UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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o | Preliminary Proxy Statement |
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☑ | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Under Rule 14a-12 |
South Jersey Industries, Inc. |
(Name of Registrant as Specified In Its Charter) |
South Jersey Industries, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box): | |||
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Corporate Governance and Board Diversity
SJI is governed by a Board of Directors, all of whom with the exception of one member are not SJI employees. Our Board of Directors, elected by the shareholders, is the Company’s ultimate decision-making entity, except with respect to matters reserved for shareholder consideration. The current board includes Michael J. Renna (SJI President and CEO), Walter M. Higgins III (Chairman), Sarah M. Barpoulis, Thomas A. Bracken, Keith S. Campbell, Victor A. Fortkiewicz, Sheila Hartnett-Devlin, Sunita Holzer, Joseph M. Rigby, and Frank L. Sims.
The board maintains seven standing committees: the Audit Committee, the Compensation Committee,
the Corporate Responsibility Committee, the Executive Committee, the Governance Committee, the Risk Committee and the Strategy & Finance Committee.
In November, 2017, the Executive Women of New Jersey (EWNJ) recognized SJI as a member of its A Seat at the Table Honor Roll for having three or more women on the company’s Board of Directors. In October 2016, the Forum of Executive Women recognized SJI and other companies where women directors comprise at least 25 percent of the Board.
 | South Jersey Industries, Inc.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: | April 24, 2020 |
TIME: | 9:00 a.m. Eastern Time |
PLACE: | The Westin Mount Laurel, The Grand Ballroom, 555 Fellowship Road, Mount Laurel, NJ 08054 |
ONLINE: | www.virtualshareholdermeeting.com/SJI2020 |
To the Shareholders of South Jersey Industries
NOTICE IS HEREBY GIVEN that South Jersey Industries, Inc.’s (“Company” or “SJI”) 2020 Annual Meeting of Shareholders (the “Annual Meeting”) will be held atResorts Casino Hotel, AtlanticThe Westin Mount Laurel, The Grand Ballroom, 1133 Boardwalk, Atlantic City, New Jersey 08401555 Fellowship Road, Mount Laurel, ,NJ 08054and online at: www.virtualshareholdermeeting.com/SJI2020 on May 11, 2018,April 24, 2020, at 9:00 a.m., Eastern Time,for the following purposes:
| 1. | To elect 10 director nominees who are |
| 2. | To hold an advisory vote to approve executive compensation |
| 3. | |
| To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for |
| To transact other business that may properly come before the |
Voting can be completed in one of | ||||||||
 | ||||||||
 | returning the proxy card by mail |   | online at www.proxyvote.com |  | Attend the meeting online at: www.virtualshareholdermeeting.com/SJI2020 | |||
 | ||||||||
 | through the telephone at 1-800-690-6903 |   | attending the meeting to vote IN PERSON | |||||
TheThe Board of Directors has fixed the close of business on March 12, 2018February 24, 2020 as the record date (the “Record Date”) for determining shareholders entitled to notice of, and to vote at, the Annual Meeting. Accordingly, only shareholders of record on that date are entitled to notice of, and to vote at, the meeting.Annual Meeting.
YouYou are cordially invited to attend the meeting.meeting in person or online meeting at: www.virtualshareholdermeeting.com/SJI2020. Attendance at the Annual Meeting will be limited to shareholders as of the record date,Record Date, their authorized representatives and guests of SJI. Guests of shareholders will not be admitted unless they are also shareholders as of the record date.Record Date. If you plan to attend the meetingAnnual Meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. Annual Meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket.
Although we intend to hold our annual meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to attend our annual meeting in person, we encourage you to attend online at www.virtualshareholdermeeting.com/SJI2020. If you attend online, you will be able to vote your shares and submit questions by following the instructions on the website. We reserve the right to convert to a virtual only meeting format should meeting in person become unsafe as a result of COVID-19. If we convert to a virtual only online meeting we will post a notification at www.sjindustries.com as soon as possible.
Whether or not you expect to attend the meeting,Annual Meeting, we urge you to vote your shares now. Please complete and sign the enclosed proxy card and promptly return it in the envelope provided or, if you prefer, you may vote by telephone or on the Internet. Please refer to the enclosed proxy card for instructions on how to use these options. Should you attend the meeting,Annual Meeting, you may revoke your proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
VP, Treasurer & Acting Corporate Secretary
Folsom, NJ
March 29, 201813, 2020
YOUR VOTE IS IMPORTANT. PLEASE VOTE, SIGN, DATE, AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE OR VOTE BY TELEPHONE OR ON THE INTERNET.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on May 11, 2018.April 24, 2020. The Proxy Statement, the Proxy Card and the 20172019 Annual Report are also available to view at www.sjindustries.com by clicking on Investors > Financial ReportingReporting.
Table of Contents
This summary highlights information contained elsewhere in this proxy statement.Proxy Statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statementProxy Statement carefully before voting.
Annual Meeting of Shareholders
Date: | April 24, 2020 | ||
Time: | |||
9:00 a.m. - meeting begins | |||
10:00 a.m. - meeting adjourns | |||
Place: | The Westin Mount Laurel | ||
The Grand Ballroom | |||
555 Fellowship Road | |||
Mount Laurel, New Jersey | |||
Online: | www.virtualshareholdermeeting.com/SJI2020 | ||
Admission to the meeting: | Attendance at the Annual Meeting will be limited to shareholders as of the | ||
Although we intend to hold our annual meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to attend our annual meeting in person, we encourage you to attend online at www.virtualshareholdermeeting.com/SJI2020. If you attend online, you will be able to vote your shares and submit questions by following the instructions on the website. We reserve the right to convert to a virtual only meeting format should meeting in person become unsafe as a result of COVID-19. If we convert to a virtual only online meeting we will post a notification at sjindustries.com as soon as possible. Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken by South Jersey Industries at the | |||
Record Date: | February 24, 2020 | ||
Agenda: | • | Election of 10 | |
• | An advisory | ||
• | |||
Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for | |||
• | Transaction of any other business that may properly come before the meeting | ||
Voting: | Shareholders as of the | ||
Voting Matters and the Board’s Recommendation
The following table summarizes the items that will be brought for a vote of our stockholdersshareholders at the meeting, along with the Board’s recommendation as to how shareholders should vote on each of them.
Proposal No. | Description of Proposal | Board’s Recommendation |
1 | Election of 10 director candidates nominated by the Board, each to serve a one-year term | FOR |
2 | An advisory | FOR |
3 | ||
Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for | FOR |
In addition to these matters, shareholders may be asked to vote on such other business as may properly be brought before the meeting or any adjournment or postponement of the meeting.thereof.
South Jersey Industries, Inc. - | 1 |
Proxy Statement Summary
The table below summarizes the votes required for approval of each matter to be brought before the annual meeting,Annual Meeting, as well as the treatment of abstentions and broker non-votes.
Proposal No. | ||||
Description of Proposal | Vote Required for Approval | Abstentions | Broker Non-Votes | |
1 | Election of directors | Majority of votes cast | No effect | Not taken into account |
2 | Executive compensation | Majority of votes cast | No effect | Not taken into account |
3 | ||||
Ratification of independent registered public accounting firm | Majority of votes cast | No effect | Not applicable |
Director Nominees
The Board is currently comprised of 10 directors: 9 independent directors; and SJI President and Chief Executive Officer. The following table provides summary information about each of the 10 director nominees, including whether the Board
considers the nominee to be independent under the New York Stock Exchange’s independence standards and SJI Corporate Governance Guidelines. Each director is elected annually by a majority of votes cast.
| Director | Positions/Committee | |||||
| Name | Age | Since | Occupation | Independent | Memberships | |
| Sarah M. Barpoulis | 53 | 2012 | Owner of Interim Energy Solutions, LLC | Yes | 1*, 2, 3, 7 | |
| Thomas A. Bracken | 70 | 2004 | President, New Jersey Chamber of Commerce | Yes | 3, 4*, 5, 7 | |
| Keith S. Campbell | 63 | 2000 | Chairman of the Board, Mannington Mills, Inc. | Yes | 2, 5, 6 | |
| Victor A. Fortkiewicz | 66 | 2010 | Of Counsel, Cullen and Dykman, LLP | Yes | 4, 5*, 6 | |
| Sheila Hartnett-Devlin, CFA | 59 | 1999 | Retired, Senior Vice President, American Century Investments | Yes | 1, 4, 7 | |
| Walter M. Higgins III | 73 | 2008 | Chief Executive Officer, Puerto Rico Electric Power Authority (PREPA) | Yes | 3* As Chairman of the Board, serves as an ex-officio member of all committees | |
| Sunita Holzer | 56 | 2011 | Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. | Yes | 2*, 3, 5, 6 | |
| Michael J. Renna | 50 | 2014 | President and CEO, South Jersey Industries | No | 3 | |
| Joseph M. Rigby | 61 | 2016 | Retired, Chairman, President and CEO, Pepco Holdings, Inc. | Yes | 1, 2, 7* | |
| Frank L. Sims | 67 | 2012 | Retired, Corporate Vice President and Platform Leader, Cargill, Inc. | Yes | 1, 3, 4, 6* |
 |  |  |  |  |
Key to Committee Memberships
| 1 | Audit Committee | 5 | Corporate Responsibility Committee | |
| 2 | Compensation Committee | 6 | Risk Committee | |
| 3 | Executive Committee | 7 | Strategy & Finance Committee | |
| 4 | Governance Committee | * | Committee Chairman |
GENERAL INFORMATIONQUESTIONS AND ANSWERS ABOUT THE MEETING
Information about the Annual Meeting and VotingWhy am I being provided with these materials?
This statement is furnished on behalf of SJI’s Board of Directors to solicit proxies for use at its 2018 Annual Meeting of Shareholders.and at any adjournments or postponements thereof. The meeting is scheduled for Friday, May 11, 2018,April 24, 2020, at 9:00 a.m. at Resorts Casino Hotel, AtlanticThe Westin Mount Laurel, 555 Fellowship Road, The Grand Ballroom, 1133 Boardwalk, Atlantic City,Mount Laurel, New
Jersey. The approximate date proxy materials will be
made available to shareholders is March 29, 2018.13, 2020. Copies of this Proxy Statement, the proxy statement, proxy card and 20172019 Annual Report are available on our website at www.sjindustries.com under the heading “Investors”.“Investors.”
Proxy SolicitationWho will pay the cost of this proxy solicitation?
The Company bears the cost of this solicitation, which is primarily made by mail. However, the Corporate Secretary or companyCompany employees may solicit proxies by phone, fax, e-mail or in person, but they will not be separately compensated for these services. The Company maywill also use a proxy-soliciting firmD. F. King at a cost
not expected to exceed $6,000,
$12,500, plus expenses, to distribute to brokerage houses and other custodians, nominees, and fiduciaries additional copies of the proxy materials and 20172019 Annual Report for beneficial owners of our stock.
Record DateWho is entitled to vote?
Only shareholders of record, meaning those holders whose shares of our common stock, are registered directly with our transfer agent, Broadridge at the close of business on March 12, 2018February 24, 2020 may vote at the meeting.
If you are a beneficial owner, meaning you hold shares in our Company in “street name” (i.e., through a broker, bank or other nominee), you cannot vote your shares directly and must instead instruct your broker, bank or other nominee on how to vote your shares.
On that date,the Record Date, the Company had 79,595,31792,447,637 shares of Common Stockcommon stock outstanding.
Shareholders are entitled to one vote per share on each matter to be acted upon.
QuorumHow do I vote my shares without attending the 2020 Annual Meeting?
If you are a shareholder of record, you may vote by granting a proxy. Specifically, you may vote:
| • | by internet—you may submit your proxy by going to www.proxyvote.com and following the instructions on how to complete an electronic proxy card. You will need the 16-digit number included on your notice or proxy card in order to vote by internet. |
| • | by telephone—you may submit your proxy by using a touch-tone telephone to dial 1-800-690-6903 and following the recorded instructions. You will need the 16-digit number included on your notice or proxy card in order to vote by telephone. |
| • | by mail—you may vote by mail by requesting a proxy card from us, indicating your vote by completing, signing and dating the |
card where indicated and Vote Requiredby mailing or otherwise returning the card in the envelope that will be provided to you. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity, you must indicate your name and title or capacity.
| • | online—www.virtualshareholdermeeting.com/SJI2020. Follow the instructions on the website to vote your shares. |
If you are a beneficial owner holding your shares in “street name,” you may vote by submitting voting instructions to your bank, broker or other nominee. In most instances, you will be able to do this on the internet, by telephone or by mail as indicated above. Please refer to information from your bank, broker or other nominee on how to submit voting instructions.
What constitutes a quorum?
A quorum is necessary to conduct the meeting’s business. This means holders of at least a majority of the outstanding shares of Common Stockcommon stock entitled to vote must be present at the meeting, either by proxy or in person. Shareholders elect Directors by a majority vote of all votes cast at the meeting. The other actions proposed herein require the affirmative vote of a majority of the votes cast at the meeting. The vote required to approve any other matter that may be properly brought before the Annual Meeting will be determined in accordance
with the New Jersey Business Corporation Act. Abstentions and broker non-votes“broker non-votes” (as discussed below) will be treated as present to determine a quorum.
In the absence of a quorum, but will not be deemed to be cast and, therefore, will not affect the outcome of anya majority of the shareholder questions. shareholders present or in person by proxy may vote to adjourn the 2020 Annual Meeting from time to time, without notice other than by oral announcement at the meeting, until the time that a quorum is present.
2 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Proxy Statement Summary
What is a “broker non-vote” and how does it affect voting on each proposal?
A broker non-vote“broker non-vote” occurs when a bank, broker or other nominee holding shares for a beneficial owner in “street name” does not vote on a particular proposal, because the bank, broker or other nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial
owner. See “Proxy Statement Summary—Votes Required for Approval” for a discussion of which proposals do and do not permit discretionary voting by brokers and the effect of a “broker non-vote.”
What am I voting on, how many votes are required to approve each proposal, how are votes counted and how does the Board of Directors recommend I vote?
See “Proxy Statement Summary—Votes Required for Approval” and “Proxy Statement Summary—Voting of ProxiesMatters and Revocationthe Board’s Recommendation” for this information.
What if I receive more than one notice or proxy card about the same time?
It generally means you hold shares registered in more than one account. To ensure that all your shares are voted, please sign and return each proxy card, or, if you vote by Internet or telephone, vote once for each notice or proxy card you receive.
What will be the result if I submit my proxy card without making specific instructions?
Properly signed proxies received by the Company will be voted at the meeting. If a properly signed proxy contains a specific instruction about any matter to be acted on, the shares represented by the proxy will be voted according to those instructions. IfConversely, if you sign and return your proxy but do not indicate
how to vote for a particular matter, your shares will be voted as the Board of Directors recommends. A shareholder who returns aSee “Proxy Statement Summary—Voting Matters and the Board’s Recommendation” for information on the Board of Directors’ voting recommendations.
May I revoke my proxy may revoke it at any time before it isor change my vote?
Yes. Whether you have voted by submittingInternet, telephone or mail, if you are a later-dated proxy or by voting by ballot
at the meeting. Ifshareholder of record, you attend the meeting and wish tomay revoke your proxy you must notifyor change your vote by:
| • | sending a written statement to that effect to the attention of our Corporate Secretary, 1 South Jersey Plaza, Folsom, New Jersey 08037, provided such statement is received no later than April 23, 2020,or, in the case of voting of shares held through the Company’s 401(k) plan, no later than April 21, 2020; |
| • | submitting a properly signed proxy card with a later date that isreceived no later than April 23, 2020, or, in the case of voting of shares held through the Company’s equity incentive plans, no later than April 21, 2020; or |
If anyyou are a beneficial owner holding your shares in “street name”, you may submit new voting instructions by contacting your bank, broker or other mattersnominee. You may also change your vote or motions properly comerevoke your proxy in person at the 2020 Annual Meeting if you obtain a signed proxy from the record holder (bank, broker or other nominee) giving you the right to vote the shares in person.
What do I need to be admitted to the 2020 Annual Meeting?
See “Proxy Statement Summary—Annual Meeting of Shareholders” for this information.
Where can I find the results of the 2020 Annual Meeting?
We will disclose the final voting results on a current report on Form 8-K within four business days after the 2020 Annual Meeting.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 3 |
Any proposal that a qualified shareholder of the Company wishes to include in the Company’s Proxy Statement and form of proxy for the Company’s 2021 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Exchange Act must be received by the Company at its principal executive offices by November 13, 2020. To be included, proposals should be mailed to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037. To be a qualified shareholder, a shareholder must have owned at least $2,000 in market value of the Company’s securities for at least one year before the meeting, including any matters dealingdate of the proposal’s submission to the Company.
Additionally, a shareholder of the Company may wish to nominate a director or have other business presented at the 2021 Annual Meeting of Shareholders, but not to have such proposal included in the Company’s Proxy Statement and form of proxy relating to that meeting. In compliance with the conductCompany’s bylaws, notice of any
such proposal must be received by the Company at its principal executive offices between January 24, 2021 and February 23, 2021. However, if we hold our 2021 Annual Meeting of Shareholders more than 30 days before or after the anniversary date of the 2020 Annual Meeting of Shareholders, such notice must be received by us no later than the tenth day after the date on which we publicly disclose or send notice regarding the date of the meeting (whichever is earlier). All such nominations and other proposals should be mailed to the persons namedCorporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037 and must satisfy the informational requirements set forth in our bylaws. If a nomination or proposal for other business is not received during this period, such proposal shall be deemed “untimely” for purposes of Rule 14a-4(c) under the accompanying proxy card intendExchange Act, and, therefore, the proxies will have the right to voteexercise discretionary voting authority with respect to such proposal.
Other Proposed Action for the proxy according to their judgment. 2020 Annual Meeting of Shareholders
The Board of Directors is not awareknows of any suchno matters other than those describedset forth in this proxy statement.the Notice of Annual Meeting of Shareholders to come before the 2020 Annual Meeting. However, if any other business should properly be presented at the meeting, the proxies will be
voted in accordance with the judgment of the person or persons holding the proxies pursuant to Rule 14a-4(c) under the Exchange Act.
Householding of Annual Meeting Materials
Under rules adopted by the SEC, we are permitted to deliver a single copy of the proxy materials, including the Notice of Annual Meeting of Shareholders, this Proxy Statement and the 2019 Annual Report, to any household at which two or more shareholders reside if we believe the shareholders are members of the same family. This process, called “householding,” allows us to reduce the number of copies of these materials we must print and mail. Even if householding is used, each shareholder will continue to be entitled to submit a separate proxy or voting instructions.
Certain banks, brokers, broker-dealers and other similar organizations acting as nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this proxy statement and the Company’s 2017 Annual Report may have been sent to multiple shareholders in your household.materials. If you are a beneficial owner of our shares and would prefer to receive separate copies of a proxy statementProxy Statement or annual report for other shareholders in your household, either now or in the future, please
contact your bank, broker, broker-dealer or other similar organization serving as your nominee.
Upon written or oral request to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037, the Company will promptly provide separate copies Beneficial owners of the 2017 Annual Report and/or this proxy statement. Shareholdersour shares sharing an address who are receiving multiple copies of this proxy statementour Proxy Statement and/or the 2017 Annual Reportour annual report and who wish to receive a single copy of these materials in the future will need to contact their bank, broker, broker-dealer or other similar organization serving as their nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
Other Matters
Any proposal that a qualified shareholder of the Company wishesIf you consent to includehouseholding, your election will remain in the Company’s proxy statement to be sent to shareholders in connection with the Company’s 2019 Annual Meeting of Shareholders that is received by the Company after November 20, 2018 will not be eligible for inclusion in the Company’s proxy statement and form of proxy for that meeting. To be included, proposals can be mailedeffect until you revoke it. Upon written or oral request to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037. To be a qualified shareholder, a shareholder must have owned at least $2,000 in market value of the Company’s securities for at least one year before the date of the proposal’s submission to the Company. A shareholder of08037, the Company may wish to have a proposal presented atwill promptly provide separate copies of the 2019 Annual Meeting of Shareholders, but not to have such proposal included in the Company’sReport and/or this Proxy Statement.
proxy statement and form of proxy relating to that meeting. In compliance with the Company’s bylaws, notice of any such proposal must be received by the Company between January 21, 2019 and February 20, 2019. If it is not received during this period, such proposal shall be deemed “untimely” for purposes of Rule 14a-4(c) under the Exchange Act, and, therefore, the proxies will have the right to exercise discretionary voting authority with respect to such proposal. Any such proposal must be submitted in writing to the Corporate Secretary at the address previously provided in this section.
The Board of Directors knows of no matters other than those set forth in the Notice of Annual Meeting of Shareholders to come before the 2018 Annual Meeting.
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At the Annual Meeting, 10 directors are to be elected to the Board of Directors to hold office for a one-year term. The Board nominated the following persons: Sarah M. Barpoulis, Thomas A. Bracken, Keith S. Campbell, Victor A. Fortkiewicz, Sheila Hartnett-Devlin, WalterG. Edison Holland Jr., Sunita Holzer, Kevin M. Higgins III, Sunita Holzer,O’Dowd, Michael J. Renna, Joseph M. Rigby and Frank L. Sims. We do not anticipate that, if elected, any of the nominees will be unable to serve. If any should be unable to accept the nomination or election, the persons designated as proxies on the proxy card may vote for a substitute nominee selected by the Board of Directors. Current directors, Walter M. Higgins, III and Thomas A. Bracken are not being nominated as nominees to the Board at the Annual Meeting. Mr. Higgins will continue to serve as the non-executive Chairman of SJI’s Board of Directors until his retirement on April 24, 2020. At that time the Board of Directors will elect a new independent non-executive Chairman. The Board is grateful to Mr. Higgins and Mr. Bracken for all they have done for our Company, our shareholders and our employees. Accordingly, after the Annual Meeting the size of our Board will be reduced to 10 members.
In accordance with its Charter, the Governance Committee reviewed the education, experience, judgment, diversity and other applicable and relevant skills of each nominee and determined
that each nominee possesses skills and characteristics that support the Company’s strategic vision. The Governance Committee determined that the key areas of expertise include: corporate governance; cybersecurity;cybersecurity/IT; enterprise leadership; environmental, social, governance (ESG); financial expertise (including accounting, finance, and “financial experts” as defined by the SEC); governmental and regulatory; human resources; public/shareholder relations; risk assessment/management; strategy formation/execution; and technical/industry. The Governance Committee concluded that the nominees possess expertise and experience in these areas, and the Board approved the slate of nominees. Based on their expertise and experience, the Board, upon recommendation of the Governance Committee, determined the following directors should be electednominated for re-election to the Board at the Annual Meeting to serve for the 20182020 - 20192021 term:
South Jersey Industries, Inc. - | 5 |
Proposal 1 Director Elections
Highlights of Director Nominees
Our Director nominees possess skills and experience aligned to our current and future strategy and business needs. Annual Board evaluations also include an assessment of whether the Board has an appropriate mix of skills, experience and other characteristics.
All Director Nominees Have:
 | |||
DIRECTOR AGE DIVERSITY
Proposal 1 Director Elections
| Sarah M. Barpoulis |
 | Keith S. Campbell | ||
Age: 55 | Age: 65 | ||
Director since: 2012 | Director since: 2000 | ||
Owner of Interim Energy Solutions, LLC, Potomac, MD | |||
| |||
Proposal 1 Director Elections
| |||
 | |||
Victor A. Fortkiewicz |
 | Sheila Hartnett-Devlin, CFA | ||
Age: 68 | Age: 61 | ||
Director since:2010 | Director since: 1999 | ||
Of Counsel, Cullen and Dykman, LLP, | |||
| Retired, Senior Vice President, American Century Investments, New York, NY | ||
 | G. Edison Holland, Jr. |  | Sunita Holzer |
Age: 66 | Age: | ||
Director since: 2019 | Director since: 2011 | ||
Proposal 1 Director Elections
| |||
| Southern Company Holdings; Retired, Executive Vice President, Southern Company Services, Atlanta, GA | |||
| |||
 | Kevin M. O’Dowd | ||
 | |||
Proposal 1 Director Elections
| Michael J. Renna |
Age: 47 | Age: 52 | |||
Director since: 2020 | Director since:2014 | |||
Co-President and CEO Cooper University Health Care, Camden, NJ | President and CEO, South Jersey Industries, Folsom, NJ | |||
 | Joseph M. Rigby |
 | Frank L. Sims | ||
Age: 63 | Age: 69 | ||
Director since:2016 | Director since: 2012 | ||
Retired, Chairman, President and CEO of Pepco Holdings, Inc., Washington, | |||
Chairman of the | |||
Atlanta, GA |
Proposal 1 Director Elections
| |||
The Board of Directors unanimously recommends a vote “FOR” each of the above nominees.
| | South Jersey Industries, Inc. - |
The Company’sOur executive compensation policies and procedures areprogram is designed to attract and retain highly qualified named executive officers while linking Company performance to named executive officer compensation. The Compensation Committee has a strong pay for performance philosophy; and, as a result,keep our senior leadership team focused on the compensation paid to our named executive officers is generally designed to be aligned withseamless execution of the Company’s performancestrategic plan and on both a short-term and a long-term basis. Our recent performance provides evidence that our executive compensation policies and procedures were effective in furthering these objectives. The financial performance in 2017 for SJI corporate results was below target, and therefore, the portion of the annual incentive plan payouts tied to SJI results was below target. SJI’s recent stock performance has been below our peer group, and our long-term incentive plans for the performance cycle ended fiscal 2017 paid out well below target. Historically, our financial performance in 2015 was below threshold goals, resulting in annual incentive payouts well below target, while our financial performance in fiscal 2016 exceeded target goals, resulting in payouts above target. Further, our long-term incentive plan for the performance cycle ended fiscal 2015 did not payout, while the performance cycle ended fiscal 2016 paid out well below target.
For 2017, the executive compensation policies and procedures for our named executive officers consisted of three parts: base salary, annual incentive awards and long-term incentive compensation. The annual incentive awards and long-term incentive compensation were again directly linked to the achievement of predefined short-term and long-term performance as follows:
These components of compensation for SJI’s named executive officers provide the proper incentives to align compensation with the Company’s performance while enhancing shareholder value. Specifically, if the Company’s performance results meet or exceed
pre-established performance targets, named executive officers have an opportunity to realize significant additional compensation through annual incentive awards and long-term equity awards. In addition, the Company’s stock ownership guidelines require our named executive officers to own shares of Company stock, which aligns with shareholder interests. We believe this pay for performance philosophy is integral to the Company’s performance and will drivedelivering shareholder value over the long term. During 2019, our senior leadership team achieved critical financial objectives and continued to execute on our Business Transformation Plan by driving forward the strategic initiatives that reinforce our focus on reliable, repeatable earnings that complement regulated growth.
Please seeDuring 2019, we increased the “Compensationfocus and intensity of our shareholder engagement efforts. The Board of Directors reached out to approximately 35 of our largest shareholders, aggregating approximately 66% of our outstanding shares.
Members of the Board, including the Chairman and Compensation Committee Chairman, met with nine of our ten top shareholders, representing approximately 30% of our shares outstanding. Through these efforts, we learned that our investors are highly supportive of our overall program design and its significant emphasis on performance-based pay. However, in response to some common concerns about one-time recognition awards to current NEOs and the notion that the existing connection between pay and performance could be enhanced, we took immediate action — the details of which are outlined in our Compensation Discussion and Analysis”Analysis (“CD&A”) beginning on page 2529 of this Proxy statementstatement.
Our compensation philosophy continued to be supported by the following principal pay elements for 2019:
Pay Element | Description | Rationale |
Salary | Fixed cash opportunity | Provides stable market based compensation for role, level of responsibility and experience. Forms basis for other pay elements |
Annual Incentive Plan (“AIP”) | Annual cash compensation with variable payout based on achievement of pre-determined corporate/business unit economic earnings goals and individual balanced scorecard objectives (other strategic non-earnings goals) for the fiscal year | Drives and incentivizes annual performance across key financial and individual performance measures |
Long-Term Incentives (“LTI”) | LTI is granted 70% in performance-based restricted stock units (“PBRSUs”), based on 3-year relative Total Shareholder Return (“TSR”) vs. peers and 3-year economic earnings growth, and 30% in time-based restricted stock units (“TBRSUs”) | PBRSU portion of awards, representing significant majority of total LTI opportunity, requires achievement of threshold level of performance for any payout; Combination of PBRSUs and TBRSUs drives long-term financial performance, shareholder value and executive retention |
We note that pursuant to SEC regulations, the Summary Compensation Table on page 45 shows total compensation for our NEOs, including not only the valuation of the major elements of our program listed above, but also other numbers that we do not consider to be a significant driver of our overall pay philosophy. For example, the Summary Compensation Table includes a column for the change in pension value and nonqualified compensation earnings which is an actuarily determined year over year change in the value of a pension balance and clearly not reflective of Committee thought process and decision making within the scheme of our compensation philosophy. For this reason, we included an additional and separate column in the Summary Compensation Table that reflects total compensation minus the change in pension value and nonqualified compensation earnings for our NEOs. For the following reasons, among others, we believe this number is more detailed discussionrepresentative of actual compensation, as it pertains to the 2017 through 2019 fiscal years:
South Jersey Industries, Inc. - 2020 Proxy Statement | | 7 |
Proposal 2 Advisory Vote To Approve Executive Compensation
The following features of our executive compensation policiesprogram promote sound compensation governance and procedures forare designed in the best interests of our named executive officers.shareholders and executives:
What We Do | What We Don’t Do | ||
✔ | Seventy (70) percent of LTI awards are performance-based for the NEOs | ✘ | No excise tax gross ups |
✔ | Three-year performance periods under our LTI awards | ✘ | No repricing or exchange of equity awards without shareholder approval |
✔ | Use a mix of absolute and relative financial performance metrics (including relative TSR) in the incentive plans, to avoid duplication of incentives across AIP and LTI plans. | ✘ | No employment agreements |
✔ | Caps on incentive awards | ✘ | No hedging or pledging of Company stock for employees or directors |
✔ | Use of ESG Metrics in AIP | ✘ | No tax gross ups for perquisites |
✔ | Change-in-control “double-trigger” for equity award vesting and severance benefits | ||
✔ | Robust claw-back policy applying to all incentive awards | ||
✔ | Limited number of perquisites | ||
✔ | Independent compensation consultant | ||
✔ | Robust stock ownership guidelines | ||
Pursuant to Section 14A(a)(1) of the Exchange Act, SJI is required to provide shareholders with a separate non-binding shareholder vote to approve the compensation of our named executive officers, including the “Compensation Discussion and Analysis”,CD&A, the compensation tables, and any other narrative disclosure in this Proxy statement. Such a proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive compensation policies and procedures as described in this Proxy statement. Shareholders may also abstain from voting.
Accordingly, shareholders are being asked to approve the following non-binding resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
Because your vote is advisory, it will not be binding on the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee values the opinions expressed by shareholders and expects to take into account the outcome of the vote when considering future executive compensation decisions.
The Board of Directors unanimously recommends a vote “FOR”“FOR” the non-binding resolution approving the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis,CD&A, compensation tables and narrative discussion.
8 | | South Jersey Industries, Inc. - |
The Audit Committee is responsible for recommending the appointment of an Amendmentthe independent registered public accounting firm to our Certificatethe Board and is directly responsible for the compensation and oversight of Incorporationthe independent auditor.
Annually, prior to Change our Name to SJI, Inc.
Our Boardmaking its recommendation, the Audit Committee considers the audit firm’s capabilities, effectiveness, industry experience, and use of Directors has approved,technology and recommends that you approve, an amendment to our certificate of incorporation to change the namedata analytics in its audits; knowledge of the Company from South Jersey Industries, Inc. to SJI, Inc. Our Board believes changingincluding its personnel, processes, accounting systems and risk profile; tenure serving the Company; and independence, and other firms with comparable professional qualifications.
Deloitte & Touche LLP (“Deloitte”) is a top accounting firm with expertise in public utility accounting. Deloitte has been the Company’s, nameor its predecessor Company’s, auditor since 1948 giving it a unique understanding of Company’s businesses and personnel. The Audit Committee considered the impact of tenure on Deloitte’s independence and determined Deloitte remains independent as, among other factors, the lead engagement partner is required to SJI, Inc.rotate off the Company’s audit every 5 years. The current lead engagement partner will rotate off after the 2023 audit. Further, the Audit Committee pre-approves all audit and non-audit services and related compensation and monitors the potential impact on independence. Finally, the Company has a policy restricting hiring certain persons formerly associated with Deloitte into an accounting or financial reporting oversight role to help ensure Deloitte’s continuing independence.
During 2019, the audit services performed for the Company consisted of (1) audits of the Company’s and its subsidiaries’ financial statements and the effectiveness of the Company’s
internal control over financial reporting, as required by the Sarbanes-Oxley Act of 2002, Section 404 and the preparation of reports based on such audits related to filings with the Securities and Exchange Commission; and (2) services performed in connection with financing transactions.
The Audit Committee evaluates the quality of Deloitte’s services annually, considering the quality of their audit services, industry knowledge from an audit and tax perspective, continued independence, information from PCAOB inspection reports, and the Audit Committee’s discussions with management about Deloitte’s performance.
After considering all factors, the Audit Committee and the Board believe that the continued retention of Deloitte to serve as the Company’s Independent Registered Public Accounting Firm for 2020 is in the best interest of the Company and its shareholders. Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of Deloitte to our shareholders and that doing so will better reflectfor ratification because we value the views of our current business operations as a public utility and energy services holding company. Our new name will not include the term “South Jersey” and will allow our non-regulated businesses to better market to prospective customers in markets across the United States, which plays a strategic role in the achievement ofshareholders on the Company’s business objectives. In addition,Independent Registered Public Accounting Firm. If our shareholders fail to ratify the new name will allow for consistency with the growthselection of the Company’s utility portfolio.
If the proposed amendment is approved, the first paragraph of our certificate of incorporationDeloitte, it will be amended and restated in its entiretyconsidered notice to read as follows:
“FIRST: The name of the corporation is SJI, Inc.”
If approved by our shareholders, the proposed amendment will become effective upon the filing of articles of amendment to our certificate of incorporation with the New Jersey Secretary of State. Upon approval of this proposal and the filing of the articles of amendment with the Secretary of State of New Jersey, our Board of Directors will amend our bylaws to replace any references to “South Jersey Industries, Inc.” with “SJI, Inc.”
Our common stock is currently listed for trading on the New York Stock Exchange (“NYSE”) under the symbol “SJI.” Whether or not the amendment is approved and the name change becomes effective, our common stock will continue to be listed on the NYSE under the symbol “SJI”.
If the name change becomes effective, the rights of shareholders holding certificated shares under currently outstanding stock certificates and the number of shares represented by those certificates will remain unchanged. The name will not affect the validity or transferability of any currently outstanding stock certificates nor will it be necessary for shareholders with certificated shares to surrender any stock certificates they currently hold as a result of the name change. After the name change, all new stock certificates issued by the Company and all uncertificated shares held in direct registration accounts, including uncertificated shares currently held in direct registration accounts, will bear the name “SJI, Inc.”
If the name change is not approved, the proposed amendment to our certificate of incorporation will not be made and the name of the Company and our ticker symbol for trading our common stock on the NYSE will remain unchanged. In making this recommendation, our Board of Directors is retaining the ability to, without further vote by our shareholders, delay or abandon the proposed name change at any time if the Board concludes that such action would be inand Audit Committee to consider the best interestselection of the Company and our shareholders.
The proposala different firm. Representatives of Deloitte will be approvedat the meeting to respond to appropriate questions and make a statement if the number of shares voted “FOR” this proposal represents a majority of the votes cast by the shareholders.they wish.
The Board of Directors unanimously recommends a vote FOR“FOR” the amendment to our certificate of incorporation to change the nameratification of the Company from South Jersey Industries, Inc. to SJI, Inc.reappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.
South Jersey Industries, Inc. - | 9 |
Proposal 1 Director Elections
HIGHLIGHTS OF DIRECTOR NOMINEES
Our Director nominees possess skills and experience aligned to our current and future strategy and business needs. Annual Board evaluations also include an assessment of whether the Board has an appropriate mix of skills, experience and other characteristics.
All Director Nominees Have:
• | A reputation of high integrity | • | An ability to exercise sound judgement |
10 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
PROPOSAL 4 RATIFICATION
TABLE OF INDEPENDENT ACCOUNTANTSCONTENTS
The Audit CommitteeProposal 1 Director Elections
Our Director nominees exhibit an effective mix of diversity, experience and thefresh perspective
South Jersey Industries, Inc. - 2020 Proxy Statement | | 11 |
Proposal 1 Director Elections
The Board of Directors subject to the approvalrecommends a vote “FOR”
each of the shareholders, reappointed Deloitte & Touche LLP, as the Company’s independent registered public accounting firm for 2018. Unless otherwise directed, proxies will be voted “FOR” approval of this appointment. If the shareholders do not ratify this appointment by the affirmative vote of a majority of the votes cast at the meeting, other auditors will be considered by the Audit Committee.following nominees:
Deloitte & Touche LLP served as the Company’s independent registered public accounting firm during 2017. During 2017, the audit services performed for the Company consisted of audits of the Company’s and its subsidiaries’ financial statements and attestation of management’s assessment of internal control, as required by the Sarbanes-Oxley Act of 2002, Section 404
Sarah M. Barpoulis
| Age: 55 Director since: 2012 Owner of Interim Energy Solutions, LLC, Potomac, MD | Skills and Qualifications: | |
• | Director Barpoulis’ areas of expertise include corporate governance; enterprise leadership; environmental, social, governance (ESG); financial expertise; risk assessment/management; strategy formation/execution and technical/industry. | |
• | Director Barpoulis is a financial expert as defined by the SEC. | |
• | Director Barpoulis is a National Association of Corporate Directors Board Leadership Fellow. | |
SJI Boards and Committees: | ||
• | Chairman of the Audit Committee | |
• | Compensation Committee | |
• | Executive Committee | |
• | Strategy & Finance Committee | |
Since 2003, Ms. Barpoulis has provided asset management and advisory services to the energy sector through Interim Energy Solutions, LLC, a company she founded. Ms. Barpoulis serves on the following boards: Director, Equitrans Midstream Corporation (a publicly traded company) and director, Educare DC; and was previously a director of SemGroup Corporation from 2009 to 2019 and Reliant Energy, Inc. from 2006 to 2008. | ||
Keith S. Campbell
| Age: 65 Director since: 2000 Chairman of the Board, Mannington Mills, Inc., Salem, NJ | Skills and Qualifications: | |
• | Director Campbell’s areas of expertise include corporate governance, cybersecurity/IT, enterprise leadership, human resources and strategy formation/execution. | |
SJI Boards and Committees: | ||
• | Compensation Committee | |
• | Corporate Responsibility Committee | |
• | Risk Committee | |
Mr. Campbell has served as chairman of the board for Mannington Mills, Inc. since 1995, as director of the Federal Reserve Bank of Philadelphia from 2008 to 2013 and as a director of Skytop Lodge, Inc. from 2000 to 2015. | ||
12 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Proposal 1 Director Elections
and the preparation of various reports based on those audits, services related to filings with the Securities and Exchange Commission and the New York Stock Exchange, and audits of employee benefit plans as required by the Employee Retirement Income Security Act. A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and will have the opportunity to make a statement, if such representative desires to do so, and to respond to appropriate questions from shareholders.Victor A. Fortkiewicz
| Age: 68 Director since: 2010 Of Counsel, Cullen and Dykman, LLP, New York, NY | Skills and Qualifications: | |
• | Director Fortkiewicz’ areas of expertise include corporate governance; enterprise leadership; environmental, social, governance (ESG); governmental and regulatory; strategy formation/execution and technical/industry. | |
SJI Boards and Committees: | ||
• | Chairman of the Corporate Responsibility Committee | |
• | Risk Committee | |
Mr. Fortkiewicz has been Of Counsel, Cullen and Dykman, LLP since October 2011. He served as executive director, New Jersey Board of Public Utilities from 2005 to 2010. | ||
Sheila Hartnett-Devlin, CFA
| Age: 61 Director since: 1999 Retired, Senior Vice President, American Century Investments, New York, NY | Skills and Qualifications: | |
• | Director Hartnett-Devlin’s areas of expertise and experience include corporate governance; enterprise leadership; environmental, social, governance (ESG); financial expertise; public/shareholder relations and risk assessment/management. | |
• | Director Hartnett-Devlin is a financial expert as defined by the SEC. | |
SJI Boards and Committees: | ||
• | Audit Committee | |
• | Governance Committee | |
• | Strategy & Finance Committee | |
• | Executive Committee member, SJI Midstream, LLC; South Jersey Energy Solutions, LLC | |
Ms. Hartnett-Devlin serves as a member of the board of Mannington Mills, Inc. Ms. Hartnett-Devlin formerly served as senior vice president, American Century Investments. She is a member of the NY Society of Security Analysts. She previously served on the board of the Mercy Investment Program. | ||
South Jersey Industries, Inc. - 2020 Proxy Statement | | 13 |
Proposal 1 Director Elections
G. Edison Holland, Jr.
| Age: 66 Director since: 2019 Retired, President and CEO, Southern Company Holdings; Retired, EVP Southern Company Services, Atlanta, GA | Skills and Qualifications: | |
• | Director Holland’s areas of expertise include corporate governance, cybersecurity/IT, enterprise leadership, governmental and regulatory, risk assessment/management, strategy formation/execution and technical/industry. | |
SJI Boards and Committees: | ||
• | Audit Committee | |
• | Governance Committee | |
• | Risk Committee | |
Mr. Holland was appointed to the SJI Board as of September 12, 2019. He retired as president and CEO of Southern Company Holdings a position that he held from January 2016 through 2017. Prior to that he served as President, Chief Executive Officer and Chairman of Mississippi Power. from 2013 to 2015; President and Chief Executive Officer of Savannah Electric from 1997-2001 and Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer of Southern Company. from 2001 to 2013. He currently serves on the Advisory Board of ClearPath and he previously served on the Board of the Atlantic Council. He has served on the Boards of the Mississippi Economic Council, Mississippi Energy Institute, the Mississippi partnership for Economic Development and Energy Insurance Mutual. | ||
Sunita Holzer
| Age: 58 Director since: 2011 Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp., Madison, NJ | Skills and Qualifications: | |
• | Director Holzer’s areas of expertise include corporate governance, enterprise leadership, human resources, public/shareholder relations, risk assessment/management and strategy formation/execution. | |
SJI Boards and Committees: | ||
• | Chairman of the Compensation Committee | |
• | Corporate Responsibility Committee | |
• | Executive Committee | |
• | Risk Committee | |
Ms. Holzer has served as Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. since March 2015; served as president, Human Capital Insight, LLC from June 2014 to February 2015; served as executive vice president and chief human resources officer, CSC, from June 2012 to May 2014; and served as executive vice president, chief human resources officer, Chubb Insurance Company from 2003 to June 2012. Ms. Holzer is formerly an advisory board member of Re: Gender. Ms. Holzer serves on the Human Resource Management Department Advisory Board at Rutgers School of Management and Labor Relations. She speaks and writes regularly about human resource management and leadership issues and is the author of Wednesday Wisdom, a weekly LinkedIn blog. She is a past member of the board for Jersey Battered Women’s Service and in 2009 was recognized as a Woman Who Makes a Difference by the National Organization for Research on Women. | ||
14 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Proposal 1 Director Elections
Kevin M. O’Dowd
| Age: 47 Director since: 2020 Co-President/CEO of Cooper University Health Care, Camden, NJ | Skills and Qualifications: | |
• | Director O’Dowd’s areas of expertise include cybersecurity/IT; enterprise leadership; environmental, social, governance (ESG); governmental and regulatory; human resources; and strategy formation/execution. | |
SJI Boards and Committees: | ||
Mr. O’Dowd currently serves as the Co-President/CEO of Cooper University Health Care. Mr. O’Dowd joined Cooper University Health Care in 2015 as Senior Executive Vice President/Chief Administrative Officer and served in that position until 2018. Before joining Cooper, Mr. O’Dowd served in the Cabinet of New Jersey Governor Chris Christie, including as Chief of Staff from 2012 to 2014. Mr. O’Dowd also served as a federal prosecutor in the U.S. Attorney’s Office for the District of New Jersey from 2003-2010 most recently as Chief of the Securities and Healthcare Fraud Unit, prior to that he served as a Deputy Attorney General for the State of New Jersey. Mr. O’Dowd holds a Juris Doctor from St. John’s University School of Law. | ||
Michael J. Renna
| Age: 52 Director since: 2014 President and CEO, South Jersey Industries, Folsom, NJ | Skills and Qualifications: | |
• | Director Renna’s areas of expertise include enterprise leadership, financial expertise, governmental and regulatory, human resources, risk assessment/management, strategy formation/execution and technical/industry. | |
SJI Boards and Committees: | ||
• | Chairman of the Board, Energy & Minerals, Inc. | |
• | Chairman of the Board, R&T Group, Inc. | |
• | Chairman of the Board, South Jersey Energy Company | |
• | Chairman of the Executive Committee, South Jersey Energy Solutions, LLC; SJI Midstream, LLC; Marina Energy, LLC; and South Jersey Resources Group, LLC | |
Mr. Renna has been President and Chief Executive Officer of South Jersey Industries, Inc. since May 1, 2015. Prior to that, he served as President and Chief Operating Officer of South Jersey Industries, Inc. from January 2014 to April 30, 2015. Mr. Renna previously served as Senior Vice President of South Jersey Industries, Inc. from January 2013 to January 2014; and as Vice President of South Jersey Industries, Inc. from 2004 to 2013. Mr. Renna also held various officer-level positions with South Jersey Industries, Inc. and its wholly owned subsidiaries from 2002 to 2014. He serves on various boards of directors including the New Jersey Chamber of Commerce and the United Way of Greater Philadelphia. Additionally, Mr. Renna sits on the board of trustees for The Hun School of Princeton. He also serves on the Advisory Council Forum of Executive Women, participates in the University of Delaware’s Student Mentoring Program and is a member of the Jefferson Health New Jersey Business Council. | ||
South Jersey Industries, Inc. - 2020 Proxy Statement | | 15 |
Proposal 1 Director Elections
Joseph M. Rigby
| Age: 63 Director since: 2016 Retired, Chairman, President and CEO of Pepco Holdings, Inc., Washington, D.C | Skills and Qualifications: | |
• | Director Rigby’s areas of expertise include corporate governance, cyber security/IT, enterprise leadership, financial expertise, human resources, public/shareholder relations, strategy formation/execution, and technical/industry. | |
• | Director Rigby is a financial expert as defined by the SEC. | |
SJI Boards and Committees: | ||
• | Audit Committee | |
• | Compensation Committee | |
• | Chairman of the Strategy & Finance Committee | |
• | Director of SJI Utilities, Inc.; South Jersey Gas Company; Elizabethtown Gas Company; and Elkton Gas Company | |
Mr. Rigby served as Chairman, President and CEO of Pepco Holdings, Inc. from 2009 through 2016. He currently serves as a Director, Dominion Energy, Inc., and was previously a Director to Dominion Midstream Partners from 2014 to 2017, Energy Insurance Mutual from 2010 to 2018 and Rutgers Board of Governance from 2015 to 2018. | ||
Frank L. Sims
| Age: 69 Director since: 2012 Chairman of the Board, Atlanta Pension Fund, Atlanta, GA | Skills and Qualifications: | |
• | Director Sims’ areas of expertise include corporate governance, enterprise leadership, financial expertise, human resources, risk assessment/management, and strategy formation/execution. | |
• | Director Sims is a financial expert as defined by the SEC. | |
SJI Boards and Committees: | ||
• | Audit Committee | |
• | Governance Committee | |
• | Executive Committee | |
• | Chairman of the Risk Committee | |
Mr. Sims currently serves as the Chairman of the Board for the Atlanta Pension Fund. He has served as the Corporate Vice President and Platform Leader at Cargill, Inc. from 2002 to 2007. He also served as interim President for Fisk University from 2015 to 2017. Mr. Sims served as a board member for PolyMet Mining Co. from 2008 through July 2014 and for Piper Jaffray Co. from 2004 to June 2013. Mr. Sims also served as Chairman of the Board, Minneapolis Federal Reserve Bank from 2002 to 2008. | ||
The Board of Directors unanimously recommends a vote “FOR” the ratificationeach of the reappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.above nominees.
16 | | South Jersey Industries, Inc. - |
The following table sets forth certain information with respect to the beneficial ownership of our common stock, as of February 28, 2018,24, 2020, of: (a) each current director and nominee for director;(b) our principal executive officer, principal financial officer, the three other
three other most highly compensated executive officers during 2017 [collectively,2019 collectively, the “Named Executive Officers” (NEOs)]; and (c) all of the directors and executive officers as a group.
| Number of Shares of Common Stock (1) | Percent of Class | |||||||
| Sarah M. Barpoulis | 20,974 | (2) | * | |||||
| Thomas A. Bracken | 56,610 | (2) | * | |||||
| Keith S. Campbell | 49,241 | (2) | * | |||||
| Stephen H. Clark | 31,067 | * | ||||||
| Steven R. Cocchi | 1,630 | * | ||||||
| Jeffrey E. DuBois | 38,052 | * | ||||||
| Victor A. Fortkiewicz | 29,720 | (2) | * | |||||
| Sheila Hartnett-Devlin | 18,568 | (2) | * | |||||
| Walter M. Higgins III | 32,525 | (2) | * | |||||
| Sunita Holzer | 23,966 | (2) | * | |||||
| Kenneth Lynch | 8,938 | * | ||||||
| Kathleen A. McEndy | 9,980 | * | ||||||
| Gregory M. Nuzzo | 6,426 | * | ||||||
| Melissa Orsen | 0 | (3) | ||||||
| Michael J. Renna | 67,915 | * | ||||||
| Joseph M. Rigby | 8,261 | (2) | * | |||||
| David Robbins, Jr. | 28,481 | * | ||||||
| Frank L. Sims | 78,757 | (2) | * | |||||
| All directors, nominees for director and executive officers as a group (18 persons) | 511,111 | |||||||
Number of Shares of Common Stock (1) | Percent of Class | ||||||
Sarah M. Barpoulis | 28,965 | (2 | ) | * | |||
Thomas A. Bracken | 65,675 | (2 | ) | * | |||
Keith S. Campbell | 59,254 | (2 | ) | * | |||
Victor A. Fortkiewicz | 37,702 | (2 | ) | * | |||
Sheila Hartnett-Devlin | 26,546 | (2 | ) | * | |||
Cielo Hernandez | 2,392 | (3 | ) | * | |||
Walter M. Higgins III | 47,940 | (2 | ) | * | |||
Sunita Holzer | 33,685 | (2 | ) | * | |||
G. Edison Holland, Jr. | 4,214 | (2 | ) | * | |||
Kenneth A. Lynch | 16,928 | * | |||||
Kathleen A. McEndy | 25,377 | (3 | ) | * | |||
Kevin M. O’Dowd | 2,863 | (2 | ) | * | |||
Melissa J. Orsen | 2,029 | (3 | ) | * | |||
Michael J. Renna | 120,560 | (3 | ) | * | |||
Joseph M. Rigby | 15,466 | (2 | ) | * | |||
David Robbins, Jr. | 43,557 | (3 | ) | * | |||
Frank L. Sims | 86,745 | (2 | ) | * | |||
All directors, nominees for director and executive officers as a group (17 persons) | 619,898 | ||||||
*Less than 1%.
| (1) | Based on information furnished by the Company’s directors and executive officers. Unless otherwise indicated, each person has sole voting and dispositive power with respect to the Common Stock shown as owned by him or her. |
| (2) | Includes shares awarded to each director under a Restricted Stock Program for directors. Per the Restricted Stock Agreements, directors do not have voting rights on restricted stock awards. |
| (3) |
South Jersey Industries, Inc. - | 17 |
Security Ownership
The Board of Directors believes significant ownership of Company Common Stockcommon stock better aligns the interests of management with those of the Company’s shareholders. Therefore, in 2001, the Board of Directors enacted the stock requirements listed below for officers which were effective through 2014 and were increased effective 2015 as outlined below and on page 37:43:
As of December 31, 2019, the CEO and all NEOs are in compliance with the ownership guidelines.
plan for purposes of determining compliance with the
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers to file reports with the SEC relating to their ownership of, and transactions in, the
Company’s Common Stock. Based on our records and other information, the Company believes that all Section 16(a) filing requirements were met for 2017.the year ended December 31, 2019,
except for Form 4 filed by Mr. Robbins on June 10, 2019 reporting two late transactions, the sale of 35 shares that occurred on May 13, 2019 and the forfeiture of shares to cover tax withholdings in connection with the vesting of Performance Restricted Stock Units that occurred on March 1, 2019.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information, as of March 12, 2018,February 24, 2020, as to each person known to the Company, based on filings with the SEC, who beneficially owns 5 percent or more of the
Company’s Common Stock.common stock. Based on filings made with the SEC, each shareholder named below has sole voting and investment power with respect to such shares.
| Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Class | ||||||
| BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 10,184,899 | 12.8% | ||||||
| The Vanguard Group 100 Vanguard Blvd Malvern, PA 19355 | 7,820,779 | 9.83% | ||||||
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Class | ||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 14,260,418 | 15.5.% | ||
The Vanguard Group 100 Vanguard Blvd Malvern, PA 19355 | 10,501,841 | 11.4% | ||
Macquarie Investment Management Business Trust 2005 Market Street Philadelphia, PA 19103 | 4,809,229 | 5.2% | ||
18 | | South Jersey Industries, Inc. - |
Effective May 1, 2015, the Board of Directors decided to separate the Chairman and CEO roles, with Mr. Renna assuming the role of President and CEO, and Walter M. Higgins III, becoming the non-executive Chairman of SJI’s Board of Directors. Mr. Higgins will continue to serve as the non-executive Chairman of SJI’s Board of Directors until his retirement on April 24, 2020. At that time the Board of Directors will elect a new independent non-executive Chairman.
InThe non-executive Chairman of SJI’s Board of Directors performs the role, Mr. Higgins:following roles:
The Board adopted Corporate Governance Guidelines that require the Board to be composed of a majority of Directors who are “Independent Directors” as defined by the rules of the New York Stock Exchange. No Director will be considered “Independent” unless the Board of Directors affirmatively determines that the Director has no material relationship with the Company. When making “Independence” determinations, the Board considers all relevant facts and circumstances, as well as any other facts and considerations specified by the New York Stock Exchange, by law or by any rule or regulation of any other regulatory body or self-regulatory body applicable to the Company. As part of its
Corporate Governance Guidelines, the Board established a policy that Board members may not serve on more than four other
boards of publicly traded companies. SJI’s Corporate Governance Guidelines are available on our website at www.sjindustries.com under the heading “Investors”.
For 2017,2019, the Board determined that Directors Barpoulis, Bracken, Campbell, Fortkiewicz, Hartnett-Devlin, Higgins, Holzer, Rigby, and Sims, constitutinghas all of the non-employeeits current Directors, meet the New York Stock Exchange standards and our own standards noted above for independence and are, therefore, considered to be Independent Directors. Accordingly, all but one of the Company’s Directors was considered to be “Independent.”other than Mr. Renna who is not considered independent by virtue of his employment with the Company.
Mr. Campbell is Chairman of ConductMannington Mills, Inc., which purchases natural gas from Company subsidiaries. Commencing January 2004, as a result of winning a competitive bid, another Company subsidiary operates a cogeneration facility that provides electricity to Mannington Mills, Inc. Payments made to our Company’s subsidiary by Mannington Mills, Inc. were less than 1% of each of Mannington Mills, Inc. and the Company’s annual consolidated gross revenues during the last completed fiscal year.
Mr. Fortkiewicz is of counsel at Cullen and Dykman, LLP, a law firm that provides legal representation to our subsidiary Elizabethtown Gas Company. This is an arm’s length long standing relationship that has existed since 1986 prior to our acquisition of
Elizabethtown Gas Company in July 2018. Mr. Fortkiewicz is not a partner, officer or employee of Cullen and Dykman LLP and he does not provide legal services on any matters relating to Elizabethtown Gas Company, and he did not receive any compensation as a result of the firm’s representation. Payments made by the Company to Cullen and Dykman LLP were less than 1% of Cullen and Dykman LLP’s annual consolidated gross revenues during its last completed fiscal year. Mr. Fortkiewicz does not serve on our Audit, Compensation or Governance committees of the Board even though he is independent under the NYSE listing standards.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 19 |
Corporate Governance
The Company has adopted codes of conductConduct for all employees, Officers and Directors, which include the codesand a Code of ethicsEthics for our principal executive officer and principal financial officer within the meaning of the SEC regulations adopted pursuant to the Sarbanes-Oxley Act of 2002.2002 (collectively the “Codes”). Additionally, the Company established a hotline and website for employees to anonymously report suspected violations.
Copies of the codes of ethicsCodes are available on the Company’s website at www.sjindustries.com under Investors > Corporate Governance. Copies of our codes of conductCodes are also available at no cost to any
shareholder who requests them in writing at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037, Attention: Corporate Secretary. If the Company were to ever amend or waive any provision of its Code of Ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, the Company intends to satisfy its disclosure obligations, if any, with respect to any such waiver or amendment by posting such information on its website set forth above rather than by filing a Current Report on Form 8-K.
You may communicate with the Chairman of the Board and chairmen of the Audit, Compensation, Corporate Responsibility Governance, Risk and Strategy & Finance Committees by sending an e-mail to chairmanoftheboard@sjindustries.com, auditchair@sjindustries.com, compchair@sjindustries.com, govchair@sjindustries.com, corpresp@sjindustries.com, StratandFinChair@sjindustries.com or riskchair@sjindustries.com respectively, or you may communicate with our outsidenon-employee
Independent Directors as a group by sending an e-mail to sjidirectors@sjindustries.com. The Charters and scope of responsibility for each of the Company’s committees are located on the Company’s website at www.sjindustries.com. You may also address any correspondence to the Chairman of the Board, chairmen of the committees or to the Independentnon-employee Directors at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Corporate Governance
Corporate Governance Materials
Shareholders can see the Company’s Corporate Governance Guidelines and Profile, Charters of the Audit Committee, Compensation Committee, Corporate Responsibility Committee, Executive Committee, Governance Committee, Risk Committee, and Strategy & Finance Committee, and Codes of Ethics on the Company’s website at www.sjindustries.com under Investors
> Investors>Corporate Governance. Copies of these documents, as well as additional copies of this Proxy Statement, are available to shareholders without charge upon request to the Corporate Secretary at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Governance Committee is responsible for implementingimplements the Board Evaluation Process on an annual basis as a method of evaluating the effectiveness of the Board and Committees and to identify opportunities for Board enhancement. The 360° Third-Party Board Effectiveness Evaluation is conducted on an annual basis. The Governance Committee engages an independent, third-party facilitator and uses surveys and interviews to ensure robust feedback. The third-party facilitator is reevaluated periodically to ensure that the feedback that can be used to enhance Board processes.remains robust. The goal of the process is to gather anonymous input from Directors regarding Board compositionthe performance and processes, and compliance with corporate governance best practices. Covered areas include essential aspectseffectiveness of Board leadership
the Board, the Board Committees, and effectiveness,individual Directors by evaluating the contribution of individual directors, overall group dynamics,Board and whether the experienceCommittee culture, Committee roles and skillsetsresponsibilities and an evaluation of the alignment of members are well alignedskill sets with SJI’s current and future strategic needs. In 2017,The Executive Team participates in the process includedassessment and interview process. Following the evaluationassessment, the Governance Committee and the Chairman of the Board and its committees. In addition to the Directors, the Executive Officers participated in the process. The Governance Committee isare responsible for implementing the recommendations generated from the evaluation results.
Meetings of the Board of Directors and its Committees
 |  |  |  |  |  |
The Board of Directors met 12 times in | Each Director attended 75 percent or more of the total number of Board meetings and the Board committee meetings on which he or she | Each Director attended the 2019 Annual Meeting of Shareholders | It is the Board’s policy that the Independent Directors meet in Executive Session at every in-person meeting of the Board or its Committees. | During | Topics of these Full Board sessions included CEO and Officer Performance and Compensation, Succession Planning, Director Tenure, Retirement Age, Strategy and Discussions of Corporate Governance. Director Higgins, Chairman of the Board, chaired the meetings of the Independent Directors. |
20 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
All current Board members and all nominees for election to the Company’s Board of Directors are required to attend the Company’s Annual Meetings of Shareholders unless unique personal circumstances affecting the Board member or Director nominee make his or her attendance impracticable. All the Directors attended the 2017 Annual Meeting of Shareholders. During 2017, each of the Company’s Directors also served on the Boards or Executive Committees of one or more of South Jersey Gas Company, South Jersey Energy Company, SouthCorporate Governance
Jersey Energy Solutions, LLC, Marina Energy, LLC, South Jersey Resources Group, LLC, South Jersey Energy Service Plus, LLC, Energy & Minerals, Inc., R&T Group, Inc., and SJI Midstream, LLC, all of which are Company subsidiaries.
There are seven standing committees of the Board: the Audit Committee; the Compensation Committee; the Corporate Responsibility Committee; the Executive Committee; the Governance Committee; the Risk Committee and the Strategy & Finance Committee.
Age | Director Since | Audit Committee | Compensation Committee | Corporate Responsibility Committee | Executive Committee | Governance Committee | Risk Committee | Strategy & Finance Committee | |||||
Sarah Barpoulis | 55 | 2012 | Xc | X | X | X | |||||||
Thomas Bracken | 72 | 2004 | X | X | Xc | X | |||||||
Keith Campbell | 65 | 2000 | X | X | X | ||||||||
Victor Fortkiewicz | 68 | 2010 | Xc | X | |||||||||
Sheila Hartnett-Devlin | 61 | 1999 | X | X | X | ||||||||
Walter M. Higgins* | 75 | 2008 | |||||||||||
G. Edison Holland, Jr. | 66 | 2019 | X | X | X | ||||||||
Sunita Holzer | 58 | 2011 | Xc | X | X | X | |||||||
Kevin M. O’Dowd** | 47 | 2020 | |||||||||||
Michael Renna | 52 | 2014 | X | ||||||||||
Joseph Rigby | 63 | 2016 | X | X | Xc | ||||||||
Frank Sims | 69 | 2012 | X | X | X | Xc | |||||||
| c | Committee chaiman |
| * | Walter Higgins is and will continue to serve as an ex-officio member of the each of the Board Committees until his retirement on April 24, 2020. At that time the Board of Directors will elect a new independent non-executive Chairman who will also be appointed as an ex-officio member of the Committee. |
| ** | The Company expects that Mr. O’Dowd will be appointed to committees by the Board following the Company’s 2020 Annual Meeting of shareholders. |
The Board’s Audit Committee, which met eight times during 2017, was2019, is comprised of six “Independent” Directors until April 21, 2017 and five thereafter: Sheila Hartnett-Devlin, Chairman until April 21, 2017;Directors: Sarah M. Barpoulis, elected Chairman on April 21, 2017; Joseph H. Petrowski until April 21, 2017;Chairman; Sheila Hartnett-Devlin; G. Edison Holland, Jr. appointed as of September 12, 2019; Joseph M. Rigby; and Frank L. Sims. Walter M. Higgins III isserves as an ex-officio member of the Audit Committee. The Board determined that no member of the Audit Committee has a material relationship that would jeopardize such member’s ability to exercise independent judgment. The Board of Directors designated each member of the Audit Committee as an “audit committee financial expert” as defined by applicable Securities and Exchange Commission rules and regulations. The Audit Committee: (1) annually engages and evaluates an independent registered public accounting firm for appointment, subject to Board approval and shareholder approval,ratification, as auditors of the Company and has the authority to unilaterally retain, compensate and terminate the Company’s independent
registered public accounting firm; (2) reviews with the independent registered public accounting firm the scope and results of each annual audit; (3) reviews with the independent registered public accounting firm, the Company’s internal auditors and management, the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget, and staffing; and
(4) establishes policies and procedures for engaging the independent registered public accounting firm to provide audit and permitted non-audit services and (5) considers the possible effect on the objectivity and independence of the independent registered public accounting firm of any non-audit services to be rendered to the Company. The Audit Committee members meet in Executive Session with Internal Audit and the independent accounting firm at the end of each in-person meeting.
The Audit Committee is also responsible for reviewing the Company’s major financial risk exposures and the steps Management has taken to monitor and control these exposures
Corporate Governance
and reviewing the guidelines and policies that govern the process by which risk assessment and management is undertaken by the Board and Management.
The Audit Committee established policiesmembers meet in Executive Session with Internal Audit and procedures for engaging the independent registered public accounting firm to provide audit and permitted non-audit services.at each in-person meeting.
The Committee Charter is available on our website at www.sjindustries.com, under the heading “Investors”. You may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Board’s Compensation Committee, which met sixseven times during 2017, was2019, is comprised of five “Independent” Directors in 2017:the following directors who are independent under SEC and NYSE rules: Sunita Holzer, Chairman; Sarah M. Barpoulis; Keith S. Campbell, Chairman until April 21, 2017; Sheila Harnett-Devlin until April 21, 2017; Sunita Holzer elected Chairman on April 21, 2017; Joseph H. Petrowski until April 21, 2017;Campbell; and Joseph M. Rigby effective April 21, 2017.Rigby. Walter M. Higgins III isserves as an ex-officio member of the Committee. Each member of the Compensation Committee.Committee met the enhanced independence standards under NYSE rules for committee membership. The Compensation Committee carries out the responsibilities delegated by the Board
relating to the review and
determination of executive compensation as well as the structure and performance of significant, long-term employee defined benefits and defined contribution plans.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc.,1, 1 South Jersey Plaza, Folsom, New Jersey 08037.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 21 |
Corporate Governance
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has ever been an Officer or employee of the Company, or any of its subsidiaries or affiliates. During the last fiscal year, none of the Company’s
Executive Officers served on a compensation committee or as a Director for any other publicly traded company.
Corporate Responsibility Committee
The Board’s Corporate Responsibility Committee, which met four times during 2017, was2019, is comprised of five “Independent” Directors: Victor A. Fortkiewicz, Chairman; Thomas A. Bracken,Bracken; Keith S. Campbell,Campbell; and Sunita Holzer. Walter M. Higgins III isserves as an ex-officio member of the Compensation Committee. The Committee provides oversight, monitoring and guidance of environmental and social related matters related toincluding safety, corporate and social citizenship, public and legal policy, work force initiatives, corporate culture, environmental stewardship and compliance, political and regulatory activities, sustainability, quality ofemployee work life, and economic and social vitality in the communities and markets in which the Company operates.
The Committee also oversees the production of the Company’s annual Corporate SustainabilityEnvironmental, Social and Governance (ESG) Report, which conveys how the Company links the business with sustainable practices. The 2017ESG at report is available on https://www.sjindustries.com/esg/Home.
Management presents an update of the Company’s Environmental, Social and Governance (ESG) activities at each Corporate
Responsibility Committee meeting. In 2018, a board appointed ESG management Committee was created to develop and implement the Company’s key ESG and corporate social responsibility strategies, initiatives and policies and to assist the Board in its oversight, monitoring and guidance of SJI’s key environmental, social and sustainability areas. This includes oversight of SJI’s commitment to safety, environmental, health, human rights, employee relations, governance and community support strategies. The ESG Committee includes cross-functional members of management from key areas of the Company such as human resources, legal, risk management, communications, safety, and environment.
The Corporate Responsibility Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Board’s Executive Committee is comprised of the Chairman of the Board, the CEO and the Chairs of the Audit, Compensation, Governance and Risk Committees. The Executive Committee acts as directed by or on behalf of the Board of Directors during intervals between the meetings of the Board of Directors in the event a quorum of the Board is not available and, if at the discretion of the Chairman of the Board, immediate action is needed. The Committee also: reviews and investigates other matters as directed by the Board of Directors; reviews and recommends to the Board the organizational structure of the Company; reviews and recommends to the Board the Officers of the Company and its direct subsidiaries; reviews and recommends to the Board the
composition and leadership of the Management Risk and Trust committees; monitors and/or implements the review or investigation of matters related to or involving the Company’s Officers; and takes action on such matters delegated to the Committee by the Board.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Board’s Governance Committee, which met six times during 2017, was2019, is comprised of six “Independent” Directors from January 2017 until April 21, 2017, and five Independent Directors thereafter:“the following directors who are independent under NYSE rules: Thomas A. Bracken, Chairman; Sarah M. Barpoulis until April 21, 2017; Victor A. Fortkiewicz;Fortkiewicz through April 15, 2019; Sheila Hartnett-Devlin elected April 21, 2017; Joseph M. Rigby until April 21, 2017Hartnett-Devlin; G. Edison Holland, Jr. as of September 12, 2019; and Frank L. Sims. Walter M. Higgins III isserves as an ex-officio member of the Compensation Committee. Each Committee member satisfies the New York Stock Exchange’s independence requirements. Among its functions, the Governance Committee: (1) maintains a list of prospective candidates for Director, including those recommended by shareholders; (2) reviews the qualifications of candidates for Director (to review minimum qualifications for Director candidates, please see the Company’s Corporate Guidelines available on our website at www.sjindustries.com under the heading “Investors”. These guidelines include consideration of education, experience, judgment, diversity and other applicable and relevant skills as determined by an assessment of the Board’s needs when an opening exists); (3) makes recommendations to the Board of Directors to fill vacancies and for nominees for election to be voted on by the shareholders; and (4) is responsible for monitoring the implementation of the Company’s Corporate Governance Policy.Guidelines.
The Governance Committee reviews with the Board, on an annual basis, the appropriate skills and characteristics required of Board members in the context of the current Board make-up and the Company’s strategic forecast. This assessmentThe criteria that the Governance Committee assesses includes issues of industry experience, education, general business and leadership experience, judgment, diversity, age, and other applicable and relevant skills as
determined by anthe Governance Committee’s assessment of the Board’s current needs. The Governance Committee also conducts a diversity assessment which includes a review of Board composition with regard to race, gender, age and geography.
In conjunction with the Board’s self-evaluation process and its review of the cumulative Board’s Skills Matrix (see page 10) the Governance Committee identified the criteria that it believed was most relevant for the Board’s composition in the foreseeable future. The criteria identified were (1) experience and responsibility for the strategic direction and day-today operation of a large organization; (2) experience and responsibility for strategic oversight and organizational development; (3) extensive utility industry experience (4) regulatory experience and (5) legal experience. Members of the Board and members of the Company’s Senior Executive team were asked to make recommendations for potential director nominees. Each of the recent Board appointed nominees, Messrs. Holland and O’Dowd were identified and recommended by a Board member and an Executive Officer of the Company respectively.
The Governance Committee will consider nominees for the Board of Directors recommended by shareholders and submitted in compliance with the Company’s bylaws, in writing, to the Corporate Secretary of the Company. The Governance Committee uses the same criteria for evaluating nominees regardless of the source of referral. Any shareholder wishing to propose a nominee should submit a recommendation in writing to the Company’s Corporate Secretary
22 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Corporate Governance
at 1 South Jersey Plaza, Folsom, New Jersey 08037, indicating the nominee’s qualifications and other relevant biographical information and providing confirmation of the nominee’s consent to serve as a Director.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may
obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc.,1, 1 South Jersey Plaza, Folsom, New Jersey 08037.
Corporate Governance
Executive Committee
The Board’s ExecutiveRisk Committee met one timefour times in 2017. Until April 21, 2017 it was comprised of the Chairman of the SJI Board, Chairmen of the subsidiary Boards, Committee Chairs and was chaired by the Chairman of the Board. Thereafter the2019. The committee is comprised of the Chairman“Independent” directors: Frank L. Sims, Chairman; Keith S. Campbell; Victor A. Fortkiewicz; G. Edison Holland, Jr. as of September 12, 2019; and Sunita Holzer. Walter Higgins serves as an ex-officio member of the Board, the CEO and the ChairsCommittee. The purpose of the Audit, Compensation, Governance and Risk Committees. The current members are: Walter M. Higgins III, Chairman; Michael J. Renna; Sarah M. Barpoulis; Thomas A. Bracken; Sunita Holzer; and Frank L. Sims. The Executive Committee acts as directed by or on behalf of the Board of Directors during intervals between the meetings ofis to assist the Board of Directors in fulfilling its oversight responsibilities with regard to the event a quorumrisks inherent in the business of SJI and the control processes with respect to such risks.
The Risk Committee of the Board is not availablemonitors major strategic risks and if at the discretionpotential impact on the execution of the ChairmanCompany’s strategic plans and oversees and reviews the Company’s risk assessment process, and risk management strategy and programs. The committee also reviews the guidelines and policies that management uses to assess and manage exposure to risk and it reviews major financial risk exposures as well as the steps management has taken to monitor and control such exposure. The Committee presents its findings to the full Board, which is charged with approving the Company’s risk appetite.
The Company has two internal Risk Management Committees that report to the Board Risk Committee at least quarterly. The SJI Risk Management Committee (RMC), established 1998, is responsible for overseeing the energy transactions and the related risks for all the SJI companies. The SJI Utilities, Inc. RMC is responsible for gas supply risk management. Annually, the Board approves the RMC members which include management from key Company areas such as finance, risk management, legal and business operations.
Enterprise Risk Management (ERM) is a company-wide systematic approach to identify, assess, monitor, and mitigate potential risks as well as seize strategic opportunities. A risk management Committee made up of members of senior management conducts Quarterly meetings with business area leaders to identify and assess the likelihood, criticality, and financial impact of each risks. The results are then analyzed and reported to the Risk Management Committee (RMC) via an ERM Dashboard. In addition, a monthly Risk Dashboard Report; including Key Risk Indictors and Strategic Risks is distributed to the RMC. The quarterly meetings conducted with the RMC and Risk Management Committee of the Board, immediate action is needed. The Committee also: reviewsinclude discussions around the ERM process, its purpose, mitigation strategies, and investigates other matters as
directed by the Board of Directors; reviews and recommends to the Board the organizational structure of the Company; reviews and recommends to the Board the Officers of the Company and its direct subsidiaries; reviews and recommends to the Board the composition and leadership of the Management Risk and Trust committees; monitors and/or implements the review or investigation of matters related to or involving the Company’s Officers; and takes action on such matters delegated to the Committee by the Board.opportunities.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Risk Management Committee
South Jersey Industries, Inc. - 2020 Proxy Statement | | 23 |
Corporate Governance
In April 2017, the Board formed the Risk Committee, which met twice in 2017. In 2017, the committee was comprised of five “Independent” directors: Frank L. Sims, Chairman; Keith S. Campbell; Victor A. Fortkiewicz; and Sunita Holzer. Walter M. Higgins III is an ex-officio member of the Compensation Committee. The purpose of the Risk Committee is to assist the Board of Directors in fulfilling its oversight responsibilities with regard to the risks inherent in the business of SJI and the control processes with respect to such risks.
The Risk Committee monitors major strategic risks and the potential impact on the execution of the Company’s strategic plans, and oversees and reviews the Company’s risk assessment process, and risk management strategy and programs. The committee also analyzes the guidelines and policies that management uses to assess and manage exposure to risk, and analyzes major financial risk exposures and the steps management has taken to monitor and control such exposure. The Committee presents its findings to the full Board, which is charged with approving the Company’s risk appetite.
At each Risk Committee meeting, management presents an update of the Company’s risk management activities. The Company has two internal Risk Committees that reportaddition to the Risk Committee, at least quarterly. The SJI Risk Management
Committee (RMC), established 1998, is responsible for overseeing the energy transactions and the related risks for allBoard has allocated its risk oversight duties to various committees of the SJI companies. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and business operations.Board:
Risk Areas | Board Responsibility | |
Corporate: | ||
• | Strategic and Financing | Strategy & Finance Committee |
• | Capital Allocation/Requirements | |
• | Enterprise Wide Risk Management | Risk Committee |
• | Major Financial Risk Exposures | Audit Committee |
Operational: | ||
• | Markets/Competition | Risk Committee & Strategy & Finance Committee |
• | Regulatory/Legislative | Risk Committee |
• | Supplier | |
• | Operations | |
• | Information Technology | |
• | Cybersecurity | |
Financial: | Audit Committee | |
• | Guidelines and Policies for Risk Assessment and Management | |
• | Major Financial Risk | |
• | Financial Reporting | |
• | Financial Disclosure | |
• | Financial Controls | |
• | Accounting/Taxes | |
Corporate Responsibility: | Corporate Responsibility Committee | |
• | Legal | |
• | Ethical | |
• | Corporate and Social Citizenship | |
• | Environmental | |
• | Safety | |
• | Sustainability Culture and Human Capital | |
Compensation | Compensation Committee | |
• | Compensation Program | |
• | Retirement Plans | |
The RMC establishes a general framework for measuring and monitoring business risks related to both financial and physical energy transactions, approves all methodologies used in risk measurement, ensures that objective and independent controls are in place, and presents reports to the Board Risk Committee reflecting risk management activity.
A South Jersey Gas Company RMC is responsible for gas supply risk management. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and gas supply. This RMC meets at least quarterly.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc.,1 South Jersey Plaza, Folsom, New Jersey 08037.
In April 2017, the Board formed theThe Strategy & Finance Committee which met sixeleven times in 2017. In 2017, the2019.The committee was comprised of five “Independent” directors: Joseph M. Rigby, Chairman; Sarah M. Barpoulis; Thomas A. Bracken; and Sheila Hartnett-Devlin. Walter M. Higgins III isserves as an ex-officio member of the Compensation Committee. The purpose of the Strategy & Finance Committee is to assist the Board of Directors in fulfilling its oversight of the Company’s strategic, financial and financing plans.
The Strategy & Finance Committee advises the Board of Directors and provides input and support to Management in the development of the Company’s long-term strategic, operating, capital and financing plans.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc.,1, 1 South Jersey Plaza, Folsom, New Jersey 08037.
24 | | South Jersey Industries, Inc. - |
Corporate Governance
2019 Director Compensation Program*
Risk Allocation
The Board has allocated its risk oversight duties as follows:
Corporate Governance
Audit Committee Report
The Board’s Audit Committee comprises fourIt is the Company’s intention to set director compensation levels at or near the market median relative to directors eachat companies of whom is independent as defined under the listing standards of the New York Stock Exchange and satisfies the additional independence criteria applicable to Audit Committee members, and the Chairman of the Board of Directors, as an Ex Officio member. The Board has determined that each member of the Committee is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission. The Audit Committee’s activitiescomparable size, industry, and scope of its responsibilitiesoperations in order to ensure directors are set forth in a written charter adopted by the Board,paid competitively for their time commitment and responsibilities. A market competitive package is posted on the Company’s website at www.sjindustries.com under the heading “Investors”.important because it enables us to attract and retain highly qualified directors who are critical to our long-term success.
In accordance with2019, the Governance Committee engaged Pearl Meyer as its Charter adopted by the Board of Directors, the Audit Committee, among other things, assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s accounting, auditing and financial reporting practices. Management is responsible for preparing the Company’s financial statements and for assessing the effectiveness of the Company’s internal control over financial reporting. The independent registered public accounting firm is responsible for examining those financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee reviewed the Company’s audited financial statements for the fiscal year ended December 31, 2017, and management’s assessment of the effectiveness of the Company’s internal control over financial reporting with management and with Deloitte & Touche LLP, the Company’s independent registered public accounting firm. The Audit Committee discussed with the independent registered public
accounting firm all communications required by generally accepted auditing standards, including those described in the Statement on Auditing Standards No. 61 (AICPA Professional Standards, Vol. 1. AU section 380), as amended, and “Communication with Audit Committees,” as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T. The Audit Committee also received written disclosures from Deloitte & Touche LLP regarding its independence from the Company that satisfy applicable PCAOB requirements for independent accountant communications with audit committees concerning auditor independence, and discussed with Deloitte & Touche LLP the independence of that firm.
Based on the above-mentioned review and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Company’s audited financial statements and management assessment of the effectiveness of the Company’s internal controls over financial reporting be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for filing with the Securities and Exchange Commission.
Audit Committee
Sarah M. Barpoulis, ChairmanWalter M. Higgins III, Ex Officio Member
Sheila Hartnett-DevlinJoseph M. RigbyFrank L. Sims
Corporate Governance
Fees Paid to the Independent Registered Public Accounting Firm
As part of its duties, the Audit Committee also considered whether the provision of services other than the audit services by the independent registered public accountants to the Company is compatible with maintaining the accountants’ independence. In accordance with its charter, the Audit Committee must pre-approve all services provided by Deloitte & Touche LLP. The Audit Committee discussed these services with the independent registered public accounting firm and Company management to
determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the U.S. Securities and Exchange Commission to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.
The fees for all services provided by the independent registered public accounting firm to the Company during 2017 and 2016 are as follows:
| FY 2017 | FY 2016 | |||||||||
| Audit Fees (a) | $2,270,100 | Audit Fees (a) | $2,022,618 | |||||||
| Fees per Engagement Letter | 1,940,000 | Fees per Engagement Letter | 1,850,000 | |||||||
| FY 2016 Audit true up billed | 100,000 | FY 2015 Audit true up billed | — | |||||||
| Audit work related to 2017 non-routine events | 230,100 | Audit work related to 2016 non-routine events | 172,618 | |||||||
| Audit-Related Fees (b) | — | Audit-Related Fees (b) | — | |||||||
| Tax Fees (c) | 242,000 | Tax Fees (c) | 219,289 | |||||||
| Tax Compliance | 135,000 | Tax Compliance | 150,525 | |||||||
| Fees related to tangible | 65,000 | Fees related to tangible | 17,142 | |||||||
| property regulations phase II (phase I & II) | property regulations phase II (phase I & II) | |||||||||
| Other tax advisory services | 42,000 | Other tax advisory services | 51,622 | |||||||
| All Other Fees | All Other Fees | |||||||||
| Total | $2,512,100 | Total | $2,241,907 | |||||||
Corporate Governance
Compensation of Directors
Since 2011, the Board has engaged Frederic W. Cook (Cook) as its consultant to review the Company’s Director Compensation Program (Program) to ensure that the Board attracts and retains highly qualified Directors. Each year, Cook evaluates total compensation andFor the structure2019 study, we considered market data for directors of the Program.
Forsame set of peer companies considered for our executive compensation programs, as well as the 2016 study, reference points wereNACD Director Compensation Report. Directors who are employees of the DirectorCompany or its affiliates do not receive separate compensation for their Board activities. The study revealed that the following peer companies, consistentProgram is aligned with market median practices, as is the group used to assess the competitiveness of the Executivedesign and pay mix between cash and equity.
Cash—Annual Retainer for Board Service | $ | 65,000 | |
Restricted Stock—awarded in January (1) | $ | 105,000 | |
Independent Subsidiary Chairman Retainer (2) | $ | 8,000 | |
Non-Executive Chairman—stock and cash retainer (3) | $ | 80,000 | |
Annual Committee Chair Fees (4): | |||
Audit | $ | 15,000 | |
Compensation | $ | 12,500 | |
Corp. Resp. | $ | 7,500 | |
Governance | $ | 8,750 | |
Risk | $ | 7,500 | |
Strategy & Finance | $ | 7,500 | |
Annual Committee Member Fees (4) | |||
Audit | $ | 15,000 | |
Compensation | $ | 10,000 | |
Corp. Resp. | $ | 5,000 | |
Governance | $ | 7,500 | |
Risk | $ | 5,000 | |
Strategy & Finance | $ | 7,500 | |
Non-Executive Chairman | $ | 25,000 |
*There were no changes in Director Compensation Program: Avista Corp., Black Hills Corp., New Jersey Resources Corp., Northwestern Corp., Northwest Natural Gas Co., One Gas, Inc., Piedmont Natural Gas Co., Questar Corp., Southwest Gas Corp., Spire, Inc., Vectren Corp. and WGL Holdings Inc. In a study presented in November 2016, Cook found as follows:program for 2020.
| The value of the | ||
| prior year. |
| The annual retainer for the Independent Subsidiary Chairman is payable monthly. The Chairman of the Board | ||
| Independent Subsidiary Chairman annual retainer. |
| (3) | The | |
| retainer is comprised of 50% stock and 50% cash. The cash portion is payable monthly. |
| (4) | Committee Chair fees and Committee Member Fees are payable monthly. |
| (5) | Meeting Fees were eliminated in February 2019. |
Directors are aligned with peer group medianreimbursed for their travel expenses, upon request. In addition to 75th percentile practice.
Based on Cook’s findings and recommendations, in 2017 the Company paid non-employeeabove compensation program, Directors as follows:
| I. | Compensation: Non – Employee Directors | ||||||||||||
| A. | Board Service | ||||||||||||
| 1. | Cash - | Annual Retainer for Board and Committee Service | $ | 75,000 | |||||||||
| 2. | Restricted Stock – SJI shares with a total value of $90,000 awarded annually in January. The value of the shares is based on the daily average share price for the period July 1 through December 31 of the prior year. | ||||||||||||
| 3. | Independent Subsidiary Chairman Retainer – Annual Retainer (payable monthly): | $ | 8,000 | ||||||||||
| 4. | Non-Executive Chairman | $ | 80,000 | ||||||||||
| (Payable 50% shares; 50% cash retainer, payable monthly) | |||||||||||||
| B. | Committee Service | ||||||||||||
| 1. | Annual Committee Chairman Retainers (payable monthly): | ||||||||||||
| Audit | $ | 15,000 | |||||||||||
| Compensation | $ | 10,000 | |||||||||||
| Governance | $ | 7,500 | |||||||||||
| Corp. Resp. | $ | 7,500 | |||||||||||
| Risk | $ | 7,500 | |||||||||||
| Strategy & Finance | $ | 7,500 | |||||||||||
| 2. | Meeting Fee: | $1,500 for each Audit Committee meeting in excess of four meetings per year. | |||||||||||
| $1,500 for each Compensation Committee, Corporate Responsibility Committee, Governance Committee, Risk Committee, or Strategy & Finance meeting in excess of four meetings per year. | |||||||||||||
| 3. | Ad Hoc Committees: In the event a Committee is formed for a special project; the Committee members will be paid $1,500 per meeting and the Chairman will be paid a retainer in an amount approved by the Board of Directors. | ||||||||||||
| II. | Other Benefits & Items | ||||||||||||
| A. | $50,000 Group Life Insurance* | ||||||||||||
| B. | $250,000 24 Hr. Accident Protection Insurance (applies to travel to or from, or conducting business for SJI) | ||||||||||||
| C. | Restricted Stock Deferral Plan | ||||||||||||
| D. | D&O Insurance - | $50 Million w/$15 Million “Side A” Coverage | |||||||||||
| No Deductible for D&O | |||||||||||||
| $200,000 Deductible for Corporation | |||||||||||||
| E. | Travel Expenses Reimbursed Upon Request | ||||||||||||
| III. | Share Ownership Requirements | ||||||||||||
| Non-employee members of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual retainer for Board Service. Shares owned outright will be combined with restricted shares awarded as part of the annual stock retainer for the purpose of meeting these requirements. All Directors have six years to satisfy the share ownership requirement after an increase in share ownership in the share ownership guidelines. | |||||||||||||
* These insurance benefits were eliminated for Directors thatwho joined the Board afterbefore April 2011.2011 are eligible for group life insurance.
South Jersey Industries, Inc. - |
Corporate Governance
In March of 2012, the Governance Committee nominated an Independent Director to serve as Chairman of the South Jersey Energy Solutions, LLC (SJES) Executive Committee. Based on the recommendation of Cook, the Board determined that an additional retainer would be paid for independent directors who serve as Chairman of the Board of SJI and its subsidiaries. Commencing May 2012, an $8,000 annual retainer was paid to Joseph M.
Petrowski, who served as the Chairman of the SJES Executive Committee and the SJI Midstream Executive Committee through April 21, 2017. Director Higgins, Chairman of the South Jersey Gas Company Board of Directors, did not receive an additional retainer for this role as he received additional compensation as Chairman of the SJI Board.
Independent Director Compensation for Fiscal Year 20172019
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (2) | Total ($) | |||||||||||||||||||||
| Sarah M. Barpoulis | 98,500 | 89,977 | — | — | — | 60 | 188,537 | |||||||||||||||||||||
| Thomas A. Bracken | 88,500 | 89,977 | — | — | — | 330 | 178,807 | |||||||||||||||||||||
| Keith S. Campbell | 81,333 | 89,977 | — | — | — | 330 | 171,640 | |||||||||||||||||||||
| Victor A. Fortkiewicz | 85,083 | 89,977 | — | — | — | 330 | 175,390 | |||||||||||||||||||||
| Sheila Hartnett-Devlin | 96,500 | 89,977 | — | — | — | 330 | 186,807 | |||||||||||||||||||||
| Walter M. Higgins III | 115,000 | 129,988 | — | — | — | 330 | 245,318 | |||||||||||||||||||||
| Sunita Holzer | 84,667 | 89,977 | — | — | — | 60 | 174,704 | |||||||||||||||||||||
| Joseph H. Petrowski | 30,667 | 89,977 | — | — | — | 110 | 120,754 | |||||||||||||||||||||
| Joseph M. Rigby | 93,500 | 89,977 | — | — | — | 60 | 183,537 | |||||||||||||||||||||
| Frank L. Sims | 89,000 | 89,977 | — | — | — | 60 | 179,037 | |||||||||||||||||||||
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (2) | Total ($) | ||||||||||||||
Sarah M. Barpoulis | 112,500 | 86,075 | — | — | — | 106 | 198,681 | ||||||||||||||
Thomas A. Bracken | 93,750 | 86,075 | — | — | — | 400 | 180,225 | ||||||||||||||
Keith S. Campbell | 85,000 | 86,075 | — | — | — | 400 | 171,475 | ||||||||||||||
Victor A. Fortkiewicz | 90,000 | 86,075 | — | — | — | 400 | 176,475 | ||||||||||||||
Sheila Hartnett-Devlin | 95,000 | 86,075 | — | — | — | 400 | 181,475 | ||||||||||||||
Walter M. Higgins III | 130,000 | 118,854 | — | — | — | 400 | 249,254 | ||||||||||||||
G. Edison Holland | 26,979 | 30,555 | — | — | — | — | 57,534 | ||||||||||||||
Sunita Holzer | 97,500 | 86,075 | — | — | — | 106 | 183,681 | ||||||||||||||
Joseph M. Rigby | 105,000 | 86,075 | — | — | — | 106 | 191,181 | ||||||||||||||
Frank L. Sims | 100,000 | 86,075 | — | — | — | 106 | 186,181 | ||||||||||||||
| (1) | Per the |
| (2) | Represents payments made by SJI for group life insurance and accident protection insurance. |
Certain Relationships
Mr. Campbell is Chairman of Mannington Mills, Inc., which purchases natural gas from Company subsidiaries. Commencing January 2004, as a result of winning a competitive bid,
| (3) | Mr. Holland was granted 933 shares of restricted stock valued at approximately $30,625 using the daily closing prices for the last two quarters of 2018. His annual restricted stock award was pro-rated because he was appointed to the Board on September 12, 2019. The above chart reflects the aggregate grant date fair value of restricted common stock awards granted in the respective fiscal year, calculated in accordance with FASB Accounting Standards Codification Topic 718, Compensation - Stock Compensation, which requires that the grant be measured at the grant date fair value. |
another Company subsidiary operates a cogeneration facility that provides electricity to Mannington Mills, Inc.
Review and Approval Policies and Procedures for Related Party Transactions
Pursuant to a policy adopted by the Company’s Governance Committee, the Company’s executive officers, directors, and principal stockholders,shareholders, including their immediate family members and affiliates, are not permitted to enter into a related party transaction with the Company without the Governance Committee’s or other independent Board committee’s prior consent, in cases in which it is inappropriate for the Governance Committee to review the transaction due to a conflict of interest.
In approving or rejecting the proposed transaction, the Governance Committee shall consider the facts and circumstances available and deemed relevant to the Committee. The Governance Committee shall approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, the Company’s best interests, as the Governance Committee determines in the good faith exercise of its discretion.
| | South Jersey Industries, Inc. - |
Corporate Governance
The Board’s Audit Committee comprises six directors, each of whom is independent as defined under the listing standards of the New York Stock Exchange. The Board has determined that each member of the Audit Committee is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission. The Audit Committee’s activities and scope of its responsibilities are set forth in a written charter adopted by the Board, and is posted on the Company’s website at www.sjindustries.com under the heading “Investors.”
In accordance with its Charter, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s financial statements and financial reporting practices. Management has the primary responsibility for preparing the Company’s financial statements and for assessing the effectiveness of the Company’s internal control over financial reporting. The Audit Committee is responsible for the appointment, compensation and oversight of the independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”). Deloitte is responsible for independently examining the Company’s financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting and issuing a report thereon.
In performing its oversight, the Audit Committee monitors financial results and discusses the Company’s accounting practices and areas requiring significant management estimates or judgement with management and Deloitte. The Audit Committee reviews with Deloitte all communications required by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and, with and without management present, reviews and discusses the quality of the financial statements, clarity and completeness of the related disclosures, and the effectiveness of internal control over financial reporting. The Audit Committee receives and discusses reports from the Company’s internal audit department on the effectiveness of internal control over financial reporting and any changes to the Company’s internal controls. The Committee then periodically consults separately with the head of internal audit, out of the presence of management, about internal control over financial reporting, and reviews any recommendations and management’s response.
The Audit Committee has received from Deloitte the written disclosures and letter regarding its independence from the Company as required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence. The Audit Committee requires that all services of Deloitte be pre-approved by the Audit Committee or the Audit Committee Chair. The Audit Committee has considered whether Deloitte’s provision of non-audit services to the Company and the total fees paid for non-audit services relative to fees paid for audit services are compatible with maintaining Deloitte’s independence. On the basis of its review, the Audit Committee determined that Deloitte has the requisite independence.
Based on the above-mentioned reviews and discussions with management, internal audit and Deloitte, the Audit Committee recommended to the Board that the Company’s audited financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for filing with the Securities and Exchange Commission.
Audit Committee
Sarah M. Barpoulis, Chairman
Walter M. Higgins III, Ex-Officio Member
Sheila Hartnett-Devlin
G. Edison Holland (appointed September 2019)
Joseph M. Rigby
Frank L. Sims
South Jersey Industries, Inc. - 2020 Proxy Statement | | 27 |
EXECUTIVE OFFICERS
Compensation Committee Report
We have reviewedTABLE OF CONTENTS
Corporate Governance
The Audit Committee is responsible for compensating the independent registered public accountants for services performed, including both audit and non-audit services. To ensure the provision of services to the Company is compatible with maintaining the accountants’ independence, in accordance with its charter, the Audit Committee must pre-approve all services provided by Deloitte. Prior to approving, the Audit Committee discussed these services with management and Deloitte to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the U.S. Securities and Exchange Commission to implement Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.
The fees for all services provided by the independent registered public accounting firm to the Company during 2019 and 2018 are contained in the table below. The Audit Committee believes these fees to be reasonable in light of the Company’s activity. Tax fees
were higher in 2018 due to the implementation of the Tax Cuts and Jobs Act. 2019 audit fees reflect additional audit work related to the acquisition of Elizabethtown Gas Company and Elkton Gas Company during 2018. Specifically, the 2019 audit fees reflect the inclusion of management’s implementation of internal controls associated with the acquired entities in the independent registered public accounting firm’s audit of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. In addition, the 2019 audit fees include audit work related to the implementation of new systems necessary to complete the integration of the acquired companies in anticipation of the end of the transition services provided by Southern Company, along with a public debt offering completed in 2019.
The fees for all services provided by the independent registered public accounting firm to the Company during 2019 and 2018 are as follows:
FY 2019 | FY 2018 | ||||||||||||
Audit Fees (a) | $ | 4,711,025 | Audit Fees (a) | $ | 3,718,000 | ||||||||
Audit-Related Fees (b) | — | Audit-Related Fees (b) | — | ||||||||||
Tax Fees (c) | 250,562 | Tax Fees (c) | 525,415 | ||||||||||
All Other Fees (d) | 2,021 | All Other Fees | — | ||||||||||
Total | $ | 4,963,608 | Total | $ | 4,243,415 | ||||||||
| (a) | Fees for audit services billed or expected to be billed relating to fiscal 2019 and 2018 include audits of the Company’s annual financial statements, evaluation and reporting on the effectiveness of the Company’s internal controls over financial reporting, reviews of the Company’s quarterly financial statements, comfort letters, consents and other services related to Securities and Exchange Commission matters. |
| (b) | SJI did not incur any fees for audit-related services during fiscal 2019 and 2018. |
| (c) | Fees for tax services provided during fiscal 2019 and 2018 consisted of tax compliance and compliance-related research. Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred to document, compute, and obtain government approval for amounts to be included in tax filings and Federal, state and local income tax return assistance. |
| (d) | Other fees billed by Deloitte for research tools and subscription services. |
28 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
This year’s Compensation Discussion and Analysis with management. Based(CD&A) reviews the objectives and elements of SJI’s executive compensation program and discusses the 2019 compensation of our Named Executive Officers (“NEOs”) listed below. It also explains the actions
the Compensation Committee (“the Committee”) took based on its ongoing commitment to consider investor feedback and ensure our senior leadership team remains focused on creating long-term shareholder value. During 2019, we:
Conducted a shareholder outreach campaign, with a significant focus on executive compensation matters | ➢ | Reached out to approximately 35 of our top shareholders, representing more than approximately 66% of shares outstanding |
➢ | Members of the Board of Directors, including the Chairman of the Board and the Chairman of the Committee, met in person/telephonically with nine of our 10 top shareholders, representing approximately 30% of shares outstanding | |
Engaged a new independent compensation consultant | ➢ | Retained Pearl Meyer to gain further insight on pay practices and ensure that our program effectively balances competitive market practices, investor expectations, best-practice governance standards and our business strategy |
Prior to understanding from our shareholders and ISS in March, 2019, of their disagreement/disapproval of our late 2018/early 2019 use of enhancements of the Non-Qualified Employee Retirement Plan (“SERP”) to facilitate a corporate restructuring and downsizing of the senior executive roles, we had used that vehicle to make these changes. After that it was never used again. | ➢ | Determined that the SERP will not be used to provide enhanced future benefits under any circumstances. In addition, the SERP was frozen in 2016 for the enrollment of new participants. |
Did not grant any Special Recognition Awards to the NEOs | ➢ | Discontinued the use of one-time special cash awards and equity grants to current NEOs (referred to as Special Recognition Awards) and to all NEOs in the future* |
Did not increase base salaries for the NEOs | ➢ | There will be no base salary increase for the incumbent NEOs for 2020. |
Made changes to our Annual Incentive Plan (“AIP”) to improve line-of-sight between performance and payout results | ➢ | For 2019, added a Company Balanced Scorecard with pre-determined, quantifiable safety, diversity and inclusion, and employee engagement objectives |
➢ | For 2020, implemented a new AIP design that creates better alignment to relative Total Shareholder Return (“TSR”) and prioritizes corporate goals in line with shareholder interests. For example, AIP payout will be capped at 100% if the Company’s one-year relative TSR does not achieve the 25th percentile, and is otherwise capped at 150%. | |
Strengthened the link between pay and performance in our Long-Term Incentive (“LTI”) Plan and better aligned the design provisions with those of our peer group | ➢ | For 2019, adjusted relative TSR threshold performance level and payout opportunities to align better with market practices and shareholder expectations |
➢ | For grants starting in 2020, approved a relative Total Shareholder Return (“TSR”) threshold performance trigger. If SJI does not achieve 3-year relative, threshold TSR, there will be no payout on the TSR portion of the award and the EPS portion will be capped at 50% of target, regardless of EPS performance | |
Updated our Clawback Policy to be more robust | ➢ | Extended clawback to apply to material violations of Code of Ethics and other company policies (in addition to instances of material negative financial restatement due to fraud, negligence, or intentional misconduct) |
Modified the treatment of equity vesting under certain termination scenarios | ➢ | Effective 1/1/2020, eliminated full vesting of unvested TBRSU shares if an executive terminates from SJI (without Cause under the Officer Severance Plan) and PBRSU shares upon a change-in-control to better align with market practice of providing a pro-rated payment based on termination date |
| * | Inducement bonuses and equity grants for newly hired NEOs and/or pay adjustments (i.e., base salary and/or target incentive award opportunity increases) related to internal promotions are not considered Special Recognition Awards |
During 2019, our senior leadership team achieved critical financial objectives and continued to execute on our reviewBusiness Transformation Plan by driving forward the strategic initiatives that reinforce our focus on reliable, repeatable earnings that complement regulated growth. We also successfully executed on our Chief Financial Officer (CFO) leadership transition plan, by seamlessly onboarding Ms. Cielo Hernandez into the CFO role early in the year.
More details about our shareholder outreach efforts, our 2019 business achievements and discussion, we recommended to the Board of Directors thatresulting compensation actions taken by the Compensation Discussion and Analysis be includedCommittee are in the Company’s proxy statement, Form 10-K and Annual Report for the year ended December 31, 2017.following pages of our CD&A.
COMPENSATION COMMITTEE
Sunita Holzer, Chairman
Sarah M. Barpoulis
Keith S. Campbell
Joseph M. Rigby
South Jersey Industries, Inc. - 2020 Proxy Statement | | 29 |
Compensation Discussion & Analysis
Introduction
This Compensation Discussion and Analysis (“CD&A”) explains the executive compensation program for the following individuals, who are referred to as the “Named2019 Named Executive Officers” (“NEOs”):Officers
Name | Position as of December 31, 2019 |
Michael J. Renna | President and Chief Executive Officer |
Cielo Hernandez(1) |
Senior Vice President and Chief Financial Officer | |
| David Robbins Jr. | Senior Vice President and President | |
Kathleen A. McEndy(2) | Senior Vice President and Chief Administrative Officer | |
Melissa J. Orsen | Senior Vice President and General Counsel | |
Kenneth A. Lynch(1) | Former Senior Vice President and Chief Accounting and Risk Officer and Principal Financial Officer |
| (1) | Ms. Hernandez replaced Mr. Lynch as principal financial officer upon her appointment as Senior Vice President and Chief Financial Officer on January 14, 2019. Mr. Lynch retired from the Company on March 31, 2019. See “Change in Principal Financial Officer” below. |
| (2) | Ms. McEndy retired from the Company on January 31, 2020. |
Change in Principal Financial Officer. Ms. Cielo Hernandez joined SJI in the role of Senior Vice President and Chief AdministrativeFinancial Officer,
Executive Summary effective January 14, 2019. In her role, Ms. Hernandez is responsible for maintaining the organization’s fiscal strength, enabling profitable operation through effective strategic planning and oversight of financial activities. Effective with her appointment on January 14, 2019, Ms. Hernandez replaced Mr. Kenneth A.
Fiscal 2017 Business Highlights
Key business highlights for 2017 are as follows:
Growing regulated focus. With a strategic shift in 2015, the company turned its focus to growing earnings from regulated investments. In October 2017, SJI announced its intent to acquire the assets of Elizabethtown Gas and Elkton Gas companies from Southern Company Gas. This transformative acquisition will position SJI as the second largest natural gas provider in New Jersey with over 681,000 customers.
Successful execution. During 2017, SJI strategically eliminated $9.1 million of investment tax credits from earnings, finishing the year with Economic Earnings totaling $98.1 million. The company also executed its eleventh fuel supply management contract and brought its sixth contract on-line in 2017.
Progress Towards the Goal:
SJILynch, our Senior Vice President and Chief Accounting and Risk Officer who had assumed the role of principal financial officer on August 17, 2018. Following replacement by Ms. Hernandez, Mr. Lynch continued moving alongto serve as our Senior Vice President and Chief Accounting and Risk Officer until he retired from the path towards achievingCompany on March 31, 2019.
We periodically meet with our shareholders to discuss business topics, seek feedback on our performance, and address other matters such as executive compensation. We increased the focus and intensity of our shareholder engagement as a result of our most recent say-on-pay vote, which yielded approximately 45% support for our executive compensation program (well below our historically strong support of greater than 95%, the average of results from fiscal years 2014 to 2018). The Board took this result as a strong indicator to increase its stated goalshareholder engagement efforts and, as such, reached out to approximately 35 of delivering $150 millionour largest shareholders, aggregating approximately 66% of Economic Earningsour outstanding shares. Members of the Board of Directors, including the Chairman of the Board and the Chairman of the Compensation Committee, met with nine of our ten top shareholders (eight meetings were in 2020. person), representing approximately 30% of our shares
outstanding. Our largest shareholder, which cast a vote in favor of our most recent say-on-pay vote, did not accept our invitation for an engagement meeting.
A significant milestone alongkey objective of our 2019 outreach efforts was to listen to our shareholders and better understand their perspectives on our executive compensation program and any concerns that motivated the way waslower level of support for our 2019 say-on-pay proposal. As part of this process, the successful completion ofCommittee also retained Pearl Meyer, a utility base rate caseleading independent compensation consulting firm, to gain further insight on current pay practices and ensure that recognized theour approach going forward effectively balances competitive market practices, shareholder expectations, best-practice governance standards and our business strategy.
significant infrastructure investment made to date. At the same time, substantial investments being made in customer service and organizational and individual development are expected to significantly benefit future performance.
2017 Performance.
30 | |
| South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
Our investors are highly supportive of our overall program design and its significant emphasis on performance-based pay – 70% of our LTI awards are granted using performance-based equity. However, there were some common concerns about one-time recognition (“Special Recognition Award”) awards to then current NEOs and most agreed that the existing connection between pay
Based on the Committee’s reviewand performance could be enhanced. We also gained a better understanding of thewhere we could be more transparent as shareholders sought more clarity in our executive compensation program disclosures. In response, we determinedhave taken multiple steps to address investor concerns, which are summarized below.
Shareholder Feedback | Committee Response | ||
SERP | Shareholders were concerned that SJI provided severance and additional service credits under the SERP to certain NEOs during 2018 and early 2019. | The SERP was closed to new participants in 2016 and will no longer be used to provide enhanced future benefits under any circumstances. Any additional credits received by NEOs during 2018 and early 2019 were part of the Board’s succession planning and leadership transition strategy and were granted in accordance with the Company’s Business Transformation Plan. No NEO will ever receive additional SERP credits at any time in the future. | |
One-Time Awards | Shareholders were concerned that SJI provided Special Recognition Awards to certain then current NEOs during 2018 | The Committee did not provide any one-time Special Recognition Awards to current NEO’s during 2019 and will discontinue the use of such awards to all NEOs in the future.* | |
Pay for Performance Alignment | Shareholders sought a stronger link between pay and stock price performance | With LTI grants starting in 2020, performance-based equity awards will be based on pre-determined relative TSR and absolute cumulative economic earnings growth (weighted equally). However, if the Company does not achieve the threshold relative TSR goal, there will be no payout on the TSR portion of the award and the EPS portion will be capped at 50% of target, regardless of EPS performance. In addition, to better align the design of the LTI plan with market practices and shareholder expectations, starting with 2020 grants, the Committee: | |
• | Adjusted the relative TSR threshold performance level from the 35th percentile to the 25th percentile; and | ||
• | Lowered potential award payout at threshold to 40% from 50% of target, which is slightly below the peer average. | ||
AIP | Shareholders wanted to better understand the mechanics of our annual incentive plan | For 2020, we are continuing to create greater uniformity in the AIP’s structure/mechanics, prioritize corporate goals in line with shareholder interests and strengthen the goal-setting process (see 2020 Annual Incentive Plan Design chart on following page): | |
• | Awards for all NEOs will be weighted: (i) 70% on the satisfaction of certain pre-determined financial metrics; and (ii) 30% on the achievement of certain pre-determined stakeholder metrics measuring corporate performance and set forth in a Company Balanced Scorecard (including customer and other strategic objectives that drive long-term shareholder value). There will not be variation in weightings among the NEOs. | ||
• | The Committee will have the discretion to modify award payouts downward or upward to differentiate and reward individual contributions, based on the accomplishment of certain objectives like those in the Individual Business Unit Balanced Scorecard. | ||
• | Annual Incentive payout will be capped at 100% if the Company’s one-year relative TSR does not achieve the 25th percentile, and is otherwise capped at 150%. | ||
• | The plan will not contain a pool funding component. | ||
Environmental, Safety and Governance (ESG) Metrics | Shareholders would like to see more materiality focused ESG/Corporate Culture metrics in the AIP | The Company Balanced Scorecard under the AIP includes quantifiable safety, diversity and inclusion and employee engagement objectives (see page 39). We also invite you to review our ESG Report, which is available on the Company’s website at http://www.sjindustries.com/esg/home. | |
Executive Compensation Disclosure | Shareholders felt our disclosure could be clearer | We have reorganized our CD&A to better align with best-practice narratives and refreshed the language to enhance readability. | |
* Inducement bonuses and equity grants for FYE 2016, NEO compensation was below market mediannewly hired NEOs and/or pay adjustments (i.e., base salary and/or target incentive award opportunity increases) related to internal promotions are not considered Special Recognition Awards
South Jersey Industries, Inc. - 2020 Proxy Statement | | 31 |
Compensation Discussion & Analysis
2020 Annual Incentive Plan Design
Compensation Philosophy and generally at or below the 25th percentile. Overall, compensation decisions made for fiscal 2017 brought target total pay positioning for our CEO around the 25th percentile of our peers and for our other NEOs generally between the 25th percentile and median of our peers, with positioning varying by individual.Guiding Principles
The executive compensation program remained generally unchanged for fiscal 2017, given that it continuesis designed to align withkeep our senior leadership team focused on the seamless execution of the Company’s short-termstrategic plan and long-term business objectives.
The compensation program fordeliver shareholder value over the NEOs during fiscal 2017 consisted of the following pay elements:
NEO Target Total Compensation
Through the comprehensive review of thelong term. As such, executive compensation program noted above, we determined that for FYE 2016, NEO total compensation was below market median and generally at or below the 25th percentile of the peers for most NEOs. Factoringdecisions are grounded in the market positioning as one input, in addition to consideration of other relevant factors such as an individual’s performance andfollowing principles:
| • | Alignment with Shareholder Interests. Our executive compensation program should emphasize variable compensation, with a focus on equity-based compensation, as a valuable means of aligning the interests of our NEOs with those of our shareholders. |
| • | Accountability for Performance. Our executive compensation program should directly and measurably link pay to business and individual performance with a substantial portion of compensation designed to create incentives for superior performance and meaningful consequences for below target performance. |
potential, the breadth, scope and complexity of the role, internal equity and attraction and retention objectives, the Committee approved compensation increases for Mr. Renna and all other NEOs, as further described below. For further details on NEO target compensation in 2017, refer to the section in this CD&A entitled “Detailed Discussion and Analysis.”
CEO
| • |
| • | Competition Among Peers. Our executive compensation program should enable us to attract and retain key executives by providing a total |
All Other NEOs
Our compensation increases for all other NEOs inphilosophy is supported by the way of salary adjustments ranging from 5.2% to 25.9%, as well as increases in target AIP opportunities for Messrs. Clark and Robbins, and LTI opportunity for Mr. Clark. For FYE 2016, NEO compensation was generally below the 25th percentile of the peers, and these changes were generallyfollowing principal pay elements:
Pay Element | Description |
Compensation Discussion & Analysis
Total Compensation Mix
While there is not a specific formula for the mix of pay elements, there is greater weighting on performance-based compensation elements over fixed pay for all of the NEOs.
Pay for Performance
Actual compensation received in Fiscal 2017 reflects the Company’s performance:
Salary |
Compensation Discussion & Analysis
Compensation Practices
The Company and the Compensation Committee regularly monitor best practices and emerging trends in executive compensation and determine what enhancements should be made to strengthen the compensation program. Below is a list of the compensation
practices that are (or, where noteworthy, are not) incorporated into the current executive compensation program, which are aligned with stockholders’ interests.
Shareholder Say-on-Pay Vote and Company Response
At the Company’s Annual Meeting of Shareholders held in April 2017, shareholders were presented with a vote to approve, on an advisory basis, the compensation paid to the NEOs as disclosed in the “Compensation Discussion and Analysis” section of the proxy statement relating to that meeting (referred to as a “say-on-pay” proposal). Ninety-eight percent of the votes
cast on the say-on-pay proposal voted in favor of the proposal, indicating their strong support of the executive compensation program. Consistent with the Company’s commitment to stockholders’ interests and SJI’s pay-for-performance approach, the Compensation Committee continued to examine the compensation program and make changes where warranted.
Detailed Discussion & Analysis
Executive Compensation Principles
The Company’s executive compensation program applies to all Company Officers, including NEOs and is designed to aid in achieving the Company’s strategic plan while increasing shareholder value. Executive compensation program decisions were made based on the following principles:
Compensation Discussion & Analysis
2017 Compensation Components
The Company’s executive compensation structure consists of base salary, AIP and LTI. AIP and LTI are directly linked to achieving predefined short-term and long-term performance goals.
Descriptions of each component of the compensation program for the NEOs are set forth below:
| Fixed cash | Provides stable market based compensation for role, level of responsibility and experience. Forms basis for other pay elements | |
Annual Incentive Plan (“AIP”) | Annual cash compensation with variable payout | Drives and |
Long-Term Incentives (“LTI”) | LTI is granted 70% in performance-based restricted stock units (“ | PBRSU portion of awards, representing significant majority of total LTI opportunity, requires achievement of threshold level of performance |
32 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
PursuantCompensation Discussion & Analysis
We note that pursuant to SEC regulations, the Summary Compensation Table on page 3845 shows total compensation for our NEOs, including not only the valuation of the major elements of our program listed above, but also other numbers that we do not consider to be a significant driver of our overall pay philosophy. For example, the Summary Compensation Table includes a column for the change in pension value and nonqualified compensation earnings. Theearnings which is an actuarily determined year over year change in the value of a pension balance and clearly not reflective of Committee thought process and decision making within the scheme of our compensation philosophy. For this reason, we included an additional and separate column in the Summary Compensation Table that reflects total compensation minus the change in pension value and nonqualified compensation earnings for our NEOs. For the following reasons, among others, we believe this number is more representative of actual compensation, as it pertains to the 2017 through 2019 fiscal years:
in the Change in Pension Value and Nonqualified Compensation Earnings Column each year will reflect only one year of service. We believeservice for each NEO.
The charts below show the target total direct compensation of our CEO and theour other NEOs for 2019*. These charts illustrate that a majority of NEO total direct compensation is at-risk (76% for our CEO and an average of 62% for our other NEOs).
* Mr. Lynch is excluded from all other NEOs in the tables above, because he retired from the Company April 1, 2019 and, as we believe this number is more representativea result did not receive 12 months of actual compensation.compensation for 2019. See “2019 Executive Compensation Program Elements – Base Salary” for further information.
South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
Specific 2017 pay decisions for each pay element were as follows:The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our shareholders and executives:
Base Salary
What We Do | What We Don’t Do | ||
✔ | Seventy (70) percent of LTI awards are performance-based for the NEOs | ✘ | No excise tax gross ups |
✔ | Three-year performance periods under our LTI awards | ✘ | No repricing or exchange of equity awards without shareholder approval |
✔ | Use a mix of absolute and relative financial performance metrics (including relative TSR) in the incentive plans, to avoid duplication of incentives across AIP and LTI plans. | ✘ | No employment agreements |
✔ | Caps on incentive awards | ✘ | No hedging or pledging of Company stock for employees or directors |
✔ | Use of ESG Metrics in AIP | ✘ | No tax gross ups for perquisites |
✔ | Change-in-control “double-trigger” for equity award vesting and severance benefits | ||
✔ | Robust claw-back policy applying to all incentive awards | ||
✔ | Limited number of perquisites | ||
✔ | Independent compensation consultant | ||
✔ | Robust stock ownership guidelines | ||
The Compensation Committee determines base salaries for the NEOs each year taking into account multiple factors such as the individual’s performance and potential, breadth, scope and complexity of the role, internal equity, as well as market positioning. The Committee also considers the analyses provided by our independent compensation consultants who reaffirmed that for FYE 2016, our position relative to peers was below the median and generally at or below the 25th percentile of the peer group. We made changes to bring compensation closer to median effective January 1, 2017. In addition, in the case of NEOs other than the CEO, the Committee takes into consideration the recommendations of the CEO.
At the beginning of 2017, the Compensation Committee approved a salary increase for Mr. Renna of 15.7% and salary increases for each of the other NEOs ranging from 5.2% to 25.9% effective on January 1, 2017. These salary increases were determined considering the NEOs’ target total pay positioning generally at or below the 25th percentile of the peers, internal equity, succession planning and retention objectives, as well as expansion in individuals’ roles and responsibilities. Following the salary increases, as well as increases to the AIP and LTI opportunities for certain NEOs, as described in the following sections, the CEO’s target total pay positioning was around the 25th percentile of the peers, while the other NEOs’ target total pay positioning was generally between the 25th percentile and median.
| Named Executive Officer | Annual Base Salary at FYE 2016 $Value | Annual Base Salary Effective 1/1/2017 $Value | ||||||
| Michael J. Renna | 605,000 | 700,000 | ||||||
| Stephen H. Clark | 385,000 | 410,000 | ||||||
| Jeffrey E. DuBois | 404,000 | 425,000 | ||||||
| David Robbins Jr. | 270,000 | 340,000 | ||||||
| Kathleen A. McEndy | 330,000 | 360,000 | ||||||
Annual Incentive Plan
Each NEO had a pre-established AIP opportunity for 2017. Actual AIP awards can range from 0 to 150 percent of each NEO’s target AIP opportunity based on the achievement of the performance
metrics discussed below. The 2017 target AIP award opportunity for each Named Executive is set forth below:
Target AIP Awards for the NEOs
| 2016 Target AIP Awards | 2017 Target AIP Awards | |||||||||||||||
| Named Executive Officer | % of Salary | $ Value | % of Salary | $ Value | ||||||||||||
| Michael J. Renna | 85 | % | 514,250 | 100 | % | 700,000 | ||||||||||
| Stephen H. Clark | 60 | % | 231,000 | 70 | % | 287,000 | ||||||||||
| Jeffrey E. DuBois | 70 | % | 282,800 | 70 | % | 297,500 | ||||||||||
| David Robbins Jr. | 60 | % | 162,000 | 70 | % | 238,000 | ||||||||||
| Kathleen A. McEndy | 60 | % | 198,000 | 60 | % | 216,000 | ||||||||||
The AIP drives and rewards short-term performance. The performance metrics used for the NEOs for 2017 were based on various metrics, including SJI core earnings, South Jersey Gas (“SJG”) core earnings, and individual balanced scorecard
objectives. Performance and resulting payouts for each metric were assessed independently. Specific metrics and weightings vary by individual based on role and responsibility as set forth below:
| Core Earnings | ||||||||||||
| Named Executive Officer | SJI | South Jersey Gas (“SJG”) | Balanced Scorecard | |||||||||
| Michael J. Renna | 75 | % | 25 | % | ||||||||
| Stephen H. Clark | 50 | % | 50 | % | ||||||||
| Jeffrey E. DuBois | 50 | % | 50 | % | ||||||||
| David Robbins | 25 | % | 25 | % | 50 | % | ||||||
| Kathleen A. McEndy | 50 | % | 50 | % | ||||||||
Compensation Discussion & Analysis
2017 Core Earnings Pay/Performance Scales and Actual Results
The annual incentive goals and payout scales are set at the beginning of the fiscal year, based on expected levels of performance for that coming year. No payment is made to our named executive officers for the core earnings component of the annual incentive plan unless threshold performance is met. Our core earnings are defined as our economic earnings less investment tax credits and adjusted for non-operational events. The threshold core earnings performance level for SJI in 2017 was set equal to actual SJI core earnings in
2016. Therefore, core earnings performance at or above prior year actual performance was required for any payout for our SJI core earnings component. The target core earnings performance level for SJG in 2017 was set below actual SJG core earnings in 2016 to reflect the 2017 SJG budget. Actual performance and the payouts are interpolated between the levels set forth below.
For SJI core earnings, the goals and payout scales, and actual results for 2017 were as follows:
| SJI Core Earnings Pay/Performance Scale | ||||||||
| Performance Level | SJI Core Earnings $ Value ($M) | Payout as a % of Target | ||||||
| Maximum | ≥106.5 | 150 | % | |||||
| Target | 99.1 | 100 | % | |||||
| Threshold | 90.0 | 50 | % | |||||
| Below Threshold | <90.0 | 0 | % | |||||
| Actual Performance | 96.3 | 85 | % | |||||
SJI core earnings of $96.3 million represents 7% growth over prior year.
For SJG core earnings, the goals and payout scales, and actual results for 2017 were as follows:
| SJG Core Earnings Pay/Performance Scale | ||||||||
| Performance Level | SJG Core Earnings $ Value ($M) | Payout as a % of Target | ||||||
| Maximum | ≥70.0 | 150 | % | |||||
| Target | 67.0 | 100 | % | |||||
| Threshold | 64.0 | 50 | % | |||||
| Below Threshold | <64.0 | 0 | % | |||||
| Actual Performance | 72.6 | 150 | % | |||||
SJG core earnings of $72.6 million represents 5.1% growth over prior year.
2017 Balanced Scorecard Summary Objectives
In addition to the financial performance components used to determine the AIP awards described above, awards to NEOs are based on individual balanced scorecard performance. An individual balanced scorecard (“BSC”) is a strategic performance management tool that has four quadrants that may be used to measure financial and non-financial goals. The BSC measures may include financial, customer, process and learning and growth.
The CEO’s performance highlights for the year included: continuing to execute the long-term strategy, achieving strategic growth milestones, promoting a culture of safety and exceptional customer service and expanded talent and leadership development efforts.
Fiscal 2017 performance highlights for the other NEOs:
Stephen H. Clark
Jeffrey E. DuBois
David Robbins
Compensation Discussion & Analysis
Kathleen A. McEndy
BSC objectives are predefined at or close to the beginning of the calendar year in which they are to be performed. The objectives are tied to business plans for the applicable year. The Compensation Committee approves the objectives for the CEO at the beginning of the year and assesses his performance at the close of the calendar year based on a review of his performance in comparison to his specific goals. The BSC for the other Named Executive Officers is determined based on the CEO’s review of each entity’s business initiatives and individual performance assessments that are then
ratified by the Compensation Committee. The Compensation Committee approves the BSC payment of the AIP for each Named Executive Officer.
Payment for achieving balanced scorecard objectives range from 0% at below threshold, 50% at threshold, 100% at target to 150% at maximum. Payment for achieving results between these levels is interpolated.
The level of performance achieved for each BSC objective is dependent upon the terms of the objective itself, relative to each NEO’s performance. For 2017, our NEOs’ BSC payouts reflect each NEO’s performance versus their individual BSC objectives as described above, as well as our Company’s overall achievements over the year versus our strategic initiatives Based on the performance level achieved, our CEO received a 150% payout on the individual BSC portion of the AIP (weighted 25% of his total AIP payout). Individual BSC payouts for our other NEOs, weighted 50% of their total AIP payouts, were as follows: 125% for Messrs. Clark and DuBois and 150% for Mr. Robbins and Ms. McEndy.
The 2017 AIP target opportunity for each NEO and actual payout, reflecting actual core earnings and individual BSC results is set forth below:
| Named Executive Officer | Target AIP Opportunity ($) | Core Earnings Weighted % Payout | BSC Objectives Weighted % Payout | Total Payout as a % of Target | Total AIP Award Received for 2017 Performance ($) | |||||||||||||||
| Michael J. Renna | 700,000 | 63.75 | % | 37.5 | % | 101.25 | % | 708,750 | ||||||||||||
| Stephen H. Clark | 287,000 | 42.5 | % | 62.5 | % | 105 | % | 301,350 | ||||||||||||
| Jeffrey E. DuBois | 297,500 | 42.5 | % | 62.5 | % | 105 | % | 312,375 | ||||||||||||
| David Robbins | 238,000 | 58.75 | % | 75 | % | 133.75 | % | 318,325 | ||||||||||||
| Kathleen A. McEndy | 216,000 | 42.5 | % | 75 | % | 117.5 | % | 253,800 | ||||||||||||
Long-Term Incentives
Awards Granted in 2017
For 2017, the LTI component ofoversees the executive compensation program for our NEOs consists of 70% performance-based restricted stock (“PBRS”) grants and 30% time-based restricted stock
(“TBRS”)operates pursuant to a charter that complies with a performance condition to satisfySEC rules and the conditions for tax deductibility under Section 162(m)corporate standards of the Code.
2017 PBRS Award
PBRS awards are earned based on the following performance measures:
TSR directly ties to shareholder return and economic earnings growthNew York Stock Exchange (NYSE). The Committee is a financial measure that links awards to longer-term operating performance and financial goals.
The relative TSR goals are set at levels consistent with market practice for similar relative TSR based long-term performance awards and reflect rigorous performance hurdles.
The economic earnings goals are set at levels that require long-term growth for any payouts to be received for these components.
The PBRS goals and payout scales are set at the beginningcomprised of independent, non-employee members of the three-year performance period.Board. The Committee has developed a scheduleworks very closely with its independent consultant and senior management to determineexamine the actual amounteffectiveness of the LTI awards earned, evaluated for each measure separately, as shown below.
Compensation Discussion & Analysis
Specific performance andCompany’s executive compensation program throughout the resulting payout will be interpolated between the levels indicated below. PBRS can be earned from 50% of target shares granted if threshold performance is met and up to 200% of target shares granted if maximum performance
is met. No shares are earned for performance below threshold performance level.
Provided below are the pay-and-performance scales for the 2017 PBRS awards:
| Compound Annual Economic Earnings Growth | ||||||||
| Performance Level | SJI’s 3-Year Compound Annual Economic Earnings Growth | Payout as a % of Target | ||||||
| Maximum | ≥15 | % | 200 | % | ||||
| Target | 9 | % | 100 | % | ||||
| Threshold | 3 | % | 50 | % | ||||
| Below Threshold | <3 | % | 0 | % | ||||
2017 TBRS Award
TBRS grants made in 2017 vest in three equal installments in March 2018, January 2019 and January 2020, subject to achieving the performance condition of at least 7% ROE in 2017. This performance condition is intended to satisfy the conditions
for deductibility under Section 162(m)year. Details of the Code. Actual ROE for 2017 was 7.9%, exceeding the ROE performance condition. The 2017 TBRS grantsCommittee’s authority and responsibilities are subject to continued time-based vesting.
Fiscal 2017 LTI Award Opportunities
The Compensation Committee considered the data provided by the independent compensation consultants,specified in its charter, which reaffirmed the Compensation Committee’s understanding that, for FYE 2016, total compensation for the NEOs was below market median and generally at or below the 25th percentile. In particular, the LTI target
opportunities were below market for 2016. Given the relatively low market pay position and considering pay for performance alignment for some of the NEOs, the Committee approved increases to LTI target opportunities for 2017 for Messrs. Renna and Clark as set forth below.
| 2016 Target LTI | 2017 Target LTI | |||||||||||||||
| Named Executive Officer | % of Salary | $ Value | % of Salary | $ Value | ||||||||||||
| Michael J. Renna | 170 | % | 1,028,500 | 200 | % | 1,400,000 | ||||||||||
| Stephen H. Clark | 85 | % | 327,250 | 100 | % | 410,000 | ||||||||||
| Jeffrey E. DuBois | 100 | % | 404,000 | 100 | % | 425,000 | ||||||||||
| David Robbins | 100 | % | 270,000 | 100 | % | 340,000 | ||||||||||
| Kathleen A. McEndy | 85 | % | 280,500 | 85 | % | 306,000 | ||||||||||
Details with respect to the number of shares, stock prices on the date of grant and grant date values for the NEOs’ 2017 LTI
grants are provided in the “Grants of Plan-Based Awards and Outstanding Equity Awards” tables.
Compensation Discussion & Analysis
Fiscal 2015 LTI Grant Payout
The LTI goals and payout scales are set prior to the beginning of the upcoming three-year performance cycle. Specifically, for the LTI performance cycle ended in fiscal 2017, goals were set prior to the beginning of fiscal 2015 and were based 40% on three-year TSR vs. the peer group, 30% on 3-year compound annual EPS growth, and 30% on 3-year average ROE. The LTI goals were set at appropriate
levels that fully supported the pay-for-performance philosophy. In addition, the relative goals are designed to be consistent with typical market practices among companies also setting LTI goals relative to peers.
For relative TSR, the goals and payout scales, and actual results for 2017 were as follows:
For EPS growth, the goals and payout scales, and actual results for 2017 were as follows:
| Performance Level | SJI EPS CAGR | Payout as a % of Target | ||||||
| Maximum | 10.0 | % | 200 | % | ||||
| Target | 6.0 | % | 100 | % | ||||
| Threshold | 2.0 | % | 50 | % | ||||
| Below Threshold | <2.0 | % | 0 | % | ||||
| Actual Performance – EPS CAGR | –7.8 | % | 0 | % | ||||
For ROE, the goals and payout scales, and actual results for 2017 were as follows:
| Performance Level | SJI ROE Average | Payout as a % of Target | ||||||
| Maximum | 15.0 | % | 200 | % | ||||
| Target | 11.0 | % | 100 | % | ||||
| Threshold | 9.0 | % | 50 | % | ||||
| Below Threshold | <9.0% | 0 | % | |||||
| Actual Performance – ROE Average | 9.4 | % | 60.2 | % | ||||
For the three-year performance cycle ended December 31, 2017 (Fiscal 2015 PBRS award), the total weighted payout based on the performance above is 18.1%.
Benefits and Perquisites
Each of the NEOs is eligible for other employee benefit plans generally available to all employees (e.g., qualified pension plan, deferred compensation plan, major medical and health insurance,
disability insurance, 401(k) Plan) on the same terms as all other employees. In addition to those benefits, NEOs are eligible for the following benefits:
Non-Qualified Supplemental Retirement Plan (the “SERP”)
Non-Qualified Performance-Based Defined Contribution Plan (the “PBDCP”)
Compensation Discussion & Analysis
Supplemental Saving Plan Contributions
Disability Insurance
Group Life Insurance
Supplemental Survivor’s Benefit
Other Benefits and Perquisites
Approach for Developing the Executive Compensation Program
Role of the Compensation Committee. The Compensation Committee
SJI’s executive has the power and authority to oversee our compensation program is administered by the Committee.policies and programs and makes all compensation-related decisions for our NEOs. The Committee members meettakes into account recommendations from its independent compensation consultant as well as the New York Stock Exchange’s independence standards. In determiningCEO (other than with respect to his own compensation); however, the independenceCommittee ultimately has final approval over all compensation decisions for all of our executive officers other than the CEO. The CEO does not participate in the deliberations of the Committee regarding his own compensation. Independent members of the Board make all final determinations regarding CEO compensation.
The Compensation Committee seeks to ensure that the Board considers all factors specifically relevanttotal compensation paid to determining whether the director has a relationship to the Company thatour NEOs is material to that director’s ability to be independent from management in connectionaligned with the dutiesshareholder interests, is fair, reasonable and competitive, provides an appropriate balance of a Compensation Committee member, including: (i) the source of the director’s compensation, including any consulting, advisory or other compensation fees;base pay and (ii) any affiliate relationships between the director and the Company or any of its subsidiaries. In accordance with its charter, the Committee sets the principles and strategies that guide the design of the employee compensation and benefit programs for the NEOs.
The Committee annually evaluates the CEO’s performance. Taking performance into consideration, along with recommendations from the compensation consultant (discussed below), the Committee
then establishes and approves compensation levels for the CEO, including annual base salary and AIPshort-term and long-term stock incentive awards. The Committee also reviews recommendations from the CEO regarding the CEO’s evaluation of,incentives, and pay recommendations for, the other NEOs. The Committee evaluates and approves the recommendations, as appropriate.does not cause unnecessary risk-taking. All performance goals for the NEOs’ AIP awards are established at the beginning of each year for use in the performance evaluation process.
The Role of the CEO. The CEO annually reviews the performance of, and makes recommendations regarding, each of our NEOs (other than himself) to the Committee. The conclusions reached and recommendations based upon these reviews, including with respect to salary adjustment and annual and long-term incentive compensation plan target and actual payout amounts and performance metrics, are presented to the Committee. The Committee reviews direct compensation (base salary, AIPhas the discretion to modify any recommended grant sizes and performance targets and, within the confines of the annual and long-term incentives) annually. incentive compensation plans, the payouts to our executive officers.
The Role of the Independent Consultant. The Compensation Committee meets regularlyhas the authority to engage and retain an independent compensation consultant to provide independent counsel and advice. At least annually, the Committee formally conducts an evaluation as to the effectiveness of the independent compensation consultant and periodically runs a request for proposal process to ensure the independent compensation consultant is meeting its needs. For 2019, the Committee continued its engagement with Clearbridge Compensation Group, LLC (“ClearBridge”) as the independent compensation consultant for matters related to executive compensation, including the determination of 2019 salaries and the making of 2019 annual and long-term incentive grants in executive sessions without membersApril 2019. ClearBridge was retained through May 2019, at which time the Committee retained the services of management presentPearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant for the remainder of 2019.
Pearl Meyer was engaged to evaluatesupport the Compensation Committee’s efforts to conduct a comprehensive analysis of the current executive compensation program, and reports regularlywhich was in direct response to shareholder feedback following the BoardCompany’s 2019 Annual Meeting of Directors on its actions and recommendations.Shareholders. Pearl Meyer was selected as the independent consultant after an extensive review process conducted by the Committee.
34 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Discussion & Analysis
The following services were provided by the independent compensation consultants in 2019:
Consultant | Services Provided | |
ClearBridge | • | Review and recommendation regarding the compensation peer group for use in 2019 |
• | Annual competitive market assessment and recommendations for 2019 compensation decisions | |
• | Review, design and recommendations for the 2019 annual and long-term incentive plans, including all grants thereunder | |
• | Other ad-hoc requests related to executive compensation market practices | |
Pearl Meyer | • | Review and recommendation regarding the peer group for use in 2020 executive compensation determinations |
• | Annual competitive market assessment and recommendations for 2020 compensation decisions | |
• | Review, design and recommendations for the 2020 annual and long-term incentive plans | |
• | Other ad-hoc requests related to executive compensation market practices | |
The Compensation Committee also reviews indirect compensation (non-qualified retirement plan and other benefits and change in control agreements) on a 3-yearthree-year cycle, or more frequently, if warranted, based on market conditions and the recommendation of the independent compensation and benefits consultant.
Role During November of Independent Consultants
To assist the Committee in its evaluation of the executive compensation program for 2017, the Committee retained an independent compensation consultant, ClearBridge Compensation Group, LLC (“ClearBridge”). ClearBridge’s role as independent advisor to the Committee includes:
Compensation Discussion & Analysis
During 2017, in connection with its review of South Jersey Industries’ ExecutiveSJI’s executive benefit programs, the Committee also retained an independent benefits consultant, Pinnacle Financial Group (“Pinnacle”) to examine all components of
the executive benefits program and provide consulting services foran analysis of how the nonqualified deferred compensation planbenefits compare with peers and the supplemental long term disability plan. Pinnacle assisted with the plan design, financial analysis, record-keeper selection, education and communication with plan eligibles, and plan implementation.broad market.
The Compensation Committee reviewed its engagementengagements with ClearBridge, Pearl Meyer and Pinnacle, including based on the factors set forth in the corporate governance standards of the New York Stock Exchange, and believesdetermined that there are no conflicts of interest between these firms and the Committee. In reaching this conclusion, the Committee considered the factors regarding compensation advisor independence set forth in the SEC rule effective July 27, 2012 and the NYSE proposed listing standards released on September 25, 2012 that were adopted by the SEC on January 11, 2013.
2019 Compensation Peer GroupGroup.
Along with reviewing the executive compensation program, the Committee reviews and determines the appropriate peer group companies for benchmarking purposes. Consistent with the goal of providing competitive compensation, the executive compensation programs are compared to those programs in place at identified peer
companies. For 2017,the purposes of setting 2019 compensation levels, the Committee,
in consultation with its independent consultant, ClearBridge, selected a peer group that was comprised of 1214 similarly sized gas and multi-utilityother utility companies with comparable revenue and market capitalization. The peer group consists of the following companies:
Atmos Energy Corp. | Avista Corp. | Black Hills Corporation | |
National Fuel Gas Co. | New Jersey Resources Corp. | ||
Northwest Natural Gas Co. | |||
NorthWestern Corp. | ONE Gas, Inc. | PNM Resources, Inc. | |
Portland General Electric Co. | Southwest Gas | Spire, Inc. | |
Vectren Corp.* | WGL Holdings, Inc.* |
| * | Vectren Corp. | was acquired by CenterPoint Energy on February 1, 2019; WGL Holdings, Inc. was acquired by AltaGas Ltd. on July 6, 2018 |
This peer group was consistent with the peer group used in 2016, with the following exceptions: ONE Gas, Inc.2018, except that Atmos Energy Corp. was added given its size and business relevance and UIL Holdings was removed following its acquisition by Iberdrola USA. For fiscal 2018, the peer group was further revised to add National Fuel Gas Company, PNM Resources, Inc., and Portland General Electric Company given their size and business relevance and remove Piedmont Natural Gas Co. following its acquisition by Duke Energy, and Questar Corporation following its acquisition by Dominion Resources.relevance.
The Company used the above peer group for purposes of benchmarking salary, AIP, LTI, total direct compensation (salary plus AIP and TDC. The Committee relied on the peer group for all formal benchmarking. LTI opportunities) and executive benefits.
The Committee believes that the peer group data and industry compensation
studies give the Committee an independent and accurate view of the market “value” of each position on a comparative basis. While the Company does not target any particular percentile at which to align pay, the Committee uses the peer group 50th percentilemedian as a reference point when assessing compensation levels. The purpose of referencing the 50th percentile is to inform the Company of the relevant competitive market when making pay decisions and enable the Company to attract and retain qualified executives while at the same time protecting shareholder interests. Although the 50th percentile is used as a reference point, actualActual levels of pay depend on a variety of factors such as experience and individual and Company performance. Based
South Jersey Industries, Inc. - 2020 Proxy Statement | | 35 |
Compensation Discussion & Analysis
2019 financial performance is summarized below:
*Annex A includes a reconciliation of our income from continuing operations and earnings per share from continuing operations to
Economic Earnings and Economic Earnings per share (in thousands, except per share data). Income from continuing operations and earnings per share from continuing operations are the most directly comparable measures reported under accounting principles generally accepted in the United States (“GAAP”)
Other key business and operational highlights for 2019 are as follows:
Regulatory Initiative Growth. SJI continued to focus efforts in 2019 on growing earnings from regulated assets and investments. In June, Elizabethtown Gas received authorization from the New Jersey Board of Public Utilities (NJBPU) for a $300M, five-year infrastructure investment program. Additionally, in November the NJBPU approved a base rate change for Elizabethtown Gas – reflecting substantial capital investments made to enhance system safety, reliability and resiliency. With this informationsettlement, annual revenues from ClearBridgeElizabethtown Gas base rates are expected to increase by $34 million.
Reshaping SJI. In December 2019, SJI entered into agreements to sell both its Marina Thermal Facility, in Atlantic City, NJ and Elkton Gas, in Elkton, MD. These asset sales support our strategic plan – focusing investments, energy and resources on our core utilities while also helping strengthen our balance sheet in support of further opportunities for innovation and growth. Also of note, SJI continued developing the performance evaluations (See “Rolebusiness intelligence and data resources vital to streamlining business operations and ensuring that needed process improvements and efficiencies are identified and pursued.
Business Integration. In our first full year operating Elizabethtown Gas, we’ve worked to position the business for success as transition service agreements approach their end, including significant efforts to integrate our people, processes and technologies. We’ve also successfully increased the number of customer service representatives based in New Jersey, built an Elizabethtown Gas dispatch team, built the space and technology demanded for them to help keep customers safe and made notable progress in system development projects that will allow this business to stand on its own without transition services in early 2020.
New Energy Investments. As part of our commitment to sustainability, SJI invested in new, sustainable energy sources in 2019. In August, South Jersey Gas entered into a renewable natural gas environmental attributes-based supply agreement and in November, South Jersey Gas began using certified responsible natural gas in its system. As part of the renewable natural gas agreement, South Jersey Gas is displacing traditional natural gas dispensed at its owned and operated CNG stations with renewable natural gas sourced from an out of state landfill biogas project. The renewable natural gas supply will further reduce greenhouse gas emissions for all CNG fleets using the stations, including the South Jersey Gas fleet. Additionally, our certified responsible natural gas, provides us with a solution to deliver the same quality of service to our customers while reducing our environmental impact. The product is certified and rated based on factors such as emissions, well integrity and community engagement. These investments reinforce the foundation for a sustainable business and energy future for the region.
36 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Committee”Discussion & Analysis
The Compensation Committee determines base salaries for more detail),the NEOs each year accounting for multiple factors, including breadth, scope and complexity of the role, internal equity, succession planning and retention objectives, market positioning and budget. The Committee also considers the analyses provided by our independent compensation consultant.
At the beginning of 2019, the Committee determinesapproved salary increases for Mr. Renna, Mr. Robbins and Ms. McEndy of approximately 2% to continue to align better their base salaries with the market and recognize their individual performance in their roles. Ms. Orsen received a 22.4% increase to her base salary target AIP, LTIthat reflected her additional responsibilities she assumed including overseeing internal audit, corporate secretary and TDCgovernment affairs. Ms. Orsen is also responsible for managing outside counsel relationships. Mr. Lynch was eligible to receive certain compensation for his service through March 31, 2019, including (i) a pro-rated salary of $91,873, (ii) a pro-rated cash grant under our Annual Incentive Plan which paid out in 2020 in the amount of $45,152, (iii) his company car, 401(k) match and certain group life insurance premium payments, (iv) a pro-rated payout of all outstanding TBRSUs and PBRSUs, based on actual performance achieved and (v) certain medical, SERP and other retirement benefits, each NEO.
Severance/Changeas further described in Control Agreementsthe “Executive Compensation Tables—Summary Compensation Table,” “Executive Compensation Tables—Grants of Plan-Based Awards,” “Executive Compensation
SJI has not entered into separate employment agreements with any employee, including any of the NEOs. Instead, the Company has an Officer Severance Plan to provide certain benefits to Company Officers, including the NEOs, upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control. The Company has also adopted separate Tables—Change in Control (“CIC”) agreements which provide the Company’s senior executive officers, including the NEOs, with certain severance benefits upon a qualifying termination following a change in control. Further details regarding the severance and change in control benefits are provided under the “Change in Control Agreements and Other Potential Post-Employment Payments” section.Payments—Retirement” and “Executive Compensation Tables—All Other Compensation Table.” The determination to provide Mr. Lynch with the compensation described above upon his retirement from the Company was made in March 2019 and as part of a larger reorganization that provided the company with a significant and sustained reduction in O&M. After contemplating the results of last years “say-on-pay” vote, and conducting extensive shareholder outreach, the Compensation Committee determined that it would no longer provide its executive officers with Early Retirement Incentive Program equivalent benefits or enhanced retiree medical care upon retirement from the Company.
Ms. Cielo Hernandez. In addition to Ms. Hernandez’s regular total direct compensation (base salary and target annual and long-term incentive opportunities) package described in the tables below, she received a sign-on package as an inducement to forfeit certain compensation from her previous employer, which included: (i) a inducement bonus of $75,000 which was subject to forfeiture if she voluntarily terminated her employment or was terminated from SJI for Cause before January 2, 2020; (ii) an inducement restricted stock grant valued at $100,000 vesting in two equal installments on the first and second anniversaries of hire; and (iii) up to $75,000 for relocation, consistent with our Company policy.
NEO | Annual Base Salary at FYE 2018 | Annual Base Salary Effective January 1, 2019 | Percent Increase (Approximate) | ||||
Michael J. Renna | $ | 750,000 | $ | 765,000 | 2.0% | ||
Cielo Hernandez(1) | n/a | $ | 390,000 | n/a | |||
David Robbins Jr. | $ | 385,000 | $ | 392,700 | 2.0% | ||
Kathleen A. McEndy | $ | 371,000 | $ | 378,500 | 2.0% | ||
Melissa J. Orsen | $ | 290,000 | $ | 355,000 | 22.4% | ||
| (1) | Ms. Hernandez was hired as Senior Vice President and Chief Financial Officer on January 14, 2019. See “CD&A at-a-Glance—2019 Named Executive Officers—Onboarding Ms. Hernandez.” |
The Compensation Committee also determined that there would be no annual base salary increases for any of the NEOs for 2020.
Effective with the 2015 LTI grants, equity award agreements provide for “double trigger” vesting upon a change in control. Further,Target Opportunities. Target annual incentive opportunities under the 2015 Omnibus Equity Compensation Plan,AIP are expressed as a percentage of base salary and are established based on the NEO’s level of responsibility and ability to impact the Company’s overall results. The Committee also considers market data in setting target award amounts. Actual AIP
awards can range from 0% to 150% of each NEO’s target AIP opportunity (subject to a threshold of 50%) based on the event of a termination by the Company without Cause, or if the employee terminates employment for Good Reason, in either case within 12 months following a change in control, outstanding awards will become fully vested asachievement of the date of such termination. However, if the vesting of any suchperformance criteria discussed below. The 2019 target AIP award is based on performance, the applicable Award Agreement specifies how the award will become vested. See the “Change in Control Agreements and Other Potential Post-Employment Payments” section for further details.opportunities are set forth below:
2019 Target AIP Award | ||||||
NEO | % of Salary | $ Value | ||||
Michael J. Renna | 100 | % | $ | 765,000 | ||
Cielo Hernandez | 60 | % | $ | 234,000 | ||
David Robbins Jr. | 70 | % | $ | 274,890 | ||
Kathleen A. McEndy | 60 | % | $ | 227,100 | ||
Melissa J. Orsen | 60 | % | $ | 213,000 | ||
South Jersey Industries, Inc. - | 37 |
Compensation Discussion & Analysis
As described below, actual (final) AIP awards for each NEO in 2019 were driven by a comprehensive analysis of financial performance of the Company and individual performance of the NEO tied to certain strategic goals. Specific financial and individual metrics and weightings varied in 2019 by the individual NEO based on role and responsibility. Additionally, for 2019, NEO awards under the AIP were designed to be paid out of a larger cash pool. Following the
close of the 2019 fiscal year, the Compensation Committee determined the total amount to be allocated to the final AIP pool based on its assessment of achievements relative to certain pre-established financial goals and certain strategic corporate (rather than individual) goals set forth in a Company Balanced Scorecard. The below graphic shows the design of the AIP for 2019.
2019 Financial Performance Metrics. The primary metric by which financial performance for determining the AIP pool was economic earnings. Local Distribution Companies with significant wholesale marketing businesses, such as SJI, typically use a non-GAAP financial measure because such a measure eliminates unrealized gains and losses from our derivative and storage activities, as well as certain transactions that could make period-to-period comparisons confusing. We believe that economic earnings provide investors with a clear picture of operating performance and profitability and that such a non-GAAP measure is both commonly used and widely accepted by institutional investors, rating agencies and equity analysts. A schedule reconciling non-GAAP economic earnings to GAAP Earnings is available in Annex A.
Why Economic Earnings? | |
✔ | It is tracked and well understood by investors, rating agencies and equity analysts in their valuations of our business |
✔ | It reinforces our objectives for sustained long-term performance and shareholder value creation |
✔ | It provides our management team with clear line of sight to long-term financial results and allows us to effectively manage our business |
38 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Discussion & Analysis
Definition of Economic Earnings. We employ a hedging strategy related to our non-regulated lines of business including gas storage and gas transportation derivative trading. Economic earnings exclude the mark to market valuation of the derivative side of our gas storage and gas transportation hedging activities. Only considering the change in market value of the derivative and not the physical gas can lead to large variations on our actual earnings between periods. Economic earnings also exclude the impact of transactions, contractual arrangements or other events where management believes period to period comparison of SJI’s
operations could be difficult or potentially confusing. Examples of amounts excluded are impairment charges, the impact of pricing disputes with third parties, costs to acquire Elizabethtown Gas Company and Elkton Gas Company, costs to prepare to exit the Transaction Services Agreement (TSA) with Southern Company Gas, costs incurred and gains recognized on the sale of assets, customer credits related to the acquisition of ETG and ELK, ERIP costs, severance and other employee separation costs and the impact of Tax Cuts and Jobs Act (Tax Reform). For further information see Annex A.
The economic earnings goals and payout scales are set at the beginning of the fiscal year, based on expected levels of performance for that coming year. The economic earnings goals and payout scales, and actual results for 2019 were as follows:
Performance Range (Millions) | ||||||||||||||||||
Payout as a % of Target (2) | Below Threshold 0% | Threshold 50% | Target 100% | Maximum 150% | Actual Results ($) | Actual Payout (as a % of Target) | ||||||||||||
SJI Economic Earnings(1) | $ | <91.8 | $ | 91.8 | $ | 102.0 | $ | 112.2 | $ | 103.0 | 105 | % | ||||||
SJIU Economic Earnings | $ | <108.8 | $ | 108.8 | $ | 114.5 | $ | 120.2 | $ | 122.2 | 150 | % | ||||||
| (1) | If SJI Economic Earnings does not meet its target performance level, then the Company Balanced Scorecard will not be funded above 100%. |
| (2) | Actual results are determined based on straight line interpolation between threshold and maximum. There is no payout on the financial performance portion of the AIP award if performance results are below threshold. |
2019 Company Balanced Scorecard. The Company Balanced Scorecard was introduced in 2019 to strengthen our focus on quantifiable ESG-related metrics in our incentive plan — with an emphasis on safety and corporate culture. Below are the scorecard goals and actual results for 2019.
Goal | ||||||||||||||||||
Company Balanced Scorecard Metrics | Weight | Below Threshold | Threshold | Target | Stretch | Actual Results | ||||||||||||
Safety | ||||||||||||||||||
Days Away, Restrictions & Transfers (DART) Injury Rate | 20 | % | >10 | 10 | 8 | ≤6 | 10 | |||||||||||
Customer Growth | ||||||||||||||||||
Customer Additions – SJG & ETG | 20 | % | <9,300 | 9,300 | 9,705 | ≥9,900 | 9,517 | |||||||||||
Customer Satisfaction | ||||||||||||||||||
Achieve top tier ranking as measured by JD Power CSI scores for SJG & ETG | 20 | % | <725 | 725 | 730 | ≥735 | 743 | |||||||||||
System Reliability Investment | ||||||||||||||||||
Replace 200 miles of pipe by 12/31/2019 | 20 | % | <190 | 190 | 200 | ≥210 | 207 | |||||||||||
Culture & Communication | ||||||||||||||||||
Deepen Commitment to Diversity and Inclusion as measured by participant impact survey following Unconscious Bias Training | 10 | % | <3 | 3 | 3.5 | >4 | 4.73 | |||||||||||
Raise Level of Employee Engagement as measured by improvement in key survey targets | 10 | % | <10 | % | 10 | % | 25 | % | ≥50 | % | 70 | % | ||||||
Payout as a % of Target | 0 | % | 50 | % | 100 | % | 150 | % | 112.5 | % | ||||||||
2019 Final AIP Pool Funding for NEOs. Based on the actual financial performance and Company Balanced Scorecard results described above, the AIP pool for NEOs was initially funded at 109.7% of target. The Compensation Committee could use its business judgment to adjust the AIP pool funding based on a
qualitative assessment of Company performance (including, strategic initiatives, customer satisfaction, safety performance leadership, or any other factors the Committee deems appropriate). However, for 2019, the Committee did not adjust the AIP pool funding for the NEOs.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 39 |
Compensation Discussion & Analysis
2019 Individual Balanced Scorecards. In addition to being evaluated against the financial performance metrics described above, NEOs were able to earn a portion of their AIP award based on performance achieved against Individual Balanced Scorecard objectives. Each NEO had his or her own Individual Balanced Scorecard with specific measures tied to overall objectives in the following four categories that were weighted equally and directly linked to our business strategy and reinforce our commitment to sustainability:
Category | Weight |
Financial/Strategic: focus on creating long-term shareholder value through strategic actions that improve the quality of earnings, strengthen the balance sheet, and maintain a low to moderate risk profile | 25% |
Customer: drive customer satisfaction through investment in expanding and modernizing our utility infrastructure and regulatory innovation that provides safety, reliability, value and certainty to our customers | 25% |
Internal Process: improve business process and results through operational efficiency, continuous improvement and thoughtful investments in technology, people and communications — with safety and security underpinning everything we do | 25% |
Culture: expand and develop managerial and leadership competencies and build a sustainable pipeline of leadership talent, while deepening our commitments to Diversity & Inclusion, employee engagement and social/environmental responsibility | 25% |
Individual Balanced Scorecards for each NEO were developed and approved by the Compensation Committee at or close to the beginning of 2019. Specific measures in the NEOs’ scorecards were based on their roles, responsibilities and area of operation. At the end of the year, the NEOs were evaluated individually and relative to their specific measures. Award recommendations for the NEOs (other than the CEO) were determined based on the CEO’s
review of each business units’ achievements and individual performance assessments. The Compensation Committee reviewed the CEO’s recommendations and approved the associated payouts for each NEO. The CEO’s performance was assessed, and his award level was approved by the Compensation Committee relative to his Individual Balanced Scorecard.
For 2019, individual performance achievements reflected each NEO’s performance versus their Individual Balanced Scorecard in each of the categories as described above.
NEO | Summary of Key Individual Balanced Scorecard Achievements | Individual Results (as a % of Target) | |
Michael J. Renna President and Chief Executive Officer | • | Led strategic transformation efforts by leveraging people, process and technology to reduce costly redundancies, inefficiencies and misalignment resulting in a leaner, more efficient and lower cost organization | 112.5% |
• | Redirected strategy and repositioned SJI to best align with New Jersey and the region’s Energy Policy | ||
• | Led SJI through significant transition and uncertainty to performance at the high end of our guidance and above consensus | ||
Cielo Hernandez Senior Vice President and Chief Financial Officer | • | Improved monthly Operating Results Reviews to monitor and drive financial performance | 116% |
• | Aligned talent with business requirements by strengthening the Finance Business Partner model | ||
• | Automated several key Financial processes to support operational efficiency goals | ||
David Robbins Jr. Senior Vice President and President SJI Utilities, Inc. | • | Improved key customer satisfaction metrics | 116% |
• | Led organizational structure at SJG to support Business Transformation | ||
• | Improved Manager Effectiveness related scores on the Employee Engagement Survey | ||
Kathleen A. McEndy Senior Vice President and Chief Administrative Officer | • | Strengthened procurement RFP process resulting in significant savings | 105% |
• | Launched an HR self-service technology resulting in approved reporting | ||
• | Completed inaugural talent development programs for high potential employees | ||
Melissa J. Orsen Senior Vice President and General Counsel | • | Significantly reduced external legal fees | 118% |
• | Assisted in completion of divestitures | ||
• | Educated state and local officials about our customer and business needs | ||
40 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Discussion & Analysis
2019 AIP Final Award Payouts. Based on the final AIP pool funding and performance achievements described above, final AIP award payouts for each of the NEOs were as follows:
CEO | AIP Target Award Opportunity ($) | SJI Financial Payout 75% Weighting | Individual Payout 25% Weighting | Final Award Payout ($) | Final Award Payout (%) (as a % of Target) | ||||||||||
(AIP Target x Weighting x Results) | (AIP Target x Weighting x Results) | (Financial + Individual) | |||||||||||||
Michael J. Renna | $ | 765,000 | $ | 602,438 | $ | 215,156 | $ | 817,594 | 106.9 | % | |||||
Other Corporate NEOs | AIP Target Award Opportunity ($) | SJI Financial Payout 50% Weighting | Individual Payout 50% Weighting | Final Award Payout ($) | Final Award Payout (%) ( as a % of Target) | ||||||||||
(AIP Target x Weighting x Results) | (AIP Target x Weighting x Results) | (Financial + Individual) | |||||||||||||
Cielo Hernandez | $ | 234,000 | $ | 122,850 | $ | 135,720 | $ | 258,570 | 110.5 | % | |||||
Kathleen A. McEndy | $ | 227,100 | $ | 119,228 | $ | 119,227 | $ | 238,455 | 105.0 | % | |||||
Melissa J. Orsen | $ | 213,000 | $ | 111,825 | $ | 125,670 | $ | 237,495 | 111.5 | % | |||||
SJIU NEO | AIP Target Award Opportunity ($) | SJI Financial Payout 50% Weighting | Individual Payout 50% Weighting | Final Award Payout ($) | Final Award Payout (%) (as a % of Target) | |||||||||||||
(AIP Target x Weighting x Results) | (AIP Target x Weighting x Results) | (Financial + Individual) | ||||||||||||||||
SJI (25%) | SJIU (25%) | |||||||||||||||||
David Robbins Jr. | $ | 274,890 | $ | 72,159 | $ | 103,084 | $ | 159,436 | $ | 334,679 | 121.8 | % | ||||||
For a discussion of the one-time signing cash bonus made to Ms. Hernandez in 2019 in connection with her appointment as our new CFO, please see “2019 Executive Compensation Program Elements—Base Salary—Ms. Cielo Hernandez”. For changes
made to the design of our AIP for 2020 awards, including the cap on AIP payout based on the Company’s one-year relative TSR performance, see “Board Responsiveness to Shareholder Feedback—What We Heard and How We Responded—AIP.”
Long-Term Incentive (LTI) Opportunities
Awards Granted in 2019. Equity compensation directly aligns the interests of the NEOs with those of our shareholders. In 2019, the Company granted long-term equity incentives as follows:
Type of Equity Award | Weight | Description |
Performance-Based Restricted Stock Units (PBRSUs) | 70% | 50% vest based on 3-year relative TSR (vs. peers); 50% vest based on 3-year Earnings Per Share (EPS) growth Promotes continued focus on both short- and long-term performance. |
Time-Based Restricted Stock Units (TBRSUs) | 30% | Vest ratably (1/3rd) over three years; TBRSUs support the Company’s leadership retention objectives and foster a culture of ownership |
South Jersey Industries, Inc. - 2020 Proxy Statement | | 41 |
Compensation Discussion & Analysis
Fiscal 2019 LTI Award Opportunities. Target long-term equity incentive awards are expressed as a total dollar value based on a percentage of the NEO’s base salary. For awards granted in 2019, the specified percentage of each NEO’s base salary used for purposes of determining the amount of long-term equity incentive awards granted and the corresponding dollar values are shown in the table below.
Details with respect to the number of shares, stock prices on the date of grant and grant date values for the NEOs’ 2019 LTI grants are provided in the “Grants of Plan-Based Awards and Outstanding Equity Awards” tables.
NEO | 2019 Target LTI Awards ($ Value) | |||||||||||
% of Salary | PBRUs | TBRSUs | Total | |||||||||
Michael J. Renna | 225 | % | $ | 1,204,875 | $ | 516,375 | $ | 1,721,250 | ||||
Cielo Hernandez(1) | 100 | % | $ | 273,000 | $ | 117,000 | $ | 390,000 | ||||
David Robbins Jr.(2) | 125 | % | $ | 343,613 | $ | 147,262 | $ | 490,875 | ||||
Kathleen A. McEndy | 85 | % | $ | 225,208 | $ | 96,517 | $ | 321,725 | ||||
Melissa J. Orsen | 85 | % | $ | 211,225 | $ | 90,525 | $ | 301,750 | ||||
| (1) | In conjunction with Ms. Hernandez’s new-hire arrangement (see page 29 of this CD&A), she also received a $100,000 inducement equity grant of TBRSUs, which is not included in the table above. |
| (2) | The Compensation Committee approved a 25% increase to Mr. Robbins Jr.’s target award opportunity as a percentage of salary for 2019 in recognition of the increased scope of his responsibilities following the acquisition of Elizabethtown Gas and Elkton Gas and his promotion to President of SJIU. Further, the increase in Mr. Robbins’ equity compensation more directly aligns his compensation with our shareholders as the regulated utility businesses he oversees represents more than 75% of our earnings. |
A Closer Look at 2019 PBRSUs. PBRSU awards are earned based on the achievement of certain financial performance measures earned upon the completion of a three-year performance period, with vesting occurring once at the end of the three-year period. These measures are determined at the beginning of the three-year period and are as follows:
Relative TSR directly ties to shareholder return, and EPS growth is a financial measure that links awards to longer-term operating performance and financial goals. The relative TSR goals are set at levels consistent with market practice for similar relative TSR based long-term performance awards and reflect rigorous performance hurdles. The EPS growth goals are set at levels consistent with our long-term financial plan and guidance. For the 2019 awards, the EPS growth is measured based on SJI’s economic earnings per average diluted shares outstanding. For a discussion of economic earnings, see “2019 Executive Compensation Program Elements—Annual Incentives— Funding of 2019 AIP Pool.”
The PBRSU goals and payout scales are set at the beginning of the three-year performance period. The Committee has developed a schedule to determine the actual amount of the LTI awards earned, evaluated for each measure separately, as shown below. Specific performance and the resulting payout are interpolated on a straight-line basis between the levels indicated below. PBRSUs can be earned from 50% of target shares granted if threshold performance is met and up to 200% of target shares granted if maximum performance is met. No shares are earned for performance below threshold performance level and any performance over the maximum will result in a 200% payout. Provided below are the pay-and-performance scales for the 2019 PBRSU awards:
Performance Measure | <Threshold | Threshold | Target | Stretch | Maximum |
3-Year TSR Ranking v. Peers | <35th percentile | 35th percentile | 50th percentile | 80th percentile | 99th percentile |
3-Year EPS Growth | <5.5% | 5.5% | 8% | 9% | 10% |
Payout as a % of Target | 0% | 50% | 100% | 150% | 200% |
Payouts on 2017 PBRSU Awards. The LTI goals and payout scales are set prior to the applicable three-year performance cycle. For the LTI performance cycle ended in fiscal 2019, goals were set prior to the beginning of fiscal 2017 and were based 50% on three-year TSR vs. the peer group and 50% on 3-year compound annual economic earnings. The goals, payout scales and actual results for the 2017-2019 PBRSU awards were as follows:
Performance Measure | <Threshold | Threshold | Target | Stretch | Maximum |
3-Year TSR Ranking v. Peers | <35th percentile | 35th percentile | 50th percentile | 80th percentile | 99th percentile |
3-Year Economic Earnings Growth | <3% | 3% | 9% | 12% | 15% |
Payout as a % of Target | 0% | 50% | 100% | 150% | 200% |
For the 2017-2019 performance period, the Company achieved the 0th percentile with respect to relative TSR, resulting in a 0% payout. Results for 3-year economic earnings growth were 0.1%, resulting in a 0% payout.
The total weighted payout based on the performance above was 0% of target. The NEOs who were granted PBRSUs in 2017 received no payouts of the Fiscal 2017 PBRSUs. Ms. Hernandez
and Ms. Orsen were not with the Company in 2017 and did not receive a 2017 PBRSU award. We believe that these payouts reflect our disciplined approach to executive compensation and balanced pay-for-performance philosophy and the demanding nature of the performance metrics thoughtfully set by our Committee.
42 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Compensation Discussion & Analysis
NEO | Shares Granted at Target (#)(1) | Actual Shares Vested (#) | ||||
Michael J. Renna | 29,089 | 0 | ||||
David Robbins Jr. | 7,064 | 0 | ||||
Kathleen A. McEndy | 6,358 | 0 | ||||
| (1) | Amount does not include accumulated dividend equivalent shares. |
Other Executive Compensation Practices and Policies
Stock Ownership Guidelines and Holding Requirements
The Company has stock ownership guidelines in place for NEOs to reinforce alignment with shareholders.
CEO stock ownership guideline is 5five (5) times the CEO’s annual base salary. All other NEOs are required to own shares of Company common stock with a market value equal to a minimum of 2two (2) times their annual base salary. NEOs have six
years to achieve their ownership guidelines. As of December 31, 2017, allAll the NEOs are in compliance with the ownership guidelines.
Additionally, a stock holding period was introduced in 2015 that requires all of the NEOsrequired to retain at least 50 percent of vested and/or earned shares, net of taxes, until their new stock ownership guideline has been met. In November 2019,
Compensation Committee approved the elimination of the provision that NEOs have six (6) years to achieve their ownership guidelines. As of December 31, 2019, Mr. Robbins has met his ownership guidelines. Mr. Renna and Ms. McEndy continue to accumulate shares and are on track to meet their guidelines in 2020. Ms. Hernandez and Ms. Orsen were recently hired and continue to accumulate shares to meet their guidelines.
The Company has a clawbackclaw-back policy that applies to all annual incentive awards and long-term equity awards held by officers
including our NEOsNEOs. The policy allows for the recoupment of incentive compensation in the event of a material negative financial
restatement due to fraud, negligence, or intentional misconduct. In 2019, the policy was amended to also allow for recoupment of incentives in the event of a material violation of the Company’s Code of Ethics or any other material Company policy.
Anti-Hedging, and Anti-Pledging PoliciesPolicy
The Company has anti-hedging and anti-pledging policies that prohibit the Officersall employees and directors from engaging without exception in any hedging, pledging or other monetization
transactions with respect to the Company’s securities.
Other Compensation-Related Matters
Accounting for Share-Based Compensation
Share-based compensation including restricted stock, restricted stock units and performance share awards are accounted for in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718 (“ASC Topic 718”), Compensation – Stock Compensation.
Impact of Tax Treatment on Compensation
Section 162(m) of the Internal Revenue Code limits the deduction allowable for compensation paid to certain NEOs over $1 million. Qualified performance-based compensation is excluded from this limitation if certain requirements are met. While the Company generally attempts to preserve the federal income tax deductibility of compensation paid, to the extent consistent with its business goals, the Committee weighs the benefits of full deductibility with the other objectives of the executive compensation program and reserves the right to pay the Company’s employees, including NEOs, amounts which may or may not be deductible under Section 162(m) or other provisions of the Internal Revenue Code. Section 162(m) was changed substantially in connection with the
adoption of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017 (the “Act”). Under the Act, the “qualified performance-based” compensation exemption was repealed for tax years beginning in 2018, unless such compensation qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. The application and interpretation of the transition relief under the legislation is ambiguous and although we expect that certain incentive compensation will satisfy this transition relief, no assurances can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) as “qualified performance-based” compensation will, in fact, be fully deductible.
Risk Assessment
The Committee reviews its compensation programs in order to help mitigate the effects of excessive risk-taking. Through a combination of incentive compensation that has a short and long-term focus, the Company tries to establish an appropriate balance between achieving short-term and long-term goals. In addition, the Committee utilizes multiple metrics to help ensure that there is not undue focus on any particular financial result to the detriment of other aspects of the business. Payout schedules related to the metrics are measured after the completion of the appropriate time horizon to help ensure a full assessment of the metric. Finally, in formulating and reviewing the executive compensation policies, the Committee considers whether the policy’s design encourages excessive risk-taking and attaches specific measurable objectives to the extent possible.
During 2017,2019, the Company, consisting of a team from the Human Resources and Risk Management departments, conducted a comprehensive assessment of the compensation programs administered by the Company and each of its subsidiaries. These evaluations focused on potential risks inherent in the compensation programs. Having reviewed the extensive risk assessment conducted by the Company, the Committee determined that the compensation programs are not reasonably likely to have a material adverse effect upon the Company and do not encourage unnecessary or excessive risk.
Each of the NEOs is eligible for other employee benefit plans generally available to all employees (e.g., qualified pension plan, deferred compensation plan, major medical and health insurance, disability insurance, 401(k) Plan) on the same terms as all other employees. NEOs and certain other employees may also be eligible for the following:
Non-Qualified Supplemental Retirement Plan (the “SERP”). Employees who became officers prior to April 30, 2016 are covered by a supplemental retirement plan (the “SERP”) upon attaining age 50. Compensation under the SERP is considered as base salary plus annual incentives. See Executive Compensation Tables-Pension Benefits Table for further detail. In 2016, the SERP was closed to new participants.
Non-Qualified Defined Contribution Retirement Plan (the “DCRP”). Beginning May 1, 2016, newly appointed Officers may participate in the DCRP. Each year, officers in the DCRP may receive an “Employer Credit” which is a company contribution that is a percentage of annual cash compensation ranging from
8%-12% of annual cash compensation (base salary and AIP payout) based on the individual’s age. DCRP account balances are not vested until age 50. Plan participants that terminate (voluntarily or involuntarily) prior to age 50 forfeit their entire account balance.
Supplemental Saving Plan Contributions. The Internal Revenue Code limits the contributions that may be made by, or on behalf of, an individual under defined contribution plans such as the Company’s 401(k) Plan. Eligible employees are reimbursed the amount of Company contributions that may not be made because of this limitation. Amounts paid pursuant to this policy are included in the All Other Compensation Table that serves as a supplement to the 2019 Summary Compensation Table.
Disability Insurance. Certain employees, including the NEOs, are eligible for short-term disability benefits equal to 100% of the NEO’s base salary for a certain period of time depending on years of service. Long-term disability (LTD) begins upon the expiration of temporary disability benefits and is generally paid at a rate of 60% of the NEO’s base salary up to a monthly maximum benefit of
South Jersey Industries, Inc. - |
Compensation Discussion & Analysis
$10,000. Due to limitations in the group LTD benefits, in 2017, a supplemental LTD plan was implemented to cover up to 60% of salary and cash bonus up to a monthly maximum benefit of $25,000.
Group Life Insurance. Officers, including the NEOs, are provided with both group life insurance and 24- Hour Accident Protection coverage. The insurance premiums for these benefits are paid by the Company and the NEO is responsible for resultant federal, state or local income taxes. Amounts paid pursuant to this policy are included in the All Other Compensation Table that serves as a supplement to the 2019 Summary Compensation Table.
Other Benefits and Perquisites. We offer limited perquisites and other personal benefits to our NEOs at competitive levels with those provided by our Peer Group companies, as well as the larger group of companies within the general industry that are similar in overall size and relative performance. We believe the other benefits we provided to our NEOs were necessary to help us attract and retain our senior executive team and the values of these benefits were reasonable, competitive, and consistent with the overall executive compensation program. For more information on the perquisites and certain other benefits provided to the NEOs in 2019, see the All Other Compensation Table that serves as a supplement to the 2019 Summary Compensation Table.
SJI has not entered into separate employment agreements with any employee, including any of the NEOs. Instead, the Company has an Officer Severance Plan to provide certain benefits to Company Officers, including the NEOs, upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control. The Company has also adopted separate Change in Control (“CIC”) agreements which provide the Company’s executive officers, including the NEOs, with certain severance benefits upon a qualifying termination following a change in control. Effective January 1, 2019, CIC agreements are in effect for three years with successive one-year extensions until the Board affirmatively decides not to renew the agreement. Further details regarding the severance and change in control benefits are provided under the “Executive Compensation Tables-Change in Control Agreements and Other Potential Post-Employment Payments” section.
Equity award agreements provide for “double trigger” vesting upon a change in control. Further, under the 2015 Omnibus Equity Compensation Plan, in the event of a termination by the Company without Cause, or if the employee terminates employment for Good Reason, in either case within 12 months following a change in control, outstanding awards will become fully vested as of the date of such termination. However, if the vesting of any such award is based on performance, the applicable Award Agreement specifies how the award will become vested. See the “Executive Compensation Tables- Change in Control Agreements and Other Potential Post-Employment Payments” for further details.
We consider the impact of various tax and accounting rules in implementing our compensation program. We have historically structured incentive compensation arrangements with a view toward qualifying them as performance-based compensation exempt from the deduction limitations under Section 162(m) of the Internal Revenue Code, although we have viewed and continue to view the availability of a tax deduction as only one relevant consideration. The Compensation Committee believes that its primary responsibility is to provide a compensation program that is consistent with its compensation philosophy and supports the achievement of its compensation objectives.
Federal tax legislation enacted in December 2017 eliminated the Section 162(m) performance-based compensation exemption prospectively and made other changes to Section 162(m), but with a transition rule that preserves the performance-based compensation exemption for certain arrangements and awards in place as of November 2, 2017. We intend to continue to administer arrangements and awards subject to this transition rule with a view toward preserving their eligibility for the performance-based compensation exemption to the extent practicable and consistent with the non-tax compensation program objectives noted above.
We have reviewed the Compensation Discussion and Analysis with management. Based on our review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement, Form 10-K and Annual Report for the year ended December 31, 2019.
COMPENSATION COMMITTEE
Sunita Holzer, Chair
Sarah M. Barpoulis
Keith S. Campbell
Joseph M. Rigby
Walter M. Higgins III (ex-officio)
44 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards (1) | Non-Equity Incentive Plan Compensation ($) (2) | Change in Pension Value and Nonqualified Compensation Earnings ($) (3) | All Other Compensation (4) | Totals ($) | Totals Without Change in Pension Value and Nonqualified Compensation Earnings ($) (5) | |||||||||||||||||||||||||||
| Michael J. Renna | 2017 | 696,346 | — | 1,377,914 | 708,750 | 5,476,000 | 28,016 | 8,287,026 | 2,811,026 | |||||||||||||||||||||||||||
| President and Chief Executive | 2016 | 603,096 | — | 1,013,354 | 604,244 | 107,000 | 24,680 | 2,352,374 | 2,245,374 | |||||||||||||||||||||||||||
| Officer | 2015 | 528,846 | — | 786,842 | 113,437 | — | 20,373 | 1,449,498 | 1,449,498 | |||||||||||||||||||||||||||
| Stephen H. Clark | 2017 | 409,038 | — | 403,533 | 301,350 | 1,320,000 | 25,007 | 2,458,928 | 1,138,928 | |||||||||||||||||||||||||||
| Executive Vice President | 2016 | 383,789 | — | 322,436 | 255,833 | 1,116,000 | 23,323 | 2,101,381 | 985,381 | |||||||||||||||||||||||||||
| and Chief Financial Officer | 2015 | 347,692 | — | 237,627 | 57,750 | 347,000 | 20,541 | 1,010,610 | 663,610 | |||||||||||||||||||||||||||
| Jeffrey E. DuBois | 2017 | 424,192 | — | 418,322 | 312,375 | 1,622,000 | 43,829 | 2,820,718 | 1,198,718 | |||||||||||||||||||||||||||
| Executive Vice President and | 2016 | 403,515 | — | 398,051 | 313,201 | 1,441,000 | 23,731 | 2,579,498 | 1,138,498 | |||||||||||||||||||||||||||
| Chief Operating Officer SJI | 2015 | 388,769 | — | 378,305 | 61,425 | 202,000 | 22,874 | 1,053,373 | 851,373 | |||||||||||||||||||||||||||
| David Robbins | 2017 | 337,308 | — | 334,631 | 318,325 | 1,343,000 | 14,804 | 2,348,068 | 1,005,068 | |||||||||||||||||||||||||||
| Senior Vice President and | ||||||||||||||||||||||||||||||||||||
| President, South Jersey Gas | ||||||||||||||||||||||||||||||||||||
| Kathleen A. McEndy | 2017 | 358,846 | — | 301,174 | 253,800 | 329,000 | 26,569 | 1,269,389 | 940,389 | |||||||||||||||||||||||||||
| Senior Vice President | 2016 | 328,961 | — | 276,367 | 237,600 | 286,000 | 23,925 | 1,152,853 | 866,853 | |||||||||||||||||||||||||||
| and Chief Administrative Officer | 2015 | 299,231 | — | 203,729 | 99,000 | 105,000 | 23,663 | 730,623 | 625,623 | |||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards (1) | Non-Equity Incentive Plan Compensation ($) (2) | Change in Pension Value and Nonqualified Compensation Earnings ($) (3) | All Other Compensation (4) | Totals ($) | Totals Without Change in Pension Value and Nonqualified Compensation Earnings ($) (5) | |||||||||||||||||||||
Michael J. Renna President and Chief Executive Officer | 2019 | 764,365 | — | 1,745,743 | 817,594 | 2,966,000 | 53,261 | 6,346,963 | 3,380,963 | |||||||||||||||||||||
2018 | 748,077 | — | 1,684,078 | 937,500 | 1,261,000 | 33,939 | 4,664,594 | 3,403,594 | ||||||||||||||||||||||
2017 | 696,346 | — | 1,377,914 | 708,750 | 5,476,000 | 28,016 | 8,287,026 | 2,811,026 | ||||||||||||||||||||||
Cielo Hernandez Senior Vice President and Chief Financial Officer | 2019 | 360,000 | 75,000 | 494,570 | 258,570 | 0 | 60,440 | 1,248,580 | 1,248,580 | |||||||||||||||||||||
David Robbins Jr. Senior Vice President and President of SJI Utilities | 2019 | 392,374 | — | 497,839 | 334,679 | 1,722,000 | 26,824 | 2,973,716 | 1,251,716 | |||||||||||||||||||||
2018 | 383,269 | — | 434,262 | 336,875 | 921,000 | 18,917 | 2,094,323 | 1,173,323 | ||||||||||||||||||||||
2017 | 337,308 | — | 334,631 | 318,325 | 1,343,000 | 14,804 | 2,348,068 | 1,005,068 | ||||||||||||||||||||||
Kathleen A. McEndy Senior Vice President and Chief Administrative Officer | 2019 | 378,183 | — | 326,259 | 238,455 | 374,000 | 37,633 | 1,354,530 | 980,530 | |||||||||||||||||||||
2018 | 370,577 | — | 364,729 | 300,510 | 717,000 | 32,916 | 1,785,732 | 1,068,732 | ||||||||||||||||||||||
2017 | 358,846 | — | 301,174 | 253,800 | 329,000 | 26,569 | 1,269,389 | 940,389 | ||||||||||||||||||||||
Melissa J. Orsen Senior Vice President and General Counsel | 2019 | 352,250 | — | 306,001 | 237,495 | 0 | 76,958 | 972,704 | 972,704 | |||||||||||||||||||||
2018 | 277,731 | — | 246,002 | 261,000 | 0 | 11,703 | 796,436 | 796,436 | ||||||||||||||||||||||
Kenneth A. Lynch Former Senior Vice President and Chief Accounting & Risk Officer and Principal Financial Officer | 2019 | 91,873 | — | 0 | 45,152 | 343,000 | 531,777 | 1,011,802 | 668,802 | |||||||||||||||||||||
2018 | 308,654 | — | 262,115 | 231,750 | 1,564,000 | 22,891 | 2,389,410 | 825,410 | ||||||||||||||||||||||
| (1) | Represents the full grant date fair value of awards in connection with the grants of performance-based restricted stock |
| (2) | This amount represents the aggregate annual incentive awards paid out to each Named Executive with respect to |
| (3) | Amounts in this column represent the aggregate change in the actuarial present value of each NEO’s accumulated benefit in the SERP and Retirement Plan for Employees of South Jersey Industries, Inc. |
| (4) | Includes employer contributions to the Company’s 401(k) Plan, reimbursement for 401(k) contributions not permitted under Internal Revenue Code, employer contributions to the Defined Contribution Retirement Plan (DCRP) for Ms. Hernandez and Ms. Orsen, the value of group life insurance and other perquisites. The |
| (5) |
South Jersey Industries, Inc. - | 45 |
Executive Compensation Discussion & AnalysisTables
As of Fiscal Year End 2017Year-End 2019
| Michael J. Renna | Stephen H. Clark | Jeffrey E. DuBois | David Robbins | Kathleen A. McEndy | ||||||||||||||||
| 401(k) Plan | $ | 6,883 | $ | 7,743 | $ | 8,100 | $ | 4,627 | $ | 9,000 | ||||||||||
| 401(k) Reimbursement | $ | 10,143 | $ | 3,564 | $ | 4,155 | $ | 108 | $ | 2,558 | ||||||||||
| Group Life Insurance | $ | 3,584 | $ | 3,975 | $ | 4,114 | $ | 3,170 | $ | 5,271 | ||||||||||
| Perquisites (a) | $ | 7,406 | $ | 9,724 | $ | 27,460 | $ | 6,899 | $ | 9,740 | ||||||||||
| Total Value | $ | 28,016 | $ | 25,007 | $ | 43,829 | $ | 14,804 | $ | 26,569 | ||||||||||
Michael J. Renna | Cielo Hernandez | David Robbins Jr. | Kathleen A. McEndy | Melissa J. Orsen | Kenneth A. Lynch(e) | |||||||||||||
401(k) Plan | $ | 13,209 | $ | 0 | $ | 9,046 | $ | 12,358 | $ | 11,968 | $ | 4,594 | ||||||
401(k) Reimbursement | $ | 24,218 | $ | 4,000 | $ | 5,619 | $ | 4,909 | $ | 3,613 | $ | 0 | ||||||
Defined Contribution Retirement Plan | $ | 49,486 | $ | 47,180 | ||||||||||||||
Group Life Insurance | $ | 4,082 | $ | 775 | $ | 3,814 | $ | 10,812 | $ | 786 | $ | 2,451 | ||||||
Severance(a) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 490,200 | ||||||
Perquisites(b) | $ | 9,252 | $ | 5,329 | $ | 8,345 | $ | 9,554 | $ | 10,578 | $ | 34,532 | ||||||
Perquisites(c) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,833 | $ | 0 | ||||||
Perquisites(d) | $ | 2,500 | $ | 850 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||
Total Value | $ | 53,261 | $ | 60,440 | $ | 26,824 | $ | 37,633 | $ | 76,958 | $ | 531,777 | ||||||
| (a) | Mr. Lynch retired from the Company on March 31, 2019. For more information, see “Change in Control Agreements and Other Potential Post-Employment Payments. |
| (b) | The amounts of the perquisites reflect the value of the Company-provided automobile for each NEO |
| (c) | The amounts of the perquisites reflect the value of | |
| SJI Medical Waiver. |
| (d) | The amounts of the perquisites reflect the Financial Planning/Tax Preparation Reimbursement. |
| (e) | The determination to provide Mr. Lynch with the compensation described above upon his retirement from the Company was made in March 2019 and as part of a larger reorganization that provided the company with a significant and sustained reduction in O&M. After contemplating the results of last years “say-on-pay” vote, and conducting extensive shareholder outreach, the Compensation Committee determined that it would no longer provide its executive officers with Early Retirement Incentive Program equivalent benefits or enhanced retiree medical care upon retirement from the Company. |
The following table sets forth certain information concerning the grant of awards made to the Named Executive Officers during the year ended December 31, 2017.2019.
Grants of Plan-Based Awards - 20172019
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Possible Payouts of Shares Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | ||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#) | Awards ($ / Sh) | Awards ($) (3) | ||||||||||||||||||||||||||||||
| Michael J. Renna | 1/1/2017(4) | 0 | 700,000 | 1,050,000 | 0 | 29,089 | 58,178 | — | — | 957,901 | ||||||||||||||||||||||||||||||
| 1/1/2017(5) | 12,467 | — | — | 420,013 | ||||||||||||||||||||||||||||||||||||
| Stephen H. Clark | 1/1/2017(4) | 0 | 287,000 | 430,500 | 0 | 8,519 | 17,038 | — | — | 280,531 | ||||||||||||||||||||||||||||||
| 1/1/2017(5) | 3,651 | — | — | 123,002 | ||||||||||||||||||||||||||||||||||||
| Jeffrey E. DuBois | 1/1/2017(4) | 0 | 297,500 | 446,250 | 0 | 8,831 | 17,662 | — | — | 290,805 | ||||||||||||||||||||||||||||||
| 1/1/2017(5) | 3,785 | — | — | 127,517 | ||||||||||||||||||||||||||||||||||||
| David Robbins | 1/1/2017(4) | 0 | 238,000 | 357,000 | 0 | 7,064 | 14,128 | — | — | 232,618 | ||||||||||||||||||||||||||||||
| 1/1/2017(5) | 3,028 | — | — | 102,013 | ||||||||||||||||||||||||||||||||||||
| Kathleen A. McEndy | 1/1/2017(4) | 0 | 216,000 | 324,000 | 0 | 6,358 | 12,716 | — | — | 209,369 | ||||||||||||||||||||||||||||||
| 1/1/2017(5) | 2,725 | — | — | 91,805 | ||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts of Shares Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||
Michael J. Renna | 1/1/2019 | (5) | 382,500 | 765,000 | 1,147,500 | — | — | — | — | — | |||||||||||||||||
4/22/2019 | (6) | — | — | — | 19,198 | 38,396 | 76,792 | — | 1,231,360 | ||||||||||||||||||
4/22/2019 | (7) | — | — | — | — | — | — | 16,455 | 514,383 | ||||||||||||||||||
Cielo Hernandez | 1/1/2019 | (5) | 117,000 | 234,000 | 351,000 | — | — | — | — | — | |||||||||||||||||
4/22/2019 | (6) | — | — | — | 4,350 | 8,699 | 17,398 | — | 278,977 | ||||||||||||||||||
4/22/2019 | (7) | — | — | — | — | — | — | 3,728 | 116,537 | ||||||||||||||||||
1/14/2019 | (8) | — | — | — | — | — | — | 3,404 | 99,056 | ||||||||||||||||||
David Robbins Jr. | 1/1/2019 | (5) | 137,445 | 274,890 | 412,335 | — | — | — | — | — | |||||||||||||||||
4/22/2019 | (6) | — | — | — | 5,475 | 10,950 | 21,900 | — | 351,167 | ||||||||||||||||||
4/22/2019 | (7) | — | — | — | — | — | — | 4,692 | 146,672 | ||||||||||||||||||
Kathleen A. McEndy | 1/1/2019 | (5) | 113,550 | 227,100 | 340,650 | — | — | — | — | — | |||||||||||||||||
4/22/2019 | (6) | — | — | — | 3,588 | 7,176 | 14,352 | — | 230,134 | ||||||||||||||||||
4/22/2019 | (7) | — | — | — | — | — | — | 3,075 | 96,125 | ||||||||||||||||||
Melissa J. Orsen | 1/1/2019 | (5) | 106,500 | 213,000 | 319,500 | — | — | — | — | — | |||||||||||||||||
4/22/2019 | (6) | — | — | — | 3,366 | 6,731 | 13,462 | — | 215,847 | ||||||||||||||||||
4/22/2019 | (7) | — | — | — | — | — | — | 2,884 | 90,154 | ||||||||||||||||||
Kenneth A. Lynch | 1/1/2019 | (5) | 94,560 | 189,120 | 283,680 | — | — | — | — | — | |||||||||||||||||
4/22/2019 | (6) | — | — | — | — | — | — | — | — | ||||||||||||||||||
4/22/2019 | (7) | — | — | — | — | — | — | — | — | ||||||||||||||||||
| (1) | Amounts represent potential cash awards payable to our NEOs determined by the level of performance achieved against the |
46 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Tables
| (2) | Represents the possible payout of shares of the performance-based restricted stock unit grants |
| (3) | Represents the time-based restricted stock unit grants to each NEO. |
| (4) | Represents the full grant date fair value of the grants of restricted stock units calculated in accordance with FASB ASC Topic 718. See Footnote 2 of the financial statements for additional information, including valuation assumptions used in calculating the fair value of the awards. |
| (5) | Represents potential payouts under the 2019 Annual Incentive Plan |
| (6) | Represents performance-based restricted stock unit grants with a performance period from |
| (7) | Represents standard time-based restricted stock unit grants subject to |
| (8) | Represents an inducement grant of TBRSUs associated with Ms. Hernandez’s new-hire arrangement valued at $100,000 using prior day closing price to determine number of shares |
| (9) | RSUs are |
South Jersey Industries, Inc. - |
Executive Compensation Discussion & AnalysisTables
Equity Awards
The following table sets forth certain information concerning outstanding restricted stock unit awards for the Named Executive Officers as of December 31, 2017.2019.
Outstanding Equity Awards at Fiscal Year-End - 20172019
Stock Awards
| Name | Year | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | |||||||||||||||
| Michael J. Renna | 2017 | (3) | — | — | 29,089 | 908,449 | ||||||||||||||
| 2017 | (4) | — | — | 12,467 | 389,344 | |||||||||||||||
| 2016 | (5) | — | — | 30,610 | 955,950 | |||||||||||||||
| 2016 | (6) | — | — | 8,746 | 273,138 | |||||||||||||||
| 2015 | (7) | — | — | 17,818 | 556,456 | |||||||||||||||
| 2015 | (8) | — | — | 2,544 | 79,449 | |||||||||||||||
| 2015 | (7) | — | — | 1,584 | 49,468 | |||||||||||||||
| 2015 | (8) | — | — | 226 | 7,058 | |||||||||||||||
| Stephen H. Clark | 2017 | (3) | — | — | 8,519 | 266,048 | ||||||||||||||
| 2017 | (4) | — | — | 3,651 | 114,021 | |||||||||||||||
| 2016 | (5) | — | — | 9,740 | 304,180 | |||||||||||||||
| 2016 | (6) | — | — | 2,783 | 86,913 | |||||||||||||||
| 2015 | (7) | — | — | 5,820 | 181,759 | |||||||||||||||
| 2015 | (8) | — | — | 830 | 25,921 | |||||||||||||||
| Jeffrey E. DuBois | 2017 | (3) | — | — | 8,831 | 275,792 | ||||||||||||||
| 2017 | (4) | — | — | 3,785 | 118,206 | |||||||||||||||
| 2016 | (5) | — | — | 12,024 | 375,510 | |||||||||||||||
| 2016 | (6) | — | — | 3,435 | 107,275 | |||||||||||||||
| 2015 | (7) | — | — | 9,266 | 289,377 | |||||||||||||||
| 2015 | (8) | — | — | 1,322 | 41,286 | |||||||||||||||
| David Robbins | 2017 | (3) | — | — | 7,064 | 220,609 | ||||||||||||||
| 2017 | (4) | — | — | 3,028 | 94,564 | |||||||||||||||
| 2016 | (5) | — | — | 8,036 | 250,964 | |||||||||||||||
| 2016 | (6) | — | — | 2,296 | 71,704 | |||||||||||||||
| 2015 | (7) | — | — | 3,824 | 119,424 | |||||||||||||||
| 2015 | (8) | — | — | 548 | 17,114 | |||||||||||||||
| Kathleen A. McEndy | 2017 | (3) | — | — | 6,358 | 198,560 | ||||||||||||||
| 2017 | (4) | — | — | 2,725 | 85,102 | |||||||||||||||
| 2016 | (5) | — | — | 8,348 | 260,708 | |||||||||||||||
| 2016 | (6) | — | — | 2,385 | 74,484 | |||||||||||||||
| 2015 | (7) | — | — | 4,990 | 155,838 | |||||||||||||||
| 2015 | (8) | — | — | 714 | 22,298 | |||||||||||||||
Name | Year | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | ||||||||||
Michael J. Renna | 2019 | (4) | — | — | 39,435 | 1,300,562 | |||||||||
2019 | (5) | 16,900 | 557,369 | — | — | ||||||||||
2018 | (6) | — | — | 40,653 | 1,340,744 | ||||||||||
2018 | (7) | 11,615 | 383,075 | — | — | ||||||||||
2017 | (8) | — | — | 32,283 | 1,064,710 | ||||||||||
2017 | (9) | 4,611 | 152,080 | — | — | ||||||||||
Cielo Hernandez | 2019 | (4) | — | — | 8,934 | 294,655 | |||||||||
2019 | (5) | 3,829 | 126,276 | — | — | ||||||||||
2019 | (11) | 3,528 | 116,343 | — | — | ||||||||||
2018 | (6) | — | — | — | — | ||||||||||
2018 | (7) | — | — | — | — | ||||||||||
2017 | (8) | — | — | — | — | ||||||||||
2017 | (9) | — | — | — | — | ||||||||||
David Robbins Jr. | 2019 | (4) | — | — | 11,246 | 370,902 | |||||||||
2019 | (5) | 4,819 | 158,929 | — | — | ||||||||||
2018 | (6) | — | — | 9,276 | 305,907 | ||||||||||
2018 | (7) | 2,649 | 87,377 | — | — | ||||||||||
2018 | (10) | 543 | 17,901 | — | — | ||||||||||
2017 | (8) | — | — | 7,840 | 258,555 | ||||||||||
2017 | (9) | 1,121 | 36,968 | — | — | ||||||||||
Kathleen A. McEndy | 2019 | (4) | — | — | 7,370 | 243,068 | |||||||||
2019 | (5) | 3,158 | 104,157 | — | — | ||||||||||
2018 | (6) | — | — | 7,597 | 250,539 | ||||||||||
2018 | (7) | 2,170 | 71,567 | — | — | ||||||||||
2018 | (10) | 543 | 17,901 | — | — | ||||||||||
2017 | (8) | — | — | 7,056 | 232,714 | ||||||||||
2017 | (9) | 1,009 | 33,271 | — | — | ||||||||||
Melissa J. Orsen | 2019 | (4) | — | — | 6,913 | 227,995 | |||||||||
2019 | (5) | 2,962 | 97,688 | — | — | ||||||||||
2018 | (6) | — | — | 5,938 | 195,844 | ||||||||||
2018 | (7) | 1,697 | 55,971 | — | — | ||||||||||
2017 | (8) | — | — | — | — | ||||||||||
2017 | (9) | — | — | — | — | ||||||||||
Kenneth A. Lynch | 2019 | (4) | — | — | — | — | |||||||||
2019 | (5) | — | — | — | — | ||||||||||
2018 | (6) | — | — | 2,627 | 86,631 | ||||||||||
2018 | (7) | — | — | — | — | ||||||||||
2017 | (8) | — | — | 4,403 | 145,216 | ||||||||||
2017 | (9) | — | — | — | — | ||||||||||
| (1) | Represents grants of time-based restricted stock units and accumulated dividend equivalent shares earned through December 31, 2019. |
| (2) | Market value of Company common stock at December 31, 2019 was $32.98. |
48 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Tables
| (3) | Represents grants of performance-based restricted stock units at target performance and |
| These awards consist of performance-based restricted stock units that would vest in March 2022 if the performance criteria are satisfied. The number of shares is shown at target assuming the performance criteria are satisfied. |
| (5) | These awards consist of time-based restricted stock units. The awards will vest in three installments on April 22, 2020, January 1, 2021 and January 1, 2022. |
| (6) | These awards consist of performance-based restricted stock units that would vest in March 2021 if the performance criteria are satisfied. The number of shares is shown at target assuming the performance criteria are satisfied. |
| (7) | These awards consist of time-based restricted stock units. The first portion vested on March 1, 2019 and the remaining portions will vest on January 1, 2020 and January 1, 2021. |
| (8) | These awards consist of performance-based restricted stock units that would vest in March 2020 if the performance criteria are satisfied. The number of shares is shown at target assuming the performance criteria are satisfied. |
| These awards consist of time-based restricted stock |
Compensation Discussion & Analysis
| 2020. |
| (10) | These awards consist of time-based restricted stock units. The awards will vest in three equal installments with the first portion having vested on June 7, 2018, the second having vested on June 7, 2019 and the remaining portion to vest on June 7, 2020. |
| (11) | This award consists of time-based restricted stock units. The award will vest in two equal installments with the first portion to vest on January 14, 2020 and the remaining portion to vest on January 14, 2021. |
| (12) | Shares reflected in this table include accumulated dividend equivalent shares earned from grant through December 31, 2019. |
The following table sets forth certain information concerning the vesting of restricted stock for the Company’s Named Executive Officers during the year ended December 31, 2017.2019. No options are outstanding, and none were exercised by the NEOs during the year ended December 31, 2017.2019. The number of shares acquired on vesting shown below includes accrued dividends on vested shares.
Stock Vested – 2017
2019 Stock Awards
| Name | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) (2) | ||||||
| Michael J. Renna | 12,303 | 428,661 | ||||||
| Stephen H. Clark | 4,313 | 150,495 | ||||||
| Jeffrey E. DuBois | 6,559 | 228,760 | ||||||
| David Robbins | 2,975 | 103,838 | ||||||
| Kathleen A. McEndy | 4,307 | 150,496 | ||||||
Name | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) (2) | ||||
Michael J. Renna | 38,408 | 1,139,299 | ||||
Cielo Hernandez | 0 | 0 | ||||
David Robbins Jr. | 10,332 | 308,026 | ||||
Kathleen A. McEndy(3) | 10,281 | 306,822 | ||||
Melissa J. Orsen | 818 | 24,205 | ||||
Kenneth A. Lynch | 8,427 | 251,353 | ||||
| (1) | This column represents the portion of the time-based restricted stock unit awards granted in |
| (2) | The dollar value is calculated by multiplying the number of shares that vested by the market value of the Company’s common stock on the respective vesting date. The closing prices on the vesting dates of January 1, | |
| If the vesting date falls on a weekend or holiday, the closing price of the common stock as reported on the New York Stock Exchange on the business day immediately prior to that is used to calculate this dollar value. |
Pension Benefits Table
| Name | Plan Name (1) (2) | Number of Years Credited Service Under Plan at FAS Measurement Date | Present Value of Accumulated Benefit (3) | Payments During Last Fiscal Year | ||||||||||
| Retirement Plan for Employees of SJI | 19 | $ | 674,000 | $ | 0 | |||||||||
| Michael J. Renna | SJI Supplemental Executive Retirement Plan | 20 | $ | 5,345,000 | $ | 0 | ||||||||
| Retirement Plan for Employees of SJI | 20 | $ | 986,000 | $ | 0 | |||||||||
| Stephen H. Clark | SJI Supplemental Executive Retirement Plan | 21 | $ | 3,603,000 | $ | 0 | ||||||||
| Retirement Plan for Employees of SJI | 30 | $ | 1,403,000 | $ | 0 | |||||||||
| Jeffrey E. DuBois | SJI Supplemental Executive Retirement Plan | 31 | $ | 5,886,000 | $ | 0 | ||||||||
| Retirement Plan for Employees of SJI | 21 | $ | 903,000 | $ | 0 | |||||||||
| David Robbins | SJI Supplemental Executive Retirement Plan | 22 | $ | 2,497,000 | $ | 0 | ||||||||
| Retirement Plan for Employees of SJI | ||||||||||||||
| Kathleen A. McEndy | SJI Supplemental Executive Retirement Plan | 5 | $ | 1,227,000 | $ | 0 | ||||||||
| (3) | For shares underlying equity awards that vested upon Ms. McEndy’s retirement in 2020, see Executive Compensation - Change in Control Agreements and Other Potential Post-Employment Payments. |
South Jersey Industries, Inc. - |
Executive Compensation Tables
Name | Plan Name (1) (2) | Number of Years Credited Service Under Plan at FAS Measurement Date | Present Value of Accumulated Benefit (3) | Payments During Last Fiscal Year | ||||||
Michael J. Renna | Retirement Plan for Employees of SJI | 21 | $ | 861,000 | $ | 0 | ||||
SJI Supplemental Executive Retirement Plan | 22 | $ | 9,385,000 | $ | 0 | |||||
Cielo Hernandez | Retirement Plan for Employees of SJI | N/A | N/A | N/A | ||||||
SJI Supplemental Executive Retirement Plan | N/A | N/A | N/A | |||||||
David Robbins Jr. | Retirement Plan for Employees of SJI | 23 | $ | 1,155,000 | $ | 0 | ||||
SJI Supplemental Executive Retirement Plan | 24 | $ | 4,888,000 | $ | 0 | |||||
Kathleen A. McEndy | Retirement Plan for Employees of SJI | N/A | N/A | N/A | ||||||
SJI Supplemental Executive Retirement Plan | 10 | $ | 2,318,000 | $ | 0 | |||||
Melissa J. Orsen | Retirement Plan for Employees of SJI | N/A | N/A | N/A | ||||||
SJI Supplemental Executive Retirement Plan | N/A | NA | NA | |||||||
Kenneth A. Lynch | Retirement Plan for Employees of SJI | N/A | N/A | N/A | ||||||
SJI Supplemental Executive Retirement Plan | 19 | $ | 3,462,000 | $ | 134,000 | |||||
Compensation Discussion & Analysis
| (1) | Employees who became an officer prior to April 30, 2016 will be eligible for the South Jersey Industries, Inc. Supplemental Executive Retirement Plan (the “SERP”) once they have attained age 50. |
| A participant is eligible for a normal retirement benefit under the SERP after having attained age 60. We base the normal retirement benefit on |
| A participant is eligible for an early retirement benefit under the SERP after having attained age 55. A participant’s early retirement benefit equals his or her normal retirement benefit reduced by 2 percent per year. The SERP benefit for officers hired on or after July 1, 2003 reflects a reduction for the annuity equivalent of the employer provided benefit under the Company’s 401(k) Plan. |
| The SERP’s normal form of payment is a life annuity with six years guaranteed. |
| (2) | The Retirement Plan for Employees of South Jersey Industries, Inc. (the “Retirement Plan”) provides benefits to non-bargaining employees who were hired before July 1, 2003. Eligibility for the Retirement Plan for Employees of SJI began after one year of service. The plan defines Normal Retirement Age as age 65. A Participant is eligible for a non-reduced benefit under the Retirement Plan after having attained age 60 with 5 years of service. We base the normal retirement benefit on the sum of (a) the participant’s accrued benefit as of September 30, 1989 increased 5 percent per year thereafter, and (b) 1.00 percent of the participant’s “final average compensation” plus 0.35 percent of the participant’s final average compensation in excess of covered compensation, multiplied by years of credited service after September 30, 1989 (up to 35 years less credited service as of September 30, 1989). “Final average compensation” is the average of the participant’s base pay plus commissions for the highest three years of the final six years of employment immediately preceding retirement, as defined by the plan. |
| A participant is eligible for an early retirement benefit under the Retirement Plan after having attained age 55 and completed five years of service. A participant’s early retirement benefit equals his or her normal retirement benefit reduced by 2 percent per year prior to age 60. The Retirement Plan’s normal form of payment is a life annuity with six years guaranteed. |
| (3) | We base present values for participants on a | |
| As previously disclosed, in 2018 South Jersey Industries attributed an additional three years of service and age under the SERP to Ms. McEndy and Mr. Lynch, resulting in an increase in the present value of accumulated benefit in 2019 in their SERPs of $569,000 and $1,270,000, respectively. |
50 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Tables
Nonqualified Deferred Compensation Table
The following table sets forth certain information regarding the Company’s Restricted Stock Deferral Plan and Non-Qualified Deferred Compensation Plan. The Restricted Stock Deferral Plan permits the deferral of fully vested shares of restricted stock units earned by the Company’s NEOs pursuant to previously issued performance-based, restricted stock unit grants. The Company does not make contributions to the plan, and all earnings referenced in the table represent dividends paid on outstanding shares of common stock.
Beginning July 2017, the company implemented a Non-Qualified Deferred Compensation Plan which offers NEOs and other
highly compensated employees the ability to defer pretax base compensation and AIP awards in excess of the maximum benefits that may be provided under the Saving Plan as a result of limits imposed by the Code. Generally, NEOs may elect to defer up to 75 percent of salary and up to 100 percent of AIP. Deferral elections are made annually by eligible participants in respect to compensation to be earned for the following year. There were no contributions by the NEOs under the Non-Qualified Deferred Compensation plan in 2017.
| Name | Plan Name | Executive Contribution in Last FY | Registrant Contributions in Last FY | Aggregate Earnings in Last FY (2) | Aggregate Withdrawals Distribution | Aggregate Balance in Last FYE (1) |
| Michael J. Renna | Restricted Stock Deferral Plan | |||||
| Non-Qualified Deferred Compensation plan | ||||||
| Stephen H. Clark | Restricted Stock Deferral Plan | |||||
| Non-Qualified Deferred Compensation plan | ||||||
| Jeffrey E. DuBois | Restricted Stock Deferral Plan | 3,274 | 107 | 105,578 | ||
| Non-Qualified Deferred Compensation plan | ||||||
| David Robbins | Restricted Stock Deferral Plan | 1,639 | 72 | 70,427 | ||
| Non-Qualified Deferred Compensation plan | ||||||
| Kathleen A. McEndy | Restricted Stock Deferral Plan | |||||
| Non-Qualified Deferred Compensation plan |
Name | Plan Name | Executive Contributions in Last FY($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals Distribution ($) | Aggregate Balance in Last FYE ($) | ||||||||||
Michael J. Renna | Restricted Stock Deferral Plan | |||||||||||||||
Non-Qualified Deferred Compensation plan | ||||||||||||||||
Cielo Hernandez | Restricted Stock Deferral Plan | |||||||||||||||
Non-Qualified Deferred Compensation plan | ||||||||||||||||
David Robbins Jr. | Restricted Stock Deferral Plan | 3,001 | (1) | 38,688 | 86,522 | (2) | ||||||||||
Non-Qualified Deferred Compensation plan | ||||||||||||||||
Kathleen A. McEndy(4) | Restricted Stock Deferral Plan | |||||||||||||||
Non-Qualified Deferred Compensation plan | 119,228 | (3) | 20,111 | (4) | 299,184 | (5) | ||||||||||
Melissa J. Orsen | Restricted Stock Deferral Plan | |||||||||||||||
Non-Qualified Deferred Compensation plan | ||||||||||||||||
Kenneth A. Lynch | Restricted Stock Deferral Plan | |||||||||||||||
Non-Qualified Deferred Compensation plan | ||||||||||||||||
| These amounts are not reported in the Summary Compensation Table as they represent dividends earned on the deferred common stock. Dividends are payable on all outstanding shares of the Company’s common stock. |
Compensation Discussion & Analysis
| The amounts for the aggregate balance in the Restricted Stock Deferral Plan represent the market value of vested shares of previously restricted stock deferred including dividend equivalents earned less any withdrawals by the NEOs calculated by multiplying the number of shares of deferred stock by the market value of the Company’s common stock as of December 31, |
| (3) | Ms. McEndy earned an AIP award of $238,455 in fiscal year 2019, which was included in the amount disclosed in the Summary Compensation Table under Non-Equity Incentive Plan Compensation and elected to defer $119,227.50. |
| (4) | The amount reported in this column represents interest earned on the executive contributions and are not reported in the Summary Compensation Table. |
| (5) | The amounts for the aggregate balance in the Non-Qualified Deferred Compensation Plan represent balance of previously deferred salary and/or AIP including interest earned less any withdrawals by the NEOs. |
South Jersey Industries, Inc. - 2020 Proxy Statement | | 51 |
Executive Compensation Tables
Change in Control Agreements and Other Potential Post-Employment Payments
All Named Executive Officers are party to a Change in Control Agreement (“CIC Agreement”) that provides for severance benefits upon a qualifying termination following a change in control. A summary of the CIC Agreement terms are set below:
52 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Tables
Below is an estimate of the amounts payable to each NEO assuming various termination of employment scenarios on December 31, 2017.2019.
Involuntary Termination/ Good Reason | ||||||||||||||||||
Retirement ($) | For Cause ($) | Following a CIC(1) ($) | Without a CIC(2) ($) | Death ($) | Disability ($) | |||||||||||||
Michael Renna | ||||||||||||||||||
Cash Compensation(3) | 0 | 0 | 5,402,767 | 795,758 | 817,594 | 817,594 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 4,545,494 | 765,000 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 0 | 0 | 765,000 | 0 | 817,594 | 817,594 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 92,273 | 30,758 | 0 | 0 | ||||||||||||
Equity Compensation(5) | 0 | 0 | 4,798,539 | 1,092,524 | 3,733,830 | 3,733,830 | ||||||||||||
Performance-based Restricted Stock Units | 0 | 0 | 3,706,015 | 0 | 2,641,306 | 2,641,306 | ||||||||||||
Time-based Restricted Stock Units | 0 | 0 | 1,092,524 | 1,092,524 | 1,092,524 | 1,092,524 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 1,530,000 | 0 | ||||||||||||
Total Compensation | 0 | 0 | 10,201,306 | 1,888,282 | 6,081,424 | 4,551,424 | ||||||||||||
David Robbins | ||||||||||||||||||
Cash Compensation(3) | 334,679 | 0 | 1,687,715 | 423,458 | 334,679 | 334,679 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 1,351,800 | 392,700 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 334,679 | 0 | 274,400 | 0 | 334,679 | 334,679 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 61,515 | 30,758 | 0 | 0 | ||||||||||||
Equity Compensation(5) | 478,806 | 0 | 1,236,538 | 301,174 | 977,983 | 977,983 | ||||||||||||
Performance-based Restricted Stock Units | 327,273 | 0 | 935,364 | 0 | 676,809 | 676,809 | ||||||||||||
Time-based Restricted Stock Units | 151,533 | 0 | 301,174 | 301,174 | 301,174 | 301,174 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 785,400 | 0 | ||||||||||||
Total Compensation | 813,485 | 0 | 2,924,253 | 724,632 | 2,098,062 | 1,312,662 | ||||||||||||
Cielo Hernandez | ||||||||||||||||||
Cash Compensation(3) | 0 | 0 | 1,538,273 | 418,137 | 258,570 | 258,570 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 1,248,000 | 390,000 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 0 | 0 | 234,000 | 0 | 258,570 | 258,570 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 56,273 | 28,137 | 0 | 0 | ||||||||||||
Equity Compensation(5) | 0 | 0 | 537,274 | 242,619 | 537,274 | 537,274 | ||||||||||||
Performance-based Restricted Stock Units | 0 | 0 | 294,655 | 0 | 294,655 | 294,655 | ||||||||||||
Time-based Restricted Stock Units | 0 | 0 | 242,619 | 242,619 | 242,619 | 242,619 | ||||||||||||
Life Insurance Death Benefits | 0 | 0 | 0 | 0 | 780,000 | 0 | ||||||||||||
Total Compensation | 0 | 0 | 2,075,547 | 660,756 | 1,575,844 | 795,844 | ||||||||||||
Kathleen McEndy | ||||||||||||||||||
Cash Compensation and Other Benefits(4) | 450,399 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Cash Lump Sum | 378,500 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 19,235 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Property Transfers | 45,164 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Financial and Tax Prep Services | 7,500 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Equity Compensation(6) | 260,942 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Performance-based Restricted Stock Units | 244,480 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Time-based Restricted Stock Units | 16,462 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Total Compensation | 711,341 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Melissa Orsen | ||||||||||||||||||
Cash Compensation(3) | 0 | 0 | 1,445,000 | 355,000 | 237,495 | 237,495 | ||||||||||||
Severance (Salary and Bonus) | 0 | 0 | 1,232,000 | 355,000 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 0 | 0 | 213,000 | 0 | 237,495 | 237,495 | ||||||||||||
COBRA Reimbursements | 0 | 0 | 0 | n/a | 0 | 0 | ||||||||||||
Equity Compensation(5) | 0 | 0 | 577,497 | 153,658 | 577,497 | 577,497 | ||||||||||||
Performance-based Restricted Stock Units | 0 | 0 | 423,839 | 0 | 423,839 | 423,839 | ||||||||||||
Time-based Restricted Stock Units | 0 | 0 | 153,658 | 153,658 | 153,658 | 153,658 | ||||||||||||
Life Insurance Death Benefits | 0 | 0 | 0 | 0 | 710,000 | 0 | ||||||||||||
Total Compensation | 0 | 0 | 2,022,497 | 508,658 | 1,524,992 | 814,992 | ||||||||||||
As of Fiscal Year End 2017
| Executive Benefits and Payments Upon Termination | Retirement ($) | Termination by the Company for Cause ($) | Termination by the NEO for Good Reason or by the Company without Cause following a CIC ($) | Termination by the NEO for Good Reason or by the Company without Cause without a CIC ($) | ||||||||||||
| Michael J. Renna | ||||||||||||||||
| Cash Compensation | $ | 0 | $ | 0 | $ | 3,931,236 | $ | 730,448 | ||||||||
| Equity Compensation | $ | 0 | $ | 0 | $ | 3,219,313 | $ | 359,645 | ||||||||
| Stephen H. Clark | ||||||||||||||||
| Cash Compensation | $ | 0 | $ | 0 | $ | 1,484,603 | $ | 440,448 | ||||||||
| Equity Compensation | $ | 431,724 | $ | 0 | $ | 978,842 | $ | 112,834 | ||||||||
| Jeffrey E. DuBois* | ||||||||||||||||
| Cash Compensation | n/a | n/a | n/a | n/a | ||||||||||||
| Equity Compensation | n/a | n/a | n/a | n/a | ||||||||||||
| David Robbins | ||||||||||||||||
| Cash Compensation | $ | 0 | $ | 0 | $ | 1,182,663 | $ | 370,448 | ||||||||
| Equity Compensation | $ | 346,903 | $ | 0 | $ | 796,990 | $ | 96,782 | ||||||||
| Kathleen A. McEndy | ||||||||||||||||
| Cash Compensation | $ | 0 | $ | 0 | $ | 1,340,209 | $ | 386,001 | ||||||||
| Equity Compensation | $ | 94,533 | $ | 0 | $ | 774,379 | $ | 88,818 | ||||||||
South Jersey Industries, Inc. - |
Executive Compensation Tables
Involuntary Termination/ Good Reason | ||||||||||||||||||
Retirement ($) | For Cause ($) | Following a CIC(1) ($) | Without a CIC(2) ($) | Death ($) | Disability ($) | |||||||||||||
Kenneth Lynch | ||||||||||||||||||
Cash Compensation and Other Benefits(4) | 567,293 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Cash Lump Sum | 490,200 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Pro-rata Bonus | 45,152 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Property Transfers | 31,941 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Financial and Tax Prep Services | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Equity Compensation(6) | 97,608 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Performance-based Restricted Stock Units | 84,188 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Time-based Restricted Stock Units | 13,420 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Life Insurance Death Benefits(7) | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Total Compensation | 664,901 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
| (1) | Amounts in this column represent the benefits the named executive officers would be entitled to receive in the event a transaction had occurred on December 31, 2019 that constituted a change in control (“CIC”) under the terms of the Officer ClC Agreements, 2015 Ominibus Equity Compensation Plan, equity award agreements, and other compensation plans. |
| (2) | Amounts in this column represent the benefits the named executive officers would be entitled to receive in the event of a qualifying termination under the terms of the Officer Severance Plan, the 2015 Omnibus Equity Compensation Plan, equity award agreements, and other compensation plans. |
| (3) | Amounts in this row represent cash payments for (a) lump sum severance, (b) pro-rated annual bonuses for the year of termination, and (c) COBRA reimbursements. Severance amounts in connection with a CIC are equal to three times (for Mr. Renna), and two-times (for other executives), the executive’s year end salary and average bonus paid for fiscal years 2016, 2017, and 2018; since Ms. Hernandez was hired in 2019, we used her target annual bonus to estimate her CIC severance. Severance amounts not in connection with a CIC are equal to one year of the executive’s year end salary. The pro-rated bonus amount in the CIC scenario is based on target performance results; in the retirement, death and disability scenarios, the bonus is based on actual performance through December 31, 2019. Assumes 36 months (for the CEO) and 24 months (for other executives) of COBRA reimbursements in the CIC Scenario; for involuntary terminations not in connection with a CIC assumes 12 months of COBRA reimbursements. |
| (4) | Amounts in this row represent the cash payments, pro-rated bonus, perquisites, and other property items paid in connection with the executive’s retirement from the Company as further described on pages 45 and 46. |
| (5) | Amounts in this row represent the value of accelerated or continued vesting of time and performance-based restricted stock units under the terms of the Officer CIC Agreements, Severance Plan, the 2015 Omnibus Equity Compensation Plan and equity award agreements. Awards, including accumulated dividend equivalent shares, have been valued using the closing sales price per share of the Company’s common stock on the NYSE on 12/31/2019 of $32.98. Values assume full vesting of all of the executive’s unvested time-based restricted stock units for involuntary/good reason terminations, and in the event of retirement, death and permanent disability. For performance-based restricted stock units, assumes full vesting at target performance levels for terminations in connection with a CIC and continued vesting in the retirement, death and permanent disability scenarios assuming no amounts would be earned for the 2017 awards and that the 2018 and 2019 grants will pay out at 100% of the target levels. |
| (6) | Amounts in this row represent the estimated value of accelerated or continued vesting of time and performance-based restricted stock units payable in connection with the executive’s retirement from the Company. Awards, including accumulated dividend equivalent shares, have been valued using the closing sales price per share of the Company’s common stock on the NYSE on the date of retirement from the Company, or $30.80 (as of 01/31/2020) for Ms. McEndy, and $32.05 (as of 04/01/2019) for Mr. Lynch. All unvested time-based restricted stock units vested in full on their respective termination dates and their performance-based restricted stock awards will remain outstanding and be settled at the end of the performance cycle. Assumes no amounts were earned for the 2017 performance-based awards and that the 2018 and 2019 grants will pay out at 100% of the target levels. PBRSUs can be earned from 50% of target shares granted if threshold performance is met and up to 200% of target shares granted if maximum performance is met. No shares are earned for performance below threshold performance level and any performance over the maximum will result in a 200% payout. |
| (7) | Reflects amounts payable through life insurance policies equal to 2 times the executive’s base salary. |
54 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Executive Compensation Discussion & AnalysisTables
Below is a description of the additional assumptions that were used in determining the payments in the tables above upon termination as of December 31, 2017:2019:
NEOs are entitled to pro-rated vesting of PBRSPBRSUs upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRS TBRSU
awards upon retirement, based on the applicable 3-year vesting period and achievement of the performance condition. The amounts for Messrs. Clark and Robbins represent the pro-rated value of outstanding shares from the 2016 and 2017 PBRS awards based on target level performance, and the pro-rated value of the 2015, 2016 and 2017 TBRS awards. The 2015 PBRS awards have been included based on actual performance. The amount for Ms. McEndy represents the pro-rated value of outstanding shares from the 2017 PBRS award based on target level performance, and the pro-rated value of the 2017 TBRS award, per the award agreement.
*Mr. DuBois retired from the position of Executive Vice President and Chief Operating Officer, SJI effective December 31, 2017.conditions.
In connection with his retirement, he was entitled to (i) a payout of his 2017 annual incentive award in the amount of $312,375, (ii) his company car, phone, computer, and tablet, with an aggregate fair market value of $20,123, as included in the Summary Compensation Table and (iii) a pro-rated payout of all outstanding shares of restricted stock, based on his service during the applicable performance period and the actual performance achieved. Assuming a pro-rated payout at actual performance for the 2015 PBRS awards, a pro-rated payout at target level for the 2016 and 2017 outstanding PBRS awards, a pro-rated payout at actual performance for the 2015, 2016, and 2017 TBRS awards, and using the market value of the Company’s common stock as of December 31, 2017 of $31.23, the value of the outstanding restricted stock awards would be $528,880. Mr. DuBois is also entitled to certain pension benefits as described under the Pension Benefits Table.
Change in Control (CIC)
A change in control generally means any of the following: (1)
majority different from the current slate, unless each such new director stands for election as a management nominee and is elected by shareholders immediately prior to the election of any such new majority; or (4)
Termination Following a Change in Control (Good Reason orWithout Cause) – The CIC Agreements include a modified cutback if any payments under the agreements (including any other agreements) would otherwise constitute a parachute payment under Section 280G of the Code so that the payments will be
limited to the greater of (i) the dollar amount which can be paid to the NEO without triggering an excise tax under Section 4999 of the Code or (ii) the greatest after-tax dollar amount after taking into account any excise tax incurred under Section 4999 of the Code with respect to such parachute payments.
Retirement – NEOs are entitled to pro-rated vesting of PBRSPBRSUs upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRSTBRSU awards upon retirement, based on the applicable 3-year vesting period and(and achievement of the performance condition. The amounts for Messrs. Clark and Robbins represent the pro-rated value of outstanding shares from the 2016 and 2017 PBRS awards based on target level performance, and the pro-rated value of the 2015, 2016 and 2017 TBRS awards. The 2015 PBRS awards have been included based on actual performance. The amount for Ms. McEndy represents the pro-rated value of outstanding shares from the 2017 PBRS award based on target level performance, and the pro-rated value of the 2017 TBRS award, per the award agreement.conditions.
Change in ControlControl – Upon a qualifying termination following a change in control, the award agreements currently provide that all unvested PBRSPBRSU awards that are outstanding vest and pay
at target level performance. TBRSTBRSU awards that are outstanding will
fully vest. A qualifying termination includes an involuntary termination without cause by the Company or a resignation for good reason by the NEO, each following a change in control. The amounts disclosed represent the value of outstanding 2015, 2016 and 2017 PBRS awards based on target level of performance and the value of 2015, 2016 and 2017 TBRS awards.
Termination Without a Change in ControlControl – Under the Officer Severance Plan, upon an NEO’s qualifying termination, TBRSTBRSU awards that are outstanding will fully vest. PBRSPBRSU awards that are outstanding are forfeited, in accordance with the terms of the award agreements. A qualifying termination includes an involuntary termination without cause for the Company or a resignation for good reason by the NEO, absent a change in control.
Stock Price – Assumed to be $31.23 based on the market value of the Company’s common stock as of December 31, 2017.
Compensation Discussion & Analysis
The ratio of our CEO’s compensation to our median employee’s compensation was calculated as required by the SEC pursuant to Item 402(u) of Regulation S-K. Consistent with the applicable rules we used reasonable estimates in the methodology used to identify our median employee. We determined our median employee based on 20172019 W-2 gross earnings for all individuals who were employed by the Company as of December 31, 2017,2019, excluding our CEO. This included all full-time and part-time employees of the Company aside from the CEO. Compensation was annualized for employees hired or on leaves of absence during the year.
After identifying Consistent with the applicable rules we used reasonable estimates in the methodology used to identify our median employee, weemployee.
We calculated the median employee’s total 20172019 compensation in the same way as
calculated for our NEOs in the Summary Compensation Table included in this Proxy Statement. Calculated in this manner, our median employee compensation was $157,088.$92,730. Our CEO’s total 20172019 compensation, as set forth in the Summary Compensation Table was $8,287,026.$6,346,963. Therefore, our CEO to median employee pay ratio was 53 to 1. As described in the Summary Compensation Table on page 38, Mr. Renna’s change in pension value and nonqualified compensation earnings for 2017 is not reflective of his compensation levels going forward. If we eliminated the change in pension value and nonqualified compensation earnings from our median employee and CEO’s total compensation, our CEO to median employee pay ratio would have been 3068 to 1.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 55 |
Executive Compensation Tables
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 20172019 relating to equity compensation plans of the Company pursuant to
which grants of restricted stock, restricted stock units, options or other rights to acquire shares may be made from time to time.
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | (b) Weighted average exercise price of outstanding options, warrants and rights ($) (1) | (c) Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) (#) | ||||||
Equity compensation plans approved by security holders (2) | 720,043 | — | 1,370,001 | ||||||
Equity compensation plans not approved by security holders | — | — | — | ||||||
Total 2015 Omnibus Equity Compensation Plan | 720,043 | — | 1,370,001 | ||||||
Equity Compensation Plan Information
| (a) | (b) | (c) | ||||||||||
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | Weighted average exercise price of outstanding options, warrants and rights ($) (1) | Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) (#) | |||||||||
| Equity compensation plans approved by security holders(2) | 455,127 | — | 1,820,541 | |||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
| Total 2015 Omnibus Equity Compensation Plan | 455,127 | — | 1,820,541 | |||||||||
| (1) |
| (2) | These plans include those used to make awards of |
56 | | South Jersey Industries, Inc. - |
The Audit Committee is responsible for recommending the appointment of the independent registered public accounting firm to the Board and is directly responsible for the compensation and oversight of the independent auditor. Annually, prior to making its recommendation, the Audit Committee considers the audit firm’s capabilities, effectiveness, industry experience, and use of technology and data analytics in its audits; knowledge of the Company including its personnel, processes, accounting systems and risk profile; tenure serving the Company; and independence, and other firms with comparable professional qualifications.
Deloitte & Touche LLP (“Deloitte”) is a top accounting firm with expertise in public utility accounting. Deloitte has been the Company’s, or its predecessor Company’s, auditor since 1948 giving it a unique understanding of Company’s businesses and personnel. The Audit Committee considered the impact of tenure on Deloitte’s independence and determined Deloitte remains independent as, among other factors, the lead engagement partner is required to rotate off the Company’s audit every 5 years. The current lead engagement partner will rotate off after the 2023 audit. Further, the Audit Committee pre-approves all audit and non-audit services and related compensation and monitors the potential impact on independence. Finally, the Company has a policy restricting hiring certain persons formerly associated with Deloitte into an accounting or financial reporting oversight role to help ensure Deloitte’s continuing independence.
During 2019, the audit services performed for the Company consisted of (1) audits of the Company’s and its subsidiaries’ financial statements and the effectiveness of the Company’s internal control over financial reporting, as required by the Sarbanes-Oxley Act of 2002, Section 404 and the preparation of
reports based on such audits related to filings with the Securities and Exchange Commission; and (2) services performed in connection with financing transactions.
The Audit Committee evaluates the quality of Deloitte’s services annually, considering the quality of their audit services, industry knowledge from an audit and tax perspective, continued independence, information from PCAOB inspection reports, and the Audit Committee’s discussions with management about Deloitte’s performance.
After considering all factors, the Audit Committee and the Board believe that the continued retention of Deloitte to serve as the Company’s Independent Registered Public Accounting Firm for 2020 is in the best interest of the Company and its shareholders. Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of Deloitte to our shareholders for ratification because we value the views of our shareholders on the Company’s Independent Registered Public Accounting Firm. If our shareholders fail to ratify the selection of Deloitte, it will be considered notice to the Board and Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee may select a different Independent Registered Public Accounting Firm at any time during the year if it determines such change would be in the best interests of the Company and our shareholders. Representatives of Deloitte will be at the meeting to respond to appropriate questions and make a statement if they wish.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the reappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.
South Jersey Industries, Inc. - 2020 Proxy Statement | | 57 |
A copy of the Company’s 20172019 Annual Report accompanies this proxy statement.Proxy Statement. The 20172019 Annual Report is not proxy-soliciting material or a communication by which any solicitation is made.
Upon written request of any person who on the record dateRecord Date for the Annual Meeting was a record owner of the Common Stock, or who represents in good faith that he or she was on that date a beneficial
owner of such stock and is entitled to vote at the Annual
Meeting, the Company will send to that person, without charge, a copy of its 20172019 Annual Report. Requests for this report should be directed to Ann T. Anthony, Vice President, Treasurer & ActingEdythe Nipper, Corporate Secretary, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
By Order of the Board of Directors,
VP, Treasurer & Acting Corporate Secretary
March 29, 201813, 2020
| | South Jersey Industries, Inc. - |
Annex A – Non-GAAP Measures
We define Economic Earnings as: Income from continuing operations, (i) less the change in unrealized gains and plus the change in unrealized losses on all derivative transactions; (ii) less realized gains and plus realized losses on inventory injection hedges, which relate to expected purchases of gas in storage to match the recognition of these gains and losses with the recognition of the related cost of the gas in storage in the period of withdrawal; and (iii) less the impact of transactions, contractual arrangements or other events where management believes period to period comparisons of SJI's operations could be difficult or potentially confusing. With respect to part (iii) of the definition, several items are excluded from Economic Earnings, including impairment charges, the impact of pricing disputes with third parties, costs to acquire ETG and ELK, costs to prepare to exit the Transaction Services Agreement (TSA), costs incurred and gains recognized on the sale of assets, customer credits related to the acquisition of ETG and ELK, Employee Retirement Incentive Program (ERIP) costs, severance and other employee separation costs and the impact of Tax Reform. See (A)-(H) in the table below.
Economic Earnings is a significant performance metric used by our management to indicate the amount and timing of income from continuing operations that we expect to earn after taking into account the impact of derivative instruments on the related transactions, contractual arrangements and other events that management believes make period to period comparisons of SJI's operations difficult or potentially confusing. Specifically regarding derivatives, we believe that this financial measure indicates to investors the profitability of the entire derivative related transaction and not just the portion that is subject to mark-to-market valuation under GAAP. We believe that considering only the change in market value on the derivative side of the transaction can produce a false sense as to the ultimate profitability of the total transaction as no change in value is reflected for the nonderivative portion of the transaction.
The following table presents a reconciliation of our income and earnings per share from continuing operations to Economic Earnings and Economic Earnings per share (in thousands, except per share data):
2019 | 2018 | 2017 | |||||||
Income (Loss) from Continuing Operations | $ | 77,189 | $ | 17,903 | $ | (3,404 | ) | ||
Minus/Plus: | |||||||||
Unrealized Mark-to-Market (Gains) Losses on Derivatives | 14,546 | (35,846 | ) | 14,226 | |||||
Realized Losses on Inventory Injection Hedges | — | — | 332 | ||||||
Loss on Property, Plant and Equipment (A) | 10,745 | 105,280 | 91,299 | ||||||
Net Losses from Legal Proceedings (B) | 2,336 | 5,910 | 56,075 | ||||||
Acquisition/Sale Costs (C) | 3,468 | 34,674 | 19,564 | ||||||
Customer Credits (D) | — | 15,333 | — | ||||||
ERIP and OPEB (E) | — | 6,733 | — | ||||||
Other (F) | 4,179 | — | 2,227 | ||||||
Income Taxes (G) | (9,423 | ) | (33,753 | ) | (70,834 | ) | |||
Additional Tax Adjustments (H) | — | — | (11,420 | ) | |||||
Economic Earnings | $ | 103,040 | $ | 116,234 | $ | 98,065 | |||
Earnings (Loss) per Share from Continuing Operations | $ | 0.84 | $ | 0.21 | $ | (0.04 | ) | ||
Minus/Plus: | |||||||||
Unrealized Mark-to-Market (Gains) Losses on Derivatives | 0.16 | (0.42 | ) | 0.18 | |||||
Realized Losses on Inventory Injection Hedges | — | — | — | ||||||
Loss on Property, Plant and Equipment (A) | 0.12 | 1.24 | 1.14 | ||||||
Net Losses from Legal Proceedings (B) | 0.02 | 0.07 | 0.70 | ||||||
Acquisition/Sale Costs (C) | 0.04 | 0.41 | 0.25 | ||||||
Customer Credits (D) | — | 0.18 | — | ||||||
ERIP and OPEB (E) | — | 0.08 | — | ||||||
Other (F) | 0.04 | — | 0.03 | ||||||
Income Taxes (G) | (0.10 | ) | (0.39 | ) | (0.89 | ) | |||
Additional Tax Adjustments (H) | — | — | (0.14 | ) | |||||
Economic Earnings per Share | $ | 1.12 | $ | 1.38 | $ | 1.23 | |||
| (A) | Represents impairment charges taken as follows: in 2019 on solar generating facilities along with the agreement to sell MTF and ACB, which were both driven by the expected purchase prices being less than the carrying value of the assets; in 2018 on solar generating facilities, which was also primarily driven by the purchase price in the agreement to sell solar assets being less than the carrying amount of the assets, along with LFGTE assets, which was primarily driven by the remaining carrying value of these assets no longer being recoverable; and in 2017 on solar generating facilities, LFGTE long-lived assets, LFGTE assets customer relationships, and goodwill. |
South Jersey Industries, Inc. - 2020 Proxy Statement | | 59 |
| (B) | Represents net losses from three separate legal proceedings: (a) charges in 2017, 2018 and 2019, including interest, legal fees and the realized difference in the market value of the commodity (including financial hedges) resulting from a ruling in a legal proceeding related to a pricing dispute between SJI and a gas supplier that began in October 2014; (b) a charge in 2017, including legal fees, resulting from a settlement with a counterparty over a dispute related to a three-year capacity management contract; and (C) a gain taken in 2017 resulting from a favorable FERC decision, including interest, over a tariff rate dispute with a counterparty, whereby SJI contended that the counterparty was overcharging for storage demand charges over a ten-year period. |
| (C) | ||
| certain SREC’s. | ||
| (D) | Represents credits to ETG and ELK customers that were required as part of the Acquisition. |
| (E) | Represents costs incurred on the Company’s ERIP as well as the benefit of amending the Company’s OPEB. |
| (F) | Represents severance and other employee separation costs taken in 2019. Included in this amount in 2017 are amendments made to an existing interest rate derivative linked to unrealized losses previously recorded in AOCL |
| (G) | Determined using a combined average statutory tax rate of approximately 26%, 25% and 39% for 2019, 2018 and 2017, respectively. |
| (H) | Represents one-time tax adjustments, most notably for Tax Reform. |
60 | | South Jersey Industries, Inc. - 2020 Proxy Statement |
Please note the meeting location!
Directions to the Resorts Casino HotelThe Westin Mount Laurel
for the Annual Meeting of Shareholders
Resorts Casino Hotel, The AtlanticWestin Mount Laurel, The Grand Ballroom,1133 Boardwalk, Atlantic City,555 Fellowship Road, Mount Laurel, New Jersey 08054
| 9:00 a.m. - | meeting begins |
10:00 a.m. - | meeting adjourns |
Admission to the Meeting:
Attendance at the Annual Meeting will be limited to shareholders as of the record date,Record Date, their authorized representatives and guests of SJI. Guests of shareholders will not be admitted unless they are also shareholders as of the record dateRecord Date.. If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket.
Although we intend to hold our annual meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to attend our annual meeting in person, we encourage you to attend online at www.virtualshareholdermeeting.com/SJI2020. If you attend online, you will be able to vote your shares and submit questions by following the instructions on the website. We reserve the right to convert to a virtual only meeting format should meeting in person become unsafe as a result of COVID-19. If we convert to a virtual only online meeting we will post a notification at sjindustries.com as soon as possible.
Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken by South Jersey Industries at the 20182020 Annual Shareholders’ Meeting may be used by South Jersey Industries. By attending the 20182020 Annual Shareholders’ Meeting, you will be agreeing to South Jersey Industries’ use of those photographs and waive any claim or rights with respect to those photographs and their use.
From East
DIRECTIONS TO RESORTS CASINO HOTEL IN ATLANTIC CITY
From Philadelphia
Cross the Benjamin Franklin Bridge or Walt Whitman Bridge and follow the North-South Freeway (Route 42) to the Atlantic City Expressway. At the base ofFollow the Atlantic City Expressway turn leftWest to Exit 31, New Jersey 73 toward Winslow/Blue Anchor. Merge onto Pacific Avenue. Continue to North Carolina Avenue.NJ 73 North. Go through one roundabout. Turn right onto Fellowship Road. The hotel entrance is on the left.
From West
Follow New Jersey 73 South toward the New Jersey Turnpike/Marlton/Berlin. Turn right onto Fellowship Road. The hotel entrance is on the left.
From Philadelphia Airport
Proceed on PA-291 East toward Valley Forge. Continue on PA-291/Penrose Avenue. Merge onto Penrose Avenue. Take I-76 East toward Walt Whitman Bridge. Take Exit 1B to I-295 North Carolina to Resorts.toward Trenton/New Jersey Turnpike. Continue on Trenton/New Jersey Turnpike and take RT 73 South. Turn right onto Fellowship Road. The hotel entrance is on the left.
From Delaware (South)
Follow Interstate 295, which becomes the New Jersey Turnpike. Take Exit 4, New Jersey 73 toward Camden / Philadelphia. Merge onto NJ 73 North. Turn right onto Fellowship Road. The hotel entrance is on the left.
From New YorkNorth
TakeFollow the New Jersey Turnpike to the Garden State Parkway (Exit 11). Proceed south on the ParkwaySouth to Exit 38 (Atlantic City Expressway). Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to North Carolina Avenue.4, New Jersey 73. Turn right onto North Carolina to Resorts.
From Baltimore/Washington D.C.
Take I-95 North across the Delaware Memorial Bridge and follow Route 40 East to the Atlantic City Expressway. Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Pacific Avenue. Continue to North Carolina Avenue.NJ 73 North. Turn right onto North Carolina to Resorts.
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Admission Ticket
2018 Annual MeetingFriday, May 11, 2018 at 9:00 AM Eastern TimeResorts Casino HotelAtlantic Ballroom, 1133 Boardwalk, Atlantic City, NJ 08401
Fellowship Road. The top portion of this proxy cardhotel entrance is your admission ticket for entry into the Annual Meeting of Shareholders.
Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken at the 2018 Annual Shareholders’ Meeting may be used by South Jersey Industries. By attending the 2018 Annual Shareholders’ Meeting, you will be agreeing to South Jersey Industries’ use of those photographs and waive any claim or rights with respect to those photographs and their use.
DIRECTIONS TO RESORTS AC IN ATLANTIC CITY
From Philadelphia
Cross the Benjamin Franklin Bridge or Walt Whitman Bridge and follow the North-South Freeway (Route 42) to the Atlantic City Expressway. At the base of the Atlantic City Expressway, turn left onto Pacific Avenue. Continue to North Carolina Avenue. Turn right onto North Carolina to Resorts.
From New York
Take the New Jersey Turnpike to the Garden State Parkway (Exit 11). Proceed south on the Parkway to Exit 38 (Atlantic City Expressway). Take the Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to North Carolina Avenue. Turn right onto North Carolina to Resorts.left.
From Baltimore/Washington D.C.
Take I-95 North across the Delaware Memorial Bridge and follow Route 40 East to the Atlantic City Expressway. Take the Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Pacific Avenue. Continue to North Carolina Avenue. Turn right onto North Carolina to Resorts.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:TABLE OF CONTENTS
The Notice and Proxy Statement, Form 10-K and Annual Report are available at www.proxyvote.com.
E43904-P01253
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