progressenergy_def14a.htm
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant
[x]
Filed by a Party other
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Check the appropriate box:
[_] Preliminary Proxy
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[_] Confidential,
For Use of
the
14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive
Additional Materials
PROGRESS ENERGY,
INC.
------------------------------------------------------------------------------------------------------------------------------------------------------
(Name of Registrant as
Specified In Its Charter)
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Filing Proxy Statement, if Other Than the Registrant)
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Progress Energy
Proxy
Statement |
Progress Energy,
Inc.
410 S. Wilmington Street
Raleigh, NC 27601-1849
March 31,
2010
Dear
Shareholder:
I am pleased to invite you to attend the 2010 Annual Meeting of the
Shareholders of Progress Energy, Inc. The meeting will be held at 10:00 a.m. on
May 12, 2010, at the Progress Energy Center for the Performing Arts, 2 East
South Street, Raleigh, North Carolina.
As described in the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement, the matters scheduled to be acted upon at the meeting for
Progress Energy, Inc. are the election of directors, the ratification of the
selection of the independent registered public accounting firm for Progress
Energy, Inc., and a shareholder proposal regarding the adoption of a
“hold-into-retirement” policy for equity awards.
We are pleased to take advantage of the Securities and Exchange
Commission rules that permit companies to electronically deliver proxy materials
to their shareholders. This process allows us to provide our shareholders with
the information they need while lowering printing and mailing costs and more
efficiently complying with our obligations under the securities laws. On or
about March 31, 2010, we mailed to our registered and beneficial shareholders a
Notice containing instructions on how to access our combined Proxy Statement and
Annual Report and vote online.
Regardless of the size of your holdings, it is important that your shares
be represented at the meeting. IN ADDITION TO VOTING IN PERSON AT THE MEETING,
SHAREHOLDERS OF RECORD MAY VOTE VIA A TOLL-FREE TELEPHONE NUMBER OR OVER THE
INTERNET. SHAREHOLDERS WHO RECEIVED A PAPER COPY OF THE PROXY STATEMENT AND THE
ANNUAL REPORT MAY ALSO VOTE BY COMPLETING, SIGNING AND MAILING THE ACCOMPANYING
PROXY CARD IN THE RETURN ENVELOPE PROVIDED AS SOON AS POSSIBLE. IF YOUR SHARES
ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER HOLDER OF RECORD, CHECK YOUR
PROXY CARD TO SEE WHICH OPTIONS ARE AVAILABLE TO YOU. Voting by any of these
methods will ensure that your vote is counted at the Annual Meeting if you do
not attend in person.
I am delighted that you have chosen to invest in Progress Energy, Inc.,
and look forward to seeing you at the meeting. On behalf of the management and
directors of Progress Energy, Inc., thank you for your continued support and
confidence in 2010.
Sincerely,
William D. Johnson
Chairman of the Board, President
and
Chief Executive
Officer
VOTING YOUR PROXY IS IMPORTANT
Your vote is important. To ensure your representation at the Annual
Meeting, please vote your shares as promptly as possible. In addition to voting
in person, shareholders of record may VOTE VIA A TOLL-FREE TELEPHONE NUMBER OR OVER THE
INTERNET, as instructed in
the materials.
If you received this Proxy Statement by mail, please promptly
SIGN, DATE and RETURN the enclosed proxy card or VOTE BY TELEPHONE
in accordance with the instructions on the enclosed proxy card so that as many
shares as possible will be represented at the Annual Meeting. A self-addressed
envelope, which requires no postage if mailed in the United States, is enclosed
for your
convenience.
Progress Energy
Proxy
Statement |
PROGRESS ENERGY, INC.
410 S. Wilmington Street
Raleigh, North Carolina
27601-1849
__________________________
NOTICE OF THE ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON
MAY 12, 2010
The Annual Meeting of the Shareholders of Progress Energy, Inc. (the
“Company”) will be held at 10:00 a.m. on May 12, 2010, at the Progress Energy
Center for the Performing Arts, 2 East South Street, Raleigh, North Carolina.
The meeting will be held in order to:
|
(1) |
|
Elect
fourteen (14) directors of the Company, each to serve a one-year term. The
Board of Directors recommends a vote FOR each of the nominees for
director. |
|
|
|
(2) |
|
Ratify
the selection of Deloitte & Touche LLP as the independent registered
public accounting firm for the Company. The Board of Directors recommends
a vote FOR the ratification of the selection of
Deloitte & Touche LLP as the Company’s independent registered public
accounting firm. |
|
|
|
(3) |
|
Vote
on a shareholder proposal regarding the adoption of a
“hold-into-retirement” policy for equity awards. The Board of Directors
recommends a vote AGAINST the shareholder proposal. |
|
|
|
(4) |
|
Transact any other business as may properly be brought before the
meeting. |
All holders of the Company’s Common Stock of record at the close of
business on March 5, 2010, are entitled to attend the meeting and to vote. The
stock transfer books will remain open.
By order of the Board of Directors |
|
|
JOHN R. MCARTHUR |
Executive Vice President |
and Corporate Secretary |
Raleigh, North
Carolina
March 31, 2010
PROXY STATEMENT
TABLE OF CONTENTS
|
Page |
Annual Meeting and Voting
Information |
|
Proposal 1—Election of Directors |
4 |
Principal Shareholders |
10 |
Management Ownership of Common Stock |
10 |
Transactions with Related
Persons |
12 |
Section 16(a) Beneficial Ownership Reporting Compliance |
13 |
Corporate Governance Guidelines and Code
of Ethics |
13 |
Director Independence |
14 |
Board, Board Committee and Annual
Meeting Attendance |
15 |
Board Committees |
15 |
Executive Committee |
15 |
Audit and Corporate
Performance Committee |
15 |
Corporate Governance Committee |
15 |
Finance Committee |
16 |
Nuclear Project Oversight Committee (ad hoc) |
16 |
Operations and Nuclear
Oversight Committee |
16 |
Organization and Compensation Committee |
16 |
Compensation Committee
Interlocks and Insider Participation |
18 |
Director Nominating Process and
Communications with Board of Directors |
18 |
Board Leadership Structure and Role in Risk Oversight |
19 |
Compensation Discussion and
Analysis |
21 |
Compensation Tables |
45 |
Summary Compensation |
45 |
Grants of Plan-Based
Awards |
48 |
Outstanding Equity Awards at Fiscal Year-End |
51 |
Option Exercises and Stock
Vested |
53 |
Pension Benefits |
54 |
Nonqualified Deferred
Compensation |
55 |
Cash Compensation and Value of Vesting Equity |
57 |
Potential Payments Upon
Termination |
59 |
Director Compensation |
69 |
Equity Compensation Plan Information |
73 |
Report of the Audit and Corporate
Performance Committee |
74 |
Disclosure of Independent Registered Public Accounting Firm’s
Fees |
74 |
Proposal 2—Ratification of Selection of
Independent Registered Public Accounting Firm |
76 |
Proposal 3—Adoption of a “Hold-into-Retirement” Policy for Equity
Awards |
77 |
Financial Statements |
80 |
Future Shareholder Proposals |
80 |
Other Business |
81 |
Exhibit A—Policy and Procedures with Respect to Related Person
Transactions |
A-1 |
Progress Energy
Proxy
Statement |
PROGRESS ENERGY, INC.
410 S. Wilmington Street
Raleigh, North Carolina
27601-1849
__________________________
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (at times referred to as the “Board”) of proxies to be
used at the Annual Meeting of Shareholders. That meeting will be held at 10:00
a.m. on May 12, 2010, at the Progress Energy Center for the Performing Arts, 2
East South Street, Raleigh, North Carolina. (For directions to the meeting
location, please see the map included at the end of this Proxy Statement.)
Throughout this Proxy Statement, Progress Energy, Inc. is at times referred to
as “Progress Energy,” “we,” “our” or “us.” This Proxy Statement and form of
proxy were first sent to shareholders on or about March 31, 2010.
An audio Webcast of the Annual Meeting of Shareholders will be available
online in Windows Media Player format at www.progress-energy.com/investor. The Webcast will be archived on the site for
three months following the date of the meeting.
Copies of our Annual Report on Form 10-K for the year ended December 31,
2009, including financial statements and schedules, are available upon written
request, without charge, to the persons whose proxies are solicited. Any exhibit
to the Form 10-K is also available upon written request at a reasonable charge
for copying and mailing. Written requests should be made to Mr. Thomas R.
Sullivan, Treasurer, Progress Energy, Inc., P.O. Box 1551, Raleigh, North
Carolina 27602-1551. Our Form 10-K is also available through the Securities and
Exchange Commission’s (the “SEC”) Web site at www.sec.gov or through our Web site at www.progress-energy.com/investor. The contents of these Web sites are not, and shall not be deemed to be,
a part of this Proxy Statement or proxy solicitation
materials.
In accordance with the “notice and access” rule adopted by the SEC, we
are making our proxy materials available to our shareholders on the Internet,
and we are mailing to our registered and beneficial holders a “Notice of
Internet Availability of Proxy Materials” containing instructions on how to
access our proxy materials and how to vote on the Internet and by telephone. If
you received a “Notice of Internet Availability of Proxy Materials” and would
like to receive a printed copy of our proxy materials, free of charge, you
should follow the instructions for requesting such materials
below.
We have adopted a procedure approved by the SEC called “householding.”
Under this procedure, shareholders of record who have the same address and last
name and do not participate in the electronic delivery of proxy materials will
receive only one copy of our Proxy Statement and Annual Report, unless one or
more of the shareholders at that address notifies us that they wish to continue
receiving individual copies. We believe this procedure provides greater
convenience to our shareholders and saves money by reducing our printing and
mailing costs and fees.
If you prefer to receive a separate copy of our combined Proxy Statement
and Annual Report, please write to Shareholder Relations, Progress Energy, Inc.,
P.O. Box 1551, Raleigh, North Carolina 27602-1551 or telephone our Shareholder
Relations Section at 919-546-3014, and we will promptly send you a separate
copy. If you are currently receiving multiple copies of the Proxy Statement and
Annual Report at your address and would prefer that a single copy of each be
delivered there, you may contact us at the address or telephone number provided
in this paragraph.
1
PROXIES
The accompanying proxy is solicited by our Board of Directors, and we
will bear the entire cost of solicitation. We expect to solicit proxies
primarily by telephone, mail, e-mail or other electronic media or personally by
our and our subsidiaries’ officers and employees, who will not be specially
compensated for such services. In addition, the Company will engage Morrow &
Co., LLC, if necessary, to assist in the solicitation of proxies on behalf of
the Board. It is anticipated that the cost of the solicitation service to the
Company will be approximately $35,000 plus out-of-pocket expenses.
You may vote shares either in person or by duly authorized proxy. In
addition, you may vote your shares by telephone or via the Internet by following
the instructions provided on the enclosed proxy card. Please be aware that if
you vote via the Internet, you may incur costs such as telecommunication and
Internet access charges for which you will be responsible. The Internet and
telephone voting facilities for shareholders of record will close at 12:01 a.m.
E.D.T. on the morning of the meeting. Any shareholder who has executed a proxy
and attends the meeting may elect to vote in person rather than by proxy. You
may revoke any proxy given by you in response to this solicitation at any time
before the proxy is exercised by (i) delivering a written notice of revocation
to our Corporate Secretary, (ii) timely filing, with our Corporate Secretary, a
subsequently dated, properly executed proxy, or (iii) attending the Annual
Meeting and electing to vote in person. Your attendance at the Annual Meeting,
by itself, will not constitute a revocation of a proxy. If you vote by telephone
or via the Internet, you may also revoke your vote by any of the three methods
noted above, or you may change your vote by voting again by telephone or via the
Internet. If you decide to vote by completing and mailing the enclosed proxy
card, you should retain a copy of certain identifying information found on the
proxy card in the event that you decide later to change or revoke your proxy by
accessing the Internet. You should address any written notices of proxy
revocation to: Progress Energy, Inc., P.O. Box 1551, Raleigh, North Carolina
27602-1551, Attention: Corporate Secretary.
All shares represented by effective proxies received by the Company at or
before the Annual Meeting, and not revoked before they are exercised, will be
voted in the manner specified therein. Executed proxies that do not contain
voting instructions will be voted “FOR” the election
of all directors as set forth in this Proxy Statement; “FOR” the
ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2010,
as set forth in this Proxy Statement; and “AGAINST” the
shareholder proposal regarding the adoption of a “hold-into-retirement” policy
for equity awards as set forth in this Proxy Statement. Proxies will be voted at
the discretion of the named proxies on any other business properly brought
before the meeting.
If you are a participant in our 401(k) Savings & Stock Ownership
Plan, shares allocated to your Plan account will be voted by the Trustee only if
you execute and return your proxy, or vote by telephone or via the Internet.
Plan participants must provide voting instructions on or before 11:59 p.m.
E.D.T. on May 9, 2010. Company stock remaining in the ESOP Stock Suspense
Account that has not been allocated to employee accounts shall be voted by the
Trustee in the same proportion as shares voted by participants in the 401(k)
Plan.
If you are a participant in the Savings Plan for Employees of Florida
Progress Corporation (the “FPC Savings Plan”), shares allocated to your Plan
account will be voted by the Trustee when you execute and return your proxy, or
vote by telephone or via the Internet. If no direction is given, your shares
will be voted in proportion with the shares held in the FPC Savings Plan and in
the best interest of the FPC Savings Plan.
Special Note for Shares Held in “Street
Name”
If your shares are held by a brokerage firm, bank or other nominee (i.e.,
in “street name”), you will receive directions from your nominee that you must
follow in order to have your shares voted. “Street name” shareholders who wish
to vote in person at the meeting will need to obtain a special proxy form from
the brokerage firm, bank or other nominee that holds their shares of record. You
should contact your brokerage firm, bank or other nominee for details regarding
how you may obtain this special proxy form.
2
Progress Energy
Proxy
Statement |
If your shares are held in “street name” and you do not give instructions
as to how you want your shares voted (a “nonvote”), the brokerage firm, bank or
other nominee who holds Progress Energy shares on your behalf may vote the
shares at its discretion with regard to “routine” matters. However, such
brokerage firm, bank or other nominee is not required to vote the shares of
Common Stock, and therefore these unvoted shares would be counted as “broker
nonvotes.”
With respect to “routine” matters, such as the ratification of the
selection of the independent registered public accounting firm, a brokerage
firm, bank or other nominee has authority (but is not required) under the rules
governing self-regulatory organizations (the “SRO rules”), including the New
York Stock Exchange (“NYSE”), to vote its clients’ shares if the clients do not
provide instructions. When a brokerage firm, bank or other nominee votes its
clients’ Common Stock shares on routine matters without receiving voting
instructions, these shares are counted both for establishing a quorum to conduct
business at the meeting and in determining the number of shares voted
“FOR” or “AGAINST” such
routine matters. The NYSE recently amended its rules to make the election of
directors a “nonroutine” matter.
With respect to “nonroutine” matters, including the election of directors
and shareholder proposals, a brokerage firm, bank or other nominee is not
permitted under the SRO rules to vote its clients’ shares if the clients do not
specifically instruct their brokerage firm, bank or other nominee on how to vote
their shares. The brokerage firm, bank or other nominee will so note on the vote
card, and this constitutes a “broker nonvote.” “Broker nonvotes” will be counted
for purposes of establishing a quorum to conduct business at the meeting but not
for determining the number of shares voted “FOR,” “AGAINST” or
“ABSTAINING” from such nonroutine matters. At the 2010
Annual Meeting of Shareholders, two nonroutine matters, the election of 14
directors of the Company with terms expiring in 2011 and a shareholder proposal
regarding the adoption of a “hold-into-retirement” policy for equity awards,
will be presented for a vote.
Accordingly, if you do not vote your proxy, your brokerage firm, bank or
other nominee may either: (i) vote your shares on routine matters and cast a
“broker nonvote” on nonroutine matters, or (ii) leave your shares unvoted
altogether. Therefore, we encourage you to provide instructions to your
brokerage firm, bank or other nominee by voting your proxy. This action ensures
that your shares and voting preferences will be fully represented at the
meeting.
VOTING SECURITIES
Our directors have fixed March 5, 2010, as the record date for
shareholders entitled to vote at the Annual Meeting. Only holders of our Common
Stock of record at the close of business on that date are entitled to notice of
and to vote at the Annual Meeting. Each share is entitled to one vote. As of
March 5, 2010, there were outstanding 284,645,924 shares of Common
Stock.
Consistent with state law and our By-Laws, the presence, in person or by
proxy, of holders of at least a majority of the total number of Common Stock
shares entitled to vote is necessary to constitute a quorum for the transaction
of business at the Annual Meeting. Once a share of Common Stock is represented
for any purpose at a meeting, it is deemed present for quorum purposes for the
remainder of the meeting and any adjournment thereof, unless a new record date
is or must be set in connection with any adjournment. Common Stock shares held
of record by shareholders or their nominees who do not vote by proxy or attend
the Annual Meeting in person will not be considered present or represented at
the Annual Meeting and will not be counted in determining the presence of a
quorum. Proxies that withhold authority or reflect abstentions or “broker
nonvotes” will be counted for purposes of determining whether a quorum is
present.
Pursuant to the provisions of our Articles of Incorporation, as amended
effective May 10, 2006, a candidate for director will be elected upon receipt of
at least a majority of the votes cast by the holders of Common Stock entitled to
vote. Accordingly, assuming a quorum is present, each director shall be elected
by a vote of the majority of the votes cast with respect to that director. A
majority of the votes cast means that the number of shares voted “FOR” a director
must exceed the number of votes cast “AGAINST” that
director. Shares voting “ABSTAIN” and
shares held in “street name” that are not voted in the election of directors
will not be included in determining the number of votes cast.
3
Approval of the proposal to ratify the selection of our independent
registered public accounting firm, and other matters properly brought before the
Annual Meeting, if any, generally will require the affirmative vote of a
majority of votes actually cast by holders of Common Stock entitled to vote.
Assuming a quorum is present, the number of “FOR” votes cast at
the meeting for this proposal must exceed the number of “AGAINST” votes
cast at the meeting in order for this proposal to be approved. Abstentions from
voting and “broker nonvotes” will not count as votes cast and will not have the
effect of a “negative” vote with respect to any such matters.
Approval of the shareholder proposal regarding the adoption of a
“hold-into-retirement” policy for equity awards will require the affirmative
vote of a majority of the shares cast on the proposal provided that the total
votes cast on the proposal represents over 50 percent of the shares entitled to
vote on the proposal. Abstentions will not have the effect of “negative” votes
with respect to the proposal. Shares held in “street name” that are not voted
with respect to the shareholder proposal regarding the adoption of a
“hold-into-retirement” policy for equity awards will not be included in
determining the number of votes cast.
We will announce preliminary voting results at the Annual Meeting. We
will publish the final results in a current report on Form 8-K within four (4)
business days of the Annual Meeting. A copy of this Form 8-K may be obtained
without charge by any of the means outlined above for obtaining a copy of our
Annual Report on Form 10-K.
PROPOSAL 1—ELECTION OF
DIRECTORS
The Company’s amended By-Laws provide that the number of directors of the
Company shall be between eleven (11) and fifteen (15). The amended By-Laws also
provide for annual elections of each director. Directors will serve one-year
terms upon election at the 2010 Annual Meeting of Shareholders.
Our Articles of Incorporation require that a candidate in an uncontested
election for director receive a majority of the votes cast in order to be
elected as a director (i.e., the number of votes cast “FOR” a director
must exceed the number of votes cast “AGAINST” that
director). In a contested election (i.e., a situation in which the number of
nominees exceeds the number of directors to be elected), the standard for
election of directors will be a plurality of the votes cast. Under North
Carolina law, a director continues to serve in office until his or her successor
is elected or until there is a decrease in the number of directors, even if the
director is a candidate for re-election and does not receive the required vote,
referred to as a “holdover director.” To address the potential for such a
“holdover director,” our Board of Directors approved a provision in our
Corporate Governance Guidelines. That provision states that if an incumbent
director is nominated, but not re-elected by a majority vote, the director shall
tender his or her resignation to the Board. The Corporate Governance Committee
(the “Governance Committee”) would then make a recommendation to the Board
whether to accept or reject the resignation. The Board will act on the
Governance Committee’s recommendation and publicly disclose its decision and the
rationale regarding it within 90 days after receipt of the tendered resignation.
Any director who tenders his or her resignation pursuant to this provision shall
not participate in the Governance Committee’s recommendation or Board of
Directors’ action regarding the acceptance of the resignation offer. However, if
all members of the Governance Committee do not receive a vote sufficient for
re-election, then the independent directors who did not fail to receive a
sufficient vote shall appoint a committee amongst themselves to consider the
resignation offers and recommend to the Board of Directors whether to accept
them. If the only directors who did not fail to receive a sufficient vote for
re-election constitute three or fewer directors, all directors may participate
in the action regarding whether to accept the resignation offers.
Based on the report of the Governance Committee (see page 15), the Board
of Directors nominates the following 14 nominees to serve as directors with
terms expiring in 2011 and until their respective successors are elected and
qualified: John D. Baker II, James E. Bostic, Jr., Harris E. DeLoach, Jr., James
B. Hyler, Jr., William D. Johnson, Robert W. Jones, W. Steven Jones, Melquiades
R. “Mel” Martinez, E. Marie McKee, John H. Mullin, III, Charles W. Pryor, Jr.,
Carlos A. Saladrigas, Theresa M. Stone, and Alfred C. Tollison, Jr.
There are no family relationships between any of the directors, any
executive officers or nominees for director of the Company or its subsidiaries,
and there is no arrangement or understanding between any director or director
nominee and any other person pursuant to which the director or director nominee
was selected.
4
Progress Energy
Proxy
Statement |
The election of directors will be determined by a majority of the votes
cast at the Annual Meeting at which a quorum is present. This means that the
number of votes cast “FOR” a director
must exceed the number of votes cast “AGAINST” that
director in order for the director to be elected. Abstentions and broker
nonvotes, if any, are not treated as votes cast and, therefore, will have no
effect on the proposal to elect directors. Shareholders do not have cumulative
voting rights in connection with the election of directors.
Valid proxies received pursuant to this solicitation will be voted in the
manner specified. Where specifications are not made, the shares represented by
the accompanying proxy will be voted “FOR” the election
of each of the 14 nominees. Votes (other than abstentions) will be cast pursuant
to the accompanying proxy for the election of the nominees listed above unless,
by reason of death or other unexpected occurrence, one or more of such nominees
shall not be available for election, in which event it is intended that such
votes will be cast for such substitute nominee or nominees as may be determined
by the persons named in such proxy. The Board of Directors has no reason to
believe that any of the nominees listed above will not be available for election
as a director.
The Board of Directors, acting through the Governance Committee, is
responsible for assembling for shareholder consideration a group of nominees
that, taken together, have the experience, qualifications, attributes and skills
appropriate for functioning effectively as a board. The Governance Committee
regularly reviews the composition of the Board in light of the Company’s
changing requirements and its assessment of the Board’s performance. A
discussion of the characteristics the Governance Committee looks for in
evaluating director candidates appears in the “Governance Committee Process for
Identifying and Evaluating Director Candidates” section on page 18 of this Proxy
Statement.
The names of the 14 nominees for election to the Board of Directors,
along with their ages, principal occupations or employment for the past five
years, directorships of public companies held during the past five years, and
disclosures regarding the specific experience, qualifications, attributes or
skills that led the Board to conclude that such individual should serve on the
Board, are set forth below. Messrs. John D. Baker II and Melquiades R. “Mel”
Martinez, who were elected by the Board on September 17, 2009 and March 1, 2010,
respectively, are directors standing for election to the Board by our
shareholders for the first time. Mr. Baker was recommended to the Governance
Committee by one of our non-management directors, and Mr. Martinez was
recommended to the Governance Committee by William D. Johnson, who is our
Chairman of the Board, President and Chief Executive Officer. (Carolina Power
& Light Company d/b/a Progress Energy Carolinas, Inc. (“PEC”) and Florida
Power Corporation d/b/a Progress Energy Florida, Inc. (“PEF”), which are noted
below, are wholly owned subsidiaries of the Company.) Information concerning the
number of shares of our Common Stock beneficially owned, directly or indirectly,
by all current directors appears on page 10 of this Proxy
Statement.
The Board of Directors recommends a
vote “FOR” each nominee for director.
Nominees for Election
JOHN D. BAKER II, age 61, is President and Chief Executive Officer of
Patriot Transportation Holding, Inc., which is engaged in the transportation and
real estate businesses. He has served in these positions since November 2007.
Mr. Baker was President and Chief Executive Officer of Florida Rock Industries,
Inc., a producer of cement, aggregates, concrete and concrete products from 1997
to 2007. As a lawyer and business executive with more than 35 years of
experience in the construction materials and trucking industries, Mr. Baker
brings business insight and expertise that will be valuable to the Company as it
navigates a complex and changing business environment. Mr. Baker has served as a
director of the Company since September 17, 2009 and is a member of the Board’s
Finance Committee and the Organization and Compensation Committee.
Other public
directorships in past five years:
Patriot Transportation Holding, Inc. (1986 to
present)
Wells Fargo & Company (January 2009 to present)
Vulcan
Materials Co. (November 2007 until February 2009)
Wachovia Bank, N.A. (2001
to December 2008)
Florida Rock Industries, Inc. (1979 until November
2007)
Hughes Supply, Inc. (1994 until 2006)
5
JAMES E. BOSTIC, JR., age 62, has been Managing Director of HEP &
Associates, a business consulting firm, and a partner of Coleman Lew &
Associates, an executive search consulting firm, since 2006. He retired as
Executive Vice President of Georgia-Pacific Corporation, a manufacturer and
distributor of tissue, paper, packaging, building products, pulp and related
chemicals, in 2006. During his 20 years at Georgia-Pacific, Mr. Bostic served in
various senior positions, including a stint as senior vice
president—Environmental, Government Affairs and Communications. Over the years,
Mr. Bostic’s business background and his expertise on environmental and
regulatory issues have been significant assets to the Company. That expertise
will be particularly helpful as we continue to address new laws and regulations
regarding global climate change and other environmental issues. Additionally,
due to his years of service on the Board, Mr. Bostic has developed a keen
understanding of how the Company operates, the key issues it faces, and its
strategy for addressing those issues as it carries out its responsibilities to
its shareholders and other stakeholders. He has served as a director of the
Company since 2002. Mr. Bostic is a member of the Board’s Audit and Corporate
Performance Committee, the Nuclear Project Oversight Committee and the
Operations and Nuclear Oversight Committee.
HARRIS E. DELOACH, JR., age 65, is Chairman, President and Chief
Executive Officer of Sonoco Products Company, a manufacturer of paperboard and
paper and plastic packaging products, since April 2005. He served as President
and Chief Executive Officer of Sonoco Products from July 2000 to April 2005. Mr.
DeLoach joined Sonoco Products in 1986 and has served in various management
positions during his tenure there. Prior to joining Sonoco, Mr. DeLoach was in
private law practice and served as an outside counsel to Sonoco for 15 years.
Mr. DeLoach’s legal background and years of experience leading a global
packaging company will be valuable to the Company as it confronts a challenging
economy and changing business environment. He has served as a director of the
Company since 2006. Mr. DeLoach is Chair of the Board’s Operations and Nuclear
Oversight Committee and a member of the Executive Committee, the Governance
Committee, the Nuclear Project Oversight Committee and the Organization and
Compensation Committee.
Other public directorships in
past five years:
Sonoco Products Company (1998
to present)
Goodrich Corporation
(2001 to present)
JAMES B. HYLER, JR., age 62, retired as Vice Chairman and Chief Operating
Officer of First Citizens Bank in 2008. He served in these positions from 1994
until 2008. Mr. Hyler was Chief Financial Officer of First Citizens Bank from
1980 to 1988, and served as President of First Citizens Bank from 1988 to 1994.
Prior to joining First Citizens Bank, Mr. Hyler was an auditor with Ernst &
Young for 10 years. Mr. Hyler has more than 37 years of experience in the
financial services industry. Mr. Hyler’s experience and accounting background
have provided him with an understanding of the accounting principles used by the
Company to prepare its financial statements and the ability to analyze such
statements. His knowledge and experience in financial services and corporate
finance will be valuable to the Company as our utilities continue to move
forward with the expansion projects necessary to meet our customers’ future
energy needs reliably and affordably. Mr. Hyler has served as a director of the
Company since 2008 and is a member of the Board’s Finance Committee and the
Organization and Compensation Committee.
Other
public directorships in past five years:
First Citizens BancShares
(August 1988 until January 2008)
WILLIAM D. JOHNSON, age 56, is Chairman, President and Chief Executive
Officer of Progress Energy, since October 2007. Mr. Johnson previously served as
President and Chief Operating Officer of Progress Energy from January 2005 to
October 2007. In that role, Mr. Johnson oversaw the generation and delivery of
electricity by PEC and PEF. Mr. Johnson has been with Progress Energy (formerly
CP&L) in a number of roles since 1992, including Group President for Energy
Delivery, President and Chief Executive Officer for Progress Energy Service
Company, LLC and General Counsel and Secretary for Progress Energy. Before
joining Progress Energy, Mr. Johnson was a partner with the Raleigh, N.C. law
office of Hunton & Williams LLP, where he specialized in the representation
of utilities. Mr. Johnson has served in a variety of senior management positions
during his tenure with the Company. His background as a lawyer representing
utilities, and his years of hands-on experience
6
Progress Energy Proxy
Statement |
at the Company, provide
him a unique perspective and a keen understanding of the Company and our
industry. Mr. Johnson’s breadth of knowledge and experience in addressing key
operational, policy, legislative and strategic issues, and his proven leadership
skills, will be significant assets to the Company as it implements its long-term
strategy in the face of a challenging economy and a changing regulatory and
legislative environment. He has served as a director of the Company since
2007.
ROBERT W. JONES, age 59, is the sole owner of Turtle Rock Group, LLC,
founded in May 2009. From 1974 until May 2009, Mr. Jones held various management
positions at Morgan Stanley, a global provider of financial services to
companies, governments and investors. He served as a Senior Advisor from 2006
until May of 2009, and as Managing Director and Vice Chairman from 1997 until
2006. While at Morgan Stanley, Mr. Jones specialized in the utility industry for
many years before being named Vice Chairman. Turtle Rock Group, LLC is a
financial advisory consulting firm whose sole current client is Morgan Stanley.
During his career, Mr. Jones has participated in many major international and
domestic utility and project financing transactions, with a particular focus on
strategic advisory and capital raising assignments. He has testified before
numerous state public utility commissions and has been a frequent speaker on
regulatory and corporate governance issues. Mr. Jones’s expertise in financial
services and his experience in the regulatory arena provide him with a unique
perspective that will be beneficial to the Company as it undertakes the
expansion projects necessary to implement its balanced solution to meeting its
customers’ future energy needs in a challenging economy and uncertain regulatory
environment. He has served as a director of the Company since 2007. Mr. Jones is
Chair of the Board’s Finance Committee and a member of the Executive Committee,
the Governance Committee and the Organization and Compensation
Committee.
W. STEVEN JONES, age 58, is Dean (Emeritus) and Professor of Strategy and
Organizational Behavior at the Kenan-Flagler Business School at the University
of North Carolina at Chapel Hill, since 2008. He served as Dean of the
Kenan-Flagler Business School from August 2003 until August 2008. Prior to
joining the Kenan-Flagler Business School in 2003, Mr. Jones had a 30-year
career in business. That career included serving as Chief Executive Officer and
Managing Director of Suncorp-Metway Ltd., which provides banking, insurance and
investing services in Brisbane, Queensland, Australia. He also worked for ANZ,
one of Australia’s four major banks, in various capacities for eight years. Mr.
Jones has international experience in developing strategy, leading change and
building organizational capability in a variety of industries. His expertise in
the financial services arena will continue to be beneficial as the Company
prepares to undertake the expansion projects necessary to satisfy its customers’
future energy needs reliably and affordably. Mr. Jones has served as a director
of the Company since 2005. He is a member of the Board’s Audit and Corporate
Performance Committee, the Nuclear Project Oversight Committee and the
Operations and Nuclear Oversight Committee.
Other
public directorships in past five years:
Premiere Global Services, Inc.
(2007 to present)
Bank of America
(April 2005 to April 2008)
MELQUIADES R. “MEL” MARTINEZ, age 63, is currently a partner in the law
firm of DLA Piper in its Orlando office. Mr. Martinez has had a distinguished
career in both the public and private sectors, most recently as a United States
Senator from Florida. While serving in the U.S. Senate from 2005 to 2009, he
addressed multiple policy and legislative issues as a member of the following
Senate committees: Armed Services; Banking, Housing & Urban Affairs; Foreign
Relations; Energy and Natural Resources; Commerce; and Special Committee on
Aging. Prior to his election, Mr. Martinez served as the Secretary of Housing
and Urban Development from 2001 to 2004. His extensive legal, policy and
legislative experience will be valuable to the Company as we address new laws
and regulations in areas such as environmental compliance, renewable energy
standards and energy policy. Prior to representing the State of Florida in the
U.S. Senate, Mr. Martinez served as Mayor of Orange County Florida, and as a
board member of the Orlando Utilities Commission. He also spent over 25 years in
private legal practice, conducting numerous trials in state and federal courts
throughout Florida. As a resident and public servant of the State of Florida,
Mr. Martinez brings to our Board a unique perspective and first-hand knowledge
that will be beneficial as we continue to address key regulatory issues in that
State. Mr. Martinez’s diversified experience and background will be significant
assets to our Company’s Board. He has served as a director of the Company since
March 1, 2010 and is a member of the Audit and Corporate Performance Committee
and the Operations and Nuclear Oversight Committee.
7
E. MARIE MCKEE, age 59, is Senior Vice President of Corning Incorporated,
a manufacturer of components for high-technology systems for consumer
electronics, mobile emissions controls, telecommunications and life sciences,
since 1996. She also serves as President of the Corning Museum of Glass. Ms.
McKee has over 30 years of experience at Corning, where she has held a variety
of positions with increasing levels of responsibility. She initially served in
various human resources manager positions including Human Resources Director for
Corning’s Electronics Division, its Research & Development Division and its
Centralized Engineering Division. While serving in these positions, Ms. McKee
gained significant experience in designing and implementing human resources
strategies, business processes and organizational change efforts. She then
served in various management positions, including Division Vice President of
Corporate Strategic Staffing, Vice President, Human Resources and Senior Vice
President, Human Resources and Corporate Diversity Officer. Ms. McKee served as
Chairman of Steuben Glass from 1998 until the company was sold in 2008. Ms.
McKee has served as a director of the Company and its predecessors since 1999.
During her tenure on the Board, Ms. McKee’s business experience and perspective
have proven valuable to the Company as it has addressed various operational and
human resources issues, including executive compensation, succession planning
and diversity. Ms. McKee’s experience will continue to be beneficial to the
Company as shareholders, regulators and legislators continue to focus on
executive compensation and corporate governance issues. Ms. McKee is Chair of
the Board’s Organization and Compensation Committee and a member of the
Executive Committee, the Governance Committee, the Nuclear Project Oversight
Committee and the Operations and Nuclear Oversight Committee.
JOHN H. MULLIN, III, age 68, is Chairman of Ridgeway Farm, LLC, a limited
liability company engaged in farming and timber management, since 1989. He is a
former Managing Director of Dillon, Read & Co., a former investment banking
firm. Mr. Mullin was employed by Dillon Read for approximately 20 years. During
that time, he worked with a diversified mix of clients and was involved in a
variety of corporate assignments, including private and public offerings, and
corporate restructurings. Since 1989, Mr. Mullin has managed the diversified
businesses of Ridgeway Farm. He has served on the boards of a number of other
major publicly traded companies, providing him with substantial experience in
the areas of corporate strategy, oversight and governance. Mr. Mullin has
utilized his broad and extensive business experiences to provide leadership to
the Company’s Board as Lead Director. He has served as a director of the Company
and its predecessors since 1999. Mr. Mullin is Chair of the Board’s Governance
Committee and a member of the Executive Committee, the Finance Committee and the
Organization and Compensation Committee.
Other
public directorships in past five years:
Sonoco Products Company (2002
to present)
Hess Corporation
(2007 to present)
Liberty
Corporation (1989 to 2006)
CHARLES W. PRYOR, JR., age 65, is Chairman of Urenco Investments, Inc., a
global provider of services and technology to the nuclear generation industry
worldwide, since January 2007. He served as President and Chief Executive
Officer of Urenco Investments, Inc. from 2004 to 2006. Mr. Pryor served as
President and Chief Executive Officer of the Utilities Business Group of British
Nuclear Fuels from 2002 to 2004. From 1997 to 2002, he served as President and
Chief Executive Officer of Westinghouse Electric Co., a supplier of nuclear
fuel, nuclear services and advanced nuclear plant designs to utilities operating
nuclear power plants. Mr. Pryor’s service as chief executive officer of a
multi-billion dollar company provided him with experience that enables him to
understand the financial statements and financial affairs of the Company. Mr.
Pryor’s knowledge and experience in engineering, power generation, nuclear fuel
and the utility industry will help us in the years ahead as our Company pursues
a balanced solution to meeting its customers’ future energy needs. He has served
as a director of the Company since 2007. Mr. Pryor is Chair of the Board’s
Nuclear Project Oversight Committee and a member of the Audit and Corporate
Performance Committee and the Operations and Nuclear Oversight
Committee.
Other
public directorships in past five years:
DTE
Energy Co. (1999 to present)
8
Progress Energy Proxy
Statement |
CARLOS A. SALADRIGAS, age 61, is Chairman and Chief Executive Officer of
Regis HRG, which offers a full suite of outsourced human resources services to
small and mid-sized businesses. He has served in these positions since July
2008. Mr. Saladrigas served as Chairman, from 2002 to 2007, and Vice Chairman,
from 2007 to 2008, of Premier American Bank in Miami, Florida. In 2002, Mr.
Saladrigas retired as Chief Executive Officer of ADP Total Source (previously
the Vincam Group, Inc.), a Miami-based human resources outsourcing company that
provides services to small and mid-sized businesses. Mr. Saladrigas has
extensive expertise in both the human resources and financial services arenas.
His accounting background provides him with an understanding of the principles
used to prepare the Company’s financial statements and enables him to
effectively analyze those financial statements. Mr. Saladrigas is a resident of
Florida and is familiar with the policy issues facing that State. His unique
perspective and business acumen continue to be valuable assets to the Board. Mr.
Saladrigas has served as a director of the Company since 2001 and is a member of
the Board’s Audit and Corporate Performance Committee and the Finance
Committee.
Other
public directorships in past five years:
Advance Auto Parts, Inc. (2003
to present)
THERESA M. STONE, age 65, has been Executive Vice President and Treasurer
of the Massachusetts Institute of Technology Corporation (“M.I.T.”), since
February 2007. In her role as Executive Vice President and Treasurer, Ms. Stone
is responsible for M.I.T.’s capital programs, facilities, human resources and
information technology, and serves as M.I.T.’s Chief Financial Officer and
Treasurer. Prior to serving in her current role, Ms. Stone served as Executive
Vice President and Chief Financial Officer of Jefferson-Pilot Financial (now
Lincoln Financial Group) from November 2001 to March 2006. Ms. Stone began her
career as an investment banker, advising clients primarily in the financial
services industry on financial and strategic matters and has held senior
financial executive officer positions at various companies since that time. Ms.
Stone’s knowledge and expertise in finance make her uniquely qualified to
understand and effectively analyze the Company’s financial statements, and to
assist the Company as it undertakes the expansion efforts necessary to implement
its balanced solution to satisfying its customers’ energy needs reliably and
affordably. She has served as a director of the Company since 2005. Ms. Stone is
Chair of the Board’s Audit and Corporate Performance Committee and a member of
the Executive Committee, the Governance Committee and the Finance
Committee.
ALFRED C. TOLLISON, JR., age 67, retired as Chairman and Chief Executive
Officer of the Institute of Nuclear Power Operations (“INPO”), a nuclear
industry-sponsored nonprofit organization in March 2006. He was employed by INPO
from 1987 until March 2006. During his tenure there, Mr. Tollison’s
responsibilities included industry and government relations, communications,
information systems and administrative activities. He also served as the
executive director of the National Academy for Nuclear Training. From 1970 until
1987, Mr. Tollison was employed by PEC, where he served in a variety of
management positions, including plant general manager of the Brunswick Nuclear
Plant and manager of nuclear training. Mr. Tollison’s track record and expertise
in promoting the safe and reliable operations of our nation’s nuclear generating
plants will continue to be a significant asset to our board as the Company moves
forward with its balanced solution for meeting the future generation needs of
its customers safely, reliably and affordably. He has served as a director of
the Company since 2006. Mr. Tollison is Vice Chair of the Board’s Nuclear
Project Oversight Committee and a member of the Audit and Corporate Performance
Committee and the Operations and Nuclear Oversight Committee. He also serves as
the Nuclear Oversight Director.
9
PRINCIPAL SHAREHOLDERS
The table below sets forth the only shareholder we know to beneficially
own more than 5 percent (5%) of the outstanding shares of our Common Stock as of
December 31, 2009. We do not have any other class of voting
securities.
Title of |
|
Name and Address of |
|
Number of Shares |
|
Percentage of |
Class |
|
|
Beneficial Owner |
|
Beneficially Owned
|
|
Class |
Common Stock |
|
State Street
Corporation
|
|
25,939,7121 |
|
9.3 |
|
|
One Lincoln Street |
|
|
|
|
|
|
Boston, MA 02111 |
|
|
|
|
1
Consists of shares of Common
Stock held by State Street Corporation, acting in various fiduciary capacities.
State Street Corporation has sole power to vote with respect to 0 shares, sole
dispositive power with respect to 0 shares, shared power to vote with respect to
12,892,635 shares and shared power to dispose of 25,939,712 shares. State Street
Corporation has disclaimed beneficial ownership of all shares of Common Stock.
(Based solely on information contained in a Schedule 13G filed by State Street
Corporation on February 12, 2010.)
MANAGEMENT OWNERSHIP OF COMMON
STOCK
The following table describes the beneficial ownership of our Common
Stock as of February 22, 2010, of (i) all current directors and nominees for
director, (ii) each executive officer named in the Summary Compensation Table
presented later in this Proxy Statement, and (iii) all directors and nominees
for director and executive officers as a group. As of February 22, 2010, none of
the individuals or the group in the above categories owned one percent (1%) or
more of our voting securities. Unless otherwise noted, all shares of Common
Stock set forth in the table are beneficially owned, directly or indirectly,
with sole voting and investment power, by such shareholder.
|
Number of Shares |
|
of Common Stock |
|
Beneficially |
Name |
Owned1,2 |
John D. Baker II |
7,450 |
|
James E. Bostic, Jr. |
8,445 |
1 |
Harris E. DeLoach, Jr. |
5,000 |
|
James B. Hyler, Jr. |
1,000 |
|
William D. Johnson |
136,751 |
2 |
Robert W. Jones |
1,000 |
|
W. Steven Jones |
1,000 |
|
Jeffrey J. Lyash |
19,393 |
2 |
Melquiades R. “Mel” Martinez |
— |
3 |
E. Marie McKee |
3,000 |
1 |
Mark F. Mulhern |
34,550 |
2 |
John H. Mullin, III |
10,000 |
1 |
Charles W. Pryor, Jr. |
1,042 |
|
Carlos A. Saladrigas |
7,000 |
1 |
Paula J. Sims |
11,766 |
2 |
Theresa M. Stone |
1,000 |
|
Alfred C. Tollison, Jr. |
1,000 |
|
Lloyd M. Yates |
27,937 |
2 |
Shares of Common Stock beneficially
owned by all directors and executive |
|
|
officers of the Company as a group (25 persons) |
438,761 |
4 |
10
Progress Energy Proxy
Statement |
____________________
1 Includes
shares of our Common Stock such director has the right to acquire beneficial
ownership of within 60 days through the exercise of certain stock options, as
follows:
Director |
Stock Options
|
James E.
Bostic, Jr. |
4,000 |
E. Marie
McKee |
2,000 |
John H.
Mullin, III |
6,000 |
Carlos A.
Saladrigas |
6,000 |
2 Includes
shares of Restricted Stock currently held, and shares of our Common Stock such
officer has the right to acquire beneficial ownership of within 60 days through
the exercise of certain stock options as follows:
Officer |
Restricted Stock |
Stock Options
|
William D.
Johnson |
16,134 |
— |
Jeffrey J.
Lyash |
3,834 |
— |
Mark F.
Mulhern |
5,834 |
7,000 |
Paula J.
Sims |
1,000 |
— |
Lloyd M.
Yates |
3,834 |
— |
3 Mr.
Martinez was elected to the Board effective March 1, 2010 and did not own any
shares of the Company’s Common Stock at the time of his election. Mr. Martinez
is standing for election to the Board by our shareholders for the first
time.
4 Includes
shares each group member (shares in the aggregate) has the right to acquire
beneficial ownership of within 60 days through the exercise of certain stock
options.
Ownership of Units Representing Common
Stock
The table below shows ownership of units representing our Common Stock
under the Non-Employee Director Deferred Compensation Plan and units under the
Non-Employee Director Stock Unit Plan as of February 22, 2010. A unit of Common
Stock does not represent an equity interest in the Company, and possesses no
voting rights, but is equal in economic value at all times to one share of
Common Stock.
|
Directors’ Deferred |
Non-Employee
Director |
Director |
Compensation Plan |
Stock Unit Plan |
John
D. Baker II |
1,339 |
1,489 |
James E. Bostic, Jr. |
11,723 |
10,017 |
Harris E. DeLoach, Jr. |
10,299 |
5,989 |
James B. Hyler, Jr. |
1,231 |
3,090 |
Robert W. Jones |
7,294 |
4,538 |
W.
Steven Jones |
11,911 |
7,522 |
Melquiades R. “Mel” Martinez* |
67 |
— |
E.
Marie McKee |
29,288 |
12,877 |
John
H. Mullin, III |
19,601 |
13,374 |
Charles W. Pryor, Jr. |
2,147 |
4,538 |
Carlos A. Saladrigas |
6,993 |
11,013 |
Theresa M. Stone |
10,087 |
7,522 |
Alfred C. Tollison, Jr. |
9,905 |
5,989 |
* Units owned as of March 1,
2010.
The table below shows ownership as of February 22, 2010, of (i)
performance units under the Long-Term Compensation Program; (ii) performance
units recorded to reflect awards deferred under the Management Incentive
Compensation Plan (“MICP”); (iii) performance shares awarded under the
Performance Share Sub-Plan of the 1997, 2002 and 2007 Equity Incentive Plans
(“PSSP”) (see “Outstanding Equity Awards at Fiscal Year-End Table” on page 51);
(iv) units recorded to reflect awards deferred under the PSSP; (v) replacement
units representing the value of our contributions to the 401(k) Savings &
Stock Ownership Plan that would have been made but for the deferral of salary
under the Management Deferred Compensation Plan and contribution limitations
under Section 415 of the
11
Internal Revenue Code of
1986, as amended; and (vi) Restricted Stock Units (“RSUs”) awarded under the
2002 and 2007 Equity Incentive Plans.
|
Long-Term |
|
|
|
|
|
|
Compensation |
|
|
PSSP |
|
|
Officer |
Program |
MICP |
PSSP |
Deferred |
MDCP |
RSUs |
William D. Johnson |
— |
1,711 |
146,294 |
— |
1,059 |
66,001 |
Jeffrey J. Lyash |
— |
— |
36,289 |
— |
314 |
25,398 |
Mark
F. Mulhern |
— |
3,853 |
28,308 |
2,452 |
— |
20,942 |
Paula J. Sims |
— |
7,347 |
26,621 |
1,512 |
— |
19,617 |
Lloyd M. Yates |
— |
2,672 |
36,132 |
6,376 |
158 |
25,325 |
TRANSACTIONS WITH RELATED
PERSONS
There were no transactions in 2009, and there are no currently proposed
transactions involving more than $120,000, in which the Company or any of its
subsidiaries was or is to be a participant and in which any of the Company’s
directors, executive officers, nominees for director or any of their immediate
family members had a direct or indirect material interest.
Our Board of Directors has adopted policies and procedures for the
review, approval or ratification of Related Person Transactions under Item
404(a) of Regulation S-K (the “Policy”), which is attached to this Proxy
Statement as Exhibit A. The Board has determined that the Governance Committee
is best suited to review and approve Related Person Transactions because the
Governance Committee oversees the Board of Directors’ assessment of our
directors’ independence. The Governance Committee will review and may recommend
to the Board amendments to this Policy from time to time.
For the purposes of the Policy, a “Related Person Transaction” is a
transaction, arrangement or relationship, including any indebtedness or
guarantee of indebtedness (or any series of similar transactions, arrangements
or relationships), in which we (including any of our subsidiaries) were, are or
will be a participant and the amount involved exceeds $120,000, and in which any
Related Person had, has or will have a direct or indirect material interest. The
term “Related Person” is defined under the Policy to include our directors,
executive officers, nominees to become directors and any of their immediate
family members.
Our general policy is to avoid Related Person Transactions. Nevertheless,
we recognize that there are situations where Related Person Transactions might
be in, or might not be inconsistent with, our best interests and those of our
shareholders. These situations could include (but are not limited to) situations
where we might obtain products or services of a nature, quantity or quality, or
on other terms, that are not readily available from alternative sources or when
we provide products or services to Related Persons on an arm’s length basis on
terms comparable to those provided to unrelated third parties or on terms
comparable to those provided to employees generally. In determining whether to
approve or disapprove each Related Person Transaction, the Governance Committee
considers various factors, including (i) the identity of the Related Person;
(ii) the nature of the Related Person’s interest in the particular transaction;
(iii) the approximate dollar amount involved in the transaction; (iv) the
approximate dollar value of the Related Person’s interest in the transaction;
(v) whether the Related Person’s interest in the transaction conflicts with his
obligations to the Company and its shareholders; (vi) whether the transaction
will provide the Related Person with an unfair advantage in his dealings with
the Company; and (vii) whether the transaction will affect the Related Person’s
ability to act in the best interests of the Company and its shareholders. The
Governance Committee will only approve those Related Person Transactions that
are in, or are not inconsistent with, the best interests of the Company and its
shareholders.
12
Progress Energy Proxy Statement |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers to file reports of their holdings and
transactions in our securities with the SEC and the NYSE. Based on our records
and other information, we believe that all Section 16(a) filing requirements
applicable to our directors and executive officers with respect to the Company’s
2009 fiscal year were met, except as follows: James Scarola inadvertently failed
to timely file a Form 4 related to the deferral, in 2009 and 2010, of portions
of two awards granted under the Company’s Management Incentive Compensation
Plan. A Form 4 reporting both transactions was filed on March 16, 2010. Paula J.
Sims inadvertently failed to file on a timely basis a Form 4 with respect to the
deferral in 2009 of a portion of an award granted under the Company’s Management
Incentive Compensation Plan. A Form 4 reporting the transaction was filed on
March 16, 2010. Additionally, with regard to the Company’s 2010 fiscal year,
each of Jeffrey A. Corbett, Vincent M. Dolan, William D. Johnson, Michael A.
Lewis, Jeffrey J. Lyash, John R. McArthur, Mark F. Mulhern, James Scarola, Frank
A. Schiller, Paula J. Sims, Jeffrey M. Stone and Lloyd M. Yates inadvertently
failed to file on a timely basis a Form 4 with respect to the payout of
performance units granted under the Company’s Performance Share Sub-Plan. A Form
4 reporting the transaction was filed by each individual on March 11,
2010.
CORPORATE GOVERNANCE GUIDELINES AND CODE OF
ETHICS
The Board of Directors operates pursuant to an established set of written
Corporate Governance Guidelines (the “Governance Guidelines”) that set forth our
corporate governance philosophy and the governance policies and practices we
have implemented in support of that philosophy. The three core governance
principles the Board embraces are integrity, accountability and
independence.
The Governance Guidelines describe Board membership criteria, the Board
selection and orientation process and Board leadership. The Governance
Guidelines require that a minimum of 80 percent of the Board’s members be
independent and that the membership of each Board committee, except the
Executive Committee, consist solely of independent directors. Directors who are
not full-time employees of the Company must retire from the Board at age 73.
Directors whose job responsibilities or other factors relating to their
selection to the Board change materially after their election are required to
submit a letter of resignation to the Board. The Board will have an opportunity
to review the continued appropriateness of the individual’s Board membership
under these circumstances, and the Governance Committee will make the initial
recommendation as to the individual’s continued Board membership. The Governance
Guidelines also describe the stock ownership guidelines that are applicable to
Board members and prohibit compensation to Board members other than directors’
fees and retainers.
The Governance Guidelines provide that the Organization and Compensation
Committee of the Board will evaluate the performance of the Chief Executive
Officer on an annual basis, using objective criteria, and will communicate the
results of its evaluation to the full Board. The Governance Guidelines also
provide that the Governance Committee is responsible for conducting an annual
assessment of the performance and effectiveness of the Board, and its standing
committees, and reporting the results of each assessment to the full Board
annually.
The Governance Guidelines provide that Board members have complete access
to our management and can retain, at our expense, independent advisors or
consultants to assist the Board in fulfilling its responsibilities, as it deems
necessary. The Governance Guidelines also state that it is the Board’s policy
that the nonmanagement directors meet in executive session on a regularly
scheduled basis. Those sessions are chaired by the Lead Director, John H.
Mullin, III, who is also Chair of the Governance Committee. He can be contacted
by writing to John H. Mullin, III, Lead Director, Progress Energy, Inc. Board of
Directors, c/o John R. McArthur, Executive Vice President and Corporate
Secretary, P.O. Box 1551, Raleigh, North Carolina 27602-1551. We screen mail
addressed to Mr. Mullin for security purposes and to ensure that it relates to
discrete business matters relevant to the Company. Mail addressed to Mr. Mullin
that satisfies these screening criteria will be forwarded to him.
13
In keeping with the Board’s commitment to sound corporate governance, we
have adopted a comprehensive written Code of Ethics that incorporates an
effective reporting and enforcement mechanism. The Code of Ethics is applicable
to all of our employees, including our Chief Executive Officer, our Chief
Financial Officer and our Controller. The Board has adopted the Company’s Code
of Ethics as its own standard. Board members, our officers and our employees
certify their compliance with our Code of Ethics on an annual
basis.
Our Governance Guidelines and Code of Ethics are posted on our Internet
Web site and can be accessed at www.progress-energy.com/investor.
DIRECTOR INDEPENDENCE
The Board of Directors has determined that the following current members
of the Board are independent, as that term is defined under the general
independence standards contained in the listing standards of the
NYSE:
John D. Baker II |
E. Marie McKee |
James E. Bostic, Jr. |
John H. Mullin, III |
Harris E. DeLoach, Jr. |
Charles W. Pryor, Jr. |
James B. Hyler, Jr. |
Carlos A. Saladrigas |
Robert W. Jones |
Theresa M. Stone |
W. Steven Jones |
Alfred C. Tollison, Jr. |
Melquiades R. “Mel” Martinez |
|
Additionally, the Board of Directors has determined that David L. Burner,
who served as a member of the Board during a portion of 2009, was independent as
that term is defined under the general independence standards contained in the
NYSE’s listing standards. In addition to considering the NYSE’s general
independence standards, the Board has adopted categorical standards to assist it
in making determinations of independence. The Board’s categorical independence
standards are outlined in our Governance Guidelines. The Governance Guidelines
are available on our Internet Web site and can be accessed at www.progress-energy.com/investor. All directors, former directors and director
nominees identified as independent in this Proxy Statement meet these
categorical standards.
In determining that the individuals named above are or were independent
directors, the Governance Committee considered their involvement in various
ordinary course commercial transactions and relationships. During 2009, Ms.
McKee and Messrs. DeLoach and Mullin served as officers and/or directors of
companies that have been among the purchasers of the largest amounts of electric
energy sold by PEC during the last three preceding calendar years. Messrs.
Baker, Mullin and Saladrigas served as officers and/or directors of companies
that purchase electric energy from PEF. Mr. Robert W. Jones was an employee of
Morgan Stanley through May 2009. Morgan Stanley has provided a variety of
investment banking services to us during the past several years; however, Mr.
Jones had no direct or indirect material interests or involvement in
transactions between the Company and Morgan Stanley. Mr. Jones is no longer a
Morgan Stanley employee although his firm provides services to Morgan Stanley.
Mr. W. Steven Jones serves as a director of a communications technology company
that provided services to us in 2009. Mr. Baker currently serves as a director
of Wells Fargo & Company and is a former director of Wachovia Corporation.
Both of these entities have been part of our core bank group and have provided a
variety of banking and investment services to us during the past several years.
Mr. Pryor is a director of a company that has affiliates that provide uranium
enrichment services to PEC and PEF. Mr. Tollison is a former employee of PEC and
thus receives a modest pension from us. All of the described transactions were
ordinary course commercial transactions conducted at arm’s length and in
compliance with the NYSE’s standards for director independence. In addition, the
Governance Committee considers the relationships our directors have with
tax-exempt organizations that receive contributions from the Company. The
Governance Committee considered each of these transactions and relationships and
determined that none of them was material or affected the independence of the
directors involved under either the general independence standards contained in
the NYSE’s listing standards or our categorical independence
standards.
14
Progress Energy Proxy Statement |
BOARD, BOARD COMMITTEE AND ANNUAL MEETING
ATTENDANCE
The Board of Directors is currently comprised of fourteen (14) members.
The Board of Directors met six times in 2009. Average attendance of the
directors at the meetings of the Board and its committees held during 2009 was
90 percent, and no director attended less than 80 percent of all Board and
his/her respective committee meetings held in 2009.
Our Company expects all directors to attend its annual meetings of
shareholders. Such attendance is monitored by the Governance Committee. All
directors who were serving as directors as of May 13, 2009, the date of the 2009
Annual Meeting of Shareholders, attended that meeting, with the exception of Mr.
Burner, who retired from the Board effective May 13, 2009, and Mr. Saladrigas,
who was recovering from an illness at the time of the meeting.
BOARD COMMITTEES
The Board of Directors appoints from its members an Executive Committee,
an Audit and Corporate Performance Committee, a Governance Committee, a Finance
Committee, a Nuclear Project Oversight Committee, an Operations and Nuclear
Oversight Committee, and an Organization and Compensation Committee. The
charters of all committees of the Board are posted on our Internet Web site and
can be accessed at www.progress-energy.com/investor. The current membership and functions of the
standing Board committees are discussed below.
Executive Committee
The Executive Committee is presently composed of one director who is an
officer and five nonmanagement directors: Messrs. William D. Johnson—Chair,
Harris E. DeLoach, Jr., Robert W. Jones, and John H. Mullin, III, and Ms. E.
Marie McKee and Ms. Theresa M. Stone. The authority and responsibilities of the
Executive Committee are described in our By-Laws. Generally, the Executive
Committee will review routine matters that arise between meetings of the full
Board and require action by the Board. The Executive Committee held no meetings
in 2009.
Audit and Corporate Performance
Committee
The Audit and Corporate Performance Committee (the “Audit Committee”) is
presently composed of the following seven nonmanagement directors: Ms. Theresa
M. Stone—Chair, and Messrs. James E. Bostic, Jr., W. Steven Jones, Melquiades R.
“Mel” Martinez, Charles W. Pryor, Jr., Carlos A. Saladrigas, and Alfred C.
Tollison, Jr. All members of the committee are independent as that term is
defined under the enhanced independence standards for audit committee members
contained in the Securities Exchange Act of 1934 and the related rules, as
amended, as incorporated into the listing standards of the NYSE. Mr. Saladrigas
and Ms. Stone have been designated by the Board as the “Audit Committee
Financial Experts,” as that term is defined in the SEC’s rules. The work of the
Audit Committee includes oversight responsibilities relating to the integrity of
our financial statements, compliance with legal and regulatory requirements, the
qualifications and independence of our independent registered public accounting
firm, performance of the internal audit function and of the independent
registered public accounting firm, and the Corporate Ethics Program. The role of
the Audit Committee is further discussed under “Report of the Audit and
Corporate Performance Committee” below. The Audit Committee held seven meetings
in 2009.
Corporate Governance
Committee
The Governance Committee is presently composed of the following five
nonmanagement directors: Messrs. John H. Mullin, III—Chair/Lead Director, Harris
E. DeLoach, and Robert W. Jones, and Ms. E. Marie McKee and Ms. Theresa M.
Stone. All members of the Governance Committee are independent as that term is
defined under the general independence standards contained in the NYSE listing
standards. The Governance Committee is responsible for making recommendations to
the Board with respect to the governance of the Company and the Board. Its
responsibilities include recommending amendments to our Charter and By-Laws,
making
15
recommendations
regarding the structure, charter, practices and policies of the Board, ensuring
that processes are in place for annual Chief Executive Officer performance
appraisal and review of succession planning and management development,
recommending a process for the annual assessment of Board performance,
recommending criteria for Board membership, reviewing the qualifications of and
recommending to the Board nominees for election. The Governance Committee is
responsible for conducting investigations into or studies of matters within the
scope of its responsibilities and to retain outside advisors to identify
director candidates. The Governance Committee will consider qualified candidates
for director nominated by shareholders at an annual meeting of shareholders,
provided, however, that written notice of any shareholder nominations must be
received by the Corporate Secretary of the Company no later than the close of
business on the 120th calendar day before
the date our Proxy Statement was released to shareholders in connection with the
previous year’s annual meeting. See “Future Shareholder Proposals” below for
more information regarding shareholder nominations of directors. The Governance
Committee held three meetings in 2009.
Finance Committee
The Finance Committee is presently composed of the following six
nonmanagement directors: Messrs. Robert W. Jones—Chair, John D. Baker II, James
B. Hyler, Jr., John H. Mullin, III, and Carlos A. Saladrigas, and Ms. Theresa M.
Stone. The Finance Committee reviews and oversees our financial policies and
planning, financial position, strategic planning and investments, pension funds
and financing plans. The Finance Committee also monitors our risk management
activities and financial position and recommends changes to our dividend policy
and proposed budget. The Finance Committee held four meetings in
2009.
Nuclear Project Oversight Committee
(ad hoc)
The Nuclear Project Oversight Committee is presently composed of the
following six nonmanagement directors: Messrs. Charles W. Pryor, Jr.—Chair,
Alfred C. Tollison, Jr.—Vice Chair, James E. Bostic, Jr., Harris E. DeLoach,
Jr., and W. Steven Jones, and Ms. E. Marie McKee. The Nuclear Project Oversight
Committee is an ad hoc committee that serves as the primary point of
contact for Board oversight of the construction of new nuclear projects, and
advises the Board of construction status, including schedule, cost and legal,
legislative and regulatory activities. The Nuclear Project Oversight Committee
held no meetings in 2009.
Operations and Nuclear Oversight
Committee
The Operations and Nuclear Oversight Committee is presently composed of
the following seven nonmanagement directors: Messrs. Harris E. DeLoach,
Jr.—Chair, James E. Bostic, Jr., W. Steven Jones, Melquiades R. “Mel” Martinez,
Charles W. Pryor, Jr., and Alfred C. Tollison, Jr., and Ms. E. Marie McKee. The
Operations and Nuclear Oversight Committee reviews our load forecasts and plans
for generation, transmission and distribution, fuel procurement and
transportation, customer service, energy trading and term marketing, and other
Company operations. The Operations and Nuclear Oversight Committee reviews and
assesses our policies, procedures, and practices relative to the protection of
the environment and the health and safety of our employees, customers,
contractors and the public. The Operations and Nuclear Oversight Committee
advises the Board and makes recommendations for the Board’s consideration
regarding operational, environmental and safety-related issues. The Operations
and Nuclear Oversight Committee held four meetings in 2009.
Organization and Compensation
Committee
The Organization and Compensation Committee (the “Compensation
Committee”) is presently composed of the following six nonmanagement directors:
Ms. E. Marie McKee—Chair, and Messrs. John D. Baker II, Harris E. DeLoach, Jr.,
James B. Hyler, Jr., Robert W. Jones, and John H. Mullin, III. All members of
the Compensation Committee are independent as that term is defined under the
general independence standards contained in the NYSE listing standards. The
Compensation Committee verifies that personnel policies and procedures are in
keeping with all governmental rules and regulations and are designed to attract
and retain competent, talented employees and
16
Progress Energy
Proxy
Statement |
develop the potential of
these employees. The Compensation Committee reviews all executive development
plans, makes executive compensation decisions, evaluates the performance of the
Chief Executive Officer and oversees plans for management
succession.
The Compensation Committee may hire outside consultants, and the
Compensation Committee has no limitations on its ability to select and retain
consultants as it deems necessary or appropriate. Annually, the Compensation
Committee evaluates the performance of its compensation consultant to assess its
effectiveness in assisting the Committee with implementing the Company’s
compensation program and principles. For 2009, the Compensation Committee
retained Hewitt Associates as its executive compensation and benefits consultant
to assist the Compensation Committee in meeting its compensation objectives for
our Company. Under the terms of its engagement, in 2009, Hewitt Associates
reported directly to the Compensation Committee. In January 2010, Hewitt
Associates spun off its executive compensation practice into a separate entity
named Meridian Compensation Partners, LLC (“Meridian”), an independent agency
wholly-owned by its partners. Meridian reports directly to the Compensation
Committee.
The Compensation Committee relies on its compensation consultant to
advise it on various matters relating to our executive compensation and benefits
program. These services include:
- Advising the Compensation
Committee on general trends in executive compensation and
benefits;
- Summarizing developments relating
to disclosure, risk assessment process and other technical
areas;
- Performing benchmarking and
competitive assessments;
- Assistance in designing incentive
plans;
- Performing financial analysis
related to plan design and assisting the Compensation Committee in
making pay decisions in light of
results; and
- Recommending appropriate
performance metrics and financial targets.
The Compensation Committee has adopted a policy for Pre-Approval of
Compensation Consultant Services (the “Policy”). Pursuant to the Policy, the
compensation consultant may not provide any services or products to the Company
without the express prior approval of the Compensation Committee. The
compensation consultant did not provide any services or products to the Company
other than those that are provided to the Committee and that are related to the
Company’s executive compensation and benefits program.
The Compensation Committee’s chair or the chairman of our Board of
Directors may call meetings, other than previously scheduled meetings, as
needed. The Compensation Committee may form subcommittees for any purpose that
the Compensation Committee deems appropriate and may delegate to such
subcommittees such power and authority as the Compensation Committee deems
appropriate. Appropriate executive officers of the Company ensure that the
Compensation Committee receives administrative support and assistance, and make
recommendations to the Committee to ensure that compensation plans are aligned
with our business strategy and compensation philosophy. John R. McArthur, our
Executive Vice President and Corporate Secretary, serves as management’s liaison
to the Compensation Committee. William D. Johnson, our Chief Executive Officer,
is responsible for conducting annual performance evaluations of the other
executive officers and making recommendations to the Compensation Committee
regarding those executives’ compensation.
The Compensation Committee held
seven meetings in 2009.
17
Compensation Committee Interlocks and Insider
Participation
None of the directors who served as members of the Compensation Committee
during 2009 was our employee or former employee and none of them had any
relationship requiring disclosure under Item 404 of Regulation S-K. During 2009,
none of our executive officers served on the compensation committee (or
equivalent), or the board of directors of another entity whose executive
officer(s) served on our Compensation Committee or Board of
Directors.
DIRECTOR NOMINATING PROCESS AND
COMMUNICATIONS
WITH BOARD OF DIRECTORS
Governance Committee
The Governance Committee performs the functions of a nominating
committee. The Governance Committee’s Charter describes its responsibilities,
including recommending criteria for membership on the Board, reviewing
qualifications of candidates and recommending to the Board nominees for election
to the Board. As noted above, the Governance Guidelines contain information
concerning the Committee’s responsibilities with respect to reviewing with the
Board on an annual basis the qualification standards for Board membership and
identifying, screening and recommending potential directors to the Board. All
members of the Governance Committee are independent as defined under the general
independence standards of the NYSE’s listing standards. Additionally, the
Governance Guidelines require that all members of the Governance Committee be
independent.
Director Candidate Recommendations and
Nominations by Shareholders
Shareholders should submit any director candidate recommendations in
writing in accordance with the method described under “Communications with the
Board of Directors” below. Any director candidate recommendation that is
submitted by one of our shareholders to the Governance Committee will be
acknowledged, in writing, by the Corporate Secretary. The recommendation will be
promptly forwarded to the Chair of the Governance Committee, who will place
consideration of the recommendation on the agenda for the Governance Committee’s
regular December meeting. The Governance Committee will discuss candidates
recommended by shareholders at its December meeting and present information
regarding such candidates, along with the Governance Committee’s recommendation
regarding each candidate, to the full Board for consideration. The full Board
will determine whether it will nominate a particular candidate for election to
the Board.
Additionally, in accordance with Section 11 of our By-Laws, any
shareholder of record entitled to vote for the election of directors at the
applicable meeting of shareholders may nominate persons for election to the
Board of Directors if that shareholder complies with the notice procedure set
forth in the By-Laws and summarized in “Future Shareholder Proposals”
below.
Governance Committee Process for Identifying
and Evaluating Director Candidates
The Governance Committee evaluates all director candidates, including
those nominated or recommended by shareholders, in accordance with the Board’s
qualification standards, which are described in the Governance Guidelines. The
Committee evaluates each candidate’s qualifications and assesses them against
the perceived needs of the Board. Qualification standards for all Board members
include: integrity; sound judgment; independence as defined under the general
independence standards contained in the NYSE listing standards and the
categorical standards adopted by the Board; financial acumen; strategic
thinking; ability to work effectively as a team member; demonstrated leadership
and excellence in a chosen field of endeavor; experience in a field of business;
professional or other activities that bear a relationship to our mission and
operations; appreciation of the business and social environment in which we
operate; an understanding of our responsibilities to shareholders, employees,
customers and the communities we serve; and service on other boards of directors
that would not detract from service on our Board.
18
Progress Energy
Proxy
Statement |
Although the Company does not have an official policy regarding the
consideration of diversity in identifying director nominees, diversity is among
the factors that are considered in selecting Board nominees. The Company values
diversity among its Board members and seeks to create a Board that reflects the
demographics of the areas we serve, and includes a complimentary mix of
individuals with diverse backgrounds, viewpoints, professional experiences,
education and skills that reflect the broad set of challenges the Board
confronts.
Communications with the Board of
Directors
The Board has approved a process for shareholders and other interested
parties to send communications to the Board. That process provides that
shareholders and other interested parties can send communications to the Board
and, if applicable, to the Governance Committee or to specified individual
directors, including the Lead Director, in writing c/o John R. McArthur,
Executive Vice President and Corporate Secretary, Progress Energy, Inc., P.O.
Box 1551, Raleigh, North Carolina 27602-1551.
We screen mail addressed to the Board, the Governance Committee or any
specified individual director for security purposes and to ensure that the mail
relates to discrete business matters relevant to the Company. Mail that
satisfies these screening criteria is forwarded to the appropriate
director.
BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK
OVERSIGHT
Board Leadership
Our Governance Guidelines allow the Board to select a Chairman based on
the needs of the Company at the time. The Board may appoint the Chief Executive
Officer or it may choose another director for the Chairman position. Thus, the
Board has the authority to separate the Chairman and Chief Executive Officer
positions if it chooses to do so, but it is not required to do so.
Currently, the Board believes that the Company’s interests are best
served by having the Chief Executive Officer also serve as Chairman because it
allows the Board to most effectively and directly leverage the Chief Executive
Officer’s day-to-day familiarity with the Company’s operations. This is
particularly beneficial for the Board at this time given the rapidly evolving
nature of the energy industry and the complexity of the projects being
considered by the Company, including the construction of new nuclear
facilities.
Our Governance Guidelines provide that if the Chief Executive Officer
currently holds the position of Chairman, then the full Board shall appoint an
independent director to serve as Chair of the Governance Committee and Lead
Director of the Board. The clearly delineated and comprehensive duties of the
Lead Director include presiding over all meetings of the Board at which the
Chairman is not present, including executive sessions and other meetings of the
non-management and independent directors and serving as liaison and facilitating
communication between the independent directors and the Chairman. The Lead
Director also provides input to the Chairman and CEO with respect to information
sent to the Board and the agendas and schedules for Board and committee
meetings. Any independent director, including the Lead Director, has the
authority to call meetings of the independent directors. If requested by major
shareholders, the Lead Director is available for consultation and direct
communication. In addition, the Lead Director serves as a mentor and advisor to
the Chairman and Chief Executive Officer and assures that the Chairman and Chief
Executive Officer understands the Board’s views on critical matters. Pursuant to
the Governance Guidelines, Mr. Mullin, an independent director and Chair of the
Governance Committee, has served as Lead Director of the Board since
2004.
In our view, our current leadership structure has fostered sound
corporate governance practices and strong independent Board leadership that have
benefitted the Company and its shareholders.
19
Board Role in Risk
Oversight
We have established a risk management framework that is the backbone for
risk management activities that occur across Progress Energy. The framework
establishes processes for identifying, measuring, managing and monitoring risk
across the Company and its subsidiaries. We also maintain an ongoing inventory
that details risk types, the internal department that manages each type of risk
and the Board committees that are involved in overseeing those activities. Our
Chief Executive Officer and Senior Management have responsibility for assessing
and managing the Company’s exposure to risk. In this regard, we have established
a Risk Management Committee, comprised of various senior executives, that
provides guidance and direction in the identification and management of
financial risks. The Board is not involved in the Company’s day-to-day risk
management activities; however, the various Board Committees are involved in
different aspects of overseeing those activities.
The Audit and Corporate Performance Committee is responsible for ensuring
that appropriate guidelines and controls are in place and reviews the framework
for managing risk and adherence to that framework. The Audit and Corporate
Performance Committee reviews and discusses with management the Company’s
guidelines and polices governing risk assessment and risk
management.
The Finance Committee is responsible for the oversight of the Risk
Management Committee Policy and Guidelines. It oversees the financial risks
associated with guarantees, risk capital, corporate financing activities and
debt structure. The Finance Committee ensures that dollar amounts and limits are
managed within the established framework. The Finance Committee reports to the
full Board at least once a quarter.
The Operations and Nuclear Oversight Committee is charged with oversight
of risks related to operations and environmental and health and safety
issues.
The Organization and Compensation Committee is responsible for the
oversight of risks that can result from personnel issues and misalignment
between compensation and performance plans and the interests of the Company’s
shareholders.
The enterprise risk management program is reviewed with the Board on an
annual basis. Our risk management framework is designed to enable the Board to
stay informed about and understand the key risks facing the Company, understand
how those risks relate to the Company’s business and strategy, and the steps the
Company is taking to manage those risks.
20
Progress Energy
Proxy
Statement |
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) has four parts.
The first part describes the Company’s executive compensation philosophy and
provides an overview of the compensation program and process. The second part
describes each element of the Company’s executive compensation program. The
third part describes how the Organization and Compensation Committee of the
Company’s Board of Directors (in this CD&A, the “Committee”) applied each
element to determine the compensation paid to each of the named executive
officers in the Summary Compensation Table on page 45 (the “named executive
officers”) for the services they provided to the Company in 2009. For 2009, the
Company’s named executive officers were:
- William D. Johnson, Chairman,
President and Chief Executive Officer;
- Mark F. Mulhern, Senior Vice
President and Chief Financial Officer;
- Jeffrey J. Lyash, Executive Vice
President – Corporate Development (formerly President and Chief Executive Officer, Progress Energy Florida,
Inc. (PEF));
- Lloyd M. Yates, President and
Chief Executive Officer, Progress Energy Carolinas, Inc. (PEC);
and
- Paula J. Sims, Senior Vice
President – Power Operations.
The fourth part consists of the
Committee’s Report.
Following the CD&A are the tables setting forth the 2009 compensation
for each of the named executive officers, as well as a discussion concerning
compensation for the members of the Company’s Board of Directors. Throughout
this CD&A, the Company is at times referred to as “we,” “our” or
“us.”
I. COMPENSATION PHILOSOPHY AND
OVERVIEW
We are an integrated electric utility primarily engaged in the regulated
utility business. Our executive compensation philosophy is designed to provide
competitive and reasonable compensation consistent with the three key principles
that we believe are critical to our long-term success as described
below:
- Aligning the interests of shareholders and
management. We believe
that our major shareholders invest in the Company because they believe we can produce average
annual total shareholder return
in the 7% to 10% range over the long term. Total shareholder return is defined
as the stock price appreciation
plus dividends over the period, divided by the share price at the
beginning of the measurement
period. Further, our investors do not expect or desire significant
volatility in our stock price.
Accordingly, our executive compensation program is designed to
encourage management to lead
our Company in a way that consistently produces earnings per share
growth and a competitive
dividend yield. In the two years since Mr. Johnson became our Chief
Executive Officer, under his
leadership and that of the Committee, many actions have been taken to align
the executive compensation
structure with our shareholders’ interests. These actions include a
significant reduction of
perquisites for both our executive officers and non-executive officers who are
in senior management; an
increase in the stock ownership guidelines; implementation of a new
performance measure in the
Management Incentive Compensation Plan (“MICP”) to further enhance
transparency and alignment of
performance and payouts for executive officers and non-executive officers in
senior management; and a
modification of our Performance Share Sub-Plan (“PSSP”) to closely align
awards under that plan to our
operating results, actual total shareholder returns, and, with respect to our
peers, relative total
shareholder returns.
21
- Rewarding operating performance
results that are consistent with reliable and efficient electric
service. We believe that to
achieve this goal over the long term, we must:
- deliver high levels of customer
satisfaction;
- operate our systems
reliably and efficiently;
- maintain a constructive
regulatory environment;
- have a productive,
engaged and highly motivated workforce;
- meet or exceed our
operating plans and budgets;
- be a good corporate
citizen; and
- produce value for our
investors.
Therefore, we determine base salary levels and annual incentive
compensation based on corporate performance in these areas, along with
individual contribution and performance.
- Attracting and retaining an experienced and
effective management team. The competition for
skilled and experienced management is significant in the utility industry. We
believe that the management of
our business requires executives with a variety of experiences and skills. We
expect the competition for
talent to continue to intensify, particularly in the nuclear, renewable energy
sources, and emerging
technologies areas, as the industry enters a significant capital expenditure
phase and the requirement for
reliable and environmentally responsible generating capacity increases. To
address this issue, we have
designed market-based compensation programs that are competitive and are
aligned with our corporate
strategy.
Consistent with these principles, the Committee seeks to provide
executive officers a compensation program that is competitive in the market
place and provides incentives necessary to motivate executives to perform in the
best interests of the Company and its shareholders.
In determining an individual executive officer’s compensation
opportunity, the Committee believes that it must be competitive within the
marketplace for each particular executive officer. As such, the compensation
opportunities vary significantly from individual to individual based on the
specific nature of the executive position. For example, our Chief Executive
Officer is responsible for the overall performance of the Company and, as such,
his position has a greater scope of responsibility than our other executive
positions and is benchmarked accordingly. From a market perspective, the
position of chief executive officer receives a greater compensation opportunity
than other executive positions. The Committee therefore sets our Chief Executive
Officer’s compensation opportunity at levels that reflect the responsibilities
of his position and the Committee’s expectations.
ASSESSMENT OF RISK
Our Company is highly regulated at both the federal and state levels, and
therefore significant swings in earnings performance or growth over time are
less influenced by any particular individual or groups of individuals. We
believe the variable components of our compensation program for executive
officers do not incentivize excessive risk taking for the following
reasons:
- Our incentive compensation
practices do not reward the executive officers for meeting or exceeding
volume or revenue targets.
22
Progress Energy
Proxy
Statement |
- Our compensation
program is evaluated annually for its effectiveness and consistency with
the Company’s goals
without promoting excessive risk.
- Our compensation
program appropriately balances short- and long-term incentives with
approximately 60% of total
target compensation for the executive officers provided in equity and focused
on long-term
performance.
- The PSSP rewards
significant and sustainable performance over the longer term by focusing on
three-year earnings per
share growth and relative total shareholder return targets.
- The MICP in
effect for 2009 specifically focuses on earnings before interest, taxes,
depreciation and amortization
(“EBITDA”), and the MICP that is in effect for 2010 specifically focuses on
legal entity net income,
because we believe that these are appropriate measures to assess the intrinsic
value of the Company to
determine whether the Company has been successful in its fundamental
business.
- Our compensation
programs are designed to make it difficult for any one person to
meaningfully influence his or
her own incentive award.
- The executive
officers receive restricted stock units that generally have a three-year
vesting period so that their upside
potential and downside risk are aligned with that of our shareholders and
promote long-term
performance over the vesting period.
- The executive
officers are subject to stock ownership guidelines independently set by the
Board to reflect the compensation program’s goals of risk assumption and sharing
between executives and shareholders.
We have determined that the compensation program for non-executive
officers who are in senior management positions does not encourage excessive
risk taking for all the reasons stated above.
23
COMPENSATION PROGRAM
STRUCTURE
The table below summarizes the
current elements of our executive compensation program.
|
|
|
Short- or |
|
|
|
Long-Term |
Element |
Brief Description |
Primary Purpose |
Focus |
Base
Salary |
Fixed compensation.
Annual |
Basic element of
compensation and |
Short-term |
|
merit increases
reward |
necessary to attract
and retain. |
(annual) |
|
individual performance
and |
|
|
|
growth in the position. |
|
|
Annual Incentive |
Variable compensation
based |
Rewards operating
performance results |
Short-term |
|
on achievement of
annual |
that are consistent
with reliable and |
(annual) |
|
performance goals. |
efficient electric service. |
|
Long-Term Incentives — |
Variable compensation
based |
Align interests of
shareholders and |
Long-term |
Performance Shares |
on achievement of
long-term |
management and aid in
attracting and |
|
|
performance goals. |
retaining executives. |
|
Long-Term Incentives — |
Fixed compensation
based on |
Align interests of
shareholders and |
Long-term |
Restricted Stock/Restricted |
target levels.
Service-based |
management and
essential in attracting |
|
Stock Units |
vesting. |
and
retaining executives. |
|
Supplemental Senior |
Formula-based
compensation, |
Provides long-term
retirement benefit |
Long-term |
Executive Retirement Plan |
based on salary,
annual |
influenced by service
and performance. |
|
|
incentives and
eligible years |
Aids in attracting and
retaining |
|
|
of
service. |
executives. |
|
Management Change-In- |
Elements based on
specific |
Aligns interests of
shareholders and |
Long-term |
Control Plan |
plan
eligibility. |
management and aids in
(i) attracting |
|
|
|
executives; (ii)
retaining executives |
|
|
|
during transition
following a change-in- |
|
|
|
control; and (iii)
focusing executives on |
|
|
|
maximizing value for shareholders. |
|
Employment Agreements |
Define
Company’s |
Aid in attracting and
retaining executives. |
Long-term |
|
relationship with
its |
|
|
|
executives and
provide |
|
|
|
protection to each of
the |
|
|
|
parties in the event
of |
|
|
|
termination of employment. |
|
|
Executive Perquisites |
Personal benefits
awarded |
Aid in attracting and
retaining executives. |
Short-term |
|
outside of base pay
and |
|
(annual) |
|
incentives. |
|
|
Other Broad-Based |
Employee benefits such
as |
Basic elements of
compensation expected |
Both
Short- |
Benefits |
health and welfare
benefits, |
in the marketplace.
Aid in attracting and |
and Long- |
|
401(k) and pension plan. |
retaining executives. |
term |
Deferred Compensation |
Provides executives
with tax |
Aids in attracting and
retaining |
Long-term |
|
deferral options in
addition |
executives. |
|
|
to those available
under our |
|
|
|
qualified plans. |
|
|
24
Progress Energy
Proxy
Statement |
The Committee believes these various
compensation program elements:
- link compensation
with our short- and long-term success by using operating and financial
performance
measures in determining payouts for annual and long-term incentive
plans;
- align management
interests with investor expectations by rewarding executives for
delivering long-term total
shareholder return;
- attract and
retain executives by maintaining compensation that is competitive with our
peer group;
- foster effective
teamwork and collaboration between executives working in different areas
to support our core
values, strategy and interests;
- comply in all
material respects with applicable laws and regulations; and
- can be readily
understood by us, the Committee, our executives and our shareholders,
and therefore are effective in meeting our business
objectives.
PROGRAM ADMINISTRATION
Our executive compensation program is administered by the Committee,
which is composed of six independent directors (as defined under the NYSE
Corporate Governance Rules). Members of the Committee currently do not receive
compensation under any compensation program in which our executive officers
participate. For a discussion of director compensation, see the “Director
Compensation” section on page 69 of this Proxy Statement.
The Committee’s charter authorizes the Committee to hire outside
consultants, and the Committee has no limitations on its ability to select and
retain consultants as it deems necessary or appropriate. The Committee evaluates
the performance of its compensation consultant annually to assess the
consultant’s effectiveness in assisting the Committee with implementing the
Company’s compensation program and principles. The Committee retained Hewitt
Associates (“Hewitt”) as its independent executive compensation consultant to
assist the Committee in meeting its compensation objectives for our Company.
Under the terms of its engagement, in 2009 Hewitt reported directly to the
Committee. In January 2010, Hewitt spun off its executive compensation practice
into a separate entity named Meridian Compensation Partners, LLC (“Meridian”),
an independent agency wholly-owned by its partners. Meridian reports directly to
the Committee.
The Committee relies on its compensation consultant to advise it on
various matters relating to our executive compensation and benefits program.
These services include:
- advising the Committee on general
trends in executive compensation and benefits;
- summarizing developments relating
to disclosure, risk assessment process and other technical
areas;
- performing benchmarking and
competitive assessments;
- assistance in designing incentive
plans;
- performing financial analysis
related to plan design and assisting the Committee in making pay decisions in light of results;
and
- recommending appropriate
performance metrics.
25
Hewitt did not provide
any services or products to the Company other than those provided to the
Committee and related to the Company’s executive compensation and benefits
program. Meridian solely provides executive compensation advisory services to
the Committee and provides no other services to the Committee or the
Company.
Our executive officers meet with the compensation consultant to ensure
the consultant understands the Company’s business strategy. In addition, the
executive officers ensure that the Committee receives administrative support and
assistance, and make recommendations to the Committee to ensure that
compensation plans are aligned with our business strategy and meet the
principles described above. John R. McArthur, our Executive Vice President,
serves as management’s liaison to the Committee. Our executive officers and
other Company employees provide the consultant with information regarding our
executive compensation plans and benefits and how we administer them on an
as-needed basis. William D. Johnson, our Chief Executive Officer, is responsible
for conducting annual performance evaluations of the other executive officers
and making recommendations to the Committee regarding those executives’
compensation. The Committee conducts an annual performance evaluation of Mr.
Johnson.
COMPETITIVE POSITIONING
PHILOSOPHY
The Committee’s compensation philosophy is to establish target
compensation opportunities near the 50th percentile of the
market, with flexibility to pay higher or lower amounts based on individual and
corporate performance. The Committee believes that this philosophy is aligned
with our executive compensation objective of linking pay to actual
performance.
When we set and benchmark compensation for our executives against a peer
group, we focus on “target” compensation. Target compensation is the value of a
pay opportunity as of the beginning of the year. For short-term incentives, this
means the value of that incentive opportunity based on the target percentage of
salary if our performance objectives are achieved. For example, the Chief
Executive Officer’s target incentive opportunity is 85% of salary. This means if
we reach our target financial objectives for the year, a target incentive award
would likely be paid. Correspondingly, if performance should fall short or rise
above these goals then the earned incentive award would typically be lesser or
greater than target. In any event, target incentive opportunities are not a
certainty but are a function of business results. For the performance shares,
the ultimate value of any earned award is entirely a function of performance
against the pre-established 3-year performance goals as well as the value of the
underlying stock price. Also, for the restricted shares the value of any earned
award is a function of extended service and the value of the underlying stock
price. The target value is not a certainty but only the value of the
opportunity.
What ultimately might be earned from either short- or long-term
incentives is a function of performance and extended service. We do not
benchmark realized values from our programs. With respect to our variable pay
programs it is generally not the Company’s purpose to deliver comparable pay
outcomes since outcomes can differ by company based on their performance. Our
general compensation objective is to deliver comparable pay opportunities.
Realized results will then be a significant function of performance and extended
service. This is a common convention among companies; nonetheless, it is an
important context to consider when reviewing the remainder of this CD&A
where regular references to targets and/or grant date values for our
compensation programs appear.
Progress Energy, a regulated electric utility holding company, is
considered to be part of the broader industry classification of electric
utilities. The Company is included in several well-publicized indices, including
the S&P Electric Index and the Philadelphia Utility Index. Over the past
decade, as deregulation has occurred in several geographic areas of the United
States, the investor community has separated the utility industry into a number
of subsectors. The two main themes of separation are the aspect of the value
chain in which the company participates (generation, transmission and/or
delivery), and how much of its business is governed by rate-of-return regulation
as opposed to competitive markets.
26
Progress Energy
Proxy
Statement |
Thus, the industry now has subsectors identified frequently as
competitive merchant, regulated delivery, regulated integrated, and unregulated
integrated (typically state-regulated delivery and unregulated generation). Each
of these subsectors typically differs in financial performance and market
valuation characteristics such as earnings multiples, earnings growth prospects
and dividend yields.
Progress Energy generally is identified as being in the regulated
integrated subsector. This means Progress Energy and its peer companies are
primarily rate-of-return regulated, operate in the full range of the value
chain, and typically have requirements to serve all customers under state
utility regulations. Other companies that are similar to us from a business
model perspective and that are generally categorized in our subsector include
companies like Southern Company, Duke Energy, SCANA, Xcel and PG&E. The
Committee, therefore, monitors companies like these in comparing and evaluating
Progress Energy’s financial performance for investors and compensation for
executives.
On an annual basis, the Committee’s compensation consultant provides the
Committee with a written analysis comparing base salaries, target annual
incentives and the grant date value of long-term incentives of our executive
officers to compensation opportunities provided to executive officers of our
peers. For 2009, the Committee approved the use of the same peer group of 18
integrated utilities used in the prior year (that is, utilities that have
transmission, distribution and generation assets) (the “Benchmarking Peer
Group”). The Benchmarking Peer Group was chosen based primarily on revenues.
These companies would likely be companies with which we primarily compete for
executive talent. The table below lists the companies in the Benchmarking Peer
Group.
Allegheny Energy, Inc. |
Edison International |
Pinnacle West Capital Corporation |
Ameren Corporation |
Entergy Corporation |
PPL Corporation |
American Electric Power Co., Inc. |
Exelon Corporation |
SCANA Corporation |
Dominion Resources, Inc. |
FirstEnergy Corporation |
Southern Company |
DTE Energy Company |
FPL Group, Inc. |
TECO Energy, Inc. |
Duke Energy Corporation |
PG&E Corporation |
Xcel Energy, Inc. |
The Committee will annually evaluate the Benchmarking Peer Group to
ensure that it remains appropriate for compensation comparisons.
SECTION 162(m) IMPACTS
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits,
with certain exceptions, the amount a publicly held company may deduct each year
for compensation over $1 million paid or accrued with respect to its chief
executive officer and any of the other three most highly compensated officers
(excluding the chief financial officer). Certain performance-based compensation
is, however, specifically exempt from the deduction limit. To qualify as
performance-based, compensation must be paid pursuant to a plan that
is:
- administered by a committee of
outside directors;
- based on achieving objective
performance goals; and
- disclosed to and approved by the
shareholders.
The Committee considers the impact of Section 162(m) when designing
executive compensation elements and attempts to minimize nondeductible
compensation. The Company received shareholder approval of the Progress Energy
2009 Executive Incentive Plan (the “EIP”), an annual cash incentive plan for the
Company’s named executive officers, at its 2009 Annual Meeting of Shareholders.
The MICP and EIP were designed to work together to enable the Company to
preserve the tax deductibility of incentive awards under Section 162(m) of the
Internal Revenue Code, as amended, to the extent practicable. The sole purpose
of the EIP is to preserve the tax deductibility of incentive awards that are
qualified performance-based compensation.
27
STOCK OWNERSHIP GUIDELINES
To align the interests of our executives with the interests of
shareholders, the Board of Directors utilizes stock ownership guidelines for all
executive officers. The guidelines are designed to ensure that our management
maintains a significant ownership stake in the Company. The guidelines require
each senior executive to own a multiple of his or her base salary in the form of
Company common stock generally within five years of assuming his or her
position. The required levels of ownership are designed to reflect the level of
responsibility that the executive positions entail.
Each year, the Committee benchmarks both the position levels and the
multiples in our guidelines against those of the Benchmarking Peer Group and
general industry designs. The benchmarking for 2009 indicated that the Company’s
guidelines were “at market” with respect to ownership levels, the types of
equity that count toward ownership, and the timeframe for compliance. The stock
ownership guidelines for our executive officer positions are shown in the table
below:
Position Level |
Stock Ownership
Guidelines |
Chief Executive Officer |
5.0 times Base
Salary |
Chief Operating Officer |
4.0 times Base
Salary |
Chief Financial Officer |
3.0 times Base
Salary |
Presidents/Executive Vice Presidents/Senior Vice
Presidents |
3.0 times Base
Salary |
For purposes of meeting the applicable guidelines, the following are
considered as common stock owned by an executive: (i) shares owned outright by
the executive; (ii) stock held in any defined contribution, Employee Stock
Ownership Plan or other stock-based plan; (iii) phantom stock deferred under an
annual incentive or base salary deferral plan; (iv) stock earned and deferred in
any long-term incentive plan account; (v) restricted stock awards and restricted
stock units; and (vi) stock held in a family trust or immediate family
holdings.
As of February 23, 2010, our named executive officers were in compliance
with the guidelines (see Management Ownership table on page 10 of this Proxy
Statement for specific details). As an indication of Mr. Johnson’s alignment of
his interests with that of our shareholders, he currently holds equity more than
8½-times his base salary which exceeds the 5-times base salary required under
the guidelines. Further, he has not sold any of the shares he received upon the
vesting of his restricted stock awards, restricted stock units, and performance
shares since he became Chief Executive Officer.
II. ELEMENTS OF
COMPENSATION
The various elements of our executive compensation program described
above under the caption “Compensation Program Structure” on page 24 are designed
to meet the three key principles described under the caption “Compensation
Philosophy and Overview” on page 21 of this Proxy Statement. We have designed an
allocation of long-term to short-term compensation that reflects the job
responsibilities of the executive, provides an incentive for the executive to
maximize his or her contribution to the Company, and is consistent with market
practices. In general, we believe that the more senior an executive’s position,
the greater responsibility and influence he or she has regarding the long-term
strategic direction of the Company. Thus, the Chief Executive Officer’s target
long-term compensation is designed to account for approximately two-thirds of
his total compensation package (i.e., base salary, target annual incentives, and
long-term incentives). By comparison, Senior Vice Presidents’ target long-term
compensation is designed to constitute approximately one-half of their total
target compensation packages. Under this approach, executives who bear the most
responsibility for and influence over the Company’s long-term performance
receive compensation packages that provide greater incentives to achieve the
Company’s long-term objectives.
The table below shows the mix of short-term and long-term incentive
awards to each named executive officer for 2009. Percentages for incentives are
expressed as a percentage of base salary. Additional elements of compensation
are discussed further in this section.
28
Progress Energy
Proxy
Statement |
|
|
|
Long-Term Incentive |
|
|
|
Short-Term |
Targets as a Percentage |
|
|
|
(annual) |
of Salary |
Total |
Named Executive |
Base Salary |
Incentive |
Performance |
Restricted |
Incentive |
Officer |
(as of 1/1/10) |
Target1 |
Shares2 |
Stock |
Target |
William D. Johnson |
$990,000 |
85% |
233% |
117% |
435% |
Mark
F. Mulhern |
$425,000 |
55% |
117% |
58% |
230% |
Jeffrey J. Lyash |
$453,000 |
55% |
117% |
58% |
230% |
Lloyd M. Yates |
$448,000 |
55% |
117% |
58% |
230% |
Paula J. Sims |
$370,000 |
45% |
100% |
50% |
195% |
1 Annual incentive awards can range from
0%-200% of target percentages noted above.
2 Payout opportunities can range from 0%-200%
of grant.
To assess overall compensation, the Committee utilizes tally sheets that
provide a summary of the elements of compensation for each senior executive. The
tally sheets indicate target and actual pay earned. They also summarize
potential retirement benefits at age 65, current equity holdings, and potential
value from severance.
1. BASE SALARY
The primary purpose of base salaries is to provide a basic element of
compensation necessary to attract and retain executives. Base salary levels are
established based on data from the Benchmarking Peer Group identified above and
consideration of each executive officer’s skills, experience, responsibilities
and performance. Market compensation levels are used to assist in establishing
each executive’s job value (commonly called the “midpoint” at other companies).
Job values serve as the market reference for determining base
salaries.
Each year, the compensation consultant provides the market values for our
executive officer positions. Based, in part, on these market values and, in
part, on the executives’ achievement of individual and Company goals, the Chief
Executive Officer then recommends to the Committee base salary adjustments for
our executive officers (excluding himself). The Committee reviews the proposed
base salaries, adjusts them as it deems appropriate based on the executives’
achievement of individual and Company goals and market trends that result in
changes to job values, and approves them in the first quarter of each year. The
Committee meets in executive session with the compensation consultant to review
and establish the Chief Executive Officer’s base salary.
The Committee’s compensation philosophy is to consider market values near
the 50th
percentile of the Benchmarking Peer Group. The Committee may choose to set base
salaries at a higher percentile of the market to address such factors as
competition, retention, succession planning, and the uniqueness and complexity
of a position; however, on average, base salaries of the named executive
officers for 2009 were approximately 10% below those of the Benchmarking Peer
Group. While our current named executive officers have significant experience
and tenure with the Company, they, as a group, do not have significant tenure in
their current positions. The Committee expects that over time, the average base
salary percentile will continue to target the market median. We discuss how
individual named executive officers’ base salaries compare to the targeted
benchmark in “2009 COMPENSATION DECISIONS” on page 40 below.
2. ANNUAL INCENTIVE
We sponsor the MICP, an annual cash incentive plan, in which our
executives, managers and supervisors participate. The Company includes managers
and supervisors in the MICP to increase accountability for all levels of the
Company’s management team and to better align compensation with management
performance. Annual incentive opportunities are provided to executive officers
to promote the achievement of annual performance objectives. MICP targets are
based on a percentage of each executive’s base salary and are intended to offer
target award opportunities that approximate the 50th percentile of the
market for Benchmarking Peer Group. For 2009, all MICP targets for our named
executive officers were at or below the 50th
percentile.
29
Each year, the Committee establishes the threshold, target and
outstanding levels for the performance measures applicable to the named
executive officers. The 2009 MICP performance measures were ongoing earnings per
share (EPS) and business unit EBITDA for PEC and PEF as shown in the table
below:
MICP Financial Performance
Goals |
(in millions except
EPS) |
Threshold |
Target |
Outstanding |
Company
EPS |
$2.86 |
$3.06 |
$3.16 |
PEC
EBITDA |
$1,630 |
$1,685 |
$1,715 |
PEF
EBITDA |
$1,060 |
$1,100 |
$1,115 |
The MICP’s performance targets are designed to align with our financial
plan and are intended to appropriately motivate the executive officers to
achieve the desired corporate financial objectives. The potential MICP funding
for each performance measure is 50% at threshold, 100% at target and 200% at
outstanding (maximum). Interpolation occurs when actual performance is between
the identified levels. Each performance measure is assigned a weight based on
the relative importance of that measure to the Company’s performance. During the
year, updates are provided to the Committee on the Company’s performance as
compared to the performance measures. Effective January 1, 2010, the legal
entity EBITDA performance measure was replaced by legal entity net income. This
new performance measure was implemented as a result of the Company’s desire to
increase its legal entity focus on net income results. Net income results
include certain regulatory decisions and key costs that are part of achieving
EPS targets in managing a capital-intensive utility business.
The determination of the annual MICP award that each named executive
officer receives has two steps: 1) funding the MICP awards based on the
performance as compared to the financial goals specified above; and 2)
determining individual MICP awards. First, the Committee determines the total
amount that will be made available to fund MICP awards to managers and
executives, including the named executive officers. To determine the total
amount available to fund all MICP awards, we calculate an amount for each MICP
participant by multiplying each participant’s base salary by a performance
factor (based on the sum of a participant’s weighted target award achievements).
The performance factor ranges between 0 and 200% of a participant’s target
award, depending upon the results of each applicable performance measure. The
sum of these amounts for all participants is the total amount of funds available
to pay to all participants, including the named executive officers. For 2009,
the named executive officers’ performance measures under the MICP were weighted
among earnings per share and EBITDA as follows:
|
|
Performance Measures |
|
|
(Relative Percentage
Weight) |
|
|
Company |
|
|
Named Executive |
Target |
Earnings |
PEC |
PEF |
Officer |
Opportunity |
Per Share
|
EBITDA
|
EBITDA |
William D. Johnson |
85% |
100% |
— |
— |
Mark F.
Mulhern |
55% |
100% |
— |
— |
Jeffrey J.
Lyash (through July 5, 2009) |
55% |
45% |
— |
55% |
Jeffrey J.
Lyash (effective July 6, 2009)1 |
55% |
35% |
32.5% |
32.5% |
Lloyd M.
Yates |
55% |
45% |
55% |
— |
Paula J.
Sims |
45% |
35% |
32.5% |
32.5% |
1 Mr. Lyash’s
performance measure opportunities and relative weights under the MICP were
adjusted effective July 6, 2009, to reflect his becoming the Company’s Executive
Vice President – Corporate Development.
Second, the Committee utilizes discretion to determine the MICP award to
be paid to each executive. This determination is based on the executive’s target
award opportunity, the degree to which the Company achieved certain goals, and
the executive’s individual performance based on achieving individual goals and
operating results.
As allowed by the MICP, the Committee uses discretion to adjust funding
amounts up or down depending on factors that it deems appropriate, such as storm
costs and other nonrecurring items including impairments, restructuring costs,
and gains/losses on sales of assets. The Committee uses ongoing earnings per
share as defined and reported by the Company in its annual earnings release.
Based on management’s recommendations, with
30
Progress Energy
Proxy
Statement |
respect to 2009, the
Committee exercised discretion for the three performance measures—earnings per
share, PEC EBITDA, and PEF EBITDA. The Committee approved adjusting earnings per
share results upward by $0.04 to account for storm costs and investment gains on
certain employee benefit trusts. The Committee approved adjusting the PEC EBITDA
results for the decline in residential, commercial, and industrial retail usage
due to weak economic conditions, favorable weather, and storm costs for a net
upward adjustment of $72 million. The Committee also approved adjusting the PEF
EBITDA downward by $52 million to reflect the impact of favorable weather and
pension expense amortization. These adjustments resulted in earnings per share,
PEC EBITDA and PEF EBITDA performance at 93%, 68% and 107% of target,
respectively.
The Committee may reduce but cannot increase the amount payable to a
participant according to business factors determined by the Committee, including
the performance measures under the MICP. Awards are earned based upon the
achievement of performance measures approved by the Committee under the
MICP.
3. LONG-TERM INCENTIVES
The 2007 Equity Incentive Plan (the “Equity Incentive Plan”) was approved
by our shareholders in 2007 and allows the Committee to make various types of
long-term incentive awards to Equity Incentive Plan participants, including the
named executive officers. The awards are provided to the named executive
officers to align the interests of each executive with those of the Company’s
shareholders. Long-term incentive awards are intended to offer target award
opportunities that approximate the 50th percentile of the
peer group. Currently, the Committee utilizes only two types of equity-based
incentives: restricted stock units and performance shares.
The Committee has determined that to accomplish our compensation
program’s purposes effectively, equity-based awards should consist of one-third
restricted stock units and two-thirds performance shares. This allocation
reflects the Committee’s strategy of utilizing long-term incentives to retain
officers, align officers’ interests with those of the Company’s shareholders and
drive specific financial performance. Performance shares are intended to focus
executive officers on the multi-year sustained achievement of financial and
shareholder value objectives. Restricted stock units are service-based and
provide an opportunity for the executive officer’s interests to be further
aligned with shareholder interests if the executive remains with the Company
long enough for the restricted stock units to vest.
The table below shows the 2009
long-term incentive targets for each of the named executive officer’s
positions.
Long-Term Incentive Award Target1
|
Performance |
Restricted Stock |
|
Shares |
Units |
|
Target Award |
Target Award |
Position2 |
2009 |
2009 |
Chief Executive
Officer |
233% |
117% |
Executive Vice
President |
117% |
58% |
Chief Financial
Officer |
117% |
58% |
Presidents, PEC
and PEF |
117% |
58% |
Senior Vice
Presidents |
100% |
50% |
1 Target award amounts are expressed as
percentages of base salaries for the listed positions.
2 Position held at Progress Energy, Inc. unless
otherwise noted.
31
In determining long-term incentive targets, the Committee may choose to
establish targets at a higher percentile of the market to address such factors
as competition, retention, succession planning and the uniqueness and complexity
of a position; however, on average, the targets established for the named
executive officers for 2009 were 15% lower than comparable aggregate long-term
incentive opportunities of our peer group. The Committee expects that, over
time, the long-term incentive opportunities will continue to approximate the
50th percentile of
the peer group. We discuss how individual named executive officers’ long-term
incentive targets compared to the targeted benchmarks in “2009 COMPENSATION
DECISIONS” on page 40 below. Grants of equity-based awards typically occur in
the first quarter, after the annual earnings release. This timing allows current
financial information to be fully disclosed and publicly available prior to any
grants.
After October 2004, we ceased granting stock options. All previously
granted stock options remain valid in accordance with their terms and
conditions.
Performance Shares
The PSSP authorizes the Committee to
issue performance shares to executives as selected by the Committee in its sole discretion. The value of
a performance share is equal to the value of a share of the Company’s common
stock, and earned performance share awards are paid in Company common stock. The
performance period for a performance share is the
three-consecutive-calendar-year period beginning in the year in which it is
granted. The closing stock price on the last trading day of the year prior to
the beginning of the performance period is used to calculate the number of
performance shares granted to each participant in that performance period. The
Committee may exercise discretion in determining the size of each performance
share grant, with the maximum grant size at 125% of target. In 2009, the
Committee did not exercise this discretion with respect to any grant of the
named executive officers.
2007 Performance Share
Sub-Plan
The PSSP, as redesigned in 2007 (the “2007 PSSP”), provides for an
adjusted measure of total shareholder return to be utilized as the sole measure
for determining the amount of a performance share award upon vesting. The
Committee and management designed the total shareholder return performance
measure to be calculated assuming a constant price to earnings ratio, which was
set at the beginning of each performance period. The performance measure also
uses the Company’s publicly reported ongoing earnings as the earnings component
for determining performance share awards. The Committee chose this method, which
we will refer to as “Total Business Return,” as the sole performance measure to
support its desire to better align the long-term incentives with the interests
of our shareholders and to emphasize our focus on dividend and earnings per
share growth. The performance measure for the 2007 and 2008 performance share
grants made under the 2007 PSSP are shown in the table below.
|
Threshold
|
Target
|
Outstanding
|
2007 Total Business Return* |
5 |
% |
8 |
% |
≥10.5 |
% |
2007 Percentage of Target Award Earned |
50 |
% |
100 |
% |
200 |
% |
2008 Total Business Return* |
5 |
% |
8 |
% |
≥11 |
% |
2008 Percentage of Target Award Earned |
25 |
% |
100 |
% |
200 |
% |
* Total shareholder return, adjusted to reflect a constant price to
earnings ratio set at January 1 of the grant year and to reflect the Company’s
ongoing earnings per share for each year of the performance period.
Additionally, the Committee retained the discretion to reduce the number
of performance shares awarded if it determines that the payouts resulting from
the Total Business Return do not appropriately reflect the Company’s actual
performance.
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Progress Energy
Proxy
Statement |
In 2007, the Committee approved a transition plan designed to bridge the
prior long-term incentive plan to the redesigned long-term incentive plan. Under
the transition plan, the Committee awarded interim grants of performance units
to our officers (the “Transitional Grants”). The Transitional Grants were
determined using the same Total Business Return measure as the annual grants
described above.
The Transitional Grants included a grant that vested in 2009. The size of
the grant awarded to each of the named executive officers was equal to such
officer’s revised PSSP long-term incentive target for 2007. The transition plan
provides that any award from the Transitional Grants vesting in 2009 will be
reduced by awards, if any, from the outstanding 2006 performance share grants
vesting in 2009. Based on the performance results calculated under the terms of
the 2006 PSSP, the Company did not make a payment in 2009 in connection with the
performance shares that were issued in 2006. Under the terms of the Transitional
Grants, the actual payout opportunity ranges from 0% to 200% of the grant, based
on performance. In 2009, the Committee approved a payout of 100% of the target
value for the Transitional Grant that vested in 2009.
2009 Performance Share Sub-Plan (the “2009
PSSP”)
In early 2009, the Committee, along with its executive compensation
consultant, concluded that the PSSP should be modified to further align it with
the prevailing structure of long-term incentive plans of other highly regulated
utility companies and to improve its alignment with the Company’s goals. The
2009 PSSP continues to be based on a three-year performance period, and
performance shares accrue quarterly dividend equivalents, which are reinvested
in additional shares. Shares vest on January 1 following the end of the
performance period and are paid out in Company common stock provided the
performance measures have been met.
The modifications to the 2009 PSSP use two equally weighted performance
measures: relative total shareholder return (TSR) and earnings growth. By using
a combination of relative (TSR) and absolute (earnings growth) performance
measures, the 2009 PSSP allows the Committee to consider the Company’s
performance as compared to the PSSP Peer Group (as defined below), and
management’s achievement of internal goals. TSR is defined as the appreciation
or depreciation in the value of the stock, plus dividends paid during the year,
divided by the closing value of the stock on the last trading day of the
preceding year. The relative TSR performance is calculated using the Company’s
three-year annualized TSR ranked against the PSSP Peer Group (as defined below).
This component of the PSSP award is based on the Company’s relative TSR
percentile ranking. However, regardless of the relative ranking, if the
Company’s TSR is negative for the performance period, no award above the
threshold can be earned. The table below shows the percent of target awards that
may be earned based on the Company’s relative TSR percentile
ranking:
Performance and Award Structure
(50%) |
Percentile Ranking |
Percent of Target Award
Earned |
80th |
200% |
50th |
100% |
40th |
50% |
<40th |
0% |
The Committee selected a peer group for the PSSP awards comprised of
highly regulated companies with a business strategy similar to ours based on a
percentage of regulated earnings (the “PSSP Peer Group”). These companies have a
significant amount of their earnings generated from regulated assets. In
addition, the PSSP Peer Group was selected based on other factors including
revenues, market capitalization, enterprise value and percent of regulated
earnings. The table below lists the companies in the PSSP Peer
Group.
Alliant Energy Corporation |
Great Plains Energy, Inc. |
SCANA Corporation |
American Electric Power, Inc. |
NV
Energy, Inc. |
Southern Company |
Consolidated Edison, Inc. |
PG&E Corporation |
Westar Energy, Inc. |
DPL,
Inc. |
Pinnacle West Capital Corporation |
Wisconsin Energy Corp. |
Duke
Energy Corporation |
Portland General Electric Company |
Xcel
Energy, Inc. |
33
The PSSP Peer Group differs from the Benchmarking Peer Group the
Committee uses for purposes of benchmarking compensation. The Benchmarking Peer
Group is a broader group that represents those companies with which we primarily
compete for executive talent and includes companies that are not regulated
integrated utilities. The Committee believes that for purposes of our long-term
incentive plan, it is more appropriate to use the PSSP Peer Group comprised of
companies that derive a significant percentage of their earnings from regulated
businesses.
Earnings growth is based on the Company’s ongoing annual EPS. The ongoing
EPS is determined in accordance with the Company’s “Policy for Press Release
Earnings Disclosure.” The earnings growth component of the PSSP award is based
on the Company’s earnings growth performance as measured against pre-established
goals set at the beginning of the performance period. The table below shows the
percent of target awards that may be earned based on the Company’s earnings
growth performance:
Performance and Award Structure
(50%) |
|
Three-Year Average
Ongoing |
Percent of Target
Award |
Performance |
EPS Growth |
Earned |
Threshold |
2% |
50%
|
Target |
4% |
100%
|
Maximum |
6% |
200%
|
Restricted Stock and Restricted Stock
Units
The restricted stock component of the current long-term incentive program
helps us retain executives and aligns the interests of management with those of
our shareholders and management by rewarding executives for increasing
shareholder value. In 2007, the Committee began issuing restricted stock units
rather than restricted stock. The restricted stock units provide the same
incentives and value as restricted stock, but are more flexible and cost
effective for the Company. Executive officers typically receive a grant of
service-based restricted stock units in the first quarter of each year which are
subject to a three-year graded vesting schedule. The size of each grant is based
on the executive officer’s target and determined using the closing stock price
on the last trading day prior to the Committee’s action. The Committee
establishes target levels based on the peer group information discussed under
the caption “Competitive Positioning Philosophy” on page 26 above. The 2009
restricted stock unit targets for the named executive officer positions are
shown in the “Long-Term Incentive Award Target” table on page 31 above. The
restricted stock units pay quarterly cash dividend equivalents equal to the
amount of any dividends paid on our common stock. The Committee believes that
the service-based nature of restricted stock units is effective in retaining an
experienced and capable management team.
To further accent the retention quality of the Equity Incentive Plan and
to recognize the contribution of the officer team, including the named executive
officers, the Committee may also issue in its discretion service-based ad hoc
grants of restricted stock units to executives. Ad hoc grants awarded by the
Committee during 2009 are discussed in “2009 COMPENSATION DECISIONS” on page 40
below.
4. SUPPLEMENTAL SENIOR EXECUTIVE RETIREMENT
PLAN
The Supplemental Senior Executive Retirement Plan (“SERP”) provides a
supplemental, unfunded pension benefit for executive officers who have at least
10 years of service and at least three years of service on our Senior Management
Committee. Currently, 11 executive officers participate in the SERP. The SERP is
designed to provide pension benefits above those earned under our qualified
pension plan. Current tax laws place various limits on the benefits payable
under our qualified pension, including a limit on the amount of annual
compensation that can be taken into account when applying the plan’s benefit
formulas. Therefore, the retirement incomes provided to the named executive
officers by the qualified plans generally constitute a smaller percentage of
final pay than is typically the case for other Company employees. To make up for
this shortfall and to maintain the market-competitiveness of the Company’s
executive retirement benefits, we maintain the SERP for executive officers,
including the named executive officers.
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Progress Energy
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Statement |
The SERP defines covered compensation as annual base salary plus the
annual cash incentive award. The qualified plans define covered compensation as
base salary only. The Committee believes it is appropriate to include annual
cash incentive awards in the definition of covered compensation for purposes of
determining pension plan benefits for the named executive officers to ensure
that the named executive officers can replace in retirement a similar portion of
total compensation as replaced for other employees who participate in the
Company’s pension plan. This approach takes into account the fact that base pay
alone comprises a relatively smaller percentage of a named executive officer’s
total compensation than of other Company employees’ total
compensation.
The Committee believes that the SERP is a valuable and effective tool for
attraction and retention due to its vesting requirements and its significant
benefit. It is also a common tool among the Benchmarking Peer Group and
utilities in general. Total years of service attributable to an eligible
executive officer may consist of actual or deemed years. The Committee grants
deemed years of service on a case-by-case basis depending upon our need to
attract and retain a particular executive officer. All of our named executive
officers are fully vested in the SERP.
Payments under the SERP are made in the form of an annuity, payable at
age 65. The monthly SERP payment is calculated using a formula that equates to
4% per year of service (capped at 62%) multiplied by the average monthly
eligible pay for the highest completed 36 months of eligible pay within the
preceding 120-month period. Eligible pay includes base salary and annual
incentive. (For those executives who became SERP participants on or after
January 1, 2009, the target benefit percentage is 2.25% rather than 4% per year
of service. None of the named executive officers for 2009 is subject to the new
benefit percentage.) Benefits under the SERP are fully offset by Social Security
benefits and by benefits paid under our qualified pension plan. An executive
officer who is age 55 or older with at least 15 years of service may elect to
retire and commence his or her SERP benefit prior to age 65. The early
retirement benefit will be reduced by 2.5% for each year the participant
receives the benefit prior to reaching age 65.
5. MANAGEMENT CHANGE-IN-CONTROL
PLAN
We sponsor a Management Change-In-Control Plan (the “CIC Plan”) for
selected employees. The purpose of the CIC Plan is to retain key management
employees who are critical to the negotiation and subsequent success of any
transition resulting from a change-in-control (“CIC”) of the Company. Providing
such protection to executive officers in general minimizes disruption during a
pending or anticipated CIC. Under our CIC Plan, we generally define a CIC as
occurring at the earliest of the following:
- the date any person or group
becomes the beneficial owner of 25% or more of the combined voting
power of our then outstanding
securities; or
- the date a tender offer for the
ownership of more than 50% of our then outstanding voting securities is
consummated; or
- the date we consummate a merger,
share exchange or consolidation with any other corporation or entity, regardless of whether we are the
surviving company, unless our outstanding securities immediately prior to the transaction
continue to represent more than 60% of the combined voting power of the outstanding voting securities
of the surviving entity immediately after the transaction; or
- the date, when, as a result of a
tender offer, exchange offer, proxy contest, merger, share exchange,
consolidation, sale of assets or any
combination of the foregoing, the directors serving as of the effective
date of the change-in-control plan, or
elected thereafter with the support of not less than 75% of those directors, cease to constitute at least
two-thirds (⅔) of the members of the Board of Directors;
or
- the date that our shareholders
approve a plan of complete liquidation or winding-up or an agreement
for the sale or disposition by us of
all or substantially all of our assets; or
35
- the date of any other event that
our Board of Directors determines should constitute a CIC.
The purposes of the CIC Plan and the
levels of payment it provides are designed to:
- focus executives on maximizing
shareholder value;
- ensure business continuity during
a transition and thereby maintain the value of the acquired
company;
- allow executives to focus on their
jobs by easing termination concerns;
- demonstrate the Company’s
commitment to its executives;
- reward executives for their role
in executing a transition and, if appropriate, align awards with the
new company’s
performance;
- recognize the additional stress,
efforts and responsibilities of employees during periods of transition;
and
- keep executives in place and
provide them with severance only if a CIC transaction is completed.
The Committee has the sole authority and discretion to designate
employees and/or positions for participation in the CIC Plan. The Committee has
designated certain positions, including all of the named executive officer
positions, for participation in the CIC Plan. Participants are not eligible to
receive any of the CIC Plan’s benefits absent both a CIC of the Company and an
involuntary termination of the participant’s employment without cause, including
voluntary termination for good reason. Good reason termination includes changes
in employment circumstances such as:
- a reduction of base salary or
incentive targets;
- certain reductions in position or
scope of authority;
- a significant change in work
location; or
- a breach of provisions of the CIC
Plan.
Rather than allowing benefit amounts to be determined at the discretion
of the Committee, the CIC Plan has specified multipliers designed to be
attractive to the executives and competitive with current market practices. With
the assistance of its executive compensation and benefits consultant, the
Committee has reviewed the benefits provided under the CIC Plan to ensure that
they meet the Company’s needs, are reasonable and fall within competitive
parameters. The Committee has determined that the current multipliers are needed
for the CIC Plan to be effective at meeting the goals described
above.
The CIC Plan provides separate tiers of severance benefits based on the
position a participant holds within our Company. The continuation of health and
welfare benefits coverage and the degree of excise tax gross-up for terminated
participants align with the length of time during which they will receive
severance benefits.
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Progress Energy
Proxy
Statement |
The following table sets forth the key provisions of the CIC Plan
benefits as it relates to our named executive officers:
|
Tier I |
Tier II |
Eligible Positions |
Chief Executive
Officer, |
Senior Vice
Presidents |
Chief Operating
Officer, |
Presidents and
Executive |
Vice Presidents |
Cash Severance |
300% of base salary and annual incentive1 |
200% of base salary and annual incentive1 |
Health & Welfare Coverage Period |
Coverage up to 36 months |
Coverage up to 24 months |
Gross-ups |
Full gross-up of excise tax |
Conditional gross-up of excise
tax |
1 The cash
severance payment will be equal to the sum of the applicable percentage of
annual base salary and the greater of the average of the participant’s annual
incentive award for the three years immediately preceding the participant’s
employment termination date, or the participant’s target annual incentive award
for the year the participant’s employment with the Company
terminates.
Additionally, the following benefits
are potentially available to named executive officers upon a CIC.
Benefit |
Description |
Annual Incentive |
100% of target incentive in year of CIC |
Restricted Stock Agreements |
Restrictions are fully waived on all outstanding grants upon
termination |
Performance Share Sub-Plan |
Outstanding awards vest as of the termination date |
Stock Option Agreements |
Rights dependent upon whether option has been assumed by
successor |
Supplemental Senior Executive Retirement Plan |
Participant shall be deemed to have met minimum service
requirements for benefit purposes, and participant shall be entitled to
payment of benefit under the SERP |
Deferred Compensation |
Entitled to payment of accrued benefits in all accrued nonqualified
deferred compensation plans |
Split-Dollar Life Insurance Policies1 |
We pay all premiums due under a split-dollar life insurance
arrangement under which the terminated participant is the insured for a
period not to exceed the applicable period of either 36 (Tier I) or 24
(Tier II) months |
1 Prior to 2003, we
sponsored an executive split-dollar life insurance program. The plan provided
life insurance coverage approximately equal to three times salary for executive
officers. During 2003, we discontinued our executive split-dollar program for
all future executives and discontinued our payment of premiums on existing
split-dollar policies for senior executives in response to the Internal Revenue
Service’s final split-dollar regulations and the Sarbanes-Oxley Act of 2002. In
2008 the Committee authorized the Chief Executive Officer to terminate the
executive split-dollar program. The Plan was terminated effective January 1,
2009. All named executive officers surrendered their policies for cash value.
Surrender proceeds were issued in January 2009.
In the event of a change-in-control of the Company, each named executive
officer can receive the greater of benefits provided under the CIC Plan or
severance benefits provided under his employment agreement, but not both. The
tables captioned “Potential Payments Upon Termination,” on pages 59 through 68
below show the potential payments each of our named executive officers would
receive in the event of a CIC.
37
The CIC Plan also permits the Board to establish a nonqualified trust to
protect the benefits of the impacted participants. This type of trust generally
is established to protect nonqualified and/or deferred compensation against
various risks such as a CIC or a management change-of-heart. Any such trust the
Board establishes will be irrevocable and inaccessible to future or current
management, and may be currently funded. To date, no such trust has been funded
with respect to any of our named executive officers.
6. EMPLOYMENT AGREEMENTS
Each named executive officer has an employment agreement that documents
the Company’s relationship with that executive. We provide these agreements to
the executives as a means of attracting and retaining them. Each agreement has a
term of three years. When an agreement’s remaining term diminishes to two years,
the agreement automatically adds another year to the term, unless we give
60-days advance notice that we do not want to extend the agreement. If a named
executive officer is terminated without cause during the term of the agreement,
he is entitled to severance payments equal to his base salary times 2.99, as
well as up to 18 months of COBRA reimbursement. A description of each named
executive officer’s employment agreement is discussed under the “Employment
Agreement” section of the “Discussion of Summary Compensation Table and Grants
of Plan-Based Awards Table” on page 50 of this Proxy Statement.
The Committee provides employment agreements to the named executive
officers because it believes that such agreements are important for the Company
to be competitive and retain a cohesive management team. The employment
agreements also provide for a defined employment arrangement with the executives
and provide various protections for the Company, such as prohibiting competition
with the Company, solicitation of the Company’s employees and disclosure of
confidential information or trade secrets. The Committee believes that the terms
of the employment agreements are in line with general industry
practice.
7. EXECUTIVE PERQUISITES
We provide certain perquisites and other benefits to our executives.
Amounts attributable to perquisites are disclosed in the “All Other
Compensation” column of the Summary Compensation Table on page 45.
During 2009, the Committee evaluated the perquisites program to determine
whether it was competitive and consistent with the Company’s compensation
philosophy. As a result of this evaluation, the Committee determined that the
current perquisites were appropriate and consistent with market practices. The
perquisites available to the named executive officers during 2009
include:
Perquisites for 2009 |
Description |
Personal Travel on Corporate Aircraft and “Business-Related”
Spousal Travel1 |
Personal and spousal travel on corporate aircraft is permitted
under very limited circumstances. |
Financial and Estate Planning |
An annual allowance of up to $16,500
for the purpose of purchasing financial and estate planning counseling and
services and preparation of personal tax return. |
Luncheon and Health Club Dues |
Membership in an approved luncheon club and membership in a health
club of executive officer’s choice. |
Executive Physical |
Reimbursement of up to $2,500 for an
extensive physical at a clinic specializing in executive physicals, every
other year. |
Internet and Telecom Service2 |
Monthly fees for Internet and telecom access. |
Home Security |
An installed home security system and payment of monitoring
fees. |
Accidental Death and Dismemberment Insurance |
$500,000 of AD&D insurance for each executive
officer. |
38
Progress Energy
Proxy
Statement |
1 Personal
travel on the Company’s aircraft in the event of a family emergency or similar
situation is permitted with the approval of the Chief Executive Officer.
Executives’ spouses may travel on the Company’s aircraft to accompany the
executives to “business-related” events executives’ spouses are requested to
attend. For 2009, the named executive officers whose perquisites included
spousal travel on corporate aircraft for business purposes were Messrs. Lyash
and Yates.
2 Including
home use of Company-owned computer.
The Committee believes that the perquisites we provide to our executives
are reasonable, competitive and consistent with our overall executive
compensation program in that they help us attract and retain skilled and
qualified executives. We believe that these benefits generally allow our
executives to work more efficiently and, in the case of the tax and financial
planning services, help them to optimize the value received from all of the
compensation and benefits programs offered. The costs of these benefits
constitute only a small percentage of each named executive officer’s total
compensation.
8. OTHER BROAD-BASED
BENEFITS
The named executive officers receive our general corporate benefits
provided to all of our regular, full-time, nonbargaining employees. These
broad-based benefits include the following:
- participation in our 401(k) Plan
(including a limited Company match of up to 6% of eligible compensation);
- participation in our funded,
tax-qualified, noncontributory defined-benefit pension plan, which uses
a cash balance formula to
accrue benefits; and
- general health and welfare
benefits such as medical, dental, vision and life insurance, as well as
long-term disability coverage.
9. DEFERRED COMPENSATION
We sponsor the Management Deferred Compensation Plan (the “MDCP”), an
unfunded, deferred compensation arrangement. The plan is designed to provide
executives with tax deferral options, in addition to those available under the
existing qualified plans. An executive may elect to defer, on a pre-tax basis,
payment of up to 50% of his or her salary for a minimum of five years or until
his or her date of retirement. As a make-up for the 401(k) statutory
compensation limits, executives receive deferred compensation credits of 6% of
their base salary over the Internal Revenue Code statutory compensation limit on
401(k) retirement plans. The Committee views the matching feature as a
restoration benefit designed to restore the matching contribution the executive
would have received under the 401(k) retirement plan in the absence of the
Internal Revenue Service compensation limits. These Company matching allocations
are allocated to an account that will be deemed initially to be invested in
shares of a stable value fund within the MDCP. Each executive may reallocate his
or her deferred compensation among the other available deemed investment funds
that mirror those options available under the 401(k) plan.
Executives can elect to defer up to 100% of their MICP and/or performance
share awards. The deferral option is provided as an additional benefit to
executive officers to provide flexibility in the receipt of compensation.
Historically, all deferred awards were deemed to be invested in performance
units, generally equivalent to shares of the Company’s common stock and received
a 15% discount to the Company’s then-current common stock price. Beginning
January 1, 2009, the discount feature was eliminated and deferred awards may be
allocated among investment options that mirror the Company’s 401(k)
Plan.
39
III. 2009 COMPENSATION
DECISIONS
Company Performance
The Committee made decisions for the executive officers’ compensation
following the process described above. The Committee noted that under the
leadership of our executive officer management team, the Company reported solid
financial and operating results in 2009 despite the challenging economic and
regulatory environment. Highlights of the Company’s 2009 performance include the
following:
- Returned value to shareholders
including increasing dividends from $642 million in 2008 to $693
million in 2009; dividend
payments increased for the 21st consecutive year;
- Total shareholder return in 2009
was 10.4% as compared to the average 2009 total shareholder return
for the Benchmarking Peer Group of
9.66%; the Company’s 3-year total shareholder return was -0.53% as compared to the average 3-year
total shareholder return for the Benchmarking Peer Group of -5.27%;
- Delivered ongoing earnings of $846
million, or $3.03 per share, compared to $776 million, or $2.96 per share in 2008;
- Received approval from the Florida
Public Service Commission (“FPSC”) to increase base rates by $132 million; the Committee acknowledges
that this increase represents only 26% of the Company’s request and believes the result was due to
the FPSC’s unwillingness to meaningfully raise consumer rates in the particularly challenging
Florida economic environment;
- Received final orders from the
FPSC for all of PEF’s proposed 2010 recovery for fuel, environmental
and energy-efficiency costs;
and
- Filed with the North Carolina
Utilities Commission (“NCUC”) a plan to retire by the end of 2017 the remaining 11 North Carolina coal-fired
units that do not have flue-gas desulfurization controls (scrubbers) and filed a corresponding plan
to build a 600-megawatt (MW) natural gas-fired plant to replace the coal-fired units at our Sutton
Plant in conjunction with their retirement in 2014; the Sutton Plant project would represent an estimated
investment of approximately $600 million and significantly reduce overall emissions.
Chief Executive Officer
Compensation
William D.
Johnson
In March 2009, the Committee considered Mr. Johnson’s salary against the
salaries of the chief executive officers in the Benchmarking Peer Group, the
Company’s performance, and the difficult external economic and regulatory
climate. Based on these factors, the Committee approved a salary of $990,000 for
Mr. Johnson representing an increase of 4.2% to his 2008 salary. Mr. Johnson’s
current target total base compensation is approximately 18% below the 50th percentile of the
Benchmarking Peer Group due to his relatively short tenure in the Chief
Executive Officer position, and more significantly, the challenging economic and
regulatory environment. It is the Committee’s intention to increase Mr.
Johnson’s salary over time to a level that is at the 50th percentile of the
Benchmarking Peer Group. For 2009, the Committee set Mr. Johnson’s MICP target
award at 85% of base salary. This target award was the same as the target Mr.
Johnson had in 2007 after he assumed his new position, and represents a target
award opportunity that is below the 50th percentile of market.
The payout of the 2009 MICP award was based on the extent to which Mr. Johnson
achieved his performance goals, which were focused on the following general
areas of Company success:
- Delivering on fundamentals of
safety, operational excellence and customer satisfaction;
- Achieving financial
objectives;
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Progress Energy
Proxy
Statement |
- Managing capital projects
effectively;
- Executing the energy-efficiency
and emerging technology features of the Company’s Balanced Solution Strategy;
- Achieving reasonable outcome on
PEF’s 2010 base rate proceeding filed in March 2009;
- Advocating effectively for
achievable, affordable climate and renewable energy policies;
and
- Strengthening leadership focus on
employee engagement, communication, diversity and inclusion.
In recognition of his accomplishments during 2009, including his
leadership in achieving the Company Performance described above, the Committee
awarded Mr. Johnson an MICP payout of $950,000, which is equal to 114% of Mr.
Johnson’s target award. The Committee also considered Mr. Johnson’s emphasis on
specific leadership behaviors and expectations throughout the year which were
communicated to the Company’s management team in clear and direct terms. The
Committee also noted Mr. Johnson’s active leadership in key national industry
organizations, including frequent, direct engagement with policymakers and
regulators at the federal and state levels.
With respect to his long-term incentive compensation during 2009, Mr.
Johnson was granted 27,892 restricted stock units and 55,546 performance shares
in accordance with his pre-established targets of 117% and 233%, respectively,
of his base salary. The performance shares are earned based on performance over
the three years ending December 31, 2011. Additionally, 29,456 shares of the
2007 annual grant vested in 2009 and were paid out at 100% of target. The
Committee also issued to Mr. Johnson an ad hoc retention grant of 8,000
restricted stock units to recognize his leadership in the critical position of
Chief Executive Officer, outstanding performance against objectives and the
manner in which he achieved those objectives. Total year-over-year compensation
to Mr. Johnson for 2009, as compared to 2008, as noted in the “Summary
Compensation Table” on page 45 of this Proxy Statement, was relatively
flat.
Chief Financial Officer
Compensation
Mark F. Mulhern
In March 2009, Mr. Johnson recommended and the Committee approved a base
salary of $425,000 for Mr. Mulhern, representing a 10.4% increase to his
previous salary of $385,000. The new base salary was set at 20% below the
50th percentile of
the Benchmarking Peer Group. Mr. Mulhern’s base salary was established at this
level due to his relatively short tenure in the Chief Financial Officer
position, and more significantly, the challenging economic and regulatory
environment. It is the Committee’s intention to increase Mr. Mulhern’s salary
over time to a level that is at the 50th percentile of the
Benchmarking Peer Group.
For 2009, Mr. Mulhern’s MICP target award was set at 55% of his base
salary. This target award is the same target Mr. Mulhern had in 2008 after he
assumed the Chief Financial Officer position and represents a target award
opportunity that is below the 50th percentile of the
market. Mr. Mulhern’s performance goals for 2009 focused on the following
general areas of Company success:
- Achieving financial
objectives;
- Developing a pension funding
strategy and communicating it effectively to the investment
community;
- Achieving reasonable outcome on
PEF’s rate settlement with respect to 2006-2008 expenditures;
and
- Strengthening leadership focus on
employee engagement, communication, diversity and inclusion.
41
In recognition of the achievements he accomplished in 2009 and on Mr.
Johnson’s recommendation, the Committee awarded Mr. Mulhern an MICP payout of
$225,000, which is equal to 99% of Mr. Mulhern’s target award. Mr. Mulhern’s
award was due in part to his leadership in the Company achieving its EPS goal,
execution of a funding strategy for the pension plan, and obtaining interim rate
relief for PEF.
With respect to his long-term incentive compensation, in 2009, Mr.
Mulhern was granted 5,604 restricted stock units and 11,304 performance shares
in accordance with his pre-established targets of 58% and 117%, respectively, of
base salary. The performance shares are earned based on performance over the
three years ending December 31, 2011. Additionally, 7,131 shares of the 2007
annual grant vested in 2009 and were paid out at 100% of target. On Mr.
Johnson’s recommendation, the Committee also issued to Mr. Mulhern an ad hoc
retention grant of 2,500 restricted stock units to recognize his leadership in
the critical position of Chief Financial Officer, his outstanding performance
against objectives and the manner in which he achieved those objectives. The
decrease in year-over-year total compensation to Mr. Mulhern for 2009, as
compared to 2008, as noted in the “Summary Compensation Table” on page 45 of
this Proxy Statement, was largely due to vesting of the total accumulated SERP
benefit that occurred in 2008.
Compensation of Other Named Executive
Officers
For 2009, Mr. Johnson recommended and the Committee approved base
salaries for Messrs. Lyash and Yates of $453,000 and $448,000, respectively. The
base salaries for Messrs. Lyash and Yates represented an increase of
approximately 1.80% and 1.82%, respectively, above their 2008 salaries. The new
base salaries are set at 9% below the 50th percentile of the
market. The modest year-over-year increase to Mr. Lyash’s and Mr. Yates’
salaries reflects the Committee’s and management’s recognition of the
challenging economic and regulatory environment. It is the Committee’s intention
to increase Messrs. Lyash’s and Yates’ salaries over time to a level that is at
the 50th
percentile of the Benchmarking Peer Group.
For 2009, Mr. Johnson recommended and the Committee approved Ms. Sims’
base salary to remain at $370,000. The 2009 base salary is set at 11% above the
50th percentile of
the Benchmarking Peer Group due to Ms. Sims’ extensive knowledge of fuel and
power operations.
Mr. Lyash received standard assistance with relocation expenses in
connection with the Company’s requirement that he relocate from Florida to North
Carolina to assume his current position. Mr. Lyash also received assistance with
the sale of his Florida home. For more information, see note 16 to the “Summary
Compensation Table” on page 45.
42
Progress Energy
Proxy
Statement |
On Mr. Johnson’s recommendation, the Committee awarded Messrs. Lyash and
Yates and Ms. Sims 2009 MICP awards as described in the table
below.
Named Executive |
2009 MICP |
Percent of |
|
Officer |
Award |
Target |
Explanation of Award |
Jeffrey J.
Lyash
|
$235,000
|
95%
|
Mr. Lyash played a
significant role in mitigating a substantial reduction in PEF’s retail
revenue through a combination of O&M reductions, wholesale contracts
and rate mitigation resulting in PEF’s attaining its earnings goals;
completion of the Bartow Plant repowering that is reflected in rates; and
implementation of project oversight process.
|
Lloyd M.
Yates
|
$235,000
|
96%
|
Mr. Yates played a
significant role in the Company’s achievement of its EPS goal and PEC’s
achievement of its capital spending budget goal; led development of fleet
modernization strategy to replace coal-fired plants with natural gas-fired
plants; execution of wholesale expansion and renewal contracts on
favorable terms; and development of effective relationships in the
regulatory and legislative arenas resulting in passage of significant
legislation in North Carolina.
|
Paula J.
Sims
|
$160,000
|
96%
|
Ms. Sims played a
significant role in the Power Operation Group’s achievement of its O&M
and capital spending goals; led the Continuous Business Excellence effort
to obtain sustainable 3-5% productivity gains; implementation of a
strategy to reduce emissions by replacing coal-fired plants with natural
gas-fired plants; and increased the focus on safety by reducing our OSHA
injury rate.
|
With respect to long-term compensation, in 2009 each of the other named
executive officers received annual grants of restricted stock units and
performance shares in accordance with their pre-established targets. The table
below describes those grants, the transitional performance share grants that the
Committee issued in 2007, and the ad hoc restricted stock unit
grants.
|
Restricted |
Transitional |
|
|
|
Stock Units Vesting in |
Performance |
Performance |
Ad Hoc Restricted |
Named Executive |
1/3 Increments in 2010, |
Shares |
Shares |
Stock Units |
Officer |
2011 and 2012 |
Vesting 2009 |
Vesting 2012 |
Vesting 2012 |
Jeffrey J.
Lyash |
6,477 |
9,535 |
13,065 |
2,000 |
Lloyd M.
Yates |
6,404 |
9,535 |
12,918 |
2,000 |
Paula J.
Sims |
4,642 |
7,131 |
9,285 |
2,000 |
The increase in total compensation to Mr. Lyash, as compared to 2008, as
noted in the “Summary Compensation Table” on page 45 of this Proxy Statement,
was largely due to the increase in his equity grants value and the receipt of
relocation expenses and assistance with the sale of his Florida
home.
The decrease in year-over-year total compensation to Mr. Yates, as
compared to 2008, as noted in the “Summary Compensation Table” on page 45 of
this Proxy Statement, was largely due to vesting of the total accumulated SERP
benefit that occurred in 2008.
43
The significant increase in year-over-year total compensation to Ms.
Sims, as compared to 2008, as noted in the “Summary Compensation Table” on page
45 of this Proxy Statement, was largely due to her vesting in the SERP in
2009.
IV. COMPENSATION COMMITTEE
REPORT
The Committee has reviewed and discussed this CD&A with management as
required by Item 402(b) of Regulation S-K. Based on such review and discussions,
the Committee recommended to the Company’s Board of Directors that the CD&A
be included in this Proxy Statement.
Organization and Compensation Committee |
|
E.
Marie McKee, Chair |
John
D. Baker II |
Harris
E. DeLoach, Jr. |
James
B. Hyler, Jr. |
Robert
W. Jones |
John
H. Mullin, III |
Unless specifically stated otherwise in any of the Company’s filings
under the Securities Act of 1933 or the Securities Exchange Act of 1934, the
foregoing Compensation Committee Report shall not be deemed soliciting material,
shall not be incorporated by reference into any such filings and shall not
otherwise be deemed filed under such Acts.
44
Progress Energy
Proxy
Statement |
SUMMARY COMPENSATION TABLE FOR 2009
The following Summary Compensation Table discloses the compensation
during 2009 of our Chief Executive Officer, Chief Financial Officer, and the
other three most highly paid executive officers who were serving at the end of
2009. Additionally, column (h) is dependent upon actuarial assumptions for
determining the amounts included. A change in these actuarial assumptions would
impact the values shown in this column. Where appropriate, we have indicated the
major assumptions in the footnotes to column (h).
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
Pension Value |
|
|
|
|
|
|
|
|
|
and |
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
|
|
Non-Equity |
Deferred |
|
|
Name and |
|
|
|
Stock |
Option |
Incentive Plan |
Compensation |
All Other |
|
Principal |
|
Salary1 |
Bonus |
Awards2 |
Awards3 |
Compensation4 |
Earnings5 |
Compensation6 |
Total2 |
Position |
Year |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
(a) |
(b) |
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
(i) |
(j) |
William D. Johnson, |
2009 |
$979,231 |
N/A |
$3,090,605 |
8 |
$0 |
$950,000 |
$1,144,448 |
9 |
$289,726 |
10 |
$6,454,010 |
Chairman, President and |
2008 |
950,000 |
|
2,911,701 |
|
0 |
929,000 |
1,091,256 |
|
304,571 |
|
6,186,528 |
Chief Executive Officer7 |
2007 |
807,539 |
|
5,231,023 |
|
0 |
863,500 |
946,938 |
|
299,445 |
|
8,148,445 |
Mark
F. Mulhern, |
2009 |
$414,231 |
N/A |
$655,990 |
11 |
$0 |
$225,000 |
$369,822 |
12 |
$102,137 |
13 |
$1,767,180 |
Senior Vice President and |
2008 |
355,385 |
|
433,473 |
|
0 |
200,000 |
820,419 |
|
141,354 |
|
1,950,631 |
Chief Financial Officer |
2007 |
308,792 |
|
1,620,321 |
|
0 |
190,000 |
34,205 |
|
116,014 |
|
2,269,332 |
Jeffrey J. Lyash, Executive |
2009 |
$450,846 |
N/A |
$728,120 |
14 |
$0 |
$235,000 |
$244,369 |
15 |
$292,061 |
16 |
$1,950,396 |
Vice
President – Corporate |
2008 |
432,885 |
|
612,952 |
|
0 |
225,000 |
323,904 |
|
140,812 |
|
1,735,553 |
Development (formerly |
2007 |
386,154 |
|
2,146,232 |
|
0 |
265,000 |
272,656 |
|
125,548 |
|
3,195,590 |
President and Chief |
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer, PEF) |
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd M. Yates, |
2009 |
$445,846 |
N/A |
$720,683 |
17 |
$0 |
$235,000 |
$308,815 |
18 |
$119,432 |
19 |
$1,829,776 |
President and Chief |
2008 |
429,231 |
|
612,952 |
|
0 |
210,000 |
777,983 |
|
155,042 |
|
2,185,208 |
Executive Officer, PEC |
2007 |
374,039 |
|
2,146,232 |
|
0 |
265,000 |
26,730 |
|
127,981 |
|
2,939,982 |
Paula J. Sims, |
2009 |
$370,000 |
N/A |
$538,333 |
20 |
$0 |
$160,000 |
$707,802 |
21 |
$97,505 |
22 |
$1,873,640 |
Senior Vice President – |
2008 |
364,615 |
|
459,724 |
|
0 |
140,000 |
25,728 |
|
92,743 |
|
1,082,810 |
Power Operations |
2007 |
324,177 |
|
1,620,321 |
|
0 |
170,000 |
21,930 |
|
108,233 |
|
2,244,661 |
1 Consists
of base salary earnings prior to (i) employee contributions to the Progress
Energy 401(k) Savings & Stock Ownership Plan and (ii) voluntary deferrals,
if any, under the Management Deferred Compensation Plan. See “Deferred
Compensation” discussion in Part II of the CD&A. Salary adjustments, if
deemed appropriate, generally occur in March of each year.
2 Includes
the fair value of stock awards as of the grant date computed in accordance with
FASB ASC Topic 718. Assumptions made in the valuation of material stock awards
are discussed in Note 9.B. to our consolidated financial statements for the year
ended December 31, 2009. The values reflected for 2008 and 2007 in columns (e)
and (j) are different than previously disclosed because these values represent
the fair value of stock awards as of the grant date rather than the expense
related to equity awards for financial statement reporting purposes in
accordance with SFAS No. 123(R).
3 We ceased
granting stock options in 2004. No additional expense remains with respect to
our stock option program.
4 Includes
the awards given under the Management Incentive Compensation Plan (MICP) for
2007, 2008 and 2009 performance.
5 Includes
the change in present value of the accrued benefit under Progress Energy’s
Pension Plan, SERP, and/ or Restoration Plan where applicable. In addition, it
includes the above market earnings on deferred compensation under the Deferred
Compensation Plan for Key Management Employees. The current incremental present
values were determined using actuarial present value factors as provided by our
actuarial consultants, Buck Consultants, based on FAS mortality assumptions
post-age 65 and FAS discount rates of 6.25%, 6.30%, and 6.10% for calculating
the accrued benefit under the SERP for 2007, 2008, and 2009, respectively. FAS
discount rates of 5.95%, 6.25%, and 5.45% were used for calculating the accrued
benefits under the Restoration Retirement Plan for 2007, 2008, and 2009,
respectively. FAS discount rates of 6.15%, 6.30%, and 5.95% were used for
calculating the accrued benefits under the Pension Plan for 2007, 2008, and
2009, respectively. The 1996-1999 Deferred Compensation Plan for Key Management
Employees provided a fixed rate of return of 10.0% on deferred
amounts,
45
which was 2.7% above the
market interest rate of 7.3% at the time the plan was frozen in 1996. The
Deferred Compensation Plan for Key Management Employees was discontinued in 2000
and replaced with the Management Deferred Compensation Plan, which does not have
a guaranteed rate of return. Named executive officers who were participants in
the 1996-1999 Deferred Compensation Plan for Key Management Employees continue
to receive plan benefits with respect to amounts deferred prior to its
discontinuance in 2000. The above market earnings under the Deferred
Compensation Plan for Key Management Employees are included in this column for
Mr. Johnson.
6 Includes
the following items: Company match contributions under the Progress Energy
401(k) Savings & Stock Ownership Plan; dividends paid under provisions of
the Restricted Stock Award/Unit Plans and Management Deferred Compensation
Plans; perquisites; and tax gross-ups related primarily to imputed
income.
7 Mr.
Johnson did not receive additional compensation for his service on the Board of
Directors.
8 Includes
(i) the grant date fair value of the restricted stock units granted during 2009
under the 2007 Equity Incentive Plan, $1,213,150; and (ii) the grant date fair
value of the performance shares granted during 2009 under the 2009 PSSP,
$1,877,455. The maximum potential for the performance shares granted to Mr.
Johnson in 2009 is $3,754,910 (200%), based on the March 17, 2009 closing stock
price of $33.80.
9 Includes
changes in present value of the accrued benefit during 2009 for the following
plans: Progress Energy Pension Plan: $65,737; the SERP: $1,068,674; and above
market earnings on compensation deferred under the Deferred Compensation Plan
for Key Management Employees of $10,037. Mr. Johnson’s change in his
year-over-year SERP benefit was relatively flat.
10 Consists
of (i) $14,700 in Company contributions under the Progress Energy 401(k) Savings
& Stock Ownership Plan; (ii) $43,582 in deferred compensation credits
pursuant to the terms of the Management Deferred Compensation Plan; (iii)
$195,485 in Restricted Stock/Unit Dividends; (iv) $11,970 in tax gross-ups
related to imputed income; and (v) $23,989 in perquisites consisting of the
following: financial/estate/tax planning, $5,000; Internet and telecom access,
$3,724; health club dues, $2,407; home security, $4,255; and spousal travel,
$6,370. Other perquisites include luncheon club membership, executive physical
and AD&D insurance.
11 Includes
(i) the grant date fair value of the restricted stock units granted during 2009
under the 2007 Equity Incentive Plan, $273,915; and (ii) the grant date fair
value of the performance shares granted during 2009 under the 2009 PSSP,
$382,075. The maximum potential for the performance shares granted to Mr.
Mulhern in 2009 is $764,150 (200%), based on the March 17, 2009 closing stock
price of $33.80.
12 Includes
changes in present value of the accrued benefit during 2009 for the following
plans: Progress Energy Pension Plan: $46,636; and the SERP: $323,186. Mr.
Mulhern’s change in SERP decreased in 2009 primarily due to vesting of the total
accumulated benefit that occurred in 2008.
13 Consists
of (i) $14,700 in Company contributions under the Progress Energy 401(k) Savings
& Stock Ownership Plan; (ii) $9,682 in deferred compensation credits
pursuant to the terms of the Management Deferred Compensation Plan; (iii) $5,276
in tax gross-ups related to imputed income; and (iv) $72,479 in Restricted
Stock/Unit Dividends. The total value of the perquisites and personal benefits
received by Mr. Mulhern was less than $10,000. Thus, these amounts are excluded
from column (i).
14 Includes
(i) the grant date fair value of the restricted stock units granted during 2009
under the 2007 Equity Incentive Plan, $286,523; and (ii) the grant date fair
value of the performance shares granted during 2009 under the 2009 PSSP,
$441,597. The maximum potential for the performance shares granted to Mr. Lyash
in 2009 is $883,194 (200%), based on the March 17, 2009 closing stock price of
$33.80.
15 Includes
changes in present value of the accrued benefit during 2009 for the following
plans: Progress Energy Pension Plan: $48,250; and the SERP: $196,119. Mr.
Lyash’s change in SERP decreased in 2009 primarily due to a lower FAS discount
rate.
16 Consists
of (i) $14,700 in Company contributions under the Progress Energy 401(k) Savings
& Stock Ownership Plan; (ii) $12,256 in deferred compensation credits
pursuant to the terms of the Management Deferred Compensation Plan; (iii)
$70,378 in Restricted Stock/Unit Dividends; (iv) $1,445 in tax gross-ups related
to imputed income; and (v) $17,708 in perquisites including spousal use of
Company aircraft, $14,669. Other perquisites include luncheon club membership,
spousal
46
Progress Energy
Proxy
Statement |
travel, home security, and Internet
and telecom access. During 2009, the Company required Mr. Lyash to relocate from
Florida to North Carolina in connection with his becoming the Company’s
Executive Vice President - Corporate Development. Mr. Lyash received standard
Company relocation benefits totaling $53,005 that included travel expenses, the
equivalent of one month’s salary, temporary housing, shipment of household
goods, and closing costs in connection with his purchase of a home in North
Carolina. Mr. Lyash also received assistance with the sale of his home in
Florida where the Company previously required Mr. Lyash to relocate in
connection with his former role as President and Chief Executive Officer of
Progress Florida, Inc. The Company purchased his Florida home at a price equal
to the average of two independent appraisals after he was unable to sell the
home within a 60-day marketing period. The Company agreed that if the purchase
price of Mr. Lyash’s Florida home, as determined by the average of the two
independent appraisals, resulted in a loss on the sale of his prior home, the
Company would pay Mr. Lyash the difference between the price he paid for the
Florida home (excluding the cost of improvements made subsequent to such
purchase) and the purchase price paid by the Company based on the independent
appraisals. Because of the precipitous decline in the Florida housing market
since Mr. Lyash’s purchase of his Florida home, the agreed purchase price was
significantly below Mr. Lyash’s purchase price. SEC rules require that we
include as fiscal year 2009 compensation this difference, which was $80,000,
along with other transaction costs. In light of the fact that the relocation was
required by the Company and because this make-whole amount paid to Mr. Lyash
will be treated as income to him, we agreed to provide Mr. Lyash with a tax
gross-up on amounts from this transaction that are considered taxable income.
The tax gross-up was $42,569. In approving Mr. Lyash’s relocation expenses,
including the reimbursement of the loss incurred on his Florida home, the
Committee required Mr. Lyash to agree to reimburse the Company for the
relocation assistance in the event he voluntarily leaves the Company within
three years of relocating to North Carolina.
17 Includes
(i) the grant date fair value of the restricted stock units granted during 2009
under the 2007 Equity Incentive Plan, $284,055; and (ii) the grant date fair
value of the performance shares granted during 2009 under the 2009 PSSP,
$436,628. The maximum potential for the performance shares granted to Mr. Yates
in 2009 is $873,257 (200%), based on the March 17, 2009 closing stock price of
$33.80.
18 Includes
changes in present value of the accrued benefit during 2009 for the following
plans: Progress Energy Pension Plan: $33,106; and the SERP: $275,709. Mr. Yates’
change in SERP decreased in 2009 primarily due to vesting of the total
accumulated benefit that occurred in 2008.
19 Consists
of (i) $14,700 in Company contributions under the Progress Energy 401(k) Savings
& Stock Ownership Plan; (ii) $11,956 in deferred compensation credits
pursuant to the terms of the Management Deferred Compensation Plan; (iii)
$70,986 in Restricted Stock/Unit Dividends; (iv) $4,026 in tax gross-ups related
to imputed income; and (v) $17,764 in perquisites including financial/estate/tax
planning, $10,000, and spousal use of Company aircraft, $4,920. Other
perquisites include luncheon club membership, health club dues, home security,
Internet and telecom access, executive physical and AD&D
insurance.
20 Includes
(i) the grant date fair value of the restricted stock units granted during 2009
under the 2007 Equity Incentive Plan, $224,500; and (ii) the grant date fair
value of the performance shares granted during 2009 under the 2009 PSSP,
$313,833. The maximum potential for the performance shares granted to Ms. Sims
in 2009 is $627,666 (200%), based on the March 17, 2009 closing stock price of
$33.80.
21 Includes
changes in present value of the accrued benefit during 2009 for the following
plans: Progress Energy Pension Plan: $30,117; and the SERP: $703,105. Ms. Sims
became vested in the SERP on June 1, 2009 which attributed to her increase for
the year. Ms. Sims’ accumulated Restoration Plan benefit of $25,420 was
forfeited upon her vesting in the SERP.
22 Consists
of (i) $14,700 in Company contributions under the Progress Energy 401(k) Savings
& Stock Ownership Plan; (ii) $7,500 in deferred compensation credits
pursuant to the terms of the Management Deferred Compensation Plan; (iii)
$47,759 in Restricted Stock/Unit Dividends; (iv) $15,188 in tax gross-ups
related to imputed income; and (v) $12,358 in stock purchase discounts for
annual incentive deferrals pursuant to the MICP. The total value of the
perquisites and personal benefits received by Ms. Sims was less than $10,000.
Thus, these amounts are excluded from column (i).
47
GRANTS OF PLAN-BASED
AWARDS
|
|
Estimated |
Estimated |
|
|
|
|
Future Payouts Under |
Future Payouts Under |
|
|
|
|
Non-Equity Incentive |
Equity Incentive |
|
|
|
|
Plan Awards1 |
Plan Awards2 |
|
|
|
|
|
|
|
|
|
|
All |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
|
Awards: |
Grant Date |
|
|
|
|
|
|
|
|
Number |
Fair Value |
|
|
|
|
|
|
|
|
of Shares |
of Stock |
|
|
|
|
|
|
|
|
of Stock |
and Option |
|
Grant |
Threshold |
Target |
Maximum |
Threshold |
Target |
Maximum |
or Units3 |
Awards4 |
Name |
Date |
($) |
($) |
($) |
(#) |
(#) |
(#) |
(#) |
($) |
(a) |
(b) |
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
(i) |
(j) |
William D. Johnson, Chairman, President and Chief Executive Officer |
MICP |
|
|
|
|
|
|
|
|
3/5/10 |
$416,173 |
$832,346 |
$1,664,692 |
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
|
|
|
35,892 |
$1,213,150 |
PSSP |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
27,773 |
55,546 |
111,092 |
|
$1,877,455 |
Mark F. Mulhern, Senior Vice President and Chief Financial Officer |
MICP |
|
|
|
|
|
|
|
|
3/5/10 |
$113,914 |
$227,827 |
$455,654 |
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
|
|
|
8,104 |
$273,915 |
PSSP |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
5,652 |
11,304 |
22,608 |
|
$382,075 |
Jeffrey J. Lyash, Executive Vice President - Corporate Development (formerly President and Chief
Executive Officer,
PEF) |
MICP |
|
|
|
|
|
|
|
|
3/5/10 |
$123,983 |
$247,965 |
$495,930 |
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
|
|
|
8,477 |
$286,523 |
PSSP |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
6,533 |
13,065 |
26,130 |
|
$441,597 |
Lloyd M. Yates, President and Chief
Executive Officer,
PEC |
MICP |
|
|
|
|
|
|
|
|
3/5/10 |
$122,608 |
$245,215 |
$490,430 |
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
|
|
|
8,404 |
$284,055 |
PSSP |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
6,459 |
12,918 |
25,836 |
|
$436,628 |
Paula J. Sims, Senior Vice President –
Power Operations |
MICP |
|
|
|
|
|
|
|
|
3/5/10 |
$83,250 |
$166,500 |
$333,000 |
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
|
|
|
6,642 |
$224,500 |
PSSP |
|
|
|
|
|
|
|
|
3/17/09 |
|
|
|
4,643 |
9,285 |
18,570 |
|
$313,833 |
1 The
Management Incentive Compensation Plan is considered a non-equity incentive
compensation plan. Award amounts are shown at threshold, target, and maximum
levels. The target award is calculated using the 2009 eligible earnings times
the executive’s target percentage. See target percentage in table on page 30 of
the CD&A. Threshold is calculated at 50% of target and maximum is calculated
at 200% of target. Actual award amounts paid are reflected in the Summary of
Compensation Table under the “Non-Equity Incentive Plan Compensation”
column.
48
Progress Energy
Proxy
Statement |
2 Reflects
the potential payouts in shares of the 2009 PSSP grants. The grant size was
calculated by multiplying the executive’s salary as of January 1, 2009, times
his 2009 PSSP target and dividing by the December 31, 2008, closing stock price
of $39.85. The Threshold column reflects the minimum payment level under our
PSSP, which is 50% of the target amount shown in the Target column. The amount
shown in the maximum column is 200% of the target amount.
3 Reflects
the number of restricted stock units granted during 2009 under the 2007 Equity
Incentive Plan. The number of shares granted was determined by multiplying the
executive’s salary as of January 1, 2009, times his 2009 restricted stock target
and dividing by the December 31, 2008, closing stock price of
$39.85.
4 Reflects
the grant date fair value of the award based on the following assumptions:
Market value of restricted stock granted on March 17, 2009, based on closing
price of $33.80 per share, times the shares granted in column (i). Market value
of PSSP granted on March 17, 2009, based on closing stock price on March 17,
2009, of $33.80 times target number of shares in column (g). The 2009 PSSP grant
payout is expected to be 100% of target.
49
DISCUSSION OF SUMMARY COMPENSATION TABLE AND
GRANTS OF
PLAN-BASED AWARDS TABLE
EMPLOYMENT AGREEMENTS
Messrs. Johnson, Mulhern, Lyash and Yates and Ms. Sims entered into
employment agreements with the Company or one of its subsidiaries, referred to
collectively in this section as the “Company.” Each of these agreements has an
effective date of May 8, 2007. The employment agreements replaced the previous
employment agreements in effect for each of these officers.
The employment agreements provide for base salary, annual incentives,
perquisites and participation in the various executive compensation plans
offered to our senior executives. The agreements expired on December 31, 2009.
Thereafter, each agreement will be automatically extended by an additional year
on January 1 of each year. We may elect not to extend an executive officer’s
agreement and must notify the officer of such an election at least 60 days prior
to the automatic extension date. Each employment agreement contains restrictive
covenants imposing non-competition obligations, restricting solicitation of
employees and protecting our confidential information and trade secrets for
specified periods if the applicable officer is terminated without cause or
otherwise becomes eligible for the benefits under the agreement.
Except for the application of previously granted years of service credit
to our post-employment health and welfare plans as discussed below, the
employment agreements do not affect the compensation, benefits or incentive
targets payable to the applicable officers.
With respect to Mr. Johnson, the Employment Agreement specifies that the
years of service credit we previously granted to him for purposes of determining
eligibility and benefits in the SERP will also be applicable for purposes of
determining eligibility and benefits in our post-employment health and welfare
benefit plans. Mr. Johnson was awarded seven years of deemed service toward the
benefits and vesting requirements of the SERP. However, as of 2008, Mr. Johnson
reached the maximum service accrual and therefore benefit augmentation for
deemed service is $0. Three of those years also were deemed to have been in
service on the Senior Management Committee for purposes of SERP
eligibility.
Each Employment Agreement provides that if the applicable officer is
terminated without cause or is constructively terminated (as defined in
Paragraph 8(a)(i) of the agreement), then the officer will receive (i) severance
equal to 2.99 times the officer’s then-current base salary and (ii)
reimbursement for the costs of continued coverage under certain of our health
and welfare benefit plans for a period of up to 18 months.
50
Progress Energy
Proxy
Statement |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
Option Awards1 |
Stock Awards |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
Equity |
Plan |
|
|
|
|
|
|
|
|
Incentive |
Awards: |
|
|
|
|
|
|
|
|
Plan |
Market or |
|
|
|
Equity |
|
|
|
|
Awards: |
Payout |
|
|
|
Incentive |
|
|
|
|
Number of |
Value of |
|
|
|
Plan |
|
|
|
|
Unearned |
Unearned |
|
Number |
|
Awards: |
|
|
|
Market |
Shares, |
Shares, |
|
of |
Number of |
Number of |
|
|
Number of |
Value of |
Units or |
Units or |
|
Securities |
Securities |
Securities |
|
|
Shares or |
Shares or |
Other |
Other |
|
Underlying |
Underlying |
Underlying |
|
|
Units of |
Units of |
Rights |
Rights |
|
Unexercised |
Unexercised |
Unexercised |
Option |
|
Stock That |
Stock That |
That |
That |
|
Options |
Options |
Unearned |
Exercise |
Option |
Have Not |
Have Not |
Have Not |
Have Not |
|
(#) |
(#) |
Options |
Price |
Expiration |
Vested |
Vested |
Vested |
Vested |
|
Exercisable |
Unexercisable |
(#) |
($) |
Date |
(#) |
($) |
(#) |
($) |
Name (a) |
(b) |
(c) |
(d) |
(e) |
(f) |
(g)2 |
(h)3 |
(i)4 |
(j)4 |
William D. Johnson, |
0 |
— |
— |
$43.49 |
9/30/2011 |
82,1355 |
$3,368,356 |
152,6736 |
$6,261,120 |
Chairman, President |
0 |
|
|
$41.97 |
9/30/2012 |
|
|
|
|
and
Chief |
0 |
|
|
$44.75 |
9/30/2013 |
|
|
|
|
Executive Officer |
|
|
|
|
|
|
|
|
|
Mark
F. Mulhern, |
0 |
— |
— |
$43.49 |
9/30/2011 |
26,7767 |
$1,098,084 |
29,9668 |
$1,228,906 |
Senior Vice |
0 |
|
|
$41.97 |
9/30/2012 |
|
|
|
|
President and Chief |
7,000 |
|
|
$44.75 |
9/30/2013 |
|
|
|
|
Financial Officer |
|
|
|
|
|
|
|
|
|
Jeffrey J. Lyash, |
0 |
— |
— |
$43.49 |
9/30/2011 |
29,2329 |
$1,198,804 |
38,52810 |
$1,580,033 |
Executive |
0 |
|
|
$41.97 |
9/30/2012 |
|
|
|
|
Vice
President – |
0 |
|
|
$44.75 |
9/30/2013 |
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
Development |
|
|
|
|
|
|
|
|
|
(formerly President |
|
|
|
|
|
|
|
|
|
and
Chief Executive |
|
|
|
|
|
|
|
|
|
Officer, PEF) |
|
|
|
|
|
|
|
|
|
Lloyd M. Yates, |
0 |
— |
— |
$43.49 |
9/30/2011 |
29,15911 |
$1,195,811 |
38,37312 |
$1,573,677 |
President and Chief |
0 |
|
|
$41.97 |
9/30/2012 |
|
|
|
|
Executive Officer, |
0 |
|
|
$44.75 |
9/30/2013 |
|
|
|
|
PEC |
|
|
|
|
|
|
|
|
|
Paula J. Sims, Senior |
0 |
— |
— |
$43.49 |
9/30/2011 |
20,61713 |
$845,503 |
28,30514 |
$1,160,778 |
Vice
President – |
0 |
|
|
$41.97 |
9/30/2012 |
|
|
|
|
Power Operations |
0 |
|
|
$44.75 |
9/30/2013 |
|
|
|
|
1 All
outstanding stock options were vested as of December 31, 2006. The Company
ceased granting stock options in 2004.
2 Consists
of outstanding restricted stock grants and restricted stock units.
3 Market
value at December 31, 2009, was based on a December 31, 2009, closing price of
$41.01 per share.
4 The 2006
and 2007 2-year transitional grants vested on January 1, 2009; the 2007 grant
vests on January 1, 2010; the 2008 grant vests on January 1, 2011; and the 2009
grant vests on January 1, 2012. Performance share value for the 2007 annual
grant is expected to be at 125% of target while the 2008 annual grant and 2009
annual grant were expected to be 100% of target. The value in Column (j) is
derived by multiplying the shares (rounded to the nearest whole share) times the
December 31, 2009 closing stock price ($41.01). The difference between the
calculated value and the noted value is attributable to fractional shares. See
further discussion under “Performance Shares” in Part II of the
CD&A.
51
5
Restricted stock grants vest based on the following schedule: 5,533 shares on
March 14, 2010; 5,067 shares on March 15, 2010; and 5,534 shares on March 14,
2011. Restricted stock unit grants vest based on the following schedule: 9,297
units on March 17, 2010; 9,297 units on March 17, 2011; 17,298 units on March
17, 2012; 7,650 units on March 18, 2010; 4,936 units on March 20, 2010; 7,651
units on March 18, 2011; 4,936 units on March 20, 2011; and 4,936 units on March
20, 2012.
6 Includes
performance shares granted on March 20, 2007, March 18, 2008, March 17, 2009,
and accumulated dividends as of December 31, 2009. Outstanding performance share
balances consist of the following: (i) 43,280 – 2007 annual grant; (ii) 51,018 –
2008 annual grant; and (iii) 58,375 – 2009 annual grant.
7
Restricted stock grants vest based on the following schedule: 1,167 shares on
March 14, 2010; 3,500 shares on March 21, 2010; and 1,167 shares on March 14,
2011. Restricted stock unit grants vest based on the following schedule: 1,868
units on March 17, 2010; 1,868 on March 17, 2011; 4,368 on March 17, 2012; 1,136
units on March 18, 2010; 8,189 units on March 20, 2010; 1,136 units on March 18,
2011; 1,189 units on March 20, 2011; and 1,188 units on March 20,
2012.
8 Includes
performance shares granted on March 20, 2007, March 18, 2008, March 17, 2009,
and accumulated dividends as of December 31, 2009. Outstanding performance share
balances consist of the following: (i) 10,479 – 2007 annual grant; (ii) 7,607 –
2008 annual grant; and (iii) 11,880 – 2009 annual grant.
9
Restricted stock grants vest based on the following schedule: 1,367 shares on
March 14, 2010; 1,100 shares on March 15, 2010; and 1,367 on March 14, 2011.
Restricted stock unit grants vest based on the following schedule: 2,159 units
on March 17, 2010; 1,597 on March 18, 2010; 10,576 units on March 20, 2010;
2,159 units on March 17, 2011; 1,597 units on March 18, 2011; 1,576 units on
March 20, 2011; 4,159 units on March 17, 2012; and 1,575 units on March 20,
2012.
10 Includes
performance shares granted on March 20, 2007, March 18, 2008, March 17, 2009,
and accumulated dividends as of December 31, 2009. Outstanding performance share
balances consist of the following: (i) 14,010 – 2007 annual grant; (ii) 10,787 –
2008 annual grant; and (iii) 13,731 – 2009 annual grant.
11
Restricted stock grants vest based on the following schedule: 1,367 shares on
March 14, 2010; 1,100 shares on March 15, 2010; and 1,367 shares on March 14,
2011. Restricted stock unit grants vest based on the following schedule: 2,134
on March 17, 2010; 1,597 on March 18, 2010; 10,576 units on March 20, 2010;
2,135 on March 17, 2011; 1,597 units on March 18, 2011; 1,576 units on March 20,
2011; 4,135 on March 17, 2012; and 1,575 units on March 20, 2012.
12 Includes
performance shares granted on March 20, 2007, March 18, 2008, March 17, 2009,
and accumulated dividends as of December 31, 2009. Outstanding performance share
balances consist of the following: (i) 14,010 – 2007 annual grant; (ii) 10,787 –
2008 annual grant; and (iii) 13,576 – 2009 annual grant.
13
Restricted stock grants vest based on the following schedule: 1,000 shares on
April 1, 2011. Restricted stock units grants vest based on the following
schedule: 1,547 units on March 17, 2010; 1,204 units on March 18, 2010; 8,189
units on March 20, 2010; 1,547 units on March 17, 2011; 1,205 units on March 18,
2011; 1,189 units on March 20, 2011; 3,548 units on March 17, 2011; and 1,188
units on March 20, 2012.
14 Includes
performance shares granted on March 20, 2007, March 18, 2008, March 17, 2009,
and accumulated dividends as of December 31, 2009. Outstanding performance share
balances consist of the following: (i) 10,479 – 2007 annual grant; (ii) 8,068 –
2008 annual grant; and (iii) 9,758 – 2009 annual grant.
52
Progress Energy
Proxy
Statement |
OPTION EXERCISES AND STOCK VESTED
|
Option Awards |
Stock Awards |
|
Number of |
|
Number of |
|
|
Shares |
Value |
Shares |
|
|
Acquired |
Realized |
Acquired |
Value Realized |
|
on Exercise |
on Exercise |
on Vesting1 |
on Vesting1 |
Name |
(#) |
($) |
(#) |
($) |
(a) |
(b) |
(c) |
(d) |
(e) |
William D. Johnson, |
— |
— |
55,5972 |
$2,049,258 |
Chairman, President and Chief Executive Officer |
|
|
|
|
Mark
F. Mulhern, |
— |
— |
18,0773 |
$656,906 |
Senior Vice President and Chief Financial Officer |
|
|
|
|
Jeffrey J. Lyash, |
— |
— |
15,7274 |
$589,337 |
Executive Vice President – Corporate Development |
|
|
|
|
(formerly President and Chief Executive Officer, PEF) |
|
|
|
|
Lloyd M. Yates, |
— |
— |
16,9275 |
$630,131 |
President and Chief Executive Officer, PEC |
|
|
|
|
Paula J. Sims, |
— |
— |
9,1806 |
$358,539 |
Senior Vice President – Power Operations |
|
|
|
|
1 Reflects
the number of restricted stock shares, restricted stock units, and performance
shares that vested in 2009. Restricted stock units vested for named executive
officers on March 18 at $33.80 per share, and performance shares vested on
January 1, 2009 for the 2006 and 2007 2-year transitional grants at $39.85 per
share. Restricted stock shares vested on the following days: (i) March 7 at
$33.02 per share; (ii) March 14, 15, and 16 at $31.85 per share; and (iii) April
28 at $33.79 per share. The value realized is the sum of the vested shares for
each vesting date times the vesting price.
2 Includes
15,000 restricted stock awards consisting of the following: 5,533 on March 14;
5,067 on March 15; and 4,400 on March 16. Performance shares totaled 32,947.
Restricted stock units totaled 7,650.
3 Includes
8,966 restricted stock awards consisting of the following: 1,166 on March 14;
and 7,800 on April 28. Performance shares totaled 7,976. Restricted stock units
totaled 1,135.
4 Includes
3,466 restricted stock awards consisting of the following: 1,366 on March 14;
1,100 on March 15; and 1,000 on March 16. Performance shares totaled 10,665.
Restricted stock units totaled 1,596.
5 Includes
4,666 restricted stock awards consisting of the following: 2,200 on March 7;
1,366 on March 14; and 1,100 on March 15. Performance shares totaled 10,665.
Restricted stock units totaled 1,596.
6
Performance shares totaled 7,976. Restricted stock units totaled 1,204. Ms. Sims
did not have any restricted stock awards that vested during 2009.
53
PENSION BENEFITS TABLE
|
|
Number of |
Present |
|
|
|
Years |
Value of |
Payments |
|
|
Credited |
Accumulated |
During Last |
|
|
Service |
Benefit1 |
Fiscal Year |
Name |
Plan Name |
(#) |
($) |
($) |
(a) |
(b) |
(c) |
(d) |
(e) |
William D. Johnson, |
Progress Energy
Pension Plan |
17.3 |
|
$448,578 |
|
$0 |
Chairman, President and Chief |
Supplemental
Senior |
|
|
|
|
|
Executive Officer |
Executive
Retirement Plan |
24.3 |
2 |
$7,282,483 |
3 |
$0 |
Mark
F. Mulhern, |
Progress Energy
Pension Plan |
13.8 |
|
$269,399 |
|
$0 |
Senior Vice President and Chief |
Supplemental
Senior |
|
|
|
|
|
Financial Officer |
Executive
Retirement Plan |
13.8 |
|
$1,144,767 |
4 |
$0 |
Jeffrey J. Lyash, |
Progress Energy
Pension Plan |
16.6 |
|
$274,417 |
|
$0 |
Executive Vice President – Corporate |
Supplemental
Senior |
|
|
|
|
|
Development (formerly President and |
Executive Retirement
Plan |
|
|
|
|
|
Chief Executive Officer, PEF) |
|
16.6 |
|
$1,419,208 |
5 |
$0 |
Lloyd M. Yates, |
Progress Energy
Pension Plan |
11.1 |
|
$157,608 |
|
$0 |
President and Chief Executive |
Supplemental
Senior |
|
|
|
|
|
Officer, PEC |
Executive
Retirement Plan |
11.1 |
|
$1,065,706 |
6 |
$0 |
Paula J. Sims, |
Progress Energy
Pension Plan |
10.6 |
|
$131,941 |
|
$0 |
Senior Vice President – |
Restoration
Retirement Plan |
— |
|
($25,420) |
7 |
$0 |
Power Operations |
Supplemental
Senior |
|
|
|
|
|
|
Executive
Retirement Plan |
10.6 |
|
$703,105 |
8 |
$0 |
1 Actuarial
present value factors as provided by our actuarial consultants, Buck
Consultants, based on FAS mortality assumptions post-age 65 and FAS discount
rates as of December 31, 2009, for computation of accumulated benefit under the
Supplemental Senior Executive Retirement Plan and the Progress Energy Pension
Plan was 6.10%. Additional details on the formulas for computing benefits under
the Supplemental Senior Executive Retirement Plan and Progress Energy Pension
Plan can be found under the headings “Supplemental Senior Executive Retirement
Plan” and “Other Broad-Based Benefits,” respectively, in the
CD&A.
2 Includes
seven years of deemed service. However, as of 2008, Mr. Johnson reached the
maximum service accrual and therefore benefit augmentation for deemed service is
$0.
3 Based on
an estimated annual benefit payable at age 65 of $1,043,010.
4 Based on
an estimated annual benefit payable at age 65 of $233,894.
5 Based on
estimated annual benefit payable at age 65 of $326,421.
6 Based on
estimated annual benefit payable at age 65 of $231,022.
7 Ms. Sims’
Restoration Retirement Plan benefits were forfeited upon her vesting in the
Senior Supplemental Retirement Plan on June 1, 2009.
8 Based on
estimated annual benefit payable at age 65 of $161,716.
54
Progress Energy
Proxy
Statement |
NONQUALIFIED DEFERRED
COMPENSATION
The table below shows the nonqualified deferred compensation for each of
the named executive officers. Information regarding details of the deferred
compensation plans currently in effect can be found under the heading “Deferred
Compensation” in the CD&A on page 39 of this Proxy Statement. In addition,
the Deferred Compensation Plan for Key Management Employees is discussed in
footnote 5 to the “Summary Compensation Table.”
|
Executive |
Registrant |
Aggregate |
Aggregate |
Aggregate |
|
Contributions |
Contributions |
Earnings |
Withdrawals/ |
Balance |
|
in Last FY1 |
in Last FY2 |
in Last FY3 |
Distributions |
at Last FYE4 |
Name and Position |
($) |
($) |
($) |
($) |
($) |
(a) |
(b) |
(c) |
(d) |
(e) |
(f) |
William D. Johnson, |
|
|
|
|
|
|
|
|
Chairman, President |
|
|
|
|
|
|
|
|
and
Chief Executive Officer |
$0 |
$43,582 |
$76,353 |
5 |
$0 |
|
$736,071 |
6 |
Mark
F. Mulhern, |
|
|
|
|
|
|
|
|
Senior Vice President and Chief |
|
|
|
|
|
|
|
|
Financial Officer |
$20,712 |
$9,682 |
$30,580 |
|
($32,861) |
7 |
$325,876 |
8 |
Jeffrey J. Lyash, |
|
|
|
|
|
|
|
|
Executive Vice President – Corporate |
|
|
|
|
|
|
|
|
Development (formerly President and |
|
|
|
|
|
|
|
|
Chief Executive Officer, PEF) |
$0 |
$12,256 |
$31,303 |
|
$0 |
|
$135,173 |
9 |
Lloyd M. Yates, |
|
|
|
|
|
|
|
|
President and Chief Executive |
|
|
|
|
|
|
|
|
Officer, PEC |
$0 |
$11,956 |
$60,701 |
|
$0 |
|
$499,804 |
10 |
Paula J. Sims, Senior Vice President – |
|
|
|
|
|
|
|
|
Power Operations |
$107,000 |
$19,858 |
$44,241 |
|
($14,115) |
11 |
$444,049 |
12 |
1 Reflects
salary deferred under the Management Deferred Compensation Plan, which is
reported as “Salary” in the Summary Compensation Table. For 2009, named
executive officers deferred the following percentages of their base salary: (i)
Mulhern – 5%; and (ii) Sims – 10%. In addition, Ms. Sims deferred 50% of her
2009 Management Incentive Compensation Plan (MICP) award.
2 Reflects
registrant contributions under the Management Deferred Compensation Plan, which
is reported as “All Other Compensation” in the Summary Compensation
Table.
3 Includes
aggregate earnings in the last fiscal year under the following nonqualified
plans: Management Incentive Compensation Plan, Management Deferred Compensation
Plan, Performance Share Sub-Plan, and Deferred Compensation Plan for Key
Management Employees.
4 Includes
December 31, 2009 balances under the following deferred compensation plans:
Management Incentive Compensation Plan, Performance Share Sub-Plan, Management
Deferred Compensation Plan, and Deferred Compensation Plan for Key Management
Employees.
5 Includes
above market earnings of $10,037 under the Deferred Compensation Plan for Key
Management Employees, which is reported as “Change in Pension Value and
Nonqualified Deferred Compensation Earnings” in the Summary Compensation
Table.
6 Includes
balances under the following deferral plans: Management Deferred Compensation
Plan: $413,100; Management Incentive Compensation Plan: $69,090; and Deferred
Compensation Plan for Key Management Employees: $253,881.
7 Mr.
Mulhern received distributions from his Management Incentive Deferred
Compensation Plan: $23,077; Management Deferred Compensation Plan: $0; and
Performance Share Sub-Plan: $9,784.
55
8 Includes
balances under the following deferral plans: Management Deferred Compensation
Plan: $71,311; Management Incentive Deferred Compensation Plan: $155,570; and
Performance Share Sub-Plan: $98,995.
9
Includes balance
under the Management Deferred Compensation Plan: $135,173.
10
Includes balances under the
following deferral plans: Management Deferred Compensation Plan: $134,519;
Management Incentive Deferred Compensation Plan: $107,892; and Performance Share
Sub-Plan: $257,393.
11
Ms. Sims received a
distribution from her Management Incentive Deferred Compensation Plan:
$14,115.
12
Includes balances under the
following deferral plans: Management Deferred Compensation Plan: $296,625;
Management Incentive Compensation Plan: $86,401; and Performance Share Sub-Plan:
$61,023.
56
Progress Energy
Proxy
Statement |
CASH COMPENSATION AND VALUE OF VESTING EQUITY
TABLE
The following table shows the actual cash compensation and value of
vesting equity received in 2009 by the named executive officers. The Committee
believes that this table is important in order to distinguish between the actual
cash and vested value received by each named executive officer as opposed to the
compensation expense accruals and grant date fair value of equity awards as
shown in the Summary Compensation Table.
|
|
|
Deferred |
|
|
|
|
|
|
|
|
|
Annual |
Compensation |
|
|
|
|
|
|
|
|
|
Incentive |
under |
Restricted |
Performance |
Restricted |
Stock |
|
Tax |
|
|
Base |
(paid in |
MDCP and |
Stock / Units |
Shares |
Stock / Unit |
Options |
|
Gross- |
|
Name and |
Salary |
2009) |
MICP |
Vesting |
Vesting |
Dividends |
Vesting |
Perquisite |
ups |
|
Position |
(a)1 |
(b)2 |
(c)3 |
(d)4 |
(e)5 |
(f)6 |
(g)7 |
(h)8 |
(i)9 |
Total |
William D. |
|
|
|
|
|
|
|
|
|
|
Johnson, |
|
|
|
|
|
|
|
|
|
|
Chairman, |
|
|
|
|
|
|
|
|
|
|
Chief |
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
|
|
|
|
|
|
|
|
Officer and |
|
|
|
|
|
|
|
|
|
|
President |
$979,231 |
$929,000 |
$0 |
$736,320 |
$1,163,688 |
$195,485 |
$0 |
$23,989 |
$11,970 |
$4,039,683 |
Mark F. |
|
|
|
|
|
|
|
|
|
|
Mulhern, |
|
|
|
|
|
|
|
|
|
|
Senior Vice |
|
|
|
|
|
|
|
|
|
|
President |
|
|
|
|
|
|
|
|
|
|
and Chief |
|
|
|
|
|
|
|
|
|
|
Financial |
|
|
|
|
|
|
|
|
|
|
Officer |
$414,231 |
$200,000 |
$20,712 |
$339,062 |
$281,712 |
$72,479 |
$0 |
$2,093 |
$5,276 |
$1,314,853 |
Jeffrey J. |
|
|
|
|
|
|
|
|
|
|
Lyash, |
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
|
|
|
|
|
|
|
|
Vice |
|
|
|
|
|
|
|
|
|
|
President – |
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
Development |
|
|
|
|
|
|
|
|
|
|
(formerly |
|
|
|
|
|
|
|
|
|
|
President |
|
|
|
|
|
|
|
|
|
|
and Chief |
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
|
|
|
|
|
|
|
|
Officer, PEF) |
$450,846 |
$225,000 |
$0 |
$164,337 |
$376,688 |
$70,378 |
$0 |
$5,621 |
$44,015 |
$1,336,885 |
Lloyd M. |
|
|
|
|
|
|
|
|
|
|
Yates, |
|
|
|
|
|
|
|
|
|
|
President |
|
|
|
|
|
|
|
|
|
|
and Chief |
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
|
|
|
|
|
|
|
|
Officer, PEC |
$445,846 |
$210,000 |
$0 |
$205,131 |
$376,688 |
$70,986 |
$0 |
$13,726 |
$4,026 |
$1,326,403 |
Paula J.
Sims, |
|
|
|
|
|
|
|
|
|
|
Senior Vice |
|
|
|
|
|
|
|
|
|
|
President – |
|
|
|
|
|
|
|
|
|
|
Power |
|
|
|
|
|
|
|
|
|
|
Operations |
$370,000 |
$140,000 |
$107,000 |
$40,695 |
$281,712 |
$47,759 |
$0 |
$9,587 |
$15,188 |
$904,941 |
1
Consists of the total 2009 base
salary earnings prior to (i) employee contributions to the Progress Energy
401(k) Savings & Stock Ownership Plan and (ii) voluntary deferrals, if
applicable, under the Management Deferred Compensation Plan (MDCP) shown in
column (c).
2
Awards given under the
Management Incentive Compensation Plan (MICP) attributable to Plan Year 2008 and
paid in 2009.
3
Consists of amounts deferred
under the MDCP and the MICP. These deferral amounts are part of Base Pay and/or
Annual Incentive and therefore are not included in the Total
column.
57
4
Reflects the value of restricted
stock and restricted stock units vesting in 2009. The value of the restricted
stock was calculated using the opening stock price for Progress Energy Common
Stock three days prior to the day vesting occurred. The value of the restricted
stock units was calculated using the closing stock price for Progress Energy
Common Stock on the business day prior to when vesting occurred.
5
Reflects the value of performance
shares vesting on January 1, 2009. The value of the 2007 2-year transitional
performance share units was calculated using the closing stock price for
Progress Energy Common Stock on the business day prior to when distribution
occurred.
6
Reflects dividends and dividend
equivalents paid as the result of outstanding restricted stock or restricted
stock units held in Company Plan accounts.
7
Reflects the value of any stock
options vesting in 2009. Since we ceased granting stock options under our
Incentive Plans in 2004, all outstanding options had fully vested in
2009.
8
Reflects the value of all
perquisites provided during 2009. For a complete listing of the perquisites, see
the “Executive Perquisites” section of the “Elements of Compensation” discussion
of the CD&A on page 38 of this Proxy Statement. Perquisite details for each
named executive officer are discussed in the Summary Compensation Table
footnotes.
9
Reflects the value of tax
gross-up related to miscellaneous income items (Supplemental Senior Executive
Retirement Plan (SERP) or Restoration and MDCP 401(k) make-up) provided during
2009. In addition, Mr. Lyash received an additional $42,569 in tax gross-up from
the loss on the sale of his home as disclosed in the Summary Compensation Table
footnotes.
58
Progress Energy
Proxy
Statement |
POTENTIAL PAYMENTS UPON
TERMINATION
William D. Johnson, Chairman, Chief Executive
Officer, and President
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
Involuntary |
|
or Good |
|
|
|
|
|
Not for |
|
Reason |
|
|
Voluntary |
Early |
Normal |
Cause |
For Cause |
Termination |
Death or |
|
Termination |
Retirement1 |
Retirement |
Termination |
Termination |
(CIC) |
Disability |
|
($) |
($) |
($) |
($) |
($) |
($) |
($) |
Compensation |
|
|
|
|
|
|
|
Base
Salary—$990,0002 |
$0 |
$0 |
$0 |
$2,960,100 |
$0 |
$5,657,500 |
$0 |
Annual Incentive3 |
$0 |
$950,000 |
$0 |
$0 |
$0 |
$841,500 |
$950,000 |
Long-term Incentives |
|
|
|
|
|
|
|
Performance Shares
(PSSP)4 |
|
|
|
|
|
|
|
2007 (performance
period) |
$0 |
$1,774,913 |
$0 |
$0 |
$0 |
$1,774,913 |
$1,774,913 |
2008 (performance
period) |
$0 |
$1,394,832 |
$0 |
$0 |
$0 |
$2,092,248 |
$1,394,832 |
2009 (performance
period) |
$0 |
$797,986 |
$0 |
$0 |
$0 |
$2,393,959 |
$797,986 |
Restricted Stock
Units5 |
|
|
|
|
|
|
|
2007 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$185,557 |
$0 |
$0 |
$0 |
$202,425 |
$202,425 |
2007 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$139,167 |
$0 |
$0 |
$0 |
$202,425 |
$202,425 |
2007 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$111,334 |
$0 |
$0 |
$0 |
$202,425 |
$202,425 |
2008 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$274,511 |
$0 |
$0 |
$0 |
$313,727 |
$313,727 |
2008 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$183,031 |
$0 |
$0 |
$0 |
$313,768 |
$313,768 |
2009 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$285,952 |
$0 |
$0 |
$0 |
$381,270 |
$0 |
2009 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$142,976 |
$0 |
$0 |
$0 |
$381,270 |
$0 |
2009 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$177,348 |
$0 |
$0 |
$0 |
$709,391 |
$0 |
Restricted
Stock6 |
|
|
|
|
|
|
|
Unvested and
Accelerated |
$0 |
$661,655 |
$0 |
$0 |
$0 |
$661,655 |
$661,655 |
Benefits and
Perquisites |
|
|
|
|
|
|
|
Incremental Nonqualified
Pension7 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
Deferred
Compensation8 |
$736,071 |
$736,071 |
$0 |
$736,071 |
$736,071 |
$736,071 |
$736,071 |
Post-retirement Health
Care9 |
$0 |
$0 |
$0 |
$23,022 |
$0 |
$45,140 |
$0 |
Executive AD&D
Proceeds10 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$500,000 |
280G Tax Gross-up11 |
$0 |
$0 |
$0 |
$0 |
$0 |
$5,097,620 |
$0 |
TOTAL |
$736,071 |
$7,815,333 |
$0 |
$3,719,193 |
$736,071 |
$22,007,307 |
$8,050,227 |
1 Mr. Johnson became eligible for early
retirement at age 55 in January 2009. Therefore, under the voluntary termination
and involuntary not for cause termination scenarios, Mr. Johnson would be
treated as having met the early retirement criteria under the Equity Incentive
Plan and would be paid out under the early retirement provisions of that
plan.
2 There is no provision for payment of salary
under voluntary termination, early retirement, for cause termination, death or
disability. Mr. Johnson is not eligible for normal retirement. In the event of
involuntary not for cause termination, salary continuation provision per Mr.
Johnson’s employment agreement requires a severance equal to 2.99 times his then
current base salary ($990,000) payable in equal installments over a period of
2.99 years. In the event of involuntary or good reason termination (CIC), the
maximum benefit allowed under the cash payment provision of the Management
Change-in-Control Plan equals the sum of annual salary times three plus average
MICP award for the three years prior times three (($990,000 + $895,833) x 3).
Does not include impact of long-term disability. In the event of a long-term
disability, Mr. Johnson would receive 60% of base salary during the period of
his disability.
3 There is no provision for payment of annual
incentive under voluntary termination, involuntary not for cause termination, or
for cause termination. Mr. Johnson is not eligible for normal retirement. In the
event of involuntary or good reason termination (CIC), Mr. Johnson would receive
100% of his target award under the Annual Cash Incentive Compensation Plan
provisions of the Management Change-in-Control Plan, calculated as 85% times
$990,000. In the event of early retirement, death or disability, Mr. Johnson
would receive a pro-rata incentive award for the period worked during the year.
For December 31, 2009, this is based on the full award. For 2009, Mr. Johnson’s
MICP award was $950,000.
59
4
Unvested performance shares would
be forfeited under for cause termination. Voluntary termination and involuntary
not for cause termination are not applicable. See footnote 1. Mr. Johnson is not
eligible for normal retirement. In the event of early retirement, Mr. Johnson
would receive 43,280 performance shares from the 2007 grant; 34,012 performance
shares from the 2008 grant; and 18,458 performance shares from the 2009 grant.
In the event of involuntary or good reason termination (CIC), unvested
performance shares vest as of the date of Management Change-in-Control and
payment is made based upon the applicable performance factor. As of December 31,
2009, the performance factor is 100%. In the event of death or disability, the
2007 performance shares would vest 100% and be paid in an amount using
performance factors determined at the time of the event. For the 2008 and 2009
performance grants, a pro-rata payment would be made based upon time in the
plan.
5
Unvested restricted stock units
(RSU) would be forfeited under for cause termination. Voluntary termination and
involuntary not for cause termination are not applicable. See footnote 1. In the
event of early retirement, Mr. Johnson would receive a pro-rata percentage of
the unvested units, based upon the number of full months elapsed between the
grant date and the date of early retirement. Mr. Johnson would vest the
following on a pro-rata basis: 10,633 restricted stock units granted on March
20, 2007; 11,157 restricted stock units granted on March 18, 2008; and 14,784
units granted on March 17, 2009. Mr. Johnson is not eligible for normal
retirement. In the event of involuntary or good reason termination (CIC), all
outstanding restricted stock units would vest immediately. For a detailed
description of outstanding restricted stock units, see the “Outstanding Equity
Awards at Fiscal Year-End Table.” Upon death or disability, all outstanding
restricted stock units that are more than one year past their grant date would
vest immediately. Shares that are less than one year past their grant date would
be forfeited. Mr. Johnson would immediately vest 14,808 restricted stock units
granted on March 20, 2007; 15,301 restricted stock units granted on March 18,
2008; and would forfeit 35,892 restricted stock units granted on March 17,
2009.
6
Unvested restricted stock would
be forfeited under voluntary termination, involuntary not for cause termination,
or for cause termination. In the event of early retirement, all 16,134
outstanding restricted stock shares may vest at the Committee’s discretion. Mr.
Johnson is not eligible for normal retirement. In the event of involuntary or
good reason termination (CIC), all outstanding restricted stock shares would
vest immediately. For a detailed description of outstanding restricted stock
shares, see “Outstanding Equity Awards at Fiscal Year-End Table.” Upon death or
disability, all outstanding restricted stock shares that are more than one year
past their grant date would vest immediately. Shares that are less than one year
past their grant date would be forfeited. All of Mr. Johnson’s restricted stock
grant dates are beyond the one-year threshold; therefore, all 16,134 restricted
stock shares would vest immediately.
7
No accelerated vesting or
incremental nonqualified pension benefit applies under any of these scenarios.
Mr. Johnson was vested under the SERP as of December 31, 2009, so there is no
incremental value due to accelerated vesting under involuntary or good reason
termination (CIC). For a detailed description of the accumulated SERP benefit
and estimated annual benefit payable at age 65, see “Pension Benefits Table.” In
the event of early retirement, Mr. Johnson would receive a 2.5% decrease in his
accrued SERP benefit for each year that he is younger than age 65.
8
All outstanding deferred
compensation balances will be paid immediately following termination, subject to
IRC Section 409(a) regulations, under voluntary termination, early retirement,
involuntary not for cause termination, for cause termination, involuntary or
good reason termination (CIC), death and disability. Mr. Johnson is not eligible
for normal retirement. Unvested MICP deferral premiums would be forfeited. Mr.
Johnson would forfeit $0 of unvested deferred MICP premiums.
9
No post-retirement health care
benefits apply under voluntary termination, for cause termination, death or
disability. In the event of early retirement, Mr. Johnson would receive no
additional benefits above what all full-time, non bargaining employees would
receive. Mr. Johnson is not eligible for normal retirement. Under involuntary
not for cause termination, Mr. Johnson would be reimbursed for 18 months of
COBRA premiums at $1,278.98 per month as provided in his employment agreement.
In the event of involuntary or good reason termination (CIC), the Management
Change-in-Control Plan provides for Company-paid medical, dental and vision
coverage in the same plan Mr. Johnson was participating in prior to termination
for 36 months at $1,253.90 per month.
10
Mr. Johnson would be
eligible to receive $500,000 proceeds from the executive AD&D
policy.
11
Upon a change in control, the
Management Change-in-Control Plan provides for the Company to pay all excise
taxes under IRC Section 280G plus applicable gross-up amounts for Mr. Johnson.
Under IRC Section 280G, Mr. Johnson would be subject to excise tax on $9,400,700
of excess parachute payments above his base amount. Those excess parachute
payments result in $1,880,140 of excise taxes, $3,144,621 of tax gross-ups, and
$72,859 of employer Medicare tax related to the excise tax payment.
60
Progress Energy
Proxy
Statement |
POTENTIAL PAYMENTS UPON TERMINATION
Mark F.
Mulhern, Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
Involuntary |
|
or Good |
|
|
|
|
|
Not for |
|
Reason |
|
|
Voluntary |
Early |
Normal |
Cause |
For Cause |
Termination |
Death or |
|
Termination |
Retirement |
Retirement |
Termination |
Termination |
(CIC) |
Disability |
|
($) |
($) |
($) |
($) |
($) |
($) |
($) |
Compensation |
|
|
|
|
|
|
|
Base
Salary—$425,0001 |
$0 |
$0 |
$0 |
$1,270,750 |
$0 |
$1,317,500 |
$0 |
Annual Incentive2 |
$0 |
$0 |
$0 |
$0 |
$0 |
$233,750 |
$225,000 |
Long-term Incentives |
|
|
|
|
|
|
|
Performance Shares
(PSSP)3 |
|
|
|
|
|
|
|
2007 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$429,734 |
$429,734 |
2008 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$311,963 |
$198,522 |
2009 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$487,199 |
$132,872 |
Restricted Stock
Units4 |
|
|
|
|
|
|
|
2007 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$335,831 |
$335,831 |
2007 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$48,761 |
$48,761 |
2007 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$48,720 |
$48,720 |
2008 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$46,587 |
$46,587 |
2008 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$46,587 |
$46,587 |
2009 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$76,607 |
$0 |
2009 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$76,607 |
$0 |
2009 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$179,132 |
$0 |
Restricted
Stock5 |
|
|
|
|
|
|
|
Unvested and
Accelerated |
$0 |
$0 |
$0 |
$0 |
$0 |
$239,252 |
$239,252 |
Benefits and
Perquisites |
|
|
|
|
|
|
|
Incremental Nonqualified
Pension6 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
Deferred
Compensation7 |
$325,876 |
$0 |
$0 |
$325,876 |
$325,876 |
$325,876 |
$325,876 |
Post-retirement Health
Care8 |
$0 |
$0 |
$0 |
$15,249 |
$0 |
$19,934 |
$0 |
Executive AD&D
Proceeds9 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$500,000 |
280G Tax Gross-up10 |
$0 |
$0 |
$0 |
$0 |
$0 |
$1,459,661 |
$0 |
TOTAL |
$325,876 |
$0 |
$0 |
$1,611,875 |
$325,876 |
$5,683,701 |
$2,577,742 |
1 There is no provision for payment of salary
under voluntary termination, for cause termination, death or disability. Mr.
Mulhern is not eligible for early retirement or normal retirement. In the event
of involuntary not for cause termination, salary continuation provision per Mr.
Mulhern’s employment agreement requires a severance equal to 2.99 times his then
current base salary ($425,000) payable in equal installments over a period of
2.99 years. In the event of involuntary or good reason termination (CIC), the
maximum benefit allowed under the cash payment provision of the Management
Change-in-Control Plan equals the sum of annual salary times two plus annual
target MICP award times two (($425,000 + $233,750) x 2). Does not include impact
of long-term disability. In the event of a long-term disability, Mr. Mulhern
would receive 60% of base salary during the period of his
disability.
2 There is no provision for payment of annual
incentive under voluntary termination, involuntary not for cause termination, or
for cause termination. Mr. Mulhern is not eligible for early retirement or
normal retirement. In the event of involuntary or good reason termination (CIC),
Mr. Mulhern would receive 100% of his target award under the Annual Cash
Incentive Compensation Plan provisions of the Management Change-in-Control Plan,
calculated as 55% times $425,000. In the event of death or disability, Mr.
Mulhern would receive a pro-rata incentive award for the period worked during
the year. For December 31, 2009, this is based on the full award. For 2009, Mr.
Mulhern’s MICP award was $225,000.
61
3
Unvested performance shares would
be forfeited under voluntary termination, involuntary not for cause termination,
or for cause termination. Mr. Mulhern is not eligible for early retirement or
normal retirement. In the event of involuntary or good reason termination (CIC),
unvested performance shares vest as of the date of Management Change-in-Control
and payment is made based upon the applicable performance factor. As of December
31, 2009, the performance factor is 100%. In the event of death or disability,
the 2007 performance shares would vest 100% and be paid in an amount using
performance factors determined at the time of the event. For the 2008 and 2009
performance grants, a pro-rata payment would be made based upon time in the
plan.
4
Unvested restricted stock units
(RSU) would be forfeited under voluntary termination, involuntary not for cause
termination, or for cause termination. Mr. Mulhern is not eligible for early
retirement or normal retirement. In the event of involuntary or good reason
termination (CIC), all outstanding restricted stock units would vest
immediately. For a detailed description of outstanding restricted stock units,
see the “Outstanding Equity Awards at Fiscal Year-End Table.” Upon death or
disability, all outstanding restricted stock units that are more than one year
past their grant date would vest immediately. Shares that are less than one year
past their grant date would be forfeited. Mr. Mulhern would immediately vest
10,566 restricted stock units granted on March 20, 2007; 2,272 restricted stock
units granted on March 18, 2008; and would forfeit 8,404 restricted stock units
granted on March 17, 2009.
5
Unvested restricted stock would
be forfeited under voluntary termination, involuntary not for cause termination,
or for cause termination. Mr. Mulhern is not eligible for early retirement or
normal retirement. In the event of involuntary or good reason termination (CIC),
all outstanding restricted stock shares would vest immediately. For a detailed
description of outstanding restricted stock shares, see the “Outstanding Equity
Awards at Fiscal Year-End Table.” Upon death or disability, all outstanding
restricted stock shares that are more than one year past their grant date would
vest immediately. Shares that are less than one year past their grant date would
be forfeited. All of Mr. Mulhern’s restricted stock grant dates are beyond the
one-year threshold; therefore, all 5,834 restricted stock shares would vest
immediately.
6
No accelerated vesting or
incremental nonqualified pension benefit applies under any of these scenarios.
Mr. Mulhern was vested under the SERP as of December 31, 2009, so there is no
incremental value due to accelerated vesting under involuntary or good reason
termination (CIC).
7
All outstanding deferred
compensation balances will be paid immediately following termination, subject to
IRC Section 409(a) regulations, under voluntary termination, involuntary not for
cause termination, for cause termination, involuntary or good reason termination
(CIC), death and disability. Mr. Mulhern is not eligible for early retirement or
normal retirement. Unvested MICP deferral premiums would be forfeited. Mr.
Mulhern would forfeit $0 of unvested deferred MICP premiums.
8
No post-retirement health care
benefits apply under voluntary termination, for cause termination, death or
disability. Mr. Mulhern is not eligible for early retirement or normal
retirement. Under involuntary not for cause termination, Mr. Mulhern would be
reimbursed for 18 months of COBRA premiums at $847.18 per month as provided in
his employment agreement. In the event of involuntary or good reason termination
(CIC), the Management Change-in-Control Plan provides for Company-paid medical,
dental and vision coverage in the same plan Mr. Mulhern was participating in
prior to termination for 24 months at $830.57 per month.
9
Mr. Mulhern would be
eligible to receive $500,000 proceeds from the executive AD&D
policy.
10
Upon a change in control, the
Management Change-in-Control Plan provides for the Company to pay all excise
taxes under IRC Section 280G plus applicable gross-up amounts for Mr. Mulhern.
Under IRC Section 280G, Mr. Mulhern would be subject to excise tax on $2,691,811
of excess parachute payments above his base amount. Those excess parachute
payments result in $538,362 of excise taxes, $900,436 of tax gross-ups, and
$20,863 of employer Medicare tax related to the excise tax payment.
62
Progress Energy
Proxy
Statement |
POTENTIAL PAYMENTS UPON TERMINATION
Jeffrey
J. Lyash, Executive Vice President – Corporate Development
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
Involuntary |
|
or Good |
|
|
|
|
|
Not for |
|
Reason |
|
|
Voluntary |
Early |
Normal |
Cause |
For Cause |
Termination |
Death or |
|
Termination |
Retirement |
Retirement |
Termination |
Termination |
(CIC) |
Disability |
|
($) |
($) |
($) |
($) |
($) |
($) |
($) |
Compensation |
|
|
|
|
|
|
|
Base
Salary—$453,0001 |
$0 |
$0 |
$0 |
$1,354,470 |
$0 |
$2,139,000 |
$0 |
Annual Incentive2 |
$0 |
$0 |
$0 |
$0 |
$0 |
$249,150 |
$235,000 |
Long-term Incentives |
|
|
|
|
|
|
|
Performance Shares
(PSSP)3 |
|
|
|
|
|
|
|
2007 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$574,550 |
$574,550 |
2008 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$442,375 |
$281,511 |
2009 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$563,108 |
$153,575 |
Restricted Stock
Units4 |
|
|
|
|
|
|
|
2007 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$433,722 |
$433,722 |
2007 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$64,632 |
$64,632 |
2007 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$64,591 |
$64,591 |
2008 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$65,493 |
$65,493 |
2008 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$65,493 |
$65,493 |
2009 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$88,541 |
$0 |
2009 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$88,541 |
$0 |
2009 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$170,561 |
$0 |
Restricted
Stock5 |
|
|
|
|
|
|
|
Unvested and
Accelerated |
$0 |
$0 |
$0 |
$0 |
$0 |
$157,232 |
$157,232 |
Benefits and
Perquisites |
|
|
|
|
|
|
|
Incremental Nonqualified
Pension6 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
Deferred
Compensation7 |
$135,173 |
$0 |
$0 |
$135,173 |
$135,173 |
$135,173 |
$135,173 |
Post-retirement Health
Care8 |
$0 |
$0 |
$0 |
$16,221 |
$0 |
$31,807 |
$0 |
Executive AD&D
Proceeds9 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$500,000 |
280G Tax Gross-up10 |
$0 |
$0 |
$0 |
$0 |
$0 |
$1,620,699 |
$0 |
TOTAL |
$135,173 |
$0 |
$0 |
$1,505,864 |
$135,173 |
$6,954,668 |
$2,730,972 |
1 There is no provision for payment of salary
under voluntary termination, for cause termination, death or disability. Mr.
Lyash is not eligible for early retirement or normal retirement. In the event of
involuntary not for cause termination, salary continuation provision per Mr.
Lyash’s employment agreement requires a severance equal to 2.99 times his then
current base salary ($453,000) payable in equal installments over a period of
2.99 years. In the event of involuntary or good reason termination (CIC), the
maximum benefit allowed under the cash payment provision of the Management
Change-in-Control Plan equals the sum of annual salary times three plus average
MICP award for the three years prior times three (($453,000 + $260,000) x 3).
Does not include impact of long-term disability. In the event of a long-term
disability, Mr. Lyash would receive 60% of base salary during the period of his
disability.
2 There is no provision for payment of annual
incentive under voluntary termination, involuntary not for cause termination, or
for cause termination. Mr. Lyash is not eligible for early retirement or normal
retirement. In the event of involuntary or good reason termination (CIC), Mr.
Lyash would receive 100% of his target award under the Annual Cash Incentive
Compensation Plan provisions of the Management Change-in-Control Plan,
calculated as 55% times $453,000. In the event of death or disability, Mr. Lyash
would receive a pro-rata incentive award for the period worked during the year.
For December 31, 2009, this is based on the full award. For 2009, Mr. Lyash’s
MICP award was $235,000.
63
3
Unvested performance shares would
be forfeited under voluntary termination, involuntary not for cause termination,
or for cause termination. Mr. Lyash is not eligible for early retirement or
normal retirement. In the event of involuntary or good reason termination (CIC),
unvested performance shares vest as of the date of Management Change-in-Control
and payment is made based upon the applicable performance factor. As of December
31, 2009, the performance factor is 100%. In the event of death or disability,
the 2007 performance shares would vest 100% and be paid in an amount using
performance factors determined at the time of the event. For the 2008 and 2009
performance grants, a pro-rata payment would be made based upon time in the
plan.
4
Unvested restricted stock units
(RSU) would be forfeited under voluntary termination, involuntary not for cause
termination, or for cause termination. Mr. Lyash is not eligible for early
retirement or normal retirement. In the event of involuntary or good reason
termination (CIC), all outstanding restricted stock units would vest
immediately. For a detailed description of outstanding restricted stock units,
see the “Outstanding Equity Awards at Fiscal Year-End Table.” Upon death or
disability, all outstanding restricted stock units that are more than one year
past their grant date would vest immediately. Shares that are less than one year
past their grant date would be forfeited. Mr. Lyash would immediately vest
13,727 restricted stock units granted on March 20, 2007; 3,194 restricted stock
units granted on March 18, 2008; and would forfeit 8,477 restricted stock units
granted on March 17, 2009.
5
Unvested restricted stock would
be forfeited under voluntary termination, involuntary not for cause termination,
or for cause termination. Mr. Lyash is not eligible for early retirement or
normal retirement. In the event of involuntary or good reason termination (CIC),
all outstanding restricted stock shares would vest immediately. For a detailed
description of outstanding restricted stock shares, see the “Outstanding Equity
Awards at Fiscal Year-End Table.” Upon death or disability, all outstanding
restricted stock shares that are more than one year past their grant date would
vest immediately. Shares that are less than one year past their grant date would
be forfeited. All of Mr. Lyash’s restricted stock grant dates are beyond the
one-year threshold; therefore, all 3,834 restricted stock shares would vest
immediately.
6
No accelerated vesting or
incremental nonqualified pension benefit applies under any of these scenarios.
Mr. Lyash was vested under the SERP as of December 31, 2009, so there is no
incremental value due to accelerated vesting under involuntary or good reason
termination (CIC).
7
All outstanding deferred
compensation balances will be paid immediately following termination, subject to
IRC Section 409(a) regulations, under voluntary termination, involuntary not for
cause termination, for cause termination, involuntary or good reason termination
(CIC), death and disability. Mr. Lyash is not eligible for early retirement or
normal retirement. Unvested MICP deferral premiums would be forfeited. Mr. Lyash
would forfeit $0 of unvested deferred MICP premiums.
8
No post-retirement health care
benefits apply under voluntary termination, for cause termination, death or
disability. Mr. Lyash is not eligible for early retirement or normal retirement.
Under involuntary not for cause termination, Mr. Lyash would be reimbursed for
18 months of COBRA premiums at $901.19 per month as provided in his employment
agreement. In the event of involuntary or good reason termination (CIC), the
Management Change-in-Control Plan provides for Company-paid medical, dental and
vision coverage in the same plan Mr. Lyash was participating in prior to
termination for 36 months at $883.52 per month.
9
Mr. Lyash would be
eligible to receive $500,000 proceeds from the executive AD&D
policy.
10
Upon a change in control, the
Management Change-in-Control Plan provides for the Company to pay all excise
taxes under IRC Section 280G plus applicable gross-up amounts for Mr. Lyash.
Under IRC Section 280G, Mr. Lyash would be subject to excise tax on $2,988,788
of excess parachute payments above his base amount. Those excess parachute
payments result in $597,758 of excise taxes, $999,777 of tax gross-ups, and
$23,164 of employer Medicare tax related to the excise tax payment.
64
Progress Energy
Proxy
Statement |
POTENTIAL PAYMENTS UPON TERMINATION
Lloyd
M. Yates, President and Chief Executive Officer, PEC
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
Involuntary |
|
or Good |
|
|
|
|
|
Not for |
|
Reason |
|
|
Voluntary |
Early |
Normal |
Cause |
For Cause |
Termination |
Death or |
|
Termination |
Retirement |
Retirement |
Termination |
Termination |
(CIC) |
Disability |
|
($) |
($) |
($) |
($) |
($) |
($) |
($) |
Compensation |
|
|
|
|
|
|
|
Base
Salary—$448,0001 |
$0 |
$0 |
$0 |
$1,339,520 |
$0 |
$2,083,200 |
$0 |
Annual Incentive2 |
$0 |
$0 |
$0 |
$0 |
$0 |
$246,400 |
$235,000 |
Long-term Incentives |
|
|
|
|
|
|
|
Performance Shares
(PSSP)3 |
|
|
|
|
|
|
|
2007 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$574,550 |
$574,550 |
2008 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$442,375 |
$281,511 |
2009 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$556,752 |
$151,841 |
Restricted Stock
Units4 |
|
|
|
|
|
|
|
2007 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$433,722 |
$433,722 |
2007 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$64,632 |
$64,632 |
2007 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$64,591 |
$64,591 |
2008 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$65,493 |
$65,493 |
2008 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$65,493 |
$65,493 |
2009 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$87,515 |
$0 |
2009 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$87,556 |
$0 |
2009 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$169,576 |
$0 |
Restricted
Stock5 |
|
|
|
|
|
|
|
Unvested and
Accelerated |
$0 |
$0 |
$0 |
$0 |
$0 |
$157,232 |
$157,232 |
Benefits and
Perquisites |
|
|
|
|
|
|
|
Incremental Nonqualified
Pension6 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
Deferred
Compensation7 |
$499,804 |
$0 |
$0 |
$499,804 |
$499,804 |
$499,804 |
$499,804 |
Post-retirement Health
Care8 |
$0 |
$0 |
$0 |
$23,022 |
$0 |
$45,140 |
$0 |
Executive AD&D
Proceeds9 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$500,000 |
280G Tax Gross-up10 |
$0 |
$0 |
$0 |
$0 |
$0 |
$1,621,931 |
$0 |
TOTAL |
$499,804 |
$0 |
$0 |
$1,862,346 |
$499,804 |
$7,265,962 |
$3,093,869 |
1 There is no provision for payment of salary
under voluntary termination, for cause termination, death or disability. Mr.
Yates is not eligible for early retirement or normal retirement. In the event of
involuntary not for cause termination, salary continuation provision per Mr.
Yates’ employment agreement requires a severance equal to 2.99 times his then
current base salary ($448,000) payable in equal installments over a period of
2.99 years. In the event of involuntary or good reason termination (CIC), the
maximum benefit allowed under the cash payment provision of the Management
Change-in-Control Plan equals the sum of annual salary times three plus annual
target MICP award times three (($448,000 + $246,400) x 3). Does not include
impact of long-term disability. In the event of a long-term disability, Mr.
Yates would receive 60% of base salary during the period of his
disability.
2 There is no provision for payment of annual
incentive under voluntary termination, involuntary not for cause termination, or
for cause termination. Mr. Yates is not eligible for early retirement or normal
retirement. In the event of involuntary or good reason termination (CIC), Mr.
Yates would receive 100% of his target award under the Annual Cash Incentive
Compensation Plan provisions of the Management Change-in-Control Plan,
calculated as 55% times $448,000. In the event of death or disability, Mr. Yates
would receive a pro-rata incentive award for the period worked during the year.
For December 31, 2009 this is based on the full award. For 2009, Mr. Yates’ MICP
award was $235,000.
65
3 Unvested
performance shares would be forfeited under voluntary termination, involuntary
not for cause termination, or for cause termination. Mr. Yates is not eligible
for early retirement or normal retirement. In the event of involuntary or good
reason termination (CIC), unvested performance shares vest as of the date of
Management Change-in-Control and payment is made based upon the applicable
performance factor. As of December 31, 2009, the performance factor is 100%. In
the event of death or disability, the 2007 performance shares would vest 100%
and be paid in an amount using performance factors determined at the time of the
event. For the 2008 and 2009 performance grants, a pro-rata payment would be
made based upon time in the plan.
4 Unvested
restricted stock units (RSU) would be forfeited under voluntary termination,
involuntary not for cause termination, or for cause termination. Mr. Yates is
not eligible for early retirement or normal retirement. In the event of
involuntary or good reason termination (CIC), all outstanding restricted stock
units would vest immediately. For a detailed description of outstanding
restricted stock units, see the “Outstanding Equity Awards at Fiscal Year-End
Table.” Upon death or disability, all outstanding restricted stock units that
are more than one year past their grant date would vest immediately. Shares that
are less than one year past their grant date would be forfeited. Mr. Yates would
immediately vest 13,727 restricted stock units granted on March 20, 2007; 3,194
restricted stock units granted on March 18, 2008; and would forfeit 8,404
restricted stock units granted on March 17, 2009.
5 Unvested
restricted stock would be forfeited under voluntary termination, involuntary not
for cause termination, or for cause termination. Mr. Yates is not eligible for
early retirement or normal retirement. In the event of involuntary or good
reason termination (CIC), all outstanding restricted stock shares would vest
immediately. For a detailed description of outstanding restricted stock shares,
see the “Outstanding Equity Awards at Fiscal Year-End Table.” Upon death or
disability, all outstanding restricted stock shares that are more than one year
past their grant date would vest immediately. Shares that are less than one year
past their grant date would be forfeited. All of Mr. Yates’ restricted stock
grant dates are beyond the one-year threshold; therefore, all 3,834 restricted
stock shares would vest immediately.
6 No
accelerated vesting or incremental nonqualified pension benefit applies under
any of these scenarios. Mr. Yates was vested under the SERP as of December 31,
2009, so there is no incremental value due to accelerated vesting under
involuntary or good reason termination (CIC).
7 All
outstanding deferred compensation balances will be paid immediately following
termination, subject to IRC Section 409(a) regulations, under voluntary
termination, involuntary not for cause termination, for cause termination,
involuntary or good reason termination (CIC), death and disability. Mr. Yates is
not eligible for early retirement or normal retirement. Unvested MICP deferral
premiums would be forfeited. Mr. Yates would forfeit $0 of unvested deferred
MICP premiums.
8 No
post-retirement health care benefits apply under voluntary termination, for
cause termination, death or disability. Mr. Yates is not eligible for early
retirement or normal retirement. Under involuntary not for cause termination,
Mr. Yates would be reimbursed for 18 months of COBRA premiums at $1,278.98 per
month as provided in his employment agreement. In the event of involuntary or
good reason termination (CIC), the Management Change-in-Control Plan provides
for Company-paid medical, dental and vision coverage in the same plan Mr. Yates
was participating in prior to termination for 36 months at $1,253.90 per
month.
9
Mr. Yates would be eligible to receive $500,000 proceeds from the
executive AD&D policy.
10 Upon a
change in control, the Management Change-in-Control Plan provides for the
Company to pay all excise taxes under IRC Section 280G plus applicable gross-up
amounts for Mr. Yates. Under IRC Section 280G, Mr. Yates would be subject to
excise tax on $2,991,059 of excess parachute payments above his base amount.
Those excess parachute payments result in $598,212 of excise taxes, $1,000,537
of tax gross-ups, and $23,182 of employer Medicare tax related to the excise tax
payment.
66
Progress Energy
Proxy
Statement |
POTENTIAL PAYMENTS UPON TERMINATION
Paula
J. Sims, Senior Vice President – Power Operations
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
Involuntary |
|
or Good |
|
|
|
|
|
Not for |
|
Reason |
|
|
Voluntary |
Early |
Normal |
Cause |
For Cause |
Termination |
Death or |
|
Termination |
Retirement |
Retirement |
Termination |
Termination |
(CIC) |
Disability |
|
($) |
($) |
($) |
($) |
($) |
($) |
($) |
Compensation |
|
|
|
|
|
|
|
Base Salary—$370,0001 |
$0 |
$0 |
$0 |
$1,106,300 |
$0 |
$1,073,000 |
$0 |
Annual Incentive2 |
$0 |
$0 |
$0 |
$0 |
$0 |
$166,500 |
$160,000 |
Long-term Incentives |
|
|
|
|
|
|
|
Performance Shares (PSSP)3 |
|
|
|
|
|
|
|
2007 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$429,734 |
$429,734 |
2008 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$330,869 |
$210,553 |
2009 (performance
period) |
$0 |
$0 |
$0 |
$0 |
$0 |
$400,176 |
$109,139 |
Restricted Stock Units4 |
|
|
|
|
|
|
|
2007 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$335,831 |
$335,831 |
2007 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$48,761 |
$48,761 |
2007 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$48,720 |
$48,720 |
2008 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$49,376 |
$49,376 |
2008 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$49,417 |
$49,417 |
2009 – 2010 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$63,442 |
$0 |
2009 – 2011 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$63,442 |
$0 |
2009 – 2012 |
|
|
|
|
|
|
|
(grant date vesting) |
$0 |
$0 |
$0 |
$0 |
$0 |
$145,503 |
$0 |
Restricted Stock5 |
|
|
|
|
|
|
|
Unvested and
Accelerated |
$0 |
$0 |
$0 |
$0 |
$0 |
$41,010 |
$41,010 |
Benefits and
Perquisites |
|
|
|
|
|
|
|
Incremental Nonqualified
Pension6 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
Deferred Compensation7 |
$414,523 |
$0 |
$0 |
$414,523 |
$414,523 |
$444,049 |
$444,049 |
Post-retirement Health
Care8 |
$0 |
$0 |
$0 |
$5,344 |
$0 |
$6,985 |
$0 |
Executive AD&D
Proceeds9 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$500,000 |
280G Tax Gross-up10 |
$0 |
$0 |
$0 |
$0 |
$0 |
$1,194,126 |
$0 |
TOTAL |
$414,523 |
$0 |
$0 |
$1,526,167 |
$414,523 |
$4,890,941 |
$2,426,590 |
1 There is no provision
for payment of salary under voluntary termination, for cause termination, death
or disability. Ms. Sims is not eligible for early retirement or normal
retirement. In the event of involuntary not for cause termination, salary
continuation provision per Ms. Sims’ employment agreement requires a severance
equal to 2.99 times her then current base salary ($370,000) payable in equal
installments over a period of 2.99 years. In the event of involuntary or good
reason termination (CIC), the maximum benefit allowed under the cash payment
provision of the Management Change-in-Control Plan equals the sum of annual
salary times two plus target MICP award times two (($370,000 + $166,500) x 2).
Does not include impact of long-term disability. In the event of a long-term
disability, Ms. Sims would receive 60% of base salary during the period of her
disability.
2 There is no provision
for payment of annual incentive under voluntary termination, involuntary not for
cause termination, or for cause termination. Ms. Sims is not eligible for early
retirement or normal retirement. In the event of involuntary or good reason
termination (CIC), Ms. Sims would receive 100% of her target award under the
Annual Cash Incentive Compensation Plan provisions of the Management
Change-in-Control Plan, calculated as 45% times $370,000. In the event of death
or disability, Ms. Sims would receive a pro-rata incentive award for the period
worked during the year. For December 31, 2009, this is based on the full award.
For 2009, Ms. Sims’ MICP award was $160,000.
67
3 Unvested
performance shares would be forfeited under voluntary termination, involuntary
not for cause termination, or for cause termination. Ms. Sims is not eligible
for early retirement or normal retirement. In the event of involuntary or good
reason termination (CIC), unvested performance shares vest as of the date of
Management Change-in-Control and payment is made based upon the applicable
performance factor. As of December 31, 2009, the performance factor is 100%. In
the event of death or disability, the 2007 performance shares would vest 100%
and be paid in an amount using performance factors determined at the time of the
event. For the 2008 and 2009 performance grants, a pro-rata payment would be
made based upon time in the plan.
4 Unvested
restricted stock units (RSU) would be forfeited under voluntary termination,
involuntary not for cause termination, or for cause termination. Ms. Sims is not
eligible for early retirement or normal retirement. In the event of involuntary
or good reason termination (CIC), all outstanding restricted stock units would
vest immediately. For a detailed description of outstanding restricted stock
units, see the “Outstanding Equity Awards at Fiscal Year-End Table.” Upon death
or disability, all outstanding restricted stock units that are more than one
year past their grant date would vest immediately. Shares that are less than one
year past their grant date would be forfeited. Ms. Sims would immediately vest
10,566 restricted stock units granted on March 20, 2007; 2,409 restricted stock
units granted on March 18, 2008; and would forfeit 6,642 restricted stock units
granted on March 17, 2009.
5 Unvested
restricted stock would be forfeited under voluntary termination, involuntary not
for cause termination, or for cause termination. Ms. Sims is not eligible for
early retirement or normal retirement. In the event of involuntary or good
reason termination (CIC), all outstanding restricted stock shares would vest
immediately. For a detailed description of outstanding restricted stock shares,
see the “Outstanding Equity Awards at Fiscal Year-End Table.” Upon death or
disability, all outstanding restricted stock shares that are more than one year
past their grant date would vest immediately. Shares that are less than one year
past their grant date would be forfeited. All of Ms. Sims’ restricted stock
grant dates are beyond the one-year threshold; therefore, all 1,000 restricted
stock shares would vest immediately.
6 No
accelerated vesting or incremental nonqualified pension benefit applies under
any of these scenarios. Ms. Sims was vested under the SERP as of December 31,
2009, so there is no incremental value due to accelerated vesting under
involuntary or good reason termination (CIC).
7 All
outstanding deferred compensation balances will be paid immediately following
termination, subject to IRC Section 409(a) regulations, under voluntary
termination, involuntary not for cause termination, for cause termination,
involuntary or good reason termination (CIC), death and disability. Ms. Sims is
not eligible for early retirement or normal retirement. Unvested MICP deferral
premiums would be forfeited. Ms. Sims would forfeit $29,526 of unvested deferred
MICP premiums.
8 No
post-retirement health care benefits apply under voluntary termination, for
cause termination, death or disability. Ms. Sims is not eligible for early
retirement or normal retirement. Under involuntary not for cause termination,
Ms. Sims would be reimbursed for 18 months of COBRA premiums at $296.88 per
month as provided in her employment agreement. In the event of involuntary or
good reason termination (CIC), the Management Change-in-Control Plan provides
for Company-paid medical, dental and vision coverage in the same plan Ms. Sims
was participating in prior to termination for 24 months at $291.06 per
month.
9 Ms. Sims would be
eligible to receive $500,000 proceeds from the executive AD&D
policy.
10 Upon a
change in control, the Management Change-in-Control Plan provides for the
Company to pay all excise taxes under IRC Section 280G plus applicable gross-up
amounts for Ms. Sims. Under IRC Section 280G, Ms. Sims would be subject to
excise tax on $2,202,132 of excess parachute payments above her base amount.
Those excess parachute payments result in $440,426 of excise taxes, $736,633 of
tax gross-ups, and $17,067 of employer Medicare tax related to the excise tax
payment.
68
Progress Energy
Proxy
Statement |
DIRECTOR COMPENSATION
The following includes the required
table and related narrative detailing the compensation each director received
for his or her services in 2009.
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
Pension Value |
|
|
|
|
|
|
|
and |
|
|
|
Fees |
|
|
Non-Equity |
Nonqualified |
|
|
|
Earned |
|
|
Incentive |
Deferred |
|
|
|
Paid in or |
Stock |
Option |
Plan |
Compensation |
All Other |
|
|
Cash1 |
Awards2 |
Awards |
Compensation |
Earnings |
Compensation3 |
Total |
Name |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
(a) |
(b) |
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
John
D. Baker II |
$28,433 |
$0 |
— |
— |
— |
$2,186 |
$30,619 |
James E. Bostic, Jr. |
$93,500 |
$60,000 |
— |
— |
— |
$77,502 |
$231,002 |
David L. Burner |
|
|
|
|
|
|
|
(Retired May 13, 2009) |
$51,750 |
$60,000 |
— |
— |
— |
$15,640 |
$127,390 |
Harris E. DeLoach, Jr. |
$103,500 |
$60,000 |
— |
— |
— |
$51,844 |
$215,344 |
James B. Hyler, Jr. |
$95,000 |
$60,000 |
— |
— |
— |
$8,899 |
$163,899 |
Robert W. Jones |
$100,654 |
$60,000 |
— |
— |
— |
$35,715 |
$196,369 |
W.
Steven Jones |
$93,500 |
$60,000 |
— |
— |
— |
$65,622 |
$219,122 |
E.
Marie McKee |
$107,000 |
$60,000 |
— |
— |
— |
$148,522 |
$315,522 |
John
H. Mullin, III |
$108,500 |
$60,000 |
— |
— |
— |
$112,871 |
$281,371 |
Charles W. Pryor, Jr. |
$96,500 |
$60,000 |
— |
— |
— |
$18,475 |
$174,975 |
Carlos A. Saladrigas |
$93,500 |
$60,000 |
— |
— |
— |
$58,558 |
$212,058 |
Theresa M. Stone |
$107,000 |
$60,000 |
— |
— |
— |
$57,114 |
$224,114 |
Alfred C. Tollison, Jr. |
$101,500 |
$60,000 |
— |
— |
— |
$50,966 |
$212,466 |
1 Reflects the annual
retainer plus any Board or Committee fees earned in 2009. Amounts may have been
paid in cash or deferred into the Non-Employee Director Deferred Compensation
Plan.
2 Reflects the grant
date fair value of awards granted under the Non-Employee Director Stock Unit
Plan in 2009. The assumptions made in the valuation of awards granted pursuant
to the Non-Employee Director Stock Unit Plan are not addressed in our
consolidated financial statements, footnotes to our consolidated financial
statements or in Management’s Discussion and Analysis because the Director Plan
is immaterial to our consolidated financial statements. As a liability plan
under FASB ASC Topic 718, the fair value of the Director Plan is re-measured at
each financial statement date. The grant date fair value for each stock unit
granted to each director on January 2, 2009 was $40.65. The numbers of stock
units outstanding in the Non-Employee Director Stock Unit Plan as of December
31, 2009 for each Director listed above are shown in the table in footnote 3
below.
69
3 Includes the following
items: The dollar value of dividend reinvestments and unit
appreciation/depreciation accrued under the Non-Employee Director Stock Unit
Plan; dividend reinvestments and unit appreciation/depreciation accrued under
the Non-Employee Director Deferred Compensation Plan; tax gross-ups; and
matching contributions made to eligible nonprofit organizations and to
accredited colleges and universities under the Company’s now suspended Matching
Gifts Program as follows: James E. Bostic, Jr.–$5,500; W. Steven Jones–$2,300;
E. Marie McKee–$1,071; and Charles W. Pryor, Jr.–$1,000. The dollar values of
dividend reinvestments and unit appreciation for each Director listed above are
in the table below. The total value of the perquisites and personal benefits
received by each director was less than $10,000. Thus, those amounts are
excluded from this column. The numbers of stock units outstanding in the
Non-Employee Director Deferred Compensation Plan as of December 3, 2009 for each
Director listed above are in the table below.
|
Non-Employee Director |
Non-Employee
Director |
|
Stock Unit Plan |
Deferred Compensation
Plan |
|
|
Dividend Reinvestments |
|
Dividend
Reinvestments |
|
Stock Units |
and Unit Appreciation/ |
Stock Units |
and Unit
Appreciation/ |
|
Outstanding as of |
Depreciation in column |
Outstanding as of |
Depreciation in
column |
|
Dec. 31, 2009 |
(g) |
Dec. 31, 2009 |
(g) |
Name |
(see footnote 2 above) |
(see footnote 3 above) |
(see footnote 3 above) |
(see footnote 3
above) |
John
D. Baker II |
0 |
$0 |
747 |
$2,186 |
James E. Bostic, Jr. |
8,396 |
$29,764 |
11,260 |
$42,238 |
David L. Burner |
|
|
|
|
(Retired May 13, 2009) |
0 |
($39,745) |
14,682 |
$54,647 |
Harris E. DeLoach, Jr. |
4,430 |
$15,147 |
9,506 |
$36,697 |
James B. Hyler, Jr. |
1,576 |
$4,628 |
1,028 |
$4,272 |
Robert W. Jones |
3,001 |
$9,881 |
6,548 |
$25,835 |
W.
Steven Jones |
5,939 |
$20,709 |
11,155 |
$42,613 |
E.
Marie McKee |
11,211 |
$40,141 |
28,649 |
$107,309 |
John
H. Mullin, III |
11,700 |
$41,944 |
19,113 |
$70,927 |
Charles W. Pryor, Jr. |
3,001 |
$9,881 |
1,930 |
$7,594 |
Carlos A. Saladrigas |
9,376 |
$33,378 |
6,701 |
$25,181 |
Theresa M. Stone |
5,939 |
$20,709 |
9,747 |
$36,405 |
Alfred C. Tollison, Jr. |
4,430 |
$15,147 |
9,131 |
$35,283 |
70
Progress Energy
Proxy
Statement |
DISCUSSION OF DIRECTOR COMPENSATION
TABLE
RETAINER AND MEETING FEES
During 2009, Directors who were not employees of the Company received an
annual retainer of $80,000, of which $30,000 was automatically deferred under
the Non-Employee Director Deferred Compensation Plan (see below). The Lead
Director/Chair of the following Board Committees received an additional retainer
of $15,000: Audit and Corporate Performance Committee; Governance Committee; and
Organization and Compensation Committee. The Chair of each of the following
standing Board Committees received an additional retainer of $10,000: Finance
Committee and Operations and Nuclear Oversight Committee. The nonchair members
of the following standing Board Committees received an additional retainer of
$7,500: Audit and Corporate Performance Committee and the Organization and
Compensation Committee. The nonchair members of the following standing Board
Committees received an additional retainer of $6,000: Governance Committee;
Finance Committee; and Operations and Nuclear Oversight Committee. The Nuclear
Oversight Director received an additional retainer of $8,000. The Chair of the
Nuclear Project Oversight Committee receives an attendance fee of $2,000 per
meeting held by that Committee. Additionally, each member of the Nuclear Project
Oversight Committee receives an attendance fee of $1,500 per meeting held by
that Committee. Directors who are not employees of the Company received a fee of
$1,500 per meeting, paid with the next quarterly retainer, for noncustomary
meetings or reviews of the Company’s operations that are approved by the
Governance Committee. Directors who are employees of our Company do not receive
an annual retainer or attendance fees. All Directors are reimbursed for expenses
incidental to their service as Directors. Committee positions held by the
Directors are discussed in the “Board Committees” section of this Proxy
Statement.
The Non-Employee Director Stock Unit Plan provides that each Director
will receive an annual grant of stock units that is equivalent to
$60,000.
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION
PLAN
In addition to $30,000 from the annual retainer that is automatically
deferred, outside Directors may elect to defer any portion of the remainder of
their annual retainer and Board attendance fees until after the termination of
their service on the Board under the Non-Employee Director Deferred Compensation
Plan. Any deferred fees are deemed to be invested in a number of units of Common
Stock of the Company, but participating Directors receive no equity interest or
voting rights in any shares of the Common Stock. The number of units credited to
the account of a participating Director is equal to the dollar amount of the
deferred fees divided by the average of the high and low selling prices (i.e.,
market value) of the Common Stock on the day the deferred fees would otherwise
be payable to the participating Director. The number of units in each account is
adjusted from time to time to reflect the payment of dividends on the number of
shares of Common Stock represented by the units. Unless otherwise agreed to by
the participant and the Board, when the participant ceases to be a member of the
Board of Directors, he or she will receive cash equal to the market value of a
share of the Company’s Common Stock on the date of payment multiplied by the
number of units credited to the participant’s account.
NON-EMPLOYEE DIRECTOR STOCK UNIT
PLAN
Effective January 1, 1998, we established the Non-Employee Director Stock
Unit Plan (“Stock Unit Plan”). The Stock Unit Plan provides for an annual grant
of stock units equivalent to $60,000 to each non-employee Director. Each unit is
equal in economic value to one share of the Company’s Common Stock, but does not
represent an equity interest or entitle its holder to vote. The number of units
is adjusted from time to time to reflect the payment of dividends with respect
to the Common Stock of the Company. Benefits under the Stock Unit Plan vest
after a participant has been a member of the Board for five years and are
payable solely in cash. Effective January 1, 2007, a Director shall be fully
vested at all times in the stock units credited to his or her
account.
71
OTHER COMPENSATION
Directors are eligible to receive certain perquisites, including tickets
to various cultural arts and sporting events, which are de minimis in
value. Each retiring Director also receives a gift valued at approximately
$1,500 in appreciation for his/her service on the Board.
Additionally, in 2009, directors were eligible to receive a 50 percent
match from the Company for contributions made in 2008 to eligible nonprofit
organizations and to all accredited colleges and universities. The Company’s
Matching Gifts Program was suspended as of January 1, 2009.
We charge Directors with imputed income in connection with (i) their
travel on Company aircraft for non-Company related purposes and (ii) their
spouses’ travel on Company aircraft. When spousal travel is at our invitation,
we will gross up the Directors for taxes incurred in connection with the imputed
income related to the travel.
72
Progress Energy
Proxy
Statement |
EQUITY COMPENSATION PLAN INFORMATION
as of
December 31, 2009
|
|
|
(c) |
|
|
|
Number of |
|
(a) |
|
securities |
|
Number of |
|
remaining available |
|
securities to |
|
for future issuance |
|
be issued upon |
(b) |
under equity |
|
exercise of |
Weighted-average |
compensation plans |
|
outstanding |
exercise price of |
(excluding |
|
options, |
outstanding |
securities |
|
warrants and |
options, |
reflected in column |
Plan category |
rights |
warrants and rights |
(a)) |
Equity compensation plans approved by |
|
|
|
security holders |
4,414,788 |
$42.64 |
6,436,623 |
Equity compensation plans not approved by |
|
|
|
security holders |
N/A |
N/A |
N/A |
Total |
4,414,788 |
$42.64 |
6,436,623 |
Column (a) includes stock options
outstanding, outstanding performance units assuming maximum payout potential,
and outstanding restricted stock units.
Column (b) includes only the
weighted-average exercise price of outstanding options.
Column (c) includes reduction for
unissued, outstanding performance units assuming maximum payout potential and
unissued, outstanding restricted stock units, and issued restricted
stock.
73
REPORT OF THE AUDIT AND
CORPORATE
PERFORMANCE COMMITTEE
The Audit and Corporate Performance Committee of the Company’s Board of
Directors (the “Audit Committee”) has reviewed and discussed the audited
financial statements of the Company for the fiscal year ended December 31, 2009,
with the Company’s management and with Deloitte & Touche LLP, the Company’s
independent registered public accounting firm. The Audit Committee discussed
with Deloitte & Touche LLP the matters required to be discussed by Statement
on Auditing Standards No. 114, as amended (AICPA, Professional Standards, Vol. 1
AU Section 380) as adopted by the Public Company Accounting Oversight Board in
Rule 3200T, by the SEC’s Regulation S-X, Rule 2-07, and by the NYSE’s Corporate
Governance Rules, as may be modified, amended or supplemented.
The Audit Committee has received the written disclosures and the letter
from Deloitte & Touche LLP required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountant’s
communication with the Audit Committee concerning independence and has discussed
with Deloitte & Touche LLP its independence.
Based upon the review and discussions noted above, the Audit Committee
recommended to the Board of Directors that the Company’s audited financial
statements be included in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2009, for filing with the SEC.
Audit and Corporate Performance Committee |
|
Theresa M. Stone, Chair |
James E. Bostic, Jr. |
W. Steven Jones |
Melquiades R. “Mel” Martinez* |
Charles W. Pryor, Jr. |
Carlos A. Saladrigas |
Alfred C. Tollison, Jr. |
* Mr. Martinez was elected to the Board effective March 1, 2010, and thus
did not participate in the reviews and discussions described in the foregoing
Report of the Audit Committee.
Unless specifically stated otherwise in any of the Company’s filings
under the Securities Act of 1933 or the Securities Exchange Act of 1934, the
foregoing Report of the Audit Committee shall not be incorporated by reference
into any such filings and shall not otherwise be deemed filed under such
Acts.
DISCLOSURE OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM’S FEES
The Audit Committee has actively monitored all services provided by its
independent registered public accounting firm, Deloitte & Touche LLP, the
member firms of Deloitte & Touche Tohmatsu, and their respective affiliates
(collectively, “Deloitte”) and the relationship between audit and non-audit
services provided by Deloitte. We have adopted policies and procedures for
pre-approving all audit and permissible non-audit services rendered by Deloitte,
and the fees billed for those services. Our Controller (the “Controller”) is
responsible to the Audit Committee for enforcement of this procedure, and for
reporting noncompliance. Pursuant to the pre-approval policy, the Audit
Committee specifically pre-approved the use of Deloitte for audit, audit-related
and tax services.
The pre-approval policy requires management to obtain specific
pre-approval from the Audit Committee for the use of Deloitte for any
permissible non-audit services, which generally are limited to tax services,
including tax compliance, tax planning, and tax advice services such as return
review and consultation and assistance. Other types of permissible non-audit
services will not be considered for approval except in limited instances, which
could include circumstances in which proposed services provide significant
economic or other benefits to us. In
74
Progress Energy
Proxy
Statement |
determining whether to
approve these services, the Audit Committee will assess whether these services
adversely impair the independence of Deloitte. Any permissible non-audit
services provided during a fiscal year that (i) do not aggregate more than 5
percent of the total fees paid to Deloitte for all services rendered during that
fiscal year and (ii) were not recognized as non-audit services at the time of
the engagement must be brought to the attention of the Controller for prompt
submission to the Audit Committee for approval. These de minimis non-audit services
must be approved by the Audit Committee or its designated representative before
the completion of the services. Non-audit services that are specifically
prohibited under the Sarbanes-Oxley Act Section 404, SEC rules, and Public
Company Accounting Oversight Board (“PCAOB”) rules are also specifically
prohibited under the policy.
Prior to approval of permissible tax
services by the Audit Committee, the policy requires Deloitte to (1) describe in
writing to the Audit Committee (a) the scope of the service, the fee structure
for the engagement and any side letter or other amendment to the engagement
letter or any other agreement between the Company and Deloitte relating to the
service and (b) any compensation arrangement or other agreement, such as a
referral agreement, a referral fee or fee-sharing arrangement, between Deloitte
and any person (other than the Company) with respect to the promoting, marketing
or recommending of a transaction covered by the service; and (2) discuss with
the Audit Committee the potential effects of the services on the independence of
Deloitte.
The policy also requires the
Controller to update the Audit Committee throughout the year as to the services
provided by Deloitte and the costs of those services. The policy also requires
Deloitte to annually confirm its independence in accordance with SEC and NYSE
standards. The Audit Committee will assess the adequacy of this policy as it
deems necessary and revise accordingly.
Set forth in the table below is
certain information relating to the aggregate fees billed by Deloitte for
professional services rendered to us for the fiscal years ended December 31,
2009, and December 31, 2008.
|
2009 |
|
2008 |
Audit fees |
$ |
3,581,000 |
|
$ |
3,673,000 |
Audit-related fees |
|
91,000 |
|
|
94,000 |
Tax fees |
|
19,000 |
|
|
22,000 |
Other fees |
|
— |
|
|
— |
Total Fees |
$ |
3,691,000 |
|
$ |
3,789,000 |
|
|
|
|
|
|
Audit fees include fees billed for services rendered in
connection with (i) the audits of our annual financial statements and those of
our SEC reporting subsidiaries (Carolina Power & Light Company and Florida
Power Corporation); (ii) the audit of the effectiveness of our internal control
over financial reporting; (iii) the reviews of the financial statements included
in our Quarterly Reports on Form 10-Q and those of our SEC reporting
subsidiaries; (iv) accounting consultations arising as part of the audits; and
(v) audit services in connection with statutory, regulatory or other filings,
including comfort letters and consents in connection with SEC filings and
financing transactions. Audit fees for 2009 and 2008 also include $1,265,000 and
$1,264,000, respectively, for services in connection with the Sarbanes-Oxley Act
Section 404 and the related PCAOB Standard No. 2 relating to our internal
control over financial reporting.
Audit-related fees
include fees billed for (i) special
procedures and letter reports; (ii) benefit plan audits when fees are paid by us
rather than directly by the plan; and (iii) accounting consultations for
prospective transactions not arising directly from the audits.
Tax fees include fees billed for tax compliance matters
and tax planning and advisory services.
The Audit Committee has concluded
that the provision of the non-audit services listed above as “Tax fees” is
compatible with maintaining Deloitte’s independence.
None of the services provided
required approval by the Audit Committee pursuant to the de minimis waiver
provisions described above.
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PROPOSAL 2—RATIFICATION OF SELECTION
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit and Corporate Performance Committee of our Board of Directors
(the “Audit Committee”) has selected Deloitte & Touche LLP (“Deloitte &
Touche”) as our independent registered public accounting firm for the fiscal
year ending December 31, 2010, and has directed that management submit the
selection of that independent registered public accounting firm for ratification
by the shareholders at the 2010 Annual Meeting of the Shareholders. Deloitte
& Touche has served as the independent registered public accounting firm for
our Company and its predecessors since 1930. In selecting Deloitte & Touche,
the Audit Committee considered carefully Deloitte & Touche’s previous
performance for us, its independence with respect to the services to be
performed and its general reputation for adherence to professional auditing
standards. A representative of Deloitte & Touche will be present at the
Annual Meeting of Shareholders, will have the opportunity to make a statement
and will be available to respond to appropriate questions. Shareholder
ratification of the selection of Deloitte & Touche as our independent
registered public accounting firm is not required by our By-Laws or otherwise.
However, we are submitting the selection of Deloitte & Touche to the
shareholders for ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection, the Audit Committee will reconsider
whether or not to retain Deloitte & Touche. Even if the shareholders ratify
the selection, the Audit Committee, in its discretion, may direct the
appointment of a different independent registered public accounting firm at any
time during the year if it is determined that such a change would be in the best
interest of the Company and its shareholders.
Valid proxies received pursuant to this solicitation will be voted in the
manner specified. Where no specification is made, the shares represented by the
accompanying proxy will be voted “FOR” the
ratification of the selection of Deloitte & Touche as our independent
registered public accounting firm. Votes (other than votes withheld) will be
cast pursuant to the accompanying proxy for the ratification of the selection of
Deloitte & Touche.
The proposal to ratify the selection of Deloitte & Touche to serve as
our independent registered public accounting firm for the fiscal year ending
December 31, 2010, requires approval by a majority of the votes actually cast by
holders of Common Stock present in person or represented by proxy at the Annual
Meeting of Shareholders and entitled to vote thereon. Abstentions from voting
and broker nonvotes will not count as shares voted and will not have the effect
of a “negative” vote, as described in more detail under the heading “PROXIES” on
page 2.
The Audit Committee and the Board of Directors recommend a vote
“FOR” the ratification of the selection of
Deloitte & Touche as our independent registered public accounting
firm.
76
Progress Energy
Proxy
Statement |
PROPOSAL 3—ADOPTION OF A
“HOLD-INTO-RETIREMENT” POLICY FOR
EQUITY AWARDS
One of our shareholders has submitted the proposal set forth below
relating to the adoption of a “hold-into-retirement” policy for equity awards.
Upon written or oral request, the Company will provide the name, address and
share ownership of the proponent. Any such requests should be directed to our
Corporate Secretary. For the reasons set forth after the proposal, the Board
recommends a vote “AGAINST” the proposal.
Resolved: That
stockholders of Progress Energy, Inc. (“Company”) urge the Compensation
Committee of the Board of Directors (the “Committee”) to adopt a policy
requiring that senior executives retain a significant percentage of shares
acquired through equity compensation programs until two years following the
termination of their employment (through retirement or otherwise), and to report
to stockholders regarding the policy before Company 2011 annual meeting of
stockholders. The stockholders recommend that the Committee not adopt a
percentage lower than 75% of net after-tax shares. The policy should address the
permissibility of transactions such as hedging transactions which are not sales
but reduce the risk of loss to the executive.
Supporting
Statement:
Equity-based compensation is an
important component of senior executive compensation at the
Company.
Requiring senior executives to hold a significant portion of shares
obtained through compensation plans after the termination of employment would
focus them on Company long-term success and would better align their interests
with those of Company stockholders. In the context of the current financial
climate, we believe it is imperative that companies reshape their compensation
policies and practices to discourage excessive risk-taking and promote
long-term, sustainable value creation. A 2002 report by a commission of The
Conference Board endorsed the idea of a holding requirement, stating that the
long-term focus promoted thereby “may help prevent companies from artificially
propping up stock prices over the short-term to cash out options and making
other potentially negative short-term decisions.”
The Company has established stock ownership guidelines for executive
officers. The guidelines were increased in 2009 to a minimum level of ownership
of five times base salary for the Chief Executive Officer (“CEO”), four times
base salary for the Chief Operating Officer (“COO”), and three times base salary
for the Chief Financial Officer and Presidents/Executive Vice Presidents/Senior
Vice Presidents.
We believe this policy does not go far enough to ensure that equity
compensation builds executive ownership. We also view a retention requirement
approach as superior to a stock ownership guideline because a guideline loses
effectiveness once it has been satisfied.
We urge stockholders to vote for
this proposal.
COMPANY RESPONSE
The Board and management oppose this shareholder proposal and recommend a
vote “AGAINST” the proposal for the reasons set forth below:
The Board has considered this proposal and believes that its adoption is
unnecessary and not in the best interests of the Company or its shareholders.
For the reasons discussed below, the Board recommends that you vote “AGAINST” adoption
of this proposal.
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- The Board of Directors believes
that the Company’s equity compensation policies have been essential to
attracting and retaining experienced and effective executives and motivating
them to perform in the best interests of the Company and its
shareholders.
The Board of Directors believes strongly that equity compensation and
mandatory equity ownership promote accountability and encourage executives to
enhance long-term shareholder value. This belief is reflected in our
compensation policies and practices. Equity ownership is a fundamental element
of the Company’s executive compensation program and provides an essential source
of incentive and motivation for our senior executives. Approximately 60% of
total target compensation for our executive officers is provided in equity and
focused on long-term performance. The Company’s executive compensation program
is carefully designed to provide a competitive level of at-risk and
performance-based incentives through a combination of equity awards, including
restricted stock units and performance shares. The Board believes that the
proposal would result in an overemphasis on post-retirement compensation and
undermine the effectiveness of the Company’s existing executive compensation
programs.
- The Board believes that our stock ownership
guidelines ensure that the Company’s executive officers have a significant equity stake in the future of the
Company.
The Company’s stock ownership guidelines are consistent with those of the
peer group the Organization and Compensation Committee used to benchmark
compensation and with which we compete for executive talent. Our guidelines are
consistent with the 50th percentile for both
the base salary multiple and the time required to meet ownership targets. The
Company’s CEO currently holds 8.5 times his base salary although our guidelines
require him to hold 5 times his base salary in equity compensation. All of our
senior executives are in compliance with the Company’s stock ownership
guidelines.
The proposal states that the two-year post retirement retention approach
is “superior” because the guideline approach loses effectiveness once the
guidelines have been met. The Board of Directors does not believe this is true,
as executives are continually expected to meet the guidelines, even during
market downturns. Moreover, the ownership levels established in the guidelines
represent a significant amount of money and, as a result, are a regular and
strong source of alignment with shareholders’ interests. Finally, three to five
times an executive’s salary is a significant amount that is not easily dismissed
just because further accumulation of equity is no longer necessary.
- Because we are in a highly regulated
industry, our compensation programs do not provide incentives
for executive officers to take unnecessary
and excessive risks that threaten the value of the Company.
Post-termination holding periods are purported to prevent executives from
taking actions that would cause the price of a company’s stock to rise as they
depart in order for them to be able to sell their holdings at an elevated price
before their behavior is discovered and corrected. As an integrated electric
utility, primarily engaged in the regulated utility business, the Company is
highly regulated at both the federal and state levels. State and federal
regulators set the parameters within which the Company can operate. The state
regulators have authority to review and approve the rates we charge our
customers. The regulators review certain of our costs and investments, and
approve our recovery of them from customers only if they determine that the
costs and investments were reasonable and prudent when incurred. In such a
regulated environment, excessive risk-taking is neither encouraged nor allowed.
Therefore, it is highly unlikely our executives would be able to successfully
engage in the type of behavior the proposal is intended to protect
against.
- The Board believes that the type of policy
mandated by the proposal, with its high retention threshold and post-retirement holding period, is not a prevalent
practice and may lead to an early loss of executive talent.
The two-year post termination requirement would limit our executives’
financial resources at a time when they no longer have any control over our
operations or results. Long-term alignment is, of course, important. However,
for our compensation programs to have value, participants should be permitted
the flexibility for
78
Progress Energy
Proxy
Statement |
some degree of diversification. In
the absence of this balanced approach, executives who have been successful in
enhancing shareholder value may choose to leave the Company earlier than they
otherwise would if they are interested in selling any of their shares in order
to share in the value they have helped to create. As a result, the proposal
could lead to an early loss of experienced talent and make it more difficult and
costly to attract, motivate and retain executives.
- The Board believes that the type of policy
mandated by the proposal will result in executives’ failure
to take the actions needed to ensure the
Company’s long-term success.
As noted above, the Company is a member of a highly regulated industry in
which excessive risk-taking is neither encouraged nor allowed. The Company
recognizes, however, that some amount of
risk-taking is inherent in its business and is necessary in order to increase
profitability and long-term shareholder value. If executives are too focused on
preserving the value of their equity holdings in the Company into retirement,
they may become reluctant to pursue strategies or undertake projects or capital
investments that could be beneficial to the Company. The proposed policy would
leave our executives almost completely dependent on the value of the Company
stock, potentially resulting in them becoming unduly risk averse to the
detriment of our shareholders.
The Board of Directors remains committed to the design and implementation
of equity compensation programs and stock ownership guidelines that best align
the interests of the Company’s leadership with those of our shareholders,
provide competitive compensation that requires executives to own a significant
portion of Company stock and ensure that executives have the appropriate
flexibility to manage their personal financial affairs. We believe the Company’s
existing programs and guidelines achieve these objectives and are essential to
our ability to attract, motivate and retain talented executives.
YOUR BOARD OF DIRECTORS AND MANAGEMENT URGE
YOU
TO VOTE AGAINST THIS
PROPOSAL
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FINANCIAL STATEMENTS
Our 2009 Annual Report, which includes financial statements as of
December 31, 2009 and 2008, and for each of the three years in the period ended
December 31, 2009, together with the report of Deloitte & Touche LLP, our
independent registered public accounting firm, was mailed to those who were
shareholders of record as of the close of business on March 5,
2010.
FUTURE SHAREHOLDER
PROPOSALS
Shareholder proposals submitted for inclusion in the proxy statement for
our 2011 Annual Meeting must be received no later than December 1, 2010, at our
principal executive offices, addressed to the attention of:
John
R. McArthur |
Executive Vice President and Corporate Secretary |
Progress Energy, Inc. |
P.O.
Box 1551 |
Raleigh, North Carolina
27602-1551 |
Upon receipt of any such proposal, we will determine whether or not to
include such proposal in the proxy statement and proxy in accordance with
regulations governing the solicitation of proxies.
In order for a shareholder to nominate a candidate for director, under
our By-Laws timely notice of the nomination must be received by the Corporate
Secretary of the Company either by personal delivery or by United States
registered or certified mail, postage pre-paid, not later than the close of
business on the 120th calendar day before
the date our proxy statement was released to shareholders in connection with the
previous year’s annual meeting. In no event shall the public announcement of an
adjournment or postponement of an annual meeting or the fact that an annual
meeting is held after the anniversary of the preceding annual meeting commence a
new time period for a shareholder’s giving of notice as described above. The
shareholder filing the notice of nomination must include:
- As to the shareholder giving the
notice:
– |
|
the name and
address of record of the shareholder who intends to make the nomination,
the beneficial owner, if any, on whose behalf the nomination is made and
of the person or persons to be nominated; |
|
– |
|
the class and
number of our shares that are owned by the shareholder and such beneficial
owner; |
|
– |
|
a representation
that the shareholder is a holder of record of our shares entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice;
and |
|
– |
|
a description of
all arrangements, understandings or relationships between the shareholder
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by
the shareholder. |
- As to each person whom the
shareholder proposes to nominate for election as a director:
– |
|
the name, age,
business address and, if known, residence address of such
person; |
|
– |
|
the principal
occupation or employment of such person; |
|
– |
|
the class and
number of shares of our stock that are beneficially owned by such
person; |
80
Progress Energy
Proxy
Statement |
– |
|
any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise
required by the rules and regulations of the SEC promulgated under the
Securities Exchange Act of 1934; and |
|
– |
|
the written
consent of such person to be named in the proxy statement as a nominee and
to serve as a director if elected. |
In order for a shareholder to bring other business before a shareholder
meeting, we must receive timely notice of the proposal not later than the close
of business on the 60th day before the first
anniversary of the immediately preceding year’s annual meeting. Such notice must
include:
- the information described above
with respect to the shareholder proposing such business;
- a brief description of the
business desired to be brought before the annual meeting, including the
complete text of any resolutions to be
presented at the annual meeting, and the reasons for conducting such business at the annual meeting;
and
- any material interest of such
shareholder in such business.
These requirements are separate from the requirements a shareholder must
meet to have a proposal included in our proxy statement.
Any shareholder desiring a copy of our By-Laws will be furnished one
without charge upon written request to the Corporate Secretary. A copy of the
By-Laws, as amended and restated on May 10, 2006, was filed as an exhibit to our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and is
available at the SEC’s Web site at www.sec.gov.
OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
meeting other than that stated in this Proxy Statement. The Board knows of no
other matter to come before the meeting. If other matters are properly brought
before the meeting, it is the intention of the Board of Directors that the
persons named in the enclosed proxy will vote on such matters pursuant to the
proxy in accordance with their best judgment.
81