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SECURITIES AND EXCHANGE COMMISSION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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| Preliminary Proxy Statement |
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| Definitive Proxy Statement |
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| Definitive Additional Materials |
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| Soliciting Material under Rule 14a-12 |
NISOURCE INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the registrant)
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NISOURCE INC. |
(Name of registrant as specified in its charter) |
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(Name of person(s) filing proxy statement, if other than the registrant) |
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TABLE OF CONTENTS
801 E. 86
th Avenue— • Merrillville, INIndiana 46410— • (877) 647-5990To the Holders of
Our Common
Stock of NiSource Inc.:Stock:
The
2023 annual meeting of
the stockholders (the “Annual Meeting”) of NiSource Inc., a Delaware corporation,
(the “Company”), will be
held at the Hyatt Rosemont, 6350 N. River Road, Rosemont, IL 60018conducted in a virtual format only via live audio webcast on Tuesday, May
12, 2015,23, 2023, at 10:00 a.m.
Central Time at www.virtualshareholdermeeting.com/NI2023,
local time, for the following purposes:
| (1)■ | To elect eleventwelve directors named in the proxy statement to hold office until the next annual stockholders’ meeting and until their respective successors have been elected or appointed;appointed and qualified; |
| (2)■ | To approve named executive officer compensation on an advisory basis; |
| ■ | To approve the frequency of future advisory votes on named executive officer compensation on an advisory basis; |
| (3)■ | To ratify the appointment of Deloitte & Touche LLP as the Company’sour independent registered public accountantsaccounting firm for the year 2015;2023; |
| (4)■ | To approve an amendment to the Company’sour Amended and Restated Certificate of Incorporation to give stockholdersincrease the power to request special meetings of the stockholders; |
| (5) | To approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to reduce the minimum number of Company directors from nine to seven;authorized shares of common stock; |
| (6) | To re-approve the Company’s 2010 Omnibus Incentive Plan pursuant to Section 162(m) of the Internal Revenue Code; |
| (7) | To approve an amendment to the Company’s Employee Stock Purchase Plan to increase the maximum number of shares available under the plan; |
| (8)■ | To consider a stockholder proposal regarding reports on political contributions, if properly presented;requesting that our Board of Directors adopt a policy requiring separation of the roles of Chairman of the Board and Chief Executive Officer; |
| ■ | To consider a stockholder proposal requesting that we publish an annual lobbying report; and |
| (9)■ | To transact such other business as may properly come before the meetingAnnual Meeting and any adjournment or postponement thereof. |
All persons
The Annual Meeting will be conducted in a virtual format only to provide access to all of our stockholders regardless of geographic location. There is no in-person meeting for you to attend. A virtual-only meeting enables increased shareholder attendance and participation, improves efficiency, and reduces costs. We designed the format of the Annual Meeting to ensure that our stockholders who wereattend the Annual Meeting will be afforded similar rights and opportunities to participate as they would at an in-person meeting.
All stockholders of record
atas of the close of business on March
16, 2015 will be entitled29, 2023, are eligible to vote at the Annual Meeting and any adjournment
or postponement thereof.
Please act promptly
This year, we are pleased to help protect the environment and save costs by using the “Notice and Access” method of delivery. Instead of receiving paper copies of our proxy materials in the mail, many shareholders will receive a Notice of Internet Availability of Proxy Materials (the “Notice”).
Your vote
your shares with respect to the proposals described above.is very important. You may vote
your shares by marking, signing, dating and mailingduring the
enclosed proxy card. You may also vote by telephone or through the InternetAnnual Meeting by following the instructions
set forthavailable on the
meeting website, but if you are not able to attend virtually, please submit your vote as soon as possible as instructed in the Notice, proxy
card. Ifcard or voting instruction form. You can vote via mail, telephone or the Internet. Whether or not you
attendplan on attending the Annual Meeting,
we urge you
may be able to vote
and submit your
sharesproxy in
person, even if you have previously submitted a proxy. See the section “Voting in Person” for specific instructions on voting your shares.If you plan to attendadvance of the Annual Meeting please so indicate in the space provided on the proxy card or respond when prompted on the telephone or through the Internet.
PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET OR BY PROMPTLY
MARKING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD.
Robert E. Smith
Corporate Secretary
using one of these methods.
| | | |
| | | Kimberly S. Cuccia |
| | | Senior Vice President, General Counsel and Corporate Secretary |
Important Notice Regarding the Availability of Proxy Materials
For for the Annual Meeting
of Stockholders to be Held on May
12, 201523, 2023
The Proxy Statement,
Notice of Annual Meeting and
20142022 Annual Report to Stockholders
are available at
http:https://ir.nisource.com/annuals.cfmwww.nisource.com/filings
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This summary highlights information that may be expanded upon elsewhere in this proxy statement (“Proxy Statement”). This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement before voting. The accompanying proxy is solicited on behalf of the Board of Directors of NiSource Inc. (the “Board”) for the 20152023 annual meeting of the stockholders (the “Annual Meeting”).
2023 ANNUAL MEETING OF STOCKHOLDERS
| | Time and Date: | | | 10:00 a.m. Central Time
on Tuesday, May 23, 2023 | |
| | Website: | | | www.virtualshareholdermeeting.com/NI2023 | |
| | Record Date: | | | March 29, 2023 | |
| | Shares of Common Stock Outstanding on Record Date: | | | [■] | |
| | Voting: | | | Each share is entitled to one vote for each director to be elected and on each matter to be voted upon at the Annual Meeting. | |
This Proxy Statement and the accompanying proxy card are first being sent to stockholders on April [■], 2023.
VOTING MATTERS AND BOARD RECOMMENDATIONS
| | Proposal 1 | | | To elect twelve directors named in this Proxy Statement. | | | For All Nominees | | | | |
| | Proposal 2 | | | To approve the compensation of our named executive officers (the “Named Executive Officers” or “NEOs”) on an advisory basis. | | | For | | | | |
| | Proposal 3 | | | To approve the frequency of future advisory votes on NEO compensation on an advisory basis. | | | One Year | | | | |
| | Proposal 4 | | | To ratify Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for 2023. | | | For | | | | |
| | Proposal 5 | | | To approve an amendment to our Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) to increase the number of authorized shares of common stock. | | | For | | | | |
| | Proposal 6 | | | To consider a stockholder proposal requesting that our Board adopt a policy requiring separation of the roles of Chairman of the Board and Chief Executive Officer (“CEO”). | | | Against | | | | |
| | Proposal 7 | | | To consider a stockholder proposal requesting that we publish an annual lobbying report. | | | Against | | | | |
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BOARD OF DIRECTORS NOMINEES
| | Peter A. Altabef | | | 63 | | | 2017 | | | Chair & CEO,
Unisys Corporation | | | | | | | | | ✔* | | | | | | ✔ | | | ✔ | |
| | Sondra L. Barbour | | | 60 | | | 2022 | | | Retired EVP, Lockheed Martin Corporation | | | ✔ | | | | | | | | | | | | ✔ | | | | |
| | Theodore H. Bunting Jr. | | | 64 | | | 2018 | | | Retired Group President, Entergy Corporation | | | ✔* | | | ✔ | | | | | | | | | | | | ✔ | |
| | Eric L. Butler | | | 62 | | | 2017 | | | President and CEO, Aswani- Butler Investment Associates | | | ✔ | | | ✔* | | | | | | | | | | | | ✔ | |
| | Aristides S. Candris | | | 71 | | | 2012 | | | Retired President & CEO, Westinghouse | | | | | | | | | | | | ✔* | | | ✔ | | | ✔ | |
| | Deborah A. Henretta | | | 62 | | | 2015 | | | Partner, Council Advisors; Retired Group President, Procter & Gamble Co. | | | | | | ✔ | | | | | | | | | ✔* | | | ✔ | |
| | Deborah A. P. Hersman | | | 52 | | | 2019 | | | Retired Chief Safety Officer and Consultant at Waymo LLC | | | | | | | | | ✔ | | | ✔ | | | | | | | |
| | Michael E. Jesanis | | | 66 | | | 2008 | | | Retired President & CEO, National Grid USA | | | | | | | | | ✔ | | | ✔ | | | | | | | |
| | William D. Johnson | | | 69 | | | 2022 | | | Retired President & CEO, Pacific Gas & Electric Corporation | | | | | | ✔ | | | | | | ✔ | | | | | | | |
| | Kevin T. Kabat | | | 66 | | | 2015 | | | Chair of the Board,
NiSource Inc. | | | | | | | | | | | | | | | ✔ | | | ✔* | |
| | Cassandra S. Lee | | | 54 | | | 2022 | | | Chief Audit Executive,
AT&T Inc. | | | ✔ | | | | | | ✔ | | | | | | | | | | |
| | Lloyd M. Yates | | | 62 | | | 2020 | | | President & CEO,
NiSource Inc. | | | | | | | | | | | | | | | | | | | |
* Chair of Committee
See “Proposal 1 – Election of Directors” for more information on our director nominees.
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GOVERNANCE HIGHLIGHTS
| | ✔ | | | Annual election of directors | |
| | ✔ | | | Majority voting for all directors with resignation policy | |
| | ✔ | | | No supermajority voting provisions | |
| | ✔ | | | No stockholder rights plan (“poison pill”) | |
| | ✔ | | | Proxy access by-law (3% ownership / 3 years duration / up to 20 stockholders / 20% of board) | |
| | ✔ | | | Stockholder right to call special meetings | |
| | ✔ | | | Separate chair and CEO | |
| | ✔ | | | All directors independent except CEO | |
| | ✔ | | | Board committees comprised of all independent directors | |
| | ✔ | | | Regular executive sessions of independent directors | |
| | ✔ | | | Annual Board and committee evaluation process and ongoing evaluations of individual directors | |
| | ✔ | | | Strategic and risk oversight by Board and committees | |
| | ✔ | | | Annual “Say-on-Pay” advisory votes | |
| | ✔ | | | Strong alignment between pay and performance in incentive plans | |
| | ✔ | | | Commitment to safety and customer care | |
| | ✔ | | | Political contributions disclosure | |
| | ✔ | | | Enhanced independent registered public accounting firm disclosure | |
| | ✔ | | | Significant Board and governance refreshment process in 2022 | |
See “Corporate Governance” for more information on our corporate governance practices.
EXECUTIVE COMPENSATION HIGHLIGHTS
We have designed our executive compensation program to meet our business objectives using various compensation elements intended to drive both long-term and short-term performance. We believe that a significant portion of total compensation should consist of at-risk performance-based compensation. Our executive compensation practices include the following, each of which the Compensation and Human Capital Committee believes reinforces our executive compensation policy and objectives.
See “Compensation Discussion and Analysis (CD&A)” and “2022 Executive Compensation” for more information on our executive compensation program.
ENVIRONMENTAL AND SOCIAL HIGHLIGHTS
On November 7, 2022, we announced a goal of net-zero greenhouse gas emissions by 2040 covering both Scope 1 and Scope 2 emissions (“Net-Zero Goal”). Our Net-Zero Goal builds on greenhouse gas emission reductions achieved to-date and demonstrates that continued execution of our long-term business plan will drive further greenhouse gas emission reductions. We remain on track to achieve previously announced interim greenhouse gas emission reduction targets by reducing fugitive methane emissions from main and service lines by 50 percent from 2005 levels by 2025 and reducing Scope 1 greenhouse gas emissions from company-wide operations by 90 percent from 2005 levels by 2023. We plan to achieve our Net-Zero Goal primarily through continuation and enhancement of existing programs, such as the retirement of coal-fired electric generation, increased sourcing of renewable energy, methane reductions from priority pipeline replacement, traditional leak detection and repair, and deployment of advanced leak detection and repair. Additionally, we are active in several efforts to accelerate the development and demonstration of lower-carbon energy technologies and resources, such as hydrogen and renewable natural gas, to enable affordable pathways to economy-wide decarbonization. For more information on environmental and related matters, see our 2022 Integrated Annual Report, our 2022 Climate Report and the “Sustainability” section of our website at www.nisource.com.
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We are keenly aware that in addition to being a business entity, we are also a social and community enterprise that includes our employees, partners, customers and the communities we serve. For more information about our corporate responsibility diversity and sustainability efforts, see our 2022 Integrated Annual Report and the “Sustainability” and “Diversity, Equity and Inclusion” sections of our website at www.nisource.com.
For more information on our business and strategy, see our 2022 Integrated Annual Report, located at www.nisource.com.
GENERAL INFORMATION
Stock Symbol: NI
Stock Exchange: NYSE
Registrar and Transfer Agent: Computershare Investor Services
State of Incorporation: Delaware
Corporate Headquarters: 801 E. 86th Avenue, Merrillville, Indiana 46410
Corporate Website: www.nisource.com
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The accompanying proxy is solicited on behalf of the Board for the Annual Meeting to be held
at the Hyatt Rosemont, 6350 North River Road, Rosemont, IL 60018 on Tuesday, May
12, 201523, 2023 at 10:00 a.m.
, local time. Central Time, in a virtual format only via live audio webcast at www.virtualshareholdermeeting.com/NI2023. The common stock, $.01 par value per share, of the Company represented by the
accompanying proxy will be voted as directed. If you return a signed proxy card without indicating how you want to vote your shares, the shares represented by the accompanying proxy will be voted as recommended by the
Board “FOR” all of the nominees for director; “FOR” advisory approval of the compensation of the Company’s Named Executive Officers; “FOR” the ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accountants for 2015; “FOR” both of the proposed amendments to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”); “FOR” the re-approval of the Company’s 2010 Omnibus Incentive Plan (the “Omnibus Plan”); “FOR” the proposed amendment to the Company’s Employee Stock Purchase Plan; and “AGAINST” the stockholder proposal regarding reports on political contributions.Board:
| ■ | “FOR” all of the nominees for director; |
| ■ | “FOR” advisory approval of the compensation of our NEO; |
| ■ | “ONE YEAR” for the frequency of future advisory votes on NEO compensation; |
| ■ | “FOR” the ratification of the appointment of Deloitte as our independent registered public accounting firm for 2023; |
| ■ | “FOR” the amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock; |
| ■ | “AGAINST” the stockholder proposal requesting that our Board of adopt a policy requiring separation of the roles of Chairman of the Board and CEO; and |
| ■ | “AGAINST” the stockholder proposal requesting that we publish an annual lobbying report. |
This Proxy Statement and the accompanying proxy card are first being sent to stockholders on April
7, 2015.[■], 2023. We will bear the expense of this mail solicitation, which may be supplemented by telephone, facsimile,
e-mail email and personal solicitation by our officers, employees and agents. To aid in the solicitation of proxies, we have retained D.F. King for a fee of
approximately $9,500,$11,000, plus reimbursement of expenses.
We may incur additional fees if we request additional services. We will also request brokerage houses and other nominees and fiduciaries to forward proxy materials, at our expense, to the beneficial owners of stock held
as of 5:00 p.m. Eastern Time on March
16, 2015,29, 2023, the record date for voting.
We use the terms “NiSource,” the “Company,” “we,” “our” and “us” in this
proxy statementProxy Statement to refer to NiSource Inc.
Holders of shares of common stock as of the close of business on March
16, 201529, 2023, are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of March
16, 2015,29, 2023, [
—■] shares of common stock were issued and outstanding. Each share of common stock outstanding on that date is entitled to one vote on each matter presented at the Annual Meeting.
If you are a “stockholder of record” (that is, if your shares of common stock are registered directly in your name on the Company’s records), you may vote your shares by proxy
in advance of the Annual Meeting using any of the following methods:
| ■ | Telephoning the toll-free number listed on the proxy card; |
| ■ | Using the Internet website listed on the proxy card: www.proxyvote.com; or |
| ■ | Marking, dating, signing and returning the enclosed proxy card. |
Telephoning the toll-free number listed on the proxy card;
Using the Internet website listed on the proxy card; or
Marking, dating, signing and returning the enclosed proxy card.
All votes must be received by the proxy tabulator by 11:59 p.m. Eastern Time on May 11, 2015.
22, 2023.
If your shares are held in a brokerage account or by a bank, broker, trust or other stockholder of recordnominee (herein referred to as a “Broker”), you are considered a “beneficial owner” of shares held in “street name.” As a beneficial owner, you will receive proxy materials and voting instructions from the stockholder of record that holds your shares. You must follow the voting instructions in order to have your shares of common stock voted.
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Discretionary Voting by Brokers
Banks and
Other Stockholders of Record“Broker Non-Votes”
If your shares are held in street name and you do not provide the Broker with instructions as to how to vote such shares, your Broker will only be able to vote your shares at its discretion on certain “routine” matters as permitted by New York Stock Exchange (“NYSE”) rules. The proposal to ratify the appointment of our independent registered public
accountantsaccounting firm is
the only proposal considered a routine
matter. At this meeting,matter and, accordingly, at the Annual Meeting, Brokers will only have discretionary authority to vote your shares
with regard toregarding Proposal No. 4, the ratification of the appointment of Deloitte as our independent registered public
accountantsaccounting firm for
2015.2023. A “broker non-vote” occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial owner as to how the beneficial owner would like the shares to be voted. Brokers will not have discretionary authority to vote your shares with respect to the
election of directors,other proposals to be presented at the
advisory approval of executive compensation, either of theproposed amendments to our Certificate of Incorporation, the re-approval of the Omnibus Plan, the proposed amendment to our Employee Stock Purchase Plan, or the stockholder proposal.Annual Meeting. Therefore, it is important that you instruct your Broker or other nominee how to vote your shares.
If Brokers exercise their discretionary voting authority on Proposal No. 4, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting, which are considered “non-routine.”
Voting Shares Held in Our 401(k) Plan If you hold your shares
of common stock in our 401(k) Plan,
(“401(k) Plan”) administered bythose shares are held in the name of Fidelity Management Trust Company (“Fidelity”),
youthe administrator of the 401(k) Plan. You will receive a proxy card that includes the number of shares of our common stock held in the 401(k) Plan. You should instruct Fidelity
how to vote your shares by one of the methods discussed in this Proxy Statement. If you do not instruct the 401(k) Plan how to vote your shares by completing and returning the proxy card or by
using thevoting your shares by Internet or by telephone,
or Internet,as detailed above under “Voting Your Proxy.” If you do not instruct Fidelity how to vote your shares, or if you sign the proxy card with no further instructions as to how to vote your shares,
the 401(k) Plan provides for Fidelity
towill vote your shares in the same proportion as the shares for which it receives instructions from all other participants to the extent permitted under applicable law.
Voting in Person
You also may come To allow enough time for Fidelity to the Annual Meeting and vote your shares in personaccordance with your direction, your voting instructions must be received by obtainingFidelity no later than 11:59 p.m. Eastern Time on May 18, 2023.
Attending and
submitting a ballot thatVoting During the Virtual Annual Meeting Format of Meeting. The Annual Meeting will be conducted in a virtual format only to provide access to all our stockholders regardless of geographic location. There is no in-person meeting for you to attend. We designed the format of the Annual Meeting to ensure that our stockholders who attend the Annual Meeting will be afforded similar rights and opportunities to participate as they would at an in-person meeting.
Attending the Meeting. You are entitled to attend and participate in the Annual Meeting if you were a stockholder of record as of the close of business on March 29, 2023, the record date, or hold a legal proxy for the Annual Meeting provided by your Broker as described below. To attend and participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/NI2023 and enter your 16-digit control number, which can be found on your proxy card, voting instruction form or email you received with your proxy materials. If your shares are held by a Broker and you do not have a control number, please contact your Broker as soon as possible so that you can be provided with a control number.
Voting During the Meeting. You may vote during the Annual Meeting by following the instructions available aton the meeting website during the meeting. However, ifIf your shares are held in street name by a Broker, then, in order to be able to vote at the meeting,Annual Meeting, you must obtain an executed legal proxy from the Broker indicating that you were the beneficial owner of the shares on March 16, 2015,29, 2023, the record date for voting, and that the Broker is giving you its proxy to vote the shares.If your shares are held in the 401(k) Plan, you will not be able to vote your shares at the meeting. In order to vote your shares you must provide instructions to Fidelity either by returning your proxy cardAnnual Meeting. Whether or by voting via the telephone or internet no later than 11:59 p.m. Eastern Time on May 11, 2015.
Votes cast in person or represented by proxy at the meeting will be tabulated by the inspectors of election.
Ifnot you plan to attend the Annual Meeting, please so indicate whenwe urge you to vote so that we may send you an admission ticket and make the necessary arrangements. Stockholders who plan to attendsubmit your proxy in advance of the meeting must present picture identification alongby one of the methods described above under “Voting Your Proxy.” Votes cast at the Annual Meeting or represented by proxy at the Annual Meeting will be tabulated by the inspector of election.
Technical Assistance. The Annual Meeting will begin promptly at 10:00 a.m. Central Time. We encourage you to access the Annual Meeting approximately 15 minutes in advance to allow ample time for you to log in to the meeting and test your computer audio system. We recommend that you carefully review the above procedures needed to gain admission in
6 | 2023 Proxy Statement
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advance. Technicians will be ready to assist you with an admission ticketany technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or evidenceduring the meeting, please call the technical support number that will be posted on the meeting login page at www.virtualshareholdermeeting.com/NI2023.
Submitting Questions During the Meeting. As part of beneficial ownership.the Annual Meeting, we will hold a question and answer session during which we intend to answer questions submitted during the meeting that are relevant to the purposes of the meeting and the Company’s business in accordance with the Annual Meeting procedures posted on the meeting website, as time permits. Questions may be submitted by stockholders that have used 16-digit control numbers to enter the meeting at
www.virtualshareholdermeeting.com/NI2023. Questions and answers may be grouped by topic and substantially similar questions may be grouped and answered once. You may revoke your proxy at any time before a vote is taken or the authority granted is otherwise exercised. To revoke a proxy, you may send
a letter to
the Company’sour Corporate Secretary
a letter (which must be received before a vote is taken) indicating that you want to revoke your proxy, or you can supersede your initial proxy by submitting a duly executed proxy bearing a later date, voting by telephone or through the Internet on a later date, or attending the
meetingvirtual Annual Meeting and voting
in person.during the meeting. Attending the
virtual Annual Meeting will not in and of itself revoke a proxy.
A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the outstanding shares of common stock, present in personduring the virtual Annual Meeting or represented by proxy, will constitute a quorum at the Annual Meeting. The inspectors of election appointed for the Annual Meeting will determine whether or not a quorum is present. The inspectors of election will treat abstentions and broker non-votes as present and entitled to voteAbstentions are counted for purposes of determining whether a quorum is present. As explained above under “Discretionary Voting by Brokers and ‘Broker Non-Votes’,” if Brokers exercise their discretionary voting authority on Proposal No. 4, such shares will be considered present at the presence of a quorum. Ameeting for quorum purposes and broker non-vote occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial ownernon-votes will occur as to howeach of the beneficial owner would likeother proposals presented at the shares to be voted.Annual Meeting.
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PROPOSAL 1
—– ELECTION OF DIRECTORS
At the recommendation of the
CorporateEnvironmental, Social, Nominating & Governance
(“ESN&G”) Committee, the Board has nominated the persons listed below to serve as directors, each for a one-year term, beginning at the Annual Meeting on May
12, 201523, 2023, and
running untilexpiring at the
20162024 annual meeting of
the Company’sour stockholders (the
“2016“2024 Annual Meeting”)
. and until their successors are duly elected or appointed and qualified. The nominees include
teneleven independent directors, as defined in the applicable rules of the NYSE, and our President and
Chief Executive Officer (“CEO”).CEO. The Board does not anticipate that any of the nominees will be unable to serve, but if any nominee is unable to serve, the proxies will be voted in accordance with the judgment of the person or persons voting the proxies.
All of the nominees currently serve on the Board.
The Company has announced plans to separate its natural gas pipeline and related businesses into a stand-alone publicly traded company, Columbia Pipeline Group, Inc. (“CPG, Inc.”). If the planned separation Set forth below is information regarding all of CPG, Inc. from the Company (the “Separation”) occurs in mid-2015, we expect that six of the Company’s directors — Sigmund L. Cornelius, Marty R. Kittrell, W. Lee Nutter, Deborah S. Parker, Robert C. Skaggs and Teresa A. Taylor — are expected to resign from the Company’s Board and will become directors of CPG, Inc. The other five Company directors — Richard A. Abdoo, Aristides S. Candris, Michael E. Jesanis, Richard L. Thompson and Carolyn Y. Woo — will continue to serve on the Company’s Board until the 2016 Annual Meeting. In addition, in connection with the Separation, Joseph Hamrock is expected to become CEO of the Company and to be named to the Company’s Board. Mr. Hamrock is currently Executive Vice President and Group CEO of the Company’s gas distribution business unit and one of the Company’s Named Executive Officers for 2014. Mr. Hamrock is not a nominee for director at the Annual Meeting.
The following chart gives information about allour nominees (each of whom has consented to being named in the proxy statementProxy Statement and to serving, if elected). The dates shown for service as a director include service as a director of the Company and its corporate predecessor.
To be elected, a nominee must receive more votes cast in favor of his or her election than against election. Abstentions by those present or represented by proxy and broker non-votes will not be votedcounted as a vote cast either “for” or “against” with respect to the election of directors and, therefore, will have no effect on the outcome. Brokers will not have discretionary authority to vote on the election of directors. Accordingly, there could be broker non-votes which will have no effect on the vote.
Under our Corporate Governance Guidelines, each nominee will tender a conditional resignation prior to the Annual Meeting, effective only if both (a) the votes “against” a nominee’s election exceed the votes “for” election (a “failed re-election”) and (b) such resignation is subsequently accepted by the Board. Any failed re-election will be referred to the ESN&G Committee, which will make a recommendation to the Board as to whether to accept or reject the resignation. The Board will decide and publicly disclose its decision, the rationale for the decision and the directors who participated in the process within 90 days after the election. The Board expects the director who has not been re-elected to abstain from participating in the ESN&G Committee or Board discussion or vote regarding whether to accept his or her resignation offer. A director who has had a failed re-election may participate in discussions or votes with respect to other directors who have had a failed re-election.
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PROPOSAL 1 – ELECTION OF DIRECTORS
Nominee Demographics, Skills and Biographies
Our director nominees are diverse and possess the necessary breadth and depth of skills and experience to oversee our business operations and long-term strategy. The following tables and biographies identify the balance of experience, skills and qualifications that the director nominees bring to the Board. The fact that a particular skill or qualification is not designated as to one or more nominees does not mean that those nominees do not also possess the specific experience and qualification.
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| | ✔ | | | Industry Experience (58%) * | |
| | ✔ | | | Other Operations / Customer Service (100%) | |
| | ✔ | | | Government and Regulatory (100%) | |
| | ✔ | | | Public Company Board (100%) | |
| | ✔ | | | Financial or Capital Markets (75%) | |
| | ✔ | | | Risk Management (100%) | |
| | ✔ | | | Technology (67%) | |
| | ✔ | | | Safety (67%) | |
| | ✔ | | | Environmental, Sustainability, Corporate
Responsibility and Ethics (100%) | |
| | ✔ | | | Non-Profit Board / Community Service (92%) | |
| | ✔ | | | CEO (Current or Prior) (58%) | |
| | ✔ | | | Strategic Planning (100%) | |
| | ✔ | | | Financial / Accounting Expertise (100%) | |
| | ✔ | | | Talent Management (Executive Compensation and Benefits, and Talent Development) (100%) | |
* Percentages shown in this table represent the portion of the Board with the indicated skill or experience.
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PROPOSAL 1 – ELECTION OF DIRECTORS
THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.
| | PETER A. ALTABEF | |
Name, Age
| 
Age: 63
Director Since: 2017
Standing Board Committees:
■ Finance Committee (Chair)
■ Environmental, Social, Nominating and Principal Occupationsfor Past Five Years and Directorships Held
Governance Committee
■ Executive Committee | | Has Been a
Director Since |
Directors Expected to Remain on the Board Following the Separation:
| | |
| |
Richard A. Abdoo, 71
| | 2008 |
Since May 2004,
Executive Experience: Mr. Abdoo has been President of R.A. Abdoo & Co. LLC, Milwaukee, Wisconsin, an environmental and energy consulting firm. Prior thereto, Mr. Abdoo was ChairmanAltabef currently serves as Chair and CEO of Wisconsin EnergyUnisys Corporation, from 1991 until his retirementa global information technology company, a position he has held since January 2015 (becoming Chair in April 2004.2018). He also served as President from January 2015 through March 2020 and from November 2021 to May 2022. Prior to his current role, he served as president and CEO of Wisconsin EnergyMICROS Systems, Inc., a provider of integrated software and hardware solutions to the hospitality and retail industries, from 2013 to 2014, when it was acquired by Oracle Corporation. Before that, he served as president and CEO of Perot Systems Corporation from 19912004 to April 2003.2009, when it was acquired by Dell Inc. Following that transaction, Mr. AbdooAltabef served as president of Dell Services, the information technology services and business process solutions unit of Dell Inc., until his departure in 2011.
Outside Board and Other Experience: Mr. Altabef is Chair of the board of directors of Unisys Corporation. He is also a member of the President’s National Security Telecommunications Advisory Committee (NSTAC), a trustee of the Committee for Economic Development (CED), a member of the advisory board of Merit Energy Company, LLC and of the board of directors of Petrus Trust Company, LTA. He has previously served as a senior advisor to 2M Companies, Inc., in 2012, and as a director of A.K. SteelMICROS Systems, Perot Systems Corporation and ZBB Energy Corp.Belo Corporation. He is also active in community service activities, having served on the boards and committees of several cultural, medical, educational and charitable organizations and events.
Skills and Qualifications: Mr. Altabef has experience leading large organizations as CEO and a strong background in strategic planning, financial reporting, risk management, business operations and corporate governance. He also has more than 25 years of senior leadership experience at some of the world’s leading information technology companies. As a result, he has a deep understanding of the cybersecurity issues facing businesses today. His overall leadership experience and his cybersecurity background provide the Board with valuable perspective and insight into significant issues that we face. | |
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| | SONDRA L. BARBOUR | |
| | 
Age: 60
Director Since: 2022
Standing Board Committees:
■ Audit Committee
■ Environmental, Social, Nominating and Governance Committee | | | Executive Experience: Ms. Barbour retired as Executive Vice President, Information Systems and Global Solutions, of Lockheed Martin Corporation (“Lockheed Martin”) in 2016 and served in a transition role at Leidos Holdings until her retirement in 2017. Ms. Barbour joined Lockheed Martin in 1986 and served in various leadership capacities and has extensive technology experience, notably in the design and development of large-scale information systems. From 2008 to 2013, Ms. Barbour served as Senior Vice President, Enterprise Business Services and Chief Information Officer, heading all of Lockheed Martin’s internal information technology operations, including protecting the company’s infrastructure and information from cyber threats. Prior to that role, Ms. Barbour served as Vice President, Corporate Shared Services and Vice President, Corporate Internal Audit providing oversight of supply chain activities, internal controls, and risk management.
Outside Board and Other Experience: Ms. Barbour serves as a director of AGCO Corporation, where she chairs the Audit Committee, and was previously a director for each of 3M Company and Perspecta Inc.
Skills and Qualifications: Ms. Barbour’s significant experience with information technology systems and cybersecurity is valuable in helping steer our development of technology and management of cyber risks. Ms. Barbour brings 30 years of leadership experience at Lockheed Martin, where she oversaw complex information technology systems of a 110,000+ employee business. She brings significant risk management knowledge related to technology and supply chain oversight, which are of key importance to our success. Ms. Barbour also enhances the Board’s public company experience in the areas of internal controls, accounting, audit, risk management and cybersecurity. | |
| | THEODORE H. BUNTING, JR. | |
By virtue
| 
Age: 64
Director Since: 2018
Standing Board
Committees:
■ Audit Committee (Chair)
■ Compensation and
Human Capital
Committee
■ Executive Committee | | | Executive Experience: Mr. Bunting most recently served as group president, utility operations, at Entergy Corporation (“Entergy”), an integrated energy company, from 2012 until his retirement in 2017. Before that, he was senior vice president and chief accounting officer at Entergy from 2007 to 2012 and chief financial officer (“CFO”) of several subsidiaries from 2000 to 2007. He held other management positions of increasing responsibility in accounting and operations at Entergy since joining the company in 1983.
Outside Board and Other Experience: Mr. Bunting has been a director of Unum Group since 2013 and is currently chair of its regulatory compliance committee and a member of its human capital committee. Mr. Bunting has been a director of the Hanover Group since 2020 and is a member of the Audit Committee. Mr. Bunting served as a director of IEA from 2021 until October 2022 and is a member of the ESN&G and Compensation and Human Capital Committees. He previously served as a director of Imation Corp., a global data storage and information security company. He also serves on the board of Foundation for the Mid South and previously served on the board of Hendrix College.
Skills and Qualifications: Mr. Bunting’s utility industry knowledge, including his former positionsexperience in customer service, safety and regulatory relations, are valuable to us as Chairmanwe continue to execute on our robust long-term utility infrastructure investment plans. He also brings additional public company experience in the areas of strategic finance, accounting, auditing, and capital and risk management to the Board. He is a certified public accountant. | |
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| | ERIC L. BUTLER | |
| | 
Age: 62
Director Since: 2017
Standing Board Committees:
■ Compensation and Human Capital Committee (Chair)
■ Audit Committee
■ Executive Committee | | | Executive Experience: Mr. Butler currently is President and CEO of Aswani-Butler Investment Associates, a large electricprivate equity investment firm. Previously he served in a number of executive leadership roles at Union Pacific Corporation (“Union Pacific”), a transportation company located in Omaha, Nebraska, until his retirement in February 2018. He began his career at Union Pacific in 1986 and gas utility holding company,held leadership roles in finance, accounting, marketing and sales, supply, operations research and planning and human resources. He was Vice President of Financial Planning and Analysis from 1997 to 2000, Vice President of Purchasing and Supply Chain from 2000 to 2003, Vice President and General Manager of the Automotive Business from 2003 to 2005 and Vice President and General Manager of the Industrial Products Business from 2005 to 2012. He was Executive Vice President of Marketing and Sales and Chief Commercial Officer and ran the worldwide Commercial business from 2012 to 2017. He served as well asExecutive Vice President, Chief Administrative Officer and Corporate Secretary from 2017 until his current positions as directorretirement.
Outside Board and Other Experience: Mr. Butler was appointed to the Federal Reserve Bank of Kansas City’s Omaha Branch Board in 2015 and, in 2018, was elected chair. His term on the Federal Reserve board ended in December 2020. He currently serves on the board of the Omaha Airport Authority, which he joined in 2007, and the Eastman Chemical Company Board, which he joined in 2022.
Skills and Qualifications: Mr. Butler developed and led strategic and financial planning, marketing, sales, commercial, and supply, procurement and purchasing for one other energy-related companyof the largest transportation companies in the world, Union Pacific. He most recently led the corporate governance, human resources, labor relations and administration functions at Union Pacific. His knowledge of the railroad transportation industry and the challenges in maintaining top-tier safety, customer service and risk management standards while providing an important part of the nation’s infrastructure provides him with unique skills and insights that are valuable to the Board. In addition, he has experience in the purchase of fuel and energy materials and equipment. As a steel makerresult, Mr. Butler has an understanding of the aging infrastructure, safety, organizational and regulatory issues facing utilities today and provides a fresh viewpoint from an industry that is a major user of energy, Mr. Abdoo has extraordinary expertisesimilarly positioned. His overall leadership experience and experiencehis regulated public company background provides the Board with the issues facing the energy industry in general and public utilities in particular. As a former CEO, Mr. Abdoo has deep understanding about the issues facing executive management of a major corporation. Mr. Abdoo’s credentials as a registered professional engineer in several states allow him to offer a unique technicalanother perspective on certainsignificant issues under consideration by the Board. As a long-time champion of humanitarian and social causes, including on behalf of the Lebanese-American community, Mr. Abdoo brings expertise and understanding with respect to social issues confronting the Company. His commitment to and work on behalf of social causes earned him the Ellis Island Medal of Honor, presented to Americans of diverse origins for their outstanding contributions to their own ethnic groups and to American society.that we face. | | |
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| | ARISTIDES S. CANDRIS | |
Name, Age
| 
Age: 71
Director Since: 2012
Standing Board Committees:
■ Safety, Operations, Regulatory and Principal Occupationsfor Past Five YearsPolicy
Committee (Chair)
■ Environmental, Social, Nominating and Directorships Held Governance Committee
■ Executive Committee | | Has Been a
Director Since |
Aristides S. Candris, 63
| | 2012 |
Executive Experience:Dr. Candris was President and CEO of Westinghouse Electric Company (“Westinghouse”), Pittsburgh, Pennsylvania, a nuclear engineering company, which was a unit of Tokyo-based Toshiba Corp., from July 2008 until his retirement onin March 31, 2012. During his 36 years of service at Westinghouse, Dr. Candris served in various positions, including as Senior Vice President, Nuclear Fuel, from September 2006 to July 2008. Dr. Candris was also2008, and continued to serve on the board of Westinghouse until October 1, 20122012.
Outside Board and Other Experience: Dr. Candris served on the advisory board of Atomos Nuclear and Space Corporation from 2018 until 2020. He is also a directormember of the advisory boards of the Carnegie Institute of Technology and the Wilton E. Scott Institute for Energy Innovation at Carnegie Mellon University. He also serves on the boards of trustees of Transylvania University and the Hellenic American University and the board of directors of The Hellenic Initiative. He previously served on the boards of Westinghouse and Kurion Inc. | | |
| |
Skills and Qualifications:Dr. Candris is a nuclear scientist and engineer and has significant experience gained through leading a global nuclear power company. His knowledge of the electric industry gives him significant insight onto the issues impacting the electric utility industry. His experience managing highly technical engineering operations, is valuableand particularly his extensive experience and expertise in risk assessment and safety management systems, as well as process optimization methodologies (such as Lean/Six Sigma), are of great value as we build and maintain facilities to address increasing environmental regulations and make long-term strategic decisions on electric power generation.generation and gas and electric delivery. His technical and management skills are helpful as we continue to build and modernize both our transmission and distribution systems. Dr. Candris’Candris has great insight from his experience developing customer focusedcustomer-focused programs and attaining excellence in business processes and behaviors, is insightful as wewhich will assist us to better meet the increasing expectations of customers and regulators. He | |
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| | DEBORAH A. HENRETTA | |
| | 
Age: 62
Director Since: 2015
Standing Board Committees:
■ Environmental, Social, Nominating and Governance Committee (Chair)
■ Compensation and Human Capital Committee
■ Executive Committee | | | Executive Experience: Ms. Henretta currently is a partner at Council Advisors company, where she serves as Senior Advisor spearheading digital transformation practice for SSA & Company, and is a senior advisor for G100 Companies, a C-suite learning and development company. She retired from Procter & Gamble Co. (“P&G”) in 2015, where she served as Group President of Global e-Business. Prior to her appointment as Group President of Global e-Business in January 2015, she held various senior positions throughout several P&G sectors, including as Group President of Global Beauty from 2012 to 2015 and as Group President of P&G Asia from 2007 to 2012. Prior to her appointment as Group President of P&G Asia, she was President of P&G’s business in ASEAN, Australia and India from 2005 to 2007. She joined P&G in 1985.
Outside Board and Other Experience: Ms. Henretta has been a director at American Eagle Outfitters, Inc. since 2019, a director at Meritage Homes since 2017 and a director at Corning Incorporated since 2013. Ms. Henretta served as a director of Staples, Inc. from June 2016 until September 2017 and served on its Compensation and Human Capital Committee. Additionally, she serves on the Boardsboard of Carnegie Mellon Universitytrustees for Syracuse University.
Skills and Transylvania University. He also servesQualifications: Ms. Henretta has over 30 years of business leadership experience with P&G in a multi-jurisdictional regulatory and competitive business environment. She has experience across many markets, including profit and loss responsibility for multi-billion-dollar businesses at P&G and responsibility for strategic planning, sales, marketing, e-business, government relations and customer service. Ms. Henretta led a dynamic business segment and is, therefore, keenly aware of the delicate balance of keeping pace with customer expectations in a changing environment, as well as maximizing the benefits that inclusion and diversity can provide. Because of this experience, Ms. Henretta brings valuable insights to the Board and strategic leadership to us as we operate in multiple regulatory environments and develop products and customer service programs to meet our customer commitments. In her previous partner role at G100 Companies where she continues as an senior advisor, she assisted in establishing a Board Excellence Program, which provides board director education. | |
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| | DEBORAH A. P. HERSMAN | |
| | 
Age: 52
Director Since: 2019
Standing Board Committees:
■ Safety, Operations, Regulatory and Policy Committee
■ Finance Committee | | | Executive Experience: Ms. Hersman served as Chief Safety Officer and consultant at Waymo LLC, the self-driving car technology subsidiary of Alphabet Inc., from January 2019 to December 2020. In this role, she was responsible for systems safety, field safety and safety management systems across the company’s extensive testing and development programs. From 2014 to 2019, she served as president and CEO of the National Safety Council, a nonprofit organization focused on eliminating preventable deaths at work, in homes and communities, and on the road through leadership, research, education and advocacy.
Outside Board and Other Experience: From 2004 to 2014, Ms. Hersman served as a board member and then as chair at the National Transportation Safety Board (the “NTSB”). Previously, she served in a professional staff role for the U.S. Senate Commerce, Science and Transportation Committee, where she played key roles in crafting the Pipeline Safety Improvement Act of 2002 and legislation establishing a new modal administration focused on bus and truck safety. In 2022, she served on the Board of DirectorsVelodyne (“VLDR”), a technology company that provides light detection and ranging (“LIDAR”) solutions for The Hellenic Initiative.autonomous vehicles, driver assistance, robotics, mapping and infrastructure applications.
Skills and Qualifications: Ms. Hersman is a seasoned safety executive, having previously served as the CEO of the National Safety Council and as the chair and chief executive at the NTSB. She has a successful track record running complex safety-focused organizations with numerous stakeholders. A widely respected safety leader driven by mission and a passion for preserving human life, Ms. Hersman also has expertise in the details of navigating crises and strong experience with safety policy legislation and advocacy. Ms. Hersman’s extensive safety experience is of great value to the Board as we continue to implement our safety management system and meet our safety commitments to our customers and stakeholders. | |
| | MICHAEL E. JESANIS | |
Michael E. Jesanis, 58
| 
Age: 66
Director Since: 2008
Standing Board Committees:
■ Finance Committee
■ Safety, Operations, Regulatory and Policy Committee | 2008 |
Since July 2013,
| Executive Experience: Mr. Jesanis has been a co-founderco-founded and was from 2013 to 2021 Managing Director of HotZero, LLC, a firm formed to develop hot water district energy systems in New Hampshire.England. Mr. Jesanis has also, since November 2007, been a principal with Serrafix, Boston, Massachusetts, a firm providing energy efficiency consulting and implementation services, principally to municipalities. Mr. Jesanis also servesserved as an advisor to several startups in energy relatedenergy-related fields. From July 2004 through December 2006, Mr. Jesanis was President and CEO of National Grid USA, a natural gas and electric utility, and a subsidiary of National Grid plc, of which Mr. Jesanis was also an Executive Director. Prior to that position, Mr. Jesanis was Chief Operating OfficerCOO and CFO of National Grid USA from January 2001 to July 2004.2004 and CFO of its predecessor utility holding company from 1998 to 2000.
Outside Board and Other Experience: Mr. Jesanis also is a board member of El Paso Electric Company. He previously served as a director offor several electric and energy companies, including Ameresco, Inc. | | |
| |
Mr. Jesanis is the former chair of the board of a college and a past trustee (and past chair of the audit committee) of a university.
Skills and Qualifications:By virtue of his former positions as President and CEO, Chief Operating OfficerCOO and, prior thereto Chief Financial Officer (“CFO”)CFO, of a major electric and gas utility holding company as well as his current role with an energy efficiency consulting firm, Mr. Jesanis has extraordinarily broad and deepextensive experience with regulated utilities. He has strong financial acumen and extensive managerial experience, having led modernization efforts in the areas of operating infrastructure improvements, customer service enhancements and management-teammanagement team development. Mr. Jesanis also demonstrates a commitment to education as the former chair of the board of a college and a currentpast trustee (and past chair of the audit committee) of a university. As a result of his former senior managerial roles and his non-profit board service, Mr. Jesanis also has particular expertise with board governance issues. | | |
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| | WILLIAM D. JOHNSON | |
Name, Age
| 
Age: 69
Director Since: 2022
Standing Board Committees:
■ Compensation and Principal Occupationsfor Past Five YearsHuman Capital
Committee
■ Safety, Operations, Regulatory and Directorships HeldPolicy Committee | | Has Been | Executive Experience: Mr. Johnson most recently served as President and Chief Executive Officer of Pacific Gas & Electric Corporation, a
Director Since |
Richard L. Thompson, 75
| | 2004 |
Independent Chairman utility company, from May 2019 through June 2020. Mr. Johnson also served as President and Chief Executive Officer of the Board sinceTennessee Valley Authority, an electric utility company, from January 2013 to May 2013.2019. Prior to his retirement in 2004,joining Tennessee Valley Authority, Mr. Thompson was Group President, Caterpillar Inc., Peoria, Illinois, a leading manufacturerJohnson held the positions of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Mr. Thompson also is lead director of Lennox International, Inc. He was also on the board of Gardner Denver Inc. from November 1998 to July 2013.
| | |
| |
In his prior role as Group President of a large, publicly traded manufacturing company, Mr. Thompson had responsibility for its gas turbine and reciprocating engine business, as well as research and development activities. By virtue of this and prior positions, Mr. Thompson possesses significant experience in energy issues generally and gas turbine electric power generation and natural gas pipeline compression in particular. He is a graduate electrical engineer with experience in electrical transmission system design and generation system planning. This experience provides Mr. Thompson a valuable understanding of technical issues faced by the Company.
| | |
Carolyn Y. Woo, 60
| | 1998 |
Since January 2012, Dr. Woo has beenChairman, President and CEO of Catholic Relief Services, the international humanitarian agencyProgress Energy, Inc. (“Progress”) from October 2007 to July 2012, and previously to that as President and Chief Operating Officer from 2005 to 2007. His career at Progress included leadership roles of the Catholic communityincreasing responsibility including as President, Energy Delivery from 2004 to 2005, President and Chief Executive Officer from 2002 to 2003, and Executive Vice President and General Counsel from 2000 to 2002 of Progress Energy Service Company. Mr. Johnson’s career began in the United States. Prior thereto, Dr. Woo was Martin J. Gillen Dean1992 at Carolina Power & Light Company (predecessor to Progress) where he held increasing senior management roles of Associate General Counsel and RayManager, Legal Department; Vice President, Senior Counsel and Milann Siegfried Professor of Entrepreneurial Studies, Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana. Dr. Woo is alsoCorporate Secretary and Senior Vice President and Corporate Secretary.
Outside Board and Other Experience: Mr. Johnson has been a director of AON Corporation.TC Energy Corp. since June 2021, where he currently serves on the Audit Committee and Human Resources Committee. Mr. Johnson has also served on the boards of the following utility industry groups or associations: Edison Electric Institute as Vice Chair, Nuclear Energy Institute as Chair, Institute of Nuclear Power Operations, World Association of Nuclear Operators as Governor and Nuclear Electric Insurance Limited.
Skills and Qualifications: Mr. Johnson brings three decades of industry and leadership expertise to the Board. Mr. Johnson’s multiple tenures as CEO and vast experience with industry groups related to gas, electric, nuclear and other utilities provide him with extensive leadership skills in the utilities industry and a deep understanding of regulated industry operations. Mr. Johnson guided Pacific Gas & Electric Corporation through its emergence from bankruptcy and served as CEO of Progress during its merger with Duke Energy, through which he gained significant experience in complex corporate restructuring, transactions, and strategy. His experience has also informed an understanding of safety and risk oversight in the utilities industry that the Board values. This extensive experience and depth of knowledge gives Mr. Johnson a strong perspective on strategic operations within the industry and makes Mr. Johnson a valuable asset to the Board. | |
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PROPOSAL 1 – ELECTION OF DIRECTORS
| | KEVIN T. KABAT | |
| | 
Age: 66
Director Since: 2015
Chair of the Board
Standing Board Committees:
■ Environmental, Social, Nominating and Governance Committee
■ Executive Committee (Chair) | | | Executive Experience: From April 2007 to November 2015, Mr. Kabat was CEO of Fifth Third Bancorp, a bank holding company. He continued to serve as Vice Chair of the board of directors of Fifth Third Bancorp until his retirement in April 2016. Before becoming CEO, he served as Fifth Third Bancorp’s President from June 2006 to September 2012 and as Executive Vice President from December 2003 to June 2006. Additionally, he was previously President and CEO of Fifth Third Bank (Michigan). Prior to that position, he was Vice Chair and President of Old Kent Bank, which was acquired by Fifth Third Bancorp in 2001.
Outside Board and Other Experience: Mr. Kabat has been a director of Unum Group since 2008 and is currently chair of the board and chair of its governance committee. He was also previously the lead independent director of E*TRADE Financial Corporation. He has also held leadership positions on the boards and committees of local business, educational, cultural and charitable organizations and campaigns.
Skills and Qualifications: Mr. Kabat has significant leadership experience as a CEO in a regulated industry at a public company. As a result, he has a deep understanding of operating in a regulatory environment and balancing the interests of many stakeholders. His extensive experience in strategic planning, risk management, financial reporting, internal controls and capital markets makes him an asset to the Board, as he is able to provide unique strategic insight, financial expertise and risk management skills. In addition, he has broad corporate governance skills and perspective gained from his service in leadership positions on the boards of other publicly traded companies. | |
| | CASSANDRA S. LEE | |
Dr. Woo’s current
| 
Age: 54
Director Since: 2022
Standing Board Committees:
■ Audit Committee
■ Finance Committee | | | Executive Experience: Ms. Lee is an experienced financial and operational leader with extensive knowledge of the telecommunication industry, currently serving as Senior Vice President and Chief Audit Executive for AT&T Inc. (“AT&T”), a position she has held since 2021. Ms. Lee joined AT&T in 1993 and has served in various leadership capacities, including Senior Vice President and Chief Financial Officer, AT&T Network, Technology and Capital Management from 2018 to 2021.
Outside Board and Other Experience: Ms. Lee currently serves on the Board of Directors of Andretti Acquisition Corp., a special purpose acquisition company, where she chairs the Audit Committee. Ms. Lee serves on the Board of Directors for the Girl Scouts of Northeast Texas and leads the Finance Committee.
Skills and Qualifications: In more than three decades with AT&T, Ms. Lee has acquired a wealth of expertise in various areas including retail operations, distribution strategy, global supply chain, mergers, acquisitions, and integration, capital management, network and other capacity planning, and shared services operations. Her vast and multifaceted experience in the telecommunication industry translates well in her service on the Board. Ms. Lee also has significant public company financial oversight and leadership experience that strengthens the Board’s depth of financial acumen. Ms. Lee is a certified public accountant and veteran of the United States Army. | |
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| | LLOYD M. YATES | |
| | 
Age: 62
Director Since: 2020
President and CEO since 2022
Standing Board Committees:
■ None | | | Executive Experience: Mr. Yates has served as President and CEO of an international organization provides herNiSource since February 2022. Mr. Yates retired in 2019 from Duke Energy, where he most recently served as Executive Vice President, Customer and Delivery Operations, and President, Carolinas Region, since 2014. In this role, he was responsible for aligning customer-focused products and services to deliver a personalized end-to-end customer experience to position Duke Energy for long-term growth, as well as for the profit/loss, strategic direction and performance of Duke Energy’s regulated utilities in North Carolina and South Carolina. Previously, he served as Executive Vice President of Regulated Utilities at Duke Energy, overseeing Duke Energy’s utility operations in six states, federal government affairs, and environmental and energy policy at the state and federal levels, as well as Executive Vice President, Customer Operations, where he led the transmission, distribution, customer services, gas operations and grid modernization functions for millions of utility customers. He held various senior leadership roles at Progress Energy, Inc., prior to its merger with knowledgeDuke Energy, from 2000 to 2012.
Outside Board and experience in managing a large organization. Her experience as the dean of a major business school and her experience as a professor of entrepreneurship provided her a deep understanding of business principles and extensive expertise with management and strategic planning issues. Through her current and previous serviceOther Experience: Mr. Yates currently serves on the boardsboard of directors audit committees and compensation committees of a number of public companies, including a global reinsurance and risk management consulting company, a pharmaceutical distribution company, an international automotive manufacturer and a financial institution, Dr. Woo has developed an excellent understanding of corporate governance, internal control, financial and strategic analysis and risk management issues. Dr. Woo is a leader in the areas of corporate social responsibility and sustainability, which adds an important perspective to the Company. She is also a current and past board member of several non-profit organizations, including an international relief organization, a global business school accreditation organization, leadership development organizations and an educational organization. This commitment to social and educational organizations provides Dr. Woo with an additional important perspective on the various community and social issues confronting the Company in the various communities that the Company serves. | | |
| | |
Name, Age and Principal Occupations
for Past Five Years and Directorships Held
| | Has Been a
Director Since |
Directors Expected to Resign from the Board in Connection with the Separation:
| | |
| |
Sigmund L. Cornelius, 60
| | 2011 |
Since April 1, 2014, Mr. Cornelius has been President and Chief Operating Officer of Freeport LNG, LLC. From October 2008 to October 2010, Mr. Cornelius served as Senior Vice President, Finance and CFO of ConocoPhillips, Houston, Texas, an integrated energy company, before retiring at the end of 2010. During his 30-year tenure at ConocoPhillips, Mr. Cornelius served in various positions, including Senior Vice President, Planning, Strategy and Corporate Affairs from September 2007 to October 2008; Regional President, ExplorationMarsh & Production-Lower 48 from 2006 to September 2007; and President, Global Gas from 2004 to 2006. Mr. CorneliusMcLennan Companies. He previously served on the board of DCP Midstream L.P. from 2007 to 2008 and is also a directordirectors of USEC, Inc., Carbo Ceramics Inc., Western Refining,American Water Works Company Inc. and Parallel Energy Inc.
| | |
| |
Sonoco Products Company.
Skills and Qualifications:Mr. CorneliusYates brings significant energy and regulated utility experience to our Board. He has significantover 40 years of experience in the oilenergy industry, including in the areas of profit/loss management, customer service, nuclear and natural gas industry, which enables himfossil generation and energy delivery. At Duke Energy, he used his operational experience to provide valuable insight on issues impacting our pipeline business.improve safety, reliability and the overall customer experience for millions of customers. He has expertise overseeing regulated utility operations, working with state regulators, and managing consumer and community affairs. He also has significant experience in exploration, production as well as the midstream business,managing gas and grid modernization functions, which is valuable to usour Board as we expandexecute our presence in the Utica and Marcellus Shale gas plays.business strategies. In addition, as the former CFO of a public company, he has extensive experience and skills in the areas of corporate finance, accounting, strategic planning and risk oversight. | | |
Marty R. Kittrell, 58
| | 2007 |
In February 2011, Mr. Kittrell retired as Executive Vice President & CFO of Dresser, Inc. (“Dresser”), Addison, Texas, after serving in that capacity since December 2007. Dresser, a worldwide leader in providing highly engineered products for the global energy industry, was acquired by General Electric Company in February 2011. Prior to joining Dresser, Mr. Kittrell was Executive Vice President and CFO of Andrew Corporation from October 2003 to December 2007. Mr. Kittrell is also a director of On Assignment, Inc.
| | |
| |
Mr. Kittrell brings to the Board over 25 years ofhis experience as a CFO, having served in that role at severaldirector for other prominent public companies. As a result of this experience, he has significant expertise with financial reporting issues facing the Company, including Securities and Exchange Commission reporting, and Sarbanes-Oxley internal control design and implementation. His position with a company that supplies infrastructure productscompanies benefits our Board by bringing additional perspective to the energy industry gives Mr. Kittrell a particular familiarity with the issues facing the Company’s gas transmission and storage and gas distribution businesses. Mr. Kittrell also has extensive experience with mergers and acquisitions and capital markets transactions. He formerly practiced accounting with a national accounting firm and is an active member of the American Institute of CPAs, the National Association of Corporate Directors, and Financial Executives International. Mr. Kittrell also serves on the Executive Committee and as Chair of the Finance and Real Estate Committee of Lipscomb University.
| | |
| | |
Name, Age and Principal Occupations
for Past Five Years and Directorships Held
| | Has Been a
Director Since |
W. Lee Nutter, 71
| | 2007 |
Prior to his retirement in 2007, Mr. Nutter was Chairman, President and CEO of Rayonier, Inc., Jacksonville, Florida, a leading supplier of high performance specialty cellulose fibers and owner of timberlands and other higher value land holdings. Mr. Nutter was a director of Rayonier, Inc. from 1996 to 2009. He is also a director of Republic Services Inc. and the non-executive Chairman of J.M. Huber Corporation. He is also a member of the Advisory Board at the University of Washington Foster School of Business.
| | |
| |
Mr. Nutter’s former positions as Chairman and CEO of a forest products company, and his current positions as director of one company engaged in waste management and another involved in the forest products and energy industries, give him a particular familiarity with the issues involved in managing natural resources. These issues include compliance with environmental laws and exercising responsible environmental stewardship. Mr. Nutter also has an extensive background and familiarity in human resource and compensation issues, which complements well his service as chair of the Company’s Officer Nomination and Compensation Committee. In addition, as a former CEO, Mr. Nutter understands how to address the complex issues facing major corporations.
| | |
Deborah S. Parker, 62
| | 2007 |
Ms. Parker retired as Senior Vice President, Quality and Environmental, Health and Safety of Alstom Power, a business segment of Alstom, in August 2014, after serving in that capacity since April 2011. Alstom Power, a global leader in power generation located in Zurich, Switzerland, has agreed to be acquired by General Electric Company. From April 2008 until April 2011, Ms. Parker was President and CEO of International Business Solutions, Inc. (“IBS”), Washington, D.C., a provider of strategic planning and consulting services to profit and not-for-profit organizations. Before joining IBS, Ms. Parker was Executive Vice President and Chief Operations Officer of the National Urban League from July 2007 through April 2008. Prior thereto, Ms. Parker served in numerous operating positions, including Vice President of Global Quality at Ford Motor Company. During her tenure at Ford Motor Company, Ms. Parker also served as CEO and Group Managing Director at Ford Motor Company of Southern Africa (Pty) Ltd. from September 2001 to December 2004.
| | |
| |
Ms. Parker brings a unique combination of community development and industrial management experience to the Board. As a Senior Vice President of Quality, Environmental, Health and Safety of a global power generation firm, she brings knowledge and understanding of operations, health and safety issues that are valuable to us as we execute on our commitment to increase our investment in environmental projects and focus on safety. As a former CEO of a consulting firm and Chief Operating Officer of a national civil rights organization dedicated to economic empowerment of historically underserved urban communities, Ms. Parker brings expertise and understanding with respect to the social and economic issues confronting the Company and the communities it serves. As a result of her 23-year career at a global manufacturing company, Ms. Parker has extensive experience managing industrial operations, including turning around several struggling business units, finding innovative solutions to management and union issues, implementing quality control initiatives and rationalizing manufacturing and inventory. This experience positions her well to provide valuable insights on the Company’s operations and processes, as well as on social issues confronting the Company.
| | |
| | |
Name, Age and Principal Occupations
for Past Five Years and Directorships Held
| | Has Been a
Director Since |
Robert C. Skaggs, Jr., 60
| | 2005 |
Chief Executive Officer of the Company since July 2005 and President of the Company since October 2004. Prior thereto, Mr. Skaggs served as Executive Vice President, Regulated Revenue from October 2003 to October 2004; President of Columbia Gas of Ohio, Inc. from February 1997 to October 2003; President of Columbia Gas of Kentucky, Inc. from January 1997 to October 2003; President of Bay State Gas Company and Northern Utilities from November 2000 to October 2003; and President of Columbia Gas of Virginia, Inc., Columbia Gas of Maryland, Inc. and Columbia Gas of Pennsylvania, Inc. from December 2001 to October 2003.
| | |
| |
The Board believes it is important that the Company’s CEO serve on the Board. Mr. Skaggs has a unique understanding of the challenges and issues facing the Company. During his nearly 32 years with the Company, he has served in a variety of positions across the organization, including the legalimportant areas of governance and finance departments, President of a number of our gas distribution subsidiaries, and Executive Vice President, Regulated Revenue, where he was responsible for developing regulatory strategies and leading external relations across all of our energy distribution markets, as well as our interstate pipeline system. He also led regulated commercial activities, including large customer and marketer relations, energy supply services, as well as federal governmental relations. This wide and deep experience provides an incomparable knowledge of our operations, our markets and our people. Over the course of his career, Mr. Skaggs has been involved in a wide array of community-based organizations as well as a number of industry organizations, further providing him with a valuable perspective on the communities the Company serves and the issues facing our industry. He served as Chairman of the American Gas Association in 2010.
strategic planning. | | |
Teresa A. Taylor, 51
| | 2012 |
Ms. Taylor is currently CEO of Blue Valley Advisors, LLC. Ms. Taylor served as Chief Operating Officer of Qwest Communications, Inc. (“Qwest”), Denver, Colorado, from August 2009 to April 2011. Prior thereto, she was Executive Vice President, Business Markets Group of Qwest from January 2008 to April 2009 and served as Executive Vice President and Chief Administrative Officer from December 2005 to January 2008. Ms. Taylor served in various positions with Qwest and the former US West since 1987. Ms. Taylor also is a director of T-Mobile USA, Inc. and First Interstate BancSystem, Inc.
| | |
| |
In her position as Chief Operating Officer, Ms. Taylor was responsible for the daily operations of a publicly traded telecommunications company. In this role, she led a senior management team responsible for field support, technical development, sales, marketing, customer support and information technology systems. During her 24-year tenure with Qwest and US West, she held various leadership positions responsible for strategic planning and execution, sales, marketing, product development, human resources, corporate communications and social responsibility. Ms. Taylor is keenly aware of the technical and managerial skills necessary to operate a customer service company in a complex regulatory and competitive business environment. This experience will provide valuable insights to the Company as it operates in multiple regulatory environments and develops products and customer service programs to meet the expectations of our customers.
| | |
2023 Proxy Statement | 19
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Corporate Governance Enhancements In 2022, there was significant Board and governance refreshment, which included a reconstitution of the committees and the addition of three new independent directors. All of our committees remain fully independent.
Under our Corporate Governance Guidelines, a majority of the Board must be comprised of “independent directors.” In order to assist the Board in making its determination of director independence, the Board has adopted categorical standards of independence consistent with the standards contained in Section
303A.02(b)303A.02 of the NYSE
Corporate Governance Standards. The Board also has adopted an additional independence standard providing that a director who is an executive officer of a company that has made payments to or received payments from theListed Company
for property or services within the last three years in excess of 1% of such other company’s consolidated gross revenues is not independent until three years after payments fall below that threshold.Manual. A copy of our Corporate Governance Guidelines is posted on our website at
http:https://ir.nisource.com/governance.cfm.www.nisource.com/investors/governance.
In considering Mr. Johnson’s independence, the Board considered the ordinary course and arms-length business relationship between subsidiaries of the Company and TC Energy Corp., where Mr. Johnson serves as a member of the board of directors. The Board has affirmatively determined that, with the exception of Mr.
Skaggs,Yates, all of the members of the Board and all nominees are “independent directors” as defined in Section
303A.02(b)303A.02 of the NYSE
Listed Company Manual and our Corporate Governance
Standards and meet the additional standard for independence set by the Board.Guidelines.
Policies and Procedures with Respect to Transactions with Related Persons
We have established policies and procedures with respect to the review, approval and ratification of any transactions with related
persons as set forth in the Audit Committee Charter and the Code of Business Conduct.persons.
Under its
Charter,charter, the
AuditESN&G Committee
is charged with the review ofreviews reports and disclosures of insider and
affiliated partyrelated person transactions. Under
the Codeour Conflicts of
Business Conduct,Interest policy, the following situations
may present a conflict of interest and must be reviewed to determine if they involve a direct or indirect interest of any director, executive officer or employee (including immediate family members)
:owning more than or otherwise present a conflict of interest:
| ■ | owning more than a 10% equity interest or a general partner interest in any entity that transacts business with the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000; |
| ■ | selling anything to the Company or buying anything from the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000; |
| ■ | consulting for or being employed by a competitor of the Company; and |
| ■ | being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member employed by the Company. |
Related person transactions but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;
selling anything to the Company or buying anything from the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;
consulting for or being employed by a competitor of the Company; and
being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member employed by the Company.
Related party transactions requiring review under the Code of Business Conduct are annually reviewed and, if appropriate, ratified by the AuditESN&G Committee. Directors individuals subjectare expected to Section 16raise any potential transactions involving a conflict of interest that relate to them with the Securities Exchange Act of 1934 (“Section 16 Officers”) and senior executiveESN&G Committee so that they may be reviewed in a prompt manner. Additionally, officers are expected to raise any potential transactions involving a conflict of interest that relatesrelate to them with the Audit CommitteeGeneral Counsel so that they may be reviewed in a prompt manner.
The General Counsel’s office will review with the ESN&G Committee situations that may present a conflict of interest.
There were no transactions between the Company and any officer, director or nominee for director, or any affiliate of or person related to any of them, since January 1,
20142022, of the type or amount required to be disclosed under the applicable Securities and Exchange Commission (“SEC”) rules.
20 | 2023 Proxy Statement
Executive Sessions of Non-Management DirectorsTABLE OF CONTENTS
To promote open discussion among the non-management directors, the Board schedules regular executive sessions at meetings of the Board and each of its Committees. The non-management members met separately from management six times in 2014 in sessions at which the independent Chairman of the Board presided. All of the non-management members are “independent directors” as defined under the applicable NYSE and SEC rules.
Communications with the Board and Non-Management Directors
Stockholders and other interested persons may communicate any concerns they may have regarding the Company as follows:
| ■ | Communications to the Board may be made to the Board generally, any director individually, the non-management directors as a group, or the Chair of the Board, by writing to the below address. The Corporate Secretary will review and forward, as appropriate, such correspondence in order to facilitate communication with the Board, its committees, the independent directors, or individual members. |
Communications to the Board may be made to the Board generally, any director individually, the non-management directors as a group, or the Chairman of the Board, by writing to the following address:
NiSource Inc.
Attention: Board of Directors, or any Board member, or non-management directors, or Chairman Chair
Merrillville, Indiana 46410
| ■ | • | | The Audit Committee has approved procedures with respect to the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters. Communications regarding such matters may be made by contacting the Company’sour Ethics and Compliance Officer atethics@nisource.com, calling the business ethics hotline at 1-800-457-2814, or writing to:
|
Attention: Director, Corporate Ethics
Merrillville, Indiana 46410
We are committed to engaging with our stockholders and soliciting their views and input on important governance, environmental, social, executive compensation and other matters. Our ESN&G Committee is responsible for overseeing the stockholder engagement process and the periodic review and assessment of stockholder input on governance matters. In 2022, management held conversations with stockholders on a variety of corporate governance topics, including Board composition, the Board’s annual evaluation process, executive compensation and other matters. The Company also held an Investor Day in November 2022, during which management continued these conversations with investors. The information obtained from stockholders was shared with our ESN&G Committee and used to enhance our disclosures. We intend to continue stockholder engagement on governance each year outside of the proxy season. Our independent directors are available to engage in dialogue with stockholders on matters of significance to understand stockholders’ views. In addition, management regularly participates in investor and industry conferences throughout the year to discuss performance and share its perspective on the Company and industry developments.
Code of Business Conduct
The Company has adopted
We have a Code of Business Conduct to
promotepromote: (i) ethical behavior, including the ethical handling of conflicts of
interest,interest; (ii) full, fair, accurate, timely and understandable financial
disclosure,disclosure; (iii) compliance with applicable laws, rules and
regulations,regulations; (iv) accountability for adherence to our
codeCode of Business Conduct; and (v) prompt internal reporting of violations of our code. Our Code of Business Conduct satisfies applicable SEC and NYSE requirements and applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer and controller)
, as well as
to our employees of
the Company and
itsour affiliates. A copy of our Code of Business Conduct is available on our website at
http:https://ir.nisource.com/governance.cfmwww.nisource.com/investors/governanceand also is available to any stockholder upon written request to our Corporate
Secretary.Secretary at the address noted above under the heading “Communications with the Board and Non-Management Directors.”
Any waiver of our Code of Business Conduct for any director, executive officer or Section 16 Officer or senior executive may be made only by the Audit Committee of the Board and must be promptly disclosed to the extent and in the manner required by the SEC or the NYSE and posted on our website. No such waivers have been granted.
2023 Proxy Statement | 21
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To instill and reinforce our values and culture, we require our employees to participate in regular training on rotating ethics and compliance topics each year, including, among others, raising concerns, treating others with respect, preventing discrimination in the workplace, anti-bribery and corruption, data protection, unconscious biases, harassment, conflicts of interest, and the anonymous ethics and compliance hotline. All employees receive training on our Code of Business Conduct biannually or more frequently if there is a material change in content. Our business ethics program, including the employee training program, is reviewed annually by our executive leadership team and the Audit Committee of the Board. Our Audit Committee receives regular updates throughout the year.
Corporate Governance Guidelines
The
Corporate GovernanceESN&G Committee is responsible for annually reviewing and reassessing the Corporate Governance Guidelines and
will submitsubmitting any recommended changes to the Board for its approval. A copy of the Corporate Governance Guidelines can be found on our website at
http:https://ir.nisource.com/governance.cfmwww.nisource.com/investors/governance and is also available to any stockholder upon written request to
the Company’sour Corporate Secretary.
Board Leadership Structure
and Risk OversightOur Corporate Governance Guidelines state that
the Companywe should remain free to configure leadership of the Board in the way that best serves
the Company’sour interests at the time and, accordingly, the Board has no fixed policy with respect to combining or separating the offices of
ChairmanChair and CEO. If the
ChairmanChair is not an independent director, an independent
lead directorLead Director will be chosen annually by the
Corporate GovernanceBoard, taking into account the recommendation of the ESN&G Committee. The
ChairmanChair or, if the
ChairmanChair is not an independent director, the
lead directorLead Director, will
serve as chair of the Corporate Governance Committee and asbe the presiding director
for purposesof executive sessions of the
NYSE rules.Board. To promote open discussion among the non-management directors, the Board schedules regular executive sessions at meetings of the Board and each of its committees.
Since late 2006, the offices of ChairmanChair and CEO of the Company have been held by different individuals, with the ChairmanChair being an independent director. In deciding to separate
The duties of the offices,Chair of the Board determined that having a director with a long tenure serveare as Chairman would help ensure continuityfollows:
| ■ | providing leadership to the Board and management, and monitoring the discharge of their duties; |
| ■ | presiding at meetings of stockholders and the Board, including executive sessions of the Board and meetings of the independent directors; |
| ■ | serving as a liaison between the independent directors and management; |
| ■ | in consultation with the CEO, setting agendas for the meetings of the Board, and developing annual Board meeting schedules for approval by the Board; |
| ■ | ensuring proper flow of information to the Board; |
| ■ | having the authority to call special meetings of the Board and independent directors; |
| ■ | being available for consultation and direct communication with stockholders and other key stakeholders, as appropriate; and |
| ■ | having such other responsibilities and performing such duties as may from time to time be assigned to him or her by the Board. |
The Board periodically reviews the structure and
stability. At this time,the division of responsibilities between the role of independent Chair and CEO. The structure and division of responsibilities is intended to maintain the integrity of the oversight function of the Board
believes thatby providing a separate framework of responsibilities for the independent
Chairman arrangement serves the Company well.Chair as set forth above.
The Board takes an active role in monitoring and assessing the Company’sour strategic, compliance, operational and financial risks, which includeas well as cybersecurity risks. The Board has oversight over risks associated with operations, credit, energy supply, financing, capital investments,related to Environmental, Social and compensation policiesGovernance (“ESG”) strategy and practices.governance, including assuring that ESG risks and opportunities are directly tied to our business strategy and understanding how we are measuring progress toward goals as part of our ESG strategy. The Board administers its oversight function through utilization of its various committees, as well as through acommittees.
22 | 2023 Proxy Statement
TABLE OF CONTENTS
Our Risk Management Committee, consistingwhich consists of members of our senior management, which is responsible for theoversight of our risk management process. Senior management regularly provides an annual reportreports on our risks to the Board, and to the Audit Committee.Committee and the other Board committees that oversee the applicable risks. Additionally, the Audit Committee discusses with management and the independent auditorregistered public accounting firm the effect of regulatory and accounting initiatives on the Company’sour financial statements and is responsible for review and evaluation of the Company’sour major risk exposures, including cybersecurity and supplier risks, and the steps management has taken to monitor and control such exposures.
The
AuditCompensation and Human Capital Committee,
reviewsthe Safety, Operations, Regulatory and
assesses the adequacy of the Company’s Risk ManagementPolicy (“SORP”) Committee,
Charter annually and amends the charter as appropriate. In addition, the Finance Committee
Officer Nomination and Compensation (“ONC”) Committee and the
Environmental, Safety and Sustainability (“ESS”)ESN&G Committee are each charged with overseeing the risks associated with their respective areas of responsibility.
For example, the Compensation and Human Capital Committee oversees risks related to executive compensation and human capital management matters, including incentive compensation, succession planning, diversity, employee engagement, culture and talent management. The SORP Committee oversees risks related to safety and operations. The Finance Committee oversees risks related to capital management and allocation and investor relations. The ESN&G Committee oversees risks related to environmental, social, sustainability and climate change matters, public company governance, CEO succession planning, political spending and stockholder engagement. For more information regarding the oversight responsibilities of the Board Committees, see the descriptions of the committees below.
Generally, at each Board meeting, the chairs of each committee provide a report to the Board on any key items and risks discussed at the respective committee meetings. In addition, the Board regularly discusses the Company’s short-, medium-, and long-term strategy and risks. Shorter term risks and related matters are generally discussed at meetings of the Board and applicable committee on a regular and recurring basis, whereas longer term risks are discussed at least annually and as appropriate throughout the course of the year. Our Board or applicable committee receives information from external advisors and others, including the Company’s independent auditors, legal counsel, compensation consultant, and financial advisors, to advise on key risks and other issues relevant to the Company.
Our management team performs succession planning quarterly for officer-level and critical roles to ensure that we develop and sustain a strong bench of talent capable of performing at the highest levels. Not only is talent identified, but potential paths of development are discussed to ensure that employees have an opportunity to build their skills and are well prepared for future roles. We maintain formal succession plans for our CEO and key executive officers. The succession plan for our CEO is reviewed by the ESN&G Committee and the succession plans for executive officers (other than the CEO) and critical roles are reviewed by the Compensation and Human Capital Committee annually or more frequently as needed.
Meetings and Committees of the Board
The Board met fourteen12 times during 2014.2022. Each incumbent director attended at least 93%75% of the total number of meetings of the Board meetings and the meetings of the committees of the Board on which he or she was a member.served, and in each case, during the periods that he or she served. Pursuant to our Corporate Governance Guidelines, all directors are expected to attend all Board meetings to spend the Annual Meeting. time needed to discharge their responsibilities as directors and to attend the annual meeting of stockholders.
All
incumbentbut one of the then-serving directors attended the
2014 Annual Meeting2022 annual meeting of
Stockholders.stockholders.
Pursuant to our Corporate Governance Guidelines, the Board expects that our senior officers will regularly attend Board and Committee meetings, present proposals and otherwise assist in the work of the Board. Members of the Board have direct access to all of our employees, outside advisors and independent registered public accounting firm.
The Board has established fivesix standing committees to assist the Board in carrying out its duties: the Audit Committee, the Corporate GovernanceCompensation and Human Capital Committee, the ESSESN&G Committee, the Executive Committee, the Finance Committee and the ONCSORP Committee. The Board generally evaluates the structure and membership of its committees on an annual basis, and appoints the independent members of the Board to serve on the committees and elects committee
2023 Proxy Statement | 23
TABLE OF CONTENTS
chairs following the
Annual Meetingannual meeting of
Stockholders.stockholders. The following
tables showtable shows the composition of each
standing Board committee
during 2014.as of the date of this Proxy Statement. Mr.
SkaggsYates does not serve on any committee but is invited to attend various committee meetings. Mr.
Thompson who is ChairmanKabat, Chair of the Board
also serves
ason the
Chair of the Corporate Governance CommitteeESN&G committee and is invited to attend all meetings of each of the
standingother committees.
Board Committee Composition
Director | Peter A. Altabef | Audit | | | Corporate
Governance | | | ESS | | | Finance | | ✔* | ONC | | ✔ | | | ✔ | |
Richard A. Abdoo
| Sondra L. Barbour(1) | | | ✔ | | | X | | | | | | | | X | * ✔ | | | X | |
| Theodore H. Bunting, Jr.(1) | | | ✔* | | | ✔ | | | | | | | | | | | | ✔ | |
| | Eric L. Butler | | | ✔ | | | ✔* | | | | | | | | | | | | ✔ | |
| | Aristides S. Candris | | | X | | | | X | | ✔* | | X | | | | ✔ | | | ✔ | | |
Sigmund L. Cornelius
| Deborah A. Henretta | | X | | | | ✔ | | | | | | | | X | ✔* | | | X✔ | |
| Deborah A. P. Hersman | | | | | | | | | ✔ | | | ✔ | | | | | | | |
| | Michael E. Jesanis | | | X | | | | | | ✔ | | X | * ✔ | | | | | | | X | |
Marty R. Kittrell
| William D. Johnson | | X | *(F) | | | ✔ | | | ✔ | X | | | | X | | | | | |
W. Lee Nutter
| Kevin T. Kabat(2) | | | | | | X | | | | | | | | X | ✔ | | | X✔* | * |
Deborah
| Cassandra S. ParkerLee(1) | | | X✔ | | | | | | | | X | ✔ | | | X | | | | | |
Teresa A. Taylor
| Lloyd M. Yates | | | | | | X | | | | | | | | X | | | | X | * |
Richard L. Thompson(1)
| | | | | | | X | * | | | | | | | | | | | | |
Carolyn Y. Woo
| | | | | | | X | | | | X | | | | | | | | X | |
*
| Committee Chair. Mr. Nutter was Chair of the ONC Committee until May 14, 2014, when Ms. Taylor became Chair. |
| (1) | Independent Chairman of the Board. |
(F)
| Audit Committee Financial Expert, as defined by the SEC rules. |
(2)
| Independent Chair of the Board. |
The summaries below are qualified by reference to the entire charter for each of the Audit, Corporate Governance, ESS,Compensation and Human Capital, ESN&G, Executive, Finance and ONC Committees;SORP Committees; each of which can be found on our website athttp:https://ir.nisource.com/governance.cfmwww.nisource.com/investors/governanceand is also available to any stockholder upon written request to the Company’sour Corporate Secretary. Additionally, any committee may perform other duties and responsibilities, consistent with their respective charters, our Amended and Restated Bylaws (our “Bylaws”), governing law, the rules of the NYSE, the federal securities laws and such other requirements applicable to us, delegated to any committee by the Board, or in the case of the Compensation and Human Capital Committee, under any provision of any of our benefit or compensation plans.
24 | 2023 Proxy Statement
TABLE OF CONTENTS
The Audit Committee met
eightten times in
2014. Among other things,2022. Our Audit Committee is responsible for the
oversight of our internal audit function and financial reporting process. The Audit Committee has the sole authority to appoint, retain or replace
theour independent
auditorsregistered public accounting firm and is responsible
for:for, among other things:| ■ | monitoring the integrity of the financial statements of the Company; |
| ■ | reviewing our independent registered public accounting firm’s qualifications and independence and compensating our independent registered public accounting firm; |
| ■ | overseeing the performance of our internal audit function and our independent registered public accounting firm; |
| ■ | reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements before earnings announcements; |
| ■ | reviewing and discussing with management our annual and quarterly earnings press releases; |
| ■ | reviewing and discussing with management and our independent registered public accounting firm major issues regarding accounting principles and financial statement presentations, adequacy of internal controls, and any critical judgments or accounting estimates made in connection with the preparation of financial statements; |
| ■ | reviewing and evaluating our major risk exposures, including cybersecurity and supplier risks, and the steps management has taken to monitor and control such exposures, including discussion of our risk assessment and risk management policies; and |
| ■ | overseeing our compliance with legal and regulatory requirements. |
reviewing the independent auditors’ qualifications and independence;
overseeing the performance of the Company’s internal audit function and the independent auditors;
reviewing and discussing with management and the independent auditor our annual and quarterly financial statements;
reviewing and discussing with management and the independent auditor major issues regarding accounting principles, adequacy of internal controls, and critical judgments and estimates made in connection with the preparation of financial statements;
reviewing related party transactions; and
overseeing the Company’s compliance with legal and regulatory requirements.
The Board has determined that all of the members of the Audit Committee are independent as defined under the applicable NYSE and SEC rules, including the additional independence standard for audit committee members, and meet the additional independence standard set forth in theunder our Corporate Governance Guidelines. The Audit Committee has reviewed and approved the independent registered public accountants, both for 2014 and 2015, and the fees relating to audit services and other services performed by them.
For more information regarding the Audit Committee, see “Audit Committee
Report”Report,” “Proposal 4 — Ratification of Independent Registered Public Accounting Firm” and “Independent Registered Public Accounting Firm Fees” below.
Corporate Governance
Compensation and Human Capital Committee
The Corporate GovernanceCompensation and Human Capital Committee met four times in 2014.2022. The Compensation and Human Capital Committee is responsible for reviewing our human capital management function and programs, including related procedures, programs, policies and practices, and to make recommendations to management with respect to equal employment opportunity and diversity, equity and inclusion (“DE&I”) initiatives, employee engagement and corporate culture and talent management. The Compensation and Human Capital Committee also apprises the Board with respect to the evaluation, compensation and benefits of our executives. Its responsibilities include:include, among others:
| ■ | evaluating the performance of our CEO and other executive officers in light of our goals and objectives; |
| ■ | reviewing and approving the corporate goals and objectives relevant to CEO and executive officer compensation; |
| ■ | making recommendations to the independent Board members regarding CEO compensation and approving compensation of the other executive officers; |
| ■ | reviewing and approving periodically a general compensation policy for our other officers and officers of our principal subsidiaries; |
| ■ | approving, or if appropriate, making recommendations to the Board with respect to incentive compensation plans and equity-based plans; |
| ■ | reviewing our officer candidates for election by the Board; |
| ■ | reviewing and evaluating the executive officers’ development and succession plan (other than our CEO’s succession plan, which is reviewed by the ESN&G Committee); |
| ■ | evaluating the risks associated with our compensation policies and practices and the steps management has taken to monitor and control such risks; and |
| ■ | overseeing the Company’s human capital management function, including procedures, programs, policies and practices with respect to equal employment opportunity and DE&I initiatives; employee engagement and corporate culture; and talent management. |
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identifying individuals qualified to become Board members, consistent with criteria approved by the Board;
CORPORATE GOVERNANCE
recommending to the Board director nominees for election at the next annual meeting
All of the stockholders;
developingdirectors serving on the Compensation and recommending toHuman Capital Committee are: (i) independent as defined under the Board a set of corporate governance principles applicable to the Company;
consulting with management to determine the appropriate response to stockholder proposals submitted pursuant toNYSE and SEC rules;
reviewingrules and evaluating the CEO succession plan;
reviewing and overseeing corporate and business unit political spending;
evaluating any resignation tendered by a director and making recommendations to the Board about whether to accept such resignation; and
overseeing the evaluation of the performance of the Board and its Committees.
Pursuant to theunder our Corporate Governance Guidelines and the additional NYSE independence standard for members of compensation committees and (ii) “non-employee directors” as defined under Rule 16b-3 of the Exchange Act. For additional information regarding the Compensation and Human Capital Committee’s principles, policies and practices, please see the discussion under “Compensation Discussion and Analysis (CD&A)”.
SORP Committee
The SORP Committee met six times during 2022. The SORP Committee assists the Board in overseeing the programs, performance and risks relative to the oversight and review of our operations, including safety, performance and regulatory compliance matters. Its responsibilities include, among others:
| ■ | overseeing the overall performance of our utility company operations; |
| ■ | evaluating our safety policies, practices and performance relating to our employees, contractors and the general public; |
| ■ | reviewing and assessing stockholder proposals related to safety, operations, regulatory or policy; |
| ■ | monitoring our relationships with regulatory and governmental authorities; |
| ■ | reviewing and monitoring major legislation, regulation and other external influences that pertain to the SORP Committee’s responsibilities and assessing the impact on us; and |
| ■ | reviewing and evaluating our programs, policies, practices and performance with respect to health and safety compliance auditing. |
Finance Committee
The Finance Committee met five times during 2022. Its responsibilities include the following, among others:
| ■ | reviewing and evaluating our financial plans, capital structure, equity and debt levels, dividend policy and financial policies; |
| ■ | reviewing our corporate insurance programs; |
| ■ | reviewing our investment strategy and investments; |
| ■ | reviewing and evaluating our financial, tax, third party credit and commodity risks and the steps management has taken to monitor and control such risks; |
| ■ | reviewing our annual earnings guidance and capital budgets and recommending approval to the Board; and |
| ■ | reviewing our hedging policies and exempt swap transactions. |
ESN&G Committee
The ESN&G Committee met five times in 2022. Its responsibilities include, among others:
| ■ | identifying individuals qualified to become Board members, consistent with criteria approved by the Board; |
| ■ | recommending to the Board director nominees for election at the next annual meeting of the stockholders; |
| ■ | developing and recommending to the Board the Corporate Governance Guidelines; |
| ■ | consulting with management to determine the appropriate response to stockholder proposals submitted pursuant to SEC rules; |
| ■ | reviewing and evaluating our reports, programs, policies, practices and performance with respect to environmental, sustainability and social matters, including polices and initiatives related to corporate social responsibility issues and DE&I; |
| ■ | overseeing our ESG-related stockholder engagement process and periodically reviewing stockholder input on corporate governance matters; |
| ■ | reviewing and evaluating our CEO succession plan and working with the Board to evaluate potential successors to our CEO; |
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| ■ | reviewing and overseeing, at least annually, corporate and business unit political spending; |
| ■ | reviewing reports and disclosures of insider and related person transactions; |
| ■ | reviewing and evaluating our strategy, efforts, programs, policies, practices and performance with respect to environmental, social, sustainability and climate change matters; |
| ■ | reviewing our sustainability targets and our progress towards achieving such targets; |
| ■ | monitoring risks and opportunities related to environmental, social, sustainability and climate change matters; |
| ■ | evaluating any resignation tendered by a director and making recommendations to the Board about whether to accept such resignation; and |
| ■ | overseeing the evaluation of the performance of the Board and its committees. |
The ESN&G Committee, with the assistance of the ONC Committee and its independent compensation consultant, Exequity LLP,annually reviews the amount and composition of non-employee director compensation from time to time and makes recommendations tocompensation. Please see the Board when it concludes changes are needed. The Committee is also responsiblediscussion under the heading “2022 Director Compensation” for evaluating the performancea description of the CEO and his executive direct reports.compensation we provide to our non-employee directors. The ESN&G Committee reviews and approvesalso leads the Company’s goals and objectives relevant to the CEO and his executive direct reports and evaluates their performance in light of those goals and objectives and after receiving input from the Board.processes set forth below.
Director Selection Process. The Chair of the Committee reports the Committee’s findings to the ONC Committee, which uses these findings to set the compensation of the CEO and his executive direct reports.TheESN&G Committee identifies and screens candidates for director and makes its recommendations for director to the Board. At times the Board as a whole. Themay establish an ad hoc search committee to assist the ESN&G Committee in this process. Additionally, the ESN&G Committee has the authority to retain a search firm to help it identify director candidates to the extent it deems necessary or appropriate. Any search firm that is engaged will include women and minority candidates in the pool from which the ESN&G Committee selects director candidates. In considering candidates for director, the ESN&G Committee con-
sidersconsiders the natureskills, expertise, experience and qualifications that will best complement the overall mix of skills and expertise of the expertise and experience required for the performanceBoard in view of the dutiesstrategy of, a director of a company engaged in our businesses,and the risks and opportunities that we face, as well as each candidate’s relevant business, academic and industry experience, professional background, age, current employment, community service, other board service and other factors. Pursuant toIn addition, the Corporate Governance Guidelines, theESN&G Committee also considerstakes into account the racial, ethnic and gender diversity of the Board. Board and actively seeks minority and female candidates.
The
ESN&G Committee seeks to identify and recommend candidates with a reputation for, and record of, integrity and good business judgment
who:who have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are
affiliated;affiliated; are effective in working in complex collegial
settings;settings; are free from conflicts of interest that could interfere with a director’s duties to
the Companyus and
its stockholders;our stockholders; and are willing and able to make the necessary commitment of time and attention required for effective service on the
Board.Board, including limiting their service on other boards to a reasonable number. The
ESN&G Committee also takes into account the candidate’s level of financial literacy. The
ESN&G Committee monitors the mix of skills and experience of the directors in order to assess whether the Board has the necessary tools to perform its oversight function effectively. The
ESN&G Committee also assesses the diversity of the Board as
a part of its annual self-assessment
process.process as described in more detail below. The
ESN&G Committee will consider nominees for directors recommended by stockholders and will use the same criteria to evaluate candidates proposed by
stockholders.stockholders as it uses to evaluate the candidates identified by the Board.
The Board has determined that all of the members of the
ESN&G Committee are independent as defined under the applicable NYSE rules and
meet the additional independence standard set forth in theour Corporate Governance Guidelines.
For information on how to nominate a person for election as a director at the
20162024 Annual Meeting, please see the discussion under the heading “Stockholder Proposals and Nominations for
20162024 Annual Meeting.”
Environmental, Safety & Sustainability Committee
Evaluation Processes.The ESS Committee met five times during 2014. The ESS Committee assistsBoard recognizes that a robust and constructive performance evaluation process is an essential component of Board effectiveness. As such, the Board conducts (a) director and (b) board and committee annual performance evaluations that are intended to determine whether the Board, each of its committees, and individual Board members are functioning effectively and to provide them with an opportunity to reflect upon and improve processes and effectiveness. The ESN&G Committee oversees these evaluation processes. Annually at its meeting in overseeingMarch, the programs, performanceESN&G Committee initiates the board and risks relativecommittee self-evaluation process and approves the form of written evaluation questionnaires that are distributed to environmental, safetyeach director for completion. The written evaluation questionnaires are updated each year as necessary to reflect changes identified in the prior year, any committee charter changes and sustainabilityany suggestions from the directors. The questionnaires solicit feedback on Board composition, Board
2023 Proxy Statement | 27
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meeting mechanics, including information received, core responsibilities, relationship with management, committee functioning and other relevant matters.
Annually at its meeting in October, the ESN&G Committee initiates the director evaluation process and approves the form of written evaluation questionnaires that are distributed to each director for completion. Similar to the board and committee evaluations, the director evaluation questionnaires are reviewed and updated annually, as needed to reflect changes identified since the prior year, any committee charter changes and any suggestions from the directors. In
this regard,addition, on an ongoing basis, the
Committee:evaluates the Company’s environmental and sustainability policies and practices;
evaluates the Company’s safety policies and practices relatingESN&G Chair meets with each director individually to our employees, contractors, and the general public;
reviews and assesses the impact of shareholder proposals related to environmental safety and sustainability;
evaluates the Company’s programs, policies, practices and performancesolicit feedback with respect to healthboth the full Board and safety compliance auditing;any committee on which the director serves, in addition to individual director performance and
assesses major legislation, regulation Board dynamics. Our Board utilizes the results of these evaluations in making decisions on Board agendas, Board structure, committee responsibilities and other external influences that pertain to the Committee’s responsibilities.
Finance Committee
The Finance Committee met five times during 2014. Its responsibilities include overseeing and monitoring the following:
the financial plans of the Company, capital structure, long and short-term debt levels, and financial policy;
the Company’s dividend policy and periodic dividends, investment strategy, investments, capital budgets, financial risks and steps taken to control those risks;
the Company’s corporate insurance coverage; and
the Company’s hedging policies and exempt swap transactions.
Officer Nomination and Compensation Committee
The ONC Committee met six times in 2014. The ONC Committee advises the Board with respect to nomination, evaluation, compensation and benefits of our executives. In that regard, the Committee:
approves the CEO’s compensation based on the Corporate Governance Committee’s report on the evaluation of the CEO’s performance;
approves the compensation of the CEO’s executive direct reports;
makes recommendationsagendas, information presented to the Board, with respect to incentive compensation plans and equity-based plans;
reviews and approves periodically a general compensation policy for other officerscontinued service of individual directors on the Company and officers of its principal subsidiaries;
recommends Company officer candidates for election byBoard. This information is then shared with the Board, and overseesappropriate actions or changes are then identified.
Director Education. At the evaluationCompany’s expense, all directors are encouraged to periodically attend director continuing education programs offered by various organizations. The Company also maintains an orientation program that consists of management;written materials, oral presentations, and site visits. In addition to orientation, we maintain an internal director education program where corporate and industry information is disseminated through various mediums, including presentations and written materials, webinars and seminars and site visits.
reviews andRetirement Age; No Term Limits. The Board periodically evaluates the management succession plan, exceptperformance and qualifications of individual directors in connection with the nomination process, including the appropriate time for retirement of directors. However, no director after having attained the CEO’s succession plan;
evaluatesage of 72 years will be nominated for re-election to the risks associated with our compensation policies and practices; and
oversees equal employment opportunity and diversity initiatives.
In approvingBoard unless the compensationBoard determines that the nomination is in the best interests of the CEO and his executive direct reports,Company. In addition, although the ESN&G
Committee
takes into considerationwill consider length of service in recommending candidates for re-election, the
Corporate Governance Committee’s evaluation of the individual performance of each. When considering changes in compensationBoard does not believe that adopting a set term limit for
the Named Executive Officers, the Committee also considers input from the Senior Vice President, Human Resources and Exequity LLP, an executive compensation consulting firm that the Committee engaged to advise it with respect to executive compensation design, comparative compensation practices and compensation matters relating to the Board. Exequity LLP provides no other services to the Company. The ONC Committee has determined Exequity LLP is independent under the NYSE rules.All of the directors serving on the ONC Committee are (i) independent as defined under the applicable NYSE and SEC rules and meet the additional independence standard set forthserves our interests. Such limits may result in the Corporate Governance Guidelinesloss of contributions from directors who have been able to develop, over a period of time, increasing insight into our operations and our strategic direction. The ESN&G Committee reviews these policies as part of its annual governance review and will consider modifications to these policies as deemed necessary and in our best interests and the additional NYSE standard for compensation committees, (ii) “non-employee directors” as defined under Rule 16b-3best interests of the Securities Exchange Act of 1934 (“Exchange Act”), and (iii) “outside directors” as defined by Section 162(m) of the Internal Revenue Code (“Section 162(m)”).
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2014, Messrs. Abdoo, Cornelius, Jesanis and Nutter, Ms. Taylor and Dr. Woo served on the ONC Committee. There were no compensation committee interlocks or insider participation.
DIRECTOR COMPENSATION
our stockholders.
Director Compensation.
This section describes compensation for our non-employee directors. To attract and retain highly qualified candidates to serve on the Board, we useprovide a combination of cash and equity awards. Our non-employee director compensation is reviewed annually by our ESN&G Committee with the assistance of Meridian Compensation Partners, LLC (“Meridian”), the Compensation and Human Capital Committee’s independent compensation consultant. A full-time employee who serves as a director does not receive any additional compensation for service on the Board. Consequently, because Mr. Skaggs is also our President and CEO, he does not receive additional compensation for his service as a Board member.Each
For 2022, each non-employee director
receivesreceived an annual retainer of
$210,000,$275,000, consisting of
$90,000$110,000 in cash and an award of restricted stock units
(“RSUs”) valued at
$120,000$165,000 at the time of
the award.grant. The cash retainer is paid in arrears in four equal installments at the end of each calendar quarter.
The restricted stock units
RSUs are awarded annually, and the number of restricted stock unitsRSUs is determined by dividing the value of the grant by the closing price of our common stock on the grant date. RestrictedThe RSUs granted following the Company’s 2022, 2021 and 2020 annual meetings of stockholders were granted under the NiSource Inc. 2020 Omnibus Incentive Plan (“2020 Omnibus Plan”), while RSU awards granted prior to the 2020 annual meeting of stockholders were granted under the NiSource Inc. 2010 Omnibus Incentive Plan (“2010 Omnibus Plan”). Unless the non-employee director elects to defer receipt of his or her RSU awards, the RSUs are payable in shares of our common stock on the earlier to occur of: (a) the last day of the director’s annual term for which the RSUs are awarded; or (b) the date that the director separates from the Board due to a “Change-in-Control” (as defined in the 2020 Omnibus Plan or 2010 Omnibus Plan (the “Omnibus Plan”), as applicable); provided, however, that any director that commences service on the Board after the start of an annual term will vest on the first anniversary of the initial grant. The RSU awards also contain pro-rata vesting provisions for a separation from the Board due to retirement, death or disability. RSUs accrue dividends prior to settlement in shares of our common stock. If a non-employee director elects to defer receipt of his or her RSUs, then such deferred stock units are granted to directors underwill be paid in shares of our common stock upon the Omnibus Plan, which was approvednon-employee director’s separation from the Board or such other date selected by the stockholders on May 11, 2010.non-employee director.
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Additionally, each
Each non-employee director who serves as chair of a Board committee receives compensation for
this responsibility.the additional responsibilities associated with such service. The
annual2022 committee chair fees
arewere $20,000 for each of the standing committees. The
ChairmanChair of the Board
receivesreceived additional annual compensation of $160,000 for his role. These fees are paid in cash in arrears in four equal installments and are prorated in the case of partial year service.
All Other Compensation.
The other compensation included under the column “All Other Compensation” in the 2022 Director Compensation tableTable below consists of matching contributions made by the NiSource Charitable Foundation.Omnibus PlanFoundation (the “Foundation”). The Omnibus Plan permits equity awards to be made to non-employee directors in the form of incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Terms and conditions of awards to non-employee directors are determined by the Board prior to grant. Since May 11, 2010,
awards to directors have been made from the Omnibus Plan. Awards of restricted stock units associated with periods prior to June 1, 2011, vested immediately but are not distributed in shares of common stock until after the director terminates or retires from the Board. Beginning June 1, 2011, the awards of restricted stock units vest and are payable in shares of common stock on the earlier of (a) the last day of the director’s annual term for which the restricted stock units are awarded or (b) the date that the director separates from service due to a “Change-in-Control” (as defined in the Omnibus Plan); provided, however, that in the event that the director separates from service prior to such time as a result of “Retirement” (defined as the cessation of services after providing a minimum of five continuous years of service as a member of the Board), death or “Disability” (as defined in the Omnibus Plan), the director’s restricted stock unit awards shall pro-rata vest in an amount determined by using a fraction, where the numerator is the number of full or partial calendar months elapsed between the grant date and the date of the director’s Retirement, death or Disability, and the denominator of which is the number of full or partial calendar months elapsed between the grant date and the last day of the director’s annual term for which the director is elected that corresponds to the year in which the restricted stock units are awarded. The vested restricted stock units awarded on or after June 1, 2011 are payable as soon as practicable following vesting unless otherwise provided pursuant to any prior election the non-employee director may have made to defer distribution.
With respect to restricted stock units that have not been distributed, additional restricted stock units are credited to each non-employee director to reflect dividends paid to stockholders on common stock. The restricted stock units have no voting or other stock ownership rights and are payable in shares of our common stock upon distribution.
Director Stock Ownership.
The Board maintains stock ownership requirements for its directors that are included in theour Corporate Governance Guidelines. Within five years of becoming a non-employee director, each non-employee director is required to hold an amount of Companyour stock with a value equal to five times the annual cash retainer paid to directors by the Company.directors. Company stock that counts towards satisfaction of this requirement includes shares purchased on the open market, awards of restricted stock or restricted stock units through the prior Non-Employee Director Stock Incentive Plan or Omnibus Plan,RSUs, and shares beneficially owned in a trust or by a spouse or other immediate family member residing in the same household. All of the non-employee director nominees are in compliance with the stock ownership guideline or are within the five-year transition period included in the Corporate Governance Guidelines.
Each director has a significant portion of his or her compensation directly aligned with long-term stockholder value.
Fifty-sevenApproximately sixty percent
(57%(60%) of a non-employee director’s
2022 annual retainer (valued as of the time of
award) consistsaward and excluding committee retainers) consisted of
restricted stock units,RSUs, which are converted into common stock when
vested and distributed to the director.
The table below shows the number of shares of common stock beneficially owned by each non-employee director, the number of non-voting restricted stock units that have been awarded, and the combined total as of February 27, 2015.
| | | | | | | | | | | | |
| Name | | Shares of Common Stock | | | Non-Voting
Restricted Stock Units | | | Total Number of
Shares of
Common Stock
and Non-Voting
Restricted Stock Units(1) | |
Richard A. Abdoo | | | 15,000 | | | | 38,127 | | | | 53,127 | |
Aristides S. Candris | | | 2,000 | | | | 11,959 | | | | 13,959 | |
Sigmund L. Cornelius | | | 8,043 | | | | 8,078 | | | | 16,121 | |
Michael E. Jesanis | | | 7,715 | | | | 25,154 | | | | 32,869 | |
Marty R. Kittrell | | | 845 | | | | 31,339 | | | | 32,184 | |
W. Lee Nutter | | | 114,970 | | | | 39,888 | | | | 154,858 | |
Deborah S. Parker | | | — | | | | 39,514 | | | | 39,514 | |
Teresa A. Taylor | | | 4,444 | | | | 7,291 | | | | 11,735 | |
Richard L. Thompson | | | 12,871 | | | | 50,691 | | | | 63,562 | |
Carolyn Y. Woo | | | 16,315 | | | | 58,801 | | | | 75,116 | |
(1) | The number includes non-voting restricted stock units granted under the Non-Employee Director Stock Incentive Plan and the Omnibus Plan. |
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2022 DIRECTOR COMPENSATION
2022 Director Compensation
The table below sets forth all compensation earned by or paid to our non-employee directors in
2014. Our2022. Mr. Yates’ compensation below was for his service as a director in 2022 prior to becoming our President and CEO. Upon becoming President and CEO,
doesMr. Yates did not receive any additional compensation for his service on the Board.
His compensationMr. Yates’ Compensation for serving as
President and CEO
during 2022 is
listed underdiscussed in the Executive Compensation
section of
Executive Officers. | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or
Paid in Cash
($)(1) | | | Stock Awards
($)(2) | | | All Other Compensation ($)(3) | | | Total ($) | |
Richard A. Abdoo | | | 107,238 | | | | 120,000 | | | | 15,000 | | | | 242,238 | |
Aristides S. Candris | | | 87,238 | | | | 120,000 | | | | 20,000 | | | | 227,238 | |
Sigmund L. Cornelius | | | 87,238 | | | | 120,000 | | | | 10,000 | | | | 217,238 | |
Michael E. Jesanis | | | 107,238 | | | | 120,000 | | | | 10,000 | | | | 237,238 | |
Marty R. Kittrell | | | 107,238 | | | | 120,000 | | | | — | | | | 227,238 | |
W. Lee Nutter | | | 94,604 | | | | 120,000 | | | | 20,000 | | | | 234,604 | |
Deborah S. Parker | | | 87,238 | | | | 120,000 | | | | — | | | | 207,238 | |
Teresa A. Taylor | | | 99,872 | | | | 120,000 | | | | — | | | | 219,872 | |
Richard L. Thompson | | | 267,238 | | | | 120,000 | | | | — | | | | 387,238 | |
Carolyn Y. Woo | | | 87,238 | | | | 120,000 | | | | 10,000 | | | | 217,238 | |
| | Peter A. Altabef | | | 128,024 | | | 165,000 | | | 10,000 | | | 303,024 | |
| | Sondra L. Barbour | | | 100,685 | | | 165,000 | | | — | | | 265,685 | |
| | Theodore H. Bunting, Jr. | | | 128,024 | | | 165,000 | | | — | | | 293,024 | |
| | Eric L. Butler | | | 128,024 | | | 165,000 | | | — | | | 293,024 | |
| | Aristides S. Candris | | | 128,024 | | | 165,000 | | | 10,000 | | | 303,024 | |
| | Wayne S. Deveydt | | | 41,774(5) | | | — | | | — | | | 41,774 | |
| | Deborah A. Henretta | | | 120,121 | | | 165,000 | | | 7,500 | | | 292,621 | |
| | Deborah A.P. Hersman | | | 108,024 | | | 165,000 | | | 2,000 | | | 275,024 | |
| | Michael E. Jesanis | | | 108,024 | | | 165,000 | | | 2,500 | | | 275,524 | |
| | William D. Johnson | | | 86,290 | | | 165,000 | | | — | | | 251,290 | |
| | Kevin T. Kabat | | | 275,927 | | | 165,000 | | | — | | | 440,927 | |
| | Cassandra S. Lee | | | 94,758 | | | 165,000 | | | 1,050 | | | 260,808 | |
| | Carolyn Y. Woo | | | 7,903(5) | | | — | | | 35,000(6) | | | 42,903 | |
| | Lloyd M. Yates | | | 12,702 | | | — | | | — | | | 12,702 | |
(1)
| The fees shown include the annual cash retainer and any Board and chair fees paid during the year to each non-employee director. |
(2)
| The amounts reportedshown reflect the grant date fair value of awards computed in accordance with FASB ASCthe Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. For restricted stock units,RSUs, the grant date fair value is the number of shares multiplied by the closing price of our stock on the award date. EachOn May 24, 2022, each non-employee director who was elected on May 13, 2014 received an award of restricted stock unitsRSUs valued at $120,000$165,000, which was equal to approximately 3,3465,282 RSUs valued at $31.24 per unit, the closing price of our common stock on that date. For information on the valuation assumptions used in these computations, see Note 14 to our consolidated financial statements included in our 2022 Annual Report on Form 10-K. |
(3)
| As of December 31, 2022, the number of equity awards (in the form of RSUs or deferred stock units) that were outstanding for each non-employee director was as follows: Mr. Altabef, 5,369; Ms. Barbour, 7,052, Mr. Bunting, 27,523; Mr. Butler, 5,369; Dr. Candris, 67,169; Ms. Henretta, 50,056; Ms. Hersman, 23,255; Mr. Jesanis, 5,369; Mr. Johnson, 9,363, Mr. Kabat, 5,369; and Ms. Lee, 6,851. For Mr. Yates, the number of RSUs or deferred stock units valued at $35.86 per unit.outstanding as of December 31, 2022 was 44,545. |
(3)(4)
| This column includesThe amounts shown reflect matching contributions made by the NiSource Charitable Foundation under the Director Charitable Match Program. The Foundation matches up to $10,000 annually in contributions by any non-employee director to approved tax-exempt charitable organizations. Any amount not utilized for the match in the year it is first available is carried over to the following year. |
(5)
| Dr. Woo departed from the Board effective January 27, 2022. Mr. DeVeydt departed from the Board effective March 15, 2022. |
(6)
| In connection with Dr. Woo’s retirement from the Board, the Board approved a contribution in the amount of $35,000 to be made by the Foundation to the tax-exempt charitable organization of Dr. Woo’s choice, subject to the approval of the Foundation. |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table
contains information about those persons or groups that are known toshows as of March 6, 2023, the
Company to be thenumber of shares of our outstanding common stock beneficially owned by: (i) beneficial owners of more than
five percent5% of
theour outstanding common stock
based(based solely on the
latest SchedulesSchedule 13G
filings and any amendments thereto filed with the SEC on or before
February 27, 2015. | | | | | | | | |
| Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | | Percent of Class Outstanding | |
The Vanguard Group(1) | | | 24,716,611 | | | | 7.8% | |
100 Vanguard Blvd. Malvern, PA 19355 | | | | | | | | |
T. Rowe Price Associates, Inc.(2) | | | 21,991,926 | | | | 6.9% | |
100 East Pratt Street Baltimore, MD 21202 | | | | | | | | |
BlackRock, Inc.(3) | | | 21,005,426 | | | | 6.7% | |
55 East 52nd Street New York, NY 10022 | | | | | | | | |
Deutsche Bank AG(4) | | | 19,417,886 | | | | 6.1% | |
Taunusanlage 12 60325 Frankfurt am Main Germany | | | | | | | | |
State Street Corporation(5) | | | 16,275,486 | | | | 5.2% | |
One Lincoln Street Boston, MA 02111 | | | | | | | | |
FMR LLC(6) | | | 16,099,997 | | | | 5.1% | |
245 Summer Street Boston, MA 02210 | | | | | | | | |
| | 5% Owners
| | | | | | | |
| | The Vanguard Group(1)
100 Vanguard Blvd.
Malvern, PA 19355 | | | 52,054,948 | | | 12.82% | |
| | BlackRock, Inc.(2)
55 East 52nd Street
New York, NY 10055 | | | 43,425,768 | | | 10.6% | |
| | State Street Corporation(3)
State Street Financial Center
1 Lincoln Street
Boston, MA 02111 | | | 22,596,044 | | | 5.56% | |
| |
| | | | | | | |
| | Directors and Named Executive Officers | | | | | | | |
| | Shawn Anderson(5) | | | | | | 30,310 | |
| | Peter A. Altabef(4) | | | | | | 35,641 | |
| | Sondra L. Barbour(4) | | | | | | 7,117 | |
| | Melody Birmingham(5) | | | | | | 0 | |
| | Donald E. Brown(5) | | | | | | 140,913 | |
| | Theodore H. Bunting, Jr.(4) | | | | | | 23,251 | |
| | Eric L. Butler(4) | | | | | | 46,718 | |
| | Aristides S. Candris(4) | | | | | | 20,344* | |
| | Joseph Hamrock(5) | | | | | | 479,994 | |
| | Deborah A. Henretta(4) | | | | | | 4,477* | |
| | Deborah A.P. Hersman(4) | | | | | | 14,110* | |
| | William Jefferson, Jr.(5) | | | | | | 0 | |
| | Michel E. Jesanis(4) | | | | | | 46,875 | |
| | William D. Johnson(4) | | | | | | 6,421 | |
| | Kevin K. Kabat(4) | | | | | | 45,481 | |
| | Cassandra S. Lee(4) | | | | | | 6,914 | |
| | Pablo A. Vegas(5) | | | | | | 66,483 | |
| | Lloyd M. Yates(4)(5) | | | | | | 19,738 | |
| | All directors and executive officers as a group (22 persons) | | | | | | * | |
* Less than 1%
(1)
| As reported on an amendment to statement on Schedule 13G13G/A filed with the SEC on behalf of The Vanguard Group on February 10, 2015.9, 2023. The Vanguard Group has solereported shared voting power with respect to 568,067729,060 shares, sole dispositive power with respect to 24,203,39750,210,058 shares and shared dispositive power with respect to 513,214 shares reported as beneficially owned.1,844,890 shares. |
2023 Proxy Statement | 31
TABLE OF CONTENTS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(2)
| As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of T. Rowe Price Associates, Inc. on February 13, 2015. T. Rowe Price Associates, Inc. has sole voting power with respect to 6,960,111 shares and sole dispositive power with respect to 21,991,926 shares reported as beneficially owned. |
(3) | As reported on an amendment to statement on Schedule 13G13G/A filed with the SEC on behalf of BlackRock, Inc. on January 29, 2015.27, 2023. BlackRock, Inc. hasreported sole voting power with respect to 18,198,31240,059,742 shares and sole dispositive power with respect to 21,005,426 shares reported as beneficially owned.43,425,768 shares. |
(4)(3)
| As reported on aan amendment to statement on Schedule 13G filed with the SEC on behalf of Deutsche Bank AG on February 17, 2015. Deutsche Bank AG has sole voting power with respect to 19,331,470 shares, sole dispositive power with respect to 19,415,886 shares and shared dispositive power with respect to 2,000 shares reported as beneficially owned. |
(5) | As reported on a Schedule 13G13G/A filed with the SEC on behalf of State Street Corporation on February 12, 2015.7, 2023. State Street Corporation hasreported shared voting power with respect to 18,794,883 shares and shared dispositive power with respect to 16,275,486 shares reported as beneficially owned.22,594,019 shares. |
(6)(4)
| As reported on a Schedule 13G filed withDoes not include RSUs issued under the SEC on behalf of FMR LLC on February 13, 2015. FMR LLC has sole voting power with respect to 298,188 shares and sole dispositive power with respect to 16,099,997 ofOmnibus Plan unless the shares reported as beneficially owned.have been distributed or the non-employee director has the right to acquire the shares within 60 days of March 6, 2023. |
The following table contains information about the beneficial ownership of our common stock as of February 27, 2015 for each of the directors, director nominees and Named Executive Officers, and for all directors and executive officers as a group. Beneficial ownership reflects sole voting and sole investment power, unless otherwise noted.
| | | | |
Name of Beneficial Owner | | Amount and Nature of
Beneficial Ownership(1)
| |
Richard A. Abdoo
| | | 15,000 | |
Aristides S. Candris
| | | 2,000 | |
Sigmund L. Cornelius
| | | 8,043 | |
Joseph Hamrock
| | | 43,486 | |
Carrie J. Hightman(2)
| | | 116,862 | |
Michael E. Jesanis
| | | 7,715 | |
Glen L. Kettering
| | | 109,243 | |
Marty R. Kittrell
| | | 845 | |
W. Lee Nutter
| | | 114,970 | |
Deborah S. Parker
| | | — | |
Robert C. Skaggs, Jr.(3)
| | | 863,265 | |
Stephen P. Smith
| | | 185,388 | |
Teresa A. Taylor
| | | 4,444 | |
Richard L. Thompson
| | | 12,871 | |
Carolyn Y. Woo
| | | 16,315 | |
All directors and executive officers as a group (18 persons)
| | | 1,601,968 | |
(1)(5)
| Includes shares held in our 401(k) Plan and shares that are distributable within 60 days pursuant to restricted stock units, as applicable. The percentage of common stock owned by any director or Named Executive Officer, or all directors and executive officers as a group, does not exceed one percent of the common stock outstanding as of February 27, 2015.March 6, 2023. |
(2) | Includes shares owned by a trust over which Ms. Hightman maintains investment control and of which one or more of her immediate family members are the sole beneficiaries. |
(3) | Includes shares owned by trusts over which Mr. Skaggs maintains investment control and of which he and his immediate family members are the sole beneficiaries. |
Certain of our directors and executive owners own common units representing limited partnership interests of Columbia Pipeline Partners LP (“CPPL”), a master limited partnership that the Company controls and in which the Company has a 46.5% ownership interest through its subsidiary, Columbia Energy Group. The table below shows the number of common units beneficially owned as of February 27, 2015. Beneficial ownership reflects sole voting and sole investment power.
| | | | |
Name of Beneficial Owner | | Amount and Nature of
Beneficial Ownership
of CPPL Common
Units(1)
| |
Richard A. Abdoo
| | | — | |
Aristides S. Candris
| | | 3,800 | |
Sigmund L. Cornelius
| | | 4,400 | |
Joseph Hamrock
| | | 2,500 | |
Carrie J. Hightman
| | | 1,200 | |
Michael E. Jesanis
| | | 2,000 | |
Glen L. Kettering
| | | 1,300 | |
Marty R. Kittrell
| | | — | |
W. Lee Nutter
| | | 25,000 | |
Deborah S. Parker
| | | — | |
Robert C. Skaggs, Jr.
| | | 37,500 | |
Stephen P. Smith
| | | 37,500 | |
Teresa A. Taylor
| | | 3,000 | |
Richard L. Thompson
| | | 10,000 | |
Carolyn Y. Woo
| | | — | |
All directors and executive officers as a group (18 persons)
| | | 133,200 | |
(1) | The percentage of common units owned by any director or Named Executive Officer, or all directors and executive officers as a group, does not exceed one percent of the common units outstanding as of February 27, 2015. |
32 | 2023 Proxy Statement
EXECUTIVE COMPENSATIONTABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
2014 Accomplishments
The Company had another year of significant achievements in 2014 including:
Another industry leading year in stock price appreciation;
Delivering total shareholder return of approximately 32%;
Increasing our annual dividend by approximately 4%;
OutperformingIn the major utility indices for the sixth consecutive year;CD&A, we describe and
Generating earnings growth in line with our guidance range for the eighth consecutive year.
Our 2014 performance was once again driven in large part by our continued disciplined execution across all facets of our established infrastructure focused and investment-driven business strategy. Key business accomplishments during 2014 include:
Initiating our strategic and transformational growth plan, including the creation of CPPL and planned separation of our natural gas pipeline and related business into CPG, Inc., a stand-alone, publicly traded company;
Being selected to the Dow Jones Sustainability North American Index;
Completing the second of several electric generation environmental upgrades;
Originating several transformational, customer-driven growth projects at Columbia Pipeline Group, including placing into service more than $300 million in system expansion projects, adding approximately 1.1 billion cubic feet of system capacity; placing into service nearly $200 million in new midstream projects; and completing approximately $325 million in system modernization projects during the year;
Continuing our multi-billion dollar system modernization programs across each of our business units;
Being selected as one of the World’s Most Ethical Companies for the fourth consecutive year;
Increasing equity market capitalization by approximately $3 billion.
In addition, we continued to strengthen our financial profile, and deliver on our capital investment program of just over $2.2 billion while maintaining an investment grade credit rating, and providing a solid and growing dividend.
The ONC Committee considered these achievements while performing its oversight activities throughout the course of the year.
Executive Compensation Highlights
In connection with its ongoing review of discuss our executive compensation program, including its objectives and elements, as well as determinations made by the ONCCompensation and Human Capital Committee maderegarding the compensation of our named executive officers (“NEOs”). Below is a numbercondensed table of compensation decisions with respectcontents to 2014 including:
Approving base salary increases for eachhelp guide you through the CD&A section of thethis proxy statement:
- Executive Overview (pp 33) - Executive Compensation Decision Making (pp 37) - Our Executive Compensation Program (pp 38) - Executive Compensation Elements (pp 39) - Executive Compensation Process and Guidelines (pp 47) Our Named Executive Officers for(NEOs)
As of December 31, 2022, the reasons explained in the section entitled “2014 Base Salaries;”NEOs are:
Approving an increase in the trigger, targetLloyd Yates —President and stretch award opportunities for the annual cash short-term incentive for the Chief Executive Officer (“CEO”)
Donald E. Brown—Executive Vice President and Chief Financial Officer (“CFO”)
Shawn Anderson—Senior Vice President Strategy and Chief Risk Officer
Melody Birmingham—Executive Vice President and Chief Innovation Officer
Bill Jefferson—Executive Vice President and Chief Safety Officer
Joseph Hamrock—Former President and Chief Executive Officer
Pablo A. Vegas—Former Executive Vice President and Group President, Utilities
On March 15, 2023, we announced a reconfiguration of leadership responsibilities for several of the reasons explainedabove named NEOs, effective March 27, 2023. Please see our annual report or our website for further details.
Our Company
NiSource is one of the largest fully regulated utility companies in the section entitled “Annual Performance-Based Cash Incentives;”
Delivering the 2014 annual long-term equity awardsUnited States, serving approximately 3.2 million natural gas customers and 500,000 electric customers across six states through its local Columbia Gas and NIPSCO brands. Based in Merrillville, Indiana, NiSource’s approximately 7,500 employees are focused on safely delivering reliable and affordable energy to our Named Executive Officers solelycustomers and the communities we serve.
Our strategies focus on improving safety and reliability, enhancing customer service, pursuing regulatory and legislative initiatives to increase accessibility for customers currently not on our gas and electric service, ensuring customer affordability and reducing emissions while generating sustainable returns. With our strategies in the form of performance shares that vest upon the achievement of performance goalsmind, NiSource is committed to providing safe and continuous employment over the course of the multi-year performance period;
Further aligning the performance goalsreliable energy for our 2014 annual long-term equity awards with the Company’s strategic operating plan and with the interests of shareholders by removing “funds from operations” as a performance goal under the 2014 annual long-term equity incentive program and substantially increasing the weightingcustomers, which in turn creates value for relative total shareholder return;
Approving increases in the grant date value of the 2014 annual long-term equity award opportunities for Messrs. Skaggs, Smith, and Hamrock for the reasons explained in the section entitled “LTIP Awards;”
Awarding Mr. Kettering a special cash bonus of $100,000 and a special grant of time-vested restricted stock units with a grant date fair value of $500,000 in recognition of his role as interim Business Unit CEO;
Approving discretionary cash bonuses for each of the Named Executive Officers based on their significant contributions to the Company’s success as further explained in the section entitled “Additional Discretionary Lump Sum Payouts to the Named Executive Officers Based on 2014 Performance;”
Approving a change to our 2014 restricted stock and restricted stock unit awards so that change-in-control vesting is contingent on the occurrence of both a qualifying change-in-control and employment termination; and
Modifying the Comparative Group (as defined below) to further align the Company with companies that are operationally similar and with which we compete forstockholders. Our executive talent.
Overview of Our 2014 Executive Compensation Program
Compensation Practices
Our compensation program is intended to attract and retain the best leadership talent in the industry. At the same time, our compensation program is designed to align our executives to achieve these critical commitments.
Leadership Enhancements In 2022
2022 was a year of continued transition for NiSource. Following the planned retirement of former CEO and motivate highly qualified executives.president Joe Hamrock, the company appointed Lloyd Yates as CEO and President, assuming these roles on February 14, 2022. Mr. Hamrock assisted in facilitating the CEO transition in a non-executive officer role and resigned effective July 31, 2022.
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
On July 1, 2022, William Jefferson and Melody Birmingham joined NiSource. On September 2, 2022, Pablo Vegas departed NiSource.
Company Performance Highlights in 2022 and Impact on Compensation Outcomes
In 2022, NiSource completed a comprehensive business review, resulting in a top-tier plan to drive shareholder value. Additionally, we maintained strong regulatory execution throughout the NiSource footprint; continued focus on operational excellence, efficiency, and enhanced safety; and built a long-term plan to invest in new technologies to change how NiSource and our operating companies plan, schedule, and execute work in the field and engage and provide service to customers.
In 2022, we delivered strong financial performance, exceeding our adjusted earnings guidance. We also:
1.
| Aligned our business priorities to optimize growth by refreshing our mission, vision, values, and aspirational commitments to advance our goals to deliver safe, reliable energy that drives value to our customers. |
2.
| Continued to advance our sustainability plan by announcing a net zero goal, which places NiSource among the industry leaders. |
3.
| Were recognized by LRQA, a leading global provider of professional engineering and technology services, for achieving conformance certification in the American Petroleum Institute’s Recommended Practice 1173 for its Safety Management System (SMS). |
4.
| Committed to increasing our spend with diverse suppliers as part of our economic inclusion initiatives. |
5.
| Earned several awards, including being recognized on the Forbes list of Best Employers for Women 2022 and named to the S&P Global Sustainability Yearbook for the first time, recognizing NiSource as one of the world’s most sustainable companies. |
We believe that our performance highlights reflect a successful year of commitment to our shareholders while not wavering on our company’s shared commitment to safety, reliability, affordability, and sustainability.
Business Performance Affecting Compensation Outcomes for 2022
The principalCompensation and Human Capital Committee believes that 2022 compensation awards and outcomes were appropriate and are reflective of performance. Below is a summary by each Compensation and Human Capital Committee approved performance measure, showing the target performance goals, achieved results and percentage of target for i) STI earned in 2022, ii) 2020 PSUs earned over the 2020-2022 performance period, and iii) 2021 Special PSUs earned over the 2021-2022 performance period.
34 | 2023 Proxy Statement
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
2022 STI
The 2022 STI program design included financial and safety performance measures that each had a target goal. For the officer level STI program participants, actual individual award values were subject to discretionary adjustment based upon individual performance. The 2022 overall achieved results for the performance measures were115% of target. After review by the Compensation and Human Capital Committee, a 94.44% payout opportunity pool was funded for STI. For more information, see “Executive Compensation Elements – 2022 Short-Term Incentive (STI) Program.”
| | FINANCIAL PERFORMANCE (70% weighting) | |
| | NOEPS | | | $1.44 - $1.46 | | | $1.47 | | | 108% | |
| | SAFETY SCORECARD (30% weighting) | |
| | Severe Injury and Event Year Over Year Reduction | | | 20% | | | 50% | | | 150% | |
| | Executive and Leadership Safety Observations | | | 35,600 | | | 53,448 | | | 150% | |
| | Process Safety Incidents | | | 0 | | | 0 | | | 100% | |
| | Operational Rigor | | | 95% | | | 100% | | | 150% | |
| | Records and Technology: | | | | | | | | | | |
| | Completion POD and District Regulator Station Isometric Drawings for Above Ground Assets | | | 97% | | | 99% | | | 133% | |
| | Buried Control Lines Located and Mapped on Isometric Drawings (>=125# Station Inlet Pressure) | | | 10% | | | 22% | | | 150% | |
| | % of leak survey main miles completed by Picarro technology | | | 27% | | | 28% | | | 100% | |
| | % of identified field employees protected with 4 gas sensor/Lone Worker technology (NiSafe/Blackline) | | | 98% | | | 99% | | | 125% | |
2020 PSUs
The three-year results for 2020-2022 for the below performance measures resulted in 79% of target PSUs earned for our NEOs. For more information, see “Executive Compensation Elements – 2020 PSU Awards.”
Prior to the payment of any 2020 PSUs, a threshold net operating earnings per share (“NOEPS”) trigger must be met. NOEPS is a non-GAAP measure described in “Executive Compensation Elements – 2022 Short-Term Incentive (STI) Program.”
| | FINANCIAL PERFORMANCE (80% weighting) | |
| | Thee-Year Cumulative NOEPS | | | $4.25 | | | $4.21 | | | 74% | |
| | Relative Total Shareholder Return (20% weighting) | |
| | Three-Year Customer Value Framework | | | Various Customer
Value Goals | | | 1 of 4 goals met | | | 5% | |
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
2021 PSUs
The results for the 2021 PSUs earned over the 2021-2022 performance year resulted in 175% of target PSUs earned for our NEOs.
| | FINANCIAL PERFORMANCE (100% weighting) | |
| | Relative Totals Shareholder Return (over 2 and 3 year Performance Period) | | | 55th Percentile | | | 82nd Percentile | | | 177% | |
| | SAFETY SCORECARD (+/-20% modifier) | |
| | Average Annual STI Safety Scorecard Results (as % of Target) Over Three-Year Performance Period | | | 100% | | | 99% | | | -1% | |
Components of 2022 Compensation
The mix of key elements of compensation we provide(expressed as a proportion of total compensation) awarded to our executives are:chief executive officer reflects a significant portion of the total target being both performance-based and at-risk, which is consistent with our pay for performance philosophy.
For 2022, the Compensation and Human Capital Committee approved a mix of pay that balanced short-term and long-term incentives and focused the efforts of our NEOs on the achievement of both short-term business objectives and long-term strategic objectives. The majority of our NEOs’ total target direct compensation was in the form of equity awards to further align the interests of our NEOs with those of our stockholders. For more information, see “Our Executive Compensation Program.”
Highlights of our Compensation Practices
We review all elements of our executive compensation program and, in addition to designing a program to comply with required rules, we adopt current best practices where deemed appropriate for our business and shareholders.
| | ✔ | | | Incentive award metrics that are tied to key company performance measures | | | ✘ | | | Repricing of options without stockholder approval | |
| | ✔ | | | Share ownership guidelines applicable to executive officers and independent directors | | | ✘ | | | Hedging or pledging transactions or short sales by executive officers or directors | |
| | ✔ | | | Compensation recoupment policy | | | ✘ | | | Tax gross-ups for Named Executive Officers | |
| | ✔ | | | Limited perquisites | | | ✘ | | | Automatic single-trigger equity vesting upon a change-in-control | |
| | ✔ | | | Prohibition against pledging unearned shares in our long-term incentive plan | | | ✘ | | | Excise tax gross-ups under change-in-control agreements | |
| | ✔ | | | Double-trigger severance benefits upon a change-in-control | | | ✘ | | | Excessive pension benefits or defined benefit supplemental executive retirement plan | |
| | ✔ | | | One-year minimum vesting for equity awards | | | ✘ | | | Excessive use of non-performance based compensation | |
| | ✔ | | | Significant portions of the executive compensation opportunity that are entirely contingent on performance against pre-established performance goals | | | ✘ | | | Excessive severance benefits | |
| | ✔ | | | Independent compensation consultant | | | | | | | |
| | ✔ | | | Annual Say-on-Pay vote by stockholders | | | | | | | |
36 | 2023 Proxy Statement
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Executive Compensation Decision Making Our Objectives
The key design priorities of our 2022 executive compensation program were to:
| | ■ | | | Attract and retain talented executives | | | ■ | | | Provide market competitive compensation opportunities | |
| | ■ | | | Motivate and reward executives for sustaining high performance | | | ■ | | | Ensure significant portions of pay opportunity are aligned with our strategy and shareholder value creation | |
The Compensation and Human Capital Committee believes that our executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives and reward effective leadership decisions that support the creation of value for all our stakeholders: customers, employees, communities, and stockholders.
Compensation
Annually, the Compensation and Human Capital Committee is responsible for reviewing and approving (or, in the case of our CEO, recommending to the independent members of the Board for approval) each element of total target direct compensation for our executive officers including our NEOs. NEO compensation decisions for Messrs. Vegas and Anderson were made in January 2022 at which time the Compensation and Human Capital Committee consisted of Messrs. Butler, Jesanis and Yates and Ms. Henretta. NEO compensation decisions made for Ms. Birmingham and Mr. Jefferson were made at the time of hire for each of them, at which time the Compensation and Human Capital Committee consisted of Messrs. Butler, Bunting, Johnson, and Ms. Henretta. All of the executive compensation decisions made by the Compensation and Human Capital Committee were based primarily on the following factors (“Pay Factors”):
| ■ | Corporate performance and attainment of our established business and financial goals (Messrs. Vegas and Anderson) |
| ■ | Competitiveness of our compensation program (and each NEO’s total target direct compensation and each element of compensation) based upon competitive market data |
| ■ | Executive officer’s/NEO’s position, experience, role, responsibilities, and performance relative to achievement of business goals |
| ■ | Mix of variable at-risk versus fixed pay |
| ■ | Mix of cash versus equity pay |
In addition, the Compensation and Human Capital Committee considered compensation recommendations from our then-CEO, Mr. Hamrock, reflecting his assessment of each NEO’s performance (other than his own performance). The Compensation and Human Capital Committee separately evaluated potential pay alternatives prepared by Meridian to develop its compensation recommendation for review and approval by the independent members of the Board for Mr. Yates. Mr. Yates was not involved in making recommendations with respect to his compensation.
2022 Say-on-Pay Results
When making decisions about our executive compensation program, the Compensation and Human Capital Committee considers the stockholders’ views of such matters. In 2022, approximately 95% of the votes cast by our investors were voted in favor of our say-on-pay proposal at our 2022 annual meeting of stockholders. In fact, over the last five years, we have received an average of 95% of the votes cast by our investors in favor of our say-on-pay proposal. No changes were made to the design of our executive compensation program in response to the 2022 say-on-pay advisory vote. The Compensation and Human Capital Committee did, however, make some limited changes to the 2022 STI and LTI programs, as described in further detail under “2022 Short-Term Incentive (STI) Program” and “2022 Long-Term Incentive (LTI) Program” below under “Executive Compensation Elements.”
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TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Our Executive Compensation Program Components of 2022 Executive Compensation Program
The primary components of our 2022 executive compensation program were base salary, the short-term incentive program, and the long-term incentive program.
2022 Executive Compensation Pay Mix and Total Target Direct Compensation
We set 2022 total target direct compensation (base salary, annual short-term performance-based cash incentives, and long-term
performance-based equity incentive
awards. Taken together these three elements are referred to as “total compensation.”We generally target total compensationawards) to be competitive with the compensation paid to similarly positioned executives at companies within our compensation peer group of companies (the “Comparative“Comparator Group”) as described in the section entitled “Our Executive Compensation Process — Competitive Market Review.”. We do not, however, manage pay to a certain targetstipulated percentile of the ComparativeComparator Group practices.
We use short and long-term performance-based compensation to motivate our executives to meet and exceedcompanies.
The following charts show the
short and long-term business objectivesmix of
the Company.Historically, we have used 100% performance-based equity2022 total target direct compensation for our CEO, the average total target direct compensation for other NEOs and the portion that is performance based and/or at-risk.
For purposes of these charts, the percentage of total target direct compensation was determined based on the annual long-term equitybase salary and target incentive awardsopportunities applicable to the active NEOs as a means to alignof December 31, 2022.
The following table shows 2022 total target direct compensation and each component of total target direct compensation for the interestslisted NEO as of our executives with those of our stockholders. See the section entitled “Changes to Our December 31, 2022.
| | Lloyd Yates | | | 1,000,000 | | | 1,150,000 | | | 3,600,034 | | | 899,965 | | | 6,649,999 | |
| | Donald E. Brown | | | 630,360 | | | 472,770 | | | 959,997 | | | 240,014 | | | 2,303,141 | |
| | Shawn Anderson | | | 400,000 | | | 240,000 | | | 350,011 | | | 149,979 | | | 1,139,990 | |
| | Melody Birmingham | | | 625,000 | | | 468,750 | | | 1,000,004 | | | 249,986 | | | 2,343,740 | |
| | William Jefferson | | | 475,000 | | | 332,500 | | | 569,988 | | | 142,497 | | | 1,519,986 | |
(1)
| The table and charts above do not include a) any information for Messrs. Hamrock or Vegas as they are no longer employed with the Company or b) Special Awards that were granted as such awards do not represent an annual component of our executive compensation program. For more information regarding these awards, see the “Special Retention Awards” section under “Executive Compensation Elements.” |
38 | 2023 Proxy Statement
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Executive Compensation
Program in 2015” for an explanation of our use of restricted stock units for our 2015 annual long-term equity awards. We also occasionally use special awards of time-vested restricted stock and restricted stock units to attract and retain executive talent, promote management continuity and reward outstanding performance.We employ leading governance practices, such as clawback policies and stock ownership guidelines, and we conduct an annual risk assessment of the Company’s compensation practices.
In addition, our executive officers are prohibited from trading in Company securities during quarterly blackout periods and they are also prohibited from engaging in hedging or short sales of the Company’s equity securities.
Finally, when making decisions about our executive compensation program, we take into account the stockholders’ view of such matters. In 2014, 96% of our investors voted in favor of our Say on Pay Proposal at our Annual Meeting. No changes were made to the design of our executive compensation program as a result of the stockholder vote.
Our Executive Compensation Philosophy
The discussion of executive compensation philosophy, program and practices that follows applies to our Company’s Named Executive Officers in 2014. They were: Robert C. Skaggs, Jr., President and CEO, Stephen P. Smith, Executive Vice President and CFO; Glen L. Kettering, Executive Vice President and Group Chief Executive Officer, Columbia Pipeline Group (“CPG”); Carrie J. Hightman, Executive Vice President and Chief Legal Officer; and Joseph Hamrock, Executive Vice President and Group Chief Executive Officer, NiSource Gas Distribution (“NGD”).
The key design priorities of the Company’s executive compensation program are to:
ElementsMaintain a financially responsible program aligned with the Company’s strategic plan to build stockholder value and long-term, sustainable earnings growth;
Provide a total compensation package that is aligned with the standards in our industry thereby enhancing the Company’s ability to:
Attract and retain executives with competitive compensation opportunities;
Motivate and reward for achieving and exceeding our business objectives; and
Provide substantial portions of pay at risk for failure to achieve our business objectives;
Align the interests of stockholders and executives by emphasizing stock-denominated compensation opportunities that are contingent on goal achievement; and
Comply with all applicable laws and regulations.
The ONC Committee believes that the Company’s executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives, and rewards decision making that creates value for our stockholders, customers and other key stakeholders.
Principal Elements of Our Compensation Program
We have designed our program to meet our business objectives using various compensation elements intended to drive both short-term and long-term performance.
We believe that total compensation for our Named Executive Officers should be largely performance-based, and the proportion of at-risk, performance-based compensation should increase as the executive’s level of responsibility within the Company increases. The ONC Committee believes the appropriate mix of the elements of compensation should take into account the Company’s business objectives, the competitive environment, Company performance, individual performance and responsibilities and evolving governance practices.
For 2014, the approximate percentage of our Named Executive Officers’ 2014 target total compensation (base salary, the annual performance-based cash incentive payable at the target level and the grant date fair value of the annual long-term performance-based equity incentive award payable at the target level) that was fixed (base salary) was as follows:
The principal elements of our total compensation package, as more fully described below, help us achieve the objectives of our compensation program as follows:
| | | | | | | | | | | | | | |
| | | | | | Time Horizon | | | | |
Element of Total Compensation
| | Form of
Compensation | | Attraction | | Short-
Term | | | | Long-
Term | | Alignment with
Stockholder Interest | | Retention |
Base Salary
| | Cash | | ü | | | | | | | | | | ü |
Annual Performance-Based
Cash Incentive
| | Cash | | ü | | ü | | | | | | ü | | ü |
Long-Term Performance-Based
Equity Incentive
| | Performance
Shares | | ü | | | | | | ü | | ü | | ü |
Base Salary.
Base salary is designed to provideprovides our employeesNEOs with a level of fixed pay that is commensurate with the employee’s role and responsibility. We believe that by delivering base salaries that are reflective of market norms,For 2022, the Company is well-positioned to attract, retainCompensation and motivate top caliber executives in an increasingly competitive labor environment. The ONCHuman Capital Committee annually reviewsincreased the base salariessalary by approximately 2% for Mr. Brown and 14% for Mr. Anderson. In making these decisions and recommendations, the Compensation and Human Capital Committee considered each of the Company’s senior executives,Pay Factors discussed above. These salary adjustments became effective on March 1, 2022. The Compensation and Human Capital Committee also reviewed benchmark data, industry experience and performance when determining the compensation for Ms. Birmingham and Mr. Jefferson and for evaluating and recommending compensation for Mr. Yates to the Board of Directors for approval.
2022 Short-Term Incentive (STI) Program
2022 STI Objectives. The objectives of our 2022 STI program were to:
| ■ | Motivate our NEOs (and all other participants) to achieve critical financial and safety performance goals, which were directly aligned with the Company’s annual financial plan and key business imperatives; and |
| ■ | Provide a competitive level of STI payout opportunities |
The 2022 STI provides participants, including the
Named Executive Officers, to ensure they are competitive within our industry. In so doing, the ONC Committee considers the base salaries paid to similarly situated executives by the companies in the Comparative Group. See the section entitled “Our Executive Compensation Process — Competitive Market Review” listing the companies in our Comparative Group. The ONC Committee determines any base salary changes for the Company’s senior executives based on a combination of factors that includes competitive pay standards, level of responsibility, experience, internal equity considerations, historical compensation, and individual performance and contribution to business objectives, as well as recommendations from the CEO. The CEO is evaluated separately, taking into account those factors reviewed for all other senior executives, as well as the Corporate Governance Committee’s evaluation of the CEO’s performance. See the section below entitled “ONC Committee Actions Related to 2014 Compensation” for more information.Annual Performance-Based Cash Incentive Plan (“Incentive Plan”). This component of total compensation provides employeesNEOs, with the opportunity to earn a cash incentive award tied to both the annual performanceachievement of the Company and individual contribution to the organization’s success. Annual cash incentives are authorized by the Omnibus Plan which was previously approved by stockholders in May 2010. Thefinancial performance goals for the Incentive Plan are based on the financial plan approved by the Board at the beginning of the year. The financial plan is designed to achieve the Company’s aim of creating sustainable stockholder value by growing earnings, effectively managing the Company’s cash(NOEPS weighted 70%) and providingsafety goals (weighted 30%) over a strong dividend.
Eligibility for participation in the Incentive Plan extends to nearly all Company employees.one-year performance period. Every eligible employee has an incentive opportunity at trigger,threshold, target and stretch levels of performance. The Compensation and Human Capital Committee retains discretion to adjust STI awards, either on a formulaic or discretionary basis.
2022 STI Performance Measures. In January 2022, the Compensation and Human Capital Committee approved the following weighting of performance measures and goals to be used to determine the 2022 STI payouts for the NEOs and other participating employees.
| | Net Operating Earnings per Share | | | 70% | | | $1.44-1.46 | |
| | Safety Scorecard | | | 30% | | | 100% scorecard achievement | |
Financial Measure (70%): The NOEPS financial performance goals were determined based on our 2022 annual financial plan. The Compensation and Human Capital Committee selected NOEPS as a financial measure because it is viewed by the Board as representative of our fundamental earnings strength, aligned with stockholder value creation, used internally for budgeting and reporting to the Board, and generally consistent with our external reporting of results.
The definition of NOEPS is income from continuing operations determined in accordance with GAAP, including, without limitation, the impact of incentive payouts and adjusted for certain items, such as fluctuations in weather and other significant unusual events disclosed in our earnings reports (examples of which may include transaction-related costs, debt extinguishment costs or certain income tax items).
Safety Measures (30%): The safety performance goals were determined based on our 2022 annual safety plan, which was approved by the Safety, Operations, Regulatory and Policy Committee (formerly known as the Environmental Safety and Sustainability Committee) of the Board of Directors. The Compensation and Human Capital Committee selected safety as a performance measure to focus STI participants, including the NEOs, on the criticality of establishing and maintaining practices and procedures to ensure the highest safety levels throughout Company operations.
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
2022 STI Target Opportunity. Based on the Compensation and Human Capital Committee’s recommendation (minus the then-Committee member Mr. Yates), the independent members of the Board approved the CEO’s 2022 target incentive opportunity. The Compensation and Human Capital Committee approved 2022 target STI opportunities for the listed NEOs after considering the Pay Factors. Please see the Summary Compensation table for Mr. Vegas’ information.
| | Lloyd Yates | | | 115% | | | 1,150,000 | | | — | | | — | |
| | Joseph Hamrock | | | 120% | | | 1,236,000(2) | | | 120% | | | 1,236,000 | |
| | Donald E. Brown | | | 75% | | | 472,770 | | | 75% | | | 463,500 | |
| | Shawn Anderson | | | 60% | | | 240,000 | | | 60% | | | 210,000 | |
| | Melody Birmingham | | | 75% | | | 468,750 | | | — | | | — | |
| | William Jefferson | | | 70% | | | 332,500 | | | — | | | — | |
(1)
| As a result of Mr. Vegas’ resignation, STI was forfeited. |
(2)
| As a result of Mr. Hamrock’s retirement, the final amount paid was prorated |
2022 STI Performance Goals, Achieved Results and Percentage of Target Earned. The table below shows each performance measure and weight, target performance goal, achieved results and percentage of target earned based on achieved performance against performance goals. The 2022 STI program design included financial and safety performance measures that each had a target goal. For the officer level STI program participants, actual award values were 100% discretionary based upon individual performance. The 2022 overall achieved results for the performance measures was 115% of target. The program included a significant focus on safety measures, all of which were met at target. For non-officers, the STI program resulted in a payout opportunity of 91%. The program design included a significant focus on customer measures, all of which were not met. Management recommended, and the ONCCompensation and Human Capital Committee identifies expectationsapproved, a weighted average approach to the final results. Therefore, all employee groups had a 94.44% payout opportunity pool funded for all senior executives, includingSTI, subject to individual performance.
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The NOEPS and safety scorecard measures are reflected in the Named Executive Officers. Seefollowing table.
| | NOEPS | | | 70% | | | $1.38 | | | $1.44-1.46 | | | $1.52 | | | $1.47 | | | 76% | | | 108% | |
| | Safety Scorecard | | | | | | | | | | | | | | | | | | | | | | |
| | Severe Injury and Event Reduction | | | 5% | | | 10% | | | 20% | | | 50% | | | 50% | | | 7.50% | | | 150% | |
| | Executive and Leadership Safety Observations | | | 5% | | | 35,600 | | | 35,600 | | | 39,160 | | | 53,448 | | | 7.50% | | | 150% | |
| | Process Safety Incidents | | | 10% | | | 0 | | | 0 | | | 0 | | | 0 | | | 10% | | | 100% | |
| | Operational Rigor | | | 5% | | | 90 | | | 95 | | | 98 | | | 100 | | | 7.50% | | | 150% | |
| | Completion of 100% POD and District Regulator Station Isometric Drawings for Above Ground Assets | | | 5% Combined | | | 93% | | | 97% | | | 100% | | | 99% | | | 6.35% | | | 133% | |
| | Buried Control Lines Located and Mapped on Isometric Drawings (>=125# Station Inlet Pressure) | | | 7% | | | 10% | | | 12% | | | 22% | | | 150% | |
| | -% of leak survey main miles completed by Picarro technology | | | 25% | | | 27% | | | 30% | | | 28% | | | 100% | |
| | -% of identified field employees protected with 4 gas sensor/Lone Worker technology (NiSafe/Blackline) | | | 95% | | | 98% | | | 100% | | | 99% | | | 125% | |
| | Total | | | 100% | | | | | | | | | | | | | | | 115% | | | | |
(1)
| If performance results fall between two performance levels (for example, between target and stretch goals), the incentive opportunity is determined by interpolation. |
(2)
| Weighted achievement is determined by multiplying the weight by the formulaic results as a percent of target. The weighted achievement for all measures results in a formulaic payout of 115%. |
2022 Long-Term Incentive (LTI) Program
2022 LTI Mix. For 2022, the section below entitled “ONCCompensation and Human Capital Committee Actions Relatedapproved the following mix of LTI awards granted to 2014 Compensation”our NEOs:
| ■ | Performance Share Units (80% of 2022 target LTI award value for NEOs except for Mr. Anderson at 70%) |
| ■ | Restricted Stock Units (20% of 2022 target LTI award value for NEOs except for Mr. Anderson at 30%) |
2022 LTI Award Target Values. In January 2022, the independent members of the Board (excluding Mr. Yates) approved the CEO’s 2022 LTI target award value based on the Compensation and Human Capital Committee’s recommendation. Also in January 2022, the Compensation and Human Capital Committee approved 2022 LTI target award values for more information regardingMessrs. Brown, Vegas, and Anderson, after considering the 2014 Incentive Plan, including incentivePay Factors. In May 2022, the members also approved award values for Ms. Birmingham and Mr. Jefferson.
| | Lloyd Yates | | | 4,500,000 | | | 122,994 | | | 30,747 | | | — | |
| | Joseph Hamrock | | | — | | | — | | | — | | | 4,800,000 | |
| | Donald E. Brown | | | 1,200,000 | | | 32,798 | | | 8,200 | | | 1,200,000 | |
| | Shawn Anderson | | | 500,000 | | | 11,958 | | | 5,124 | | | 330,000 | |
| | Melody Birmingham | | | 1,250,000 | | | 33,278 | | | 8,319 | | | — | |
| | William Jefferson | | | 712,500 | | | 18,968 | | | 4,742 | | | — | |
| | Pablo A. Vegas | | | 1,300,000 | | | 33,532(3) | | | 8,882(3) | | | 1,235,000 | |
(1)
| 2022 PSU awards will vest based on Company performance, the application of the safety, environmental and DE&I magnifiers, and satisfaction of the service condition (the executive’s continued employment through February 28, 2025). |
(2)
| 2022 RSU awards will vest based on the executive’s continued employment through February 28, 2025. |
(3)
| As a result of Mr. Vegas’ resignation, these shares were forfeited. |
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
2022 Performance Share Units
PSU Objectives. The objectives of our 2022 PSU grants are to:
| ■ | Motivate NEOs to achieve critical long-term financial and total shareholder return goals (relative to peers) and achieve critical business imperatives related to safety, environmental and DE&I performance goals |
| ■ | Align the interests of NEOs with stockholders |
| ■ | Provide competitive LTI opportunities (when aggregated with RSU grants, which are discussed below) |
PSU Overview. In January 2022, the Compensation and Human Capital Committee approved the grant of PSUs to Messrs. Brown, Anderson and Vegas and the independent members of the Board (excluding Mr. Yates) approved a grant to Mr. Yates of PSUs. In May 2022, the Compensation and Human Capital Committee approved the grant of PSUs to Ms. Birmingham and Mr. Jefferson. The PSUs provide our NEOs the opportunity to earn shares of our common stock based on achieved results against three-year cumulative NOEPS (weighted 50%) and RTSR (weighted 50%) performance goals over a three-year performance period, subject to potential adjustment based on achieved results relating to safety, environmental and DE&I goals.
In addition, vesting of the PSUs is tied to the executive’s continued employment through the end of the vesting period (February 28, 2025), subject to special vesting rules in the event of death, retirement, disability, or a qualifying termination following a change-in-control of the Company prior to the vesting date. Termination for any other reason prior to February 28, 2025 will result in forfeiture of the 2022 PSUs. The number of PSUs earned and vested at the end of the three-year performance period will be settled in a like number of shares of our common stock.
2022 PSU Performance Measures. In January 2022, the Compensation and Human Capital Committee approved the following performance measures and goals reflected in the chart below to be used to determine each NEO’s payouts under their respective 2022 PSU grants.
2022 PSU Performance Goals
| | Three-Year Cumulative
NOEPS | | | 50% | | | $4.51 | | | $4.75 | | | $4.99 | |
| | RTSR | | | 50% | | | 30th Percentile | | | 50th Percentile | | | 80th Percentile | |
| | Magnifiers | |
| | Safety: Average Annual STI Safety Scorecard Results (as % of Target) Over Three-Year Performance Period | | | +/-20%
Magnifier | | | Scorecard Results: 80%
Number of Earned PSUs
Reduced by 20% | | | Scorecard Results:
100%
Number of Earned
PSUs Unchanged | | | Scorecard Results: 120%
Number of Earned PSUs
Increased by 20% | |
| | Environmental:
GHG Emission
Reduction | | | +/-10%
Magnifier | | | Below Target
(anything less
than Target)
Number of Earned PSUs
Reduced by 10% | | | Met Target(2)
Number of Earned
PSUs Unchanged | | | Exceeded Target(3)
Number of Earned PSUs
Increased by 10% | |
| | Diversity, Equity and Inclusion: Diversity of Workforce | | | +/-10%
Magnifier | | | 10 or less of 12 Categories – Number of Earned PSUs
Reduced by 10% | | | 11 of 12 Categories
– PSUs
Unchanged(4) | | | 12 of 12 Categories –
Number of Earned PSUs
Increased by 10% | |
(1)
| If performance results fall between two performance levels (for example, between target and stretch goals), the result is determined by interpolation. |
(2)
| Target goal means reduction in NIPSCO R.M. Schahfer Generating Station coal unit CO2 emissions by 11.9 million tonnes from a 2005 baseline and reduction in NiSource's methane emissions by 14.4% tonnes CO2e from a 2005 baseline. |
(3)
| Exceeded target goal means achievement of target goal and reduction in NiSource's methane emissions by 42.6% tonnes CO2e from a 2005 baseline (interpolate between goal and this level of achievement). |
(4)
| Target goal means eliminating the gap to availability (gender and ethnicity) in 11 of 12 categories. |
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Three-Year Cumulative NOEPS. The three-year cumulative NOEPS financial performance goals were determined based on our three-year financial plan. For the definition and payouts for eachcalculation of NOEPS, see above under “2022 STI Performance Measures.”
The Compensation and Human Capital Committee selected this measure because it aligns the
Named Executive Officers.Long-Term Equity Incentive Plan (“LTIP”). Our compensation program also includes a long-term equity incentive component. The ONC Committee believes it important that each executive, in particular eachinterests of our senior executives, has personal financial exposure to the performance of the Company’s stock and, therefore, is aligned with the financial interests of stockholders. The ONC Committee also believes that long-term equity incentives promote decision making that is consistent with the Company’s long-range operating goals.
To ensure that our executives’ interests are alignedNEOs with those of our stockholders, and it supports the creation of sustainable stockholder value by growing earnings and providing a strong dividend.
The Compensation and Human Capital Committee selected an NOEPS performance measure for both the 2022 PSU grants and the 2022 STI because the Compensation and Human Capital Committee considers NOEPS to be a core driver of both our short-term and long-term financial performance and stockholder value creation for both the short-term and long-term.
The target three-year cumulative NOEPS performance goal is designed to be achievable with strong management performance over the three-year performance period.
Three-Year Relative Total Shareholder Return (RTSR). Three-year RTSR will be determined by the annualized growth in the price of a share of our common stock, assuming dividends are reinvested, over the period beginning January 1, 2022 and ending on December 31, 2024, compared to a similar calculation for a group of 32 energy services companies that are within our industry or providing similar services to ours or with which we compete for the sale of equity capital, 21 of which are in the Comparator Group.
The Compensation and Human Capital Committee selected this measure because it aligns the interests of our NEOs with those of our stockholders, and it supports the creation of sustainable stockholder value.
Modifiers. The number of PSUs earned based on achievement of three-year cumulative NOEPS and RTSR performance goals is subject to adjustment based on achievement against safety, environmental and DE&I performance goals. The Compensation and Human Capital Committee selected these performance measures to reflect the Company’s long-term business objectives,broad commitment to these priorities.
2022 Restricted Stock Units
In January 2022, the ONCCompensation and Human Capital Committee determinedapproved the grant of RSUs to Messrs. Brown, Anderson and Vegas and the independent members of the Board (excluding Mr. Yates) approved a grant of RSUs to Mr. Yates. In May 2022, the Compensation and Human Capital Committee approved the grant of RSUs to Ms. Birmingham and Mr. Jefferson. These RSUs will vest based on the executive’s continued employment through February 28, 2025, subject to special vesting rules in the event of death, retirement, disability or a qualifying termination following a change-in-control of the Company prior to the vesting date. Termination for any other reason prior to February 28, 2025, will result in forfeiture of the 2022 RSUs. The number of RSUs that vest at the annual long-term equity incentive awards shouldend of the three-year service period will be delivered solelysettled in performance shares. Performance shares provide the opportunity to earna like number of shares of our common stock.
The Compensation and Human Capital Committee chose to grant RSUs to the Company’s common stock contingentNEOs because RSUs reward long-term service, help to retain NEOs over a multi-year service period, and align the interests of our NEOs with those of our stockholders.
Special Awards
2022 Special RSU Award. Mr. Anderson received a special RSU award of $500,000 to ensure his long-term leadership of the Company. This award is scheduled to vest based on his continued employment through January 28, 2025. Ms. Birmingham received a special RSU award of $1,161,855 to attract her to NiSource and to ensure her long-term leadership of the Company. Forty percent of this award is scheduled to vest based on her continued employment through July 1, 2023 and sixty percent on July 1, 2024. Mr. Jefferson received a special RSU award of $800,000 to attract him to NiSource and to ensure his long-term leadership of the Company. Fifty percent of this award is scheduled to vest based on his continued employment through each of July 1, 2023 and July 1, 2024, respectively. Special vesting rules apply in the event of retirement, death, disability, or a qualifying termination following a change-in-control of the Company.
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
2020 PSU Awards
In 2020, the Compensation and Human Capital Committee (and, in the case of the CEO, the independent members of the Board) approved LTI awards to Messrs. Hamrock, Brown, Anderson and Vegas in the form of PSUs (80% of the target 2020 LTI award). All the 2020 PSUs were subject to a threshold cumulative NOEPS performance trigger. Under the 2020 PSU design, 80% of the target PSUs were eligible to vest based on NOEPS performance above the trigger, with a +/- 25% RTSR performance modifier if top or bottom quartile RTSR performance was achieved. The remaining 20% of the target PSUs were eligible to vest based on the achievement of multi-yearcustomer value framework goals.
The performance measures, goals that we believe drive stockholder value. and results for the 2020 PSUs as certified by the Compensation and Human Capital Committee, are shown below.
| | Three-Year
Cumulative
NOEPS | | | Trigger (50% Payout): $4.03 | | | Three-year
Cumulative
NOEPS $4.21(1) | | | 74% | |
| | Target (100% Payout): $4.25 | |
| | Stretch (200% Payout): $4.47 | |
| | Threshold Goal(1) | | | Three-Year Customer Value
Framework Categories(3) | | | | | | % of Target PSU Earned | |
| | Three-Year
Cumulative
NOEPS | | | Safety, Customer Care, Organizational
Culture, and Environmental Impact | | | 1 of 4 Goals
Achieved(3) | | | 5% | |
(1)
| The 2020 PSUs were eligible for vesting only if the cumulative NOEPS performance trigger of $4.03 over a three-year performance period was met. For the three-year period ending December 31, 2022, our adjusted cumulative NOEPS was $4.21, which exceeded the cumulative NOEPS trigger of $4.03 for the 2020-2022 performance period. Once the NOEPS threshold was met, both the NOEPS PSUs (80% of the target PSUs) and customer value framework PSUs (20% of the target PSUs) were eligible to vest. Our cumulative NOEPS performance from January 1, 2020 through December 31, 2022 reflects the total of the amounts disclosed in our earnings reports for such years plus a COVID-19 pandemic adjustment of $0.05 approved by the Compensation and Human Capital Committee in 2020. The 2020 NOEPS target of $4.38 was adjusted after the sale of Columbia Gas of Massachusetts (“CMA”). As a result of the CMA adjustment, “cumulative NOEPS” means the Company’s cumulative NOEPS, as reported in the Company’s annual financial statements with additional adjustments made to the targets and results for: (x) transactions that the Company discloses on Form 8-K filed with the SEC, including merger, acquisition, divestiture, consolidation or corporate restructuring, any recapitalization, reorganization, spin-off, split-up, combination, liquidation, dissolution, sale of assets or similar corporate transactions that meet disclosure thresholds; and (y) pending transactions as a result of requirements to present operations as “held for sale” under Accounting Standard Codification 205.” |
(2)
| 74% of the target PSU was eligible to vest based on three-year cumulative NOEPS. Our RTSR performance was in the second quartile resulting in no modification in the number of PSUs earned. |
(3)
| 5% of the target PSU was eligible to vest based on achievement of customer value framework goals related to environmental, as measured by reduced greenhouse gas emissions over the performance period of 2020 to 2022. The safety, customer care, and organizational culture goals were not met. |
Vesting of the 2020 PSUs remained subject to the executive’s continued employment through February 28, 2023. The following table shows the target number of
performance shares
that can be earned ranges from 50% of target when performance reachessubject to the
trigger level to 200% of target when performance reaches the maximum creditable level of results.When establishing award opportunity levels for each Named Executive Officer, the ONC Committee considers, among other things, the executive’s base salary, the appropriate mix of cash and equity award opportunities,
prior awards under the LTIP and the compensation practices for similarly situated executives at other companies in our Comparative Group. The actual value of each performance-based award, if any, depends on Company performance against pre-established performance measures2020 PSUs as well as the number of shares of common stock pricethat vested pursuant to the terms of the 2020 PSUs.
| | Joseph Hamrock | | | 120,095 | | | 94,875 | |
| | Donald E. Brown | | | 31,615 | | | 24,976 | |
| | Shawn Anderson | | | 5,498 | | | 4,343 | |
(1)
| As a result of Mr. Hamrock’s retirement, vested shares were prorated. As a result of Mr. Vegas’ resignation, all shares (31,615) were forfeited. |
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
2021 Special PSU Awards
2021 Special PSUs. In January 2021, the Compensation and Human Capital Committee (and, in the case of the CEO, the independent members of the Board), granted special performance-based equity awards in the form of PSUs (“2021 Special PSUs”) to Messrs. Hamrock, Brown, Anderson and Vegas. The 2021 Special PSUs were granted to incentivize the retention of the leadership team and provide enhanced motivation to strive for the achievement of the goals required under the Company’s NiSource Next transformation initiative. Because the performance required for payouts under these awards is exceptional, with threshold payouts for the 2021 Special PSUs equivalent to target RTSR performance under the 2021 PSU program, the awards are designed to reward the achievement of the goals related to the NiSource Next transformation initiative and align with stockholder interest.
Under the program design, accelerated payout of 67% of the target award value may occur after two years if our RTSR performance results are at
or above the
timeutility peer group median. Any earned award is further adjusted by a safety magnifier to assure alignment with our safety performance. The Compensation and Human Capital Committee (and, in the case of the CEO, the independent members of the Board) set the award
is paid out.size at levels designed to provide a meaningful incremental incentive in relation to each executive’s total target direct compensation.
The ONCperformance measures, goals and results for the 2021 Special PSUs as certified by the Compensation and Human Capital Committee may also approve special equity awards that are not performance-based to attract and retain executive talent or to recognize significant contributions. See the section below entitled “ONC Committee Actions Related to 2014 Compensation” for more information regarding the 2014 LTIP awards for eachshown below.
| | FINANCIAL PERFORMANCE (100% weighting) | |
| | Relative Totals Shareholder Return (over 2 and 3 year Performance Period(1)) | | | 55th Percentile | | | 82nd Percentile | | | 177% | |
| | SAFETY SCORECARD (+/-20% modifier) | |
| | Average Annual STI Safety Scorecard Results (as % of Target) Over Three-Year Performance Period(1) | | | 100% | | | 99% | | | -1% | |
| | FINAL ACHIEVED RESULTS | | | | | | | | | 175% | |
(1)
| RTSR will be calculated over the two-year and three-year periods using methodology as described above under 2022 PSU Performance Goals. Safety scorecard results will generally be calculated as discussed above in the section entitled “2022 Short-Term Incentive (STI) Program” and will be averaged over the two-year and three-year periods. If performance results fall between two performance levels (for example, between target and stretch goals), the result is determined by interpolation. |
Vesting of the
Named Executive Officers, including2021 Special PSUs remained subject to the
performance measures and goals andexecutive’s continued employment through February 28, 2023. Special vesting
requirementsrules apply in the event of death, retirement, disability or a qualifying termination following a change-in-control of the Company. Termination for
any other reason prior to February 28, 2023, will result in forfeiture of the
2014 performance share awards, Mr. Kettering’s special time-vested equityentire award,
in recognitionor the remaining portion of
his rolethe award if such termination occurs after such date but prior to February 28, 2024. The following table shows the target number of shares subject to the 2021 Special PSUs as
interim Chief Executive Officerwell as the number of
CPG, andshares of common stock that vested pursuant to the
performance results and payout amounts forterms of the
2012 performance share awards.2021 Special PSUs.
| | Joseph Hamrock | | | 135,476 | | | 63,522 | |
| | Donald E. Brown | | | 40,663 | | | 31,731 | |
| | Shawn Anderson | | | 11,182 | | | 8,726 | |
(1)
| As a result of Mr. Hamrock’s retirement, vested shares were prorated. As a result of Mr. Vegas’ resignation, all shares were forfeited. |
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Other Compensation and Benefits
We
Our NEOs also
participate in an executive deferred compensation plan, change-in-control and termination agreements, and an executive severance policy. In addition, we provide
other forms of compensation to our
executives, including the Named Executive Officers, consisting ofNEOs with a limited number of perquisites
severance and
change-in-control arrangements and a number of other
broad-based employee benefits that
are generally
are extended to our entire employee population.
TheseWe believe that these other forms of compensation
and benefits are aligned with our compensation objectives and are generally comparable to those that are provided to similarly situated executives at other
companies of our size.Perquisites. Perquisites are not a principal element of our executive compensation program. They are intended to assist executive officers in the performance of their duties on behalf of the Company or otherwise to provide benefits that have a combined personal and business purpose. The Company does not reimburse the Named Executive Officers for the payment of personal income taxes incurred by the executives in connection with their receipt of these benefits. For more information on these perquisites, see the Summary Compensation Table and footnote 6 to that table.
comparable companies.
Severance and
Change-In-ControlChange-in-Control Benefits.
We maintain an executive severance policy, Change-in-Control Agreements with each of the Named Executive OfficersEach NEO is covered under a separate change-in-control and a lettertermination agreement with Mr. Smith regarding payments to be made in the event of termination of his employment.Change-in-Control(“CIC Agreement”). The CIC Agreements are intended to ensure that the NEOs continue to apply thoroughly objective judgments are madejudgment to appropriately safeguard stockholder value and maximize investor return in relation to any potential change in corporate ownership so that stockholder value is appropriately safeguarded and returns to investors are maximized.change-in-control. The Change-in-ControlCIC Agreements provide for cash severance benefits upon a double triggerdouble-trigger (meaning there must be both a qualifying change-in-control and termination of employment) and do not provide forinclude any “gross-up” payments to executives forcover an executive’s excise taxes incurred by an executive with respect to benefits received underthe receipt of payments in connection with a Change-in-Control Agreement.
change-in-control. Each NEO is subject to our executive severance policy.
Our 2020 Omnibus Plan provides for double-trigger vesting for equity awards that are assumed or replaced by an acquiring company upon a change-in-control. In the event equity awards are not assumed or replaced in a change-in-control, then the outstanding equity awards will vest upon the occurrence of such change-in-control.
For further discussioninformation regarding the benefits to be received upon termination of these agreements,employment or change-in-control, see the “Potentialsection entitled “2022 Executive Compensation – Potential Payments upon Termination of Employment or a Change-in-Control of the Company” tableCompany.”
Perquisites. Perquisites are not a principal element of our executive compensation program. We provide a limited number of perquisites to each NEO. We do not reimburse NEOs for the payment of individual income taxes they might incur in connection with their receipt of these benefits. For information regarding 2022 perquisites, see the 2022 Summary Compensation Table and footnote (4) to that table.
Deferred Compensation Plan. Eligible executives, including the accompanying narrative.Pension ProgramsNEOs, may elect to defer between 5% and 80% of their base salary and/or STI payout under our Executive Deferred Compensation Plan (the “Deferred Compensation Plan”). During 2014, we maintained a tax-qualified defined benefit pension plan The Deferred Compensation Plan provides an opportunity for essentially all salaried exempt employees hired before January 1, 2010, all non-exempt employees (both non-union and certain union employees) hired before January 1, 2013, as well as for other union employees, regardless of hire date, and a non-qualified defined benefit pension plan (the “Pension Restoration Plan”) for all eligible employees with annualexecutives to defer their cash compensation or pension benefits in excess ofwithout regard to the limits imposed by the Internal Revenue Service (“IRS”), including for amounts that may be deferred under our 401(k) Plan. For information regarding the Named Executive Officers. The Pension RestorationDeferred Compensation Plan, provides for a pension benefit undersee the same formula provided under the tax-qualified plan but without regard to the IRS limits, reduced by amounts paid under the tax-qualified plan. The material terms of the pension programs are described in the narrative to the Pension Benefits table.
2022 Non-Qualified Deferred Compensation table and accompanying narrative.
Savings Programs.
Our Named Executive OfficersThe NEOs are eligible to participate in the same tax-qualified 401(k) Plan as most employees and in a non-qualified defined contribution plan (the “Savings Restoration Plan”) maintained for eligible executive employees.executives. The 401(k) Plan includes a Company match that varies depending on the pension plan in which the employee participates and a Company profit sharing contribution for most employees of between 0.5% and 1.5% of the employee’s eligible earnings based on achievement of the overall corporate net operating earnings per shareNOEPS measure. In addition, for salaried employees hired after January 1, 2010 and non-union hourlynon-union non-exempt employees hired after January 1, 2013, the 401(k) Plan includes a 3% Company contribution to the employee accounts.accounts (4.5% beginning in 2023). The Savings Restoration Plan provides for Company contributions in excess of IRS limits under the 401(k) Plan for eligible employees, including the Named Executive Officers. The material terms ofNEOs. For information regarding the Savings Restoration Plan, are described insee the narrative to the Non-qualified2022 Non-Qualified Deferred Compensation table.
Deferred Compensation Plan. We also maintain the Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) through which eligible Company executives, including the Named Executive Officers, may elect to defer between 5%table and 80% of their base salary and annual cash incentive payout. The Company makes the Deferred Compensation Plan available to eligible executives so they have the opportunity to defer their cash compensation without regard to the limits imposed by the IRS for amounts that may be deferred under the 401(k) Plan. The material terms of the Deferred Compensation Plan are described in the narrative to the Non-qualified Deferred Compensation table.
accompanying narrative.
Health and Welfare Benefits.
We also provide the NEOs other broad-based benefits such as medical, dental, life insurance and long-term disability coverage on the same terms and conditions to all employees, including the Named Executive Officers. We believe that these broad-based benefits enhance the Company’s reputation as an employer of choice and thereby serve the objectives of our compensation program to attract, retain and motivate our employees.
46 | 2023 Proxy Statement
Our TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Executive Compensation Process
and Guidelines
Role of the Compensation and Human Capital Committee
The ONCCompensation and Human Capital Committee is responsible for determining salaries, performance-based incentivesestablishing, implementing, and other matters relatedmonitoring our executive compensation program objectives and assuring alignment with our business objectives. In overseeing our executive compensation programs, the Compensation and Human Capital Committee identifies and approves performance measures and goals under our STI and LTI programs. Additionally, the Compensation and Human Capital Committee approves annual long-term equity incentive awards and periodic long-term equity incentive awards granted to the compensation of our executivesnewly hired and for overseeingpromoted executive officers. The Compensation and Human Capital Committee also oversees the administration of our equity plans, including equity award grantsplans.
The Compensation and Human Capital Committee evaluates and determines the compensation of our executive leadership team, which is composed of senior executives who directly report to our
executive officers.CEO. The
ONC Committee takes into account various factors when making compensation decisions, including:Attainment of established businessCompensation and financial goals of the Company;
Competitiveness of the Company’s compensation program based upon competitive market data; and
An executive’s position, level of responsibility and performance, as measured by the individual’s contribution to the Company’s achievement of its business objectives.
The ONCHuman Capital Committee reviews the performance and compensation of our CEO and hisour executive direct reportsleadership team each year. In determiningyear with input from Meridian and apprises the compensationBoard accordingly. For our CEO, the Compensation and Human Capital Committee evaluates CEO performance and submits its recommendations to the independent members of the CEOBoard for review and his executive direct reports, the Committee takes into consideration the Corporate Governance Committee’s evaluation of the CEO’s performance and the CEO’s recommendation with respect to his executive direct reports.approval. When considering changes in compensation for our executive leadership team, including the Named Executive Officers,NEOs, the ONCCompensation and Human Capital Committee also considers input from the CEO and the Senior Vice President, Chief Human Resources Officer and Meridian. Our CEO is not involved in making recommendations with respect to his compensation.
The Compensation and Human Capital Committee also has continuous involvement with our human resources talent management initiatives regarding our CEO and our executive leadership team. The Compensation and Human Capital Committee also leads our development and succession efforts by providing strategic direction as we identify key executive skill and capability talent priorities. The Compensation and Human Capital Committee reviews the performance of our CEO and executive leadership team against leadership skills and capability requirements designed to identify, attract and develop highly-qualified executives that promote continuous learning; foster our culture of equality, inclusion and diversity; deliver safety, reliability and environmental performance improvements; and ultimately support our long-term strategy to build value for all our stakeholders, including our customers, employees, communities and stockholders.
Independent Compensation Consultant
For 2022, the Compensation and Human Capital Committee engaged the services of Meridian as its independent compensation consultant to advise it with respect to executive compensation design, comparative compensation practices and compensation matters relating to the Board. The Compensation and Human Capital Committee takes recommendations from Meridian into consideration along with its evaluation of the individual performance of each executive officer.
Each year, the Compensation and Human Capital Committee evaluates the independence and quality of the services provided by its independent compensation consultant. In reviewing Meridian’s engagement for 2022, the Compensation and Human Capital Committee considered the factors set forth in SEC Rule 10C-1(b)(4) and the ONC Committee’sapplicable NYSE rules and determined that Meridian was independent executive compensation consultant, Exequity LLP.and there were no conflicts of interest with respect to Meridian’s work for the Compensation and Human Capital Committee.
2023 Proxy Statement | 47
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Competitive Market Review.Review
In connection with its compensation decision making, the
ONCCompensation and Human Capital Committee reviews the executive compensation practices in effect at other companies in the
ComparativeComparator Group.
These companies comprise leadingThe Comparator Group consists of a mix of gas, electric,
combination utility and
natural gas transmission companiesmulti-line utilities that
have been selected by the ONC Committeeare operationally similar to us and with which we compete for
their operational comparability to the Company and because we generally compete with these companies for the samesimilar executive talent. For
2014, the ONC Committee, with input from Exequity LLP, removed PG&E Corporation, PNM Resources Inc. and Southern Company from the Comparative Group and added Spectra Energy. These2022, no changes were made to
further align the
Company with its peer companies with respect to revenue size, market capitalization and operational similarity. Forprior year’s Comparator Group. The Comparator Group for purposes of
considering 2014evaluating 2022 compensation
decisions, the Comparative Group included the following companies:practices is shown below.AGL | Alliant Energy Corporation | CMS Energy Corporation | ONE Gas, Inc. | |
| | Ameren Corporation | Dominion Energy, Inc. | PNM Resources, Inc. | | Pepco Holdings, Inc. |
Ameren Corporation | | PPL Corporation |
American Electric Power Company, Inc. | DTE Energy Company | Public Service Enterprise Group IncorporatedPPL Corporation | |
| | Atmos Energy Corporation | Eversource Energy | Sempra Energy | |
| | Avista Corporation | FirstEnergy Corp. | Southwest Gas Holdings, Inc. | |
| | Black Hills Corporation | New Jersey Resources Corporation | Spire, Inc. | |
| | CenterPoint Energy, Inc. | | Questar Corporation |
CMS Energy Corporation | | SCANA Corporation |
Dominion Resources, Inc. | | Sempra Energy |
DTE Energy Company | | SpectraOGE Energy Corp. | WEC Energy Group, Inc. | |
| | NiSource | | | $4,622 | | | $9,860 | |
| | NiSource Percentile Rank | | | 48th percentile | | | 38th percentile | |
EQT Corporation | | WGL Holdings, Inc. |
FirstEnergy Corp. | (1)
| The Williams Companies, Inc.Compensation and Human Capital Committee confirmed the 2022 Comparator Group in August 2021 based in part on trailing 12-month revenue and July 2021 market capitalization data compiled and provided by Meridian at the time. |
48 | 2023 Proxy Statement
TABLE OF CONTENTS
PoliciesCOMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Stock Ownership and Guidelines.Retention Guidelines
Our executive leadership team, which includes the NEOs, and other senior leaders are subject to stock ownership and retention guidelines. We maintain
variousthese guidelines
to ensure that our executive leadership and
policiessenior leaders maintain a significant investment in our stock, which in turn helps to
help us meetalign the interests of our
compensation objectives including: | • | | Executive Stock Ownership and Retention Guidelines. Senior executives, including the Named Executive Officers, are generally expected to satisfy their applicable ownership guidelinesexecutive leadership and senior leaders with those of our stockholders.Our executive leadership team and senior leaders are generally expected to satisfy their applicable ownership guideline (as described below) within five years of becoming subject to the guidelines. The stock ownership guideline for the CEO is five times his annual base salary. The other senior executives have a stock ownership guideline of three times their respective annual base salaries. Once the senior executive satisfies the guidelines, he/she must continue to own a sufficient number of shares to remain in compliance with the guidelines. Until such time as the senior executives satisfy the stock ownership guidelines, they are required to hold at least 50% of the shares of common stock received upon the lapse of the restrictions on restricted stock units and the vesting of performance shares. At the end of 2014, each of the Named Executive Officers exceeded their ownership guidelines with the exception of Mr. Hamrock who has an additional two years to satisfy his ownership guideline.
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| • | | Trading Windows/Trading Plans/Hedging. We restrict the ability of certain employees to freely trade in the Company’s common stock because of their periodic access to material non-public information regarding the Company. Under our insider trading policy, our key executives are prohibited from trading in Company securities during quarterly blackout periods. In addition, under our Securities Transaction Compliance Policy for Certain Employees and our Securities Transaction Compliance Policy for Directors and Executive Officers, all directors and all senior executives, including our Named Executive Officers, are prohibited from engaging in short sales of the Company’s equity securities or in buying or selling puts, calls or other options on the Company’s securities or otherwise hedging against or speculating in the potential changes in the value of the Company’s common stock. None of our directors or officers owns Company securities that are pledged.
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| • | | Compensation Recovery for Misconduct. While we believe our executives conduct business with the highest integrity and in full compliance with our Code of Business Conduct, the ONC Committee believes it is appropriate to ensure that the Company’s compensation plans and agreements provide for financial penalties to an executive who engages in certain fraudulent or other inappropriate conduct. Consequently, our Incentive Plan, the Omnibus Plan and its predecessor, the 1994 Long-Term Incentive Plan, contain “clawback” provisions that require reimbursement of amounts received under the plans in the event of certain acts of misconduct with respect to both the annual short-term cash incentive and long-term equity awards.
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Tax Treatment of Executive Compensation. Section 162(m) provides that annual compensation in excess of $1,000,000 paid to the CEO or certain of the other Named Executive Officers, other than compensation meeting the definition of “performance-based compensation,” will not be deductible by a corporation for federal income tax purposes. In January 2014, the ONC Committee established a threshold performance target based on the Company’s operating income in order to qualify certain compensation as performance based for purposes of Section 162(m). The ONC Committee reviews the deductibility of compensation under Section 162(m) and related regulations published by the IRS. The ONC Committee retains the discretion to amend any compensation arrangement to comply with Section 162(m)’s requirements for deductibility in accordance with the terms of such arrangements and what it believes is in the best interest of the Company.
The ONC Committee considers the anticipated tax treatment to the Company when determining executive compensation and routinely seeks to structure its executive compensation program in a way that preserves the deductibility of compensation payments and benefits. It should be noted, however, that there are many factors which are considered by the ONC Committee in determining executive compensation and, similarly, there are many factors which may affect the deductibility of executive compensation. To maintain the flexibility to compensate the Named Executive Officers in a manner designed to promote varying corporate goals, the ONC Committee has not adopted a policy that all executive compensation must be deductible under Section 162(m).
In addition, Sections 280G and 4999 of the Internal Revenue Code (the “Code”) impose excise taxes on Named Executive Officers, directors who own significant stockholder interests in the Company and other service providers who receive payments in excess of a threshold level upon a change-in-control. Although the Company does not provide any gross up payments to reimburse officers, directors or others for any such taxes, the
Company or its successor could lose a deduction for amounts subject to the additional tax. As discussed under “Potential Payments upon Termination of Employment or a Change-in-Controlguidelines. Once applicable share ownership levels are satisfied, the senior executive must continue to own enough shares to remain in compliance. Until such time as the applicable stock ownership guideline is satisfied, the CEO and Executive Vice Presidents are required to hold at least 50% of the Company” below, it is possible that paymentsshares of common stock received upon the vesting of equity awards. As of the record date, the NEOs are on a path to achieving the Namedapplicable ownership guideline within the 5-year requirement. Shares counted toward ownership targets include common stock held and unvested RSUs.
| | CEO | | | 6x base salary | |
| | Executive Vice President | | | 3x base salary | |
| | Senior Vice President | | | 2x base salary | |
Risk Management Policies and Guidelines
Trading Windows/Trading Plans. We restrict the ability of directors, executive officers and employees who work in designated areas to freely trade in our common stock because of their periodic access to our material non-public information. Under our insider trading policy, such persons are prohibited from trading in our securities during quarterly blackout periods, and at such other times as the General Counsel may deem appropriate.
Anti-Hedging Policy/Pledging. Under our Securities Transaction Compliance Policy for Certain Employees and our Securities Transaction Compliance Policy for Directors and Executive Officers, could be subject to these taxes.Finally, Section 409Aall directors, executive officers, and employees who work in designated areas are prohibited from engaging in short sales of our equity securities or buying or selling puts or calls or other options on our securities. We do not have such a policy for employees who work in areas other than the Code imposes additional taxes on Named Executive Officers, directors and other service providers who defer compensationdesignated areas.
Compensation Recovery for Misconduct. Included in our 2020 Omnibus Plan is a manner“clawback” provision that does not comply with Section 409A. The Company has reviewed its compensation arrangements for compliance with applicable Section 409A requirements.ONC Committee Actions Related to 2014 Compensation
During 2014,states the ONC Committee reviewed and, as appropriate, took action with respect to each element of total compensation for each Named Executive Officer following the principles, practices and processes described above. In doing so, the ONC Committee concluded that the total compensation provided for each of the Company’s senior executives in 2014, including the Named Executive Officers, was consistent with the Company’s compensation philosophy and was reasonable, competitive and appropriate.
The ONC Committee’s compensation determinations, though subjective in part, were based primarily upon recognition of the performance of each Named Executive Officer, and a determination that the total compensation awarded to each Named Executive Officer provided well-balanced incentives to focus on serving the interests ofemployee shall reimburse the Company amounts received under STI and its stockholders.
In addition, the ONC Committee considered the stockholders’ advisory approval of the 2013 compensation of our Named Executive Officers at the 2014 Annual Meeting and determined that no changes were necessary or advisable in connection with the design of our senior executive compensation programLTI awards if we are required to prepare an accounting restatement as a result of the stockholders’ vote.employee’s misconduct.
2023 Proxy Statement | 49
TABLE OF CONTENTS
2014 Base Salaries. Historically, base salaries of senior executives, including the Named Executive Officers, have been adjusted when deemed necessary to maintain competitivenessCOMPENSATION AND HUMAN CAPITAL COMMITTEE REPORT The Compensation and
reflect performance. During 2014, the Committee reviewed the base salaries of the Company’s senior executives, including the Named Executive Officers, and approved salary increases for each of the Named Executive Officers.In so doing, the Committee considered the base salaries earned by similarly situated executives of companies in the Comparative Group, increased responsibilities, experience, internal pay equity, historical compensation practices, individual performance and contribution to achievement of business objectives. In particular, the ONC Committee noted the strong performance of each of the Named Executive Officers, Mr. Kettering’s increased responsibilities as Executive Vice President and Group CEO of CPG and the fact that, with the exception of Mr. Hamrock, there had been no salary increases for the Named Executive Officers since 2012.
The 2014 base salary adjustments for each Named Executive Officer are shown in the table below.
| | | | | | | | |
| Name | | 2013
Annual Salary | | | 2014
Annual Salary | |
Robert C. Skaggs, Jr. | | $ | 900,000 | | | $ | 980,000 | |
Stephen P. Smith | | $ | 575,000 | | | $ | 600,000 | |
Glen L. Kettering | | $ | 340,000 | | | $ | 500,000 | |
Carrie J. Hightman | | $ | 475,000 | | | $ | 490,000 | |
Joseph Hamrock | | $ | 470,000 | | | $ | 500,000 | |
Annual Performance-Based Cash Incentives. In January 2014, the ONC Committee established performance measures to determine the 2014 incentive payouts to the Named Executive Officers. In determining incentive compensation ranges for the Named Executive Officers, the ONC Committee considered competitive information from the Comparative Group, input from the independent compensation consultant, historical payouts and individual performance and determined that the cash-based incentive compensation range for Mr. Skaggs should be increased to a target of 125% from 100%. Mr. Skaggs’ trigger and stretch amounts were increased to 50% and 200% respectively from 40% and 160% after considering his strong leadership and an evaluation of the competitive market data, including a recognition that Mr. Skaggs’ target cash compensation remained below the market median. The trigger, target and stretch levels were unchanged from the prior year for
the other Named Executive Officers. For more information on the 2014 payout amounts for each of the Named Executive Officers, see the section below entitled “2014 Incentive Plan Payouts to the Named Executive Officers.”
The 2014 Incentive Plan awards for senior executives, including all of the Named Executive Officers, were subject to achievement with respect to two corporate financial goals, net operating earnings per share and corporate funds from operations, as well as an additional operational measure relating to safety. The ONC Committee approved these measures because they were deemed to be important to the Company’s success in increasing stockholder value.
Earnings, cash flow and safety were measured as follows:
The measure of earnings was net operating earnings per share (after accounting for the cost of any incentive payout). Net operating earnings was defined as income from continuing operations determined in accordance with Generally Accepted Accounting Principles (“GAAP”), adjusted for certain items, such as weather, gains and losses on the sale of assets, certain out-of-period items and reserve adjustments. The ONC Committee uses net operating earnings, a non-GAAP financial measure, for determining financial performance for incentive compensation plans because the Board and management believe this measure better represents the fundamental earnings strength and performance of the Company. The Company uses net operating earnings internally for budgeting and for reporting to the Board.
The cash flow measure, corporate funds from operations, was calculated by taking net income from operations and adding back non-cash items such as depreciation. The ONC Committee uses corporate funds from operations as an Incentive Plan measure because the ONC Committee and management believe this measure fairly represents the amount of cash produced by the Company’s operations.
Safety was measured by the number of employee work days missed or restricted or the number of days an employee was transferred, known as the DART metric, which was developed by the Occupational Safety and Health Administration. Each business unit of the Company had its own safety goal. The safety goal for corporate staff was based upon the respective business unit goals, weighted by employee hours for each business unit.
The incentive opportunities for the senior executives, including the Named Executive Officers, were contingent on achievement of goals relating to these measures, subject to final discretionary adjustment by the ONC Committee.
The 2014 Incentive Plan awards for the leaders of our business units also are subject to achievement with respect to business unit net operating earnings and funds from operations goals for each of the business units. The ONC Committee believes the inclusion of business unit goals in the annual Incentive Plan improves the line of sight between employees and the incentive measures, thereby enhancing Company performance. The ONC Committee extended to Mr. Skaggs the authority to establish the annual business unit targets for the year. He assigned goals that, if accomplished, were expected to ensure the Company’s attainment of its overall corporate objectives.
Consequently, the incentive opportunities for Messrs. Kettering and Hamrock were subject to achievement with respect to the corporate financial measures (net operating earnings per share and corporate funds from operations), and achievement with respect to performance measures tied to the business unit net operating earnings (net of interest expense and income taxes) and business unit funds from operations and business unit safety measures for which they have responsibility. As such, each of their measures is weighted differently than the other Named Executive Officers who are members of the corporate service group, as shown in the tables below.
The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for Messrs. Skaggs and Smith, and Ms. Hightman were:
| | | | | | | | | | | | | | | | | | | | | | |
| Corporate Measures(1) | | Weight | | Trigger | | Target | | Stretch | | Result | | Robert C. Skaggs, Jr. | | Stephen P. Smith | | Carrie J. Hightman |
| | | | | | | Formulaic Amounts(2) | | Formulaic Amounts(2) | | Formulaic Amounts(2) |
| | | | | | | Payout as a % of Target | | Weighted Adjusted Payout as a % of Target | | Payout
as a % of Target | | Weighted Adjusted
Payout
as a %
of Target | | Payout
as a % of Target | | Weighted Adjusted Payout
as a % of Target |
NiSource Net Operating Earnings Per Share | | 50% | | $1.61 | | $1.66 | | $1.71 | | $1.72 | | 160% | | 80% | | 157.14% | | 78.57% | | 158.33% | | 79.17% |
NiSource Funds from Operations | | 40% | | $1,205M | | $1,355M | | $1,505M | | $1,456M(3) | | 140.40% | | 56.16% | | 138.48% | | 55.39% | | 139.28% | | 55.71% |
Safety | | 10% | | .79 days | | .71 days | | — | | .76 days | | 37.50% | | 3.75% | | 37.50% | | 3.75% | | 37.50% | | 3.75% |
(1) | When the result for a particular measure lands between two goals (for example, between the target and stretch goal), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target incentive opportunity. Interpolation for the safety goal only applies between trigger and target. Consequently, target is the maximum available level for the safety goal. |
(2) | These amounts reflect a percentage of each executive’s target incentive opportunity. The trigger, target and stretch incentive opportunities for each of the Named Executive Officers are provided in the section entitled “2014 Incentive Plan Payouts to the Named Executive Officers.” |
(3) | This includes an upward adjustment to Funds from Operations of $92.4 million taking into consideration the impact of non-recurring items, such as incremental pension expense subsidized by the Company and changes in accounting. |
The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for Mr. Kettering were:
| | | | | | | | | | | | | | |
| Corporate Measures(1) | | Weight | | Trigger | | Target | | Stretch | | Result | | Formulaic
Payout as a
% of Target(2) | | Weighted Adjusted Formulaic
Payout as a %
of Target(2) |
NiSource Net Operating Earnings Per Share | | 25% | | $1.61 | | $1.66 | | $1.71 | | $1.72 | | 158.33% | | 39.58% |
NiSource Funds from Operations | | 20% | | $1,205M | | $1,355M | | $1,505M | | $1,456M(3) | | 139.28% | | 27.86% |
CPG Safety | | 10% | | .25 days | | .19 days | | — | | .09 days | | 100.00% | | 10.00% |
CPG Net Operating Earnings | | 22.50% | | $264M | | $269M | | $279M | | $274M(4) | | 129.17% | | 29.06% |
CPG Funds from Operations | | 22.50% | | $397M | | $440M | | $483M | | $527M(5) | | 158.33% | | 35.63% |
(1) | When the result for a particular measure lands between two goals (for example, between the target and stretch goal), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target opportunity. Interpolation for the safety goal only applies between trigger and target. Consequently, target is the maximum available level for the safety goal. |
(2) | These amounts reflect a percentage of Mr. Kettering’s target incentive opportunity. The trigger, target and stretch incentive opportunities for Mr. Kettering are provided in the section entitled “2014 Incentive Plan Payouts to the Named Executive Officers.” |
(3) | This includes an upward adjustment to Funds from Operations for NiSource of $92.4 million taking into consideration the impact of non-recurring items, such as incremental pension expense subsidized by the Company and changes in accounting. |
(4) | This includes an upward adjustment to Net Operating Earnings for CPG of $9.8 million taking into consideration the impact of changes in tax law, and the impact of non-recurring items such as incremental pension expense subsidized by the Company and other changes in accounting. |
(5) | This includes an upward adjustment to Funds from Operations for CPG of $38.6 million taking into consideration the impact of non-recurring items, such as incremental pension expense subsidized by the Company and changes in accounting. |
The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for Mr. Hamrock were:
| | | | | | | | | | | | | | |
| Corporate Measures(1) | | Weight | | Trigger | | Target | | Stretch | | Result | | Formulaic
Payout as a
% of Target(2) | | Weighted Adjusted Formulaic
Payout as a %
of Target(2) |
NiSource Net Operating Earnings Per Share | | 25% | | $1.61 | | $1.66 | | $1.71 | | $1.72 | | 161.54% | | 40.38% |
NiSource Funds from Operations | | 20% | | $1,205M | | $1,355M | | $1,505M | | $1,456M(3) | | 141.44% | | 28.29% |
NGD Safety | | 10% | | .91 days | | .82 days | | — | | 1.03 days | | 0.00% | | 0.00% |
NGD Net Operating Earnings | | 22.50% | | $214M | | $220M | | $231M | | $216M(4) | | 58.97% | | 13.27% |
NGD Funds from Operations | | 22.50% | | $287M | | $397M | | $507M | | $444M(5) | | 126.29% | | 28.42% |
(1) | When the result for a particular measure lands between two goals (for example, between the target and stretch goal), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target opportunity. Interpolation for the safety goal only applies between trigger and target. Consequently, target is the maximum available level for the safety goal. |
(2) | These amounts reflect a percentage of Mr. Hamrock’s target incentive opportunity. The trigger, target and stretch incentive opportunities for Mr. Hamrock are provided in the section entitled “2014 Incentive Plan Payouts to the Named Executive Officers.” |
(3) | This includes an upward adjustment to Funds from Operations for NiSource of $92.4 million taking into consideration the impact of non-recurring items, such as incremental pension expense subsidized by the Company and changes in accounting. |
(4) | This includes an upward adjustment to Net Operating Earnings for NGD of $2.3 million taking into consideration the impact of changes in accounting. |
(5) | This includes a downward adjustment to Funds from Operations for NGD of $34.1 million taking into consideration the impact of changes in tax law. |
2014 Incentive Plan Payouts to the Named Executive Officers. For 2014, the annual incentive opportunities and actual payout amounts for each of the Named Executive Officers as approved by the ONC Committee were:
| | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Trigger (% of Salary) | | | Target (% of Salary) | | | Stretch (% of Salary) | | | 2014 Award (% of Target) | | | 2014
Award(1) | |
Robert C. Skaggs, Jr. | | | 50 | % | | | 125 | % | | | 200 | % | | | 140 | % | | $ | 1,715,000 | |
Stephen P. Smith | | | 30 | % | | | 70 | % | | | 110 | % | | | 138 | % | | $ | 579,600 | |
Glen L. Kettering | | | 25 | % | | | 60 | % | | | 95 | % | | | 142 | % | | $ | 426,000 | |
Carrie J. Hightman | | | 25 | % | | | 60 | % | | | 95 | % | | | 139 | % | | $ | 408,660 | |
Joseph Hamrock | | | 25 | % | | | 65 | % | | | 105 | % | | | 110 | % | | $ | 357,500 | |
(1) | The 2014 Awards for each of the Named Executive Officers were calculated as follows: annual base salary multiplied by his/her Target (% of Salary) multiplied by the applicable 2014 Award (% of Target). |
In January 2015, the ONC Committee certified the performance results set forth in the tables above. The ONC Committee determined it was appropriate to approve an Incentive Plan payout of $1,715,000 to Mr. Skaggs based on the Company’s above-target performance relative to the net operating earnings per share financial metric and funds from operations financial metric as well as his continued strong leadership in 2014. Mr. Skaggs also
made recommendations to the ONC Committee with respect to the award of Incentive Plan payouts to the other senior executives, including the other Named Executive Officers. In making his recommendations, Mr. Skaggs considered the Company’s performance and the performance of the senior executives in delivering strong stockholder returns again in 2014, as well as the performances of the business unit and corporate functions the executives led. The ONC Committee considered and accepted Mr. Skaggs’ recommendations and approved Incentive Plan payouts to the Named Executive Officers in accordance with the Incentive Plan formula, as set forth in the table above.
2014 Discretionary Lump Sum Payout to Mr. Kettering. In January 2014, the ONC Committee awarded Mr. Kettering a special one-time cash bonus award of $100,000 in recognition of his role as interim CEO of the CPG. The bonus amount is set forth in the Bonus column of the Summary Compensation Table because it was not based on performance relative solely to the pre-established performance criteria under the Incentive Plan.
Additional Discretionary Lump Sum Payouts to the Named Executive Officers Based on 2014 Performance. In January 2015, the ONC Committee exercised its discretion to award bonuses to each of the Named Executive Officers in addition to amounts based on performance relative to pre-established performance criteria described above under the section entitled “Incentive Plan.” The ONC Committee approved a discretionary bonus of $1,785,000 for Mr. Skaggs based on the Company’s consistently superior performance over the last several years under his stewardship, including 207% cumulative total shareholder return over the past five years and Mr. Skaggs’ strategic leadership in developing and executing on the decision to create CPPL and to separate the Company’s natural gas pipeline and related businesses into a stand-alone publicly traded company.
In addition, the ONC Committee approved discretionary bonuses of $750,000 for Mr. Smith, and $500,000 for Mr. Kettering based on their significant contributions to the development and execution of the decision to create CPPL and to separate the Company’s natural gas pipeline and related businesses into a stand-alone publicly traded company. In particular, the ONC Committee considered Mr. Smith’s and Mr. Kettering’s key roles in developing and executing on the formation of CPPL and the Separation, including strategic and financial analysis, transition analysis and preparation. The ONC Committee also approved discretionary bonuses of $400,000 and $300,000 for Mr. Hamrock and Ms. Hightman, respectively, based on their contributions to the preparation for the Separation. In particular the ONC Committee considered Mr. Hamrock’s strategic leadership in developing a post-separation organization for our Company and Ms. Hightman’s performance in executing on the preparation for the Separation, as well as the creation of CPPL and its initial public offering.
The amounts of these discretionary bonuses are set forth in the Bonus column of the Summary Compensation Table because they are in addition to the amounts based on performance relative to the pre-established performance criteria under the Incentive Plan, described above, which are set forth in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
LTIP Awards.
2014 Performance Share Awards. In January 2014, the ONC Committee approved a grant of performance shares to senior executives of the Company, including each of the Named Executive Officers. In determining the 2014 long-term incentive grant values to be awarded to the Named Executive Officers, the ONC Committee considered the competitive pay practices at companies within our Comparative Group, input from the ONC Committee’s independent compensation consultant, the historical mix of fixed compensation versus variable incentive compensation and individual performance. In particular, the ONC Committee considered the continued strong leadership of Messrs. Skaggs and Smith and the increased leadership experience of Mr. Hamrock, in addition to the appropriateness of market adjustments for Messrs. Skaggs and Hamrock based on Comparative Group information. The ONC Committee approved an increase for 2014 grant values for Messrs. Skaggs, Smith and Hamrock that were approximately 25%, 8%, and 17% greater than their prior year’s award values, respectively.
Vesting of the 2014 grant of performance shares is dependent on the Company meeting certain performance measures over a three-year performance period and the executive’s continued employment through January 28, 2017. Special vesting rules apply in the event of death, “Retirement,” “Disability” or a “Change-in-Control” (each as defined in the Omnibus Plan). Termination for any other reason will result in forfeiture of all performance shares.
The performance measures on which vesting of 2014 performance shares is contingent relate to cumulative net operating earnings per share over the three-year period from January 1, 2014 through December 31, 2016,
and Relative Total Shareholder Return (“RTSR”). The ONC Committee approved the application of these measures for the 2014-2016 performance cycle because they were deemed to be important to the Company’s success in increasing stockholder value. The ONC Committee determined it appropriate to eliminate funds from operations as a performance measure for the 2014 performance share awards in order to further align the 2014 performance shares with the Company’s strategic operating plan.
For the 2014 awards, we defined RTSR as the annualized growth in the dividends and share price of a share of the Company’s common stock, calculated using a 20-day trading average of the closing price of the Company’s common stock, over a period beginning December 31, 2013 and ending on December 31, 2016 compared to the similarly calculated total shareholder return performance of a peer group of energy companies, pre-determined by the ONC Committee. The peer group of companies selected by the ONC Committee for the purpose of determining RTSR is broader than the Comparative Group utilized by the ONC Committee in its compensation decision-making. The 36 energy companies, including 15 companies from the Comparative Group, were selected by the ONC Committee because each of the companies is similarly affected by external factors that impact stock price such as interest rates and industry opportunities and challenges.
If the pre-established performance goals and service condition are met at target performance levels, award recipients will earn 100% of the target number of performance shares awarded. The ONC Committee also approved trigger and stretch goals for each measure for each executive. If the trigger level is not met, then the executive will not receive any portion of the grant. If the target level is exceeded, the executive could receive up to a maximum of 200% of the target value of the grant unless total shareholder return is negative for the performance period, in which case, the maximum payout for RTSR would be at target regardless of performance relative to the peer group. When the result of net operating earnings per share and RTSR above the 50th percentile lands between two goals (for example, between the target and stretch goal), then the long-term incentive payout is determined by linear interpolation and is expressed as a percentage of the target opportunity. There is no interpolation between goals below the 50th percentile for the RTSR metric.
The measures and goals pertaining to the 2014 performance share awards are:
| | | | | | | | |
| Performance Measure | | Weight | | Trigger (50% Award) | | Target (100% Award) | | Stretch (200% Award) |
Cumulative Net Operating Earnings Per Share for 2014-2016 | | 50% | | $5.11 | | $5.26 | | ³$5.63 |
Relative Total Shareholder Return as of December 31, 2016 | | 50% | | 40-49th
Percentile | | 50th
Percentile | | 100th
Percentile |
The ONC Committee authorized 2014 performance share awards to the Named Executive Officers in the following amounts:
| | |
Named Executive Officer | | Target Number of Performance Shares Awarded |
Robert C. Skaggs, Jr.
| | 109,457 |
Stephen P. Smith
| | 39,405 |
Glen L. Kettering
| | 14,594 |
Carrie J. Hightman
| | 21,891 |
Joseph Hamrock
| | 20,432 |
Consistent with the philosophy and principles articulated above, the ONC Committee believes that the 2014 performance share awards:
Align the interests of executives with the Company’s stockholders as the ultimate value of the award is dependent upon the value of the Company’s stock;
Support the Company’s philosophy of paying for performance as the performance shares will not vest unless the Company achieves its performance goals over the measurement period; and
Provide competitive compensation to recruit and retain executive talent by including a long-term incentive component with a three-year service condition.
Special 2014 Restricted Stock Unit Award for Mr. Kettering. In January 2014, the ONC Committee granted Mr. Kettering a special award of 14,594 restricted stock units in recognition of his role as interim CEO of CPG. All of these restricted stock units vest three years from the date of grant. The grant date fair value of this restricted stock unit award is included in the Stock Awards column of the Summary Compensation Table.
2012 Performance Share Awards. In 2012, the ONC Committee awarded a grant of performance shares to each of the Named Executive Officers. Vesting of the 2012 grant of performance shares was dependent upon the Company meeting certain performance measures over the three-year period from 2012 through 2014 and the executive’s continued employment through January 30, 2015. The performance measures related to cumulative net operating earnings per share and cumulative funds from operations over the three-year period and RTSR beginning December 31, 2011 through December 31, 2014. The peer group of companies selected by the ONC Committee for the purpose of determining RTSR for the 2012 awards was comprised of 36 energy companies including ten companies from the Comparative Group that the ONC Committee looked to for purposes of 2012 compensation decision making. Based on the Company’s performance as certified by the ONC Committee in January 2015, 183% of the performance share awards vested as described below.
The performance measures, their weightings and results, as certified by the ONC Committee, were:
| | | | | | | | | | |
| Performance Measure(1) | | Weight | | Trigger (50% Award) | | Target (100% Award) | | Stretch (200% Award) | | Actual Results |
Cumulative Net Operating Earnings Per Share for 2012-2014 | | 40% | | $4.41 | | $4.56 | | ³$4.88 | | $4.76 |
Cumulative Funds from Operations for 2012-2014 | | 40% | | $3,002M | | $3,302M | | ³$3,902M | | $3,964M |
Relative Total Shareholder Return as of December 31, 2014 | | 20% | | 40-49th
Percentile | | 50th
Percentile | | 100th
Percentile | | 95th
Percentile |
(1) | When the result for a particular measure lands between two goals (for example, between the target and stretch goal), then the long-term incentive award opportunity is determined by interpolation and is expressed as a percentage of the target opportunity. |
Thereafter, each Named Executive Officer fully vested in the performance shares, payable one-for-one in shares of the Company’s common stock, as set forth in the table below:
| | |
Named Executive Officer | | 2012 Performance Shares |
Robert C. Skaggs, Jr.
| | 234,917 |
Stephen P. Smith
| | 97,881 |
Glen L. Kettering
| | 39,153 |
Carrie J. Hightman
| | 58,728 |
Joseph Hamrock
| | 43,710 |
Changes to Our Executive Compensation Program in 2015
In January 2015, the ONC Committee determined that the 2015 annual long-term incentive awards to all Company executives, including the Named Executive Officers, should be in the form of service-based restricted stock units instead of performance-based shares in anticipation of the Separation. These restricted stock units do not vest until February 2, 2018, at which time they will vest in full subject to the award recipient’s continued service through the vesting date.
Additionally, the ONC Committee intends to exercise its discretion to make adjustments to the performance conditions and performance periods for outstanding performance share awards in order to preserve the value of such awards for Company executives, contingent upon the occurrence of the Separation. The same service vesting conditions as the original awards would continue. The ONC Committee also intends to make adjustments to the performance conditions and performance period for the 2015 annual performance-based cash incentive awards under the Incentive Plan, contingent upon the occurrence of the Separation.
The Named Executive Officers who are expected to become executive officers of CPG, Inc. at Separation are Messrs. Skaggs, Smith and Kettering. At such time, CPG, Inc. will become a separate publicly traded company, and each of these Named Executive Officers will cease to be employees of the Company. The unvested awards held by each of the Named Executive Officers who become executive officers of CPG, Inc. will be cancelled by the Company and we anticipate that CPG, Inc. will provide awards of equivalent value in lieu of such awards. Their separation from employment will not constitute a “Change-in-Control” for purposes of the Change-in-Control Agreements or a termination of employment for purposes of the Executive Severance Policy.
OFFICER NOMINATION AND COMPENSATION COMMITTEE REPORT
The Officer Nomination and CompensationHuman Capital Committee of the Board of Directors (the “ONC Committee”“Committee”) has furnished the following report to the stockholders of the Company in accordance with rules adopted by the Securities and Exchange Commission.
The
ONC Committee states that it reviewed and discussed with management the Company’s Compensation Discussion and Analysis contained in this Proxy Statement.
Based upon the review and discussions referred to above, the
ONC Committee recommended to the Board
of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31,
2014.2022.
This report is submitted on behalf of the members of the ONC Committee:
| | | | | Eric L. Butler, Chair
Theodore H. Bunting
Deborah A. Henretta
William D. Johnson | |
50 | 2023 Proxy Statement
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Officer Nomination
COMPENSATION AND HUMAN CAPITAL COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During parts of 2022, Messrs. Bunting, Butler, Jesanis, Johnson and
Yates and Ms. Henretta served on the Compensation
and Human Capital Committee. Mr. Yates resigned from the Compensation and Human Capital Committee
Teresa A. Taylor, Chair
Richard A. Abdoo
Sigmund L. Cornelius
Michael E. Jesanis
W. Lee Nutter
Carolyn Y. Woo
March 2, 2015
on January 27, 2022. as a result of his appointment as CEO of the Company. None of these persons had ever been an officer or employee of the Company or any of its subsidiaries while serving on the Compensation and Human Capital Committee. No executive officer of the Company served on the board of directors or compensation committee of any other entity that had one or more executive officers who served as a member of the Compensation and Human Capital Committee during 2022.
ASSESSMENT OF RISK
The Company annually assesses whether its incentive
We perform an annual risk assessment of our compensation program. We concluded our programs are constructed in a manner that might induce participant behaviors that could cause the Company material harm. An assessment was performed in 2014, and the Company concluded that the incentive components of our program for senior executives are not reasonably likely to have a material adverse effect on the Company, for reasons that includebased on the following:
| ■ | Executive/Board Oversight—Our executive leadership and board regularly monitor our programs and people to ensure decisions are made with integrity and in the best long-term interests of the Company; |
| ■ | Strategic Consistency—Our compensation program is aligned with our goals without promoting excessive risk; |
| ■ | Sound Performance Criteria—Performance measures for incentive awards are consistent with long-term shareholder value and operational excellence; measures and underlying goals are approved by the Compensation and Human Capital Committee of the Board; |
| ■ | Long-term Focus—Executive compensation is weighted toward LTIs, aligning executives with long-term results and shareholders; |
| ■ | Performance Focus—LTI awards for executives are predominately performance-based; |
| ■ | Stock Ownership Guidelines—Executives are subject to stock ownership guidelines set by the Compensation and Human Capital Committee; this further reinforces the need for a long-term view in decision making; |
| ■ | Operational Excellence—Incentive compensation is partially tied to safety and other operational metrics to encourage a strong culture of safety and motivate the prioritization of safe operations; and |
| ■ | Clawback Policy—Policies are in place to recoup compensation in the event of certain acts of misconduct and to prohibit hedging of our stock by senior executive officers. |
2023 Proxy Statement | 51
TABLE OF CONTENTS
Our operations are highly regulated at both the federal and state levels and, therefore, are subject to continuous oversight by independent bodies.
Policies are in place to recoup compensation in the event of certain acts of misconduct and prohibit hedging by our senior executive officers.
Our compensation program is evaluated annually for its effectiveness and alignment with the Company’s goals without promoting excessive risk.
Senior executive compensation is weighted toward long-term incentives, thereby ensuring that senior executives have an ongoing, multi-year focus of attention.
The performance measures that are the basis of incentive awards are approved each year by an independent committee of the Board.
The long-term incentive equity awards to senior executives generally have three-year vesting periods and are performance based so that their upside potential and downside risk are aligned with that of our stockholders and promote long-term performance over the vesting period.
The senior executive officers are subject to stock ownership and retention guidelines that are independently set by the Board which are intended to ensure senior executives assume financial risk that is coincident with our stockholders.
The senior executive officers’ performance incentive measures include safety metrics in order to encourage a strong culture of safety.
COMPENSATION OF2022 EXECUTIVE OFFICERS
Summary. COMPENSATION
The following table summarizes compensation for services to
NiSourcethe Company and its affiliates
for 2014, 2013 and 2012 awarded to, earned by or paid to each of the
Named Executive Officers as of December 31, 2014.NEOs during 2022. In accordance with SEC disclosure rules, the stock awards reported in the table below are reported based on the aggregate grant date fair value and do not represent the amounts actually realized by the NEOs, with the values realized by the NEOs, if any, impacted by the Company’s performance against the pre-established performance goals for PSUs and the Company’s stock price at settlement for all stock awards.
2022 Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal
Position | | Year | | | Salary ($)(1) | | | Bonus ($)(2) | | | Stock
Awards ($)(3) | | | Non-equity
Incentive Plan
Compensation ($)(4) | | | Change in
Pension Value and
Non-qualified
Deferred
Compensation
Earnings ($)(5) | | | All Other
Compensation ($)(6) | | | Total ($) | |
Robert C. Skaggs, Jr. | | | 2014 | | | | 946,667 | | | | 1,785,000 | | | | 3,395,356 | | | | 1,715,000 | | | | 357,545 | | | | 82,471 | | | | 8,282,039 | |
President and Chief Executive Officer | | | 2013 | | | | 900,000 | | | | — | | | | 2,662,652 | | | | 1,224,000 | | | | 306,743 | | | | 85,625 | | | | 5,179,020 | |
| | | 2012 | | | | 900,000 | | | | — | | | | 2,635,436 | | | | 720,000 | | | | 347,464 | | | | 79,336 | | | | 4,682,236 | |
Stephen P. Smith | | | 2014 | | | | 589,583 | | | | 750,000 | | | | 1,222,343 | | | | 579,600 | | | | 80,415 | | | | 52,993 | | | | 3,274,934 | |
Executive Vice President and CFO | | | 2013 | | | | 575,000 | | | | — | | | | 1,109,438 | | | | 539,350 | | | | 70,691 | | | | 52,436 | | | | 2,346,915 | |
| | | 2012 | | | | 564,583 | | | | — | | | | 1,098,088 | | | | 438,725 | | | | 70,947 | | | | 54,601 | | | | 2,226,944 | |
Glen L. Kettering | | | 2014 | | | | 448,333 | | | | 600,000 | | | | 908,914 | | | | 426,000 | | | | 109,019 | | | | 299,848 | | | | 2,792,114 | |
Executive Vice President and Group CEO | | | 2013 | | | | 340,000 | | | | 500,000 | | | | 443,775 | | | | 275,400 | | | | 120,229 | | | | 68,226 | | | | 1,747,630 | |
| | | 2012 | | | | 340,000 | | | | — | | | | 439,239 | | | | 222,360 | | | | 82,106 | | | | 71,750 | | | | 1,155,455 | |
Carrie J. Hightman | | | 2014 | | | | 483,750 | | | | 300,000 | | | | 679,059 | | | | 408,660 | | | | 62,395 | | | | 47,520 | | | | 1,981,384 | |
Executive Vice President and
Chief Legal Officer | | | 2013 | | | | 475,000 | | | | — | | | | 665,663 | | | | 384,750 | | | | 55,232 | | | | 49,274 | | | | 1,629,919 | |
| | | 2012 | | | | 475,000 | | | | — | | | | 658,849 | | | | 310,650 | | | | 53,288 | | | | 51,300 | | | | 1,549,087 | |
Joseph Hamrock | | | 2014 | | | | 487,500 | | | | 400,000 | | | | 633,801 | | | | 357,500 | | | | — | | | | 48,930 | | | | 1,927,731 | |
Executive Vice President and
Group CEO | | | 2013 | | | | 461,667 | | | | — | | | | 532,540 | | | | 418,535 | | | | — | | | | 46,529 | | | | 1,459,271 | |
| | | 2012 | | | | 298,370 | | | | 392,500 | | | | 1,105,313 | | | | — | | | | — | | | | 28,564 | | | | 1,824,747 | |
| | Lloyd Yates**
President and CEO | | | 2022 | | | 879,167 | | | 514,137 | | | 4,671,273 | | | 954,828 | | | 94,101 | | | 7,113,506 | |
| | 2021 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 2020 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Joseph Hamrock*
Former President and CEO | | | 2022 | | | 600,833 | | | — | | | — | | | 680,912 | | | 71,248 | | | 1,352,993 | |
| | 2021 | | | 1,025,000 | | | — | | | 6,953,903 | | | 1,470,840 | | | 86,039 | | | 9,535,782 | |
| | 2020 | | | 1,000,000 | | | — | | | 4,901,916 | | | 480,000 | | | 75,809 | | | 6,457,725 | |
| | Donald E. Brown
EVP, CFO and President, NCS | | | 2022 | | | 628,300 | | | 500,000 | | | 1,245,681 | | | 445,025 | | | 56,234 | | | 2,875,240 | |
| | 2021 | | | 615,000 | | | — | | | 1,738,219 | | | 520,000 | | | 59,722 | | | 2,932,941 | |
| | 2020 | | | 600,000 | | | — | | | 3,084,923 | | | 180,000 | | | 52,003 | | | 3,916,926 | |
| | Shawn Anderson**
SVP Strategy & Chief Risk Officer | | | 2022 | | | 391,667 | | | — | | | 953,324 | | | 332,901 | | | 43,408 | | | 1,712,300 | |
| | 2021 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 2020 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Melody Birmingham**
EVP & Chief Innovation Office | | | 2022 | | | 312,500 | | | 325,000 | | | 2,397,721 | | | 276,680 | | | 27,324 | | | 3,339,225 | |
| | 2021 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 2020 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | William Jefferson**
EVP Operations & Chief Safety Officer | | | 2022 | | | 237,500 | | | 250,000 | | | 1,496,725 | | | 196,258 | | | 16,493 | | | 2,196,976 | |
| | 2021 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 2020 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Pablo A. Vegas***
EVP, Former COO and President, NiSource Utilities | | | 2022 | | | 458,618 | | | 500,000 | | | 1,349,480 | | | — | | | 18,300 | | | 2,326,398 | |
| | 2021 | | | 615,000 | | | — | | | 1,788,910 | | | 565,000 | | | 43,727 | | | 3,012,637 | |
| | 2020 | | | 600,000 | | | — | | | 3,084,923 | | | 180,000 | | | 36,000 | | | 3,900,923 | |
*
| Mr. Hamrock retired from his officer and Board positions effective February 14, 2022. Mr. Yates, a member of our Board, was appointed President and CEO as of such date. |
**
| Messrs. Yates, Anderson, and Jefferson and Ms. Birmingham were not NEOs during 2020 or 2021. |
***
| Mr. Vegas resigned from his position effective September 2, 2022. |
(1)
| SalaryAny salary deferred at the election of the Named Executive OfficerNEO is reported as salary in the category and year in which such salary was earned. |
| (2) | This column shows discretionary bonus payouts that are in addition to any amounts paid under the Incentive Plan described in footnote 4. These bonus amounts are more fully described in the “Compensation Discussion and Analysis — ONC Committee Actions Related to 2014 Compensation — 2014 Discretionary Lump Sum Payout to Mr. Kettering” and “Additional Discretionary Lump Sum Payouts to the Named Executive Officers Based on 2014 Performance.” |
(3)
| For a discussion of stock awards granted in 2014,2022, please see “Compensation Discussionthe LTI section above in the CD&A under “Executive Compensation Elements” and Analysis — LTIP Awards” and the 2022 Grants of Plan-Based Awards table. ThisTable. Amounts reported in this column showsfor 2022 represent the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, with respect to the PSUs and RSUs granted in 2022. The grant date fair value of the restricted stock, restricted stock units, and performance shares granted in 2014RSUs is calculated based on the average market price of our common stock on the NYSE on the grant date, discounted forless the present value of any dividends not received induring the vesting period. SinceWith respect to the performance share awardsPSUs subject to NOEPS goals, grant date fair value is based on the closing stock price of our common stock at grant date. With respect to the PSUs subject to the RTSR goals, grant date fair value is calculated based on a Monte Carlo valuation technique in accordance with FASB ASC Topic 718. All of the PSUs are subject to performance conditions,conditions; therefore, the grant date value reported in this column for these awards is based upon the probable outcome of such conditions. The following table showsFor information on the value of the performance share awards reportedvaluation assumptions used in the Summary Compensation Table at the grant date assuming that the highest level of performance conditions will be achieved.these computations, see Note 14 to our consolidated financial statements included in our 2022 Annual Report on Form 10-K. |
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2022 EXECUTIVE COMPENSATION
| | | | |
Name | | Maximum Performance
Share Potential as
of Grant Date for
Awards ($)
| |
Robert C. Skaggs, Jr.
| | | 6,790,712 | |
Stephen P. Smith
| | | 2,444,686 | |
Glen L. Kettering
| | | 905,412 | |
Carrie J. Hightman
| | | 1,358,118 | |
Joseph Hamrock
| | | 1,267,601 | |
(4)(3)
| For 2014,2022, the Incentive Plan payoutSTI amount for each of the Named Executive Officers reflected above in the column entitled Non-Equity Incentive Plan Compensation wasNEO is based upon overallpro-rated salary earned during 2022 plus corporate and business unitindividual performance. For more information regarding 20142022 corporate performance and business unit performance, Incentive Planthe 2022 STI payout opportunities for the NamedNEOs, please see the “2022 Short-Term Incentive (STI) Program” section in the CD&A under “Executive Compensation Elements” above. The funding pool for the 2022 STI was 94.44% of target (the formulaic amount). An individual performance-based adjustment was applied to Mr. Anderson, Mr. Jefferson, and Ms. Birmingham as determined by the CEO and as approved by the Compensation and Human Capital Committee. This adjustment was multiplied by the named executive officer’s formulaic STI amount to arrive at the final STI payout for 2022. The adjustment was based on the following: Mr. Anderson-150%: As the Senior Vice President Strategy & Chief Risk Officer, Mr. Anderson’s exceptional individual performance was significantly weighted on setting the strategic direction for the enterprise and driving financial results. He successfully led the completion of a strategic review to fund key initiatives for the Company’s long-term growth strategy; Ms. Birmingham-125%: In the newly created role of Executive OfficersVice President & Chief Innovation Officer, Ms. Birmingham’s individual performance was significantly weighted on her drive and the actual payout amounts, see “Compensation Discussiondiscipline in developing an IT 5-year roadmap and Analysis — ONC Committee Actions Related to 2014 Compensation — Annual Performance-Based Cash Incentives and 2014 Incentive Plan Payoutstransformation discipline to the Namedenterprise along with delivering a pragmatic and efficient approach to the Customer Experience; Mr. Jefferson-125%: As the Executive Officers.”Vice President Operations & Chief Safety Officer, Mr. Jefferson’s individual performance was weighted on setting the strategic direction to drive industry leading, risk informed, asset management capability across the utility companies and for his execution of the centralization of core utility and construction operations. |
The following table shows the value of the 2022 PSUs reported in the 2022 Summary Compensation Table at the grant date assuming that the highest level of performance conditions will be achieved and less the present value of any dividends not received in the vesting period. For information on the valuation assumptions used in these computations, see Note 14 to our consolidated financial statements included in our 2022 Annual Report on Form 10-K.
| | Lloyd Yates | | | 6,744,991 | |
| | Joseph Hamrock* | | | 0 | |
| | Donald E. Brown | | | 2,086,662 | |
| | Shawn Anderson | | | 655,777 | |
| | Melody Birmingham | | | 1,824,966 | |
| | William Jefferson | | | 1,040,205 | |
| | Pablo A. Vegas* | | | 1,948,575 | |
*
| Mr. Hamrock retired from his officer and the non-qualified Pension Restoration PlanBoard positions effective February 14, 2022 and was not granted any PSUs for 2022; as a result of annual pay and interest credits to their account balance under the plans as described in the narrative to the Pension Benefits table. Mr. Hamrock is not eligible to participate in either of the Company’s pension plans. For a description ofVegas’ resignation, these plans and the basis used to develop the present values, see the Pension Benefits table and accompanying narrative. No earnings on deferred compensation are shown in this column, since no earningsshares were above market or preferential.forfeited. |
(6)(4)
| The table below provides a breakdown of the amounts shown in the “All Other Compensation” column for each Named Executive OfficerNEO in 2014.2022. |
| | | | | | | | | | | | | | | | |
| | | | | | Other Compensation | | | | |
| Name | | Perquisites & Personal Benefits(a) ($) | | | Company Contributions
To 401(k)
Plan(b) ($) | | | Company Contributions To Savings Restoration Plan(c) ($) | | | Total ($) | |
Robert C. Skaggs, Jr. | | | 11,471 | | | | 19,500 | | | | 51,500 | | | | 82,471 | |
Stephen P. Smith | | | 8,774 | | | | 19,500 | | | | 24,719 | | | | 52,993 | |
Glen L. Kettering | | | 257,973 | | | | 19,500 | | | | 22,375 | | | | 299,848 | |
Carrie J. Hightman | | | 11,239 | | | | 19,500 | | | | 16,781 | | | | 47,520 | |
Joseph Hamrock | | | 12,367 | | | | 19,500 | | | | 17,063 | | | | 48,930 | |
| | Lloyd Yates | | | 33,049 | | | 21,180 | | | 39,872 | | | 94,101 | |
| | Joseph Hamrock | | | 24,651 | | | 21,180 | | | 25,417 | | | 71,248 | |
| | Donald E. Brown | | | 12,602 | | | 21,180 | | | 22,451 | | | 56,234 | |
| | Shawn Anderson | | | 16,209 | | | 21,180 | | | 6,018 | | | 43,408 | |
| | Melody Birmingham | | | 5,623 | | | 21,180 | | | 521 | | | 27,324 | |
| | William Jefferson | | | — | | | 16,493 | | | — | | | 16,493 | |
| | Pablo A. Vegas | | | — | | | 18,300 | | | — | | | 18,300 | |
| (a)
| All perquisites are valued based on the aggregate incremental cost to the Company, as required by the rules of the SEC. The “Compensation Discussion and Analysis — OtherPlease see the “Other Compensation and Benefits —– Perquisites” section of this Proxy Statement containsabove in the CD&A under “Executive Compensation Elements” for additional information about the perquisites provided bywe provide to the Company to its Named Executive Officers.NEOs. The perquisite amounts listed include financial planning and tax services as follows:for some of the NEOs (Messrs. Hamrock, Brown, and Anderson, and Ms. Birmingham). For Mr. Skaggs, $11,471; Mr. Smith, $8,774; Mr. Kettering, $9,870, Ms. Hightman, $11,104, and Mr. Hamrock, $12,367; travel expense as follows: Mr. Kettering, $233,579; living expense as follows: Mr. Kettering, $14,155; spousal travel as follows: Mr. Kettering, $369; and taxable gift as follows: Ms. Hightman $135. The travel expense for Mr. Kettering was calculated byYates, the perquisite amount listed above reflects the value of his personal use of Company or leased aircraft. Regarding use of Company or leased aircraft, the costs shown reflect the incremental cost to the Company based on the incremental variable operating costs associated with theof Mr. Yates’ use of the Company-leasedCompany or leased aircraft attributable to commutecommuting to or from his residence or other personal location in connection with Company business. The incremental cost to the executive’s office, which includes an hourly use rate, fuel rate and other flight related fees and expenses. Executives are responsible for all taxes associated with the use of the Company aircraft for this purpose. |
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of the personal use of Company aircraft is calculated based on the aggregate variable operating costs to the Company, including fuel costs, trip-related maintenance, universal weather-monitoring costs, on-board catering, landing/ramp fees, and other miscellaneous variable costs. Fixed costs which do not change based on usage, such as pilots’ salaries, the amortized costs of the aircraft, and the cost of maintenance not related to trips are excluded. With respect to flights on a leased or chartered airplane, direct operating costs equal the amount that the third party charges the Company for such trip. NEOs are permitted to invite their spouse or other guests to accompany them on business trips when space is available; however, in such events, the NEO is imputed income in accordance with IRS guidelines. Beginning in 2023, the Company adopted a policy that requires NEOs to reimburse the Company for the direct operating costs of any personal travel, except Mr. Yates is not required to reimburse the Company for the cost of travel to meetings of the board of directors of other companies on which board he serves or for the cost of having his spouse accompany him on business trips if spouses are invited by the event organizer to attend.
| (b)
| This column reflects Company matching contributions and profit sharingprofit-sharing contributions made on behalf of each of the Named Executive OfficersNEOs and a Company non-elective contribution of 3% of compensation on behalf of Mr. Hamrock to the 401(k) Plan. The 401(k) Plan is a tax-qualified defined contribution plan, as described above under “Compensation Discussion and Analysis — Otherin the “Other Compensation and Benefits —– Savings Programs.”Programs” section in the CD&A under “Executive Compensation Elements”. |
| (c)
| This column reflects Company matching contributions and profit sharingprofit-sharing contributions made on behalf of the Named Executive Officersall eligible NEOs and a Company non-elective contribution of 3% of compensation on behalf of Mr. Hamrock, in excess of IRS limits to the Savings Restoration Plan. The Savings Restoration Plan is a non-qualified defined contribution plan, as described above under “Compensation Discussion and Analysis — Otherin the “Other Compensation and Benefits —– Savings Programs,”Programs” section in the CD&A under “Executive Compensation Elements” above, and in the narrative following the Non-qualified2022 Non-Qualified Deferred Compensation table.Table. |
2022 Grants of Plan-Based Awards
The following table sets forth information concerning plan-based awards
granted under the
2020 Omnibus Plan to the
Named Executive OfficersNEOs in
2014. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock
Awards Number of Shares of Stock or Units (#)(3) | | | Grant Date Fair Value
of Stock and
Option Awards ($)(4) | |
| Name | | Grant Date | | | Threshold
($) | | | Target ($) | | | Maximum
($) | | | Threshold
(#) | | | Target (#) | | | Maximum
(#) | | | |
Robert C. Skaggs, Jr. | | | 01/30/2014 | | | | 490,000 | | | | 1,225,000 | | | | 1,960,000 | | | | 54,729 | | | | 109,457 | | | | 218,914 | | | | — | | | | 3,395,356 | |
Stephen P. Smith | | | 01/30/2014 | | | | 180,000 | | | | 420,000 | | | | 660,000 | | | | 19,703 | | | | 39,405 | | | | 78,810 | | | | — | | | | 1,222,343 | |
Glen L. Kettering | | | 01/30/2014 | | | | 125,000 | | | | 300,000 | | | | 475,000 | | | | 7,297 | | | | 14,594 | | | | 29,188 | | | | 14,594 | | | | 908,914 | |
Carrie J. Hightman | | | 01/30/2014 | | | | 122,500 | | | | 294,000 | | | | 465,500 | | | | 10,946 | | | | 21,891 | | | | 43,782 | | | | — | | | | 679,059 | |
Joseph Hamrock | | | 01/30/2014 | | | | 125,000 | | | | 325,000 | | | | 525,000 | | | | 10,216 | | | | 20,432 | | | | 40,864 | | | | — | | | | 633,801 | |
| | Lloyd Yates | | | — | | | | | | 480,000 | | | 1,150,000 | | | 1,920,000 | | | — | | | — | | | — | | | — | | | — | |
| | 1/28/2022 | | | 1/27/2022 | | | — | | | — | | | — | | | 27,674 | | | 122,994 | | | 245,988 | | | — | | | 3,878,616 | |
| | 1/28/2022 | | | 1/27/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 30,747 | | | 792,658 | |
| | Joseph
Hamrock | | | — | | | | | | 494,400 | | | 1,236,000 | | | 1,977,600 (5) | | | — | | | — | | | — | | | — | | | — | |
| | Donald E.
Brown | | | — | | | | | | 189,108 | | | 472,770 | | | 756,432 | | | — | | | — | | | — | | | — | | | — | |
| | 1/28/2022 | | | 1/24/2022 | | | — | | | — | | | — | | | 7,380 | | | 32,798 | | | 65,596 | | | — | | | 1,034,285 | |
| | 1/28/2022 | | | 1/24/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,200 | | | 211,396 | |
| | Shawn
Anderson | | | — | | | | | | 96,000 | | | 240,000 | | | 384,000 | | | — | | | — | | | — | | | — | | | — | |
| | 1/28/2022 | | | 1/24/2022 | | | — | | | — | | | — | | | 2,691 | | | 11,958 | | | 23,916 | | | — | | | 377,096 | |
| | 1/28/2022 | | | 1/24/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,124 | | | 132,097 | |
| | 1/28/2022 | | | 1/24/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 17,082 | | | 444,132 | |
| | Melody
Birmingham | | | — | | | | | | 187,500 | | | 468,750 | | | 750,000 | | | — | | | — | | | — | | | — | | | — | |
| | 7/1/2022 | | | 5/6/2022 | | | — | | | — | | | — | | | 7,488 | | | 33,278 | | | 66,556 | | | — | | | 1,074,047 | |
| | 7/1/2022 | | | 5/6/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,319 | | | 226,776 | |
| | 7/1/2022 | | | 5/6/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 38,664 | | | 1,096,898 | |
| | William
Jefferson | | | — | | | | | | 133,000 | | | 332,500 | | | 532,000 | | | — | | | — | | | — | | | — | | | — | |
| | 7/1/2022 | | | 5/6/2022 | | | — | | | — | | | — | | | 4,268 | | | 18,968 | | | 37,936 | | | — | | | 612,192 | |
| | 7/1/2022 | | | 5/6/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,742 | | | 129,267 | |
| | 7/1/2022 | | | 5/6/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 26,622 | | | 755,266 | |
| | Pablo A.
Vegas(6) | | | — | | | | | | 204,800 | | | 512,000 | | | 819,200 | | | — | | | — | | | — | | | — | | | — | |
| | 1/28/2022 | | | 1/24/2022 | | | — | | | — | | | — | | | 7,995 | | | 35,532 | | | 71,064 | | | — | | | 1,120,501 | |
| | 1/28/2022 | | | 1/24/2022 | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,882 | | | 228,978 | |
(1)
| The information in the “Threshold,” “Target,” and “Maximum” columns reflects potential payouts based on the performance targets set under the 2014 Incentive Plan.STI. The amounts actually paid appear in the “Non-Equity Incentive Plan Compensation” column of the 2014 Summary Compensation Table. For a description, please see the Compensation Discussion and Analysis section under the caption “ONC Committee Actions Related to 2014 Compensation — Annual Performance-Based Cash Incentives.” |
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Compensation” column of the 2022 Summary Compensation Table. For a description of the STI, please see the “2022 Short-Term Incentive (STI) Program” section above in the CD&A under “Executive Compensation Elements.”
(2)
| The information in the “Threshold,” “Target,” and “Maximum” columns reflects the potential share payouts under the 2014 performance share awards. The actual numberportion of performance sharesthe 2022 LTI award granted in the form of PSUs (for the annual program, PSUs represented 80% of the LTI award for Messrs. Brown, Jefferson and Vegas, and Ms. Birmingham and 70% of the award for Mr. Anderson. Under the terms of the PSU awards, the PSUs will be earned is determined based on performance overachievement of goals relating to NOEPS and relative total shareholder return, subject to a +/-20% safety modifier, +/-10% environmental modifier, and +/-10% workforce diversity modifier. The amount reported in the three-year period from 2014 through 2016. In order“Threshold” column represents the minimum level of the PSUs that may vest based on the achievement of the threshold NOEPS goal and threshold RTSR goal, -20% safety modifier, -10% environmental modifier, and -10% workforce diversity modifier for a participant to receive shares, the Company must attain specific performance goals3-year program. The amount reported in the “Target” column represents target achievement of the NOEPS and RTSR goals. The amount reported in the participant must satisfy“Maximum” column represents maximum achievement of the applicable service condition.maximum NOEPS goal and threshold RTSR goal, +20% safety modifier, +10% environmental modifier, and +10% workforce diversity modifier for the 3-year program. Please note that this maximum is capped at 200%. For a description,further information regarding these awards, please see the “2022 Long-Term Incentive (LTI) Program” section above in the CD&A under “Executive Compensation Discussion and Analysis section Elements |
(3)
| underRepresents the caption “Compensation Discussion and Analysis — LTIP Awards.” If the target level of performance is met, the individual would receive 100% of the grant designated by the ONC Committee. The ONC Committee also set threshold and maximum goals. If the threshold level is not met, then the executive would not receive any value of that portion of the grant. At2022 LTI award granted in the threshold levelform of RSUs (20% of the LTI award for Messrs. Yates, Brown, Jefferson and Vegas, Ms. Birmingham and 30% for Mr. Anderson). These awards will vest on February 28, 2025 (with a portion of Ms. Birmingham’s and Mr. Jefferson’s awards vesting July 1, 2023 and July 1, 2024) provided the executive would receive 50% ofcontinues to be employed by us through that date, as described in the value of“2022 Long-Term Incentive (LTI) Program” section above in the target value ofCD&A under “Executive Compensation Elements.” For more information regarding these awards, please see the grant, and at“2021 Long-Term Incentive (LTI) Program” section in the maximum level the executive would receive 200% of the target value of the grant.CD&A under “Executive Compensation Elements.” |
(3)(4)
| The informationAmounts reported in this column reflects time-based restricted stock units granted to Mr. Kettering on January 30, 2014, all of which will vest on January 30, 2017. |
(4) | This column showsrepresent the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, with respect to the PSUs and RSUs granted in 2022. The grant date fair value of the restricted stock, restricted stock units, and performance shares granted in 2014RSUs is calculated based on the average market price of our common stock on the NYSE on the grant date, discounted forless the present value of any dividends not received induring the vesting period. SinceWith respect to the performance share awardsPSUs subject to NOEPS goals, grant date fair value is based on the closing stock price of our common stock at grant date. With respect to the PSUs subject to the RTSR goals, grant date fair value is calculated based on a Monte Carlo valuation technique in accordance with FASB ASC Topic 718. Additionally, all the PSUs are subject to performance conditions and the grant date value isvalues reported in this column for the PSU awards are based upon the probable outcome of such conditions. |
(5)
| As a result of Mr. Hamrock’s retirement, these amounts were prorated based on actual eligible earnings. |
(6)
| As a result of Mr. Vegas’ resignation, these amounts were forfeited. |
Outstanding Equity Awards at
2022 Fiscal Year-End
The following table sets forth information at fiscal year-end concerning outstanding grants of equity awards to the
Named Executive Officers, includingNEOs. At fiscal year-end, none of our NEOs held any outstanding option awards
of restricted stock, restricted stock units, and performance shareswith respect to the
Named Executive Officers.Company.Name | | Number of SecuritiesUnderlying Unexercised OptionsExercisable
Shares or
Units of Stock
That Have
Not Vested
(#)
| | | Market Value of
Shares or
Units of Stock
That Have
Not Vested
($)(1) | | Option
Exercise
Price
($)
| | Option
Expiration
Date | | Equity Incentive
Plan Awards:
Shares, or
Units of
Stockor Other
Rights That
Have
(#)
| | | Equity Incentive
Plan Awards:
Market
or Payout
Value of
Unearned
Shares, or
Units of
Stockor Other
Rights That
Have
($)(2)
| | | Equity Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)
| | | Equity
Incentive
Plan Awards
Market or
Payout Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)(3)
| |
Robert C. Skaggs, Jr.
| Lloyd Yates | — | | —30,747(3) | | — | 843,083 | | 64,043 | (4)— | | | 2,716,704— | | | | — | | | | — | |
| | — | — | | — | | — | 122,994(4) | | 46,685 | (5)3,372,495 | | | 1,980,378 | | | | — | | | | — | |
| | Joseph Hamrock | — | | —111,235(5) | | — | 3,050,064 | | 29,126 | (6)— | | | 1,235,525— | | | | — | | | | — | |
| | 74,087(6) | — | | —2,031,466 | | — | — | | 234,917 | (7)— | | | 9,965,179 | | | | — | | | | — | |
| | 62,972(7) | — | | —1,726,692 | | — | — | | — | — | | | — | | | | 113,208 | (8) | | | 4,802,283 | |
| | 58,858(8) | — | | —1,613,886 | | — | — | | — | — | | | — | | | | 109,457 | (9) | | | 4,643,166 | |
Stephen P. Smith
| 24,493(9) | — | | —671,598 | | — | — | | 97,881 | (7)— | | | 4,152,112 | | | | — | | | | — | |
| | 21,671(10) | — | | —594,219 | | — | — | | — | — | | | — | | | | 47,170 | (8) | | | 2,000,951 | |
| | 97,972(11) | — | | —2,686,392 | | — | — | | — | — | | | — | | | | 39,405 | (9) | | | 1,671,560 | |
Glen L. Kettering
| — | — | | — | | — | 86,682(12) | | 39,153 | (7)2,376,820 | | | 1,660,870 | | | | — | | | | — | |
| | — | — | | — | | — | 54,176(13) | | — | 1,485,506 | | | — | | | | 18,868 | (8) | | | 800,381 | |
| | — | | — | | — | | | — | | | | — | | | | 14,594 | (9) | | | 619,077 | |
| | — | | — | | — | | | 14,594 | (10) | | | 619,077 | | | | — | | | | — | |
Carrie J. Hightman
| | — | | — | | — | | | 58,728 | (7) | | | 2,491,242 | | | | — | | | | — | |
| | — | | — | | — | | | — | | | | — | | | | 28,302 | (8) | | | 1,200,571 | |
| | — | | — | | — | | | — | | | | — | | | | 21,891 | (9) | | | 928,616 | |
Joseph Hamrock
| | — | | — | | — | | | 43,710 | (11) | | | 1,854,178 | | | | — | | | | — | |
| | — | | — | | — | | | — | | | | — | | | | 22,642 | (8) | | | 960,474 | |
| | — | | — | | — | | | — | | | | — | | | | 20,432 | (9) | | | 866,725 | |
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| | Donald E. Brown | | | 8,200(3) | | | 224,844 | | | — | | | — | |
| | 7,904(9) | | | 216,728 | | | — | | | — | |
| | 10,825(10) | | | 296,822 | | | — | | | — | |
| | 34,364(14) | | | 942,261 | | | — | | | — | |
| | — | | | — | | | 32,798(4) | | | 899,321 | |
| | 31,615(11) | | | 866,883 | | | — | | | — | |
| | — | | | — | | | 43,302(12) | | | 1,187,341 | |
| | — | | | — | | | 27,064(13) | | | 742,095 | |
| | Shawn Anderson | | | 5,124(3) | | | 140,500 | | | — | | | — | |
| | 1,375(9) | | | 37,703 | | | — | | | — | |
| | 13,746(16) | | | 376,915 | | | — | | | — | |
| | 4,465(10) | | | 122,430 | | | — | | | — | |
| | 17,082(17) | | | 468,388 | | | — | | | — | |
| | — | | | — | | | 11,958(4) | | | 327,888 | |
| | 5,498(11) | | | 150,755 | | | — | | | — | |
| | — | | | — | | | 10,420(12) | | | 285,716 | |
| | — | | | — | | | 7,442(13) | | | 204,060 | |
| | Melody Birmingham | | | 8,319(3) | | | 228,107 | | | — | | | — | |
| | 38,664(15) | | | 1,060,167 | | | — | | | — | |
| | — | | | — | | | 33,278(4) | | | 912,483 | |
| | William Jefferson | | | 4,742(3) | | | 130,026 | | | — | | | — | |
| | 26,622(15) | | | 729,975 | | | — | | | — | |
| | — | | | — | | | 18,968(4) | | | 520,103 | |
| | Pablo Vegas | | | 0 | | | 0 | | | 0 | | | 0 | |
(1)
| There are no outstanding options held by the Named Executive Officers. |
(2) | This column showsAmounts shown represent the market value of the unvested restricted stock units and restricted stock awards held byRSUs calculated using the Named Executive Officers based on $42.42 per share, the closing sale price of our common stock on December 30, 2022, the NYSE on December 31, 2014.last trading day of fiscal 2022, which was $27.42 per share. |
(3)(2)
| This column showsAmounts shown represent the market value of the unvested performance shares held byPSUs calculated using the Named Executive Officers payable at target levels, based on $42.42 per share, the closing sale price of our common stock on December 30, 2022, the NYSE on December 31, 2014.last trading day of fiscal 2022, which was $27.42 per share. |
(4)(3)
| The awards shown represent restricted stock unitsRSUs granted on March 24, 2009. VestingJanuary 28, 2022, except for Ms. Birmingham and Mr. Jefferson’s awards, which were granted on July 1, 2022. These shares will vest on February 28, 2025, provided the executive continues to be employed by us on that date. |
(4)
| The awards shown represent 2022 PSUs granted on January 28, 2022, except for Ms. Birmingham and Mr. Jefferson’s awards, which were granted on July 1, 2022. The number of shares that will vest is dependent upon our performance relative to three-year performance goals over the 2022-2024 performance period and the executive's continued employment through February 28, 2025. |
(5)
| The awards shown represent RSUs granted on July 13, 2015, following the conversion of the 2013 performance shares in connection with the separation of Columbia Pipeline Group, Inc. from the Company (the “Separation”). The vesting date for these restricted stock unitsawards was February 29, 2016. The amounts shown represent the portion of the award the vesting of which has been delayed in accordance with the terms of Mr. Skaggs’the award agreementagreements due to the limitations on deductibility under Section 162(m) of the Internal Revenue Code (“Section 162(m) of the Code”). These units will vest and beare payable in shares of our common stock on the earlier to occur of: histhe executive’s termination of employment,employment; the date hethe executive is no longer subject to Section 162(m) of the Code; or the date that such shares couldthe RSUs can be paid to himthe executive and be deductible under Section 162(m). of the Code. These delayed awards were released February 1, 2023. |
(5)(6)
| The awardawards shown represents restricted stockrepresent RSUs granted on July 13, 2015, following the conversion of the 2014 performance shares in connection with the Separation. The vesting date for these awards was February 28, 2017. The amounts shown |
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represent the portion of the award the vesting of which has been delayed in accordance with the terms of the award agreements due to the limitations on deductibility under Section 162(m) of the Code. These units are payable in shares of our common stock on the earlier to occur of: the executive’s termination of employment; the date the executive is no longer subject to Section 162(m) of the Code; or the date the RSUs can be paid to the executive and be deductible under Section 162(m) of the Code. These delayed awards were released February 1, 2023.
(7)
| The awards shown represent the 2015 annual long-term equity awards granted in the form of RSUs in connection with the Separation. These units were granted on January 22, 2010. Vesting29, 2015. The vesting date for these awards was February 2, 2018. The amounts shown represent the portion of these restricted stock unitsthe award the vesting of which has been delayed in accordance with the terms of Mr. Skaggs’the award agreementagreements due to the limitations on deductibility under Section 162(m). of the Code. These units will vest and beare payable in shares of our common stock on the earlier to occur of: histhe executive's termination of employment,employment; the date hethe executive is no longer subject to Section 162(m) of the Code; or the date that the restricted stock unitsRSUs can be paid to himthe executive and be deductible under Section 162(m). of the Code. These delayed awards were released February 1, 2023. |
(6)(8)
| The awardThese awards shown represents restricted stock unitsrepresent RSUs granted on March 23, 2010. VestingJuly 13, 2015, in connection with the assumption of additional responsibilities in connection with the Separation. The vesting date for these restricted stock unitsawards was February 2, 2018. The amounts shown represent the portion of the award the vesting of which has been delayed in accordance with the terms of Mr. Skaggs’the award agreementagreements due to limitationsthe limitation on deductibility under Section 162(m). of the Code. These units will vest and beare payable in shares of our common stock on the earlier to occur of: histhe executive's termination of employment,employment; the date hethe executive is no longernot subject to Section 162(m) of the Code; or the date that the restricted stock unitsRSUs can be paid to himthe executive and be deductible under Section 162(m). of the Code. These delayed awards were released February 1, 2023. |
(7)(9)
| The awards shown represent performance sharesRSUs granted January 26, 2012. These awards vested on February 18, 2015, immediately following the certification of Company performance after satisfaction of the service condition on January 30, 2015. The performance measures, their weightings and results are set forth in2020, except for Mr. Hamrock's award, which was granted on January 31, 2020. These shares will vest on February 28, 2023, provided the Compensation Discussion and Analysis underexecutive continues to be employed by us on that date. Due to his retirement, the Section entitled “ONC Committee Actions Related to 2014 Compensation — 2012 Performance Share Awards.”value for Mr. Hamrock shows the prorated shares which have a vesting date of February 1, 2023. |
(8)(10)
| The awards shown represent performanceRSUs granted on January 28, 2021, except for Mr. Hamrock's award, which was granted on January 29, 2021. These shares will vest on February 28, 2024, provided the executive continues to be employed by us on that date. Due to his retirement, the value for Mr. Hamrock shows the prorated shares which have a vesting date of February 1, 2023. |
(11)
| The awards shown represent 2020 PSUs granted on January 24, 2013 at target levels.30, 2020, except for Mr. Hamrock's award, which was granted on January 31, 2020. The number of shares that will actually vest is dependent upon the Company meeting multi-yearour performance measures,relative to three-year performance goals over the 2013 — 20152020-2022 performance period and the executive’sexecutive's continued employment through February 29, 2016.28, 2023. Due to his retirement, the value for Mr. Hamrock shows the prorated shares. |
(9)(12)
| The awards shown represent performance shares2021 PSUs granted on January 30, 2014 at target levels.28, 2021, except for Mr. Hamrock's award, which was granted on January 29, 2021. The number of shares that will actually vest is dependent upon the Company meeting multi-yearour performance measures,relative to three-year performance goals over the 2014 — 20162021-2023 performance period and the executive’sexecutive's continued employment through February 28, 2017. 2024. Due to his retirement, the value for Mr. Hamrock shows the prorated shares. |
(13)
| The performance measures and targetawards shown represent 2021 PSUs granted on January 28, 2021, except for Mr. Hamrock's award, which was granted on January 29, 2021. The number of shares awardedthat will vest is dependent upon our performance relative to each oftwo-year and three-year performance goals over the Named Executive Officers are set forth in2021-2022 performance period and the Compensation Discussion2021-2023 performance period and Analysis under the Section entitled “Compensation Discussion and Analysis — LTIP Awards.”executive's continued employment through February 28, 2024. Due to his retirement, the value for Mr. Hamrock shows the prorated shares. |
(10)(14)
| The awardawards shown represents sharesrepresent special retention awards of restricted stockservice based RSUs granted on January 30, 2014.2020. The award vestsawards vest on January 30, 2017.2024, provided the executive continues to be employed by us on that date. For more information regarding these awards, please see the “Special Awards” section in the CD&A under “Executive Compensation Elements.” |
(11)(15)
| The awardawards shown represents performance sharesrepresent special retention awards of service based RSUs granted May 14, 2012. This award vested on February 17, 2015, upon certificationJuly 1, 2022. The awards vest on July 1, 2023 and July 1, 2024, provided the executive continues to be employed by us on those dates. For more information regarding these awards, please see the “Special Awards” section in the CD&A under “Executive Compensation Elements.” |
(16)
| The awards shown represent special retention awards of Company performance following satisfaction of the service conditionbased RSUs granted on January 30, 2015.2020. The performance measures, their weightings and results are set forthawards vest on January 30, 2023, provided the executive continues to be employed by us on that date. For more information regarding these awards, please see the “Special Awards” section in the CD&A under “Executive Compensation Discussion and Analysis under the Section entitled “ONC Committee Actions Related to 2014 Compensation — 2012 Performance Share Awards.Elements.” |
(17)
| The awards shown represent special retention awards of service based RSUs granted on January 28, 2022. The awards vest on January 28, 2025, provided the executive continues to be employed by us on that date. For more information regarding these awards, please see the “Special Awards” section in the CD&A under “Executive Compensation Elements.” |
2023 Proxy Statement | 57
TABLE OF CONTENTS
2022 EXECUTIVE COMPENSATION
2022 Option Exercises and Stock Vested
| | | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
Name | | Number of Shares
Acquired on Exercise
(#)
| | Value Realized on
Exercise
($)(1)
| | Number of Shares
Acquired on Vesting
(#)
| | | Value Realized on
Vesting
($)(5)
| |
Robert C. Skaggs, Jr.
| | — | | — | | | 33,476 | (2) | | | 1,144,210 | |
| | — | | — | | | 150,643 | (3) | | | 5,317,698 | |
Stephen P. Smith
| | — | | — | | | 57,245 | (3) | | | 2,020,749 | |
Glen L. Kettering
| | — | | — | | | 27,116 | (3) | | | 957,195 | |
Carrie J. Hightman
| | — | | — | | | 42,180 | (3) | | | 1,488,954 | |
Joseph Hamrock
| | — | | — | | | 7,962 | (4) | | | 288,543 | |
The following table sets forth information regarding the vesting of stock awards during 2022. During 2022, none of our NEOs exercised or held option awards with respect to the Company.
| | Lloyd Yates | | | — | | | — | |
| | Joseph Hamrock | | | 131,003 | | | 3,789,917 | |
| | Donald E. Brown | | | 32,911 | | | 952,115 | |
| | Shawn Anderson | | | 5,983 | | | 173,088 | |
| | Melody Birmingham | | | — | | | — | |
| | William Jefferson | | | — | | | — | |
| | Pablo A. Vegas | | | 32,911 | | | 952,115 | |
(1)
| During 2014, noThe stock options were exercised by any of the Named Executive Officers. |
(2) | Mr. Skaggs’awards represent 2019 performance and restricted stock award vested in its entirety on January 28, 2014. Mr. Skaggs had made an election under Section 83(b) of the Code (“Section 83(b)”) on the grant date and consequently no shares were subject to delayed vesting due to the limitations on deductibility under Section 162(m). |
(3) | Award shown represents performance shares granted January 28, 2011 thatshare awards, which vested on February 18, 2014, immediately following the certification of Company performance after satisfaction of the service condition on January 28, 2014.2022. |
(4)(2)
| AwardAmounts shown represents restricted stock units granted May 14, 2012 of which 7,962 shares vested May 2, 2014. |
(5) | The amounts in this column reflect the value realized by the Named Executive Officer upon the vesting of stock which isawards during 2022, computed by multiplying the number of shares that vested by the market value of our common stock on the vesting date. |
Pension Benefits
| | | | | | | | | | |
| Name | | Plan Name | | Number of Years
Credited Service
(#) | | | Present Value of
Accumulated Benefit
($) | |
Robert C. Skaggs, Jr. | | Columbia Energy Group Pension Plan | | | 33.5 | | | | 1,471,116 | |
| | | Pension Restoration Plan | | | 33.5 | | | | 4,040,992 | |
Stephen P. Smith | | Columbia Energy Group Pension Plan | | | 6.6 | | | | 109,705 | |
| | | Pension Restoration Plan | | | 6.6 | | | | 302,311 | |
Glen L. Kettering | | Columbia Energy Group Pension Plan | | | 35.5 | | | | 838,927 | |
| | | Pension Restoration Plan | | | 35.5 | | | | 551,140 | |
Carrie J. Hightman | | NiSource Inc. Pension Plan | | | 7.1 | | | | 114,848 | |
| | | Pension Restoration Plan | | | 7.1 | | | | 219,296 | |
Joseph Hamrock(1) | | NiSource Inc. Pension Plan | | | — | | | | — | |
| | | Pension Restriction Plan | | | — | | | | — | |
(1) | Because Mr. Hamrock was hired after January 1, 2010 he is not eligible to participate in any defined benefit pension plan sponsored by the Company or its affiliates. |
Tax Qualified Pension Plans 2022 Non-Qualified Deferred Compensation The
Company and its affiliates sponsor several qualified defined benefit pension plans for their respective exempt salaried employees hired before January 1, 2010, includingfollowing table provides information regarding deferred compensation with respect to our NEOs under the
Named Executive Officers identified in the Pension Benefits Table. Benefits under these plans are funded through and are payable out of a trust fund, which consists of contributions made by the Company and the earnings of the fund.The specific defined benefit pension plan in which an employee participates depends upon the affiliate into which the employee was hired. Messrs. Skaggs and Kettering participate in the Columbia Energy Group Pension Plan (the “CEG Plan”) because they were participants in this plan at the time of the acquisition of Columbia Energy Group by the Company. Mr. Smith participates in the CEG Plan because he was hired into Columbia Energy Group. Ms. Hightman participates in the NiSource Inc. Pension Plan (the “NiSource Plan”) because she was hired into NiSource Corporate Services Company. Both the CEGDeferred Compensation Plan and the NiSource Plan previously provided for a “final average pay” benefit (“FAP benefit”) for exempt employees and, alternatively, a cash balance benefit feature (described below). As of January 1, 2011, all active exempt employees participating in our qualified defined benefit pension plans, including the CEG Plan and the NiSource Plan, who had accrued a benefit under a FAP benefit formula or, alternatively, under the prior cash balance formula, were converted to each plan’s respective current cash balance formula. Mr. Skaggs was the only Named Executive Officer participating in the FAP benefit at the time of the January 1, 2011 conversion. Mr. Kettering also previously participated in the FAP benefit but was converted to the prior cash balance formula during an earlier choice program. As such, both Mr. Skaggs’ and Mr. Kettering’s accrued benefit under the CEG plan is equal to his cash balance account, calculated as described below, or, if greater at the time of retirement, his “protected benefit” which is a calculation taking into consideration the accrued benefit under the FAP benefit formula as of the day immediately preceding conversion of the participant’s benefit to the cash balance formula (using only service and compensation earned prior to the benefit conversion). Ms. Hightman and Mr. Smith were participating in the applicable current cash balance benefit formula at the time of the above-referenced conversion.
Pursuant to the above-described conversion of all exempt employees of the Company, including Mr. Skaggs, to the applicable current cash balance feature, each eligible exempt employee who transitioned to the current cash balance feature has an account benefit consisting of: (1) an “opening account balance” equal to either (a) in the case of an exempt employee transitioning from a FAP benefit formula, the lump sum actuarial equivalent of his accrued FAP benefit as of December 31, 2010, or (b) in the case of an exempt employee transitioning from the prior cash balance formula, equal to the account balance in such prior cash balance formula as of December 31, 2010; plus (2) annual pay and interest credits to the cash balance account. Annual pay credits to a participant’s account under the current cash balance formula equal a percentage of compensation, taking into account the Social Security Taxable Wage Base, based on the participant’s combined age and service for the plan year. The applicable pay credits are listed in the following table:
| | | | | | | | |
Sum of Age Plus Years of Service | | Percentage of Total
Compensation | | | Percentage of Compensation Above 1/2
of the Taxable Wage Base | |
Less than 50 | | | 4.0 | %�� | | | 1.0 | % |
50-69 | | | 5.0 | % | | | 1.0 | % |
70 or more | | | 6.0 | % | | | 1.0 | % |
Compensation for purposes of annual pay credits means base pay, any performance-based pay, any “banked” vacation (in the year of vacation payout) and any salary reduction contributions made for the employee pursuant to a plan maintained by the Company or an affiliate under Code Sections 125 or 401(k), but excluding any amounts deferred to a non-qualified plan maintained by the Company. In accordance with Code limits, the maximum compensation taken into account in determining benefits under the plans with respect to all participants, including the Named Executive Officers, in 2014 was limited to $260,000. Interest is credited each year to the account based on the interest rate on 30-year Treasury securities, as determined by the IRS, for the September immediately preceding the first day of each year, subject to a minimum interest credit of 4%.
The automatic form of benefit under the cash balance features of both the CEG Plan and the NiSource Plan is a single life annuity in the case of an unmarried participant and a 50% joint and survivor pop-up annuity in the case of a married participant (unreduced for the value of the pop-up feature). Optional forms of payment are available under the pension plans, depending on the participant’s marital status and benefit feature. Each optional form of benefit is defined in the applicable plan to be the actuarial equivalent of the normal form of benefit defined in the plan.
Under the cash balance features of the applicable plans, any participant may take a distribution of his or her vested cash balance account benefit upon termination of employment, without any reduction. Alternatively, if the
participant’s accrued benefit is determined by the protected benefit calculation referenced above (i.e., the protected benefit calculation is greater than the participant’s cash balance account), the participant would receive the protected benefit amount (which may reflect an actuarial or early retirement reduction if the participant elects to receive it prior to normal retirement date as provided in the applicable plan). Because each of the Named Executive Officers now participates in the current cash balance feature of the applicable plan, each such Named Executive Officer is eligible to take an unreduced distribution of his cash balance account upon termination of employment regardless of age and service, or, if greater, the Named Executive Officer could take a distribution of the accrued benefit using the protected benefit calculation. Currently, Mr. Skaggs and Mr. Kettering are the only Named Executive Officers who are eligible for early retirement (which impacts the protected benefit calculation), with early retirement defined under the CEG Plan as the earlier of age 55 with 10 years of eligible service or age 60 with 5 years of eligible service.
Assumptions. The present value of the accumulated benefit for each Named Executive Officer identified above is their account balance payable under the applicable plan. For Mr. Skaggs and Mr. Kettering, this value is greater than the present value of their protected benefit using the assumptions set forth in Note 10 — Pension and Other Postretirement Benefits in the footnotes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2014. The Company has not granted any extra years of credited service under the plans identified above.
Non-qualified Pension Benefit Plan. The Company also sponsors the PensionSavings Restoration Plan for NiSource Inc. and Affiliates (the “Pension Restoration Plan”). The Pension Restoration Plan is a non-qualified, unfunded defined benefit plan. The plan includes employees of the Company and its affiliates whose benefits under the applicable tax-qualified pension plan are limited by sections 415 and 401(a)(17) of the Code, including each of the Named Executive Officers. The Pension Restoration Plan provides for a supplemental retirement benefit equal to the difference between (i) the benefit a participant would have received under the qualified pension plan had such benefit not been limited by sections 415 and 401(a)(17) of the Code, or any other applicable section, and reduced by deferrals into our Deferred Compensation Plan, minus (ii) the actual benefit received under the qualified pension plan after applying any limits and considering deferrals into our Deferred Compensation Plan. Participants are provided the opportunity to elect any form of payment available under the qualified pension plan prior to accruing a benefit under the plan. If no election is made, the benefit is payable as a lump sum. The timing of payment under the Pension Restoration Plan generally is 45 days after one of the following: (1) if the participant qualifies for early retirement under the applicable qualified pension plan, following separation from service; or (2) if the participant does not qualify for early retirement at the time of separation from service, the later of separation from service or age 65. Key employees for purposes of section 409A of the Code, however, may not receive payments triggered by separation from service until 6 months after the termination date.
No plan benefits were paid to any Named Executive Officer under the CEG Plan, the NiSource Plan or the Pension Restoration Plan in 2014.
Non-qualified Deferred Compensation
| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Plan Name | | Executive
Contributions
in Last FY ($)(1) | | | Registrant
Contributions
in Last FY ($)(5) | | | Aggregate
Earnings in
Last FY ($)(6) | | | Aggregate
Withdrawals/
Distributions
($) | | | Aggregate
Balance
at Last
FYE ($)(7) | |
Robert C. Skaggs, Jr. | | Deferred
Compensation
Plan(2) | | | — | | | | — | | | | 246,016 | | | | — | | | | 3,540,023 | |
| | | Savings
Restoration
Plan(3) | | | — | | | | 57,442 | | | | 57,887 | | | | — | | | | 1,846,013 | |
| | | Phantom
Stock Units(4) | | | — | | | | — | | | | 1,711,449 | | | | — | | | | 6,932,745 | |
Stephen P. Smith | | Savings
Restoration
Plan(3) | | | — | | | | 22,400 | | | | 41,327 | | | | — | | | | 338,326 | |
Glen L. Kettering | | Savings
Restoration
Plan(3) | | | — | | | | 5,950 | | | | 96,810 | | | | — | | | | 1,075,471 | |
| | | Phantom
Stock(4) | | | — | | | | — | | | | 467,206 | | | | 45,128 | | | | 1,876,788 | |
Carrie J. Hightman | | Savings
RestorationPlan(3) | | | — | | | | 15,400 | | | | 4,878 | | | | — | | | | 156,513 | |
Joseph Hamrock | | Deferred
Compensation
Plan(2) | | | 209,268 | | | | — | | | | 7,549 | | | | — | | | | 267,537 | |
| | | Savings
Restoration Plan(3) | | | — | | | | 14,467 | | | | 1,960 | | | | — | | | | 18,846 | |
| | Lloyd Yates | | | Deferred Compensation Plan | | | — | | | — | | | — | | | — | | | — | |
| | Savings Restoration Plan | | | — | | | — | | | — | | | — | | | — | |
| | Joseph Hamrock | | | Deferred Compensation Plan | | | — | | | — | | | (99,984) | | | — | | | 442,272 | |
| | Savings Restoration Plan | | | — | | | 52,259 | | | (139,206) | | | — | | | 489,189 | |
| | Donald E. Brown | | | Deferred Compensation Plan | | | 52,000 | | | — | | | (89,494) | | | — | | | 192,513 | |
| | Savings Restoration Plan | | | — | | | 23,108 | | | (49,914) | | | — | | | 152,129 | |
| | Shawn Anderson | | | Deferred Compensation Plan | | | — | | | — | | | — | | | — | | | — | |
| | Savings Restoration Plan | | | — | | | 3,674 | | | 195 | | | — | | | 4,619 | |
| | Melody Birmingham | | | Deferred Compensation Plan | | | — | | | — | | | — | | | — | | | — | |
| | Savings Restoration Plan | | | — | | | — | | | — | | | — | | | — | |
| | William Jefferson | | | Deferred Compensation Plan | | | — | | | — | | | — | | | — | | | — | |
| | Savings Restoration Plan | | | — | | | — | | | — | | | — | | | — | |
| | Pablo A. Vegas | | | Deferred Compensation Plan | | | — | | | — | | | — | | | — | | | — | |
| | Savings Restoration Plan | | | — | | | 23,108 | | | (18,009) | | | — | | | 88,236 | |
(1)
| Amounts shown as “Executive Contributions in Last FY,” if any, were deferred under our Deferred Compensation Plan. The Named Executive OfficersNEOs may elect to defer and invest between 5% and 80% of their base compensation and between 5% and 100%80% of their bonus on a pre-tax basis. These contributionsParticipant deferrals are fully vested. |
| (2) | For a description of the Deferred Compensation Plan, please see “Compensation Discussion and Analysis — Other Compensation and Benefits — Deferred Compensation Plan” and the narrative accompanying this table. |
(3) | For a description of the Savings Restoration Plan, please see “Compensation Discussion and Analysis — Other Compensation and Benefits — Savings Programs” and the narrative accompanying this table. These contributions are fully vested. |
(4) | For a description of the phantom stock units, see the narrative accompanying this table. All phantom stock units are vested. Dividend equivalent rights payable with respect to the phantom units are reinvested as additional phantom units at the election of Mr. Skaggs and are paid in cash at the election of Mr. Kettering. Dividend equivalent rights are shown in the aggregate earnings in last fiscal year column and when taken in cash are also shown as a distribution. |
(5)
| The amount of Company contributions for each Named Executive OfficerNEO in this column is included in each Named Executive Officer’sNEO’s compensation reported onin the 2022 Summary Compensation Table as Allunder the column “All Other Compensation.” |
(6)(3)
| The aggregate earnings in this column are not reported in the 2022 Summary Compensation Table. For a discussion of investment options under these plans, see the narrative accompanying this table. |
(7)(4)
| The aggregate balance reflectsincludes amounts for each Named Executive OfficerNEO that would have been previously reported as compensation in the Summary Compensation Table for prior years had he or she been a Named Executive OfficerNEO in those prior years with the exception of the phantom stock units andany amounts shown for the aggregate earnings on deferred compensation. |
58 | 2023 Proxy Statement
The Company sponsorsTABLE OF CONTENTS
2022 EXECUTIVE COMPENSATION
(5)
| For a description of the Deferred Compensation Plan, please see the “Other Compensation and Benefits – Deferred Compensation Plan” section in the CD&A under “Executive Compensation Elements” and the narrative accompanying this table. |
(6)
| For a description of the Savings Restoration Plan, please see the “Other Compensation and Benefits – Savings Programs” section in the CD&A under “Executive Compensation Elements” and the narrative accompanying this table. These contributions are fully vested. |
We sponsor the Savings Restoration Plan and the Deferred Compensation Plan, two non-qualified defined contribution plans, neither of which credits above-market or preferential earnings.
They are the Savings Restoration Plan and the Deferred Compensation Plan. Participants in both plans have an unsecured contractual right to be paid the amountsAmounts due under the plans
are unsecured contractual obligations that are paid from
the Company’sour general assets.
Savings Restoration
Plan.Plan. The Company sponsors the Savings Restoration Plan to provideprovides a supplemental benefit to eligible employees, including the Named Executive Officers,NEOs, equal to the difference between: (i) the employer contributions (including matching and profit sharing contributions) an employee would have received under our Retirement Savings Plan had such benefit not been limited by sectionsSections 415 (a limitation on annual contributions under a defined contribution plan of $52,000$61,000 for 2014)2022) and 401(a)(17) (a limitation on annual compensation of $260,000$305,000 for 2014)2022) of the Code, and the Retirement Savings Plan’s definition of compensation, which excludes deferrals into our Deferred Compensation Plan for purposes of calculating certain employer contributions, minus (ii) the actual employer contributions the employee received under the Retirement Savings Plan. Amounts credited under the Savings Restoration Plan are deferred on a pre-tax basis. All of the Named Executive Officers are eligible to participate in the Savings Restoration Plan. Participants’ accounts under the Savings Restoration Plan are 100% vested. Employees designate how these contributions will be invested;invested, with the investment options generally are the same as those available under our Retirement Savings Plan.The timing of payment under the Savings Restoration Plan differs depending on whether the amounts were earned and vested before January 1, 2005 (“Pre-409A Amounts”) or after December 31, 2004 (“Post-409A Amounts”). Pre-409A Amounts generally are payable at the time when amounts under the Retirement Savings Plan are paid. Participants may elect in any year to withdraw Pre-409A Amounts, but that withdrawal is subject to a 10% reduction to the extent the payment is before the amount was otherwise payable under the Retirement Savings Plan. Post-409A Amounts generally are paid within 45 days after separation from service, although
keyspecified employees
generally must not be paid until 6 months after their separation date.(within the meaning of Section 409A of the Code) are subject to a six-month payment delay in accordance with Section 409A of the Code. Participants may not elect to receive early in-service distributions of Post-409A
amounts.Amounts. Both Pre-409A
Amounts and Post-409A Amounts may be distributed upon an unforeseeable
emergency.emergency, as determined in accordance with the terms of the Savings Restoration Plan. The form of payment for
both amountsthe Pre-409A Amounts is the
same form
elected bythat the participant
among the choices availableelected under the Retirement Savings Plan.
The form of payment for Post-409A Amounts depends on when the participant made the payment election, as reflected below:
(1)
| If the election was made before January 1, 2014, the payment options were the following: lump sum, monthly installments, semi-annual installments, and annual installments. Such installments are substantially equal and made over the period of time elected, not greater than 15 years. |
(2)
| If elected on or after January 1, 2014, and before November 1, 2020, the payment options were the following: lump sum or annual installments. Installment payments are substantially equal and made over the period of time elected, not greater than 15 years. |
(3)
| If elected on and after November 1, 2020, the only payment option is one lump sum. |
(4)
| If a participant has not made a timely and valid election as to the form of payment, payment is made in one lump sum. |
Deferred Compensation Plan.The Company sponsors the Deferred Compensation Plan in whichprovides employees at certain job levels and other key employees designated by the ONC Committee, including the Named Executive Officers, are eligibleNEOs, the ability to participate to allow deferraldefer compensation on a pre-tax basis, of compensation, including compensation that would otherwise be limited by the Code. Participants may elect to defer and invest between 5% and 80% of their base compensation and between 5% and 80% of their non-equity incentive paymentannual bonus on a pre-tax basis. Employees designate how their contributions will be invested;invested, with the investment options generally are the same as those available under our Retirement Savings Plan. Employee contributions and any earnings thereon are 100% vested. The timing of payment under the Deferred Compensation Plan generally is the March 31st after the date of the participant’s separation from service. This timing applies both to the Pre-409A Amounts and Post-409A Amounts. In the case of Post-409A Amounts payable to keyspecified employees within the meaning
2023 Proxy Statement | 59
TABLE OF CONTENTS
2022 EXECUTIVE COMPENSATION
of
Code Section 409A
of the Code, payments generally will not be payable until
6six months after the date of separation from service. Participants also may elect to receive in-service distributions of both Pre-409A
Amounts and Post-409A Amounts. If a participant requests an in-service distribution of a Pre-409A Amount with less than 12 months’ advance notice, however, the distribution is subject to a 10% reduction. Participants may delay the commencement of distributions for five years after their originally scheduled payment date, in accordance with the
subsequent deferral
timing procedures under
Code Section
409A.409A of the Code. Both Pre-409A
Amounts and Post-409A Amounts also may be paid upon an unforeseeable
emergency.emergency, as determined in accordance with the terms of the plan. The form of payment for both amounts may be either a lump sum or annual installments of up to 15 years, as elected by the participant.
Phantom Units. Messrs. Skaggs and Kettering were granted fully vested phantom stock units following the acquisition by the Company of Columbia Energy Group, as part of an agreement entered into as of February 1,
2001. Under this agreement, Mr. Skaggs and Mr. Kettering agreed to terminate their rights under a Columbia
Energy Group Change-in-Control Agreement. In exchange, they accepted employment with the Company and agreed to non-competition and non-solicitation provisions. These phantom stock units are recorded as a bookkeeping entry in our books and records and represent an unsecured contractual right to receive cash in the future. They are unfunded and subject to the rights of the Company’s general creditors. One phantom stock unit is equal in value to one share of our common stock. The phantom stock units also are credited with dividend equivalents, which are equal in value to dividends declared on shares of our common stock and payable, at Mr. Skaggs’ and Mr. Kettering’s election, in cash or credited to his account as additional phantom stock units. Their elections must be made in the calendar year prior to the year in which the dividend equivalents are credited. These Units are payable in cash upon termination of employment from the Company subject to execution of a general release of claims.
Potential Payments upon Termination of Employment or a Change-in-Control
of the Company
The Company provides
All of the NEOs are eligible for certain benefits,
to eligible employees, including the Named Executive Officers, upon certain types of
terminationterminations of employment, including a termination of employment involving a
Change-in-Controlchange-in-control of the
Company.Company (“Change-in Control”). Any benefits received under these agreements for Messrs. Hamrock and Vegas are reflected in the Summary Compensation Table. These benefits are in addition to the benefits to which
the employeesthey would be entitled upon a termination of employment generally
(i.e.(i.e., (i) vested retirement benefits accrued as of the date of termination, (ii) stock-based awards that are vested as of the date of termination, and (iii) the right to continue medical coverage pursuant to COBRA). The
incrementaladditional benefits
that pertain to the Named Executive Officers are described below.
NiSource
Executive Severance Policy.
The NiSource Our Executive Severance Policy was established to provideprovides severance pay and other benefits to terminated executive-level employees whoat a certain job level, including our NEOs, provided they satisfy the terms of the policy. No severance pay or other benefits are paid under this policy if the termination of employment occurs in connection with a Change-in-Control. Under the Executive Severance Policy, an employee isbecomes eligible to receive benefits under the policy if termination of employment results in the employee being eligible for a payment under a Change-in-Control and Termination Agreement or employment agreement.A participant becomes entitled to receive benefits under the policy only if he or she is terminated forunder any of the following reasons:scenarios: (a) the employee’sa position is eliminatedelimination due to a reduction in force or other restructuring;restructuring; (b) the employee’sa position is required by the Company to relocaterelocation of more than 50 miles from its current location andthat results in the employee having a longer commute of at leastmore than 20 miles and the employee chooses not to relocate;relocate; or (c) the employee is constructively terminated.constructive termination. Constructive termination means a material reduction with respect to: (1) the scope of the participant’s position is changed materially,employee’s position; (2) the participant’semployee’s base pay is reduced by a material amountpay; or (3) the participant’s opportunity to earnemployee’s annual incentive opportunity; and as a bonus under a corporate incentive planresult of the Company is materially reduced or is eliminated, and, in any such event, the participantemployee chooses not to remain employed in such position.
terminate employment. Under the NiSourceour Executive Severance Policy, an eligible employee receives severance pay in the amount of 52 weeks of base salary at the rate in effect on the date of termination. The employee also receives:receives a lump sum paymentamount equivalent to 130% of 52-weeks52 weeks of COBRA (as defined in the Code and the Employee Retirement Income Security Act of 1974 (“ERISA”))1974) continuation coverage premiums and outplacement services.
All of the Named Executive Officers are eligible to receive benefits under the NiSource Executive Severance Policy.
Change-in-Control and Termination
Agreements and Employment Agreements.
As of December 31, 2014, the Company2022, we had Change-in-ControlCIC and Termination Agreements with each of the Named Executive Officers. The CompanyNEOs. We entered into these agreements based upon itsour belief that they are in the best interests of the stockholders, theystockholders. They are designed to help ensure that in the event of extraordinary events, a thoroughly objective judgment is made on any potential corporate transaction, so that stockholder value is appropriately safeguarded and maximized. The Change-in-ControlCIC and Termination Agreements provide for cash severance benefits if the executive terminates employment for “Good Reason” (as defined below) or is terminated by the Companyus for any reason other than “Good Cause” (as defined below) within 24 months following certain Change-in-Control events (referred to as a “double trigger”). In addition, pursuant to the terms of the 2020 Omnibus Plan and 2010 Omnibus Plan, the executives’ equity awards are subject to double trigger).trigger accelerated vesting in the event of a Change-in-Control unless an acquiring company does not assume or replace such awards upon the Change-in-Control. None of the agreements contain a “gross-up” provision to reimburse executives for excise taxes incurred with respect to benefits received under a Change-in-ControlCIC and Termination Agreement. The Change-in-ControlCIC and Termination Agreements can be terminated on twelve months’ notice.notice to the participant. For purposes of the Change-in-ControlCIC and Termination Agreements:
“Change-in-Control”shall be deemed to take place on the occurrence of any of the following events: (1) the acquisition by an entity, person or group (including all affiliates or associates of such entity, person or group) of beneficial ownership, as that term is defined in Rule 13d-3 under the Exchange Act, of capital stock of the Company entitled to exercise more than 30% of the outstanding voting power of all capital stock of the Company entitled to vote in elections of directors (“Voting Power”); (2) the effective time of: (i) a merger or consolidation of the Company with one or more other corporations unless the holders of the outstanding Voting Power of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any affiliate or associate thereof) hold at least 50% of the Voting Power of the surviving or resulting corporation (in substantially the same proportion as the Voting Power of the Company immediately prior to such merger or consolidation), or (ii) a transfer of a substantial portion of the property of the Company, other than to an entity of which the Company owns at least 50% of the Voting Power; or (3) the election to the Board of the Company of candidates who were not recommended for election by the Board, if such candidates constitute a majority of those elected in that particular election (for this purpose, recommended directors will not include any candidate who becomes a member of the Board as a result of an actual or threatened election contest or proxy or consent solicitation on behalf of anyone other than the Board or as a result of any appointment, nomination, or other agreement intended to avoid or settle a contest or solicitation). Notwithstanding the foregoing, a Change-in-Control shall not be deemed to take place by virtue of any transaction in which the executive is a participant in a group effecting an acquisition of the Company and, after such acquisition, the executive holds an equity interest in the acquiring entity.
“Good Cause”shall be deemed to exist if, and only if, the Company notifieswe notify the executive, in writing, within 60 days of itsour knowledge that one of the following events occurred: (1) the executive has engaged in acts or omissions constituting dishonesty, intentional breach of fiduciary obligation or intentional wrongdoing or malfeasance, in each case that results in substantial harm to the Company;Company; or (2) the executive has been convicted of a criminal violation involving fraud or dishonesty.
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2022 EXECUTIVE COMPENSATION
“Good Reason”
shall be deemed to exist if, and only if: (1) there is a significant diminution in the nature or the scope of the executive’s authorities or duties;duties; (2) there is a significant reduction in the executive’s monthly rate of base salary and the executive’s opportunity to earn a bonus under an incentive bonus compensation plan maintained by the Companywe maintain or the executive’s benefits;benefits; (3) the Company changeswe change by 50 miles or more the principal location at which the executive is required to perform services as of the date of a Change-in-Control;Change-in-Control; or (4) there is a material breach of the Change-in-ControlCIC and Termination Agreement.The Change-in-ControlCIC and Termination Agreements provide for a lump sum payment of two (three in the case of Mr. Skaggs)Yates) times the executive’s current annual base salary and target annual incentive bonus compensation. The executive will also receive a pro rata portion of the executive’s targeted annual incentive bonus for the year of termination. The Change-in-ControlCIC and Termination Agreements also provide that in the event of a Change-in-Control, the executive’s total Change-in-Control related payments will be equal one dollar less thanto the amountbest “net benefit” which is equal to the greater of: (i) the after-tax value of the executive’s total Change-in-Control related payments reduced by the 20% excise tax and other federal, state, local and other taxes; and (ii) the after-tax value of the executive’s Change-in-Control related payments that has been reduced to the extent necessary so that it would not trigger an excise tax, gross up; provided, however, that if the total payment due, after being reduced for federal, state, local and other taxes is greater than the reduced amount, the executive will receive the total Change-in-Control payments due (without(in each case, without a gross-up).
In addition, the
Change-in-ControlCIC and Termination Agreements provide for the executives to receive
a lump sum amount equivalent to 130% of the COBRA continuation premiums due for the two-year period (three in the case of Mr.
Skaggs)Yates) following termination. In the event of a Change-in-Control, all
performance shareoutstanding equity awards
which have been granted to each of the
Named Executive OfficersNEOs under the
applicable Omnibus Plan
and are outstanding as of December 31,
20142022, will
immediately vest. Restricted stock unit awards granted before January 1, 2014 and outstanding as of December 31, 2014 will immediately vest and restricted stock unit awards granted during 2014 and outstanding as of December 31, 2014 vest only upon a termination of employment in connection with a Change-in-Control.
Pursuant to a letter agreement dated May 14, 2008 between
For the
Company and Mr. Smith, ifNEOs, we have quantified the
Company terminates his employment other than for cause or if he terminates his employment for good reason, he is entitled to receive the following severance benefits in lieupotential payments upon termination under various termination scenarios as of
severance benefits under the NiSource Executive Severance Policy: (1) a lump sum payment equal to his annual base salary; (2) a lump sum payment equal to his prorated target incentive for the year in which termination occurs; (3) a lump sum payment equal to 130% of COBRA continuation coverage premiums for one year; and (4) reasonable outplacement services.Potential Payments Upon Termination of Employment. The table below represents amounts payable at, following, or in connection with the events described below, assuming that such events occurred on December 31, 2014 for each of the Named Executive Officers.2022.
| | Lloyd Yates
| | | | | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | 1,150,000 | | | 1,331,241 | | | — | | | — | | | — | | | 2,481,241 | |
| | Death(2) | | | — | | | 1,150,000 | | | 1,331,241 | | | — | | | — | | | — | | | 2,481,241 | |
| | Involuntary Termination(3) | | | 1,000,000 | | | — | | | — | | | — | | | 24,890 | | | 25,000 | | | 1,049,890 | |
| | Change-in-Control(4) | | | 6,450,000 | | | 1,150,000 | | | 4,215,578 | | | — | | | 83,094 | | | 25,000 | | | 11,923,672 | |
| | Donald E. Brown
| | | | | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | 472,770 | | | 3,680,285 | | | 486,111 | | | — | | | — | | | 4,639,166 | |
| | Death(2) | | | — | | | 472,770 | | | 3,680,285 | | | 486,111 | | | — | | | — | | | 4,639,166 | |
| | Involuntary Termination(3) | | | 630,360 | | | — | | | — | | | — | | | 33,202 | | | 25,000 | | | 688,562 | |
| | Change-in-Control(4) | | | 2,206,260 | | | 472,770 | | | 5,376,294 | | | 500,000 | | | 71,125 | | | 25,000 | | | 8,651,449 | |
| | Shawn Anderson
| | | | | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | 240,000 | | | 1,218,134 | | | — | | | — | | | — | | | 1,458,134 | |
| | Death(2) | | | — | | | 240,000 | | | 1,218,134 | | | — | | | — | | | — | | | 1,458,134 | |
| | Involuntary Termination(3) | | | 400,000 | | | — | | | — | | | — | | | 24,673 | | | 25,000 | | | 449,673 | |
| | Change-in-Control(4) | | | 1,280,000 | | | 240,000 | | | 2,114,356 | | | — | | | 52,340 | | | 25,000 | | | 3,711,696 | |
| | Melody Birmingham
| | | | | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | 468,750 | | | 412,671 | | | — | | | — | | | — | | | 881,421 | |
| | Death(2) | | | — | | | 468,750 | | | 412,671 | | | — | | | — | | | — | | | 881,421 | |
| | Involuntary Termination(3) | | | 625,000 | | | — | | | — | | | — | | | 22,247 | | | 25,000 | | | 672,247 | |
| | Change-in-Control(4) | | | 2,187,500 | | | 468,750 | | | 2,200,757 | | | — | | | 49,173 | | | 25,000 | | | 4,931,180 | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Severance
($) | | | Pro Rata Target Bonus Payment
($) | | | Equity Grants
($) | | | Welfare Benefits
($) | | | Outplacement
($) | | | Total Payment
($) | |
Robert C. Skaggs, Jr. | | | | | | | | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | | | — | | | | — | | | | 5,932,607 | | | | — | | | | — | | | | 5,932,607 | |
Retirement(2) | | | — | | | | — | | | | 9,797,578 | | | | — | | | | — | | | | 9,797,578 | |
Disability(2) | | | — | | | | — | | | | 9,797,578 | | | | — | | | | — | | | | 9,797,578 | |
Death(2) | | | — | | | | — | | | | 9,797,578 | | | | — | | | | — | | | | 9,797,578 | |
Involuntary Termination(3) | | | 980,000 | | | | — | | | | — | | | | 11,887 | | | | 25,000 | | | | 1,016,887 | |
Change-in-Control(4) | | | 6,615,000 | | | | 1,225,000 | | | | 5,093,327 | | | | 43,665 | | | | 25,000 | | | | 13,001,992 | |
Stephen P. Smith | | | | | | | | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Retirement(2) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Disability(2) | | | — | | | | — | | | | 3,999,230 | | | | — | | | | — | | | | 3,999,230 | |
Death(2) | | | — | | | | — | | | | 3,999,230 | | | | — | | | | — | | | | 3,999,230 | |
Involuntary Termination(3) | | | 600,000 | | | | 420,000 | | | | — | | | | 19,233 | | | | 25,000 | | | | 1,064,233 | |
Change-in-Control(4) | | | 2,040,000 | | | | 420,000 | | | | 5,941,430 | | | | 42,735 | | | | 25,000 | | | | 8,469,165 | |
Glen L. Kettering | | | | | | | | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Retirement(2) | | | — | | | | — | | | | 1,784,864 | | | | — | | | | — | | | | 1,784,864 | |
Disability(2) | | | — | | | | — | | | | 1,784,864 | | | | — | | | | — | | | | 1,784,864 | |
Death(2) | | | — | | | | — | | | | 1,784,864 | | | | — | | | | — | | | | 1,784,864 | |
Involuntary Termination(3) | | | 500,000 | | | | — | | | | — | | | | 19,268 | | | | 25,000 | | | | 544,268 | |
Change-in-Control(4) | | | 1,600,000 | | | | 300,000 | | | | 1,362,021 | | | | 42,094 | | | | 25,000 | | | | 3,329,115 | |
Carrie J. Hightman | | | | | | | | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Retirement(2) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Disability(2) | | | — | | | | — | | | | 2,376,071 | | | | — | | | | — | | | | 2,376,071 | |
Death(2) | | | — | | | | — | | | | 2,376,071 | | | | — | | | | — | | | | 2,376,071 | |
Involuntary Termination(3) | | | 490,000 | | | | — | | | | — | | | | 19,572 | | | | 25,000 | | | | 534,572 | |
Change-in-Control(4)(5) | | | 1,568,000 | | | | 294,000 | | | | 3,490,530 | | | | 42,630 | | | | 25,000 | | | | 4,280,340 | |
Joseph Hamrock | | | | | | | | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Retirement(2) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Disability(2) | | | — | | | | — | | | | 1,866,098 | | | | — | | | | — | | | | 1,866,098 | |
Death(2) | | | — | | | | — | | | | 1,866,098 | | | | — | | | | — | | | | 1,866,098 | |
Involuntary Termination(3) | | | 500,000 | | | | — | | | | — | | | | 19,268 | | | | 25,000 | | | | 544,268 | |
Change-in-Control(4) | | | 1,650,000 | | | | 325,000 | | | | 2,840,401 | | | | 42,094 | | | | 25,000 | | | | 4,882,495 | |
2022 EXECUTIVE COMPENSATION
| | William Jefferson
| | | | | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | 332,500 | | | 258,763 | | | — | | | — | | | — | | | 591,263 | |
| | Death(2) | | | — | | | 332,500 | | | 258,763 | | | — | | | — | | | — | | | 591,263 | |
| | Involuntary Termination(3) | | | 475,000 | | | — | | | — | | | — | | | 24,890 | | | 25,000 | | | 524,890 | |
| | Change-in-Control(4) | | | 1,615,000 | | | 332,500 | | | 1,380,103 | | | — | | | 53,337 | | | 25,000 | | | 3,405,940 | |
(1)
| Amounts payable to each of the Named Executive OfficersNEOs as shown in the Pension Benefits Table and the NonqualifiedNon-Qualified Deferred Compensation Table and under the tax-qualified, nondiscriminatory 401(k) Plan are not included. Upon voluntary termination, Mr. Skaggs would receive 64,043 shares under his 2009 Restricted Stock Unit Award, 46,685 shares under his special 2010 Restricted Stock Unit Award, and 29,126 shares under his 2010 annual Restricted Stock Unit Award. The original vesting date for these shares has passed. included in the table. |
| However, these shares were subject to delayed vesting in accordance with the terms of the award agreements due to limitations on deductibility under Section 162(m). These shares are payable to Mr. Skaggs on the earlier to occur of his termination of employment, the date he is no longer subject to Section 162(m) or the date that such shares could be paid to him and be deductible under Section 162(m). In addition, Messrs. Skaggs and Kettering would receive the pro-rated equity amounts reflected below in note 2 because they are retirement eligible at termination. |
(2)
| Special vesting rules apply in the event of Retirement, Disabilityretirement, disability or death pursuant to the terms and conditions of our equity award agreements as discussed above under “Compensation Disclosure and Analysis — LTIP Awards.” Only Mr. Skaggs and Mr. Kettering were eligible for Retirement as of December 31, 2014. For Mr. Skaggs, 230,966 shares would have pro-rata vested as a result of his Retirement, Disability or death. For Mr. Kettering, 42,076 shares would have pro-rata vested as a result of his Retirement, Disability or death. For each of the other Named Executive Officers, theagreements. The number of shares that would have vested in the event of the executive’s Disabilitydisability or death is as follows: Mr. Smith, 94,277Yates, 48,550 shares; Mr. Brown, 134,219 shares; Mr. Anderson, 44,425 Shares; Ms. Hightman, 56,013 sharesBirmingham, 15,050 shares; and Mr. Hamrock, 43,991Jefferson, 9,437 shares. The value of the equity grants was determined by multiplying the closing price of the Company’sour common stock on the NYSE on December 31, 2014 of $42.4230, 2022, which was $27.42 per share, by the number of shares that would have vested upon the Retirement, Disabilityretirement, disability or death, as applicable, of the Named Executive Officer and, with respect to performance shares, assumes a payout at the target level. No performance shares are actually payable until such time as the ONC Committee certifies attainment of the applicable performance goals, exceptNEO. For Mr. Brown, special vesting rules also apply in the caseevent of disability or death with more than 12under his cash-based Special Retention Award agreements. The amounts shown represent the pro-rata portion of his cash-based awards based on service months remaining infrom the performance period, in which case the performance shares are payable at target levels regardless of ONC Committee certification.respective grant dates to December 31, 2022. |
(3)
| Amounts shown reflect payments to be made upon the involuntary termination of the Named Executive Officereach NEO eligible under the Company’sour Executive Severance Policy described above, or in the case of Mr. Smith, pursuant to the terms of his employment agreement. The amounts shown for Mr. Skaggs and Mr. Kettering do not include equity grants that would pro-rata vest solely as a result of their eligibility for retirement. In addition, the amount shown for Mr. Skaggs’ does not include the shares subject to delayed vesting due to limitations on deductibility under Section 162(m) referred to in note (1) above, which are payable to him in on the earlier to occur of his termination of employment, the date he is no longer subject to Section 162(m) or the date that such shares could be paid to him and be deductible under Section 162(m).above. |
(4)
| Amounts shown reflect payments to be made upon termination of employment in the event of a Change-in-Control of the Company under the Change-in-ControlCIC and Termination Agreements described above which have been reduced by excise tax payments if applicable.described. As described above, the Change-in-ControlCIC and Termination Agreements do not provide for any “gross-up” payments to executives for excise taxes incurred with respect to benefits received under a Change-in-ControlCIC and Termination Agreement. The Change-in-ControlCIC and Termination Agreements provide that in the event of a Change-in-Control, the executive’s total Change-in-Control will be equal to the best “net benefit” which is equal to the greater of: (i) the after-tax value of the executive’s total Change-in-Control related payments will equal one dollar less than(reduced by the amount20% excise tax and other federal, state, local and other taxes); and (ii) the after-tax value of the executive’s Change-in-Control related payments that has been reduced to the extent necessary so that it would not trigger an excise tax, gross up; provided, however, that if the total payment due, after being reduced for federal, state, local and other taxes (in each case, without a gross-up). The amounts reflected in this table do not reflect the application of the best “net benefit” provision. |
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2022 EXECUTIVE COMPENSATION
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following disclosure about the relationship of the annual total compensation of our employees to the annual total compensation of our CEO.
For 2022, our last completed fiscal year:
| ■ | The median annual total compensation of all employees (other than our CEO) was $148,962; and |
| ■ | The annualized total compensation of our CEO, Lloyd Yates, was $7,234.339. |
Based on this information, for 2022, the ratio of the annualized total compensation of Mr. Yates, our CEO during 2022, to the annual total compensation of the median employee is estimated to be 49 to 1.
To identify the median of the annual total compensation of all our employees (other than our CEO), as well as to determine the annual total compensation of our median employee and our CEO, we took the following steps consistent with Item 402(u) of Regulation S-K:
1.
| We determined that, as of December 31, 2022, our employee population consisted of approximately 7,328 employees, with all of our employees located in the United States. This population consisted of our full-time, part-time and temporary employees, as determined for employment law purposes. |
2.
| To identify the “median employee” from our employee population, we prepared a full census of all our employees (except our CEO) using our existing centralized payroll database of base cash compensation (base salary plus overtime and shift premiums, calculated based on the hours worked during the relevant period) that is greater thanused internally to calculate annual cash incentive compensation and profit-sharing eligibility. We used base cash compensation as our compensation measure as it is the reduced amount,principal form of compensation delivered to all of our employees. We used the executive will receivesame median employee as 2021 where we used the following methodology: |
| ■ | We adjusted as of December 31, 2021, the compensation of 638 full-time employees and 19 part-time employees hired during 2021 to annualize compensation for any portion of the measurement period that they were not with the Company. |
| ■ | Although all of our employees are eligible for an annual cash incentive (paid in 2022 for 2021 individual and Company performance), we excluded this for all employees because we determined its inclusion would not have a meaningful effect on the determination of the median employee. |
| ■ | Since we do not widely distribute annual equity awards to our employees, such awards were excluded from our compensation measure. |
3.
| We identified our median employee from a full census report compiled using base cash compensation as our consistently applied compensation measure. Since all our employees are located in the United States, as is our CEO, we did not make any cost-of-living adjustments identifying the “median employee.” |
4.
| Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $148,962. |
5.
| For the year ended December 31, 2022, the total Change-in-Control payments due (withoutcompensation for our CEO, Mr. Yates, was $7,113,506 as reported in the “Total” column of the Summary Compensation Table of this Proxy Statement. As permitted by SEC rules, the Company elected to annualize the compensation of Mr. Yates, who became CEO of the Company on February 14, 2022. To annualize Mr. Yates’ compensation for 2022, the annual base salary for the CEO was used to reflect a gross-up). In addition,full year of earnings annualized at $1,000,000 where his partial year salary earnings were $879,167. |
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2022 Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive Compensation Actually Paid (“CAP”) to our CEO and to our non-CEO NEOs and certain financial performance of the Company. CAP, as determined under SEC requirements, does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the “Compensation Discussion and Analysis (CD&A)” section above.
| | 2022(4) | | | $7,113,506 | | | $6,720,202 | | | $1,352,993 | | | ($3,953,194)(3) | | | $2,221,932 | | | $1,305,705 | | | $109 | | | $119 | | | $749.00 | | | $1.47 | |
| | 2021(5) | | | $0 | | | $0 | | | $9,535,782 | | | $13,795,347 | | | $2,491,010 | | | $3,453,360 | | | $106 | | | $117 | | | $529.80 | | | $1.37 | |
| | 2020(6) | | | $0 | | | $0 | | | $6,457,725 | | | $2,329,180 | | | $3,093,801 | | | $1,632,643 | | | $85 | | | $99 | | | ($72.70) | | | $1.32 | |
(1)
| For 2022, the amounts showntable includes Lloyd Yates as CEO and Joseph Hamrock as Former CEO. For 2021 and 2020, the table includes Joseph Hamrock. |
(2)
| Amounts for Mr. Skaggs’ and Mr. Kettering’s equity grantseach year do not includereflect the shares referredactual amount of compensation earned by or paid to in note (2) above, which would automatically pro-rata vest in the event of their termination of employment regardless of a Change-in-Control; and,CEO during the amount shown for Mr. Skaggs does not include the shares subject to delayed vesting due to limitations on deductibility under Section 162(m) referred to in note (1) above, which are payable to him in the event of his termination of employment regardless of a Change-in-Control. |
(5) | applicable year. In accordance with the terms of her Change-in-Control and Termination Agreement described above,SEC rules, the amountamounts reported in these columns for each year were calculated by making the adjustments shown in the following tables to amounts reported for Ms. Hightman reflects a benefit reduction of $1,139,820 as it resultsthe CEOs in a better after-tax position than her receipt of the full benefit and payment ofSummary Compensation Table in the excise tax. Ms. Hightman was the only Named Executive Officer who was in a better after-tax position astotal column. |
(3)
| As a result of benefit reduction.Mr. Hamrock’s retirement, the value of all unvested equity awards were prorated. |
(4)
| For 2022, the other NEOs were Donald E. Brown, Shawn Anderson, Melody Birmingham, William Jefferson and Pablo A. Vegas. |
(5)
| For 2021, the other NEOs were Donald E. Brown, Pablo A. Vegas, Violet G. Sistovaris and Charles E. Shafer. |
(6)
| For 2020, the other NEOs were Donald E. Brown, Pablo A. Vegas, Violet G. Sistovaris and Carrie J. Hightman. |
(7)
| NOEPS is a non-GAAP financial measure. Appendix A to this Proxy Statement contains a full reconciliation of GAAP earnings per share to NOEPS. |
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2022 PAY VERSUS PERFORMANCE
To calculate CAP, the following amounts were deducted from and added to Summary Compensation Table (“SCT”) total compensation:
CEO SCT to CAP Reconciliation:
| | 2022 | | | $7,113,506 | | | – | | | $4,671,273 | | | + | | | $4,277,969 | | | – | | | $0 | | | + | | | $0 | | | = | | | $6,720,202 | |
Former CEO SCT to CAP Reconciliation:
| | 2022 | | | $1,352,993 | | | – | | | $0 | | | + | | | ($5,306,187) | | | – | | | $0 | | | + | | | $0 | | | = | | | ($3,953,194) | |
| | 2021 | | | $9,535,782 | | | – | | | $6,953,903 | | | + | | | $11,213,468 | | | – | | | $0 | | | + | | | $0 | | | = | | | $13,795,347 | |
| | 2020 | | | $6,457,725 | | | – | | | $4,901,916 | | | + | | | $773,371 | | | – | | | $0 | | | + | | | $0 | | | = | | | $2,329,180 | |
Other NEOs SCT to CAP Reconciliation:
| | 2022 | | | $2,221,932 | | | – | | | $1,218,690 | | | + | | | $302,463 | | | – | | | $0 | | | + | | | $0 | | | = | | | $1,305,705 | |
| | 2021 | | | $2,491,010 | | | – | | | $1,449,191 | | | + | | | $2,415,827 | | | – | | | $22,263 | | | + | | | $17,977 | | | = | | | $3,453,360 | |
| | 2020 | | | $3,093,801 | | | – | | | $2,002,865 | | | + | | | $613,661 | | | – | | | $87,911 | | | + | | | $15,957 | | | = | | | $1,632,643 | |
(a)
| Represents the sum of the amounts reported in the Summary Compensation Table in the Stock Awards Column. |
(b)
| See reconciliation of the Equity Award Adjustments below. |
(c)
| See reconciliation of the Average Pension Benefits Adjustments below. |
CEO Equity Adjustment to CAP Reconciliation (viii)
| | 2022 | | | $4,277,969 | | | – | | | $0 | | | = | | | $4,277,969 | | | $0 | | | – | | | $0 | | | = | | | $0 | | | $4,277,969 | |
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2022 PAY VERSUS PERFORMANCE
Former CEO Equity Adjustment to CAP Reconciliation (viii)
| | 2022 | | | $9,020,953 | | | – | | | $14,498,631 | | | = | | | ($5,477,678 ) | | | $3,789,917 | | | – | | | $3,618,426 | | | = | | | $171,491 | | | ($5,306,187) | |
| | 2021 | | | $18,117,056 | | | – | | | $6,390,653 | | | = | | | $11,726,403 | | | $2,427,192 | | | – | | | $2,940,127 | | | = | | | ($512,935) | | | $11,213,468 | |
| | 2020 | | | $9,330,780 | | | – | | | $8,445,743 | | | = | | | $885,037 | | | $3,679,530 | | | – | | | $3,791,196 | | | = | | | ($111,666) | | | $773,371 | |
Other NEOs Equity Adjustment to CAP Reconciliation (viii)
| | 2022 | | | $2,403,995 | | | – | | | $2,120,332 | | | = | | | $283,663 | | | $415,464 | | | – | | | $396,664 | | | = | | | $18,800 | | | $302,463 | |
| | 2021 | | | $4,105,650 | | | – | | | $1,607,251 | | | = | | | $2,498,399 | | | $390,766 | | | – | | | $473,338 | | | = | | | ($82,572) | | | $2,415,827 | |
| | 2020 | | | $2,365,276 | | | – | | | $1,722,626 | | | = | | | $642,650 | | | $955,252 | | | – | | | $984,241 | | | = | | | ($28,989) | | | $613,661 | |
(i)
| The year-end fair value of any equity awards in the applicable year that are outstanding and unvested as of the end of the year. |
(ii)
| The year-end fair value of any equity awards in prior years that are outstanding and unvested as of the end of the applicable year. |
(iii)
| The amount disclosed in column (ii) subtracted from the amount disclosed in column (i). |
(iv)
| The vesting date fair value of awards granted in prior years that vest during the applicable year. |
(v)
| Prior year-end fair value of awards granted in prior years that vest during the applicable year, deduction for the amount equal to the fair value at the end of the prior fiscal year. |
(vi)
| The amount disclosed in column (v) subtracted from the amount disclosed in column (iv). |
(vii)
| The amount disclosed in column (iii) plus the amount disclosed in column (vi). |
(viii)
| Fair values reported in this table are computed in accordance with FASB ASC Topic 718. The grant date fair value of the RSUs is calculated based on the average market price of our common stock on the grant date, less the present value of any dividends not received during the vesting period. With respect to the PSUs subject to NOEPS goals, grant date fair value is based on the closing stock price of our common stock at grant date. With respect to the PSUs subject to the RTSR goals, grant date fair value is calculated based on a Monte Carlo valuation technique in accordance with FASB ASC Topic 718. All of the PSUs are subject to performance conditions; therefore, the value reported in this column for these awards is based upon the probable outcome of such conditions. For information on the valuation assumptions used in these computations, see Note 14 to our consolidated financial statements included in our 2022 Annual Report on Form 10-K. |
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2022 PAY VERSUS PERFORMANCE
Other NEOs Pension Adjustment to CAP Reconciliation
| | 2022 | | | Pension Plan | | | $0 | | | $0 | | | $0 | |
| | | | | Pension Restoration Plan | | | $0 | | | $0 | | | $0 | |
| | | | | Total | | | $0 | | | $0 | | | $0 | |
| | 2021 | | | Pension Plan | | | $41,946 | | | $0 | | | $10,486 | |
| | | | | Pension Restoration Plan | | | $29,963 | | | $0 | | | $7,491 | |
| | | | | Total | | | $71,909 | | | $0 | | | $17,977 | |
| | 2020 | | | Pension Plan | | | $35,124 | | | $0 | | | $8,781 | |
| | | | | Pension Restoration Plan | | | $28,702 | | | $0 | | | $7,176 | |
| | | | | Total | | | $63,826 | | | $0 | | | $15,957 | |
TSR: Company versus Peer Group
As shown in the graph below, the Company’s three-year TSR is in line with peer companies and the Dow Industrial Utility Index.
CAP versus Total Shareholder Return
The graph below represents the relationship between Compensation Actually Paid (CAP) and Total Shareholder Return (TSR).
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2022 PAY VERSUS PERFORMANCE
CAP versus Net Income
The graph below shows the Company’s net income increasing consistently year over year, and the CEO and Other NEOs CAP varies year over year. The company does not use Net Income to determine compensation and is not included in incentive plans.
CAP versus Company Selected Measures: NOEPS
The graph below shows the Company’s net operating earnings per share increasing consistently year over year, yet the CEO and Other NEOs CAP varies year over year. NOEPS is a non-GAAP financial measure. Appendix A to this Proxy Statement contains a full reconciliation of GAAP earnings per share to NOEPS.
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2022 PAY VERSUS PERFORMANCE
Company Selected Performance Measures
The following were the three most important performance measures as determined by the Company that link compensation actually paid to our NEOs to the Company’s performance for the most recently completed fiscal year. NOEPS and RTSR are the only two financial measures used as part of the Company’s compensation programs. Safety is the most important non-financial measure used to link compensation actually paid to Company performance.
2023 Proxy Statement | 69
EQUITY COMPENSATION PLAN INFORMATION
The following table
sets forth certainprovides information
for all equity compensation plans and individual compensation arrangements (whether with employees or non-employees, such as directors), in effect as of December 31,
2014. | | | | | | | | | | | | |
| Plan Category | | Number of Securities to
be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#)(a) | | | Weighted-
Average Exercise
Price of Outstanding Options, Warrants
and Rights ($)(2)(b) | | | Number of Securities
Remaining Available
for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) (#)(c) | |
Equity compensation plans approved by security holders(1) | | | 2,424,851 | | | | 22.62 | | | | 6,491,322 | |
Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
Total | | | 2,424,851 | | | | 22.62 | | | | 6,491,322 | |
| | Equity compensation plans approved by security holders(1) | | | 2,890,356 | | | — | | | 8,704,201 | |
| | Equity compensation plans not approved by security holders | | | — | | | — | | | — | |
| | Total | | | 2,890,356 | | | — | | | 8,704,201 | |
(1)
| The Plans approved by security holders includeconsist of the following plans:following: the 1994 Long Term Incentive2010 Omnibus Plan, approved by the stockholders on May 10, 200511, 2010 (no shares remain available for future issuancegrants under the plan),; the Non-Employee Director Stock Incentive Plan, approved by the stockholders on May 20, 2003 (no shares remain available for future issuance under the plan), the2020 Omnibus Plan approved by the stockholders on May 11, 2010,19, 2020; and the Company’s Employee Stock Purchase Plan, approved by the stockholders on May 15, 2012. As of December 31, 2014, 6,264,223 remained available for issuance under the Omnibus Plan and 227,099 shares remained available for purchase under the Employee Stock Purchase Plan.7, 2019. |
(2)
| In calculating the weighted-average exercise price of outstanding options, shown in column (b), restricted stock units and performance stock units which can convert into shares of common stock upon vesting have been excluded. Restricted stock units and performance stock unitsshare awards are payable at no cost to the grantee on a one-for-one basis. As of December 31, 2021, there were no outstanding stock options under the 2010 Omnibus Plan or the 2020 Omnibus Plan. |
(3)
| As of December 31, 2022, 8,704,201 shares remained available for issuance under the 2020 Omnibus Plan and 460,506 shares remained available for purchase under the Employee Stock Purchase Plan. The Employee Stock Purchase Plan provides the opportunity for eligible employees to acquire shares of our common stock at a 10% discount. For purposes of this table, we have included the number of shares issuable under outstanding performance share awards assuming performance targets are achieved at the maximum achievement level. |
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PROPOSAL 2
—– ADVISORY APPROVAL OF
EXECUTIVENEO COMPENSATION
In accordance with
Pursuant to Section 14A of the federal securities laws,Exchange Act, we are asking stockholders to approve, in ana non-binding advisory vote, the compensation paid to the Company’s Named Executive Officers,our NEOs, as disclosed under the heading “Executiveheadings “2022 Executive Compensation” and “Compensation Discussion and Analysis (CD&A)” above, includingcommonly known as a “Say-on-Pay” proposal.
At the
“Compensation Disclosure and Analysis.” We currently2017 annual meeting of stockholders, we provided our stockholders with an advisory vote regarding how frequently the Company will conduct future stockholder advisory votes to approve the compensation paid to our NEOs. More than a majority of the shares present or represented at the meeting were voted in favor of an annual vote, consistent with the Board’s recommendation. Based on these results, the Board has determined to hold an annual advisory vote on
the compensation paid to our
Named Executive Officers’ compensation. Accordingly, a vote will take place at the Annual Meeting and the next such vote will take place at the 2016 Annual Meeting.NEOs.
The Board
of Directors encourages stockholders to carefully review the
2022 Executive Compensation
sectionand Compensation Discussion and Analysis (CD&A) sections of this Proxy Statement,
including the Compensation Discussion and Analysis section, for a thorough discussion of our executive compensation program and philosophy. Our compensation program is designed to be significantly performance-based and to attract and retain highly qualified individuals who enhance long-term stockholder value by contributing to
the Company’sour ongoing success. All facets of our compensation program are regularly monitored by the
ONCCompensation and Human Capital Committee to ensure that the program is well-tailored to fulfill
the Company’sour compensation philosophy and objectives.
In considering this proposal, stockholders may wish to consider the following factors that
we believe demonstrate our commitment to maintaining a robust compensation program:
| ■ | Compensation is closely tied to both corporate and individual performance; |
| ■ | Annual and long-term incentive compensation opportunities are contingent on the Company achieving pre-established goals; |
| ■ | Total compensation packages are competitive with those offered by members of our Comparator Group; |
| ■ | Perquisites are appropriately limited in number and modest in dollar value; and |
| ■ | We believe our compensation program does not create incentives for behaviors that create material risk to the Company. |
Compensation is closely tied to both corporate and individual performance;
Annual and long-term incentive compensation opportunities are contingent on the Company achieving pre-established goals;
Total compensation packages are competitive with those offered by members of the Company’s Comparative Group;
Perquisites are appropriately limited in number and modest in dollar value; and
Our compensation program does not create incentives for behaviors that create material risk to the Company.
As discussed in the Compensation Discussion and Analysis (CD&A) and 2022 Executive Compensation sectionsections of this Proxy Statement, the ONCCompensation and Human Capital Committee and the Board believe that the Company’sour executive compensation program fulfills the objectives of itsour compensation philosophy in a prudent and effective manner.
Accordingly, the following resolution is submitted for an advisory stockholder vote at the Annual Meeting:
RESOLVED
, that the compensation paid to the Company’s Named Executive Officers,our NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved on an advisory basis.As this is an advisory vote, the result will not be binding on the Company, the Board or the
ONCCompensation and Human Capital Committee, although the
Compensation and Human Capital Committee and the Board will carefully consider the outcome of the vote when evaluating our compensation program and philosophy.
The affirmative vote of a majority of the shares present
in personat the virtual Annual Meeting or represented by proxy at the meeting and entitled to vote is needed to approve the advisory vote on the compensation of the
Named Executive Officers.NEOs. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the advisory approval of executive compensation of
the Company’s Named Executive Officers.our NEOs. Abstentions by those present or represented by proxy will have the same effect as a vote against the
Say-on-Pay proposal. Brokers will not have discretionary authority to vote on
this proposal, sothe Say-on-Pay proposal. Accordingly, there could be broker
non-votes. Broker non-votes,
which will have no effect on the
outcome.vote.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF NEO COMPENSATION ON AN ADVISORY BASIS.
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PROPOSAL 3 – ADVISORY APPROVAL OF
EXECUTIVETHE FREQUENCY OF FUTURE ADVISORY VOTES ON NEO COMPENSATION
PAID TO In addition to the Say-on-Pay proposal above, we are asking stockholders to approve, on an advisory basis, the frequency with which the Company should ask stockholders for advisory approval of executive compensation, commonly known as a “Say-on-Frequency” proposal. You may cast a vote as to whether a Say-on-Pay vote should be held every one, two or three years, or you may abstain. Pursuant to Section 14A of the Exchange Act, this non-binding vote is held at least every six years. Because our last Say-on-Frequency vote was held at the 2017 annual meeting, we are again holding a Say-on-Frequency vote at the Annual Meeting. At our 2017 annual meeting, a majority of stockholders voting on the matter indicated a preference for holding the Say-on-Pay vote on an annual basis. Accordingly, the Board resolved that the non-binding advisory vote to approve the compensation of our NEOs would be held on an annual basis at least until the next Say-on-Frequency vote.
The Board values stockholders’ opinions and believes it would benefit from direct, timely feedback on the Company’s executive compensation program. Accordingly, after careful consideration, the Board unanimously recommends that stockholders vote for the option of “one year” to provide stockholder advisory approval of executive compensation on an annual basis.
The following resolution is submitted to stockholders for an advisory vote at the Annual Meeting:
RESOLVED, that the stockholders advise the Company to hold a stockholder vote for the advisory approval of the compensation paid to the Company’s NEOs every:
As this is an advisory vote, the result will not be binding on the Company, the Board or the Compensation and Human Capital Committee, although the Compensation and Human Capital Committee and the Board will carefully consider the outcome of the vote when evaluating our compensation program and philosophy.
Vote Required
The Say-on-Frequency option that receives the greatest number of votes from the stockholders will be considered the Say-on-Frequency option approved by the stockholders. Proxies submitted without direction will be voted for the “ONE YEAR” frequency. Abstentions by those present or represented by proxy and broker non-votes will not be voted with respect to the “Say-on-Frequency” proposal and, therefore, will have no effect on the outcome. Brokers will not have discretionary authority to vote on the “Say-on-Frequency” proposal. Accordingly, there could be broker non-votes, which will have no effect on the vote.
THE NAMED EXECUTIVE OFFICERS.BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR “ONE YEAR” AS THE FREQUENCY OF FUTURE ADVISORY VOTES ON NEO COMPENSATION.
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PROPOSAL
3 —4 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTSACCOUNTING FIRM
The Audit Committee of the Board is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our financial statements. The Audit Committee appointed Deloitte & Touche LLP (“Deloitte”), 111 South Wacker Drive, Chicago, IL 60606, as the Company’sour independent registered public accountantsaccounting firm for 2023. As part of its oversight of our relationship with our independent registered public accounting firm and to assure continuing independence of such firm, the year 2015. A representativeAudit Committee considers whether it is appropriate to adopt a policy of rotating its independent registered public accounting firm on a regular basis. Further, in conjunction with ensuring the rotation of such firm’s lead engagement partner, the Audit Committee and its Chair are directly involved with the selection of Deloitte’s lead engagement partner. The Audit Committee also reviews proposals for all auditing services (including fees and terms thereof) of our independent registered public accounting firm and approves all such proposals prior to the commencement or performance of such services, subject to the pre-approval policies and procedures described under “Independent Registered Public Accounting Firm Fees.”
Deloitte
will be present athas served as our independent registered public accounting firm since 2002 and has the
meeting, will be given an opportunityrequisite understanding of our business, accounting policies and practices, and internal control over financial reporting to
makedrive audit quality and efficient fee structures. As a
statement if he or she so desires,result of this expertise, and,
will be availableas noted above, the Audit Committee’s oversight designed to
respond to appropriate questions.Theassure continuing independence, the Board of Directors and its Audit Committee consider Deloitte well qualified to serve as our independent registered public accountants. Theaccounting firm. Further, the Board believes that the continued retention of Directors recommends ratificationDeloitte is in our best interest and the best interest of such appointment by theour stockholders.
Although action by stockholders for this matter is not required, the Board of Directors and the Audit Committee believe that it is appropriate to seek stockholder ratification of this appointment in order to provide stockholders a means of communicating the stockholders’ level of satisfaction with the performance of the independent registered public accountantsaccounting firm and their level of independence from management. If the proposal is not approved and the appointment of Deloitte is not ratified by the stockholders, the Audit Committee will take this into consideration and will reconsider the appointment.
A representative of Deloitte will be present at the virtual Annual Meeting, will be given an opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
The affirmative vote of a majority of the shares present
in personduring the virtual Annual Meeting or represented by proxy
at the meeting and entitled to vote is needed to ratify the appointment of
Deloitte.Deloitte as our independent registered public accounting firm for 2023. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the ratification of the appointment of Deloitte. Abstentions by those present or represented by proxy will have the same effect as a vote against the proposal. Brokers will have discretionary authority to vote on this proposal,
soand, accordingly, there will not be
any broker non-votes.
THE BOARD
RECOMMENDSAND ITS AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE AS
THE COMPANY’SOUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTSACCOUNTING FIRM FOR
FISCAL YEAR 2015.2023.
2023 Proxy Statement | 73
AUDIT COMMITTEE REPORTTABLE OF CONTENTS
Our Audit Committee consists of Messrs. Candris, Cornelius, Jesanis and Kittrell and Ms. Parker. Each of the members of the Audit Committee is independent as defined by the applicable NYSE and SEC rules and meets the additional independence standard set forth by the Board of Directors in the Corporate Governance Guidelines. Each of the members of the Audit Committee also is “financially literate” for purposes of applicable NYSE rules. The Board of Directors has designated Marty R. Kittrell, the Chair of the Audit Committee, as the “audit committee financial expert.”
The Audit Committee has reviewed and discussed the audited consolidated financial statements with management and has discussed with Deloitte, the Company’s independent registered public accountants, the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”), Auditing Standard No. 16, “Communications with Audit Committees”; SEC regulation S-X Rule 2-07; PCAOB Auditing Standard No. 5 and the NYSE Corporate Governance Rules. The Audit Committee also has received the written disclosures and the letter from Deloitte required by PCAOB Ethics and Independence Rule 3526, “Communication with Audit Committees Concerning Independence,” and has discussed with Deloitte its independence. The Audit Committee has considered whether Deloitte’s provision of non-audit services to the Company is compatible with maintaining Deloitte’s independence.
In reliance on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
Upon recommendation of the Audit Committee, the Company has appointed Deloitte to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015.
Audit Committee
Marty R. Kittrell, Chair
Aristides S. Candris
Sigmund L. Cornelius
Michael E. Jesanis
Deborah S. Parker
February 17, 2015
INDEPENDENT AUDITOR FEESThe following table represents the aggregate fees for professional services billed by Deloitte for the fiscal years ended December 31, 2013 and 2014.
| | | | | | | | |
| | | 2013 | | | 2014 | |
Audit Fees(1) | | $ | 6,029,000 | | | $ | 6,279,000 | |
Audit-Related Fees(2) | | | 829,495 | | | | 2,566,582 | |
Tax Fees(3) | | | 533,387 | | | | 533,132 | |
All Other Fees(4) | | | 18,862 | | | | 14,140 | |
(1) | Audit Fees— These are fees for professional services performed by Deloitte for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q filings, and services that are normally provided in connection with statutory and regulatory filings or engagements. |
(2) | Audit-Related Fees— These are fees for the assurance and related services performed by Deloitte that are reasonably related to the performance of the audit or review of the Company’s financial statements. In 2014, these fees include services provided by Deloitte in connection with the Proposed Separation and Columbia Pipeline Partners LP’s initial public offering of its outstanding limited partnership interests. |
(3) | Tax Fees— These are fees for professional services performed by Deloitte with respect to tax compliance, tax advice and tax planning. |
(4) | All Other Fees— These are fees for permissible work performed by Deloitte that does not meet the above categories. |
Pre-Approval Policies and Procedures. During fiscal year 2014, the Audit Committee approved all audit, audit related and non-audit services provided to the Company by Deloitte prior to management engaging the auditor for those purposes. The Audit Committee’s current practice is to consider for pre-approval annually all audit, audit related and non-audit services proposed to be provided by our independent auditors for the fiscal year. Additional fees for other proposed audit-related or non-audit services (not within the scope of the approved audit engagement) which have been properly presented to the Pre-Approval Subcommittee of the Audit Committee (consisting of Marty R. Kittrell) by the Vice President, Controller and Chief Accounting Officer of the Company may be considered and, if appropriate, approved by the Pre-Approval Subcommittee of the Audit Committee, subject to later ratification by the full Audit Committee. In no event, however, will any non-audit related service be approved by the Pre-Approval Subcommittee that would result in the independent auditor no longer being considered independent under the applicable SEC rules. In making its recommendation to appoint Deloitte as our independent auditor, the Audit Committee has considered whether the provision of the non-audit services rendered by Deloitte is compatible with maintaining that firm’s independence.
PROPOSAL 4 —5 – AMENDMENT TO THE COMPANY’S AMENDED AND RESTATEDOUR CERTIFICATE OF INCORPORATION TO GIVE STOCKHOLDERSINCREASE THE POWER TO REQUEST SPECIAL MEETINGSNUMBER OF THE STOCKHOLDERS
Currently, the Company’sAUTHORIZED SHARES OF COMMON STOCK
The Board has adopted and approved, and is recommending to stockholders for approval, an amendment to our Certificate of Incorporation providesto increase the number of authorized shares of common stock from 600 million to 750 million and a corresponding increase to the number of authorized shares of all classes of capital stock from 620 million to 770 million. The proposed amendment would not increase the number of authorized shares of preferred stock.
Under our Certificate of Incorporation, the total number of shares of all classes of stock which the Company has the authority to issue is 620 million. Of these authorized shares, common stock comprises 600 million shares and preferred stock comprises 20 million shares. As of March 14, 2023, 416,935,061 shares of common stock were issued, including 3,963,255 treasury shares, with 97,962,697 shares of common stock reserved for possible future issuance under our stock plans, our at-the-market equity offering (“ATM”) program and our Series A equity units. Approximately 85,102,242 authorized shares of common stock remain available for issuance for future purposes and the Board deems it advisable to increase our authorized shares of common stock. The adoption of the proposed amendment would provide for an additional 150 million shares of common stock for future issuance. As of March 14, 2023, we also had 1,302,500 shares of preferred stock issued.
The following table sets forth the number of authorized, outstanding, and reserved shares of common stock, as of March 14, 2023:
| | Total Authorized Shares of Common Stock | | | 600,000,000 | |
| | Less: Issued and Outstanding Shares, including Treasury | | | 416,935,061 | |
| | Shares of Common Stock Available for Future Issuance | | | 183,064,939 | |
| | Shares of Common Stock Reserved for Future Issuance Under: | | | | |
| | ATM Program | | | 14,370,314 | |
| | Omnibus Incentive Plan | | | 11,494,634 | |
| | Employee Stock Purchase and Retirement Savings Plan | | | 1,718,007 | |
| | Series A Equity Units | | | 70,379,742 | |
| | Total Shares of Common Stock Reserved for Future Issuance | | | 97,962,697 | |
| | Shares Available for Future Issuance, Less Reserved Shares | | | 85,102,242 | |
Our business is capital intensive, requiring significant resources to fund operating expenses, capital project expenditures, scheduled debt maturities and interest payments, and dividend payments on our common stock and preferred stock. In addition to internal sources to fund liquidity and capital requirements for 2023 and beyond, we expect to rely on external sources of funds, including, but not limited to, equity financings such as the previously announced ATM program we expect to put in place in 2025 to maintain credit metrics as our growth investments continue.
The Board believes that it is advisable and in the best interests of our stockholders to increase the number of authorized shares of common stock to provide us with greater flexibility in considering and planning for future business needs, such as raising additional capital through the sale of equity securities, convertible debt securities or other equity-linked securities, purchases under our employee stock plans, grants of equity incentive awards to employees (subject to any required future stockholder approvals under equity plans), potential strategic transactions, stock dividends, stock splits, and other general corporate purposes. Approval of this amendment by stockholders at the Annual Meeting will enable us to take timely advantage of market conditions and other opportunities that may become available to us without the expense and delay of arranging a special meeting of stockholders in the future. If the proposed amendment is adopted, we would be permitted to issue the authorized shares of common stock without further stockholder approval, except asto the extent otherwise required by law, any rules or listing requirements of the NYSE, or by our Certificate of Incorporation.
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PROPOSAL 5 – AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Other than the planned annual equity financing described above and subjectthe routine practices of issuing shares pursuant to employee stock plans and employee equity incentive awards, we have no present plans, proposals, or arrangements with respect to the issuance of any additional shares of common stock authorized upon approval of the proposed amendment.
Existing holders of shares of our common stock have no preemptive rights under our Certificate of Incorporation to purchase any additional shares of common stock issued by the Company. The additional shares of common stock, if and when issued, would have the same rights and privileges as the shares of common stock currently authorized. Approval of this proposal and the issuance of additional authorized shares of common stock would not affect the rights of the holders of any seriescurrently outstanding shares of preferredour common stock, except for the effects incidental to increasing the number of shares outstanding. The effects include dilution of voting power of existing stockholders, decreasing earnings per share, and, depending on the price at which they are issued, could be dilutive to our existing stockholders.
We have not proposed the increase in the authorized number of shares of common stock with the intention of using the additional shares for anti-takeover purposes, although an issuance of additional shares could, in certain circumstances, make an attempt to acquire control of the Company that may be issuedmore difficult. We are not at this time aware of any such attempts and we are not proposing this increase in the future, only the Board may call special meetingsresponse to any third-party effort to acquire control of the stockholders of the Company.
The Board has
adopted,approved, and is now submitting for approval by
the Company’sour stockholders, an amendment to
Section A.4 of Article IV of the Certificate of Incorporation
to add a provision permitting stockholders of the Company holding not less than twenty-five percent (25%) of the shares of Company common stock issued and outstanding to request a special meeting of the Company’s stockholders, subject to the provisions of the Company’s Amended and Restated Bylaws (the “Bylaws”). The complete text of the proposed amendment isas set forth in
Exhibit A.In determiningAppendix B to the proxy statement to increase the number of authorized shares of common stock from 600 million to 750 million and a corresponding increase to the number of authorized shares of capital stock from 620 million to 770 million. The Board has determined that the proposalamendment is advisable and in the best interest of the Company’s stockholders, the Corporate Governance Committee and the Board noted that the Bylaws were amended on May 11, 2010 to permit stockholders of the Company holding not less than twenty-five percent (25%) of the shares of Company common stock issued and outstanding to request a special meeting of the Company’s stockholders in accordance with the terms of the Bylaws. The Board decided to propose to the Company’s stockholders the amendment of the Certificate of Incorporation reflected in Exhibit A in order to ensure that the Certificate of Incorporation is consistent with the Bylaws.
our stockholders.
If
the Company’sour stockholders approve this proposal,
the text of the proposed amendment will become effective immediately upon the filing of the proposed amendment with the Secretary of State of the State of Delaware. We expectwe plan to file the proposed amendment
promptly with the Secretary of State of the State of Delaware,
promptlyand the proposed amendment will become effective immediately upon
approval of this Proposal 4 by our stockholders.the filing.
The affirmative vote of a majority of the
outstanding shares
outstandingof our common stock is needed to approve the amendment to the Certificate of Incorporation. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes. Abstentions and broker non-votes will have the same effect as a vote against the proposal.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO
THEOUR CERTIFICATE OF INCORPORATION TO
GIVE STOCKHOLDERSINCREASE THE
POWER TO REQUEST SPECIAL MEETINGS OF THE STOCKHOLDERS.PROPOSAL 5 — AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO REDUCE THE MINIMUM NUMBER OF DIRECTORSAUTHORIZED SHARES OF THE COMPANY FROM NINE TO SEVEN
COMMON STOCK. 2023 Proxy Statement | 75
Currently, the Certificate of Incorporation provides that the Board shall consist of not less than nine (9) and not more than twelve (12) directors. The Board has adopted, and is now submitting for approval by the Company’s stockholders, an amendment to Section A.1 of Article V of the Certificate of Incorporation to reduce the minimum number of directors of the Company from nine (9) to seven (7). The maximum number of directors of the Company will remain twelve (12). The proposed text of the amendment is set forth in Exhibit B.
In determining that the proposal is advisable and in the best interest of the Company’s stockholders, the Corporate Governance Committee and the Board considered that the Company has announced plans to separate CPG, Inc. from the Company and that if the Separation occurs as planned in mid-2015, six of the Company’s directors, including our current President and CEO, are expected to resign from the Board and to become directors of CPG, Inc. The Board decided to propose to stockholders an amendment of the Certificate of Incorporation as reflected in Exhibit B in the interest of giving the Board greater flexibility in filling vacancies on the Board in light of such expected resignations.
If the Company’s stockholders approve this proposal, the text of the proposed amendment will become effective immediately upon the filing of the proposed amendment with the Secretary of State of the State of Delaware. We expect to file the proposed amendment with the Secretary of State of the State of Delaware promptly upon approval of this Proposal 5 by our stockholders.
Vote Required
The affirmative vote of a majority of the shares outstanding is needed to approve the amendment to the Certificate of Incorporation. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes. Abstentions and broker non-votes will have the same effect as a vote against the proposal.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVALTABLE OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO REDUCE THE MINIMUM NUMBER OF DIRECTORS OF THE COMPANY FROM NINE TO SEVEN.CONTENTS
PROPOSAL 6
— RE-APPROVAL– STOCKHOLDER PROPOSAL REQUESTING THAT OUR BOARD ADOPT A POLICY REQUIRING SEPARATION OF THE
COMPANY’S 2010 OMNIBUS PLAN PURSUANT TO SECTION 162(m)ROLES OF CHAIRMAN OF THE
INTERNAL REVENUE CODEThe BoardBOARD AND CEO
Mr. John Chevedden of
Directors recommends that you vote “FOR” the re-approval of the Omnibus Plan for purposes of preserving the ability to grant awards to certain executives under the Plan that are intended to qualify as performance-based compensation that is deductible under Section 162(m). This proposal does not seek to increase the number of shares of the Company’s Common Stock that can be issued pursuant to awards granted under the Omnibus Plan, and approval of this proposal will not result in any additional cost to the Company.Section 162(m) limits to $1 million per year the deductibility of compensation paid to the CEO and the next three most highly compensated executive officers other than the CFO (“covered executives”). This limit on deductibility does not apply to compensation defined in Section 162(m) as “qualified performance-based compensation.”
One of the requirements of the qualified performance-based compensation exception under Section 162(m) is that the material terms of the performance goals under which the compensation may be paid be disclosed to and approved by stockholders at least once every five years. For purposes of Section 162(m), the material terms include (i) the individuals eligible to receive compensation, (ii) a description of the business criteria on which the performance goal is based, and (iii) the maximum amount of compensation that can be paid to an individual under the performance goal.
Our stockholders approved the Omnibus Plan at the 2010 Annual Meeting on May 11, 2010, and the ONC Committee amended the Omnibus Plan in October 2013 to allow the ONC Committee the authority to grant equity awards authorized under the Omnibus Plan to provide for double-trigger vesting in the event of a change in control. Previously, the terms of the Omnibus Plan provided forsingle-trigger vesting only. A copy of the
Omnibus Plan is attached as Exhibit C to this Proxy Statement, and this discussion is qualified in its entirety by reference to the full text of the Omnibus Plan.
If the Omnibus Plan is approved by the Company’s stockholders, the Company will be able to continue to structure performance-based awards in a manner that should qualify for the performance-based compensation exception from the deduction limitations of Section 162(m). If the Company’s stockholders fail tore-approve the Omnibus Plan, the Omnibus Plan will not be available for grants of certain performance-based awards to the covered executives, and the Company may not be entitled to a tax deduction for some or all of the compensation paid to the covered executives. Notwithstanding the foregoing, the Omnibus Plan will continue to provide the ONC Committee the ability to grant awards that do not qualify as performance-based compensation under Section 162(m), if the ONC Committee believes that such awards are in the best interest of the Company.
The basic features of the Omnibus Plan are as follows.
Administration
The Omnibus Plan will be administered by the ONC Committee, or such other committee as the Board of Directors shall appoint from time to time, which shall consist of two or more directors all of whom are intended to satisfy the requirements for an “outside director” under Section 162(m), a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act, and an “independent director” under the rules of the NYSE. The ONC Committee has the discretion to interpret the Omnibus Plan and any award or other agreement employed by the Company in the administration of the Omnibus Plan. Subject to the provisions of the Omnibus Plan, the ONC Committee has the power to:
determine when and to whom awards will be granted;
make awards under the Omnibus Plan;
determine the fair market value of shares or other property, where applicable;
determine the terms, conditions, and restrictions applicable to each award and any shares acquired pursuant to such awards;
determine how an award will be settled;
approve one or more forms of award agreements;
amend, modify, extend, cancel, or renew any award or waive any restrictions or conditions applicable to any award or any shares acquired upon the exercise of an award;
accelerate, continue, extend, or defer the exercisability of any award or the vesting of any shares acquired upon the exercise of an award;
prescribe, amend, or rescind any rules and regulations relating to the administration of the Omnibus Plan; and
make all other determinations necessary or advisable for the administration of the Omnibus Plan.
Notwithstanding the foregoing, the Board of Directors shall perform the functions of the ONC Committee for purposes of granting awards to non-employee directors.
Eligibility
The Omnibus Plan gives the ONC Committee full discretion to designate any non-employee director of the Company or any employee of the Company or an affiliate as a participant in the Omnibus Plan. The Company currently has ten non-employee directors, and the Company and its affiliates currently have approximately 8,000 employees eligible to participate in the Omnibus Plan.
Number of Shares and Limitations
The original share reserve available for awards under the Omnibus Plan was 8,000,000 shares, plus any shares subject to outstanding awards granted under either the NiSource Inc. 1994Long-Term Incentive Plan (the “LTIP”) or the NiSource Inc. Non-employee Director Stock Incentive Plan (the “Director Plan”) that expire or terminate for any reason (subject to adjustment for future stock splits, stock dividends, and similar changes in the capitalization of the Company). After giving effect to awards previously made under the Omnibus Plan, the
aggregate number of shares that are available for issuance is approximately [—] shares as of March 16, 2015, the record date for the 2015 Annual Meeting. This number does not include the effect of forfeitures, if any, of outstanding awards.
The following shares related to awards will be available for issuance again under the Omnibus Plan:
shares related to awards paid in cash and
shares related to awards that expire, are forfeited, are cancelled, or terminate for any other reason without the delivery of the shares.
In addition, the following shares related to awards also will be available for issuance again under the Omnibus Plan:
shares equal in number to the shares withheld, surrendered or tendered in payment of the exercise price of an award, including an award granted under the LTIP or Director Plan;
shares tendered or withheld in order to satisfy tax withholding obligations; and
shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of awards, including awards granted under the LTIP or Director Plan.
No participant may receive in any fiscal year of the Company awards under the Omnibus Plan that exceed the following limitations:
no more than $12,000,000 subject to stock options or stock appreciation rights;
no more than $7,000,000 subject to restricted stock or restricted stock units; and
no more than $10,000,000 subject to performance shares, performance units, cash-based awards, or other stock-based awards.
Performance Targets and Section 162(m)
Awards under the Omnibus Plan may be conditioned upon the attainment of performance targets awards may be based on any number and type of performance targets that the ONC Committee determines are desirable. The performance measured may be that of the Company, its affiliates, or business units within the Company or affiliates. In setting performance targets, the ONC Committee may assign payout percentages to various levels of performance that will be applied to reduce or increase the payout connected to the award when performance over a performance period either falls short of or exceeds the performance target.
With respect to awards intended to qualify as “performance-based compensation” under Section 162(m), such performance targets will be based on one or any combination of two or more performance measures listed in Section 13.1(b) of the Omnibus Plan. The ONC Committee may provide in any such award that any evaluation of performance may include or exclude any extraordinary events described in Section 13.1(c) of the Omnibus Plan. To the extent such inclusions or exclusions affect awards to covered employees under Section 162(m), they shall be prescribed in a form that meets the requirements of Section 162(m) for deductibility except as otherwise determined by the ONC Committee in its sole discretion. Awards that are intended to qualify as “performance- based compensation” under Section 162(m) may not be adjusted upward. The ONC Committee shall retain the discretion to adjust such awards downward, either on a formula or discretionary basis or a combination of the two, as the ONC Committee determines.
Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) may be based on these or other performance measures, as determined by the ONC Committee.
Types of Awards
The types of awards that may be granted under the Omnibus Plan include incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards.
Subject to certain restrictions applicable to incentive stock options, awards granted under the Omnibus Plan will be exercisable by the participants at such times as are determined by the ONC Committee, but in no event may the term of an award be longer than ten years after the grant date. In addition to the general characteristics of
all of the awards described in this Proxy Statement, the basic characteristics of awards that may be granted under the Omnibus Plan are as follows:
Incentive and Nonqualified Stock Options (“ISOs” and “NSOs”)
Both incentive and nonqualified stock options may be granted to participants at such exercise prices as the ONC Committee may determine, but the exercise price for any option may not be less than 100% of the fair market value (as defined in the Omnibus Plan) of a share of the Company’s common stock on the grant date. Stock options may be granted and exercised at such times as the ONC Committee may determine, except that (a) ISOs may be granted only to employees, (b) no ISOs may be granted more than ten years after the effective date of the Omnibus Plan, (c) an option shall not be exercisable more than ten years after the date of grant, and (d) the aggregate fair market value of the shares of common stock of the Company with respect to which ISOs granted under the Omnibus Plan and any other plan of the Company first become exercisable in any calendar year for any employee may not exceed the $100,000 maximum amount permitted under Code Section 422(d). Additional restrictions apply to an ISO granted to an individual2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, who beneficially owns more than 10% of the combined voting power of all classes of stock of the Company.
The purchase price payable upon exercise of options generally may be paid in any of the following methods:
by authorizing a third party with which the optionee has a brokerage or similar account to sell the shares (or a sufficient portion of such shares) acquired upon the exercise of the option and remit to the Company a portion of the sale proceeds sufficient to pay the entire option exercise price to the Company;
by delivering shares that have an aggregate fair market value on the date of exercise equal to the option exercise price;
by authorizing the Company to withhold from the totalrequisite number of shares as to which the option is being exercised the number of shares having a fair market value on the date of exercise equal to the aggregate option exercise price for the total number of shares as to which the option is being exercised;
by such other means by which the ONC Committee determines to be consistent with the purpose of the Omnibus Plan and applicable law; or
by any combination of items listed above.
Stock Appreciation Rights (“SARs”)
The value of an SAR granted to a participant is determined by the appreciation in the number of shares the Company’s common stock subject to the SAR during its term, subject to any limitations upon the amount or percentage of total appreciation that the ONC Committee may determine at the time the right is granted. The participant receives all or a portion of the amount by which the fair market value of a specified number of shares, as of the date the SAR is exercised, exceeds a price specified by the ONC Committee at the time the right is granted. The price specified by the ONC Committee must be at least 100% of the fair market value of the specified number of shares of the Company’s common stock to which the right relates, determined as of the date the SAR is granted. An SAR may be granted in connection with a previously or contemporaneously granted option, or independent of any option. An SAR may be paid in cash, shares the Company’s common stock or a combination of cash and shares as determined by the ONC Committee. No SAR may be exercised more than ten years after its date of grant.
Restricted Stock and Restricted Stock Units (“RSUs”)
The ONC Committee may grant participants awards of restricted stock and RSUs. Restricted stock involves the granting of shares to participants subject to restrictions on transferability and any other restrictions the ONC Committee may impose. The restrictions lapse if either the holder continues to perform services to the Company or its affiliates for a specified period of time established by the ONC Committee under the applicable award agreement or satisfies other restrictions, including performance-based restrictions, during the period of time established by the ONC Committee. RSUs are similar to restricted stock except that no shares actually are awarded to the participant on the grant date, and the holder typically does not enjoy any shareholder rights with
respect to the units. Restricted stock awards are settled in shares. RSU awards may be settled in cash, shares, or a combination of cash and shares, as determined by the ONC Committee and provided in the applicable award agreement.
Performance Shares
The ONC Committee may grant participants awards of performance shares. The period of time over which performance targets are measured will be of such duration as the ONC Committee shall determine in an award agreement. Upon satisfaction of the applicable performance targets during the performance period, the participant will be entitled to receive shares of common stock of the Company.
Performance Units
The ONC Committee may grant participants awards of performance units. The period of time over which the performance goals are measured will be no less than two years, unless otherwise determined by the ONC Committee in an award agreement. Upon satisfaction of the applicable performance targets during the performance period, the participant will be entitled to receive either shares, cash, or a combination of shares and cash as determined by the ONC Committee in an award agreement.
Cash-Based Awards
Cash-based awards entitle the participant to payment in amounts of cash determined by the ONC Committee based upon the achievement of specified performance targets during a specified performance period, which typically will be one year unless otherwise determined by the ONC Committee. Each cash-based award will have its value determined by the ONC Committee.
Other Stock-Based Awards
The ONC Committee may also grant other awards that are valued in whole or in part by reference to, or are otherwise based on and/or payable in, shares of common stock of the Company. Other stock-based awards are a catch-all category to provide for awards of stock-based compensation that do not fit within the scope of the other specifically described types of awards. Payments with respect to other stock-based awards may be made in cash, shares, or a combination of cash and shares as determined by the ONC Committee. The ONC Committee has the discretion to determine the terms and conditions of these other stock-based awards.
Termination of Service
If a participant ceases to be an employee or director of the Company or its affiliates, the ONC Committee may provide for special vesting and payment conditions upon such termination in an applicable award agreement. If a participant’s employment or directorship is terminated for cause, however, the participant’s right to receive the benefits of an award is forfeited.
Transferability
In general, awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title 1 of ERISA or the rules thereunder. Except as otherwise provided in the Omnibus Plan, all rights with respect to an award granted to a participant shall be available during his or her lifetime only to such participant. Notwithstanding the foregoing, a participant, at any time prior to his death, may assign all or any portion of an NSO or SAR to:
his spouse or lineal descendant;
the trustee of a trust for the primary benefit of his spouse or lineal descendant; or
atax-exempt organization as described in Code Section 501(c)(3).
Notwithstanding the foregoing, non-employee directors may assign all or any portion of any award granted to them to assignees described above. In the event of an assignment, the spouse, lineal descendant, trustee ortax-exempt organization shall be entitled to all of the rights of the participant with respect to the assigned portion of such award, and such portion of the award shall continue to be subject to all of the terms, conditions and
restrictions applicable to the award as set forth in the Omnibus Plan and in the related award agreement, immediately prior to the effective date of the assignment. Any such assignment shall be permitted only if (i) the participant does not receive any consideration therefore, and (ii) the assignment is expressly approved by the ONC Committee or its delegate. Further notwithstanding the foregoing, no incentive stock option may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent or distribution.
Duration, Adjustments, Modifications, Terminations
The Omnibus Plan will remain in effect until all shares of the Company subject to the Omnibus Plan are distributed, or the Omnibus Plan is terminated as described below.
In the event of a recapitalization, stock split, reverse stock split, spin-off, spin-out or other distribution of assets to stockholders, stock distributions or combinations of shares, payment of stock dividends, other increase or decrease in the number of such shares outstanding effected without receipt of consideration by the Company, or any other occurrence for which the ONC Committee determines an adjustment is appropriate, the ONC Committee shall equitably adjust the number and type of shares available for awards or the number and type of shares and amount of cash subject to outstanding awards, the option exercise price of outstanding options, and provisions regarding payment with respect to outstanding awards. The ONC Committee has the discretion to make similar adjustments in connection with other changes in the Company’s capitalization, including due to a merger, reorganization, or consolidation.
The Omnibus Plan also gives the Board and ONC Committee the right to terminate, suspend or amend the Omnibus Plan without the authorization of stockholders to the extent allowed by law, including without limitation any rules issued by the SEC under Section 16 of the Exchange Act, insofar as stockholder approval thereof is required in order for the Omnibus Plan to continue to satisfy the requirements of Rule16b-3 under the Exchange Act, or the rules of any applicable stock exchange. No termination, suspension or amendment of the Omnibus Plan shall adversely affect any right acquired by any participant under an award granted before the date of such termination, suspension or amendment, unless such participant shall consent; but it shall be conclusively presumed that any adjustment for changes in capitalization as provided for herein does not adversely affect any such right.
Upon a change in control, all outstanding awards shall become fully exercisable and all restrictions thereon shall terminate; provided, however, that notwithstanding the above, the ONC Committee, as constituted before such change in control, is authorized, and has sole discretion, as to any award, either at the time such award is granted or any time thereafter, to provide for the extent of vesting and the treatment of partially completed performance periods (if any) for any awards outstanding upon a change in control.
Federal Tax Considerations
The Company has been advised by its counsel that awards made under the Omnibus Plan generally will result in the following tax events for United States citizens under current United States federal income tax laws.
Nonqualified Stock Options
A participant will have no taxable income, and the Company will not be entitled to any related deduction, at the time a NSO is granted under the Plan. At the time of exercise of NSOs, the participant will realize ordinary income, and the Company will be entitled to a deduction equal to the excess of the fair market value of the stock on the date of exercise over the option exercise price. Upon disposition of the shares, any additional gain or loss realized by the participant will be taxed as a capital gain or loss.
Incentive Stock Options
A participant will have no taxable income, and the Company will not be entitled to any related deduction, at the time an ISO is granted under the Plan. If a participant disposes of shares acquired from the exercise of an ISO no earlier than (a) two years after the grant of the option and (b) one year after the exercise of the option (both (a) and (b) collectively referred to as the “Holding Periods”), then no taxable income will result upon the exercise of such ISO, and the Company will not be entitled to any deduction in connection with such exercise. Upon dis-
position of the shares after expiration of the Holding Periods, any gain or loss realized by a participant will be a capital gain or loss. The Company will not be entitled to a deduction with respect to a disposition of the shares by a participant after the expiration of the Holding Periods.
Except in the event of death, if the participant disposes of the shares before the end of the Holding Periods (a “Disqualifying Disposition”), such participant will recognize a gain (taxable at ordinary income tax rates) which equals the lesser of (a) the difference between the fair market value on the exercise date and the option exercise price, or (b) the difference between the sale price of the shares and the option exercise price on the date of sale. The balance, if any, will be taxed as short-term or long-term capital gain, depending upon how long the participant held the shares. The Company will be entitled to a deduction at the same time and in the same amount as the participant is deemed to have realized ordinary income. If the participant pays the option exercise price with shares that were originally acquired pursuant to the exercise of an ISO and the Holding Periods for such shares have not been met, the participant will be treated as having made a Disqualifying Disposition of such shares, and the tax consequence of such Disqualifying Disposition will be as described above.
For alternative minimum tax purposes, an ISO will be treated as if it were a nonqualified stock option, the tax consequences of which are discussed previously.
Stock Appreciation Rights
There will be no federal income tax consequences to either the participant or the Company upon the grant of an SAR. The participant, however, generally must recognize ordinary taxable income upon the exercise or surrender of an SAR in an amount equal to the fair market value (on the date of exercise) of the shares exercised, less the exercise price. Gain or loss recognized upon any later sale or other disposition of the acquired shares generally will be a capital gain or loss.
Restricted Stock
Unless the participant files an election to be taxed under Code Section 83(b), the participant will not realize income upon the grant of restricted stock. Instead, the participant will realize ordinary income, and the Company will be entitled to a corresponding deduction, when the restrictions lapse. The amount of such ordinary income and deduction will be the fair market value of the restricted stock on the date the restrictions lapse. If the participant files an election to be taxed under Code Section 83(b), the tax consequences to the participant and the Company will be determined as of the date of the grant of the restricted stock rather than as of the date of the lapse of the restrictions.
When the participant disposes of restricted stock, the difference between the amount received upon such disposition and the fair market value of such shares on the date the participant realizes ordinary income will be treated as a capital gain or loss.
Restricted Stock Units
A recipient of RSUs will not recognize taxable income upon the award of RSUs, and the Company will not be entitled to a deduction at such time. Upon payment or settlement of a RSU award, the participant will recognize ordinary income equal to the value of the shares or cash received and the Company will be entitled to a corresponding deduction. Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally received by the participant.
Performance Shares, Performance Units, and Cash-Based Awards
Generally, the participant will not realize taxable income on the date of grant of a performance share, performance unit, or cash-based award. Instead, the participant will realize ordinary income, and the Company will be entitled to a corresponding deduction, in the year cash, shares, or a combination of cash and shares are delivered to the participant in payment of the award. The amount of such ordinary income and deduction will be the amount of cash received plus the fair market value of the shares received, if any, on the date of issuance. Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally received by the participant.
Section 162(m)
Compensation of the Company’s CEO and its three most highly compensated executive officers (not including the CEO and CFO) is subject to the tax deduction limits of 162(m). Awards that qualify as “performance-based compensation,” however, will be exempt from Section 162(m), thus allowing the Company the full tax deduction otherwise permitted for such awards. If approved by the Company’s stockholders, the Omnibus Plan will enable the ONC Committee to grant awards that will be exempt from the deduction limits of Section 162(m).
Code Section 409A
Code Section 409A provides that covered amounts deferred under a nonqualified deferred compensation plan are includable in the participant’s gross income to the extent not subject to a substantial risk of forfeiture and not previously included in income, unless certain requirements are met, including limitations on the timing of deferral elections and events that may trigger the distribution of deferred amounts. The Omnibus Plan has been designed so that awards should be exempt from coverage under Code Section 409A. Certain terms have been defined in a manner so that if awards are subject to Code Section 409A, they should comply with Code Section 409A.
Forfeiture and Over/Under Payments
The ONC Committee may specify in an award agreement that the participant’s rights, payments, and benefits with respect to an award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an award. Such events may include, but shall not be limited to, termination of service for cause or any act by a participant, whether before or after termination of service, that would constitute cause for termination of service.
If any participant or beneficiary receives an underpayment of shares or cash payable under the terms of any award, payment of any such shortfall shall be made as soon as administratively practicable. If any participant or beneficiary receives an overpayment of shares or cash payable under the terms of any award for any reason, the ONC Committee or its delegate shall have the right, in its sole discretion, to take whatever action it deems appropriate, including but not limited to the right to require repayment of such amount or to reduce future payments under this Plan, to recover any such overpayment. Notwithstanding the foregoing, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the participant knowingly or through gross negligence engaged in the misconduct, or knowingly or through gross negligence failed to prevent the misconduct, or if the participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse the Company the amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC of the financial document embodying such financial reporting requirement.
Withholding
The Omnibus Plan permits the Company to withhold from awards an amount sufficient to cover any required withholding taxes. The Omnibus Plan also permits the Company to require a participant to remit to the Company an amount sufficient to satisfy any required withholding taxes. In lieu of cash, the ONC Committee may permit a participant to cover withholding obligations through a reduction in the number of shares to be delivered to such participant or by delivery of shares already owned by the participant.
New Plan Benefits
The ONC Committee has not yet made any determination with respect to awards that may be granted in the future pursuant to the Omnibus Plan.
Vote Required
Re-approval of the Company’s Omnibus Plan requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on this item at the meeting. Proxies solicited by the Board of Directors will be voted “FOR” approval of the Omnibus Plan unless stockholders specify otherwise in their proxies. For this purpose, a stockholder voting through a proxy who abstains with respect to approval of the Omnibus
Plan is considered to be present and entitled to vote on the approval of the Omnibus Plan at the meeting, and is in effect a negative vote, but a stockholder (including a broker) who does not give authority to a proxy to vote or withholds authority to vote on the approval of the Omnibus Plan shall not be considered present and entitled to vote on the proposal. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes; broker non-votes will have no effect on the vote.
THE BOARD RECOMMENDS A VOTE “FOR” RE-APPROVAL OF THE COMPANY’S OMNIBUS PLAN PURSUANT TO SECTION 162(m) OF THE INTERNAL REVENUE CODE.
PROPOSAL 7 — APPROVAL OF AN AMENDMENT TO THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE PLAN
We maintain the NiSource Inc. Employee Stock Purchase Plan, as amended and restated effective August 1, 2012 (the “ESPP”). The ESPP, or a predecessor plan, has been maintained by the Company and its predecessors since 1964. The ESPP is an important component of our efforts to attract and retain qualified employees. It also encourages employees to become Company stockholders, which assists in aligning their long-term interests with those of the Company’s stockholders.
Proposed Amendments
The proposed amendment would increase the maximum number of shares of our common stock remaining available for future purchase under the ESPP by 900,000 shares. The purpose of the amendment is to ensure that we are able to continue to provide all current and new employees interested in participating in the ESPP with sufficient shares available for purchase in light of strong employee interest in ESPP participation.
Description of the ESPP
General. The ESPP provides eligible employees with the opportunity to purchase our common stock at a discount from market value through payroll deductions. The primary purposes of the ESPP are to provide employees of the Company and certain of its subsidiaries an additional means of saving a portion of their earnings and to encourage employee ownership of Company common stock.
Shares Subject to Award. Under the proposed amendment, the maximum number of shares of our common stock that may be purchased in the future under the ESPP will be increased from 199,496 as of February 27, 2015 to 1,099,496 shares of common stock, less shares purchased under the ESPP on March 31, 2015. The number of shares that can be purchased may increase in the future with additional stockholder approval. This number may also increase or decrease proportionately, as appropriate, in the event of a future stock dividend, stock split or combination of our common stock, spin-off, reorganization or recapitalization. If at any time the number of shares remaining available for purchase under the ESPP is not sufficient to satisfy all then outstanding purchase rights, the available shares will be apportioned among all participants on an equitable basis. The closing price of our common stock on February 27, 2015 was $42.91.
Administration. The ESPP is administered by the Company’s Corporate Secretary. Fidelity is the directed trustee of the ESPP. The ESPP Administrator has the right to interpret the provisions of the ESPP and to make all rulings or interpretations regarding the ESPP and the directed trustee provides services to employees.
Eligibility. The ESPP is open to each active employee of the Company and its participating subsidiaries who either (a) customarily works for the Company or any subsidiary more than 20 hours per week for more than five months in any calendar year; or (b) is customarily employed by the Company or a participating subsidiary for at least six months in any calendar year. However, no employee is eligible to participate in the ESPP if, immediately after participating, the employee would own, directly or indirectly, stock possessing 5% or more of the total combined voting power or value of all classes of our stock, including any stock which the employee may purchase under outstanding rights and options. In addition, no employee may accrue the right to purchase shares under the ESPP (and any other employee stock purchase plan of the Company and its affiliates) with a fair market of more than $25,000 for each calendar year.
Participation. The ESPP provides for four savings periods during each calendar year. Savings accumulated by an employee through payroll deductions will be used at the end of each savings period to purchase as many full and fractional shares of our common stock as possible at the purchase price determined for that savings
period. Savings periods are the three-month periods from January 1 to March 31, April 1 to June 30, July 1 to September 30 and October 1 to December 31.
Each savings period includes all paydays within that period. The purchase price per share assigned to our common stock for any savings period will be 90% of the closing price of our common stock on the NYSE on the last trading day of the savings period. Shares of our common stock purchased under the ESPP will come from treasury shares, authorized but unissued shares or open market purchases of our common stock. The shares purchased will be credited and outstanding to an employee as of the close of business on the last day of each savings period.
An employee is eligible to participate in the ESPP on the first day of the month in which such employee first meets the eligibility criteria. As part of the enrollment process, Fidelity establishes an individual brokerage account for the employee. Employees must also elect an amount that will be deducted from their paychecks for the purchase of our common stock. Payroll deduction elections will be sent by Fidelity to our payroll department. Payroll deductions will begin as quickly as administratively possible. Payroll deductions can be in any full dollar amounts, not less than $10 per regular pay period, and not more than $20,000 per calendar year. An employee may increase, decrease or stop payroll deduction at any time. An employee’s death, retirement or termination of employment with the Company or its affiliates will be considered an automatic termination from participation in the ESPP.
Employees do not pay any brokerage commissions, fees or service charges in connection with purchases of stock under the ESPP. These costs are paid by us. Any shares of stock held in an employee’s individual brokerage account at Fidelity can be sold at the employees’ direction. Employees are responsible for all costs incurred in the sale of shares within their individual brokerage account at Fidelity.
To terminate participation in the ESPP, an employee may change their contribution to $0 on Fidelity’s website or by contacting Fidelity by phone. Fidelity will inform us to stop any future payroll deductions and to refund any payroll deductions amounts that have not been used to purchase any of our common stock and remain in the employee’s individual brokerage account. Payroll deduction and refunds will be made as soon as administratively possible.
Duration, Termination and Amendment. Unless earlier terminated by the Board, the ESPP will terminate when the maximum number of shares of our common stock available for sale under the ESPP has been purchased. We reserve the right to modify, suspend or terminate the ESPP, by action of the Board of Directors or the ONC Committee, as of the beginning of any savings period. Notice of suspension, modification or termination will be given to all participants. Upon termination of the ESPP for any reason, the cash then credited to an employee’s account will be refunded by our payroll department. All full and fractional shares of Company common stock held in individual employee’s brokerage account will be available to the employee.
The Board or the ONC Committee may also amend the ESPP from time to time to meet changes in legal requirements or for any other reason. In no event, however, may the Board or the ONC Committee amend the ESPP to (i) materially adversely affect any rights outstanding under the ESPP during the savings period in which such amendment is to be effected, (ii) increase the maximum number of shares of common stock which may be purchased under the ESPP without stockholder approval, (iii) decrease the purchase price of the common stock below 90% of the fair market value of the closing price of our common stock on the NYSE on the last trading day of the savings period, or (iv) adversely affect the qualification of the Plan under Section 423 of the Code.
Certain Federal Income Tax Consequences. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. An employee will not realize taxable income at the time he or she purchases shares of common stock under the ESPP. Employees will be taxed on dividends on shares as they are paid. The length of time an employee holds shares of common stock before disposing of them is an important variable in determining federal income tax consequences. A holding period starts the day after the day shares are purchased (i.e., the last day the common stock was traded on the NYSE in the applicable savings period).
For an employee who sells or otherwise disposes of shares of common stock purchased under the ESPP, federal income tax considerations will differ, depending upon how long he or she has held the shares. Under present law, if the employee holds the shares at least two years before disposing of them, (1) any profit up to the 10% discount will be taxable as ordinary income, (2) any further profit will be taxable as a capital gain, and
(3) any loss will be treated as a capital loss. Under present law, if the employee holds shares less than two years before disposing of them (1) the full 10% discount will be taxable as ordinary income, (2) any further profit also will be taxable as a capital gain, and (3) any loss, after considering the full 10% discount as income, will be treated as capital loss. Under present law, upon the death of an employee, whenever it occurs, there shall be included in the employee’s ordinary taxable income, in the year in which death occurs, the amount by which the market price at date of death exceeds the amount paid for the shares; however, this amount shall not exceed the original 10% discount.
An employee does not have any tax consequences so long as he or she retains the shares. Under present law, if an employee holds shares less than two years before disposing of them, the Company will be allowed a deduction in the year of disposal equal to the 10% discount in computing its taxable income. If an employee disposes of his or her shares other than by selling them at market value, different U.S. tax considerations may apply. State and local income tax considerations may also apply.
Specific Benefits. The benefits that will be received by or allocated to persons eligible to participate in the ESPP in the future cannot be determined at this time because the amount of contributions set aside to purchase shares of our common stock under the ESPP (subject to the limits of the plan) are entirely within the discretion of each participant.
Vote Required
Approval of the amendment to the Company’s ESPP requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Abstentions will have the same effect as a vote against the proposal. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes; broker non-votes will have no effect on the vote.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE PLAN.
PROPOSAL 8 — STOCKHOLDER PROPOSAL REGARDING REPORTS ON POLITICAL CONTRIBUTIONS
The Comptroller of the State of New York, as the sole Trustee of the New York State Common Retirement Fund, which beneficially held at least $2,000 in market value of common stock, has informed the Company that ithe plans to present the following proposal at the meeting:
Resolved, that the shareholders ofNiSource Inc., (“Company”) herebymeeting.
Proposal 6 – Independent Board Chairman
Shareholders request that the
Company provide a report, updated semiannually, disclosingBoard of Directors adopt an enduring policy,and amend the
Company’s:1. Policiesgoverning documents as necessary in order that 2 separate people hold the office of the Chairman and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalfthe office of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.
2. Monetary and non-monetary contributions and expenditures (direct and indirect) used inCEO.
Whenever possible, the
manner described in section 1 above, including: | a. | The identity of the recipient as well as the amount paid to each; and |
| b. | The title(s) of the person(s) in the Company responsible for decision-making. |
The reportChairman of the Board shall be presentedan independent director.
The Board has the discretion to
the board of directors or relevant board committee and posted on the Company’s website within 12 months from the dateselect a Temporary Chairman of the
annual meeting.Stockholder Supporting Statement
As long-term shareholders of NiSource, we support transparency and accountability in corporate spending on political activities. These include any activities considered intervention in any political campaign underBoard who is not an independent director to serve while the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties, or organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.
DisclosureBoard is in the best interestseeking an Independent Chairman of the companyBoard on an accelerated basis.
It is a best practice to adopt this policy soon. However, this policy could be phased in when there is a contract renewal for our current CEO or for the next CEO transition.
The roles of Chairman and
its shareholders. The Supreme Court said in itsCitizens Uniteddecision: “[D]isclosure permits citizensCEO are fundamentally different and
shareholders to react to the speech of corporate entities inshould be held by 2 directors, a
proper way. This transparency enables the electorate to make informed decisionsCEO and
give proper weight to different speakers and messages.”Publicly available records show that NiSource contributed at least $2.7 million in corporate funds since the 2004 election cycle. (CQ: http://moneyline.cq.com and National Institute on Money in State Politics:http://www.followthemoney.org)
Gaps in transparency and accountability may expose the company to reputational and business risks that could threaten long-term shareholder value. This may be especially true for NiSource, which the non-profit organization Public Campaign criticized in a December 2011 report,For Hire: Lobbyists or the 99%? The report alleged that a group of companies, including NiSource, paid no federal income taxes between 2008 and 2010 while spending millions on campaign contributions and lobbying and increasing their executive compensation.
Relying on publicly available data does not provide a complete pictureChairman who is completely independent of the Company’s political spending.CEO and our company. The job of the CEO is to manage the company. The job of the Chairman is to oversee the CEO and management.
This proposal
askssimply translates the current practice at NiSource
of an independent chairman into an enduring policy. This proposal is more important to
disclose allNiSource because NiSource has not named in one place the duties of
its political spending, including payments to trade associations and other tax exempt organizations used for political purposes. This would bring our Company in line with a
growing number of its peers, includingExelon Corp., Edison International, andPG&E Corp., that support political disclosure and accountability and present this information on their websites.The Company’slead director should NiSource not have an independent board chairman.
Please vote yes: Independent Board and its shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.Chairman - Proposal 6
Board of Directors’ Statement in Opposition
Your Board of Directors unanimously recommends a vote AGAINST this proposal.
The Board of Directors hasand its ESN&G Committee have considered this proposal and as discussed below, concluded that it is unnecessary and not in the best interests of our stockholders. The Board recommends a vote AGAINST this proposal for the following reasons:
| ■ | Providing our Board the flexibility to determine our leadership structure at a given time and based on relevant circumstances best serves the Company and our stockholders; |
| ■ | For more than 16 years—since late 2006—the offices of Chairman and CEO have been held by different individuals, with the Chairman being an independent director; and |
| ■ | Our existing governance practices and current leadership structure promote effective and independent Board oversight. |
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PROPOSAL 6 – STOCKHOLDER PROPOSAL REQUESTING THAT OUR BOARD ADOPT A POLICY REQUIRING SEPARATION OF THE ROLES OF CHAIRMAN OF THE BOARD AND CEO
Providing our Board the flexibility to determine our leadership structure at a given time and based on relevant circumstances best serves the Company and our stockholders.
Our Corporate Governance Guidelines do not provide for a fixed policy with respect to combining or separating the offices of Chairman and CEO. Rather than taking a “one-size-fits-all” approach to Board leadership, our existing policies provide the Board flexibility to configure the leadership of the Board and the Company in the way that best serves the Company’s interests at the time. The most effective leadership structure at a given time will depend on a variety of factors, including the leadership, skills, and experience of each of the CEO, the Chairman, and the other members of the Board, as well as the needs of the business and other factors. The Board has deep knowledge of the strategic goals of the Company, the opportunities and challenges it faces, and the various capabilities of our directors and management, and is therefore best positioned to determine the most effective leadership structure to protect and enhance long-term stockholder value.
The Board has a fiduciary duty to evaluate and determine the Board’s leadership structure based on what will best serve stockholders’ interests under the circumstances, not pursuant to an inflexible pre-established policy. No single, fixed leadership model is appropriate in all circumstances. If this proposal were to be approved and implemented, it would deprive the Board of important flexibility to utilize its business judgment to determine the most effective leadership structure to serve the interests of the Company and its stockholders.
For more than 16 years—since late 2006—the offices of Chairman and CEO have been held by different individuals, with the Chairman being an independent director.
The Board recognizes the importance of having in place a structure that allows it to function in an appropriately independent manner and believes that independent Board leadership is a critical component of its governance structure. Our Corporate Governance Guidelines require us to have an independent lead director if the positions of Chairman and CEO are held by the same person. The Board regularly reviews the Company’s leadership structure and currently believes that separating the roles of Chairman and CEO is the most effective leadership structure for the Company to protect and enhance long-term stockholder value.
These roles have been separate since late 2006—meaning that the Board has already adopted a practice that is essentially the same as that requested by this proposal (without unduly depriving the Board of its flexibility). Pursuant to our Corporate Governance Guidelines, however, if the Board determines at some point in the future that combining the Chairman and CEO roles is in the Company’s best interest, the Board will then select a lead independent director, taking into account the recommendation of the ESN&G Committee. In that event, the lead independent director will be the presiding director for purposes of the NYSE rules and would have many responsibilities similar to the current Chairman.
Our existing governance practices and current leadership structure promote effective and independent Board oversight.
The Board believes that independent oversight involves not only having an independent Board leader, but also demonstrating a commitment to strong corporate governance. Our strong corporate governance policies and practices, including the items outlined below, empower our independent directors to effectively oversee management. These extensive strong governance practices include:
| ■ | Annual election of directors; |
| ■ | Majority voting for all directors with resignation policy; |
| ■ | Stockholder right to call special meetings; |
| ■ | No supermajority voting provisions; |
| ■ | Proxy access bylaw (3% ownership / 3 years / up to 20 stockholders / 20% of Board); |
| ■ | Independent chairman separate from CEO; |
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PROPOSAL 6 – STOCKHOLDER PROPOSAL REQUESTING THAT OUR BOARD ADOPT A POLICY REQUIRING SEPARATION OF THE ROLES OF CHAIRMAN OF THE BOARD AND CEO
| ■ | All directors independent except CEO; |
| ■ | Board committees comprised of all independent directors; |
| ■ | Regular executive sessions of independent directors; |
| ■ | Annual Board and committee evaluation process and ongoing evaluations of individual directors; |
| ■ | Strategic and risk oversight by Board and committees; |
| ■ | Annual “Say-on-Pay” advisory votes; |
| ■ | Active and experienced Board; |
| ■ | Robust succession planning and recent Board refreshment, with an average tenure on the Board of 6 years of service; and |
| ■ | Regular stockholder engagement. |
See the section titled “Corporate Governance” for more details on the Company’s commitment to strong corporate governance.
Summary
The Board has a long-standing history of strong corporate governance practices. The Board’s current structure, which is memorialized in our Corporate Governance Guidelines, provides for effective and independent Board oversight. In contrast, the proponent’s proposal calls for an inflexible policy that would restrict the Board’s discretion in meeting its fiduciary duty to evaluate and determine the appropriate structure to serve stockholder interests under the circumstances. Adoption of this policy is both unnecessary, especially in light of the Company’s actual practice of separating these roles for more than 16 years, and would preclude the Board from exercising its independent judgment to determine the most effective leadership structure in the future. In light of the current and long-standing practice of separating these roles, the substantial independent oversight of management by the Board, and the Company’s strong corporate governance practices, the Board believes the inflexible standard that would be imposed under this proposal is neither necessary, nor in the best interests of the Company or
ourits stockholders.
We are committed to being a good corporate citizen in the communities in which we conduct our business. Consistent with this commitment, we support and encourage our employees to actively engage in community and civic activities. We also encourage employees to participate in the political process as private citizens should they desire to do so. Our commitment to corporate citizenship is set forth in our Code of Business Ethics under a section entitled “Committed to Fair and Ethical Dealings with Others — Corporate Citizenship”, and is available on our website at:www.nisource.com/ethics.
We do not — and under federal law we cannot — use corporate funds for direct contributions to federal candidates. Such contributions may be made only by NiSource Inc. PAC (NiPAC), a non-profit entity that solicits voluntary contributions from eligible administrative and management employees in compliance with federal election laws. NiPAC contributes to the campaigns of federal and state candidates, where permissible, and files required reports with the Federal Election Commission and various state and local election commissions. These reports are publicly available. Reports filed with the Federal Election Commission are available at www.fec.gov.
We also do not make independent expenditures, as authorized by theCitizens United decision, and do not currently have any plans to do so.
We participate in trade and industry associations to benchmark best practices and share knowledge. While some of these trade organizations may engage in legislative or other political activity, we do not necessarily support all of their political goals. Because these associations operate independently of their members, disclosure of our regular dues made to them would not provide our stockholders with greater understanding of our business strategies, sustainability initiatives or values. Furthermore, compiling information regarding every trade association to which any of our business units may have made a dues or other payment would be unreasonably burdensome and an inefficient use of Company resources.
Nevertheless, in an effort to be responsive to some of the recommendations made in the stockholder proposal, we implemented procedures to heighten oversight and review of political contributions in 2014. Our corporate political activities are conducted under the oversight of the Corporate Governance Committee of the Board. In addition, all legally permissible direct and indirect corporate political spending is reviewed centrally by
the head of the Company’s Corporate Affairs Group, and is periodically reported to and reviewed by the Corporate Governance Committee of the Board.
The Board of Directors believes that the Company’s heightened oversight and review procedures are sufficient to ensure accountability. We also believe that much of what the proposal advocates is already publicly available, and that adopting a policy as set forth in the proposal is unnecessary and would result in an unproductive use of Company resources.
If this proposal is properly presented at the meeting, approval requires the affirmative vote of a majority of the shares present at the
meeting, in personvirtual Annual Meeting or represented by proxy, and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted AGAINST the stockholder proposal. Abstentions will have the same effect as a vote against the proposal.
BrokersWe believe brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes.
Broker non-votes will have no effect on the vote.THE BOARD BELIEVES THAT
THETHIS PROPOSAL IS NOT IN
YOURTHE BEST INTERESTS
OF STOCKHOLDERS AND RECOMMENDS
THAT YOUA VOTE “AGAINST” THIS PROPOSAL.
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PROPOSAL 7 – STOCKHOLDER
PROPOSALS AND NOMINATIONS FOR 2016PROPOSAL REQUESTING THAT WE PUBLISH AN ANNUAL
MEETINGAnyLOBBYING REPORT
The Service Employees International Union Master Trust of our stockholdersP.O. Box 22650, Lehigh Valley, Pennsylvania 18002, who wish to bring any business before the 2016 Annual Meeting must filebeneficially owns a noticerequisite number of the holder’s intent to do so no earlier than January 11, 2016, and no later than February 10, 2016. The notice must include a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made. Any holder of common stock who wishes to submit a proposal to be included in the Company’s proxy materials in connection with the 2016 Annual Meeting must submit the proposal to the Company’s Corporate Secretary no later than December 8, 2015. The holder submitting the proposal must have owned common stock having a market value of at least $2,000 for at least one year prior to submitting the proposal and represent to the Company that the holder intends to hold those shares of common stock, throughhas informed the dateCompany that they plan to present the following proposal at the meeting.
Proposal 7 – Annual Lobbying Report
Whereas, we believe in full disclosure of NiSource’s lobbying activities and expenditures to assess whether its lobbying is consistent with its expressed goals and stockholders’ interests.
Resolved, the stockholders of NiSource request the preparation of a report, updated annually, disclosing:
| ■ | Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. |
| ■ | Payments by NiSource used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient. |
| ■ | NiSource’s membership in and payments to any tax-exempt organization that writes and endorses model legislation. |
| ■ | Description of management’s and the Board’s decision-making process and oversight for making payments described in sections 2 and 3 above. |
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the 2016communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which NiSource is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.
The report shall be presented to the Nominating and Governance Committee and posted on NiSource’s website.
Supporting Statement
NiSource spent $3,307,000 from 2019 – 2021 on federal lobbying. This does not include state lobbying, where NiSource also lobbies, for example drawing attention for lobbying on a bill blocking cities from banning natural gas in Ohio.
Companies can give unlimited amounts to third party groups that spend millions on lobbying and undisclosed grassroots activity. NiSource discloses its trade associations where a portion of dues had been used to lobby, disclosing lobbying amounts exceeding $25,000, leaving disclosure gaps.
| ■ | NiSource is leaving out all dues lobbying amounts falling below $25,000. |
| ■ | Disclosing only dues leaves a loophole to make additional payments that would not be disclosed under a “dues” disclosure policy. |
| ■ | NiSource’s disclosure leaves out the Chamber of Commerce, which has spent $1.8 billion lobbying since 1998, despite listing an executive as serving on its Taxation Committee. |
| ■ | And NiSource does not disclose its contributions to groups which write and endorse model legislation, such as sponsoring the American Legislative Exchange Council. |
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PROPOSAL 7 – STOCKHOLDER PROPOSAL REQUESTING THAT WE PUBLISH AN ANNUAL LOBBYING REPORT
NiSource’s lack of disclosure presents legal and reputational risks when it hides payments to third-party groups. Highlighting these risks, peer FirstEnergy was fined $230 million for funneling $60 million through a third-party group in an Ohio bribery scandal. S&P notes the Ohio scandal has increased “scrutiny of how utilities use ‘dark money’ groups.” And NiSource’s Ohio lobbying has recently drawn scrutiny amid a record-high rate increase request, with scandals reportedly clouding trust in Ohio’s utility regulation commission.
We urge NiSource to expand its lobbying disclosure.
Board of Directors’ Statement in Opposition
Your Board of Directors unanimously recommends a vote AGAINST this proposal.
Our Board believes that participating in the political process in a transparent manner is an important way to enhance stockholder value and promote good corporate citizenship. Our engagement with policymakers and regulators is guided by a commitment to ensuring our participation is open, transparent, and clear to all of our stakeholders.
Our Board is committed to transparency in all areas of our business, including our public policy activities and lobbying expenditures. The Political Engagement page of our website already contains much of the information requested by the proposal. Our Board therefore believes the report requested by this proposal is not in the best interests of the Company and its stockholders and recommends a vote AGAINST this proposal for the following reasons.
The Company Already Publishes Transparent and Extensive Political Engagement Disclosures
The Political Engagement page of our website includes robust and detailed disclosures, including:
1.
| Our policies and procedures regarding our political engagement activities. |
2.
| List of trade associations, independent organizations, and other tax-exempt groups that receive contributions from the Company and engage in lobbying activities, updated annually. |
3.
| Description of our governance process and oversight of political engagement activities. |
Additionally, in compliance with applicable laws, the Company discloses a significant amount of information in publicly available filings. We file all required state and federal lobbying reports and these are publicly available.
The Company Maintains Robust Board Oversight of Political Engagement
The Company’s political and advocacy activities are managed by our President and Chief Executive Officer and the Environmental, Social, Nominating and Governance Committee of the Board, who are responsible for overseeing and, at least annually, reviewing corporate and business unit political spending. The Presidents of each of the NiSource operating companies review and approve all corporate political spending in their states. All indirect political spending is also approved by a member of the executive leadership team.The Company does not contribute corporate funds to federal candidates. Such contributions may be made only by the NiSource Inc. Political Action Committee (“NiPAC”), a non-profit entity that solicits voluntary contributions from eligible employees in compliance with applicable law. NiPAC contributes to the campaigns of federal and state candidates, where permissible, and files required reports with the Federal Election Commission and various state and local election commissions. Reports filed with the Federal Election Commission are publicly available.
Further, the Code of Business Conduct makes clear that the Company’s political spending reflects its business interests and is not based on the personal interests or political preference of any individual officer, director, or employee. Therefore, the Board believes that existing oversight and transparency (described below) meet or exceed any legal requirements and provide stockholders with substantial visibility into the Company’s political engagement activities and management and oversight practices. The Board does not believe that additional detailed disclosures would be beneficial to stockholders.
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PROPOSAL 7 – STOCKHOLDER PROPOSAL REQUESTING THAT WE PUBLISH AN ANNUAL LOBBYING REPORT
Our Transparency and Current Disclosures Regarding Lobbying and Political Activities Meet or Exceed any Legal Requirements
The Company believes that transparency in its lobbying expenditures and political activities is important and provides both required and voluntary disclosures with respect to its lobbying expenditures and political activities. In addition, the Company regularly reviews its disclosures relating to political activities and believes these disclosures are aligned with those of its peers. As such, the Board does not believe that the additional detailed disclosures contemplated by this proposal would be beneficial to stockholders.
The Company participates in the policymaking process by informing public officials about our positions on issues significant to our customers and other stakeholders and our business. These issues are discussed in the context of existing and proposed laws, legislation, regulations, and policy initiatives. Related to these discussions, the Company files required federal Lobbying Disclosure Act reports with Congress and complies with all state requirements. These reports are publicly available and provide the Company’s federal lobbying activities and expenses for the preceding quarter. These reports include information regarding the Company’s total federal lobbying expenditures, the issue that was the topic of communication, disclosure of the Company individuals who act as lobbyists on behalf of the Company, and identification of the legislative body or executive branch agency that was contacted.
In addition, the Company is a member of certain trade associations and coalitions that the company believes can assist us in achieving our long-term strategic objectives, and it participates in organizations that represent industries relevant to our business and that work on issues that align with the Company’s top priorities. Some of the trade associations and organizations engage in lobbying and policy advocacy. The Company voluntarily reports each U.S. trade association that has received material contributions (i.e., more than $25,000) from the Company in the most recently completed year.
Further, the Company posts information about political expenditures by the Company and disbursements by NiPAC, and describes policies and procedures for Company political contributions. All such policies and voluntary reports are available on the Company’s website at https://www.nisource.com/company/political-engagement.
Given the depth and breadth of our existing disclosures and frequency of our updates to our stockholders and the public about our public policy activities, our Board believes that the report requested by this proposal would not provide substantial additional information to our stockholders.
Summary
The Company is transparent about its direct and indirect lobbying activities, public policy priorities and strategies, political contributions, and trade association memberships. This transparency allows our stockholders and other stakeholders to evaluate the Company’s positions for consistency with the Company’s expressed goals and stockholder interests. Therefore, we believe the adoption of this proposal and the preparation of the requested report is unnecessary and not in the best interests of the Company and its stockholders.
Vote Required
If this proposal is properly presented at the meeting, approval requires the affirmative vote of a majority of the shares present at the virtual Annual Meeting. Any suchMeeting or represented by proxy, and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted AGAINST the stockholder proposal. Abstentions will have the same effect as a vote against the proposal. We believe brokers will not have discretionary authority to vote on this proposal, must meetso there could be broker non-votes.
THE BOARD BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST INTERESTS OF STOCKHOLDERS AND RECOMMENDS A VOTE “AGAINST” THIS PROPOSAL.
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Our Audit Committee consists of Messrs. Bunting and Butler and Mss. Barbour and Lee. Each member of the Audit Committee is independent as defined by the applicable NYSE and SEC rules and meets the additional independence standard set forth by the Board in the Corporate Governance Guidelines. Each member of the Audit Committee also is “financially literate” for purposes of applicable NYSE rules. The Board has determined that Mr. Bunting, the Chair of the Audit Committee, and Mss. Barbour and Lee are each an “audit committee financial expert” as defined by SEC rules.
The Audit Committee is responsible for, among other things, assisting the Board in monitoring the integrity of our financial statements; reviewing the qualifications and independence of our independent registered public accounting firm; overseeing the performance of our internal audit function and independent registered public accounting firm; and reviewing our risk assessment process. The Audit Committee has the sole authority to appoint, retain or replace the independent registered public accounting firm and is directly responsible for the compensation and oversight of the work of the independent registered public accounting firm for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent registered public accounting firm reports directly to the Audit Committee.
In the performance of its responsibilities, the Audit Committee met regularly with the members of our internal audit function and Deloitte, our independent registered public accounting firm, with and without management present, to discuss the results of its examinations, evaluations of our internal controls, and the overall quality of our financial reporting. In addition, the Audit Committee Chair and members of the Audit Committee met with Deloitte on a recurring basis to discuss the audit process, accounting and internal control matters, among other things. The Audit Committee also met regularly with management to discuss accounting, auditing, internal control, financial reporting, earnings and risk management matters. During these meetings, the Audit Committee reviewed and discussed, among other items, the audited consolidated financial statements, the unaudited interim financial statements, significant accounting policies applied by us in our financial statements and non-GAAP financial measures, with management and Deloitte. The Audit Committee also discussed with, and received regular status reports from, our internal audit function and Deloitte on the overall scope and plans for their audits, including the scope and plans for evaluating the effectiveness of internal controls over financial reporting.
The Audit Committee has discussed with Deloitte the matters required to be discussed by the applicable requirements of
Rule 14a-8 under the
Exchange ActPublic Company Accounting Oversight Board (the “PCAOB”) and
all other rulesthe SEC. The Audit Committee also has received the written disclosures and the letter from Deloitte required by the applicable requirements of the
SEC relatingPCAOB regarding the independent registered public accounting firm’s communications with audit committees concerning independence and has discussed with Deloitte its independence. The Audit Committee has considered whether Deloitte’s provision of non-audit services to
stockholder proposals.Any holder of common stock who wishesus is compatible with maintaining Deloitte’s independence. In reliance on the review and discussions referred to nominate a director atabove, the 2016Audit Committee recommended to the Board that the audited consolidated financial statements be included in our Annual Meeting must file a notice of the nomination no earlier than January 11, 2016, and no later than February 10, 2016. Our Bylaws require that a notice to nominate an individual as a director include the name of each nominee proposed, the number and class of shares of each class of Company stock beneficially owned by the nominee, such other information concerning the nominee as would be required under the rules of the SEC in a proxy statement soliciting proxiesReport on Form 10-K for the election of the nominee, the nominee’s signed consentyear ended December 31, 2022.
The Audit Committee has appointed Deloitte to serve as a directorour independent registered public accounting firm for the year ending December 31, 2022. In determining whether to reappoint Deloitte, the Audit Committee took into consideration various factors, including the historical and recent performance of Deloitte on the audit; the professional qualifications of the Company if elected, the nominating stockholder’s name and address,firm and the numberlead audit partner; the quality of ongoing discussions with Deloitte; the results of an internal survey of Deloitte’s service and classquality; the appropriateness of sharesfees; and evidence supporting the firm’s independence, objectivity and professional skepticism. Although the Audit Committee has sole authority to appoint the independent registered public accounting firm, the Audit Committee has recommended that the Board seek stockholder ratification of each classthe appointment at the Annual Meeting as a matter of stock beneficially ownedgood corporate governance.
| | | |
| | | | | Audit Committee | |
| | | | | | |
| | | | | Theodore H. Bunting, Jr., CPA, Chair | |
| | | | | Sondra Barbour | |
| | | | | Eric L. Butler | |
| | | | | Cassandra Lee, CPA | |
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES The following table represents the aggregate fees for professional services billed by Deloitte for the fiscal years ended December 31, 2022 and 2021.
| | Audit Fees(1) | | | $5,395,170 | | | $4,691,000 | |
| | Audit-Related Fees(2) | | | 442,294 | | | 516,041 | |
| | Tax Compliance(3) | | | — | | | — | |
| | Tax Advice and Tax Planning(4) | | | — | | | 43,437 | |
| | All Other Fees(5) | | | 13,584 | | | 101,649 | |
(1)
| Audit Fees — Fees for professional services performed by Deloitte for the audit of our annual financial statements in our Annual Report on Form 10-K and review of financial statements included in our Quarterly Report on Form 10-Q filings and services that are normally provided in connection with statutory and regulatory filings or engagements. |
(2)
| Audit-Related Fees — Fees for the assurance and related services performed by Deloitte that are reasonably related to the performance of the audit or review of our financial statements. These fees included services provided by Deloitte in connection with the audit of our benefit plans. |
(3)
| Tax Compliance — Fees for professional services performed by Deloitte with respect to tax compliance. |
(4)
| Tax Advice and Tax Planning — Fees for professional services performed by Deloitte with respect to tax advice and tax planning. |
(5)
| All Other Fees — Fees for permissible work performed by Deloitte that does not fit within the above categories. |
Pre-Approval Policies and Procedures. During 2022, the Audit Committee approved all audit, audit-related and non-audit services provided to us by Deloitte prior to management engaging the independent registered public accounting firm for those purposes. The Audit Committee’s current practice is to consider for pre-approval annually all audit, audit-related and non-audit services proposed to be provided by our independent registered public accounting firm for the year. Additional fees for other proposed audit-related or non-audit services (not within the scope of the approved audit engagement) which have been properly presented to the Pre-Approval Subcommittee of the Audit Committee (consisting of Theodore H. Bunting, Jr.) by our Vice President and Chief Accounting Officer may be considered and, if appropriate, approved by the nominating stockholder.Pre-Approval Subcommittee of the Audit Committee, subject to later ratification by the full Audit Committee. In no event, however, will any non-audit service be approved by the Pre-Approval Subcommittee that would result in the independent registered public accounting firm no longer being considered independent under the applicable SEC rules. In appointing Deloitte as our independent registered public accounting firm, the Audit Committee has considered whether the provision of the non-audit services rendered by Deloitte is compatible with maintaining the firm’s independence.
DELINQUENT SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE16(A) REPORTS
Based
solely upon ouron a review of
reports filed with the
Forms 3, 4SEC and
5 furnished to the Company pursuant towritten representations that no other reports were required under Section 16(a) of the Exchange Act, we believe that all of our directors, officers and beneficial owners of more than 10% of
the Company’sour common stock
filedwho are required to file such reports did file all such reports on a timely basis during
2014.2022, except that Gunnar Gode’s disposition of 1,224 shares to satisfy his tax withholding obligations in connection with the vesting of an award of restricted stock units on August 10, 2022 was reported after the filing deadline on a Form 5 filed on January 4, 2023. This delinquent filing was due to an administrative error.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 2024 ANNUAL MEETING Stockholders may submit proposals appropriate for stockholder action at the 2024 Annual Meeting consistent with the requirements of Rule 14a-8 under the Exchange Act, all other rules of the SEC relating to stockholder proposals and our Bylaws. Written notice containing the required information should be addressed to the attention of our Corporate
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Secretary at NiSource Inc., 801 E. 86th Avenue, Merrillville, Indiana 46410. For your proposal to be considered for inclusion in our proxy statement in connection with the 2024 Annual Meeting, we must receive your written proposal no later than December [■], 2023.
Stockholder proposals not intended to be included in our proxy statement (including director nominations) may be brought before the 2024 Annual Meeting by filing a notice of stockholder’s intent to do so no earlier than January 24, 2024, and no later than February 23, 2024. The notice must include all of the information required to be set forth in any such notice by our Bylaws.
Stockholders who intend to submit director nominees for inclusion in our proxy materials for the 2024 Annual Meeting must comply with the requirements of proxy access as set forth in our Bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to us no earlier than November [■], 2023, and no later than December [■], 2023.
In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules (once effective), stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 24, 2023.
If you would like a copy of our Bylaws, please contact our Corporate Secretary at the above address or access our Bylaws filed with the SEC as Exhibit 3.1 to our Current Report on Form 8-K filed on August 10, 2022. Failure to comply with our Bylaw procedure and deadlines may preclude presentation and consideration of the matter or of the proposed nominee for election at the 2024 Annual Meeting.
FORM 10-K, ANNUAL REPORT AND FINANCIAL STATEMENTS
Attention is directed to the financial statements contained in the Company’s Annual Report for the year ended December 31, 2014. A copy of the Annual Report has been sent, or is concurrently being sent, to all stockholders of record as of March 16, 2015. These statements and other reports filed with the SEC are available through our website atwww.nisource.com/financials.cfm.
AVAILABILITY OF FORM 10-K
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014,2022, including the financial statements and the financial statement schedules, but without exhibits, is contained within the Company’sour Annual Report which has been sent, or is concurrently being sent, to you and is available on our website at https://www.nisource.com/filings. We will mail a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, including the financial statements and the financial statement schedules, but without exhibits, free of charge to any stockholder upon written request to Robert E. Smith,NiSource Inc., c/o Corporate Secretary, 801 East 86th Avenue, Merrillville, Indiana 46410.
AVAILABILITY OF PROXY MATERIALS In accordance with SEC rules, we are using the internet as our primary means of furnishing proxy materials to stockholders. Consequently, most stockholders will not receive paper copies of our proxy materials. We will instead send these stockholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our Proxy Statement and Annual Report for the year ended December 31, 2022, and voting via the internet. The Notice of Internet Availability of Proxy Materials also provides information on how stockholders may obtain paper copies of our proxy materials if they so choose. This makes the proxy distribution process more efficient and less costly and helps conserve natural resources. If you previously elected to receive our proxy materials electronically, these materials will continue to be sent via email unless you change your election.
MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS — “HOUSEHOLDING” The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,” may potentially provide extra convenience for stockholders and cost savings for companies or the intermediary.
You may receive proxy materials through an intermediary who uses householding to deliver proxy materials. If so, a single copy of the proxy materials, including the Notice of Internet Availability of Proxy Materials, may be delivered to
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multiple stockholders sharing an address unless the affected stockholder provides contrary instructions. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If this applies to you and you would prefer to receive separate copies of the proxy materials, including the Notice of Internet Availability of Proxy Materials, please notify your broker that you no longer wish to participate in householding. Additionally, you may direct your written request for a copy of the proxy materials to NiSource Inc.,
c/o Corporate Secretary, 801
E. 86thEast 86th Avenue, Merrillville, Indiana 46410, or you may request a copy by telephone at (877) 647-5990. If your broker is not currently householding (i.e., you received multiple copies of our Notice of Availability of Proxy Materials), and you would like to request delivery of a single copy, you should contact your broker and find out if this option is also available on our website atwww.nisource.com/annuals.cfm.to you.
The Board
of Directors does not intend to bring any other matters before the Annual Meeting
and does not know of any matters that will be brought before the meeting by others.other than those described in this Proxy Statement. If any
other matters
do properly come before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote the proxy in accordance with their judgment on such matters.
Whether or not you plan to attend the
virtual Annual Meeting, you can be sure your shares are represented at the meeting by submitting your completed proxy by telephone, through the Internet or by promptly marking, dating, signing and returning the enclosed proxy card.
| | | | | BY ORDER OF THE BOARD OF DIRECTORS | |
| | | | | | |
| | | | | Kimberly S. Cuccia | |
| | | | | Senior Vice President, General Counsel and | |
| | | | | Corporate Secretary | |
| | Dated: April [■] , 2023 | | | | |
Cautionary Note Regarding Forward-Looking Information
This Proxy Statement contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “predicts,” “assumes,” “goal” and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. These forward-looking statements are subject to various factors that could cause actual results to differ materially from the results anticipated in these statements. These factors include, but are not limited to, those discussed in the “FORWARD-LOOKING STATEMENTS AND INFORMATION” and “RISK FACTORS” sections of Annual Report on Form 10-K for the year ended December 31, 2022 as updated in subsequent reports we file with the SEC. We have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. References to our website or other links to our publications or other information are provided for the convenience of our stockholders. None of the information or data included on our websites or accessible at these links is incorporated into, and will not be deemed to be a part of, this Proxy Statement or any of our other filings with the SEC.
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TABLE OF THE BOARDCONTENTS
APPENDIX A TO PROXY STATEMENT
RECONCILIATION OF
DIRECTORS
Robert E. Smith
Corporate Secretary
Dated: April 7, 2015
CONSOLIDATED NET INCOME AVAILABLE TO COMMON SHAREHOLDERS TO NET OPERATING EARNINGS AVAILABLE TO COMMON SHAREHOLDERS
Schedule 1 - Reconciliation of Consolidated Net Income Available to Common Shareholders to Net Operating Earnings Available to Common Shareholders (Non-GAAP) (unaudited)
| | GAAP Net Income Available to Common Shareholders | | | $749.0 | | | $529.8 | | | $(72.7) | |
| | Adjustments to Operating Income:
| | | | | | | | | | |
| | Operating Revenues:
| | | | | | | | | | |
| | Weather - compared to normal | | | (24.9) | | | 1.2 | | | 24.0 | |
| | FAC adjustment(1) | | | 8.0 | | | — | | | | |
| | Massachusetts Business transaction revenue | | | | | | | | | (9.0) | |
| | Operating Expenses:
| | | | | | | | | | |
| | Greater Lawrence Incident(1) | | | — | | | 9.2 | | | 16.7 | |
| | Plant retirement costs(2) | | | — | | | 14.1 | | | 4.6 | |
| | NiSource Next initiative(2) | | | 3.3 | | | 24.7 | | | 45.8 | |
| | Massachusetts Business related amounts(3) | | | (105.0) | | | 6.8 | | | 400.3 | |
| | Gain on sale of assets, net | | | | | | | | | (1.8) | |
| | Total adjustments to operating income | | | (118.6) | | | 56.0 | | | 480.6 | |
| | Other Income (Deductions):
| | | | | | | | | | |
| | Interest rate swap settlement gain | | | (10.0) | | | — | | | | |
| | Loss on early extinguishment of long-term debt | | | | | | | | | 243.5 | |
| | Income Taxes:
| | | | | | | | | | |
| | Income taxes - discrete items | | | | | | | | | 47.9 | |
| | Tax effect of above items(4) | | | 27.8 | | | (14.6) | | | (191.8) | |
| | Total adjustments to net income (loss) | | | (100.8) | | | 41.4 | | | 580.2 | |
| | Net Operating Earnings Available to Common Shareholders (Non-GAAP) | | | $648.2 | | | $571.2 | | | 507.2 | |
| | Diluted Average Common Shares | | | 442.7 | | | 417.3 | | | 385.3 | |
| | GAAP Diluted Earnings Per Share | | | $1.70 | | | $1.27 | | | $(0.19) | |
| | Adjustments to diluted earnings per share | | | (0.23) | | | 0.10 | | | 1.51 | |
| | Non-GAAP Diluted Net Operating Earnings Per Share(5) | | | $1.47 | | | $1.37 | | | $1.32 | |
(1)
| Represents fuel costs deemed over-collected from customers through the FAC mechanism and ordered to be refunded to customers. |
(2)
| Represents incremental severance and third-party consulting costs incurred in connection with the NiSource Next initiative. |
(3)
| 2022 represents proceeds from a property insurance settlement related to the Greater Lawrence Incident. 2021 primarily represents final net working capital adjustments to the purchase price for the loss incurred on the sale of the Massachusetts Business. |
(4)
| Represents income tax expense calculated using the statutory tax rates by legal entity. |
(5)
| The Non-GAAP diluted NOEPS numerator is equal to net operating earnings available to common shareholders adjusted for add-backs for interest expense incurred, net of tax, related to Series A Equity Unit purchase contracts. The add-backs for the three months ended December 31, 2022 and 2021 were $0.5M and $0.6M, respectively.The add-back for the twelve months ended December 31, 2022 and 2021 were $2.0M and $1.6M, respectively. |
2023 Proxy Statement | A-1
EXHIBIT ATABLE OF CONTENTS
ProposedAPPENDIX B TO PROXY STATEMENT CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NISOURCE INC.
NiSource Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: that this Certificate of Amendment to Section A.4amends the provisions of the Corporation’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware, as amended (the “Amended and Restated Certificate of Incorporation”).
SECOND: that the first paragraph of Article IV of the Amended and Restated Certificate of Incorporation of NiSource Inc.Section A.4 of Article IV of the Company’s Amended and Restated Certificate of Incorporation will be replaced in its entirety by the following revised Section A.4 of Article IV:
Any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Exceptis hereby amended as otherwise required by law and subject to the rights of the holders of any class or any series of Preferred Stock, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of thefollows:
“The total number of authorized directors (whether or not there exist any vacanciesshares of all classes of stock which the Corporation shall have authority to issue is seven hundred seventy million (770,000,000), of which twenty million (20,000,000) shares of the par value $.01 each are to be of a class designated Preferred Stock and seven hundred fifty million (750,000,000) shares of the par value of $.01 each are to be of a class designated Common Stock.”
THIRD: that the foregoing amendment was duly adopted in previously authorized directorships at the time any such resolution is presented to the Board for adoption) or, subject toaccordance with the provisions of the BylawsSection 242 of the General Corporation upon the written request of stockholdersLaw of the Corporation holding no less than twenty-five percentState of the shares of Common Stock issued and outstanding.EXHIBIT B
Proposed Amendment to Section A.1 of Article VDelaware.
FOURTH: All other provisions of the Amended and Restated Certificate of Incorporation of NiSource Inc.Section A.1 of Article V of the Company’s Amended and Restated Certificate of Incorporation will be replaced in its entirety by the following revised Section A.1 of Article V:
The Board of Directors shall consist of not less than seven (7) or more than twelve (12) persons, the exact number to be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption), provided, however, this provision shall not act to limit Board size in the event the holders of one or more series of Preferred Stock are entitled to elect directors to the exclusion of holders of Common Stock. Each director who is serving as a director on the date of this Amended and Restated Certificate of Incorporation shall hold office until the next annual meeting of stockholders following such date and until his or her successor has been duly elected and qualified, notwithstanding that such director may have been elected for a term that extended beyond the date of such next annual meeting of stockholders. At each annual meeting of the stockholders of the Corporation after the date of this Amended and Restated Certificate of Incorporation, directors elected at such annual meeting shall hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified.
EXHIBIT C
NISOURCE INC.
2010 OMNIBUS INCENTIVE PLAN
NISOURCE INC.
2010 OMNIBUS INCENTIVE PLAN
TABLE OF CONTENTS
| | | | | | |
| | | | Page | |
I.
| | Establishment, Purpose, Duration | | | C-1 | |
II.
| | Definitions | | | C-1 | |
III.
| | Administration | | | C-5 | |
IV.
| | Stock Subject to the Plan | | | C-7 | |
V.
| | Eligibility and Participation | | | C-8 | |
VI.
| | Options | | | C-8 | |
VII.
| | Stock Appreciation Rights | | | C-9 | |
VIII.
| | Restricted Stock and Restricted Stock Units | | | C-10 | |
IX.
| | Performance Shares | | | C-11 | |
X.
| | Performance Units | | | C-11 | |
XI.
| | Cash-Based Awards | | | C-12 | |
XII.
| | Other Stock-Based Awards | | | C-13 | |
XIII.
| | Awards Under the Plan; Code Section 162(m) | | | C-13 | |
XIV.
| | Dividend Equivalents | | | C-14 | |
XV.
| | Beneficiary Designation | | | C-14 | |
XVI.
| | Change in Control | | | C-15 | |
XVII.
| | Deferrals | | | C-15 | |
XVIII
| | Withholding | | | C-16 | |
XIX
| | Compliance With Code Section 409A | | | C-16 | |
XX.
| | Amendment and Termination | | | C-17 | |
XXI
| | Miscellaneous | | | C-17 | |
C-i
NISOURCE INC.
2010 Omnibus Incentive Plan
Article I
Establishment, Purpose, Duration
Section 1.1Establishment of the Plan. NiSource Inc. (formerly NIPSCO Industries, Inc.) (the “Company”) adopted the NIPSCO Industries, Inc. 1994Long-Term Incentive Plan effective April 13, 1994, which was later amended and restated effective April 14, 1999, and renamed the NiSource Inc. 1994Long-Term Incentive Plan (the “LTIP”). The LTIP has been amended from time to time, with the most recent amendment and restatement effective January 14, 2009.
In addition, the Company adopted the NiSource Inc. Nonemployee Director Stock Incentive Plan (formerly the NIPSCO Industries, Inc. Nonemployee Director Stock Incentive Plan), effective February 1, 1992, as amended effective December 16, 1997 and February 1, 1998 (the “Director Stock Plan”). The Company also adopted the NiSource Inc. Nonemployee Director Restricted Stock Unit Plan (formerly the NIPSCO Industries, Inc. Nonemployee Director Restricted Stock Unit Plan) effective January 1, 1999 (the “Director Stock Unit Plan”). The Company merged the Director Stock Plan and the Director Stock Unit Plan into a single document, effective July 1, 2002 (the “Director Incentive Plan”). The Director Incentive Plan has been amended from time to time, with the most recent amendment and restatement effective May 13, 2008.
Finally, the Company adopted the NiSource Inc. Corporate Incentive Plan (the “Corporate Incentive Plan”) to provide annual cash awards to employees of the Company.
The Company replaced the Prior Plans with one incentive plan document called the NiSource Inc. 2010 Omnibus Incentive Plan upon stockholder approval at the 2010 annual meeting. On October 21, 2013, the Committee amended the Plan to provide authority to grant Awards that contain eithersingle-trigger or double-trigger vesting in the event of a Change in Control, as the Committee deems appropriate, instead of requiring only single trigger vesting. Each of the Prior Plans will continue to remain effective with respect to awards granted under each Prior Plan. Since stockholder approval of this Plan, no new awards have been granted under the Prior Plans, and no new awards will be granted under the Prior Plan. New Awards will continue to be granted under this Plan.
Section 1.2Purpose. The Plan is designed to promote the achievement of both short-term and long-term objectives of the Company by (a) aligning compensation of Participants with the interests of Company stockholders, (b) enhancing the interest of Participants in the growth and success of the Company, and (c) attracting and retaining Participants of outstanding competence.
Section 1.3Effective Date and Duration. This Plan, if reapproved by a majority of the votes cast by Company stockholders at the May 2015 annual meeting shall be renewed effective at such date and shall remain in effect, subject to the right of the Board or the Committee to amendfull force and terminate the Plan at any time as provided in this Plan, until all Shares subject to it shall have been purchased or acquired according to the Plan’s provisions. In no event, however, may an Award be granted under the Plan more than ten years after the date the Plan was approved by the stockholders.
effect. 2023 Proxy Statement | B-1
Article II
Definitions
Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
Section 2.1162(m) Award. “162(m) Award” means an Award that is intended to be deductible as “performance-based compensation” under Code Section 162(m).
Section 2.21934 Act. “1934 Act” means the Securities Exchange Act of 1934, as amended.
Section 2.3Affiliate. “Affiliate” means any entity that is a Subsidiary or a parent corporation, as defined in Code Section 424(e), of the Company, or any other entity designated by the Committee as covered by the Plan in which the Company has, directly or indirectly, at least a 20% voting interest.
Section 2.4Award. “Award” means any Option, SAR, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award, or other Article XII stock-based award granted to a Participant under the Plan.
Section 2.5Award Agreement. “Award Agreement” means a written or electronic statement or agreement prepared by the Company that sets forth the terms, conditions and restrictions applicable to Awards granted under the Plan.
Section 2.6Board or Board of Directors. “Board” or “Board of Directors” means the Board of Directors of the Company.
Section 2.7Cash-Based Award. “Cash-Based Award” means an Award granted to a Participant, as described in Article XI herein.
Section 2.8Cause. “Cause,” unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement, shall be as defined in any employment agreement between the Company and a Participant; provided however, that if there is no such employment agreement, “Cause” shall mean any of the following: (a) the Participant’s conviction of any criminal violation involving dishonesty, fraud or breach of trust; (b) the Participant’s willful engagement in any misconduct in the performance of his or her duty that materially injures the Company; (c) the Participant’s performance of any act which would materially and adversely impact the business of the Company; or (d) the Participant’s willful and substantial nonperformance of assigned duties. Notwithstanding the foregoing, the Committee shall have sole discretion with respect to the application of the provisions ofsubsections (a)-(d) above, and such exercise of discretion shall be conclusive and binding upon the Participant and all other persons.
Section 2.9CEO. “CEO” means the Chief Executive Officer of the Company.
Section 2.10CEO’s Pool. “CEO’s Pool” means the portion of Shares available for Awards under this Plan that the Committee reserves for the CEO in accordance with Article IV of the Plan.
Section 2.11Change in Control. “Change in Control” means the occurrence of either a “Change in Ownership,” “Change in Effective Control” or a “Change of Ownership of a Substantial Portion of Assets,” as defined below:
| (a) | Change in Ownership. A Change in Ownership of the Company occurs on the date that any one person, or more than one Person Acting as a Group (as defined below), acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company. However, if any one person or more than one Person Acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Ownership of the Company (or to cause a Change in Effective Control of the Company). An increase in the percentage of stock owned by any one person, or Persons Acting as a Group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock. This subsection (a) applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction. |
| (b) | Change in Effective Control. A Change in Effective Control of the Company occurs on the date that either — |
| (i) | any one person, or more than one Person Acting as a Group, acquires (or has acquired during the12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or |
| (ii) | candidates are elected to the Board who were not recommended for election by the current Board, if such candidates constitute a majority of those elected in that particular election (for this purpose, recommended directors will not include any candidate who becomes a member of the Board as a result of an actual or threatened election contest or proxy or consent solicitation on behalf of anyone other than the Board or as a result of any appointment, nomination, or other agreement intended to avoid or settle a contest or solicitation). |
In the absence of an event described in paragraph (i) or (ii), a Change in Effective Control of the Company shall not have occurred.
| (c) | Acquisition of additional control. If any one person, or more than one Person Acting as a Group, is considered to effectively control the Company, the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Effective Control of the Company (or to cause a Change in Ownership of the Company). |
| (d) | Change of Ownership of a Substantial Portion of Assets. A Change of Ownership of a Substantial Portion of Assets occurs on the date that any one person, or more than one Person Acting as a Group, acquires (or has acquired during the12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. |
| (e) | Transfers to a related person. There is no Change in Control when there is a transfer to an entity that is controlled by the stockholders of the Company immediately after the transfer. A transfer of assets by the Company is not treated as a Change of Ownership of a Substantial Portion of Assets if the assets are transferred to — |
| (i) | a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; |
| (ii) | an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company; |
| (iii) | a person, or more than one Person Acting as a Group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or |
| (iv) | an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii) next above. |
A person’s status is determined immediately after the transfer of assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is amajority-owned subsidiary of the Company after the transaction is not treated as a Change of Ownership of a Substantial Portion of Assets of the Company.
| (f) | Persons Acting as a Group. Persons shall not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such stockholder is considered to be acting as a group with other stockholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. |
Section 2.12Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.
Section 2.13Committee. “Committee” means the Officer Nomination and Compensation Committee of the Board of Directors, or such other committee as the Board shall appoint from time to time, which shall consist of two or more directors all of whom are intended to satisfy the requirements for an “outside director” under Code Section 162(m), a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act, and an “independent director” under the rules of the New York Stock Exchange (or any other national securities exchange which is the principal exchange on which the Shares may then be traded); provided, however, that as to any Award intended to be a 162(m) Award, if any member of the Officer Nomination and Compensation Committee shall not satisfy such “outside director” requirements, “Committee” means a subcommittee (of two or more persons) of the Officer Nomination and Compensation Committee consisting of all members thereof who satisfy such “outside director” requirement; and further provided that any action taken by the Committee shall be valid and effective whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership specified above.
Section 2.14Company. “Company” means NiSource Inc., a Delaware corporation, or any successor thereto.
Section 2.15Corporate Incentive Plan. “Corporate Incentive Plan” means the NiSource Inc. Corporate Incentive Plan, as described in Article I.
Section 2.16Covered Officer. “Covered Officer” means a Participant who, in the sole judgment of the Committee, may be treated as a “covered employee” under Code Section 162(m) at the time income is recognized by such Participant in connection with an Award that is intended to qualify as a 162(m) Award.
Section 2.17Director Incentive Plan. “Director Incentive Plan” means the single plan document resulting from the merger of the Director Stock Plan and the Director Stock Unit Plan, effective July 1, 2002, as described in Article I.
Section 2.18Director Stock Plan. “Director Stock Plan” means NiSource Inc. Nonemployee Director Stock Incentive Plan, as described in Article I.
Section 2.19Director Stock Unit Plan. “Director Stock Unit Plan” means the NiSource Inc. Nonemployee Director Restricted Stock Unit Plan, as described in Article I.
Section 2.20Disability or Disabled. “Disability” or “Disabled” means a condition that (a) causes the Participant to be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (b) causes the Participant, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, to receive income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its Affiliates or (c) causes the Participant to be eligible to receive Social Security disability payments. The Committee, in its sole discretion, shall determine the date of any Disability.
Section 2.21Employee. “Employee” means any person who is an employee of the Company or any Affiliate; provided, however, that with respect to ISOs, “Employee” means any person who is considered an employee of the Company or any Affiliate for purposes of Treasury Regulation Section 1.421-1(h).
Section 2.22Fair Market Value. “Fair Market Value” means, on any given date and as may be specified in an Award Agreement, (a) the closing sales price per share (or, if otherwise specified by the Committee, a price that is based on the opening, actual, high, low, or average sales prices per Share) of the Company’s common stock as reported on the New York Stock Exchange or such other established securities market on which the Shares are traded, or, if there were no reported sales of Shares on such date, then, unless otherwise required under the Code, the business day immediately preceding such date; or (b) if (a) does not apply, the price that the Committee in good faith determines through any reasonable valuation method that a Share might change hands between a willing buyer and a willing seller, neither being under compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. Notwithstanding the above, for purposes of broker-facilitated cashless exercises of Awards involving Shares under the Plan, “Fair Market Value” shall mean the real-time selling price of such Shares as reported by the broker facilitating such exercises.
Section 2.23Grant Price. “Grant Price” means the price established at the time of grant of an SAR pursuant to Article VII (Stock Appreciation Rights), used to determine whether there is any payment due upon exercise of the SAR, which shall not be less than 100% of the Fair Market Value of the Shares at the time the SAR was granted.
Section 2.24Incentive Stock Option or ISO. “Incentive Stock Option” or “ISO” means an Option that is an “incentive stock option” within the meaning of Code Section 422.
Section 2.25LTIP. “LTIP” means the NiSource Inc. 1994 Long-Term Incentive Plan, as described in Article I.
Section 2.26Nonemployee Director. “Nonemployee Director” means a member of the Board who is not an Employee.
Section 2.27Nonqualified Stock Option or NQSO. “Nonqualified Stock Option” or “NQSO” means an option to purchase Shares that does not constitute an Incentive Stock Option under Code Section 422 (or any successor Code Section).
Section 2.28Option. “Option” means a right to purchase Shares in accordance with the terms and conditions of the Plan.
Section 2.29Option Exercise Price. “Option Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
Section 2.30Participant. “Participant” means an Employee or Non-Employee Director who is selected to receive an Award or who has outstanding an outstanding Award granted under the Plan.
Section 2.31Performance Measure. “Performance Measure” means one or more business criteria to be used by the Committee in establishing Performance Targets for 162(m) Awards under the Plan.
Section 2.32Performance Shares. “Performance Shares” means an Award designated as Performance Shares and granted to a Participant in accordance with Article IX of the Plan.
Section 2.33Performance Target. “Performance Target” means the specific, objective goal or goals that are timely set forth in writing by the Committee for grants of 162(m) Awards under the Plan with respect to any one or more Performance Measures.
Section 2.34Performance Unit. “Performance Unit” means an Award designated as a Performance Unit and granted to a Participant in accordance with Article X of this Plan.
Section 2.35Period of Restriction. “Period of Restriction” means the period during which the transfer of Shares underlying an Award is limited in some way, or the Shares are subject to a substantial risk of forfeiture.
Section 2.36Plan. “Plan” means the NiSource Inc. 2010 Omnibus Incentive Plan, as may be amended from time to time.
Section 2.37Prior Plans. “Prior Plans” means the LTIP, Director Incentive Plan, and the Corporate Incentive Plan.
Section 2.38Restricted Stock. “Restricted Stock” means an Award that is a grant of Shares delivered to a Participant, subject to restrictions described in Article VIII of this Plan.
Section 2.39Restricted Stock Unit or RSU. “Restricted Stock Unit” or “RSU” means an Award that is subject to the restrictions described in Article VIII of this Plan and is a promise of the Company to deliver at the end of a Period of Restrictions (a) one Share for each RSU, (b) cash in an amount equal to the Fair Market Value of one Share for each RSU, or (c) a combination of (a) and (b), as determined by the Committee.
Section 2.40Retirement. “Retirement” means, with respect to Employees, retirement as defined in the Company’s tax-qualified pension plan, unless defined otherwise in an Award Agreement.
Section 2.41Service. “Service” means a Participant’s work for the Company or an Affiliate, either as an Employee or Non-Employee Director.
Section 2.42Shares. “Shares” means the shares of common stock of the Company, $0.01 par value per share.
Section 2.43Stock Appreciation Right or SAR. “Stock Appreciation Right” or “SAR” means an Award designated as an SAR in accordance with the terms of Article VII of the Plan.
Section 2.44Subsidiary. “Subsidiary” means any corporation, partnership, joint venture, or other entity in which the Company has a majority voting interest; provided, however, that with respect to ISOs, the term “Subsidiary” shall include only an entity that qualifies under Code Section 424(f) as a “subsidiary corporation” with respect to the Company.
Section 2.45Tandem SAR. “Tandem SAR” means a SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (with a similar cancellation of the Tandem SAR when a Share is purchased under the Option). Except for the medium of payment, the terms of a Tandem SAR shall be identical in all material respects to the terms of the related Option.
Article III
Administration
Section 3.1Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by
the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. Notwithstanding the foregoing, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to Nonemployee Directors.
Section 3.2Powers of the Committee. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
| (a) | to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of Shares to be subject to each Award; |
| (b) | to determine the type of Award granted; |
| (c) | to determine the Fair Market Value of Shares or other property where applicable; |
| (d) | to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any Shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of Shares pursuant to any Award, (ii) the method of payment for Shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with Award, including by the withholding or delivery of Shares, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any Shares acquired pursuant thereto, (v) the time of the expiration of any Award, (vi) the effect of the Participants termination of Service on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to any Award or Shares acquired pursuant thereto not inconsistent with the terms of the Plan; |
| (e) | to determine how an Award will be settled, as provided under an Award Agreement; |
| (f) | to approve one or more forms of Award Agreement; |
| (g) | to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any Shares acquired upon the exercise thereof; |
| (h) | to accelerate, continue, extend or defer the exercisability of any Award or the vesting of any Shares acquired upon the exercise thereof, including with respect to the period following a Participants termination of Service; |
| (i) | to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted Awards; and |
| (j) | to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law. |
Section 3.3Action by the Committee. A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee, and the act of a majority of the members present at any meeting at which a quorum is present or the act approved in writing by a majority of all the members of the Committee shall be the act of the Committee. In the performance of their duties under this Plan, the Committee members shall be entitled to rely upon information and advice furnished by the Company’s officers, employees, accountants or counsel, or any executive compensation consultant or other professional retained by the Company or the Committee to assist in the administration of this Plan.
Section 3.4Indemnification. No member of the Board or of the Committee shall be liable for any action taken, or determination made, hereunder in good faith. Service on the Committee shall constitute service as a Nonemployee Director of the company so that members of the Committee shall be entitled to indemnification and reimbursement as Nonemployee Directors of the Company, pursuant to the Company’s bylaws.
Article IV
Stock Subject to the Plan
Section 4.1Aggregate Shares. Subject to adjustment as provided under the Plan, the total number of Shares that are available for Awards under the Plan shall not exceed in the aggregate 8,000,000 Shares, plus any Shares subject to outstanding awards granted under a Prior Plan and that expire or terminate for any reason shall be available under this Plan. Any of the authorized Shares may be used for any type of Award under the Plan, and any or all of 8,000,000 Shares may be allocated to Incentive Stock Options. Such Shares may be authorized and unissued Shares, treasury Shares, or Shares acquired on the open market.
Section 4.2Individual Award Limitations. Subject to adjustments as provided in herein, the following rules shall apply to grants of Awards under the Plan to Participants:
| (a) | Options: The maximum aggregate face value (Fair Market Value of a Share of common stock on the date of grant times the number of Options granted) that may be covered by Awards of Options granted in any one fiscal year to any one Participant shall be $12,000,000 per year. |
| (b) | SARs: The maximum aggregate face value (Fair Market Value of a Share of common stock on the date of grant times the number of SARs granted) that may be covered by Awards of SARs granted in any one fiscal year to any one Participant shall be $12,000,000 per year. |
| (c) | Restricted Stock and Restricted Stock Units: The maximum aggregate face value (Fair Market Value of a Share of common stock on the date of grant times either the number of Shares of Restricted Stock granted or number of Shares underlying the RSUs granted) that may be covered by Restricted Stock or Restricted Stock Unit Awards granted to any one Participant shall be $7,000,000 per year. |
| (d) | Performance Shares: The maximum aggregate face value (Fair Market Value of a Share of common stock on the date of grant times the maximum number of Shares that could be earned under the Award) that may be granted to any one Participant shall be $10,000,000 per year. |
| (e) | Performance Units: The maximum aggregate payout (determined as of the end of the applicable performance period) with respect to Performance Units that may be granted to any one Participant shall be $10,000,000 per year. |
| (f) | Cash-Based Awards: The maximum aggregate payout (determined as of the end of the applicable performance period) with respect to Cash-Based Awards to any one Participant shall be $10,000,000 per year. |
| (g) | Other Article XII Stock-Based Awards: The maximum aggregate Fair Market Value (as determined on the date of grant) of Shares subject to the Article XII stock-based Awards that may be granted to any one Participant shall be $10,000,000 per year. |
Section 4.3Share Counting. The following Shares related to Awards will be available for issuance again under the Plan: (a) Shares related to Awards paid in cash and (b) Shares related to Awards that expire, are forfeited, are cancelled, or terminate for any other reason without the delivery of the Shares. Notwithstanding any provision to the contrary, the following Shares related to Awards will be available for issuance again under the Plan: (a) Shares equal in number to the Shares withheld, surrendered or tendered in payment of the exercise price of an Award, including an award granted under the LTIP or Director Incentive Plan, (b) Shares tendered or withheld in order to satisfy tax withholding obligations, (c) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Awards, including awards granted under the LTIP or Director Incentive Plan.
Section 4.4Adjustment to Number of Shares.
| (a) | Appropriate adjustments in the aggregate number of Shares issuable pursuant to the Plan, the number of Shares subject to each outstanding award granted under the Plan, the Option price with respect to Options and Tandem SARs, the specified price of SARs not connected to Options, and the value for Performance Units, shall be made to give effect to any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of Shares, whether through recapitalization, stock split, reverse stock split,spin-off,spin-out or other distribution of assets to stockholders, stock distributions or combinations of Shares, payment of stock dividends, other increase or decrease in the number of such Shares outstanding effected without receipt of consideration by the Company, or any other occurrence for which the Committee determines an adjustment is appropriate. |
| (b) | In the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, or an acquisition by the Company of the stock or assets of any other corporation or corporations, there shall be substituted on an equitable basis, as determined by the Committee in its sole discretion, for each Share then subject to the Plan, and for each Share then subject to an Award granted under the Plan, the number and kind of Shares of stock, other securities, cash or other property to which the holders of Shares of the Company are entitled pursuant to such transaction. |
| (c) | Without limiting the generality of the foregoing provisions of this paragraph, any such adjustment shall be deemed to have prevented any dilution or enlargement of a Participant’s rights, if such Participant receives in any such adjustment, rights that are substantially similar (after taking into account the fact that the Participant has not paid the applicable option price) to the rights the Participant would have received had he exercised his outstanding Award and become a stockholder of the Company immediately prior to the event giving rise to such adjustment. Adjustments under this paragraph shall be made by the Committee, whose decision as to the amount and timing of any such adjustment shall be conclusive and binding on all persons. |
Section 4.5CEO’s Pool of Shares. A portion of the Shares available for Awards under this Plan, to be determined by the Committee, may be reserved for the CEO to make certain Awards (the “CEO’s Pool”). The CEO may grant any type of Award with shares from the CEO Pool; provided however, that the CEO may not grant any Award to any Covered Officers or other executive officers. Awards available for grant from the CEO Pool will be authorized in a Committee resolution. Unless otherwise determined by the Committee, any Shares not used for Awards under the CEO Pool in one year shall remain available under the CEO Pool in subsequent years.
Article V
Eligibility and Participation
Section 5.1Eligibility to Receive Awards. Persons eligible to receive Awards under the Plan are Employees and Nonemployee Directors.
Section 5.2Participation in the Plan. Subject to the other provisions of this Plan, the Committee has the full discretion to grant Awards to eligible persons described in Section 5.1. Eligible persons may be granted more than one Award. Eligibility in accordance with this Section, however, shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
Article VI
Options
Section 6.1Grant of Options. Options shall be evidenced by Award Agreements in such form and not inconsistent with the Plan as the Committee shall approve from time to time. Award Agreements shall specify the Option Exercise Price, the duration of the Option, the number of Shares to which the Option pertains, provisions for vesting and exercisability, whether the Option is an ISO or NSO, and such other provisions as the Committee shall determine. Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with the following terms and conditions. Except in accordance with equitable adjustments as provided in Section 4.4 of this Plan, no Option granted under the Plan shall at any time be repriced or subject to cancellation and replacement without stockholder approval.
Section 6.2Option Exercise Price. The Option Exercise Price shall not be less than 100% of the Fair Market Value of a Share on the day the Option is granted.
Section 6.3Exercise of Options. Each Award Agreement shall state the period or periods of time within which the Option may be exercised by the optionee, in whole or in part, which shall be such period or periods of time as may be determined by the Committee, provided that the Option exercise period shall not end later than ten years after the date of the grant of the Option. The Committee shall have the power to permit in its discretion an acceleration of the previously determined exercise terms, within the terms of the Plan, under such circumstances and upon such terms and conditions as it deems appropriate.
Section 6.4Payment of Option Exercise Price. Except as otherwise provided in the Plan, or in any Award Agreement, the optionee shall pay the Option Exercise Price upon the exercise of any Option (i) in cash,
(ii) by authorizing a third party with which the optionee has a brokerage or similar account to sell the Shares (or a sufficient portion of such Shares) acquired upon the exercise of the Option and remit to the Company a portion of the sale proceeds sufficient to pay the entire Option Exercise Price to the Company, (iii) by delivering Shares that have an aggregate Fair Market Value on the date of exercise equal to the Option Exercise Price; (iv) by authorizing the Company to withhold from the total number of Shares as to which the Option is being exercised the number of Shares having a Fair Market Value on the date of exercise equal to the aggregate Option Exercise Price for the total number of Shares as to which the Option is being exercised, (v) by such other means by which the Committee determines to be consistent with the purpose of the Plan and applicable law, or (vi) by any combination of (i), (ii), (iii), (iv), and (v). In the case of an election pursuant to (i) above, cash shall mean cash or check issued by a federally insured bank or savings and loan association and made payable to NiSource Inc. In the case of payment pursuant to (ii) or (iii) above, the optionee’s authorization must be made on or prior to the date of exercise and shall be irrevocable. In lieu of a separate election governing each exercise of an Option, an optionee may file a blanket election with the Committee, which shall govern all future exercises of Options until revoked by the optionee.
Section 6.5Transfer of Shares. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
Section 6.6Additional Rules for Incentive Stock Options.
| (a) | Employees. Incentive Stock Options may be granted only to Employees of the Company or a Subsidiary and not to Employees of any Affiliate unless such entity is classified as a “disregarded entity” of the Company or the applicable Subsidiary under the Code. Incentive Stock Options may not be granted to Nonemployee Directors. |
| (b) | Exercise Limitations. The Committee, in its sole discretion, may provide in each Award Agreement the period or periods of time within which the Option may be exercised by the optionee, in whole or in part, provided that the Option period shall not end later than ten years after the date of the grant of the Option. The aggregate Fair Market Value (determined with respect to each Incentive Stock Option at the time of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year (under all incentive stock option plans of the Company and its Subsidiaries) shall not exceed $100,000. If the aggregate Fair Market Value (determined at the time of grant) of the Shares subject to an Option, which first becomes exercisable in any calendar year, exceeds this limitation, so much of the Option that does not exceed the applicable dollar limit shall be an Incentive Stock Option and the remainder shall be a Nonqualified Stock Option; but in all other respects, the original Award Agreement shall remain in full force and effect. Notwithstanding anything herein to the contrary, if an Incentive Stock Option is granted to an individual who owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporations, within the meaning of Code Section 422(b)(6), (i) the purchase price of each Share subject to the Incentive Stock Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of the Share on the date the Incentive Stock Option is granted, and (ii) the Incentive Stock Option shall expire, and all rights to purchase Shares thereunder shall cease, no later than the fifth anniversary of the date the Incentive Stock Option was granted. |
| (c) | Rights Upon Termination of Service. The rules under Section 6.6 of this Plan generally shall apply when an optionee holding an ISO terminates Service. Notwithstanding the foregoing, in accordance with Code Section 422, if an Incentive Stock Option is exercised more than ninety days after termination of Service, that portion of the Option exercised after such date shall automatically be a Nonqualified Stock Option, but, in all other respects, the original Award Agreement shall remain in full force and effect. |
Article VII
Stock Appreciation Rights
Section 7.1Grant of SARs. Stock Appreciation Rights shall be evidenced by Award Agreements in such form and not inconsistent with the Plan as the Committee shall approve from time to time. Award Agreements
shall specify the Grant Price of the SAR, the duration of the SAR, the number of Shares to which the SAR pertains, provisions for vesting and exercisability, and such other provisions as the Committee shall determine. Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with the following terms and conditions.
Section 7.2Awards. An SAR shall entitle the grantee to receive upon exercise the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over (ii) the Grant Price, or, if connected with a previously issued Option, not less than 100% of the Fair Market Value of Shares at the time such Option was granted. An SAR may be a Tandem SAR or may not be granted in connection with an Option.
Section 7.3Term of SAR. SARs shall be granted for a period of not more than ten years, and shall be exercisable in whole or in part, at such time or times and subject to such other terms and conditions, as shall be prescribed by the Committee at the time of grant, subject to the provisions of this Plan.
Section 7.4Special Rules for Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.
Section 7.5Payment. Upon exercise of a Stock Appreciation Right, the Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (i) the difference between the Fair Market Value of a Share on the date of exercise over the Grant Price; by (ii) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, payment shall be made in cash, in the form of Shares at Fair Market Value, or in a combination thereof, as the Committee may determine.
Article VIII
Restricted Stock and Restricted Stock Units
Section 8.1Grants. The Committee, at any time and from time to time, may grant Shares of Restricted Stock or grant Restricted Stock Units to Participants in such amounts as the Committee shall determine. Each Restricted Stock or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units issued to the Participant, and such other provisions as the Committee shall determine. Such Award Agreements shall be consistent with the provisions of this Article VIII.
Section 8.2Period of Restriction. The end of any Period of Restriction for Restricted Stock or Restricted Stock Units may be conditioned upon the satisfaction of such conditions as are satisfied by the Committee in its sole discretion and set forth in an applicable Award Agreement. Such conditions include, without limitation, restrictions based upon the continued Service of the Participant, the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable federal or state securities laws, prohibitions against transfer, and repurchase by the Company or right of first refusal. The Committee shall have the power to permit in its discretion, an acceleration of the expiration of the applicable Period of Restriction with respect to any part or all of the Shares or number of Restricted Stock Units awarded to a Participant.
Section 8.3Certificates. If a certificate is issued in respect of Shares awarded to a Participant, each certificate shall be deposited with the Company, or its designee, and shall bear the following legend:
“This certificate and the shares represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in the NiSource Inc. 2010 Omnibus Incentive Plan and an Award Agreement entered into by the registered owner. Release from such terms and conditions shall be obtained only in accordance with the provisions of the Plan and Award Agreement, a copy of each of which is on file in the office of the Secretary of said Company.”
Section 8.4Lapse of Restrictions. A Restricted Stock Award Agreement or Restricted Stock Unit Award Agreement shall specify the terms and conditions upon which any restrictions upon Shares awarded or RSUs awarded under the Plan shall lapse, as determined by the Committee. Upon the lapse of such restrictions, any Shares that have been awarded, free of the previously described restrictive legend, shall be issued to the Participant or his legal representative.
Section 8.5Termination of Service. Each Restricted Stock Award Agreement and Restricted Stock Unit Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Shares of Restricted Stock or Restricted Stock Units following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 8.6Code Section 83(b) Election. If a Participant makes an election pursuant to Code Section 83(b) with respect to a Restricted Stock Award, the Participant shall be required to promptly file a copy of such election with the Company.
Article IX
Performance Shares Awards
Section 9.1Grants of Performance Shares. The Committee, at any time and from time to time, may grant Awards of Performance Shares to Participants in such amounts as the Committee shall determine. Each Performance Shares grant shall be evidenced by an Award Agreement that shall specify the applicable performance period, the number of Shares subject to a Performance Shares Award that are to be delivered to the Participant upon satisfaction of the performance targets by the expiration of the performance period, and such other provisions as the Committee shall determine. Such Award Agreements shall be consistent with the provisions of this Article IX.
Section 9.2Performance Period and Performance Goals. At the time of award, the Committee, in its sole discretion shall establish a performance period and the performance goals to be achieved during the applicable performance period with respect to an Award of Performance Shares.
Section 9.3Delivery of Shares. Following the conclusion of each performance period, the Committee shall determine the extent to which performance goals have been attained for such period as well as the other terms and conditions established by the Committee. The Committee shall determine the amount of Shares, if any, to be delivered to the Participant in satisfaction of the Award.
Section 9.4Termination of Service. Each Performance Shares Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Performance Shares following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Shares Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 9.5Code Section 162(m). If any Performance Shares are intended to be 162(m) Awards, the Committee shall follow the procedures set forth in Section 13.1 with respect to such Performance Shares.
Article X
Performance Units
Section 10.1Grant of Performance Units. Subject to the terms of the Plan, Performance Units may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. Performance Units shall be evidenced by Award Agreements that are subject to the terms of this Article X.
Section 10.2Performance Period and Performance Goals. Unless otherwise determined by the Committee, at the time of award, the Committee shall establish with respect to each Performance Unit a performance period of not less than two years. At the time of award, the Committee also shall establish, in its sole discretion, the performance goals to be achieved during the applicable performance period with respect to an Award of Performance Units.
Section 10.3Value of Performance Units. At the time Performance Units are granted, the Committee shall establish with respect to each such Award a value for each Performance Unit, which may vary thereafter determinable from criteria specified by the Committee at the time of Award.
Section 10.4Code Section 162(m). If any Performance Units are intended to be 162(m) Awards, the Committee shall follow the procedures set forth in Section 13.1 with respect to such Performance Units.
Section 10.5Payment of Performance Units. Following the conclusion of each performance period, the Committee shall determine the extent to which performance targets have been attained for such period as well as the other terms and conditions established by the Committee. The Committee shall determine what, if any, payment is due on the Performance Units. Payment shall be made as soon as practicable after the end of the applicable performance period, but no later than the March 15th of the year after the year in which such performance period ends, in cash, in the form of Shares, or in a combination thereof, as the Committee may determine.
Section 10.6Termination of Service. Each Performance Unit Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Performance Units following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Units Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 10.7Other Terms. The Award Agreements with respect to Performance Units shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article XI
Cash-Based Awards
Section 11.1Grant of Cash-Based Awards. Subject to the terms of the Plan, Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee, subject to the terms of this Article XI.
Section 11.2Performance Period and Performance Goals. Unless otherwise determined by the Committee, the performance period for any Cash-Based Award shall be one year. At the time of award, the Committee also shall establish, in its sole discretion, the performance goals to be achieved during the applicable performance period with respect to Cash-Based Awards.
Section 11.3Value of Cash-Based Awards. At the time Cash-Based Awards are granted, the Committee shall establish the value of such Awards, which may vary thereafter determinable from criteria specified by the Committee at the time of Award.
Section 11.4Code Section 162(m). If the grant of any Cash-Based Awards are intended to be 162(m) Awards, the Committee shall follow the procedures set forth in Section 13.1 with respect to such Cash-Based Awards.
Section 11.5Payment of Cash-Based Awards. If payable, the Participant’s Cash-Based Award will be distributed to the Participant, or the Participant’s estate in the event of the Participant’s death before payment, in cash in a single sum as soon after the end of the applicable performance period as practicable, but no later than March 15th after the end of the performance period, in accordance with the Company’s payroll practices.
Section 11.6Termination of Service. With respect to Cash-Based Awards, the Committee shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of such Cash-Based Awards following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Cash-Based Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Article XII
Other Stock-Based Awards
The Committee may from time to time grant Shares and other Awards under the Plan that are valued in whole or in part by reference to, or are otherwise based upon and/or payable in Shares. The Committee, in its sole discretion, shall determine the terms and conditions of such Awards, which shall be consistent with the terms and purposes of the Plan.
Article XIII
Awards Under the Plan; Code Section 162(m)
Section 13.1Compliance with Code Section 162(m).
| (a) | General. The Committee may grant Awards that are designed to qualify as 162(m) Awards and Awards that are not 162(m) Awards. In the case of Awards granted to Covered Officers that are intended to be 162(m) Awards, the Committee shall make in writing all determinations necessary to establish the terms of such 162(m) Awards within 90 days of the beginning of the applicable performance period (or such other time period required under Code Section 162(m)), including, without limitation, the designation of the Covered Officers to whom such 162(m) Awards are made, the Performance Measures applicable to the Awards and the Performance Targets that relate to such Performance Measures, and the dollar amounts or number of Shares payable upon achieving the applicable Performance Targets. To the extent required by Code Section 162(m), the provisions of such 162(m) Awards must state, in terms of an objective formula or standard, the method of computing the amount of compensation payable to the Covered Officer. The specific Performance Targets established by the Committee shall be made while the achievement of such Performance Targets remains substantially uncertain in accordance with Code Section 162(m). Subject to the terms of this Plan, after each applicable performance period has ended, the Committee shall determine the extent to which the Performance Targets have been attained or a degree of achievement between minimum and maximum levels with respect to 162(m) Awards in order to establish the level of payment to be made, if any, with respect to such 162(m) Awards, and shall certify the results in writing prior to payment of such 162(m) Awards. |
| (b) | Performance Targets and Performance Measures. With respect to 162(m) Awards, at the time of grant of a 162(m) Award, the Committee shall establish in writing maximum and minimum Performance Targets to be achieved with respect to each Award during the performance period. The Participant shall be entitled to payment of the entire amount awarded if the maximum Performance Target is achieved during the performance period, but shall be entitled to payment with respect to a portion of the Award according to the level of achievement of Performance Targets, as specified by the Committee, for performance during the performance period that meets or exceeds the minimum Performance Target but fails to meet the maximum Performance Target. With respect to Cash-Based Awards, the Committee may assign payout percentages based upon various potential Performance Targets, ranging from a minimum “Trigger” percentage to a maximum “Stretch” percentage, to be applied if the Performance Targets are met. The Committee has full discretion and authority to determine the “Target,” “Trigger,” and “Stretch” payouts for Cash-Based Award’s performance period. |
The Performance Targets established by the Committee may relate to corporate, division, department, or business unit performance and may be established in terms of any one or a combination of the following Performance Measures: (i) growth in gross revenue, (ii) earnings per share, (iii) operating earnings per share, (iv) business unit operating earnings, (v) specified revenue targets, (vi) expense control, (vii) productivity, (viii) ratio of earnings to stockholders’ equity or to total assets, (ix) dividend payments, (x) total stockholders’ return, (xi) operating income, (xii) return on capital or return on investment, (xiii) return on assets, (xiv) return on net assets, (xv) operating margins, (xvi) earnings before interest and taxes, (xvii) earnings before interest taxes depreciation, amortization and depletion, (xviii) funds from operations, (xix) total debt or change in total debt or the rating on our debt as determined by external rating agencies, (xx) cash from operations, (xxi) gross margins, (xxii) return on equity, (xxiii) net income, (xxiv) pre-tax income, (xxv) specified customer satisfaction targets, (xxvi) specified safety targets, and (xxvii) specified reliability targets. Multiple Performance Targets
may be used and may have the same or different weighting, and they may relate to absolute performance or relative performance as measured against other institutions or divisions or units thereof.
| (c) | Calculation and Adjustments. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occur during a performance period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) mergers, acquisitions or divestitures, (f) foreign exchange gains and losses, and (g) extraordinary, unusual, or other nonrecurring items as described in U.S. Generally Accepted Accounting Principles or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s consolidated report to the investment community or investor letters. To the extent such inclusions or exclusions affect Awards to Covered Officers, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility except as otherwise determined by the Committee in its sole discretion. Awards that are intended to qualify as 162(m) Awards may not be adjusted upward from the amount otherwise payable to a Covered Officer under the pre-established Performance Target. The Committee shall retain the discretion to adjust such Awards downward, either on a formulaic or discretionary basis or a combination of the two, as the Committee determines. If applicable tax and securities laws change to permit Committee discretion to alter the governing Performance Measures or Performance Targets without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. |
Section 13.2Non-Code Section 162(m) Awards. In the case of Awards that are not intended to be qualifying as “performance-based compensation” under Code Section 162(m), the Committee may designate performance targets from among the previously described Performance Measures in this Article or such other business criteria as it determines in its sole discretion. The Committee also may make adjustments to such Performance Measures or other business criteria in any manner it deems appropriate in its discretion.
Article XIV
Dividends and Dividend Equivalents
No dividends or dividend equivalents may be awarded with respect to any Options or SARs. An Award (other than Options or SARs) may, if so determined by the Committee, provide the Participant with the right to receive dividend payments, or, in the case of Awards that do not involve the issuance of Shares concurrently with the grant of the Award, dividend equivalent payments with respect to Shares subject to the Award (both before and after the Shares are earned, vested or acquired), which payments may be either made currently, credited to an account for the Participant, or deemed to have been reinvested in additional Shares which shall thereafter be deemed to be part of and subject to the underlying Award, including the same vesting and performance conditions. Notwithstanding the foregoing, with respect to Awards subject to performance conditions, any such dividend or dividend equivalent payments shall not be paid currently and instead shall either be credited to an account for the Participant or deemed to have been reinvested in additional Shares. Dividend or dividend equivalent amounts credited to an account for the Participant may be settled in cash or Shares or a combination of both, as determined by the Committee, and shall be subject to the same vesting and performance conditions as the underlying Award. Except as provided otherwise in an Award Agreement, any Participant entitled to receive a cash dividends or dividend equivalents pursuant to his applicable Award may, by written election filed with the Company, at least ten days before the date of payment of such dividend equivalent, elect to have such dividend equivalent credited to an account maintained for his benefit under a dividend reinvestment plan maintained by the Company.
Article XV
Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by
the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
Article XVI
Change in Control
Section 16.1Effect of Change in Control. Except as otherwise provided in the Plan or any Award Agreement granted hereunder, upon a Change in Control, all outstanding Awards shall become fully exercisable and all restrictions thereon shall terminate; provided, however, that the Committee may determine and provide through an Award Agreement or other means the extent of vesting and the treatment of partially completed performance periods (if any) for any Awards outstanding upon a Change in Control. Further, the Committee, as constituted before such Change in Control, is authorized, and has sole discretion, as to any Award, either at the time such Award is granted hereunder or any time thereafter, to take any one or more of the following actions: (i) provide for the cancellation of any such Award for an amount of cash equal to the difference between the exercise price and the then Fair Market Value of the Shares covered thereby had such Award been currently exercisable; (ii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; or (iii) cause any such Award then outstanding to be assumed, by the acquiring or surviving corporation, after such Change in Control.
Section 16.2Participant Elections to Minimize Code Section 4999 Excise Tax.
| (a) | Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Code Section 4999 due to the characterization of such acceleration of vesting, payment or benefit as an excess parachute payment under Code Section 280G, the Participant may elect, in his or her sole discretion, to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization. Such an election, however, may not change the time and form of any payment in a manner that would cause the Participant to incur additional taxes or penalties under Code Section 409A. |
| (b) | Determination by Independent Accountants. To aid the Participant in making any election called for under part (a) above, no later than the date of the occurrence of any event that might reasonably be anticipated to result in an excess parachute payment to the Participant as described in part (a) above, the Company shall request a determination in writing by independent public accountants selected by the Company (the “Accountants”). As soon as practicable thereafter, the Accountants shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Accountants may rely on reasonable, good faith interpretations concerning the application of Code Sections 280G and 4999. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make their required determination. The Company shall bear all fees and expenses the Accountants may reasonably charge in connection with their services contemplated by this subpart (b). |
Article XVII
Deferrals
The Committee may permit (upon timely election by the Participant) or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock or Performance Shares, or the satisfaction of any requirements or goals with respect to Performance Units or Cash-Based Awards. If any such deferral election is required or permitted, the Committee may, in its sole discretion, establish rules and procedures for such payment deferrals in a manner consistent with Code Section 409A and the regulations thereunder.
Article XVIII
Withholding
Section 18.1Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
Section 18.2Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing before the date in which income is realized by the recipient in connection with the particular transaction, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. The amount of required withholding shall be a specified rate not less than the statutory minimum federal, state and local (if any) withholding rate, and not greater than the maximum federal, state and local (if any) marginal tax rate applicable to the Participant and to the particular transaction.
Article XIX
Compliance with Code Section 409A
Section 19.1Awards Subject to Code Section 409A. The provisions of this Section 19.1 shall apply to any Award or portion thereof that is or becomes subject to Code Section 409A, notwithstanding any provision to the contrary contained in the Plan or the Award Agreement applicable to such Award. Awards subject to Code Section 409A include, without limitation:
| (a) | Any Nonqualified Stock Option having an exercise price per share less than the Fair Market Value determined as of the date of grant of such Option or that permits the deferral of compensation other than the deferral of recognition of income until the exercise or transfer of the Option or the time the shares acquired pursuant to the exercise of the option first become substantially vested. |
| (b) | Any Award that either provides by its terms, or under which the Participant makes an election, for settlement of all or any portion of the Award either (i) on one or more dates following the end of the Short-Term Deferral Period (as defined below) or (ii) upon or after the occurrence of any event that will or may occur later than the end of the Short-Term Deferral Period. |
Subject to U.S. Treasury Regulations promulgated pursuant to Code Section 409A (“Section 409A Regulations”) or other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the later of (i) the 15th day of the third month following the end of the Company’s fiscal year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Participant’s taxable year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the meaning set forth in Section 409A Regulations or other applicable guidance.
Section 19.2No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this Plan does not permit the acceleration of the time or schedule of any distribution under this Plan pursuant to any Award subject to Code Section 409A, except as provided by Code Section 409A and Section 409A Regulations.
Section 19.3Separation from Service. If any amount shall be payable with respect to any Award hereunder as a result of a Participant’s termination of employment or other Service and such amount is subject to the provisions of Code Section 409A, then notwithstanding any other provision of this Plan, a termination of employment or other Service will be deemed to have occurred only at such time as the Participant has experienced a “separation from service” as such term is defined for purposes of Code Section 409A.
Section 19.4Timing of Payment to a Specified Employee. If any amount shall be payable with respect to any Award hereunder as a result of a Participant’s separation from Service at such time as the Participant is a “specified employee” and such amount is subject to the provisions of Code Section 409A, then notwithstanding
any other provision of this Plan, no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh (7th) calendar month beginning after the Participant’s separation from Service (or the date of his or her earlier death). The Company may adopt a specified employee policy that will apply to identify the specified employees for all deferred compensation plans subject to Code Section 409A; otherwise, specified employees will be identified using the default standards contained in the regulations under Code Section 409A.
Article XX
Amendment and Termination
Section 20.1Amendment, Modification, and Termination of the Plan. The Board or the Committee may at any time terminate, suspend or amend the Plan without the authorization of stockholders to the extent allowed by law, including without limitation any rules issued by the Securities and Exchange Commission under Section 16 of the 1934 Act, insofar as stockholder approval thereof is required in order for the Plan to continue to satisfy the requirements ofRule 16b-3 under the 1934 Act, or the rules of any applicable stock exchange. No termination, suspension or amendment of the Plan shall adversely affect any right acquired by any Participant under an Award granted before the date of such termination, suspension or amendment, unless such Participant shall consent; but it shall be conclusively presumed that any adjustment for changes in capitalization as provided for herein does not adversely affect any such right.
Section 20.2Amendment of Awards. The Committee may unilaterally amend the terms of any Award Agreement previously granted, except that (i) no such amendment may materially impair the rights of any Participant under the applicable Award without the Participant’s consent, unless such amendment is necessary to comply with applicable law, stock exchange rules or accounting rules; and (ii) in no event may an Option or SAR be amended or modified, other than as provided in Section 4.4, to decrease the Option or SAR exercise or base price thereof, or be cancelled in exchange for cash, a new Option or SAR with a lower exercise price or base price, or other Awards, or otherwise be subject to any action that would be treated for accounting purposes as a “repricing” of such Option or SAR, unless such action is approved by the Company’s stockholders.
Article XXI
Miscellaneous
Section 21.1Approval Restrictions. Each Award under the Plan shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the recipient of an Award with respect to the disposition of Shares is necessary or desirable as a condition of, or in connection with, the granting of such award or the issue or purchase of Shares thereunder, such Award may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained, free of any conditions not acceptable to the Committee.
Section 21.2Securities Law Compliance. With respect to Participants subject to Section 16 of the 1934 Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. If any provision of this Plan or of any Award Agreement would otherwise frustrate or conflict with the intent expressed in the preceding sentence, that provision to the extent possible shall be interpreted and deemed amended in the manner determined by the Committee so as to avoid the conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed void as applicable to Participants who are then subject to Section 16 of the 1934 Act. In addition, no Shares will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any stock exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to the grant, exercise, vesting or settlement of an Award, the Company may require the Participant to take any reasonable action to meet such requirements. The Committee may impose such conditions on any Shares issuable under the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any stock exchange upon which such Shares of the same class are then listed, and under any blue sky or other securities laws applicable to such Shares.
Section 21.3Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural.
Section 21.4Rights as a Stockholder. The recipient of any Award under the Plan, unless otherwise provided by the Plan, shall have no rights as a stockholder with respect thereto unless and until certificates for Shares are issued to the recipient.
Section 21.5Forfeiture. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.
Section 21.6Rights as Employee or Nonemployee Director. No person, even though eligible pursuant to Article V, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee or Nonemployee Director or interfere with or limit in any way any right of the Company or Affiliate to terminate the Participant’s Service at any time. To the extent that an Employee of an Affiliate receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.
Section 21.7Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.
Section 21.8Effect on Other Plans. Unless otherwise specifically provided, participation in the Plan shall not preclude a Participant’s eligibility to participate in any other benefit or incentive plan. Any Awards made pursuant to the Plan shall not be considered as compensation in determining the benefits provided under any other plan.
Section 21.9No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
Section 21.10Over/Under Payments. If any Participant or beneficiary receives an underpayment of Shares or cash payable under the terms of any Award, payment of any such shortfall shall be made as soon as administratively practicable. If any Participant or beneficiary receives an overpayment of Shares or cash payable under the terms of any Award for any reason, the Committee or its delegate shall have the right, in its sole discretion, to take whatever action it deems appropriate, including but not limited to the right to require repayment of such amount or to reduce future payments under this Plan, to recover any such overpayment. Notwithstanding the foregoing, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the Participant knowingly or through gross negligence engaged in the misconduct, or knowingly or through gross negligence failed to prevent the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission of the financial document embodying such financial reporting requirement.
Section 21.11Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Affiliate shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Affiliate and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Affiliate. The Participants shall have no claim against any Affiliate for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
Section 21.12No Liability With Respect to Adverse Tax Treatment. Notwithstanding any provision of this Plan to the contrary, in no event shall the Company or any Affiliate be liable to a Participant on account of an Award’s failure to (i) qualify for favorable U.S., foreign, state, local, or other tax treatment or (ii) avoid adverse tax treatment under U.S., foreign, state, local, or other law, including, without limitation, Code Section 409A.
Section 21.13Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
Section 21.14Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
Section 21.15Governing Law. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Indiana.
Section 21.16Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company.
Section 21.17Provisions Regarding Transferability of Awards.
| (a) | General. Except as otherwise provided below, Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title 1 of the Employee Retirement Income Security Act or the rules thereunder. Except as otherwise provided in the Plan, all rights with respect to an Award granted to a Participant shall be available during his or her lifetime only to such Participant. |
| (b) | Nonqualified Stock Options and Stock Appreciation Rights. No NSO or SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title 1 of the Employee Retirement Income Security Act or the rules thereunder. Notwithstanding the foregoing or anything in part (a) above, a Participant, at any time prior to his death, may assign all or any portion of the NSO or SAR to (i) his spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit of his spouse or lineal descendant, or (iii) atax-exempt organization as described in Code Section 501(c)(3). In such event the spouse, lineal descendant, trustee ortax-exempt organization shall be entitled to all of the rights of the Participant with respect to the assigned portion of such NSO or SAR, and such portion of the NSO or SAR shall continue to be subject to all of the terms, conditions and restrictions applicable to the NSO or SAR as set forth herein, and in the related Award Agreement, immediately prior to the effective date of the assignment. Any such assignment shall be permitted only if (i) the Participant does not receive any consideration therefore, and (ii) the assignment is expressly approved by the Committee or its delegate. Any such assignment shall be evidenced by an appropriate written document executed by the Participant, and a copy thereof shall be delivered to the Committee or its delegate on or prior to the effective date of the assignment. |
| (c) | Incentive Stock Options. Notwithstanding anything in part (a) and (b) above, no ISO may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent or distribution. |
| (d) | Nonemployee Directors. Notwithstanding anything in parts (a), (b), or (c) to the contrary, a Nonemployee Director at any time prior to his or her death, may assign all or any portion of an Award granted to him or her under the Plan to (i) his or her spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit of his or her spouse or lineal descendant or (iii) atax-exempt organization as described in Code Section 501(c)(3). In such event, the spouse, lineal descendant, trustee, ortax-exempt
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| organization shall be entitled to all of the rights of the Participant with respect to the assigned portion of such Award, and such portion of the Award shall continue to be subject to all of the terms, conditions and restrictions applicable to the Award as set forth herein, and in the related Award Agreement, immediately prior to the effective date of the assignment. Any such assignment shall be permitted only if (i) the Participant does not receive any consideration therefore, and (ii) the assignment is expressly approved by the Committee or its delegate. Any such assignment shall be evidenced by an appropriate written document executed by the Participant, and a copy thereof shall be delivered to the Committee or its delegate on or prior to the effective date of the assignment. |
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| | | Electronic Voting Instructions |
| | | Available 24 hours a day, 7 days a week!
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| | | Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
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| | | VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
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| | | Proxies submitted by the Internet or telephone must be received by 11:59 PM, Eastern Time, on May 11, 2015.
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| | |  | | Vote by Internet |
| | | | • Go towww.investorvote.com/NI
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| | | | • Or scan the QR code with your smartphone
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| | | | • Follow the steps outlined on the secure website
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| | | Vote by telephone
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
• Follow the instructions provided by the recorded message
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Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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A
| | Proposals — The Board of Directors recommends a vote “FOR” Proposals 1, 2, 3, 4, 5, 6, and 7. | |  |
Proposal 1 – To elect eleven directors to hold office until the next annual stockholders’ meeting and until their respective successors have been elected or appointed.
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| | For | | Against | | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | |
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1.1 - Richard A. Abdoo | | ¨ | | ¨ | | ¨ | | 1.2 - Aristides S. Candris | | ¨ | | ¨ | | ¨ | | 1.3 - Sigmund L. Cornelius | | ¨ | | ¨ | | ¨ | | |
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1.4 - Michael E. Jesanis | | ¨ | | ¨ | | ¨ | | 1.5 - Marty R. Kittrell | | ¨ | | ¨ | | ¨ | | 1.6 - W. Lee Nutter | | ¨ | | ¨ | | ¨ | | |
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1.7 - Deborah S. Parker | | ¨ | | ¨ | | ¨ | | 1.8 - Robert C. Skaggs, Jr. | | ¨ | | ¨ | | ¨ | | 1.9 - Teresa A. Taylor | | ¨ | | ¨ | | ¨ | | |
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1.10 - Richard L. Thompson | | ¨ | | ¨ | | ¨ | | 1.11 - Carolyn Y. Woo | | ¨ | | ¨ | | ¨ | | | | | | | | | | |
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| | | | For
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Proposal 2 – | | To approve executive compensation on an advisory basis.
| | ¨ | | ¨ | | ¨ | | | | Proposal 3– | | To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants. | | ¨ | | ¨ | | ¨ |
Proposal 4 – | | To amend the Company’s Certificate of Incorporation to give stockholders the power to request special meetings.
| | ¨ | | ¨ | | ¨ | | | | Proposal 5 – | | To amend the Company’s Certificate of Incorporation to reduce the minimum number of Company directors from nine to seven. | | ¨ | | ¨ | | ¨ |
Proposal 6 – | | To re-approve the Company’s 2010 Omnibus Incentive Plan.
| | ¨ | | ¨ | | ¨ | | | | Proposal 7 – | | To approve an amendment to the Company’s Employee Stock Purchase Plan. | | ¨ | | ¨ | | ¨ |
The Board of Directors recommends a vote “AGAINST” Proposal 8.
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| | | | For
| | Against
| | Abstain
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Proposal 8 – | | To consider a stockholder proposal regarding reports on political contributions.
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDESTABLE OF THIS CARD.CONTENTS
TABLE OF CONTENTS
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| | Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.
The Proxy Statement and the 2014 Annual Report to Stockholders are available at:http://ir.nisource.com/annuals.cfm.
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proxy — NiSource Inc. | |
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This Proxy is Solicited on Behalf of the Board of Directors of NiSource Inc.
for its Annual Meeting of Stockholders, to be held on May 12, 2015.
The undersigned hereby appoints Robert C. Skaggs, Jr. and Stephen P. Smith, or either of them, the proxies of the undersigned, with all power of substitution, for and in the name of the undersigned to represent and vote the shares of common stock of the undersigned at the Annual Meeting of Stockholders of the Company, to be held at the Hyatt Rosemont, 6350 N. River Road, Rosemont, IL 60018, on Tuesday, May 12, 2015, at 10:00 a.m., local time, and at the adjournment or adjournments thereof.
Unless otherwise marked, this proxy will be voted: “FOR” all of the nominees listed in Proposal 1, “FOR” advisory approval of executive compensation in Proposal 2, “FOR” ratification of the independent registered public accountants in Proposal 3, “FOR” the proposed amendments to the Company’s Certificate of Incorporation in Proposals 4 and 5, “FOR” re-approval of the Company’s 2010 Omnibus Incentive Plan in Proposal 6, “FOR” the proposed amendment to the Company’s Employee Stock Purchase Plan in Proposal 7, and “AGAINST” the stockholder proposal regarding reports on political contributions in Proposal 8.
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement relating to the Annual Meeting and hereby revokes any proxy or proxies previously given. The undersigned stockholder may revoke this proxy at any time before it is voted by filing with the Corporate Secretary of the Company a written notice of revocation or a duly executed proxy bearing a later date, by voting by telephone or through the Internet, or by attending the Annual Meeting and voting in person.
PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET, OR BY MARKING, SIGNING, DATING AND MAILING THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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Change of Address — Please print your new address below. | | | | Comments — Please print your comments below. | | | | Meeting Attendance | | |
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| | | | | | | | Mark the box to the right if you plan to attend the Annual Meeting. | | ¨ |
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C
| | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
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NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
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Date (mm/dd/yyyy) — Please print date below. | | | | Signature 1 — Please keep signature within the box. | | | | Signature 2 — Please keep signature within the box. |
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¢ | | IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
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