Committee apprises the Board with respect to the evaluation, compensation and benefits of our executives. Its responsibilities include, among others: evaluating the performance of our CEO and other executive officers in light of the Company’sour goals and objectives; reviewing and approving the corporate goals and objectives relevant to CEO and executive officer compensation; making recommendations to the independent Board members regarding CEO compensation and approving compensation of the other executive officers; reviewing and approving periodically a general compensation policy for our other officers of the Company and officers of itsour principal subsidiaries; approving, or if appropriate, making recommendations to the Board with respect to incentive compensation plans and equity-based plans; reviewing Companyour officer candidates for election by the Board; reviewing and evaluating the executive officers’ development and succession plan (other than our CEO’s succession plan, which is reviewed by the Nominating and Governance Committee); evaluating the risks associated with our compensation policies and practices and the steps management has taken to monitor and control such risks; and overseeing equal employment opportunity and diversity initiatives. In making recommendations regarding the compensation of our CEO and approving the compensation of the other executive officers, the Compensation Committee takes into consideration its evaluation of the individual performance of each person. The Compensation Committee also considers recommendations from the independent executive compensation consultant that the Compensation Committee engages to advise it with respect to executive compensation design, comparative compensation practices and compensation matters relating to the Board. Each year, the Compensation Committee evaluates the independence and quality of the services provided by its independent executive compensation consultant. Additionally, when considering changes in compensation for senior executives that report to our CEO, including the Named Executive Officers, the Compensation Committee also considers input from our CEO; Executive Vice President, Regulatory Policy and Corporate Affairs; and Vice President, Human Resources.
For the 2017 fiscal year, the Compensation Committee engaged the services of Exequity LLP to assist in executive compensation design, comparative compensation practices and compensation matters relating to the Board. The Compensation Committee determined that Exequity LLP was independent after considering the factors set forth in SEC Rule10C-1(b)(4) and the applicable NYSE rules. Exequity LLP provided no other services to the Company in 2017. In August 2017, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consultant for all such matters for the 2018 fiscal year. In doing so, the Compensation Committee considered the independence factors set forth in SEC Rule10C-1(b)(4) and the applicable NYSE rules and determined that both Meridian and its individual lead consultant were independent from the Company.
The Compensation Committee has authority to delegate its responsibilities to subcommittees as deemed appropriate, provided the subcommittees are composed entirely of independent directors who also meet the other requirements for membership of the Compensation Committee. All of the directors serving on the Compensation Committee are: (i) independent as defined under the applicable NYSE and SEC rules and meet the additional independence standard set forth in the Corporate Governance Guidelines and the additional NYSE independence standard for members of compensation committees;committees and (ii) “non-employee “non-employee directors” as defined under Rule 16b-3 of the Exchange Act; and (iii) “outside directors” as defined by Section 162(m) of the Internal Revenue Code (hereafter “Section 162(m) of the Code” or “Code Section 162(m)”).Compensation Committee Interlocks and Insider Participation
As of the fiscal year ended December 31, 2017, Messrs. Kabat and DeVeydt, Dr. Candris and Ms. Henretta served onAct. For additional information regarding the Compensation Committee. DuringCommittee's principles, policies and practices, please see the fiscal year ended December 31, 2017, there were no compensation committee interlocks or insider participation.discussion under “Executive Compensation - Compensation Discussion and Analysis”.
TABLE OF CONTENTS Environmental, Safety and Sustainability Committee The ESS Committee met five times during 2017.2019. The ESS Committee assists the Board in overseeing the programs, performance and risks relative to environmental, safety and sustainability matters. Its responsibilities include, among others: evaluating the Company’sour environmental and sustainability policies, practices and performance; evaluating the Company’sour safety policies, practices and performance relating to our employees, contractors and the general public; reviewing and assessing stockholder proposals related to the environment, safety and sustainability; reviewing and evaluating the Company’sour programs, policies, practices and performance with respect to health and safety compliance auditing; and assessing major legislation, regulation and other external influences that pertain to the ESS Committee’s responsibilities and assessing the impact on the Company. us.The Finance Committee met fivesix times during 2017.2019. Its responsibilities include the following, among others: reviewing and evaluating theour financial plans, of the Company, capital structure, equity and debt levels, dividend policy and financial policies; reviewing the Company’sour corporate insurance programs; reviewing the Company’sour investment strategy and investments; reviewing and evaluating the Company’sour financial, tax, third party credit and commodity risks and the steps management has taken to monitor and control such risks; reviewing the Company’sour annual earnings guidance and capital budgets and recommending approval to the Board; and reviewing the Company’sour hedging policies and exempt swap transactions. Nominating and Governance Committee The Nominating and Governance Committee met five times in 2017.2019. Its responsibilities include, among others: identifying individuals qualified to become Board members, consistent with criteria approved by the Board; recommending to the Board director nominees for election at the next annual meeting of the stockholders; developing and recommending to the Board the Corporate Governance Guidelines; consulting with management to determine the appropriate response to stockholder proposals submitted pursuant to SEC rules; reviewing and evaluating risks to the Company’sour reputation and the steps management has taken to monitor and control such risks; reviewing and evaluating our CEO succession plan and working with the Board to evaluate potential successors to our CEO; reviewing and overseeing, at least annually, corporate and business unit political spending; evaluating any resignation tendered by a director and making recommendations to the Board about whether to accept such resignation; and overseeing the evaluation of the performance of the Board and its committees. The Nominating and Governance Committee, with the assistance of the independent compensation consultant, annually reviews the amount and composition of non-employee director compensation. Please see the discussion under the heading “Director Compensation” for a description of the compensation we provide to our non-employee directors.
Director Selection Process. The Nominating and Governance Committee identifies and screens candidates for director and makes its recommendations for director to the Board. At times the Board may establish an ad hoc search committee to assist the Nominating and Governance Committee in this process. Additionally, the Nominating and Governance Committee has the authority to retain a search firm to help it identify director candidates to the extent it deems necessary or appropriate. In 2015, theThe Board established a search committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. In 2017, theThe Nominating and Governance Committee has also engaged the firm of Heidrick & Struggles International, Inc., which firm recommended Mr. ButlerMs. Hersman for director. In considering candidates for director, the Nominating and Governance Committee considers the skills, expertise, experience and qualifications that will best complement the overall mix of skills and expertise of the Board in view of the strategy of, and the risks and opportunities faced by the Company,that we face, as well as each candidate’s relevant business, academic and industry experience, professional background, age, current employment, community service, other board service and other factors. In addition, the Nominating and Governance Committee takes into account the racial, ethnic and gender diversity of the Board and actively seeks minority and female candidates.
The Nominating and Governance Committee seeks to identify and recommend candidates with a reputation for, and record of, integrity and good business judgment who have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are affiliated; are effective in working in complex collegial settings; are free from conflicts of interest that could interfere with a director’s duties to the Companyus and itsour stockholders; and are willing and able to make the necessary commitment of time and attention required for effective service on the Board, including
TABLE OF CONTENTS limiting their service on other boards to a reasonable number. The Nominating and Governance Committee also takes into account the candidate’s level of financial literacy. The Nominating and Governance Committee monitors the mix of skills and experience of the directors in order to assess whether the Board has the necessary tools to perform its oversight function effectively. The Nominating and Governance Committee also assesses the diversity of the Board as a part of its annual self-assessment process as described in more detail below. The Nominating and Governance Committee will consider nominees for directors recommended by stockholders and will use the same criteria to evaluate candidates proposed by stockholders as it uses to evaluate the candidates identified by the Board. The Board has determined that all of the members of the Nominating and Governance Committee are independent as defined under the applicable NYSE rules and meet the additional independence standard set forth in the Corporate Governance Guidelines. For information on how to nominate a person for election as a director at the 20192021 Annual Meeting, please see the discussion under the heading “Stockholder Proposals and Nominations for 20192021 Annual Meeting.”
Board Evaluation Process. Process.The Nominating and Governance Committee oversees the self-evaluation process, which is used by the Board and by each committee of the Board to determine effectiveness and identify opportunities for improvement. Annually at its meeting in March, the Nominating and Governance Committee initiates the self-evaluation process and approves the form of written evaluation questionnaires that are distributed to each director for completion. The written evaluation questionnaires are updated each year as necessary to reflect changes identified in the prior year, any committee charter changes and any suggestions from the directors. The questionnaires solicit feedback on Board composition, Board meeting mechanics including information received, core responsibilities, relationship with management, committee functioning and other relevant matters. The Chief Legal Officer compiles and summarizes the responses for discussion at the subsequent Board and committee meetings. In addition, on an ongoing basis, the Chairman meets with each director individually to solicit feedback with respect to both the full Board and any committee on which the director serves, in addition to individual director performance and Board dynamics. Our Board utilizes the results of these evaluations in making decisions on Board agendas, Board structure, committee responsibilities and agendas, information presented to the Board, and continued service of individual directors on the Board. This information is then shared with the Board, and appropriate actions or changes are then identified.
No Mandatory Retirement Age or Term Limits. Our Corporate Governance Guidelines set forth that we do not believe that mandatory retirement ages or term limits serve the needs of the Company.our needs. The Board periodically evaluates the performance and qualifications of individual directors in connection with the nomination process. In addition, although the Nominating and Governance Committee will consider length of service in recommending candidates forre-election, the Board does not believe that adopting a set term limit for directors serves the interests of the Company.our interests. Such limits may result in the loss of contributions from directors who have been able to develop, over a period of time, increasing insight into the Company, itsour operations and itsour strategic direction. The Nominating and Governance Committee reviews these policies as part of its annual governance review and will consider modifications to these policies as deemed necessary and in our best interests and the best interests of the Company.our stockholders.
Director Compensation.This section describes compensation for ournon-employee directors. To attract and retain highly qualified candidates to serve on the Board, we provide a combination of cash and equity awards. Ournon-employee director compensation is reviewed annually by our Nominating and Governance Committee with the assistance of Meridian Compensation Partners, LLC (“Meridian”), the Compensation Committee's independent executive compensation consultant. The Nominating and Governance Committee, with the assistance of Exequity LLPMeridian, reviewed the amount and composition of director compensation for 20172019 and recommended an increase of $10,000 in the value of the equity portion of the annual retainer we provideno changes as compared to ournon-employee directors, which was implemented.2018. A full-time employee who serves as a director does not receive any additional compensation for service on the Board. Consequently,Accordingly, because Mr. Hamrock is also our President and CEO, he does not receive additional compensation for his service as a Board member. Each
For 2019, each non-employee director receivesreceived an annual retainer of $220,000,$235,000, consisting of $90,000$97,500 in cash and an award of restricted stock units valued at $130,000$137,500 at the time of the award.grant. The cash retainer is paid in arrears in four equal installments at the end of each calendar quarter. The restricted
Restricted stock units are awarded annually, and the number of restricted stock units is determined by dividing the value of the grant by the closing price of our common stock on the grant date. RestrictedThe 2019 restricted stock units arewere granted to non-employee directors under the NiSource Inc. 2010 Omnibus Incentive Plan (“Omnibus Plan”) , which was approved by. Unless the stockholders on May 11, 2010, andre-approved on May 12, 2015.Additionally, eachnon-employee director who serves as chairelects to defer receipt of a Board committee receives compensation for this responsibility. The annual committee chair fees are $20,000 for each of the standing committees. The Chairman of the Board receives additional annual compensation of $160,000 for his role and the Vice Chairman of the Board receives additional annual compensation of $75,000 for his role. These fees are paid in cash in arrears in four equal installments and are prorated in the case of partial year service.
All Other Compensation.The other compensation included under the column “All Other Compensation” in the Director Compensation Table below consists of matching contributions made by the NiSource Charitable Foundation.
Omnibus Plan. The Omnibus Plan permits equity awards to be made tonon-employee directors in the form ofnon-qualified stock options, stock appreciation rights,or her restricted stock andunit awards, the restricted stock units performance shares, performance units, cash-based awards and other stock-based awards. Except as provided below, terms and conditions of awards tonon-employee directors are determined by the Board prior to grant. Since May 11, 2010, awards to directors have been made under the Omnibus Plan. Awards of restricted stock units associated with periods prior to June 1, 2011, vested immediately, but are not distributed in shares of common stock until after the director separates from the Board. Awards of restricted stock units made after June 1, 2011, vest and are payable in shares of our common stock on the earlier to occur of: (a) the last day of the director’s annual term for which the restricted stock units are awarded; or (b) the date that the director separates from servicethe Board due to a“Change-in-Control” “Change-in-Control” (as defined in the Omnibus Plan); provided, however, that effective in 2015, any director that commences servicesservice on the Board after the start of an annual term vestswill vest on the first anniversary of the initial grant; and, provided further, that in the event that the director separates from service prior to such time as a result of “Retirement” (defined as the cessation of services after providing a minimum of five continuous years of service as a member of the Board), death or “Disability” (as defined in the Omnibus Plan), the director’sgrant. The restricted stock unit awards shall pro rata vest in an amount determined by usingalso contain pro-rata vesting provisions for a fraction, whereseparation from the numerator is the number of full or partial calendar months elapsed between the grant date and the date of the director’s Retirement,Board due to retirement, death or Disability, and the denominatordisability. Restricted stock units accrue dividends prior to settlement in shares of which is the numberour common stock. If a non-employee director elects to defer receipt of fullhis or partial calendar months elapsed between the grant date and the last day of the director’s annual term for which the director is elected that corresponds to the year in which theher restricted stock units, are awarded. All equity awards under our Omnibus Plan, including awards tonon-employee directors have a minimum vesting term of one year unless the director separates from service prior tothen such time as the result of Retirement, death or Disability. The vested restricteddeferred stock units awarded on or after June 1, 2011, are payable as soon as practicable following vesting, unless otherwise provided pursuant to any prior election thenon-employee director may have made to defer distribution. With respect to restricted stock units that have not been distributed, additional restricted stock units are credited to eachnon-employee director to reflect dividendswill be paid to stockholders on common stock. The restricted stock units have no voting or other stock ownership rights and are payable in shares of our common stock upon distribution.the non-employee director's separation from the Board or such other date selected by the non-employee director.
Each non-employee director who serves as chair of a Board committee receives compensation for the additional responsibilities associated with such service. The 2019 committee chair fees were $20,000 for each of the standing committees. The Chairman of the Board received additional annual compensation of $160,000 for his role and the Vice Chairman of the Board received additional annual compensation of $75,000 for his role. These fees are paid in cash in arrears in four equal installments and are prorated in the case of partial year service. All Other Compensation. The compensation included under the column “All Other Compensation” in the 2019 Director Compensation Table below consists of matching contributions made by the NiSource Charitable Foundation.
Director Stock Ownership.The Board maintains stock ownership requirements for its directors that are included in theour Corporate Governance Guidelines. Within five years of becoming anon-employee director, eachnon-employee director is required to hold an amount of Companyour stock with a value equal to five times the annual cash retainer paid to directors by the Company.directors. Company stock that counts towards satisfaction of this requirement includes shares TABLE OF CONTENTS purchased on the open market, awards of restricted stock or restricted stock units through the prior Non-Employee Director Stock Incentive Plan or Omnibus Plan, and shares beneficially owned in a trust or by a spouse or other immediate family member residing in the same household. All of the non-employee director nominees are in compliance with the stock ownership requirements thatguideline or are within the five-year transition period included in the Corporate Governance Guidelines. Each director has a significant portion of his or her compensation directly aligned with long-term stockholder value. Fifty-nineApproximately fifty-nine percent (59%) of a non-employee director’s 20172019 annual retainer (valued as of the time of award)award and excluding committee retainers) consisted of restricted stock units, which are converted into common stock when vested and distributed to the director. 2017
2019 Director Compensation The table below sets forth all compensation earned by or paid to our non-employee directors in 2017.2019. Our CEO did not receive any additional compensation for his service on the Board. His compensation for serving as CEO is listed underdiscussed in the Executive Compensation section of Executive Officers. | | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash ($)(1) | | Stock Awards ($)(2)(3) | | All Other Compensation ($)(4) | | Total ($) | Richard A. Abdoo | | 97,151 | | 130,000 | | 15,000 | | 242,151 | Peter A. Altabef(5) | | 83,710 | | 164,510 | | 10,000 | | 258,220 | Eric L. Butler(6) | | 42,823 | | 103,852 | | — | | 146,675 | Aristides S. Candris | | 110,000 | | 130,000 | | 10,000 | | 250,000 | Wayne S. DeVeydt | | 90,000 | | 130,000 | | 20,000 | | 240,000 | Deborah A. Henretta | | 90,000 | | 130,000 | | — | | 220,000 | Michael E. Jesanis | | 110,000 | | 130,000 | | 10,000 | | 250,000 | Kevin T. Kabat | | 102,903 | | 130,000 | | — | | 232,903 | Richard L. Thompson | | 270,000 | | 130,000 | | — | | 400,000 | Carolyn Y. Woo | | 110,000 | | 130,000 | | 7,000 | | 247,000 |
this Proxy Statement. | Peter A. Altabef | | | 117,500 | | | 137,500 | | | 10,000 | | | 265,000 | | | Theodore H. Bunting, Jr. | | | 97,500 | | | 137,500 | | | — | | | 235,000 | | | Eric L. Butler | | | 110,511 | | | 137,500 | | | — | | | 248,011 | | | Aristides S. Candris | | | 117,500 | | | 137,500 | | | 10,000 | | | 265,000 | | | Wayne S. DeVeydt | | | 97,500 | | | 137,500 | | | 10,000 | | | 245,000 | | | Deborah A. Henretta | | | 97,500 | | | 137,500 | | | — | | | 235,000 | | | Deborah A. P. Hersman(5) | | | 55,792 | | | 131,113 | | | 10,000 | | | 196,905 | | | Michael E. Jesanis | | | 117,500 | | | 137,500 | | | — | | | 255,000 | | | Kevin T. Kabat | | | 234,785 | | | 137,500 | | | — | | | 372,285 | | | Richard L. Thompson(6) | | | 90,679 | | | — | | | — | | | 90,679 | | | Carolyn Y. Woo | | | 117,500 | | | 137,500 | | | 10,500 | | | 265,500 | |
(1)
| The fees shown include the annual cash retainer and any Board and chair fees paid during the year to eachnon-employee director. With respect to Messrs. AltabefMs. Hersman and Butler,Mr. Thompson, the fees were prorated for partial year service on the Board; with respect to Messrs. AbdooButler, Kabat and KabatThompson the fees were prorated for partial year service as committee chair. chairs. Mr. Thompson, who did not stand for reelection in 2019, served on the Board until May 7, 2019. Ms. Hersman was appointed to the Board on June 5, 2019. |
(2)
| The amounts shown reflect the grant date fair value of awards computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. For restricted stock units, the grant date fair value is the number of shares multiplied by the closing price of our stock on the award date. Each non-employee director who was elected on May 9, 2017,7, 2019, received an award of restricted stock units valued at $120,000$137,500 which was equal to approximately 5,0444,957 restricted stock units valued at $23.79$27.74 per unit, the closing price of our common stock on that date. See “Security Ownership of Certain Beneficial Owners and Management” and the footnotes to that table for information regarding the number of shares of stock held by each current director as of March 1, 2018. |
(3)
| As of December 31, 2017,2019, the number of equity awards (in the form of restricted stock units or deferred stock units) that were outstanding for eachnon-employee director was as follows: Mr. Abdoo, 59,906;Altabef, 5,029; Mr. Altabef, 7,075;Bunting, 8,522; Mr. Butler, 4,173;5,029; Dr. Candris, 31,627;44,339; Mr. DeVeydt, 5,465;16,555; Ms. Henretta, 17,269;28,879; Ms. Hersman, 4,666; Mr. Jesanis, 5,465;5,029; Mr. Kabat, 5,465;5,029; Mr. Thompson, 56,559;2,902; and Dr. Woo, 32,811. 39,793. |
(4)
| The amounts shown reflect matching contributions made by the NiSource Charitable Foundation under the Director Charitable Match Program. The Foundation matches up to $10,000 annually in contributions by anynon-employee director to approvedtax-exempt charitable organizations. Any amount not utilized for the match in the year it is first available is carried over to the following year. |
(5)
| The amount shown in the Stock Awards column for Mr. Altabef includes an additionalMs. Hersman is a pro-rated award valued at $34,510 which was equal to approximately 1,5674,599 restricted stock units valued at $22.03$28.51 per unit, the closing price of our common stock on January 27, 2017,June 5, 2019, the date of hisher appointment to the Board. |
(6)
| The amount shown inMr. Thompson served on the Stock Awards column for Mr. Butler is apro-rated award which was equal to approximately 4,119 restricted stock units valued at $25.21 per unit, the closing price of our common stock on July 10, 2017, the date of his appointment to the Board. Board until May 7, 2019. |
TABLE OF CONTENTS SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows as of March 1, 2018,24, 2020, the number of shares of our outstanding common stock beneficially owned by: (i) each of our directors; (ii) each of the Named Executive Officers; (iii) our directors and executive officers as a group; and (iv) beneficial owners of more than 5% of our outstanding common stock (based solely on the Schedule 13G filings and any amendments thereto filed with the SEC on or before March 1, 2018)24, 2020) except as noted below. None of the Named Executive Officers or directors has any outstanding stock options as of that date. The business address of each of the Company’sour directors and executive officers is the Company’sour address. | | | | | | | | | Name and Address of Beneficial Owner | | Number of Shares of Common Stock Beneficially Owned | | | Percent of Class Outstanding | | 5% Owners | | | | | | | | | The Vanguard Group(1) | | | 36,108,835 | | | | 10.7% | | 100 Vanguard Blvd. Malvern, PA 19355 | | | | | | | | | BlackRock, Inc.(2) | | | 24,799,547 | | | | 7.4% | | 55 East 52nd Street New York, NY 10055 | | | | | | | | | T. Rowe Price Associates, Inc.(3) | | | 24,432,926 | | | | 7.2% | | 100 East Pratt Street Baltimore, MD 21202 | | | | | | | | | Directors and Executive Officers | | | | | | | | | Richard A. Abdoo(4) | | | 15,000 | | | | * | | Peter A. Altabef(4) | | | 1,611 | | | | * | | Donald E. Brown(5) | | | 45,818 | | | | * | | Eric L. Butler(4) | | | — | | | | * | | Aristides S. Candris(4) | | | 2,000 | | | | * | | Wayne S. DeVeydt(4) | | | 5,934 | | | | * | | Joseph Hamrock(5) | | | 327,406 | | | | * | | Deborah A. Henretta(4) | | | 179 | | | | * | | Carrie J. Hightman(5)(6) | | | 349,536 | | | | * | | Michael E. Jesanis(4) | | | 26,845 | | | | * | | Kevin T. Kabat(4) | | | 11,451 | | | | * | | Violet G. Sistovaris(5) | | | 128,615 | | | | * | | Jim L. Stanley(7) | | | 71,738 | | | | * | | Richard L. Thompson(4) | | | 29,144 | | | | * | | Pablo A. Vegas(5) | | | 30,839 | | | | * | | Carolyn Y. Woo(4) | | | 32,698 | | | | * | | All directors and executive officers as a group (22 persons) | | | 1,257,482 | | | | * | |
| 5% Owners | | | | | | | | | T. Rowe Price Associates, Inc.(1) 100 E. Pratt Street Baltimore, MD 21202
| | | 52,937,405 | | | 14.1% | | | The Vanguard Group(2) 100 Vanguard Blvd. Malvern, PA 19355
| | | 44,449,680 | | | 11.9% | | | BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10055
| | | 31,832,354 | | | 8.5% | | | State Street Corporation(4) One Lincoln Street Boston, MA 02111
| | | 20,149,187 | | | 5.4% | | | Directors and Executive Officers
| | | | | | | | | Peter A. Altabef(5) | | | 17,871 | | | * | | | Donald E. Brown(6) | | | 89,350 | | | * | | | Theodore H. Bunting, Jr(5) | | | 3,447 | | | * | | | Eric L. Butler(5) | | | 18,948 | | | * | | | Aristides S. Candris(5) | | | 15,245 | | | * | | | Wayne S. DeVeydt(5) | | | 22,604 | | | * | | | Joseph Hamrock(6) | | | 453,095 | | | * | | | Deborah A. Henretta(5) | | | 2,408 | | | * | | | Deborah A. P. Hersman(5) | | | 2,350 | | | * | | | Carrie J. Hightman (6)(7) | | | 342,604 | | | * | | | Michael E. Jesanis(5) | | | 33,104 | | | * | | | Kevin T. Kabat(5) | | | 27,711 | | | * | | | Violet G. Sistovaris(6) | | | 135,547 | | | * | | | Pablo A. Vegas(6) | | | 44,052 | | | * | | | Carolyn Y. Woo(5) | | | 46,230 | | | * | | | Lloyd M. Yates(5) | | | 10,980 | | | * | | | All directors and executive officers as a group (21 persons) | | | 1,327,902 | | | * | |
(1)
| As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of The Vanguard Group on February 9, 2018. The Vanguard Group has sole voting power with respect to 513,795 shares, shared voting power with respect to 153,995 shares, sole dispositive power with respect to 35,500,863 shares and shared dispositive power with respect to 607,972 shares reported as beneficially owned. |
(2) | As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of BlackRock, Inc. on January 25, 2018. BlackRock, Inc. has sole voting power with respect to 21,826,511 shares and sole dispositive power with respect to 24,799,547 shares reported as beneficially owned.
|
(3) | As reported on an amendment to statement on Schedule 13G13G/A filed with the SEC on behalf of T. Rowe Price Associates, Inc. on February 14, 2018.2020. T. Rowe Price Associates, Inc. hasreported sole voting power with respect to 8,244,00817,000,191 shares and sole dispositive power with respect to 24,432,92652,937,405 shares.
|
(2)
| As reported on an amendment to statement on Schedule 13G/A filed with the SEC on behalf of The Vanguard Group on February 12, 2020. The Vanguard Group reported sole voting power with respect to 648,425 shares, shared voting power with respect to 193,686 shares, sole dispositive power with respect to 43,732,886 shares and shared dispositive power with respect to 716,794 shares. |
(3)
| As reported on an amendment to statement on Schedule 13G/A filed with the SEC on behalf of BlackRock, Inc. on February 5, 2020. BlackRock, Inc. reported sole voting power with respect to 28,700,999 shares and sole dispositive power with respect to 31,832,354 shares reported. |
(4)
| As reported on Schedule 13G filed with the SEC on behalf of State Street Corporation on February 14, 2020. State Street Corporation has shared voting power with respect to 17,341,826 shares and shared dispositive power with respect to 20,094,350 shares reported as beneficially owned. |
(4)(5)
| Does not include restricted stock units issued under the Omnibus Plan and the formerNon-Employee Director Stock Incentive Plan unless the shares have been distributed or thenon-employee director has the right to acquire the shares within 60 days of March 1, 2018. 24, 2020. |
(5)(6)
| Includes shares held in our 401(k) Plan and shares that are distributable within 60 days of March 1, 2018. 24, 2020. |
(6)(7)
| Includes shares owned by a trust over which Ms. Hightman maintains investment control and of which one or more of her immediate family members are the sole beneficiaries. |
(7) | Mr. Stanley left the Company on June 1, 2017. His holdings appear as Mr. Stanley reported to the Company as of December 31, 2017.
|
TABLE OF CONTENTS EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This CD&A describes our compensation philosophy and the material elements of our 20172019 executive compensation program applicable to the Named Executive Officers. The Named Executive Officers who currently serve as executive officers of the Company are:in 2019 were: Joseph Hamrock —Hamrock- President and Chief Executive Officer (“CEO”)CEO Donald E. Brown —Brown- Executive Vice President and Chief Financial Officer (“CFO”)Pablo A. Vegas — Executive Vice President, Gas Business Segment and Chief Customer Officer
CFO Carrie J. Hightman —Hightman- Executive Vice President and Chief Legal Officer (“CLO”) Violet G. Sistovaris —Sistovaris- Executive Vice President and President, Northern Indiana Public Service Company LLC (“NIPSCO”) We have one additional Named Executive Officer who is no longer an executive officer of the Company, Jim L. Stanley, our former
Pablo A. Vegas- Executive Vice President and Chief Operating OfficerPresident, Gas Utilities 2019 Business Developments During 2019, we continued to execute on our established infrastructure investment-driven business strategy and remained deeply focused on our top priority- safety. We continue to invest in safety improvements, implement policies and procedures, develop technical training and guidelines for our employees and leverage new tools and technology to improve our maps, records and infrastructure performance. Importantly, we followed through on our commitment to accelerate and enhance our schedule for implementation of a Safety Management System (“COO”SMS”), who left across all of our operating companies. Key developments during 2019 included: Installing over-pressurization protection on low pressure systems across our seven-state service territory, including the Companycompletion of those upgrades in Massachusetts and Virginia. Implementing an Incident Command Structure (ICS) aligned with Federal Emergency Management Agency standards and providing ICS training to nearly all our employees, enhancing our emergency preparedness and response capability. Introducing a corrective action program which offers a simple way for employees and contractors to report safety concerns and supports our systematic process to review, prioritize, and track progress to reduce risk. Training 86% of gas employees on June 1, 2017. SEC executive compensation disclosure rules require usSMS, with the completion of the training of the rest of our gas employees targeted for 2020. Appointing an independent quality review board to provide informationoversee our safety programs. Investing approximately $1.9 billion of capital across our Columbia Gas and NIPSCO operating companies in support of long-term safety and service reliability for any individual who servedour customers and communities. Replacing approximately 337 miles of priority gas pipelines across seven states, with the goal of enhancing gas system safety and reliability, and reducing methane emissions. Replacing approximately 33 miles of underground electric cable and more than 1900 electric poles in Indiana to further support increased electric reliability. Advancing our electric generation strategy in Indiana, consistent with our 2018 Integrated Resource Plan by obtaining approval for wind projects announced in 2019 and completing our Coal Combustion Residuals (CCR) capital investments. Achieving significant industry and national recognition, including: being named to the Dow Jones Sustainability-North America Index for the sixth consecutive year; being named to the Bloomberg Gender Equality Index for the second consecutive year; listed as one of America’s Best Large Employers by Forbes magazine for the fourth consecutive year; and, once again, being named to the FTSE4Good index, an executive officer duringindex that measures the yearperformance of companies demonstrating strong environmental, social and would have been reported as a Named Executive Officer in this Proxy Statement had that individual not left the Company.governance practices.
2017 Accomplishments
The Company achieved a number of significant accomplishments in 2017, including:
TABLE OF CONTENTS Delivering
Our total shareholder return of approximately 19%, outperformingwas twelve percent for 2019 and reflected a significant improvement, as compared to 2018, although we underperformed both major utilities indexes; andutility indices. Generating consistent earnings growth, which we believe reflects the strength of our long-term customer-focused infrastructure investment strategy.
Total shareholder return shown in the chart above is calculated by sharestock price appreciation plus the annual dividend amount. The NiSource 2015 sharestock price appreciation and total shareholder return shown in the charts above are based on a 2014 year-end closing price calculated utilizing the Bloomberg separation formula taking into account the separation of Columbia Pipeline Group, Inc. from the Company on July 1, 2015 (the “Separation”). We believe that our 2017 performance was once again driven in large part by our continued disciplined execution across all facets of our established infrastructure-focused and investment-driven business strategy. Key business accomplishments during 2017 include:
Investing a record $1.7 billion of capital across our Columbia Gas and NIPSCO utilities in support of long-term safety and service reliability for our customers and communities;
Replacing more than 377 miles of priority gas pipelines across seven states, thus further enhancing safety and reducing methane leaks and emissions;
Replacing approximately 68 miles of underground electric cable and more than 1,300 electric poles to further support increased service reliability;
Improving customer satisfaction scores at our Columbia Gas and NIPSCO utilities while adding more than 28,000 net new natural gas customers;
Completing our safest year on record for employee safety, including achieving industry top decile in core safety metrics and continued declines in preventable vehicle accidents;
Refinancing approximately $1 billion in long-term debt at more favorable interest rates, which will result in significant interest expense savings;
Opening the third of fourstate-of-the-art field employee training centers;
Setting aggressive environmental targets, including the goal of reducing carbon dioxide equivalent emissions by 50% by 2025 (from 2005 levels), levels that exceed goals outlined by the Paris Agreement, Clean Power Plan and Environmental Protection Agency’s Methane Challenge Program; and
Achieving significant industry and national recognition, including: being named to the Dow Jones Sustainability North American Index for the fourth straight year; one of the World’s Most Ethical Companies by Ethisphere for the seventh consecutive year; a Best Place to Work for LGBTQ Equality by the Human Rights Campaign; the top utility in Forbes magazine list of America’s Best Large Employers; and one of the world’s Top 100 Energy Leaders by Thomson Reuters.
Executive2019 Compensation Highlights
In connection with its ongoing review of our executive compensation program,Committee Notable Actions
During 2019, the Compensation Committee made the following key compensation decisions with respect to 2017:2019 compensation: Recommended toApproved increases in base salary and the independent memberstarget grant date fair value of the Board an increase in our CEO’s base salary, target and stretch award opportunities under the annual cash short-term incentive plan and the grant date value of his 20172019 annual long-term equity award opportunityincentive opportunities for all of the Named Executive Officers other than our CEO, for the reasons explained in “Compensation Committee Actions Related to 20172019 Compensation” in the sections entitled “2017“2019 Base Salaries,” “2017 Cash Incentive Plan” and “2017“2019 LTIP Awards,” respectively; respectively.Approved increases in base salaryRefined the performance-based restricted stock unit (“PSU”) performance goals by eliminating the discretionary assessment of individual performance that was used to determine vesting for Mr. Brown and Ms. Sistovaris and increases in the grant date value20% of the 2017 annual long-term equity award opportunitiestarget 2018 PSUs. We continued to drive accountability for Messrs. Brown, Vegas and Stanley and Ms. Sistovaris foroperational performance by tying the reasons explained in “Compensation Committee Actions Related to 2017 Compensation” investing of 20% of the sections entitled “2017 Base Salaries” and “2017 LTIP Awards” respectively;
Approved promotional increases in base salary, trigger, target and stretch award opportunities under the annual cash short-term incentive plan and an additional increase in the grant date value of Mr. Vegas’ 2017 annual long-term equity award opportunity for the reasons explained in “Compensation Committee Actions Related to 2017 Compensation” in the sections entitled “2017 Base Salaries,” “2017 Cash Incentive Plan” and “2017 LTIP Awards,” respectively;
Determined discretionary cash bonuses for Mr. Hamrock and Ms. Sistovaris were appropriate based on their contributionsPSUs to the Company’s successachievement of key business imperatives, subject to the achievement of a financial vesting trigger, as further explained in the sectionsections entitled “2017 Discretionary Payouts“Long-Term Incentive Program” and “2019 LTIP Awards.” In addition, we continue to Certain Named Executive Officers;”
Delivereddrive individual accountability as individual performance is evaluated prior to grant to determine the 2017 annual long-term equity awardssizing of the LTIP award, in recognition of individual performance.
Increased the CEO stock ownership guideline from 5x base salary to the Named Executive Officers in the form of performance shares that vest upon the achievement of cumulative performance goals over a three-year performance period6x base salary, as further described below under “Stock Ownership and continuous employment through the post-performance period vesting date;Retention Guidelines.” Approved performance goals for our 2017 annual long-term equity awards that are designed to align the Company’s strategic operating plan with the interests of stockholders by selecting relative total shareholder return and cumulative net operating earnings per share as performance measures; and
Evaluated 2017 executive compensation utilizing a Comparative Group that is designed to align the Company with entities that the Compensation Committee considers to be operationally similar and with which we compete for executive talent.
Our Executive Compensation Philosophy The key design priorities of the Company’s 2017our 2019 executive compensation program were to: Maintain a financially responsible program that is aligned with the Company’sour strategic plan to build stockholder value and support long-term, sustainable earnings and dividend growth; growth.Provide a total compensation package that is aligned with the standards in our industry thereby enhancing the Company’sour ability to: –
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| Attract and retain executives with competitive compensation opportunities. |
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| Motivate and reward executives for sustaining high performance. |
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| Ensure that significant portions of pay opportunity remain at-risk for failure to achieve business objectives relating to financial performance, safety and customer care. |
Reward executives based upon level of responsibility and retain executivesindividual performance. Provide compensation that is both competitive with competitive compensation opportunities;– Motivatethe market for executive talent and reward executives for achievingappropriately correlated to Company performance so that the executive receives increased payouts under our incentive programs when Company performance is high and exceedingdecreased payouts under our business objectives;
– Ensure that significant portions of pay remain at risk for failure to achieveincentive programs when our business objectives; performance is low. Align the interests of stockholders and executives by emphasizing stock-denominated compensation opportunities that are contingent on goal achievement; and
Comply with applicable laws and regulations. The Compensation Committee believes that the Company’sour executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives and reward effective leadership decisions that create value for our stockholders, customers and other key stakeholders. TABLE OF CONTENTS Overview of Our 20172019 Executive Compensation Program We design our executive compensation program to attract, retain and motivate highly-qualified executive talent. We believe highly-qualified executive talent is an essential driver of the Company’s success in achieving itssuccessful achievement of our business objectives. The principal elements of compensation that we provide to our executives, including all of the Named Executive Officers, are: base salary,salary; annual short-term performance-based cash incentivesincentives; and long-term performance-based and service-based equity incentive awards. We use short- and long-term performance-based compensation to motivate our executives to meet and exceed our business objectives over both time horizons. To emphasize safety as a priority throughout the Company’s short-organization, safety-related criteria are included as performance goals in both our Annual Performance-Based Cash Incentive Plan and long-term business objectives.our Customer Value Framework, as described below. We also include service-based equity in the form of service-based restricted stock units (“RSUs”) in order to enhance the attractiveness and talent retention aspects of our executive compensation program. Our long-term performance-based compensationincentive program is denominated entirely in common sharesstock to align the interests of executives with those of our stockholders.stockholders as the ultimate value of our long-term incentive compensation is determined by the performance of our stock. The principal elements of our 20172019 total compensation program, time horizon and design objectives of each element are shown below. | | | | | | | | | | | | | | | | | Elements of Total Compensation and Compensation Design Priorities | | Element of Total
Compensation
| | Form of Compensation | | | Talent Attraction | | | Alignment with
Stockholder Interest | | | Talent Retention | | Short-term:
| | | | | | | | | | | | | | | | | Base Salary
| | | Cash | | | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | | | | AnnualPerformance-
Based Cash Incentive
| | | Cash | | | | ✓ | | | | ✓ | | | | ✓ | | Long-term:
| | | | | | | | | | | | | | | | | Long-Term Performance-
Based Equity Incentive
| | | Performance Shares | | | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | | | |
We generally target total compensation (base salary, target annual short-term performance-based cash incentives and target long-term equity incentive awards) to be competitive with the compensation paid to similarly positioned executives at companies within our compensation peer group of companies (the “Comparative“Comparator Group”) as described in the section entitled “Our Executive Compensation Process —- Competitive Market Review.” We do not, however, manage pay to a stipulated percentile of the ComparativeComparator Group practices. 2019 Say-on-Pay Vote Outcome When making decisions about our executive compensation program, the Compensation Committee takes into account the stockholders’ view of such matters. In 2017, over 96%2019, approximately 97% of the votes cast by our investors were voted in favor of ourSay-on-Pay Proposal at our 20172019 annual meeting of stockholders. No changes were made to the design of our executive compensation program in response to the 2017 stockholder2019 Say-on-Pay vote. Our Executive Compensation Mix We believe that a significant percentage of total compensation for the Named Executive Officers should consist of variable and at-risk performance-based compensation. The Compensation Committee believes the appropriate mix of compensation elements should take into account the Company’sour financial and strategic objectives, the competitive environment, retentive elements, Company performance, individual performance and responsibilities, and evolving governance practices. Additionally, the Compensation Committee reviews and assesses total Named Executive Officer compensation to evaluate whether we offer well-balanced incentives for senior executives to focus on serving both Company and stockholder interests.
TABLE OF CONTENTS The following charts illustrateshow the extent to which 2017proportion of 2019 target total compensation for our CEO and ourthe other Named Executive Officers was payable in fixed compensation (base salary) and performance-contingent (annualvariable and at-risk compensation (target annual performance-based cash incentive payable atincentives and the target level and the grant date fair value of the annual long-term performance-based equity incentive award payable at theawards) formats. The following table shows 2019 target level) formats.
| | | | | | | | | | | | | | | | | Named Executive Officer | | Annualized Base Salary ($) | | | Annual Cash Incentive Target ($) | | | Long-Term Incentive Target (Performance Shares) ($) | | | Total ($) | | Joseph Hamrock President and CEO | | | 975,000 | | | | 1,170,000 | | | | 3,000,000 | | | | 5,145,000 | | Donald E. Brown Executive Vice President and CFO | | | 525,000 | | | | 393,750 | | | | 900,000 | | | | 1,818,750 | | Pablo A. Vegas Executive Vice President, Gas Business Segment and Chief Customer Officer | | | 500,000 | | | | 350,000 | | | | 850,000 | | | | 1,700,000 | | Carrie J. Hightman Executive Vice President and CLO | | | 490,000 | | | | 294,000 | | | | 750,000 | | | | 1,534,000 | | Violet G. Sistovaris Executive Vice President and President, NIPSCO | | | 450,000 | | | | 292,500 | | | | 650,000 | | | | 1,392,500 | | Jim L. Stanley Former COO | | | 550,000 | | | | 412,500 | | | | 1,100,000 | | | | 2,062,500 | |
total compensation and each element of target total compensation for each Named Executive Officer. | Joseph Hamrock President and CEO
| | | 1,000,000 | | | 1,200,000 | | | 860,000 | | | 3,440,000 | | | 6,500,000 | | | Donald E. Brown Executive Vice President and CFO
| | | 600,000 | | | 450,000 | | | 220,000 | | | 880,000 | | | 2,150,000 | | | Carrie J. Hightman Executive Vice President and CLO
| | | 500,000 | | | 300,000 | | | 160,000 | | | 640,000 | | | 1,600,000 | | | Violet G. Sistovaris Executive Vice President and President, NIPSCO
| | | 500,000 | | | 350,000 | | | 150,000 | | | 600,000 | | | 1,600,000 | | | Pablo A. Vegas Executive Vice President and President, Gas Utilities
| | | 600,000 | | | 450,000 | | | 220,000 | | | 880,000 | | | 2,150,000 | |
Principal Elements of Our 20172019 Executive Compensation Program
Base salary is designed to provide all our employees, including the Named Executive Officers, with a level of fixed pay that is commensurate with the employee’s role and responsibility. We believe that by delivering base salaries that are designed to be reflective of market norms, the Company iswe are well-positioned to attract, retain and motivate top caliber executives in an increasingly competitive labor environment. The Compensation Committee annually reviews the base salaries of the Company’s senior executives, including the Named Executive Officers, along with the salaries of all our other senior executives, to evaluate whether they are competitive within our industry. In reviewing the base salaries, the Compensation Committee considers the base salaries paid toof similarly situated executives by the companies in the ComparativeComparator Group. See the section entitled “Our Executive Compensation Process —- Competitive Market Review.” The Compensation Committee determines any base salary changes for the Company’sall our senior executives, including the Named Executive Officers, based on a combination of factors that includesinclude: competitive pay standards,standards; level of responsibility, experience,responsibility; experience; internal pay equity considerations,considerations; and historical compensation, andcompensation. Additionally, the Compensation Committee considers recommendations from our CEO, Mr. Hamrock, reflecting his assessment of individual Named Executive Officer performance and contributiontheir contributions to the achievement of business objectives, as well as recommendations from Mr. Hamrock, our CEO. Mr. Hamrock’sobjectives. CEO pay is evaluated separately by the Compensation Committee, taking into account those factors reviewed for all other senior executives other than the recommendation from Mr. Hamrock. The Compensation Committee then provides theirits recommendation regarding CEO compensation to the independent members of the Board for approval. See the section below entitled “Compensation Committee Actions Related to 20172019 Compensation – 2017- 2019 Base Salaries” for more information. TABLE OF CONTENTS Annual Performance-Based Cash Incentive Plan (“Cash Incentive Plan”) The Cash Incentive Plan provides our employees, including the Named Executive Officers with the opportunity to earn a cash incentive award tied to both the Company’sCompany performance and their individual contributions to our performance. A threshold financial trigger of net operating earnings per share (“NOEPS”) must be met before any award may be paid under the Company’s success. AwardsCash Incentive Plan. Once the financial trigger is met, awards to all of our senior executives, including the Named Executive Officers, under the Cash Incentive Plan are subject to one corporate financial performance goal (weighted at 75%) and severalfour operational goals related to key business imperatives of safety and customer care and safety (weighted at 25%). The NOEPS financial performance goal is determined based on the Company’s annual financial plan, which is approved by the Board at the beginning of the year, and is designed to achieve the Company’sour goal of creating sustainable stockholder value by growing earnings and providing a strong dividend. The safety and customer care and safety goals are designed to incent achievement of ourkey business imperatives. In addition, under the terms of the Omnibus Plan, the Compensation Committee retains discretion to adjust Cash Incentive Plan awards downward, either on a formulaic or discretionary basis, as the Compensation Committee determines to be appropriate to reflect other items of Company or individual performance deemed relevant by the Compensation Committee. | | Cash Incentive Plan | 75% Financial Performance
| 25% Customer Care and Safety
|
Eligibility
Importantly, eligibility for participation in the Cash Incentive Plan extends to nearly all Companyour employees. Every eligible employee has an incentive opportunity at trigger, target and stretch levels of performance, and theperformance. The Compensation Committee identifies expectations for all senior executives,employees, including the Named Executive Officers andOfficers. With respect to the CEO, for whom the Compensation Committee makes recommendations regarding his award opportunities for consideration and approval by the independent members of the Board. See the section below entitled “Compensation Committee Actions Related to 20172019 Compensation — 2017- 2019 Cash Incentive Plan” for more information regarding the 20172019 Cash Incentive Plan, including incentive opportunities, performance measures and weightings, goals and payouts for each of the Named Executive Officers.
Long-Term Equity Incentive PlanProgram (“LTIP”) LTIP Design Overview.The LTIP provides our executives, including the Named Executive Officers and our senior executives with the opportunity to earn shares of Companyour stock tied to Company performance.based on performance and continued service. The 20172019 LTIP awards consist solelywere entirely comprised of performance shares thatequity in the form of PSUs (80% of the 2019 target LTIP award) and RSUs (20% of the 2019 target LTIP award). The PSUs are eligible to vest based on financial performance and progress with respect to several key business imperatives that we believe build stockholder value, subject to the achievement of twoa threshold cumulative financial trigger. The RSUs will vest after the completion of a multi-year service condition. The 2019 LTIP award program is designed to: Directly link earned compensation with the achievement of longer-term financial objectives through the grant of 80% of the target PSUs (65% of the 2019 target LTIP award) with vesting tied to financial performance, while still maintaining a relative performance element through the incorporation of a +/- 25% relative total stockholder return (“RTSR”) performance payout modifier with respect to this portion of the 2019 LTIP award. Focus executives on five equally weighted operational goals that we believe build stockholder value because they are related to our key business imperatives of safety, customer care, cost containment, organizational culture and environmental impact (the “Customer Value Framework”) (as more fully described in the section “PSUs”) to drive accountability for operational performance through the grant of 20% of the target PSUs (15% of the 2019 target LTIP award) with vesting tied to achievement of the Customer Value Framework. Enhance retention by rewarding long-term service through the grant of RSUs (20% of the 2019 target LTIP award), which vest subject to the executive’s continued employment through a multi-year service period. The key LTIP design elements that are intended to drive Company financial and operational performance and align with stockholder interests are shown below. | PSUs | | | • 80% of the target long-term incentive opportunity | | | • Three-year performance period | | | • 80% of target PSUs (65% of the 2019 target LTIP award) vesting based on NOEPS performance, subject to a +/- 25% payout modifier based on RTSR performance | | | • 20% of target PSUs (15% of the 2019 target LTIP award) vesting based on Customer Value Framework performance subject to an NOEPS vesting trigger | | | RSUs | | | • 20% of the target long-term incentive opportunity | | | • Vesting subject to the executive’s continued employment through a multi-year service period (in excess of three years) | |
TABLE OF CONTENTS PSUs. The 2019 PSUs (80% of the 2019 target LTIP award) are eligible for vesting only if a cumulative NOEPS performance trigger is met over a three yearthree-year performance period: cumulative net operatingperiod. The NOEPS financial performance goal is determined based on the Company’s annual financial plan, which is approved by the Board at the beginning of the performance period, and is designed to achieve our goal of creating sustainable stockholder value by growing earnings per share (weighted at 50%) and relative total shareholder return (weighted at 50%providing a strong dividend. If the NOEPS performance trigger is achieved, 80% of the target PSUs (65% of the 2019 target LTIP award) will vest based on NOEPS performance above the trigger, as modified by our RTSR performance (which can reduce or increase the vesting level by up to 25%). The Compensation Committee selected cumulative NOEPS as a goal and RTSR as a modifier because it believes it is important that each executive has personal financial exposure to the performance of the Company’sour stock and, therefore, is aligned with the financial interests of stockholders. The Compensation Committee alsodetermined that because NOEPS continues to be viewed as a core driver of our financial performance and stockholder value creation, this measure remained appropriate for both the short-term and long-term incentive programs. As a result, the Compensation Committee utilized NOEPS as a performance measure in both the 2019 LTIP award and the 2019 Cash Incentive Plan. The Compensation Committee continued its practice of supplementing the NOEPS measure with additional operational performance measures that we believe build stockholder value in order to strike an appropriate balance with respect to incentivizing earnings growth, non-financial business imperatives and stockholder returns over both the short-term and long-term horizons. If the NOEPS vesting trigger is achieved, the remaining 20% of the target PSUs (15% of the 2019 target LTIP award) will vest based on the Company’s successful execution of the Customer Value Framework, with each category of the Customer Value Framework equally weighted in the determination of this portion of the LTIP Award. The Customer Value Framework represents important enterprise-wide customer value initiatives, the achievement of which requires the coordinated, cross functional efforts of the Named Executive Officers. We believe these customer value initiatives are key business imperatives that build stockholder value over the long-term. The Compensation Committee utilized NSCBS and JD Power (as defined in the section entitled “2019 Cash Incentive Plan”) as safety and customer care performance measures under the Customer Value Framework portion of the 2019 LTIP in addition to the 2019 Cash Incentive Plan to reflect the significance of these key business imperatives. Additionally, the Compensation Committee tied 2019 LTIP payouts to our performance related to our long-term impact on our employees and the environment by including organizational culture and environmental goals in the Customer Value Framework along with a cost containment measure tied to the conservation of our financial resources, thereby further aligning the 2019 LTIP with the interests of our customers and stockholders. RSUs. The remaining 20% of the 2019 target LTIP award consists of RSUs that will vest based on the executive’s continued employment through February 28, 2022, subject to earlier vesting for certain qualifying terminations of employment prior to that date. This service-based award is designed to reward long-term service and thereby adds a retention incentive to our compensation mix. Additionally, RSUs are considered by the Compensation Committee to be at-risk and aligned with stockholder interests as the ultimate value of the RSUs will fluctuate based on our stock price performance. Other Design Considerations. The Compensation Committee believes that the long-term equity incentives promoteincentive program promotes decision making that is consistent with the Company’sour long-term business objectives.When establishing long-term equity awardincentive opportunity levels for our senior executives, including the Named Executive Officers, the Compensation Committee considers, among other things, the executive’s base salary, the appropriate mix of cash and equity awardincentive opportunities, prior awards under the LTIP and the compensation practices for similarly situated executives at other companies inboth within the Company and our ComparativeComparator Group. The actual value of the 20172019 LTIP award,Award, if any, will depend upon Company performance againstrelative to pre-established performance measures as well as the Company’sand our stock price at the time the awards are settled. The table below summarizes key features of the 2017 LTIP awards. See the section below entitled “Compensation Committee Actions Related to 2017 Compensation” for more information regarding the 2017 LTIP awards for each of the Named Executive Officers. | | | | | Key Features of 2017 LTIP Awards | | Alignment with Shareholder Interest | 100% performance shares
| | Payouts are linked to Company performance | Two performance measures:
| | | Ø 50% Cumulative net operating earnings
per share
Ø 50% Relative Total Shareholder Return
(“RTSR”)
| | Award value is dependent upon the value of the Company’s stock |
Other Compensation and Benefits We also provide other forms of compensation and benefits to our senior executives, including the
The Named Executive Officers consisting of severance andchange-in-control arrangements,also participate in an executive deferred compensation plan and receive executive severance and change-in-control compensation and benefits, a limited number of perquisites and a number of other employee benefits that generally are extended to our entire employee population. TheseWe believe that these other forms of compensation and benefits are generally comparable to those that are provided to similarly situated executives at other companies of our size and thereby serve the objectives of our compensation program to attract and retain our senior executives.
Severance and Change-In-Control Benefits We maintain an executive severance policyprovide Change-in-Control andChange-in-Control Termination Agreements with eachthe intent of the Named Executive Officers.Change-in-Control Agreements are intendedensuring that our senior executives continue to ensure thatapply thoroughly objective judgments are madejudgment to appropriately safeguard stockholder value and maximize investor return in relation to any potential change in corporate ownership so that stockholder value is appropriately safeguardedchange-in-control. The Change-in-Control and returns to investors are maximized. TheChange-in-ControlTermination Agreements provide for cash severance benefits upon a double-trigger (meaning there must be both a qualifyingchange-in-control and termination of employment) and do not provide forinclude any“gross-up” “gross-up” payments to executives for excise taxes incurred with respect to benefits received under a change-in-control of the Company. We maintain Change-in-Control Agreement. and Termination Agreements with each of the Named Executive Officers and all the Named Executive Officers are subject to our executive severance policy. Additionally, the Omnibus Plan provides for double-trigger vesting for equity awards that are assumed or replaced by an acquiring company upon a change-in-control; meaning that there must be both achange-in-control and a qualifying termination of employment in order for the equity awards to vest in connection with or following suchchange-in-control. In the event equity awards are not assumed or replaced in a change-in-control, then the outstanding equity awards will vest upon the occurrence of a change-in-control alone. For further information regarding the benefits to be received upon termination of employment or change-in-control, see the table in the section entitled “Potential Payments upon Termination of Employment or a Change-in-Control of the Company” and the accompanying narrative. In connection with Mr. Stanley’s announced retirement, the Company eliminated the position of COO and realigned Mr. Stanley’s prior responsibilities among other executive officers. As consideration for Mr. Stanley’s agreement to remain employed with the Company to assist with the transition of his roles through his June 1, 2017 separation date and in exchange for a release of claims in favor of the Company, Mr. Stanley was provided separation benefits generally consistent with a position elimination under the Company’s Executive Severance Policy. Mr. Stanley received: (i) a lump sum payment of $550,000; (ii) a payout under the 2017 cash incentive plan as detailed under “2017 Cash Incentive Plan,” based on actual performance during the year; (iii) a payout equivalent to the cost of 130% of twelve months of COBRA premiums; and (iv) a payout of accrued and unused vacation time. All payments provided to Mr. Stanley are shown in the Summary Compensation Table and are detailed in the table under the section entitled “Potential Payments upon Termination of Employment or aChange-in-Control of the Company.”
Perquisites are not a principal element of our executive compensation program. TheyWe provide a limited number of perquisites that are intended to assist executivesthe Named Executive Officers in the performance of their duties on the Company’sour behalf or to otherwise provide benefits that have a combined personal and business purpose. Generally, the Company doeswe do not reimburse the Named Executive Officers for the payment of personal income taxes they incur in connection with their receipt of these benefits, except for relocation expenses, consistent with Company practice for all employees who receive Company-paid relocation expenses.benefits. For information regarding 20172019 perquisites, see the 20172019 Summary Compensation Table and footnote (6) to that table. Deferred Compensation Plan We also maintain the Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) through which eligible Company
Eligible executives, including the Named Executive Officers, may elect to defer between 5% and 80% of their base salary and annual cash incentive payout. The Company makes thepayout under our Executive Deferred Compensation Plan available to(the “Deferred Compensation Plan”). The Deferred Compensation Plan provides an opportunity for eligible executives so they have the opportunity to defer their cash compensation without regard to the limits imposed by the IRS for amounts that may be deferred under theour 401(k) Plan. The material terms of the Deferred Compensation Plan are described in the narrative to the 20172019 Non-qualified Deferred Compensation Table.
During 2017,2019, we maintained a tax-qualified defined benefit pension plan for essentiallynearly all salaried exempt employees hired before January 1, 2010, all non-exempt employees (both non-union and certain union employees) hired before January 1, 2013, as well as for other union employees, regardless of hire date, and a non-qualified defined benefit pension plan (the “Pension Restoration Plan”) for all eligible employees with annual compensation or pension benefits in excess of the limits imposed by the Internal Revenue Service (“IRS”), including any eligible Named Executive Officer. The Pension Restoration Plan provides for a pension benefit under the same formula provided under the tax-qualified plan but without regard to the IRS limits and reduced by amounts paid under the tax-qualified plan. The material terms of the pension programs are described in the narrative to the 20172019 Pension Benefits Table.
The Named Executive Officers are eligible to participate in the same tax-qualified 401(k) Plan as most employees and in a non-qualified defined contribution plan (the “Savings Restoration Plan”) maintained for eligible executive employees. The 401(k) Plan includes a Company match that varies depending on the pension plan in which the employee participates and a Company profit sharing contribution for most employees of between 0.5% and 1.5% of the employee’s eligible earnings based on achievement of the overall corporate net operating earnings per shareNOEPS measure. In addition, for salaried employees hired after January 1, 2010, and non-unionnon-exempt non-union non-exempt employees hired after January 1, 2013, the 401(k) Plan includes a 3% Company contribution to the employee accounts. The Savings Restoration Plan provides for Company contributions in excess of IRS limits under the 401(k) Plan for eligible employees, including the Named Executive Officers. The material terms of the Savings Restoration Plan are described in the narrative to the 20172019 Non-qualified Deferred Compensation Table.
Health and Welfare Benefits We also provide the Named Executive Officers other broad-based benefits such as medical, dental, life insurance and long-term disability coverage on the same terms and conditions to all employees, including the Named Executive Officers.employees. We believe that these broad-based benefits enhance the Company’sour reputation as an employer of choice. Our Executive Compensation Process The Compensation Committee is responsible for evaluating and determining the compensation of our senior executives and for overseeing the administration of our equity plans including equity award grants to our executive officers.and grants. In doing so, the Compensation Committee apprises the Board with respect to the evaluation, compensation and benefits of our executives. The Compensation Committee takes into account various factors when making compensation decisions, including: Attainment of our established business and financial goals of the Company; goals.Competitiveness of the Company’sour compensation program based upon competitive market data; and data.An executive’s position, level of responsibility and performance, as measured by the individual’s contribution to the Company’s achievement of itsour business objectives. The Compensation Committee reviews the performance and compensation of our CEO and his executive direct reports each year.year and apprises the Board accordingly. For our CEO, the Compensation Committee evaluates CEO performance in light of the Company’sour goals and objectives and considers recommendations from the Compensation Committee’s independent executive compensation consultant, that are reflective of the Compensation Committee’s assessment of our CEO’s performance and compensation competitiveness. Following this evaluation, the Compensation Committee submits its recommendations to the independent members of the Board for review and approval. When considering changes in compensation for senior executives that report to our CEO, including the Named Executive Officers, the Compensation Committee considers input from the CEO and the ExecutiveSenior Vice President, Regulatory Policy and Corporate Affairs, Vice President,Chief Human Resources Officer, in addition to the Compensation Committee’s independent compensation consultant. Independent Compensation Consultant For 2019, the Compensation Committee engaged the services of Meridian as its independent compensation consultant to advise it with respect to executive compensation design, comparative compensation practices and compensation matters relating to the Board. The Compensation Committee takes recommendations from Meridian into consideration along with its evaluation of the individual performance of each executive officer. In addition, during 2019 and early 2020, Meridian assisted in the evaluation and review of the NiSource Inc. 2020 Omnibus Incentive Plan, which is described in detail in Proposal 4. Each year, the Compensation Committee evaluates the independence and quality of the services provided by its independent compensation consultant. In reviewing Meridian’s engagement for 2019, the Compensation Committee considered the factors set forth in SEC Rule 10C-1(b)(4) and the applicable NYSE rules and determined that Meridian was independent.
TABLE OF CONTENTS Competitive Market Review In connection with its compensation decision making, the Compensation Committee reviews the executive compensation practices in effect at other companies in the ComparativeComparator Group. These companies comprised leading gas, electric, and combinationmulti-line utilities that were selected by the Compensation Committee for their operational comparability to the Company and because we generally compete with these companies for the samesimilar executive talent. For 2017,2019, the Compensation Committee, with input from its independent compensation consultant, Exequity LLP, made no changeMeridian, added Avista Corporation, Black Hills Corporation, New Jersey Resources Corporation and Southwest Gas Holdings, Inc. to the compensation peer group, exceptComparator Group to reflect The Lacledecontinue to align us with operationally similar companies. Additionally, due to their acquisitions, the Compensation Committee removed Piedmont Natural Gas Company, Inc., SCANA Corporation and WGL Holdings from the Comparator Group Inc.’s name change to Spire, Inc., Dominion Resources, Inc.’s name change to Dominion Energy, Inc. and the mergers of AGL Resources Inc. into Southern Company Gas and Questar Corporation into Dominion Energy, Inc.for 2019. For purposes of evaluating 20172019 compensation practices, the ComparativeComparator Group included the following companies:companies shown below. | | | Alliant Energy Corporation | | Piedmont Natural Gas Company, Inc. | New Jersey Resources Corporation | Ameren Corporation | | PNM Resources, Inc. | OGE Energy Corp. | American Electric Power Company, Inc. | | PPL Corporation | ONE Gas, Inc. | Atmos Energy Corporation | | | PNM Resources, Inc. | Avista Corporation | | | PPL Corporation | Black Hills Corporation | | | Public Service Enterprise Group Incorporated | CenterPoint Energy, Inc. | | SCANA Corporation | Sempra Energy | CMS Energy Corporation | | Sempra Energy | Southwest Gas Holdings, Inc. | Dominion Energy, Inc. | | Southern Company Gas | Spire, Inc. | DTE Energy Company | | Spire, Inc. | Vectren Corporation | FirstEnergy Corp. | | Vectren Corporation
| OGE Energy Corp. | | WEC Energy Group, Inc. | ONE Gas, Inc.
| | WGL Holdings, Inc.
|
| | | | | | | | | | | | | | | | | | Compensation Peer Group | | | | Revenue(1) ($ millions) | | | | Market Cap(1) ($ millions) | NiSource | | | | 4,652 | | | | 6,217 | NiSource Percentile Rank | | | | 51st | | | | 38th | 75th Percentile | | | | 8,950 | | | | 15,295 | Median | | | | 4,380 | | | | 7,900 | 25th Percentile | | | | 2,316 | | | | 4,459 |
(1)The Compensation Committee selected the 2017 Compensation Peer Group in October 2016 based on fiscalyear-end 2015 revenue and market capitalization data. Fiscalyear-end revenue and market capitalization data was compiled by the Committee’s independent compensation consultant.
| NiSource | | | $4,875 | | | $9,533 | | | NiSource Percentile Rank | | | 50th%ile | | | 42nd%ile | | | 75th Percentile | | | $9,853 | | | $20,654 | | | Median | | | $4,738 | | | $11,124 | | | 25th Percentile | | | $2,385 | | | $4,050 | |
(1)
| The Compensation Committee selected the 2019 Compensation Peer Group in August 2018 based on fiscal year-end 2017 revenue and market capitalization data compiled and provided by Meridian. |
Compensation Committee Actions Related to 20172019 Executive Compensation During 2017, the
The Compensation Committee reviewed and, as appropriate, took action with respect to each element of total compensation for each Named Executive Officer following the principles, practices and processes described above. The Compensation Committee’s compensation determinations and recommendations were based primarily upon recognition of the roles, responsibilities and performance of each Named Executive Officer, a review of the ComparativeComparator Group and an assessment that theof total compensation provided to each Named Executive Officer offered well-balanced incentives to focus on serving the interests of the Company and its stockholders.compensation.
The Compensation Committee annually reviews the base salaries of senior executives, including the Named Executive Officers, and all our senior executives, to evaluate whether they are competitive and appropriately reflect performance. In January 2017,setting 2019 base salary levels, the Compensation Committee considered competitive market data, the base salaries earned by similarly situated executivescompetitiveness of companies in the Comparative Group,annual total target compensation of each Named Executive Officer, responsibilities, experience, internal pay equity, historical compensation practices, individual performance and contributions to achievement of business objectives. The Compensation Committee approved salary increases for Mr. Brown and Ms. Sistovaris to maintain salary level market competitiveness for each executive that is reflective of strong performance and their significant achievements in their roles as CFO and Executive Vice President and President of NIPSCO, respectively. With respect to Mr. Hamrock,Based on this assessment, the Compensation Committee recommended to(or, in the case of our CEO, the independent members of the Board an increase inBoard) approved 2019 base salary levellevels, effective June 1, 2019. The Compensation Committee did not recommend a 2019 base salary increase for our CEO, noting that his cash compensation was deemed to maintain market competitiveness that is reflective of his strong performance and significant achievements in his role as President and CEO ofbe appropriately aligned with the Company. The independent members of the Board considered and approved the recommendation of the Compensation Committee.Subsequently,competitive market. With respect to Mr. Vegas, the Compensation Committee approved an increase for Mr. Vegasof approximately 14.3%, taking into account (i) his effective on May 1, 2017, due toperformance in core aspects of his assumption of additional responsibilities and promotion torole as Executive Vice President, Gas Business SegmentUtilities, (ii) his successful assumption of additional duties during 2018, and Chief Customer Officer.
The 2017(iii) the need for further alignment of his cash compensation with the competitive market. Below are the 2019 and 2018 annual base salary adjustmentslevels for Messrs. Hamrock and Brown and Ms. Sistovaris were effective on June 1, 2017 and Mr. Vegas’ salary increase became effective on May 1, 2017. All 2017 increases ineach Named Executive Officer salaries are shown in the table below. No other Named Executive Officer received an increase in 2017.Officer.
| Joseph Hamrock | | | 1,000,000 | | | 1,000,000 | | | Donald E. Brown | | | 600,000 | | | 575,000 | | | Carrie J. Hightman | | | 500,000 | | | 490,000 | | | Violet G. Sistovaris | | | 500,000 | | | 475,000 | | | Pablo A. Vegas | | | 600,000 | | | 525,000 | |
TABLE OF CONTENTS | | | | | | | | | | | 2017 Base Salary Increases | | Name | | 2017 Annual Salary | | | | | 2016 Annual Salary | | Joseph Hamrock | | $ | 975,000 | | | | | $ | 900,000 | | Donald E. Brown | | $ | 525,000 | | | | | $ | 500,000 | | Pablo A. Vegas | | $ | 500,000 | | | | | $ | 450,000 | | Violet G. Sistovaris | | $ | 450,000 | | | | | $ | 400,000 | |
2017In January 2017,2019, the Compensation Committee established performance measures and goals to be used to determine the 20172019 Cash Incentive Plan payouts for the Named Executive Officers and all of our employees, includingother participating employees. In addition, the Compensation Committee set each Named Executive Officers. In determiningOfficer’s Cash Incentive Plan trigger, target and stretch opportunities taking into account the following factors: competitive market practice of the Comparator Group, input from Meridian, historical payouts and individual performance. Based on this assessment, the Compensation Committee made no changes to the Cash Incentive Plan opportunities for the Named Executive Officers, the Compensation Committee considered competitive information from the Comparative Group, input from the independent compensation consultant, historical payouts and individual performance in its review of the trigger, target and stretch opportunities for Named Executive Officers and made no changes to the trigger, target and stretch opportunities for Named Executive Officers, except for Mr. Hamrock. With respect to Mr. Hamrock, the Compensation Committee recommended to the independent members of the Board an increase in his target and stretch incentive opportunity. Officers. The Compensation Committee recommended this increase along with an increase to his base salary, as noted above, and long-term incentive, as noted below, in order to further align his compensation with other chief executive officers within the Comparative Group, reward his strong performance and maintain market competitiveness. The independent members of the Board considered and approved the recommendation of the Compensation Committee.Subsequently, the Compensation Committee increased each of the trigger, target and stretch incentive opportunities for Mr. Vegas, effective on May 1, 2017, due to his assumption of increased responsibilities and promotion to Executive Vice President, Gas Business Segment and Chief Customer Officer. The Compensation Committee determined Mr. Vegas’ Cash Incentive Plan opportunities should be adjusted in addition to his base salary, as noted above, and long-term incentive as noted below, to reflect the increased responsibilities and to maintain competitiveness with other similarly positioned executives within the Comparative Group for his new role as Executive Vice President, Gas Business Segment and Chief Customer Officer.
All 2017 increases to Named Executive Officer Cash Incentive Plan opportunities are shown in the table below. No other Named Executive Officer received an increase in 2017.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 Cash Incentive Plan Opportunity Increases | | Name | | 2017 Opportunities | | | | | | 2016 Opportunities | | | | Trigger (% of Salary) | | | Target (% of Salary) | | | Stretch (% of Salary) | | | | | | Trigger (% of Salary) | | | Target (% of Salary) | | | Stretch (% of Salary) | | Joseph Hamrock | | | 40% | | | | 120% | | | | 175% | | | | | | | | 40% | | | | 100 | % | | | 160 | % | Pablo A. Vegas | | | 30% | | | | 70% | | | | 110% | | | | | | | | 25% | | | | 65 | % | | | 105 | % |
The 20172019 Cash Incentive Plan awards for senior executives, including all of the Named Executive Officers, and all our senior executives, were subject to achievement with respect toof one corporate financial goal, net operating earnings per share, as well as additionalNOEPS, and four operational goals related to customer care and safety, as detailed in the table below. The Compensation Committee approved these measures for the annual performance period because they were deemed to be important to the Company’sour success in increasing stockholder value. The incentive opportunities for the Named Executive Officers were contingent on achievement of goals relating to these measures, subject to final discretionary adjustments by the Compensation Committee. measures. | Earnings
| | | | | | | | | | | | Net Operating Earnings Per Share (“NOEPS”), a non-GAAP measure. | | | Income from continuing operations determined in accordance with Generally Accepted Accounting Principles after accounting for(“GAAP”), including, without limitation, the costimpact of any incentive payoutpayouts and adjusted for certain items, such as fluctuations in weather and other significant unusual events disclosed in the Company’s earnings reports, (examples of which may include transaction-related costs, debt extinguishment costs or certain income tax items). | | | • Represents | | | Viewed by the Board as representative of the fundamental earnings strength and our performance of the Company.and aligned with stockholder value creation. | | | • | | | Net operating earnings is used internally for budgeting and reporting to the Board. | | Customer Care | • | | | Consistent with our external reporting of results
| | 2017
| | | | (1)For 2019, a pre-tax adjustment of $233.6 million was included in GAAP earnings and attributable to costs incurred for estimated third-party claims and related other expenses as a result of the Greater Lawrence Incident, net of insurance recoveries recorded. Additionally, a pre-tax adjustment of $414.5 million was excluded from GAAP earnings and attributable to impairments of goodwill and franchise rights related to Columbia of Massachusetts. For details regarding the Greater Lawrence Incident please see Note 19-E to our consolidated financial statements included in our Annual Report on Form 10-K. For details regarding the impairments of both goodwill and franchise rights, please see Note 6 to our consolidated financial statements included in our Annual Report on Form 10-K. | | | | | | | | | Customer Care
| | | | | | | | | | | | 2019 JD Power Gas and ElectricalElectric Utility Residential Customer Satisfaction Studies (“JD Power Studies”) | | | Measures relative performance of the Company’sour operating companies as compared to peer companies within each operating company’s jurisdiction (based on company size and geographic region), as reported in the 20172019 JD Power Studies, with the target set using the Company’s 20162018 performance as the baseline. Threshold, target and maximum performance goals are based on the scoring set forth in the JD Power Studies. | | | • | | | Designed to track our progress in delivering satisfaction to our customers relative to our peers. | | | • | | | Aligned with our stakeholder commitment oftop-tier customer satisfaction and brand perception. |
| | | | | Performance Goal | | Description
| | Reason Selected
| Customer Care
| 2017
2019 MSR Group overall post transaction customer satisfaction survey results (“MSR Group Survey”) | | | Measures the Company’sour operating companies’ performance in a post transaction survey designed to assess the customer experience, with the target set using the Company’s 2016 performance as the baseline.experience. Threshold, target and maximum performance goals are based on our percentile rankingset using the Company’s 2018 performance as compared to the other surveyed companies.baseline. | | | • | | | Designed to track our progress in delivering satisfaction to our customers relative to our prior performance. | | | • | | | Aligned with our stakeholder commitment oftop-tier customer satisfaction and brand perception. | |
TABLE OF CONTENTS | Safety
| | | | | | | | | | | | DART Rate | | | Measures the rate of employee injuries that resulted in work days missed or restricted or an employee transfer, with the target set using industry benchmark of top decile. | | | • | | | Designed to track our progress in achieving the optimum employee safety climate. | | 2017
| 2019 National Safety Council Barometer Survey developed by the National Safety Council (“NSCBS”) | | | A survey that gauges employee perception of Companyour safety programs and benchmarks results against a proprietary database of over 800 companies, with the target set using the Company’s 20162018 performance as the baseline. Threshold, target and maximum performance goals are based on our percentile ranking as compared to the other surveyed companies. | | | • | | | Designed to track our progress in achieving the optimum safety climate supported by the appropriate activities while also gauging management, supervisor and employee engagement.
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The applicable2019 performance measures, performance goals, associated weighting of each performance measure, and their associated weightings andformulaic results as a percentage of the target incentiveCash Incentive Plan opportunity for 2017 for each of the Named Executive Officers are shown in the table below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate Measures(1) | | Weight | | Trigger | | Target | | Stretch | | Result | | Formulaic Payout as a % of Target(2) | | Weighted Adjusted Formulaic Payout as a % of Target | Mr. Hamrock | | | | | | | | | | | | | | | NiSource Net Operating Earnings Per Share | | 75% | | $1.12 | | $1.15 | | $1.18 | | $1.21 | | 145.83% | | 109.38% | Customer Care (JD Power Studies) | | 10% | | 695 | | 705 | | 715 | | 733 | | 145.83% | | 14.58% | Customer Care (MSR Group Survey) | | 5% | | 85% | | 87% | | 89% | | 88% | | 122.92% | | 6.15% | Safety (DART Rate) | | 5% | | .66 | | .44 | | .22 | | .43 | | 102.08% | | 5.10% | Safety (NSCBS) | | 5% | | 75% | | 78% | | 80% | | 89% | | 145.83% | | 7.29% | Messrs. Brown and Stanley | | | | | | | | | | | | | | | NiSource Net Operating Earnings Per Share | | 75% | | $1.12 | | $1.15 | | $1.18 | | $1.21 | | 160.00% | | 120.00% | Customer Care (JD Power Studies) | | 10% | | 695 | | 705 | | 715 | | 733 | | 160.00% | | 16.00% | Customer Care (MSR Group Survey) | | 5% | | 85% | | 87% | | 89% | | 88% | | 130.00% | | 6.50% | Safety (DART Rate) | | 5% | | .66 | | .44 | | .22 | | .43 | | 102.73% | | 5.14% | Safety (NSCBS) | | 5% | | 75% | | 78% | | 80% | | 89% | | 160.00% | | 8.00% | Mr. Vegas | | | | | | | | | | | | | | | NiSource Net Operating Earnings Per Share | | 75% | | $1.12 | | $1.15 | | $1.18 | | $1.21 | | 157.14% | | 117.86% | Customer Care (JD Power Studies) | | 10% | | 695 | | 705 | | 715 | | 733 | | 157.14% | | 15.71% | Customer Care (MSR Group Survey) | | 5% | | 85% | | 87% | | 89% | | 88% | | 128.57% | | 6.43% | Safety (DART Rate) | | 5% | | .66 | | .44 | | .22 | | .43 | | 102.60% | | 5.13% | Safety (NSCBS) | | 5% | | 75% | | 78% | | 80% | | 89% | | 157.14% | | 7.86% | Ms. Hightman | | | | | | | | | | | | | | | NiSource Net Operating Earnings Per Share | | 75% | | $1.12 | | $1.15 | | $1.18 | | $1.21 | | 158.33% | | 118.75% | Customer Care (JD Power Studies) | | 10% | | 695 | | 705 | | 715 | | 733 | | 158.33% | | 15.83% | Customer Care (MSR Group Survey) | | 5% | | 85% | | 87% | | 89% | | 88% | | 129.17% | | 6.46% | Safety (DART Rate) | | 5% | | .66 | | .44 | | .22 | | .43 | | 102.65% | | 5.13% | Safety (NSCBS) | | 5% | | 75% | | 78% | | 80% | | 89% | | 158.33% | | 7.92% | Ms. Sistovaris | | | | | | | | | | | | | | | NiSource Net Operating Earnings Per Share | | 75% | | $1.12 | | $1.15 | | $1.18 | | $1.21 | | 161.54% | | 121.15% | Customer Care (JD Power Studies) | | 10% | | 695 | | 705 | | 715 | | 733 | | 161.54% | | 16.15% | Customer Care (MSR Group Survey) | | 5% | | 85% | | 87% | | 89% | | 88% | | 130.77% | | 6.54% | Safety (DART Rate) | | 5% | | .66 | | .44 | | .22 | | .43 | | 102.80% | | 5.14% | Safety (NSCBS) | | 5% | | 75% | | 78% | | 80% | | 89% | | 161.54% | | 8.08% |
| NOEPS | | | 75% | | | $1.30 | | | $1.33 | | | $1.36 | | | 1.32 | | | 60% | | | 62% | | | Customer Care (JD Power Studies) | | | 10% | | | 744 | | | 746 | | | 749 | | | 736 | | | 0% | | | Customer Care (MSR Group Survey) | | | 5% | | | 90% | | | 91% | | | 92% | | | 90% | | | 2% | | | Safety (DART Rate) | | | 5% | | | .53 | | | 0.44 | | | .22 | | | 1.08 | | | 0% | | | Safety (NSCBS) | | | 5% | | | 90% | | | 92% | | | 95% | | | 86% | | | 0% | |
(1)
| For performance between two performance levels (for example, between target and stretch goals), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target opportunity. |
(2)
| The Formulaic Payout2019 results were calculated as a % of Target varies among the Named Executive Officers based on the difference between the Named Executive Officer’s trigger, target and stretch opportunities. The incentive opportunity range for each of the Named Executive Officers is shown in the table below. discussed above under “2019 Cash Incentive Plan.” |
2017(3)
| Weighted achievement is determined by multiplying the weight by the achievement percentage. |
2019 Cash Incentive Plan Payouts to the Named Executive Officers The 20172019 Cash Incentive Plan opportunities and actual payout amounts as approved by the Compensation Committee (and with respect to the CEO, by the independent members of the Board) are shown in the table below. | | | | | | | | | | | | | | | | | | | | | | | | | | Named Executive Officer | | Trigger (% of Salary) | | Target (% of Salary) | | Stretch (% of Salary) | | 2017 Award (% of Target) | | 2017 Award(1) | Joseph Hamrock | | | | 40% | | | | | 120% | | | | | 175% | | | | | 142.50% | | | | $ | 1,667,250 | | Donald E. Brown | | | | 30% | | | | | 75% | | | | | 120% | | | | | 155.64% | | | | $ | 612,833 | | Pablo A. Vegas | | | | 30% | | | | | 70% | | | | | 110% | | | | | 152.99% | | | | $ | 535,465 | | Carrie J. Hightman | | | | 25% | | | | | 60% | | | | | 95% | | | | | 154.09% | | | | $ | 453,025 | | Violet G. Sistovaris | | | | 25% | | | | | 65% | | | | | 105% | | | | | 157.06% | | | | $ | 459,401 | | Jim L. Stanley | | | | 30% | | | | | 75% | | | | | 120% | | | | | 155.64% | | | | $ | 314,385 | |
| Joseph Hamrock | | | 1,000,000 | | | 120% | | | 62% | | | 744,000 | | | 720,000(4) | | | Donald E. Brown | | | 600,000 | | | 75% | | | 62% | | | 279,000 | | | 279,000 | | | Carrie J. Hightman | | | 500,000 | | | 60% | | | 62% | | | 186,000 | | | 186,000 | | | Violet G. Sistovaris | | | 500,000 | | | 70% | | | 62% | | | 217,000 | | | 217,000 | | | Pablo A. Vegas | | | 600,000 | | | 75% | | | 62% | | | 279,000 | | | 279,000 | |
(1)
| The 2017 Awards for eachEach Named Executive Officer has a trigger bonus opportunity equal to 40% of target and a stretch bonus opportunity equal to 160% of target.
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(2)
| Formulaic Result reflects the percentage of Target payable to the Named Executive Officers based on the Company’s 2019 results as determined by the pre-established performance goals. |
(3)
| The Formulaic Amounts were calculated as follows: 2019 annual base salary multiplied by his or her Target (% of Salary) multiplied by the applicable 2017 AwardFormulaic Result (% of Target), except for. |
(4)
| In accordance with the terms of the 2019 Cash Incentive Plan, the Compensation Committee exercised discretion to reduce Mr. Stanley who left the Company on June 1, 2017. His incentive was calculated using his prorated 2017 salary rather than his annual base salary.Hamrock’s formulaic payout by $24,000, reflecting a payout of approximately 60% of Target. |
TABLE OF CONTENTS 2019 LTIP Awards In January 2018, the Compensation Committee certified the performance results set forth in the tables above. Additionally, the Compensation Committee determined it was appropriate to recommend to the independent members of the Board that Mr. Hamrock receive a 2017 Cash Incentive Plan payout of $1,667,250 based on the Company’s 2017 performance, Mr. Hamrock’s exceptional contribution to the Company’s success in 2017, and his continued strong performance in the Company’s top leadership role. The independent members of the Board considered and approved the Cash Incentive Plan payout recommended by the Compensation Committee.Mr. Hamrock also made recommendations to the Compensation Committee with respect to the award of 2017 Cash Incentive Plan payouts to the other senior executives, including the other Named Executive Officers. In making his recommendations, Mr. Hamrock considered the Company’s performance and the performance of the senior executives in delivering strong stockholder returns again in 2017 as well as the performances of the corporate functions the executive led. The Compensation Committee considered and accepted Mr. Hamrock’s recommendations and approved Cash Incentive Plan payouts to the Named Executive Officers in accordance with the Cash Incentive Plan formula, as set forth in the table above.
2017 Discretionary Payouts to Certain Named Executive Officers
At the January 2018 Compensation Committee meeting, the Compensation Committee exercised its discretion to provide bonuses in addition to the amount based on performance relative to thepre-established performance criteria described above under “2017 Cash Incentive Plan.” The Compensation Committee determined it was appropriate to approve a $40,599 discretionary bonus to Ms. Sistovaris in recognition of her contribution to the Company’s efforts to provide sustained value for customers and investors, including her successful launch of various initiatives at NIPSCO that resulted in improved safety, customer care and service reliability in 2017. Additionally, the Compensation Committee determined it was appropriate to recommend to the independent members of the Board that Mr. Hamrock receive a discretionary bonus of $87,750 in recognition of his successful leadership of the Company in 2017, and his continued strong performance in the Company’s top leadership role. The independent members of the Board approved the discretionary bonus to the CEO as recommended by the Compensation Committee.
These discretionary bonuses are set forth in the Bonus column of the 2017 Summary Compensation Table because they are not based on performance relative solely to thepre-established performance criteria under the Cash Incentive Plan described above. Payouts under the 2017 Cash Incentive Plan are set forth in theNon-equity Incentive Plan Compensation column of the 2017 Summary Compensation Table.
2017 LTIP Awards
2017 Performance Share Awards. In January 2017,2019, the Compensation Committee approved a grant of performance sharesPSUs to the Company’sour senior executives including each of the Named Executive Officers. For 2019, the Compensation Committee retained the design used for the 2018 LTIP awards, except it eliminated the discretionary assessment of individual performance included in 2018 LTIP with respect to 20% of the target PSUs (15% of the LTIP award) that were tied to key business imperatives. In doing so, the Compensation Committee increased the emphasis on the achievement of certain key business imperatives, tying payout to their achievement regardless of individual considerations and contingent on our financial performance, thus seeking to further align incentive payouts with stockholder interests. Consistent with the philosophy and principles articulated above, the Compensation Committee believes that the 2017 performance share2019 LTIP awards:
Align the interests of executives with the Company’sour stockholders as the ultimate value of the award is dependent upon the value of the Company’s stock; our stock.Support the Company’sour philosophy of paying for performance asbecause the performance shares willPSUs are not eligible to vest unless the Company achieves itsa threshold financial performance goalsgoal over the three-year performance period; and period.Provide competitive compensation to recruit and retain executive talent by including a long-term equity incentive component with vesting based on a three-yearmulti-year service condition. condition, subject to earlier vesting in the event of certain qualifying terminations of employment.Offers compensation that emphasizes the value of continuous long-term service. Endorses the enterprise-wide customer value initiatives and drives accountability by aligning the actual value of the award to the achievement of the Customer Value Framework. In determining the 20172019 LTIP grantaward values to be awarded to the Company’s senior executives, including the Named Executive Officers and all our senior executives in January 2019, the Compensation Committee considered the competitive pay practices at companies withinof our ComparativeComparator Group, input from the Compensation Committee’s independent compensation consultant,Meridian, the historical mix of fixed compensation versus variable incentive compensation, internal pay equity and the expectations of the executive’s role in driving our strategic and financial objectives and individual performance. The Compensation Committee approved an increase in 2017 grant date values for Messrs. Brown, Vegas and Stanley and Ms. Sistovaris. Additionally,Based on this assessment, the Compensation Committee recommended to(or, in the case of our CEO, the independent members of the Board an increase inBoard) approved the 2017 grant date value2019 LTIP award values for Mr. Hamrock,each Named Executive Officer. All our Named Executive Officers received increased 2019 LTIP award values except for our CEO. The independent membersCompensation Committee did not recommend an increase for 2019, noting that the CEO’s 2018 LTIP value and total CEO compensation was deemed appropriate and market competitive. In the case of the Board considered and approved the recommendation of the Compensation Committee.In particular, in approving the increased LTIP grant values for Messrs. Brown and Vegas and Stanley and Ms. Sistovaris, and making its recommendation to the independent members of the Board with respect to Mr. Hamrock,Hightman, in considering increases from their 2018 award values, the Compensation Committee considered each executive’s consistently strong performance,noted their demonstrated leadership in their roles, their historic award values in relation to the Comparative Group, and, with respect to Mr. Hamrock, his effective leadership in the execution of a successful operating strategy for the Company. The Compensation Committee approved an increase for Mr. Vegas in January 2017 based on his former role as Executive Vice President and President, Columbia Gas Group. Subsequently, the Compensation Committee approved an additional increase for Mr. Vegas effective May 1, 2017, to maintain competitiveness with other similarly positioned executives within the Comparative Group, due to his assumption of additional responsibilitiesduties, in addition to consistent strong performance in 2018, sustained leadership in each executive's role in driving our strategic and promotion tofinancial objectives, historical award levels and the market competiveness of their total compensation. The 2019 and 2018 LTIP award values for each Named Executive Vice President, Gas Business SegmentOfficer are shown below.
| Joseph Hamrock | | | 4,300,000 | | | 4,300,000 | | | Donald E. Brown | | | 1,100,000 | | | 950,000 | | | Carrie J. Hightman | | | 800,000 | | | 700,000 | | | Violet G. Sistovaris | | | 750,000 | | | 700,000 | | | Pablo A. Vegas | | | 1,100,000 | | | 950,000 | |
The 2019 LTIP award values shown above were granted in the form of PSUs (80% of the 2019 LTIP award) and Chief Customer Officer. | | | | | | | 2017 LTI Award Increases | Name | | 2017 Grant Date Face Value | | | | 2016 Grant Date Face Value | Joseph Hamrock | | $3,000,000 | | | | $2,500,000 | Donald E. Brown | | $900,000 | | | | $850,000 | Pablo A. Vegas(1) | | $850,000 | | | | $650,000 | Violet G. Sistovaris | | $650,000 | | | | $600,000 | Jim L. Stanley(2) | | $1,100,000 | | | | $1,050,000 |
| (1) | Mr. Vegas’ target value was increased by $100,000 in January 2017 and an additional $100,000 effective May 1, 2017.
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| (2) | Mr. Stanley left the Company on June 1, 2017 and forfeited his entire 2017 performance share award in accordance with the terms of the award agreement.
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in the form of RSUs (20% of the 2019 LTIP award) as shown below. Vesting of the 2017 grants of performance shares2019 PSUs is dependent on the Companyour meeting certain financial performance measures over the 2017-20192019-2021 performance period (the “performance period”). Executives ordinarily must be continuously employed by and the Companyexecutive’s continued employment through February 28, 2020, to receive payment2022. Vesting of performance shares related to the performance period, although specialRSUs is dependent on the executive’s continued employment through February 28, 2022. Special vesting rules apply to both the PSUs and RSUs in the event of death, “Retirement,” “Disability” or a“Change-in-Control” “Change-in-Control” (each as defined in the Omnibus Plan). Termination for any other reason prior to February 28, 2020,2022, will result in forfeiture of all related performance shares. Mr. Stanley forfeited histhe entire 2017 and 2016 performance share grants (as well as his 2015 service-based award) because his separation from the Company did not meet the definition of Retirement under the Omnibus Plan.
2019 LTIP award. The performance measures on which vesting2019 LTIP awards to Named Executive Officers are shown below. | Joseph Hamrock | | | 128,406 | | | 32,102 | | | Donald E. Brown | | | 32,258 | | | 8,065 | | | Carrie J. Hightman | | | 23,461 | | | 5,865 | | | Violet G. Sistovaris | | | 21,994 | | | 5,499 | | | Pablo A. Vegas | | | 32,258 | | | 8,065 | |
(1)
| All 2019 PSU awards will vest based on Company performance, the application of the RTSR modifier and satisfaction of the service condition (the executive’s continued employment through February 28, 2022), as detailed below. |
(2)
| All 2019 RSU awards will vest based on the executive’s continued employment through February 28, 2022, as detailed below. |
TABLE OF CONTENTS 2019 PSUs. All of the 2017 performance shares is contingent relate2019 PSUs are subject to the achievement of a cumulative net operating earnings per shareNOEPS trigger (calculated as detailed earlier under 20172019 Cash Incentive Plan) in order for any vesting to occur. If the NOEPS trigger is achieved, 80% of the target PSUs (65% of the 2019 LTIP award) will vest based on NOEPS performance above the trigger, as modified by our RTSR performance (which can reduce or increase the vesting level of the award by up to 25%). The remaining 20% of the target PSUs (15% of the 2019 LTIP award) will vest based on the achievement of the Customer Value Framework (as described in the section entitled “Long Term Incentive Program-PSUs”). Vesting of the entire PSU portion of the 2019 LTIP award is subject to the executive’s continued employment through February 28, 2022. Termination for any reason other than death, “Retirement,” “Disability” or a “Change-in-Control” (each as defined in the Omnibus Plan) prior to February 28, 2022, will result in forfeiture of the entire 2019 LTIP award. The Compensation Committee approved the use of cumulative NOEPS as the primary performance goal in the 2019 LTIP program design to tie a substantial percentage of the PSUs to the achievement of a key financial goal while measuring and rewarding relative total shareholder return (“RTSR”)performance with the use of the RTSR modifier. The Compensation Committee believes that this design enhances pay for performance transparency as payouts are directly linked to the Company’s absolute performance while retaining a relative performance element. As noted above, the NOEPS goal was established after considering our annual financial plan at the beginning of the performance period and was designed to be achievable with strong management performance over the three-year performance period. The Additionally, the Compensation Committee utilized net operatingapproved the vesting of a portion of the 2019 PSUs (15% of the 2019 LTIP award and 20% of the target PSU component) based the successful execution of the Customer Value Framework over the three-year performance period. In so doing, the Compensation Committee supplemented the financial measures that incentivize earnings per share as a performance measure for the LTIP awards in recognition that this straightforward measure supports enterprise-wide strategy and performance and is alignedstrength with stockholder value. This measure was also used as a performance metric in the Company’s 2017 Cash Incentive Plan, supplemented by operational measuresexecution-focused transparency to strike an appropriate balance over the long-term. The Customer Value Framework is designed to be achievable overall, with respect to incentivizing earnings strength, nonfinancialeach respective category weighted equally in the vesting determination. The Customer Value Framework is based on key business imperatives that align with enterprise-wide initiatives relating to safety, customer care, cost containment, organizational culture and stockholder value over the short-term and long-term.The Compensation Committee approved measures related to cumulative net operating earnings per share and RTSR for the three-year performance period because they were deemed to be important indicators of the Company’s success in increasing stockholder value. For the 2017 awards, RTSR will be determined by the annualized growth in the price of a share of the Company’s common stock, assuming dividends are reinvested, over the period beginning December 31, 2016 and ending on December 31, 2019, compared to the similarly calculated total stockholder returns generated by a group of 34 energy services companies, each of which is similarly affected by external factors that impact stock price, such as interest rates and industry opportunities and challenges. The Compensation Committee selected the companies included in the RTSR performance peer group (which group includes 20 of the Comparative Group companies) because these companies are either within our industry or provide similar services to ours and with which we compete for the sale of equity capital. Each year, the Compensation Committee reviews any updates to the RTSR performance peer group due to merger, acquisition, bankruptcy or liquidation of any of the companies in the RTSR group. To ameliorate the effect on RTSR of single day share price volatility, the starting and ending share prices for the computation of RTSR will equal the average closing price of each company’s common stock over the 20 trading days immediately preceding the first and last day of the performance period.
If actual results over the performance period reach target goals, award recipients will earn 100% of the target number of performance shares awarded. The Compensation Committee also approved trigger and stretch goals for each measure. If the trigger performance level is not met for either measure, then the executive will not earn any portion of the 2017 grant. If the stretch goal for both measures is achieved, the executive will earn such number of shares as equate to 200% of his or her target 2017 grant, unless total shareholder return is negative for the performance period, in which case, the maximum payout for RTSR will be at target regardless of performance relative to the peer group.
environmental impact. The measures and goals pertaining to the 2019 PSUs are shown below. | Three-year Cumulative NOEPS: $3.93 | | | Three-year Cumulative NOEPS | | | Trigger (50% Payout): $3.93 | | | 65 | | | RTSR Performance(2) | | | Target (100% Payout): $4.14 | | | Top Quartile= | | | +25% modifier | | | Stretch (200% Payout): $4.35 | | | Bottom Quartile= | | | -25% modifier | | | Customer Value Framework | | | Threshold Goal(1) | | | Measure | | | Categories and Measures | | | % of LTIP(3) | | | Measures and Goals(4) | | | Three-year Cumulative NOEPS: $3.93 | | | Three-year Customer Value Framework | | | Safety - NSCBS Customer Care - JD Power Studies Cost Containment - Financial Operations and Maintenance financial plan (“O&M”)
Culture - Continuous Improvement Index Environmental Impact - Greenhouse Gas Emission Reductions | | | 15 | | | NSCBS- Remain in Top Decile
JD Power Studies - Achieve Top Quartile
Maintain O&M per Company financial plan
Continuous Improvement Index- Achieve Top Quartile
Reduce Greenhouse Gas Emissions to 11.85 million tonnes | |
(1)
| The goals were approved in January 2019 and were designed to be challenging but achievable with strong management performance over the three-year performance period. The NOEPS result will generally be calculated as discussed above under “2019 Cash Incentive Plan.” |
(2)
| RTSR will be determined by the annualized growth in the price of a share our common stock, assuming dividends are reinvested, over the period beginning December 31, 2018 and ending on December 31, 2021, compared to a similar calculation for a group of 30 energy services companies within our industry or providing similar services to ours and companies with which we compete for the sale of equity capital, 19 of which are in the Comparator Group. |
(3)
| This percentage reflects 100% achievement of the Customer Value Framework. |
(4)
| Each goal represents 3% of LTIP, and is not eligible for any modifier. |
TABLE OF CONTENTS 2019 RSUs. As discussed above, a portion of the 2019 LTIP award (20%) was granted in the form of RSUs in order to reward long-term service and retain executives over a multi-year service period. While the RSUs vest based on the executive’s continued service, the Compensation Committee views RSUs to be at-risk compensation because the ultimate value of the RSUs will fluctuate based on our stock price performance. The RSUs granted in January 2019 will vest after the completion of a three-year service period and the executive’s continued employment through February 28, 2022, subject to earlier vesting in the event of death, “Retirement,” “Disability” or a “Change-in-Control” (each as defined in the Omnibus Plan) prior to February 28, 2022. 2017 Performance Share Awards. In 2017, the Compensation Committee (and, in the case of the CEO, the independent members of the Board) approved grants of performance share awards to the Named Executive Officers. Vesting of the 2017 grants of performance share awards was dependent on our achievement relative to certain performance goals over the 2017-2019 performance period. The performance measures related to cumulative NOEPS and RTSR. Based on our performance during the three-year performance period beginning January 1, 2017, and ending December 31, 2019, 100% of the 2017 performance share awards are: | | | | | | | | | | | | | | | | | | | | | Performance Measure(1) | | Weight | | Trigger (50% Award) | | Target (100% Award) | | Stretch (200% Award) | Cumulative Net Operating Earnings Per Share for 2017-2019 | | 50% | | $3.57 | | $3.66 | | ³$3.83 | Relative Total Shareholder Return for 2017-2019 | | 50% | | 40th
Percentile | | 50th
Percentile | | 100th
Percentile |
vested as described below. The performance measures, their weightings and results, as certified by the Compensation Committee, are shown below. | Cumulative NOEPS for 2017-2019 | | | 50% | | | $3.57 | | | $3.66 | | | >$3.83 | | | $3.83(3) | | | RTSR for 2017-2019 | | | 50% | | | 40th Percentile | | | 50th Percentile | | | 100th Percentile | | | 35th Percentile | ��� |
(1)
| Performance results are calculated in the same manner as discussed above. |
(2)
| For performance results between two performance levels (for example, between the target and stretch goals)goal), the incentive opportunity is determined by interpolationinterpolation. |
(3)
| Based upon cumulative NOEPS performance from January 1, 2017 through December 31, 2019. The 2017-2019 cumulative NOEPS result consists of 2017, 2018 and is expressed2019 NOEPS results, as a percentagedisclosed in our earnings report for the applicable year. The 2019 NOEPS result was calculated as discussed above under “2019 Cash Incentive Plan.” |
Vesting of the target opportunity. |