DEF 14A 1 d687580ddef14a.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
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  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12


PPL CORPORATION

 

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Table of Contents

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Table of Contents

 

 

 

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WILLIAM H. SPENCE

CHAIRMAN, PRESIDENT AND

CHIEF EXECUTIVE OFFICER

Message to

our Shareowners

Dear Shareowner,

On behalf of our Board of Directors and the entire team at PPL, thank you for your confidence in us and for your support of the work we do each day to make a difference in our customers’ lives.

From Kentucky to Pennsylvania to the U.K., PPL continues to make a positive impact on society and deliver on our commitments to shareowners.

We remain steadfast in pursuit of our long-term strategy to deliver best-in-sector operational performance, invest responsibly in a sustainable energy future, maintain a strong financial foundation, and engage and develop our people.

We continue to build tomorrow’s energy grid, improve grid resiliency, incorporate new technology and reshape electricity networks to enable more distributed energy resources, like solar and energy storage. In addition, we are taking steps to advance a cleaner energy future and have set a goal to cut our carbon dioxide emissions 70 percent from 2010 levels by 2050.

As we invest in infrastructure that benefits our customers, we are controlling costs to keep electricity and natural gas affordable for those we serve, mindful of the struggles many families face each day. We continue to give back to local communities, understanding that we succeed when those we serve succeed.

In 2018, PPL again delivered strong financial results and operational excellence. This included achieving the high end of our earnings forecast, completing $3.3 billion in infrastructure investment, taking steps to strengthen our balance sheet post tax reform, raising our dividend for the 16th time in 17 years, and delivering award-winning customer satisfaction. These and other performance highlights can be found on page 1 of this document.

I encourage you to review this Proxy Statement to learn more about these achievements; our diverse, independent and experienced board; our performance-based compensation program; and the strong corporate governance structure in place to foster accountability.

Lastly, I encourage you to vote your shares and invite you to join us for our Annual Meeting of Shareowners, which will begin at 9 a.m. on Tuesday, May 14, at the Hyatt Regency Lexington, 401 West High Street, Lexington, Kentucky.

We look forward to creating additional value for you, for our customers and for the communities we serve moving forward. Thank you for your continued investment in PPL.

Sincerely,

 

 

LOGO

William H. Spence

 


Table of Contents

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 Tuesday, May 14, 2019
Place    

Hyatt Regency Lexington

401 West High Street

Lexington, Kentucky 40507

        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 the compensation of our named executive officers.

 

•  To ratify the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for the year ending December 31, 2019.

 

•  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 28, 2019.
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 84.

 

 

On Behalf of the Board of Directors,

 

 

LOGO

 

 

 

Joanne H. Raphael

Executive Vice President, General Counsel

and Corporate Secretary

April 2, 2019

 

Important Notice Regarding the Availability of Proxy

Materials for the Shareowner Meeting to Be Held on May 14, 2019:

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 Director

     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     
  

Board and Committee Evaluations

     11     
  

Guidelines for Corporate Governance

     11     
  

Communications with the Board

     11     
  

Code of Ethics

     11     
  

Shareowner Engagement

     12     
   BOARD COMMITTEES      13     
  

Board Committee Membership

     13     
  

Audit Committee

     13     
  

Compensation, Governance and Nominating Committee

     14     
  

Compensation Processes and Procedures

     14     
  

Director Nomination Process and Proxy Access

     15     
  

Succession Planning

     17     
  

Compensation Committee Interlocks and Insider Participation

     17     
  

Executive Committee

     17     
  

Finance Committee

     17     
   THE BOARD’S ROLE IN RISK OVERSIGHT      18     
   COMPENSATION OF DIRECTORS      20     
  

Annual Retainer

     20     
  

Presiding Director Retainer

     20     
  

Committee Chair Retainers

     20     
  

Other Fees

     20     
  

Directors Deferred Compensation Plan

     20     
  

Director Equity Ownership Guidelines

     20     
  

2018 Director Compensation

     21     
        
  

STOCK OWNERSHIP

 

     
       

 

Page 22

 

 

 

  
  

Directors and Executive Officers

     22     
  

Principal Shareowners

 

    

 

23

 

 

 

  
  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

 

       

 

Page 23

 

 

 

  
  

TRANSACTIONS WITH RELATED PERSONS

 

 

       

 

Page 24

 

 

 

  
  

EXECUTIVE COMPENSATION

 

 

  
       

 

Page 26

 

 

 

  
   PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS      26     
   COMPENSATION COMMITTEE REPORT      27     
   COMPENSATION DISCUSSION AND ANALYSIS (CD&A)      27     
  

Table of Contents for CD&A

     27     
   NAMED EXECUTIVE OFFICERS      28     
   2018 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT      28     
  

An Overview of 2018 Performance

     28     
  

How We Align PPL’s Compensation Program with Performance

     30     
  

2018 Pay and Performance

     31     
  

2018 Say-on-Pay Advisory Vote and Shareowner Engagement

     31     
  

Aligning Employees and Compensation Strategies with Our Corporate Strategic Framework

     32     
   OVERVIEW OF PPL’S EXECUTIVE COMPENSATION PROGRAM FRAMEWORK      34     
  

Process for Setting Executive Compensation

     34     
  

Use of Market Data

     34     
  

Establishing Performance Targets

     35     
  

Elements of NEO Compensation

     35     
  

Changes to the Compensation Program for 2018

     37     
        
        
 

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    i


Table of Contents

TABLE OF CONTENTS

 

   2018 NAMED EXECUTIVE OFFICER COMPENSATION      38     
  

Base Salary

     38     
  

2018 Annual Cash Incentive Awards

     38     
  

2018 Long-term Equity Incentive Awards

     45     
  

Compensation Realized by Our CEO in 2018

     48     
  

Other Elements of Compensation

     49     
  

GOVERNANCE POLICIES

UNDERPINNING OUR COMPENSATION FRAMEWORK

     52     
  

Equity Ownership Guidelines

     52     
  

Hedging and Pledging Prohibitions

     53     
  

Clawback Policy

     53     
   ADDITIONAL INFORMATION      53     
  

Other Compensation

     53     
  

Tax Implications of Our Executive Compensation Program

     54     
   EXECUTIVE COMPENSATION TABLES      55     
  

Summary Compensation Table

     55     
  

Grants of Plan-Based Awards During

2018

     57     
  

Outstanding Equity Awards at Fiscal

Year-End 2018

     59     
  

Option Exercises and Stock Vested in

2018

     61     
  

Pension Benefits in 2018

 

 

     62     
  

Nonqualified Deferred Compensation

in 2018

     66     
   POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL OF PPL CORPORATION      68     
  

Change-in-Control Arrangements

     68     
  

Termination Benefits

     70     
  

Employment Agreement

 

    

 

72

 

 

 

           
  

PROPOSAL  3: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

       

 

Page 79

 

 

 

  
  

Fees to Independent Auditor for 2018 and 2017

     79     
  

Report of the Audit Committee

 

    

 

81

 

 

 

  
  

GENERAL INFORMATION

 

 

       

 

Page 83

 

 

 

  
  

ANNEX A

 

 

       

 

A-1

 

 

 

  
 

 

 

 

ii    PPL CORPORATION 2019 Proxy Statement


Table of Contents

Proxy Summary

This summary highlights 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 2018 Annual Report before you vote.

We first released this proxy statement and the accompanying proxy materials to shareowners on or about April 2, 2019.

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

Voting Matters and Board Voting Recommendations

 

 

Election of Directors ... Page 4.

 

 

   

 

        Your Board recommends a vote FOR each nominee.

 

Management Proposals

•  Advisory vote to approve the compensation of our named executive officers ... Page 26.

•  Ratification of Deloitte & Touche LLP as independent auditor for 2019 ... Page 79.

 

 

   

 

        Your Board recommends a vote FOR both proposals.

Performance Highlights for 2018

We delivered on our earnings commitments to shareowners, achieving the high end of our earnings guidance while taking steps to bolster our balance sheet following U.S. tax reform. We continued to control costs and achieve allowed returns set by each regulatory jurisdiction in which we operate. In addition, we increased our dividend by 4 percent, our 16th dividend increase in 17 years.

At the same time, we invested $3.3 billion in infrastructure improvements to benefit our customers and advance a cleaner energy future. We maintained top-quartile reliability performance across our U.S. utilities. We ranked among the very best for customer satisfaction in the regions we serve. This included receiving our 46th and 47th J.D. Power awards for customer satisfaction in the U.S. and once again topping all other U.K. distribution network operators in a broad measure of customer satisfaction. Guided by our sustainability commitments, we set a goal to reduce our carbon dioxide emissions 70 percent from 2010 levels by 2050.

In addition, throughout 2018, we maintained a strong balance sheet, investment grade credit ratings and strong cash flow as we positioned the company for long-term earnings growth and success.

While we executed well, PPL’s stock price was pressured by political and regulatory uncertainty in the U.K. PPL’s U.K. operations represent over 50% of our business. For our named executive officers, 40% of their long-term incentive compensation is based on three-year total shareowner return, or TSR, relative to the Philadelphia Stock Exchange Utility Index, or UTY. Because no company in the UTY has significant utility U.K. operations, the political and regulatory uncertainty in the U.K. disproportionately affected our TSR performance relative to the UTY. As a result, our named executive officers forfeited all of the TSR-based performance units that were granted for the 2016-2018 performance period.

 

Highest   $3.3 billion   $1 billion   CO2 Goal
     
in customer satisfaction
among U.K. utilities and
winners of two J.D. Power
awards for customer
satisfaction in the U.S.
  in infrastructure investment to make the grid smarter, more
reliable and more resilient
and to advance a cleaner
energy future.
  in dividends returned to
shareowners.
  set to reduce our carbon
dioxide emissions
70 percent from 2010 levels
by 2050.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    1


Table of Contents

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

 

   
      

9 of 10 directors in 2018 were independent

 

         No supermajority voting provisions         

Directors required to hold shares until they leave Board

 

   
       Independent lead director         

Proxy access implemented by Board in 2015

 

        

Officers and directors prohibited from pledging/hedging PPL shares

 

   
      

Diverse Board; added independent director, Phoebe Wood, in 2018

 

        

Shareowner right to call a special meeting

 

         Clawback policy in place

Director Nominees

 

         
  Name   Age  

Director

Since

  Principal Occupation   Independent  

Committee

Memberships(1)

         

John W. Conway

  73   2000  

Retired Chief Executive Officer,

Crown Holdings, Inc.

  Independent

Lead

Director

  CGNC, EC, FC
         
         

Steven G. Elliott

  72   2011  

Retired Senior Vice Chairman, Bank

of New York Mellon Corporation

  X   AC, EC, FC
         
         

Raja Rajamannar

  57   2011  

Chief Marketing & Communications

Officer, and President, Healthcare,

MasterCard International Incorporated

  X   AC, CGNC
         
         

Craig A. Rogerson

  62   2005  

Chairman, President and Chief

Executive Officer, Hexion Inc.

  X   AC, CGNC, EC
         
         

William H. Spence

  62   2011  

Chairman, President and Chief

Executive Officer, PPL Corporation

  Management

Director

  EC
         
         

Natica von Althann

  68   2009  

Retired Senior Credit Risk

Management Executive, Bank of

America and Chief Credit

Officer, U.S. Trust

  X   CGNC, EC, FC
         
         

Keith H. Williamson

  66   2005  

Executive Vice President, Secretary

and General Counsel, Centene

Corporation

  X   AC, FC
         
         

Phoebe A. Wood

  65   2018  

Principal of CompaniesWood and

former Chief Financial Officer of

Brown-Foreman Corporation

  X   CGNC
         
         

Armando Zagalo de Lima

  60   2014  

Retired Executive Vice President,

Xerox Corporation

  X   AC, FC
         

 

(1) 

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

 

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2    PPL CORPORATION 2019 Proxy Statement


Table of Contents

PROXY SUMMARY

 


 

Executive Compensation Program

 

CEO’s 2018 Target

Total Direct 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 links executive compensation with the interests of our shareowners. In 2018, 85% of the CEO’s target compensation opportunity was “at-risk” and 72% was performance-based.

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 corporate and business segment financial and operational performance

 

  Combination of corporate and segment performance for business segment leaders

Long-term Equity Incentives

Performance Units

 

    Payable in stock

 

    Payout range from 0% to 200% of target

 

    Based on three-year TSR performance relative to the UTY (40% of long-term incentives (LTI))

 

    Based on the average of PPL’s annual corporate return on equity, or ROE, for each year of a three-year performance period (40% of LTI)

Restricted Stock Units (20% of LTI)

 

    Payable in stock

 

    Restricted for three years after grant

Changes in 2018

 

    Changed the weighting of performance units from 25% ROE and 75% TSR to 50% ROE and 50% TSR

Other Elements

 

  Limited perquisites

 

  Retirement plans

 

  Deferred compensation plans

Pay for Performance

For 2018, performance-based compensation for the NEOs was primarily based on (1) earnings per share from ongoing operations as adjusted for compensation purposes, or EPS, (2) net income from ongoing operations of each business segment as adjusted for compensation purposes, (3) corporate and business segment operational goals, (4) relative TSR, and (5) corporate ROE. All of our goals align with our commitment to shareowners to deliver earnings growth and shareowner value creation.

Our 2018 performance resulted in:

 

  Annual cash incentive award payouts ranging from 147.68% to 174.68% of target as a result of achieving strong financial and operating results.

 

  The forfeiture of the TSR-based 2016-2018 performance units as a result of our TSR performance relative to the UTY.

Performance units forfeited as a result of 2016–2018 TSR performance had a grant date value of $3.0 million for Mr. Spence and $2.3 million for all other NEOs.

In 2018, Mr. Spence realized approximately 36% less actual compensation than what is reported in the Summary Compensation Table, reflecting the alignment of his compensation with TSR performance as shown in the graph below.

 

LOGO

2018 Summary Compensation Table vs. Realized Pay William H. Spence

The political and regulatory uncertainty in the U.K. pressured PPL’s stock price and TSR for the past three years, contributing to a 39% decrease in Mr. Spence’s realized pay over that period from $11.99 million in 2016 to $7.27 million in 2018.

 

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    3


Table of Contents

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, however, any nominee should become unavailable prior to the Annual Meeting, 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 the nominees, unless you indicate otherwise on the proxy or ballot card.

Rodney C. Adkins, who has served as a director since 2014, will step down from the Board in May 2019. During the annual nominating process, the Compensation, Governance and Nominating Committee, or CGNC, consulted with Mr. Adkins regarding his potential nomination for 2019. Due to the rigorous demands of his professional schedule, Mr. Adkins and the CGNC mutually agreed that he would not stand for re-election at the Annual Meeting of Shareowners. We thank Mr. Adkins for his service to our company.

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 CGNC 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 additional board leadership and governance experience, exposure to best practices, and substantial knowledge and skills that further enhance the functioning of our Board.

The table below summarizes, in no particular order, the primary experiences, qualifications and skills that our nominees for director bring to the Board.

 

                   
    

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Global Business Perspective

 

 

 

 

 

 

 

 

 

Customer Relationships and Marketing

     

 

     

 

 

 

 

Public Company Board Experience

 

 

     

 

 

     

   

Risk Management

 

 

     

 

 

     

   

Regulated Industry

     

 

     

 

 

       

Technology and Cybersecurity

     

 

     

         

 

Finance and Accounting

     

             

 

 

   

Environmental

 

         

 

               

CEO

 

         

 

               

 

 

 

4    PPL CORPORATION 2019 Proxy Statement


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 


 

NOMINEES FOR DIRECTOR

 

LOGO  

JOHN W. CONWAY

 

Age: 73

 

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. in December 2015, having served as Chief Executive Officer since 2001 and as President from 2001 until March 2013. He continues to serve as a non-executive Chairman of the Board of Crown, a position he has held since 2001. Prior to 2001, he served as President and Chief Operating Officer of Crown. 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 regarding organizational, operational and risk management, as well as environmental oversight and board leadership experience, essential to a large public company.

 

LOGO

 

STEVEN G. ELLIOTT

 

Age: 72

 

Director since: 2011

 

Independent Director

  

Board Committees:

 

•   Audit (Chair)

•   Executive

•   Finance

  

Other Public Directorships:

 

•   Huntington Bancshares Incorporated

 

Former Public Directorships within the Last Five Years:

 

•   AllianceBernstein Corporation (2011-2017)

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, Los Angeles.

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 extensive knowledge of organizational and operational management from a regulated industry perspective, as well as risk management expertise. He also has strategic technology leadership experience, essential to a large public company.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    5


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

LOGO

 

RAJA RAJAMANNAR

 

Age: 57

 

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 joining MasterCard in September 2013. 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 expertise and a keen understanding of technology issues, all of which are crucial to a large public company.

 

LOGO  

CRAIG A. ROGERSON

 

Age: 62

 

Director since: 2005

 

Independent Director

    

Board Committees:

 

•   Audit

•   Compensation Governance and Nominating
(Chair)

•   Executive

 

Other Public Directorships:

 

•   Ashland Global Holdings Inc.

 

Former Public Directorships within the Last Five Years:

 

•   Chemtura Corporation (2008-2017)

Mr.  Rogerson is Chairman, President and Chief Executive Officer of Hexion Inc., a position he has held since July 2017. Hexion is a global producer of thermoset resins as well as other chemical platforms serving a wide range of market applications. He is the former Chairman, President and Chief Executive Officer of Chemtura Corporation, a position he held from December 2008 until April 2017. Chemtura was a global manufacturer and marketer of specialty chemicals, serving a broad spectrum of industrial markets until its acquisition by LANXESS Aktiengesellschaft in April 2017. 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, as well as the Pancreatic Cancer Action Network. 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, operational and risk management, as well as environmental oversight and board leadership experience, essential to a large public company.

 

 

 

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LOGO

 

WILLIAM H. SPENCE

 

Age: 62

 

Director since: 2011

 

Management Director

    

Board Committees:

 

•   Executive (Chair)

 

Other Public Directorships:

 

•   The Williams Companies, Inc.

 

Mr.  Spence is Chairman, President and Chief Executive Officer of PPL Corporation. Prior to his 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 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 currently serves on the board of the Electric Power Research Institute, on the Executive Committee of the Edison Electric Institute (EEI) and as co-chairman of EEI’s CEO Policy Committee on Reliability, Security and Business Continuity. He is a member of EEI’s Finance and Environment and Climate CEO Policy Committees. He is also a member of EEI’s 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, environmental and information technology experience, and an in-depth knowledge of the company’s business and culture to the Board and the Chairman position.

 

LOGO  

NATICA VON ALTHANN

 

Age: 68

 

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 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 regarding organizational and operational management from a regulated industry perspective, as well as financial and risk management expertise, essential to a large public company.

 

 

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS

 

 

LOGO  

KEITH H. WILLIAMSON

 

Age: 66

 

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 from 1999 to 2006. 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 groups, 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, as well as customer relationship experience, all of which is crucial to a large public energy company.

 

LOGO

 

PHOEBE A. WOOD

 

Age: 65

 

Director since: 2018

 

Independent Director

  

Board Committees:

 

•   Compensation, Governance and Nominating

  

Other Public Directorships:

 

•   Invesco Ltd.

•   Leggett & Platt, Incorporated

•   Pioneer Natural Resources Company

 

Former Public Directorships within the Last Five Years:

 

•   Coca-Cola Enterprises, Inc. (2010-2016)

Ms. Wood is principal of CompaniesWood, a consulting firm specializing in early stage investments, a position she has held since 2008. She is the former Vice Chairman and Chief Financial Officer of Brown-Forman Corporation, a diversified consumer products manufacturer, a position she held from 2006 to 2008. From 2001 to 2006, she served as Brown-Forman Corporation’s Executive Vice President and Chief Financial Officer. Before joining Brown-Forman Corporation, Ms. Wood served as Vice President and Chief Financial Officer, and as a director, of Propel Corporation (a telecom subsidiary of Motorola, Inc.) from 2000 to 2001. Previously, Ms. Wood served in various financial management capacities during her almost 24-year tenure at Atlantic Richfield Company (now BP).

Experience and Qualifications. With her extensive experience as a financial executive, including in the energy industry, and board service with publicly traded companies in other industries, Ms. Wood brings to our Board a wealth of experience in finance, accounting, strategic planning, capital markets and risk management, all essential to a large public energy company.

 

 

 

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LOGO  

ARMANDO ZAGALO DE LIMA

 

Age: 60

 

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, customer service 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 86.

 

 

Your Board of Directors recommends that you vote FOR each nominee included in Proposal 1

 

 

 

 

 

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BOARD OF DIRECTORS

Attendance. The Board of Directors met seven times during 2018. 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 2018 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 2018 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/governance), the Board considers all relevant facts and circumstances in making an independence determination, including transactions and relationships between each director or members of his or her immediate family and the company and its subsidiaries. The Board determined that the following nine 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 Mses. von Althann and Wood.

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 for these executive sessions and also serves as the independent “lead” director of the Board, as described more particularly in the following section.

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. Mr. Conway is our longest serving director, and he has served with three different CEOs, as well as different management teams during his tenure, providing continuity and leadership to each CEO. In addition, PPL has been very active in strategic acquisitions and divestitures over the past decade. Having a lead director with Mr. Conway’s institutional knowledge and proven track record has been instrumental in smoothly executing these strategic transactions. These transactions have also changed the composition of the PPL Board, and there has been significant and ongoing refreshment among our Board members. Maintaining an appropriate blend of seasoned and less tenured directors provides valuable perspectives when considering long-term strategy and decisions. Based on these facts and circumstances, the Board is confident that Mr. Conway continues to maintain his independence and brings a wealth of experience and unique perspective regarding changes to our company and within our industry.

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 committee 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 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 were it 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;

 

 

 

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has the authority to call meetings of the independent directors;

 

 

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.

Board and Committee Evaluations. Each year, the Board and each committee, other than the Executive Committee, evaluate Board and committee performance. We use a director questionnaire to facilitate the annual evaluation of topics such as Board dynamics, Board and committee effectiveness and engagement, assessment of director performance, access to management, agenda requests and the like, encouraging a broad range of commentary from each director. Our Chairman and the Chair of the CGNC review the results and share them with the entire Board in executive session at the next Board meeting. Our Chairman also periodically meets individually with each Board member to seek additional input as to Board processes, strategy and other suggestions. While every Board member is encouraged to provide comments as to the structure and operation of Board committees, each committee conducts its own annual assessment as well.

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/governance).

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 financial statement fraud are to be brought immediately to the attention of the Corporate Audit 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 is 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 of Integrity in the Corporate Governance section of our website (www.pplweb.com/governance).

 

 

 

 

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Shareowner Engagement. We engage with our shareowners throughout the year in a variety of forums involving our directors, senior management, investor relations, sustainability officer and legal department. We meet with our shareowners in person, by telephone and at external venues, and attend conferences and other forums at which shareowners are present. Our Chair of the CGNC regularly accompanies management in its governance-focused outreach with our larger investors. Our engagement covers a broad range of governance and business topics, including business strategy and execution, board composition and refreshment, executive compensation practices, risk oversight, climate change, sustainability, employee engagement and culture and workforce development. These meaningful exchanges provide us with a valuable understanding of our shareowners’ perspectives as well as an opportunity to share our views with shareowners.

 

 

LOGO

FALL Conduct face-to-face or phone meetings between PPL management and our largest investors to obtain feedback on governance, compensation and other matters.WINTER Review feedback from fall meetings with Board and use It to enhance proxy disclosures and make appropriate governance and compensation changes. SPRING Conduct follow-up conversations with our largest investors to address important annual meeting issues.Our Shareowner Engagement Program Annual Meeting of Shareowners SUMMER Review PPL shareowner votes at our most recent annual meeting and current trends in corporate governance.

 

 

 

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BOARD COMMITTEES

The Board of Directors has four standing committees:

 

 

Audit Committee;

 

 

Compensation, Governance and Nominating Committee;

 

 

Executive Committee; and

 

 

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/governance).

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 2018.

Board Committee Membership

 

         
Director        Audit  

Compensation, 

Governance and 

Nominating 

  Executive    Finance 
         

Rodney C. Adkins

  I          
         

John W. Conway

  I/LD          
         

Steven G. Elliott(1)

  I     Chair      
         

Raja Rajamannar(1)

  I          
         

Craig A. Rogerson(1)

  I       Chair    
         

William H. Spence

           Chair  
         

Natica von Althann

  I           Chair
         

Keith H. Williamson(1)

  I          
         

Phoebe A. Wood(2)

  I          
         

Armando Zagalo de Lima(1)

  I              
         

Number of Meetings in 2018

      5   5   3   6

I Independent Director                 LD Lead Director                 Chairman of the Board

 

(1) 

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

 

(2) 

Joined the Compensation, Governance and Nominating Committee on January 18, 2018.

Audit Committee. The primary function of the Audit Committee is to assist the Board in the oversight of:

 

 

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

 

 

the effectiveness of the company’s disclosure controls and procedures and internal control over financial reporting;

 

 

the identification, assessment and management of risk;

 

 

the company’s compliance with legal and regulatory requirements and the company’s compliance and ethics program;

 

 

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

 

 

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

 

 

 

 

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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 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:

 

 

oversee corporate governance for the company;

 

 

review management’s succession planning;

 

 

oversee the company’s policies and practices to further its corporate citizenship, including sustainability, environmental and corporate social responsibility initiatives;

 

 

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

 

 

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 compensation, including incentive awards;

 

 

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

 

 

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

All of the members of the CGNC are independent under the listing standards of the NYSE, including those rules applicable to board and committee service, and the company’s standards of independence described 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 under 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 PPL’s 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 arrangements, including the design of, and adoption of performance measures and award opportunities for, the executive incentive programs. The CGNC regularly reviews the company’s executive compensation program 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 strategies.

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 a representative of Frederic W. Cook & Co., Inc., or FW 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 present. The Chair reports the CGNC’s actions to the Board after each committee meeting. Each year, the CGNC determines the elements of compensation and the financial and other measures 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.

 

 

 

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Role of Advisers to the Committee

Independent Advisers. The CGNC has retained FW Cook as its independent compensation consultant since July 1, 2014. FW Cook provides additional information to the CGNC so that the CGNC can determine whether the company’s executive compensation program is reasonable and consistent with competitive practices. A representative of FW Cook regularly participates in CGNC meetings, providing expertise and guidance as to executive compensation program design, market trends and best pay practices.

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

 

 

Utility Industry Executive Compensation Trends — 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 information for both utility and general industry, 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 27.

Annually, the CGNC requests that FW 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 all matters, however, FW Cook reports to the CGNC rather than management.

Although 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 FW Cook.

The CGNC annually reviews and approves total expenditures paid to the independent compensation consultant. FW 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 2018. In addition, the CGNC evaluates whether any work provided by FW Cook may present a conflict of interest, and for 2018, 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 a 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 members of management 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 the executive compensation program 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 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 and Proxy Access

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,

 

 

 

 

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independence of thought and judgment and who have senior corporate leadership experience. The Board believes that prior business experience at a senior executive level is strongly desired, and it seeks candidates who have diverse experience relevant to serving on the Board, such as financial, operating, executive management, technology and regulated industry 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. While the CGNC does not have a formal diversity policy, in selecting a director nominee, the CGNC considers skills, expertise, background, professional experience, education, and other individual characteristics, such as race, gender and ethnicity, as well as a variety of attributes that contribute to the Board’s collective strength. 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 sought at that time 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, their past contributions to the company’s success and their expected future engagement and contributions in furtherance of PPL’s strategic goals. Ms. Wood was recommended by the CGNC after it considered a group of potential candidates provided by advisers of the company and utilized services from a third-party search firm in connection with her nomination.

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, as well as additional directors, if available, then interview the prospective candidate 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 any 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.

The Board of Directors adopted proxy access in 2015. Pursuant to 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.

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 2020 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 earlier than November 5, 2019 and no later than December 5, 2019.

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/governance).

 

 

 

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Succession Planning

CEO and Other Management Succession

At least annually, consistent with its charter, the CGNC reviews the company’s plan for management succession, both in the ordinary course of business and in response to emergency situations, recognizing the importance of continuity of leadership to ensure a smooth transition for its employees, customers and shareowners. As part of this process, the CGNC reviews the top and emerging talent internally, their level of readiness and development needs. This process is conducted not only for the CEO position but also for other critical senior level positions in the company. The CGNC also reviews external successor candidates for the CEO position, with assistance periodically from an independent third-party consultant.

Lead Director Succession

Annually, the Chairman and the Chair of the CGNC also review Lead Director succession. The review covers key skills and competencies of the Lead Director position, the risk of loss of the current Lead Director, an assessment of the current board members relative to key skills and competencies and the identification of potential Lead Director successors. As part of the regular review of attributes and skills for any potential director candidate, they also consider possible qualification as a future Lead Director in the succession pipeline.

Compensation Committee Interlocks and Insider Participation. During 2018, 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 business plan (for not less than three years), which includes the annual financing plan, as well as the five-year capital expenditure plan for the company and its subsidiaries;

 

 

approve company financings, guarantees or other credit or liquidity support in excess of $100 million, to the extent not contemplated by the annual financing plan approved by the Finance Committee;

 

 

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

 

 

authorize capital expenditures in excess of $100 million;

 

 

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

 

 

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.”

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    17


Table of Contents

GOVERNANCE OF THE COMPANY

 

THE BOARD’S ROLE IN RISK OVERSIGHT

 

 

LOGO

 

Overview. The Board, together with its committees, and with the aid and input of our senior management and professional advisors, oversees the company’s risk management practices. The Board regularly reviews the material risks associated with the company’s business plans and activities as part of its consideration of the ongoing operations and strategic direction of the company.

While systemic risk oversight is a function of the full Board, the Board recognizes that material risks may arise from or impact multiple areas of the organization. As such, the Board retains primary oversight of certain risks, including strategic, operational, legal, regulatory, cyber-related and physical security risks, and tasks its Audit Committee, Finance Committee and CGNC with principal oversight of the company’s management of material risks within each respective committee’s areas of responsibility. In turn, each committee reports to the Board regularly, including with respect to material risks within its purview, fostering awareness and communication of significant matters among all directors, and promoting a coordinated approach to risk oversight.

At meetings of the Board and its committees, directors receive updates from management regarding our risk profile and 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, General Counsel, Global Chief Compliance Officer, Chief Information Security Officer, or CISO, Vice President-Corporate Audit and Senior Director of Risk Management, or SDRM. In addition, the Board, and each committee, may request information from the company’s professional advisors or engage its own independent advisors.

Oversight by the Audit Committee. The Audit Committee assists the Board in its oversight of the identification and management of certain broad-based enterprise risks. More specifically, the Audit Committee periodically reviews the company’s enterprise risk management program, including its processes for identifying, assessing and managing business risks and exposures, as well as formulating related guidelines and policies. To assist the Audit Committee in its oversight activities, the Vice President-Corporate Audit, who reports directly to the Audit Committee, and the Global Chief Compliance Officer, as well as their respective teams, the SDRM and the Risk Management group, and the CISO provide periodic reports to the Audit Committee, or the full Board, regarding key risk exposures and mitigation strategies.

Risks identified through the company’s enterprise risk management function may be overseen directly by the Audit Committee or, when appropriate, by another committee or escalated to the full Board. The Audit Committee regularly reviews risk management activities related to our financial statements and disclosures, certain legal and compliance matters, tax, information technology, transition of the utility sector, and other key areas. The Audit Committee also periodically meets in executive session with representatives from Deloitte & Touche LLP, the company’s independent registered public accounting firm, the CFO, the General Counsel, the Vice President and Controller, the Global Chief Compliance Officer and the Vice President-Corporate Audit.

 

 

 

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GOVERNANCE OF THE COMPANY

 


 

Oversight by the Finance Committee. The Finance Committee assists the Board in its oversight of the management of select financial risks to the company, including market risk, credit risk, liquidity risk and currency risk. The Finance Committee reviews and approves the company’s annual business and financing plans, as well as any changes to these plans, and oversees the policies and practices employed by the company’s Risk Management Committee, which is chaired by the SDRM. The Risk Management Committee and the SDRM serve at the direction of the Finance Committee and are responsible for identifying and managing risks related to capital raising activities, foreign currency hedging and interest rate exposures, as well as monitoring the company’s liquidity position and counterparty credit exposure.

Oversight by the CGNC. The CGNC assists the Board in its oversight of risks relating to our compensation programs, human capital management, sustainability, and economic, social, and governance, or ESG, practices and positions. The CGNC regularly considers risks related to the attraction and retention of talent, the design of our compensation programs, and succession planning. Specifically, the CGNC annually reviews management’s assessment of whether risks arising from our compensation policies and practices for all employees, including non-executive officers, are reasonably likely to have a material adverse effect on the company. To do so, 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.

The CGNC also oversees risks related to the company’s governance practices, the composition of the Board, and the identification of qualified individuals to become board members. Management provides periodic updates regarding emerging governance trends and practices, and reports on significant interactions with, and concerns of, shareowners related to our governance profile. More broadly, the CGNC has responsibility for overseeing PPL’s practices and positions to further ESG performance and sustainability. PPL’s sustainability strategy, commitments and priorities, including climate-related issues, are reviewed by corporate leadership and the CGNC at regularly scheduled meetings. The full Board also receives sustainability updates as significant issues arise.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    19


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. During 2018, our non-employee directors received an annual retainer of $250,000, of which a minimum of $140,000 was mandatorily allocated in quarterly installments to each director’s deferred stock account under the Directors Deferred Compensation Plan, or DDCP. The remaining $110,000 portion of the annual retainer was payable 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).

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 and are also not paid to the director until retirement.

The CGNC assesses the compensation of directors annually and, if applicable, makes recommendations to the Board. As part of this assessment, FW Cook, the CGNC’s independent compensation consultant, provides a Director Pay Analysis, which 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. Effective January 1, 2018, the CGNC recommended, and the Board authorized, an increase in the annual retainer to the current $250,000 from $235,000 for all non-employee directors. Prior to this change, director compensation had not been increased since January 2015.

Presiding Director Retainer. During 2018, the presiding director, who is also our independent lead director, received an additional annual cash retainer of $30,000, which was payable in quarterly installments unless voluntarily deferred under the DDCP.

Committee Chair Retainers. During 2018, the Audit Committee Chair received an additional annual cash retainer of $25,000, which was payable in quarterly installments unless voluntarily deferred under the DDCP. The CGNC Chair and the Finance Committee Chair each received an additional annual cash retainer of $20,000, which was payable in quarterly installments unless voluntarily deferred under the DDCP. Effective January 1, 2018, the Audit Committee Chair’s annual cash retainer was increased to the current $25,000 from $20,000, while the annual cash retainer for the CGNC and Finance Committee Chairs was increased to $20,000 from $15,000.

Other Fees. PPL reimburses each director for usual and customary travel expenses. Directors are not paid meeting fees.

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 -13.13% to 1.98% during 2018. 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.

Director Equity Ownership Guidelines. The Board requires directors to hold, within five years after their election to the Board, shares of company common stock (including deferred stock units held in the DDCP) with a value of at least five times the annual cash retainer fee. All directors who have been on the Board more than five years were in compliance with their equity ownership guidelines as of December 31, 2018. Mr. Zagalo de Lima and Ms. Wood, who have served on the Board less than five years, are currently on track to meet their equity ownership requirements.

 

 

 

20    PPL CORPORATION 2019 Proxy Statement


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GOVERNANCE OF THE COMPANY

 


 

The following table summarizes all compensation earned during 2018 by our non-employee directors with respect to Board of Directors and committee service.

2018 DIRECTOR COMPENSATION

 

    

 

Fees Earned or Paid in Cash

                
Name of Director   

Paid in

Cash(2)

    

 

Deferred into

Restricted

Stock Units(3)

     Total   

Stock

Awards(4)

  

All Other

Compensation(5)

     Total

 

Rodney C. Adkins

  

 

 

 

$110,000

 

 

  

 

 

 

—     

 

 

  

 

$110,000

  

 

$140,000

  

 

 

 

$10,000

 

 

  

 

$260,000  

 

John W. Conway

  

 

 

 

  140,000

 

 

  

 

 

 

—     

 

 

  

 

  140,000

  

 

  140,000

  

 

 

 

—     

 

 

  

 

  280,000  

 

Steven G. Elliott

  

 

 

 

  135,000

 

 

  

 

 

 

—     

 

 

  

 

  135,000

  

 

  140,000

  

 

 

 

  10,000

 

 

  

 

  285,000  

 

Raja Rajamannar

  

 

 

 

  110,000

 

 

  

 

 

 

—     

 

 

  

 

  110,000

  

 

  140,000

  

 

 

 

—     

 

 

  

 

  250,000  

 

Craig A. Rogerson

  

 

 

 

 

 

  

 

 

 

$130,000     

 

 

  

 

  130,000

  

 

  140,000

  

 

 

 

—     

 

 

  

 

  270,000  

 

Natica von Althann

  

 

 

 

  130,000

 

 

  

 

 

 

—     

 

 

  

 

  130,000

  

 

  140,000

  

 

 

 

    3,500

 

 

  

 

  273,500  

 

Keith H. Williamson

  

 

 

 

  110,000

 

 

  

 

 

 

—     

 

 

  

 

  110,000

  

 

  140,000

  

 

 

 

—     

 

 

  

 

  250,000  

 

Phoebe A. Wood(1)

  

 

 

 

  104,806

 

 

  

 

 

 

—     

 

 

  

 

  104,806

  

 

  133,389

  

 

 

 

  10,000

 

 

  

 

  248,195  

 

Armando Zagalo de Lima

  

 

 

 

 

 

  

 

 

 

  110,000     

 

 

  

 

  110,000

  

 

  140,000

  

 

 

 

—     

 

 

  

 

  250,000  

(1) 

Ms. Wood joined the Board on January 18, 2018.

 

(2) 

This column reports the dollar 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 2018. Ms. Wood voluntarily deferred $104,806 into a deferred cash account under the DDCP. The cash retainers for the committee chairs were: Mr. Elliott (Audit — $25,000); Mr. Rogerson (CGNC — $20,000); and Ms. von Althann (Finance — $20,000). Mr. Conway received a $30,000 retainer for serving as the Lead Director.

 

(3) 

This column reports the dollar amount of retainers voluntarily deferred into deferred stock accounts under the DDCP.

 

(4) 

This column represents the grant date fair value of the mandatorily deferred portion of the annual retainer during 2018 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, 2018, the aggregate number of deferred stock units (including dividend equivalents) held by each current non-employee director was as follows: Mr. Adkins —19,296; Mr. Conway — 142,627; Mr. Elliott — 39,833; Mr. Rajamannar — 35,916; Mr. Rogerson —110,902; Ms. von Althann — 44,722; Mr. Williamson — 67,495; Ms. Wood — 4,655 and Mr. Zagalo de Lima — 35,472.

 

(5) 

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. Under the program, PPL will contribute, on a 100% matching basis, up to $10,000 per year per person to specified charitable institutions.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    21


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 5, 2019, 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, 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 Amended and Restated 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)

Rodney C. Adkins

    

 

20,823

(2) 

 

John W. Conway

    

 

150,261

(3) 

 

Gregory N. Dudkin

    

 

59,980

(4) 

 

Steven G. Elliott

    

 

41,659

(2) 

 

Raja Rajamannar

    

 

37,685

(2) 

 

Joanne H. Raphael

    

 

181,383

(5) 

 

Craig A. Rogerson

    

 

114,921

(2) 

 

Vincent Sorgi

    

 

184,834

(6) 

 

William H. Spence

    

 

1,370,652

(7) 

 

Robert A. Symons

    

 

39,967

(8) 

 

Paul W. Thompson

    

 

26,018

(9) 

 

Natica von Althann

    

 

46,620

(2) 

 

Keith H. Williamson

    

 

69,725

(2) 

 

Phoebe A. Wood

    

 

5,968

(2) 

 

Armando Zagalo de Lima

    

 

38,213

(2) 

 

All 18 executive officers and directors as a group

    

 

2,422,175

(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 stock units credited to the director’s deferred stock account under the DDCP.

 

(3) 

Includes 145,952 stock units credited to Mr. Conway’s deferred stock account under the DDCP.

 

(4) 

Includes 36,334 restricted stock units.

 

(5) 

Includes 31,196 restricted stock units and 123,036 shares of common stock that may be acquired within 60 days of March 5, 2019 upon the exercise of stock options granted under the ICPKE.

 

(6) 

Includes 42,388 restricted stock units and 125,034 shares of common stock that may be acquired within 60 days of March 5, 2019 upon the exercise of stock options granted under the ICP and SIP.

 

(7) 

Includes 196,072 restricted stock units and 991,988 shares of common stock that may be acquired within 60 days of March 5, 2019 upon the exercise of stock options granted under the ICP or SIP. Also includes 12,824 shares held in an irrevocable trust for the benefit of Mr. Spence’s wife and 10,426.275 shares held in a grantor-retained annuity trust, both of which he disclaims beneficial ownership.

 

(8) 

Includes 32,318 restricted stock units.

 

(9)

Includes 26,018 restricted stock units.

 

(10) 

Includes 384,291 restricted stock units, 1,240,058 shares of common stock that may be acquired within 60 days of March 5, 2019 upon the exercise of stock options granted under the ICP, ICPKE or the SIP, and 521,565 stock units credited to the directors’ deferred stock accounts under the DDCP.

 

 

 

22    PPL CORPORATION 2019 Proxy Statement


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STOCK OWNERSHIP

 


 

PRINCIPAL SHAREOWNERS

Based on filings made under Sections 13(d) and 13(g) of the Exchange Act, as of February 14, 2019, 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

 

62,237,939

 

 

 

8.60%

 

 

 

 

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

 

56,900,006

 

 

 

7.90%

 

 

 

 

  FMR LLC(3)
  245 Summer Street
  Boston, MA 02210

 

46,954,131

 

 

 

6.52%

 

 

 

 

(1) 

Based solely on a review of the Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 6, 2019. As reported on the Schedule 13G/A, as of December 31, 2018, BlackRock, Inc. beneficially owned, in the aggregate, 62,237,939 shares held by BlackRock affiliates and had sole voting power over 56,595,422 shares and sole dispositive power over 62,237,939 shares.

 

(2) 

Based solely on a review of the Schedule 13G/A filed by The Vanguard Group with the SEC on February 12, 2019. As reported on the Schedule 13G/A, as of December 31, 2018, The Vanguard Group beneficially owned, in the aggregate, 56,900,006 shares held by The Vanguard Group and had sole voting power over 963,539 shares, shared voting power over 370,579 shares, shared dispositive power over 1,182,703 shares and sole dispositive power over 55,717,303 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 610,769 shares or 0.08% and 916,145 shares or 0.12%, 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.

 

(3) 

Based solely on a review of the Schedule 13G jointly filed with the SEC by FMR LLC and Abigail P. Johnson on February 13, 2019. As reported on the Schedule 13G, as of December 31, 2018, FMR LLC and Ms. Johnson, chairman and chief executive officer and a director of FMR LLC, beneficially owned, in the aggregate, 46,954,131 shares held by FIAM LLC; Fidelity Institutional Asset Management Trust Company; Fidelity Management & Research Company (FMR Co); FMR CO, Inc and Strategic Advisors LLC and had sole voting power over 6,974,464 of the shares and sole dispositive power over all 46,954,131 of the shares. Members of the Johnson family, including Ms. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Ms. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act advised by FMR Co, a wholly owned subsidiary of FMR LLC, which power resides with the Boards of Trustees of such funds. FMR Co carries out the voting of the shares under written guidelines established by the Boards of Trustees of such funds.

 

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 2018, except for one Form 4 filed for Tadd J. Henninger on March 8, 2018 to report the grant of restricted stock units, which was inadvertently filed late due to administrative oversight.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    23


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 its 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 NYSE 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 “non-employee 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 2019, stating that it holds 8.6% 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, we 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 approximately $6,000 during 2018. A subsidiary of the company also invested in a liquidity fund managed by a BlackRock affiliate, which received fees of approximately $14,700 during 2018. In addition, several affiliates of BlackRock provided investment management services for the company’s pension trusts in the U.S. and U.K., which are separate from the company and are managed by independent trustees. In addition to the fees paid by these trusts, PPL affiliates made payments of approximately $462,000 for investment management services related to several U.K. pension trusts. These relationships were reviewed and ratified by the Board in compliance with the company’s related-person transaction policy.

FMR LLC filed a Schedule 13G in February 2019, stating that it holds 6.524% of PPL’s common stock. As a result of beneficially owning more than 5% of PPL’s common stock, FMR is currently considered a “related person” under PPL’s

 

 

 

24    PPL CORPORATION 2019 Proxy Statement


Table of Contents

TRANSACTIONS WITH RELATED PERSONS

 


 

related person transaction policy. After conducting a review of any relationships between FMR and its subsidiaries and our company and its subsidiaries, the company determined that affiliates of FMR provide a variety of services to the company under the general umbrella of “Fidelity Investments” in connection with our stock plans and benefit plans:

 

 

The company paid FMR affiliates an aggregate of approximately $216,000 for the following services during 2018:

 

   

FMR affiliates provided trustee or recordkeeping services in connection with several of our 401(k) plans, the PPL Employee Stock Ownership Plan, the PPL Directors Deferred Compensation Plan, the PPL Officers Deferred Compensation Plan and the PPL Supplemental Executive Retirement Plan.

 

   

Affiliates of FMR also provided administrative services to some of the company’s U.S. retirement plans and our stock plans.

 

 

Another FMR affiliate provided services to some of our U.S. retirement plans, such as paying the monthly retirement benefits to retirees and processing employee retirement requests. Fidelity also provided internet based services to PPL employees for estimating retirement benefits and planning for retirement. Fees in the aggregate amount of approximately $915,000 were paid by the U.S. pension trust, as the services provided a benefit to plan participants.

 

 

Fidelity Investments Asset Management (FIAM), an affiliate of FMR, provided investment management services to PPL’s U.S. pension trust until January 2018. The Trust is separate from the company and is managed by an independent trustee.

 

 

Certain affiliates of FMR also received investment management fees incurred by 401(k) plan participants in the amount of approximately $2 million in the aggregate during 2018 from Fidelity mutual funds offered under the 401(k) plans, based on a percentage of the plan assets invested in such mutual fund, as well as certain administrative 401(k) fees.

These relationships and transaction with FMR affiliates were reviewed and ratified by the Board in compliance with the company’s related-person transaction policy.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    25


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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 2018 compensation of our named executive officers, or NEOs, as described on pages 27-78.

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. For 2018, performance-based compensation for the NEOs was primarily based on (1) earnings per share from ongoing operations as adjusted for compensation purposes, or EPS, (2) net income from ongoing operations of each business segment as adjusted for compensation purposes, (3) corporate and business segment operational goals, (4) relative total shareowner return, or TSR, and (5) corporate return on equity, or ROE. All of our goals align with our commitment to shareowners to deliver earnings growth and shareowner value creation. In 2018, 85% of the CEO’s target compensation opportunity was “at-risk,” 75% of the CFO’s target compensation was “at-risk,” and an average of 69% of the other NEOs’ target compensation was “at-risk.”

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 27, as well as the discussion regarding “Compensation Processes and Procedures” beginning on page 14.

The company currently holds advisory votes on an annual basis. Although the results of the vote are non-binding and advisory in nature, 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 about 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 2023 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 in this proxy statement 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 advisory vote on 2018 compensation of our NEOs.

 

Your Board of Directors recommends that you vote FOR Proposal 2

 

 

 

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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, 2018 and included in this Proxy Statement.

Compensation, Governance and Nominating Committee

Craig A. Rogerson, Chair

John W. Conway

Raja Rajamannar

Natica von Althann

Phoebe A. Wood

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

TABLE OF CONTENTS

 

 

 

NAMED EXECUTIVE OFFICERS

     28  
 

 

2018 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT

     28  
 

An Overview of 2018 Performance

     28  
 

How We Align PPL’s Compensation Program with Performance

     30  
 

2018 Pay and Performance

     31  
 

2018 Say-on-Pay Advisory Vote and Shareowner Engagement

     31  
 

Aligning Employees and Compensation Strategies with Our Corporate Strategic Framework

     32  
  OVERVIEW OF PPL’S EXECUTIVE COMPENSATION PROGRAM FRAMEWORK      34  
 

Process for Setting Executive Compensation

     34  
 

Use of Market Data

     34  
 

Establishing Performance Targets

     35  
 

Elements of NEO Compensation

     35  
 

Changes to the Compensation Program for 2018

     37  
  2018 NAMED EXECUTIVE OFFICER COMPENSATION      38  
 

Base Salary

     38  
 

2018 Annual Cash Incentive Awards

     38  
 

2018 Long-term Equity Incentive Awards

     45  
 

Compensation Realized by Our CEO in 2018

     48  
 

Other Elements of Compensation

     49  
  GOVERNANCE POLICIES UNDERPINNING OUR COMPENSATION FRAMEWORK      52  
 

Equity Ownership Guidelines

     52  
 

Hedging and Pledging Prohibitions

     53  
 

Clawback Policy

     53  
  ADDITIONAL INFORMATION      53  
 

Other Compensation

     53  
 

Tax Implications of Our Executive Compensation Program

 

    

 

54

 

 

 

 

 

 

 

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NAMED EXECUTIVE OFFICERS

For 2018, our named executive officers, or NEOs, were:

 

 Named Executive Officer    Title
 William H. Spence    Chairman, President and Chief Executive Officer (CEO)
 Vincent Sorgi(1)    Executive Vice President and Chief Financial Officer (CFO)
 Paul W. Thompson(2)    Chairman of the Board, Chief Executive Officer and President, LG&E and KU Energy LLC (LKE)
 Gregory N. Dudkin    President of PPL Electric Utilities Corporation (PPL Electric)
 Joanne H. Raphael(1)    Executive Vice President, General Counsel and Corporate Secretary
 Robert A. Symons(3)    Former Chief Executive, Western Power Distribution (WPD)

 

 

(1)

Effective January 25, 2019, Mr. Sorgi and Ms. Raphael were promoted to Executive Vice President.

 

(2)

Mr. Thompson assumed this position at LKE on March 16, 2018 and previously served as President and Chief Operating Officer.

 

(3)

Mr. Symons passed away on November 7, 2018. Actual compensation for Mr. Symons represents what he earned through this date.

The 2018 compensation of these NEOs is explained in the following sections and in the Executive Compensation Tables that follow this CD&A.

2018 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT

An Overview of 2018 Performance

PPL continued to deliver on its commitments to shareowners and customers in 2018 as we pursued our strategy for long-term growth and success.

We delivered power safely, reliably and affordably to more than 10 million customers in the U.S. and U.K. We provided award-winning customer service, ranking among the very best for customer satisfaction in each of the regions we serve. Focused on the future, we invested $3.3 billion in infrastructure to strengthen grid reliability and resiliency for our customers.

At the same time, we delivered strong financial results. We achieved the high end of our earnings from ongoing operations forecast range. This marked the ninth consecutive year we exceeded the midpoint of our earnings guidance and the second straight year we achieved the high end of our guidance range.

As we increased earnings, we took steps to strengthen our balance sheet post tax-reform. We also increased our dividend by 4 percent, our 16th increase in 17 years, returning more than $1 billion to PPL shareowners.

Despite this strong execution, PPL’s stock price continued to be pressured by U.K. political and regulatory uncertainty relative to other U.S.-based utility investment options. PPL’s U.K. operations represent over half of our business. For our NEOs, 40% of their long-term incentive compensation is based on three-year total shareowner return, or TSR, relative to the Philadelphia Stock Exchange Utility Index, or UTY. Because no company in the UTY has significant U.K. utility operations, the political and regulatory uncertainty in the U.K. disproportionately affected our TSR performance relative to the UTY. This outcome resulted in the forfeiture of the 2016-2018 TSR performance units for our NEOs, as described below.

The U.K.’s decision to leave the European Union, commonly referred to as Brexit, is the major driver of U.K. political uncertainty. However, we do not expect it to have a significant impact on our operations or financial condition. And while Brexit poses potential foreign currency translation risk, we continued to execute hedges in 2018 to actively mitigate this risk through mid-2020. Regarding regulatory uncertainty, the Office of Gas and Electricity Markets, or Ofgem, sharpened its focus in 2018 on future price controls. For our part, we continued to actively engage with Ofgem to enable the best outcome for all stakeholders when the next price control period, RIIO-ED2, begins in April 2023.

 

 

 

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Looking ahead, we continue to believe the U.K. uncertainty will be a short-term phenomenon, and we remain focused on operational excellence. Our performance in this area reflects a common purpose and desire across PPL to deliver without fail for our customers, exceed their expectations and create long-term value for our shareowners.

As we move forward, we remain steadfast in pursuit of our long-term strategy to drive best-in-sector operational performance, invest responsibly in a sustainable energy future, maintain a strong financial foundation, and engage and develop our people. Additional highlights of our 2018 performance are noted below.

Drive best-in-sector operational performance

 

 

Both PPL Electric Utilities Corporation, or PPL Electric, and Kentucky Utilities Company, or KU, received J.D. Power awards for residential customer satisfaction. PPL Electric ranked highest among large utilities in the East region, while KU ranked highest among mid-sized utilities in the Midwest.

 

 

WPD finished the 2017/2018 regulatory year as the top-performing Distribution Network Operator, or DNO, group in Ofgem’s broad measure of customer satisfaction. WPD was once again rated best at engaging stakeholders and addressing vulnerable customers. WPD also received the U.K. government’s Customer Service Excellence Award for the 26th consecutive year.

 

 

Across our utilities, we took additional steps to strengthen reliability and grid resilience for our customers. All three of our U.S. utilities were recognized in the top quartile of public utilities nationwide in limiting the frequency of power outages for our customers.

Investing responsibly in a sustainable energy future

 

 

Throughout 2018, we remained focused on reinvesting in our business to grow value for shareowners and improve service to customers. This included $3.3 billion in infrastructure investments to modernize the grid and advance a cleaner energy future.

 

 

In Pennsylvania, we remained well on pace to complete our 1.4 million advanced metering project in 2019, topping 1.2 million new meter installations through December 2018. The advanced meters will give customers more usage information, enable us to more quickly detect and respond to power outages, and deliver additional customer benefits. PPL Electric also continued to strengthen its transmission system infrastructure through capital improvements that will support long-term efficient and lower cost operation.

 

 

In Kentucky, we continued to make progress on more than $845 million in environmental upgrades as part of a five-year project to cap and close ash ponds at our coal-fired power plants. We ramped up investment in smart grid technology on our distribution and transmission systems to more quickly detect outages and restore power. Through the end of 2018, we had installed more than 600 electronic reclosers on the electric distribution grid, enabling avoidance of just under 47,000 customer service interruptions. In addition, we completed a $148 million modernization of our Ohio Falls hydroelectric facility, a project that included overhauling eight generating units and increasing the facility’s generating capacity from 80 to 100 megawatts.

 

 

In the U.K., we implemented our asset replacement and fault management plans. We continued to incorporate more automation on our networks to strengthen reliability and support our evolution from passive network manager to distribution system operator. In addition, we advanced nearly two dozen low-carbon network initiatives to enable more distributed energy resources on the grid. This included our Electric Nation electric vehicle charging program, the largest pilot program of its kind in the U.K.

 

 

Across PPL, we continued to advance sustainability, governance and disclosure initiatives, setting a goal to cut PPL’s carbon dioxide emissions 70 percent from 2010 levels by 2050 and responding to the 2018 CDP, formerly the Carbon Disclosure Project, survey.

 

 

We acquired Safari Energy, LLC, a leading provider of solar energy solutions for commercial customers in the U.S., providing PPL a low-risk opportunity to help advance a cleaner energy future; support the growth of distributed energy resources, including energy storage; and gain additional experience with technologies that will shape the future energy grid.

 

 

 

 

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Maintaining a strong financial foundation

 

 

In 2018, we entered into equity forward contracts to issue $1.7 billion of PPL common stock to mitigate U.S. tax reform impacts, strengthen future credit metrics and support our solid investment-grade credit rating.

 

 

We increased our annualized common stock dividend 4 percent from $1.58 to $1.64 per share and returned more than $1 billion to shareowners.

 

 

We achieved strong returns at or near authorized levels in the regulatory jurisdictions in which we operate. We accomplished this through cost management, utilization of available cost recovery mechanisms and achievement of U.K. performance incentives.

 

 

In the 2017/2018 regulatory year, WPD’s strong performance earned £69 million in incentive revenues, which will be collected in the 2019/2020 rates.

 

 

In Kentucky, we filed a request with the Kentucky Public Service Commission to increase revenue by a combined $172 million at LG&E and KU to support additional capital investments to make the grid smarter, stronger and more resilient; replace aging natural gas lines; and support additional power plant performance and reliability improvements. A decision on our request is expected in the second quarter of 2019.

Engaging and developing our people

 

 

From apprentices to lineman trainees to leaders at all levels throughout the business, we continued to invest in our employees, to develop the pipeline of future leaders and foster a culture of inclusion, creativity, innovation and continuous improvement.

 

 

We were recognized by Forbes magazine in 2018 as not only one of America’s best employers but also one of the world’s best employers.

 

 

Our Pennsylvania operations received a perfect score of 100 percent on the Human Rights Campaign Foundation’s Corporate Equality Index, a national benchmarking survey and report on corporate policies and practices relating to lesbian, gay, bisexual and transgender workplace.

 

 

Our Pennsylvania operations were recognized as a 2018 Best Place to Work for Disability Inclusion on the Disability Equality Index®, a national benchmarking tool that rates companies on their disability inclusion policies and practices.

How We Align PPL’s Compensation Program with Performance

For 2018, performance-based compensation for the NEOs was primarily based on (1) our earnings per share from ongoing operations as adjusted for compensation purposes, or EPS, (2) net income from ongoing operations of each business segment as adjusted for compensation purposes, (3) corporate and business segment operational goals, (4) relative TSR, and (5) corporate return on equity, or ROE. All of our goals align with our commitment to shareowners to deliver earnings growth and shareowner value creation.

The selection of measures is given careful consideration, with a view to both short-term and longer-term strategic goals, while focusing on areas most within management’s control. Earnings are central to our business strategy and a primary focus of the investment community. Consequently, EPS performance measures have historically been, and continue to be, central to the compensation program for our NEOs. 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, especially our CEO and CFO. Management actions with respect to financing and tax strategy, capital investment and our revenue models drive EPS. In addition to EPS, our business segment heads are also expected to meet their business segment’s adjusted net income goals. For 2018, all NEOs were also compensated based on achievement of operational goals at each business segment.

To supplement our annual cash incentive awards, which measure performance based upon achievement of financial goals, relative TSR and corporate ROE are used for certain equity-based awards, further aligning executives’ interests with the long-term interests of shareowners. ROE was added as a performance unit metric in 2017 based on investor

 

 

 

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input. We believe our best-in-sector ROE differentiates PPL from other investor-owned utilities, and it continues to be an important performance metric for this reason. As noted above, no company in the UTY has significant U.K. utility operations. The corporate ROE metric provides a measurement of our performance across our entire business, including our U.K. operations. This approach provides an objective assessment of how the market is responding to our current and potential operational performance in comparison to our peers, which is correlated to market performance.

2018 Pay and Performance

In 2018, our financial and operational performance was strong, resulting in above target-level payouts for annual incentive awards. However, our stock price, and accordingly our TSR relative to the UTY, continued to be pressured by political and regulatory uncertainty in the UK, negatively impacting certain other components of compensation. Below are highlights of how our 2018 performance correlated with 2018 compensation:

 

 

Our NEOs received annual cash incentive awards ranging from 147.68% to 174.68% of target based on annual results.

 

 

All of our NEOs forfeited the TSR-based performance units granted to them in 2016 for the 2016-2018 performance period. The forfeited performance units had a grant date value of $3.0 million for Mr. Spence and $2.3 million for all other NEOs.

 

 

Mr. Spence did not receive a pay increase for 2018 or 2019 due to TSR performance.

 

 

Mr. Spence’s realized pay for 2018 was 36% less than the amount reported as “Total Compensation” in the Summary Compensation Table on page 55.

We provide further details of these matters throughout this CD&A, and particularly in “2018 Named Executive Officer Compensation” beginning on page 38.

2018 Say-on-Pay Advisory Vote and Shareowner Engagement

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 92% in support of the compensation of our NEOs in response to our say-on-pay proposal at the company’s 2018 Annual Meeting.

During 2018, as part of our annual engagement efforts, including participation by the independent Chair of the CGNC, we conducted a focused outreach to our larger shareowners to seek their views on our executive compensation program, as well as our corporate governance practices. See “Shareowner Engagement” on page 12 for annual outreach efforts. Based on the supportive 2018 “say on pay” results and positive feedback with no shareowner concerns expressed with respect to the compensation program, the CGNC determined that our executive compensation philosophy, compensation objectives and program design are appropriate, and decided not to make any further substantive changes to the core design of our program.

 

 

 

 

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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 program.

 

 

 

LOGO

 

The performance goals that PPL has established reinforce the core features of our operational mission: reliability, safety, and customer satisfaction. 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. Our executive compensation program is structured to reward our executives for performance toward these goals.

Although virtually all PPL operations are 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 and operational metrics for its largest business segments, providing direct alignment to our goal of increasing shareowner value.

 

 

 

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How We Define It

 

 

Where We Use It

 

   
 

PPL Corporation

EPS

 

•  Earnings per share from ongoing operations, excluding for compensation purposes certain unbudgeted foreign currency economic hedges executed to optimize our hedging portfolio and impacts of merger, acquisition, and disposition activity

 

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

 

 

•  Portion of Annual Cash Incentive

     
   
 

Corporate

Operational Goals

 

•  Operational goals of LKE, PPL Electric and WPD weighted for each business segment (see page 41 for a description of the goals and the respective weighting)

 

 

•  Portion of Annual Cash Incentive

     
   
 

Business Segment

Adjusted Net Income

 

•  Net income from ongoing operations of each business segment, as adjusted for compensation purposes

 

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

 

 

•  Portion of Annual Cash Incentive for each business segment

     
   
 

Business Segment

Operational Goals

 

•  Operational goals for each of LKE, PPL Electric and WPD (see page 42 for a description of the goals for each business segment)

 

 

•  Portion of Annual Cash Incentive for each business segment

     
   
  TSR  

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

 

•  Performance assessed relative to the Philadelphia Stock Exchange Utility Index, or UTY

 

 

•  Performance Units

 

•  Portion of long-term incentive, or LTI, compensation

     
   
  ROE  

•  Corporate return on equity, which is the average of PPL Corporation’s annual corporate ROE for each year of the three- year performance period

 

 

•  Performance Units

 

•  Portion of LTI compensation

Further information about the targets that apply to specific awards for each NEO is set out in 2018 Named Executive Officer Compensation beginning on page 38 of 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 as described on page 52. These practices further reinforce our commitment to create shareowner value by directly linking NEO compensation to share price appreciation and sustainable long-term growth.

 

 

 

 

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OVERVIEW OF PPL’S EXECUTIVE COMPENSATION PROGRAM FRAMEWORK

Our executive 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.

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 executive compensation program.

 

 

LOGO

 

Below in this section, 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.

Use of Market Data

The CGNC uses market compensation data as one of several criteria when reviewing individual NEO compensation levels. The CGNC believes that the Willis Towers Watson CDB Energy Services Executive Compensation Survey and the Willis Towers Watson General Industry Executive Compensation Survey are appropriate market references because they reflect both general industry and, more specifically, the energy industry. The survey data provides a large sample size resulting in more consistent and reliable market comparisons. 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. The market data are adjusted to appropriately reflect our size.

The CGNC also uses information on pay practices from a select group of industry comparators, which includes public utilities with revenue, market capitalization and enterprise value that are approximately one-third to three times those of PPL. For Mr. Symons, the CGNC considered U.K.-based compensation data compiled by FIT Remuneration Consultants, including utility companies within the Financial Times Stock Exchange 100 Index.

For additional insight into executive compensation practices, the CGNC directed Frederic W. Cook & Co., Inc., or FW Cook, the CGNC’s independent compensation consultant, to conduct an executive market assessment and present market findings to the CGNC. For 2018 compensation decisions for our NEOs, the CGNC considered these compensation data points.

 

 

 

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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.

In setting the PPL Corporation EPS performance target for compensation purposes, the CGNC reviews comprehensive data and systematically assesses PPL’s targets by considering:

 

 

PPL’s historical performance;

 

 

Historical performance within the industry; and

 

 

PPL’s earnings forecasts for the coming year.

In setting the targets for the business segments, the CGNC considers historical business segment performance and segment business plans that support PPL’s earnings forecasts for the coming year, as well as key operational metrics to support our strategy of providing energy reliably, safely and at a reasonable cost to our customers and to achieve best-in-sector returns for our shareowners. This information is used to set goals that are considered challenging and competitive within the industry. The targets for the 2018 awards were reviewed during the first quarter of 2018 and are summarized beginning on page 38.

Elements of NEO Compensation

The executive 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.

 

       
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 changes effective in January

 

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

 

     

•  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 business segment financial and operational performance

 

•  Capped at two times target payout for top performance

     

•  Financial measures, which include PPL EPS and business segment adjusted net income, and business segment operational goals

 

•  One-year performance period

 

 

   

 

 

 

 

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Compensation

Element

      Purpose       Features      

Performance Measures

and Time Horizon

   

Long-term Equity Incentives

               
     

Performance

Units Based on

TSR and ROE

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

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

 

•  Payable in shares of PPL common stock

 

•  Dividends accrue quarterly in the form of additional performance units, but are not paid unless and until underlying award vests

 

•  Represents 80% of the total long-term equity incentive opportunity

 

     

•  50% relative TSR, using the UTY index

 

•  50% corporate ROE; average of the annual ROE for each year of the PPL performance period

 

•  Three-year performance period

   
     

Restricted Stock

Units

    To align shareowner and executive interests while rewarding and encouraging retention    

•  Payable in shares of PPL common stock

 

•  Dividends accrue quarterly in the form of additional restricted stock units, but are not paid unless and until underlying award vests

 

•  Restricted for three years from date of grant

 

•  Represents 20% of the total long-term equity incentive opportunity

 

   

•  Time based

 

•  Restricted for three years following grant

 
                             

In addition, the NEOs receive modest perquisites, such as executive physical, financial planning, tax preparation services and matching charitable contributions. Read more in the “Other Elements of Compensation” section on page 49.

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 2018, 85% of the CEO’s target compensation opportunity was “at-risk” and 72% was performance-based. For the CFO, 75% of target compensation was “at risk” and the average for the other NEOs was 69%.

 

 

 

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The following charts illustrate the 2018 elements of compensation divided among base salary, target annual cash incentive and target long-term incentive opportunity.

 

Elements of Compensation as a Percentage of Target Total Direct Compensation — 2018(1)

 

LOGO    LOGO   

LOGO

CEO CFO All Other NEOs(2) At-Risk Compensation 85% At-Risk Compensation 75% At-Risk Compensation 69%

 

(1) 

Based on target award levels as a percentage of target total direct compensation for performance during 2018.

 

(2) 

Includes the positions of the Chairman of the Board, Chief Executive Officer and President of LKE, the President of PPL Electric, the Executive Vice President, General Counsel and Corporate Secretary, and the former Chief Executive of WPD.

 

Changes to the Compensation Program for 2018

In 2018, the CGNC adjusted the weighting of the performance unit awards that we use in the long-term incentive component of our compensation program. Awards of performance units continued to represent 80% of the NEO’s long-term incentive opportunity, and continued to be based upon one company-specific metric, corporate ROE, and one relative metric, TSR. The weighting of the performance units was changed to 50% ROE and 50% TSR (previously 75% TSR and 25% ROE). In the CGNC’s view, this change properly places equal emphasis on corporate ROE, where our strategy is to achieve best-in-class returns, and TSR, a long-recognized metric of company performance. By balancing the weighting of ROE and TSR, the performance metrics appropriately emphasize operational performance and capital allocation that drive ROE, and recognize the challenges and opportunities inherent in our business mix of U.S. and U.K. operations.

 

 

Eighty percent of our equity grants are performance-based as shown below:

 

LOGO

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    37


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EXECUTIVE COMPENSATION

 

2018 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 current salary is competitive.

In the first quarter of 2018, the CGNC approved base salary increases ranging from 0% to 5.08%, with an average increase for the NEOs of 2.93%, as follows:

 

     

      Name

 

 

    2017 Year-End Salary    

 

   

2018 Salary

 

   

% Change

 

 
       

  William H. Spence

    $1,184,580                   $1,184,580       0.00%      
     

  Vincent Sorgi

    $550,000                   $565,125       2.75%      
     

  Paul W. Thompson

    $590,000                   $620,000       5.08%      
     

  Gregory N. Dudkin

    $545,000                   $560,000       2.75%      
     

  Joanne H. Raphael

    $510,000                   $530,000       3.92%      
     

  Robert A. Symons

    £582,000                   £600,000       3.09%      

Mr. Spence did not receive an increase to his salary in 2018. While the CGNC recognized that Mr. Spence’s performance contributed to the delivery of strong financial and operating results for 2017, the company’s TSR was challenged by external events that did not significantly impact companies in the UTY. As a result, the CGNC determined that Mr. Spence should not receive a salary increase for 2018. Mr. Spence also did not receive an increase to his salary for 2019.

Individual base salaries for each of the rest of the NEOs were adjusted to bring salaries in line with market and maintain market competitiveness. Additionally, the following points are noted:

 

 

Mr. Sorgi received a 2.75% increase to maintain market competitiveness consistent with his experience.

 

 

Mr. Thompson received a higher increase than the other executives to bring his salary to a more competitive level for his new role.

 

 

Mr. Dudkin received a 2.75% increase to maintain market competitiveness with his experience.

 

 

Ms. Raphael received a 3.92% increase to align her base salary to market and continue to recognize her skills and experience.

 

 

Mr. Symons received a 3.09% increase in alignment with the U.K. market.

2018 Annual Cash Incentive Awards

The annual cash incentive awards, which were made under the shareowner-approved 2016 Short-term Incentive Plan, measure and reward performance against the company’s financial and operational goals for the year. The measures used to assess management’s success in executing the company’s strategy and initiatives were corporate EPS, corporate operational goals that include all three business segments weighted for the corporate goal, business segment adjusted net income and business segment operational goals. These align with our goals of increasing shareowner value and were set and communicated to the NEOs in the first quarter of 2018.

 

 

 

38    PPL CORPORATION 2019 Proxy Statement


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EXECUTIVE COMPENSATION

 


 

For compensation purposes, in addition to corporate EPS being adjusted for special items, certain unbudgeted foreign currency economic hedges executed to optimize our hedging portfolio were also excluded as described in Annex A. Business segment net income was adjusted to exclude special items, as well as certain corporate interest expenses for LKE and corporate hedging and other expenses for WPD as described in Annex A.

In summary, the performance measures for 2018 were as follows:

 

 

2018 PPL Cash Incentive Goal Weighting

 

Name

 

  

 

Financial Performance

 

  

 

Operational Performance

 

  

 

Corporate          

 

  

 

Business Segment          

 

  

 

Corporate          

 

  

 

Business Segment          

 

       

  William H. Spence

 

   80%         

 

   —         

 

   20%         

 

   —         

 

       

  Vincent Sorgi

 

   80%         

 

   —         

 

   20%         

 

   —         

 

       

  Paul W. Thompson

 

   40%         

 

   40%         

 

   10%         

 

   10%         

 

       

  Gregory N. Dudkin

 

   40%         

 

   40%         

 

   10%         

 

   10%         

 

       

  Joanne H. Raphael

 

   80%         

 

   —         

 

   20%         

 

   —         

 

       

  Robert A. Symons

 

   40%         

 

   40%         

 

   10%         

 

   10%         

 

 

 

2018 PPL Corporate Financial Performance

 

 

EPS

 

In 2018, adjusted EPS, as described above for the purposes of compensation, was $2.43, which was above the
target performance level of $2.30 but below the maximum performance level of $2.50. The target of $2.30
established for 2018 exceeded 2017 actual performance of $2.25. There were no adjustments made due to impacts
of merger, acquisition, and disposition activity.

 

 

LOGO

 

Therefore, the percent of target opportunity earned in relation to PPL’s EPS was 165% of target.

 

No annual cash incentive award would have been made to NEOs for 2018 if the EPS from ongoing operations had
been below $2.20.

 

 

 

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    39


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EXECUTIVE COMPENSATION

 

The adjusted net income goal for each business segment is aligned with the segment’s expected contribution to PPL’s overall financial performance and is set based on the business plan approved by PPL’s Board of Directors. WPD’s goal is also aligned with a stretch plan accepted by Ofgem in the RIIO-ED1 price control determination.

 

 

 

2018 PPL Business Segment Financial Performance

 

 

LKE – Paul W. Thompson

 

Adjusted Net Income

 

•  Target ongoing net income for the year was $419.564 million.

 

•  LKE ongoing net income for the year was $452.193 million, which was above the maximum payout levels.

 

•  The percent of target opportunity earned for the LKE ongoing net income was 200.00% of target.

 

LKE’s ongoing net income exceeded target primarily due to higher sales volumes, higher base electricity and gas rates and returns on additional environmental capital investments.

 

 

 

PPL Electric – Gregory N. Dudkin

 

Adjusted Net Income

 

•  Target ongoing net income for the year was $418.187 million.

 

•  PPL Electric ongoing net income for the year was $436.152 million, which was between the target and maximum payout levels.

 

•  The percent of target opportunity earned for the PPL Electric ongoing net income was 152.64% of target.

 

PPL Electric’s ongoing net income exceeded target primarily due to higher electricity usage and effective cost management.

 

 

 

WPD – Robert A. Symons

 

Adjusted Net Income

 

•  Target ongoing net income for the year was £766.432 million.

 

•  WPD ongoing net income for the year was £788.127 million, which was between the target and maximum payout level.

 

•  The percent of target opportunity earned for the WPD ongoing net income was 135.64% of target.

 

WPD’s ongoing net income exceeded target primarily due to additional efficiencies within the business, greater than planned recovery of engineering costs and lower overall operating costs.

 

 

 

 

 

 

40    PPL CORPORATION 2019 Proxy Statement


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EXECUTIVE COMPENSATION

 


 

 

 

2018 PPL Corporate Operational Performance

 

 
               
Goal Summary Statement   Target    

Actual

Results

   

Attainment

Score

   

Goal

Weight

   

Goal

Score

   

Corporate

Weight

   

 

Corporate

Goal
Score

 

 

 

LKE

 

 

       

Achieve the Customer Satisfaction

Rating target

    18.0       27.0       137.50%       50%       68.75%      

Achieve the Reliability System Average Interruption Duration Index

(SAIDI) goal target

    91.90       95.24       94.27%       25%       23.57%      
             
Achieve the Equivalent Forced Outage Rate (EFOR) goal target     0.050       0.028       173.67%       25%       43.41%      
 

Total for LKE

 

    135.73%       22%       29.86%  

 

PPL Electric

 

 

             
Achieve the Customer Satisfaction targeted rating     88%       85%       50.00%       25%       12.50%      
Achieve the Reliability Non-Storm System Average Interruption Frequency Index (SAIFI) goal target     0.62       0.73       0.00%       25%       0.00%      
             
Achieve the Transmission Earnings Before Interest and Taxes (EBIT) target (in millions)     $383.139       $372.982       40.25%       25%       10.06%      

Achieve the Distribution EBIT target

(in millions)

    $350.840       $359.995       130.27%       25%       32.57%      

 

Total for PPL Electric

 

 

 

 

 

55.13%

 

 

 

 

 

 

24%

 

 

 

 

 

 

13.23%

 

 

 

WPD

 

 

 

Achieve the Operational Incentive Revenues (Stakeholder Engagement, Customer Minutes Lost, Customer Interruptions, Broad Measure Customer Satisfaction (BMCS)) goal target (in millions)     £77.20       £79.21       200.00%       100%       200.00%      
 
Total for WPD

 

    200.00%       54%       108.00%  

 

Total Weighted Corporate Operational Performance

 

 

    151.09%  

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    41


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EXECUTIVE COMPENSATION

 

 

 

2018 PPL Business Segment Operational Performance

 

         
Goal Summary Statement   Target    

Actual  

Results  

  Attainment  
Score  
   

Goal  

Weight  

 

 

Goal  

Score  

 

 

 LKE

 

Achieve the Customer Satisfaction Rating target

 

18.0

 

27.0

 

 

137.50%

 

 

50%

 

68.75%

Achieve the Reliability SAIDI goal target

 

91.90

 

95.24

 

 

94.27%

 

 

25%

 

23.57%

         

Achieve the EFOR goal target

 

0.050

 

0.028

 

 

173.67%

 

 

25%

 

43.41%

   

Total Operational Performance for LKE

  135.73%

 

 

 PPL Electric

 

Achieve the Customer Satisfaction targeted rating

 

88%

 

85%

 

 

50.00%

 

 

25%

 

12.50%

Achieve the Reliability Non-Storm SAIFI goal target

 

0.62

 

0.73

 

 

0.00%

 

 

25%

 

0.00%

     

Achieve the Transmission EBIT target (in millions)

 

$383.139

 

$372.982

 

 

40.25%

 

 

25%

 

10.06%

         

Achieve the Distribution EBIT target (in millions)

 

$350.840

 

$359.995

 

 

130.27%

 

 

25%

 

32.57%

   

Total Operational Performance for PPL Electric

 

55.13%

 

 

 WPD

 

 

Achieve the Operational Incentive Revenues (Stakeholder Engagement, Customer Minutes Lost, Customer Interruptions, BMCS) goal target (in millions)

  £77.20   £79.21     200.00%     75%   150.00%
         

Achieve the Safety goal target

 

76

 

61

 

 

200.00%

 

 

25%

 

50.00%

   

Total Operational Performance for WPD

 

200.00%

 

LKE

LKE’s Customer Satisfaction metric is based upon points earned for performance compared to a competitive group of six utilities selected to ensure a meaningful comparison to appropriate industry peers conducted by a third party. The criteria included factors such as overall demographics, J.D. Power & Associates Study scores and urban and rural customer mix and electric versus a combination utility mix. Performance is assessed quarterly, and points are given for performance above (six points) or within (three points) the competitive range. Bonus points are achieved by finishing first (2 points) or second (1 point) in an absolute ranking. To achieve the targeted customer satisfaction objective of 18 points, LKE had to be above the competitive range for at least two quarters, and within the range for two quarters. LKE performed well against this rigorous customer-satisfaction target, accumulating a total of 27 points that achieved a customer satisfaction payout of 137.5% of target. LKE did this by performing above the competitive range for all four quarters in 2018, earning bonus points for first-place customer satisfaction in the third quarter of 2018 and second place in the first quarter of 2018.

LKE’s Reliability SAIDI metric measures customer reliability based upon LKE’s combined Transmission and Distribution SAIDI, the average outage duration for each customer served. LKE’s performance was adversely impacted by residual effects of historic storms in July and November — two of the top seven storms experienced by LG&E and KU since 2003 — and an abnormally high number of other strong wind events on the electric system during 2018.

LKE’s EFOR is the measurement of the percent of steam generation not available due to forced outages or reduction in generation output. Targets are set using historical regional results to drive optimal business performance. LKE performed exceptionally well with limited plant outages, which resulted in an EFOR performance of 2.8% against a target of 5.0% and a resulting payout of 173.67%.

 

 

 

42    PPL CORPORATION 2019 Proxy Statement


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EXECUTIVE COMPENSATION

 


 

PPL Electric

PPL Electric’s CSAT target measures overall customer satisfaction and other key components that impact performance. The metric is gathered by a third-party vendor and represents the percent of customers who select 8, 9 or 10 on a 10-point scale for their overall satisfaction with PPL Electric as a provider of electric service to their home or business. Responses are weighted between residential and business customers to achieve a blended overall customer CSAT rate. The annual target is set based on previous performance and current management expectations. For 2018, CSAT was below target, which reflects lower than expected improvement in residential CSAT over the past year, partially offset by business CSAT trending up in the second half of the year.

PPL Electric’s Non-Storm SAIFI target is based on an industry-recognized metric used to measure reliability by electric utilities. The metric measures the average number of interruptions per customer, based on standards set by the Institute of Electrical and Electronics Engineers (IEEE). The annual target is set based on previous performance and current management expectations. For 2018, IEEE SAIFI was below target primarily due to precautionary outages to enable proper gas leak response and weather-related vegetation outages.

PPL Electric’s Transmission and Distribution EBIT targets, while financial metrics, are measurements of operational success. The business areas must achieve certain operational goals, including cost management and timely in-service of capital projects, in order to achieve EBIT targets. The annual target is set based on the annual business plan. For 2018, Transmission EBIT was short of target primarily due to project write-offs, and Distribution EBIT exceeded target primarily due to favorable weather, higher usage and effective cost management, partially offset by higher storm costs.

WPD

WPD’s Operational Incentive Revenues represent earned payouts by WPD’s regulator, Ofgem, for WPD’s operational performance. Performance is assessed in five areas:

 

 

Customer Interruptions / Customer Minutes Lost is measured against a target, tightened annually, set on a mixture of benchmark and WPD’s own performance. Since inception, WPD has earned the highest overall percent revenue of any DNO group, which has produced strong Operational Incentive Revenue payouts.

 

 

BMCS provides customer satisfaction survey results from an Ofgem-sponsored survey of WPD customers. Each of WPD’s four businesses has maintained the top four positions for the past seven years, likewise contributing to strong Operational Revenue Incentive payouts.

 

 

Stakeholder Engagement and Customer Vulnerability Incentive is a competitive incentive across all U.K. gas, electric and transmission companies that rewards outstanding performance. WPD has maintained the top position for seven years, contributing to strong Operational Incentive payouts.

 

 

Time to Connect is comprised of two components: (1) elapsed time to quote for new service installation, and (2) elapsed time to connect new customers. Operational Incentive Revenue is paid or based on a common DNO target set by Ofgem.

 

 

Incentive on Connection Engagement is a discretionary, penalty only component decided by Ofgem. WPD has not received such a penalty in the past three years, since this incentive was introduced.

WPD’s 2018 Operational Incentive Revenue target of £77.2 million represented a 3.9% increase over the earned 2017 payout. With WPD operational performance historically at or near the top for DNOs, and Ofgem increasing performance expectations each year, the performance range for minimum, targeted and maximum payouts were rigorous.

WPD maintains an ongoing and continuous improvement in its safety performance by setting annual targets for health and safety. In the event of a workplace fatality, the Committee will exercise discretion as to this goal achievement.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    43


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EXECUTIVE COMPENSATION

 

Individual Annual Cash Incentive Awards for 2018 Performance

The following annual incentive awards were approved by the CGNC for 2018 performance and ranged from 147.68% of target to 174.68% of target:

 

   
Name  

Weight x Goal Results

 

       2018 Earned  
Award
 

 

Financial Performance

 

   

 

Operational Performance

 

 
 

Corporate

 

   

Business
Segment

 

   

Corporate

 

   

Business
Segment

 

 
         

 

  William H. Spence

 

 

 

 

 

 

80% x 165.00%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20% x 151.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

162.22%

 

         

 

  Vincent Sorgi

 

 

 

 

 

 

80% x 165.00%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20% x 151.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

162.22%

 

         

 

  Paul W. Thompson

 

 

 

 

 

 

40% x 165.00%

 

 

 

 

 

 

 

 

 

40% x 200.00%

 

 

 

 

 

 

 

 

 

10% x 151.09%

 

 

 

 

 

 

 

 

 

10% x 135.73%

 

 

 

 

  

 

174.68%

 

         

 

  Gregory N. Dudkin

 

 

 

 

 

 

40% x 165.00%

 

 

 

 

 

 

 

 

 

40% x 152.64%

 

 

 

 

 

 

 

 

 

10% x 151.09%

 

 

 

 

 

 

 

 

 

10% x   55.13%

 

 

 

 

  

 

147.68%

 

         

 

  Joanne H. Raphael

 

 

 

 

 

 

80% x 165.00%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20% x 151.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

162.22%

 

         

 

  Robert A. Symons

 

 

 

 

 

 

40% x 165.00%

 

 

 

 

 

 

 

 

 

40% x 135.64%

 

 

 

 

 

 

 

 

 

10% x 151.09%

 

 

 

 

 

 

 

 

 

10% x 200.00%

 

 

 

 

  

 

155.37%

 

 

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

 

       

Name

 

  

    2018 Base    

Salary

 

 

Target Opportunity

(% of Base Salary)

 

 

   

2018 Earned

Award

 

 

   

2018 Annual Cash

Incentive Award

 

 

 
       

 

   William H. Spence

 

  

 

$1,184,580

 

 

 

 

 

                

 

 

 

 

140%

 

 

 

 

 

                

 

 

 

 

 

 

        

 

 

 

 

162.22%

 

 

 

 

 

        

 

 

 

 

 

 

        

 

 

 

 

$2,690,277

 

 

 

 

 

        

 

 

       

 

   Vincent Sorgi

 

  

 

   $565,125

 

   

 

  80%

 

     

 

162.22%

 

     

 

  $733,397

 

 
       

 

   Paul W. Thompson

 

  

 

   $620,000

 

   

 

  85%

 

     

 

174.68%

 

     

 

  $920,564

 

 
       

 

   Gregory N. Dudkin

 

  

 

   $560,000

 

   

 

  80%

 

     

 

147.68%

 

     

 

  $661,606

 

 
       

 

   Joanne H. Raphael

 

  

 

   $530,000

 

   

 

  75%

 

     

 

162.22%

 

     

 

  $644,824

 

 
       

 

   Robert A. Symons

 

  

 

   £600,000

 

   

 

  60%

 

     

 

155.37%

 

     

 

  £476,582

 

 

 

 

 

 

44    PPL CORPORATION 2019 Proxy Statement


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EXECUTIVE COMPENSATION

 


 

2018 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 units and restricted stock units. Performance units tie compensation to the financial performance and share price of PPL based on TSR and ROE performance measured over three-year periods.

 

Target Opportunity (% of Base Salary)
Name  

Total Long-term    

Incentive    

  20% Restricted    
Stock Units    
 

40% Performance    
Units    

(Based on TSR)    

 

40% Performance    
Units    

(Based on ROE)    

       

  William H. Spence

 

  450%         90%       180%       180%  
       

  Vincent Sorgi

 

  220%         44%       88%       88%  
       

  Paul W. Thompson

 

  150%         30%       60%       60%  
       

  Gregory N. Dudkin

 

  180%         36%       72%       72%  
       

  Joanne H. Raphael

 

  180%         36%       72%       72%  
       

  Robert A. Symons

 

  100%         20%       40%       40%  

 

The CGNC customarily grants the annual long-term incentive awards at its regularly scheduled January meeting.

While off-cycle awards may be made from time-to-time, for example, on the appointment of a new executive officer, no such awards were made in 2018 to the NEOs.

2018 Restricted Stock Units

Restricted stock units are PPL stock-equivalent units representing a future delivery of a specified number of shares of PPL common stock at the end of three years. The value of the shares that may ultimately vest may be greater than or less than the targeted value, depending on future increases or decreases in PPL’s share price.

 

Restricted Stock Unit Awards Granted in 2018*

 

 

Name

 

 

 

     2017 Base Salary       

 

  

 

  Target        
  (% of  Salary)       

 

  

 

  Award Value       

 

  

 

     Units Granted     

 

 
       

William H. Spence

 

  $1,184,580          90%        $1,066,122          33,038                 
       

Vincent Sorgi

 

     $550,000          44%           $242,000          7,500                 
       

Paul W. Thompson

 

     $590,000          30%           $177,000          5,485                 
       

Gregory N. Dudkin

 

     $545,000          36%           $196,200          6,080                 
       

Joanne H. Raphael

 

     $510,000          36%           $183,600          5,690                 
       

Robert A. Symons

 

     £582,000          20%           £116,400          5,102                 

 

 

*

Number of restricted stock units granted is the award value divided by the closing price of PPL common stock on January 25, 2018, the date the CGNC approved the grants, which was $32.27, and equivalent to £22.82 using an exchange rate of £0.70711 for Mr. Symons’ award. The number of units is rounded up to the nearest unit.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    45


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EXECUTIVE COMPENSATION

 

2018 Performance Unit Awards

The performance units awarded in 2018 were designed to align the interests of our NEOs with those of our shareowners by directly linking NEO pay with sustained company performance over the three-year performance period. Performance units granted in January 2018 were calculated based on year-end 2017 salary.

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 index and corporate ROE performance, as follows.

Performance Units – TSR (50% of the performance units granted)

 

LOGO   

TSR combines the impact of share price movement and reinvested dividends during the three-year performance period from January 1, 2018 to December 31, 2020.

 

The CGNC determined that the constituents of the UTY index 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.

To achieve the target TSR award value granted in 2018, PPL’s TSR performance must be in the 50th percentile relative to the companies in the UTY index at the end of the three-year performance period.

At the end of the performance period, awards can range from 0% to 200% of target depending on relative performance. TSR awards are forfeited if PPL ranks below the 25th percentile of the companies in the UTY index at the end of the three-year period.

Performance Units – ROE (50% of the performance units granted)

 

LOGO   

ROE is more directly impacted by executive performance and aligns with operational performance and capital allocation. ROE achievement is calculated based on the average of the annual ROE for each year of the 2018-2020 performance period for PPL Corporation.

 

Annual ROE is calculated by taking earnings from ongoing operations of PPL Corporation, divided by the average total equity. If PPL’s credit rating should drop below investment grade, the maximum award will not exceed 100% payout.

To achieve the target ROE award value granted in 2018, the average annual ROE over the three-year performance period must be 10%. The CGNC increased the target to 11% for 2019 award grants.

ROE awards are forfeited if the average of the annual ROE for each year of the three-year performance period is below 8%.

 

 

 

46    PPL CORPORATION 2019 Proxy Statement


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The following performance unit awards were granted by the CGNC in January 2018 and are subject to PPL’s relative TSR ranking over the 2018-2020 performance period and attainment of ROE during the same period.

 

 

Performance Unit Awards Granted in 2018*

 

Name   2017 Base
Salary
   

 

Performance Units – TSR

 

 

 

Performance Units – ROE

 

 

 

Target

(% of

Salary)

  Award Value  

Units

Granted

 

 

Target

(% of

Salary)

  Award
Value
 

Units

Granted

             

  William H. Spence

 

   

 

$1,184,580    

 

 

 

  180%  

 

  $2,132,244

 

  66,076

 

  180%  

 

  $2,132,244

 

  66,076

 

             

  Vincent Sorgi

 

   

 

   $550,000    

 

 

 

  88%

 

     $484,000

 

  14,999

 

  88%

 

     $484,000

 

  14,999

 

             

  Paul W. Thompson

 

   

 

   $590,000    

 

 

 

  60%

 

     $354,000

 

  10,970

 

  60%

 

     $354,000

 

  10,970

 

             

  Gregory N. Dudkin

 

   

 

   $545,000    

 

 

 

  72%

 

     $392,400

 

  12,160

 

  72%

 

     $392,400

 

  12,160

 

             

  Joanne H. Raphael

 

   

 

   $510,000    

 

 

 

  72%

 

     $367,200

 

  11,379

 

  72%

 

     $367,200

 

  11,379

 

             

  Robert A. Symons

 

   

 

   £582,000    

 

 

 

  40%

 

     £232,800

 

  10,203

 

  40%

 

     £232,800

 

  10,203

 

 

 

*

Number of performance units granted is the award value divided by the closing price of PPL common stock on January 25, 2018, the date the CGNC approved the grants, which was $32.27, and equivalent to £22.82 using an exchange rate of £0.70711 for Mr. Symons’ award. The number of units is rounded up to the nearest unit.

Following the CGNC’s assessment and certification of performance in early 2021, the applicable percentage of the performance unit awards and dividend equivalents will vest, if any. The CGNC has no discretion to provide for payment other than as reflected in the actual attainment of the stated performance goals. Dividend equivalents accrue on the performance units as additional performance units but are not paid unless and only to the extent that the units vest.

Forfeited 2016–2018 Performance Units

Performance unit awards were made to the NEOs in 2016, 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, 2016 to December 31, 2018 relative to companies in the UTY.

Over this three-year period, PPL ranked at the 5th percentile. As a result, the 2016-2018 performance units, and accrued dividend equivalents on the units, were forfeited. Performance units forfeited as a result of 2016–2018 TSR performance had a grant date value of over $5.3 million in the aggregate for the NEOs, including $3.0 million for Mr. Spence and $2.3 million for all other NEOs.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    47


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EXECUTIVE COMPENSATION

 

Compensation Realized by Our CEO in 2018

Our compensation programs for Mr. Spence and the other NEOs are primarily based on performance. The information shown below is intended to supplement rather than substitute the information in the Summary Compensation Table on page 55.

 

LOGO

2018 Summary Compensation Table vs. Realized Pay William H. Spence

  

The Summary Compensation Table includes several items that reflect accounting or actuarial assumptions rather than compensation actually received or realized by Mr. Spence for performance periods that ended on December 31, 2018. For example, the Summary Compensation Table combines pay actually received (base salary and annual cash incentive payments) with the accounting value of equity compensation granted in 2018, which may be realized in the future or not at all. The Summary Compensation Table is also required to include the change in pension values (based on actuarial assumptions), which is not realized until retirement.

The realized pay table and the comparison graph for 2018 present elements of pay that Mr. Spence actually received (base salary, annual cash incentive and all other compensation) plus the gross compensation (before applicable taxes) that he received or earned upon the vesting of performance-contingent restricted stock units and performance units based on TSR, as shown in the “Option Exercises and Stock Vested in 2018” table on page 61, regardless of when these equity awards were granted.

 

     Year   Salary  

Annual

Cash

Incentive

 

Long-term Stock

Incentives

Realized

 

All Other

Compensation

  Total

  William H. Spence

  2018   $1,184,580   $2,690,277   $3,272,516   $121,478   $7,268,851

 

LOGO

Realized Pay History - William H. Spence

   The continuing political and regulatory uncertainty in the U.K. pressured PPL’s stock price and TSR for the past three years, contributing to a 39% decrease in Mr. Spence’s realized pay over that period from $11.99 million in 2016 to $7.27 million in 2018.

 

 

 

48    PPL CORPORATION 2019 Proxy Statement


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Other Elements of Compensation

In addition to the three elements of total direct compensation (base salary, annual cash incentive and long-term equity incentives in the form of performance units and restricted stock units), the company also provides other forms of compensation to the NEOs, which are summarized below.

Limited Perquisites

PPL provides limited executive perquisites to its NEOs. Where provided, we believe these perquisites 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, tax and estate 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 program are met and not hindered by unexpected tax or other consequences.

Additionally, each NEO is eligible for an executive physical, up to an aggregate cost of $6,000 every two years, and genetic testing not to exceed $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 did not receive all of the perquisites described above, in accordance with the WPD Executive Car Allowance Policy, Mr. Symons received a monthly cash allowance of £862.98 and reimbursement for fuel.

The incremental cost to PPL of all perquisites received by each of our NEOs for the year is summarized in Note 6 to the Summary Compensation Table on page 56.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    49


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EXECUTIVE COMPENSATION

 

Retirement Programs

The company provides executive benefits such as tax-qualified and supplemental non-qualified executive retirement plan benefits and nonqualified deferred compensation opportunities. 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. Thompson, or all WPD employees in the case of Mr. Symons. 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 Dudkin, and Ms. Raphael
 

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 and Dudkin, and Ms. Raphael
 
 

PPL Supplemental Compensation

Pension Plan

  

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

 

   Mr. Sorgi
 

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

•  Nonqualified defined benefit pension plan

 

•  Closed to new participants after December 31, 2011

 

   Mr. Thompson
   

Electricity Supply Pension Scheme (ESPS)

 

  

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

   Mr. Symons

Additional details about these plans are provided under “Executive Compensation Tables — Pension Benefits in 2018” beginning on page 62.

 

 

 

50    PPL CORPORATION 2019 Proxy Statement


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The primary capital accumulation opportunities for NEOs other than Messrs. Thompson and Symons are: (1) stock gains under the company’s long-term equity incentive program (as described above) and the employee stock ownership plan (as described below); and (2) voluntary savings opportunities that, for 2018, 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 Dudkin, and Ms. Raphael
 

  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 and in excess of the amounts allowed by statute under the PPL Deferred Savings Plan

 

•  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 condition for the company matching contributions

   Messrs. Spence, Sorgi and Dudkin, and Ms. Raphael

The PPL Employee Stock Ownership Plan, or ESOP, is a tax-qualified, employee stock ownership plan in which Messrs. Spence, Sorgi and Dudkin, and Ms. Raphael, participate. No contributions have been made to the ESOP since 2012.

Mr. Thompson does not participate, and Mr. Symons did not participate, in the ESOP, the PPL Deferred Savings Plan or the PPL Executive Deferred Compensation Plan. Mr. Thompson did, 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 2018” beginning on page 66.

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    51


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EXECUTIVE COMPENSATION

 

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

 

 

 Conduct annual pay risk assessment

 

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

 

 

 Retain independent compensation consultant

 

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

 

 

 Adopted proxy access

 

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

 

 

 Require significant equity ownership; increased CEO’s required holdings from 5x to 6x base salary in 2017

 

 

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

 

 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 policy and clawback policy 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 robust levels of ownership in PPL stock:

 

 

Executive Officer Level

 

      

Equity Guideline

(Multiple of Salary)

 

   
 

Chairman, President and CEO

 

    

6x

 

 
 

Executive Vice Presidents

 

    

3x

 

 
 

Senior Vice Presidents

 

    

2x

 

 
 

Business segment leaders*

 

    

2x

 

 
              

 

  *

Includes Messrs. Thompson, Dudkin and Symons.

NEOs must attain the minimum ownership requirement that applies to their level by the end of their fifth anniversary 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.

 

 

 

52    PPL CORPORATION 2019 Proxy Statement


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All NEOs who have served in their current position more than five years were in compliance with their equity ownership guidelines as of December 31, 2018. All other NEOs are on track to meet their equity ownership requirements.

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

The CGNC has 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

Other Compensation

In addition to the annual direct compensation and retirement programs described above, the company provides other compensation under specific situations as described below.

Employment Agreements. We generally do not enter into traditional employment agreements with our named executive officers. Other than a Service Agreement entered into with Mr. Symons in the U.K. as described at page 72 under “Employment Agreement,” there are no specific agreements with respect to length of employment that would commit the company to pay a named executive officer for a specific period. Generally, our named executive officers are “employees-at-will” whose employment is conditioned on performance and subject to termination by the company at any time.

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 68) 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 benefits upon qualifying terminations of employment in connection with a change in control, which generally include cash severance and accelerated vesting of specific outstanding equity awards. 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. Details on current arrangements and agreements are discussed further in “Termination Benefits,” beginning on page 70, and “Change-in-Control Arrangements” on page 68.

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

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    53


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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.

As noted above, 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 70.

Tax Implications of Our Executive Compensation Program

In past years, we have generally designed our incentive compensation plans to maintain federal tax deductibility for executive compensation under Section 162(m) of the Internal Revenue Code, and the CGNC considered the potential Section 162(m) impact when designing performance awards for our NEOs. Prior to the 2017 Tax Cuts and Jobs Act, Section 162(m) generally disallowed a tax deduction for compensation over $1 million paid to certain executive officers unless it qualified as performance-based compensation. The Tax Cuts and Jobs Act effectively repealed the exemption for performance-based compensation with respect to tax years beginning after December 31, 2017 other than arrangements in place on November 2, 2017 that are not later modified in any material respect. As such, with respect to 2018 and going forward, we are not able to deduct compensation awarded to certain of our executive officers above $1 million. While we intend for our performance units granted prior to November 2, 2017 to qualify for deductibility under Section 162(m), we cannot guarantee that any compensation intended to be deductible under Section 162(m) will qualify as such. While the CGNC continues to consider the deductibility of compensation, the primary goals of our executive compensation program are to attract, incentivize and retain key employees and align pay with performance. The CGNC retains the ability to provide compensation that exceeds deductibility limits as it determines appropriate.

 

 

 

54    PPL CORPORATION 2019 Proxy Statement


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EXECUTIVE COMPENSATION TABLES

The following table summarizes all compensation for our chief executive officer, our chief financial officer, our next three most highly compensated executives and a former executive, known as our named executive officers, or NEOs, for service to PPL and its subsidiaries.

SUMMARY COMPENSATION TABLE

 

  Name and Principal Position(1)

 

 

Year

 

   

Salary(2)

 

   

Bonus

 

 

Stock

Awards(3)

 

   

Option

Awards

 

 

Non-Equity

Incentive Plan

Compensation(4)

 

 

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings(5)

 

 

All Other

Compensation(6)

 

 

Total

 

 

 

  William H. Spence

  Chairman, President and

  Chief Executive Officer

 

 

 

 

2018

 

 

 

 

$

 

1,184,580

 

 

 

 

 

 

$

 

5,740,353

 

 

 

 

 

 

$2,690,277

 

 

$1,602,097

 

 

$   121,478

 

 

$

 

11,338,785

 

 

 

 

 

 

2017

 

 

 

 

 

 

1,183,469

 

 

 

 

 

 

 

 

8,555,315

 

 

 

 

 

 

  2,255,772

 

 

  1,417,579

 

 

     128,196

 

 

 

 

13,540,331

 

 

 

 

 

 

2016

 

 

 

 

 

 

1,154,712

 

 

 

 

 

 

 

 

6,256,112

 

 

 

 

 

 

  2,506,225

 

 

  5,418,856

 

 

     171,354

 

 

 

 

15,507,259

 

 

 

  Vincent Sorgi

  Executive Vice President and

  Chief Financial Officer

 

 

 

 

2018

 

 

 

 

 

 

564,543

 

 

 

 

 

 

 

 

1,303,054

 

 

 

 

 

 

     733,397

 

 

     278,310

 

 

       55,891

 

 

 

 

2,935,195

 

 

 

 

 

 

2017

 

 

 

 

 

 

549,039

 

 

 

 

 

 

 

 

1,783,550

 

 

 

 

 

 

     598,488

 

 

     709,887

 

 

       58,544

 

 

 

 

3,699,508

 

 

 

 

 

 

2016

 

 

 

 

 

 

524,134

 

 

 

 

 

 

 

 

1,233,033

 

 

 

 

 

 

     569,258

 

 

     485,430

 

 

       50,108

 

 

 

 

2,861,963

 

 

 

  Paul W. Thompson

  Chairman of the Board,

  Chief Executive Officer and President —

  LG&E and KU Energy LLC

 

 

 

 

2018

 

 

 

 

 

 

618,846

 

 

 

 

 

 

 

 

953,019

 

 

 

 

 

 

     920,564

 

 

     201,687

 

 

       54,444

 

 

 

 

2,748,560

 

 

                 
                 

 

  Gregory N. Dudkin

  President — PPL Electric Utilities

  Corporation

 

 

 

 

2018

 

 

 

 

 

 

559,423

 

 

 

 

 

 

 

 

1,056,400

 

 

 

 

 

 

     661,606

 

 

     299,524

 

 

       19,733

 

 

 

 

2,596,686

 

 

 

 

 

 

2017

 

 

 

 

 

 

544,247

 

 

 

 

 

 

 

 

1,555,810

 

 

 

 

 

 

     536,498

 

 

     589,068

 

 

       19,662

 

 

 

 

3,245,285

 

 

 

 

 

 

2016

 

 

 

 

 

 

524,143

 

 

 

 

 

 

 

 

987,892

 

 

 

 

 

 

     625,450

 

 

     584,072

 

 

       34,412

 

 

 

 

2,755,969

 

 

 

  Joanne H. Raphael

  Executive Vice President, General

  Counsel and Corporate Secretary

 

 

 

 

2018

 

 

 

 

 

 

529,231

 

 

 

 

 

 

 

 

988,567

 

 

 

 

 

 

     644,824

 

 

     796,734

 

 

       40,835

 

 

 

 

3,000,191

 

 

                 
                 

 

  Robert A. Symons

  Former Chief Executive — WPD

 

 

 

 

2018

 

 

 

 

 

 

738,045

 

 

 

 

 

 

 

 

886,402

 

 

 

 

 

 

     629,184

 

 

              —

 

 

  6,713,547

 

 

 

 

8,967,178

 

 

 

 

 

 

2017

 

 

 

 

 

 

750,314

 

 

 

 

 

 

 

 

1,134,292

 

 

 

 

 

 

     793,576

 

 

     818,601

 

 

       21,394

 

 

 

 

3,518,177

 

 

 

 

 

 

2016

 

 

 

 

 

 

741,127

 

 

 

 

 

 

 

 

789,848

 

 

 

 

 

 

     668,969

 

 

  1,466,339

 

 

       25,331

 

 

 

 

3,691,614

 

 

 

(1) 

Effective January 25, 2019, Mr. Sorgi and Ms. Raphael were promoted to Executive Vice President from Senior Vice President.

 

    

Mr. Thompson assumed this position at LKE on March 16, 2018 and previously served as President and Chief Operating Officer.

 

    

Mr. Symons passed away on November 7, 2018. He was based in the United Kingdom and was compensated in British pounds sterling. We converted his 2018 cash compensation and personal benefits to U.S. dollars at an exchange rate of $1.3419, which is the average 2018 monthly translation rate through November, the last month Mr. Symons was paid, except with respect to the Non-Equity Incentive Plan Compensation amount, which was converted to U.S. dollars at an exchange rate of $1.3202, which is the translation rate for March 1, 2019 (the date the cash incentive award was paid), and the death benefit amount, which was converted to U.S. dollars at an exchange rate of $1.2902, which is the average monthly translation rate for November 2018.

 

(2) 

Salary includes cash compensation deferred to the PPL Executive Deferred Compensation Plan or, for Mr. Thompson, to the LG&E and KU Nonqualified Savings Plan. The following NEOs deferred salary in 2018 in the amounts indicated: Mr. Spence ($35,537); Mr. Sorgi ($16,936); Mr. Thompson ($34,837) and Ms. Raphael ($15,877). These amounts are included in the “Nonqualified Deferred Compensation in 2018” table on page 67 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 value of restricted stock units is calculated using the closing price of PPL common stock on the NYSE on the date of grant. The grant date fair value 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 2018” table on page 57. The maximum potential values as of the grant date of the TSR-based performance units granted in 2018, assuming the highest level of performance are as follows: Mr. Spence — $5,083,887; Mr. Sorgi — $1,154,023; Mr. Thompson — $844,032; Mr. Dudkin — $935,590; Ms. Raphael — $875,500 and Mr. Symons — $785,019. The maximum potential values as of the grant date of the ROE-based performance units granted in 2018 assuming the highest level of performance are as follows: Mr. Spence — $4,264,545; Mr. Sorgi — $968,035; Mr. Thompson — $708,004; Mr. Dudkin — $784,806; Ms. Raphael — $734,401 and Mr. Symons — $658,502. 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, 2018, as filed with the SEC. Further information regarding the

 

 

 

 

PPL CORPORATION 2019 Proxy Statement    55


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  2018 awards is included in the “Grants of Plan-Based Awards During 2018” and “Outstanding Equity Awards at Fiscal Year-End 2018” tables elsewhere in this proxy statement.

 

(4) 

Amounts represent cash awards paid in March 2019 for performance under the company’s annual cash incentive award program for 2018, which were made under PPL’s 2016 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. Thompson, to the LG&E and KU Nonqualified Savings Plan. The following NEOs deferred cash awards in the amounts indicated: Mr. Spence ($80,708); Mr. Sorgi ($183,349); Mr. Thompson ($55,234); Mr. Dudkin ($19,848) and Ms. Raphael ($19,345). These amounts will be included in the “Nonqualified Deferred Compensation in 2019” table as executive contributions in next year’s proxy statement if the executive is an NEO for 2019.

 

(5) 

This column represents the sum of the changes during 2018 in the actuarial present value of accumulated benefit in the PPL Retirement Plan and PPL Supplemental Executive Retirement Plan, or PPL SERP, for Messrs. Spence, Sorgi and Dudkin, and Ms. Raphael, the LG&E and KU Retirement Plan and the LG&E and KU Supplemental Executive Retirement Plan for Mr. Thompson and the Electricity Supply Pension Scheme in the United Kingdom for Mr. Symons. Mr. Sorgi’s change in pension value for 2018 of $278,310 includes an increase in the value of his accumulated benefit under the PPL SERP of $292,589, which is offset by a decrease of ($14,279) under the PPL Retirement Plan. Mr. Thompson’s change in pension value for 2018 of $201,687 includes an increase in the value of his accumulated benefit under the LG&E and KU SERP of $276,134, which is offset by a decrease of ($74,448) under the LG&E and KU Retirement Plan. No amounts are shown under the Change in Pension Value and Nonqualified Deferred Compensation Earnings column for Mr. Symons as the change in pension value during 2018 was a negative amount and his pension was converted to a spousal benefit after his death. The net decrease in pension value for Mr. Symons for 2018 was ($3,618,034), which was converted to U.S. dollars at an exchange rate of $1.3355. See “Pension Benefits in 2018” beginning on page 62 for additional information. No above-market or preferential earnings under the PPL Executive Deferred Compensation Plan, the LG&E and KU Nonqualified Savings Plan or the LG&E Energy Corp. Nonqualified Savings Plan were reportable for 2018. See “Nonqualified Deferred Compensation in 2018” beginning on page 66 for additional information. Mr. Symons did not participate in a deferred compensation plan.

 

(6) 

The table below reflects the components of this column for 2018, 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 certain perquisites including financial planning and tax preparation services, company car and other personal benefits as noted. It also includes a legacy death benefit amount for Mr. Symons as provided in his Service Agreement dated March 16, 2015. See “Employment Agreement” beginning on page 72 for additional information.

 

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

Company

Car(a)

 

Other

 

Total

  Spence

 

             $  8,250              $99,233     $11,000           —                  $       2,995 (b)                     $   121,478            

  Sorgi

 

        8,250                26,641       11,000           —         10,000 (c)                 55,891     

  Thompson

 

      11,550       32,542         9,345           —                   1,007 (b)               54,444     

  Dudkin

 

        8,250            483       11,000           —                       19,733     

  Raphael

 

        8,250       23,235         9,000           —         350 (c)               40,835     

  Symons

 

                  —                    —                —   $19,269             6,694,278 (d)                 6,713,547        

 

  (a) 

Reflects car benefits provided to Mr. Symons, including monthly car allowance and reimbursement for fuel. Benefit capped at £20,000 per year.

 

  (b) 

Includes cost of executive physicals paid by the company for Messrs. Spence and Thompson, and for Mr. Thompson, also includes a cash benefit provided as part of LKE’s wellness program.

 

  (c) 

For Mr. Sorgi and Ms. Raphael, includes contributions made by the company under our charitable matching gift program, pursuant to which we will contribute, on a 100% matching basis, up to $10,000 per year per person to specified charitable institutions. Also includes a contribution through Dollars for Doers, the company’s employee-volunteers recognition program, which supports those who volunteer at least 40 hours in a calendar year to a single nonprofit organization by contributing a $1,000 grant on their behalf to the qualifying organization.

 

  (d) 

Includes cost of private medical insurance plan in the United Kingdom for Mr. Symons and his wife, and a death benefit amount for Mr. Symons of $6,691,911 as provided in his Service Agreement.

 

    

The company, through two of its subsidiaries, owns fractional interests in two aircraft, which are used for business travel by the NEOs. In addition to the amounts reflected above, spouses may accompany executive officers on business travel if the aircraft is not fully utilized by company personnel. Our policy requires any incremental cost of spousal travel to be reimbursed to the company, up to the Federal Aviation Administration limit on reimbursement. In 2018, Mr. Spence’s wife accompanied him on one business trip, for which Mr. Spence reimbursed the company for all incremental costs. As a result, there was no reportable incremental cost to the company for such travel in 2018.

 

 

 

56    PPL CORPORATION 2019 Proxy Statement


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EXECUTIVE COMPENSATION

 


 

GRANTS OF PLAN-BASED AWARDS DURING 2018