DEF 14A 1 d120749ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

Securities and Exchange Commission

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

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

Check the appropriate box:

 

¨   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-12

SPECTRA ENERGY CORP

(Name of Registrant as Specified in its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

x   No fee required.
¨   Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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¨   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Table of Contents

To Our

Shareholders

 

 

 

LOGO

 

Dear Shareholders,

 

2015 was a year that reaffirmed the fundamental strength and stability of Spectra Energy. In a year of challenge across the midstream energy sector, your company performed well, delivering on our commitments to create value for investors and serving the needs of our diverse stakeholders.

 

I am proud of our 2015 results, which we will again highlight during our Annual Meeting of Shareholders in Houston on April 26, 2016. I invite you to attend the meeting either in person or via our webcast.

 

I am also proud of the resolve and resilience our team demonstrates year after year. We are a company grounded in the fundamentals of reliable service, value creation, community partnership, environmental integrity – and the discipline it takes to deliver on those commitments.

 

Our financial and strategic plans are designed for long-term value creation. And while we are not entirely immune to the dramatic and recent drop in crude oil and natural gas liquids prices, we believe we are well positioned to weather down cycles without compromising our commitment to investors.

 

I count our dedication to sound and principled governance as one of Spectra Energy’s great strengths. Our board of directors ensures that the company operates at the highest levels of integrity, transparency and compliance. Further, our board is steadfastly committed to representing your needs and expectations, and members work closely with the management team in reviewing course-setting strategy and the capital investments designed to expand Spectra Energy’s market presence and earnings capacity.

 

We were pleased to expand our board in 2015 with the addition of Miranda Hubbs, who brings diverse perspective and extensive financial and energy expertise to the table.

 

Spectra Energy is uniquely positioned to help North America act upon the wealth of opportunities afforded by abundant, affordable energy. We have a proven record of execution, a deep bench of management experience and excellence, keen market insight, financial stability and solid values.

 

I thank you for your interest and investment and look forward to continued collaborative success.

 

Sincerely,

 

LOGO

Gregory L. Ebel

 

CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

  

LOGO

 

Dear Shareholders,

 

I am privileged and proud to serve as your company’s lead independent director. I am especially pleased to be in this role this year – a year of challenge across the industry – but a year of continued success for Spectra Energy.

 

Your company has many strengths, and is grounded in sound fundamentals. Most defining, from my perspective, are Spectra Energy’s core values – and the governance principles inspired by those values. Spectra Energy’s governance principles are designed and continually assessed to ensure that we operate our business responsibly, ethically and in a manner aligned with the interests of our investors and stakeholders. Your board’s governance structure is focused within four committees: audit, compensation, corporate governance and finance and risk – all comprised solely of independent directors. Information about the charters and membership of each committee can be found within this proxy, and on our website. In 2015, your board held 12 meetings and the committees of the board met a total of 26 times.

 

The rapidly shifting dynamics of today’s energy sector make risk management a key imperative, and each year the board reviews and prioritizes risks across four areas: financial, strategic, operational and legal. Additionally, at every meeting, the board is updated on risk trends, changes to previously identified risks as well as emerging risks. Importantly, the Finance and Risk Committee provides oversight on environmental, health and safety issues affecting the company.

 

Spectra Energy’s Audit Committee oversees the quality and integrity of the company’s financial statements and internal controls and compliance with legal and regulatory requirements.

 

The Compensation Committee of the board ensures that Spectra Energy executives are compensated in a manner that is fair, equitable, performance-based and guided by the long-term interests of investors.

 

And through our Corporate Governance Committee, we continuously review and refine the structure, composition, principles and guidelines of our board to serve your needs now and into the future. Under Pamela Carter’s able leadership, our Corporate Governance Committee delivered impressive results in 2015, including the adoption of proxy access, a mechanism that gives shareholders a meaningful voice in corporate board elections.

 

I appreciate your ongoing confidence in Spectra Energy and the board of directors. We are committed to serving your interests, and we welcome your thoughtful input always.

 

LOGO

Tony Comper

 

LEAD INDEPENDENT DIRECTOR

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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  LOGO

 

Notice of Annual Meeting

of Shareholders

 

 

                  
   

Where:

Spectra Energy Corp

Headquarters

5400 Westheimer Court

Houston, Texas 77056

 

When:

Tuesday, April 26, 2016

10:00 a.m. Central Time

    

At our Annual Meeting, shareholders will:

 

u Vote on the election of all directors for the coming year

 

u Vote to approve the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2016

 

u Vote on the approval of the Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated

 

u Vote on the approval of the Spectra Energy Corp Executive Short-Term Incentive Plan, as amended and restated

 

u Vote on an advisory resolution to approve our executive compensation

 

u Vote on the two shareholder proposals described in this proxy statement, if properly presented at the meeting

 

u Transact other business that may properly come before the meeting

   
            
            
            
   
                  

You are entitled to vote if you were a shareholder of record at the close of business on March 1, 2016. Even if you plan to attend the Annual Meeting in person, please cast your vote as soon as possible. You may vote by Internet, by telephone, or by completing and mailing your proxy card. If you attend the Annual Meeting and wish to change your vote at that time, you will be able to withdraw any previously submitted proxy and vote in person.

By Order of the Board of Directors

 

LOGO

Patricia M. Rice

Vice President, Deputy General Counsel and Secretary

March 16, 2016

Houston, Texas

For specific voting information, see “Annual Meeting Information” beginning on page 69 of this proxy statement.

 

Your vote is important. Please complete, sign, date and return your proxy or submit your vote by telephone or the Internet. See page 1 for the weblink and the toll-free telephone number for shareholder voting.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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Table of Contents

 

Notice of Annual Meeting of Shareholders         
Proxy Summary      1   
Proposal 1: Election of Directors      4   
Information on our Nominees      4   
Corporate Governance      10   
  Independent Directors      10   
  Board Leadership Structure      10   
  Risk Oversight      11   
  Board Meetings and Attendance      11   
  Board Committees      12   
  Board and Committee Performance Evaluations      13   
  Transactions with Related Persons      14   
Report of the Corporate Governance Committee      15   
Director Compensation      18   
Stock Ownership Information      19   
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2016      20   
Report of the Audit Committee      22   
Proposal 3: Approval of Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated      23   
Proposal 4: Approval of Spectra Energy Corp Executive Short-Term Incentive Plan, as amended and restated      30   
Proposal 5: Advisory Vote Approving Executive Compensation      32   
Report of the Compensation Committee      33   
Compensation Discussion and Analysis      34   
  2015 Summary      34   
  Summary of Compensation Philosophy      34   
  Compensation-Setting Process      36   
  Factors Considered in Determining Total Compensation      38   
  Elements of Our Compensation Program      39   
  2015 Compensation      41   
  2016 Compensation      48   
  Retirement and Other Benefits      49   
  Other Compensation Policies      50   
Compensation Tables      52   
Shareholder Proposals      62   
  Proposal 6: Political Contributions      62   
  Proposal 7: Lobbying Disclosures      64   
Other Information      66   

 

 

 

Annual Meeting Information

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 26, 2016. The proxy statement, our 2015 Annual Report to Shareholders and our 2015 Annual Report on Form 10-K are available at www.proxyvote.com.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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Unless stated otherwise or the context otherwise requires, all references in this proxy statement to “us,” “we,” “our,” “Company” or “Spectra Energy” are to Spectra Energy Corp.

Proxy Summary

In this summary, we highlight certain information you will find in this proxy statement. Please review the entire proxy statement carefully before casting your vote. Distribution of this proxy statement and form of proxy to shareholders began on or about March 16, 2016.

 

 

Spectra Energy 2016 Annual Meeting of Shareholders

 

Tuesday, April 26, 2016

10:00 a.m. Central Time

Spectra Energy Corp Headquarters

5400 Westheimer Court

Houston, Texas 77056

Who May Vote: You are entitled to vote if you held Spectra Energy shares as of the record date for this meeting, which was March 1, 2016.

Admission to the Meeting: Spectra Energy shareholders as of the record date are entitled to attend the Annual Meeting. In accordance with our security procedures, you must present a government-issued photo identification to attend the meeting.

If your shares are held in the name of your broker, bank or other nominee and you wish to vote at the Annual Meeting, you must bring an account statement or letter from the nominee indicating that you were the owner of the shares as of March 1, 2016.

Meeting Webcast: If you cannot attend in person, we invite you to access a live webcast of the meeting via the Investors section of Spectra Energy’s website. You may also listen in by conference call at 888-252-3715 (United States or Canada) or 706-634-8942 (international callers). The conference code is 69037464. Please call 5 to 10 minutes prior to the scheduled start time.

 

 

VOTING RECOMMENDATIONS

 

Proposal
Number
   Subject of Proposal   Recommended Vote    For details
see pages
starting on
1   

Election of directors for the coming year

 

FOR the proposal

   4
2   

Approval of the Board’s selection of independent auditor

 

FOR the proposal

   20
3   

Approval of Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated

 

FOR the proposal

   23
4   

Approval of Spectra Energy Corp Executive Short-Term Incentive Plan, as amended and restated

 

FOR the proposal

   30
5   

Non-binding approval of executive compensation

 

FOR the proposal

   32
6   

Shareholder proposal – political contributions

 

AGAINST the proposal

   62
7   

Shareholder proposal – lobbying disclosures

 

AGAINST the proposal

   64

 

                 
         

Your vote is important, so please

cast your vote as soon

as possible by:

  LOGO  

 

Internet at

  www.proxyvote.com  

 

  LOGO  

 

  Toll-free call from the
United States

or Canada at

1-800-690-6903

  LOGO  

 

  Mailing your signed  

proxy or voting

instruction form

  LOGO  

 

 Scanning this QR code

to vote with your

mobile device

                 

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      1


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PROXY SUMMARY

 

 

Board Nominees

 

Name   Principal Occupation   Director Since    Committee Service

 

Gregory L. Ebel

Chairman

 

 

President and Chief Executive Officer,

Spectra Energy Corp

  2008     

F. Anthony Comper

Lead Independent Director

 

Retired President and Chief Executive Officer,

BMO Financial Group

  2007   

Audit

Corporate Governance

Austin A. Adams

 

Retired Executive Vice President and Chief

Information Officer, JPMorgan Chase & Co.

  2007   

Audit

Corporate Governance

Joseph Alvarado

  Chairman, President and Chief Executive Officer, Commercial Metals Company   2011   

Compensation

Finance and Risk

Pamela L. Carter

  Retired President, Cummins Distribution Business   2007   

Compensation

Corporate Governance (Chair)

Clarence P. Cazalot Jr

  Retired Executive Chairman, President and Chief Executive Officer, Marathon Oil Corporation   2013   

Compensation

Finance and Risk

Peter B. Hamilton

  Retired Senior Vice President and Chief Financial Officer, Brunswick Corporation   2007   

Audit (Chair)

Corporate Governance

Miranda C. Hubbs

  Former Executive Vice President and Managing Director, McLean Budden   2015   

Audit

Finance and Risk

Michael McShane

  Former Chairman, President and Chief Executive Officer, Grant Prideco, Inc.   2008   

Audit

Finance and Risk (Chair)

Michael G. Morris

  Retired Chairman, President and Chief Executive Officer, American Electric Power   2013   

Compensation

Finance and Risk

Michael E.J. Phelps

  Chairman, Dornoch Capital Inc.   2006   

Compensation (Chair)

Finance and Risk

Governance Highlights

We are committed to strong and sustainable corporate governance, which promotes the long-term interests of our shareholders, strengthens Board and management accountability, and helps build public trust in our Company. Highlights of our commitment to strong corporate governance include:

 

  Annual Election of all Directors

 

  Majority Voting for Directors

 

  10 out of 11 Director Nominees are Independent

 

  Independent Lead Director

 

  Independent Audit, Compensation and Corporate Governance Committees

 

  Independent Finance and Risk Committee

 

  Regular Executive Sessions of Independent Directors
  Risk Oversight by Board and Committees

 

  Annual Board and Committee Self-Evaluations

 

  Annual Shareholder Advisory Approval of Executive Compensation

 

  Political Contributions Policy

 

  Long-standing Active Shareholder Engagement

 

  Share Ownership Guidelines for Directors and Executives

 

  Transparent Public Policy Engagement
  Executive Compensation Driven by Pay-For Performance Philosophy

 

  Equity Awards with Clawback Provisions

 

  No Shareholder Rights Plan or “Poison Pill”

 

  Initiatives on Sustainability, Environmental Matters and Social Responsibility

 

  By-Laws Provide for Proxy Access by Shareholders
 

 

 

2      SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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PROXY SUMMARY

 

 

Performance Overview

 

 

 

2015 Highlights

 

    Continued increase in annual dividend

 

    Generated strong cash flows from fee-based assets

 

    Placed growth projects into service

 

    Growth projects supported by firm, fee-based contracts

 

 

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SPECTRA ENERGY CORP 2016 PROXY STATEMENT      3


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Proposal 1:

Election of Directors

Based on recommendations from the Corporate Governance Committee, our Board has nominated the following 11 individuals for election to the Board:

 

  Gregory L. Ebel, our Chairman, President and Chief Executive Officer;

 

  F. Anthony Comper, our Lead Director (independent); and

 

  our other independent nominees: Austin A. Adams, Joseph Alvarado, Pamela L. Carter, Clarence P. Cazalot Jr, Peter B. Hamilton, Miranda C. Hubbs, Michael McShane, Michael G. Morris and Michael E. J. Phelps.

All the nominees are current members of our Board. Each nominee is standing for election to a one-year term that will expire at the 2017 Annual Meeting. If any nominee is unable to stand for election, the Board may either reduce the number of directors or designate a substitute. If the Board chooses to designate a substitute, shares represented by proxies may be voted for that substitute. We do not expect that any nominee will be unavailable or unable to serve.

Information on our Nominees

We believe that all nominees are well qualified to fulfill their responsibilities. Their qualifications include strong leadership ability, global business experience, financial and industry expertise and experience in law and public policy. The characteristics we look for in any director candidate include intelligence, perceptiveness, good judgment, maturity, high ethical standards, integrity and fairness, professional compatibility with our other directors and executives, and diversity that enhances the perspective and experience of our Board.

 

 

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Gregory L. Ebel    Chairman, President and Chief Executive Officer, Spectra Energy
   

LOGO

 

Age 51

 

Director since
2008

 

SKILLS AND QUALIFICATIONS:

 

Serves as our Chairman, President and CEO

 

Served as our Chief Financial Officer and in other leadership positions in operations, strategic development, and government and investor relations

  

Served as President of Union Gas Limited, one of our Canadian subsidiaries

 

KEY EXPERIENCE:

  Before assuming his current position as President and CEO on January 1, 2009, Mr. Ebel served as Spectra Energy’s Group Executive and Chief Financial Officer beginning in January 2007. Prior to that time, he served as President of Union Gas Limited from January 2005 until January 2007, and Vice President, Investor & Shareholder Relations of Duke Energy Corporation from November 2002 until January 2005. Mr. Ebel joined Duke Energy in March 2002 as Managing Director of Mergers and Acquisitions in connection with Duke Energy’s acquisition of Westcoast Energy Inc. Mr. Ebel is Chairman, President and Chief Executive Officer of our master limited partnership, Spectra Energy Partners, LP (“SEP”), and he is also a director of our joint venture entity, DCP Midstream, LLC.
   
   

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

    The Mosaic Company (current).

 

 

4      SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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PROPOSAL 1: ELECTION OF DIRECTORS

Information on Our Nominees

 

 

F. Anthony Comper    Retired President and Chief Executive Officer, BMO Financial Group
   

LOGO

 

Age 70

 

SKILLS AND QUALIFICATIONS:

 

Experience as both chairman and CEO of a large global financial institution

 

Financial expertise, including extensive experience with capital markets transactions and risk management

  

Significant knowledge of the Canadian marketplace and Canadian political and regulatory environments

 

 

KEY EXPERIENCE:

 

Director since

2007 and

Lead Director since

2014

  Mr. Comper is the retired President and Chief Executive Officer and former director of BMO Financial Group, a diversified financial services organization and one of the largest banks in North America. He was appointed to those positions in February 1999 and served as Chairman from July 1999 to May 2004. He previously served on the Board of Directors of BMO Financial Group.

 

Austin A. Adams    Retired Executive Vice President and Chief Information Officer, JPMorgan Chase & Co.
   

LOGO

 

Age 72

 

Director since
2007

 

SKILLS AND QUALIFICATIONS:

 

Expertise in information technology and security, risk management and strategy, and human resources

 

Experience leading and collaborating with senior management teams

 

Strategic expertise, including extensive involvement with mergers and acquisitions

  

Experience that enables him to help the Audit Committee and Board assess technology, security, regulatory and other types of risk, which is particularly helpful given the importance of these issues in our daily operations

 

KEY EXPERIENCE:

  Mr. Adams is the retired Executive Vice President and Chief Information Officer of JPMorgan Chase & Co., a global financial services firm. He assumed that role upon the 2004 merger of JPMorgan Chase and Bank One Corporation and served in that position until he retired in October 2006. Before joining Bank One in 2001, Mr. Adams served as Chief Information Officer at First Union Corporation, now Wells Fargo Corp.
   
   

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

    CommScope Holding Company, Inc. (current); CommunityONE Bank, N.A. (former); Dun & Bradstreet Corporation (former); and First Niagara Financial Group (current).

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      5


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PROPOSAL 1: ELECTION OF DIRECTORS

Information on Our Nominees

 

 

Joseph Alvarado     Chairman, President and Chief Executive Officer, Commercial Metals Company
   

LOGO

 

Age 63

 

Director since
2011

 

SKILLS AND QUALIFICATIONS:

 

Current CEO of Commercial Metals Company, a major corporation with international operations

 

Variety of executive management positions provide our Board excellent perspective

  

As an active CEO, deals with many of the same issues we face at Spectra Energy, including highly competitive industries, operational and manufacturing issues, safety, and diverse and changing regulatory environments

 

KEY EXPERIENCE:

  Mr. Alvarado is Chairman, President and Chief Executive Officer of Commercial Metals Company (“CMC”), a manufacturer, recycler and marketer of steel and other metals and related products. Mr. Alvarado joined CMC in April 2010 as Executive Vice President and Chief Operating Officer, was named President and Chief Operating Officer in April 2011, and became President and CEO in September 2011. He has been a member of CMC’s board since September 2011 and Chairman since January 2013. Prior to joining CMC, he was President and Chief Operating Officer of Lone Star Technologies, Inc. from 2004 to 2007. In 2007, following the acquisition of Lone Star Technologies, Inc. by United States Steel Corporation, Mr. Alvarado was named President of U.S. Steel Tubular Products, Inc., a division of United States Steel Corporation.
     

 

Pamela L. Carter     Retired President, Cummins Distribution Business
   

LOGO

 

Age 66

 

Director since
2007

 

SKILLS AND QUALIFICATIONS:

 

A diverse background that includes experience in law, government, politics and business

 

Knowledge of macro-economic global conditions

 

A valuable and dynamic international business perspective

  

First woman and first African-American elected as Attorney General of Indiana and first African-American female elected to the state attorney general post in the nation

 

Significant experience in, and insight into, global operations, government relations, governance and public policy issues (particularly valuable in her role as Chair of our Corporate Governance Committee)

 

KEY EXPERIENCE:

  Ms. Carter is the retired President of Cummins Distribution Business, a division of Cummins Inc., a global manufacturer of diesel engines and related technologies. She assumed that role in 2008 and served in that position until she retired in April 2015. She previously served as President – Cummins Filtration, then as Vice President and General Manager of Europe, Middle East and Africa business and operations for Cummins Inc. since 1999. Ms. Carter served as Vice President and General Counsel of Cummins Inc. from 1997 to 1999. Prior to joining Cummins Inc., she served as the Attorney General for the State of Indiana from 1993 to 1997. In 2010, Ms. Carter was appointed to the Export-Import Bank of the United States’ sub-Saharan Africa Advisory Council.
   
   

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

    CSX Corporation (current) and Hewlett Packard Enterprise Company (current).

 

 

6      SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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PROPOSAL 1: ELECTION OF DIRECTORS

Information on Our Nominees

 

 

 

Clarence P. Cazalot Jr    Retired Executive Chairman, President and Chief Executive Officer, Marathon Oil

Corporation

   

LOGO

 

Age 65

 

Director since
2013

 

SKILLS AND QUALIFICATIONS:

 

A highly respected energy executive with more than 40 years of industry experience

 

Extensive exploration and production expertise (a valuable addition as we expand a strong footprint in the transportation and storage of crude oil and liquids)

  

Experience as a board member of public companies with international operations

 

Lead Director of FMC Technologies

 

KEY EXPERIENCE:

  Mr. Cazalot is the retired Executive Chairman, President and Chief Executive Officer of Marathon Oil Corporation (“Marathon”). He was Executive Chairman of Marathon from August 2013 to December 2013; Chairman from 2011 to 2013; and President, Chief Executive Officer and director from 2002 to August 2013. From 2000 to 2001, he served as Vice Chairman of USX Corporation and President of Marathon. Mr. Cazalot held various executive positions with Texaco Inc. from 1972 to 2000. He is a member of the Advisory Board of the James A. Baker III Institute for Public Policy, the Board of visitors of Texas M.D. Anderson Cancer Center, the Memorial Hermann Health Care Systems Board and the LSU Foundation.
   
   

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

    Baker Hughes Incorporated (current) and FMC Technologies (current).

 

Peter B. Hamilton    Retired Senior Vice President and Chief Financial Officer, Brunswick Corporation
   

LOGO

 

Age 69

 

Director since
2007

 

SKILLS AND QUALIFICATIONS:

 

An experienced senior executive with sound business acumen and experience that includes legal and regulatory matters, finance and operations

 

Well-versed in the operations of a large diversified corporation, with a particular focus on manufacturing, operations, supply chain, labor relations and customer issues

  

His experience in finance and public-company governance enables him to make valuable contributions to our Board’s Audit and Corporate Governance committees (particularly valuable in his role as Chair of our Audit Committee)

 

KEY EXPERIENCE:

  Mr. Hamilton is the retired Senior Vice President and Chief Financial Officer of Brunswick Corporation, a global designer, manufacturer and marketer of recreation products. He held that position from September 2008 to February 2013. He previously served as a director of Brunswick Corporation. He retired from the Brunswick Corporation Board in 2007. He was Vice Chairman of Brunswick Corporation from 2000 to January 2007; President – Brunswick Boat Group in 2006; President – Life Fitness Division from 2005 to 2006; and President – Brunswick Bowling & Billiards from 2000 to 2005.
   
   

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

    SunCoke Energy, Inc. (current) and Oshkosh Corporation (current).

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      7


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PROPOSAL 1: ELECTION OF DIRECTORS

Information on Our Nominees

 

 

Miranda C. Hubbs    Former Executive Vice President and Managing Director, McLean Budden
   

 

LOGO

 

Age 49

 

Director since

2015

 

SKILLS AND QUALIFICATIONS:

 

Significant financial, accounting and business experience in Canadian energy markets

 

Former Executive Vice President and Managing Director of a large Canadian financial services company

  

Former energy research analyst and investment banker with a large Canadian brokerage firm

 

 

KEY EXPERIENCE:

 

Ms. Hubbs is a former Executive Vice President and Managing Director of McLean Budden, one of Canada’s largest institutional asset managers, with over $30 billion in assets under management prior to its sale in 2011 to Sun Life Financial. Before joining McLean Budden in 2002, she served as an energy research analyst and investment banker with Gordon Capital, a large Canadian brokerage firm. Ms. Hubbs received Brendan Wood International TopGun Awards in 2010 as one of the Top 50 Portfolio Managers in Canada and in 2011 as one of the TopGun Investment Minds in Oil and Gas in Canada.

 

Ms. Hubbs is a member of the Canadian Red Cross National Audit and Finance Committee as well as a founding member and the National Co-Chair of the Canadian Red Cross Tiffany Circle Society of Women Leaders.

   
   

OTHER PUBLIC COMPANY DIRECTORSHIPS DURING PAST FIVE YEARS:

    Agrium Inc. (current).

 

Michael McShane    Former Chairman, President and Chief Executive Officer, Grant Prideco, Inc.
   

LOGO

 

Age 61

 

Director since
2008

 

SKILLS AND QUALIFICATIONS:

 

A seasoned leader and chief financial officer within the energy industry, with expansive knowledge of the oil and gas sectors

 

Relationships with chief executives and other senior management at oil and natural gas companies and oilfield service companies around the world

 

Former chairman and CEO of a leading North American drill bit technology and drill pipe manufacturer

  

Brings to the Board a producer perspective that enhances strategic discussions

 

His significant financial and accounting experience makes him highly qualified to serve on our Audit Committee (particularly valuable in his role as Chair of our Finance and Risk Committee)

 

 

KEY EXPERIENCE:

    Mr. McShane served as a director and as President and Chief Executive Officer of Grant Prideco, Inc. from June 2002 and assumed the role of Chairman of the Board of Grant Prideco beginning in May 2004. Mr. McShane retired from Grant Prideco following its acquisition by National Oilwell Varco, Inc. in April 2008. Prior to joining Grant Prideco, Mr. McShane was Senior Vice President-Finance and Chief Financial Officer and director of BJ Services Company LLC beginning in 1990. Mr. McShane serves as an Advisor to Advent International Corporation, a global private equity firm. Mr. McShane also serves as an advisor to TPH Asset Management, LLC.
   
   

OTHER PUBLIC COMPANY DIRECTORSHIPS DURING PAST FIVE YEARS:

    Superior Energy Services, Inc. (current); Forum Energy Technologies Inc. (current); and Oasis Petroleum Inc. (current).

 

 

8      SPECTRA ENERGY CORP 2016 PROXY STATEMENT


Table of Contents

 

LOGO

 

 

PROPOSAL 1: ELECTION OF DIRECTORS

Information on Our Nominees

 

 

Michael G. Morris    Retired Chairman, President and Chief Executive Officer, American Electric Power

Company, Inc.

   

 

LOGO

 

Age 69

 

Director since
2013

 

SKILLS AND QUALIFICATIONS:

 

  A seasoned executive responsible for the management of complex, regulated business operations, with significant experience in areas relevant to our business

 

  Considerable knowledge of the energy industry

  

  Extensive experience in corporate governance and leadership

 

  Experience as a senior executive with multi-state gas and electric utility companies

 

KEY EXPERIENCE:

  Mr. Morris is the retired Chairman, President and Chief Executive Officer of American Electric Power Company, Inc. (“AEP”). He retired as Chairman of AEP in December 2013 and as Chief Executive Officer of AEP in November 2011. He served as a director of AEP until April 2014. Mr. Morris joined AEP as Chairman, President and Chief Executive Officer in January 2004. Prior to joining AEP, Mr. Morris was Chairman, President and Chief Executive Officer of Northeast Utilities System from 1997 to 2003. Prior to joining Northeast Utilities, Mr. Morris was President and Chief Executive Officer of Consumers Energy, a principal subsidiary of CMS Energy, and President of CMS Marketing, Services and Trading. He was previously President of Colorado Interstate Gas Co. and Executive Vice President of marketing, transportation and gas supply for ANR Pipeline Co., both subsidiaries of El Paso Energy.
   
   

OTHER PUBLIC COMPANY DIRECTORSHIPS DURING PAST FIVE YEARS:

    Alcoa Inc. (current); L Brands, Inc. (current); and The Hartford Financial Services Group (current).

 

Michael E.J. Phelps    Chairman, Dornoch Capital Inc.
   

 

LOGO

 

Age 68

 

Director since
2006

 

SKILLS AND QUALIFICATIONS:

 

  Extensive management, finance and industry experience

 

  Deep knowledge of the North American energy industry and the political/regulatory environment

 

  Energy-development experience in Indonesia, China and Mexico

 

  Brings a valuable Canadian perspective that is particularly helpful since a substantial portion of our assets and employees are in Canada

  

  Prior experience as chairman and CEO of Westcoast Energy Inc., a Canadian subsidiary of Spectra Energy, is valuable in the development of our business in North America and internationally and in managing cross-border relationships

 

  Appointed by the Government of Canada to chair a committee to review the regulation of securities markets

 

  Long-term member and chairman of various compensation committees (particularly valuable in his role as Chair of our Compensation Committee)

   
   

KEY EXPERIENCE:

    Mr. Phelps is Chairman and founder of Dornoch Capital Inc., a private investment company. Prior to forming Dornoch in 2002, he served as President and Chief Executive Officer, and as Chairman and Chief Executive Officer of Westcoast Energy Inc., Vancouver, BC. Mr. Phelps has been actively involved in the Interstate Natural Gas Association of America, the North American association representing interstate and interprovincial natural gas pipeline companies.
   
   

OTHER PUBLIC COMPANY DIRECTORSHIPS DURING PAST FIVE YEARS:

    Marathon Oil Corporation (current) and Canadian Pacific Railway Company (former).

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      9


Table of Contents

 

LOGO

 

 

 

Corporate Governance

Our Board recognizes that excellence in corporate governance is essential to carrying out its responsibilities to our shareholders. The framework for our corporate governance can be found in our Principles for Corporate Governance, our Code of Business Ethics, and the charters of the Audit Committee, the Compensation Committee, the Corporate Governance Committee and the Finance and Risk Committee. You can access these governance materials on our website at www.spectraenergy.com in the “Corporate Governance” section. You can receive printed copies upon request.

Independent Directors

In exercising their duties to our shareholders, our Board members should not be conflicted in any way. To minimize potential conflicts, the only member of our Board who is not independent is our Chairman, President and Chief Executive Officer.

In accordance with the standards for companies listed on the New York Stock Exchange (“NYSE”), the Board considers a director to be independent if it has affirmatively determined that the director has no material relationship with Spectra Energy or its consolidated subsidiaries, either directly or as a shareholder, director, officer or employee of an organization that has a relationship with us or our subsidiaries. The Board makes independence determinations when it approves director nominees for election at the Annual Meeting and also whenever a new director joins the Board between Annual Meetings.

For 2015, the Board determined that none of Spectra Energy’s independent directors, nor any member of their immediate families, had a material relationship with our Company or its subsidiaries. All of these independent director nominees (Messrs. Adams, Alvarado, Cazalot, Comper, Hamilton, McShane, Morris, Phelps, and Mses. Carter and Hubbs) are therefore independent under the NYSE’s listing standards. In reaching this conclusion, the Board considered all transactions and relationships between each such nominee (or any member of his or her immediate family) and our Company and its subsidiaries.

To assist in its independence determinations, the Board has adopted specific standards under which certain relationships are deemed not to impair a director’s independence. Please see “Other Information” beginning on page  66 of this proxy statement for more details.

Board Leadership Structure

One of the Board’s key responsibilities is determining the appropriate leadership structure for the Board, which helps ensure its effective and independent oversight of management on behalf of the Company’s shareholders. The Board has chosen one independent director, F. Anthony Comper, to serve as its Lead Director, while our President and Chief Executive Officer, Gregory L. Ebel, serves as Chairman of the Board.

We believe that our Board leadership structure is appropriate for Spectra Energy because it allows one person to speak for and lead both the Company and the Board, while also providing for effective oversight by an independent board through an independent lead director. The Board reviews its leadership structure and has the flexibility to revise it at any time as it deems appropriate.

In his role as Lead Director, Mr. Comper has broad authority and responsibility over Board governance and operations. His responsibilities, described in our Principles for Corporate Governance, include:

 

  presiding at Board meetings at which the Chairman is not present, including executive sessions of the independent directors, which are held after each Board meeting;

 

  consulting with the Chairman on Board meeting agendas;

 

  calling meetings of independent directors and setting agendas for executive sessions;

 

 

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CORPORATE GOVERNANCE

Risk Oversight

 

 

 

  serving as a liaison between the Chairman and the independent directors;

 

  approving meeting schedules to ensure that there is sufficient time for discussions; and

 

  representing the Board from time to time in consultations or direct communications with shareholders.

Risk Oversight

The Board is responsible for overseeing our risk management process. Acting as a whole, the Board exercises its oversight responsibility with respect to certain business risks that we face, including strategic and competitive risks and risks related to succession of our Chief Executive Officer and other members of management. The Board exercises additional risk oversight responsibilities through its committees, which are comprised solely of independent directors. Each such committee has primary risk oversight responsibility with respect to all matters within the scope of its duties as contemplated by its charter and as described in the table below.

 

Board Committee   Areas of Risk Oversight    Additional Information

Audit Committee

  Financial reporting, internal control, legal, compliance and technology risks    Receives regular reports from management regarding risks faced in our business, including operational and project risks. As noted below, the Finance and Risk Committee also receives these types of reports.
Compensation Committee   Compensation programs    Management has undertaken, and the Compensation Committee has reviewed, an evaluation of any incentives created by our compensation programs that may encourage our employees to take risks. Based upon that evaluation, the Committee has concluded that Spectra Energy’s compensation programs do not encourage unnecessary or excessive risks that are reasonably likely to result in a material adverse effect on the Company.
Finance and Risk Committee   Credit, commodity, environment, health & safety, financial risks; and overseeing company-wide risk management and risk management governance structure    Together with the Audit Committee, receives regular reports from management regarding risks our business faces, including operational and project risks.

Board Meetings and Attendance

Our Board held 12 meetings during 2015 and the committees of the Board met a total of 26 times. All of the directors attended at least 95% of the meetings of the Board and meetings of the committees on which they served during fiscal year 2015. Directors are encouraged to attend the Annual Meeting, and all Board members attended our 2015 Annual Meeting.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      11


Table of Contents

 

LOGO

 

 

CORPORATE GOVERNANCE

Board Committees

 

 

Board Committees

The Board has four standing committees – Audit; Compensation; Corporate Governance; and Finance and Risk. Each committee operates under a written charter adopted by the Board. The charters are posted on our website at www.spectraenergy.com in the “Corporate Governance” section. The charters are available in print to any shareholder upon request.

 

Audit Committee
   

Chair

Hamilton

 

Other Members

Adams

Comper

Hubbs

McShane

 

10 Meetings

Held in 2015

 

The Audit Committee’s responsibilities include:

 

 

selecting and hiring an independent public accounting firm to conduct audits of our accounting and financial reporting activities and those of our subsidiaries

 

approving all audit and permissible non-audit services that our accounting firm provides

 

reviewing with the accounting firm the scope and results of its audits

 

reviewing with the accounting firm our accounting procedures, internal controls, and accounting and financial reporting policies and practices, as well as those of our subsidiaries

 

reporting and making recommendations to the Board as it deems appropriate

 

providing oversight for all matters related to the security of information technology systems and procedures

 

overseeing our ethics and compliance activities

 

 

 

See page 21 for additional information on the Audit Committee’s pre-approval policy.

 

The Board has determined that each member of the Audit Committee is “independent” under the NYSE’s listing standards, applicable securities regulations, and the Company’s categorical standards for independence. The Board has also determined that Messrs. Comper, Hamilton, McShane and Ms. Hubbs are “audit committee financial experts” as defined by the Securities and Exchange Commission (“SEC”).

 

 

Compensation Committee
   

Chair

Phelps

 

Other Members

Alvarado

Carter

Cazalot

Morris

 

5 Meetings

Held in 2015

 

The Compensation Committee’s responsibilities include:

 

 

establishing and reviewing our overall executive compensation philosophy and approving changes to our compensation program

 

reviewing and approving corporate goals and objectives relevant to our CEO’s compensation and evaluating his performance in light of those goals and objectives

 

reviewing and approving annual salaries, short-term and long-term incentive opportunities, and results and other benefits for our CEO and other executive officers

 

reviewing and approving any agreement that we enter into with an executive officer

 

approving equity grants under our Long-Term Incentive Plan

 

reviewing and discussing with management our compensation-related disclosures

 

 

The Board has determined that each member of the Compensation Committee is “independent” under the NYSE’s listing standards and the Company’s categorical standards for independence, a “non-employee director” under the Securities Exchange Act Rule 16b-3, and an “outside director” as defined in Section 162(m) of the Internal Revenue Code.

 

 

 

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CORPORATE GOVERNANCE

Board and Committee Performance Evaluations

 

 

 

Corporate Governance Committee
   

Chair

Carter

 

Other Members

Adams

Comper

Hamilton

 

5 Meetings

Held in 2015

 

The Corporate Governance Committee’s responsibilities include:

 

 

making recommendations on the size and composition of the Board and its committees

 

making recommendations on the compensation of independent directors

 

recommending potential CEO candidates as part of our succession-planning process

 

recommending qualified and suitable individuals to fill Board vacancies when they occur (and hiring external search firms or other third parties to help identify and evaluate potential nominees)

 

recommending the slate of director nominees for each year’s Annual Meeting, including any nominees recommended by shareholders

 

overseeing the self-evaluation of the Board and its committees

 

reviewing any conflict of interest involving officers and directors

 

 

The Board has determined that each member of the Corporate Governance Committee is “independent” under the NYSE’s listing standards and the Company’s categorical standards for independence.

 

 

Finance and Risk Committee
   

Chair

McShane

 

Other Members

Alvarado

Cazalot

Hubbs

Morris

Phelps

 

5 Meetings

Held in 2015

 

The Finance and Risk Committee’s responsibilities include:

 

 

reviewing our overall financial and fiscal affairs and making recommendations to the Board regarding dividends, financing and fiscal policies

 

reviewing our financial exposure and the strategies used to mitigate risk

 

reviewing our risk exposure as it relates to earnings and to the overall corporate portfolio

 

reviewing the financial impacts of major transactions such as mergers, acquisitions, reorganizations and divestitures

 

overseeing enterprise risk management

 

overseeing management of environmental, health and safety matters

   

Board and Committee Performance Evaluations

In 2015, as they do each year, the Board and its standing committees conducted self-evaluations of their performance. The Corporate Governance Committee oversaw these performance evaluations, which were also discussed with the full Board. These self-evaluations did not suggest a need for any material changes to the processes and governance procedures of the Board or its committees.

 

 

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CORPORATE GOVERNANCE

Transactions with Related Persons

 

 

Transactions with Related Persons

The Board is responsible for the oversight and approval (or ratification) of any “related-person transactions.” These are transactions, relationships or arrangements involving the Company in which any “related person” has a direct or indirect material interest. For this purpose, the following persons are considered “related” to the Company:

 

  our directors, director nominees, executive officers, and their immediate family members;

 

  beneficial owners of more than 5% of our common stock and their immediate family members; and

 

  entities in which a person described above is employed, has a substantial interest, or holds a position such as general partner or principal.

Under the Board’s written procedures for the reporting, review and approval of related-person transactions, the Corporate Governance Committee evaluates these transactions and approves only those that it believes are consistent with the best interests of the Company and its shareholders as the Committee determines in good faith. The Committee bases this evaluation on all relevant factors, including:

 

  the benefits of the transaction to the Company;

 

  the terms of the transaction and whether they were made on an arm’s-length basis and in the ordinary course of the Company’s business;

 

  the direct or indirect nature of the related person’s interest in the transaction;

 

  the size and expected term of the transaction; and

 

  other facts and circumstances that bear on the materiality of the transaction under applicable laws and listing standards.

 

 

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Report of the Corporate Governance Committee

The following report of the Corporate Governance Committee describes its philosophy, its responsibilities, and certain of its policies relating to the Board.

Philosophy

The Corporate Governance Committee believes that sound corporate governance has three components:

 

  Board independence;

 

  processes and practices that foster solid decision-making by both management and the Board; and

 

  balancing the interests of all of our stakeholders – our investors, customers, employees, the communities we serve and the environment.

The Committee’s charter is available on our website at www.spectraenergy.com in the “Corporate Governance” section. The Committee’s charter is summarized below.

Membership

The Corporate Governance Committee must have 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:

 

  implementing policies regarding corporate governance matters;

 

  assessing the Board’s membership needs and recommending nominees;

 

  recommending to the Board those directors to be selected for membership on, or removal from, the various Board committees and those directors to be designated as chairs of Board committees;

 

  recommending compensation of independent directors;

 

  reviewing or approving related party transactions; and

 

  sponsoring and overseeing performance evaluations for the various Board committees, the Board as a whole, and the directors and management, including the Chief Executive Officer.

The Committee may conduct or authorize investigations or studies of matters within the scope of the Committee’s duties and responsibilities, and may retain, at the Company’s expense and at the Committee’s sole discretion, consultants and attorneys to assist in such work as the Committee deems necessary. In addition, the Committee has the sole authority to retain or terminate any search firm to be used to identify director candidates, including the sole authority to approve the search firm’s fees and other retention terms, with such fees to be borne by the Company. Finally, the Committee conducts an annual self-evaluation of its performance.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      15


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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

Director Candidates

 

 

Director Candidates

Profile

While the Committee has not prescribed standards for considering diversity, as a matter of practice, the Committee looks for diverse nominees who can enhance perspective and experience through diversity in gender, ethnic background, geographic origin and professional experience. The Committee looks for the following characteristics in any candidate for nominee to serve on our Board:

 

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

 

  a genuine interest in the Company and a recognition that, as a member of the Board, one is accountable to the Company’s shareholders as a whole;

 

  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;

 

  experience as a 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 as a professional who regularly advises such organizations;

 

  no conflict of interest or impediment that would interfere with the duty of loyalty owed to the Company 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 the Company as a director;

 

  independent judgment and willingness to express views in a constructive manner; and

 

  diversity and the extent to which the nominee would fill a present need on the Board.

Identifying Nominees

As noted above, the Committee may engage a third party from time to time to assist it in identifying and evaluating new director candidates. Based on surveys of the then-current Board members and the profile described above, the Committee will advise the third party of the characteristics, skills and experiences that may complement those of our existing members. The third party will then recommend nominees having such attributes. All of the nominees on the proxy card are current members of our Board and were recommended by the Committee.

Nominations by Shareholders

The Committee considers nominees recommended by shareholders, 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 Company and the nominating shareholder.

In 2015, the Board adopted proxy access By-Laws to permit (beginning after the 2016 Annual Meeting) a group of shareholders (up to 20) who have owned a significant amount of Spectra Energy stock (at least 3%) for a significant amount of time (at least 3 years) the ability to submit director nominees (up to 20% of the Board) for inclusion in our proxy statement if the shareholder(s) and the nominee(s) satisfy the requirements specified in our By-Laws.

Shareholders interested in submitting nominees for the Board will need to comply with the terms of our By-Laws, which include providing timely written notice to the Corporate Secretary, Spectra Energy Corp, 5400 Westheimer Court, Houston, Texas 77056. Our Corporate Secretary must receive this notice not less than 90 or more than 120 days prior to the anniversary of the Annual Meeting.

 

 

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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

Resignation Policy

 

 

Under our By-Laws, the notice must include certain information about the nominee and comply with certain other provisions of the By-Laws. You can access the By-Laws on our website at www.spectraenergy.com in the “Corporate Governance” section.

Resignation Policy

In an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election is required to tender his or her resignation following certification of the shareholder vote. The Corporate Governance Committee is then required to make recommendations to the Board with respect to any such letter of resignation. The Board is required to take action with respect to this recommendation and to disclose its decision-making process. Full details of this policy are set out in our Principles for Corporate Governance, which is posted on our website at www.spectraenergy.com in the “Corporate Governance” section.

Communications with Directors

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

Corporate Secretary

Spectra Energy Corp

5400 Westheimer Court

Houston, TX 77056

Our Corporate Secretary will distribute communications to the Board, to an individual director or to selected directors, depending on the content of the communication. In accordance with rules of the NYSE, interested parties wishing to communicate only with the non-management or independent directors can address their communications to “Independent Directors, c/o Corporate Secretary” at the above-mentioned address. In that regard, the Board has requested that certain items that are unrelated to the duties and responsibilities of the Board 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

Pamela L. Carter (Chair)

Austin A. Adams

F. Anthony Comper

Peter B. Hamilton

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      17


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Director Compensation

Compensation Structure for Non-Employee Directors

We use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on our Board. In making its recommendation on independent director compensation, the Corporate Governance Committee considers peer and general industry data, including an analysis of director compensation provided by an independent consultant. Under our stock ownership policy, outside directors are required to own 15,000 shares of the Company’s common stock (or common stock equivalents) within five years after becoming subject to the policy. At the end of 2015, all directors had met the targeted ownership level, except for Ms. Hubbs and Mr. Cazalot, who are on track to reach the targeted ownership level within the five-year period. Our Chairman, President and Chief Executive Officer does not receive compensation for his services as a director.

2015 DIRECTOR COMPENSATION STRUCTURE

 

Type    Amount
Annual retainer for all non-employee directors   

$125,000 in Spectra Energy shares*

$110,000 in cash

Retainers for Committee Chairs   

Corporate Governance Committee: $15,000 (cash)

All other committees: $20,000 (cash)

Retainer for Lead Director    $30,000 (cash)

 

* Valued at the NYSE closing price on the date of grant.

Charitable Giving Program. Under the Spectra Energy Foundation Matching Gifts Program, the Company will match contributions to qualifying institutions of up to $7,500 per director per calendar year. In 2015, the Spectra Energy Foundation made matching charitable contributions on behalf of Mr. Hamilton.

Expense Reimbursement. The Company reimburses non-employee directors for expenses they reasonably incur in connection with attending and participating in Board and Committee meetings, director education conferences and seminars, and special functions.

2015 COMPENSATION OF NON-EMPLOYEE DIRECTORS

 

Name   

Fees Earned or
Paid in Cash

($)

     Stock Awards
($)(1)
     Options Awards
($)
    

Change in
Pension Value and
Nonqualified Deferred

Compensation Earnings

($)

     All Other
Compensation
($)(2)
    

Total

($)

 

A. Adams

     107,500         125,000                                 232,500   

J. Alvarado

     107,500         125,011                                 232,511   

P. Carter

     120,000         125,011                                 245,011   

C. Cazalot

     107,500         125,011                                 232,511   

F. Comper

     137,500         125,011                                 262,511   

P. Hamilton

     125,000         125,011                         3,500         253,511   

M. Hubbs

     72,500         125,011                                 197,511   

M. McShane

     125,000         125,011                                 250,011   

M. Morris

     107,500         125,000                                 232,500   

M. Phelps

     125,000         125,011                                 250,011   
(1) This column reflects the aggregate grant date fair value of the stock awarded, computed in accordance with FASB ASC Topic 718.
(2) This column reflects matching charitable contributions made in 2015 pursuant to the Spectra Energy Foundation Matching Gifts Program, which matches contributions made by our directors to qualifying institutions up to $7,500 per director per calendar year.

The value of all perquisites and other personal benefits or property received by each non-employee director in 2015 was less than $5,000 and is not included in the above table.

 

 

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Stock Ownership Information

The following table shows, as of January 31, 2016, the amount of our common stock beneficially owned by our directors, the executive officers listed in the Summary Compensation Table under “Compensation Tables” on page 52 (referred to as the “Named Executive Officers”), and by all directors and executive officers as a group. The table also shows the number of common units of SEP beneficially owned by these individuals. SEP is a publicly traded master limited partnership in which Spectra Energy Corp owns approximately 78% of the outstanding equity interest.

 

Name or Beneficial Owner    Number of
Shares Held
     Number of
Shares Acquirable
within 60 days
    

Total Shares

Beneficially Owned

    Percent of
Class
     Total Units of SEP
Beneficially Owned
 

Dorothy M. Ables

     145,438         49,050         194,488        *         4,353   

Austin A. Adams

     46,676         14,404         61,080        *         909   

Joseph Alvarado

     18,995                 18,995        *           

Guy G. Buckley

     28,176         32,550         60,726        *           

Pamela L. Carter

     36,968                 36,968        *         909   

Clarence P. Cazalot Jr

     9,239                 9,239        *           

F. Anthony Comper

     39,501                 39,501        *         348   

Gregory L. Ebel

     241,715         176,100         417,815 (1)      *         5,766   

Peter B. Hamilton

     35,299                 35,299        *         909   

Reginald D. Hedgebeth

     116,208         22,450         138,658        *           

Miranda C. Hubbs

     14,613                 14,613        *           

Michael McShane

     29,182                 29,182        *           

Michael G. Morris

     16,287         4,042         20,329        *         11,900   

Michael E. J. Phelps

     87,154         16,240         103,394        *           

J. Patrick Reddy

     100,378         28,000         128,378 (1)      *           

Directors and executive
officers as a group (18 persons)

     1,047,094         414,536         1,461,630        *         35,104   

 

* Represents less than 1%.

 

(1) Messrs. Ebel and Reddy beneficially own additional 1,473 and 93,457 shares, respectively, in a Company-sponsored deferred compensation plan. Generally, those shares will be paid out six months following their separation from service.

The following table lists the beneficial owners of more than 5% of the outstanding shares of Spectra Energy common stock as of February 15, 2016. This information is based on the most recently available reports filed with the SEC.

 

      Shares of common stock  
Name and Address of Beneficial Owner    Beneficially Owned      Percentage  

Blackrock, Inc.(1)

55 East 52nd Street, New York, NY 10055

     41,352,717         6.2%   

The Vanguard Group(2)

100 Vanguard Blvd., Malvern, PA 19355

     41,555,664         6.18%   

 

(1) According to the Schedule 13G/A filed on January 27, 2016 by Blackrock Inc., these shares are beneficially owned by its clients, and it has sole voting power with respect to 35,432,490 shares and sole dispositive power with respect to all the shares.
(2) According to the Schedule 13G/A filed on February 11, 2016 by The Vanguard Group, these shares are beneficially owned by its clients, and it has sole voting power with respect to 1,281,823 shares, shared voting power with respect to 65,900 shares, sole dispositive power with respect to 40,235,460 shares and shared dispositive power with respect to 1,320,204 shares.

 

 

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Proposal 2:

Ratification of Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2016

Although our By-Laws do not require that the Company’s shareholders ratify the appointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm, the Board is submitting the appointment of Deloitte to the Company’s shareholders for ratification as a matter of good corporate governance. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Deloitte.

Representatives of Deloitte are expected to be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions.

The following table presents fees for professional services rendered by Deloitte and the member firms of Deloitte Touche Tohmatsu and their respective affiliates to the Company for 2015 and 2014:

 

Type of Fees (in millions)    2015      2014  

Audit Fees(a)

   $ 8.9       $ 8.4   

Audit-Related Fees(b)

   $ 0.9       $ 0.8   

Tax Fees(c)

   $ 0.9       $ 1.0   

All Other Fees(d)

   $ 0.1       $ 0.1   

Total

   $ 10.8       $ 10.3   

 

(a) Audit Fees are fees billed or expected to be billed by Deloitte for professional services for the audit of our Consolidated Financial Statements (including associated fees for our consolidated master limited partnership, SEP) included in our Annual Report on Form 10-K and review of financial statements included in our quarterly reports on Form 10-Q, services that are normally provided by Deloitte in connection with statutory, regulatory or other filings or engagements or any other service performed by Deloitte to comply with generally accepted auditing standards. Audit Fees also include fees billed or expected to be billed by Deloitte for professional services for the audit of our internal controls under the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations.

 

(b) Audit-Related Fees are fees billed by Deloitte for assurance and other services that are reasonably related to the performance of an audit or review of our financial statements, including assistance with acquisitions and divestitures, and internal control reviews. Audit-Related Fees also include comfort and consent letters in connection with SEC filings and financing transactions.

 

(c) 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.

 

(d) All Other Fees are fees billed by Deloitte for any services not included in the first three categories, primarily translation of audited financials into foreign languages.

 

 

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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2016

 

 

 

To safeguard the continued independence of our independent auditor, our Audit Committee adopted a policy that prevents our independent auditor from providing services to us and our subsidiaries that are prohibited under Section 10A(g) of the Securities Exchange Act of 1934 (“Exchange Act”). This policy also provides that the independent auditor is only permitted to provide services to us and our subsidiaries that have been pre-approved by our Audit Committee or the Audit Committee of SEP, as applicable. Pursuant to the policy, all audit services require advance approval by these audit committees.      Our Audit Committee’s Charter describes its responsibilities and is available on our website at www.spectraenergy.com in the “Corporate Governance” section

All other services by the independent auditor that fall within certain designated dollar thresholds, both per engagement as well as annual aggregate, have been pre-approved under the policy. Different dollar thresholds apply to the three categories of pre-approved services specified in the policy (Audit-Related services, Tax services and Other services). All services that exceed the dollar thresholds must be approved in advance by our Audit Committee or the Audit Committee of SEP, as applicable. Pursuant to applicable provisions of the Exchange Act, the audit committees have delegated approval authority to the Chairman of each audit committee. The Chairman has presented all approval decisions to the full audit committee. All engagements performed by the independent auditor were approved by the audit committee pursuant to its pre-approval policy.

 

 

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Report of the Audit Committee

The Audit Committee assists the Board in its general oversight of the Company’s financial reporting, internal controls and audit functions. Management has the primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. 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, as well as expressing an opinion on the effectiveness of internal control over financial reporting.

In this context:

 

    the Audit Committee has reviewed and discussed with management and Deloitte the Company’s audited financial statements for the year ended December 31, 2015 and Deloitte’s evaluation of the Company’s internal controls over financial reporting;

 

    the Audit Committee has discussed with Deloitte the matters that are required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standards No. 16, Communications with Audit Committees;

 

    Deloitte has provided the Audit Committee with written disclosures and the PCAOB-required letter regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Deloitte that firm’s independence; and

 

    the Audit Committee has concluded that Deloitte’s provision of audit and non-audit services to the Company and its affiliates is compatible with Deloitte’s independence.

Based on the review and discussions referenced above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s 2015 Annual Report on Form 10-K, for filing with the SEC.

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

Peter B. Hamilton (Chair)

Austin A. Adams

F. Anthony Comper

Miranda C. Hubbs

Michael McShane

 

 

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Proposal 3:

Approval of Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated

We maintain the Spectra Energy Corp 2007 Long-Term Incentive Plan (as amended and restated) (the “LTIP” or “Plan”), which was last approved by our shareholders on April 19, 2011. The purpose of the LTIP is to promote the interests of the Company and its shareholders by strengthening the Company’s ability to attract, motivate and retain key employees and directors of the Company upon whose judgment, initiative and efforts the financial success and growth of the business of the Company largely depend, and to provide an additional incentive for key employees and directors through stock ownership and other rights that promote and recognize the financial success and growth of the Company. All key employees of Spectra Energy and its subsidiaries and all non-employee directors are eligible to be granted awards under the LTIP, as selected from time to time by the Compensation Committee in its sole discretion. Currently approximately 300 employees and 10 non-employee directors are eligible for awards under the LTIP. The LTIP is the only equity-based incentive plan maintained by the Company.

The Plan is being presented to shareholders for approval to, among other things, ensure that awards granted under it may be structured to satisfy the requirements for “performance-based” compensation under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), as discussed more fully below.

Key Corporate Governance Features

The LTIP contains a number of provisions that the Board believes are consistent with the interests of shareholders and sound corporate governance practices. Some of the key features of the Plan that reflect the Board’s commitment to effective management of incentive compensation are set forth below and are described more fully under “Summary of the Amended and Restated LTIP.”

 

  No Discount Stock Options. The LTIP prohibits the granting of stock options with an exercise price of less than the fair market value of the Company’s common stock at the time of the grant.

 

  No Stock Option Repricing. The LTIP prohibits the repricing of stock options, stock appreciation rights or other purchase rights without the approval of shareholders.

 

  Clawback. The LTIP provides that the Company may recoup any compensation paid to a participant under the Plan to the extent permitted or required by applicable law, listing exchange policy, or Company policy.

 

  No Transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution, unless approved by the Compensation Committee.

 

  No Evergreen Provision. There is no “evergreen” feature pursuant to which the shares authorized for issuance under the Plan can be automatically replenished.

 

  No Automatic Grants. The LTIP does not provide for “reload” or other automatic grants to participants.

 

  No Tax Gross-Ups. The LTIP does not provide for any tax gross-ups.

History and Reason for Plan Approval

The Plan has been structured in a manner such that awards granted under it can be structured to satisfy the requirements for “performance-based” compensation within the meaning of Section 162(m); however, there can be no guarantee that any amounts payable under the Plan will be treated as qualified “performance-based” compensation under Section 162(m). In general, under Section 162(m), in order for the Company to be able to deduct compensation

 

 

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PROPOSAL 3: APPROVAL OF SPECTRA ENERGY CORP 2007 LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED

Summary of the Amended and Restated LTIP

 

 

in excess of $1,000,000 paid in any one year to the Company’s chief executive officer or any of the Company’s three other most highly compensated executive officers (other than the Company’s chief financial officer), such compensation must qualify as “performance-based.” One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by the Company’s shareholders every five years, and the Plan is being presented to shareholders for approval to, among other things, comply with this requirement. For purposes of Section 162(m), the material terms include (i) the individuals eligible to receive compensation, (ii) a description of the business criteria on which the performance goal is based, and (iii) the maximum amount of compensation that can be paid to an individual under the performance goal. Each of these aspects is discussed more fully below under “Summary of the Amended and Restated LTIP”, and shareholder approval of the Plan will be deemed to constitute approval of each of these aspects of the Plan for purposes of the approval requirements of Section 162(m).

In addition, the Board of Directors has approved, subject to shareholder approval, certain amendments to the Plan which would:

 

  increase the number of shares of our common stock reserved for issuance under the Plan by an additional 12,500,000 shares;

 

  add additional performance measures available for awards designed to qualify as “performance-based” compensation as discussed further below; and

 

  provide for certain other clarifying and administrative amendments.

The Board has approved the amendment and restatement of the Plan to provide increased flexibility to the Compensation Committee to structure and grant equity awards that will be responsive to the Company’s needs, as well as to respond to emerging corporate governance best practices. In particular, the Company has not historically granted stock options to participants under the Plan, but options were granted to certain participants in the Plan as of February 2016, and the Compensation Committee believes that it may be appropriate to grant options to participants in the future. Accordingly, the Company is requesting shareholder approval of a sufficient number of shares to provide flexibility in structuring incentive awards on a going-forward basis and in the event of continued market volatility.

Our shareholders are being asked to approve the Plan, as amended and restated. If shareholders do not approve the Plan, we will continue to grant equity awards under the terms of the Spectra Energy Corp 2007 Long-Term Incentive Plan as currently in effect and subject to the existing terms and conditions, including the existing authorized share limits.

Summary of the Amended and Restated LTIP

The following is a summary of the provisions of the LTIP. The summary is qualified in its entirety by the full text of the amended and restated LTIP, which has been included as an exhibit to this proxy statement and is available on the SEC’s website at www.sec.gov.

Reservation of Shares. When the LTIP was adopted in 2007, we reserved 30,000,000 shares of common stock for issuance under the LTIP, with an additional 10,000,000 shares reserved following shareholder approval on April 19, 2011. Under the proposed amendment to the LTIP, an additional 12,500,000 shares of common stock would be reserved for issuance under the LTIP. As of February 16, 2016, there were 13,808,172 shares of common stock available for issuance under the LTIP. Of that number, 6,952,459 shares were available for future awards and 6,855,713 shares were subject to outstanding awards consisting of 1,878,728 stock options, 1,693,615 phantom units of which 963,035 units are liability-classified and will be settled in cash and 730,580 units that are equity-classified, and 3,283,370 performance share units assuming maximum performance. Shares issued under the LTIP may include authorized but unissued shares, treasury shares, or a combination thereof.

Share Counting Provisions. For purposes of determining the number of shares available for future issuance under the LTIP, all awards are taken into account as follows: (a) shares covered by an award will only be counted to the

 

 

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PROPOSAL 3: APPROVAL OF SPECTRA ENERGY CORP 2007 LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED

Summary of the Amended and Restated LTIP

 

 

extent they are actually issued, (b) if the exercise price of an option or the tax withholding requirements with respect to any award granted under the LTIP are satisfied through the withholding of shares otherwise deliverable in respect of the award or actual or constructive transfer to the Company of shares already owned, a number of shares equal to such withheld or transferred shares will again be available for issuance or transfer under the LTIP, (c) if a stock appreciation right is exercised, only the number of shares issued, net of the shares tendered, if any, will be deemed delivered for purposes of determining the number of shares available for delivery under the LTIP, and (d) to the extent permitted by applicable law and the rules of any applicable exchange, shares issued in assumption of, or in substitution for, outstanding equity awards of any entity acquired in a corporate transaction by the Company or an affiliate will not count against the share limit in the LTIP. For awards granted after shareholder approval of the most recent amendment of the Plan on April 19, 2011, each share of common stock issued in satisfaction of any award under the LTIP will count as one share in calculating the LTIP share limit, regardless of the type of award.

Administration. The LTIP is administered by the Compensation Committee, which has the authority to determine the persons to whom awards are granted, the types of awards granted, the time at which awards will be granted, the number of shares, units or other rights subject to an award, and the terms and conditions of each award. The Company indemnifies members of the Compensation Committee against any liability or expense arising out of their actions relating to the Plan, unless such action is taken in bad faith or without reasonable belief that it is in the best interests of the Company.

Eligibility. All key employees of Spectra Energy and its subsidiaries and all non-employee directors are eligible to be granted awards under the LTIP, as selected from time to time by the Compensation Committee in its sole discretion.

Awards. The LTIP authorizes the grant of:

 

  Nonqualified stock options and incentive stock options. Nonqualified stock options are intended to qualify for exemption under Section 162(m) of the Internal Revenue Code (“Code”) and may be granted to employees and non-employee directors. Incentive stock options may only be granted to employees, and no more than 20,000,000 shares of common stock may be issued under the LTIP pursuant to the exercise of incentive stock options. The maximum number of any options that may be granted to one participant during a calendar year is 3,750,000.

 

  Stock appreciation rights. Stock appreciation rights entitle the holder, upon exercise, to receive a payment based on the difference between the base price of the stock appreciation right and the fair market value of a share of common stock on the date of exercise, multiplied by the number of shares as to which such stock appreciation right is exercised.

 

  Performance awards. Performance awards are units denominated on the date of grant either in shares of common stock or in specified dollar amounts. Performance awards are payable upon the achievement of performance criteria established by the Compensation Committee at the beginning of the performance period.

 

  Restricted stock. An award of restricted stock represents shares of common stock that are issued subject to such restrictions on transfer and on incidents of ownership and such forfeiture conditions as the Compensation Committee deems appropriate. The restrictions imposed upon an award of restricted stock will lapse in accordance with the vesting requirements specified by the Compensation Committee in the award agreement, which may also provide that any dividends or other distributions to be paid with respect to unvested restricted stock will be subject to vesting conditions as the Compensation Committee determines.

 

  Phantom stock. An award of phantom stock gives the participant the right to receive payment at the end of a fixed vesting period based on the value of a share of common stock at the time of vesting. Phantom stock awards are payable in cash or in shares of common stock having an equivalent fair market value on the applicable vesting dates.

 

  Stock bonuses. A stock bonus represents a specified number of shares of common stock that are issued without restrictions on transfer or forfeiture conditions. The Compensation Committee may require the payment of a specified purchase price for a stock bonus.

 

 

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PROPOSAL 3: APPROVAL OF SPECTRA ENERGY CORP 2007 LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED

Summary of the Amended and Restated LTIP

 

 

 

  Other stock-based awards. Under the revised Plan, the Compensation Committee may also grant other equity-based or equity-related awards, which may be settled in cash or shares, may require the payment of an exercise or purchase price, may be subject to performance-based or service-based vesting conditions, may be designed to comply with foreign law, and/or may be designed to qualify as “performance-based compensation” for purposes of Section 162(m).

 

  Dividend equivalent awards. A dividend equivalent award entitles the holder to a right to receive cash payments determined by reference to dividends declared on Spectra Energy common stock during the term of the award.

Performance Awards and Section 162(m). The LTIP gives the Compensation Committee the ability to grant options or stock appreciation rights and other awards that are designated in units denominated on the date of grant in shares of common stock (“Performance Shares”) or in specified dollar amounts (“Performance Units”) and designed to qualify as “performance-based compensation” exempt from Section 162(m) (such exception, the “Performance Exception” and such awards, “Qualified Performance-Based Awards”). Options and stock appreciation rights meet the Performance Exception because their value is based solely on any increase in the value of the Company’s common stock after the date of grant. Other Qualified Performance-Based Awards are granted subject to performance goals specified in the Plan.

The Compensation Committee may grant Performance Shares, Performance Units or other stock-based awards that will become payable to an eligible participant upon achievement of specified management objectives to be met within a specified period (the “Performance Period”) (collectively “Performance Awards”). In the case of Performance Awards that are intended to satisfy the Performance Exception, the Compensation Committee will make all determinations necessary to establish the Performance Award within 90 days of the beginning of the Performance Period, or such other period required under Section 162(m). Prior to the payment of any such Performance Award, the Compensation Committee will certify in writing that the applicable performance goal has been satisfied.

At the time the Compensation Committee determines the performance targets, the Compensation Committee may also specify any exclusion(s) for charges related to any event(s) or occurrence(s) which the Compensation Committee determines should appropriately be excluded for purposes of measuring performance against the applicable performance targets as long as the excluded items are objectively determinable by reference to Spectra Energy’s financial statements, notes to the financial statements and/or management’s discussion and analysis of financial condition and results of operations, appearing in Spectra Energy’s Annual Report on Form 10-K for the applicable year. In addition, if the Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances, render previously established performance targets unsuitable, the Compensation Committee may modify the performance targets as it deems appropriate and equitable. Unless the Compensation Committee determines otherwise, no action will be taken if and to the extent it would result in the loss of an otherwise available exemption of the award under Section 162(m). The performance goals applicable to a Performance Award may be subject to such later revisions as the Compensation Committee deems appropriate to reflect significant unforeseen events such as changes in law, accounting practices or unusual or nonrecurring items or occurrences, or to satisfy regulatory requirements.

The performance measures upon which the payment or vesting of a Performance Award intended to qualify for the Performance Exception may be based are limited to the following business measures, which may be applied with respect to the Company, any subsidiary or any business unit, or, if applicable, any participant, and may be measured on an absolute or relative to a peer-group or other market measure basis: total shareholder return; stock price; stock price increase; return on equity; return on capital; return on capital employed; earnings per share; debt/equity; interest coverage; coverage ratios; cash coverage ratio; distribution coverage ratio; dividend coverage ratio; EBIT (earnings before interest and taxes); EBITDA (earnings before interest, taxes, depreciation and amortization); debt to EBITDA; debt to capital; ongoing earnings; cash flow (including distributable cash flow, operating cash flow, free cash flow, discounted cash flow return on investment, and cash flow in excess of costs of capital); EVA (economic value added); economic profit (net operating profit after tax, less a cost of capital charge); SVA (shareholder value added); revenues; net income; operating income; pre-tax profit margin; performance against business plan; customer service; corporate

 

 

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PROPOSAL 3: APPROVAL OF SPECTRA ENERGY CORP 2007 LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED

Summary of the Amended and Restated LTIP

 

 

governance quotient or rating; market share; employee satisfaction; safety record; employee engagement; supplier diversity; workforce diversity; operating margins; credit rating; dividend payments or other distributions; expenses; retained earnings; completion of acquisitions, divestitures and corporate restructurings; operation and maintenance expense; environmental, health, safety and/or operational measures; and individual goals based on objective business criteria underlying the goals listed above and which pertain to individual effort as to achievement of those goals or to one or more business criteria in the areas of litigation, human resources, information services, production, inventory, support services, site development, plant development, building development, facility development, government relations, safety, product market share or management.

Individual Limits. To satisfy the Performance Exception requirements of Section 162(m) of the Code, the LTIP imposes certain sub-limits on awards granted to any one individual during any one calendar year. As a result, no individual may be granted, during any calendar year: (1) stock options covering more than 3,750,000 shares of common stock, (2) stock appreciation rights covering more than 3,750,000 shares of common stock, and (3) Performance Units paying a maximum amount of more than $9,000,000 or Performance Shares covering more than 900,000 shares of common stock. The limits are being increased from the limits that previously applied to provide the Compensation Committee with additional flexibility when structuring awards without compromising the Company’s ability to receive a tax deduction under Section 162(m) of the Code. Although the Company is requesting approval of increased individual limits, the Company does not necessarily intend to grant awards that approach the revised limits in the future. If the revised limits are not approved, the Company can still grant awards under the LTIP that exceed the Section 162(m) limits specified in the LTIP; however, the awards may not satisfy the requirements of Section 162(m), and the Company’s ability to take a tax deduction for the awards could be limited.

Change in Control. The Compensation Committee may provide for the effect of a “change in control” on an award granted under the LTIP. Such provisions may include (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from an award, (ii) the waiver or modification of performance or other conditions related to payment or other rights under an award, (iii) providing for the cash settlement of an award, (iv) the assumption of any award by an acquirer or successor, or (v) such other modification or adjustment to an award as the Compensation Committee deems appropriate to maintain and protect the rights and interests of participants upon or following the change in control. The LTIP provides that treatment of awards need not be uniform among participants or among awards held by a participant.

A “change in control” is generally defined in the LTIP to include the occurrence of one or more of the following: (i) an acquisition by an individual, entity or group of beneficial ownership of 30% or more of the then outstanding shares of common stock or the combined voting power of the then outstanding voting securities of the Company, with certain exclusions; (ii) the individuals who, as of the approval date of the amended and restated Plan constituted the Board cease to constitute a majority of the Board, other than new directors whose election or nomination was approved by a majority of the members of the Board as of the approval date of the amended and restated Plan, but excluding for this purpose members of the Board whose assumption of office results from an actual or threatened election contest or solicitation of proxies; (iii) the consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, or a sale or disposition of all or substantially all of the assets of the Company or any of its subsidiaries (a “Business Combination”), in each case unless (1) the individuals and entities that were beneficial owners of Company common stock and voting securities of Spectra Energy immediately prior to the transaction continue to represent more than 50% of the shares of common stock and combined voting power after the transaction in substantially the same proportion as their ownership prior to the Business Combination, (2) no person (excluding any parent or other entity resulting from the Business Combination or any employee benefit plan (or related trust) of the Company or an entity resulting from the Business Combination) beneficially owns 30% or more of the then-outstanding shares of common stock or voting power, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the Board resulting from the Business Combination were members of the Board at the time of the execution of the original agreement or action of the Board providing for the Business Combination; or (iv) approval by the shareholders of a complete liquidation or dissolution of Spectra Energy.

 

 

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PROPOSAL 3: APPROVAL OF SPECTRA ENERGY CORP 2007 LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED

Benefits to Named Executive Officers and Others

 

 

Adjustments to Awards. The Compensation Committee will make appropriate adjustments to outstanding awards and the number of shares eligible for issuance under the LTIP in the event of any merger, consolidation, recapitalization, reclassification, stock dividend, stock split or other similar corporate transactions.

Term and Amendment. The amended and restated LTIP will have a term of ten years from the date of approval by the shareholders of the Company, subject to earlier termination or amendment by the Board. To the extent permitted under applicable laws and rules, the Board may amend the LTIP at any time, except that shareholder approval is required for amendments that would change the persons eligible to participate in the LTIP, increase the number of shares of common stock reserved for issuance under the LTIP, allow the grant of stock options or stock appreciation rights at an exercise price below fair market value, or allow the repricing of stock options or stock appreciation rights without shareholder approval.

Benefits to Named Executive Officers and Others

Because the grant of Awards pursuant to the LTIP are discretionary, it is not possible to determine the Awards that will be made under the Plan. Information about outstanding awards made under the prior version of the Plan to our Named Executive Officers is provided in the Outstanding Equity Awards Table on page 54. In addition, under the prior version of the LTIP, as of February 27, 2007, options covering 260,800 shares of Company common stock were granted to our current executive officers as a group, and options covering 774,100 shares of Company common stock were granted to our other employees as a group; as of July 2, 2007, options covering 3,400 shares of Company common stock were granted to our current executive officers as a group, and options covering 7,500 shares of Company common stock were granted to our other employees as a group; as of October 1, 2007, options covering 17,200 shares of Company common stock were granted to our employees, excluding our executive officers, as a group; and as of October 1, 2009, options covering 20,000 shares of Company common stock were granted to our employees, excluding our executive officers, as a group.

Federal Income Tax Consequences

The following is a general summary of the United States federal income tax consequences to participants and Spectra Energy relating to awards that may be granted under the LTIP. This summary is not intended to be complete and does not describe state, local, foreign or other tax consequences.

A participant will not recognize income upon the grant of a nonqualified stock option to purchase shares of common stock. Upon exercise of the option, the participant will recognize ordinary compensation income equal to the excess of the fair market value of the shares of common stock on the date the option is exercised over the exercise price for such shares. Spectra Energy generally will be entitled to a deduction equal to the amount of ordinary compensation income recognized by the participant. The deduction will be allowed at the same time the participant recognizes the income.

A participant will not recognize income upon the grant of an incentive stock option to purchase shares of common stock and will not recognize income upon exercise of the option, provided the participant was an employee of Spectra Energy or a subsidiary at all times from the date of grant until three months prior to exercise. Where a participant who has exercised an incentive stock option sells the shares of common stock acquired upon exercise more than two years after the grant date and more than one year after exercise, capital gain or loss will be recognized equal to the difference between the sales price and the exercise price. A participant who sells such shares of common stock within two years after the grant date or within one year after exercise will recognize ordinary compensation income in an amount equal to the lesser of the difference between (a) the exercise price and the fair market value of such shares on the date of exercise, or (b) the exercise price and the sales proceeds. Any remaining gain or loss will be treated as a capital gain or loss. Spectra Energy generally will be entitled to a deduction equal to the amount of ordinary compensation income recognized by the optionee in this case. The deduction will be allowable at the same time the participant recognizes the income.

 

 

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PROPOSAL 3: APPROVAL OF SPECTRA ENERGY CORP 2007 LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED

Federal Income Tax Consequences

 

 

The federal income tax consequences of other awards authorized under the LTIP are generally in accordance with the following: stock appreciation rights are subject to taxation in substantially the same manner as nonqualified stock options; restricted stock subject to a substantial risk of forfeiture results in income recognition in an amount equal to the excess of the fair market value of the shares of common stock over the purchase price (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); performance awards, phantom stock and dividend equivalents are generally subject to tax, as ordinary compensation income, at the time of payment. Stock bonuses are generally subject to tax, as ordinary compensation income, on the date of grant. In each of the foregoing cases, Spectra Energy will generally have a corresponding deduction at the same time the participant recognizes income.

To the extent applicable, it is intended that the LTIP and any awards granted under the LTIP comply with the provisions of Section 409A of the Internal Revenue Code. The LTIP and any awards granted under the LTIP will be administered in a manner consistent with this intent.

 

 

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Proposal 4:

Approval of Spectra Energy Corp Executive Short-Term Incentive Plan, as amended and restated

We maintain the Spectra Energy Corp Executive Short-Term Incentive Plan (the “STIP”), which was last approved by our shareholders on April 19, 2011. The purpose of the STIP is to reward selected senior executives of Spectra Energy for their contributions to the Company’s financial success and motivate them to continue to make such contributions in the future by granting annual performance-based awards. Officers and other employees of Spectra Energy and its subsidiaries who could be treated as “covered employees” within the meaning of Section 162(m) of the Code, as determined from time to time by the Compensation Committee in its sole discretion, will be eligible to participate in the STIP. Currently approximately 12 employees are eligible for awards under the STIP.

Reapproval of Section 162(m) Performance Targets and Limits

As discussed in Proposal 3 above (Approval of the Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated), the Performance Exception under Section 162(m) requires shareholder approval of the material terms of the performance targets and the individual limits that will apply to awards intended to qualify for the Performance Exception. The STIP gives the Compensation Committee the ability to grant cash awards that are subject to performance targets specified in the STIP and thus may be designed to qualify for the Performance Exception (the “STIP Qualified Performance-Based Awards”).

Accordingly, our shareholders are being asked to approve the material terms of the performance targets and the individual limits under the STIP in order to qualify certain compensation awards under the STIP as performance-based compensation for purposes of Section 162(m).

Summary of the Amended and Restated STIP

The following is a summary of the provisions of the amended and restated STIP. The summary is qualified in its entirety by the full text of the amended and restated STIP, which has been filed as an exhibit to this proxy statement and is available on the SEC’s website at www.sec.gov.

Administration. The STIP is administered by the Compensation Committee, which has the authority to determine the persons to whom awards are granted and the terms and conditions of each award.

Eligibility. Officers and other employees of Spectra Energy and its subsidiaries who could be treated as “covered employees” within the meaning of Section 162(m) of the Code, as determined from time to time by the Compensation Committee in its sole discretion, will be eligible to participate in the STIP. Currently approximately 12 employees are eligible for awards under the STIP.

Awards. The STIP authorizes the grant of annual cash awards to eligible employees. The Compensation Committee may grant awards under the STIP that are designed to qualify for the Performance Exception under Section 162(m) of the Internal Revenue Code. Such STIP Qualified Performance-Based Awards will become payable to an eligible participant upon achievement of specified management objectives (the “STIP Performance Targets”) to be met within a specified period (the “STIP Performance Period”). The Compensation Committee will make all determinations necessary to establish the STIP Qualified Performance-Based Awards within 90 days of the beginning of the STIP Performance Period, or such other period required under Section 162(m). With respect to a participant who becomes eligible to receive an award more than 90 days after the beginning of the STIP Performance Period, the Compensation Committee may either grant an award based on the established STIP Performance Targets, or based on different targets and/or a

 

 

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PROPOSAL 4: APPROVAL OF SPECTRA ENERGY CORP EXECUTIVE SHORT-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED

Summary of the Amended and Restated STIP

 

 

different performance period in accordance with the regulations pursuant to Section 162(m). Prior to the payment of any such STIP Qualified Performance-Based Award, the Compensation Committee will certify in writing that the applicable performance target has been satisfied. Awards granted under the STIP are settled in cash.

At the time the Compensation Committee determines the terms of the STIP Performance Target(s), the Compensation Committee may also specify any exclusion(s) for charges related to any event(s) or occurrence(s) which the Compensation Committee determines should appropriately be excluded, as applicable, for purposes of measuring performance against the applicable Performance Targets provided that such excluded items are objectively determinable by reference to Spectra Energy’s financial statements, notes to Spectra Energy’s financial statements and/or management’s discussion and analysis of financial condition and results of operations, appearing in Spectra Energy’s Annual Report on Form 10-K for the applicable year. If the Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances, render previously established STIP Performance Targets unsuitable, the Compensation Committee may in its discretion modify such STIP Performance Targets, in whole or in part, as the Compensation Committee deems appropriate and equitable; provided that, unless the Compensation Committee determines otherwise, no such action shall be taken if and to the extent it would result in the loss of an otherwise available exemption of the award under Section 162(m). In addition, a performance measure used to determine a STIP Performance Target may be subject to such later revisions as the Compensation Committee shall deem appropriate to reflect significant unforeseen events such as changes in law, accounting practices or unusual or nonrecurring items or occurrences or to satisfy applicable regulatory requirements. Any such adjustments shall be subject to such limitations as the Compensation Committee deems appropriate in the case of an award that is intended to qualify for exemption under Section 162(m).

The performance measures upon which the payment or vesting of a STIP Qualified Performance-Based Award may be based are limited to the following business measures, which may be applied with respect to Spectra Energy, any subsidiary or any business unit, or, if applicable, any participant, and may be measured on an absolute or relative to a peer-group or other market measure basis: total shareholder return; stock price; stock price increase; return on equity; return on capital; return on capital employed; earnings per share; debt/equity; interest coverage; coverage ratios; cash coverage ratio; distribution coverage ratio; dividend coverage ratio; EBIT (earnings before interest and taxes); EBITDA (earnings before interest, taxes, depreciation and amortization); debt to EBITDA; debt to capital; ongoing earnings; cash flow (including distributable cash flow, operating cash flow, free cash flow, discounted cash flow return on investment, and cash flow in excess of costs of capital); EVA (economic value added); economic profit (net operating profit after tax, less a cost of capital charge); SVA (shareholder value added); revenues; net income; operating income; pre-tax profit margin; performance against business plan; customer service; corporate governance quotient or rating; market share; employee satisfaction; safety record; employee engagement; supplier diversity; workforce diversity; operating margins; credit rating; dividend payments or other distributions; expenses; retained earnings; completion of acquisitions, divestitures and corporate restructurings; operation and maintenance expense; environmental, health, safety and/or operational measures; and individual goals based on objective business criteria underlying the goals listed above and which pertain to individual effort as to achievement of those goals or to one or more business criteria in the areas of litigation, human resources, information services, production, inventory, support services, site development, plant development, building development, facility development, government relations, safety, product market share or management.

Individual Limits. The aggregate amount of all awards payable to any employee under the STIP for any one calendar year is limited to $5 million.

Termination and Amendment. The STIP shall continue in effect until terminated by the Board. The Compensation Committee may at any time amend or otherwise modify the STIP in such respects as it deems advisable; provided, however, no such amendment or modification may be effective without Board approval or shareholder approval if such approval is necessary to comply with the requirements for qualified performance-based compensation under Section 162(m).

 

 

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Proposal 5:

Advisory Vote Approving Executive Compensation

As required by Section 14A of the Exchange Act, we are asking our shareholders to provide an advisory, non-binding vote to approve the compensation of our Named Executive Officers. We conduct an advisory vote approving executive compensation at each year’s Annual Meeting. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and our compensation-related policies and practices as described in this proxy statement.

We ask that, as you consider your vote, you review the Compensation Discussion and Analysis on the following pages and the compensation tables that begin on page 52. We designed our compensation programs to attract, retain and incentivize executives of high caliber who create value for our shareholders.

We therefore ask that you vote to approve the compensation of our Named Executive Officers as disclosed in this proxy statement. This vote is advisory and not binding on the Company, the Compensation Committee or the Board. However, the Board and the Compensation Committee value the opinions of the Company’s shareholders and expect to consider the outcome of the vote, along with other relevant factors, when considering future executive compensation decisions.

RESOLVED, that the shareholders approve the compensation awarded to the Company’s Named Executive Officers for 2015, as disclosed under SEC rules, including the Compensation Discussion and Analysis, the Compensation Tables and related material included in this proxy statement.

 

 

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Report of the Compensation Committee

The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. This report is provided by the following independent directors who comprise the Compensation Committee:

Michael E. J. Phelps (Chair)

Joseph Alvarado

Pamela L. Carter

Clarence P. Cazalot Jr

Michael G. Morris

 

 

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Compensation Discussion and Analysis

In this section, we describe the design and purpose of the compensation programs that apply to the executive officers of Spectra Energy who are listed in the Summary Compensation Table on page 52. We refer to these officers as our Named Executive Officers. They are:

 

  Gregory L. Ebel, Chairman, President and Chief Executive Officer

 

  J. Patrick Reddy, Chief Financial Officer

 

  Reginald D. Hedgebeth, General Counsel and Chief Ethics & Compliance Officer

 

  Guy G. Buckley, Chief Development Officer

 

  Dorothy M. Ables, Chief Administrative Officer

2015 Summary

 

u    Target pay opportunities for our executives are established within range of the median of Peer Group information and the markets in which we compete for talent.

 

u    Our direct compensation program consists of 1) base salary, 2) short-term incentives and 3) long-term incentives, with the incentive compensation elements representing a clear alignment with pay for performance.

 

u    The financial and operating objectives in our short-term incentive program focus management on critical performance levers that drive shareholder value. For 2015, we generated strong cash flows from our fee-based assets and successfully executed on capital expansion plans, operating our assets reliably and safely, which resulted in an above-target payout on short-term incentives. Please see pages 43-46 for more
   

information about our short-term incentive objectives and results.

 

u    In spite of these accomplishments in 2015, our stock price was impacted by the dramatic and recent drop in crude oil and natural gas liquids prices. Our total shareholder return (“TSR”) for the 2013-2015 long-term incentive (“LTI”) performance award cycle was at the 37.5 percentile of the 2013 Peer Group for LTI, which resulted in a below-target payout percentage of 68.75% for our performance share unit awards granted in 2013. Please see pages 46-48 for more information about our LTI objectives and results.

 

u    As a result, consistent with our pay for performance philosophy and alignment with our shareholders, we achieved above-target payout on short-term incentives and below-target payout on performance shares.
 

 

Summary of Compensation Philosophy

We believe that the successful execution of our strategy should result in enhanced shareholder value. Our executive compensation programs are designed to attract and retain executives who are highly qualified to carry out our strategy and to create incentives that link to our strategic direction.

To achieve these objectives, we design compensation opportunities for executives based on the following principles:

 

u    Compensation programs should support the accomplishment of our strategic and financial goals.

 

u    The majority of compensation available for our Named Executive Officers should be contingent on the Company’s attainment of pre-established performance objectives, both short-term and long-term.
u    Compensation opportunities should be aligned with the interests of shareholders, and incentive programs should be designed in consideration of their impact on shareholders, both immediately and in the long-term.
 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Summary of Compensation Philosophy

 

 

u    Compensation opportunities – as measured by the sum of salary, short-term cash incentive target, and the targeted value of long-term compensation awards – should be sufficiently competitive (in relation to the median of the markets in which we compete for
   

executives) to attract, retain and incentivize Spectra Energy’s executives.

 

u    Fringe benefits, perquisite programs and other forms of indirect compensation should be minimized.
 

 

Overview of 2015 Company Performance

Throughout 2015, we continued to successfully execute the long-term strategies we outlined for our shareholders-meeting the needs of our customers, generating strong cash flows from our fee-based assets, executing capital expansion plans that underlie our growth objectives, and maintaining our investment-grade balance sheet. These results, combined with future growth opportunities, led our Board of Directors to approve an increase in our 2016 quarterly dividend to $0.405 per share, which represents an increase in our annual dividend by $0.14 per share.

Among our other accomplishments in a year of challenge across the midstream energy sector, we successfully delivered a slate of new projects into service and supplemented our backlog of new projects by approximately $2 billion. Importantly, we realized these accomplishments while operating our assets reliably and safely.

Therefore, in line with our weighting factors, including the weighting given to safety, the 2015 Short-Term Incentive payouts were awarded to our Named Executive Officers at a range of 144% to 164% of target amounts. Please see “- 2015 Compensation - Short-Term Incentive Opportunities” for a discussion of how we set our target levels. In spite of these accomplishments in 2015, our stock price was impacted by the dramatic and recent drop in crude oil and natural gas liquid prices. Our three-year TSR was at the 37.5 percentile of the peer companies in our 2013 LTI peer group, which resulted in a payout percentage of 68.75% of target levels. Please see “- Factors Considered in Determining Total Compensation - Peer Group Comparison” and “- 2015 Compensation - 2015 Long-Term Incentive Opportunities,” respectively, for a discussion of how we set our peer group and target levels.

Role of Performance Measures in Our Compensation Program

Each year the Compensation Committee establishes financial and operational objectives for each Named Executive Officer that are linked to our strategic goals. Our compensation plans are designed to reduce compensation below targeted payouts if these objectives are not realized. Alternatively, in the event we exceed our objectives, these plans are designed to compensate executives at above-target levels.

As noted above, providing safe and reliable operations continues to be a foundational strategy of our business. Although safe and reliable operations benefit the Company and its shareholders in the long-term, the Compensation Committee believes that this goal is best measured in the short-term. The Compensation Committee also believes it is important to link compensation opportunities for our executives to our stock performance over the long-term. Given these considerations, the Committee links compensation incentive opportunities with meeting financial targets while providing safe and reliable operations in the short-term, and enhancing shareholder return over the long-term.

Consistent with this philosophy, the Committee has structured our annual short-term incentive program to provide our Named Executive Officers with substantial incentives to reach short-term strategic objectives that are aligned with the Company’s long-term strategic plan. Short-term cash payouts are tied to specific financial and operational goals at the

corporate and business unit level, where appropriate, that align with our strategic objectives and our shareholders’ interests:

 

  80% of each executive’s short-term cash incentive opportunity is based upon targets for our EPS, Spectra Energy Transmission EBITDA and ROCE and capital project targets of our core businesses.

 

  The remaining 20% is based upon achieving operational and safety objectives.

Please see pages 43-45 to learn more about these performance measures and why the Committee chose them.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Compensation-Setting Process

 

 

In our long-term incentives, the Committee emphasizes TSR. A substantial portion of the compensation opportunities for our Named Executive Officers consists of long-term equity-based incentives that are designed both to align our executives’ interests with our shareholders’ long-term interests and to provide meaningful performance and retention incentives:

 

  60% of the long-term incentive grants made to our Named Executive Officers vest based on TSR measured over a three-year period.

 

  40% of the grants are subject to vesting requirements at the end of three years.

Please see pages 46-48 for more detail about our long-term incentives.

2015 Shareholder Advisory Vote on Compensation

We have traditionally received very strong support for our executive compensation practices. In an advisory vote held at the 2015 Annual Meeting, our shareholders voted in strong support of the executive compensation programs and on the compensation earned by our Named Executive Officers, with a vote of over 95% in favor.

Compensation-Setting Process

Compensation Committee

The Compensation Committee’s responsibilities include:

 

  establishing and reviewing the Company’s overall compensation philosophy;

 

  reviewing the effectiveness of our compensation program on a regular basis and approving changes to the program;

 

  reviewing and approving the salaries and other compensation of all our executive officers, including the Named Executive Officers, and any agreements with executive officers regarding their compensation;

 

  with input from the Board, performing an annual evaluation of our Chief Executive Officer’s performance; and

 

  making recommendations to the Board on targeted compensation levels for our Chief Executive Officer.

The Compensation Committee operates under a written charter adopted by the Board, which you may view in the “Corporate Governance” section of our website at www.spectraenergy.com. For more information about the Committee and its responsibilities, see page 12.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Compensation-Setting Process

 

 

Five independent directors make up our Compensation Committee: Michael E. J. Phelps (Chair), Joseph Alvarado, Pamela L. Carter, Clarence P. Cazalot Jr and Michael G. Morris. Each has had significant responsibility for the design and administration of executive compensation programs, having served either on other public company compensation committees or as the senior executive of a business unit.

 

COMPENSATION COMMITTEE MEMBERS: RELEVANT EXPERIENCE

Mr. Phelps

(Chair)

  

over 10 years as a member and chairman of various compensation committees and currently Chairman and founder of Dornoch Capital Inc. and a director of Marathon Oil Corporation

also served as Chairman, President and Chief Executive Officer of Westcoast Energy Inc. (a company later acquired by a predecessor of Spectra Energy)

Mr. Alvarado

  

currently serves as Chairman, President and Chief Executive Officer and a director of Commercial Metals Company

Ms. Carter

  

previously served as President of a business unit at Cummins Inc., a global manufacturer of diesel engines and related technologies, and is a director of CSX Corporation and Hewlett Packard Enterprise Company

Mr. Cazalot

  

previously served as Chairman, President and Chief Executive Officer of Marathon Oil Corporation, and is also a director of Baker Hughes Incorporated and FMC Technologies, and serves on the Compensation Committee of FMC Technologies

Mr. Morris

  

previously served as Chairman, President and Chief Executive Officer of American Electric Power Company, Inc., serves as a director of Alcoa Inc., L Brands, Inc. and The Hartford Financial Services Group, serves as the Chair of Alcoa Inc.’s Compensation and Benefits Committee and serves as a member of the Compensation Committee of L Brands, Inc.

It is expected that the Compensation Committee will meet as often as is necessary to perform its duties and responsibilities. In 2015, the Committee met five times. Our Chief Executive Officer and other members of management may attend Compensation Committee meetings, as invited. The Compensation Committee also meets in executive session without the presence of management or its consultant.

The Chair of the Compensation Committee works with management to establish meeting agendas. The Committee receives and reviews materials in advance of each meeting; these may include information that management believes will be helpful to the Compensation Committee, as well as materials the Committee has specifically requested. In 2015, these materials addressed matters such as (1) the competitiveness of executive compensation programs based on market data; (2) total compensation provided to Spectra Energy executives; (3) trends and legislative activity in executive compensation and/or benefits; (4) executive stock ownership levels; and (5) corporate financial and operational performance compared to predetermined objectives.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee is or has been an officer or employee of Spectra Energy. In addition, during the last fiscal year, none of our executive officers served as a member of the board or the compensation committee of any entity in which a Spectra Energy Board or Compensation Committee member is an executive officer.

Committee Advisors

Since 2007, the Compensation Committee has retained ExeQuity, LLP as its independent compensation consultant. ExeQuity reports directly to the Compensation Committee on matters related to executive compensation, advises it on best practices, and analyzes meeting materials prepared by management. It confers, independently of management, with the Committee’s Chair and with the full Committee, although it may discuss compensation matters with management on a limited basis at the Committee’s direction. As needed, ExeQuity meets with the Committee in

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Factors Considered in Determining Total Compensation

 

 

executive sessions at which no one from Spectra Energy’s management is present. ExeQuity performs no other services for the Company.

In 2015, ExeQuity prepared materials for the Compensation Committee, reviewed materials provided to the Compensation Committee by management, consulted with the Chair prior to meetings regarding agenda items, and attended Committee meetings.

In retaining ExeQuity, the Compensation Committee considered the six factors set forth in Section 303A.05(c)(iv) of the NYSE Listed Company Manual concerning potential conflicts of interest. In addition, after a review of information provided by each member of the Compensation Committee, as well as information provided by ExeQuity, the Compensation Committee determined that there are no conflicts of interest raised by ExeQuity’s work with the Compensation Committee.

Role of Management

Members of Spectra Energy’s management, including our Chief Executive Officer, participate in certain aspects of the compensation-setting process, including:

 

  recommending compensation programs, compensation policies, compensation levels and incentive opportunities;

 

  compiling, preparing and distributing materials for Compensation Committee meetings, including market data;

 

  recommending performance targets and objectives; and

 

  evaluating employee performance (other than the performance of our Chief Executive Officer, whose performance is reviewed by the independent members of the Board).

In 2015, management engaged Aon Hewitt to assist management in developing its recommendations regarding compensation; in this capacity, Aon Hewitt may be asked to attend the Compensation Committee meetings from time to time to discuss research and reports that it prepares at management’s request.

Factors Considered In Determining Total Compensation

 

Peer Group Comparison

 

  

The Compensation Committee sets salaries and short-term and long-term Incentive target levels based in part on what it determines to be the market median of compensation available to our executives in the market. The market for highly talented executives is competitive, and we believe our success depends on our ability to attract and retain executives who are qualified to successfully execute our short-term and long-term objectives. We believe that our hiring objectives cannot be achieved unless we offer compensation opportunities that are competitive in the marketplace.

 

We would prefer to define the market median based on the practices of a sizeable peer group of companies with market capitalizations and revenues comparable to ours and with lines of business similar to ours. However, there are not enough companies meeting this description to allow us to assemble such a peer group. Therefore, in setting compensation targets, the Compensation Committee considers data from published compensation surveys as well as information from the public filings of representative companies in the markets where we compete for executive talent and capital – which we refer to as the Peer Group. Companies included in the Peer Group are shown to the right.

  

 

Peer Group*

 

CenterPoint Energy, Inc.

 

Consolidated Edison, Inc.

 

Dominion Resources, Inc.

 

DTE Energy Company

 

Enbridge Inc.

 

EQT Corporation

 

Kinder Morgan, Inc.

 

National Fuel Gas Company

 

ONEOK, Inc.

 

PG&E Corporation

 

Public Service Enterprise Group Inc.

 

Sempra Energy

 

TransCanada Corporation

 

Williams Companies, Inc.

 

Xcel Energy Inc.

  

 

* NiSource Inc., which was part of the 2014 Peer Group, has been removed because its pipeline, midstream and storage assets were spun off in the first quarter of 2015, resulting in it being an electric gas utility.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Elements of Our Compensation Program

 

 

 

The Compensation Committee also considers trends in the broader market as
shown in general industry surveys. Specifically, the Compensation Committee has
used the Aon Hewitt Total Compensation Management Database because it
believes this survey provides a reliable indication of compensation practices in
companies with revenues comparable to ours and of similar size.
       Our total incentive opportunities
emphasize long-term goals to
drive long-term decision-making
and shareholder alignment.

External Market Conditions and Individual Factors

In addition to using benchmark survey data, the Compensation Committee takes into account external market conditions and individual factors when establishing the total compensation of each Named Executive Officer. Individual factors include the executive’s performance, level of experience, tenure, responsibilities and position. External market conditions include competitive pressures for the executive’s particular position within the industry, economic developments, the condition of labor markets, and the financial and market performance of the Company. To assist in its evaluation, the Compensation Committee uses tally sheets that provide the details of an executive’s historical and proposed compensation. Finally, the Compensation Committee considers internal equity when evaluating the compensation of our Named Executive Officers relative to one another.

Risk Considerations in Our Compensation Program

In addition to reviewing market factors, the Compensation Committee reviews the alignment of the executive compensation program components with the interests of our shareholders. The overall mix and design of our executives’ short- and long-term incentive compensation opportunities are balanced to mitigate undue risk and promote the health of the Company.

To drive long-term decision-making, our total incentive opportunities place greater emphasis on long-term goals. In our short-term program, no more than 30% of a Named Executive Officer’s targeted award is dependent on any one performance measure. Our short-term measures are chosen to balance the importance of generating short-term earnings and cash with the efficiency and effectiveness of our employed capital. Sixty (60) percent of each executive’s long-term opportunity is contingent on the performance of our stock relative to that of our peers, and each executive is required to own certain amounts of Spectra Energy stock, which provides continued alignment with our shareholders’ interests in the long-term growth of the Company.

Elements of Our Compensation Program

The objective of our compensation program is to link total compensation to individual and company performance on both a short-term and long-term basis. To carry out this objective, the program is structured to include short-term incentives that reward the achievement of predetermined performance objectives and long-term incentives that reward stock performance and encourage our executives to align their interests with those of shareholders.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Elements of Our Compensation Program

 

 

PRINCIPAL COMPENSATION COMPONENTS FOR NAMED EXECUTIVE OFFICERS

 

Component    Rationale    Structure

Salary

  

Provides compensation for performing day-to-day responsibilities

 

Creates a framework for incentive awards, which are structured as a percentage of base salary

   Paid in cash at regular intervals throughout the year.

 

Short-Term

Incentive

 

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Makes significant percentage of cash compensation contingent on specific financial targets and operational performance goals.

 

Employs performance goals that are appropriate short-term measures of the business imperatives necessary to build financial success and operational excellence in the long term.

  

Annual cash payment based on the achievement of defined financial and operational performance goals:

 

80% based on financial goals (EPS, EBITDA, ROCE and project goals) for our core businesses

 

20% based on operational and safety goals

 

Long-Term

Incentive

 

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Aligns the interests of executives with those of shareholders by rewarding long-term Company stock performance

 

Builds our executives’ equity ownership stake and provides a retention incentive

  

Performance share units (60% of target award value)

 

Payouts depend on TSR compared with our Peer Group over a three year measurement period

 

Payouts can range from 0% to 200% of target

 

Once earned, the units are converted to common stock

 

Dividend equivalents are accumulated from grant date but paid only upon vesting

 

Phantom units (40% of target award value)

 

Time-based; vest after three years

 

Once earned, units are paid in cash

 

Dividend equivalents are accumulated from grant date but paid only upon vesting

Retirement

  

Provides retention incentives, rewards service through retirement-related payments, and provides savings opportunities

 

Comparable to market; important tool for attracting and retaining executives

   Company-sponsored retirement and savings plans (401(k), deferred compensation, defined-benefit plans)

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2015 Compensation

 

 

Component    Rationale    Structure

Severance

  

Promotes management continuity and focus on best results for shareholders in the event of a change in control of the Company

 

Incorporates features that limit the circumstances in which payout can occur and the amount paid (e.g., double-trigger, no tax gross-ups)

   Agreements that provide benefits upon termination following a change in control of the Company.

2015 Compensation

Pay Mix

An executive’s total compensation opportunity is the sum of annual base salary, annual cash incentive target, and the target value of his annual long-term incentive grant. The opportunity established for each of our Named Executive Officers is intended to provide total target compensation that falls in the median range for individuals who hold comparable positions in the markets in which we compete for executive talent.

For 2015, the total target pay opportunity, in aggregate, was at the market median for our Named Executive Officers.

Consistent with the pay-for-performance objectives of our compensation program, 84% of our Chief Executive Officer’s total target pay opportunity, and an average of 69% of all other Named Executive Officers’ total target pay opportunity, was in the form of short-term and long-term incentives.

The following charts show the mix of total target compensation for our Chief Executive Officer and for the other Named Executive Officers.

 

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COMPENSATION DISCUSSION AND ANALYSIS

2015 Compensation

 

 

Salary and Total Pay Opportunities

Chief Executive Officer

In determining Mr. Ebel’s 2015 total compensation opportunity, in February 2015 the Compensation Committee reviewed his 2014 performance and that of the Company; the Company’s long-term performance; market survey data; and Peer Group data.

Among the Company’s performance results and other factors the Committee considered were the following:

 

  In 2014, an all-time high was achieved for safety results, with results improving across the Company; there was a 40% improvement over 2013 employee injury rates and a 20% improvement over 2013 contractor injury rates.

 

  $800 million of growth projects were placed into service during the year and Spectra Energy secured 3.5 billion of new growth projects, supported by firm, fee-based contracts. These advancements marked significant progress towards the Company’s goal of securing $35 billion in growth opportunities by the end of the decade.

 

  We increased our annual dividend growth to 14 cents per share, up from 12 cents.

 

  We substantially exceeded our distributable cash flow, dividend coverage ratio, and EBITDA targets.

After considering this record of achievement, the Compensation Committee deemed it appropriate to increase Mr. Ebel’s short-term incentive target from 100% to 110%. This continues to align Mr. Ebel’s total target compensation with the overall general industry survey data as well as our Peer Group.

Other Named Executive Officers

In February 2015, the Compensation Committee reviewed the 2014 salaries of our Named Executive Officers and approved salary adjustments based on job responsibilities, levels of experience, individual performance, the salaries of executives in comparable positions as obtained from market surveys, and internal comparisons. The Compensation Committee also reviewed the 2014 total target pay opportunities for our executives to see how those opportunities compare with pay opportunities at companies with which we compete for talent.

To ensure that their salaries remain competitive with the marketplace, Mr. Reddy received a base salary adjustment for 2015 of approximately 5%, and Mr. Hedgebeth and Ms. Ables each received a base salary adjustment for 2015 of approximately 3%.

The following table shows the 2015 target pay opportunities for each Named Executive Officer.

 

2015 TARGET PAY OPPORTUNITIES                                
Name    Salary*      STI Target Opportunity      LTI Target Opportunity      Total Target
Pay Opportunity
 

Gregory L. Ebel

     $1,133,000         $1,246,300 (110%)         $4,815,250 (425%)         $7,194,550   

J. Patrick Reddy

     $640,000         $480,000 (75%)         $1,152,000 (180%)         $2,272,000   

Reginald D. Hedgebeth

     $570,800         $399,560 (70%)         $856,200 (150%)         $1,826,560   

Guy G. Buckley

     $450,000         $292,500 (65%)         $630,000 (140%)         $1,372,500   

Dorothy M. Ables

     $477,800         $334,460 (70%)         $597,250 (125%)         $1,409,510   

 

* Base salary effective March 1, 2015

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2015 Compensation

 

 

Short-Term Incentive Opportunities

The 2015 short-term incentive opportunities under the Spectra Energy Executive Short-Term Incentive (“STI”) Plan were designed to compensate executives based on the Company’s 2015 financial and operational performance against goals set at the beginning of the year, and also on each executive’s overall individual performance during the year. The Committee established threshold, target and maximum incentive opportunities for each participant, expressed as a percentage of base salary. Target STI awards for our Named Executive Officers in 2015 are reflected in the 2015 Target Pay Opportunities table above.

Under guidelines adopted for the 2015 STI program, the Compensation Committee set a maximum payment opportunity on 2015 short-term incentive payments for all of our executives equal to 200% of their STI target. In order to meet requirements relating to the Company’s tax deduction under Section 162(m) of the Internal Revenue Code, annual incentive payouts are initially set at this maximum level to the extent that performance against any one of the Spectra Energy, Spectra Energy Transmission or business unit financial goals meets the threshold level of performance. To determine actual payouts, however, the Compensation Committee applies the following framework (in conjunction with actual performance against the Company’s financial and operational measures and individual performance evaluations in order to determine appropriate payout levels):

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2015 Compensation

 

 

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Spectra Energy Ongoing EPS is one of the primary measures the investment community uses to value the Company. We define this measure as earnings per share adjusted for the per-share impact of discontinued operations and certain charges and credits that we believe will not be recurring on a regular basis. As

shown to the right, the actual 2014 EPS result was $1.62 and the EPS target for 2015 was set at $1.19. The EPS target for 2015 was set lower than the actual 2014 EPS result because of commodity prices and foreign exchange rates. The EPS amount necessary to achieve the maximum payout was set at $1.45, or about 22% above the target, an earnings level that was judged to be possible if financial performance was far superior to our original expectation.

 

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Spectra Energy Transmission EBITDA is a measure of the effectiveness of the core business’s ability to generate cash without depreciation, interest or taxes, excluding our joint venture, DCP Midstream, LLC (“DCP Midstream”). In determining this measure, we have eliminated the impact of certain factors in order to make this measure a clearer gauge of the performance of our four core business units, including among others, the elimination of the effect of commodity price changes, the effect of exchange rate fluctuations in Canadian currency and the impact of weather at our distribution business unit. Target performance was set at a level that matched our corporate forecasts. Maximum performance was set at a level judged to be difficult to achieve, and minimum performance was set at the lowest level that would justify a payout.

Spectra Energy Transmission ROCE reflects the efficiency and effectiveness of capital deployment in our core business. Our business is capital-intensive and depends on the effective execution of our projects. Our ability to achieve our targeted returns on these projects is vital to the success of our business. Spectra Energy Transmission ROCE is one of the 2015 STI performance measures used for all of our Named Executive Officers. We define Spectra Energy Transmission ROCE as our EBIT (excluding results from DCP Midstream) divided by our annual average total debt plus equity minus cash on hand and our investment in DCP Midstream. Target performance was set at a level consistent with corporate forecasts. Similar to other measures, maximum and minimum performance were set, respectively, at levels deemed by the Compensation Committee to be significant challenges or minimally acceptable.

Given the importance of safe and reliable operations, two scorecards were designed to provide alignment and a common culture in all our field and office locations. The first scorecard is the Environmental, Health and Safety Scorecard, which consists of several industry-leading and lagging indicators that promote leadership, continuous improvement and a culture of zero injury. Annual targets in these areas are set to achieve incremental improvement in performance over prior years’ results.

 

 

 

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2015 Compensation

 

 

To promote leadership in enhancing a safety culture, safety leadership training for front line field supervisors was developed and conducted, and employees were required to complete all applicable environmental, health and safety training.

We emphasized the importance of a zero-injury culture in two areas: our people and our environment. With respect to our people, we measured improvement in frequency rates for recordable employee and contractor injury, for employee days away and restricted time incident frequency, and for preventable vehicle incidents. With respect to our environment, we focused on: ensuring that corrective actions and root cause analyses are developed for recordable incidents, development and implementation of a process to ensure that learnings from significant incidents are shared across the Company, and minimization of impacts on our environment.

The second scorecard is the Operations Scorecard, which consists of several goals designed to ensure effective management of efficient operations. These measures consisted of effectively managing operational and maintenance costs, measuring the reliability of performance at our compressor stations and processing plants, measuring the compliance of our pipelines with prescribed inspection and maintenance work, and maintaining the integrity of our pipelines.

We also have a third scorecard, which is the Project Scorecard. This consists of two goals designed to ensure effective management of budget and schedule for our capital expansion projects. These measures consisted of: meeting budgeted capital expenditures and achieving budgeted internal rates of return on these projects.

Determination of 2015 Short-Term Incentive Payments

At the end of the 2015 cycle, management prepared a report on the achievement of the financial and operational goals under our STI plan. The Compensation Committee reviewed and approved these results in February 2016, along with any proposed adjustments based on individual performance for each Named Executive Officer. In the case of Named Executive Officers other than our Chief Executive Officer, the Chief Executive Officer made recommendations to the Committee regarding any adjustments based on individual performance. In the case of our Chief Executive Officer, the Committee reviewed and approved his performance against financial and operational objectives and his overall individual performance. Following this process, the Compensation Committee approved the final performance results and payment of incentives to all Named Executive Officers.

The table below shows the level of performance needed to achieve the threshold, target and maximum payouts established for each financial goal, as well as the actual 2015 results and actual payout percentages. As discussed above, for each goal, achievement of the threshold, target and maximum amounts would result in corresponding payout percentages of 50%, 100% and 200%, respectively, of the target level.

For example, an executive’s short-term incentive payment associated with our Spectra Energy Ongoing EPS results was calculated as 20% of the executive’s target cash incentive opportunity (20% being the weighting assigned to the EPS measure) multiplied by the actual 2015 payout percentage for the EPS measure, which was 84.62%.

 

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COMPENSATION DISCUSSION AND ANALYSIS

2015 Compensation

 

 

In determining the final award amounts, the Committee also considered other factors, including Mr. Ebel’s leadership in driving strong company performance in 2015, positioning the Company to succeed during an energy downturn as well as ensuring the Company’s financial strength and stability in an extremely volatile market. The Committee also included in its final determination of awards, Messrs. Reddy’s and Buckley’s performance related to the Company’s financial and strategic success in 2015 and Ms. Ables’ success in delivering a major IT project on-time and under budget.

 

2015 STI AWARDS                    
Name     

Actual Short-Term

Incentive Payout

      

Payout as a Percent of

STI Target Opportunity

 

Gregory L. Ebel

     $ 1,889,001           152%   

J. Patrick Reddy

     $ 749,016           156%   

Reginald D. Hedgebeth

     $ 573,548           144%   

Guy G. Buckley

     $ 479,869           164%   

Dorothy M. Ables

     $ 510,101           153%   

2015 Long-Term Incentive Opportunities

We provide long-term incentive opportunities to our executive officers to achieve an alignment of executive and shareholder interests. These opportunities are designed to incentivize executives to achieve strategic goals that will maximize long-term shareholder value.

The Compensation Committee decided that our long-term incentive program should consist of both a time-based element and a performance-based element. It believes that combining these two forms of awards, with a heavier weighting on the performance element, is an effective means of creating a focus on shareholder return and helping us retain our executive talent in a competitive market. We therefore award performance share units, which generally vest when certain specific performance goals are achieved, in combination with phantom units that generally vest over a three-year period if the grantee remains continuously employed by the Company/affiliates.

Phantom units

Phantom units make up 40% of the annual LTI grant value. These units generally vest at the end of three years if the grantee remains continuously employed by the Company/affiliates, at which time they are paid in cash, based on the fair market value of Spectra Energy common stock at the time of vesting. Dividend equivalents are accumulated from the date of grant and paid (in cash) only on the number of phantom units that actually vest.

Performance share units

For 2015, performance share unit awards continued to make up the remaining 60% of the target value of annual long-term compensation. These units are earned based on how the Company performs over a three-year period relative to our Peer Group. Please see “– Factors Considered in Determining Total Compensation – Peer Group Comparison” for more information regarding the Peer Group.

The vesting of performance share unit awards depends on how the TSR of our common stock (a performance metric under our long-term incentive program) compares to TSR results of our Peer Group over a three-year measurement period, as shown below:

 

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COMPENSATION DISCUSSION AND ANALYSIS

2015 Compensation

 

 

The Compensation Committee approved these percentages after reviewing similar plans adopted by many of the companies in the Peer Group, reviewing the historical returns of the Peer Group as well as indices that track energy company performance, and consulting with its independent compensation consultant.

Once earned, the performance share units are converted to shares of Spectra Energy common stock at the time of vesting. This payout design for the performance share units, in combination with the payout design for the phantom units, is intended to provide for stock accumulation while also allowing for investment diversification. Dividend equivalents are accumulated from the date of grant and paid (in cash) only on the number of performance share units that actually vest.

For the purpose of determining the number of performance share units and phantom units granted, we use Aon Hewitt’s Total Compensation Management valuation model. Based on this model, adjustments are made to reflect the risk associated with the performance and time vesting conditions, resulting in discounts to 88.78% and 93.78% for performance share units and phantom units, respectively.

We use this expected value methodology in determining awards because this valuation method represents the benefit or opportunity to the employee. It assigns a prospective dollar value to long-term incentives for various compensation-related purposes including comparison of compensation across companies in a peer group. The value shown in the Summary Compensation Table is calculated using standard accounting methodologies. Under the accounting rules, use of a relative TSR performance measure generally produces higher accounting expense than awards that vest based on other measures or solely on service.

We believe in strong alignment of executive pay with TSR. This alignment provides competitive long-term incentive opportunities and incentivizes management to focus on the critical value of shareholder returns. Even though it produces higher accounting expense, we have a heavier weighting on relative TSR as a performance metric than the majority of our peers, as we believe it has the strongest alignment with returns our shareholders realize.

The table below shows long-term incentive awards granted to our Named Executive Officers in 2015:

 

2015 LTI GRANTS                       
Name    Expected Value of LTI/Equity Grants
(as a % of Base Salary)
    Number of Performance
Share Units Granted
    

Number of Phantom

Units Granted

 

Gregory L. Ebel

     425     94,000         59,350   

J. Patrick Reddy

     180     22,500         14,200   

Reginald D. Hedgebeth

     150     16,700         10,550   

Guy G. Buckley

     140     12,300         7,750   

Dorothy M. Ables

     125     11,650         7,350   

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2016 Compensation

 

 

Determination of 2013-2015 Performance Share Unit Awards

The 2013 performance unit cycle commenced on January 1, 2013 and ended on December 31, 2015. Performance share units vest based on our TSR for this three-year period as compared to the TSR for companies in our 2013 Peer Group for LTI (which was the same as the 2015 Peer Group shown on page 38, except that it also included Ameren Corporation, Questar Corporation and NiSource Inc.). Our final TSR for the three-year period was 3.54%, which is at the 37.5 percentile of the 2013 Peer Group for LTI. This resulted in a payout percentage of 68.75%. It has been a challenging 18 months in our industry sector and in spite of these headwinds, we have continued to provide steady and stable results on our financial and operational fronts. The markets have responded and through the end of January 2016, our TSR increased from -3.54% to 12.97%, while some of our peers have continued to experience challenges in the marketplace. The following table lists the resulting number of 2013-2015 performance shares that vested and the total value realized including associated dividend equivalents:

 

      Original 2013 PSU Grant      Final 2013 PSU Results  
Name    # Shares at
Target
     Value of Grant      # Shares at
Vest
     Value Realized  

Gregory L. Ebel

     88,000       $ 3,193,520         60,500       $ 1,976,233   

J. Patrick Reddy

     24,800       $ 899,992         17,050       $ 556,938   

Reginald D. Hedgebeth

     19,900       $ 722,171         13,682       $ 446,923   

Guy G. Buckley

     8,300       $ 301,207         5,708       $ 186,452   

Dorothy M. Ables

     13,900       $ 504,431         9,558       $ 312,212   

2016 Compensation

The Compensation Committee approved the 2016 incentive programs including the following:

In the short-term incentive program, Distributable Cash Flow is replacing EPS as our enterprise-wide corporate measure to better align with how our shareholders measure the Company’s performance. The STI program will continue to focus on cash generation through EBITDA, incentivize the efficiency and effectiveness of capital deployment in our core businesses through ROCE, and focus on the importance of safe and reliable operations though EHS and Operational measures.

Three key changes have been made to the 2016 long-term incentive program for our Named Executive Officers:

 

  The majority of the LTI awards will continue to be performance-based and will consist of performance share units, phantom units, and non-qualified stock options (please see “Change in LTI Awards” table below).

 

  The measure for the performance share units will continue to be relative TSR over a three year period; however, the customized peer group will consist of companies in the S&P 500 Energy Index, the Alerian Index (excluding SEP and DCP Midstream), and Enbridge Inc. and TransCanada Corporation. The LTI peer group was revised to reflect changes in our industry and to better align industry results with the performance of the Company.

 

  Lastly, all equity awards for our Named Executive Officers will contain a “double trigger” for vesting upon a change in control; that is, vesting will only accelerate when both a change in control and a qualifying termination event has occurred.

Change in LTI Awards

 

      LTI Grant Value
Weighting
       
Equity Type    2015
Award
     2016
Award
     All equity types align with shareholder interests, in addition
to:

Performance Share Units

     60%         50%       Aligns Spectra Energy’s stock performance relative to others in our key indices

Non-qualified stock options

     none         20%       Aligns Spectra Energy’s stock performance on an absolute basis

Phantom Units

     40%         30%       Provides retention for executives

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Retirement and Other Benefits

 

 

Additionally, the Compensation Committee made no change to the Chief Executive Officer’s 2016 base pay or short-term and long-term incentive targets due to his target compensation being in line with the overall general industry survey data and in recognition of current industry market conditions. Following the Committee’s approval, effective on March 15, 2016, the Company entered into an amendment to the change in control agreement for the Chief Executive Officer to increase his cash severance benefits from two times to three times his annual salary and annual target cash incentive to be in line with market practice.

Retirement and Other Benefits

Retirement Benefits

We provide our executives with retirement benefits under the Spectra Energy Retirement Savings Plan, the Spectra Energy Executive Savings Plan, the Spectra Energy Retirement Cash Balance Plan and the Spectra Energy Executive Cash Balance Plan. The Compensation Committee has determined that, based on market surveys, these plans are comparable to the benefits provided by our peers and provide an important tool for attracting and retaining our executives. Please refer to “Compensation Tables” beginning on page 52 for disclosure of the amounts paid to our Named Executive Officers under these plans.

The Spectra Energy Retirement Savings Plan, a “401(k) plan,” is generally available to all our employees in the United States. It is a tax-qualified retirement plan that provides a means for employees to save for retirement on a tax-deferred basis and to receive an employer matching contribution. Earnings on amounts credited to the plan depend on each participant’s investment choices (which may include a Spectra Energy common stock fund).

The Spectra Energy Executive Savings Plan enables executives to defer compensation, and receive employer matching contributions, in excess of the limits of the Internal Revenue Code that apply to qualified retirement plans such as the Spectra Energy Retirement Savings Plan. Investment choices under this plan are similar to those offered to all employees under the Spectra Energy Retirement Savings Plan.

The Spectra Energy Retirement Cash Balance Plan provides a defined benefit beginning at retirement, the amount of which is based on a participant’s cash balance account balance, which grows with monthly pay and interest credits.

The Spectra Energy Executive Cash Balance Plan provides executives with the retirement benefits to which they would be entitled under the Spectra Energy Retirement Cash Balance Plan in the absence of the Internal Revenue Code limits.

Perquisites and Personal Benefits

At the direction of the Board, Mr. Ebel uses the Company aircraft for personal travel in limited circumstances, primarily for business efficiency. Mr. Ebel’s family and guests may accompany him on business and personal trips. Other executive officers are not allowed to initiate personal trips on corporate or chartered aircraft. However, they are permitted to invite their spouses or guests to accompany them on business trips when space is available. When an executive officer’s use of aircraft or a guest’s travel does not meet the Internal Revenue Service’s standard for business use, the cost of that travel is imputed as income to the officer even if it did not result in incremental cost to the Company.

Severance

The Compensation Committee believes that change-in-control severance arrangements serve shareholders’ best interests by diminishing the potential distraction created by the personal uncertainties and risks that may affect our executives’ focus in the context of a potential corporate restructuring or change-in-control transaction. These protections also help ensure continuity of management in the event of certain corporate transactions.

However, the Committee believes that executives should not be unduly enriched if change-in-control severance arrangements are triggered. Accordingly, each Named Executive Officer has entered into an agreement with the Company that defines the circumstances under which severance benefits would be paid.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Other Compensation Policies

 

 

The Compensation Committee approved the terms of these agreements after consultation with its independent compensation consultant and with outside counsel. For 2015, the agreements include the provisions listed below, which the Compensation Committee considered to be sufficient to achieve its objectives. See also – “Compensation Tables – Potential Payments upon Termination of Employment or Change in Control.”

 

  Agreements are triggered only if there is both a change in control of the Company and a qualifying termination of employment. This feature is commonly called a “double trigger.”

 

  Cash severance benefits are limited to two times annual salary plus two times annual target cash incentive.

 

  Medical, dental and life insurance are continued during the two years following severance.

 

  A lump-sum payment is provided for company savings-plan and pension-plan contributions.

 

  There is no provision to gross-up excise taxes that may be triggered under Section 4999 of the Internal Revenue Code. However, severance payments may be reduced to a level that does not trigger the excise tax if this results in greater net after-tax benefits for the executive than if severance benefits were not reduced and excise tax was paid.

 

  Executives are subject to certain non-competition and non-solicitation provisions.

Other Compensation Policies

Clawback Policy

We have a policy on recovery of executive compensation (“Clawback Policy”). Our executive officers who are subject to Section 16 of the Exchange Act are subject to the Clawback Policy (each, a “Covered Person”). If our financial results are significantly restated due to fraud or intentional misconduct and a Covered Person is found to be personally responsible for the fraud or intentional misconduct that caused the need for the restatement, the Clawback Policy permits seeking recoupment of incentive, equity and/or performance-based compensation amounts awarded and paid to such Covered Person during the three-year period preceding the date of the restatement. Determinations of whether or not to seek such recoupment will be made, with respect to our Chief Executive Officer, at the sole discretion of our Board, and with respect to other Covered Persons, at the sole discretion of the Compensation Committee.

Stock Ownership Policy

We have adopted a stock ownership policy for executive officers and other key employees who receive long-term incentives. We believe that our executives should be required to own shares of Spectra Energy in order to establish an alignment between their interests and the interests of our shareholders. The employee is required to satisfy the ownership target within five years after becoming subject to the policy. To reinforce the importance of stock ownership, employees who do not achieve their ownership targets by a preset date become ineligible for future long-term incentives unless they apply all short-term incentive payments to the purchase of our common stock until the ownership target is achieved.

The following table summarizes our stock ownership policy for our executive officers. All Named Executive Officers have exceeded their aggregate stock ownership requirement under this policy.

 

STOCK OWNERSHIP REQUIREMENTS        
Position    Number of Shares  

Chairman, President and Chief Executive Officer

     200,000   

Other Named Executive Officers

     70,000   

All Other Executives Subject to Guidelines

     2,000-30,000   

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Tax and Accounting Implications of Our Compensation Program

 

 

Derivative Transactions

Our stock trading policy applies to transactions in any securities that derive their value from our common stock or any of our debt securities. To avoid even the appearance of insider trading, this policy permits trading by our directors and executives in our securities only during a 30-day window following our quarterly or annual earnings release and only after obtaining preclearance from our Chief Executive Officer or General Counsel. In addition, because of the inherent potential for abuse, this policy restricts our directors and executives from entering into short-swing transactions, short sales, or the use of derivative securities, hedging transactions or margin accounts when such accounts or transactions relate to our securities.

Tax and Accounting Implications of Our Compensation Program

Deductibility of Executive Compensation

The Compensation Committee reviewed and considered the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company generally may not deduct for federal income tax purposes annual compensation in excess of $1 million paid to certain employees. However, the $1 million limit does not apply to performance-based compensation that is paid pursuant to shareholder-approved plans and is approved by directors who qualify as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code.

The Compensation Committee generally structures and administers executive compensation plans and arrangements so that they will not be subject to the 162(m) deduction limit. However, to maintain flexibility in structuring appropriate compensation programs, the Committee may from time to time approve payments that cannot be deducted. For example, phantom units awarded to certain employees under our Long-Term Incentive Plan may not be deductible for federal income tax purposes, depending on the amount and type of other compensation these employees receive.

Accounting for Stock-Based Compensation

In accounting for employee awards, equity classified stock-based compensation cost is measured at the grant date based on the fair value of the award and is generally recognized as expense over the period beginning on the date the award is granted and ending on the earlier of the date the award vests or the date the employee becomes retirement-eligible. For accounting purposes, awards granted to retirement-eligible employees are deemed to vest on the grant date and their cost is recognized at that time. Liability classified stock-based compensation cost is re-measured at each reporting period and is recognized as expense over the requisite service period.

Internal Revenue Code Section 409A

To the extent we permit executives to defer compensation or we commit to deliver compensation at a later date than when earned and vested, we endeavor to ensure that, if applicable, the requirements of Section 409A of the Internal Revenue Code are satisfied. Failure to satisfy the Section 409A requirements could subject the executives receiving such nonqualified deferred compensation to a 20% excise tax.

 

 

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Compensation Tables

This section provides information regarding the compensation of our Named Executive Officers for 2013 through 2015.

 

Summary Compensation Table                                                   
Name and Principal Position   Year    

Salary

($)

    Bonus
($)
    Stock
Awards
($)(1)
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)(2)
   

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings

($)(3)

    All Other
Compensation
($)(4)
   

Total

($)

 

Gregory L. Ebel(5)

President and Chief Executive Officer

    2015        1,133,000               6,664,813               1,889,001        313,525        342,321        10,342,660   
    2014        1,127,500               6,285,224               1,784,594        756,627        311,110        10,265,055   
    2013        1,094,167               4,841,116               1,941,204        249,233        175,023        8,300,743   

J. Patrick Reddy

Chief Financial Officer

    2015        634,900               1,595,076               749,016        162,207        96,312        3,237,511   
    2014        606,443               1,430,768               719,902        164,158        95,228        3,016,499   
    2013        588,788               1,363,936               681,388        99,231        67,069        2,800,412   

Reginald D. Hedgebeth

General Counsel and Chief Ethics & Compliance Officer

    2015        568,033                1,184,285                573,548        73,150        74,850        2,473,866   
    2014        551,507               1,675,599               611,046        139,007        71,549        3,048,708   
    2013        535,428               1,093,921               493,452        78,983        64,905        2,266,689   

Guy G. Buckley

Chief Development Officer

    2015        438,333               1,317,409               479,869        63,385        56,313        2,355,309   

Dorothy M. Ables

Chief Administrative Officer

    2015        475,488               825,805               510,101        90,479        70,371        1,972,244   
    2014        461,673               757,848               511,511        167,068        64,481        1,962,581   
    2013        448,223               763,169               413,084        85,836        47,492        1,757,804   

 

(1) Stock Awards column reflects the aggregate grant date fair value of performance share units and phantom units awards granted each year as shown in the “2015 Grants of Plan-Based Awards” table on page 53, and computed in accordance with the provisions of FASB ASC Topic 718. The aggregate dollar amount was determined without regard to any estimate of forfeitures related to service-based vesting conditions. See Note 22 of the Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2015 regarding assumptions underlying the valuation of equity awards. See page 47 for determination of units granted and variance with accounting values shown above. If the performance share units vested at the maximum level, the following represents the maximum value that would be payable on the performance share units granted in 2015, based on the closing stock price of our common stock on the grant date of these awards for Messrs. Ebel, Reddy, Hedgebeth, and Buckley and Ms. Ables: $6,914,640, $1,655,100; $1,228,452; $904,788; and $856,974, respectively.

 

(2) Non-Equity Incentive Plan Compensation column includes amounts payable under the Spectra Energy Executive STI Plan with respect to the 2015, 2014 and 2013 performance periods. Unless deferred, these amounts were paid, respectively, in February 2016, March 2015, and February 2014.

 

(3) Change in Pension Value and Nonqualified Deferred Compensation Earnings represents the change in value during the twelve-month period ending on December 31 of each year. These changes were as follows for each Named Executive Officer:

 

     Gregory L. Ebel
($)
   

J. Patrick
Reddy

($)

   

Reginald D.
Hedgebeth

($)

    Guy G.
Buckley
($)
   

Dorothy M.
Ables

($)

 
Change in actuarial present value of accumulated benefit under the Spectra Energy Retirement Cash Balance Plan     11,219        28,378        11,800        10,772        18,159   
Change in actuarial present value of accumulated benefit under the Spectra Energy Executive Cash Balance Plan     228,749        133,829        61,350        52,613        72,320   
Change in actuarial present value of accumulated benefit under the Pension Choices Plan for Employees of Westcoast Energy Inc. and Affiliated Companies     (29,041                            
Change in actuarial present value of accumulated benefit under the Spectra Energy Supplemental Pension Plan     102,598                               

Total

    313,525        162,207        73,150        63,385        90,479   

 

 

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COMPENSATION TABLES

2015 Grants of Plan-Based Awards

 

 

 

 

(4) All Other Compensation column includes the following for 2015:

 

    

Gregory L. Ebel

($)

   

J. Patrick
Reddy

($)

   

Reginald D.
Hedgebeth

($)

   

Guy G.
Buckley

($)

   

Dorothy M.
Ables

($)

 
Matching contributions under the Spectra Energy Retirement Savings Plan     15,900        15,900        15,900        15,900        15,900   
Make-whole matching contribution credits under the Spectra Energy Corp Executive Savings Plan     159,156        65,388        54,845        34,947        43,320   
Premiums for life insurance coverage provided under life insurance plans     2,622        7,524        1,710        4,266        4,651   
Matching charitable contributions made in the name of the executive under Spectra Energy’s matching gift policy*     8,000        7,500        500        1,200        6,500   
Personal use of Company aircraft     152,702               1,895                 
Tax-return preparation services     3,941                               

Total

    342,321        96,312        74,850        56,313        70,371   

 

  The amounts shown as “Personal use of Company aircraft” reflect the personal use of the Company’s aircraft by the Named Executive Officers. When travel costs did not meet the IRS standard for “business use,” income was imputed to the officer even though such travel may not have resulted in incremental cost to Spectra Energy. The methodology used to compute the incremental cost of this benefit was based on the hourly variable cost for the use of the aircraft, plus any tax-deduction disallowance.

 

(5) A portion of Mr. Ebel’s pension value for 2015, 2014 and 2013 was provided in Canadian dollars and has been converted to U.S. dollars using the Bloomberg spot rate of $0.7226 on December 31, 2015, $0.8605 on December 31, 2014, and $0.9414 on December 31, 2013.

 

* Amounts represent Company-matched charitable contributions during 2015.

 

2015 Grants of Plan-Based Awards                                                 
   

Grant

Date

   

Committee

Approval

Date

        Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
        Estimated Future Payouts Under
Equity Incentive Plan  Awards(2)(3)
   

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units

(#)(2)(3)

   

Grant

Date Fair

Value of

Stock and

Option

Awards

($)(4)

 
Name          

Threshold

($)

   

Target

($)

   

Maximum

($)

       

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

     

Gregory L. Ebel

                      $ 623,150      $ 1,246,300      $ 2,492,600                                               
    2/17/2015        2/16/2015                                        47,000        94,000        188,000              $ 4,481,920   
      2/17/2015        2/16/2015                                                                59,350      $ 2,182,893   

J. Patrick Reddy

                        240,000        480,000        960,000                                               
    2/17/2015        2/16/2015                                        11,250        22,500        45,000              $ 1,072,800   
      2/17/2015        2/16/2015                                                                14,200      $ 522,276   
Reginald D. Hedgebeth                         199,780        399,560        799,120                                               
    2/17/2015        2/16/2015                                        8,350        16,700        33,400              $ 796,256   
      2/17/2015        2/16/2015                                                                10,550      $ 388,029   
Guy G. Buckley(5)                         146,250        292,500        585,000                                               
    2/17/2015        2/16/2015                                        6,150        12,300        24,600              $ 586,464   
    2/17/2015        2/16/2015                                                                7,750      $ 285,045   
      7/01/2015        4/27/2015                                                                14,000      $ 445,900   
Dorothy M. Ables                         167,230        334,460        668,920                                               
    2/17/2015        2/16/2015                                        5,825        11,650        23,300              $ 555,472   
      2/17/2015        2/16/2015                                                                7,350      $ 270,333   

 

(1) This column shows the potential payout opportunities established for the 2015 performance period under the terms of the Spectra Energy Executive STI Plan. The actual amounts paid to each executive under the plan for 2015 are disclosed in the Summary Compensation Table.

 

(2) Awards were made in units of Spectra Energy common stock and were granted under the terms of the Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated.

 

(3) All performance share units are earned based on how the Company performs relative to our Peer Group over a three year performance period (January 1, 2016 to December 31, 2018).

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      53


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COMPENSATION TABLES

2015 Option Exercises and Stock Vested

 

 

 

 

(4) All awards reflected in this column were computed in accordance with FASB ASC Topic 718. The per-share full grant date fair value of the phantom units and performance share units granted on February 17, 2015 were $36.78 and $47.68, respectively. The per-share full grant date fair value of the phantom units granted on July 1, 2015 was $31.85.

 

(5) The Spectra Energy Compensation Committee, at its meeting on April 27, 2015, approved a retention grant of phantom units to Mr. Buckley. Mr. Buckley is a key and critical individual to retain long-term, as he provides leadership for our long-term strategy, M&A and key oversight for our investment in DCP Midstream, as well as oversight of our capital expansion projects. This key executive possesses highly marketable skills in a position of strategic importance as the Company executes on its growth strategy. The Committee sought to ensure that Mr. Buckley would continue to be integral to Spectra Energy’s succession plan.

 

Outstanding Equity Awards at 2015 Fiscal Year-End                    
     Option Awards          Stock Awards  
Name  

Number of

Securities
Underlying

Unexercised

Options

(#) Exercisable

   

Number of

Securities
Underlying

Unexercised

Options

(#) Unexercisable

  Option
Exercise
Price
($)(1)
    Option
Expiration
Date
        

Number of

Shares or

Units of Stock

That Have

Not Vested

(#)(2)

   

Market Value

of Shares or

Units of Stock

That Have

Not Vested

($)

   

Equity
Incentive
Plan Awards:

Number of

Unearned
Shares, Units
or Other Rights
That Have

Not Vested

(#)(3)

   

Equity
Incentive
Plan Awards:

Market or

Payout Value

of Unearned

Shares, Units or
Other Rights
That Have

Not Vested

($)

 

Gregory L. Ebel

    76,700          $ 25.64        2/27/2017            171,850      $ 4,114,089        184,500      $ 4,416,930   

J. Patrick Reddy

                                    42,800      $ 1,024,632        43,100      $ 1,031,814   

Reginald D. Hedgebeth

                                    46,850      $ 1,121,589        32,300      $ 773,262   

Guy G. Buckley(4)

    23,200          $ 25.64        2/27/2017            32,550      $ 779,247        21,200      $ 507,528   

Dorothy M. Ables

    33.400          $ 25.64        2/27/2017            22,950      $ 549,423        22,550      $ 539,847   

 

(1) For options expiring on February 27, 2017, the exercise price is equal to the closing price of our common stock on the date of grant.

 

(2) Messrs. Ebel, Reddy, Hedgebeth and Buckley and Ms. Ables received Spectra Energy phantom units on February 17, 2015, February 18, 2014, and February 19, 2013 which, subject to certain exceptions, vest on the third anniversary of the date of grant.

 

(3) Messrs. Ebel, Reddy, Hedgebeth, and Buckley and Ms. Ables received performance share units on February 17, 2015 and February 18, 2014 which, subject to certain exceptions, are eligible for vesting on December 31, 2017 and December 31, 2016, respectively. As directed by Instruction 3 to Item 402(f)(2) of the SEC’s Regulation S-K, performance share units are listed at the targeted number of units.

 

(4) Mr. Buckley received 14,000 phantom units on July 1, 2015 which, subject to certain exceptions, vest on the third anniversary of the date of grant.

 

2015 Option Exercises and Stock Vested  
Name    Option Awards           Stock Awards  
   Number of Shares
Acquired on Exercise
(#)
     Value Realized on Exercise
($)
           Number of Shares
Acquired on Vesting
(#)(1)
    

Value Realized on Vesting

($)(2)

 

Gregory L. Ebel

                          111,700         4,028,329   

J. Patrick Reddy

                          30,250         1,085,994   

Reginald D. Hedgebeth

                          25,282         911,851   

Guy G. Buckley

                          20,508         779,429   
Dorothy M. Ables                           17,658         636,860   

 

(1) Time-vested shares included in this column are 51,200 to Mr. Ebel; 13,200 to Mr. Reddy; 11,600 to Mr. Hedgebeth; 14,800 to Mr. Buckley; and 8,100 to Ms. Ables, and the remainder are 50% settled in shares and cash.

 

(2) Calculated based on the closing price of a share of common stock on the respective vesting date; includes the following cash payments for dividend equivalents on earned phantom and performance share units, which were paid upon vesting: $448,684 to Mr. Ebel; $121,740 to Mr. Reddy; $101,550 to Mr. Hedgebeth; $79,696 to Mr. Buckley; and $70,928 to Ms. Ables.

 

 

54       SPECTRA ENERGY CORP 2016 PROXY STATEMENT


Table of Contents

 

LOGO

 

 

COMPENSATION TABLES

Pension Benefits

 

 

Pension Benefits

This section contains information regarding benefits available to our Named Executive Officers under the Company’s pension and retirement plans.

Spectra Energy Retirement Cash Balance Plan and Executive Cash Balance

We provide pension benefits that are intended to assist our retirees with their retirement income needs. This section contains a detailed description of the plans that make up our pension program.

Each of the Named Executive Officers actively participated in pension plans sponsored by us or an affiliate in 2015. This included the Spectra Energy Retirement Cash Balance Plan (“RCBP”), a noncontributory, defined-benefit retirement plan that is intended to qualify under Section 401(a) of the Internal Revenue Code. The RCBP generally covers non-bargaining employees of the Company and its affiliates, and provides benefits under a “cash balance account” formula.

Each of the Named Executive Officers who participates in the RCBP has satisfied the requirements for receiving the account benefit upon termination of employment. The RCBP benefit is payable in the form of a lump sum in the amount credited to the hypothetical account at the time of benefit commencement. Payment is also available in the form of an annuity based on the actuarial equivalent of the account balance.

The amount credited to the hypothetical account is increased with monthly pay credits, as follows:

 

Age and service    Percentage of eligible monthly compensation*  

Participants with combined age and service of less than 35 points

     4%   

Participants with combined age and service of 35 to 49 points

     5%   

Participants with combined age and service of 50 to 64 points

     6%   

Participants with combined age and service of 65 or more points

     7%   

 

* For the RCBP, eligible monthly compensation is equal to Form W-2 wages, plus elective deferrals under a 401(k) or cafeteria plan. It does not include severance pay (including payment for unused vacation), expense reimbursements, allowances, cash or noncash fringe benefits, moving expenses, bonuses for performance periods in excess of one year, transition pay, long-term incentive compensation (including income resulting from any stock-based awards such as stock options, stock appreciation rights, phantom stock or restricted stock) and certain other compensation items.

If the participant earns more than the Social Security wage base, the account is credited with additional pay credits equal to 4% of eligible compensation above the Social Security wage base. Interest credits are credited monthly. The interest rate is determined quarterly based upon the 30-year Treasury rate, but with a 4% minimum and a 9% maximum.

A participant’s RCBP benefit may not be less than the amount determined under certain prior benefit formulas (including optional forms). In addition, the benefit is subject to benefit and compensation limits under the Internal Revenue Code.

Each of our Named Executive Officers was also eligible to participate in the Spectra Energy Executive Cash Balance Plan (“ECBP”), a noncontributory, defined-benefit retirement plan that is not intended to satisfy the requirements for qualification under Section 401(a) of the Internal Revenue Code. Benefits earned under the ECBP are attributable to (a) compensation in excess of the Internal Revenue Code’s annual compensation limit ($265,000 for 2015) for the determination of pay credits under the RCBP; (b) restoration of benefits in excess of a defined-benefit plan maximum annual benefit limit ($210,000 for 2015) under the Internal Revenue Code that applies to the RCBP; and (c) supplemental benefits granted to a particular participant. Generally, benefits earned under the RCBP and the ECBP vest upon completion of three years of service and, with certain exceptions, vested benefits generally become payable upon termination of employment with the Company.

We have established a grantor trust that is subject to the claims of our creditors into which funds related to the ECBP are deposited. Funds deposited into the trust are managed by an independent trustee subject to guidelines provided by the Company.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      55


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LOGO

 

 

COMPENSATION TABLES

Pension Benefits

 

 

Pension Choices Plan for Employees of Westcoast Energy Inc. and Spectra Energy Supplemental Pension Plan

Mr. Ebel participated in the Pension Choices Plan for Employees of Westcoast Energy Inc. and Affiliated Companies (“Pension Plan”) and the Spectra Energy Supplemental Executive Retirement Plan (“SERP”) while he resided in Canada prior to 2007. The Pension Plan is registered under the Income Tax Act and under the Pension Benefits Act (Ontario). The executive component of the Pension Plan is a non-contributory defined-benefit plan that provides a pension based on 2% of the annualized average of the executive’s highest consecutive 36 months’ salary and cash incentive multiplied by his years of service while located in Canada. The Income Tax Act imposes a limit on the amount of benefits that can be paid from a registered pension plan.

The SERP is primarily intended to restore benefits under the Pension Plan to the level that would be available absent this limit. Mr. Ebel’s benefit accruals related to the Duke SERP were transferred to the Spectra Energy SERP effective with the spin-off. SERP benefits are paid from the general revenues of Spectra Energy generally as a life annuity. Effective with his transfer to the United States, Mr. Ebel began participating in the Spectra Energy RCBP, and his active participation in the Pension Plan was suspended, although compensation (but not additional service) with Spectra Energy will be used in the calculation of his Pension Plan and SERP benefit. The table below provides information, determined as of December 31, 2015, about each plan that provides for payments or other benefits to our Named Executives Officers at, following or in connection with retirement:

 

PENSION BENEFITS TABLE                             
Name   Plan Name    Number of
Years of
Credited
Service (#)
    

Present

Value of

Accumulated
Benefit ($)

    

Payments
During Last

Fiscal Year
($)

 

Gregory L. Ebel

  Spectra Energy Retirement Cash Balance Plan      18.00       $ 273,655           
  Spectra Energy Executive Cash Balance Plan      18.00       $ 1,431,585           
  Pension Choices Plan for Employees of
Westcoast Energy Inc.
     6.48       $ 144,010           
    Spectra Energy Supplemental Pension Plan      6.48       $ 2,828,092           

J. Patrick Reddy

  Spectra Energy Retirement Cash Balance Plan      7.00       $ 173,629           
    Spectra Energy Executive Cash Balance Plan      7.00       $ 650,724           

Reginald D. Hedgebeth

  Spectra Energy Retirement Cash Balance Plan      6.76       $ 146,966           
    Spectra Energy Executive Cash Balance Plan      6.76       $ 453,323           

Guy G. Buckley

  Spectra Energy Retirement Cash Balance Plan      26.32       $ 483,839           
    Spectra Energy Executive Cash Balance Plan      26.32       $ 433,407           
Dorothy M. Ables   Spectra Energy Retirement Cash Balance Plan      30.36       $ 701,771           
    Spectra Energy Executive Cash Balance Plan      30.36       $ 841,196           

Spectra Energy Executive Savings Plan

Under the Spectra Energy Executive Savings Plan, participants can elect to defer a portion of their base salary, short-term incentive compensation and long-term incentive compensation (other than stock options). Participants also receive a company matching contribution in excess of the contribution limits prescribed by the IRS under the Spectra Energy Retirement Savings Plan. In general, payments are made following termination of employment or death in the form of a lump sum or installments, as selected by the participant. Participants may request an accelerated distribution upon an “unforeseeable emergency.” In general, participants may direct the deemed investment of base salary deferrals, short-term incentive deferrals and matching contributions among investment options available under the Spectra Energy

 

 

56       SPECTRA ENERGY CORP 2016 PROXY STATEMENT


Table of Contents

 

LOGO

 

 

COMPENSATION TABLES

Potential Payments Upon Termination of Employment or Change in Control

 

 

Retirement Savings Plan, including in a Spectra Energy Common Stock Fund. Deferrals of equity awards are credited with earnings and losses based on the performance of the Spectra Energy Common Stock Fund. We have established a grantor trust that is subject to the claims of our creditors into which funds related to the Spectra Energy Executive Savings Plan are deposited; an independent trustee manages these funds under guidelines provided by the Company.

 

NONQUALIFIED DEFERRED COMPENSATION                                       
Name   

Executive

Contributions
in Last FY

($)(1)

    

Company

Contributions
in Last FY

($)(2)

    

Aggregate

Earnings in Last
FY

($)

   

Aggregate
Withdrawals/

Distribution
($)

    

Aggregate
Balance at
Last FYE

($)

 

Gregory L. Ebel

   $ 275,615       $ 159,156       ($ 145,483           $ 2,502,998   

J. Patrick Reddy

   $ 57,288       $ 65,388       ($ 1,309,134           $ 3,069,926   

Reginald D. Hedgebeth

   $ 68,164       $ 54,845       ($ 33,786           $ 731,201   

Guy G. Buckley

   $ 26,847       $ 34,947       ($ 79,029           $ 635,586   

Dorothy M. Ables

   $ 35,220       $ 43,320       ($ 73,383           $ 1,277,029   

 

(1) The table reflects contributions made to the Spectra Energy Executive Savings Plan. Executive contributions credited to the plan in 2015 include amounts reported as “Salary” in the Summary Compensation Table as well as “Non-Equity Incentive Plan Compensation” paid in 2015 but reported in the table as compensation earned in 2014. Amounts may also include elective deferrals of awards earned under our Long-Term Incentive Plan and payable in 2015.

 

(2) Reflects matching contribution credits made in 2015 under the plan with respect to elective salary deferrals made by executives during 2015.

Potential Payments upon Termination of Employment or Change

in Control

Under certain circumstances, each Named Executive Officer would be entitled to compensation if the executive’s employment were to terminate. The amount of compensation is contingent upon a variety of factors, including the circumstances of the termination. The agreements and terms of awards affecting this type of compensation are described below, followed by a table that estimates the amount that would become payable to each Named Executive Officer as a result of a change in control or a termination of employment, assuming a termination was effective as of December 31, 2015. The actual amounts that would be paid can be determined only at the time of the Named Executive Officer’s termination of employment.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      57


Table of Contents

 

LOGO

 

 

COMPENSATION TABLES

Potential Payments Upon Termination of Employment or Change in Control

 

 

Effect of Termination on Long-Term Incentive Awards

The following table summarizes the consequences that would occur in the event of a change in control or the termination of employment of a Named Executive Officer under our long-term incentive award agreements, without giving effect to the change in control agreements described below.

 

Event    Consequences

Change in Control

  

Phantom Units – continue to vest

 

Performance Share Units – award vests upon change in control, with goal achievement at target for awards granted in 2014 and determined based on actual TSR results for Spectra Energy and its Peer Group for a truncated performance period (i.e., the beginning of the performance period through the date of the change in control) for awards granted in 2015.

Termination with cause

   Phantom and Performance Share Units – executive’s right to unvested portion of award terminates immediately

Voluntary termination (not retirement eligible)

   Phantom and Performance Share Units – executive’s right to unvested portion of award terminates immediately
Involuntary termination without cause (not retirement eligible)   

Phantom Units – prorated portion of award vests

 

Performance Share Units – prorated portion of award vests based on actual performance after performance period ends

Voluntary termination or involuntary termination without cause (retirement eligible)   

Phantom Units – prorated portion of award continues to vest

 

Performance Share Units – prorated portion of award vests based on actual performance after performance period ends

Involuntary termination without cause after a Change in Control   

Phantom Units – award vests

 

Performance Share Units – award vests upon change in control, with goal achievement at target for awards granted in 2014 and determined based on actual TSR results for Spectra Energy and its Peer Group for a truncated performance period (i.e., the beginning of the performance period through the date of the change in control) for awards granted in 2015.

Termination due to Death or Disability

  

Phantom Units – award vests

 

Performance Share Units – award vests based on target performance

Change in Control Agreements

Each Named Executive Officer has entered into a change in control agreement with the Company. The agreements have an initial term of two years, and automatically extend for a year starting on the first anniversary of the date of the agreements. The Company or the Named Executive Officers can terminate the agreements following the initial two-year term, after providing 6 months advance written notice.

 

 

58       SPECTRA ENERGY CORP 2016 PROXY STATEMENT


Table of Contents

 

LOGO

 

 

COMPENSATION TABLES

Potential Payments Upon Termination of Employment or Change in Control

 

 

The change in control agreements provide for payments and benefits to the executive in the event of termination of employment within two years after a “change in control” of the Company, other than termination: (1) by the Company for “cause;” (2) by reason of death or disability; or (3) of the executive for other than “good reason” (each such term as defined in the agreements).

For 2015, payments and benefits included:

 

  a lump-sum cash payment equal to a pro-rata amount of the executive’s target cash incentive for the year in which the termination occurs;

 

  a lump-sum cash payment equal to two times the sum of the executive’s annual base salary and target annual cash incentive opportunity in effect immediately prior to termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting “good reason”;

 

  continued medical, dental and basic life insurance coverage for a two-year period (which can also be provided through a third-party insurer); and

 

  a lump-sum cash payment representing the amount the Company would have allocated or contributed to the executive’s qualified and nonqualified defined-benefit pension plan and defined contribution savings plan accounts during the two years following the termination date, plus the unvested portion, if any, of the executive’s accounts as of the date of termination that would have vested during such two-year period.

In addition, under certain circumstances, the agreements may provide for continued vesting of certain long-term incentive awards for two additional years.

Under the change in control agreements, each Named Executive Officer also is entitled to reimbursement of up to $50,000 for the cost of certain legal fees incurred in connection with claims under the agreements. In the event that any of the payments or benefits provided for in the change in control agreement otherwise would constitute an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code), the amount of payments or benefits would be reduced to the maximum level that would not result in excise tax under Section 4999 of the Internal Revenue Code, if this reduction would cause the executive to receive a larger after-tax amount than if no reduction were made. In the event a Named Executive Officer becomes entitled to payments and benefits under a change in control agreement, the executive would be subject to a one-year non-competition and non-solicitation provision from the date of termination, in addition to certain confidentiality and cooperation provisions.

Potential Payments Upon Termination of Employment or a Change in Control Table

The amounts listed in the following table have been estimated based on a variety of assumptions, and the actual amounts to be paid out can only be determined at the time of each Named Executive Officer’s termination of employment. Amounts shown do not include compensation to which each Named Executive Officer would be entitled without regard to termination of employment, including (a) base salary and short-term incentives that have been earned but not yet paid, and (b) amounts that have been earned, but not yet paid, under the terms of the plans listed under the “Pension Benefits” and “Nonqualified Deferred Compensation” tables.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      59


Table of Contents

 

LOGO

 

 

COMPENSATION TABLES

Potential Payments Upon Termination of Employment or Change in Control

 

 

With respect to a Named Executive Officer who is covered by a change in control agreement, the amounts shown do not reflect any reduction in payments that might be made so that the excise tax under Section 4999 of the Internal Revenue Code would not apply.

 

Name and Triggering Event(1)  

Cash
Severance
Payment(2)

($)

   

Incremental

Retirement
Plan

Benefit(3)

($)

   

Welfare and
Similar

Benefits(4)

($)

   

Stock Awards(5)

($)

   

Option Awards

($)

   

Total

($)

 

Gregory L. Ebel

                                               

Change in Control

                         4,042,920               4,042,920   

Voluntary termination or termination with cause

                  43,577                      43,577   

Involuntary termination without cause

                  43,577        2,912,042               2,955,619   

Involuntary or good reason termination after a CIC

    4,758,600        821,701        87,825        8,575,638               14,243,764   

Death or Disability

                  43,577        9,282,048               9,325,625   

J. Patrick Reddy

                                               

Change in Control

                         939,614               939,614   

Termination with cause

                  86,154                      86,154   

Voluntary or involuntary termination without cause

                  86,154        784,148               870,302   

Involuntary or good reason termination after a CIC

    2,240,000        381,562        122,201        2,071,580               4,815,343   

Death or Disability

                  86,154        2,240,667               2,326,821   

Reginald D. Hedgebeth

                                               

Change in Control

                         705,611               705,611   

Voluntary termination or termination with cause

                  21,954                      21,954   

Involuntary termination without cause

                  21,954        766,433               788,387   

Involuntary or good reason termination after a CIC

    1,940,720        309,015        66,202        1,941,355               4,257,292   

Death or Disability

                  21,954        1,885,286               1,907,240   

Guy G. Buckley

                                               

Change in Control

                         451,175               451,175   

Termination with cause

                  60,577                      60,577   

Voluntary or involuntary termination without cause

                  60,577        376,672               437,249   

Involuntary or good reason termination after a CIC

    1,485,000        249,622        104,398        1,283,100               3,122,120   

Death or Disability

                  60,577        1,087,601               1,148,178   

Dorothy M. Ables

                                               

Change in Control

                         492,697               492,697   

Termination with cause

                  64,319                      64,319   

Voluntary or involuntary termination without cause

                  64,319        426,047               490,366   

Involuntary or good reason termination after a CIC

    1,624,520        274,004        95,772        1,100,465                3,094,761   

Death or Disability

                  64,319        1,188,015               1,252,334   

 

(1) Amounts in the table represent obligations of the Company under agreements currently in place, and valued as of December 31, 2015.

 

(2) Amounts payable under the terms of the Named Executive Officer’s change in control agreement, not including accrued salary and cash incentive payments earned but not paid through December 31, 2015 (these amounts are reflected in the Summary Compensation Table, however).

 

(3) Pursuant to the Named Executive Officers’ change in control agreements, this column represents the additional amounts that would be credited and vested in respect of the Spectra Energy Retirement Cash Balance Plan, Spectra Energy Executive Cash Balance Plan, Spectra Energy Retirement Savings Plan and the Spectra Energy Executive Savings Plan if the Named Executive Officer continued to be employed by Spectra Energy for two additional years, at the rate of base salary plus target bonus percentage as in effect on December 31, 2015.

 

(4) Amounts include the maximum accrued vacation allowed under Company policy and the amount that would be paid to each Named Executive Officer who has entered into a change in control agreement in lieu of providing continued welfare benefits for 24 months.

 

 

60       SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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COMPENSATION TABLES

Potential Payments Upon Termination of Employment or Change in Control

 

 

 

(5) Amounts that would result from the acceleration of the vesting of previously awarded stock and any associated dividend equivalent payments due upon vesting. For Messrs. Reddy and Buckley and Ms. Ables who are retirement eligible, amounts also include the continued vesting of previously awarded phantom units after the applicable termination event.

The amounts shown above with respect to the Company’s outstanding stock awards were calculated based on a variety of assumptions, including the following: (a) the Named Executive Officer terminated employment on the last day of 2015; (b) a stock price for our common stock equal to $23.94, which was the closing price on the last trading day of 2015; (c) the continuation of our dividend at the rate in effect on December 31, 2015; and (d) performance at the target level with respect to performance share units granted in 2014 and at actual performance through December 31, 2015 for awards granted in 2015.

Current Equity Compensation Plan Information

The following table contains information, as of December 31, 2015, about securities to be issued upon the exercise of outstanding options, warrants and rights under our equity compensation plans, along with the weighted-average exercise price of the outstanding options, warrants and rights and the number of securities remaining available for future issuance under the plans.

 

Plan Category    Number of securities to be
issued upon exercise of
outstanding  options,
warrants and rights
     Weighted-average
exercise price of
outstanding options,
warrants and rights
     Number of securities
remaining available
under equity
compensation  plans
(excluding securities
reflected in column(1)(2)
 

Equity compensation plans approved by security holders(3)

     964,434       $ 25.63         10,640,985   

Equity compensation plans not approved by security holders

                       

Total

     964,434       $ 25.63         10,640,985   

 

(1) Represents shares available for issuance for awards of phantom unit awards, performance share unit awards or options under the Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated. In the case of performance share units, amounts assume target performance.

 

(2) However, if performance share units are assumed to achieve maximum performance, only 8,758,445 shares are available for grant under the Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated, as of December 31, 2015 and 6,834,868 shares are available for grant as of February 16, 2016.

 

(3) As of February 16, 2016, there were 8,594,144 shares available for grant assuming the performance share units achieve target performance, 1,878,728 outstanding stock options with a weighted average exercise price of $27.00 and a weighted average remaining term of 5.52 years, 1,693,615 outstanding phantom units consisting of 963,035 units that are liability-classified and will be settled in cash and 730,580 units that are equity-classified and 1,956,010 outstanding performance share units assuming target performance.

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      61


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Shareholder Proposals

All statements contained in the shareholder proposals and supporting statements are the sole responsibility of the respective proponent(s). The shareholder proposals may contain assertions about the Company or other matters that the Company believes are incorrect, but the Company has not attempted to refute all such assertions. The Board recommends a vote against the shareholder proposals based on the reasons set forth in the Company’s statements in opposition following each shareholder proposal.

The name, address and share ownership of each proponent of a shareholder proposal, and any co-filer, are available upon request by calling 713-627-4606 or by sending a request to Spectra Energy Corp, c/o Investor Relations, 5400 Westheimer Court, Houston, Texas 77056.

Proposal 6: Shareholder Proposal-Political Contributions

Resolved: That the shareholders of Spectra Energy (“Company”) hereby request that the Company provide a report, updated semiannually, disclosing the Company’s:

 

1. Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.

 

2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including:

 

  a. The identity of the recipient as well as the amount paid to each; and

 

  b. The title(s) of the person(s) in the Company responsible for decision-making.

The report shall be presented to the board of directors or relevant board committee and posted on the Company’s website.

Supporting Statement: As long-term shareholders of Spectra Energy, we support transparency and accountability in corporate spending on political activities. These include any activity considered intervention in a political campaign under the Internal Revenue Code, such as direct and indirect political contributions to candidates, political parties, or political organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.

Disclosure is in the best interest of the Company and its shareholders and critical for compliance with federal ethics laws. Moreover, the Supreme Court’s Citizens United decision recognized the importance of political spending disclosure for shareholders when it said, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Gaps in transparency and accountability may expose the Company to reputational and business risks that could threaten long-term shareholder value.

We note that Spectra Energy provides a brief policy statement on political spending on its website. However, this does not include any information regarding to whom the Company gave, either directly or indirectly. Indeed, Spectra Energy placed near the bottom of the 2015 CPA-Zicklin Index of Corporate Political Accountability and Disclosure, receiving just 33 points out of 100.

We ask the Company to disclose all of its political spending, including payments to trade associations and other tax exempt organizations used for political purposes. This would bring our Company in line with a growing number of leading companies that support transparency and present this information on their websites, including Schlumberger, Noble Energy and ConocoPhillips. We also note that Spectra lags behind peer companies such as Williams, Phillips 66, Kinder Morgan, and EQT.

The Company’s Board and its shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.

 

 

62       SPECTRA ENERGY CORP 2016 PROXY STATEMENT


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LOGO

 

 

SHAREHOLDER PROPOSALS 

Proposal 6: Political Contributions

 

 

 

LOGO

 

Opposition Statement of the Company

 

This proposal was included in our 2013, 2014 and 2015 Proxy Statements and a significant majority of our shareholders consistently voted against it.

Our approach to political engagement and related governance practices continues to be guided by what we believe is in the best interests of our shareholders, the Company, its employees, customers and other key stakeholders. These interests are best served when we engage constructively in the political process to support policies that create shareholder value and further our business interests. We continue to be committed to the highest standards of ethical conduct and to compliance with applicable laws in our involvement in the political process. Likewise, we continue to maintain our commitment to providing shareholders and other interested parties with information about our political activity.

Following considerable engagement with our shareholders, in February 2013, we enhanced and published our political contributions policy on our website at www.spectraenergy.com, in the “Corporate Governance” section. The political contributions policy was again enhanced in January 2015, to provide additional disclosures on our lobbying activities. The political contributions policy, as well as our Code of Business Ethics, which is also available on our website at www.spectraenergy.com in the “Corporate Governance” section, set out the governance principles and standards for participation in the political process by the Company and its employees and substantially address the concerns raised by this Proposal.

As expressly stated in our political contributions policy, we follow federal laws in both Canada and the United States which place limits on a company’s ability to participate in the political process, and as such, we do not contribute corporate funds directly to federal

political candidates, committees or parties in either jurisdiction. On a limited basis, we may use corporate funds in the United States to make contributions to 527 organizations (tax-exempt organizations that engage in political activities).

We also participate in business and industry forums, such as trade associations, which provide an appropriate and cost-effective means to share our perspective on matters important to our business and our shareholders’ interests. The trade associations where we have a greater level of participation are listed in our sustainability report and are on our website. In all of these efforts, we advocate for our industry by lending our resources, knowledge and influence to encourage understanding and appreciation for the important role natural gas, natural gas liquids and oil are playing in achieving North America’s energy, environmental and economic goals – and to spur positive policy and action toward that end.

Our governance practices ensure accountability for the Company’s political activity. All of our proposed political contributions are reviewed and approved by a senior business unit government affairs officer and, in some instances, by the President of the relevant business unit or our Chief Executive Officer. Our political spending policies and practices, as well as our public policy positions, advocacy priorities and aggregate political contributions also are reviewed annually by our Board.

We believe that the disclosure enhancements we made in 2013 and 2015, and continue to maintain, are responsive to the request made in the Proposal. We continue to provide ample disclosure about our participation in the political process, and our internal governance practices ensure accountability for the Company’s political contributions and related expenditures.

 

 

 

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LOGO

 

 

SHAREHOLDER PROPOSALS

Proposal 7: Lobbying Disclosures

 

 

Proposal 7: Shareholder Proposal — Lobbying Disclosures

Whereas, we believe in full disclosure of our company’s direct and indirect lobbying activities and expenditures to assess whether our company’s lobbying is consistent with Spectra Energy’s expressed goals and in the best interests of shareholders.

Resolved, the shareholders of Spectra Energy request the preparation of a report, updated annually, disclosing:

 

1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.

 

2. Payments by Spectra Energy used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.

 

3. Spectra Energy’s membership in and payments to any tax-exempt organization that writes and endorses model legislation.

 

4. Description of management’s and the Board’s decision making process and oversight for making payments described in sections 2 and 3 above.

For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Spectra Energy is a member.

Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels. Neither “lobbying” nor “grassroots lobbying communications” include efforts to participate or intervene in any political campaign or to influence the general public or any segment thereof with respect to an election or referendum.

The report shall be presented to the Audit Committee or other relevant oversight committees and posted on Spectra Energy’s website.

Supporting Statement

We encourage transparency in Spectra Energy’s use of corporate funds to influence legislation and regulation. Spectra Energy spent $2.64 million in 2013 and 2014 on federal lobbying (opensecrets.org). These figures do not include lobbying expenditures to influence legislation in states, where Spectra Energy also lobbies but disclosure is uneven or absent. For example, Spectra Energy spent $591,370 lobbying in New York for 2014 (http://jcope.ny.gov/). Spectra Energy’s lobbying on pipelines has attracted press attention (“Proposed Natural Gas Pipeline in Pennsylvania, New Jersey Touches off Debate,” Associated Press, Oct. 3, 2015).

Spectra Energy lists memberships in the American Petroleum Institute and Interstate Natural Gas Association, which together spent over $21 million on lobbying for 2013 and 2014. Spectra Energy does not disclose its payments to trade associations, or the amounts used for lobbying. Transparent reporting would reveal whether company assets are being used for objectives contrary to Spectra Energy’s long-term interests.

And Spectra Energy does not disclose membership in tax-exempt organizations that write and endorse model legislation, such as its support for the American Legislative Exchange Council (ALEC). Spectra Energy’s ALEC membership has drawn media scrutiny (“ALEC Sharpens Attack on Environmental Safeguards,” Huffington Post, Dec. 22, 2014). Over 100 companies have publicly left ALEC, including BP, ConocoPhillips, Entergy, PG&E, Shell and Xcel Energy.

 

 

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LOGO

 

 

SHAREHOLDER PROPOSALS 

Proposal 7: Lobbying Disclosures 

 

 

LOGO

 

Opposition Statement of the Company

 

A similar proposal was also previously included in our 2015 Proxy Statement and was likewise rejected by a significant majority of our stockholders, supporting the Board’s opposition to the proposal. As we stated in our response to Proposal 6, our approach to political engagement and related governance practices are guided by what we believe is in the best interests of our shareholders, the Company, its employees, customers and other key stakeholders. Our approach to political engagement, including lobbying activities, supports our belief in strong governance practices that ensure transparency with respect to our public policy involvement. Our political engagement and advocacy priorities are published in our sustainability report and are on our website. We believe that ensuring transparency in this area should be a continuing process that is assessed in light of the changing environment and what is in the best interest of our stakeholders.

In January 2015, we enhanced our political contributions policy to specifically include discussion of our lobbying activities and our public disclosure of those activities. The policy includes a section entitled “Lobbying” which sets forth why we employ and engage lobbyists, how we select lobbyists and a description of the approval and oversight process with respect to the lobbyists that we engage. We have also set forth in the policy a detailed description of the public disclosure related to our lobbying activities in both the U.S. and Canada.

As set forth in the policy, we file lobbying reports with the U.S. Congress, the Government of Canada, state and provincial agencies on a regular basis, disclosing information about lobbying activities. The reports include information on the issues lobbied, the agencies contacted and the expenditures made, and

are available for public review in the United States on the websites of the U.S. House of Representatives (http://www.house.gov) and the U.S. Senate (http://www.senate.gov), and in Canada on the websites of Office of the Commissioner of Lobbying of Canada, as noted below. In many cases, state and provincial reports are made available for review on the applicable state or provincial agency website.

In the U.S., we maintain and file Lobbying Disclosure Act Registration and Reports (Form LD-2) with the U.S. Congress. These reports detail the particular bills and issues on which individual lobbyists had activity, as well as the total lobbying expenses incurred during each calendar quarter. The Lobbying reports may be found at: http://www.senate.gov/legislative/ Public_Disclosure/LDA_reports.htm.

In the U.S., Spectra Energy and its registered federal lobbyists must also file semi-annual reports detailing, among other things, Spectra-DCP PAC disbursements and personal and/or direct contributions to federal candidates. These forms (LD-203) are viewable by using the following link: http://www.senate.gov/legislative/ Public_Disclosure/LDA_reports.htm.

In Canada, Spectra Energy’s registered consultants and in-house lobbyists must file monthly reports detailing communications with designated public office holders. These forms are publically available at: http://ocl-cal.gc.ca/eic/site/012.nsf/eng/home.

We believe our enhanced policy directly responds to this Proposal and sets forth a more comprehensive system of accountability than sought by the Proposal.

 

 

 

 

SPECTRA ENERGY CORP 2016 PROXY STATEMENT      65


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Other Information

NYSE Listing Standards

Because our common stock is listed on the New York Stock Exchange, we are subject to the NYSE’s regulations regarding corporate governance and other matters. As of the date of this proxy statement, we are in compliance with all applicable NYSE regulations.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons owning more than 10% of our common stock, to file with the SEC initial reports of beneficial ownership of the Company’s equity securities and of certain changes in that beneficial ownership. We prepare and file these reports on behalf of our directors and executive officers. To our knowledge, all Section 16(a) reporting requirements applicable to our directors and executive officers were complied with during 2015.

Proposals and Business by Shareholders

If you wish to submit a proposal in accordance with SEC Rule 14a-8 for inclusion in our proxy statement for our 2017 Annual Meeting of Shareholders, we must receive it by November 16, 2016. Your proposal must be mailed to our Corporate Secretary at 5400 Westheimer Court, Houston, Texas 77056. As the rules of the SEC make clear, simply submitting a proposal does not guarantee that it will be included.

As described on page 16 of this proxy statement, the Board adopted proxy access By-Laws in 2015 regarding submission of a proposal for director nominees in accordance with the provisions of the By-Laws. Shareholders interested in submitting nominees for the Board for inclusion in our 2017 Proxy Statement will need to comply with the terms of our By-Laws, which include providing timely written notice to the Corporate Secretary, Spectra Energy Corp, 5400 Westheimer Court, Houston, Texas 77056. To be considered timely, we must receive a shareholder’s written notice no earlier than December 27, 2016 and no later than January 26, 2017.

In addition, if you wish to introduce business or nominate directors at our 2017 Annual Meeting (other than a matter or nominee to be included in the proxy statement), you must send us written notice. Your notice must comply with the requirements of our By-Laws, and we must receive it no earlier than December 27, 2016 and no later than January 26, 2017. The individuals named as proxy holders for our 2017 Annual Meeting will have discretionary authority to vote proxies on matters of which we are not properly notified and also may have discretionary voting authority under other circumstances. Your notice should be mailed to our Corporate Secretary at 5400 Westheimer Court, Houston, Texas 77056.

Director Independence Standards for Relationships Deemed Immaterial

As noted on page 10, the Board has adopted categorical standards under which certain relationships are deemed not to impair a director’s independence. Those standards are as follows:

 

Relationship    Requirements for Immateriality of Relationship
Personal Relationships   
The director or an immediate family member resides within a service area of, and is provided with utility service by, Spectra Energy or its subsidiaries.   

Utility services must be provided in the ordinary course of the provider’s business and at rates or charges fixed in conformity with law or governmental authority, or if the service is unregulated, on arm’s-length terms.