DEF 14A 1 def14a2019.htm DEF 14A Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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DTE Energy Company
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LETTER TO SHAREHOLDERS
Dear Fellow Shareholders,
We invite you to attend our company’s annual meeting of shareholders, which will be held on May 9, 2019 in Phoenix, Arizona. Please see page 69 for details on attending.
2018 was a year of great progress on many fronts for DTE Energy, driven by the energy and focus of our 10,000 dedicated employees.
Topping the list is our safety performance. Our employees’ commitment to working safely and watching out for the safety of their coworkers and the public resulted in DTE leading our industry in preventing severe injuries. That stellar performance is only possible when employees are fully engaged in their work, which was confirmed by engagement surveys that ranked DTE’s employees in the top four percent across all industries worldwide.
Our employees also delivered on our commitment to our customers and communities. In addition to making significant progress in our ongoing work to modernize our energy grid and gas distribution system while keeping our customers’ bills affordable, we also made landmark progress toward achieving our goal of reducing carbon emissions by more than 80 percent by 2050. In March 2018 DTE announced plans to double its renewable energy generation by investing more than $1.7 billion by 2022. And, in August, we took our single largest step toward reducing emissions when we broke ground on the Blue Water Energy Center, a state-of-the-art natural gas-fueled power plant that will come on line in 2022 as we retire multiple coal-fired plants.
In addition to delivering for our customers, we produced record results for you, our shareholders. After raising our earnings guidance twice during the year, we achieved record operating earnings of $1.1 billion, up 14 percent versus 2017.
Our operational and financial strength gives us the opportunity to look beyond the walls of our company to the role we aspire to play in building healthy, strong and sustainable communities. DTE is working to harness the economic engine of the private sector to the task of revitalizing our neighborhoods, strengthening our local economies, and preparing our youth to succeed in the workforce. One standout accomplishment in this area is that more than 50 percent of our employees spent hours volunteering in our communities, including thousands of hours of skills-based volunteerism, where employees apply skills gained from their work at DTE to community projects and organizations.
Thank you for your continued investment in DTE Energy.        
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James B. Nicholson
Gerard M. Anderson
Lead Independent Director
Chairman and Chief Executive Officer

                        



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DTE Energy Company
One Energy Plaza
Detroit, Michigan 48226
2019 Notice of Annual Meeting of Shareholders and Proxy Statement
Meeting Date:
Time:
Location:
Thursday, May 9, 2019
8:00 a.m. Mountain Standard Time
Arizona Biltmore Hotel 2400 East Missouri Avenue Phoenix, Arizona 85016
We invite you to attend the annual meeting of DTE Energy Company.
Agenda:
1.
Elect eleven directors;
2.
Ratify the appointment of PricewaterhouseCoopers LLP by the Audit Committee of the Board of Directors as our independent registered public accounting firm for the year 2019;
3.
Provide an advisory vote to approve executive compensation;
4.
Vote on shareholder proposals, if properly presented, to require an independent board chairman and to require additional disclosure of political contributions; and
5.
Consider any other business that may properly come before the meeting.
Only shareholders of record at the close of business on March 12, 2019, the record date for this meeting, or their representatives authorized by proxy may attend or vote at the meeting.
This 2019 Notice of Annual Meeting, as well as the accompanying proxy statement and proxy card, will be first sent or given to our shareholders on or about March 26, 2019.
This year we have conserved resources and reduced costs by mailing a meeting notice to many of our registered and beneficial shareholders containing instructions on how to access our proxy statement and annual report on Form 10-K and vote online or how to request a paper copy. Shareholders who receive that meeting notice will not receive a paper copy of the proxy statement and annual report on Form 10-K or a proxy card unless they request one.
Every vote is important. You may vote your shares (1) by telephone, (2) via the Internet, (3) if you received a paper copy, by completing and mailing the enclosed proxy card in the return envelope or (4) in person at the annual meeting. Specific instructions for voting by telephone or via the Internet are attached to the proxy card or to the meeting notice that you received if you did not receive a paper copy. If you attend the meeting and vote at it, your vote at the meeting will replace any earlier vote by telephone, Internet or proxy. If you wish to attend the annual meeting in person, you must register in advance. Please vote your proxy, then follow the instructions on page 69 to pre-register.
By Order of the Board of Directors
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Lisa A. Muschong
Vice President, Corporate Secretary & Chief of Staff March 14, 2019
  
 

Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Shareholders to Be Held on May 9, 2019:
The proxy statement and annual report are available to security holders free of charge at
proxydocs.com/dte

                        




TABLE OF CONTENTS
 

i




ii



PROXY STATEMENT SUMMARY
DTE Energy Aspiration and System of Priorities

At DTE Energy Company (“DTE Energy,” the “Company,” “we,” “us” or “our”), we aspire to be the best-operated energy company in North America and a force for growth and prosperity in the communities where we live and serve. This aspiration drives everything we do and has led us to develop a system of corporate priorities that guide our daily, monthly and annual plans which help us to achieve this aspiration. Our Board of Directors (the “Board”) evaluates our Company’s and executives’ performance based upon goals that align with this system of priorities, and we will refer to this system of priorities as we discuss DTE Energy’s performance and our compensation programs throughout this proxy statement.
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Becoming the best-operated energy company means having great corporate governance, competitive compensation and excellent shareholder relations.

 
DTE ENERGY 2019 PROXY STATEMENT      1



Shareholder Engagement
We have continued our shareholder engagement activities this year and, as a result of those discussions, we’ve learned a lot about what is important to our shareholders. The shareholder engagement team consists of members from the Corporate Secretary's office, the General Counsel organization, Investor Relations, Environmental Management, and Corporate Communications. Shareholder engagement is a year-round process for us.
Every spring we reach out to large shareholders to discuss issues related to proxy season and the proposals to be presented at our annual meeting. In the fall we conduct another round of conversations to discuss general governance issues and trends. We also discuss pressing matters on an ad hoc basis.
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Our shareholder engagement activities help us identify governance and compensation policies and practices that are most important to our shareholders.
The shareholder engagement team reports directly to the Corporate Governance Committee and other committees as needed, conveying the feedback received from shareholders and proposing implementation of best practices.
The committees and the full Board of Directors deliberate over proposed governance changes, adopt best practices and provide guidance to the shareholder engagement team in their communications with shareholders.
In 2018, the Company held discussions with shareholders who collectively own or exercise voting control over 45% of the Company’s outstanding shares. In addition, the Company routinely contacts shareholders who have submitted proposals for inclusion in our annual proxy statement, in an effort to understand their concerns and to address, where possible, the issues behind their proposals. We will continue to look for opportunities to provide more information about the Company’s approach on topics of interest to shareholders, and to stimulate more conversations with shareholders.
Governance Highlights
The Board is committed to creating long-term value for our shareholders while operating in an ethical, legal, environmentally sensitive and socially responsible manner. The Board follows sound governance practices, some of which are highlighted below. For more detail, see the “Corporate Governance” section of this proxy statement.
Ten of eleven director nominees, 91%, are independent; our Chairman & Chief Executive Officer ("CEO") is the only management director.
All Board committees are composed exclusively of independent directors.
We have implemented a proxy access provision, which makes it possible for a group of shareholders meeting certain criteria to nominate and include in the Company’s proxy materials a candidate for the Board.
We have a Lead Independent Director, elected by the independent members of the Board. The Lead Independent Director maintains final approval authority over Board agendas, meeting materials and schedules. The Lead Independent Director is also available for consultation and direct communication with large shareholders.
Independent directors met in executive sessions chaired by the Lead Independent Director at six of the seven 2018 Board meetings.
All of our directors are elected annually.
We have a majority vote requirement for uncontested director elections.
The Board and its committees conduct annual self-assessments. In addition, each independent director who has served for one year or more undergoes an annual peer review.
Our executive officers and directors are all subject to robust stock ownership requirements.
We have instituted anti-hedging policies applicable to all Company directors, officers and employees.

2      DTE ENERGY 2019 PROXY STATEMENT

 



Our Board’s Mission and Governance Guidelines recommend that the Board consider diversity of characteristics including experience, gender, race, ethnicity and age when evaluating nominees for the Board.
We limit our directors who are CEOs of public companies to a total of not more than three public company boards and all other directors to a total of not more than four public company boards.
Performance Highlights
The Company continued to deliver on its objectives to provide strong earnings per share and dividend growth in 2018, while maintaining a strong balance sheet, employee engagement and improving customer service. Some highlights of the Company’s 2018 performance include:

Achieved 9.0% compound operating earnings per share growth during the five years ending in 2018 (see discussion of operating earnings on page 39 ).
Increased our dividend payment to $3.60 per share in 2018, representing a 7% increase over the dividend in 2017.
Provided our shareholders with a five-year total shareholder return of 196% (indexed with 2013 as the base year = 100%).
Delivered cash from operations of 2.7 billion in 2018.
Ranked second in residential customer satisfaction in the Midwest from J.D. Power for both electric and gas utilities.
Received Gallup Great Workplace Award for the sixth consecutive year.
Executive Compensation Highlights
Our executive compensation programs are designed to be competitive with our peers, have a meaningful performance component linked to the achievement of short-term and long-term goals that align with our shareholders’ long-term interests and encourage executives to have an ownership interest in the Company. Our Chairman and CEO’s total compensation shows strong pay-for-performance alignment with growth in long-term shareholder value creation. Our CEO’s compensation growth trend is consistent with the growth in value of a $100 investment in DTE Energy Company stock made at the beginning of 2013.
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2016
2017
2018
CEO Total Compensation ($000s)
12,499
15,836
10,987
Total Shareholder Return (Indexed, Base Period 2013=100)
164.41
188.40
196.30

 
DTE ENERGY 2019 PROXY STATEMENT      3



The Company’s compensation programs are also designed to clearly align performance objectives for our Named Executive Officers with the interests of shareholders and with our system of priorities. Our performance measures are designed to help move our Company toward achieving these priorities. For more details, see our priorities alignment chart in the Compensation Discussion and Analysis Summary on page 32.
Other highlights from our compensation program include:
 
Our CEO received 67% of his 2018 total compensation in contingent, performance-based incentives. For our other Named Executive Officers, the average percentage of contingent, performance-based compensation was 57%. See more details on page 33.
Our short-term and long-term performance metrics all tie directly to our system of priorities (see above). These are the same metrics that management uses to assess the Company’s progress toward our aspiration of becoming the best-operated energy company in North America and a force for growth and prosperity in the communities where we live and serve.
Our long-term plan awards include a mix of restricted stock and performance shares designed in part to encourage executive stock ownership. The Board’s Organization and Compensation Committee has not issued stock options since 2010.
Our equity compensation plan forbids buyouts of “underwater” stock options. The Company has never bought or repriced “underwater” stock options.
Our equity compensation plan requires a minimum one-year vesting period for equity awards. The Company’s typical practice is to require a three-year vesting period for equity awards and the Company has never issued equity awards with less than a one-year vesting period.
Our Board has adopted a “clawback” policy that provides that, in the event of an accounting restatement due to material noncompliance with federal securities laws, the Company may recover excess performance-based compensation awarded to current or former officers during the three-year period preceding the restatement.
Our executive Change-In-Control Severance Agreements do not include excise tax gross-ups.
We have eliminated the automatic vesting of equity issued under our Long-Term Incentive Plan upon a change in control of the Company, unless an acquiring or surviving entity fails to replace or affirm the existing equity awards with awards by the surviving company.

Items for Shareholder Vote at this Meeting
At the 2019 Annual Meeting shareholders will vote on the following proposals:
Proposal 1: Elect eleven members of the Board of Directors for one year terms ending in 2020;
Proposal 2: Ratify the appointment of PricewaterhouseCoopers LLP as our independent auditors;
Proposal 3: Provide a nonbinding vote to approve the Company’s executive compensation;
Proposal 4: Vote on a shareholder proposal to require an independent board chairman; and
Proposal 5: Vote on a shareholder proposal regarding disclosure of political contributions.
Shareholders may vote on any other matter that properly comes before the meeting.



4      DTE ENERGY 2019 PROXY STATEMENT

 



Proposal No. 1 — Election of Directors
The Board of Directors has nominated eleven directors for election at the 2019 annual shareholder meeting. Directors are elected to serve annual terms which expire when their successors are elected at the next year’s annual shareholder meeting. All of the nominees are currently directors of the Company. Josue Robles, Jr., who had served as a director since 2003, retired from the Board effective December 31, 2018. Additionally, James B. Nicholson, who has served as a director since 2012, will retire from the Board effective May 9, 2019, having reached our mandatory retirement age of 75.
Proxies cannot be voted for more than eleven persons at this meeting. If any nominee becomes unable or unwilling to serve at the time of the meeting, the persons named in the enclosed proxy card have discretionary authority to vote for a substitute nominee or nominees. It is anticipated that all nominees will be available for election.

The biography of each of the nominees below contains information regarding the person’s service as a director, business experience and director positions held currently or at any time during at least the last five years. The age provided for each director is as of March 14, 2019. In addition to the information presented below regarding each person’s experience, qualifications, attributes and skills that caused our Corporate Governance Committee and Board to determine that the person should serve as a director, the Board believes that all of the Company’s directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen, strategic insight, an ability to exercise sound judgment and a commitment to service and community involvement. Finally, we value their significant experience on other public company boards of directors and board committees and the diversity that they bring to our Board. The following graphs display information about the skills and experience our Board members bring to their service:
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DTE ENERGY 2019 PROXY STATEMENT      5



The Board's demographic makeup is set forth below:
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The biographies below disclose the committees on which each director serves. The following abbreviations are used to denote each committee: Corp Gov=Corporate Governance; O&C=Organization and Compensation; Nuc Rev=Nuclear Review; and PPRC=Public Policy & Responsibility.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR ELECTION AT THIS MEETING.


 
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Gerard M. Anderson
Chairman (2011–present) and CEO (2010–present), DTE Energy Company
 
 
 
 
Previous Experience
 
DTE Energy Company–President (2004–2013), COO (2005–2010), Executive VP (1997–2004)
 
McKinsey & Co.–Senior Consultant (1988–1993)
 
Not Independent
Other Public Boards
 
Age: 60
The Andersons, Inc. (2008–present)
 
Director since: 2009
Qualifications for DTE Energy Company Board of Directors
 
 
Energy Industry Experience
 
 
 
DTE Energy Chief Operating Officer for 5 years prior to becoming CEO
 
 
 
Growth and Value Creation
 
 
 
 
Extensive experience in strategic planning and corporate business development
 
 
 
Operations and Continuous Improvement
 
 
 
 
Broad experience managing capital-intensive industries

6      DTE ENERGY 2019 PROXY STATEMENT

 



 
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David A. Brandon
Chairman and CEO, Toys "R" Us, Inc.* (2015–2018)
 
 
 
 
Previous Experience
 
University of Michigan–Athletic Director (2010–2014)
 
Domino’s Pizza, Inc.–Chairman and CEO (1999–2010)
 
Independent

Valassis Communications, Inc. (a marketing and sales promotion firm)–President
and CEO (1989–1998)
 
Age: 66
Other Public Boards
 
Director since: 2010
Domino’s Pizza, Inc. (1999–present)
 
DTE Committees:
Herman Miller, Inc. (2011–present)
 
O&C (Chair)
Kaydon Corporation (2004–2013)
 
Finance
Qualifications for DTE Energy Company Board of Directors
 
 
 
CEO Experience
 
 
 
 
Service as chief executive of large public companies
 
 
 
Customer Service and Satisfaction
 
 
 
 
Extensive experience in marketing and sales
 
 
 
Financial Planning and Review
 
 
 
 
Strong skill sets in corporate finance and strategic planning
 
 
 
Executive Compensation
 
 
 
 
Experience in executive compensation and organizational best practices
 
* In September 2017, Toys "R" Us, Inc. filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
 
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W. Frank Fountain, Jr.
President, Escambia Enterprises, LLC (an investment and consulting firm) (2012–present)
 
 
 
 
Previous Experience
 
Walter P. Chrysler Museum Foundation–Chairman of Board of Directors (2009–2012)
 
Chrysler, LLC–Senior VP of External Affairs and Public Policy (1998–2008) VP, Government Affairs (1995–1998)
 
Independent
Qualifications for DTE Energy Company Board of Directors
 
Age: 74
Corporate Governance
 
Director since: 2007
 
Experience as a leader of large business organizations
 
DTE Committees:
Government, Regulatory and Community
 
Audit
 
Strong skills in public policy, government relations and knowledge of regulatory matters
 
PPRC (Chair)
Financial Planning and Review
 
 
 
 
Extensive experience with public and financial accounting for complex organizations

 
DTE ENERGY 2019 PROXY STATEMENT      7



 
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Charles G. McClure, Jr.
Managing Partner, Michigan Capital Advisors (a private equity firm)(2014–present)
 
 
 
 
Previous Experience
 
Meritor, Inc.–Chairman of the Board, CEO and President (2004–2013)
 
Federal-Mogul Corporation–CEO (2003–2004), President and COO (2001–2003)
 
Independent
Detroit Diesel Corporation–President and CEO (1997–2000)
 
Age: 65
Other Public Boards
 
Director since: 2012
Crane Co. (2017–present)
 
DTE Committees:
3D Systems Inc. (2017–present)
 
Audit
Remy International, Inc. (2015)
 
Corp Gov
Meritor, Inc. (2004–2013)
 
Nuc Rev
Qualifications for DTE Energy Company Board of Directors
 
 
 
CEO Experience
 
 
 
 
CEO, president and director of several major domestic and international corporations
 
 
 
Operations and Continuous Improvement
 
 
 
 
Broad knowledge of business and industry
 
 
 
Employee Engagement, Safety and Talent
 
 
 
 
Extensive proven leadership skills and service on boards of industry organizations
 
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Gail J. McGovern
President and CEO, American Red Cross (2008–present)
 
 
 
 
Previous Experience
 
Harvard Business School–Professor (2002–2008)
 
Fidelity Personal Investments (a unit of Fidelity Investments)–President (1998–2002)
 
Independent
Other Public Boards
 
Age: 67
PayPal Holdings, Inc. (2015–present)
 
Director since: 2003
eBay Inc. (2015)
 
DTE Committees:
Qualifications for DTE Energy Company Board of Directors
 
O&C
CEO Experience
 
Finance
 
Top executive of major non-profit organization
 
 
 
Customer Service and Satisfaction
 
 
 
 
Extensive executive experience in marketing, sales and customer relations
 
 
 
Growth and Value Creation
 
 
 
 
Experience in strategic planning and corporate finance

8      DTE ENERGY 2019 PROXY STATEMENT

 



 
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Mark A. Murray
Vice Chairman, Meijer, Inc. (2013–present)
 
 
 
 
Previous Experience
 
Meijer, Inc.–President (2006–2013), Co-CEO (2013–2016)
 
Grand Valley State University–President (2001–2006)
 
Independent
State of Michigan–Treasurer (1999–2001)
 
Age: 64
Michigan State University–VP of Finance and Administration (1998–1999)
 
Director since: 2009
Other Public Boards
 
DTE Committees:
Universal Forest Products, Inc. (2004–2016)
 
Nuc Rev (Chair)
Fidelity Fixed Income and Asset Allocation (2016–present)
 
PPRC
Qualifications for DTE Energy Company Board of Directors
 
 
 
CEO Experience
 
 
 
 
President and Co-CEO of a major Michigan-based corporation
 
 
 
Financial Planning and Review
 
 
 
 
Strategic planning, corporate development and finance experience
 
 
 
Government, Regulatory and Community
 
 
 
 
University president and state government official
 
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Ruth G. Shaw
Retired Group Executive, Public Policy and President, Duke Nuclear, Duke Energy (2003–2009)
 
 
 
 
Previous Experience
 
Duke Energy–Executive Advisor (2007–2009)
 
Duke Nuclear–Group Executive for Public Policy and President (2006–2007)
 
Independent
Duke Power Company–President and CEO (2003–2006)
 
Age: 71
Other Public Boards
 
Director since: 2008
Dow DuPont, Inc. (2017–present)
 
DTE Committees:
The Dow Chemical Company (2005–2017)
 
Corp Gov (Chair)
SPX Corporation (2015–present)
 
O & C
Qualifications for DTE Energy Company Board of Directors
 
Nuc Rev
Energy Industry Experience
 
 
 
 
Extensive experience in the nuclear and energy industries
 
 
 
Corporate Governance
 
 
 
 
Service on corporate boards and industry associations and organizations
 
 
 
Government, Regulatory and Community
 
 
 
 
Broad knowledge of regulatory matters, public policy and corporate communications

 
DTE ENERGY 2019 PROXY STATEMENT      9



 
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Robert C. Skaggs, Jr.
Retired Chairman and CEO, Columbia Pipeline Group, Inc. (2015–2016)
 
 
 
 
Previous Experience
 
NiSource, Inc.–President (2004–2015) and CEO (2005–2015)
 
Other Public Boards
 
Cloud Peak Energy, Inc. (2015–present)
 
Independent
Columbia Pipeline Group, Inc. (2015–2016)
 
Age: 64
NiSource, Inc. (2005–2015)
 
Director since: 2017
Qualifications for DTE Energy Company Board of Directors
 
DTE Committees:
CEO Experience
 
Finance
 
Extensive executive leadership experience in the utility sector
 
Nuc Rev
Energy Industry Experience
 
 
 
 
Broad experience in natural gas and electric generation, transmission, storage and distribution
 
 
 
Government, Regulatory and Community
 
 
 
 
Experience developing regulatory strategies and leading external relations
 
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David A. Thomas
President, Morehouse College (2018–present)
 
 
 
 
Previous Experience
 
Harvard Business School–H. Naylor Fitzhugh Professor of Business Administration (2016–2017, 1990–2011)
 
Georgetown University McDonough School of Business–Dean and William R. Berkeley Professor of Business Administration (2011–2016)
 
Independent
Wharton School of Finance–Assistant Professor of Management (1986–1990)
 
Age: 62
Qualifications for DTE Energy Company Board of Directors
 
Director since: 2013
Employee Engagement, Safety and Talent
 
Independent
 
Leadership and research in corporate inclusion and diversity
 
DTE Committees:
Corporate Governance
 
Finance
 
Service on various civic and educational boards, advisor to other corporate boards
 
PPRC
Executive Experience as senior level higher education administrator
 
 
 
 
Expertise in executive development and strategic human resource management

10      DTE ENERGY 2019 PROXY STATEMENT

 



 
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James H. Vandenberghe
Retired Vice Chairman and former Director, Lear Corporation (1998–2008)
 
 
 
 
Previous Experience
 
Lear Corporation–President and COO (1997–1998), CFO (1988–1997, 2006–2007)
 
Other Public Boards
 
Lear Corporation (1995–2008)
 
Independent
Federal-Mogul Corporation (2008–2013)
 
Age: 69
Qualifications for DTE Energy Company Board of Directors
 
Director since: 2006
Growth and Value Creation
 
DTE Committees:
 
Extensive experience in strategic planning and managing capital-intensive industries
 
Audit
Financial Planning and Review
 
Corp Gov
 
Broad experience with public and financial accounting for complex organizations
 
Finance (Chair)
 
 
 
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Valerie M. Williams
Retired Southwest Assurance Managing Partner, Ernst & Young LLP (2009–2016)
 
 
 
 
Previous Experience
 
Ernst & Young, LLP–Southwest AABS Managing Partner (2006–2009)
 
Ernst & Young, LLP–National Office Professional Practice Partner (2005)
 
Independent
Other Public Boards
 
Age: 62
Omnicom Group (2016–present)
 
Director since: 2018
WPX Energy, Inc. (2018–Present)
 
DTE Committees:
Qualifications for DTE Energy Company Board of Directors
 
Audit (Chair)
Financial Planning and Review
 
 
 
Significant financial reporting expertise for complex organizations
 
 
 
Corporate Governance
 
 
 
 
Leadership experience in audit practice and risk management
 
 
 
Growth and Value Creation
 
 
 
 
Experience in oversight of operations and strategy development
 
 
 
 
 

 
DTE ENERGY 2019 PROXY STATEMENT      11




Corporate Governance
Governance Guidelines
At DTE Energy, we are committed to operating in an ethical, legal, environmentally sensitive and socially responsible manner, while creating long-term value for our shareholders. The foundation of our governance practices begins at the top, with the DTE Energy Board of Directors Mission and Guidelines (“Governance Guidelines”). The Governance Guidelines set forth the practices the Board follows with respect to Board composition and selection, Board meetings, the performance evaluation and succession planning for DTE Energy’s Chief Executive Officer, Board committees, Board compensation and communicating with the Board, among other things. The Governance Guidelines are also intended to align the interests of directors and management with those of our shareholders. The following is a summary of the Governance Guidelines, along with other governance practices at DTE Energy.
Election of Directors and Vacancies
The Company has a declassified board of directors. Directors are elected annually for terms which expire upon election of their successor at the next year’s annual shareholder meeting.
If a vacancy on the Board occurs between annual shareholder meetings, the vacancy may be filled by a majority vote of the directors then in office. The new director’s term will expire upon election of their successor at the next year’s annual shareholder meeting.
Under the Governance Guidelines, the Corporate Governance Committee periodically assesses the skills, characteristics and composition of the Board, along with the need for expertise and other relevant factors as it deems appropriate. In light of these assessments, and in light of the standards set forth in the Governance Guidelines, the Corporate Governance Committee may seek candidates with specific qualifications and candidates who satisfy other requirements set by the Board. We believe our Board should be comprised of directors who have had high-level executive experience, have been directors on other boards and have been tested through economic downturns and crises. Industry experience, regional relationships and broad diversity of experience and backgrounds are also factors in Board nominee selection. The Board’s Governance Guidelines confirm that we believe it is desirable for Board members to possess diverse characteristics of gender, race, ethnicity and age, and we consider these factors in Board evaluation and in the identification of candidates for Board membership. We believe this type of composition enables the Board to oversee the management of the business and affairs of the Company effectively. Information about the skills, experiences and qualifications of our directors is included in their biographies beginning on page 6.
The Corporate Governance Committee considers candidates who have been properly nominated by shareholders, as well as candidates who have been identified by Board members and Company personnel. In addition, the Corporate Governance Committee may use a search firm to assist in the search for candidates and nominees and to evaluate the nominees’ skills against the Board’s criteria. Based on its review of all candidates, the Corporate Governance Committee recommends a slate of director nominees for election at the annual meeting of shareholders. The slate of nominees may include both incumbent and new nominees.

Potential candidates are reviewed and evaluated by the Corporate Governance Committee, and selected candidates go on to be interviewed by one or more Corporate Governance Committee members. An invitation to join the Board is extended by the Board itself, through the Chairman and the Chair of the Corporate Governance Committee.

During 2018, the Corporate Governance Committee screened director candidates and recommended to the Board that Valerie M. Williams be elected as a director. Ms. Williams was recommended as a potential candidate by an independent search firm. Ms. Williams was elected by the Board to serve for a term effective May 31, 2018 and expiring at the 2019 annual meeting.
Under our Bylaws, a group of up to 20 shareholders owning 3% or more of the Company’s outstanding common stock continuously for at least three (3) years may nominate and include in the Company’s proxy materials a candidate for the Board of Directors (a Shareholder Nominee), provided that the shareholder(s) and the nominee satisfy the requirements

12      DTE ENERGY 2019 PROXY STATEMENT

 



specified in the Bylaws. The total number of Shareholder Nominees that the Company must include in the Company’s proxy materials in a given year shall not exceed 20% of the number of directors in office at the time of the nomination.
Composition of the Board
Our Governance Guidelines and our Bylaws state that the exact size of the Board will be determined by resolution of the Board from time to time. Our Board currently has twelve members. As noted above, James B. Nicholson's retirement will be effective as of May 9, 2019, at which time the size of the Board will be reduced to eleven.
Director Independence and Categorical Standards
As a matter of policy and in accordance with New York Stock Exchange (“NYSE”) listing standards, we believe that the Board should consist of a majority of independent directors. The Board must affirmatively determine that a director has no material relationship with the Company, either directly or indirectly, or as a partner, shareholder or officer of an organization that has a relationship with the Company. The Board has established the following categorical standards for director independence, which are more stringent than the NYSE independence standards for former Company executives:
A director for whom any of the following is true will not be considered independent:
 
A director who is currently, or has been at any time in the past, an employee of the Company or a subsidiary.
A director whose immediate family member is, or has been within the last three years, an executive officer of the Company.
A director who receives, or whose immediate family member receives, more than $120,000 in direct compensation from the Company during any twelve-month period within the last three years, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
A director who is, or whose immediate family member is, a current partner of a firm that is the Company’s internal or external auditor; the director is a current employee of such a firm; the immediate family member is a current employee of such a firm and personally works on the Company’s audit; or the director or immediate family member was, within the last three years, a partner or employee of such a firm and personally worked on the Company’s audit within that time.
A director who is employed, or whose immediate family member is employed, or has been employed within the last three years, as an executive officer of another company where any of the Company’s present executives at the same time serves or served on that company’s compensation committee.
A director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues is not independent until three years after the company falls below such threshold.
Contributions by the Company to a tax-exempt organization will not be considered to be a material relationship that would impair a director’s independence if a director serves as an executive officer of a tax-exempt organization and, within the preceding three years, contributions in any single fiscal year were less than $1 million or 2% of such tax-exempt organization’s consolidated gross revenues (whichever is greater).
Applying these standards and considering all relevant facts and circumstances, the Board has affirmatively determined that all of our director nominees other than Gerard M. Anderson qualify as independent and have no material relationship with the Company. The independent directors are David A. Brandon, W. Frank Fountain, Jr., Charles G. McClure, Jr., Gail J. McGovern, Mark A. Murray, Ruth G. Shaw, Robert C. Scaggs, Jr., David A. Thomas, James H. Vandenberghe, and Valerie M. Williams. Mr. Anderson is not an independent director and may be deemed to be an affiliate of the Company under the categorical standards. Mr. Anderson is not considered independent due to his current employment as Chairman and Chief Executive Officer. There were no material relationships that the Board considered when determining the independence of the directors other than Mr. Anderson.

 
DTE ENERGY 2019 PROXY STATEMENT      13



Assessment of Board and Committee Performance
The Board evaluates its performance annually. In addition, each Board committee performs an annual self-assessment to determine its effectiveness. Each Board member also performs an intensive annual peer review of every other director who has served one year or more. The results of the Board and committee self-assessments are discussed with the Board and each committee, respectively. The results of the individual peer review are reviewed by the Chair of the Corporate Governance Committee and discussed with the Corporate Governance Committee. The Chair of the Corporate Governance Committee discusses the results of the peer review with individual directors, as directed by the Corporate Governance Committee.
Terms of Office
The Board has not established term limits for directors. We assure the independence and ongoing effectiveness of each independent director through the individualized peer assessment process described above, in which each Board member annually undergoes a rigorous evaluation by the other members. In addition, the Corporate Governance Committee of the Board has established policies that independent directors should not stand for election after attaining the age of 75, unless the Board waives this provision when circumstances exist which make it prudent to continue the service of the particular independent director. Directors who are retired CEOs of the Company or its subsidiaries shall not stand for election after attaining the age of 70. Except for the CEO, who may continue to serve as a director after retirement for so long as he is serving as Chairman, any other employees who are also directors will not stand for re-election after retiring from employment with the Company.
Election of the Chairman and the CEO; Lead Independent Director
Our Bylaws currently provide that the Chairman may simultaneously serve as the CEO of the Company and shall preside at all meetings of the Board. Our Bylaws also provide that the independent members of the Board may elect an independent director as Lead Independent Director, which has been our practice since 2004.
The Board believes it is in the best interests of the Company and shareholders for the Board to have flexibility in determining whether to separate or combine the roles of Chairman and Chief Executive Officer based on the Company’s circumstances. The Board has strong governance structures and processes in place to ensure the independence of the Board, eliminate conflicts of interest and prevent dominance of the Board by senior management. The Governance Guidelines and various committee charters provide for independent discussion among directors and for independent evaluation of, and communication with, many members of senior management.
The Board members have considerable experience and knowledge regarding the challenges and opportunities facing the Company and shareholders. The Board believes, therefore, that separating the roles of Chairman and Chief Executive Officer is unnecessary at this time. The Board believes that Mr. Anderson is well qualified through his experience and expertise to be the person who generally sets the agenda for (subject to the approval of the Lead Independent Director) and leads Board discussions of strategic issues for the Company. Nevertheless, the Board will separate these functions when it considers the separation to be in the best interests of the Company and shareholders.
With both the Chairman and CEO positions held by Mr. Anderson, the Board continues to believe a good governance practice is to elect a Lead Independent Director from the independent directors. The Lead Independent Director has such responsibilities as required under the NYSE listing standards, as well as such other responsibilities as determined by the Board. The Lead Independent Director serves in that capacity until replaced. There is no defined term of office, and the assignment does not rotate among the directors. On September 18, 2014, the Board unanimously elected James B. Nicholson to serve as Lead Independent Director. When Mr. Nicholson's retirement becomes effective on May 9, 2019, the Board will elect a new Lead Independent Director. The Lead Independent Director’s duties include:
 
Calling regularly scheduled executive sessions; presiding at Board executive sessions of non-management directors or independent directors; and providing feedback regarding such sessions, as appropriate, to the Chairman and CEO;
Serving as the liaison between the Chairman and CEO and the independent directors;
Approving the general scope and type of information to be presented at Board meetings;
Reviewing shareholder communications addressed to the Board or to the Lead Independent Director;

14      DTE ENERGY 2019 PROXY STATEMENT

 



Making himself or herself available if requested by major shareholders, for direct consultation and communication with shareholders;
Organizing Board meetings in the absence of the Chairman and presiding at any session of the Board where the Chairman is not present;
Designating one or more directors as alternate members of any committee to replace an absent or disqualified member at any committee meeting, provided that, in the event an alternate member is designated for the Audit, Corporate Governance or Organization and Compensation Committee, the designate meets the Company’s categorical standards for director independence and SEC and NYSE requirements;
Consulting with the Chairman and CEO in the selection of topics to be discussed when developing the annual Board calendar;
Retaining independent advisors in consultation with the Board, on behalf of the Board as the Board determines to be necessary or appropriate;
Participating in the Organization and Compensation Committee’s annual review and approval of the CEO’s corporate goals and objectives and evaluation of the CEO’s performance;
Approving Board meeting agendas after consulting with the Chairman and CEO and the Corporate Secretary; and
Collaborating with the Chairman and CEO and the Corporate Secretary on scheduling Board and committee meetings and approving the schedule of Board and Committee meetings.
Board Meetings and Attendance
The Board met seven times in 2018. All of the incumbent directors attended at least 89% of the Board meetings and the meetings of the committees on which they served, six of whom had a 100% attendance record. The Board does not have a policy with regard to directors’ attendance at the annual meeting of shareholders. All twelve directors standing for election at the 2018 annual meeting attended.
Executive Sessions
It is the Board’s practice that the independent directors meet in executive session at most regular Board meetings and meet in executive session at other times whenever they believe it appropriate. The independent directors met in executive sessions (sessions without the Chairman and CEO or any representatives of management present) at six of the seven Board meetings in 2018. The independent directors meet in executive session on an annual basis to review the Organization and Compensation Committee’s performance review of the CEO. The Lead Independent Director chairs the executive sessions of the independent directors.
Codes of Business Conduct and Ethics
The DTE Energy Board of Directors Code of Business Conduct and Ethics, the Officer Code of Business Conduct and Ethics and the DTE Energy Way are the standards of behavior for Company directors, officers and employees. Any waiver of, or amendments to, the Board of Directors Code of Business Conduct and Ethics and the Officer Code of Business Conduct and Ethics as it pertains to the CEO, the Chief Financial Officer, senior financial officers and other Executive Officers, as defined in the “Security Ownership of Directors and Officers” section on page 25, will be disclosed promptly by posting such waivers or amendments on the Company website, dteenergy.com. There were no waivers or amendments during 2018.

 
DTE ENERGY 2019 PROXY STATEMENT      15



Communications with the Board
The Company has established several methods for shareholders or other non-affiliated persons to communicate their concerns to the directors. Concerns regarding auditing, accounting practices, internal controls, or other business ethics issues may be submitted to the Audit Committee through its reporting channel:
By telephone:
By Internet:
By mail:
877-406-9448
ethicsinaction.dteenergy.com
For auditing, accounting, or internal control matters:
For business ethics issues:
 
 
DTE Energy Company
DTE Energy Company
 
 
Audit Committee
Ethics and Employee Issues
 
 
One Energy Plaza
One Energy Plaza
 
 
Room 2431 WCB
Room 2188 WCB
 
 
Detroit, Michigan 48226-1279
Detroit, Michigan 48226-1279
Any other concern may be submitted to the Corporate Secretary by mail for prompt delivery to the Lead Independent Director at:
Lead Independent Director
c/o Corporate Secretary
DTE Energy Company
One Energy Plaza
Room 2386 WCB
Detroit, Michigan 48226-1279
Periodically, we revise our governance information in response to changing regulatory requirements and evolving corporate governance developments. Current copies of the Governance Guidelines, committee charters, categorical standards of director independence and the codes of ethics referred to above are available on our website at dteenergy.com/governance. You can also request a copy of any or all of these documents and a copy of the Company’s Annual Report on Form 10-K, free of charge, by mailing your request to the Corporate Secretary, DTE Energy Company, One Energy Plaza, Room 2386 WCB, Detroit, Michigan 48226-1279.
The information on the Company’s website is not, and shall not be deemed to be, a part of this proxy statement or incorporated into any other filings the Company makes with the SEC.

Committees of the Board of Directors
The Board has standing committees for Audit, Corporate Governance, Finance, Nuclear Review, Organization and Compensation, and Public Policy and Responsibility. The Board committees act in an advisory capacity to the full Board, except that the Organization and Compensation Committee has direct responsibility for the CEO’s goals, performance and compensation along with compensation of other executives, and the Audit Committee has direct responsibility for appointing, replacing, compensating and overseeing the independent registered public accounting firm. Each committee has adopted a charter that clearly establishes the committee’s respective roles and responsibilities. In addition, each committee has authority to retain independent outside professional advisors or experts as it deems advisable or necessary, including the sole authority to retain and terminate any such advisors, to carry out its duties. The Board has determined that each member of the Audit, Corporate Governance, and Organization and Compensation Committees is independent under our categorical standards and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment. The Board has determined that each member of the Audit Committee meets the independence requirements under the SEC rules and NYSE listing standards applicable to audit committee members. The Board has also determined that each member of the Organization and Compensation Committee meets the independence requirements under the SEC rules and NYSE listing standards applicable to compensation committee members.

16      DTE ENERGY 2019 PROXY STATEMENT

 



The following is a summary of the terms of each committee’s charter and the responsibilities of its members:
Audit Committee (Six meetings in 2018)
 
Assists the Board in its oversight of the quality and integrity of our accounting, auditing and financial reporting practices and the independence of the independent registered public accounting firm.
Reviews scope of the annual audit and the annual audit report of the independent registered public accounting firm.
Reviews financial reports, internal controls and financial and accounting risk exposures.
Discusses with management (a) earnings press releases and (b) material financial information and earnings guidance.
Reviews the policies, programs, performance and activities relating to the Company’s compliance and ethics programs.
Reviews accounting policies and system of internal controls.
Assumes responsibility for the appointment, replacement, compensation and oversight of the independent registered public accounting firm.
Reviews and pre-approves permitted non-audit functions performed by the independent registered public accounting firm.
Reviews the scope of work performed by the internal audit staff.
Reviews legal or regulatory requirements or proposals that may affect the committee’s duties or obligations.
Retains independent outside professional advisors, as needed.
The Board has determined that each member of the Audit Committee is financially literate and independent. The Board has reviewed the qualifications and experience of each of the Audit Committee members and determined that Ms. Williams and Messrs. Fountain and Vandenberghe qualify as “audit committee financial experts” as that term has been defined by the SEC.
Corporate Governance Committee (Five meetings in 2018)
 
Considers the organizational structure of the Board.
Identifies and reports to the Board risks associated with the Company’s governance practices and the interaction of the Company’s governance with enterprise risk management.
Recommends the nominees for directors to the Board.
Reviews recommended compensation arrangements for the Board, director and officer indemnification and insurance for the Board.
Reviews recommendations for director nominations received from shareholders.
Reviews shareholder proposals and makes recommendations to the Board regarding the Company’s response.
Reviews best practices in corporate governance and recommends corporate and Board policies/practices, as appropriate.
Retains independent outside professional advisors, as needed.
Finance Committee (Six meetings in 2018)
 
Reviews matters related to capital structure.
Reviews major financing plans.
Recommends dividend policy to the Board.
Reviews financial planning policies and investment strategy.
Reviews certain capital expenditures.
Reviews insurance and business risk management.
Receives reports on the strategy, investment policies, adequacy of funding and performance of post-retirement obligations.
Reviews certain potential mergers, acquisitions and divestitures.
Reviews investor relations activities.
Retains independent outside professional advisors, as needed.

 
DTE ENERGY 2019 PROXY STATEMENT      17



Nuclear Review Committee (Six meetings in 2018)
 
Provides non-management oversight and review of the Company’s nuclear power program.
Reviews the financial, operational and business and safety plans and performance at the Company’s nuclear facilities.
Reviews the policies, procedures and practices related to health and safety, potential risks, resources and compliance at the Company’s nuclear facilities.
Reviews the operating performance and key performance indicators and trends for the Company’s nuclear facilities.
Reviews non-financial audit findings related to the Company’s nuclear facilities or personnel.
Reviews the impact of changes in regulation on the Company’s nuclear facilities.
Retains independent outside professional advisors, as needed.

Organization and Compensation Committee (Four meetings in 2018)
 
Reviews the CEO’s performance and approves the CEO’s compensation.
Approves the compensation of certain other executives.
Administers the executive incentive plans and oversees the Company’s overall executive compensation and benefit plan philosophy, structure and practices, and the risks involved in executive compensation plans.
Reviews and approves executive employment agreements, severance agreements and change-in-control agreements, along with any amendments to those agreements.
Assesses and discusses with the Board the relationship between the inherent risk in executive compensation plans, executive compensation arrangements and executive performance goals and payouts, and how the level of risk corresponds to the Company’s business strategies.
Reviews the Compensation Disclosure and Analysis disclosure and recommends inclusion in the Company’s annual report or proxy statement.
Reviews the Company’s policies and programs promoting diversity and inclusion among the Company’s employees and officers.
Recommends to the full Board the officers to be elected by the Board.
Reviews succession and talent planning.
Evaluates the independence of the independent compensation consultant at least annually.
Reviews and discusses with management transactions with the independent compensation consultant or its affiliates.
Retains independent outside professional advisors, as needed.
Public Policy and Responsibility Committee (Five meetings in 2018)
 
Reviews and advises the Board on current and emerging social, economic, political and environmental issues.
Reviews management’s response to risk exposures related to regulatory, social, economic, political, reputational and environmental issues and advises the Board on management’s procedures for assessing, monitoring, controlling and reporting on such exposures.
Reviews the Company's programs and strategies related to environmental sustainability.
Reviews the Company’s policies on social responsibilities.
Reviews the Company’s policies and programs promoting diversity and inclusion among the Company’s suppliers.
Reviews the Company’s regulatory strategies and activities (including rate case strategies, rate competitiveness and environmental regulations) as well as its state and federal legislative and political activities and strategies.
Reviews reports from management regarding policies and safety issues related to customers and the general public.
Retains independent outside professional advisors, as needed.

18      DTE ENERGY 2019 PROXY STATEMENT

 



Board of Directors Risk Oversight Functions
The Board receives, reviews and assesses reports from the Board committees and from management relating to enterprise-level risks. Each Board committee is responsible for overseeing and considering risk issues relating to their respective committee and reporting their assessments to the full Board at each regularly scheduled Board meeting. When granting authority to management, approving strategies and receiving management reports, the Board and committees consider, among other things, the risks we face.
Each Board committee reviews management’s assessment of risk for that committee’s respective area of responsibility. As part of its oversight function, the Board discusses any risk conflicts that may arise between the committees or assigns to a committee risk issues that may arise which do not fall within a specific committee’s responsibilities.
Board Committee
 
Areas of Risk Oversight
Audit Committee
 
Overall review of risk issues, policies and controls associated with our overall financial reporting and disclosure process and legal compliance, and review policies on risk control assessment and accounting risk exposure, as well as cybersecurity risk.
Finance Committee
 
Review of financial, capital, credit and insurance risk.
Organization and Compensation Committee
 
Assess and discuss with the Board the relationship between the inherent risks in executive compensation plans, executive compensation arrangements and executive performance goals and payouts, and how the level of risk corresponds to the Company’s business strategies.
Corporate Governance Committee
 
Review risks associated with the Company’s governance practices and the interaction of the Company’s governance with enterprise risk-level management.
Nuclear Review Committee
 
Review risks relating to the operation of our nuclear power facilities.
Public Policy and Responsibility Committee
 
Review risks associated with regulatory, social responsibility, political activity, economic conditions, reputation, safety and the environment.
All Board committees meet periodically with members of senior management to discuss the relevant risks and challenges facing the Company. In addition to its regularly scheduled Committee meetings, the Audit Committee meets with the Chief Financial Officer, the General Auditor and the independent registered public accounting firm in executive sessions at least semi-annually, and meets with the General Counsel and the Chief Compliance Officer at least annually in separate executive sessions. The Company’s General Auditor attends all Audit Committee meetings. The Treasurer and Chief Risk Officer meets annually with either the Audit Committee or the full Board to update the members on the Company’s enterprise-level risk management. The General Auditor and the Treasurer and Chief Risk Officer also periodically meet with the other Board committees and the full Board as may be required.
The Company also utilizes an internal Risk Management Committee, chaired by the Chairman and CEO and comprised of the Chief Operating Officer, Chief Financial Officer, Chief Administrative Officer, General Counsel, Treasurer and Chief Risk Officer, General Auditor and other senior officers. Among other things, the internal Risk Management Committee directs the development and maintenance of comprehensive risk management policies and procedures, and sets, reviews and monitors risk limits on a regular basis for enterprise-level risks, counter-party credit and commodity-based exposures.
The Board believes that the committee structure of risk oversight is in the best interests of the Company and its shareholders. Each committee member has expertise on risks relative to the nature of the committee on which he or she sits. With each committee reporting on risk issues at full Board meetings, the entire Board is in a position to assess the overall risk implications, to evaluate how they may affect the Company and to provide oversight on appropriate actions for management to take.
With regard to risk and compensation programs and policies, the Company’s Energy Trading segment has compensation programs and policies that are structured differently from those in other units within the Company. These compensation programs and policies are designed to discourage excessive risk taking by the Energy Trading employees and are subject to specific written policies and procedures administered by members of the Company’s senior management. The Company has determined that the Energy Trading compensation programs and policies do not create risks that are reasonably likely to have a material adverse effect on the Company.

 
DTE ENERGY 2019 PROXY STATEMENT      19




Board of Directors Compensation

Elements of Director Compensation
Employee directors receive no payment for service as directors. The goal of our compensation policies for non-employee directors is to tie their compensation to your interests as shareholders. Accordingly, approximately 50% of a director’s annual compensation is in the form of equity-based compensation, including phantom shares of our common stock. Generally, the compensation program for non-employee directors is reviewed on an annual basis by the Corporate Governance Committee and the Board. This review includes a review of a comparative peer group of companies that is identical to the peer group used to review executive compensation (See “Executive Compensation—Compensation Discussion and Analysis” beginning on page 31). Based on its December 2018 review, the Board made no modifications to the existing compensation program.
Cash Compensation
 
 
Cash retainer
 
$120,000 annually
Lead Independent Director retainer
 
$25,000 annually
Committee chair retainer
 
$20,000 annually for Audit Committee Chair; $15,000 annually for Corporate Governance, Finance, Nuclear Review, Organization and Compensation, and Public Policy and Responsibility Committee Chairs
New Member Orientation/Mentor Program
 
$1,250 and $750 quarterly for the New Member and Mentor, respectively, for the duration of the orientation
Equity Compensation
 
 
Upon first election to the Board
 
1,000 shares of restricted DTE Energy common stock
Annual equity compensation
 
A variable number of phantom shares of DTE Energy common stock valued at $130,000 annually, with the actual number of phantom shares to be granted each year determined based on the closing price of the Company’s common stock on the first business day of each calendar year(1)
(1)
Phantom shares of DTE Energy common stock are credited to each non-employee director’s account in January of each year. Phantom share accounts are also credited with dividend equivalents which are reinvested into additional phantom shares. For phantom shares granted after 2004, payment of the cash value is made three years after the date of grant unless otherwise deferred by voluntary election of the director. For phantom shares granted before 2005, payment of the cash value occurs only after the date a director terminates his or her service on the Board.

Payment of Non-Employee Director Fees and Expenses
Retainers for non-employee directors are either (i) payable in cash or (ii) at the election of the director, deferred into an account pursuant to the DTE Energy Company Plan for Deferring the Payment of Directors’ Fees. Non-employee directors may defer up to 100% of their annual retainer into an unfunded deferred compensation plan. Deferred fees may accrue for future payment, with interest accrued monthly at the 5-year U.S. Treasury Bond rate as of the last business day of each month or, at the election of the director, they may be invested in phantom shares of our common stock with all dividend equivalents reinvested.
In addition to the retainers, non-employee directors are reimbursed for their travel expenses incurred in attending Board and committee meetings, along with reimbursement for fees and expenses incurred when attending director education seminars or special meetings requested by management. Non-employee directors of the Company, along with full-time active employees and retirees, are also eligible to participate in the DTE Energy matching gift program, whereby the DTE Energy Foundation matches certain charitable contributions.

20      DTE ENERGY 2019 PROXY STATEMENT

 



Director Life Insurance
The Company provides each non-employee director with group term life insurance in the amount of $20,000 and travel accident insurance in the amount of $100,000.
Director Stock Ownership
We have established stock ownership guidelines for non-employee directors to more closely tie their interests to those of shareholders. Under these guidelines, the Board requires that each director own shares of the Company’s common stock beginning no later than 30 days after election to the Board. In addition, directors are required to own, within five years after initial election to the Board, shares of Company stock having a value equal to two times the sum of a director’s annual cash retainer plus the value of a director’s annual phantom stock compensation. Based on the 2018 director compensation program, a director with five years of service will be required to hold a minimum of $500,000 in stock under these guidelines. This ownership requirement is greater than four times the amount of a director’s cash retainer under the 2019 compensation program. Common stock, time-based restricted stock and phantom shares held by a director are counted toward fulfillment of this ownership requirement. As of December 31, 2018, all directors met the initial common stock ownership requirement and all those directors who have served as a director for at least five years after their initial election fulfilled the five-year requirement.

 
DTE ENERGY 2019 PROXY STATEMENT      21



2018 Director Compensation Table
The following table details the compensation earned in 2018 by each of the non-employee directors:
Name
 
Fees Earned or Paid in Cash ($)(1)
 
Stock Awards ($)(2)
 
All Other Compensation ($)(3)
 
Total ($)
 David A. Brandon
 
135,000

 
130,000

 
5,305

 
270,305

 W. Frank Fountain, Jr.
 
135,000

 
130,000

 
494

 
265,494

 Charles G. McClure, Jr.
 
120,000

 
130,000

 
5,305

 
255,305

 Gail J. McGovern
 
120,000

 
130,000

 
5,305

 
255,305

 Mark A. Murray
 
127,500

 
130,000

 
5,158

 
262,658

 James B. Nicholson (retiring)
 
146,500

 
130,000

 
5,494

 
281,994

 Charles W. Pryor, Jr. (retired)
 
67,500

 
130,000

 
7,575

 
205,075

 Josue Robles, Jr. (retired)
 
140,000

 
130,000

 
165

 
270,165

 Ruth G. Shaw 
 
136,750

 
130,000

 
494

 
267,244

 Robert C. Skaggs, Jr.
 
122,500

 
130,000

 
6,158

 
258,658

 David A. Thomas
 
120,000

 
130,000

 
158

 
250,158

 James H. Vandenberghe
 
135,000

 
130,000

 
5,305

 
270,305

 Valerie M. Williams
 
72,917

 
102,430

 
92

 
175,439


(1)
The following table provides a detailed breakdown of the fees earned or paid in cash:
 
 
Fees Earned or Paid in Cash
Name
 
Board     
Retainer ($)     
 
Lead Independent Director/Committee Chair Retainers ($)
 
New Member Orientation/Mentor Program Fees ($)
 
Total ($)

 David A. Brandon
 
120,000

 
15,000

 

 
135,000

 W. Frank Fountain, Jr. 
 
120,000

 
15,000

 

 
135,000

 Charles G. McClure, Jr. 
 
120,000

 

 

 
120,000

 Gail J. McGovern 
 
120,000

 

 

 
120,000

 Mark A. Murray 
 
120,000

 
7,500

 

 
127,500

 James B. Nicholson 
 
120,000

 
25,000

 
1,500

 
146,500

 Charles W. Pryor, Jr. 
 
60,000

 
7,500

 

 
67,500

 Josue Robles, Jr. 
 
120,000

 
20,000

 

 
140,000

 Ruth G. Shaw 
 
120,000

 
15,000

 
1,750

 
136,750

Robert C. Skaggs, Jr.
 
120,000

 

 
2,500

 
122,500

 David A. Thomas 
 
120,000

 

 

 
120,000

 James H. Vandenberghe 
 
120,000

 
15,000

 

 
135,000

 Valerie M. Williams
 
70,000

 

 
2,917

 
72,917


Messrs. Brandon and Vandenberghe elected to defer 100% and Mr. Nicholson elected to defer 50% of the fees detailed above into the DTE Energy Company Plan for Deferring the Payment of Directors’ Fees.

(2)
These amounts represent the dollar amounts of compensation cost for 2018 in accordance with ASC Topic 718 and, as such, include costs recognized in the financial statements with respect to phantom shares and shares of restricted stock granted. Because the phantom shares are 100% vested (with a mandatory three-year deferral) on the grant date, the ASC Topic 718 expense equals the grant date fair value as of January 2, 2018. The grant date fair value of $108.45 was the closing price of the Company stock on January 2, 2018. For all of the non-employee directors except Ms. Williams, this amount is $130,000 in phantom shares of DTE Energy stock granted on January 2, 2018, subject to a three-year payment deferral. Based on the grant date fair value of $108.45, this grant equated to a grant of 1,200 phantom shares. For Ms. Williams, this amount is the value of 1,000 shares of restricted stock granted on May 31, 2018. For this award, the grant date fair value of $102.43 was the closing price on May 31, 2018.

22      DTE ENERGY 2019 PROXY STATEMENT

 



Outstanding equity awards as of December 31, 2018 are as follows: 
Name
 
Phantom Shares in Equity Plan
 
Phantom Shares in Deferred Fee Plan
 
Restricted Stock
David A. Brandon
 
4,314

 
6,398

 

W. Frank Fountain, Jr.
 
23,410

 
13,472

 
 

Charles G. McClure, Jr.
 
4,314

 
609

 
 

Gail J. McGovern
 
31,127

 
 

 
 

Mark A. Murray
 
4,314

 
609

 
 

James B. Nicholson
 
9,734

 
6,050

 
 

Charles W. Pryor, Jr.
 
20,989

 
 

 
 

Josue Robles, Jr.
 
6,193

 
 

 
 

Ruth G. Shaw
 
4,314

 
 

 
 

Robert C. Skaggs, Jr.
 
1,230

 

 
1,000

David A. Thomas
 
4,314

 
 

 

James H. Vandenberghe
 
4,314

 
5,448

 
 

Valerie M. Williams
 

 

 
1,000

(3)
This amount is the total of the premiums paid for the group-term life insurance provided to the non-employee directors by the Company and all contributions made by the DTE Energy Foundation under the Company matching program. For Mr. Pryor, the amount also includes personal use of the corporate aircraft.

Information on Company Executive Officers
Under our Bylaws, the officers of DTE Energy are elected annually by the Board of Directors, each to serve until his/her successor is elected and qualified, or until his/her resignation or removal. The current executive officers of the Company elected by the Board are as follows:
Name
 
Age(1)
 
Present Position
 
Present
Position
Held Since
Gerard M. Anderson
 
60
 
Chairman of the Board and Chief Executive Officer
 
12/30/2013
 
Trevor F. Lauer
 
54
 
President and Chief Operating Officer, DTE Electric Company
 
4/4/2016
(2)
David E. Meador
 
62
 
Vice Chairman and Chief Administrative Officer
 
1/1/2014
 
Lisa A. Muschong
 
49
 
Vice President, Corporate Secretary and Chief of Staff
 
11/2/2015
(2)
Gerardo Norcia
 
56
 
President and Chief Operating Officer, DTE Energy Company
 
4/4/2016
(2)
Peter B. Oleksiak
 
52
 
Senior Vice President and Chief Financial Officer
 
1/1/2014
 
Bruce D. Peterson
 
62
 
Senior Vice President and General Counsel
 
6/25/2002
 
Mark C. Rolling
 
51
 
Vice President, Controller and Chief Accounting Officer
 
3/4/2019
(2)
David Ruud
 
52
 
President-Power and Industrial
 
12/30/2013
 
David Slater
 
53
 
President-DTE Gas Storage and Pipelines
 
10/2/2014
(2)
Mark W. Stiers
 
56
 
President & Chief Operating Officer, DTE Gas Company
 
12/30/2013
 
 
(1)
As of March 14, 2019.
(2)
These executive officers have held various other positions at DTE Energy for five or more years.
Compensation Committee Interlocks and Insider Participation
During 2018, the Organization and Compensation Committee consisted of Dr. Shaw, Messrs. Brandon and Nicholson and Ms. McGovern. No member of the Organization and Compensation Committee serves as an officer or employee of the Company or any of its subsidiaries nor has any member of the Organization and Compensation Committee formerly served as an officer of the Company or any of its subsidiaries. During 2018, none of the executive officers of the Company served on the board of directors or on the compensation committee of any other entity, any of whose executive officers served either on the Board or on the Organization and Compensation Committee of the Company.

 
DTE ENERGY 2019 PROXY STATEMENT      23




Indemnification and Liability
Pursuant to Article VI of our Articles of Incorporation, to the fullest extent permitted by law, no director of the Company shall be personally liable to the Company or its shareholders for any acts or omissions in the performance of his/her duties.
Article VII of our Articles of Incorporation provides that each person who is or was or had agreed to become a director or officer, or each person who is or was serving or who had agreed to serve at the request of the Board as an employee or agent of the Company, or as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including heirs, executors, administrators or estate of such person), shall be indemnified by the Company to the fullest extent permitted by law. We have entered into indemnification agreements with each of our directors and executive officers. These agreements require the Company to indemnify such individuals for certain liabilities to which they may become subject as a result of their affiliation with the Company.
The Company, the directors and officers in their capacities as such are insured against liability for alleged wrongful acts (to the extent defined) under twelve insurance policies providing aggregate coverage in the amount of $255 million.

24      DTE ENERGY 2019 PROXY STATEMENT

 



Security Ownership of Directors and Officers

The following table sets forth information as of December 31, 2018, with respect to beneficial ownership of common stock, phantom stock, performance shares and options exercisable within 60 days for (i) each of our directors and nominees for director, (ii) our Chairman and Chief Executive Officer, Senior Vice President and Chief Financial Officer and the three other highest paid executive officers (together, the “Named Executive Officers”), and (iii) all executive officers and directors as a group. Executive officers for this purpose are those individuals defined as executive officers under Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Unless otherwise indicated, each of the named individuals has sole voting and/or investment power over the shares identified. To our knowledge, no member of our management team or director was a beneficial owner of one percent or more of the outstanding shares of common stock as of December 31, 2018.
Amount and Nature of Beneficial Ownership as of December 31, 2018
Name of Beneficial Owners
 
Common Stock(1)
 
 
 
Phantom Stock(2)
 
Options Exercisable
Within 60 Days
 
Other Shares That May Be Acquired(3)
Gerard M. Anderson
 
517,713

 
 
 
13,408

 
32,500

 
173,283

David A. Brandon
 
1,000

 
 
 
10,712

 

 

W. Frank Fountain, Jr.
 
1,000

 
 
 
36,382

 

 

Charles G. McClure, Jr.
 
1,000

 
 
 
4,923

 

 

Gail J. McGovern
 

 
 
 
31,127

 

 

Mark A. Murray
 
1,000

 
 
 
4,923

 

 

James B. Nicholson
 
4,200

 
 
 
15,784

 

 

Ruth G. Shaw
 
3,500

 
 
 
4,314

 

 

Robert C. Skaggs, Jr.
 
1,000

 
 
 
1,230

 

 

David A. Thomas
 
1,673

 
 
 
4,314

 

 

James H. Vandenberghe

 
2,000

 
 
 
9,762

 

 

Valerie M. Williams
 
1,000

 
 
 

 

 

Trevor F. Lauer
 
14,767

 
 
 
1,301

 

 
22,520

David E. Meador
 
150,671

 
 
 

 

 
39,699

Gerardo Norcia
 
132,012

 
 
 
1,330

 

 
54,936

Peter B. Oleksiak
 
29,295

 
 
 

 

 
33,793

Directors and Executive Officers as a group — 22 persons
 
1,003,060

 
 
 
140,463

 
32,500

 
397,578

 
(1)
Includes directly held common stock, restricted stock and shares held pursuant to the DTE Energy Company Savings and Stock Ownership Plan (tax-qualified 401(k) plan).

(2)
Shares of phantom stock are acquired as follows: (a) by non-employee directors (i) as compensation under the DTE Energy Company Deferred Stock Compensation Plan for Non-Employee Directors and (ii) through participation in the DTE Energy Company Plan for Deferring the Payment of Directors’ Fees and (b) by executive officers pursuant to the (i) DTE Energy Company Supplemental Savings Plan and (ii) DTE Energy Company Executive Supplemental Retirement Plan. Shares of phantom stock may be paid out in either cash or stock.

(3)
Represents performance shares under the Long-Term Incentive Plan (as described beginning on page 42) that entitle the executive officers to receive shares or cash equivalents (or a combination thereof) in the future if certain performance measures are met. The number of performance shares reflected in the table assumes that target levels of performance are achieved and includes an increase from the original grant amount, assuming full dividend reinvestment at the fair market value on each dividend payment date. Performance shares are not currently outstanding shares of our common stock and are subject to forfeiture if the performance measures are not achieved over a designated period of time. Executive officers do not have voting or investment power over the performance shares until performance measures are achieved. See the discussion in “Long-Term Incentives - Performance Shares Granted in 2018” beginning on page 42.

 
DTE ENERGY 2019 PROXY STATEMENT      25



Prohibition on Pledging and Hedging Company Securities
The Company maintains policies which expressly prohibit hedging Company securities by all employees, executive officers and directors of the Company and its subsidiaries. For purposes of these policies, hedging includes purchases and sales of derivatives or any monetization transaction involving DTE securities that has the effect of limiting or eliminating the full risks of ownership of DTE securities. Our directors and officers are also prohibited from pledging their shares of Company stock as collateral for any loan or indebtedness. This prohibition includes, but is not limited to, holding such shares in a margin account.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and certain 10% shareholders (if any) to file reports of ownership and changes in ownership with respect to our securities with the SEC and to furnish copies of these reports to us. We reviewed the filed reports and written representations from our directors and executive officers regarding the necessity of filing reports.
Based upon our review, all of our current executive officers’ and directors’ required Section 16 filings during 2018 were filed on a timely basis.

Security Ownership of Certain Beneficial Owners
The following table sets forth information regarding the only persons or groups known to the Company to be beneficial owners of more than 5% of our outstanding common stock.
Title of Class
 
Name and Address of Beneficial Owner
 
Amount and Nature of Beneficial Ownership
 
 
Percent    
of Class    
Common Stock
 
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, Pennsylvania 19355
 
20,388,434

(1)
 
11.2
%
Common Stock
 
Capital World Investors
333 South Hope Street
Los Angeles, California 90071
 
18,193,148

(2)
 
10.0
%
Common Stock
 
BlackRock, Inc.
55 East 52nd Street
New York, New York 10055
 
15,212,035

(3)
 
8.4
%
Common Stock
 
State Street Corporation
One Lincoln Street
Boston, Massachusetts 02111
 
9,179,977

(4)
 
5.0
%

(1)
Based on information contained in Schedule 13G/A filed on February 11, 2019. Shares listed as beneficially owned by Vanguard are owned by the following entities: The Vanguard Fiduciary Trust Company, Vanguard Investments Australia, Ltd. and The Vanguard Group, Inc. The Vanguard Group, Inc. has sole voting power with respect to 208,302 shares, sole dispositive power with respect to 20,116,239 shares, shared dispositive power with respect to 272,195 shares and is deemed to beneficially own 20,388,434 shares.

(2)
Based on information contained in Schedule 13G filed on February 14, 2019. Capital World Investors has sole dispositive power with respect to 18,193,148 shares, sole voting power with respect to 18,193,148 shares, and is deemed to beneficially own 18,193,148 shares.

(3)
Based on information contained in Schedule 13G/A filed on February 4, 2019. Shares listed as beneficially owned by BlackRock are owned by the following entities: BlackRock Life Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., iShares (DE) I Investmentaktiengesellschaft mit Teilgesellschaftsvermogen, BlackRock Japan Co., Ltd, BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, and BlackRock Investment Management (UK)

26      DTE ENERGY 2019 PROXY STATEMENT

 



Limited. BlackRock Inc. has sole dispositive power with respect to 15,212,035 shares, sole voting power with respect to 13,657,433 shares, and is deemed to beneficially own 15,212,035 shares.

(4)
Based on information contained in Schedule 13G filed on February 14, 2019. Shares listed as beneficially owned by State Street are owned by the following entities: SSGA Funds Management, Inc., State Street Global Advisors Limited (UK), State Street Global Advisors Ltd (Canada), State Street Global Advisors, Australia Limited, State Street Global Advisors (Japan) Co., LTD., State Street Global Advisors (Asia) LTD., State Street Global Advisors Singapore LTD., State Street Global Advisors GmbH, State Street Global Advisors Ireland Limited, and State Street Global Advisor Trust Company. State Street Corporation has shared voting power with respect to 8,451,100 shares, shared dispositive power with respect to 9,162,117 shares, and is deemed to beneficially own 9,179,977 shares.

Certain Relationships and Related Transactions
Related-person transactions have the potential to create actual or perceived conflicts of interest. The Company has policies in place to address related-party transactions. In addition, our Corporate Governance Committee and Audit Committee review potential dealings or transactions with related parties. In conducting such reviews, the committees consider various factors they deem appropriate, which may include (i) the identity of the related party and his or her relationship to the Company, (ii) the nature and size of the transaction, including whether it involved the provision of goods or services to the Company that are unavailable from unrelated third parties and whether the transaction is on terms that are comparable to the terms available from unrelated third parties, (iii) the nature and size of the related party’s interest in the transaction, (iv) the benefits to the Company of the transaction and (v) whether the transaction could involve an apparent or actual conflict of interest with the Company.
In general, employees and directors may not be involved in a business transaction where there is a conflict of interest with the Company. The DTE Energy Way requires non-officer employees to report conflicts of interest or potential conflicts of interest to their respective superiors; the Officer Code of Conduct and Ethics requires officers to report conflicts of interest or potential conflicts of interest to the Company’s General Counsel or to the Company’s Board of Directors; and the Board of Directors Code of Business Conduct and Ethics requires directors to disclose conflicts of interest or potential conflicts of interest to the Company’s Corporate Governance Committee or the Chairman of the Board. For directors and officers, any waivers of the Company’s conflict of interest policy must be approved by the Board or a Board committee, as required under the Officer Code of Conduct and Ethics or Board of Directors Code of Business Conduct and Ethics, disclosed to shareholders and posted to our website at dteenergy.com/ethics.

Proposal No. 2 — Ratification of Appointment of Independent Registered Public Accounting Firm
Subject to ratification by the shareholders, the Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2019 and to perform other audit-related services. Following the Audit Committee’s appointment, the Board voted unanimously to recommend that our shareholders vote to ratify the Audit Committee’s selection of PwC as our independent auditors for 2019.
The reports of PwC on the consolidated financial statements of DTE Energy for the year ended December 31, 2018 and for the year ended December 31, 2017 did not contain adverse opinions or a disclaimer of opinions and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company’s two most recent fiscal years, ended December 31, 2018 and 2017, and from January 1, 2019 through February 7, 2019, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to PwC’s satisfaction, would have caused PwC to make reference to the subject matter of such disagreements in connection with its reports on the Company’s consolidated financial statements for such years.

 
DTE ENERGY 2019 PROXY STATEMENT      27



During the Company’s two most recent fiscal years, ended December 31, 2018 and 2017 and from January 1, 2019 through February 7, 2019, there were no “reportable events” as defined under Item 304(a)(1)(v) of Regulation S-K.
Representatives of PwC will be present at the annual meeting and will be afforded an opportunity to make a statement, if they desire, and to respond to appropriate questions from shareholders.
Fees to the Independent Registered Public Accounting Firm
The following table presents fees for professional services rendered by PwC for the audit of the Company’s consolidated annual financial statements for the years ended December 31, 2018 and December 31, 2017, and fees billed for other services rendered by PwC during those periods.
 
2018
 
2017
Audit fees(1)
$
7,173,518

 
$
7,501,916

Audit-related fees(2)
587,507

 
390,092

Tax fees(3)
217,836

 
282,240

All other fees(4)
2,117,297

 
3,003,472

Total
$
10,096,158

 
$
11,177,720

 
(1)
Represents fees for professional services performed by PwC for the audits of the Company’s consolidated annual financial statements included in the Company’s Form 10-K, review and audit of the Company’s internal control over financial reporting, the review of consolidated financial statements included in the Company’s Form 10-Q filings, and services that are normally provided in connection with regulatory filings or engagements. Audit fees are presented on an Audit Year basis in accordance with SEC guidelines and include an estimate of fees incurred for the most recent Audit Year.
(2)
Represents the aggregate fees billed for audit-related services and various attest services.
(3)
Represents fees billed for tax services, including tax reviews and planning.
(4)
Represents consulting services for the purpose of providing advice and recommendations.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Consistent with SEC policies regarding the independence of the registered public accounting firm, the Audit Committee is responsible for appointing, approving professional service fees of, and overseeing the work of the independent registered public accounting firm. The Audit Committee has established a policy regarding pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm.
Prior to engaging the independent registered public accounting firm to perform specific services, the Audit Committee pre-approves these services by category of service. The Audit Committee may delegate to the Chair of the Audit Committee, or to one or more other designated members of the Audit Committee, the authority to grant pre-approvals of all permitted services or classes of these permitted services to be provided by the independent registered public accounting firm up to, but not exceeding, a pre-defined limit. The decisions of the designated member to pre-approve a permitted service are reported to the Audit Committee at each scheduled meeting. At least quarterly, the Audit Committee reviews:
 
A report summarizing the services, or groupings of related services, including fees, provided by the independent registered public accounting firm.
A listing of new services requiring pre-approval, if any.
As appropriate, an updated projection for the current fiscal year, presented in a manner consistent with the proxy disclosure requirements, of the estimated annual fees to be paid to the independent registered public accounting firm.
All audit, audit-related, tax and other services performed by PwC were pre-approved by the Audit Committee in accordance with the regulations of the SEC. The Audit Committee considered and determined that the provision of the non-audit services by PwC during 2018 was compatible with maintaining independence of the registered public accounting firm.

28      DTE ENERGY 2019 PROXY STATEMENT

 




Report of the Audit Committee
The purpose of the Audit Committee is to assist the Board’s oversight of the integrity of the Company’s consolidated financial statements, the Company’s compliance with legal and regulatory requirements, the Company’s independent registered public accounting firm’s qualifications and independence and the performance of the Company’s internal audit function. All members of the Audit Committee meet the criteria for independence as defined in our categorical standards and the audit committee independence requirements under the SEC rules. The Audit Committee Charter also complies with requirements of the NYSE.
Management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management is also responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. The independent registered public accounting firm is responsible for auditing these consolidated financial statements and expressing an opinion as to their conformity with GAAP. The independent registered public accounting firm is also responsible for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to monitor and review these processes, acting in an oversight capacity, and the Audit Committee does not certify the consolidated financial statements or internal control over financial reporting or guarantee the independent registered public accounting firm’s reports. The Audit Committee relies, without independent verification, on the information provided to it including representations made by management and the reports of the independent registered public accounting firm.
The Audit Committee discussed with PwC the matters required to be discussed by audit standards, SEC regulations and NYSE requirements. Disclosures were received from PwC regarding its independence as required by applicable requirements of the Public Company Accounting Oversight Board and discussed with them. The Audit Committee has considered whether the services provided by PwC other than those services relating to audit services are compatible with maintaining PwC’s independence. The Audit Committee has concluded that such services have not impaired PwC’s independence. The Audit Committee reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2018 with management and PwC. Based on the review and discussions noted above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2018. The Audit Committee reviewed and discussed Management’s Report on Internal Control over Financial Reporting as of December 31, 2018 with management and PwC. Based on the review and discussions noted above, the Audit Committee recommended to the Board that Management’s Report on Internal Control over Financial Reporting as of December 31, 2018 be included in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2018.
Audit Committee
Valerie M. Williams, Chair
W. Frank Fountain, Jr.
Charles G. McClure, Jr.
James H. Vandenberghe
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.


 
DTE ENERGY 2019 PROXY STATEMENT      29



Proposal No. 3 — Advisory Proposal — Nonbinding Vote to Approve Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires the Company to provide shareholders with an opportunity to vote to approve, on an advisory basis, the compensation of our Named Executive Officers as described in the “Compensation Discussion and Analysis” (“CD&A”) section of this proxy statement and in the tabular and narrative disclosure regarding Named Executive Officer compensation, all contained under the heading “Executive Compensation” in this proxy statement.
The Company’s executive compensation program is designed to include elements of cash and equity-based compensation to motivate and reward executives who achieve short-term and long-term corporate and financial objectives leading to the success of the Company. We emphasize competitive, performance-based compensation to attract and retain talented executives and align the interests of our executives with those of our shareholders. At each of the 2018 and 2017 annual meetings, 94.6% and 94.8%, respectively, of voting shareholders approved the compensation of the Named Executive Officers.
Shareholders have in the past approved the incentive plans that we use to motivate and reward our executives, including the Annual Incentive Plan and the Long-Term Incentive Plan. In addition, the Company has enhanced our disclosures related to executive compensation to provide more detail to our shareholders about our compensation programs, including expanded disclosures relating to these plans in this proxy statement.
Our executive compensation programs have been important in driving the Company’s success in achieving its corporate and financial objectives by tying executive compensation to achieving very specific goals in each of our key priority areas. Progress against these objectives is necessary for the Company to achieve its ultimate goal of becoming the best-operated energy company in North America and a force for growth and prosperity in the communities where we live and serve. We explain each of our performance targets and measures in detail in our CD&A, but a few examples of Company success in areas related to our targets and measures include the following:

Achieved 9.0% compound operating earnings per share growth during the five years ending 2018 (see discussion of operating earnings on page 39).
Increased our dividend payment to $3.60 per share in 2018, representing a 9% increase over the dividend in 2017.
Provided our shareholders with a five-year total shareholder return of 196% (indexed with 2013 as the base year = 100%).
Delivered cash from operations of 2.7 billion in 2018.
Ranked second in residential customer satisfaction in the Midwest from J.D. Power for both electric and gas utilities.
Received Gallup Great Workplace Award for the sixth consecutive year.
Each of these accomplishments is related to a specific performance goal in our short- or long-term compensation programs, which in turn support the Company’s aspiration of becoming the best-operated energy company in North America and a force for growth and prosperity in the communities where we live and serve.

The Organization and Compensation Committee (“O&C Committee”) employs the highest standards of corporate governance when implementing and reviewing our executive compensation programs. The O&C Committee ensures independence of committee members and compensation consultants, avoids conflicts of interest and has enhanced shareholder disclosure in accordance with SEC and NYSE requirements.
For these reasons, the Board recommends that shareholders vote in favor of the following resolution:
“RESOLVED, that the shareholders approve, on an advisory basis, the overall executive compensation paid to the Named Executive Officers of the Company, as described in the Compensation Discussion and Analysis and the tabular and narrative disclosure regarding Named Executive Officer compensation contained in this proxy statement.”

30      DTE ENERGY 2019 PROXY STATEMENT

 



Because this vote is advisory, it will not be binding upon the Company or the Board. The O&C Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO APPROVE EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
The Company believes in executive compensation that is competitive with our peers, has a meaningful performance component and has equity-based elements to encourage executives to maintain an appropriate ownership interest in the Company. Our performance-based compensation programs result in a majority of the compensation of our Named Executive Officers (as identified below) being linked to the achievement of a combination of short-term and long-term Company and personal goals and shareholder value creation.
The following elements comprise the total compensation awarded to our Named Executive Officers (“NEOs”):
Elements of Compensation
 
How this Element Serves the Company’s Objectives
Base Salary
 
Provides a stable, fixed source of income that reflects an executive’s job responsibilities, experience, value to the Company and demonstrated performance.

We target median base salaries for our peer group, taking into account differences in company size within the peer group.
Annual Incentive Awards
 
Intended to compensate individuals yearly based on the achievement of specific near-term, annual goals, which are established at the beginning of each year and approved by the O&C Committee.

The Board and management have identified several priority areas that management and the Board discuss regularly when reviewing Company performance. Our performance measures for annual incentive awards are the measurements that the Board uses to track progress in these key priority areas. Achievement of these performance objectives is a critical measure of the Company’s progress towards its goal of becoming the best-operated energy company in North America and a force for growth and prosperity in the communities where we live and serve. 
Long-term Incentive Awards
 
Used to align executive actions with long-term management and shareholder objectives, providing rewards consistent with the creation of shareholder value.

Our plan is designed to help retain executives over time and ensure they have a strong sense of ownership in the Company.

Pay for Performance Alignment
The Company’s compensation programs are designed to clearly align performance objectives for our Named Executive Officers with the interests of shareholders and with management’s system of priorities. (See image of system of priorities on page 1.) Our Company’s aspiration is to be the best-operated energy company in North America and a force for growth and prosperity in the communities where we live and serve. We follow a system of priorities to achieve this objective, and our performance measures are designed to help move our Company towards achieving these priorities. The following table demonstrates how our annual and long-term performance measures map to our system of priorities.

 
DTE ENERGY 2019 PROXY STATEMENT      31



Our System of Priorities
 
Related Annual or Long-Term Performance Metrics
Highly Engaged Employees
 
 
DTE Energy Employee Engagement - Gallup
DTE Energy OSHA Recordable Incident Rate
DTE Energy OSHA Days Away, Restricted and Transfer Rate

Top-Decile Customer Satisfaction
 
Customer Satisfaction Index
Customer Satisfaction Improvement Program Index
MPSC Customer Complaints
Distinctive Continuous Improvement Capability
 
Customer Satisfaction Improvement Program Index
Utility Operating Excellence Index
Strong Political & Regulatory Context
 
Customer Satisfaction Improvement Program Index
Utility Operating Excellence Index
MPSC Customer Complaints
Clear Growth & Value Creation Strategy
 
DTE Energy Total Shareholder Return vs Peer Group
Superior & Sustainable Financial Performance
 
 
DTE Energy Cash Flow
DTE Energy Operating Earnings Per Share
DTE Energy Ratio of Funds From Operations to Debt
 


What We Do and What We Don’t Do
Our compensation programs are competitive and well-governed. We adopt best practices that make sense for our company and industry and avoid pay practices that are inconsistent with our pay-for-performance structure.

What we do:
We use multiple performance measures in our short-term and long-term plans that link compensation to our corporate objectives to be the best operated energy company in North America and to maximize shareholder value
We make the majority of our compensation for Named Executive Officers “at risk” to further tie compensation to performance and shareholder interests
Our O&C Committee is comprised of all independent directors and our compensation consultant is independent 
We adopted a clawback mechanism to allow the Company to recover incentive compensation in the event of a material financial restatement
We require executives and directors to meet robust stock ownership requirements 
We review and update our peer groups and benchmarking on a regular basis to make sure our compensation remains competitive and near the median of the peer group
We engage with shareholders to seek input about our compensation practices and policies

What we don’t do:
No single-trigger change-in-control payments
No excessive perquisites
No tax gross-ups on change-in-control agreements
No guaranteed bonuses
No pledging, hedging or short sales of Company securities for officers or directors
No stock option grants since 2010
No repricing of existing stock options
No “excessive” golden parachute payments in any of our change-in-control arrangements

32      DTE ENERGY 2019 PROXY STATEMENT

 




CEO Total Actual Compensation for 2018: Fixed vs. At-Risk
Our pay mix puts a high weight on performance-based compensation. This means that the majority of compensation is variable and will go up or down based on company performance. For 2018, 67% of our Chairman and Chief Executive Officer’s compensation was performance-based or “at risk.”
a2017proxy_chart-41947a02.jpg
Overview
Your understanding of our executive compensation program is important to us. The goal of this Compensation Discussion and Analysis is to explain:
 
Our compensation philosophy and objectives for executives of the Company, including our Named Executive Officers;
The roles of our O&C Committee and management in the executive compensation process;
The key components of the executive compensation program; and
The decisions we make in the compensation process that align with our philosophy and objectives.
Throughout this proxy statement, the term “Named Executive Officers” means: (1) the Chairman of the Board and Chief Executive Officer, Gerard M. Anderson; (2) the Senior Vice President and Chief Financial Officer, Peter B. Oleksiak; (3) the President and Chief Operating Officer—DTE Electric, Trevor F. Lauer; (4) the Vice Chairman and Chief Administrative Officer, David E. Meador; and (5) the President and Chief Operating Officer, Gerardo Norcia. In addition, the term “executive” includes the Named Executive Officers, other key employees of the Company as designated by management from time to time and Executive Officers as defined by the Exchange Act.
Philosophy and Objectives

Our executive compensation philosophy is to motivate and reward executives who achieve short-term and long-term corporate and financial objectives leading to the success of the Company. We will continue to emphasize performance-based compensation for results that are consistent with shareholder and customer interests. The main objectives underlying this philosophy are:

Compensation must be competitive in order to attract and retain talented executives — data from peer group companies are taken into consideration when analyzing our compensation practices and levels;

 
DTE ENERGY 2019 PROXY STATEMENT      33



Compensation should have a meaningful performance component — a portion of an executive’s total compensation opportunity is linked to predefined short-term and long-term corporate and financial objectives along with an executive’s individual performance; and
Compensation must include equity-based elements to encourage executives to have an ownership interest in the Company.
Role of the Organization and Compensation Committee
The Board has a long-standing process for determining executive compensation that is performance-based, objective and transparent. The process is designed to serve the purpose of recruiting, retaining and motivating executives for the benefit of shareholders and customers. The Board delegates to the O&C Committee the responsibility to determine and approve the CEO’s compensation, and to approve the compensation of certain other executives. The O&C Committee makes all decisions regarding compensation for the Named Executive Officers. Although the responsibilities have been delegated, the entire Board maintains oversight and receives direct reports after each O&C Committee meeting.
The O&C Committee is composed entirely of independent directors, none of whom derives a personal benefit from the compensation decisions the O&C Committee makes. Generally, the O&C Committee is responsible for our executive compensation programs throughout the enterprise (including subsidiaries). The O&C Committee responsibilities are more fully detailed in its charter, which is available at dteenergy.com/governance. The O&C Committee continually monitors the executive compensation program and adopts changes to reflect the dynamic marketplace in which we compete for talent. To the extent necessary, the O&C Committee also works with other Board committees to review or approve reports, awards and other matters relating to compensation. For example, the Finance Committee reviews the financial components of performance measures and metrics, the Corporate Governance Committee assists in the review of this Compensation Discussion and Analysis and the Audit Committee reviews the internal controls over the data reported herein.
The O&C Committee uses information from several external sources to monitor and achieve an executive compensation program that supports our business goals and attracts executives whose performance will be measured against those goals. Independent outside consultants and external information enable the O&C Committee to maintain impartial decision-making regarding performance and pay. The O&C Committee annually reviews each component of the Named Executive Officers’ compensation and is advised directly by the outside compensation consulting firm, discussed in further detail below, in connection with such review. Based on input from its consultant and from management and based on a review of competitive data from peer group companies (as discussed below), the O&C Committee believes that the current structure is appropriately balanced and competitive to accomplish the important tasks of recruiting, retaining and motivating talented executives in the energy industry in which we compete.
The O&C Committee also reviews and considers the results from the most recent shareholder advisory vote on executive compensation. At the 2018 and 2017 annual meetings, 94.6% and 94.8%, respectively, of voting shareholders approved the compensation of the Named Executive Officers. As part of our shareholder engagement program, we seek feedback from shareholders about our compensation practices.
Independent Review of Compensation Program
The O&C Committee directly employs an outside consulting firm to advise the O&C Committee on various executive compensation matters, including current compensation trends, and provide objective recommendations as to the design of our executive compensation program. During 2018, the O&C Committee engaged two compensation consultants who reported directly to the O&C Committee. For the period of January 1, 2018 through June 19, 2018, the O&C Committee engaged the services of Mercer Human Resources Consulting LLC ("Mercer HR"), a subsidiary of Marsh & McClennan Companies, Inc., and for the period of June 20, 2018 through December 31, 2018, the O&C Committee engaged Meridian Compensation Partners LLC ("Meridian"). Use of an outside consultant is an important component of the compensation setting process, as it enables the O&C Committee to make informed decisions based on market data and practices.

34      DTE ENERGY 2019 PROXY STATEMENT

 



The respective representatives from each outside consulting firm, both of whom are considered leading professionals in the compensation field, attended O&C Committee meetings, met with Committee members in executive session, consulted with the members as required and provided input with regard to the CEO’s compensation and performance.
Mercer HR served as the O&C Committee’s outside consultant from 2002 until June 19, 2018. The O&C Committee has determined Mercer HR to be an independent consultant. Mercer HR has no affiliations with any of the Named Executive Officers or members of the Board other than in its role as an outside consultant. The lead consultant and partner in charge for Mercer HR, who provided executive compensation consulting services to the O&C Committee, did not provide any other services to the Company. To help ensure that the consultant maintained the highest level of independence from the Company, all work performed by Mercer HR and its affiliates (a) which fell outside the scope of work performed for the O&C Committee on executive compensation matters, and (b) which had a total cost of $750,000 or greater, required pre-approval by the O&C Committee based upon the recommendation of management.
In 2018, we paid Mercer HR $39,327. In addition, in 2018 the Company paid $90,000 for services unrelated to human resources consulting to affiliates of Mercer HR. In 2018, the O&C Committee followed its process to pre-approve certain work awarded to affiliates of Mercer HR.
Effective June 20, 2018, Meridian began serving as the O&C Committee's outside consultant. The O&C Committee has determined Meridian to be an independent consultant with no affiliations with any of the Named Executive Officers or members of the Board separate its role as an outside consultant. The lead consultant and partner in charge for Meridian, who provided executive compensation consulting services to the O&C Committee, did not provide any other services to the Company.
In 2018, the Company paid $41,763.06 to Meridian for services related to the O&C Committee. The Company did not engage Meridian or its affiliates for any other services.

Management’s Role
Our management works closely with the O&C Committee in the executive compensation process. Excluding the CEO’s compensation, management’s responsibilities include:
 
Recommending performance measures and metrics that are formulated based on our corporate strategy and priorities;
Reporting executive performance evaluations;
Recommending base salary levels and other compensation, including equity awards; and
Recommending appointment of executives.
The CEO’s compensation is determined solely by the O&C Committee, which bases its decisions on performance and market studies along with participation and recommendations from its independent outside consultant.
Compensation and Peer Group Assessment

Each component of executive compensation (see “Key Components of Executive Compensation” below) is compared, measured and evaluated against a peer group of companies. The O&C Committee approves the peer group and periodically reviews and updates the companies included in that group.

The most recent peer group was approved by the O&C Committee in June 2018. That peer group, which is applicable for 2018, consisted of the companies listed below. Most of these companies, along with DTE Energy, participate in the same independent compensation surveys. The surveys provide data needed for accurate compensation comparisons. The peer group consists primarily of utilities (including utility holding companies), broad-based energy companies, and significant non-energy companies selected on the basis of revenues, financial strength, geographic location and availability of compensation information. The O&C Committee reviews the peer group data when making compensation decisions relating to the Named Executive Officers and the Company’s mix of compensation components.

Management also retains an external consulting firm to conduct a market study covering compensation practices for similar positions in the peer group. The most recent market study was completed in October 2018 by Aon, whose

 
DTE ENERGY 2019 PROXY STATEMENT      35



comprehensive database included all of our desired utility/energy peer companies and also included data for most of our utility/energy-related executive positions.

Utility/Energy Companies
Non-Energy Companies
Ameren Corporation
BorgWarner, Inc.
American Electric Power Company, Inc.
Cummins Inc.
Avangrid, Inc.
Illinois Tool Works Inc.
CenterPoint Energy, Inc.
Kellogg Company
CMS Energy Corporation
Masco Corporation
Consolidated Edison
Navistar International Corporation
Duke Energy Corporation
PPG Industries, Inc.
Edison International
The Sherwin-Williams Company
FirstEnergy Corp.
Whirlpool Corporation
NiSource Inc.
 
 
PG&E Corporation
 
 
Sempra Energy
 
 
Southern Company
 
 
WEC Energy Group, Inc.
 
 
Xcel Energy, Inc.
 
 
Key Components of Executive Compensation
The key components of the compensation program include the following:

Base Salary
Annual and Long-Term Incentives
Pension and Deferred Compensation
Post-Termination Agreements (Severance and Change-In-Control)

While the programs and pay levels reflect differences in job responsibilities, the structure of the compensation and benefits program is applied consistently to our Named Executive Officers, including the CEO. Differences in compensation between the CEO and the other Named Executive Officers are due, in part, to an analysis of peer group benchmark data, as well as differences in the responsibilities of each Named Executive Officer. We review each element of total compensation, both individually and on a combined basis, for each Named Executive Officer and make adjustments as appropriate based on these comparisons. The following is a more detailed discussion of the components of the Company’s executive compensation program:
Base Salary
The objective of base salary is to provide a stable, fixed source of income that reflects an executive’s job responsibilities, experience, value to the Company, and demonstrated performance. When setting individual base salary levels, we consider several factors, including (i) the market reference point for the executive’s position, (ii) the responsibilities of the executive’s position, (iii) the experience and performance of the executive, and (iv) retention issues. Market reference points target the median for most positions, adjusted to take into account differences in company size within the peer group. In addition, we establish midpoints for each executive group level for determining base salary for those executives whose jobs cannot be easily matched in the marketplace. These midpoints are consistent with the market reference points for other executives in the same executive group. We review these midpoints annually to ensure they are consistent with the market and make salary adjustments, when appropriate.

36      DTE ENERGY 2019 PROXY STATEMENT

 



We have two primary types of incentives that reward executives for performance. The incentives are designed to tie compensation to performance and encourage executives to align their interests with those of the shareholders and customers of the Company. Our annual incentives allow us to reward executives with annual cash bonuses for performance against pre-established objectives based on work performed in the prior year. Our long-term incentives allow us to grant executives long-term equity incentives to encourage continued employment with DTE Energy, to accomplish pre-defined long-term performance objectives and to create shareholder alignment.
We believe the current mix among base salary, annual incentives, and long-term incentives is appropriately set to provide market-competitive compensation when Company performance warrants. The mix is more heavily weighted toward incentive compensation at higher executive levels within DTE Energy. The interplay between the annual incentives and the long-term incentives provides a balance to motivate executives to achieve our business goals and objectives and to properly reward executives for the achievement of such goals and objectives.
The Board has implemented a “clawback” policy enabling the Company to recover some or all of the performance-based compensation awarded to current or former executives. Under the policy, if the Company is required to prepare an accounting restatement due to material noncompliance with federal securities laws, and the O&C Committee determines it appropriate, the Company may recover from any current or former executive any previously awarded performance-based compensation the executive received (including awards under the Annual Incentive Plan, the Long-Term Incentive Plan and the Executive Performance Plan) in excess of performance-based compensation that would have been awarded under the restatement. This "clawback" would apply to performance-based compensation during the three-year period preceding the date on which the Company is required to prepare an accounting restatement, in accordance with applicable law and regulations.
Annual Incentives
The objective of the annual incentives is to compensate individuals yearly based on the achievement of specific annual goals and tie compensation to near-term performance. Annual incentive awards are paid to our executives under the DTE Energy Annual Incentive Plan (“Annual Incentive Plan”). The O&C Committee sets individual performance measures, metrics and targets for the Named Executive Officers for each year using the measure, metrics, targets and procedures described below, and the Named Executive Officer’s performance against those measures, metrics and targets is considered when the O&C Committee determines the officer’s annual incentive award under the Annual Incentive Plan for that year.
Under the terms of the Annual Incentive Plan, participating executives and other select employees may receive annual cash awards based on performance compared against pre-established Company and business unit objectives. Objectives that management proposes are reviewed and approved or revised by the O&C Committee, with financial goal recommendations reviewed by the Board’s Finance Committee, usually within the first 90 days of the performance period. The objectives include performance measures in several categories that are critical to our success. When setting these objectives, management and the O&C Committee determine the elements of our business that require the focused attention of the executives. The weights, which can change from year to year, are determined based on the Company’s key priorities and areas of focus for the upcoming year. The final awards, if any, are paid after the O&C Committee approves the final results of each objective.
The amount of an executive’s Annual Incentive Plan award is determined as follows:
 
The executive’s most recent year-end base salary is multiplied by an Annual Incentive Plan target percentage to arrive at the target award.
The overall performance payout percentage, which can range from 0% to 175%, is determined based on final results compared to threshold, target and maximum levels for each objective.
The target award is then multiplied by the performance payout percentage to arrive at the pre-adjusted calculated award.
The pre-adjusted calculated award is then adjusted by an individual performance modifier (assessment of an individual executive’s achievements for the year), which can range from 0% to 150%, to arrive at the final award.

 
DTE ENERGY 2019 PROXY STATEMENT      37



Each objective has a threshold, target and maximum level. The Company or relevant business unit must attain a minimum level of achievement for an objective before any compensation is payable with respect to that objective. The minimum established level of each objective will result in a payout of 25% of target and the maximum established for each level (or better) will result in a payment of 175% of target.
The operating earnings per share and cash flow measures were chosen as indicators of the Company’s financial strength. The customer satisfaction, employee engagement and safety performance and effectiveness measures were selected to make the Company more responsive to our customers’ needs and to make the Company a safer and better place to work. For Messrs. Anderson, Oleksiak, Meador and Norcia, the Utility Operating Excellence measures were chosen as representative of (a) electric generation and distribution reliability and (b) gas system reliability, gas system availability and the pace of gas system improvements. For Mr. Lauer, the DTE Electric Operating Excellence measures were chosen as representative of electric generation and distribution reliability.
For 2018, the performance objectives and the related weightings, thresholds, targets, maximums and results for calculating the Named Executive Officers’ pre-adjusted annual incentive award amounts were as follows.
For Messrs. Anderson, Oleksiak, Meador and Norcia:
Measures
 
Weight
 
Threshold
 
Target
 
Maximum
 
Result
 
Payout
 
Weighted
Average
Payout
DTE Energy Operating Earnings Per Share
 
20.0
%
 
$
5.57

 
$
5.78

 
$
5.99

 
$
6.30

 
175.0%
 
35.00%

DTE Energy Adjusted Cash Flow ($ millions)
 
20.0
%
 
$
(691
)
 
$
(274
)
 
$
144

 
$
346

 
175.0%
 
35.00%

Customer Satisfaction Index (percentile)
 
8.0
%
 
76

 
86

 
96

 
66.5

 
0.0%
 
        0.00%

Customer Satisfaction Improvement Program (#)
 
4.0
%
 
53,506

 
50,748

 
47,990

 
76,129

 
0.0%
 
0.00%

Customer Satisfaction Improvement Index (#)
 
4.0
%
 
100,378

 
105,397

 
110,416

 
102,464

 
56.2%
 
2.25%

MPSC Customer Complaints
 
4.0
%
 
1,781

 
1,681

 
1,581

 
3,317

 
0.0%
 
0.00%

DTE Energy Employee Engagement– Gallup
 
10.0
%
 
4.18

 
4.32

 
4.45

 
4.380

 
134.6%
 
13.46%

Safety Performance & Effectiveness Index:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DTE Energy OSHA Recordable Incident Rate
 
5.0
%
 
0.72

 
0.58

 
0.40

 
0.51

 
127.7%
 
6.39%

DTE Energy OSHA Days Away, Restricted and Transfers Rate
 
5.0
%
 
0.45

 
0.33

 
0.20

 
0.20

 
172.9%
 
8.65%

Utility Operating Excellence Index:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All Weather SAIDI (minutes)
 
2.5
%
 
265

 
240

 
227

 
485

 
0.0%
 
0.00%

Blue Sky CAIDI (minutes)
 
2.5
%
 
139

 
129

 
116

 
116

 
175.0%
 
4.38%

Fossil Power Plant Reliability
 
5.0
%
 
8.3
%
 
7.3
%
 
6.3
%
 
6.3
%
 
175.0%
 
8.75%

Nuclear Generation Operating Excellence Index
 
5.0
%
 
[see footnote for description]
 
Above Target
 
103.1%
 
5.16%

Gas Distribution System Improvement
 
1.25
%
 
1,373

 
973

 
673

 
586

 
175.0%
 
2.19%

Gas Distribution Response Time (minutes)
 
0.75
%
 
23.8

 
22.8

 
21.8

 
23.1

 
76.0%
 
0.57%

Lost and Unaccounted for Gas (bcf)
 
0.75
%
 
3.6

 
3.3

 
3.0

 
3.7

 
0.0%
 
0.00%

Gas Compression Reliability
 
0.75
%
 
88.0
%
 
90.0
%
 
91.0
%
 
92.1
%
 
175.0%
 
1.31%

Gas Damage Prevention Effectiveness
 
1.0
%
 
3.5

 
3.3

 
3.1

 
5.1

 
0.0%
 
0.00%

Gas Transmission Reliability
 
0.5
%
 
32

 
34

 
36

 
36

 
175.0%
 
0.88%

Total
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
123.99
%
The measures in the above table are defined below:
DTE Energy Operating Earnings Per Share: DTE Energy reported earnings after operating adjustments divided by average shares outstanding. DTE Energy management believes that operating earnings provide a more meaningful representation of the Company's earnings from ongoing operations and uses operating earnings as the primary performance measurement internally and externally. Operating earnings can be reconciled to our reported earnings as set forth in the following table:

38      DTE ENERGY 2019 PROXY STATEMENT

 



 
2018

2013

Reported Earnings per Share
$
6.17

$
3.76

Remeasurement of deferred taxes due to TCJA
0.12
 
Implementation costs of new billing system
0.02
 
One-time benefits expense reimbursement, net of customer sharing
(0.05
)
 
Asset impairment
0.03
0.02

Certain mark-to-market transactions
0.01

0.31

Operating Earnings per Share
$
6.30

$
4.09

DTE Energy Adjusted Cash Flow: DTE Energy net cash from operating activities adjusted by utility capital expenditures, asset sale proceeds and other items approved by the O&C Committee.

Customer Satisfaction Index: Measures the satisfaction of four customer segments: (1) electric residential, (2) gas residential, (3) electric business, and (4) gas business using industry standard methodology developed by JD Power Associates (“JDPA”) to determine performance percentile relative to peers.
Customer Satisfaction Improvement Program (DPMO): The calculation for defects per million opportunities (“DPMO”) based on defects from DTE Cares Callbacks.
Customer Satisfaction Improvement Program Index: The calculation for plus ones per million opportunities based on field transactions, Call Center transactions, Self-Service transactions, Home Energy Consultations and Advocacy transactions.
MPSC Customer Complaints: Number of complaints received by the Michigan Agency on Energy ("MAE")/Michigan Public Service Commission (“MPSC”) in the calendar year for all business units across DTE Energy.
DTE Energy Employee Engagement–Gallup: The average of the DTE Energy Company Gallup Grand Mean scores from two surveys during the year.
Safety Performance and Effectiveness Index: Includes two measures that are a representation of safety performance:
1. DTE Energy OSHA Recordable Incident Rate: Number of Occupational Safety and Health Administration (“OSHA”) defined recordable injuries in the calendar year per 100 employees (working an average of 2,000 hours per year, per employee) divided by the actual number of hours worked.
2. DTE Energy OSHA Days Away, Restricted and Transfers Rate: The number of OSHA defined recordable injuries that resulted in days away from work, work restrictions, and/or job duty/position transfer due to work-related injuries (DART) in the calendar year per 100 employees (working an average of 2,000 hours per year, per employee) divided by the actual number of hours worked.
Utility Operating Excellence Index: Corporate index that encompasses ten operating excellence measures:
1. All Weather SAIDI (System Average Interruption Duration Index): For all customers served, the average minutes of interruption, regardless of weather conditions.
2. Blue Sky CAIDI (Customer Average Interruption Duration Index): The average minutes of interruption for all customers experiencing an outage for those days when there is no declared storm. A storm is declared when there are 15,000 outages in 24 hours.
3. Fossil Power Plant Reliability: The Monroe and Belle River Random Outage Factor (ROF) which is the weighted average of the six base load coal units’ year-end ROF. A unit’s ROF is the percentage of time that a unit is not capable of reaching 100% capacity, excluding planned outages.

4. Nuclear Generation Operating Excellence Index: An evaluation of operating excellence based on the following:

 
DTE ENERGY 2019 PROXY STATEMENT      39



a.
Nuclear Power Plant Performance Improvement Matrix: Summation of points assigned to each of five improvement indicators based on performance.
b.
Refuel Outage Duration: The time between the breaker open to the breaker close that the plant is off-line to refuel the reactor.
c.
Nuclear On-Line Unit Capability Factor: The ratio of available energy generation over a given time period to the reference energy generation over the same time period.
d.
Nuclear Power Plant Reliability Matrix: Summation of points assigned to each of five reliability indicators based on performance.
5. Gas Distribution System Improvement: The number of open leaks in the system as of December 31, 2018.
6. Gas Distribution Response Time: Elapsed time in minutes from when the customer reports the condition to when the field service employee arrives at the site.
7. Lost and Unaccounted for Gas: Lost and unaccounted for gas from the source and disposition report measured in billion cubic feet (Bcf). It is a function of multiple contributors including transmission losses, theft, leaks, billing inaccuracies and metering equipment condition.
8. Gas Compression Reliability: The total number of available hours less the number of hours unavailable due to planned and unplanned shutdowns, divided by the total hours in one year.
9. Gas Damage Prevention Effectiveness: Number of third-party damages to main and service gas lines per 1,000 tickets. A ticket is defined as one staking request received from 811 (Miss Dig).
10. Gas Transmission Reliability: Installation of remote control valves (RCV) on the gas transmission system in the areas defined by regulation as High Consequence Areas (HCA). HCA is established largely by population density. The metric is measured as RCV unit installation completed, including commissioning. 
The aggregate weighted payment percentage for the pre-adjusted calculated award was 123.99% for Messrs. Anderson, Oleksiak, Meador and Norcia.
For Mr. Lauer:
Measures
 
Weight
 
Threshold
 
Target
 
Maximum
 
Result
 
Payout
 
Weighted
Average
Payout
DTE Electric Operating Earnings ($ millions)
 
15.0
%
 
$
627

 
$
659

 
$
692

 
$
669

 
122.7%
 
18.41%

DTE Electric Adjusted Cash Flow ($ millions)
 
15.0
%
 
$
(656
)
 
$
(517
)
 
$
(379
)
 
$
(206
)
 
175.0%
 
26.25%

DTE Energy Operating Earnings Per Share
 
10.0
%
 
$
5.57

 
$
5.78

 
$
5.99

 
$
6.30

 
175.0%
 
17.50%

Customer Satisfaction Index (percentile)
 
7.0
%
 
76

 
86

 
96

 
66.5

 
0.0%
 
0.00%

Customer Satisfaction Improvement Program
 
2.0
%
 
53,506

 
50,748

 
47,990

 
76,129

 
0.0%
 
0.00%

Customer Satisfaction Improvement Index (#)
 
2.0
%
 
100,378

 
105,397

 
110,416

 
102,464

 
56.2%
 
1.12%

MPSC Customer Complaints
 
4.0
%
 
1,781

 
1,681

 
1,581

 
3,317

 
0.0%
 
0.00%

DTE Electric Employee Engagement– Gallup
 
7.5
%
 
4.18

 
4.32

 
4.45

 
4.40

 
146.2%
 
10.97%

Safety Performance & Effectiveness Index:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DTE Electric OSHA Recordable Incident Rate
 
3.75
%
 
0.77

 
0.62

 
0.43

 
0.58

 
114.1%
 
4.28%

DTE Electric OSHA Days Away, Restricted and Transfers Rate
 
3.75
%
 
0.45

 
0.33

 
0.20

 
0.29

 
121.9%
 
4.58%

DTE Electric Operating Excellence Index:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All Weather SAIDI (minutes)
 
5.0
%
 
265

 
240

 
227

 
485

 
0.0%
 
0.00%

Blue Sky CAIDI (minutes)
 
5.0
%
 
139

 
129

 
116

 
116

 
175.0%
 
8.75%

Fossil Power Plant Reliability
 
10.0
%
 
8.3
%
 
7.3
%
 
6.3
%
 
6.3
%
 
175.0%
 
17.50%

Nuclear Generation Operating Excellence Index
 
10.0
%
 
[see footnote for description]
 
Above Target
 
103.1%
 
10.31%