DEF 14A 1 a2015proxystatement1.htm DEF 14A 2015 proxy statement (1)

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
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Soliciting Material Pursuant to 240.14a-12
THE AES CORPORATION

 
(Name of Registrant as Specified In Its Charter)

 
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NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS OF THE AES CORPORATION
TO BE HELD ON THURSDAY, APRIL 23, 2015
March 9, 2015
TO THE HOLDERS OF COMMON STOCK OF THE AES CORPORATION:
Notice is hereby given that the 2015 Annual Meeting of Stockholders of The AES Corporation (the “Company” or “AES”) will be held on Thursday, April 23, 2015, at 9:30 a.m. EDT, at the NRECA Conference Center, 4301 Wilson Boulevard, Arlington, VA 22203, for the following purposes, as more fully described in the accompanying Proxy Statement:
1.
To elect ten members to the Company's Board of Directors (the "Board");
2.
To re-approve The AES Corporation 2003 Long Term Compensation Plan, As Amended and Restated;
3.
To re-approve The AES Corporation Performance Incentive Plan, As Amended and Restated;
4.
To ratify the appointment of Ernst & Young LLP (“E&Y” or the “Independent Registered Public Accounting Firm”) as the independent auditors of the Company for the year 2015;
5.
To approve, on an advisory basis, the Company’s executive compensation;
6.
To approve, on an advisory basis, the Company’s nonbinding proposal to allow Stockholders to request special meetings of Stockholders;
7.
To approve, on an advisory basis, the Company’s nonbinding proposal to provide proxy access for Stockholder-nominated director candidates;
8.
If properly presented, to vote on a nonbinding Stockholder proposal relating to special meetings of Stockholders;
9.
If properly presented, to vote on a nonbinding Stockholder proposal relating to proxy access; and
10.
To transact such other business as may properly come before the Annual Meeting.
Doors to the meeting will open at 8:30 a.m. EDT. Stockholders of record at the close of business on February 27, 2015 are entitled to notice of, and to vote at, the Annual Meeting. If you plan to attend the Annual Meeting, please note that, for security reasons, before being admitted, you must present your admission ticket or proof of stock ownership and valid photo identification at the door. All hand-carried items will be subject to inspection and any bags, briefcases or packages must be checked at the registration desk prior to entering the meeting room.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON THURSDAY, APRIL 23, 2015: THE PROXY STATEMENT, ANNUAL REPORT ON FORM 10-K AND RELATED PROXY MATERIALS ARE AVAILABLE AT www.envisionreports.com/aes.

 
Brian A. Miller
Executive Vice President, General Counsel
and Corporate Secretary
 



TABLE OF CONTENTS
 
 
 
NOTICE OF ANNUAL MEETING
TABLE OF CONTENTS
PROXY STATEMENT
Questions and Answers Regarding the Proxy Statement and Annual Meeting
PROPOSAL 1: ELECTION OF DIRECTORS
Information Concerning Our Board of Directors
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
Our Executive Compensation Process
Overview of AES Total Compensation
2014 Compensation Determinations
Other Relevant Compensation Elements and Policies
Compensation Committee Report
Risk Assessment
Summary Compensation Table
Grants of Plan-Based Awards Table
Narrative Disclosure Relative to the Summary Compensation Table and the Grants of Plan-Based Awards Table
Outstanding Equity Awards at Fiscal Year-End
Option Exercises and Stock Vested
Non-Qualified Deferred Compensation
Narrative Disclosure Relative to the Non-Qualified Deferred Compensation Table
Potential Payments Upon Termination or Change-in-Control
Additional Information Relating to Potential Payments Upon Termination of Employment or Change-in-Control
Payment of Long-Term Compensation Awards in the Event of Termination or Change-in-Control as Determined by the Provisions Set Forth in the 2003 Long-Term Compensation Plan
Information About our Compensation Committee
Compensation of Directors
TRANSACTIONS WITH RELATED PERSONS
PROPOSAL 2: RE-APPROVAL OF THE AES CORPORATION 2003 LONG TERM COMPENSATION PLAN, AS AMENDED AND RESTATED
PROPOSAL 3: RE-APPROVAL OF THE AES CORPORATION PERFORMANCE INCENTIVE PLAN, AS AMENDED AND RESTATED
PROPOSAL 4: RATIFICATION OF INDEPENDENT AUDITORS FOR 2015
Report of the Financial Audit Committee
Information Regarding the Independent Registered Public Accounting Firms Fee’s, Services and Independence
PROPOSAL 5: TO APPROVE, ON AN ADVISORY BASIS, THE COMPANY’S EXECUTIVE COMPENSATION
INTRODUCTION TO PROPOSALS 6, 7, 8 AND 9
PROPOSAL 6: TO APPROVE, ON AN ADVISORY BASIS,THE COMPANY’S NONBINDING PROPOSAL TO ALLOW STOCKHOLDERS TO REQUEST SPECIAL MEETINGS OF STOCKHOLDERS
PROPOSAL 7: TO APPROVE, ON AN ADVISORY BASIS,THE COMPANY’S NONBINDING PROPOSAL TO PROVIDE PROXY ACCESS FOR STOCKHOLDER-NOMINATED DIRECTOR CANDIDATES
PROPOSAL 8: TO VOTE ON A NONBINDING STOCKHOLDER PROPOSAL RELATING TO SPECIAL MEETINGS OF STOCKHOLDERS
PROPOSAL 9: TO VOTE ON A NONBINDING STOCKHOLDER PROPOSAL RELATING TO PROXY ACCESS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS
GOVERNANCE MATTERS
APPENDIX A - THE AES CORPORATION 2003 LONG TERM COMPENSATION PLAN, AS AMENDED AND RESTATED
APPENDIX B - THE AES CORPORATION PERFORMANCE INCENTIVE PLAN, AS AMENDED AND RESTATED
DIRECTIONS TO THE ANNUAL MEETING
 

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PROXY STATEMENT
March 9, 2015
The Board of Directors (the “Board”) of The AES Corporation (the “Company” or “AES”) is soliciting Proxies to be voted on the Stockholders behalf at the 2015 Annual Meeting of Stockholders.

The Annual Meeting will commence at 9:30 a.m. EDT on Thursday, April 23, 2015. The Annual Meeting will be held at the NRECA Conference Center, 4301 Wilson Boulevard, Arlington, Virginia 22203.
This Proxy Statement provides information regarding the matters to be voted on at the Annual Meeting as well as other information that may be useful to you. In accordance with rules adopted by the United States Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of our proxy materials to each Stockholder of record, we are furnishing proxy materials to our Stockholders on the Internet. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials other than as described below. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your Proxy over the Internet. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.
It is anticipated that the Notice of Internet Availability of Proxy Materials will first be sent to Stockholders on or about March 12, 2015. This Proxy Statement and accompanying Proxy Card, Annual Report on Form 10-K for the year ended December 31, 2014 (“AES’ Form 10-K”) and related proxy materials will first be made available to Stockholders on or about March 12, 2015 at www.envisionreports.com/aes for registered holders of AES stock and, at www.edocumentview.com/aes for beneficial holders of AES stock. In accordance with SEC rules, the websites, www.envisionreports.com/aes and www.edocumentview.com/aes provide complete anonymity with respect to a Stockholder accessing the websites.
At the close of business on February 27, 2015, there were 703,204,475 shares of common stock outstanding. Each share of common stock is entitled to one vote.
Questions and Answers Regarding the Proxy Statement and Annual Meeting
WHAT IS THE RECORD DATE?
The record date has been established by the Board as permitted by Delaware law. Owners of record of our common stock at the close of business on the record date are entitled to receive notice of the Annual Meeting. Such owners of record are also entitled to vote at the Annual Meeting and any adjournments of the Annual Meeting. Each share of common stock is entitled to one vote. The record date for the Annual Meeting is February 27, 2015.
HOW DOES A STOCKHOLDER SUBMIT A VOTE ON A PROPOSAL?
A Stockholder may vote by telephone, via the Internet, or in person by attending the Annual Meeting. A Stockholder may also vote by marking, signing, dating and returning the Proxy Card to the Office of the Corporate Secretary at 4300 Wilson Boulevard, Arlington, Virginia 22203. Only Stockholders registered on the books of our transfer agent may vote in person at the Annual Meeting. Instructions on how to vote by phone or via the Internet are set forth in the Notice of Internal Availability of Proxy Materials or Proxy Card. If a Stockholder owns shares through a broker or other intermediary, voting instructions will be set forth on the voting instruction card provided by your broker or other intermediary.
WHAT ARE THE APPROVAL REQUIREMENTS?
If a Proxy is properly executed, the shares it represents will be voted at the Annual Meeting in accordance with the instructions noted on the Proxy. If no instructions are specified in the Proxy with respect to the matters to be acted upon, the shares represented by the Proxy will be voted in accordance with the recommendations of the Board. The recommendations of the Board regarding the matters to be acted upon at the Annual Meeting are set forth in this Proxy Statement. Each share of common stock is entitled to one vote on each proposal contained herein. For any proposal, except as otherwise provided by law, rule, AES’ Sixth Restated Certificate of Incorporation (the “Charter”) or our Amended and Restated Bylaws (“Bylaws”), the affirmative vote of a majority of the shares of common stock present in person or represented by Proxy at the meeting and entitled to vote on the matter is required for approval, including for the election of Directors (in accordance with Section 216 and subject to Section 141(b) of the Delaware General Corporation Law). In tabulating the voting results for any particular proposal, abstentions have the same effect as votes against the matter. If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may be treated as “broker non-votes.” Generally, broker non-votes occur when a broker is not permitted to vote on a particular matter without instructions from the beneficial owner and instructions

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have not been given. Brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on “non-routine” proposals, such as the election of Directors, the re-approval of the 2003 Long Term Compensation Plan, as amended and restated, the re-approval of the Performance Incentive Plan, as amended and restated, the advisory approval of the Company’s executive compensation, the advisory approval of the Company’s nonbinding proposal to allow Stockholders to request special meetings of Stockholders, the advisory approval of the Company’s nonbinding proposal to provide proxy access for Stockholder nominated director candidates, the nonbinding Stockholder proposal relating to special meeting of stockholders, and the nonbinding Stockholder proposal relating to proxy access, although brokers may vote their clients’ shares on “routine” proposals such as the proposal seeking ratification of E&Y as the independent registered public accounting firm for the year 2015. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal.
WHAT CONSTITUTES A QUORUM?
For business to be conducted at the Annual Meeting, a quorum must be present or represented by Proxy. Under our Bylaws, the presence, in person or represented by Proxy, of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting will constitute a quorum, except as otherwise provided by statute or by the Charter. The number of outstanding shares of common stock entitled to vote at the Annual Meeting is determined as of the record date. Abstentions and broker non-votes will be counted in determining whether a quorum is present for the Annual Meeting. A copy of the Bylaws is available on our website (www.aes.com).
MAY A STOCKHOLDER CHANGE A VOTE?
Stockholders are entitled to revoke their Proxies at any time before their shares are voted at the Annual Meeting. To revoke a Proxy, a Stockholder must file a written notice of revocation with the Company, deliver a duly executed Proxy bearing a later date than the original submitted Proxy, submit voting instructions again by telephone or the Internet, or attend the Annual Meeting and vote in person. Attendance at the Annual Meeting will not, by itself, revoke your Proxy. If you hold shares in street name, you must contact your broker, bank or other nominee to change your vote or obtain a Proxy to vote your shares if you wish to cast your vote in person at the meeting.
ARE VOTING RECORDS CONFIDENTIAL?
We require vote tabulators and the Inspector of the Election to execute agreements to maintain the confidentiality of voting records. Voting records will remain confidential, except as necessary to meet legal requirements and in other limited circumstances such as proxy contests.
HOW DOES THE COMPANY SOLICIT PROXIES?
The Company will solicit Proxies by mail, telephone, or other means of communication. We will bear the cost of the solicitation of Proxies. The Company has retained Computershare Trust Co., N.A. and Georgeson Inc. to assist in soliciting Proxies from Stockholders and we will pay a fee estimated at $30,000, plus expenses, for such services. In addition, solicitation may be made by our Directors, Officers, and other employees. We reimburse brokerage firms, custodians, nominees, and fiduciaries in accordance with the rules of the Financial Industry Regulatory Authority for reasonable expenses incurred by them in forwarding materials to the beneficial owners of our common stock.

DO I NEED AN ADMISSION TICKET TO ATTEND THE ANNUAL MEETING?
Yes. You must present both an admission ticket or proof of stock ownership and valid photo identification to attend the Annual Meeting.
If you received these materials by mail, your admission ticket is attached to your Proxy card. Please detach the ticket and bring it with you to the Annual Meeting.
If you vote electronically through the Internet, you can print an admission ticket from the online site.
If you hold shares through an account with a bank or broker, contact your bank or broker to request a legally valid Proxy from the owner of record to vote your shares in person. This will serve as your admission ticket.
A recent brokerage statement or letter from your broker showing that you owned AES common stock in your account as of February 27, 2015, also serves as an admission ticket.
If you do not have an admission ticket or proof of ownership and valid photo identification, you will not be admitted into the Annual Meeting.
Please also note that, if you attend the Annual Meeting, the use of cell phones, smartphones, pagers, recording and photographic equipment and/or computers and similar devices is strictly prohibited at the Annual Meeting.



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PROPOSAL 1: ELECTION OF DIRECTORS

The Board has nominated ten Directors (the “Nominees”) for election at the Annual Meeting. The Nominees are identified and discussed in the paragraphs below for election at this year’s Annual Meeting to each serve a one-year term expiring at the Annual Meeting in 2016.

Andrés R. Gluski, age 57, has been our President and Chief Executive Officer (the “CEO”) and a Director of AES since September 2011 and serves as Chairman of the Strategy and Investment Committee of the Board and member of the Innovation and Technology Committee of the Board. Qualifications and Experience: As the chief executive of AES, he provides our Board with in-depth knowledge about the Company’s business and issues confronting our business, the electric industry and international markets. Mr. Gluski was appointed to the U.S. Brazil CEO Forum in 2012 and the President's Export Council in 2013. Prior to his current leadership position, Mr. Gluski served as Executive Vice President and Chief Operating Officer of the Company from March 2007 to September 2011, Regional President for Latin America from 2006 to 2007, Senior Vice President for the Caribbean and Central America from 2003 to 2006, CEO of La Electricidad de Caracas (“EDC”) from 2002 to 2003 and CEO of AES Gener (Chile) in 2001. Before joining AES, Mr. Gluski was Executive Vice President and Chief Financial Officer of EDC, Executive Vice President of Banco de Venezuela (Grupo Santander), Vice President for Santander Investment, and Executive Vice President and Chief Financial Officer of CANTV (subsidiary of GTE). Mr. Gluski has also worked with the International Monetary Fund in the Treasury and Latin American Departments and served as Director General of the Ministry of Finance of Venezuela. Education: Mr. Gluski is a magna cum laude graduate of Wake Forest University and holds a M.A. and a Ph.D in Economics from the University of Virginia.

Directorships for the Past Five Years: Mr. Gluski currently serves on the Board of Directors of Waste Management, Inc. (from January 2015 to the present), The Council of the Americas (from 2011 to the present), The Edison Electric Institute (from 2010 to the present), and is Chairman of AES Gener (from May 2005 to the present) and AES Brasiliana (from March 2006 to the present). He also served on the Board of Directors of Cliffs Natural Resources from January 2011 to August 2014.

Charles L. Harrington, age 56, has been a Director of AES since December 2013 and serves on the Financial Audit Committee and Innovation and Technology Committee of the Board. Qualifications and Experience: Mr. Harrington brings to the AES Board a strong record of driving innovation and sustainable results. Since May 2008, Mr. Harrington has served as Chairman and Chief Executive Officer of Parsons Corporation, an engineering, construction, technical and management services firm, and has spent over 30 years with Parsons in various operations, finance (including Chief Financial Officer) and business development roles. During his tenure as Chief Executive Officer, Mr. Harrington has focused on expanding into strategically important new business areas and led Parsons to record profitability. Education: Mr. Harrington received a B.S., magna cum laude, in Engineering from California Polytechnic State University and a M.B.A. in Finance and Marketing from the Anderson School of Management, UCLA.

Directorships for the Past Five Years: Mr. Harrington has been a member of the following privately-held or non-profit companies: Parsons Corporation (from 2008 to the present), Anderson School of Management at UCLA (2008-2014), California Polytechnic State University (from 2008 to the present), Blumenthal Performing Arts Center (2006-2012), California Science Center (from 2008 to the present) and Business-Higher Education Forum (from 2011 to the present).

Kristina M. Johnson, age 57, has been a Director of AES since January 2011, and currently serves on the Compensation Committee and is Chair of the Innovation and Technology Committee of the Board. Dr. Johnson previously served on the Board from April 2004 to April 2009. Qualifications and Experience: Dr. Johnson currently is the Chief Executive Officer of Enduring Hydro LLC, a company that invests in, develops, and modernizes hydroelectric facilities and provides consulting services on hydroelectric power and other clean energy projects, since April 2011 and is the former Undersecretary for Energy at the U.S. Department of Energy (from May 2009 to November 2010). Prior to government service, Dr. Johnson was Provost and Senior Vice President for Academic Affairs at the Johns Hopkins University from September 2007 to April 2009. Previously, she served as the Chief Academic and Administrative Officer and Chief Budget Officer of the Edmund T. Pratt, Jr., School of Engineering at Duke University (“Duke”), joining Duke in July 1999. Prior to joining Duke, Dr. Johnson served on the faculty of the University of Colorado at Boulder from 1985 to 1999 as a Professor of Electrical and Computer Engineering and a co-founder and director (from 1993 to 1997) of the National Science Foundation Engineering Research Center for Optoelectronic Computing Systems Center. Education: Dr. Johnson received her B.S. with distinction, M.S. and Ph.D from Stanford University in Electrical Engineering. She is an expert in liquid crystal electro-optics and has over forty-five patents or patents pending in this field. Dr. Johnson has received numerous recognitions for contributions to her field, including the John Fritz Medal, considered the highest award given in the engineering profession, and was inducted into the National Inventor’s Hall of Fame (June 2015).

Directorships for the Past Five Years: Since 2006, Dr. Johnson served on the boards of directors of Minerals Technologies, Inc., Boston Scientific Corporation and Nortel Networks, until her appointment to the Department of Energy when she resigned from all public boards. After leaving the Department of Energy, she was re-elected to the board of directors of Boston Scientific Corporation (from December 2010 to the present) and elected to the board of directors of Cisco Systems, Inc. (from August 2012 to the present).


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Tarun Khanna, age 48, has been a Director of AES since April 2009 and serves on the Nominating, Governance and Corporate Responsibility Committee, the Financial Audit Committee and the Innovation and Technology Committee of the Board. Qualifications and Experience: Dr. Khanna is the Jorge Paulo Lemann Professor at the Harvard Business School, joining the faculty in 1993. He brings substantial expertise regarding global business, emerging markets and corporate strategy to the Board. Dr. Khanna’s scholarly work has been published in a range of economics, management and foreign policy journals and he recently published Billions of Entrepreneurs: How China and India are Reshaping their Futures, and Yours, a book focusing on the drivers of entrepreneurship in Asia. He also co-authored the book, Winning in Emerging Markets: A Roadmap for Strategy and Execution, which was published in March 2010. He was appointed a Young Global Leader (under 40) by the World Economic Forum in 2007, was elected as a Fellow of the Academy of International Business in 2009, and was appointed Director of Harvard University’s South Asia Institute in 2010. Education: Dr. Khanna received a B.S.E. from Princeton University and Ph.D from Harvard University.

Directorships for the Past Five Years: Dr. Khanna is also a member of the boards of directors of SKS Microfinance (from February 2009 to the present) and the following privately-held companies: GVK Bio Sciences (from 2007 to the present) and TVS Logistics (from 2008 to the present).

Holly K. Koeppel, age 56, is being nominated for election to the Board of Directors and was recommended by several non-management Directors to the Board. Qualifications and Experience: Ms. Koeppel, a senior operating and financial executive, has served for over thirty years in the energy industry. Her knowledge of global energy-related commodity markets and infrastructure industries offers valuable insights to the Board. Most recently (2010 to February 2015), Ms. Koeppel was Partner and Global Co-Head of Citi Infrastructure Investors, a division of Citigroup. Prior to her service at Citi Infrastructure Investors, Ms. Koeppel served as Executive Vice President and Chief Financial Officer for American Electric Power Corporation (“AEP”) from 2006 to 2009, and several additional executive positions at AEP from 2000 to 2006. Education: Ms. Koeppel received a B.S. in Business Administration from Ohio State University and an M.B.A. from Ohio State University where she was a member of Phi Beta Kappa.

Directorships for the Past Five Years: Ms. Koeppel has been a member of the boards of directors of Reynolds American Inc., (from 2008 to the present) and Integrys Energy Group, Inc. (from 2012-February 2015).

Philip Lader, age 69, has been a Director of AES since April 2001 and serves as Chairman of the Nominating, Governance and Corporate Responsibility Committee, member of the Strategy and Investment Committee and member of the Innovation and Technology Committee of the Board. Qualifications and Experience: Mr. Lader brings substantial executive, board and government experience to AES. The former U.S. Ambassador to the Court of St. James’s, he serves as Chairman of WPP plc, the world’s largest global advertising and marketing services company, comprised of approximately 176,000 people in 112 countries, which includes J. Walter Thompson, Young & Rubicam, and Ogilvy & Mather from 2001 to the present. A lawyer, Mr. Lader is also a Senior Advisor to Morgan Stanley and Palantir Technologies, and serves as a member of the Investment Committees of Morgan Stanley’s Global Infrastructure Fund. Mr. Lader was Vice Chairman of RAND Corporation, and continues on as a Director. Mr. Lader served as White House Deputy Chief of Staff, Assistant to the President, Deputy Director of the Office of Management and Budget, and Administrator of the U.S. Small Business Administration during the Clinton Administration. Mr. Lader was also President of Sea Pines Company, Executive Vice President of the U.S. holdings of the late Sir James Goldsmith, and president of universities in South Carolina and Australia. Education: Mr. Lader graduated with a B.A. from Duke University where he was a member of Phi Beta Kappa, an M.A. from the University of Michigan, completed graduate law studies at Oxford University, and received a J.D. from Harvard Law School.

Directorships for the Past Five Years: Mr. Lader is or has been a member of the boards of directors of WPP plc (from 2001 to the present), Lloyd’s of London (2005-2010), Marathon Oil Corporation (from 2002 to the present), UC RUSAL (from 2006 to the present), Songbird Estates, plc (2006-2009), and the following privately-held or non-profit companies: Duck Creek Technologies (2009-2011), RAND Corporation (2001-2011, 2013-present), Atlantic Council of US (from 2008 to the present), Smithsonian Museum of American History (from 2006 to the present), Salzburg Global Seminar (2008-2013), Middleton Place Foundation (2008-2013) and Bankinter Foundation for Innovation (from 2007 to the present).

James H. Miller, age 66, has been a Director of AES since June 2013 and serves on the Financial Audit Committee and Compensation Committee of the Board. Qualifications and Experience: Mr. Miller brings to the AES Board his substantial experience in the energy industry both in the US and internationally, including experience in regulated utilities and the competitive power markets. With more than 35 years of experience in the energy industry, Mr. Miller served as Chairman of PPL Corporation from 2006 until his retirement in March 2012. He joined PPL as President of its US generation businesses in 2001. Previously, he was Executive Vice President of USEC Inc. and President of two ABB Group subsidiaries: ABB Environmental Systems and ABB Resource Recovery Systems. He began his career at the former Delmarva Power & Light Co. Education: Mr. Miller holds a bachelor’s degree in electrical engineering from the University of Delaware and served in the US Navy nuclear submarine program.

Directorships for the Past Five Years: Mr. Miller has been a member of the boards of directors of Rayonier, Inc. (from 2011 to 2014), Rayonier Advanced Materials (2014 to present), Lehigh Gas Partners LP (from 2012 to 2013), Crown Holdings, Inc. (from 2010 to the present), and Chicago Bridge & Iron Company N.V. (from 2014 to present).

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John B. Morse, Jr., age 68, has been a Director of AES since December 2008 and serves as Chairman of the Financial Audit Committee and as a member of the Strategy and Investment Committee of the Board. Qualifications and Experience: Mr. Morse brings substantial executive experience to the Board, including board, investment and other finance expertise. Before his retirement in December 2008, Mr. Morse served as the Senior Vice President, Finance and Chief Financial Officer of The Washington Post Company (the “Post”), now Graham Holdings Co., a diversified education and media company whose principal operations include educational services, newspaper and magazine print and online publishing, television broadcasting and cable television systems recording over $4.4 billion in annual operating revenues. During Mr. Morse’s 19 year tenure, the Post’s leadership made more than 100 investments in both domestic and international companies and included new endeavors in emerging markets. Prior to joining the Post, Mr. Morse was a partner at Price Waterhouse (now PricewaterhouseCoopers), where he worked with publishing/media companies and multilateral lending institutions for more than 17 years. Education: Mr. Morse graduated with a B.A. from the University of Virginia and an M.B.A. from the Wharton School of Finance at the University of Pennsylvania. Mr. Morse is a Certified Public Accountant.

Directorships for the Past Five Years: Mr. Morse is also a member of the boards of directors of Host Hotels & Resorts Corporation (from 2005 to the present), the Home Shopping Network (from 2008 to the present), Former Trustee and President Emeritus of the College Foundation of the University of Virginia (2002-2012), and completed a six-year term as a member of the Financial Accounting Standards Advisory Council (2004-2010).

Moisés Naím, age 62, has been a Director of AES since April 2013 and serves on the Nominating, Governance and Corporate Responsibility Committee and Compensation Committee of the Board. Qualifications and Experience: Dr. Naím is a Distinguished Fellow in the International Economics Program at the Carnegie Endowment for International Peace and has served in that role from June 2010 to present. For fourteen years (1996-2010), Dr. Naím served as Editor in Chief for Foreign Policy magazine (first, at The Carnegie Endowment for International Peace and subsequently, at The Washington Post Company). He has written extensively on international economics and global politics, economic development and the consequences of globalization, and Dr. Naím is the chief international columnist for El País and La Repubblica, high circulation daily newspapers in Spain and Italy, respectively. His columns are syndicated worldwide. Dr. Naím is also the host and producer of Efecto Naím, a global Spanish language news and analysis broadcast. Dr. Naím brings substantial international economics and political expertise to AES through his tenure as Venezuela’s Minister of Industry and Trade and Director of Venezuela’s Central Bank in the early 1990s and as an Executive Director of the World Bank in the early 1990s. He is also the author of many scholarly articles and more than ten books on economics and politics and has broad experience as a consultant to corporations, governments and non-governmental organizations. Education: Dr. Naím holds M.Sc and Ph.D degrees from the Massachusetts Institute of Technology.

Directorships for the Past Five Years: Dr. Naím is a member of the board of directors of FEMSA (from 2011 to the present) and a member of the board of directors of Cementos Pacasmayo (from 2013 to the present).

Charles O. Rossotti, age 74, has been a Director of AES since March 2003 and has served as Chairman of the Board and Lead Independent Director since April 2013. Qualifications and Experience: Mr. Rossotti brings substantial executive, entrepreneurial, global business, operations, and finance experience to our Board as a result of his previous positions. He serves as a Senior Advisor with the Carlyle Group, one of the world’s largest private equity firms, since March 2003. From November 1997 until November 2002, Mr. Rossotti was the Commissioner of Internal Revenue at the United States Internal Revenue Service (“IRS”), where he was responsible for regulatory and financial and accounting functions for $2 trillion a year in tax revenues. Prior to joining the IRS, Mr. Rossotti was a founder of American Management Systems, Inc. (“AMS”), a technology and management consulting firm which grew from inception to 9,000 employees and $800 million in revenue, where he oversaw operations in the U.S., Europe, and Asia. Mr. Rossotti held the position of President of AMS from 1970 to 1989, Chief Executive Officer from 1981 to 1993 and Chairman from 1989 to 1997, where he oversaw expansion into developed international markets, risk management of contracting functions, and strategic actions. From 1965 to 1969, he held various positions in the Office of Systems Analysis within the Office of the Secretary of Defense. He is currently a member of the board of directors of Capital Partners for Education, a non-profit organization and a member of the Controller General’s Advisory Board of the U.S. Government Accountability Office. Education: Mr. Rossotti graduated magna cum laude from Georgetown University and received an M.B.A. with high distinction from Harvard Business School.

Directorships for the Past Five Years: Mr. Rossotti serves or served as a member of the boards of directors of Bank of America Corporation (2009-2013), Booz, Allen, Hamilton (from 2008 to the present), and Merrill Lynch Corporation (2004-2008) and the following privately held companies: Apollo Global (2008-2012), Compusearch Systems, Inc. (2005-2011), Quorum Management Solutions (from 2010 to the present), Primatics Financial (from 2011 to the present), Wall Street Institute (2005-2010), ECi Software Solutions (2014 to the present) and Carlyle Select Trust (2014 to the present).

THE BOARD RECOMMENDS A VOTE FOR THE
ELECTION OF EACH OF THE TEN DIRECTORS DISCUSSED ABOVE

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INFORMATION CONCERNING OUR BOARD OF DIRECTORS

Director Independence

We are required to have a majority of independent Directors serving on our Board and may only have independent Directors serving on each of our Financial Audit, Compensation and Nominating, Governance and Corporate Responsibility Committees pursuant to the rules of the New York Stock Exchange (the “NYSE”) and, with respect to our Financial Audit Committee, the rules and regulations existing under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Our Board undertook an annual review of Director and Director Nominee independence in February 2015. The purpose of this review was to determine whether any relationships or transactions involving Directors and Director nominees (including their family members and affiliates) were inconsistent with a determination that the Director or Director nominee is independent under the independence standards set forth in the NYSE rules and our Corporate Governance Guidelines and, with respect to Financial Audit Committee members, under the independence standards for audit committee members under the Exchange Act.

In making this determination, the Board considered not only the criteria for independence set forth in the listing standards of the NYSE but also any other relevant facts and circumstances that may have come to the Board’s attention, after inquiry, relating to transactions, relationships or arrangements between a Director or a Director nominee or any member of their immediate family (or any entity of which a Director or Director nominee or an immediate family member is an Executive Officer, general partner or significant equity holder) on the one hand, and AES or any of its subsidiaries or affiliates, on the other hand, that might signal potential conflicts of interest, or that might bear on the materiality of a Director’s or a Director nominee’s relationship to AES or any of its subsidiaries. As described in the preceding sentence, the Board considered the independence issue not merely from the standpoint of the Director or Director nominee, but also from that of the persons or organizations with which the Director or Director nominee is affiliated.

Based on its review, our Board determined that Messrs. Harrington, Lader, Miller, Morse, Rossotti, and Sandstrom. Ms. Koeppel (in connection with her nomination to the Board) and Drs. Johnson, Khanna, Moose and Naím each qualify as independent under the independence standards existing under the NYSE rules. Our Board also determined that Messrs. Harrington, Miller, Morse and Sandstrom and Dr. Khanna qualify as independent under the independence standards for audit committee members adopted by the SEC.

Board Leadership Structure

Our Corporate Governance Guidelines require the separation of the offices of the Chairman of the Board (“Chairman”) and CEO. If the Chairman is independent, he or she will also serve as Lead Independent Director. Since 1993, we have separated the offices of Chairman and CEO. Since 2003, our Chairman has been an independent Director who has also acted as Lead Independent Director.

We believe the structure described above provides strong leadership for our Board, while positioning our CEO as the leader of the Company for our investors, counterparties, employees and other stakeholders. Our current structure, which includes an independent Chairman serving as Lead Independent Director, helps ensure independent oversight over the Company. Our Corporate Governance Guidelines state that the Lead Independent Director’s duties include coordinating the activities of the independent Directors, coordinating the agenda for and moderating sessions of the Board’s independent Directors, and facilitating communications among the other members of the Board. At the same time, our current structure allows the CEO to focus his energies on management of the Company.

Our Board has nine independent members. A number of our independent Board members are currently serving or have served as Directors or as members of senior management of other public companies. We have three Board Committees comprised solely of independent Directors, each with a different independent Director serving as Chairman of the Committee. We believe that the number of independent experienced Directors that make up our Board, along with the independent oversight of the Board by the non-executive Chairman, benefits our Company and our Stockholders.  

Pursuant to our Bylaws and our Corporate Governance Guidelines, our Board determines the best leadership structure for the Company. As part of our annual Board self-evaluation process, the Board evaluates issues such as independence of the Board, communication between Directors and Management, the relationship between the CEO and Chairman, and other matters that may be relevant to our leadership structure. The Company recognizes that in the event that circumstances facing the Company change, a different leadership structure may be in the best interests of the Company and its Stockholders.

THE COMMITTEES OF THE BOARD

In 2014, the Board maintained five standing Committees: Compensation Committee, Financial Audit Committee, Innovation and Technology Committee, Nominating, Governance and Corporate Responsibility Committee, and Strategy and Investment Committee. The Board has determined that each of the members of the Compensation Committee, Financial Audit Committee, and Nominating,

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Governance and Corporate Responsibility Committee meets the standards of independence established by the NYSE as currently in effect. A description of each Board Committee is set forth below.

STANDING COMMITTEES:

Compensation Committee

The members of the Compensation Committee are Kristina M. Johnson, James H. Miller, Sandra O. Moose (Chair), and Moisés Naím. For information regarding the role of our Compensation Committee, including its processes and procedures for determining executive compensation, see “Information About our Compensation Committee.” The Compensation Committee operates under the Charter of the Compensation Committee, which has been adopted and approved by the Board. Consistent with the requirements of the Charter, the Board determined that all Compensation Committee members are independent within the meaning of the SEC rules and listing standards of the NYSE. The Compensation Committee may form subcommittees and delegate to those subcommittees such power and authority as the Compensation Committee deems appropriate and in compliance with law. A copy of the Compensation Committee’s Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, VA 22203.

Financial Audit Committee (the “Audit Committee”)

The members of the Audit Committee are Charles L. Harrington, Tarun Khanna, James H. Miller, John B. Morse, Jr. (Chair), and Sven Sandstrom. The Audit Committee is responsible for the review and oversight of the Company’s performance with respect to its financial responsibilities and the integrity of the Company’s accounting and reporting practices. The Audit Committee may delegate its authority to subcommittees when it deems such delegation to be appropriate and in the best interests of the Company. The Audit Committee, on behalf of the Board, also appoints the Company’s independent auditors, subject to Stockholder ratification, at the Annual Meeting. The Audit Committee operates under the Charter of the Audit Committee adopted and approved by the Board. A copy of the Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203. Our Board has determined that all members of the Audit Committee are independent within the meaning of the SEC rules and under the current listing standards of the NYSE. The Board has also determined that each member of the Audit Committee is “financially literate” as required by the NYSE rules and Messrs. Morse, Harrington, Miller and Sandstrom are Audit Committee Financial Experts within the meaning of the SEC rules based on, among other things, the experience of such member, as described under “Proposal 1: Election of Directors” of this Proxy Statement.

Innovation and Technology Committee

The members of the Innovation and Technology Committee are Kristina M. Johnson (Chair), Andrés Gluski, Charles L. Harrington, Tarun Khanna and Philip Lader. The Innovation and Technology Committee is responsible for oversight of the Company’s efforts to foster growth through innovation and in evaluating the Company’s efforts to identify and address risks and opportunities in the power industry and adjacent industries arising from emerging or competing technologies. It is also responsible for oversight of the Company’s performance excellence and continuous improvement program and the Company’s approach to the replication of innovative solutions across businesses. The Innovation and Technology Committee operates under the Charter of the Innovation and Technology Committee adopted and approved by the Board. A copy of the Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203.

Strategy and Investment Committee

The members of the Strategy and Investment Committee are Andrés Gluski (Chair), Philip Lader, Sandra O. Moose and John B. Morse, Jr. The Strategy and Investment Committee focuses on the evaluation of strategic plans and of capital deployment in the context of the Company’s corporate strategy. In addition, at the request of the Board, the Committee or Management, individual transactions may also be reviewed by the Committee including, potential investments, asset sales, proposed equity and/or debt offerings, or other transactions. The Strategy and Investment Committee operates under the Charter of the Strategy and Investment Committee adopted and approved by the Board. A copy of the Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203.

Nominating, Governance and Corporate Responsibility Committee (the “Nominating Committee”)

The members of the Nominating Committee are Philip Lader (Chair), Tarun Khanna, Moisés Naím and Sven Sandstrom. The Nominating Committee provides recommendations for potential Director nominees for election to the Board, establishes compensation for Directors, considers governance, social responsibility and cyber security issues relating to the Board and the Company and considers the scope of the Company’s internal environmental and safety audit programs. The Nominating Committee may form subcommittees and delegate to those subcommittees such power and authority as the Committee deems appropriate and in compliance with law. The Nominating

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Committee operates under the Charter of the Nominating Committee adopted and approved by the Board. Consistent with the requirements of the Charter, the Board determined that all Nominating Committee members are independent within the meaning of the SEC rules and listing standards of the NYSE. A copy of the Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203.

Director Qualifications. Director nominees are selected on the basis of, among other things, experience, knowledge, skills, expertise, integrity, ability to make independent analytical inquiries, understanding the Company’s global business environment and willingness to devote adequate time and effort to Board responsibilities so as to enhance the Board’s ability to oversee and direct the affairs and business of the Company.

Diversity. The Company does not maintain a separate policy regarding the diversity of the Board. However, the charter of the Nominating Committee requires that the Committee review the composition of the Board to ensure it has the “appropriate balance” of attributes such as knowledge, experience, diversity and other attributes. In addition, the Company’s Corporate Governance Guidelines establish that the size of the Board shall be nine to twelve members, a range which “permits diversity of experience without hindering effective discussion or diminishing individual accountability.” Consistent with these governing documents, both the Nominating Committee and the full Board seek Director nominees with distinct professional backgrounds, experience and perspectives so that the Board as a whole has the range of skills and viewpoints necessary to fulfill its responsibilities. As part of our annual Board self-evaluation process, the Board evaluates whether or not the Board as a whole has the skills and backgrounds for the current issues facing the Company. The Board also evaluates its effectiveness with regard to specific areas of expertise.

Director Nomination Process. Pursuant to our Corporate Governance Guidelines, our Nominating Committee reviews the qualifications of proposed Director nominees to serve on our Board and recommends Director nominees to our Board for election at the Company’s Annual Meeting. The Board proposes a slate of Director nominees to the Stockholders for election to the Board, using information provided by the Nominating Committee.

In certain instances, a third party may assist in identifying potential Director nominees. The Nominating Committee also considers potential nominations for Director provided by Stockholders and submits any such suggested nominations, when appropriate, to the Board for approval. Stockholder nominees for Director are evaluated using the criteria described above. As described under “Proposal 1: Election of Directors,” Ms. Koeppel was recommended for nomination by several Board members. Stockholders wishing to recommend persons for consideration by the Nominating Committee as nominees for election to the Board can do so by writing to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203 and providing the information and following the additional procedures set forth in the Bylaws, which are described in “Stockholder Proposals and Nominations for Director” of this Proxy Statement.

Director Compensation. The Nominating Committee periodically reviews the level and form of compensation paid to Directors, including our Director compensation program’s underlying principles. Under the Corporate Governance Guidelines, a Director who is also an Officer of AES is not permitted to receive additional compensation for service as a Director. In reviewing and determining the compensation paid to Directors, the Nominating Committee considers how such compensation relates and compares to that of companies of comparable size and/or equivalent complexity. The Committee’s review includes looking at both direct and indirect forms of compensation paid to our Directors, including any charitable contributions made by the Company, on behalf of such Directors, to organizations with which Directors are affiliated. The General Counsel’s Office assists the Nominating Committee with its review of our Director compensation program. The General Counsel’s Office conducts research on other companies’ director compensation practices by reviewing broad-based director compensation studies, which generally include a hundred or more companies, and providing the Committee with a benchmarking analysis of such companies’ practices as compared to the Company’s Director compensation program. These reports are further described in “Director Compensation for Year 2014” below. Neither the General Counsel’s Office nor the Nominating Committee retains an independent compensation consultant to assist with recommending or determining Director compensation. Any proposed changes to the Director compensation program are recommended by the Nominating Committee to the Board for consideration and approval. For further information regarding our Director compensation program, see “Director Compensation for Year 2014” of this Proxy Statement.

BOARD’S ROLE IN RISK MANAGEMENT

Our Management is responsible for the management and assessment of risk at the Company, including communication of the most material risks to the Board and its Committees, who provide oversight over the risk management practices implemented by Management. Our full Board provides oversight with respect to risk management, except for the oversight of risks that have been specifically delegated to a Committee of the Board. Even when the oversight of a specific area of risk has been delegated to a Committee, the full Board maintains oversight over such risks through the receipt of reports from the Committee Chairpersons to the full Board at each regularly-scheduled full Board meeting. In addition, if a particular risk is material or where otherwise appropriate, the full Board may assume oversight over a particular risk, even if the risk was initially overseen by a Board Committee. The Board and Committee reviews occur principally

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through the receipt of regular reports from Management to the Board on these areas of risk, and discussions with Management regarding risk assessment and risk management.

Full Board. At its regularly scheduled meetings, the Board generally receives a number of reports which include information relating to risks faced by the Company. The Company’s Chief Financial Officer and/or Treasurer provide a report on the Company’s liquidity position, which may include an analysis of prospective sources and uses of funds, and the implications to the Company’s debt covenants and credit rating, if any. The Chief Operating Officer or his designee provides operational reports, which may include risks related to tariffs, efficiency at our subsidiaries’ plants, construction, and related matters. The Company’s Vice President of Risk provides a report to the Board which explains the Company’s primary risk exposures, including currency, commodity and interest rate risk. Finally, the Company’s General Counsel provides a privileged dispute resolution report which provides information regarding the status of the Company’s litigation and related matters. At each regularly-scheduled Board meeting, the full Board also receives reports from Committee Chairpersons, which may include a discussion of risks initially overseen by the Committees for discussion and input from the full Board. As noted above, in addition to these regular reports, the Board receives reports on specific areas of risk from time to time, such as regulatory, geopolitical, cyclical or other risks.

Committees. The Audit Committee maintains initial oversight over risks related to the integrity of the Company’s financial statements; internal controls over financial reporting and disclosure controls and procedures (including the performance of the Company’s internal audit function); the performance of the independent auditor; and the effectiveness of the Company’s Ethics and Compliance Program. The Innovation and Technology Committee maintains initial oversight over risks related to technologies and innovations deployed by the Company for use in its fleet of businesses. The Nominating Committee maintains initial oversight over risks related to workplace safety and cyber security, and our subsidiaries’ continuing efforts to ensure compliance with the best practices in these areas. When appropriate, the Nominating Committee also receives environmental reports regarding our subsidiaries’ compliance with environmental laws and their efforts to ensure continuing compliance with governing laws and regulations. The Compensation Committee maintains initial oversight over risks related to the Company’s compensation practices, including practices related to hiring and retention, succession planning (approved by the full Board), and training of employees. The Strategy and Investment Committee maintains initial oversight over risks related to our overall strategic plans and capital deployment in the context of our corporate strategy.

DIRECTOR ATTENDANCE

In 2014, our Board convened 9 times, including 4 telephonic meetings, and our Board Committees held the following number of meetings: (i) Audit Committee - 8 meetings; (ii) Compensation Committee - 8 meetings; (iii) Innovation and Technology Committee - 3 meetings; (v) Nominating Committee - 5 meetings; and (vi) Strategy and Investment Committee - 5 meetings.

Under our Corporate Governance Guidelines, Directors are expected to attend Board meetings and meetings of Committees on which they serve in person or by conference telephone, and Directors are also encouraged to attend the Annual Meeting. Messrs. Gluski, Harrington, Lader, Miller, Morse, Rossotti, Sandstrom and Zhang and Drs. Johnson, Khanna, Moose and Naím attended the 2014 Annual Meeting of Stockholders on April 17, 2014. In 2014, all of our current Directors attended at least 75% of the aggregate of all meetings of the Board and the Committees on which they served.

In accordance with the Company’s Corporate Governance Guidelines, non-management Directors met in executive session after each in-person meeting of the Board. Non-management Directors met 5 times in 2014, with Mr. Rossotti presiding as Lead Independent Director.


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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis (“CD&A”)
Executive Summary
The CD&A includes compensation details for our “Named Executive Officers” (“NEOs”), including:
 
Name
Title
Mr. Andrés Gluski
President & Chief Executive Officer (“CEO”)
Mr. Thomas O’Flynn
EVP & Chief Financial Officer (“CFO”)
Mr. Brian Miller
EVP, General Counsel & Corporate Secretary (“General Counsel”)
Ms. Elizabeth Hackenson
SVP, Global Business Services & CIO (“CIO”)
Mr. Bernerd Da Santos
SVP & Chief Operating Officer (“COO”)
Mr. Andrew Vesey
Former EVP & Chief Operating Officer (“Former COO”)

Discussion of 2014 Performance
AES’ compensation philosophy emphasizes pay-for-performance. As context for understanding our 2014 NEO compensation, the following discussion summarizes the Company’s financial and operational results and other notable accomplishments and business activities in 2014. Non-GAAP measures (Adjusted EPS and Proportional Free Cash Flow) are reconciled to the nearest GAAP financial measures in the section titled “Non-GAAP Measures” of this CD&A.

In 2014, the Company faced challenges in several of its key markets, including poor hydrological conditions in Brazil and Panama because of inadequate rainfall, which impacts the efficiency and availability of our hydro plants in those countries. Consistent with the Company’s pay for performance philosophy, in reviewing compensation for the Named Executives, the Committee considered the fact that Management took a number of initiatives to mitigate the impact of inadequate rainfall, including capital allocation, cost containment and operational productivity. While the Committee had a favorable view of Management’s performance in light of these circumstances, the Committee nevertheless noted that the Company’s financial results were at the middle or lower end of the Company’s estimates, which had a significant impact on Annual Incentive Payments as compared to the target award and the prior year award for each Named Executive. In addition, as further described below, other elements of the Named Executives’ compensation also paid below target, resulting in realizable value well below grant date fair value.

In terms of financial results, the Company achieved:
Subsidiary Distributions of $1,151M, at the midpoint of the target established by the Committee at the beginning of the year
Adjusted EPS of $1.30 which is in the original guidance range that Management provided for 2014 ($1.30 to $1.38) and at the top end of the revised guidance range Management provided in November ($1.25 to $1.31)
Proportional Free Cash Flow of $891M which is close to the low end of the revised guidance ($900M to $1,000M)

In addition, as noted above, the Committee also considered the fact that in other critical operational and strategic areas, the Company performed at or above expectations as described below.
Our Operational Key Performance Indicator (“KPI”) was 106% of the target goals, driven by strong operational results in our Andes, Europe and MCAC strategic business units.
The Company achieved its cumulative annual cost savings target of $200M one year ahead of schedule.
Our Board of Directors approved a 100% increase to the quarterly dividend, to $0.10 per share, beginning in the first quarter of 2015.
The Company announced or closed $1.9B in financial partnerships at the project or business level, including Masinloc in the Philippines, AES Dominicana in the Dominican Republic and IPALCO in the United States.
The Company continued to execute our strategy to focus on markets where AES has a competitive advantage with the announcement or closing of ten asset sale transactions for $1.8B in equity proceeds to AES upon closing.
The Company invested $916M to strengthen our balance sheet through debt prepayment and share buybacks.
The Company continued to make investments to grow our platform in key markets and now has more generation capacity under construction than at any time in AES’ history.

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In 2014, the Company commenced construction of six new projects, totaling 2,226 MW in five countries.
At the end of 2014, the Company’s construction activities represented 7,141 MW of new generation capacity.

2014 Compensation Highlights
Compensation determinations made for 2014 reflect our pay-for-performance philosophy and the Company’s intent to align its NEO compensation with the interests of Stockholders. The key compensation determinations made with respect to our NEOs are summarized below.
Base salaries were frozen. At the CEO’s recommendation, NEO base salaries were held flat at 2013 levels during the annual compensation review in February 2014.
Our Board of Directors also held its compensation flat in its annual review.
Annual Incentives were paid below target. We awarded annual incentives to our NEOs below the target award level, at 82% of their target award opportunity.
Performance Stock Units paid below target. Less than half (48.7%) of the 2012-2014 performance stock units vested.
50% of the 2012-2014 performance stock unit awards forfeited because the Company did not attain the performance threshold which was Total Stockholder Return equal to the 30th percentile of S&P 500 Utility companies.
The other 50% of this performance stock unit award paid out at 97.5% of the target number of shares based on our actual EBITDA less CapEx result of $8.0B, which was 99.4% of the pre-established target EBITDA less CapEx goal.
In addition, the current realizable value of our NEO’s outstanding long-term compensation grants is below the original grant date fair value. This outcome demonstrates the Company’s pay for performance philosophy since generally the NEOs will only realize the grant date fair value if the share price appreciates subsequent to the grant date. The actual amounts paid under the awards in this analysis may differ from both the realizable pay estimate and the grant date fair value.
The following chart compares the realizable value (as defined below) of long-term compensation grants made in the last three years to their original grant date fair market value for each NEO.
Realizable value is defined as the pre-tax value as of December 31, 2014 of all stock options, restricted stock units and performance stock units granted between 2012 and 2014 with certain assumptions regarding performance stock units as discussed below.
For the 2012-2014 performance stock unit grant, the 48.7% vesting level, discussed above, is reflected in the chart.
For performance stock unit awards for which the performance period is not yet complete (2013-15 and 2014-16), the value is based on our period-to-date results through December 31, 2014 which are generally below the target performance level.

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Our Executive Compensation Practices

The Compensation Committee frequently reviews developments in governance practices and market trends relating to executive compensation and has taken several actions intended to align the design and structure of AES’ executive compensation program, including our NEOs’ compensation, with current standards of governance and our stockholders’ interests. Key policies of the Compensation Committee are summarized below.

Target Total Compensation at 50th Percentile of Companies Comparable in Size
Our philosophy is to target total compensation (i.e., sum of base salary, target annual incentive opportunity and target long-term incentive opportunity) at the size-adjusted 50th percentile (based on revenues) of survey data to ensure a competitive compensation opportunity compared to similarly-sized companies;
Heavy Weight on Performance-based Compensation
Our compensation program is heavily weighted to performance-based pay with the majority of our compensation being paid through our annual incentive and long-term compensation plans;
Relative Pay-for-Performance Alignment
The Compensation Committee annually reviews an analysis of AES’ performance and CEO compensation relative to 15 utility and generation companies with revenues generally over $10B from the S&P 500 Utilities Index to whom investors may compare AES. Total Stockholder Return is the primary performance measure reviewed in that analysis.
The analysis summarized in the below chart indicated that AES’ CEO compensation and Total Stockholder Return were both below median for the three-year period from January 1, 2011 to December 31, 2013. CEO realizable pay was in the bottom quartile while AES’ Total Stockholder Return was in the third quartile. This analysis indicates that compensation actually realizable by our CEO aligns with value creation to AES Stockholders.

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Executive Stock Ownership Guidelines
We maintain market-competitive stock ownership guidelines to align our NEOs’ interests with those of our stockholders;
Clawback Policy
The Company maintains a “clawback” policy that provides the Compensation Committee with the discretion to seek recoupment of certain previously-paid incentive awards in the event that such awards are linked to a financial restatement caused by executive misconduct;
Executive Severance Provisions Comparable to Market Practice
The Company maintains an Executive Severance Plan which provides for severance benefits under certain termination scenarios, including termination in connection with a change-in-control. The benefits under these plans are comparable to what other companies similar in size offer to their executives;
No Change-in-Control Excise Tax Gross-ups
In the Company’s executive change-in-control severance arrangements, we have entirely discontinued the provision of change-in-control excise tax gross-ups;
No Perquisites for our Executive Officers
We do not provide perquisites to any of our Executive Officers;
No Special Retirement Benefit Formulas for our Executive Officers
Our supplemental executive retirement benefits are designed primarily to restore benefits capped under our broad-based retirement plans due to statutory limits imposed by the Internal Revenue Code (the “Code”);
No Backdating or Option Repricings
We have not backdated or repriced stock options, nor modified pre-set targets for annual incentive or performance equity awards;
No Hedging or Pledging of AES Common Stock
We maintain a policy that prohibits Executive Officers (including our NEOs) and Directors of the Company from hedging their economic interest in AES Common Stock or using AES Common Stock as collateral in a financial transaction;
Independent Consultant Retained by the Compensation Committee
Our Compensation Committee has retained and directs an independent compensation consultant who does not provide any other services to the Company; and
Annual Review of Risk Related to Compensation Programs
The Compensation Committee’s independent consultant annually conducts a review of the risks associated with our executive and incentive compensation programs and has determined that our compensation programs are not reasonably likely to have a material adverse effect on the Company.

These practices are discussed in further detail throughout the remainder of this CD&A.

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Results of 2014 Advisory Vote to Approve Executive Compensation (“2014 Say on Pay Vote”)

At its 2014 annual meeting of stockholders, AES received over 95% support for its NEO compensation based on the shares voted in favor of the 2014 Say on Pay vote. This outcome confirmed the Company’s view that the NEO compensation program is performance-based and aligns with our stockholders’ interests. In making future decisions on NEO compensation, the Compensation Committee will consider the outcome of future annual Say on Pay votes, including the vote to be taken in 2015.

Our Executive Compensation Process
The Role of Our Compensation Committee

The Compensation Committee has primary responsibility for oversight of the Company’s compensation plans, employee benefit plans and practices which cover our NEOs. The Compensation Committee Chair and the full Board of Directors also review the Company’s succession plan for the NEOs and other key positions.

Our philosophy is to provide compensation opportunities that approximate the size-adjusted 50th percentile of survey data based on our revenue size and industry. We then design our incentive plans to pay for performance with more compensation paid when performance exceeds expectations and less compensation paid when performance does not meet expectations. Thus, the actual compensation realized by an NEO will be commensurate with our actual performance.

In applying this philosophy, the Compensation Committee annually reviews the compensation of our NEOs to determine whether compensation changes are appropriate and may make changes to target total compensation opportunities as a result. In making these decisions, the Compensation Committee reviews survey data as described in the section titled “How We Use Survey Data in our Executive Compensation Process.”

The Compensation Committee also considers additional factors in making its decisions on each NEO’s target total compensation opportunity. The specific factors include: (1) survey data (as discussed above); (2) the individual’s performance against pre-set goals and objectives for the year, and Company performance; (3) the individual’s experience and expertise; (4) the NEO’s position and scope of responsibilities; (5) the individual’s future prospects with the Company; and (6) how changes to one compensation element affect total compensation.

The Compensation Committee is also responsible for assessing Company performance to determine and recommend payouts under incentive plans. To assess Company performance, the Compensation Committee receives a detailed summary of the Company’s overall performance against its pre-set targets for the year and, in the case of long-term compensation awards with performance criteria, the Company’s performance against pre-set targets for the three-year performance period.

The Role of the Compensation Committee’s Independent Consultant

In 2014, the Compensation Committee retained the services of its own independent consultant, Meridian Compensation Partners, LLC (“Meridian”), who provided the Compensation Committee with independent knowledge and experience related to executive compensation. Throughout the year, Meridian reported directly and exclusively to the Compensation Committee and provided objective input and analysis with reference to market data, trends, regulatory initiatives, governance best practices and emerging governance norms. Meridian’s services included reviewing survey data and the underlying methodologies used by management, and providing advice on determining the actual compensation amounts to be paid to the NEOs. During 2014, Meridian participated in eight Compensation Committee meetings either in person or by telephone. During 2014, Meridian provided no services to AES other than executive compensation services.

The Compensation Committee has reviewed the independence of Meridian as required by the NYSE rules that relate to the engagement of its advisors. No information was presented to the Compensation Committee that would affect Meridian’s independence.

The Role of Our Management

Our CEO participates in all Compensation Committee meetings, excluding any of the executive sessions or sessions of the Compensation Committee in which his compensation and performance are discussed or approved. His role in the process of determining executive compensation is to provide the Compensation Committee with an assessment of each NEO’s performance against his/her pre-set goals and objectives, and to provide his initial recommendations for each NEO’s compensation (other than his own).

Our SVP and Chief Human Resources Officer (“CHRO”) develops written background and supporting materials for review by the Compensation Committee prior to its meetings and presents information relating to specific elements of our compensation program. If

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warranted, she also proposes changes to our annual incentive and long-term compensation plans. In addition, she attends all Compensation Committee meetings.

The CEO and CHRO also provide the Compensation Committee with information about the Company’s overall performance to enable the Compensation Committee to make compensation decisions based on the Company’s performance, consistent with our pay-for-performance philosophy.

With the Compensation Committee’s knowledge and approval, the Human Resources team also directly interfaces with Meridian to prepare the necessary background information for the Compensation Committee.

How We Use Survey Data in our Executive Compensation Process

At the time it decides target total compensation opportunities, the Compensation Committee reviews survey data from Towers Watson. The data enables the Compensation Committee to compare compensation for our NEOs to compensation provided by similarly-sized general industry and energy companies for executives in comparable positions to our NEOs.

In 2014, we used survey data from Towers Watson’s U.S. General Industry and U.S. Energy Industry Databases.

The U.S. General Industry Database consisted of 442 companies, including 104 companies with revenues from $10B to $20B (AES is in this size category).
The U.S. Energy Industry Database consisted of 104 companies, including 29 companies with revenues over $6B (AES is in this size category). Also, the majority of the companies comprising the S&P 500 Utilities Index in February 2014 were included in the U.S. Energy Industry Database.
Survey data typically lag the year for which the compensation decision will apply and therefore are aged at an annualized rate of 3% per year.

To size-adjust market data, we used regression analysis, when available, to provide the most accurate indication of the compensation that companies with revenue size comparable to AES provide to executives in comparable roles. Regression analysis predicts the compensation paid by companies closest to us in size. Executive target total compensation more closely correlates with revenue than any other company size indicator for general and energy industry companies.

The Compensation Committee reviewed survey data at the time it made decisions on target total compensation for our NEOs in 2014. For some NEOs, a blend of general industry and energy industry data is appropriate based on the operational knowledge required of their positions and the international scope of their roles. For other NEOs, general industry data is appropriate based on the NEO’s responsibility over a major staff function within the Company (e.g., Legal, IT) and the international scope of their roles. Mr. Da Santos was not an Executive Officer at the time of this review in 2014 as discussed below. This approach is summarized below.

NEO
Equal Blend of General Industry and Energy Company Data
General Industry Data
Mr. Gluski, CEO
ü
 
Mr. O’Flynn, CFO
ü

 
Mr. Miller, General Counsel
 
ü

Ms. Hackenson, CIO
 
ü

Mr. Vesey, Former COO
ü
 

For 2014, target total compensation for our NEOs compared to the market percentile data are summarized in the following table.

NEO
Market Percentile of 2014 Target Total Compensation
Mr. Gluski, CEO
Between 25th and 50th percentile
 Mr. O’Flynn, CFO
At 50th percentile (within 5%)
 Mr. Miller, General Counsel
Above the 50th percentile (but within 20%)

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NEO
Market Percentile of 2014 Target Total Compensation
 Ms. Hackenson, CIO
Above the 50th percentile (but within 10%)
 Mr. Vesey, Former COO
Between 25th and 50th percentile

During the Company’s annual performance and compensation review in 2014, Mr. Da Santos was not an Executive Officer of the Company. His compensation for 2014 was set based on our internal management compensation structure. In December 2014, Mr. Da Santos was appointed SVP & COO on a permanent basis effective January 2015. In connection with this appointment, the Company approved the following compensation arrangements for Mr. Da Santos: annual base salary of $380,000; annual target incentive opportunity equal to 80% of base salary; and annual target long-term compensation opportunity equal to 140% of base salary.

The Compensation Committee views the Towers Watson survey data as an appropriate benchmark of compensation practices and levels of similarly-sized companies with international operations against whom we compete for talent.

CEO Compensation Relative to other NEOs

Our CEO’s compensation is higher than the compensation paid to our other NEOs largely due to the scope of his position and his overall responsibility for the Company’s strategy and direction, as well as his overall influence on AES’ near- and long-term performance, in general. When compared to our other NEOs, our CEO’s total compensation is more heavily weighted towards incentive compensation and his stock ownership guideline is higher. The higher compensation and different mix for our CEO are consistent with the survey data described above.

Overview of AES Total Compensation
Elements of Compensation
The following table lists each element of compensation and explains what the element is designed to reward, the objective of each element, and why we choose to pay each element.
Element of
Compensation
Description
Base Salary
Objective: Provide fixed cash compensation for each job position that is competitive and reflects the individual’s experience, responsibility and expertise
Designed to reward: Accomplishment of day-to-day job responsibilities; increases in salary take into account individual performance as well as other factors such as an NEO’s competitive positioning
Why we choose to pay: Market competitive and helps to attract and retain our NEOs
Performance
Incentive Plan
(our annual incentive plan)
Objective: Provide performance-based, short-term cash compensation relative to the achievement of pre-set, financial, operational and strategic objectives, and individual performance accomplishments and contributions
Designed to reward: Subject to achieving threshold performance goals, NEOs may receive 50-200% of the target incentive award based on achievement of pre-set financial, operational and strategic objectives
Why we choose to pay:
• Direct incentive to achieve the Company's financial, operational and strategic objectives for the year
• Market competitive and helps to attract and retain our NEOs
Long-Term Compensation
Objective: Provide equity-based awards that align the interests of our executives with those of our stockholders
Designed to reward: Share price growth, dividend performance and attainment of long-term financial goals
Why we choose to pay: 
• Directly links NEOs’ interests with those of stockholders and AES long-term financial performance
• Helps to build NEO stock ownership which further aligns NEOs’ interests with those of stockholders
• Market competitive and helps to attract and retain our NEOs

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Element of
Compensation
Description
Retirement and Health and Welfare Benefits
Objective:
• Provide competitive retirement and health and welfare benefits that are generally comparable to those provided to our broad-based U.S. employee population
• Our non-qualified Restoration Supplemental Retirement Plan (“RSRP”) is provided to restore benefits limited under our broad-based retirement plans due to statutory limits imposed by the Internal Revenue Code (there are no special or enhanced benefit contribution formulas under the RSRP)
Designed to reward: 
• All U.S. employees are offered retirement and health and welfare benefits in connection with their performance of services for the Company
• All individuals above a certain income threshold, including our NEOs, are offered the RSRP
Why we choose to pay:
• Consistent with our approach for the broad-based population
• Market competitive and helps to attract and retain our NEOs

How We Determine Each Element of Compensation
The Company does not target a specific allocation of cash versus equity compensation, nor does it target a specific allocation between short- and long-term compensation. Instead the Compensation Committee sets each individual element of total compensation based on a review of:

Survey data for each element of total compensation;
Individual performance against pre-set goals and objectives for the year, and Company performance;
An individual’s experience and expertise;
Position and scope of responsibilities;
An individual’s future prospects with the Company; and
The new total compensation that would result from any change and how the new total compensation compares to survey data on total compensation.

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CEO Target Total Compensation Mix
Other NEO Target Total Compensation Mix
For our CEO, over 70% of compensation is at-risk and performance-based, and over 65% is equity-based.
For our other NEOs, on average, 65% of compensation is at-risk and performance-based, and over 50% is equity-based.

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The Compensation Committee does not explicitly consider other factors in making compensation decisions, including prior years’ awards or current equity holdings. The Compensation Committee does, however, annually review “Tally Sheets” to ensure it has a detailed understanding of how its decisions on individual compensation elements affect other compensation elements and total compensation. For each NEO, the Tally Sheets provide the Compensation Committee with detailed information on:

Year-over-year changes in total compensation;
The value of outstanding long-term compensation awards under various share price and financial performance scenarios;
Payouts and realized gains from past long-term compensation awards; and
The value of benefits payable upon termination and change-in-control.

A discussion of how the Compensation Committee determined each element of compensation for 2014 is provided in the next section of this CD&A.

2014 Compensation Determinations

Base Salary

As explained in the section titled “Our Executive Compensation Process,” the Compensation Committee reviews the base salaries of our NEOs annually. In addition, the Compensation Committee will review the base salary of an Executive Officer if there is a promotion or in the case of a newly-hired Executive Officer.

At the recommendation of the CEO, the 2014 base salary for each of our Executive Officers was held constant at 2013 levels to signal executive leadership’s commitment to the Company’s overhead cost savings objectives.

Further details on 2014 base salaries paid to our NEOs can be found in the Summary Compensation Table of this Proxy Statement.

2014 Performance Incentive Plan Payouts

2014 Company Performance Score Targets: Our NEOs are eligible for annual incentive awards under the Performance Incentive Plan, a stockholder-approved plan that is intended to preserve the tax deductibility of annual incentive awards paid by the Company under Section 162(m) of the Code. Under the Performance Incentive Plan, the NEOs were eligible to receive a maximum payout capped at 0.17% of EBITDA for the CEO and 0.07% of EBITDA for each of the other NEOs. Assuming the Company achieves positive EBITDA and awards are payable, the Compensation Committee has the right (but not the obligation) to exercise negative discretion to reduce the amount of the awards that are paid to our NEOs.

Subject to the Compensation Committee’s discretionary authority to reduce the award, the final annual incentive awards paid to the NEOs were based on certain additional pre-established measures. As described more fully below, in the first quarter of 2014, the Compensation Committee established measures in four categories: Safety, Financial, Operational KPIs and Enterprise Objectives. In setting these additional performance measures, the Compensation Committee considered information provided by Management about the Company’s strategy, financial budget for the year and operational objectives. The Compensation Committee approved performance measures and objectives across all four categories that it considered to be highly challenging.
Safety: 10% Weight
Safety is a critical measure for AES given the dangers inherent in the operation of our business. The Company has a global safety program which encourages its businesses to promote safety, and safety is a key corporate value.
While goals are set for each measure below, the Compensation Committee approves a score based on its qualitative assessment.
• Workplace safety incidents
• Improvement in lost time incident (LTI) case rate
• Monthly safety walk targets
• Monthly safety meeting attendance

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Financial Measures: 60% Weight
Financial measures were included to ensure the payouts to our NEOs align with value creation to stockholders. The 2014 targets, set forth below, were equal to our 2014 budget, subject to pre-established guidelines for adjusting the targets for portfolio changes during the year.
Provided the threshold financial requirement for each measure is met, the score ranges from 50% to 200%. A 50% score corresponds to actual results at 80% of the target goal. A 200% score corresponds to actual results at or above 120% of the target goal.
• Adjusted EPS: $1.34 (25% weight)
• Proportional Free Cash Flow: $1,153M (20% weight)
• Subsidiary Distributions: $1,150M (15% weight)
• Subsidiary Distributions are important to AES because AES is a holding company that does not derive any significant direct revenues from its own activities, but instead relies on its subsidiaries’ business activities and the resultant distributions to fund its debt service, investment and other cash needs.
• Subsidiary Distributions should not be construed as an alternative to Net Cash Provided by Operating Activities, which is determined in accordance with GAAP.
• The difference between Subsidiary Distributions and Net Cash provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons, which are both discretionary and non-discretionary in nature.
Adjusted EPS and Proportional Free Cash Flow are reconciled to the nearest GAAP measure in the section titled “Non-GAAP Measures.”
Operational Key Performance Indicator Index: 20% Weight
The Operational Key Performance Indicator Index measures how efficiently and reliably we operate our plants, meet our customers’ electricity needs and manage collections.
Each Key Performance Indicator is weighted and has a threshold, target and maximum performance goal set at the beginning of the year. The final index score may range from 0% to 200%.
Generation Key Performance Indicators (weighting)
• Commercial Availability (43.26%)
• Equivalent Forced Outage Factor (34.08%)
• Heat Rate (20.41%)
• Days Sales Outstanding (2.25%)
Distribution Key Performance Indicators (weighting)
• System Average Interruption Duration Index (38.39%)
• System Average Interruption Frequency Index (26.63%)
• Non-Technical Losses (5.87%)
• Customer Service (18.54%)
• Days Sales Outstanding (10.57%)
Enterprise Objectives: 10% Weight
Enterprise objectives include measures considered to be of strategic importance to the Company, including realization of overall cost reduction targets, people development, management of the asset portfolio and enhancements to our capital allocation process.
While goals are set for each measure below, the Compensation Committee approves the score based on its qualitative assessment.
Cost and Efficiency Targets
• Overall Overhead Cost Savings from 2011 Base: $193M
Talent Management
• Expanded Development and Succession Plans for Top 50 Positions
Capital Allocation
• New Build Projects of 2,000 MW
• Adjacencies and Enhancements to achieve $40M in 2015 PTC
• Three New Financial Partnerships


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2014 Actual Results: In February 2015, the Compensation Committee determined that the Company achieved positive EBITDA of $4,145M and that the NEOs were eligible for annual incentive awards under the pre-established Section 162(m) performance criteria. The Compensation Committee exercised negative discretion to pay the 2014 corporate performance score based on actual results on the pre-established performance measures as shown below. As a result, each NEO’s initial payout was 82% of target.
Measurement Category
Actual Result
Weight
Final Score
(as % of Target)
Safety
• Safety incidents occurred during year
• 2014 LTI case rate improved relative to 2013
• Number of safety walks exceeded target
• Monthly safety meeting attendance exceeded target
10%
90%
(qualitative assessment)
Financial
• Adjusted EPS: $1.30
• Proportional Free Cash Flow: $891M
• Subsidiary Distributions: $1,151M1
60%
64%
Operational KPIs
• Operational KPI Score of 106
20%
106%
Enterprise Objectives
Cost and Efficiency Targets
• Overall Overhead Cost Savings from 2011 Base: $226M
Talent Management
Succession / development plans expanded to Top 50 Positions
Capital Allocation
• New Build Projects of 2,105 MW
• Adjacencies and Enhancements to achieve $51M in 2015 PTC
• Four New Financial Partnerships
10%
135%
(qualitative assessment)
Overall AES Performance Score 82%
1 Actual results shown above reflect adjustments based on pre-established guidelines to address impact of portfolio changes

NEO Individual Strategic Objectives: The Compensation Committee is empowered with the authority to further determine whether to differentiate the annual incentive award payouts for each NEO from the Overall AES Performance Score based on performance against individual strategic objectives. Specific individual strategic objectives pertaining to each NEO are shown below. The Compensation Committee determined that, based on their contributions to Company performance, the award payout as a percent of target should be consistent across the NEOs in 2014 at the Overall AES Performance Score.

Strategic Objective
Mr. Gluski
Mr. O’Flynn
Mr. Miller
Ms. Hackenson
Develop Strategic Financial Partnerships
ü
ü

ü

 
Overhead Cost Savings Initiative
ü

ü
ü

ü

Global Sourcing Savings
ü

ü
ü
ü

Adjacencies and Enhancements
ü

 
 
ü

Drought Mitigation Efforts
ü

 
 
 
Reduce Outstanding Legal Disputes
ü

 
ü

 
New Build Goals
ü

 
 
 
Portfolio Management Activities
 
ü

ü

 
Advance Platform Growth Strategy
ü
ü

ü
ü
AES Capital Structure
 
ü

 
 
Finance Process KPIs
 
ü

 
 
Stakeholder Outreach
 
 
ü

 
Key IT Processes
 
 
 
ü

Effective Facility Management
 
 
 
ü

Advance Construction Projects
ü
 
 
 


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Mr. Da Santos’ 2014 objectives were initially set in conjunction with his role of CFO Operations at the beginning of 2014. Upon his transition to the COO role, he assumed the completion or continuation of the objectives previously assigned to Mr. Vesey, which included the Overhead Cost Savings Initiative, Global Sourcing Savings, Adjacencies and Enhancements, and Drought Mitigation Efforts.

Final 2014 Annual Incentive Payouts: The following table shows the final award for each of our NEOs under the 2014 Performance Incentive Plan. As discussed above, the Compensation Committee set the annual incentive payout (as a percent of the target award) equal to the Overall AES Performance Score of 82% for the CEO and the other NEOs. Mr. Vesey was not entitled to a payment under the Performance Incentive Plan due to his separation from the Company prior to the payment date.

NEO
2014 Base Salary
2014 Target Annual Incentive
(% of base salary)
Actual 2014 Annual Incentive Award
% of Target Annual Incentive
Dollar Value
Mr. Gluski, CEO
$1,130,000
150%
82%
$1,390,000
Mr. O’Flynn, CFO
$650,000
100%
82%
$533,000
Mr. Miller, General Counsel
$568,000
100%
82%
$466,000
Ms. Hackenson, CIO
$420,000
85%
82%
$293,000
Mr. Da Santos, COO
$339,248
80%
82%
$223,000

Long-Term Compensation

2014 Long-term Compensation Mix: For 2014, the overall long-term compensation award mix was based on our (1) compensation philosophy which emphasizes alignment between executive compensation and stockholder value creation; (2) long-term strategic and financial objectives; (3) goal of retaining our NEOs; and (4) review of relevant market practices. For 2014, we utilized the same mix as in 2012 and 2013. This mix consisted entirely of equity-based awards and 80% of the 2014 mix was performance-based as follows:

Restricted Stock Units are awarded to assist in retaining our NEOs and to increase NEO stock ownership to align NEOs’ interests with those of stockholders

Performance Stock Units that vest based on EBITDA less Maintenance & Environmental CapEx are awarded to focus our NEOs on both long-term cash generation, a measure of AES financial performance, as well as share price performance as units are settled in shares of AES Common Stock
 
 
Stock Options are awarded to provide our NEOs with an incentive to increase the price of AES Common Stock subsequent to the grant date
 
Performance Stock Units that vest based on Total Stockholder Return are awarded to focus our NEOs on delivering total returns to stockholders that are equal to or in excess of returns produced by other S&P 500 Utility Companies

Performance Stock Units Based on EBITDA Less Maintenance & Environmental CapEx (EBITDA less CapEx): Performance stock units represent the right to receive a single share of AES Common Stock subject to performance- and service-based vesting conditions. Half of the performance stock units granted in 2014 are eligible to vest subject to our three-year cumulative EBITDA less CapEx. EBITDA less CapEx is a measure of long-term cash generation driven by increasing revenue, reducing costs, improving productivity and efficiently utilizing capital. Growth-related CapEx is excluded since the EBITDA less CapEx measure is intended to assess our operating efficiency and the amount of cash we generate for capital allocation. In addition, environmental capital projects that generate a regulated rate of return are excluded from the definition of Environmental CapEx.

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The EBITDA less CapEx target is set for the three-year performance period and is subject to pre-defined, objective adjustments during the three-year performance period, based on changes to the Company’s portfolio, such as an asset divestiture or sale of a portion of equity in a subsidiary.

The final value of the performance stock unit award depends upon the level of EBITDA less CapEx achieved over the three-year measurement period as well as our share price performance over the period since the award is stock-settled. If a threshold level of EBITDA less CapEx is achieved, units vest and are settled in the calendar year that immediately follows the performance period end.

The following table illustrates the vesting percentage at each EBITDA less CapEx level for targets set for the 2014-2016 performance period:
Performance Level
Vesting Percentage
Below 75% of Performance Target
0%
Equal to 100% of Performance Target
100%
Equal to 125% of Performance Target
200%

Between the EBITDA less CapEx levels listed in the above table, straight-line interpolation is used to determine the vesting percentage for the award. The ability to earn performance stock units is also generally subject to the continued employment of the NEO. The Compensation Committee approved an EBITDA less CapEx target for the 2014 performance stock unit that was considered to be highly challenging and will require improvement over prior performance.

Performance Stock Units Based on AES Total Stockholder Return: For the other half of the performance stock units granted in 2014, vesting is subject to AES three-year cumulative Total Stockholder Return from January 1, 2014 through December 31, 2016 relative to companies in the S&P 500 Utilities Index. We use Total Stockholder Return as a performance measure to align our NEOs’ compensation with our stockholders’ interests since the ability to earn the award is linked directly to stock price and dividend performance over a period of time.

Total Stockholder Return is defined as the appreciation in stock price and dividends paid over the performance period as a percent of the beginning stock price. To determine share price appreciation, we use a 90-day average stock price for AES and the S&P 500 Utilities Index companies at the beginning and end of the three-year performance period. This avoids short-term volatility impacting the calculation.

The final value of the performance stock unit award depends upon AES’ percentile rank against the S&P 500 Utilities Index companies as well as the performance of our share price over the period since the award is stock-settled. If AES’ Total Stockholder Return is above the threshold percentile rank established for the performance period, units vest and are settled in AES Common Stock in the calendar year that immediately follows the performance period end. The following table illustrates the vesting percentage at each percentile rank for the 2014-2016 performance period:

AES 3-Year Total Stockholder Return Percentile Rank
Vesting Percentage
Below 30th percentile
0%
Equal to 30th percentile
50%
Equal to 50th percentile
100%
Equal to 90th percentile
200%

Between the percentile ranks listed in the above table, straight-line interpolation is used to determine the vesting percentage for the award. The ability to earn these performance stock units is also generally subject to the continued employment of the NEO.

Stock Options: A stock option represents an individual’s right to purchase shares of AES Common Stock at a fixed exercise price after the stock option vests. We award stock options to align our NEOs’ interests by providing an incentive to increase the price of AES Common Stock subsequent to grant; a stock option only has value to the holder if our stock price exceeds the stock option’s exercise price after it vests. Stock options vest based on continued service with the Company in three equal installments beginning on the first anniversary of the grant.

It is our policy to grant stock options to NEOs at an exercise price equal to the closing price of AES Common Stock on the grant date.

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Restricted Stock Units: Restricted stock units represent the right to receive a single share of AES Common Stock subject to service-based vesting conditions. The Company grants restricted stock units to assist in retaining our NEOs and also to increase their ownership of AES Common Stock, which further aligns our NEOs’ interests with those of stockholders. Restricted stock units vest based on continued service with the Company in three equal installments beginning on the first anniversary of the grant.

2014 Long-Term Compensation Grants: In February 2014, consistent with our practice in prior years, the Company granted long-term compensation to the NEOs. The expected target grant values below are based on the Black-Scholes value of stock options assuming options are exercised at the end of the full contractual term and the grant date closing stock price of AES Common Stock for performance stock units and restricted stock units.
NEO
February 2014 Long-Term Compensation Grant Expected Target Grant Value
As % of Base Salary
Dollar Amount
Mr. Gluski, CEO
525%
$5,932,500
Mr. O’Flynn, CFO
250%
$1,625,000
Mr. Miller, General Counsel
210%
$1,192,800
Ms. Hackenson, CIO
140%
$588,000
Mr. Da Santos, COO
127%
$408,713
Mr. Vesey, Former COO
275%
$1,787,500


Further details on all long-term compensation grants to our NEOs can be found in the Summary Compensation Table and Grants of Plan-Based Awards Table of this Proxy Statement.

Prior Year Performance Stock Units Vesting in 2014: All of the NEOs received a grant of performance stock units in February 2012 with the exception of Messrs. O’Flynn and Da Santos. Mr. O’Flynn commenced employment with the Company after the annual 2012 grant date. Mr. Da Santos received long-term compensation grants under a different award mix in 2012 including performance units which are described below. For the 2012-2014 performance stock units:

50% of the target number of shares was based on the Company’s Total Stockholder Return relative to S&P 500 Utility companies for the period from January 1, 2012 to December 31, 2014; and
50% of the target number of shares was based on the achievement of the Company’s cumulative EBITDA less CapEx target for the 2012-2014 period.
The portion of the performance stock unit award based on Total Stockholder Return was forfeited because the Company did not attain the performance threshold which was Total Stockholder Return equal to the 30th percentile of S&P 500 Utility companies.

The portion of the performance stock unit award based on EBITDA less CapEx paid out at 97.5% of the target number of shares based on our actual EBITDA less CapEx result of $8.0B, which was 99.4% of the target EBITDA less CapEx goal of $8.1B.

Thus, the total payout for this award for the NEOs, with the exception of Messrs. O’Flynn and Da Santos who did not receive this award, was 48.7% of the original target number of shares as detailed in the following table:

2012 Performance Stock Units (2012-2014 Performance Period)
NEO
Target Number of Units
% of Target Vested Based on:
Final Shares Vested
Relative
AES Total Stockholder Return
Cumulative
EBITDA less CapEx
Number of Shares 1
% of Original Target
Mr. Gluski, CEO
155,109
0%
97.5%
75,600
48.7%
Mr. Miller, General Counsel
40,584
0%
97.5%
19,781
48.7%
Ms. Hackenson, CIO
20,212
0%
97.5%
9,851
48.7%
Mr. Vesey, Former COO
46,898
0%
97.5%
15,239
48.7%

1 In accordance with the service requirements of this grant, the final one-third vesting of units required continued service through the third anniversary of the grant date. Due to Mr. Vesey’s separation from the Company on December 31, 2014, the final one-third of his target units were forfeited.


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EBITDA less CapEx is defined as Gross Margin; plus Depreciation and Amortization; plus Intercompany Management Fees; minus SG&A to equal EBITDA. An adjustment is made to reduce EBITDA by Maintenance and Environmental CapEx. The Environmental CapEx for this adjustment is reduced by those projects with tracker returns that, through a regulatory mechanism, provide for the recovery of, and return on, certain utility investments. As a final step in the calculation, the Total EBITDA less CapEx is adjusted by AES’ ownership percentage (which reflects AES’ direct or indirect ownership in a particular business).

Further details on the 2012-2014 performance stock unit payout to our NEOs can be found in the Outstanding Equity Awards at Fiscal Year-End Table and Option Exercises and Stock Vested Table of this Proxy Statement.

Prior Year Performance Units Vesting in 2014: Mr. Da Santos received a grant of performance units in February 2012. Performance units represent the right to receive cash subject to performance- and service-based vesting conditions. Each unit granted has a $1 target value. Threshold performance on this metric occurs for performance at 75% of target at which time 0% of the units vest. Maximum performance is attained at 125% of target which would trigger a vesting of 200% of the granted units.

For this award, performance was based entirely on the achievement of the Company’s cumulative EBITDA less CapEx target for the 2012-2014 period. The EBITDA less CapEx performance metric is consistent with the metric used for half the performance stock units as described above. This performance unit award paid out at 97.5% of the target cash value based on our actual EBITDA less CapEx result of $8.0B, which was 99.4% of the target EBITDA less CapEx goal of $8.1B as detailed in the following table.

2012 Performance Units (2012-2014 Performance Period)
NEO
Target Number of Units
Target Cash Value
Cumulative
EBITDA less CapEx
Performance
Final Award Value
Mr. Da Santos, COO
$103,361
$103,361
97.5%
$100,746

Further details on the 2012-2014 performance unit payout to Mr. Da Santos can be found in the Summary Compensation Table of this Proxy Statement.

Other Relevant Compensation Elements and Policies

Perquisites

We do not provide perquisites to any of our Executive Officers.

Retirement Benefits

We cover our NEOs under the Restoration Supplemental Retirement Plan (“RSRP”) to restore benefits that are limited under our broad-based retirement plans due to statutory limits imposed by the Code. The RSRP’s objectives are consistent with our philosophy to provide competitive levels of retirement benefits and to retain talented executives. The RSRP does not contain any enhanced or special benefit formulas for our NEOs. Contributions to the RSRP made in 2014 are included in the All Other Compensation column of the Summary Compensation Table of this Proxy Statement. Additional information regarding the RSRP is contained in the “Narrative Disclosure Relating to the Non-Qualified Deferred Compensation Table” of this Proxy Statement. In addition to the RSRP, the Company covers the NEOs under the same qualified retirement plan that covers other U.S.-based AES employees who do not participate a defined benefit plan at one of our U.S. subsidiaries.

Stock Ownership Guidelines

Our Board of Directors, based upon our Management’s and the Compensation Committee’s recommendations, adopted stock ownership guidelines in 2010 that became effective in January 2011. These guidelines promote our objective of increasing stockholder value by encouraging our NEOs to acquire and maintain a meaningful equity stake in the Company.

The guidelines were designed to maintain stock ownership at levels high enough to assure our stockholders of our NEOs’ commitment to value creation. Under these guidelines, our NEOs are expected, over time, to acquire and hold shares of AES Common Stock equal in value to a multiple of their annual salaries. The Compensation Committee sets the ownership multiples based on market practice for each NEO’s position. The current ownership multiple for each NEO is as follows:


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NEO
Ownership Multiple
(multiple of base salary)
Mr. Gluski, CEO
5x
Mr. O’Flynn, CFO
3x
Mr. Miller, General Counsel
3x
Ms. Hackenson, CIO
2x
Mr. Da Santos, COO
2x

Shares owned directly and shares beneficially acquired under our retirement plans all count toward satisfying the guidelines. Unexercised stock options, unvested performance stock units and unvested restricted stock unit awards do not count towards satisfaction of the guidelines.

The Company requires that 67% of net shares (net of option exercise price and/or withholding tax) acquired after the guideline effective date will be retained and cannot be liquidated until the guideline has been met.

Mr. Vesey’s stock 3x ownership guideline was effective through December 31, 2014, the date of his separation from the Company. The stock ownership guideline for Mr. Da Santos is effective beginning on January 1, 2015.

Severance and Change-in-Control Arrangements

The Company maintains certain severance and change-in-control arrangements, including the Executive Severance Plan and change-in-control provisions in the long-term compensation award agreements.

Executive Severance Plan: The Compensation Committee has included all Executive Officers on a single Executive Severance Plan, the design of which is consistent with current market practices. Newly hired or promoted executives are included in this plan beginning on the first date of their executive appointment. The Executive Severance Plan does not contain any excise tax gross-ups and, thus, none of our NEOs are eligible for an excise tax gross-up.

The Company provides severance benefits for qualifying termination both related and unrelated to a change-in-control to enable the attraction and retention of key executive talent. Also, in the case of severance benefits upon a qualifying termination related to a change-in-control, the Company believes these benefits will help to align the NEOs’ interests with those of stockholders by mitigating any uncertainties the NEOs may have about their ongoing employment if the change-in-control is pursued. The Company provides severance benefits after a change-in-control only if there is a qualifying termination of employment following the change-in-control (i.e., “double-trigger benefits”).

Further details on the Executive Severance Plan can be found in the section titled “Additional Information Relating to Potential Payments upon Termination of Employment or Change-in-Control” of this Proxy Statement.

Vesting of Long-term Compensation Awards upon Change-in-Control: Upon a change-in-control, the unvested portion of all outstanding awards will vest immediately (at target performance levels for performance awards). The purpose of this accelerated vesting is to ensure that we retain our Executive Officers and other key employees prior to and through the change-in-control. The Compensation Committee periodically reviews these vesting provisions in relation to market practice.

Clawback Policy

The Company has adopted a “clawback policy” which provides the Compensation Committee with the discretion to seek the reimbursement of any annual incentive payment or long-term compensation award, as defined under the policy, to key executives of the Company, including our NEOs, where:

The initial payment was calculated based upon achieving certain financial results that were subsequently the subject of a material restatement of the Company’s financial statements;
The Compensation Committee, in its discretion, determines that the executive engaged in fraud or willful misconduct that caused, or substantially caused, the need for the restatement; and
A lower payment would have been made to the executive based upon the restated financial results.

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In each such instance, the Compensation Committee has the discretion to determine whether it will seek recovery from the individual executive and has discretion to determine the amount. The policy applies to annual incentive payments made in or after 2013 under the Performance Incentive Plan and performance unit and performance stock unit awards granted in or after 2012.

Prohibition Against Hedging and Pledging

The Board of Directors has adopted a policy that prohibits Directors and Officers required to file reports with the SEC under Section 16 of the Securities Exchange Act of 1934, as amended, which includes our NEOs, from hedging their economic interest in AES Common Stock or using AES Common Stock as collateral in a financial transaction.

IRS Section 162(m)

The Compensation Committee also considers and evaluates the impact of applicable tax laws with respect to compensation paid under our plans, arrangements and agreements. For instance, with certain exceptions, Section 162(m) of the Code limits our deduction for compensation in excess of $1M paid to certain covered employees (generally our CEO and three other highest paid Executive Officers). Compensation paid to covered employees is not subject to the deduction limitation if it is considered “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.

While the Compensation Committee generally intends to structure and administer our stockholder-approved compensation plans so as not to be subject to the deduction limit of Section 162(m) of the Code, the Compensation Committee may, where it believes it is in the best interests of our stockholders and to remain competitive in the marketplace for talent, approve awards or payments that cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs. Additionally, if any provision of a plan or award that is intended to be performance-based under Section 162(m) of the Code is later found to not satisfy the conditions of Section 162(m), our ability to deduct such compensation may be limited.

Our Performance Incentive Plan and Long-Term Compensation Plan currently enable us to grant awards thereunder which comply with the tax deductibility requirements of Section 162(m).

Non-GAAP Measures

In this CD&A, we reference certain Non-GAAP measures, including Adjusted EPS and Proportional Free Cash Flow, which are publicly disclosed in our periodic filings with the SEC or in other materials posted on our website. These measures are reconciled to the nearest GAAP measure in the information below.

Reconciliation of Adjusted EPS
 
 
Year Ended
December 31, 2014
Diluted EPS from continuing operations
 
$
1.09

Unrealized derivative (gains)/ losses
 
$
(0.12
)
Unrealized foreign currency transaction (gains)/ losses
 
0.14

Disposition/ acquisition (gains)
 
(0.59
)
Impairment losses
 
0.53

Loss on extinguishment of debt
 
0.25

Adjusted pre-tax contribution and Adjusted EPS
 
$
1.30















29



Reconciliation of Proportional Free Cash Flow (in millions)
 
 
Year Ended December 31, 2014
Proportional Operating Cash Flow
 
$
1,432

 
 
 
Less: Proportional Maintenance Capital Expenditures, net of reinsurance proceeds
 
$
485

Less: Proportional Non-recoverable Environmental Capital Expenditures
 
56

Proportional Free Cash Flow
 
$
891


For purposes of the 2014 Performance Incentive Plan target goals and actual results, we have included certain further adjustments to Proportional Free Cash Flow which were approved by the Compensation Committee. These adjustments are made in order to reflect changes in our portfolio during the year such as sales of businesses, discontinued operations and acquisitions.

Report of the Compensation Committee

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with AES’ Management and, based on this review and discussion, recommended to the Board that it be included in AES’ Proxy Statement and incorporated into AES’ Annual Report on Form 10-K for the year ended December 31, 2014.

The Compensation Committee of the Board of Directors,

Sandra O. Moose, Chair
Kristina M. Johnson
James H. Miller
Moisés Naím

Risk Assessment

We believe that the general design of our compensation program reflects an appropriate mix of compensation elements and balances current and long-term performance objectives, cash and equity compensation, and risks and rewards associated with our executives’ roles. The following features of the program illustrate this point:

Our program reflects a balanced mix of compensation awards to avoid excessive weight on any one performance measure and is designed to promote stability and growth (1) in the short-term through the payment of an annual incentive award with largely pre-set targets; and (2) in the long-term, through the payment of equity awards;
Our annual incentive plan and performance stock units provide a defined range of payout opportunities ranging from 0-200% of target;
Total compensation levels are heavily weighted on long-term equity-based incentive awards with three-year service-based vesting schedules and, in the case of performance stock units, cumulative long-term performance goals;
We have implemented stock ownership guidelines that became effective in January 2011 so that our NEOs’ and other senior executives’ personal wealth is tied to the long-term success of the Company; and
The Compensation Committee retains discretion to adjust or modify compensation based on the Company’s and executives’ performance.
In 2014, with the assistance of its independent advisor, the Compensation Committee analyzed all of the Company’s compensation programs from a risk perspective. In that review, Meridian identified several risk mitigators including:

Good balance of fixed and variable pay opportunities;
Capped incentive plans;
Multiple incentive measures that compete with each other;
Performance measured at the large business unit or corporate level;
Mix of measurement time periods;
Long-term stock holding periods or stock ownership requirements;

30



Allowable Compensation Committee discretion, especially in the annual incentive plan and performance stock unit agreements;
Oversight provided by non-participants in the plans, including external party review of plan results and Compensation Committee approval of goals;
Moderate severance program; and
Clawback policy.
Because of the presence of the risk mitigators identified above and the design of our compensation program, we believe that the risks arising from our employee compensation program are not reasonably likely to have a material adverse effect upon AES.

Summary Compensation Table (2014, 2013 and 2012)*
 
Name and Principal Position
 
Year
 
Salary
($)(1)
 
Stock Awards
($)(2)
 
Option Awards
($)(3)
 
 Non-Equity Incentive Plan Compensation
($)(4)
 
All Other Compensation
($)(5)
 
 Total
($)
Andrés Gluski
 
2014
 
$1,130,000
 
$4,209,510
 
$1,476,435
 
$1,390,000
 
$197,300
 
$8,403,245
President & Chief Executive Officer
 
2013
 
$1,130,000
 
$4,010,731
 
$1,159,169
 
$2,102,000
 
$173,250
 
$8,575,150
 
2012
 
$1,000,000
 
$3,444,977
 
$800,868
 
$2,302,014
 
$153,506
 
$7,701,365
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thomas O’Flynn
 
2014
 
$650,000
 
$1,153,062
 
$404,416
 
$533,000
 
$82,458
 
$2,822,936
EVP & Chief Financial Officer
 
2013
 
$650,000
 
$1,214,236
 
$350,937
 
$806,000
 
$25,600
 
$3,046,773
 
2012
 
$214,167
 
$500,000
 
$422,079
 
$214,167
 
$10,708
 
$1,361,121
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brian Miller
 
2014
 
$568,000
 
$846,378
 
$296,854
 
$466,000
 
$89,454
 
$2,266,686
EVP, General Counsel & Corporate Secretary
 
2013
 
$568,000
 
$864,543
 
$249,867
 
$704,000
 
$94,210
 
$2,480,620
 
2012
 
$551,000
 
$901,376
 
$209,543
 
$1,006,438
 
$105,502
 
$2,773,859
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Elizabeth Hackenson
 
2014
 
$420,000
 
$417,227
 
$146,338
 
$293,000
 
$25,246
 
$1,301,811
SVP, Global Business Services & CIO
 
2013
 
$420,000
 
$472,245
 
$136,487
 
$443,000
 
$24,447
 
$1,496,179
 
2012
 
$407,453
 
$448,912
 
$104,362
 
$559,392
 
$31,647
 
$1,551,766
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bernerd Da Santos
 
2014
 
$339,248
 
$290,001
 
$101,716
 
$323,746
 
$46,689
 
$1,101,400
SVP & COO
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Andrew Vesey
 
2014
 
$650,000
 
$1,268,351
 
$444,857
 
$0
 
$99,783
 
$2,462,991
Former EVP & COO
 
2013
 
$650,000
 
$1,214,236
 
$350,937
 
$806,000
 
$96,230
 
$3,117,403
 
2012
 
$578,000
 
$1,416,598
 
$513,608
 
$1,116,908
 
$101,040
 
$3,726,154
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

*
Table excludes the Bonus and Change in Pension Value and Non-Qualified Deferred Compensation Earnings columns, which are not applicable.

NOTES:
(1)
The base salary earned by each NEO during fiscal years 2014, 2013 and 2012, as applicable. Mr. Da Santos was not an NEO for 2013 or 2012.
(2)
Aggregate grant date fair value of performance stock units and restricted stock units granted in the year which are computed in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 718, “Compensation-Stock Compensation” (“FASB ASC Topic 718”) disregarding any estimates of forfeitures related to service-based vesting conditions. A discussion of the relevant assumptions made in the valuation may be found in our financial statements, footnotes to the financial statements (footnote 18), or Management’s Discussion & Analysis, as appropriate, contained in our Annual Report on Form 10-K for the year ended December 31, 2014 (“AES’ Form 10-K”) which also includes information for 2012 and 2013. Based on the share price at grant and assuming the maximum market and financial performance conditions are achieved, the maximum value of the performance stock units granted in fiscal year 2014 and payable following completion of the 2014-2016 performance period are shown below.

31



 
Maximum Value of Performance Stock Units
Granted in FY14 (payable after
completion of 2014-2016 performance period)
 
 
Name
 
# 
 
$
(Based on Grant Price) 
 
Andrés Gluski
405,502
$5,932,494
Thomas O’Flynn
111,074
$1,625,013
Brian Miller
81,532
$1,192,813
Elizabeth Hackenson
40,192
$588,009
Bernerd Da Santos
27,936
$408,704
Andrew Vesey
122,180
$1,787,493
(3)
Aggregate grant date fair value of stock options granted in the year which are computed in accordance with FASB ASC Topic 718. The aggregate grant date fair value disregards any estimates of forfeitures related to service-based vesting conditions. A discussion of the relevant assumptions made in the valuation may be found in our financial statements, footnotes to the financial statements (footnote 18), or Management’s Discussion & Analysis, as appropriate, contained in AES’ Form 10-K which also includes information for 2012 and 2013.
(4)
The value of all non-equity incentive plan awards earned during the 2014 fiscal year and paid in 2015, which includes awards earned under our Performance Incentive Plan (our annual incentive plan) and awards earned for the three-year performance period ended December 31, 2014 for our cash-based performance units granted under our LTC Plan. The following chart shows the breakdown of awards under these two plans for each NEO. Mr. Vesey was not entitled to a payment under the Performance Incentive Plan due to his separation from the Company prior to the payment date.
Name
2014 Annual Incentive Plan Award
2012-2014 Performance Unit Award
Total Non-Equity Incentive Plan Compensation
Andrés Gluski
$1,390,000
$0
$1,390,000
Thomas O’Flynn
$533,000
$0
$533,000
Brian Miller
$466,000
$0
$466,000
Elizabeth Hackenson
$293,000
$0
$293,000
Bernerd Da Santos
$223,000
$100,746
$323,746

(5)
All Other Compensation includes Company contributions to both qualified and non-qualified defined contribution retirement plans.
Name
AES Contributions 
to  Qualified Defined 
Contribution Plans 
AES Contributions 
to Non-Qualified Defined 
Contribution Plans 
Total Other
Compensation
Andrés Gluski
$28,300
$169,000
$197,300
Thomas O’Flynn
$28,300
$54,158
$82,458
Brian Miller
$28,300
$61,154
$89,454
Elizabeth Hackenson
$15,300
$9,946
$25,246
Bernerd Da Santos
$28,300
$18,389
$46,689
Andrew Vesey
$28,300
$71,483
$99,783


32



Grants of Plan-Based Awards (2014)
 
Name
Grant 
Date
Estimated Future Payouts
Under Non-Equity
 
Incentive Plan Awards (1) 
 
Estimated Future Payouts
Under Equity
 
Incentive Plan Awards (2) 
 
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)(3)
All Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)(4)
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant
Date
 
Fair
Value of
Stock
and
Option
Awards
($)(5)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Andrés Gluski
 
$
847,500

$
1,695,000

$
3,390,000

 
 
 
 
 
 
 
 
21-Feb-14
 
 
 
50,688
202,751
405,502
 
 
 
$
3,023,017

 
21-Feb-14
 
 
 
 
 
 
81,100
 
 
$
1,186,493

 
21-Feb-14
 
 
 
 
 
 
 
446,053
$14.63
$
1,476,435

Thomas O’Flynn
 
$
325,000

$
650,000

$
1,300,000

 
 
 
 
 
 
 
 
21-Feb-14
 
 
 
13,884
55,537
111,074
 
 
 
$
828,057

 
21-Feb-14
 
 
 
 
 
 
22,215
 
 
$
325,005

 
21-Feb-14
 
 
 
 
 
 
 
122,180
$14.63
$
404,416

Brian Miller
 
$
284,000

$
568,000

$
1,136,000

 
 
 
 
 
 
 
 
21-Feb-14
 
 
 
10,192
40,766
81,532
 
 
 
$
607,821

 
21-Feb-14
 
 
 
 
 
 
16,306
 
 
$
238,557

 
21-Feb-14
 
 
 
 
 
 
 
89,684
$14.63
$
296,854

Elizabeth Hackenson
 
$
178,500

$
357,000

$
714,000

 
 
 
 
 
 
 
 
21-Feb-14
 
 
 
5,024
20,096
40,192
 
 
 
$
299,631

 
21-Feb-14
 
 
 
 
 
 
8,038
 
 
$
117,596

 
21-Feb-14
 
 
 
 
 
 
 
44,211
$14.63
$
146,338

Bernerd Da Santos
 
$
135,699

$
271,398

$
542,796

 
 
 
 
 
 
 
 
21-Feb-14
 
 
 
3,492
13,968
27,936
 
 
 
$
208,263

 
21-Feb-14
 
 
 
 
 
 
5,587
 
 
$
81,738

 
21-Feb-14
 
 
 
 
 
 
 
30,730
$14.63
$
101,716

Andrew Vesey
 
$
325,000

$
650,000

$
1,300,000

 
 
 
 
 
 
 
 
21-Feb-14
 
 
 
15,273
61,090
122,180
 
 
 
$
910,852

 
21-Feb-14
 
 
 
 
 
 
24,436
 
 
$
357,499

 
21-Feb-14
 
 
 
 
 
 
 
134,398
$14.63
$
444,857

 

NOTES:
(1)
Each NEO received an award under the Performance Incentive Plan (our annual incentive plan) in 2014. The first row of data for each NEO shows the threshold, target and maximum award under the Performance Incentive Plan. For the Performance Incentive Plan, the threshold award is 50% of the target award, and the maximum award is 200% of the target award. The extent to which awards are payable depends upon AES’ performance against goals established in the first quarter of the fiscal year. This award is payable in the first quarter of 2015.
(2)
Each NEO received performance stock units on February 21, 2014 awarded under the Long-Term Compensation Plan. These units vest based on both market and financial performance conditions, and service conditions. The market condition which applies to half

33



the award is based on our Total Stockholder Return as compared to the Total Stockholder Return of the S&P 500 Utility companies for the three-year period ending December 31, 2016 (as more fully described in the Compensation Discussion and Analysis of this Proxy Statement). At threshold performance, the vesting percentage is 50%. At maximum performance, the vesting percentage is 200%. Straight line interpolation is applied for performance between the threshold and target and between the target and maximum.
The financial performance condition which applies to the other half of the award is based on the EBITDA less CapEx metric for the three-year period ending December 31, 2016 (as more fully described in the Compensation Discussion and Analysis of this Proxy Statement). At threshold, the vesting percentage is 0%. At maximum performance, the vesting percentage is 200%. Straight line interpolation is applied for performance between the threshold and target and between the target and maximum.
With respect to the service-based condition, voluntary termination or termination for cause prior to the end of the three-year performance period will result in the forfeiture of all outstanding performance stock units. Involuntary termination or a qualified retirement, which requires the NEO to reach 60 years of age and 7 years of service with the Company, allow prorated time-vesting in increments of one-third or two-thirds vesting if the NEO has completed one or two years of service from the grant date, respectively. Service-based vesting is contingent on at least one of the two performance conditions being achieved at a minimum of threshold performance.
(3)
Each NEO received restricted stock units on February 21, 2014 awarded under the Long-Term Compensation Plan. These units vest on a service-based condition in which one-third of the restricted stock units vest on each of the first three anniversaries of the grant.
(4)
Each NEO received stock options on February 21, 2014 awarded under the Long-Term Compensation Plan. The stock options vest on a service-based condition in which one-third of the stock options vest and become exercisable on each of the first three anniversaries of the grant.
(5)
Aggregate grant date fair value of performance stock units, restricted stock units and stock options granted in the year which are computed in accordance with FASB ASC Topic 718 disregarding any estimates of forfeitures related to service-based vesting conditions. A discussion of the relevant assumptions made in the valuations may be found in our financial statements, footnotes to the financial statements (footnote 18), or Management’s Discussion & Analysis, as appropriate, contained in AES’ Form 10-K for the year ended December 31, 2014.
Based on the share price at grant and assuming the maximum market and financial performance conditions are achieved, the maximum value of the performance stock units granted in fiscal year 2014 and payable following completion of the 2014-2016 performance period is shown in footnote 2 of the Summary Compensation Table of this Proxy Statement.
In the case of Mr. Vesey, the 2014 performance stock unit, restricted stock unit and stock option awards were forfeited in their entirety upon his termination.

Narrative Disclosure Relating to the Summary Compensation Table and the Grants of Plan-Based Awards Table

Incentive Compensation Plans Applicable for All NEOs

Performance Incentive Plan

In early 2015, we expect to make cash payments to Messrs. Gluski, O’Flynn, Miller, and Da Santos and Ms. Hackenson under the Performance Incentive Plan for performance during 2014. The amount paid to each NEO is included in the amounts reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for such NEO. A description of the Performance Incentive Plan and awards made thereunder is set forth in the Compensation Discussion and Analysis of this Proxy Statement and in Proposal 3: Re-Approval of The AES Corporation Performance Incentive Plan, as Amended and Restated.

2003 Long Term Compensation Plan

The Summary Compensation Table and Grants of Plan-Based Awards Table include amounts relating to performance units, performance stock units, restricted stock units and stock options granted under the Long-Term Compensation Plan.

Restricted Stock Units and Performance Stock Units
The amount reported in the “Stock Awards” column of the Summary Compensation Table for each NEO is based upon the aggregate grant date fair value of restricted stock units and performance stock units, granted in the applicable year, which are computed in accordance with FASB ASC Topic 718 disregarding any estimates of forfeitures related to service-based vesting conditions. For a description of the terms of restricted stock unit and performance stock unit awards, see the Compensation Discussion and Analysis of this Proxy Statement.

Stock Options
The amount reported in the “Option Awards” column of the Summary Compensation Table for each NEO is based upon the aggregate grant date fair value of stock options granted in the applicable year, which are computed in accordance with FASB ASC Topic 718 disregarding any estimates of forfeitures related to service-based vesting conditions. For a description of the terms of the stock option awards, see the Compensation Discussion and Analysis of this Proxy Statement.

34




Performance Units
The amount reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Mr. Da Santos includes a performance unit plan payout for the three-year performance period ended December 31, 2014, as described in the Compensation Discussion and Analysis of this Proxy Statement.

Effect of Termination of Employment or Change-in-Control

The vesting of performance stock units, restricted stock units, stock options and performance units and the ability of the NEOs to exercise or receive payments under those awards are affected by the termination of their employment and by a change-in-control. These events and the related payments and benefits are described in “Additional Information Relating to Potential Payments Upon Termination of Employment or Change-in-Control” of this Proxy Statement.

35




Outstanding Equity Awards at Fiscal Year-End (2014)*

The following table contains information concerning exercisable and unexercisable stock options and unvested Stock Awards granted to the NEOs which were outstanding on December 31, 2014.
 
 
Option Awards 
 
Stock Awards ** 
 
Name
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
 
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
(day/mo/year)
Number of
Shares or Units
That Have Not
Vested
(#)
 
Market
Value 
of Shares  or 
Units That
Have Not
Vested
($)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or  Other Rights
That Have
Not Vested
(#)
 
Equity
Incentive
Plan Awards:
Market or
Payout Value
 of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
Andrés Gluski
13,066
 
 
$
16.8100

   25-Feb-15
 
 
 
 
 
 
 
40,553
 
 
$
17.5800

   24-Feb-16
 
 
 
 
 
 
 
42,404
 
 
$
22.2800

   23-Feb-17
 
 
 
 
 
 
 
57,190
 
 
$
18.8700

   22-Feb-18
 
 
 
 
 
 
 
191,030
 
 
$
6.7100

   20-Feb-19
 
 
 
 
 
 
 
88,158
 
 
$
12.1800

   19-Feb-20
 
 
 
 
 
 
 
107,807
 
 
$
12.8800

   18-Feb-21
 
 
 
 
 
 
 
99,734
 
 
$
9.7600

   30-Sep-21
 
 
 
 
 
 
 
163,776
(1)
81,889
$
13.7000

   17-Feb-22
 
 
 
 
 
 
 
174,837
(2)
349,674
$
11.1700

   15-Feb-23
 
 
 
 
 
 
 
                —
(3)
446,053
$
14.6300

   21-Feb-24
191,053
(6)
$
2,630,800

443,015
(7)
$
6,100,317

 
 
 
 
 
 
 
 
 
 
 
 
Thomas O’Flynn
108,225
(4)
54,113
$
11.2900

   4-Sep-22

 
 
 
 
 
 
52,931
(2)
105,864
$
11.1700

   15-Feb-23
 
 
 
 
 
 
 
                —
(3)
122,180
$
14.6300

   21-Feb-24
56,376
(6)
$
776,298

128,276
(7)
$
1,766,361

 
 
 
 
 
 
 
 
 
 
 
 
Brian Miller
7,186
 
 
$
16.8100

   25-Feb-15
 
 
 
 
 
 
 
27,036
 
 
$
17.5800

   24-Feb-16
 
 
 
 
 
 
 
22,861
 
 
$
22.2800

   23-Feb-17
 
 
 
 
 
 
 
25,871
 
 
$
18.8700

   22-Feb-18
 
 
 
 
 
 
 
83,056
 
 
$
6.7100

   20-Feb-19
 
 
 
 
 
 
 
49,123
 
 
$
12.1800

   19-Feb-20
 
 
 
 
 
 
 
59,113
 
 
$
12.8800

   18-Feb-21
 
 
 
 
 
 
 
42,851
(1)
21,426
$
13.7000

   17-Feb-22
 
 
 
 
 
 
 
37,687
(2)
75,375
$
11.1700

   15-Feb-23
 
 
 
 
 
 
 
                —
(3)
89,684
$
14.6300

   21-Feb-24
42,123
(6)
$
580,034

92,557
(7)
$
1,274,510

 
 
 
 
 
 
 
 
 
 
 
 
Elizabeth Hackenson
43,605
 
 
$
6.7100

   20-Feb-19
 
 
 
 
 
 
 
23,257
 
 
$
12.1800

   19-Feb-20
 
 
 
 
 
 
 
28,108
 
 
$
12.8800

   18-Feb-21
 
 
 
 
 
 
 
21,342
(1)
10,671
$
13.7000

   17-Feb-22
 
 
 
 
 
 
 
20,586
(2)
41,173
$
11.1700

   15-Feb-23
 
 
 
 
 
 
 
                —
(3)
44,211
$
14.6300

   21-Feb-24
21,561
(6)
$
296,895

48,386
(7)
$
666,275

 
 
 
 
 
 
 
 
 
 
 
 
Bernerd Da Santos
2,722
 
 
$
17.2200

   25-Feb-15
 
 
 
 
 
 
 
6,361
 
 
$
17.5800

   24-Feb-16
 
 
 
 
 
 
 
7,375
 
 
$
22.2800

   23-Feb-17
 
 
 
 
 
 
 
8,170
 
 
$
18.8700

   22-Feb-18
 
 
 
 
 
 
 
7,070
(2)
14,141
$
11.1700

   15-Feb-23
 
 
 
 
 
 
 
                —
(3)
30,730
$
14.6300

   21-Feb-24
10,693
(6)
$
147,243

23,684
(7)
$
326,129

 
 
 
 
 
 
 
 
 
 
 
 
Andrew Vesey
5,082
 
 
$
16.8100

   25-Feb-15
 
 
 
 
 
 
 
11,132
 
 
$
17.5800

   29-Jun-15
 
 
 
 
 
 
 
8,850
 
 
$
22.2800

   29-Jun-15
 
 
 
 
 
 
 
17,021
 
 
$
18.8700

   29-Jun-15
 
 
 
 
 
 
 
83,056
 
 
$
6.7100

   29-Jun-15
 
 
 
 
 
 
 
57,895
 
 
$
12.1800

   29-Jun-15
 
 
 
 
 
 
 
75,130
 
 
$
12.8800

   29-Jun-15
 
 
 
 
 
 
 
49,518
(1)
                —
$
13.7000

   29-Jun-15
 
 
 
 
 
 
 
84,175
(5)
                —
$
10.8600

   29-Jun-15
 
 
 
 
 
 
 
52,931
(2)
                —
$
11.1700

   29-Jun-15
           —
(6)
$
0

                —
(7)
$
0

 
 
 
 
 
 
 
 
 
 
 
 
 


36



*
Table excludes the following column which is not applicable based on award types currently outstanding: Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
**Valued using closing price on the last business day of the fiscal year (December 31, 2014) of $13.77.
NOTES:
(1)
Option grant made on February 17, 2012 vests in three equal installments on the following dates: February 17, 2013, February 17, 2014 and February 17, 2015. Unvested options related to this grant were forfeited by Mr. Vesey upon his separation and were no longer outstanding on December 31, 2014.
(2)
Option grant made on February 15, 2013 vests in three equal installments on the following dates: February 15, 2014, February 15, 2015 and February 15, 2016. Unvested options related to this grant were forfeited by Mr. Vesey upon his separation and were no longer outstanding on December 31, 2014.
(3)
Option grant made on February 21, 2014 vests in three equal installments on the following dates: February 21, 2015, February 21, 2016 and February 21, 2017.
(4)
Option grant made on September 4, 2012 vests in three equal installments on the following dates: September 4, 2013, September 4, 2014 and September 4, 2015.
(5)
Option grant made on December 7, 2012 vests in three equal installments on the following dates: December 7, 2013, December 7, 2014 and December 7, 2015. Unvested options related to this grant were forfeited by Mr. Vesey upon his separation and were no longer outstanding on December 31, 2014.
(6)
Included in this item are:
a.
A restricted stock unit grant made to all NEOs excluding Mr. O’Flynn on February 17, 2012 that vests in one remaining installment on February 17, 2015. Mr. Vesey’s unvested units were forfeited upon his separation and were no longer outstanding on December 31, 2014.
b.
In the case of Mr. O’Flynn, a restricted stock unit grant made on September 4, 2012 that vests in one remaining installment on September 4, 2015.
c.
A restricted stock unit grant made to all NEOs on February 15, 2013 that vests in two remaining equal installments on February 15, 2015 and February 15, 2016. Mr. Vesey’s unvested units were forfeited upon his separation and were no longer outstanding on December 31, 2014.
d.
A restricted stock unit grant made to all NEOs on February 21, 2014 that vests in three equal installments on February 21, 2015, February 21, 2016 and February 21, 2017. Mr. Vesey’s unvested units were forfeited upon his separation and were no longer outstanding on December 31, 2014.
e.
One-third of the performance stock unit grant made to all NEOs excluding Messrs. O’Flynn and Da Santos on February 17, 2012 for which the performance period had elapsed on December 31, 2014 but for which the service vesting condition had not yet been satisfied. The amount in the above table reflects the final 48.7% vesting percentage based on the AES Total Stockholder Return relative to companies in the S&P 500 Utilities Index and EBITDA less CapEx performance metrics for the period ended December 31, 2014. The other two-thirds of this grant, for which the service vesting conditions were satisfied on December 31, 2014, is reflected in the Option Exercises and Stock Vested (2014) table. Mr. Vesey’s unvested units were forfeited upon his separation and were no longer outstanding on December 31, 2014.
(7)
Included in this item are:
a.
Performance stock units granted to all NEOs on February 15, 2013 which vest based on market and financial performance conditions (AES three-year cumulative Total Stockholder Return relative to S&P 500 Utility companies and EBITDA less CapEx, each weighted 50%) and three-year service conditions (but only when and to the extent the market and financial performance conditions are met).
b.
Performance stock units granted to all NEOs on February 21, 2014 which vest based on market and financial performance conditions (AES three-year cumulative Total Stockholder Return relative to S&P 500 Utility companies and EBITDA less CapEx, each weighted 50%) and three-year service conditions (but only when and to the extent the market and financial performance conditions are met).
Based on AES’ performance through the end of fiscal year 2014 relative to the performance criteria, our current period to-date results for ongoing performance periods are between threshold and target and thus the target number of performance stock units granted in 2013 and 2014 is included above.

37



Option Exercises and Stock Vested (2014)
The following table contains information concerning the exercise of stock options and the vesting of performance stock unit and restricted stock unit awards by the NEOs during 2014.
 
Option Awards 
 
Stock Awards (1) 
 
Name
 
Number of
Shares
Acquired on
Exercise (#)
 
 
Value Realized
on Exercise ($)
 
 
Number of
Shares
Acquired on
Vesting (#)
 
 
Value Realized
on Vesting ($)
 
 
Andrés Gluski

$ —  
158,480

$2,259,604
Thomas O’Flynn

$ —  
24,460

$358,491
Brian Miller
12,369

$61,598
34,793

$498,765
Elizabeth Hackenson

$ —  
17,453

$250,201
Bernerd Da Santos

$ —  
6,412

$94,108
Andrew Vesey
1,946

$5,021
54,507

$774,773
 

NOTES:
(1)
Vesting of stock awards in 2014 consisted of eight separate grants as shown in the following table.
 
 
Number of Shares Acquired on Vesting (#)
Name
2/18/11
PSUs
(a)
2/17/12
PSUs
(b)
2/18/11
RSUs
(c)
2/17/12
RSUs
(d)
2/15/13
RSUs
(e)
9/4/12
RSUs
(f)
9/30/11
RSUs
(g)
12/7/12
RSUs
(h)
Total
Andrés Gluski
6,247
50,400
10,695
20,681
32,035
38,422
158,480
Thomas O’Flynn
9,698
14,762
24,460
Brian Miller
3,425
13,187
5,865
5,411
6,905
34,793
Elizabeth Hackenson
1,630
6,567
2,789
2,695
3,772
17,453
Bernerd Da Santos
2,602
2,515
1,295
6,412
Andrew Vesey
4,353
15,239
7,454
6,253
9,698
11,510
54,507
 
Value Realized on Vesting ($)
Name
2/18/11
PSUs
(a)
2/17/12
PSUs
(b)
2/18/11
RSUs
(c)
2/17/12
RSUs
(d)
2/15/13
RSUs
(e)
9/4/12
RSUs
(f)
9/30/11
RSUs
(g)
12/7/12
RSUs
(h)
Total
Andrés Gluski
$92,206
$694,008
$157,858
$302,356
$468,352
$ —  
$544,824
$ —  
$2,259,604
Thomas O’Flynn
$ —  
$ —  
$ —  
$ —  
$141,785
$216,706
$ —  
$ —  
$358,491
Brian Miller
$50,553
$181,585
$86,567
$79,109
$100,951
$ —  
$ —  
$ —  
$498,765
Elizabeth Hackenson
$24,059
$90,428
$41,166
$39,401
$55,147
$ —  
$ —  
$ —  
$250,201
Bernerd Da Santos
$ —  
$ —  
$38,406
$36,769
$18,933
$ —  
$ —  
$ —  
$94,108
Andrew Vesey
$64,250
$209,841
$110,021
$91,419
$141,785
$ —  
$ —  
$157,457
$774,773
 

(a)
The February 18, 2011 performance stock unit grant vested based on two conditions. The first was based on our Total Stockholder Return (50%) and the second was based on our Cash Value Added internal financial metric (50%) for the three-year period ended December 31, 2013 which resulted in performance of 23.4% of target. Once the performance condition was met, the performance stock units vested in three equal annual installments beginning one year from grant. Therefore, the first two-thirds of the performance stock units vested at that performance level as of December 31, 2013 and were included in our 2014 Proxy Statement. The final one-third of the performance stock units vested at that performance level on February 18, 2014, the third anniversary of the grant date, at the closing stock price of $14.76.
(b)
The February 17, 2012 performance stock unit grant vested based on two conditions. The first was based on our Total Stockholder Return (50%) relative to companies in the S&P 500 Utilities Index and the second was based on our EBITDA less CapEx internal financial metric (50%) for the three-year period ended December 31, 2014 which resulted in performance of 48.7% of target. Once the performance condition was met, the performance stock units vested in three equal annual installments beginning one year from

38



grant. Therefore, the first two-thirds of the performance stock units vested at that performance level as of December 31, 2014 at the closing stock price of $13.77. The final one-third of the performance stock units will vest at that performance level on February 17, 2015, the third anniversary of the grant date.
(c)
The February 18, 2011 restricted stock unit grant vested in three equal installments on the anniversary of the grant date. The final vesting occurred on February 18, 2014 at a vesting price of $14.76.
(d)
The February 17, 2012 restricted stock unit grant vests in three equal installments on the anniversary of the grant date. The second vesting occurred on February 17, 2014 at a vesting price of $14.62.
(e)
The February 15, 2013 restricted stock unit grant vests in three equal installments on the anniversary of the grant date. The first vesting occurred on February 15, 2014 at a vesting price of $14.62.
(f)
The September 4, 2012 restricted stock unit grant vests in three equal installments on the anniversary of the grant date. The second vesting occurred on September 4, 2014 at a vesting price of $14.68.
(g)
The September 30, 2011 restricted stock unit grant vested in three equal installments on the anniversary of the grant date. The final vesting occurred on September 30, 2014 at a vesting price of $14.18.
(h)
The December 7, 2012 restricted stock unit grant vests in three equal installments on the anniversary of the grant date. The second vesting occurred on December 7, 2014 at a vesting price of $13.68.

Non-Qualified Deferred Compensation (2014)
The following table contains information for the NEOs for each of our plans that provides for the deferral of compensation that is not tax-qualified.
Name
 
Executive
Contributions in
Last FY ($)
(1) 
 
Registrant
Contributions in
Last FY ($)
(2) 
 
Aggregate
Earnings in Last
FY ($)
(3) 
 
Aggregate
Withdrawals /
Distributions
($)
(4) 
 
Aggregate Balance
at Last FY ($)
(5) 
 
Andrés Gluski
$169,500
$169,000
$26,030
-$193,180
$2,773,782
Thomas O’Flynn
$52,000
$54,158
-$898
$0
$127,078
Brian Miller
$65,000
$61,154
$9,241
-$79,535
$1,311,036
Elizabeth Hackenson
$4,200
$9,946
-$2,299
$0
$62,852
Bernerd Da Santos
$45,246
$18,389
-$1,497
-$111,881
$367,359
Andrew Vesey
$120,000
$71,483
$2,443
$0
$939,563
 

NOTES:
(1)
Amounts in this column represent elective contributions to the Restoration Supplemental Retirement Plan ( “RSRP”) in 2014.
(2)
Amounts in this column represent the Company’s contributions to the RSRP. The amount reported in this column and the Company’s additional contributions to the 401(k) Plan are included in the amounts reported in the 2014 row of the “All Other Compensation” column of the Summary Compensation Table.
The table below provides Company contributions under the RSRP that were included in the “All Other Compensation” column of the Summary Compensation Table. Mr. O’Flynn had no Company contributions for the RSRP in 2012 and 2013. Mr. Da Santos was not an NEO in 2012 and 2013.
Name
Included in 2012 All Other Compensation
Included in 2013 All Other Compensation
Included in 2014 All Other Compensation
Andrés Gluski
$121,406
$145,500
$169,000
Thomas O’Flynn
$0
$0
$54,158
Brian Miller
$73,402
$66,460
$61,154
Elizabeth Hackenson
$12,047
$9,447
$9,946
Bernerd Da Santos
$0
$0
$18,389
Andrew Vesey
$68,940
$68,480
$71,483


39



(3)
Amounts in this column represent investment earnings under the RSRP and earnings on the mandatory deferrals of earned restricted stock units. A breakdown of amounts reported in this column is as follows:
Name
Investment
Earnings Under
Restoration
Supplemental
Retirement Plan
Earnings on
Deferred
Restricted Stock
Units
Total Earnings in
Last FY
 
 
Andrés Gluski
$26,030
$0
$26,030
Thomas O’Flynn
-$898
$0
-$898
Brian Miller
$9,241
$0
$9,241
Elizabeth Hackenson
-$2,299
$0
-$2,299
Bernerd Da Santos
$4,516
-$6,013
-$1,497
Andrew Vesey
$2,443
$0
$2,443
(4)
Amounts in this column represent distributions from the RSRP and the value of the 2010 restricted stock units released from the mandatory deferral period as of December 31, 2014 (based on the closing share price of $13.77). A breakdown of amounts reported in this column is as follows:
Name
Distributions from RSRP
2010 Restricted Stock Unit Distribution
Total Aggregate Withdrawals / Distributions
Andrés Gluski
-$193,180
$0
-$193,180
Thomas O’Flynn
$0
$0
$0
Brian Miller
-$79,535
$0
-$79,535
Elizabeth Hackenson
$0
$0
$0
Bernerd Da Santos
$0
-$111,881
-$111,881
Andrew Vesey
$0
$0
$0

(5)
Amounts in this column represent the balance of amounts in the RSRP at the end of 2014.


Narrative Disclosure Relating to the Non-Qualified Deferred Compensation Table

The AES Corporation Restoration Supplemental Retirement Plan (RSRP)

The Code places statutory limits on the amount that participants, such as our NEOs, can contribute to The AES Corporation Retirement Savings Plan (the “401(k) Plan”). As a result of these regulations, matching contributions to the 401(k) Plan accounts of our NEOs in fiscal year 2014 were limited. To address the fact that participant and Company contributions are restricted by the statutory limits imposed by the Code, our NEOs and other highly compensated employees can participate in the RSRP, which is designed primarily to restore benefits limited under our broad-based retirement plans due to statutory limits imposed by the Code.

Under the 401(k) Plan, eligible employees, including our NEOs, can elect to defer a portion of their compensation into the 401(k) Plan, subject to certain statutory limitations imposed by the Code such as the limitations imposed by Sections 402(g) and 401(a)(17) of the Code. The Company matches, dollar-for-dollar, the first five percent of compensation that an individual contributes to the 401(k) Plan. In addition, individuals who participate in the RSRP may defer up to 80% of their compensation (excluding bonuses) and up to 100% of their annual bonus under the RSRP. The Company provides a matching contribution to the RSRP for individuals who actively defer and who are also subject to the statutory limits as described above.

On an annual basis, we may choose to make a discretionary retirement savings contribution (a “profit sharing contribution”) to all eligible participants in the 401(k) Plan. The profit sharing contribution, made in the form of AES Common Stock, is provided to individuals at a percentage of their compensation, subject to certain statutory limitations imposed by the Code such as the limitations imposed by Sections 401(a)(17) and 415 of the Code.


40



Eligible individuals participating in the RSRP also receive a supplemental profit sharing contribution. The amount of the supplemental profit sharing contribution is equal to the difference between the profit sharing contribution provided by the Company under the 401(k) Plan and the profit sharing contribution that would have been made by the Company under the 401(k) Plan if no Code limits applied.
 
Participants in the RSRP may designate up to four separate deferral accounts, each of which may have a different distribution date and a different distribution option. A participant may elect to have distributions made in a lump sum payment or annually over a period of two to fifteen years. All distributions are made in cash.

Individuals have the ability to select from a list of hypothetical investments, which currently includes an AES stock hypothetical investment option. The investment options are functionally equivalent to the investments made available to all participants in the 401(k) Plan. Individuals may change their hypothetical investments within the time periods that are permitted by the Compensation Committee, provided that they are entitled to change such designations at least quarterly.

Earnings or losses are credited to the deferral accounts by the amount that would have been earned or lost if the amounts were actually invested.

Individual RSRP account balances are always 100% vested.
Restricted Stock Units and Performance Stock Units
Under the terms of our Long-Term Compensation Plan, the shares underlying restricted stock unit and performance stock unit awards granted prior to 2011 are not issued until two years after they have vested. Beginning with grants made in 2011, shares subject to restricted stock unit and performance stock unit awards are issued immediately after they become vested. The final distribution of the vested units from the 2010 restricted stock unit awards were distributed at the end of 2014.

41



Potential Payments Upon Termination or Change-in-Control
The following table contains estimated payments and benefits to each of the NEOs in connection with a termination of employment or a change-in-control. The amounts assume that a termination or change-in-control event occurred on December 31, 2014, and, where applicable, uses the closing price of AES Common Stock of $13.77 (as reported on the NYSE on December 31, 2014).
 
 
Termination
 
Name
Voluntary  or 
For Cause
 
Without Cause
In Connection
with Change
in Control
Death
Disability
Change in
Control
Only (No
Termination)
Andrés Gluski
 
 
 
 
 
 
Cash Severance1   
$0
$5,650,000
$8,475,000
$0
$0
$0
Accelerated Vesting of LTI2   
$0
$0
$9,646,001
$9,646,001
$9,646,001
$9,646,001
Benefits Continuation3   
$0
$27,560
$41,340
$0
$0
$0
Outplacement Assistance4   
$0
$25,000
$25,000
$0
$0
$0
Total
$0
$5,702,560
$18,187,341
$9,646,001
$9,646,001
$9,646,001
Thomas O’Flynn
 
 
 
 
 
 
Cash Severance1   
$0
$1,300,000
$2,600,000
$0
$0
$0
Accelerated Vesting of LTI2   
$0
$0
$2,952,104
$2,952,104
$2,952,104
$2,952,104
Benefits Continuation3   
$0
$13,780
$20,670
$0
$0
$0
Outplacement Assistance4   
$0
$25,000
$25,000
$0
$0
$0
Total
$0
$1,338,780
$5,597,774
$2,952,104
$2,952,104
$2,952,104
Brian Miller
 
 
 
 
 
 
Cash Severance1   
$0
$1,136,000
$2,272,000
$0
$0
$0
Accelerated Vesting of LTI2   
$0
$0
$2,052,018
$2,052,018
$2,052,018
$2,052,018
Benefits Continuation3   
$0
$13,780
$20,670
$0
$0
$0
Outplacement Assistance4   
$0
$25,000
$25,000
$0
$0
$0
Total
$0
$1,174,780
$4,369,688
$2,052,018
$2,052,018
$2,052,018
Elizabeth Hackenson
 
 
 
 
 
 
Cash Severance1   
$0
$777,000
$1,554,000
$0
$0
$0
Accelerated Vesting of LTI2   
$0
$0
$1,070,967
$1,070,967
$1,070,967
$1,070,967
Benefits Continuation3   
$0
$0
$0
$0
$0
$0
Outplacement Assistance4   
$0
$25,000
$25,000
$0
$0
$0
Total
$0
$802,000
$2,649,967
$1,070,967
$1,070,967
$1,070,967
Bernerd Da Santos
 
 
 
 
 
 
Cash Severance1   
$0
$339,248
$678,496
$0
$0
$0
Accelerated Vesting of LTI2   
$0
$0
$510,138
$510,138
$510,138
$510,138
Benefits Continuation3   
$0
$18,144
$27,216
$0
$0
$0
Outplacement Assistance4   
$0
$25,000
$25,000
$0
$0
$0
Total
$0
$382,392
$1,240,850
$510,138
$510,138
$510,138
 

NOTES:
(1)
Upon termination without cause, or a qualifying termination following a change-in-control, and in the case of Mr. Gluski, termination due to death or disability, a pro-rata bonus to the extent earned would be payable. Pro-rata bonus amounts are not included in the above table because as of December 31, 2014, the service and performance conditions under AES’ 2014 annual incentive plan would have been satisfied.