DEF 14A 1 ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.     )

 

 

Filed by the Registrant x   Filed by a Party other than the Registrant ¨

 

Check the appropriate box:

 

¨  Preliminary Proxy Statement

 

¨  CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
     (AS PERMITTED BY RULE 14a-6(e)(2))

 

x  Definitive Proxy Statement

 

¨  Definitive Additional Materials

 

¨  Soliciting Material Pursuant to §240.14a-12

 

 

 

 

EXELON CORPORATION


(Name of Registrant as Specified In Its Charter)

 

 

 

  


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

 

Payment of Filing Fee (Check the appropriate box):

 

x  No fee required.

 

¨  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)  Title of each class of securities to which transaction applies:

 

  

 
  (2)  Aggregate number of securities to which transaction applies:

 

  

 
  (3)  Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  

 
  (4)  Proposed maximum aggregate value of transaction:

 

  

 
  (5)  Total fee paid:

 

  

 

 

¨  Fee paid previously with preliminary materials.

 

¨  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1)  Amount Previously Paid:

 

  

 
  (2)  Form, Schedule or Registration Statement No.:

 

  

 
  (3)  Filing Party:

 

  

 
  (4)  Date Filed:

 

  

 

 

 


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LOGO


Table of Contents

LOGO

 

NOTICE OF THE ANNUAL MEETING

AND 2009 PROXY STATEMENT

 

 

March 19, 2009

Dear Shareholder:

We will hold the annual meeting of Exelon Corporation shareholders on Tuesday, April 28, 2009 at 9:30 A.M. Eastern Daylight Savings Time at the PECO Energy Company Headquarters, 2301 Market Street, Philadelphia, Pennsylvania.

The purpose of the annual meeting is to consider and take action on the following matters:

 

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The election of ten directors: John A. Canning, Jr., M. Walter D’Alessio, Bruce DeMars, Nelson A. Diaz, Rosemarie B. Greco, Paul L. Joskow, John M. Palms, John W. Rogers, Jr., John W. Rowe and Stephen D. Steinour; each to serve a term of one year;

 

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The renewal of the Exelon Corporation Annual Incentive Plan for Senior Executives, effective January 1, 2009;

 

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The ratification of PricewaterhouseCoopers LLP as Exelon’s independent accountant for the year 2009;

 

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One shareholder proposal, if properly presented at the meeting; and

 

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Any other business that properly comes before the meeting.

Shareholders of record as of March 2, 2009 are entitled to vote at the annual meeting.

We are pleased this year to take advantage of a Securities and Exchange Commission rule that permits us to furnish proxy materials to shareholders over the Internet. On or about March 19, 2009, we will mail to our shareholders a Notice Regarding the Availability of Proxy Materials, which will indicate how to access our proxy materials on the Internet. By furnishing this Notice, we are lowering the costs and reducing the environmental impact of our annual meeting.

Thank you for your continued interest and support of Exelon Corporation.

LOGO

Katherine K. Combs

Senior Vice President, Corporate Governance, Corporate Secretary

and Deputy General Counsel


Table of Contents

Table of Contents

 

 

1. Frequently Asked Questions     

n       Why am I receiving these proxy materials?

           4

n       What is Notice and Access?

   4

n       What is the record date and what does it mean?

   4

n       Who pays for the proxy solicitation related to the Annual Meeting?

   4

n       How do I vote?

   5

n       What is the quorum?

   5

n       What vote is needed for the proposals to be adopted?

   5

n       Will any business other than discussed in this proxy statement be considered or acted upon at this annual meeting?

   5

n       How can I submit a proposal for consideration at the 2010 annual meeting?

   6

n       How can I recommend or nominate someone to become a director of Exelon?

   6

n       Who will count and certify the votes?

   6

n       How can I attend the annual meeting?

   6

n       Can I view or receive the proxy materials electronically?

   7

n       How can I avoid duplicate mailings?

   7
2. Corporate Governance at Exelon     

n       The Board’s Function and Structure

   7

n       Board/Committee/Director Evaluation

   7

n       Director Education

   8

n       Process for Shareholder Communications with the Board

   8

n       Information about the Board of Directors and Committees

   8

n       Report of The Audit Committee

   10

n       Director Nomination Process

   13

n       Proposal 1: Election of Directors

   14

n       Class II and Class III Director to be Elected for a Term of One Year

   15

n       Continuing Class I Directors with Terms Expiring in 2010

   18

n       Director Independence

   20

n       Related Person Transactions

   22

n       Compensation Of Non-Employee Directors

   23
3. Ownership of Exelon stock     

n       Stock Ownership Requirements for Directors and Officers

   27

n       Beneficial Ownership Table

   28

n       Other Significant Owners of Exelon Stock

   29

n       Stock Performance Graph

   30
4. Compensation Discussion and Analysis     

n       Objectives of the Compensation Program

   31

n       The Role of Individual Performance In Setting Executive Compensation

   33

n       Elements of Compensation

   33

n       Executive Stock Ownership and Trading Requirements

   35

n       How the Amount of 2008 Compensation Was Determined

   38

n       How Base Salary Was Determined

   38

n       How 2008 Annual Incentives Were Determined

   39

n       How Long-Term Incentives Were Determined

   41

 

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n       Tax Consequences

   43

n       Report of the Compensation Committee

   44
5. Executive Compensation Data     

n       Summary Compensation Table

       44

n       Grants of Plan Based Awards

   48

n       Outstanding Equity Awards at Fiscal Year End

   50

n       Option Exercises and Stock Vested

   51

n       Pension Benefits

   52

n       Nonqualified Deferred Compensation

   53

n       Potential Payments upon Termination or Change In Control

   54

n       Estimated Value of Benefits to be Received Upon Retirement

   59

n       Estimated Value of Benefits to be Received Upon Termination Due to Death or Disability

   60

n       Estimated Value of Benefits to be Received Upon Involuntary Separation not Related to a Change In Control

   61

n       Estimated Value of Benefits to be Received Upon a Qualifying Termination Following a Change in Control

   62
6. Other Proposals to be voted upon     

n       Proposal 2: Renewal of the Exelon Corporation Annual Incentive Plan for Senior Executives, effective January 1, 2009

   63

n       Proposal 3: Ratification of PricewaterhouseCoopers LLP as Exelon’s Independent Accountant for 2009

   65

n        Proposal 4: A Shareholder Recommendation to Prepare a Report Showing that Exelon’s Actions to Reduce Global Warming Have Reduced Global Mean Temperature or Avoided Disasters

   66

n       Other Matters and Discretionary Voting Authority

   68
Annex A: Exelon Corporation Annual Incentive Plan For Senior Executives    A-1

 

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1. Frequently Asked Questions

 

Why am I receiving these proxy materials?

You are receiving these proxy materials in connection with the solicitation by the Exelon board of directors of proxies to be voted at the 2009 annual meeting of shareholders. Exelon has appointed William A. Von Hoene, Jr. and Katherine K. Combs, or either of them with power of substitution, to vote all proxies properly executed and submitted by shareholders who are entitled to vote at the annual meeting, or any adjournment of the meeting.

What is Notice and Access?

Notice and Access refers to the method, recently adopted by the Securities and Exchange Commission (“SEC”), by which shareholders will receive in the mail a Notice Regarding the Availability of Proxy Materials (the “Notice”) containing instructions on how to view the proxy materials on the Internet instead of receiving the full paper set of materials. The Notice will contain instructions on how to request a paper copy of the materials if the shareholder does not have access to the Internet or would prefer to have a paper copy. If a paper copy is requested, shareholders should expect to receive it within several days. Exelon is using Notice and Access for the first time in order to lower costs and reduce the environmental impact of our annual meeting.

The Notice will direct shareholders to the website, www.proxyvote.com, where they will log in using their unique control number. On this website, shareholders will be able to view Exelon’s proxy statement, summary annual report and financial information; the documents have been formatted for easy readability and are completely searchable. Shareholders may cast their votes in a secure manner on the same website.

What is the record date and what does it mean?

The record date is the date used to determine which shareholders are entitled to vote at the annual meeting. At the close of business on March 2, 2009, there were 658,623,268 shares of Exelon common stock issued and outstanding and eligible to vote at the annual meeting.

If you hold shares that are registered directly in your name with Exelon’s transfer agent, BNY Mellon Shareowner Services, or if you are an Exelon employee who holds shares purchased through the Employee Stock Purchase Plan, you are considered a Holder of Record, and Exelon has sent to you the Notice.

If you are an Exelon employee who holds shares through the Employee Savings Plan (the 401(k)) Exelon has sent to you the full paper set of materials.

If you hold Exelon shares through a bank, brokerage or other nominee account, you are considered the beneficial owner of shares held in street name. Your bank, broker or other nominee has sent to you the Notice, unless you had previously elected with your bank, broker or other nominee to receive a full paper set of materials, along with a vote instruction form (“VIF”). Whether you received the Notice or the full paper set of materials, you have the right to direct your bank, broker or other nominee how to vote your shares by submitting your voting instructions through the Internet at www.proxyvote.com or by completing and mailing the VIF.

Who pays for the proxy solicitation related to the Annual Meeting?

Exelon does. We have retained Georgeson Shareholder Communications, Inc. to help us send out the proxy materials and ask for proxies. Georgeson’s fee for these services is $15,000, plus reimbursement of out-of-pocket expenses. We can ask for proxies through the mail, by telephone or the Internet. We may use directors, officers and regular employees of Exelon to ask for proxies. These people do not receive additional compensation for performing this service. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of Exelon common stock.

 

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How do I vote?

Your vote is important. We encourage you to vote promptly. Internet and telephone voting are available through 11:59 p.m. Eastern Daylight Savings Time on Monday, April 27, 2009. You may vote in the following ways:

 

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By Internet. You will need the control number included on your Notice Regarding the Availability of Proxy Materials, proxy card or VIF, as applicable. You may vote in a secure manner at www.proxyvote.com 24 hours a day. You will be able to confirm that the system has properly recorded your votes and you do not need to return your proxy card or VIF. You may incur telephone and Internet access charges if you vote by the Internet.

 

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By Telephone. If you are located in the United States or Canada, you can vote by calling the toll-free telephone number and following the recorded instructions. You will need the control number included on your Notice Regarding the Availability of Proxy Materials, proxy card or VIF, as applicable. You may vote by telephone 24 hours a day. The telephone voting system has easy-to-follow instructions and allows you to confirm that the system has properly recorded your votes. If you vote by telephone, you do not need to return your proxy card or your VIF.

 

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By Mail. If you are a holder of record and received a full paper set of materials, you can vote by marking, dating and signing your proxy card and returning it by mail in the postage-paid envelope provided. If you hold shares in street name, please complete and mail the VIF.

 

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At the Annual Meeting. Attend the annual meeting in person and use a ballot provided at the meeting to cast your vote.

Revocation of Proxies. You can revoke your proxy at any time before your shares are voted if you (1) submit a written revocation to the Corporate Secretary, (2) submit a later-dated proxy (or VIF, if you hold shares in street name), (3) provide subsequent telephone or Internet voting instructions, or (4) vote in person at the annual meeting.

What is the quorum?

As of March 2, 2009, there were 658,623,268 shares of Exelon common stock outstanding and entitled to vote. We will have a quorum and will be able to conduct business at the annual meeting if a majority of these outstanding shares are present at the annual meeting, either in person or by proxy. Abstention and broker non-votes on any proposal to be acted upon by shareholders will be treated as present at the annual meeting for purposes of quorum.

What vote is needed for the proposals to be adopted?

 

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Proposals: More than one-half of the shares present either in person or by proxy and entitled to vote at the annual meeting must vote “for” a proposal in order for it to be adopted.

 

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Directors: To be elected in a contested election, a director nominee is elected by a plurality of the votes cast. Under the bylaws, in an uncontested election, each director nominee must submit to the board before the annual meeting a letter of resignation which is conditioned on not receiving the required majority of the total number of votes cast (either for or against the nominee) at the meeting. The resignation of a director nominee who is not an incumbent director is automatically accepted by the board. The resignation of an incumbent director is tendered to the independent directors of the board, for a determination of whether or not to accept the resignation. The board’s decision and the basis for the decision would be disclosed within 90 days following the certification of the final vote results.

Will any business other than discussed in this proxy statement be considered or acted upon at this annual meeting?

No. Exelon’s bylaws required the submission to the company by November 19, 2008 of advance notice of all director nominations and shareholder proposals to be considered at the 2009 annual meeting, regardless of whether the proponent seeks inclusion of their nomination or proposal in this proxy, or intends to solicit their own proxies. Since Exelon did not receive notice of any other matters (except that which is included in this proxy statement), no other nominations or proposals shall be considered at the 2009 annual meeting. A copy of our bylaws is available on Exelon’s website at www.exeloncorp.com, under the investor relations tab.

 

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How can I submit a proposal for consideration at the 2010 annual meeting?

In order to be considered for the 2010 annual meeting, shareholder proposals must be submitted before Thursday, November 19, 2009, in writing to our principal executive office in care of Ms. Katherine K. Combs, Senior Vice President, Corporate Governance, Corporate Secretary and Deputy General Counsel, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. To be effective, the notice must disclose fully all ownership interests the proponent has in Exelon and contain a representation as to whether the shareholder has any intention of delivering a proxy statement to the other shareholders of Exelon. The proposal must also meet the other requirements of the rules of the SEC relating to shareholder proposals.

How can I recommend or nominate someone to be a director of Exelon?

A shareholder who wishes to recommend a candidate (including a self-nomination) to be considered by the Exelon corporate governance committee for nomination as a director must submit the recommendation in writing to Mr. M. Walter D’Alessio, Chairman of the Corporate Governance Committee, c/o Katherine K. Combs, Senior Vice President, Corporate Governance, Corporate Secretary and Deputy General Counsel, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. The corporate governance committee will consider all recommended candidates and self-nominees when making its recommendation to the full board of directors to nominate a slate of directors for election.

 

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Nominations for 2009. Under the Exelon bylaws, the deadline has passed for a shareholder to nominate a candidate (or nominate himself or herself) for election to the board of directors at the 2009 annual meeting.

 

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Nominations for 2010. To nominate a candidate for election as a director or to stand for election at the 2010 annual meeting, a shareholder must either submit a recommendation to the corporate governance committee or provide the proper notice and the other information required by Exelon’s bylaws: (1) notice of the proposed nomination must be received by Exelon no later than Thursday, November 19, 2009; (2) the notice must include information required under the bylaws, including: (a) information about the nominating shareholder, (b) information about the candidate that would be required to be included in a proxy statement under the rules of the SEC, (c) a representation as to whether the shareholder intends to deliver a proxy statement to the other shareholders of Exelon, and (d) the signed consent of the candidate to serve as a director of Exelon, if elected.

Who will count and certify the votes?

Representatives from Broadridge Investor Communication Solutions and Exelon’s Office of Corporate Governance will count the votes and certify the election results. The results will be available on the investor relations page of our website by May 5, 2009, and will also be published in Exelon’s second quarter SEC report on Form 10-Q.

How can I attend the annual meeting?

Admittance to the annual meeting is limited to shareholders who are eligible to vote or their authorized representatives. If you are a Holder of Record and wish to attend the annual meeting, you must present both state-issued photo identification and any of the following in order to gain admission into the meeting:

 

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the Notice instruction card;

 

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the bottom half of your proxy card; or

 

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if you received your proxy materials through the Internet, you may print the e-mail with your control number.

If your shares are held in the name of a bank, broker or other nominee, and you wish to attend the annual meeting, you must bring state-issued photo identification along with proof of ownership, such as an account statement that clearly shows that you held Exelon common stock on the record date or a legal proxy obtained from your bank, broker or other nominee. Alternatively, you may obtain a ticket by sending your request and a copy of proof of your ownership to: Annual Meeting Admission Tickets c/o Katherine K. Combs, Senior Vice President, Corporate Governance, Corporate Secretary and Deputy General Counsel, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398.

No cameras, recording equipment, electronic devices, large bags, backpacks, briefcases or packages will be permitted in the meeting room or adjacent areas. All other items may be subject to search.

 

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Can I view or receive the proxy materials electronically?

Yes, simply log into www.proxyvote.com and follow the instructions to consent to the electronic delivery of materials. If you are a street name shareholder, please check the information provided by your bank, broker or other nominee concerning the availability of this service.

How can I avoid duplicate mailings?

If you received more than one set of materials, you may request “householding” by calling the Exelon Shareowner Services Helpline at 1-800-626-8729 and speaking to a customer service representative. Householding allows Exelon to send a single annual report and proxy statement to two or more shareholders who share the same address, subject to certain conditions.

If your household received only one copy and you wish to receive another, or if you wish to remove your account from the householding program, please call the Exelon Shareowner Services Helpline at 1-800-626-8729 and speak to a customer service representative or submit your request in writing to Exelon Corporation c/o BNY Mellon Shareowner Services P.O. Box 358016, Pittsburgh, PA 15252-8016.

2. Corporate Governance at Exelon

 

The Board’s Function and Structure

Exelon’s business, property and affairs are managed under the direction of the board of directors. The board is elected by shareholders to oversee management of the company in the long-term interest of all shareholders. The board considers the interests of other constituencies, which include customers, employees, annuitants, suppliers, the communities we serve, and the environment. The board is committed to ensuring that Exelon conducts business in accordance with the highest standards of ethics, integrity, and transparency.

The Exelon board and those of its predecessor companies have monitored governance trends and implemented best practices for many years. As a result, Exelon already had in place many of the governance structures and processes that were required as governance reforms following the enactment of the Sarbanes-Oxley Act of 2002. Foremost among these were the Exelon Corporate Governance Principles. These principles are revised from time to time to reflect emerging governance trends and to better address the particular needs of the corporation as they change over time.

The Exelon Corporate Governance Principles, the Exelon Code of Business Conduct, the Exelon Amended and Restated Bylaws, and the charters for the audit, corporate governance, compensation and other committees of the board of directors are available on the Exelon website at www.exeloncorp.com, under the investor relations tab. Copies may be printed from the Exelon website and copies are available without charge to any shareholder who requests them by writing to Katherine K. Combs, Senior Vice President, Corporate Governance, Deputy General Counsel and Corporate Secretary, Exelon Corporation, P.O. Box 805398, Chicago, Illinois 60680-5398.

Board/Committee/Director Evaluation

The board has a three-part annual evaluation process that is coordinated by the corporate governance committees: committee self-evaluations; a full board evaluation; and the evaluation of the individual directors in the class whose term is expiring at the next annual meeting. The committee self-assessments consider whether and how well each committee has performed the responsibilities in its charter, whether the committee members possess the right skills and experience to perform their responsibilities or whether additional education or training is required, whether there are sufficient meetings covering the right topics, and whether the meeting materials are effective. The full board evaluation considers the following, in light of the committee self-assessments: (1) the effectiveness of the board organization and committee structure; (2) the quality of meetings, agendas, presentations and meeting materials; (3) the effectiveness of director preparation and participation in discussions; (4) the effectiveness of director selection, orientation and continuing education processes; (5) the effectiveness of the process for establishing the Chief Executive Officer’s (“CEO’s”) performance criteria and evaluating his performance; and (6) the quality of administrative planning and logistical support.

Individual director performance assessments involve a discussion among the members of the corporate governance committee of each director’s performance using the performance expectations for directors contained in the Corporate Governance Principles. In addition, the chairman of the corporate governance committee or the chairman of the board provides individual feedback, as necessary. All assessments focus on both strengths and opportunities for improvement.

 

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Director Education

The board has a program, overseen by the corporate governance committee, for orienting new directors and providing continuing education for all directors. The orientation program is tailored to the needs of each new director depending on his or her level of experience serving on other boards and knowledge of the company or industry acquired before joining the board. All new directors receive materials about Exelon, the board and board policies and operations. Each new director is scheduled for meetings with the CEO and each executive vice president and members of his or her staff for a briefing on the executive’s responsibilities, programs and challenges. New directors are also scheduled for tours of various company facilities, depending on their orientation needs (incumbent directors are also invited to participate in the site visits, if available).

Continuing director education is primarily delivered during portions of regular board and committee meetings and focuses on the topics necessary to enable the board to consider effectively issues before them at that time (such as new regulatory or accounting standards). The education often takes the form of “white papers,” covering timely subjects or topics, which a director can review before the meeting and ask questions about during the meeting. The audit committee devotes a full meeting each year to educating the committee members about new accounting rules and standards, and topics that are necessary to having a good understanding of our accounting practices and financial statements. Both the energy delivery oversight committee and the generation oversight committee use site visits as a regular part of education for their members: (1) the generation oversight committee holds each meeting at a different generating station (nuclear, fossil and hydro) and the agenda always includes a briefing by local plant management, a tour of the facility and lunch with plant personnel; and (2) the energy delivery oversight committee periodically tours substations, transmission and distribution lines, call centers and other facilities. The company pays the cost for any director to attend outside director education seminars on corporate governance or other topics relevant to their service as directors.

Process for Shareholder Communications with the Board

Shareholders and other interested persons can communicate with the chairman of the corporate governance committee or with the independent directors as a group by writing to them, c/o Ms. Katherine K. Combs, Senior Vice President, Corporate Governance, Corporate Secretary and Deputy General Counsel, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. The board has instructed the corporate secretary to review communications initially and transmit a summary to the directors and to exclude from transmittal any communications that are commercial advertisements, other forms of solicitation, general shareholder service matters or individual service or billing complaints. Under the board policy, the corporate secretary will forward to the directors any communication raising substantial issues. All communications are available to the directors upon request. Shareholders may also report an ethics concern with the Exelon Ethics Hotline by calling 1-800-23-Ethic (1-800-233-8442). You may also report an ethics concern via the Internet at EthicsOffice@ExelonCorp.com.

Information About the Board of Directors and Committees

The board of directors met 13 times during 2008. The board also attended a two-day strategy retreat with the senior officers of Exelon and subsidiary companies. All directors attended at least 75% of all board and committee meetings that they were eligible to attend, with an average attendance of over 93% across all directors for all board and committee meetings. Although Exelon does not have a formal policy requiring attendance at the annual shareholders meeting, all directors generally attend the annual meeting and all of them did so in 2008.

 

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The board has six standing committees: audit, compensation, corporate governance, risk oversight, energy delivery oversight and generation oversight. The committees and their membership during 2008 are presented below.

All of the directors, except Mr. Rowe, are determined to be “independent” under the listing standards of the NYSE and Exelon’s Corporate Governance Principles.

 

Director   Audit   Compensation   Corporate
Governance
  Energy
Delivery
  Generation
Oversight
 

Risk
Oversight

 

                                

John A. Canning, Jr.

  Member (1)   Member (1)                

M. Walter D’Alessio

  Member (2)   Member   Chair            

Nicholas DeBenedictis

          Member   Chair (3)   Member    

Bruce DeMars

  Member       Member   Member   Chair    

Nelson A. Diaz

              Member   Member   Member

Sue L. Gin

  Member       Member           Chair

Rosemarie B. Greco

      Chair (4)       Member        

Paul L. Joskow

  Member           Member       Member

Richard W. Mies

                  Member (5)    

John M. Palms

  Chair       Member       Member   Member

William C. Richardson

  Member   Member   Member (6)           Member

Thomas J. Ridge

              Member        

John W. Rogers, Jr.

          Member           Member

John W. Rowe (7)

                       

Stephen D. Steinour

  Member   Member           Member    

Don Thompson

              Member   Member    
                         

 

1. Mr. Canning was appointed to the audit and compensation committees, effective September 23, 2008.

 

2. After serving on the audit committee for four years, Mr. D’Alessio stepped down, effective September 23, 2008, when Mr. Canning was appointed to the committee.

 

3. Mr. DeBenedictis was appointed chair of the energy delivery oversight committee, effective April 29, 2008, replacing Ms. Greco who was chair until that time.

 

4. Ms. Greco was appointed chair of the compensation committee, effective April 29, 2008. On the same date, she stepped down as chair of the energy delivery oversight committee but remains a member of the energy delivery oversight committee.

 

5. Admiral Mies was appointed to the generation oversight committee, effective February 2, 2009.

 

6. Mr. Richardson was appointed to the corporate governance committee, effective April 29, 2008.

 

7. Mr. Rowe is considered an invited guest and is welcome to attend all committee meetings, except when the independent directors meet in executive session, such as when they conduct Mr. Rowe’s performance evaluation.

Board Committee Charters

Each board committee operates pursuant to a written charter approved by the board of directors. Copies of the committee charters are available on Exelon’s website at www.exeloncorp.com on the “Investor Relations” page under the link “Corporate Governance–Board Committees.”

Audit Committee

The audit committee held 11 meetings during 2008. The board has determined that all members of the audit committee are “independent,” as that term is defined in Section 10A of the Securities Exchange Act of 1934, as amended, the related SEC rules, the New York Stock Exchange (“NYSE”) listing standards and our Corporate Governance Principles. As required by the rules of the NYSE, the board of directors has determined that all members of the audit committee are financially literate and have accounting or related financial management expertise, as the board in its business judgment interprets those qualifications. In addition, the board of directors has determined that all members of the committee are “audit committee financial experts,” as defined by SEC regulations.

 

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The audit committee’s principal duties, as discussed in its charter, include:

 

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Reviewing financial reporting, accounting practices and internal control functions;

 

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With the assistance of the risk oversight committee, reviewing and making recommendations to the full board regarding risk management policy and legal and regulatory compliance;

 

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Recommending the independent accountant;

 

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Approving the scope of the annual audits by the independent accountant and internal auditors; and

 

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Reviewing and making recommendations to the full board regarding officers and directors expenses and compliance with Exelon’s Code of Business Conduct.

The committee meets outside the presence of management for portions of its meetings to hold separate discussions with the independent accountant, the internal auditors and the chief legal officer.

Report of the Audit Committee

In fulfilling its responsibilities, the audit committee has reviewed and discussed the audited financial statements contained in the 2008 Annual Report on SEC Form 10-K with Exelon Corporation’s management and the independent accountant. The Exelon audit committee discussed with the independent accountant the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Exelon audit committee has received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee regarding independence and has discussed with the independent accountant the independent accountant’s independence.

In reliance on the reviews and discussions referred to above, the Exelon audit committee recommended to the Exelon board of directors (and the Exelon board of directors has approved) that the audited financial statements be included in Exelon Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008, for filing with the SEC.

The committee has a charter that has been approved by the Exelon board of directors.

 

February 6, 2009    
   
The Audit Committee    
John M. Palms, Chair   Paul L. Joskow  
John A. Canning, Jr.   William C. Richardson  
Bruce DeMars   Stephen D. Steinour  
Sue L. Gin    

Compensation Committee

The compensation committee met five times during 2008. All members of the committee are independent directors.

The compensation committee’s principal duties, as discussed in its charter, include:

 

  n  

Ensuring that executive compensation levels and targets are aligned with, and designed to achieve, Exelon’s strategic and operating objectives; and

 

  n  

Reviewing recommendations from management and outside consultants and approving or recommending approval of matters of executive compensation for officers of Exelon and its subsidiaries, including base salary, incentive awards, equity grants, perquisites, and other forms of compensation.

The compensation committee has a charter that has been approved by the board of directors.

Pursuant to the compensation committee’s charter, the committee is authorized to retain and terminate, without board or management approval, the services of an independent compensation consultant to provide advice and assistance, as

 

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the committee deems appropriate. The committee has the sole authority to approve the consultant’s fees and other retention terms, and reviews the independence of the consultant and any other services that the consultant or the consultant’s firm may provide to the company. The chair of the compensation committee reviews, negotiates and executes an engagement letter with the compensation consultant. The compensation consultant directly reports to the committee. The committee engaged Mr. Richard Meischeid, Managing Principal of Towers Perrin, as its independent compensation consultant for 2008.

As part of its ongoing services to the compensation committee, the compensation consultant supports the committee in executing its duties and responsibilities with respect to Exelon’s executive compensation programs by providing information regarding market trends and competitive compensation programs and strategies. In supporting the compensation committee, the compensation consultant does the following:

 

  n  

Prepares market data for each senior executive position, including evaluating Exelon’s compensation strategy and reviewing and confirming the peer group used to prepare the market data;

 

  n  

Provides the committee with an independent assessment of management recommendations for changes in the compensation structure;

 

  n  

Works with management to ensure that the company’s executive compensation programs are designed and administered consistent with the committee’s requirements; and

 

  n  

Provides ad hoc support to the committee, including discussing executive compensation and related corporate governance trends.

Exelon’s human resources staff and senior management use the data provided by the compensation consultant to prepare documents for use by the compensation committee in preparing their recommendations to the full board of directors or, in the case of the CEO, the independent directors, on compensation for the senior executives.

In addition to its general responsibilities, the compensation consultant attends the compensation committee’s meetings, if requested. The committee, or Exelon’s management on behalf of the committee, may also ask the compensation consultant to perform other executive and non-executive compensation-related projects. The committee has established a process for determining whether any significant additional services will be needed and whether a separate engagement for such services is necessary.

In 2008, the compensation consultant also worked with Exelon’s corporate governance committee to provide market data regarding director compensation at the same peer group of companies as is used for benchmarking executive compensation.

In order to ensure the independence of the compensation consultant, the committee requires that Mr. Meischeid and his associates providing services to the compensation committee have no direct involvement with any other aspects of Towers Perrin’s relationship with Exelon (other than the director compensation services performed for the corporate governance committee), and that no element of their compensation be based on any consideration of the revenues for other services that Towers Perrin may provide to Exelon. A different office of Towers Perrin provides Exelon certain actuarial and other services relating to pension and post-retirement plans and other benefits, including related financial calculations for SEC disclosures, human resources technology support, and occasional special studies. The amount of revenues for such other services is regularly reported to the compensation committee.

Executive officers are involved in evaluation of the performance and development of initial recommendations with respect to compensation adjustments; however, the compensation committee (and the independent directors and the full board of directors, respectively, with respect to the compensation of the CEO and the executive vice presidents and the ComEd CEO) makes the final determinations with respect to compensation programs and adjustments. Under Exelon’s Corporate Governance Principles, the CEO is considered an invited guest and is welcome to attend the meetings of the compensation committee, except when the compensation committee meets in executive session to discuss, for example, the CEO’s own compensation. The CEO cannot call meetings of the compensation committee.

Management, including the executive officers, makes recommendations as to goals for the incentive compensation programs that are aligned with Exelon’s business plan. The compensation committee reviews the recommendations and

 

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establishes the final goals. The compensation committee strives to ensure that the goals are consistent with the overall strategic goals set by the board of directors (including the individual goals of subsidiaries, as appropriate), that they are sufficiently difficult to meaningfully incent management performance, and, if the targets are met, that the payouts will be consistent with the design for the overall compensation program. Executive officers take an active role in evaluating the performance of the executives who report to them, directly or indirectly, and in recommending the amount of compensation their subordinate executives receive. Executive officers review peer group compensation data for each of their subordinates in conjunction with their annual performance reviews to formulate a recommendation for base salary and whether to apply an individual performance multiplier to the subordinate executive’s annual incentive payout, and if so, the amount of the multiplier. Executive officers generally do not make recommendations with respect to annual and long-term incentive target percentages or payouts. The CEO reviews all of the recommendations of the executive officers before they are presented to the compensation committee. The human resources function provides to the compensation committee and the independent directors data showing the history of the CEO’s compensation and data that analyzes the cost of a range of several alternatives for changes to the CEO’s compensation, but neither the executive officers nor the CEO makes any recommendation to the compensation committee or the independent directors with respect to the compensation of the CEO.

The compensation committee has delegated to the CEO the authority to make off-cycle awards to employees who are not subject to the limitations of Section 162(m), are not executive officers for purposes of reporting under Section 16 of the Securities Exchange Act of 1934, and are not executive vice presidents or higher of Exelon, provided that such authority is limited to making grants of up to 1,200,000 options in the aggregate, and 20,000 options per recipient in any year. The compensation committee reviews and ratifies these grants. On rare occasions, stock options are granted to new hires on the date they commence employment. One off-cycle grant of stock options was made in 2008 to a recently-promoted officer who should have received a grant in January 2008 when the annual stock option grants were made. In addition, the CEO has been delegated authority from the compensation committee to adjust base salaries for retention purposes or unique circumstances for officers who are not executive vice presidents or higher.

Corporate Governance Committee

The corporate governance committee met five times in 2008. All members of the committee are independent directors.

The corporate governance committee’s principal duties, as discussed in its charter, include:

 

  n  

Reviewing and making recommendations on corporate, board and committee structure, organization, committee membership, functions, compensation and effectiveness;

 

  n  

Monitoring corporate governance trends and making recommendations to the board regarding the Corporate Governance Principles;

 

  n  

Coordinating the annual evaluations of the performance of each committee and the board as a whole;

 

  n  

Evaluating the performance of individual directors as the term of each class expires and the members are considered for re-election;

 

  n  

Overseeing the directors’ orientation and continuing education program;

 

  n  

Identifying potential director candidates and coordinating the nominating process for directors;

 

  n  

Coordinating the board’s role in establishing performance criteria for the CEO and evaluating the CEO’s performance;

 

  n  

Monitoring succession planning and executive leadership development;

 

  n  

Overseeing Exelon’s policies and practices to protect and improve the environment, including climate change, sustainability and Exelon’s 2020 Strategy;

 

  n  

Approving or amending delegations of authority for Exelon and its subsidiaries; and

 

  n  

Overseeing Exelon’s efforts to promote diversity among its directors, officers, employees and contractors.

The committee may act on behalf of the full board when the board is not in session. The committee utilizes an independent compensation consultant to assist it in evaluating directors’ compensation, and for this purpose it

 

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periodically asks the consultant to prepare a study of the compensation of the company’s directors compared to the directors of companies in the same peer group used for executive compensation. This study is used as the basis for the corporate governance committee’s recommendations to the full board with respect to director compensation. The corporate governance committee may utilize other consultants, such as specialized search firms to identify candidates for director.

Director Nomination Process

The corporate governance committee serves as the nominating committee and recommends director nominees. The board of directors receives the proposed nominations from the corporate governance committee and approves the nominees to be included in the Exelon proxy materials that are distributed to shareholders.

The corporate governance committee considers all candidates for director, including both directors currently serving on the board whose term is expiring and candidates recommended by shareholders and others. The committee may also utilize specialized search firms to identify and assess potential candidates. The committee periodically assesses the board’s needs for skills and experience in light of current and future needs. All candidates are considered in light of the following standards and qualifications for director that are contained in the Exelon Corporate Governance Principles:

 

  n  

Highest personal and professional ethics, integrity and values;

 

  n  

An inquiring and independent mind;

 

  n  

Practical wisdom and mature judgment;

 

  n  

Broad training and experience at the policy-making level in business, government, education or technology;

 

  n  

Expertise useful to Exelon and complementary to the background and experience of other Exelon board members;

 

  n  

Willingness to devote the required amount of time to the duties and responsibilities of board membership;

 

  n  

A commitment to serve over a period of years to develop knowledge about Exelon; and

 

  n  

Involvement only in activities or interests that do not create a conflict with responsibilities to Exelon and its shareholders.

Risk Oversight Committee

The risk oversight committee met four times in 2008.

The risk oversight committee’s principal duties, as discussed in its charter, include:

 

  n  

Overseeing the company’s risk management functions;

 

  n  

Reporting to the audit committee and to the full board regarding corporate risk management policy (including financial risks, legal and regulatory risks), power marketing, power trading risk management strategy, nuclear fuels procurement and performance, and the hedged condition of the generation portfolio;

 

  n  

Reviewing and approving risk policies relating to power marketing, hedging and the use of derivatives;

 

  n  

Overseeing and reviewing the performance and management of assets in Exelon’s pension and nuclear decommissioning trust funds; and

 

  n  

Appointing and removing the parties overseeing the performance and management of investment of assets in Exelon’s employee benefit trusts.

Energy Delivery Oversight Committee

The energy delivery oversight committee met five times in 2008.

The energy delivery oversight committee’s principal duties, as discussed in its charter, include:

 

  n  

Overseeing the operating utilities’ (ComEd and PECO) performance trends, compared to benchmarks, focusing on issues having cross-utility impact or opportunities for sharing best practices and lessons learned;

 

  n  

Reviewing issues having significant impact on utility capital budgets and resource adequacy to meet utility service obligations;

 

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  n  

Reviewing significant legislative, regulatory and investment and recovery strategies, focusing on those with potential multi-state or multi-utility impact;

 

  n  

Reviewing significant labor and human relations policies or issues related to the operating utilities, focusing on those with potential cross-utility impact and sharing of best practices and lessons learned; and

 

  n  

Reviewing significant environmental, health and safety policies or practices related to the operating utilities.

Generation Oversight Committee

The generation oversight committee met four times in 2008.

The generation oversight committee’s principal duties, as discussed in its charter, include:

 

  n  

Advising and assisting the full board in fulfilling its responsibilities to oversee the safe and reliable operation of all generating facilities owned or operated by Exelon or its subsidiaries, including those in which Exelon has significant equity or operational interests;

 

  n  

Reviewing major investments and changes in strategy regarding the generating facilities; and

 

  n  

Reviewing the budget and business plans of Exelon Generation Company and monitoring its operating and financial performance.

Proposal 1: Election of Directors

Our board is composed of 16 members. In 2007, we amended the Articles of Incorporation to declassify the board of directors over a three-year period. As a result, this year both Class II and Class III directors are standing for election to one-year terms; prior to declassification, each class served staggered three-year terms, with only one class standing for election each year. Beginning in 2010, all directors will be elected annually to serve for one-year terms.

Upon the recommendation of the corporate governance committee, the board nominated the following 10 candidates for election as directors, each to serve a one-year term:

Each of the following nominees has agreed to be named in this proxy statement and to serve as a director, if elected.

 

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The board of directors recommends a vote “FOR”

each of the director nominees below.

Class II and III Directors to be Elected for a Term of One Year

 

LOGO   

John A. Canning, Jr.

Director since 2008

Age 64

 

Member-Audit Committee

Member-Compensation Committee

 

Mr. Canning is the Chairman and co-founder of Madison Dearborn Partners, LLC, a private equity investment firm. Prior to co-founding Madison Dearborn Partners, Mr. Canning spent 24 years with First Chicago Corporation. He has 28 years of experience in private equity investing. Mr. Canning is a director and the Chairman of the Federal Reserve Bank of Chicago. He is also a Commissioner of the Irish Pension Reserve Fund.

LOGO   

M. Walter D’Alessio

Director since 2000

Age 75

 

Presiding Director

Chair-Corporate Governance Committee

Member-Compensation Committee

 

Mr. D’Alessio serves as presiding director, who leads the discussion when the non-management directors meet in executive session. With the chair of the compensation committee, he also leads the discussion during the executive session to evaluate the chief executive officer and determine his compensation. He is Vice Chairman of NorthMarq Capital (a real estate investment banking firm) and is Senior Managing Director of NorthMarq Advisors (a real estate consulting group), positions he has held since July 2003. Prior to that, he was the Chairman and CEO of Legg Mason Real Estate Services, Inc. (from 1982 through July 2003). He is the Chairman of the board of Brandywine Real Estate Investment Trust, Chairman of the board of Independence Blue Cross, a director of the Federal Home Loan Bank Board of Pittsburgh and a director of the Pennsylvania Real Estate Investment Trust. He also serves on the Board of PECO Energy Company, an Exelon subsidiary (“PECO”).

LOGO   

Bruce DeMars

Director since 2000

Age 73

 

Chair-Generation Oversight Committee

Member-Audit Committee

Member-Corporate Governance Committee

Member-Energy Delivery Oversight Committee

 

Admiral DeMars is a Retired Admiral, United States Navy. From 1988 until his retirement from the Navy in October 1996, Admiral DeMars was the Director of the Naval Nuclear Propulsion Program, a joint Department of the Navy/Department of Energy program responsible for the design, construction, maintenance, operation and final disposal of nuclear reactor plants for the U.S. Navy. Admiral DeMars is also a director of Oceanworks International, Inc.

 

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LOGO   

Nelson A. Diaz

Director since 2004

Age 61

 

Member-Energy Delivery Oversight Committee

Member-Generation Oversight Committee

Member-Risk Oversight Committee

 

Judge Diaz has been Of Counsel to Cozen O’Connor, a Philadelphia-based law firm since May 2007. He was previously a partner of Blank Rome LLP (a law firm), from March 2004 through May 2007, and from February 1997 through December 2001. He served as the City Solicitor for the City of Philadelphia from December 2001 through January 2004, and Judge of the Court of Common Pleas, First Judicial District of Pennsylvania, from 1981 to 1993. He also served as General Counsel, United States Department of Housing and Urban Affairs, from 1993 to 1997. He also serves as a director of PECO.

LOGO   

Rosemarie B. Greco

Director since 2000

Age 62

 

Chair-Compensation Committee

Member-Energy Delivery Oversight Committee

 

Ms. Greco serves as a Senior Advisor to the Governor of Pennsylvania-Health Care Reform. She served as the director of the Governor’s Office of Health Care Reform for the Commonwealth of Pennsylvania from January 2003 through December 2008. She is also the founding principal of GRECOVentures Ltd., a private management consulting firm. She was formerly President of CoreStates Financial Corporation and former Director, President and CEO of CoreStates Bank, N.A. She is a director of Sunoco, Inc. and Pennsylvania Real Estate Investment Trust. She is also a trustee of SEI Investment Management Corp., a subsidiary of SEI Investments, Co. She also serves as a director of PECO.

LOGO   

Paul L. Joskow, Ph. D.

Director since 2007

Age 61

 

Member-Audit Committee

Member-Energy Delivery Oversight Committee

Member-Risk Oversight Committee

 

Professor Joskow has been the President of the Alfred P. Sloan Foundation since January 1, 2008. He is also the Elizabeth and James Killian Professor of Economics and Management at the Massachusetts Institute of Technology (“MIT”). He was Director of the MIT Center for Energy and Environmental Policy Research from 1999 to 2007. Professor Joskow joined the MIT faculty in 1972 and was head of the MIT Department of Economics from 1994 to 1998. He is a Fellow of the American Academy of Arts and Sciences and the Econometric Society. He has served on the U.S. Environmental Protection Agency’s (“EPA”) Acid Rain Advisory Committee, on the Environmental Economics Committee of EPA’s Science Advisory Board, and on the National Commission on Energy Policy. He is a director of TransCanada Corporation and a Trustee of the Putnam Mutual Funds. Professor Joskow is also a trustee of Yale University.

 

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LOGO   

John M. Palms, Ph. D.

Director since 2000

Age 73

 

Chair-Audit Committee

Member-Corporate Governance Committee

Member-Generation Oversight Committee

Member-Risk Oversight Committee

 

Dr. Palms is a Distinguished President Emeritus and Distinguished University Professor Emeritus of the University of South Carolina. He served as the President of the University of South Carolina from 1991 through June 2002 and as Distinguished University Professor from 2002 through 2007. He is the former President of Georgia State University, and the former Vice President for Academic Affairs and the Charles Howard Chandler Professor of Radiation and Environmental Physics at Emory University. He is the Chairman of the board of directors of Assurant Inc., and also serves on the boards of Computer Task Group, Inc. and the Geo Group. In addition, Dr. Palms is the Chairman of the board of trustees of the Institute for Defense Analyses, and was formerly a member of the National Nuclear Accreditation Board and the Advisory Council for the Institute of Nuclear Power Operations.

LOGO   

John W. Rogers, Jr.

Director since 2000

Age 50

 

Member-Corporate Governance Committee

Member-Risk Oversight Committee

 

Mr. Rogers is the founder, Chairman and CEO of Ariel Investments, LLC, an institutional money management firm and serves as trustee of the Ariel Investment Trust. He is a director of Aon Corporation and McDonald’s Corporation. He is also a director of Commonwealth Edison Company, an Exelon subsidiary (“ComEd”).

LOGO   

John W. Rowe

Director since 2000

Age 63

 

Mr. Rowe has served as a Director and as Chief Executive or Co-Chief Executive Officer of Exelon since its formation in October of 2000. He has served as Chairman and Chief Executive Officer since April of 2002. At various times since 2000, he has also held the title of President of Exelon. He previously served as Chairman, President and Chief Executive Officer of Unicom Corporation and Commonwealth Edison Company. He also serves as a director of Sunoco, Inc. and The Northern Trust Corporation. He serves as Chairman and director of PECO.

LOGO   

Stephen D. Steinour

Director since 2007

Age 50

 

Member-Audit Committee

Member-Compensation Committee

Member-Generation Oversight Committee

 

In January 2009, Mr. Steinour was elected the Chairman, President and Chief Executive Officer of Huntington Bancshares Incorporated, a regional bank holding company. He was the Chairman and Managing Partner of Cross Harbor Capital Partners, a private equity firm, from 2008 through January 2009. He was previously President and CEO of Citizens Financial Group, Inc., a multi-state commercial bank holding company, a position that he held from 2006 through 2008. From 2005 through 2006, he served as Vice Chairman and Chief Executive Officer of Citizens Mid-States regional banking. He served as Vice Chairman and Chief Executive Officer of Citizens Mid-Atlantic Region from 2001 to 2005.

 

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Continuing Class I Directors With Terms Expiring in 2010

 

LOGO   

Nicholas DeBenedictis

Director since 2002

Age 63

 

Chair-Energy Delivery Oversight Committee

Member-Corporate Governance Committee

Member-Generation Oversight Committee

 

Mr. DeBenedictis is the Chairman (since 1993) and Chief Executive Officer (since 1992) of Aqua America Inc., a water utility with operations in 13 states. Aqua America is the second largest U.S.-based, publicly-traded water and wastewater company in the country. Mr. DeBenedictis has also served in two cabinet positions in the Pennsylvania government, as Secretary of the Pennsylvania Department of Environmental Resources and as Director of the Office of Economic Development. He also spent eight years with the U.S. Environmental Protection Agency and was President of the Greater Philadelphia Chamber of Commerce for three years. Mr. DeBenedictis also serves as a director of Met-Pro Corporation, and P.H. Glatfelter, Inc.

LOGO   

Sue L. Gin

Director since 2000

Age 67

 

Chair-Risk Oversight Committee

Member- Audit Committee

Member-Corporate Governance Committee

 

Ms. Gin is the Founder, Owner, Chairman and CEO of Flying Food Group, LLC, an airline catering and fresh meal production company serving international airlines and specialty retailers. She has served as its Chairman and Chief Executive Officer since 1983. She is also the owner and founder of New Management, Ltd., a real estate sales, leasing, management and development firm, and has served as its President since 1977. Ms. Gin is a director of Centerplate, Inc. She is also a director of ComEd.

LOGO   

Richard W. Mies

Director since 2009

Age 64

 

Member-Generation Oversight Committee

 

Admiral Mies is President and Chief Executive Officer of The Mies Group, Ltd., a private consulting firm. Admiral Mies retired from the United States Navy in 2002 following 35 years of service. A nuclear submariner, Admiral Mies commanded the United States Strategic Command for four years prior to his retirement. Following his military service, Admiral Mies served as a Senior Vice President of Science Applications International Corporation and as President and Chief Executive Officer of its wholly-owned subsidiary, Hicks and Associates, until September 2007. Admiral Mies is also a director of McDermott International, Inc. and Mutual of Omaha. He is also a member of the Board of Governors of Los Alamos and Lawrence Livermore National Security LLC’s.

 

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LOGO   

William C. Richardson, Ph. D.

Director since 2005

Age 68

 

Member-Audit Committee

Member-Compensation Committee

Member-Corporate Governance Committee

Member-Risk Oversight Committee

 

Dr. Richardson is the President and Chief Executive Officer Emeritus of the W.K. Kellogg Foundation, a private foundation, and the President and Chief Executive Officer Emeritus of Johns Hopkins University. Dr. Richardson served as the President and CEO of the W. K. Kellogg Foundation from 1995 through his retirement in July 2005. He was the President of Johns Hopkins University from 1990 through 1995, and Executive Vice President and Provost of Pennsylvania State University from 1984 through 1990. He is also a director of The Bank of New York Mellon Corporation and a member of the Institute of Medicine, National Academy of Sciences.

LOGO   

Thomas J. Ridge

Director since 2005

Age 63

 

Member-Energy Delivery Oversight Committee

 

Governor Ridge is President of Ridge Global LLC, a consulting firm. He is also a strategic limited partner in Doheny Global Group, a U.S.-based international developer of energy facilities. He served as Secretary of the United States Department of Homeland Security from January 2003 through January 2005, and Assistant to the President for Homeland Security (an Executive Office created by President George W. Bush) from October 2001 through December 2002. He served as Governor of the Commonwealth of Pennsylvania from 1994 through October 2001. He is also a director of The Hershey Company and Vonage Holdings Corp. He also serves as a director of PECO.

LOGO   

Don Thompson

Director since 2007

Age 45

 

Member-Energy Delivery Oversight Committee

Member-Generation Oversight Committee

 

Mr. Thompson is President of McDonald’s USA, a restaurant business. Previously, he served as Executive Vice President and Chief Operating Officer, McDonald’s USA, and as the Executive Vice President for McDonald’s restaurant solutions group and the President of McDonald’s West Division.

The Board has a mandatory retirement policy, under which directors retire at the end of the calendar year in which he or she reaches the age of 72. The board suspended the policy after the termination of the PSEG merger agreement in 2006. It had been anticipated that several senior directors would have retired and been succeeded by new directors coming from the PSEG board. When that did not happen, the board wished to retain the senior directors until appropriate successors could be recruited. Accordingly, the board has suspended the mandatory retirement policy for Messrs. DeMars and Palms until the end of the calendar year in which they turn 75, and for Mr. D’Alessio until the end of the calendar year in which he turns 76.

If any director is unable to stand for election, the board may reduce the number of directors in that class or designate a substitute. In that case, shares represented by proxies may be voted for a substitute director in that class. Exelon does not expect that any director nominee will be unable to serve.

 

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Director Independence

Under Exelon’s Corporate Governance Principles, a substantial majority of the board must be composed of independent directors, as defined by the NYSE. In addition to complying with the NYSE rules, Exelon monitors the independence of audit and compensation committee members under rules of the SEC (for members of the audit and compensation committees) and the Internal Revenue Service (for members of the compensation committee). The board has adopted independence criteria corresponding to the NYSE rules for director independence and the following categorical standards to address those relationships that are not specifically covered by the NYSE rules:

 

  1. A director’s relationship with another company with which Exelon does business will not be considered a material relationship that would impair the director’s independence if the aggregate of payments made by Exelon to that other company, or received by Exelon from that other company, in its most recent fiscal year, is less than the greater of $1 million or 5% of the recipient’s consolidated gross revenues in that year. In making this determination, a commercial transaction will not be deemed to affect a director’s independence if, and to the extent that: (1) the transaction involves rates or charges that are determined by competitive bidding, set with reference to prevailing prices set by a well-established commodity market, or fixed in conformity with law or governmental authority; or (2) the provider of goods or services in the transaction is determined by the purchaser to be the only practical source for the purchaser to obtain the goods or services.

 

  2. If a director is a current employee, or a director’s immediate family member is an executive officer of a charitable or other tax-exempt organization to which Exelon has made contributions, the contributions will not be considered a material relationship that would impair the director’s independence if the aggregate of contributions made by Exelon to that organization in its most recent fiscal year is less than the greater of $1 million or 2% of that organization’s consolidated gross receipts in that year. In any other circumstance, a director’s relationship with a charity or other tax-exempt organization to which Exelon makes contributions will not be considered a material relationship that would impair the director’s independence if the aggregate of all contributions made by Exelon to that organization in its most recent fiscal year is less than the greater of $1 million or 5% of that organization’s consolidated gross receipts in that year. Transactions and relationships with charitable and other tax-exempt organizations that exceed these standards will be evaluated by the board to determine whether there is any effect on a director’s independence.

Each year, directors are requested to provide information about their business relationships with Exelon and its affiliates, including other boards on which they may serve, and their charitable, civic, cultural and professional affiliations. We also gather information on significant relationships that their immediate family members may have with Exelon and its affiliates. All relationships are evaluated for materiality. Data on all relationships are presented to the corporate governance committee, which reviews the data and makes recommendations to the full board regarding the materiality of such relationships for the purpose of assessing director independence. The full board reviews the same data considered by the corporate governance committee in making the final determination of independence.

Each of the directors named below was affirmatively determined by our board of directors to be “independent” under applicable guidelines presented above. The information below describes certain director relationships or arrangements that were considered by the board in determining whether the named director was “independent,” as defined under the NYSE rules and the categorical standards specified in the company’s corporate governance principles. In all cases, the amounts involved in the transactions between Exelon and its affiliates, on the one hand, and the companies with which a director or an immediate family member is associated, on the other hand, fell below the thresholds specified by the NYSE rules and the categorical standards specified in Exelon’s Corporate Governance Principles.

Because Exelon provides utility services through its subsidiaries (ComEd, PECO and Exelon Energy) and many of its directors live in and are civic leaders in areas served by the Exelon subsidiaries, many of the directors are affiliated with businesses and charities that receive utility services from Exelon’s subsidiaries. Similarly, because Exelon and its subsidiaries make substantial charitable contributions in the communities they serve, many of Exelon’s directors are affiliated with charities that receive contributions from Exelon and its subsidiaries. The board has found that these relationships do not impair the directors’ independence since the amounts are immaterial and no other factors are present.

 

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John A. Canning, Jr.

Mr. Canning serves as the Chairman of the board and a director of a bank that receives funds for Exelon employee savings bonds. Mr. Canning also serves as the director of a company that provides services to Exelon. Mr. Canning serves on the boards of seven charitable or tax-exempt organizations that receive support from Exelon and ComEd. All payments were immaterial under the applicable independence criteria.

M. Walter D’Alessio

Mr. D’Alessio is an executive officer of two companies whose common parent company is a customer of ComEd. Mr. D’Alessio also serves as a director of three companies, all of which are customers of PECO and one of which provides services to certain Exelon entities. In addition, Mr. D’Alessio serves on the advisory board of a bank that is a PECO customer and provides some financial services to Exelon. Mr. D’Alessio also serves on the boards of five charitable organizations that receive contributions from Exelon and PECO. All payments were immaterial under the relevant independence criteria.

Nicholas DeBenedictis

Mr. DeBenedictis is an executive officer of a water public utility that is a customer of PECO and ComEd and that provides services to certain PECO facilities. Mr. DeBenedictis also serves as a director of two public companies that are customers of PECO and ComEd; one provides services to Exelon. Mr. DeBenedictis also serves as a director of a company that is a customer of PECO and provides services to PECO. In addition, Mr. DeBenedictis serves on the advisory board of a bank that is a PECO customer and provides some financial services to Exelon. Mr. DeBenedictis also serves on the boards of six charitable or tax-exempt organizations that received contributions from Exelon and PECO. All payments were immaterial under the applicable independence criteria.

Bruce DeMars

Admiral DeMars served through May 2008 as a director of a company that has a subsidiary that provides services to Exelon Generation. Admiral DeMars is the Chairman of a tax-exempt organization that has received support from Exelon, and a member, but not an officer or director, of a tax-exempt organization that has received support from Exelon in previous years. All payments were immaterial under the applicable independence criteria.

Nelson A. Diaz

Mr. Diaz is Of Counsel to a law firm that provides legal services to Exelon. Mr. Diaz does not work on any matters relating to Exelon and the board does not consider that Exelon’s relationship with the law firm impairs Mr. Diaz’s independence. In addition, Mr. Diaz serves on the advisory board of a bank that is a PECO customer and has provided some financial services to Exelon. Mr. Diaz also serves on the boards of four charitable or tax-exempt organizations that received contributions from Exelon and PECO. Mr. Diaz’s wife serves on the boards of two charitable organizations that received contributions from Exelon and PECO. All payments were immaterial under the applicable independence criteria.

Sue L. Gin

Ms. Gin is the owner of three companies that are customers of ComEd and one is also a customer of Exelon Energy. Ms. Gin owns eight individual residential properties that are customers of ComEd. Ms. Gin also serves on the boards of nine charitable organizations that received contributions from Exelon and ComEd. All payments were immaterial under the applicable independence criteria.

Rosemarie B. Greco

Until the end of 2008, Ms. Greco served as executive director of the Governor’s Office of Health Care Reform of the Commonwealth of Pennsylvania. Although Exelon makes tax and other required payments to the Commonwealth of Pennsylvania and the Commonwealth is a PECO customer, none of those payments were made directly to or from the office of which Ms. Greco served as Executive Director. Ms. Greco also serves as a director of three companies that are PECO customers, one of which is also a supplier to Exelon Generation and PECO. In addition, Ms. Greco serves on the board of seven charitable organizations that received contributions from Exelon and PECO. All payments were immaterial under the applicable independence criteria.

Dr. Paul L. Joskow

Professor Joskow’s brother is an officer of a subsidiary of a public company that performed services for Exelon in amounts below the threshold for materiality.

 

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Dr. John M. Palms

Dr. Palms is a Distinguished President Emeritus and Distinguished University Professor Emeritus of the University of South Carolina, to which Exelon has made contributions in previous years. He also served on the board of a charitable organization that has received support from Exelon. All payments were immaterial under the applicable independence criteria.

Dr. William C. Richardson

Dr. Richardson is a director of a public company that provides services to Exelon entities. Dr. Richardson served until August 2008 as a director of a public company that was a customer of and provided services to Exelon. Dr. Richardson also serves on the board of two tax-exempt or charitable organizations that received support from Exelon and ComEd. All payments were immaterial under the applicable independence criteria.

Thomas J. Ridge

Governor Ridge is a senior advisor to a major accounting firm that occasionally provided non-audit services to Exelon. He also serves on the board of a private company that provides services to Exelon. He also serves on the board of a charitable organization that received support from Exelon. All payments were immaterial under the applicable independence criteria.

John W. Rogers, Jr.

Mr. Rogers is an executive officer of a company that is a customer of ComEd. He also serves as a director of two companies that are ComEd customers; one is also a customer of PECO and Exelon Energy, and one also provides administrative services to Exelon. Mr. Rogers serves on the boards of twelve charitable or tax-exempt organizations that received contributions from Exelon and ComEd. Mr. Rogers’ wife serves on the board of two charitable organizations that received support from Exelon and ComEd. All payments were immaterial under the applicable independence criteria.

Stephen D. Steinour

Mr. Steinour is on the board of two charitable or tax-exempt organizations that received support from Exelon and PECO. All payments were immaterial under the applicable independence criteria.

Don Thompson

Mr. Thompson is an executive officer of a corporation that is a customer of ComEd, PECO and Exelon Energy. Mr. Thompson and his wife are also on the board of a charitable organization that received support from Exelon and ComEd. All payments were immaterial under the applicable independence criteria. Mr. Thompson’s wife serves on the boards of two other charitable organizations that received immaterial support from Exelon and ComEd.

Related Person Transaction Policy

Exelon has a written policy for the review and approval or the ratification of related person transactions. Transactions covered by the policy include commercial transactions for goods and services and the purchase of electricity or gas at non-tariff rates from Exelon or any of its subsidiaries by an entity affiliated with a director or officer of Exelon. The retail purchase of electricity or gas from ComEd or PECO at rates set by tariff, and transactions between or among Exelon or its subsidiaries are not considered. Charitable contributions approved in accordance with Exelon’s Contribution Guidelines are deemed approved or ratified under the Related Persons Transaction policy and do not require separate consideration and ratification.

Related Person Transactions in 2008

As required by the policy, the board reviewed all commercial, charitable, civic and other relationships with Exelon in 2008 that were disclosed by directors and executive officers of Exelon, ComEd and PECO, and by executive officers of Exelon Generation. The Office of Corporate Governance collected information about each of these transactions, including the related persons and entities involved and the dollar amounts either paid by or received by Exelon. The Office of Corporate Governance also conducted additional due diligence, where required to determine the specific circumstances of the particular transaction, including whether it was competitively bid or whether the consideration paid was based on tariffed rates.

 

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The corporate governance committee and the board reviewed detailed relationship charts showing the relationships, dollar amounts and other aspects of the transactions, as well as an analysis prepared by the Office of Corporate Governance which identified those related person transactions which required ratification or approval, under the terms of the policy, or disclosure under the SEC regulations. The corporate governance committee and the board considered the facts and circumstances of each related person transaction, including the amounts involved, the nature of the director’s or officer’s relationship with the other party to the transaction, whether the transaction was competitively bid and whether the price was fixed or determined by a tariffed rate.

The committee recommended that the board ratify all of the transactions. On the basis of the committee’s recommendation, the board did so. Several transactions were ratified because the related person served only as a director of the affiliated company, was not an officer or employee of the affiliated company and did not have a pecuniary or material interest in the transaction. For some of these transactions, the value or cost of the transaction was very small, and the board considered the de minimus nature of the transaction as further reason for ratifying it. The board approved and ratified other transactions that were the result of a competitive bidding process, and therefore were considered fairly priced, or arms length, regardless of any relationship. The remaining transactions were approved by the board, even though the director is an executive officer of the affiliated company, because the transactions involved only retail electricity or gas purchases under set, tariffed rates or the price and terms were determined as a result of a competitive bidding process.

All but one of the related person transactions did not require disclosure in this proxy statement because: (1) the related person served only as a director of the affiliated company and therefore did not have a material interest in the transaction; (2) the purchases were from utilities at tariffed rates; (3) the transaction was competitively bid; or (4) the transaction involved the services of a transfer agent or trustee.

There was one transaction subject to disclosure during 2008. McDonald’s Corporation and its subsidiaries purchase both gas and electricity from Exelon in the ordinary course of business. McDonald’s independently-owned and operated franchisees also purchase gas and electricity from Exelon in the ordinary course of business. Purchases made from ComEd and PECO are at tariffed rates and therefore do not require disclosure. Gas purchases made from Exelon Energy are made at market prices based on an independent, publicly available index (the monthly Natural Gas Index). Electricity purchases made from Exelon Energy are made at the fixed price for power in the ComEd Zone as determined by the PJM Interconnection. In 2008, McDonald’s USA procured electricity services from Exelon Energy at market rates in the amount of approximately $3,772,000 and gas services at market rates in the amount of approximately $1,926,000. McDonald’s USA will procure electricity and gas from Exelon Energy under the same agreements in 2009. Director Don Thompson is also President of McDonald’s USA. Director John Rogers is also a director of McDonald’s Corporation, of which McDonald’s USA is a subsidiary.

The corporate governance committee and the Exelon board reviewed the sales at market prices to McDonald’s as related person transactions and concluded that the transactions were in the best interests of Exelon because they involved the sale of electricity and gas in the ordinary course based on an independent, publicly available indices. There was no indication that either of Exelon’s directors were involved in the negotiations of the contracts or had any direct or indirect material interest in the transaction or influence over them. As compared to Exelon’s and McDonald’s overall sales, the transactions are immaterial, individually and in the aggregate.

Compensation of Non-Employee Directors

For their service as directors of the corporation, Exelon’s non-employee directors receive primarily cash and equity compensation. As an employee director, Mr. Rowe receives no additional compensation for service as a director. Admiral Mies is not included in the compensation charts or stock ownership tables because his appointment as a director was effective February 2, 2009.

 

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Fees Earned or Paid in Cash

Non-employee directors receive cash retainers for their service on the board, as chairs of committees, and as members of the audit and generation oversight committees. They also receive cash payments for attending meetings.

In July 2008, the Exelon board voted to increase director compensation to bring it in line with the median compensation of the peer group, which was the same group of companies used to benchmark executive compensation. All directors receive an annual retainer of $50,000 (an increase from the previous value of $45,000). Committee chairs receive an additional $10,000 per year (an increase from the previous value of $7,500). Members of the audit committee and generation oversight committee, including the committee chairs, continue to receive an additional $5,000 per year for their participation on these committees.

Directors receive $2,000 for each meeting of the board or board committee that they attend, whether in person or by means of teleconferencing or video conferencing equipment (an increase from the previous value of $1,500). Directors also receive a $2,000 meeting fee for attending the annual shareholders meeting and the annual strategy retreat.

Stock Awards

To align director’s interests with shareholders, Exelon pays a significant portion of director compensation in the form of deferred stock units. The deferred stock units are not paid out to the directors until they retire from the board, or upon reaching age 72, leaving these amounts at risk during the director’s entire tenure on the board.

In July 2008, the board voted to increase the amount of deferred stock units granted to directors each year from $85,000 to $100,000. Deferred stock units are granted and credited to a notional account maintained on the books of the corporation at the end of each calendar quarter based upon the closing price of Exelon common stock on the day the quarterly dividend is paid. Deferred stock units earn the same dividends available to all holders of Exelon common stock, which are reinvested in the account as additional units.

Deferred Compensation

Directors may elect to defer any portion of their cash compensation in a non-qualified multi-fund deferred compensation plan. Each director has an unfunded account where the dollar balance can be invested in one or more of several mutual funds, including one fund composed entirely of Exelon common stock. Fund balances (including those amounts invested in the Exelon common stock fund) will be settled in cash and may be distributed in a lump sum or in annual installment payments upon a director’s reaching age 65, age 72 or upon retirement from the board. These funds are identical to those that are available to executive officers and are generally identical to those available to company employees who participate in the Exelon Employee Savings Plan. Directors and executive officers have one additional fund not available to employees that, through its composition, provides returns that can be in excess of 120% of the Federal long-term rate that is used by the IRS to determine above market returns. However, during 2008, none of the directors had investments in this fund.

Deferred Stock Unit and Deferred Compensation Payout

In June 2007, the board amended both the deferred stock unit plan and the deferred compensation plan to allow directors to elect distributions upon reaching age 72, in addition to age 65, or retirement from the board. The amendment also provided directors an opportunity to elect to take a one-time lump sum distribution from each plan in January 2008. The change was primarily designed to permit directors who had been kept on the board past their normal retirement age after the termination of the PSEG merger agreement to receive distributions at the same time as they would have had they retired as planned.

 

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The following table shows the payouts made from each plan in January 2008 pursuant to elections made by the directors in June 2007. Directors could also elect to receive their stock units in shares of Exelon common stock or have them converted to cash. For purposes of the distribution, stock units were valued at $81.64, the closing price on December 31, 2007 and for those directors with balances in the deferred compensation plan, each individual fund in which they were invested was valued at its December 31, 2007 closing price.

 

     Number of
Deferred
Stock Units
Converted
at Payout
    Value of
Deferred
Stock Unit
Received
at Payout
    Value of
Deferred
Compensation
Received at
Payout
       
                     
                     

M. Walter D’Alessio

  28,625     $ 2,336,973     $ —  

Nicholas DeBenedictis

  3,631       296,447       —  

Bruce DeMars

  11,800       963,374       —  

Sue L. Gin (1)

  11,800       963,374       378,653

Rosemarie B. Greco

  8,804       718,722       —  

John M. Palms

  25,039       2,044,220       1,024,035
                     

 

1. Ms. Gin elected to receive her stock units as shares of Exelon common stock.

Other Compensation

Non-employee directors receive perquisites relating to the cost of a director’s spouse’s travel, meals, lodging and related activities when the spouses are invited to attend company or industry related events where it is customary and expected that directors attend with their spouses. The cost of such travel, meals and other activities is imputed to the director as additional taxable income. However, in most cases there is no incremental cost to Exelon of providing transportation and lodging for a director’s spouse when he or she accompanies the director, and the only additional costs to Exelon are those for meals and activities and to reimburse the director for the taxes on the imputed income. In 2008, the incremental cost to the company to provide these perquisites was less than $10,000 per director and the aggregate amount for all directors as a group, a total of 14 directors, was $24,438. The aggregate amount paid to all directors as a group (14 directors) for reimbursement of taxes on imputed income was $22,664. Exelon has a matching gift program available to employees and directors that matches their contributions to educational institutions up to $2,000 per year for employees and $5,000 per year for directors.

Expense Reimbursement

Exelon has a board compensation and expense reimbursement policy under which directors are reimbursed for reasonable travel to and from their primary residence and lodging expenses incurred when attending board and committee meetings or other events on behalf of Exelon, (including director’s orientation or continuing education programs, facility visits or other business related activities for the benefit of Exelon). Under the policy, Exelon will arrange for its corporate aircraft to transport groups of directors, or when necessary, individual directors, to meetings in order to maximize the time available for meetings and discussion.

 

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Compensation of Non-Employee Directors

 

       Committee
Membership
  Fees Earned or Paid in Cash     Stock
Awards
  Change in
Pension Value
and
Nonqualified
Compensation
Earnings
  Total
    Annual
Board &
Committee
Retainers
    Board &
Committee
Meeting
Fees
       
                                    

John A. Canning, Jr. (1)

  Au, Co   $ 22,147     $ 26,000     $ 41,576    —     $ 89,723

M. Walter D’Alessio

  CG (ch), Co     59,891       59,000       92,500   —       211,391

Nicholas DeBenedictis

  CG, EDO (ch), GO     58,798       52,500       92,500   —       203,798

Bruce DeMars

  Au, CG, EDO, GO (ch)     66,250       68,000       92,500   —       226,750

Nelson A. Diaz

  EDO, GO, RO     52,500       51,000       92,500   —       196,000

Sue L. Gin

  Au, CG, RO (ch)     61,250       61,000       92,500   —       214,750

Rosemarie B. Greco

  Co (ch), EDO     58,146       45,500       92,500   —       196,146

Paul L. Joskow

  Au, EDO, RO     52,500       63,000       92,500   —       208,000

John M. Palms

  Au (ch), CG, GO, RO     66,250       70,000       92,500   —       228,750

William C. Richardson

  Au, Co, CG, RO     52,500       69,000       92,500   —       214,000

Thomas J. Ridge

  EDO     47,500       27,000       92,500   —       167,000

John W. Rogers, Jr.

  CG, RO     47,500       42,000       92,500   —       182,000

Stephen D. Steinour

  Au, Co, GO     57,500       58,500       92,500   —       208,500

Don Thompson

  EDO, GO     52,500       43,500       92,500   —       188,500

Total All Directors

        755,232       736,000       1,244,076   —       2,735,308
                                     

Committee Membership Key:

Audit = Au, Chairman = Ch, Compensation = Co, Corporate Governance = CG, Energy Delivery Oversight = EDO, Generation Oversight = GO, Risk Oversight = RO

Notes

1. Mr. Canning was appointed to the board, effective August 1, 2008.

As of December 31, 2008, the directors held the following amounts of deferred Exelon stock units. The units are valued at the closing price of Exelon common stock on December 31, 2008, which was $55.61. Legacy plans include those stock units earned from Exelon’s predecessor companies, PECO Energy Company and Unicom Corporation. For Adm. DeMars and Mr. Rogers, the legacy deferred stock units reflect accrued benefits from the Unicom Directors Retirement Plan (which was terminated in 1997) and the Unicom 1996 Directors Fee Plan (which was terminated in 2000), respectively.

 

    

Year First
Elected to

the Board

    Deferred
Stock Units
From Legacy
Plans
    Deferred
Stock Units
From
Exelon Plan
    Total
Deferred
Stock
Units
    Fair
Market
Value as of
12/31/2008
 
           
            #     #     #     $  
                                     

John A. Canning (1)

  2008           708     708     $ 39,372  

M. Walter D’Alessio

  1983           8,734     8,734       485,698  

Nicholas DeBenedictis

  2002           6,514     6,514       362,244  

Bruce DeMars

  1996     1,275     1,366     2,641       146,866  

Nelson A. Diaz

  2004           6,396     6,396       355,682  

Sue L. Gin

  1993           1,366     1,366       75,963  

Rosemarie B. Greco

  1998           10,430     10,430       580,012  

Paul L. Joskow

  2007           1,844     1,844       102,545  

John M. Palms

  1990           6,514     6,514       362,244  

William C. Richardson

  2005           4,719     4,719       262,424  

Thomas J. Ridge

  2005           4,465     4,465       248,299  

John W. Rogers, Jr.

  1999     3,436     13,515     16,951       942,645  

Stephen D. Steinour

  2007           2,101     2,101       116,837  

Don Thompson

  2007           2,101     2,101       116,837  

Total All Directors

        4,711     70,773     75,484     $ 4,197,668  
                                 

 

1. Mr. Canning was appointed to the Board effective August 1, 2008.

 

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3. Ownership of Exelon Stock

 

Stock Ownership Requirements for Directors and Officers

Under Exelon’s Corporate Governance Principles, all directors are required to own within five years after election to the board at least 5,000 shares of Exelon common stock or deferred stock units or share equivalents accrued in the Exelon common stock fund of the directors’ deferred compensation plan. The corporate governance committee utilized an independent compensation consultant who determined that, compared to its peer group, Exelon’s ownership requirement is reasonable.

Officers of Exelon (and its subsidiaries) are required to own certain amounts of Exelon common stock, depending on their seniority, by the later of five years after their employment or promotion to their current position. The objective is to encourage officers to think and act like owners. The ownership guidelines are expressed as both a fixed number of shares and a multiple of annualized base salary to avoid arbitrary changes to the ownership requirements that could arise from ordinary course volatility in the market price for Exelon’s shares. The minimum stock ownership targets by level are the lesser of the fixed number of shares or the multiple of annualized base salary. The number of shares was determined by taking the following multiples of the officer’s base salary as of the latest of September 30, 2008 or the date of hire or promotion: (1) Chairman and CEO, five times base salary; (2) executive vice presidents, three times base salary; (3) presidents and senior vice presidents, two times base salary; and (4) vice presidents and other executives, one times base salary. Ownership is measured by valuing an executive’s holdings using the 60-day average price of Exelon common stock as of the appropriate date. Shares held outright, earned non-vested performance shares, and deferred shares count toward the ownership guidelines; unvested restricted stock and stock options do not count for this purpose. In 2007 the compensation committee terminated the stock ownership requirements for ComEd officers (including Mr. Clark) in light of the continuing efforts to recognize ComEd’s independence and the compensation committee’s recommendation that ComEd officers participate in a separate cash-based long-term incentive program instead of receiving Exelon performance shares. As of December 31, 2008, the named executive officers (“NEOs”) held the following amounts of stock relative to the applicable guidelines:

 

         
Name   Ownership
Multiple
    Ownership
Guideline
in Shares
    Share or
Share
Equivalents
Owned
    Ownership
As a
Percent of
Guideline
 
                              

John W. Rowe

  5X     101,089     437,323     433%  

Matthew F. Hilzinger

  2X     10,000     26,162     262%  

Christopher M. Crane

  3X     21,868     97,461     446%  

Ian P. McLean

  3X     22,165     93,992     424%  

Frank Clark

  —       —       —       —      
                         

 

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Table of Contents

Beneficial Ownership Table

The following table shows the ownership of Exelon common stock as of December 31, 2008 or by each director, each NEO in the Summary Compensation Table, and for all directors and executive officers as a group.

 

     Beneficially
Owned
Shares
    Shares
Held in
Company
Plans
    Vested
Stock
Options
and
Options
that Vest
Within 60
days
   

Total

Shares Held

   

Share
Equivalents
to be

Settled in
Cash or
Stock

    Total
Share
Interest
 
           Note (1)                 Note (2)        
             
     [A]     [B]     [C]     [D]=[A]+[B]+[C]     [E]     [F]=[D]+[E]  
                                            

Directors

                                   

John A. Canning, Jr.

  5,000     708     —       5,708     839     6,547  

M. Walter D’Alessio

  11,847     8,734     —       20,581     —       20,581  

Nicholas DeBenedictis

  —       6,514     —       6,514     —       6,514  

Bruce DeMars

  11,498     1,366     —       12,864     —       12,864  

Nelson A. Diaz

  1,500     6,396     —       7,896     1,868     9,764  

Sue L. Gin

  44,043     1,366     —       45,409     1,829     47,238  

Rosemarie B. Greco

  2,000     10,430     —       12,430     9,243     21,673  

Paul L. Joskow

  2,000     1,844     —       3,844     2,300     6,144  

John M. Palms

  —       6,514     —       6,514     —       6,514  

William C. Richardson

  1,291     4,719     —       6,010     —       6,010  

Thomas J. Ridge

  —       4,465     —       4,465     2,147     6,612  

John W. Rogers, Jr.

  11,374     16,951     —       28,325     8,533     36,858  

Stephen D. Steinour (3)

  —       2,101     —       2,101     2,618     4,719  

Don Thompson (3)

  —       2,101     —       2,101     1,664     3,765  

Named Officers

                                   

John W. Rowe

  301,915     6,169     332,500     640,584     129,239     769,823  

Matthew F. Hilzinger

  2,801     23,139     34,375     60,315     222     60,537  

John F. Young (4)

  —       —       —       —       —       —    

Christopher M. Crane

  18,657     50,000     71,000     139,657     28,804     168,461  

Ian P. McLean

  46,972     15,010     414,038     476,020     32,010     508,030  

Frank Clark

  26,451     5,000     58,500     89,951     9,996     99,947  

Total

           

Directors & Executive Officers as a group, 25 people (5)

  589,762     254,572     1,261,913     2,106,247     323,056     2,429,303  
                                     

 

1. The shares listed under Shares Held in Company Plans, Column [B], include deferred stock units, restricted shares, shares held in the 401(k) plan, and deferred shares held in the Stock Deferral Plan.

 

2. The shares listed above under Share Equivalents to be Settled in Cash, Column [E], include unvested performance shares that may be settled in cash or stock depending on where the named officer stands with respect to their stock ownership requirement, and phantom shares held in a non-qualified deferred compensation plan which will be settled in cash on a 1 for 1 basis upon retirement or termination.

 

3. Messrs. Steinour and Thompson were elected to the board in April 2007 and have until April 2012 to achieve their stock ownership requirement of 5,000 shares.

 

4. Mr. Young resigned effective January 29, 2008.

 

5. Beneficial ownership, shown in Column [A], of each director and officer, and of the directors and executive officers as a group, represents less than 1% of the outstanding shares of Exelon common stock. Total includes share holdings from all directors and NEOs, as well as those executive officers listed in Item 1, Executive Officers of the Registrants, who are not NEOs for purposes of compensation disclosure.

 

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Table of Contents

Other Significant Owners of Exelon Stock

Shown in the table below are those owners who are known to Exelon to hold more than 5% of the outstanding common stock. This information is based on the most recent Schedule 13G filed by each owner with the SEC.

 

     
Name and address of beneficial owner   Amount and nature of
beneficial ownership
    Percent of
class
 
                

Capital World Investors

333 South Hope Street

Los Angeles, California 90071

  32,994,000     5%  

Capital Research Global Investors

333 South Hope Street

Los Angeles, California 90071

  39,237,320     6%  
             

Capital World Investors and Capital Research Global Investors are each divisions of Capital Research and Management Company. Capital World Investors disclosed in its Schedule 13G that it disclaims beneficial ownership of all shares and it has sole voting power over 734,000 shares and sole dispositive power over all shares. Capital Research Global Investors disclosed in its Schedule 13G that it disclaims beneficial ownership of all shares and it has sole voting power over 25,451,720 shares and sole dispositive power over all shares.

 

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Table of Contents

Stock Performance Chart

The performance graph below illustrates a five-year comparison of cumulative total returns based on an initial investment of $100 in Exelon Corporation common stock, as compared with the S&P 500 Stock Index and the S&P Utility Index for the period 2003 through 2008.

The performance chart assumes $100 invested on December 31, 2003 in Exelon Corporation common stock, in the S&P 500 Stock Index and in the S&P Utility Index, and that all dividends are reinvested.

LOGO

 

   
     Value of Investment at December 31,  
               
     LEGEND   2003     2004     2005     2006     2007     2008  
                                                 

Exelon Corporation

  LOGO   $ 100.00     $ 137.35     $ 170.89     $ 204.60     $ 276.34     $ 193.78  

S&P 500

  LOGO   $ 100.00     $ 110.84     $ 116.27     $ 134.60     $ 141.98     $ 89.53  

S&P Utilities

  LOGO   $ 100.00     $ 124.24     $ 144.88     $ 175.26     $ 209.14     $ 148.64  
                                                     

Source: Bloomberg

 

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4. Compensation Discussion and Analysis

 

Objectives of the Compensation Program

The compensation committee has designed Exelon’s executive compensation program to attract and retain outstanding executives. The compensation programs are designed to motivate and reward senior management for achieving financial, operational and strategic success consistent with Exelon’s goal of being the best group of electric generation and electric and gas delivery companies in the country, thereby building value for shareholders. Exelon’s compensation program has three principles, as described below:

1. A Substantial Portion Of Compensation Should Be Performance-Based

The compensation committee has adopted a pay-for-performance philosophy, which places an emphasis on pay-at-risk. Exelon’s compensation program is designed to reward superior performance, that is, meeting or exceeding financial and operational goals set by the compensation committee. When excellent performance is achieved, pay will increase. Failure to achieve the target goals established by the compensation committee will result in lower pay. There are pay-for-performance features in both cash and equity-based compensation. The NEOs listed in the Summary Compensation Table participate in an annual incentive plan that provides cash compensation based on the achievement of performance goals established each year by the compensation committee. A substantial portion of each NEO’s equity-based compensation is in the form of performance share units that are paid to the extent that longer-range performance goals set by the compensation committee are met, with the balance delivered in stock options that have value only to the extent that Exelon’s stock price increases following the option grant date. As a result of the performance-based features of his cash and equity-based compensation, 82% of Mr. Rowe’s 2008 target total direct compensation (base salary plus annual and long-term incentive compensation) was at-risk. Similarly, of the other NEOs’ 2008 target total direct compensation, approximately 51% to 73% was at-risk.

Recoupment Policy

Consistent with the pay-for-performance policy, in May 2007 the board of directors adopted a recoupment policy as part of Exelon’s corporate governance principles. The board of directors will seek recoupment of incentive compensation paid to an executive officer if the board determines, in its sole discretion, that:

 

  n  

the executive officer engaged in fraud or intentional misconduct;

 

  n  

as a result of which Exelon was required to materially restate its financial results;

 

  n  

the executive officer was paid more incentive compensation than would have been payable had the financial results been as restated;

 

  n  

recoupment is not precluded by applicable law or employment agreements; and

 

  n  

the board concludes that, under the facts and circumstances, seeking recoupment would be in the best interest of Exelon and its shareholders.

2. A Substantial Portion Of Compensation Should Be Granted As Equity-Based Awards

The compensation committee believes that a substantial portion of compensation should be in the form of equity-based awards in order to align the interests of the NEOs with Exelon’s shareholders. The objective is to make the NEOs think and act like owners. Equity-based compensation is in the form of performance share units, stock options, and restricted stock units that are valued in relation to Exelon’s common stock, and they gain value in relation to the market price of Exelon’s stock or Exelon’s total shareholder return in comparison to other energy services companies and/or general industry. Conversely, when the market price of Exelon’s stock decreases, the value of the equity compensation decreases. The NEOs have been affected by the decline in the market value of Exelon’s stock price in 2008 in three ways. First, the stock options awarded in 2008, 2007 and 2006 are not “in the money.” Second, the target number of performance shares for the 2006–2008 performance period was based on the January 2008 stock price of approximately $73, while the shares awarded in January 2009 were worth approximately $56. As a result, while Exelon’s total shareholder return performance was at 200% of target, as described below, the value of the shares paid out was only about 153% of the target value. Third, the value of the accumulated equity that the NEOs retained from prior compensation declined.

 

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3. Exelon’s Compensation Program Should Enable The Company To Compete For And Retain Outstanding Executive Talent

Exelon’s shareholders are best served when we can successfully recruit and retain talented executives with compensation that is competitive and fair. The compensation committee strives to deliver total direct compensation generally at the median (the 50th percentile), which is deemed to be the competitive level of pay of executives in comparable positions at certain peer companies with which we compete for executive talent. If Exelon’s performance is at target, the compensation will be targeted at the 50th percentile; if Exelon’s performance is above target, the compensation will be targeted above the 50th percentile, and if performance is below target, the compensation will be targeted below the 50th percentile. This concept reinforces the pay-for-performance philosophy.

Each year the compensation committee commissions its consultant to prepare a study to benchmark total direct compensation against a peer group of companies. The study includes an assessment of competitive compensation levels at high-performing energy services companies and other large, capital asset-intensive companies in general industry, since the company competes for executive talent with companies in both groups. All competitive data was aged to January 2008 using a 3.75% annual update factor. The study indicated that a steady state was appropriate, with an average of 4% increases to base salaries and relatively unchanged targets for annual and long-term incentives, and that no changes were needed for the long-term incentive mix and design. The consultant considered Exelon’s organizational changes to determine how Exelon’s positions compared with positions at its peers by establishing a benchmark match for each Exelon executive in the competitive market, where available, and reviewed each element of compensation as well as total direct compensation.

The peer group criteria include having revenue similar to Exelon’s, market capitalization generally greater than $5 billion, and a balance of industry segments. The members of the peer group are reviewed each year to determine whether their inclusion continues to be appropriate. Generally the peer group is comprised of 24 companies: 12 general industry companies and 12 energy services companies. The companies were selected by the compensation committee from the Towers Perrin Energy Services Industry Executive Compensation Database and their Executive Compensation Database. The peer group was the same in 2008 as it was in 2007 and 2006, except that for 2008 Bell South, which was acquired by AT&T in late 2006, was replaced by Hess Corporation because it met the criteria with revenues similar to Exelon’s and is a domestic, asset-intensive company similar in size to Exelon. The peer group includes the following companies:

 

General Industry Companies   Energy Services Companies
       

3M

  American Electric Power

Abbott Laboratories

  Centerpoint Energy

Caterpillar Inc.

  Dominion Resources, Inc.

General Mills Inc.

  Duke Energy Corp.

Hess Corporation

  Edison International

Honeywell International

  Entergy Corp.

International Paper

  FirstEnergy

Johnson Controls Inc.

  PG&E Corp.

PepsiCo Inc.

  Public Service Enterprise Group Inc.

PPG Industries, Inc.

  Southern Co.

Union Pacific Corp.

  TXU Corp.*

Weyerhaeuser Company

  Xcel Energy, Inc.
     

 

  * Included prior to privatization in 2008.

The compensation committee generally applies the same policies with respect to the compensation of each of the individual NEOs. The compensation committee carefully considers the roles and responsibilities of each NEO relative to the peer group, as well as the individual’s performance and contribution to the performance of the business in

 

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establishing the compensation opportunity for each NEO. The differences in the amounts of compensation awarded to the NEOs reflect primarily two factors, the differences in the compensation paid to officers in comparable positions in the peer group and differences in the individual responsibility and experience of the Exelon officers. Time in position affects where individuals are relative to market percentiles, with cash compensation generally at the median and incentive compensation slightly above the median. The nuclear organization’s pay is generally closer to the 75th percentile given the size and quality of Exelon’s nuclear fleet, and certain positions are at the 75th percentile because of unusual expertise in regulatory or nuclear matters. The delivery company presidents were evaluated as a blend of top energy delivery executives and freestanding CEOs, given the amount of independence they have. Mr. Rowe’s target compensation was based on the same factors as the other NEOs, but his compensation reflected a greater degree of policy and decision-making authority and a higher level of responsibility with respect to strategic direction and financial and operating results of Exelon. His target compensation was assessed relative to other CEOs in the peer group. Mr. Rowe’s compensation also reflects the fact that Exelon has the largest market capitalization in the industry and that Exelon has the largest nuclear fleet in the industry. It also reflects that Mr. Rowe is the senior CEO in the industry.

The Role Of Individual Performance In Setting Compensation

While the consideration of benchmarking data to ensure that Exelon’s compensation is competitive is a critical component of compensation decisions, individual performance is factored into the setting of compensation in three ways:

 

  n  

First, base salary adjustments are based on an assessment of the individual’s performance in the preceding year as well as a comparison with market data for comparable positions in the peer group.

 

  n  

Second, annual incentive targets are based on the individual’s role in the enterprise — the most senior officers with responsibilities that span specific business units or functions have a target based on earnings per share for the company as a whole, while individuals with specific functional or business unit responsibilities have a significant portion of their targets based on the performance of that functional or business unit.

 

  n  

Third, consideration is given as to whether an individual performance multiplier would be appropriately applied to the individual’s annual incentive plan award, based on the individual’s performance. The individual performance multiplier can result in a decision not to make an award or to decrease the amount of the award or to increase the amount of the award by up to 10% so long as the adjusted award does not exceed the maximum amount that could be paid to the executive based on achievement of the objective performance criteria applicable under the plan.

Elements of Compensation

This section is an overview of our compensation program for NEOs. It describes the various elements and discusses matters relating to those items, including why the compensation committee chooses to include items in the compensation program. The next section describes how 2008 compensation was determined and awarded to the NEOs.

Exelon’s executive compensation program is comprised of four elements: base salary; annual incentives; long-term incentives; and other benefits.

Cash compensation is comprised of base salary and annual incentives. Equity compensation is delivered through long-term incentives. Together, these elements are designed to balance short-term and longer-range business objectives and to align NEOs’ financial rewards with shareholders’ interests. Approximately 37% to 67% of NEOs’ total target direct compensation is delivered in the form of cash. Equity compensation accounts for approximately 33% to 63% of NEO total target direct compensation. The range in the mix of cash and equity compensation is consistent with competitive compensation practices among companies in the peer group. The compensation committee believes that this mix of cash and equity compensation strikes the right balance of incentives to pursue specific short and long-term performance goals that drive shareholder value.

1. Base Salary

Exelon’s compensation program for NEOs is designed so that approximately 18% to 49% of NEO total direct compensation is in the form of base salary, consistent with practices at the companies in the peer group.

 

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2. Annual Incentives

Annual incentive compensation is designed to provide incentives for achieving short-term financial and operational goals for the company as a whole, and for subsidiaries, individual business units and operating groups, as appropriate. Under the annual incentive program, cash awards are made to NEOs and other employees if, and only to the extent that, performance conditions set by the compensation committee are met. The amount of the annual incentive target opportunity is expressed as a percentage of the officer’s or employee’s base salary. Actual awards are determined using the base salary at the end of the year. “Threshold,” “Target” and “Distinguished” (i.e., maximum) achievement levels are established for each goal. Threshold is set at the minimally acceptable level of performance, for a payout of 50% of target. Target is set consistent with the achievement of the business plan objectives. Distinguished is set at a level that significantly exceeds the business plan and has a low probability of payout, and is capped at 200% of target. Awards are interpolated to the extent performance falls between the threshold, target and distinguished levels.

3. Long-term Incentives

Long-term incentives are made available to executives and key management employees who affect the long-term success of Exelon. The long-term incentive compensation programs are primarily equity-based and designed to provide incentives and rewards closely related to the interests of Exelon’s shareholders, generally as measured by the performance of Exelon’s total shareholder return and stock price appreciation.

A portion of the long-term incentive compensation is in the form of performance share units that are awarded only to the extent that performance conditions established by the compensation committee are met. The balance of long-term incentive compensation is in the form of time-vested stock options that provide value only if, and to the extent that, the market price of Exelon’s common stock increases following the grant. The use of both forms of long-term incentives is consistent with the practices in our peer group. The mix of long-term incentives depends on the compensation committee’s assessment of competitive compensation practices of companies in the peer group.

In 2007, consistent with the continuing efforts to recognize ComEd’s independence, the compensation committee recommended, and the ComEd board adopted, a separate long-term incentive program for ComEd’s executives for the period 2007–2009. The goals under the ComEd long-term incentive program are the achievement of ComEd financial, operational, and regulatory/legislative goals. Payments under this plan are made in cash, and are awarded annually by the ComEd board based on the assessment of performance during the year. Other features of the program are similar to the Exelon performance share award program, including the payout of awards ranging from 0-200% of target and vesting over three years.

Stock Options

Individuals receiving stock options are provided the right to buy a fixed number of shares of Exelon common stock at the closing price of such stock on the grant date. The target for the number of options awarded is determined by the portion of the long-term incentive value attributable to stock options and a theoretical value of each option determined by the compensation committee using a Black-Scholes valuation formula. Options vest in equal annual installments over a four-year period and have a term of ten years. Time vesting adds a retention element to our stock option program. Stock option repricing is prohibited by policy or the terms of the company’s long-term incentive plans. Accordingly, no options have been repriced. Stock option awards are generally granted annually at the regularly scheduled January compensation committee meeting when the committee reviews results for the preceding year and establishes the compensation program for the coming year. Only one off-cycle grant of stock options was made in 2008. All grants to the NEOs must be approved by the full board of directors, which acts after receiving a recommendation from the compensation committee, except grants to Mr. Rowe, which must be approved by the independent directors, who act after receiving recommendation from the compensation committee.

Performance Share Units

The compensation committee established a performance share unit award program based on total shareholder return for Exelon as compared to the companies in the Standard & Poor’s 500 Index and the Dow Jones Utility Index for a three-year period. The threshold, target and distinguished goals for performance unit share awards are established on the grant date (generally the date of the first compensation committee meeting in the fiscal year). The actual performance against the goals and the number of performance unit share awards are established on the award date (generally the

 

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date of the first compensation committee meeting after the completion of the fiscal year). The first third of the awarded performance shares vests upon the award date, with the remaining thirds vesting on the date of the compensation committee’s January meeting in the next two years. The vesting schedule is designed to add a retention factor to the program. The form of payment provides for payment in Exelon common stock to executives with lower levels of stock ownership, with increasing portions of the payments being made in cash as executives’ stock ownership levels increase in excess of the ownership guidelines. If an executive achieves 125% or more of the applicable ownership target, performance shares will be paid half in cash and half in stock. If executive vice presidents and above achieve 200% or more of their applicable stock ownership target, their performance shares will be paid entirely in cash. This payment structure serves to deliver the long-term compensation in cash where the executive has substantially greater than the required stock ownership and provides the executive with liquidity and the opportunity for diversification.

Restricted Stock & Restricted Stock Units

In limited cases, the compensation committee has determined that it is necessary to grant restricted shares of Exelon common stock or restricted stock units to executives as a means to recruit and retain talent. They may be used for new hires to offset annual or long-term incentives that are forfeited from a previous employer. They are also used as a retention vehicle and are subject to forfeiture if the executive voluntarily terminates, and in some cases may incorporate performance criteria as well as time-based vesting.

Executive Stock Ownership And Trading Requirements

To strengthen the alignment of executives’ interests with those of shareholders, officers of the company are required to own certain amounts of Exelon common stock by the later of five years after their employment or promotion to their current position. However, in 2007 the compensation committee terminated the stock ownership requirements for ComEd officers in light of the continuing efforts to recognize ComEd’s independence and the compensation committee’s recommendation that ComEd officers participate in a separate cash-based long-term incentive program instead of receiving Exelon performance shares.

Exelon has adopted a policy requiring officers, executive vice presidents and above, who wish to sell Exelon common stock to do so only through Rule 10b5-1 stock trading plans, and permitting other officers to enter into such plans. This requirement is designed to enable officers to diversify a portion of their holdings in excess of the applicable stock ownership requirements in an orderly manner as part of their retirement and tax planning activities. The use of Section 10b5-1 stock trading plans serves to reduce the risk that investors will view routine portfolio diversification stock sales by executive officers as a signal of negative expectations with respect to the future value of Exelon’s stock. In addition, the use of Rule 10b5-1 stock trading plans reduces the potential for accusations of trading on the basis of material, non-public information that could damage the reputation of the company. Many of the NEOs have such plans, and their exercises during 2008 are reflected in the “Option Exercises and Stock Vested” table below. Exelon’s stock trading policy does not permit short sales or hedging.

4. Other Benefits

Other benefits offered by Exelon include such things as qualified and non-qualified deferred compensation programs, post-termination compensation, retirement benefit plans and perquisites. The company also provides other benefits such as medical and dental coverage and life insurance to each NEO to generally the same extent as such benefits are provided to other Exelon employees, except that executives pay a higher percentage of their total medical premium. These benefits are intended to make our executives more efficient and effective and provide for their health, well-being and retirement planning needs. The compensation committee reviews these other benefits to confirm that they are reasonable and competitive in light of the overall goal of designing the compensation program to attract and retain talent while maximizing the interests of our shareholders.

Deferred Compensation Programs

Exelon offers deferred compensation plans to permit the deferral of certain cash compensation to facilitate tax and retirement planning and satisfaction of stock ownership requirements for executives and key managers. Exelon maintains non-qualified deferred compensation plans that are open to certain highly-compensated employees, including the NEOs.

 

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The Deferred Compensation Plan is a non-qualified plan that permits executives and key managers to defer contributions that would be made to the Exelon Corporation Employee Savings Plan (the company’s tax-qualified 401(k) plan) but for the applicable limits under the Internal Revenue Code. The Deferred Compensation Plan permits participants to defer taxation of a portion of their income. It benefits the company by deferring the payment of a portion of its compensation expense, thus preserving cash.

The Employee Savings Plan is tax-qualified under Sections 401(a) and 401(k) of the Internal Revenue Code (the “Code”). Exelon maintains the Employee Savings Plan to attract and retain qualified employees, including the NEOs, and to encourage employees to save some percentage of their cash compensation for their eventual retirement. The Employee Savings Plan permits employees to do so, and allows the company to make matching contributions in a relatively tax-efficient manner. The company maintains the excess matching feature of the Deferred Compensation Plan to enable management employees to save for their eventual retirement to the extent they otherwise would have were it not for the limits established by the IRS for purposes of Federal tax policy.

The Stock Deferral Plan is a non-qualified plan that permitted executives to defer performance share units prior to 2007.

In response to declining plan enrollment and the administrative complexity of compliance with Section 409A of the Code, the compensation committee approved amendments to the Deferred Compensation and Stock Deferral Plans at its December 4, 2006 meeting. The amendments cease future compensation deferrals for the Stock Deferral Plan and Deferred Compensation Plan other than the excess Employee Savings Plan contribution deferrals. For more information about the amendments, please see “Nonqualified Deferred Compensation.”

Change in Control and Severance Benefits

The compensation committee believes that change in control employment agreements and severance benefits are an important part of Exelon’s compensation structure for NEOs. The compensation committee believes that these agreements will help to secure the continued employment and dedication of the NEOs to continue to work in the best interests of shareholders, notwithstanding any concern they might have regarding their own continued employment prior to or following a change in control. The compensation committee also believes that these agreements and the Exelon Corporation Senior Management Severance Plan are important as recruitment and retention devices, as all or nearly all of the companies with which Exelon competes for executive talent have similar protections in place for their senior leadership.

Exelon’s Change in Control and Severance Benefits policies were initially adopted in January 2001 and harmonized the policies of Exelon’s predecessor companies. In adopting the policies, the compensation committee considered the advice of a consultant who advised that the levels were consistent with competitive practice and reasonable. The Exelon benefits include multiples of change in control benefits ranging from two times base salary and annual bonus for corporate and subsidiary vice presidents to 2.99 times base salary and annual bonus for the executive committee and select senior vice presidents other than the CEO. In 2003, the compensation committee reviewed the terms of the Senior Management Severance Plan and revised it to reduce the situations when an executive could terminate and claim severance benefits for “good reason,” clarified the definition of “cause,” and reduced non-change in control benefits for executives with less than two years of service. In December 2004, the compensation committee’s consultant presented a report on competitive practice on executive severance. The competitive practices described in the report were generally comparable to the benefits provided under Exelon’s severance policies. In discussing the compensation consultant’s December 2007 annual report to the committee on compensation trends, the consultant commented that Exelon’s change in control and severance policies were conservative, citing the use of double triggers, and that they remained competitive.

In 2007, the compensation committee adopted a policy limiting the amount of future severance benefits to be paid to NEOs under future arrangements without shareholder approval to 2.99 times salary plus annual incentive. This policy clarifies that severance benefits include cash severance payments and other post-employment benefits and perquisites, but do not include:

 

  n  

Amounts earned in the ordinary course of employment rather than upon termination, such as pension benefits and retiree medical benefits;

 

  n  

Amounts payable under plans approved by shareholders;

 

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  n  

Amounts available to one or more classes of employees other than the NEOs;

 

  n  

Excise tax gross-up payments, but only if the compensation includable in determining whether excise taxes apply exceed 110% of the threshold amount; otherwise the NEO’s benefits are reduced so that no excise tax is imposed; and

 

  n  

Amounts that may be required by existing agreements that have not been materially modified, Exelon’s indemnification obligations or the reasonable terms of a settlement agreement.

In April 2008, the compensation committee reviewed the level of non-change in control severance benefits provided to senior vice presidents. These benefits had varied over time as the corporate organization evolved from 1.25 to 2 times annual salary and incentive. The compensation consultant reported that 1.5 times annual salary and incentive was more appropriate and consistent with competitive practices. The compensation committee determined that non-change in control severance benefits for senior vice presidents would be reset at 1.5 times annual salary and bonus, provided that those senior vice presidents with such benefits at 2 times annual salary and bonus would be grandfathered at that level. In December 2008, the individual change in control employment agreements provided to the NEOs (other than the CEO) and certain other executives were amended to comply with section 409A of the Internal Revenue Code, which requires that certain payments of deferred compensation be paid not earlier than six months following a termination of employment. In addition, the severance multiple available to executives who entered into such agreements prior to 2007 was reduced from 3.0 to 2.99 times base salary and annual incentive, consistent with the 2007 compensation committee policy described immediately above, and the board’s recoupment policy was incorporated.

Retirement Benefit Plans

The compensation committee believes that retirement benefit plans are an important part of the NEO compensation program. These plans serve a critically important role in the retention of senior executives, as retirement benefits increase for each year that these executives remain employed. The plans thereby encourage our most senior executives to remain employed and continue their work on behalf of the shareholders. Exelon sponsors both qualified traditional defined benefit and cash balance defined benefit pension plans and related non-qualified supplemental pension plans (the “SERPs”).

Exelon previously granted additional years of credited service under the SERP to a few executives in order to recruit or retain them. As of January 1, 2004, Exelon ceased the practice of granting additional years of credited service to executives under the non-qualified pension plans that supplement the Exelon Corporation Retirement Program for any period in which services are not actually performed, except that up to two years of service credits may be provided under severance or change in control agreements first entered into after such date. Service credits available under employment, change in control or severance agreements or arrangements (or any successor arrangements) in effect as of January 1, 2004 were not affected by this policy. To attract a new executive, Exelon is permitted to grant additional years of service under the SERP related to its cash balance pension plan to make the executive whole for retirement benefits lost from another employer by joining Exelon, provided such a grant is disclosed to shareholders. To date, Exelon has not made any such grant.

Perquisites

Exelon provides limited perquisites intended to serve specific business needs for the benefit of Exelon; however, it is understood that some may be used for personal reasons as well. When perquisites are utilized for personal reasons, the cost or value is imputed to the officer as income and the officer is responsible for all applicable taxes; however, in certain cases, the personal benefit is closely associated with the business purpose in which case the company may reimburse the officer for the taxes due on the imputed income. In 2005, the compensation consultant reviewed Exelon’s perquisites program. Although specific data for Exelon’s peer group was not available, the compensation consultant based its analysis on survey data for large energy and general industry companies. The compensation consultant found that Exelon’s perquisite program was competitive. The compensation committee reviewed the costs of the perquisite program and determined the costs to be appropriate for a company of Exelon’s size.

Anticipating an emerging trend among the peer group to curtail perquisite programs in the future, on January 22, 2007 the compensation committee approved the phase-out of many executive perquisites, effective January 1, 2008. The eliminated perquisites included: leased vehicles (existing leases allowed to expire), financial and estate planning, tax

 

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preparation and health and dining/airline club memberships. The phase-out approach included a one-time transition payment in January 2008. The amounts of the transition payments are reflected in the column headed “All Other Compensation” in the Summary Compensation Table and are detailed in the table headed “Perquisites” that follows that table. Mr. Rowe did not receive a transition payment. Exelon continues to provide executive physicals, parking in downtown Chicago, supplemental long-term disability insurance and executive life insurance for those with existing policies. Exelon provides Mr. Rowe with 60 hours of personal travel per year on the corporate aircraft and car and driver services because of the time commitments his position requires.

How the Amount of 2008 Compensation Was Determined

This section describes how 2008 compensation was determined and awarded to the NEOs.

The independent directors of the Exelon board, on the recommendations of the Exelon corporate governance committee, conducted a thorough review of Mr. Rowe’s performance in 2008. The review considered performance requirements in the areas of finance and operations, strategic planning and implementation, succession planning and organizational goals, communications and external relations, board relations, leadership, and shareholder relations. Mr. Rowe prepared a detailed self-assessment reporting to the board on his performance during the year with respect to each of the performance requirements. The Exelon board considered the financial highlights of the year and a strategy scorecard that assessed performance against the company’s vision and goals. The factors considered included:

 

1) goals with respect to protecting the current value of Exelon, including:

 

  n  

delivering superior operating performance in terms of safety, reliability, efficiency, and the environment;

 

  n  

supporting competitive markets;

 

  n  

protecting the value of our generation assets; and

 

  n  

building healthy, self-sustaining delivery companies,

 

  as well as:

 

2) goals relating to growing long-term value, including:

 

  n  

organizational improvement;

 

  n  

advancing an environmental strategy that sets the industry standard for low carbon energy generation and delivery; and

 

  n  

rigorously evaluating new growth opportunities.

The Exelon board considered, in particular, outage frequency at the energy delivery companies, the high average capacity factor of the nuclear generating plants, above target results in operating earnings, notwithstanding the current economic turmoil, and improvements in safety and environmental performance, as well as challenges such as the decline in the value of the pension and nuclear decommissioning funds and increased bad debt expenses. The board also considered 2008 progress in advancing longer-term goals, including the formulation of Exelon’s low-carbon strategy and diversity and inclusion strategy, leadership in addressing regulatory issues, and progress toward building value through disciplined financial management.

How Base Salary Was Determined

At its January 28, 2008 meeting, the compensation committee considered organizational changes recommended by the corporate governance committee, subject to approval by the board of directors, which was obtained on January 29, 2008. These changes included promoting Mr. McLean to Executive Vice President, Finance and Markets and Mr. Hilzinger to Senior Vice President and Chief Financial Officer, both effective as of January 29, 2008. The compensation committee reviewed base salary data for the other NEOs listed in the Summary Compensation Table as compared to compensation data at the 50th and 75th percentile of the peer group. Based on this review and their individual performance reviews, including the review of Mr. Rowe’s performance by the corporate governance committee and the independent directors, most of the NEOs received base salary increases effective as of March 1, 2008 that were in line with the average 4% increase that the consultant reported was competitive. Because Messrs. Crane and Clark received significant base salary increases in September 2007, they did not receive base salary increases effective March 1, 2008.

 

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In July 2008, the compensation committee recommended, and the board of directors approved, base salary increases for certain NEOs in the nuclear and finance areas as well as the CEOs of ComEd and PECO. These increases were based on the compensation committee’s determination that the compensation for these officers was not competitive, as evidenced by specific examples of Exelon Nuclear officers who were being recruited by other nuclear generating and engineering companies and by the resignation of several senior financial officers who left Exelon to pursue opportunities at other companies, as well as the leadership being demonstrated by the ComEd and PECO CEOs in the face of significant challenges. These base salary adjustments were effective as of August 1, 2008. In addition, Mr. Crane received a further increase in pay effective as of September 23, 2008, in connection with his promotion to President and Chief Operating Officer of Exelon and President of Generation. The amounts of base pay, percentages of increase, and effective dates of base salary increases are set forth in the following table.

 

       
Name   Base
Salary
   

Percent

Increase

   

Effective

Date

 
                       

Rowe

  $ 1,430,000     4.0%     3/1/2008  

Hilzinger

    380,000     15.9%     1/29/2008  

Hilzinger

    425,000     11.8%     8/1/2008  

Crane

    700,000     16.7%     8/1/2008  

Crane

    800,000     14.3%     9/23/2008  

McLean

    570,000     21.3%     1/29/2008  

McLean

    625,000     9.6%     8/1/2008  

Clark

    550,000     7.8%     8/1/2008  
                     

How 2008 Annual Incentives Were Determined

For 2008, the annual incentive payments to Mr. Rowe and each of nine other senior executives were funded by a notional incentive pool established by the Exelon compensation committee under the Annual Incentive Plan for Senior Executives, a shareholder-approved plan, which is intended to comply with Section 162(m). The incentive pool was funded with 1.5% of Exelon’s 2008 operating income, the same percentage used in 2007 and 2006, but was not fully distributed to participants because the committee decided on substantially lesser awards.

Annual incentive payments for 2008 to Messrs. Rowe and McLean were made from the portion of the incentive pool available to fund awards for each of them based on the company’s operating earnings per share, adjusted for non-operating charges and other one-time, unusual and non-recurring items.

For executives with general corporate responsibilities, the goal was adjusted (non-GAAP) operating earnings per share so that they would focus their efforts on overall corporate performance. The earnings per share goal ranges were set to be like the forecast earnings ranges, with the annual incentive plan target slightly higher than the financial plan target. This goal was thought to be a stretch, but attainable. In accordance with the design of the annual incentive program, the compensation committee reviewed 2008 earnings and decided not to include the effects of significant one-time charges or credits that are not normally associated with ongoing operations and mark-to-market adjustments from economic hedging activities in adjusting earnings for purposes of making awards under the annual incentive plan. The adjusted earnings are consistent with the adjusted (non-GAAP) operating earnings that Exelon reports in its quarterly earnings releases. For 2008, the adjustments included:

 

  n  

the cost of Illinois rate relief associated with the legislative settlement and a settlement with the City of Chicago;

 

  n  

unrealized gains and losses on mark-to-market adjustments;

 

  n  

a reduction in estimated decommissioning costs; and

 

  n  

the positive effect of adjustments relating to sales of businesses.

2008 annual incentive payments for other NEOs with specific business unit responsibilities were based upon a combination of adjusted (non-GAAP) operating earnings per share (so that they would focus on overall corporate performance) and business unit financial and/or operating measures, depending on the nature of their responsibilities (so they would focus on the performance of their business unit). Under the terms of the plan, the business unit financial

 

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measures are adjusted from GAAP measures. For ComEd executive officers, adjusted (non-GAAP) operating earnings of Exelon were not a goal, consistent with the continuing efforts to recognize ComEd’s independence as described above. ComEd’s goals included other financial and operational goals. The ComEd net income goals were reduced from 50% in 2007 to 25% for 2008 and their reliability, safety and customer satisfaction goals were increased from 25% in 2007 to 50% in 2008 so that their goals would be more similar to the goals for other ComEd employees. The following table summarizes the goals and weights applicable to the NEOs for 2008:

 

             
Name   Adjusted
Operating
Earnings
Per Share
    Adjusted
Generation
Net
Income
    Adjusted
Business
Services
Company
(“BSC”)
Total
Cost
    Adjusted
ComEd
Net
Income
    Adjusted
ComEd
Total
Cost
    ComEd
Reliability,
Safety &
Customer
Satisfaction
Measures
 
                                            

Rowe

  100%     0%     0%     0%     0%     0%  

Clark

  0%     0%     0%     25%     25%     50%  

Hilzinger

  75%     0%     25%     0%     0%     0%  

Crane

  75%     25%     0%     0%     0%     0%  

McLean

  100%     0%     0%     0%     0%     0%  
                                     

The following table describes the performance scale and result for the 2008 goals:

 

           
2008 Goals   Threshold     Target     Distinguished     2008
Results
    Payout as a
Percentage
of Target
 
                                     

Adjusted (non-GAAP) Operating Earnings Per Share (EPS)

  3.65     4.15     4.45     4.20     116.67%  

Adjusted Generation Net Income ($M)

  2,006     2,156     2,256     2,291.9     200.00%  

Adjusted BSC Total Cost ($M)

  638.1     607.7     589.5     580.83     200.00%  

Adjusted ComEd Net Income ($M)

  220     237     260     241.82     121.53%  

Adjusted ComEd Total Cost ($M)

  1,681     1,601     1,552     1,602.38     98.83%  

ComEd Reliability Measure — CAIDI (minutes per outage)

  114     95     87     116     0.00%  

ComEd Reliability Measure — SAIFI (outages per customer)

  1.35     1.21     1.17     1.13     200.00%  

ComEd Safety Measure — OSHA Recordable Rate

  1.54     1.21     1.15     1.10     200.00%  

ComEd Customer Satisfaction (weighted combined score of residential, small commercial & industrial and large commercial & industrial customers)

  75     77     79     79.20     200.00%  
                               

In making annual incentive awards, the compensation committee has the discretion to reduce or not pay awards even if the targets are met.

The 2008 annual incentive program included the following shareholder protection features (“SPF”):

 

  n  

If target earnings per share are not achieved, then operating company/business unit key performance indicator payments are limited to actual performance, not to exceed 100% of the target payout.

 

  n  

If earnings per share are greater than or equal to target, but less than 150% of target, then the operating company/business unit key performance indicator payments are limited to 150% of target payout.

 

  n  

If earnings per share are greater than or equal to 150% of target, operating company/business unit key performance indicators are based on actual performance.

As a result of 2008 earnings being at 116.67% of target, the operating company/business unit key performance indicators were limited to actual performance, not to exceed 150% of target. The effect of these SPF reductions is shown in the table below.

With respect to the NEOs in the table below, individual performance multipliers (IPM) were approved and recommended by the compensation committee based upon assessments of NEO performance and input from the CEO. Under the

 

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terms of the Annual Incentive Program, the individual performance multiplier is used to adjust awards from minus 50% to plus 10% subject to the maximum 200% of target opportunity and the amounts available under the incentive pool.

The compensation committee also took into account the result in the ComEd rate case, which was viewed as favorable even though ComEd did not receive as much of a rate increase as it had requested. Accordingly, the compensation committee provided relief to Mr. Clark on the operating net income goal for the asset write-off resulting from the rate case. Based on the performance against the goals shown in the tables above, and taking into account the reductions resulting from the shareholder protection features and the adjustments discussed above, the compensation committee recommended and the Exelon or the ComEd board of directors, as the case may be (or in the case of Mr. Rowe, the independent directors) approved the following awards for the NEOs:

 

     Payout as a %
of Target
(pre-SPF)
    Payout $
(pre-SPF)
    SPF
Reduction $
    Payout as a %
of Target
(post-SPF &
pre-IPM)
    Payout $
(post-SPF &
pre-IPM)
    IPM %     Payout $
(post-SPF &
post-IPM)
 
                                                   

Rowe

  116.7%     $ 1,835,166     $ 0     116.7%     $ 1,835,166     100%     $ 1,835,166  

Hilzinger

  137.5           350,625       (31,875)     125.0           318,750     100           318,750  

Crane

  137.5           825,000       (75,000)     125.0           750,000     100           750,000  

McLean

  116.7           510,416       0     116.7           510,416     100           510,416  

Clark

  120.1           495,371       0     120.1           495,371     100           495,371  
                                                   

How Long-Term Incentives Were Determined

The compensation committee reviewed the amount of long-term compensation paid in the peer group for positions comparable to the positions held by the NEOs and then applied a ratio of stock options to performance shares in order to determine the target long-term equity incentives for each NEO, using Black-Scholes valuation for stock options and a 90 day weighted-average price for the preceding quarter to value performance shares. Stock option grants for 2008 were all at the targeted amounts. The actual amounts of performance shares awarded to the NEOs depended on the extent to which the performance measures were achieved.

Stock Option Awards

The company granted non-qualified stock options to the Exelon Corporation senior officers, including the NEOs, but excluding Mr. Clark, on January 28, 2008. These options were awarded at an exercise price of $73.29, which was the closing price on the January 28, 2008 grant date. The stock option awards were all at target levels. The size of the awards granted in 2008 was smaller than in 2007, reflecting the increase in the price of Exelon’s stock on the grant date in 2008 as compared to the price on the grant date in 2007.

Exelon Performance Share Unit Awards

The 2008 Long-Term Performance Share Unit Award Program was based on two measures, Exelon’s three-year Total Shareholder Return (“TSR”), compounded monthly, as compared to the TSR for the companies listed in the Dow Jones Utility Index (60% of the award), and Exelon’s three-year TSR, as compared to the companies in the Standard and Poor’s 500 Index (40% of the award). This structure was consistent with the structure used in the 2007 program.

Payouts are determined based on the following scale: the threshold TSR Position Ranking, for a 50% of target payout, was the 25th percentile; the target, for a 100% payout, was 50th percentile; and distinguished, for a 200% payout, was the 75th percentile, with payouts interpolated for performance falling between the threshold, target, and distinguished levels.

Exelon exceeded target performance levels with respect to both TSR measures. For the performance period of January 1, 2006 through December 31, 2008, Exelon’s relative ranking of TSR as compared to the Dow Jones Utility Index was at the distinguished level (75 percentile ranking or 200% of target payout). For the same time period, the company’s relative ranking of TSR in the S&P 500 Index was at the distinguished level (85.6 percentile ranking or 200% of target payout). Overall performance against both measures combined resulted in a payout to participants for 2008 that represented 200% of each participant’s target opportunity.

The amount of each NEO’s target opportunity was based on the portion of the long-term incentive value for each NEO attributable to performance share units (75%) and the weighted average Exelon stock price for the fourth quarter of 2007.

 

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Based on the formula, 2008 Performance Share Unit Awards for NEOs were as set forth in the following table. The first third of the awarded performance shares vests upon the award date, with the remaining thirds vesting on the date of the compensation committee’s January meeting in the next two years.

 

Exelon   Shares     Value    

Form of

Payment

 
       
            Note (1)     Note (2)  
                       

Rowe

  104,000     $ 5,877,040     100% Cash  

Hilzinger

  10,000       565,100     50% Cash /50% Stock  

Crane

  26,220       1,481,692     100% Cash  

McLean

  24,800       1,401,448     100% Cash  
                     

 

1. Based on the Exelon closing stock price of $56.51 on January 26, 2009.

 

2. Form of payment based on stock ownership level. Stock payment means amounts paid in shares of Exelon common stock. The figures in this column are not the same as the figures reported in the Stock Awards column of the Summary Compensation Table because of the effect of the vesting requirement.

2007–2009 ComEd Long-Term Incentive Program

In 2007 the compensation committee recommended, and the ComEd board adopted, a long-term incentive program designed to align the incentive compensation program with ComEd’s status as a fully regulated operating company. Accordingly, the program pays out in cash; there is no Exelon equity component to the program. The program for the 2007–2009 performance period is based on ComEd’s executive’s ability to avoid adverse legislation and maintain competitive power procurement with cost pass through as well as make appropriate progress in ComEd’s 2007–2011 business plan. The measures are qualitative and quantitative and encompass financial (one-third), operational (one-third), and regulatory and legislative (one-third) goals for the three-year target. There is a subjective element to payouts under the program. Financial goals for the performance cycle are that by year-end 2009, ComEd’s 2010 budget should reflect financial stability as evidenced by financial measures such as an industry median, adjusted (non-GAAP) operating return on equity, with the milestone for year-end 2008 being an adjusted (non-GAAP, e.g., excluding goodwill) return on equity at 6% with 56% debt; the threshold for this milestone is 5.6%, with distinguished at 6.6%. Operational goals are measured by ComEd CAIDI and ComEd SAIFI. The performance cycle goals are to achieve second quartile (or the level agreed to with the Illinois Commerce Commission) with targets of 1.15 and 92, respectively. The 2008 milestone is SAIFI of 1.21, with threshold at 1.35 and distinguished at 1.17, and CAIDI at 95, with threshold at 114 and distinguished at 87. The regulatory/legislative goals for the performance cycle are measured by ratemaking, preservation of the power procurement process, and avoidance of harmful legislation. The goals for the performance cycle are supporting the current delivery service tariff rate case; preparing for the next rate case using a future test year as base, if feasible; developing contingency plans for potential 2008 rate case outcomes; supporting the transmission rate case update; implementing a new horizontal RFP procurement process; working with the IPA and stakeholders to obtain ICC approval of the 2009–2010 procurement plan; developing and supporting retail competition initiatives; implementing energy efficiency and demand response plans; and avoiding adverse legislation that would significantly impact the business.

For the performance period of January 1, 2008 through December 31, 2008, ComEd achieved below threshold performance relative to CAIDI (outage duration) and distinguished performance relative to SAIFI (outage frequency). For the same time period, ComEd achieved a below threshold level of performance relative to 2008 operating return on equity. However, the result in the ComEd rate case was viewed as favorable even though ComEd did not receive as much of a rate increase as it had requested. Excluding the rate case asset write-offs, ComEd would have achieved target performance on the financial goal. Taking into consideration the favorable result in the rate case and heavy storm recovery costs, the committee considered performance on the financial goal to have been at target. ComEd also achieved a distinguished level of performance relative to its regulatory and legislative goals. Based on their evaluation of this performance, the compensation committee recommended, and the ComEd board approved, payouts to participants for 2008 that represented 150% of each participant’s target opportunity.

Based on the formula, 2008 ComEd Long-Term Incentive Awards for Mr. Clark were as set forth below. The first third of the award vests upon the award date, with the remaining thirds vesting on the date of the compensation committee’s January meeting in the next two years.

 

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ComEd   Value     Form of
Payment
 
     
     Note (1)     Note (2)  
                

Clark

  $ 1,554,000     100% Cash  
               

 

(1) Based on 150% of target opportunity.

 

(2) Form of payment is 100% cash. The figures in this column are not the same as the figures reported in the Stock Awards column of the Summary Compensation Tables because of the effect of the vesting requirement.

Retention Awards

In July 2008, the compensation committee recommended, and the Exelon board approved, retention awards of restricted stock units for certain officers. These awards were based on the same considerations that led to the approval of base salary increases effective on August 1, 2008 that were discussed above. These restricted stock units will be settled in shares. The NEOs who received such awards and the number of restricted stock units are set forth below:

 

     
     Shares     Vesting  
                

Hilzinger

  5,000     100% after 5 years  

Crane

  15,000     100% after 5 years  

McLean

  10,000     50% after 3 years
50% after 5 years
 
 
             

Tax Consequences

Under Section 162(m) of the Code, executive compensation in excess of $1 million paid to a CEO or other person among the four other highest compensated officers is generally not deductible for purposes of corporate Federal income taxes. However, qualified performance-based compensation, within the meaning of Section 162(m) and applicable regulations, remains deductible. The compensation committee intends to continue reliance on performance-based compensation programs, consistent with sound executive compensation policy. The compensation committee’s policy has been to seek to cause executive incentive compensation to qualify as “performance-based” in order to preserve its deductibility for Federal income tax purposes to the extent possible, without sacrificing flexibility in designing appropriate compensation programs.

Because it is not “qualified performance-based compensation” within the meaning of Section 162(m), base salary is not eligible for a Federal income tax deduction to the extent that it exceeds $1 million. Accordingly, Exelon is unable to deduct that portion of Mr. Rowe’s base salary in excess of $1 million. Annual incentive awards and performance share units payable to NEOs are intended to be qualified performance-based compensation under Section 162(m), and are therefore deductible for Federal income tax purposes. However, because of the element of compensation committee and ComEd board of directors discretion in the 2007–2009 ComEd Long-Term Incentive Program, payments under that program are not eligible for Federal income tax deduction to the extent that, combined with an individual’s base salary, payments exceed $1 million. Restricted stock and restricted stock units are not deductible by the company for Federal income tax purposes under the provisions of Section 162(m) if NEOs’ compensation that is not “qualified performance-based compensation” is in excess of $1 million.

Under Section 4999 of the Internal Revenue Code, there is a steep excise tax if change in control or severance benefits are greater than 2.99 times the five-year average amount of income reported on an individual’s W-2. This provision can have an arbitrary effect, due to the uneven effect of such items as relocation reimbursements and stock option exercises. In addition, the excise tax is imposed if compensation is only $1 greater than the threshold. Accordingly, Exelon has a policy of providing excise tax gross-ups, and avoiding gross-ups by reducing payments to under the threshold if the amount otherwise payable to an executive is not more than 110% of the threshold. In December 2007 the compensation committee reviewed this policy and concluded that it was reasonable.

Conclusion

The compensation committee is confident that Exelon’s compensation programs are performance-based and consistent with sound executive compensation policy. They are designed to attract, retain and reward outstanding executives and to motivate and reward senior management for achieving high levels of business performance, customer satisfaction and outstanding financial results that build shareholder value.

 

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Report of the Compensation Committee

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the compensation committee recommended to the board that the Compensation Discussion and Analysis be included in the 2008 Annual Report on Form 10-K and the 2009 Proxy Statement.

 

February 6, 2009    
The Compensation Committee    
Rosemarie B. Greco, Chair   William C. Richardson  
John A. Canning, Jr.   Stephen D. Steinour  
M. Walter D’Alessio    

5. Executive Compensation Data

 

Summary Compensation Tables

The tables below summarize the total compensation paid or earned by each NEO for the year ended December 31, 2008.

Salary amounts may not match the amounts discussed in Compensation Discussion and Analysis because that discussion concerns salary rates; the amounts reported in the Summary Compensation Tables reflect actual amounts paid during the year including the effect of changes in salary rates. Changes to base salary generally take effect on March 1, and there may also be changes at other times during the year to reflect promotions or changes in responsibilities.

Bonus reflects discretionary bonuses or amounts paid under the annual incentive plan on the basis of the individual performance multiplier approved by the compensation committee and the board of directors or, in the case of Mr. Rowe, approved by the independent directors.

Stock awards and option awards show the dollar amount calculated in accordance with SFAS No.123-R and recognized in the company’s financial statements for the full year 2008 for all outstanding equity awards made to NEOs in prior years as well as the grants of any awards made during 2008. In accordance with SFAS No.123-R, if the NEO is retirement eligible, the full value of any outstanding awards will be recognized in the year of grant for financial statement purposes, even though the NEO will still receive the award subject to the original vesting schedule.

Stock awards consist primarily of performance share awards. All performance share units are made pursuant to the terms of the 2006 Long-Term Incentive Plan (“LTIP”) based upon the achievement of goals, as described above. The threshold, target and distinguished goals for performance share unit awards are established on the grant date. The actual performance against the goals and the number of performance share units awarded are established on the award date. Upon retirement or involuntary termination without cause, earned but non-vested shares are eligible for accelerated vesting. The form of payment provides for payment in Exelon common stock to executives with lower levels of stock ownership, with increasing portions of the payments being made in cash as executives’ stock ownership levels increase in excess of the ownership guidelines. If an executive achieves 125% or more of the applicable ownership target, performance shares will be paid half in cash and half in stock. If executive vice presidents and above achieve 200% or more of their applicable stock ownership target, their performance shares will be paid entirely in cash. Stock awards may also include restricted stock or stock unit awards. When awarded, restricted stock or stock units are earned by continuing employment for a pre-determined period of time or, in some instances, after certain performance requirements are met. In some cases, the award may vest ratably over a period; in other cases, it vests in full at one or more pre-determined dates. Amounts of restricted shares held by each NEO, if any, are shown in the footnotes to the Outstanding Equity Table.

All option awards are made pursuant to the terms of the 2006 LTIP and are for the purchase of Exelon common stock. All options are granted at a strike price that is not less than the fair market value of a share of stock on the date of grant. Fair market value is defined under the plans as the closing price on the grant date as reported on the New York Stock

 

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Exchange. Options vest in equal annual installments over a four-year period and have a term of ten years. Employees who are retirement eligible are eligible for accelerated vesting upon retirement or termination without cause.

Non-equity incentive plan compensation includes the amounts earned under the annual incentive plan by the extent to which the applicable financial and operational goals were achieved. The annual incentive plan for 2008 is described in Compensation Discussion and Analysis above.

 

Name and Principal

Position

  Year     Salary     Bonus     Stock Awards     Option
Awards
   

Non-Equity
Incentive
Plan
Compen-

sation

   

Change in
Pension
Value and
Nonqual-

ified
Deferred
Compen-
sation
Earnings

    All Other
Compen-
sation
    Total  
                   
                   Note (7)     Note (8)     Note (9)     Note (10)     Note (11)     Note (12)         
                                                                 

Rowe (1)

  2008     $ 1,474,423     —       $ 2,068,010     $ 2,455,433     $ 1,835,166     $ 830,272     $ 400,192     $ 9,063,496  
  2007       1,361,154     —         12,728,849       2,798,893       1,680,249       504,385       418,026       19,491,556  
    2006       1,291,918     168,345       10,527,089       1,324,393       1,683,455       856,413       575,455       16,427,068  

Hilzinger (2)

  2008       408,627     —         556,237       141,429       318,750       57,492       143,916       1,626,451  

Young (3)

  2008       60,750     —         (1,282,781)       —         —         9,819       18,089       (1,194,123)  
  2007       578,538     —         2,787,570       383,148       562,960       74,623       125,378       4,512,217  
    2006       546,767     —         2,174,945       310,360       498,575       77,622       158,808       3,767,077  

Crane (4)

  2008       694,230     —         2,519,603       931,625       750,000       642,938       272,727       5,811,123  
  2007       558,000     —         2,161,974       482,210       577,536       442,503       158,029       4,380,252  
    2006       505,959     43,911       1,545,742       309,035       439,110       352,298       131,404       3,327,459  

McLean (5)

  2008       561,538     —         1,125,928       670,842       510,416       95,727       216,544       3,180,995  
  2007       482,500     —         2,593,306       473,898       403,276       53,160       96,874       4,103,014  
    2006       442,575     —         1,811,526       407,167       383,145       62,625       102,602       3,209,640  

Clark (6)

  2008       546,692     —       $ (198,434)       56,970     $ 2,049,371     $ 548,986     $ 193,738       3,197,323  
  2007       482,500     —         566,726       121,635       2,288,853       391,782       146,412       3,989,639  
    2006       440,000     —         2,239,794       592,755       326,584       158,233       162,925       3,920,291  
                                                                     

Notes to the Summary Compensation Table

1. John W. Rowe, Chairman and CEO, Exelon; Chairman, Generation.

 

2. Matthew F. Hilzinger, Senior Vice President and CFO, Exelon. Mr. Hilzinger is an executive officer of Exelon and Generation.

 

3. John F. Young, Executive Vice President, Finance & Markets and CFO, Exelon and Generation through January 5, 2008. Mr. Young remained an employee through January 29, 2008.

 

4. Christopher M. Crane, President and Chief Operating Officer (COO), Exelon and Generation.

 

5. Ian P. McLean, Executive Vice President, Finance & Markets, Exelon.

 

6. Frank M. Clark, Chairman and CEO, ComEd.

 

7. In previous years in recognition of their overall performance, certain NEOs received an individual performance multiplier to their annual incentive payments or other special recognition awards.

 

8. The amounts shown in this column include the compensation expense recognized in the 2008 financial statements for the performance share unit awards granted on January 28, 2008 and paid out in January 2009 with respect to the three-year performance period ending December 31, 2008, and the expense recognized during 2008 for performance share unit awards granted in previous years, as well as the expense recognized during 2008 for restricted stock or stock unit awards made to many of these officers in 2008 or previous years. For a discussion of the assumptions made in the valuation of these awards under SFAS No. 123-R, see note 12 of the Combined Notes to the Consolidated Financial Statements. For purposes of this table, estimates of forfeitures related to service- based vesting conditions have been disregarded. With respect to the performance share awards granted on January 23, 2006 and January 22, 2007 that are eligible for cash distribution in January 2009 and 2010, including the outstanding awards to Mr. Clark who no longer receives performance share awards, in 2008 Exelon recorded an adjustment to amounts recorded as of December 31, 2007. This resulted in negative expense being recorded in 2008 due to the decrease in stock price from $81.64 at December 31, 2007 to $55.61 at December 31, 2008.

 

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9. The amounts shown in this column include the compensation expense recognized in the 2008 financial statements for the award of non-qualified options to purchase Exelon common stock granted on January 29, 2008, as well as the expense recognized during 2008 for stock option grants awarded in previous years. For a discussion of the assumptions made in the valuation of these awards under SFAS No. 123-R, see note 16 of the Combined Notes to the Consolidated Financial Statements in Exelon’s 2008 Annual Report on Form 10-K or Exelon’s 2008 Financial Information. For purposes of this table, estimates of forfeitures related to service-based vesting conditions have been disregarded.

 

10. The amounts shown in this column represent payments made pursuant to the Annual Incentive Plan and the ComEd Long-Term Incentive Plan. Both programs are paid with respect to 2008 performance and were awarded on January 26, 2009. The table below details Mr. Clark’s payments applicable to the Annual Incentive Plan and the ComEd Long-Term Incentive Plan.

 

         
Name   Year     Annual Incentive
Plan
   

ComEd

Long-Term
Incentive
Plan

    Total  
                              

Clark

  2008

2007

 

 

  $

 

495,371

475,853

 

 

  $

 

1,554,000

1,813,000

 

 

  $

 

2,049,371

2,288,853

 

 

                               

 

11. The amounts shown in the column represent the change in the accumulated pension benefit from December 31, 2007 to December 31, 2008. For Mr. Crane and Mr. McLean, this amount includes $48 and $160, respectively, of above market earnings in their non-qualified deferred compensation accounts.

 

12. The amounts shown in this column include the items summarized in the following tables:

All Other Compensation

 

Name   Perquisites     Reimburse-
ment for
Income
Taxes
    Payments
or Accruals
for
Termination
or Change
in Control
(CIC)
    Company
Contributions
to Savings
Plans
    Company
Paid
Term Life
Insurance
Premiums
    Dividends
or Earnings
not included
in Grants
    Total  
               
     Note (1)     Note (2)     Note (3)     Note (4)     Note (5)     Note (6)         
                                                   

Rowe

  $ 179,269     $ 6,865     —       $ 73,721     $ 140,337       —       $ 400,192  

Hilzinger

    59,083       31,849     —         20,431       3,109     $ 29,444       143,916  

Young

    15,051       —       —         3,038       —         —         18,089  

Crane

    69,809       39,910     —         34,712       42,046       86,250       272,727  

McLean

    63,419       42,224             28,077       72,574       10,250       216,544  

Clark

    68,245     $ 39,910     —       $ 27,335     $ 48,123       10,125     $ 193,738  
                                                       

Notes to All Other Compensation Table

1. The amounts shown in this column represent the incremental cost to Exelon to provide certain perquisites to NEOs as summarized in the Perquisites Table.

 

2. Officers receive a reimbursement to cover applicable taxes on imputed income for business-related spousal travel, certain club memberships and relocation expenses because the personal benefit is closely related to the business purpose.

 

3. Represents the expense Exelon has recorded during 2008 after the announcement of the officer’s retirement or resignation for severance related costs including salary and Annual Incentive Plan (AIP) continuation, payroll taxes, outplacement fees and medical benefits for a specified period of time.

 

4. Represents company matching contributions to the NEO’s qualified and non-qualified savings plans. The 401(k) plan is available to all employees and the annual contribution for 2008 was generally limited to $15,500. NEOs and other officers may participate in the Deferred Compensation Plan, into which payroll contributions in excess of the specified IRS limit are credited under the separate, unfunded plan that has the same portfolio of investment options as the 401(k) plan.

 

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5. Exelon provides basic term life insurance, accidental death and disability insurance, and long-term disability insurance to all employees, including NEOs. The values shown in this column include the premiums paid during 2008 for additional term life insurance policies for the NEOs, additional supplemental accidental death and dismemberment insurance and for additional long-term disability insurance over and above the basic coverage provided to all employees. Mr. Rowe has two term life insurance policies and one additional accidental death and dismemberment policy.

 

6. The amounts shown represent the dividends on current equity awards that have not been included in the values shown in the column labeled Stock Awards in the Summary Compensation Tables above. The values shown represent regular dividends on common stock paid in cash during the year on each officer’s unvested restricted stock, and for certain officers, the value, calculated in accordance with SFAS No. 123-R, of reinvested regular dividends earned during 2008 on their unvested performance share balances which were distributed in stock upon vesting in January 2009.

Perquisites

 

Name  

Personal

and Spouse

Travel

    Automobile
Lease and
Parking
   

Financial
Estate

and Tax
Planning
Services

    Dining,
Health and
Airline Club
Memberships
   

Other

Items

    Perquisite
Transition
Payment
    Total  
               
     Note (1) & Note (2)     Note (3)     Note (4)     Note (5)     Note (6)     Note (7)         
                                                   

Rowe

  $ 168,268     $ 10,211     $ 475     —       $ 315       —       $ 179,269  

Hilzinger

    —         18,768       —       —         315     $ 40,000       59,083  

Young

    —         15,051       —       —         —         —         15,051  

Crane

    204       19,290       —       —         315       50,000       69,809  

McLean

    2,186       8,618       —       —         2,615       50,000       63,419  

Clark

    984       16,946       —       —         315       50,000       68,245  
                                                       

Note to Perquisite Table

1. Mr. Rowe is entitled to up to 60 hours of personal use of corporate aircraft each year. The figure shown in this column includes $155,338, representing the aggregate incremental cost to Exelon for Mr. Rowe’s personal use of corporate aircraft. This cost was calculated using the hourly cost for flight services paid to the aircraft vendor, Federal excise tax, fuel charges, and domestic segment fees. From time to time Mr. Rowe’s spouse accompanies Mr. Rowe in his travel on corporate aircraft. The aggregate incremental cost to Exelon, if any, for Mrs. Rowe’s travel on corporate aircraft is included in this amount. For all executive officers, including Mr. Rowe, Exelon pays the cost of spousal travel, meals, and other related amenities when they attend company or industry-related events where it is customary and expected that officers attend with their spouses. The aggregate incremental cost to Exelon for these expenses is included in the table. In most cases, there is no incremental cost to Exelon of providing transportation or other amenities for a spouse, and the only additional cost to Exelon is to reimburse officers for the taxes on the imputed income attributable to their spousal travel, meals, and related amenities when attending Exelon or industry-related events. This cost is shown in the Perquisites column of the All Other Compensation Table above.

 

2. Exelon maintains several cars and drivers in order to provide transportation services for the NEOs and other officers to carry out their duties among Exelon’s various offices and facilities that are located throughout northeastern Illinois and southeastern Pennsylvania. Messrs. Rowe and Clark are also entitled to limited personal use of Exelon’s cars and drivers, including use for commuting which allows them to work while commuting. The cost included in the table represents the estimated incremental cost to Exelon to provide limited personal service. This cost is based upon the number of hours that the drivers worked overtime providing services to each NEO, multiplied by the average overtime rate for drivers plus an additional amount for fuel and maintenance. Personal use was imputed as additional taxable income to Messrs. Rowe and Clark.

 

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3. In 2008, Exelon discontinued the leased vehicle perquisite for most officers effective at the lease expiration dates occurring throughout 2008. Certain leases are set to expire in early 2009. Exelon continued to provide insurance, maintenance, applicable taxes and provided a company-paid credit card for fuel purchases, and where required, such as in downtown Chicago, company-paid parking while the vehicle leases were still in effect. Officers are imputed additional taxable income for that portion of their use of these perquisites that is personal; however, the figure shown in the table is the total cost to provide the automobile and related amenities to the officer.

 

4. In 2008, Exelon ceased providing financial, estate and tax planning services to NEOs; the payment shown reflects reimbursements paid during the first two months of 2008 for services provided in 2007 and 2008 corrections to earlier covered tax returns.

 

5. In 2008, Exelon discontinued to provide club memberships to NEOs.

 

6. Executive officers may use company-provided vendors for comprehensive physical examinations and related follow-up testing. Executives also receive certain gifts during the year in recognition of their services that are imputed to the officer as additional taxable income.

 

7. As part of Exelon’s decision to eliminate many components of the perquisite program, a one-time transition payment was made to NEOs. This payment was calculated to approximate the replacement cost of the eliminated perquisites for a period of three years and was grossed up for income tax purposes.

Grants of Plan Based Awards

 

Name   Grant Date    

Estimated Future

Payouts Under

Non-Equity Incentive

Plan Awards

   

Estimated Future

Payouts Under

Equity Incentive

Plan Awards

    All other
Stock
Awards:
Number of
Shares or
Units
   

All Other

Options

Awards:

Number

of

Securities

Under-

lying

Options

    Exercise
or Base
Price of
Option
Awards.
    Grant Date
Fair Value
of Stock
and Option
Awards
 
           Note (1)     Note (2)          
           Threshold     Target     Maximum     Threshold     Target     Maximum          
                     
                                                      Note (3)                   Note (4)  
                                                                               

Rowe

  28 Jan. 2008     $ 786,500     $ 1,573,000     $ 3,146,000                
  28 Jan. 2008           26,000     52,000     104,000           $ 6,402,614  
    28 Jan. 2008                                                     114,000     $ 73.29       2,093,040  

Hilzinger

  01 Aug. 2008       127,500       255,000       510,000                
  28 Jan. 2008           2,500     5,000     10,000             615,636  
  28 Jan. 2008                   11,000       73.29       201,960  
    29 Jul. 2008                                               5,000                     377,200  

Crane (5)

  23 Sep. 2008       300,000       600,000       1,200,000                
  28 Jan. 2008           6,200     12,400     24,800             1,526,777  
  23 Sep. 2008           355     710     1,420             89,782  
  28 Jan. 2008                   28,000       73.29       514,080  
    29 Jul. 2008                                               15,000                     1,131,600  

McLean

  01 Aug. 2008       218,750       437,500       875,000                
  28 Jan. 2008           6,200     12,400     24,800             1,526,777  
  28 Jan. 2008                   28,000       73.29       514,080  
    29Jul. 2008                                               10,000                     754,400  

Clark

  28 Jan. 2008     $ 518,000     $ 1,036,000     $ 2,072,000     —       —       —       —       —         —         —    
    01 Aug. 2008       206,250       412,500       825,000     —       —       —       —       —         —         —    
                                                                             

Notes to Grants of Plan Based Awards Table

1. All NEOs (except Mr. Young, who received no awards in 2008) have annual incentive plan target opportunities based on a fixed percentage of their base salary. Mr. Clark has a long-term incentive plan target based on a cash target (for Mr. Clark, the top row is the long-term incentive, and the next row is the annual incentive). Under the terms of both incentive plans, threshold performance earns 1/2 of the respective target while the maximum payout is capped at 200% of target. For additional information about the terms of these programs, see Compensation Discussion and Analysis above.

 

2.

Non-ComEd NEOs have a long-term performance share target opportunity that is a fixed number of performance shares commensurate with the officer’s position. The 2008 Long-Term Performance Share Unit Award Program was based on two measures, Exelon’s TSR compounded monthly, for the three-year period ended December 31, 2008,

 

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as compared to the TSR for the companies listed in the Dow Jones Utility Index (60% of the award), and Exelon’s three-year TSR, as compared to the companies in the Standard and Poor’s 500 Index (40% of the award). The threshold TSR Position Ranking, for a 50% of target payout, was the 25th percentile; the target, for a 100% payout, was the 50th percentile; and distinguished, for a 200% payout, was the 75th percentile, with payouts interpolated for performance falling between the threshold, target, and distinguished levels. The threshold, target and distinguished goals for performance share unit awards are established on the grant date. The actual performance against the goals and the number of performance share units awarded are established on the award date. One third of the awarded performance shares vests upon the award date with the balance vesting in January of the next two years.

 

3. This column shows additional restricted share awards made during the year. Messrs. Hilzinger, Crane and McLean received restricted grant awards on July 29, 2008. The vesting dates of the awards are provided in footnote #3 to the Outstanding Equity Table below.

 

4. This column shows the grant date fair value, calculated in accordance with SFAS No. 123-R, of the performance share awards, stock options, and restricted stock granted to each NEO during 2008. Fair value of performance share awards is based on an estimated payout of 168% of target.

 

5. For Mr. Crane, the values shown in the columns under Estimated Future Payouts Under Equity Incentive Plan Awards reflect an upward adjustment made to his grants upon his promotion to Chief Operating Office in September 2008. The grant date fair value of the September 2008 portion of the award is based on an estimated payout of 188% of target.

 

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Table of Contents

Outstanding Equity Awards at Fiscal Year-End

 

Name                               Options                          Stock  
     
                                 Note (2)                          Note (3)  
     Number of
Securities
Underlying
Unexercised
Options
That Are
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
That Are
Not
Exercisable
    Option
Exercise
or Base
Price
   

Option

Grant

Date

    Option
Expiration
Date
    Number of
Shares or
Units of
Stock
That Have
Not Yet
Vested
   

Market

Value of
Share or
Units of
Stock That
Have Not
Yet Vested
Based on
12/31

Closing
Price
$55.61

   

Equity
Incentive

Plan

Awards:
Number

of

Unearned
Shares,

Units or
Other
Rights
That
Have Not
Yet
Vested

   

Equity
Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have

Not Yet

Vested

 
                                                                 

Rowe

  —       114,000     $ 73.29     28 Jan. 2008     27 Jan. 2018     127,338     $ 7,081,266     104,000     $ 5,783,440  
  37,500     112,500       59.96     22 Jan. 2007     21 Jan. 2017          
    171,750     57,250       42.85     24 Jan. 2005     23 Jan. 2015                              

Hilzinger

  —       11,000       73.29     28 Jan. 2008     27 Jan. 2018     22,595       1,256,508     10,000       556,100  
  2,625     7,875       59.96     22 Jan. 2007     21 Jan. 2017          
  5,250     5,250       58.55     23 Jan. 2006     22 Jan. 2016          
  10,500     3,500       42.85     24 Jan. 2005     23 Jan. 2015          
    4,500     —         32.54     26 Jan. 2004     25 Jan. 2014                              

Young (1)

  —       —         —               —               —            

Crane

  —       28,000       73.29     28 Jan. 2008     27 Jan. 2018     78,121       4,344,309     26,220       1,458,094  
  8,750     26,250       59.96     22 Jan. 2007     21 Jan. 2017          
  7,500     15,000       58.55     23 Jan. 2006     22 Jan. 2016          
  9,000     9,000       42.85     24 Jan. 2005     23 Jan. 2015          
    13,500             32.54     26 Jan. 2004     25 Jan. 2014                              

McLean

  —       28,000       73.29     28 Jan. 2008     27 Jan. 2018     40,396       2,246,422     24,800       1,379,128  
  8,750     26,250       59.96     22 Jan. 2007     21 Jan. 2017          
  17,500     17,500       58.55     23 Jan. 2006     22 Jan. 2016          
  42,000     14,000       42.85     24 Jan. 2005     23 Jan. 2015          
  80,000     —         32.54     26 Jan. 2004     25 Jan. 2014          
  72,000     —         24.81     27 Jan. 2003     26 Jan. 2013          
  90,000     —         23.46     28 Jan. 2002     27 Jan. 2012          
  9,288     —         24.84     25 Feb. 2002     24 Feb. 2012          
    56,000     —         29.75     20 Oct. 2000     19 Oct. 2010                              

Clark

  15,000     15,000       58.55     23 Jan. 2006     22 Jan. 2016     13,449     $ 747,899     —         —    
    27,000     9,000       42.85     24 Jan. 2005     23 Jan. 2015                              
                                                             

Notes to Outstanding Equity Table

1. Pursuant to the terms of the Long Term Incentive Plan under which the options were granted, Mr. Young’s unvested stock options were cancelled and his vested stock options expired 90 days from the date of his resignation on January 29, 2008. Mr. Young forfeited all unvested performance shares and restricted shares.

 

2. Non-qualified stock options are granted to NEOs pursuant to the company’s long-term incentive plans. Grants made prior to 2003 vested in three equal increments, beginning on the first anniversary of the grant date. Grants made in 2003 and thereafter vest in four equal increments, beginning on the first anniversary of the grant date. All grants expire on the tenth anniversary of the grant date. For all data above, the number of shares and exercise prices have been adjusted to reflect the 2 for 1 stock split of May 5, 2004.

 

3. The amount shown in the column labeled Number of Shares or Units of Stock That Have Not Vested includes the unvested portion of performance share awards earned with respect to the three-year performance periods ending December 31, 2007 and December 31, 2006 and any unvested restricted stock awards as shown in the table below. The first third of the awarded performance shares vests immediately upon the award date (usually the date of the first compensation committee meeting after the completion of the fiscal year) with the remaining thirds vesting on the date of the compensation committee’s January meeting in the next two years. The amount shown in the column labeled Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Yet Vested represents the maximum number of performance shares available to each NEO for the performance period ending December 31, 2008. Shares are valued at $55.61, the closing price of Exelon stock on December 31, 2008.

 

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For the following NEOs, the amounts shown in the column labeled Number of Shares or Units of Stock That Have Not Vested includes these unvested restricted stock awards.

 

       
Name  

Grant

Date

    Number of
Restricted
Shares
    Vesting
Dates
 
                       

Hilzinger

  01 Aug. 2004

01 Aug. 2008

 

 

  8,000

5,000

 

 

  01 Aug. 2009

01 Aug. 2013

 

 

Crane

  01 Feb. 2004

01 Aug. 2004

03 Sep. 2007

01 Aug. 2008

 

 

 

 

  10,000

10,000

15,000

15,000

 

 

 

 

  01 Feb. 2009

01 Aug. 2009

03 Sep. 2011

01 Aug. 2013

 

 

 

 

McLean

  01 Aug. 2008

01 Aug. 2008

 

 

  5,000

5,000

 

 

  01 Aug. 2011

01 Aug. 2013

 

 

Clark

  01 Aug. 2004     5,000     01 Aug. 2009  
                   

Option Exercises and Stock Vested

 

Name   Option Awards     Stock Awards  
  Note (1)     Note (2)  
     Number of
Shares Acquired
on Exercise
    Value Realized
on Exercise
    Number of
Shares Acquired
on Vesting
    Value Realized
on Vesting
 
         
                              
                              

Rowe

  550,000     $ 27,209,265     113,262     $ 8,300,997  

Hilzinger

  —         —       7,956       583,123  

Young (3)

  40,000       1,189,306     27,273       1,998,815  

Crane

  —         —       22,915       1,679,446  

McLean

  —         —       27,273       1,998,815  

Clark

  13,500       630,192     13,362       979,282  
                             

Notes to Option Exercises and Stock Vested Table

1. Messrs. Rowe and Clark exercised all options shown above pursuant to Rule 10b5-1 trading plans that were entered into when the officer was unaware of any material information regarding Exelon that had not been publicly disclosed. In each case, the formula for the dates, number of options, and sale price was set at the time the trading plans were established.

 

2. Share amounts are generally composed of performance shares that vested on January 29, 2008, which included 1/3 of the grant made with respect to the three-year performance period ending December 31, 2007; 1/3 of the grant made with respect to the three-year performance period ending December 31, 2006, and 1/3 of the grant made with respect to the three-year performance period ending December 31, 2005. Shares were valued at $73.29 upon vesting.

 

3. For Mr. Young, the table reflects all options exercised for the full year and shares vested through the date of his resignation on January 29, 2008.

 

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Pension Benefits

Exelon sponsors the Exelon Corporation Retirement Program, a traditional defined benefit pension plan that covers certain management employees who commenced employment prior to January 1, 2001 and certain collective bargaining unit employees. Effective January 1, 2001, Exelon also established two cash balance defined benefit pension plans in order to both reduce future retirement benefit costs and provide an option that is portable as the company anticipated a work force that was more mobile than the traditional utility workforce. The cash balance defined benefit pension plans cover management employees and certain collective bargaining unit employees hired on or after such date, as well as certain management employees hired prior to such date who elected to transfer to a cash balance plan. Each of these plans is intended to be tax-qualified under Section 401(a) of the Internal Revenue Code.

Covered compensation under the plans generally includes salary and annual incentive payments, which are disclosed in the Summary Compensation Table for the NEOs. The calculation of retirement benefits under the Exelon Corporation Retirement Program is based upon average earnings for the highest consecutive multi-year period.

Under the cash balance pension plan, a notional account is established for each participant and the account balance grows as a result of annual benefit credits and annual investment credits. Beginning January 1, 2008, the annual benefit credit under the plan is 7.00% of base pay and annual incentive award (subject to applicable Internal Revenue Code limit). For the portion of the account balance accrued beginning January 1, 2008, the annual investment credit is the third segment rate of interest on long-term investment grade corporate bonds, as provided for in Internal Revenue Code Section 430(h)(2)(C)(iii). The Segment Rate will be determined as of November of the year for which the cash balance account receives the investment credit. For the portion of the benefit accrued before January 1, 2008, pending Internal Revenue Service guidance, the annual investment credit is the greater of 4%, or the average for the year of the S&P 500 Index and the applicable interest rate specified in Section 417(e) of the Internal Revenue Code that is used to determine lump sum payments (the interest rate is determined in November of each year). Benefits are vested and non-forfeitable after completion of at least three years of service, and are payable following termination of employment. Apart from the benefit credits and vesting requirement, and as described above, years of service are not relevant to a determination of accrued benefits under the cash balance pension plans.

The Internal Revenue Code limits to $230,000 for 2008 the individual annual compensation that may be taken into account under the tax-qualified retirement plan. As permitted by Employee Retirement Income Security Act, Exelon sponsors the SERP that allow the payment to certain individuals out of its general assets of any benefits calculated under provisions of the applicable qualified pension plan which may be above these limits.

For purposes of the SERP, Mr. Crane received an additional eight years of credited service through December 31, 2006 as part of his employment offer that provides one additional year of service credit for each year of employment to a maximum of 10 additional years.

Under his employment agreement, Mr. Rowe is entitled to receive a special supplemental executive retirement plan benefit (the “SERP benefit”) upon termination of employment. The SERP benefit, when added to all other retirement benefits provided to Mr. Rowe by Exelon, will equal Mr. Rowe’s SERP benefit, calculated under the terms of the SERP in effect on March 10, 1998 as if he had earned 20 years of service on March 16, 1998 and one additional year of service on each anniversary of that date occurring prior to his termination of employment. In the event Mr. Rowe’s employment had terminated for cause prior to March 16, 2006 (his “normal retirement date” under his original employment agreement), his entire SERP benefit would have been forfeited. Upon a termination for cause on or after March 16, 2006 and prior to March 16, 2010, the portion of the SERP benefit accruing after that date is forfeited.

As of January 1, 2004, Exelon does not grant additional years of credited service to executives under the non-qualified pension plans that supplement the Exelon Corporation Retirement Program for any period in which services are not actually performed, except that up to two years of service credits may be provided under severance or change in control agreements first entered into after such date. Service credits previously available under employment, change in control or severance agreements or arrangements (or any successors arrangements) are not affected by this policy.

 

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The amount of the change in the pension value for each NEO is the amount included in the Summary Compensation Table above in the column headed “Change in Pension Value & Nonqualified Deferred Compensation Earnings.” The present value of each NEO’s accumulated pension benefit is shown in the following tables.

 

Name   Plan Name  

Number of

Years

Credited Service

   

Present

Value of
Accumulated
Benefit

   

Payments

During

Last Fiscal
Year

 
         
     Note (1)                  
         
                            
                            

Rowe (2)

 

SAS

SERP

  10.80
30.80
 
 
  $
 
434,782
16,433,423
 
 
   

 

—  

—  

 

 

Hilzinger

  Cash Balance SERP   6.72
6.72
 
 
   
 
106,746
145,910
 
 
   

 

—  

—  

 

 

Young

  Cash Balance SERP   4.92
4.92
 
 
   

 

—  

—  

 

 

  $
 
74,738
235,226
 
 

Crane

 

SAS

SERP

  10.26
20.26
 
 
   
 
266,424
2,130,898
 
 
   

 

—  

—  

 

 

McLean

  Cash Balance SERP   6.00
6.00
 
 
   
 
88,440
257,825
 
 
   

 

—  

—  

 

 

Clark

 

SAS

SERP

  40.00
40.00
 
 
  $
 
1,761,284
4,665,925
 
 
   

 

—  

—  

 

 

                           

Notes to Pension Benefit Table

1. SAS=Service Annuity System, the legacy Commonwealth Edison plan. SAP=Service Annuity Plan, the legacy PECO Energy plan. SERP=applicable non-qualified supplemental pension plan.

 

2. Based on discount rates prescribed by the SEC executive compensation disclosure rules, the present value of Mr. Rowe’s SERP benefit is $16,433,423. Based on lump sum plan rates for immediate distributions, the comparable lump sum amount applicable for service through December 31, 2008 is $20,312,894. Note that, in any event, payments made upon termination may be delayed for six months in accordance with U.S. Treasury Department guidance.

Nonqualified Deferred Compensation

The following tables show the amounts that NEOs have accumulated under both the Deferred Compensation Plan and the Stock Deferral Plan. Both plans were closed to new deferrals of base pay, annual incentive payments or performance shares awards in 2007, and participants were granted a one-time election to receive a distribution of their accumulated balance in each plan during 2007. The plans will continue in effect for those officers who did not elect to receive the one-time distribution, and their balances will continue to accrue dividends or other earnings until payout upon termination. Balances in the Deferred Compensation Plan will be settled in cash upon the termination event selected by the officer and will be distributed either in a lump sum, or in annual installments. Share balances in the Stock Deferral Plan continue to earn the same dividends that are available to all shareholders, which are reinvested as additional shares in the plan. Balances in the plan are distributed in shares of Exelon stock in a lump sum or installments upon termination of employment.

The Deferred Compensation Plan continues in effect, without change, for those officers who participate in the 401(k) savings plan and who reach their statutory contribution limit during the year. After this limit is reached, their elected payroll contributions and company matching contribution will be credited to their account in the Deferred Compensation Plan. The investment options under the Deferred Compensation Plan consist of a basket of mutual funds benchmarks that mirror those funds available to all employees through the 401(k) plan, with the exception of one benchmark fund that offers a fixed percentage return over a specified market return. Deferred amounts generally represent unfunded unsecured obligations of the company.

 

53


Table of Contents
Name   Executive
Contributions
in 2008
    Registrant
Contributions
in 2008
   

Aggregate
Earnings

in 2008

    Aggregate
Withdrawals/
Distributions
    Aggregate
Balance at
12/31/2008
 
           
     Note (1)     Note (2)     Note (3)           Note (4)  
           
                                     
                                     

Rowe

  $ 62,221     $ 62,221     (61,397)     —       $ 183,122  

Hilzinger

    8,931       8,931     (4,062)     —         23,896  

Young

    —         —       (10,605)     (40,234)       —    

Crane

    53,923       26,635     (6,812)     —         136,541  

McLean

    17,558       17,558     (126,743)     —         404,429  

Clark

    39,169       19,488     (24,074)     —         86,051  
                                     

Notes to the Nonqualified Deferred Compensation Table

1. The full amount shown for executive contributions is included in the base salary figures for each NEO shown above in the Summary Compensation Table.

 

2. The full amount shown under registrant contributions are included in the company contributions to savings plans for each NEO shown above in the All Other Compensation Table.

 

3. The amount shown under aggregate earnings reflects the NEOs gain or loss based upon the individual allocation of their notional account balance into the basket of mutual fund benchmarks. These gains or losses do not represent current income to the NEO and have not been included in any of the compensation tables shown above.

 

4. For all NEOs the aggregate balance shown above includes those amounts, both executive contributions and registrant contributions, that have been disclosed either as base salary as described in Note 1 or as company contributions under all other compensation as described in Note 2 for the current fiscal year. In 2007, all NEOs received a distribution of their entire account balance in the plan accumulated through December 31, 2006 except for Mr. McLean. Mr. McLean has been disclosed as an NEO in filings made with the SEC since 2003 that reported compensation for the fiscal year ending December 31, 2002. Since that time all deferrals have been disclosed as base salary in the year deferred and all company matching contributions have been disclosed as other annual compensation. For Mr. McLean, the aggregate of previously disclosed contributions through 2007 is $200,631.

Potential Payments upon Termination or Change in Control

Employment Agreement with Mr. Rowe

Under the amended and restated employment agreement between Exelon and Mr. Rowe, Mr. Rowe will continue to serve as CEO of Exelon, Chairman of Exelon’s board of directors and a member of the board of directors until July 1, 2011.

If, prior to July 1, 2011, Exelon terminates Mr. Rowe’s employment for reasons other than cause, death or disability or Mr. Rowe terminates his employment for good reason, he would be eligible for the following benefits:

 

  n  

a lump sum payment of Mr. Rowe’s accrued but unpaid base salary and a