UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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NextEra Energy, Inc.
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Notice of 2019
Annual Meeting and
Proxy Statement
YOUR VOTE IS IMPORTANT
PLEASE SUBMIT YOUR PROXY PROMPTLY
NextEra Energy, Inc.
700 Universe Boulevard
Juno Beach, Florida 33408-0420
Notice of Annual Meeting of Shareholders
May 23, 2019
The 2019 Annual Meeting of Shareholders of NextEra Energy, Inc. (NextEra Energy or the Company) will be held on Thursday, May 23, 2019, at 8:00 a.m., Central time, at Hotel Ivy, 201 South Eleventh Street, Minneapolis, Minnesota to consider and act upon the following matters:
1. | Election as directors of the nominees specified in the accompanying proxy statement; |
2. | Ratification of appointment of Deloitte & Touche LLP as NextEra Energys independent registered public accounting firm for 2019; |
3. | Approval, by non-binding advisory vote, of NextEra Energys compensation of its named executive officers as disclosed in the accompanying proxy statement; |
4. | A shareholder proposal, as set forth on pages 16 to 17 of the accompanying proxy statement, if properly presented at the meeting; and |
5. | Such other business as may properly be brought before the annual meeting or any adjournment(s) or postponement(s) of the annual meeting. |
The proxy statement more fully describes these matters. NextEra Energy has not received notice of other matters that may properly be presented at the annual meeting.
The record date for shareholders entitled to notice of, and to vote at, the annual meeting and any adjournment(s) or postponement(s) of the annual meeting is March 26, 2019.
Admittance to the annual meeting will be limited to shareholders as of the record date or their duly-appointed proxies. For the safety of attendees, all boxes, handbags and briefcases are subject to inspection. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices are not permitted at the meeting.
NextEra Energy is pleased to deliver proxy materials electronically via the Internet. Electronic delivery allows NextEra Energy to provide you with the information you need for the annual meeting, while reducing environmental impacts and costs.
Regardless of whether you expect to attend the annual meeting, please submit your proxy or voting instructions promptly so that your shares can be voted.
By order of the Board of Directors,
W. Scott Seeley
Vice President, Compliance & Corporate Secretary
Juno Beach, Florida
April 5, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING TO BE HELD MAY 23, 2019
This proxy statement and the NextEra Energy 2018 annual report to shareholders are available at www.proxyvote.com.
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Proposal 1: Election as directors of the nominees specified in this proxy statement |
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Common Stock Ownership of Certain Beneficial Owners and Management |
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Appendix A: Reconciliations of Non-GAAP to GAAP Financial Measures |
A-1 |
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider. You should read the entire proxy statement carefully before voting. This proxy statement contains information related to the solicitation of proxies by the Board of Directors (the Board) of NextEra Energy, Inc., a Florida corporation (NextEra Energy, the Company, we, us or our), in connection with the 2019 annual meeting of NextEra Energys shareholders and at any adjournment(s) or postponement(s) of the meeting. On or about April 5, 2019 NextEra Energy began mailing this proxy statement and a Notice of Internet Availability of Proxy Materials to shareholders.
Meeting Information
Time and Date: |
8:00 a.m., Central time, May 23, 2019 | |
Place: |
Hotel Ivy 201 South Eleventh Street Minneapolis, Minnesota | |
Record Date: |
March 26, 2019 | |
Webcast: |
The Company will provide a live audio webcast of the annual meeting from its website at http://www.nexteraenergy.com. | |
Voting: |
Shareholders as of the record date are entitled to vote. Each share of common stock, par value $.01 per share (common stock), is entitled to one vote for each director nominee and one vote for each of the other properly presented proposals to be voted. | |
Admission: |
An admission ticket is required to enter the annual meeting. See page 81 in the Questions and Answers about the Annual Meeting section regarding how to obtain a ticket. |
Voting Matters and Board Recommendations
Voting Matters | Board Vote Recommendation |
Page Reference | ||
Proposal 1 Election of directors |
FOR each nominee | 4 | ||
Proposal 2 Ratification of appointment of Deloitte & Touche LLP as NextEra Energys independent registered public accounting firm for 2019 |
FOR | 14 | ||
Proposal 3 Advisory vote to approve NextEra Energys compensation of its named executive officers |
FOR | 15 | ||
Proposal 4 Shareholder Proposal |
AGAINST | 16 |
How to Vote
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By Internet Go to the website www.proxyvote.com, 24 hours a day, seven days a week. You will need the control number that appears on your proxy card or on your Notice of Internet Availability of Proxy Materials (the Notice). | |
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By Telephone Call 1-800-690-6903, 24 hours a day, seven days a week. You will need the control number that appears on your card. | |
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By Mail If you received a full paper set of materials, date and sign your proxy card exactly as your name appears on your proxy card and mail it in the enclosed, postage-paid envelope. If you received a Notice, you may request a proxy card by following the instructions in your Notice. You do not need to mail the proxy card if you are voting by Internet or telephone. | |
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In person At the annual meeting. |
1
Business and Governance Highlights
Business Highlights
NextEra Energy achieved Company-record adjusted earnings* of $3.673 billion, adjusted earnings per share (EPS) of $7.70 and a 1-year total shareholder return (TSR) of 14%. NextEra Energys 2018 TSR outperformed the TSR of the S&P 500 Utilities Index of 4% and the TSR of the S&P 500 Index of -4% for 2018.
These accomplishments came as the Company continued to be a leader among the 10 largest U.S. utilities (based on market capitalization) in substantially all financial metrics. Among these largest 10 U.S. utilities, NextEra Energy ranked #2 for 1-year TSR and #1 for 2-year, 3-year, 5-year, 7-year and 10-year TSR. The Company ranked #2 among these utilities for 2018 adjusted earnings per share growth and #1 for 3-year and 5-year adjusted earnings per share growth. In 2018, NextEra Energy ranked #1 among U.S. and global utility companies, based on market capitalization.**
In 2019, NextEra Energy was named by Fortune Magazine as the Worlds Most Admired Electric & Gas Utility for the twelfth time in the last thirteen years. Also in 2019, NextEra Energy was named by the Ethisphere Institute as one of the Worlds Most Ethical Companies for the twelfth time in thirteen years.
The returns that NextEra Energy generated for its shareholders were attributable to outstanding 2018 performance by the Companys two principal operating businesses, Florida Power & Light Company (FPL) and NextEra Energy Resources, LLC and its subsidiaries (NextEra Energy Resources). Highlights of this performance are described in more detail in the Compensation Discussion and Analysis beginning on page 32.
Ultimately, the Companys financial and operational performance is reflected in the increased value of its common stock. As the table on page 33 illustrates, TSR over the three-year period from December 31, 2015 to December 31, 2018 was 82%, meaning that an investment of $100 in NextEra Energy common stock on December 31, 2015 was worth $181.88 on December 31, 2018.
The chart below compares the Companys TSR for the 1-, 3-, 5- and 10-year periods ended December 31, 2018 to the TSRs of the S&P 500 Electric Utilities Index, the S&P 500 Utilities Index, the Philadelphia Exchange Utility Sector Index (UTY) and the S&P 500. NextEra Energy outperformed all of these indices over all of the periods shown. NextEra Energys outperformance over all these periods in comparison to others in its industry, and over the 1-, 3-, 5- and 10-year periods in comparison to the S&P 500, was substantial.
NextEra Energy Total Shareholder Return Through 12-31-18 vs. Various Indices (1)
1-year TSR | 3-year TSR | 5-year TSR | 10-year TSR | |||||||||||||
NextEra Energy |
14 | % | 82 | % | 134 | % | 380 | % | ||||||||
S&P 500 Electric Utilities Index, total return |
4 | % | 33 | % | 65 | % | 129 | % | ||||||||
S&P 500 Utilities Index, total return |
4 | % | 36 | % | 67 | % | 170 | % | ||||||||
UTY, total return |
4 | % | 37 | % | 66 | % | 154 | % | ||||||||
S&P 500, total return |
(4 | %) | 30 | % | 50 | % | 243 | % |
(1) | Source: FactSet Research Systems Inc.; except UTY, source: Bloomberg |
* | This measure is not a financial measure calculated in accordance with accounting principles generally accepted in the United States of America (GAAP). See Appendix A to this proxy statement for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure. |
** | Market capitalization is as of December 31, 2018; rankings are sourced from FactSet Research Systems Inc. |
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Governance Highlights
Director Independence | Twelve of thirteen director nominees are independent Chief Executive Officer (CEO) is the only management director All members of Board committees (other than the Executive Committee) are independent directors | |
Board Leadership | Independent Lead Director selected by the independent directors Lead Director has strong role and significant governance duties, including chairing regularly-scheduled executive sessions of independent directors | |
Board Accountability | All directors stand for election annually and the Board has adopted a resignation policy for directors who fail to receive the required vote in uncontested elections Simple majority voting standard for all uncontested director elections Shareholders of 20% or more of the outstanding shares may call a special meeting No shareholder rights (poison pill) plan No supermajority vote requirements in the Companys Articles of Incorporation | |
Board Evaluation and Effectiveness | Annual Board and committee self-assessments Annual independent director evaluation of the Chairman and CEO | |
Board Refreshment & Diversity | Balance of new and experienced directors, with tenure of current directors averaging nine years In 2018, added a new independent, diverse director Added six new directors in the last seven years and have a specified retirement age for directors Six of thirteen directors are women or ethnically diverse and average age of directors is less than 65 years old | |
Director Engagement | Each director attended 100% of Board and their assigned committee meetings and attended the annual meeting in 2018 Board policy limits non-employee director membership on other public company boards to three | |
Clawback and Anti-Hedging Policies | Recoupment or clawback policy to recover certain executive pay Policy prohibiting short sales, hedging and margin accounts | |
Share Ownership | CEO required to hold shares equivalent to 7x base salary All senior executives required to hold shares equivalent to 3x base salary Directors required to hold shares equivalent to 7x the cash portion of their annual retainer | |
Proxy Access | Available to a shareholder, or group of up to 20 shareholders, owning 3% of the Companys outstanding shares for at least three years May nominate candidates for the greater of two directorships or up to 20% of the current membership of the Board |
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Business of the Annual Meeting
The Board is currently composed of 13 members. Upon the recommendation of the Governance & Nominating Committee, the Board has nominated the 13 incumbent members listed below for election as directors at the 2019 annual meeting. Unless you specify otherwise, your proxy will be voted FOR the election of the listed nominees. If any nominee becomes unavailable for election, which is not currently anticipated, proxies instructing a vote for that nominee may be voted for a substitute nominee selected by the Board or, in lieu thereof, the Board may reduce the number of directors by the number of nominees unavailable for election.
The Board believes that membership at its current size is appropriate because such a Board size facilitates substantive discussions among Board members, provides for sufficient staffing of Board committees and allows for contributions by directors having a broad range of skills, expertise, industry knowledge and diversity of opinion. Directors serve until the next annual meeting of shareholders or until their respective successors are elected and qualified.
Board Refreshment and Diversity
Board Refreshment. The Board and the Governance & Nominating Committee engage in a continuous process of considering the mix of skills and experience needed by the Board as a whole to discharge its responsibilities. During the period from July 2012 to February 2015, five new members joined the Board, adding significantly to the skills, expertise and experience of the Board. In October 2018, the size of the Board was increased by one member and a new individual was appointed to the Board and as a member of the Audit Committee.
The Company also has a director retirement policy. Generally, no person who shall have attained the age of 72 years by the date of election shall be eligible for election as a director. However, the Board may, by unanimous action (excluding the affected director), extend a directors eligibility for one or two additional years, in which event such a director will not be eligible for subsequent election as a director if he or she would have attained the age of 73 or 74 by or prior to the date of such election.
Diversity. Diversity is among the factors that the Governance & Nominating Committee considers when identifying and evaluating potential Board nominees. NextEra Energy, Inc.s Corporate Governance Principles & Guidelines (the Governance Guidelines) provide that, in identifying nominees for director, the Company seeks to achieve a mix of directors representing a diversity of background and experience, including diversity with respect to age, gender, race, ethnicity and specialized experience. In the Boards annual self-evaluation, it reviews the criteria for skills, experience and diversity reflected in the Boards membership and also reviews the Boards process for identification, consideration, recruitment and nomination of prospective Board members.
Darryl L. Wilson, who was appointed to the Board in October 2018, is a nominee for election to the Board this year who was not previously elected by the shareholders. Following a recommendation by a Board member, Mr. Wilson was identified to the Governance & Nominating Committee as an individual that the Governance & Nominating Committee might wish to consider as a potential candidate for Board service. Mr. Wilson was interviewed by each of the members of the Governance & Nominating Committee and by Mr. Robo. The Governance & Nominating Committee then evaluated the qualifications, background and experience of Mr. Wilson using the criteria set forth in the Governance Guidelines discussed above, noting in particular that Mr. Wilson would provide expertise beneficial to the Company in the areas of operations and leadership in global manufacturing and services businesses as a result of his experience as a senior leader of an electrical power generation and distribution manufacturer and services provider.
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Following the evaluation by the Governance & Nominating Committee, Mr. Wilson was interviewed by the other members of the Board. The Governance & Nominating Committee then recommended Mr. Wilson for appointment to the Board and the Board approved Mr. Wilsons appointment to the Board at its regularly scheduled October meeting.
Identifying and Evaluating Nominees for Directors
The Governance & Nominating Committee uses a variety of methods for identifying and evaluating nominees for director. The Governance & Nominating Committee periodically assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. Candidates may come to the attention of the Governance & Nominating Committee through current Board members, professional search firms, shareholders or other persons. Candidates are evaluated at regular or special meetings of the Governance & Nominating Committee and may be considered at any time during the year. When considering candidates for the Board, the Governance & Nominating Committee considers all nominee recommendations, including those from shareholders, in the same manner. If any materials are provided by a shareholder in connection with the nomination of a director candidate, such materials are provided to the Governance & Nominating Committee. The Governance & Nominating Committee also reviews materials provided by professional search firms or other parties. In evaluating nominations, the Governance & Nominating Committee seeks to achieve a diverse balance of knowledge, experience and capability.
Director Resignation Policy
Under the NextEra Energy, Inc. Amended and Restated Bylaws (the Bylaws), in an uncontested election, directors are elected by a majority of the votes cast. The Board has adopted a Policy on Failure of Nominee Director(s) to Receive a Majority Vote in an Uncontested Election (Director Resignation Policy), the effect of which is to require that, in any uncontested director election, any incumbent director who is not elected by the required vote shall offer to resign and the Board shall determine whether or not to accept the resignation within 90 days of the certification of the shareholder vote. The Company will report the action taken by the Board under the Director Resignation Policy in a publicly-available forum or document. The Bylaws provide that, in a contested election, director nominees are elected by a plurality of the votes cast.
Director Qualifications
The Governance Guidelines and the Governance & Nominating Committee Charter identify Board membership qualifications, including experience, skills and attributes that are considered by the Governance & Nominating Committee in recommending non-employee nominees for Board membership. In addition to the membership qualifications identified in the Governance Guidelines, no person will be considered for Board membership who is an employee or director of a business in significant competition with the Company or of a major or potentially-major customer, supplier, contractor, counselor or consultant of the Company, or an executive officer of a business where a Company employee-director serves on the board of such other business.
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The Board views itself as a cohesive whole consisting of members who together serve the interests of the Company and its shareholders. The following matrix highlights the experience, qualifications, attributes and skills of the director nominees. This high-level summary is not intended to be an exhaustive list and information regarding the experience and qualifications of each individual director nominee is set forth in the biographies which follow.
Summary of Director Qualifications and Experience
Public Company CEO Experience | Six Directors | |
Financial Industry Experience and Leadership | Four Directors | |
Strategy Expertise | Eight Directors | |
Operations Management and Leadership | Eight Directors | |
International Experience | Seven Directors | |
Utility / Regulated Industry Leadership | Three Directors | |
Political / Legislative Experience | Two Directors | |
Energy Industry Leadership | Three Directors | |
Engineering & Construction Industry Experience | Six Directors | |
Nuclear Operations Leadership | Two Directors | |
Mergers & Acquisitions Experience | Seven Directors | |
Information Technology / Cyber Experience and Leadership | Two Directors | |
Investor Relations Management | Six Directors | |
Marketing / Sales / Customer Service Experience and Leadership | Seven Directors | |
Diversity | Six Directors | |
New Business Development | Nine Directors | |
Human Resources Development | Thirteen Directors |
6
Sherry S. Barrat
Age: 69
Director Since: 1998
Public Company Boards: Arthur J. Gallagher & Company (since 2013) Independent trustee or director of certain
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Biography Mrs. Barrat retired in 2012 as vice chairman of Northern Trust Corporation, a financial holding company headquartered in Chicago, Illinois, where she was also a member of Northern Trusts Management Committee. Prior to being appointed as vice chairman in March 2011, Mrs. Barrat had served as president of Personal Financial Services for Northern Trust since January 2006. She served as chairman and chief executive officer of Northern Trust Bank of California, N.A. from 1999 through 2005 and as president of Northern Trust Bank of Floridas Palm Beach Region from 1992 through 1998. Mrs. Barrat joined Northern Trust in 1990 in Miami.
Qualifications Mrs. Barrat has 38 years of leadership experience in financial services, including her service through July 1, 2012 as vice chairman, and her previous service as president of Personal Financial Services (one of four principal business units) of Northern Trust Corporation, a Fortune 500 company. She is experienced in building and leading client service businesses that operate in a variety of regulatory jurisdictions and, as a Florida native with a significant part of her former employers business in Florida, has had extensive experience with Florida-based customers and business conditions. In addition, her 21 years of service on the Board have provided her with knowledge and experience regarding the Companys history and businesses. | |
James L. Camaren
Age: 64
Director Since: 2002 |
Biography Mr. Camaren is a private investor. Until May 2006, he was chairman and chief executive officer of Utilities, Inc. Utilities, Inc. was one of the largest investor-owned water utilities in the United States until March 2002 when it was acquired by Nuon, a Dutch company, which subsequently sold Utilities, Inc. in April 2006. He joined Utilities, Inc. in 1987 and served successively as vice president of business development, executive vice president, and vice chairman, becoming chairman and chief executive officer in 1996.
Qualifications Mr. Camaren has 19 years of leadership experience with a large, regulated investor-owned utility. During the years he served as chairman and chief executive officer, the utility had customer growth at a rate that exceeded the industry average and acquired and integrated over 40 utilities. In addition, Mr. Camaren has experience in managing capital expenditures, environmental compliance, regulatory affairs and investor relations. |
7
Kenneth B. Dunn
Age: 67
Director Since: 2010 |
Biography Mr. Dunn is Emeritus Professor of Financial Economics at the David A. Tepper School of Business at Carnegie Mellon University (the Tepper School). He also served as Dean of the Tepper School from July 2002 to January 2011. Before his service in that position, Mr. Dunn had a 16-year career managing fixed income portfolios at Miller Anderson & Sherrerd and its successor by merger, Morgan Stanley Investment Management, where he served as a managing director and as co-director of the U.S. Core Fixed Income and Mortgage teams. Since 2014, he has been a managing member of Tier Capital LLC and, since 2015, chief executive officer of its subsidiary, Traditional Mortgage Acceptance Corporation, which originates, acquires and services mortgage loans and issues Government National Mortgage Association (GNMA) mortgage-backed securities.
Qualifications Mr. Dunn has extensive experience in investment and asset and risk management gained through his 16-year career at Miller, Anderson & Sherrerd and its successor by merger, Morgan Stanley Investment Management. In addition, he is an expert in financial economics, having taught that subject as a professor at, and Dean of, the Tepper School. Mr. Dunn has a Ph.D. in industrial administration. | |
Naren K. Gursahaney
Age: 57
Director Since: 2014
Public Company Boards: The ADT Corporation (2012 2016) ServiceMaster Global Holdings, Inc. (since 2017) |
Biography Mr. Gursahaney is retired. He served as the president and chief executive officer, and a member of the Board of Directors, of The ADT Corporation (ADT), a provider of security systems and services, from September 2012 until its acquisition by affiliated funds of Apollo Global Management LLC in May 2016. Prior to ADTs separation from Tyco International Ltd. (Tyco) in September 2012, Mr. Gursahaney served as president of Tycos ADT North American Residential business segment and was the president of Tyco Security Solutions, then a provider of electronic security to residential, commercial, industrial and governmental customers and the largest operating segment of Tyco. Mr. Gursahaney joined Tyco in 2003 as senior vice president of operational excellence. He then served as president of Tyco Engineered Products and Services and president of Tyco Flow Control. Prior to joining Tyco, Mr. Gursahaney was president and chief executive officer of GE Medical Systems Asia, where he was responsible for the companys sales and services business in the Asia-Pacific region. During his 10-year career with GE, Mr. Gursahaney held senior leadership roles in services, marketing and information management.
Qualifications Mr. Gursahaney has extensive operations, strategic planning and leadership experience in global manufacturing and services businesses serving residential, commercial, industrial and governmental customers gained as the chief executive officer of a public company providing security systems and service. He also has extensive global operations, information technology and service experience gained as the president and chief executive officer of the Asia-Pacific division of a medical diagnostic and imaging manufacturer. He has a MBA from the University of Virginia and a Bachelor of Science in Mechanical Engineering from Pennsylvania State University. |
8
Kirk S. Hachigian
Age: 59
Director Since: 2013
Public Company Boards: JELD-WEN, inc. (since 2014) PACCAR, Inc. (since 2008) Allegion plc (since 2013) |
Biography Mr. Hachigian has been chairman of the board of JELD-WEN, inc., a manufacturer of windows and doors, since April 2014. He also previously served as chief executive officer of JELD-WEN, inc. from April 2014 until November 2015. He served as chairman, president and chief executive officer of Cooper Industries plc (Cooper), a publicly-held electrical equipment and tool manufacturer, until Coopers acquisition by Eaton Corporation in November 2012. He was named chairman of Cooper in 2006, chief executive officer in 2005 and president in 2004. Mr. Hachigian was retired during the period between his departure from Cooper and when he joined JELD-WEN, inc. in April 2014.
Qualifications Mr. Hachigian has extensive leadership, operations and strategic planning experience gained through his prior service as the chairman, chief executive officer and president of a global, publicly-held manufacturer of electrical equipment and tools. He also has international leadership and operations experience gained through his prior service as the president and chief executive officer of the Asia-Pacific operations of a lighting products manufacturer and in key management positions in Singapore and Mexico. In addition, Mr. Hachigian has financial and risk oversight experience developed through his prior service on the audit committee of another public company and as a prior member of the board of the Houston branch of the Federal Reserve Bank of Dallas. He has a MBA in finance from the Wharton School of Business and a bachelors degree in engineering from the University of California (Berkeley). | |
Toni Jennings
Age: 69
Director Since: 2007
Public Company Boards: Brown & Brown, Inc. (since 2007) Mid-America Apartment Communities, Inc. (since 2016) Post Properties, Inc. (2013 2016)
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Biography Ms. Jennings has served since 2007 as chairman of the board of Jack Jennings & Sons, Inc., a family-owned construction business that provides general contractor, construction manager and design builder services. She served as the Lieutenant Governor of the State of Florida from March 2003 through December 2006. Prior to serving in that role, she was a member of the Florida Senate from 1980 until 2000, serving two consecutive terms as Senate President, and a member of the Florida House of Representatives from 1976 until 1980. Ms. Jennings served on the gubernatorial transition teams for Florida Governors Rick Scott and Ron DeSantis. From 1983 until she became Lieutenant Governor, she also served as president of Jack Jennings & Sons, Inc.
Qualifications Ms. Jennings has extensive legislative and political experience, gained through service for four years as Lieutenant Governor of the State of Florida and 24 years in the Florida legislature. She also served as a member of the transition teams of Florida Governors Rick Scott and Ron DeSantis. In addition, through her 20 years as president and eleven years as chairman of Jack Jennings & Sons, Inc., she has extensive experience in operating a Florida-based business and familiarity with the Florida business environment. |
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Amy B. Lane
Age: 66
Director Since: 2015
Public Company Boards: The TJX Companies, Inc. (since 2005) GNC Holdings, Inc. (since 2011) Trustee of Urban Edge Properties (since 2015)
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Biography Ms. Lane retired in 2002 as managing director and group leader of the global Retailing Investment Banking Group of Merrill Lynch & Co., Inc. (Merrill Lynch), an investment banking firm. Prior to joining Merrill Lynch in 1997, she was a managing director at Salomon Brothers, Inc., an investment banking firm, where she founded and led the retail industry investment banking unit, having joined Salomon Brothers in 1989.
Qualifications Ms. Lane has 26 years of leadership experience with financial services, capital markets, finance and accounting, capital structure, and acquisitions and divestitures in the financial services industry, as well as extensive experience in management, leadership and strategy. Ms. Lane served as a managing director and group leader of the global Retailing Investment Banking Group at Merrill Lynch from 1997 until her retirement in 2002. In that role, she led and worked on mergers and acquisitions and equity and debt transactions for a wide range of major retailers. Prior to joining Merrill Lynch, she was a managing director at Salomon Brothers, Inc., which she joined in 1989 and where she founded and led the retail industry investment banking unit. Ms. Lane has a MBA from the Wharton School of Business. | |
James L. Robo
Age: 56
Director Since: 2012
Public Company Boards: NextEra Energy Partners, LP (since 2017) J.B. Hunt Transport Services, Inc. (since 2002, lead independent director since 2012) |
Biography Mr. Robo has been chairman of the board since December 2013, and president and chief executive officer, and a director, of NextEra Energy since July 2012. He is also chairman of NextEra Energys subsidiary, FPL (which has no publicly-traded stock). Prior to his succession to the role of chief executive officer, he served as president and chief operating officer of NextEra Energy since 2006. Mr. Robo joined NextEra Energy as vice president of corporate development and strategy in March 2002 and became president of NextEra Energy Resources later in 2002. Mr. Robo is chairman of the board and chief executive officer of NextEra Energy Partners, LP (NEP), a publicly-traded limited partnership formed by the Company (and in which the Company owns an underlying approximate 65.3% economic interest as of March 26, 2019).
Qualifications Mr. Robo, NextEra Energys chairman, president and chief executive officer, previously served as the Companys vice president of corporate development and strategy, as president of NextEra Energys competitive energy subsidiary, NextEra Energy Resources, and as the Companys chief operating officer. As a result of his service in his current and prior positions, Mr. Robo has extensive experience in operations, finance, strategic planning, risk management and mergers and acquisitions. He also has experience in financial and risk oversight, both through his position with the Company and his service as chairman of the audit committee of another public company, and in corporate governance, through his service as lead independent director and a member of the nominating and corporate governance committee of the board of that public company. Prior to joining NextEra Energy, Mr. Robo was president and chief executive officer of a major division of General Electric Capital Corporation, a subsidiary of General Electric Company (GE). He also served as chairman and CEO of GE Mexico and was a member of the GE corporate development team. Prior to joining GE, he was vice president of Strategic Planning Associates, a management consulting firm. Mr. Robo has a Bachelor of Arts degree from Harvard College and a MBA from Harvard Business School. |
10
Rudy E. Schupp
Age: 68
Director Since: 2005
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Biography Mr. Schupp is retired. He served as president of Valley National Bancorp and chief banking officer of Valley National Bank until his retirement in January 2018. He previously served as presidentFlorida Division of Valley National Bank from November 2014 until January 2017 and as president and chief executive officer, and a director, of 1st United Bank, a banking corporation headquartered in Boca Raton, Florida, and chief executive officer and a director of its publicly-held parent company, 1st United Bancorp, Inc., from mid-2003 until its sale to Valley National in November 2014. He was the chairman, president and chief executive officer of Republic Security Bank headquartered in West Palm Beach, Florida from 1984 until March 2001, and the chairman, president and chief executive officer of its parent company, Republic Security Financial Corporation (RSFC), from 1985 until March 2001, when RSFC was acquired by Wachovia Corporation. Following the acquisition, he served as Chairman of Florida Banking of Wachovia Bank, N.A. until December 2001. From March 2002 until March 2003, Mr. Schupp served as managing director of Ryan Beck & Co., an investment banking and brokerage company. He served as a director of the Federal Reserve Bank of Atlanta from January 2007 to December 2014.
Qualifications Mr. Schupp has 34 years of leadership experience as a chief executive officer of both public and private banking organizations and has experience in reviewing the financial statements of complex businesses, mergers and acquisitions, developing and implementing capital raising strategies, strategic planning and expertise in Florida-based customers and business conditions. In addition, he has experience in such areas as macroeconomic policy, community and economic development and government regulation gained from his service as a director of the Federal Reserve Bank of Atlanta. | |
John L. Skolds
Age: 68
Director Since: 2012
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Biography Mr. Skolds is retired. He served as executive vice president of Exelon Corporation, an energy service provider (Exelon), and president of Exelon Energy Delivery from December 2003 until his retirement in September 2007. He also served as president of Exelon Generation from March 2005 to September 2007. From March 2002 to December 2003, Mr. Skolds served as senior vice president of Exelon and president and chief nuclear officer of Exelon Nuclear. Mr. Skolds was a director of Constellation Energy Group from 2007 until its merger with Exelon in March 2012.
Qualifications Mr. Skolds has extensive leadership experience in the operation and management of nuclear power generation facilities and utilities and in financial and strategic planning. He retired as executive vice president of Exelon, a utility services holding company, and president of Exelon Energy Delivery and Exelon Generation. Earlier in his career, Mr. Skolds worked at SCANA Corporation, an energy-based holding company, in a number of capacities, including president and chief operating officer of South Carolina Electric and Gas. Mr. Skolds also served on the boards of the Institute for Nuclear Power Operations and the Nuclear Energy Institute. Mr. Skolds is a graduate of the United States Naval Academy and spent over five years in the Navy where, among other duties, he operated nuclear submarines. Mr. Skolds also holds a MBA from the University of South Carolina. |
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William H. Swanson
Age: 70
Director Since: 2009
Public Company Boards: The TJX Companies, Inc. (2015 2016)
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Biography Mr. Swanson is the retired chairman of the board and chief executive officer of Raytheon Company (Raytheon), a technology and innovation leader specializing in defense, security and civil markets throughout the world. He was Raytheons chief executive officer from July 2003 to March 2014 and served as chairman of the board from January 2004 until his retirement in September 2014. Before assuming those positions, he served as president of Raytheon from July 2002 to May 2004, as executive vice president of Raytheon and president of its Electronic Systems division from January 2000 to July 2002, and as executive vice president of Raytheon and chairman and chief executive officer of Raytheon Systems Company from January 1998 to January 2000. Mr. Swanson joined Raytheon in 1972 and held a wide range of leadership positions with the company.
Qualifications Mr. Swanson has 42 years of leadership experience at Raytheon, a complex public company with international operations. Mr. Swanson served 10 years as Raytheons chairman of the board and 10 years as its chief executive officer. He has extensive experience in strategic planning, operations and management, global business operations and complex technologies. He holds a bachelors degree in industrial engineering from California Polytechnic State University. | |
Hansel E. Tookes, II
Age: 71
Director Since: 2005
Public Company Boards: Corning Incorporated (since 2001) Harris Corporation (since 2005) Ryder System, Inc. (since 2002)
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Biography Mr. Tookes is retired. Mr. Tookes served in senior executive positions with Raytheon, a technology and innovation leader specializing in defense, security and civil markets throughout the world, from 1999 until December 2002. He joined Raytheon in 1999 as president and chief operating officer of Raytheon Aircraft Company, was appointed chairman and chief executive officer of Raytheon Aircraft Company in 2000, and became president of Raytheon International in 2001. From 1980 until joining Raytheon, Mr. Tookes held a variety of leadership positions with United Technologies Corporation, including service as president of Pratt & Whitneys Large Military Engines Group.
Qualifications Mr. Tookes has many years of operational leadership in senior management positions at large international public companies, which provided him with leadership, financial and global experience, as well as substantial leadership experience in the management of complex technology businesses. His science, engineering and business education and training have provided him with knowledge relevant to the operation of the Companys businesses. His public company board experience includes service on the audit, finance, compensation, governance and nominating and business ethics committees of various public companies. |
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Darryl L. Wilson
Age: 55
Director Since: October 2018 |
Biography Mr. Wilson was vice president, commercial of GE Power, a business of GE, from June 2017 until his retirement in December 2017. From January 2016 to June 2017, he was vice president & chief commercial officer of GE Energy Connections and, from January 2013 to January 2016, he was vice president & chief commercial officer of GE Distributed Power. From July 2008 to January 2013, he was president & chief executive officer of GE Aeroderivative Products. Other prior responsibilities include serving as the president & chief executive officer of GE Consumer & Industrial Asia & India based in Shanghai, China.
Qualifications Mr. Wilson has extensive leadership experience in operations and commercial management in global manufacturing and services businesses as a result of his senior leadership roles for a global manufacturer and service provider of electrical power generation and distribution equipment. He also has extensive experience leading and managing commercial and manufacturing operations outside the U.S. for a consumer and industrial electrical equipment manufacturer. |
Unless you specify otherwise in your voting instructions, your proxy will be voted FOR election of each of the nominees.
The Board unanimously recommends a vote FOR the election of all nominees
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Proposal 2: Ratification of appointment of Deloitte & Touche LLP as NextEra Energys independent registered public accounting firm for 2019
The Audit Committee appoints the Companys independent registered public accounting firm. It has appointed Deloitte & Touche LLP (Deloitte & Touche) as the independent registered public accounting firm for the fiscal year ending December 31, 2019 to audit the accounts of the Company and its subsidiaries, as well as to provide its opinion on the effectiveness of the Companys internal control over financial reporting. The members of the Audit Committee and the Board believe that the continued retention of Deloitte & Touche as the Companys independent registered public accounting firm is in the best interests of the Company and its shareholders.
Although ratification is not required, the Board is submitting the selection of Deloitte & Touche to shareholders as a matter of good corporate practice. If the shareholders do not ratify the appointment, the appointment will be reconsidered by the Audit Committee, although the Audit Committee may nonetheless decide to retain Deloitte & Touche as NextEra Energys independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may terminate the service of Deloitte & Touche at any time during the year if it determines that the appointment of a different independent registered public accounting firm would be in the best interests of NextEra Energy and its shareholders. Additional information on audit-related matters may be found beginning on page 29 of this proxy statement.
Representatives of Deloitte & Touche are expected to be present at the annual meeting and will have an opportunity to make a statement and respond to appropriate questions from shareholders at the meeting.
Unless you specify otherwise in your voting instructions, your proxy will be voted FOR ratification of appointment of Deloitte & Touche as NextEra Energys independent registered public accounting firm for 2019.
The Board unanimously recommends a vote FOR ratification of appointment of Deloitte & Touche LLP as NextEra Energys independent registered public accounting firm for 2019
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Proposal 3: Approval, by non-binding advisory vote, of NextEra Energys compensation of its named executive officers as disclosed in this proxy statement
The Company is asking shareholders to cast an advisory vote on the compensation of the Companys named executive officers (NEOs), which is commonly called a say-on-pay vote, pursuant to section 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act). Although this vote is not binding, it will provide information to the Compensation Committee regarding investor sentiment about the Companys executive compensation philosophy, policies and practices, which the Compensation Committee will be able to consider when making future determinations regarding NEO compensation. The Company plans to give shareholders the opportunity to cast an advisory vote on this matter annually. Following the vote on this proposal, the next opportunity will occur in connection with the Companys 2020 annual meeting.
The Company asks shareholders to approve this proposal by approving the following non-binding resolution: RESOLVED, that the shareholders of NextEra Energy, Inc. approve, on an advisory basis, the compensation paid to the Companys NEOs, as disclosed in this proxy statement for the 2019 annual meeting of shareholders, including the Compensation Discussion & Analysis section, the compensation tables and the accompanying narrative discussion.
The fundamental objective of NextEra Energys executive compensation program is to motivate and reward actions that will increase shareholder value, particularly over the longer term. The Compensation Committee believes the Companys executive compensation program reflects a strong pay-for-performance philosophy and is well-aligned with the short-term and long-term interests of shareholders and other important Company stakeholders, including customers and employees. A significant portion of each NEOs total compensation opportunity is performance-based and carries both upside and downside potential.
The Executive Compensation section of the proxy statement, beginning on page 32, provides a detailed discussion of the Companys compensation program for its NEOs. The discussion reflects that NextEra Energys compensation program has been achieving its objective. For example, the chart below compares the Companys TSR for the 1-, 3-, 5- and 10-year periods ended December 31, 2018 to the TSRs of the S&P 500 Electric Utilities Index, the S&P 500 Utilities Index, the UTY and the S&P 500. NextEra Energy outperformed all of these indices over all of the periods shown. NextEra Energys outperformance over all these periods in comparison to others in its industry, and over the 1-, 3-, 5- and 10-year periods in comparison to the S&P 500, was substantial.
NextEra Energy Total Shareholder Return Through 12-31-18 vs. Various Indices(1)
1-year TSR | 3-year TSR | 5-year TSR | 10-year TSR | |||||||||||||||||
NextEra Energy |
14 | % | 82 | % | 134 | % | 380 | % | ||||||||||||
S&P 500 Electric Utilities Index, total return |
4 | % | 33 | % | 65 | % | 129 | % | ||||||||||||
S&P 500 Utilities Index, total return |
4 | % | 36 | % | 67 | % | 170 | % | ||||||||||||
UTY, total return |
4 | % | 37 | % | 66 | % | 154 | % | ||||||||||||
S&P 500, total return |
(4 | %) | 30 | % | 50 | % | 243 | % |
(1) | Source: FactSet Research Systems Inc.; except UTY, source: Bloomberg |
Unless you specify otherwise in your voting instructions, your proxy will be voted FOR approval, by non-binding advisory vote, of NextEra Energys compensation of its NEOs as disclosed in this proxy statement.
The Board unanimously recommends a vote FOR approval, by non-binding advisory vote, of NextEra Energys compensation of its named executive officers as disclosed in this proxy statement
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In accordance with Securities and Exchange Commission (SEC) regulations, the text of the shareholder proposal and supporting statement appear exactly as received by the Company. The shareholder proposal may contain assertions about the Company or other matters that the Company believes are incorrect, but the Company has not attempted to refute all of those assertions. All statements contained in the shareholder proposal and supporting statement are the sole responsibility of the proponent. The Company disclaims responsibility for the content of the proposal and the supporting statement.
The Comptroller of the State of New York, Thomas P. DiNapoli, 59 Maiden Lane, 30th Floor, New York, NY 10038, is the trustee of the New York State Common Retirement Fund (the Fund) and has given the Company notice that he intends to present this proposal at the annual meeting on behalf of the Fund. The Fund represented that it held a total of 1,410,600 shares of common stock as of the date the proposal was submitted.
Proposal 4Political Contributions Disclosure
Resolved, that the shareholders of NextEra Energy, Inc. (Company) hereby request that the Company provide a public report, updated semiannually, disclosing the Companys:
1. | Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum. |
2. | Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: |
a. | The identity of the recipient as well as the amount paid to each; and |
b. | The title(s) of the person(s) in the Company responsible for decision-making. |
The report shall be presented to the board of directors or relevant board committee and posted on the Companys website within 12 months from the date of the annual meeting. This proposal does not encompass lobbying spending.
Supporting Statement
As long-term shareholders of NextEra Energy, Inc., we support transparency and accountability in corporate spending on political activities. These include any activities considered intervention in any political campaign under the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties, or organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.
Disclosure is in the best interest of the company and its shareholders. Moreover, the Supreme Courts Citizens United decision recognized the importance of political spending disclosure for shareholders when it said, [D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages. Gaps in transparency and accountability may expose the company to reputational and business risks that could threaten long-term shareholder value.
Relying on publicly available data does not provide a complete picture of the Companys political spending. For example, the Companys payments to trade associations used for political activities are undisclosed and unknown. In some cases, even management does not know how trade associations use their companys money politically. The proposal asks the Company to disclose all of its political spending, including
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payments to trade associations and other tax-exempt organizations used for political purposes. This would bring our Company in line with a growing number of leading companies that support political disclosure and accountability and present this information on their websites.
The Companys Board and its shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.
Political Contributions DisclosureProposal 4
The Board unanimously recommends a vote AGAINST the foregoing proposal for the following reasons:
The Board believes that adopting the shareholder proposal would not be in the best interests of the Company or its shareholders.
The very same proposal from the same proponent was defeated by the Companys shareholders at the 2015, 2016, 2017 and 2018 annual meetings of shareholders.
The same proposal was presented on behalf of the Fund at the Companys 2015, 2016, 2017 and 2018 annual meetings of shareholders and the Companys shareholders rejected this proposal with 60.4%, 57.3%, 58.8% and 56.8%, respectively, of votes cast voting against the proposal.
In 2017, NextEra Energy updated its website to provide additional information related to political contributions.
The Company updated its website to place filed lobbying reports directly on the Companys website. As a result, much of the information requested in the shareholder proposal is now available directly on the Companys website. The Company also added additional navigation links to provide easier access to the political contributions policy and information.
NextEra Energy needs to be an effective participant in the legislative and regulatory process.
The Company is closely regulated and subject to legislation that can impact the Companys operations and profitability. The Board believes that it is in the best interests of the Companys shareholders for NextEra Energy to be an effective participant in the political process. Laws and policies enacted and adopted by federal, state and local authorities can have a significant impact on the Company and its customers, employees and shareholders. NextEra Energys active participation in political processes and public policy discussions is appropriate to ensure that public officials are informed about key issues that affect the Companys interests and those of its customers, employees and shareholders and of the communities the Company serves.
NextEra Energy already has a Political Contributions Policy and its political contributions are regulated by the government.
NextEra Energy maintains a rigorous compliance process to ensure that the Companys political activities are lawful, properly disclosed and aligned with its Code of Business Conduct & Ethics. Political contributions are also subject to comprehensive regulation by federal, state and local governments with detailed disclosure requirements, including requirements to file reports with appropriate state and federal agencies on lobbying-related activities and expenditures. NextEra Energy is committed to compliance with all such applicable laws.
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The proposal is unnecessary and duplicative because NextEra Energys political contributions are already subject to extensive disclosure requirements.
NextEra Energys publicly available Political Contributions Policy discloses the process for and the titles of the individuals responsible for authorizing contributions pursuant to this policy. NextEra Energy already reports corporate lobbying-related activities and expenditures as required to appropriate federal, state and local agencies. Information about the Political Contributions Policy and NextEra Energys political action committee (PAC) contributions and current lobbying activities can be found on the Companys website at http://www.investor.nexteraenergy.com/corporate-governance/political-engagement-policy and in reports filed with various state and federal agencies, which are also available through links on the Companys website.
Adopting the proposal would not be the best use of NextEra Energys resources because adequate disclosure already exists.
Since disclosure of the Companys policies and procedures regarding lobbying activities, business associations and PAC contributions are already readily available to the public and Company shareholders, the Company believes that the additional reports requested in the proposal could result in an unnecessary and unproductive use of the Companys resources.
Additional disclosure requirements could hinder the Companys ability to pursue its business and strategic objectives.
Subjecting the Company to additional disclosure requirements could hinder the Companys ability to pursue its business and strategic objectives. Such additional disclosure would make it easier for competitors and others to discern the Companys public policy and political strategies and implement strategies opposed to the Companys public policy goals, which could prevent the achievement of such goals and negatively affect the Company, its operations and its results. NextEra Energy believes that its responsible participation in the political process and its prudent expenditures in connection with such participation are in the best interests of the Company, its shareholders and its customers.
Unless you specify otherwise in your voting instructions, your proxy will be voted AGAINST proposal 4.
For the above reasons, the Board unanimously recommends a vote AGAINST this proposal
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Information About NextEra Energy and Management
Section 16(a) Beneficial Ownership Reporting Compliance
The Companys directors and executive officers are required to file initial reports of ownership and reports of changes of their beneficial ownership of NextEra Energy common stock with the SEC pursuant to Section 16(a) of the Exchange Act. Based solely upon a review of these filings and written representations from the directors and executive officers that no other reports were required of them, the Company believes that all required filings were timely made in 2018.
The Companys Security Trading Policy
The Companys Security Trading Policy (the Trading Policy) prohibits hedging transactions with respect to securities of the Company. The Trading Policy provides in relevant part as follows: Additional Prohibited Transactions. The Company considers it improper and inappropriate for any Company insider to engage in short-term or speculative transaction in the Companys securities. It therefore is the Companys policy that insiders may not engage in any of the following transactions: Hedging Transactions. Certain forms of hedging or monetization transactions with respect to the Companys securities, such as prepaid variable forwards, equity swaps and collars, allow an insider to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the insider to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the insider may no longer have the same objectives as the Companys other shareholders. Therefore, these transactions are prohibited under this Policy .
Common Stock Ownership of Certain Beneficial Owners and Management
The following table shows the beneficial ownership of NextEra Energy common stock as of December 31, 2018 by the only persons known by the Company to own beneficially more than 5% of the outstanding shares of the Companys common stock based on 478,892,504 shares outstanding as of March 26, 2019.
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Percent of Class | |||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355(2) |
42,621,224(1) | 8.9% | |||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055(1) |
37,651,697(2) | 7.9% | |||||
State Street Corporation State Street Financial Center One Lincoln Street Boston, MA 02111(3) |
24,037,752(3) | 5.0% |
(1) | This information has been derived from a statement on Schedule 13G/A of The Vanguard Group, filed with the SEC on February 11, 2019. As of December 31, 2018, The Vanguard Group, an investment adviser, reported that it had sole dispositive power with respect to 41,829,645 shares reported as beneficially owned; shared dispositive power with respect to 791,579 shares reported as beneficially owned; sole voting power as to 641,119 shares reported as beneficially owned; and shared voting power as to 249,691 shares reported as beneficially owned. |
(2) | This information has been derived from a statement on Schedule 13G/A of BlackRock, Inc., filed with the SEC on February 6, 2019. As of December 31, 2018, BlackRock, Inc., a parent holding company, reported that it had sole dispositive power with respect to all of the shares reported as beneficially owned and sole voting power as to 33,235,813 of such shares. |
(3) | This information has been derived from a statement on Schedule 13G of State Street Corporation, filed with the SEC on February 14, 2019. As of December 31, 2018, State Street Corporation, a parent holding company, reported that it had shared dispositive power with respect to 24,033,276 shares reported as beneficially owned and shared voting power with respect to 22,019,460 shares reported as beneficially owned. |
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The table below shows the number of shares of NextEra Energy common stock beneficially owned as of March 26, 2019 by each of NextEra Energys directors (all of whom are nominees for director) and NEOs and by all directors and executive officers as a group. As of March 26, 2019, all directors and executive officers as a group beneficially owned less than 1% of NextEra Energy common stock. No shares are pledged as security.
Common Stock Beneficially Owned | Phantom/Deferred Shares(4) |
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Name | Shares Owned(1) | Shares Which May Be Acquired Within 60 Days(2) |
Total Shares Beneficially Owned(3) |
|||||||||||||
Sherry S. Barrat |
30,811 | 2,653 | 33,464 | 14,685 | ||||||||||||
James L. Camaren |
33,710 | 0 | 33,710 | 7,204 | ||||||||||||
Kenneth B. Dunn |
17,370 | 0 | 17,370 | 0 | ||||||||||||
Naren K. Gursahaney |
4,690 | 2,570 | 7,260 | 0 | ||||||||||||
Kirk S. Hachigian |
7,470 | 0 | 7,470 | 0 | ||||||||||||
Toni Jennings |
21,010 | 0 | 21,010 | 0 | ||||||||||||
John W. Ketchum |
35,888 | 42,688 | 78,576 | 2,762 | ||||||||||||
Amy B. Lane |
4,400 | 3,365 | 7,765 | 0 | ||||||||||||
Manoochehr K. Nazar |
114,055 | 184,946 | 299,001 | 10,759 | ||||||||||||
Armando Pimentel, Jr.(5) |
74,098 | 197,589 | 271,687 | 8,929 | ||||||||||||
James L. Robo |
354,857 | (6) | 684,574 | 1,039,431 | 256,733 | |||||||||||
Rudy E. Schupp |
20,810 | (7) | 0 | 20,810 | 0 | |||||||||||
Eric E. Silagy |
42,319 | 106,046 | 148,365 | 5,753 | ||||||||||||
John L. Skolds |
10,070 | 0 | 10,070 | 0 | ||||||||||||
William H. Swanson |
27,130 | 0 | 27,130 | 0 | ||||||||||||
Hansel E. Tookes, II |
1,811 | 23,010 | 24,821 | 0 | ||||||||||||
Darryl L. Wilson |
1,390 | 0 | 1,390 | 222 | ||||||||||||
All directors and executive officers as a group (24 persons) |
990,046 | 1,286,624 | 2,276,670 | 318,264 |
(1) | Includes shares of restricted stock (performance-based for executive officers) for Messrs. Ketchum (3,896), Nazar (5,507), Pimentel (3,378), Robo (5,778) and Silagy (7,281), as well as for Mrs. Barrat (7,800), Ms. Lane (1,310) and Messrs. Camaren (3,200) and Gursahaney (590), and a total of 64,493 shares of restricted stock for all directors and executive officers as a group. The holders of such shares of restricted stock have voting power, but not dispositive power. |
(2) | Includes, for executive officers, shares which may be acquired as of or within 60 days after March 26, 2019, upon the exercise of stock options and, for directors, shares payable under the Companys Deferred Compensation Plan, amended and restated effective January 1, 2003 (the Frozen Deferred Compensation Plan) or the NextEra Energy, Inc. Deferred Compensation Plan effective January 1, 2005, as amended and restated through February 11, 2016, as amended (the Successor Deferred Compensation Plan), the receipt of which has been deferred until the first day of the month after termination of service as a Board member, except for Mr. Wilson, the receipt of which has been deferred until the first day of the year after termination of service as a Board member. The Frozen Deferred Compensation Plan and the Successor Deferred Compensation Plan are collectively referred to as the Deferred Compensation Plan. |
(3) | Represents the total number of shares listed under the columns Shares Owned and Shares Which May Be Acquired Within 60 Days. Under SEC rules, beneficial ownership as of any date includes any shares as to which a person, directly or indirectly, has or shares voting power or dispositive power and also any shares as to which a person has the right to acquire such voting or dispositive power as of or within 60 days after such date through the exercise of any stock option or other right. |
(4) | Includes phantom shares under the FPL Group, Inc. Supplemental Executive Retirement Plan, amended and restated effective April 1, 1997 (the Frozen SERP), and the NextEra Energy, Inc. (f/k/a FPL Group, Inc.) Supplemental Executive Retirement Plan, amended and restated effective January 1, 2005 (the Restated SERP). The Frozen SERP and the Restated SERP are collectively referred to as the SERP. Also includes, for Mr. Robo, 72,968 shares held by the trustee of a grantor trust pursuant to a deferred stock grant made under the LTIP, as to which he has neither voting nor dispositive power, 47,131 shares, the receipt of which is deferred pursuant to the terms of a deferred stock grant under the NextEra Energy, Inc. Amended and Restated 2011 Long Term Incentive Plan (2011 LTIP), and 107,511 shares, the receipt of which is deferred pursuant to an election made under the NextEra Energy, Inc. Deferred Compensation Plan. |
(5) | Mr. Pimentel retired as President and CEO of NextEra Energy Resources in March 2019 and, therefore, is not included in the group total. |
(6) | Includes 104,842 shares held by Mr. Robos spouses gifting trusts, the trustee of which is Mr. Robo, 107,632 shares held by the James L. Robo Gifting Trust, the trustee of which is Mr. Robos spouse, and 20,000 shares owned by Mr. Robos spouse. |
(7) | Includes 200 shares owned by Mr. Schupps spouse, as to which Mr. Schupp disclaims beneficial ownership. |
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Corporate Governance and Board Matters
Corporate Governance Principles & Guidelines/Code of Ethics
The Board has adopted Governance Guidelines that set forth expectations for directors, director independence standards, board committee structure and functions and other policies for the Companys governance. NextEra Energy has adopted a Code of Business Conduct & Ethics applicable to all representatives of NextEra Energy and its subsidiaries, including directors, officers and employees, as well as a Code of Ethics for Senior Executive and Financial Officers (Senior Code), which applies to certain senior executive officers. These documents are available on the Companys website at www.investor.nexteraenergy.com/corporate-governance. Any amendments or waivers of the Senior Code will be disclosed at this website address.
The Board conducts an annual review regarding the independence from the Companys management of each of its members and, in addition, assesses the independence of any new member at the time that the new member is considered for appointment or nomination for election to the Board. In assessing independence, the Board considers all relevant facts and circumstances and the standards established by the New York Stock Exchange (NYSE) and also set forth or referred to in the Governance Guidelines. The NYSE standards and the Governance Guidelines require that NextEra Energy have a majority of independent directors and that the Board must affirmatively determine that each director has no material relationship with the Company in order to determine that the director is independent. Material relationships for this purpose may include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others.
Based on its review, the Board determined that Sherry S. Barrat, James L. Camaren, Kenneth B. Dunn, Naren K. Gursahaney, Kirk S. Hachigian, Toni Jennings, Amy B. Lane, Rudy E. Schupp, John L. Skolds, William H. Swanson, Hansel E. Tookes, II and Darryl L. Wilson, constituting all 12 non-employee directors, are independent under the NYSE standards and the Governance Guidelines.
In determining that Mr. Schupp is independent, the Board considered that a NextEra Energy subsidiary has employed Mr. Schupps son since June 2011 in non-executive business roles, for total compensation in 2018 of approximately $173,000. In determining that Mr. Gursahaney is independent, the Board considered that, in 2018, a NextEra Energy subsidiary purchased electrical transformers, through transactions determined by competitive bids, from a manufacturer in which Mr. Gursahaneys sister-in-law is an owner and in which Mr. Gursahaney has no interest of any nature.
The Board believes that the decision as to who should serve as chairman and as CEO, and whether the offices should be combined or separate, is properly the responsibility of the Board to be exercised from time to time in appropriate consideration of the Companys then-existing characteristics or circumstances. In view of the Companys operating record, including its role as a national leader in renewable energy generation, and the operational and financial opportunities and challenges faced by the Company, the Boards judgment is that the functioning of the Board is generally best served by maintaining a structure of having one individual serve as both chairman and CEO. The Board believes that having a single person acting in the capacities of chairman and CEO promotes unified leadership and direction for the Board and executive management and allows for a single, clear focus for the chain of command to execute the Companys strategic initiatives and business plans and to address its challenges. However, in certain circumstances, such as the transition from one CEO to another, the Board believes that it may be appropriate for the roles of the CEO and the chairman to be separated.
The Board has an independent Lead Director selected by and from the independent directors (with strong consideration given to present and past committee chairs). The Lead Director serves a two-year term
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commencing on the date of the Companys annual meeting of shareholders. Unless the independent directors determine otherwise due to particular circumstances, no director will serve as the Lead Director for more than one two-year term on a consecutive basis. In 2016, the independent directors selected Sherry S. Barrat to serve as the Lead Director until the 2018 annual meeting of shareholders. At a meeting of the Board held in connection with the 2018 annual meeting of shareholders, the independent directors chose Rudy E. Schupp as the Companys Lead Director, so that at all times an independent Lead Director has continually served on the Board.
The Lead Director has the following duties and authorities:
| act, on a non-exclusive basis, as liaison between the independent directors and the chairman; |
| approve the Board agenda and information sent to the Board; |
| preside at Board meetings in the absence of the chairman and to chair executive sessions of the non-management directors; |
| approve meeting schedules to assure that there is sufficient time for discussion of all agenda items; |
| call executive sessions of the independent directors; |
| if requested by major shareholders, be available, when appropriate, for consultation and direct communication consistent with the Companys policies regarding communications with shareholders; |
| communicate Board member feedback to the CEO; and |
| have such other duties as may from time to time be assigned by the Board. |
The Board believes that having an independent Lead Director, regular Board and committee executive sessions, a substantial majority of independent directors and the corporate governance structures and processes described in this proxy statement allow the Board to maintain effective oversight of management.
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The Board discharges its risk oversight responsibilities primarily through its committees. The Board exercises its role in risk oversight in a variety of ways, including the following:
Audit Committee | Oversees the integrity of the Companys financial statements, the independent auditors qualifications and independence, the performance of the Companys internal audit function and the Companys accounting and financial reporting processes
Oversees compliance with legal and regulatory requirements
Discusses with management the Companys policies with respect to risk assessment and risk management
Reviews and discusses the Companys major financial risk exposures and the steps management has taken to monitor and control those exposures
Ensures that risks identified from time to time as major risks are reviewed by the Board or a Board committee | |
Finance & Investment Committee | Reviews and monitors the Companys financing plans
Reviews and makes recommendations regarding the Companys dividend policy
Reviews risk management activities and exposures related to the Companys energy trading and marketing operations
Reviews the Companys major insurance lines
Oversees the risks associated with financing strategy, financial policies and the use of financial instruments, including derivatives | |
Nuclear Committee | Reviews the safety, reliability and quality of nuclear operations
Reviews reports issued by external oversight groups
Reviews the Companys long-term strategies and plans related to its nuclear operations | |
Compensation Committee | Oversees compensation-related risks, including annually reviewing managements assessment of risks related to employee compensation programs
Oversees the compensation risk mitigation practices and controls that the Company has in place |
NextEra Energys CEO, as the Companys chief risk officer, together with other members of the Companys senior management team, oversees the execution and monitoring of the Companys risk management policies and procedures. NextEra Energys management maintains a number of risk oversight committees that assess operational and financial risks throughout the Company. NextEra Energy also has a Corporate Risk Management Committee, composed of senior executives, that assesses the Companys strategic risks and the strategies employed to mitigate those risks. The Board committees discussed above meet periodically with the Companys senior management team to review the Companys risk management practices and key findings.
Each year the Board engages in a self-evaluation process which is conducted by the Governance & Nominating Committee. Members of the Board are surveyed to assess the effectiveness of the Boards membership and oversight processes and to solicit input from members of the Board for improvements to the Boards functions. With the input of the Governance & Nominating Committee, recommendations from
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Board members are incorporated into Board processes and Board agenda topics. This annual self-evaluation process ensures that the Board periodically considers improvements to Board processes and procedures.
Director Meetings and Attendance
The Board and its committees meet on a regular schedule and also hold special meetings from time to time. Executive sessions of the independent directors are scheduled in the agenda for each regularly-scheduled Board meeting. The Board met six times in 2018. Each director attended 100% of the total number of Board meetings and meetings of the committees on which he or she served during 2018. Absent circumstances that cause a director to be unable to attend the Board meeting held in conjunction with the annual shareholders meeting, Board members are required to attend the annual shareholders meeting. The twelve directors in office at the time attended the 2018 annual meeting of shareholders.
The standing committees of the Board are the Audit Committee, the Compensation Committee, the Governance & Nominating Committee, the Finance & Investment Committee, the Nuclear Committee and the Executive Committee. The committees regularly report their activities and actions to the full Board, generally at the Board meeting next following the committee meeting. Executive sessions are held after each regularly-scheduled committee meeting (other than quarterly earnings review meetings of the Audit Committee) and are chaired by the committee chairs. Each of the committees operates under a charter approved by the Board and each committee (other than the Executive Committee) conducts an annual self-evaluation of its performance. Current copies of the charters of the committees are available on the Companys website at www.investor.nexteraenergy.com/corporate-governance. The current membership and primary functions of the committees are described below.
Audit Committee | ||||||
Members: |
Primary Responsibilities: |
Meetings in 2018: | ||||
William H. Swanson (Chair) Kenneth B. Dunn Naren K. Gursahaney Toni Jennings John L. Skolds Darryl L. Wilson
All members are independent and financially literate under applicable NYSE and SEC requirements
Mr. Swanson and Mr. Gursahaney are audit committee financial experts under the definition provided by the SEC |
Appoints the Companys independent registered public accounting firm and approves all permitted services to be performed by the firm
Reviews the independent registered public accounting firms qualifications, performance and independence
Approves the engagement of any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services
Assists the Board in overseeing the integrity of the financial statements and compliance with legal and regulatory requirements
Assists the Board in overseeing the performance of the Companys internal audit function, the accounting and financial reporting processes of the Company and audits of the Companys financial statements
Establishes procedures for the receipt, retention and treatment of complaints and concerns received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission of concerns regarding questionable accounting or auditing matters |
Eight |
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Compensation Committee | ||||||
Members:
Kirk S. Hachigian (Chair) Sherry S. Barrat James L. Camaren Amy B. Lane Hansel E. Tookes, II
All members meet the NYSE standards for independence |
Primary Responsibilities:
Reviews and approves corporate goals and objectives relevant to the compensation of the CEO and the other executive officers
Evaluates the performance of the CEO in light of those goals and objectives, approves the compensation of the CEO and the other executive officers, approves any compensation-related agreements for the CEO and the other executive officers and makes recommendations to the Board with respect to the non-employee directors compensation
Oversees the preparation of the Compensation Discussion & Analysis section of this proxy statement and approves the Compensation Committee Report
Reviews the results of the Companys shareholder advisory vote on the compensation of its NEOs, makes recommendations to the Board with respect to incentive compensation plans and other equity-based plans and administers the Companys annual and long-term incentive plans and non-employee directors stock plan
Retains, and assesses the independence of, any outside compensation consultants engaged to assist in the evaluation of compensation |
Meetings in 2018: Four | ||||
Governance & Nominating Committee | ||||||
Members:
Rudy E. Schupp (Chair) James L. Camaren Naren K. Gursahaney Kirk S. Hachigian Toni Jennings
All members meet the NYSE standards for independence |
Primary Responsibilities:
Reviews the size and composition of the Board, identifies and evaluates potential nominees for election to the Board and recommends candidates for all directorships to be elected by shareholders or appointed by the Board
Reviews the Governance Guidelines, the Related Person Transactions Policy and the content of the Code of Business Conduct & Ethics and the Senior Code and recommends any proposed changes to the Board
Oversees the evaluation of the Board
Makes recommendations to the Board regarding the business of the annual meeting of shareholders, as well as with respect to shareholder proposals that may be considered at the annual meeting |
Meetings in 2018: Three |
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Finance & Investment Committee | ||||||
Members:
Amy B. Lane (Chair) Sherry S. Barrat Kenneth B. Dunn Rudy E. Schupp William H. Swanson Hansel E. Tookes, II
All members meet the NYSE standards for independence |
Primary Responsibilities:
Reviews and monitors the Companys financing plans
Reviews and makes recommendations to the Board regarding the Companys dividend policy
Reviews the Companys risk management activities and exposures related to its energy trading and marketing operations
Reviews certain proposed capital expenditures
Reviews the performance of the Companys pension, nuclear decommissioning and other investment funds |
Meetings in 2018: Five | ||||
Nuclear Committee | ||||||
Members:
John L. Skolds (Chair)
Mr. Skolds meets the NYSE standards for independence |
Primary Responsibilities:
Meets with senior members of the Companys nuclear division
Reviews the operation of the Companys nuclear division and makes reports and recommendations to the Board with respect to such matters
Reviews, among other matters, the safety, reliability and quality of the Companys nuclear operations and the Companys long-term strategies and plans for its nuclear operations |
Meetings in 2018: Four | ||||
Executive Committee | ||||||
Members:
James L. Robo (Chair) Kirk S. Hachigian Amy B. Lane Rudy E. Schupp William H. Swanson |
Primary Responsibilities:
Provides an efficient means of considering such matters and taking such actions as may require the attention of the Board or the exercise of the Boards powers or authorities when the Board is not in session |
Meetings in 2018: None |
Consideration of Director Nominees
Proxy Access Shareholder Nominees
The Companys recently amended Bylaws permit a shareholder, or a group of up to 20 shareholders, owning continuously for at least three years shares of NextEra Energy representing an aggregate of at least 3% of the Companys outstanding shares to nominate and include in the Companys proxy materials director nominees for up to 20% of the current membership of the Board or two directorships, whichever is greater, provided that the shareholder and nominee satisfy the requirements in the Bylaws. Notice of proxy access director nominees for the 2020 annual meeting of shareholders should be addressed to the Corporate Secretary, NextEra Energy, Inc., P.O. Box 14000, 700 Universe Boulevard, Juno Beach, Florida 33408-0420 and must be received no earlier than November 7, 2019 and no later than the close of business on December 7, 2019. A copy of the Bylaws containing the complete proxy access requirements is available on NextEra Energys website at www.investor.nexteraenergy.com/corporate-governance.
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Other Shareholder Nominees
The policy of the Governance & Nominating Committee is to consider properly submitted shareholder nominations of candidates for membership on the Board. Shareholder nominations are reviewed in the same manner as candidates identified by or recommended to the Governance & Nominating Committee. Any shareholder nominations proposed for consideration by the Governance & Nominating Committee should include the nominees name and qualifications for Board membership, should include all information that the Companys Bylaws require for director nominations and should be addressed to the Corporate Secretary, NextEra Energy, Inc., P.O. Box 14000, 700 Universe Boulevard, Juno Beach, Florida 33408-0420. A copy of the Bylaws is available on NextEra Energys website at www.investor.nexteraenergy.com/corporate-governance. In order for nominations to be timely under the advance notice requirements of the Bylaws for the 2020 annual meeting, they must be received by February 23, 2020.
The Board has established procedures by which shareholders and other interested parties may communicate with the Board, any Board committee, the Lead Director and any one or more of the other directors. Such parties may write to one or more of the directors, care of the General Counsel, NextEra Energy, Inc., P.O. Box 14000, 700 Universe Boulevard, Juno Beach, Florida 33408-0420, or send an e-mail to: boardofdirectors@nexteraenergy.com. They may also contact any member of the Audit Committee with a concern under the Companys Code of Business Conduct & Ethics by calling 561-694-4644.
The Board has instructed the General Counsel to assist the Board in reviewing all written communications to the Board, any Board committee or any director as follows:
| Complaints or similar communications regarding accounting, internal accounting controls or auditing matters will be handled in accordance with the NextEra Energy, Inc. and Subsidiaries Procedures for Receipt, Retention and Treatment of Complaints and Concerns Regarding Accounting, Internal Accounting Controls or Auditing Matters. |
| All other legitimate communications related to the duties and responsibilities of the Board or any committee will be promptly forwarded by the General Counsel to the applicable directors, including, as appropriate under the circumstances, to the chairman of the board, the Lead Director and/or the appropriate committee chair. |
| All other shareholder, customer, vendor, employee and other complaints, concerns and communications will be handled by management with Board involvement as advisable with respect to those matters that management reasonably concludes to be significant. |
Communications that are of a personal nature or not related to the duties and responsibilities of the Board, are unduly hostile, threatening, illegal or similarly inappropriate or unsuitable, are conclusory or vague in nature, or are surveys, junk mail, resumes, service or product inquiries or complaints, or business solicitations or advertisements, generally will not be forwarded to any director unless the director otherwise requests or the General Counsel determines otherwise.
NextEra Energy will disclose the following matters, if such matters should occur, on its website at www.investor.nexteraenergy.com/corporate-governance.
| any contributions by NextEra Energy to tax exempt organizations of which a director of the Company serves as an executive officer exceeding the greater of $1,000,000 or 2% of the organizations revenues in any single fiscal year during the past three fiscal years; and |
| any Board determination that service by a member of the Companys Audit Committee on the audit committees of more than three public companies does not impair the ability of that individual to serve effectively on the Companys Audit Committee. |
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Transactions with Related Persons
In 2007, the Board adopted a Related Person Transactions Policy (the Policy) for the review and approval of Related Person Transactions by the Governance & Nominating Committee. Transactions and series of transactions exceeding $120,000 in any fiscal year involving the Company and in which any Related Person has a direct or indirect material interest are governed by the Policy. Related Persons under the Policy are executive officers, directors and nominees for director of NextEra Energy, any beneficial owner of more than 5% of any class of NextEra Energys voting securities and any immediate family member of any of the foregoing persons.
In considering whether to approve a Related Person Transaction, the Governance & Nominating Committee (or its Chair, to whom authority has been delegated under certain circumstances) considers such factors as it (or the Chair) deems appropriate, which may include: (1) the Related Persons relationship to NextEra Energy and interest in the transaction; (2) the material facts of the proposed Related Person Transaction, including the proposed value of such transaction or, in the case of indebtedness, the principal amount that would be involved; (3) the benefits to NextEra Energy and its shareholders of the Related Person Transaction; and (4) an assessment of whether the Related Person Transaction is on terms that are comparable to the terms that would be available to an unrelated third party.
The Policy provides for standing approval for certain categories of Related Person Transactions without the need for specific approval by the Governance & Nominating Committee. These categories include (1) certain transactions with other companies where the Related Persons only relationship is as an employee (other than an executive officer), partner or principal, if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of the other companys gross annual revenues in its most recently-completed fiscal year and (2) charitable contributions, grants or endowments by NextEra Energy to charitable organizations, foundations or universities with which a Related Persons only relationship is as an employee (other than an executive officer) or a trustee, if the aggregate amount involved does not exceed the lesser of $500,000 or 2% of the charitable organizations total annual receipts in its most recently completed fiscal year.
During 2018, three providers of investment management and administrative services to the Company were also beneficial owners of more than 5% of NextEra Energys outstanding common stock. The nature and value of services provided by these 5% shareholders and their affiliates are described below:
| BlackRock provided investment management services to the NextEra Energy, Inc. Employee Pension Plan and the Employee Retirement Savings Plan, money market fund management services to NextEra Energy subsidiaries and investment services to the decommissioning trust funds for NextEra Energys Duane Arnold and Point Beach nuclear plants; it received fees of approximately $520,696 for such services in 2018; |
| State Street provided investment management and administrative services to the Companys Employee Pension Plan and Employee Retirement Savings Plan and investment services to the decommissioning trust funds for NextEra Energys Florida Power & Light, Duane Arnold, Point Beach and Seabrook nuclear plants; it received fees of approximately $1,020,139 for such services in 2018; and |
| Vanguard provided investment management and administrative services to the Companys Employee Retirement Savings Plan and received fees of approximately $1,249,959 for such services in 2018. |
NextEra Energy believes that the terms of the services described above are comparable to the terms that would be available to an unrelated third party under the same or similar circumstances.
During 2018, the adult son of Mr. Rudy E. Schupp was employed by a subsidiary of NextEra Energy as a Project Manager. His total compensation for 2018 was approximately $173,000, and he was eligible for company benefits available to all other employees in a similar position.
During 2018, a NextEra Energy subsidiary purchased electrical transformers, through transactions determined by competitive bids, from a manufacturer in which Mr. Gursahaneys sister-in-law is an owner and in which Mr. Gursahaney has no interest of any nature.
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The Audit Committee submits the following report for 2018:
In accordance with the written Audit Committee Charter, the Audit Committee assists the Board of Directors (Board) in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company. During 2018, the Audit Committee met eight times, including four meetings where, among other things, the Audit Committee discussed the interim financial information contained in each quarterly earnings announcement with the chief financial officer, the chief accounting officer and the independent registered public accounting firm prior to public release.
In discharging its oversight responsibility as to the audit process, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board (PCAOB) regarding the independent registered public accounting firms communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm the firms independence. The Audit Committee has reviewed any relationships that may affect the objectivity and independence of the independent registered public accounting firm and has satisfied itself as to the firms independence. The Audit Committee also discussed with management, the internal auditors and the independent registered public accounting firm the quality and adequacy of the Companys internal controls and the internal audit functions organization, responsibilities, resources and staffing. The Audit Committee reviewed with both the independent registered public accounting firm and the internal auditors their audit plans, audit scope and identification of audit risks.
The Audit Committee discussed and reviewed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including those required to be discussed by PCAOB Auditing Standard No. 1301, Communications with Audit Committees, and discussed and reviewed the results of the firms audit of the financial statements. The Audit Committee also discussed the results of the internal audit examinations.
The Audit Committee reviewed and discussed the audited financial statements of the Company for the year ended December 31, 2018 with management and the independent registered public accounting firm. Management has the responsibility for the preparation of the Companys financial statements and the independent registered public accounting firm has the responsibility for the audit of those statements.
Based on the above-mentioned review and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Companys audited financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the Securities and Exchange Commission.
In addition, and in accordance with the Audit Committee Charter, the Audit Committee reviewed and discussed with management and the independent registered public accounting firm managements internal control report, managements assessment of the internal control structure and procedures of the Company for financial reporting and the independent registered public accounting firms opinion on the effectiveness of the Companys internal control over financial reporting, all as required to be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2018.
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As specified in the Audit Committee Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Companys financial statements are complete and accurate and in accordance with generally accepted accounting principles. These are the responsibilities of the Companys independent registered public accounting firm and management. In discharging its duties, the Audit Committee has relied on (1) managements representations to us that the financial statements prepared by management have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles and (2) the report of the independent registered public accounting firm with respect to such financial statements.
Respectfully submitted,
William H. Swanson, Chair
Kenneth B. Dunn
Naren K. Gursahaney
Toni Jennings
John L. Skolds
Darryl L. Wilson
Fees Paid to Deloitte & Touche
The following table presents fees billed for professional services rendered by Deloitte & Touche, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates, for the fiscal years ended December 31, 2018 and 2017.
2018
|
2017
|
|||||||
Audit Fees(1)
|
$
|
6,492,000
|
|
$
|
6,932,000
|
| ||
Audit-Related Fees(2)(3)
|
|
2,638,000
|
|
|
6,743,000
|
| ||
Tax Fees(4)
|
|
433,000
|
|
|
135,000
|
| ||
All Other Fees(5)
|
|
25,000
|
|
|
52,000
|
| ||
Total Fees(2)
|
$
|
9,588,000
|
|
$
|
13,862,000
|
|
(1) | Audit Fees consist of fees billed for professional services rendered for the audit of NextEra Energys and FPLs annual consolidated financial statements for the fiscal year, the reviews of the financial statements included in NextEra Energys and FPLs Quarterly Reports on Form 10-Q filed during the fiscal year and the audit of the effectiveness of internal control over financial reporting, comfort letters, consents and other services related to SEC matters, services in connection with annual and semi-annual filings of NextEra Energys financial statements with the Japanese Ministry of Finance and reviews of supplemental schedules. |
(2) | In 2017, these fees also include amounts billed for professional services rendered to NEP, the Companys publicly traded subsidiary. |
(3) | Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of NextEra Energys and FPLs consolidated financial statements and are not reported under Audit Fees. These fees primarily related to audits of subsidiary financial statements, consultations on transactions, and attestation services. |
(4) | Tax Fees consist of fees billed for professional services rendered for tax compliance and tax advice and planning. In 2018 and 2017, approximately $360,000 and $12,000, respectively, were paid related to tax advice and planning services. All other tax fees in 2018 and 2017 related to tax compliance services. |
(5) | All Other Fees consist of fees for products and services other than the services reported under the other named categories. In 2018 and 2017, these fees related to training. |
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm
In accordance with the requirements of Sarbanes-Oxley, the Audit Committee Charter and the Audit Committees pre-approval policy for services provided by the independent registered public accounting firm, all services performed by Deloitte & Touche are approved in advance by the Audit Committee. Audit
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and audit-related services specifically identified in an appendix to the pre-approval policy for which the fee is expected to be $250,000 or less are pre-approved by the Audit Committee each year. This pre-approval allows management to obtain the specified audit and audit-related services on an as-needed basis during the year, provided any such services are reviewed with the Audit Committee at its next regularly scheduled meeting. Any audit or audit-related service for which the fee is expected to exceed $250,000, or that involves a service not listed on the pre-approval list, must be specifically approved by the Audit Committee prior to commencement of such service. In addition, the Audit Committee approves all services other than audit and audit-related services performed by Deloitte & Touche in advance of the commencement of such work. The Audit Committee has delegated to the Chair of the Audit Committee the right to approve audit, audit-related, tax and other services, within certain limitations, between meetings of the Audit Committee, provided any such decision is presented to the Audit Committee at its next regularly scheduled meeting. At each Audit Committee meeting (other than meetings held solely to review earnings materials), the Audit Committee reviews a schedule of services and the estimated fees for those services for which Deloitte & Touche has been engaged since the prior Audit Committee meeting under existing pre-approvals. In 2018 and 2017, no services provided to NextEra Energy or FPL by Deloitte & Touche were approved by the Audit Committee after services were rendered pursuant to Rule 2-01(c)(7)(i)(C) of the SECs Regulation S-X (which provides a waiver of the otherwise applicable pre-approval requirement under certain conditions).
The Audit Committee has determined that the non-audit services provided by Deloitte & Touche during 2018 and 2017 were compatible with maintaining that firms independence.
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This compensation discussion and analysis explains our 2018 executive compensation program for the NEOs. The executive compensation program for the Companys NEOs generally applies to the Companys other executive officers. Please read this discussion and analysis together with the tables and related narrative about executive compensation which follow.
Executive Summary
2018 Company Performance and CEO Compensation
NextEra Energy has a strong pay for performance philosophy that contributed to robust 2018 results. NextEra Energy achieved Company-record adjusted earnings* of $3.673 billion, adjusted EPS* of $7.70 and a 1-year TSR of 14%. NextEra Energys 2018 TSR outperformed the TSR of the S&P 500 Utilities Index of 4% and the TSR of the S&P 500 Index of -4% for 2018.
These significant accomplishments came as the Company continued to be a leader among the ten largest U.S. utilities (based on market capitalization) in substantially all financial metrics. Among these largest ten U.S. utilities, NextEra Energy ranked #1 for 2-year, 3-year, 5-year, 7-year and 10-year TSR and #1 for 3-year, 5-year, 7-year and 10-year adjusted EPS growth. In 2018, NextEra Energy ranked #1 among U.S. and global utility companies, based on market capitalization.**
In 2019, NextEra Energy was named by Fortune Magazine as the Worlds Most Admired Electric & Gas Utility for the twelfth time in the last thirteen years. Also in 2019, NextEra Energy was named by the Ethisphere Institute as one of the Worlds Most Ethical Companies for the twelfth time in thirteen years.
The returns that NextEra Energy generated for its shareholders were attributable to outstanding 2018 performance by the Companys two principal operating businesses, FPL and NextEra Energy Resources. Some of the Companys many operational and financial achievements in 2018 include:
FPL:
| achieved best-ever performance in minutes of service unavailability per customer and best-ever average number of momentary interruptions per customer; |
| among the lowest typical residential customer bill in Florida and customer bills that are about 30% below the latest national average; |
| delivered best-in-class performance in per-customer operations & maintenance (O&M) expense and top-decile overall fossil fleet generation availability of 91.9%; |
| ranked 2nd by JD Power for highest residential customer satisfaction among large utilities in the South; and |
| achieved top-decile business and residential customer satisfaction scores. |
NextEra Energy Resources:
| originated 6,185 megawatts of renewables, an all-time record for the Company and the industry and nearly twice the Companys previous record set in 2017; |
| continued market leadership in North American wind generation, with approximately 2,632 megawatts of new wind projects added and 1,283 megawatts of wind repowering projects added to its backlog; |
* | This measure is not a financial measure calculated in accordance with accounting principles generally accepted in the United States of America (GAAP). See Appendix A to this proxy statement for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure. |
** | Market capitalization is as of December 31, 2018; rankings are sourced from FactSet Research Systems Inc. |
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| delivered strong performance in solar development, adding 2,270 megawatts of solar development and won 19% of market share of 2018 U.S. signed power purchase agreements; |
| reduced wind O&M per megawatt hour (MWh) by 16% and nuclear O&M per MWh by 8%; and |
| achieved top-decile overall equivalent forced outage rate (EFOR) of 1.69%. |
Ultimately, the Companys financial and operational performance is reflected in the increased value of its common stock. As the following table illustrates, TSR over the three-year period from December 31, 2015 to December 31, 2018 was 82%, meaning that an investment of $100 in NextEra Energy common stock on December 31, 2015 was worth $181.88 on December 31, 2018. The CEOs total direct compensation over the same period was well-aligned with TSR.
While our executive compensation program is designed to tie compensation to performance, some performance metrics on which our CEOs compensation is based are intentionally designed to result in value creation over an extended period of time as opposed to on an annual basis. As a result, CEO compensation may not precisely parallel TSR in any given period. CEO compensation may lag corporate performance in certain years and it may outpace corporate performance in other years. Although absolute alignment between pay and performance in each year may not be achieved and, in any event, may not be appropriate, the Compensation Committee believes that, over time, the Companys executive compensation program rewards superior performance, provides a disincentive for performance that falls short of expectations and closely aligns executive compensation with shareholder returns.
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Fundamental Objective of Our Compensation Program | ||
The fundamental objective of our executive compensation program is to motivate and reward actions that the Compensation Committee believes will increase long-term shareholder value. The program is designed to attract, retain, motivate, reward and develop high-quality, high-performing executive leadership whose talent and expertise should enable the Company to create long-term shareholder value that over time is superior to the shareholder value created by our peers.
|
The table below highlights the fundamental elements of our executive compensation program that the Compensation Committee believes fulfills the fundamental objective of our compensation program.
Fundamental Elements of Our Compensation Program | ||||||
As discussed in more detail below, NEO direct compensation has three principal elements: base salary, annual incentive awards and equity compensation. |
||||||
| Base Salary is a fixed amount of compensation that reflects the responsibilities and day-to-day contributions of NEOs.
|
|||||
| Annual Incentive Awards reward participants for achievement of a set of key financial and operational performance measures, the majority of which are based on industry benchmarks and for which payouts depend on Company performance relative to those benchmarks. The financial measures are the Companys one-year adjusted EPS growth and adjusted return on equity (ROE) compared to the ten-year average of the companies in the S&P 500 Utilities Index. The operational measures are focused on operational performance relative to industry performance.
|
|||||
| Equity Compensation consists of performance share awards, performance-based restricted stock awards, performance-based restricted NEP common unit awards and non-qualified stock option awards:
|
|||||
Performance share awards are granted for three-year performance periods to drive intermediate results. Payouts of performance share awards are based on two distinct measurements: (1) three-year adjusted EPS growth and adjusted ROE relative to the ten-year average of the companies in the S&P 500 Utilities Index; and (2) three-year average performance on core operational performance measures relative to industry peers. These award payouts are modified by ± 20% based on our three-year TSR relative to the top ten power companies by market cap (a subset of the S&P 500 Utilities Index).
|
||||||
Performance-based restricted stock awards vest ratably over three years only if the Company achieves a specified annual adjusted earnings goal each year.
|
||||||
Performance-based NEP restricted common unit awards vest ratably over three years only if NEP achieves a specified annual adjusted EBITDA goal each year.
|
||||||
Non-qualified stock option awards are granted subject to a three-year ratable vesting period, have a ten-year term and will deliver value to executives only if the Companys stock price at exercise exceeds the stock price on the grant date of the award.
|
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Key Practices of Our Compensation Program | ||||
|
We set target total direct compensation opportunity and pay mix to support the goals of shareholder value creation and executive retentionEach NEOs 2018 target total direct compensation opportunity was set with reference to two groups of benchmarked companies, drawn from energy services and general industry, representing the broad, competitive labor market from which we recruit executive talent and with which we must compete for that talent. This target opportunity was then allocated over several forms of compensation, the mix of which was designed to support the goals of shareholder value creation and executive retention.
| |||
|
We link NEO financial success to shareholder value creationAll NEOs 2018 compensation included a significant element of equity compensation, supported by robust stock ownership guidelines, performance hurdles, vesting schedules and the potential for clawback.
| |||
|
We value, and review, performance relative to the performance of our competitors and peers whenever possible, rather than relative to arbitrary goalsOur basic principle underlying the linkage between performance (both financial and operational) and executive compensation is that performance superior to our competition and peers will result in above-target compensation, while performance that is inferior to our competition and peers will result in below-target compensation. Wherever comparable industry information was available, our 2018 financial and operational performance goals were set, and our 2018 performance against those goals was measured, relative to industry performance.
| |||
|
Our principal financial metrics in 2018 were adjusted ROE and adjusted EPS growthThe principal financial metrics on which our 2018 results were benchmarked against industry performance were adjusted ROE and adjusted EPS growth, both measured in comparison to the actual results of the other members of the S&P 500 Utilities Index over the ten-year period from January 1, 2009 through December 31, 2018.* The Compensation Committee believes that these financial metrics are enduring standards, because they are objective, require the Company to demonstrate superior performance, are aligned with how shareholder value is created and encourage management to include stretch goals as part of the annual budget-setting process. The Compensation Committee believes that a ten-year period is appropriate for comparison due to the historically longer-term economic cycles inherent in the power industry and the sporadic volatility that the power industry experiences from time-to-time. The Compensation Committee accordingly believes that a ten-year period reduces the likelihood that, in any given year, inappropriate metrics will be established as a result of short-term industry anomalies.
|
* | Estimated for 2018 using actual results for the first three quarters and analysts estimates for the fourth quarter. |
35
What We Do | ||||||
| Tie pay to performanceA substantial majority of NEO pay is not guaranteed; 93% of the CEOs actual direct 2018 compensation was performance-based.
|
|||||
| Use industry benchmarks when setting operational goals and when reviewing actual performance to determine payoutsWe generally target top decile or top quartile performance as compared to our industry on operational measures where benchmark data is available. Actual award payouts are driven by performance relative to industry rather than performance against arbitrary goals. Delivered performance superior to our industry will generally result in above-target compensation, while performance that is inferior to our industry will generally result in below-target compensation.
|
|||||
| Mitigate undue riskWe take steps to mitigate undue risks related to compensation, including using a clawback policy, stock ownership and retention requirements and multiple performance metrics. The Compensation Committee believes that none of the Companys compensation programs create risks that are reasonably likely to have a material adverse impact on the Company, which the Committee validates through a comprehensive risk assessment of incentive compensation plans each year.
|
|||||
| Robust stock ownership guidelinesWe have robust stock ownership guidelines, which all NEOs exceed.
|
|||||
| Holding period on performance-based restricted stockWe require executive officers to hold performance-based restricted stock for two years after vesting (net of shares withheld for, or used to pay, taxes).
|
|||||
| Minimum full vesting period for stock options and performance-based restricted stockStock options and performance-based restricted stock generally are granted with a minimum full vesting period of three years.
|
|||||
| Independent compensation consultantThe Compensation Committee benefits from its use of an independent compensation consultant that provides no other services to the Company.
|
|||||
| Shareholder outreach and assessment for improvementWe engage in shareholder outreach and regularly assess the executive compensation program against shareholder input, emerging trends and other factors.
|
|||||
| NEOs required to enter into Rule 10b5-1 plans with minimum waiting periods to transact trades in company securitiesCompany practice requires that NEOs must execute all trades pursuant to trading plans under SEC Rule 10b5-1 with specified minimum waiting periods approved by the General Counsel.
|
36
What We Do Not Do
| ||||||||
| No CEO employment agreement
|
|||||||
| No tax gross-ups of NEO perquisites
|
|||||||
| No excise tax gross-up provisions in change in control agreementsSince 2009, new or materially amended change in control agreements have not included excise tax gross-up provisions.
|
|||||||
| No repricing of underwater stock options
|
|||||||
| No share recycling under equity compensation plan
|
|||||||
| No hedging of company securities by NEOs or directors permitted under securities trading policy
|
|||||||
| No pledging of company securitiesPledging of NextEra Energy securities as collateral is prohibited.
|
|||||||
| No guaranteed annual or multi-year bonuses
|
Compensation Committee Role and Processes; Role of External Consultant
The Compensation Committee plans its agendas to ensure a thorough and thoughtful decision process. Typically, information regarding strategic decisions with respect to the NEOs is presented at one meeting to the Compensation Committee, which makes its decision at a subsequent meeting. This allows time for follow-up questions from Compensation Committee members in advance of the final decision.
The Compensation Committee had an executive session at the end of each of its 2018 meetings, during which no executive officers were present. During the appropriate executive sessions, the Compensation Committee evaluated the performance of the chairman and CEO, discussed and approved the compensation of the chairman and CEO, met with the Compensation Consultant and discussed and considered such other matters as it deemed appropriate.
During 2018, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (FW Cook), an independent executive compensation consulting firm which performed no other services for NextEra Energy or its affiliates, to provide advice and counsel to the Compensation Committee from time-to-time. FW Cook is sometimes referred to as the Compensation Consultant.
In 2018, the Compensation Consultant participated in all Compensation Committee meetings. In accordance with its engagement letter, during the 2018 executive compensation cycle, FW Cook provided the Compensation Committee and the Company with analyses and advice on topics such as pay competitiveness and executive compensation program plan design. FW Cook also benchmarked and discussed with the Compensation Committee its recommendation with respect to non-employee director compensation. The Compensation Consultant also monitored current and emerging market trends and reported to the Compensation Committee on such trends and their impact on Company compensation practices. In 2018, the Compensation Committee also assessed the independence of FW Cook in accordance with SEC rules and concluded that the Compensation Consultants work for the Compensation Committee did not raise any conflicts of interest.
2018 Say-On-Pay Vote and Shareholder Outreach
In 2018, we held our eighth annual advisory vote to approve NEO compensation, commonly known as say-on-pay. In 2018, we sought to engage with shareholders who, in the aggregate, represented a significant percentage of our outstanding shares, and held discussions with those who agreed to our request for engagement. Those shareholders were generally supportive of our executive compensation
37
program and of our overall corporate governance practices. Prior to making determinations about 2019 NEO total compensation opportunities, the Compensation Committee reviewed the results of the 2018 say-on-pay vote, noting that 95.2% of those voting had voted FOR the Companys compensation of its NEOs. The Committee considered this vote to be supportive of the Companys executive compensation program.
How We Made 2018 Compensation Decisions
General
The Compensation Committee used its business judgment to set each NEOs target total direct compensation opportunity for 2018 and each compensation element. The Compensation Committee based its determination on its integrated assessment of a series of factors, including competitive alternatives, individual and team contribution and performance, corporate performance, complexity and importance of role and responsibilities, experience, leadership and growth potential and the relationship of the NEOs pay to the pay of NextEra Energys other executive officers. There are no material differences among NEOs with respect to the application of NextEra Energys compensation policies or the way in which total compensation opportunity is determined.
Resources
The Compensation Committee primarily used the following resources to aid in its determination of the 2018 target total direct compensation opportunity for each NEO.
Market Comparisons/Peer Group
When establishing each NEOs target total direct compensation opportunity for 2018, the Compensation Committee considered the competitive market for comparable executives and compensation opportunities provided by comparable companies. Competition for executive talent primarily affects the aggregate level of the target total direct compensation opportunity available to the NEOs. The Compensation Committee believes that it is critical to the Companys long-term performance to offer its executive officers compensation opportunities broadly commensurate with their competitive alternatives. The Company obtained market comparison information for all NEOs from publicly-available peer group information. The Companys peer group is composed of a set of companies from the energy services industry and a set of companies from general industry. These companies were selected by the Compensation Committee with input from executive officers (including the CEO) and the Compensation Consultant. The Compensation Committee believes that the use of companies both from the energy services industry and from general industry was appropriate because the Companys executive officers come both from within and from outside the Companys industry. NEOs were recruited from within and outside the Companys industry and the Compensation Committee believes that their opportunities for alternative employment are not limited to other energy or utility companies.
For 2018, the Compensation Committee conducted a review of the then-existing 2017 peer group based on the following criteria:
Criteria for Energy Services Industry Companies
| publicly-traded companies with a strong United States domestic presence |
| classified with a Standard Industrial Classification (SIC) code similar to the Companys SIC code |
| annual revenue greater than $5 billion |
| a potential source of executive talent |
| included in an executive compensation survey database provided by a third party |
38
Criteria for General Industry Companies
| publicly-traded companies with a strong United States domestic presence |
| included among the S&P 500 |
| considered highly reputable and highly regarded for operational excellence, product/service leadership or customer experience |
| sustained revenues typically between 50% and 250% of the Companys revenues |
| consistently high performing |
| heavily industrialized, highly regulated or a producer of consumer staples |
| operate in industries which may be potential sources of executive talent |
| no unusual executive pay arrangements |
| included in an executive compensation survey database provided by a third party |
| contribute to diversity of industry representation in this segment of the peer group |
All energy services industry companies and general industry companies included in the Companys 2017 peer group met these criteria and were retained by the Compensation Committee for the 2018 peer group and no additional companies were added to either group. Thus, the executive compensation programs of the following companies were reviewed as market comparators for 2018:
Energy Services Industry
|
General Industry
| |
American Electric Power Company, Inc.
|
3M Company
| |
Consolidated Edison, Inc.
|
Air Products and Chemicals, Inc.
| |
Dominion Resources, Inc.
|
Anadarko Petroleum Corporation
| |
Duke Energy Corporation
|
CIGNA Corporation
| |
Edison International
|
Colgate-Palmolive Company
| |
Entergy Corporation
|
Devon Energy Corporation
| |
Exelon Corporation
|
E. I. du Pont de Nemours and Company
| |
FirstEnergy Corp.
|
Eaton Corporation
| |
PG&E Corporation
|
Emerson Electric Co.
| |
PPL Corporation
|
Fluor Corporation
| |
Public Service Enterprise Group Incorporated
|
General Dynamics Corporation
| |
Sempra Energy
|
Hess Corporation
| |
The Southern Company
|
Honeywell International, Inc.
| |
Xcel Energy Inc.
|
Kellogg Company
| |
|
Marsh & McLennan
| |
|
Principal Financial Group, Inc.
| |
|
Schlumberger Limited
| |
|
Texas Instruments Incorporated
| |
|
Union Pacific Corporation
| |
|
Waste Management, Inc.
| |
|
Xerox Corporation
|
39
Although the Compensation Committee did not target specific total compensation levels relative to industry peers (a so-called percentile approach), it generally reviewed peer company data at the 50th percentile for the general industry companies and the 75th percentile for the energy services industry companies. The Compensation Committee believes these levels were appropriate because:
| the Companys practice is to make a relatively high portion of each NEOs compensation performance-based as compared to its peers; |
| the Companys operations are more complex, more diverse and of a greater size than those of substantially all of its energy services industry peer companies; and |
| the Companys 2017 market capitalization and assets were above the 50th percentile of its general industry peer companies and above the 75th percentile of its energy services industry peer companies. |
Other Resources
What We Use | How We Use It | |||
Tally sheets and walk-away charts |
Provides a check to ensure that the Compensation Committee sees the full value of all elements of the NEOs annual compensation, both as opportunity and as actually realized, and sees the actual results of its compensation decisions in the various situations under which employment may terminate |
|||
Reviews by the CEO |
Prior to the beginning of the year, the Compensation Committee solicits performance reviews of the other NEOs and executive officers from the CEO for use as an additional input to the Compensation Committees determination of target total direct compensation opportunity and, after the end of the year, whether or not to use their discretion to adjust annual incentive compensation amounts determined using the formula discussed below |
2018 NEO Pay
Target Pay Mix
NextEra Energy has three fundamental elements of total direct compensation: base salary, annual incentive awards and long-term equity compensation. The Compensation Committee believes that a significant portion of each NEOs total direct compensation opportunity should be performance-based, reflecting both upside and downside potential. When determining the proportion of total compensation that each compensation element constituted in 2018, the Compensation Committee reviewed current market practices and industry trends, taking into consideration the Companys preference for emphasizing performance-based compensation and de-emphasizing fixed compensation. In determining performance-based compensation, the Compensation Committee sought to focus the efforts of the NEOs on a balance of short-term, intermediate-term and long-term goals. In addition, the Compensation Committee considered the NEOs perception of the relative values of the various elements of compensation and sought input from the CEO and the Compensation Consultant.
40
As illustrated in the following charts, 90% of the CEOs 2018 target total direct compensation opportunity, and 77% of the other NEOs 2018 target total direct compensation opportunities, were performance-based and not guaranteed.
2018 Base Salary
CEO: For 2018, Mr. Robos base salary was increased by 3.7% to $1,400,000 primarily reflecting the Companys superior operating results in 2017, the nature and responsibilities of Mr. Robos position, his expertise and performance, the competitiveness of his current pay in relation to his corresponding peer groups and the business judgment of the Compensation Committee.
Other NEOs: Mr. Ketchums base salary in 2018 of $819,000 represented a 26.0% increase, Mr. Nazars base salary in 2018 of $950,000 represented a 5.0% increase, Mr. Pimentels base salary in 2018 of $1,004,600 represented a 12.0% increase and Mr. Silagys base salary in 2018 of $1,049,200 represented a 22.0% increase, all of which were based on the nature and responsibilities of their respective positions, their expertise and performance, the competitiveness of each NEOs current pay in relation to his corresponding peer group and the recommendations of the CEO.
41
2018 Annual Performance-Based Incentive Compensation
Description of the Annual Incentive Plan for 2018
Annual Incentive Plan goals are established to incentivize superior performance relative to industry peers and a majority of these goals are based on industry benchmarks. Payouts under the Annual Incentive Plan are generally based on Company performance in the relevant period as compared to the benchmarks.
Prior to the beginning of 2018, the Compensation Committee established financial and operational performance goals under the Annual Incentive Plan in the following categories:
Type of 2018 Performance Goals
|
How We Established and Used the 2018 Performance Goals
| |
Financial |
The financial metrics are based on enduring standards indicative of sustained performanceadjusted EPS growth and adjusted ROEas compared to the financial performance over the ten-year period ended on December 31, 2018 of the companies included in the S&P 500 Utilities Index.
Higher ratings indicate corporate financial performance superior to industry median and lower ratings indicate corporate financial performance which lags industry median.
| |
Operational |
Operational goals and payout scales are established in advance of the year using available industry benchmarks insofar as possible.
If an industry benchmark is not available, the applicable goal generally is set at a level representing an improvement or a stretch as compared to prior performance.
As a general principle, the Compensation Committee seeks to set operational performance goals at levels that represent excellent performance, superior to the results of typical companies in our industry, and that require significant effort on the part of the executive team to achieve.
Performance on certain compliance-related goals is scored as either met or not met, while performance against other goals is judged on a sliding scale in comparison to top decile, top quartile, median and sub-median performance as compared to the industry. |
2018 Financial Performance Matrix
The financial performance matrix approved by the Compensation Committee for 2018, which is illustrated below, compares the Companys 2018 adjusted EPS growth and adjusted ROE to the average of the actual annual EPS growth and ROE of the companies included in the S&P 500 Utilities Index during the
42
ten-year period from January 1, 2009 to December 31, 2018 (estimated for 2018 using actual results for the first three quarters and analysts estimates for the fourth quarter).*
The Compensation Committee believes that these financial metrics are enduring standards because they are objective, require the Company to demonstrate improvement, are aligned with how shareholder value is created and encourage management to include stretch goals as part of the annual budget-setting process. The financial performance matrix is designed to provide relatively greater rewards if the Company outperforms others in its industry on the indexed measures and relatively lower rewards if it does not. The Compensation Committee based the matrix on adjusted earnings because it believes that adjusted earnings provide a more meaningful representation of the Companys fundamental earning power than net income calculated in accordance with GAAP. Therefore, the Committee believes that using adjusted earnings better aligns the NEOs motivations with the Companys strategy and with shareholders long-term interests. In addition, the Compensation Committee believes that the use of adjusted earnings for this purpose is consistent with the way in which the Company communicates its earnings to analysts and investors.
The numbers in the following matrix set forth the range of possible ratings for corporate financial performance. A rating of 1 indicates overall corporate financial performance at the industry median, while higher ratings indicate corporate financial performance superior to the industry median, and lower ratings indicate corporate financial performance which lags the industry median.
It is important to recognize that the adjusted ROE and adjusted EPS growth amounts set forth in the illustration below are not generated arbitrarily by the Company, but reflect actual industry performance on these measures for the ten-year period ended December 31, 2018, and that the Companys executive compensation is based, with respect to adjusted ROE and adjusted EPS growth, on the performance delivered by the Company relative to industry performance.
* | Adjusted EPS and adjusted ROE are not financial measurements calculated in accordance with GAAP. Adjusted earnings, as defined by NextEra Energy for purposes of the Annual Incentive Plan, are the Companys consolidated net income, as reported in the audited annual financial statements as determined in accordance with GAAP, excluding the effects of: (1) changes in the mark-to-market value of non-qualifying hedges; (2) other than temporary impairments on investments; (3) extraordinary items; (4) non-recurring charges or gains (e.g., restructuring charges and material litigation losses); (5) discontinued operations; (6) regulatory and/or legislative changes and/or changes in accounting principles; (7) labor union disruptions; and (8) acts of God such as hurricanes, which is used, among other reasons, to provide industry comparability. Adjusted ROE, as defined by NextEra Energy, is equal to the Companys adjusted earnings divided by average common shareholders equity, adjusted to provide industry comparability, expressed as a percentage. Adjusted EPS, as defined by NextEra Energy, are equal to the Companys adjusted earnings divided by weighted average diluted shares outstanding. |
43
2018 Operational Goals
The Compensation Committees philosophy with respect to both setting and paying out incentives based on operational goals is that the goals set and the actual award payouts are driven by Company performance relative to industry benchmarks, rather than performance against arbitrary goals. Operational goals and payout scales are established based on industry benchmarks and Company performance when meaningful benchmarks are available. As noted previously, delivered performance superior to our industry will generally result in above-target compensation, while performance that is inferior to our industry will generally result in below-target compensation.
In that context, FPLs typical performance goals are generally equal to or better than the top quartile performers in its industry and NextEra Energy Resources targets earnings growth and profitability goals that are well above utility industry norms (in both cases based on internal reviews of publicly-available information and information provided by consultants and industry associations). The following tables set forth, for 2018, the operational performance goals and the actual performance achieved against those goals.
Florida Power & Light Company:
Indicator
|
Goal
|
Actual
|
Weight
|
|||||
Operations & maintenance costs (plan-adjusted)(1)
|
$1,285 million(1) |
$1,262 million(1) |
40% | |||||
Capital expenditures (plan-adjusted)(1)
|
$4,950 million(1)
|
$4,889 million(1)
| ||||||
Fossil generation availability(2) |
top decile performance |
exceeded top decile performance
|
30% | |||||
Nuclear industry composite performance index(3) |
aggressive goal |
beat goal and exceeded top decile performance
| ||||||
Service reliabilityservice unavailability (minutes) |
better than top decile (59.0 minutes)
|
best ever (58.3 minutes) | ||||||
Service reliabilityaverage frequency of customer interruptions
|
0.71 interruptions per customer per year (average)
|
0.70best ever | ||||||
Service reliabilityaverage number of momentary interruptions per customer
|
7.0 momentary interruptions per customer per year
|
6.3best-ever performance and top decile performance
| ||||||
Employee safetyOSHA recordables(4)/200,000 hours
|
better than top decile 0.49 |
0.66 |
30% | |||||
Significant environmental violations
|
0
|
0
| ||||||
Customer satisfactionresidential value surveys
|
aggressive goal
|
beat goal
| ||||||
Customer satisfactionbusiness value surveys
|
aggressive goal
|
beat goal
| ||||||
Performance under FERC and NERC reliability standards(6)
|
no significant violations |
no significant violations |
44
NextEra Energy Resources:
Indicator
|
Goal
|
Actual
|
Weight
|
|||||
Earnings (plan-adjusted)(1)
|
$1,500 million(1)
|
$1,455 million(1)
|
47% | |||||
Return on equity
|
13.7%
|
14.3%
| ||||||
Meet budgeted cost goals
|
$1,925 million
|
$1,851 million
| ||||||
NEP EBITDA
|
$1,075 million
|
beat goal
| ||||||
NEP Cash Available for Distribution
|
$380 million
|
beat goal
| ||||||
Employee safetyOSHA recordables(4)/200,000 hours
|
0.51top decile
|
0.32beat goal and exceeded top decile performance
|
22% | |||||
Significant environmental violations
|
0
|
0
| ||||||
Nuclear industry composite performance index(3)
|
aggressive goal
|
beat goal and exceeded top decile performance
| ||||||
Equivalent forced outage rate(5)
|
top decile performance
|
beat goal and exceeded top decile
| ||||||
Performance under FERC and NERC reliability standards(6)
|
no significant violations
|
no significant violations
| ||||||
Execute on schedule and on budget approved North American wind projects
|
2,254 MW |
beat goal |
31% | |||||
Execute on schedule and on budget approved North American solar projects
|
207 MW |
beat goal | ||||||
New development or acquisition opportunities in wind, solar, gas infrastructure, or transmission
|
aggressive goal
|
beat goal
| ||||||
Maintain construction of Mountain Valley Pipeline (MVP) on schedule and on budget
|
on schedule and on budget
|
missed goal
| ||||||
Pre-tax income contribution from all asset optimization, marketing and trading activities, full requirements and retail
|
aggressive goal
|
beat goal
|
(1) | Certain of the financial performance indicators used in the Annual Incentive Plan are calculated in a manner consistent with NextEra Energys planning and budgeting process and how management reviews its performance relative to that plan, and are not, or do not relate directly to, financial measures calculated in accordance with GAAP. For information about the Companys results of operations for 2018, as presented in accordance with GAAP, investors should review the Companys Annual Report on Form 10-K for the year ended December 31, 2018 and should not rely on any adjusted amounts or non-GAAP financial measures set forth above. The following explains how the plan-adjusted amounts are calculated from NextEra Energys audited consolidated financial statements: (a) FPL operations & maintenance costs (plan-adjusted) is a measure that includes most but not all operations & maintenance expenses and includes certain expenses not classified as operations & maintenance expenses under GAAP, but reported for state regulatory purposes as operations & maintenance expenses; (b) FPL capital expenditures (plan-adjusted) are presented on an accrual basis, and exclude nuclear fuel payments and certain costs not classified as capital expenditures under GAAP in the consolidated statement of cash flows but reported for state regulatory purposes as capital expenditures; and (c) NextEra Energy Resources earnings (plan-adjusted) exclude: (i) the mark-to-market effect of non-qualifying hedges; (ii) other than temporary impairments on investments; (iii) extraordinary items; (iv) non-recurring charges or gains (e.g., restructuring charges and material litigation losses); (v) discontinued operations; (vi) regulatory and/or legislative changes and/or changes in accounting principles; (vii) labor union disruptions; and (viii) acts of God such as hurricanes. |
(2) | Fossil generation availability measures the amount of time during a given period that a power generating unit is available to produce power. |
(3) | The nuclear industry composite performance index referenced is the Institute of Nuclear Power Operations, or INPO, index. INPO promotes the highest levels of safety and reliability in the operation of commercial nuclear power plants by establishing performance objectives, criteria and guidelines for the nuclear power industry and conducting regular detailed evaluations of all nuclear power plants in North America. The INPO index is an 18-month rolling average of a nuclear plants, and a companys nuclear fleets, performance against operating performance measures. |
(4) | OSHA is the United States Occupational Safety and Health Administration. An OSHA recordable injury is an occupational injury or illness that requires medical treatment more than simple first aid and must be reported under OSHA regulations. |
45
(5) | The equivalent forced outage rate is computed as the hours of unit failure (unplanned outage hours and equivalent unplanned de-rated hours) given as a percentage of the total hours of the availability of an electricity generating unit. |
(6) | FERC is the Federal Energy Regulatory Commission and NERC is the North American Electric Reliability Corporation. |
After the end of 2018, the Executive Compensation Review Board (review board), whose members were Messrs. Ketchum, Pimentel, Robo and Silagy and the most senior human resources officer, assessed: (1) whether the operational performance goals had been achieved, exceeded or missed and, to the extent exceeded or missed, by what margin such goals had been exceeded or missed (as set forth in the tables above); (2) the degree of difficulty of achieving each goal; and (3) the Companys performance with respect to each goal as compared to the pre-established payout scale based on top decile, top quartile, median and sub-median performance on the same measure (industry-based where benchmark data was available), and arrived at an aggregate determination for the Companys 2018 performance as compared to the goals. This assessment determined that the Company had achieved superior performance in 2018. The determination of the review board was then presented to the Compensation Committee, which had ultimate authority to accept or modify all or any part of the determination. For 2018, the Compensation Committee reviewed and discussed the review boards recommendations and the conclusions on which they were based, and determined to accept those recommendations.
2018 Annual Incentive Awards for the NEOs
Each NEOs 2018 annual incentive compensation was determined based on a rating (NextEra Energy performance rating) derived by combining the Companys financial performance as measured by the financial performance matrix (weighted 50%) and the Companys operational performance as compared to the operational performance goals (weighted 50%). The NextEra Energy performance rating for 2018, determined in this manner, was 1.81.
The NextEra Energy performance rating may be adjusted for each NEO by the Compensation Committee based on individual performance under circumstances in which the Compensation Committee determines that the formulaic calculation of the performance rating without adjustment would otherwise result in the payment of an inappropriate incentive. The Compensation Committee generally uses this aspect of the executive compensation program on a conservative basis, as it believes that the formula for calculating the NextEra Energy performance rating ordinarily should result in appropriate incentive payments. The individual performance adjustment, when used, historically has most often ranged between ±10%.
The Compensation Committee determined the individual performance factors in 2018 based on recommendations from the CEO (for all of the NEOs other than himself). For each NEO other than the CEO, the 2018 individual performance factor was based primarily upon the Companys exceptional performance as described in the Executive Summary, above, as well as (for each NEO other than the CEO) the NEOs performance relative to a set of objectives agreed upon with the CEO at the beginning of the year. For the CEO, the Compensation Committee determined the individual performance factor. The Compensation Committee determined Mr. Robos 2018 individual performance factor based on the Compensation Committees assessment of his performance and the Companys overall 2018 performance as described in the Executive Summary.
The following illustrates the determination of the 2018 annual incentive for each NEO:
annual incentive = (NextEra Energy performance rating x individual performance factor) x target annual incentive
46
In years where the Companys performance is above or substantially above the performance of its peers as evidenced by industry benchmarks, as it was in 2018, the Company expects that annual incentive awards will be paid to the NEOs at a rate exceeding the target rate. For 2018, the NEOs annual incentive awards were as follows:
Named Executive Officer
|
2018 Target Annual Incentive
|
2018 Annual Incentive Award
| ||||||||
James L. Robo
|
|
$2,240,000
|
|
|
$4,480,000
|
| ||||
John W. Ketchum
|
|
$ 573,300
|
|
|
$1,089,300
|
| ||||
Armando Pimentel, Jr.
|
|
$ 703,220
|
|
|
$1,272,800
|
| ||||
Manoochehr K. Nazar
|
|
$ 665,000
|
|
|
$1,330,000
|
| ||||
Eric E. Silagy
|
|
$ 734,440
|
|
|
$1,461,500
|
|
The amounts set forth above for the NEOs 2018 annual incentive awards are also set forth in the Non-Equity Incentive Plan Compensation column (column (g)) in Table 1a: 2018 Summary Compensation Table.
2018 Long-Term Performance-Based Equity Compensation
Equity Compensation Mix
What We Granted
|
Why We Granted It
| |
Performance shares |
Directly focus NEOs on the multi-year sustained achievement of challenging TSR, financial and operational goals, because the number of shares ultimately earned depends upon the Companys and the NEOs performance over a three-year performance period.
| |
Performance-based restricted stock |
Includes a performance goal; affected by all stock price changes, so value to NEOs affected by both increases and decreases in the Companys stock price.
| |
Performance-based restricted NEP common units |
Includes a performance goal; affected by all unit price changes, so value to NEOs affected by both increases and decreases in NEPs unit price.
| |
Stock options |
Reward the NEOs only if the Companys stock price increases and remains above the stock price on the date of grant.
|
In determining the appropriate mix of equity compensation components, the Compensation Committee primarily considers the following factors:
| the mix of these components at competitor and peer companies and emerging market trends; |
| the retention value of each element and other values important to the Company, including, for example, the tax and accounting consequences of each type of award; |
| the advice of the Compensation Consultant; and |
| the perceived value to the NEO of each element. |
47
As shown below, the Compensation Committee continued its practice of granting NEOs equity-based compensation which is composed of a substantially greater percentage of performance share awards, since our shareholders indicated, through shareholder outreach, that they most highly value the longer-term performance features of performance shares. After the Compensation Committee determined the appropriate mix of equity compensation components, the target award level for each equity-based element was expressed as a percentage of each NEOs target total direct compensation opportunity. The target dollar value for each component was converted to a number of shares of equivalent value (estimated present value for stock options and performance shares).
2018 Mix of Equity Compensation Awards for the NEOs
In 2018, the Compensation Committee granted the following mix of equity-based compensation to the NEOs:
Mix of Equity Compensation Awards(1)
| ||||||||||||||||||||
Named Executive Officer
|
Performance
|
Options
|
Performance-
|
Performance-
| ||||||||||||||||
James L. Robo
|
|
65%
|
|
|
25%
|
|
|
3%
|
|
|
7%
|
| ||||||||
John W. Ketchum
|
|
60%
|
|
|
20%
|
|
|
13%
|
|
|
7%
|
| ||||||||
Manoochehr K. Nazar
|
|
60%
|
|
|
20%
|
|
|
20%
|
|
|
0%
|
| ||||||||
Armando Pimentel, Jr.
|
|
60%
|
|
|
20%
|
|
|
13%
|
|
|
7%
|
| ||||||||
Eric E. Silagy
|
|
60%
|
|
|
20%
|
|
|
20%
|
|
|
0%
|
|
(1) | Calculation of mix percentages based on the grant date present value of each grant as a percentage of each NEOs total equity-based compensation. |
Performance Share Awards Granted in 2018 for the Performance Period Ending December 31, 2020
For the performance share awards granted in 2018 for the performance period beginning January 1, 2018 and ending December 31, 2020, the Compensation Committee implemented changes to the NEOs performance share awards in order to better align the award design with TSR plan design trends and enable stronger pay for performance alignment. A summary of the changes are as follows:
| replace the relative TSR performance measure of 35% with a relative TSR performance modifier of ±20% to the performance share award payout; |
| change the TSR peer group to the top 10 power companies by market cap, a subset of the S&P 500 Utilities Index; |
| change the weighting of the financial and operating measures; and |
| adjust the start and end date measurement periods used to calculate TSR to a 20-trading day trailing average. |
48
Similar to the performance share awards granted in 2017, the 2018 performance share awards have 3-year adjusted ROE and EPS growth and operational measures as performance measures. Consistent with prior years, the awards also have an individual performance factor ranging from ±20%, which is applicable only to 65% of the performance share award determined based on financial and operational performance measures to enable the Compensation Committee to adjust payouts based on their assessment of the NEOs individual performance. The goals used to measure long-term performance for purposes of the NEOs performance share awards are different both in terms of the objectives and time-frames than the goals used to measure short-term performance under the Companys Annual Incentive Plan. The measures, and their relative weights, are set forth below:
Performance Measure
|
Weight
| |
3-year TSR relative to top ten power companies by market capitalization, which is a subset of the S&P 500 Utilities Index
|
±20% modifier to
| |
3-year adjusted ROE and adjusted EPS growth (determined using a financial matrix similar to the one set forth on page 43)
|
80%
| |
Operational measures: 3-year average employee safetyOSHA recordables/200,000 hours Nuclear industry composite performance index (combined for FPL and NextEra Energy Resources nuclear facilities) 3-year average equivalent forced outage rate (fossil and renewable generation) FPL 3-year average service reliabilityservice unavailability (minutes)
|
5% each |
During the performance period, performance shares are not issued, the NEO may not sell or transfer the NEOs contingent right to receive performance shares and dividends are not paid.
Performance Share Awards for the Performance Period Ended December 31, 2018
Each NEO was granted a target number of performance shares in 2016 for a three-year performance period beginning January 1, 2016 and ended on December 31, 2018. The Compensation Committee views the payout of this grant after the end of the performance period as part of each NEOs 2016 compensation, while the performance shares granted in 2018 for the performance period ending on December 31, 2020 are considered to be part of each NEOs 2018 compensation, even though the shares will not be issued, if at all, until February 2021.
At the end of the performance period for the performance share awards granted in 2016, each NEOs performance share award payout was determined in accordance with measures and weights as set forth below:
Performance Measure
|
Weight
| |
3-year TSR relative to the companies in the S&P 500 Utilities Index
|
35%
| |
3-year adjusted return on equity and adjusted EPS growth (determined using a financial matrix similar to the one set forth on page 43)
|
52%
| |
Operational measures: 3-year average employee safetyOSHA recordables/200,000 hours Nuclear industry composite performance index (combined for FPL and NextEra Energy Resources nuclear facilities) 3-year average equivalent forced outage rate (fossil and renewable generation) FPL 3-year average service reliabilityservice unavailability (minutes)
|
3.25% each |
49
The 2016 performance share award overall rating, determined in this manner, was 2.00, as shown below.
Performance Measure(1)
|
Weight
|
Result
|
Payout as a %
| ||||||||||||
Adjusted EPS Growth and Adjusted ROE
|
|
52
|
%
|
|
2.00
|
|
|
200
|
%
| ||||||
Operational Measures
|
|
13
|
%
|
|
2.00
|
|
|
200
|
%
| ||||||
Relative TSR
|
|
35
|
%
|
|
2.00
|
|
|
200
|
%
| ||||||
Overall Rating
|
|
2.00
|
|
|
200
|
%
|
(1) | The individual performance factor ranging from ± 20% (applicable to 65% of the performance share award determined based on financial and operational performance measures) was not applied to 2016 performance share award ratings for the NEOs, whose performance was determined in accordance with the measures and weights described in the table above. |
Applying the overall rating results to the target performance shares resulted in the following performance share award payouts for each of the NEOs:
Named Executive Officer
|
Target Performance Shares
|
Performance Shares Earned
| ||||||||
James L. Robo
|
|
53,400
|
|
|
106,800
|
| ||||
John W. Ketchum
|
|
5,613
|
|
|
11,226
|
| ||||
Armando Pimentel, Jr.
|
|
10,849
|
|
|
21,698
|
| ||||
Manoochehr K. Nazar
|
|
9,824
|
|
|
19,648
|
| ||||
Eric E. Silagy
|
|
7,984
|
|
|
15,968
|
|
See Table 2: 2018 Grants of Plan-Based Awards for information about the performance shares awarded to the NEOs in 2018 and Table 4: 2018 Option Exercises and Stock Vested for additional information about the performance shares issued for the three-year performance period which began on January 1, 2016 and ended on December 31, 2018.
Performance-Based Restricted Stock Granted in 2018
The performance objective for performance-based restricted stock is adjusted earnings of $1.2 billion. Therefore, the shares of performance-based restricted stock granted in 2018, which would otherwise vest ratably in 2019, 2020 and 2021, will not vest unless and until the Compensation Committee certifies that NextEra Energys adjusted earnings for each of 2019, 2020 and 2021, respectively, equal or exceed $1.2 billion.
Because the Compensation Committee intends for the grant date present value of performance-based restricted stock awards to equal the fair market value of an equivalent number of shares of the Companys common stock absent the performance and vesting conditions, dividends are paid on performance-based restricted stock awards as and when dividends are paid on the common stock. However, any dividends paid on performance-based restricted stock awards that do not vest must be repaid within 30 days following forfeiture of the award.
See Table 2: 2018 Grants of Plan-Based Awards for information about the performance-based restricted stock awarded to the NEOs in 2018 and the description following that table for information about the material terms and conditions applicable to those performance-based restricted stock awards.
Performance-Based Restricted NEP Common Units Granted in 2018
In February 2018, as part of the Compensation Committees setting of 2018 long-term performance-based incentive compensation for the NEOs, the Compensation Committee expressed its preference that a portion of the long-term performance-based incentive compensation to be awarded to the NEOs who are also officers of NEP be granted in the form of NEP performance-based restricted common units (NEP Awards). The Compensation Committee concluded that the proposed NEP Awards would further align the
50
incentive compensation of these NEOs to activities that promote the growth of long-term value for shareholders of the Company. After considering this and other factors, the Board of Directors of NEP (the NEP Board) in February 2018 approved grants of NEP Awards to those Company NEOs who are also officers of NEP, as well as to other officers and employees of the Company or its affiliates who are responsible for significant NEP activities.
The NEP Awards received by the NEOs did not increase the NEOs overall incentive compensation opportunity, but instead replaced on a dollar-for-dollar basis approximately 7% of the aggregate grant date value of the portion of their long-term performance-based awards in 2018 that otherwise would have been issued in the form of performance-based restricted stock of the Company. The performance objective for NEP Awards is adjusted EBITDA of $400 million. Therefore, the NEP Awards granted in 2018, which would otherwise vest ratably in 2019, 2020 and 2021, will not vest unless and until the NEP Board certifies that NEPs adjusted EBITDA for 2019, 2020 and 2021, respectively, equals or exceeds $400 million.
The NEP Awards were made pursuant to the NextEra Energy Partners, LP 2014 Long Term Incentive Plan (NEP 2014 LTIP). NEP will be reimbursed by the Company for the grant date fair value of all NEP Awards granted to employees and officers of the Company or its affiliates.
See Table 2: 2018 Grants of Plan-Based Awards for information about the performance-based restricted NEP common units awarded to the NEOs in 2018 and the description following that table for information about the material terms and conditions applicable to those performance-based restricted common units.
Non-Qualified Stock Option Awards in 2018
The Compensation Committee grants non-qualified stock options, rather than incentive stock options, primarily because the tax treatment of non-qualified stock options is more favorable to the Company than the treatment of incentive stock options. The 2011 LTIP prohibits repricing of awarded options without shareholder approval. See Table 2: 2018 Grants of Plan-Based Awards for information about the stock options granted to the NEOs in 2018 and the description following that table for further information about the material terms and conditions applicable to stock options.
Equity Grant Practices
Equity awards are granted by the Compensation Committee to the NEOs each year in mid-February, which is a date that is normally set two years in advance. The Compensation Committee believes that granting equity in this way is appropriate because the Company typically releases year-end earnings in late January, so all relevant information should be available to the market on the grant date. Equity awards may also be made to new executive officers upon hire or promotion, generally coincident with the date of hire or promotion or the Compensation Committee meeting next following the date of hire or promotion. The Compensation Committee does not seek to time equity grants to take advantage of information, either positive or negative, about the Company which has not been publicly disseminated. The exercise price of options granted is equal to the closing market price of NextEra Energys common stock on the effective date of grant.
Additional 2018 Compensation Elements
Benefits
NextEra Energy provides its executive officers with a comprehensive benefits program which includes health and welfare, life insurance and other personal benefits. For programs to which employees contribute premiums, executive officers pay the same premiums as other similarly-situated exempt employees. Retirement and other post-employment benefits are discussed under Post-Employment Compensation. These benefits are an integral part of the total compensation package for NEOs, and the aggregate value is included in the information reviewed by the Compensation Committee annually to ensure the reasonableness and appropriateness of total rewards. In addition, NextEra Energy believes that the intrinsic value placed on personal benefits by the NEOs is generally greater than the incremental cost of those benefits to the Company.
51
Personal Benefits
NextEra Energy provides its executive officers with personal benefits which, in many cases, improve efficiency by allowing the executive officers to focus on their critical job responsibilities and/or increasing the hours they can devote to work. Some of these benefits also serve to better secure the safety of the executive officers and their families. The Compensation Committee and its Compensation Consultant periodically review the personal benefits offered by the Company to ensure that the program is competitive and producing the desired results. The Compensation Committee believes that the benefits the Company derives from these personal benefits more than offset their incremental cost to the Company.
See footnote 2 to Table 1b: 2018 Supplemental All Other Compensation for a description of the personal benefits provided to the NEOs for 2018.
Use of Company-Owned Aircraft
Company aircraft are available to the NEOs, as well as other employees and directors, for business travel, which includes, in the judgment of the Governance & Nominating Committee, travel by NEOs to Company-approved outside board meetings and travel in connection with physical examinations. Among other advantages, business use of the aircraft by executives maximizes time efficiencies, provides a confidential environment for business discussions and enhances security.
NextEra Energy permits limited non-business use of Company aircraft by NEOs when that use does not interfere with the use of Company aircraft for business purposes. Non-business use is generally discouraged, however, and must be approved in advance by the CEO. NEOs must pay the Company for their non-business use based on the rate prescribed by the IRS for valuing non-commercial flights. A NEO traveling on Company aircraft for business purposes may, with the approval of the CEO, be accompanied by the NEOs guests, spouse and/or other family members. In this circumstance, there is essentially no incremental cost to the Company associated with transporting the additional passengers. Unless the travel is important to carrying out the business responsibilities of the NEO, however, the Company generally requires payment by the NEO for these passengers based on the rates described above. All non-business use of Company aircraft is reported to and reviewed by the Governance & Nominating Committee annually. In 2018, the NEOs use of Company aircraft for non-business purposes represented approximately 145 passenger flight hours and for travel to Company-approved outside board meetings and annual physical examinations represented an additional approximately 27 passenger flight hours. Company aircraft were used for a total of approximately 3,848 passenger flight hours in the aggregate in 2018.
Policy on Tax Reimbursements on Executive Perquisites
In accordance with the NextEra Energy, Inc. Policy on Tax Reimbursements on Executive Perquisites, the Company does not provide tax reimbursements on perquisites to the NEOs. In circumstances where the Compensation Committee deems such an action appropriate, the Company may provide tax reimbursements to executives as part of a plan, policy or arrangement applicable to a broad base of management employees of the Company, such as a relocation or expatriate tax equalization policy.
Stock Ownership and Retention Policies
The Company believes it is important for executive officers to accumulate a significant amount of NextEra Energy common stock to align officers interests with those of the Companys shareholders. NextEra Energys NEOs (and all other executives) are subject to a stock ownership policy and a stock retention policy. The Company believes these policies strongly reinforce NextEra Energys executive compensation philosophy and objectives. At the same time, the Company recognizes that the accumulation of a large, undiversified position in NextEra Energy common stock can at some point create undesired incentives, and it permits its officers some degree of diversification once the target level of holdings is reached. Under the stock ownership policy, officers are expected, within three years after appointment to office, to own NextEra Energy common stock with a value equal to a multiple of their base salaries. Shares of NextEra Energy
52
common stock and share units held in NextEra Energys employee benefit plans and deferred compensation plan are credited toward meeting this requirement. Unvested shares of performance-based restricted stock count, while shares subject to unpaid performance share awards and unexercised options do not count, toward the calculation of required holdings. The current multiples are as follows:
Chief Executive Officer
|
7x base salary rate
| |
Senior Executive Officers
|
3x base salary rate
| |
Other Officers
|
1x base salary rate
|
As of December 31, 2018, all NEOs owned common stock in excess of their requirements.
Under the stock retention policy, until such time as the requirements of the stock ownership policy are met, NextEra Energy expects executive officers to retain (and not sell) a number of shares equal to at least two-thirds of shares acquired through equity compensation awards (cumulatively, from the date of appointment as an executive officer). In addition, all of the NEOs (among other executive officers) must retain all shares of performance-based restricted stock for a minimum of 24 months after vesting (net of shares withheld for, or used to pay, taxes).
Officers who fail to comply with the retention policy may not be eligible for future equity-based compensation awards for a two-year period. The CEO may approve the modification or reduction of the minimum retention requirements (other than for himself) to address the special needs of a particular officer, although to date there have been no such modifications or reductions.
Clawback Provisions
The Company has an incentive compensation recoupment, or clawback, policy which provides for recoupment of incentive compensation from current and former executive officers in the event of the occurrence of either of the following triggering events:
(1) | a decision by the Audit Committee that recoupment is appropriate in connection with an accounting restatement of the Companys previously-published financial statements caused by what the Audit Committee deems to be material non-compliance by the Company with any financial reporting requirement under the federal securities laws (Financial Statement Triggering Event); or |
(2) | a decision by the Compensation Committee that one or more performance metrics used for determining previously paid incentive compensation was incorrectly calculated and, if calculated correctly, would have resulted in a lower payment to one or more executive officers (Performance Triggering Event). |
If a triggering event occurs, the Company will (to the extent permitted by applicable law) recoup from any executive officer any incentive compensation paid or granted during the three-year period preceding the triggering event that was in excess of the amount that would have been paid or granted after giving effect, as applicable, to the accounting restatement that resulted from the Financial Statement Triggering Event or to what would have been the correct calculation of the performance metric(s) used in determining that a Performance Triggering Event had occurred. The incentive compensation to be recouped will be in an amount and form determined in the judgment of the Board. In addition, the 2011 LTIP provides that any award granted under the 2011 LTIP will be subject to mandatory repayment by the grantee to the extent that events occur that require such mandatory repayment under (a) any Company clawback or recoupment policy that is adopted to comply with the requirements of any applicable law, rule or regulation, or otherwise (such as the policy described above) or (b) any law, rule or regulation which imposes mandatory recoupment upon the occurrence of such events.
53
Post-Employment Compensation
General
NextEra Energy expects continued and consistent high levels of individual performance from all executive officers as a condition of continued employment. The Company has in the past terminated the employment of executive officers who were unable to sustain the expected levels of performance, and it is prepared to do so in the future should that become necessary. All of the NEOs, including the CEO, are employees at will.
Set forth below is a description of the agreements and programs that may provide for compensation should a NEOs employment with the Company terminate under specified circumstances.
Severance Plan
The NextEra Energy, Inc. Executive Severance Benefit Plan (the Severance Plan) provides for the payment of severance benefits to the NEOs and to certain other senior executives if their employment with the Company is involuntarily terminated in specified circumstances. The purpose of the Severance Plan is to retain the covered senior executives and encourage dedication to their duties by ensuring the equitable treatment of those who may experience an involuntary termination, as defined in the Severance Plan. The Severance Plan provides severance benefits following involuntary termination in exchange for entry by the executive into a release of claims against the Company and an agreement to adhere to certain non-competition and related covenants protective of the Company and its affiliates. Following a covered involuntary termination and the execution of the release and other agreement, the executive would receive a cash payment equal to two times the executives annual base salary plus two times the executives target annual incentive compensation for the year of termination, payable in two equal annual installments. In addition, the executives outstanding equity and equity-based awards would vest pro rata, and become payable at the end of any applicable performance periods, subject to the attainment by the Company of the specified performance objectives. The executive also would receive certain ancillary benefits, including outplacement assistance or payment in an amount equal to the value of the outplacement assistance. Amounts payable under the Severance Plan are subject to a cap specified in the Severance Plan.
The Company may amend or terminate the Severance Plan, in full or in part, at any time, but if an amendment or termination would affect the rights of an executive, the executive must agree in writing to the amendment or termination. The Severance Plan does not provide for the payment of severance benefits upon terminations governed by the terms of the Retention Agreements described below.
Change in Control
Each of the NEOs is a party to an executive retention employment agreement (Retention Agreement) with the Company. The Compensation Committee has concluded that the Retention Agreements are desirable in order to align NEO and shareholder interests under some unusual conditions, as well as useful and, in some cases, necessary to attract and retain senior executive talent.
In connection with a change in control of the Company, it can be important to secure the dedicated attention of executive officers whose personal positions are at risk and who have other opportunities readily available to them. By establishing compensation and benefits payable under various merger and acquisition scenarios, change in control agreements enable the NEOs to set aside personal financial and career objectives and focus on maximizing shareholder value. These agreements also help the officer to maintain an objective and neutral perspective in analyzing opportunities that may arise. Furthermore, they ensure continuity of the leadership team at a time when business continuity is of paramount concern. Without the Retention Agreements, the Company would have a greater risk of losing key executives in times of uncertainty.
54
Retention Agreements entered into since 2009 do not include excise tax gross-ups. The material terms of the Retention Agreements are described under Potential Payments Upon Termination or Change in Control on page 71.
Retirement Programs
Employee Pension Plan and 401(k) Plan
NextEra Energy maintains two retirement plans which qualify for favorable tax treatment under the Internal Revenue Code (Code): a non-contributory defined benefit pension plan and a defined contribution 401(k) plan. These plans are available to substantially all NextEra Energy employees. Each of the NEOs participates in both plans. The pension plan is more fully described following Table 5: Pension Benefits.
Supplemental Executive Retirement Plan (SERP)
Current tax laws place various limits on the benefits payable under tax-qualified retirement plans, such as NextEra Energys defined benefit pension plan and 401(k) plan, including a limit on the amount of annual compensation that can be taken into account when applying the plans benefit formulas. Therefore, the retirement incomes provided to the NEOs by the qualified plans generally constitute a smaller percentage of final pay than is typically the case for other Company employees. In order to make up for this and maintain the market-competitiveness of NextEra Energys executive retirement benefits, NextEra Energy maintains an unfunded, non-qualified SERP for its executive officers, including the NEOs. For the NEOs, compensation included under the SERP is annual base salary plus the actual annual cash incentive award, as opposed to the compensation included under the qualified plans, which is annual base salary only. NextEra Energy believes it is appropriate to include annual cash incentive awards for purposes of determining retirement plan benefits (both defined benefit pension and 401(k)) for the NEOs in order to ensure that the NEOs can replace in retirement a proportion of total compensation similar to that replaced by other employees participating in the Companys defined benefit pension and 401(k) plans, bearing in mind that base salary alone constitutes a relatively smaller percentage of a NEOs total compensation.
For additional information about the defined benefit plan benefit formulas under the SERP, see Table 5: Pension Benefits and accompanying descriptions.
Deferred Compensation Plan
NextEra Energy sponsors a non-qualified, unfunded Deferred Compensation Plan, which allows eligible highly compensated employees, including the NEOs, voluntarily and at their own risk to elect to defer certain forms of compensation prior to the compensation being earned and vested. NextEra Energy makes this opportunity available to its highly compensated employees as a financial planning tool and an additional method to save for retirement. Deferrals by executive officers generally result in the Company deferring its obligation to make cash payments or issue shares of its common stock to those executive officers.
The Compensation Committee does not view the Deferred Compensation Plan as providing executives with additional compensation. Participants in the Deferred Compensation Plan are general creditors of the Company and the deferral of the payment obligation provides a financial advantage to the Company. For additional information about the Deferred Compensation Plan, see Table 6: Nonqualified Deferred Compensation and accompanying descriptions.
Tax Considerations
The Compensation Committee carefully considers the tax impact of the Companys compensation programs on NextEra Energy as well as on the NEOs. However, the Compensation Committee believes that decisions regarding executive compensation should be primarily based on whether they result in positive long-term value for the Companys shareholders and other important stakeholders. In light of the repeal of the performance-based compensation exception to Section 162(m), the Compensation Committee expects compensation granted or paid in 2018 and future tax years will not be fully deductible for income tax
55
purposes. While the Compensation Committee believes that shareholder interests are best served if it retains discretion and flexibility in awarding compensation, even though some compensation awards may result in non-deductible compensation expenses, the Compensation Committee intends to maintain strong pay-for-performance alignment of executive compensation arrangements notwithstanding loss of deductibility due to repeal of the exemption for performance-based compensation.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion & Analysis required by applicable SEC rules which precedes this Report and, based on its review and that discussion, the Compensation Committee recommended to the Board that the Compensation Discussion & Analysis set forth above be included in the Companys proxy statement for the 2019 annual meeting of shareholders.
Respectfully submitted,
Kirk S. Hachigian, Chair
Sherry S. Barrat
James L. Camaren
Amy B. Lane
Hansel E. Tookes, II
56
When reviewing the narrative, tables and footnotes which follow, note that, in order to meet the goals and objectives of NextEra Energys executive compensation program as described in Compensation Discussion & Analysis, the Compensation Committee primarily focuses on, and values, each NEOs total compensation opportunity at the beginning of the relevant performance periods. Since many elements of total compensation are variable, based on performance and are not paid to the NEO for one, two or three years (and in some instances longer) after the compensation opportunity is first determined, the amounts reported in some of the tables in this proxy statement may reflect compensation decisions made prior to 2018 and in some cases reflect amounts different from the amounts that may ultimately be paid.
Table 1a: 2018 Summary Compensation Table
The following table provides certain information about the compensation paid to, or accrued on behalf of, the NEOs in 2018. It is important to keep in mind the following when reviewing the table:
| The amounts shown in the Stock Awards and the Option Awards columns are based on the aggregate grant date fair value of awards computed under applicable accounting rules for all equity compensation awards. |
| The Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflects the change in the present value of the pension benefit payable to each NEO in the applicable year. These changes in present value are not related to any compensation decision on the part of the Compensation Committee. |
Table 1a: 2018 Summary Compensation Table
Name and Principal Position(a) |
Year (b) |
Salary ($)(c) |
Bonus ($)(d) |
Stock Awards(2)(3)(4) ($)(e) |
Option Awards(2) ($)(f) |
Non-Equity Incentive Plan Compen- sation(5) ($)(g) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings (6)(7) ($)(h) |
All Other Compen- sation(6)(8) ($)(i) |
Total ($)(j) | ||||||||||||||||||||||||||||||||||||
James L. Robo |
2018 | $ | 1,400,000 | $ | 0 | $ | 11,611,417 | $ | 2,624,993 | $ | 4,480,000 | $ | 854,722 | $ | 387,610 | $ | 21,358,742 | ||||||||||||||||||||||||||||
Chairman, President and CEO |
2017 | 1,350,000 | 0 | 9,607,113 | 2,437,497 | 4,320,000 | 754,433 | 342,650 | 18,811,693 | ||||||||||||||||||||||||||||||||||||
2016 | 1,300,000 | 0 | 9,629,404 | 1,156,993 | 3,732,300 | 672,321 | 267,753 | 16,758,771 | |||||||||||||||||||||||||||||||||||||
John W. Ketchum |
|
2018 |
|
|
819,000 |
|
|
0 |
|
|
2,311,181 |
|
|
409,591 |
|
|
1,089,300 |
|
|
226,055 |
|
|
122,942 |
|
|
4,978,069 |
| ||||||||||||||||||
Executive Vice President, |
2017 | 650,000 | 0 | 1,653,209 | 325,089 | 873,600 | 185,793 | 107,847 | 3,795,538 | ||||||||||||||||||||||||||||||||||||
2016 | 575,000 | 0 | 1,107,531 | 213,193 | 752,700 | 153,193 | 94,812 | 2,896,429 | |||||||||||||||||||||||||||||||||||||
Armando Pimentel, Jr. |
|
2018 |
|
|
1,004,600 |
|
|
0 |
|
|
3,296,321 |
|
|
584,188 |
|
|
1,272,800 |
|
|
353,407 |
|
|
153,133 |
|
|
6,664,449 |
| ||||||||||||||||||
Former President and CEO |
2017 | 897,000 | 0 | 2,652,861 | 521,600 | 1,205,600 | 320,145 | 143,860 | 5,741,066 | ||||||||||||||||||||||||||||||||||||
2016 | 838,100 | 0 | 2,140,778 | 412,198 | 1,120,500 | 294,735 | 127,667 | 4,933,978 | |||||||||||||||||||||||||||||||||||||
Manoochehr K. Nazar |
|
2018 |
|
|
950,000 |
|
|
0 |
|
|
2,472,314 |
|
|
438,200 |
|
|
1,330,000 |
|
|
357,796 |
|
|
159,229 |
|
|
5,707,539 |
| ||||||||||||||||||
President, Nuclear Division and Chief Nuclear |
2017 | 904,800 | 0 | 2,122,451 | 417,296 | 1,266,700 | 330,084 | 146,425 | 5,187,756 | ||||||||||||||||||||||||||||||||||||
2016 | 874,200 | 0 | 1,938,471 | 373,290 | 1,168,800 | 303,519 | 142,154 | 4,800,434 | |||||||||||||||||||||||||||||||||||||
Eric E. Silagy |
|
2018 |
|
|
1,049,200 |
|
|
0 |
|
|
3,065,463 |
|
|
543,287 |
|
|
1,461,500 |
|
|
315,204 |
|
|
166,656 |
|
|
6,601,310 |
| ||||||||||||||||||
President and CEO of FPL |
2017 | 860,000 | 0 | 2,264,864 | 445,293 | 1,204,000 | 273,590 | 173,490 | 5,221,237 | ||||||||||||||||||||||||||||||||||||
2016 | 796,100 | 0 | 1,575,382 | 303,289 | 1,114,500 | 234,353 | 122,547 | 4,146,171 |
(1) | In August 2015, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the SEC adopted a rule requiring annual disclosure of the ratio of the median employees annual total compensation to the total annual compensation of the principal executive officer (PEO). The rule went into effect January 1, 2018. In accordance with the rule, for 2018, NextEra Energys last completed fiscal year, the ratio of the total compensation of Mr. Robo, the PEO, to NextEra Energys median employees annual compensation was 170 to 1. The median employees annual total compensation was $125,365. The total annual compensation of the PEO for purposes of calculating the pay ratio was $21,358,742. NextEra Energy had 14,148 U.S.-based active employees as of December 31, 2018, which was also the date for determining the median employee. NextEra Energy has 105 employees in Canada and 69 employees in Spain (total of 174 employees) that are excluded in accordance with SEC rules from the median employee determination as they represent less than 5% of the Companys workforce. The |
57
compensation measure used to identify the median employee is total cash compensation, and no employees compensation was annualized. Total cash compensation is the predominant form of employee remuneration. After the median employee was identified, all of the elements of the employees 2018 compensation was combined in accordance with the applicable SEC rules. |
(2) | The amounts shown represent the aggregate grant date fair value of equity-based compensation awards granted during the relevant year, valued in accordance with applicable accounting rules, without reduction for estimated forfeitures. See Note 11 Common Shareholders EquityStock-Based Compensation to the consolidated financial statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2018, and Note 10 Common Shareholders EquityStock-Based Compensation to the consolidated financial statements in the Companys Annual Report on Form 10-K for the years ended December 31, 2017 and December 31, 2016, for the assumptions used in this valuation. |
(3) | Includes performance-based restricted stock and performance share awards valued based on the probable outcome of the performance conditions as of the grant date; and for Messrs. Robo, Ketchum and Pimentel, performance-based restricted NEP common units. The grant date fair value of performance-based restricted NEP common units is measured based upon the closing market price of NEP common units as of the date of grant, February 20, 2018. With respect to the performance shares granted in 2018 to all NEOs, a performance rating assumption of 1.40 (i.e. target shares multiplied by 1.40) was used (in accordance with applicable accounting guidance) to value such performance share awards and grant date fair value for all NEOs was determined on the grant date using the Monte-Carlo simulation process with the variables listed in the table below. With respect to 65% of the target number of performance shares granted in 2017 and 2016 to all NEOs, a performance rating assumption of 1.40 (i.e. target shares multiplied by 1.40) was used (in accordance with applicable accounting guidance) to value such performance share awards. With respect to 35% of the target number of performance shares granted in 2017 and 2016, grant date fair value for all NEOs was determined on the grant date using the Monte-Carlo simulation process with the following variables: |
Description |
Market |
Volatility |
Yield |
Interest Rate |
Expected Life |
Fair Value |
||||||||||||
For the 2/15/2018 grant: |
|
$154.43 |
|
16.26% |
|
3.05 |
% |
2.37% |
2.87 yr. |
|
$154.64 |
| ||||||
For the 2/17/2017 grant: |
|
$126.86 |
|
17.64% |
|
3.16 |
% |
1.44% |
2.87 yr. |
|
$147.07 |
| ||||||
For the 2/12/2016 grant: |
|
$111.67 |
|
17.15% |
|
3.16 |
% |
0.87% |
2.88 yr. |
|
$126.65 |
|
(4) | The maximum payout of performance shares granted in 2018 is 2.00 times target. Therefore, the maximum aggregate grant date fair value of the awards granted in 2018 is: for Mr. Robo, 97,568 shares, or $15,087,916; for Mr. Ketchum, 17,568 shares, or $2,716,716; for Mr. Pimentel, 25,056 shares, or $3,874,660; for Mr. Nazar, 18,792 shares, or $2,905,995; and for Mr. Silagy, 23,300 shares, or $3,603,112. |
(5) | Includes the amount earned by each NEO, as applicable, with respect to 2018, 2017 and 2016 under the Annual Incentive Plan. |
(6) | NextEra Energy maintains both defined benefit and defined contribution retirement plans (as described in Compensation Discussion & AnalysisPost-Employment CompensationRetirement Programs). Company contributions to defined benefit and defined contribution retirement plans (both qualified and nonqualified) are allocated between columns (h) and (i), respectively. |
(7) | All amounts in this column reflect the one-year change in the present value of each NEOs accumulated benefit under the tax-qualified defined benefit employee pension plan and the SERP. The Deferred Compensation Plan does not permit above-market interest to be credited and, therefore, no above-market interest was credited in 2018, 2017 and 2016. |
(8) | Additional information about the amounts for 2018 set forth in the All Other Compensation column may be found in Table 1b: 2018 Supplemental All Other Compensation, which immediately follows. |
(9) | Mr. Pimentel retired March 1, 2019. |
58
The following table (Table 1b) provides additional information for 2018 regarding column (i) of Table 1a: 2018 Summary Compensation Table.
Table 1b: 2018 Supplemental All Other Compensation
Name |
Total
From |
Contributions |
Perquisites | ||||||||||||
James L. Robo |
|
$387,610 |
|
|
$271,654 |
|
|
$115,956 |
| ||||||
John W. Ketchum |
|
122,942 |
|
|
80,244 |
|
|
42,698 |
| ||||||
Armando Pimentel, Jr. |
|
153,133 |
|
|
104,886 |
|
|
48,247 |
| ||||||
Manoochehr K. Nazar |
|
159,229 |
|
|
105,252 |
|
|
53,977 |
| ||||||
Eric E. Silagy |
|
166,656 |
|
|
106,854 |
|
|
59,802 |
|
(1) | NextEra Energy maintains both defined benefit and defined contribution retirement plans. Amounts attributable to the defined benefit plans are reported in Table 1a: 2018 Summary Compensation Table under column (h), Change in Pension Value and Nonqualified Deferred Compensation Earnings. Amounts attributable to the defined contribution plans are reported under column (i), All Other Compensation, and are further described below under Additional Disclosure Related to Pension Benefits Table. This column includes employer matching contributions to the Companys qualified 401(k) plan of $13,062 for each NEO, plus the Companys contributions to the nonqualified defined contribution portion of the SERP. |
(2) | This column includes the aggregate incremental cost to NextEra Energy of providing personal benefits to the NEOs. For each NEO, the personal benefits reported for 2018 in this column include: annual premiums for $5 million in umbrella coverage under a group personal excess liability insurance policy; reimbursement for professional financial planning and legal services; for all NEOs other than Mr. Robo, the cost of the officers participation in an executive vehicle program, which includes use of a Company-leased passenger vehicle, fuel and other ancillary costs (the incremental cost incurred for which was $31,443 for Mr. Ketchum, $32,400 for Mr. Pimentel, $29,155 for Mr. Nazar and $36,226 for Mr. Silagy); for Mr. Robo, a vehicle allowance; for all NEOs except Mr. Silagy, fees paid for travel programs such as airline memberships and hospitality room memberships; for Messrs. Robo and Nazar, costs for maintenance of a residential home security system and central station monitoring; and, for Mr. Silagy, costs for a club membership used primarily for business but also available for personal and family use. For Mr. Nazar, the personal benefits reported in this column also include the costs of participation in a voluntary annual executive physical examination, including lodging costs and related expenses. For all NEOs, the personal benefits reported in this column also include premiums for a life insurance benefit in an amount equal to 2.5 times salary. For all NEOs, the personal benefits reported in this column also include the incremental cost to the Company for personal use of Company-owned aircraft, which is the variable operating costs of such use, net of payments to the Company by or on behalf of the NEOs, as is generally required by Company policy for such personal use. Variable operating costs include fuel, trip-related maintenance, crew travel expenses, on-board catering, landing fees, trip-related hangar/parking costs, excise taxes and other miscellaneous variable costs. The total annual variable costs are divided by the annual number of statute miles the Company aircraft flew to derive an average variable cost per mile. The incremental cost incurred was $66,446 for Mr. Robo. |
Table 2: 2018 Grants of Plan-Based Awards
The following table provides information about the cash and equity incentive compensation awarded to the NEOs in 2018. It is important to keep in mind the following when reviewing the table:
| Columns (c), (d) and (e) below set forth the range of possible payouts established under the Annual Incentive Plan for 2018 and are not amounts actually paid to the NEOs. The actual amounts paid with respect to 2018 under the Annual Incentive Plan, which is a Non-Equity Incentive Plan, as that term is used in the heading for columns (c), (d) and (e) of this table, are set forth in Table 1a: 2018 Summary Compensation Table in column (g), entitled Non-Equity Incentive Plan Compensation. |
| The number of shares listed under Estimated Future Payouts Under Equity Incentive Plan Awards (columns (g) and (h)) represent 2018 grants of performance shares, performance-based restricted stock and performance-based restricted NEP common units, the material terms of which are described below this table. |
| The number of shares listed under All Other Option Awards: Number of Securities Underlying Options (column (j)) and the exercise price set forth under Exercise or Base Price of Option Awards (column (k)) represent the number and exercise price of 2018 grants of non-qualified stock options, the material terms of which are described below this table. |
59
| In the column headed Grant Date Fair Value of Stock and Option Awards (column (l)), the top number is the grant date fair value of the performance share award, the next number is the grant date fair value of the performance-based restricted stock award, the third number is the grant date fair value of the stock options granted and the fourth number is the grant date fair value of NEP performance-based restricted common units, as applicable. |
Table 2: 2018 Grants of Plan-Based Awards
Grant |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All Other Stock Awards: Number of Shares of Stock or Units (#) (i) |
All Other Option Awards: Number of Securities Underlying Options(3) (#) (j) |
Exercise or Base Price of Option Awards ($/Sh) (k) |
Grant Date Fair Value of Stock and Option Awards($)(4) (l) |
||||||||||||||||||||||||||||||||||||||
Name(a) | Thre- shold ($) (c) |
Target ($) (d) |
Maximum ($) (e) |
Thre- shold |
Target (#) (g) |
Maximum (#) (h) |
||||||||||||||||||||||||||||||||||||||
James L. Robo |
|
|
|
|
$0 |
|
$ |
2,240,000 |
|
$ |
4,480,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
2/15/2018 |
|
|
0 |
|
|
48,784 |
|
|
97,568 |
|
$ |
10,561,541 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
0 |
|
|
2,039 |
|
|
2,039 |
|
$ |
314,883 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
145,429 |
|
$ |
154.43 |
|
$ |
2,624,993 |
| |||||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
0 |
|
|
18,329 |
|
|
18,329 |
|
$ |
734,993 |
| ||||||||||||||||||||||||||||||
John W. Ketchum |
|
|
|
|
0 |
|
|
573,300 |
|
|
1,146,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
2/15/2018 |
|
|
0 |
|
|
8,784 |
|
|
17,568 |
|
|
1,901,701 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
0 |
|
|
1,723 |
|
|
1,723 |
|
|
266,083 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
22,692 |
|
|
154.43 |
|
|
409,591 |
| |||||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
0 |
|
|
3,576 |
|
|
3,576 |
|
|
143,398 |
| ||||||||||||||||||||||||||||||
Armando Pimentel, Jr. |
|
|
|
|
0 |
|
|
703,220 |
|
|
1,406,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
2/15/2018 |
|
|
0 |
|
|
12,528 |
|
|
25,056 |
|
|
2,712,262 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
0 |
|
|
2,458 |
|
|
2,458 |
|
|
379,589 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
32,365 |
|
|
154.43 |
|
|
584,188 |
| |||||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
0 |
|
|
5,099 |
|
|
5,099 |
|
|
204,470 |
| ||||||||||||||||||||||||||||||
Manoochehr K. Nazar |
|
|
|
|
0 |
|
|
665,000 |
|
|
1,330,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
2/15/2018 |
|
|
0 |
|
|
9,396 |
|
|
18,792 |
|
|
2,034,196 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
0 |
|
|
2,837 |
|
|
2,837 |
|
|
438,118 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
24,277 |
|
|
154.43 |
|
|
438,200 |
| |||||||||||||||||||||||||||||||||
Eric E. Silagy |
|
|
|
|
0 |
|
|
734,440 |
|
|
1,468,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
2/15/2018 |
|
|
0 |
|
|
11,650 |
|
|
23,300 |
|
|
2,522,178 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
0 |
|
|
3,518 |
|
|
3,518 |
|
|
543,285 |
| ||||||||||||||||||||||||||||||
|
2/15/2018 |
|
|
30,099 |
|
|
154.43 |
|
|
543,287 |
|
(1) | Non-Equity Incentive Plan awards are paid under the Annual Incentive Plan, the material terms of which are described in Compensation Discussion & Analysis. For 2018, amounts payable were paid in cash in February 2019. See column (g) of Table 1a: 2018 Summary Compensation Table for actual amounts paid with respect to 2018 under the Annual Incentive Plan. |
(2) | In 2018, each NEO was granted awards of performance shares and performance-based restricted stock under the 2011 LTIP and for Messrs. Robo, Ketchum and Pimentel, performance-based restricted NEP common units under the NEP 2014 LTIP. Performance shares were granted in 2018 for a three-year performance period ending December 31, 2020. The number of shares which will ultimately be paid to each NEO at the end of the performance period will be determined by multiplying the NEOs target number of performance shares by a percentage determined by the Compensation Committee based on the Companys performance over the three-year performance period (as more fully described in Compensation Discussion & Analysis), which may not exceed 200% of the target award. See footnotes (5) through (9) to Table 3: 2018 Outstanding Equity Awards at Fiscal Year End for further information about the vesting of performance-based restricted stock and performance-based restricted NEP common units. |
(3) | Non-qualified stock options were granted under the 2011 LTIP in 2018. The stock options generally vest and become exercisable at the rate of one-third per year beginning approximately one year from date of grant and are fully exercisable after three years. See footnote (1) to Table 3: 2018 Outstanding Equity Awards at Fiscal Year End for further information about the vesting of stock options. All stock options were granted at an exercise price of 100% of the closing price of NextEra Energy common stock on the date of grant. |
(4) | The amounts shown are the value of the equity-based compensation grants as of the 2018 grant date under applicable accounting rules. |
60
Additional Disclosure Related to 2018 Summary Compensation Table and 2018 Grants of Plan-Based Awards Table
Material Terms of Performance Shares Granted to NEOs in 2018
| three-year performance period; |
| paid in shares of NextEra Energy common stock, based primarily on Company performance for the three-year performance period as compared to specified financial and operational objectives with a ±20 relative TSR modifier based on performance of the top ten power companies by market capitalization at the end of a 3-year period, capped at 200% of target; |
| dividends are not paid or accrued during the performance period; |
| may vest in full or in part upon the occurrence of certain events, such as a change in control, death, disability or some retirements; |
| forfeited if employment terminates prior to the end of the performance period in all other instances (subject to the terms of Retention Agreements and the Severance Plan); and |
| award agreement includes non-solicitation and non-competition provisions. |
Material Terms of Performance-Based Restricted Stock Granted to NEOs in 2018
| if corporate performance objective of adjusted earnings of $1.2 billion is met as of the end of the preceding year, performance-based restricted stock vests one-third per year for three years for each year the corporate performance objective is met, beginning approximately one year from date of grant; |
| if corporate performance objective of adjusted earnings of $1.2 billion is not met in any year, performance-based restricted stock scheduled to vest in that year is forfeited; |
| dividends are paid on performance-based restricted stock as and when declared by the Company, but are subject to repayment by NEO if awards are forfeited prior to vesting; |
| NEOs have the right to vote their shares of performance-based restricted stock; |
| may vest in full or in part prior to or on normal vesting date and, in some circumstances, without regard to satisfaction of performance objective, upon the occurrence of certain events, such as a change in control, death, disability or some retirements; |
| forfeited if employment terminates prior to vesting in all other instances (subject to terms of Retention Agreements and the Severance Plan); and |
| award agreement includes non-solicitation and non-competition provisions. |
Material Terms of Performance-Based Restricted NEP Common Units Granted to NEOs in 2018
| if the NEP performance objective of adjusted EBITDA of $400 million is met as of the end of the preceding year, performance-based restricted NEP common units vest one-third per year for three years for each year the NEP performance objective is met, beginning approximately one year from date of grant; |
| if the NEP performance objective of adjusted EBTIDA of $400 million is not met in any year, performance-based restricted NEP common units scheduled to vest in that year are forfeited; |
| distributions are paid on performance-based restricted NEP common units as and when declared by NEP, but are subject to repayment by NEO if awards are forfeited prior to vesting; |
| NEOs have the right to vote their performance-based restricted NEP common units; |
61
| may vest in full or in part prior to or on normal vesting date and, in some circumstances, without regard to satisfaction of performance objective, upon the occurrence of certain events, such as a change in control, death, disability or some retirements; |
| forfeited if employment terminates prior to vesting in all other instances (subject to terms of Retention Agreements and the Severance Plan); and |
| award agreement includes non-solicitation and non-competition provisions. |
Material Terms of Stock Options Granted to NEOs in 2018
| vest and become exercisable one-third per year for three years, beginning approximately one year from date of grant; |
| exercise price equal to closing price of NextEra Energy common stock on date of grant (February 15, 2018); |
| generally expire ten years from date of grant; |
| may vest in full or in part prior to normal vesting date upon the occurrence of some events, such as a change in control, death, disability or some retirements; |
| forfeited if employment terminated prior to vesting in all other instances (subject to terms of Retention Agreements and the Severance Plan); and |
| award agreement includes non-solicitation and non-competition provisions. |
Determination of Amount Payable Under Annual Incentive Plan to NEOs
See Compensation Discussion & Analysis for a description of the criteria used to determine the amount payable to each NEO under the Annual Incentive Plan (Non-Equity Incentive Plan Compensation).
Salary and Bonus as a Proportion of 2018 Total Compensation
No discretionary bonuses were paid to NEOs in 2018. The salaries, as set forth in column (c) of Table 1a: 2018 Summary Compensation Table, of each of the NEOs as a proportion of 2018 total compensation were as follows:
Mr. Robo7%
Mr. Ketchum18%
Mr. Pimentel16%
Mr. Nazar18%
Mr. Silagy17%
These proportions are consistent with the Companys philosophy of paying NEOs a higher percentage of performance-based compensation and a lower percentage of fixed compensation.
Table 3: 2018 Outstanding Equity Awards at Fiscal Year End
The following table provides information about equity incentive awards granted to the NEOs in 2018 and in prior years. It is important to keep in mind the following when reviewing the table:
| The number of shares listed in column (i), Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested, includes both performance shares, at maximum payout level (in accordance with applicable SEC rules), prior to the expiration of the performance period, and performance-based restricted stock and NEP common units prior to the satisfaction of the performance |
62
and time criteria required for vesting. The number of shares listed in column (g), Number of Shares or Units of Stock That Have Not Vested, includes a deferred retirement award issued to Mr. Robo in 2012 in connection with his initial appointment as CEO. |
| As required by SEC rules, the amounts listed in column (j), Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested, represent the value of performance-based restricted stock and NEP common units and performance share awards at maximum payout levels. These amounts were not realized by the NEOs during 2018, and the value of awards which vest at a later date is likely to be different from the amount listed, based on, among other factors, the performance of the Company and the price of the Companys common stock. |
Table 3: 2018 Outstanding Equity Awards at Fiscal Year End
Option Awards |
Stock Awards | |||||||||||||||||||||||||||||||||||
Name (a) |
Number of Securities Underlying Unexercised Options(#) Exercisable(1) (b) |
Number of Securities Underlying Unexercised Options(#) Unexer- cisable(1) (c) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options(#) (d) |
Option Exercise Price($) (e) |
Option Expiration Date (f) |
Number of Shares or Units of Stock That Have Not Vested(2) (#) (g) |
Market Value of Shares or Units of Stock That Have Not Vested($)(3) (h) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(#)(4) (i) |
Equity Plan Awards: Market
or |
|||||||||||||||||||||||||||
James L. Robo |
111,864 | 0 | 0 | 45.57 | 2/12/2020 | |||||||||||||||||||||||||||||||
89,074 | 0 | 0 | 54.59 | 2/18/2021 | ||||||||||||||||||||||||||||||||
101,937 | 0 | 0 | 60.22 | 2/17/2022 | ||||||||||||||||||||||||||||||||
82,931 | 0 | 0 | 72.50 | 2/15/2023 | ||||||||||||||||||||||||||||||||
58,922 | 0 | 0 | 93.27 | 2/14/2024 | ||||||||||||||||||||||||||||||||
78,744 | 0 | 0 | 103.62 | 2/13/2025 | ||||||||||||||||||||||||||||||||
67,899 | 33,949 | 0 | 111.67 | 2/12/2026 | ||||||||||||||||||||||||||||||||
61,320 | 122,642 | 0 | 126.86 | 2/17/2027 |