DEF 14A 1 d267427ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.  )

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


PPL CORPORATION

 

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WILLIAM H. SPENCE

CHAIRMAN, PRESIDENT AND

CHIEF EXECUTIVE OFFICER

Message to

the Shareowners

Dear Shareowner,

We are pleased to present PPL Corporation’s 2016 Proxy Statement and invite you to attend our Annual Meeting of Shareowners on Wednesday, May 25, at the PPL Center in Allentown, Pa.

As we prepare to host this year’s meeting, we do so as a company transformed.

Over the past five years, we have dramatically reshaped PPL through the acquisition of high-performing utilities in Kentucky, the major expansion of utility operations in the United Kingdom and the spinoff of our competitive generation business in the U.S. During this time of change and challenge in our industry, we have acted boldly and strategically to preserve and create long-term value for you.

As a result, today we are poised for growth and success as a purely regulated utility business and one of the largest companies in the U.S. utility sector.

2015 performance

In 2015, PPL delivered total shareowner return of more than 6 percent, among the highest overall in our sector.

In addition to completing the spinoff of our Energy Supply segment, we achieved strong operational and financial results, investing $3.5 billion in infrastructure improvements, increasing per-share earnings from ongoing operations by 9 percent and raising our dividend for the 13th time in 14 years. We also continued to strengthen reliability for our customers and to deliver award-winning customer service.

Additional performance highlights can be found in the accompanying Proxy Statement, which has been redesigned to improve readability and better organize important information.

Looking forward

Looking forward, we are well-positioned to deliver continued strong earnings growth, a competitive dividend and long-term shareowner value. Moreover, we’re well-positioned to continue to deliver safe, reliable, affordable service to the millions of electric and natural gas customers who count on us each day to power their lives.

I am proud of what we have been able to accomplish for you and for our customers, and I am excited about the bright prospects ahead for PPL.

On behalf of our Board of Directors, I encourage you to vote your shares as we move forward together. Your vote on the matters detailed in this Proxy Statement is important.

Above all, I thank you for your continued investment and for the trust you’ve placed in us. We appreciate your support.

Sincerely,

 

LOGO

William H. Spence

 


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PPL CORPORATION

Two North Ninth Street

Allentown, Pennsylvania 18101

Notice of Annual Meeting of Shareowners

 

 

  Time and Date         9:00 a.m., Eastern Time, on Wednesday, May 25, 2016.
  Place        

PPL Center

701 Hamilton Street

Allentown, Pennsylvania 18101

          Items of Business        

•    To elect nine directors, as listed in this Proxy Statement, for a term of one year.

 

•    To conduct an advisory vote to approve compensation of named executive officers.

 

•    To approve the 2016 Short-term Incentive Plan, an annual cash incentive compensation plan compliant with Internal Revenue Code Section 162(m).

 

•    To amend the company’s Articles of Incorporation to increase the number of authorized shares of common stock.

 

•    To ratify the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for the year ending December 31, 2016.

 

•    To consider two shareowner proposals, if properly presented.

 

•    To consider such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof.

  Record Date         You can vote if you were a shareowner of record on February 29, 2016.
  Proxy Voting         Your vote is important. Please vote your shares by voting on the Internet or by telephone or by completing and returning your proxy card. For more details, see the information beginning on page 86.

 

On Behalf of the Board of Directors,
LOGO

Joanne H. Raphael

Senior Vice President, General Counsel

and Corporate Secretary

April 12, 2016

 

Important Notice Regarding the Availability of Proxy

Materials for the Shareowner Meeting to Be Held on May 25, 2016:

This Proxy Statement and the Annual Report to Shareowners are available at

www.pplweb.com/PPLCorpProxy


Table of Contents

TABLE OF CONTENTS

 

  

PROXY SUMMARY

 

    
      

 

Page 1

 

  

 

  
   
  

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

      

 

Page 4

 

  

 

  
   Nominees for Directors     5      
     
  

GOVERNANCE OF THE COMPANY

 

  

  
      

 

Page 10

 

  

 

  
   BOARD OF DIRECTORS     10      
  

Attendance

    10      
  

Independence of Directors

    10      
  

Executive Sessions; Presiding and Lead Director

    10      
  

Board Leadership Structure

    10      
  

Guidelines for Corporate Governance

    11      
  

Communications with the Board

    11      
  

Code of Ethics

    11      
   BOARD COMMITTEES     12      
  

Board Committee Membership

    12      
  

Audit Committee

    13      
  

Compensation, Governance and Nominating Committee

    13      
  

Compensation Processes and Procedures

    13      
  

Director Nomination Process

    15      
  

Proxy Access

    15      
  

Compensation Committee Interlocks and Insider Participation

    16      
  

Executive Committee

    16      
  

Finance Committee

    16      
   THE BOARD’S ROLE IN RISK OVERSIGHT     17      
   COMPENSATION OF DIRECTORS     18      
  

Annual Retainer

    18      
  

Presiding Director Retainer

    18      
  

Committee Chair Retainers

    18      
  

Other Fees

    18      
  

Directors Deferred Compensation Plan

    18      
  

2015 Director Compensation

 

    19      
     
  

STOCK OWNERSHIP

 

    
      

 

Page 20

 

  

 

  
   Directors and Executive Officers     20      
  

Principal Shareowners

 

   

 

21

 

  

 

  
  

SECTION  16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

      

 

Page 21

 

  

 

  
   
  

TRANSACTIONS WITH RELATED PERSONS

 

      

 

Page 22

 

  

 

  
     
  

EXECUTIVE COMPENSATION

 

  

  
      

 

Page 23

 

  

 

  
   PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS     23      
   COMPENSATION COMMITTEE REPORT     24      
   COMPENSATION DISCUSSION AND ANALYSIS (CD&A)     24      
  

Table of Contents for CD&A

    24      
   NAMED EXECUTIVE OFFICERS     25      
     2015 PERFORMANCE
ACHIEVEMENTS AND PAY
ALIGNMENT
  26       
  

An Overview of 2015 Performance

    26      
  

Aligning Employees and Compensation Strategies with Our Corporate Strategic Framework

    28      
  

How We Align PPL’s Compensation Programs with Performance

    28      
  

2015 Pay and Performance

    29      
   OVERVIEW OF PPL’S EXECUTIVE COMPENSATION FRAMEWORK     30      
  

Process for Setting Executive Compensation

    30      
  

The Use of Market Data

    30      
  

Establishing Performance Targets

    30      
  

Elements of NEO Compensation

    31      
  

2015 Say-on-Pay Advisory Vote on Executive Compensation

    32      
   2015 NAMED EXECUTIVE OFFICER COMPENSATION     33      
  

Base Salary

    33      
  

2015 Annual Cash Incentive Awards

 

    33      
 

 

 

 

 

PPL CORPORATION 2016 Proxy Statement    i


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2015 Long-term Equity Incentive Awards

    37      
  

Vesting of 2013-2015 Performance Units

    39      
  

Other Elements of Compensation

    40      
   GOVERNANCE POLICIES UNDERPINNING OUR COMPENSATION FRAMEWORK     43      
  

Equity Ownership Guidelines

    43      
  

Hedging and Pledging Prohibitions

    44      
  

Clawback Policy

    44      
   ADDITIONAL INFORMATION     44      
  

Special Compensation

    44      
  

Tax Deductibility of Compensation

    45      
   EXECUTIVE COMPENSATION TABLES     46      
  

Summary Compensation Table

    46      
  

Grants of Plan-Based Awards During 2015

    48      
  

Employment Agreement

    49      
  

Outstanding Equity Awards at Fiscal Year-End 2015

    50      
  

Option Exercises and Stock Vested in 2015

    53      
  

Pension Benefits in 2015

    53      
  

Nonqualified Deferred Compensation in 2015

    58      
   POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL OF PPL CORPORATION     60      
  

Change-in-Control Arrangements

    60      
  

Retention Agreements

    63      
  

Termination Benefits

    64      
   
  

PROPOSAL  3: APPROVAL OF 2016
SHORT-TERM INCENTIVE PLAN

 

      

 

Page 72

 

  

 

  
  

Administration

    72      
  

Participation

    72      
  

Awards under the Plan

    72      
  

Amendment and Termination of the Plan

    73      
  

Miscellaneous

    73      
   EQUITY COMPENSATION PLAN INFORMATION     74      
  

PROPOSAL  4: APPROVAL OF
AMENDMENT TO PPL CORPORATION’S
ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON
STOCK

 

      

 

Page 75

 

  

 

  
  

Proposed Amendment

    75      
  

Purpose of the Proposed Amendment

    76      
  

Possible Effects of the Amendment and Additional Anti-takeover Considerations

    76      
   
  

PROPOSAL  5: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

 

      

 

Page 77

 

  

 

  
  

Fees to Independent Auditor for 2015 and 2014

    78      
  

Report of the Audit Committee

    78      
       
  

SHAREOWNER PROPOSALS

 

    
      

 

Page 80

 

  

 

  
   PROPOSAL 6: INDEPENDENT BOARD CHAIRMAN     80      
  

PPL’s Statement in Response

    81      
   PROPOSAL 7: REPORT ON DISTRIBUTED RESOURCES DEPLOYMENT     82      
  

PPL’s Statement in Response

    83      
       
  

GENERAL INFORMATION

 

    
      

 

Page 85

 

  

 

  
       
  

ANNEX A

 

    
      

 

A-1

 

  

 

  
       
  

ANNEX B

 

    
      

 

B-1

 

  

 

  
 

 

 

ii    PPL CORPORATION 2016 Proxy Statement


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Proxy Summary

This summary below offers highlights of information found elsewhere in this proxy statement. It does not contain all of the information you should consider in voting your shares. Please refer to the complete proxy statement and 2015 Annual Report before you vote.

This proxy statement and the “Compensation Discussion and Analysis” below contain references to “earnings from ongoing operations,” “EBIT,” “EBITDA” and “ongoing net income” of PPL. These are measures of financial performance used by PPL, among other things, in making incentive compensation grants and awards to executive officers. These, however, are not financial measures prescribed by generally accepted accounting principles, or GAAP. These non-GAAP financial measures eliminate from “net income” (which is a GAAP financial measure) certain special items. For a reconciliation of earnings from ongoing operations to net income, as well as a description and itemization of the special items used to derive earnings from ongoing operations, please see Annex A to this proxy statement.

Voting Matters and Board Voting Recommendations

 

 

Election of Directors … Page 4.

 

ü          Your Board recommends a vote for each nominee.

 

Management Proposals

 

•    Advisory vote to approve compensation of named executive officers … Page 23.

•    Approval of Short-term Incentive Plan … Page 72.

•    Amendment of Articles of Incorporation to increase number of authorized shares of common stock … Page 75.

•    Ratification of Deloitte & Touche LLP as independent auditor for 2016 … Page 77.

ü          Your Board recommends a vote for all four proposals.

 

 

Shareowner Proposals … Beginning on Page 80.

 

û          Your Board recommends a vote against each proposal.

Performance Highlights for 2015

PPL Corporation continued to deliver strong performance in 2015. We transformed PPL into a purely regulated utility company with the spinoff of our competitive generation business in June. In addition, we continued to invest in tomorrow’s energy infrastructure, to strengthen the diversity of our regulated generating fleet, and to provide power safely, reliably and affordably.

 

         
6.3%   9%   $3.5 billion   13th   $1 billion

total shareowner

return was among the highest overall in our sector.

  increase in earnings per share from ongoing operations.   in infrastructure investment to improve reliability.  

dividend increase

in 14 years, raising

the dividend from

$1.49 to $1.51

per share on an annualized basis.

 

  in dividends returned to shareowners.

 

 

 

PPL CORPORATION 2016 Proxy Statement    1


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PROXY SUMMARY

 

Corporate Governance Highlights

 

   

¡ Board elected annually, with majority vote in uncontested elections

 

¡ Clear, effective process for shareowners to raise concerns to the Board

 

¡ Key committees fully independent, with agendas driven by chairs

¡ 8 of 9 directors are fully independent

 

¡ No supermajority voting provisions

 

¡ Directors required to hold shares until they leave Board.

¡ Lead independent director

 

¡ Proxy access implemented by Board in December 2015

 

¡ Officers and directors prohibited from pledging/hedging PPL shares

¡ Clawback policy in place

 

¡ Shareowner right to call a special meeting

 

¡ Diverse Board

Director Nominees

 

Name   Age  

Director

Since

  Principal Occupation   Independent  

Committee

Memberships(1)

Rodney C. Adkins

  57   2014   President, 3RAM Group, LLC   X   AC, FC

John W. Conway

  70   2000  

Retired Chief Executive Officer,

Crown Holdings, Inc.

  Lead

Director

  CGNC, EC, FC

Steven G. Elliott

  69   2011   Retired Senior Vice Chairman, Bank of New York Mellon Corporation   X   AC, EC, FC

Raja Rajamannar

  54   2011   Chief Marketing & Communications Officer, and President, Healthcare, MasterCard International Incorporated   X   AC, CGNC

Craig A. Rogerson

  59   2005   Chairman, President and Chief Executive Officer, Chemtura Corporation   X   AC, CGNC, EC

William H. Spence

  59   2011   Chairman, President and Chief Executive Officer, PPL Corporation   Management
Director
  EC

Natica von Althann

  65   2009   Former Senior Credit Risk Management Executive, Bank of America and former Chief Credit Officer, U.S. Trust   X   CGNC, EC, FC

Keith H. Williamson

  63   2005   Executive Vice President, Secretary and General Counsel, Centene Corporation   X   AC, FC

Armando Zagalo de Lima

  57   2014   Retired Executive Vice President, Xerox Corporation   X   AC, FC

 

(1)  Board Committees:     AC – Audit      CGNC – Compensation, Governance and Nominating      EC – Executive      FC – Finance

 

LOGO   LOGO

 

 

2    PPL CORPORATION 2016 Proxy Statement


Table of Contents

PROXY SUMMARY

 


 

Executive Compensation Programs

 

CEO’s 2015 Targeted

Total Compensation Mix

LOGO

Overview

Our executive compensation program reflects the company’s ongoing commitment to pay for performance. The compensation of our named executive officers, or NEOs, is aligned with our Corporate Strategic Framework, which in turn links to the interests of our shareowners. Over 70% of our NEOs’ compensation, and 85% of our CEO’s compensation, is driven by short- and long-term company performance.

Pay for Performance

Our primary compensation metrics are EPS, EBIT and relative TSR, as more fully described on page 29, reflecting internal and external measures of shareowner value creation. By using EPS and EBIT, our program balances executive officers’ primary accountability for strong EPS performance, and the more general operational profitability across the company.

Performance in 2015 resulted in the following awards:

 

  Annual cash incentive awards ranging from 116.5% to 158.4% of target;

 

  Performance-Contingent Restricted Stock Unit awards for the 2013–2015 performance period being granted at a value of 141.6% of target; and

 

  Performance Unit awards for the 2013-2015 performance period vesting at 142.86% of target.

 

Key Compensation Elements

Base Salary

 

  Reviewed annually

 

  Set to reflect performance, experience, responsibility and competitive market levels

Annual Cash Incentive

 

  Awards range from 0% to 200% of target

 

  Based on financial performance

 

  Combination of corporate and segment performance for business segment presidents

Long-term Equity Incentives

Performance-Contingent Restricted Stock Units

 

    Payable in stock

 

    Award value based on three-year EPS performance

 

    Restricted for three years from grant

Performance Units

 

    Payable in stock

 

    Vesting range of 0% to 200% of target

 

    Vesting based on three-year TSR performance relative to the Philadelphia Stock Exchange Utility Index

Other Elements

 

  Limited perquisites

 

  Retirement plans

 

  Deferred compensation plans

Our Commitment to Corporate Governance

Strong corporate governance practices are in place and are intended to drive results and support accountability to shareowners, as well as align interests of executive officers with those of shareowners.

 

 

What We Do   What We Don’t Do

 

ü   Conduct annual pay risk assessment

 

ü   Retain independent compensation consultant

 

ü   Adopted proxy access

 

ü   Require significant equity ownership

 

ü   Adopted clawback policy

 

 

û   No hedging or pledging

 

û   No dividend equivalents on unvested equity awards

 

û   No tax “gross-ups” for NEO perquisites or in new change-in-control severance agreements

 

û   No “single trigger” change-in-control severance agreements

 

û   No new participants in the PPL SERP or the LG&E SERP

 
 
 
 
 

 

 

 

PPL CORPORATION 2016 Proxy Statement    3


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PROPOSAL 1: ELECTION OF DIRECTORS

 

What are you voting on?    The Board of Directors is asking you to re-elect the nine director nominees listed below to hold office until the next Annual Meeting of Shareowners. Each nominee elected as a Director will continue in office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or retirement.

The Board of Directors has no reason to believe that any of the nominees will become unavailable for election. If any nominee should become unavailable prior to the Annual Meeting, however, the accompanying proxy will be voted for the election of such other person as the Board of Directors may recommend in place of that nominee.

The proxies appointed by the Board of Directors intend to vote the proxy for the election of each of these nominees, unless you indicate otherwise on the proxy or ballot card.

The following pages contain biographical information about the nominees, as well as information concerning the particular experience, qualifications, attributes and/or skills that led the Compensation, Governance and Nominating Committee and the Board to determine that each nominee should serve as a director. In addition, a majority of our directors serve or have served on boards and board committees (including, in many cases, as committee chairs) of other public companies, which we believe provides them with additional board leadership and governance experience, exposure to best practices, and substantial knowledge and skills that further enhance the functioning of our Board.

 

   
SKILLS   DIRECTORS WITH EXPERIENCE

International Business

  8   LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO

Regulated Industry

  5   LOGO LOGO LOGO LOGO LOGO

Public Company Board Experience

  5   LOGO LOGO LOGO LOGO LOGO

Technology

  4   LOGO LOGO LOGO LOGO

Finance and Accounting

  3   LOGO LOGO LOGO

CEO

  3   LOGO LOGO LOGO

Risk Management

  3   LOGO LOGO LOGO

Marketing

  2   LOGO LOGO

 

 

4    PPL CORPORATION 2016 Proxy Statement


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 


 

NOMINEES FOR DIRECTORS:

 

LOGO

  

RODNEY C. ADKINS

 

Age: 57

 

Director since: 2014

 

Independent Director

  

Board Committees:

 

•      Audit

•      Finance

  

Other Public Directorships:

 

•      Avnet, Inc.

•      United Parcel Service, Inc.

•      W.W. Grainger, Inc.

 

Former Public Directorships within the Last Five Years:

 

•      Pitney Bowes Inc. (2007-2013)

Mr. Adkins is President of 3RAM Group, LLC, an investment, consulting and property management firm. He retired in December 2014 as a Senior Vice President of International Business Machines Corporation, or IBM, a globally integrated technology and consulting company. Until April 2014, Mr. Adkins served as Senior Vice President of Corporate Strategy at IBM. Prior to assuming that role in 2013, he was Senior Vice President of the Systems and Technology Group at IBM, a position he held since 2009, and was previously Senior Vice President of development and manufacturing for the Systems and Technology Group at IBM, a position he held since 2007. In his more than 33-year career with IBM, Mr. Adkins held a number of product management and executive roles, including running the Desktop PC and UNIX Systems businesses and serving as general manager of the Pervasive Computing division.

Experience and Qualifications. Having served as a senior executive of a public technology company, Mr. Adkins provides critical insight to our Board in emerging technologies and services, global business operations and supply chain management.

 

LOGO   

JOHN W. CONWAY

 

Age: 70

 

Director since: 2000

 

Independent Director

 

Lead Director

  

Board Committees:

 

•      Compensation, Governance and Nominating

•      Executive

•      Finance

  

Other Public Directorships:

 

•      Crown Holdings, Inc.

Mr. Conway retired from Crown Holdings, Inc. on December 31, 2015, having served as Chief Executive Officer since 2001 and as President from 2001 until March 2013. He continues to serve as Chairman of the Board of Crown Holdings, a position he has held since 2001. Prior to 2001, he served as President and Chief Operating Officer. Crown is an international manufacturer of packaging products for consumer goods. Mr. Conway joined Crown in 1991 as a result of its acquisition of Continental Can International Corporation. Prior to 1991, he served as President of Continental Can and in various other management positions. Mr. Conway is the past Chairman of the Can Manufacturers Institute.

Experience and Qualifications. With years of demonstrated managerial ability as a chief executive officer and chief operating officer of a large global manufacturing company, Mr. Conway brings to our Board a wealth of knowledge of organizational and operational management, as well as board leadership experience, essential to a large public company.

 

 

 

PPL CORPORATION 2016 Proxy Statement    5


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

LOGO   

STEVEN G. ELLIOTT

 

Age: 69

 

Director since: 2011

 

Independent Director

  

Board Committees:

 

•     Audit (Chair)

•     Executive

•     Finance

  

Other Public Directorships:

 

•     AllianceBernstein Corporation

•     Huntington Bancshares Incorporated

Mr. Elliott is the retired Senior Vice Chairman of The Bank of New York Mellon Corporation, an investment management and investment servicing company. He served in that position from 1998 until his retirement in December 2010. He joined Mellon in 1987 as Executive Vice President and head of the finance department. He was named Chief Financial Officer in 1990, Vice Chairman in 1992 and Senior Vice Chairman in 1998. Before joining Mellon, he held senior officer positions at: First Commerce Corporation, New Orleans; Crocker National Bank, San Francisco; Continental Illinois National Bank, Chicago; and First Interstate Bank of California.

Experience and Qualifications. With his long and distinguished career in the financial services industry, as well as his accounting background, Mr. Elliott brings to our Board a wealth of knowledge of organizational and operational management from a regulated industry, as well as risk management expertise, essential to a large public company.

 

LOGO   

RAJA RAJAMANNAR

 

Age: 54

 

Director since: 2011

 

Independent Director

  

Board Committees:

 

•     Audit

•     Compensation, Governance and Nominating

Mr. Rajamannar is the Chief Marketing & Communications Officer, and President, Healthcare, of MasterCard International Incorporated, a technology company in the global payments industry. Prior to assuming this role in January 2016, he served as Chief Marketing Officer since September of 2013, when he joined MasterCard. Before joining MasterCard, he served as the Executive Vice President, Senior Business, and Chief Transformation Officer of WellPoint, Inc., one of the nation’s largest health benefits companies, from March 2012 until January 2013. Prior to joining WellPoint, he served as Senior Vice President & Chief Innovation and Marketing Officer for Humana Inc., a healthcare company that offers a wide range of insurance products and health and wellness services. He held that position from April 2009 until March 2012. Prior to joining Humana, Mr. Rajamannar had 24 years of global business management experience, including 15 years with Citigroup, the New York-based banking conglomerate. Prior to joining Citigroup in 1994, Mr. Rajamannar held marketing and sales positions at Unilever in India from 1988 to 1994, and was a senior product manager at Asian Paints Limited in India.

Experience and Qualifications. With years of demonstrated leadership and business experience in a variety of regulated industry and international positions, Mr. Rajamannar brings to our Board valuable insight into global organizational and operational management, as well as marketing experience and a keen understanding of technology issues, all of which is crucial to a large public company.

 

 

6    PPL CORPORATION 2016 Proxy Statement


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 


 

 

LOGO   

CRAIG A. ROGERSON

 

Age: 59

 

Director since: 2005

 

Independent Director

    

Board Committees:

 

•      Audit

•      Compensation, Governance and Nominating
(Chair)

•      Executive

 

Other Public Directorships:

 

•      Chemtura Corporation

Mr. Rogerson is Chairman, President and Chief Executive Officer of Chemtura Corporation, a position he has held since December 2008. Chemtura is a global manufacturer and marketer of specialty chemicals, serving a broad spectrum of industrial markets. Mr. Rogerson served as President, Chief Executive Officer and director of Hercules Incorporated from December 2003 until its acquisition by Ashland, Incorporated in November 2008. Hercules was a global manufacturer and marketer of specialty chemicals and related services for a broad range of business, consumer and industrial applications. Mr. Rogerson joined Hercules in 1979 and served in a number of management positions before leaving the company to serve as President and Chief Executive Officer of Wacker Silicones Corporation in 1997. In May 2000, Mr. Rogerson rejoined Hercules and was named President of its BetzDearborn Division in August 2000. Prior to being named CEO of Hercules in December 2003, Mr. Rogerson held a variety of senior management positions with the company. Mr. Rogerson serves on the boards of the American Chemistry Council and the Society of Chemical Industry. He also serves on the Advisory Board of the Chemical Engineering & Materials Science College of Michigan State University.

Experience and Qualifications. With years of demonstrated managerial ability as a CEO of large global chemical manufacturing companies, Mr. Rogerson brings to our Board a wealth of knowledge of organizational and operational management, as well as board leadership experience, essential to a large public company.

 

LOGO   

WILLIAM H. SPENCE

 

Age: 59

 

Director since: 2011

 

Management Director

  

Board Committees:

 

•      Executive (Chair)

Mr. Spence is Chairman, President and Chief Executive Officer of PPL Corporation. Prior to his current appointment as Chairman in April 2012, Mr. Spence was named Chief Executive Officer and appointed to the Board of Directors of PPL Corporation in November 2011, was named President and Chief Operating Officer in July 2011, and served as Executive Vice President and Chief Operating Officer since June of 2006. Prior to joining PPL in June 2006, Mr. Spence had 19 years of service with Pepco Holdings, Inc. and its heritage companies, Delmarva Power and Conectiv, where he held a number of senior management positions.

Mr. Spence is currently serving on the board of the Electric Power Research Institute. He also serves as a member of the Executive Committee of the Edison Electric Institute (EEI) and as co-chairman of EEI’s CEO Policy Committee on Reliability and Business Continuity. He is a member of both EEI’s CEO Policy Committee on Environment and the Electricity Subsector Coordinating Council, which serves as the principal liaison between the federal government and the electric power sector to protect the grid from cyber and physical threats to critical infrastructure.

Experience and Qualifications. Having broad-ranging operating experience in the energy industry, Mr. Spence brings a full range of strategic and risk management expertise, a broad understanding of the issues facing a global business in the energy industry and an in-depth knowledge of the company’s business and culture to the Board and the Chairman position.

 

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS

 

 

LOGO   

NATICA VON ALTHANN

 

Age: 65

 

Director since: 2009

 

Independent Director

    

Board Committees:

 

•     Compensation, Governance and Nominating

•     Executive

•     Finance (Chair)

 

Other Public Directorships:

 

•     FuelCell Energy, Inc.

Ms. von Althann was a founding partner of C&A Advisors, a consulting firm in the areas of financial services and risk management, from 2009 until 2013. She retired in June 2008 as the Senior Credit Risk Management Executive for Bank of America and Chief Credit Officer of U.S. Trust, an investment management company. Prior to being appointed to the Bank of America position in 2007 after U.S. Trust was acquired by Bank of America, Ms. von Althann served as Chief Credit Officer of U.S. Trust since 2003. Prior to joining U.S. Trust in 2003, she served as managing director at IQ Venture Partners, an investment banking boutique. Previously, Ms. von Althann spent 26 years at Citigroup, including in a number of senior management roles. During her time at Citigroup, among other positions, she served as managing director and co-head of Citicorp’s U.S. Telecommunications-Technology group, managing director and global industry head of the Retail and Apparel group and division executive and market region head for Latin America in the Citigroup private banking group. Ms. von Althann currently serves as a director of TD Bank US Holding Company and its two bank subsidiaries, TD Bank, N.A. and TD Bank USA, N.A.

Experience and Qualifications. With her extensive background in the banking industry, including operating responsibilities and senior management experience for international businesses, Ms. von Althann brings to our Board a wealth of knowledge of organizational and operational management from a regulated industry, as well as financial and risk management expertise, essential to a large public company.

 

LOGO   

KEITH H. WILLIAMSON

 

Age: 63

 

Director since: 2005

 

Independent Director

  

Board Committees:

 

•     Audit

•     Finance

Mr. Williamson is Executive Vice President, Secretary and General Counsel of Centene Corporation. Prior to being promoted to this position in November 2012, he served as Senior Vice President, Secretary and General Counsel, a position he held since 2006. Centene Corporation is a provider of Medicaid-managed care and specialty healthcare services for under-insured and uninsured individuals. Mr. Williamson previously served as President of the Capital Services Division of Pitney Bowes Inc., a position he held since 1999. Pitney Bowes is a global provider of integrated mail, messaging and document management solutions. He joined Pitney Bowes in 1988 and held a series of positions in the company’s tax, finance and legal operations, including oversight of the treasury function and rating agency activity.

Experience and Qualifications. With years of demonstrated leadership and international business experience in a variety of industry positions with publicly traded companies, Mr. Williamson brings to our Board a combination of general business and finance experience, including from a regulated industry, which is crucial to a large public company.

 

 

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LOGO   

ARMANDO ZAGALO DE LIMA

 

Age: 57

 

Director since: 2014

 

Independent Director

  

Board Committees:

 

•      Audit

•      Finance

Mr. Zagalo de Lima retired in December 2015 as an Executive Vice President of Xerox Corporation, a position he held since February 2010. Xerox is a multinational enterprise for business process and document management. From January 2012 to July 2014, Mr. Zagalo de Lima also served as President of Xerox Technology and was responsible for engineering, product development, manufacturing, distribution, managed print services, sales channels and technical services to effectively manage and grow business on a global basis. From 2010 to 2012, he served as President of Global Customer Operations, responsible for worldwide sales, service and customer administration activities for Xerox’s document technology, services and solutions. Prior to this role, Mr. Zagalo de Lima led Xerox Europe from 2001 to 2010, serving as Chief Operating Officer from 2001 to 2004, and then as President from 2004 to 2010, driving business activity in nearly 20 countries. He first joined Xerox in Portugal in 1983 and held sales, marketing and management positions across Europe.

Experience and Qualifications. Having served as a senior executive of a public technology company, Mr. Zagalo de Lima provides critical insight to our Board in emerging technologies and services and global business operations.

Vote Required for Approval. The affirmative vote of a majority of the votes cast, in person or by proxy, by all shareowners voting as a single class, is required to elect each director. For more information about voting, see “General Information – What vote is needed for these proposals to be adopted?” beginning at page 88.

 

 

Your Board of Directors recommends that you vote FOR Proposal 1

 

 

 

 

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BOARD OF DIRECTORS

Attendance. The Board of Directors met seven times during 2015. Each director attended at least 75% of the meetings held by the Board and the committees on which he or she served during the year. The average attendance of directors at Board and committee meetings held during 2015 was 95%. Directors are expected to attend all meetings of shareowners, the Board and the committees on which they serve. All of our directors attended the 2015 Annual Meeting of Shareowners.

Independence of Directors. The Board has established guidelines to assist it in determining director independence, which conform to the independence requirements of the New York Stock Exchange, or NYSE, listing standards. In addition to applying these guidelines, which are available in the Corporate Governance section of our website (www.pplweb.com/Independence-Standards-July2009), the Board considers all relevant facts and circumstances in making an independence determination. The Board determined that the following eight directors, constituting all of PPL’s non-employee directors, are independent from the company and management pursuant to its independence guidelines: Messrs. Adkins, Conway, Elliott, Rajamannar, Rogerson, Williamson and Zagalo de Lima, and Ms. von Althann.

In reaching this conclusion, the Board considered transactions and relationships between each director or members of his or her immediate family and the company and its subsidiaries. From time to time, our subsidiaries have transacted business in the ordinary course with companies with which several of our directors are or were affiliated. In particular, the Board considered that, with respect to each of the most recent three completed fiscal years for Mr. Rogerson and Mr. Zagalo de Lima, each was an officer of a company with which PPL has engaged in business transactions in the ordinary course. The Board reviewed all transactions with each of these companies and determined that the annual amount of revenues received by Mr. Rogerson’s company or Mr. Zagalo de Lima’s companies in each fiscal year was significantly below 1% of the consolidated gross revenues of both PPL and such other companies. As part of its determination, the Board also considered that the transactions were competitively bid. The Board determined that none of these relationships was material or affected the independence of such directors under either the company’s independence guidelines or the applicable NYSE rules.

Executive Sessions; Presiding and Lead Director. The independent directors meet in regular executive sessions during each Board meeting without management present. Mr. Conway serves as the presiding director in chairing these executive sessions and also serves as the independent “lead” director of the Board.

Board Leadership Structure. The positions of Chairman and Chief Executive Officer, or CEO, are held by Mr. Spence. Mr. Conway serves as the independent lead director. The Board believes that the responsibilities delegated to the lead director are substantially similar to many of the functions typically fulfilled by a board chairman. The Board believes that its lead director position balances the need for effective and independent oversight of management with the need for strong, unified leadership. Of our nine director nominees, only Mr. Spence is not independent from the company. All of our committees, with the exception of the Executive Committee on which Mr. Spence serves, are composed entirely of independent directors, and the agendas are driven by the independent chairs through discussions with designated management liaisons. Each independent director is encouraged to, and does, regularly contact management with either questions or suggestions for agenda items. The Board does not believe that the establishment of an independent chairman is necessary or recommended at the present time. The Board continues to have the right to separate those roles if it were to determine that such a separation would be in the best interest of the company, its shareowners and other stakeholders.

The lead director serves in the following roles:

 

  presides at all meetings of the Board at which the Chairman and CEO is not present, including executive sessions of the independent directors that occur at each Board meeting;

 

  serves as an adviser to the Chairman and CEO, as well as a non-exclusive liaison between the independent directors and the Chairman and CEO;

 

  periodically reviews or suggests meeting agendas and schedules for the Board and at least annually solicits suggestions from the Board on meeting topics, such as strategy, management performance and governance matters;

 

  has the authority to call meetings of the independent directors;

 

 

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  responds to shareowner and other stakeholder questions that are directed to the presiding or lead director, as well as to the independent directors as a group; and

 

  fulfills such other responsibilities as the Board may from time to time request.

The Corporate Secretary’s Office, together with any other key employees requested by the lead director, provides support to the lead director in fulfilling his role.

Guidelines for Corporate Governance. The full text of our Guidelines for Corporate Governance can be found in the Corporate Governance section of our website (www.pplweb.com/Guidelines).

Communications with the Board. Shareowners or other parties interested in communicating with the lead director, with the Board or any member of the Board, or with the independent directors as a group, may write to such person or persons at the following address:

c/o Corporate Secretary’s Office

PPL Corporation

Two North Ninth Street

Allentown, Pennsylvania 18101

The Corporate Secretary’s Office forwards all correspondence to the respective Board members, with the exception of commercial solicitations, advertisements or obvious “junk” mail. Concerns relating to accounting, internal controls or auditing matters are to be brought immediately to the attention of the company’s Corporate Audit and Business Ethics group and are handled in accordance with procedures established by the Audit Committee with respect to such matters.

Code of Ethics. We maintain a code of business conduct and ethics, our Standards of Integrity, which are applicable to all Board members and employees of the company and its subsidiaries, including the principal executive officer, the principal financial officer and the principal accounting officer of the company. You can find the full text of the Standards in the Corporate Governance section of our website (www.pplweb.com/Standards-of-Integrity).

 

 

 

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BOARD COMMITTEES

The Board of Directors has four standing committees:

 

  the Audit Committee;

 

  the Compensation, Governance and Nominating Committee;

 

  the Executive Committee; and

 

  the Finance Committee.

Each non-employee director usually serves on one or more of these committees. All of our committees, with the exception of the Executive Committee, are composed entirely of independent directors. Each committee has a charter, all of which are available in the Corporate Governance section of the company’s website (www.pplweb.com/board-committees).

The following table shows the directors who are currently members or chairs of each of the standing Board Committees and the number of meetings each committee held in 2015.

Board Committee Membership

 

 Director        Audit   Compensation,
Governance and
Nominating
  Executive   Finance
         

Rodney C. Adkins(1)

  I   X       X
         

John W. Conway

  I/LD     X   X   X
         

Steven G. Elliott(2)(3)

  I   Chair     X   X
         

Raja Rajamannar(4)

  I   X   X    
         

Craig A. Rogerson(5)

  I   X   Chair   X  
         

William H. Spence

        Chair  
         

Natica von Althann(3)(4)

  I     X   X   Chair
         

Keith H. Williamson

  I   X       X
         

Armando Zagalo de Lima(6)

  I   X           X

Number of Meetings in 2015

      9   6   1   4

I Independent Director             LD Lead Director              Chairman of the Board

 

(1)  Joined the Finance Committee on January 1, 2016.

 

(2)  Designated as an “audit committee financial expert” as defined by the rules and regulations of the Securities and Exchange Commission, or SEC.

 

(3)  Joined the Executive Committee on June 1, 2015.

 

(4)  Joined the Compensation, Governance and Nominating Committee on June 1, 2015.

 

(5)  Joined the Audit Committee on June 1, 2015.

 

(6)  Joined the Audit Committee on January 1, 2016.

 

 

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Audit Committee. The primary function of the Audit Committee is to assist the company’s Board of Directors in the oversight of:

 

  the integrity of the financial statements of the company and its subsidiaries;

 

  the effectiveness of the company’s internal control over financial reporting;

 

  the identification, assessment and management of risk;

 

  the company’s compliance with legal and regulatory requirements;

 

  the independent registered public accounting firm’s, or “independent auditor’s,” qualifications and independence; and

 

  the performance of the company’s independent auditor and internal audit function.

The members of the Audit Committee are not employees of the company, and the Board of Directors has determined that each of its Audit Committee members has met the independence and expertise requirements of the NYSE, the rules of the SEC and the company’s independence standards described above under the heading “Independence of Directors.”

Compensation, Governance and Nominating Committee. The principal functions of the Compensation, Governance and Nominating Committee, or CGNC, are:

 

  to review and evaluate at least annually the performance of the CEO and other executive officers of the company, including setting goals and objectives, and to set their remuneration, including incentive awards;

 

  to review management’s succession planning;

 

  to review the fees paid to outside directors for their services on the Board and its committees;

 

  to establish and administer programs for evaluating the performance of Board members;

 

  to develop and recommend to the Board corporate governance guidelines applicable to the company; and

 

  to identify and recommend to the Board candidates for election to the Board.

All of the members of the CGNC are independent within the meaning of the listing standards of the NYSE, including those rules applicable to board and committee service, and the company’s standards of independence described above under the heading “Independence of Directors.” In addition, each member of the CGNC is a “non-employee director” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and is an “outside director” as defined for Section 162(m) of the Internal Revenue Code.

Compensation Processes and Procedures

Role of the Compensation, Governance and Nominating Committee

As part of its duties, there are a number of activities the CGNC undertakes each year in reviewing the operation and effectiveness of the PPL compensation programs. One of the primary roles of the CGNC is to approve the compensation of each of our executive officers, including the named executive officers, or NEOs, included in this proxy statement. The CGNC has the exclusive authority to grant equity awards to executive officers and delegates specified administrative functions to certain officers, including the CEO and the Chief Human Resources Officer, or CHRO. The CGNC has strategic and administrative responsibilities for our executive compensation plans, including the design of, and performance measures and award opportunities for, the executive incentive programs. The CGNC regularly reviews the company’s executive compensation programs and practices, monitors new rules and regulations and assesses evolving best practices concerning executive compensation and corporate governance. A key concern of the CGNC is to ensure that PPL compensates executive officers effectively and in a manner consistent with our stated compensation and corporate strategy.

The Chair of the CGNC determines the agenda for committee meetings, with the assistance of the CHRO, who serves as the liaison to the CGNC. Meetings of the CGNC are attended by representatives of Frederic W. Cook & Co., Inc., or Cook, the committee’s independent compensation consultant, the CEO, the CHRO, the General Counsel and other representatives of management as appropriate. The CGNC regularly meets in executive session, without management

 

 

 

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present. The Chair reports the CGNC’s actions to the Board after each committee meeting. Each year, the CGNC determines the elements of compensation to be used to measure performance for the upcoming year, as well as sets annual goals and targets for each executive officer, including the NEOs. The CGNC evaluates the performance and leadership of the CEO, seeking input from all independent directors, and reviews the performance of the other executive officers against their established goals and objectives. Based on these evaluations, the CGNC determines and approves the annual compensation of the executive officers.

Role of Advisers to the Committee

Independent Advisers. The CGNC has retained Cook as its independent compensation consultant since July 1, 2014. Cook provides additional information to the CGNC so that the CGNC can determine whether the company’s executive compensation programs are reasonable and consistent with competitive practices. Representatives of Cook regularly participate in CGNC meetings, providing expertise and guidance as to executive compensation program design, market trends and best pay practices. Cook does not perform any other consulting work or any other services for PPL and reports directly to the CGNC.

The CGNC regularly requests Cook to provide the following information and analyses:

 

  Utility Industry Executive Compensation Trends Presentation — provides a report on current trends in utility industry executive compensation.

 

  Director Pay Analysis — reviews the pay program for PPL’s non-employee directors relative to a group of utility companies and to a broad spectrum of general industry companies.

 

  Executive Compensation Analysis — provides a review of compensation for the executive officer positions at PPL, including each of the NEOs. This review includes both utility and general industry medians, and it results in a report on the compensation of executive officers and competitive market data. A detailed discussion of the competitive market comparison process is provided in the CD&A, beginning on page 30.

Annually, the CGNC requests that Cook present emerging issues and trends in executive compensation among the largest U.S. utilities at its July meeting and provide a detailed analysis of competitive pay levels and practices at its year-end meeting. The CGNC uses this analysis to provide a general understanding of current market practices when it assesses performance and considers salary levels and incentive awards at its January meeting following the conclusion of the performance year.

Additionally, management may request data analyses, market assessment or other information in order to assist in the administration of the executive compensation programs, including competitive analyses on new executive positions and recommendations that the CEO may make to the CGNC concerning executive compensation other than his own. For these matters, Cook reports to the CGNC rather than management.

While the CGNC considers analysis and advice from its independent consultant when making compensation decisions for the CEO and other NEOs, it uses its own independent judgment in making final decisions concerning compensation paid to the executive officers. The CGNC has the full authority to retain and terminate the services of Cook.

The CGNC annually reviews and approves total expenditures paid to the independent compensation consultant. Cook and its affiliates did not provide any services to the company or any of the company’s affiliates other than advising the CGNC on director and executive officer compensation during 2015. The CGNC evaluated whether any work provided by Cook raised any conflict of interest and determined that there was no conflict of interest.

Internal Advisers. The CGNC can seek the input of management to inform decision-making. Each year, senior management develops an annual strategic business plan, which includes recommendations on the proposed goals for the annual cash incentive and long-term incentive programs. The CGNC takes this into account when establishing and setting all incentive goals for executive officers.

The CGNC may choose to invite certain individuals to attend meetings or contribute written materials. Such individuals may review and comment on market compensation data, including the composition of market comparison groups and the description of comparable officer positions. They may also present proposals relating to executive compensation programs and policies for review and approval by the CGNC, including base salary, performance goals and goal weightings for short-term and long-term incentive awards, and the mix of compensation components for each

 

 

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executive officer. No individual is present when matters pertaining to their own compensation are being discussed, and neither the CEO nor any of the other executive officers discusses their own compensation with the CGNC or the CGNC’s independent compensation consultant.

Director Nomination Process

The CGNC establishes guidelines for new directors and evaluates director candidates. In considering candidates, the CGNC seeks individuals who possess strong personal and professional ethics, high standards of integrity and values, independence of thought and judgment and who have senior corporate leadership experience. The company believes that prior business experience at a senior executive level is desired, and it seeks candidates who have diverse experience relevant to serving on the Board, such as financial, operating, executive management and technology experience.

In addition, the CGNC seeks individuals who have a broad range of demonstrated abilities and accomplishments beyond corporate leadership. These abilities include the skill and expertise sufficient to provide sound and prudent guidance with respect to all of the company’s operations and interests. The CGNC believes that, while diversity and variety of experiences and viewpoints represented on the board should always be considered, a director nominee should not be chosen solely or largely because of race, color, gender, national origin or sexual orientation or identity. Therefore, the Board does not have a formal diversity policy. In selecting a director nominee, the CGNC focuses on skills, expertise or background that would complement the existing board, recognizing that the company’s businesses and operations are diverse and global in nature. Our directors come from diverse backgrounds including industrial, energy, financial, non-profit, healthcare and technology. Finally, the CGNC seeks individuals who are capable of devoting the required amount of time to serve effectively, including preparation time and attendance at Board, committee and shareowner meetings.

Nominations for the election of directors may be made by the Board of Directors, the CGNC or any shareowner entitled to vote in the election of directors generally. The CGNC screens all candidates in the same manner regardless of the source of the recommendation. The CGNC’s review is typically based on any written materials provided with respect to a candidate. The CGNC determines whether a candidate meets the company’s general qualifications and specific qualities and skills for directors and whether requesting additional information or an interview is appropriate.

When considering whether the Board’s directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of the company’s business and structure, the Board focused primarily on the information discussed in each of the Board members’ biographical information set forth beginning on page 5. In particular, in connection with the nominations of each director for election as directors at the 2016 Annual Meeting of Shareowners, the Board considered their contributions to the company’s success during their previous years of Board service.

Proxy Access

We have a long-standing practice of engaging with our shareowners on matters of interest to them. In light of the June 1, 2015 spinoff of the company’s Energy Supply business, and after a non-binding proxy access shareowner proposal received approval at PPL’s 2015 annual meeting of shareowners, the company had further discussions with the shareowner proponent and then reached out to a number of its largest shareowners, representing approximately 38% of its outstanding stock, to discuss a variety of corporate governance matters, including proxy access. This process allowed the company to gain valuable feedback from its shareowners regarding proxy access, including insight as to the particular proxy access parameters that the company’s shareowners view as appropriate. Based on the approval of the shareowner proposal at the 2015 annual meeting and the feedback received from PPL’s shareowners during this engagement process, the Board designed a proxy access framework for the company that it believes provides meaningful access for shareowners while safeguarding the long-term interests of PPL and its shareowners and limiting the potential for abuse.

The Board of Directors of PPL approved amendments to PPL’s Bylaws, effective December 18, 2015, to adopt proxy access. Pursuant to new Article III, Section 3.18 of the Bylaws, a shareowner, or a group of up to 25 shareowners, owning 3% or more of PPL’s outstanding common stock continuously for at least three years, may nominate, and include in PPL’s proxy materials, directors constituting up to the greater of (1) 20% of the Board or (2) two directors, provided that the shareowner(s) and the nominee(s) satisfy the requirements specified in the Bylaws. In connection

 

 

 

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with PPL’s adoption of proxy access and in order to ensure full disclosure in regard to a nominating shareowner’s ownership position in PPL, Article III, Section 3.16 of the Bylaws was also amended to expand the disclosure requirements for the nomination of directors under PPL’s advance notice provision, including disclosure of securities ownership, derivative and short positions, certain interests that the nominating shareowner or director nominee might have in the nomination and such other information as PPL may reasonably request.

If the CGNC or management identifies a need to add a new Board member to fulfill a special requirement or to fill a vacancy, the CGNC may retain a third-party search firm to identify a candidate or candidates. The CGNC also seeks prospective nominees through personal referrals and independent inquiries by directors. Once the CGNC has identified a prospective nominee, it generally requests the third-party search firm to gather additional information about the prospective nominee’s background and experience. The CEO, the chair of the CGNC and other members of the CGNC, if available, then interview the prospective candidates in person. After completing the interview and evaluation process, which includes evaluating the prospective nominee against the standards and qualifications set out in the company’s Guidelines for Corporate Governance, the CGNC makes a recommendation to the full Board as to the persons who should be nominated by the Board. The Board then votes on whether to approve the nominee after considering the recommendation and report of the CGNC.

Shareowners interested in recommending nominees for directors should submit their recommendations in writing to:

Corporate Secretary

PPL Corporation

Two North Ninth Street

Allentown, Pennsylvania 18101

In order to be considered, we must generally receive nominations by shareowners at least 75 days prior to the 2017 Annual Meeting. In order to be included in our proxy statement under the proxy access provisions of our Bylaws, the nominations must be received by the company no later than December 13, 2016 and no earlier than November 13, 2016. The nominations must also contain the information required by our Bylaws, such as the name and address of the shareowner making the nomination and of the proposed nominees and certain other information concerning the shareowner and the nominee. The exact procedures for making nominations are included in our Bylaws, which can be found at the Corporate Governance section of our website (www.pplweb.com/Bylaws).

Compensation Committee Interlocks and Insider Participation. During 2015, none of the members of the CGNC was an officer or employee of the company, and no executive officer of PPL served on the compensation committee or board of any company while that company employed any member of the CGNC.

Executive Committee. During periods between Board meetings, the Executive Committee may exercise all of the powers of the Board of Directors, except that the Executive Committee may not elect directors, change the membership of or fill vacancies in the Executive Committee, fix the compensation of the directors, change the Bylaws or take any action restricted by the Pennsylvania Business Corporation Law or the Bylaws (including actions committed to another Board committee).

Finance Committee. The principal functions of the Finance Committee are:

 

  to review and approve annually the three-year business plan, which includes the annual financing plan, as well as the five-year capital expenditure plan for the company;

 

  to approve company financings in excess of $50 million, to the extent not contemplated by the annual financing plan approved by the Finance Committee;

 

  to approve reductions of the outstanding securities of the company in excess of $100 million;

 

  to authorize capital expenditures in excess of $100 million;

 

  to authorize acquisitions and dispositions in excess of $100 million; and

 

  to review, approve and monitor the policies and practices of the company and its subsidiaries in managing financial risk.

All of the members of this committee are independent within the meaning of the listing standards of the NYSE and the company’s standards of independence described above under the heading “Independence of Directors.”

 

 

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THE BOARD’S ROLE IN RISK OVERSIGHT

The Board provides oversight of the company’s risk management practices. The Board reviews material risks associated with the company’s business plan periodically as part of its consideration of the ongoing operations and strategic direction of the company. At meetings of the Board and its committees, directors receive periodic updates from management regarding risk management activities. Outside of formal meetings, the Board, its committees and individual Board members have full access to senior executives and other key employees, including the CEO, CFO, the General Counsel and the Director of Risk Management, or DRM.

Each of the committees of the Board, other than the Executive Committee, reports regularly to the full Board on risk-related matters. The committees also oversee the management of material risks that fall within such committee’s areas of responsibility. In performing this function, each committee has full access to management as well as the ability to engage advisers. The CFO communicates key risks to the Audit and Finance Committees. This communication includes the identification of key risks and emerging risks and how these risks are being measured and managed.

A primary function of the Audit Committee is to assist the Board in the oversight of the identification and management of risk. More specifically, the Audit Committee is responsible for the review of the company’s process for identifying, assessing and managing business risks and exposures and discussing related guidelines and policies. The Audit Committee regularly reviews risk management activities related to the financial statements, legal and compliance matters, tax, information technology and other key areas. The Audit Committee also periodically meets in executive session with representatives from the company’s independent registered public accounting firm, the CFO, the General Counsel, the Vice President and Controller, the DRM and the Corporate Audit and Business Ethics Vice President.

The Audit Committee also oversees the company’s enterprise risk management process. The CFO has responsibility for leading the company’s enterprise risk management process. The company’s Risk Management group and Corporate Audit and Business Ethics department provide periodic reports to the Audit Committee and the full Board regarding key risk matters. The Corporate Audit and Business Ethics Vice President reports directly to the Audit Committee.

The Finance Committee is responsible for, among other items provided in its Charter, reviewing, approving and monitoring the policies and practices to be followed by the company and its subsidiaries in managing market risk, credit risk, liquidity risk and currency risk. The company’s internal Risk Management Committee is chaired by the DRM. The Risk Management Committee and the DRM serve at the direction of the Finance Committee to provide oversight of risk management activities related to foreign currency exchange and translation, buying and selling electricity and gas, fuel procurement and the issuance of corporate debt.

The CGNC considers various risks including those related to the attraction and retention of talent, the design of compensation programs, succession planning, governance matters and the identification of qualified individuals to become board members. The CGNC reviews management’s assessment of whether risks arising from the company’s compensation policies and practices for all employees, including non-executive officers, are reasonably likely to have a material adverse effect on the company. The CGNC follows a risk assessment process that formally identifies and prioritizes compensation plan features that could induce excessive risk-taking, misstatement of financial results or fraudulent misconduct to enhance an employee’s compensation and cause material harm to the company. Based on this detailed risk assessment process, the company has determined that any risks arising from its compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the company.

 

 

 

PPL CORPORATION 2016 Proxy Statement    17


Table of Contents

GOVERNANCE OF THE COMPANY

 

COMPENSATION OF DIRECTORS

Annual Retainer. Directors who are company employees do not receive any separate compensation for service on the Board of Directors or committees of the Board of Directors. During 2015, our non-employee directors received an annual retainer of $235,000, of which a minimum of $130,000 was mandatorily allocated in quarterly installments to each director’s deferred stock account under the Directors Deferred Compensation Plan, or DDCP. The remaining $105,000 portion of the annual retainer was paid in cash in quarterly installments to each director, unless voluntarily deferred to his or her stock account or to his or her deferred cash account under the DDCP (as discussed below with respect to all retainers and other fees).

Each deferred stock unit represents the right to receive a share of PPL common stock and is fully vested upon grant but is not paid to the director until after retirement (as discussed below with respect to payments under the DDCP). Deferred stock units do not have voting rights, but accumulate quarterly dividend equivalents, which are reinvested in additional deferred stock units, which are also not paid to the director until retirement.

Presiding Director Retainer. During 2015, the presiding director, who is also our independent lead director, received an additional annual cash retainer of $30,000, which was paid in quarterly installments unless voluntarily deferred under the DDCP.

Committee Chair Retainers. During 2015, the Audit Committee Chair received an additional annual cash retainer of $20,000, which was paid in quarterly installments unless voluntarily deferred under the DDCP. Each other committee chair received an additional annual cash retainer of $15,000, which was paid in quarterly installments unless voluntarily deferred under the DDCP.

Other Fees. PPL reimburses each director for usual and customary travel expenses. Effective for 2015, the Board eliminated the use of meeting fees.

No increases in director compensation were authorized for 2016.

Directors Deferred Compensation Plan. Pursuant to the DDCP, non-employee directors may elect to defer all or any part of their fees or any retainer that is not part of the mandatory stock unit deferrals. Under this plan, directors can defer compensation other than the mandatory deferrals into a deferred cash account or the deferred stock account. The deferred cash account earns a return as if the funds had been invested in one or more of the core investment options offered to employees under the PPL Deferred Savings Plan at Fidelity Investments. These investment accounts include large, mid and small cap index and investment funds, international equity index funds, target date funds, bond funds and a stable value fund, with returns that ranged from -3.29% to 7.94% during 2015. The brokerage account option that is available to employees is not available to directors. For 2015, two directors elected to defer all or a portion of their cash retainers into a deferred cash account, and three directors elected to defer all or a portion of their cash retainers into a deferred stock account. Payment of the amounts allocated to a director’s deferred cash account and accrued earnings, together with deferred stock units and accrued dividend equivalents, is deferred until after the director’s retirement from the Board of Directors, at which time the deferred cash and stock is disbursed in one or more annual installments for a period of up to 10 years, as previously elected by the director.

In connection with PPL’s June 1, 2015 spinoff of its competitive generation business to form the publicly traded Talen Energy Corporation, each DDCP participant’s deferred stock unit account was credited, for each share of PPL common stock in the participant’s deferred stock unit account, with a number of Talen Energy Corporation deferred stock units representing the same number of shares of Talen Energy Corporation common stock that would have been received in respect of a like number of shares of PPL common stock under the terms and conditions governing the spinoff had such PPL shares been shares of record on the record date for the spinoff. The Talen Energy Corporation shares underlying the DDCP deferred stock units will be payable in accordance with each director’s applicable deferral elections governing their deferred stock unit accounts under the DDCP.

 

 

18    PPL CORPORATION 2016 Proxy Statement


Table of Contents

GOVERNANCE OF THE COMPANY

 


 

The following table summarizes all compensation earned during 2015 by our non-employee directors.

2015 DIRECTOR COMPENSATION

 

     Fees Earned or Paid in Cash               
Name of Director    Paid in
Cash(3)
   Deferred into
Restricted
Stock  Units(4)
   Total    Stock
Awards(5)
   All Other
Compensation(6)
   Total

Rodney C. Adkins

       $105,000                   $105,000          $130,000          $4,000          $239,000  

Frederick M. Bernthal(1)

       30,000          $  20,000          50,000          54,167                   104,167  

John W. Conway

       135,000                   135,000          130,000                   265,000  

Philip G. Cox(1)

       43,750                   43,750          54,167                   97,917  

Steven G. Elliott

       125,000                   125,000          130,000          4,000          259,000  

Louise K. Goeser(1)

       43,750                   43,750          54,167                   97,917  

Stuart E. Graham(1)

       43,750                   43,750          54,167          4,000          101,917  

Stuart Heydt(2)

       43,750                   43,750          54,167          250          98,167  

Raja Rajamannar

       105,000                   105,000          130,000                   235,000  

Craig A. Rogerson

       54,000          66,000          120,000          130,000                   250,000  

Natica von Althann

       120,000                   120,000          130,000                   250,000  

Keith H. Williamson

       105,000                   105,000          130,000          4,000          239,000  

Armando Zagalo de Lima

                105,000          105,000          130,000                   235,000  
(1)  On June 1, 2015, concurrent with the spinoff of PPL’s competitive generation business, referenced in this proxy statement as the Energy Supply segment, Dr. Bernthal, Messrs. Cox and Graham, and Ms. Goeser resigned from the Board of Directors of PPL.

 

(2)  On May 19, 2015, Dr. Heydt retired from the Board of Directors of PPL.

 

(3)  This column reports the amount of retainers either actually paid in cash or voluntarily deferred into cash accounts under the DDCP for Board and committee service by each director for 2015, and the cash retainers for the committee chairs: Dr. Bernthal (Nuclear Oversight — $6,250); Mr. Elliott (Audit — $20,000); Mr. Rogerson (CGNC — $15,000); and Ms. von Althann (Finance — $15,000). Mr. Conway also received a $30,000 retainer for serving as the Lead Director. The following directors voluntarily deferred all or a portion of their retainers into the deferred cash account under the DDCP: Dr. Bernthal — $30,000; and Mr. Rogerson — $54,000.

 

(4)  This column reports the dollar amount of retainers voluntarily deferred into deferred stock accounts under the DDCP. The following directors voluntarily deferred all or a portion of their retainers into the deferred stock account under the DDCP: Dr. Bernthal — $20,000; Mr. Rogerson — $66,000; and Mr. Zagalo de Lima — $105,000.

 

(5)  This column represents the grant date fair value of the mandatorily deferred portion of the annual retainer during 2015 as calculated under ASC Topic 718. The grant date fair value for the deferred stock units was calculated using the closing price of PPL common stock on the NYSE on the date of grant.

 

     All deferred stock units held in each director’s deferred stock account are vested. As of December 31, 2015, the aggregate number of deferred stock units (including dividend equivalents) held by each current non-employee director was as follows: Mr. Adkins — 5,666; Mr. Conway — 112,891; Mr. Elliott — 22,562; Mr. Rajamannar — 20,116; Mr. Rogerson — 55,073; Ms. von Althann — 27,772; Mr. Williamson — 47,571; and Mr. Zagalo de Lima — 10,560.

 

(6)  This column reflects contributions made under our charitable matching gift program. Non-employee directors are eligible to participate in our charitable matching gift program on the same basis as employees, pursuant to which we will contribute, on a 100% matching basis, from $50 up to $4,000 per year per person to specified charitable institutions.

 

 

 

PPL CORPORATION 2016 Proxy Statement    19


Table of Contents

STOCK OWNERSHIP

DIRECTORS AND EXECUTIVE OFFICERS

All directors and executive officers as a group hold less than 1% of PPL’s common stock. The table below shows the number of shares of our common stock beneficially owned as of March 4, 2016, by each of our directors and each NEO for whom compensation is disclosed in the Summary Compensation Table, as well as the number of shares beneficially owned by all of our director nominees and executive officers as a group. The table also includes information about stock options, stock units, restricted stock units granted to executive officers under the company’s Incentive Compensation Plan, or ICP, the company’s Incentive Compensation Plan for Key Employees, or ICPKE, as well as the company’s 2012 Stock Incentive Plan, or SIP, and stock units credited to the accounts of our directors under the DDCP.

 

Name   

Shares of
  Common Stock  

Owned(1)

R. C. Adkins

       6,695 (2)

J. W. Conway

       118,858 (3)

S. G. Elliott

       23,780 (2)

P. A. Farr

       167,259 (4)

R. J. Grey

       552,614 (5)

R. Rajamannar

       21,306 (2)

C. A. Rogerson

       57,145 (2)

V. Sorgi

       187,692 (6)

W. H. Spence

       1,789,429 (7)

V. A. Staffieri

       84,886 (8)

R. A. Symons

       48,082 (9)

N. von Althann

       29,048 (2)

K. H. Williamson

       49,069 (2)

A. Zagalo de Lima

       12,423 (2)

All 16 executive officers and directors as a group

       2,830,129 (10)

 

(1)  The number of shares owned includes: (a) shares directly owned by certain relatives with whom directors or officers share voting or investment power; (b) shares held of record individually by a director or officer or jointly with others or held in the name of a bank, broker or nominee for such individual’s account; (c) shares in which certain directors or officers maintain exclusive or shared investment or voting power, whether or not the securities are held for their benefit; and (d) with respect to executive officers, shares held for their benefit by the Trustee under PPL’s Employee Stock Ownership Plan, or ESOP.

 

(2)  Consists of shares credited to the director’s deferred stock account under the DDCP.

 

(3)  Includes 115,122 shares credited to Mr. Conway’s deferred stock account under the DDCP.

 

(4)  Includes 93,484 stock units that have vested and 73,603 shares of common stock that may be acquired within 60 days upon the exercise of stock options granted under the ICP.

 

(5)  Includes 53,004 restricted stock units and 473,705 shares of common stock that may be acquired within 60 days upon the exercise of stock options granted under the ICP or SIP.

 

(6)  Includes 38,610 restricted stock units and 125,034 shares of common stock that may be acquired within 60 days upon the exercise of stock options granted under the ICP or SIP.

 

(7)  Includes 295,125 restricted stock units and 1,420,996 shares of common stock that may be acquired within 60 days upon the exercise of stock options granted under the ICP and SIP. Also includes 12,824 shares held in an irrevocable trust for the benefit of Mr. Spence’s wife and of which he disclaims beneficial ownership.

 

(8)  Includes 84,885 restricted stock units and 1 share of common stock that may be acquired within 60 days upon the exercise of stock options granted under the SIP.

 

(9)  Includes 34,181 restricted stock units.

 

(10)  Includes 552,306 restricted stock units, 1,799,365 shares of common stock that may be acquired within 60 days upon the exercise of stock options granted under the ICP, ICPKE or the SIP, and 314,588 shares credited to the directors’ deferred stock accounts under the DDCP.

 

 

20    PPL CORPORATION 2016 Proxy Statement


Table of Contents

STOCK OWNERSHIP

 


 

PRINCIPAL SHAREOWNERS

Based on filings made under Sections 13(d) and 13(g) of the Exchange Act, as of February 16, 2016, the only persons known by the company to be beneficial owners of more than 5% of PPL’s common stock are:

 

Name and Address of Beneficial Owner    Amount and Nature
of Beneficial
Ownership
   Percent
of Class

BlackRock, Inc.(1)
55 East 52nd Street
New York, NY 10055

       42,899,078          6.4%     

The Vanguard Group, Inc.(2)
100 Vanguard Blvd.
Malvern, PA 19355

       42,061,055          6.25%   

 

(1)  Based solely on a review of the Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 10, 2016. As reported on the Schedule 13G/A, as of December 31, 2015, BlackRock, Inc. beneficially owned, in the aggregate, 42,899,078 shares held by BlackRock (Luxembourg) S.A.; BlackRock (Netherlands) B.V.; BlackRock Advisors (UK) Limited; BlackRock Advisors, LLC; BlackRock Asset Management Canada Limited; BlackRock Asset Management Deutschland AG; BlackRock Asset Management Ireland Limited; BlackRock Asset Management North Asia Limited; BlackRock Asset Management Schweiz AG; BlackRock Capital Management, Inc.; BlackRock Financial Management, Inc.; BlackRock Fund Advisors; BlackRock Fund Managers Limited; BlackRock Institutional Trust Company, N.A.; BlackRock International Limited; BlackRock Investment Management (Australia) Limited; BlackRock Investment Management (UK) Limited; BlackRock Investment Management, LLC; BlackRock Japan Co., Ltd; BlackRock Life Limited; and iShares (DE) I InvAG mit Teilgesellschaftsvermoegen and had sole voting power over 37,145,679 shares and sole dispositive power over 42,899,078 shares.

 

(2)  Based solely on a review of the Schedule 13G/A filed by The Vanguard Group with the SEC on February 10, 2016. As reported on the Schedule 13G/A, as of December 31, 2015, The Vanguard Group beneficially owned, in the aggregate, 42,061,055 shares held by the Vanguard Group and had sole voting power over 1,243,854 shares, shared voting power over 72,200 shares, shared dispositive power over 1,299,577 shares and sole dispositive power over 40,761,478 shares. The Vanguard Group reported that Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., wholly owned subsidiaries of The Vanguard Group, Inc., are the beneficial owners of 1,040,877 shares or 0.15% and 461,677 shares or 0.06%, respectively, of the common stock outstanding of the company as a result of its serving as investment manager of collective trust accounts and as investment manager of Australian investment offerings, respectively.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To our knowledge, our directors and executive officers met all filing requirements under Section 16(a) of the Exchange Act during 2015, except that one Form 4 in 2015, as well as one Form 4 in 2014, each to report the exercise of phantom stock options for Mr. Symons, were inadvertently filed late due to administrative oversight.

 

 

 

PPL CORPORATION 2016 Proxy Statement    21


Table of Contents

TRANSACTIONS WITH RELATED PERSONS

The Board of Directors has adopted a written related-person transaction policy to recognize the process the Board will use to identify potential conflicts of interest arising out of financial transactions, arrangements or relations between PPL and any related persons. This policy applies to any transaction or series of transactions in which PPL Corporation or a subsidiary is a participant, the amount exceeds $120,000 and a “related person” has a direct or indirect material interest. A related person includes not only the company’s directors and executive officers, but others related to them by certain family relationships, as well as shareowners who own more than 5% of any class of PPL Corporation’s voting securities.

Under the policy, each related-person transaction must be reviewed and approved or ratified by the disinterested independent members of the Board, other than any employment relationship or transaction involving an executive officer and any related compensation, which must be approved by the CGNC.

In connection with the review and approval or ratification of a related-person transaction, the Board, or the CGNC, as applicable, will consider the relevant facts and circumstances, including:

 

  the importance of the transaction both to PPL and to the related person;

 

  whether the transaction would likely impair the judgment of a director or executive officer to act in the best interest of PPL;

 

  whether the value and the terms of the transaction are substantially similar as compared to those of similar transactions previously entered into by PPL with non-related persons, if any; and

 

  any other matters that management or the disinterested directors deem appropriate.

In addition, in connection with any approval or ratification of a related-person transaction involving a non-employee director or nominee for director, the CGNC will consider whether such transaction would compromise such director’s status as: (1) an independent director under the New York Stock Exchange Listing Standards, including those rules applicable to board and committee service, and PPL’s categorical independence standards, (2) an “outside director” under Section 162(m) of the Internal Revenue Code or a “nonemployee director” under Rule 16b-3 under the Exchange Act if such non-employee director serves on the CGNC, or (3) an independent director under Rule 10A-3 under the Exchange Act if such non-employee director serves on the Audit Committee of the Board.

We collect information about potential related-person transactions in annual questionnaires completed by directors and executive officers. We also review any payments made by the company or its subsidiaries to each director and executive officer and their immediate family members, and to or from those companies that either employ a director or an immediate family member of any director or executive officer. In addition, we review any payments made by the company or its subsidiaries to, or any payments received by the company and its subsidiaries from, any shareowner who owns more than 5% of any class of PPL Corporation’s voting securities. The company’s Office of General Counsel determines whether a transaction requires review by the Board or the CGNC. Transactions that fall within the definition of the policy are reported to the Board or the CGNC. The disinterested independent members of the Board, or the CGNC, as applicable, review and consider the relevant facts and circumstances and determine whether to approve, deny or ratify the related-person transaction.

BlackRock, Inc. filed an amended Schedule 13G in February 2016, stating that it holds 6.4% of PPL’s common stock. As a result of beneficially owning more than 5% of PPL’s common stock, BlackRock is currently considered a “related person” under PPL’s related-person transaction policy. After conducting a review of any relationships between BlackRock and its subsidiaries and our company and its subsidiaries, the company determined that the company invests its short-term cash overnight in money market funds managed by BlackRock Institutional Management Corporation, which received fees in the amount of about $62,000 during 2015. Another subsidiary of the company also invested in a liquidity fund managed by a BlackRock affiliate, which received fees of approximately $55,000 during 2015. In addition, several affiliates of BlackRock provided asset management investment services for the company’s U.S. retirement plan trust and the company’s pension trusts in the United Kingdom, all of which are separate from the company and are managed by independent trustees. These relationships were reviewed and ratified by the Board of Directors in compliance with the company’s related-person transaction policy.

 

 

22    PPL CORPORATION 2016 Proxy Statement


Table of Contents

EXECUTIVE COMPENSATION

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

 

What are you voting on?   The Board of Directors is asking you to vote, in an advisory manner, to approve the 2015 compensation of our named executive officers, or NEOs, as described on pages 24-71. The company currently intends to hold such votes on an annual basis. The next vote will be held at our 2017 Annual Meeting of Shareowners.

The Board recommends a vote FOR this proposal, because it believes our compensation policies and practices are effective in achieving their objectives to:

 

  Drive the executive team to produce superior, sustainable financial and operating results.

 

  Support strategic initiatives that increase value for shareowners.

 

  Align compensation effectively with short- and long-term shareowner interests.

 

  Attract and retain talented and experienced individuals.

Our executive compensation program reflects the company’s ongoing commitment to pay for performance. Our NEOs’ compensation is aligned with the interests of shareowners and is linked to short- and long-term company performance. Our primary compensation metrics are earnings per share from ongoing operations, or EPS, and relative total shareowner return, or TSR, both of which are important to shareowners. At least 70% of each NEO’s compensation is made up of incentive components that focus on EPS, earnings from ongoing operations before interest and taxes, or EBIT, relative stock price appreciation and dividend performance.

In considering your vote, you may wish to review the information on PPL’s compensation policies and decisions regarding the NEOs presented in the “Compensation Discussion and Analysis” and “Executive Compensation Tables” beginning on page 24, as well as the discussion regarding “Compensation Processes and Procedures” beginning on page 13.

The Board values the opinions of our shareowners and will consider the outcome of the vote when making future decisions on the compensation of our NEOs and our executive compensation program. In addition, the company is required at least once every six years to submit to shareowners the question of how frequently the company is required to seek shareowner approval of executive compensation. We currently expect the next shareowner vote on frequency to occur at our 2017 Annual Meeting of Shareowners.

The Board of Directors recommends approval of the following resolution:

RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is approved.

Vote Required for Approval. The affirmative vote of a majority of the votes cast, in person or by proxy, by all shareowners voting as a single class, is required to approve the 2015 compensation of our NEOs.

 

Your Board of Directors recommends that you vote FOR Proposal 2

 

 

 

PPL CORPORATION 2016 Proxy Statement    23


Table of Contents

EXECUTIVE COMPENSATION

 

COMPENSATION COMMITTEE REPORT

The Compensation, Governance and Nominating Committee, or CGNC, has reviewed the following Compensation Discussion and Analysis (CD&A) and discussed it with management.

Based on its review and discussions with management, the CGNC recommended to the Board that the CD&A be incorporated by reference into the company’s Annual Report on Form 10-K for the year ended December 31, 2015 and included in this Proxy Statement.

Compensation, Governance and Nominating Committee

Craig A. Rogerson, Chair

John W. Conway

Raja Rajamannar

Natica von Althann

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

TABLE OF CONTENTS

 

  NAMED EXECUTIVE OFFICERS        25   
  2015 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT        26   
 

An Overview of 2015 Performance

       26   
 

Aligning Employees and Compensation Strategies with Our Corporate Strategic Framework

       28   
 

How We Align PPL’s Compensation Program with Performance

       28   
 

2015 Pay and Performance

       29   
  OVERVIEW OF PPL’S EXECUTIVE COMPENSATION FRAMEWORK        30   
 

Process for Setting Executive Compensation

       30   
 

The Use of Market Data

       30   
 

Establishing Performance Targets

       30   
 

Elements of NEO Compensation

       31   
 

2015 Say-on-Pay Advisory Vote on Executive Compensation

       32   
  2015 NAMED EXECUTIVE OFFICER COMPENSATION        33   
 

Base Salary

       33   
 

2015 Annual Cash Incentive Awards

       33   
 

2015 Long-term Equity Incentive Awards

       37   
 

Vesting of 2013-2015 Performance Units

       39   
 

Other Elements of Compensation

       40   
  GOVERNANCE POLICIES UNDERPINNING OUR COMPENSATION FRAMEWORK        43   
 

Equity Ownership Guidelines

       43   
 

Hedging and Pledging Prohibitions

       44   
 

Clawback Policy

       44   
  ADDITIONAL INFORMATION        44   
 

Special Compensation

       44   
 

Tax Deductibility of Compensation

       45   

 

 

24    PPL CORPORATION 2016 Proxy Statement


Table of Contents

EXECUTIVE COMPENSATION

 


 

NAMED EXECUTIVE OFFICERS

In 2015, our named executive officers, or NEOs, were:

 

 Named Executive Officer    Title
 W. H. Spence    Chairman, President and Chief Executive Officer (CEO)
 V. Sorgi    Senior Vice President and Chief Financial Officer (CFO)
 R. J. Grey(1)    Executive Vice President and Chief Legal Officer (CLO)
 P. A. Farr(2)    Former President of PPL Energy Supply, LLC (Energy Supply)
 V. A. Staffieri    Chairman of the Board, Chief Executive Officer and President of LG&E and KU Energy LLC (LKE)
 R. A. Symons    Chief Executive of Western Power Distribution (WPD)

 

(1)  Mr. Grey served as Executive Vice President, General Counsel and Secretary through May 31, 2015. He served as our Executive Vice President and Chief Legal Officer from June 1, 2015 until his retirement on January 31, 2016.

 

(2)  Following the spinoff of PPL’s competitive supply business, referenced in this CD&A as Energy Supply, effective June 1, 2015, Mr. Farr ceased being an executive officer of PPL and became the Chief Executive Officer of Talen Energy Corporation, an independent, publicly traded company. Actual compensation for Mr. Farr represents what he earned through May 31, 2015.

The 2015 compensation of these NEOs is explained in the following sections and in the Summary Compensation Table that follows this CD&A.

 

 

 

PPL CORPORATION 2016 Proxy Statement    25


Table of Contents

EXECUTIVE COMPENSATION

 

2015 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT

An Overview of 2015 Performance

 

PPL delivered strong operational and financial results for shareowners in 2015, while laying a firm foundation for the company’s long-term growth and success.

 

PPL’s 6.3% total shareowner return was among the highest overall in its sector. In a challenging year for utilities, PPL’s stock significantly outperformed both the Philadelphia Stock Exchange Utility Index, or UTY, and the S&P 500 Utilities Index, or S&P 500 EU, with PPL stock up 1.2%, while these indices were down 9.8% and 9.1%, respectively.

 

The company extended its proven track record of delivering on financial commitments, growing per-share earnings from ongoing operations by 9% and exceeding the midpoint of its forecast earnings range for the sixth consecutive year. See Annex A for a description of adjusted 2014 earnings from ongoing operations. In addition, the company increased its dividend for the 13th time in 14 years and maintained investment-grade credit ratings from both Moody’s Investors Service and Standard & Poor’s Ratings Services.

 

In June, the company successfully completed the spinoff of its Energy Supply segment, one of the largest transactions in PPL history. The transaction completed PPL’s strategic transformation into a high performing, purely regulated utility business. It created value for shareowners, gave investors clear choices and eliminated PPL’s exposure to the risk associated with today’s challenging competitive energy markets.

 

At the same time, the executive team led a significant corporate restructuring and adopted
a leaner management structure to achieve long-term cost savings.

 

Across the businesses in 2015, PPL successfully completed $3.5 billion in infrastructure improvements, investments that demonstrate our focus toward the future. These investments are driving robust rate base growth and sustainable earnings growth, and they are improving reliability and safety for the company’s 10 million customers in the U.S. and U.K. In delivering these improvements, the company demonstrated its proven ability to execute large capital projects efficiently and effectively.

 

In Pennsylvania and Kentucky, PPL secured favorable results for rate requests, receiving commission approvals for increases that will provide an additional $256 million in annual revenue at our U.S. operations. In the U.K., we transitioned successfully to a new regulatory framework that sets customer charges and incentive opportunities for our U.K. utilities over an eight-year period, which began April 1, 2015, providing more regulatory and revenue certainty. Our four Western Power Distribution (WPD) subsidiaries were the only U.K. distribution networks to receive fast-track regulatory approval for their business plans for this eight-year period. The fast-track incentive is worth approximately $43 million annually for WPD assuming a $1.60/£ foreign currency exchange rate.

 

Other notable achievements in 2015 include the following:

 

In Pennsylvania

 

•   Energized the Susquehanna-Roseland transmission line, a critical regional grid project that has improved reliability in the PJM Interconnection. This approximately $650 million project included 100 miles of new 500 kV transmission line and is the company’s largest transmission project in over three decades.

 

•   Made significant progress on the $335 million Northeast-Pocono transmission project – including 70 miles of new transmission lines, three new substations and additional improvements. This project is expected to be completed this May, a year earlier than originally anticipated.

 

•   Secured Pennsylvania Public Utility Commission approval for a $471 million project to replace 1.4 million customer meters with new, more advanced metering technology.

   

LOGO

 

LOGO

   
   
   
   

 

 

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In Kentucky

 

•    Began commercial operation of a new 642-megawatt natural gas, combined-cycle generating unit, a $527 million project.

 

•    Completed the planned retirement of 800 megawatts of coal-fired generation.

 

•    Started construction on a new $30 million, 10-megawatt solar facility, the state’s first utility-scale solar installation.

 

In the U.K.

 

•    Concluded the last five-year regulatory review cycle in March 2015 as the top-performing U.K. utility over the period, earning $478 million in incentive revenues for outperforming WPD’s incentive targets.

 

•    Achieved new records in 2015 for reducing customer interruptions and the time customers are without service, positioning WPD to earn near maximum incentive rewards for these metrics and achieving at or near maximum reward levels for customer satisfaction.

 

These outstanding financial, operational and strategic results demonstrate our focus to increase value for shareowners in both the short- and long-term, a focus supported by our executive compensation program and “pay-for-performance” culture.

 

Based on the close alignment of PPL’s executive compensation with performance, these performance achievements resulted in:

 

•    Annual cash incentive awards ranging from 116.5% to 158.4% of target;

 

•    Performance-Contingent Restricted Stock Unit awards for the 2013–2015 performance period being granted at a value of 141.6% of target; and

 

•    Performance Unit awards for the 2013-2015 performance period vesting at 142.86% of target.

 

Looking forward, the company is solidly positioned to continue to deliver strong earnings growth, a competitive dividend and long-term shareowner value.

   

LOGO

 

LOGO

 

*  “Earnings” are from ongoing operations

 

   
   
   

The CGNC believes that a well-designed executive compensation program rewards annual financial and operational results while ensuring a focus on long-term shareowner value. In reviewing the results of the past several years, which have included both major expansion of the regulated utility businesses and a spinoff of the competitive energy supply business, transforming PPL into a fully regulated company, the CGNC concluded that the company’s executive compensation program for 2015 contained the appropriate elements to support the company’s strategy and focus on creating long-term shareowner value.

Read more in “2015 Named Executive Officer Compensation” beginning on page 33.

 

 

 

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Aligning Employees and Compensation Strategies with Our Corporate Strategic Framework

PPL’s corporate strategic framework provides the basis for determining annual and longer-term performance goals and objectives under our executive compensation programs.

 

LOGO

The performance goals that PPL has established reinforce the core features of our operational mission: reliability and safety. We believe success occurs through achieving operational excellence, as well as workforce readiness and engagement. If we are effective in these areas, our underlying performance should increase shareowner value that out-paces our sector, and our performance toward these goals is measured specifically to reward our executives for these accomplishments through our compensation program.

Although PPL operations are now fully regulated, the company continues to operate in multiple regulatory environments that can and do vary significantly by region. To align our NEOs’ actions with the company’s overall goals, NEO performance objectives are focused on enterprise-wide metrics that measure the financial performance of PPL, as well as financial metrics for its largest segments, providing direct alignment to our goal of increasing shareowner value.

How We Align PPL’s Compensation Programs with Performance

Performance-based compensation for the NEOs is primarily based on three core metrics: earnings per share from ongoing operations, or EPS, earnings from ongoing operations before interest and taxes, or EBIT, and relative total shareowner return, or TSR. These metrics align with our commitment to shareowners to deliver earnings growth and shareowner value creation.

The balance of measures is given careful consideration, with a view to our short-term and longer-term strategic goals, while focusing on areas most within an individual’s control.

Earnings are central to our business strategy and a primary focus of the investment community. Consequently, EPS and EBIT performance measures are central to the compensation program for our NEOs.

At the NEO level, the emphasis is placed on EPS growth. In our experience, EPS is the primary measure by which our shareowners and market analysts assess PPL’s performance, and accountability for strong EPS performance primarily falls on PPL’s executive officers. Management actions with respect to financing and tax strategy, capital investment and our revenue models drive EPS.

We balance the use of EPS with an EBIT measure. EBIT provides a more general means by which to assess and reward operational profitability with less emphasis on financing and tax strategies; thus, EBIT is more representative of the financial performance of the core operations of the business segments and the business as a whole. The CGNC believes that both measures in combination provide a balanced assessment of PPL’s financial performance.

 

 

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To supplement the internal assessment of performance provided by the EPS and EBIT measurements, relative TSR is used for certain equity-based awards, further aligning executives’ interests with those of shareowners. This approach provides an objective assessment of how the market is responding to our current and potential operational performance in comparison to our peers, directly correlated to market performance.

 

        EPS       EBIT       TSR

How We

Define It

   

•    Earnings per share from ongoing operations

 

•    See Annex A for a reconciliation of financial measures presented in accordance with GAAP to non-GAAP measures used for compensation

   

•    Earnings from ongoing operations before interest and taxes

 

•    See Annex A for a reconciliation of financial measures presented in accordance with GAAP to non-GAAP measures used for compensation

   

•    Total shareowner return, which is a combination of share price appreciation and reinvested dividends

 

•    Assessed relative to the UTY

           

Where We

Use It

   

•    Annual Cash Incentive

 

•    Performance-Contingent Restricted Stock Units

   

•    Annual Cash Incentive

   

•    Performance Units

Further information about the targets that apply to specific awards is set out in this CD&A.

A substantial portion of NEO compensation is delivered in the form of equity, and our senior executives are subject to significant Equity Ownership Guidelines. These practices further reinforce our commitment to create shareowner value by directly linking NEO compensation to share price appreciation and sustainable long-term growth.

2015 Pay and Performance

The PPL compensation framework places a heavy emphasis on at-risk performance-based pay through the use of annual and long-term performance-based compensation elements. In 2015, 85% of the CEO’s target compensation opportunity was “at-risk performance-based” pay. For the CFO, this percentage was 73%, and the average for the other NEOs was 71%.

The following graphs illustrate the 2015 elements of compensation divided among base salary, annual cash incentive targeted opportunity and the total long-term incentive targeted opportunity.

 

Elements of Compensation as a Percentage of Targeted Total Direct Compensation — 2015(1)

 

LOGO

 

(1)  Based on target award levels as a percentage of targeted total direct compensation for performance during 2015. Values of performance-contingent restricted stock unit and performance unit awards shown in the Summary Compensation Table in this proxy statement reflect equity awards granted in 2015. Performance-contingent restricted stock unit awards granted in January 2015 were awarded based on performance for 2012-2014. Because the performance-contingent restricted stock units granted in 2016 are based on performance for 2013-2015, the CD&A includes such awards as part of the CGNC’s analysis.

 

(2)  Includes the positions of the CLO, the former President of PPL Energy Supply, the President of LKE and the Chief Executive of WPD.

 

 

 

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OVERVIEW OF PPL’S EXECUTIVE COMPENSATION FRAMEWORK

Our compensation program reflects PPL’s ongoing commitment to pay-for-performance, with executive compensation aligned to shareowner interests and linked to short- and long-term company performance. As illustrated in the previous section, at least 70% of our NEOs’ compensation is at-risk and directly linked to the financial performance of PPL.

 

Process for Setting Executive Compensation

 

As part of its duties, there are a number of activities the CGNC undertakes each year in reviewing the operation and effectiveness of the PPL compensation program.

 

LOGO

 

Below in this CD&A, we provide additional information on two critical aspects of this process: the way in which the CGNC uses market data to inform decisions on executive officer compensation, and the process by which targets are set under the incentive plans.

The Use of Market Data

The CGNC uses market compensation data as one of several criteria when reviewing individual NEO compensation levels. The primary source of competitive data is the Towers Watson 2014 U.S. Energy Services Industry Executive Compensation Database. The CGNC believes this is the most appropriate market reference because it reflects the broad energy industry and the primary source for executive talent, can be adjusted to reflect our size, and the large sample size results in more consistent reliable information. The CGNC also uses, as market references, competitive data from the Towers Watson 2014 U.S. General Industry Executive Compensation Database and information on pay practices from a select group of industry comparators, which includes public utilities with revenues one-third to three times that of PPL. For Mr. Symons, the CGNC considers U.K.-based compensation data compiled by FIT Remuneration Consultants, including utility companies within the Financial Times Stock Exchange in London, England.

These analyses produce a market median reference point (the 50th percentile) referred to as “PPL Competitive Data.” Although the survey participants can vary slightly from year to year, the large nature of the samples minimizes the risk this change could distort general market trends. For 2015 compensation decisions, the CGNC considered this data to determine the PPL Competitive Data reference point for compensation of our NEOs. Frederic W. Cook & Co., Inc., or Cook, the CGNC’s independent compensation consultant, provides the compensation data to the CGNC.

Establishing Performance Targets

Each year, the CGNC reviews and sets the performance targets that apply to incentive awards. This process is particularly important in seeking to ensure alignment between pay and performance over short- and long-term periods.

 

 

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In setting the PPL Corporation EPS and EBIT targets, the CGNC reviews comprehensive data and systematically assesses PPL’s targets by considering:

 

  PPL’s historical performance.

 

  Historical performance within the industry.

 

  PPL’s earnings forecasts for the coming year.

 

  Analysts’ earnings forecasts for the coming year.

These data are used with a view to setting goals that are appropriately challenging and competitive within the industry. The targets for the 2015 awards were reviewed during the first quarter of 2015 and are summarized beginning on page 33.

Elements of NEO Compensation

The compensation program is composed of three key elements — base salary, an annual cash incentive and long-term equity incentives — which make up total direct compensation.

There were no substantial changes to the elements of compensation or how they were used in 2015, as compared to 2014, other than the changes to the weightings of corporate and business segment measures with respect to annual cash incentive awards for Messrs. Staffieri and Symons, as described below under “Annual Cash Incentive.”

Regarding Mr. Grey, the CGNC authorized the company to enter into a retention agreement with him on May 6, 2015. The purpose of this agreement was to secure his continued employment and engagement as CLO until January 31, 2016 through the critical spinoff of the Energy Supply segment and related transition. In his role, Mr. Grey was central in advising PPL on the successful completion of the spinoff, transitioning to a new General Counsel post-spinoff, and managing matters involving the evolving legal operations for the company pre- and post-spinoff. For more information regarding Mr. Grey’s agreement, see “Retention Agreements” beginning on page 63.

 

Compensation

Element

  Purpose   Features  

Performance Measures

and Time Horizon

     
Base Salary   To reward sustained performance, experience, value in the market and to PPL, and individual skills, knowledge and behaviors  

•    Reviewed annually with any change effective in January

 

•    CGNC applies judgment in setting salary to reflect performance, experience and responsibility

 

•    Review of individual performance and market position

     

Annual Cash

Incentive

  To motivate and reward corporate performance over the short term  

•    Paid in cash

 

•    Combination of corporate and segment performance for business segment presidents

 

•    Up to two times target for top performance

 

•    100% financial

 

•    Measures include PPL EPS, PPL EBIT, business segment net income and EBIT, and earnings before interest, taxes, depreciation and amortization, or EBITDA

 

•    One year

 

 

 

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Compensation

Element

  Purpose   Features  

Performance Measures

and Time Horizon

Long-term Equity Incentives        
   

Performance-

Contingent Restricted Stock

Units

  To align shareowner and executive interests while rewarding longer-term performance and encouraging retention  

•   Grant value determined based on EPS performance over prior three years

 

•   Payable in shares of PPL common stock

 

•   Dividends accrue quarterly, but are not paid unless and until underlying award vests

 

•   Restricted for three years from date of grant

 

•   Represents 40% of the total long-term equity incentive opportunity

 

•   100% EPS

 

•   Based on performance over the three years preceding grant

 

•   Restricted for three additional years following grant

   

Performance

Units

  To align shareowner and executive interests and to drive sustainable growth over the long-term  

•   Vests at 0% to 200% of target, subject to certification of performance at the end of the three-year performance period

 

•   Payable in shares of PPL common stock

 

•   Dividends accrue quarterly, but are not paid unless and until underlying award vests

 

•   Represents 60% of the total long-term equity incentive opportunity

 

 

•   100% relative TSR, using the UTY

 

•   Three-year performance period

             

In addition, the NEOs receive modest perquisites, such as financial planning, tax preparation services and matching contributions under our deferred compensation plans. Read more in the “Other Elements of Compensation” section on page 40.

2015 Say-on-Pay Advisory Vote on Executive Compensation

The CGNC considered the results of the last shareowner advisory vote on executive compensation when reviewing potential changes to PPL’s executive compensation program. PPL received a favorable shareowner vote of over 96% in support of the compensation of our NEOs in response to our say-on-pay proposal at the company’s 2015 annual meeting. We have a long-standing practice of engaging with our shareowners on various matters of interest to them. In 2015, we enhanced our efforts by conducting a focused outreach to shareowners representing approximately 38% of our outstanding shares to seek their views on our compensation program, as well as our corporate governance practices. The CGNC decided to maintain the core design of our compensation program for 2016, but it is continuing to assess the feedback received from shareowners to ensure our compensation structure is aligned with our corporate strategy and best pay practices.

 

 

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2015 NAMED EXECUTIVE OFFICER COMPENSATION

Base Salary

Each year, the CGNC reviews base salary in the context of responsibilities, experience, value in the market and to PPL, sustained individual performance and internal parity to determine whether an executive’s base salary will be increased. In reaching a decision, the CGNC reviews market compensation data and whether each executive’s position is competitive.

In January 2015, the CGNC approved increases ranging from 0% to 11.1%, with an average increase for the NEOs of 3.6%, as follows:

 

     

      Named Executive Officer

 

 

    2014 Year-End Salary    

 

   

2015 Salary

 

   

% Change

 

 
       

  W. H. Spence

    $1,127,500                    $1,127,500        0.0%       
     

  V. Sorgi

    $450,000                    $500,000        11.1%       
     

  R. J. Grey

    $565,000                    $580,000        2.7%       
     

  P. A. Farr

    $737,100                    $773,955        5.0%       
     

  V. A. Staffieri

    $811,220                    $811,220        0.0%       
     

  R. A. Symons

    £535,000                    £551,050        3.0%       

 

With respect to individual base salary decisions, the following points are noted:

 

Although the CGNC considered Mr. Spence’s individual performance as very strong, he did not receive a salary increase because his base salary at that time was fully market competitive.

 

Mr. Sorgi assumed the role of CFO in June 2014, at which time he received an increase to his salary. In light of his demonstrated performance in the CFO role, his salary was increased in 2015 to bring his base salary to a more competitive level.

 

Messrs. Grey’s and Symons’ base salary changes reflected their respective performance and merit increase.

 

Mr. Farr’s increase was approved in anticipation of his new CEO role with Talen Energy Corporation.

 

Mr. Staffieri’s base salary was not increased because his base salary at that time was fully market competitive.

2015 Annual Cash Incentive Awards

The Annual Cash Incentive awards, which are made under the shareowner-approved Short-term Incentive Plan, measure and reward performance against the company’s financial goals for the year. The measures used to assess management’s success in executing the company’s strategy and initiatives are primarily EPS (or net income at a segment level) and EBIT. These align with our goals of increasing shareowner value and were set and communicated to the NEOs in January 2015.

For 2015, the CGNC approved a number of changes to the relative weights of performance measures under the Annual Cash Incentive program for the segment presidents. These changes were intended to better align the potential outcome within their area of direct control. In particular:

 

Mr. Staffieri’s targets were rebalanced to 40% PPL Corporation and 60% LKE financial measures, from 60% PPL Corporation and 40% LKE.

 

Mr. Symons’ targets were also rebalanced and changed to 40% PPL Corporation and 60% WPD financial measures, from 25% PPL Corporation and 75% financial and operational WPD targets.

 

 

 

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In anticipation of the spinoff of the Energy Supply segment, incentives for Mr. Farr were based solely on the performance of Energy Supply. The 2015 performance measures focused on earnings (as measured by EBITDA) and free cash flow, both identified as key measures of short-term performance for the Energy Supply segment in the lead-up to the spinoff. Reflecting the shorter performance period, Mr. Farr’s maximum opportunity was capped at 125% of target, while the other NEOs could earn up to 200% of target for exceeding the maximum levels of goals. Mr. Farr’s 2014 targets had been composed of 42% PPL EPS, 18% PPL EBIT, 28% Energy Supply Net Income and 12% Energy Supply EBIT.

In summary, the performance measures for 2015 were as follows:

 

   

 

Measure

 

CEO, CFO,

CLO

    Segment Presidents of WPD and LKE      

President of    

Energy Supply    

  Relative Weight   Relative Weight         Overall Weight     Relative Weight    

 

PPL EPS

 

 

 

70%

 

 

 

40%

 

 

 

70%

 

 

 

40% * 70% = 28% 

 

   

 

PPL EBIT

 

 

 

30%

 

   

 

30%

 

 

 

40% * 30% = 12% 

 

 

 

Business Segment Net
Income
  

         

 

60%

 

 

 

70%

 

 

 

60% * 70% = 42% 

 

   

LKE EBIT

WPD EBITDA

           

 

30%

 

 

 

60% * 30% = 18% 

 

 

 

Energy Supply EBITDA

 

                     

 

70%

 

 

Energy Supply Free Cash Flow

                     

 

30%

 

 

 

 

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PPL Corporate Financial Performance

 

 

EPS (70% of corporate element)

 

EPS from ongoing operations in 2015 was $2.21, which is
between the target and maximum payout levels of $2.15
and $2.37, respectively. The threshold target was $2.05,
below which no amount would be awarded.

 

LOGO

 

Therefore, the percent of target earned in relation to
PPL’s EPS was 127.3% of target.

 

 

EBIT (30% of corporate element)

 

EBIT in 2015 was $2,889.92 million, which is slightly
below the target payout level of $2,906 million.

 

LOGO

 

Therefore, the percent of target earned in relation to
PPL’s EBIT was 91.4% of target. If EPS had been
below $2.05, no payout for EBIT would have been
awarded.

 

As a result, the combined incentive earned for corporate financial performance was 116.5% of target.

 

 

Business Segment Financial Performance

 

 

LG&E and KU Energy (LKE) – V. A. Staffieri

 

Net Income (70% of segment element)

 

•    Target ongoing net income for the year was $353.4 million.

 

•    LKE ongoing net income for the year was $376 million, which is between the target and maximum payout levels.

 

•    The percent of target earned for the LKE ongoing net income target was 173.1% of target.

 

 

 

WPD – R. A. Symons

 

Net Income (70% of segment element)

 

•    Target ongoing net income for the year was £589.6 million.

 

•    WPD ongoing net income for the year was £646 million, which exceeded the maximum payout level.

 

•    The percent of target earned for the WPD ongoing net income measure was 200% of target.

 

EBIT (30% of segment element)

 

•    Target EBIT for the year was $754.2 million.

 

•    LKE EBIT for the year was $784 million, which is between the target and maximum payout levels.

 

•    The percent of target earned for the LKE EBIT target was 157.9% of target.

 

 

EBITDA (30% of segment element)

 

•    Target EBITDA for the year was £994 million.

 

•    WPD EBITDA for the year was £1,033 million, which is between the target and maximum payout levels.

 

•    The percent of target earned for the WPD EBITDA target was 154.7% of target.

 

As a result, the combined incentive earned for LKE financial performance was 168.5% of target.

 

 

 

As a result, the combined percent of target earned for WPD financial performance was 186.4% of target.

 

 

 

 

 

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Energy Supply Financial Performance

 

 

In light of the spinoff of the Energy Supply segment, 2015 performance was measured through May 31, 2015, the last full day before the effective date of the spinoff.

 

•   EBITDA for the partial year was $308 million against a prorated target of $240 million, which exceeded the maximum payout level of $299 million. Due to the cap previously set by the CGNC, the incentive earned for the Energy Supply EBITDA measure was 125% of target.

 

•   Free Cash Flow for the partial year was $134 million against a prorated target of $86 million, which exceeded the maximum payout level of $121 million. Due to the cap previously set by the CGNC, the incentive earned for the Energy Supply Free Cash Flow target was 125% of target.

 

As a result, the payout earned was deemed to be 125% of target.

 

Individual Annual Cash Incentive Awards for 2015 Performance

The following annual incentive awards were approved by the CGNC for 2015 performance:

 

 

Named Executive

Officer

 

  

Weight × Goal Results

 

     2015 Earned Award  
  

Corporate

 

  

Segment

 

  

Energy Supply

 

  
       

W. H. Spence

   100% × 116.5%                        —                          —    116.5%
       

V. Sorgi

   100% × 116.5%                        —                          —    116.5%
       

R. J. Grey

   100% × 116.5%                        —                          —    116.5%
       

P. A. Farr

                           —                        —    100% × 125.0%    125.0%
       

V. A. Staffieri

     40% × 116.5%    60% × 168.5%                          —    147.7%
       

R. A. Symons

     40% × 116.5%    60% × 186.4%                          —    158.4%

 

This resulted in the following annual cash incentive awards approved for the NEOs:

 

       

Named Executive

Officer

 

  

2015 Base
Salary

 

 

Target Opportunity

(% of Base Salary)

 

 

2015 Earned

Award

 

 

2015 Annual Cash

Incentive Award

 

       

W. H. Spence

   $1,127,500     140%       116.5%       $1,838,953  
       

V. Sorgi

      $500,000       70%       116.5%         $407,750  
       

R. J. Grey

      $580,000       75%       116.5%         $506,775  
       

P. A. Farr(1)

      $773,955       80%       125.0%         $322,481  
       

V. A. Staffieri

      $811,220       75%       147.7%         $898,629  
       

R. A. Symons

      £551,050       55%       158.4%         £480,075  

 

 

(1)  Mr. Farr’s annual cash incentive award was prorated to reflect the five months through May 31, 2015, before the completion of the spinoff of the Energy Supply segment.

 

 

 

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2015 Long-term Equity Incentive Awards

The purpose of the long-term incentive program is to align our executives’ interests with those of shareowners by providing long-term equity incentives that are earned based on company performance. This goal is achieved through two distinct equity awards – Performance-Contingent Restricted Stock Units and Performance Units – that tie compensation to the share price of PPL, based on EPS and TSR performance measures over different three-year periods.

 

 

Named Executive

Officer

  

 

Target Award (% of Base Salary)

   Total Long-term
Incentive
  

40% Performance-
Contingent Restricted
Stock Units

(Based on EPS)

  

60% Performance Units

(Based on TSR)

     

  W. H. Spence

   450%    180%    270%
     

  V. Sorgi

   200%      80%    120%
     

  R. J. Grey

   165%      66%      99%
     

  P. A. Farr

   270%    108%    162%
     

  V. A. Staffieri

   175%      70%    105%
     

  R. A. Symons

     70%      28%      42%

 

It has been the CGNC’s long-time practice to make these annual grants at its regularly scheduled January meeting.

While off-cycle awards may be made from time-to-time, for example, at the appointment of a new executive officer, no such awards were made in 2015 to the NEOs.

2015 Performance-Contingent Restricted Stock Unit Awards

The 2015 Performance-Contingent Restricted Stock Units were assigned a target value, with actual awards made to reflect PPL’s EPS performance over the three calendar years ended December 31, 2015. Awards were calculated based on year-end 2015 salary and awarded in January 2016 for the 2013–2015 performance period. Restrictions lapse on the third anniversary of the grant date, subject to continued employment through that date.

 

LOGO

 

 

 

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EPS performance targets are consistent with those established in each of the performance years for the Annual Cash Incentive and provide an additional focus on delivering sustained long-term EPS performance. The goals and corresponding level of achievement for 2015 awards were as follows:

 

 

EPS Goals and Corresponding Level of Achievement for Last Three Years(1)

 

Performance Year   Threshold   Target   Maximum   Annual EPS
Results
 

Achievement

(% of Target)

 

         

2013

  $2.02   $2.25 - $2.30   $2.53   $2.45   163.6%
         

2014

  $2.00   $2.15 -$2.28   $2.78   $2.45   134.0%
         

2015

  $2.05   $2.15   $2.37   $2.21   127.3%

 

 

(1)  Performance targets were set for 2015 in anticipation of the spinoff of the Energy Supply segment and excluded earnings from that business. For purposes of comparison, the 2014 EPS annual result was similarly adjusted as publicly reported in PPL’s 2014 earnings release, as $2.03 per share instead of $2.45. Based on that comparison, the 2015 EPS target represented growth of 5.9% from the 2014 EPS result, as adjusted for the spinoff. See Annex A for a description of adjusted earnings from ongoing operations for 2014.

The average EPS goal attainment for the three-year performance period was 141.6% of target. Therefore, the following Performance-Contingent Restricted Stock awards were approved and made to the NEOs by the CGNC in January 2016 as part of their total compensation package for 2015. These awards will be reflected in the Summary Compensation Table and Grants of Plan-based Awards table for 2016.

 

 

Performance-Contingent Restricted Stock Unit Awards Granted for the Performance Period 2013-2015

 

Named Executive

Officer

   2015 Base Salary   

Target Award
(% of Salary)

 

   Award Value   

Units Granted(1)

 

       

  W. H. Spence

   $1,127,500    180%    $2,873,772    86,482
       

  V. Sorgi

      $500,000      80%       $566,400    17,045
       

  R. J. Grey

      $580,000      66%       $542,045    16,312
       

  P. A. Farr(2)

      $773,955    108%       $493,164    14,841
       

  V. A. Staffieri

      $811,220      70%       $804,081    24,198
       

  R. A. Symons

      £551,050      28%       £218,480      9,294

 

 

(1)  Number of units granted is the award value divided by the closing price of PPL common stock on January 21, 2016, the date the CGNC approved the grants, which was $33.23, and equivalent to £23.51 using an exchange rate of £0.7075 for Mr. Symons’ award. The number of units is rounded up to the nearest whole unit.

 

(2)  Mr. Farr’s award was prorated to reflect his five months of service through May 31, 2015, before completion of the Energy Supply spinoff. As contemplated in the agreements governing the spinoff entered into in June 2014, the CGNC approved the acceleration of vesting of Mr. Farr’s units as of the completion of the spinoff, consistent with the acceleration of all employees’ units as provided for in the transaction agreements.

2015 Performance Unit Awards

The Performance Unit awards complement the Performance-Contingent Restricted Stock Unit awards by rewarding executives for relative shareowner value creation over the three years starting in the year they are granted. Performance Unit awards made in January 2015 were calculated based on year-end 2014 salary.

 

 

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Target award values are established at the start of the year, and the actual number of shares that an NEO receives is contingent on PPL’s TSR performance relative to the companies in the UTY, as follows:

 

LOGO   

TSR combines the impact of share price movement and reinvested dividends during the three-year performance period from January 1, 2015 to December 31, 2017.

 

The CGNC determined that the constituents of the UTY are an appropriate TSR industry group for PPL. The UTY is a market capitalization-weighted index of 20 geographically diverse, North American utility companies that are considered to be our peers by analysts and investors.

                       

At the end of the performance period, awards can range from 0% to 200% of target depending on relative performance. Awards are forfeited if PPL ranks below the 25th percentile at the end of the three-year period. The CGNC has no discretion to provide for payment other than as reflected in the actual attainment of the stated performance goals.

The following Performance Unit awards were granted by the CGNC in January 2015, subject to the 2015-2017 performance period.

 

 

Performance Unit Awards Granted in 2015

 

Named Executive

Officer

      2014 Base Salary           

Target Award 

(% of Salary) 

          Award Value             Number of
Performance Units
Granted
(1)
   
     

  W. H. Spence

    $1,127,500       270%         $3,044,250            85,280  
     

  V. Sorgi

       $450,000       120%         $540,000            15,130  
     

  R. J. Grey

       $565,000         99%         $559,350            15,670  
     

  P. A. Farr(2)

       $737,100       162%         $1,194,102            33,450  
     

  V. A. Staffieri

       $811,220       105%         $851,781            23,860  
     

  R. A. Symons

       £535,000         42%         £224,700              9,460  

 

 

(1)  Number of units granted is the award value divided by the closing price of PPL common stock on January 22, 2015, the date the CGNC approved the grants, which was $35.70, and equivalent to £23.77 using an exchange rate of £0.6658 for Mr. Symons’ award. The number of units is rounded up to the nearest 10 units.

 

(2)  At the time of Mr. Farr’s award, the spinoff of the Energy Supply segment had not yet occurred. On completion of the spinoff, all of Mr. Farr’s 2015 Performance Units were forfeited in accordance with the related grant agreement.

Following the CGNC’s assessment and certification of performance in early 2018, the Performance Unit awards and dividend equivalents will vest, if applicable.

Vesting of 2013–2015 Performance Units

Performance Unit awards were made to the NEOs in 2013, subject to a three-year performance period. The actual number of units that could vest at the end of the performance period was contingent on PPL’s TSR from January 1, 2013 to December 31, 2015 relative to companies in the UTY.

Over this three-year period, PPL ranked at the 65th percentile. As a result, the 2013–2015 Performance Units were earned at 142.86% of target.

 

 

 

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EXECUTIVE COMPENSATION

 

Other Elements of Compensation

In addition to the three core elements of compensation (base salary, an annual cash incentive and long-term equity incentives in the form of Performance-Contingent Restricted Stock Units and Performance Units), the company also provides other forms of indirect compensation, which are summarized below.

Perquisites

PPL provides limited executive perquisites to its NEOs. Where provided, these are consistent with market practice and serve a direct business interest.

Financial planning services, including tax preparation and support, and a one-time payment for estate document preparation, are provided to the NEOs other than Mr. Symons. These services are provided in recognition of time constraints on executives and their more complex compensation program that requires professional financial and tax planning. We believe that good financial planning by experts reduces the amount of time and attention that executive officers must spend on such issues. Such planning also helps ensure the objectives of our compensation programs are met and not hindered by unexpected tax or other consequences.

Additionally, each NEO, other than Mr. Symons, is also eligible for an executive physical every two years, up to a cost of $5,000. The CGNC believes the benefit is beneficial to both the employee and the company through potential reduced costs and increased productivity.

Mr. Symons’ arrangements reflect U.K. market practice. Although he does not receive the perquisites described above, in accordance with the WPD Executive Car Allowance Policy, Mr. Symons receives a monthly cash allowance of £862.98 and reimbursement for fuel.

The incremental cost to PPL of all perquisites received by our NEOs for the year is summarized in Note 7 to the Summary Compensation Table on page 47.

 

 

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Indirect Compensation

The company provides executive benefits such as nonqualified deferred compensation opportunities and supplemental executive retirement plan benefits. We have historically viewed our retirement benefits as a means of providing financial security to all our salaried employees after they have spent a substantial portion of their careers with the company. Officers of the company, including the NEOs, participate in certain benefit programs offered to all PPL employees, or all LKE employees in the case of Mr. Staffieri, or all WPD employees in the case of Mr. Symons. In addition, officers are eligible for the executive benefit plans discussed below.

 

 

Retirement Plan

 

  Description    NEO Participants
 

PPL Retirement

Plan

 

•    Tax-qualified defined benefit pension plan

 

•    Closed to new salaried employees after December 31, 2011

  

Messrs. Spence, Sorgi and Grey

 

Mr. Farr participated in this plan prior to June 1, 2015

PPL Supplemental Executive

Retirement Plan

(PPL SERP)

 

•    Nonqualified defined benefit pension plan to provide for retirement benefits above amounts available under the PPL Retirement Plan

 

•    Closed to new officers after December 31, 2011

   Messrs. Spence, Sorgi, Grey and Farr(1)
 

Supplemental Compensation

Pension Plan

 

•    Nonqualified defined benefit plan that applies to certain employees hired before January 1, 2012, who are not vested in the PPL SERP

   Mr. Sorgi
PPL Subsidiary Retirement Plan  

•    Tax-qualified defined benefit pension plan

 

•    Closed to new salaried employees after December 31, 2011

 

•    This plan was transferred to Talen Energy Corporation, effective June 1, 2015, the closing of the spinoff of the Energy Supply segment

   Mr. Farr
 

LG&E and KU Retirement Plan

(LG&E Retirement

Plan)

 

•    Tax-qualified defined benefit pension plan

 

•    Closed to new participants after December 31, 2005

   Mr. Staffieri
LG&E and KU Supplemental Executive Retirement Plan (LG&E SERP)  

•    Nonqualified defined benefit pension plan

 

•    Closed to new participants effective January 1, 2012

   Mr. Staffieri
 
Electricity Supply Pension Scheme (ESPS)  

•    U.K. tax-approved defined benefit pension scheme

   Mr. Symons

 

 

(1)  In connection with the June 1, 2015 spinoff of PPL’s Energy Supply segment, the CGNC approved the acceleration of Mr. Farr’s vesting in the PPL SERP, consistent with other participants who were part of the spinoff; no additional benefits accrued to Mr. Farr after that time.

Additional details about these plans are provided under “Executive Compensation Tables — Pension Benefits in 2015” beginning on page 53.

 

 

 

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The primary capital accumulation opportunities for NEOs other than Messrs. Staffieri and Symons are: (1) stock gains under the company’s long-term incentive program (as described above) and the employee stock ownership plan; and (2) voluntary savings opportunities that, for 2015, included (a) savings through the tax-qualified employee savings plan, which is a 401(k) plan (our PPL Deferred Savings Plan), and (b) the PPL Executive Deferred Compensation Plan, which is a nonqualified deferred compensation arrangement.

 

 

Savings Plans

 

  Description    NEO Participants
     

PPL Deferred

Savings Plan

 

•   Tax-qualified defined contribution plan

 

•   PPL provides matching contributions of up to 3% of the participant’s pay subject to contribution limits imposed by the Internal Revenue Service, or IRS

 

•   Pay defined as salary plus annual cash incentive award

 

•   Participants vest in PPL’s matching contributions after one year of service

 

•   Participants may request distribution of their account at any time following termination of employment

  

Messrs. Spence, Sorgi and Grey

 

Mr. Farr participated in this plan prior to June 1, 2015

 

PPL Executive

Deferred

Compensation

Plan

 

•   Non-qualified deferred compensation plan

 

•   Participants may defer some or all of their cash compensation in excess of the estimated minimum legally required annual payroll tax withholding

 

•   Matching contributions are made under this plan on behalf of participating officers to make up for matching contributions that could not be made on behalf of such officers under the PPL Deferred Savings Plan because of statutory limits on qualified plan benefits

 

•   There is no vesting requirement for the company matching contributions

  

Messrs. Spence, Sorgi and Grey

 

Mr. Farr participated in this plan prior to June 1, 2015

          

The company also has a PPL Employee Stock Ownership Plan, or ESOP. Although it is a tax-qualified, employee stock ownership plan in which Messrs. Spence, Sorgi and Grey participate, no contributions have been made to the ESOP since 2012. Mr. Farr participated in the ESOP prior to June 1, 2015.

Neither Mr. Staffieri nor Mr. Symons participates in the ESOP, the PPL Deferred Savings Plan or the PPL Executive Deferred Compensation Plan. Mr. Staffieri does, however, participate in the LG&E and KU Savings Plan and in the LG&E and KU Nonqualified Savings Plan, which allow participants to defer a maximum of 75% of base salary and annual cash incentive awards, as further described under “Executive Compensation Tables — Nonqualified Deferred Compensation in 2015” beginning on page 58.

 

 

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GOVERNANCE POLICIES UNDERPINNING OUR COMPENSATION FRAMEWORK

At PPL, the CGNC has adopted strong corporate governance practices that are intended to drive results and support accountability to shareowners, as well as align interests of executive officers with those of shareowners.

 

  What We Do   What We Don’t Do
 

ü    Conduct annual pay risk assessment

 

 

û     No hedging or pledging of PPL stock by officers and directors

 

ü    Retain independent compensation consultant

 

û     No dividend equivalents paid on unvested equity awards granted to executive officers

 

ü    Adopted proxy access

 

û     No tax “gross-ups” for NEO perquisites or in new change-in-control severance agreements

 

ü    Require significant equity ownership

 

û     No “single trigger” change-in-control severance agreements

 

ü    Adopted clawback policy

 

û     No new participants in the PPL SERP or LG&E SERP

 

Additional information on PPL’s Equity Ownership Guidelines, Hedging and Pledging and Clawback Policies can be found below.

Equity Ownership Guidelines

An important part of PPL’s compensation philosophy is ensuring a strong linkage between executives and shareowners. The Equity Ownership Guidelines enable the company to align executives with this philosophy. The guidelines provide that NEOs should maintain the following levels of ownership in PPL stock:

 

Executive Officer Level   

  Equity Guideline    

(Multiple of Salary)  

Chairman, President and CEO

   5x

Executive Vice Presidents

   3x

Senior Vice Presidents

   2x

Presidents of business segments(1)

   2x
      

 

  (1)  Includes Messrs. Staffieri and Symons, and included Mr. Farr until the June 1, 2015 spinoff of the Energy Supply segment.

NEOs must attain the minimum ownership requirement that applies to their level by the end of their fifth anniversary year at that level. If an NEO fails to achieve the required level within the specified time frame, the following additional requirements apply until the Guideline is exceeded.

 

  The NEO must not sell any shares of PPL stock.

 

  The NEO will be required to retain any vesting equity awards, net of required tax withholding.

 

  The CGNC retains the right, at its discretion, to deliver annual cash incentive awards in the form of restricted stock unit grants.

All NEOs were in compliance with the Equity Ownership Guidelines as of December 31, 2015, and Mr. Farr was in compliance as of June 1, 2015, the date he left the company.

 

 

 

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Hedging and Pledging Prohibitions

In accordance with best governance practices, the company has an established policy that prohibits its officers and directors from the following actions:

 

  Pledging shares of company stock as collateral for any loans.

 

  Engaging in any form of hedging transaction.

 

  Trading in derivatives of PPL common stock.

Clawback Policy

In January 2013, the CGNC adopted a policy regarding the recoupment of executive compensation, commonly referred to as a “clawback.” Subject to the discretion and approval of the Board, this policy enables the company to seek recoupment of incentive-based compensation awarded to any current executive officer of the company in situations where the Board has determined that:

 

  the company is required to prepare an accounting restatement due to the material noncompliance by the company with any financial reporting requirement under the securities laws, and

 

  a lower award would have been made to the executive officer based upon the restated financial results.

The Board has full and final authority to make all determinations under this policy, including, without limitation, whether the policy applies and, if so, the amount of cash bonus or other incentive-based compensation, if any, to be repaid by any executive officer. In each such instance, as determined by the Board, the company will, to the extent permitted by applicable law, seek to recover incentive-based compensation received by such individual in excess of the amount that would have been received under the accounting restatement. Any recoupment under this policy is to be in addition to any other remedies that may be available to the company, including such remedies contained in the company’s equity grant agreements, employment letters, if any, and applicable law.

ADDITIONAL INFORMATION

Special Compensation

In addition to the annual direct and indirect compensation described above, the company provides special compensation under specific situations.

Employment Agreements. We generally do not enter into traditional employment agreements with executive officers. Other than a Service Agreement entered into with Mr. Symons in the U.K. as described at page 49 under “Employment Agreement,” there are no specific agreements pertaining to length of employment that would commit the company to pay an executive for a specific period. Generally, our executive officers are “employees-at-will” whose employment is conditioned on performance and subject to termination by the company at any time.

Retention Agreements. The company entered into a retention agreement with Mr. Grey on May 6, 2015, pursuant to which he retired from PPL on January 31, 2016. PPL previously entered into a retention agreement with Mr. Farr, under which he was granted shares of restricted PPL common stock. For specific details on retention agreements that were in place for NEOs during 2015, see “Retention Agreements” beginning on page 63.

Change-in-Control Protections. The company believes certain executive officers who are terminated without cause or who resign for “good reason” (as defined in “Change-in-Control Arrangements” on page 60) in connection with a change in control of PPL Corporation should be provided separation benefits. These benefits are intended to ensure that executives focus on serving the company and shareowner interests without the distraction of possible job and income loss. All of our NEOs have agreements with the company providing for separation benefits in the event of a change in control.

The major components of the company’s change-in-control protections are:

 

 

Accelerated Vesting of Specific Outstanding Equity Awards. As of the close of a transaction that results in a change in control of PPL Corporation, all outstanding equity awards granted under the former ICP as part of the company’s compensation program (excluding restricted stock and restricted stock units issued pursuant to

 

 

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  retention agreements) become available to executives. As a result, restrictions on all outstanding restricted stock units lapse, a pro rata portion of performance units become payable and all unexercisable stock options become exercisable. No awards have been made under this plan since 2012, when a new equity plan, the SIP, was implemented.

Equity awards granted under the SIP become vested upon a change in control, only if the executive is terminated following or in connection with the change in control (a “double trigger”).

Stock options granted prior to 2007 are exercisable for 36 months following a qualifying termination of employment in connection with a change in control; options granted in 2007 and thereafter under the ICP are, after a change in control, exercisable for the remaining term of the stock option.

The company believes that its change-in-control benefits are consistent with the practices of companies with whom PPL competes for talent and assist in retaining executives and recruiting new executives to the company.

Additional details on current arrangements and agreements are discussed further below under “Termination Benefits,” beginning on page 64, and “Change-in-Control Arrangements,” beginning on page 60.

Severance Benefits. To continue to retain and protect our executives, the company adopted an Executive Severance Plan in 2012 that provides severance benefits for officers, including the NEOs other than Mr. Symons, terminated for reasons other than cause.

The key features of the plan include (1) two years of base pay; (2) an allowance for benefit continuation; and (3) outplacement or career services support. Severance benefits payable under this program are conditioned on the executive officer agreeing to release the company from any liability arising from the employment relationship.

The company has agreements with all of the NEOs that provide benefits to the executives upon specified terminations of employment in connection with a change in control of PPL Corporation. The benefits provided under these agreements replace any other severance benefits provided to these officers by PPL Corporation, including the Executive Severance Plan or any prior severance agreement.

Additional details on current arrangements and agreements for NEOs are discussed further below under “Termination Benefits” at page 64.

Tax Deductibility of Compensation

Section 162(m) of the Internal Revenue Code generally provides that publicly held corporations may not deduct in any taxable year specified compensation in excess of $1 million paid to the CEO and the next three most highly compensated executive officers (excluding the CFO). Performance-based compensation in excess of $1 million is deductible if specified criteria are met, including shareowner approval of applicable plans. In this regard, the PPL Corporation Short-term Incentive Plan is designed to enable PPL to make cash awards to officers that are deductible under Section 162(m). Similarly, the PPL SIP is structured to enable grants of equity-based incentive awards to be deductible under Section 162(m).

The CGNC generally seeks ways to limit the impact of Section 162(m). However, the CGNC believes that the tax deduction limitation should not compromise our ability to establish and implement incentive programs that support the compensation objectives discussed above. Accordingly, achieving these objectives and maintaining required flexibility in this regard may result in payments of compensation or grants of awards that are not deductible for federal income tax purposes.

 

 

 

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EXECUTIVE COMPENSATION TABLES

The following table summarizes all compensation for our chief executive officer, our chief financial officer, our former president of PPL’s Energy Supply business and our next three most highly compensated executives, known as named executive officers, or NEOs, for service to PPL and its subsidiaries. Mr. Spence also served as a director but received no separate compensation for board service.

SUMMARY COMPENSATION TABLE

 

  Name and Principal Position(1)   Year   Salary(2)   Bonus   Stock
Awards
(3)
  Option
Awards
(4)
  Non-Equity
Incentive Plan
Compensation
(5)
  Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
(6)
  All Other
Compensation
(7)
  Total

William H. Spence

Chairman, President and

Chief Executive Officer

      2015       $ 1,127,500               $ 6,237,307       $ 727,355         $1,838,953          $2,994,822          $  54,075       $ 12,980,012  
      2014         1,126,760                 6,292,601                 2,134,132         3,808,318         27,445         13,389,256  
      2013         1,098,846                 4,768,559         1,526,000         2,519,440         2,144,007         52,868         12,109,720  

Vincent Sorgi

Senior Vice President and

Chief Financial Officer

      2015         498,462                 994,921         70,635         407,750          153,159          32,318         2,157,245  
      2014         398,404                 613,624                 344,924         318,067         27,602         1,702,621  
                                   

Robert J. Grey

Executive Vice President

and Chief Legal Officer

      2015         579,539                 1,146,332         235,660         506,775                 56,927         2,525,233  
      2014         563,253                 1,056,292                 572,910         591,769         33,185         2,817,409  
      2013         499,292                 837,779         251,463         531,806                 30,729         2,151,069  

Paul A. Farr

Former President —

PPL Energy Supply, LLC

      2015         341,192                 2,446,781         494,821         322,481          203,878          36,538         3,845,692  
      2014         736,155                 2,418,196                 883,025         1,122,169         56,599         5,216,144  
      2013         701,377                 1,796,407         593,156         861,354         28,870         40,582         4,021,746  

Victor A. Staffieri

Chairman of the Board, Chief

Executive Officer and President —

LG&E and KU Energy LLC

      2015         811,220                 1,745,339         39,745         898,629          60,305          76,630         3,631,868  
      2014         811,220                 1,843,401                 751,393         3,173,983         88,862         6,668,859  
      2013         811,220       $ 20,000         1,597,735         479,774         923,574                 134,265         3,966,568  

Robert A. Symons

Chief Executive — WPD

      2015         836,038                 691,919         6,569         690,156          369,842          20,288         2,614,812  
      2014         872,710                 775,944                 609,305         1,520,212         27,115         3,805,286  

 

(1)  Effective June 1, 2015, concurrent with the spinoff of PPL’s Energy Supply segment, Mr. Farr resigned from PPL.

 

  Mr. Symons is based in the United Kingdom and is compensated in Pounds Sterling. We converted his 2015 cash compensation, changes in pension value and personal benefits to U.S. dollars at an exchange rate of $1.5283, which is the average monthly translation rate for 2015, except with respect to the Non-Equity Incentive Plan Compensation amount, which was converted to U.S. dollars at an exchange rate of $1.4376, which is the translation rate for February 2, 2016, the date the cash incentive award was paid to Mr. Symons.

 

(2)  Salary includes cash compensation deferred to the PPL Executive Deferred Compensation Plan or, for Mr. Staffieri, to the LG&E and KU Nonqualified Savings Plan. The following NEOs deferred salary in 2015 in the amounts indicated: Mr. Spence ($33,825); Mr. Sorgi ($14,953); Mr. Grey ($17,386); Mr. Farr ($119,417); and Mr. Staffieri ($44,929). These amounts are included in the “Nonqualified Deferred Compensation in 2015” table on page 59 as executive contributions for the last fiscal year.

 

(3)  This column represents the aggregate grant date fair value of restricted stock units and performance units as calculated under ASC Topic 718, without taking into account estimated forfeitures. The grant date fair values of restricted stock units are calculated using the closing price of PPL common stock on the NYSE on the date of grant. The grant date fair values of the performance units reflected in this column are the target payouts based on the probable outcome of the performance condition, determined as of the grant date, and are disclosed in the “Grants of Plan-Based Awards During 2015” table on page 48. The maximum potential values as of the grant date of the performance units granted in 2015 assuming the highest level of performance are as follows: Mr. Spence—$6,430,355; Mr. Sorgi—$1,140,852; Mr. Grey—$1,181,592; Mr. Farr—$2,522,287; Mr. Staffieri—$1,799,139; and Mr. Symons—$713,331. For additional information on the assumptions made in the valuation of performance units, refer to Note 10 to the PPL financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC. Further information regarding the 2015 awards is included in the “Grants of Plan-Based Awards During 2015” and “Outstanding Equity Awards at Fiscal Year-End 2015” tables elsewhere in this proxy statement.

 

(4) 

For 2015, amounts represent the incremental fair value under ASC Topic 718 of adjustments to prior year grants made to the NEOs under the anti-dilution provisions of PPL’s equity-based compensation plans as a result of the spinoff of PPL’s Energy Supply segment. No stock options were awarded in 2015. For additional information on the assumptions made in the

 

 

46    PPL CORPORATION 2016 Proxy Statement


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  valuation of adjustments to outstanding stock options, refer to Note 10 to the PPL financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC. A description of the adjustments made in connection with the spinoff is included in the introduction to the “Outstanding Equity Awards at Fiscal Year-End 2015” at page 50.

 

(5)  For 2015, amounts represent cash awards made in January 2016 for performance under the company’s annual cash incentive award program for 2015, which were made under PPL’s Short-term Incentive Plan for all NEOs. These amounts include amounts the NEOs have elected to defer to the PPL Executive Deferred Compensation Plan or, for Mr. Staffieri, to the LG&E and KU Nonqualified Savings Plan. The following NEOs deferred cash awards in the amounts indicated: Mr. Spence ($55,169); Mr. Sorgi ($122,325); and Mr. Staffieri ($53,918). These amounts will be included in the “Nonqualified Deferred Compensation in 2016” table as executive contributions in next year’s proxy statement.

 

(6)  This column represents the sum of the changes in the actuarial present value of accumulated benefit in the PPL Retirement Plan and PPL Supplemental Executive Retirement Plan during 2015 for Messrs. Spence, Sorgi, Grey and Farr, the PPL Subsidiary Retirement Plan for Mr. Farr (as of May 31, 2015), the LG&E and KU Retirement Plan and the LG&E and KU Supplemental Executive Retirement Plan for Mr. Staffieri and the Electricity Supply Pension Scheme in the United Kingdom for Mr. Symons. See the “Pension Benefits in 2015” table beginning on page 56 for additional information. No amounts are shown for 2015 under this column for Mr. Grey as his change in pension value during 2015 was a negative amount. Mr. Grey’s net decrease in pension value for 2015 was ($146,175), composed of a decrease in the value of his accumulated benefit under the PPL SERP of ($203,751), offset by an increase in the value of his accumulated benefit under PPL Retirement Plan of $57,576. No above-market or preferential earnings under the PPL Executive Deferred Compensation Plan are reportable for 2015. As to Mr. Staffieri, no above-market or preferential earnings under the LG&E and KU Nonqualified Savings Plan and LG&E Energy Corp. Nonqualified Savings Plan are reportable for 2015. See the “Nonqualified Deferred Compensation in 2015” table on page 59 for additional information. Mr. Symons does not participate in a deferred compensation plan in the United Kingdom.

 

(7)  The table below reflects the components of this column for 2015, which include the company’s matching contribution for each individual’s 401(k) plan contributions under respective savings plans, the company’s matching contribution for each individual’s contributions under nonqualified deferred compensation plans, or NQDC, and the perquisites of financial planning and tax preparation services, company car, and other personal benefits as noted.

 

Name        401(k)
Match
       NQDC
Employer
Contributions
  Financial
Planning
and Tax
Preparation
 

Company

Car(a)

 

Other

       Total

W. H. Spence

    $7,950     $30,000   $11,000               —       $5,125   (b)         $54,075  

V. Sorgi

      7,950       13,313     11,000               —      

55

  (c)           32,318  

R. J. Grey

      7,950       16,346       9,000               —       23,631   (d)           56,927  

P. A. Farr

      7,950       28,588            —               —                   36,538  

V. A. Staffieri

    11,130       54,500     11,000               —                   76,630  

R. A. Symons

            —                —            —       $17,993           2,295   (e)                 20,288    

 

  (a)  Car benefits provided to Mr. Symons, including monthly car allowance and reimbursement for fuel. Benefit is capped at £20,000 per year.

 

  (b)  Includes $5,000 paid for executive physical and $125 value of a hospitality gift.

 

  (c)  Value of a hospitality gift.

 

  (d)  Includes $23,576 reimbursed to Mr. Grey for legal fees as set forth in his Retention Agreement described beginning on page 63 and $55 value of a hospitality gift.

 

  (e)  Includes $2,240 for cost of private medical insurance plan in the United Kingdom for Mr. Symons, his wife and daughter and $55 value of a hospitality gift.

 

 

 

PPL CORPORATION 2016 Proxy Statement    47


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GRANTS OF PLAN-BASED AWARDS DURING 2015

The following table provides information about equity and non-equity incentive plan awards granted to the NEOs in 2015.

 

   

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)

 

Grant

Date

Fair

Value of

Stock

and

Option

Awards(4)

Name     Threshold   Target   Maximum   Threshold   Target   Maximum    

W. H. Spence

  1/22/2015       $789,250   $1,578,500   $3,157,000                    
  1/22/2015                               91,028   $3,022,130  
  1/22/2015                   22,926   91,705   183,410         3,215,177  
      6/1/2015(5)                                    727,355  

V. Sorgi

  1/22/2015         175,000        350,000        700,000                    
  1/22/2015                               12,786        424,495  
  1/22/2015                     4,068   16,270     32,540            570,426  
    6/1/2015(5)                       70,635  

R. J. Grey

  1/22/2015         217,500        435,000        870,000                    
  1/22/2015                               16,733        555,536  
  1/22/2015                     4,213   16,851     33,702            590,796  
      6/1/2015(5)                                    235,660  

P. A. Farr

  1/22/2015         129,003        258,006        516,011                    
  1/22/2015                               35,712     1,185,638  
  1/22/2015                     8,993   35,971     71,942         1,261,143  
    6/1/2015(5)                      494,821  

V. A. Staffieri

  1/22/2015         304,207        608,415   1,216,830                    
  1/22/2015                               25,475        845,770  
  1/22/2015                     6,415   25,658     51,316            899,569  
      6/1/2015(5)                                     39,745  

R. A. Symons

  1/22/2015         231,547        463,194        926,387                    
  1/22/2015                               10,098        335,254  
  1/22/2015                     2,543   10,173     20,346            356,665  
      6/1/2015(5)                                       6,323  

 

(1)  These columns show the potential payout range under the 2015 annual cash incentive award program. For additional information, see “CD&A — 2015 Named Executive Officer Compensation — 2015 Annual Cash Incentive Awards” beginning on page 33. The cash incentive payout range is from 50% to 200% of target. If the actual performance falls below the 50% payout level, the payout is zero. Mr. Symons is based in the United Kingdom and is compensated in Pounds Sterling. We converted his annual cash incentive award ranges to U.S. dollars at an exchange rate of $1.5283, which is the average monthly translation rate for 2015.

 

(2)  These columns show the potential payout range for the performance units granted in 2015 to the NEOs under PPL’s SIP. For additional information, see “CD&A — 2015 Named Executive Officer Compensation — 2015 Long-term Equity Incentive Awards — 2015 Performance Unit Awards” beginning on page 38. The payout range for performance unit awards granted in 2015 is from 25% to 200% of target. The performance period is 2015-2017. At the end of the performance period, PPL TSR for the three-year period is compared to the total return of the companies in the Philadelphia Stock Exchange Utility Index, or UTY. Shares of PPL common stock reflecting the applicable number of performance units, as well as reinvested cash or stock dividend equivalents, will vest and be paid according to the applicable level of achievement of the performance goal. If actual performance falls below the 25% payout level, the payout is zero.

 

(3) 

This column shows the number of performance-contingent restricted stock units granted in 2015 to the NEOs under PPL’s SIP based on EPS performance during 2012-2014. For additional information, see “CD&A — 2015 Named Executive Officer Compensation — 2015 Long-term Equity Incentive Awards — 2015 Performance-Contingent Restricted Stock Unit Awards” beginning on page 37. In general, restrictions on the awards will lapse on January 22, 2018, three years from the date of

 

 

48    PPL CORPORATION 2016 Proxy Statement


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  grant. Each restricted stock unit entitles the executive to receive additional restricted stock units equal in value to the amount of quarterly dividends paid on PPL common stock. These additional restricted stock units are payable in shares of PPL common stock at the end of the restriction period, subject to the same conditions as the underlying restricted stock units.

 

(4)  This column shows the grant date fair value, as calculated under ASC Topic 718, of the performance units and restricted stock units granted to the NEOs, without taking into account estimated forfeitures. For restricted stock units granted on January 22, 2015, grant date fair value is calculated using the closing price of PPL common stock on the NYSE on the grant date of $35.70. For performance units, grant date fair value is calculated using a Monte Carlo pricing model value of $35.06 for the awards granted on January 22, 2015. Also includes adjustments made to restricted stock units and performance units as described in the introduction to the “Outstanding Equity Awards at Fiscal Year-End 2015” table on page 50. For additional information on the valuation assumptions for performance units, see Note 10 to the PPL financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC.

 

(5)  Reflects adjustments made to prior year grants under the anti-dilution provisions of PPL’s stock-based compensation plans as a result of the June 2015 spinoff of PPL’s Energy Supply segment. No new stock options were granted in 2015. For a description of the adjustments made to outstanding stock option and other equity awards, see the introduction to the “Outstanding Equity Awards at Fiscal Year-End 2015” table on page 50.

Employment Agreement

Mr. Symons is a party to an amended and restated Service Agreement, dated March 16, 2015, with Western Power Distribution (South West) plc, or WPD (South West). He serves as the Chief Executive of the Western Power Distribution group of companies, four of which are British regional electricity distribution utility companies. The Service Agreement provides that Mr. Symons is entitled to an annual base salary equal to £535,000, subject to annual review. His salary for 2015 was £535,000 for the first three months of 2015 and increased to £551,050 on April 1, 2015. Furthermore, Mr. Symons is eligible to participate, at WPD (South West)’s discretion, in any bonus or incentive plans for senior executives and/or directors that WPD (South West) may operate, from time to time. Currently, Mr. Symons participates in the Directors’ Results Related Bonus Scheme. The terms of the Service Agreement further provide that Mr. Symons, his wife and dependent children are entitled to participate in a private medical insurance plan, at WPD (South West)’s expense. Mr. Symons is also entitled to car usership and private fuel benefits in accordance with WPD (South West)’s executive car program. His car usership benefits are capped at an annual amount equal to £20,000. WPD (South West) has also committed, while Mr. Symons is employed with the company, to provide life insurance for him in the amount of £4.79 million. The amount of insurance is adjusted annually in connection with The Retail Price Index in the United Kingdom. This benefit terminates once Mr. Symons leaves WPD (South West). The term of the Service Agreement is to continue until after six months’ notice to terminate provided by either WPD (South West) or Mr. Symons, or until Mr. Symons is otherwise terminated as provided in the agreement.

In the event that Mr. Symons’ employment is terminated during the two-year period following a change in control of WPD (South West) (as defined in the Service Agreement) pursuant to a “relevant event” (as described below), Mr. Symons is entitled to (1) a lump-sum payment equal to two times his taxable pay received from WPD (South West) during the 12-month period immediately preceding the change in control, payable within seven days of the termination of his employment and (2) amounts owed to him under the pension plan in which he participated up until April of 2006. See “Potential Payments upon Termination or Change in Control of PPL Corporation — Change-in-Control Arrangements” beginning on page 60 for additional change-in-control benefits available to Mr. Symons.

For purposes of the Service Agreement, “relevant event” is defined to mean (1) a termination of Mr. Symons’ employment by WPD (South West) other than because of his gross misconduct or his material breach of contract or (2) a termination of Mr. Symons’ employment by him pursuant to one of a number of circumstances including: (a) a material alteration in his position or responsibilities; (b) a reduction in his base salary; (c) the relocation of Mr. Symons’ place of work more than 50 miles away; or (d) a cutback or exclusion from a compensation plan, pension plan or welfare plan.

Mr. Symons’ Service Agreement contains restrictive covenants, including an indefinite covenant not to disclose confidential information and, during Mr. Symons’ employment and for the 12-month period following the termination of his employment, a covenant not to solicit employees and directors of WPD (South West) or its subsidiaries.

 

 

 

PPL CORPORATION 2016 Proxy Statement    49


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EXECUTIVE COMPENSATION

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2015

The following table provides information on all unexercised stock option awards, as well as all unvested restricted stock unit awards and unearned and unvested performance units, for each NEO as of December 31, 2015. Each stock option grant, as well as each grant of performance units that is unearned and unvested, is shown separately for each NEO, and the restricted stock units that have not vested are shown in the aggregate. The vesting schedule for each grant is shown following this table, based on the grant date of the stock option, phantom stock option, restricted stock unit award, or performance unit award grant date. The market value of the stock awards is based on the closing price of PPL common stock on the NYSE as of December 31, 2015, the last trading day of 2015, which was $34.13. For additional information about stock awards, see “CD&A — 2015 Named Executive Officer Compensation — 2015 Long-term Equity Incentive Awards” beginning on page 37.

In connection with PPL’s June 1, 2015 spinoff of its Energy Supply segment to form the publicly traded Talen Energy Corporation, PPL adjusted outstanding (but previously unsettled) stock option, restricted stock unit and performance unit awards in accordance with the recapitalization adjustment provisions of the relevant stock plans, as authorized by the CGNC, to reflect that the holders of such awards did not receive a distribution of Talen Energy Corporation common stock with respect to the PPL shares underlying their outstanding awards. Outstanding restricted stock units and performance units were increased by multiplying the number of PPL units outstanding before the spinoff by an adjustment ratio of 1.07534, which was calculated based on the value of the foregone Talen Energy Corporation distribution shares utilizing the three-day average closing prices for Talen Energy Corporation and PPL shares of common stock over the three trading days immediately following the spinoff date. The number of outstanding PPL stock options was increased by multiplying the number of stock options outstanding before the spinoff by an adjustment ratio of 1.10996, and the per share exercise prices of such stock options were adjusted by dividing the pre-spinoff exercise prices by that same option adjustment ratio. The option adjustment ratio was calculated by comparing the average closing trading price of PPL shares of common stock during the five trading days immediately preceding the spinoff date to the average closing trading price of PPL shares of common stock during the five trading days immediately following the spinoff date. The methodology used for adjusting the outstanding stock options was intended to comply with applicable tax law requirements.

 

    Option Awards   Stock Awards
Name   Grant
Date(1)
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(2)
  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(2)
 

Option
Exercise
Price

($)

  Option
Expiration
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested(3)
(#)
  Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
  Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(4)
(#)
  Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)

W. H. Spence

  1/25/07   126,224       31.65   1/24/2017                
  1/24/08     77,419       42.84   1/23/2018                
  1/27/11     63,445       23.20   1/26/2021                
  7/22/11     10,334       25.24   7/21/2021                
  1/26/12   430,041       25.41   1/25/2022                
  1/24/13   517,978   258,990   26.59   1/23/2023                
                      317,140   10,823,988        
  1/23/14                           229,020   7,816,453  
    1/22/15                           189,952   6,483,062  

V. Sorgi

  3/29/10     13,696       25.13   3/28/2020                
  1/27/11     26,561       23.20   1/26/2021                
  1/26/12     29,624       25.41   1/25/2022                
  1/24/13     36,768     18,385   26.59   1/23/2023                
                        30,112     1,027,723        
  1/23/14                             25,602      873,796  
    1/22/15                             33,701   1,150,215  

 

 

50    PPL CORPORATION 2016 Proxy Statement


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    Option Awards   Stock Awards
Name   Grant
Date(1)
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(2)
  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(2)
 

Option
Exercise
Price

($)

  Option
Expiration
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested(3)
(#)
  Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
  Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(4)
(#)
  Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)

R. J. Grey

  1/25/07   62,512       31.65   1/24/2017                
  1/24/08   33,498       42.84   1/23/2018                
  1/22/09   50,192       28.77   1/21/2019                
  1/21/10   46,052       28.09   1/20/2020                
  1/27/11   76,820       23.20   1/26/2021                
  1/26/12   76,598       25.41   1/25/2022                
  1/24/13   85,354   42,679   26.59   1/23/2023                
                      56,688   1,934,761        
  1/23/14                           38,189   1,303,391  
    1/22/15                           34,903   1,191,239  

P. A. Farr

  1/25/07   22,512       31.65   1/24/2017                
  1/24/08   51,091       42.84   1/23/2018                
    1/22/09   81,015       28.77   1/20/2019                

V. A. Staffieri

  1/24/13       81,427   26.59   1/23/2023                
                      98,929   3,376,477        
  1/23/14                           65,680   2,241,658  
    1/22/15                           53,146   1,813,873  

R. A. Symons

  2/15/07   28,880       33.50   2/15/2017                
  2/15/08   24,208       42.88   2/15/2018                
  2/15/13       30,804   27.51   2/15/2023                
                      37,796   1,289,977        
  1/23/14                           27,655      943,865  
    1/22/15                           21,073      719,221  

 

(1)  For a better understanding of this table, we have included an additional column showing the grant date of the outstanding stock options and the unearned and unvested performance units.

 

(2)  Under the terms of PPL’s ICP and SIP, stock options for the NEOs, except for Mr. Symons, vest, or become exercisable, in three equal annual installments over a three-year period beginning on the first anniversary of the grant date. As contemplated in the agreements governing the spinoff entered into in June 2014, the CGNC waived the service-based vesting requirement for Mr. Farr’s outstanding stock options as of the completion of the spinoff, consistent with the waiver of the service-based vesting for all employees’ stock options as provided for in the transaction agreements. The vesting dates of unvested stock option awards for the following NEOs are:

 

Name    Grant Date   

Vesting Date

1/24/16

W. H. Spence

   1/24/13    258,990

V. Sorgi

   1/24/13      18,385

R. J. Grey

   1/24/13      42,679

V. A. Staffieri

   1/24/13      81,427

 

 

 

PPL CORPORATION 2016 Proxy Statement    51


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EXECUTIVE COMPENSATION

 

Prior to 2014, Mr. Symons received phantom stock option awards pursuant to WPD’s Long-term Incentive Plan. Phantom stock options are the right to receive the appreciation in the value of PPL common stock over a fixed price for a specified period of time and are sometimes referred to as stock appreciation rights, or SARs. The exercise price of the phantom stock options, which have a 10-year term, is equivalent to the closing price of PPL’s common stock on the NYSE the day before the grant. The options vest, or become exercisable, in three equal annual installments over a three-year period beginning on the first anniversary of the grant date. The vesting date of unvested phantom stock option awards for Mr. Symons is as follows:

 

Name    Grant Date   

Vesting Date

2/15/16

R. A. Symons

   2/15/13    30,804

 

(3)  All restricted stock units for the NEOs under PPL’s ICP and the SIP vest on the third anniversary of the grant date. As contemplated in the agreements governing the spinoff entered into in June 2014, the CGNC waived the service-based vesting requirement for Mr. Farr’s outstanding restricted stock and restricted stock unit awards as of the completion of the spinoff, consistent with the waiver of service-based vesting requirements for all employees’ restricted stock or restricted stock units as provided for in the transaction agreements. The dates that restrictions lapse for each restricted stock unit award granted to the NEOs other than Mr. Farr are:

 

    

Grant

Date

 

   Vesting Dates
Name       1/24/16    1/23/17    1/22/18

W. H. Spence

       1/24/13          110,810                        
       1/23/14                     112,056             
         1/22/15                                94,274  

V. Sorgi

       1/24/13          8,787                        
       1/23/14                     8,083             
         1/22/15                                13,242  

R. J. Grey

       1/24/13          20,403                        
       1/23/14                     18,955             
         1/22/15                                17,330  

V. A. Staffieri

       1/24/13          38,914                        
       1/23/14                     33,631             
         1/22/15                                26,384  

R. A. Symons

       1/24/13          13,184                        
       1/23/14                     14,153             
         1/22/15                                10,459  

 

(4)  The number of performance units granted in 2014 disclosed in the table for each NEO represents the maximum payout amount for 2014 awards. The maximum amount is used because PPL’s total relative shareowner return was at the maximum payout level of the awards as compared to its industry peers for the time period of 2014 through 2015, the first two years of the three-year performance period for the 2014 awards. The number of performance units granted in 2015 disclosed in the table for each NEO represents the maximum payout amount for 2015 awards. The maximum amount is used because PPL’s total relative shareowner return was above the maximum payout level of the awards as compared to its industry peers for 2015, the first year of the three-year performance period for the 2015 awards. The number of shares shown in the table for each NEO also includes dividend equivalents reflected as additional performance units.

 

     These performance units are payable in shares of PPL common stock following the performance period. While the performance period ends on December 31, 2016 for the 2014 awards and December 31, 2017 for the 2015 awards, the number of performance units earned is not determined until the CGNC certifies that the level of performance goals have been achieved. The number of performance units earned at the time of certification may be more or less than the number of awards reflected in this table, depending on whether or not the performance goals have been achieved and the level of achievement. See “CD&A — 2015 Named Executive Officer Compensation — 2015 Long-term Equity Incentive Awards — 2015 Performance Unit Awards” beginning on page 38 for a discussion of the performance goals related to TSR and the attainment levels for each award.

 

 

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OPTION EXERCISES AND STOCK VESTED IN 2015

The following table provides information for each of the NEOs with respect to (1) stock option and phantom stock option award exercises during 2015, including the number of shares acquired or treated as acquired upon exercise and the value realized, and (2) the number of shares acquired during 2015 upon the vesting of stock awards in the form of restricted stock units and the deemed vesting of stock awards in the form of performance units and the value realized, each before payment of any applicable withholding tax and broker commissions.

 

     Option Awards      Stock Awards  
Name    Number of Shares
Acquired on Exercise(1)
     Value Realized
on Exercise(2)
    

Number of Shares

Acquired

on Vesting

    

Value Realized

on Vesting(3)

 

W. H. Spence

     —                         —                 166,221                 $  5,619,314           

V. Sorgi

     —                         —                 15,416                 518,989           

R. J. Grey

     —                         —                 37,853                 1,273,419           

P. A. Farr (4)

     773,412                         $5,579,345                 328,619                 11,339,752           

V. A. Staffieri

     131,763                         772,129                 73,479                 2,471,358           

R. A. Symons

     44,227                         231,673                 27,305                 918,775           

 

(1)  For Mr. Symons, the phantom stock option awards reflected in the table were settled in cash in accordance with their terms.

 

(2)  Amounts reflect the difference between the exercise price of the stock option or phantom stock option award and the closing price on the NYSE of PPL common stock underlying the stock option or phantom stock option award at the time of exercise.

 

(3)  Amounts reflect the closing price on the NYSE of the shares of PPL common stock underlying the restricted stock units on the day the restrictions lapsed and the closing price on December 31, 2015 on the NYSE of the shares of PPL common stock underlying the performance units granted in 2013 that are deemed to have been earned as of December 31, 2015, the last day of the three-year performance period.

 

(4)  As a result of the spinoff of PPL’s Energy Supply segment, the service-based vesting requirement for Mr. Farr’s outstanding restricted stock units and performance units was waived. However, distribution will occur under the original vesting provisions of the awards. As of December 31, 2015, Mr. Farr’s outstanding restricted stock units totaled 117,253 (39,482, 42,011 and 25,760 to be distributed in 2016, 2017 and 2018, respectively) on which he will continue to earn divided equivalents. As of December 31, 2015, Mr. Farr’s outstanding performance units granted in 2014 totaled 87,705, the maximum payout amount for 2014 awards because PPL’s total relative shareowner return was at the maximum payout level as compared to its industry peers for the time period of 2014 through 2015, the first two years of the three-year performance period for the 2014 awards. Mr. Farr will continue to earn dividend equivalents on these outstanding awards through December 31, 2016, the completion of the performance period. The actual number of shares to be distributed, including accrued dividend equivalents, will depend on the actual attainment of the performance goals, if any, at the end of the performance period.

PENSION BENEFITS IN 2015

The following table sets forth information on the pension benefits for the NEOs under each of the following pension plans:

 

  PPL Retirement Plan. The PPL Retirement Plan is a funded and tax-qualified defined benefit retirement plan that covers approximately 2,477 active employees as of December 31, 2015. The PPL Retirement Plan was closed to new salaried employees after December 31, 2011. As applicable to Messrs. Spence, Sorgi and Grey, and to Mr. Farr until May 31, 2015, the plan provides benefits based primarily on a formula that takes into account the executive’s earnings for each fiscal year. Benefits under the PPL Retirement Plan for eligible employees are determined as the greater of the following two formulas:

 

    The first is a “career average pay formula” of 2.25% of annual earnings for each year of credited service under the plan.

 

    The second is a “final average pay formula” as follows:

1.3% of final average earnings up to the Average Social Security Wage Base

 

 

 

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plus

1.7% of final average earnings in excess of the Average Social Security Wage Base

multiplied by

the sum of years of credited service (up to a maximum of 40 years).

Under the final average pay formula, “final average earnings” equal the average of the highest 60 months of pay during the last 120 months of credited service. The Average Social Security Wage Base is the average of the taxable Social Security Wage Base for the 35 consecutive years preceding an employee’s retirement date or, for employees retiring at the end of 2015, $72,636. The executive’s annual earnings taken into account under each formula include base salary and cash incentive awards, but may not exceed an IRS-prescribed limit applicable to tax-qualified plans ($265,000 for 2015).

The benefit an employee earns is payable starting at retirement on a monthly basis for life or in a lump sum. Benefits are computed on the basis of the life annuity form of pension, with a normal retirement age of 65. Benefits are reduced for retirement prior to age 60 for employees with 20 years of credited service and reduced prior to age 65 for other employees. Employees vest in the PPL Retirement Plan after five years of credited service. In addition, the plan provides for joint and survivor annuity choices and does not require employee contributions.

Benefits under the PPL Retirement Plan are subject to the limitations imposed under Section 415 of the Internal Revenue Code. The Section 415 limit for 2015 was $210,000 per year for a single life annuity payable at an IRS-prescribed retirement age. Benefits in excess of these federal limits are payable from company funds under the Supplemental Compensation Pension Plan described below unless the employee is eligible for benefits under the PPL Supplemental Executive Retirement Plan described below.

 

  Supplemental Compensation Pension Plan. The PPL Supplemental Compensation Pension Plan is a nonqualified plan that covers approximately 71 active employees hired prior to January 1, 2012 who are vested in the PPL Retirement Plan and, in the case of Mr. Sorgi, is not vested in the PPL SERP, at the time of termination or retirement. The benefit formula is the same as the PPL Retirement Plan, but it reflects compensation in excess of the IRS-prescribed limit of $265,000 for 2015. The plan benefit is calculated using all PPL affiliated company service, not just service credited under the PPL Retirement Plan. Upon retirement, this plan will only pay out the “excess” benefit above and beyond the PPL Retirement Plan. At such time as Mr. Sorgi vests in the PPL SERP, he will no longer be eligible for this plan.

 

  PPL Supplemental Executive Retirement Plan. The PPL SERP covers approximately seven active officers as of December 31, 2015, including Messrs. Spence, Sorgi and Grey, and Mr. Farr until May 31, 2015, to provide for retirement benefits above amounts available under the PPL Retirement Plan described above. The PPL SERP is unfunded and is not qualified for tax purposes. Accrued benefits under the PPL SERP are subject to claims of the company’s creditors in the event of bankruptcy. The PPL SERP was closed to new officers after December 31, 2011.

The PPL SERP formula is 2.0% of final average earnings for the first 20 years of credited service plus 1.5% of final average earnings for the next 10 years. “Final average earnings” is the average of the highest 60 months of earnings during the last 120 months of credited service. “Earnings” include base salary and annual cash incentive awards.

Benefits are computed on the basis of the life annuity form of pension, with a normal retirement age of 65. Generally, no benefit is payable under the PPL SERP if the executive officer has less than 10 years of service unless specifically authorized, such as upon a qualifying termination in connection with a change in control. Benefits under the PPL SERP are paid, in accordance with a participant’s advance election, as a single sum or as an annuity, including choices of a joint and survivor or years-certain annuity. At age 60, or at age 50 with 10 years of service, accrued benefits are vested and may not be reduced by an amendment to the PPL SERP or termination by the company. After the completion of 10 years of service, participants are eligible for death benefit protection.

The company does not have a policy for granting additional years of service but has done so under the PPL SERP in individual situations. A grant of additional years of service to any executive officer must be approved by the CGNC. The CGNC previously granted to Mr. Spence an additional year of service for each year of employment under the PPL SERP as a retention mechanism. Mr. Grey was credited with service under the PPL

 

 

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SERP commencing as of age 30, based on plan provisions in effect prior to January 1, 1998. The total PPL SERP benefit cannot increase beyond 30 years of service for any participant. The table below reflects the additional service amounts based on service as of December 31, 2015. In connection with the June 1, 2015 spinoff of PPL’s Energy Supply segment, the CGNC approved the acceleration of Mr. Farr’s vesting in the PPL SERP, consistent with other PPL SERP participants who were part of the spinoff. No additional benefits under the PPL SERP accrued to Mr. Farr after that time. Please refer to the table footnotes for additional information related to credited service under the PPL SERP.

 

  PPL Subsidiary Retirement Plan. The PPL Subsidiary Retirement Plan, in which Mr. Farr became a participant before he became an officer of the company, is a defined benefit plan that covered approximately 306 active employees as of May 31, 2015, and utilizes a hypothetical account balance to determine a monthly retirement annuity when an individual retires (known as a “cash balance plan”). The PPL Subsidiary Retirement Plan was closed to new salaried employees after December 31, 2011. Age 65 is the normal retirement age, but an individual may receive a reduced benefit as early as age 50 if the participant has at least five years of service. This plan was transferred to Talen Energy Corporation, effective June 1, 2015, the closing of the spinoff of the Energy Supply segment, and is no longer a plan of the company.

The benefit formula for yearly increases to the hypothetical account balance is an increasing scale, based on age plus years of service. A participant whose age plus years of service is 32 or lower receives the minimum yearly credit of 5% of compensation plus 1.5% of compensation that is in excess of 50% of the Social Security Wage Base for that year. “Compensation” generally means base salary. The amount credited increases as age plus years of service increases, up to a maximum credit, at age plus years of service of 75 or above, of 14% of compensation plus 6% of compensation that is in excess of 50% of the Social Security Wage Base.

A participant has a vested right to a benefit under this plan after three years of service. Benefits are paid as a monthly annuity amount for life, or as a joint and survivor annuity. The amount of the annuity is determined by converting the hypothetical account balance, plus an assumed rate of interest, into a monthly annuity for life or joint lives at the participant’s date of commencement of payment.

 

  LG&E and KU Retirement Plan. The LG&E and KU Retirement Plan, or LG&E Retirement Plan, is a funded and tax-qualified defined benefit retirement plan that covers approximately 1,601 active employees as of December 31, 2015 and that was closed to new participants on December 31, 2005. As applicable to Mr. Staffieri, the LG&E Retirement Plan provides benefits based on a formula that takes into account the executive’s average monthly earnings and years of service. Benefits for eligible employees are determined as the greater of the following two formulas:

 

    The first formula is 1.58% of average monthly earnings plus 0.40% of average monthly earnings in excess of “covered compensation” multiplied by years of credited service (up to a maximum of 30 years).

 

    The second formula is 1.68% of average monthly earnings multiplied by years of credited service (up to a maximum of 30 years).

Under the LG&E Retirement Plan, the “average monthly earnings” is the average of the highest five consecutive monthly earnings prior to termination of employment. “Monthly earnings” is defined as total compensation as indicated on Form W-2 including deferrals to a 401(k) plan, but excluding any earnings from the exercise of stock options, limited to the IRS-prescribed limit applicable to tax-qualified plans ($265,000 for 2015), divided by 12.

“Covered compensation” is 1/12th of the average of the Social Security Wage Base for the 35-year period ending with the year of a participant’s social security retirement age. The Social Security Wage Base for future years is assumed to be equal to the Social Security Wage Base of the current year.

The benefit an employee earns is payable starting at retirement on a monthly basis for life. Benefits are calculated on the basis of the life annuity form of pension with a normal retirement age of 65. Early retirement occurs at the earlier of age 55 or 30 years of service. Prior to January 1, 2015, there was no early retirement reduction after attainment of age 62. Prior to age 62, benefits were reduced. Effective January 1, 2015, there is no early retirement reduction after attainment of age 60. As a result, prior to age 60, benefits are reduced. Employees vest in the LG&E Retirement Plan after five years of service.

Benefits under the LG&E Retirement Plan are subject to the limitations imposed under Section 415 of the Internal Revenue Code. The Section 415 limit for 2015 is $210,000 per year for a single life annuity payable at an IRS-prescribed retirement age.

 

 

 

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  LG&E and KU Supplemental Executive Retirement Plan. Mr. Staffieri is a participant in the LG&E and KU Supplemental Executive Retirement Plan, or LG&E SERP. The LG&E SERP is unfunded and is not qualified for tax purposes. It was closed to new participants effective January 1, 2012. Accrued benefits under the LG&E SERP are subject to claims of the company’s creditors in the event of bankruptcy.

The LG&E SERP formula is equal to 64% of the average monthly compensation less

 

    100% of the monthly qualified LG&E Retirement Plan benefit payable at age 65;

 

    100% of the primary Social Security Benefit payable at age 65;

 

    100% of any matching contribution or the employer contribution for those participants for whom the defined contribution plan is the primary retirement vehicle; and

 

    100% of any other employer-provided benefit payable at age 65 as a life annuity from any qualified defined benefit plan or defined contribution plan (if such qualified defined contribution plan was the employer’s primary vehicle for retirement) sponsored by previous employers.

The net benefit is multiplied by a fraction, not to exceed one, the numerator of which is years of service at date of termination and the denominator is 15.

“Average monthly compensation” is the average compensation for the highest 36 consecutive months preceding termination of employment. “Compensation” is defined as base salary plus short-term incentive pay prior to any deferrals under any qualified or nonqualified deferred compensation plan.

Normal retirement is age 65. Early retirement for a participant who has been credited with at least five years of service and whose age is at least age 50 is the later of separation of service or age 55. There is no early retirement reduction after attainment of age 62.

 

  Electricity Supply Pension Scheme. Mr. Symons was an active participant in the Electricity Supply Pension Scheme, or ESPS, in the United Kingdom until April 6, 2006, at which time he ceased to accrue any benefits under the ESPS. The ESPS is a United Kingdom tax-approved defined benefit pension scheme. It provides at retirement an annual pension of 1/80th of final salary for each year of service, a lump sum of three times a member’s annual pension, which is payable at retirement, and dependents’ benefits payable on the member’s death. In addition to the standard benefit accrual rate of 1/80th, Mr. Symons received an enhancement to his pension of 1/30th accrual rate for the period April 1, 2000 to April 5, 2006. He began receiving distributions from the ESPS on March 20, 2012, and the distributions received during 2015 are included in the following table.

 

Name   Plan Name   Number of Years
Credited  Service(1)
  Present Value  of
Accumulated
Benefit(2)(3)
  Payments
  During Last  
Fiscal Year
    

W. H. Spence

 

PPL Retirement Plan

      9.5       $ 552,368            
 

 

   

PPL SERP

      19.0 (4)       15,754,028              

V. Sorgi

 

PPL Retirement Plan

      9.7         354,750            
 

 

 

Supplemental Compensation Pension Plan

      9.7         357,242            
 

 

   

PPL SERP

      9.7         499,293              

R. J. Grey

 

PPL Retirement Plan

      20.8         1,267,214            
 

 

   

PPL SERP

      30.0 (5)       6,497,765              

P. A. Farr(6)

 

PPL SERP

      17.0         4,356,119              

V. A. Staffieri

 

LG&E Retirement Plan

      23.8         1,627,646            
 

 

   

LG&E SERP

      23.8         13,650,846              

R. A. Symons

 

Electricity Supply Pension Scheme

      34.0         15,926,177 (7)       608,878 (7)    

 

(1)  See “PPL Supplemental Executive Retirement Plan” above for a description of the years of service that have been granted under the PPL SERP to Messrs. Spence and Grey.

 

 

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(2)  The assumptions used in estimating the present values of each NEO’s accumulated pension benefit are:

 

Plan  

Assumed

Retirement

Date(a)

 

Discount

Rate

  Post-retirement Mortality
Assumption

PPL Retirement Plan

  60   4.60%   RP-2014 gender specific healthy annuitant tables with white collar adjustment (removing MP-2014 improvement projections from 2006-2014) and applying Scale BB 2-Dimensional mortality improvements from 2006 on a generational basis (for LG&E and KU Retirement Plan and the LG&E and KU SERP, the base rates are increased by 2%)

Supplemental Compensation Pension Plan

  60   4.60%  

LG&E Retirement Plan

  60   4.58%  

LG&E SERP

  62   4.63%  
     
           

PPL SERP

  60   4.63%   RP-2014 gender specific healthy annuitant tables with no collar adjustment (removing MP-2014 improvement projections from 2006-2014) and applying Scale BB 2-Dimensional mortality improvements from 2006 on a generational basis.

Electricity Supply Pension Scheme

  60   3.68%   Based upon United Kingdom standard tables S1PMA and S1PFA appropriate for the member’s year of birth with a 95% scaling factor and future improvements subject to the standard table projected forward from 2002 in line with the 20011CMI core projections with a long-term improvement rate of 1.0% per annum.

 

  (a) For the PPL Retirement Plan, PPL Supplemental Compensation Pension Plan and PPL SERP, this column reflects the age at which retirement may occur without any reduction in benefits. For the PPL Retirement Plan and the PPL Supplemental Compensation Pension Plan, an employee may retire without any reduction in benefits at age 60 provided that the employee has at least 20 years of service. Effective January 1, 2015, for the LG&E Retirement Plan, the age at which retirement may occur without any reductions in benefits is age 60. Prior to that date, it was age 62. For the LG&E SERP, the age at which retirement may occur without any reduction in benefits is age 62. For the WPD Electricity Supply Pension Scheme, the age at which retirement may occur without any reduction in benefits is age 60.

 

(3)  The present values in the column reflect theoretical figures prescribed by the SEC for disclosure and comparison purposes. The table below reflects the actual benefits payable under the PPL SERP and the LG&E SERP upon the listed events assuming termination of employment occurred as of December 31, 2015.

 

SERP Payments upon Termination
as of December 31, 2015(a)
Named Executive Officer   Retirement    Death    Disability

W. H. Spence(b)

      $16,168,495            $7,982,774            $16,168,495    

V. Sorgi(b)

      —            114,734            —    

R. J. Grey

      6,549,481            3,187,144            6,549,481    

P. A. Farr(b)

      —            1,452,423            —    

V. A. Staffieri(c)

      14,068,810            7,698,998            10,914,219    

 

  (a)  Messrs. Spence, Sorgi, Grey and Farr have elected to receive benefits payable under the PPL SERP as a lump-sum payment, subject to applicable law. For Mr. Staffieri, the LG&E SERP does not provide for a lump-sum payment, but a lump-sum amount is shown here for comparison purposes. See note (c) below for Mr. Staffieri’s monthly LG&E SERP benefits. The amounts shown in this table represent the values that would have become payable based on a December 31, 2015 termination of employment. Actual payment would be made following December 31, 2015 subject to plan rules and in compliance with Section 409A of the Internal Revenue Code.

 

  (b) 

Messrs. Spence, Sorgi and Farr are not eligible to retire under the PPL SERP. Messrs. Spence and Farr, however, are vested under the PPL SERP, while Mr. Sorgi is not. If Mr. Spence had left the company on December 31, 2015, voluntarily or as a result of a disability or death, he, or his spouse, would have been vested in a deferred benefit under the PPL Retirement Plan and the PPL SERP. If Mr. Sorgi had left the company voluntarily on December 31, 2015, he would have been eligible for benefits under the PPL Retirement Plan and the PPL Supplemental

 

 

 

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  Compensation Pension Plan, but not under the PPL SERP. Mr. Farr left the company on June 1, 2015 in connection with the spinoff of the Energy Supply segment and was vested in a deferred benefit under the PPL Retirement Plan and the PPL SERP, as well as the PPL Subsidiary Retirement Plan. See Note 6 below for information for that plan. Additionally, if Mr. Sorgi had died on December 31, 2015, his spouse would have been eligible for a PPL SERP benefit in addition to a benefit from the PPL Retirement Plan.

 

  (c)  If Mr. Staffieri had retired on December 31, 2015, and commenced his LG&E SERP benefit on January 1, 2016, the monthly LG&E SERP benefit payable as a life annuity would have been $80,066. If he had died on December 31, 2015, the monthly LG&E SERP benefit payable to his spouse for her lifetime on January 1, 2016 would have been $42,288. If Mr. Staffieri had become disabled on December 31, 2015, the monthly LG&E SERP disability benefit payable at age 65 as a life annuity (assuming continued accrual) would have been $82,418.

 

(4)  Includes 9.5 additional years of service provided to Mr. Spence. The years of credited service in excess of actual years of service provided to the company resulted in an increase to the present value of accumulated benefits for Mr. Spence as of December 31, 2015 under the PPL SERP of $8,140,141.

 

(5)  Includes 9.2 additional years of service provided to Mr. Grey. The years of credited service in excess of actual years of service provided to the company resulted in an increase to the present value of accumulated benefits for Mr. Grey as of December 31, 2015 under the PPL SERP of $1,954,909.

 

(6)  Mr. Farr also participated in the PPL Subsidiary Retirement Plan during 2015, which was transferred to Talen Energy Corporation, effective June 1, 2015, the closing of the spinoff of the Energy Supply segment. This plan is no longer a plan of the company. As of June 1, 2015, the day the plan was transferred, Mr. Farr had 4.8 years of credited service in the plan, and the present value of accumulated benefit in the plan was $58,879. No payments from this plan were made to Mr. Farr from January 1, 2015 through May 31, 2015.

 

(7) Mr. Symons is based in the United Kingdom and receives his pension benefits in Pounds Sterling. His present value of accumulated benefit as of December 31, 2015 is converted from Pounds Sterling to U.S. dollars at an exchange rate of $1.4834, the translation rate for December 31, 2015, and his pension distributions are converted to U.S. dollars at an exchange rate of $1.5283, which is the average monthly translation rate for 2015.

NONQUALIFIED DEFERRED COMPENSATION IN 2015

The PPL Executive Deferred Compensation Plan allows participants to defer all or a portion of their cash compensation in excess of the required minimum payroll taxes. In addition, the company made matching contributions to this plan during 2015 of up to 3% of an executive’s cash compensation (base salary plus annual cash incentive award) to match executive contributions that would have been made to PPL’s tax-qualified 401(k) deferred savings plan, also known as the PPL Deferred Savings Plan, except for IRS-imposed limitations on those contributions. The PPL Executive Deferred Compensation Plan is unfunded and is not qualified for tax purposes. All benefits under this plan are subject to the claims of the company’s creditors in the event of bankruptcy. A hypothetical account is established for each participant who elects to defer, and the participant selects one or more deemed investment choices that generally mirror those that are available to employees under the PPL Deferred Savings Plan at Fidelity Investments. These investment accounts include large, mid and small cap index and investment funds, international equity index funds, target date funds, bond funds and a stable value fund, with returns that ranged from -6.69% to 7.94% during 2015. Earnings and losses on each account are determined based on the performance of the investment funds selected by the participant. The company maintains each account as a bookkeeping entry. During 2015, Messrs. Spence, Sorgi, Grey and Farr notionally invested in one or more of those funds.

In general, the NEOs who participate in this plan cannot withdraw any amounts from their deferred accounts until they either leave or retire from the company. The company’s Corporate Leadership Council, which currently consists of the chief executive officer, chief financial officer and general counsel, has the discretion to make a “hardship distribution” if there is an unforeseeable emergency that causes a severe financial hardship to the participant.

Participants may elect distribution in one or more annual installments for a period of up to 15 years, provided the participant complies with the election and timing rules of Section 409A of the Internal Revenue Code.

Mr. Staffieri is a participant in the LG&E and KU Nonqualified Savings Plan. The plan allows participants to defer up to a maximum of 75% of base salary and annual cash incentive awards. In addition, the participant receives a matching contribution equal to 70% of the first 6% deferred if that participant is not eligible for matching contributions in the LG&E and KU Savings Plan (a tax-qualified 401(k) plan) at the time the deferred compensation would have otherwise been paid to the participant. The LG&E and KU Nonqualified Savings Plan is unfunded and is not qualified for tax purposes. All benefits under the LG&E and KU Nonqualified Savings Plan are subject to the claims of creditors in the event of bankruptcy. A hypothetical account is established for each participant who elects to defer. The amount in the

 

 

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EXECUTIVE COMPENSATION

 


 

participant’s hypothetical account is credited with interest at an annual rate equal to the Prime Interest Rate as reported in The Wall Street Journal. The Prime Interest Rate will be reset quarterly based on the last day of the preceding calendar quarter or March 31, June 30, September 30, and December 31. The interest is calculated by applying the Prime Interest Rate to the balance in the hypothetical account. Mr. Staffieri’s rate of return for 2015 was 3.25%.

In general, distributions under the LG&E and KU Nonqualified Savings Plan are made as specified by the NEO at the time of completion of the deferral agreement. A “hardship distribution” may be approved by the Employee Benefits Plan Board, however, if there is an unforeseeable emergency, as defined by Section 409A of the Internal Revenue Code, which causes a severe financial hardship to the participant.

Participants may elect a lump-sum payment or annual installment payments for a period of not less than two years and not more than 10 years, provided the participant complies with the election and timing rules of Section 409A of the Internal Revenue Code.

Mr. Staffieri also has a hypothetical account in the LG&E Energy Corp. Nonqualified Savings Plan. This is a grandfathered deferred compensation plan that was closed to new contributions on January 1, 2005. The plan is unfunded and is not qualified for tax purposes. The plan is subject to claims of creditors in the event of bankruptcy. The hypothetical account is credited with interest in the same manner as the LG&E and KU Nonqualified Savings Plan. Mr. Staffieri’s rate of return for 2015 was 3.25%

Mr. Symons does not participate in a deferred compensation plan in the United Kingdom.

 

Name   Name of Plan   Executive
Contributions
in Last FY(1)
  Registrant
Contributions
in Last FY(2)
  Aggregate
Earnings
in Last FY(3)
  Aggregate
Withdrawals/
Distributions
  Aggregate
Balance
at Last FYE(4)

W. H. Spence

 

PPL Executive Deferred Compensation Plan

  $  97,849   $30,000   $ 29,552      $   811,816

V. Sorgi

 

PPL Executive Deferred Compensation Plan

    152,923     13,313        8,582           256,114

R. J. Grey

 

PPL Executive Deferred Compensation Plan

      17,386     16,346   (32,104)          911,736

P. A. Farr

 

PPL Executive Deferred Compensation Plan

    560,930     28,588      63,344        4,259,784

V. A. Staffieri

 

LG&E and KU
Nonqualified Savings Plan

      90,013     54,500      27,953           923,970
   

LG&E Energy Corp. Nonqualified Savings Plan

             —            —      34,889        1,092,503

 

(1)  The following NEOs deferred salary in 2015 in the amounts indicated: Spence—$33,825; Sorgi—$14,953; Grey—$17,386; Farr—$119,417; and Staffieri—$44,929, which is included in the “Salary” column of the Summary Compensation Table for 2015. In addition, the following NEOs deferred a portion of their cash incentive awards for 2014 performance paid in 2015, which were included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for 2014: Spence—$64,024; Sorgi—$137,970; Farr—$441,513; and Staffieri—$45,084.

 

(2)  Amounts in this column are company matching contributions during 2015 and are included in the Summary Compensation Table for 2015 under the heading “All Other Compensation.”

 

(3)  Aggregate earnings for 2015 are not reflected in the Summary Compensation Table because such earnings are not deemed to be “above-market” or preferential earnings.

 

(4)  Represents the total balance of each NEO’s account as of December 31, 2015. Of the totals in this column, the following amounts were reported as compensation to the NEO in the Summary Compensation Table for previous years:

 

Named Executive Officer    Executive
Contributions
   Registrant
Contributions
   Total

W. H. Spence

   $   236,203    $188,873    $   425,076  

V. Sorgi

          11,952          9,052           21,004  

P. A. Farr

     2,334,679      169,446      2,504,125  

R. J. Grey

        219,380        83,713         303,093  

V. A. Staffieri

        378,038      234,002         612,040  

 

 

 

PPL CORPORATION 2016 Proxy Statement    59


Table of Contents

EXECUTIVE COMPENSATION

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL OF PPL CORPORATION

Change-in-Control Arrangements

The company has entered into change-in-control severance agreements with each of its currently employed NEOs that provide benefits to these officers upon qualifying terminations of employment in connection with a change in control of the company (a so-called “double trigger”).

The change-in-control agreement with respect to Mr. Spence is of the older form of agreement. Messrs. Sorgi’s and Staffieri’s agreements follow the new form of agreement and are described separately below. Mr. Symons’ agreement, while substantially similar, differs as described below. The change-in-control agreement for Mr. Spence defines “Change in Control” as the occurrence of any of the following five specific events:

 

  a change in the majority of the members of our Board of Directors occurs through contested elections;

 

  an investor or group acquires 20% or more of the company’s common stock;

 

  a merger occurs that results in less than 60% control of the company or the surviving entity by the current shareowners;

 

  shareowner approval of the liquidation or dissolution of the company; or