DEF 14A 1 d338039ddef14a.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                              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))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material pursuant to §240.14a-12


XCEL ENERGY INC.

(Name of Registrant as Specified In Its Charter)


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

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

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

 

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

          

 

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

          

 

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

          

 

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  (5)   Total fee paid:

          

 

 

Fee paid previously with preliminary materials.

 

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

 

  (1) Amount Previously Paid:

          

 

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

          

 

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LOGO

 


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Powering the lives of our customers is at the core of what we do every day, and we are committed to delivering affordable clean energy.

 

We understand the tremendous responsibility we have to ensure public safety,
drive economic growth in our communities and protect the environment.

 

This responsibility is deeply ingrained in our DNA.

 

LOGO

      
      

 


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LOGO   

 

Ben Fowke

Chairman of the Board, President and

Chief Executive Officer

April 4, 2017

Dear Fellow Shareholders:

Xcel Energy looks forward to welcoming you to Amarillo, Texas for our 2017 Annual Shareholders’ Meeting. We have many exciting things underway across our service territories and I look forward to showcasing our operations, community involvement, and team in the Southwest.

2016 was again an outstanding year for Xcel Energy. Highlights of the year include:

 

    Meeting or exceeding our annual ongoing earnings guidance for the 12th consecutive year
    Increasing our dividend for the 13th consecutive year
    Exceeding the three- and five-year total shareholder return of our 21-member industry peer group
    Gaining further recognition as a leader, innovator, and partner in our communities for clean energy solutions
    Delivering strong results on reliability, safety and customer loyalty, the table stakes of our business

We have many opportunities in front of us, including strategic investments that will serve our customers and our shareholders well into the future. Xcel Energy’s future is bright, and I look forward to sharing more with you in Amarillo regarding our plans for:

 

    Increased development and ownership of renewable energy under our “steel for fuel” growth strategy
    Investments in advanced capabilities of the electric grid to better serve our customers’ needs
    New product offerings that help our customers achieve their objectives and position our communities for growth

Details for meeting attendance are included in this proxy statement. You can also listen to the meeting via webcast at www.xcelenergy.com.

Also enclosed are details for how and when to vote and other important information. Your vote is very important, so please cast it promptly.

Thank you for your confidence in us. I hope to see you in Texas.

Sincerely,

 

LOGO

Ben Fowke

Chairman, President and Chief Executive Officer


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LOGO   

 

Chris Policinski

Lead Independent Director

April 4, 2017

Dear Fellow Shareholders:

On behalf of Xcel Energy’s Board of Directors, I invite you to the 2017 Annual Shareholders’ Meeting. Your Board is committed to delivering solid results for you.

We are proud to have delivered those results consistently over time. I attribute those results to the sound governance practices we employ, practices that combine the benefits of both strong, independent oversight with broad expertise and strong management that – working together — allows us to successfully chart our course in a complex and changing industry. Through good governance, we achieve effective Board operations, employ independent thought, and execute appropriate levels of Board involvement and oversight that produces consistent strong results.

We are committed not only to delivering solid outstanding results, but also representing your interests. These and other practices are detailed in the proxy statement, which I encourage you to review as you cast your vote.

As your Lead Independent Director, I am focused on the important obligations that our Board owes to you, our shareholders. My responsibilities include reviewing and approving the agenda for our board meetings to ensure they cover key areas of Company focus, working with the Chairman to provide the directors information needed to effectively govern and acting as a regular communications channel between our independent directors and our chief executive officer — these and other duties all designed to ensure the efficient operations of the Board and effective oversight of the Company.

It is my privilege to serve as Xcel Energy’s Lead Independent Director and I look forward to continuing my service to the Company. Know that your Board remains focused on delivering value to you, today and long into the future.

Thank you for investing in Xcel Energy. We look forward to another great year.

Sincerely,

 

LOGO

Chris Policinski

Lead Independent Director


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Xcel Energy Inc.

414 Nicollet Mall, Minneapolis, MN 55401    

 

  Notice of 2017 Annual Shareholders’ Meeting

 

 

 
 

Meeting Information

 

    

Voting Information

 

•   Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting.

 

•   Your broker will NOT be able to vote your shares with respect to the election of directors and most of the other matters presented at the meeting unless you have given your broker specific instructions to do so. We strongly encourage you to vote.

 

•   You may vote via the Internet, by telephone, or, if you have received a printed version of these proxy materials, by mail.

 

•   See “Questions and Answers about the Proxy Materials and the Annual Meeting” beginning on page 68 of this proxy statement for more information.

 

  Time and Date  

11:00 a.m. Central Time

May 17, 2017

 

    
  Attend in Person  

790 S. Buchanan Street,

Suite 400

Amarillo, Texas

 

    
  Record Date  

March 21, 2017

 

    
        

 

 

Annual Meeting Agenda

Proposals

  1. Election of 12 directors named in the proxy statement

 

  2. Advisory vote on frequency of advisory vote on executive compensation

 

  3. Approval of executive compensation in an advisory vote

 

  4. Ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for 2017

 

  5. A shareholder proposal, if properly presented at the annual meeting

 

  6. Transaction of other business that may properly come before the meeting

 

 

 

Attending in Person

 

    You do not need to attend the annual meeting to vote if you submit your proxy in advance.  
    To attend the annual meeting, you will need to:  
    provide proof of your stock ownership as of the record date;  
    reserve an admission ticket; and  
    provide government-issued photo identification (such as a driver’s license) prior to entering the meeting.  
    Doors open at 10:15 a.m.  
    Meeting starts at 11:00 a.m.  
    Please refer to the Questions and Answers Section under “How do I Reserve an Admission Ticket to Attend the Annual Meeting?” on page 71 and “Are There Any Rules Regarding Admission to the Annual Meeting?” on page 70.  

 

Notice of Internet Availability of Proxy Materials or this proxy statement and proxy card are being distributed on or about April 4, 2017. Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 17, 2017: Our 2017 proxy statement and Annual Report are available free of charge at www.proxydocs.com/xel

You are receiving these proxy materials in connection with the solicitation by the Board of Directors (“Board”) of Xcel Energy Inc. (referred to in this proxy statement as “Xcel Energy,” the “Company,” “we,” “us,” and “our”) of proxies to be voted at Xcel Energy’s 2017 Annual Meeting of Shareholders. Please vote on the proposals described in this proxy statement.

Thank you for investing in Xcel Energy.


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Table of Contents

 

   

Notice of 2017 Annual Shareholders’ Meeting

       

Proxy Summary

    1  

Corporate Governance

    7  

Leadership Structure and Roles

    9  

Risk Oversight

    10  

Board Committees

    11  

Practices

    13  

Board Planning and Composition

    15  

Board Statistics

    16  

Governing Documents

    17  
Proposal No. 1 Election of Directors     18  

Nominees

    19  
Beneficial Ownership of Certain Shareholders     25  

Share Ownership of Directors and Officers

    25  

Largest Owners of Xcel Energy’s Shares

    26  
Proposal No. 2 Advisory Vote on Frequency of Advisory Vote on Executive Compensation     27  

Recommendation and Background

    27  
Proposal No. 3 Advisory Vote on Executive Compensation     28  

Recommendation and Background

    28  
Compensation Discussion and Analysis     29  

Highlights

    30  

2016 Performance

    30  

2016 Compensation

    30  

Compensation Philosophy

    30  

Executive Compensation Practices

    31  

Impact of 2016 Say on Pay Vote

    31  

What We Pay and Why

    32  

Establishing Target Compensation

    32  

Peer Group

    32  

Executive Compensation Elements

    33  

Mix of Total Compensation

    34  

Overview of Target Total Compensation for 2016

    34  

Base Salary

    34  

Annual Incentive

    35  

Long-term Incentives

    36  

Retirement and Deferred Compensation Benefits

    38  

Additional Compensation Program Features and Policies

    38  

Severance Policy

    38  

Employment Contracts

    38  

Stock Ownership Requirements

    38  

Equity Grant Practices

    39  

Hedging and Pledging

    39  

Recoupment

    39  

Risk Assessment

    40  

Deductibility of Executive Compensation under IRC Section 162(m)

    40  
   
Report of the Compensation Committee     41  
Executive Compensation Tables     42  
Director Compensation     59  

Annual Equity Grant

    59  

Director Compensation Table

    59  

Director Stock Ownership Guidelines

    60  

Stock Equivalent Program

    60  
Proposal No. 4 Ratification of the Appointment of Deloitte  & Touche LLP as Xcel Energy Inc.’s Independent Registered Public Accounting Firm for 2017     61  
Report of the Audit Committee     62  
Independent Registered Public Accounting Firm     63  

Audit and Non-Audit Fees

    63  

Audit Committee Pre-Approval Policies

    63  
Proposal No. 5 Shareholder Proposal on the Separation of the Role of Chairman and Chief Executive Officer     64  

Shareholder Proposal

 

Recommendation and Background

 
Additional Information     67  

Related Person Transactions

    67  

Section 16(a) Beneficial Ownership Reporting Compliance

    67  
Questions and Answers about the Proxy Materials and the Annual Meeting     68  
Exhibit A     A-1  
Driving Directions     Inside Back Cover  
Annual Meeting Guidelines     Back Cover  
 


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Forward-Looking Statements

The statements contained in this proxy statement about our future performance, including, without limitation, future financial and operational results, strategies, prospects, consequences and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on information currently available and on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from any forward-looking statements made herein. A discussion of some of these risks and uncertainties is contained in our Annual Report on Form 10-K and subsequent reports on Form 8-K filed with the Securities and Exchange Commission (“SEC”), and available on our website: www.xcelenergy.com. These reports address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this proxy statement. In addition, any forward-looking statements included herein represent our estimates only as of the date hereof and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our internal estimates change, unless otherwise required by applicable securities laws.


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Proxy Summary    

 

 

Proxy Summary

 

Voting Matters and Board Recommendations:    Board Vote
Recommendation
  

 

Page Reference

(for more

detail)

Proposal No. 1    Election of Directors   

 

FOR

each nominee

 

   Page 18
    

 

Candidates provide the needed experience and expertise to govern the Company and ensure strong independent oversight.

 

       
Proposal No. 2   

 

Advisory Vote on Frequency of Advisory Vote on Executive Compensation

 

   ONE YEAR    Page 27
    

 

Allows shareholders to provide timely, direct input on executive compensation each year.

 

       
Proposal No. 3   

 

Advisory Vote on Executive Compensation

 

   FOR    Page 28
    

 

Xcel Energy’s executive compensation plan is market-based, performance-driven, and aligned with shareholder interests.

 

       
Proposal No. 4   

 

Ratification of the Appointment of Deloitte & Touche LLP as the Independent Registered Public Accounting Firm for 2017

 

   FOR    Page 61
    

 

All independence standards have been met and sound practices are employed to ensure strong, independent financial governance.

 

       
Proposal No. 5   

 

Shareholder Proposal on the Separation of the Roles of Chairman and Chief Executive Officer

 

   AGAINST    Page 64
    

 

Xcel Energy shareholders are best served by the current governance structure, which combines strong, independent governance with robust industry experience and insight.

 

         

How to Vote

If you held shares of Xcel Energy common stock as of the record date (March 21, 2017), you are entitled to vote at the annual meeting.

 

 

   LOGO      By Internet — Go to the website at www.proxypush.com/xel, 24 hours a day, seven days a week. You will need the control number that appears on your proxy card or on your Notice of Internet Availability of Proxy Materials.
   LOGO      By Telephone — Call 1-866-883-3382, 24 hours a day, seven days a week. You will need the control number that appears on your proxy card.
   LOGO      By Mail — If you received a full paper set of materials, date and sign your proxy card exactly as your name appears on your proxy card and mail it in the enclosed, postage-paid envelope. If you received a Notice of Internet Availability of Proxy Materials, you may request a proxy card by following the instructions in your Notice. You do not need to mail the proxy card if you are voting by Internet or telephone.
   LOGO      In Person — At the annual meeting.

 

2017 Xcel Energy Proxy Statement  |  1

 


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    Proxy Summary

 

    

 

LOGO

 

Corporate Governance Our proven track record of delivering solid financial and operational results is rooted in a foundation of sound corporate governance and a culture of compliance.Shareholder Value Strong Operational and Financial Results Sound Corporate GovernanceStrong Governance Practices Independent Oversight Shareholder Rights Regular executive sessions Tenure and overboarding policies Annual Board and committee evaluations Annual risk review 11 independent directors Lead Independent Director elected annually Committees composed entirely of independent directors Directors elected by majority vote Annual advisory vote on executive compensation No supermajority approval provisions Good mix of directors with varying tenure Board governance process for cybersecurity New Lead Director in place New director elected Committee assignments refreshed Proxy access adopted Direct governance outreach to shareholders representing nearly 40% of outstanding shares Direct investor relations outreach to active institutional investors representing 70% of shares Governance Highlights Our Board is composed of the right skill mix and has a healthy succession cadence. 9 92% 33% 92% 58% Years Average Tenure Are Independent Are Female and/or Minority Have C-suite Experience Have Environmental Experience “Best Corporate Social Responsibility Disclosure” for disclosure of environmental risk factors, employee and consumer safety and corporate sustainability, as well as the role the company plays in the community (2016 Corporate Secretary’s Corporate Governance Awards).

 

2  |  2017 Xcel Energy Proxy Statement

 


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Proxy Summary    

 

 

 

LOGO

 

Operational Performance We deliver outstanding results in safety, storm restoration, carbon reduction and customer value, positioning us as an industry leader. Our “steel for fuel” growth strategy offers customers more clean energy while maintaining or reducing bills, reducing our carbon footprint, and creating growth for our business and shareholders. Safe, Reliable Service Invested more than $22 million to enhance grid information and security capabilities, with more than one billion in additional investment planned for the next five years Improved the health of our gas system, including an 82% reduction in bare steel piping and a 100% reduction in cast iron piping since 2010; top quartile performance for preventing damages to buried gas facilities Recognized for strong emergency response by the Edison Electric Institute 50% reduction in OSHA recordable employee injuries since 2009 First utility to use drones in beyond line-of-sight inspections of electric and natural gas infrastructure, an approach expected to be safer for employees and more cost effective Clean Energy Named #1 utility wind provider for 12th consecutive year by the American Wind Energy Association More than 7,500 megawatts of wind and solar capacity on our system, with nearly 1,000 megawatts added in 2016 Increased wind ownership by 200 megawatts in 2016, 600 megawatts under development, proposals for 2,150 megawatts and plans for more 30% reduction in carbon emissions since 2005, with plans to reach a carbon emissions reduction of at least 45% by 2021 Customer Value Industry leader in our level of focus on the Net Promoter Score®1 customer loyalty metric National account team formed to support commercial customers Pilots and demonstrations underway to evaluate emerging generation, storage and energy management technologies Customers saved more than 1,000 gigawatt hours through our energy-saving programs Ranked #3 Top Green Power Program provider by The Green Power Network, and new all-renewable product offerings now available 1 Net Promoter Score is a trademark of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc. Environmental Protection Agency’s (EPA) 2016 Climate Leadership Award for “Excellence in Greenhouse Gas Management-Goal Achievement,” the only utility recognized by EPA in 2016 and the only organization to receive two awards.

 

2017 Xcel Energy Proxy Statement  |  3

 


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    Proxy Summary

 

    

 

LOGO

 

Financial Performance Earning the trust and confidence of our shareholders, customers and policymakers remains a top priority. Our 2016 results demonstrate our continued ability to deliver on that commitment. Total Shareholder Return Xcel Energy 21-Member Peer Group EEI Investor- Owned Electrics1 17.1% 18.1% 17.4% 62.3% 46.9% 45.5% 77.4% 72.1% 67.8% One Year Three Year Five Year Track Record of Success 2015-2016 2005-2016 (CAGR) Ongoing EPS Growth3 5.7% 6.1% Met or exceeded ongoing EPS guidance for 12 consecutive years Dividend Growth 6.3% 4.3% Increased dividend for 13 consecutive years Stock Price 13.3% 7.5% CAGR reflects YE 2005 to YE 2016 1 EEI index is market capitalization-weighted, comprised of 44 companies for the one-year period, and 43 for the three and five-year periods. 2 One-year results reflect end-of-year uncertainty and volatility in the utility industry, given election results and interest rate changes. 3 Ongoing EPS is a non-GAAP number and is defined in Exhibit A, which reconciles this amount to GAAP EPS for each period.Recognized among Fortune Magazine’s “Most Admired Utilities,” with quality of products/ services, quality of management and long-term investment value among our highest-rated attributes.

 

4  |  2017 Xcel Energy Proxy Statement

 


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Proxy Summary    

 

 

 

LOGO

 

Responsible by Nature We drive prosperity into our communities through economic development, community involvement and investments. Our collaborative approach and commitment to the environment help advance state, city and customer clean energy goals. Economic Development Nearly 70% of normal goods and services spend — more than $2 billion — went to local businesses Played a leadership role in helping other Minnesota-based companies integrate local/diverse suppliers into their sourcing Active membership/sponsorship in nearly 200 chambers of commerce Community Engagement More than 48,000 hours of volunteer service donated by our employees More than $5.5 million pledged through our United Way campaign, with $3 million in employee donations and more than $2.5 million matched by the Xcel Energy Foundation $3.9 million in grants awarded through the Xcel Energy Foundation to nonprofit organizations in STEM education, economic sustainability, environmental stewardship, and access to arts and culture Diversity & Veteran Hiring More than doubled spend with diverse suppliers since 2007 Brought more than 150 women-owned and minority-owned businesses together to identify potential bid opportunities Exceeded our target veteran hiring rate of 10%, attaining 14% by year end Honored with the Pro Patria award through the Department of Defense for support of Guard and Reserve employees Clean Energy Leadership Recognized by the White House, Department of Energy and Environmental Protection Agency for leadership and innovation with the Minneapolis Clean Energy Partnership Converted more than 50,000 street lights to high efficiency LED lighting in 2016, with plans to complete 275,000 more, ultimately saving over 160 gigawatt hours annually Distributed more than a half-million LED lightbulbs through sponsorships and events, an estimated savings of nearly 20 gigawatt hours annually Poised to offer wind and solar energy directly to customers via innovative new product offerings Recognized as one of Corporate Responsibility Magazine’s “100 Best Corporate Citizens” for performance related to the environment, employee relations, corporate governance, financial results, and community support.

 

 

2017 Xcel Energy Proxy Statement  |  5

 


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    Proxy Summary

 

    

 

LOGO

 


 

Results-Driven Compensation Our compensation programs are performance-based and market competitive, aligning incentive opportunities with the performance expected of us by our shareholders and customers. Performance-based Market Competitive Equity-based Incentive Majority of compensation is at risk, and pay is aligned with performance Enables us to attract and retain talented leaders Focuses on long-term shareholder value Motivates achievement of financial, operational and stock price performance goals Compares us to a 21-member industry peer group Aligns executive interests with those of shareholders and rewards for strategic success Annual Incentive Pay (Financial performance can influence award funding and payout) Customer Reliability Employee 50% 30% 20% Customer Safety, Affordability and Loyalty Grid and Plant Reliability Employee Safety Long-term Incentive Pay Total Shareholder Return Environment Leadership Continuity 50% 30% 20% Relative to Peer Companies Carbon Emissions Reduction Continued Service Notable Accomplishments Operating and maintenance expenses held flat for the past two years Increased focus on customer loyalty metrics 2nd best year ever in 2016 for employee safety based on number of OSHA recordable injuries Reduced carbon emissions by 30% since 2005 Recognized by Military Times again in 2016 as one of the 75 best employers for veterans based on company culture and policies.

 


 

6  |  2017 Xcel Energy Proxy Statement

 


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Corporate Governance    

 

 

Corporate Governance

Serving shareholders well is a key priority for your Board. We believe that the most effective oversight comes from:

 

    Strong and effective practices in corporate governance and ethical business conduct as we believe these practices create the business culture that results in successful performance.

 

    Directors that represent a diverse range of experience and perspectives to provide the collective skills, qualifications and attributes necessary to provide sound governance.

 

    A Board that works well as a whole and plans for its own refreshment with members bringing their experience to the table and dialoguing freely with each other and management to create an environment that results in well-functioning oversight.

Xcel Energy has both the practices and the Board to deliver consistent and strong results for shareholders.

We regularly monitor issues and trends in corporate governance and employ practices that best serve shareholders. Current practices include:

 

    Leadership and organization most appropriate to our business. Ours is a rapidly changing business that benefits from industry experience and expertise coupled with strong independent oversight. Through the roles of the Chairman and CEO, Lead Independent Director, and committees of independent directors, we are best positioned to continue delivering strong results.

 

    Sound practices to ensure effective Board operations and independent oversight. To ensure the Board remains focused on the right issues over time, Xcel Energy employs sound practices to regularly review and refresh charters and practices in light of current enterprise risk assessments.

 

    Effective Board planning and succession. Succession planning is important for both management and the Board. We employ good practices to ensure both Board refreshment over time while maintaining director experience to ensure effective oversight over the long term.

 

    Strong shareholder rights. Serving shareholders well is a top priority for Xcel Energy. We keep abreast of developments in corporate governance and practices and adopt those that best serve our shareholders.

 

    Regular oversight of key corporate policies. Our governance practices set the foundation for excellent management and operations for the company. Corporate policies communicate expectations to employees so that they understand and adhere to good business conduct.

 

2017 Xcel Energy Proxy Statement  |  7

 


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    Corporate Governance

 

    

 

Highlights of our practices are summarized on the following table, followed by additional explanation of key features.

 

Summary of Governance Practices

Structure

 

 

Lead Independent Director

 

 

Specified duties to ensure robust independent oversight and effective flow of information between management and independent directors.

 

 

Committees

 

 

Membership and chairs determined to leverage directors’ expertise and development to provide effective oversight over their tenure.

 

 

Independence and Expertise    

 

 

Governance, Compensation and Nominating Committee (“GCN”) regularly reviews and validates director independence and assesses desired expertise for potential new directors to ensure the Board is appropriately refreshed and well positioned to effectively manage risks and execute strategies. The Board also determines which directors qualify as Audit Committee financial experts and meet independence standards under the requirements of the New York Stock Exchange and Securities and Exchange Commission.

 

 

Practices

 

 

Risk Management

 

 

Regular updates to the Board on enterprise risk and assignment of new and emerging risks to the appropriate committee. Regular updates on compliance risk assessment and Audit Committee oversight of plans to mitigate those risks.

 

 

Strategy Session

 

 

Regular session to review industry landscape, hear from outside experts and refine strategies for execution. The Board and Committees receive updates throughout the year on progress made on the key initiatives to execute those strategies.

 

 

Annual Evaluations

 

 

Formal and regular process for evaluating the effectiveness of Board and Committee operations, including surveys, individual director conversations with the Lead Independent Director, and executive session discussions to address identified areas for improvement.

 

 

Training

 

 

Every committee regularly identifies training topics to keep fresh on emerging issues, and directors are encouraged to participate in topical conferences and off-site training opportunities.

 

 

Tenure Policies

 

 

Term Limit

 

 

Directors may not serve on the Board for more than 15 years (directors at the time of the merger in 2000 are exempt from this requirement).

 

 

Mandatory Retirement

 

 

 

Directors must retire at age 72.

 

 

Change in Principal Employment

 

 

 

Directors must offer to resign upon any substantial change in principal employment.

 

Shareholder Rights

 

 

Shareholder Voting

 

 

Opportunity to annually vote for directors, provide an advisory vote on executive compensation and ratify the selection of auditors.

 

 

No Supermajority

 

 

 

There are no supermajority voting provisions.

 

 

Opportunities to be Heard        

 

 

Open forum at annual meeting and published lines of communication to our directors and management.

 

 

Proxy Access

 

 

 

Ability to nominate director candidates for election, in accordance with the terms of our bylaws.

 

 

Corporate Policies

 

 

Code of Conduct

 

 

 

Annual review and approval of policy and annual training of directors, officers and employees.

 

 

Stock Ownership Requirements

 

 

 

Directors and executive officers are required to maintain specific levels of stock ownership.

 

Hedging and Pledging

 

 

 

Policies that prohibit hedging and restrict pledging of our stock.

 

 

Political Contributions,

Lobbying and Government

Communications

 

 

 

Stricter standards than required by law and annual disclosure of certain political contributions on Xcel Energy’s website.

 

Environmental

 

 

Commitment to environmental compliance and industry initiatives to enhance value to customers and shareholders.

 

 

8  |  2017 Xcel Energy Proxy Statement


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Corporate Governance    

 

 

Leadership Structure and Roles

Our Board consists of a combined Chairman/CEO position, complemented with a Lead Independent Director chosen from our independent directors. This structure, along with other corporate governance practices discussed below, provides sound and independent oversight of the Company. The Board believes that this structure is best suited for the Company at this time and serves shareholders well.

The Chairman/CEO role brings to the Board the experience and expertise of both the Company and the industry. The skills and experience of the CEO are well-suited for the role of Chairman, putting the Board in the best position to identify and assess key industry drivers and important changes in the energy and consumer landscape so that the Board can develop effective strategies. In light of the opportunities and challenges facing the Company and the importance of the Chairman role, the Board believes that shareholders are best served by having a combined role of Chairman and CEO.

Mr. Fowke currently serves in this role, providing the benefit of his extensive experience in the regulated energy industry to both the Company and the Board. His thorough understanding of the opportunities and challenges facing the industry is valuable at both the Board and management levels.

The Lead Independent Director plays an important role in our governance structure, working with both the independent directors and management to ensure the Company is well positioned with sound strategy, solid risk management and effective governance. Mr. Policinski serves in this role, having been elected to serve a one-year term in May 2016, his first in this role.

The final piece of this governance structure is the independent directors. The Board currently consists of eleven independent directors. Our directors are strong individuals, comfortable with their roles representing shareholders and maintaining objectivity of the Board’s deliberations. They conduct business via a sound committee structure that oversees risk management and mitigation as assigned by the Board and reports back to the Board for an efficient and effective process.

The Board believes that this structure ensures that directors receive the information, industry experience and direction needed to form successful strategies, while maintaining the independence needed to ensure effective governance and oversight. Our business is rather unique in that it is price-regulated, operates under a complex set of federal, state and local regulations, and is undergoing significant change. Working with the Lead Independent Director, the Chairman can both educate the Board and lead the development of strategy, providing information and insight on the Company’s opportunities, challenges and performance.

 

Board of Directors

 

      

Lead Independent Director

 

 

Independent Oversight

   

 

Responsibilities

(Per our Guidelines on Corporate Governance)

 

•  11 of 12 directors are independent.

 

•  Independent directors regularly meet in executive session without management present at Board and committee meetings.

 

•  Each director may request items to be addressed at Board meetings.

 

•  Directors may request additional information from management at any time.

 

•  All committees of the Board are composed entirely of independent directors.

 

•  CEO performance is addressed annually by the GCN, and all other independent members of the Board participate in the CEO’s performance evaluation.

   

•  Presides at all meetings of the Board at which the Chair is not present.

 

•  Presides at all Board executive sessions of the independent directors.

 

•  Maintains regular communications with the independent directors, including an annual evaluation process.

 

•  Serves as a liaison between the Chair and the independent directors.

 

•  Approves the agenda, materials provided to the directors and the meeting schedules.

 

•  Calls meetings of the independent directors, as necessary.

 

•  Consults and communicates with major shareholders, if requested.

 

•  Develops and maintains a process for CEO succession planning with the GCN.

     
       

Term and Selection

 

•  Elected by the independent directors annually.

 

•  Is generally expected to serve for at least one, but no more than four years.

 

 

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    Corporate Governance

 

    

 

Risk Oversight

A key accountability of the Board is the oversight of material risk, and our Board employs a strong process for doing so. As outlined below, management and each Board committee has responsibility for overseeing the identification and mitigation of key risks and reporting their assessments and activities to the full Board.

Management identifies and analyzes risks to determine materiality and other attributes such as timing, probability and controllability. Management broadly considers our business, the utility industry, the domestic and global economies, and the environment, and employs a robust compliance program when identifying, assessing, managing and mitigating risk.

 

 

Key Components of Management’s Oversight and Mitigation of Risk

 

Identify and analyze materiality

of risks through:

 

•   Formal key risk assessment

 

•   Financial disclosure process

 

•   Hazard risk management process

 

•   Internal auditing and compliance with financial and operational controls

 

•   Business planning process

 

•   Development of strategic goals and key performance indicators

 

Provide regular presentations

to the Board regarding

risk assessment and

mitigation, including:    

 

•   Comprehensive risk overview

 

•   Legal and regulatory risks

 

•   Operating risks

 

•   Financial risks

 

•   Compliance programs

 

Manage and mitigate risks through use of management structures and groups,

including:

 

 

•   Management councils

 

•   Management risk committees

 

•   Advice from internal corporate areas

Employ a robust compliance program for the mitigation of

risk, including:

 

 

•   Adherence to our Code of Conduct and other compliance policies

 

•   Operation of formal risk management structures and groups

 

•   Focused management to mitigate the risks inherent in the implementation of our strategy

The Board approaches oversight and mitigation of risk as an integral and continuous part of its governance of the Company. First, the Board as a whole regularly reviews management’s key risk assessment and analyzes areas of existing and future risks and opportunities. Next, the Board assigns oversight of certain critical risks to each of its four standing committees to ensure these risks are both well understood and provided focused oversight by the committees with the most applicable expertise. New risks identified during the risk assessment process are considered and assigned as appropriate, typically during the annual Board and committee evaluation process, with committee charters and annual work plans updated accordingly. Committees regularly report on their oversight activities and certain risk topics may be brought to the full Board for consideration where deemed appropriate to ensure broad Board understanding of the nature of the risk. Finally, the Board conducts an annual strategy session where the Company’s future plans and initiatives are reviewed and confirmed in light of the current and projected landscape.

The Audit Committee is responsible for reviewing the adequacy of risk oversight and affirming that appropriate oversight occurs. Current risk assignments are as follows:

 

 

Responsible Party            

 

 

 

Area of Risk Oversight

 

 

Board of Directors

 

 

 

Overall identification, management, and mitigation of risk, with a focus on strategic risks

 

 

Audit Committee

 

 

Financial reporting and internal control risks

Adequacy of risk oversight

 

 

Finance Committee

 

 

 

Financial risks, including liquidity, credit, capital market and insurance risks

 

 

GCN Committee

 

 

Executive compensation-related risks

Political activity risks

Board and management succession risks

 

 

Operations, Nuclear, Environmental and Safety (“ONES”) Committee

 

 

 

Operating risks, including nuclear, environmental, physical and cybersecurity risks

 

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Corporate Governance    

 

 

This tiered and structured approach provides a comprehensive risk-management framework that ensures shareholder interests are protected. For example, during 2016, the Board executed comprehensive oversight of the risks associated with cybersecurity and the security of our assets, with the topic addressed twice at the Board level, as well as at the ONES and Audit Committees throughout the year. While the ONES Committee has primary committee responsibility for this topic due to the operational issues involved, the Board has determined that the topic is of sufficient importance to warrant this comprehensive oversight approach.

The Board also employs a process of ensuring compliance practices are sound, a particularly important topic given our highly regulated business. Management performs a regular compliance risk assessment as a companion to the enterprise risk assessment, providing a focused overview of the unique areas of compliance risk the Company faces. The Audit Committee is regularly apprised of compliance risks via regular briefings and written updates to ensure these risks are appropriately managed and mitigated.

Board Committees

Structures

As noted, the Board employs a committee structure to assist in conducting its work and regularly refreshes that work in light of regular risk assessments. By assigning responsibilities to committees with particular expertise and focus, the Board can ensure it fulfills its duties in an efficient and effective manner.

Committees are made up exclusively of independent directors, with members of Audit and GCN meeting additional independence criteria. Each operates under a written charter that clearly defines its responsibilities, which is regularly reviewed and approved at both the committee and Board level. Committees have the authority to engage outside experts, advisors, and counsel to assist in their duties, as needed. In addition, each committee undertakes a regular evaluation process and members participate in training on relevant topics to ensure the committee functions well and directors are well educated on issues. Additional information regarding these governance practices is provided in the Practices section below.

For topics having broad implications for Xcel Energy, the full Board may hear or act on any issue, and committees may provide updates up to the full Board for its information and consideration. Likewise, a committee may as appropriate delegate all or a portion of its responsibilities to a subcommittee.

 

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    Corporate Governance

 

    

 

 

Audit Committee          

(6 Meetings; 6 Executive Sessions)

Wolf (chair)

O’Brien

Prokopanko

Sampson

Williams

 

•   All members are financially literate and independent under the applicable NYSE and SEC requirements

 

•   Mr. O’Brien, Mr. Wolf, and Ms. Williams have been determined to be audit committee financial experts under the definitions provided by the SEC

 

•   No member serves on the audit committees of more than three public boards

    Oversees the financial reporting process, including the integrity of our financial statements, compliance with legal and regulatory requirements and our Code of Conduct, and the independence and performance of internal and external auditors.
    Reviews the annual audited financial statements and quarterly financial information with management and the independent registered public accounting firm.
    Appoints our independent registered public accounting firm.
    Reviews with management the Company’s major financial risk exposures and the steps management has taken to monitor and control the exposures, including the Company’s risk assessment and risk management guidelines and policies.
    Reviews the implementation and effectiveness of our compliance and business conduct program.
    Reviews the scope and the planning of the annual audit with both the independent registered public accounting firm and internal auditors.
   

Reviews the findings and recommendations of both internal auditors and the independent registered public accounting firm and management’s response to those recommendations.

 

Finance Committee

(7 Meetings; 6 Executive Sessions)

Williams (chair)

Davis

Policinski

Sampson

Westerlund

 

•   All members are independent

    Oversees corporate capital structure and budgets and recommends approval of major capital projects.
    Oversees financial plans and key financial risks.
    Oversees dividend policies and makes recommendations as to dividends.
    Oversees insurance coverage and banking relationships.
    Reviews investment objectives of our nuclear decommissioning trust and trusts for our employee benefit plans.
    Oversees investor relations.
      Review and recommend new business.
Governance, Compensation and Nominating Committee (GCN)

(5 Meetings; 4 Executive Sessions)

Davis (chair)

Boudreaux

Sheppard

Westerlund

 

•   All members meet the NYSE standards for independence

    Determines Board organization, selection of director nominees and setting of director compensation.
    Evaluates performance of the CEO.
    Approves executive officer compensation, including incentives and other benefits.
    Establishes corporate governance principles and procedures.
    Reviews the Company’s workforce strategy and risks and the process for management development and long-range planning.
    Ensures effective CEO succession planning.
    Oversees compensation- and governance-related risks.
    Reviews the Company’s lobbying expenditures, contributions, and key lobbying activity and the related Company policy.
    Reviews proxy disclosures regarding directors’ and executive officers’ compensation and benefits.
    Prepares the Report of the Compensation Committee included in this proxy statement.
    Recommends Lead Independent Director and Board committee memberships.
    Oversees Company’s Code of Conduct policy.
Operations, Nuclear, Environmental and Safety Committee (ONES)

(5 Meetings; 5 Executive Sessions)

Boudreaux (chair)

O’Brien

Prokopanko

Sheppard

Wolf

 

•   All members are independent

    Oversees nuclear strategy, operations and performance, including the review of the results of reports and major inspections and evaluations.
    Oversees the operating issues and performance of the Company’s significant electric and natural gas operations.
    Reviews environmental strategy, compliance, performance issues and initiatives.
    Reviews material risks relating to our nuclear operations and environmental and safety performance, as well as risks, performance and compliance with operations measures of our electric and natural gas systems.
    Oversees physical and cyber security risks related to plants and operations.
      Reviews safety performance, strategy and initiatives.

 

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Corporate Governance    

 

 

Practices

Evaluations

The Board and committees conduct an annual assessment process to evaluate the effectiveness of their processes, identify issues or topics for further exploration and provide feedback on the quality and timeliness of information from management, among other things. The process includes a survey of the directors, individual interviews with the Lead Independent Director, discussion in both regular and executive sessions, and feedback to management. The Board believes this assessment process is an important component of the governance process and helpful in driving continued improvement in the overall effectiveness of Board and committee oversight.

Training

Committees are regularly apprised of new and emerging requirements and trends facing the industry. Each committee conducts training on topics relevant to its responsibilities, and committees regularly seek input to prioritize training topics. In addition, the ONES Committee participates in site visits to gain understanding of our operations, including tours of our nuclear plants. Directors are encouraged to participate in outside training on topics related to corporate governance and industry issues. In addition, under our Guidelines on Corporate Governance, each new director is expected to participate in a detailed orientation process and each sitting director is expected to participate in periodic continuing education.

The Company publishes continuing education opportunities periodically for director consideration and facilitates participation. During 2016, members of the Board attended outside training on topics such as financial governance, emerging trends in audit issues, and education on nuclear issues.

Shareholder Engagement and Investor Outreach

Our Company believes that regular, transparent communication with our shareholders and other stakeholders is essential to Xcel Energy’s long-term success. We have continued our practice of engaging with shareholders throughout the year on a range of topics. Presentations at financial conferences, meetings with analysts and investment firms, regular outreach on governance topics, and responding to inquiries are examples of the activities we employ to engage our shareholders. During 2016, our governance outreach with our largest shareholders represented nearly 40 percent of outstanding shares and we attended 12 sell-side analyst and industry conferences, participated in 6 non-deal road shows, and held over 170 individual and group meetings with approximately 380 institutional investors, representing nearly 70% of shares held by active managers. The Board received regular updates on such efforts. The Board also offers channels for shareholders to contact it with any inquiry or issue, and responds as appropriate.

Communications with the Board

The Board welcomes your input. You may communicate with the Board in two ways: First, you may send correspondence to the Company’s principal offices in care of the Corporate Secretary, Xcel Energy Inc., 414 Nicollet Mall, Minneapolis, Minnesota 55401. Second, you may contact the directors directly via e-mail at BoardofDirectors@xcelenergy.com. These e-mails are sent automatically to an independent director designated to receive such communications. The email is simultaneously sent to the Corporate Secretary’s Office, who may act as agent for the independent directors and coordinate the response. If the receiving director requests the Company to respond on behalf of the directors, a copy of the Company-prepared response is provided to the receiving director. If the receiving director does not request a response, the agent acting for the receiving director will provide a summary of the actions taken. The Company reserves the option to review and change this policy if directed by the Board due to the nature and volume of the correspondence.

 

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    Corporate Governance

 

    

 

Determining Executive Officer and Director Compensation

The GCN has broad authority to develop and implement compensation policies and programs for executive officers and directors. The GCN may retain independent, external compensation consultants to assist in this effort and may change consultants at any time during the year if it determines that a change would be in the best interests of the Company and its shareholders.

To assist in setting 2016 compensation, the GCN retained Meridian Compensation Partners, LLC (“Meridian”) as its independent, executive compensation consultant. Meridian is an independent consulting firm delivering advisory services to compensation committees and does not perform any assignments for the Company other than providing executive and director compensation services for the GCN.

Several internal controls exist to ensure the independent judgment of Meridian:

 

    Meridian reports directly to the GCN and not to Company management.

 

    Meridian routinely participates in executive sessions of the GCN without members of management present.

 

    The GCN has the exclusive authority to hire, retain, and set the compensation for its executive compensation consultant and advisors.

The GCN assessed Meridian’s independence pursuant to NYSE and SEC rules and concluded that no conflict of interest exists that prevents it from independently advising the GCN. In its oversight of our 2016 executive compensation program, the GCN worked with Meridian, the CEO and the Executive Vice President, Group President, Utilities and Chief Administrative Officer. The GCN receives additional support from the Senior Vice President, Corporate Secretary and Executive Services; the Senior Vice President, Human Resources and Employee Services; and the Executive Vice President, General Counsel. In 2016, the CEO and other officers provided recommendations with respect to:

 

    The corporate performance objectives and goals, on which awards of both annual and long-term incentive compensation are based.

 

    Attracting, retaining and motivating executive officers.

 

    Information regarding financial performance, budgets and forecasts as they pertain to executive compensation.

 

    Market information regarding compensation levels, practices, and trends.

Additional information regarding the determination of executive compensation is included in the Compensation Discussion and Analysis (“CD&A”) beginning on page 29.

 

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Corporate Governance    

 

 

Board Planning and Composition

We believe that the most effective oversight comes from a Board of Directors that represents a diverse range of experience and perspectives that provides the collective skills, qualifications, and attributes necessary to provide sound governance. We also believe it is important for the Board to work well as a whole, with members bringing their experience to the table and dialoguing freely with each other and with management to create an environment that results in well-functioning oversight. The GCN establishes and regularly reviews with the Board the experience and attributes desired for effective governance in our changing industry and evaluates the current Board make-up in light of these criteria.

Director Experience and Attributes

We seek directors with experience and expertise in the following areas:

 

Leadership and Strategy     

LOGO

Directors who hold or have held significant leadership positions provide the Company with unique insights. These people generally possess extraordinary leadership qualities as well as the ability to identify and develop those qualities in others. They demonstrate a practical understanding of organizations, processes, strategy, risk management and corporate governance, and know how to drive change and growth.

 

    
Finance     

 

LOGO

 

Accurate financial reporting and thorough auditing are critical to our success. We seek to have a number of directors who qualify as audit committee financial experts, and we expect all of our directors to be literate in finance and financial reporting processes.

 

    
Risk Management     

 

LOGO

Effectively managing risk in a rapidly changing environment is critical to our success. Directors should have a sound understanding of the most significant risks facing the Company and the experience and leadership to provide effective oversight of risk management processes.

 

    
Environmental Issues      LOGO

The production of energy has environmental implications and how we address rapidly evolving environmental regulation has important strategic implications. Directors with experience in addressing complex environmental regulations or siting major facilities bring valuable expertise to our Board.

 

    
Nuclear Operations     

 

LOGO

A portion of our business deals with nuclear regulations and operations. Therefore, we seek at least one director with experience in nuclear risk management and nuclear power operations to provide effective oversight and expertise to our business.

 

    
Regulated Industry     

 

LOGO

Our businesses are heavily regulated and are directly affected by governmental actions. Likewise, cultivating a strong culture of compliance is critical to our business success and maintaining our strong reputation and brand. As such, we seek directors with experience with government or with highly regulated businesses who possess insight and understanding of effective strategies and compliance.

 

    
Customer and Community      LOGO

Understanding the interests and needs of stakeholders such as our customers, communities, and policymakers is important in a business as critical as ours; effective engagement with stakeholders is likewise important to our business success. Marketing and branding expertise is also important as our business becomes more competitive and as we seek to better understand and communicate with stakeholders. We seek directors who have experience in consumer businesses and are committed to excellence in service.

 

    

 

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    Corporate Governance

 

    

 

In addition to experience and expertise, the GCN and Board consider several additional factors in assessing Board composition and director nominees:

 

LOGO   Independence      LOGO   Diversity      LOGO  

Tenure and Board

Refreshment

•  Regular assessments of regulatory requirements, including potential competitive restrictions and interlocks

 

•  Other positions and directorships held are considered

    

•  Diversity of backgrounds, experience and thought is important in ensuring effective risk oversight

 

•  Ethnicity, gender, age, disability, veteran status, sexual orientation, race, national origin, color, religion, creed, geographic representation, education and personality are considered

 

    

•  Diversity in tenure creates good mix of perspectives

 

•  Emerging business needs and desired skills are considered when evaluating potential Board candidates

  Independence is a critical requirement for good governance

 

  The Board reviews independence annually, when candidates are evaluated, and position changes for an existing director

    

  Embracing diversity is one of our core corporate values

 

  Our Guidelines on Corporate Governance identify diversity as an important consideration when seeking candidates for the Board

    

  Longer-tenured directors bring a deep understanding of the Company

 

  Newer members bring fresh perspectives or expertise related to an emerging issue

It is critical for the Company and shareholders to have a well-rounded, diverse Board that functions well as a whole. In evaluating director nominees, the GCN considers experience in the areas identified above and expects director nominees to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In addition, for incumbent directors, the GCN considers attendance, past performance on the Board and contributions to the Board and applicable committees.

Board Statistics

Director Independence

Each of our director nominees other than Mr. Fowke is independent. The Board has satisfied, and expects to continue to satisfy, its objective to have no more than two directors who are not independent serving on the Board at any time.

The Board determined director independence under the standards established by the NYSE, which we have adopted with a four-year look back. In addition, a director who is an employee or representative of a significant supplier of any Xcel Energy business unit or legal entity will not be “independent” unless we entered into the relationship with the supplier as a result of competitive purchasing practices. When evaluating director independence, the Board has determined that the receipt of regulated electric and gas service from the Company does not constitute a material relationship.

The Board reviews ordinary course of business transactions in which directors have an interest as part of the Board’s annual independence review. The Board specifically considered the Company’s ordinary course transactions with U.S. Bancorp when determining Mr. Davis’ independence. During 2016, U.S. Bancorp affiliates provided service to the Company, for which we paid U.S. Bancorp approximately $1.1 million, or less than .01 percent of U.S. Bancorp’s annual revenue. The services provided included trustee services, service as a non-lead participant for our and our subsidiaries’ syndicated revolving credit facilities and service as one of the underwriters, but not the lead underwriter, on a public debt securities offering by one of our subsidiaries.

The Board considered the nature and relative size of the transactions, the lack of Mr. Davis’ personal involvement in the transactions and the routine commercial nature of such transactions. Based on its consideration of these factors, the Board determined that none of the transactions impaired Mr. Davis’ independence. In addition, none of the transactions were related-party transactions because Mr. Davis did not have a direct or indirect material interest in the listed transactions.

Director Attendance

During 2016 the Board met six times, and the independent directors met in executive session without management present on all six occasions. The average attendance for all directors at Board and committee meetings was approximately 97 percent. Eight of our directors attended 100 percent of Board and applicable committee meetings, while two others were slightly lower at 81 and 82 percent. Each director also attended a half-day strategy session and related executive session. We do not have a formal policy, but encourage our directors to attend the annual meeting of shareholders. Nine of ten then serving directors attended the 2016 annual meeting.

 

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Corporate Governance    

 

 

Director Tenure

The Board believes that diversity in tenure creates a good mix of perspectives, with longer-tenured directors bringing a deep understanding of the Company while others bring a fresh perspective and expertise helpful to keeping abreast of a changing industry. The GCN considers emerging business needs and desired skills when evaluating potential candidates. Over the past five years, the Board has added two new directors. As of the date of this proxy statement, the Board consists of 12 directors, whose tenure is shown below.

 

 

LOGO

New Director Nominee

The Board determined to expand the size of the Board in 2017 by one additional director to a total of 12 members. The GCN reviewed the skills and expertise of the Board and determined the Board would benefit from an additional member with expertise in economic and project development, complex stakeholder relationships, and capital and investment management. The GCN sought recommendations of the directors and one of our non-employee directors identified Mr. Yohannes as a potential candidate. After reviewing Mr. Yohannes’ qualifications and interviewing him, the GCN recommended him for election to the Board, which the Board did in February 2017. Mr. Yohannes’ extensive experience in banking and economic development, as well as managing complex stakeholder relationships, brings valuable experience and strategic insight to the Board.

We believe our slate of director nominees provides a well-rounded and well-qualified Board that collectively provides effective oversight and governance of the Company.

Governing Documents

The following materials relating to our corporate governance can be found on our website at www.xcelenergy.com, under “Company — Investor Relations — Governance Documents” or www.xcelenergy.com, under “Company — Corporate Governance” (under “Investor Relations”) and are also available free of charge to shareholders who request them.

 

     Guidelines on Corporate Governance  

     Governance,Compensation and Nominating Committee Charter

     Amended and Restated Articles of Incorporation            

     Operations,Nuclear, Environmental and Safety Committee Charter

     Bylaws        Finance Committee Charter
     Audit Committee Charter  

Shareholders may request our governing documents by writing our offices at: Corporate Secretary, Xcel Energy Inc., 414 Nicollet Mall, Minneapolis, Minnesota 55401. We publish any amendments to the Code of Conduct and waivers of the Code of Conduct for our executive officers or directors on our website.

Shareholder Recommendation of Directors

Any shareholder may recommend potential nominees to the GCN for consideration for membership on the Board. Recommendations can be made by sending a written statement of the qualifications of the recommended individual to the Corporate Secretary, Xcel Energy Inc. 414 Nicollet Mall, Minneapolis, Minnesota 55401. Such recommendations should be received by October 1, 2017 to be considered for the 2018 annual meeting. The GCN will evaluate candidates recommended by shareholders on the same basis as it evaluates other candidates.

Proxy Access

In February 2016, we amended our bylaws to permit any shareholder (or group of no more than 20 shareholders) owning three percent or more of our common stock continuously for at least three years to nominate up to an aggregated limit of two candidates or 20 percent of our Board (whichever is greater) for inclusion in our proxy statement. Notice of such nominees must be received no earlier than November 6, 2017 and no later than close of business on December 5, 2017. Notice should be addressed to the Corporate Secretary, Xcel Energy Inc., 414 Nicollet Mall, Minneapolis, Minnesota 55401. Requirements for such nominations and nominees are detailed in our bylaws, which are available on our website at www.xcelenergy.com, under “Company — Investor Relations — Governance Documents” or www.xcelenergy.com, under “Company — Corporate Governance” (under “Investor Relations”).

 

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    Proposal No. 1

 

    

 

Proposal No. 1

Election of Directors

Serving shareholders well is a key priority for your Board. We believe a well-qualified and diverse mix of directors best positions the Board to effectively govern and achieve strong results. Demonstrated leadership, judgment, and expertise, combined with diversity, integrity, and experience, are some of the important characteristics for Board members. Such characteristics are evaluated when nominating directors and considering potential director candidates.

Twelve nominees have been recommended by the GCN and nominated by the Board. We believe this slate of directors brings not only the right expertise and experience to the Board, but also the right attributes to ensure constructive and free exchange of ideas and opinions with each other and with management.

Eleven of the twelve nominees are Xcel Energy directors who were elected by shareholders at the 2016 annual meeting. The Board elected to expand to twelve members to bring on the expertise and experience of Mr. Daniel Yohannes, whose background is detailed below.

Each nominee has agreed to be named in this proxy statement and to serve if elected. Should any nominee become unable to serve for any reason, the persons named as proxies reserve full discretion to vote “FOR” any other persons who may be recommended by the GCN and nominated by the Board, or the Board may reduce the number of nominees. If elected at the 2017 annual meeting, the nominees will hold office until the 2018 annual meeting and until their successors have been elected and qualified.

Vote Required

Each director shall be elected by majority vote, meaning a nominee must receive more votes “FOR” election than the votes cast “AGAINST.” Any director who does not receive a majority of the votes cast “FOR” election must offer his or her resignation for consideration by the Board under the process outlined on page 68. Proxies solicited by the Board will be voted “FOR” each of the nominees, unless a different vote is specified.

 

   

   Your Board recommends a vote “FOR” the election to the Board of each of the following nominees.

 

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Proposal No. 1    

 

 

Nominees

 

LOGO     

Director Qualifications and Experience:

Ms. Boudreaux’s experience in the health care insurance industry brings strong leadership skills, business acumen, and a consumer focus to the Board. Both her background in finance and her experience serving on public company audit committees provide valuable expertise that has been put to use through her service on our Audit Committee when she was first elected to the Board. With her extensive career in the healthcare industry, Ms. Boudreaux provides the Company experience in management, risk management, and governance issues relevant to our highly regulated industry, as well as a commitment to excellent customer service in a dynamic and changing business. She is the chair of our ONES Committee and serves on our GCN Committee.

 

Business Experience:

•  CEO and Founder, GKB Global Health, LLC, a health care strategy and advisory firm (June 2015 to present)

•  Senior Fellow of the Healthcare Initiative, Tuck School of Business, Dartmouth College (September 2015 to present)

•  CEO, UnitedHealthcare, a diversified health insurance and well-being company (2011 to November 2014); President, UnitedHealthcare (2008 to January 2011)

•  Executive Vice President, UnitedHealth Group, health, well-being and health insurance (2008 to February 2015)

•  Executive VP, External Operations, Healthcare Services Corporation, health care and health insurance (2005 to 2008)

 

Committees:

•  ONES (Chair)

•  GCN

 

 

LOGO     

Director Qualifications and Experience:

Mr. Davis’ executive experience in the highly regulated banking industry provides the Board with valuable leadership skills, strategic insight, and commercial acumen. His extensive financial expertise is valuable in our capital-intensive industry and his background in delivering strong results for a complex financial institution brings valuable skills to the Board. Mr. Davis also serves as a director of several nonprofit and educational institutions in the communities that we serve, bringing an enhanced awareness of our stakeholder base that is valuable to our business. Mr. Davis previously served as Lead Independent Director for four years and currently chairs our GCN Committee and serves on our Finance Committee.

 

Business Experience:

•  Executive Chairman, U.S. Bancorp, a multi-state financial holding company (April 2017 to present)

•  Chairman, U.S. Bancorp, (2007 to April 2017) and CEO (2006 to April 2017). In January 2017, U.S. Bancorp announced that Mr. Davis would be retiring from these positions effective April 18, 2017 and would become the Executive Chairman of U.S. Bancorp

•  President, U.S. Bancorp (2006 to January 2016)

 

Committees:

•  GCN (Chair)

•  Finance

 

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    Proposal No. 1

 

    

 

 

LOGO     

Director Qualifications and Experience:

With a long and distinguished career in the utility industry, Mr. Fowke provides the strategic focus and leadership needed to position the Company well for the future. Having served as the Company’s Chief Financial Officer, he has a strong background in finance, financial reporting, and shareholder outreach. His extensive experience in environmental issues, operations, and the energy business makes Mr. Fowke keenly familiar with the risks we face and provides unique insight into effective management of those risks that has delivered strong results over the long term. His tenure and involvement in the utility industry provides significant expertise in regulatory issues that are central to our business. With his service as a director of nonprofit institutions and utility industry organizations, he provides good understanding of not only the opportunities and challenges of our business, but also the customers and communities we serve. Mr. Fowke serves as Chairman of the Board.

 

Business Experience:

•  Chairman of the Board and CEO, Xcel Energy Inc. (2011 to present)

•  President, Xcel Energy Inc. (2009 to present)

•  Chief Operating Officer, Xcel Energy Inc. (August 2009 to August 2011)

•  Various Executive Positions with Xcel Energy Inc. since 2002

 

Committees:

•  None

 

 

LOGO     

Director Qualifications and Experience:

Mr. O’Brien has extensive executive experience that provides to the Board valuable strategic insight, leadership skills, and a sound understanding of delivering effective operations in an expansive and capital-intensive business. His acumen in financial reporting and accounting has been determined by our Board to qualify him as an audit committee financial expert. He is currently consulting in the areas of strategy and leadership and operating effectiveness with select mining and private equity firms considering investments in the mining industry. His background in both the mining and electric and gas industries is directly relevant to our business and he brings both valuable experience in effective management of environmental issues and expertise in industry and regulatory issues to our Board. He serves on our ONES and Audit Committees.

 

Business Experience:

•  Independent Consultant (October 2015 to current)

•  President and CEO, Boart Longyear Limited, a global provider of drilling services, equipment and performance tooling for mining and drilling companies globally (April 2013 to October 2015)

•  CEO, Newmont Mining Corporation, a global gold mining company (September 2012 to February 2013)

•   President and CEO, Newmont Mining Corporation (July 2007 to September 2012)

 

Committees:

•  ONES

•  Audit

 

20  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Proposal No. 1    

 

 

 

LOGO     

Director Qualifications and Experience:

Mr. Policinski’s extensive experience leading a rapidly growing, multinational food and agricultural cooperative provides valuable leadership experience, strategic insight, and experience in effectively addressing environmental issues. As president and CEO of the third-largest United States cooperative, Mr. Policinski has extensive experience in effectively managing operations, addressing new risks and regulatory requirements, and delivering value via effective growth management. He is well versed in finance and the financial reporting process. An active member of the community, Mr. Policinski serves as a director of a number of nonprofits, educational institutions and trade industry groups and provides a solid understanding of the communities we serve. Mr. Policinski was elected to serve as our Lead Independent Director in May 2016 and serves on our Finance Committee.

 

Business Experience:

•  President and CEO, Land O’Lakes, Inc., an agricultural and dairy cooperative (October 2005 to present)

•  Senior leadership positions at Land O’Lakes, Inc. and The Pillsbury Company, a grain processor and food production company

 

Committees

•  Finance

 

 

LOGO     

Director Qualifications and Experience:

With extensive experience leading large and complex businesses, Mr. Prokopanko brings leadership skills and strategic insight to the Board. Throughout his career he has gained valuable experience in creating growth, managing expansive operations, building key assets and effectively addressing environmental issues. His experience in commodities, with capital-intensive businesses, and as a director on other public companies brings valuable and relevant expertise to the Board. Mr. Prokopanko works with and serves on the boards of several nonprofit organizations and brings a thoughtful understanding of the communities we serve. He serves on our ONES and Audit Committees.

 

Business Experience:

•  President and CEO, The Mosaic Company, producer of phosphate and potash crop nutrients (January 2007 to August 2015)

•  Executive Vice President and COO, The Mosaic Company (July 2006 to January 2007)

•  Senior Leadership Positions, Cargill Corporation, trading, purchasing and distributing grain and other agricultural commodities (1999 to 2006)

 

Committees:

•  ONES

•  Audit

 

2017 Xcel Energy Proxy Statement  |  21

 


Table of Contents

 

    Proposal No. 1

 

    

 

 

LOGO     

Director Qualifications and Experience:

As leader of a management development and strategy planning business, Ms. Sampson brings valuable expertise and business experience to the Board. She provides valuable perspective in ethics and business conduct, talent acquisition, retention and development, diversity and social responsibility, all of which are important issues to our stakeholders. Her experience as a business owner provides insight into finance and the financial reporting processes. Ms. Sampson is the former CEO of the Greater Minneapolis Area Chapter of the American Red Cross and is a former and current board member of various religious and philanthropic organizations within the communities we serve. She serves on our Audit and Finance Committees.

 

Business Experience:

•  CEO, President and Owner, The Sampson Group, Inc., a management development and strategic planning business (1996 to present)

•  Former CEO, Greater Minneapolis Area Chapter of the American Red Cross

 

Committees:

•  Audit

•  Finance

 

LOGO     

Director Qualifications and Experience:

Mr. Sheppard brings to the Board extensive leadership experience in electric utilities, a solid understanding of the issues facing our industry, and valuable expertise on effective and efficient operations. He is a recognized expert in the nuclear industry, having overseen nuclear operations for major utilities and currently consulting on nuclear projects under development across the globe. His experience provides valuable insight, knowledge, business acumen, and judgment that is valuable to our nuclear operations and is extremely helpful to the Board. Mr. Sheppard serves on our ONES and GCN Committees.

 

Business Experience:

•  Independent Consultant (January 2011 to present)

•  Senior Vice President and Chief Nuclear Officer, Southern California Edison, an electric utility (September 2010 to December 2010)

•  Independent Consultant (January 2010 to August 2010)

•  Chairman, President and CEO, STP Nuclear Operating Company (April 2003 to December 2009)

•  Senior positions, South Texas Project, Sequoyah Fuels Corp. and Robinson Nuclear Project (1990 to 2003)

 

Committees:

•  ONES

•  GCN

 

22  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Proposal No. 1    

 

 

 

LOGO     

Director Qualifications and Experience:

Mr. Westerlund has extensive experience in corporate governance, environmental and workforce issues, bringing valuable insight to the Board. Having served as a senior executive in a Fortune 500 company, he brings leadership skills and business acumen to the Board. Mr. Westerlund was responsible for environmental health and safety, corporate compliance, security, real estate activities, and human resources, including labor and employee relations, and benefits while at Ball Corporation, and he brings extensive knowledge of compliance, corporate governance, compensation, and equal employment opportunity issues to the Board. He serves on the boards of a number of community organizations. He previously served as Chair of our GCN Committee, and currently serves on our GCN and Finance Committees.

 

Business Experience:

•  Executive Vice President, Administration and Corporate Secretary, Ball Corporation, a supplier of metal packaging, aerospace and other technologies and services (2006 to September 2011)

•  Senior level positions with Ball Corporation prior to 2006

 

Committees:

•  GCN

•  Finance

 

LOGO     

Director Qualifications and Experience:

Ms. Williams brings extensive experience in leadership with a major investment management company, providing valuable and unique strategic insights to the Board. Her strong financial background is particularly valuable in our capital-intensive industry and she has been determined to be an audit committee financial expert by our Board. She brings extensive expertise in risk assessment and management that is valuable for our business. She is active in the community and serves as a trustee of a number of nonprofit and educational boards. Ms. Williams is the chair of our Finance Committee and serves on our Audit Committee.

 

Business Experience:

•  Partner, Wellington Management Company, LLP, an investment and asset management company for institutional investors (1995 to 2005)

•  Leadership positions, Loomis, Sayles & Co., Inc., an investment management company, and Imperial Chemical Industries Pension Fund (prior to 1995)

 

Committees:

•  Finance (Chair)

•  Audit

 

2017 Xcel Energy Proxy Statement  |  23

 


Table of Contents

 

    Proposal No. 1

 

    

 

LOGO

    

 

Director Qualifications and Experience:

With a career as a senior executive in consumer products industries, Mr. Wolf brings strategic insight, business acumen and valuable experience to the Board. He served as Chief Financial Officer of a major corporation and contributes valuable experience in and knowledge of finance, reporting and governance. Mr. Wolf has been determined to be an audit committee financial expert by our Board. Having led both organizations and the integration of organizations, Mr. Wolf has a sound understanding of business risk and effective risk management oversight. He serves as a director of several nonprofit and educational organizations. Mr. Wolf is chair of our Audit Committee and serves on our ONES Committee.

 

Business Experience:

•  President, Wolf Interests, Inc., an investment company (June 2010 to present)

•  Chief Integration Officer, MillerCoors Brewing Company LLC, a consumer beverage product company (2008 to June 2010)

•  Prior leadership positions with Molson Coors Brewing Company and Coors Brewing Company

 

Committees:

•  Audit (Chair)

•  ONES

 

LOGO

    

Director Qualifications and Experience:

With extensive experience in banking and economic development, Mr. Yohannes provides valuable strategic insight and leadership skills. He was nominated by President Barack Obama to serve as the United States Ambassador to the Organization for Economic Cooperation and Development in 2014. Prior to his government service, Mr. Yohannes specialized in financial services and the renewable energy sector. He is passionate about protecting the environment and provides experience in effectively addressing environmental issues. Mr. Yohannes is active in his community and has served on various nonprofit boards and civil organizations.

 

Business Experience:

•  United States Ambassador and Permanent Representative to the Organization for Economic Cooperation and Development, including the International Energy Agency and the Nuclear Energy Agency (April 2014 to January 2017)

•  Chief Executive Officer, Millennium Challenge Corporation, an independent U.S. Government foreign aid agency (November 2009 to April 2014)

 

Committees:

•  None

 

24  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Beneficial Ownership of Certain Shareholders    

 

 

Beneficial Ownership of Certain Shareholders

Share Ownership of Directors and Officers

The table below provides the beneficial ownership of our common stock as of March 21, 2017 for: (a) each director and director nominee; (b) the executive officers named in the Summary Compensation Table; and (c) the directors and current executive officers as a group. Unless otherwise indicated, each person has sole investment and voting power (or shares such powers with his or her spouse) of the shares noted. None of the listed individual directors, officers, or director nominees beneficially owned more than one percent of our common stock. The directors and executive officers as a group beneficially owned less than one percent of our common stock on March 21, 2017. None of the shares owned by our directors or executives are subject to any type of pledge.

 

Name and Principal

Position of Beneficial Owner

 

  

Common

Stock(1)

 

 

Restricted

Stock

 

  

Total

Shares

Beneficially

Owned

 

 

Stock    

Equivalents(2)    

 

 

Gail K. Boudreaux

Director

 

      

 

1,780    

 

 

     

 

—  

 

 

      

 

1,780

 

 

     

 

42,522    

 

 

 

 

Richard K. Davis

Director

 

      

 

7,697    

 

 

     

 

—  

 

 

      

 

7,697

 

 

     

 

58,223    

 

 

 

 

Richard T. O’Brien

Director

 

      

 

2,000    

 

 

     

 

—  

 

 

      

 

2,000

 

 

     

 

37,006    

 

 

 

Christopher J. Policinski

Director

 

      

 

2,000    

 

 

     

 

—  

 

 

      

 

2,000

 

 

     

 

68,731    

 

 

 

James T. Prokopanko

Director

 

      

 

1,000    

 

 

     

 

—  

 

 

      

 

1,000

 

 

     

 

7,715    

 

 

 

A. Patricia Sampson

Director

 

      

 

2,398    

 

 

     

 

—  

 

 

      

 

2,398

 

 

     

 

128,950    

 

 

 

James J. Sheppard

Director

 

      

 

1,000    

 

 

     

 

—  

 

 

      

 

1,000

 

 

     

 

34,029    

 

 

 

David A. Westerlund

Director

 

      

 

7,750    

 

 

     

 

—  

 

 

      

 

7,750

 

 

     

 

102,245    

 

 

 

Kim Williams

Director

 

      

 

1,188    

 

 

     

 

—  

 

 

      

 

1,188

 

 

     

 

70,739    

 

 

 

Timothy V. Wolf

Director

 

      

 

4,300    

 

 

     

 

—  

 

 

      

 

4,300

 

(3)

 

     

 

53,994    

 

 

 

Daniel Yohannes

Director

 

      

 

—      

 

 

     

 

—  

 

 

      

 

—  

 

 

     

 

165    

 

 

 

Ben Fowke

Chairman, President and Chief Executive Officer

 

      

 

533,788    

 

 

     

 

21,958

 

 

      

 

555,746

 

 

     

 

68,213    

 

 

 

Robert Frenzel

Executive Vice President and Chief Financial Officer

 

      

 

—      

 

 

     

 

7,620

 

 

      

 

7,620

 

 

     

 

—      

 

 

 

Kent Larson

Executive Vice President and Group President, Operations

 

      

 

84,432    

 

 

     

 

2,245

 

 

      

 

86,677

 

 

     

 

24,886    

 

 

 

Marvin McDaniel, Jr.

Executive Vice President, Group President, Utilities and

Chief Administrative Officer

 

      

 

92,976    

 

 

     

 

2,143

 

 

      

 

95,119

 

 

     

 

39,841    

 

 

 

Scott Wilensky

Executive Vice President, General Counsel

 

      

 

134,838    

 

 

     

 

—  

 

 

      

 

134,838

 

 

     

 

590    

 

 

 

Teresa Madden

Former Executive Vice President and Chief Financial Officer

 

      

 

124,807    

 

 

     

 

—  

 

 

      

 

124,807

 

(4)

 

     

 

—      

 

 

 

Directors and Current Executive Officers

as a group (23 persons)

 

      

 

1,063,830    

 

 

     

 

40,212

 

 

      

 

1,104,042

 

 

     

 

931,584    

 

 

 

(1)  On March 21, 2017, the closing price of our common stock on the NYSE was $44.36.

 

(2)  Common stock equivalents represent (i) the share equivalents of our common stock held by executive officers under our deferred compensation plan as of March 21, 2017, and (ii) stock equivalent units held under the directors’ SEP as of March 21, 2017. For information on common stock equivalents granted during 2016 and holdings at December 31, 2016, see page 59. The information in this column is not required by the rules of the SEC because these share equivalents carry no voting rights and the recipient does not have the right to acquire any underlying shares within 60 days of March 21, 2017. Nevertheless, we believe that this information provides a more complete picture of the financial stake that our directors and executive officers have in the Company.

 

(3)  Mr. Wolf’s son owns 300 of these shares. Mr. Wolf disclaims beneficial ownership of these shares.

 

(4)  Ms. Madden retired effective June 30, 2016. Shares reflected in this table for Ms. Madden are as of March 21, 2017.

 

2017 Xcel Energy Proxy Statement  |  25

 


Table of Contents

 

    Beneficial Ownership of Certain Shareholders

 

    

 

Largest Owners of Xcel Energy’s Shares

The table below provides information as to each person or entity known to us to be the beneficial owner of more than five percent of our common stock:

 

    Name and Address of Beneficial Owner

 

  

Number of Shares

Beneficially Owned

 

    

Percent   

of Class   

 

 

    BlackRock, Inc.

    55 East 52nd Street

    New York, NY 10055

 

   41,998,237(1)

 

     8.3%   

 

 

    JPMorgan Chase & Co.

    270 Park Ave.

    New York, NY 10017

 

   25,637,897(2)

 

     5.0%   

 

 

    The Vanguard Group

    100 Vanguard Blvd.

    Malvern, PA 19355

 

   34,010,051(3)

 

     6.7%   

 

 

    State Street Corporation

    One Lincoln Street

    Boston, MA 02111

 

   25,508,425(4)

 

     5.0%   

 

 

(1)  The information contained in the table and this footnote with respect to BlackRock, Inc. is based solely on a Schedule 13G/A filed by the listed person with the SEC on January 27, 2017. The filing indicates that as of December 31, 2016, BlackRock, Inc. had sole voting power for 36,738,832 shares and sole dispositive power for 41,998,237 shares.

 

(2)  The information contained in the table and this footnote with respect to JPMorgan Chase & Co. is based solely on a Schedule 13G/A filed by the listed person with the SEC on January 19, 2017. The filing indicates that as of December 30, 2016, JPMorgan Chase & Co. had sole voting power for 23,389,012 shares, shared voting power for 204,549 shares, sole dispositive power for 25,326,966 shares and shared dispositive power for 297,474 shares.

 

(3) The information contained in the table and this footnote with respect to The Vanguard Group, Inc. is based solely on a Schedule 13G/A filed by the listed person with the SEC on February 10, 2017, The filing indicates that as of December 31, 2016, The Vanguard Group, Inc. reported that it had sole voting power for 842,477 shares, shared voting power for 143,855 shares, sole dispositive power for 33,080,766 shares and shared dispositive power for 929,285 shares. The Vanguard Group, Inc. also reported that (i) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 656,430 shares as a result of its serving as investment manager of collective trust accounts and (ii) Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 458,902 shares as a result of its serving as investment manager of Australian investment offerings.

 

(4)  The information contained in the table and this footnote with respect to State Street Corporation is based solely on a Schedule 13G filed by the listed person with the SEC on February 10, 2017. The filing indicates that as of December 31, 2016, State Street Corporation reported that it had shared voting power for 25,508,425 shares and shared dispositive power for 25,508,425 shares.

 

26  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Proposal No. 2    

 

 

Proposal No. 2

Advisory Vote on Frequency of Advisory Vote on Executive Compensation

Recommendation and Background

We are submitting a non-binding, advisory proposal to shareholders to indicate how frequently we should seek an advisory vote on executive compensation. Under this proposal, our shareholders may indicate they would prefer to have an advisory vote on executive compensation every one, two or three years.

Our GCN and Board believe that a frequency of every ONE year for the advisory vote on executive compensation is the best approach for Xcel Energy and its shareholders.

Our GCN and Board believe that an annual vote will allow our shareholders to provide timely, direct input on the Company’s executive compensation philosophy, policies and practices as disclosed in our proxy statement each year. The GCN, which administers the Company’s executive compensation program, values the opinions expressed by shareholders in these votes. The Board believes that an annual vote is therefore consistent with the Company’s efforts to engage in an ongoing dialogue with our shareholders on executive compensation and corporate governance matters.

In voting on this proposal, you should mark your proxy for ONE, TWO or THREE based on your preference as to the frequency with which an advisory vote on executive compensation should be held. If you have no preference you may abstain. Shareholders will not be voting to approve or disapprove the Board’s recommendation. Although this advisory vote on the frequency of the “say on pay” vote is nonbinding, the Board and GCN will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.

Vote Required

The Board will consider shareholders to have selected the frequency option receiving the most votes among the choices. Abstentions and broker non-votes will have no effect on this matter.

 

 

  

 

 

Your Board recommends a vote to hold “say on pay” votes

every ONE year (as opposed to every two or every three years).

Proxies solicited by the Board will be voted for ONE year,

unless a different vote is specified.

 

 

2017 Xcel Energy Proxy Statement  |  27

 


Table of Contents

 

    Proposal No. 3

 

    

 

Proposal No. 3

Advisory Vote on Executive Compensation

Recommendation and Background

Our Board recognizes that performance-based executive compensation is an important element in driving long-term shareholder value. We are seeking shareholders’ views on the compensation of named executive officers identified in the Executive Compensation Tables section of this proxy statement through an advisory vote on the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s 2017 proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

The Company’s goal for its executive compensation program is to align executive leadership’s interests with those of our shareholders, customers and employees. The Board believes our executive compensation program satisfies this goal and is strongly aligned with the long-term interests of our shareholders.

Shareholders are urged to read the CD&A and other information included in the Executive Compensation Tables section of this proxy statement. The GCN and the Board believe that the information provided in these sections demonstrate that our executive compensation program aligns our executives’ compensation with our short-term and long-term performance and provides the compensation and incentives needed to attract, motivate and retain key executives who are crucial to our long-term success.

As an advisory vote, this proposal is not binding upon the Company. However, the GCN, which is responsible for designing and administering our executive compensation program, values the opinions expressed by shareholders in their vote on this proposal and will continue to consider the outcome of the vote when making future compensation decisions for named executive officers.

Vote Required

The Board will consider shareholders to have approved our executive compensation if the shares voted “FOR” the proposal exceed the shares voted “AGAINST.” Abstentions and broker non-votes will have no effect on this matter. Proxies solicited by the Board will be voted “FOR” the approval of our executive compensation, unless a different vote is specified.

 

 

  

 

 

Your Board recommends a vote “FOR” approval of the

advisory vote on compensation.

 

 

28  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Compensation Discussion and Analysis

In this section, we describe the material components of our executive compensation program for 2016 for named executive officers (“NEOs”), who appear in the Summary Compensation Table and other compensation tables contained in this Proxy Statement.

Compensation Discussion and Analysis Table of Contents

 

Section

 

  

Element

 

  

Page

 

 
 

 

Highlights

 

 

    

 

2016 Performance

 

     30  
  

 

2016 Compensation

 

     30  
  

 

Compensation Philosophy

 

     30  
  

 

Executive Compensation Practices

 

     31  
  

 

Impact of 2016 Say on Pay Vote

 

     31  
 

 

What We Pay and Why

 

 

    

 

Establishing Target Compensation

 

     32  
  

 

Peer Group

 

     32  
  

 

Executive Compensation Elements

 

     33  
  

 

Mix of Total Compensation

 

     34  
  

 

Overview of Target Total Compensation for 2016

 

     34  
  

 

Base Salary

 

     34  
  

 

Annual Incentive

 

     35  
  

 

Long-term Incentives

 

     36  
  

 

Retirement and Deferred Compensation Benefits

 

     38  
 

 

Additional Compensation Program Features and Policies

 

 

    

 

Severance Policy

 

     38  
  

 

Employment Contracts

 

     38  
  

 

Stock Ownership Requirements

 

     38  
  

 

Equity Grant Practices

 

     39  
  

 

Hedging and Pledging

 

     39  
  

 

Recoupment

 

     39  
  

 

Risk Assessment

 

     40  
    

 

Deductibility of Executive Compensation under IRC Section 162(m)

 

     40  

 

2017 Xcel Energy Proxy Statement  |  29

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Highlights

2016 Performance

Our strong financial and operational performance is enhanced by our continued focus on environmental leadership, positioning Xcel Energy well for meeting long-term shareholder interests.

 

LOGO    LOGO      Financial Performance     LOGO  

Environmental

Leadership

  

 

•  Three- and five-year TSR better than our benchmarks

 

•  Met ongoing EPS guidance

 

•  Increased our dividend

 

   

 

•  30% reduction in carbon emissions since 2005

 

•  More than 7,500 megawatts of wind and solar capacity

LOGO  

Customer Safety,

Affordability and Loyalty

   LOGO      Grid and Plant Reliability     LOGO   Employee
Safety

•  Top quartile performance for preventing damages to buried gas facilities

 

•  Operating and maintenance expenses held flat for the past two years

 

•  Industry leader in focusing on the Net Promoter Score customer loyalty metric

  

•  Recognized for strong emergency response by the Edison Electric Institute

 

•  Invested more than $22 million to enhance grid information and security capabilities

   

•  2nd best year ever in 2016 for employee safety based on number of injuries (OSHA recordable)

 

•  50% reduction in employee injuries since 2009

2016 Compensation

No significant changes were made to our executive compensation program in 2016, which continues to be primarily variable compensation based on performance outcomes. We continue to monitor evolving best practices to ensure our talent needs for attraction, motivation and retention are met, and we continue to assess certain features of our programs compared to market practices.

Our solid operational and financial performance resulted in the following 2016 compensation outcomes:

 

    The 2016 annual incentive awards achieved 127 percent of target. This payout is reflective of our results which focus on operational performance and financial results, as described in the Annual Incentives section beginning on page 35.

 

    Performance-based long-term incentive awards granted in 2014 achieved approximately 182 percent of target (plus accrued dividend equivalents). This payout reflects very strong relative TSR performance and meeting our environmental commitments by reducing carbon dioxide emissions, as described in the Long-Term Incentives section on pages 36 to 37.

Compensation Philosophy

Our executive compensation programs are designed to align the interests of our executives with the interests of our shareholders, customers and employees. Our compensation philosophy is based on the following principles:

 

LOGO  

Performance-

based

     LOGO   

Market

Competitive

     LOGO   

Equity-based

Incentive

•  Majority of compensation is at risk, and pay is aligned with performance

 

•  Motivates achievement of financial, operational and stock price performance goals

    

•  Enables us to attract and retain talented leaders

 

•  Compares us to a 21-member industry peer group

    

•  Focus on long-term shareholder value

 

•  Aligns executive interests with those of shareholders and rewards for strategic success

This philosophy, which includes significant emphasis on pay for performance, is applied consistently across all executives; however, individual compensation may be differentiated based on scope of responsibilities, experience, and contributions to Company results.

 

30  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Executive Compensation Practices

Our compensation practices for NEOs are outlined below. These practices reflect our compensation philosophy and help ensure sound corporate governance practices.

 

          
           

 

 

 

Pay for performance as a substantial percentage of each NEO’s total direct compensation is variable and at risk through performance-based metrics

 

      
        

Conduct an annual “say-on-pay” advisory vote

 

 
        

Use an appropriate peer group when establishing compensation

 

 
        

Review tally sheets when making executive compensation decisions

 

 
        

Balance short- and long-term incentive performance goals to reflect operating and strategic objectives

 

 
        

Strong emphasis on long-term equity compensation

 

 
        

Align executive compensation with shareholder returns through long-term incentives

 

 
      What We Do           

Include caps on individual payouts in incentive plans

 

 
        

Subject equity grants to non-solicitation covenants

 

 
        

Set significant stock ownership guidelines for NEOs, other executives and non-employee directors

 

 
        

Require minimum vesting periods for equity based awards and all shares are to be held until stock holding requirements and ownership achieved

 

 
        

Mitigate undue risk-taking in compensation programs

 

 
        

Include recoupment provision in our long-term incentive program

 

 
        

Include criteria in incentive plans to maximize tax deductibility

 

 
        

Maintain an independent GCN

 

 
        

Retain an independent compensation consultant

 

 
          
        

Provide employment contracts

 

 
        

Permit executives to hedge their company stock

 

 
 

 

What We

Don’t Do

      

Provide tax gross-ups for new executive officer participants in the Senior Executive Severance Policy

 

 
        

Provide tax gross-ups on executive perquisites except for circumstances regarding relocation

 

 
        

Provide unusual or excessive perquisites

 

 
         Supplement service credit to newly-hired officers under any of the Company’s qualified or non-qualified retirement plans  
          

 

Impact of 2016 Say on Pay Vote

Each year, Xcel Energy provides shareholders with a non-binding “say-on-pay” vote on its executive compensation programs.

The GCN evaluated results of the say-on-pay vote, and in light of the broad shareholder support of our executive compensation programs, the GCN decided to maintain the core design of our compensation programs. The GCN will continue to consider the outcome of future say-on-pay votes, in addition to various other factors, when making future compensation decisions.

LOGO

94% of the votes cast were in favor of our executive compensation programs and policies

 

 

2017 Xcel Energy Proxy Statement  |  31

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

What We Pay and Why

Establishing Target Compensation

At the GCN’s request, Meridian, its independent compensation consultant, presented its annual market assessment comparing our executive compensation programs and compensation against our peer group for:

 

    base salary;

 

    total cash compensation (base salary plus target annual incentive); and

 

    total direct compensation (total cash compensation plus target long-term incentive).

To provide a broad perspective of the competitive market, Meridian analyzed data for various market pay levels, including the 25th, 50th and 75th percentiles. We consider compensation to be market competitive if it is within a competitive range of the median of the peer group.

For 2016, the GCN made pay decisions based on this annual market assessment of compensation and specific factors about each NEO, including individual performance, experience, internal equity, Company results, scope and responsibility, retention and the NEO’s role in succession planning.

The GCN exercises its independent judgment to approve the compensation level for the CEO. For all other executive officers, the GCN considers the CEO’s recommendation for setting compensation levels. The GCN approved compensation for the CEO and all other executive officers that is aligned with the Company’s overall compensation philosophy described above.

Peer Group

Our peer group of 21 U.S.-based publicly traded energy services companies is generally consistent from year to year (subject to changes resulting from mergers and acquisitions) and was developed by Meridian to approximate the competitive market in which we compete for talent. The companies were selected primarily based on the following criteria:

 

    Utilities with similar revenue and market capitalization.

 

    Part of the market for which we compete for talent and investor capital.

 

    Similar operating models and challenges with their regulated utility businesses.

 

    Included in an executive compensation survey database for which compensation information is available for a cross-section of executive and managerial roles.

The peer group, at year-end, is comprised of the following companies:

 

2016 Peer Group Companies     
Ameren    Duke Energy    PG&E Corporation
American Electric Power    Edison International    PPL
CenterPoint Energy    Entergy    Public Service Enterprise Group
CMS Energy    Eversource Energy    Scana
Consolidated Edison    Exelon    Sempra Energy
Dominion Resources    First Energy    Southern Company
DTE Energy    NextEra Energy    WEC Energy Group

In December 2015 at the time 2016 compensation was assessed:

 

    The median revenue for the peer group was $12.4 billion as compared to our revenue of $11.7 billion.

 

    The median market capitalization for the peer group was $20.0 billion as compared to our market capitalization of $18.0 billion.

 

32  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Executive Compensation Elements

The following table provides information regarding the elements of total direct compensation for our NEOs in 2016:

 

   

 

Base Salary

 

 

Annual Incentive

 

 

Long-term Incentive: Performance Shares

 

 

Long-Term Incentive: Restricted Stock Units

 

Primary Purpose  

 

Motivation, Attraction and Retention

 

 

 

Reward for ongoing work performed

 

 

Reward short-term performance

 

 

 

Reward long-term performance

 

 

Continuity

 

 

Align Interest with customers, shareholders and employees

 

 

 

Align interest with customers and shareholders

 

Recipients

 

 

All NEOs

 

 

Reviewed

 

 

Annually

 

 

Payment

 

 

Ongoing

 

 

 

In February following end of performance period

 

Cash / Equity

 

 

Cash

 

 

Cash or Equity at executive officer’s election

 

 

 

Majority is equity with balance as cash

 

 

Equity

 

  Performance Period  

 

 

 

Ongoing

 

 

 

1 year

 

 

 

3 years

 

In addition, the company provides the following retirement and post-employment programs:

 

 

Retirement and Post-employment programs

 

 

Pension Plan (qualified and non-qualified)

 

•      Provides retirement income for eligible participants based on fixed plan-based formulas.

 

 

Supplemental Executive Retirement Plan (SERP)

 

•      CEO is the sole participant; closed to new participants in 2008.

 

•      Provides supplemental retirement income in addition to the pension benefits.

 

 

401(k) Savings and Deferred Compensation Plan

 

•      Provides for savings opportunities by deferring salary up to tax code limitations (401(k)) and salary, annual incentive and/or long-term incentive (Deferred Compensation).

 

 

Severance and Change in Control

 

•      Provides compensation and benefits in the case of involuntary termination without cause.

 

Perquisites offered by the Company are very limited in nature and scope.

 

2017 Xcel Energy Proxy Statement  |  33

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Mix of Total Compensation

We balance the mix of compensation by delivering a blend of short- and long-term incentives that are consistent with prevailing market practice. This approach has effectively resulted in 86 percent of total direct compensation for the CEO and 74 percent of total direct compensation for other NEOs to be in the form of variable compensation, with the remainder representing fixed compensation. The GCN and the Board believe this design encourages a balance of short- and long-range strategic thinking, which is important given the long-term nature of utility operations and the capital investment necessary for such operations.

The following charts illustrate the mix of total direct compensation for the CEO and other NEOs at target performance.

 

 

LOGO

Overview of Target Total Compensation for 2016

The GCN set 2016 base salary, target annual incentive awards and target long-term incentive awards for all Xcel Energy executive officers, including the NEOs. The GCN believes these compensation levels align and are competitive with the market for the utility industry. The table below shows the base salary and target awards for short-term and long-term incentives for each NEO who continued to serve as an NEO throughout 2016.

 

   

Annualized
Base Salary

($)

 

Annual
Incentive
Target (% of
Base Salary)

 

 

Long-term Incentive Targets

 

 Named Executive Officer

 

     

Performance
Shares

($)

 

 

Restricted Stock
Units

($)

 

 

Total

($)

 

 

 Ben Fowke, Chairman, President and CEO

 

   

 

 

 

 

 

 

1,200,000

 

 

 

 

   

 

 

 

 

120

 

 

%

 

   

 

 

 

 

4,640,000

 

 

 

   

 

 

 

 

1,160,000

 

 

 

   

 

 

 

 

8,440,000  

 

 

 

 

 Bob Frenzel, Executive Vice President, CFO

 

   

 

 

 

 

600,000

 

 

 

   

 

 

 

 

70

 

 

%

 

   

 

 

 

 

960,000

 

 

 

   

 

 

 

 

240,000

 

 

 

   

 

 

 

 

2,220,000  

 

 

 

 

 Kent Larson, Executive Vice President and Group President, Operations

 

   

 

 

 

 

550,000

 

 

 

   

 

 

 

 

75

 

 

%

 

   

 

 

 

 

984,000

 

 

 

   

 

 

 

 

246,000

 

 

 

   

 

 

 

 

2,192,500  

 

 

 

 

 Marvin McDaniel, Jr., Executive Vice President, Group President, Utilities and Chief Administrative Officer

 

     

 

550,000

 

 

     

 

75

 

%

 

     

 

984,000

 

 

     

 

246,000

 

 

     

 

2,192,500  

 

 

 

 Scott Wilensky, Executive Vice President, General Counsel

 

   

 

 

 

 

505,000

 

 

 

   

 

 

 

 

65

 

 

%

 

   

 

 

 

 

700,000

 

 

 

   

 

 

 

 

175,000

 

 

 

   

 

 

 

 

1,708,250  

 

 

 

Base Salary

Base salary provides a fixed element of regular income. The amount of base salary set by the GCN is competitive in the utility industry. A key consideration is the median base salary rates at peer companies, although the GCN has flexibility to review other relevant factors as outlined in our compensation philosophy. The base salaries for the NEOs were, in aggregate, just below the median of base salaries of our peer companies.

 

34  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Annual Incentive

In February 2016, our management recommended goals to the GCN based on an evaluation of prior performance and available objective metrics and benchmarks. These goals are designed to not encourage short-term thinking or behavior that could threaten the value of the Company or the investment of its shareholders. The Committee established the annual incentive program (“AIP”) which determines awards based on these goals as approved and Company financial performance as follows:

 

    Up to 150 percent of a target award, which is determined by multiplying base salary and the target percent, is based on the weighted actual achievement of our operational metrics outlined below and a funding factor multiplier, that is based on EPS results, which can be adjusted for certain identified financial impacts.

 

    Up to an additional 50 percent is based on attaining superior financial performance as measured by EPS.

 

    When combined, award payouts range from 0 percent to 200 percent of a participant’s target award.

The table below discloses the GCN approved corporate operational goals and actual results for the AIP in 2016:

 

2016

Corporate  
Goal

  Key Performance Indicator   Threshold
  Performance  
  Target
  Performance  
  Maximum
  Performance  
  2016 Actual
  Performance  
   % Payout     % Weight   

Weighted

 Calculation 

Customer

 

Customer Loyalty

(Net Promoter Score)

  30th percentile   50th percentile   70th percentile   56th percentile   115.00%   10%   11.5%
 

O&M Cost Management

(recoverable O&M)(1)

  2.5%   1.0%   0.0%   -0.40%   150.00%   25%   37.5%

Reliability

 

Public Safety

(damages per 1000 locates)

  1.45   1.30   1.25   1.34   86.67%   15%   13.0%
 

Customer Electric Reliability

(SAIDI)

  99   92   87   92   100.00%   15%   15.0%
 

Power Plant Availability

(unplanned outage rate)

  83%   87%   91%   87%   100.00%   15%   15.0%

Employee

 

Employee Safety

(OSHA Recordable Incident

Rate(2))

  1.14   0.92   0.85   1.02   150.00%   20%   30.0%
    Results on Operational Metrics             100%   122.0%
  Overall Result, as described below                           127.0%

 

(1)  The O&M growth rate shall not be impacted by new types of O&M expense (such as a new category of amortization of expense) that are directly offset by revenue in a rate proceeding.

 

(2)  The OSHA Recordable Incident Rate will be reduced to Threshold level if an employee fatality occurs or increased to Maximum level if no employee fatality occurs and there are no direct personal primary voltage electrical contacts that result in an OSHA Recordable injury or unplanned natural gas ignitions and the OSHA Recordable Incident Rate is above Threshold.

Annual incentive awards are, in part, based on EPS, which can be adjusted for certain identified financial impacts. For 2016, no adjustments were made to EPS. When EPS is below a certain threshold, awards will not be paid. If EPS is in the lower end of initial earnings guidance, or $2.12 to $2.20, then operational results can be modified by a funding factor multiple of 50 percent to 100 percent. If EPS is at $2.21 or greater, then the operational results can be modified by a funding factor multiple of 100 percent to 150 percent, not to exceed 150 percent overall result. For 2016, the operational results were not modified by the funding factor.

Superior financial performance is recognized and rewarded as a pre-defined percentage of each NEO’s target annual incentive award. For 2016, an additional 5 percent of target annual incentive awards was awarded based on the achieved EPS result of $2.21 per share, as reported on February 2, 2017, which was above the midpoint of the guidance range. When combined with the operational results awards were paid at 127 percent of target. The GCN has the discretion to take individual executive performance into consideration in setting final awards but did not do so for any NEOs.

Annual incentives are determined under the Xcel Energy Inc. Omnibus Incentive Plan (the “Plan”).

 

2017 Xcel Energy Proxy Statement  |  35

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Long-Term Incentives

Grant of 2016-2018 LTI Awards

Long-term incentive compensation is approximately 69 percent of the CEO’s target total direct compensation and 55 percent of the average of the other NEOs’ target total direct compensation and is primarily performance-based. Prior to vesting, long-term incentive awards may not be sold, encumbered or otherwise transferred by the participant. Stock earned under long-term incentive compensation is subject to our Stock Ownership Policy (see page 38).

For 2016, our long-term incentive program had two components which provide a balance between performance-oriented opportunities and service-based opportunities:

 

    Performance shares targeted to deliver 80 percent of each executive officer’s long-term incentive opportunity; and

 

    RSUs targeted to deliver the remaining 20 percent.

 

 

LOGO

The following describes the performance-based long-term incentive grants for the three-year period ending December 31, 2018.

 

Performance Shares based on

the Company’s Relative TSR

  

Performance Shares based on

Carbon Dioxide Emissions Reduction

 

LOGO

  

 

LOGO

For performance between percentiles, the number of performance shares earned shall be determined by straight line interpolation

 

 

Based on the achievement of specified levels of the Company’s TSR relative to our peer group, with the payout ranging from 0 percent to 200 percent.

 

 

 

Based on the achievement of specified reductions in carbon dioxide emissions, with the payout ranging from 0 percent to 200 percent.

 

 

The goal links the interest of executive officers with shareholders by rewarding management for creating shareholder value when compared to utility industry peer companies.

 

  This goal supports our strong environmental stewardship.

 

Dividend equivalents are credited on each granted award during the three-year cycle to the same extent that dividends are paid on shares of our common stock.

 

Credited dividend equivalents are paid solely to the extent the underlying performance share vests based on the achievement of the applicable performance goal. If the applicable threshold performance goal is not achieved at the end of the three-year performance cycle, then all associated performance shares and dividend equivalents would be forfeited.

 

Each performance share represents one share of Xcel Energy common stock.

 

 

Grant awards, at Target:

 

•      CEO: 81,232

 

•      Other NEOs range: 12,255 to 17,227

 

 

 

Grant awards, at Target:

 

•      CEO: 48,739

 

•      Other NEOs range: 7,353 to 10,336

 

 

Generally paid as 50 percent cash and 50 percent shares.

 

 

 

Generally paid as shares.

 

 

36  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Restricted Stock Units Subject to Service-Based Vesting

These RSUs, granted in 2016, vest upon the third anniversary of the grant, provided that the NEO remains continuously employed until such anniversary. They serve as an important continuity and retention tool. Each RSU represents one share of our common stock. Awards will also vest pro rata tor NEOs who are at least 55 years of age and have 10 years of service in the event that any such NEO leaves the company for any reason, other than with cause, during the term of the grant.

Dividend equivalents are credited on each granted RSU during the vesting period to the same extent that dividends are paid on shares of our common stock, but such dividend equivalents are paid solely to the extent the underlying RSU vests based on the satisfaction of the service requirement.

For 2016, the CEO was awarded 32,494 RSUs and the other NEOs were awarded from 4,902 to 6,891 RSUs.

The Performance Share and RSU grants are included in the Grants of Plan-Based Awards table on pages 44 to 45.

Settlement of 2014-2016 LTI Awards

For 2014, the long-term incentive program had two components — Performance Shares and Restricted Stock Units. The following describes the results of these award grants for the three-year period ended December 31, 2016.

 

Performance Shares based on

the Company’s Relative TSR

  

Performance Shares based on

Carbon Dioxide Emissions Reduction

 

LOGO

  

 

LOGO

 

 

Results are due to strong operational and earnings growth performance over the three-year period. The performance outcome is at the 75th percentile which results in a 171.4 percent of target payout.

  

 

Results are due to implementing renewables, being a leader in resource plans, energy efficiency programs and favorable market conditions. The performance outcome is above the maximum payout or a 25 percent reduction over 2005 levels which results in a 200 percent of target payout.

 

 

Earned awards:

 

•      CEO: 160,374

 

•      Range for other NEOs who continued to serve as an NEO throughout 2016: 0 to 30,472

 

  

 

Earned awards:

 

•      CEO: 112,262

 

•      Range for other NEOs who continued to serve as an NEO throughout 2016: 0 to 21,329

 

 

These awards include dividend equivalents credited over the three-year performance cycle.

 

Restricted Stock Units Subject to Service-Based Vesting

In 2014, we granted to each NEO restricted stock units that vested upon the third anniversary of the grant, provided such NEO remained continuously employed for the three-year period.

The CEO earned 37,421 restricted stock units and the other NEOs earned from 0 to 7,111 restricted stock units, all of which included dividend equivalents credited over the three-year cycle.

These earned Performance Shares and Restricted Stock Unit awards are included in the Option Exercises and Stock Vested Table on page 48.

 

2017 Xcel Energy Proxy Statement  |  37

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Retirement and Deferred Compensation Benefits

In 2016, the Company provided retirement benefits to executive officers under the Xcel Energy qualified and non-qualified pension plans. The role of the pension plans in executive compensation is the same as it is for other employees: to provide income during retirement and aid in the retention of qualified employees. The qualified pension plan includes earnings up to the Internal Revenue Service’s established limits and the benefit may be payable in a manner that results in individual income tax advantages. The non-qualified pension plan includes earnings, if any, above the same Internal Revenue Service limit. The 2016 Internal Revenue Service earnings limit was $265,000.

Xcel Energy maintains a Supplemental Executive Retirement Plan (“SERP”), which was closed to new participants in 2008. Benefits continue to accrue for Mr. Fowke who remains the sole participant in the SERP. The SERP provides a benefit to the officer participating which is offset by the qualified and non-qualified pension plan benefits. Covered compensation for the purposes of calculating SERP benefits includes base salary and annual incentive awards. Long-term incentive payments are not included in covered compensation. The SERP benefit is valued as a 20-year annuity, but is payable as a lump sum after the officer’s termination of employment. Unreduced benefits are payable at age 62; benefits are payable as early as age 55, reduced 5 percent for each year that the benefit commencement date precedes age 62.

Each executive officer is eligible to participate in Xcel Energy’s 401(k) Savings Plan and Deferred Compensation Plan. The plans allow executive officers, like other eligible employees, to defer a portion of their base salary and all or a portion of their annual incentive award up to certain IRS limits. The plan also allows executive officers to defer all or a portion of their performance-based long-term incentive awards. For 2016, the Company matched 50 percent of base salary deferrals (up to 8 percent deferred), netting to a maximum 4 percent, for eligible matching contributions. One of the purposes of the Deferred Compensation Plan is to allow for a full employer matching contribution that cannot be contributed under the Company’s qualified retirement plans due to the Internal Revenue Service Code limitations.

Additional Compensation Program Features and Policies

Severance Policy

The Company provides severance benefits to NEOs in accordance with the Xcel Energy Senior Executive Severance and Change in Control Policy (as amended, the “Severance Policy”). The Board or the GCN may name additional participants. The GCN believes the Severance Policy provides a competitive severance benefit that retains key talent during a critical and potentially protracted period of uncertainty and provides a competitive pay arrangement in the event the Company undergoes a change in control and the executive is not retained following the completion of such event. Outside of change in control situations, the Severance Policy also encourages executive officers to focus on the interests of Xcel Energy and its shareholders without undue concern that the officer will be terminated without compensation and benefits.

The benefits payable under the Severance Policy are discussed in more detail under Potential Payments Upon Termination or Change in Control beginning on page 54.

Employment Contracts

Neither our CEO nor any of our other executive officers have employment contracts.

Stock Ownership Requirements

Our Stock Ownership Policy is an important feature of our compensation plan that helps to ensure alignment of executive interests with those of our shareholders. The share ownership guideline for each executive is based on the executive’s position. Executives are expected to achieve the applicable ownership requirement within five years of the date they assume their current executive position.

Each executive is required to hold the net shares acquired through the Company’s compensation plans for a period of at least one year from the date the GCN certifies results and authorizes payment of an award. These holding periods apply to shares acquired through the Company’s compensation plans even if the executive is otherwise already in compliance with the stock ownership requirements. If an executive is not in compliance with the ownership requirement within the required time period, the executive must elect to receive payment of any incentive awards in stock and must retain 100 percent of the net shares (after-tax) delivered to him or her until the ownership requirement is met.

 

38  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

As of March 21, 2017, all current NEOs, have achieved, or are on track to achieve, the stated share ownership requirement by the date specified for achievement. All shares of common stock that the executive owns as well as amounts deferred into Xcel Energy stock count toward compliance with the ownership guidelines. The table below shows the value of shares of common stock that each NEO must hold by the required dates expressed as a multiple of base salary.

 

           
CEO         5x base salary    
           
Named Executive Officers         3x base salary        
           
All Other Executive Officers         2x - 3x base salary        
           

Equity Grant Practices

We follow these practices regarding the timing of equity compensation grants:

 

    Performance shares and RSUs are normally approved on the date of the regularly scheduled December GCN meeting and granted on the first trading day of the fiscal year.

 

    Off-cycle grants to employees and new hires are made after the trading window opens following the earnings release for the quarter in which the triggering event occurred.

 

    Grants to newly promoted executive officers or otherwise made as described above are made either (i) on the day the GCN approves the grant for a promotion that has already occurred or is occurring concurrently; or (ii) on the effective date of a promotion for promotions or grants that become effective at a future date.

 

    In years where we pay out annual incentive awards, we issue the common shares and restricted shares of our common stock to executives who have elected to receive their award in common stock on the regularly scheduled date of the February GCN meeting.

Hedging and Pledging

We prohibit the use of any hedging or similar transactions related to our shares for directors and all employees, including executives. In addition, the pledging of shares by executive officers and directors is only allowed if the executive officer or director receives approval from the securities trading policy committee prior to pledging the shares. No directors or executive officers have pledged shares of our common stock. The Board believes that these policies are consistent with our philosophy that senior executives’ and directors’ interests should be aligned with those of our long-term shareholders through equity ownership.

Recoupment

The Company has recoupment provisions in place to provide the right to recover certain payments made to executives or other employees as required by Dodd-Frank.

In addition, Xcel Energy may recover all or a portion of paid long-term incentive awards:

 

    For a period of up to three years if there is a miscalculation that results in a materially incorrect payment

 

    If an individual is terminated for fraud or misconduct

Further, Xcel Energy may cancel outstanding and unvested LTI grants for individuals who were determined to be engaged in fraud or misconduct and whose actions likely resulted in a material adverse impact to the company, whether operational, financial or reputational.

 

2017 Xcel Energy Proxy Statement  |  39

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Risk Assessment

Our compensation programs are designed to motivate performance while not promoting behaviors that create undue risk. The GCN considers several risk factors in establishing executive compensation programs, when setting compensation levels and when selecting target measures for variable compensation programs.

 

    Designed to align shareholder, customer and employee interests.

 

    Performance metrics are clear, easily identifiable and are based on variables that are generally accepted in the market, such as EPS and TSR.

 

    Performance metrics align to our business strategy.

 

    Long-term incentives have three-year vesting periods to encourage long-term decision making and value creation.

 

    Incentive metrics are subject to auditing and internal controls which apply to performance achievement and reporting of results.

 

    Payout ranges are understood and capped.

 

    Performance, structure and target incentive opportunities are comparable to those of our industry or peer companies.

 

    Our Stock Ownership Policy requires that executive officers retain a substantial stake in the Company so that executive interests are long-term in nature.

 

    Recoupment provisions are in place as described above.

Deductibility of Executive Compensation under IRC Section 162(m)

Federal tax law limits the deductibility of executive compensation in excess of $1,000,000 paid for any fiscal year to our highest paid executive officers other than our chief financial officer; however, the statute exempts qualifying performance-based compensation when specified conditions are met. In general, the GCN intends to structure incentive-based compensation awards to maintain the deductibility of executive compensation. The AIP includes pool funding to ensure awards to NEOs meet the requirements for tax deductibility under Section 162(m) of the Tax Code. The maximum pool that can be used to pay annual incentives to NEOs is 2 percent of Operating Income. There are additional caps including no more than 40 percent of the pool can be awarded to the CEO and 10 percent to each other NEO. The Committee did not award the full amount authorized by this pool funding and the amounts awarded are well below the caps. The GCN maintains the discretion to award compensation that exceeds Section 162(m)’s deductibility limit.

 

40  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Report of the Compensation Committee    

 

 

Report of the Compensation Committee

The GCN, in its capacity as the compensation committee of the Board, has reviewed and discussed with management the CD&A in this proxy statement. Based on the review and discussions referred to above, the GCN recommended to the Company’s Board that the CD&A be included in the Company’s proxy statement on Schedule 14A.

Compensation Committee

Richard K. Davis, Chair

Gail K. Boudreaux

James J. Sheppard

David A. Westerlund

 

2017 Xcel Energy Proxy Statement  |  41

 


Table of Contents

 

    Executive Compensation Tables

 

    

 

Executive Compensation Tables

Summary Compensation Table

The following table summarizes the primary elements of compensation paid or granted to our named executive officers. See the CD&A above for a description of our executive compensation program to gain an understanding of the information disclosed in this and the following tables.

 

  Name and Principal Position   Year     Salary
($)(1)
    Bonus
($)(2)
  Stock
Awards
($)(3)
    Non-Equity
Incentive Plan
Compensation
($)(4)
 

Change in
Pension Value
and Non-
qualified
Deferred
Compensation
Earnings

($)(5)

  All Other
Compensation
($)(6)
      Total    
($)
 

  Ben Fowke

    2016       1,200,000         5,800,001     1,828,800   2,638,417   52,902     11,520,120  

 

Chairman, President and CEO

 

 

 

 

2015

 

 

 

 

 

 

1,200,000

 

 

 

 

 

 

 

 

6,123,614

 

 

 

 

1,224,275

 

 

830,969

 

 

54,312

 

 

 

 

9,433,170

 

 

 

 

 

 

2014

 

 

 

 

 

 

1,200,000

 

 

 

 

 

 

 

 

5,893,803

 

 

 

 

1,512,236

 

 

4,187,624

 

 

76,814

 

 

 

 

12,870,477

 

 

  Robert Frenzel(7)

    2016       397,500         2,120,102 (8)    266,700   14,402(9)   281,226     3,079,930  

 

Executive Vice President, Chief Financial Officer

                                               

  Kent Larson

    2016       550,000         1,230,008     523,875   373,654   24,608     2,702,145  

 

Executive Vice President and Group President, Operations

 

 

 

 

2015

 

 

 

 

 

 

550,000

 

 

 

 

 

 

 

 

1,050,008

 

 

 

 

532,956

 

 

499,192

 

 

24,585

 

 

 

 

2,656,741

 

 

 

 

 

 

2014

 

 

 

 

 

 

550,000

 

 

 

 

 

 

 

 

1,170,085

 

 

 

 

427,902

 

 

749,611

 

 

35,162

 

 

 

 

2,932,760

 

 

  Marvin McDaniel, Jr.

    2016       550,000         1,230,008     523,875   366,599   25,950     2,696,432  

 

 

Executive Vice President, Group

 

President, Utilities and Chief

Administrative Officer

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

550,000

 

 

 

 

 

 

 

 

1,050,008

 

 

 

 

532,956

 

 

236,108

 

 

24,741

 

 

 

 

2,393,813

 

 

 

 

 

 

2014

 

 

 

 

 

 

525,000

 

 

 

 

 

 

 

 

1,010,088

 

 

 

 

408,453

 

 

540,685

 

 

33,987

 

 

 

 

2,518,213

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

   

 

 

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

  Scott Wilensky

    2016       505,000         940,665     354,346   231,611   23,812     2,055,434  

 

Executive Vice President,

General Counsel

 

 

 

 

2015

 

 

 

 

 

 

505,000

 

 

 

 

 

 

 

 

969,291

 

 

 

 

340,798

 

 

283,364

 

 

12,280

 

 

 

 

2,110,733

 

 

  Teresa Madden(10)

    2016       287,500         1,150,004     253,487   905,932   11,735     2,608,658  

 

Former Executive Vice President, Chief Financial Officer

 

 

 

 

2015

 

 

 

 

 

 

575,000

 

 

 

 

 

 

 

 

1,150,025

 

 

 

 

517,383

 

 

561,355

 

 

12,369

 

 

 

 

2,816,132

 

 

 

 

 

 

2014

 

 

 

 

 

 

575,000

 

 

 

 

 

 

 

 

1,150,012

 

 

 

 

639,076

 

 

749,236

 

 

32,349

 

 

 

 

3,145,673

 

 

 

(1)  Amounts in this column reflect base salary earned for the corresponding year regardless of whether any portions were deferred under the 401(k) Savings Plan or otherwise.

 

(2)  The Company did not pay any discretionary awards to the NEOs.

 

(3)  Amounts in this column reflect the aggregate grant date fair value of long-term incentive awards granted. For Ms. Madden, although the grant date fair value of these awards is reflected in this column, outstanding awards granted in 2014, 2015 and 2016 were subsequently reduced on a prorated basis or forfeited due to her retirement, as applicable and as described in footnote 10 and in the Outstanding Equity Awards at Fiscal Year-End Table. The majority of the amounts in this column do not represent earned or paid compensation as awards are still subject to performance and/or vesting conditions. The remaining amounts include awards earned under the AIP that the executive officer elected to receive in shares of unrestricted and restricted common stock, in lieu of a portion of the cash payment. In each instance, the grant date fair value was computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, as described below:

 

    Restricted shares and unrestricted shares granted under the AIP are valued based on the closing price of Xcel Energy’s common stock, as reported on the NYSE, on the trading date preceding the issuance date; shares are issued following the close of the performance year, and include a premium (5 percent for unrestricted stock or 20 percent for restricted stock) for the election to receive shares of stock in lieu of cash.

 

    The long-term incentive grants are valued based on the market price of our common stock on the grant date of the award, based on the assumption that target performance will be achieved or the service requirement will be met and the awards and future credited dividend equivalents will vest and will not be forfeited.

 

  The aggregate grant date fair value of equity grants is equal to the closing price of Xcel Energy’s common stock, as reported on the NYSE, on the trading date preceding the date of grant. The aggregate grant date fair value of performance share awards granted in 2016 that have a variable vesting value, assuming the maximum performance conditions are achieved, is reflected in the table below:

 

     

Ben

  Fowke  

         Robert
  Frenzel  
        

Kent

  Larson  

        

Marvin

  McDaniel, Jr.  

        

Scott

  Wilensky  

        

Teresa

  Madden  

    

Performance Shares

   $9,279,929         $2,880,018         $1,967,998         $1,967,998         $1,400,011         $1,839,978    

 

(4)  Amounts in this column reflect annual incentive awards earned under our AIP regardless of whether any portion was deferred under the Deferred Compensation Plan. These amounts do not include amounts that the executive elected to receive in shares of unrestricted and restricted shares in lieu of a portion of the cash payment. The value of stock received in lieu of the cash payment plus associated premiums are reflected in the Stock Awards column for the respective years.

 

42  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Executive Compensation Tables    

 

 

 

(5)  Amounts in this column reflect the increase in the present value of the executive officer’s benefits under all pension plans established by the Company, using methods that are consistent with those used in our financial statements. The change from the prior year is generally due to (a) the additional years of service earned by the executive officer under the plans, (b) the change in the final average salary from the prior year used to determine plan benefits, (c) the interest earned on accumulated benefits during the year (that is, the decrease in the deferral period until benefits commence as the executive officer approaches retirement), and (d) changes in actuarial assumptions including interest rates.

 

  For Mr. Fowke, the 2014 change in pension value includes $ 2,146,537 resulting from the required changes in discount rates and mortality table assumptions. The 2016 change in pension values includes $ 696,277 resulting from the required changes in discount rates.

 

(6)  Amounts included in All Other Compensation include the Company match under the 401(k) Savings Plan, Company contributions to the non-qualified savings plan, imputed income on life insurance paid by the Company, amounts related to our executive physical program, and amounts related to relocation expenses for one of our NEOs. None of these amounts exceed $10,000 except the following:

 

    Contributions to the non-qualified savings plan: Mr. Fowke $39,000; Mr. Larson $13,000; Mr. McDaniel $13,000 and Mr. Wilensky $11,200.

 

    All other compensation for Mr. Frenzel includes $276,793 in relocation expense reimbursement which includes $12,085 in income tax reimbursement for taxes related to the relocation reimbursement.

 

  Except for the executive physical imputed amount, programs included in the “All Other Compensation” column were available to all eligible and qualifying employees of Xcel Energy.

 

  Under corporate policy, the corporate aircraft may not be scheduled for personal use. Executive officers and their families may use the corporate aircraft for personal travel only when the aircraft is already scheduled to fly to the same destination on Company business. Because the aircraft may only be used for personal travel if the aircraft already is scheduled to fly to the same destination, there is no incremental cost to the Company for such personal use. We have significant corporate operations in Minneapolis, Minnesota, and Denver, Colorado, and some executive officers, including several of the NEOs, split time between those offices and use the corporate aircraft to travel between Minneapolis and Denver. Executive officers may also have the occasional personal use of event tickets when such tickets are not being used for business purposes, for which we have no incremental costs.

 

(7) Mr. Frenzel was hired as Executive Vice President, Chief Financial Officer effective May 3, 2016.

 

(8)  Represents long-term incentive awards for the performance periods of 2016 to 2018 and 2015 to 2017 and the value of Annual Incentive elected to be received as shares of restricted stock as described in footnote 3.

 

(9) Mr. Frenzel will become a participant after completion of one full year of service. The value represents the amount he would earn assuming he remains employed at Xcel Energy under the pension plan.

 

(10) Ms. Madden retired as Executive Vice President, Chief Financial Officer on May 3, 2016 and as an employee on June 30, 2016. Prorated amounts of 2016 long-term incentive awards after retirement equal $191,667.

 

2017 Xcel Energy Proxy Statement  |  43

 


Table of Contents

 

    Executive Compensation Tables

 

    

 

Grants of Plan-Based Awards Table

The following table provides information regarding incentive awards and other stock-based awards granted during 2016 to the NEOs.

 

  Name    Grant
Date
     Date of
Committee
Action(1)
    

 

 

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

    

    Estimated Future Payouts Under    

Equity Incentive Plan Awards(3)

     Grant
Date Fair
Value of
Stock
and Option
Awards
($)(4)
 
         Threshold
($)
     Target
($)
     Maximum
($)
     Threshold
(#)
     Target
(#)
    Maximum
(#)
    
                   

  Ben Fowke

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

24,370

 

 

 

    

 

81,232

 

(a)  

 

   

 

162,464

 

 

 

    

 

2,899,983

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

14,622

 

 

 

    

 

48,739

 

(b)  

 

   

 

97,478

 

 

 

    

 

1,739,982

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

                    

 

32,494

 

(c)  

 

   

 

 

 

 

    

 

1,160,036

 

 

 

                         720,000        1,440,000        2,880,000                                     

  Robert Frenzel

    

 

5/3/16

 

 

 

    

 

4/15/16

 

 

 

             

 

4,443

 

 

 

    

 

14,811

 

(a)  

 

   

 

29,622

 

 

 

    

 

599,994

 

 

 

    

 

5/3/16

 

 

 

    

 

4/15/16

 

 

 

             

 

2,666

 

 

 

    

 

8,887

 

(b)  

 

   

 

17,774

 

 

 

    

 

360,012

 

 

 

    

 

5/3/16

 

 

 

    

 

4/15/16

 

 

 

             

 

 

 

 

    

 

5,925

 

(c)  

 

   

 

 

 

 

    

 

240,022

 

 

 

    

 

5/3/16

 

 

 

    

 

4/15/16

 

 

 

             

 

2,222

 

 

 

    

 

7,406

 

(d)  

 

   

 

14,812

 

 

 

    

 

300,017

 

 

 

    

 

5/3/16

 

 

 

    

 

4/15/16

 

 

 

             

 

1,333

 

 

 

    

 

4,443

 

(e)  

 

   

 

8,886

 

 

 

    

 

179,986

 

 

 

    

 

5/3/16

 

 

 

    

 

4/15/16

 

 

 

             

 

 

 

 

    

 

2,963

 

(f)  

 

   

 

 

 

 

    

 

120,031

 

 

 

                    $126,000        $252,000 (g)      $504,000     
                         105,000        210,000        420,000                                     

  Kent Larson

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

5,168

 

 

 

    

 

17,227

 

(a)  

 

   

 

34,454

 

 

 

    

 

615,004

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

3,101

 

 

 

    

 

10,336

 

(b)  

 

   

 

20,672

 

 

 

    

 

368,995

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

 

 

 

    

 

6,891

 

(c)  

 

   

 

 

 

 

    

 

246,009

 

 

 

                         206,250        412,500        825,000                                     

  Marvin McDaniel, Jr.

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

5,168

 

 

 

    

 

17,227

 

(a)  

 

   

 

34,454

 

 

 

    

 

615,004

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

3,101

 

 

 

    

 

10,336

 

(b)  

 

   

 

20,672

 

 

 

    

 

368,995

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

 

 

 

    

 

6,891

 

(c)  

 

   

 

 

 

 

    

 

246,009

 

 

 

                         206,250        412,500        825,000                                     

  Scott Wilensky

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

3,677

 

 

 

    

 

12,255

 

(a)  

 

   

 

24,510

 

 

 

    

 

437,504

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

2,206

 

 

 

    

 

7,353

 

(b)  

 

   

 

14,706

 

 

 

    

 

262,502

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

 

 

 

    

 

4,902

 

(c)  

 

   

 

 

 

 

    

 

175,001

 

 

 

                   

 

$25,850

 

 

 

    

 

$51,699

 

(g)  

 

   

 

$103,399

 

 

 

  
                         139,506        279,013        558,025                                     

  Teresa Madden(5)

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

4,832

 

 

 

    

 

16,106

 

(a)  

 

   

 

32,212

 

 

 

    

 

574,984

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

2,899

 

 

 

    

 

9,664

 

(b)  

 

   

 

19,328

 

 

 

    

 

345,005

 

 

 

    

 

1/4/16

 

 

 

    

 

12/8/15

 

 

 

             

 

 

 

 

    

 

6,443

 

(c)  

 

   

 

 

 

 

    

 

230,015

 

 

 

                         201,250        402,500        805,000                                     

 

(1)  The GCN approved the long-term incentive awards on December 8, 2015 for all NEOs except Mr. Frenzel, effective as of January 4, 2016. The GCN approved the long-term incentive awards for Mr. Frenzel on April 15, 2016, effective May 3, 2016.

 

(2)  Amounts show target annual incentive awards pursuant to the AIP. Target annual incentive awards, as a percentage of base salary, were set as follows: 120 percent for Mr. Fowke, 75 percent for Messrs. Larson and McDaniel, 70 percent for Ms. Madden and Mr. Frenzel and 65 percent for Mr. Wilensky. Payouts of annual incentive awards are dependent on the level of achievement of corporate financial and operational goals approved by the GCN, with each individual having the opportunity to earn from 0 percent to 200 percent of the target annual incentive award based on the level of achievement of the goals. With approval of the GCN, an executive officer may elect to receive shares of restricted or common stock in lieu of all or a portion of the cash payment for which they were otherwise entitled under the AIP. To the extent an executive officer elected to receive restricted or unrestricted shares in lieu of a cash payment for 2016 under the AIP, the dollar value of the future payout of those equity awards at threshold, target and maximum are disclosed in dollar amounts in the columns under the caption “Estimated Future Payouts Under Equity Incentive Plan Awards.” The values shown include the individual’s elected forms of payment and associated premium and therefore may include a 5 percent premium (should the participant elect to receive unrestricted common shares) or a 20 percent premium (should the participant elect to receive restricted shares). The actual payments of the cash component of these awards are included in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table.

 

(3)  The amounts show the threshold, target, and maximum payouts for grants of performance shares and target payout for RSUs. Performance shares are dependent on the level of achievement of performance conditions approved by the GCN, with each individual having the opportunity to earn from 0 percent to 200 percent of the target performance share award based on the level of achievement.

 

  Share amounts in this column reflect long-term incentive stock-based awards to all NEOs, as described further in (a) through (c) below as well as grants for outstanding award cycles made to Mr. Frenzel in connection with his commencement of employment as described in (d) through (f). Dollar amounts in this column also reflect annual incentive awards that the NEO has elected to receive in restricted and/or unrestricted shares of our common stock, as described further in (g) below and footnote 2 above.

 

  (a)   performance shares based on a relative TSR with a measurement date of December 31, 2018
  (b)   performance shares based on reducing carbon emissions with a measurement date of December 31, 2018
  (c)   RSUs vesting on December 31, 2018
  (d)   performance shares based on a relative TSR with a measurement date of December 31, 2017
  (e)   performance shares based on reducing carbon emissions with a measurement date of December 31, 2017
  (f)   RSUs vesting on December 31, 2017

 

44  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Executive Compensation Tables    

 

 

  (g)   dollar value of payouts for 2016 Annual Incentive Program to be received as restricted stock which has a 20 percent premium or common stock which has a 5 percent premium in accordance with an executive officer’s election (see footnote 2)

 

  All share amounts reflected were issued under the 2015 Omnibus Incentive Plan. Performance share payout values, while based on level of performance, are also determined by the price of our common stock at payout. The lines reflecting dollar values are for the AIP payouts, pursuant to the 2015 Omnibus Incentive Plan, to be received in restricted and/or unrestricted shares of common stock in accordance with an executive officer’s election (see footnote 2 above). The number of shares to be received for annual incentive award payouts is determined based on the fair market value of our common stock at the time the shares are issued following the close of the performance year. The value of the shares actually issued to each executive officer pursuant to 2016 annual incentive awards is included in the “Stock Awards” column in the Summary Compensation Table.

 

(4)  This column shows the grant date fair value pursuant to FASB ASC Topic 718 for equity awards.

 

(5)  Performance shares and RSUs granted to Ms. Madden will be prorated to reflect her retirement effective June 30, 2016.

 

2017 Xcel Energy Proxy Statement  |  45


Table of Contents

 

    Executive Compensation Tables

 

    

 

Outstanding Equity Awards at Fiscal Year-End Table

The following table provides additional information regarding restricted stock, performance shares and RSUs that were outstanding on December 31, 2016 for the NEOs. Fractional share amounts have been rounded to the nearest whole share.

 

     Stock Awards             Equity Incentive Plan Awards
  Name   

Number of Shares or
Units of Stock That

Have Not Vested
(#)

    

Market Value of
Shares or Units of
Stock That Have Not

Vested
($)(1)

             Number of Unearned Shares,
Units or Other Rights
That Have Not Vested
(#)(2)
   Market or Payout Value of
Unearned Shares, Units or
Other Rights That Have Not
Vested
($)(1)(2)

  Ben Fowke

 

    

 

18,089(4)

 

 

 

    

 

736,221

 

 

 

      158,846(6)

 

   6,465,041

 

    

 

19,099(5)

 

 

 

    

 

777,331

 

 

 

        95,306(7)

 

   3,878,973

 

              31,770(8)

 

   1,293,034

 

              83,240(9)

 

   3,387,873

 

              99,888(10)

 

   4,065,430

 

              33,297(11)

 

   1,355,199

 

                                108,318(12)    4,408,524

  Robert Frenzel

 

              15,053(6)

 

      612,652

 

                9,031(7)

 

      367,541

 

                3,011(8)

 

      122,555

 

              15,052(9)

 

      612,611

 

              18,063(10)

 

      735,166

 

                                    6,021(11)       245,069

  Kent Larson

 

    

 

2,750(3)

 

 

 

    

 

111,923

 

 

 

        30,887(6)

 

   1,257,099

 

     4,453(4)        181,252           18,532(7)

 

      754,259

 

                6,177(8)

 

      251,420

 

              17,653(9)

 

      718,472

 

              21,183(10)

 

      862,149

 

                                    7,061(11)       287,397

  Marvin Mc Daniel, Jr.

 

    

 

2,750(3)

 

 

 

    

 

111,923

 

 

 

        30,887(6)

 

   1,257,099

 

    

 

4,251(4)

 

 

 

    

 

173,006

 

 

 

        18,532(7)

 

      754,259

 

                6,177(8)

 

      251,420

 

              17,653(9)

 

      718,472

 

              21,183(10)

 

      862,149

 

                                    7,061(11)       287,397

  Scott Wilensky

 

    

 

3,474(3)

 

 

 

    

 

141,373

 

 

 

        25,003(6)

 

   1,017,614

 

              15,003(7)

 

      610,603

 

                5,001(8)

 

      203,549

 

              12,558(9)

 

      511,109

 

              15,070(10)

 

      613,330

 

                                    5,023(11)       204,443

  Teresa Madden(13)

 

              16,914(6)

 

      688,399

 

              10,148(7)

 

      413,022

 

                2,751(9)

 

      111,953

 

                3,301(10)

 

      134,349

 

                                    1,100(11)         44,785
(1)  Values were calculated based on a $40.70 closing price of our common stock, as reported on the NYSE on December 30, 2016. Actual performance shares and performance share payout values, while based on level of performance, are also determined by the price of our common stock at payout. Values reflected in the table for performance shares granted in 2015 and 2016 assume maximum level performance except for performance shares granted in 2016 based on relative TSR which assume target level performance.

 

(2)  Amounts reflected exclude performance share awards and RSUs that have a measurement period that ended on December 31, 2016. The GCN certified payment of these awards on February 21, 2017; the amounts for these awards are included in the amounts in the column titled “Number of Shares Acquired on Vesting” in the Option Exercises and Stock Vested Table on page 48.

 

(3)  Represents restricted stock, and credited dividends, that the executive officers elected to receive in lieu of cash compensation for annual incentive awards granted in 2014 for which they were otherwise entitled under the AIP. The restrictions lapsed on March 1, 2017.

 

(4)  Represents restricted stock, and credited dividends, that the executive officers elected to receive in lieu of cash compensation for annual incentive awards granted in 2015 for which they were otherwise entitled under the AIP. Two-thirds of the restrictions have lapsed and the remaining one-third of the restrictions will lapse on March 1, 2018 or the next available trading day if the designated date is not a trading day.

 

(5)  Represents restricted stock, and credited dividends, that the executive officers elected to receive in lieu of cash compensation for annual incentive awards granted in 2016 for which they were otherwise entitled under the AIP. One-third of the restrictions lapsed March 1, 2017, and the remaining two thirds of the restrictions will lapse in equal installments on March 1, 2018 and March 1, 2019 or the next available trading day if the designated date is not a trading day.

 

(6)  Represents performance shares granted in 2015, and credited dividend equivalents, based on a relative TSR for the performance period January 1, 2015 to December 31, 2017. The measurement date for the vesting of these awards is December 31, 2017.

 

(7)  Represents performance shares granted in 2015, and credited dividend equivalents, based on reducing carbon emissions. The measurement date for the vesting of these awards is December 31, 2017.

 

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Executive Compensation Tables    

 

 

 

(8)  Represents RSUs granted in 2015, and credited dividend equivalents, vesting on December 31, 2017.

 

(9)  Represents performance shares granted in 2016, and credited dividend equivalents, based on a relative TSR for the performance period January 1, 2016 to December 31, 2018. The measurement date for the vesting of these awards is December 31, 2018.

 

(10)  Represents performance shares granted in 2016, and credited dividend equivalents, based on reducing carbon emissions. The measurement date for the vesting of these awards is December 31, 2018.

 

(11)  Represents RSUs granted in 2016, and credited dividend equivalents vesting on December 31, 2018.

 

(12)  Represents retention-based restricted stock units granted February 20, 2013, and credited dividend equivalents. One-third of the restricted stock units vested on February 20, 2016, and the remaining two-thirds will vest on February 20, 2018.

 

(13)  Long-term incentive grant values reflected in this table are prorated, and forfeited awards are not included, to reflect Ms. Madden’s retirement effective June 30, 2016.

 

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Table of Contents

 

    Executive Compensation Tables

 

    

 

Option Exercises and Stock Vested Table

The following table discloses on a grant-by-grant basis the stock or similar awards that vested in 2016. Pursuant to the Stock Ownership Policy, each executive is required to hold the net shares acquired from restricted stock, performance share awards and restricted stock unit awards for a period of at least one year from the date each award is paid. Fractional share amounts have been rounded to the nearest whole share.

 

      

Stock Awards(1)

 

  Name

 

    

Number of
Shares Acquired
on Vesting
(#)(2)

 

    

Value Realized     

on Vesting     

($)(2)     

 

 

  Ben Fowke

 

        

 

8,825

 

(3)

 

        

 

348,952

 

(4)

 

        

 

52,063

 

(5)

 

        

 

2,047,653

 

(6)

 

        

 

160,374

 

(7)

 

        

 

6,735,728

 

(8)

 

        

 

112,262

 

(9)

 

        

 

4,714,989

 

(8)

 

          

 

37,421

 

(10)

 

        

 

1,571,694

 

(8)

 

 

  Robert Frenzel

 

        

 

 

 

        

 

 

 

        

 

 

 

        

 

 

 

        

 

 

 

        

 

 

 

          

 

 

 

        

 

 

 

 

  Kent Larson

 

        

 

6,818

 

(3)

 

        

 

269,596

 

(4)

 

        

 

30,472

 

(7)

 

        

 

1,279,823

 

(8)

 

        

 

21,329

 

(9)

 

        

 

895,831

 

(8)

 

          

 

7,111

 

(10)

 

        

 

298,642

 

(8)

 

 

  Marvin McDaniel, Jr.

 

        

 

8,027

 

(3)

 

        

 

317,402

 

(4)

 

        

 

25,661

 

(7)

 

        

 

1,077,758

 

(8)

 

        

 

17,963

 

(9)

 

        

 

754,443

 

(8)

 

          

 

5,987

 

(10)

 

        

 

251,465

 

(8)

 

 

  Scott Wilensky

 

        

 

5,544

 

(3)

 

        

 

219,202

 

(4)

 

        

 

24,859

 

(7)

 

        

 

1,044,081

 

(8)

 

        

 

17,401

 

(9)

 

        

 

730,832

 

(8)

 

          

 

5,801

 

(10)

 

        

 

243,626

 

(8)

 

 

  Teresa Madden(11)

 

        

 

30,767

 

(7)

 

        

 

1,292,228

 

(8)

 

          

 

21,517

 

(9)

 

        

 

903,702

 

(8)

 

 

(1)  The Company has not granted stock options since 2001, and there are no outstanding options. As such, the columns relating to option exercises have been omitted.

 

(2)  Amounts reflected include performance share awards and RSUs that had performance periods that ended on December 31, 2016. The GCN certified the achievement of the applicable performance measures on February 21, 2017.

 

(3)  Reflects vesting of restricted stock elected in lieu of cash compensation under the AIP plus associated stock acquired with reinvested dividends.

 

(4)  Value is based on the close of our common stock on February 29, 2016, or $39.54, the date the restrictions lapsed.

 

(5)  Reflects partial vesting of retention units plus associated stock acquired with reinvested dividends received under a Retention Agreement.

 

(6)  Value is based on the close stock price of our common stock on February 19, 2016 or $39.33, the date the restrictions lapsed.

 

(7)  Reflects vesting of performance shares granted February 19, 2014, as applicable, and associated dividend equivalent performance shares based on achievement of TSR relative to our peer group for the performance period January 1, 2014 to December 31, 2016. The number of performance shares includes credited dividend equivalents associated with the January 20, 2017 dividend as the record date for these dividend equivalents, December 27, 2016, was prior to settlement. Upon settlement, each officer received 50 percent of the performance share award in shares of our common stock with the remaining 50 percent paid as cash, unless otherwise elected to be deferred under the Deferred Compensation Plan.

 

(8)  Value is based on the closing market price of our common stock on February 17, 2017, or $42.00, the preceding trading date prior to the GCN certification.

 

(9)  Reflects vesting of performance shares granted February 19, 2014 as applicable and associated dividend equivalent units based on achievement of defined reduction of carbon dioxide emissions. The number of performance shares includes credited dividend equivalents associated with the January 20, 2017 dividend as the record date for these dividend equivalents, December 27, 2016, was prior to settlement. Upon settlement, each officer received 100 percent of the performance share award in shares of our common stock, unless otherwise elected to be deferred under the Deferred Compensation Plan.

 

(10)  Reflects vesting of service-based restricted stock units granted February 19, 2014, as applicable and associated dividend equivalent units based on active employment at the time of vesting. The number of units includes credited dividend equivalents associated with the January 20, 2017 dividend as the record date for these dividend equivalents, December 27, 2016, was prior to settlement. Upon settlement, each officer received 100 percent of the RSUs in shares of common stock.

 

(11)  Performance shares granted to Ms. Madden were prorated and RSUs forfeited to reflect her retirement effective June 30, 2016.

 

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Executive Compensation Tables    

 

 

Pension Benefits

We maintain two defined benefit plans in which the NEOs participate, and one additional defined benefit plan in which one NEO participated in 2016.

 

    The Xcel Energy Pension Plan provides funded, tax-qualified benefits that are subject to compensation and benefit limits under the Internal Revenue Code.

 

    The Xcel Energy Inc. Non-qualified Pension Plan (referred to as the “Non-qualified Pension Plan”) provides unfunded, non-qualified benefits for compensation that is above the required limits of the Xcel Energy Pension Plan.

 

    The Xcel Energy SERP provides unfunded, non-qualified benefits that are offset by benefits under the Xcel Energy Pension Plan and the Non-qualified Pension Plan. Participation in the SERP is closed to new participants.

 

  Name

 

  

Plan Name

 

    

Number of
Years
Credited
Service
(#)

 

    

Present
Value of
Accumulated
Benefit
($)

 

    

Payments
    During Last    

Fiscal Year
($)

 

  Ben Fowke

 

  

Pension Plan

 

     20

 

       1,979,805

 

            —

 

  

Non-qualified Pension Plan

 

     20

 

       4,503,375

 

            —

 

    

SERP

 

     20

 

     13,514,615

 

            —

 

  Robert Frenzel

 

  

Pension Plan

 

     1

 

               10,847(1)

 

            —

 

    

Non-qualified Pension Plan

 

     1

 

                 3,555(1)

 

            —

 

  Kent Larson

 

  

Pension Plan

 

     35

 

     1,707,615

 

            —

 

    

Non-qualified Pension Plan

 

     35

 

     1,945,213

 

            —

 

  Marvin McDaniel, Jr.

 

  

Pension Plan

 

     29

 

     1,620,415

 

            —

 

    

Non-qualified Pension Plan

 

     29

 

     1,375,586

 

            —

 

  Scott Wilensky

 

  

Pension Plan

 

     18

 

         852,604

 

            —

 

    

Non-qualified Pension Plan

 

     18

 

     1,108,660

 

            —

 

  Teresa Madden

  

Pension Plan

 

     34

 

     2,055,181

 

     63,809

 

    

Non-qualified Pension Plan

 

     34

 

     2,058,471

 

            —

 

 

(1)  Mr. Frenzel will become a participant after completion of one full year of service. The value represents the amount he would earn assuming he remains employed at Xcel Energy under the pension plan.

Present Value of Accumulated Benefits

Except for Ms. Madden, the Present Value of Accumulated Benefit is the present value of the annual pension benefit earned as of December 31, 2016 that would be payable under each plan for the NEOs beginning at normal retirement age, or the earliest time at which the NEO may retire without a benefit reduction. For Ms. Madden, her amounts are equal to the present value of her retirement benefits as of her June 30, 2016 retirement date. Certain assumptions regarding interest rates and mortality were used to determine the present value of the benefit. Those assumptions are consistent with those used in Note 9, Benefit Plans and Other Postretirement Benefits, to Xcel Energy’s Consolidated Financial Statement, included as part of Xcel Energy’s 2016 Annual Report on Form 10-K, including use of an updated discount rates assumptions. Specifically, the discount rate for qualified pension benefits was changed from 4.64 percent for 2015 to 4.11 percent for 2016. Non-qualified pension benefits and SERP discount rates were changed from 4.34 percent for 2015 to 3.99 percent for 2016.

Normal retirement age for this purpose is defined by the various plans in which the NEOs participate. The Present Value of Accumulated Benefit is determined for each plan assuming benefits commence at the age described below:

 

    Xcel Energy Pension Plan. Benefits are calculated assuming the normal retirement age is 65, with the exception of Ms. Madden whose benefits commenced as of her June 30, 2016 retirement date.

 

    Non-qualified Pension Plan. Benefits are calculated assuming normal retirement age is 65, with the exception of Ms. Madden whose benefits commenced as of her June 30, 2016 retirement date.

 

    SERP. Benefits are calculated assuming the normal retirement age is 62.

The following narrative provides detailed information about the retirement benefits available to the NEOs.

Xcel Energy Pension Plan

The NEO’s participate in either the Pension Equity or Cash Balance formula under the Xcel Energy Pension Plan:

 

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    Executive Compensation Tables

 

    

 

Pension Equity Benefit Formula

There are three general benefit components payable under the Pension Equity benefit: the basic benefit, the retirement spending account and the social security supplement.

The basic Pension Equity benefit is determined as follows:

 

    Monthly benefit, payable as a single life annuity at the participant’s normal retirement age, which is the actuarial equivalent of the participant’s Pension Equity Plan (“PEP”) balance. The PEP balance is equal to 10 percent of the participant’s highest average pay (expressed on a monthly basis) times years of credited service times twelve (12).

 

    Highest average pay is equal to the highest average monthly rate of base pay plus annual incentive pay during any 48 consecutive months of covered employment. Base pay is regular, straight-time earnings, including employee contributions to the 401(k) Savings Plan, the Flexible Benefits Plan and, effective January 1, 2002, the Deferred Compensation Plan. Mr. Fowke and Mr. Larson are eligible for retirement under the Xcel Energy Pension Plan at the benefit level described here. Ms. Madden retired effective June 30, 2016.

If a participant terminates employment before age 65 but after completing three years of vesting service, the benefit is calculated as described above but based on service and highest average pay at termination.

Retirement Spending Account

The Retirement Spending Account annual benefit is available for PEP participants, and is expressed as a monthly benefit, payable as a single life annuity that is the actuarial equivalent of the Retirement Spending Account balance. The Retirement Spending Account balance is the accumulated value at retirement of the initial account balance, annual credits, and annual interest credits.

 

    Initial account balance equal to $1,400 times all years of service as of December 31, 2002, for former New Century Energy participants and December 31, 1998 for former Northern States Power Company participants. For all other participants, the initial account balance is zero.

 

    Annual credits equal to $1,400.

 

    Interest credits based on one-year treasury constant maturities plus 1 percent from the prior November.

Social Security Supplement

The Social Security Supplement is a supplement available for PEP participants and that is paid from the participant’s retirement date to his or her Social Security retirement age. The monthly supplement is equal to $50 times the number of years of service (limited to 20 years). Participants are eligible for the Social Security Supplement if they are (1) age 57 with 20 years of vesting service, (2) age 55 and the sum of age and credited service is greater than or equal to 90, (3) age 65 with one year of service, or (4) 40 years of credited service.

Cash Balance Formula

The basic benefit is determined as follows:

 

    Monthly benefit, payable as a single life annuity at the participant’s normal retirement age, which is the actuarial equivalent of the participant’s Cash Balance account balance. The Cash Balance account balance is equal to an annual pay credit of 5 percent of base salary and annual incentive pay plus an annual interest credit.

 

    Interest credits based on 30-year Treasury Rate from the prior November.

Credited Service and Distributions

Generally, a participant’s years of credited service are based on the years of employment with the Company and its predecessors. The years of credited service listed above for the Xcel Energy Pension Plan for all of our NEOs are based only on their period of service while employed by the Company and its predecessors.

Benefits provided under the Xcel Energy Pension Plan are based on compensation up to the compensation limit under Section 401(a)(17) of the Internal Revenue Code ($265,000 in 2016). In addition, benefits provided under the Xcel Energy Pension Plan may not exceed a benefit limit under Section 415(b) of the Internal Revenue Code ($210,000 payable as a single life annuity beginning at normal retirement age in 2016).

Benefits are payable under one of the optional forms of payment elected by the participant, including a lump sum. Benefits under the Xcel Energy Pension Plan are funded and payable from the assets held in an irrevocable tax-exempt trust.

Non-qualified Pension Plan

The Non-qualified Pension Plan replaces the benefit that would have been payable through the Xcel Energy Pension Plan if not for the limits imposed by Internal Revenue Code sections 401(a)(17) and 415(b). All active participants must receive their Non-qualified Pension Plan benefit as a lump sum.

Generally, a participant’s years of credited service are based on their years of employment with the Company and its predecessors. However, in certain cases, credit for service prior to participation in the plan may be granted. The years of credited service listed above for the Non-qualified Pension Plan for all of our NEOs are based only on their period of service while employed by the Company and its predecessors.

 

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Executive Compensation Tables    

 

 

The Non-qualified Pension Plan is unfunded and maintained as a book reserve account. No funds are set aside in a trust or otherwise; participants in the Non-qualified Pension Plan are general creditors of the Company with respect to the payment of their Non-qualified Pension Plan benefits. The executive officer’s accrued benefit under the Non-qualified Pension Plan cannot be sold, transferred or otherwise anticipated before it becomes payable under the terms of the plan, other than through a qualified domestic relations order.

Supplemental Executive Retirement Plan

In 2008, the Board closed the SERP to additional participants. The SERP provides a target percentage of final average compensation based on years of service, offset by the benefits received from the Xcel Energy Pension Plan and the Non-qualified Pension Plan. Final average compensation for the SERP is defined as the average of the highest three calendar years of compensation during the five calendar year period immediately preceding the calendar year in which the participant retires or terminates employment. Compensation is defined as the participant’s base pay plus any annual incentive earned for that year, regardless of whether such annual incentive is paid in that year or in the next year under our regular annual incentive plans.

The SERP benefit, defined as a 20-year certain annuity, accrues ratably over 20 years and, when fully accrued, is equal to (a) 55 percent of final average compensation minus (b) any other qualified or non-qualified benefits. The Retirement Spending Account and Social Security Supplement are not included in the offset. The SERP benefit is payable as a single lump-sum amount equal to the actuarial equivalent present value of the 20-year certain annuity. Benefits generally are payable at age 62, or as early as age 55, but would be reduced 5 percent for each year that the benefit commencement date precedes age 62.

Generally, a participant’s years of credited service are based on their years of employment with the Company and its predecessors. However, in certain cases, credit for service prior to participation in the plan may be granted. The years of credited service listed above for the SERP for the NEO is based only on his period of service while employed by the Company and its predecessors.

The company established an irrevocable granter trust to hold assets from which to fund benefit payments under the SERP when they become due. The executive’s accrued benefit under the SERP cannot be sold, transferred or otherwise anticipated before it becomes payable under the terms of the plan, other than through a qualified domestic relations order. The SERP is a discretionary plan and the NEO who participates in the SERP was selected for participation by recommendation and approval of the GCN.

 

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    Executive Compensation Tables

 

    

 

Non-Qualified Deferred Compensation

The following table shows the amounts deferred by the NEOs and our matching contributions during 2016.

 

  Name

 

  

Executive
Contributions

in 2016

($)(1)

 

  

Registrant

Contributions

in 2016

($)(2)

 

  

Aggregate
Earnings

in 2016

($)

 

  

Aggregate
Withdrawals/
Distributions

($)

 

 

Aggregate
    Balance at    

Dec. 31,

2016
($)(3)

 

 

  Ben Fowke

 

    

 

 

 

 

84,000

 

 

 

    

 

 

 

 

39,000

 

 

 

    

 

 

 

 

352,755

 

 

 

    

 

 

 

 

 

 

 

   

 

 

 

 

4,056,962

 

 

 

 

  Robert Frenzel

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

  Kent Larson

 

    

 

 

 

 

707,333

 

 

 

    

 

 

 

 

13,000

 

 

 

    

 

 

 

 

106,445

 

 

 

    

 

 

 

 

 

 

 

   

 

 

 

 

2,122,710

 

 

 

 

  Marvin McDaniel, Jr.

 

    

 

 

 

 

27,500

 

 

 

    

 

 

 

 

13,000

 

 

 

    

 

 

 

 

245,261

 

 

 

    

 

 

 

 

 

 

 

   

 

 

 

 

2,393,889

 

 

 

 

  Scott Wilensky

 

    

 

 

 

 

25,250

 

 

 

    

 

 

 

 

11,200

 

 

 

    

 

 

 

 

5,813

 

 

 

    

 

 

 

 

 

 

 

   

 

 

 

 

116,957

 

 

 

 

  Teresa Madden

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

223,827

 

 

 

    

 

 

 

 

(228,981

 

 

)

 

   

 

 

 

 

2,523,108

 

 

 

 

(1)  Deferrals into the deferred compensation plan were made from compensation earned in 2016 and are reported in the column titled “Salary” in the Summary Compensation Table on page 42 for 2016, with the exception of annual incentive and long-term incentive amounts earned in 2016 but paid out and deferred in 2016. These amounts are as follows:

 

  Name   

Base Salary

($)

  

Annual Incentive
Payout

($)

  

Long-term
    Incentive Payout    

($)

 

  Ben Fowke

 

    

 

 

 

 

84,000

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

  Robert Frenzel

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

  Kent Larson

 

    

 

 

 

 

82,500

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

624,833

 

 

 

 

  Marvin McDaniel, Jr.

 

    

 

 

 

 

27,500

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

  Scott Wilensky

 

    

 

 

 

 

25,250

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

  Teresa Madden

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

(2)  Amounts shown reflect our matching contributions (above applicable Internal Revenue Code limits) into our deferred compensation plan during 2016, and are included in “All Other Compensation” in the Summary Compensation Table. These amounts are described in footnote 6 to the Summary Compensation Table on page 43.

 

(3)  Of the amounts shown, the following were included in the column titled “Salary” in the Summary Compensation Table for 2014 and 2015: Mr. Fowke: $168,000; Mr. Frenzel: $0 Mr. Larson: $137,500; Mr. McDaniel: $53,750; Mr. Wilensky: $0; and Ms. Madden: $115,000.

Deferred Compensation Plan

On an annual basis, eligible executives and key employees may elect to defer up to 75 percent of base salary, up to 100 percent of the annual incentive payable in the following calendar year, and beginning in 2013, up to 100 percent of vested long-term incentive awards of performance shares and certain RSUs into the Deferred Compensation Plan. For 2016, the Company matched 50 percent of base pay deferrals, (up to 8 percent deferred), netting to a maximum 4 percent, for eligible matching contributions for eligible executives whose matching contributions into the Company’s 401(k) Savings Plan are restricted by Internal Revenue Code imposed limits. The Company matching contributions are credited to the Xcel Energy Stock Fund. We may also make discretionary contributions to accounts of certain participants but did not do so for any NEO in 2016.

We have irrevocable trusts established to provide a secure source of funds to assist in meeting our deferred compensation obligations. We may make contributions to the trusts from time-to-time in amounts determined sufficient to pay benefits when due to participants under this Plan. Notwithstanding the trusts, this Plan is nonqualified and amounts on deposit in the trust are subject to the claims of the Company’s general creditors.

Investment Funds

The investment fund options under the Deferred Compensation Plan consist of those options available to all employees under the 401(k) Savings Plan, including the Xcel Energy Stock Fund, except that the Vanguard brokerage account option is not available under the Deferred Compensation Plan. As under the 401(k) Savings Plan, participants may change their assumed investment funds on a daily basis. Deferred amounts from certain long-term incentive awards must remain invested in the Xcel Energy Stock Fund for a minimum of one year.

Distribution Options

For the Deferred Compensation Plan, the executive’s account is payable on the earlier of a specific year or the executive’s separation of service or death and will be paid in a lump sum or in ten annual installments as elected by the executive or, if no election is made, in a lump sum.

 

    If a specific year is elected, and is earlier than separation of service, a lump sum distribution will be made around January 31st of the elected year.

 

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    Distributions based on separation of service will be made (or will begin) around the next January 31st or July 31st that first follows the sixth-month anniversary of the executive’s separation of service.

 

    In the event of the executive’s death, payment to the executive’s beneficiary will be made in a lump sum unless the executive was already receiving installment payments. In that case, the installment payments will continue to be paid to the executive’s beneficiary.

 

    The executive can receive a distribution in the event of an extreme financial hardship that cannot be satisfied by any other means.

 

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Table of Contents

 

    Executive Compensation Tables

 

    

 

Potential Payments upon Termination or Change in Control

We provide severance benefits to our NEOs under the Xcel Energy Senior Executive Severance and Change in Control Policy (as amended, the “Severance Policy”). As discussed above, the Severance Policy provides a market-competitive severance benefit and manages potential risks and changes in the event the Company were to undergo a change in control. Each of our current NEOs is a participant in the Severance Policy. Additional participants may be named by the Board or the GCN from time to time.

Under the Severance Policy, a participant whose employment is terminated will receive severance benefits unless:

 

    The employer terminated the participant for cause, which for this purpose includes termination for (i) the willful and continued failure of a participant to perform substantially his or her duties, after a written demand for substantial performance, or (ii) the willful engagement by a participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company;

 

    Termination was because of the participant’s death, disability or retirement;

 

    The participant’s division, subsidiary or business unit was sold and the buyer agreed to continue the participant’s employment with specified protections for the participant; or

 

    The participant terminated voluntarily.

The severance benefits under the Severance Policy include the following payments:

 

    A lump sum cash payment equal to the participant’s annual base salary and target annual incentive award;

 

    Prorated target annual incentive compensation for the year of termination paid in a lump sum;

 

    A lump sum cash payment of $30,000 for outplacement services;

 

    A lump sum cash payment equal to the value of the additional amounts that would have been credited to or paid on behalf of the participant under pension and retirement savings plans if the participant had remained employed for one additional year; and

 

    Continued medical, dental and life insurance benefits for one additional year.

If the participant is terminated (including a voluntary termination following a diminution in salary, benefits or responsibilities) within two years following a change in control, the participant will receive benefits under the Severance Policy similar to the severance benefits described above, except as follows:

 

    The cash payment of the participant’s annual base salary and target annual incentive award will be increased by a severance multiplier of three times, depending upon the participant’s tier;

 

    The cash payment for the value of additional retirement savings and pension credits will be for three years, depending upon the participant’s tier; and

 

    Medical, dental and life insurance benefits will be continued for three years, depending upon the participant’s tier.

In addition, a subset of the participants entitled to enhanced benefits upon a change in control will be entitled to receive an additional cash payment to make the participant whole for any excise tax on excess parachute payments that he or she may incur, with certain limitations specified in the Severance Policy. This section of the Severance Policy was modified in October 2011 to eliminate the gross-up feature for new participants in the policy and for current participants whose benefit levels change after such date.

For these purposes, a change of control generally means (i) any acquisition of 20 percent or more of either our common stock or combined voting power (subject to limited exceptions for acquisitions directly from us, acquisitions by us or one of our employee benefit plans, or acquisitions pursuant to specified business combinations in which (a) our shareholders will own more than 60 percent of the shares of the resulting corporation, (b) no one person will own 20 percent or more of the shares of the resulting corporation, and (c) a majority of the Board of the resulting corporation will be our incumbent directors), (ii) directors of the Company as of the date of the Severance Policy and those directors who have been elected subsequently and whose nomination was approved by such directors fail to constitute a majority of the Board, (iii) a merger, share exchange or sale of all or substantially all of the assets of the Company (each, a “business combination”) (except those business combinations that satisfy clauses (a), (b) and (c) above), or (iv) shareholder approval of a complete liquidation or dissolution of the Company.

In addition, pursuant to the terms of our incentive compensation plans, upon a change in control, all unvested shares of restricted stock and unvested RSUs and Retention Units will vest immediately, and all performance shares will vest and be paid out immediately in cash as if the applicable performance goals had been obtained at target levels.

The amounts payable in cash for each of the NEOs relating to the performance shares and RSUs are included in the “Equity Compensation” row of the “Termination upon Change in Control” column in the table of Aggregate Termination Payments below. Additionally, restrictions would lapse on the following shares of restricted stock: Ben Fowke, 37,188 shares with an aggregate value of $1,513,552; Kent Larson, 7,203 shares with an aggregate value of $293,175; Marvin McDaniel, Jr., 7,001 shares with an aggregate value of $284,929; and Scott Wilensky, 3,474 shares with an aggregate value of $141,373.

To receive the benefits under the Severance Policy, the participant must also sign an agreement releasing all claims against the employer and its affiliates and agreeing not to compete with the employer and its affiliates and not to solicit their employees and customers for one year.

 

54  |  2017 Xcel Energy Proxy Statement


Table of Contents
   

 

Executive Compensation Tables    

 

 

Disability Benefits

All disability benefits for NEOs and all of our active employees are provided through an insured arrangement with a third party administrator/insurer. Each of the NEOs is eligible for a disability benefit in the event of a total and permanent disability. This disability benefit is generally available to all employees of the Company.

For participants in the long-term disability benefit, the monthly disability benefit payable is equal to 60 percent of the participant’s basic monthly earnings, limited to a maximum $25,000 monthly benefit. This monthly benefit would be payable until normal retirement age, or for those participants becoming disabled after age 63, for a specific period of time.

Retirement Benefits

Upon retirement, the executive officers will be entitled to receive the retirement benefits described above under the caption “Pension Benefits” on pages 49 to 51 and the non-qualified deferred compensation described under the caption “Non-qualified Deferred Compensation” on pages 52 to 53.

Outstanding Equity Compensation Awards

As discussed above, pursuant to the terms of our incentive compensation plans, in the event there is a change in control, all stock-based awards, such as restricted stock and retention units, will vest immediately and any awards that may be settled in cash or stock, such as performance shares, and RSUs, will vest and be paid out immediately in cash as if the applicable performance goals had been obtained at target levels.

The treatment of other unvested stock-based awards and awards that may be settled in cash or stock in situations other than a change in control, is as follows:

 

Award        Voluntary
    Termination    
  Involuntary
Termination
With Cause
  Involuntary
Termination
Without Cause
          Retirement           Death or
        Disability        
         
Performance Shares (Long-Term Plan)  

2015 Award;

2016 Award for NEOs that do not meet age and service requirements

  Forfeited   Forfeited   Forfeited  

Prorated until date of retirement, with actual payment dependent upon the achievement

of performance goals

  Restrictions lapse
  2016 Award for NEOs that are at least age 55 with 10 years of continuous service   Prorated until date of separation     Prorated until date of separation    
             
Restricted Stock
Units (RSUs)
(Long-Term Plan)
 

2015 Award;

2016 Award for NEOs that do not meet age and service requirements

  Forfeited   Forfeited   Forfeited   Forfeited   Restrictions lapse
  2016 Award for NEOs that are at least age 55 with 10 years of continuous service   Prorated until date of separation     Prorated until date of separation   Prorated until date of retirement  
             
Retention Units (Long-Term Plan)   2013 Award   Forfeited   Forfeited   Forfeited;
at Board’s discretion, units may vest pro-rata based on completed service
  Forfeited   Vest pro-rata
based on
completed service
             
Restricted Stock (AIP)   All awards   Forfeited   Forfeited   Forfeited   Forfeited   Restrictions lapse

 

2017 Xcel Energy Proxy Statement  |  55

 


Table of Contents

 

    Executive Compensation Tables

 

    

 

Aggregate Termination Payments

This section explains those payments and benefits that are accelerated in various termination-of-employment scenarios.

For purposes of preparing this table, we have assumed that (i) the NEOs were terminated on December 31, 2016, and (ii) that the price of our common stock was $40.70 (the closing price on December 30, 2016). For Ms. Madden, there were no additional payments triggered by her retirement, effective June 30, 2016, other than those previously disclosed and therefore is not included in the table below.

 

  Name   

Termination

upon Change

in Control(1)

($)

   

Voluntary

Termination/

Retirement

($)

   

Involuntary

Termination

with Cause

($)

    

Involuntary

Termination