DEF 14A 1 d853945ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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

Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant  ☑

Filed by a Party other than the Registrant  ☐

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


PPL CORPORATION

 

(Name of Registrant as Specified In Its Charter)
        
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LOGO


Table of Contents

 

 

 

LOGO

 

 

WILLIAM H. SPENCE

CHAIRMAN AND

CHIEF EXECUTIVE OFFICER

Message to

Our Shareowners

Dear Shareowner,

On behalf of our Board of Directors and our entire team at PPL, thank you for your continued investment.

As we celebrate PPL’s centennial in 2020, I am reminded of just how far we have come as a company and as a society. A century ago, PPL’s focus was extending electric light to communities across the regions we serve. Today, it’s about powering so much more, from how we work to how we play and everything in between.

Against this backdrop, the people of PPL continue to make a positive impact on society. Our achievements in 2019 speak to this progress as we:

 

  Delivered electricity and gas safely and reliably to more than 10 million customers.

 

  Invested more than $3 billion to improve grid resilience, minimize our impact on the environment and advance a cleaner energy future.

 

  Provided superior customer satisfaction in the regions we serve.

 

  Continued to innovate to improve service to our customers.

 

  Executed agreements to acquire, develop, own and operate 110 megawatts of solar generation capacity.

 

  Achieved earnings above our forecast midpoint for the 10th straight year.

 

  Paid more than $1 billion in dividends to shareowners who have invested their hard-earned savings with PPL.

These accomplishments and more are a testament to our vision, our values, and the teamwork, dedication, expertise and professionalism of our 12,000 employees in the U.S. and U.K. Moreover, they are the direct result of our long-term strategy to deliver best-in-sector operational performance, invest responsibly in a sustainable energy future, provide a superior customer experience, maintain a strong financial foundation, and engage and develop our people.

As PPL eyes a new century of service, I am excited about the opportunity we have to shape our shared energy future, to foster innovation, to shift in a smart way to a cleaner energy mix, to create long-term shareowner value and to make a difference in our customers’ lives. And I am pleased that our company will be under the leadership of Vince Sorgi, who will succeed me as our CEO when I retire on June 1.

As always, we welcome your feedback on the direction we’re headed, we encourage you to vote your shares, and we invite you to join us for our annual meeting of shareowners, which will begin at 9 a.m. on Wednesday, May 13, via live webcast on the internet. Please see the details in our Notice of Annual Meeting of Shareowners and in the General Information section of our proxy statement.

We look forward to creating additional value for you, for our customers and for the communities we serve moving forward. We are grateful for your continued support.

Sincerely,

 

 

LOGO

William H. Spence

 


Table of Contents

PPL CORPORATION

Two North Ninth Street

Allentown, Pennsylvania 18101

Notice of Annual Meeting of Shareowners

 

 

Date     May 13, 2020
Time    

Online check-in begins:    8:30 a.m. Eastern Time

Meeting begins:                9:00 a.m. Eastern Time

Place     Meeting live via the internet. Please visit: www.virtualshareholdermeeting.com/PPL2020
        Items of Business    

•  To elect ten 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, 2020.

 

•  To consider one shareowner proposal, if properly presented.

 

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

Record Date     You can vote if you were a shareowner of record on February 28, 2020.
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 85.

 

Due to the emerging public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our partners and shareowners, this year’s Annual Meeting will be held in a virtual meeting format only, which will be conducted live through an audio webcast on the internet. You will not be able to attend the Annual Meeting in-person. We believe that a virtual meeting this year provides expanded shareowner access and participation at a time when many shareowners may be concerned with possible health risks of attending a meeting with a large group of people or who are subject to “stay-at-home” directives. The virtual meeting affords shareowners the same rights as if the meeting were held in person, including the ability to vote shares electronically during the meeting and ask questions in accordance with the rules of conduct for the meeting. You will be able to attend the Annual Meeting online and submit your questions before and during the meeting by visiting www.virtualshareholdermeeting.com/PPL2020. To participate in the Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the voting instructions that accompanied your proxy materials.

 

On Behalf of the Board of Directors,

 

LOGO

 

Joanne H. Raphael

Executive Vice President, General Counsel

and Corporate Secretary

April 2, 2020

 

Important Notice Regarding the Availability of Proxy

Materials for the Shareowner Meeting to Be Held on May 13, 2020:

 

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

www.pplweb.com/PPLCorpProxy

 


Table of Contents

 

QUICK INFORMATION

The following charts provide quick information about PPL Corporation’s 2020 Annual Meeting and our corporate governance and executive compensation practices. These charts do not contain all of the information provided elsewhere in the proxy statement; therefore, you should read the entire proxy statement carefully before voting.

We first released this proxy statement and the accompanying proxy materials to shareowners on or about April 2, 2020.

Annual Meeting Information

 

 

 

LOGO

DATE & TIME

Wednesday, May 13, 2020

9:00 a.m. Eastern Time

 

LOGO

LOCATION

Meeting live via the internet. Please visit: www.virtualshareholdermeeting.com/PPL2020

  

LOGO

RECORD DATE

February 28, 2020

  Proposals That Require Your Vote

 

 

 

Proposal    Voting Options    Board Recommendation    More Information

Proposal 1

Election of Directors

   FOR, AGAINST or ABSTAIN for each Director Nominee    FOR each Nominee    Page 5

Proposal 2

Advisory Vote to Approve Compensation of Named Executive Officers

   FOR, AGAINST or ABSTAIN    FOR    Page 26

Proposal 3

Ratification of the Appointment of Independent Registered Public Accounting Firm

   FOR, AGAINST or ABSTAIN    FOR    Page 78

Proposal 4

Shareowner Proposal – Adopt Policy to Require Independent Chairman of the Board

   FOR, AGAINST or ABSTAIN    AGAINST    Page 81

See information beginning on page 85 on how you can vote.

  Corporate Governance and Compensation Facts

 

 

 

Corporate Governance or Compensation Matter

 

  

PPL’s Practice

 

Board Composition, Leadership and Operations

 

Current Number of Directors

   9

Director Independence

   89%

Standing Board Committee Membership Independence

   Yes

Separate Chairman of the Board and Chief Executive Officer

   No

Independent Lead Director

   Yes

Robust Responsibilities and Duties Assigned to the Lead Director

   Yes

Voting Standards in Director Elections

   Majority with plurality carve-out for contested elections


Table of Contents
Corporate Governance or Compensation Matter   PPL’s Practice

Board Composition, Leadership and Operations

 

Frequency of Director Elections   Annual
Resignation Policy   Yes
Classified Board   No
Mandatory Retirement Age   Yes (75)
Mandatory Tenure   No
Average Director Age   66
Median Director Tenure   9 years
Total Diversity on Board   56% (based on gender and ethnicity)
Directors Attending Fewer than 75% of Meetings   None
Annual Board and Committee Self-Evaluation Process   Yes
Independent Directors Meet without Management Present   Yes
Number of Board Meetings Held in 2019   7
Total Number of Board and Committee Meetings Held in 2019   25
Proxy Access Bylaw   Yes

Sustainability and Other Governance Practices

 

Board and Committee Oversight of ESG   Yes
Board Oversight of Corporate Culture   Yes
Board Oversight of Cybersecurity   Yes
Sustainability Strategy and Commitments   Yes
ESG Considered in Enterprise Risk Management   Yes
Environmental Commitment   Yes
Human Rights Statement   Yes
Code of Conduct for Directors, Officers and Employees   Yes
Supplier Code of Conduct   Yes
Shareowner Engagement Practice   Yes
Corporate Political Contribution Policy   Yes
Political Contributions Disclosed   Yes
Voluntary Disclosures Using Frameworks (GRI, CDP Climate, TCFD, SASB & EEI-AGA)   Yes
Anti-hedging and Anti-pledging Policy   Yes
Robust Stock Ownership Policies   Yes
Family Relationships   None
Material Related-Party Transactions with Directors   None
Independent Auditor   Deloitte & Touche LLP

Compensation Practices

 

CEO Pay Ratio   96:1
Clawback Policy   Yes
Employment Agreements for Executive Officers   No
Repricing of Underwater Options   No
Excessive Perks   No
Pay-for-Performance   Yes
Frequency of Say-on-Pay Advisory Vote   Annual
Double-Trigger Change-in-Control Provisions   Yes
Percentage of Incentive Compensation at Risk   100%
Performance-based Percentage of Long-term Incentive Compensation   80%
Dividend Equivalents Paid on Unvested Equity Awards Granted to Executive Officers   None
Tax “Gross-ups” for NEO Perquisites or in New Change-in-Control Severance Agreements   None
Annual Risk Assessment of Compensation Policies and Practices   Yes
Independent Compensation Consultant   Frederic W. Cook & Co., Inc.


Table of Contents

TABLE OF CONTENTS

 

  

PROXY SUMMARY

 

     
       

 

Page 1

 

 

 

  
  

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

 

  
       

 

Page 5

 

 

 

  
   NOMINEES FOR DIRECTOR      6     
  

GOVERNANCE OF THE COMPANY

 

 

  
       

 

Page 11

 

 

 

  
   BOARD OF DIRECTORS      11     
  

Attendance

     11     
  

Independence of Directors

     11     
  

Executive Sessions; Presiding and Lead Director

     11     
  

Board Leadership Structure

     11     
  

Board and Committee Evaluations

     12     
  

Guidelines for Corporate Governance

     12     
  

Communications with the Board

     12     
  

Code of Ethics

     12     
  

Shareowner Engagement

     13     
   BOARD COMMITTEES      14     
  

Board Committee Membership

     14     
  

Principal Functions of Each Committee

    
15
 
  
  

Audit Committee

     15     
  

Compensation Committee

     15     
  

Executive Committee

     15     
  

Finance Committee

     15     
  

Governance and Nominating Committee

     16     
  

Compensation Processes and Procedures

     16     
  

CEO and Other Management Succession

     17     
  

Director Nomination Process and Proxy Access

     17     
  

Chairman and Lead Director Succession

     18     
   THE BOARD’S ROLE IN RISK OVERSIGHT      19     
  

Overview

     19     
  

Board Oversight of Key Risks

     19     
   COMPENSATION OF DIRECTORS      21     
  

2019 Director Pay Components

     21     
  

Directors Deferred Compensation Plan

     21     
  

Director Equity Ownership Guidelines

     21     
  

2019 Director Compensation

     22     
        
        
  

STOCK OWNERSHIP

 

     
       

 

Page 23

 

 

 

  
  

DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS

 

     23     
    

 

    

 

 

 

  
  

TRANSACTIONS WITH RELATED PERSONS

 

 

       

 

Page 25

 

 

 

  
  

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     
   2019 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT      28     
  

An Overview of 2019 Performance

     28     
  

How We Align PPL’s Compensation Program with Performance

     29     
  

2019 Pay and Performance

     31     
  

2019 Say-on-Pay Advisory Vote and Shareowner Engagement

     31     
  

Changes to the Compensation Program for 2019 and 2020

     32     
   OVERVIEW OF PPL’S EXECUTIVE COMPENSATION PROGRAM FRAMEWORK      32     
  

Aligning Employees and Compensation Strategies with Our Corporate Strategic Framework

     32     
  

Elements of NEO Compensation

     32     
  

Process for Setting Executive Compensation

     35     
  

Use of Market Data

     35     
  

Establishing Performance Targets

     35     
   2019 NAMED EXECUTIVE OFFICER COMPENSATION      36     
  

Base Salary

     36     
  

2019 Annual Cash Incentive Awards

     37     
  

2019 Long-term Equity Incentive Awards

     43     
  

Other Elements of Compensation

     48     
        
        
 

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    i


Table of Contents

TABLE OF CONTENTS

 

   GOVERNANCE POLICIES UNDERPINNING OUR COMPENSATION FRAMEWORK      51     
  

Equity Ownership Guidelines

     51     
  

Hedging and Pledging Prohibitions

     52     
  

Clawback Policy

     52     
  

Compensation Risk Assessment

     52     
   ADDITIONAL INFORMATION      52     
  

Other Compensation

     52     
  

Tax Implications of Our Executive Compensation Program

     53     
   EXECUTIVE COMPENSATION TABLES      54     
  

Summary Compensation Table

     54     
  

Grants of Plan-Based Awards During 2019

     56     
  

Outstanding Equity Awards at Fiscal
Year-End 2019

     58     
  

Option Exercises and Stock Vested in 2019

     61     
  

Pension Benefits in 2019

     61     
  

Nonqualified Deferred Compensation in 2019

     65     
   POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
OF PPL CORPORATION
     67     
  

Change-in-Control Benefits

     67     
  

Payment Triggers and Benefits

     67     
  

Defined Terms under Change-in-Control Agreements

     69     
  

Additional Benefits

     69     
  

Termination Benefits

     70     
  

Severance

     70     
  

Annual Cash Incentive Awards

     70     
  

Long-term Incentive Awards

     70     
  

Summary of Benefits-Termination Events

     71     
   CEO PAY RATIO      77     
  

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

 

 

       

 

Page 78

 

 

 

  
  

Fees to Independent Auditor for 2019 and 2018

     78     
  

Report of the Audit Committee 

 

    

 

79

 

 

 

  
  

SHAREOWNER PROPOSAL

 

 

       

 

Page 81

 

 

 

  
   PROPOSAL 4: INDEPENDENT BOARD CHAIRMAN      81     
  

Board of Directors’ Response 

 

    

 

81

 

 

 

  
   GENERAL INFORMATION

 

       

 

Page 84

 

 

 

  
  

ANNEX A

 

 

       

 

Page A-1

 

 

 

  
 

 

This proxy statement, including the “Compensation Discussion and Analysis” section, contains 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.

 

 

 

ii    PPL CORPORATION 2020 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 2019 Annual Report before you vote.

We first released this proxy statement and the accompanying proxy materials to shareowners on or about April 2, 2020.

Voting Matters and Board Voting Recommendations

 

 

Election of Directors ... Page 5.

 

 

   

 

        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 2020 ... Page 78.

 

 

   

 

        Your Board recommends a vote FOR both proposals.

 

 

Shareowner Proposal ... Page 81.

 

 

X   

 

         Your Board recommends a vote AGAINST this proposal.

Performance Highlights for 2019

 

Highest    $3.2 billion    $1 billion    COreduction
       
in customer satisfaction among U.K. utilities and winners of four 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 paid to shareowners, including PPL’s 17th dividend increase in the last 18 years.    by 56% from 2010 levels.
In 2020, increased CO2 reduction goal to 70% by 2040 and 80% reduction by 2050.

See page 28 for additional information on PPL’s performance highlights for 2019.

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    1


Table of Contents

PROXY SUMMARY

 

Director Nominees

 

         
  Name   Age  

Director

Since

  Principal Occupation   Independent  

Committee

Memberships(1)

         

John W. Conway

  74   2000  

Retired Chief Executive Officer,

Crown Holdings, Inc.

  Independent

Lead

Director

  CC, EC, FC
         

Steven G. Elliott

  73   2011  

Retired Senior Vice Chairman, Bank

of New York Mellon Corporation

  X   AC, EC, FC
         

Raja Rajamannar

  58   2011  

Chief Marketing & Communications

Officer and President, Healthcare,

MasterCard Incorporated

  X   CC, GNC
         

Craig A. Rogerson

  63   2005  

Chairman, President and Chief

Executive Officer, Hexion Holdings Corporation and Hexion Inc.

  X   CC, EC, FC
         

Vincent Sorgi

  48   Nominee   President and Chief Operating Officer, PPL Corporation   Management
Nominee
  None
         

William H. Spence

  63   2011   Chairman and Chief Executive Officer, PPL Corporation   Management
Director
  EC
         

Natica von Althann

  69   2009  

Former Senior Credit Risk

Management Executive, Bank of

America and former Chief Credit

Officer, U.S. Trust

  X   CC, EC, FC
         

Keith H. Williamson

  67   2005   President, Centene Charitable Foundation, and Former Executive Vice President, Secretary and General Counsel, Centene Corporation   X   AC, GNC
         

Phoebe A. Wood

  66   2018  

Principal of CompaniesWood and

former Chief Financial Officer of

Brown-Forman Corporation

  X   AC, EC, GNC
         

Armando Zagalo de Lima

  61   2014  

Retired Executive Vice President,

Xerox Corporation

  X   AC, GNC

 

(1) 

Board Committees: AC – Audit    CC – Compensation    EC – Executive    FC – Finance    GNC – Governance and Nominating

 

LOGO    LOGO   LOGO

 

 

 

2    PPL CORPORATION 2020 Proxy Statement


Table of Contents

PROXY SUMMARY

 


 

Executive Compensation Program

 

 

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 2019, 85% of the CEO’s target compensation opportunity was “at-risk” and 73% was performance-based.

  

 

CEO’s 2019 Target

Total Direct Compensation Mix

 

 

 

 

LOGO

 

Compensation

Element

 

 

Features

 

 
  Base Salary  

•  Reviewed annually

 

•  Compensation Committee applies judgment in setting salary to reflect performance, experience, responsibility and competitive market levels

 
  Annual Cash Incentive  

•  Paid in cash

 

•  Based on a combination of corporate and business segment financial and operational performance

 

•  Capped at two times target payout for top performance

  Long-term Equity Incentives (LTI)

 

 

  Performance Units

  TSR – 40% of LTI

  ROE – 40% of LTI

 

•  Payable in shares of PPL common stock

 

•  Payout range from 0% to 200% of target

 

•  Represents 80% of the total LTI opportunity

 

•  Dividends accrue quarterly in the form of additional performance units, and vest according to the applicable level of achievement of the performance goal, if any

 

TSR-based Performance Units

 

•  Based on three-year total shareowner return (TSR) performance relative to the Philadelphia Stock Exchange Utility Index (UTY)

 

ROE-based Performance Units

 

•  Based on the average of PPL’s annual corporate return on equity (ROE) for each year of a three-year performance period

 

 

  Restricted Stock Units

  20% of LTI

 

•  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

 

 
  Other Elements  

•  Limited perquisites

 

•  Retirement plans

 

•  Deferred compensation plans

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    3


Table of Contents

PROXY SUMMARY

 

Pay for Performance

For 2019, 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 2019 performance resulted in:

 

   

Annual cash incentive award payouts ranging from 150.34% to 180.11% of target as a result of achieving strong financial and operating results.

 

   

Forfeited 60% of the total LTI grants made to NEOs in 2017 due to below threshold level performance relative to the UTY. Forfeited awards were TSR-based performance units for the 2017-2019 performance period.

 

   

Performance units forfeited had a grant date value of $3.12 million for Mr. Spence and $2.26 million for all other NEOs.

 

   

ROE-based performance units, which comprised 20% of the total LTI grants made to our NEOs in 2017, paid out at 200% of target for the 2017-2019 performance period.

 

   

ROE grants from 2017 had a grant date value of $1.04 million for Mr. Spence and $750,000 for all other NEOs.

 

   

Mr. Spence did not receive a base salary increase in 2019 for the second consecutive year, reflecting the Compensation Committee’s desire to align the CEO compensation with TSR performance.

 

LOGO   Primarily due to a decrease in the discount rate used to measure pension obligations, there was an increase in 2019 of approximately $2.7 million in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column for Mr. Spence in the Summary Compensation Table (SCT) on page 54. To show the effect that the year-over-year change in pension value had on total compensation as shown in the “Total” column of the SCT, this table shows what Mr. Spence’s total compensation was for the last three years with and without the change in pension value.

 

 

 

4    PPL CORPORATION 2020 Proxy Statement


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 

What are you voting on?    The Board of Directors is asking you to elect the ten 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.

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

 

                     
    

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

Global Business Perspective

 

 

 

 

 

 

 

 

 

 

Regulated Industry      

 

     

 

 

 

 

   
Risk Management  

 

     

 

 

 

     

   
Customer Relationships and Marketing      

 

         

 

 

     

Public Company Board Experience  

 

     

     

 

     

   
Finance and Accounting      

         

     

 

 

   
Technology and Cybersecurity      

 

         

         

 

Environmental

 

     

 

     

               

CEO

 

         

     

               

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    5


Table of Contents

PROPOSAL 1: ELECTION OF DIRECTORS

 

NOMINEES FOR DIRECTOR

 

LOGO  

JOHN W. CONWAY

 

Age: 74

 

Director since: 2000

 

Independent Director

 

Lead Director

  

Board Committees:

 

•   Compensation

•   Executive

•   Finance

 

Other Public Directorships:

 

•   Crown Holdings, Inc.

Professional Experience:

 

 

Former Chief Executive Officer (2001–2015), President (1998–2013) and Chief Operating Officer (1998–2001), Crown Holdings, Inc., an international manufacturer of packaging products for consumer goods

 

 

Former President, Continental Can International Corporation

 

 

Former Chairman, 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 at a large public company.

 

LOGO

 

STEVEN G. ELLIOTT

 

Age: 73

 

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)

Professional Experience:

 

 

Former Senior Vice Chairman (1998–2010), Vice Chairman (1992–1998), Chief Financial Officer (1990–1992) and Executive Vice President and head of the finance department (1987–1990), The Bank of New York Mellon Corporation, an investment management and investment servicing company

 

 

Prior to joining Mellon, held senior officer positions at First Commerce Corporation, Crocker National Bank, Continental Illinois National Bank and First Interstate Bank of California

Experience and Qualifications: With his long and distinguished career in the financial services industry, as well as his accounting background, Mr. Elliott brings to our Board extensive knowledge of organizational and operational management from a regulated industry perspective, as well as risk management expertise. Mr. Elliott has experience leading strategic acquisitions, divestitures and restructurings, as well as in asset servicing, securities lending, foreign exchange, capital markets, global cash management and strategic technology.

 

 

 

6    PPL CORPORATION 2020 Proxy Statement


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PROPOSAL 1: ELECTION OF DIRECTORS

 


 

LOGO

 

RAJA RAJAMANNAR

 

Age: 58

 

Director since: 2011

 

Independent Director

  

Board Committees:

 

•   Compensation

•   Governance and Nominating

Professional Experience:

 

 

Current Chief Marketing & Communications Officer and President, Healthcare (2016–present) and Chief Marketing Officer (2013–2016), MasterCard Incorporated, a technology company in the global payments industry

 

 

Former Executive Vice President, Senior Business, and Chief Transformation Officer of WellPoint, Inc. (2012–2013)

 

 

Former Chief Innovation and Marketing Officer and Chief Executive of International Operations for Humana Inc. (2009–2012)

 

 

Various senior management marketing and sales positions with Citigroup (1994–2009)

 

 

Various sales and product management roles with Unilever (1988–1994)

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, data and digital technologies expertise. He also received a post graduate certificate in environmental studies.

 

LOGO  

CRAIG A. ROGERSON

 

Age: 63

 

Director since: 2005

 

Independent Director

    

Board Committees:

 

•   Compensation (Chair)

•   Executive

•   Finance

 

Other Public Directorships:

 

•   Ashland Global Holdings Inc.

 

Former Public Directorships within the Last Five Years:

 

•   Chemtura Corporation
(2008-2017)

Professional Experience:

 

 

Chairman, President and Chief Executive Officer (July 1, 2019–present), Hexion Holdings Corporation, and continues to serve as Chairman, President and Chief Executive Officer (2017–present), Hexion Inc., a global producer of thermoset resins as well as other chemical platforms serving a wide range of market applications. In April 2019, Hexion Inc. filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code and successfully emerged in July 2019.

 

 

Former Chairman, President and Chief Executive Officer (2008–2017), Chemtura Corporation, a global manufacturer and marketer of specialty chemicals

 

 

Former President, Chief Executive Officer and director, Hercules Incorporated (2003–2008)

 

 

Serves as a Director for: American Chemistry Council; Society of Chemical Industry; Pancreatic Cancer Action Network; and 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 expertise, as well as environmental oversight and board leadership experience.

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    7


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PROPOSAL 1: ELECTION OF DIRECTORS

 

LOGO

 

VINCENT SORGI

 

Age: 48

 

Director Nominee

 

Management Director

      

Professional Experience:

 

 

President and Chief Operating Officer (July 2019–present), PPL Corporation

 

 

Former Executive Vice President (January 2019–June 2019) and Chief Financial Officer (2014–2019), Senior Vice President (2014–2019) and Vice President and Controller (2010–2014), PPL Corporation

 

 

Previous Controller for PPL’s former energy supply and marketing segment (2010–2014) and financial director of the former PPL Generation subsidiary (2006–2010)

 

 

Prior to joining PPL, worked for Public Service Enterprise Group and Deloitte & Touche LLP

 

 

Member, American Institute of Certified Public Accountants

 

 

Chairman of the Board of the Da Vinci Science Center in Allentown, Pennsylvania

Experience and Qualifications: With more than 25 years of experience in the utility industry, Mr. Sorgi brings to our Board extensive finance and accounting expertise, providing valuable insight into the areas of financial reporting and accounting and controls. He also provides a wealth of knowledge on risk management, financial planning, and strategic development from a regulated utility industry perspective.

 

LOGO

 

WILLIAM H. SPENCE

 

Age: 63

 

Director since: 2011

 

Management Director

    

Board Committees:

 

•   Executive (Chair)

 

Other Public Directorships:

 

•   The Williams Companies, Inc.

 

Professional Experience:

 

 

Chairman (2012–present) and Chief Executive Officer (2011–present), PPL Corporation

 

 

Former President (2011–2019) and Executive Vice President and Chief Operating Officer (2006–2011), PPL Corporation

 

 

Former Senior Vice President, Pepco Holdings, Inc. (2002–2006) and held a number of senior management positions during 19 years with Pepco Holdings, Inc. and its heritage companies, Delmarva Power and Conectiv

 

 

Member, Executive Committee of the Edison Electric Institute (EEI)

 

 

Co-Chairman, EEI’s CEO Policy Committee on Reliability, Security and Business Continuity

 

 

Member, EEI’s Electricity Subsector Coordinating Council (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.

 

 

 

8    PPL CORPORATION 2020 Proxy Statement


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PROPOSAL 1: ELECTION OF DIRECTORS

 


 

LOGO  

NATICA VON ALTHANN

 

Age: 69

 

Director since: 2009

 

Independent Director

    

Board Committees:

 

•   Compensation

•   Executive

•   Finance (Chair)

 

Other Public Directorships:

 

•   FuelCell Energy, Inc.

Professional Experience:

 

 

Founding Partner (2009–2013), C&A Advisors, a consulting firm in the areas of financial services and risk management

 

 

Former Senior Credit Risk Management Executive, Bank of America (2007–2008)

 

 

Former Chief Credit Officer, U.S. Trust (2003–2007)

 

 

26 years at Citigroup in various senior management roles including managing director and co-head of the U.S. Telecommunications – Technology group for Citigroup Securities, 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

 

 

Director, 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.

 

LOGO  

KEITH H. WILLIAMSON

 

Age: 67

 

Director since: 2005

 

Independent Director

  

Board Committees:

 

•   Audit

•   Governance and Nominating

Professional Experience:

 

 

President, Centene Charitable Foundation (February 2020–present)

 

 

Former Executive Vice President, Secretary and General Counsel (2012–February 2020), Centene Corporation, a provider of managed healthcare services, primarily through Medicaid, commercial and Medicare products

 

 

Former Senior Vice President, Secretary and General Counsel, Centene Corporation (2006–2012)

 

 

Former President, Capital Services Division, Pitney Bowes Inc. (1999–2006) and various positions in tax, finance and legal groups, including oversight of the treasury function and rating agency activity (1988–1998)

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.

 

 

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS

 

LOGO

 

PHOEBE A. WOOD

 

Age: 66

 

Director since: 2018

 

Independent Director

  

Board Committees:

 

•   Audit

•   Executive

•   Governance and Nominating (Chair)

  

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)

Professional Experience:

 

 

Principal (2008–present), CompaniesWood, a consulting firm specializing in early stage investments

 

 

Former Vice Chairman and Chief Financial Officer (2006–2008) and Executive Vice President (2001–2006), Brown-Forman Corporation

 

 

Former Vice President and Chief Financial Officer and director, Propel Corporation (2000–2001)

 

 

Almost 24-year tenure at Atlantic Richfield Corporation in various financial management capacities

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.

 

LOGO  

ARMANDO ZAGALO DE LIMA

 

Age: 61

 

Director since: 2014

 

Independent Director

  

Board Committees:

 

•   Audit

•   Governance and Nominating

Professional Experience:

 

 

Former Executive Vice President (2010–2015), Xerox Corporation, a multinational enterprise for business process and document management

 

 

Former President, Xerox Technology (2012–2014)

 

 

Former President of Global Customer Operations (2010–2012), Xerox Corporation

 

 

Former President (2004–2010) and Chief Operating Officer (2001–2004), Xerox Europe

 

 

Various sales, marketing and management positions for Xerox across Europe (1983–2001)

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 88.

 

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

 

 

 

10    PPL CORPORATION 2020 Proxy Statement


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GOVERNANCE OF THE COMPANY

BOARD OF DIRECTORS

Attendance. The Board of Directors met seven times during 2019. 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. Directors are expected to attend all meetings of shareowners, the Board and the committees on which they serve. All of our directors attended the 2019 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 eight directors, constituting all of PPL’s non-employee directors, are independent from the company and management pursuant to its independence guidelines: Messrs. 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 currently held by Mr. Spence. In light of the company’s recently announced plans for a transition in the CEO position, the Board has determined to split the Chairman and CEO roles. The company announced in February 2020 that Mr. Spence will transition out of his CEO role and become the non-executive Chairman of the Board as of June 1, 2020. Until that time, he will continue to serve as executive Chairman and CEO. In connection with this transition, Mr. Sorgi, who is currently serving as our President and Chief Operating Officer, will assume the role of CEO as of June 1, 2020 and is being nominated in this proxy statement for election to the PPL Board of Directors. The Board believes the retention of Mr. Spence as non-executive Chairman is optimal at this time given Mr. Spence’s extensive experience in the utility industry, his deep knowledge of PPL’s complex business and operations and his ability to assess risks and opportunities, and to formulate and oversee the implementation of strategic initiatives. The Board also believes Mr. Spence’s service as non-executive Chairman supports a smooth transition in the company’s executive leadership. Further, it will allow Mr. Sorgi to focus primarily on the execution of PPL’s long-term strategy for sustainable growth, the day-to-day operations of PPL’s high-performing utilities, risk management, employee development and ongoing strategic planning.

Our Guidelines for Corporate Governance provide that if the same person holds the CEO and chairman roles or if the chairman is not independent, the Board will designate one of the independent directors to serve as the lead director. Mr. Conway has served as the independent lead director since 2011. 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 ten director nominees, only Messrs. Sorgi and Spence are 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

 

 

 

 

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GOVERNANCE OF THE COMPANY

 

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.

Under our Guidelines for Corporate Governance, 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.

 

   

Reviews and approves 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.

 

   

Holds 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.

 

   

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 GNC 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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GOVERNANCE OF THE COMPANY

 


 

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. During 2019, the Chair of the Compensation Committee regularly joined 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

 

 

 

 

 

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GOVERNANCE OF THE COMPANY

 

BOARD COMMITTEES

The Board of Directors has five standing committees: Audit Committee; Compensation Committee; Executive Committee; Finance Committee; and Governance and Nominating Committee.

In October 2019, the Board realigned its committee structure to better address the evolving needs of the company. As part of this restructuring, the Board separated its prior Compensation, Governance and Nominating Committee, or CGNC, into two separate committees: the Compensation Committee and the Governance and Nominating Committee. This new structure allows greater focus on aligning our compensation programs with our strategy, as well as emphasizing our continuing commitment to strong corporate governance practices and board refreshment. For the purposes of this proxy statement, references to the Compensation Committee and the Governance and Nominating Committee include, for periods prior to October 2019, the CGNC.

Each non-employee director usually serves on one or more committees. All of our committees, with the exception of the Executive Committee, are composed entirely of independent directors under the listing standards of the NYSE and the company’s standards of independence described under the heading “Independence of Directors.” In addition, all members of the Audit Committee qualify as “audit committee financial experts.” 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 2019.

Board Committee Membership

 

           
Director     Audit     Compensation     Executive     Finance  

  Governance and  

Nominating 

           

 John W. Conway

I/LD  
           

 Steven G. Elliott(1)

I   Chair
           

 Raja Rajamannar

I  
           

 Craig A. Rogerson

I   Chair
           

 William H. Spence

   Chair
           

 Natica von Althann

I   Chair
           

 Keith H. Williamson(1)

I  
           

 Phoebe A. Wood(1)

I   Chair
           

 Armando Zagalo de Lima(1)

I  
           

 Number of Meetings in 2019

5 6(2) 3 3 5(2)

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) 

Includes four meetings held by the CGNC prior to the separation of the CGNC into two separate committees.

 

 

 

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Principal Functions of Each Committee

The following table describes the principal functions of each committee.

 

 

Committee

 

   Principal Function
 

Audit

Committee

  

•  Oversee:

 

•  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.

 

Compensation Committee

  

•  Oversee the company’s executive compensation philosophy, policies and programs and how these policies and programs align with the company’s overall business strategy;

 

•  Oversee management’s executive officer succession planning;

 

•  Discuss results of annual say-on-pay vote and periodically recommend the frequency of such vote;

 

•  Review and evaluate the performance of the CEO and other executive officers of the company, including setting goals and objectives, and approving their compensation, including incentive awards;

 

•  Review and approve the stock ownership requirements for the company’s directors and executive officers;

 

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

 

•  Undertake independence and conflicts of interest assessments of its compensation consultant.

 

Executive Committee

  

•  Exercise all of the powers of the Board of Directors during periods between Board meetings, with the exception of:

 

•  electing directors;

 

•  changing the membership of or filling vacancies in the Executive Committee;

 

•  fixing the compensation of the directors;

 

•  amending the Bylaws; or

 

•  taking any action restricted by the Pennsylvania Business Corporation Law or the Bylaws (including actions committed to another Board committee).

 

Finance Committee

  

•  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;

 

 

 

 

 

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Committee

 

   Principal Function
    

 

•  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.

 

Governance and Nominating Committee

  

•  Oversee corporate governance for the company;

 

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

 

•  Review, approve and ratify, as applicable, any related-person transactions consistent with the company’s Related-Person Transaction Policy;

 

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

 

•  Recommend to the Board any changes in size or composition of the Board;

 

•  Recommend to the Board the composition of each committee of the Board; and

 

•  Identify and recommend to the Board candidates for election to the Board.

Compensation Processes and Procedures

The Compensation Committee undertakes to compensate executive officers effectively and in a manner consistent with our stated compensation and corporate strategies. The Compensation Committee 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 Compensation Committee has strategic and administrative responsibilities with respect to our executive compensation arrangements, including:

 

   

reviewing and approving the design of the executive compensation program and practices;

 

   

monitoring new rules and regulations and assessing evolving best practices concerning executive compensation;

 

   

determining the elements of compensation and the financial and other measures to be used to measure performance for the upcoming year;

 

   

setting annual goals and targets for each executive officer, including the NEOs;

 

   

evaluating the performance and leadership of the CEO, seeking input from all independent directors, and reviewing the performance of the other executive officers against their established goals and objectives; and

 

   

determining and approving the annual compensation of the executive officers based on such evaluations.

The Compensation Committee has retained Frederic W. Cook & Co., Inc., or FW Cook, as its independent compensation consultant since July 1, 2014 to assist the committee in determining whether the company’s executive compensation program is reasonable and consistent with competitive practices. FW Cook provides advice and counsel on executive and director compensation matters and provides information and advice regarding market trends, competitive compensation programs and strategies including as described below.

 

   

Reports regularly on current trends in utility industry executive compensation and provides data analyses, market assessments or other information as requested in order to assist in the administration of the executive compensation programs.

 

   

Provides a detailed analysis of competitive pay levels and practices to the Compensation Committee, which the Compensation Committee uses to understand 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.

 

 

 

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Reviews the pay program for the company’s non-employee directors relative to a group of utility companies and to a broad spectrum of general industry companies.

 

   

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 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.

Although the Compensation Committee considers analysis and advice from its independent consultant when making compensation decisions for the CEO and other NEOs, the committee uses its own independent judgment in making final decisions concerning compensation paid to the executive officers.

FW Cook and its affiliates did not provide any services to the company or any of the company’s affiliates other than advising the Compensation Committee on executive officer and director compensation during 2019. In addition, the Compensation Committee annually evaluates whether any work provided by FW Cook may present a conflict of interest and, for 2019, determined that there was no conflict of interest.

The Compensation Committee can also 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 Compensation Committee takes this into account when establishing and setting all incentive goals for executive officers.

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 Compensation Committee or the Compensation Committee’s independent compensation consultant.

CEO and Other Management Succession

At least annually, consistent with its charter, the Compensation Committee 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 Compensation Committee 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 Compensation Committee also reviews external successor candidates for the CEO position, with assistance periodically from an independent third-party consultant.

The company announced in February 2020 that Mr. Spence will transition out of his CEO role and become the non-executive Chairman of the Board as of June 1, 2020. Until that time, he will continue to serve as executive Chairman and CEO. In connection with this transition, Mr. Sorgi, who is currently serving as our President and Chief Operating Officer, will assume the role of CEO as of June 1, 2020 and is being nominated in this proxy statement for election to the PPL Board of Directors.

Director Nomination Process and Proxy Access

The GNC establishes guidelines for new directors and evaluates director candidates. In its evaluation, the GNC will consider the qualifications, qualities and skills of director candidates as outlined in our Guidelines for Corporate Governance, including:

 

   

strong personal and professional ethics, high standards of integrity and values, independence of thought and judgment and who have senior corporate leadership experience;

 

   

prior business experience at a senior executive level;

 

   

diverse experience relevant to serving on the Board, such as financial, operating, executive management, technology and regulated industry experience;

 

   

a broad range of demonstrated abilities and accomplishments beyond corporate leadership, including the skill and expertise sufficient to provide sound and prudent guidance with respect to all of the company’s operations and interests; and

 

   

capability to devote the required amount of time to serve effectively, including preparation time and attendance at Board, committee and shareowner meetings.

 

 

 

 

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While the GNC does not have a formal diversity policy, in selecting a director nominee, the GNC 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.

Nominations for the election of directors may be made by the Board of Directors, the GNC or any shareowner entitled to vote in the election of directors generally. The GNC screens all candidates in the same manner regardless of the source of the recommendation.

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 6, their past contributions to the company’s success and their expected future engagement and contributions in furtherance of PPL’s strategic goals.

If the GNC or management identifies a need to add a new Board member to fulfill a special requirement or to fill a vacancy, the GNC may retain a third-party search firm to identify a candidate or candidates. The GNC also seeks prospective nominees through personal referrals and independent inquiries by directors. Once the GNC 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 GNC and other members of the GNC, 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 GNC 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 GNC.

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 2021 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 3, 2020 and no later than December 3, 2020.

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).

Chairman and Lead Director Succession

Annually, the GNC reviews a succession plan for the chairman of the board and the lead director positions. The review covers key skills and competencies of the chairman and lead director positions, the risk of loss of the current chairman and lead director, an assessment of the current board members relative to key skills and competencies and the identification of potential chairman and 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 chairman or lead director in the succession pipeline.

 

 

 

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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, Compensation Committee, Finance Committee and GNC 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, COO, 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.

Board Oversight of Key Risks

 

 

Oversight of Cybersecurity Risks. Cybersecurity and the effectiveness of the company’s cybersecurity strategy are regular topics of discussion at Board meetings. The company’s strategy for managing cyber-related risks is risk-based and, where appropriate, integrated within the company’s enterprise risk management processes. The company’s CISO, who reports directly to the Chief Executive Officer, leads a dedicated cybersecurity team and is responsible for the design, implementation, and execution of cyber-risk management strategy. The CISO provides periodic reports to the Board regarding the company’s cybersecurity risk exposures and mitigation strategies.

 

 

 

 

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GOVERNANCE OF THE COMPANY

 

 

Oversight of Environmental, Social and Governance (ESG) Risks. The Board has designated the GNC with responsibility for overseeing the company’s practices and positions to further ESG performance and sustainability. The committee receives updates, which include climate-related issues, at regularly scheduled meetings, and the full Board receives sustainability updates as significant issues arise. The company has also established a Corporate Sustainability Committee, which includes senior leaders throughout the company. The committee is responsible for reviewing and guiding the development of a sustainability strategy, providing oversight and establishing priorities and performance metrics. The sustainability strategy, commitments and priorities are reviewed by the Corporate Leadership Council and presented to the Board. The company also maintains a robust enterprise risk management (ERM) process that provides a business portfolio view of material risks that may impact achievement of the company’s business strategy. As part of the ERM process, representatives from the company’s operating companies and service groups identify, assess, monitor and report on ongoing and emerging risks, including climate-related and broader ESG risks. The company’s Risk Management group oversees this process and reports quarterly to the Audit Committee.

 

 

 

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GOVERNANCE OF THE COMPANY

 


 

COMPENSATION OF DIRECTORS

2019 Director Pay Components. Directors who are company employees do not receive any separate compensation for service on the Board of Directors or committees of the Board. During 2019, compensation for non-employee directors consisted of the elements described in the table below. The independent Lead Director and committee chairs receive additional compensation due to the increased workload and additional responsibilities associated with these critical board leadership positions. PPL reimburses each director for usual and customary travel expenses.

 

 

  Annual Retainer  

Components

 

  Non-Employee  

Directors

 

 

Incremental Awards for Board Leadership

  Independent Lead  

Director Fee

  Audit Committee  

Chair Fee

  All Other Committee Chair  

Fees (Excluding Executive

Committee)

 

 

 Cash(1)

$110,000 $30,000 $25,000 $20,000

 

 Deferred Stock Units(2)

$140,000 N/A N/A N/A

 

(1)

The annual cash retainer and other fees are payable in quarterly installments to each director unless voluntarily deferred to the director’s deferred stock account or deferred cash account under the Directors Deferred Compensation Plan, or DDCP.

 

(2) 

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 Compensation Committee assesses the compensation of directors annually and, if applicable, makes recommendations to the Board. As part of this assessment, FW Cook, the Compensation Committee’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.

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 2.33% to 19.37% during 2019. 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, 2019. Ms. Wood, who has served on the Board less than five years, was on track to meet her equity ownership requirements as of that date.

 

 

 

 

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GOVERNANCE OF THE COMPANY

 

The following table summarizes all compensation earned during 2019 by our non-employee directors with respect to Board of Directors and committee service.

2019 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(1)

  

 

$

 

55,000

 

 

  

 

 

 

—     

 

 

  

 

$

 

55,000

 

 

  

 

$

 

70,000

 

 

  

 

 

 

—     

 

 

  

 

$

 

125,000  

 

 

 

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

 

 

  

 

 

 

5,000

 

 

  

 

 

 

275,000  

 

 

 

Keith H. Williamson

  

 

 

 

110,000

 

 

  

 

 

 

—     

 

 

  

 

 

 

110,000

 

 

  

 

 

 

140,000

 

 

  

 

 

 

10,000

 

 

  

 

 

 

260,000  

 

 

 

Phoebe A. Wood

  

 

 

 

115,000

 

 

  

 

 

 

—     

 

 

  

 

 

 

115,000

 

 

  

 

 

 

140,000

 

 

  

 

 

 

10,000

 

 

  

 

 

 

265,000  

 

 

 

Armando Zagalo de Lima

  

 

 

 

 

 

  

 

 

 

110,000

 

 

  

 

 

 

110,000

 

 

  

 

 

 

140,000

 

 

  

 

 

 

—     

 

 

  

 

 

 

250,000  

 

 

(1) 

Mr. Adkins retired from the Board effective May 13, 2019.

 

(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 2019. Ms. Wood voluntarily deferred $57,500 into a deferred cash account under the DDCP. The cash retainers for the committee chairs were: Mr. Elliott (Audit — $25,000); Mr. Rogerson (Compensation — $20,000); Ms. von Althann (Finance — $20,000); and Ms. Wood (GNC — $20,000, of which Ms. Wood received $5,000 when the GNC was formed on October 1, 2019). 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 2019 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, 2019, the aggregate number of deferred stock units (including dividend equivalents) held by each current non-employee director was as follows: Mr. Conway — 155,237; Mr. Elliott — 46,748; Mr. Rajamannar — 42,614; Mr. Rogerson — 126,127; Ms. von Althann — 51,908; Mr. Williamson — 75,943; Ms. Wood — 9,621 and Mr. Zagalo de Lima — 45,845.

 

(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.

 

 

 

22    PPL CORPORATION 2020 Proxy Statement


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STOCK OWNERSHIP

DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS

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 2, 2020, by: each of our directors; each NEO for whom compensation is disclosed in the Summary Compensation Table; all of our director nominees and executive officers as a group; and the only persons known by the company to be beneficial owners of more than 5% of PPL’s common stock as of February 14, 2020. 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 Amended and Restated 2012 Stock Incentive Plan, or SIP, and stock units credited to the accounts of our directors under the DDCP.

 

  Name of Directors and NEOs   

Shares of

  Common Stock  

Owned(1)

 

Joseph P. Bergstein, Jr.

  

 

45,291

(2) 

John W. Conway

  

 

162,584

(3) 

Gregory N. Dudkin

  

 

56,708

(4) 

Steven G. Elliott

  

 

48,351

(5) 

Raja Rajamannar

  

 

44,169

(5) 

Joanne H. Raphael

  

 

169,516

(6) 

Craig A. Rogerson

  

 

129,607

(5) 

Vincent Sorgi

  

 

184,257

(7) 

William H. Spence

  

 

404,371

(8) 

Paul W. Thompson

  

 

34,926

(9) 

Natica von Althann

  

 

53,572

(5) 

Keith H. Williamson

  

 

77,886

(5) 

Phoebe A. Wood

  

 

10,792

(5) 

Armando Zagalo de Lima

  

 

48,250

(5) 

All 17 executive officers and directors as a group

  

 

1,505,587

(10) 

 

  Name and Address of Beneficial Owner   

Amount and Nature

of Beneficial

Ownership

  

Percent

of Class

 

 

  The Vanguard Group, Inc.(11)
  100 Vanguard Blvd.
  Malvern, PA 19355

 

   62,196,688

 

     8.60%  

 

  BlackRock, Inc.(12)
  55 East 52nd Street
  New York, NY 10055

 

   58,239,595

 

     8.10%  

 

  State Street Corporation(13)
  State Street Financial Center
  One Lincoln Street
  Boston, MA 02111

 

   40,414,765

 

     5.59%  

 

(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) 

Includes 11,397 restricted stock units.

 

 

 

 

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STOCK OWNERSHIP

 

(3)

Includes 158,104 stock units credited to Mr. Conway’s deferred stock account under the DDCP.

 

(4)

Includes 19,996 restricted stock units.

 

(5)

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

 

(6) 

Includes 217,070 restricted stock units and 101,748 shares of common stock that may be acquired within 60 days of March 2, 2020 upon the exercise of stock options granted under the ICPKE.

 

(7) 

Includes 27,702 restricted stock units and 111,338 shares of common stock that may be acquired within 60 days of March 2, 2020 upon the exercise of stock options granted under the ICP and SIP.

 

(8) 

Includes 103,167 restricted stock units and 12,824 shares held in an irrevocable trust for the benefit of Mr. Spence’s wife.

 

(9) 

Includes 18,130 restricted stock units.

 

(10) 

Includes 184,155 restricted stock units, 233,731 shares of common stock that may be acquired within 60 days of March 2, 2020 upon the exercise of stock options granted under the ICP, ICPKE or the SIP, and 575,211 stock units credited to the directors’ deferred stock accounts under the DDCP.

 

(11) 

Based solely on a review of the Schedule 13G/A filed by The Vanguard Group, Inc. with the SEC on February 12, 2020. As reported on the Schedule 13G/A, as of December 31, 2019, The Vanguard Group beneficially owned, in the aggregate, 62,196,688 shares held by The Vanguard Group and had sole voting power over 1,272,114 shares, shared voting power over 397,176 shares, shared dispositive power over 1,408,057 shares and sole dispositive power over 60,788,631 shares. The Vanguard Group reported that Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., wholly owned subsidiaries of The Vanguard Group, are the beneficial owners of 817,711 shares or 0.11% and 1,032,155 shares or 0.14%, 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.

 

(12) 

Based solely on a review of the Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 5, 2020. As reported on the Schedule 13G/A, as of December 31, 2019, BlackRock, Inc. beneficially owned, in the aggregate, 58,239,595 shares held by BlackRock affiliates and had sole voting power over 52,241,805 shares and sole dispositive power over 58,239,595 shares. We and our affiliates engage in ordinary course brokerage, asset management or other transactions or arrangements with BlackRock, Inc. and its affiliates. These transactions are negotiated on arm’s-length bases and contain customary terms and conditions. Affiliates of BlackRock, Inc. also provide investment management services for the company’s pension trusts in the U.S. and U.K. The U.K. pension schemes are separate from the company and are managed by independent trustees. The company and the company’s affiliates paid fees of $1,566,000 million in 2019 to BlackRock, Inc. and its affiliates. While BlackRock’s affiliates’ engagement is unrelated to BlackRock’s common stock ownership, these relationships were reviewed and ratified by the GNC in compliance with the company’s related-person transaction policy.

 

(13) 

Based solely on a review of the Schedule 13G filed by State Street Corporation with the SEC on February 14, 2020. As reported on the Schedule 13G, as of December 31, 2019, State Street Corporation beneficially owned, in the aggregate, 40,414,765 shares held by State Street affiliates and had shared voting power over 34,360,567 shares and shared dispositive power over 40,349,781 shares.

 

 

 

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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. There are no related-person transactions to disclose regarding the company’s directors or executive officers. For information on certain transactions involving the company and its 5% shareowners, see “Stock Ownership” above.

Under the policy, each related-person transaction must be reviewed and approved or ratified by the disinterested independent members of the GNC, or of the Board if there is no quorum with the GNC.

In connection with its review and approval or ratification of a related-person transaction, the GNC or the Board, 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 or the independence of a non-employee director;

 

   

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.

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 GNC and transactions that fall within the definition of the policy are reported to the GNC. The disinterested independent members of the GNC or the Board, as applicable, review and consider the relevant facts and circumstances and determine whether to approve, deny or ratify the related-person transaction.

 

 

 

 

PPL CORPORATION 2020 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 2019 compensation of our named executive officers, or NEOs, as described on pages 27-77.

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 2019, 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 2019, 85% of the CEO’s target compensation opportunity was “at-risk” and 73% was performance-based. For the CFO, 72% of target compensation was “at-risk,” while 77% of target compensation for the COO was “at risk”; for the other NEOs, on average, 71% of 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 16.

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 2019 compensation of our NEOs.

 

Your Board of Directors recommends that you vote FOR Proposal 2

 

 

 

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COMPENSATION COMMITTEE REPORT

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

Based on its review and discussions with management, the Compensation Committee 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, 2019 and included in this Proxy Statement.

Compensation Committee

Craig A. Rogerson, Chair

John W. Conway

Raja Rajamannar

Natica von Althann

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

Table of Contents for CD&A

 

 

NAMED EXECUTIVE OFFICERS

 

     28  
  2019 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT      28  
 

An Overview of 2019 Performance

     28  
 

How We Align PPL’s Compensation Program with Performance

     29  
 

2019 Pay and Performance

     31  
 

2019 Say-on-Pay Advisory Vote and Shareowner Engagement

     31  
 

Changes to the Compensation Program for 2019 and 2020

     32  
  OVERVIEW OF PPL’S EXECUTIVE COMPENSATION PROGRAM FRAMEWORK      32  
 

Aligning Employees and Compensation Strategies with Our Corporate Strategic Framework

     32  
 

Elements of NEO Compensation

     32  
 

Process for Setting Executive Compensation

     35  
 

Use of Market Data

     35  
 

Establishing Performance Targets

     35  
  2019 NAMED EXECUTIVE OFFICER COMPENSATION      36  
 

Base Salary

     36  
 

2019 Annual Cash Incentive Awards

     37  
 

2019 Long-term Equity Incentive Awards

     43  
 

Other Elements of Compensation

     48  
  GOVERNANCE POLICIES UNDERPINNING OUR COMPENSATION FRAMEWORK      51  
 

Equity Ownership Guidelines

     51  
 

Hedging and Pledging Prohibitions

     52  
 

Clawback Policy

     52  
 

Compensation Risk Assessment

     52  
  ADDITIONAL INFORMATION      52  
 

Other Compensation

     52  
 

Tax Implications of Our Executive Compensation Program

 

    

 

53

 

 

 

 

 

 

 

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NAMED EXECUTIVE OFFICERS

For 2019, our named executive officers, or NEOs, were:

 

 Named Executive Officer    Title(1)
 William H. Spence    Chairman and Chief Executive Officer (CEO)
 Joseph P. Bergstein, Jr.    Senior Vice President and Chief Financial Officer (CFO)
 Vincent Sorgi    President and Chief Operating Officer (COO)
 Paul W. Thompson    Chairman of the Board, Chief Executive Officer and President, LG&E and KU Energy LLC (LKE)
 Joanne H. Raphael    Executive Vice President, General Counsel and Corporate Secretary
 Gregory N. Dudkin    President of PPL Electric Utilities Corporation (PPL Electric)

 

(1)

Column reflects the title of each NEO as of December 31, 2019.

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

Effective July 1, 2019: (1) Mr. Spence’s title changed from Chairman, President and CEO to Chairman and CEO; (2) Mr. Bergstein was promoted to Senior Vice President and CFO from Vice President-Investor Relations and Corporate Development & Planning; and (3) Mr. Sorgi was promoted to President and COO from Executive Vice President and CFO.

Effective June 1, 2020: (1) Mr. Spence is retiring from the company and will continue to serve as the non-executive Chairman; and (2) Mr. Sorgi will become President and CEO. Mr. Sorgi is also included as a nominee for director in this proxy statement.

The 2019 compensation of these NEOs is explained in the following sections and in the Executive Compensation Tables that follow this CD&A.

2019 PERFORMANCE ACHIEVEMENTS AND PAY ALIGNMENT

An Overview of 2019 Performance

PPL delivered on its commitments to shareowners, customers and the communities we serve in 2019.

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

Most importantly, we delivered power safely, reliably and affordably to more than 10 million customers in the U.S. and U.K. No job we do is more important than that.

At the same time, we:

 

   

Delivered strong financial results, exceeding the midpoint of our earnings guidance for the 10th straight year, and maintained our solid investment-grade credit rating.

 

   

Remained committed to dividend growth, increasing our dividend for the 17th time in 18 years and paying more than $1 billion in dividends to shareowners.

 

   

Sustained strong transmission and distribution reliability across our utilities, while achieving top-decile generation reliability in Kentucky.

 

   

Provided superior customer service, ranking among the very best for customer satisfaction in the regions we serve.

 

   

Invested more than $3 billion in infrastructure improvements to strengthen grid resiliency, incorporate new technology and reshape electricity networks for a cleaner energy future.

 

   

Executed agreements to acquire, develop, own and operate 110 megawatts of solar capacity contracted via long-term power purchase agreements.

 

   

Continued to advance a sustainable energy future in other ways, publishing a comprehensive electric vehicle strategy in the U.K., enhancing solar offerings for customers in Kentucky and deploying a new distributed energy resource management system in Pennsylvania.

 

 

 

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Maintained our focus on achieving balanced regulatory outcomes that will benefit our customers and shareowners, achieving regulatory approval in Kentucky of a combined $187 million annual revenue increase to support additional investments.

 

   

Enhanced our environmental, social and governance, or ESG, disclosures, including mapping reports using the Sustainability Accounting Standards Board (SASB) materiality framework for electric utilities, as well as ESG disclosures that are informed by the Task Force on Climate-related Financial Disclosures (TCFD), all of which are available at www.pplweb.com/sustainability.

These achievements and more reflect our shared values and common purpose across PPL to deliver without fail for our customers, to exceed their expectations and to continuously improve.

Total Shareowner Return

PPL’s U.K. operations currently generate over half of PPL’s earnings. For all 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 over the three-year period. This outcome resulted in the forfeiture of the 2017-2019 TSR-based performance units for our NEOs, as described below.

In late 2019, the U.K. political uncertainty that had weighed on our stock for several years significantly diminished. The U.K.’s December 12, 2019 general election delivered the Conservative Party an overwhelming majority. This, in turn, cleared the way for the U.K.’s exit of the European Union and virtually eliminated the threat of energy sector renationalization raised by the minority Labour Party.

PPL’s stock price responded accordingly, increasing 6.8% from December 12, 2019, through December 31, 2019. The UTY reflected a 3.4% increase during that same time period.

How We Align PPL’s Compensation Program with Performance

For 2019, 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 annual compensation program for our NEOs. Earnings per share from ongoing operations is the primary measure by which our shareowners and market analysts assess PPL’s performance, and accountability for strong earnings per share performance primarily falls on PPL’s executive officers. Management actions with respect to financing and tax strategy, capital investment and our revenue models drive earnings per share. In addition to EPS for compensation purposes, our business segment heads are also expected to meet their business segment’s adjusted net income goals. For 2019, 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 and operational goals, relative TSR and corporate ROE are used for certain equity-based awards in order to further align executives’ interests with the long-term interests of shareowners. The TSR metric provides a comparison of our three-year TSR performance relative to the companies in the UTY. 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 prospective operational performance in comparison to our peers, which is correlated to market performance. We believe our best-in-sector ROE differentiates PPL from other investor-owned utilities.

 

 

 

 

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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 and operational performance of PPL, as well as financial and operational metrics for its largest business segments. This provides direct alignment to our goal of increasing shareowner value.

 

   
       

How We Define It

 

 

Where We Use It

 

   
 

PPL Corporation

EPS

 

•  Earnings per share from ongoing operations, adjusted for compensation purposes to exclude certain unbudgeted foreign currency economic hedges executed to optimize our hedging portfolio and to exclude 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 40 for a description of the goals and page 37 for the respective weighting)

 

 

•  Portion of Annual Cash Incentive

     
   
 

Business Segment

Adjusted Net Income

 

•  Net income from ongoing operations of each business segment

 

•  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 40 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 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 “2019 Named Executive Officer Compensation” beginning on page 36 of this CD&A.

 

 

 

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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 51. These practices further reinforce our commitment to create shareowner value by directly linking NEO compensation to share price appreciation and sustainable long-term growth.

 

LOGO    Primarily due to a decrease in the discount rate used to measure pension obligations, for Mr. Spence there was an increase in 2019 of approximately $2.7 million in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column in the Summary Compensation Table (SCT) on page 54. To show the effect that the year-over-year change in pension value had on total compensation as shown in the “Total” column of the SCT, this table shows what Mr. Spence’s total compensation was for the last three years with and without the change in pension value.

2019 Pay and Performance

In 2019, our financial and operational performance was strong, resulting in above target-level payouts for annual incentive awards. However, our three-year stock price performance, and accordingly our TSR relative to the UTY, continued to be pressured by political and regulatory uncertainty in the U.K., negatively impacting certain other components of compensation. Below are highlights of how our 2019 performance correlated with 2019 compensation:

 

   

Annual cash incentive award payouts ranging from 150.34% to 180.11% of target as a result of achieving strong 2019 financial and operational results.

 

   

Forfeited 60% of the total LTI grants made to our NEOs in 2017 due to below threshold level performance. These forfeited awards were TSR-based performance units for the 2017-2019 performance period. The forfeited performance units had a grant date value of $3.12 million for Mr. Spence and $2.26 million for all other NEOs.

 

   

ROE-based performance units, which comprised 20% of the total LTI grants made to our NEOs in 2017, paid out at 200% of target for the 2017-2019 performance period. These grants had a grant date value of $1.04 million for Mr. Spence and $750,000 for all other NEOs.

 

   

Mr. Spence did not receive a base salary increase in 2019 for the second consecutive year, reflecting the Compensation Committee’s desire to align CEO compensation with TSR performance.

We provide further details of these matters throughout this CD&A and particularly in “2019 Named Executive Officer Compensation” beginning on page 36.

2019 Say-on-Pay Advisory Vote and Shareowner Engagement

The Compensation Committee 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 shareowner vote of approximately 84% in support of the compensation of our NEOs in response to our say-on-pay proposal at the company’s 2019 Annual Meeting.

As part of our annual engagement efforts in the fall of 2019, which included the participation of the independent Chair of the Compensation Committee, we conducted outreach to our larger shareowners to seek their views on our corporate governance practices, including our executive compensation program. See “Shareowner Engagement” on

 

 

 

 

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page 13 for annual outreach efforts. None of the discussions on executive compensation during these meetings suggested any recommended changes to our executive compensation program. Taking this feedback into account, the Compensation Committee determined that our executive compensation philosophy, compensation objectives and program design are appropriate and decided not to make any substantive changes to the core design of our program. The Compensation Committee, however, did make the changes described below as to the ROE-based performance awards in order to add increased rigor to the ROE goal and ensure that performance-based ROE pays out above target only when PPL’s ROE is at or above the 50th percentile of companies in the UTY.

Changes to the Compensation Program for 2019 and 2020

 

   

For 2019 grants of ROE-based performance awards, PPL increased the ROE achievement required for target payout from 10% to 11%.

 

   

For 2020 grants, PPL increased the ROE achievement required for maximum payout from 14% to 15%. Additionally, for performance periods beginning in 2020, PPL added a requirement that PPL’s ROE from ongoing operations be in the top half of companies in the UTY in order for the ROE-based performance units to pay above target.

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.

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.

The performance goals that PPL has established reinforce the core features of our operational mission to deliver power safely, reliably and affordably. 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.

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

 

•  Compensation Committee 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 Corporate 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% and 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, and vest according to the applicable level of achievement of the performance goal, if any

 

•  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

 

•  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 physicals, financial planning, tax preparation services and matching charitable contributions. The CEO also receives periodic residential security updates. For additional information, see “Other Elements of Compensation” section on page 48.

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 2019, 85% of the CEO’s target compensation opportunity was “at-risk” and 73% was performance-based. For the CFO, 72% of target compensation was “at risk,” while 77% of the target compensation for the COO was “at risk”; for the other NEOs, on average, 71% of target compensation was “at risk.”

 

 

 

 

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The following charts illustrate the 2019 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 — 2019(1)

 

  LOGO  
LOGO    

LOGO

  LOGO  

 

(1) 

Based on target compensation as a percentage of target total direct compensation for performance as of December 31, 2019.

 

(2) 

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

 

 

 

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Process for Setting Executive Compensation

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

 

LOGO

Use of Market Data

The Compensation Committee uses market compensation data from the Willis Towers Watson General Industry Executive Compensation Survey as one of several criteria when reviewing individual NEO compensation levels. 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 sample size minimizes the risk that this change could distort general market trends. The market data are adjusted to appropriately reflect our size.

The Compensation Committee also uses information on compensation practices from a select group of industry comparators, which includes public utilities with revenue, market capitalization and enterprise value that are generally between one-half to two times those of PPL.

For additional insight into executive compensation practices, the Compensation Committee directed Frederic W. Cook & Co., Inc., or FW Cook, the Compensation Committee’s independent compensation consultant, to conduct an executive market assessment and present market findings to the Compensation Committee. When determining 2019 compensation for our NEOs, the Compensation Committee considered these compensation data points.

Establishing Performance Targets

Each year, the Compensation Committee 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 Compensation Committee 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.

 

 

 

 

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In setting the targets for the business segments, the Compensation Committee 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 2019 awards were reviewed during the first quarter of 2019 and are summarized beginning on page 37.

2019 NAMED EXECUTIVE OFFICER COMPENSATION

Base Salary

Each year, the Compensation Committee 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 Compensation Committee reviews market compensation data and whether each executive’s current salary is competitive and commensurate with their performance, skills and experience.

In 2019, the Compensation Committee approved base salary increases effective January 1, 2019 ranging from 0% to 11.3% as well as mid-year base salary increases due to new appointments or promotions. The table below reflects base salary increases during the year.

 

     

      Name

 

 

    2018 Year-End Salary    

 

   

2019 Salary

 

   

% Change

 

 
     

  Bill Spence

    $1,184,580                   $1,184,580       0.0 %     
     

  Joe Bergstein

    305,325                   500,000       63.8 %     
     

  Vince Sorgi

    565,125                   700,000       23.9 %     
     

  Paul Thompson

    620,000                   643,560       3.8 %     
     

  Joanne Raphael

    530,000                   590,000       11.3 %     
     

  Greg Dudkin

    560,000                   590,000       5.4 %     

In the case of Mr. Spence, while the Compensation Committee recognized that Mr. Spence’s performance contributed to the delivery of strong financial and operational results for 2018, the company’s TSR was challenged by external events that did not significantly impact companies in the UTY. As a result, for the second consecutive year, Mr. Spence did not receive a salary increase.

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

 

   

Mr. Bergstein received a 3% increase in January 2019 while serving as Vice President-Investor Relations and Corporate Development & Planning. When he assumed the role of Senior Vice President and CFO in July 2019, he received an adjustment of 59% to his salary to come within a competitive range of market for his new role as CFO.

 

   

Mr. Sorgi received a 6.17% increase in January 2019 while serving as Executive Vice President and CFO. When he assumed the role of President and COO in July 2019, he received an adjustment of 16.7% to his salary to come within a competitive range of market for his new role as President and COO.

 

   

Mr. Thompson received a 3.8% increase to maintain market competitiveness aligning his performance, skills and experience in this position.

 

 

 

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Ms. Raphael received a 11.3% increase to maintain market competitiveness and to recognize her continued performance, skills and experience.

 

   

Mr. Dudkin received a 5.4% increase to maintain market competitiveness aligning his performance, skills and experience in this position.

2019 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 (1) corporate EPS, (2) corporate operational goals that include all three business segments weighted for the forecasted contribution to EPS, (3) business segment adjusted net income and (4) business segment operational goals. These measures align with our goals of increasing shareowner value and were set and communicated to the NEOs in the first quarter of 2019.

In summary, the performance measures for 2019 were as follows:

 

 

2019 PPL Cash Incentive Goal Weighting

 

Name

 

 

Proration    
for Time    
in Position     

 

  

 

Financial Performance

 

  

 

Operational Performance

 

    
  

 

    Corporate          

 

  

 

  Business          

  Segment          

 

  

 

    Corporate          

 

  

 

  Business          

  Segment          

 

  

 

Individual    
Performance    

 

           

  Bill Spence

 

           80%         

 

   —     

 

       20%         

 

   —     

 

   —     

 

           

  Joe Bergstein(1)

 

      49.59%    

 

       64%         

 

   —     

 

       16%         

 

   —     

 

   20%     

 

           
        50.41%    

 

       80%         

 

   —     

 

       20%         

 

   —     

 

   —     

 

           

  Vince Sorgi

 

           80%         

 

   —     

 

       20%         

 

   —     

 

   —     

 

           

  Paul Thompson

 

           40%         

 

   40%     

 

       10%         

 

   10%     

 

   —     

 

           

  Joanne Raphael

 

           80%         

 

   —     

 

       20%         

 

   —     

 

   —     

 

           

  Greg Dudkin

 

           40%         

 

   40%     

 

       10%         

 

   10%     

 

   —     

 

 

(1)

Mr. Bergstein’s promotion to Senior Vice President and CFO resulted in a mid-year change to his cash incentive goal weighting. Prior to his promotion, 20% of his cash incentive award was based on individual performance. Cash incentive awards are prorated based upon the number of days in each position.

 

 

 

 

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2019 PPL Corporate Financial Performance

 

 

EPS

 

For compensation purposes, annual cash incentive awards are based on earnings per share from ongoing operations, as further adjusted to exclude certain unbudgeted foreign currency economic hedges executed to optimize our hedging portfolio as described in Annex A.

 

The target of $2.40 set for 2019 represented an increase from the 2018 target of $2.30. In 2019, this adjusted EPS was $2.49, which was above the target performance level of $2.40 but below the maximum performance level of $2.52.

 

 

LOGO

 

Therefore, the percent of target opportunity earned in relation to PPL’s EPS was 175% of target.

 

No payout for the corporate financial goal would have been made to NEOs for 2019 if the EPS from ongoing operations had been below the 50% goal of $2.29.

 

No annual cash incentive award would have been made to NEOs for 2019 if the EPS from ongoing operations had been below $2.19.

 

 

 

 

 

 

38    PPL CORPORATION 2020 Proxy Statement


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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.

 

 

2019 PPL Business Segment Financial Performance

 

 

LKE – Paul Thompson

 

Adjusted Net Income

 

•  Target ongoing net income for the year was $441.060 million, and maximum ongoing net income for the year was $460.956 million.

 

•  LKE ongoing net income for the year was $468.637 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 continued focus on operating and financing cost discipline combined with favorable regulatory outcomes and weather.

 

 

 

PPL Electric – Greg Dudkin

 

Adjusted Net Income

 

•  Target ongoing net income for the year was $445.271 million, and maximum ongoing net income for the year was $466.954 million.

 

•  PPL Electric ongoing net income for the year was $452.660 million, which was between the target and maximum payout levels.

 

•  The percent of target opportunity earned for the PPL Electric ongoing net income was 133.16% of target.

 

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

 

 

 

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    39


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EXECUTIVE COMPENSATION

 

 

2019 PPL 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

 

26.0

 

 

133.33%

 

 

50%

 

66.67%

   

Achieve the reliability System Average Duration Index (SAIDI) goal target*

 

88.64

 

93.59

 

 

91.18%

 

 

25%

 

22.79%

   
             

Achieve Equivalent Forced Outage Rate (EFOR) goal target*

 

0.050

 

0.0234

 

 

188.67%

 

 

25%

 

47.17%

   

Total Operational Performance for LKE

  136.63%     22%       30.06%  

 

PPL Electric

 

 

               
             

Achieve Customer Satisfaction (CSAT) targeted rating

 

85%

 

86%

 

 

125.00%

 

 

50%

 

62.50%

   

Achieve the reliability non-storm System Average Interruption Frequency Index (SAIFI) goal target*

 

0.65

 

0.66

 

 

87.50%

 

 

50%

 

43.75%

   

Total Operational Performance for PPL Electric

 

106.25%

 

 

23%

 

 

 

24.44%

 

 

WPD

 

 

               
             
Achieve the Operational Incentive Revenues (Stakeholder Engagement, Customer Minutes Lost, Customer Interruptions, Broad Measure Customer Satisfaction (BMCS), Time to Connect, Incentive on Connection Engagement) goal target (in millions)   £71.71   £78.40     200.00%     100%   200.00%    

Total Operational Performance for WPD

 

200.00%

 

 

55%

 

 

 

110.00%

 

Total Weighted Corporate Operational Performance

 

 

100%

 

 

 

164.50%

 

 

*

Indicates a lower number is better

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 as conducted by a third party. 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 (two points) or second (one point) in an absolute ranking. To achieve the targeted customer satisfaction objective of 18 points, LKE needed to perform 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, finishing above the competitive range for all four quarters in 2019, earning bonus points for second-place customer satisfaction in the second and fourth quarters.

 

 

 

40    PPL CORPORATION 2020 Proxy Statement


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LKE’s reliability metric is based upon LKE’s combined Transmission and Distribution SAIDI, the average outage duration for each customer served, with the objective of achieving the lowest possible actual result. While LKE had good Transmission reliability performance, a significant number of isolated weather events affected Distribution performance, causing the result to be slightly below target.

LKE’s EFOR is the measurement of the percent of steam generation not available due to forced outages or reduction in generation output, with the objective of achieving the lowest possible actual result. Targets are set using historical regional results to drive optimal business performance. Through a concentrated effort on long-term outage planning, process standardization across the fleet and ongoing focus on process improvement, LKE performed exceptionally well with limited plant outages.

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 CSAT rate. The annual target is set based on previous performance and current management expectations. For 2019, CSAT was above target, which is attributable to improvement in residential CSAT throughout most of the year and upward trends in business CSAT 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), with the objective of achieving the lowest possible actual result. The annual target is set based on previous performance and current management expectations. For 2019, IEEE SAIFI was below target primarily due to outages caused by vegetation.

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:

 

   

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 Revenue payouts.

 

   

Customer Minutes Lost / Customer Interruptions 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 Distribution Network Operator (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 Incentive Revenue 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 2019 Operational Incentive Revenue target was £71.71 million. 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.

Safety at PPL

PPL is committed to the health, safety and welfare of its employees and of those with whom we do business. Because safety is an integral part of our values and culture, we do not pay cash incentives based upon safety. However, in the event of a workplace fatality, the Compensation Committee will exercise discretion as to cash incentive payouts.

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    41


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EXECUTIVE COMPENSATION

 

Individual Annual Cash Incentive Awards for 2019 Performance

The following annual incentive awards were approved by the Compensation Committee for 2019 performance and ranged from 150.34% of target to 180.11% of target:

 

       
Name   Proration
for Time
in Position
  Weight x Goal Results   Individual
Performance
  2019
Earned
Award
 

 

 

Financial Performance

 

 

 

 

Operational Performance

 

 

Corporate

 

 

Business
Segment

 

 

Corporate

 

 

Business
Segment

 

             

 

  Bill Spence

 

      80% x 175%

 

 

 

 

 

20% x 164.5%

 

 

 

 

     

 

172.90%

 

             

 

  Joe Bergstein(1)

 

 

49.59%

 

  64% x 175%

 

 

 

 

 

16% x 164.5%

 

 

 

 

 

 

20% x 160%

 

 

 

170.32%

 

               
    50.41%   80% x 175%

 

 

 

  20% x 164.5%

 

 

 

     

172.90%

 

             

 

  Vince Sorgi

      80% x 175%

 

 

 

 

 

20% x 164.5%

 

 

 

 

     

 

172.90%

 

             

 

  Paul Thompson

      40% x 175%

 

  40% x 200.00%

 

 

 

10% x 164.5%

 

 

 

10% x 136.63%

 

     

 

180.11%

 

             

 

  Joanne Raphael

 

      80% x 175%

 

 

 

  20% x 164.5%

 

 

 

     

 

172.90%

 

             

 

  Greg Dudkin

 

     

 

40% x 175%

 

 

 

40% x 133.16%

 

 

 

10% x 164.5%

 

 

 

10% x 106.25%

 

     

 

150.34%

 

 

 

(1)

Mr. Bergstein’s promotion to Senior Vice President and CFO during 2019 resulted in a mid-year change in his PPL cash incentive goal weighting. Prior to his promotion, 20% of his cash incentive award was based on individual performance, including his actions to enhance investor communications, increase investor outreach, improve business planning processes, support RIIO-2 process and support strategic initiatives. Cash incentive awards are prorated based upon the number of days in each position.

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

 

         
Name   Proration
for Time
in Position
(1)
 

2019
Base    

Salary(2)

 

   

 

Target Opportunity

(% of Base Salary)

   

 

2019 Earned

Award

    2019 Annual Cash
Incentive Award
 
  Prorated     Total  
           

  Bill Spence

        $1,184,580                          140%                                     172.90%                      $2,867,395  
           

  Joe Bergstein(3)

  49.59%           500,000           45%             170.32%           $190,039    
           
    50.41%           500,000           75%             172.90%           326,846    
           
                                     516,885  
           

  Vince Sorgi(4)

  49.59%           700,000           85%             172.90%           510,160    
           
    50.41%           700,000           95%             172.90%           579,606    
           
                                  1,089,766  
           

  Paul Thompson

              643,560           85%             180.11%                  985,249  
           

  Joanne Raphael

              590,000           80%             172.90%                  816,088  

  Greg Dudkin

 

       

 

590,000

 

 

 

     

 

80%

 

 

 

         

 

150.34%

 

 

 

           

 

709,605

 

 

 

 

 

(1)

Cash incentive awards were prorated based upon the number of days in each position, to the extent applicable.

 

(2)

Cash incentive awards were calculated based on year-end base salary of the performance period.

 

(3) 

Mr. Bergstein’s promotion to Senior Vice President and CFO during 2019 resulted in a mid-year change to his cash incentive goal weighting and target opportunity. Prior to his promotion, 20% of his cash incentive award was based on individual performance.

 

(4) 

Mr. Sorgi’s promotion to President and COO during 2019 resulted in a mid-year change to his cash incentive target opportunity.

 

 

 

42    PPL CORPORATION 2020 Proxy Statement


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EXECUTIVE COMPENSATION

 


 

2019 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. Restricted stock units align shareowner and executive interests while rewarding and encouraging retention.

 

Target Opportunity (% of Base Salary)

 

 

Name

 

 

 

Proration

for Time in

Position(1)

 

 

 

Total Long-term

Incentive (LTI)

 

  

 

20% Restricted

Stock Units

 

  

 

40% Performance

Units

(Based on TSR)

 

  

 

40% Performance

Units

(Based on ROE)

 

           

  Bill Spence

      450%    90%    180%    180%
           

  Joe Bergstein(2)

  50%     75%    15%      30%      30%
           
    50%   180%    36%      72%      72%
           

  Vince Sorgi(3)

  50%   220%    44%      88%      88%
           
    50%   235%    47%      94%      94%
           

  Paul Thompson

      150%    30%      60%      60%
           

  Joanne Raphael

      180%    36%      72%      72%
           

  Greg Dudkin

      180%    36%      72%      72%

 

 

(1)

LTI awards were prorated based upon the number of months in each position, to the extent applicable.

 

(2)

Mr. Bergstein’s promotion to Senior Vice President and CFO during 2019 resulted in a mid-year change to his LTI target opportunity.

 

(3) 

Mr. Sorgi’s promotion to President and COO during 2019 resulted in a mid-year change to his LTI target opportunity.

The Compensation Committee customarily grants the annual long-term incentive awards at its regularly scheduled January meeting. Off-cycle awards may be made from time-to-time, for example, on the appointment or promotion of a new executive officer or a compensation adjustment.

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    43


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EXECUTIVE COMPENSATION

 

2019 Restricted Stock Units (20% of Total LTI)

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 2019(1)

 

 

Name

 

 

Adjustment /
Proration
(2)

 

2019 Base

Salary

 

 

Target

(% of Salary)

 

 

 

Target Value

 

 

Award Value

 

 

Units Granted

             

  Bill Spence

 

            $1,184,580       90 %       $1,066,122       $1,066,122       34,637
             

  Joe Bergstein(3)

 

      January 2019       314,485       15 %       47,173       47,173       1,533
             
        July 2019       500,000       36 %       180,000            
             
        Difference(6)                     132,827            
             
        50% Proration(7)                           66,414       2,172
             

  Vince Sorgi(4)

 

      January 2019       600,000       44 %       264,000       264,000       8,577
             
        July 2019       700,000       47 %       329,000            
             
        Difference(6)                     65,000            
             
        50% Proration(7)                           32,500       1,063
             

  Paul Thompson

 

            643,560       30 %       193,068       193,068       6,273
             

  Joanne Raphael(5)

 

      January 2019       562,000       36 %       202,320       202,320       6,574
             
        Adjusted Salary       590,000       36 %       212,400            
             
        Difference(6)                     10,080       10,080       321
             

  Greg Dudkin

 

            590,000       36 %       212,400       212,400       6,901

 

 

(1)

Number of restricted stock units granted is the award value divided by the closing price of PPL common stock on the date of approval or, if later, the effective date (January 24, 2019, $30.78; June 14, 2019, $31.45; July 1, 2019, $30.58). The number of units is rounded up to the nearest unit.

 

(2)

LTI awards were prorated based upon the number of months in each position, to the extent applicable.

 

(3)

Mr. Bergstein’s promotion to Senior Vice President and CFO during 2019 resulted in a mid-year change to his LTI target opportunity.

 

(4) 

Mr. Sorgi’s promotion to President and COO during 2019 resulted in a mid-year change to his LTI target opportunity.

 

(5) 

Ms. Raphael’s base salary was adjusted in June 2019 effective January 1, 2019, which resulted in an adjustment to her LTI award on June 14, 2019.

 

(6) 

For Messrs. Bergstein and Sorgi, this reflects the difference in the full-year target value of the LTI award in each position. For Ms. Raphael, this reflects the difference in the full-year target value of the LTI award based upon her base salary adjustment.

 

(7) 

The difference in the full-year target values was prorated based upon the number of months in each position.

 

 

 

44    PPL CORPORATION 2020 Proxy Statement


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2019 Performance Unit Awards (80% of Total LTI)

The performance units awarded in 2019 were designed to align the interests of our NEOs with those of our shareowners by directly linking NEO pay with sustained long-term company performance over the three-year performance period. Performance units granted in January 2019 were calculated based on 2019 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, 2019 to December 31, 2021.

 

The Compensation Committee determined that the UTY index is 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 2019, PPL’s TSR performance must be at or above 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 2019-2021 performance period for PPL Corporation.

 

Annual ROE is calculated by taking earnings from ongoing operations of PPL Corporation, divided by the average total equity.

In setting ROE targets, PPL considered its business plan and ROE forecast as well as that of other utilities. PPL’s three-year average ROE was among the best of U.S. utilities for the period 2017-2019, exceeding the three-year average ROE reported by 18 of the 20 utilities comprising the UTY. In 2019, the average ROE target increased to 11% from 10% in 2018. If PPL’s credit rating should drop below investment grade, the maximum award will not exceed 100% payout. ROE awards are forfeited if the average of the annual ROE for each year of the three-year performance period is below 8%.

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    45


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EXECUTIVE COMPENSATION

 

To add increased rigor to the ROE goal for the 2020 ROE grants, PPL’s average ROE from ongoing operations must be at or above the 50th percentile of companies in the UTY to achieve an above-target payout, and to achieve maximum payout, PPL’s average ROE must be at least 15%.

The following performance unit awards were granted by the Compensation Committee primarily in January 2019 and are subject to PPL’s relative TSR ranking over the 2019-2021 performance period and attainment of ROE during the same period. The Compensation Committee also granted additional performance unit awards to Ms. Raphael in June 2019 and to Messrs. Bergstein and Sorgi in July 2019.

 

 

Performance Unit Awards Granted in 2019(1)

50% TSR and 50% ROE

Name

 

Adjustment  /
Proration
(2)

 

2019 Base
Salary

 

Target

(% of Salary)

 

Target
Value

 

Award
Value

 

TSR

Units
Granted

 

ROE

Units
Granted

             

  Bill Spence

  $1,184,580     360 %     $4,264,489   $4,264,489     69,274   69,274
             

  Joe Bergstein(3)

  January 2019        314,485     60 %      188,691      188,691     3,066   3,066
             
  July 2019        500,000     144 %      720,000
             
  Difference(6)        531,309
             
  50% Proration(7)        265,655     4,344   4,344
             

  Vince Sorgi(4)

  January 2019        600,000     176 %   1,056,000   1,056,000     17,154   17,154
             
  July 2019        700,000     188 %   1,316,000
             
  Difference(6)        260,000
             
  50% Proration(7)        130,000     2,126   2,126
             

  Paul Thompson

     643,560     120 %      772,272      772,272     12,546   12,546
             

  Joanne Raphael(5)

  January 2019        562,000     144 %      809,280      809,280     13,147   13,147
             
  Adjusted Salary        590,000     144 %      849,600
             
  Difference(6)        40,320       40,320     641   641
             

Greg Dudkin

 

 

 

   590,000

 

 

 

 

 

144

 

%

 

 

 

   849,600

 

 

 

 

   849,600

 

 

 

 

 

13,802

 

 

 

 

13,802

 

 

 

 

(1)

Number of performance units granted is the award value divided by the closing price of PPL common stock on the date of approval or, if later, the effective date (January 24, 2019, $30.78; June 14, 2019, $31.45; July 1, 2019, $30.58). The number of units is rounded up to the nearest unit.

 

(2)

LTI awards were prorated based upon the number of months in each position, to the extent applicable.

 

(3)

Mr. Bergstein’s promotion to Senior Vice President and CFO during 2019 resulted in a mid-year change to his LTI target opportunity.

 

(4) 

Mr. Sorgi’s promotion to President and COO during 2019 resulted in a mid-year change to his LTI target opportunity.

 

(5) 

Ms. Raphael’s base salary was adjusted in June 2019 effective January 1, 2019, which resulted in an adjustment of her LTI award on June 14, 2019.

 

(6) 

For Messrs. Bergstein and Sorgi, this reflects the difference in the full-year target value of the LTI award in each position. For Ms. Raphael, this reflects the difference in the full-year target value of the LTI award based upon her base salary adjustment.

 

(7) 

The difference in the full-year target values was prorated based upon the number of months in each position.

 

 

 

46    PPL CORPORATION 2020 Proxy Statement


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EXECUTIVE COMPENSATION

 


 

Following the Compensation Committee’s assessment and certification of performance in early 2022, the applicable percentage of the performance unit awards and dividend equivalents will vest, if any. The Compensation Committee 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 and will vest and be paid according to the applicable level of achievement of the performance goal, if any.

2017–2019 Performance Units

TSR-based performance unit awards, accounting for 60% of the total LTI award, were made to the NEOs in 2017, 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, 2017 to December 31, 2019 relative to companies in the UTY.

ROE-based performance unit awards, accounting for 20% of the total LTI award, were made to the NEOs for the first time in 2017, 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 average annual ROE from January 1, 2017 to December 31, 2019.

Forfeited 2017–2019 TSR-based Performance Units

Over the three-year performance period, PPL’s TSR ranked at the 10th percentile relative to companies in the UTY. As a result, the 2017-2019 TSR-based performance units, and accrued dividend equivalents on the units, were forfeited. Performance units forfeited as a result of 2017–2019 TSR performance had a grant date value of over $5.38 million in the aggregate for the NEOs, including $3.12 million for Mr. Spence and $2.26 million for all other NEOs.

Payout of 2017–2019 ROE-based Performance Units

Over the three-year performance period, PPL’s annual ROE was 15.03% in 2017, 15.21% in 2018 and 14.65% in 2019, resulting in a three-year average of 14.96%. In order to pay at or above target of 10% or maximum of 14%, PPL’s credit rating was also required to be above investment grade. Having met these requirements, the 2017-2019 ROE-based performance units, and accrued dividend equivalents on the units, paid out at the maximum of 200%. Performance units that paid out at maximum as a result of PPL’s 2017-2019 ROE performance had a grant date value of $1.79 million in the aggregate for the NEOs, including $1.04 million for Mr. Spence and $750,000 for all other NEOs.

 

LOGO

   The chart to the left shows the difference in the total value of the performance unit awards on grant date verses the total value of the awards realized at distribution after the completion of the performance period. The realized value includes additional dividend equivalents accrued during the performance period, an increase in the price of PPL common stock, and adjustments based upon the three-year performance as detailed above.

 

 

 

 

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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 and tax preparation and support, up to an aggregate cost of $11,000 per year, and estate planning, not to exceed $5,000 in the aggregate, are provided to the NEOs. 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 in the aggregate. The Compensation Committee believes the benefit is beneficial to both the employee and the company through potential reduced costs and increased productivity.

PPL periodically provides security assessments to its NEOs and has provided residential security updates to the CEO.

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 54.

Retirement Programs

The company provides eligible employees with the opportunity to build financial resources for retirement through tax-qualified pension benefit plans and defined contribution plans (401(k) plans). In addition, the company provides eligible executives with non-tax-qualified supplemental pension benefit and 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.

NEOs are eligible for the following pension benefit plans.

 

    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, Bergstein, 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

 

•  Eligible at age 55 with 10 years of service or age 60

 

•  Closed to new officers after December 31, 2011

 

  

Messrs. Spence and Dudkin, and Ms. Raphael

 

Mr. Sorgi is eligible once he reaches age 55

 

 

 

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    Retirement Plan  

 

Description

 

  

 

NEO Participants

 

 
   

PPL Supplemental Compensation

Pension Plan

 

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

 

  

Mr. Bergstein

 

Mr. Sorgi until he is eligible for PPL SERP

 
   

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

Additional details about these plans are provided under “Executive Compensation Tables — Pension Benefits in 2019” beginning on page 61.

NEOs are eligible for the following voluntary retirement savings opportunities.

 

 

                   Savings Plans                

 

  Description    NEO Participants
 

     PPL Deferred

     Savings Plan (PPL

     DSP)

 

•  Tax-qualified defined contribution plan

 

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

 

•  Compensation includes base 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, Bergstein, Sorgi and Dudkin, and Ms. Raphael
 

     PPL Executive

     Deferred

     Compensation

     Plan (PPL EDCP)

 

•  Non-qualified deferred compensation plan

 

•  Participants may defer some or all of their 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 of up to 3% of the participant’s compensation are made under this plan on behalf of participating

 

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

 

 

 

 

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  Savings Plans

 

  Description    NEO Participants
   

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

 

•  Compensation includes base salary plus annual cash incentive award

 

•  There is no vesting condition for the company matching contributions

    
 
  LG&E and KU Savings   Plan  

•  Tax-qualified defined contribution plan

 

•  For each dollar deferred, up to 6% of compensation, LKE will contribute 70 cents subject to contribution limits imposed by the IRS

 

•  Compensation includes base salary, plus deferrals to Company-sponsored benefit plans, Section 402(g) salary redirection, qualified transportation fringe benefit plans, short term incentive compensation, cost of living adjustments, commissions and overtime

 

•  Participants may request distribution of their account at any time following termination of employment, though there may be applicable tax consequences

   Mr. Thompson
 
  LG&E and KU Energy   LLC Nonqualified   Savings Plan  

•  Non-qualified deferred compensation plan

 

•  Participants may defer up to 75% of their compensation in accordance with the terms and conditions of the plan

 

•  Matching contributions are made under this plan on behalf of eligible participants to make up for matching contributions that could not be made on behalf of such participants under the LG&E and KU Savings Plan because of statutory limits on qualified plan benefits

 

•  Compensation includes base salary plus annual cash incentive award

 

•  There is no vesting condition for the company matching contributions

   Mr. Thompson

In addition to the retirement programs described above, the primary capital contribution opportunities for NEOs are stock gains under the company’s long-term equity incentive program (as described above) and the employee stock ownership plan, or ESOP. The ESOP is a tax-qualified, employee stock ownership plan. Mr. Thompson does not participate in the ESOP. No contributions have been made to the ESOP since 2012.

 

 

 

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GOVERNANCE POLICIES UNDERPINNING OUR COMPENSATION FRAMEWORK

At PPL, the Compensation Committee and the Governance and Nominating Committee have 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 “single trigger” change-in-control severance agreements

 

 

 Require significant equity ownership: 2x to 6x base salary for executive officers; 5x cash retainer for directors

 

 

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

 

 Maintain clawback policy

 

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

 

 

 Provide proxy access

 

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

 

 

 Limit perquisites

 

 

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)

  CEO

 

  

6x

 

  President or COO

 

  

4x

 

  Executive Vice Presidents

 

  

3x

 

 

  Senior Vice Presidents

 

  

2x

 

  Business segment leaders*

 

 

  

2x

 

 

 

 

  *

Includes Messrs. Thompson and Dudkin.

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

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, 2019. All other NEOs were on track to meet their equity ownership requirements as of that date.

 

 

 

 

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Hedging and Pledging Prohibitions

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

 

   

Pledging shares of company stock as collateral for any loans.

 

   

Engaging in any form of hedging transaction.

 

   

Trading in derivatives of PPL common stock.

Clawback Policy

The Compensation Committee 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.

Compensation Risk Assessment

The Compensation Committee regularly considers risks related to the attraction and retention of talent, the design of our compensation programs, and succession planning. Specifically, the Compensation Committee 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 Compensation Committee 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 Compensation Committee determined that PPL’s compensation programs do not encourage risk-taking incentives that are reasonably likely to have a material adverse effect on PPL.

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. 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 Benefits” on page 67) in connection with a change in control of PPL Corporation should be provided separation benefits. These benefits are intended to ensure that

 

 

 

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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 “Change-in-Control Benefits” beginning on page 67 and “Termination Benefits” on page 70.

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 terminated for reasons other than cause.

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

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 “Change-in-Control Benefits” beginning on page 67 and “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 Compensation Committee 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, starting in 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 Compensation Committee 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 Compensation Committee retains the ability to provide compensation that exceeds deductibility limits as it determines appropriate.

 

 

 

 

PPL CORPORATION 2020 Proxy Statement    53


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EXECUTIVE COMPENSATION

 

EXECUTIVE COMPENSATION TABLES

The following table summarizes all compensation for our chief executive officer, our current and former chief financial officers and our next three most highly compensated executives, 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

 

   

Total

Without

Change in

Pension

Value(7)

 

 

 

  William H. Spence

  Chairman and Chief

  Executive Officer (CEO)

 

 

 

 

2019

 

 

 

 

$

 

1,184,580

 

 

 

 

 

 

 

 

 

 

$

 

5,663,150

 

 

 

 

 

 

 

 

 

 

 

 

$2,867,395

 

 

 

 

 

 

$4,299,219

 

 

 

 

 

 

$128,223

 

 

 

 

$

 

14,142,567

 

 

 

 

$

 

9,843,348

 

 

 

 

 

 

2018

 

 

 

 

 

 

1,184,580

 

 

 

 

 

 

 

 

 

 

 

 

5,740,353

 

 

 

 

 

 

 

 

 

 

 

 

  2,690,277

 

 

 

 

 

 

  1,602,097

 

 

 

 

 

 

121,478

 

 

 

 

 

 

11,338,785

 

 

 

 

 

 

9,736,688

 

 

 

 

 

 

2017

 

 

 

 

 

 

1,183,469

 

 

 

 

 

 

 

 

 

 

 

 

8,555,315

 

 

 

 

 

 

 

 

 

 

 

 

  2,255,772

 

 

 

 

 

 

  1,417,579

 

 

 

 

 

 

128,196

 

 

 

 

 

 

13,540,331

 

 

 

 

 

 

12,122,752

 

 

 

  Joseph P. Bergstein, Jr.

  Senior Vice President and

  Chief Financial Officer (CFO)

 

 

 

 

2019

 

 

 

 

 

 

399,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

603,465

 

 

 

 

 

 

 

 

 

 

 

 

     516,885

 

 

 

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