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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.            )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

Check the appropriate box:
o   Preliminary Proxy Statement
o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý   Definitive Proxy Statement
o   Definitive Additional Materials
o   Soliciting Material under §240.14a-12

 

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DUKE ENERGY CORPORATION

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):
ý   No fee required.
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Table of Contents

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  Welcome to the Duke Energy
Annual Meeting of Shareholders

March 24, 2016

Dear Fellow Shareholders:

I am pleased to invite you to our Annual Meeting of Shareholders to be held on Thursday, May 5, 2016, at 10:00 a.m. in the O.J. Miller Auditorium located at 526 South Church Street in Charlotte, North Carolina.

As explained in the enclosed proxy statement, at this year's meeting you will be asked to vote (i) for the election of directors, (ii) for the ratification of the selection of the independent registered public accounting firm, (iii) for the approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation, (iv) against two shareholder proposals, and (v) to consider any other business that may properly come before the meeting.

This year's proxy statement details the many steps we have undertaken to expand our strong corporate governance practices. In 2015, we undertook a comprehensive approach to engagement in an effort to better understand investor perspectives on various matters, including executive compensation and board oversight of critical issues facing Duke Energy. We reached out to holders of approximately 33 percent of our shares outstanding and spoke with holders of approximately 25 percent of our shares outstanding. Based in part on the feedback from shareholders, we have made several positive changes to our corporate governance practices, including the adoption of proxy access. These steps are in addition to the many exciting developments and opportunities Duke Energy has been involved in, which will be detailed in the 2015 Annual Report.

Your vote is important – exercise your shareholder right and vote your shares now.

Please turn to page 3 for the instructions on how you can vote your shares over the Internet, by telephone or by mail. It is important that all Duke Energy shareholders, regardless of the number of shares owned, participate in the affairs of the Corporation. At Duke Energy's 2015 Annual Meeting of Shareholders, approximately 84 percent of the Corporation's outstanding shares were represented in person or by proxy.

Thank you for your continued investment in Duke Energy.

Sincerely,

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Lynn J. Good
Chairman, President and Chief Executive Officer


Table of Contents

TABLE OF CONTENTS

PROXY SUMMARY   4

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

11

PROPOSAL 1:

 

ELECTION OF DIRECTORS

 

12

INFORMATION ON THE BOARD OF DIRECTORS

 

19

REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

 

27

DIRECTOR COMPENSATION

 

30

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

32

PROPOSAL 2:

 

RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY CORPORATION'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2016

 

34

REPORT OF THE AUDIT COMMITTEE

 

35

PROPOSAL 3:

 

ADVISORY VOTE TO APPROVE DUKE ENERGY CORPORATION'S NAMED EXECUTIVE OFFICER COMPENSATION

 

36

REPORT OF THE COMPENSATION COMMITTEE

 

37

COMPENSATION DISCUSSION AND ANALYSIS

 

37

EXECUTIVE COMPENSATION

 

53

SHAREHOLDER PROPOSALS

 

68

PROPOSAL 4:

 

SHAREHOLDER PROPOSAL REGARDING ELIMINATION OF SUPERMAJORITY VOTING PROVISIONS IN DUKE ENERGY CORPORATION'S CERTIFICATE OF INCORPORATION

 

68

PROPOSAL 5:

 

SHAREHOLDER PROPOSAL REGARDING LOBBYING EXPENSE DISCLOSURE

 

70

FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING OF SHAREHOLDERS

 

72

OTHER INFORMATION

 

75

APPENDIX A

 

77

APPENDIX B

 

78

DUKE ENERGY – 2016 Proxy Statement    

Table of Contents

PARTICIPATE IN THE FUTURE OF DUKE ENERGY; CAST YOUR VOTE NOW

It is very important that you vote to play a part in the future of Duke Energy. New York Stock Exchange ("NYSE") rules state that if your shares are held through a broker, bank or other nominee, they cannot vote on your behalf on nondiscretionary matters.

Eligibility to Vote (page 72)

You can vote if you were a shareholder of record at the close of business on March 7, 2016.

Vote Now

Even if you plan to attend this year's meeting, it is a good idea to vote your shares before the meeting in the event your plans change. Whether you vote by Internet, by telephone or by mail, please have your proxy card or voting instruction form in hand and follow the instructions.


By Internet

 

By telephone

 

By mailing your
proxy card


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Visit 24/7
www.proxyvote.com
  Dial toll-free 24/7
1-800-690-6903
or by calling the
number provided
by your broker, bank
or other nominee if your shares are not
registered in your name
  Cast your ballot,
sign your proxy card
and send free of postage

 

 

 

 

 

Visit Our Website


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Visit our website
www.duke-energy.com/investors/news-events.asp
 

Review and download this proxy statement and our annual report

Listen to a live audio stream of the meeting

DUKE ENERGY – 2016 Proxy Statement    3

Table of Contents

PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider. You should read the entire proxy statement carefully before voting. Page references ("XX") are supplied to help you find further information in this proxy statement.

Voting Matters (page 11)

 
   
  More
information

  Board
recommendation

  Broker non-votes
  Abstentions
  Votes
required
for approval

 
PROPOSAL 1   Election of directors   Page 12   FOR each nominee   Do not count   Do not count   Majority of votes cast, with a resignation policy

 
PROPOSAL 2   Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent registered public accounting firm for 2016   Page 34   FOR   Vote for   Vote against   Majority of shares represented

 
PROPOSAL 3   Advisory vote to approve Duke Energy Corporation's named executive officer compensation   Page 36   FOR   Do not count   Vote against   Majority of shares represented

 
PROPOSAL 4   Shareholder proposal regarding elimination of supermajority voting provisions in Duke Energy Corporation's Certificate of Incorporation   Page 68   AGAINST   Do not count   Vote against   Majority of shares represented

 
PROPOSAL 5   Shareholder proposal regarding lobbying expenses disclosure   Page 70   AGAINST   Do not count   Vote against   Majority of shares represented

 
4    DUKE ENERGY – 2016 Proxy Statement

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2015 Business Highlights

During 2015, Duke Energy turned the corner to the future – we have (i) resolved or made strong headway on operational challenges, (ii) realigned our portfolio to focus on growth in our core businesses, and (iii) charted The Road Ahead, a map for long-term success that will benefit our customers, communities and investors for the next decade and well beyond. All the while, we remain focused on our commitment to power the lives of our customers on a 24/7 basis.

First, safety, which is our top priority. Following a challenging 2014, we reduced OSHA-reportable employee safety incidents by 20 percent and our total incident case rate by 30 percent over 2014, making Duke Energy a top safety performer in the industry.

We also reduced reportable environmental events by 50 percent and continued to advance our efforts to permanently close our coal ash basins in ways that protect people and the environment.

We are completing our multi-year transition to a higher quality, more stable business mix by focusing on our core regulated and highly-contracted businesses. To that end, we have made excellent progress to expand our natural gas platform and capabilities by agreeing to acquire Piedmont Natural Gas Company, Inc. We also completed the sale of our merchant Midwest Commercial Generation business, reducing our exposure to volatile power markets. Most recently, in early 2016, we announced our intent to exit the Latin American generation business, which has experienced returns that are inconsistent with our commitment to provide predictable, stable earnings and cash flows to our investors.

We are making significant investments to improve the customer experience and to continue making our power generation portfolio less carbon-intensive. We are investing in a more flexible, resilient electric grid to make power outages increasingly rare and service restoration faster. We are also shifting our generation mix to more natural gas and renewable energy, complementing our carbon-free nuclear fleet.

Our total shareholder return ("TSR") was negative 10.8 percent in 2015, following a very strong year in 2014 when the total return was 26.4 percent. The total shareholder return of the Philadelphia Utility Index (UTY) was negative 6.3 percent in 2015, compared to 28.9 percent in 2014.

During 2015, we increased the level of growth in the dividend payment to our shareholders to approximately four percent, reflecting our confidence in the strength of our core business. This is the eighth consecutive year of annual dividend growth. It also marked the 89th consecutive year that Duke Energy has paid a quarterly cash dividend on its common stock, a record we expect to continue for shareholders, who rely on a steady and growing dividend.

Board Representation

CHART

DUKE ENERGY – 2016 Proxy Statement    5

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Board Nominees (page 12)

 
   
   
   
  Independent (Yes/No)    
   
 
   
  Director since
   
  Committee Memberships
  Other Public
Company Boards

Name
  Age
  Occupation
  Yes
  No
             

Michael J. Angelakis

  51   2015   Chairman and Chief Executive Officer, Atairos Management, L.P.   ü    

Audit

Finance and Risk Management

 

Hewlett Packard Enterprise

Michael G. Browning
Independent Lead Director

  69   2006   Chairman, Browning Consolidated, LLC   ü      

Audit

Corporate Governance

Finance and Risk Management

 

None

             

Daniel R. DiMicco

  65   2007   Chairman Emeritus, Retired President and Chief Executive Officer, Nucor Corporation   ü    

Corporate Governance

Nuclear Oversight

 

None

John H. Forsgren

  69   2009   Retired Vice Chairman, Executive Vice President and Chief Financial Officer, Northeast Utilities   ü      

Finance and Risk Management

Nuclear Oversight

 

The Phoenix Companies, Inc.

             

Lynn J. Good
Chairman


 
56   2013   Chairman, President and Chief Executive Officer, Duke Energy Corporation     GRAPHIC  

None

 

The Boeing Company

Ann Maynard Gray

  70   1997   Retired Vice President, ABC, Inc. and President, Diversified Publishing Group, ABC, Inc.   ü      

Compensation

Corporate Governance

Finance and Risk Management

 

The Phoenix Companies, Inc.

             

John T. Herron

  62   2013   Retired President, Chief Executive Officer and Chief Nuclear Officer, Entergy Nuclear   ü    

Nuclear Oversight

Regulatory Policy and Operations

 

None

James B. Hyler, Jr.

  68   2012   Consultant, Investors Management Corporation   ü      

Audit

Finance and Risk Management

Regulatory Policy and Operations

 

None

             

William E. Kennard

  59   2014   Non-Executive Chairman, Velocitas Partners, LLC   ü    

Corporate Governance

Finance and Risk Management

Regulatory Policy and Operations

 

AT&T Inc.

Ford Motor Company

MetLife, Inc.

E. Marie McKee

  65   2012   Retired Senior Vice President, Corning Incorporated   ü      

Audit

Compensation

Corporate Governance

 

None

             

Charles W. Moorman IV

  63   2016   Retired Chairman and Chief Executive Officer, Norfolk Southern Corporation   ü    

Nuclear Oversight

 

Chevron Corporation

Carlos A. Saladrigas

  67   2012   Chairman, Regis HR Group, and Chairman, Concordia Healthcare Holdings, LLC   ü      

Audit

Compensation

Regulatory Policy and Operations

 

Advance Auto Parts, Inc.

6    DUKE ENERGY – 2016 Proxy Statement

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Corporate Governance Highlights (page 27)

   
ü   Ability for shareholders to nominate directors through proxy access   2015
Corporate Governance
Enhancement
ü   Independent Lead Director with clearly defined role and responsibilities    
   
ü   Majority voting for directors, with mandatory resignation policy and plurality carve-out for contested elections  
ü   Robust shareholder engagement program    
   
ü   Annual Board, committee and director assessments    
ü   Ability for shareholders to take action by less than unanimous written consent    
   
ü   Ability for shareholders to call a special shareholder meeting  
ü   Annual election of directors    
   
ü   Independent Board committees    
ü   No poison pill    

Shareholder Engagement

As part of Duke Energy's commitment to corporate governance, we have instituted an engagement program to discuss and obtain feedback from our shareholders on our corporate governance and executive compensation practices. During the fall of 2015, the Corporation reached out to holders of approximately 33 percent of our shares and met with the holders of approximately 25 percent of our shares to discuss, among other issues, board structure, director refreshment and executive compensation, as well as the shareholder proposals that were voted on at the 2015 Annual Meeting of Shareholders (the "2015 Annual Meeting"), including a shareholder proposal that requested the Corporation allow shareholders the right to nominate directors on the Corporation's proxy materials, known as "proxy access." A more complete discussion of our corporate governance engagement program and proxy access is included on page 21.


Duke Energy Board of Directors

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From left to right: Jim Hance, Jr. (Retiring), Ann Maynard Gray, Jim Hyler, Jr., Jim Rhodes (Retiring), Dan DiMicco, John Forsgren, Carlos Saladrigas, Lynn Good, John Herron, Marie McKee, Harris DeLoach, Jr. (Retiring), William Kennard, Richard Meserve (Retiring), Michael Browning, Charles W. Moorman and Michael Angelakis

DUKE ENERGY – 2016 Proxy Statement    7

Table of Contents

Executive Compensation Highlights (page 37)

Named Executive Officers ("NEOs") (page 37)

Name
  Age
  Occupation
  Since
  Previous occupation
       
Lynn J. Good   56   Chairman, President and Chief Executive Officer   2013   Vice Chairman, President and Chief Executive Officer from June 2013 until January 2016; Executive Vice President and Chief Financial Officer from July 2009 until June 2013
Steven K. Young   57   Executive Vice President and Chief Financial Officer   2013   Vice President, Chief Accounting Officer and Controller of Duke Energy from July 2012 until August 2013; Senior Vice President, Chief Accounting Officer and Controller of Duke Energy from December 2006 until July 2012
       
Dhiaa M. Jamil   59   Executive Vice President and President, Generation and Transmission   2015   Executive Vice President and President, Regulated Generation since August 2014; Executive Vice President and President, Duke Energy Nuclear from March 2013 until August 2014; Chief Nuclear Officer of Duke Energy from 2008 until March 2013; Chief Generation Officer of Duke Energy from July 2009 until March 2013
Julia S. Janson   52   Executive Vice President, Chief Legal Officer and Corporate Secretary   2012   President of Duke Energy Ohio and Duke Energy Kentucky from December 2008 until November 2012
       
Lloyd M. Yates   55   Executive Vice President, Market Solutions and President, Carolinas Region   2014   Executive Vice President, Regulated Utilities from December 2012 until August 2014; Executive Vice President, Customer Operations of Duke Energy from July 2012 until December 2012; President and Chief Executive Officer of Duke Energy Progress,  Inc. from July 2007 until June 2012

Our named executive officers for 2015 also include two executives who terminated employment in June 2015: Mr. Marc E. Manly, who previously served as Executive Vice President and President, Commercial Portfolio, and Mr. B. Keith Trent, who previously served as Executive Vice President, Grid Solutions and President, Midwest and Florida Regions.

Principles and Objectives

Our executive compensation program is designed to:

Link pay to performance

Attract and retain talented executive officers and key employees

Emphasize performance-based compensation to motivate executives and key employees

Reward individual performance

Encourage long-term commitment to Duke Energy and align the interests of executives with shareholders

We meet these objectives through the appropriate mix of compensation, including:

Base salary

Short-term incentives

Long-term incentives
8    DUKE ENERGY – 2016 Proxy Statement

Table of Contents

Key Executive Compensation Features

 
ü   Significant stock ownership requirements

ü

 

Stock holding policy
 

ü

 

Incentive compensation tied to a clawback policy

ü

 

Consistent level of severance
 

ü

 

Shareholder approval policy for severance agreements

ü

 

Equity award granting policy
 

ü

 

Independent compensation consultant

ü

 

Annual tally sheets for named executive officers
 

ü

 

Review and consideration of prior year's "say on pay" vote

ü

 

No tax gross-ups
 

ü

 

No hedging or pledging of Duke Energy securities

ü

 

No "single trigger" severance upon a change in control
 

ü

 

No employment agreements except for our Chief Executive Officer

ü

 

Do not encourage excessive or inappropriate risk-taking
 

ü

 

No excessive perquisites
DUKE ENERGY – 2016 Proxy Statement    9

Table of Contents

2015 Executive Total Compensation Mix (page 41)

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10    DUKE ENERGY – 2016 Proxy Statement

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Notice of Annual Meeting
of Shareholders

May 5, 2016

10:00 a.m.
O.J. Miller Auditorium
526 South Church Street
Charlotte, NC 28202

We will convene the Annual Meeting of Shareholders of Duke Energy Corporation on Thursday, May 5, 2016, at 10:00 a.m. in the O.J. Miller Auditorium located at 526 South Church Street in Charlotte, North Carolina.

The purpose of the Annual Meeting is to consider and take action on the following:

1.
Election of directors;
2.
Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent registered public accounting firm for 2016;
3.
Advisory vote to approve Duke Energy Corporation's named executive officer compensation;
4.
A shareholder proposal regarding elimination of supermajority voting provisions in Duke Energy Corporation's Certificate of Incorporation;
5.
A shareholder proposal regarding lobbying expense disclosure; and
6.
Any other business that may properly come before the meeting (or any adjournment or postponement of the meeting).

Shareholders of record as of the close of business on March 7, 2016, are entitled to vote at the Annual Meeting of Shareholders. It is important that your shares are represented at this meeting.

This year we will again be using the Securities and Exchange Commission ("SEC") rule that allows us to provide our proxy materials to our shareholders via the Internet. By doing so, most of our shareholders will only receive a notice of the Annual Meeting of Shareholders (the "notice") containing instructions on how to access the proxy materials via the Internet and vote online, by telephone or by mail. If you would like to request paper copies of the notice, proxy statement and annual report of Duke Energy Corporation (the "proxy materials"), you may follow the instructions on the notice. If you receive paper copies of the proxy materials, we ask you to consider signing up to receive these materials electronically in the future by following the instructions contained in this proxy statement. By delivering proxy materials electronically, we can reduce the consumption of natural resources and the cost of printing and mailing our proxy materials.

Whether or not you expect to be present at the Annual Meeting of Shareholders, please take time to vote now. If you choose to vote by mail, you may do so by marking, dating and signing the proxy card and returning it to us. Please follow the voting instructions that are included on your proxy card. Regardless of the manner in which you vote, we urge and greatly appreciate your prompt response.

Dated: March 24, 2016   By order of the Board of Directors,
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Julia S. Janson
Executive Vice President, Chief Legal Officer and Corporate Secretary
DUKE ENERGY – 2016 Proxy Statement    11

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PROPOSAL 1:     ELECTION OF DIRECTORS

The Board of Directors

The Board of Directors of Duke Energy has nominated the following 12 candidates to serve on the Board. We have a declassified Board of Directors, which means all of the directors are voted on every year at the Annual Meeting of Shareholders.

If any director is unable to stand for election, the Board of Directors may reduce the number of directors or designate a substitute. In that case, shares represented by proxies may be voted for a substitute director. We do not expect that any nominee will be unavailable or unable to serve. The Corporate Governance Committee, comprised of only independent directors, has recommended the following current directors as nominees for director and the Board of Directors has approved their nomination for election. Four of our directors, Mr. DeLoach, Mr. Hance, Dr. Meserve and Dr. Rhodes, will be retiring at our 2016 Annual Meeting of Shareholders in accordance with our Principles for Corporate Governance. Therefore, they are not nominated for re-election.

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12    DUKE ENERGY – 2016 Proxy Statement

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PROPOSAL 1:    ELECTION OF DIRECTORS

Michael J. Angelakis     GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 51
Director of Duke Energy since 2015
Chairman and Chief Executive Officer, Atairos Management, L.P.
  Skills and Qualifications:

Mr. Angelakis' qualifications for election include his management and financial expertise as well as his risk management experience obtained as a senior executive at a large company.

  Committees:

Audit Committee

Finance and Risk Management Committee

Other current public directorships:

Hewlett Packard Enterprise Co.


Mr. Angelakis was Senior Advisor to the Executive Committee at Comcast Corporation from July 1, 2015, until December 31, 2015, and served as Vice Chairman and Chief Financial Officer at Comcast Corporation from March 28, 2007, until August 31, 2015.

Michael G. Browning     GRAPHIC      GRAPHIC
Independent Director Nominee
Independent Lead Director
GRAPHIC   Age: 69
Director of Duke Energy since 2006
Chairman, Browning Consolidated, LLC
  Skills and Qualifications:

Mr. Browning's qualifications for election include his management experience and his knowledge and understanding of Duke Energy's Midwest service territory. Mr. Browning's financial and investment expertise adds a valuable perspective to the Board and its committees.

  Committees:

Audit Committee

Corporate Governance Committee

Finance and Risk Management Committee

Other current public directorships:

None



Mr. Browning has been Chairman of Browning Consolidated, LLC (and its predecessor), a real estate development firm, since 1981 and served as President from 1981 until 2013. He also serves as owner, general partner or managing member of various real estate entities. Mr. Browning is a former director of Standard Management Corporation, Conseco, Inc. and Indiana Financial Corporation. Mr. Browning has served as Independent Lead Director since January 1, 2016.

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DUKE ENERGY – 2016 Proxy Statement    13

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PROPOSAL 1:    ELECTION OF DIRECTORS

Daniel R. DiMicco     GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 65
Director of Duke Energy since 2007
Chairman Emeritus, Retired President and Chief Executive Officer, Nucor Corporation
  Skills and Qualifications:

Mr. DiMicco's qualifications for election include his management experience, including Chief Executive Officer of a Fortune 500 company and successfully operating a company serving many constituencies. In addition, Mr. DiMicco's experience as Chief Executive Officer of a large industrial corporation provides a valuable perspective on Duke Energy's industrial customer class as well as extensive knowledge of the environmental regulations in Duke Energy's Carolinas and Midwest territories.

  Committees:

Corporate Governance Committee

Nuclear Oversight Committee

Other current public directorships:

None


Mr. DiMicco has served as Chairman Emeritus of Nucor Corporation, a steel company, since December 2013. Mr. DiMicco served as Executive Chairman of Nucor Corporation from January 2013 until December 2013, and as Chairman from May 2006 until December 2012. He served as Chief Executive Officer from September 2000 until December 2012 and President from September 2000 until December 2010. Mr. DiMicco was a member of the Nucor Board of Directors from 2000 until 2013. Mr. DiMicco is a former chair of the American Iron and Steel Institute.

John H. Forsgren     GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 69
Director of Duke Energy since 2009
Retired Vice Chairman, Executive Vice President and Chief Financial Officer, Northeast Utilities
  Skills and Qualifications:

As a former Vice Chairman and Chief Financial Officer of a large utility company, Mr. Forsgren's qualifications for election include financial and risk management expertise as well as extensive knowledge of the energy industry, the regulatory environment within the industry and insight on renewable energy.

  Committees:

Finance and Risk Management Committee

Nuclear Oversight Committee

Other current public directorships:

The Phoenix Companies, Inc.


Mr. Forsgren has been Chairman of The Phoenix Companies, Inc. since 2013 and was Vice Chairman, Executive Vice President and Chief Financial Officer of Northeast Utilities from 1996 until his retirement in 2004. He is a former director of CuraGen Corporation and Neon Communications Group, Inc.

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14    DUKE ENERGY – 2016 Proxy Statement

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PROPOSAL 1:    ELECTION OF DIRECTORS

Lynn J. Good     GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC
Non-Independent Director Nominee
Chairman
GRAPHIC   Age: 56
Director of Duke Energy since 2013
Chairman, President and Chief Executive Officer, Duke Energy Corporation
  Skills and Qualifications:

Ms. Good is our Chief Executive Officer and was previously our Chief Financial Officer. Her knowledge of the affairs of Duke Energy and its business and her experience in the energy industry provide valuable resources for the Board.

  Committees:

None

Other current public directorships:

The Boeing Company


Ms. Good has served as Chairman, President and Chief Executive Officer of Duke Energy since January 1, 2016, and was Vice Chairman, President and Chief Executive Officer of Duke Energy since July 2013. She served as Executive Vice President and Chief Financial Officer of Duke Energy from July 2009 until June 2013. She is a former director of Hubbell Incorporated.

Ann Maynard Gray     GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 70
Director of Duke Energy since 1997
Retired Vice President, ABC, Inc. and President, Diversified Publishing Group, ABC,  Inc.
  Skills and Qualifications:

Ms. Gray's qualifications for election include her business experience, both from a management perspective and as a result of her experience as a director at several public companies. Ms. Gray's public company experience has also given her in-depth knowledge of governance principles, which she utilizes on a variety of matters, including, among other things, succession planning, executive compensation and corporate governance.

  Committees:

Compensation Committee

Corporate Governance Committee

Finance and Risk Management Committee

Other current public directorships:

The Phoenix Companies, Inc.


Ms. Gray was President of Diversified Publishing Group of ABC, Inc., a television, radio and publishing company, from 1991 until 1997 and was a Corporate Vice President of ABC, Inc. and its predecessors from 1979 until 1998. Ms. Gray is a former director of Elan Corporation, plc and former trustee of JPMorgan Funds. Ms. Gray served as Chairman of the Board of Duke Energy from December 31, 2013, until December 31, 2015.

GRAPHIC

DUKE ENERGY – 2016 Proxy Statement    15

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PROPOSAL 1:    ELECTION OF DIRECTORS

John T. Herron     GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 62
Director of Duke Energy since 2013
Retired President, Chief Executive Officer and Chief Nuclear Officer, Entergy Nuclear
  Skills and Qualifications:

Mr. Herron's qualifications for election include his knowledge and extensive insight gained as a senior executive in the utility industry, including his three decades of experience in nuclear energy. During Mr. Herron's career, he has gained significant regulatory and risk management expertise, which is an asset to the Board and its committees.

  Committees:

Nuclear Oversight Committee

Regulatory Policy and Operations Committee

Other current public directorships:

None


Mr. Herron was President, Chief Executive Officer and Chief Nuclear Officer of Entergy Nuclear from 2009 until his retirement in 2013. Mr. Herron joined Entergy Nuclear in 2001 and held a variety of positions. He began his career in nuclear operations in 1979 and has held positions at a number of nuclear stations across the country. Mr. Herron is a director of Ontario Power Generation and also has served on the Institute of Nuclear Power Operations' board of directors.

James B. Hyler, Jr.     GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 68
Director of Duke Energy since 2012
Consultant, Investors Management Corporation
  Skills and Qualifications:

Mr. Hyler's qualifications for election include his understanding of Duke Energy's North Carolina service territory and his knowledge and expertise in financial services, corporate finance and risk management.

  Committees:

Audit Committee

Finance and Risk Management Committee

Regulatory Policy and Operations Committee

Other current public directorships:

None


Mr. Hyler is Consultant of Investors Management Corporation, a firm which invests in and acquires companies in various industries, since January 2016. He served as Managing Director of Morehead Capital Management, LLC from December 2011 until December 2015. He retired as Vice Chairman and Chief Operating Officer of First Citizens Bank in 2008, having served in these positions from 1994 until 2008. Mr. Hyler was President of First Citizens Bank from 1988 until 1994 and was Chief Financial Officer of First Citizens Bank from 1980 until 1988. Prior to joining First Citizens Bank, Mr. Hyler was an auditor with Ernst & Young for 10 years. Mr. Hyler served as a director of First Citizens BancShares from 1988 until 2008.

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PROPOSAL 1:    ELECTION OF DIRECTORS

William E. Kennard     GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 59
Director of Duke Energy since 2014
Non-Executive Chairman, Velocitas Partners, LLC
  Skills and Qualifications:

Mr. Kennard's qualifications for election include his considerable experience and knowledge of the regulatory arena, as well as his financial knowledge, legal knowledge and international perspective. As former Chairman of the Federal Communications Commission, Mr. Kennard also has a great deal of expertise in technology, which is extremely valuable to the Board and its committees.

  Committees:

Corporate Governance Committee

Finance and Risk Management Committee

Regulatory Policy and Operations Committee

Other current public directorships:

AT&T Inc.

Ford Motor Company

MetLife, Inc.


Mr. Kennard is Non-Executive Chairman of Velocitas Partners, LLC, an asset management and advisory firm, since November 2014, as well as a member of the Operating Executive Committee of Staple Street Capital, a private equity firm. Prior to joining Velocitas Partners, LLC, Mr. Kennard served as Senior Advisor at Grain Management from October 2013 until November 2014; U.S. Ambassador to the European Union from 2009 until August 2013; Managing Director of The Carlyle Group from 2001 until 2009; and Chairman of the Federal Communications Commission from 1997 until 2001.

E. Marie McKee     GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 65
Director of Duke Energy since 2012
Retired Senior Vice President, Corning Incorporated
  Skills and Qualifications:

Ms. McKee's qualifications for election include her experience in human resources, which provides her with a thorough knowledge of employment and compensation practices. Her prior experience as a senior executive of Corning Incorporated has also given her excellent operating skills and an understanding of financial matters.

  Committees:

Audit Committee

Compensation Committee

Corporate Governance Committee

Other current public directorships:

None


Ms. McKee is a retired Senior Vice President of Corning Incorporated, a manufacturer of components for high-technology systems for consumer electronics, mobile emissions controls, telecommunications and life sciences. Ms. McKee has over 35 years of experience at Corning, where she held a variety of management positions with increasing levels of responsibility, including Senior Vice President of Human Resources from 1996 until 2010; President of Steuben Glass from 1998 until 2008; and President of The Corning Museum of Glass and The Corning Foundation from 1998 until 2014.

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PROPOSAL 1:    ELECTION OF DIRECTORS

Charles W. Moorman IV     GRAPHIC      GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 63
Director of Duke Energy since 2016
Retired Chairman and Chief Executive Officer, Norfolk Southern Corporation
  Skills and Qualifications:

Mr. Moorman's qualifications for election include experience in business, finance, technology, strategy, risk management and safety and environmental issues as a result of his career at a large public company in the freight and transportation industry.

  Committees:

Nuclear Oversight Committee

Other current public directorships:

Chevron Corporation


Mr. Moorman is the Retired Chairman and Chief Executive Officer of Norfolk Southern Corporation, a freight transportation company, and was Special Advisor to the Chief Executive Officer of Norfolk Southern from October 1, 2015, until December 31, 2015. Prior to his retirement, he served as Chairman of the Board at Norfolk Southern from 2006 until 2015 and as Chief Executive Officer from 2005 until 2015.

Carlos A. Saladrigas     GRAPHIC      GRAPHIC      GRAPHIC
Independent Director Nominee
GRAPHIC   Age: 67
Director of Duke Energy since 2012
Chairman, Regis HR Group, and Chairman, Concordia Healthcare Holdings, LLC
  Skills and Qualifications:

Mr. Saladrigas' qualifications for election include his extensive expertise in health care, human resources, financial services and accounting arenas, as well as his understanding of Duke Energy's Florida service territory.

  Committees:

Audit Committee

Compensation Committee

Regulatory Policy and Operations Committee

Other current public directorships:

Advance Auto Parts, Inc.


Mr. Saladrigas is Chairman of Regis HR Group, which offers a full suite of outsourced human resources services to small and mid-sized businesses. He has served in this position since July 2008. Mr. Saladrigas also serves as Chairman of Concordia Healthcare Holdings, LLC, which specializes in managed behavioral health, since January 2011. He served as Vice Chairman, from 2007 until 2008, and Chairman, from 2002 until 2007, of Premier American Bank in Miami, Florida. Mr. Saladrigas served as Chief Executive Officer of ADP Total Source (previously the Vincam Group, Inc.) from 1984 until 2002.

Majority Voting for the Election of Directors

Under the Corporation's By-Laws, in an uncontested election at which a quorum is present, a director-nominee will be elected if the number of votes cast "FOR" the nominee's election exceeds the number of votes cast as "WITHHOLD" from that nominee's election. Abstentions and broker non-votes do not count. In addition, the Corporation has a resignation policy in its Principles for Corporate Governance which requires an incumbent Director who has more votes cast as "WITHHOLD" from that nominee's re-election than votes cast "FOR" his or her re-election to tender his or her letter of resignation for consideration by the Corporate Governance Committee of the Corporation's Board of Directors.

In contested elections, Directors will continue to be elected by plurality vote. For purposes of the By-Laws, a "contested election" is an election in which the number of nominees for director is greater than the number of directors to be elected.

The Board of Directors Recommends a Vote "FOR" Each Nominee.

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Our Board Leadership

Prior to January 1, 2016, our Board of Directors was structured with an independent Chairman, Ann Maynard Gray, and a separate Vice Chairman, Lynn J. Good, who was also our President and Chief Executive Officer. In December 2015, in recognition of Ms. Good's leadership since her appointment as Chief Executive Officer in 2013 and her expertise with regard to the Corporation, the Board of Directors elected Ms. Good as Chairman, effective January 1, 2016. The Board believes that combining the Chairman and Chief Executive Officer roles fosters clear accountability, effective decision-making and execution of corporate strategy.

The Board regularly evaluates the leadership structure of the Corporation and may consider alternative approaches, as appropriate, over time. Though the Board is currently structured with a combined Chairman and Chief Executive Officer, the Board believes that the Corporation and its shareholders are best served by the Board retaining discretion to determine the appropriate leadership structure based on what it believes is best for the Corporation at a particular point in time, including whether the same individual should serve as both Chairman and Chief Executive Officer, or whether the roles should be separate.

Independent Lead Director

In conjunction with Ms. Good's election as Chairman, Michael G. Browning was elected as the new Independent Lead Director. In connection with Mr. Browning's appointment as Independent Lead Director, the Board amended the Corporation's Principles for Corporate Governance to clarify the duties and responsibilities of the Independent Lead Director. These responsibilities, which meet the latest corporate governance standards set by the National Association of Corporate Directors, include, among other things:

leading, in conjunction with the Corporate Governance Committee, the process for the review of the Chief Executive Officer;

presiding at the executive sessions of the independent members of the Board;

assisting the Chairman and the Chief Executive Officer in setting, reviewing and approving agendas and schedules of Board meetings;

calling meetings of the independent members of the Board when necessary and appropriate;

developing topics for discussion during executive sessions of the Board;

consulting with the Corporate Governance Committee on the Board's annual self-assessment;

assisting the Chairman and the Chief Executive Officer to promote the efficient and effective performance and functioning of the Board; and

being available for consultation and direct communication with the Corporation's major shareholders.

A complete list of the responsibilities of our Independent Lead Director are included in our Principles for Corporate Governance, a copy of which is posted on our website at www.duke-energy.com/corporate-governance/principles.asp.

Director Attendance

The Board of Directors of Duke Energy met 14 times during 2015 and has met once so far in 2016. The overall attendance percentage for our directors was approximately 98 percent in 2015, and no director attended less than 89 percent of the total of the Board of Directors' meetings and the meetings of the committees upon which he or she served in 2015. Directors are encouraged to attend the Annual Meeting of Shareholders. All members of the Board of Directors attended Duke Energy's last Annual Meeting of Shareholders on May 7, 2015.

Independence of Directors

The Board of Directors has determined that none of the directors, other than Ms. Good, has a material relationship with Duke Energy or its subsidiaries, and all are, therefore, independent under the listing standards of the NYSE and the rules and regulations of the SEC.

In making the determination regarding each director's independence, the Board of Directors considered all transactions and the materiality of any relationship with Duke Energy and its subsidiaries in light of all facts and circumstances.

The Board of Directors may determine a director to be independent if the Board of Directors has affirmatively determined that the director has no material relationship with Duke Energy or its subsidiaries (references in this proxy statement to Duke Energy's subsidiaries shall mean its consolidated subsidiaries), either directly or as a shareholder,

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INFORMATION ON THE BOARD OF DIRECTORS

director, officer or employee of an organization that has a relationship with Duke Energy or its subsidiaries. Independence determinations are generally made on an annual basis at the time the Board of Directors approves director nominees for inclusion in the proxy statement and, if a director joins the Board of Directors in the interim, at such time.

The Board of Directors also considers its Standards for Assessing Director Independence, which set forth certain relationships between Duke Energy and directors and their immediate family members, or affiliated entities, that the Board of Directors, in its judgment, has deemed to be immaterial for purposes of assessing a director's independence. Duke Energy's Standards for Assessing Director Independence are linked on our website at www.duke-energy.com/corporate-governance/board-of-directors/independence.asp. In the event a director has a relationship with Duke Energy that is not addressed in the Standards for Assessing Director Independence, the Corporate Governance Committee, which is composed entirely of independent members of the Board, reviews the relationship and makes a recommendation to the independent members of the Board who determine whether such relationship is material.

Board and Committee Assessments

Each year the Board, with the assistance of the Corporate Governance Committee, conducts an assessment of the Board of Directors, each of its committees and the directors. The assessment process is facilitated by an independent adviser, which allows directors to provide anonymous feedback and promotes candidness among the directors. The results of the feedback are presented to the Board and committees and discussed. This annual review and discussion provides continuous improvement in the overall effectiveness of the directors, committees and Board.

Board Oversight of Risk

The Corporation faces a myriad of risks, including operational, financial, strategic and reputational risks that affect every segment of its business. The Board of Directors is actively involved in the oversight of these risks in several ways. This oversight is conducted primarily through the Finance and Risk Management Committee of the Board but also through the other committees of the Board, as appropriate. The Finance and Risk Management Committee reviews the Corporation's enterprise risk program with management, including the Chief Risk Officer. The enterprise risk program includes the identification of a broad range of risks that affect the Corporation, their probabilities and severity and incorporates a review of the Corporation's approach to managing and prioritizing those risks, based on input from the officers responsible for the management of those risks.

Each committee of the Board is responsible for the oversight of certain areas of risk that pertain to that committee's area of focus. Throughout the year, each committee chair reports to the full Board regarding the committee's considerations and actions relating to the risks within its area of focus.

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INFORMATION ON THE BOARD OF DIRECTORS

Shareholder Engagement

We conduct extensive governance reviews and investor outreach so that management and the Board understand and consider the issues that matter most to our shareholders and address them effectively. In 2015, we reached out to holders of approximately 33 percent of Duke Energy's outstanding shares throughout the year.

At the Corporation's 2015 Annual Meeting, a shareholder proposal was voted on that requested that the Corporation allow shareholders the right to nominate directors on the Corporation's proxy materials, known as proxy access. The proxy access proposal received the vote of a majority of the shares represented at the 2015 Annual Meeting. During the fall 2015 corporate governance engagement program, the Corporation reached out to holders of approximately 33 percent of Duke Energy's outstanding shares of common stock, and met with holders of approximately 25 percent of Duke Energy's outstanding shares of common stock, including the proponent of the proxy access proposal, and discussed the proxy access proposal as well as some of the detailed provisions that were not contemplated by the proposal to determine what type of provisions would be in the best interest of the Corporation and its shareholders. After considering the feedback it received from shareholders on these provisions, and after discussions with the proponent of the proxy access proposal about what provisions were responsive to the concerns which prompted the proponent to submit the proposal, the Board of Directors amended the Corporation's By-Laws in January 2016 to provide for a proxy access right which allows a group of up to 20 shareholders holding three percent of the Corporation's outstanding stock continuously for three years to include director nominees in the Corporation's proxy statement.

In addition to our discussions with shareholders about proxy access during the 2015 corporate governance engagement program, the Corporation also continued its discussions with shareholders about executive compensation and important environmental, social and governance issues such as the Board's approach to risk management, its oversight of coal ash management and other environmental concerns, the skills of our directors, and Board succession planning.

Our Year-Round Approach to Shareholder Engagement

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INFORMATION ON THE BOARD OF DIRECTORS

Board of Directors Committees

The Board of Directors has the six standing, permanent committees described below:

Audit Committee

Nine meetings held in 2015

    Committee Members    

PHOTO
  Carlos A. Saladrigas, Chairperson, Financial Expert
Michael J. Angelakis, Financial Expert
Michael G. Browning
James H. Hance, Jr., Financial Expert
James B. Hyler, Jr.
E. Marie McKee
      

Carlos A. Saladrigas

The Audit Committee considers risks and matters related to financial reporting, internal controls, compliance and legal matters. As part of those responsibilities, the Audit Committee selects and retains an independent registered public accounting firm to conduct audits of the accounts of Duke Energy and its subsidiaries. It also reviews with the independent registered public accounting firm the scope and results of their audits, as well as the accounting procedures, internal controls, and accounting and financial reporting policies and practices of Duke Energy and its subsidiaries, and makes reports and recommendations to the Board of Directors as it deems appropriate. The Audit Committee is responsible for approving all audit and permissible non-audit services provided to Duke Energy by its independent registered public accounting firm. Pursuant to this responsibility, the Audit Committee adopted the policy on Engaging the Independent Auditor for Services, which provides that the Audit Committee will establish detailed services and related fee levels that may be provided by the independent registered public accounting firm and will review such policy annually. See page 34 for additional information on the Audit Committee's pre-approval policy.

The Board of Directors has determined that Mr. Angelakis, Mr. Hance and Mr. Saladrigas are "audit committee financial experts" as such term is defined in Item 407(d)(5)(ii) of Regulation S-K. See pages 13 and 18 for a description of Mr. Angelakis' and Mr. Saladrigas' business experience. Mr. Hance will be retiring at the 2016 Annual Meeting of Shareholders.

Each of the members has been determined to be "independent" within the meaning of the NYSE's listing standards, Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Corporation's Standards for Assessing Director Independence. In addition, each of the members meets the financial literacy requirements for audit committee membership under the NYSE's rules and the rules and regulations of the SEC.
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Compensation Committee

Eight meetings held in 2015

    Committee Members    

PHOTO
  E. Marie McKee, Chairperson
Ann Maynard Gray
James H. Hance, Jr.
Carlos A. Saladrigas
      

E. Marie McKee

The Compensation Committee establishes and reviews the overall compensation philosophy of the Corporation, confirms that our policies and philosophy do not encourage excess or inappropriate risk-taking by our employees, reviews and approves the salaries and other compensation of certain employees, including all executive officers of Duke Energy, reviews and approves compensatory agreements with executive officers, approves equity grants and reviews the effectiveness of, and approves changes to, compensation programs. The Compensation Committee also makes recommendations to the Board of Directors on compensation for independent directors.

Management's role in the compensation-setting process is to recommend compensation programs and assemble information as required by the committee. When establishing the compensation program for our named executive officers, the committee considers input and recommendations from management, including Ms. Good, who attends the Compensation Committee meetings.

The Compensation Committee has engaged Frederic W. Cook & Company, Inc. as its independent compensation consultant. The compensation consultant generally attends each Committee meeting and provides advice to the committee at the meetings, including reviewing and commenting on market compensation data used to establish the compensation of the executive officers and directors. The consultant has been instructed that it shall provide completely independent advice to the Committee and is not permitted to provide any services to Duke Energy other than at the direction of the Compensation Committee.

Each of the members of the Compensation Committee has been determined to be "independent" within the meaning of the NYSE's listing standards, Rule 10C-1(b) of the Exchange Act, and the Corporation's Standards for Assessing Director Independence; to be "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"); and, to be "non-employee directors" within the meaning of Rule 16b-3 of the Exchange Act.
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Corporate Governance Committee

Seven meetings held in 2015

    Committee Members    

PHOTO
  Ann Maynard Gray, Chairperson
Michael G. Browning
Harris E. DeLoach, Jr.
Daniel R. DiMicco
William E. Kennard
E. Marie McKee
   

Ann Maynard Gray

The Corporate Governance Committee considers risks and matters related to corporate governance and formulates and periodically revises governance principles. It recommends the size and composition of the Board of Directors and its committees and recommends potential successors to the Chief Executive Officer. The Corporate Governance Committee also recommends to the Board of Directors the slate of nominees, including any nominees recommended by shareholders, for director for each year's annual meeting of shareholders and, when vacancies occur, names of individuals who would make suitable directors of Duke Energy. This committee may engage an external search firm or a third party to identify or evaluate or to assist in identifying or evaluating a potential nominee. The Committee also performs an annual evaluation of the performance of the Chief Executive Officer with input from the full Board of Directors. The Corporate Governance Committee also assists the Board in its annual determination of director independence and review of any related person transactions as well as its annual assessment of the Board of Directors and each of its committees. The Committee is also responsible for the oversight of the Corporation's policies and practices with respect to its political activities and community affairs.

Each of the members of the Corporate Governance Committee has been determined to be "independent" within the meaning of the NYSE's listing standards and the Corporation's Standards for Assessing Director Independence.

Finance and Risk Management Committee

Five meetings held in 2015

    Committee Members    

PHOTO
  James H. Hance, Jr., Chairperson
Michael J. Angelakis
Michael G. Browning
John H. Forsgren
Ann Maynard Gray
James B. Hyler, Jr.
William E. Kennard
   

James H. Hance, Jr.

The Finance and Risk Management Committee is primarily responsible for the oversight of financial risk and enterprise risk at the Corporation. This oversight function includes reviews of Duke Energy's financial and fiscal affairs and recommendations to the Board of Directors regarding dividends, financing and fiscal policies, and significant transactions. It reviews the financial exposure of Duke Energy, as well as mitigation strategies, reviews Duke Energy's enterprise risk exposures and provides oversight for the process to assess and manage enterprise risk, and reviews the financial impacts of major projects as well as capital expenditures.
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INFORMATION ON THE BOARD OF DIRECTORS

Nuclear Oversight Committee

Six meetings held in 2015

    Committee Members    

PHOTO
  James T. Rhodes, Chairperson
Harris E. DeLoach, Jr.
Daniel R. DiMicco
John H. Forsgren
John T. Herron
Richard A. Meserve
Charles W. Moorman IV
   

James T. Rhodes

The Nuclear Oversight Committee provides oversight of the nuclear safety, operational and financial performance as well as operational risks, long-term plans and strategies of Duke Energy's nuclear power program. The oversight role is one of review, observation and comment and in no way alters management's authority, responsibility or accountability. At least annually, the Nuclear Oversight Committee visits each of Duke Energy's operating nuclear power stations and reviews the station's nuclear safety, operational and financial performance.

Regulatory Policy and Operations Committee

Eight meetings held in 2015

    Committee Members    

PHOTO
  James B. Hyler, Jr., Chair
John T. Herron
William E. Kennard
Richard A. Meserve
James T. Rhodes
Carlos A. Saladrigas
   

James B. Hyler, Jr.

The Regulatory Policy and Operations Committee provides oversight of Duke Energy's regulatory and legislative strategy impacting utility operations in each jurisdiction. The Committee also has oversight over environmental, health and safety matters and the risks related to such matters, including our ash management strategy, as well as the public policies and practices of Duke Energy. This includes reviewing Duke Energy's regulatory approach to strategic initiatives, the operational performance of Duke Energy's utilities with regard to energy supply, delivery, fuel procurement and transportation and making visits to Duke Energy's generation facilities. The Regulatory Policy and Operations Committee is also responsible for the oversight of Duke Energy's environmental, health and safety goals and policies.

Each committee operates under a written charter adopted by the Board of Directors. The charters are posted on our website at www.duke-energy.com/corporate-governance/board-committee-charters.asp.

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BOARD OF DIRECTORS COMMITTEE MEMBERSHIP ROSTER (AS OF MARCH 24, 2016)

Name
  Audit
  Compensation
  Corporate
Governance

  Finance and Risk
Management

  Nuclear
Oversight

  Regulatory Policy and
Operations  

Michael J. Angelakis

           

Michael G. Browning

                 

Harris E. DeLoach, Jr.(1)

           

Daniel R. DiMicco

                   

John H. Forsgren

           

Lynn J. Good

                       

Ann Maynard Gray

      C      

James H. Hance, Jr.(1)

          C        

John T. Herron

           

James B. Hyler, Jr.

                  C

William E. Kennard

           

E. Marie McKee

    C              

Richard A. Meserve(1)

           

Charles W. Moorman IV

                     

James T. Rhodes(1)

          C  

Carlos A. Saladrigas

  C                
C
Committee Chair

(1)
Retiring at the 2016 Annual Meeting of Shareholders.
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The following is the report of the Corporate Governance Committee with respect to its philosophy, responsibilities and initiatives.

Philosophy and Responsibilities

We believe that sound corporate governance has three components: (i) Board of Directors' independence, (ii) processes and practices that foster solid decision-making by both management and the Board of Directors, and (iii) balancing the interests of all of our stakeholders – our investors, customers, employees, the communities we serve and the environment. The Corporate Governance Committee's charter is available on our website at www.duke-energy.com/corporate-governance/board-committee-charters/corporate-governance.asp and is summarized below. Additional information about the Corporate Governance Committee and its members is detailed on page 24 of the proxy statement.

Membership. The Committee must be comprised of three or more members, all of whom must qualify as independent directors under the listing standards of the NYSE and other applicable rules and regulations.

Responsibilities. The Committee's responsibilities include, among other things (i) implementing policies regarding corporate governance matters, (ii) assessing the Board of Directors' membership needs and recommending nominees, (iii) recommending to the Board of Directors those directors to be selected for membership on, or removal from, the various Board of Directors' committees and those directors to be designated as chairs of Board of Directors' committees, (iv) sponsoring and overseeing annual performance evaluations for the various Board of Directors' committees, including the Corporate Governance Committee, the Board of Directors and the Chief Executive Officer, (v) overseeing the Corporation's political expenditures and activities pursuant to the Political Activity Policy, and (vi) reviewing the Corporation's charitable contributions and community service policies and practices. The Committee may also conduct or authorize investigations into or studies of matters within the scope of the Committee's duties and responsibilities, and may retain, at the Corporation's expense, and in the Committee's sole discretion, consultants to assist in such work as the Committee deems necessary.

Governance Policies

All of our Board of Directors committee charters, as well as our Principles for Corporate Governance, Code of Business Ethics for Employees and Code of Business Conduct & Ethics for Directors, are available on our website at www.duke-energy.com/investors/corporate-governance.asp. Any amendments to or waivers from our Code of Business Ethics for Employees with respect to executive officers or Code of Business Conduct & Ethics for Directors must be approved by the Board and will be posted on our website. During 2015, our Board of Directors held five executive sessions with independent directors only.

Board Composition

Director Qualifications. We look for the following characteristics in any candidate for nomination to our Board of Directors:

fundamental qualities of intelligence, perceptiveness, good judgment, maturity, high ethics and standards, integrity and fairness;

a genuine interest in Duke Energy and a recognition that, as a member of the Board of Directors, one is accountable to the shareholders of Duke Energy, not to any particular interest group;

a background that includes broad business experience or demonstrates an understanding of business and financial affairs and the complexities of a large, multifaceted, global business organization;

diversity among the existing Board members, including racial and ethnic background, gender, experiences, skills and qualifications;

present or former chief executive officer, chief operating officer, or substantially equivalent level executive officer of a highly complex organization such as a corporation, university or major unit of government, or a professional who regularly advises such organizations;

no conflict of interest or legal impediment which would interfere with the duty of loyalty owed to Duke Energy and its shareholders;

the ability and willingness to spend the time required to function effectively as a director;

compatibility and ability to work well with other directors and executives in a team effort with a view to a long-term relationship with Duke Energy as a director;
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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

independent opinions and willingness to state them in a constructive manner; and

willingness to become a shareholder of Duke Energy (within a reasonable time of election to the Board of Directors).

Director Candidate Recommendations. The Committee may engage a third party from time to time to assist it in identifying and evaluating director-nominee candidates, in addition to current members of the Board of Directors standing for re-election. The Committee will provide the third party, based on the profile described above, the characteristics, skills and experiences that may complement those of our existing members. The third party will then provide recommendations for nominees with such attributes. The Committee considers nominees recommended by shareholders on a similar basis, taking into account, among other things, the profile criteria described above and the nominee's experiences and skills. In addition, the Committee considers the shareholder-nominee's independence with respect to both the Corporation and the recommending shareholder. All of the nominees on the proxy card are current members of our Board of Directors and were recommended by the Committee.

Shareholders interested in submitting nominees as candidates for election as directors must provide timely written notice to the Corporate Governance Committee, c/o Ms. Julia S. Janson, Executive Vice President, Chief Legal Officer and Corporate Secretary, Duke Energy Corporation, DEC 48H, P.O. Box 1414, Charlotte, NC 28201-1414. The notice must set forth, as to each person whom the shareholder proposes to nominate for election as director:

the name and address of the recommending shareholder(s), and the class and number of shares of capital stock of Duke Energy that are beneficially owned by the recommending shareholder(s);

a representation that the recommending shareholder(s) is a holder of record of capital stock of Duke Energy entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person(s) specified in the notice;

the name, age, business address and principal occupation and employment of the recommended nominee;

any information relevant to a determination of whether the recommended nominee meets the criteria for Board of Directors membership established by the Board of Directors and/or the Corporate Governance Committee;

any information regarding the recommended nominee relevant to a determination of whether the recommended nominee would be considered independent under the applicable NYSE rules and SEC rules and regulations;

a description of any business or personal relationship between the recommended nominee and the recommending shareholder(s), including all arrangements or understandings between the recommended nominee and the recommending shareholder(s) and any other person(s) (naming such person(s)) pursuant to which the nomination is to be made by the recommending shareholder(s);

a statement, signed by the recommended nominee, (i) verifying the accuracy of the biographical and other information about the nominee that is submitted with the recommendation, (ii) affirming the recommended nominee's willingness to be a director, and (iii) consenting to serve as a director if so elected;

if the recommending shareholder(s) has beneficially owned more than five percent of Duke Energy's capital stock for at least one year as of the date the recommendation is made, evidence of such beneficial ownership as specified in the rules and regulations of the SEC;

if the recommending shareholder(s) intends to solicit proxies in support of such recommended nominee, a representation to that effect; and

all other information relating to the recommended nominee that is required to be disclosed in solicitations for proxies in an election of directors pursuant to Regulation 14A under the Exchange Act, including, without limitation, information regarding (i) the recommended nominee's business experience, (ii) the class and number of shares of capital stock of Duke Energy, if any, that are beneficially owned by the recommended nominee, and (iii) material relationships or transactions, if any, between the recommended nominee and Duke Energy's management.

Director Candidate Nominations through Proxy Access. In response to shareholder feedback during the Corporation's 2015 corporate governance engagement program, which is discussed in more detail on page 21, the Board of Directors amended the Corporation's By-Laws in January 2016 to provide for proxy access. In order to nominate a director pursuant to the Corporation's proxy access provision, shareholders who meet the eligibility and other requirements set forth in Section 3.04 of the Corporation's By-Laws must send a notice to the Corporate Governance Committee, c/o Ms. Julia S. Janson, Executive Vice President, Chief Legal Officer and Corporate Secretary, Duke Energy Corporation, DEC 48H, P.O. Box 1414, Charlotte, NC 28201-1414. The notice must provide the information set forth above, as well as the other detailed requirements set forth in Section 3.04 of the Corporation's By-Laws, which can be located on our website at www.duke-energy.com/pdfs/By-Laws.pdf.

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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

New Directors since the 2015 Annual Meeting

Following the 2015 Annual Meeting, the Corporate Governance Committee sought to recruit additional Board members whose qualifications align with the needs of the Board in light of the major risks and issues facing the Corporation as well as its long-term strategy. After working with an independent search firm, the Corporate Governance Committee recommended in September 2015 that Mr. Michael J. Angelakis be appointed to the Board and, in February 2016, recommended that Mr. Charles W. Moorman IV be appointed to the Board. Mr. Angelakis' appointment was effective October 1, 2015. Mr. Angelakis brings management, financial expertise and risk management experience obtained as a senior executive at a large company in the telecommunications industry. Mr. Moorman's appointment was effective March 1, 2016. Mr. Moorman brings significant management, finance, risk management and environmental expertise to the Corporation as a result of his 38-year career in management at a large railroad company.

Communications with Directors

Interested parties can communicate with any of our directors by writing to our Corporate Secretary at the following address:

Corporate Secretary
Ms. Julia S. Janson
Executive Vice President, Chief Legal Officer and Corporate Secretary
Duke Energy Corporation
DEC 48H
P.O. Box 1414
Charlotte, NC 28201-1414

Interested parties can communicate with our Independent Lead Director by writing to the following address:

Independent Lead Director
c/o Ms. Julia S. Janson
Executive Vice President, Chief Legal Officer and Corporate Secretary
Duke Energy Corporation
DEC 48H
P.O. Box 1414
Charlotte, NC 28201-1414

Our Corporate Secretary will distribute communications to the Board of Directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Duke Energy Board of Directors has requested that certain items that are unrelated to the duties and responsibilities of the Board of Directors be excluded, such as: spam; junk mail and mass mailings; service complaints; resumes and other forms of job inquiries; surveys; and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, obscene or similarly unsuitable will be excluded. However, any communication that is so excluded remains available to any director upon request.

Corporate Governance Committee
Ann Maynard Gray (Chairperson)
Michael G. Browning
Harris E. DeLoach, Jr.
Daniel R. DiMicco
William E. Kennard
E. Marie McKee

DUKE ENERGY – 2016 Proxy Statement    29

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DIRECTOR COMPENSATION

Annual Retainer and Fees. Effective May 7, 2015, the retainer and meeting fees paid to our independent directors consisted of:

 
 
Meeting Fees
Type of Fee
Fee (Other Than
for Meetings) ($)

In-Person Attendance at
Meetings Held in Conjunction
With a Regular Board of
Directors Meeting
($)

In-Person Meetings Not
Held in Conjunction
With a Regular Board
of Directors Meeting
($)

Telephonic
Participation
in Meetings
($)

Annual Board of Directors Retainer (Cash)

90,000

Annual Board of Directors Retainer (Stock)

125,000      

Board of Directors Meeting Fees

2,000 2,500 2,000

Annual Board Chair Retainer (applicable only for non-employees)

100,000      

Annual Lead Director Retainer (if applicable)

40,000 *

Annual Audit Committee Chair Retainer

25,000      

Annual Chair Retainer (Other Committees)

15,000

Audit Committee and Finance and Risk Management Committee Meeting Fees

  3,000 2,500 2,000

Nuclear Oversight Committee Meeting Fees

4,000 2,500 2,000

Regulatory Policy and Operations Committee Meeting Fees

  3,500 2,500 2,000

Other Committee Meeting Fees

2,000 2,500 2,000
*
The Annual Lead Director Retainer, which was not paid during 2015, was reduced from $75,000 to $40,000 effective January 1, 2016.

This compensation program is the same as in effect at the end of 2014, except for the following adjustments that became effective May 7, 2015:

    The Annual Board of Directors Retainer (Cash) was increased from $75,000 to $90,000

    The Finance and Risk Management Committee Meeting Fee was increased from $2,000 to $3,000

    The Regulatory Policy and Operations Committee Meeting Fee was increased from $2,000 to $3,500

Annual Stock Retainer for 2015. In 2015, each eligible director received the portion of his or her annual retainer that was payable in stock in the form of fully-vested shares.

Deferral Plans and Stock Purchases. Directors may elect to receive all or a portion of their annual compensation, consisting of retainers and attendance fees, on a current basis, or defer such compensation under the Duke Energy Corporation Directors' Savings Plan (the "Directors' Savings Plan"). Deferred amounts are credited to an unfunded account, the balance of which is adjusted for the performance of phantom investment options, including the Duke Energy common stock fund, as elected by the director, and generally are paid when the director terminates his or her service from the Board of Directors.

Charitable Giving Program. The Duke Energy Foundation, independent of Duke Energy, maintains the Duke Energy Foundation Matching Gifts Program under which directors are eligible to request matching contributions of up to $5,000 per director per calendar year to qualifying institutions. Duke Energy also maintains a Directors' Charitable Giving Program. Eligibility for this program has been frozen and Ms. Gray is the only current director who is eligible. Under this program, Duke Energy will make, upon the director's death, donations of up to $1,000,000 to charitable organizations selected by the director. Ms. Gray may request that donations be made under this program during her lifetime, in which case the maximum donation will be reduced on an actuarially determined net present value basis. In 2015, no donations were made on behalf of Ms. Gray. In addition, Duke Energy made a $1,000 donation to the American Red Cross – Greater Carolinas Chapter in December 2015 on behalf of each of the independent directors who were actively serving at that time.

Expense Reimbursement and Insurance. Duke Energy provides travel insurance to directors and reimburses directors for expenses reasonably incurred in connection with attendance and participation at Board of Directors and committee meetings and special functions.

Stock Ownership Guidelines. Outside directors are subject to stock ownership guidelines, which establish a target level of ownership of Duke Energy common stock (or common stock equivalents). Currently, each independent director is required to own shares with a value equal to at least five times the annual Board of Directors cash retainer (i.e., an ownership level of $450,000) or retain 50 percent of his or her vested annual equity retainer. All independent directors were in compliance with the guidelines as of December 31, 2015.

30    DUKE ENERGY – 2016 Proxy Statement

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DIRECTOR COMPENSATION


The following table describes the compensation earned during 2015 by each individual who served as an independent director during 2015. Because Mr. Moorman joined the Board of Directors on March 1, 2016, he did not receive any compensation in 2015 and is not listed below.

Name
  Fees Earned
or Paid in Cash
($)(2)

  Stock
Awards
($)(3)

  Change in Pension Value
and Nonqualified Deferred
Compensation Earnings
($)(4)

  All Other
Compensation
($)(5)

  Total
($)

 

Michael J. Angelakis

  44,500   74,519   0   6,064   125,083  

G. Alex Bernhardt, Sr.(1)

    52,874     0     8,442     5,322     66,638  

Michael G. Browning

  165,225   125,000   0   6,231   296,456  

Harris E. DeLoach, Jr.

    167,225     125,000     0     6,231     298,456  

Daniel R. DiMicco

  153,725   125,000   0   1,231   279,956  

John H. Forsgren

    167,225     125,000     0     5,731     297,956  

Ann Maynard Gray

  308,725   125,000   0   4,731   438,456  

James H. Hance, Jr.

    181,225     125,000     0     6,231     312,456  

John T. Herron

  160,225   125,000   0   1,231   286,456  

James B. Hyler, Jr.

    185,225     125,000     0     1,231     311,456  

William E. Kennard

  174,225   125,000   0   1,231   300,456  

E. Marie McKee

    195,725     125,000     0     6,231     326,956  

Richard A. Meserve

  145,350   156,334   0   6,217   307,901  

E. James Reinsch(1)

    54,874     0     0     322     55,196  

James T. Rhodes

  177,725   125,000   0   6,231   308,956  

Carlos A. Saladrigas

    198,225     125,000     0     6,231     329,456  
(1)
Effective May 6, 2015, Mr. Bernhardt and Mr. Reinsch retired from the Board of Directors of Duke Energy.

(2)
Mr. Angelakis, Mr. Bernhardt, Mr. Browning, Mr. DeLoach, Mr. DiMicco, Mr. Hyler, Dr. Meserve, Mr. Saladrigas and Dr. Rhodes elected to defer $22,250; $52,874; $165,225; $167,225; $153,725; $46,306; $145,350; $198,225 and $88,863, respectively, of their 2015 cash compensation under the Directors' Savings Plan.

(3)
This column reflects the grant date fair value of the stock awards granted to each eligible director during 2015. The grant date fair value was determined in accordance with the accounting guidance for stock-based compensation. See Note 20 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 ("Form 10-K") for an explanation of the assumptions made in valuing these awards. In February 2015, Dr. Meserve received a pro-rated portion of the 2014-15 annual stock retainer, amounting to 361 shares of Duke Energy common stock, upon joining the Board of Directors. In May 2015, each sitting director on the Duke Energy Board received their annual stock retainer in the form of 1,627 shares of Duke Energy common stock. Mr. Browning, Mr. DeLoach, Mr. DiMicco, Mr. Forsgren, Ms. Gray, Mr. Hyler, Mr. Kennard, Dr. Rhodes and Mr. Saladrigas elected to defer their 2015-16 stock retainer of Duke Energy shares under the Directors' Savings Plan. In addition, Mr. Angelakis received a pro-rated portion of the 2015-16 annual stock retainer, amounting to 1,054 shares of Duke Energy common stock, upon joining the Board of Directors on October 1, 2015.

(4)
Reflects above-market interest earned on a grandfathered investment fund previously provided under a predecessor plan to the Directors' Savings Plan. Participants can no longer defer compensation into the grandfathered investment fund but continue to be credited with interest at the fixed rate on amounts previously deferred into such fund.

(5)
As described in the following table, All Other Compensation for 2015 includes a business travel accident insurance premium that was pro-rated among the directors based on their service on the Board of Directors during 2015, contributions made in the director's name to charitable organizations and a gift for directors who retired in 2015.

Name
  Business Travel
Accident
Insurance
($)

  Charitable
Contributions
($)

  Retirement Gift
($)

  Total
($)

 

Michael J. Angelakis

  64   6,000   0   6,064  

G. Alex Bernhardt, Sr.

    65     5,000     257     5,322  

Michael G. Browning

  231   6,000   0   6,231  

Harris E. DeLoach, Jr.

    231     6,000     0     6,231  

Daniel R. DiMicco

  231   1,000   0   1,231  

John H. Forsgren

    231     5,500     0     5,731  

Ann Maynard Gray

  231   4,500   0   4,731  

James H. Hance, Jr.

    231     6,000     0     6,231  

John T. Herron

  231   1,000   0   1,231  

James B. Hyler, Jr.

    231     1,000     0     1,231  

William E. Kennard

  231   1,000   0   1,231  

E. Marie McKee

    231     6,000     0     6,231  

Richard A. Meserve

  217   6,000   0   6,217  

E. James Reinsch

    65     0     257     322  

James T. Rhodes

  231   6,000   0   6,231  

Carlos A. Saladrigas

    231     6,000     0     6,231  
DUKE ENERGY – 2016 Proxy Statement    31

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates the amount of Duke Energy common stock beneficially owned by the current directors, the executive officers listed in the Summary Compensation Table under Executive Compensation (referred to as the named executive officers), and all directors and executive officers as a group as of March 7, 2016.

Name or Identity of Group
Total Shares
Beneficially Owned(1)

Percent
of Class

Michael J. Angelakis

8,870 *

Michael G. Browning

65,759 *

Harris E. DeLoach, Jr.

26,463 *

Daniel R. DiMicco

37,036 *

John H. Forsgren

16,719 *

Lynn J. Good

82,668 *

Ann Maynard Gray

40,043 *

James H. Hance, Jr.

36,246 *

John T. Herron

11,632 *

James B. Hyler, Jr.

11,709 *

Dhiaa M. Jamil

38,439 *

Julia S. Janson

23,316 *

William E. Kennard

4,145 *

Marc E. Manly(2)

14,711 *

E. Marie McKee

131 *

Richard A. Meserve

1,989 *

Charles W. Moorman IV

304 *

James T. Rhodes

25,667 *

Carlos A. Saladrigas

1,792 *

B. Keith Trent(2)

1,031 *

Lloyd M. Yates

37,955 *

Steven K. Young

46,072 *

Directors and executive officers as a group (26)

605,712 *
*
Represents less than 1%.

(1)
Includes the following number of shares with respect to which directors and executive officers have the right to acquire beneficial ownership within 60 days of March 7, 2016: Mr. Angelakis – 0; Mr. Browning – 19,065; Mr. DeLoach – 6,695; Mr. DiMicco – 14,905; Mr. Forsgren – 12,455; Ms. Good – 0; Ms. Gray – 1,636; Mr. Hance – 0; Mr. Herron – 0; Mr. Hyler – 6,695; Mr. Jamil – 0; Ms. Janson – 0; Mr. Kennard – 4,145; Mr. Manly – 0; Ms. McKee – 131; Dr. Meserve – 0; Mr. Moorman – 0; Dr. Rhodes – 1,837; Mr. Saladrigas – 922; Mr. Trent – 0; Mr. Yates – 0; Mr. Young – 0; and all directors and executive officers as a group – 68,486.

(2)
Provided as of the date of termination of employment.

Ownership of Units Representing Common Stock

The table below shows ownership of other units (not listed in the table above) related to Duke Energy common stock under the Directors' Savings Plan. These units do not represent an equity interest in Duke Energy and possess no voting rights, but are equal in economic value to one share of Duke Energy common stock.

Name
Number of Units

Michael J. Angelakis

0

Michael G. Browning

27,580

Harris E. DeLoach, Jr.

27,712

Daniel R. DiMicco

1,259

John H. Forsgren

0

Ann Maynard Gray

3,745

James H. Hance, Jr.

0

John T. Herron

0

James B. Hyler, Jr.

10,645

William E. Kennard

0

E. Marie McKee

53,872

Richard A. Meserve

0

Charles W. Moorman IV

0

James T. Rhodes

16,537

Carlos A. Saladrigas

30,705
32    DUKE ENERGY – 2016 Proxy Statement

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below shows ownership of other units (not listed in the table on page 32) related to Duke Energy common stock under the Duke Energy Corporation Executive Savings Plan ("Executive Savings Plan"). These units do not represent an equity interest in Duke Energy and possess no voting rights, but are equal in economic value to one share of Duke Energy common stock.

Name
Number of Units

Lynn J. Good

69

Steven K. Young

459

Dhiaa M. Jamil

1,733

Julia S. Janson

193

Lloyd M. Yates

10,546

Marc E. Manly(1)

0

B. Keith Trent(1)

84,211
(1)
Provided as of the date of termination of employment.

The following table lists the beneficial owners of five percent or more of Duke Energy's outstanding shares of common stock as of December 31, 2015. This information is based on the most recently available reports filed with the SEC and provided to us by the company listed.

Name or Identity of Beneficial Owner
Shares of Common Stock
Beneficially Owned

Percentage
BlackRock Inc.
40 East 52nd Street
New York, NY 10022


38,666,050 5.60% (1)
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
39,791,165 5.97% (2)
(1)
According to the Schedule 13G/A filed by BlackRock Inc., these shares are beneficially owned by BlackRock Inc., which is the parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) to various investment companies, and has sole voting power with respect to 32,699,912 shares, 0 shares with shared voting power, sole dispositive power with regard to 38,666,050 shares and 0 shares with shared dispositive power.

(2)
According to the Schedule 13G/A filed by The Vanguard Group, these shares are beneficially owned by The Vanguard Group, which is the parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) to various investment companies, and has sole voting power with respect to 1,324,920 shares, 69,900 shares with shared voting power, sole dispositive power with regard to 39,791,165 shares and 1,336,528 shares with shared dispositive power.
DUKE ENERGY – 2016 Proxy Statement    33

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PROPOSAL 2:     RATIFICATION OF DELOITTE & TOUCHE LLP AS
DUKE ENERGY CORPORATION'S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR
2016

The Audit Committee is directly responsible for the appointment and compensation, including the pre-approval of audit fees as described below, and the retention and oversight of the independent registered public accounting firm that audits our financial statements and our internal control over financial reporting. The Audit Committee has selected Deloitte & Touche LLP ("Deloitte") as Duke Energy's independent registered public accounting firm for 2016. Deloitte has served as our independent registered public accounting firm since 1978.

Independence

The Audit Committee and the Board believe that the continued retention of Deloitte as Duke Energy's independent registered public accounting firm is in the best interests of the Corporation and its shareholders. Deloitte's years of experience with Duke Energy have allowed them to gain expertise regarding Duke Energy's operations, accounting policies and practices and internal controls over financial reporting. It also prevents the significant time commitment that educating a new auditor would entail, which could also result in distraction in focus for Duke Energy management.

To safeguard the continued independence of the independent registered public accounting firm, the Audit Committee adopted a policy that provides that the independent registered public accounting firm is only permitted to provide services to Duke Energy and its subsidiaries that have been pre-approved by the Audit Committee. Pursuant to the policy, detailed audit services, audit-related services, tax services and certain other services have been specifically pre-approved up to certain categorical fee limits. In the event that the cost of any of these services may exceed the pre-approved limits, the Audit Committee must approve the service before the independent registered public accounting firm is engaged for such service. All other services that are not prohibited pursuant to the SEC's or other applicable regulatory bodies' rules or regulations must be specifically approved by the Audit Committee before the independent registered public accounting firm is engaged for such service. All services performed in 2015 and 2014 by the independent registered public accounting firm were approved by the Duke Energy Audit Committee pursuant to its policy on Engaging the Independent Auditor for Services.

In addition to the annual review of Deloitte's independence and in association with the mandated rotation of Deloitte's lead engagement partner, the Audit Committee is directly involved in the selection of Deloitte's new lead engagement partner.

Representatives of Deloitte are expected to be present at the Annual Meeting of Shareholders. They will have an opportunity to make a statement and will be available to respond to appropriate questions. Information on Deloitte's fees for services rendered in 2015 and 2014 are listed below.

Audit Fees

Type of Fees
  2015
  2014
 

Audit Fees(1)

  $ 12,332,000   $ 12,000,000  

Audit-Related Fees(2)

    2,498,000     4,176,000  

Tax Fees(3)

  195,000   727,000  

All Other Fees(4)

    40,000     40,000  

TOTAL FEES:

  $ 15,065,000   $ 16,943,000  
(1)
Audit Fees are fees billed, or expected to be billed, by Deloitte for professional services for the financial statement audits, audit of Duke Energy's financial statements included in Duke Energy's Annual Report on Form 10-K and reviews of financial statements included in Duke Energy's Quarterly Reports on Form 10-Q. Audit fees also include services related to certain regulatory and agreed upon procedures reports.

(2)
Audit-Related Fees are fees billed by Deloitte for assurance and related services that are reasonably related to the performance of an audit or review of financial statements, including assistance with acquisitions and divestitures.

(3)
Tax Fees are fees billed by Deloitte for tax return assistance and preparation, tax examination assistance and professional services related to tax planning and tax strategy.

(4)
Other Fees are billed by Deloitte for conferences, seminars, research tools, subscription services, etc.

For the Above Reasons, the Board of Directors Recommends a Vote "FOR" This Proposal.

34    DUKE ENERGY – 2016 Proxy Statement

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REPORT OF THE AUDIT COMMITTEE

The following is the report of the Audit Committee with respect to Duke Energy's audited financial statements for the fiscal year ended December 31, 2015.

The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" or "filed" or "incorporated by reference" in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Duke Energy specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.

The purpose of the Audit Committee is to assist the Board in its general oversight of Duke Energy's financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the Committee and is available on our website at www.duke-energy.com/corporate-governance/board-committee-charters/audit.asp. Further information about the Audit Committee, its Policy on Engaging the Independent Auditor for Services and its members is detailed on pages 22 and 34 of the proxy statement.

The Audit Committee has reviewed and discussed the consolidated financial statements with management and Deloitte, the Corporation's independent registered public accounting firm. Management is responsible for the preparation, presentation and integrity of Duke Energy's financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting; and, evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Deloitte is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States ("GAAP"), as well as expressing an opinion on the effectiveness of internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework (2013).

The Audit Committee reviewed the Corporation's audited financial statements with management and Deloitte, and met separately with both management and Deloitte to discuss and review those financial statements and reports prior to issuance. These discussions also addressed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. Management has represented, and Deloitte has confirmed, that the financial statements present fairly, in all material respects, in conformity with GAAP.

In addition, management completed the documentation, testing and evaluation of Duke Energy's system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates provided by management and Deloitte at regularly scheduled Audit Committee meetings. At the conclusion of the process, management presented to the Audit Committee on the effectiveness of the Corporation's internal control over financial reporting. The Audit Committee also reviewed the report of management contained in the Corporation's Form 10-K filed with the SEC, as well as Deloitte's Report of Independent Registered Public Accounting Firm included in the Corporation's Form 10-K related to its audit of (i) the consolidated financial statements and (ii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Corporation's efforts related to its internal control over financial reporting and management's preparations for the evaluation in fiscal 2015.

The Audit Committee has discussed with Deloitte the matters required to be discussed by professional and regulatory requirements, including, but not limited to, the standards of the Public Company Accounting Oversight Board regarding The Auditors' Communications with Those Charged with Governance. In addition, Deloitte has provided the Audit Committee with the written disclosures and the letter required by "Public Company Accounting Oversight Board Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence" that relates to Deloitte's independence from Duke Energy and its subsidiaries and the Audit Committee has discussed with Deloitte the firm's independence.

Based on its review of the consolidated financial statements and discussions with and representations from management and Deloitte referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Duke Energy's Form 10-K, for filing with the SEC.

Audit Committee
Carlos A. Saladrigas (Chairperson)
Michael J. Angelakis
Michael G. Browning
James H. Hance, Jr.
James B. Hyler, Jr.
E. Marie McKee

DUKE ENERGY – 2016 Proxy Statement    35

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PROPOSAL 3:     ADVISORY VOTE TO APPROVE DUKE ENERGY
CORPORATION'S NAMED EXECUTIVE OFFICER
COMPENSATION

At the 2011 Annual Meeting of Shareholders, our shareholders recommended that our Board of Directors hold say-on-pay votes on an annual basis. As a result, we are providing our shareholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. This proposal gives our shareholders the opportunity to express their views on the compensation of our named executive officers.

In connection with this proposal, the Board of Directors encourages shareholders to review in detail the description of the compensation program for our named executive officers that is set forth in the Compensation Discussion and Analysis beginning on page 37, as well as the information contained in the compensation tables and narrative discussion in this proxy statement.

As described in more detail in the Compensation Discussion and Analysis section, the guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of our executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results as compared to predetermined measures of success. A significant portion of our named executive officers' total direct compensation is directly contingent upon achieving specific results that are important to our long-term success and growth in shareholder value. We supplement our pay-for-performance program with a number of compensation policies that are aligned with the long-term interests of Duke Energy and its shareholders.

We are asking our shareholders to indicate their support for the compensation of our named executive officers as disclosed in this proxy statement by voting "FOR" the following resolution:

"RESOLVED, that the shareholders of Duke Energy approve, on an advisory basis, the compensation paid to Duke Energy's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion in Duke Energy's 2016 Proxy Statement."

Because your vote is advisory, it will not be binding on the Board of Directors, the Compensation Committee or Duke Energy. The Compensation Committee, however, will review the voting results and take them into consideration when making future decisions regarding the compensation of our named executive officers.

For the Above Reasons, the Board of Directors Recommends a Vote "FOR" This Proposal.

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REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of Duke Energy has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee

E. Marie McKee (Chairperson)
Ann Maynard Gray
James H. Hance, Jr.
Carlos A. Saladrigas

COMPENSATION DISCUSSION AND ANALYSIS

The purpose of this Compensation Discussion and Analysis is to provide information about Duke Energy's compensation objectives and policies for our named executive officers, who, for 2015 are:

Name
  Title
Lynn J. Good(1)   Chairman, President and Chief Executive Officer
Steven K. Young   Executive Vice President and Chief Financial Officer
Dhiaa M. Jamil   Executive Vice President and President, Generation and Transmission
Julia S. Janson   Executive Vice President, Chief Legal Officer and Corporate Secretary
Lloyd M. Yates   Executive Vice President, Market Solutions and President, Carolinas Region
(1)
Ms. Good served as Vice Chairman of the Board of Directors until January 1, 2016, at which time she became Chairman of the Board.

Our named executive officers for 2015 also include two executives who terminated employment in June 2015: Mr. Marc E. Manly, who previously served as Executive Vice President and President, Commercial Portfolio, and Mr. B. Keith Trent, who previously served as Executive Vice President, Grid Solutions and President, Midwest and Florida Regions. This Compensation Discussion and Analysis focuses on the compensation earned by the current named executive officers listed in the table above, but also describes the compensation earned by Mr. Manly and Mr. Trent.

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary of the Compensation Discussion and Analysis

2015 Compensation Highlights

GRAPHIC

As discussed throughout this Compensation Discussion and Analysis, our compensation program is designed to link pay to performance. Our 2015 Business Highlights are described on page 5 of this proxy statement.

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COMPENSATION DISCUSSION AND ANALYSIS

Objectives of the Compensation Program

Duke Energy is committed to creating value for our shareholders while building trust and transforming our energy future. We continuously strive to achieve this core purpose of creating shareholder value in all that we do, but with a particular emphasis on the areas described below in The Road Ahead.

GRAPHIC

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COMPENSATION DISCUSSION AND ANALYSIS

We design our compensation program so that it motivates our executives to focus on the four priorities in The Road Ahead, all of which are designed to ensure that our compensation program aligns with the interests of executives and shareholders:

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COMPENSATION DISCUSSION AND ANALYSIS

Pay-for-Performance

The guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results, as compared to predetermined measures of success.

Our core compensation program consists of base salary, STI and LTI (performance shares and restricted stock units). The following chart illustrates the components of the target total direct compensation opportunities provided to our named executive officers.

GRAPHIC

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COMPENSATION DISCUSSION AND ANALYSIS

Align Interests of Named Executive Officers and Shareholders

Following are key features of our executive compensation program, which reinforce our pay-for-performance philosophy and strengthen the alignment of interests of our executives and shareholders:

AT DUKE ENERGY WE...   AT DUKE ENERGY WE DO NOT...

GRAPHIC
  Require significant stock ownership. We maintain aggressive guidelines to reinforce the importance of Duke Energy stock ownership. These guidelines are intended to align the interests of executives and shareholders and to focus the executives on our long-term success. Under these guidelines, each of our current named executive officers must own Duke Energy shares in accordance with the following schedule:  
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  Provide tax gross-ups. We do not provide excise tax gross-ups for severance received by our named executive officers under the Change in Control Agreements or under the Executive Severance Plan, and we do not provide tax gross-ups on other payments such as perquisites.

 

Leadership Position
  Value of Shares
Chief Executive Officer   5x Base Salary
Other Named Executive Officers   3x Base Salary

 


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  Maintain a stock holding policy. Each named executive officer is required to hold 50 percent of all shares acquired under the LTI program (after payment of any applicable taxes) and 100 percent of all shares acquired upon the exercise of stock options (after payment of the exercise price and taxes) until the applicable stock ownership requirement is satisfied. Each of our named executive officers was in compliance with the stock ownership/stock holding policy during 2015.  
GRAPHIC
  Permit hedging or pledging of Duke Energy securities. We have a policy that prohibits employees (including the named executive officers) and directors from trading in options, warrants, puts and calls or similar instruments in connection with Duke Energy securities, or selling Duke Energy securities "short." In addition, we prohibit the pledging of Duke Energy securities in margin accounts.

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  Tie incentive compensation to a clawback policy. We maintain a "clawback policy," which would allow us to recover (i) certain cash or equity-based incentive compensation based on financial results in the event those results were restated due at least in part to the recipient's fraud or misconduct or (ii) an inadvertent payment based on an incorrect calculation.  
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  Provide "single trigger" severance upon a change in control. Our Change in Control Agreements provide cash severance only upon a "double trigger," meaning that change in control severance is payable only if our named executive officers incur a qualifying termination of employment (i.e., an involuntary termination without "cause" or a voluntary termination for "good reason") and the termination occurs in connection with a change in control of Duke Energy.

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  Provide a consistent level of severance. We maintain the Duke Energy Corporation Executive Severance Plan ("Executive Severance Plan") in order to provide a consistent approach to executive severance and to provide eligible employees, including our named executive officers (excluding Ms. Good, who is provided with severance compensation through her employment agreement), with certainty and security while they are focusing on their duties and responsibilities. Under this plan, severance compensation is payable only upon a qualifying termination of employment (i.e., an involuntary termination without "cause" or a voluntary termination for "good reason").  
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  Provide employment agreements to a broad group. Except for our Chief Executive Officer, no other executive is provided a comprehensive employment agreement.

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  Maintain a shareholder approval policy for severance agreements. We have a policy generally to seek shareholder approval for any future agreements with our named executive officers that provide severance compensation in excess of 2.99 times the executive's annual compensation or that provide for tax gross-ups in connection with a termination event.  
GRAPHIC
  Encourage excessive or inappropriate risk-taking through our compensation program. In consultation with the Compensation Committee, members of management from Duke Energy's Human Resources, Legal and Risk Management groups assessed whether our compensation policies and practices encourage excessive or inappropriate risk-taking by our employees, including employees other than our named executive officers. This assessment included a review of the risk characteristics of Duke Energy's business and the design of our incentive plans and policies. Management reported its findings to the Compensation Committee, and after review and discussion, the Compensation Committee concluded that our plans and policies do not encourage excessive or inappropriate risk-taking.
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COMPENSATION DISCUSSION AND ANALYSIS


AT DUKE ENERGY WE...   AT DUKE ENERGY WE DO NOT...

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  Comply with equity award granting policy. In recognition of the importance of adhering to specific practices and procedures in the granting of equity awards, the Compensation Committee has adopted a policy that applies to the granting of equity awards. Under this policy, annual grants to employees may be made at any regularly scheduled meeting, provided that reasonable efforts will be made to make such grants at the first regularly scheduled meeting of each calendar year, and annual grants to independent directors may be made by the Board of Directors at any regularly scheduled meeting, provided that reasonable efforts will be made to make such grants at the regularly scheduled meeting that is held in conjunction with the annual meeting of shareholders each year.  
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  Provide excessive perquisites. Our perquisites program is limited to an executive physical, an airline club membership to facilitate travel, limited personal use of corporate aircraft (subject generally to the requirement that the executive reimburse Duke Energy for the direct operating costs for such travel), financial planning and matching charitable contributions. See page 50 for additional details.

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  Use an independent compensation consultant. The Compensation Committee has engaged Frederic W. Cook & Company, Inc. to report directly to the Compensation Committee as its independent compensation consultant. The consultant has been instructed to provide completely independent advice to the Compensation Committee and is not permitted to provide any services to Duke Energy other than at the direction of the Compensation Committee. The Compensation Committee has assessed the independence of Frederic W. Cook & Company, Inc. pursuant to SEC rules and concluded that no conflict of interest exists that would prevent the consulting firm from independently advising the Compensation Committee.        

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  Review tally sheets. At least once a year, the Compensation Committee reviews tally sheets for each named executive officer, which include a summary of compensation paid in prior years, compensation for the current year, the valuation (at various assumed stock prices) of all outstanding equity awards and a summary of amounts payable upon a termination of employment under various circumstances. This information allows the Compensation Committee to evaluate the total compensation package for each named executive officer, as well as adjustments to specific elements of the total direct compensation package.        

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  Consider prior year's "say on pay" vote. As required by the Dodd Frank Act, we included a shareholder vote on executive compensation in last year's proxy statement, which was approved by approximately 81 percent of the votes represented in person or by proxy. The Compensation Committee considers the results of this advisory vote when designing our compensation program, including our emphasis on pay for performance, which is structured and designed to achieve our stated goals and objectives. In addition, we regularly engage our shareholders in an open dialogue regarding our compensation program. As a result of feedback from shareholders, we added a cumulative EPS goal as a performance metric for our 2016 performance share grants as described in more detail above in the "2015 Compensation Highlights" section of this proxy statement on page 38.        
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COMPENSATION DISCUSSION AND ANALYSIS

Elements of Duke Energy's Compensation Program

As discussed in more detail below, during 2015, the principal components of compensation for the named executive officers were: base salary; STI compensation; LTI compensation; retirement and welfare benefits and perquisites.

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Following is a summary of each principal compensation component provided to the named executive officers during 2015.

Base Salary The salary for each executive is based upon job responsibilities, level of experience, individual performance, comparisons to the salaries of executives in similar positions obtained from market surveys and internal comparisons. The following base salary adjustments for the named executive officers occurred in 2015:

Effective June 25, 2015, Ms. Good's annual rate of base salary was increased from $1,200,000 to $1,250,000 to bring her compensation closer to the market median and recognize her exemplary leadership and performance over the past two years as CEO.

Effective March 1, 2015, Mr. Young received a market adjustment of approximately nine percent to bring his salary closer to market median since his internal promotion to CFO, and Mr. Jamil and Mr. Yates received merit adjustments of approximately four percent and three percent, respectively.

Short-Term Incentive Compensation STI opportunities are provided to our named executive officers under the Duke Energy Corporation Executive Short-Term Incentive Plan ("STI Plan") to promote the achievement of annual performance objectives.

Each year, the Compensation Committee establishes the target annual incentive opportunity for each named executive officer, which is based on a percentage of his or her base salary. No changes were made to the target incentive opportunities of the named executive officers in 2015 other than for Ms. Good, whose target incentive opportunity was increased from 125 percent to 140 percent of her annual base salary, effective as of June 25, 2015, to bring her total cash compensation closer to the market median.

Name
Target Incentive Opportunity
(as a % of base salary)(1)

Lynn J. Good

140 %

Steven K. Young

80 %

Dhiaa M. Jamil

80 %

Julia S. Janson

80 %

Lloyd M. Yates

80 %
(1)
STI opportunities effective as of December 31, 2015. Each of Mr. Manly and Mr. Trent had a target incentive opportunity during the portion of 2015 during which he was employed equal to 80% of his base salary.
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COMPENSATION DISCUSSION AND ANALYSIS

As discussed in more detail below, the Compensation Committee established the following objectives under the STI Plan in February 2015 with the STI target opportunity allocated between corporate and individual objectives.

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In order to emphasize the importance of the EPS objective, the Compensation Committee established a circuit-breaker, providing that if an adjusted diluted EPS performance level of at least $4.20 was not achieved, the named executive officers would not have received any payout under the 2015 STI Plan. To encourage a continued focus on safety, the Compensation Committee also included a potential safety adder and penalty, each in the amount of five percent of a participant's entire STI payment.

Depending on actual performance, named executive officers were eligible to earn up to 183.75 percent of the amount of their STI target opportunity, based on a potential maximum payout of 200 percent for the EPS objective, a 150 percent potential maximum payout for the operational excellence, customer satisfaction and individual objectives, and a potential five percent safety adder.

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COMPENSATION DISCUSSION AND ANALYSIS

Corporate Objectives

The 2015 corporate objectives and the related target and performance results were as follows and are defined below:

Objective(1)
  Weight
  Threshold
(50%)

  Target
(100%)

  Maximum(2)
  Result
  Payout
 
Adjusted Diluted EPS(3)   50 % $ 4.35   $ 4.65   $ 4.95   $ 4.54   81.67 %
Operational Excellence(4)     20 %                           96.08 %

(a) Operations and Maintenance ("O&M") Expense

    $ 5.325B   $ 5.220B   $ 5.115B   $ 5.269B   76.67 %

(b) Reliability(5)

                                  70.66 %

Regulated Generation (Fossil/Hydro) Commercial Availability

    87.56 % 88.46 % 89.52 % 87.37 % 0 %

Nuclear Generation Capacity Factor

          91.40 %   93.29 %   95.18 %   94.21 %   124.34 %

System Average Interruption Duration Index ("SAIDI")

    133   124   114   131   61.11 %

Renewables Availability

          93.00 %   96.00 %   98.00 %   93.32 %   55.33 %

International Equivalent Availability

    88.9 % 90.9 % 92.9 % 91.4 % 112.5 %

(c) Safety/Environmental(6)

                                  140.91 %

Total Incident Case Rate ("TICR")

    0.63   0.55   0.43   0.41   150 %

Reportable Environmental Events ("REE")

          68     54     43     47     131.82 %
Customer Satisfaction ("CSAT")   10 % 751   761   769   752   55 %
(1)
For additional information about the calculation of the EPS and O&M expense control objectives, see page 52.

(2)
A payout of up to 200% of the target opportunity is available for the adjusted diluted EPS objective and a payout of up to 150% of the target opportunity is available for the Operational Excellence and CSAT objectives.

(3)
If an adjusted diluted EPS performance level of at least $4.20 was not achieved, the named executive officers would not have received a payout under the 2015 STI Plan.

(4)
Each of the three primary operational excellence objectives contains an equal weighting of one-third of the aggregate weighting of 20%.

(5)
The reliability objectives are calculated as described below. Each reliability metric contains an equal weighting of one-fifth of the aggregate weighting of the reliability objective.

(6)
The safety/environmental objectives are calculated as described below. Each safety/environmental metric contains an equal weighting of one-half of the aggregate weighting of the safety/environmental objective.

After the end of 2015, the Compensation Committee approved the following adjustments to the threshold, target and maximum adjusted diluted EPS performance levels under the 2015 STI Plan: (i) increased each of the threshold, target and maximum performance levels by $0.04 to negate the positive impact of our accelerated share repurchase program, which occurred approximately three months prior to the date assumed at the time the original adjusted diluted EPS performance levels were established under our 2015 STI Plan, and (ii) decreased each of the threshold, target and maximum performance levels by $0.04 to reflect the disposition of our Midwest Commercial Generation business approximately three months earlier than was assumed at the time the original adjusted diluted EPS performance levels were established under our 2015 STI Plan. The Compensation Committee also approved a reduction in each of the threshold, target and maximum performance levels for the O&M expense performance measure of $75 million to reflect the O&M expense budgeted for the Midwest Commercial Generation business for the portion of the year during which it was not owned.

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COMPENSATION DISCUSSION AND ANALYSIS

Reliability Metrics
  Description
Regulated Generation (Fossil/Hydro) Commercial Availability   A measure of regulated fossil generation reliability, determined as the weighted percentage of time the regulated fossil generation units are available to generate electricity, where the availability each hour is weighted by the difference between market price and unit cost.

Nuclear Generation Capacity Factor

 

A measure of the amount of electricity produced by a nuclear generating unit relative to the amount of electricity the unit is capable of producing.

System Average Interruption Duration Index (SAIDI)

 

A measure of the number of outage minutes experienced during the year per customer served from both transmission and distribution systems calculated in accordance with the applicable guidelines set forth in the IEEE Standard 1366-Guide for Electric Power Distribution Reliability Indices, including application of the "major event day" exclusions described therein.

Renewables Availability

 

A renewables energy yield metric, calculated by comparing actual generation to expected generation based on the wind speed measured at the turbine and by calculating the actual generation to expected generation based on solar intensity measures at the panels. The renewables energy yield is weighted 90% to wind and 10% to solar.

International Equivalent Availability

 

A measure of the amount of electricity that potentially could be produced by an international generating unit relative to the amount of electricity the unit is actually producing.

 

Safety/Environmental Metrics
  Description
Reportable Environmental Events (REE)   REE refers to environmental events resulting from Duke Energy operations that require notification to, or enforcement action by, a regulatory agency. We added this objective to emphasize service reliability and mitigate environmental risks associated with our operations.

Total Incident Case Rate (TICR)

 

TICR measures the number of occupational injuries and illnesses per 100 employees. This objective was added to emphasize our focus on achieving an event-free and injury-free workplace.

 

Customer Satisfaction Metric (CSAT)
   
Description   The CSAT metric is a composite of state level customer satisfaction results for North Carolina, South Carolina, Florida, Indiana, and Ohio/Kentucky.

Calculation

 

Results are based on the J.D. Power Electric Utility Residential Customer Satisfaction Index ("JDP CSI"), and internal surveys of customers through the Small/Medium Customer Perception Tracker ("SMB CPT") and the Large Business Perception Tracker ("LB CPT") using the following formula:

 

 

CSAT=0.50 (JDP CSI Score)+0.25 (SMB CPT Score)+0.25 (LB CPT Score)

 

 

The enterprise-wide CSAT score is calculated utilizing the state level CSAT scores, based on the following weights: NC (43%); SC (9%); FL (24%); IN (11%); and OH/KY (13%).
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COMPENSATION DISCUSSION AND ANALYSIS

Individual Objectives

The 2015 individual objectives were as follows:

GRAPHIC

*
Mr. Manly and Mr. Trent terminated employment in June 2015. Under the Executive Severance Plan, they were entitled to a pro rata amount of their annual bonus, determined based on the actual achievement of performance objectives. Mr. Manly's individual objectives for 2015 were: improve operational excellence and optimize performance with an emphasis on safety/reliability and event-free operations (5%), deliver value by leading the Commercial Portfolio in achieving growth initiatives and support the development of new initiatives (10%), and strengthen leadership effectiveness, enhance performance accountability, employee engagement and development (5%). Mr. Trent's individual objectives for 2015 were: improve operational excellence and optimize performance with an emphasis on safety/reliability and event-free operations (5%), achieve growth and financial results (5%), enhance customer focus (5%), and strengthen leadership effectiveness, enhance performance accountability, employee engagement and development (5%).

Safety Component

In order to encourage a continued focus on safety, the Compensation Committee included the following safety measures in the 2015 STI Plan:

Safety Penalty.  The STI Plan payments for each of the named executive officers were subject to a safety penalty of five percent if Duke Energy experienced more than 26 enterprise-wide serious injuries and fatalities ("SIF") or there was a significant operational event (including work-related employee or contractor fatalities).

Safety Adder.  The STI Plan payments of the named executive officers were also eligible for a safety adder that could result in an increase of five percent if: (i) there were no work-related fatalities of any Duke Energy employee or contractor during 2015, (ii) there were fewer than 19 SIFs during 2015, and (iii) there were no significant operational events.

There were 16 SIFs during 2015, which is less than the number (19) at which the safety penalty otherwise would apply. While five fatalities occurred during 2015, these fatalities were thoroughly investigated and determined not to be worker preventable. Therefore, consistent with the terms of the 2015 STI Plan, they are excluded from the calculation, resulting in the application of the safety adder such that payments under the 2015 STI Plan were increased by five percent for eligible employees.

Payouts

As a result of the aggregate corporate, operational and individual performance, each named executive officer's aggregate payout under the 2015 STI Plan was equal to:

Name*
  Payout
   
Lynn J. Good   $ 1,572,161    
Steven K. Young   $ 445,068    
Dhiaa M. Jamil   $ 532,795    
Julia S. Janson   $ 388,714    
Lloyd M. Yates   $ 480,464    
*
Mr. Manly and Mr. Trent, each of whom terminated employment in June 2015, were entitled to a pro rata amount of their annual bonus under the Executive Severance Plan, determined based on the actual achievement of performance objectives, in the amount of $212,322 and $220,978, respectively.
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COMPENSATION DISCUSSION AND ANALYSIS

Long-Term Incentive Compensation

Opportunities under the LTI program are provided to our named executive officers to provide appropriate balance to the STI Plan and to align executive and shareholder interests in an effort to maximize shareholder value.

2015 LTI Program

Each year, the Compensation Committee establishes the target LTI opportunity for each named executive officer, which is based on a percentage of his or her base salary. In order to bring Ms. Good's compensation closer to the market median, the Compensation Committee approved an increase in Ms. Good's target LTI opportunity from 450 percent to 600 percent of her annual base salary, effective June 25, 2015. At that time, Ms. Good was granted an additional 7,974 restricted stock units and 18,605 performance shares to reflect her increased LTI opportunity. The target 2015 LTI opportunities for Mr. Jamil and Ms. Janson were increased from 225 percent to 250 percent and from 175 percent to 200 percent, respectively, in order to bring their compensation levels closer to market median and for internal equity purposes. No changes were made to the target LTI opportunities of the other named executive officers for 2015.

Name
Target LTI Opportunity
(as a % of base salary)

Lynn J. Good

600 %

Steven K. Young

225 %

Dhiaa M. Jamil

250 %

Julia S. Janson

200 %

Lloyd M. Yates

225 %
*
The target LTI opportunities for Mr. Manly and Mr. Trent were 200% and 225%, respectively.

Under the 2015 LTI program, each named executive officer's LTI opportunity was provided in the form of restricted stock units and performance shares, as follows:

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The performance shares incorporate an objective based on Duke Energy's relative TSR for the three-year performance period from January 1, 2015, to December 31, 2017, as compared to the companies in the Philadelphia Utility Index, as follows:

TSR Percentile Ranking
Percent Payout
of Target
Performance Shares

90th or Higher

200 %

50th (Target)

100 %

25th

30 %

Below 25th

0 %

2013-2015 Performance Shares under the Duke Energy 2013 LTI Program

The 2013 performance share cycle commenced on January 1, 2013, and ended on December 31, 2015. The performance shares could be earned based on Duke Energy's relative TSR for the three-year period from January 1, 2013, to December 31, 2015, as compared to the companies in the Philadelphia Utility Index. The results and payout levels for the 2013-2015 performance shares are as follows:

Relative TSR Performance Percentile
Percent Payout of
Target 2013-2015
Performance Shares

Result
Payout of Target
 

90th or Higher

200 % 36.8th 63.2 %  

50th (Target)

100 %      

25th

30 %  

Below 25th

0 %      

Retirement and Welfare Benefits

Our named executive officers participate in the retirement and welfare plans generally available to other eligible employees. In addition, in order to attract and retain key executive talent, we believe that it is important to provide our named executive officers with certain limited retirement benefits that are offered only to a select group of management. The retirement plans that are provided to our named executive officers, including the plans offered only to a select group of management, are described on pages 59-62. These benefits are comparable to the benefits provided by peers of Duke Energy, as determined based on market surveys.

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COMPENSATION DISCUSSION AND ANALYSIS

Duke Energy provides the named executive officers with the same health and welfare benefits it provides to all other similarly situated employees, and at the same cost charged to all other eligible employees. The named executive officers also are entitled to the same post-retirement health and welfare benefits as those provided to similarly situated retirees.

Perquisites

In 2015, Duke Energy provided our named executive officers with certain other perquisites, which are disclosed in footnote 7 to the Summary Compensation Table on page 54. Duke Energy provides these perquisites as well as other benefits to certain executives in order to provide competitive compensation packages. The cost of perquisites and other personal benefits is not part of base salary and, therefore, does not affect the calculation of awards and benefits under Duke Energy's other compensation arrangements (i.e., retirement and incentive compensation plans).

Our named executive officers were eligible to receive the following perquisites and other benefits during 2015: (i) up to $2,500 for the cost of a comprehensive physical examination, (ii) reimbursement of expenses incurred for tax and financial planning services, which program is administered on a three-year cycle, such that participating executives can be reimbursed for up to $15,000 of eligible expenses during the three-year cycle, (iii) matching contributions from the Duke Energy Foundation of up to $5,000 to qualifying charitable institutions, and (iv) Chairman's Preferred Status at American Airlines.

In addition, Ms. Good may use corporate aircraft for personal travel in North America. With advance approval from the Chief Executive Officer, the other named executive officers may use the corporate aircraft for personal travel in North America. If Ms. Good or any other named executive officer uses the aircraft for personal travel, he or she must reimburse Duke Energy for the direct operating costs for such travel. However, Ms. Good is not required to reimburse Duke Energy for the cost of travel to the executive physical described above or to meetings of the board of directors of other companies on whose board she serves. For additional information on the use of the corporate aircraft, see footnote 7 to the Summary Compensation Table.

Compensation Peer Group

One of our core compensation objectives is to attract and retain talented executive officers through total compensation that generally is competitive with that of other executives and key employees of similarly sized companies with similar complexity, whether within or outside of the utility sector. The Compensation Committee has developed a customized peer group for review of executive compensation levels and plan design practices.

The customized peer group consists of 23 similarly-sized companies from the utility and general sectors, with the general industry companies also having satisfied at least one of the following characteristics: (i) operates in capital intensive industry, (ii) operates in a highly regulated industry, (iii) has significant manufacturing operations, or (iv) derives more than 50 percent of revenue in the United States. The customized combined peer group, which did not change in 2015, consists of:

Compensation Peer Group
3M   Dominion Resources *   FedEx   Monsanto
American Electric Power *   Dow Chemical   FirstEnergy *   NextEra Energy *
CenturyLink   DuPont   General Dynamics   PG&E Corp. *
Colgate-Palmolive   Eaton   International Paper   Southern *
Consolidated Edison *   Edison International *   Lockheed Martin   UPS
Deere & Co.   Exelon *   Medtronic    
*
Utility subset consisting of largest nine companies in the Philadelphia Utility Index.

The Compensation Committee also reviews executive compensation levels against a subset of the customized peer group consisting of the nine largest companies in the Philadelphia Utility Index. For those positions where the customized peer group does not provide an appropriate source of competitive market data, the Compensation Committee is provided with data from all companies in the Towers Watson Energy Services Executive Compensation database, which consists of 110 companies with aggregate revenues between $168 million and $51 billion, as listed on Appendix A, and/or the companies (with revenues in a range of approximately one-half to two times our revenues) in the Towers Watson General Industry Executive Compensation database, which consists of 144 companies with aggregate revenues between $10 billion and $54 billion, as listed on Appendix B.

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COMPENSATION DISCUSSION AND ANALYSIS

Severance and Change in Control Benefits

Employment Agreement with Ms. Good

Effective July 2013, Duke Energy entered into an employment agreement with Ms. Good that contains a three-year initial term and automatically renews for additional one-year periods at the end of the initial term unless either party provides 120 days' advance notice. In the event of a change in control of Duke Energy, the term automatically extends to a period of two years. Effective June 25, 2015, Ms. Good's employment agreement was amended to increase her base salary, STI opportunity, and LTI opportunity as described above in the section entitled "Elements of Duke Energy's Compensation Program" on page 44 of this proxy statement.

Upon a termination of Ms. Good's employment by Duke Energy without "cause" or by Ms. Good for "good reason" (each as defined in her employment agreement), Ms. Good would be entitled to the severance benefits as are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement. Ms. Good's employment agreement does not provide for golden parachute excise tax gross-up payments.

Severance Plan

The Executive Severance Plan provides varying levels of severance to the named executive officers other than Ms. Good. The Compensation Committee believes that this plan is appropriate in order to provide a consistent approach to executive severance and to provide eligible executives with certainty and security while they are focusing on their duties and responsibilities. Severance compensation would only be paid in the event that an eligible executive's employment is involuntarily terminated without "cause" or is voluntarily terminated for "good reason," and is subject to compliance with restrictive covenants (i.e., noncompetition). The severance compensation that would be paid in the event of a qualifying termination of employment to those senior executives who are identified as "Tier I Participants," including Mr. Young, Mr. Jamil, Ms. Janson, and Mr. Yates, generally approximates two times their annual compensation and benefits. The Executive Severance Plan prohibits the payment of severance if an executive also would be entitled to severance compensation under a separate agreement or plan maintained by Duke Energy, including the Change in Control Agreements described below. The Executive Severance Plan does not provide for golden parachute excise tax gross-up payments.

The benefit levels under the Executive Severance Plan are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement.

Mr. Manly and Mr. Trent terminated employment in June 2015 and in connection with their terminations, each executive was entitled to receive severance benefits under the Executive Severance Plan. The severance benefits received by each of Mr. Manly and Mr. Trent are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement.

Change in Control Agreements

Duke Energy has entered into Change in Control Agreements with the named executive officers other than Ms. Good. Under these agreements, each such named executive officer would be entitled to certain payments and benefits if (i) a change in control were to occur and (ii) within two years following the change in control, (a) Duke Energy terminates the executive's employment without "cause" or (b) the executive terminates his or her employment for "good reason." The severance provided by Duke Energy is generally two times the executive's annual compensation and benefits and becomes payable only if there is both a change in control and a qualifying termination of employment. The Compensation Committee approved the two times severance multiplier after consulting with its advisors and reviewing the severance provided by peer companies. The Change in Control Agreements do not provide for golden parachute excise tax gross-up payments.

Our restricted stock unit awards provide for "double-trigger" vesting in full (without pro-ration) upon a qualifying termination of employment in connection with a change in control. Our performance share awards provide for pro rata vesting at the target performance level in the event of a change in control (on a "single-trigger" basis, without regard to termination of employment).

The Compensation Committee believes these change in control arrangements are appropriate in order to diminish the uncertainty and risk to the executives' roles in the context of a potential or actual change in control. The benefit levels under the Change in Control Agreements and equity awards are described in more detail under the "Potential Payments Upon Termination or Change in Control" section on page 63 of this proxy statement.

Tax and Accounting Implications

Deductibility of Executive Compensation

The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that Duke Energy generally may not deduct, for federal income tax purposes, annual compensation in excess of $1 million paid to certain employees. Performance-based compensation paid pursuant to shareholder approved plans is not subject to the deduction limit as long as such compensation is approved by "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code and certain other requirements are satisfied.

Although the Compensation Committee generally intends to structure and administer executive compensation plans and arrangements so that they will not be subject to the deduction limit of Section 162(m) of the Code, the Compensation Committee may, from time to time, approve payments that

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COMPENSATION DISCUSSION AND ANALYSIS

cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs in the interests of shareholders. For example, restricted stock unit awards received by certain employees, and amounts paid to certain employees under the STI Plan with respect to individual objectives, may not be deductible for federal income tax purposes, depending on the amount and other types of compensation received by such employees.

Accounting for Stock-Based Compensation

Stock-based compensation represents costs related to stock-based awards granted to employees and members of the Duke Energy Board of Directors. Duke Energy recognizes stock-based compensation based upon the estimated fair value of the awards, net of estimated forfeitures at the date of issuance. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period or, for certain share-based awards, until the employee becomes retirement eligible, if earlier. Compensation cost is recognized as expense or capitalized as a component of property, plant and equipment.

Non-GAAP Financial Measures

As described previously in this Compensation Discussion and Analysis, Duke Energy uses various financial measures, including adjusted diluted EPS and O&M expense, in connection with short-term and long-term incentives. Adjusted diluted EPS is a non-GAAP financial measure as it represents diluted EPS from continuing operations attributable to Duke Energy Corporation common shareholders, adjusted for the per-share impact of the mark-to-market impacts of economic hedges in the Commercial Portfolio segment (formerly Commercial Power) and special items, including the operating results of the nonregulated Midwest Commercial Generation business ("Disposal Group") classified as discontinued operations for GAAP purposes. Duke Energy's management also uses adjusted diluted EPS as a measure to evaluate operations of Duke Energy. The O&M expense measure used for incentive plan purposes also is a non-GAAP financial measure as it represents GAAP O&M adjusted primarily for expenses recovered through rate riders, certain regulatory accounting deferrals and applicable special items. Special items represent certain charges and credits, which management believes will not be recurring on a regular basis, although it is reasonably possible such charges and credits could recur. Operating results of the Disposal Group sold to Dynegy Inc. are reported as discontinued operations, including a portion of the mark-to-market adjustments associated with derivative contracts. Management believes that including the operating results of the Disposal Group reported as discontinued operations better reflects its financial performance and therefore has included these results in adjusted diluted EPS prior to the sale of the Disposal Group in April 2015. Additionally, as a result of completing the sale of the Disposal Group during the second quarter of 2015, state income tax expense increased as state income tax apportionments changed. The additional tax expense was recognized in Continuing Operations on a GAAP basis. This impact to state income taxes has been excluded from the Commercial Portfolio segment for adjusted diluted EPS purposes as management believes these impacts are incidental to the sale of the Disposal Group. Derivative contracts are used in Duke Energy's hedging of a portion of the economic value of its generation assets in the Commercial Portfolio segment. The mark-to-market impact of derivative contracts is recognized in GAAP earnings immediately and, if associated with the Disposal Group, classified as discontinued operations, as such derivative contracts do not qualify for hedge accounting or regulatory treatment. The economic value of generation assets is subject to fluctuations in fair value due to market price volatility of input and output commodities (e.g., coal, electricity, natural gas). Economic hedging involves both purchases and sales of those input and output commodities related to generation assets. Operations of the generation assets are accounted for under the accrual method. Management believes excluding impacts of mark-to-market changes of the derivative contracts from adjusted earnings until settlement better matches the financial impacts of the derivative contract with the portion of economic value of the underlying hedged asset. Management believes that the presentation of adjusted diluted EPS provides useful information to investors, as it provides them an additional relevant comparison of Duke Energy's performance across periods. The most directly comparable GAAP measures for adjusted diluted EPS and O&M expense measures used for incentive plan purposes are reported diluted EPS from continuing operations attributable to Duke Energy Corporation common shareholders and reported O&M expense from continuing operations, which includes the impact of special items, mark-to-market impacts of economic hedges in the Commercial Portfolio segment and discontinued operations.

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Table of Contents

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table provides compensation information for our Chief Executive Officer (Ms. Good), our Chief Financial Officer (Mr. Young) and the three other most highly compensated executive officers who were employed on December 31, 2015 (Mr. Jamil, Ms. Janson and Mr. Yates). The table also provides compensation information for Mr. Manly and Mr. Trent, each of whom would have been among the three most highly compensated executive officers if they had remained employed with Duke Energy through December 31, 2015. The table provides information for 2013 and 2014 only to th