UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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2014 | ||
PSEG | ||
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Statement |
Public Service Enterprise Group Incorporated
80 Park Plaza, P.O. Box 1171, Newark, New Jersey 07101-1171
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 16, 2013
AND
PROXY STATEMENT
To the Stockholders of Public Service Enterprise Group Incorporated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Public Service Enterprise Group Incorporated will be held at the New Jersey Performing Arts Center, One Center Street, Newark, New Jersey, on April 16, 2013, at 1:00 P.M., for the following purposes:
Date | April 15, 2014 at 1:00 P.M. | |||
Location | The New Jersey Performing Arts Center One Center Street Newark, New Jersey 07102 | |||
Items of Business | 1. | Elect ten members of the Board of Directors to hold office until the Annual Meeting of Stockholders in |
2. | Consider and act upon an advisory vote on the approval of executive compensation; |
3. | Consider and act upon |
4. |
Consider and act upon the ratification of the appointment of Deloitte & Touche LLP as independent auditor for |
5.
Transact such other business as may properly come before the meeting or any adjournment or postponement thereof. | ||||
Record Date | Stockholders entitled to vote at the meeting are the holders of Common Stock of record on February 14, 2014. |
Stockholders entitled to vote at the meeting are the holders of Common Stock of record on February 15, 2013.
By order of the Board of Directors,
Scan thisQR Code to view the 2014 PSEG Proxy Statement and Annual Report on your mobile device. | By order of the Board of Directors, | |||||
M. Courtney McCormick Secretary March 3, 2014 |
M. Courtney McCormick
Secretary
February 27, 2013
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders
to be Held on April 16, 2013:15, 2014: The Proxy Statement and Annual Report to Stockholders are available at
www.ezodproxy.com/pseg/2013/pseg2012ar2014/pseg2013ar
IMPORTANT! YOUR VOTE IS YOU MAY HAVE MULTIPLE ACCOUNTS AND THEREFOR RECEIVE MORE THAN ONE PROXY CARD OR VOTING INSTRUCTION FORM AND RELATED MATERIALS. PLEASE VOTE EACH PROXY CARD AND VOTING INSTRUCTION FORM THAT YOU RECEIVE. THANK YOU FOR VOTING. |
The approximate date on which this Proxy Statement and the accompanying proxy card were first sent or given to security holders and made available electronically via the Internet was March 8, 2013.10, 2014.
TABLE OF CONTENTS
TABLE OF CONTENTS |
PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
TABLE OF CONTENTS
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PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
TABLE OF CONTENTS |
Forward-Looking Statements
The statements contained in this Proxy Statement about usour and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on information currently available and on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from theany forward-looking statements made herein. A discussion of some of these risks and uncertainties is contained in our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission (SEC), and available on our website:http://www.pseg.com. These documentsreports address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this Proxy Statement. In addition, any forward-looking statements included herein represent our estimates only as of the date hereof and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our internal estimates change, unless otherwise required by applicable securities laws.
PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
PROXY STATEMENT SUMMARY |
PROXY STATEMENT SUMMARY
OUR COMPANY
Public Service Enterprise Group Incorporated (we, us, our, PSEG or the Company) is distributing this Proxy Statement in connection with our 20132014 Annual Meeting of Stockholders. We are a holding company that directly owns fourfive subsidiaries:
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PSEG Energy Holdings L.L.C. (Energy Holdings), an owner of energy-related investments; and PSEG Services Corporation (Services), which provides management and administrative services to us and our subsidiaries.
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ANNUAL MEETING PROPOSALS
Proposals | Proposals | Board Recommendation | Page Number for More Information | Proposals | Board Recommendation | Page Number for More Information | ||||||||||||
1. |
Election of Directors – vote to elect director nominees to serve one-year terms. |
FOR |
8 | Election of Directors –vote to elect ten director nominees to serve one-year terms.
| FOR | 9 | ||||||||||||
2. |
Approval of Executive Compensation – advisory vote to approve the executive compensation of the named executive officers. |
FOR |
30 | Approval of Executive Compensation –advisory vote to approve the executive compensation of the named executive officers.
| FOR | 32 | ||||||||||||
3. |
2004 Long-Term Incentive Plan – approve proposed amendment and restatement of our 2004 Long-Term Incentive Plan. |
FOR |
68 | |||||||||||||||
3(a). | Approval of Amendments to our Certificate of Incorporation – to eliminate supermajority voting requirements for certain business combinations.
| FOR | 68 | |||||||||||||||
3(b). | Approval of Amendments to our Certificate of Incorporation and By-Laws -to eliminate supermajority voting requirements to remove a director without cause.
| FOR | 68 | |||||||||||||||
3(c). | Approval of Amendment to our Certificate of Incorporation –to eliminate supermajority voting requirement to make certain amendments to our By-Laws.
| FOR | 68 | |||||||||||||||
4. |
Employee Stock Purchase Plan – approve proposed amendment and restatement of the PSEG Employee Stock Purchase Plan. |
FOR |
72 | Ratification of Auditor –ratification of the appointment of Deloitte & Touche LLP as independent auditor for 2014.
| FOR | 70 | ||||||||||||
5. |
Ratification of Auditor – ratification of the appointment of Deloitte & Touche LLP as independent auditor for 2013. |
FOR |
75 | |||||||||||||||
6. |
Stockholder Proposal – stockholder proposal requesting elimination of voting requirements that calls for a greater than simple majority vote. |
AGAINST |
77 |
VOTING AND PROCEDURES
Voting is strongly encouraged. We urge you to sign, date and return the accompanying proxy card whether or not you plan to attend the Annual Meeting. For stockholders of record, we have provided several alternative methods for voting, including voting via the Internet or the toll-free telephone number listed below.
Annual Meeting For shares held by a bank or broker, please follow the voting instructions you receive from each of Stockholdersthem. Most banks and brokers are likely to provide you with methods for internet or toll-free telephone voting.
Annual Meeting of Stockholders | ||||
Date and Time | April | |||
Location | The New Jersey Performing Arts Center (NJPAC), One Center Street, Newark, | |||
Record Date | February Holders of Common Stock outstanding on the record date will have one vote per |
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 1
PROXY STATEMENT SUMMARY |
Voting Methods
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PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement 1
PROXY STATEMENT SUMMARY
To Submit Proposals for 2014 Annual Meeting
Final Date | November | |||
Contact | Corporate Secretary, PSEG, 80 Park Plaza, T4B, P.O. Box 1171 Newark, New Jersey 07101-1171 |
NOMINEES FOR ELECTION AS DIRECTOR
Name | Age | Director Since | Primary Occupation | Committee Memberships | Other Public Company Boards | Age
| Director
| Primary Occupation
| Committee
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Other Public
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Albert R. Gamper, Jr. | 71 | 2000 | Retired Chairman of the Board and CEO of CIT Group | Lead Director, A, E, F | 1 | 72 | 2000 | Retired Chairman of the Board and CEO of CIT Group | Lead Director, A, E, F | 1 | ||||||||||||||||
William V. Hickey | 68 | 2001 | Chairman of the Board and CEO of Sealed Air Corporation | F, FG (Chair), NG (Chair), O | 2 | 69 | 2001 | Retired Chairman of the Board and CEO of Sealed Air Corporation | F(Chair), FG, NG, O | 1 | ||||||||||||||||
Ralph Izzo | 55 | 2006 | Chairman of the Board, President and CEO of PSEG | E (Chair) | 0 | 56 | 2006 | Chairman of the Board, President and CEO of PSEG | E (Chair) | 1 | ||||||||||||||||
Shirley Ann Jackson | 66 | 2001 | President of Rensselaer Polytechnic Institute | E, F (Chair), FG, NG, O | 4 | 67 | 2001 | President of Rensselaer Polytechnic Institute | E, F, FG (Chair), NG (Chair), O | 4 | ||||||||||||||||
David Lilley | 66 | 2009 | Retired Chairman of the Board, President and CEO of Cytec Industries | A (Chair), F, O | 2 | 67 | 2009 | Retired Chairman of the Board, President and CEO of Cytec Industries | A (Chair), F, O | 2 | ||||||||||||||||
Thomas A. Renyi | 67 | 2003 | Retired Executive Chairman of The Bank of New York Mellon | A, CG (Chair), O | 1 | 68 | 2003 | Retired Executive Chairman of The Bank of New York Mellon | A, CG (Chair), O | 2 | ||||||||||||||||
Hak Cheol (H.C.) Shin | 55 | 2008 | Executive Vice President – International Operations of 3M Company | A, CG, FG, NG | 0 | 56 | 2008 | Executive Vice President – International Operations of 3M Company | A, CG, FG, NG | 0 | ||||||||||||||||
Richard J. Swift | 68 | 1994 | Retired Chairman of the Board, President and CEO of Foster Wheeler | CG, E, FG, NG, O (Chair) | 4 | 69 | 1994 | Retired Chairman of the Board, President and CEO of Foster Wheeler | CG, E, FG, NG, O (Chair) | 4 | ||||||||||||||||
Susan Tomasky | 60 | 2012 | Retired President – AEP Transmission of American Electric Power Corporation | A, CG | 2 | 61 | 2012 | Retired President – AEP Transmission of American Electric Power Corporation | A, CG | 2 | ||||||||||||||||
Alfred W. Zollar | 58 | 2012 | Retired General Manager – Tivoli Software Division of IBM Corporation | F, FG, NG | 1 | 59 | 2012 | Retired General Manager – Tivoli Software Division of IBM Corporation | F, FG, NG | 1 |
A=Audit CG=Corporate Governance E=Executive F=Finance FG=Fossil Generation NG=Nuclear Generation O=Organization and Compensation
We believe that our directors are a diverse group of highly qualified leaders with a broad range of business, industry, academic and public service experience. Their skills in the areas of accounting, finance, construction, consumer products, sales, government, law, operations, management, science, technology and risk management serve us well.
2 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
PROXY STATEMENT SUMMARY |
CORPORATE GOVERNANCE
We have adopted what we believe are strong corporate governance standards and practices to assure effective management by our executives and oversight by our Board of Directors (Board). These measures include the following:
Independent Directors |
| Risk Management | Code of Ethics | |||
The Board has established standards for director independence, which are set forth in our Corporate Governance Principles (Principles). All of our current directors and nominees are independent under our Principles and the requirements of the New York Stock Exchange (NYSE), except Ralph Izzo, our Chairman of the Board, President and Chief Executive Officer (CEO), who is an employee of the Company. |
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2 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
PROXY STATEMENT SUMMARY
BUSINESS PERFORMANCE
In 2012, our financial results continuedOur business plan is designed to be adversely impacted by lowermanage the risks associated with fluctuations in commodity prices for electricity and natural gaschanges in the marketsconsumer demand as we serve, while uncertainty concerninginvest to achieve growth in light of market, regulatory and environmental policies dampened investor returns. Electricity prices remained low due to a combination of a decline in demand growth and sustained low natural gas prices. The slow economic recovery has negatively impacted utility sales, as well as prices in the wholesale energy and capacity markets in whichtrends. In 2013, we operate. The continued decline in wholesale natural gas prices, resulting from greater supply from shale production, further contributed to the continuing decline in the wholesale price of electricity.
In response to the challenging conditions facing our industry, we remained committed to our strategy of pursingfocus on operational excellence, financial strength and disciplined investment. We endedThese guiding principles have provided the yearbase from which we have been able to execute our strategic initiatives, including:
Compared to the prior year, year over year earnings were lower, but within our targeted range and the price of our Common Stock was lower at year end. While power prices declined approximately 24% from 2011 to 2012, through executing our strategy the decline in our earnings was, in comparison, approximately 15% during the same period.
Financial Highlights
YE 2012 ($ 000’s) | YE 2011 ($ 000’s) | |||||||||||||||||||
Dollars in Millions, except per share amounts |
2013 ($) |
2012 ($) | ||||||||||||||||||
Total Revenues | 9,781 | 11,079 | 9,968 | 9,781 | ||||||||||||||||
Income from Continuing Operations | 1,275 | 1,407 | 1,243 | 1,275 | ||||||||||||||||
Net Income | 1,275 | 1,503 | 1,243 | 1,275 | ||||||||||||||||
Total Assets | 31,725 | 29,821 | 32,522 | 31,725 | ||||||||||||||||
Earnings Per Share - Diluted | ($) | ($) | ||||||||||||||||||
Income from Continuing Operations | 2.51 | 2.77 | 2.45 | 2.51 | ||||||||||||||||
Net Income | 2.51 | 2.96 | 2.45 | 2.51 | ||||||||||||||||
Dividends Paid per Share | 1.42 | 1.37 | 1.44 | 1.42 | ||||||||||||||||
Market Price per Share | 30.60 | 33.01 | ||||||||||||||||||
Market Price per Share - Year-end | 32.04 | 30.60 |
For a more comprehensive assessment of the Company’s performance, please review the entire Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 20122013 (Form 10-K).
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 3
PROXY STATEMENT SUMMARY |
EXECUTIVE COMPENSATION
Compensation Philosophy
We have designed a competitive performance-oriented executive compensation program that we believe helps us recruit and retain top talent while closely linking pay to performance, which we benchmark to industry peers.performance. We seek to align the interests of our executive officers, including our CEO and the Named Executive Officers (NEOs) reported in this Proxy Statement, with those of our stockholders through performance-oriented short-term and long-term incentive opportunities. Ultimate payment dependsThese pay-at-risk incentives are targeted to pay out at approximately the benchmarked industry peer median when we deliver on our goals. Amounts earned under our Senior Management Incentive Compensation Plan (SMICP) and Amended and Restated 2004 Long-Term Incentive Plan (LTIP) depend upon performance, measured against financial and other business results, utilizing internal targets and relevant peer group comparisons.
In setting and overseeing executive compensation, our Board utilizes an independent compensation consultant which provides no otheronly compensation services to us.the Board. A detailed discussion of our executive compensation program, including its elements, the factors we use in determining compensation and our governance features, appears below in the Compensation Discussion and Analysis (CD&A).
We have adopted executive compensation governance measures that we believe support good governance practices and further align our executive’s interests with those of stockholders, including:
Our program provides the following compensation:
Base |
• | Experience, performance and competitive market. | |||||
Annual cash incentive |
PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement 3
PROXY STATEMENT SUMMARY
• • | Multiple performance measures with emphasis on EPS as the corporate objective; and Payment from zero to 150% of target percentage of salary, and up to 200% for exceptional performance. | |||||
Equity-based incentive awards under our |
• | 60% performance share units (PSUs), with payment, if any, measured over a three-year period against Return on Invested Capital (ROIC) and relative Total Shareholder Return (TSR), with the opportunity to earn between zero and 200% of target based on performance; and |
• | 40% restricted stock units (RSUs), which cliff vest at the end of three years. |
Market-based retirement and post-employment benefits |
We have adopted executive compensation governance measures, including:
• | Double trigger change-in-control provisions; and No excise-tax gross-ups. |
4 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
PROXY STATEMENT SUMMARY |
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Pay for Performance
We believe that our pay for performance philosophy is critical to our continued success and that our program effectively focuses our executives on creating sustained stockholder value without encouraging excessive risk. By emphasizing incentive-based compensation, our CEO and NEOs will be rewarded based upon our achieving financial and operating results, with the ultimate payout of a significant portion of their total compensation determined relative to the achievement of our goals. For 2013, the target annual and long-term incentive pay for our CEO was 88%86% and the average target annual and long-term incentive pay for our NEOs was 71% of targeted total direct compensation, respectively.
When we compared our recent financial performance with the compensation of our CEO and NEOs, we found that the financial measures we examined were at approximately the median of our peer group of companies and our executive compensation was at or below the peer median. Thus, we concluded that our performance and executive compensation are appropriately aligned. Further, performance is reflected in the actual value of the one-year annual cash incentive payments and the three-year equity incentive compensation paid upon vesting of awards. awards:
These realized compensation amounts reflect the Option Exerciseseffect on earnings of our strategic initiatives and Stock Vested During 2012 Table.the rebalancing of our business mix.
The following table provides highlights of the compensation for our CEO and other NEOs in 20122013 as reported in the 20122013 Summary Compensation Table in this Proxy Statement. For the complete details of compensation, please review the entire Proxy Statement.
Base Salary | Equity Incentive Plan Compensation | Non-Equity Incentive Plan Compensation | Total Compensation | |||||||||||||||||||||||||||||
| 2012 | 2012 | 2012 | 2012 | ||||||||||||||||||||||||||||
NEO | ($) | ($) | ($) | ($)(1) | Base Salary
($) |
Equity Incentive Plan 2013
($) | Non-Equity Incentive
($) | Total
($)(1) | ||||||||||||||||||||||||
Ralph Izzo | 1,004,715 | 5,724,001 | 1,653,800 | 10,513,543 | 1,092,615 | 6,367,186 | 1,874,400 | 9,400,649 | ||||||||||||||||||||||||
Caroline Dorsa | 595,691 | 1,099,985 | 567,900 | 3,678,237 | 617,686 | 1,199,928 | 589,800 | 2,971,021 | ||||||||||||||||||||||||
William Levis | 560,377 | 1,099,985 | 546,200 | 2,989,703 | 565,485 | 2,223,214 | 607,600 | 3,582,160 | ||||||||||||||||||||||||
Randall E. Mehrberg | 553,414 | 924,182 | 499,400 | 2,716,866 | ||||||||||||||||||||||||||||
Randall E. Mehrberg(2) | 549,595 | 1,029,280 | 495,400 | 2,143,929 | ||||||||||||||||||||||||||||
J. A. Bouknight, Jr. | 535,570 | 849,495 | 461,300 | 1,926,914 | 544,922 | 943,788 | 496,700 | 2,070,969 | ||||||||||||||||||||||||
Ralph A. LaRossa | 497,142 | 824,611 | 400,700 | 2,332,861 | 499,078 | 943,788 | 438,800 | 1,946,149 |
(1) Reflects all compensation, including change in pension value and all other, as reported in the 2013 Summary Compensation Table.
(2) Retired on December 2, 2013.
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Key Recent Executive Compensation Actions
In overseeing our executive compensation program, our Organization and Compensation Committee (O&CC), working with its consultant, continued to emphasize our results oriented philosophy. During 2012,2013, we:
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Confirmed the pay for performance alignment of executive compensation with financial results and approved benchmarked salaries, incentive awards and payouts in accordance with established criteria; and Increased the stock ownership guideline for the CEO from 5x to 6x base salary to better align with market. For a more comprehensive discussion, see our CD&A. |
4 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement 5
ANNUAL MEETING, VOTING AND PROCEDURES |
ANNUAL MEETING, VOTING AND PROCEDURES
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This Proxy Statement is furnished by PSEGus on behalf of the Board. We are soliciting proxies to be voted at the 20132014 Annual Meeting of Stockholders scheduled to be held on April 16, 201315, 2014 and at all adjournments or postponements of that meeting.
The mailing address of our principal executive offices is 80 Park Plaza, P.O. Box 1171, Newark, New Jersey 07101-1171, telephone (973) 430-7000. Our Internet website iswww.pseg.com.
In an effort to encourage stockholder voting, we have structured our Proxy Statement in an easy-to-read format. After describing each proposal, we provide the related information for you to consider in voting. Accordingly:
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Proposal 4.Ratification of the Appointment of Independent Auditor(page 70) is followed by our Audit Committee Report and disclosure of our Independent Auditor’s fees.
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We have provided without charge to each person solicited by means of this Proxy Statement a copy of our Form 10-K, which has been filed with the Securities and Exchange Commission (SEC). Each such copy of the Form 10-K does not include any exhibits thereto, but is accompanied by, including a list briefly describing all suchthe related exhibits. We will furnish any such exhibit upon request. Any such You may request should be made incopies of the exhibits by writing to: Vice President-Investor Relations, Public Service Enterprise Group Incorporated, 80 Park Plaza, T6B, P.O. Box 1171, Newark, New Jersey 07101-1171. The Form 10-K is also available on our websitewww.pseg.com/info/investors/financial_info/index.jsp.
Delivery of Documents and Internet Availability
Each stockholder receives his or her own proxy card by which to vote. In future years, we intend to sendWe have sent only a single copy of each of our Annual Report to Stockholders, in which we will includeincluding our Form 10-K, and Proxy Statement, to any household at whichwith two or more stockholders reside if they appear to be members ofhaving the same family,last name and address unless one of the stockholders at that address notifies us to requesthas requested individual copies. This “householding” saves our company printing and delivery costs. If you share an address with another stockholder and receive only a single copy of one of those documents, we will send you may request an additional copy if you send a written requestby writing to the above address noted above or phonecontacting us at (973) 430-6566.
OurStockholders may choose to no longer receive printed copies of our Annual Report, to Stockholders, Form 10-K and Proxy Statement are availableand instead receive and view them electronically over the Internet.internet. If you are a stockholder of record and would like to receive these documents, as well as other stockholder communications and materials, electronically in the future and save our companyus the cost of producing and mailing them to you, you may do so by following the instructions atwww.ematerials.com/www.proxypush.com/peg. If your shares are held in the name of a bank or broker, please follow that organization’s instructions for electronic delivery. You may also follow the instructions provided for future electronic delivery if you vote via the Internet.
If you receive our future Proxy Statements, Annual Reports and Forms 10-K electronically over the Internet, you will receive each year an e-mail message containing the Internet address to access these documents. The e-mail will also include instructions for voting via the Internet as you will not receive a separate proxy card.
This year, due to a change of our registrar and transfer agent, we are not able to provide “householding” or electronic delivery.
6 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement 5
ANNUAL MEETING, VOTING AND PROCEDURES
ANNUAL MEETING, VOTING AND PROCEDURES |
Attendance
Our Annual Meeting will be held on Tuesday, April 16, 2013 at 1:00 P.M., at the NJPAC in Newark, New Jersey. We request that if you plan to attend the Annual Meeting, you should so indicate on the proxy card or when voting your shares telephonically or electronically. We have included transportation information and a map on the back cover of this Proxy Statement.Please bring with you evidence that you are a stockholder.
Holders of record of the 505,961,739506,164,959 shares of Common Stock outstanding on February 15, 201314, 2014 will have one vote per share. A quorum will consist of the holders of Common Stock entitled to cast a majority of the votes at the Annual Meeting, present in person or represented by proxy. All votes cast by proxy or in person will be counted. Abstentions and broker non-votes will not be counted, except for the purpose of establishing a quorum. All votes will be tabulated by an independent inspector of elections.
Election of directors under Proposal 1 is subject to our majority vote requirement described below. The say-on-pay vote presented in Proposal 2 is advisory and non-binding, whether or not approved by a majority of the votes cast. The approval of the respective amendment and restatement of each of the LTIPamendments to our Certificate of Incorporation and ESPP under Proposal 3By-Laws set forth in Proposals 3(a), 3(b) and Proposal 4, respectively, requires receipt3(c) must receive a favorable vote of a majorityat least 80% of the votes cast with respectoutstanding shares eligible to each.vote to be approved. A majority of the votes cast is needed for the Proposal 5 ratification of the auditor. The stockholder proposal contained inauditor under Proposal 6 must receive a majority of the votes cast to be approved, but is non-binding on us. Any change to our governing documents as set forth in Proposal 6 would require additional action by our Board and our stockholders, as described further below.4.
Proxy Card and Voting of Shares
Every vote is important. We urge you to vote whether or not you plan to attend the Annual Meeting. Kindly sign, date and return the accompanying proxy card or, if you are a stockholder of record, you may vote your proxy using the toll-free telephone number listed on the proxy card or via the Internet at the electronic address provided above and also listed on the proxy card. When a proxy card is returned properly dated and signed, or properly voted telephonically or electronically, the shares represented by the proxy will be voted by the persons named as proxies in accordance with the voting stockholder’s directions.
You may specify your choices by marking the appropriate boxes on the enclosed proxy card. The proxy card also includes any shares registered in the names shown on the proxy in Enterprise Direct (our dividend reinvestment and stock purchase plan) and the PSEG ESPP.. If a proxy card is dated, signed and returned without specifying choices, the shares will be voted as recommended by the Board. If you vote telephonically or electronically, you should follow the directions given during the call or on the computer screen. If you are a stockholder of record, your shares will not be voted unless you provide a proxy by return mail, telephonically or electronically or vote in person at the Annual Meeting. However, ifIf you are participant in the PSEG Employee Stock Purchase Plan (ESPP), you will receive a separate direction card from the administrator of the plan. If no instructions are received from you with respect to any shares held in Enterprise Direct or the ESPP, the respective administrator of that plan will vote those shares in accordance with the recommendations of the Board.
If you are a participant in the PSEG Thrift and Tax-Deferred Savings Plan or the PSEG Employee Savings Plan of PSEG (PSEG Savings Plans) or either of the two Incentive Thrift Plans (Incentive Thrift Plans) of Long Island Electric Utility Servco LLC, a subsidiary of PSEG LI, you will receive a separate direction card from the respective plan’s trustee for shares that have been allocated to your accounts. The trustee will vote the shares of Common Stock beneficially owned by you under the respective plan in accordance with your instructions. If no instructions are received with respect to the PSEG Savings Plans, the shares will not be voted. If no instructions are received with respect to the Incentive Thrift Plans, the respective trustee will vote your shares in the same proportion as those shares as to which it receives instructions from other participants in the plan in which you participate.
If your shares are held in the name of a bank or broker, you should follow the voting instructions on the form received from your bank or broker. For such shares, while the availability of telephone or Internet voting will depend on the voting processes of your bank or broker. Ifbroker, we believe that most will make such voting methods available. In accordance with the rules of the NYSE, if no instructions are received from you by a bank or broker with respect to such shares, the shares may be voted by the bank or broker on certain of the proposals in this Proxy Statement at the discretion of the bank or broker in accordance with the rules of the NYSE. The NYSE rules provide that if no instructions are received from you, a bank or broker may use its discretion to vote your shares that are held by it only in regard to Proposal 5,4, Ratification of the Appointment of Independent Auditor.
A bank or broker may not vote your shares held by it in regard to Proposal 1. Election of Directors, Proposal 2. Advisory Vote on the Approval of Executive Compensation, Proposal 3. Approval of LTIP, Proposal 4. Approval of ESPP and Proposal 6. Shareholder Proposal on Simple Majority Voting, unless it receives instructions from you. If you do not provide instructions to your bank or broker as to how you wish to vote in respect of each of these matters, your shares will not be voted on these matters.
A bank or broker may not vote your shares held by it in regard to Proposal 1 - Election of Directors, Proposal 2 - Advisory Vote on the Approval of Executive Compensation, and Proposals 3(a), 3(b) and 3(c) – Amendments to Certificate of Incorporation and By-Laws, unless it receives instructions from you. If you do not provide instructions to your bank or broker as to how you wish to vote in respect of each of these matters, your shares will not be voted on these matters. |
6 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement 7
ANNUAL MEETING, VOTING AND PROCEDURES
ANNUAL MEETING, VOTING AND PROCEDURES |
If any matters not described in this Proxy Statement should properly come before the Annual Meeting, the persons named in the enclosed proxy card or their substitutes will vote proxies given in said form of proxy in respect of any such matters in accordance with their best judgment. As of the date of this Proxy Statement, the Board and management did not know of any other matters which might be presented for stockholder action at the Annual Meeting.
You may revoke a proxy given in the form of the card which accompanies this Proxy Statement or a vote made telephonically or electronically. However, by law, your presence at the Annual Meeting will not revoke a proxy you have given unless you file a written notice of such revocation with the Secretary of PSEG prior to the voting of the proxies at the Annual Meeting or you vote the shares subject to the proxy by written ballot.
The cost of soliciting proxies in the form accompanying this Proxy Statement will be borne by us. In addition to solicitation by mail, proxies may be solicited by our directors, officers and employees, none of whom will be directly compensated for such services, in person or by telephone, electronically or by facsimile. We have also retained Morrow & Co. to assist in the distribution and solicitation of proxies from brokers, bank nominees, other institutional holders and certain large individual holders. The anticipated cost of such services is approximately $13,500,$14,500, plus reimbursement of expenses.
Date for Submission of Stockholder Proposals
AnyIn accordance with SEC rules, stockholders may submit proposals intended for inclusion in the Proxy Statement in connection with our 20142015 Annual Meeting of StockholdersStockholders. Such proposals should be sent to: Corporate Secretary, Public Service Enterprise Group Incorporated, 80 Park Plaza, T4B, P.O. Box 1171, Newark, New Jersey 07101-1171, and must be received by November 8, 2013.7, 2014.
Discretionary Proxy Voting Authority
If any matters not described in this Proxy Statement are properly presented at the Annual Meeting, the persons named in the enclosed proxy card or their substitutes will vote proxies so given in respect of any such matters in accordance with their best judgment. As of the date of this Proxy Statement, the Board and management did not know of any other matters which might be presented for stockholder action at the Annual Meeting.
If we are not notified by January 22, 20142015 of any proposal intended to be presented for consideration at the 20142015 Annual Meeting of Stockholders, then the proxiespersons named by us with respect to that meeting shall have discretionary voting authority with respect to such proposal if presented at that meeting.Annual Meeting.
8 PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 7
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS |
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You are being asked to vote on the election of ten individuals nominated by your Board to serve as the Directors of our Company. In this Proxy Statement,Below, we are providing you withhave provided information about the Board, director independence, our leadership structure, risk management oversight, Board committees, code of ethics and related matters of corporate governance. We also describe our provisions for majority voting, our director qualifications, diversity and retirement criteria and theeach nominee’s specific experience, skills and qualifications of each nominee.qualifications. We also report to you information about security ownership and director compensation.As recommended by the Board, we ask you to vote forFOR all nominees.
Our business and affairs are managed by or under the direction of the Board, which delegates certain responsibilities to its committees and to management consistent with our By-Laws. The Board has adopted and operates under the Principles which reflect our current governance practices in accordance with applicable statutory and regulatory requirements, including those of the SEC and the NYSE. OurYou can request copies of our By-Laws and Principles are posted on our website,or view them atwww.pseg.com/info/investors/governance/index.jsp. We will send you a copy of either or both upon request.
The Board provides direction and oversight of the conduct of our business by management. In fulfilling these responsibilities, the Board performs the following principal functions:
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The Board has full and free access to all members of management and may hire its own consultants and advisors as it deems necessary.
Under our Principles and the requirements of the NYSE, the Board must consist of a majority of independent directors. The Board has established standards for director independence, which are set forth in the Principles.
8 PUBLIC SERVICE ENTERPRISE GROUP |20132014 Proxy StatementStatement 9
CORPORATE GOVERNANCE
Independence Standards
In order to be independent:
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These limitations apply for three years after the endThe Board annually reviews other commercial relationships of the applicable affiliation or arrangement.directors and determines whether any of those relationships are material relationships that impair a director’s independence.
The Board has determined that all of the current directors, and all of thewhom are nominees for election, as directors are independent under our Principles and the requirements of the NYSE, except Ralph Izzo, our Chairman of the Board, President and CEO. These determinations were based upon a review of the responses submitted by each director and nominee to questionnaires we provided to them, relevant business records, publicly available information and applicable SEC and NYSE requirements.
Under our By-Laws, our senior leadership may include a Chairman of the Board, a President and a CEO, which positions may be held by one person or may be divided between two different people. As provided in its charter, the Corporate Governance Committee has the responsibility to assess the structure of the Board and periodically evaluate the Board’s governance practices as well as the Principles. Building on the advice of the Corporate Governance Committee, the Board applies its experience and knowledge of our business to establish what it believes to be the most effective form of organization. In doing so, it utilizes its understanding of the challenges and opportunities we face and its evaluation of the individuals who are involved.
Based on that analysis and evaluation, the Board has determined that, at the present time and given our present officers and personnel, it is in the best interests of the Company and stockholders for a single individual to hold all three positions of Chairman of the Board, President and CEO. The Board believes that this strikes a desirable balance allowing us to benefit from the advantages of efficiency, coordination and accountability. Ralph Izzo currently holds these positions. As such, he has plenary powers of supervision and direction of our business and affairs and he also presides at all meetings of the Board and of stockholders. The Board believes that Mr. Izzo possesses the attributes of experience, judgment, vision, managerial skill and overall leadership ability essential for our continued success. Mr. Izzo’s in-depth knowledge and understanding of our strategy, operations, risk profile, regulatory and environmental circumstances and financial condition best position him to head our Board and provide leadership to management, employees, investors, customers, officials and the public. The diverse experience and independence of the other directors allows the Board to maintain effective oversight of operations, long-range planning, finances and risk management.
In addition to the Chairman, President and CEO, our leadership structure is designed to rely on the contributions of our Lead Director. The Lead Director provides the independent directors with a key means for collaboration and communication regarding Board agendas and the information directors receive from management. Importantly, all directors play an active role in overseeing the company’s business both at the Board and Committee level,committee levels, bringing fresh and differing viewpoints. The Lead Director coordinates with the Chairs of our various Board committees in setting agendas for committee meetings. Albert R. Gamper, Jr. currently serves as Lead Director. In that capacity, he complements the talents and contributions of Mr. Izzo and promotes confidence in our governance structure by providing an additional perspective to that of management. Our Principles provide for the following:
PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement 9
CORPORATE GOVERNANCE
Lead Director Duties and Responsibilities
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The Lead Director is an independent director designated annually by the non-managementindependent directors with the expectation that he or she will typically serve in that capacity for four years. The Lead Director may be appointed to serve up to twelve additional months beyond the four years if approved by a majority of the non-management independent directors. Mr. Gamper was designated as our Lead Director by the Board in April 20122013 for a term expiring at the first meeting of directors after the 20132014 Annual Meeting of Stockholders. Mr. Gamper has served as Lead Director since April 2011. The Corporate Governance Committee expects to make a recommendation regarding the individual to serve as Lead Director at its first meeting following the 20132014 Annual Meeting, in accordance with our policy.
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The Board believes that our leadership structure has been designed with the appropriate controls to support the efficacy of this arrangement without jeopardizing the integrity of the governance process. A majority of the Board must consist of independent directors in accordance with our Principles and, currently, Mr. Izzo is our only director who is not independent. As discussed below, our Principles also set forth various expectations and criteria for Board membership. All directors must adhere to our Standards and exercise their responsibilities in a manner consistent with our best interests and those of our stockholders and their fiduciary duties established by applicable law.
The Board is responsible for the oversight of risk at PSEG, both as a whole and through delegation to Board committees, which meet regularly and report back to the full Board. All committees play significant roles in carrying out the risk oversight function. In particular:
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Risk management is also a key part of our strategic planning and business operations. The Board has approved a Risk Management Policy and it reviews and adopts the Company’s Financial Risk Management Practice. The Financial Risk Management Practice serves to define the major roles, responsibilities and procedures, including controls and reporting, necessary to actively manage our financial risk exposure
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consistent with our business plans. It is reviewed annually and approved by the Audit Committee and the Finance Committee and recommended to the Board for its approval.
Risk Management Program
The Board also has oversight of the Risk Management Program which consists of policies, processes and controls, including the Risk Management Policy and Financial Risk Management Practice, as well as other policies and practices developed by management relating to:
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Our Risk Management Program forms an integral part of our corporate culture and values.
We have established a management-level Risk Management Committee (RMC) consisting of senior executives, that is responsible for assessing exposure and determining our overall financial risk management strategy, taking into consideration, when appropriate, operational, regulatory and legal risks. The RMC consisting of senior executives, is charged with, among other things:
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 11
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In addition, our Capital Review Committee, which also consists of senior management employees, provides oversight and reviews proposed capital projects. Investments above a stated amount require approval of our Board or theour respective subsidiary’s board, of Power, PSE&G or Energy Holdings, as applicable. Our Compliance Committee of senior management personnel reviews various compliance issues, including the approval of our Standards, and regularly reports to the Audit Committee.
Our Delegation of Authority setsprovisions set forth the respective authority levels at which management and employees are authorized to conduct business.
The Board believes that we have an effective system of risk management practices with appropriate controls and Board oversight.
The Board takes very seriously its responsibility to provide for an orderly process of succession within the ranks of our senior management. The O&CC periodically reviews with the CEO succession plans for key leadership positions to assure that highly qualified candidates are available should the need arise to fill vacancies. We seek to maintain a continuity of management through appropriate recruitment and retention methods, including market-based and performance-measured compensation and career advancement and training opportunities.
The Board holds regularly scheduled meetings and meets on other occasions when circumstances require. Board and Committeecommittee meetings are scheduled over most of an entire work day and oftenusually begin on the prior afternoon or evening. Each particular meeting typically takes approximately two to three hours or longer. Each Committeecommittee executes its responsibilities, as described below, and the Board receives reports from the Committeecommittee Chairs on the significant matters considered and actions taken. A Board meeting typically focuses on the strategic and more important issues facing us. Directors spend additional time preparing for Board and Committeecommittee meetings they attend and they are called upon for counsel between meetings.
Our Principles provide that the Board will meet at least six times each year and in executive session without management in attendance at every meeting, unless waived by the Board. When the Board meets in executive sessions, the Lead Director presides. In addition, each Board committee, except the Executive Committee, meets in executive session at each of its meetings, unless waived by the respective Committee.
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Under our Principles, each director is expected to attend all Board meetings and all meetings of committees of which such director is a member, as well as the Annual Meeting of Stockholders. Meeting materials are provided to Board and Committee members in advance of each meeting, and members are expected to review such materials prior to each meeting. During 2012,2013, each incumbent director attended at least 75% of the aggregate number of meetings of the Board meetings and each committee meetings on which he or she served. EachWith the exception of Mr. Gamper, each director attended the 20122013 Annual Meeting of Stockholders.
2013 Meetings and Executive Sessions | ||||
Board/Committee
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PSEG Board | 7* | 7 | ||
PSE&G Board | 6 | 6 | ||
Audit | 8 | 5 | ||
Corporate Governance | 4 | 4 | ||
Executive | 0 | 0 | ||
Finance | 4 | 0 | ||
Fossil Generation Operations Oversight | 3** | 2 | ||
Nuclear Generation Operations Oversight | 3*** | 2 | ||
Organization and Compensation | 5 | 5 |
*Includes an all-day business strategy session
**One meeting held at a generating station
***One meeting held at the site of nuclear generating stations we operate
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CORPORATE GOVERNANCE |
2012 Meetings and Executive Sessions
Board/Committee
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Meetings
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Executive Sessions
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PSEG Board | 7* | 7 | ||
PSE&G Board | 6 | 6 | ||
Audit | 8 | 5 | ||
Corporate Governance | 4 | 4 | ||
Executive | 0 | 0 | ||
Finance | 4 | 0 | ||
Fossil Generation Operations Oversight | 3** | 2 | ||
Nuclear Generation Operations Oversight | 3*** | 2 | ||
Organization and Compensation | 5 | 5 |
Director Orientation and Continuing Education
New directors receive an orientation program and materials, which includes visits to our facilities and presentations by senior management to familiarize new directorsthem with our strategic plans, operations, significant financial, accounting and risk management issues, compliance programs, the Standards, principal officers and internal and independent auditors. During each year, continuing education is provided to all directors on topics of importance to our business.
Our Principles require that directors own shares of our Common Stock (including any restricted stock, whether or not vested, any stock units under the Directors’ Equity Plan and any phantom stock under the Directors’ Deferred Compensation Plan) equal to four times the annual cash retainer (currently $70,000) within five years after election to the Board. All incumbent directors currently meet this requirement, except Ms. Tomasky and Mr. Zollar, each of whom was first elected to the Board in 2012.
You, as a stockholder, and other interested parties may communicate directly with the Board, including the independent directors, by writing to:
M. Courtney McCormick, Secretary
Public Service Enterprise Group Incorporated
80 Park Plaza, T4B, P.O. Box 1171, Newark, New Jersey 07101-1171,
and indicating who should receive the communication. Unless the context otherwise requires, the Secretary will provide the communication to the Lead Director and to the Chair of the Board Committeecommittee most closely associated with the nature of the request. The Secretary has the discretion not to forward communications that are commercial advertisements, other forms of soliciting material or billing complaints. All communications are available to any member of the Board upon his or her request.
The Board committees, of the Board, their principal functions, and membership requirements and minimum number of meetings held are described below. Each committee has open and free access to all Company information, may require any of our officers or employees to furnish it with information, documents or reports that it deems necessary or desirable in carrying out its duties, is empowered to investigate any matter involving us and may retain appropriate resources to assist it in discharging its responsibilities.
Each committee, other than the Executive Committee, operates pursuant to a charter that defines its roles and responsibilities and annually conducts a performance evaluation of its activities and a review of its charter. The authority of the Executive Committee is set forth in our By-Laws. The committee charters and our By-Laws are posted on our website,www.pseg.com/info/investors/governance/committees.jsp. We will send you a copy of any or all of them upon request.
Each committee reports its activities to the Board. Each committee Chair is appointed annually with the expectation that he or she will typically serve in that capacity for four years. A Chair may be appointed to serve up to twelve additional months beyond the four years if approved by a majority of the independent directors.
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Committee |
Membership Requirements | |
Audit |
Members may receive no direct or indirect compensation from us or our subsidiaries, other than as a director or committee member, and may not be affiliated with us or our | |
Corporate Governance | ||
Consists of three or more independent directors who meet at least two times per
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Executive | Consists of the Chairman of the Board, the Lead Director and at least one additional independent director. | |
Finance | Consists of three or more independent directors who meet at least three times per year. | |
Fossil Generation Operations Oversight | Consists of three or more independent directors who meet at least three times per year. | |
Nuclear Generation Operations Oversight | Consists of three or more independent directors who meet at least three times per year. | |
Organization & Compensation | Consists of three or more independent directors in accordance with SEC and NYSE rules, who meet at least two times per year. |
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 13
CORPORATE GOVERNANCE |
Audit Committee
The Audit Committee’s responsibilities include:
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Reviewing |
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The Board determines annually, and upon any change in Audit Committee composition, the independence financial literacy and financial expertise of the Audit Committee membersindependent auditor, as well as Public Company Accounting Oversight Board (PCAOB) and makes written affirmation to the NYSE in accordance with its rules. The Board has determined that all memberspeer review reports of the Audit Committee are financially literateindependent auditor’s performance;
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 13
CORPORATE GOVERNANCE
Thomas A. Renyi, and Susan Tomasky, each a member of the Audit Committee, is an audit committee financial expert under the Sarbanes-Oxley Act of 2002statements and the rulesacceptability and quality of our financial statements and our accounting, reporting and auditing practices;
Managementindependent auditor any audit issues or difficulties and management’s response, and resolving disagreements which may arise between management and the Board believe thatindependent auditor regarding financial reporting;
The Audit Committee Report appears below under Proposal 5.4. Ratification of the Appointment of Independent Auditor in this Proxy Statement.
Corporate Governance Committee
The Corporate Governance Committee’s responsibilities include:
14 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
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The nomination process and criteria utilized are described below under Nominees and Election.
Executive Committee
Except as otherwise provided by law, the Executive Committee may exercise all the authority of the Board when the Board is not in session.
Finance Committee
The Finance Committee’s responsibilities include:
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Reviewing with management credit agency ratings and analyses.
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Fossil Generation Operations Oversight Committee
The Fossil Generation Operations Oversight Committee’s responsibilities include:
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Reviewing the results of major inspections, evaluations and audit findings by external oversight groups and management’s response.
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Nuclear Generation Operations Oversight Committee
The Nuclear Generation Operations Oversight Committee’s responsibilities include:
PUBLIC SERVICE ENTERPRISE GROUP |2014 Proxy Statement 15
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Organization and Compensation Committee (O&CC)
The O&CC’s responsibilities include:
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The O&CC Report on Executive Compensation appears below under Proposal 2. Advisory Vote on the Approval of Executive Compensation.
The O&CC has the authority to retain advisors and compensation consultants, with sole authority for their hiring and firing. The O&CC is directly responsible for such appointment, compensation and oversight in accordance with the applicable SEC requirements and NYSE standards. Since September 2009, the O&CC has retained Compensation Advisory Partners LLC (CAP) as its independent compensation consultant to provide it with information and advice that is not influenced by management. CAP is an executive compensation consulting firm that does not perform any other services for us or our subsidiaries. CAP provides advice to the O&CC on executive compensation and may also provide advice to the Corporate Governance Committee on matters pertaining to compensation of directors who are not executive officers. CAP may not perform any other services for us without obtaining the prior approval of the Chair of the O&CC.
Responsibility for assignment to and evaluation of work by CAP is solely that of the O&CC and, with respect to the compensation of non-employee directors, the Corporate Governance Committee.
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 15
CORPORATE GOVERNANCE
The SEC and NYSE require compensation committees to assess the independence of their advisors and determine whether any conflicts of interest exist. In FebruaryJuly 2013, the O&CC reviewed CAPsCAP’s independence relative to the following factors: (i) CAP’s provision of other services to the Company; (ii) the amount of fees CAP receives from the Company as a percentage of CAP’s total revenue; (iii) the policies and procedures of CAP that are designed to prevent conflicts of interest; (iv) any business or personal relationship between O&CC members and CAP or its compensation consultants; (v) any PSEG stock owned by CAP or its compensation consultants; (vi) any business or personal relationship between our executive officers and CAP or any of its compensation consultants; and (vii) other factors that would be relevant to CAP’s independence from management. On the basis of such review, the O&CC concluded that CAP is independent and no conflicts of interest exist.
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In furtherance of CAP’s independence, management receives copies of certain materials provided by CAP to the O&CC only after the materials have been provided to the O&CC. The scope of CAP’s assignment is to provide general advice relating to all aspects of executive compensation, including the review of our current compensation programs and levels, benefit plans, provision of comparative industry trends and peer data and the recommendation of program and pay level changes.
We pay the fees of any compensation consultant retained by the O&CC. Additional information regarding any such services performed in the past year is included in the CD&A below. The O&CC also utilizes the services of our internal compensation professionals.
Compensation Committee Interlocks and Insider Participation
During 2012,2013, each of the following individuals served as a member of the O&CC: William V. Hickey, Shirley Ann Jackson, David Lilley, Thomas A. Renyi, and Richard J. Swift (Chair). During 2012,2013, no member of the O&CC was an officer or employee or a former officer or employee of any PSEG company. None of our officers served as a director of or on the compensation committee of any of the companies for which any of these individuals served as an officer. No member of the O&CC had a direct or indirect material interest in any transaction with us.
Standards of Integrity
Our Standards is a code of ethics applicable to us and our subsidiaries. The Standards:
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The Standards are posted on our website,www.pseg.com/info/investors/governance/documents.jsp. We will send you a copy on request.
We will post on our website,www.pseg.com/info/investors/governance/documents.jsp:that website:
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A waiver of any provision of the Standards may be granted in exceptional circumstances, but only for substantial cause. A waiver for any director or executive officer may be made only by the Board and, if granted, must be promptly disclosed to our stockholders. In 2012,2013, we did not grant any waivers to the Standards.
16 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
NOMINEES AND ELECTION
We regularly evaluateThe Corporate Governance Committee oversees our reporting practices to ensure that our disclosure appropriately meetspolitical activities and contributions in accordance with the needs of our shareholders. Accordingly, the Board recently approved a Corporate Political Participation Practice. This Practice which we have made publicly available on our website atwww.pseg.com/info/investors/governance/documents.jsp. In accordance with this Practice, we provide our stockholders with access to our reported state and federal political contributions. The Political Participation Practice also establishes a controls process, pursuant to which our senior management monitors, assesses, and approves certain political contributions. Our Board is responsible for generally overseeing our political participation activities and expenses. We believe this Political Participation Practice will allowallows us to minimize reputational and political risks and continue to focus on our operational excellenceexcellence. Stockholders may view our Practice atwww.pseg.com/info/investors/governance/documents.jsp. We also provide stockholders with access to our reported state and federal political contributions.
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 17
NOMINEES AND ELECTION |
Transactions with Related Persons
There were no transactions during 2012,2013, and there are no transactions currently proposed, in which we were or are to be a participant and the amount involved exceeded $120,000 and in which any related person (director, nominee, executive officer or their immediate family members) had or will have a direct or indirect material interest.
Our policies and procedures with regard to transactions with related parties, including the review, approval or ratification of any such transactions, the standards applied and the responsibilities for application are set forth in our Principles, our Business Conduct Compliance Program (Compliance Program) and the Standards. These are our only written policies and procedures regarding the review, approval or ratification of transactions with related persons.
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Our written management practices provide that any capital investment with a non-PSEG entity or its affiliate, for which one of our directors or officers serves as a director or executive officer, must be approved by our Board.
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Directors elected at each annual meeting are elected to serve one-year terms. Directors whose terms are to expire are eligible for re-nomination and will be considered by the Corporate Governance Committee in accordance with its policies and the retirement policy for directors, which are summarized in this Proxy Statement. Each of the current directors has been nominated for re-election.
Our By-Laws currently provide that the Board shall consist of not less than three nor more than 16 directors as shall be fixed from time to time by the Board. The number of directors is currently setfixed at ten.
The nominees listed below were selected by the directors upon the recommendation of the Corporate Governance Committee. As discussed above under Annual Meeting, Voting and Procedures, proxies will be voted in accordance with your instructions as indicated on the enclosed proxy card, bank or broker voting card or when voting by telephone or Internet.
If at the time of the 20132014 Annual Meeting any of the nominees listed below should be unable to serve, which is not anticipated, it is the intention of the persons designated as proxies to vote, in their discretion, for other nominees, unless the number of directors constituting a full Board is reduced.
PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement 17
NOMINEES AND ELECTION
Majority Voting for Election of Directors
Our By-laws provide that in an uncontested election, each director shall be elected by a majority of the votes cast with respect to the director. A majority of votes cast means that the number of shares cast “for” a director’s election exceeds the number of votes cast “against” that director. We do not include as votes cast (i) shares which are marked withheld, (ii) abstentions and (iii) shares as to which a stockholder has given no authority or direction.
As provided in our Principles, the Board has adopted a policy whereby any incumbent director receiving a majority vote “against” must promptly tender an offer of resignation. As a result, in uncontested elections, the Board will nominate for election or re-election as a director only candidates who have agreed promptly to tender a letter of resignation in the event that the number of shares voted “for” that director
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does not exceed the number of shares voted “against” that director. If an incumbent director fails to receive the required “majority” vote, the Corporate Governance Committee will consider the matter and then make a recommendation to the Board as to whether or not to accept the resignation. The Board will make the determination on whether or not to accept the recommendation of the Corporate Governance Committee.
The Principles further provide that no director who fails to receive a majority vote in an uncontested election shall participate in either the recommendation of the Corporate Governance Committee or the determination of the Board with respect to his or her resignation letter or that of any other director in regard to that year’s Annual Meeting election. Any such director may, however, participate in any and all other matters of the Board and its various committees to the fullest extent to which he or she would otherwise be permitted in accordance with applicable law and the Principles. If a majority of the Corporate Governance Committee fails to receive a majority vote, then the remaining independent directors will determine whether to accept one or more of the applicable resignations. If three or fewer independent directors diddo not receive a majority vote in the same election, then all independent directors may participate in any discussions or actions with respect to accepting or rejecting the resignation offers (except that no director will vote to accept or reject his or her own resignation offer).
In evaluating tendered resignations, the Corporate Governance Committee and the Board may consider all factors they deem relevant, including, but not limited to, the stated reason(s) for the “against” vote, the impact that the acceptance of the resignation would have upon our compliance with applicable law or regulation, the potential triggering of any change in control or similar provision in contracts, benefit plans or otherwise, the qualifications of the director and his or her past and anticipated future contributions to us.
The Corporate Governance Committee and the Board may consider possible remedies or actions to take in lieu of or in addition to acceptanceaccepting or rejectionrejecting of the resignation, such as development and implementation of a plan to address and cure the issues underlying the failure to receive a majority vote.
Following the Board’s determination, we will publicly disclose the decision and, ifas applicable, the reasons for accepting or rejecting the resignation. To the extent that the Board accepts one or more resignations, the Corporate Governance Committee may recommend to the Board, and the Board will then determine, whether to fill any vacancy.
Director Qualifications, Diversity and Retirement
The Board believes that a nominee for director should be selected on the basis of the individual’s ability, diversity of background and experience and soundness of judgment, from among candidates with an attained position of leadership in their field of endeavor. As noted above, a majority of the Board must consist of independent directors in accordance with our Principles and NYSE requirements.
The Board seeks to maintain an orderly transition for retirement and proper succession planning. Under the Board’s retirement policy, set forth in our Principles as revised in November 2013, directors who have never been employees of the PSEG group of companies may not serve as directors beyond the Annual Meeting of Stockholders held in the calendar year following their seventy-second birthday. If however, the Corporate Governance Committee and the Board determine that there is good cause to extend any such director’s Board service, he or she may be re-nominated following the age of seventy-two, but in no event beyond the age of seventy-five, and remain in service for the full term until the next Annual Meeting of Stockholders held in the calendar year following his or her seventy-fifth birthday. Mr. Gamper attained age 72 in March 2014. He is therefore eligible to serve until the 2015 Annual Meeting and has been re-nominated. Directors who are former PSEG CEOs may not serve as directors beyond the Annual Meeting of Stockholders following termination of active employment with the PSEG group of companies, unless otherwise determined by the Board, and may not serve beyond their seventy-second birthday. Directors who are former employees, other than CEOs, may not serve as directors beyond the Annual Meeting of Stockholders following termination of active employment with the PSEG group of companies.
In addition, it is the Board’s policy of the Board that a nominee recommended initially for election be able to serve at least five years, consistent with the Board’s retirement policy. The Board believes that the ability of a director to serve for at least five years is a reasonable expectation in order for us to receive an appropriate benefit from the individual’s abilities. This is especially so in light of the time invested by a director to become knowledgeable about our complex business operations. The Board believes that these age and service limitations provide it with a means for achieving a reasonable balance of veteran and new directors.
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 19
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18 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
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Diversity
Diversity is a factor for consideration of nominees for director pursuant to the diversity policy contained in our Principles and the charter of the Corporate Governance Committee. In considering diversity, the Corporate Governance Committee utilizes a broad meaning to include not only factors such as race, gender and national origin, but also background, experience, skills, accomplishments, financial expertise, professional interests, personal qualities and other traits desirable in achieving an appropriate group of qualified individuals. The Corporate Governance Committee considers and assesses the effectiveness of this policy in connection with the annual nomination process to assure it contains an effective mix of people to best further our long-term business interests.
The Corporate Governance Committee also considers the amount of time that a person will likely have to devote to his or her duties as a director, including non-PSEG responsibilities as an executive officer, board member or trustee of business or charitable institutions and the contributions by directors to our ongoing business. The Corporate Governance Committee considers the qualifications of incumbent directors and potential new nominees, as well as the continuity of service and the benefit of new ideas and perspectives, before making recommendations to the Board for election or re-election. The Board then selects nominees based on the Corporate Governance Committee’s recommendation.
The Corporate Governance Committee does not believe it is appropriate to set absolute term limits on the length of a director’s term. Directors who have served on the Board for an extended period of time are able to provide valuable insight into the operations and future of the Company based on their experience with and understanding of our history, policies and objectives.
Prior to accepting an invitation to serve as a director of another public company, the CEO and any directors must submit a letter to the Corporate Governance Committee so as to allow it to review potential conflicts and time demands of the new directorship. Any director who undertakes or assumes a new principal occupation, position or responsibility from that which he or she held when he or she was elected to the Board must submit a letter to the Corporate Governance Committee volunteering to resign from the Board. The Board does not believe that in every instance a director who undertakes or assumes a new occupation, position or responsibility from that which he or she held when the director joined the Board should necessarily leave the Board. The Corporate Governance Committee reviews the relevant details of such director’s new position and determines the continued appropriateness of Board membership under the circumstances.
Nominees and Nomination Process
The present terms of all ten directors,Albert R. Gamper, Jr., William V. Hickey, Ralph Izzo, Shirley Ann Jackson, David Lilley, Thomas A. Renyi, Hak Cheol Shin, Richard J. Swift, Susan Tomasky andAlfred W. Zollar, expire at the 20132014 Annual Meeting. Each director has been re-nominated. Each will be presented for election to serve until the 20142015 Annual Meeting, or until theirhis or her respective successors aresuccessor is elected and qualified. All nominees except Mr. Zollar, who was elected as a director by the Board in June 2012, were elected to their present terms by our stockholders.
Conrad Harper retired from the Board effective December 31, 2012. Mr. Harper had served on the Board since 1997. The members of the Board wish to thank Mr. Harper and express the Board’s sincere appreciation for his many years of dedicated service to our Company.
The Corporate Governance Committee on occasion may pay a fee to an executive search firm to assist it in identifying and evaluating potential director nominees meeting our criteria, which are described further below.above. Any such firm’s function would be to assist the Committee in identifying potential candidates for its consideration. During 2012,2013, we engageddid not engage a third-party firm to conduct a search for potential candidates. Mr. Zollar was identified to us in this process.
The Corporate Governance Committee will consider stockholders’ recommendations for nominees for election to the Board. Such recommendations must be submitted in writing to M. Courtney McCormick, Secretary, Public Service Enterprise Group Incorporated, 80 Park Plaza, T4B, P.O. Box 1171, Newark, New Jersey 07101-1171. Nominations must be made in compliance with the procedures set forth in our By-Laws and accompanied by the written consent of any such person to serve if nominated and elected and by biographical material to permit evaluation of the individual recommended. Our By-Laws require that stockholder nominations must be submitted at least 90 days in advance of an Annual Meeting of Stockholders.
The Corporate Governance Committee utilizes the same criteria to evaluate all potential nominees, including those recommended by stockholders or from other sources.
We show below for each nominee:
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20 PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 19
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NOMINEES AND ELECTION |
We also discuss the specific experience, qualifications, attributes and skills that led to the conclusion that he or she should serve as one of our directors. Each nominee’s beneficial ownership of Common Stock is shown under Security Ownership of Directors, Management and Certain Beneficial Owners. Compensation for service as a director is shown in the Director Compensation Table and accompanying narrative.
As discussed above, the Corporate Governance Committee and the Board recommend and nominate for election those individuals they deem qualified and capable of serving as directors pursuant to the criteria they have set. Each of the nominees this year meets these standards.
Board Composition, Skills and Qualifications
Composition
The Board is comprised of individuals with a diverse mix of knowledge, expertise and backgrounds. Among the ten nominees, we have business leaders from industries including banking, science and technology, energy, consumer products and manufacturing as well as those who have excelled in academia and public service. As a group, they complement one another with a desirable mix of competencies and skills as the Board discharges its duties of overseeing our businesses. Our Board members have dealt widely with the types of issues and challenges facing us, including achieving optimal operational and financial performance, managing for growth, meeting regulatory, environmental and safety requirements, overseeing risk management and corporate governance, maintaining an engaged and diverse workforce and adapting to rapidly evolving business conditions. All have served in leadership positions.
Skills and Qualifications
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20 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
NOMINEES AND ELECTION
Current committee assignments are presented in the following table. From time to time, Committee assignments and chairs are changed to best utilize the talents of our directors. The last such changes occurred in April 2012 and Mr. Zollar received committee assignments in September 2012.2013. Ongoing committee assignments for all directors are expected to be made at the organizational meeting following the 20132014 Annual Meeting of Stockholders.
Audit | Corporate Governance | Executive | Finance | Fossil Generation Operations Oversight | Nuclear Generation Operations Oversight | Organization & Compensation | ||||||||
Albert R. Gamper, Jr. Lead Director | ü | |||||||||||||
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Ralph Izzo | Chair | |||||||||||||
Shirley Ann Jackson | ü | ü | Chair | Chair | ü | |||||||||
David Lilley | Chair | ü | ü | |||||||||||
Thomas A. Renyi | ü | Chair | ü | |||||||||||
Hak Cheol Shin | ü | ü | ü | ü | ||||||||||
Richard J. Swift | ü | ü | ü | ü | Chair | |||||||||
Susan Tomasky | ü | ü | ||||||||||||
Alfred W. Zollar | ü | ü | ||||||||||||
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During 2012,2013, Albert R. Gamper, Jr., Ralph Izzo, Shirley Ann Jackson and Richard J. Swift and Ralph Izzo also served on the Board of Directors of PSE&G. Shirley Ann Jackson became a member of the PSE&G Board of Directors in February 2013. Mr. Izzo also serves on the Boards of Directors of Power, PSEG LI, Energy Holdings and Services.
Our Principles require that directors own shares of our Common Stock (including any restricted stock, whether or not vested, any stock units under the Directors’ Equity Plan and any phantom stock under the Directors’ Deferred Compensation Plan) equal to four times the annual cash retainer (currently $70,000) within five years after election to the Board. All incumbent directors currently meet this requirement, except Ms. Tomasky and Mr. Zollar, each of whom was first elected to the Board in 2012. Additional details can be found in the table under Security Ownership of Directors, Management and Certain Beneficial Owners below.
Biographical Information for Nominees for Election as Director
Shown below is the relevant business and biographical information for each of the individuals nominated for election to the Board.
PUBLIC SERVICE ENTERPRISE GROUP | 20132014 Proxy Statement 21
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NOMINEES AND ELECTION |
22 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
NOMINEES AND ELECTION |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
| ALBERT R. GAMPER, JR.,age | |||||
Director since 2000 | ||||||
Experience | ||||||
Ÿ | Lead Director since April 2011. | |||||
Ÿ | Director of PSE&G. | |||||
Ÿ | Chairman of the Board of CIT Group, Inc., Livingston, New Jersey, a commercial insurance company, from July 2004 until December 2004; Chairman of the Board and Chief Executive Officer of CIT Group, Inc. from September 2003 to July 2004; Chairman of the Board, President and Chief Executive Officer from June 2002 to September 2003; President and Chief Executive Officer from February 2002 to June 2002; Chairman of the Board, President and Chief Executive Officer from January 2000 to June 2001; President and Chief Executive Officer from December 1989 to December 1999. President and Chief Executive Officer of Tyco Capital Corporation from June 2001 to February 2002. | |||||
Ÿ | Trustee to the Fidelity Group of Funds. | |||||
Skills and Qualifications | ||||||
Ÿ | Management/ | |||||
Ÿ | The Board values Mr. Gamper’s background considering our capital structure, liquidity needs and need to assess and oversee credit and other risks. He brings perspective and leadership to management and governance oversight. | |||||
| WILLIAM V. HICKEY,age | |||||
Director since 2001 | ||||||
Experience | ||||||
Ÿ | Chairman of the Board | |||||
Ÿ |
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Skills and Qualifications | ||||||
Ÿ | Manufacturing/Product Development/Consumer Products/ Accounting/Finance/Management/Technology – Mr. Hickey has a strong industrial and commercial manufacturing background from his service as President and Chief Executive Officer at Sealed Air Corporation. He is also a Certified Public Accountant and, as CEO of Sealed Air Corporation, he had ultimate responsibility for financial matters and overall business performance. | |||||
Ÿ | Mr. Hickey’s executive managerial experience with product innovation, development, production and marketing contributes to the Board’s ability to oversee our Company and focus on operational excellence. |
22 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement 23
NOMINEES AND ELECTION
NOMINEES AND ELECTION |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
| RALPH IZZO,age | |||||
Director since 2006 | ||||||
Experience | ||||||
Ÿ | Chairman of the Board, President and Chief Executive Officer of PSEG since April 1, 2007. | |||||
Ÿ | Chair of the Executive Committee. | |||||
Ÿ | Director of PSE&G, Power, PSEG LI, Energy Holdings and Services. | |||||
Ÿ | President and Chief Operating Officer of PSEG from October 2006 to April 2007; President and Chief Operating Officer of PSE&G from October 2003 to October 2006. | |||||
Ÿ | Director of the Williams Companies, Inc. | |||||
Skills and Qualifications | ||||||
Ÿ | Management/Strategic Planning/Finance/Industry | |||||
Ÿ | Dr. Izzo’s background as a research physicist is of much benefit to a company that deals with many technical and scientific matters.
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| SHIRLEY ANN JACKSON, age | |||||
Director since 2001 | ||||||
Experience | ||||||
Ÿ | Director of PSE&G. | |||||
Ÿ | President of Rensselaer Polytechnic Institute, Troy, New York, since July 1999. | |||||
Ÿ | Former director of PSEG from 1987 to 1995. | |||||
Ÿ | Chair, U.S. Nuclear Regulatory Commission (NRC) from July 1995 to July 1999. | |||||
Ÿ | Director of FedEx Corporation, IBM Corporation, Marathon Oil Corporation and Medtronic, Inc. | |||||
Ÿ | Former director of NYSE Euronext and US Steel. | |||||
Skills and Qualifications | ||||||
Ÿ | Management/Government/Science/Technology/Finance/Generating Plant Operations - Dr. Jackson is a distinguished scientist, who also brings an array of executive, governmental, scientific and academic experience from her years as Chair of the NRC and President of Rensselaer Polytechnic Institute. Her responsibilities as the head of a major university include financial matters. | |||||
Ÿ | We are a heavily regulated business which is very much affected by public policy and scientific developments, so Dr. Jackson’s experience and continued involvement in energy policy, scientific research and development, technology and innovation, security and financial services industry oversight is highly valued by the Board. Her background as a nuclear physicist and former NRC Chair is important as we have extensive nuclear operations. |
24 PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 23
NOMINEES AND ELECTION
NOMINEES AND ELECTION |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
| DAVID LILLEY,age | |||||
Director since 2009 | ||||||
Experience | ||||||
Ÿ | Chairman of the Board, President and Chief Executive Officer of Cytec Industries, Inc., Woodland Park, New Jersey, a global specialty chemicals and materials company from January 1999 until December 2008; President and Chief Executive Officer from May 1998 to January 1999; President and Chief Operating Officer from January 1997 to May 1998. | |||||
Ÿ | Director of Rockwell Collins, Inc. and Tesoro Corporation. | |||||
Ÿ | Former director of Arch Chemicals, Inc. and Cytec Industries, Inc. | |||||
Skills and Qualifications | ||||||
Ÿ | Product Development/Manufacturing/Sales/Finance/Management – Mr. Lilley has experience in product development, manufacturing and sales, gained from his years as Chairman of the Board, President and Chief Executive Officer at Cytec Industries. In this role he also had ultimate responsibility for financial matters and overall business performance. | |||||
Ÿ | Mr. Lilley’s leadership is very important to us in light of the Board’s oversight of our operations and adherence to safety and environmental requirements. | |||||
| THOMAS A. RENYI,age | |||||
Director since 2003 | ||||||
Experience | ||||||
Ÿ | Executive Chairman of The Bank of New York Mellon Corporation, New York, New York, a provider of banking and other financial services to corporations and individuals, from July 2007 until August 2008. | |||||
Ÿ | Chairman of the Board and Chief Executive Officer of The Bank of New York Company, Inc. and The Bank of New York from February 1998 to July 2007. | |||||
Ÿ | Directors of Hartford Financial | |||||
Ÿ | Former director of RiskMetrics Group. | |||||
Skills and Qualifications | ||||||
Ÿ | Finance/Management/Customer | |||||
Ÿ | The Board views Mr. Renyi’s background as highly valuable in the oversight of risk management and our continued focus on financial strength, disciplined investment and operational excellence. |
24 PUBLIC SERVICE ENTERPRISE GROUP |20132014 Proxy Statement 25
NOMINEES AND ELECTION
NOMINEES AND ELECTION |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
| HAK CHEOL (H.C.) SHIN,age | |||||
Director since 2008 | ||||||
Experience | ||||||
Ÿ | Executive Vice President – International Operations, of 3M Company, St. Paul, Minnesota, a diversified technology company, with product lines in consumer and office, healthcare electronics, industrial, graphics, | |||||
Ÿ | Executive Vice President-Industrial and Transportation Business of 3M Company from January 2006 to May 2011; Executive Vice President-Industrial Business from June 2005 to January 2006; Division Vice President-Industrial Adhesives and Tapes Division from July 2003 to June 2005; Division Vice President-Electronics Markets Materials Division from October 2002 to June 2003; Division Vice President-Superabrasives and Microfinishing Systems Division from March 2001 to October 2002. | |||||
Skills and Qualifications | ||||||
Ÿ | Technology/Manufacturing/Consumer Products/Customer Satisfaction/Management – Mr. Shin brings diversified experience in the areas of technology, manufacturing, consumer products and customer satisfaction acquired through various senior positions at 3M Company, a company noted for innovation and operational excellence. | |||||
Ÿ | Mr. Shin’s skills are important as we seek operational excellence and invest in renewable energy technology, while satisfying customer expectations and maintaining reliability. | |||||
| RICHARD J. SWIFT,age | |||||
Director since 1994 | ||||||
Experience | ||||||
Ÿ | Lead Director from February 2010 until April 2011. | |||||
Ÿ | Presiding Director from June 2007 until February 2010. | |||||
Ÿ | Director of PSE&G. | |||||
Ÿ | Former Chairman of the Financial Accounting Standards Advisory Council from January 2002 to December 2006. | |||||
Ÿ | Chairman of the Board, President and Chief Executive Officer of Foster Wheeler, Ltd., Clinton, New Jersey, which provides design, engineering, construction, manufacturing, management, plant operations and environmental services, from April 1994 until October 2001. | |||||
Ÿ | Director of CVS Caremark Corporation, Hubbell Incorporated, Ingersoll-Rand Limited and Kaman Corporation. | |||||
Skills and Qualifications | ||||||
Ÿ | Management/Engineering/Construction/Generating Plant Operations/Finance/ | |||||
Ÿ | The Board believes that we benefit significantly from Mr. Swift’s experience as we are heavily engaged in similar endeavors in our generation and utility businesses. While CEO at Foster Wheeler, he had ultimate responsibility for financial matters. |
26 PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 25
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
| SUSAN TOMASKY,age | |||||
Director since 2012 | ||||||
Experience | ||||||
Ÿ | President-AEP Transmission of American Electric Power Corporation, Columbus, Ohio, an electric utility holding company with generation, transmission and distribution businesses, from May 2008 to July 2011. | |||||
Ÿ | Executive Vice President – Shared Services of American Electric Power Corporation from September 2006 to May 2008; Executive Vice President and Chief Financial Officer from September 2001 to September 2006; Executive Vice President and General Counsel and Corporate Secretary from July 1998 to September 2001. | |||||
Ÿ | Former General Counsel, U.S. Federal Energy Regulatory Commission (FERC), from March 1993 to June 1997. | |||||
Ÿ | Director of Tesoro Corporation and Summit Midstream Partners, LP. | |||||
Skills and Qualifications | ||||||
Ÿ | Industry Operations/Management/Finance/Legal/ | |||||
Ÿ | The Board views Ms. Tomasky’s background as providing a valuable resource and perspective on utility management, finance, law, risk management and governmental regulation. | |||||
| ALFRED W. ZOLLAR,age | |||||
Director since 2012 | ||||||
Experience | ||||||
Ÿ | Executive Partner, Siris Capital Group, LLC, a private equity firm, since February 2014; General Manager | |||||
Ÿ | Director of Chubb | |||||
Skills and Qualifications | ||||||
Ÿ | Management/Technology/Product Development/Customer Satisfaction – Mr. Zollar brings a wealth of knowledge from his executive leadership, product development and information technology experience. He has served in various leadership roles, including senior management positions, in every IBM software group division. | |||||
Ÿ | The Board believes that Mr. Zollar’s executive and managerial experience in business development and technology |
26 PUBLIC SERVICE ENTERPRISE GROUP |20132014 Proxy Statement 27
SECURITY OWNERSHIP
SECURITY OWNERSHIP |
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
Directors, Nominees and Management
The following table sets forth, as of February 15, 2013,14, 2014, beneficial ownership of our Common Stock by the directors, nominees and currently serving executive officers named in the 20122014 Summary Compensation Table. The information presented includes stock options, stock units and phantom shares. None of these amounts exceeds 1% of our Common Stock outstanding.
Owned (#)(1) | Restricted Stock (#)(2) | Stock Units/ Restricted (#)(3) | Phantom (#)(4) | Stock (#)(5) | Total (#) | Stock Units/ | Deferred | |||||||||||||||||||||||||||||||||||||||||||||
J.A. Bouknight, Jr. | 8,387 | - | 23,017 | - | 53,625 | 85,029 | ||||||||||||||||||||||||||||||||||||||||||||||
Owned | Restricted | Restricted | Phantom | Equity | Stock | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Stock | Stock Units | Shares | Shares | Options | Total | ||||||||||||||||||||||||||||||||||||||||||||||
(#)(1) | (#)(2) | (#)(3) | (#)(4) | (#)(5) | (#)(6) | (#) | ||||||||||||||||||||||||||||||||||||||||||||||
J. A. Bouknight, Jr. | 17,678 | - | 23,302 | - | 18,917 | 71,500 | 131,397 | |||||||||||||||||||||||||||||||||||||||||||||
Caroline Dorsa | 20,825 | 8,800 | 29,199 | - | 110,825 | 169,649 | 53,201 | 8,800 | 31,554 | - | - | 127,400 | 220,955 | |||||||||||||||||||||||||||||||||||||||
Albert R. Gamper, Jr. | 8,492 | 9,600 | 19,836 | 23,518 | - | 61,446 | 8,803 | 9,600 | 23,825 | 24,565 | - | - | 66,793 | |||||||||||||||||||||||||||||||||||||||
William V. Hickey | 6,332 | 9,600 | 19,836 | 18,531 | - | 54,299 | 6,332 | 9,600 | 23,825 | 19,356 | - | - | 59,113 | |||||||||||||||||||||||||||||||||||||||
Ralph Izzo | 389,896 | - | 157,433 | - | 1,209,125 | 1,756,454 | 455,870 | - | 157,067 | - | 124,560 | 1,274,100 | 2,011,597 | |||||||||||||||||||||||||||||||||||||||
Shirley Ann Jackson | 5,604 | 9,600 | 19,836 | - | - | 35,040 | 5,604 | 9,600 | 23,825 | - | - | - | 39,029 | |||||||||||||||||||||||||||||||||||||||
Ralph A. LaRossa | 32,298 | - | 57,557 | - | 201,600 | 291,455 | 39,701 | - | 59,379 | - | 43,610 | 215,400 | 358,090 | |||||||||||||||||||||||||||||||||||||||
William Levis | 58,758 | - | 62,628 | - | 232,200 | 353,586 | 28,973 | - | 65,112 | - | - | 249,700 | 343,785 | |||||||||||||||||||||||||||||||||||||||
David Lilley | - | - | 14,174 | 12,240 | - | 26,414 | - | - | 17,911 | 16,051 | - | - | 33,962 | |||||||||||||||||||||||||||||||||||||||
Randall E. Mehrberg | 15,751 | - | 25,429 | - | 179,175 | 220,355 | ||||||||||||||||||||||||||||||||||||||||||||||
Thomas A. Renyi | 4,628 | 8,800 | 19,836 | 32,646 | - | 65,910 | - | 8,800 | 23,825 | 37,132 | - | - | 69,757 | |||||||||||||||||||||||||||||||||||||||
Hak Cheol Shin | - | - | 16,957 | - | - | 16,957 | - | - | 20,817 | - | - | - | 20,817 | |||||||||||||||||||||||||||||||||||||||
Richard J. Swift | 304 | 14,400 | 19,836 | 45,720 | - | 80,260 | 304 | 14,400 | 23,825 | 47,754 | - | - | 86,283 | |||||||||||||||||||||||||||||||||||||||
Susan Tomasky | - | - | 3,615 | - | - | 3,615 | - | - | 6,883 | - | - | - | 6,883 | |||||||||||||||||||||||||||||||||||||||
Alfred W. Zollar | - | - | 3,452 | - | - | 3,452 | - | - | 6,713 | - | - | - | 6,713 | |||||||||||||||||||||||||||||||||||||||
All directors and executive officers as a group (16 persons) | 571,416 | 60,800 | 501,241 | 132,655 | 1,986,550 | 3,252,662 | ||||||||||||||||||||||||||||||||||||||||||||||
All directors and executive officers as a group (15 persons) | 644,469 | 60,800 | 516,030 | 144,858 | 187,087 | 1,938,100 | 3,491,344 |
(1) | Includes all shares, if any, held directly, in brokerage accounts, under the Thrift and Tax-Deferred Savings Plan (401(k) Plan), Enterprise Direct, ESPP, shares owned jointly by or with a spouse and shares held in a trust or a custodial account. Beneficial ownership is disclaimed as to 360 |
(2) | Includes restricted stock granted to executive officers under the LTIP and restricted stock granted to directors under the former Stock Plan for Outside Directors. |
(3) | Includes restricted stock units granted to executive officers under the LTIP and stock units granted to directors under the Equity Compensation Plan for Outside Directors (Directors Equity Plan), with no voting rights. |
(4) | Includes phantom shares accrued under the Directors’ Deferred Compensation Plan for those individuals who have elected to have the earnings on their deferred payments calculated based upon the performance of our Common Stock, with no voting rights. |
(5) | Includes shares deferred under the Equity Deferral Plan, with no voting rights. | |
(6) | Stock options granted under the LTIP, |
Izzo (#) | Dorsa (#) | Levis (#) | Mehrberg (#) | Bouknight (#) | LaRossa (#) | Group (#) | ||||||||||||||||||
86,975 | 16,575 | 17,500 | 14,725 | 17,875 | 13,800 | 167,450 |
28 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
SECURITY OWNERSHIP |
AsThe following table sets forth, as of February 15, 2013, no14, 2014, beneficial ownership in shares by any person or group was known to us to be the beneficial owner of more than five percent of our Common Stock, accordingStock. According to the Schedulesschedule 13G filed by the respective ownersowner with the SEC.SEC, these securities were acquired and are held in the ordinary course of business and not for the purpose of changing or influencing the control of the Company.
Name and Address | Amount and Nature of Beneficial Ownership | Percent | ||||||
BlackRock, Inc. | 38,590,563 | 7.60(1) | ||||||
40 East 52nd Street | ||||||||
New York, NY 10022 | ||||||||
The Vanguard Group, Inc. | 26,539,198 | 5.24(2) | ||||||
100 Vanguard Blvd | ||||||||
Malvern, PA 19355 |
(1) | As reported on Schedule 13G/A filed January 30, 2014. | |
(2) | As reported on Schedule 13G filed February 12, 2014. |
PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement 27
DIRECTORS’ COMPENSATION
Section 16(a) Beneficial Ownership Reporting Compliance
During 2012,2013, none of our directors or executive officers was late in filing a Form 3, 4 or 5 in accordance with the requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, with regard to transactions involving our Common Stock, with the exception of Susan Tomasky, one of our Directors. Ms. Tomasky filed one late report on Form 3 to report any ownership by her of our Common Stock at the time of her election to the Board. At that time, Ms. Tomasky did not own any of our Common Stock.
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 29
DIRECTOR COMPENSATION |
DIRECTORS’DIRECTOR COMPENSATION
20122013 DIRECTOR COMPENSATION TABLE
Fees ($)(2) | Stock ($)(3) | Option ($) | Non-Equity ($) | Change in Pension Value and Deferred Compensation Earnings ($) | All Other Compensation ($)(4) | Total ($) | Fees Earned Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity ($) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(3) | Total ($) | |||||||||||||||||||||||||||||||
Albert R. Gamper, Jr. | 110,000 | 110,019 | - | - | - | 150 | 220,169 | 110,000 | 110,026 | - | - | - | 150 | 220,176 | ||||||||||||||||||||||||||||||
Conrad K. Harper(1) | 98,705 | 76,794 | - | - | - | 5,150 | 180,649 | |||||||||||||||||||||||||||||||||||||
William V. Hickey | 105,000 | 110,019 | - | - | - | 150 | 215,169 | 99,375 | 110,026 | - | - | - | 150 | 209,551 | ||||||||||||||||||||||||||||||
Shirley Ann Jackson | 97,500 | 110,019 | - | - | - | 5,150 | 212,669 | 103,125 | 110,026 | - | - | - | 5,000 | 218,151 | ||||||||||||||||||||||||||||||
David Lilley | 100,591 | 110,019 | - | - | - | 5,150 | 215,760 | 105,000 | 110,026 | - | - | - | 5,000 | 220,026 | ||||||||||||||||||||||||||||||
Thomas A. Renyi | 98,205 | 110,019 | - | - | - | 150 | 208,374 | 97,500 | 110,026 | - | - | - | 150 | 207,676 | ||||||||||||||||||||||||||||||
Hak Cheol Shin | 95,000 | 110,019 | - | - | - | 150 | 205,169 | 95,000 | 110,026 | - | - | - | - | 205,026 | ||||||||||||||||||||||||||||||
Richard J. Swift | 100,000 | 110,019 | - | - | - | 5,150 | 215,169 | 100,000 | 110,026 | - | - | - | 5,150 | 215,176 | ||||||||||||||||||||||||||||||
Susan Tomasky | 60,015 | 110,019 | - | - | - | - | 170,034 | 85,000 | 110,026 | - | - | - | - | 195,026 | ||||||||||||||||||||||||||||||
Alfred W. Zollar | 41,588 | 110,025 | - | - | - | - | 151,613 | 85,000 | 110,026 | - | - | - | - | 195,026 |
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Includes all meeting fees, chair/committee retainer fees and the annual retainer as described below. Includes the following amounts deferred pursuant to the Directors’ Deferred Compensation Plan, described below: |
Gamper | Harper | Hickey | Jackson | Lilley | Renyi | Shin | Swift | Tomasky | Zollar | |||||||||||||||||||
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- | 98,705 | 105,000 | 97,500 | 100,591 | 98,205 | - | - | - | - |
Gamper ($) | Hickey ($) | Jackson ($) | Lilley ($) | Renyi ($) | Shin ($) | Swift ($) | Tomasky ($) | Zollar ($) | ||||||||||||||||||||||||||
- | 99,375 | 103,125 | 105,000 | 97,500 | - | - | - | - |
For each outside director, |
The following table shows outstanding stock units granted under the Directors’ Equity Plan and restricted stock granted under the prior Stock Plan for Outside Directors, as of December 31, 2012.2013:
Gamper (#) | Harper (#) | Hickey (#) | Jackson (#) | Lilley (#) | Renyi (#) | Shin (#) | Swift (#) | Tomasky (#) | Zollar (#) | Gamper (#) | Hickey (#) | Jackson (#) | Lilley (#) | Renyi (#) | Shin (#) | Swift (#) | Tomasky (#) | Zollar (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Units | 19,836 | 19,836 | 19,836 | 19,836 | 14,174 | 19,836 | 16,957 | 19,836 | 3,615 | 3,452 | 23,825 | 23,825 | 23,825 | 17,911 | 23,825 | 20,817 | 23,825 | 6,883 | 6,713 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock | 9,600 | 13,200 | 9,600 | 9,600 | - | 8,800 | - | 14,400 | - | - | 9,600 | 9,600 | 9,600 | - | 8,800 | - | 14,400 | - | - |
Consists of charitable contributions made by us on behalf of each individual and under our educational matching gift program. |
Director Fees
A director who is an employee of a PSEG Company receives no additional compensation for services as a director. Mr. Izzo receives no compensation as a director. His compensation as an employee is shown in this Proxy Statement, in the executive compensation tables and CD&A.
Directors receive an annual retainer of $70,000, paid quarterly, and an annual equity grant of Common Stock units equal to $110,000, paid quarterly.$110,000. The Lead Director receives an incremental $25,000 cash retainer. The Audit Committee Chair is paid an additional retainer of $25,000, the O&CC Chair is paid an additional retainer of $15,000 and the Chair of any other committee is paid an additional retainer of $12,500. Each Audit Committee member receives an additional $10,000 annually. Each other director is paid an additional $5,000 annually per committee assignment.
28 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
DIRECTORS’ COMPENSATION
Directors’ Equity Plan
The Directors’ Equity Plan is a deferred compensation plan and, under its terms, each outside director is granted an award of “stock units” each May 1st (in an amount determined from time-to-time by the Board) which is recorded in a bookkeeping account in her/his name and accrues credits equivalent to the dividends on shares of our Common Stock. If a director fails to remain a member of the Board (other than on account of disability or death) until the earlier of the succeeding April 30th or the next Annual Meeting of Stockholders, the award for that year will be prorated to reflect actual service. Distributions under the Directors’ Equity Plan are made in shares of our Common Stock after the director terminates service on the Board in accordance with distribution elections made by her/him, which may be either in a lump-sum payment or, with respect to grants made prior to 2012, in annual payments over a period of up to ten years.
30 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
DIRECTOR COMPENSATION |
Under the Directors’ Equity Plan, with respect to grants made beginning in 2012, and future years, directors may elect to commence distribution of a particular year’s deferrals either upon termination of service or after a specified number of years thereafter. A director may elect to receive distribution of such deferrals in the form of a lump-sum payment, or annual installments over a period of three to fifteen years. Distribution elections must be made prior to the date that services giving rise to the awards are performed.
Shares granted under the prior Stock Plan for Outside Directors are subject to forfeiture if a director leaves service prior to age 72, except after a change-in-control or if waived by non-participating directors.
Directors’ Deferred Compensation Plan
Under the Directors’ Deferred Compensation Plan, directors who are not employees may elect to defer any portion of their cash retainer by making appropriate elections in the calendar year prior to the year in which the services giving rise to such compensation being deferred is rendered. At the same time he/she elects to defer such compensation, the participant must make an election as to the timing and the form of distribution from his/her Directors’ Deferred Compensation Plan account. Distributions are made in cash or, at the election of the participant in the case of amounts credited with earnings by reference to the performance of our Common Stock, in shares of Common Stock.
For amounts deferred prior to 2012, distributions may commence (a) on the thirtieth day after the date he/she terminates service as a director or, in the alternative, (b) on January 15th of any calendar year following termination of service elected by him/her, but in any event no later than the later of (i) January of the year following the year of his/her 71st birthday or (ii) January following termination of service. Participants may elect to receive the distribution of their Directors’ Deferred Compensation account in the form of one lump-sum payment, or annual distributions over a period selected by the participant, up to 10 years.
With respect to compensation deferred beginning in 2012, and future years, directors may elect to commence distribution of a particular year’s deferrals, either (a) within 30 days of termination of service, or (b) a specified number of years following termination of service. They may elect to receive distribution of such deferrals in the form of a lump-sum payment, or annual installments over a period of three to fifteen years.
Participants may make changes of distribution elections on a prospective basis. Participants may also make changes of distribution elections with respect to prior deferred compensation as long as any such new distribution election is made at least one year prior to the date that the commencement of the distribution would otherwise have occurred and the revised commencement date is at least five years later than the date that the commencement of the distribution would otherwise have occurred.
Participants may choose to have amounts deferred under the Directors’ Deferred Compensation Plan credited with earnings based on (i) the performance of one or more of pre-mixed lifestyle investment portfolio funds, (ii) at the rate of Prime plus 1/2%, capped at 120% of the applicable federal long-term rate, or (iii) by reference to the performance of our Common Stock, in such percentages designated by the participant. These are the same investment options offered under our 401(k) plan to employees (except the Schwab Personal Choice Retirement Account). A participant who fails to provide a designation will accrue earnings on his/her account at the rate of Prime plus 1/2%, capped at 120% of the applicable federal long-term rate. A participant may change fund selection daily, except for the Common Stock Fund, for which selection may be made only prior to deferral.
For 2012, theThe one-year rates of return as of December 31, 20122013 for the offered funds as computed by the recordkeeper for the Directors’ Deferred Compensation Plan were as follows:
Rates of Return | ||||||||||||||
Pre-Mixed Portfolios | Target Retirement Funds | |||||||||||||
Conservative Portfolio | 12.17% | Target Retirement Income | 5.75% | |||||||||||
Moderate Portfolio | 17.47% | Target Retirement 2010 | 8.96% | |||||||||||
Aggressive Portfolio | 23.69% | Target Retirement 2015 | 12.98% | |||||||||||
Funds | Target Retirement 2020 | 15.79% | ||||||||||||
Stable Value | 1.97% | Target Retirement 2025 | 18.11% | |||||||||||
Diversified Bond | -1.97% | Target Retirement 2030 | 20.42% | |||||||||||
Large Company Stock Index | 32.27% | Target Retirement 2035 | 22.76% | |||||||||||
Mid-Cap Index | 35.09% | Target Retirement 2040 | 24.33% | |||||||||||
Institutional Developed Markets Index | 21.93% | Target Retirement 2045 | 24.30% | |||||||||||
Small – Cap Index | 37.74% | Target Retirement 2050 | 24.28% | |||||||||||
Enterprise Common Stock | 9.16% | Target Retirement 2055(1) | 13.95% | |||||||||||
Other | Target Retirement 2060(1) | 13.25% | ||||||||||||
Prime Plus 1/2% | 3.37% |
Pre-Mixed Portfolios | Target Retirement Funds | |||||||||
Conservative Portfolio | 8.93 | % | Target Retirement Income | 8.13 | % | |||||
Moderate Portfolio | 12.03 | % | Target Retirement 2010 | 10.02 | % | |||||
Aggressive Portfolio | 15.09 | % | Target Retirement 2015 | 11.27 | % | |||||
Target Retirement 2020 | 12.25 | % | ||||||||
Funds | Target Retirement 2025 | 13.19 | % | |||||||
Stable Value | 2.56 | % | Target Retirement 2030 | 14.14 | % | |||||
Diversified Bond | 4.82 | % | Target Retirement 2035 | 15.06 | % | |||||
Large Company Stock Index | 15.89 | % | Target Retirement 2040 | 15.45 | % | |||||
Mid-Cap Index | 15.94 | % | Target Retirement 2045 | 15.47 | % | |||||
Institutional Developed Markets Index | 18.85 | % | Target Retirement 2050 | 15.48 | % | |||||
Small-Cap Index | 18.18 | % | Other | |||||||
Enterprise Common Stock | -4.27 | % | Prime Plus 1/2% | 3.00 | % |
(1) | Partial year rate of return from date added to choices available to participants. |
PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 2931
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
ADVISORY VOTE ON THE APPROVAL OF EXECUTIVE COMPENSATION |
We are providing you with an opportunity to cast an advisory vote on our executive compensation programs as described in this Proxy Statement. This is commonly referred to as “say-on-pay.” We plan to do this each year, in accordance with the applicable rules of the SEC.
This vote is advisory and thus it is non-binding on us and the Board. However, management, the O&CC and the Board intend to carefully review the voting results and take them into consideration when making future decisions regarding our executive compensation. In accordance with applicable SEC requirements, we will disclose to you in our future proxy statements how our compensation policies and decisions have taken into account the results of the most recent stockholder advisory vote on our executive compensation.
At the 20122013 Annual Meeting of Stockholders, our stockholders voted over 96%94% in favor of our say-on-pay proposal. We were gratified by this result and believe this demonstrated strong support for our executive compensation policies and practices and our approach to aligning pay and performance. In furtherance of our pay for performance philosophy, we continuously review and make changes to our executive compensation program in recognition of investor concerns, evolving trends and best practices. We annually review and adjust as necessary the compensation of our executives in light of their performance, their role in our management, our business results and our financial condition. Based on this review, we made individual determinations about the compensation of our CEO and the other NEOs, as discussed below. We did not make any significant changes to our program.program for 2013.
We have disclosed in this Proxy Statement an overview of the philosophy and elements of our executive compensation program, as well as the details of the individual compensation paid or awarded to each of our NEOs and our process for making those determinations. We have provided below the Report of our O&CC, ourthe CD&A and the compensation tables. In our CD&A, we have explained the reasons supporting our executive pay decisions as reported in the various Tablestables and accompanying narrative included in this Proxy Statement.
We believe our executive compensation is reasonable and appropriate, reflecting market conditions. We are asking you to indicate your support of our executive compensation program as described in this Proxy Statement. This vote is not intended to address any specific item of compensation or any specific individual. Rather, it is an indication of your agreement with the overall philosophy, policies, practices and compensation of our executive officers as described in this Proxy Statement. Accordingly, as recommended by the Board, we ask for you to vote in favor of the following resolution:
Resolved, that the stockholders hereby approve, on an advisory basis, the compensation of the NEOs, as disclosed in the Company’s Proxy Statement for the 20132014 Annual Meeting of Stockholders pursuant to the applicable rules of the SEC, including the CD&A, compensation tables and narrative discussion.
The Board of Directors recommends a vote FOR the resolution in this proposal.
30 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The Organization and Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management and with Compensation Advisory Partners LLC, the Committee’s compensation consultant. Based on such review and discussions, the Organization and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Members of the Organization and Compensation Committee:
Richard J. Swift, Chair
William V. Hickey
Shirley Ann Jackson
David Lilley
Thomas A. Renyi
February 19, 201318, 2014
32 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This CD&A explains our executive compensation philosophy, and the material elements of our executive compensation program and the decisions made regarding our CEO and the NEOs in this Proxy Statement. We have provided an Executive Summary consisting of an overview of the key aspects of our program and recent actions followed by a more detailed analysis and specific information concerning compensation, including:
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We provide an explanation of the data reported in the Tablestables in this Proxy Statement, with respect to pay for performance, “say-on-pay”, compensation risk, the components of our compensation, calculations as to SMICP and LTIP incentive payouts and certain compensation policies.
2012 NEOs
In the CD&A Executive Summary we specifically address those areas which we believe are of utmost interest to our stockholders, while a complete reading of the CD&A provides a more thorough description of our compensation program and explanation of our recent activities:
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We have designed this CD&A to be forthcoming and transparent in demonstrating that our executive compensation program is based on well-established principles thoughtfully carried out under the oversight of the O&CC for the long-term benefit of our stockholders.
PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 3133
CD&A EXECUTIVE SUMMARY |
COMPENSATION DISCUSSION AND ANALYSIS
Executive compensation is administeredgoverned under the direction and authority of the O&CC. The O&CC is made up of directors who are independent under NYSE rules and our requirements for independent directors. The O&CC receives advice from its independent compensation consultant, CAP, which provides only executive compensation consulting services to the O&CC.Board and not to management.
Executive Compensation Philosophy - Pay for Performance,Mix and Peer Group and Pay Mix
Our executive compensation program is designed to closely link pay toand performance and align the interests of executives, including our NEOs, with stockholders. We have structured our program to tie executive compensation to the successful execution of our strategic plans, meeting our financial and operational goals and delivery of strong returns to our shareholders.returns. This translates into higher compensation in years of strong performance and stockholder returns and lower compensation when performance is not as strong. We seekprovide a peer-competitive compensation package to create stockholder value by attractingattract and retainingretain exceptional executive talent needed for long-term success, and providingwith incentives for our executives to achieve outstanding individual performance and business results. Our senior management team, headed by our NEOs, continues to provide strategic and management leadership as we focus on operational leadership in a difficult marketexcellence, financial strength and regulatory environment. We do this with competitive compensation opportunities relative to our industry peers for similar positions, with actual compensation payments determined by individual and business performance, without encouraging excessive risk.disciplined investment.
We benchmark executive compensation, including that of the NEOs, to a peer group of companies in our industry where data for the position is available to us. To most effectively evaluate executive compensation, we believe that an analysis of the “pay mix”, or Total Direct Compensation (base salary plus target annual incentive and target long-term incentive) is a better measure for evaluating executive compensation as opposed to focusing on each of the elements individually. We target Total Direct Compensation at the median of the industry peer group) within a range that recognizes differences in roles, performance, tenure and volatility of market data from year to year:
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The O&CC regularlyannually reviews and evaluates at least annually, the philosophy, objectives, design and effectiveness of our compensation program, including the performance of the NEOs. The O&CC maintains the flexibility to make decisions about the program and actual compensation levels and awards based on achievement of our business objectives and relevant circumstances affecting our Company. In addition to the established performance measures, these may include economic, market and competitive conditions, regulatory and legal requirements, internal pay equity considerations and peer group best practices. The O&CC and the entire Board seek to assure alignment of pay with performance in order to create value without encouraging excessive risk taking. Our directors are committed to acting in the best interest of stockholders as responsible stewards overseeing our executive compensation program.
Our compensation consists primarily of the following components:
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We benchmark executive compensation, including that of the NEOs, to a peer group of companies in our industry. To most effectively evaluate executive compensation, we believe that an analysis of the “pay mix”, or Total Direct Compensation (base salary plus target annual incentive and target long-term incentive) is a better measure for evaluating executive compensation as opposed to focusing on each of the elements individually. We target Total Direct Compensation at the median of the industry peer group within a range that recognizes differences in roles, performance, tenure and volatility of market data from year to year:
3234 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
CD&A Executive Summary |
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Practices
The table below highlights our executive compensation practices which remain consistent with our compensation philosophy. The left column outlines the practices we believe are conducive to encouraging sound performance by our senior executives and the right column describes those practices that we have chosen not to implement because we do not believe they further our stockholders’ long-term interests.
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2012
2013 PSEG Performance Highlights
2012 was another challenging year for usIn 2013, we met our strategic and our industry due to lowoperational objectives as we again confronted fluctuations in market prices for electricity and natural gas, uncertain regulatory and environmental requirements and difficult economic conditions. Earnings for 2012 were within our targeted range, but lower than the prior year, while the price of our Common Stock was modestly lower at year-end. Despite regulatory, environmental and economic challenges during 2012, among other things, we met our strategic and operational objectives.
Our long-range strategy, with its emphasis on business fundamentals, helped to mitigate the impact on earnings. Our shiftearnings of investment capitalthese challenges. Earnings for 2013 were above our targeted range, and the price of our Common Stock was modestly higher at year-end. Financial highlights are included in recent years from generationthe Executive Summary to the rate-regulated utilitythis Proxy Statement on page 3 above. You can find a more comprehensive discussion of our 2013 business has enabledand financial performance in our Form 10-K.
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 35
CD&A EXECUTIVE SUMMARY |
Pay For Performance
The market and other pressures on us to limit the decline in earnings despite the dramatic fall in power prices while also ensuring that we are able to provide reliable service to our utility customers. We benefited too from our emphasis on cost controls and operational efficiencies. As a result, we were able to maintain a strong balance sheet and cash position, which allowed us to increase our dividend under a revised payout formula. We were again recognized for our superior reliability as a utility and our response to Superstorm Sandy, which placed enormous strain on our employees and operations. Macroeconomic pressures, industry dynamics and unplanned events like Superstorm Sandy emphasize our need to maintain our focus on operational excellence, financial strength and disciplined investment by attracting and retaining the top talent that is critical for us to accomplish our objectives. We show below a chart comparing the relative contributions to earnings of PSE&G and Power over the past five years, together with the percentage increase of capital expenditures (CapEx) at PSE&G compared to total investment in our Company. Also shown is the comparison of Compound Annual Growth Rate (CAGR) at PSE&G and Power over the five-year period. We believe that this visual depiction demonstrates the value to stockholders of our business strategy and the emphasis on utility investment. This impact on our earnings is reflected in the realized pay of our NEOs, since our executive compensation program links incentive payouts to earnings measures over multiple time frames.
The analytical judgment and operational and managerial abilities that we expect of our senior executives are critical factors in positioning us for the future. Their performance in improving our operating efficiencies, actively influencing legislative and regulatory policies and adjusting our business mix by shifting investment to best take advantage of emerging opportunities for growth, particularly in connection with utility rate-regulated returns, have led to the accomplishments noted above. While these objectives.activities are not easily measured over the short-term by reference solely to current EPS and stock price in comparison to the levels in the recent past, the ability of our management team to address these challenges successfully are vital skills on which we place significant value in setting total compensation for our NEOs. We believe that our performance-based compensation programs have and will continue to deliver the appropriate compensation based on our results relative to both our business plan and our peers, helping us manage through an evolving business environment.
36 PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 33
COMPENSATION DISCUSSION AND ANALYSIS
2012 Accomplishments
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Say-On-Pay, Key O&CC Actions and Stockholder Engagement and Transparent Disclosure
We provide our stockholders with an annual opportunity to cast an advisory “Say-on-Pay” vote. We believe that this voting opportunity can provide valuable insights into our stockholders’ views on our compensation programs.
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The O&CC considered recommendations from CAP and management with regard to compensation design and effectiveness and reviewed competitive practices within our peer group. In addition, the O&CC monitors trends and developments in the market, with the assistance of CAP, as they relate to executive compensation. Based on the reviews and analyses undertaken by the O&CC, we did not make any significant changes to our programs. The O&CC considered this strong stockholder reinforcement of our compensation philosophy and program in determining to continue with our consistent results-oriented pay for performance approach. The O&CC took the following actions related to compensation:
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As noted elsewhere in this Proxy Statement, we had determined in 2011 to move the timing of our annual award of LTIP grants to February from the previous December. As a result, no annual LTIP grants were awarded in 2011 and accordingly, no such grants for that year are shown in our Summary Compensation Table, except for the special retention award to Mr. Levis. The grants made in February 2012 are included in the Summary Compensation Table. The amount shown for 2012, as compared to 2011, does not represent an increase in or addition of a new component of executive compensation. The difference between those two years with regard to the LTIP compensation reported in the CD&A and this Proxy Statement is due solely to the award timing difference. Changes in salary and SMICP are discussed in detail below.
Our Company hasWe have a long-standing practice of engaging in constructive dialogue with our stockholders on various matters of interest to them, including executive compensation and governance.them. We do this by meeting periodically with our major stockholders and groups of investors as well as by regular written communications. These interactions provide us with valuable insights. In recent years, we have enhanced our efforts with regard to matters of executive compensation and corporate governance to keep pace with evolving investor priorities and expectations.
We strive to be clear and transparent in the information we provide to investors in our Proxy Statement, Form 10-K and other reports filed with the SEC and in our investor communications. We continuebelieve our executive compensation disclosure addresses the issues considered most important to welcome feedback fromand provides the useful information desired by our stockholders, as evidenced by the feedback we receive at our meetings throughout the year. We always welcome your comments and suggestions and will continue to consider the outcome of the say-on-pay vote when making future compensation decisions regarding our NEOs.
Key O&CC Actions
The O&CC monitors trends and developments in the market, with the assistance of CAP, as they relate to executive compensation. In 2013, the O&CC considered recommendations from CAP and management with regard to compensation design and effectiveness and reviewed competitive practices within our peer group. Based on the reviews and analyses undertaken by the O&CC, we did not make any significant changes to our programs. The O&CC considered the strong stockholder reinforcement of our compensation philosophy and program in determining to continue with our consistent results-oriented pay for performance approach. In 2013, the O&CC took the following actions related to compensation:
34 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement 37
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION PHILOSOPHYCompensation Philosophy and Performance
Pay for Performance
We believe it is important to link pay with performance and long-term stockholder value. We utilize compensation to further align the interests of our executives with those of our stockholders. However, we believe that it is crucial to our stockholders’ long-term interests that we not measure performance too narrowly on merely a single year’s results. Our compensation programs are designed to assess and reward for performance over varying time horizons.horizons with our incentives linked to successful implementation of our corporate strategic objectives. Our SMICP focuses on financial and operating performance over a one-year period while our LTIP is focused on multi-year performance criteria and payouts.performance. Similarly, the goals of individual NEOs, including our CEO, place a high value on strategic initiatives, long-range planning and operational excellence. While the impact of this approach may not necessarily be seen in any single year, over time the actual value of compensation, especially equity grants, should reflect our Company’s performance.
Our ability to effectively compete and reliably serve our customers, as a recognized industry leader, while adjusting to evolving industry and market factors is to a great degree dependent on our ability to appropriately incent the performance of ourattract, retain and reward senior executives and retain their continued employment.executives. When we establish performance targets, we consider internal and external factors and set stretch goals to reflect an appropriate degree of difficulty. Our incentive compensation payouts are determined based on measures that align CEO and NEO compensation with stockholder interests, as EPS, TSR and ROIC are used in calculating the amounts. Although these are important components for evaluating pay for performance, we do not believe it is particularly meaningful to merely compare EPS or Common Stock price at year-end with CEO and NEO reported compensation. For example, a meaningful pay for performance analysis entails more than a mere comparison of year-end quantitative measures such as TSR to compensation as reported. Among other things, the reported compensation, in particular the equity compensation shown in the tables in the Proxy Statement, is based on an accounting valuation of targeted future payouts. These could differ significantly from what is ultimately earned by the executives depending on actual results of the performance measures and the value of equity awards at the time they are earned, if at all. The O&CC considers these factors when it assesses the pay for performance relationship.
Viewing performance in this broad context, we believe the total compensation paid to senior executives in recent years and as structured for future payouts has achieved the desired results. In general, our delivered performance in 2012, relative to the degree of difficulty, was aligned with our pre-set goals and our business plan. As described in more detail below, in 2012, financial results reflect the current industry and Company circumstances while our CEO and NEOs have continued to focus on strategic responses and operational efficiencies to optimize earnings and returns while positioning us for continued success. For another year, these efforts have helped mitigate the effects of low gas and power prices and regulatory uncertainty.
As part of our pay for performance review during 2012,2013, the O&CC considered relative financial performance data comparing us to those companies in our peer group for whom data was available. Aavailable, as discussed further discussion regarding peer group analysis is provided below. With the assistance of CAP, we analyzed key performance metrics and compensation for 2011,2012, the most recent year for which data was available. Included in the metrics were revenue growth,operating income margin, EPS growth, return on capital and TSR. The total cash compensation included base salary and SMICP and the total direct compensation included those two items plus the grant date fair value of LTIP awards, all of which are reported in our 20122013 Summary Compensation Table. These performance metrics were broader than the measures we use in determining award payouts under the SMICP and LTIP. We believe they provide a more expansive view of our relative performance.
Based onViewing performance in this assessment,broad context, we believe the total compensation paid to senior executives and as further discussed below,structured for future payouts has achieved the desired results. In general, our delivered performance in 2013, relative to the degree of difficulty, was aligned with our pre-set goals and our business plan. We believe that our financial results reflect the current industry and Company circumstances as well as the continued focus of our CEO and NEOs on strategic responses and operational efficiencies to optimize earnings and returns while the most recent year was challengingpositioning us for us and the rest of the industry, we performed well on a relative basis over a longer period (i.e., three years). In particular, when we consider our TSR over the timeframe, we have delivered returns better than those in our peer group whose business most closely approximates ours as a whole, the integrated holding companies.continued success. In evaluating the compensation of the NEOs and in particular the CEO, we assessed the amount relative to the performance delivered and continue to conclude the two are aligned.
2012 Performance
2012 was another challenging year for us, as reflected in our lower earnings and modestly lower year-end Common Stock price, compared to 2011. Natural gas prices continued to decline. This depressed the market price for electricity and capacity and, thus, reduced our profit margins. We expect this downward pressure on natural gas and wholesale electric prices to continue through 2013 and beyond. Economic conditions and customer usage patterns also lowered demand and revenues. Lower market prices and greater competition again created incentives for increased customer “migration” to alternate electric suppliers, reducing margins although to a lesser degree than in the prior year. We expect these trends to continue as long as the economy remains weak and natural gas prices stay low.
Much of executive management’s focus in guiding our Company has been to respond strategically to market forces, low natural gas and electricity prices and weak regional economic conditions. The requisite analytical judgment and operational and managerial abilities that we expect of our senior executives are critical factors in positioning us for the future. Their efforts have been aimed at mitigating the impacts of these pressures by improving performance, actively influencing legislative and regulatory policies and adjusting our business mix by shifting investment to best take advantage of emerging opportunities for growth, particularly in connection with utility rate-regulated returns. While these activities are not easily measured over the short-term by reference solely to current EPS and stock price in comparison to the levels in the recent past, the ability of our management team to address these challenges successfully are vital skills on which we place significant value in setting total compensation for our NEOs.
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 35
COMPENSATION DISCUSSION AND ANALYSIS
2012 Highlights
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As a result of the continued focus on operational excellence, financial strength and disciplined investment, our management team has effectively responded to challenging conditions. For example, despite the steep reduction in power prices over the past five years, our EPS for the same period has experienced a more modest decline, as depicted below:
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In 2013, weWe will continue to focus on strong management of operations, including generation capacity and utility reliability, pursuit of new investments, strengthening our relationships with key stakeholders, sustained advocacy for competitive markets, adequate rate treatment and cost recovery and environmentally responsible rules. Our success will depend upon our ability to maintain strong operational and financial performance and appropriately invest in growth opportunities in a difficult economy and cost-constrained environment, amidst continued low natural gas and power prices, reduced demand, threats to competitive markets and more stringent environmental controls. We believe that our executive compensation programs reward and create incentives for our executives, from whom we expect superior performance, to meet these challenges now and in the future. We have made decisions with regard to executive compensation based on
36 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
2012 individual and business performance and the value of the individual to our Company, including long-term incentive awards that may be earned and/or whose value will be based upon future performance.
If you would like additional information about our 2012 Performance,2013 performance, including our financial statements and a more complete description of our business, please see our Form 10-K.
38 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Peer Group
A second element of our compensation philosophy includes an evaluation of the compensation of our NEOs relative to an identified peer group.Attracting and retaining top talent requires paying competitive compensation. We evaluate and set executive compensation to be competitive within thean identified peer group which was developed to reflect similarly-sized energy companies with comparable businesses. We believe that these companies appropriately reflect the landscape of our industry and the market in which we compete for talent. We have included regulated utilities, independent power producers, merchant generators and combined holding companies such as us. We have attempted to include a broad enough group to provide diversity for balanced comparison while selecting only those we think are sufficiently similar to provide a meaningful benchmark.
We consider Base Salary, Total Cash Compensation (base salary plus target annual incentive) and Total Direct Compensation (base salary plus target annual incentive plus target long-term incentive) as the elements of compensation within the peer group for purposes of benchmarking and assessing the market from which we draw executive talent as well as with whom we compete for investor capital. Each year, we re-evaluate the peer group to assess its continuing appropriateness. For 2012,Effective for 2014, we removed Constellationadded NiSource Inc., Northeast Utilities, NRG Energy GroupInc. and Progress Energy, as they were acquired in 2012 by others inPepco Holdings Inc., which more closely aligns us to the peer group.median in revenue, consistent with our compensation philosophy of targeting the median.
Thus, substantially the sameThe 2013 peer group was used as a reference point for setting pay levels at the end of 20112012 for 2012 as well as2013. The 2014 peer group was used for setting paysalaries for 20132014 at the end of 2012.2013 and will be used for all other 2014 pay decisions. The O&CC targets the median (50th percentile) of thisthe peer group for positions comparable to those of our officers for Total Direct Compensation. The peer group is also used for comparison in assessing our performance under our LTIP as well as an overall validation of the alignment between pay and performance.
Pay Governance LLC assists in analyzing the annual Towers Watson Energy Services Executive Compensation Survey–U.S. assessment of the market using the peer companies. We use the peer group data to the extent each position is reported in the survey data. CAP also reviews the outcome of the competitive assessment. As shown below, based on the most recently available data, as provided by CAP, our revenue and market capitalization were below the median, while our net income exceeded the median.
Peer Group
Company Name | Revenue 2011 ($ Millions) | Net Income 2011 ($ Millions) | Market Capitalization at 12/31/11 ($ Millions) | |||||||||
Ameren Corporation | 7,531 | 519 | 8,025 | |||||||||
American Electric Power Company, Inc. | 15,116 | 1,946 | 19,949 | |||||||||
Consolidated Edison, Inc. | 12,938 | 1,062 | 18,169 | |||||||||
Dominion Resources, Inc. | 14,379 | 1,408 | 30,235 | |||||||||
DTE Energy Company | 8,897 | 711 | 9,216 | |||||||||
Duke Energy Corporation | 14,529 | 1,706 | 29,320 | |||||||||
Edison International | 12,760 | 22 | 13,489 | |||||||||
Entergy Corporation | 11,229 | 1,367 | 12,865 | |||||||||
Exelon Corporation | 18,924 | 2,495 | 28,755 | |||||||||
FirstEnergy Corp. | 16,346 | 885 | 18,527 | |||||||||
NextEra Energy, Inc. | 15,341 | 1,923 | 25,724 | |||||||||
PG&E Corporation | 14,956 | 844 | 16,730 | |||||||||
PPL Corporation | 12,737 | 1,495 | 17,014 | |||||||||
Sempra Energy | 10,036 | 1,365 | 13,190 | |||||||||
Southern Company | 17,657 | 2,268 | 39,899 | |||||||||
Xcel Energy Inc. | 10,655 | 841 | 13,404 |
2013 Peer Group | ||||||||||||||||||||
Company Name | 2012 | 2012 Net Income |
Market Cap at 12/31/12 | |||||||||||||||||
($Millions) | ($Millions) | ($Millions) | ||||||||||||||||||
Ameren Corporation | 6,828 | (974 | ) | 7,454 | ||||||||||||||||
American Electric Power Company, Inc. | 14,945 | 1,259 | 20,710 | |||||||||||||||||
Consolidated Edison, Inc. | 12,188 | 1,141 | 16,266 | |||||||||||||||||
Dominion Resources, Inc. | 13,093 | 302 | 29,765 | |||||||||||||||||
DTE Energy Company | 8,791 | 610 | 10,333 | |||||||||||||||||
Duke Energy Corporation | 19,624 | 1,768 | 44,931 | |||||||||||||||||
Edison International | 11,862 | (92 | ) | 14,723 | ||||||||||||||||
Entergy Corporation | 10,302 | 868 | 11,330 | |||||||||||||||||
Exelon Corporation | 23,489 | 1,160 | 25,406 | |||||||||||||||||
FirstEnergy Corp. | 15,320 | 770 | 17,465 | |||||||||||||||||
NextEra Energy, Inc. | 14,256 | 1,911 | 29,282 | |||||||||||||||||
PG&E Corporation | 15,040 | 816 | 17,277 | |||||||||||||||||
PPL Corporation | 12,189 | 1,526 | 16,654 | |||||||||||||||||
Sempra Energy | 9,647 | 865 | 17,157 | |||||||||||||||||
Southern Company | 16,537 | 2,415 | 37,420 | |||||||||||||||||
Xcel Energy Inc.
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2012 Revenue | 2012 Net Income | Market Cap at 12/31/12 | ||||||||||||||||||
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($Millions) | ($Millions) | ($Millions) | ||||||||||||||||||
PSEG | 9,781 | 1,275 | 15,481 | |||||||||||||||||
Peer Group 75th Percentile | 15,110 | 1,326 | 26,375 | |||||||||||||||||
Peer Group Median | 12,641 | 887 | 17,217 | |||||||||||||||||
Peer Group 25th Percentile | 10,259 | 730 | 14,299 |
PUBLIC SERVICE ENTERPRISE GROUP | 20132014 Proxy Statement 3739
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS |
Company Name | Revenue ($ Millions) | Net Income 2011 ($ Millions) | Market ($ Millions) | |||||||||
PSEG | 11,079 | 1,503 | 16,700 | |||||||||
Peer Group 75th Percentile | 15,172 | 1,760 | 26,482 | |||||||||
Peer Group Median | 13,659 | 1,366 | 17,591 | |||||||||
Peer Group 25th Percentile | 11,085 | 843 | 13,351 |
Compensation Benchmark
The data used for the comparisons below are from the most recent data available for the companies in the 2013 peer group.group shown above. The O&CC considers a range of approximately +/- 20% of the 50th percentile of comparable positions to be within the competitive median.
Base salary, target Total Cash Compensation and target Total Direct Compensation of each of the NEOs included in this Proxy Statement as a percentage of the comparative median benchmark levels of the peer group are noted below. Decisions on salary and other pay elements, except the LTIP, are typically made at the O&CC meeting each December. Below is each executive’s market positioning as of the time those decisions were made:
% of Comparative Median Benchmark Levels (2012)
NEO | Izzo (%) | Dorsa (%) | Levis (%) | Mehrberg (%) | Bouknight (%) | LaRossa (%) | ||||||||||||||||||||||||||||||
% of Comparative Median Benchmark Levels (2013) | % of Comparative Median Benchmark Levels (2013) | |||||||||||||||||||||||||||||||||||
Izzo (%) | Dorsa (%) | Levis (%) | Mehrberg (%) | Bouknight (%) | LaRossa (%) | |||||||||||||||||||||||||||||||
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Base Salary | 78 | 96 | 107 | N/A | 105 | 102 | 89 | 96 | 104 | N/A | 103 | 114 | ||||||||||||||||||||||||
Total Cash Compensation | 87 | 96 | 110 | N/A | 105 | 102 | 98 | 96 | 104 | N/A | 106 | 118 | ||||||||||||||||||||||||
Total Direct Compensation | 108 | 96 | 112 | N/A | 103 | 106 | 113 | 97 | 108 | N/A | 100 | 120 |
The target LTIP award that is included in Total Direct Compensation was determined by the O&CC in February 2012.2013. The O&CC kept the same annual incentive target for the NEOs, except for Messrs. Bouknight and LaRossa,Mr. Izzo whose targets were each increasedtarget was reduced from 125% to 65% from 60% to align with market.120%, as discussed below. For Total Direct Compensation, we included the salaries and bonus targets that were approved in December 20112012 and effective for 2012. For Mr. Levis, there was insufficient relevant data for the peer group companies, so we compared his compensation to that of an expanded sample of all energy companies in the Towers Watson survey.2013. For Mr. Mehrberg, due to the uniqueness of his role in having multiple responsibilities, we were unable to identify relevant market data. It iswas difficult to precisely benchmark Mr. Mehrberg’s compensation because of his diverse duties. We could not identify any directly comparable position within the reported peer group data available to us of a senior executive with two or more manager staff functions whothat also hashad additional operational responsibilities. We compared Mr. Mehrberg’s position to one encompassing his administrative staff duties and added an amount to reflect expanded duties in order to align Mr. Mehrberg’s compensation with our other senior executives for internal equity within that group. Each NEO’s Total Direct Compensation was within +/-20% of the median, which we believe is consistent with our philosophy.
Pay Mix
The final element of our compensation philosophy is a consideration of the total mix of pay. The O&CC believes that Total Direct Compensation is a better measure for evaluating executive compensation than focusing on each of the elements individually and it does not set a formula to determine the mix of the various elements. The mix of base salary and annual cash incentive for each of the executive positions is surveyed from the peer group. The reported pay structure from the competitive analysis is used as a general guideline in determining the appropriate mix of compensation among base salary, annual and long-term incentive compensation opportunity. However, we also consider that the majority of a senior executive’s compensation should be performance-based and the more senior an executive is in the organization, the more his/her pay should be oriented toward long-term compensation.
38 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The mix of base salary, target annual cash incentive and long-term incentives for 20122013 are presented below for the CEO as well as the average for the other NEOs. We have also provided a comparison of the targeted pay mix to that of the peer group.
(1) | Excludes the CEO and, as explained above, Mr. Mehrberg |
40 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
ELEMENTS OF EXECUTIVE COMPENSATIONElements of Executive Compensation
The main components of our executive compensation program, including those for our NEOs, are set forth in the following table. A more detailed description is provided in the respective sections below.
Compensation Element | Description | Objective | ||
Base Salary | Fixed cash compensation | Provides compensation for the executive to perform his/her job functions
Assists with recruitment and retention | ||
Annual Cash Incentive | Paid each year if warranted by performance, based on a percentage of base salary
Opportunity to earn between zero and 150% of target,
Metrics and goals (typically earnings, operational and other) are established at the beginning of each year and the payout is made based on performance | Intended to reward for driving best-in-class operating and financial results over a one-year timeframe
Creates a direct connection between business success and financial reward
Provides strong line of sight by recognizing exceptional individual performance. | ||
Long-Term Incentives (See Table under LTIP) | Performance Share Units
Restricted Stock Units generally vest at the end of three years
| Rewards strong financial and stock price performance
Provides for strong alignment with stockholders
Assists with retention
Intended to reward for driving financial results over a multi-year time frame | ||
Retirement Plans | Defined benefit pension plans
Defined contribution 401(k) plan with a partial Company matching contribution
Supplemental retirement benefits for certain employees beyond qualified plan benefits, in view of IRS limits | Provides retirement income
Assists with recruitment and retention | ||
Deferred Compensation Plans | Permits participants to defer receipt of a portion of cash and equity compensation | Provides participants with the opportunity to more effectively manage their taxes
Assists with retention | ||
Post-Employment Benefits | Severance and change-in-control benefits | Assures the continuing performance of executives in the face of a possible termination of employment without cause
Assists with retention | ||
Other Benefits | Health and welfare programs Limited perquisites | To be competitive with peer companies
Aids safety and efficiency Assists with recruitment and retention |
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
CEO Compensation
Mr. Izzo’s compensation is designed to position his total pay around the median of the market. Mr. Izzo has demonstrated strong performance over his tenure as CEO and the O&CC believes this arrangement is appropriate. The changes to the key terms of Mr. Izzo’s compensation in 20122013 were as follows:
• | Base Salary: The median salary for a CEO in the peer group is approximately |
• | Annual Cash Incentive:The CEO’s annual incentive target for |
PUBLIC SERVICE ENTERPRISE GROUP |2014 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS |
• | Long-term Incentive: The CEO’s grant of long-term incentive (in February |
The CEO’s compensation level is reflected above in the competitive positioning detailed in Total Direct Compensation. A recommendation with respect to CEO compensation was included with data presented to the O&CC by management. After meeting in executive session, without the CEO present, the O&CC determined CEO compensation in consultation with all the independent directors.
Mr. Izzo’s salary, annual cash incentive and long-term incentive exceed that of the other NEOs due to his greater level of duties and responsibilities as the principal executive officer to whom the other NEOs report, and whom the Board holds fully accountable for the execution of corporate business plans.
Further detail regarding the CEO’s compensation is set forth below.
Base Salary
As the reference point for competitive base salaries, the O&CC considers the median of base salaries provided to executives in the peer group who have duties and responsibilities similar to those of our executive officers. The O&CC also considers the executive’s current salary and makes adjustments based principally on individual performance, including achievement of targets, and experience. Each NEO’s base salary level is reviewed annually by the O&CC using a budget it establishes for merit increases and salary survey data provided by Pay Governance and reviewed by CAP. For 2013, the O&CC set the merit increase budget at 3.0%.
The NEOs’ individual performance and, other than the CEO, his/her business unit’s performance are considered in setting salaries. Base salaries for satisfactory performance are targeted at the median of the relevant competitive benchmark data.
The O&CC considers base salaries and salary adjustments for individual NEOs, other than the CEO, based on:
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Salaries for the NEOs for 20122013 were approved at the December 20112012 meeting of the O&CC. Salaries for 20132014 were approved by the O&CC in December 2012, with2013. These amounts are shown in the table below. For each of the NEO’s receiving an increasethese years, salary decisions were based on his/hereach NEO’s performance and to better alignappropriate alignment with the peer group:
NEO | Base Salary
2013
($) |
Base Salary
2014
($) | ||||||
Ralph Izzo | 1,100,000 | 1,100,000 | ||||||
Caroline Dorsa | 619,500 | 650,000 | ||||||
William Levis | 566,500 | 650,000 | ||||||
Randall E. Mehrberg(1) | 561,400 | N/A | ||||||
J.A. Bouknight, Jr. | 545,900 | 545,900 | ||||||
Ralph A. LaRossa | 500,000 | 625,000 |
(1) | Mr. Mehrberg retired in December 2013 |
40 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
NEO | Base Salary ($) | Base Salary ($) | ||||||
Izzo | 980,000 | 1,100,000 | ||||||
Dorsa | 590,000 | 619,500 | ||||||
Levis | 550,000 | 566,500 | ||||||
Mehrberg | 545,000 | 561,400 | ||||||
Bouknight | 530,000 | 545,900 | ||||||
LaRossa | 485,000 | 500,000 |
Annual Cash Incentive Compensation
The SMICP was approved by stockholders in 2004.2002. It is an annual cash incentive compensation program for our most senior officers, including the NEOs. To support the performance-based objectives of our compensation program, corporate and business unit goals and measures are established each year based on factors deemed necessary to achieve our financial and non-financial business objectives. The corporate-level goals and those for the CEO are developed by the O&CC with input from the entire Board. The goals and measures are established by the CEO for the NEOs reporting to him, and for each other participant by the individual to whom he or she reports.
The SMICP sets a maximum award fund in any year of 2.5% of net income. The formula for calculating the maximum award fund for any plan year was determined at the time of plan adoption by reference to, among other things, similar award funds used by other companies and a review of executive compensation practices designed to address compliance with the requirements of Internal Revenue Code (IRC)
42 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Section 162(m), which, as explained below, limits the Federalfederal income tax deduction for compensation in excess of certain amounts. If appropriate, the Board will recommend for stockholder approval any material changes to the SMICP required to align the plan with our compensation objectives.
The CEO’s maximum award cannot exceed 10% of the award fund. The maximum award for each other participant cannot exceed 90% of the award fund divided by the number of participants, other than the CEO, for that year. For 20122013 performance under the SMICP, these limits were $31,875,000$31,075,000 for the total award pool, (of which $ 7,546,600 was awarded), $3,187,500$3,107,500 for the CEO’s maximum award and $2,390,625$2,330,625 for each other participant’s maximum award. Of the total award pool, $6,303,500 was awarded.
Subject to the overall maximums stated above, NEOs are eligible for annual incentive compensation. The beginning point in the process is a calculation based on a combination of the achievement of individual performance goals and business/employer performance goals, as well as overall corporate performance, as measured by the Corporate Factor. The Corporate Factor for 20122013 was EPS from Continuing Operations. We believe sustained EPS is a significant driver of stockholder value and provides line-of-sight over a one-year period between individual actions of executives and company performance. For the business units, we used operating earnings, which for Power excluded from Income from Continuing Operations gains or losses associated with our nuclear decommissioning trust, mark-to-market accounting and Superstorm Sandy costs and the impact of certain assets transferred to Power at year-end, adjusted to includefor interest variances from the business plan, and which for PSE&G were adjusted to exclude Superstorm Sandy costs andfor interest variances from the business plan.
For 2013, the CommitteeO&CC kept the same annual incentive targets for the NEOs, except for Mr. Izzo, as discussed above.
We maintained the same overall annual incentive structure as we have had for the last several years as we believe it supports our objectives of rewarding strong financial performance driven by operational excellence. We believe that through outstanding operations we can deliver the greatest long-term financial returns to our stockholders. The maximum result of this calculation is a comparative performance of 1.5. The corporate factor in 20122013 could range from zero to 1.5 based on pre-determined EPS goals. The payout factor and related targets for 20122013 are illustrated below. If the actual EPS is between the points shown below, the Corporate Payout Factor is determined using linear interpolation. In addition, Messrs. Levis, Mehrberg and LaRossa havehad business unit (BU) earnings and multiple BU scorecard (financial, operational and strategic) metrics and goals. Ms. Dorsa and Mr. Bouknight each havehad multiple BU scorecard metrics and goals. All participants havehad strategic metrics and goals: for Mr. Izzo, operational excellence, financial strength and disciplined investment; for Ms. Dorsa and Messrs. Levis, Mehrberg, Bouknight and LaRossa, employee engagement. Each factor is multiplied by the respective individual’s weighting shown below. An illustration of the plan mechanics is provided below, which when added together results in an individual’s payout as a percent of target incentive. The total payout is generally capped at 150% of target.target, increased to 200% for exceptional individual performance.
Weighting x Corporate EPS (0-150%) | + | Weighting x BU Earnings (0-150%) | + | Weighting x BU Scorecard (0-150%) | + | Weighting x Strategic Goals (0-150%) |
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS
The corporate performance goal targets and payout factors at each target performance level for 20122013 are set forth below:
EPS from Continuing Operations ($) | Corporate Payout Factor (#) | |||
< 2.25 | 0.000 | |||
2.25 | 0.500 | |||
2.37 | 1.000 | |||
2.50 | 1.500 |
EPS from Continuing Operations
($) |
Corporate Payout Factor
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< 2.13
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2.38 | 1.50 |
The respective business unit performance goal targets and payout factors at each target performance level for 20122013 for Power and PSE&G are set forth below:
Adjusted Operating Earnings ($ Millions) | ||||||||||||
Power | PSE&G | Payout Factor | ||||||||||
<583.7 | <517.5 | 0.000 | ||||||||||
583.7 | 517.5 | 0.500 | ||||||||||
614.9 | 545.1 | 1.000 | ||||||||||
648.6 | 575.0 | 1.500 |
Adjusted Operating Earnings
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Power | PSE&G | Payout Factor | ||||||
($Millions)
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< 533.7 | < 576.2 | 0.00 | ||||||
533.7
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0.50
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559.8 | 604.3 | 1.00 | ||||||
593.0 |
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For Energy Holdings, the business unit performance goal targets and payout factors are based on a four-factor formula tied to its year-end balance sheet values of owned and leased assets as compared to business plan target values. The four asset/lease categories are merchant energy leases (50%), global assets (10%), real estate investments (20%) and other assets (20%).
PUBLIC SERVICE ENTERPRISE GROUP |2014 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS |
The actual corporate and business unit results and corresponding payout factors for the performance levels achieved for 20122013 are set forth below:
Factors | Actual Results ($) | Payout Factor (#) | Actual Results ($) | Payout Factor (#) | ||||||||||
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Corporate EPS | 2.51 | 1.500 | 2.45 | 1.50 | ||||||||||
($ | Millions | ) | ($Millions)
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Power | 649.1 | 1.500 | 689.7 | 1.50 | ||||||||||
PSE&G | 546.2 | 1.019 | 609.4 | 1.07 | ||||||||||
Holdings | N/A | 1.245 | N/A | 1.37 |
Each factor (corporate earnings, BU earnings, BU scorecard and individual/strategic goals) is weighted based on an executive’s role, with the intention of balancing business unit and individual performance with corporate performance. The weighting for each of the NEOs for 20122013 is detailed below, together with the actual achievement factor attained in 2012:2013:
NEO | Weight and Payout Factor | Corporate EPS | BU Earnings | BU Scorecard | Individual Strategic | Overall Achievement Factor | ||||||||||||||||
Izzo | Weight | 75% | - | - | 25% | |||||||||||||||||
Achievement | 1.500 | - | - | 0.900 | 1.350 | |||||||||||||||||
Dorsa | Weight | 75% | - | 15% | 10% | |||||||||||||||||
Achievement | 1.500 | - | 1.336 | 0.500 | 1.375 | |||||||||||||||||
Levis | Weight | 60% | 15% | 15% | 10% | |||||||||||||||||
Achievement | 1.500 | 1.500 | 0.990 | 0.500 | 1.324 | |||||||||||||||||
Mehrberg | Weight | 60% | 15% | 15% | 10% | |||||||||||||||||
Achievement | 1.500 | 1.245 | 1.145 | 0.500 | 1.309 | |||||||||||||||||
Bouknight | Weight | 75% | - | 15% | 10% | |||||||||||||||||
Achievement | 1.500 | - | 1.096 | 0.500 | 1.339 | |||||||||||||||||
LaRossa | Weight | 60% | 15% | 15% | 10% | |||||||||||||||||
Achievement | 1.500 | 1.019 | 1.121 | 0.500 | 1.271 |
NEO | Weight and Payout Factor | Corporate EPS | BU Earnings | BU Scorecard | Corporate Strategic Goals | Overall Achievement Factor | ||||||
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Ralph Izzo | Weight | 75% | - | - | 25% | |||||||
Achievement | 1.50 | - | - | 1.16 | 1.42 | |||||||
Caroline Dorsa | Weight | 75% | - | 15% | 10% | |||||||
Achievement | 1.50 | - | 0.92 | 1.00 | 1.36 | |||||||
William Levis | Weight | 60% | 15% | 15% | 10% | |||||||
Achievement | 1.50 | 1.50 | 1.33 | 1.00 | 1.43 | |||||||
Randall E. Mehrberg | Weight | 60% | 15% | 15% | 10% | |||||||
Achievement | 1.50 | 1.37 | 1.07 | 1.00 | 1.37 | |||||||
J.A. Bouknight, Jr. | Weight | 75% | - | 15% | 10% | |||||||
Achievement | 1.50 | - | 1.18 | 1.00 | 1.40 | |||||||
Ralph A. LaRossa | Weight | 60% | 15% | 15% | 10% | |||||||
Achievement | 1.50 | 1.07 | 1.28 | 1.00 | 1.35 |
The final step in the process is for the O&CC to make an overall judgment as to the appropriate payout levels for each NEO taking into account the overall achievement factors along with other less quantifiable considerations, such as leadership and success in adapting to a changing external environment and the recommendations of the CEO.
42 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The SMICP awards of the NEOs for 20122013 are shown below and in the 20122013 Summary Compensation Table. The CommitteeO&CC made its determinations regarding SMICP awards for the 20122013 performance year in February 2013,2014, for payment that month. Based upon the executive’s overall achievement factor, his/her current base salary and target annual incentive opportunity and any O&CC modifications, if applicable, each earned the following payout for 2012,2013, as to which we also show the percent relative to salary:
NEO | Base Salary ($) | Target Annual Incentive Percentage (%) | Target ($) | Overall Achievement Factor | Modification (if applicable) | Payout Earned (1) | Percent of Salary (%) | |||||||||||||||||
Izzo | 980,000 | 125 | 1,225,000 | 1.350 | - | 1,653,800 | 168.8 | |||||||||||||||||
Dorsa | 590,000 | 70 | 413,000 | 1.375 | - | 567,900 | 96.3 | |||||||||||||||||
Levis | 550,000 | 75 | 412,500 | 1.324 | - | 546,200 | 99.3 | |||||||||||||||||
Mehrberg | 545,000 | 70 | 381,500 | 1.309 | - | 499,400 | 91.6 | |||||||||||||||||
Bouknight | 530,000 | 65 | 344,500 | 1.339 | - | 461,300 | 87.0 | |||||||||||||||||
LaRossa | 485,000 | 65 | 315,250 | 1.271 | - | 400,700 | 82.6 |
Overall | ||||||||||||||||||||||
Target Annual | Target Annual | Achievement | Payout | Percent of | ||||||||||||||||||
Base Salary | Incentive Percentage | Incentive Dollars | Factor | Modification | Earned(1) | Salary | ||||||||||||||||
NEO | ($) | (%) | ($) | (#) | (if applicable) | ($) | (%) | |||||||||||||||
Ralph Izzo | 1,100,000 | 120 | 1,320,000 | 1.42 | - | 1,874,400 | 170.4 | |||||||||||||||
Caroline Dorsa | 619,500 | 70 | 433,700 | 1.36 | - | 589,800 | 95.2 | |||||||||||||||
William Levis | 566,500 | 75 | 424,900 | 1.43 | - | 607,600 | 107.3 | |||||||||||||||
Randall E. Mehrberg(2) | 561,400 | 70 | 393,000 | 1.37 | - | 495,400 | 88.2 | |||||||||||||||
J.A. Bouknight, Jr. | 545,900 | 65 | 354,800 | 1.40 | - | 496,700 | 91.0 | |||||||||||||||
Ralph A. LaRossa | 500,000 | 65 | 325,000 | 1.35 | - | 438,800 | 87.8 |
(1) Reflects rounding.
(2) Amount of payout earned was prorated in light of Mr. Mehrberg’s retirement in December 2013. |
The O&CC believes that the 20122013 goals established for the NEOs provided the appropriate degree of difficulty, based upon the overall economic environment and that the final award determinations are appropriate. It made no discretionary modifications. To ensure that pay and performance are aligned, the O&CC, with the assistance of CAP, assesses whether the payouts that are earned by the NEOs are consistent with our performance relative to peers.
44 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Long-Term Incentive Compensation
NEOs, other officers as determined by the Committee and other key employees, as selected by the CEO within guidelines established by the O&CC, are eligible to participate in the LTIP. This plan is designed to attract and retain qualified personnel for positions of substantial responsibility, motivate participants toward achievement of long-range corporate goals, provide incentive compensation opportunities that are competitive with those of companies with whom we compete for talent and align participants’ interests with those of stockholders.
The LTIP, as amended and restated, was approved by our stockholders at the 20042013 Annual Meeting andMeeting. There was no increase in accordance with the actions of the O&CC and recommendation of the Board of Directors we are submitting an amendment and restatement of the plan extending its term for an additional ten years for approval by stockholders at this year’s Annual Meeting, as part of this proxy statement. We are not proposing to increase the number of shares of Common Stock authorized to be issued under the Amendment and Restatement of the LTIP and are otherwise making only relatively minor revisions to provide consistency with our other compensation and benefit plans and ease of administration. You may find additional information below under Proposal 3. To permit flexibility, thethereunder. The LTIP provides for different forms of equity awards: restricted stock, restricted stock units, performance share units and stock options. Currently, theThe maximum number of shares that may be awarded under grants to any one individual is 1,000,000 during any 36 month period. Underunder the Amended and Restated LTIP the maximum will beis 500,000 during any calendar year. In general, since 2010, we have been granting performance share units and restricted stock units.units; however, some recipients of prior year LTIP awards still hold stock options that have not expired. The LTIP prohibits the repricing of stock options and the buy-out by us of underwater stock options for cash.
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Element | Description | Objective | ||
Performance Share Units | Right to receive full value shares that are earned based upon independent metrics measured over a three-year period: TSR relative to peers (rewarding management when we deliver value to stockholders in excess of our peers)
ROIC against our internal goals (rewarding management for effective deployment of capital)
Participants have the opportunity to earn from zero to 200% of their target award based on performance
Dividend equivalents are accrued as declared and paid on earned shares | Rewards for strong financial and stock price performance over a longer time frame than annual rewards
Full value shares assist with retention | ||
Restricted Stock Units | Right to receive shares of full value stock at vesting dates
Generally, cliff vest at the end of three years
Dividend equivalents are accrued as declared and paid when underlying shares vest | Serves as retention device as recipient must remain an employee through vesting dates to earn payout |
The CEO develops recommendations for LTIP awards for each NEO, with the exception of himself and submits these recommendations to the O&CC for approval. Factors that are considered in the determination of award amounts are:
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In general, when making LTIP grants, the O&CC’s determinations are made independently from any consideration of the individual’s prior LTIP awards. With respect to the CEO, the O&CC develops a recommended award opportunity in consultation with CAP and submits the proposal to the Board. The value of an executive’s current holdings is not a consideration, though it is reviewed periodically by the O&CC. Beginning in 2012, grants are typically being made each February. Previously, the grants were made in December. Restricted stock units generally cliff vest after three years.
In previous years, restricted stock awards were made. Generally, these restricted stock awards vested one-fourth annually as determined at the time of grant. Recipients of restricted stock awards have full voting rights and receive dividends at the regular dividend rate and are paid on each regular dividend date. Dividends on restricted stock units accrue and are paid in additional shares at vesting.
Generally, unvested shares of restricted stock and unvested restricted stock units vest pro-rata if retirement occurs within one year of the grant and thereafter according to the original vesting schedule. Generally, unvested restricted stock is forfeited upon resignation but is paid upon an involuntary termination of employment without cause, while unvested restricted stock units are forfeited upon resignation or involuntary termination of employment.
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS |
Performance share units are denominated in shares of Common Stock and are subject to achievement of certain performance goals over a three-year period and are payable as determined by us in shares of our Common Stock or cash. Dividend equivalent units accrue but are only paid if the underlyingGenerally, performance share units are ultimately earned.prorated upon retirement or involuntary termination without cause and are forfeited upon a voluntary termination.
Performance Share Unit Payouts Onon Prior Years’ Awards for Performance Period Ended December 31, 20122013
LTIP awards of performance share units made in December 20092010 were reported in our 20102011 Proxy Statement at fair value at the time of the grants. These performance share unit grants were subject to the achievement of goals related to TSR and ROIC over a three-year performance period ended December 31, 2012.2013. Based on the performance results for that period, in 2013,2014, Messrs. Izzo, Levis, Mehrberg, Bouknight and LaRossa and Ms. Dorsa received payment of shares of our Common Stock equal to 50%75% (see table below) of the grant target amounts.
Each metric is independent and equally weighted (i.e., 50% each). TSR relative to the peer group was selected as it provides alignment with our stockholders and provides the incentive to deliver a return to stockholders greater than that of our peers. ROIC was used to ensure that we are effectively using our capital base. Based upon performance relative to the peer group on TSR and three-year average ROIC vs. our internal goals, executives can earn a stock award of between zero and 200% of their target. We believe that the ROIC goal represents a
44 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
significant degree of difficulty. We determine ROIC by dividing Income from Continuing Operations (adjusted for certain interest expense) by debt and equity (adjusted for securitized debt and cash).
Recipients will receive 100% of their grant amount if:
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Payment, if any, is made early in the year following year,that end of the performance period, once results are reviewed and approved by the O&CC. Dividend equivalents are accrued over the performance period and paid in shares of Common Stock in relation to the number of shares earned based on results for the performance period. Upon retirement, death or disability, performance share units are prorated for each month of service during the performance period and paid following the end of the period based on actual performance.
For these grants, the performance schedule for relative TSR, which can earn an individual 50% of the performance share unit award, is detailed below:
TSR Performance | Percent Payout Factor for TSR Component | |||||
Below 35 th Percentile | 0 | % | ||||
35 th Percentile | 25 | % | ||||
50 th Percentile | 100 | % | ||||
75 th Percentile | 200 | % |
(1) | Beginning with grants made in 2012, TSR performance will be measured by comparing our numerical ranking among peer group companies in respect to the TSR performance component. |
For these grants, the performance schedule for relative ROIC, which can earn an individual 50% of the performance share unit award, is detailed below:
2010 Performance Share Unit Grant 3 Year Average ROIC Target | ||||||||||||||||||||
2010 | 2011 | 2012 | 3 Yr Average | Payout%(1) | ||||||||||||||||
Maximum (110% of Goal) | 10.70% | 200% | ||||||||||||||||||
Target | 10.80% | 9.60% | 8.80% | 9.70% | 100% | |||||||||||||||
Threshold ( 90% of Goal) | 8.70% | 25% |
3 Year Average ROIC Target | |||||||||||||||||||||||||
2011 | 2012 | 2013 | 3 Yr Average | Payout%(1) | |||||||||||||||||||||
Maximum (115% of Goal) | 9.3% | 200 | |||||||||||||||||||||||
Target | 8.5% | 7.7% | 8.0% | 8.1% | 100 | ||||||||||||||||||||
Threshold (85% of Goal) | 6.9% | 25 |
(1) | Payout % above and below target will be interpolated based on the three-year average. |
Actual results of the three-year period ended December 31, 20122013 were:
TSR | ROIC | |||||||
PSEG Ranking: | 11th of 15 peer companies | Actual 3-year Average: | 9.70% | |||||
Percentile: | 28.6% | Internal Goal: | 9.70% | |||||
Payout: | 0 | Payout: | 100% | |||||
Performance Share Unit Payout Factor: | 50% |
Actual Results | Payout | |||
TSR Ranking: 11th of 15 Peer Companies | 28.6% Percentile | 0% | ||
ROIC Actual 3-year Average: 8.7% | 150% | |||
Overall Performance Share Units | 75% |
46 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Based on these results, theparticipants earned a performance share unit payout of 75%. The dollar amount of each payment, made in shares of our Common Stock, is shown below, calculated using the average of the high and low price of our Common Stock on February 19, 2013, $31.40.18, 2014, $34.90.
NEO | Performance Share Units Granted (#) | Performance Share Units Earned (#)(1) | Performance Share Units Earned ($)(1) | |||||
Izzo | 64,450 | 36,710 | 1,152,694 | |||||
Dorsa | 12,250 | 6,978 | 219,109 | |||||
Levis | 12,950 | 7,376 | 231,606 | |||||
Mehrberg | 10,900 | 6,209 | 194,963 | |||||
Bouknight | 10,900 | 6,209 | 194,963 | |||||
LaRossa | 10,250 | 5,838 | 183,313 |
Performance Share Units | Performance Share Units | Performance Share Units | |||||||||||||
Granted | Earned | Payout | |||||||||||||
NEO | (#) | (#)(1) | ($)(1) | ||||||||||||
Ralph Izzo | 100,900 | 86,220 | 3,009,078 | ||||||||||||
Caroline Dorsa | 18,050 | 15,424 | 538,298 | ||||||||||||
William Levis | 18,050 | 15,424 | 538,298 | ||||||||||||
Randall E. Mehrberg | 16,300 | 13,929 | 486,122 | ||||||||||||
J.A Bouknight, Jr. | 14,550 | 12,433 | 433,912 | ||||||||||||
Ralph A. LaRossa(2) | 43,900 | 37,513 | 1,309,204 |
(1) | Performance share units earned and market value reflect rounding. Includes accrued dividend equivalents earned. | |
(2) | Includes a 29,350 retention grant with a payout of 25,080 units. |
These amounts are reported in the Option Exercises and Stock Vested During 20122013 Table below.
PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS
2012 Grants
The structure of the long-term incentive is consistent with the prior grantgrants as described above, which is in the form of 60% performance share units and 40% restricted stock units vesting at the end of three years. The mix between performance share units and restricted stock units was determined based on our desire to provide the majority of long-term incentives in a performance-based vehicle while providing for strong retention during a challenging period in the industry. The greater emphasis on performance share units places more of our NEOs’ potential compensation payouts at risk. Grants are typically made each February.
As discussed above, in 2011 we moved the date for annual LTIP awards to February from December of the previous year. Accordingly, no grants were made in 2011 and the 2012 grants do not represent a significant new element or amount of compensation. The amounts approved in February 20122013 for the NEOs are shown below.in the 2013 Grants of Plan-Based Awards Table. These awards are also reported in the Summary Compensation Table at the grant date fair value. Payouts, if any, will be based on the same performance measures and goals discussed above with respect to payments made on prior years’ awards and will be disclosed when the applicable performance period is completed.
In 2013, we submitted our LTIP to stockholders for approval at the Annual Meeting. The dollar amount and corresponding number of shares to be granted was determined by the O&CC in February. However, in order for 2013 grants to be eligible for the federal income tax deduction under the applicable limit, as described below in Accounting and Tax Implications, the annual grants for all of the NEOs (except Ms. Dorsa, to whom the tax deduction limit was not applicable, as noted below) were made in April, following receipt of stockholder approval. Since the market price of our Common Stock was higher in April than in February, the grant date fair value reported in the Summary Compensation Table is higher than the price used by the O&CC when determining the amount of the award in February, as reported in the 2013 Grants of Plans Based Awards Table. In addition, Mr. Levis received a grant in February 2013 pursuant to a prior determination of the O&CC with regard to his retention.
NEO | PSU (#) | PSU ($) | RSU (#) | RSU ($) | Total LTIP Award ($) | |||||||||||||||
Izzo | 109,900 | 3,435,000 | 74,050 | 2,290,000 | 5,725,000 | |||||||||||||||
Dorsa | 21,100 | 660,000 | 14,250 | 440,000 | 1,100,000 | |||||||||||||||
Levis | 21,100 | 660,000 | 14,250 | 440,000 | 1,100,000 | |||||||||||||||
Mehrberg | 17,750 | 555,000 | 11,950 | 370,000 | 925,000 | |||||||||||||||
Bouknight | 16,300 | 510,000 | 11,000 | 340,000 | 850,000 | |||||||||||||||
LaRossa | 15,850 | 495,000 | 10,650 | 330,000 | 825,000 |
Retirement Benefits
We provide certain qualified retirement benefits under the Pension Plan of PSEG (Pension Plan) and the Cash Balance Pension Plan of PSEG (Cash Balance Plan) to maintain practices that are competitive with companies in the energy services industry with which we compete for executive talent. Participation depends upon the date of hire of the individual. Messrs. Izzo and LaRossa participate in the Pension Plan as they each began employment before January 1, 1996. Each of the other NEOs participates in the Cash Balance Plan as they were hired after that date.
In addition to the qualified plans, we provide certain limited nonqualified retirement benefits under the Retirement Income Reinstatement Plan (Reinstatement Plan) and the Supplemental Executive Retirement Income Plan (Supplemental Plan). We maintain these supplemental plans to provide competitive retirement benefits. Our supplemental executive retirement plans were adopted to assist in the recruitment and retention of key employees.
The Supplemental Plan is an unfunded retirement benefit plan that provides supplemental limited retirement and death benefits to participants nominated by the CEO and designated by our Employee Benefits Policy Committee. It also provides retirement benefits based upon additional credited years of service for prior allied professional or industrial experience to employees selected by the CEO. The plan is primarily used as a recruitment and retention tool. In 2011, the O&CC decided that we will no longer
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 47
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All of our NEOs participate in the Reinstatement Plan. Messrs. Izzo, Levis, LaRossa and LaRossaMehrberg participate in the additional limited provisions of the Supplemental Plan. Ms. Dorsa and Messrs. Levis and Mehrberg will be eligible to participate in the additional limited provisions of the Supplemental Plan in accordance with their respectiveher employment agreements.agreement. As described in the Pension Benefits Table, as part of their promotion and hiring, Mr. Izzo and Ms. Dorsa, respectively, are eligible to receive additional years of credited service under certain circumstances.
Additional information is provided in the Pension Benefits Table and the accompanying narrative, below.
We also maintain a defined contribution 401(k) Plan and provide a partial employer matching contribution for 401(k) Plan participants.
46 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Deferred Compensation Plans
We offer a deferred compensation plan to our officers, including the NEOs, so they can more effectively manage their personal tax obligations. Participants may elect to defer all or any portion of their cash compensation and may choose from among several different investment options based upon the choices available in our 401(k) Plan, as well as a market-based rate of Prime plus 1/2%, capped at 120% of the applicable federal long-term rate.
We also have a plan to permit deferral of equity compensation. Generally, the election to defer shares underlying an equity award must be made before the services giving rise to the equity award are performed. Deferred shares will beare held in a Rabbi Trust.
Additional details about these deferred compensation plans are provided in the descriptions following the Non-Qualified Deferred Compensation Table.
Severance and Change-in-Control Benefits
We provide severance benefits in the event of certain employment terminations. These benefits are available to officers, including the NEOs, in order to be competitive with the companies in our industry and provide a level of financial security to the executive in periods of uncertainty in the event of a termination without cause. All of our NEOs participate in our Key Executive Severance Plan. Mr. Izzo is also eligible for certain other severance benefits.
We provide severance benefits upon a change-in-control to officers, including the NEOs. A change-in-control is by its nature disruptive to an organization and theits executives. Such executives are frequently key players in the success of organizational change. To assure the continuing performance of such executives and maintain stability and continuity in the face of a possible termination of employment in the event of a change-in-control, we provide a competitive severance package. In addition, some executives, who may be key parties to such transaction, may have their employment terminated following its completion. A severance plan with benefits applicable upon a change-in-control is an important element for attracting and retaining key executives.executives in a marketplace where such protection is common.
In 2013, we reduced the amount payable with respect to one of the components of our Key Executive Severance Plan. New or promoted eligible participants will receive an amount equal to two times, rather than three times, the sum of his/her salary and target incentive bonus if he/she is terminated without cause or resigns for good reason within two years after a change-in-control.
Neither our Key Executive Severance Plan nor Mr. Izzo’s severance agreement provide for gross-up payments from us in the event that any NEO or other participant is subject to an excise tax related to receipt of a change-in-control payment. Both the Key Executive Severance Plan and Mr. Izzo’s severance agreement include a “double-trigger” provision on benefits, which are paid only in the event of termination of employment following a change-in-control. Performance share payments, if any, are prorated.
Severance and change-in-control benefits are described under Potential Payments Upon Termination of Employment or Change-in-Control below.
Perquisites
We provide certain perquisites that we believe are reasonably within compensation practices of our peers or provide benefit to us, such as providing an appropriate degree of personal security to executives with a high public profile and allowing the executive to be productive while commuting. These include automobile use (and for the CEO, a driver), stipend or car service, reimbursement of relocation expenses, annual physical examinations, limited personal and spousal travel, (withincluding use of aircraft (in accordance with the policy we have established and with CEO approval) to executives on business trips,, home security, charitable contributions on behalf of the individual and limited personal entertainment. These perquisites are described in the 20122013 Summary Compensation Table, as applicable.
We do not provide a tax gross-up of personal benefit amounts deemed to be taxable income under Federalfederal or state income tax laws and regulations, except for certain relocation expenses, primarily in the case of newly-hired executives.
48 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
EXECUTIVE COMPENSATION GOVERNANCE FEATURES AND CONTROLSExecutive Compensation Governance Features and Controls
Independent Compensation Consultant
The O&CC has retained CAP to provide information, analyses and advice regarding executive and director compensation, as described in this Proxy Statement. CAP reports directly to the O&CC and the O&CC has established procedures that it considers adequate to ensure that CAP’s advice is objective and not influenced by management. These procedures include an agreement specifying what information can and cannot be shared with management. In addition, CAP regularly meets with the O&CC in executive session, without the presence of management. CAP provides only executive compensation consulting services.
At the O&CC’s direction, CAP provided the following services:
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PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 47
COMPENSATION DISCUSSION AND ANALYSIS
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In the course of conducting its activities, CAP attended fivefour meetings of the O&CC in 20122013 and presented its findings and recommendations for discussion.
Management also retains a compensation consultant, Pay Governance, to provide market compensation data for our officers, including the NEOs. This data is made available to CAP.
Compensation Risk Assessment
In 2013, CAP, in consultation with management conducted an update in 2012 to the comprehensive assessment ofreviewed our compensation programs originally analyzed in 2010 and updated in 2011 to determine if anyassess the potential of these programs create a potential incentive forwhether they encourage individuals to take excessive risks which are reasonably likely to have a material adverse effect on our Company.risks. The risk assessment included a full inventory of all incentive compensation plans in the organization, including their design, metrics, goals and operation.operation and a review of business and operational risks. Our Vice President and Chief Risk Officer, as well as our internal compensation professionals under the supervision of our Senior Vice President–Human Resources, participated in this process. Management and CAP reviewed this assessment with the O&CC. In addition, final decisions regarding our executive compensation policies and programs, as well as specific approval of individual NEO compensation, are determined by the O&CC, all of whose members are independent of management and, as appropriate, the full Board, all of whose members, except our CEO, are independent of management. Based on this review, the O&CC determined that the programs do not create an incentive for individuals to take excessive risks which are reasonably likely to have an adverse effect on us. Factors considered include:
48 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Risk Assessment Factors
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Role of CEO
The CEO attends O&CC meetings, other than executive sessions. Other executive officers and internal compensation professionals may attend portions of O&CC meetings, as requested by the O&CC. The CEO recommends changes to the salaries of his direct reports (who include the NEOs). The CEO develops and the OCCO&CC considers these recommendations in the context of the respective executives’ individual performance, competitiveness of salary vs. peer group and internal equity among executives. The CEO recommends incentive compensation targets (expressed as a percentage of base salary) for the SMICP and LTIP grants for his direct reports as well as the associated goals, objectives and performance evaluations. The CEO participates in the O&CC’s discussions of those recommendations.
The design and effectiveness of compensation policies and programs are reviewed by the CEO in conjunction with CAP, and periodically in light of general industry practices and in comparison to the peer group trends. The CEO also reviews such compensation matters with our internal compensation professionals. Recommendations for changes are made to the O&CC as deemed appropriate by the CEO. The O&CC believes that the role played by the CEO in this process is appropriate because the CEO is uniquely suited to evaluate the performance of his direct reports.
Recent O&CC Actions
The O&CC considered recommendations from CAP and management with regard to compensation design and effectiveness and reviewed competitive practices within our peer group. In addition, the O&CC monitors trends and developments in the market, with the assistance of CAP, as they relate to executive compensation. The O&CC took the following actions related to compensation:
50 PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS
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Trading Pre-clearance
Under our Insider Trading Practice, all of our officers, including the NEOs, are required to obtain pre-clearance from the Office of the General Counsel prior to engaging in any transaction involving our Common Stock. In addition, our Insider Trading Practice does not permit any such transactions except during “open window” periods. These are limited times following the public release of earnings and disclosure of material information.
Hedging and Pledging
We have a policy which prohibits officers, including NEOs, from hedging, short-selling or pledging our Common Stock.
Clawbacks
We have adopted provisions that require a participant to forfeit any annual or long-term incentive grants and repay profits made on sales of LTIP shares if they are earned as a result of misconduct related to accounting restatements. LTIP grants and shares received on exercise of LTIP grants are also subject to clawback if the participant violates his/her non-compete, non-solicitation or confidentiality agreements. We anticipate adjusting the terms of our clawback policy as may be needed to comply with the Dodd-Frank Act once further guidance is released from the SEC.
Employment Agreements
We have entered into agreements with Messrs. Levis, Mehrberg and Bouknight and Ms. Dorsa and a severance agreement with Mr. Izzo. These are discussed following the Grants of Plan-Based Award Table below.
50 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Stock Ownership and Retention Policy
In order to strengthen the alignment of the interests of management with those of stockholders, we have established a Stock Ownership and Retention Policy (Policy). Each officer must acquire a prescribed dollar amount of sharesshare ownership by January 1 following the fifth anniversary of the date of the adoption of the Policy or the date they arehe or she was elected or promoted. In addition to shares individually or jointly owned directly, through a broker or in Enterprise Direct or the ESPP, the following are counted toward the ownership requirement: (i) shares held in trusts for the benefit of immediate family members where the officer is the trustee, (ii) shares granted to the officer in the form of restricted stock and restricted stock units, whether or not vested, and (iii) shares held by the officer in the 401(k) Plan. Stock options and performance share units (as distinct from shares which are actually issued as a result of exercise or vesting) are not counted. Shares subject to hedging or monetization transactions (such as zero-cost collars and forward sale contracts), which allow the officer to retain legal ownership without its full risks and rewards, are not counted for purposes of either the ownership or retention provisions of the Policy, since our Insider Trading Practice does not permit such hedging or pledging.
Each officer must retain at least 100%, after tax and costs of issuance, of all shares acquired through equity grants made subsequent to the adoption of the Policy, including the vesting of restricted stock or restricted stock unit grants, payout of performance share unit awards and exercise of option grants, until his or her ownership requirement is met. Once an officer attains his/his or her required level of stock ownership, he/he or she must retain 25%, after tax and costs of issuance, of shares received from equity awards granted after the ownership requirement has been met,thereafter, until retirement or his or her employment otherwise ends.
In the event an officer is not in compliance with any provision of the Policy, the O&CC may take such action as it deems appropriate, consistent with the provisions of our compensation plans and applicable law and regulations, to enable the officer to achieve compliance at the earliest practicable time or otherwise enforce the Policy. Such action may include establishing conditions with respect to requiring all or part of any SMICP or LTIP award to be held in shares. The O&CC may vary the application of the provisions of the Policy for good cause or exceptional circumstances.
The Policy was not a factor considered by the O&CC in making the 20122013 grants under the LTIP.
In 2013, we increased the CEO’s multiple from 5x to 6x base salary to better align with market. The following table shows, for each NEO, the dollar amount of stock ownership required by the Policy and the dollar amount of actual holdings as of February 19, 2013.18, 2014, the payout date for performance shares units, as discussed above. Messrs. Izzo, Levis, Bouknight and LaRossa and Ms. Dorsa each have met their respective requirement as of their January 1, 2013 compliance date. The compliance date for Mr. Bouknight is January 1, 2015, and forrequirement. Mr. Mehrberg it is January 1, 2014.not included in the table as he retired on December 2, 2013.
NEO | Multiple Required | Required Amount | Amount Held as of ($)(2) | |||||||||
Izzo | 5 | 5,500,000 | 19,364,303 | |||||||||
Dorsa | 3 | 1,858,500 | 2,314,230 | |||||||||
Levis | 3 | 1,699,500 | 4,226,921 | |||||||||
Mehrberg | 3 | 1,684,200 | 1,654,089 | |||||||||
Bouknight | 3 | 1,637,700 | 1,317,660 | |||||||||
LaRossa | 3 | 1,500,000 | 3,142,560 |
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 51
COMPENSATION DISCUSSION AND ANALYSIS |
Name | Multiple Required (#) | Required Amount ($)(1) | Amount Held ($)(2) | |||||||
| ||||||||||
Ralph Izzo | 6 | 6,600,000 | 24,368,182 | |||||||
Caroline Dorsa | 3 | 1,950,000 | 3,091,214 | |||||||
William Levis | 3 | 1,950,000 | 3,108,698 | |||||||
J. A. Bouknight, Jr. | 3 | 1,637,700 | 1,979,068 | |||||||
Ralph A. LaRossa | 3 | 1,875,000 | 4,714,685 |
(1) | Determined as of |
(2) | Based on average price of Common Stock for the twelve months preceding the effective date of the current base salary of the respective NEO. |
Accounting and Tax Implications
The O&CC has considered the effect of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly FAS 123R) (see Note 18 to Consolidated Financial Statements included in our Form 10-K) regarding the expensing of equity awards in determining the nature of the grants under the LTIP. The O&CC, with the assistance of CAP, reviews the competitiveness of the NEOs’ LTIP grants, as measured against the peer group, using reported Topic 718 grant values and approves grants to the NEOs accordingly as reported above in Long-Term Incentive Compensation.
The O&CC considers the tax-deductibility of our compensation payments. IRC Section 162(m) generally denies a deduction for United States Federal income tax purposes for compensation in excess of $1 million for persons named in the proxy statement, except for qualifying performance-based compensation pursuant to stockholder-approved plans. Stockholder approval of the SMICP was received at the 20042002 Annual Meeting of Stockholders. As a result, we believe that payment of qualifying performance-based compensation underin accordance with the terms of this plan iswould not nowbe subject to the Section 162(m) limitation on deductions contained in Section 162(m). deductions.
Although stockholders’stockholder approval of the LTIP was received at the 2004 Annual
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 51
COMPENSATION DISCUSSION AND ANALYSIS
Meeting of Stockholders, applicable IRC provisions require that stockholders give such approval at least every five years for performance-based compensation plans that permit the O&CC to change the performance criteria used from year to year. Since we havedid not subsequently soughtseek such further approval for the LTIP until the 2013 Annual Meeting, the payments of performance share units made to the NEOs (except the CFO, to whom the deduction limitation is not applicable) in 2013 and 2014 with respect to such LTIP grants madeawarded in 2009 and 2010 for the respective three-year performance periodperiods ended December 31, 2012 and December 31, 2013, are subject to the Section 162 (m) limitation on deductions. The only such grant made in 2013 prior to such approval and thus subject to the limitation was to Mr. Levis in accordance with his retention award pursuant to a prior determination of the O&CC. Any future payments, if earned, with respect to LTIP grants of performance share units made to the NEOs (except the CFO) in 2010, 2011 and 2012 are likewise subject to this limitation.
Further, the O&CC believes that restricted stock and restricted stock units are valuable components of incentive compensation as they align the interest of the recipients with those of stockholders. However, because the vesting of such grants is not performance-based, restricted stock and restricted stock unit grants do not qualify for tax-deductibilityare subject to the limitation on deductibility under Section 162(m).
We are asking our shareholders to approvePayments under the Amended and Restated 2004 Long-Term Incentive Plan, at this year’s Annual Meeting of Stockholders. If approval is received, future payments, if any are earned, on performance share units granted during the five-year period following suchstockholder approval willat the 2013 Annual Meeting are not expected to be subject to the limitation and should qualify for tax-deductibility under Section 162(m).
In 2012, none2013, a portion of our NEOs hadMessrs. Izzo’s and Levis’ compensation reported in excess ofthis Proxy Statement exceeded the amount deductible under Section 162(m) of the IRC.limit. Amounts deferred by the NEOs are not included in the Section 162(m) calculations during the deferral period because they are not otherwise deductible under applicable tax law. In light of Section 162(m), as well as certain NYSE rules, the Board’s general policy is to present incentive compensation plans in which executive officers participate to stockholders for approval. However, The OC&C and the Board reserve the right to not seek such approval and to award incentive and other compensation that is not structured so as to be exempt from the deduction limit of Section 162(m), if they determine that such arrangements are in the best interests of the Company and our stockholders. The O&CC will continue to evaluate executive compensation in light of Section 162(m) and the flexibility that is desirable in administering our executive compensation program in accordance with our compensation philosophy.
In light of Section 162(m), as well as certain NYSE rules, the Board’s general policy is to present all incentive compensation plans in which executive officers participate to stockholders for approval prior to implementation.
52 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
20122013 SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of our NEOs for the years shown. The NEOs are our CEO, CFO and four most highly compensated executive officers in 2012.2013.
Name and Principal Position(1) | Year | Salary ($)(2) | Bonus ($) | Stock Awards ($)(3) | Option Awards ($) | Non-Equity Compensation ($)(4) | Change in ($)(5) | All Other Compensation ($)(6,7) | Total ($) | |||||||||||||||||||||||
Ralph Izzo | 2012 | 1,004,715 | - | 5,724,001 | - | 1,653,800 | 2,064,000 | 67,027 | 10,513,543 | |||||||||||||||||||||||
Chairman of the Board, | 2011 | 946,450 | - | - | - | 1,535,400 | 1,710,000 | 185,306 | 4,377,156 | |||||||||||||||||||||||
President and CEO | 2010 | 946,450 | - | 5,726,042 | - | 1,113,900 | 1,384,000 | 63,422 | 9,233,814 | |||||||||||||||||||||||
Caroline Dorsa | 2012 | 595,691 | - | 1,099,985 | - | 567,900 | 1,338,000 | 76,661 | 3,678,237 | |||||||||||||||||||||||
EVP and CFO | 2011 | 567,871 | - | - | - | 505,100 | 726,000 | 79,368 | 1,878,339 | |||||||||||||||||||||||
2010 | 567,871 | - | 1,023,937 | - | 310,900 | 493,000 | 71,702 | 2,467,410 | ||||||||||||||||||||||||
William Levis | 2012 | 560,377 | - | 1,099,985 | - | 546,200 | 739,000 | 44,141 | 2,989,703 | |||||||||||||||||||||||
President and COO (Power) | 2011 | 543,960 | - | 999,396 | - | 517,200 | 346,000 | 41,460 | 2,448,016 | |||||||||||||||||||||||
2010 | 543,960 | - | 1,023,937 | - | 348,200 | 280,000 | 36,083 | 2,232,180 | ||||||||||||||||||||||||
Randall E. Mehrberg | 2012 | 553,414 | - | 924,182 | - | 499,400 | 693,000 | 46,870 | 2,716,866 | |||||||||||||||||||||||
EVP Strategy & Dev. and | 2011 | 542,963 | - | - | - | 491,000 | 451,000 | 42,552 | 1,527,515 | |||||||||||||||||||||||
President & COO (Energy Holdings) | 2010 | 542,963 | - | 925,291 | - | 331,600 | 232,000 | 24,500 | 2,056,354 | |||||||||||||||||||||||
J. A. Bouknight, Jr. | 2012 | 535,570 | - | 849,495 | - | 461,300 | 61,000 | 19,549 | 1,926,914 | |||||||||||||||||||||||
EVP and General Counsel | 2011 | 518,057 | - | - | - | 412,200 | 45,000 | 14,398 | 989,655 | |||||||||||||||||||||||
Ralph A. LaRossa | 2012 | 497,142 | - | 824,611 | - | 400,700 | 578,000 | 32,408 | 2,332,861 | |||||||||||||||||||||||
President and COO (PSE&G) | 2011 | 466,850 | - | - | - | 353,200 | 604,000 | 111,329 | 1,535,379 | |||||||||||||||||||||||
2010 | 466,850 | - | 2,824,277 | - | 185,300 | 454,000 | 18,313 | 3,948,740 |
Name and Principal Position(1)
| Year
| Salary ($)(2)
| Bonus ($)
| Stock ($)(3)
| Option ($)
| Non-Equity ($)(4)
|
Change in Value and ($)(5)
| All Other ($)(6,7& 8)
| Total ($)
| |||||||||||||||||||||||||||
Ralph Izzo | 2013 | 1,092,615 | - | 6,367,186 | - | 1,874,400 | 0 | 66,448 | 9,400,649 | |||||||||||||||||||||||||||
Chairman of the Board, President & CEO
| 2012 | 1,004,715 | - | 5,724,001 | - | 1,653,800 | 2,064,000 | 67,027 | 10,513,543 | |||||||||||||||||||||||||||
| 2011
|
|
| 946,450
|
|
| -
|
|
| -
|
|
| -
|
|
| 1,535,400
|
|
| 1,710,000
|
|
| 185,306
|
|
| 4,377,156
|
| ||||||||||
Caroline Dorsa | 2013 | 617,686 | - | 1,199,928 | - | 589,800 | 488,000 | 75,607 | 2,971,021 | |||||||||||||||||||||||||||
EVP & CFO | 2012 | 595,691 | - | 1,099,985 | - | 567,900 | 1,338,000 | 76,661 | 3,678,237 | |||||||||||||||||||||||||||
| 2011
|
|
| 567,871
|
|
| -
|
|
| -
|
|
| -
|
|
| 505,100
|
|
| 726,000
|
|
| 79,368
|
|
| 1,878,339
|
| ||||||||||
William Levis | 2013 | 565,485 | - | 2,223,214 | - | 607,600 | 0 | 185,861 | 3,582,160 | |||||||||||||||||||||||||||
President & COO (Power) | 2012 | 560,377 | - | 1,099,985 | - | 546,200 | 739,000 | 44,141 | 2,989,703 | |||||||||||||||||||||||||||
| 2011
|
|
| 543,960
|
|
| -
|
|
| 999,396
|
|
| -
|
|
| 517,200
|
|
| 346,000
|
|
| 41,460
|
|
| 2,448,016
|
| ||||||||||
Randall E. Mehrberg | 2013 | 549,595 | - | 1,029,280 | - | 495,400 | 0 | 69,654 | 2,143,929 | |||||||||||||||||||||||||||
EVP Strategy & Development and President & COO (Energy Holdings)
| 2012 | 553,414 | - | 924,182 | - | 499,400 | 693,000 | 46,870 | 2,716,866 | |||||||||||||||||||||||||||
2011 | 542,963 | - | - | - | 491,000 | 451,000 | 42,552 | 1,527,515 | ||||||||||||||||||||||||||||
J. A. Bouknight, Jr. | 2013 | 544,922 | - | 943,788 | - | 496,700 | 67,000 | 18,559 | 2,070,969 | |||||||||||||||||||||||||||
EVP & General Counsel | 2012 | 535,570 | - | 849,495 | - | 461,300 | 61,000 | 19,549 | 1,926,914 | |||||||||||||||||||||||||||
| 2011
|
|
| 518,057
|
|
| -
|
|
| -
|
|
| -
|
|
| 412,200
|
|
| 45,000
|
|
| 14,398
|
|
| 989,655
|
| ||||||||||
Ralph A. LaRossa (PSE&G)
|
|
2013 |
|
|
499,078 |
| - |
|
943,788 |
| - |
|
438,800 |
|
|
0 |
|
|
64,483 |
|
|
1,946,149 |
| |||||||||||||
2012 | 497,142 | - | 824,611 | - | 400,700 | 578,000 | 32,408 | 2,332,861 | ||||||||||||||||||||||||||||
| 2011
|
|
| 466,850
|
|
| -
|
|
| -
|
|
| -
|
|
| 353,200
|
|
| 604,000
|
|
| 111,329
|
|
| 1,535,379
|
|
(1) | Mr. |
(2) | Amounts shown are actual payments based on annualized salary. |
PUBLIC SERVICE ENTERPRISE GROUP| 2014 Proxy Statement 53
EXECUTIVE COMPENSATION |
(3) | The amounts shown reflect the grant date fair value of the awards. For a discussion of the assumptions made in valuation, see Note 18 to the Consolidated Financial Statements included in our Form 10-K. LTIP awards were granted in February |
Izzo | Dorsa | Levis | Merhberg | Bouknight | LaRossa | |||||||||||||||||||||||||||||||||||||||
Value at Target (100%) ($) | Value at ($) | Value at Target (100%) ($) | Value at ($) | Value at Target (100%) ($) | Value at ($) | Value at Target (100%) ($) | Value at ($) | Value at Target (100%) ($) | Value at ($) | Value at Target (100%) ($) | Value at Maximum (200%) ($) | |||||||||||||||||||||||||||||||||
2012 | 3,434,375 | 6,868,750 | 659,375 | 1,318,750 | 659,375 | 1,318,750 | 554,688 | 1,109,375 | 509,375 | 1,018,750 | 495,313 | 990,625 | ||||||||||||||||||||||||||||||||
2010 | 3,436,150 | 6,872,300 | 614,693 | 1,229,386 | 614,693 | 1,229,386 | 555,097 | 1,110,194 | - | - | 1,495,015 | 2,990,030 |
2013 | 2012 | |||||||||||||||
Value at ($) | Value at (200%) ($) | Value at ($) | Value at (200%) ($) | |||||||||||||
Ralph Izzo | 4,077,397 | 8,154,794 | 3,434,375 | 6,868,750 | ||||||||||||
Caroline Dorsa | 719,355 | 1,438,710 | 659,375 | 1,318,750 | ||||||||||||
William Levis | 1,783,474 | 3,566,948 | 659,375 | 1,318,750 | ||||||||||||
Randall E. Mehrberg | 658,642 | 1,317,284 | 554,688 | 1,109,375 | ||||||||||||
J.A. Bouknight, Jr. | 604,560 | 1,209,120 | 509,375 | 1,018,750 | ||||||||||||
Ralph A. LaRossa | 604,560 | 1,209,120 | 495,313 | 990,625 |
(4) | Amounts awarded were earned under the SMICP and determined and paid in the following year. Mr. Izzo elected to defer his entire 2011 |
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 53
EXECUTIVE COMPENSATION
(5) | Includes the change in the actuarial present value of accumulated benefit under defined benefit pension plans and supplemental executive retirement plans between calendar years 2013 and 2012, 2012 and 2011, and 2011 and 2010, |
Izzo ($) | Dorsa ($) | Levis ($) | Mehrberg ($) | Bouknight ($) | LaRossa ($) |
Izzo ($) | Dorsa ($) | Levis ($) | Mehrberg ($) | Bouknight ($) | LaRossa ($) | |||||||||||||||||||||||||||||||||||||
2013 | 0 | 488,000 | 0 | 0 | 67,000 | 0 | ||||||||||||||||||||||||||||||||||||||||||
2012 | 2,064,000 | 1,338,000 | 739,000 | 693,000 | 61,000 | 578,000 | 2,064,000 | 1,338,000 | 739,000 | 693,000 | 61,000 | 578,000 | ||||||||||||||||||||||||||||||||||||
2011 | 1,710,000 | 726,000 | 346,000 | 451,000 | 45,000 | 604,000 | 1,710,000 | 726,000 | 346,000 | 451,000 | 45,000 | 604,000 | ||||||||||||||||||||||||||||||||||||
2010 | 1,384,000 | 493,000 | 280,000 | 232,000 | - | 454,000 |
Any interest earned under the Deferred Compensation Plan at the prime rate plus 1/2%1/2% did not exceed 120% of the applicable long-term rate for any of the NEOs in 2013, 2012 2011 or 2010.2011. If the aggregate change in pension plan values is negative, it is shown as zero.
(6) | For |
| Includes the employer matching contribution to our 401(k) Plan |
Izzo ($) | Dorsa ($) | Levis ($) | Mehrberg ($) | Bouknight ($) | LaRossa ($) | |||||||||||||||||||
Company Match | 10,000 | 10,000 | 10,000 | 10,000 | 2,399 | 10,000 |
Izzo ($) | Dorsa ($) | Levis ($) | Mehrberg ($) | Bouknight ($) | LaRossa ($) | |||||||||||||||||||
Company Match | 10,200 | 10,200 | 10,200 | 10,200 | 2,409 | 10,200 |
(8) | Includes $32,388 of accrued 2014 vacation for Mr. Mehrberg. |
54 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
20122013 GRANTS OF PLAN-BASED AWARDS TABLE
The following table provides information on plan-based awards made to our NEOs during 2012.2013.
Estimated Possible Payouts Under Non-Equity Incentive
Plan Awards(2) | Estimated Future Payouts Under Equity Incentive
Plan Awards(3) |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(3) | Estimated Future Payouts Under Equity Incentive Plan Awards(4) | Grant Date Fair Value of Stock and Option Awards ($)(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name and Type of Award(1) | Grant Date (1) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards; Number of Shares of Stock or Units (#) | All Other Option Awards; Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | Grant Date(1) | Deter- mination | Thres- hold ($) | Target ($) | Maximum ($) | Thres- hold | Target (#) | Maximum (#) | All Other Shares (#)(5) | All Other of (#) | Exercise of ($/Sh) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ralph Izzo | 612,500 | 1,225,000 | 1,837,500 | 660,000 | 1,320,000 | 1,980,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 2/21/2012 | 0 | 109,900 | 219,800 | 3,434,375 | 4/16/2013 | 2/19/2013 | 0 | 105,550 | 211,100 | 4,077,397 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSUs | 2/21/2012 | 74,050 | 2,289,626 | 2/19/2013 | 72,900 | 2,289,789 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Caroline Dorsa | 206,500 | 413,000 | 619,500 | 216,850 | 433,700 | 650,550 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 2/21/2012 | 0 | 21,100 | 42,200 | 659,375 | 2/19/2013 | 0 | 22,100 | 44,200 | 719,355 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSUs | 2/21/2012 | 14,250 | 440,610 | 2/19/2013 | 15,300 | 480,573 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
William Levis | 206,250 | 412,500 | 618,750 | 212,450 | 424,900 | 637,350 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 2/21/2012 | 0 | 21,100 | 42,200 | 659,375 | 2/19/2013 | 12/20/2011 | 0 | 30,700 | 61,400 | 999,285 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 4/16/2013 | 2/19/2013 | 0 | 20,300 | 40,600 | 784,189 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSUs | 2/21/2012 | 14,250 | 440,610 | 2/19/2013 | 14,000 | 439,740 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Randall E. Mehrberg | 190,750 | 381,500 | 572,250 | 196,500 | 393,000 | 589,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 2/21/2012 | 0 | 17,750 | 35,500 | 554,688 | 4/16/2013 | 2/19/2013 | 0 | 17,050 | 34,100 | 658,642 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSUs | 2/21/2012 | 11,950 | 369,494 | 2/19/2013 | 11,800 | 370,638 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. A. Bouknight Jr. | 172,250 | 344,500 | 516,750 | 177,400 | 354,800 | 532,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 2/21/2012 | 0 | 16,300 | 32,600 | 509,375 | 4/16/2013 | 2/19/2013 | 0 | 15,650 | 31,300 | 604,560 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSUs | 2/21/2012 | 11,000 | 340,120 | 2/19/2013 | 10,800 | 339,228 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ralph A. LaRossa | 157,625 | 315,250 | 472,875 | 162,500 | 325,000 | 487,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 2/21/2012 | 0 | 15,850 | 31,700 | 495,313 | 4/16/2013 | 2/19/2013 | 0 | 15,650 | 31,300 | 604,560 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSUs | 2/21/2012 | 10,650 | 329,298 | 2/19/2013 | 10,800 | 339,228 |
(1) | Relates to equity awards (performance share units (PSUs) and restricted stock units (RSUs)), all of which were made under the LTIP. |
(2) | Represents date award was determined if different than grant date. The award to Mr. Levis on February 19, 2013 was pursuant to a December 20, 2011 retention determination. The awards to the NEOs, (except Ms. Dorsa) were determined on February 19, 2013, but not awarded until April 16, 2013, following receipt of stockholders approval of the LTIP, as explained in the CD&A. |
(3) | Represents possible payouts under SMICP for |
(4) | Represents LTIP award of performance share units described below. |
(5) | Represents |
(6) | Represents the grant date fair value of the equity |
Material Factors Concerning Awards Shown in Summary Compensation Table, Grants of Plan-Based Awards Table and Employment Agreements
SMICP
The plan-based awards for annual cash incentive compensation included in the 20122013 Summary Compensation Table were paid in 20132014 with respect to 20122013 performance under the terms of the SMICP. The range of possible awards for each NEO in relation to his/her Target Award is set forth in the Grants of Plan-Based Awards Table above. An explanation of the SMICP and performance goals, measures and performance factors achieved are described under Annual Cash Incentive Compensation in the CD&A.
PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 55
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
LTIP
As explained in the CD&A and shown above, LTIP awards were made to NEOs in February 2012,2013 and April 2013, in the form of restricted stock units and performance share units. The restricted stock units cliff vest after three years. The three-year performance period for the performance share units ends December 31, 2014,2015, with payment, if any, made the following year. The range of possible payouts for each NEO in relation to his/her target award is set forth in the table above. Payments of awards granted in December 20092010 were made in 20132014 based on performance for the three-year period that ended on December 31, 2012.2013. Further explanation of performance share unit payment determination is set forth under Long-Term Incentive Compensation in the CD&A above.&A. For further information about vesting, see Employment Agreements and Potential Payments Upon Termination of Employment or Change-In-Control below.
No stock options have been granted since 2009. Some options granted in previous years are still outstanding as reported in the Outstanding Equity Awards at Year-End Table. Grants were made with an exercise price equal to the NYSE closing price on the date of grant for a 10-year term. No discounted options may be granted and no repricings may be done without stockholders’ approval.
Employment Agreements
Ralph Izzo
We entered into a severance agreement with Mr. Izzo on December 16, 2008 incorporating certain of the severance provisions of his then expiring employment agreement. The terms are discussed below under Potential Payments Upon Termination of Employment or Change-In-Control.
Caroline Dorsa
The agreement executed between us and Ms. Dorsa, covering her employment as Executive Vice President and CFO, effective April 9, 2009, provides for an initial base salary of $570,000, with a salary review annually each January. The agreement provided for a cash payment upon employment of $200,000, which would have had to be repaid if Ms. Dorsa had left the Company (voluntarily or upon termination for cause) within three years of her date of hire. Ms. Dorsa also received a cash payment of $4,322 to make-up for lost compensation due to her acceptance of employment with us. In addition, the agreement provides that Ms. Dorsa will participate in the SMICP and the LTIP during her term of employment. Ms. Dorsa’s target incentive award under the SMICP was initially set at 60% of base salary. The agreement also provided for an award to Ms. Dorsa of 8,800 shares of Restricted Stock under the LTIP vesting on April 9, 2014, assuming continued employment. Ms. Dorsa’s long-term compensation opportunity under the LTIP was set at $900,000 for 2009 (prorated from her date of hire) and will be reviewed annually pursuant to the terms of the LTIP. The agreement also provides that if Ms. Dorsa remains employed through April 9, 2014, she will become a participant in the additional limited benefits provision of the Supplemental Plan and receive 15 additional years of credited service. On July 12, 2011, we entered into an amendment to the agreement to adjust her benefits that accrue after December 31, 2011 under the Supplemental Plan to provide for a calculation reducing her benefits to be based on the highest seven-year average rather than the highest five-year average, in alignment with changes generally applicable to other participants in those plans. Ms. Dorsa also participates in the Key Executive Severance Plan. Finally, the agreement provides that we will provide Ms. Dorsa with a car service for commuting purposes.
William Levis
We entered into an agreement with Mr. Levis, effective January 1, 2007, in connection with his initial employment with us, covering his employment as President and Chief Nuclear Officer of Power’s subsidiary, Nuclear.PSEG Nuclear LLC. The agreement provided for a base salary of $500,000, with a salary review in December 2007 and annually thereafter. The agreement further provided for a cash payment of $500,000, which would have had to have been repaid if Mr. Levis had left the Company (voluntarily or upon termination for cause) before January 1, 2012. Mr. Levis also received $16,667 to make-up for lost bonus opportunity with his prior employer. In addition, the agreement provides that Mr. Levis will participate in the SMICP and the LTIP during his term of employment. Mr. Levis’ target incentive award under the SMICP must be at least 60% of base salary. The agreement awarded to Mr. Levis a grant of 100,000 shares of restricted stock under the LTIP, of which 40,000 shares vested on January 1, 2010 and 60,000 shares vested on January 1, 2013.Long-term compensation opportunity is to be reviewed annually pursuant to the terms of the LTIP. The agreement also provided that on January 16, 2013, Mr. Levis became a participant in the additional limited benefits provision of the Supplemental Plan. Finally, upon retirement, Mr. Levis will receive a lump sum present value payment equal to the employer health and welfare benefits contribution for which he would have been eligible if employed by us prior to 1996. On September 19, 2011, we entered into an amendment to the agreement to adjust his benefits that accrue after December 31, 2011 under the Supplemental Plan to provide for a calculation reducing his benefit to be based on the highest seven-year average rather than the highest five-year average, in alignment with changes generally applicable to other participants in those plans.
56 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
Randall E. Mehrberg
The agreement executed between us and Mr. Mehrberg, covering his employment as Executive Vice President — Planning and Strategy effective September 8, 2008, providesprovided for an initial base salary of $545,000, with an annual salary review beginning January 2010. The agreement provided for cash payments of $250,000 within 45 days of employment and on September 8, 2009, each of which would have had to be repaid if Mr. Mehrberg had left the Company (voluntarily or upon termination for cause) within three years of the applicable payment. In addition, the agreement providesprovided that Mr. Mehrberg will participateparticipated in the SMICP and the LTIP during his term of employment. Mr. Mehrberg’s target incentive award under the SMICP was initially set at 60% of base salary. Mr. Mehrberg’s long-term compensation opportunity under the LTIP was set at $800,000 for 2008 (prorated from his date of hire) and willwould be reviewed annually pursuant to the terms of the LTIP. As provided in the agreement, if Mr. Mehrberg resignsresigned on or after September 8, 2012, in order to take a position with a governmental or non-profit entity agreed to by our CEO, any unvested LTIP awards willwould vest as if he retired. An amendment dated May 3, 2011 providesprovided that if Mr. Mehrberg resignsresigned on or after September 8, 2012, but before January 1, 2017, in order to take a position with a governmental entity or another employer agreed to by our CEO, retiresretired and our CEO approvesapproved full vesting, or iswas terminated without cause, any unvested LTIP awards would fully vest without proration upon such a resignation, retirement or termination. The agreement also providesprovided that if Mr. Mehrberg remainsremained employed through September 8, 2013, or if, before then, he resignsresigned to take a position with a governmental entity or iswas terminated without cause, he willwould become a participant in the additional limited benefits provision of the Supplemental Plan. On June 8, 2011, we entered into an amendment to Mr. Mehrberg’s agreement to adjust his benefits that accrue after December 31, 2011 under the Supplemental Plan to provide for a calculation reducing his benefit to be based on the highest seven-year average rather than the highest five-year average, in alignment with changes generally applicable to other participants in those plans. Finally, the agreement provided Mr. Mehrberg with severance benefits that are covered by the terms of the Key Executive Severance Plan. Mr. Mehrberg retired in December 2013, at which time the CEO approved full vesting of his unvested LTIP awards.
J.A. Bouknight, Jr.
The agreement executed between us and Mr. Bouknight covering his employment as Executive Vice President — Law, effective November 2, 2009, provides for an initial base salary of $520,000, with an annual salary review beginning January 2010. The agreement provides for cash payment of $300,000 within 45 days of employment, which would have had to be repaid if Mr. Bouknight had left the Company (voluntarily or upon termination for cause) prior to December 31, 2012. In addition, the agreement provides that Mr. Bouknight will participate in the SMICP and the LTIP during his term of employment. Mr. Bouknight’s target incentive award under the SMICP was initially set at 60% of base salary. Mr. Bouknight’s long-term compensation opportunity under the LTIP was set at $800,000 for 2009 (prorated from date of hire) and will be reviewed annually pursuant to the terms of the LTIP. As provided in this agreement, if Mr. Bouknight or the Company terminates his employment other than for cause after December 31, 2012, any unvested LTIP awards will vest as if he retired. Further, if he retires on or after that date or his employment is terminated by reason of disability or death, any unvested performance share units awarded with respect to the years 2009 through 2012 and earned would fully vest without proration. Finally, the agreement provided Mr. Bouknight with severance benefits that are covered by the terms of the Key Executive Severance Plan. On November 20, 2012, we entered into an amendment to Mr. Bouknight’s employment agreement to provide that any award of performance share units granted to Mr. Bouknight in 2013 under the LTIP will fully vest, without proration, if Mr. Bouknight’s date of retirement is on or after December 31, 2013, or if his employment is terminated by reason of disability or death, and any such award due will be made after the completion of the three-year performance cycle applicable to each grant. A second amendment to Mr. Bouknight’s employment agreement was entered into on February 18, 2014, with respect to any performance share units granted in 2014 or thereafter which provides that such awards will vest one-twelfth per month during the year of grant or earlier upon disability or death and be paid at the completion of the applicable performance cycle.
For additional information regarding severance benefit provisions, see Potential Payments Upon Termination of Employment or Change-in-Control.
PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 57
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
OUTSTANDING EQUITY AWARDS AT YEAR-END (12/31/12)13) TABLE
The following table lists all outstanding stock option, performance share unit, restricted stock and restricted stock unit awards as of December 31, 20122013 for our NEOs.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option Awards |
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name and Option Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Incentive (#) | Option ($)(2) | Option Date | Number of that have | Market Value of Units of Stock that have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested (#)(5) | Equity Plan Awards: or Payout Units, Units or ($)(4,6) | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($)(2) | Option Expiration Date | Number Shares Units of Stock have Vested (#)(3) | Market of Shares Units of Stock that have Not Vested ($)(4) | Equity Incentive Plan Number Unearned Shares, or Other Rights have Not Vested (#)(5) | Equity Incentive Plan Market or Payout of Unearned Shares, Units, Units or Other Rights that have Not Vested ($)(6) | ||||||||||||||||||||||||||||||||||||||||||||||||
Ralph Izzo | 157,433 | 4,817,450 | 225,048 | 6,886,469 | Ralph Izzo |
| 240,581 | 7,708,215 | 230,347 | 7,380,318 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/3/2004 | 22,000 | - | 21.3750 | 5/3/2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/16/2007 | 140,000 | - | 32.9250 | 1/16/2017 | 140,000 | 32.9250 | 1/16/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/20/2007 | 113,000 | - | 39.1650 | 3/20/2017 | 113,000 | 39.1650 | 3/20/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/18/2007 | 199,800 | - | 48.2050 | 12/18/2017 | 199,800 | 48.2050 | 12/18/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/16/2008 | 473,400 | - | 30.0300 | 12/16/2018 | 473,400 | 30.0300 | 12/16/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/14/2009 | 260,925 | 86,975 | 33.4900 | 12/14/2019 | 347,900 | 33.4900 | 12/14/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Caroline Dorsa | 37,999 | 1,162,769 | 41,765 | 1,278,009 | Caroline Dorsa | 55,279 | 1,771,139 | 46,142 | 1,478,390 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/9/2009 | 61,100 | - | 30.1800 | 4/9/2019 | 61,100 | 30.1800 | 12/15/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/14/2009 | 49,725 | 16,575 | 33.4900 | 12/14/2019 | 66,300 | 33.4900 | 12/14/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
William Levis | 122,628 | 3,752,417 | 41,765 | 1,278,009 | William Levis |
| 80,037 | 2,564,385 | 76,328 | 2,445,549 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/16/2007 | 39,000 | - | 32.9250 | 1/16/2017 | 39,000 | 32.9250 | 1/16/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/19/2007 | 3,500 | - | 44.4350 | 6/19/2017 | 3,500 | 44.4350 | 6/19/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/18/2007 | 42,000 | - | 48.2050 | 12/18/2017 | 42,000 | 48.2050 | 12/18/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/16/2008 | 95,200 | - | 30.0300 | 12/16/2018 | 95,200 | 30.0300 | 12/16/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/14/2009 | 52,500 | 17,500 | 33.4900 | 12/14/2019 | 70,000 | 33.4900 | 12/14/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Randall E. Mehrberg | 25,429 | 778,127 | 36,351 | 1,112,341 | Randall E. Mehrberg | 38,885 | 1,245,875 | 37,207 | 1,192,112 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9/22/2008 | 54,800 | - | 34.8000 | 9/22/2018 | 54,800 | 34.8000 | 9/22/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/16/2008 | 80,200 | - | 30.0300 | 12/16/2018 | 80,200 | 30.0300 | 12/16/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/14/2009 | 44,175 | 14,725 | 33.4900 | 12/14/2019 | 58,900 | 33.4900 | 12/14/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J.A. Bouknight, Jr. | 23,017 | 704,320 | 32,925 | 1,007,505 | J.A. Bouknight, Jr. | 35,322 | 1,131,717 | 34,159 | 1,094,454 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/2/2009 | 9,450 | 3,150 | 29.5200 | 11/2/2019 | 12,600 | 29.5200 | 11/2/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/14/2009 | 44,175 | 14,725 | 33.4900 | 12/14/2019 | 58,900 | 33.4900 | 12/14/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ralph A. LaRossa | 57,557 | 1,761,244 | 64,470 | 1,972,782 | Ralph A. LaRossa | 71,399 | 2,287,624 | 33,667 | 1,078,691 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/16/2007 | 52,000 | - | 32.9250 | 1/16/2017 | 52,000 | 32.9250 | 1/16/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/18/2007 | 33,000 | - | 48.2050 | 12/18/2017 | 33,000 | 48.2050 | 12/18/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/16/2008 | 75,200 | - | 30.0300 | 12/16/2018 | 75,200 | 30.0300 | 12/16/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/14/2009 | 41,400 | 13,800 | 33.4900 | 12/14/2019 | 55,200 | 33.4900 | 12/14/2019 |
(1) | Grants made on the dates shown under the LTIP of non-qualified options to purchase our Common Stock. Options vest 25% annually over four years on the grant date anniversary. All options have fully vested. |
(2) | Closing price on NYSE on grant date. |
(3) | The vesting schedule for unvested restricted stock (RSA) and unvested restricted stock units (RSU) is shown below. Dividends on restricted stock accrue at the regular dividend rate and are paid on each regular dividend payment date as declared by the Board. Dividend equivalents accrue on restricted stock units and are paid in shares of Common Stock at vesting. |
58 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
Vesting Schedule | ||||||||||||||||||||||||||
Type of Award | Grant Date | 2013 (#) | 2014 (#) | 2015 (#) | 2016 (#)(a) | 2017 (#)(a) | ||||||||||||||||||||
Ralph Izzo | RSU | 12/21/2010 | 79,957 | |||||||||||||||||||||||
RSU | 2/21/2012 | 77,476 | ||||||||||||||||||||||||
Caroline Dorsa | RSA | 4/9/2009 | 8,800 | |||||||||||||||||||||||
RSU | 12/21/2010 | 14,290 | ||||||||||||||||||||||||
RSU | 2/21/2012 | 14,909 | ||||||||||||||||||||||||
William Levis | RSA | 1/16/2007 | 60,000 | |||||||||||||||||||||||
RSU | 12/21/2010 | 14,290 | ||||||||||||||||||||||||
RSU | 12/21/2011 | 33,428 | ||||||||||||||||||||||||
RSU | 2/21/2012 | 14,910 | ||||||||||||||||||||||||
Randall E. Mehrberg | RSU | 12/21/2010 | 12,926 | |||||||||||||||||||||||
RSU | 2/21/2012 | 12,503 | ||||||||||||||||||||||||
J.A. Bouknight, Jr. | RSU | 12/21/2010 | 11,508 | |||||||||||||||||||||||
RSU | 2/21/2012 | 11,509 | ||||||||||||||||||||||||
Ralph A. LaRossa | RSU | 12/21/2010 | 11,508 | 34,906 | ||||||||||||||||||||||
RSU | 2/21/2012 | 11,143 |
Vesting Schedule | ||||||||||||||||||||||||||
Type of Award | Grant Date | 2014 (#) | 2015 (#) | 2016 (#) | 2017 (#) | Total (#) | ||||||||||||||||||||
Ralph Izzo | RSU | 12/21/2010 | 83,514 | |||||||||||||||||||||||
RSU | 2/21/2012 | 80,924 | ||||||||||||||||||||||||
RSU | 2/19/2013 | 76,143 | 240,581 | |||||||||||||||||||||||
Caroline Dorsa | RSA | 4/9/2009 | 8,800 | |||||||||||||||||||||||
RSU | 12/21/2010 | 14,925 | ||||||||||||||||||||||||
RSU | 2/21/2012 | 15,573 | ||||||||||||||||||||||||
RSU | 2/19/2013 | 15,981 | 55,279 | |||||||||||||||||||||||
William Levis | RSU | 12/21/2010 | 14,925 | |||||||||||||||||||||||
RSU | 12/21/2011 | 34,916 | (a) | |||||||||||||||||||||||
RSU | 2/21/2012 | 15,573 | ||||||||||||||||||||||||
RSU | 2/19/2013 | 14,623 | 80,037 | |||||||||||||||||||||||
Randall E. Mehrberg(b) | RSU | 12/21/2010 | 13,501 | |||||||||||||||||||||||
RSU | 2/21/2012 | 13,059 | ||||||||||||||||||||||||
RSU | 2/19/2013 | 12,325 | 38,885 | |||||||||||||||||||||||
J.A. Bouknight, Jr. | RSU | 12/21/2010 | 12,020 | |||||||||||||||||||||||
RSU | 2/21/2012 | 12,021 | ||||||||||||||||||||||||
RSU | 2/19/2013 | 11,281 | 35,322 | |||||||||||||||||||||||
Ralph A. LaRossa | RSU | 12/21/2010 | 12,020 | |||||||||||||||||||||||
RSU | 12/21/2010 | 36,459 | (a) | |||||||||||||||||||||||
RSU | 2/21/2012 | 11,639 | ||||||||||||||||||||||||
RSU | 2/19/2013 | 11,281 | 71,399 |
(a) | Represents retention | award. |
Restricted stock units vest as scheduled, in accordance with Mr. Mehrberg’s employment agreement. |
(4) | Value represents number of shares or units multiplied by the closing price on the NYSE on December 31, |
(5) | The vesting schedule for unvested performance share units (PSUs) is shown below. Performance share units awarded under the LTIP are earned based on a three-year performance period and are shown at target. The vesting schedule below shows the number of outstanding performance share units at target and includes accrued dividend equivalents. Payment, if any, is made in the first quarter of the year following |
Vesting Schedule | ||||||||||||||
Grant Date | 2014 (#) | 2015 (#) | Total (#) | |||||||||||
Ralph Izzo | 2/21/2012 | 120,101 | ||||||||||||
4/16/2013 | 110,246 | 230,347 | ||||||||||||
Caroline Dorsa | 2/21/2012 | 23,059 | ||||||||||||
2/19/2013 | 23,083 | 46,142 | ||||||||||||
William Levis | 2/21/2012 | 23,059 | ||||||||||||
4/16/2013 | 21,203 | |||||||||||||
2/19/2013 | 32,066 | (a) | 76,328 | |||||||||||
Randall E. Mehrberg(b) | 2/21/2012 | 19,398 | ||||||||||||
4/16/2013 | 17,809 | 37,207 | ||||||||||||
J.A. Bouknight, Jr. | 2/21/2012 | 17,813 | ||||||||||||
4/16/2013 | 16,346 | 34,159 | ||||||||||||
Ralph A. LaRossa | 2/21/2012 | 17,321 | ||||||||||||
4/16/2013 | 16,346 | 33,667 |
(a) | ||||||||||||
|
| |||||||||||
Represents retention award. |
| Performance share units vest as scheduled, in accordance with Mr. Mehrberg’s employment agreement. |
(6) | Value of performance share units are shown at target, multiplied by the closing price on the NYSE on December 31, |
PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 59
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
OPTION EXERCISES AND STOCK VESTED DURING 20122013 TABLE
The following table provides information, as noted, regarding the exercise of stock options by the NEOs in 20122013 and the vesting during 20122013 of restricted stock and performance share units previously granted to the NEOs, under our LTIP. No restricted stock units vested in 2013.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on (#) | Value Realized on Exercise ($)(2) | Number of Shares (#)(3) | Value Realized on Vesting ($)(4) |
Number of Shares (#) | Value Realized on Exercise ($)(2) | Number of Shares (#)(3) | Value Realized ($)(5) | ||||||||||||||||||||||||||
Ralph Izzo | 300,000(1) | 3,339,845 | 36,710 | 1,152,694 | 22,000 | (1) | 280,641 | 86,220 | 3,009,078 | |||||||||||||||||||||||||
Caroline Dorsa | - | - | 6,978 | 219,109 | - | - | 15,424 | 538,298 | ||||||||||||||||||||||||||
William Levis | - | - | 7,376 | 231,606 | - | - | 60,000 | (4) | 1,836,000 | |||||||||||||||||||||||||
- | - | 15,424 | 538,298 | |||||||||||||||||||||||||||||||
Randall E. Mehrberg | - | - | 6,209 | 194,963 | - | - | 13,929 | 486,122 | ||||||||||||||||||||||||||
J. A. Bouknight, Jr. | - | - | 6,209 | 194,963 | - | - | 12,433 | 433,912 | ||||||||||||||||||||||||||
Ralph A. LaRossa | - | - | 5,838 | 183,313 | - | - | 37,513 | 1,309,204 |
(1) |
|
(2) | Reflects the difference between the exercise price and the market price on the date of exercise, multiplied by the number of shares acquired. |
(3) | Messrs. Izzo, Levis, Mehrberg, Bouknight, LaRossa and Ms. Dorsa, had |
(4) | Represents restricted stock which vested on January 1, 2013. |
(5) | Reflects the value of the performance share units on February | price $34.90. |
60 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
20122013 PENSION BENEFITS TABLE
The following table provides information on the actuarial present value of the NEOs accumulated benefit under each of our pension and retirement plans.
Name | Plan Name | Number of Years Credited (#) | Present Value of Accumulated Benefit ($)(4) | Payments During Last Fiscal Year ($) | Plan Name |
Number of (#) | Present Value of Accumulated Benefit ($)(4) | Payments Fiscal Year | ||||||||||||||||
Ralph Izzo | Qualified Pension Plan(1) | 20.69 | 2,165,000 | - | Qualified Pension Plan(1) | 21.69 | 2,096,000 | - | ||||||||||||||||
Retirement Income Reinstatement Plan(2) | 21.69 | 2,786,000 | - | |||||||||||||||||||||
Supplemental Executive Retirement Plan(3,5) | 25.94 | 5,207,000 | - | |||||||||||||||||||||
Retirement Income Reinstatement Plan(2) | 20.69 | 2,714,000 | - |
| ||||||||||||||||||||
Supplemental Executive Retirement Plan(3,5) | 24.75 | 5,407,000 | - | 10,089,000 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
10,286,000 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
Caroline Dorsa | Qualified Pension Plan(1) | 3.73 | 47,000 | - | Qualified Pension Plan(1) | 4.73 | 58,000 | - | ||||||||||||||||
Retirement Income Reinstatement Plan(2) | 3.73 | 105,000 | - | Retirement Income Reinstatement Plan(2) | 4.73 | 135,000 | - | |||||||||||||||||
Supplemental Executive Retirement Plan(3,5,6) | 14.92 | 4,237,000 | - | Supplemental Executive Retirement Plan(3,5,6) | 18.92 | 4,684,000 | - | |||||||||||||||||
|
| |||||||||||||||||||||||
4,389,000 | 4,877,000 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
William Levis | Qualified Pension Plan(1) | 6.00 | 77,000 | - | Qualified Pension Plan(1) | 7.00 | 96,000 | - | ||||||||||||||||
Retirement Income Reinstatement Plan(2) | 7.00 | 227,000 | - | |||||||||||||||||||||
Supplemental Executive Retirement Plan(6) | 7.00 | 3,031,000 | - | |||||||||||||||||||||
Retirement Income Reinstatement Plan(2) | 6.00 | 184,000 | - |
| ||||||||||||||||||||
Supplemental Executive Retirement Plan(6) | 6.00 | 3,368,000 | - | 3,354,000 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
3,629,000 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
Randall E. Mehrberg | Qualified Pension Plan(1) | 4.31 | 62,000 | - | Qualified Pension Plan(1) | 5.24 | 69,000 | - | ||||||||||||||||
Retirement Income Reinstatement Plan(2) | 4.31 | 125,000 | - | Retirement Income Reinstatement Plan(2) | 5.24 | 145,000 | - | |||||||||||||||||
Supplemental Executive Retirement Plan(6) | 4.31 | 3,170,000 | - | Supplemental Executive Retirement Plan(6) | 5.24 | 2,999,000 | - | |||||||||||||||||
|
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3,357,000 | 3,213,000 | |||||||||||||||||||||||
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J. A. Bouknight Jr. | Qualified Pension Plan(1) | 3.16 | 27,000 | - | Qualified Pension Plan(1) | 4.16 | 33,000 | - | ||||||||||||||||
Retirement Income Reinstatement Plan(2) | 4.16 | 194,000 | - | |||||||||||||||||||||
Supplemental Executive Retirement Plan | - | |||||||||||||||||||||||
Retirement Income Reinstatement Plan(2) | 3.16 | 133,000 | - |
| ||||||||||||||||||||
Supplemental Executive Retirement Plan | - | 227,000 | ||||||||||||||||||||||
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160,000 | ||||||||||||||||||||||||
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Ralph A. LaRossa | Qualified Pension Plan(1) | 27.50 | 585,000 | - | Qualified Pension Plan(1) | 28.50 | 572,000 | - | ||||||||||||||||
Retirement Income Reinstatement Plan(2) | 27.50 | 1,095,000 | - | Retirement Income Reinstatement Plan(2) | 28.50 | 1,071,000 | - | |||||||||||||||||
Supplemental Executive Retirement Plan | 27.50 | 1,392,000 | - | Supplemental Executive Retirement Plan | 28.50 | 1,233,000 | - | |||||||||||||||||
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3,072,000 | 2,876,000 | |||||||||||||||||||||||
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(1) | All NEOs participate in either the Pension Plan, a traditional defined benefit pension plan, or the Cash Balance Plan, a cash balance defined benefit pension plan, depending on date of hire, each of which is a qualified plan under the IRC. Such plans are available to all other employees under the same terms and conditions. Additional information about the plans is provided below. Messrs. Izzo and LaRossa participate in the Pension Plan. Ms. Dorsa and Messrs. Levis, Mehrberg and Bouknight participate in the Cash Balance Plan. Years shown reflect actual years of service. |
(2) | Years shown reflect actual years of service. |
(3) | Certain employees receive additional years of credited service for the purpose of retirement benefit calculations under the Supplemental Plan in recognition of prior work experience, including 15 years for Ms. Dorsa pursuant to her employment agreement, which vest ratably over five years. In addition, Mr. Izzo receives an additional 5 years which vest at age 60 as described below under Supplemental Plan. The additional 5 years are prorated in the table for participants under age 60. Years shown reflect the sum of actual years of service and years credited under the Supplemental Plan. |
(4) | Amounts shown represent actuarial present value of accumulated benefit computed as of the same Pension Plan measurement date used for our financial statements for the year ended December 31, |
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement 61
EXECUTIVE COMPENSATION |
plan’s normal retirement age and (ii) no pre-retirement termination, disability or death was assumed to occur. For a discussion of the valuation method and material assumptions applied in quantifying the present value, see Note 12 to the Consolidated Financial Statements included in our |
(5) | The actuarial present value of accumulated benefits based on actual years of service for Mr. Izzo and Ms. Dorsa is |
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 61
EXECUTIVE COMPENSATION
(6) |
|
(7) | Although Mr. Mehrberg retired December 2, 2013, he did not receive any payout of his benefits in 2013. |
Qualified Pension Plans
All of our employees are eligible to participate in either the Pension Plan or the Cash Balance Plan.Plan, depending upon date of hire.
Pension Plan
The Pension Plan covers non-represented employees hired prior to January 1, 1996 and represented employees hired prior to January 1, 1997 and provides participants with a life annuity benefit at normal retirement (age 65) pursuant to a formula based upon (a) the participant’s number of years of service and (b) the average of the participant’s five or seven highest years of compensation up to the limit imposed by the IRC. We amended the Pension Plan effective January 1, 2012, to change the benefit formula for non-represented participants. The effect of the change is to reduce projected pension payments. Under the new formula, the average of the participant’s seven highest years of compensation up to the limit imposed by the IRC will be used rather than the average of the participant’s five highest years of compensation.
A participant’s benefit under the Pension Plan is equal to A plus B:
A. The accrued benefit calculated under the five-year final average pay formula as of December 31, 2011, as follows:
(i) 1.3% of the lesser of 5-year final average earnings (determined as of December 31, 2011) or $24,600 times years of credited service (determined as of December 31, 2011) not exceeding 35 years;
(ii) 1.5% of the amount by which 5-year final average earnings (determined as of December 31, 2011) exceeds $24,600 times years of credited service not exceeding 35 years; and
(iii) 1.5% of 5-year final average earnings times years of credited service (determined as of December 31, 2011) in excess of 35 years.
B. The accrued benefit calculated under the seven-year final average pay formula, as follows:
(i) 1.3% of the lesser of 7-year final average earnings beginning on January 1, 2012 or $24,600 times years of credited service not exceeding 35 years less the number of years as of December 31, 2011;
(ii) 1.5% of the amount by which 7-year final average earnings beginning on January 1, 2012 exceeds $24,600 times years of credited service not exceeding 35 years less the number of years as of December 31, 2011; and
(iii) 1.5% of 7-year final average earnings times years of credited service in excess of 35 years less the number of years in excess of 35 years as of December 31, 2011.
An additional benefit equal to $4.00 per month for each year of credited service is payable until the retiree reaches age 65.
All active participants are fully vested in their Pension Plan benefit. Benefits are payable on an unreduced basis (i) at age 65, (ii) at age 60, if the participant’s age, plus years of service, equals or exceeds 80 or (iii) at age 55, if the participant has 25 or more years of service. Participants whose age, plus years of service, equals or exceeds 80, but who have not yet met the criteria in (ii) or (iii) , may commence their Pension Plan benefits on a reduced basis.
Cash Balance Plan
The Cash Balance Plan covers non-represented employees hired or rehired on or after January 1,December 31, 1995 and represented employees hired after December 31, 1996 and provides each participant with a life annuity benefit at normal retirement (age 65) equal to the actuarial equivalent of a notional amount maintained for him/her. Participants are eligible for retirement under the Cash Balance Plan upon the attainment of age 55 with five or more years of service. Participants’ accounts are credited each year with a percentage of compensation, which is determined based on the participant’s age plus years of service measured at year-end.
62 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
EXECUTIVE COMPENSATION |
Sum of Age and Service | Percentage of (%) | |||
<30 | 2.00 | |||
30-39 | 2.50 | |||
40-49 | 3.25 | |||
50-59 | 4.25 | |||
60-69 | 5.50 | |||
70-79 | 7.00 | |||
80-89 | 9.00 | |||
90+ | 12.00 |
62 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
EXECUTIVE COMPENSATION
Each participant’s notional amount grows each year with interest credits based on a 6.0% annual rate of interest. Participants become immediately fully vested in their Cash Balance Plan benefit.
Reinstatement Plan
Certain management and highly compensated employees are eligible to participate in a nonqualified excess benefit retirement plan, the Reinstatement Plan, designed to replace earned pension benefits as determined under the qualified pension formula, but which cannot be paid from the qualified pension plans as a result of the IRC mandated limits for qualified plans. The benefits payable under this plan mirror those of the qualified plans described above except that the compensation considered in computing the benefit (i) will not be limited by qualified plan limits, (ii) will include any amounts that the participant deferred under deferred compensation plans, (iii) will include amounts earned under the SMICP (which are not considered under the qualified pension plans), (iv) will be limited to 150% of average base salary for the applicable five or seven years and (v) will be offset by any benefits received by the participant under the applicable qualified plan.
As a result of the changes made to the benefit formula under the qualified Pension Plan for non-represented employees, the Reinstatement Plan benefits for such participants were calculated as of December 31, 2011 using the five-year final average pay formula. Beginning on January 1, 2012, the participants’ Reinstatement Plan benefits will be determined under a seven-year final average pay formula. The participants’ Reinstatement Plan benefits will be equal to the sum of their benefits determined as set forth above, less their benefit under the Pensionpension plan (Pension Plan or Cash Balance Plan.Plan).
Supplemental Plan
Certain employees receive additional years of service for the purpose of retirement benefit calculations in recognition of prior allied work experience. However, we have determined, effective January 1, 2011, to no longer provide additional credited service to those who do not already have this benefit. Such benefits are paid from a nonqualified plan, the Supplemental Plan. Under the additional service credit provisions, certain participants may also receive an additional five years of credited service for the purpose of this supplemental benefit calculation if they retire between ages 60 and 65. The credited years of service reduce by one year for each six-month period such participant works beyond age 65. This feature of the plan is designed to encourage retirement on or before age 65. Benefits payable under the additional service provisions of the Supplemental Plan mirror those payable under the Reinstatement Plan, except that the additional years of service are considered in calculating the Supplemental Plan benefit amount. Any benefit payable under this plan is offset by benefits payable under the qualified plan and the Reinstatement Plan.
Certain participants in the Supplemental Plan receive additional limited benefits. This portion of the Supplemental Plan provides a total target replacement income percentage equal to credited service for qualified pension plan calculation purposes, plus 30, to a maximum of 75%, of covered compensation. Covered compensation used for determining limited benefits under the Supplemental Plan is the same as the covered compensation used under for the Reinstatement Plan. The target replacement amount under the limited benefit portion of this Plan is reduced by any pension benefits from any previous employers accrued and vested at the time of hire, by the participant’s Social Security benefit at normal retirement age and by the pension benefits provided by each other PSEG retirement benefit plan (qualified plans and non-qualified plans). The additional limited benefits provision of the Supplemental Plan also provides a death benefit equal to 150% of base compensation if death occurs while the participant is actively employed. Participants designated for the additional limited benefit become entitled to this benefit only upon (a) retirement under the terms of the qualified plan in which they participate (Pension Plan or Cash Balance Plan) or (b) death.
The change in the benefit formula under the qualified Pension Plan from a five-year final average pay formula to a seven-year final average pay formula impacts the limited benefits under the Supplemental Plan. Accordingly, we amended the Supplemental Plan as of January 1, 2012 to reflect this change.
PUBLIC SERVICE ENTERPRISE GROUP |l 20132014 Proxy Statement 63
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
20122013 NON-QUALIFIED DEFERRED COMPENSATION TABLE
The following table provides information regarding compensation deferred by the NEOs under our Deferred Compensation Plans.
Name | Executive Fiscal Year | Registrant Fiscal Year | Aggregate Earnings in Last Fiscal Year (2012) ($) | Aggregate Withdrawals/ Distributions (2012) ($) | Aggregate Balance at Last Fiscal Year End (2012) ($)(2) | Executive Fiscal Year ($)(1) | Registrant Fiscal Year ($) | Aggregate ($) | Aggregate ($) | Aggregate Balance at Last Fiscal Year End (2013) ($)(2) | ||||||||||||||||||||||||||
Ralph Izzo | Deferred Compensation Plan | - | - | 243,340 | 8,619,070 | Deferred Compensation Plan | - | - | 290,679 | - | 8,909,749 | |||||||||||||||||||||||||
Equity Deferral Plan | 1,152,694 | - | - | 1,152,694 | Equity Deferral Plan | 3,009,078 | - | 74,902 | - | 4,236,674 | ||||||||||||||||||||||||||
Caroline Dorsa | Deferred Compensation Plan | - | - | 56,955 | 694,779 | Deferred Compensation Plan | - | - | 97,333 | - | 792,112 | |||||||||||||||||||||||||
Equity Deferral Plan | - | - | - | - | Equity Deferral Plan | - | - | - | - | - | ||||||||||||||||||||||||||
William Levis | Deferred Compensation Plan | - | - | - | - | Deferred Compensation Plan | - | - | - | - | - | |||||||||||||||||||||||||
Equity Deferral Plan | - | - | - | - | Equity Deferral Plan | - | - | - | - | - | ||||||||||||||||||||||||||
Randall E. Mehrberg | Deferred Compensation Plan | - | - | - | - | Deferred Compensation Plan | - | - | - | - | - | |||||||||||||||||||||||||
Equity Deferral Plan | 194,963 | - | - | 194,963 | Equity Deferral Plan | - | - | 12,667 | - | 207,598 | ||||||||||||||||||||||||||
J. A. Bouknight, Jr. | Deferred Compensation Plan | 937,075 | - | 250,458 | 2,877,825 | Deferred Compensation Plan | 981,569 | - | 704,711 | - | 4,564,105 | |||||||||||||||||||||||||
Equity Deferral Plan | 194,963 | - | - | 194,963 | Equity Deferral Plan | 433,912 | - | 12,667 | - | 641,510 | ||||||||||||||||||||||||||
Ralph A. LaRossa | Deferred Compensation Plan | - | - | - | - | Deferred Compensation Plan | - | - | - | - | - | |||||||||||||||||||||||||
Equity Deferral Plan | 183,313 | - | - | 183,313 | Equity Deferral Plan | 1,309,204 | - | 11,912 | - | 1,504,429 |
(1) | Amounts shown under Executive Contributions in Last Fiscal Year |
(2) | Includes amounts reported in the Summary Compensation Table in |
Deferred Compensation Plan
Under the Deferred Compensation Plan, participants, including the NEOs, may elect to defer any portion of their cash compensation by making appropriate elections in the calendar year prior to the year in which the services giving rise to the compensation being deferred are rendered. A participant may change an election to defer compensation not later than the date that is the last date that an election to defer may be made.
At the same time he/she elects to defer compensation, the participant must make an election as to the timing and the form of distribution of that year’s deferrals from his/her Deferred Compensation Plan account. For compensation deferred in 2011 and earlier or years distribution may commence (a) on the thirtieth day after the date he/she terminates employment or, in the alternative, (b) on January 15th of any calendar year following termination of employment elected by him/her, but in any event no later than the later of (i) the January of the year following the year of his/her 70th birthday or (ii) the January following termination of employment. Notwithstanding the forgoing, however, for NEOs and other specified employees, distribution of his/her account may not occur earlier than six months following the date of his/her termination of service. Participants may elect to receive the distribution of their Deferred Compensation account in the form of one lump-sum payment, annual distributions over a five-year period or annual distributions over a 10-year period.
With respect to compensation deferred in 2012 and future years, participants may elect to commence distribution of a particular year’s deferrals (a) six months following his/her termination of employment, or (b) a specified number of years following his/her termination from employment. Participants may elect to receive distribution of such deferrals under the Deferred Compensation Plan in the form of a lump-sum payment or annual distributions over a period of three to fifteen years.
Under the scheduled future date distribution feature, participants may elect to receive a specific plan year’s deferral balance on a specified date as early as three years after the beginning of the year in which the deferrals are made. Distributions are paid in a lump sum within 90 days from the date elected regardless of whether the participant is employed by us on the payment date.
64 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
EXECUTIVE COMPENSATION
Participants may change their distribution elections as to future year’s deferrals. Participants may also make changes of their distribution elections with respect to prior years’ deferrals provided that (a) any such new distribution election is made at least one year prior to the previously selected commencement date or (b) the new commencement date is at least five years later than the previously selected commencement date.
64 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
EXECUTIVE COMPENSATION |
Amounts deferred under the Deferred Compensation Plan are credited with earnings based on (a) the performance of one or more of the pre-mixed lifestyle investment portfolio funds available to employees under our 401(k) plans (except the Company Stock fund and the Schwab Personal Choice Retirement Account) or (b) at the rate of Prime plus 1/2%, capped at 120% of the applicable federal long-term rate, in such percentages as selected by the participant. A participant who fails to provide a designation of investment funds will accrue earnings on his/her account at the rate of Prime plus 1/2%, capped at 120% of the applicable federal long-term rate. A participant may change his/her investment election on a daily basis.
For 2012,2013, the one-year rates of return as of December 31, 20122013 for the funds offered as computed by the recordkeeper of the Deferred Compensation Plan, were as follows:
Rates of Return |
Rates of Return | |||||||||||||||||||
Pre-Mixed Portfolios | Pre-Mixed Portfolios | Target Retirement Funds | Target Retirement Funds
| |||||||||||||||||
Conservative Portfolio | 8.93 | % | Target Retirement Income | 8.13 | % | 12.17% | Target Retirement Income | 5.75% | ||||||||||||
Moderate Portfolio | 12.03 | % | Target Retirement 2010 | 10.02 | % | 17.47% |
Target Retirement 2010 | 8.96% | ||||||||||||
Aggressive Portfolio | 15.09 | % | Target Retirement 2015 | 11.27 | % | 23.69% | Target Retirement 2015 | 12.98% | ||||||||||||
Target Retirement 2020 | 12.25 | % | ||||||||||||||||||
Funds | Target Retirement 2025 | 13.19 | % |
Target Retirement 2020 | 15.79% | |||||||||||||||
Stable Value | 2.56 | % | Target Retirement 2030 | 14.14 | % | 1.97% | Target Retirement 2025 | 18.11% | ||||||||||||
Diversified Bond | 4.82 | % | Target Retirement 2035 | 15.06 | % | -1.97% |
Target Retirement 2030 | 20.42% | ||||||||||||
Large Company Stock Index | 15.89 | % | Target Retirement 2040 | 15.45 | % | 32.27% | Target Retirement 2035 | 22.76% | ||||||||||||
Mid-Cap Index | 15.94 | % | Target Retirement 2045 | 15.47 | % | 35.09% |
Target Retirement 2040 | 24.33% | ||||||||||||
Institutional Developed Markets Index | 18.85 | % | Target Retirement 2050 | 15.48 | % | 21.93% | Target Retirement 2045 | 24.30% | ||||||||||||
Small – Cap Index | 18.18 | % | Other | 37.74% |
Target Retirement 2050 | 24.28% | ||||||||||||||
Prime Plus 1/2% | 3.00 | % | ||||||||||||||||||
Other | Target Retirement 2055(1) | 13.95% | ||||||||||||||||||
Prime Plus 1/2% | 3.37% |
Target Retirement 2060(1) | 13.25% |
(1) Partial | year rate of return from date added to choices available to participants. |
Equity Deferral Plan
Effective November 1, 2011, we established theParticipants in our Equity Deferral Plan. ParticipantsPlan may defer receipt of all or a portion of the shares of our Common Stock underlying future equity awards under the LTIP. Deferral elections must be made during an annual enrollment period prior to the date that services giving rise to the awards are performed. The annual enrollment window for the 2012 plan year, covering the awards made in February 2012, commenced on November 1, 2011 and closed on November 30, 2011. In addition, during that initial enrollment period, participants were permitted to make a one-time election to defer the shares underlying their performance share units awards granted in 2010 or 2011. Deferral elections under the Equity Deferral Plan are irrevocable.
At the time a participant elects to defer he/she must make an election as to the timing of payment of the deferred shares. Distributions will be made in a lump sum. Distributions may commence (a) on a specified date occurring between the third anniversary and the fifteenth anniversary of the date that the shares otherwise would have been distributed to the participant (b) upon termination of employment, or (c) the earlier of (a) and (b). Notwithstanding the forgoing, however, for NEOs and other specified employees, distribution may not occur earlier than six months following the date of his/her termination of employment. Participants will receive shares on the applicable distribution date. We will hold the deferred shares in a Rabbi Trust. The dividends attributable to the deferred shares will beare reinvested in Common Stock and distributed at the same time that the deferred shares are distributed to the participants. Participants are not permitted to direct the trustee of the Rabbi Trust to vote the deferred shares.
PUBLIC SERVICE ENTERPRISE GROUP | 20132014 Proxy Statement 65
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
POTENTIAL PAYMENTS UPON TERMINATION OF
EMPLOYMENT OR CHANGE-IN-CONTROL
Mr. Izzo’s severance agreement provides for certain benefits if he is terminated without “cause” (a willful failure to perform his duties) or resigns for “good reason” (a reduction in pay, position or authority) during the term of such agreement. He would be paid a benefit of two times base salary and target bonus, as well as a prorated payment of SMICP target incentive award for the year of termination. His welfare benefits would be continued for two years, unless he is sooner employed. Any unvested equity awards would be forfeited. The agreement provides that Mr. Izzo will be prohibited from competing with and from recruiting employees from us or our subsidiaries or affiliates, for certain periods after termination of employment. Violations of these provisions require a forfeiture of certain benefits.
Our Key Executive Severance Plan provides severance benefits to Ms. Dorsa and Messrs. Izzo, Levis, Mehrberg, Bouknight and LaRossa, and to certain of our other key executive-level employees whose employment is terminated without cause. Participants must agree to restrictive covenants including confidentiality, non-competition and non-solicitation.
Under our Key Executive Severance Plan, if any of Ms. Dorsa and Messrs. Izzo, Levis, Mehrberg, Bouknight and LaRossa is terminated without cause or resigns her or his employment for good reason within two years after a change-in-control, the individual will receive (1) a pro rata bonus based on her or his target annual incentive compensation, (2) three times the sum of her/his salary and target incentive bonus, (3) accelerated vesting of equity-based awards, except for performance share units, which vest pro rata, (4) a lump sum payment equal to the actuarial equivalent of her or his benefits under all of our retirement plans in which the individual participates calculated as though she or he remained employed for three years beyond the date employment is terminated less the actuarial equivalent of such benefits on the date employment terminates (reported in the table below as Enhanced Retirement Benefit), (5) three years continued welfare benefits (the first 18 months of which will be provided through PSEG-paid COBRA continuation coverage), (6) one year of PSEG-paid outplacement services and (7) vesting of any compensation previously deferred. Payments are limited to an amount that would not give rise to an excise tax liability under applicable IRS provisions, currently 2.99 times the individual’s average W-2 compensation for the period. Amounts above that limit are forfeited. Potential payments are shown below in the Change-in-Control Termination Table.
Also under the Key Executive Severance Plan, Ms. Dorsa and Messrs. Levis, Mehrberg, Bouknight and LaRossa would be entitled to certain severance benefits in the event that their employment was terminated without cause other than in a change-in-control situation. In such event they would be entitled to 1.0 times their annual base salary plus their target bonus, as well as a prorated payment of their SMICP target incentive award for the year of termination and certain outplacement services, educational assistance, health care and life insurance coverage. The Key Executive Severance Plan further provides that any unvested equity awards would be accelerated or forfeited in accordance with the terms of the individual’s grants under the LTIP and/or employment agreement.
If a termination without cause or for a reduction in force or reorganization had occurred on December 31, 2012,2013, each of the NEOs would have received the following benefits:
Termination without Cause | Izzo ($) | Dorsa ($) | Levis ($) | Mehrberg ($) | Bouknight ($) | LaRossa ($) | Izzo ($) | Dorsa ($) | Levis ($) | Bouknight ($) | LaRossa ($) | |||||||||||||||||||||||||||||||||
Severance | 4,410,000 | 1,003,000 | 962,500 | 926,500 | 874,500 | 800,250 | 4,840,000 | 1,053,150 | 991,375 | 900,735 | 825,000 | |||||||||||||||||||||||||||||||||
Pro Rata Bonus (SMICP) | 1,225,000 | 413,000 | 412,500 | 381,500 | 344,500 | 315,250 | 1,320,000 | 433,650 | 424,875 | 354,835 | 325,000 | |||||||||||||||||||||||||||||||||
Unvested Stock Option Spread | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Unvested Restricted Stock Spread and Unvested Restricted Stock Units Spread(1) | - | - | 2,858,910 | - | - | 1,068,127 | ||||||||||||||||||||||||||||||||||||||
LTIP Performance Unit Payout(1) | - | - | - | - | - | 979,673 | ||||||||||||||||||||||||||||||||||||||
Supplemental Plan Benefits(2) | 3,069,000 | |||||||||||||||||||||||||||||||||||||||||||
Unvested Restricted Stock Spread and Unvested Restricted Stock Units Spread(2) | - | - | 1,118,699 | - | 1,168,151 | |||||||||||||||||||||||||||||||||||||||
LTIP Performance Unit Payout(2) | - | - | 342,464 | - | - | |||||||||||||||||||||||||||||||||||||||
Health/Welfare Benefits | 47,423 | 13,852 | 20,679 | 19,917 | 25,111 | 19,096 | 57,554 | 16,160 | 21,420 | 25,984 | 23,320 | |||||||||||||||||||||||||||||||||
Outplacement | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | |||||||||||||||||||||||||||||||||
Education Assistance | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | |||||||||||||||||||||||||||||||||
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Aggregate Payments | 5,710,423 | 1,457,852 | 4,282,589 | 4,424,917 | 1,272,111 | 3,210,396 | 6,245,554 | 1,530,960 | 2,926,833 | 1,309,554 | 2,369,471 | |||||||||||||||||||||||||||||||||
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(1) | Mr. Mehrberg is excluded from this table as he retired on December 2, 2013. |
(2) | Pursuant to the terms of Mr. Levis’ employment agreement and Messrs. Levis’ and LaRossa’s respective retention awards, these amounts would have been payable only upon a termination without cause following a change in leadership. |
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If a termination without cause or resignation with good reason had occurred on December 31, 20122013 following a change-in-control, each of the NEOs would have received the following benefits:
66 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION |
Change-in-Control Termination | Izzo ($) | Dorsa ($) | Levis ($) | Mehrberg ($) | Bouknight ($) | LaRossa ($) | Izzo ($) | Dorsa ($) | Levis ($) | Bouknight ($) | LaRossa ($) | |||||||||||||||||||||||||||||||||||
Severance | 6,615,000 | 3,009,000 | 2,887,500 | 2,779,500 | 2,623,500 | 2,400,750 | 7,260,000 | 3,159,450 | 2,974,125 | 2,702,205 | 2,475,000 | |||||||||||||||||||||||||||||||||||
Pro Rata Bonus (SMICP) | 1,225,000 | 413,000 | 412,500 | 381,500 | 344,500 | 315,250 | 1,320,000 | 433,650 | 424,875 | 354,835 | 325,000 | |||||||||||||||||||||||||||||||||||
Unvested Stock Option Spread | - | - | - | - | 3,402 | - | ||||||||||||||||||||||||||||||||||||||||
Unvested Restricted Stock Spread and Unvested Restricted Stock Units Spread | 4,817,461 | 1,162,772 | 3,752,402 | 778,132 | 704,324 | 1,761,246 | 7,708,219 | 1,771,136 | 2,564,377 | 1,131,706 | 2,287,602 | |||||||||||||||||||||||||||||||||||
LTIP Performance Unit Payout | 3,418,144 | 626,839 | 626,839 | 552,146 | 497,729 | 1,472,600 | 3,742,790 | 739,060 | 1,061,444 | 555,064 | 544,560 | |||||||||||||||||||||||||||||||||||
Enhanced Retirement Benefit | 5,353,000 | 4,590,000 | 3,085,000 | 3,001,000 | 187,000 | 1,572,000 | 6,209,000 | 5,474,000 | 87,000 | 213,000 | 1,769,000 | |||||||||||||||||||||||||||||||||||
Health/Welfare Benefits | 71,135 | 46,628 | 67,663 | 66,448 | 82,931 | 61,586 | 86,332 | 54,151 | 69,991 | 86,461 | 75,170 | |||||||||||||||||||||||||||||||||||
Retiree Medical Increase(1) | - | - | - | - | - | 213,000 | ||||||||||||||||||||||||||||||||||||||||
Retiree Medical Increase(2) | - | - | - | - | 211,007 | |||||||||||||||||||||||||||||||||||||||||
Outplacement | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | |||||||||||||||||||||||||||||||||||
Parachute Payments Forfeited | (9,465,111 | ) | (7,561,972 | ) | (2,793,404 | ) | (3,992,902 | ) | (3,128,830 | ) | (3,652,814 | ) | (9,385,732 | ) | (7,981,810 | ) | (110,222 | ) | (3,421,804 | ) | (2,822,415 | ) | ||||||||||||||||||||||||
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Aggregate Payments | 12,059,629 | 2,311,267 | 8,063,500 | 3,590,824 | 1,339,556 | 4,168,618 | 16,965,609 | 3,674,637 | 7,096,590 | 1,646,467 | 4,889,924 | |||||||||||||||||||||||||||||||||||
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(1) | Mr. Mehrberg is excluded from this table as he retired on December 2, 2013. |
(2) | Represents amount Mr. LaRossa would receive because he is not yet retirement eligible. |
No NEO would be eligible for any payments under the Key Executive Severance Plan, either prior to or following a change-in-control, if he/she voluntarily terminated his/her employment (other than for “good reason” as described above) or if his/her employment were terminated by us for “cause.”
If a NEO were to retire or his/her employment were terminated on account of death or disability, the Key Executive Severance Plan provides that such participant would be entitled to accrued pay through the date of termination and prorated payment of his/her target incentive award for the year of termination.
Change-in-control provisions under the Key Executive Severance Plan generally means the occurrence of any of the following events:
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For additional information regarding the provisions of LTIP awards, see Material Factors Concerning Awards Shown in Summary Compensation Table, Grants of Plan-Based Awards Table and Employment Agreements above.
PUBLIC SERVICE ENTERPRISE GROUP | 20132014 Proxy Statement 67
APPROVAL OF LTIP
MANAGEMENT PROPOSALS |
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There will be presented to the Annual Meeting a proposal to approve the amendment and restatement of our 2004 Long-Term Incentive Plan (LTIP). The LTIP is a broad-based equity compensation program that provides for grants of various long-term incentive compensation awards, such as qualified and non-qualified stock options, stock appreciation rights, performance shares, performance share units, restricted stock and restricted stock units to officers and other key employees of PSEG and its subsidiaries which was first submitted to and approved by stockholders at the 2004 Annual Meeting. An earlier long-term incentive compensation plan was approved by stockholders at the 2001 Annual Meeting.
The purposes of the LTIP are to attract and retain the best available personnel for positions of substantial responsibility within the PSEG family of companies; to motivate participants, by means of appropriate incentives, to achieve PSEG’s long-range goals; to provide incentive compensation opportunities that are competitive with those of other similar companies; and to align participants’ interests with those of PSEG’s stockholders and thereby promote the long-term financial interest of PSEG and its subsidiaries, including the growth in value of PSEG’s equity and enhancement of long-term stockholder return.
If the amendment and restatement of the LTIP is approved by stockholders at the Annual Meeting its term will be extended until April 16, 2023.three proposals to approve amendments to each of PSEG’s Certificate of Incorporation, as amended, and By-Laws to eliminate provisions currently requiring a supermajority vote for certain actions. These amendments are described in Proposals 3(a), 3(b) and 3(c) below (Proposed Amendments).
At our 2013 Annual Meeting of Stockholders, a stockholder proposal was submitted on this topic. The termproposal did not receive the support of more than a majority of outstanding shares. However, it did receive the support of a majority of the LTIP currently expires on April 20, 2014.votes cast. The Board is aware that the proposal did not receive the support of a number of our largest stockholders. While the Board believes that those existing voting provisions have been beneficial in requiring strong stockholder support in connection with certain fundamental actions, the LTIP, which allows the use of multiple compensation vehicles, is desirableBoard continues to reflect current compensation practicesbe responsive to stockholder concerns and encourages stockholder participation in corporate governance. Accordingly, after consideration of the competitive marketadvantages and disadvantages of and stockholder support for the proposal to provide us witheliminate supermajority voting provisions, the flexibility needed to provide effective long-term incentive compensation to key employees. The Board believes that an appropriate equity-based long-term incentive compensation program plays an important role in promoting PSEG’s long-term financial interest, enhancing long-term stockholder return and retaining the services of outstanding personnel. The Board has authorizeddetermined that, subject to the amendment and restatementrequisite approval of our stockholders, it is appropriate to remove these provisions from our governance documents. The Board’s ability to do is governed by the laws of the LTIPState of New Jersey, where we are incorporated, and directed that itour Certificate of Incorporation and By-Laws.
Currently, our Certificate of Incorporation and By-Laws require the affirmative vote of shares representing 80% of our outstanding Common Stock for the following matters: (i) certain mergers and other business combinations; (ii) the removal of a director without cause; (iii) certain amendments to the By-Laws; (iv) amendments to or adoption of provisions inconsistent with existing requirements for number, election and terms of directors; (v) amendments to or adoption of provisions inconsistent with existing provisions for the submission of candidates to the Board by stockholders; and (vi) provisions allowing amendments to the By-Laws to be submitted to stockholders for approval.
The key featuresadopted or new By-Laws enacted by a majority vote of the LTIP, as amendedshares represented and restated, are:
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We believe that the amended and restated LTIP reflects current long-term compensation practices of competitive companies and affords PSEG flexibility in shaping appropriate long-term incentive compensationentitled to retain existing employees and recruit employees in the competitive market.
The key changes from the current versionvote at a meeting or a majority vote of the LTIP madedirectors present at any meeting at which there is a quorum.
Below is a summary of the recommended material terms and revisions. The actual text of the Proposed Amendments to the Certificate of Incorporation and By-Laws are set forth respectively in Appendices A and B to this Proxy Statement, marked with deletions indicated by strike-outs and additions indicated by underlining. Approval of any one of the amendedthree proposals with respect to the Proposed Amendments is not conditioned upon approval of any of the other proposals. Under the provisions of our Certificate of Incorporation and restated LTIP are:By-Laws as now in effect, the affirmative vote of at least 80% of the outstanding shares is required for the approval of each of the Proposed Amendments set forth in these proposals. Any shares that are not voted (whether by abstention or otherwise) on any such proposal will have the effect of a vote against the proposal.
Proposal 3(a)
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Approval of Amendments to Article 7 of our Certificate of Incorporation to Eliminate the Supermajority Voting Requirements for Certain Business Combinations
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Article 7, Section 1 of our Certificate of Incorporation currently requires the approval of 80% of shares outstanding for certain mergers and other business combinations. This provision would be revised to require a simple majority vote of shares outstanding for such transactions.
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Article 7, Section 7 of our Certificate of Incorporation, which currently requires the affirmative vote of 80% of shares outstanding in order to make certain amendments to or to adopt certain provisions or take certain actions inconsistent with Article 7 would be revised to require a simple majority vote of shares outstanding to make such revisions and take such actions.
Approval of this proposal requires the affirmative vote of at least 80% of shares of Common Stock outstanding. If approved, the Board will take the next steps required to implement the proposed amendments.
68 PUBLIC SERVICE ENTERPRISE GROUP |l20132014 Proxy Statement
APPROVAL OF LTIP
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No additional shares of Common Stock are being requested to be authorized for issuance under the amended and restated LTIP at this time. Only the 16,495,807 shares currently available under the LTIP (which amount gives effect to the payout to be made in February 2013 of earned performance share units and the grant in February 2013 of performance share units shown in the table below) will be available under the amended and restated plan.
The Board of Directors recommends a vote FOR the amendment and restatement of the LTIP.
The amended and restated LTIP is set forth in Appendix A. Its primary provisions are summarized below:
Administration. The amended and restated LTIP will be administered by the O&CC, which is comprised of non-employee directors, none of whom may receive any awards under the amended and restated LTIP. The O&CC will establish the terms and conditions of all awards that may be granted under the amended and restated LTIP, subject to certain limitations contained in the amended and restated LTIP.
Eligible Employees. The O&CC may grant long-term incentive awards to any employee of PSEG or its subsidiaries. In the past, the O&CC has granted long-term incentive awards in the form of stock options, restricted stock, restricted stock units and performance share units to those employees who have been identified as key contributors to PSEG’s or its subsidiaries’ success. Because stockholder approval is currently being sought for the amendment and restatement of the LTIP, certain of the annual long-term incentive grants made to NEOs in February 2013 were made subject to the stockholders’ approval of the amended and restated LTIP. Under the amended and restated LTIP, no employee may receive an equity award of more than 500,000 shares during any calendar year or a cash award of $10,000,000 during any 36-month period. In February 2013, the most recent grant date for awards under the LTIP, 253 employees received grants of restricted stock units with respect to 325,280 shares of Common Stock and performance share units with respect to 420,625 shares of Common Stock.
Shares Available. As mentioned above, if the amendment and restatement of the LTIP is approved by stockholders, the approximately 16,495,807 million shares of Common Stock available for future grants under the current plan would remain available under the amended and restated LTIP. Approval of the amended and restated LTIP will not increase the number of shares currently available for use in long-term incentive compensation. As of February 20, 2013, grants of equity awards with respect to approximately 5,065,069 million shares of Common Stock remain outstanding under the LTIP and are subject to forfeiture and reissuance under the current plan, or if adopted by stockholders, the amended and restated LTIP. The amended and restated LTIP provides that no more than 50% of the shares available for awards may be used for restricted stock, restricted stock units, performance shares or performance share unit awards. The amended and restated LTIP also provides that no more than 1,000,000 shares may be granted as qualified stock options under Section 422 of the IRC.
Incentive Awards. The amended and restated LTIP permits grants of the following types of long-term incentive compensation vehicles: non-qualified stock options; performance shares; performance share units; restricted stock; incentive stock options; stock appreciation rights; stock units; and cash awards. These may briefly be described as follows:
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Proposal 3(b)
Approval of Amendments to Article 8 of our Certificate of Incorporation and Article I, Section 1(d) of our By-Laws to Eliminate the Supermajority Voting Requirements to Remove a Director Without Cause
Article 8, Section 4 of our Certificate of Incorporation and Article I, Section 1(d) of our By-Laws each currently requires the affirmative vote of 80% of shares outstanding in order to remove a director from office without cause. Each respective provision would be revised to require a simple majority vote of shares outstanding to remove a director without cause.
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 69
APPROVAL OF LTIP
Performance Measures. The O&CC may establish performance measuresArticle 8, Section 5 of our Certificate of Incorporation currently requires the affirmative vote of 80% of shares outstanding in order to determine whether an award is earnedmake certain amendments to or granted,adopt any provisions inconsistent with Article 8. This provision would be revised to require a simple majority vote of shares outstanding to make certain amendments and to determineadopt provisions inconsistent with Article 8.
Approval of this proposal requires the sizeaffirmative vote of the award. Any performance measures would be based upon one or more of the following metrics: total shareholder return; return on equity; revenue; earnings before interest, taxes, depreciation and amortization (EBITDA); operating income; pre-tax or after-tax income; cash flow; cash flow per share; net earnings; earnings per share; return on invested capital; return on invested assets; economic value added; share price performance; improvement in or attainment of expense levels; improvement in or attainment of working capital levels; safety performance; Occupational Health and Safety Administration (OSHA) recordable rate; lost time accident rate; forced outage rate; nuclear capacity factor; Institute of Nuclear Power Operations (INPO) rating; availability factor; customer average interruption duration index (CAIDI); system average interruption frequency index (SAIFI); leak rate per mile; as determined on a grant specific basis by the O&CC.
U. S. Federal Income Tax Consequences. The grant of a non-qualified stock option would not result in income for a grantee or in a deduction for PSEG. However, the exercise of a non-qualified stock option would result in ordinary income for the grantee and a deduction for PSEG measured by the difference between the option price and the fair market value of the shares received at the time of exercise. Income tax withholding would be required.
With respect to other performance awards under the amended and restated LTIP, the employee who receives such an award must recognize ordinary (compensation) income at the time the stock or cash is received at the end of the performance period. If stock is awarded to an employee, the employee must recognize ordinary (compensation) income equal to the fair market value of the stock received. If the award is paid in cash, the employee must recognize ordinary (compensation) income equal to the amount of cash received. PSEG will be entitled to a deduction as a business expense in an equal amount subject to applicable IRS limits. Income tax withholding would be required.
Generally, an employee who receives shares of restricted stock will not be taxed on the grant until the applicable restrictions expire since there is a substantial risk of forfeiture of the stock. When the restrictions expire, the employee will be taxed on the then current value of the stock at ordinary tax rates and PSEG will be entitled to a deduction as a business expense in an equal amount. Dividends paid on restricted stock are considered compensation and are taxable to the employee at ordinary income tax rates and PSEG will be entitled to a deduction as a business expense in an equal amount.
Neither the grant nor exercise of an incentive stock option results in taxable income to the grantee or in a deduction as a business expense for PSEG. However, the spread between the exercise price of the incentive stock option and its fair market value constitutes an item of adjustment to the grantee for alternative minimum tax purposes. Subsequent qualifying transfers of stock acquired through the exercise of incentive stock options are taxed at capital gains rates. PSEG will not be entitled to a tax deduction at the time of transfer.
The grant of a stock appreciation right would not result in income for a grantee or in a deduction for PSEG. However, the exercise of a stock appreciation right would result in ordinary income for the grantee and a deduction for PSEG measured by the fair market value of and stock and/or cash received at the time of exercise. Income tax withholding would be required.
Other Information. The Board may amend the amended and restated LTIP as deemed appropriate, except that the Board may not, without further approval of stockholders, (a) increase the total numberleast 80% of shares of Common Stock which may be issued pursuantoutstanding. If approved, the Board will take the next steps required to awards made underimplement the plan, (b) increaseproposed amendments.
Proposal 3(c)
Approval of Amendment to Article 9 of our Certificate of Incorporation to Eliminate the maximum numberSupermajority Voting Requirement to Make Certain Amendments to our By-Laws
Article 9 of our Certificate of Incorporation currently requires the approval of 80% of shares that may be issued as awards to any individual, or (c) change the class of individuals eligible for awards. In addition, if the Securities Exchange Act of 1934, as amended (1934 Act) or NYSE rules requires PSEG to obtain stockholder approval of a plan change, then such approval will be sought. Awards are not assignable or transferable except in limited circumstances upon death. PSEG has filed a registration statement under the Securities Act of 1933 as amended (1933 Act) with respect to the shares to be issued under the LTIP.
In February 2013, the O&CC granted 253 employees awards of restricted stock units with respect to 325,280 shares and performance share units with respect to 420,625 shares. These award amounts were designed to reflect the median of the market of PSEG’s peer group. The grants to Messrs. Izzo, Levis, Mehrberg, Bouknight and LaRossa, with respect to 174,200 performance share units were made contingent upon stockholder approval of the amended and restated LTIP,outstanding in order for paymentto make certain amendments to our By-Laws. This provision would be revised to require a simple majority vote of these performance-basedshares outstanding to make certain amendments to our By-Laws.
Approval of this proposal requires the awardsaffirmative vote of at least 80% of shares of Common Stock outstanding. If approved, the Board will take the next steps required to qualify for a tax deduction under section 162(m)implement the proposed amendment.
The Board of the IRC. If the stockholders do not approve the amendmentDirectors Recommends Votes FOR each of Proposals 3(a), 3(b) and restatement of the LTIP, these grants will be voided. The O&CC has not granted any stock options under the LTIP since 2009.
The following table provides information regarding award grants made by the O&CC in February 2013. The restricted stock units are subject to a three-year cliff vesting schedule and the performance share units are subject to achievement of stated performance goals for a performance period beginning on January 1, 2013 and ending on December 31, 2015. As noted above, the performance share unit award grants to Messrs. Izzo, Levis, Mehrberg, Bouknight and LaRossa, will be voided if stockholders do not approve the amendment and restatement of the LTIP.3(c).
70 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
APPROVAL OF LTIP
Name and Position | Restricted Stock (#) | Performance Share Units (#) | ||||||
Ralph Izzo, Chairman, President and CEO - PSEG | 72,900 | 105,550 | (1) | |||||
Caroline Dorsa, Executive Vice President and CFO - PSEG | 15,300 | 22,100 | ||||||
William Levis, President and COO - Power | 14,000 | 51,000 | (1) | |||||
Randall E. Mehrberg, President and COO - Energy Holdings | 11,800 | 17,050 | (1) | |||||
J. A. Bouknight, Jr., Executive Vice President and General Counsel - PSEG | 10,800 | 15,650 | (1) | |||||
Ralph A. LaRossa, President and COO - PSE&G | 10,800 | 15,650 | (1) | |||||
All Executive Officers as a Group (7) | 139,600 | 230,850 | ||||||
All Non-Employee Directors and Nominees as a Group | - | - | ||||||
All Non-Executive Employees as a Group (247) | 185,680 | 189,775 |
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The Board of Directors recommends a vote FOR this proposal.
PUBLIC SERVICE ENTERPRISE GROUP | 20132014 Proxy Statement 7169
RATIFICATION OF AUDITOR APPROVAL OF ESPP
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There will be presented to the Annual Meeting a proposal to approve the amendment and restatement of PSEG’s Employee Stock Purchase Plan (ESPP). The ESPP is a stock purchase program that provides a convenient method for employees of PSEG and its subsidiaries to purchase shares of PSEG’s Common Stock through payroll deductions. The ESPP has been in effect since 1986 when PSE&G’s stockholders approved the acquisition of all of PSE&G’s outstanding common stock by PSEG and PSEG adopted the then-existing PSE&G employee stock purchase plan. PSE&G’s employee stock purchase plan had been originally adopted in 1977 and the ESPP has continuously been made available to employees since that time.
The purposes of the ESPP are to better align the interests of employees and stockholders by providing employees with a convenient way to make regular investments in shares of PSEG Common Stock and thereby promote the long-term financial interest of PSEG and its subsidiaries, including the growth in value of PSEG’s equity and enhancement of long-term stockholder return. In addition, the ESPP serves as a way to attract and retain qualified personnel by providing an additional compensation opportunity in the form of a purchase discount from the market price of the Common Stock. In the present version of the ESPP, participating employees receive a 5% discount from the then current market price of the Common Stock when shares are purchased with employee contributions and reinvested dividends.
The key changes from the present version of the ESPP made in the amended and restated ESPP are:
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No additional new issue shares of Common Stock are being requested to be authorized for issuance under the amended and restated ESPP at this time. Only the 3.6 million new issue shares currently available under the ESPP will be available under the amended and restated plan. This numerical limitation on shares does not apply to any shares purchased for the plan by an independent agent on the open market.
The Board believes that the ESPP, which facilitates employee share ownership, is desirable to promote a commonality of interests between employees and stockholders and is an appropriate element of PSEG’s employee compensation practices. The Board further believes that an employee stock purchase program can also play an important role in promoting PSEG’s long-term financial interest and in retaining the long-term commitment of outstanding personnel. The Board has authorized the amendment and restatement of the ESPP and directed that it be submitted to stockholders for approval.
The key features of the ESPP, as amended and restated, are:
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72 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
APPROVAL OF ESPP
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The amended and restated ESPP is comparable to similar plans of competitive companies and affords PSEG flexibility in shaping appropriate compensation opportunities to assist it in retaining employees and recruiting employees in the competitive market.
The Board of Directors recommends a vote FOR the amendment and restatement of the ESPP.
The amended and restated ESPP is set forth in Appendix B. Its primary provisions are summarized below:
Administration. The amended and restated ESPP will be administered by the O&CC, which is comprised of non-employee directors, none of whom may purchase any shares pursuant to the plan. In its discretion, the O&CC may change the record keeper of the plan and may change the discount applicable to participant purchases under the plan, as long as such discount does not exceed 15%.
Eligible Employees. The amended and restated ESPP is open to active employees who, at the time of enrollment, have attained age 18 and, for represented employees, have been in the employ of an Employer for more than one year. As of February 15, 2013, 2,418 employees participated in the plan out of 10,052 employees eligible to participate.
Shares Available. As mentioned above, if the amendment and restatement of the ESPP is approved by stockholders, the approximately 3.6 million shares of new issue Common Stock available for future purchases under the present plan would remain available under the amended and restated ESPP. This numerical limitation on shares does not apply to any shares purchased by an independent agent on the open market. Approval of the amended and restated ESPP will not increase the number of new issue shares currently available for sale pursuant to the terms of the plan. It has been recent PSEG practice to purchase all shares for the plan in the open market through an independent agent and not to use new issue shares for such purpose. As of February 15, 2013, the ESPP held approximately 1.18 million shares of Common Stock for the accounts of 2,418 participants.
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 73
APPROVAL OF ESPP
U. S. Federal Income Tax Consequences. For purposes of Federal income and social security taxes and state income taxes, each participant in the ESPP will be treated as receiving compensation on each date shares are purchased for such participant’s account in an amount equal to the sum of (a) the applicable discount from the weighted average price on the shares purchased for the participant’s account during such period, including both the shares purchased through payroll deductions and those purchased through the reinvestment of dividends, and (b) any brokerage commissions on the purchase of such shares. As required by applicable law, each participant’s respective Employer will withhold from such participant’s pay the appropriate amount of withholding taxes attributable to such compensation and will include such compensation on the participant’s Form W-2 for the year.
For purposes of Federal and state income taxes, each participant will also be treated as receiving income on each dividend payment date (ordinarily, the last business day of March, June, September and December) equal to the dividends on the shares held for the participant’s account under the ESPP, even if dividends are reinvested in additional shares.
The participant’s tax basis in shares purchased under the ESPP will equal 100% of the weighted average price of the stock acquired in the investment period plus any applicable brokerage commissions.
A participant’s holding period for shares acquired through the ESPP will begin on the day following the date shares are purchased for such participant’s account.
A participant, who, upon withdrawal or termination from the ESPP, receives a cash adjustment for a fraction of a share credited to his or her account, will realize a gain or loss with respect to such fraction. Gain or loss will also be realized by a participant who sells shares that have been withdrawn from the plan. The amount of such gain or loss will be the difference between the amount which the participant receives for his or her shares or fraction of a share and his or her tax basis therefor.
The amount of the applicable discount and of the brokerage commissions on all purchases of shares purchased under the ESPP will constitute an allowable Federal income tax expense to each participant’s respective Employer.
The ESPP is not qualified under Section 401(a) of the IRC.
Effective Date.If approved by stockholders, the amendment and restatement of the ESPP will become effective on July 1, 2013. If it is not approved, the present version of the plan will remain in operation.
Other Information. Although the ESPP is of indefinite duration, PSEG reserves the right to amend, modify or terminate the ESPP at any time, in its sole discretion. PSEG also retains the right to change the record keeper and/or any independent agent at its sole discretion. The Board may amend the amended and restated ESPP as deemed appropriate, except that the Board may not, without further approval of stockholders, (a) increase the total number of new issue shares of Common Stock which may be issued pursuant to the terms of the plan, (b) increase the maximum discount on share purchases pursuant to the terms of the plan beyond 15%, or (c) change the class of individuals eligible to participate in the plan. In addition, if the 1934 Act or NYSE rules require PSEG to obtain stockholder approval of a plan change, then such approval will be sought. The plan authorizes the O&CC to change the discount applicable to purchases under the plan, but any such approved discount may not exceed 15%.
Shares held in the plan are not assignable or transferable except in limited circumstances upon death. Shares acquired through the amended and restated ESPP must be held by the participant for at least three months before they may be sold.
While the amended and restated ESPP does not place restrictions on resale’s of Common Stock acquired thereunder, shares of Common Stock acquired by an “affiliate,” as that term is defined in Rule 405 under the 1933 Act, may only be resold pursuant to the registration requirements of the 1933 Act or an appropriate exemption therefrom. PSEG has filed a registration statement under the 1933 Act with respect to the shares to be issued under the ESPP. Acquisitions of shares of Common Stock and dispositions of shares of Common Stock by an officer or director, as defined under the rules promulgated under Section 16 of the 1934 Act, of PSEG within any six-month period may give rise to the right of PSEG to recapture any profit from such transactions pursuant to Section 16(b) of the 1934 Act.
Currently, none of our NEOs participates in the ESPP.
The Board of Directors recommends a vote FOR this proposal.
74 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
RATIFICATION OF AUDITOR
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITOR |
The Audit Committee of the Board, each member of which is independent, has appointed Deloitte & Touche LLP of Parsippany, New Jersey, as independent auditor to make the annual audit of our books of account and supporting records for 2013,2014, subject to the ratification of the stockholders at the Annual Meeting. As recommended by the Board, we ask you to ratify this appointment.
Representatives of Deloitte & Touche LLP will be present at the Annual Meeting and will be afforded an opportunity to make a statement if they so desire and to respond to appropriate questions.
The Board Of Directors Recommends A VoteVoting “For” This Proposal.
The Audit Committee of the PSEG Board of Directors is comprised solely of independent directors. It operates under a written charter adopted by the PSEG Board of Directors which is posted on PSEG’s website,www.pseg.com/info/investors/governance/committees.jsp. The Audit Committee Charter is annually reviewed and assessed for adequacy by the PSEG Audit Committee.
Management is responsible for PSEG’s financial statements and internal controls. The Independent Registered Public Accountantindependent auditor of PSEG, Deloitte & Touche LLP, reports directly to the PSEG Audit Committee and is responsible for performing an independent audit of PSEG’s annual consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) (U.S.) and on PSEG’s internal controls and for issuing reports thereon. The Audit Committee’s overall responsibility is to assist the PSEG Board of Directors in overseeing the quality and integrity of the accounting, auditing and financial reporting practices.
Management has represented to the Audit Committee that PSEG’s Consolidated Financial Statements were prepared in accordance with generally accepted accounting principles generally accepted(GAAP) in the United States (GAAP).States. In performance of its responsibilities, the Audit Committee has reviewed PSEG’s Consolidated Financial Statements for the year ended December 31, 20122013 and discussed these financial statements with management, the internal auditors and the independent auditor. The Audit Committee periodically meets privately with the Chief Financial Officer, the General Counsel, and the internal auditorsVice President-Internal Audit and with the independent auditor. At all of its meetings (except those held telephonically) the Audit Committee meets in executive session with only Audit Committee members present. The Audit Committee discussed with the independent auditor:
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The independent auditor also provided to the Audit Committee the written disclosures required by the PCAOB’s standards in PCAOB Rule 3526, Communication with Audit Committee Concerning Independence, and current SEC requirements for auditor independence. The Audit Committee discussed with the independent auditor the firm’s independence with respect to PSEG, internal quality control procedures, and any material issues raised and any steps taken to deal with such issues by the most recent internal quality control review, peer review or by any inquiry or investigation by governmental or professional authorities within the preceding five years, with respect to one or more independent audits carried out by the firm. The Audit Committee has also reviewed the requirements of the Sarbanes-Oxley Act of 2002 with respect to auditor independence and has defined the amount and scope of services that may be performed by Deloitte & Touche LLP consistent with maintaining that firm’s independence. The Audit Committee requires that all services of Deloitte & Touche LLP be pre-approved by the Audit Committee or the Audit Committee Chair. The Audit Committee has considered whether the independent auditor’s provision of non-audit services to PSEG and the total fees paid for non-audit services relative to fees paid for audit services are compatible with maintaining the independent auditor’s independence. On the basis of its review, the Audit Committee determined that the independent auditor has the requisite independence.
Based on the Audit Committee’s discussions with management, the internal auditors and the independent auditor, the Audit Committee’s review of the audited financial statements, the representations of management to the independent auditor regarding the audited financial
70 PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement
RATIFICATION OF AUDITOR |
statements and the independent auditor’s report to the Audit Committee, the Audit Committee recommended to the Board of Directors that
PUBLIC SERVICE ENTERPRISE GROUP | 2013 Proxy Statement 75
RATIFICATION OF AUDITOR
the audited financial statements be included in PSEG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012,2013, for filing with the SEC.
Members of the Audit Committee:
David Lilley, Chair
Albert R. Gamper, Jr.
Thomas A. Renyi
Hak Cheol Shin
Susan Tomasky
February 18, 201317, 2014
FEES BILLED BY DELOITTE & TOUCHE LLP FOR 20122013 AND 20112012
The appointment, termination, compensation and oversight of the work of the Independent Registered Public Accountants, Deloitte & Touche LLP, is the direct responsibility of the Audit Committee of our Board, which reviews its independence, the services provided and its fees, as well as peer review reports of its performance. All fees paid to Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, Deloitte & Touche) for all services, audit and non-audit, provided to us and our subsidiaries are pre-approved by the Audit Committee or its Chair.
Years ended December 31, | Years ended December 31, | |||||||||||||||
2012 ($) | 2011 ($) | 2013 ($) | 2012 ($) | |||||||||||||
Audit Fees(1) | 6,450,000 | 5,731,700 | 6,269,000 | 6,450,000 | ||||||||||||
Audit Related Fees(2) | 47,400 | 47,400 | 47,400 | 47,400 | ||||||||||||
Tax Fees(3) | 348,392 | 768,781 | ||||||||||||||
Tax Fees(3) | 299,046 | 348,392 | ||||||||||||||
All Other Fees(4) | - | - | - | - |
(1) | The audit fees were incurred for audits of our annual consolidated financial statements and those of our subsidiaries, including our Annual Reports on Form 10-K, reviews of financial statements included in our quarterly reports on Form 10-Q and for services rendered in connection with certain financing transactions, statutory and regulatory filings and fees for accounting consultations related to the application of new accounting standards and rules. |
(2) | The audit related fees primarily related to performing certain attest services. |
(3) | The tax fees primarily relate to tax compliance and tax advice. |
(4) | There were no fees other than the above. |
76 PUBLIC SERVICE ENTERPRISE GROUP |l2013 Proxy Statement
STOCKHOLDER PROPOSAL
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The following proposal was submitted on October 22, 2012, by William Steiner, 112 Abbottsford Gate, Piermont, NY 10968, who is the owner of at least 11,000 shares of our Common Stock in accordance with applicable SEC rules. The proposal is printed exactly as it was submitted:
Proposal 6 — Simple Majority Vote Right
RESOLVED, Shareholders request that our board take the steps necessary so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be eliminated. And then be replaced by a requirement of a majority of the votes cast for and against the proposal, or a simple majority in compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws.
Shareowners are willing to pay a premium for shares of corporations that have excellent corporate governance. Supermajority voting requirements have been found to be one of six entrenching mechanisms that are negatively related to company performance according to “What Matters in Corporate Governance” by Lucien Bebchuk, Alma Cohen and Allen Ferrell of the Harvard Law School.
This proposal topic won from 74% to 88% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, McGraw-Hill and Macy’s. The proponents of these proposals included James McRitchie and Ray T. Chevedden.
Currently a 1%-minority can frustrate the will of our 79%-shareholder majority. Supermajority requirements are arguably most often used to block initiatives supported by most shareowners but opposed by management.
This proposal should also be evaluated in the context of our Company’s overall corporate governance as reported in 2012:
GMI/The Corporate Library, an independent investment research firm, rated our company “C” due to concerns related to director qualifications and executive pay. CEO Ralph Izzo’s $1.7 million change in pension value and non-qualified deferred earnings were well over his base salary. This was also true for two of our other highest paid executives, CFO Caroline Dorsa and President Ralph LaRossa. Because such pay was not tied directly to company performance, it is difficult to justify in terms of shareholder value. Furthermore, long-term incentive pay continued to include restricted stock units that simply vested over time. GMI said that equity pay should have performance-vesting criteria to align with shareholder interests. Although long-term incentive pay included performance share units, some concerns included: performance was measured over three-years, portions tied to relative Total Shareholder Return vest 100% at median performance and payouts could be cash-based.
Five of our directors were long-tenured with 11 to 18 years of tenure and such tenure erodes director independence. And two of these directors were beyond age 70.
Shirley Ann Jackson (11-years tenure) and Richard Swift (18-years tenure) received our highest negative votes and were potentially over-extended with seats on 5 major boards each. Ms. Jackson continued her typical pattern of receiving among the highest negative votes at companies where she is a director. Plus these directors controlled 3 seats on our most important board committees. Albert Gamper had 12-years tenure to erode his independence and was our Lead Director.
Please encourage our board to respond positively to this proposal to strengthen our corporate governance:
Simple Majority Vote Right — Proposal 6
The Board of Directors recommends a vote AGAINST the adoption of this proposal for the following reasons:
The Board recommends a vote against this proposal because it believes that the supermajority voting requirements under the Company’s Amended Certificate of Incorporation and Bylaws (collectively, governance documents) are appropriate and necessary. Under the Company’s existing governance documents, a simple majority vote already applies to most matters submitted for stockholder approval. More than a simple majority is only required in a few, but important, matters of corporate structure and governance, which include: (i) certain mergers and other business combinations; (ii) the removal of a director without cause; (iii) certain amendments to the By-laws; (iv) the
PUBLIC SERVICE ENTERPRISE GROUP | 20132014 Proxy Statement 7771
STOCKHOLDER PROPOSAL
requirements for number, election and terms of directors; (v) provisions for the submission of candidates to the Board by stockholders; and (vi) provisions allowing amendments to the By-Laws to be adopted or new By-Laws enacted by a majority vote of the directors present at any meeting at which there is a quorum. As explained in further detail below, the Board believes that requiring a higher voting threshold in limited circumstances where the Company faces fundamental governance and structural change protects the long-term interests of the company and its stockholders.
Broad Stockholder Support. New Jersey law permits supermajority voting requirements and a number of publicly-traded companies have adopted these provisions to preserve and maximize long-term value for all stockholders. The Board believes that changes to certain fundamental provisions of the governance documents should have the support of a broad consensus of the Company’s stockholders rather than a simple majority. For this reason, our current provisions allow for broad stockholder representation by giving minority stockholders the ability to defeat proposed extraordinary transactions. Without these provisions, it would be possible for a group of short-term stockholders to approve a transaction that could negatively impact the long-term interests of stockholders, even if opposed by nearly half of the Company’s stockholders.
Fiduciary Duties. Further, the Board has fiduciary duties under the law to act in a manner that it believes to be in the best interests of the Company and its stockholders. Stockholders, on the other hand, do not have the same fiduciary duties. As a result, a group of stockholders may act in their own self-interests to the detriment of other stockholders. Accordingly, the supermajority voting standards help protect the long-term interests of the Company and all stockholders.
Protection Against Unsolicited Takeover Proposals. Our voting provisions may further protect the Company’s stockholders by encouraging persons making unsolicited takeover proposals to negotiate directly with the Board. Nine of the Company’s Board members are independent under the standards adopted by the NYSE. Considering the Board’s overall independence and its aforementioned fiduciary duty, the Company believes that the Board is in the best position to evaluate the adequacy and fairness of proposed offers, to negotiate the best possible transaction on behalf of all stockholders and to protect stockholders against abusive takeover tactics. These provisions are not intended to, and do not, preclude unsolicited, non-abusive offers to acquire the Company at a fair price.
Corporate Governance. The proponent contends that an affirmative vote of this proposal would serve as a means of strengthening the Company’s corporate governance. However, the Board does not believe that implementation of this proposal would enhance the Company’s governance practices. Our Corporate Governance Committee regularly considers and evaluates corporate governance developments and recommends changes to the Board. As discussed in this Proxy Statement, the Board operates under corporate governance principles and practices that are designed to maximize long-term value for all stockholders, align the interests of the Board and executive officers with those of our stockholders and promote high ethical conduct among our Directors and employees. Additionally, the Company’s governance policies and practices comply with all of the NYSE and SEC corporate governance standards.
Furthermore, and significantly, we already provide for a majority vote regarding the election of directors. A vote in favor of this proposal is not necessary in order for our stockholders to have the benefit of that provision.
It is important to note that stockholder approval of this proposal would not in itself remove the current voting standards. In order to change the current standards under our governance documents, the Board must first propose amendments to the Company’s governance documents. The amendments must then be approved by stockholders in accordance with the applicable provisions of our governance documents.
After careful consideration, the Board has determined that retention of the few supermajority voting requirements remains in the long-term best interests of the Company and its stockholders. The Board believes that the supermajority provisions represent prudent corporate governance and protects the interests of all stockholders.
78 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
APPENDIX A |
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Public Service Enterprise Group Incorporated
2004 Long-Term Incentive Plan
Amended and Restated as of April 16, 2013
1. Purposes.
The purposes of the Public Service Enterprise Group Incorporated 2004 Long-Term Incentive Plan (“Plan”) are to promote the growth and profitability of the Company and its Subsidiaries by enabling them to attract and retain the best available personnel for positions of substantial responsibility; to motivate Participants, by means of appropriate incentives, to achieve long-range goals; to provide incentive compensation opportunities that are competitive with those of other similar companies; and to align Participants’ interests with those of the Company’s shareholders and thereby promote the long-term financial interest of the Company and its Subsidiaries, including the growth in value of the Company’s equity and enhancement of long-term shareholder return.
2. Effective Date.
The Plan was effective as of April 20, 2004 and had a term of ten years from its effective date. The Plan was amended effective as of December 1, 2009 to change the provisions of Subsection 8(b) regarding option vesting following a Change in Control.
The Plan is being amended and restated effective as of April 16, 2013 (the “Effective Date”) and shall have a term of ten years from the Effective Date, provided that shareholder approval is received on such date. Shareholder approval of the amendment and restatement of the Plan is needed to comply with Code section 162(m).
With respect to Awards granted prior to the Effective Date, the terms of the Plan in effect as of the grant date shall apply. On and after the Effective Date, Options or other awards shall be granted under the terms of the 2013 amendment and restatement. In the event of Plan termination or expiration, any then-outstanding Award shall remain in effect pursuant to the terms of its Award Grant.
3. Definitions.
Capitalized terms used in this Plan have the meanings specified in this Section 3:
“Award” means a grant to a Participant of Options, Stock Appreciation Rights, Restricted Stock, Stock Units, Performance Shares, Performance Share Units, Cash Awards or any combination thereof.
“Award Grant” means the written notification or agreement confirming an Award and setting forth the terms and conditions thereof.
“Board of Directors” means the Board of Directors of the Company and, when used in the context of actions taken or authorized to be taken by the Board of Directors, means valid actions taken by not less than a quorum of the whole Board of Directors of the Company.
“Cash Award” means the right to receive a Performance Award denominated in cash with the eventual payment amount subject to achievement of goals relating to specified Performance Measures and subject to such other restrictions and conditions as may be established by the Committee.
“Cause” means an act of dishonesty, moral turpitude or an intentional or grossly negligent act, in each case, detrimental to the best interests of the Company or a Subsidiary, including violation of the Company’s Standards of Integrity, as determined by the Committee in its sole discretion, and as may be further defined in the Award Grants.
“Change in Control” means the occurrence of any of the following events:
PUBLIC SERVICE ENTERPRISE GROUP l2013 Proxy StatementA-1
APPENDIX A
Notwithstanding the foregoing subparagraphs (1), (2), (3) and (4), a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the Common Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
“Code” means the Internal Revenue Code of 1986, as amended, and shall be deemed to include all official guidance issued thereunder.
“Committee” means the Organization and Compensation Committee of the Board of Directors described in Section 4, or any committee or other person or persons designated by the Board of Directors as successor to the powers and duties of the Organization and Compensation Committee as described in Section 4.
“Common Stock” means the Company’s authorized Common Stock, no par value, except as this definition may be modified as provided in Section 13.
“Company” means Public Service Enterprise Group Incorporated, a New Jersey corporation, or any successor thereto.
“Covered Employee” means a person defined as such in Code section 162(m)(3) and regulations and other guidance thereunder.
“Date of Termination” means the first day occurring on or after the date of grant of an Award on which the Participant is not performing services as an Employee for the Company or any Subsidiary, regardless of the reason for cessation of services; provided that a cessation of services shall not be deemed to occur by reason of a transfer of a Participant between the Company and a Subsidiary or between two Subsidiaries; and further provided that a Participant’s services shall not be considered terminated while the Participant is on an approved leave of absence from the Company or a Subsidiary. Unless determined otherwise by the Committee, if, as a result of a sale or other transaction, the organization for which a Participant is performing services as an Employee ceases to be the Company or a Subsidiary and the Participant is not, at the end of the 30-day period following the transaction, performing services as an Employee for the Company or an organization that is then a Subsidiary, then the occurrence of such transaction shall be treated as the Participant’s Date of Termination.
“Director” means any member of the Board of Directors who is not an Employee.
“Disability” shall have the meaning ascribed to such term in the Company’s Long-Term Disability Plan (regardless of whether the Participant is eligible for benefits under such plan). For the purposes of this Plan, the question of whether a Participant’s condition shall be considered a Disability shall be determined in each case by the Committee and such determination by the Committee shall be final.
“Effective Date” shall have the meaning set forth in Section 2.
“Employee” means any employee of the Company or a Subsidiary who is receiving remuneration for personal services rendered to the Company or Subsidiary, including any such person who is an officer of the Company or Subsidiary, other than (1) solely as a
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director of the Company or a Subsidiary, (2) as a consultant, (3) as an independent contractor, (4) as an individual who is a “leased employee” within the meaning of Code section 414(n), or (5) any other individual engaged by the Company or Subsidiary in a relationship that the Company characterizes as other than an employment relationship or who has waived his rights to coverage as an employee (regardless of whether a determination is made by the Internal Revenue Service or other governmental agency or court after the individual is engaged to perform such services that the individual is an employee of the Company or Subsidiary for the purposes of the Code or otherwise).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exercise Period” means the period beginning on the date on which an Option or Stock Appreciation Right becomes exercisable pursuant to its terms, and ending on the Expiration Date of such Option or Stock Appreciation Right.
“Exercise Price” means the price established by the Committee (or determined according to a method established by the Committee) at the time an Option or Stock Appreciation Right is granted and shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of the Option or Stock Appreciation Right.
“Expiration Date” means, with respect to an Option or Stock Appreciation Right, the date specified in the Award Grant after which such Option or Stock Appreciation Right may not be exercised; provided that the Expiration Date (except as described below or in Section 8) shall not be later than the earliest to occur of:
The Committee in its sole discretion may establish an Expiration Date later than as described above, but not later than the ten-year anniversary of the date of grant. Notwithstanding the foregoing, if the Participant’s Date of Termination occurs by reason of an involuntary termination without Cause and death or Disability occurs after the involuntary termination without Cause and before the otherwise applicable Expiration Date, the Expiration Date for a Non-Statutory Option or a Stock Appreciation Right which was exercisable as a result of death or Disability shall not be earlier than the first anniversary of the date of Date of Termination, but in no event beyond the ten-year anniversary of the date of grant.
“Fair Market Value” as of any specified date means the closing sale price of the Common Stock on the New York Stock Exchange - Composite Tape on such date or, if there are no sales on such date, on the next preceding day on which there are sales. If the shares are not then listed on the NYSE, and if the shares of Common Stock are then listed on any other national securities exchange or traded on the over-the-counter market, the fair market value shall be the closing price on such exchange or on the NASDAQ National Market System or the mean of the closing bid and asked prices of the shares of Common Stock on the over-the-counter market, as reported by the NASDAQ, the National Association of Securities Dealers OTC Bulletin Board or the National Quotation Bureau, Inc., as the case may be, on such date or, if there is no closing price or bid or asked price on that day, the closing price or mean of the closing bid and asked prices on the most recent day preceding such date for which such prices are available. In all events, with respect to Non-Statutory Options and Stock Appreciation Rights, Fair Market Value shall not be less than fair market value as determined under Code section 409A.
“Incentive Option” means an Option which is intended to be an “incentive stock option’’ as defined in Code section 422.
“Non-Statutory Option” means an Option which is not intended to qualify as an Incentive Option as defined above.
“NYSE” means the New York Stock Exchange.
“Option” means an Incentive Option or a Non-Statutory Option granted by the Company pursuant to the Plan to purchase shares of Common Stock at an Exercise Price established by the Committee.
“Participant” means an Employee selected by the Committee to receive an Award. The term shall include any transferee or transferees of any person who has received an Award to the extent the transfer is permitted by the Plan and the applicable Award Grant.
PUBLIC SERVICE ENTERPRISE GROUP l2013 Proxy StatementA-3
APPENDIX A
“Performance Award” means an Award of Performance Shares, Performance Share Units and/or a Cash Award.
“Performance Goal” means a target based on Performance Measures that is established by the Committee in connection with a Performance Award. Performance Goals may be established on a corporate-wide basis or with respect to one or more business units, divisions, or Subsidiaries, and may be in either absolute terms or relative to the performance of one or more comparable companies or an index covering multiple companies.
“Performance Measures” means criteria established by the Committee relating to any of the following: revenue; earnings before interest, taxes, depreciation and amortization (EBITDA); operating income; pre- or after-tax income; cash flow; cash flow per share; net earnings; earnings per share; return on equity; return on invested capital; return on assets; economic value added (or an equivalent metric); share price performance; total shareholder return; improvement in or attainment of expense levels; improvement in or attainment of working capital levels; safety performance; OSHA recordable rate; lost time accident rate; forced outage rate; nuclear capacity factor; INPO rating; availability factor; customer average interruption duration index (CAIDI); system average interruption frequency index (SAIFI); or leak rate per mile. Performance Measures may be applied by excluding the impact of charges for restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of accounting changes, each as defined by generally accepted accounting principles.
“Performance Share” means a grant of shares of Common Stock which is contingent on achievement of Performance Goals and satisfaction of such other restrictions and conditions as may be established by the Committee.
“Performance Share Unit” means a grant of a Stock Unit which is contingent on the achievement of Performance Goals and satisfaction of such restrictions and conditions as may be established by the Committee.
“Plan” means this Public Service Enterprise Group Incorporated 2004 Long-Term Incentive Plan, amended and restated as of April 16, 2013.
“Prior Plans” mean the Public Service Enterprise Group Incorporated 1989 Long-Term Incentive Plan and the Public Service Enterprise Group Incorporated 2001 Long-Term Incentive Plan.
“Restricted Stock” means a grant of shares of Common Stock subject to transfer restrictions and a risk of forfeiture or other restrictions that will lapse upon the completion of a period of service by the Participant, or achievement of other objectives, including Performance Goals, as determined by the Committee. Subject to any such forfeiture, and except as may otherwise be determined by the Committee at the time of grant, the Participant shall be currently entitled to dividends on such shares and shall be entitled to vote such shares.
“Restricted Stock Unit” means a grant of a Stock Unit which is subject to transfer restrictions and a risk of forfeiture or other restrictions that will lapse upon the completion of service by the Participant, or achievement of other objectives or conditions, as determined by the Committee.
“Retirement” means cessation of services as an Employee for the Company or a Subsidiary by reason of satisfying the criteria for retirement (normal retirement or early retirement) under the provisions of the qualified defined benefit plan of the Company or Subsidiary in which the Employee participates on the date of the Employee’s cessation of services.
“Stock Appreciation Right” means a grant of an Award that will enable the Participant to receive shares of Common Stock or cash equal to the appreciation in value, if any, of the Common Stock between the Fair Market Value of the Common Stock on the date the Stock Appreciation Right is granted and the Fair Market Value of the Common Stock on a future exercise date.
“Stock Unit” means a right to receive a share of Common Stock in the future.
“Subsidiary” means any corporation, limited liability company, partnership, joint venture or other entity during any period in which at least fifty percent of the voting or profits interest is owned, directly or indirectly, by the Company (or by any entity that is a successor to the Company), and any other business venture designated by the Committee in which the Company (or any entity that is a successor to the Company) has a significant interest, as determined in the discretion of the Committee.
“Successor” means the person or persons entitled in lieu of the Participant to receive any shares of Common Stock or other benefits under the Plan by reason of a beneficiary designation, will, laws of intestacy, or family assignments as permitted under the Plan. The Successor of a deceased Participant shall be the person or persons entitled to do so under a beneficiary designation in accordance with Section 11 or, if none, under the Participant’s will or, if the Participant shall have failed to designate a beneficiary or make testamentary disposition of such Awards or shall have died intestate, by the Participant’s legal representative or representatives.
4. Administration.
The Plan shall be administered by the Organization and Compensation Committee of the Board of Directors which shall consist of not less
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than three Directors of the Company appointed by the Board of Directors. No person shall be eligible or continue to serve as a member of such Committee unless such person is an “outside director” within the meaning of regulations under Code section 162(m) and a “non-employee director” within the meaning of Exchange Act Rule 16b-3.
The Committee shall keep minutes of its meetings. The acts of a majority of the members present at any meeting of the Committee at which a quorum is present (as determined under the By Laws of the Company), or acts approved in writing by the entire Committee, shall be the acts of the Committee.
Within the limits of the express provisions of the Plan, the Committee shall have the authority, subject to such orders or resolutions, not inconsistent with the provisions of the Plan, as may from time to time be issued or adopted by the Board of Directors, in its discretion to determine the individuals to whom, and the time or times at which, Awards shall be granted, the type of Award grants, the number of shares of Common Stock to be subject to each Award, the limitations, restrictions and conditions applicable to each Award grant, the terms and provisions of agreements that may be entered into in connection with Award grants (which need not be identical), to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and to make all other determinations and take all other actions deemed necessary or advisable for the administration of the Plan.
In making its determinations relating to Award grants, the Committee may consult with the Chief Executive Officer of the Company and may take into account the recommendations of the Chief Executive Officer with respect to grants to be made to other Employees. The Committee may also take into account the nature of the services rendered by such individuals, their present and potential contributions to the Company’s success and such other factors as the Committee, in its discretion, shall deem relevant.
The Committee’s determinations on the matters regarding this Plan (including matters referred to in this Section 4) shall be conclusive and shall be binding on the Company, its Stockholders, its Affiliates, all Participants, all other Employees and all other persons. Except to the extent prohibited by applicable law or the applicable NYSE rules, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to the Chief Executive Officer of the Company or a committee of officers of the Company, except with respect to Awards to any Covered Employee or to an officer or other person subject to Section 16 of the Exchange Act. Any such allocation or delegation may be revised or revoked by the Committee at any time.
5. Eligibility.
Subject to the provisions of the Plan, the Committee shall determine and designate, from time to time, those Employees who will be granted one or more Awards under the Plan, and who thereby will become “Participants” in the Plan.
6. Shares Available.
The type and number of shares of Common Stock for which Awards may be granted under the Plan shall be determined in accordance with this Section 6:
PUBLIC SERVICE ENTERPRISE GROUP l2013 Proxy StatementA-5
APPENDIX A
7.Awards.
The Committee shall have full and complete authority, in its discretion, subject to the provisions of the Plan, to grant Awards to Participants consisting of Options, Stock Appreciation Rights, Restricted Stock, Stock Units, Performance Shares, Performance Share Units, Cash Awards or any combination thereof, as more fully described in Sections 8 through 10, subject to such terms and conditions as the Committee deems appropriate. Awards may be granted singly, in combination or in tandem so that the settlement or payment of one automatically reduces or cancels the other. Awards may also be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for, grants or rights under any other compensation plan of the Company or any Subsidiary, including the plan of any acquired entity. The Committee may permit or require that any Award be prorated to the date of any termination of employment.
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The Committee may provide that Awards denominated in Common Stock earn dividends or dividend equivalents. Such dividend equivalents may be paid currently in cash or shares of Common Stock or may be credited to an account established by the Committee under the Plan in the name of the Participant. In addition, dividends or dividend equivalents paid on outstanding awards or issued shares may be credited to such account rather than paid currently. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment in additional shares or share equivalents.
The Committee may require or permit Participants to elect to defer the issuance of shares or the settlement of Awards in cash under such rules and procedures as it may establish under the Plan or otherwise. It may also provide that deferred settlements include the payment or crediting of interest on the deferral amounts, conversion of deferred amounts into deferred Common Stock equivalents, or the payment or crediting of dividend equivalents on deferred settlements denominated in shares.
If a Participant elects to defer the issuance of shares of a Restricted Stock Unit or a Performance Share Unit, he or she must make such deferral election under the terms of the Public Service Enterprise Group Equity Deferral Plan.
Settlement of Awards may be in the form of cash, shares of Common Stock, other Awards, or in such combinations thereof as the Committee shall determine at the time of grant, and with such restrictions as it may impose.
8. Options and Stock Appreciation Rights.
The Committee may grant Options containing such terms and conditions as shall be requisite, in the judgment of the Committee, to constitute either Incentive Options or Non-Statutory Options. Incentive and Non-Statutory Options shall be identified as such in the Award Grant. The Committee may grant Stock Appreciation Rights either (i) independently of Options or (ii) in tandem with Options such that the exercise of the Option or Stock Appreciation Right with respect to a share of Common Stock cancels the tandem Stock Appreciation Right or Option, respectively, with respect to such share. The grant of each Option or Stock Appreciation Right shall be confirmed in writing by an Award Grant in the form prescribed by the Committee.
At the time an Option or Stock Appreciation Right is granted, the Committee shall determine the Exercise Price. Except for adjustments as provided in Section 13, the Exercise Price for any outstanding Option or Stock Appreciation Right may not be decreased after the date of grant nor may any outstanding Option or Stock Appreciation Right be surrendered to the Company as consideration for the grant of a new Option or Stock Appreciation Right with a lower Exercise Price.
Notwithstanding any provision in the Plan to the contrary, an outstanding Option or Stock Appreciation Right may not be (i) modified to reduce the Exercise Price thereof nor may a new Option or Stock Appreciation Right at a lower price be substituted for a surrendered Option or Stock Appreciation Right (other than adjustments or substitutions in accordance with Section 13), or (ii) repurchased by the Company if the per share option price of the Option or Stock Appreciation Right is less than the Fair Market Value of a share of Common Stock (other than a cancellation for no value in accordance with Section 15), unless such action is approved by the Stockholders of the Company.
Each Option or Stock Appreciation Right granted under this Plan shall be exercisable during such period and under such circumstances as the Committee shall determine, subject to the following rules:
PUBLIC SERVICE ENTERPRISE GROUP l2013 Proxy StatementA-7
APPENDIX A
Each Option or Stock Appreciation Right granted under this Plan may be exercised to the extent exercisable, in whole or in part at any time during the Exercise Period, for such number of shares as shall be prescribed by the provisions of the Award Grant evidencing such Option or Stock Appreciation Right, provided that:
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9. Other Stock Awards.
The Committee may make Awards consisting of Restricted Stock or Stock Units containing such terms and conditions, and subject to such restrictions and contingencies as the Committee shall determine, subject to the provisions of the Plan. Unless otherwise authorized by the Committee, as a condition of receiving an Award consisting of Restricted Stock, a Participant must waive in writing the right to make an election under Code section 83(b) to report the value of the Restricted Stock as income on the Date of Grant. If the right to become vested in a Restricted Stock Award granted under this Section 9 is conditioned on the completion of a specified period of service as an Employee with the Company or the Subsidiaries, without achievement of Performance Measures or other performance objectives being required as a condition of vesting, and without it being granted in lieu of other compensation or to replace forfeited awards from a prior service recipient, then, unless otherwise determined by the Committee and set forth in a Participant’s Award Grant, the required period of service for full vesting shall be not less than three years. Notwithstanding the foregoing, the Committee has the discretion to accelerate the vesting of an Award upon the occurrence of certain circumstances, including but not limited to, the Participant’s Retirement, death, Disability, or termination by the Company without Cause. The circumstances which result in accelerated vesting shall be set forth in the Participant’s Award Grant.
In the event of a Change in Control, unless such Award is replaced by the same type of award of equivalent value provided by the continuing entity which replacement award vests not later than the replaced Award and, to the extent not previously vested, the Award vests in full in the event of any involuntary cessation of performance of services for the continuing entity within the twenty-four month period following the Change in Control (other than involuntary termination for Cause).
10. Performance Awards.
The Committee may make Awards consisting of Performance Shares or Performance Share Units, containing such terms and conditions, and subject to such restrictions and contingencies as the Committee shall determine, subject to the provisions of the Plan. Performance Awards shall be conditioned on the achievement of Performance Goals, based on one or more Performance Measures, as determined by the Committee, over a performance period (not less than one year) prescribed by the Committee. For Awards under this Section 10 intended to be “performance-based compensation” within the meaning of regulations under Code section 162(m), the grant of the Awards and the performance goals shall be made during the period required under Code section 162(m). In the event that a Change in Control occurs after a Performance Award has been granted but before completion of the performance period, a pro-rata portion of such Award shall become payable as of the date of the Change in Control to the extent otherwise earned on the basis of achievement of the pro-rata portion of the Performance Goals relating to the portion of the performance period completed as of the date of the Change in Control. Notwithstanding the foregoing, if a Change in Control occurs that does not constitute a “change in control” under Code section 409A, the pro-rata portion of such Award shall be paid on the date that such Award would have been paid had a Change in Control not occurred. Unless otherwise directed by the Committee, as a condition of receiving an Award consisting of Performance Shares, a Participant must waive in writing the right to make an election under Code section 83(b) to report the value of the Performance Shares as income on the Date of Grant.
11. Non-Transferability.
Unless otherwise designated by the Committee to the contrary, each Award granted under the Plan shall by its terms be non-transferable by the Participant (except by will or the laws of descent and distribution). An Option or Stock Appreciation Right shall be exercisable during the Participant’s lifetime only by the Participant, his or her guardian or legal representative or by such other means as the Committee may approve from time to time that is not inconsistent with or contrary to the provisions of either Section 16(b) of the Exchange Act or Rule 16b-3, as either may be amended from time to time, or any law, rule, regulation or other provision that may hereafter replace such Rule. A Participant may also designate a beneficiary to exercise his or her Awards after the Participant’s death. The Committee may amend outstanding Awards to provide for transfer, without payment of consideration, to immediate family members of the Participant or to trusts or partnerships for such family members.
12. Listing and Registration of Shares and Restrictions on Shares.
If at any time the Board of Directors shall determine, in its discretion, that the listing, registration or qualification of any of the shares subject to Awards under the Plan upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of or in connection with the purchase or issue of shares thereunder, no outstanding Awards which would result in the purchase or issuance of shares may be exercised or otherwise settled unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors or the
PUBLIC SERVICE ENTERPRISE GROUP l2013 Proxy StatementA-9
APPENDIX A
Committee. The Board of Directors or the Committee may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the shares in compliance with applicable law and shall have the authority to cause the Company at its expense to take any action related to the Plan which may be required in connection with such listing, registration, qualification, consent or approval.
The Committee may impose such restrictions on any shares acquired pursuant to Restricted Stock Awards as it may deem advisable, including, without limitation, restrictions to comply with applicable Federal securities laws, with the requirements of any stock exchange or market upon which such shares are then listed and/or traded and with any blue sky or state securities laws applicable to such shares.
Certificates representing shares subject to Restricted Stock Awards may bear a legend substantially as follows:
The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer as set forth in the Public Service Enterprise Group Incorporated 2004 Long-Term Incentive Plan, and in an award document. A copy of such Plan and award documents may be obtained from Public Service Enterprise Group Incorporated.
The Company shall have the right to retain (or escrow) certificates or shares that are subject to Restricted Stock Awards until such time as all restrictions applicable to such shares have been satisfied. Shares subject to Restricted Stock Awards shall become freely transferrable (subject to applicable laws and Company imposed trading restrictions), and legends on share certificates shall be removed, once all restrictions applicable to such shares have been satisfied.
All Awards made under this Plan are specifically made with the proviso that the Company may institute clawback and/or other forfeiture provisions as may be required by law, listing requirements or Company policy, including such provisions that are instituted with respect to Awards that are issued prior to implementation of such law, listing requirements or Company policy.
The Committee may require Participants to execute stock powers or other similar instruments in order to facilitate the return to the Company of shares upon forfeiture of Restricted Stock Awards.
Neither the Participant nor his or her Successor will have any of the rights or privileges of a shareholder of the Company in respect of any shares deliverable hereunder unless and until certificates representing such shares (which may be in book entry form) will have been issued and recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant (including through electronic delivery to a brokerage account).
13. Adjustments.
The Committee may make such adjustments as it deems appropriate to meet the intent of the Plan in the event of changes that impact the Company’s share price or share status, provided that any such actions are consistently and equitably applicable to all affected Participants and provided, further, that no such adjustment shall be made to Awards to Covered Employees if it would cause such Awards to no longer qualify as “performance-based compensation” for purposes of Code section 162(m).
In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off or other distribution (other than normal cash dividends) of Company assets to shareholders, or any other change affecting shares, such adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change shall be made with respect to (i) the aggregate number of shares that may be issued under the Plan or that may be subject to Awards of a specified type and/or to any individual; (ii) the number of shares covered by outstanding Awards to any individual under the Plan; and/or (iii) the applicable price per share with respect to any outstanding Options, Stock Appreciation Rights and other Awards under the Plan.
14. Tax Withholding.
Delivery of any cash, shares, dividends or any other benefits under the Plan is subject to withholding of applicable taxes. The Committee unilaterally or by arrangement with the Participant or Successor shall make appropriate provision for satisfaction of withholding taxes in the case of any transaction under the Plan, which gives rise to a withholding requirement. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Participant, through the surrender of shares of Common Stock which the Participant already owns or (to the extent of minimum statutory withholding requirements) through withholding of shares of Common Stock to which the Participant is otherwise entitled under the Plan.
15. Amendments and Termination.
The Board of Directors may amend this Plan as it shall deem advisable, except that the Board of Directors may not, without further approval of the shareholders of the Company, (a) increase the total number of shares of Common Stock which may be issued under the Plan as set forth in Section 6(B) or the maximum number of shares that may be issued, as Awards pursuant to Sections 8 through 10, to any individual,
A-10 PUBLIC SERVICE ENTERPRISE GROUP |2013 Proxy Statement
or (b) change the class of individuals eligible for Awards. The Board of Directors may, in its discretion, terminate this Plan at any time. No amendment or termination may, in the absence of written consent to the amendment or termination by the affected Participant (or, if the Participant is not then living, the affected Successor), adversely affect the rights of any Participant or Successor under any Award granted under the Plan prior to the date such amendment or termination is effective, provided that adjustments pursuant to Section 13 are not subject to such limitation. Subject to the foregoing and the requirements of Code section 162(m), the Board of Directors may without further action on the part of the shareholders of the Company or the consent of Participants, amend the Plan to preserve the Company’s tax deduction under Code section 162(m).
16. Foreign Jurisdictions.
The Committee may, from time to time, adopt, amend, and terminate under the Plan such arrangements, not inconsistent with the intent of the Plan, as it may deem necessary or desirable, to make available tax or other benefits of laws of any foreign jurisdiction to Participants who are subject to such laws and who receive Awards under the Plan.
17. Compliance with Code sections 162(m) and 409A.
With respect to Covered Employees, transactions under the Plan are intended to avoid loss of the deduction referred to in paragraph (1) of Code section 162(m). Anything in the Plan or elsewhere to the contrary notwithstanding, to the extent any provision of the Plan or action by the Committee would result in the loss of such deduction, it shall be deemed null and void as relates to Covered Employees, to the extent permitted by law and deemed advisable by the Committee.
With respect to performance-based compensation, the Company intends to comply with Code section 162(m). However, for business reasons, there may be instances where the Committee decides that certain grants of performance-based compensation will not comply with Code section 162(m).
The Company intends that this Plan shall comply with the requirements of Code section 409A, and it shall be interpreted and administered accordingly. To the extent that Code section 409A applies, the date of a termination of employment shall be determined in accordance with the separation from service rules under Code section 409A.
18. Notices.
All notices under the Plan shall be in writing, and if to the Company, shall be delivered to the Secretary of the Company or mailed to its principal office, 80 Park Plaza, Newark, New Jersey 07102, addressed to the attention of the Secretary; and if to the Participant, shall be delivered personally or mailed to the Participant at the address appearing in the payroll records of the Company or Subsidiary or, if applicable, to the Participant’s Successor at the last known address appearing in the records of the Company. Such addresses may be changed at any time by written notice to the other party.
19. General.
Except where otherwise indicated by the context, any masculine term used herein shall also include the feminine; the singular shall include the plural and the plural shall include the singular.
The titles and headings of the sections of the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
If any part of the Plan is declared to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any other part of the Plan. Any part of the Plan so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such part to the fullest extent possible while remaining lawful and valid.
The provisions of the Plan shall take precedence over any conflicting provision contained in an Award. All matters relating to the Plan or an Award granted hereunder shall, to the extent not preempted by Federal law, be governed and construed in accordance with the laws of the State of New Jersey, without regard to the principles of conflict of laws.
The Plan and Award Grants shall be binding on Successors and on successors to the Company, whether the existence of such successor to the Company is the result of a direct or indirect purchase of all or substantially all of the business and/or assets of the Company, or a merger, consolidation, or otherwise.
PUBLIC SERVICE ENTERPRISE GROUP l 2013Proxy StatementA-11
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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
EMPLOYEE STOCK PURCHASE PLANProposed Amendments to Public Service Enterprise Group Incorporated’s Amended Certificate of Incorporation to Eliminate Supermajority Voting Requirements
AmendedSections 1, 2 and Restated July 1, 20137 of Article 7 CERTAIN BUSINESS COMBINATIONS of the Certificate of Incorporation of this corporation, as amended to date, are amended to read as follows:
SECTION 1. Vote Required for Certain Business Combinations. In addition to any affirmative vote required by law and except as otherwise expressly provided in Section 1. Definitions2 of this Article 7:
Unless(a) any merger or consolidation of the context clearly requirescorporation or any Subsidiary (hereinafter defined) with (i) any Interested Shareholder (hereinafter defined) or (ii) any other corporations (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (hereinafter defined) of an Interested Shareholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the corporation or any Subsidiary having an aggregate Fair Market Value (hereinafter defined) of $25,000,000 or more; or
(c) the issuance or transfer by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any Subsidiary to any Interested Shareholder or Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $25,000,000 or more; or
(d) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Shareholder or any Affiliate of any Interested Shareholder; or
(e) any reclassification of securities (including any reverse stock split), recapitalization of the corporation, any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise where usedinvolving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder;
shall require prior approval by the affirmative vote of80%a majority of the votes which the holders of the then outstanding shares of capital stock of the corporation are entitled to vote in the Plan,election of directors (the “Voting Stock”), voting together as a single class (each share of the words and phrases hereinafter defined shall have the following meanings:
a. Committee shall mean the Organization and Compensation CommitteeVoting Stock having a number of votes duly fixed by the Board of Directors pursuant to Article 3 of PSEG.
b. Common Stockthe Certificate of Incorporation or provided by the By-Laws). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. The term “Business Combination” as used in this Article 7 shall mean the common stock (without par value)any transaction which is referred to in any one or more of PSEG.paragraphs (a) through (e) of this Section 1.
c. Eligible EmployeeSECTION 2. Exceptions to80% VoteRequired By Section 1. The provisions of Section 1 of this Article 7 shall mean (i)not be applicable to any active Represented Employee of an Employer who has completed one (1) year of service and has attained the age of eighteen (18) years, or (ii) any active Non-Represented Employee of an Employer who has attained age 18.
d. Employeeparticular Business Combination (and such Business Combination shall mean an individual employed by an Employer who is receiving remuneration for services provided to the Employer other than (i) solely as a director of an Employer, (ii) as a consultant, (iii) as an independent contractor, (iv) as an individual who is a “leased employee” within the meaning of the IRC, or (v) any other individual engaged by an Employer in a relationship that the Employer characterizes as other than an employment relationship.
e. Employershall mean PSEG and any Participating Affiliate.
f. Enrollment Formshall mean the form,require only such affirmative vote which may be required by law or otherwise) if all of the conditions specified in electronic format,either of the following paragraphs (a) or (b) are met:
(a) The Business Combination shall have been approved by majority vote of the Disinterested Directors (hereinafter defined).
(b) All of the following conditions shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value, as mayof the date of the consummation of the Business Combination, of consideration other than cash to be designatedreceived per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of:
(1) if applicable, the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Committee pursuant to which an Eligible Employee will authorize a specified dollar amount or a specific percentage of his/her base pay to be withheld from his or her pay or sick benefits to be paid overInterested Shareholder for the purchase ofany shares of Common Stock underacquired by it (x) within the Plan.two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (y) in the transaction in which it became an Interested Shareholder, whichever is higher; or
g. Independent Agentshall mean an agent independent of PSEG and its affiliates selected by PSEG to make open market purchases(2) the Fair Market Value per share of Common Stock on behalfthe Announcement Date or on the date (the “Determination Date”) on which the Interested Shareholder became an Interested Shareholder, whichever is higher.
(ii) The aggregate amount of Participants.
h. IRCshall mean the Internal Revenue Codecash and the Fair Market Value, as of 1986, as amended, andthe date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Voting Stock other than Common Stock shall be deemedat least equal to include all official guidance thereunder.
i. Investment Date shall mean (i) for shares purchased directly from PSEG: the last business dayhighest of the quarter, and (ii) for shares purchased by the Independent Agent in the open market: the last day on which shares are purchased during the applicable Investment Period.following (it being intended that
j. Investment Period shall mean, with respect to purchases of Common Stock made on the open market, the period commencing not earlier than the fifteenth day of the month in which such open market purchases are to be made and ending no later than the last business day of such month during which period the Independent Agent shall make purchases for Participants under the Plan.
k. Non-Represented Employeeshall mean any Employee not included in a unit of Employees covered by a collective bargaining agreement.
l. Participating Affiliateshall mean any organization within the controlled group of corporations (as defined in the IRC) within which PSEG is a member and which (i) adopts the Plan with the approval of PSEG’s Board of Directors, (ii) authorizes PSEG’s Board of Directors to act for it in all matters arising under or with respect to the Plan, and (iii) complies with such other terms and conditions relating to the Plan as may be imposed by PSEG’s Board of Directors.
m. Participantsshall mean those Eligible Employees who are currently having payroll deductions made for the purchase of Common Stock under the Plan.
n. Planshall mean this Public Service Enterprise Group Incorporated Employee Stock Purchase Plan.
o. PSEG shall mean Public Service Enterprise Group Incorporated, a New Jersey corporation.
p. Record-keepershall mean the record-keeper selected by the Committee.
q. Represented Employee shall mean any Employee included in a unit of Employees covered by a collective bargaining agreement.
PUBLIC SERVICE ENTERPRISE GROUP l20132014 Proxy Statement A-1 B-1
APPENDIX B
Section 2. The Plan
The Plan provides a method for Eligible Employees to purchase shares of Common Stock at a discount from the market price. Shares of Common Stock acquired under the Plan for accounts of Participants will be purchased either (a) directly from PSEG or (b) in the open market by an Independent Agent selected by PSEG. Shares of Common Stock will be purchased with Participants’ funds made available by payroll deduction, reinvestment of dividends on shares of Common Stock purchased for Participants and held for their accounts under the Plan, together with an amount equal to the applicable purchase price discount.
Section 3. Eligibility
Participation in the Plan is open to all Eligible Employees of Employers.
Section 4. Enrollment
An Eligible Employee may enroll in the Plan at any time utilizing the Record-keeper’s on-line enrollment process. Through the enrollment process, the Participant will authorize the Participant’s Employer to withhold a specified dollar amount or a specific percentage of his/her base pay from a Participant’s pay or sick benefits each pay period and to use such payroll deductions to purchase shares of Common Stock for the Participant’s account. Enrollment in the Plan shall be effective, and payroll deductions shall commence, as soon as practical after the on-line enrollment process is completed.
Once enrolled in the Plan, a Participant shall remain in the Plan until the Participant withdraws from the Plan, the Participant’s enrollment is terminated under Section 10 or the Plan is terminated under Section 15. After withdrawing or being terminated from the Plan, an Eligible Employee may re-enroll in the Plan at any time by completing a new enrollment process as provided above.
A Participant may change the amount of his/her payroll deductions under the Plan at any time via the Record-keeper’s on-line system, indicating the new amount of deduction. The change in amount of deduction shall be effective as soon as practicable following completion of the process.
Section 5. Limit on Payroll Deductions
A Participant may authorize payroll deductions to be made each pay period in any amount up to 10% of the Participant’s base pay, but not less than $5 a week for those on weekly payroll and $10 every two weeks for those on a biweekly payroll. A request by a Participant to reduce payroll deductions below such minimum will be deemed to be a request to withdraw from the Plan.
Section 6. Purchases of Stock
PSEG will have sole discretion as to whether Common Stock purchased under the Plan will be purchased directly from it. PSEG will notify the Independent Agent prior to the commencement of the Investment Period for which the Independent Agent will be required to purchase shares for the Plan in the open market. Purchases of Common Stock not directly made from PSEG may be made by the Independent Agent on any securities exchange on which shares of Common Stock are traded or in negotiated transactions.
On the Open Market. Amounts deducted from Participants’ pay or sick benefits and an amount equal to the purchase price discount shall be transmitted to PSEG by each such Participant’s respective Employer. Similarly, the Record-keeper will transmit to PSEG any dividends to be reinvested in shares of Common Stock held for the accounts of Participants under the Plan. PSEG shall forward these amounts to the Independent Agent. The Independent Agent shall apply all such amounts to the purchase of shares of Common Stock at any time or times, at the sole discretion of the Independent Agent, during the applicable Investment Period. The last date during an Investment Period on which shares are so acquired by the Independent Agent (Investment Date) is the date as of which such shares will be credited to Participants’ accounts.
Directly from PSEG. Amounts deducted from Participants’ pay or sick benefits and an amount equal to the purchase price discount will be transmitted to PSEG by each such Participant’s respective Employer. Similarly, the Record-keeper will transmit to PSEG any dividends to be reinvested in shares of Common Stock held for the accounts of Participants under the Plan. PSEG shall, on the Investment Date, apply all such amounts to the purchase of new issue shares of Common Stock.
Purchases of shares of Common Stock under the Plan may be made only through payroll deductions and the reinvestment of dividends on shares held for the account of Participants under the Plan. Shares purchased shall be allocated to Participants’ accounts as full shares and fractional shares to six decimal places on the basis of Participants’ payroll deductions and reinvested dividends.
Under no circumstances will Common Stock purchased under the Plan be bought back from a Participant or the Independent Agent by PSEG or by any Employer.
Section 7. Cost of Stock Purchased
On the Open Market. The cost to each Participant of the Common Stock purchased with Participant contributions on the open market for the Participant’s account under this Plan shall be 95% for Represented Employees and 90% for Non-Represented Employees (or such other percentage as may be authorized by the Committee pursuant to Section 14 of the Plan) of the weighted average price paid by the Independent Agent for all shares purchased during the applicable Investment Period. The cost to each Participant of the Common Stock
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APPENDIX A |
the requirements of this paragraph (b)(ii) shall be met with respect to every such class or series whether or not the Interested Shareholder has previously acquired any shares thereof):
(1) if applicable, the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Shareholder for any shares of such class or series acquired by it (x) within the two-year period immediately prior to the “Announcement Date” or (y) in the transaction in which it became an Interested Shareholder, whichever is higher; or
(2) if applicable, the highest preferential amount per share to which the holders of shares of such class or series are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation; or
(3) the Fair Market Value per share of such class or series on the Announcement Date or on the Determination Date, whichever is higher.
(iii) The consideration to be received by holders of a particular class or series of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class or series of Voting Stock. If the Interested Shareholder has paid for shares of any class or series of Voting Stock with varying forms of considerations, the form of consideration for such class or series shall be either cash or the form used to acquire the largest number of shares of such class or series previously acquired by it. The price determined in accordance with paragraphs (b)(i) and (b)(ii) of this Section 2 shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event.
(iv) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (1) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any dividends (whether or not cumulative) on any outstanding series of Preferred Stock: (2) there shall been (x) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivisions of the Common Stock), except as approved by a majority of the Disinterested Directors and (y) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock, unless the failure to so increase such annual rate is approved by a majority of the Disinterested Directors; and (3) such Interested Shareholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder.
(v) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit directly or indirectly (except proportionately as a shareholder) of any loans, advances, guarantees, pledges or other financial assistance, or any tax credits or other tax advantages, provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such act, rules or regulations) shall be mailed to shareholders of the corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such act, rules and regulations or subsequent provisions).
SECTION 7. Amendment. Notwithstanding any other provisions of this Certificate of Incorporation, the By-Laws of the corporation or applicable law, the affirmative vote of80%a majority of the votes of the then outstanding Voting Stock, voting together as a single class, shall be required (a) to amend, modify or repeal this Article 7, (b) adopt any provision to this Certificate of Incorporation or By-Laws which is inconsistent with this Article 7, or (c) prior to the fixing by the Board of Directors of any right or preference of any series of Preferred Stock which is inconsistent with the provisions of this Article 7.
Sections 4 and 5 of Article 8 BOARD OF DIRECTORS of the Certificate of Incorporation of this corporation, as amended to date, are amended to read as follows:
SECTION 4. Removal and Suspension. Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office without cause only by the affirmative vote of the holders of80%a majority of the combined voting powers of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. The Board of Directors, by the affirmative vote of a majority of the directors in office, may remove a director or directors for cause where, in the judgment of such majority, the continuation of the director or directors in office would be harmful to the corporation and may suspend the director or directors for a reasonable period pending final determination that cause exists for such removal.
SECTION 5 Amendment, repeal, etc. Notwithstanding anything in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least80%a majority of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with or repeal this Article 8.
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APPENDIX A |
Article 9 BY-LAW AMENDMENTS of the Certificate of Incorporation of this corporation, as amended to date, is amended to read as follows:
The Board of Directors shall have power to make, alter, amend and repeal the By-Laws of the corporation (except so far as the By-Laws of the corporation adopted by the shareholders shall otherwise provide). Any By-Laws made by the Directors under the powers conferred hereby may be altered, amended or repealed by the directors or by the shareholders. Notwithstanding the foregoing and anything contained in this Certificate of Incorporation to the contrary, Article 1, Section1; Article IX, Section 9; and Article XVI of the By-Laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least80%a majorityof the voting power of all the shares of the corporation entitled to vote generally in the election of directors, voting together as a single class. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least80%a majority of the voting power of all the shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend, or adopt any provision inconsistent with or repeal this Article 9.
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement A-3
APPENDIX B |
PROPOSED AMENDMENT TO BY-LAWS |
purchased with reinvested dividends on the open market shall be 95% (or such other percentage as may be authorized by the Committee pursuantPUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
Proposed Amendments to Section 14Public Service Enterprise Group Incorporated’s By-laws to Eliminate Supermajority Voting Requirements
Article 1 SECTION 1(d) of the Plan)By-Laws of this corporation is amended to read as follows:
(d) Removal and Suspension. Subject to the weighted average price paid by the Independent Agent for all shares purchased during the applicable Investment Period.
Directly from PSEG. The cost to each Participantrights of the Common Stock purchased with Participant contributions directly from PSEG for the Participant’s account under the Plan will be 95% for Represented Employees and 90% for Non-Represented Employees (or such other percentage as may be authorized by the Committee pursuant to Section 14any class or series of the Plan) of the average of the high and low sale prices ofstock having a preference over the Common Stock as reported onto dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office without cause only by the New York Stock Exchange on the applicable Investment Date. The cost to each Participantaffirmative vote of the Common Stock purchased reinvested dividends directly from PSEG forholders of80%a majority of the Participant’s account undercombined voting power of the Plan will be 95% (or such other percentagethen outstanding shares of stock entitled to vote generally in the election of directors, voting together as may be authorizeda single class. The Board of Directors, by the Committee pursuant to Section 14affirmative vote of a majority of the Plan)directors in office, may remove a director or directors for cause where, in the judgment of such majority, the continuation of the average of the high and low sale prices of the Common Stock as reported on the New York Stock Exchange on the applicable Investment Date.
Each Employer will pay its respective costs of administering the Plan, including payment to PSEGdirector or directors in office would be harmful to the Independent Agent, ascorporation and may suspend the case may be, on behalf of Participants of an amount equal to the applicable discount, but not including any expenses of sale incurred in (i) sales of shares held in the Plandirector or (ii) making cash distributions to Participants representing fractional shares held for their account. Brokerage commissions associated with the purchase of shares of Common Stock on the open market under the Plan will be paid by each respective Employer. All payments made on behalf of Participants by their respective Employer will be reported to the Internal Revenue Service as taxable income to such Participants. No interest will be paid on payroll deductions or dividends being held for the purchase of shares of Common Stock under the Plan.
Section 8. Sale of Stock; Withdrawal of Shares from the Plan
Shares of Common Stock purchased under the Plan for the account of Participants, either by payroll deductions or by the reinvestment of dividends, shall be held by the Record-keeper in its name, or in the name of its nominee, for the account of Participants. A Participant may at any time following the end of the third month after the applicable Investment Date, by notice to the Record-keeper prescribed by the Committee utilizing the Record-keeper’s on-line process, request or the sale of any number of full shares of Common Stock held for the Participant’s account under the Plan or the transfer of shares held in the Participant’s account to the Participant. Any such sale or transfer shall be made as soon as practicable.
Following any such sale at the Participant’s request, a cash payment representing proceeds of sale based on the current market price at time of sale, less any related brokerage commission and transfer tax, shall be made to the Participant.
Certificates or book-entry forms of ownership evidencing shares purchaseddirectors for a Participant under the Plan will be issued only in the name of the Participant.
Transfers of full shares shall be issued only upon request by the Participant to the Record-keeper or upon termination of the Plan. Transfers of fractional shares shall not be made nor will fractional shares be sold under any circumstances. For payments made representing fractional shares heldreasonable period pending final determination that cause exists for the account of a Participant upon withdrawal or termination from the Plan, or upon termination of the Plan, see Sections 10 and 15.
A Participant’s rights under the Plan may not be transferred, assigned or pledged during the Participant’s lifetime. Shares held for the account of a Participant under the Plan may not be pledged as collateral.
Section 9. Dividends
All dividends on all shares of Common Stock held for participants under the Plan by the Record-keeper shall be applied to the purchase of full and fractional shares of Common Stock, unless the Participant otherwise elects to receive cash dividends. A Participant may change his/her dividend election at any time via the Record-keeper’s on-line system. The change in dividend treatment shall be effective as soon as practicable following completion of the process.
Section 10. Withdrawal
A Participant may withdraw from the Plan at any time by notifying the Record-keeper in such form as prescribed by the Committee that the Participant wishes to withdraw or by reducing authorization for payroll deductions below the required minimum contribution. Any such withdrawal shall be effective as soon as practicable after receipt of the request to withdraw. A Participant’s enrollment in the Plan shall terminate automatically upon death, termination of employment, retirement or upon commencement of a leave of absence of more than one month without pay (unless the Participant makes arrangements with his/her Employer to continue monthly payments) and payroll deductions shall cease as soon as practicable.removal.
Following such any such withdrawal or termination, the Participant may request that sale or transfer of shares held for the account of the Participant be made. Cash payment of any uninvested dividends and payroll deductions will also be made to Participants upon their withdrawal or termination from the Plan or upon termination of the Plan.
Section 11. Reports to Participants
PUBLIC SERVICE ENTERPRISE GROUP l20132014 Proxy Statement B- 3B-1
MAP AND TRANSPORTATION |
APPENDIX BMAP AND TRANSPORTATION
Arrangements have been made to provide free parking within close proximity to the New Jersey Performing Arts Center (NJPAC) at locations designated (P) on the map above.
Please bring your parking ticket with you to the meeting so that it can be validated by PSEG. Reasonable parking expenses incurred at locations other than those shown above will be reimbursed. You may obtain driving directions and public transportation information by calling 1-888-GO-NJPAC or on the NJPAC website,www.njpac.org.
As soon as practicable after the close of each calendar quarter, the Record-keeper shall provide each Participant with a statement of account showing the share transactions in the Participant’s account for that quarter, the cost thereof and the balance of shares held for the Participant’s account under the Plan. Each Participant shall also receive income tax information annually relating to all transactions in Common Stock under the Plan, dividends received and such other information that may be distributed to PSEG stockholders generally.
Section 12. Voting of Shares
A Participant shall receive a proxy and copies of all soliciting material furnished by PSEG to its stockholders in connection with any meeting of stockholders or consent sought in lieu of a meeting. If the proxy is returned properly signed and marked for voting, all of the full and fractional shares of Common Stock held for the Participant’s account will be voted as marked. If no direction as to voting is received, the Record-keeper will vote those shares in accordance with the recommendations of PSEG’s Board of Directors.
Section 13. Subscription Rights, Stock Dividends and Stock Splits
If, during the course of the Plan, PSEG should grant to the holders of its Common Stock rights to subscribe to an issue or issues of securities of PSEG, any such rights attaching to the shares of Common Stock held by the Record-keeper under the Plan shall be distributed to Participants. However, rights shall be issued for the number of full shares only and rights based on a fraction of a share held in a Participant’s account will be sold and the net proceeds will be applied to the purchase of Common Stock for the account of the Participant on the next Investment Date.
Stock dividends on shares held in a Participant’s account under the Plan and Common Stock issued upon any split of such shares, shall be credited to the Participant’s account.
Section 14. Administration
The Committee shall administer the Plan. The Committee shall have full discretionary authority to interpret the Plan and to answer all questions which may arise concerning the application, administration and interpretation of the Plan. The Committee shall adopt such rules and procedures as in its opinion are necessary or advisable to administer the Plan and to transact its business.
The Committee may, without further action by the Board of Directors, at its discretion change the amount of discount applicable to purchases of shares of Common Stock under the Plan as long as such discount does not exceed 15% of the applicable purchase price for such shares.
The Record-keeper shall keep a continuing record of each Participant’s account under the Plan, send quarterly statements of account to Participants and perform for Participants other duties relating to the Plan. Common Stock purchased under the Plan will be registered in the name of PSEG, or its nominee, as administrator for Participants in the Plan.
PSEG’s Board of Directors may change the administrator, the Independent Agent or the Record-keeper in its discretion. The Committee may change the Independent Agent or the Record-keeper in its discretion.
The Committee may delegate its authority (other than with respect to interpretation of the Plan, the determination of the amount of discount applicable to share purchases or changing the Record-keeper) as it deems appropriate.
Section 15. Termination and Amendment
The Plan may be terminated at any time by action of PSEG’s Board of Directors. Any such termination shall be effective on an Investment Date. Upon termination, distribution of all full shares held for the account of each Participant shall be made to the Participant and a cash payment representing the weighted average market value of any fractional shares held for the account of the Participant, determined as of the Date of Termination, less the expenses of any sale necessary to make such cash payment, shall be made to the Participant.
PSEG may also modify, suspend or amend the Plan at any time by action of its Board of Directors. All Participants will receive notification of any such modification, suspension or amendment.
No amendment or termination of the Plan shall impair any rights which shall have accrued under the Plan or deprive any Participant of the equivalent in cash or other benefits of the contributions of the Participant under the Plan.
Section 16. Effective Date
The Plan was originally adopted in 1986. The effective date of the amendment and restatement of the Plan shall be July 1, 2013.
B-4 PUBLIC SERVICE ENTERPRISE GROUP l2013 Proxy Statement
PUBLIC SERVICE ENTERPRISE GROUP l2014 Proxy Statement |
Public Service Enterprise Group Incorporated
80 Park Plaza, P.O. Box 1171
Newark, New Jersey 07101-1171
973-430-7000
www.pseg.com
Arrangements have been made to provide free parking within close proximity to the New Jersey Performing Arts Center (NJPAC) at locations designated (P) on the map above.
Commitment to our Customers • America’s most reliable utility (five of the last nine years) • Reliability One Award (last 12 years) • EEI storm response award (2012 and 2011) • System hardening and infrastructure enhancements • Serving 2.2 million electric and 1.8 million gas customers in NJ and 1.1 million electric customers on Long Island • Building relationships through communication and social media outreach Commitment to our Employees • Top 50 Employer: Equal Opportunity Magazine (2013) • Fortune Most Admired Companies (since 2006) • Diversity and inclusion in the workplace • Employee health and safety; wellness and lifestyle • Employee engagement, ethics and comfort speaking up • Paying over $1.1 Billion in compensation and retiree benefits annually Commitment to the Environment and Sustainability • Renewable and solar energy and energy efficiency programs • Climate leadership and carbon reduction • Water management, estuary enhancement and biodiversity • Dow Jones Sustainability North America Index (since 2008) • Provider of green energy to Super Bowl XLVIII Commitment to our Communities and the Economy • PSEG Foundation investments in safety, community, education • PSE&G Children’s Specialized Hospital • March of Dimes: Number 1 utility in New Jersey and United States in 2013 • Special Olympics USA Games 2014 • Over $7 million in annual charitable giving • Over $1 billion annually spent with NJ businesses PSEG: ProvidingPlease bring your parking ticket with you to the meeting so that it can be validated by PSEG. Reasonable parking expenses incurred at locations other than those shown above will be reimbursed. You may obtain driving directions and public transportation information by calling 1-888-GO-NJPAC or on the NJPAC website,www.njpac.org.Safe, Reliable, Economic and Greener Energy
Shareowner Services | ||||||||||||
P.O. Box 64945 | ||||||||||||
St. Paul, MN 55164-0945 | ||||||||||||
Address Change? Mark box, sign, and indicate changes below: ¨ | ||||||||||||
TO VOTE BY INTERNET OR | ||||||||||
TELEPHONE, SEE REVERSE SIDE | ||||||||||
OF THIS PROXY CARD. |
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
The Board of Directors Recommends a Vote “FOR” Items 1, 2, 3, 43(a), 3(b), 3(c) and 5 and “AGAINST” on Item 6.4.
1. | ELECTION OF DIRECTORS: | ELECTION OF DIRECTORS: | ||||||||||||||||||||||||||||||||||||||||||
Nominees for terms expiring in 2014 are: | Nominees for terms expiring in 2015 are: | |||||||||||||||||||||||||||||||||||||||||||
FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN |
FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | |||||||||||||||||||||||||||||||||
1.1 | Albert R. Gamper, Jr. | ¨ | ¨ | ¨ | 1.6 | Thomas A. Renyi | ¨ | ¨ | ¨ | Albert R. Gamper, Jr. | ¨ | ¨ | ¨ | 1.6 | Thomas A. Renyi | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||
1.2 | William V. Hickey | ¨ | ¨ | ¨ | 1.7 | Hak Cheol Shin | ¨ | ¨ | ¨ | William V. Hickey | ¨ | ¨ | ¨ | 1.7 | Hak Cheol Shin | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||
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1.3 | Ralph Izzo | ¨ | ¨ | ¨ | 1.8 | Richard J. Swift | ¨ | ¨ | ¨ | Ralph Izzo | ¨ | ¨ | ¨ | 1.8 | Richard J. Swift | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||
1.4 | Shirley Ann Jackson | ¨ | ¨ | ¨ | 1.9 | Susan Tomasky | ¨ | ¨ | ¨ | Shirley Ann Jackson | ¨ | ¨ | ¨ | 1.9 | Susan Tomasky | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||
1.5 | David Lilley | ¨ | ¨ | ¨ | 1.10 | Alfred W. Zollar | ¨ | ¨ | ¨ | David Lilley | ¨ | ¨ | ¨ | 1.10 | Alfred W. Zollar | ¨ | ¨ | ¨ |
2. | Advisory vote on the approval of executive compensation | ¨ For | ¨ Against | ¨ Abstain | ||||
Approval of Amendments to Certificate of Incorporation to eliminate supermajority voting requirements for certain business combinations | ¨ For | ¨ Against | ¨ Abstain | |||||
3(b) | Approval of Amendments to Certificate of Incorporation and By-Laws to eliminate supermajority voting requirements to remove a director without cause | ¨ For | ¨ Against | ¨ Abstain | ||||
3(c) | Approval of Amendment | ¨ For | ¨ Against | ¨ Abstain | ||||
4. | ||||||||
Ratification of the appointment of Deloitte & Touche LLP as | ||||||||
¨ For | ¨ Against | ¨ Abstain |
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED AS THE BOARD RECOMMENDS.
Please indicate if you plan to attend the Annual Meeting by marking this box. ¨
Date | ||||
Signature(s) in Box | ||||
Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy. |
Public Service Enterprise Group Incorporated
20132014 Annual Meeting of Stockholders
New Jersey Performing Arts Center
One Center Street, Newark, New Jersey
April 16, 201315, 2014 at 1:00 P.M.
(Registration Begins at 12:00 P.M. Light refreshments will be available.)
For wheelchair and hearing-impaired seating, please see host/hostess for assistance.
You should present evidence that you are a stockholder in order to gain admittance to the meeting. If shares are held in the name of a broker, trust, bank, or other nominee, you should bring with you a proxy or letter from the broker, trustee, bank or nominee confirming your beneficial ownership of the shares. Each stockholder may be asked to present valid picture identification, such as a driver’s license. Cameras, recording devices and other electronic devices will not be permitted at the meeting.
THANK YOU FOR VOTING
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For electronic delivery of future proxy materials, please visit |
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders
The Proxy Statement and the 20122013 Annual Report to Stockholders are available at:http://www.ezodproxy.com/pseg/2013/pseg2012ar2014/pseg2013ar
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
April 16, 201315, 2014
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PSEG
The undersigned hereby appointsShirley Ann Jackson, Ralph Izzo and Richard J. Swift,, and each or any of them, proxies of the undersigned, each with full power of substitution, to vote in their discretion (subject to any directions indicated on the reverse side of this proxy) at the Annual Meeting of Stockholders of Public Service Enterprise Group Incorporated (PSEG) to be held on April 16, 201315, 2014 and at all adjournments or postponements thereof, upon all matters which may come before the meeting or any adjournment, including the proposals set forth in the Notice of Meeting and Proxy Statement, receipt of which is hereby acknowledged. Said proxies are instructed to vote as set forth on the reverse side hereof with respect to said proposals.
Shares represented by this proxy will be voted in accordance with recommendations of the Board of Directors of PSEG as stated on the reverse side, unless otherwise indicated on the reverse, in which case they will be voted as marked.Information pertaining to each proposal is included in the Proxy Statement under proposals corresponding to the item numbers set forth on the reverse side.
If you have not voted by telephone or the Internet, please mark your proxy on the reverse side,
sign it and date it, and return it promptly in the envelope provided.
Vote by Internet, Telephone or Mail
24 Hours a Day, 7 Days a Week
Your phone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
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INTERNET/MOBILE
Use the Internet to vote your proxy until 11:59 p.m. (CT) on April
| PHONE
Use a touch-tone telephone to vote your proxy until 11:59 p.m. (CT) on April
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Mark, sign and date your proxy card and return it in the postage-paid envelope provided. |
If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card.