DEF 14A
Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.   )
 
Filed by the Registrant ☒
 
Filed by a Party other than the Registrant ☐
 
Check the appropriate box:
 
☐   Preliminary Proxy Statement
 
   Confidential, for Use of the Commission Only
     (as permitted by Rule 14a-6(e)(2))
 
☒   Definitive Proxy Statement
☐   Definitive Additional Materials
☐   Soliciting Material under §240.14a-12
 
AVISTA CORPORATION
 
(Name of registrant as specified in its charter)


 
 
(Name of person(s) filing proxy statement, if other than the registrant)
 
Payment of Filing Fee (Check all boxes that apply):
 
  No fee required
 
  Fee paid previously with preliminary materials
 
  Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11


Table of Contents

LOGO


Table of Contents

SHAREHOLDER LETTER

 

LOGO

March 20, 2024

Dear Fellow Shareholder:

 

 

 

Avista’s 2024 Annual Meeting will be held at 9:00 a.m. Pacific Time on Wednesday, May 1, 2024. This year’s Annual Meeting of Shareholders will once again be held in a virtual format only. You will not be able to attend the Annual Meeting in person.

 

 

 

 

 

LOGO

       

 

You will be able to participate in the Annual Meeting, vote, and submit your questions and comments during the Annual Meeting via live webcast by visiting www.virtualshareholdermeeting.com/AVA2024.

 

Whether or not you plan to participate in the Annual Meeting, we urge you to vote and submit your proxy prior to the Annual Meeting by mail, telephone or through the internet as soon as possible, following the instructions printed on your proxy card and/or proxy notice.

 

As you read this, Avista marks 135 years of service. I look forward to providing an update during the Annual Meeting on Avista’s progress and performance in the past year and highlighting the strategic steps we’ve taken to build on our historic foundation of clean hydropower to prepare for the future.

 

This Proxy Statement accompanies the 2023 Annual Report to Shareholders (the “Annual Report”), which contains information about the Company’s performance, including our audited financial statements.

 

As you’ll see in our Annual Report, this year’s theme is “Staying Power”. Throughout our 135-year history, we’ve supported our communities by providing the safe and reliable energy they count on to improve their lives and run their businesses.

 

Our staying power positions us to adapt to change, persist through challenges, and deliver on our commitments to our customers, our communities, and to you — our valued shareholders.

 

Thank you for your continued interest in and support of Avista.

 

Sincerely,

 

LOGO

 

Dennis P. Vermillion

Chief Executive Officer

 

LOGO

 


Table of Contents

 

 

LOGO

1411 E. Mission Ave.

Spokane, Washington 99202

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Avista’s Annual Meeting will be held virtually by live webcast on Wednesday, May 1, 2024 at 9:00 a.m. Pacific Time. The purposes of the meeting are to:

 

  (1)

elect eleven directors identified in the accompanying proxy statement to serve until the 2025 Annual Meeting of Shareholders;

 

 

  (2)

ratify the appointment of Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, Ltd., and their respective affiliates (collectively, “Deloitte”) as the Company’s independent registered public accounting firm for 2024;

 

 

  (3)

hold an advisory (non-binding) vote on executive compensation;

 

 

  (4)

transact other business that may come before the meeting or any adjournment or postponement thereof.

 

Shareholders of record may participate in the Annual Meeting by logging in at www.virtualshareholdermeeting.com/AVA2024. Please refer to the Additional Information for guidance regarding participation in the Annual Meeting.

Your vote is very important to us. You can be sure your shares are represented at the meeting if you are a shareholder of record by promptly voting over the internet or by telephone or by returning your completed proxy card in the pre-addressed, postage-paid return envelope (which will be provided to those shareholders who request to receive paper copies of these materials by mail), or, if your shares are held through an account with a brokerage firm, bank or other nominee, by returning your completed voting instruction card to your broker or nominee. The proxy is solicited by the Board of Directors of Avista Corp.

We cordially invite you to attend the meeting.

By Order of the Board,

 

LOGO

Gregory C. Hesler

Senior Vice President, General Counsel, Corporate Secretary and Chief Ethics/Compliance Officer

Spokane, Washington

March 20, 2024

THIS PROXY STATEMENT AND THE 2023 ANNUAL REPORT ARE AVAILABLE ON THE

INTERNET AT HTTP://PROXYVOTE.COM

 

 

 

 

REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:

 

 
 

LOGO

Via the Internet

 

Go to www.proxyvote.com and follow the instructions

 

LOGO

By Mail

 

Mark, sign, date and return your proxy card in the postage-paid envelope

 

LOGO

By Telephone

 

Call 1-800-690-6903

  LOGO

Virtual Live Webcast

 

www.virtualshareholdermeeting.

com/AVA2024 to vote during
the virtual annual meeting

 

 

 


Table of Contents

Important Information About Avista’s Virtual Annual Meeting

Avista Corporation’s (“Avista” or the “Company”) 2024 Annual Meeting of Shareholders (the “Annual Meeting”) will be held virtually by live webcast. Shareholders of record at the close of business on March 1, 2024, are entitled to participate in the meeting and participants will be able to ask questions, make comments and vote on the matters brought before the meeting. Below are some frequently asked questions regarding our Annual Meeting.

How can I view and participate in the Annual Meeting? To participate, visit www.virtualshareholdermeeting.com/AVA2024 and log in with the 16-digit control number included in your proxy materials.

When can I join the virtual Annual Meeting? You may begin to log in to the meeting platform beginning at 8:45 a.m. Pacific Time on May 1, 2024. The meeting begins at 9:00 a.m. Pacific Time on May 1, 2024.

How can I ask questions and vote? We encourage you to submit your questions and vote in advance by visiting www.proxyvote.com. Shareholders may also vote and submit questions virtually during the meeting (subject to time restrictions). During the meeting, questions can only be submitted in the question box provided in the virtual meeting webcast. To participate in the meeting webcast visit www.virtualshareholdermeeting.com/AVA2024.

What if I lost my 16-digit control number? You will be able to log in as a guest. To view the meeting webcast visit www.virtualshareholdermeeting.com/AVA2024 and register as a guest. If you log in as a guest, you will not be able to vote your shares or ask questions during the meeting.

What if I experience technical difficulties? Please call (844) 986-0822 (US) or 1 (412) 317-5419 (international) for assistance.

Where can I find additional information? For additional information about how to attend the Annual Meeting, please refer to the Additional Information section.

A recording of the Annual Meeting will be posted as soon as practical at https://investor.avistacorp.com along with answers to a representative set of any shareholder questions received before and during the Annual Meeting not answered due to time constraints. We also encourage you to read our Annual Report on Form 10-K available at www.proxyvote.com.

Your vote is important to us! Please vote today at www.proxyvote.com.

 


Table of Contents

Table of Contents

 

 

 

 

LOGO


Table of Contents

PROXY SUMMARY

 

Proxy Summary

Governance Highlights

Our Company is committed to maintaining the highest standards of corporate governance. Strong corporate governance practices help us achieve our performance goals and maintain the trust and confidence of our investors, employees, customers, regulatory agencies and other stakeholders. Our corporate governance practices are described in more detail in Corporate Governance Matters in this proxy statement and in our Corporate Governance Guidelines, which can be found in the Corporate Governance section of our website at https://investor.avistacorp.com/corporate-governance.

DIRECTOR INDEPENDENCE

 

   

•  The Chief Executive Officer (“CEO”) is the only non-independent director.

 

•  During 2023, the Board committees (except the Executive Committee) were composed exclusively of independent directors.

 

•  The Board is committed to board refreshment. Our Board added four new members in the past five years, all of whom are independent.

 

•  The independent directors regularly meet in executive sessions without management.

LOGO    LOGO    LOGO    LOGO

BOARD LEADERSHIP

 

   

•  The positions of Chairman and CEO are separated.

 

•  The Company has an independent Vice Chair, appointed by the Board.

 

•  The Vice Chair, in collaboration with the Chairman, helps facilitate and ensure there is open and effective communication between the Board, the Chairman and management. The Vice Chair’s specific duties are set forth in Corporate Governance Matters.

100%

 

All director

nominees exhibit:

  

High Integrity

 

A Commitment to Sustainability

 

Knowledge of Corporate Governance Requirements and Practices

 

Leadership Experience

  

A Commitment to the Long-Term Interests of our Shareholders

 

Strong Business Judgment

 

A Proven Record of Success

 

Innovative Thinking

 

 

2024 PROXY STATEMENT

  1


Table of Contents

PROXY SUMMARY

 

BOARD OVERSIGHT OF RISK MANAGEMENT

 

   

•  The Board and its committees consider enterprise risk in connection with all Company operations including, but not limited to, utility regulatory, operational, climate change, cybersecurity, technology, strategic, external mandates, financial, energy commodity and compliance risks.

 

•  The Board reviews Avista’s systematic approach to identifying, assessing and managing risks faced by the Company.

STOCK OWNERSHIP REQUIREMENTS

 

   

•  Independent directors are expected to achieve a minimum investment of five times the minimum equity portion of their retainer in Company common stock and are expected to retain at least that level of investment during their tenure on the Board.

 

•  Directors and officers are prohibited from engaging in short sales, pledging, or hedging the economic interest in their Company shares.

 

 

•  The stock ownership policy for the Company’s executive officers requires executive officers to own shares based on their highest position and salary:

 

•   Chief Executive Officer — 5 times salary

 

•   President — 4 times salary

 

•   Executive Vice President (“EVP”) and Senior Vice Presidents (“SVP”) — 2.5 times salary

 

•   Vice Presidents (“VP”) — 1 times salary

BOARD PRACTICES

 

   

•  The Board regularly assesses its performance through Board, committee, committee chair, and individual director evaluations.

 

•  Continuing director education is provided during regular Board and committee meetings, including education by outside experts, and by supporting attendance at outside programs.

 

•  Directors may not stand for election after age 72.

 

 

•  The Governance and Corporate Responsibility Committee (“Governance Committee”) leads the full Board in considering Board competencies and refreshment in light of Company strategy.

 

•  The Board adopted a policy that provides the Board will include candidates with a diversity of ethnicity, race, gender, age, sexual orientation and/or gender identity in the pool for possible Board members.

ACCOUNTABILITY

 

   

•  The Board proactively adopted Proxy Access for director nominees.

 

•  All directors stand for election annually.

 

•  In uncontested elections, directors must be elected by a majority of votes cast.

Shareholder Engagement

The Company has a history of engaging with our shareholders, supporting our belief in the importance of the governance process and of incorporating a meaningful understanding of shareholder perspectives on corporate governance, executive compensation, and other issues that are important to them. These discussions help to inform our Board’s approach to governance, compensation and oversight of corporate responsibility initiatives. Our Office of the Corporate Secretary coordinates shareholder engagement with Investor Relations and provides a summary of all relevant feedback to the Board. In 2023, the Company reached out to shareholders representing more than 60 percent of shares outstanding. In addition, Investor Relations meets with our shareholders throughout the year, frequently along with our CFO and CEO.

 

2  

LOGO

 


Table of Contents

PROXY SUMMARY

 

Corporate Responsibility: Building Trust and Accountability

The Company understands its commitment to sustainability, stewardship and corporate citizenship is important, not only to our shareholders, but to our communities and other constituencies. Accordingly, we have produced a Corporate Responsibility Report covering the Company’s commitments to the environment, its employees, its customers and the communities we serve, as well as ethical governance. This report is available on our website at https://investor.avistacorp.com/corporate-responsibility/our-commitment. Material on our website, including but not limited to this report and related reports and metrics, is neither part of nor intended to be incorporated into this Proxy Statement.

Compensation Highlights — 2023

In 2023, the Compensation and Organization Committee (“Compensation Committee”) established performance goals for the Company based on input from the CEO and aligned the short-term and long-term incentive plans with those goals. Our incentive arrangements allow us to focus on maintaining an attractive financial profile while creating long-term value for shareholders and customers.

As summarized below, the compensation earned by our Named Executive Officers (“NEOs”) in 2023 reflects our corporate performance for the fiscal year.

 

 

Our Annual

Cash Incentive

25%

2023 Payout

  

Our Cumulative

Earnings Per Share

Performance Shares

53%

2023 Payout

  

Our Total

Shareholder Return

Performance Shares

72.5%

2023 Payout

  

Our CEO’s

pay was

60%

Linked to Share Value

In 2023

HIGHLIGHTS

 

 

LOGO

  The Compensation Committee approved base salary adjustments ranging from 4% to 27% for our NEOs based on market comparisons, its assessment of individual performance and other factors as discussed in more detail in the Compensation Discussion and Analysis.

 

LOGO

  In early 2024, our NEOs received a payout for one-third of their restricted stock units (“RSUs”) granted in each of 2021, 2022 and 2023, along with the associated dividend equivalents. These RSUs are time-based, and one-third vest each year over a three-year period.

 

LOGO

  Our Cumulative Earnings Per Share (“CEPS”) exceeded our three-year CEPS threshold, which resulted in payment of 53% of the performance shares (“PSUs”) related to CEPS granted in 2021 for the 2021-2023 performance period and the associated dividend equivalents.

 

LOGO

  Customer Satisfaction, Reliability, Average Response Time, and EID Scorecard metrics performed at or above target for our Short-Term Incentive Plan. Our Consolidated Earnings Per Share performance and Cost Per Customer metrics both landed below threshold, resulting in a total annual cash incentive payment of 25% of target.

 

LOGO

  Our Total Shareholder Return (“TSR”) exceeded our TSR threshold, which resulted in a final payment of 72.5% of the performance shares (“PSUs”) related to TSR granted in 2021 for the 2021-2023 performance period and the associated dividend equivalents.

 

LOGO

  Our CEO compensation strongly aligns with our shareholder interests: 60% in long-term incentive equity, 20% in annual cash incentive, and 20% base salary.

 

LOGO

  Our CEO’s pay is 27 times higher than our median employee’s pay.
 

 

 

2024 PROXY STATEMENT

  3


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 

Proposal 1: Election of Directors

 

 What are you voting on?   Shareholders are being asked to elect director nominees for a one-year term. This section includes information about the Board of Directors and each director nominee.
 
 Voting Recommendation:   The Board of Directors unanimously recommends a vote FOR each of the nominees for director and urges beneficial owners, if they are not the record holders, to instruct their brokers or other nominees to vote for each director.

Director Selection Process

The Board is elected by the shareholders to oversee their interests in the long-term overall success of the Company’s business and its financial strength. Our directors have diverse backgrounds and experience and represent a broad spectrum of viewpoints.

The Board has a robust and effective director nomination and evaluation process. The Board has delegated to the Governance Committee the responsibility for reviewing and recommending to the Board nominees for director. The Governance Committee annually reviews with the Board the composition of the Board as a whole and recommends, if necessary, steps to be taken so the Board reflects the appropriate balance of knowledge, experience, competencies and expertise, all in the context of an assessment of the needs of the Board and the Company at the time. In evaluating a director candidate, the Governance Committee considers the knowledge, experience, integrity, business acumen and judgment of that candidate; the potential contribution of that candidate to the diversity of backgrounds, experience and competencies the Board desires to have represented; the willingness of that candidate to consider strategic proposals; and any other criteria established by the Board, as well as any core competencies or technical expertise necessary to staff the Board Committees.

For longer-serving directors, the Governance Committee also considers the tenure of a director and whether the duration of service impairs such director’s independence from management, as demonstrated by the director’s relationship with management and the director’s participation in Board and committee deliberations. Directors must be able to commit the requisite time for preparation and attendance at regularly scheduled Board and committee meetings, as well as be able to participate in other matters necessary to ensure good corporate governance is practiced.

The Board is committed to actively seeking out highly qualified candidates and including such individuals in each Board candidate pool, including candidates with a diversity of experience, skills, background, and viewpoint, as well as diversity in race, ethnicity, gender, age, sexual orientation and/or gender identity.

The Board considers the appropriate size of the Board and the needs of the Company with respect to the particular talents and experience of its directors. In evaluating individual director candidates, the Board takes into consideration the criteria set forth in the Company’s Corporate Governance Guidelines (available on the Company’s website at https://investor.avistacorp.com/corporate-governance), including, but not limited to:

 

 

The qualifications, knowledge, competencies, abilities and executive leadership experience of nominees, as well as work experience at the executive leadership level in his/her field of expertise;

 

 

Familiarity with the energy/utility industry;

 

 

Recognition by other leaders as a person of integrity and outstanding professional competence with a proven record of accomplishments;

 

 

Experience in a regulatory arena;

 

 

Knowledge of the business of, and/or facilities for, the generation, purchase, transmission and/or distribution of electric energy and/or the purchase, storage and/or distribution of natural gas;

 

 

Attributes enhancing the diversity and perspective of the Board; and

 

 

Knowledge of the customers, community and employee base.

 

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PROPOSAL 1: ELECTION OF DIRECTORS

 

The Board believes it must continue to refresh itself. During the last five years, the Board added four new members, all of whom are independent, as a result of retirements and departures due to professional and personal commitments. The Board consists of directors with a range of experience at policy-making levels in business, government and other areas relevant to the Company’s activities. The average tenure of the current director nominees is 8.8 years and the average age is 60.7.

The Governance Committee identifies nominees by first evaluating the current members of the Board. Current members of the Board with competencies and experience relevant to the Company’s business strategies and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service, or if the Governance Committee decides not to nominate a member for re-election, the Committee would then identify the desired qualifications, competencies, expertise, diversity, abilities and experience of a new nominee considering the criteria set forth above. Current members of the Board are polled for recommendations of individuals meeting the criteria described above. The Governance Committee may also consider candidates recommended by management, employees or others. The Governance Committee may, at its discretion, engage executive search firms to identify qualified individuals.

Shareholder Recommendations and Nominations of Director Candidates; Proxy Access

The Governance Committee will consider written recommendations for candidates for the Board made by shareholders. Recommendations must include detailed biographical material indicating the qualifications of the candidate for the Board and must include a written statement from the candidate of willingness and availability to serve. The Governance Committee will consider any candidate recommended in good faith by a shareholder. The Governance Committee will evaluate director nominees in the same manner as other candidates are evaluated; as discussed above.

While candidates for director are usually nominated by the Board (after consideration and recommendation by the Governance Committee, as discussed above), shareholders may directly nominate candidates for election as directors. In order to do so, shareholders must follow the procedures set forth in the Company’s Bylaws (“Bylaws”), described in the section “2025 Annual Meeting Information.” The Chair of the meeting may refuse to acknowledge any nomination not made in compliance with the Bylaws.

In addition, subject to the satisfaction of additional requirements and conditions, and to the exceptions and limitations set forth in the Bylaws, each registered shareholder (or group of not more than 20 shareholders) who has owned at least 3% of the Company’s outstanding shares of common stock for at least three years, may designate one nominee for election as a director of the Company for inclusion in management’s proxy soliciting materials for each Annual Meeting of Shareholders; provided, however, that management is not required to include a number of such designees greater than 20% of the total number of members of the Board of Directors; and provided, further, the designating shareholder(s) and the designated nominee(s) shall also meet the eligibility and other requirements set forth in the Bylaws and described in “2025 Annual Meeting Information”.

Current Nominees

Eleven directors are to be elected to hold office for a one-year term, and until a qualified successor is elected. The Company’s Restated Articles of Incorporation and Bylaws provide for up to 11 directors, as specified from time to time by the Board. The Board has fixed the number of directors at 11.

Upon recommendation from the Governance Committee, the Board has nominated Julie A. Bentz, Donald C. Burke, Kevin B. Jacobsen, Rebecca A. Klein, Sena M. Kwawu, Scott H. Maw, Scott L. Morris, Jeffry L. Philipps, Heidi B. Stanley, Dennis P. Vermillion and Janet D. Widmann to be re-elected as directors for a one-year term to expire at the Annual Meeting in 2025 and until their successors shall have been elected. The nominees have consented to serve as directors, and the Board has no reason to believe any nominee will be unable to serve. If a nominee should become unavailable, your shares will be voted for a Board-approved substitute. The Board concluded all nominees, with the exception of Mr. Vermillion, are independent and all nominees satisfy the various criteria for nomination as directors.

 

 

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Included in each nominee’s biography is an assessment of the specific qualifications, competencies, attributes and experience of such nominee based on the qualifications described above.

SUMMARY OF BOARD CORE COMPETENCIES

Our director nominees bring a balance of relevant skills to the boardroom, as well as an effective mix of diversity and experience. A summary of the director nominees’ core competencies is shown below:

 

Qualifications and Expertise

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO    Total

Financial
Leadership of a financial firm or management of the finance function of an enterprise, resulting in proficiency in complex financial management, capital allocation, and financial reporting processes.

                               8/11

Leadership
Extended experience leading a significant enterprise, resulting in a practical understanding of organizations, processes, strategic planning, and risk management. Demonstrated strengths in developing talent, planning succession, and driving change and long-term growth.

                         11/11

Business Innovation
Experience driving business success, with an understanding of diverse business environments including regional considerations, economic conditions, cultures, and regulatory frameworks, as well as disruptive innovation.

                         11/11

Energy and Utilities
Experience with the unique operating, regulatory, and financial aspects of the utility industry and related risks, including energy and commodity markets.

                                         3/11

Technology
Experience working in operating and administrative technology, including expertise in cybersecurity.

                                     5/11

Regulatory, Environmental and Risk
Experience with and an understanding of the regulated nature of the utility industry, including environmental regulation, the clean energy transition, and oversight of risk.

                         11/11

Mergers and Acquisitions
The ability to analyze the fit of a company’s strategy and culture, accurately value transactions, and evaluate operational integration plans.

                           10/11

 

100%

 

of our directors participate in Board Governance

  

91%

 

of our directors are independent

  

36%

 

of our directors added in the last 5 years

  

60.7 yrs

 

is the average age of our director nominees

 

 

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Except as otherwise indicated, committee membership is as of December 31, 2023.

 

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Julie A. Bentz

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 59

 

Tenure: 2 Years

 

Committees:

•  Environmental, Technology, Operations

•  Finance

 

   

MAJOR GENERAL (RETIRED) BENTZ is one of the principals of BDR LLC, a tree farm and fish hatchery management company, and the sole principal of HOMR LLC, a national security and leadership consulting firm. She retired in 2019 after a successful 33-year career spanning active, reserve and National Guard commissioned service. She has been a recurring member of the White House National Security Council Staff and Homeland Security Council for the Executive Office of the President. While working at the White House, her roles included Senior Advisor for Emerging Technologies and Director of Strategic Capabilities. She also held numerous roles in the Department of Defense at the Pentagon.

 

Major General (Retired) Bentz holds a M.S. in National Security Strategy from the National Defense University, a Ph.D. and M.S. in Nuclear Engineering from the University of Missouri, and a B.A. in Radiological Health from Oregon State University.

 

Board and Philanthropic Service:

•  Chair, External Advisory Board for National Security Programs, Sandia National Laboratory

•  Chair, External Review Committee for Strategic Deterrence, Lawrence Livermore National Laboratory

•  Board Member, External Review Committee for Global Security, Lawrence Livermore National Laboratory

•  Senior Advisor, Santiam Canyon Lionshead and Beachie Creek Wildfires Long Term Recovery Group

•  Member, CACI Strategic Advisory Group

•  Member, College of Engineering Dean’s Leadership Council, Oregon State University

 

Reasons for Nomination:

Ms. Bentz brings to the Board an extensive background in technology and security, both physical and cyber, as well as unique experience serving under three separate United States Presidents on security-related policy matters. Through her service on both the Finance Committee and the Environmental, Technology and Operations Committee, Ms. Bentz provides a unique and valuable perspective on a wide range of issues, including financial matters and investments, as well as issues involving climate change and clean energy transition, technology, and operational safety and security.

 

 

 

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Donald C. Burke

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 63

 

Tenure: 12 Years

 

Committees:

•  Vice Chair of the Board

•  Audit (Chair)

•  Executive

•  Governance

   

MR. BURKE was a managing director of BlackRock, Inc and served as the president and CEO of the BlackRock US mutual funds until his retirement in 2009. In this role, Mr. Burke was responsible for the accounting, tax and regulatory reporting requirements for over 300 open and closed-end mutual funds. Mr. Burke joined BlackRock in connection with the merger with Merrill Lynch Investment Managers (“MLIM”), taking a lead role in the integration of the two firms’ operating infrastructures. While at MLIM, Mr. Burke was the Head of Global Operations and Client Services and also served as the Treasurer and CFO of the MLIM mutual funds. He started his career in public accounting.

 

Mr. Burke is a certified public accountant and received a B.S. in Accounting and Economics from the University of Delaware and a M.B.A. in Taxation from Pace University.

 

Board and Philanthropic Service:

•  Trustee, Virtus mutual fund complex

•  Director and Audit Committee Chair, Duff & Phelps mutual fund complex

•  Former Trustee, Goldman Sachs mutual fund complex

•  Former Trustee, BlackRock global funds

•  Former Trustee and Treasurer, Crohn’s and Colitis Foundation

 

Reasons for Nomination:

Mr. Burke brings significant financial and accounting experience to the Board from his years in public accounting and his role as the treasurer and CFO of numerous mutual funds. Through his service as Chair of the Audit Committee and as the designated Audit Committee Financial Expert, Mr. Burke’s background enhances his performance of a critical leadership role in overseeing the integrity of the Company’s financial statements and related controls, compliance with legal and regulatory requirements, and the performance of the Company’s internal audit function and independent auditors. In addition, as a member of the Governance Committee, Mr. Burke provides a unique and valuable perspective on the Company’s corporate governance and corporate responsibility programs and activities. As a result of his demonstrated excellence in helping lead the Board, Mr. Burke was selected to serve as Vice Chair of the Board.

 

 

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Kevin B. Jacobsen

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 57

 

Tenure: 1 Year

 

Committees:

•  Audit

•  Environmental, Technology, Operations

   

MR. JACOBSEN is the Chief Financial Officer of The Clorox Company (NYSE: CLX), a role he has held since 2018. As CFO, Mr. Jacobsen is the senior executive responsible for Clorox’s financial activities, including general accounting, external reporting, financial planning, treasury, tax, and investor relations, as well as oversight of the company’s internal audit function. From 2011 until his appointment as CFO, Mr. Jacobsen served as vice president of financial planning and analysis for Clorox. Prior to that, he served in various roles for Clorox, including as vice president of finance, business development and international; vice president of finance, specialty division; and finance management positions for the Kingsford, Cat Litter and Brazil businesses and the product supply organizations of Clorox. He started his career with Clorox in 1995 after spending five years with General Motors Corporation (NYSE:GM) in various finance and accounting roles.

 

Board and Philanthropic Service:

•  Member of the Economic Advisory Council, Federal Reserve Bank of San Francisco

 

Reasons for Nomination:

Mr. Jacobsen brings a deep knowledge of financial and accounting issues to the Board, as well as experience as an executive of a publicly traded company operating in competitive product markets. Mr. Jacobsen’s background and experience enables him to provide a unique and valuable perspective on the Company’s business and operational risks through his anticipated service on the Environmental, Technology and Operations Committee. In addition, given his broad financial background, Mr. Jacobsen is a valuable member of the Board’s Audit Committee, where he provides important oversight over the integrity of the Company’s financial statements and related controls, compliance with legal and regulatory requirements, and the performance of the Company’s internal audit function and independent auditors.

 

 

 

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Rebecca A. Klein

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 58

 

Tenure: 14 Years

 

Committees:

•  Compensation

•  Environmental, Technology, Operations (Chair)

 

   

MS. KLEIN is the principal of Klein Energy, LLC, an energy consulting company based in Austin, Texas. Over the last 25 years, she has worked in Washington, DC and in Texas in the energy, telecommunications and national security arenas. Ms. Klein’s professional experience includes service with KPMG Consulting (now Deloitte) where she headed the development of the company’s Office of Government Affairs and Industry Relations in Washington, DC. She has served as a commissioner and chair of the Texas Public Utilities Commission and as a Senior Fellow with Georgetown University’s McDonough School of Business. She is a retired Lieutenant Colonel of the Air Force Reserve and a member of the State Bar of Texas.

 

Ms. Klein holds a B.A. in Human Biology from Stanford University, an M.B.A. from MIT, an M.A. in National Securities Studies from Georgetown University, and a J.D. from St. Mary’s University School of Law in San Antonio, Texas.

 

Board and Philanthropic Service:

•  Director, Diamondback Energy, an upstream oil and gas production company

•  Director, San Jose Water Group, a water utility with subsidiaries across the U.S.

•  Director, Riverbend Energy Group, an investment fund focused on the energy transition

•  Former Board Chair, Lower Colorado River Authority, a public power utility with generation, transmission, and water services across central Texas

•  Director and Faculty Member, Christian Latina Leadership Institute, a non-profit that provides leadership curriculum to Hispanic women in Mexico, Colombia, and the U.S.

•  Founder and Director, Texas Energy Poverty Research Institute, a non-profit focused on the nexus of energy and poverty

 

Reasons for Nomination:

Ms. Klein possesses a deep knowledge of the energy industry, energy markets and energy regulation, as well as legal expertise in energy and telecommunications and experience in technology and cybersecurity issues. She provides a unique diversity of background and perspective to the Board generally, but particularly in her role as chair of the Environmental, Technology & Operations Committee, Ms. Klein is able to provide critical leadership around the Company’s business and operational risks, environmental activities and objectives, and its strategies relating to physical and cyber security, technology, and data governance. As a member of the Compensation Committee, Ms. Klein helps provide oversight on executive compensation matters, as well as the Company’s strategies, objectives and performance relating to human capital management, including diversity, equity, and inclusion.

 

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Sena M. Kwawu

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 55

 

Tenure: 3 Years

 

Committees:

•  Environmental, Technology, Operations

•  Finance (Chair)

 

   

MR. KWAWU is an operational and finance leader with more than 25 years of multifunctional experience in high growth and mature public companies across multiple industries. Mr. Kwawu currently serves as the President, In-Home Services for Cinch Home Services, one of the nation’s leading providers of home services solutions. From 2020 to 2022, Mr. Kwawu served as the senior vice president of operations of Frontdoor, Inc. (NASDAQ: FTDR), a home services company with services ranging from flexible home service plans to on-demand solutions. Mr. Kwawu was also formerly with Starbucks Corporation (NASDAQ: SBUX), where he was the senior vice president of finance and business operations. His career also includes global leadership roles with State Street Corporation (NYSE: STT), Genworth Financial (NYSE: GNW) and General Electric Company (NYSE: GE). He also holds a patent for a system and method for pool risk assessment for life insurance.

 

Mr. Kwawu holds a B.B.A. from George Washington University and an M.B.A. from University of Michigan.

 

Board and Philanthropic Service:

•  Board Member and Chair, VillageReach

•  Board Member, The Executive Leadership Council

 

Reasons for Nomination:

Mr. Kwawu has extensive background as a public company executive, which includes experience with risk management, supply chain management, finance, banking, mergers and acquisitions, technology and customer service. Mr. Kwawu’s background allows him to bring a diversity of perspective to Board-related matters. Mr. Kwawu’s experience with operational, supply chain and technology issues allow him to provide unique insights and perspective to his service on the Company’s Environmental, Technology & Operations Committee, which oversees the business and operational risks of the Company, the Company’s environmental performance and strategy, employee and public safety, supply chain risk, and physical and cyber security, technology and data management. Likewise, through his service as Chair of the Finance Committee, Mr. Kwawu is able to bring his extensive financial background to bear in helping ensure proper oversight of the Company’s strategies, budgets, forecasts and financial plans and programs to enable the Company to meet its short and long-term goals and objectives.

 

 

 

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Scott H. Maw

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 56

 

Tenure: 7 Years

 

Committees:

•  Compensation (Chair)

•  Governance

   

MR. MAW served as executive vice president and CFO of Starbucks Corporation (NASDAQ: SBUX) from February 2014 until his retirement in November 2018. In that capacity, Mr. Maw was responsible for the company’s Global Finance organization. Prior to that, he served as senior vice president of Corporate Finance of Starbucks where he was responsible for corporate finance, including accounting, tax and treasury. Mr. Maw also had oversight of all financial and securities-related regulatory filings. He joined Starbucks as global controller in 2011.

 

Prior to joining Starbucks, Mr. Maw served as CFO of SeaBright Insurance Company, a specialty workers’ compensation insurer, from 2010 to 2011. From 2008 to 2010, he served as CFO of the Consumer Banking division of JPMorgan Chase & Co. (NYSE: JPM), having previously held a similar position at Washington Mutual Bank. From 1994 to 2003, he served in various finance leadership positions at General Electric Company, including serving as CFO of GE Insurance Holdings, Inc. in London.

 

Mr. Maw graduated from Gonzaga University with a B.A. in Accounting.

 

Board and Philanthropic Service:

•  Board of Trustees, Gonzaga University

•  Director and Audit Committee Chair, Alcon, Inc. (NYSE: ALC), a Swiss medical company specializing in eye care products

•  Lead Independent Director and Audit Committee Chair, Chipotle Mexican Grill, Inc. (NYSE: CMG)

 

Reasons for Nomination:

Mr. Maw brings more than 30 years of financial experience, including extensive experience as a senior executive of several public companies and deep expertise on financial matters and global business operations, to his service on the Board. Mr. Maw provides critical leadership to the Board through his role as Chair of the Compensation Committee, through which he helps ensure proper executive compensation practices and philosophies, provides oversight over the organizational structure and executive personnel of the Company, and helps ensure proper oversight of the Company’s strategies, objectives and performance relating to human capital management, including diversity, equity and inclusion. Likewise, Mr. Maw’s extensive executive experience allows him to bring a unique and valuable perspective to his service on the Board’s Governance Committee, as well as to the Company’s disclosure of corporate responsibility matters, including environmental, social and governance issues.

 

 

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Scott L. Morris

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 66

 

Tenure: 17 Years

 

Committees:

•  Chairman of the Board

•  Executive (Chair)

•  Finance

 

   

MR. MORRIS has been Chairman of the Company since January 2008. From January 2008 to October 1, 2019, he also served as the Company’s CEO. From January 2008 to January 2018, he served as the Company’s President. From May 2006 to December 2007, he served as the Company’s President and Chief Operating Officer (“COO”). Mr. Morris was hired by the Company in 1981 and his experience includes management positions in construction and customer service, as well as management of the Company’s Oregon utility business. He was elected as a vice president in November 2000 and, in February 2002, he was elected as a senior vice president.

 

Mr. Morris is a graduate of Gonzaga University and received his M.A. in organizational leadership from Gonzaga. He also completed the Stanford Business School Financial Management Program and the Kidder Peabody School of Financial Management.

 

Board and Philanthropic Service:

•  Director, McKinstry Co., LLC, a building systems design, operation and maintenance company

•  Director, California Water Service, the largest regulated American water utility west of the Mississippi River and the third largest in the country

•  Director, Iron Horse Acquisitions, a diversity media and entertainment SPAC company

•  Trustee Emeritus, Gonzaga University

•  Board Member, Idaho Chapter of the Nature Conservancy

•  Board Member, various Spokane nonprofit and economic development Boards

 

Reasons for Nomination:

Mr. Morris, in his position as Chairman of the Board, leads the overall activities of the Board. He has extensive utility experience, having spent his entire career in the industry. He brings a deep knowledge and understanding of the Company and its subsidiaries, as well as the Company’s overall strategies, activities and objectives, including those relating to operational performance; environmental, social and governance issues; clean energy; employee development, retention and attraction; financial performance; and ethical corporate governance. Through his service on the Finance Committee, Mr. Morris helps ensure adequate oversight of the Company’s financial strategies, budgets, forecasts and financial plans and programs to enable the Company to meet its short and long-term goals and objectives. Mr. Morris also delivers keen insight into the economic, political and cultural characteristics of the Company’s service territories and the Pacific Northwest as a whole.

 

 

 

 

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Jeffry L. Philipps

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 68

 

Tenure: 4 Years

 

Committees:

•  Audit

•  Compensation

 

   

MR. PHILIPPS was President and CEO of Rosauers Supermarkets, Inc. from July 2000 until his retirement in August 2021, during which time he oversaw the strategy and all operations of a retail grocery company operating 22 retail stores across the Pacific Northwest. Over the span of his career, Mr. Philipps has also played an integral role in the economic vitality of the greater Spokane area and Inland Pacific Northwest region through his leadership roles in a multitude of different regional and national organizations and entities. Mr. Philipps is a member of the Public Library Foundation Citizen Hall of Fame and was named “Retailer of the Year” twice by the Washington Food Industry Association.

 

Mr. Philipps is a graduate of Carroll College in Helena, Montana, where he earned B.A. degrees in Business, Economics and Accounting.

 

Board and Philanthropic Service:

•  Chair, Washington Food Industry Association (2011-2012)

•  Chair, United Way of Spokane County Campaigns (2012, 2020)

•  Board Chair (2012-2013) and Board Member through 2023, Greater Spokane Incorporated (GSI)

•  Board Chair of Life Sciences Spokane, a GSI initiative to develop and support a life and bioscience economy in Spokane, Washington

•  Council President (2015-2017) and current Board Member, Inland NW Council of the Boy Scouts of America

•  Board Chair (2022) and Board Member through 2023, Providence Community Mission Board

•  Board Member, Innovia Foundation

•  Community Advisory Board Member, University of Washington and Gonzaga University Regional Health Partnership

•  Community Advisory Board Member (2016-2020), Washington State University Elson S. Floyd College of Medicine

 

Reasons for Nomination:

Mr. Philipps brings a long history of leadership, economic development, and innovation to the Board, including more than 20 years of experience as the CEO of a retail grocery company and a background in accounting and finance, mergers and acquisitions, supply chain, organizational development, human resources, economic development, political and regulatory affairs, and consumer retail sales. His extensive background in these areas make him a valuable member of the Compensation Committee of the Board, through which he helps ensure proper alignment of executive compensation and structure, as well as oversight of human capital management and diversity, equity and inclusion issues. Likewise, through his past service on the Finance Committee, and now the Audit Committee, Mr. Philipps brings his unique and valuable leadership and background to bear in helping provide oversight of the Company’s financial strategies and objectives.

 

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Heidi B. Stanley

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 67

 

Tenure: 18 Years

 

Committees:

•  Audit

•  Executive

•  Governance

 

   

MS. STANLEY is co-owner and chair of Empire Bolt & Screw, Inc., a privately-held international distribution company headquartered in Spokane, Washington. Prior to that, Ms. Stanley spent 24 years in the banking industry. She served as CEO and chair of Sterling Savings Bank from January 2009 to October 2009. From January 2008 to December 2008, she served as director, vice chair, president & CEO. From October 2003 to December 2007, she served as director, vice chair and COO. Previously, she held a variety of leadership positions with increasingly higher levels of managerial responsibility. Prior to joining Sterling in 1985, Ms. Stanley worked for IBM in San Francisco, California and Tucson, Arizona. Throughout her career, Ms. Stanley has provided leadership to the greater Spokane area and the Inland Pacific Northwest region through her service on a variety of charitable, education and cultural organizations.

 

Ms. Stanley graduated from Washington State University with a B.A. in Business Administration.

 

Board and Philanthropic Service:

•  Director, Forterra, Inc., a for-profit, wholly-owned subsidiary of the Association of Washington Business

•  Founding Member, Greater Spokane Incorporated

•  Former Chair, Association of Washington Business

•  Former Chair, Inland Northwest YMCA

•  Former Board Member, Spokane Symphony

•  Board Member, Washington Policy Center

•  Board Member, various other charitable, education and cultural organizations

 

Reasons for Nomination:

Ms. Stanley’s varied business experiences provide a diverse business perspective on risk analysis, operations, policy development, mergers and acquisitions, organizational development, board governance and capital markets. In addition, she has a long history of leadership, economic development and community support activities, all of which allow her to provide valuable leadership on governance and corporate responsibility matters through her service on the Governance Committee. In addition, through her broad financial background, Ms. Stanley is a valuable member of the Board’s Audit Committee, where she plays an important role in ensuring proper oversight of the integrity of the Company’s financial statements and related controls, compliance with legal and regulatory requirements, and the performance of the Company’s internal audit function and independent auditors. In addition, Ms. Stanley provides deep understanding of the Company’s customer base, as well as economic and political issues throughout the Company’s service territories.

 

 

 

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Dennis P. Vermillion

 

NON-INDEPENDENT DIRECTOR NOMINEE

 

Age: 62

 

Tenure: 6 Years

 

Committees:

•  CEO

•  Executive

   

MR. VERMILLION has been CEO since October 1, 2019. In this capacity, he oversees all aspects of the Company’s business. Previously, he served as president of Avista from January 1, 2018 to October 1, 2023; senior vice president of Avista and president of the Avista Utilities division from 2009 to 2018. He also serves as chairman of the board for Avista subsidiary Alaska Electric Light and Power Company. Mr. Vermillion joined Avista in 1985 and has held various staff and management positions. His experience covers a broad range of activities, including leadership, energy trading and marketing, risk management, scheduling, resource operations, power/transmission contracting, resource planning and coordination, regulatory issues and production cost modeling. Mr. Vermillion has served as Vice President of Energy Resources of Avista Utilities and prior to that, as President and COO of Avista Energy from February 2001 until its sale in June 2007.

 

Mr. Vermillion is a graduate of Washington State University with a B.S. in Electrical Engineering.

 

Board and Philanthropic Service:

•  Board member, American Gas Association (AGA)

•  Board member, Edison Electric Institute (EEI)

•  Board member, Washington Roundtable

•  Board member, Greater Spokane Inc.

•  Board Member, Avista Foundation

•  Past Chair, Western Energy Institute

•  Past Chairman, United Way Spokane County campaign

•  Former Board Member, United Way Spokane County

 

Reasons for Nomination:

Mr. Vermillion brings extensive utility experience, together with a deep knowledge and understanding of the Company and its subsidiaries, to his service on the Board. He has devoted more than 37 years to the Company and to the energy industry as a whole and has served in a variety of executive leadership positions. He provides critical leadership in the establishment and implementation of the Company’s overall strategies, including its short- and long-term goals around such wide and varied issues as the transition to clean energy; employee development, retention and attraction; diversity, equity and inclusion; safety and security; operational excellence; ethical corporate governance; and financial performance. Mr. Vermillion is also the standard-bearer for the Company’s culture of integrity, which led to the Company’s recognition as one of Ethisphere’s “World’s Most Ethical Companies” in 2019, 2020, 2021, 2022, and 2023.

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS

 

LOGO

 

Janet D. Widmann

 

INDEPENDENT DIRECTOR NOMINEE

 

Age: 57

 

Tenure: 10 Years

 

Committees:

•  Finance

•  Governance (Chair)

   

MS. WIDMANN has more than 25 years of executive experience in health care service and technology-enabled health care companies. From 2022-2023, she served as the Executive Chairman and Interim CEO of Acorn Health, a national provider of services to children with autism. From 2016 until 2021, she also served as president and CEO of Kids Care Dental, a pediatric dental, orthodontic and oral surgery company. Prior, Ms. Widmann was executive vice president and chief executive of Blue Shield of California, a national health plan where she had overall profit and loss responsibility for $15 billion in annual revenue and 3.5 million members. Ms. Widmann began her career at Health Net, eventually serving as the COO of its dental and vision subsidiaries. Ms. Widmann has been consistently named one of the “Most Influential Women in the Bay Area by the San Francisco Business Journal.

 

Ms. Widmann holds a B.S. in Health Administration from California State University, Northridge and a M.A. in Health Administration from the University of Southern California.

 

Board and Philanthropic Service:

•  Advisory Board Member, VIDA Health

•  Former Strategic Advisor, Genney

•  Former Director, Delta Dental of California

•  Former Executive Chair, Acorn Health

•  Former Director, Cutera (NASDAQ: CUTR)

•  Former Member, California Health Professions Education Foundation and Former Board Member, Bay Area Business Council

•  Former Board Member, Versant Health

•  Member, The Committee of 200

•  Member, McKinsey & Company’s Bay Area Women’s Executive Roundtable

•  Member, International Women’s Forum

 

Reasons for Nomination:

Ms. Widmann brings a strong background of executive leadership and economic development to her service on the Board. Her experience as CEO and COO of private companies includes risk management and oversight, finance and investment banking, mergers and acquisitions, technology and cybersecurity, organizational development and human resources, innovation, economic development and customer service. As the Chair of the Governance Committee, Ms. Widmann provides critical leadership in the oversight of governance-related issues, as well as the Company’s disclosure of corporate responsibility matters, including environmental, social and governance issues. In addition, Ms. Widmann is a valuable member of the Board’s Finance Committee which provides oversight of the Company’s financial strategies, plans, programs, goals and objectives.

 

 

LOGO

 

 

 

The Board recommends a vote “FOR” all director nominees.

 

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CORPORATE GOVERNANCE MATTERS

 

Corporate Governance Matters

Corporate Governance Principles

The Board is responsible for directing the management of the business and affairs of the Company. As such, the Board gives the Company’s executive officers strategic direction and oversees their operation of the Company’s business and their conduct of its affairs, with a view to serving the best interests of the Company and its shareholders and other stakeholders.

The Board has adopted Governance Guidelines to address matters including qualification of directors, standards of independence for directors, election of directors, responsibilities and expectations of directors, and evaluation of director and committee performance. The Governance Guidelines are reviewed at least annually and updated as necessary. The Governance Guidelines, along with the Bylaws, Board Committee Charters, and the Code of Conduct, provide the framework for the governance of the Company.

Board Leadership Structure

The Board does not have a policy as to whether the role of CEO should be separate from the Chairman, nor, if the roles are separate, whether the Chairman should be selected from the independent directors. The Board selects the Chairman in a manner it determines to be in the best interests of the Company and its shareholders. This flexibility has allowed the Board to determine whether the role should be separated based on the individuals and the circumstances existing at that time. The Board believes the Company has been well served by this leadership structure.

Annually, the Board examines its governance practices, including the separation of the positions of the Chairman and the CEO and the independence of the Chairman. The Board believes it needs to retain the ability to balance the independent Board structure with the flexibility to appoint as Chairman someone with hands-on knowledge of and experience in the operations of the Company. Currently, the roles of Chairman and CEO are separated. Mr. Morris, who retired as CEO, effective October 1, 2019, serves as the Chairman of the Board. The Company is led by Mr. Vermillion, who has served as its CEO since October 1, 2019.

Duties of the Chairman

The Chairman’s duties include:

 

 

Chairing all meetings of the Board in a manner that effectively utilizes the Board’s time and which takes full advantage of the skills, expertise and experience of each director;

 

 

Working with the Vice Chair and CEO to establish schedules and agendas for Board meetings, with input from other directors and management;

 

 

Together with the Vice Chair, recommending an agenda to the Board for its approval for each shareholder meeting;

 

 

Providing input to the Chair of the Governance Committee on new Board member candidates and the selection of the Board committee members;

 

 

Facilitating and encouraging constructive and useful communication between the Board and management;

 

 

Providing leadership to the Board in the establishment of positions the Board may take on issues to come before shareholder meetings;

 

 

Presiding at all shareholder meetings; and

 

 

With input from the CEO, ensuring the Board is provided with full information on the condition of the Company, its businesses, the risks facing the Company and the environment in which it operates.

Independent Vice Chair

The Board has also established the position of independent Vice Chair, which was previously designated as independent Lead Director. Donald Burke was selected to serve as Vice Chair for a three-year term beginning May 11, 2023.

 

 

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The Vice Chair’s duties include:

 

 

Ensuring there is open and effective communication between the Board, the Chairman and management of Board-related matters;

 

 

Keeping an open line of communication that provides for dissemination of information to the Board and discussion before actions are finalized;

 

 

Serving as an independent point of contact for directors, management or shareholders wishing to communicate with the Board other than through the Chairman;

 

 

Presiding at all meetings at which the Chairman is not present; and

 

 

Working with the Chairman to set meeting schedules and agendas for the Board meetings, including soliciting input from non-management directors on items for the Board agendas, to ensure appropriate agenda items are included and there is adequate time for discussion of these items.

The Vice Chair is available for communications and consultation with major shareholders. The Company has a mechanism for shareholders and other interested parties to communicate with the Vice Chair and independent directors as a group, or on an individual basis. (See “Communications with Shareholders” in this section.)

Director Independence

The Board has been, and continues to be, a strong proponent of director independence. It is the policy of the Board that a majority of the directors be independent from management and that the Board not engage in transactions that would conflict with the best interests of the Company’s business.

The Company’s corporate governance structures and practices provide for a strong, independent Board and include several independent oversight mechanisms:

 

 

All members of the Board are independent except for Mr. Vermillion.

 

 

All members of the Board committees are independent, except for Mr. Vermillion who is a member of the Executive Committee.

 

 

Each Board Committee has a separate independent Chair.

 

 

All Board committees may seek legal, financial or other expert advice from sources independent from management.

The Board believes this governance structure and these practices ensure strong and independent directors will continue to effectively oversee the Company’s management and key issues related to its long-range business plans, long-range strategic decisions, risks and integrity.

Independence determinations are made on an annual basis at the time the Board approves nominees for election at the next Annual Meeting and, if a director joins the Board between Annual Meetings, at such time. To assist in this determination, the Board adopted Categorical Standards for Independence of Directors (the “Categorical Standards”). As a result of this review, the Board affirmatively determined the directors nominated for election at the Annual Meeting are independent of the Company and its management, with the exception of Mr. Vermillion. Mr. Vermillion is an inside director because of his employment as CEO of the Company.

Related Party Transactions

The Board recognizes related party transactions present a heightened risk of conflicts of interest and/or improper valuation of transactions (or the perception thereof) and, therefore, has adopted a written Related Party Transaction Policy, which is followed in connection with all related party transactions involving the Company and specified related persons including directors (including nominees) and executive officers, certain family members and certain shareholders, all as outlined in the applicable rules of the Securities and Exchange Commission (“SEC”). During its annual review, the Board considered whether there were any transactions or relationships between directors or members of their immediate families (or any entity of which a director or a director’s immediate family member is an executive officer, general partner, or significant equity holder) and members of the Company’s senior management or their affiliates inconsistent with a determination that the director is independent.

 

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CORPORATE GOVERNANCE MATTERS

 

In particular, the Board considered the Company and its subsidiaries in the ordinary course of business have, during the last three years, purchased products and services from companies at which some of our directors were officers, board members, or investors during 2023.

SEC rules require the Company to disclose any related party transaction in which the amount involved exceeds $120,000 in the last year. The Governance Committee has determined the Company had no reportable related party transactions for 2023.

Board Meetings

The Board strongly encourages its members to attend all Board and committee meetings and the Annual Meeting. The Board held four meetings in 2023. The attendance at all Board and Committee meetings was 100%. All directors attended the prior year’s Annual Meeting, and all directors are planning to attend the upcoming Annual Meeting.

Meetings of Independent Directors

The independent directors meet at each regularly scheduled Board meeting. The Chairman and the Vice Chair collaboratively establish the agenda for each session and also determine which, if any, other individuals, including members of management and independent advisors, should be available for each such meeting.

Board Risk Oversight

The Board plays an active role in the identification of the major risks affecting the Company and the oversight of the Company’s risk management. For organizational purposes, the Board has categorized the various risks facing the Company as follows:

 

•   utility regulatory

 

•   operational

 

•   climate change

 

•   cybersecurity

 

•   technology

 

  

•   strategic

 

•   external mandates

 

•   financial

 

•   energy commodity

 

•   compliance

While the Board retains full responsibility for the general oversight of the management of all categories of risk, it has delegated to and allocated among its committees first oversight responsibility regarding specific categories of risk. The allocation of categories of risk to the respective committees is described generally below and is more specifically set forth in the committee charters. While management is responsible for the day-to-day management of risk, appropriate Company officers make periodic reports to the respective committees or, if circumstances so warrant, to the full Board, and respond to specific inquiries made by the committees and/or the Board. Following a risk report to a committee, the chair of that committee reports to the full Board. This process facilitates the coordination of the oversight and management of the various categories of risk, particularly for the interrelationships among various risks.

See Item 1A — “Risk Factors”, Item 1C — “Cybersecurity”, and Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Enterprise Risk Management” in the Annual Report for discussions of the various risks within the general categories listed above and the Company’s risk management processes and procedures.

CEO Succession Plan

Succession plans for our CEO and other officers are an important part of the Company’s long-term success, and the Company has a succession-planning process reflecting the Company’s long-term business strategy. The Compensation Committee conducts an annual review of the succession plans for our CEO and other executives of the Company and receives quarterly updates on the plans. Our CEO and the Compensation Committee review those succession plans annually with the full Board. The succession plans reflect the

 

 

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CORPORATE GOVERNANCE MATTERS

 

Board’s belief the Company should regularly identify internal candidates for the CEO and other executive positions and it should develop those candidates for consideration when a transition is planned or necessary. Accordingly, management identifies internal candidates in various phases of development and implements development plans to assure the candidates’ readiness. Those development plans identify the candidates’ strengths and developmental opportunities, and the Compensation Committee receives periodic updates and regularly reviews the candidates’ progress. In addition to internal development pools, to assure selection of the best candidate(s), the Company may recruit externally if such approach would better suit the Company’s strategic needs. The Compensation Committee believes the Company’s succession planning process provides a good structure to assure the Company will have qualified successors for its executive officers.

The Board has adopted a Contingency CEO Succession Plan to outline the procedures for the temporary appointment of an interim CEO to avoid a vacancy in leadership that may occur because of an absence event due to death, illness, disability, or sudden departure of our CEO.

Board and Committee Evaluations

The Board conducts an annual assessment of its performance and effectiveness, as well as that of the Chairman and Vice Chair. The process is coordinated by the Board Chair and the Chair of the Governance Committee and is proctored through written assessments completed by each director. Areas of inquiry include, among other things, the following:

 

 

Overall Board performance and areas of focus including strategic and business issues, challenges and opportunities;

 

 

Succession planning;

 

 

Board Committee structure and composition;

 

 

Board culture;

 

 

Board composition;

 

 

Management performance, including quality of materials, provided to the directors; and

 

 

Board meeting logistics.

Each Board Committee also conducts an annual assessment of its performance and effectiveness, including that of the Committee Chair, through written assessments completed by each committee member. Areas of inquiry include, among other things, the following:

 

 

The sufficiency of their Charters;

 

 

Whether committee members possess the right skills and experience or whether additional education or training is required;

 

 

Whether there are sufficient meetings covering the right topics; and

 

 

Whether meeting materials are effective.

Individual Director Assessments

Annually, the Board Chair conducts an objective assessment of the quality of each Board member, considering such factors as attendance, participation, engagement with other Board members, and any other factors deemed appropriate. This process includes a discussion between the Board Chair and the Chairs of each Board Committee, as well as individual interviews of each director. The process provides an opportunity for input on individual director performance, as well as practical input from each director on what the Board should continue doing, start doing and stop doing. The information gathered through the assessment process is reviewed by the Governance Committee and considered in its recommendation of Board members to stand for election each year.

A summary of all committee assessment results is provided to the Governance Committee and the Board for review and discussion.

 

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CORPORATE GOVERNANCE MATTERS

 

Director Orientation and Continuing Education

The Governance Committee and management are responsible for director orientation and mentorship programs. Orientation and mentorship programs are designed to familiarize new directors with the Company’s business strategies and policies and help facilitate their effective transition onto the Board. The Governance Committee is also responsible for director continuing education. Continuing education programs for directors include a combination of internally developed materials and presentations and outside programs presented by third parties. Financial and administrative support is available to directors for attendance at academic or other independent programs.

Director Retirement Policy

Directors may not stand for election after age 72.

Code of Conduct

The Company has adopted a Code of Conduct that applies to members of the Board and our employees, including our CEO (the principal executive officer) and our CFO (the principal financial officer).

Information on Company Website

The Company’s Corporate Governance Guidelines, the Code of Conduct, and the Related Party Transaction Policy are available on the Company’s website at https://investor.avistacorp.com/corporate-governance. A written copy of any of these documents will be provided free of charge to any person upon request to the Corporate Secretary’s office at 1411 East Mission Avenue, P.O. Box 3727 (MSC-10), Spokane, Washington 99220.

Communications with Shareholders

Shareholders and other interested parties may send correspondence to our Board or to any individual director to the Corporate Secretary’s office at 1411 East Mission Avenue, P.O. Box 3727 (MSC-10), Spokane, Washington 99220. Concerns about accounting, internal control over accounting and/or financial reporting, or auditing matters should be directed to the Chair of the Audit Committee at the same address. All communications will be forwarded to the person(s) to whom they are addressed, unless it is determined the communication:

 

 

Does not relate to the business or affairs of the Company or the functioning or constitution of the Board or any of its committees;

 

 

Relates to routine or insignificant matters that do not warrant the attention of the Board;

 

 

Is an advertisement or other commercial solicitation or communication;

 

 

Is frivolous or offensive; or

 

 

Is otherwise not appropriate for delivery to directors.

The director or directors who receive any such communication have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made through the Company’s Corporate Secretary or General Counsel and only in accordance with the Company’s policies and procedures and applicable laws and regulations relating to the disclosure of information.

Board Committees

The Board has six standing committees — Audit Committee, Compensation and Organization Committee (“Compensation Committee”), Governance and Corporate Responsibility Committee (“Governance Committee”), Finance Committee, Environmental, Technology and Operations Committee (“Environmental Committee”) and Executive Committee. The committees, their membership as of the end of 2023, and their principal responsibilities are described below.

 

 

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Each committee of the Board has adopted a Charter approved by the Board. The Charters are reviewed on an annual basis and amendments are made as needed. The committee Charters are available on the Company’s website at https://investor.avistacorp.com/corporate-governance. A written copy of our committee Charters will be provided free of charge to any person upon request to the Corporate Secretary’s office at 1411 East Mission Avenue, P.O. Box 3727 (MSC-10), Spokane, Washington 99220.

 

 AUDIT COMMITTEE

 

LOGO

 

Donald C. Burke

CHAIR

 

Members:

Jacobsen

Philipps

Stanley

 

Number of Meetings: 6

     

 

Responsibilities:

Assists the Board in overseeing the integrity of and the risks related to the Company’s financial statements and accounting compliance, the Company’s compliance program, the qualifications and independence of the independent registered public accounting firm, and the performance of the Company’s internal audit function and independent registered public accounting firm. The Audit Committee also reviews the integrity of the Company’s systems of internal controls regarding accounting, financial reporting, disclosure, compliance and ethics that management and the Board have established, including without limitation all internal controls established and maintained pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including those initiated pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Audit Committee oversees management of the Company’s exposure to accounting and financial risk, including questionable accounting or possible fraud, and oversees generally, to assist the full Board, the Company’s overall risk assessment and risk management processes. Only independent directors sit on the Audit Committee. The Board determined Mr. Burke is an “Audit Committee Financial Expert,” as defined in the SEC rules.

 

 

 COMPENSATION COMMITTEE

 

LOGO

 

Scott H. Maw

CHAIR

 

Members:

Klein

Philipps

 

Number of Meetings: 6

 

     

 

Responsibilities:

Considers and approves, as well as oversees the risks associated with, compensation and benefits of executive officers of the Company, as well as human capital management generally. This includes overseeing the organizational structure of the Company’s management and succession planning for our CEO and other executive officers.

 

For a discussion of the Company’s processes and procedures for the consideration and determination of executive officer compensation (including the role of executive officers and compensation consultants in determining or recommending the amount or form of compensation) see the CD&A.

 

The Compensation Committee is composed entirely of independent directors, as defined by the rules of the NYSE, and within the Company’s Categorical Standards. In addition, the Compensation Committee is intended to comply with the “non-employee director” requirements of Rule 16b-3 under the Exchange Act, and to the extent still applicable, the “outside director” requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

 

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CORPORATE GOVERNANCE MATTERS

 

 GOVERNANCE COMMITTEE

 

LOGO

 

Janet D. Widmann

CHAIR

 

Members:

Burke

Maw

Stanley

 

Number of Meetings: 5

     

 

Responsibilities:

Advises the Board on corporate governance matters and oversees the risks relating to such matters, including recommending guidelines for the composition and size of the Board and its committees, evaluating Board effectiveness and organizational structure and setting director compensation (see the section on Director Compensation). The Governance Committee oversees, among other things, issues regarding conflicts of interest, independence and compliance with SEC and NYSE rules and reviews and recommends to the full Board the allocation of risk management oversight to the various Board committees. The Governance Committee provides general strategic oversight of the Company’s programs and practices relating to corporate responsibility. The Governance Committee also develops Board membership criteria and reviews potential director candidates. Recommendations for director nominees are presented to the full Board for approval. See Proposal 1—“Election of Directors”. Only independent directors sit on the Governance Committee.

 

 

 ENVIRONMENTAL COMMITTEE

 

LOGO

 

Rebecca A. Klein

CHAIR

 

Members:

Bentz

Jacobsen

Kwawu

 

Number of Meetings: 4

   

 

Responsibilities:

Assists the Board in overseeing management of the Company’s business and operational risks, other than financial risks. This includes regulatory, environmental compliance, employee and public safety, climate change, energy, commodity, cyber and physical security, cyber technology strategy, and external mandates.

 

 

 

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CORPORATE GOVERNANCE MATTERS

 

 FINANCE COMMITTEE

 

LOGO

 

Sena M. Kwawu

CHAIR

 

Members:

Bentz

Morris

Widmann

 

Number of Meetings: 4

 

     

 

Responsibilities:

Assists the Board in overseeing the Company’s strategies, budgets, forecasts, and financial plans and programs, including those providing liquidity, and oversees the associated risks. The Finance Committee’s activities and recommendations include reviewing management’s qualitative and quantitative financial plans and objectives for both the short and long-term; approving strategies with appropriate action plans to help ensure financial objectives are met; having in place a system to monitor progress toward financial goals, including monitoring commodity price and counterparty credit risk, overseeing and monitoring employee benefit plan investment performance and approving changes in investment policies and strategies, and monitoring management’s program for hedging or otherwise mitigating financial and commercial risk; and providing strategic oversight of the Company’s non-regulated investments and businesses.

 

 

 EXECUTIVE COMMITTEE

 

LOGO

 

Scott L. Morris

CHAIR

 

Members:

Burke

Stanley

Vermillion

 

Number of Meetings: 0

 

     

 

Responsibilities:

Has and may exercise, when the Board is not in session, all the powers of the Board that may be lawfully delegated, subject to such limitations as may be provided in the Bylaws, by resolutions of the Board, or by law. Generally, such action would only be taken to expedite Board authorization for certain corporate business matters when circumstances do not allow the time, or when it is otherwise not practicable, for the entire Board to meet.

 

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DIRECTOR COMPENSATION

 

Director Compensation

The Board regularly reviews director compensation with the assistance of Meridian Compensation Partners (the same consultant used for executive compensation) to determine whether it is appropriate and competitive in light of market circumstances and prevailing best practices for corporate governance for the energy/utility industry. The Board targets overall director compensation to the median of the same peer group used to review executive compensation. (See “Competitive Analysis and Peer Group” in the Compensation Discussion and Analysis.) As a result of this review process, the annual retainer for directors was increased from $220,000 to $225,000 effective September 1, 2023. The additional retainer for the chair of the Compensation Committee increased from $15,000 to $17,500 effective September 1, 2023.

The elements of director compensation reflect the Board’s view that compensation to the independent directors should consist of an appropriate mix of cash and stock. The cash portion of the retainer is paid quarterly, and the stock portion is paid annually (as soon as practicable following the Annual Meeting). Employee directors are not compensated for their Board service.

Elements of Director Compensation

 

Pay Element

         Compensation  
  Annual Retainer (cash and stock)    Board Members:      $     225,000  
   (Directors receive an annual retainer of $225,000, with $130,000 automatically paid in stock. Directors have the option of taking the balance in cash, stock or a combination of both cash and stock.)

 

  Additional Committee Chair Retainers (Cash)    Audit Committee:      $    20,000  
   Compensation Committee:      $    17,500  
   Environmental Committee:      $    15,000  
   Finance Committee:      $    15,000  
   Governance Committee:      $    15,000  
   Vice Chair:      $    30,000  
     Non-Executive Chairman:      $     100,000  

Each director is entitled to reimbursement of reasonable out-of-pocket expenses incurred in connection with meetings of the Board or its committees and related activities, including third party director education courses and materials. These expenses include travel to and from the meetings, as well as any expenses they incur while attending the meetings.

Director Stock Ownership Policy

The Company has a minimum stock ownership expectation for all Board members. Outside directors are expected to achieve a minimum investment of five times the minimum stock portion of their retainer and retain at least that level of investment while a Board member. Shares previously deferred under the former Non-Employee Director Stock Plan count for purposes of determining whether a director has achieved the ownership expectation.

The ownership expectation illustrates the Board’s philosophy of the importance of stock ownership for directors to further strengthen the commonality of interest between the Board and shareholders. The Governance Committee annually reviews director holdings to determine whether they meet ownership expectations.

There were no annual stock option grants or non-stock incentive plan compensation payments to directors for services in 2023 and none are currently contemplated under the current compensation structure. The Company also does not provide a retirement plan or deferred compensation plan to its directors. Listed below is compensation paid to each non-employee director who served during any part of the 2023 fiscal year.

 

 

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DIRECTOR COMPENSATION

 

Director Compensation Table — 2023

 

      Annual Retainer                  

Director Name

  

Director
Compensation

Paid in
Cash

($)(2)(6)

    

Director
Compensation
Paid in
Stock

($)(1)(2)

    

All Other
Compensation

($)(3)

    

Total
Compensation

($)(4)

 

Julie A. Bentz

   $ 95,029      $    126,637         $      221,667  

Kristianne Blake(5)

   $    222,026         $       1,159      $ 223,185  

Donald C. Burke

   $ 135,029      $ 126,637         $ 261,667  

Kevin B. Jacobsen

   $ 21,696      $ 126,637         $ 148,333  

Rebecca A. Klein

   $ 110,029      $ 126,637         $ 236,667  

Sena M. Kwawu

   $ 105,029      $ 126,637         $ 231,667  

Scott H. Maw

   $ 110,863      $ 126,637         $ 237,500  

Scott L. Morris

   $ 195,029      $ 126,637         $ 321,667  

Jeffry L. Philipps

   $ 95,029      $ 126,637         $ 221,667  

Heidi B. Stanley

   $ 95,029      $ 126,637         $ 221,667  

Janet Widmann

   $ 110,029      $ 126,637         $ 236,667  

Totals

   $ 1,294,820      $ 1,266,373      $ 1,159      $ 2,562,351  

 

1.

Amounts in these columns include cash retainers, stock issuances, Chair retainers, and Board and committee meeting fees.

 

2.

Stock is issued in whole shares based on the current market price at the time of issuance. Stock is fully vested upon issuance. All fractional shares are paid in cash.

 

3.

Amounts for Ms. Blake include dividends paid on those shares deferred prior to December 31, 2004, under the former Non-Employee Director Stock Plan. (Ms. Blake is the only director who deferred receipt of stock until a later date. Ms. Blake had 2,519 deferred shares until she cashed out those shares upon her retirement on May 11, 2023.)

 

4.

The Company does not provide perquisites or other personal benefits to its Board members.

 

5.

Ms. Blake retired from the Board on May 11, 2023.

 

6.

The Director Compensation Paid in Cash amount includes a cash out of Ms. Blake’s 2,519 deferred shares from the former Non-Employee Director Stock Plan.

 

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AUDIT COMMITTEE REPORT

 

Audit Committee Report

Charter and Responsibilities

The Audit Committee operates under a written Charter adopted by the Board that outlines its responsibilities and the practices it follows. The Charter can be found on the Company’s website at https://investor.avistacorp.com/corporate-governance. The Audit Committee reviews and assesses the adequacy of its Charter at least annually, and, when appropriate, recommends changes to the Board.

The Audit Committee is composed of non-management directors who meet the independence and financial literacy requirements of the NYSE and additional, heightened independence criteria applicable to members of the Audit Committee under SEC and NYSE rules. The Audit Committee recommended to the Board the designation of Donald C. Burke as the Audit Committee Financial Expert solely for the purposes of compliance with the rules and regulations of the SEC implementing Section 407 of the Sarbanes-Oxley Act. The Board approved this recommendation.

The Audit Committee assists the Board in overseeing the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the Company’s Code of Conduct, the Company’s enterprise risk management program and the independent auditor’s qualifications and independence. The Audit Committee also assists the Board in fulfilling its responsibility for oversight of the Company’s systems of internal controls, including, without limitation, those established and maintained pursuant to the Exchange Act, as amended, and the Sarbanes-Oxley Act. In addition, the Audit Committee participates in external education sessions and educational sessions developed by management, at the request of the Audit Committee.

2023 Activity

During 2023, the Audit Committee fulfilled its duties and responsibilities as outlined in the Charter. Six meetings were held, with meeting agendas established by the Audit Committee’s Chair and the Director of Internal Audit. Specifically, the Audit Committee:

 

 

Reviewed and discussed with management and Deloitte, the independent auditor, the Company’s unaudited quarterly financial statements and management’s discussion and analysis of financial condition and results of operations.

 

 

Reviewed with the CEO and CFO their certifications as to the accuracy of the Company’s financial statements and the establishment and maintenance of internal controls and procedures.

 

 

Reviewed with management all earnings press releases relating to 2023 annual and quarterly earnings prior to their issuance.

 

 

Reviewed and discussed with Deloitte various matters including, without limitation, all critical audit matters, critical accounting policies, practices and estimates, significant changes in accounting principles or the application thereof, and the effect of regulation on the Company’s financial performance and results of operations.

 

 

Discussed with management, the internal auditors, and the independent auditor the quality and adequacy of the Company’s systems of internal controls, and the internal audit functions, responsibilities, performance, and staffing.

 

 

Reviewed the audit plans, audit scopes, and identification of audit risks with the independent and the internal auditors.

 

 

Received from Deloitte a letter and other disclosures regarding the independent auditor’s communications with the Audit Committee concerning the independent auditor’s independence. The independent auditor advised the Audit Committee that this letter and other disclosures were required by the PCAOB auditor standards. The Audit Committee discussed with the independent auditor the latter’s independence.

 

 

Was advised by Deloitte that the matters discussed by Deloitte and the Audit Committee constituted all matters that PCAOB standards required Deloitte to discuss with the Audit Committee.

 

 

Reviewed and approved the services and fees of the Company’s independent auditor.

 

 

Reviewed and approved the non-audit services performed by the Company’s auditor and concluded that such services were consistent with the maintenance of independence.

 

 

Reviewed the performance of Deloitte and approved its reappointment in 2023 as the Company’s independent registered public accounting firm.

 

 

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AUDIT COMMITTEE REPORT

 

2023 Financial Statements

The Audit Committee reviewed and discussed with management and Deloitte the Company’s audited financial statements and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023. Additionally, the Committee reviewed Management’s Report on Internal Control Over Financial Reporting and the Auditor’s Report on the effectiveness of internal control over financial reporting. Based on its review and discussions, the Audit Committee recommended to the full Board, and the full Board approved the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for filing with the SEC.

This report is provided by the following independent directors, who comprise the Audit Committee:

 

Donald C. Burke — Chair    Kevin B. Jacobsen    Jeffry L. Philipps    Heidi B. Stanley

 

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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF DELOITTE AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024

 

Proposal 2: Ratification of Appointment of Deloitte as Independent Registered Public Accounting Firm For 2024

 

 What are you voting on?  

 

We are asking our shareholders to ratify the selection of Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, Ltd., and their respective affiliates (collectively, “Deloitte”) as the independent registered public accounting firm of our consolidated financial statements and our internal controls over financial reporting for 2024. Although the Audit Committee has direct responsibility for the appointment of the independent registered public accounting firm, as a matter of good corporate governance, the Board submits its selection of the independent registered public accounting firm to our shareholders for ratification.

 

 
Voting recommendation:  

 

The Board unanimously recommends a vote FOR the ratification of the appointment of Deloitte as the independent registered public accounting firm.

The Audit Committee has the direct responsibility to hire, evaluate and, where appropriate, replace the Company’s independent auditor and, in its capacity as a committee of the Board, is directly responsible for the appointment, compensation, and general oversight of the work of the independent auditor. The Audit Committee has appointed Deloitte as the Company’s independent registered public accounting firm for continuing audit work in 2024.

Shareholder approval is not required for the appointment of Deloitte. However, the appointment is being submitted to shareholders for ratification. Should the shareholders fail to ratify the appointment of Deloitte, such failure (1) would have no effect on the validity of such appointment for 2024 (given the difficulty and expense of changing the independent registered public accounting firm midway through a year) and (2) would be a factor to be taken into account, together with other relevant factors, by the Audit Committee in the selection and appointment of the independent registered public accounting firm for 2025 (but would not necessarily be the determining factor).

Annual Evaluation and Selection of the Independent Auditor

The Audit Committee annually reviews Deloitte’s independence and performance in deciding whether to retain Deloitte or engage another independent auditor. In the course of these reviews, the Audit Committee considers, among other things:

 

 

Deloitte’s historical and recent performance on the Company’s audit.

 

 

Deloitte’s depth, expertise, and knowledge of the Company’s business and industry.

 

 

The quality and candor of Deloitte’s communications with the Audit Committee and management.

 

 

How effectively Deloitte maintained its independence and employed its independent judgment, objectivity, and professional skepticism.

 

 

Available external data about quality and performance, including recent PCAOB reports on Deloitte.

 

 

The appropriateness of Deloitte’s fees.

 

 

Deloitte’s tenure as the Company’s independent auditor, including the benefits of having a long-tenured auditor, and the safeguards in place to maintain its independence.

Long Tenure Benefits

 

 

Higher audit quality. Through years of experience with the Company, Deloitte (including its predecessors) has gained institutional knowledge of, and deep expertise regarding, the Company’s operations and businesses, accounting policies and practices, and internal control over financial reporting.

 

 

No onboarding or educating new auditor. Onboarding a new auditor requires a significant time commitment that could distract from management’s focus on financial reporting and internal controls.

 

 

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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF DELOITTE AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024

 

Independence Controls

 

 

Thorough Audit Committee oversight. The Audit Committee meets with Deloitte at least four times per year. The committee also performs a comprehensive annual evaluation to determine whether to engage Deloitte. This evaluation includes assessments of Deloitte’s qualifications and performance; approach to promoting and monitoring audit quality; quality and candor of communications; and independence, objectivity, and professional skepticism. The Audit Committee also has an active role in selecting the lead partner.

 

 

Rigorous limits on non-audit services. The Audit Committee has a policy that requires pre-approval of all non-audit services, subject to a de minimis exception, and Deloitte is engaged only when it is best suited for the job.

 

 

Strong internal Deloitte independence process. Deloitte conducts periodic internal quality reviews of its audit work, assesses the adequacy of partners and other personnel working on the Company’s account, and rotates the lead partner every five years.

 

 

Strong regulatory framework. Deloitte, as an independent registered public accounting firm, is subject to PCAOB inspections, peer reviews, and PCAOB and SEC oversight.

As a result of its evaluation, the Audit Committee concluded the selection of Deloitte as the independent registered public accounting firm for 2024 is in the best interests of the Company and its shareholders. The Audit Committee made this recommendation to the full Board and the full Board approved.

Audit Fees and All Other Fees

The Audit Committee approves the fees paid to Deloitte for audit and non-audit services and receives periodic reports on the amount of fees paid. The aggregate fees for audit and other services provided by Deloitte in 2023 and 2022 were:

 

      2023      2022  

Audit Fees(a)

   $ 1,988,673      $ 1,977,796  

Audit-Related Fees(b)

     6,000        6,500  

All Other Fees(c)

     4,921        6,106  

Total

   $ 1,999,594      $ 1,990,402  

 

a.

Audit services performed in 2023 and 2022 for which audit fees were billed consisted of:

 

   

Audit of the Company’s annual consolidated financial statements and internal controls over financial reporting.

 

   

Reviews of the Company’s quarterly reports on Form 10-Q.

 

   

Comfort letters, statutory and regulatory audits, consents, and other services related to SEC matters.

 

b.

Audit-related services performed in 2023 and 2022 consisted of agreed-upon procedures.

 

c.

All other services performed in 2023 and 2022 consisted of licensing of accounting literature research databases, attendance at training seminars, and other miscellaneous projects.

Audit Committee Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Audit Committee is required to approve the audit and permissible non-audit services to be performed. The Audit Committee has adopted what it terms its Audit Committee Pre-Approval Policy (the “Policy”), which sets forth the procedures and conditions pursuant to which services proposed to be performed by the Company’s independent registered public accounting firm are pre-approved. All services provided by Deloitte in 2023 and 2022 were approved specifically or pre-approved in accordance with the Policy adopted by the Audit Committee.

 

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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF DELOITTE AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024

 

The Audit Committee approves services in advance, whether specifically or pursuant to general pre-approvals according to the Policy, only if the provision of such services is consistent with SEC and PCAOB rules on auditor independence and all other applicable laws and regulations. In rendering specific approvals or general pre-approval under the Policy, the Audit Committee considers whether the independent registered public accounting firm’s provision of specific services, or categories of services, would be inconsistent with the independence of the auditor.

Hiring Restrictions for Deloitte Employees

The Audit Committee has adopted a policy that has certain restrictions on the Company’s hiring of any Deloitte partner, director, manager, staff member, advising member of the department of professional practice, reviewing tax professional, and any other individuals responsible for providing audit assurance on any aspect of Deloitte’s audit and review of the Company’s financial statements.

Other Information

The Company has been advised by Deloitte that neither the firm, nor any covered person of the firm, has any financial interest, direct or indirect, in any capacity in the Company or its subsidiaries. A representative of Deloitte is expected to attend the Annual Meeting with the opportunity to make a statement if he/she desires to do so and is expected to be available to respond to appropriate questions.

Ratification of the appointment of the independent auditors requires the affirmative vote of a majority of the votes cast by the holders of the shares of common stock voting in person or by proxy at the Annual Meeting.

 

 

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The Board recommends a vote “FOR” the ratification of the appointment of Deloitte as the Independent Registered Public Accounting Firm.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

 

Compensation Discussion and Analysis (“CD&A”)

This CD&A provides information about the compensation objectives and policies for our NEOs and puts in perspective the quantitative and narrative disclosures in the compensation tables included in this Proxy Statement. Our NEOs for 2023 were:

 

•   Dennis P. Vermillion, Chief Executive Officer

 

•   Mark T. Thies, Former Executive Vice President, CFO, and Treasurer

 

•   Kevin J. Christie, Sr. Vice President, CFO, Treasurer, and Regulatory Affairs Officer

 

•   Heather L. Rosentrater, President and Chief Operating Officer

 

•   Jason R. Thackston, Sr. Vice President, Chief Strategy and Clean Energy Officer

 

•   Wayne O. Manuel, Vice President, Chief Information Officer and Chief Security Officer

During 2023, the following leadership changes impacting our NEOs occurred:

 

 

Mr. Thies, Executive Vice President, CFO, and Treasurer announced his retirement from the Company, effective October 1, 2023.

 

 

Effective May 11, 2023, Mr. Christie, who was previously serving as Sr. Vice President, External Affairs and Chief Customer Officer was elected Sr. Vice President, CFO, Treasurer, and Regulatory Affairs Officer.

 

 

Ms. Rosentrater, who was previously serving as Sr. Vice President and Chief Operating Officer, was elected President and Chief Operating Officer, effective October 1, 2023.

 

 

Mr. Manuel joined the Company as Vice President, Chief Information Officer and Chief Security Officer on June 1, 2023.

The CD&A also describes the following:

 

 

Our business results’ impact on incentive compensation;

 

 

Our decision-making process on compensation design and pay levels, including our compensation governance approach;

 

 

Our compensation philosophy and objectives; and

 

 

The elements of the Company’s executive compensation program.

BUSINESS RESULTS IMPACT ON INCENTIVE COMPENSATION

The Compensation Committee, with input from the CEO, establishes target incentive compensation for our NEOs at the beginning of each performance period. The Board establishes target incentive compensation for our CEO also at the beginning of each performance period. Actual pay varies above or below the target based on individual, organizational, and stock performance. Because a substantial portion of each NEO’s compensation is in the form of equity, our NEOs’ actual compensation aligns closely with changes in the stock price.

We employ several quantitative criteria to assess the performance of our NEOs. Our objectives include achieving the EPS target, achieving favorable TSR relative to our peers, managing our costs per customer, customer satisfaction, our response time to natural gas emergency calls, reliability of service, and our goals of equity, inclusion, and diversity. The charts below illustrate the relationship between our 2023 financial performance targets and our actual performance.

 

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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

 

 

RECENT PERFORMANCE RESULTS: SELECT ANNUAL INCENTIVE PLAN METRICS

 

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RECENT PERFORMANCE RESULTS: LONG-TERM INCENTIVE PLAN METRICS

 

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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

 

The chart below illustrates the relationship between our 2023 performance and our CEO’s 2023 compensation.

 

 

CHIEF EXECUTIVE OFFICER: 2023 TARGET COMPENSATION VS. REALIZED COMPENSATION

 

 

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*   The target amount shown for the RSUs is the grant date fair value of the portion of the 2021, 2022, and 2023 awards that could have vested if the CEO was not terminated on December 31, 2023. The target amount for the CEO’s PSUs represents the aggregate grant date fair value of the 2021 awards that could have vested if the TSR and the three-year CEPS performance conditions were met for the 2021-2023 performance period. The amount shown as the actual compensation realized by our CEO for 2023 includes his base salary, the actual annual cash incentive plan amount paid in early 2024 for 2023 performance, the value, as of the vesting date, of the RSUs that vested in early 2024, and the actual value, as of the vesting date, of the PSUs realized for the 2021 – 2023 performance period. Values for RSUs and PSUs do not include dividend equivalents.

 

COMPENSATION GOVERNANCE PRACTICES

The Company highly values strong compensation governance practices. We believe our executive compensation practices align with our corporate values and provide a foundation for success. The governance practices we employ, and those we avoid, include:

 

 

Practices We Employ

 

  

 

Practices We Avoid

 

•   We align pay and performance

 

•   We mitigate undue risk (see Risk Mitigation Overview)

 

•   We maintain stock ownership guidelines consistent with market practices

 

•   We maintain a recoupment (i.e., clawback) policy that allows the Company to recoup compensation due to financial and other detrimental misconduct

 

•   We pay Change in Control (“CIC”) severance solely upon a double trigger

 

•   The Compensation Committee reviews NEO tally sheets annually

 

•   The Compensation Committee is composed entirely of independent directors

 

•   The Compensation Committee engages an independent compensation consultant

 

•   The Compensation Committee regularly meets in executive sessions without management present

  

•   We do not provide perquisites

 

•   We do not permit hedging or short sales of Company stock by directors or officers

 

•   We do not permit pledging of company stock by directors or officers

 

•   We do not pay dividends or dividend equivalents on performance awards until the awards are earned

 

•   We do not provide any tax gross-ups under our CIC Plan

 

•   We no longer offer additional Supplemental Executive Retirement Plan (“SERP”) service credits as a recruitment tool for hiring executives

 

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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

 

2023 SAY ON PAY ADVISORY VOTE

At the May 2023 Annual Meeting, 96.90% of the votes cast were in support of our Say on Pay advisory resolution on our executive compensation. We view this outcome as a signal of strong shareholder support for our executive compensation philosophy, policies and practices, and made no changes as a result of the vote outcome.

Decision Making Process

ROLE OF THE COMPENSATION COMMITTEE

The Compensation Committee makes all compensation decisions regarding our CEO, our other NEOs and other executive officers, including the level of cash compensation and equity awards. Our CEO annually evaluates each executive officer’s performance and presents his evaluation to the Compensation Committee for its consideration of salary adjustments, annual incentive opportunity and annual equity award amounts. The Compensation Committee annually reviews the CEO’s performance, which it considers in the development of the CEO’s salary adjustments, annual incentive opportunity and annual equity award amounts.

ROLE OF THE COMPENSATION CONSULTANT

The Compensation Committee selects and retains an independent compensation consultant to support its oversight of our executive compensation programs. For 2023, the Compensation Committee engaged Meridian Compensation Partners (“Meridian”) as its independent compensation consultant. (The Committee also purchased survey information from the Willis Towers Watson (“WTW”) Energy Services Executive Compensation database but did not otherwise consult with WTW.) Meridian provides the Compensation Committee consulting services solely relating to executive compensation and related governance matters. In accordance with NYSE rules, the Compensation Committee determined Meridian is independent and, further, no conflicts of interest arose due to Meridian’s services rendered to the Compensation Committee.

A representative of Meridian attended Compensation Committee meetings in 2023 and advised the Compensation Committee on the principal aspects of executive compensation, including the competitiveness of program design and award values and specific analyses for our executive officers.

The Compensation Committee determines the work to be performed by Meridian. Meridian works with our Senior Vice President of Safety & Chief People Officer and his staff to gather data required in preparing its analyses for Compensation Committee review. Meridian provides services or advice to management only to the extent requested by the Compensation Committee.

Meridian interacts with management to gather information and obtain recommendations, but the Compensation Committee Chair determines if and when Meridian’s advice and materials can be shared with management. When important pay decisions are made, Meridian provides advice to the Compensation Committee in an executive session without Company management present. This approach ensures the Compensation Committee receives objective advice from Meridian so the Compensation Committee can make independent decisions about executive pay.

ROLE OF MANAGEMENT

Our CEO provides input to the Compensation Committee for each executive officer’s (other than himself) total compensation and each component of compensation.

At the request of the Compensation Committee, both the Senior Vice President of Safety & Chief People Officer and our CEO regularly attend Compensation Committee meetings, excluding the executive sessions during which their respective compensation and other matters are discussed.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

 

RISK MITIGATION OVERVIEW

The Compensation Committee believes the Company’s compensation policies and practices do not create risks reasonably likely to have a material adverse effect on the Company. In establishing pay practices for the Company, the Compensation Committee’s goal is to design a compensation structure that does not encourage inappropriate risk-taking by employees or executive officers. The following features of the compensation structure reflect this approach:

 

 

Short and long-term incentive payments are capped;

 

 

Annual cash incentive design balances key performance metrics focused on financial results and system sustainability over time;

 

 

The total compensation program does not guarantee bonuses and has multiple financial and non-financial performance measures;

 

 

The Compensation Committee reviews both short-term and long-term financial scenarios to ensure the plan design does not encourage executives to take excessive risks but also does not discourage appropriate risks;

 

 

Stock ownership guidelines are in place to strengthen the alignment of the financial interests of executives with those of shareholders;

 

 

Directors and officers are prohibited from engaging in short-sales, zero-cost collars, forward sales contracts, pledging, hedging or otherwise offsetting any decrease in the market value of their Company shares; and

 

 

The Company maintains formal recoupment (i.e., clawback) policies.

Elements of Compensation

COMPENSATION PHILOSOPHY AND OBJECTIVES

Our executive compensation program is designed to align executive pay with our financial and operational performance and the creation of long-term value for our shareholders. To accomplish these objectives, our compensation program incents executive officers to achieve specific annual, long-term, and strategic goals and improves shareholder value. The Compensation Committee believes the overall compensation of our senior executives should be weighted toward variable performance-based compensation. As a result, a significant portion of compensation is linked with goals related to specific items of corporate performance likely to produce long-term shareholder and customer value.

The charts below show the portion of target compensation that is variable and, therefore, is “at risk” for our CEO and the average for our other NEOs. Variable compensation includes annual incentives, RSUs and performance shares. The charts also show the portion of target compensation for our CEO and the average target compensation for our other NEOs directly linked to share value, including RSUs and performance shares.

 

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COMPETITIVE ANALYSIS AND PEER GROUP

The Compensation Committee believes it is important to provide a compensation structure competitive with compensation paid to comparable executives of companies within the energy/utility industry to ensure the Company can attract and retain quality employees in key positions to lead the Company. To achieve this objective, the Compensation Committee works with Meridian to conduct an annual competitive review of its total compensation program for our CEO and other NEOs. Through the review process, the Compensation Committee generally targets overall total compensation levels (base, short-term incentive and long-term incentives) at the median of the peer group. Pay components for an individual NEO may be higher or lower than the median depending on an individual’s role, responsibilities, and performance within the Company. The Compensation Committee believes this target positioning is effective to attract and retain our executives.

The Compensation Committee annually compares each element of NEO total compensation against a peer group of publicly traded companies within the energy/utility industry of similar revenue size and market capitalization. For 2023, our NEO compensation was compared with market data, as disclosed in proxy statements, from the sixteen companies in the S&P 400 Mid-Cap Utilities Index (“Proxy Peer Group”). This group is designed to be representative of the Company’s business, size and competitive market for talent.

The use of publicly disclosed data allows the Company to maintain a consistent peer group. The Proxy Peer Group can change slightly from year to year due to changes in company size and weightings determined by S&P. Hawaiian Electric was removed and Vistra Corp was added in 2023. The companies comprising the 2023 Proxy Peer Group were:

 

     

ALLETE, Inc.

 

New Jersey Resources Corporation

 

Portland General Electric Co.

Black Hills Corporation

 

NorthWestern Corporation

 

PNM Resources, Inc.

Essential Utilities, Inc.

 

OGE Energy Corp

 

Southwest Gas Holdings, Inc.

IDACORP, Inc.

 

ONE Gas, Inc.

 

Spire Inc.

National Fuel Gas Company

 

Ormat Technologies, Inc.

 

UGI Corporation

       

Vistra Corp.

 

To supplement market data derived from the Proxy Peer Group, the Compensation Committee also considered benchmark compensation data derived from the WTW Energy Services Executive Compensation database, which covered comparable diversified energy companies with revenues between $1 billion and $3 billion and with median revenues of $1.62 billion. This supplemental compensation data helped to inform the Compensation Committee on broad market compensation practices and trends within the energy services sector.

PERFORMANCE MANAGEMENT

The Compensation Committee believes in aligning pay with performance. To help accomplish that alignment, all executives receive annual performance reviews conducted by their direct manager, and the Compensation Committee reviews each NEO’s performance ratings.

At the beginning of each calendar year, the Compensation Committee asks our CEO to develop specific performance targets and goals for his role based on strategic goals for the Company set by the Board. The Compensation Committee reviews and approves our CEO’s goals at its annual February meeting and presents those goals to the full Board for its information and review. The Board quarterly reviews our CEO’s performance relative to his targets. At the end of the year, the Compensation Committee reviews our CEO’s year-end results as part of its overall CEO annual performance review process.

BASE SALARY

Our NEOs are provided with an annual base salary to compensate them for services rendered during the year. The Compensation Committee reviews the base salary of all executive officers at least annually. The factors influencing the Compensation Committee’s decisions in setting the annual base salary for our NEOs include the market data provided by Meridian and each NEO’s job complexity, experience and breadth of knowledge in the utility and diversified energy industry. The Compensation Committee also considers each NEO’s responsibilities, which may include electric and natural gas utility operations, as well as subsidiary operations, and recognizes the Company operates in several states, which requires quality relationships and interaction with multiple regulatory agencies.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

 

2023 Base Salaries

In addition to considering the factors noted above, the Compensation Committee also reviews performance results from the prior year to determine how our CEO performed against specific targets and operational goals established at the beginning of the prior year. Our CEO’s annual performance goals for 2022 were generally related to strategic planning, financial performance, safety targets, diversified energy resource management, regulatory and legislative matters, succession planning, governance and customer value delivery. When reviewing the CEO’s base salary for 2023, the Compensation Committee agreed our CEO met the established goals for 2022 performance.

The Compensation Committee also reviewed performance ratings of each of the other NEOs to determine appropriate adjustments in base salary. The Committee considered market data and individual performance in determining 2023 salary increases. The table below outlines the changes to base salary in 2023 for our NEOs.

 

     

 

2022 Salary

 

    

 

% Increase

 

    

 

2023 Salary

 

 

D. P. Vermillion

   $    850,000        4.0%      $    884,000  

M. T. Thies

   $    475,000        4.2%      $    495,000  

K. J. Christie(1)

   $    356,000        12.4%      $    400,000  

H. L. Rosentrater(1)

   $    395,000        26.6%      $    500,000  

J. R. Thackston

   $    375,000        4.5%      $    392,000  

W.O. Manuel(2)

     N/A        N/A      $    360,000  

 

1.

Mr. Christie was promoted from Sr. Vice President of External Affairs & Chief Customer Officer to Sr. Vice President, CFO, Treasurer, and Regulatory Affairs Officer on May 11, 2023; his salary changed from $372,000 to $400,000 on date of promotion. Ms. Rosentrater was promoted from Sr. Vice President, Chief Operating Officer to President and Chief Operating Officer on October 1, 2023; her salary changed from $475,000 to $500,000 on date of promotion.

 

2.

Mr. Manuel joined the Company on June 1, 2023.

2023 EXECUTIVE OFFICER ANNUAL CASH INCENTIVE

The 2023 Executive Officer Annual Cash Incentive Plan (the “Cash Incentive Plan”) was designed to align the interests of our NEOs and senior management with those of our shareholders and customers through the achievement of financial and operational performance goals for the Company. The Cash Incentive Plan reflects these goals by having 55% of the total incentive opportunity tied to Consolidated Earnings Per Share, 40% tied to key components of utility operation, and 5% tied to equity, inclusion and diversity goals. Each metric is independent, which allows the Cash Incentive Plan to pay a portion of the award upon the attainment of one goal even if the other goals are not met.

The Cash Incentive Plan’s performance metrics are based on factors essential for the long-term success of the Company, and, except for the Consolidated Earnings Per Share and the metric tied to equity, inclusion, and diversity strategy, are identical to performance metrics used in the Company’s annual cash incentive plan for non-executive employees. The Compensation Committee believes having similar metrics for both the Cash Incentive Plan and the non-executive plan encourages employees at all levels of the Company to focus on common objectives.

 

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The following chart shows the Cash Incentive Plan performance goals for each performance metric, the weighting of each metric, and the 2023 actual results of each metric.

 

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1.

Payout can vary 0%-172% based on performance level. Payout levels are interpolated on a straight-line basis for results between the threshold performance level and the maximum level.

 

2.

The Operating and Maintenance (O&M) cost is directly related to maintaining reliable, cost-effective service levels. Payouts can vary 0%-150% based on performance level. Payout levels are interpolated on a straight-line basis for results between the threshold performance level and the maximum level.

 

3.

This rating is derived from a Voice of the Customer survey conducted each quarter by an independent agency. The survey is used to track satisfaction levels of customers that have had recent contact with our call center or service center. This is a hit or miss target and the payout is either 100% or 0% based on achievement of objective.

 

4.

This measure is derived from the combination of three indices that track average restoration time for sustained outages, average number of sustained outages per customer, and percent of customers experiencing more than three sustained outages during the year. This is a hit or miss target and the payout is either 100% or 0% based on achievement of objective.

 

5.

This measures how quickly the Company responds to dispatched natural gas emergency calls. This is a hit or miss target and the payout is either 100% or 0% based on achievement of objective.

 

6.

Milestone includes achievement of four out of five goals related to our equity, inclusion, and diversity strategy. Payout is either 100% or 0% based on achievement of this objective.

 

 

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The Compensation Committee sets target goals for these performance metrics that are rigorous, but reasonably achievable with strong management performance. Maximum performance levels were designed to be difficult to achieve given historical performance and the Company’s forecasted results at the time the performance metrics were approved. Over the last ten years, the actual performance results of the Plans have averaged 100% of target and ranged from a low of 25% of target to a high of 150% of target as shown in the chart below.

 

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2023 EXECUTIVE OFFICER ANNUAL CASH INCENTIVE TARGET AWARD OPPORTUNITY

Individual annual cash incentive awards are set as a percentage of base salary. The Compensation Committee compares annual cash incentive opportunity levels against the Proxy Peer Group. As discussed previously, the Compensation Committee targets overall total compensation levels, which include base salaries, short-term incentives, and long-term incentives at the median of the Proxy Peer Group.

For 2023, the Compensation Committee maintained the target opportunity of 100% of base salary for the CEO, 65% of base salary for the President and former CFO, 60% of base salary for the current CFO and the Senior Vice Presidents, and 40% of base salary for the Vice Presidents. The actual total amounts paid could increase (up to 150% of target) or decrease (as low as 0% of target) depending on the Company’s actual performance.

2023 RESULTS FOR THE EXECUTIVE OFFICER’S ANNUAL CASH INCENTIVE PLAN

After the end of each year, the Compensation Committee assesses the performance of the Company against each Plan objective, comparing the actual year-end results to the pre-determined threshold, target, and exceeds levels for each objective, and an overall percentage amount for meeting the objectives is calculated and audited.

Based on this review, at its February 2024 meeting, the Compensation Committee determined the Company did not achieve the threshold performance level for the two financial metrics: Consolidated Earnings Per Share and O&M Cost Per Customer. The Company did meet the targets for all four of the non-financial metrics: Customer Satisfaction, Reliability, Average Response Time, and EID Scorecard. The actual performance result of the 2023 executive officers’ annual cash incentive plan was 25% of target. As a result, and at the same meeting, the Compensation Committee authorized payment of cash incentives equal to 25% of base salary (25% of 100%) for our CEO, and an average of approximately 15% of base salary (25% of 58%) for all other NEOs.

 

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LONG-TERM EQUITY COMPENSATION

The Compensation Committee believes equity-based compensation is the most effective way to create a long-term link between shareholder returns and the compensation provided to NEOs and other key management. This program encourages participants to focus on long-term Company performance and provides an opportunity for executive officers and designated key employees to increase their ownership in the Company through grants of Company stock that can be earned based on either service or performance, over a three-year cycle. Using long-term performance awards and time-based restricted stock (RSUs), the Company can compensate executives for sustained increases in the Company’s stock performance, as well as long-term growth relative to its peer group for the relevant cycle.

The Company’s current Long-Term Incentive Plan (“LTIP”) authorizes various types of equity awards. As with all the components of executive compensation, the Compensation Committee determines all material aspects of the long-term incentive awards—who receives an award, the form of the award, the amount of the award, the timing of the award, as well as any other aspect of the award it may deem material.

For 2023 equity grants, the Compensation Committee determined each NEO’s target LTIP value based on competitive market data and the NEO’s ability to influence overall Company performance. In addition, and as previously discussed, the Compensation Committee targets overall total compensation levels, which include base salaries, short-term incentives and long-term incentives, at the median of the Proxy Peer Group. The Compensation Committee determined 70% of the NEO’s target LTIP value would be granted in the form of performance share units (“PSUs”) and 30% of the NEO’s target LTIP value would be granted in the form of RSUs; this was updated from 2022 when the allocation mix was 75% and 25%, respectively. Awards are generally granted each year at the February Compensation Committee meeting and the granting of awards is not coordinated with the release of material non-public information.

Performance-Based Equity Awards

In February 2023, the Compensation Committee approved the grant of PSUs to each NEO. The 2023 PSUs are designed to provide a direct link to the long-term interests of shareholders by ensuring shares will be paid only if the Company attains specified performance levels. For 2023, 17.5% of the awards were contingent on our Total Shareholder Return (TSR) relative to our peers and 52.5% was measured by our Cumulative Earnings Per Share (CEPS) over a three-year period. For 2023, the Compensation Committee considered market data provided by Meridian regarding the total compensation levels for our CEO and all other NEOs compared to the median of the Proxy Peer Group.

 

LOGO

The peer group for TSR performance purposes consists of the sixteen companies comprising the S&P 400 Mid-Cap Utilities Index as of January 1 in the first year of the three-year performance cycle. Throughout the course of the performance cycle, companies may be added or dropped from the index by S&P due to mergers or other activities. At the end of the cycle, new companies added to the index are included in the rankings as if they had been in the ranking from the beginning, provided there is sufficient trading history to include them in the final calculation. When a company is dropped from the index, everything related to the company is excluded as if it were never in the index.

 

 

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The number of PSUs which vest is determined at the end of the three-year performance cycle based on the Company’s percentile rate-of-return ranking compared to the companies in the S&P 400 Mid-Cap Utilities Index, and is payable at the Compensation Committee’s discretion in cash, shares of Company common stock, or a combination of both. Dividend equivalents on performance awards are accumulated and paid upon vesting if the awards vest and are paid based on performance. If the Company’s relative TSR over the three-year performance period is below the threshold performance required to earn the award, accumulated dividends are forfeited as well.

The second performance metric, Cumulative Earnings Per Share (CEPS), aligns with current competitive practices within the peer group based on market data provided by the Compensation Committee’s consultant. Each year the Compensation Committee reviews and establishes a threshold, target, and maximum performance level for CEPS. The Compensation Committee seeks to establish performance levels that assure the goals are realistic enough to be achievable yet difficult enough to incentivize outstanding performance. The amount of payment of any award is determined at the end of the three-year performance cycle based on the Company’s earnings and is payable at the Compensation Committee’s discretion in cash, shares of Company common stock, or a combination of both. Dividend equivalents on performance awards are accumulated and paid upon vesting if the awards vest and are paid based on performance. If the Company’s CEPS over the three-year performance period is below the threshold performance required to earn the award, accumulated dividends are forfeited as well.

Range of Award Opportunity for Performance Share Units

Each year, the Compensation Committee approves a grant to each NEO of a target number of performance share units that vest over a three-year performance cycle based on achieving pre-determined performance goals. The number of performance shares that may be earned at the end of the performance cycle can range from 0% to 200% of the target, depending upon the level of achieved performance. The target number of performance share units granted to each NEO was determined by dividing the NEO’s target LTIP value allocated to performance share units by the grant date share price of our common stock.

The table below shows the changes made to the target value of performance share grants in 2023 for the 2023 through 2025 performance period for our NEOs. In general, the target value of performance shares aligns with market data for 2023, considering the allocation of PSUs changed from 75% in 2022 to 70% in 2023. Mr. Christie received additional grants in May 2023, valued as of the grant date, upon his promotion to CFO. Mr. Manuel joined the company in 2023.

 

       

2022 Grant

($)

       %
Change
      

2023 Grant

($)

 

D. P. Vermillion

     $ 1,953,813          (4.2 )%       $ 1,872,560  

M. T. Thies

     $ 570,069          (23.2 )%       $ 437,558  

K. J. Christie

     $ 382,583          0.7      $ 385,104  

H. L. Rosentrater

     $ 382,583          0.6      $ 385,041  

J. R. Thackston

     $ 382,583          (25.0 )%       $ 287,059  

W.O. Manuel

       N/A          N/A        $ 147,021  

The table below outlines the target number of PSUs granted in 2023 by performance metric.

 

        Relative TSR        CEPS       

2023 Grant

(#)

 

D. P. Vermillion

       11,152          33,454          44,606  

M. T. Thies

       2,606          7,817          10,423  

K. J. Christie

       2,270          6,808          9,078  

H. L. Rosentrater

       2,293          6,879          9,172  

J. R. Thackston

       1,710          5,128          6,838  

W.O. Manuel

       902          2,705          3,607  

 

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The following graphs show the percentage of performance share units that will be earned at different levels of achieved performance.

 

 

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2021-2023 Performance Shares Settlement

For performance shares linked to the Company’s TSR and granted in 2021 for the performance period ending December 31, 2023, the Compensation Committee held a special meeting on January 9, 2024, to review, certify, and settle the issuance of shares to executive officers. The Company’s cumulative TSR was 3.36% during the three-year performance cycle, which placed the Company at the 39th percentile among the S&P 400 Mid-Cap Utilities Index. Based on these results, our CEO and our other NEOs earned 72.5% of the performance share awards granted in 2021 vesting based on TSR. Accrued cash dividend equivalents were paid out on the same percentage of performance shares covered by the 2021 grant.

For performance shares linked to the Company’s Cumulative Earnings Per Share (CEPS) and granted in 2021 for the performance period ending December 31, 2023, the Compensation Committee reviewed, certified and settled the issuance of shares to executive officers at its February 2023 meeting. The Company’s CEPS for the 2021-2023 performance cycle ended at $6.46. Based on these results, our CEO and our other NEOs earned 53% of the performance share awards granted in 2021 vesting based on CEPS, noting that Mr. Manuel did not receive this grant, as he joined the Company in 2023. Accrued cash dividend equivalents were paid out on the same percentage of performance shares covered by the 2021 grant.

 

    Realized Value Received  
     Performance Share Awards  
  NEO  

TSR

(#)

      

CEPS

(#)

       Value        Dividend
Equivalents
       Total
Realized
Value
 

D. P. Vermillion

    13,802          10,090        $  838,492        $ 126,389        $  964,880  

M. T. Thies(1)

    4,163          3,043        $ 252,896        $ 38,120        $ 291,015  

K. J. Christie

    2,398          1,753        $ 145,680        $ 21,959        $ 167,639  

H. L. Rosentrater

    2,398          1,753        $ 145,680        $ 21,959        $ 167,639  

J. R. Thackston

    2,979          2,178        $ 180,985        $ 27,281        $ 208,266  

 

1.

Mr. Thies retired from the Company on October 1, 2023. Amounts shown are prorated based upon his retirement date.

 

 

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Restricted Stock Units (RSUs)

In February 2023, the Compensation Committee approved the grant of RSUs to each NEO. The 2023 RSUs are designed to incent retention, link compensation to the value of the Company common stock and align the interests of our NEOs with those of our shareholders. The 2023 RSUs are subject to three-year ratable vesting. On each vesting date one-third of the RSUs are settled in shares, provided the NEO remains continuously employed by the Company through the vesting date. Dividend equivalents on RSUs accrue and are paid in cash to the extent the underlying RSUs vest. To the extent RSUs are forfeited, the accrued dividend equivalents on such RSUs also would be forfeited.

The number of RSUs granted to each NEO was determined by dividing the NEO’s target LTIP value allocated to RSUs by the grant date share price of our common stock. The table below shows the changes made to the target value of RSU grants in 2023 for the 2023 through 2025 vesting period for our NEOs. As with performance share units, in general, the target value of RSUs increased to align with market data for 2023. Mr. Christie and Ms. Rosentrater received the highest increases to bring their respective target values closer to market in their new roles.

 

       

2022 Grant

($)

      

%

Change

      

2023 Grant

($)

 

D. P. Vermillion

     $  651,286          23.2%        $  802,448  

M. T. Thies

     $ 190,008          (1.3)%        $ 187,483  

K. J. Christie

     $ 127,513          29.3%        $ 164,935  

H. L. Rosentrater

     $ 127,513          29.4%        $ 164,981  

J. R. Thackston

     $ 127,513          (3.6)%        $ 122,959  

W.O. Manuel(1)

       N/A          N/A        $ 188,026  

 

1.

Mr. Manuel received an additional RSU grant valued at $125,000 (3,067 shares), as agreed upon in his offer of employment. The entirety of this grant vested on Dec 31, 2023.

The following chart shows the value realized by our NEOs for the RSUs vested and issued along with the associated cash dividend equivalents.

 

   

Realized Value Received

 

 
    Restricted Stock Units       

Total

Realized
Value

 
 NEO   #        Value        Dividend
Equivalents
 

D. P. Vermillion

    15,507        $   559,027        $    61,005        $   620,033  

M. T. Thies(1)

    4,064        $ 126,268        $ 5,608        $ 131,877  

K. J. Christie

    2,991        $ 107,826        $ 11,155        $ 118,981  

H. L. Rosentrater

    3,004        $ 108,294        $ 12,115        $ 120,409  

J. R. Thackston

    2,849        $ 102,706        $ 10,600        $ 113,307  

W.O. Manuel

    3,583        $ 129,167        $ 4,951        $ 134,118  

 

1.

Mr. Thies retired from the Company on October 1, 2023. Amounts shown are prorated based upon his retirement date.

PERQUISITES

The Company does not provide any perquisites or personal benefits to our CEO or any other NEO.

OTHER BENEFITS

The majority of our employees, including our NEOs, are eligible for the Company’s defined benefit plan, the Company’s 401(k) plan, health and dental coverage, Company-paid term life insurance, disability insurance, paid time off and paid holidays.

The Company’s retirement plan provides a traditional retirement benefit based on employees’ compensation and years of credited service. Earnings credited for retirement purposes represent the final average annual base salary of the employee for the highest 36

 

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consecutive months during the last 120 months of service with the Company. The NEOs participate in this retirement plan, with the exception of Mr. Manuel, whose hire date with the Company came after participation in the plan was closed to new non-union employees. Mr. Manuel participates in the Company’s enhanced 401(k) plan.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

In addition to the Company’s retirement plan, the Company provides additional pension benefits through the SERP to the Company’s executive officers, with the exception of Mr. Manuel, who, based upon his hire date with the Company, participates in the Company’s Enhanced 401(k) plan which includes a 100% match on the first 6% of contributions plus a non-elective company contribution of 3%, 4%, or 5%, based on age. Details of the SERP benefits and the amounts accrued by each NEO are found in the Pension Benefits section.

The Compensation Committee believes the pension plans, the 401(k), and the SERP are an important part of our NEOs’ compensation. These plans are market competitive within the energy/utility industry and serve a critically important role in the retention of senior executives. The benefits increase each year these executives remain employed, thereby encouraging our most senior executives to remain employed and continue their work on behalf of shareholders.

EXECUTIVE DEFERRED COMPENSATION

The Company also maintains an Executive Deferred Compensation Plan (the “EDC Plan”). Each NEO may voluntarily participate in this EDC Plan on the same terms and conditions as all other eligible employees who reach a set compensation level. This EDC Plan is competitive in the market and provides eligible employees and executives with a tax-efficient savings method. Additional information about this EDC Plan, including 2023 contributions and year-end account balances, can be found in the Non-Qualified Deferred Compensation Plan table.

COMPANY SELF-FUNDED DEATH BENEFIT PLAN

To provide death benefits to beneficiaries of executive officers who die during their term of office, the Company maintains an executive death benefit plan providing an executive officer’s designated beneficiary with a lump sum payment equal to twice the executive officer’s final annual base salary, payable within 30 days of the executive’s death. Prior to January 1, 2008, the plan continued to provide the death benefit to the beneficiaries of executives who died after retirement. Effective January 1, 2008, the post-retirement death benefit was eliminated for any individual who became an executive officer after that date. Individuals who were executive officers prior to January 1, 2008 continue to be eligible for the post-retirement death benefit. For an officer who is eligible for the post-retirement death benefit, in the event of his or her death after retirement, the designated beneficiary will receive a lump sum equal to twice the retired executive officer’s total annual pension benefit. Death benefits are paid from the general assets of the Company. The present value of this benefit for each NEO can be found in the Potential Payment Upon Termination or CIC Tables.

SUPPLEMENTAL EXECUTIVE DISABILITY PLAN

The Supplemental Executive Disability Plan provides benefits to the Company’s executive officers who become disabled during employment. The plan provides a benefit equal to 60% of the executive officer’s annual salary at the date of disability reduced by the aggregate amount, if any, of disability benefits provided for under the Company’s Long-Term Disability Plan for employees, workers’ compensation benefits, and any benefit payable under provisions of the Federal Social Security Act. Benefits will be payable until the earlier of the executive officer’s date of retirement or age 65. The present value of this benefit for each NEO can be found in the Potential Payment Upon Termination or CIC Tables.

CHANGE IN CONTROL (“CIC”) AND SEVERANCE BENEFITS

The Compensation Committee believes it is in the interest of shareholders to provide severance to our executive officers in the event of a CIC, thereby reducing the inherent conflict of our executive officers pursuing a transaction that may result in their personal job loss. Effective January 1, 2020, our new Executive Change in Control Plan (“CIC Plan”) was put in place for all executive officers of the Company replacing individual agreements certain executive officers had regarding a CIC. The following are key features of the plan:

 

 

Severance multiple: NEOs prior to January 1, 2020 would receive three times the sum of the executive’s annual base salary and target annual bonus. Future NEOs and other officers would receive two times the sum of the executive’s annual base salary and target annual bonus.

 

 

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Severance also includes reimbursement of 18 months of COBRA premiums, if COBRA is elected by the individual.

 

 

Payment of severance is conditioned on the individual’s delivery of a release of claims.

 

 

“Good reason” includes material diminution of authority, responsibility, pay, bonus opportunity or budget overseen, material relocation or material breach by the Company of the plan.

 

 

Certain protections, such as a minimum annual base salary, provided to executive officers during continued employment for up to two years following CIC.

 

 

No 280G excise tax gross up; CIC benefits are limited to greater of, on an after-tax basis, the full amount of CIC benefits subject to excise tax or a reduced amount equal to the maximum amount of CIC benefits that could be paid without triggering the 280G excise tax.

Additional information regarding the CIC Plan, including definitions of certain key terms and a quantification of benefits that hypothetically would have been received by our NEOs under the CIC Plan, and an applicable termination occurred on December 31, 2023, due to a CIC can be found in the Potential Payment Upon Termination or CIC Tables.

INTERNAL REVENUE CODE (“CODE”) SECTION 162(M)

Code Section 162(m) prohibits a publicly held corporation from taking a deduction for compensation paid to an NEO in excess of $1 million for any fiscal year. When consistent with the Company’s compensation philosophy and objectives, the Compensation Committee structures its compensation plans so the related compensation expense may be deductible for tax purposes. However, in light of the need to maintain flexibility in administering our executive compensation program and the recent changes in the tax law, the Compensation Committee retains discretion to recommend to the Board executive compensation that will not be deductible.

Compensation Governance Matters

Recoupment Policies

Under Section 10D of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), and NYSE rules adopted pursuant to Rule 10D-1 enacted thereunder, the Company is required to adopt and comply with a policy in which the Company will reasonably promptly recover incentive compensation that is determined to have been erroneously awarded to executive officers due to a required accounting restatement. Effective August 3, 2023, the Company adopted its Dodd-Frank Recovery Policy in order to comply with SEC and NYSE rules.

The Compensation Committee believes that the Company should maintain the ability to seek recovery of erroneously awarded incentive compensation beyond the required provisions of Rule 10D-1 and NYSE rules, in particular where employees (including non-executives) engage in misconduct. Therefore, in addition to the mandatory recoupment policy adopted in compliance with the Dodd-Frank Act and NYSE rules, the Board has adopted a discretionary recoupment policy applicable to incentive compensation awards. The discretionary policy authorizes the Company to recover incentive payouts from any executive or employee if those payouts are based upon performance results subsequently revised or restated to levels that would have produced payouts lower than the original incentive plan payouts, and, if, in the Board’s judgment and determination, the executive or employee engaged in fraud, negligence, or other misconduct that contributed to the need for the financial restatement. If willful or negligent misconduct or material error results in a restatement of financial results, the Compensation Committee may recommend that the Board either require forfeiture of incentive awards or seek to recover appropriate portions of the executive officer or employee’s compensation for the relevant period, in addition to other disciplinary actions that might be appropriate based on the circumstances.

Effective February 5, 2020, the Compensation Committee expanded the discretionary recoupment policy to allow up to three years of incentive compensation to be subject to recovery for detrimental conduct, which includes:

 

 

The commission of an act of fraud, misappropriation or embezzlement in the course of employment;

 

 

The commission of a criminal act, whether or not in the workplace, that in the Board’s sole discretion, constitutes a felony or crime of comparable magnitude;

 

 

The material violation of any applicable restrictive covenant (including, but not limited to, non-solicitation, non-compete or non-disclosure covenants);

 

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The willful and material breach of a Covered Person’s obligations under the Company’s Code of Conduct relating to compliance with law or regulations giving rise to dismissal under the Code of Conduct or termination for Cause; or

 

 

Any act or omission involving willful misconduct resulting in such Covered Person’s termination for cause.

The Board, in its discretion, would determine when the need for a recoupment is triggered, to whom the recoupment would apply, the amount subject to recoupment and the recoupment mechanism.

Stock Ownership Guidelines

The Board has implemented stock ownership guidelines for the Company’s executive officers. The guidelines require executive officers to own shares and achieve set ownership levels based on a formula designated as a multiple of salary within a target timeframe of five years from their employment date or date of promotion, as described within the program guidelines. The value for each executive’s ownership level is determined by using the average closing share price over the prior calendar year. This methodology aligns with current competitive practices within the peer group based on market data provided by Meridian.

The objectives of our stock ownership guidelines are to:

 

 

Strengthen alignment of the executives’ financial interests with those of shareholders;

 

 

Enhance executive long-term perspective and focus on shareholder value growth;

 

 

Reinforce “pay at risk” philosophy and provide an additional basis for sharing in Company success or failure as reflected in shareholder returns; and

 

 

Align Company practice with corporate governance best practices.

Each year at the February meeting, the Compensation Committee reviews the ownership levels to assure adherence to the guidelines. In 2024, the Compensation Committee conducted its annual review to assess whether each officer was at or moving toward the required ownership level for his or her position. The Compensation Committee determined all NEOs were in compliance with the ownership guidelines.

The specific ownership targets and certain other components of the guidelines are as follows:

 

Requirement

  Ownership Definition   Retention Requirement

•   CEO—5 times salary

•   PRES—4 times salary

•   EVP & SVPs—2.5 times salary

•   VPs—1 times salary

 

•   Direct holding and family holdings

•   Shares held in 401(k)

•   Shares held in Executive Deferred Compensation Account

•   Unvested time-based RSUs

  Officers must retain 50% of the net shares received upon restricted stock release or issuance of performance shares earned until this required ownership level is achieved

Based on the guideline definition of ownership after the change in requirements, the following chart shows the required ownership level for each NEO and the number of shares owned as of March 1, 2024.

 

        Ownership Level        Required        Owned        Met  

D. P. Vermillion

       5x          115,314          171,124          Met  

K. J. Christie

       2.5x          26,089          32,861          Met  

H. L. Rosentrater

       4x          52,178          33,692          Not Met 1 

J. R. Thackston

       2.5x          25,567          35,006          Met  

W.O. Manuel

       1x          9,392          9,637          Met  

 

(1)

Ms. Rosentrater has until 2028 to meet the required ownership target based on her promotion date of October 1, 2023.

 

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board reviewed and discussed the CD&A with management, and based on such review and discussions, the Compensation Committee recommended to the Board the CD&A be included in the Company’s Annual Report on Form 10-K and in this proxy statement.

Compensation Committee Interlocks and Insider Participation

There are no “Compensation Committee interlocks” or “insider participation” relationships SEC regulations or NYSE listing standards would require to be disclosed in this proxy statement.

Members of the Compensation Committee of the Board

 

Scott H. Maw—Chair    Rebecca A. Klein    Jeffry L. Philipps

 

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Executive Compensation Tables

The Summary Compensation Table (“SCT”) below provides summary compensation information for our NEOs: the CEO, the former and current CFO, and the three other most highly compensated executive officers who were serving as such on December 31, 2023:

Summary Compensation Table — 2023

 

Name and

Principal Position

   Year      Salary(1)    

Stock
Awards

($)(2)

   

Non-Equity
Incentive Plan
Compensation

($)(3)

   

Change in Pension and
Non-Qualified Deferred
Compensation Earnings

($)(4)

   

All Other
Compensation

($)(5)

   

Total

Compensation

($)

 

D. P. Vermillion

CEO

     2023      $ 878,769     $ 2,728,537     $ 219,692     $ 1,384,964     $ 18,000     $ 5,229,962  
     2022      $ 838,077     $ 2,923,157     $ 951,228       N/A     $ 32,917     $ 4,745,379  
     2021      $ 769,038     $ 1,986,445     $ 855,587     $ 905,751     $ 60,718     $ 4,577,539  

M. T. Thies(6)

Former Executive Vice

President, CFO

& Treasurer

     2023      $ 272,029     $ 637,549     $ 44,205       N/A     $ 32,969     $ 986,752  
     2022      $ 473,153     $ 852,877     $ 349,073       N/A     $ 18,300     $ 1,693,404  
     2021      $ 461,615     $ 653,436     $ 333,818     $ 197,793     $ 17,400     $ 1,664,062  

K. J. Christie

Sr. Vice President, CFO, Treasurer, and

Regulatory Affairs Officer

     2023      $ 386,446     $ 565,941     $ 57,967     $ 218,552     $ 14,850     $ 1,243,756  
     2022      $ 354,307     $ 572,377     $ 241,286       N/A     $ 13,725     $ 1,181,695  
     2021      $ 343,461     $ 345,109     $ 229,269     $ 186,490     $ 13,050     $ 1,117,379  

H. L. Rosentrater

President, and

Chief Operating Officer

     2023      $ 459,500     $ 561,028     $ 70,361     $ 223,727     $ 14,850     $ 1,329,466  
     2022      $ 365,858     $ 572,377     $ 249,152       N/A     $ 13,725     $ 1,201,111  
     2021      $ 343,462     $ 345,109     $ 229,269     $ 147,079     $ 13,050     $ 1,077,969  

J. R. Thackston

Sr. Vice President and

Chief Strategy & Clean Energy Officer

     2023      $ 389,386     $ 418,227     $ 58,408     $ 337,139     $ 17,322     $ 1,220,482  
     2022      $ 359,936     $ 572,377     $ 245,119       N/A     $ 16,131     $ 1,193,563  
     2021      $ 343,463     $ 428,659     $ 229,270     $ 152,208     $ 15,196     $ 1,168,796  

W. O. Manuel(7)

Vice President, Chief Information Officer &

Chief Security Officer

     2023      $ 196,616     $ 344,861     $ 36,000       N/A     $ 331,500     $ 908,977  
               
                                                         

 

1.

Amounts earned in the applicable year; includes regular pay, paid time-off, jury duty and holiday pay. The total amounts shown in this column also include any amounts an NEO elected to defer in accordance with the EDC Plan. See the “Non-Qualified Deferred Compensation Plan” table for more information.

 

2.

Values shown represent the aggregate grant date fair value calculated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 “CompensationStock Compensation” for RSUs and performance share awards granted in each of the years reported. Assumptions used in the calculation of these amounts are included in Note 1 of the Company’s audited financial statements for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC. In the case of performance share awards tied to TSR, the amounts reported in the Stock Awards column represent the aggregate grant date fair value of the target number of performance shares that may become vested if the applicable performance criteria are satisfied and computed in accordance with ASC 718. The aggregate grant date fair value for the target number of performance shares was calculated by using a Monte Carlo simulation, which produces a probable value for the awards. All performance share awards vest at the end of the vesting term, however the number of shares delivered vary based upon the attained level of performance and may range from 0 to 2.0 times the target number of performance shares awarded. For the 2023 performance share grant, if the maximum level of performance is achieved and using the closing stock price of $35.74 as reported on December 29, 2023, to calculate the value and add the dividend equivalents using an annual amount of $1.84 per share as declared in 2023 multiplied by three years, then the value of the payouts would be: Mr. Vermillion $3,680,887; Mr. Thies $860,106; Mr. Christie $749,117; Ms. Rosentrater $756,873; Mr. Thackston $564,272; and Mr. Manuel $297,650.

 

3.

Amounts shown represent the annual short-term cash incentive awards paid in 2024 earned by our NEOs for 2023 performance in accordance with the 2023 Cash Incentive Plan.

 

4.

Any increase in the present value of the accrued pension benefit at normal retirement age (the earliest age at which retirement benefits may be received by the NEO without any reduction in benefits) for any NEO between December 31, 2022, and December 31, 2023, is reported in this column. All NEOs experienced an increase in the present value of their respective accrued pension benefits during 2023. The present value as of December 31, 2023, utilizes the Pri-2012 mortality table with modified MP-2021 generational projection for males and females and a 5.86% discount rate for the retirement plan and a 5.95% discount rate for the SERP. Differences in the present value from year to year are attributable to increases in final average pay, additional service, discount rates fluctuations and mortality assumptions. There were no above-market earnings for the Company’s EDC Plan. Mr. Manuel is included in the company’s 401(k) plan only based upon his hire date.

 

 

2024 PROXY STATEMENT

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EXECUTIVE COMPENSATION TABLES

 

5.

Includes employer matching contributions under both the EDC Plan and the Investment and Employee Stock Ownership Plan (the “401(k) plan”). The Company makes matching contributions on behalf of all its employees who make regular contributions of their wages, salary, cash incentive, and overtime to the 401(k) plan during the plan year. The Company matching contribution to the 401(k) plan is equal to $0.75 for every $1.00 of regular employee contributions up to a maximum 6% of compensation for non-employees hired prior to January 1, 2006. For non-bargaining employees hired after that date, the Company matching contribution is equal to $1.00 for every $1.00 of regular employee contributions up to a maximum of 6% of compensation. for those non-bargaining employees hired after January 1 2014, there is an additional enhanced contribution of 3/4/5% based on age. The Company matching contribution under the EDC Plan is equal to $0.75 for every $1.00 contributed up to a maximum of 6% of the executive’s base pay less the maximum contribution allowed under the 401(k) plan assuming the participant contributed the maximum allowed by law. Amounts shown in the All Other Compensation column for 2023 include the following:

 

Name   

One-Leave

Cash-Out

     Special Pay      EDC Plan
Company Match
     401(k) Plan
Company Match
     Non-Elective
401(k) Plan
Company
Contribution
     Total All Other
Compensation
 

D. P. Vermillion

         $ 3,150      $ 14,850         $ 18,000  

M. T. Thies(6)

      $ 13,169         $ 19,800         $ 32,969  

K. J. Christie

            $ 14,850         $ 14,850  

H. L. Rosentrater

            $ 14,850         $ 14,850  

J. R. Thackston

         $ 2,472      $ 14,850         $ 17,322  

W.O. Manuel(7)

            $ 315,000                        $ 16,500      $ 331,500  

 

6.

Mr. Thies retired from the Company on October 1, 2023.

 

7.

Mr. Manuel joined the company on June 1, 2023. His offer of employment included the following items, listed under special pay: $75,000 signing bonus, $140,000 short-term incentive replacement, and $100,000 moving allowance.

CEO PAY RATIO

The Compensation Committee reviewed a comparison of CEO total compensation to the total compensation of the median employee. The compensation for the CEO in 2023 was approximately 27 times the total compensation of our median employee.

In 2023, we identified the median employee by first collecting pay records on all employees from all companies within the corporation including subsidiaries, 1,988 (full-time, part-time, seasonal, and temporary), who were employed by us on December 22, 2023. To determine our median employee, we used a definition that was not annual total compensation, as shown in the 2023 Summary Compensation Table above, and instead chose “base pay rate,” which we then annualized as if all employees worked full-time and were employed for all of 2023. We identified 237 employees whose annualized base pay was within a +/-5% range of the median annualized base pay rate. Total cash compensation from 2023 was collected for each of the 237 employees to further narrow down the population. We believe the use of total cash compensation for this group of employees is a consistently applied compensation measure because we do not widely distribute annual equity awards to employees. Fewer than 3% of our employees receive annual equity awards.

We calculated annual total compensation for the employee using the same methodology we use for our NEOs as set forth in the 2023 Summary Compensation Table above. The annual total compensation for 2023 was $5,229,962 for our CEO and $196,535 for our median employee. The resulting ratio of our CEO’s pay to the pay of our median employee for 2023 is 27 to 1.

The foregoing pay ratio disclosure, including but not limited to any assumptions, adjustments, methodologies and existing internal records used to identify our median employee, is a reasonable estimate calculated in a manner consistent with SEC Item 402(u) of Regulation S-K. The SEC rules for identifying the median employee and calculating that employee’s annual total compensation allow companies to make reasonable assumptions and estimates, and to apply a variety of methodologies and exclusions reflecting their compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different compensation practices, and may utilize different assumptions, estimates, methodologies and exclusions in calculating their own pay ratios.

 

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EXECUTIVE COMPENSATION TABLES
 
Pay vs. Performance (“PvP”) Tabular Disclosure — 2023
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 “compensation actually paid” (“CAP”) to our CEO and to our other NEOs and certain financial performance metrics of the Company. Compensation actually paid, 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
pay-for-performance
philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the Compensation Discussion and Analysis.
 
   
Pay
 
Performance
 
    
CEO
       
Average of Other NEOs
       
Value of $100 Initial Investment
Based On:
             
Year
(1)
 
SCT Total
Compensation
   
Compensation
Actually Paid
(2)
        
SCT Total
Compensation
   
Compensation
Actually Paid
(2)
        
Cumulative
TSR
   
Peer Group
Cumulative
TSR
(3)
   
Net Income
($M)
   
EPS
 
2023
  $ 5,229,962     $ 1,552,612       $ 1,137,887     $ 454,110       $ 86     $ 88     $ 171.2     $ 2.24  
2022
  $ 4,745,379     $ 5,290,632       $ 1,318,402     $ 1,605,440       $ 104     $ 103     $ 155.2     $ 2.12  
2021
  $ 4,577,539     $ 3,485,983       $ 1,257,052     $ 1,082,031       $ 96     $ 103     $ 147.3     $ 2.10  
2020
  $ 5,004,033     $ 2,234,759    
 
  $ 1,173,361     $ 241,559    
 
  $ 87     $ 86     $ 129.5     $ 1.90  
 
1.
The CEO in all four reporting years is Dennis Vermillion. The other NEOs in the 2023 reporting years are Mark Thies (ret.), Kevin Christie, Heather Rosentrater, Jason Thackston, and Wayne Manuel. The other NEOs in 2022 and 2021 reporting years were: Mark Thies (ret.), Jason Thackston, Heather Rosentrater, and Kevin Christie. The other NEOs in the 2020 reporting year are Mark Thies (ret.), Jason Thackston, Marian Durkin (ret.), Kevin Christie, and Heather Rosentrater.
 
2.
Amounts reported in this column are based upon total compensation reported for our CEO and our other NEOs in the Summary Compensation Table for the indicated reporting years and adjusted as shown in the table below. Fair value of equity awards was computed in accordance with the Company’s methodology used for financial reporting purposes.
 
 
2024 PROXY STATEMENT
 
47

EXECUTIVE COMPENSATION TABLES
 
    
2020
        
2021
        
2022
        
2023
 
    
CEO
   
Other
NEOs
       
CEO
   
Other
NEOs
       
CEO
   
Other
NEOs
       
CEO
   
Other
NEOs
 
Summary Compensation Table Reported Compensation
  $ 5,004,033     $ 1,173,361       $ 4,577,539     $ 1,257,052       $ 4,745,379     $ 1,318,402       $ 5,229,962     $ 1,137,887  
Deduct:
SCT reported change in pension value
  $ (2,290,317   $ (335,308     $ (905,751   $ (170,893     $     $       $ (1,384,964   $ (155,884
Add
: “CAP” pension value
  $ 985,475     $ 73,716       $ 6,658     $ 118,549       $ 3,813     $ 115,378       $ 804     $ 35,117  
Deduct:
Grant date fair values of equity awards reported in “Stock Awards” column of the SCT for the covered FY
  $ (1,778,775   $ (432,640     $ (1,986,445   $ (443,078     $ (2,923,157   $ (642,502     $ (2,728,537   $ (505,521
Deduct
: For any awards granted in any prior FY forfeited during the covered FY, the fair value at the end of the prior FY
  $     $ (10,089     $     $       $     $       $     $ (104,376
Add:
Fair values as of the end of the covered FY of all equity awards granted during the covered FY outstanding and unvested as of the end of such covered FY
  $ 798,823     $ 154,306       $ 1,865,542     $ 416,058       $ 2,626,495     $ 577,278       $ 1,767,071     $ 242,652  
Add
: The change in fair value (whether positive or negative) as of the end of the covered FY of any equity awards granted in any prior FY outstanding and unvested as of the end of such covered FY
  $ (249,034   $ (176,959     $ (192,645   $ (63,103     $ 268,274     $ 61,234       $ (1,518,971   $ (240,617
Add
: For awards granted and vested in the same FY, the fair value as of the vesting date
  $ 109,542     $ 23,708       $ 179,733     $ 40,100       $ 217,488     $ 63,451       $ 227,735     $ 58,177  
Add:
The change in fair value (whether positive or negative) as of the vesting date of any awards granted in any prior FY for which all applicable vesting conditions were satisfied at the end of or during the covered FY
  $ (410,431   $ (250,148     $ (197,784   $ (108,165     $ 119,893     $ 60,392       $ (183,866   $ (36,344
Add
: The dollar value of any dividend equivalents or other earnings paid on stock or option awards in the covered FY prior to the vesting date not otherwise reflected in the fair value of such award
  $ 65,443     $ 21,612       $ 139,135     $ 35,511       $ 232,446     $ 51,807       $ 143,377     $ 23,019  
 
 
 
   
 
 
   
 
 
 
 
   
 
 
   
 
 
 
 
   
 
 
   
 
 
 
 
   
 
 
 
Total Compensation Actually Paid
 
$
2,234,759
 
 
$
241,559
 
     
$
3,485,983
 
 
$
1,082,031
 
     
$
5,290,632
 
 
$
1,605,440
 
     
$
1,552,612
 
 
$
454,110
 
 
3.
Amounts reported in this column represent returns on an initial $100 investment in the S&P 400 Utilities Index, which we chose as peer group for purposes of the PvP table.
Most Important Measures Linking Avista NEO Pay to Performance — 2023
The following are the most important financial and
non-financial
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
y
ear.
 
 
EPS
 
 
3-Year
Relative TSR
 
 
Cost Per Customer
 
48
 
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EXECUTIVE COMPENSATION TABLES
 
Compensation Actually Paid vs. Most Important Measures — 2023
The graphs below describe the relationship between compensation actually paid to our NEOs and the Company’s cumulative Total Shareholder Return, net income, and EPS for the indicated years. In addition, the graph of CAP vs. TSR below compares the Company’s cumulative TSR and our peer group cumulative TSR.
 


 
 
 
2024 PROXY STATEMENT
 
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EXECUTIVE COMPENSATION TABLES

 

Grants of Plan-Based Awards — 2023

 

            Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards
(2)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards
(3)
   

All Other

Stock Awards:
Number of
Shares
of Stock or

   

Grant Date
Fair Value of
Stock and

Option

 

Name

  Grant
Date
(1)
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
   

Units

(#)(4)

   

Awards

($)(5)

 

D. P. Vermillion

                 

Annual Cash Award

    02/02/23     $ 530,400     $ 884,000     $ 1,326,000            

Performance Award

    02/02/23             5,576       11,152       22,304         521,691  

Performance Award

    02/02/23             13,382       33,454       66,908         1,404,399  

Restricted Stock Units

    02/02/23                                                       19,115       802,448  

M. T. Thies(6)

                 

Annual Cash Award

    02/02/23     $ 193,050     $ 321,750     $ 482,625            

Performance Award

    02/02/23             1,303       2,606       5,212         121,909  

Performance Award

    02/02/23             3,127       7,817       15,634         328,158  

Restricted Stock Units

    02/02/23                                                       4,466       187,483  

K. J. Christie

                 

Annual Cash Award

    02/02/23     $ 144,000     $ 240,000     $ 360,000            

Performance Award

    02/02/23             1,135       2,270       4,540         112,199  

Performance Award

    02/02/23             2,723       6,808       13,616         288,807  

Restricted Stock Units

    02/02/23                                                       3,888       164,935  

H. L. Rosentrater

                 

Annual Cash Award

    02/02/23     $ 195,000     $ 325,000     $ 487,500            

Performance Award

    02/02/23             1,147       2293       4,586         107,267  

Performance Award

    02/02/23             2,752       6879       13,758         288,780  

Restricted Stock Units

    02/02/23                                                       3,930       164,981  

J. R. Thackston

                 

Annual Cash Award

    02/02/23     $ 141,120     $ 235,200     $ 352,800            

Performance Award

    02/02/23             855       1,710       3,420         79,994  

Performance Award

    02/02/23             2,051       5,128       10,256         215,273  

Restricted Stock Units

    02/02/23                                                       2,929       122,959  

W.O. Manuel(7)

                 

Annual Cash Award

    06/01/23     $ 86,400     $ 144,000     $ 216,000            

Performance Award

    06/01/23             451       902       1,804         46,579  

Performance Award

    06/01/23             1,082       2,705       5,410         110,256  

Restricted Stock Units

    06/01/23                                                       4,613       188,026  

 

1.

The grant date is the date the Compensation Committee and/or the Board approves the grant of performance share awards, RSUs or non-equity incentive awards. For NEOs new to the Company, the grant date is their hire date.

 

2.

Potential annual cash incentive awards granted to NEOs for 2023 performance in accordance with the 2023 Cash Incentive Plan. The amounts actually paid to our NEOs for 2023 performance appear in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. See the CD&A for further explanation.

 

3.

Performance share awards are granted under the LTIP and vest over a three-year period. The number of shares earned at the end of the three-year performance period depends on the level of performance achieved. See the CD&A for further explanation.

 

4.

In 2023, all of our NEOs were awarded RSUs under the LTIP that vest over a three-year period. One-third of the shares vest and shares are issued on an annual basis, provided that the NEO is employed on the last day of the vesting period. Dividend equivalents accrue on the unvested RSUs and are paid in cash at the same time the underlying RSUs vest. Therefore, if an NEO’s employment ends prior to the last day of the vesting period, no RSUs or dividend equivalents are earned or paid.

 

5.

The amounts shown for the grant date fair value of the target number of performance share awards tied to TSR were calculated in accordance with ASC 718. Assumptions used in the calculation of these amounts are included in Note 1 of the Company’s audited financial statements for the year ended December 31, 2023, included in the Company’s Form 10-K filed with the SEC on February 20, 2024. The grant date fair value for the target number of performance shares tied to TSR was calculated using a Monte Carlo simulation to produce a probable value for the awards, which resulted in a fair value per share higher than the closing price per share on the grant date.

 

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EXECUTIVE COMPENSATION TABLES

 

6.

Mr. Thies retired from the Company on October 1, 2023. Awards were prorated and settled based upon his retirement date.

 

7.

Mr. Manuel received an additional RSU grant of 3,067 shares as agreed upon in his offer of employment. The entirety of this grant vested on Dec 31, 2023.

Employment Agreements

We currently do not have employment agreements with our NEOs. Please refer to the “Pension Benefits” Table for a discussion of the provisions that relate to the grant of additional vesting service credit for pension purposes, and to the “Potential Payments upon Termination or Change in Control” for a discussion of the change in control provisions.

Outstanding Equity Awards at Year-End — 2023(1)

 

              Stock Awards  
   

Name

   Date of
Grant
    

Number of Shares
or Units of Stock
Not Vested

(#)(2)

    

Market Value of Shares
or Units of Stock
Not Vested

($)(3)

    Equity Incentive Plan Awards:
Number of Unearned Shares,
Units, or Other Rights Not
Vested
(4)
    

Equity Incentive Plan Awards:
Market or Payout
 Value of

Unearned Shares, Units, or
Other Rights Not
 Vested

($)(4)

 

D. P. Vermillion

     02/03/22             44,144        1,577,707  

D. P. Vermillion

     02/03/22        4,905        175,305       

D. P. Vermillion

     02/02/23             44,606        1,594,218  

D. P. Vermillion

     02/02/23        12,743        455,435                   

M. T. Thies(5)

     02/03/22             7,514        268,550  

M. T. Thies

     02/03/22                     

M. T. Thies

     02/02/23             2,607        93,174  

M. T. Thies

     02/02/23                                 

K. J. Christie

     02/03/22             8,644        308,937  

K. J. Christie

     02/03/22        960        34,310       

K. J. Christie

     02/02/23             9,078        324,448  

K. J. Christie

     02/02/23        2,591        92,602                   

H. L. Rosentrater

     02/03/22             8,644        308,937  

H. L. Rosentrater

     02/03/22        960        34,310       

H. L. Rosentrater

     02/02/23             9,172        327,807  

H. L. Rosentrater

     02/02/23        2,620        93,639                   

J. R. Thackston

     02/03/22             8,644        308,937  

J. R. Thackston

     02/03/22        960        34,310       

J. R. Thackston

     02/02/23             6,838        244,390  

J. R. Thackston

     02/02/23        1,952        69,764                   

W.O. Manuel

             

W.O. Manuel

             

W.O. Manuel

     06/01/23             3,607        128,914  

W.O. Manuel

     06/01/23        1,030        36,812                   

 

1.

All of the 2021-2023 awards were settled at the end of 2023. Please see the “Stock Vested 2023” table for more information.

 

2.

Number of time-based RSUs unvested as of December 31, 2023. (RSUs vest and shares are issuable over a three-year period, provided the NEO remains employed on the last day of each year of the vesting period.)

 

3.

The market value of RSUs is based on the closing stock price ($35.74) as reported on December 29, 2023.

 

4.

Performance share awards reflect the number of performance shares at the target performance level. The market value is based on the closing stock price ($35.74) as reported on December 29, 2023. The value for the 2022 performance share award is shown at the target level (100%) based on results (less than target) for the first two years of the 2021-2023 performance period. The value for the 2023 performance share awards are shown at the target level (100%) based on results (less than target) for the first year of the 2023-2025 performance period.

 

5.

Mr. Thies retired from the Company on October 1, 2023. RSU shares were prorated and settled on his retirement date.

 

 

2024 PROXY STATEMENT

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EXECUTIVE COMPENSATION TABLES

 

Stock Vested — 2023

 

      Stock Awards(1)(2)  

Name

   Number of Shares
Acquired on Vesting
(#)
      

Value Realized
on Vesting

($)

 

D. P. Vermillion

     13,802 (1)       $ 499,770  

D. P. Vermillion

     10,090 (2)       $ 338,721  

D. P. Vermillion

     4,230 (3)       $ 152,492  

D. P. Vermillion

     4,905 (3)       $ 176,825  

D. P. Vermillion

     6,372 (3)       $ 229,711