DEF 14A 1 d84608ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  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 under Rule 14a-12
NISOURCE INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
Payment of Filing Fee (Check the appropriate box):
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¨   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.
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LOGO

NiSource Inc.

801 E. 86th Avenue • Merrillville, Indiana 46410 • (877) 647-5990

 

 

NOTICE OF ANNUAL MEETING

April 7, 2016

To the Holders of Common Stock of NiSource Inc.:

The annual meeting of the stockholders (the “Annual Meeting”) of NiSource Inc., a Delaware corporation (the “Company”), will be held at the Hyatt Rosemont, 6350 N. River Road, Rosemont, Illinois 60018 on Wednesday, May 11, 2016, at 10:00 a.m., local time, for the following purposes:

 

  (1)

To elect nine directors named in the proxy statement to hold office until the next annual stockholders’ meeting and until their respective successors have been elected or appointed and qualified;

 

  (2)

To approve executive compensation on an advisory basis;

 

  (3)

To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants for the year 2016;

 

  (4)

To act upon the stockholder proposals described in the proxy statement that are properly presented at the meeting; and

 

  (5)

To transact such other business as may properly come before the meeting and any adjournment or postponement thereof.

All persons who were stockholders of record at the close of business on March 15, 2016, will be entitled to vote at the Annual Meeting and any adjournment thereof.

Your vote is very important. Whether or not you plan to attend the meeting, please vote at your earliest convenience. You may vote your shares by marking, signing, dating and mailing the enclosed proxy card. You may also vote by telephone or through the Internet by following the instructions set forth on the proxy card. If you attend the Annual Meeting, you may be able to vote your shares in person, even if you have previously submitted a proxy. See the section “Voting in Person” for specific instructions on voting your shares.

If you plan to attend the Annual Meeting, please so indicate in the space provided on the proxy card or respond when prompted on the telephone or through the Internet.

PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET OR BY PROMPTLY MARKING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD.

 

 

LOGO

Samuel K. Lee

Corporate Secretary

Important Notice Regarding the Availability of Proxy Materials

For the Annual Meeting of Stockholders to be Held on May 11, 2016

The Proxy Statement, Notice of Annual Meeting and 2015 Annual Report to Stockholders

are available at http://ir.nisource.com/annuals.cfm


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TABLE OF CONTENTS

 

PROXY STATEMENT

     1   

Who May Vote

     1   

Voting Your Proxy

     1   

Discretionary Voting by Brokers, Banks and Other Stockholders of Record

     1   

Voting Shares Held in A 401(K) Plan

     2   

Voting in Person

     2   

Revoking Your Proxy

     2   

Quorum for the Meeting

     2   

PROPOSAL 1 — ELECTION OF DIRECTORS

     2   

CORPORATE GOVERNANCE

     7   

Separation of Columbia Pipeline Group

     7   

Director Independence

     7   

Policies and Procedures with Respect to Transactions with Related Persons

     7   

Executive Sessions of Non-Management Directors

     8   

Communications with the Board and Non-Management Directors

     8   

Code of Business Conduct

     8   

Corporate Governance Guidelines

     9   

Board Leadership Structure and Risk Oversight

     9   

Meetings and Committees of the Board

     9   

DIRECTOR COMPENSATION

     13   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     16   

EXECUTIVE COMPENSATION

     17   

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

     17   

COMPENSATION COMMITTEE REPORT

     37   

ASSESSMENT OF RISK

     37   

COMPENSATION OF EXECUTIVE OFFICERS

     38   

EQUITY COMPENSATION PLAN INFORMATION

     55   

PROPOSAL 2 — ADVISORY APPROVAL OF EXECUTIVE COMPENSATION

     56   

PROPOSAL 3 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

     57   

AUDIT COMMITTEE REPORT

     57   

INDEPENDENT AUDITOR FEES

     58   

PROPOSAL 4 — STOCKHOLDER PROPOSAL REGARDING REPORTS ON POLITICAL CONTRIBUTIONS

     59   

PROPOSAL 5 — STOCKHOLDER PROPOSAL REGARDING A SENIOR EXECUTIVE EQUITY RETENTION POLICY

     60   

PROPOSAL 6 — STOCKHOLDER PROPOSAL REGARDING ACCELERATED VESTING OF EQUITY AWARDS OF SENIOR EXECUTIVES UPON A CHANGE IN CONTROL

     63   

STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 2017 ANNUAL MEETING

     65   

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     65   

ANNUAL REPORT AND FINANCIAL STATEMENTS

     65   

AVAILABILITY OF FORM 10-K

     65   

MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS — “HOUSEHOLDING”

     65   

OTHER BUSINESS

     66   


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PROXY STATEMENT

The accompanying proxy is solicited on behalf of the Board of Directors of NiSource Inc. (the “Board”) for the 2016 annual meeting of the stockholders (the “Annual Meeting”) to be held at the Hyatt Rosemont, 6350 North River Road, Rosemont, Illinois 60018 on Wednesday, May 11, 2016, at 10:00 a.m., local time. The common stock, $.01 par value per share, of the Company represented by the proxy will be voted as directed. If you return a signed proxy card without indicating how you want to vote your shares, the shares represented by the accompanying proxy will be voted as recommended by the Board “FOR” all of the nominees for director; “FOR” advisory approval of the compensation of the Company’s Named Executive Officers; “FOR” the ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accountants for 2016; “AGAINST” the stockholder proposal regarding reports on political contributions; “AGAINST” the stockholder proposal regarding a senior executive equity retention policy; and “AGAINST” the stockholder proposal regarding accelerated vesting of equity awards of senior executives upon a change in control.

This Proxy Statement and the accompanying proxy card are first being sent to stockholders on April 7, 2016. We will bear the expense of this mail solicitation, which may be supplemented by telephone, facsimile, e-mail and personal solicitation by our officers, employees and agents. To aid in the solicitation of proxies, we have retained D.F. King for a fee of $9,500, plus reimbursement of expenses. We may incur additional fees if we request additional services. We will also request brokerage houses and other nominees and fiduciaries to forward proxy materials, at our expense, to the beneficial owners of stock held on March 15, 2016, the record date for voting.

We use the terms “NiSource,” the “Company,” “we,” “our” and “us” in this proxy statement to refer to NiSource Inc.

Who May Vote

Holders of shares of common stock as of the close of business on March 15, 2016, are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of March 15, 2016, 320,722,005 shares of common stock were issued and outstanding. Each share of common stock outstanding on that date is entitled to one vote on each matter presented at the Annual Meeting.

Voting Your Proxy

If you are a “stockholder of record” (that is, if your shares of common stock are registered directly in your name on the Company’s records), you may vote your shares by proxy using any of the following methods:

 

   

Telephoning the toll-free number listed on the proxy card;

 

   

Using the Internet website listed on the proxy card; or

 

   

Marking, dating, signing and returning the enclosed proxy card.

All votes must be received by the proxy tabulator by 11:59 p.m. Eastern Time on May 10, 2016.

If your shares are held in a brokerage account or by a bank or other stockholder of record (herein referred to as a “Broker”), you are considered a “beneficial owner” of shares held in “street name.” As a beneficial owner, you will receive proxy materials and voting instructions from the stockholder of record that holds your shares. You must follow the voting instructions in order to have your shares of common stock voted.

Discretionary Voting by Brokers, Banks and Other Stockholders of Record

If your shares are held in street name and you do not provide the Broker with instructions as to how to vote such shares, your Broker will only be able to vote your shares at its discretion on certain “routine” matters as permitted by New York Stock Exchange (“NYSE”) rules. The proposal to ratify the appointment of our independent registered public accountants is the only proposal considered a routine matter and, accordingly, at the Annual Meeting Brokers will only have discretionary authority to vote your shares with regard to the ratification of the appointment of Deloitte as our independent registered public accountants for 2016. Brokers will not have discretionary authority to vote your shares with respect to the election of directors, the advisory approval of executive compensation, or the stockholder proposals. Therefore, it is important that you instruct your Broker or other nominee how to vote your shares.

 

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Voting Shares Held in a 401(k) Plan

Our 401(k) Plan and the 401(k) Plan of Columbia Pipeline Group, Inc. (“CPG”) each hold shares of our common stock. All of these shares (collectively, “Plan Shares”) are held in the name of Fidelity Management Trust Company (“Fidelity”), which administers each of these plans. You will receive a proxy card that includes the number of shares of our common stock held in your 401(k). You should instruct Fidelity how to vote your shares by completing and returning the proxy card or by voting your shares by Internet or by telephone, as detailed above under “Voting Your Proxy.” If you do not instruct Fidelity how to vote your shares, or if you sign the proxy card with no further instructions as to how to vote your shares, Fidelity will vote your Plan Shares in the same proportion as the shares for which it receives instructions from all other participants, to the extent permitted under applicable law. To allow enough time for Fidelity to vote your Plan Shares in accordance with your direction, your voting instructions must be received by Fidelity no later than 11:59 p.m. Eastern Time on May 8, 2016.

Voting in Person

You also may come to the Annual Meeting and vote your shares in person by obtaining and submitting a ballot that will be available at the meeting. However, if your shares are held in street name by a Broker, then, in order to be able to vote at the meeting, you must obtain an executed proxy from the Broker indicating that you were the beneficial owner of the shares on March 15, 2016, the record date for voting, and that the Broker is giving you its proxy to vote the shares.

If your shares are held in our 401(k) Plan or CPG’s 401(k) Plan, you will not be able to vote your shares at the meeting.

Votes cast in person or represented by proxy at the meeting will be tabulated by the inspectors of election.

If you plan to attend the Annual Meeting, please so indicate when you vote, so that we may send you an admission ticket and make the necessary arrangements. Stockholders who plan to attend the meeting must present picture identification along with an admission ticket or evidence of beneficial ownership.

Revoking Your Proxy

You may revoke your proxy at any time before a vote is taken or the authority granted is otherwise exercised. To revoke a proxy, you may send a letter to the Company’s Corporate Secretary (which must be received before a vote is taken) indicating that you want to revoke your proxy, or you can supersede your initial proxy by submitting a duly executed proxy bearing a later date, voting by telephone or through the Internet on a later date, or attending the meeting and voting in person. Attending the Annual Meeting will not in and of itself revoke a proxy.

Quorum for the Meeting

A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the Annual Meeting. The inspectors of election appointed for the Annual Meeting will determine whether or not a quorum is present. The inspectors of election will treat abstentions and broker non-votes as present and entitled to vote for purposes of determining the presence of a quorum. A broker non-vote occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial owner as to how the beneficial owner would like the shares to be voted.

PROPOSAL 1 — ELECTION OF DIRECTORS

At the recommendation of the Nominating and Governance Committee, the Board has nominated the persons listed below to serve as directors, each for a one-year term, beginning at the Annual Meeting on May 11, 2016, and expiring at the 2017 annual meeting of the Company’s stockholders (the “2017 Annual Meeting”) and until their successors are duly elected or appointed and qualified. The nominees include eight independent directors, as defined in the applicable rules of the NYSE, and our President and Chief Executive Officer (“CEO”). The Board does not anticipate that any of the nominees will be unable to serve, but if any nominee is unable to serve, the proxies will be voted in accordance with the judgment of the person or persons voting the proxies.

 

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All of the nominees currently serve on the Board.

The following chart gives information about all nominees (each of whom has consented to being named in the proxy statement and to serving, if elected).

Vote Required

In order to be elected, a nominee must receive more votes cast in favor of his or her election than against election. Abstentions by those present or represented by proxy and broker non-votes will not be voted with respect to the election of directors and, therefore, will have no effect on the outcome. Brokers will not have discretionary authority to vote on the election of directors. Accordingly, there could be broker non-votes which will have no effect on the vote.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.

 

Name, Age and Principal Occupations

for Past Five Years and Directorships Held

   Has Been a
Director Since

Richard A. Abdoo, 72

   2008

Since May 2004, Mr. Abdoo has been President of R.A. Abdoo & Co. LLC, Milwaukee, Wisconsin, an environmental and energy consulting firm. Prior thereto, Mr. Abdoo was Chairman and CEO of Wisconsin Energy Corporation from 1991 until his retirement in April 2004. He also served as President of Wisconsin Energy Corporation from 1991 to April 2003. Mr. Abdoo is also a director of A.K. Steel Corporation and EnSync, Inc.

  

By virtue of his former positions as Chairman and CEO of a large electric and gas utility holding company, as well as his current positions as director of one other energy-related company and a steel maker that is a major user of energy, Mr. Abdoo has extraordinary expertise and experience with the issues facing the energy industry in general and public utilities in particular. As a former CEO, Mr. Abdoo has a deep understanding about the issues facing executive management of a major corporation. Mr. Abdoo’s credentials as a registered professional engineer in several states allow him to offer a unique technical perspective on certain issues under consideration by the Board. As a long-time champion of humanitarian and social causes, including on behalf of the Lebanese-American community, Mr. Abdoo brings expertise and understanding with respect to social issues confronting the Company. His commitment to and work on behalf of social causes earned him the Ellis Island Medal of Honor, presented to Americans of diverse origins for their outstanding contributions to their own ethnic groups and to American society.

  

Aristides S. Candris, 64

   2012

Dr. Candris was President and CEO of Westinghouse Electric Company (“Westinghouse”), Pittsburgh, Pennsylvania, which is a unit of Tokyo-based Toshiba Corp., from July 2008 until his retirement on March 31, 2012. During his 36 years of service at Westinghouse, Dr. Candris served in various positions, including Senior Vice President, Nuclear Fuel from September 2006 to July 2008. Dr. Candris was also on the board of Westinghouse until October 1, 2012 and is a director of Kurion, Inc.

  

Dr. Candris is a nuclear scientist and engineer, and has significant experience gained through leading a global nuclear power company. His knowledge of the electric industry gives him significant insight on the issues impacting the electric utility industry. His experience managing highly technical engineering operations is valuable as we build and maintain facilities to address increasing environmental regulations and make long-term strategic decisions on electric power generation. His technical and management skills are helpful as we build and modernize both our transmission and distribution systems. Dr. Candris’ experience developing customer focused programs and attaining excellence in business processes and behaviors is insightful as we better meet the increasing expectations of customers and regulators. He serves

  

 

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Name, Age and Principal Occupations

for Past Five Years and Directorships Held

   Has Been a
Director Since

on the Boards of Carnegie Mellon University, Transylvania University and the Hellenic-American University. He also serves on the Board of Directors for The Hellenic Initiative.

  

Wayne S. DeVeydt, 46

   2016

Since May 2007, Mr. DeVeydt has served as Executive Vice President and Chief Financial Officer (“CFO”) at Anthem, Inc., a health insurance company and an independent licensee of the Blue Cross and Blue Shield Association. Previously, he served as Senior Vice President and Chief Accounting Officer beginning in 2005 and Chief of Staff from 2006 to 2007. Prior to joining Anthem, Inc., Mr. DeVeydt served many roles from 1996 to 2005 at PricewaterhouseCoopers LLP, including lead engagement partner for a number of large companies in the national managed care and insurance industries.

  

Mr. DeVeydt’s current position as a CFO in a regulated industry at a public company and his former position as an engagement partner at a public accounting firm provides him with strong financial acumen along with a deep understanding of operating in a regulated industry and extensive leadership skills, particularly in the areas of accounting and finance. His significant experience in internal controls, capital markets, corporate governance, risk management and strategic planning from both a company and public accounting perspective makes him an asset to our Board. In addition, Mr. DeVeydt is an active leader in his community through his service as a board member of the U.S Chamber of Commerce and the Cancer Support Community, Central Indiana, and a member of the Boys & Girls Clubs of America Board of Governors.

  

Joseph Hamrock, 52

   2015

Mr. Hamrock has been our President and Chief Executive Officer since July 1, 2015, and prior to this appointment was our Executive Vice President and Group CEO for NiSource’s Gas Distribution Operations segment, comprised of local gas distribution companies in Kentucky, Maryland, Massachusetts, Ohio, Pennsylvania, and Virginia since May 2012. Prior thereto, he served in a variety of senior executive positions with American Electric Power (AEP), Columbus, Ohio, an electrical service public utility holding company, including President and Chief Operating Officer of AEP Ohio from January 2008 to May 2012, and leadership roles in engineering, transmission and distribution operations, customer service, marketing, and information technology. Mr. Hamrock received a bachelor’s degree in electrical engineering from Youngstown State University and a Master’s degree in business administration from the Massachusetts Institute of Technology, where he was a Sloan fellow.

  

The Board believes it is important that the Company’s CEO serve on the Board. Mr. Hamrock has extensive knowledge of our industry gained through his 26 years’ experience in a variety of positions at AEP and augmented by his senior leadership experience with the Company. He began his career in the energy industry as an electrical engineer in transmission and distribution planning and went on to work in commercial and industrial customer services, earning a leadership role in commercial marketing, customer services, and strategic development among other executive roles. Consequently, he has a firm understanding of the needs of our customers and is uniquely qualified to lead a focused utility to meet customer commitments. Additionally, he has a solid understanding of our organization through his leadership of our gas distribution segment where he led financial, operational, regulatory and commercial performance for the Company’s gas distribution operations. This significant industry experience provides Mr. Hamrock with a unique perspective into the Company’s operations, our markets, our people and the strategic vision needed to meet our long-term business performance goals. In addition, he has been, and continues to be, an active supporter of educational, charitable and utility industry organizations. He is currently a board member of the American Gas Association and Mount Carmel College of Nursing, as well as several other community boards.

  

 

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Name, Age and Principal Occupations

for Past Five Years and Directorships Held

   Has Been a
Director Since

Deborah A. Henretta, 54

   2015

Ms. Henretta currently serves as Senior Advisor to SSA & Company, an executive decision strategy consulting firm, following her retirement from Procter & Gamble Co. (“P&G”) in 2015, where she served as Group President of Global e-Commerce at P&G. Prior to her appointment as Group President of Global e-Commerce in January 2015, she held various senior positions throughout several P&G sectors, including Group President of Global Beauty from 2012 to 2015, and served as President of P&G’s business in Asia from 2007 to 2012, as well as its Global Specialty Channel from 2011 to 2012. Before her appointment as a Group President in 2007, she was Division President of Global Baby/Toddler & Adult Care and Division Vice President of Fabric Conditioners and Bleach. She joined P&G in 1985. She has been a director at Corning, Inc. since 2013, and currently serves on its audit and corporate relations committees. Ms. Henretta became a director of Meritage Homes Corporation in 2016. Additionally, she serves on the Board of Trustees for Xavier University and at Cincinnati Children’s Hospital Medical Center.

  

Ms. Henretta has over 30 years of business leadership experience with P&G across many markets that includes expertise in brand development, marketing, and government relations. Ms. Henretta led a dynamic business segment and is, therefore, keenly aware of the delicate balance of keeping pace with customer expectations in a changing environment and managing risk. During her long career at P&G she has held various leadership positions responsible for strategic planning, sales, marketing, government relations, and customer service in a multi-jurisdictional regulatory and competitive business environment. Because of this experience, Ms. Henretta brings valuable insights to our Board and strategic leadership to the Company as it operates in multiple regulatory environments and develops products and customer service programs to meet our customer commitments while providing a rewarding work environment.

  

Michael E. Jesanis, 59

   2008

Since July 2013, Mr. Jesanis has been a co-founder and Managing Director of HotZero, LLC, a firm formed to develop hot water district energy systems in New Hampshire. Mr. Jesanis has also, since November 2007, been a principal with Serrafix, Boston, Massachusetts, a firm providing energy efficiency consulting and implementation services, principally to municipalities. Mr. Jesanis also serves as an advisor to several startups in energy-related fields. From July 2004 through December 2006, Mr. Jesanis was President and CEO of National Grid USA, a natural gas and electric utility, and a subsidiary of National Grid plc, of which Mr. Jesanis was also an Executive Director. Prior to that, Mr. Jesanis was Chief Operating Officer of National Grid USA from January 2001 to July 2004. Mr. Jesanis also is a director of Ameresco, Inc.

  

By virtue of his former positions as President and CEO, Chief Operating Officer and, prior thereto, CFO of a major electric and gas utility holding company, as well as his current role with an energy efficiency consulting firm, Mr. Jesanis has extensive experience with regulated utilities. He has strong financial acumen and extensive managerial experience, having led modernization efforts in the areas of operating infrastructure improvements, customer service enhancements and management team development. Mr. Jesanis also demonstrates a commitment to education as the former chair of the board of a college and a past trustee (and past chair of the audit committee) of another university. As a result of his former senior managerial roles and his non-profit board service, Mr. Jesanis also has particular expertise with board governance issues.

  

Kevin T. Kabat, 59

   2015

From April 2007 to November 2015, Mr. Kabat was CEO of Fifth Third Bancorp. He continues to serve as vice chairman of its board of directors. Before becoming CEO, he served as president from June 2006 to September 2012 and was executive vice president of Fifth Third Bancorp from December 2003 to June 2006. Additionally, he was President and CEO of Fifth Third Bank

  

 

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Name, Age and Principal Occupations

for Past Five Years and Directorships Held

   Has Been a
Director Since

(Michigan). Prior to that, he was previously vice chairman and president of Old Kent Bank, which was acquired by Fifth Third Bancorp in 2001. He has been a director at Unum Group since 2008.

  

Mr. Kabat has significant experience as a CEO in a regulated industry at a public company. As a result, he has a deep understanding of operating in a regulatory environment and balancing the interests of many stakeholders. In addition, his extensive experience in strategic planning, risk management, financial reporting, internal controls, capital markets and corporate governance makes him an asset to our Board, because he provides unique strategic insight, financial expertise and risk management skills.

  

Richard L. Thompson, 76

   2004

Mr. Thompson has been our independent Chairman of the Board since May 2013. Prior to his retirement in 2004, Mr. Thompson was Group President of Caterpillar Inc., Peoria, Illinois, a leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. In May 2015, Mr. Thompson retired as lead director of Lennox International, Inc., (“Lennox”), a position he held since May 2012 following his service as Chairman of the Board from June 2006 to May 2012, and Vice Chairman from February 2005 to June 2006. He began his service on the board of Lennox in 1993. Additionally, he was on the board of Gardner Denver Inc. from November 1998 to July 2013.

  

In his prior role as Group President of a large, publicly traded manufacturing company, Mr. Thompson had responsibility for its gas turbine and reciprocating engine business, as well as research and development activities. By virtue of this and prior positions, Mr. Thompson possesses significant experience in energy issues generally, and gas turbine electric power generation and natural gas pipeline compression in particular. He is a graduate electrical engineer with experience in electrical transmission system design and generation system planning. This experience provides Mr. Thompson a valuable understanding of technical issues faced by the Company.

  

Carolyn Y. Woo, 61

   1998

Since January 2012, Dr. Woo has been President and CEO of Catholic Relief Services, the international humanitarian agency of the Catholic community in the United States. Prior thereto, Dr. Woo was Martin J. Gillen Dean and Ray and Milann Siegfried Professor of Entrepreneurial Studies, Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana. Dr. Woo is also a director of AON Corporation.

  

Dr. Woo’s current position as President and CEO of an international organization provides her with knowledge and experience in managing a large organization. Her experience as the dean of a major business school and her experience as a professor of entrepreneurship provided her a deep understanding of business principles and extensive expertise with management and strategic planning issues. Through her current and previous service on the boards of directors, audit committees and compensation committees of a number of public companies, including a global reinsurance and risk management consulting company, a pharmaceutical distribution company, an international automotive manufacturer and a financial institution, Dr. Woo has developed an excellent understanding of corporate governance, internal control, financial and strategic analysis and risk management issues. Dr. Woo is a leader in the areas of corporate social responsibility and sustainability, which adds an important perspective to the Company. She is also a current and past board member of several non-profit organizations, including an international relief organization, a global business school accreditation organization, leadership development organizations and an educational organization. This commitment to social and educational organizations provides Dr. Woo with an additional important perspective on the various community and social issues confronting the Company in the various communities that the Company serves.

  

 

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CORPORATE GOVERNANCE

Separation of Columbia Pipeline Group

On July 1, 2015 (the “Separation Date”), the Company completed the previously announced separation of CPG from the Company through the pro rata distribution of one share of CPG common stock for every one share of the Company’s common stock (the “Separation”). As a result of the Separation, CPG became an independent public company trading under the symbol “CPGX” on the NYSE, and NiSource continued as a fully regulated natural gas and electric utilities company.

In connection with the Separation, the Company’s Board changed as follows:

 

   

Sigmund L. Cornelius, Marty R. Kittrell, W. Lee Nutter, Deborah S. Parker, Robert C. Skaggs, Jr., and Teresa A. Taylor resigned from the Company’s Board, effective upon the Separation Date;

 

   

Joseph Hamrock, the Company’s President and Chief Executive Officer, and Deborah A. Henretta were elected to the Company’s Board, effective upon the Separation Date; and

 

   

Kevin T. Kabat was elected to the Company’s Board, effective as of July 3, 2015.

Also in connection with the Separation, the Officer Nomination and Compensation Committee was renamed the Compensation Committee and the Corporate Governance Committee was renamed the Nominating and Governance Committee.

Director Independence

Under our Corporate Governance Guidelines, a majority of the Board must be comprised of “independent directors.” In order to assist the Board in making its determination of director independence, the Board has adopted categorical standards of independence consistent with the standards contained in Section 303A.02(b) of the NYSE Corporate Governance Standards. The Board also has adopted an additional independence standard providing that a director who is an executive officer or director of a company that receives payments from the Company in an amount which exceeds 1% of such other company’s consolidated gross revenues is not “independent” until three years after falling below such threshold. A copy of our Corporate Governance Guidelines is posted on our website at http://ir.nisource.com/governance.cfm.

The Board has affirmatively determined that, with the exception of Mr. Hamrock, all of the members of the Board and all nominees are “independent directors” as defined in Section 303A.02(b) of the NYSE Corporate Governance Standards and meet the additional standard for independence set by the Board.

Policies and Procedures with Respect to Transactions with Related Persons

We have established policies and procedures with respect to the review, approval and ratification of any transactions with related persons.

Under its Charter, the Nominating and Governance Committee reviews reports and disclosures of insider and affiliated party transactions. Under the Code of Business Conduct, the following situations must be reviewed to determine if they involve a direct or indirect interest of any director, executive officer or employee (including immediate family members) or otherwise present a potential conflict of interest:

 

   

owning more than a 10% equity interest or a general partner interest in any entity that transacts business with the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;

 

   

selling anything to the Company or buying anything from the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;

 

   

consulting for or being employed by a competitor of the Company; and

 

   

being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member employed by the Company.

Related party transactions requiring review under the Code of Business Conduct are annually reviewed and, if appropriate, ratified by the Nominating and Governance Committee. Directors, individuals subject to Section 16 of the Securities Exchange Act of 1934 (“Section 16 Officers”) and senior executive officers are expected

 

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to raise any potential transactions involving a conflict of interest that relates to them with the Nominating and Governance Committee so that they may be reviewed in a prompt manner.

The son of Jim L. Stanley, our Executive Vice President and Chief Operating Officer, is employed by the Company in a non-executive officer position and received total compensation of less than $150,000 in 2015. His compensation was established by the Company in accordance with its compensation practices applicable to employees with comparable qualifications and responsibilities and holding similar positions and without the involvement of Jim L. Stanley. In addition, Jim L. Stanley does not have direct responsibility for directing or reviewing his son’s work and does not have influence over his employment at the Company. The Nominating and Governance Committee reviewed and approved this employment relationship. There were no other transactions between the Company and any officer, director or nominee for director, or any affiliate of or person related to any of them, since January 1, 2015, of the type or amount required to be disclosed under the applicable Securities and Exchange Commission (“SEC”) rules.

Executive Sessions of Non-Management Directors

To promote open discussion among the non-management directors, the Board schedules regular executive sessions at meetings of the Board and each of its committees. The non-management members met separately from management four times in 2015. The independent Chairman of the Board presided at all these executive sessions. All of the non-management members are “independent directors” as defined under the applicable NYSE and SEC rules.

Communications with the Board and Non-Management Directors

Stockholders and other interested persons may communicate any concerns they may have regarding the Company as follows:

 

   

Communications to the Board may be made to the Board generally, any director individually, the non-management directors as a group, or the Chairman of the Board, by writing to the following address:

NiSource Inc.

Attention: Board of Directors, or any Board member, or non-management directors, or Chairman of the Board

c/o Corporate Secretary

801 East 86th Avenue

Merrillville, Indiana 46410

 

   

The Audit Committee has approved procedures with respect to the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters. Communications regarding such matters may be made by contacting the Company’s Ethics and Compliance Officer at ethics@nisource.com, calling the business ethics hotline at 1-800-457-2814, or writing to:

NiSource Inc.

Attention: Director, Corporate Ethics

801 East 86th Avenue

Merrillville, Indiana 46410

Code of Business Conduct

The Company has adopted a Code of Business Conduct to promote (i) ethical behavior, including the ethical handling of conflicts of interest, (ii) full, fair, accurate, timely and understandable financial disclosure, (iii) compliance with applicable laws, rules and regulations, (iv) accountability for adherence to our code, and; (v) prompt internal reporting of violations of our code. Our Code of Business Conduct satisfies applicable SEC and NYSE requirements and applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer and controller) as well as employees of the Company and its affiliates. A copy of our Code of Business Conduct is available on our website at http://ir.nisource.com/governance.cfm and also is available to any stockholder upon written request to our Corporate Secretary.

 

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Any waiver of our Code of Business Conduct for any director, Section 16 Officer or senior executive may be made only by the Audit Committee of the Board and must be promptly disclosed to the extent and in the manner required by the SEC or the NYSE and posted on our website. No such waivers have been granted.

Corporate Governance Guidelines

The Nominating and Governance Committee is responsible for annually reviewing and reassessing the Corporate Governance Guidelines and will submit any recommended changes to the Board for its approval. A copy of the Corporate Governance Guidelines can be found on our website at http://ir.nisource.com/governance.cfm and is also available to any stockholder upon written request to the Company’s Corporate Secretary.

Board Leadership Structure and Risk Oversight

Our Corporate Governance Guidelines state that the Company should remain free to configure leadership of the Board in the way that best serves the Company’s interests at the time and, accordingly, the Board has no fixed policy with respect to combining or separating the offices of Chairman and CEO. If the Chairman is not an independent director, an independent lead director will be chosen annually by the Nominating and Governance Committee. The Chairman or, if the Chairman is not an independent director, the lead director will serve as chair of the Nominating and Governance Committee and as the presiding director of executive sessions of the Board for purposes of the NYSE rules.

Since late 2006, the offices of Chairman and CEO of the Company have been held by different individuals, with the Chairman being an independent director. At this time, the Board believes that the independent Chairman arrangement serves the Company well.

The Board takes an active role in monitoring and assessing the Company’s strategic, compliance, operational and financial risks. The Board administers its oversight function through utilization of its various committees, as well as through a Risk Management Committee, consisting of members of our senior management, which is responsible for the risk management process. Senior management provides reports on our risks to the Board, the Audit Committee and the Board committees that oversee the applicable risks. Additionally, the Audit Committee discusses with management and the independent auditor the effect of regulatory and accounting initiatives on the Company’s financial statements and is responsible for review and evaluation of the Company’s major risk exposures and the steps management has taken to monitor and control such exposures. The Audit Committee reviews and assesses the adequacy of the Company’s Risk Management Committee Charter annually, amending it as appropriate. In addition, the Finance Committee, the Compensation Committee, the Nominating and Governance Committee and the Environmental, Safety and Sustainability (“ESS”) Committee are each charged with overseeing the risks associated with their respective areas of responsibility.

Meetings and Committees of the Board

The Board met nine times during 2015. Each incumbent director attended at least 86% of the total number of the Board meetings (held during the period for which he or she was a director) and the committees of the Board on which he or she served (during the periods that he or she served). Pursuant to our Corporate Governance Guidelines, all directors are expected to attend the Annual Meeting. All then-serving directors attended the 2015 Annual Meeting of Stockholders.

The Board has established five standing committees to assist the Board in carrying out its duties: the Audit Committee, the Nominating and Governance Committee, the ESS Committee, the Finance Committee, and the Compensation Committee. In 2015, the Board also established a Search Committee, an ad hoc committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates following the Separation. The Board evaluates the structure and membership of its committees on an annual basis, appoints the independent members of the Board to serve on the committees and elects committee chairs following the Annual Meeting of Stockholders. The following tables show the composition of each Board committee as of the date of this Proxy Statement. Mr. Hamrock does not serve on any committee but is invited to attend various committee meetings. Mr. Thompson, who is Chairman of the Board, also serves as the Chair of the Nominating and Governance Committee and is invited to attend all meetings of each of the standing committees.

 

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Board Committee Composition

 

Director         Audit           Nominating
and
Governance
     ESS      Finance      Compensation  

Richard A. Abdoo

  X      X                                  X*         

Aristides S. Candris

                  X           X*           X           

Wayne S. DeVeydt(1)

                                       

Deborah A. Henretta(2)

                  X                    X           

Michael E. Jesanis

       X*(F)      X                X                       

Kevin T. Kabat(2)

  X                        X                

Richard L. Thompson(3)

         X*                                   

Carolyn Y. Woo

  X               X*         X                

 

 

    *

Committee Chair.

 

  (1)

Mr. DeVeydt was appointed to the Board on March 22, 2016. If elected by the stockholders, he will be assigned to one or more committees following the 2016 Annual Meeting of Stockholders.

 

  (2)

Ms. Henretta’s appointment to the Board became effective upon the Separation Date and Mr. Kabat was appointed July 3, 2015.

 

  (3)

Independent Chairman of the Board.

 

  (F)

Audit Committee Financial Expert, as defined by the SEC rules.

The summaries below are qualified by reference to the entire charter for each of the Audit, Nominating and Governance, ESS, Finance and Compensation Committees; each of which can be found on our website at http://ir.nisource.com/governance.cfm and is also available to any stockholder upon written request to the Company’s Corporate Secretary. Additionally, any committee may perform other duties and responsibilities, consistent with their respective charters, our Amended and Restated Bylaws (our “Bylaws”), governing law, the rules and regulations of the NYSE, the federal securities laws and such other requirements applicable to the Company, delegated to any committee by the Board, or in the case of the Compensation Committee, under any provision of any Company benefit or compensation plan.

Audit Committee

The Audit Committee met nine times in 2015. Among other things, the Audit Committee has the sole authority to appoint, retain or replace the independent auditors and is responsible for:

 

   

reviewing the independent auditors’ qualifications and independence;

 

   

overseeing the performance of the Company’s internal audit function and the independent auditors;

 

   

reviewing and discussing with management and the independent auditor our annual and quarterly financial statements;

 

   

reviewing and discussing with management and the independent auditor major issues regarding accounting principles, adequacy of internal controls, and critical judgments and estimates made in connection with the preparation of financial statements;

 

   

monitoring the Company’s risk assessment process and overseeing its insurance programs; and

 

   

overseeing the Company’s compliance with legal and regulatory requirements.

The Board has determined that all of the members of the Audit Committee are independent as defined under the applicable NYSE and SEC rules, including the additional independence standard for audit committee members, and meet the additional independence standard set forth in the Corporate Governance Guidelines. The Audit Committee has reviewed and approved the independent registered public accountants, both for 2015 and 2016, and the fees relating to audit services and other services performed by them.

 

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For more information regarding the Audit Committee, see “Audit Committee Report” and “Proposal 3 — Ratification of Independent Public Accountants” below.

Nominating and Governance Committee

 

   

The Nominating and Governance Committee met six times in 2015. Its responsibilities include:

 

   

identifying individuals qualified to become Board members, consistent with criteria approved by the Board;

 

   

recommending to the Board director nominees for election at the next annual meeting of the stockholders;

 

   

developing and recommending to the Board the Corporate Governance Guidelines;

 

   

consulting with management to determine the appropriate response to stockholder proposals submitted pursuant to SEC rules;

 

   

reviewing and evaluating the CEO succession plan;

 

   

reviewing and overseeing, at least annually, corporate and business unit political spending;

 

   

evaluating any resignation tendered by a director and making recommendations to the Board about whether to accept such resignation; and

 

   

overseeing the evaluation of the performance of the Board and its committees.

Pursuant to the Corporate Governance Guidelines, the Nominating and Governance Committee, with the assistance of the Compensation Committee and its independent compensation consultant, Exequity LLP, reviews the amount and composition of non-employee director compensation from time to time and makes recommendations to the Board when it concludes changes are needed.

The Nominating and Governance Committee identifies and screens candidates for director and makes its recommendations for director to the Board as a whole. At times the Board may establish an ad hoc Search Committee to assist the Nominating and Governance Committee in this process. In 2015, a Search Committee was established to assist the Nominating and Governance Committee in identifying qualified director candidates upon the completion of the Separation. The Nominating and Governance Committee has the authority to retain a search firm to help it identify director candidates to the extent it deems necessary or appropriate. In connection with the appointments of Ms. Henretta and Mr. Kabat to the Board in 2015, the Nominating and Governance Committee engaged the search firm of Russell Reynolds and Associates, who recommended these candidates. In connection with the nomination of Mr. DeVeydt, the Nominating and Governance Committee engaged the search firm of Heidrick and Struggles, which firm recommended Mr. DeVeydt. In considering candidates for director, the Nominating and Governance Committee considers the nature of the expertise and experience required for the performance of the duties of a director of a company engaged in our businesses, as well as each candidate’s relevant business, academic and industry experience, professional background, age, current employment, community service, other board service and other factors. In addition, the Nominating and Governance Committee takes into account the racial, ethnic and gender diversity of the Board.

The Nominating and Governance Committee seeks to identify and recommend candidates with a reputation for, and record of, integrity and good business judgment who: have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are affiliated; are effective in working in complex collegial settings; are free from conflicts of interest that could interfere with a director’s duties to the Company and its stockholders; and are willing and able to make the necessary commitment of time and attention required for effective service on the Board. The Nominating and Governance Committee also takes into account the candidate’s level of financial literacy. The Nominating and Governance Committee monitors the mix of skills and experience of the directors in order to assess whether the Board has the necessary tools to perform its oversight function effectively. The Nominating and Governance Committee also assesses the diversity of the Board as a part of its annual self-assessment process. The Nominating and Governance Committee will consider nominees for directors recommended by stockholders and will use the same criteria to evaluate candidates proposed by stockholders.

The Board has determined that all of the members of the Nominating and Governance Committee are independent as defined under the applicable NYSE rules and meet the additional independence standard set forth in the Corporate Governance Guidelines.

 

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For information on how to nominate a person for election as a director at the 2017 Annual Meeting, please see the discussion under the heading “Stockholder Proposals and Nominations for 2017 Annual Meeting.”

Environmental, Safety & Sustainability Committee

The ESS Committee met five times during 2015. The ESS Committee assists the Board in overseeing the programs, performance and risks relative to environmental, safety and sustainability matters. Its responsibilities include:

 

   

evaluating the Company’s environmental and sustainability policies, practices and performance;

 

   

evaluating the Company’s safety policies, practices and performance relating to our employees, contractors, and the general public;

 

   

reviewing and assessing shareholder proposals related to the environment, safety and sustainability;

 

   

reviewing and evaluating the Company’s programs, policies, practices and performance with respect to health and safety compliance auditing; and

 

   

assessing major legislation, regulation and other external influences that pertain to the ESS Committee’s responsibilities.

Finance Committee

The Finance Committee met eight times during 2015. Its responsibilities include the following:

 

   

reviewing and evaluating the financial plans of the Company, capital structure, long and short-term debt levels, dividend policy and financial policies;

 

   

reviewing the Company’s investment strategy and investments;

 

   

reviewing and evaluating the Company’s financial risks and the steps management has taken to monitor and control such risks;

 

   

reviewing the Company’s annual earnings guidance and capital budgets; and

 

   

reviewing the Company’s hedging policies and exempt swap transactions.

Compensation Committee

The Compensation Committee met seven times in 2015. The Compensation Committee advises the Board with respect to the evaluation, compensation and benefits of our executives. Its responsibilities include:

 

   

evaluating the performance of the CEO and other executive officers in light of the Company’s goals and objectives;

 

   

making recommendations to the independent Board members regarding CEO compensation and approving compensation of the other executive officers;

 

   

reviewing and approving periodically a general compensation policy for other officers of the Company and officers of its principal subsidiaries;

 

   

approving, or if appropriate, making recommendations to the Board with respect to incentive compensation plans and equity-based plans;

 

   

reviewing Company officer candidates for election by the Board;

 

   

reviewing and evaluating the executive officers’ development and succession plan (other than the CEO’s succession plan, which is reviewed by the Nominating and Governance Committee);

 

   

evaluating the risks associated with our compensation policies and practices; and

 

   

overseeing equal employment opportunity and diversity initiatives.

In making recommendations regarding the compensation of the CEO and approving the compensation of the other executive officers, the Compensation Committee takes into consideration its evaluation of the individual performance of each. When considering changes in compensation for the Named Executive Officers, the Compensation Committee also considers input from the Executive Vice President, Corporate Affairs and Human

 

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Resources, and Exequity LLP, an executive compensation consulting firm that the Compensation Committee engaged to advise it with respect to executive compensation design, comparative compensation practices and compensation matters relating to the Board. Exequity LLP provides no other services to the Company. The Compensation Committee has determined that Exequity LLP is independent under the NYSE rules.

The Compensation Committee has authority to delegate its responsibilities to subcommittees as deemed appropriate, provided the subcommittees are composed entirely of independent directors who also meet the other requirements for membership of the Compensation Committee.

All of the directors serving on the Compensation Committee are (i) independent as defined under the applicable NYSE and SEC rules and meet the additional independence standard set forth in the Corporate Governance Guidelines and the additional NYSE independence standard for members of compensation committees, (ii) “non-employee directors” as defined under Rule 16b-3 of the Securities Exchange Act of 1934 (“Exchange Act”), and (iii) “outside directors” as defined by Section 162(m) of the Internal Revenue Code (hereafter “Section 162(m) of the Code” or “Code Section 162(m)”).

Compensation Committee Interlocks and Insider Participation

As of the fiscal year ended December 31, 2015, Messrs. Abdoo and Candris and Ms. Henretta served on the Compensation Committee. During the fiscal year ended, there were no compensation committee interlocks or insider participation.

DIRECTOR COMPENSATION

Director Compensation.    This section describes compensation for our non-employee directors. To attract and retain highly qualified candidates to serve on the Board, we provide a combination of cash and equity awards. A full-time employee who serves as director does not receive any additional compensation for service on the Board. Consequently, because Mr. Hamrock is also our President and CEO, he does not receive additional compensation for his service as a Board member.

Each non-employee director receives an annual retainer of $210,000, consisting of $90,000 in cash and an award of restricted stock units valued at $120,000 at the time of the award. The cash retainer is paid in arrears in four equal installments at the end of each calendar quarter.

The restricted stock units are awarded annually and the number of restricted stock units is determined by dividing the value of the grant by the closing price of our common stock on the grant date. Restricted stock units are granted to directors under the NiSource Inc. 2010 Omnibus Incentive Plan (“Omnibus Plan”), which was approved by the stockholders on May 11, 2010, and re-approved for Code Section 162(m) purposes on May 12, 2015.

Additionally, each director who serves as chair of a Board committee receives compensation for this responsibility. The annual committee chair fees are $20,000 for each of the standing committees. The Chairman of the Board receives additional annual compensation of $160,000 for his role. These fees are paid in cash in arrears in four equal installments and are prorated in the case of partial year service.

All Other Compensation.    The other compensation included under the column “All Other Compensation” in the Director Compensation Table below consists of matching contributions made by the NiSource Charitable Foundation.

Omnibus Plan.    The Omnibus Plan permits equity awards to be made to non-employee directors in the form of incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Except as provided below, terms and conditions of awards to non-employee directors are determined by the Board prior to grant. Since May 11, 2010, awards to directors have been made from the Omnibus Plan. Awards of restricted stock units associated with periods prior to June 1, 2011, vested immediately, but are not distributed in shares of common stock until after the director separates from the Board. Beginning June 1, 2011, the awards of restricted stock units vest and are payable in shares of common stock on the earlier of (a) the last day of the director’s annual term for which the restricted stock units are awarded or (b) the date that the director separates from service due to a “Change-in-Control” (as defined in the Omnibus Plan); provided, however, that in the event that the

 

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director separates from service prior to such time as a result of “Retirement” (defined as the cessation of services after providing a minimum of five continuous years of service as a member of the Board), death or “Disability” (as defined in the Omnibus Plan), the director’s restricted stock unit awards shall pro rata vest in an amount determined by using a fraction, where the numerator is the number of full or partial calendar months elapsed between the grant date and the date of the director’s Retirement, death or Disability, and the denominator of which is the number of full or partial calendar months elapsed between the grant date and the last day of the director’s annual term for which the director is elected that corresponds to the year in which the restricted stock units are awarded. The vested restricted stock units awarded on or after June 1, 2011, are payable as soon as practicable following vesting, unless otherwise provided pursuant to any prior election the non-employee director may have made to defer distribution. With respect to restricted stock units that have not been distributed, additional restricted stock units are credited to each non-employee director to reflect dividends paid to stockholders on common stock. The restricted stock units have no voting or other stock ownership rights and are payable in shares of our common stock upon distribution.

In connection with the Separation, the Board approved equitable adjustments to all outstanding equity awards in order to preserve the intrinsic aggregate value of the awards prior to Separation. Vested but unpaid restricted stock units awards held by non-employee directors were credited with one immediately vested CPG restricted stock unit for each such NiSource restricted stock unit held. Unvested awards were not provided such credit, however, the awards of restricted stock units made to non-employee directors on May 12, 2015, were subject to a valuation adjustment based on a ratio of the price that a share of NiSource Common Stock traded for three days prior to the Separation and the NiSource share price traded on a when-issued basis for the same three-day period.

Also in connection with the Separation, the Company amended the restricted stock unit agreements for vested but unpaid restricted stock units to provide the non-employee directors with a one-time opportunity to elect to invest all or a portion of the such restricted stock units and the CPG restricted stock units in alternative investment options and to have such amounts settled in cash at the same time as the vested restricted stock units are paid under the prior award agreements, subject to the stock ownership requirements described below.

Director Stock Ownership.    The Board maintains stock ownership requirements for its directors that are included in the Corporate Governance Guidelines. Within five years of becoming a non-employee director, each non-employee director is required to hold an amount of Company stock with a value equal to five times the annual cash retainer paid to directors by the Company. Company stock that counts towards satisfaction of this requirement includes shares purchased on the open market, awards of restricted stock or restricted stock units through the prior Non-Employee Director Stock Incentive Plan or Omnibus Plan, and shares beneficially owned in a trust or by a spouse or other immediate family member residing in the same household.

Each director has a significant portion of his or her compensation directly aligned with long-term stockholder value. Fifty-seven percent (57%) of a non-employee director’s 2015 annual retainer (valued as of the time of award) consisted of restricted stock units, which are converted into common stock when vested and distributed to the director.

 

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Director Compensation

The table below sets forth all compensation earned by or paid to our non-employee directors in 2015. Our CEO and former CEO did not receive any additional compensation for their service on the Board. Their compensation for serving as CEO is listed under Compensation of Executive Officers.

 

Name  

Fees Earned or

Paid in Cash

($)(4)

   

Stock Awards

($)(5)(6)

   

All Other

Compensation

($)(7)

   

Total

($)

 

Richard A. Abdoo

    110,000            120,000          10,000            240,000   

Aristides S. Candris

    100,000            120,000          10,000            230,000   

Sigmund L. Cornelius(1)

      45,000            120,000          —              165,000   

Wayne S. DeVeydt(2)

    —                —                —                

Deborah A. Henretta(3)

      45,000            103,230          —              148,230   

Michael E. Jesanis

    110,000            120,000          —              230,000   

Kevin T. Kabat(3)

      44,516            102,260          —              146,776   

Marty R. Kittrell(1)

      55,000            120,000          —              175,000   

W. Lee Nutter(1)

      45,000            120,000          —              165,000   

Deborah S. Parker(1)

      45,000            120,000          —              165,000   

Teresa A. Taylor(1)

      55,000            120,000          —              175,000   

Richard L. Thompson

    270,000            120,000          —              390,000   

Carolyn Y. Woo

    100,000            120,000            3,500            223,500   

 

 

(1)

These directors resigned from the Board effective upon the Separation Date.

 

(2)

Mr. DeVeydt was appointed to the Board on March 22, 2016.

 

(3)

Ms. Henretta’s appointment to the Board became effective upon the Separation Date and Mr. Kabat was appointed to the Board on July 3, 2015.

 

(4)

The fees shown include the annual cash retainer and any Board and Chair fees paid during the year to each director.

 

(5)

The amounts shown reflect the grant date fair value of awards computed in accordance with FASB ASC Topic 718. For restricted stock units, the grant date fair value is the number of shares multiplied by the closing price of our stock on the award date. Each non-employee director who was elected on May 12, 2015, received an award of restricted stock units valued at $120,000 which was equal to approximately 2,699 restricted stock units valued at $44.46 per unit, the closing price of our common stock on that date. In connection with the Separation, these awards were equitably adjusted to 7,424 restricted stock units to preserve the intrinsic aggregate value of the awards prior to the Separation. Ms. Henretta and Mr. Kabat each received a pro-rated award valued at $103,230 and $102,260, respectively, which was equal to approximately 6,076 and 6,072 restricted stock units each based on the closing price of our common stock on July 2, 2015, with respect to Ms. Henretta, which was $16.99 and on July 6, 2015, with respect to Mr. Kabat, which was $16.84. See “Security Ownership of Certain Beneficial Owners and Management” and footnote (4) to that table for information regarding the number of shares of stock held by each current director as of March 3, 2016.

 

(6)

As of December 31, 2015, the number of equity awards (in the form of restricted stock units) that were outstanding for each director were approximately as follows: Mr. Abdoo, 46,526; Mr. Candris, 19,774; Mr. Cornelius, 4,772; Ms. Henretta, 6,178; Mr. Jesanis, 29,768; Mr. Kabat, 6,174; Mr. Kittrell, 11,268; Mr. Nutter, 0; Ms. Parker, 0; Ms. Taylor, 7,454; Mr. Thompson, 55,885; and Ms. Woo, 33,418.

 

(7)

This column includes matching contributions made by the NiSource Charitable Foundation under the Director Charitable Match Program. The Foundation matches up to $10,000 annually in contributions by any

 

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director to approved tax-exempt charitable organizations. Any amount not utilized for the match in the year it is first available is carried over to the following year.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows as of March 3, 2016, the number of shares of our outstanding common stock beneficially owned by (i) each of our directors; (ii) each of our Named Executive Officers; (iii) our directors and executive officers as a group; and, (iv) beneficial owners of more than 5% of our outstanding common stock (based solely on the Schedule 13G filings and any amendments thereto filed with the SEC on or before March 3, 2016) except as noted below. None of the Named Executive Officers or directors has any outstanding stock options as of that date. The business address of each of the Company’s directors and executive officers is the Company’s address.

 

Name and Address of Beneficial Owner   Number of Shares of
Common Stock
Beneficially Owned
   

Percent of Class

Outstanding

 

5% Owners

       
     

T. Rowe Price Associates, Inc.(1)

         31,533,011                       9.8%         

100 East Pratt Street

Baltimore, MD 21202

               

The Vanguard Group(2)

    28,165,168             8.8%         

100 Vanguard Blvd.

Malvern, PA 19355

               

BlackRock, Inc.(3)

    18,087,261             5.7%         

55 East 52nd Street

New York, NY 10022

               

Directors and Executive Officers

       
     

Richard A. Abdoo(4)

    15,000             *            

Donald E. Brown(5)

    660             *            

Aristides S. Candris(4)

    2,000             *            

Wayne S. DeVeydt(6)

    —                  *            

Joseph Hamrock(5)

    155,811             *            

Deborah A. Henretta(4)

    —                  *            

Carrie J. Hightman(5)(7)

    250,554             *            

Michael E. Jesanis(4)

    6,644             *            

Kevin T. Kabat(4)

    —                  *            

Glen L. Kettering(8)

    400             *            

Violet Sistovaris(5)

    114,428             *            

Robert C. Skaggs, Jr.(8)

    168,010             *            

Stephen P. Smith(8)

    —                  *            

Jim L. Stanley(5)

    123,275             *            

Richard L. Thompson(4)

    16,299             *            

Carolyn Y. Woo(4)

    19,744             *            

All directors and executive officers as a group (19 persons)

    1,029,277             *            

 

 

    *

Less than 1%

 

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(1)

As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of T. Rowe Price Associates, Inc. on February 10, 2016. T. Rowe Price Associates, Inc. has sole voting power with respect to 10,826,615 shares and sole dispositive power with respect to 31,533,011 shares reported as beneficially owned.

 

(2)

As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of The Vanguard Group on February 11, 2016. The Vanguard Group has sole voting power with respect to 538,836 shares, shared voting power with respect to 19,400 shares, sole dispositive power with respect to 27,651,732 shares and shared dispositive power with respect to 513,436 shares reported as beneficially owned.

 

(3)

As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of BlackRock, Inc. on January 27, 2016. BlackRock, Inc. has sole voting power with respect to 16,044,749 shares and sole dispositive power with respect to 18,087,261 shares reported as beneficially owned.

 

(4)

Does not include restricted stock units issued under the Omnibus Plan and the former Non-Employee Director Stock Incentive Plan because these restricted stock units will not vest within 60 days of March 3, 2016.

 

(5)

Includes shares held in our 401(k) Plan and shares distributable within 60 days.

 

(6)

Mr. DeVeydt was appointed to the Board on March 22, 2016.

 

(7)

Includes shares owned by a trust over which Ms. Hightman maintains investment control and of which one or more of her immediate family members are the sole beneficiaries.

 

(8)

Messrs. Skaggs, Smith and Kettering each resigned in connection with the Separation. Each of their holdings appear as reported by each executive as of December 31, 2015.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

Introduction

As noted earlier in this Proxy Statement, on July 1, 2015, the Company successfully completed the separation of its natural gas pipeline and related business into a stand-alone publicly traded company, CPG. We believe this Separation will enhance long-term stockholder value by creating two independent, highly focused, premier entities and sets the foundation for the Company to execute on our pure-play utility growth strategy. While we have retained the same executive compensation philosophy and principles post-Separation, our 2015 executive compensation program was modified as a result of the Separation in order to address the unique challenges of the mid-year Separation, including for example, (1) dramatically different financial plans for the first and second half of the year necessitating bifurcation of our annual cash short-term incentive program, (2) the difficulty in establishing long-term performance goals for our 2015 annual long-term equity awards necessitating the use of service-based restricted stock units in lieu of our traditional long-term incentive vehicle of performance-based share awards, and (3) the need to adjust performance periods and goals for our unvested 2013 and 2014 performance share awards in light of the different operating and financial plans of the Company post-Separation.

This CD&A describes our compensation philosophy and the material elements of our 2015 executive compensation program applicable to our Named Executive Officers.

Our Named Executive Officers who currently serve as executive officers of the Company are:

Joseph Hamrock — President and Chief Executive Officer

Donald E. Brown — Executive Vice President, Chief Financial Officer and Treasurer

Jim L. Stanley — Executive Vice President and Chief Operating Officer

Carrie J. Hightman — Executive Vice President and Chief Legal Officer

Violet Sistovaris — Executive Vice President, Northern Indiana Public Service Company (“NIPSCO”)

We also have three Named Executive Officers who are no longer executive officers of the Company following the Separation. SEC executive compensation disclosure rules require us to provide information for each individual who served as chief executive officer or chief financial officer at any time during the fiscal year.

 

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Mr. Robert C. Skaggs, Jr. and Mr. Stephen P. Smith served as President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, respectively, prior to the Separation on July 1, 2015 at which time both resigned from their positions with the Company and commenced employment with CPG. In addition, these disclosure rules require us to provide information for Mr. Glen L. Kettering who served as an executive officer of the Company during the year and would have been reported as a Named Executive Officer in this Proxy Statement had he not left the Company.

2015 Accomplishments

In addition to the Company’s successful completion of the Separation, the Company achieved a number of significant accomplishments in 2015, including:

 

   

Another industry leading year in stock price appreciation;

 

   

Delivering total shareholder return of approximately 16.7% since the Separation;

 

   

Outperforming the major utility indices for the seventh consecutive year; and

 

   

Generating earnings growth in line with our guidance range for the ninth consecutive year.

 

 

LOGO

Total Shareholder Return shown in the chart above is calculated by share price appreciation plus the annual dividend amount.

The NiSource 2015 share price appreciation and total shareholder return shown in the charts above are based on a 2014 year-end closing price calculated utilizing the Bloomberg separation formula taking into account the Separation on July 1, 2015.

Our 2015 performance was once again driven in large part by our continued disciplined execution across all facets of our established infrastructure-focused and investment-driven business strategy. Key business accomplishments during 2015 include:

 

   

Emerging as a premier pure-play natural gas and electric utility company following the Separation;

 

   

Being selected to the Dow Jones Sustainability North American Index for the second year straight;

 

   

Investing a record $1.37 billion at our Columbia Gas and Northern Indiana Public Service Company utilities across seven states to provide long-term safety and reliability benefits to customers and communities;

 

   

Replacing 361 miles of priority pipe and the last known cast iron pipe from Columbia Gas of Virginia;

 

   

Completing the deployment of automated meter reading devices across our nearly four million natural gas and electric customers;

 

   

Delivering a broad range of regulatory initiatives supporting enhanced safety, employee training and customer programs, including extension of Columbia Gas of Virginia’s modernization program, obtaining approval of Columbia Gas of Massachusetts’ gas system enhancement plan and successful rate settlements in three states that will support pipeline safety upgrades, and enhance safety and reliability;

 

   

Being selected as one of the World’s Most Ethical Companies for the fifth consecutive year; and

 

   

Continuing to strengthen our financial profile by delivering on our $30 billion of identified long-term regulated utility infrastructure investments, while maintaining an investment grade credit rating, and providing a solid and growing dividend.

 

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The Compensation Committee considered these achievements while performing its oversight activities throughout the course of the year.

Executive Compensation Highlights

Many of the Compensation Committee’s 2015 compensation decisions were made in anticipation of the Separation and to reflect the Company’s emergence as a pure-play utility. The following are key compensation decisions that occurred during 2015, many of which were made to address the unique circumstances related to the mid-year Separation.

In early 2015, the Compensation Committee:

 

   

Determined that no increases to base salaries of the Named Executive Officers were warranted prior to the Separation;

 

   

Approved delivery of the 2015 annual long-term equity awards to our Named Executive Officers solely in the form of service-based restricted stock units that do not vest until February 2, 2018, subject to the recipient’s continued service through such date, for the reasons explained in the section entitled “LTIP Awards;”

 

   

Approved increases in the grant date value of the 2015 annual long-term equity award for Messrs. Hamrock, Stanley, Smith, and Kettering, for the reasons explained in the section entitled “LTIP Awards;”

 

   

Approved a six-month performance period for the first half of 2015 for our annual cash short-term incentive program in the event of the Separation, for the reasons explained in the section entitled in the “Annual Performance-Based Cash Incentives;”

 

   

Awarded our new CFO, Mr. Brown, a signing bonus of $75,000, an annual long-term equity award having a grant date value of $750,000, and a special equity grant with a grant date value of $510,000 in order to compensate him for the lost compensation opportunities at his prior employer; and

 

   

Approved a valuation adjustment for outstanding unvested restricted stock units upon Separation consistent with the terms of the Omnibus Plan, in order to preserve the intrinsic aggregate value of awards prior to the Separation, based on a ratio determined by comparing the average NiSource share price for three days prior to the Separation with the NiSource share price traded on a when-issued basis for the same three day period.

In June 2015, the Compensation Committee:

 

   

Approved base salary increases for Messrs. Hamrock and Stanley and Ms. Sistovaris, each of whom assumed new roles and responsibilities after the Separation, for the reasons explained in the section entitled “2015 Base Salaries;”

 

   

Approved an incremental grant of service-based restricted stock units for Messrs. Hamrock and Stanley and Ms. Sistovaris, each of whom assumed new roles and responsibilities after the Separation, for the reasons explained in the section entitled “LTIP Awards;”

 

   

Approved an increase in the trigger, target and stretch award opportunities for the annual cash short-term incentive for Messrs. Hamrock and Stanley and Ms. Sistovaris, each of whom assumed new roles and responsibilities after the Separation, for the reasons explained in the section entitled “Annual Performance-Based Cash Incentives;”

 

   

Approved performance targets for the second half of 2015 for our annual cash short-term incentive program for the reasons explained in the section entitled in the “Annual Performance-Based Cash Incentives;” and

 

   

Approved above-target performance results for the 2013 and 2014 performance share awards based on performance through the Separation and approved conversion of the performance share awards to service-based restricted stock units, which will vest on the service-based vesting date under the original terms of the performance share awards.

In addition, in October 2015, the Compensation Committee amended the Omnibus Plan, effective October 4, 2015, to provide for (i) a minimum vesting period of one year for all awards and (ii) double-trigger vesting for equity awards that are assumed or replaced by an acquiring company upon a change-in-control; meaning that there must be both a change-in-control and a qualifying termination of employment in order for the

 

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equity awards to vest in connection with or following such change-in-control. In the event equity awards are not assumed or replaced in a change-in-control, then the outstanding equity awards will vest upon the occurrence of a change-in-control alone. Please see the section entitled “Severance and Change-in-Control Benefits” for further information regarding benefits to be received upon termination of employment or a change-in-control.

Overview of Our Executive Compensation Practices

The Compensation Committee reviews on an ongoing basis the Company’s executive compensation program to evaluate whether it supports the Company’s executive compensation philosophy and objectives and is aligned with stockholder interests. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation philosophy and objectives.

 

We DO Have This Practice             We Do NOT Have This Practice

ü      Incentive award metrics that are objective and tied to key company performance metrics

         

X      Repricing of options without stockholder approval

ü      Share ownership guidelines

         

X      Hedging or pledging transactions or short sales by executive officers or directors

ü      Compensation recoupment policy

         

X      Tax gross-ups for NEOs (other than gross-ups that are available to all employees who receive relocation benefits)

ü      Limited perquisites

         

X      Automatic single-trigger equity vesting upon a change-in-control

ü      Pledging prohibition in our long-term incentive plan

         

X      Excise tax gross-ups under change-in-control agreements

ü      Double-trigger severance benefits upon a change-in-control

         

X      Excessive pension benefits or defined benefit supplemental executive retirement plan

ü      Three year minimum vesting for equity awards to promote retention with limited exceptions for new hires and promotions

         

X      Excessive use of non-performance based compensation

ü      Tie a significant portion of executive compensation to stockholder interests in the form of at-risk compensation

         

X      Excessive severance benefits

ü      Use an independent compensation consultant

         

X      Dividend equivalent rights or dividends on executives’ unvested performance awards or restricted stock units

ü      Annual Say-on-Pay vote

           

Overview of Our Executive Compensation Program

Our compensation program is intended to attract, retain and motivate highly qualified executives.

The principal elements of compensation that we have historically provided to our executives are: base salary, annual short-term performance-based cash incentives and long-term performance-based equity incentive awards. We use short and long-term compensation to motivate our executives to meet and exceed the short and long-term business objectives of the Company.

Since 2011, we have used 100% performance-based equity compensation for our annual long-term equity incentive awards as a means to further align the interests of our executives with those of our stockholders. In 2015, however, in anticipation of the Separation and the fact that the Company and the Company’s financial plans would be very different following the mid-year Separation, we used service-based restricted stock units for

 

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our annual long-term equity awards in lieu of performance-based equity. Effective January 2016, we returned to our historical practice of awarding 100% performance-based equity compensation for our annual long-term equity incentive awards.

We generally target total compensation (base salary, annual short-term performance-based cash incentives and long-term equity incentive awards) to be competitive with the compensation paid to similarly positioned executives at companies within our peer group of companies (the “Comparative Group”) as described in the section entitled “Our Executive Compensation Process — Competitive Market Review.” We do not, however, manage pay to a certain target percentile of the Comparative Group practices.

We employ leading governance practices, such as clawback policies and stock ownership guidelines, and we conduct an annual risk assessment of the Company’s compensation practices.

In addition, our executive officers are prohibited from trading in Company securities during quarterly blackout periods and they are also prohibited from engaging in hedging or short sales of the Company’s equity securities.

Finally, when making decisions about our executive compensation program, the Compensation Committee takes into account the stockholders’ view of such matters. In 2015, 96% of our investors voted in favor of our Say-on-Pay Proposal at our Annual Meeting. No changes were made to the design of our executive compensation program in response to the 2015 stockholder vote.

Our Executive Compensation Philosophy

The key design priorities of the Company’s executive compensation program are to:

 

   

Maintain a financially responsible program aligned with the Company’s strategic plan to build stockholder value and long-term, sustainable earnings and dividend growth;

 

   

Provide a total compensation package that is aligned with the standards in our industry thereby enhancing the Company’s ability to:

–  Attract and retain executives with competitive compensation opportunities;

–  Motivate and reward executives for achieving and exceeding our business objectives;

–  Provide substantial portions of pay at risk for failure to achieve our business objectives;

 

   

Align the interests of stockholders and executives by emphasizing stock-denominated compensation opportunities; and

 

   

Comply with applicable laws and regulations.

The Compensation Committee believes that the Company’s executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives, and rewards decision making that creates value for our stockholders, customers and other key stakeholders.

Principal Elements of Our 2015 Compensation Program

We have designed our program to meet our business objectives using various compensation elements intended to drive both short-term and long-term performance.

We believe that a large percentage of total compensation for our Named Executive Officers should be performance-based, and the proportion of at-risk, performance-based compensation should increase as the executive’s level of responsibility within the Company increases. The Compensation Committee believes the appropriate mix of the elements of compensation should take into account the Company’s financial and strategic objectives, the competitive environment, Company performance, individual performance and responsibilities and evolving governance practices. For example, in anticipation of the Separation, the Compensation Committee determined it appropriate to approve 2015 annual long-term equity awards to our Named Executive Officers solely in the form of service-based restricted stock units that vest in February 2018, subject to the executive’s continued employment.

 

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We believe that the principal elements of our total compensation package for 2015, as more fully described below, help us achieve the objectives of our compensation program as follows:

 

               Time Horizon          

Element of Total Compensation

   Form of
Compensation
   Attraction    Short-
Term
        Long-
Term
   Alignment with
Stockholder Interest
   Retention

Base Salary

   Cash    ü                 ü

Annual Performance-Based

Cash Incentive

   Cash    ü    ü           ü    ü

Long-Term

Equity Incentive

   Shares
   ü           ü    ü    ü

Base Salary

Base salary is designed to provide our employees with a level of fixed pay that is commensurate with role and responsibility. We believe that by delivering base salaries that are reflective of market norms, the Company is well-positioned to attract, retain and motivate top caliber executives in an increasingly competitive labor environment. The Compensation Committee annually reviews the base salaries of the Company’s senior executives, including the Named Executive Officers, to evaluate whether they are competitive within our industry. In reviewing the base salaries, the Compensation Committee considers the base salaries paid to similarly situated executives by the companies in the Comparative Group. See the section entitled “Our Executive Compensation Process — Competitive Market Review” listing the companies in our Comparative Group used by the Compensation Committee for the first half of 2015 (pre-Separation) and in the second half of 2015 (post-Separation). The Compensation Committee determines any base salary changes for the Company’s senior executives based on a combination of factors that includes competitive pay standards, level of responsibility, experience, internal equity considerations, historical compensation, and individual performance and contribution to business objectives, as well as recommendations from Mr. Skaggs, our CEO at the time. Mr. Skaggs was evaluated separately by the Compensation Committee, taking into account those factors reviewed for all other senior executives. The Compensation Committee then provided their recommendation regarding CEO compensation to the independent members of the Board for approval. See the section below entitled “Compensation Committee Actions Related to 2015 Compensation” for more information.

Annual Performance-Based Cash Incentive Plan (“Incentive Plan”)

This component of total compensation provides employees with the opportunity to earn a cash award tied to both the performance of the Company and individual contributions to the organization’s success. Annual cash incentives are authorized by the Omnibus Plan which was originally approved by stockholders in May 2010 and re-approved by stockholders for Code Section 162(m) purposes in May 2015. The performance goals for the Incentive Plan are based on the financial plan approved by the Board at the beginning of the applicable performance period. The financial plan is designed to achieve the Company’s aim of creating sustainable stockholder value by growing earnings, effectively managing the Company’s cash and providing a strong dividend. In January 2015, in anticipation of the Separation, the Compensation Committee approved performance measures and goals for the first half of 2015 and, in June, the Compensation Committee approved the same corporate performance measures (eliminating business unit measures) but different goals for the second half of 2015 as a result of the Separation.

Eligibility for participation in the Incentive Plan extends to nearly all Company employees. Every eligible employee has an incentive opportunity at trigger, target and stretch levels of performance and the Compensation Committee identifies expectations for all senior executives, including the Named Executive Officers. See the section below entitled “Compensation Committee Actions Related to 2015 Compensation” for more information regarding the 2015 Incentive Plan, including incentive opportunities, performance measures, goals and payouts for each of the Named Executive Officers.

Long-Term Equity Incentive Plan (“LTIP”)

Our compensation program also includes a long-term equity incentive component. The Compensation Committee believes it important that each executive, in particular each of our senior executives, has personal

 

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financial exposure to the performance of the Company’s stock and, therefore, is aligned with the financial interests of stockholders. The Compensation Committee also believes that long-term equity incentives promote decision making that is consistent with the Company’s long-term business objectives.

Since 2011, the Compensation Committee delivered annual long-term equity incentive awards solely in performance shares to further align our executives’ interests with those of our stockholders and the Company’s long-term business objectives. However, in January 2015, in anticipation of the Separation, the Compensation Committee determined that the 2015 annual long-term equity awards should be in the form of service-based restricted stock units that vest in February 2018, subject to the executive’s continued employment through the vesting date. In January 2016, the Compensation Committee reverted back to its historical practice of delivering annual long-term equity incentive awards solely in the form of performance shares that vest based on the achievement of multi-year performance goals and the executive’s continued employment through the vesting date.

When establishing equity grants for each Named Executive Officer, the Compensation Committee considers, among other things, the executive’s base salary, the appropriate mix of cash and equity award opportunities, prior awards under the LTIP and the compensation practices for similarly situated executives at other companies in our Comparative Group. The actual value of each annual long-term equity award will vary based on the Company’s stock price at the time the award is settled.

The Compensation Committee may also approve special equity awards to attract and retain executive talent or to recognize significant contributions. See the section below entitled “Compensation Committee Actions Related to 2015 Compensation” for more information regarding the 2015 LTIP awards for each of the Named Executive Officers, including the special equity grant to Mr. Brown, the performance results for the 2013 and 2014 performance share awards, based on performance through the Separation, and the conversion of the 2013 and 2014 performance share awards into service-based restricted stock units at the time of the Separation.

Other Compensation and Benefits

We also provide other forms of compensation to our executives, including the Named Executive Officers, consisting of a limited number of perquisites, severance and change-in-control arrangements and a number of other employee benefits that generally are extended to our entire employee population. These other forms of compensation are generally comparable to those that are provided to similarly situated executives at other companies of our size.

Perquisites

Perquisites are not a principal element of our executive compensation program. They are intended to assist executive officers in the performance of their duties on behalf of the Company or otherwise to provide benefits that have a combined personal and business purpose. Generally, the Company does not reimburse the Named Executive Officers for the payment of personal income taxes incurred by the executives in connection with their receipt of these benefits, except for relocation expenses, consistent with Company practice for all employees who receive Company-paid relocation expenses. For more information on these perquisites, see the Summary Compensation Table and footnote (6) to that table.

Severance and Change-In-Control Benefits

We maintain an executive severance policy, and Change-in-Control Agreements with each of the Named Executive Officers that we currently employ, and we previously maintained a letter agreement with Mr. Smith, our former Chief Financial Officer, regarding payments to be made in the event of termination of his employment. No severance or Change-in-Control payments were triggered by the terminations of employment of Messrs. Skaggs, Smith or Kettering in connection with the Separation.

Change-in-Control Agreements are intended to ensure that thoroughly objective judgments are made in relation to any potential change in corporate ownership so that stockholder value is appropriately safeguarded and returns to investors are maximized. The Change-in-Control Agreements provide for cash severance benefits upon a double-trigger (meaning there must be both a qualifying change-in-control and termination of employment) and do not provide for any “gross-up” payments to executives for excise taxes incurred with respect to benefits

 

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received under a Change-in-Control Agreement. Effective as of October 2015, the Omnibus Plan was amended to provide that all equity awards granted under the Plan that are assumed or replaced by an acquiring company will be subject to double-trigger vesting upon a change-in-control. Awards that are not assumed or replaced by the acquiring company vest upon such change-in-control.

For further discussion of these agreements, see the table in the section entitled “Potential Payments upon Termination of Employment or a Change-in-Control of the Company” and the accompanying narrative.

Pension Programs

During 2015, we maintained a tax-qualified defined benefit pension plan for essentially all salaried exempt employees hired before January 1, 2010, all non-exempt employees (both non-union and certain union employees) hired before January 1, 2013, as well as for other union employees, regardless of hire date, and a non-qualified defined benefit pension plan (the “Pension Restoration Plan”) for all eligible employees with annual compensation or pension benefits in excess of the limits imposed by the Internal Revenue Service (“IRS”), including the Named Executive Officers. The Pension Restoration Plan provides for a pension benefit under the same formula provided under the tax-qualified plan but without regard to the IRS limits, reduced by amounts paid under the tax-qualified plan. The material terms of the pension programs are described in the narrative to the Pension Benefits Table.

Savings Programs

Our Named Executive Officers are eligible to participate in the same tax-qualified 401(k) Plan as most employees and in a non-qualified defined contribution plan (the “Savings Restoration Plan”) maintained for eligible executive employees. The 401(k) Plan includes a Company match that varies depending on the pension plan in which the employee participates and a Company profit sharing contribution for most employees of between 0.5% and 1.5% of the employee’s eligible earnings based on the overall corporate net operating earnings per share measure. In addition, for salaried employees hired after January 1, 2010, and non-union hourly employees hired after January 1, 2013, the 401(k) Plan includes a 3% Company contribution to the employee accounts. The Savings Restoration Plan provides for Company contributions in excess of IRS limits under the 401(k) Plan for eligible employees, including the Named Executive Officers. The material terms of the Savings Restoration Plan are described in the narrative to the 2015 Non-qualified Deferred Compensation Table.

Deferred Compensation Plan

We also maintain the Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) through which eligible Company executives, including the Named Executive Officers, may elect to defer between 5% and 80% of their base salary and annual cash incentive payout. The Company makes the Deferred Compensation Plan available to eligible executives so they have the opportunity to defer their cash compensation without regard to the limits imposed by the IRS for amounts that may be deferred under the 401(k) Plan. The material terms of the Deferred Compensation Plan are described in the narrative to the 2015 Non-qualified Deferred Compensation Table.

Health and Welfare Benefits

We also provide other broad-based benefits such as medical, dental, life insurance and long-term disability coverage on the same terms and conditions to all employees, including the Named Executive Officers. We believe that these broad-based benefits enhance the Company’s reputation as an employer of choice and thereby serve the objectives of our compensation program to attract, retain and motivate our employees.

Our Executive Compensation Process

The Compensation Committee is responsible for determining salaries, performance-based incentives and other matters related to the compensation of our executives and for overseeing the administration of our equity plans, including equity award grants to our executive officers. The Compensation Committee takes into account various factors when making compensation decisions, including:

 

   

Attainment of established business and financial goals of the Company;

 

   

Competitiveness of the Company’s compensation program based upon competitive market data; and

 

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An executive’s position, level of responsibility and performance, as measured by the individual’s contribution to the Company’s achievement of its business objectives.

The Compensation Committee reviews the compensation of our CEO and his executive direct reports each year. In determining the compensation of the CEO and his executive direct reports, the Compensation Committee takes into consideration the CEO’s recommendation with respect to his executive direct reports and submits its recommendation with respect to the CEO compensation to the independent members of the Board. When considering changes in compensation for the Named Executive Officers, the Compensation Committee also considers input from the Executive Vice President, Corporate Affairs and Human Resources and the Compensation Committee’s independent executive compensation consultant, Exequity LLP.

Competitive Market Review

In connection with its compensation decision making, the Compensation Committee reviews the executive compensation practices in effect at other companies in the Comparative Group. Prior to Separation, these companies comprised leading gas, electric, and combination utility and natural gas transmission companies that were selected by the Compensation Committee for their operational comparability to the Company and because we generally compete with these companies for the same executive talent. For purposes of considering 2015 compensation practices prior to the Separation, the pre-Separation Comparative Group included the following companies:

 

AGL Resources Inc.

  

Pepco Holdings, Inc.

Ameren Corporation

  

PPL Corporation

American Electric Power Company, Inc.

  

Public Service Enterprise Group Incorporated

CenterPoint Energy, Inc.

  

Questar Corporation

CMS Energy Corporation

  

SCANA Corporation

Dominion Resources, Inc.

  

Sempra Energy

DTE Energy Company

  

Spectra Energy Corp

EQT Corporation

  

WGL Holdings, Inc.

FirstEnergy Corp.

  

The Williams Companies, Inc.

In anticipation of the Separation, in May 2015, the Compensation Committee’s independent compensation consultant presented a revised group of comparator companies to reflect the Company’s smaller size and narrower range of operations post-Separation. This revised group was used in evaluating the compensation adjustments that were approved in June 2015 in connection with the Separation. This revised group of companies was based on the Comparative Group prior to the Separation, but updated to (i) remove the following companies: EQT Corporation, Pepco Holdings, Inc., Spectra Energy Corp, and The Williams Companies, Inc. and (ii) include the following companies: Atmos Energy Corporation, The Laclede Group, Inc., OGE Energy Corp., One Gas, Inc., Piedmont Natural Gas Company, Inc., and PNM Resources, Inc.

 

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In August 2015, the Compensation Committee, with input from its independent compensation consultant, revised the Comparative Group for purposes of evaluating compensation practices in 2016. The new post-Separation Comparative Group, set forth below, removed companies in the transportation and storage sector (EQT Corporation, Pepco Holding, Inc., Spectra Energy Corp and The Williams Companies, Inc.) and added several companies (Alliant Energy Corporation, Atmos Energy Corporation, The Laclede Group, Inc., OGE Energy Corp., One Gas, Inc., Piedmont Natural Gas Company, Inc., PNM Resources, Inc., Vectren Corporation and WEC Energy Group) in order to align with companies that are operationally similar to the Company following the Separation.

 

AGL Resources Inc.

   One Gas, Inc.

Alliant Energy Corporation

   Piedmont Natural Gas Company, Inc.

Ameren Corporation

   PNM Resources, Inc.

American Electric Power Company, Inc.

   PPL Corporation

Atmos Energy Corporation

   Public Service Enterprise Group Incorporated

CenterPoint Energy, Inc.

   Questar Corporation

CMS Energy Corporation

   SCANA Corporation

Dominion Resources, Inc.

   Sempra Energy

DTE Energy Company

   Vectren Corporation

FirstEnergy Corp.

   WEC Energy Group, Inc.

The Laclede Group, Inc.

   WGL Holdings, Inc.

OGE Energy Corp.

  

Policies and Guidelines

We maintain various guidelines and policies to help us meet our compensation objectives including:

 

   

Executive Stock Ownership and Retention Guidelines.    Senior executives, including the Named Executive Officers, are generally expected to satisfy their applicable ownership guidelines within five years of becoming subject to the guidelines. The stock ownership guideline for the CEO is five times his annual base salary. The other senior executives have a stock ownership guideline of three times their respective annual base salaries. Once the senior executive satisfies the guidelines, he/she must continue to own a sufficient number of shares to remain in compliance with the guidelines. Until such time as the senior executives satisfy the stock ownership guidelines, they are required to hold at least 50% of the shares of common stock received upon the lapse of the restrictions on restricted stock units and the vesting of performance shares. At the end of 2015, all of the currently employed Named Executive Officers exceeded their ownership guidelines.

 

   

Trading Windows/Trading Plans/Hedging.    We restrict the ability of certain employees to freely trade in the Company’s common stock because of their periodic access to material non-public information regarding the Company. Under our insider trading policy, our key executives are prohibited from trading in Company securities during quarterly blackout periods, and at such other times as the Chief Legal Officer may deem appropriate. In addition, under our Securities Transaction Compliance Policy for Certain Employees and our Securities Transaction Compliance Policy for Directors and Executive Officers, all directors and all senior executives, including our Named Executive Officers, are prohibited from engaging in short sales of the Company’s equity securities or in buying or selling puts, calls or other options on the Company’s securities or otherwise hedging against or speculating in the potential changes in the value of the Company’s common stock. None of our directors or executive officers owns Company securities that are pledged.

 

   

Compensation Recovery for Misconduct.    While we believe our executives conduct business with the highest integrity and in full compliance with our Code of Business Conduct, the Compensation Committee believes it is appropriate to ensure that the Company’s compensation plans and agreements provide for financial penalties to an executive who engages in certain fraudulent or other inappropriate conduct. Consequently, our Incentive Plan, the Omnibus Plan, contains “clawback” provisions that require

 

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reimbursement of amounts received in the event of certain acts of misconduct with respect to both the annual short-term cash incentive and long-term equity awards.

Tax Treatment of Executive Compensation.

Section 162(m) of the Code provides that annual compensation in excess of $1,000,000 paid to the CEO or certain of the other Named Executive Officers, other than compensation meeting the definition of “performance-based compensation,” will not be deductible by a corporation for federal income tax purposes. The Compensation Committee reviews the deductibility of compensation under Section 162(m) of the Code and related regulations published by the IRS. The Compensation Committee retains the discretion to amend any compensation arrangement to comply with Code Section 162(m)’s requirements for deductibility in accordance with the terms of such arrangements and what it believes is in the best interest of the Company.

The Compensation Committee considers the anticipated tax treatment to the Company when determining executive compensation and routinely seeks to structure its executive compensation program in a way that preserves the deductibility of compensation payments and benefits. It should be noted, however, that there are many factors which are considered by the Compensation Committee in determining executive compensation and, similarly, there are many factors which may affect the deductibility of executive compensation. To maintain the flexibility to compensate the Named Executive Officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy that all executive compensation must be deductible under Section 162(m) of the Code.

Compensation Committee Actions Related to 2015 Compensation

During 2015, the Compensation Committee reviewed and, as appropriate, took action with respect to each element of total compensation for each Named Executive Officer following the principles, practices and processes described above. In doing so, the Compensation Committee concluded that the total compensation provided for each of the Company’s senior executives in 2015, including the Named Executive Officers, was consistent with the Company’s compensation philosophy and was reasonable, competitive and appropriate.

The Compensation Committee’s compensation determinations, though subjective in part, were based primarily upon recognition of the roles and responsibilities and performance of each Named Executive Officer, and a determination that the total compensation awarded to each Named Executive Officer provided well-balanced incentives to focus on serving the interests of the Company and its stockholders.

In addition, the Compensation Committee considered the stockholders’ advisory approval of the 2014 compensation of our Named Executive Officers at the 2015 Annual Meeting and determined that no changes were necessary or advisable in connection with the design of our senior executive compensation program as a result of the stockholders’ vote.

2015 Base Salaries

Historically, base salaries of senior executives, including the Named Executive Officers, have been adjusted when deemed necessary to maintain competitiveness and reflect performance. The Compensation Committee reviewed the base salaries of the Company’s senior executives, including the Named Executive Officers, and approved salary increases, effective upon the Separation, for Messrs. Hamrock and Stanley and Ms. Sistovaris, each of whom assumed new roles with increased responsibilities following the Separation. No other salary adjustments were made. In addition, the Compensation Committee established Mr. Brown’s initial base salary of $450,000 at the time he joined the Company in April 2015, considering the compensation he received from his prior employer, market data and the compensation practices within the Company.

In reviewing the base salaries of the Named Executive Officers, the Compensation Committee considered the base salaries earned by similarly situated executives of companies in the post-Separation Comparative Group, increased responsibilities, experience, internal pay equity, historical compensation practices, individual performance and contributions to achievement of business objectives. In particular, the Compensation Committee considered Mr. Hamrock’s new role and responsibilities as President and CEO of the Company and determined that an increase in salary of $300,000 was appropriate, particularly as compared to the market data for chief executive officers at companies in the post-Separation Comparative Group. The Compensation Committee also

 

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determined that increases of $25,000 for Mr. Stanley and $80,000 for Ms. Sistovaris were appropriate based on market data and in recognition of their new roles and increased responsibilities as Chief Operating Officer and Executive Vice President, respectively.

The 2015 base salary adjustments, effective upon the Separation, for Messrs. Hamrock and Stanley and Ms. Sistovaris are shown in the table below. As noted above, no other base salary adjustments were made in 2015 for the Named Executive Officers.

 

Name  

2014

Annual Salary

    2015
Annual Salary
 

Joseph Hamrock

  $ 500,000      $ 800,000   

Jim L. Stanley

  $ 500,000      $ 525,000   

Violet Sistovaris

  $ 320,000      $ 400,000   

Annual Performance-Based Cash Incentives

Certain elements of our executive compensation program had to be modified in 2015 as a result of the Separation. In particular, the Incentive Plan was bifurcated into two six-month performance periods, with the same corporate performance measures for each half (but excluding business unit measures for the second half of 2015) and different performance goals for each half, reflecting the fact that the Company and its financial plans were very different pre-Separation as compared to post-Separation. Similarly, as explained below, annual performance-based cash incentive ranges and base salary amounts used to determine actual payout amounts changed post-Separation for certain Named Executive Officers.

Pre-Separation Annual Performance-Based Incentive Ranges

In January 2015, in anticipation of the Separation, the Compensation Committee established performance measures and goals for the first half of the year to determine the first half incentive payouts to the Named Executive Officers employed by the Company on December 31, 2015. In determining incentive compensation ranges for the Named Executive Officers for the first half of 2015, the Compensation Committee considered competitive information from the pre-Separation Comparative Group, input from the independent compensation consultant, historical payouts and individual performance and made no changes to the ranges for the then-serving Named Executive Officers.

The annual performance-based cash incentive ranges for each of the Named Executive Officers as of June 30, 2015, used to determine the incentive payout based on performance for the first half of the year are set forth below.

 

Named Executive Officer  

Trigger

(% of Salary)

   

Target

(% of Salary)

   

Stretch

(% of Salary)

 

Joseph Hamrock

    25%            65%            105%       

Donald E. Brown

    25%            60%            95%       

Jim L. Stanley

    25%            65%            105%       

Carrie J. Hightman

    25%            60%            95%       

Violet Sistovaris

    20%            50%            80%       

Robert C. Skaggs, Jr.(1)

    50%            125%            200%       

Stephen P. Smith(1)

    30%            70%            110%       

Glen L. Kettering(1)

    25%            60%            95%       

 

  (1)

Messrs. Skaggs, Smith and Kettering were not employed by the Company on December 31, 2015, and thus were not eligible to receive an incentive payout for 2015 under the terms of the Incentive Plan. Pursuant to the Employee Matters Agreement between the Company and CPG, the Company provided funds to CPG in the amount of $972,500 to be used by CPG to fund CPG incentive plan payouts to

 

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Messrs. Skaggs, Smith and Kettering subject to the terms and conditions of the CPG incentive plan, including the requirement that each be employed by CPG on December 31, 2015 in order to be eligible to receive a payment from CPG.

Post-Separation Annual Performance-Based Incentive Ranges

In June 2015, in anticipation of the Separation, the Compensation Committee established performance measures and goals for the second half of 2015 to determine the second half incentive payouts to the Named Executive Officers employed by the Company on December 31, 2015. The Compensation Committee also approved additional adjustments to the cash-based incentive compensation ranges for Messrs. Hamrock and Stanley and Ms. Sistovaris based on their new roles and responsibilities following the Separation taking into account competitive information from the modified post-Separation Comparative Group, and input from the independent compensation consultant to determine their payout based on performance for the second half of the year.

The annual performance-based cash incentive ranges for each of the Named Executive Officers employed by the Company on December 31, 2015, used to determine the incentive payout based on performance for the second half of the year are set forth below.

 

Named Executive Officer(1)  

Trigger

(% of Salary)

   

Target

(% of Salary)

   

Stretch

(% of Salary)

 

Joseph Hamrock

    40%            100%            160%       

Donald E. Brown

    25%            60%            95%       

Jim L. Stanley

    30%            75%            120%       

Carrie J. Hightman

    25%            60%            95%       

Violet Sistovaris

    25%            65%            105%       

 

  (1)

Messrs. Skaggs, Smith and Kettering were not eligible to receive an incentive payout from the Company for the second half of 2015 under the terms of the Incentive Plan because they were not employed by the Company following the Separation.

For more information on the 2015 payout amounts for each of the Named Executive Officers, see the sections below entitled “Pre-Separation 2015 Incentive Plan Payouts to the Named Executive Officers” and “Post-Separation 2015 Incentive Plan Payouts to the Named Executive Officers.”

Pre- and Post-Separation Financial Goals

The 2015 Incentive Plan awards for senior executives, including the eligible Named Executive Officers, were subject to achievement with respect to two corporate financial goals, net operating earnings per share and corporate funds from operations, as well as an additional operational measure relating to safety. The Compensation Committee approved these measures for the performance periods for both the first and second half of 2015 because they were deemed to be important to the Company’s success in increasing stockholder value.

Earnings, cash flow and safety were measured as follows:

 

   

The measure of earnings was net operating earnings per share (after accounting for the cost of any incentive payout). Net operating earnings was defined as income from continuing operations determined in accordance with Generally Accepted Accounting Principles (“GAAP”), adjusted for certain items, such as fluctuation in weather, environmental compliance costs, gains and losses on the sale of assets, Separation-related costs and certain income tax items. The Compensation Committee uses net operating earnings, a non-GAAP financial measure, for determining financial performance for incentive compensation plans because the Board and management believe this measure better represents the fundamental earnings strength and performance of the Company. The Company uses net operating earnings internally for budgeting and for reporting to the Board.

 

   

The cash flow measure, corporate funds from operations, was calculated by taking net income from operations and adding back non-cash items such as depreciation. The Compensation Committee uses corporate funds from operations as an Incentive Plan measure because the Compensation Committee and management believe this measure fairly represents the amount of cash produced by the Company’s operations.

 

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Safety was measured by the number of employee work days missed or restricted or the number of days an employee was transferred, known as the DART metric, which was developed by the Occupational Safety and Health Administration. Each business unit of the Company had its own safety goal and the safety goal for corporate staff was based upon the respective business unit goals, weighted by employee hours for each business unit.

The incentive opportunities for the senior executives, including the Named Executive Officers, were contingent on achievement of goals relating to these measures, subject to final discretionary adjustment by the Compensation Committee.

For the first half performance period, the 2015 Incentive Plan awards for the leaders of our business units during the first half of the year (Mr. Hamrock, who led NiSource Gas Distribution, Mr. Stanley, who led NIPSCO, and Mr. Kettering, who led Columbia Pipeline Group) also were subject to achievement with respect to business unit net operating earnings and funds from operations goals for each of the business units. The Compensation Committee extended to Mr. Skaggs the authority to establish the annual business unit targets for the year. He assigned goals that, if accomplished, would help the Company achieve its overall corporate objectives, consistent with the Compensation Committee’s belief that the inclusion of business unit goals in the annual Incentive Plan improves the line of sight between employees and the incentive measures, thereby enhancing Company performance.

Consequently, the incentive opportunities for Messrs. Hamrock, Stanley and Kettering for the first half of the 2015 performance period were subject to achievement with respect to the corporate financial measures (net operating earnings per share and corporate funds from operations), and achievement of business unit net operating earnings, business unit funds from operations and business unit safety measures for which they had responsibility. As such, each of their measures for the first half of 2015 is weighted differently than the other Named Executive Officers who were members of the corporate service group during the first half of the year, as shown in the tables below.

There are no business units remaining following the Separation since the Company is more operationally aligned following the Separation and each of the Named Executive Officers employed post-Separation was subject to the same performance goals and weighting for the second half of 2015.

Messrs. Skaggs, Smith and Kettering were not eligible to receive an incentive payout from the Company under the terms of the Incentive Plan as they were not employed on December 31, 2015 and have been excluded from the Pre-Separation Performance Results Table below. If Messrs. Skaggs and Smith had remained employed through December 31, 2015, they would have been eligible to receive annual incentive payouts based on the performance measures and weightings set forth below with respect to Ms. Hightman and Ms. Sistovaris.

Pre-Separation Performance Results

The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for the first half of 2015 for Ms. Hightman and Ms. Sistovaris were:

 

Corporate Measures(1)   Weight   Trigger   Target   Stretch   Result   Carrie J. Hightman   Violet Sistovaris
           

Formulaic

Amounts(2)

 

Formulaic

Amounts(2)

           

  Payout  

  as a %  

  of Target  

 

Weighted

Adjusted
Payout as a %

of Target

 

Payout
as a %

  of Target  

 

Weighted

Adjusted

Payout as a %
of Target

NiSource Net Operating Earnings Per Share

  50%   $.97   $1.00   $1.03   $1.03   158.33%   79.17%   160.00%   80.00%

NiSource Funds from Operations

  40%   $765M   $847M   $929M   $909M   144.11%   57.64%   145.37%   58.15%

Safety

  10%   .76 days   .60 days     .92 days   0%   0%   0%   0%

 

(1)

For performance between two performance levels (for example, between target and stretch goals), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target incentive opportunity. Interpolation for the safety goal only applies between trigger and target. Consequently, target is the maximum available level for the safety goal.

 

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(2)

These amounts reflect a percentage of each executive’s target incentive opportunity. The trigger, target and stretch incentive opportunities for Ms. Hightman and Ms. Sistovaris are provided in the section entitled “Pre-Separation 2015 Incentive Plan Payouts to the Named Executive Officers.”

The applicable performance measures and their associated weightings for the first half of 2015 for Messrs. Hamrock, Stanley and Kettering and results as a percentage of the target incentive opportunity for Messrs. Hamrock and Stanley were:

 

Corporate and Business Unit Measures(1)   Weight   Trigger   Target   Stretch   Result   Formulaic
Payout as a
%  of Target(2)
 

Weighted

Adjusted

Formulaic
Payout as a %
of Target(2)

Mr. Hamrock

                           

NiSource Net Operating Earnings Per Share

  25%   $0.97   $1.00   $1.03   $1.03   161.54%   40.38%

NiSource Funds from Operations

  20%   $765M   $847M   $929M   $909M   146.53%   29.31%

NGD Safety

  10%   1.03 days   .72 days     1.55 days   0%   0%

NGD Net Operating Earnings

  22.50%   $157M   $161M   $169M   $159M   69.23%   15.58%

NGD Funds from Operations

  22.50%   $274M   $316M   $358M   $378M   161.54%   36.35%

Mr. Stanley

                           

NiSource Net Operating Earnings Per Share

  25%   $0.97   $1.00   $1.03   $1.03   162.00%   40.38%

NiSource Funds from Operations

  20%   $765M   $847M   $929M   $909M   146.53%   29.31%

NIPSCO Safety

  10%   .84 days   .69 days     .66 days   100.00%   10.00%

NIPSCO Net Operating Earnings

  22.50%   $93M   $96M   $102M   $91M   0%   0%

NIPSCO Funds from Operations

  22.50%   $187M   $216M   $245M   $201M(3)   68.45%   15.34%

Mr.  Kettering(4)

                           

NiSource Net Operating Earnings Per Share

  25%   $0.97   $1.00   $1.03   N/A   N/A   N/A

NiSource Funds from Operations

  20%   $765M   $847M   $929M   N/A   N/A   N/A

CPG Safety

  10%   .09 days   .19 days     N/A   N/A   N/A

CPG Net Operating Earnings

  22.50   $134M   $136M   $141M   N/A   N/A   N/A

CPG Funds from Operations

  22.50   $226M   $261M   $296M   N/A   N/A   N/A

 

(1)

For performance between two performance levels (for example, between target and stretch goals), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target opportunity. Interpolation for the safety goal only applies between trigger and target. Consequently, target is the maximum available level for the safety goal.

 

(2)

These amounts reflect a percentage of the executive’s target incentive opportunity. The trigger, target and stretch incentive opportunities for Messrs. Hamrock and Stanley are provided in the section entitled “Pre-Separation 2015 Incentive Plan Payouts to the Named Executive Officers.”

 

(3)

In accordance with the terms of the Incentive Plan, this includes an upward adjustment to Funds from Operations for NIPSCO of $2.4 million taking into consideration the impact of non-recurring items related to deferred tax changes.

 

(4)

As a result of the Separation, the Compensation Committee did not certify results with respect to CPG since Mr. Kettering was not eligible to receive an annual incentive payout pursuant to the terms of the Incentive Plan because he was not employed on December 31, 2015.

 

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Pre-Separation 2015 Incentive Plan Payouts to the Named Executive Officers

The annual incentive opportunities and actual payout amounts for each of the eligible Named Executive Officers as approved by the Compensation Committee for the first half of 2015 performance period were:

 

Named Executive Officer(1)  

Trigger

(% of Salary)

   

Target

(% of Salary)

   

Stretch

(% of Salary)

   

2015 Award

(% of Target)

    2015
Award(2)
 

Joseph Hamrock

    25%            65%            105%            122%          $ 198,250   

Donald E. Brown

    25%            60%            95%            137%          $ 88,271   

Jim L. Stanley

    25%            65%            105%            95%          $ 154,375   

Carrie J. Hightman

    25%            60%            95%            137%          $ 201,390   

Violet Sistovaris

    20%            50%            80%            138%          $ 110,400   

 

(1)

Messrs. Skaggs, Smith and Kettering were not eligible to receive an incentive payout from the Company for the first half of 2015 under the terms of the Incentive Plan because they were not employed by the Company on December 31, 2015.

 

(2)

The 2015 Awards for each of the eligible Named Executive Officers were calculated as follows: 50% annual base salary at the end of the applicable performance period with the exception of the use of 2015 eligible earnings on June 30, 2015, for Mr. Brown, who joined the Company in April 2015, multiplied by his/her Target (% of Salary) period multiplied by the applicable 2015 Award (% of Target).

Post-Separation Performance Results

The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for the second half of 2015 for each of the currently employed Named Executive Officers were:

 

Corporate Measures(1)   Weight   Trigger   Target   Stretch   Result   Formulaic
Payout as a
%  of Target(2)
 

Weighted
Adjusted
Formulaic
Payout as a %

of Target(2)

Mr. Hamrock and Mr. Stanley

                           

NiSource Net Operating Earnings Per Share

  50%   $0.32   $0.35   $0.38   $0.37   140.00%   70.00%

NiSource Funds from Operations

  40%   $328M   $396M   $464M   $365M(3)   72.65%   29.06%

Corporate Safety

  10%   .76 days   .70 days     1.03 days   0%   0%

Ms. Hightman and Mr. Brown

                           

NiSource Net Operating Earnings Per Share

  50%   $0.32   $0.35   $0.38   $0.37   138.89%   69.44%

NiSource Funds from Operations

  40%   $328M   $396M   $464M   $365M(3)   73.41%   29.36%

Corporate Safety

  10%   .76 days   .70 days     1.03 days   0%   0%

Ms. Sistovaris

                           

NiSource Net Operating Earnings Per Share

  50%   $0.32   $0.35   $0.38   $0.37   141.03%   70.51%

NiSource Funds from Operations

  40%   $328M   $396M   $464M   $365M(3)   71.95%   28.78%

Corporate Safety

  10%   .76 days   .70 days     1.03 days   0%   0%

 

(1)

For performance between two performance levels (for example, between target and stretch goals), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target opportunity. Interpolation for the safety goal only applies between trigger and target. Consequently, target is the maximum available level for the safety goal.

 

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(2)

These amounts reflect a percentage of the Named Executive Officers target incentive opportunity for the second half of 2015. The trigger, target and stretch incentive opportunities for each Named Executive Officer are provided in the section entitled “Post-Separation 2015 Incentive Plan Payouts to the Named Executive Officers.”

 

(3)

In accordance with the terms of the Incentive Plan, this includes an upward adjustment to Funds from Operations for NiSource of $3.9 million taking into consideration the impact of accounting changes.

Post-Separation 2015 Incentive Plan Payouts to the Named Executive Officers

For 2015, the annual incentive opportunities and actual payout amounts for each of the eligible Named Executive Officers as approved by the Compensation Committee for the second half of 2015 were:

 

Named Executive Officer  

Trigger

(% of Salary)

   

Target

(% of Salary)

   

Stretch

(% of Salary)

   

2015 Award

(% of Target)

    2015
Award(1)
 

Joseph Hamrock

    40%            100%            160%            99%          $ 396,000   

Donald E. Brown

    25%            60%            95%            99%          $ 133,650   

Jim L. Stanley

    30%            75%            120%            99%          $ 194,906   

Carrie J. Hightman

    25%            60%            95%            99%          $ 145,530   

Violet Sistovaris

    25%            65%            105%            99%          $ 128,700   

 

(1)

The 2015 Awards for each of the eligible Named Executive Officers were calculated as follows: 50% of annual base salary on December 31, 2015, multiplied by his/her Target (% of Salary) on December 31, 2015, multiplied by the applicable 2015 Award (% of Target).

In January 2016, the Compensation Committee certified the performance results set forth in the tables above. The Compensation Committee determined it was appropriate to recommend to the independent members of the Board that Mr. Hamrock receive an Incentive Plan payout of $594,250 based on the Company’s 2015 performance, Mr. Hamrock’s contribution to the Company’s success in 2015, and his performance in the Company’s top leadership role. The independent members of the Board approved the Incentive Plan payout recommended by the Compensation Committee.

Mr. Hamrock also made recommendations to the Compensation Committee with respect to the award of Incentive Plan payouts to the other senior executives, including the other Named Executive Officers. In making his recommendations, Mr. Hamrock considered the Company’s performance and the performance of the senior executives in delivering strong stockholder returns again in 2015, as well as the performances of the business unit and corporate functions the executive led during the first half of 2015. The Compensation Committee considered and accepted Mr. Hamrock’s recommendations and approved Incentive Plan payouts to the Named Executive Officers in accordance with the Incentive Plan formula, as set forth in the table above.

2015 Discretionary Payments to Mr. Brown and Mr. Hamrock

In March 2015, the Compensation Committee approved a sign-on bonus of $75,000 as part of Mr. Brown’s offer of employment in order to compensate him for lost compensation opportunities at his prior employer. In January 2016, the Compensation Committee approved a discretionary bonus for Mr. Brown in the amount of $28,079 at the recommendation of the CEO based on Mr. Brown’s exceptional performance as the Company’s new Chief Financial Officer. The Compensation Committee also recommended to the independent members of the Board an additional modest discretionary adjustment of $5,750 to Mr. Hamrock’s Incentive Plan payout in recognition of his contributions to the Company’s success in 2015. These discretionary bonus amounts are set forth in the Bonus column of the Summary Compensation Table.

LTIP Awards

2015 Annual Long-Term Equity Awards.    In January 2015, the Compensation Committee approved a grant of restricted stock units to senior executives of the Company, including each of the Named Executive Officers. The Compensation Committee determined that the award of restricted stock units instead of performance shares was more appropriate in a year of fundamental change for the Company as a result of the Separation. In

 

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determining the 2015 long-term incentive grant values to be awarded to the Named Executive Officers based on their positions at the beginning of 2015, the Compensation Committee considered the competitive pay practices at companies within our pre-Separation Comparative Group, input from the Compensation Committee’s independent compensation consultant, the historical mix of fixed compensation versus variable incentive compensation and individual performance for each of the Named Executive Officers’ current positions. The Compensation Committee did not take into account potential future roles of the Named Executive Officer following Separation into its consideration at such time. The Compensation Committee approved an increase in 2015 grant values for Messrs. Hamrock, Stanley, Kettering and Smith that were approximately 43%, 14%, 60% and 11% greater than their prior year’s award values, respectively.

In particular, in approving the increased long-term incentive values for Messrs. Hamrock, Stanley, Kettering and Smith, the Compensation Committee considered the consistent strong performance by Messrs. Hamrock and Stanley and the appropriateness of market adjustments for Messrs. Hamrock and Stanley based on Comparative Group information, Mr. Hamrock’s contribution in developing a strategy for the Company following the Separation, as well as consistently excellent performance of Mr. Kettering in leading CPG and of Mr. Smith who was recognized as one of the top 20 Chief Financial Officers in the Wall Street Journal.

In June 2015, the Compensation Committee approved incremental grants of the 2015 service-based restricted stock units to Messrs. Hamrock and Stanley and Ms. Sistovaris contingent on the occurrence of the Separation and based on their promotions to CEO, Chief Operating Officer and Executive Vice President, respectively. The incremental grant values for Messrs. Hamrock and Stanley and Ms. Sistovaris were approximately 100%, 25% and 70%, respectively, greater than the grant values of their equity awards granted at the beginning of 2015. These incremental grants were made based on a review of the post-Separation Comparative Group for individuals holding similar positions at companies within the post-Separation Comparative Group as well as the Company’s historical compensation practices.

Vesting of the 2015 grants of restricted stock units is dependent on the executive’s continued employment through February 2, 2018. Special vesting rules apply in the event of death, “Retirement,” “Disability” or a “Change-in-Control” (each as defined in the Omnibus Plan). Termination for any other reason will result in forfeiture of all restricted stock units.

The Compensation Committee authorized the restricted stock unit awards to the Named Executive Officers in the original and adjusted and incremental grant amounts shown below:

 

Named Executive Officer  

Restricted Stock Units

Awarded(1)

    Restricted Stock Units Following
Valuation Adjustment(2)
    Incremental Restricted
Stock Unit Awards(3)
 

Joseph Hamrock

    22,894                 62,972                        58,858             

Donald E. Brown

    16,790                 46,183                        —                

Jim L. Stanley

    18,315                 50,377                        11,772             

Carrie J. Hightman

    17,170                 47,228                        —                

Violet Sistovaris

    8,013                 22,041                        14,715             

Robert C. Skaggs, Jr.(4)

    85,852                 —                             —                

Stephen P. Smith(4)

    34,341                 —                             —                

Glen L. Kettering(4)

    18,315                 —                             —                

 

(1)

These amounts represent the number of restricted stock units awarded prior to the Separation.

 

(2)

Pursuant to the terms of the Omnibus Plan, as a result of the Separation, the Compensation Committee approved the adjustment to outstanding unvested restricted stock unit awards granted under the Omnibus Plan, in order to preserve the intrinsic aggregate value of such award prior to the Separation. The Compensation Committee approved this equitable adjustment based on a ratio determined by comparing the average pre-Separation price of a share of NiSource Common Stock for three days prior to the Separation with the NiSource share price traded on a when issued basis for the same three day period (the “Valuation Adjustment”). No Valuation Adjustment was made to the awards held by Messrs. Skaggs, Smith and Kettering which were forfeited upon their termination of employment from the Company.

 

 

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(3)

These amounts represent the incremental number of restricted stock unit awards awarded in July 2015 (following the Separation) in connection with promotions of Messrs. Hamrock and Stanley and Ms. Sistovaris. As a result, the total number of restricted stock units awarded in 2015 to each of these executives is as follows: Mr. Hamrock 121,830; Mr. Stanley, 62,149; and Ms. Sistovaris 36,756.

 

(4)

Messrs. Skaggs, Smith and Kettering forfeited their restricted stock unit awards upon their termination of employment from the Company.

Special 2015 Restricted Stock Unit Award for Mr. Brown.    In March 2015, the Compensation Committee approved a special award of 11,417 restricted stock units for Mr. Brown upon commencement of his employment in order to compensate him for the loss of equity compensation from his prior employer as a result of joining the Company. This award was adjusted to 31,404 restricted stock units based on the Valuation Adjustment in order to preserve the pre-Separation intrinsic value of the grant as discussed in footnote (2) to the table above. One-third of Mr. Brown’s special award will vest on the first anniversary of his employment and the two-thirds will vest on the second anniversary of this employment.

2013 and 2014 Performance Share Awards.    In 2013 and 2014, the Compensation Committee awarded grants of performance shares to each of the Named Executive Officers. Under the original terms of the awards, vesting of the performance shares was dependent upon the Company meeting certain performance measures over the three-year performance period for each award and the executive’s continued employment through February 29, 2016, and February 28, 2017, for the 2013 and 2014 awards, respectively. In connection with the Separation, the Compensation Committee approved adjustments to the performance period and the performance targets for the 2013 and 2014 performance share awards through the Separation Date. The Compensation Committee used the underlying financial plan to determine the June 30, 2015 revised performance targets relative to the original net operating earnings per share and funds from operations performance targets and determined that the appropriate adjustments for the targets for the 2013 and 2014 performance share awards should equal 84.5% and 50% of the original targets, respectively. Relative Total Shareholder Return for the 2013 and 2014 performance share awards was measured as of March 31, 2015. The Compensation Committee reviewed performance results through April 2015 for the financial measures and forecasted performance for May and June and determined that the 2013 performance shares would be paid out based on above target performance of 188% through two and one-half years of the performance period and 50% of the 2014 performance shares would be paid out based on above target performance of 170% through one-half of the performance period and the remaining 50% of the 2014 performance shares would be paid out in the form of restricted stock units. The Compensation Committee determined that these adjustments were appropriate based upon performance through two and one half years of the three year performance period for the 2013 awards and performance through one and one half years of the three year performance period for the 2014 awards. The 2013 and 2014 performance share awards were then converted to restricted stock units and these restricted stock units were adjusted based on the Valuation Adjustment described above. These awards will remain subject to the service-based vesting conditions included in the original terms of the awards. The performance measures, their weightings and results for the 2013 and 2014 performance share awards, as considered by the Compensation Committee, were:

 

Performance Measure(1)   Weight    

Trigger    

(50% Award)    

  Target    
(100% Award)     
 

Stretch    

(200% Award)    

 

Actual  

Results(2)  

2013 Performance Share Awards

                   

Cumulative Net Operating Earnings Per Share

  40%     $4.02       $4.15       ³$4.44       $4.35  

Cumulative Funds from Operations

  40%     $2,816M       $3,114M       ³$3,619M       $3,702M  

Relative Total Shareholder Return (RTSR)(3)

  20%     40-49th    
Percentile    
  50th    

Percentile    

  100th    

Percentile    

  100th  

Percentile  

Overall Attainment Level

                  188%  

 

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Performance Measure(1)   Weight  

Trigger

(50% Award)

  Target
(100% Award)
 

Stretch

(200% Award)

 

Actual

Results(2)

2014 Performance Share Awards

                   

Cumulative Net Operating Earnings Per Share

  50%   $2.56   $2.64   ³$2.83   $2.77

Relative Total Shareholder Return (RTSR)(4)

  50%   40-49th
Percentile
  50th

Percentile

  100th

Percentile

  86th

Percentile

Overall Attainment Level

                  170%

 

(1)

For performance between two performance levels (for example, between target and stretch goals), the long-term incentive award opportunity is determined by interpolation and is expressed as a percentage of the target opportunity except that there is no interpolation between goals below the 50th percentile for the RTSR metric.

 

(2)

Performance results for the financial measures were based on actual performance results through April 2015 and forecasted performance for May and June 2015. The RTSR result was measured as of March 31, 2015.

 

(3)

The peer group of companies selected by the Compensation Committee for the purpose of determining RTSR for the 2013 awards was comprised of 36 energy companies, including 16 companies from the Comparative Group that the Compensation Committee looked to for purposes of 2013 compensation decision making.

 

(4)

The peer group of companies selected by the Compensation Committee for the purpose of determining RTSR for the 2014 awards was comprised of 36 energy companies, including 15 companies from the Comparative Group that the Compensation Committee looked to for purposes of 2014 compensation decision making.

Based on the Company’s performance, as described above, the 2013 and 2014 performance shares were converted to restricted stock units and adjusted based on the Valuation Adjustment described above, and payable one-for-one in shares of the Company’s common stock, as set forth in the table below:

 

Named Executive Officer  

2013 Converted

    Restricted Stock Units(1)    

   

2014 Converted

    Restricted Stock Units(2)    

 

Joseph Hamrock

    117,085                     75,870                 

Donald E. Brown(3)

    —                          —                    

Jim L. Stanley

    117,085                     75,870                 

Carrie J. Hightman

    146,353                     81,288                 

Violet Sistovaris

    63,419                      37,935                 

Robert C. Skaggs, Jr.(4)

    —                          —                    

Stephen P. Smith(4)

    —                          —                    

Glen L. Kettering(4)

    —                          —                    

 

  (1)

These restricted stock units fully vested on February 29, 2016.

 

  (2)

These restricted stock units will vest on February 28, 2017, subject to the Named Executive Officer’s continued employment.

 

  (3)

Mr. Brown was not employed by the Company at the time of the 2013 or 2014 grants of performance share awards.

 

  (4)

Messrs. Skaggs, Smith and Kettering forfeited their 2013 and 2014 performance share awards in connection with their July 2015 terminations of employment from the Company.

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors (the “Committee”) has furnished the following report to the stockholders of the Company in accordance with rules adopted by the Securities and Exchange Commission.

The Committee states that it reviewed and discussed with management the Company’s Compensation Discussion and Analysis contained in this Proxy Statement.

Based upon the review and discussions referred to above, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

This report is submitted on behalf of the members of the Compensation Committee:

Compensation Committee

Richard A. Abdoo, Chair

Aristides S. Candris

Deborah A. Henretta

March  8, 2016

ASSESSMENT OF RISK

The Company annually assesses whether its incentive compensation programs are constructed in a manner that might induce participant behaviors that could cause the Company material harm. An assessment was performed in 2015, and the Company concluded that the incentive components of our program for senior executives are not reasonably likely to have a material adverse effect on the Company, for reasons that include the following:

 

   

Our operations are highly regulated at both the federal and state levels and, therefore, are subject to continuous oversight by independent bodies.

 

   

Policies are in place to recoup compensation in the event of certain acts of misconduct and prohibit hedging by our senior executive officers.

 

   

Our compensation program is evaluated annually for its effectiveness and alignment with the Company’s goals without promoting excessive risk.

 

   

Senior executive compensation is weighted toward long-term incentives, thereby providing senior executives with an ongoing, multi-year focus of attention.

 

   

The performance measures that are the basis of incentive awards are approved each year by an independent committee of the Board.

 

   

The long-term incentive equity awards to senior executives generally have three-year vesting periods and are performance based so that their upside potential and downside risk are aligned with that of our stockholders and promote long-term performance over the vesting period.

 

   

The senior executive officers are subject to stock ownership and retention guidelines that are independently set by the Board which are designed for senior executives to assume financial risk that is coincident with our stockholders.

 

   

The senior executive officers’ performance incentive measures include safety metrics in order to encourage a strong culture of safety.

 

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Table of Contents

COMPENSATION OF EXECUTIVE OFFICERS

Summary.    The following table summarizes compensation for services to NiSource and its affiliates earned by or paid to each of the Named Executive Officers during 2015. Information is also provided for 2014 and 2013 if the Named Executive Officer was included in the Company’s Summary Compensation Table for those years.

2015 Summary Compensation Table

 

                 
Name and Principal Position   Year    

Salary

    ($)(1)

   

Bonus

    ($)(2)

   

Stock
Awards

    ($)(3)

   

Non-equity
Incentive

Plan
Compensation

($)(4)

 

Change in
Pension

Value and
Non-qualified
Deferred
Compensation
Earnings

    ($)(5)

 

All Other
Compensation

    ($)(6)

 

Total

($)

 

Joseph Hamrock

    2015        650,000        5,750        1,764,675         594,250       59,572     3,074,247   

President and CEO

    2014        487,500        400,000        633,801         357,500       48,930     1,927,731   
    2013        461,667               532,540         418,535       46,529     1,459,271   

Donald E. Brown

    2015        332,386        103,079        1,189,097         221,921     108,405     1,954,888   

Executive Vice President, CFO
and Treasurer

                                        
                                        

Jim L. Stanley

    2015        512,500               904,605         349,281     307,937     2,074,323   

Executive Vice President and
Chief Operating Officer

                                        
                                        

Carrie J. Hightman

    2015        490,000               690,473         346,920     84,693     45,540     1,657,626   

Executive Vice President and
Chief Legal Officer

    2014        483,750        300,000        679,059         408,660     62,395     47,520     1,981,384   
    2013        475,000               665,663         384,750     55,232     49,274     1,629,919   

Violet Sistovaris

    2015        360,000               533,252         239,100     98,188   36,166     1,266,706   

Executive Vice President,
NIPSCO

                                        
                                        

 

Robert C. Skaggs, Jr(7)

    2015        490,000               3,452,967          —(8)   388,949     30,728     4,362,644   

Former President and Chief

Executive Officer

    2014        946,667        1,785,000        3,395,356      1,715,000   357,545     82,471     8,282,039   
    2013        900,000               2,662,652      1,224,000   306,743     85,625     5,179,020   

 

Stephen P. Smith(7)

    2015        300,000               1,381,195          —(8)   105,424     15,500     1,802,119   

Former Executive Vice President
and CFO

    2014        589,583        750,000        1,222,343         579,600     80,415     52,993     3,274,934   
    2013        575,000               1,109,438         539,350     70,691     52,436     2,346,915   

 

Glen L. Kettering(7)

    2015        250,000               736,629          —(8)     109,528   221,213     1,317,370   

Former Executive Vice President
and Group CEO

    2014        448,333        600,000        908,914         426,000     109,019   299,848     2,792,114   
    2013        340,000        500,000        443,775         275,400     120,229     68,226     1,747,630   

 

 

(1)

Salary deferred at the election of the Named Executive Officer is reported in the category and year in which such salary was earned.

 

(2)

This column shows discretionary bonus payouts that are in addition to any amounts paid under the Incentive Plan described in footnote (4) to this table. These bonus amounts consist of a sign-on bonus of $75,000 and discretionary bonus of $28,079 to Mr. Brown and a $5,750 discretionary payment to Mr. Hamrock as described in the Compensation Discussion and Analysis — Compensation Committee Actions Related to 2015 Compensation — “2015 Discretionary Payments to Mr. Brown and Mr. Hamrock.”

 

(3)

For a discussion of stock awards granted in 2015, please see the Compensation Discussion and Analysis — “LTIP Awards,” above and the Grants of Plan-Based Awards Table. This column shows the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of the restricted stock units granted in 2015 based on the average price of our common stock on the grant date and less the present value of any dividends not received in the vesting period. For information on the valuation assumptions used in these computations, see Note 13 to our consolidated financial statements included in our 2015 Annual Report on Form 10-K.

 

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Table of Contents
(4)

For 2015, the total Incentive Plan amount for each of the Named Executive Officers reflected in the column entitled Non-Equity Incentive Plan Compensation was based upon the sum of two six-month performance periods, with the same corporate performance measures (but excluding business unit measures for the second half of 2015), but different performance goals in the second half. For more information regarding 2015 corporate and first half business unit performance, second half performance goals, Incentive Plan payout opportunities for the Named Executive Officers and the payout amounts, please see Compensation Discussion and Analysis — “Compensation Committee Actions Related to 2015 Compensation — Annual Performance-Based Cash Incentives” and the discussion on the pages that follow.

 

(5)

This column shows the change in the present value of each pension eligible Named Executive Officer’s accumulated benefits under our tax-qualified pension plans and the non-qualified Pension Restoration Plan as a result of annual pay and interest credits to their account balance under the plans as described in the narrative to the Pension Benefits Table. Messrs. Hamrock, Brown and Stanley are not eligible to participate the Company’s pension plans. For a description of these plans and the basis used to develop the present values, see the Pension Benefits Table and accompanying narrative. No earnings on deferred compensation are shown in this column, since no earnings were above market or preferential.

 

(6)

The table below provides a breakdown of the amounts shown in the “All Other Compensation” column for each Named Executive Officer in 2015.

 

     Other Compensation         
Name  

Perquisites &

Personal

Benefits(a)

($)

   

Tax

Gross-Ups(b)

($)

   

Company

Contributions
To 401(k)

 

Plan(c)

($)

   

Company

Contributions

To Savings

Restoration

 

Plan(d)

($)

   

Total

($)

 

Joseph Hamrock

    14,072              —              18,550               26,950              59,572   

Donald E. Brown

    53,502              34,960          15,900               4,043              108,405   

Jim L. Stanley

    191,896              80,166          18,550               17,325              307,937   

Carrie J. Hightman

    11,240              —              18,550               15,750              45,540   

Violet Sistovaris

    10,966              —              18,550               6,650              36,166   

Robert C. Skaggs, Jr.

    15,178              —              15,550               (f)                30,728   

Stephen P. Smith

    (e)                —              15,500               (f)                15,500   

Glen L. Kettering

    206,213              —              15,000               (f)                221,213   

 

 

  (a)

All perquisites are valued based on the aggregate incremental cost to the Company, as required by the rules of the SEC. Please see Compensation Discussion and Analysis — “Other Compensation and Benefits — Perquisites” above for additional information about the perquisites provided by the Company to its Named Executive Officers. The perquisite amounts listed include financial planning and tax services as follows: Mr. Hamrock, $14,072; Mr. Brown, $4,942; Mr. Stanley, $11,857; Ms. Hightman, $11,240; Ms. Sistovaris, $10,858 and Mr. Skaggs $8,153; Mr. Kettering, $6,823; travel expenses as follows: Mr. Stanley, $83,940; Mr. Skaggs $7,025; and Mr. Kettering, $199,259; living expense as follows: Mr. Stanley, $6,691; relocation expenses as follows: Mr. Brown, $48,560 and Mr. Stanley, $87,303; and taxable gifts as follows: Ms. Sistovaris $108; and Mr. Kettering, $131; personal commercial flight as follows: Mr. Stanley, $2,105. The travel expense amounts provided for Mr. Stanley and Mr. Kettering were calculated by the Company based on the incremental variable operating costs associated with the use of the Company-leased aircraft to commute to the executive’s office, which includes an hourly use rate, fuel rate and other flight-related fees and expenses. Executives are responsible for all taxes associated with the use of the Company aircraft for this purpose. The relocation expense amounts provided are the actual amounts paid for services required to complete a household goods move.

 

  (b)

Messrs. Brown and Stanley each received compensation of $34,960 and $80,166 respectively for taxes in connection with Company-paid relocation expenses, consistent with Company practice for all employees who receive Company-paid relocation expenses.

 

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  (c)

This column reflects Company matching contributions and profit sharing contributions made on behalf of each of the Named Executive Officers and a Company non-elective contribution of 3% of compensation on behalf of Mr. Hamrock, Mr. Brown and Mr. Stanley to the 401(k) Plan. The 401(k) Plan is a tax-qualified defined contribution plan, as described above under Compensation Discussion and Analysis — “Other Compensation and Benefits — Savings Programs.”

 

  (d)

This column reflects Company matching contributions and profit sharing contributions made on behalf of all eligible Named Executive Officers and a Company non-elective contribution of 3% of compensation on behalf of Mr. Hamrock, Mr. Brown and Mr. Stanley in excess of IRS limits to the Savings Restoration Plan. The Savings Restoration Plan is a non-qualified defined contribution plan, as described above under Compensation Discussion and Analysis — “Other Compensation and Benefits — Savings Programs,” and in the narrative following the 2015 Non-qualified Deferred Compensation Table.

 

  (e)

Pursuant to SEC rules, perquisites and personal benefits are not reported for any Named Executive Officer for whom such amounts were less than $10,000 in aggregate for 2015.

 

  (f)

Messrs. Skaggs, Smith and Kettering were not employed by the Company on December 31, 2015, and thus were not eligible to receive Company contributions for 2015 under the terms of the Savings Restoration Plan.

 

(7)

All data shown for Messrs. Skaggs, Smith and Kettering was earned, paid or granted in the first half of 2015, prior to the Separation. In connection with their terminations of employment from the Company at the time of Separation, the 2015 equity grants to Messrs. Skaggs, Smith and Kettering were forfeited, as detailed in the Compensation Discussion and Analysis — “LTIP Awards.”

 

(8)

Messrs. Skaggs, Smith and Kettering were not eligible to receive an Incentive Plan payout for 2015, because they were not employed with the Company on December 31, 2015, as described in footnote (1) to the table included in the Compensation Discussion and Analysis — “Pre-Separation Annual Performance-Based Incentive Ranges.”

 

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Table of Contents

2015 Grants of Plan-Based Awards

The following table sets forth information concerning plan-based awards granted under the Omnibus Plan to the Named Executive Officers in 2015. The grants reported in the table that occurred prior to the Separation reflect the number of shares subject to the Awards on the grant date and do not reflect the adjustments to the awards in connection with the Separation. No performance shares were granted in 2015. Please see the Compensation Discussion and Analysis for further information regarding the impact of the Separation on the Company’s equity awards.

 

              

Estimated Future Payouts
Under

Non-Equity Incentive

Plan Awards(1)

   

Estimated Future Payouts
Under

Equity Incentive

Plan Awards

 

All Other Stock
Awards

Number

of Shares of

Stock or Units

(#)

 

Grant Date Fair Value
of Stock and
Option Awards

($)(2)

Name  

Grant

Date

 

Approval

Date

  Threshold
($)
   

Target

($)

    Maximum
($)
    Threshold
(#)
 

Target

(#)

  Maximum
(#)
   

Joseph Hamrock

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

62,500

 

  

 

 

 

 

162,500

 

  

 

 

 

 

262,500

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Post-Separation

 

 

Post-Separation

 

 

 

 

160,000

 

  

 

 

 

 

400,000

 

  

 

 

 

 

660,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

01/29/2015

 

 

01/29/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

22,894(3)(4)

 

 

   920,651

 

 

07/13/2015

 

 

06/02/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

58,858(5)     

 

 

   844,024

Donald E. Brown

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

26,847

 

  

 

 

 

 

64,432

 

  

 

 

 

 

102,017

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Post-Separation

 

 

Post-Separation

 

 

 

 

56,250

 

  

 

 

 

 

135,000

 

  

 

 

 

 

213,750

 

  

 

 

 

 

 

 

 

 

 

 

 

 

04/06/2015

 

 

04/06/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

16,790(3)(4)

 

 

   700,596

 

 

04/06/2015

 

 

04/06/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

11,417(6)     

 

 

   488,501

Jim L. Stanley

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

62,500

 

  

 

 

 

 

162,500

 

  

 

 

 

 

262,500

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Post-Separation

 

 

Post-Separation

 

 

 

 

78,750

 

  

 

 

 

 

196,875

 

  

 

 

 

 

315,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

01/29/2015

 

 

01/29/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

18,315(3)(4)

 

 

   736,512

 

 

07/13/2015

 

 

06/02/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

11,772(5)    

 

 

   168,093

Carrie J. Hightman

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

61,250

 

  

 

 

 

 

147,000

 

  

 

 

 

 

232,750

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Post-Separation

 

 

Post-Separation

 

 

 

 

61,250

 

  

 

 

 

 

147,000

 

  

 

 

 

 

232,750

 

  

 

 

 

 

 

 

 

 

 

 

 

 

01/29/2015

 

 

01/29/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

17,170(3)(4)

 

 

   690,473

Violet Sistovaris

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

32,000

 

  

 

 

 

 

80,000

 

  

 

 

 

 

128,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Post-Separation

 

 

Post-Separation

 

 

 

 

50,000

 

  

 

 

 

 

130,000

 

  

 

 

 

 

210,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

01/29/2015

 

 

01/29/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  8,013(3)(4)

 

 

   322,239

 

 

07/13/2015

 

 

06/02/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

14,715(5)   

 

 

   211,013

Robert C. Skaggs, Jr.

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

245,000

 

  

 

 

 

 

612,500

 

  

 

 

 

 

980,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

01/29/2015

 

 

01/29/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

85,852(3)(7)

 

 

3,452,967

Stephen P. Smith

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

90,000

 

  

 

 

 

 

210,000

 

  

 

 

 

 

330,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

01/29/2015

 

 

01/29/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

34,341(3)(7)

 

 

1,381,195

Glen L. Kettering

 

 

Pre-Separation

 

 

Pre-Separation

 

 

 

 

62,500

 

  

 

 

 

 

150,000

 

  

 

 

 

 

237,500

 

  

 

 

 

 

 

 

 

 

 

 

 

 

01/29/2015

 

 

01/29/2015

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

18,315(3)(7)

 

 

   736,629

 

 

(1)

The information in the “Threshold,” “Target,” and “Maximum” columns reflects potential payouts based on the performance targets set under the 2015 Incentive Plan. The amounts actually paid appear in the “Non-Equity Incentive Plan Compensation” column of the 2015 Summary Compensation Table. For 2015, the performance year was divided into two six-month performance periods and corresponding metrics: prior to the Separation, shown in the Pre-Separation row, and following the Separation, shown in the Post-Separation row. The amounts reported in the Post-Separation row reflect increases in the base salary and incentive ranges for each Named Executive Officer that assumed additional duties following the Separation. Under the terms of the 2015 Incentive Plan, Messrs. Skaggs, Smith and Kettering were each eligible for an award for the Pre-Separation performance period, but each forfeited his award because he failed to satisfy the service condition for the award since his employment ended in connection with the Separation. For a description of the 2015 Incentive Plan, please see the Compensation Discussion and Analysis — “Annual Performance-Based Cash Incentive Plan” and “Compensation Committee Actions Related to 2015 Compensation — Annual Performance-Based Cash Incentives.”

 

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(2)

Amounts reported in this column represent the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of restricted stock units granted in 2015 based on the average market price of our common stock on the grant date and less the present value of any dividends not received during the vesting period.

 

(3)

Represents the 2015 annual long-term equity awards in the form of service-based restricted stock units. These awards will vest on February 2, 2018, provided the executive continues to be employed by the Company on that date, as described in the Compensation Discussion and Analysis — “LTIP Awards.” These awards were granted on January 29, 2015, except for Mr. Brown’s award, which was granted on April 6, 2015, the date he joined the Company.

 

(4)

Represents number of shares granted prior to the Separation. Outstanding awards at the time of Separation were adjusted to preserve the intrinsic aggregate value of the awards prior to the Separation. The number of shares were adjusted as follows: Mr. Hamrock 62,972; Mr. Brown 46,183; Mr. Stanley 50,377; Ms. Hightman 47,228; and Ms. Sistovaris 22,041.

 

(5)

Represents equity awards in the form of incremental service-based restricted stock units approved prior to the Separation and granted on July 13, 2015, in connection with the assumption of additional responsibilities following the Separation. These awards will vest on February 2, 2018, provided the executive continues to be employed by the Company on that date. For further information regarding these awards, please see the Compensation Discussion and Analysis — “LTIP Awards.”

 

(6)

Represents a special equity grant of service-based restricted stock units awarded upon joining the Company on April 6, 2015, of which 3,767 units (or, 10,362 units, as adjusted for the Separation) will vest on April 6, 2016, and 7,650 units (or, 21,042 units, as adjusted for the Separation) will vest on April 6, 2017, provided Mr. Brown continues to be employed by the Company on the applicable vesting date. For further information regarding these awards, please see the Compensation Discussion and Analysis — “LTIP Awards.”

 

(7)

In connection with their terminations of employment from the Company at the time of the Separation, the 2015 equity grants to Messrs. Skaggs, Smith and Kettering were forfeited.

 

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Outstanding Equity Awards at 2015 Fiscal Year-End

As discussed in the Compensation Discussion and Analysis, the outstanding equity awards of NiSource at the time of the Separation were adjusted to preserve the intrinsic aggregate value of the awards prior to the Separation. The following table sets forth information at fiscal year-end concerning outstanding grants of equity awards to the Named Executive Officers, as adjusted at the time of the Separation. None of the Named Executive Officers has any outstanding options or unvested performance shares as of December 31, 2015.

 

     Option Awards   Stock Awards
Name  

Number of 

Securities

Underlying 

Unexercised 

Options

Exercisable 

(#)

 

Number of 

Securities 

Underlying 

Unexercised 

Options

Unexercisable 

(#)

 

Option 

Exercise 

Price 

($)

 

Option 

Expiration 
Date

 

 Number of

 Shares or
 Units of
 Stock That
 Have Not
 Vested

(#)

   

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested

    ($)(1)

   

Equity Incentive 

Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested

(#)

 

Equity
Incentive
Plan Awards
Market or
Payout Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested

($)

Joseph Hamrock

            117,085(2)        2,284,328       
              75,870(3)        1,480,224       
              62,972(4)        1,228,584       
              58,858(5)        1,148,320       

Donald E. Brown

            46,183(4)        901,030       
              31,404(6)        612,692       

Jim L. Stanley

            117,085(2)        2,284,328       
              75,870(3)        1,480,224       
              50,377(4)        982,855       
              11,772(5)        229,672       

Carrie J. Hightman

            146,353(2)        2,855,347       
              81,288(3)        1,585,929       
              47,228(4)        921,418       

Violet Sistovaris

            63,419(2)        1,237,305       
              37,935(3)        740,112       
              22,041(4)        430,020       
                      14,715(5)        287,090           

Robert C. Skaggs, Jr(10)

            176,157(7)        3,436,823       
              128,412(8)        2,505,318       
              80,114(9)        1,563,024       

Stephen P. Smith(10)

                         

Glen L. Kettering(10)

                         

 

(1)

Amounts shown represent the market value of the unvested restricted stock units held by the Named Executive Officers based on the closing price of our common stock on December 31, 2015, which was $19.51 per share.

 

(2)

Represents restricted stock units received following the conversion of the 2013 Performance Share Awards into restricted stock units. These awards vested on February 29, 2016.

 

(3)

Represents restricted stock units received following the conversion of the 2014 Performance Share Awards into restricted stock units. These awards vest on February 28, 2017, provided the executive continues to be employed by the Company on that date.

 

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(4)

Represents the 2015 annual long-term equity awards in the form of service-based restricted stock units. These awards vest on February 2, 2018, provided the executive continues to be employed by the Company on that date, as described in the Compensation Discussion and Analysis — “LTIP Awards.” These awards were granted on January 29, 2015, except for Mr. Brown’s award, which was granted on April 6, 2015, the date he joined the Company.

 

(5)

Represents equity awards in the form of service-based restricted stock units granted on July 13, 2015, in connection with the assumption of additional responsibilities following the Separation. These awards vest on February 2, 2018, provided the executive continues to be employed by the Company on that date, as described in the Compensation Discussion and Analysis — “LTIP Awards.”

 

(6)

Represents a special equity award of service-based restricted stock units granted upon joining the Company on April 6, 2015, of which 10,362 units will vest on April 6, 2016, and 21,042 units will vest on April 6, 2017, provided Mr. Brown continues to be employed by the Company on the applicable vesting date, for the reasons explained in the Compensation Discussion and Analysis — “LTIP Awards.”

 

(7)

Award shown represents restricted stock units granted on March 24, 2009, the vesting of which was delayed under the terms of Mr. Skaggs’ award agreement due to the limitations on deductibility under Section 162(m) of the Code. Because he is no longer an employee and the award is deductible as compensation in 2016, the award was paid in shares of common stock on January 4, 2016.

 

(8)

Award shown represents restricted stock units granted on January 22, 2010, the vesting of which was delayed under the terms of Mr. Skaggs’ award agreement due to limitations on deductibility under Section 162(m) of the Code. Because he is no longer an employee and the award is deductible as compensation in 2016, the award was paid in shares of common stock on January 4, 2016.

 

(9)

Award shown represents restricted stock units granted on March 23, 2010, the vesting of which was delayed under the terms of Mr. Skaggs’ award agreement due to limitations on deductibility under Section 162(m) of the Code. Because he is no longer an employee and the award is deductible as compensation in 2016, the award was paid in shares of common stock on January 4, 2016.

 

(10)

All other equity awards were forfeited in connection with Messrs. Skaggs, Smith and Kettering’s termination of employment at the time of the Separation, with the exception of Mr. Skaggs’ restricted stock units for which vesting was delayed as noted in above footnotes (7), (8), and (9), as described in the Compensation Discussion and Analysis — “LTIP Awards.”

2015 Option Exercises and Stock Vested

The following table sets forth information on the number of shares vested and the value received upon vesting during 2015 with respect to our Named Executive Officers. None of the Named Executive Officers exercised any stock options during 2015.

 

     Option Awards   Stock Awards
Name  

Number of Shares  
Acquired on Exercise  

(#)

 

Value Realized on  
Exercise  

($)

 

Number of Shares
  Acquired on Vesting  

    (#)(1)

 

  Value Realized on  

Vesting

    ($)(2)

Joseph Hamrock