PROPOSAL 1: ELECTION OF
TRUSTEES
Our Board of Trustees oversees the
business affairs and management of Northeast Utilities. The Board currently
consists of 14 Trustees, only one of whom, Thomas J. May, our Chairman of the
Board, President and Chief Executive Officer, is a member of management. Mr.
Charles Shivery, who served the Company both as Chairman of the Board, President
and Chief Executive Officer, and then as Chairman of the Board following his
retirement from employment in 2012, is stepping down from the Board of Trustees
following the 2014 Annual Meeting of Shareholders.
Thirteen Trustees have been nominated
for reelection as Trustees at the Annual Meeting to hold office until the next
annual meeting and until the succeeding Board of Trustees has been elected, and
until at least a majority of the succeeding Board is qualified to act. Unless
you specify otherwise, the enclosed proxy will be voted to elect the 13 nominees
named on pages 9-15 as Trustees.
If one or more of the nominees should
become unavailable for election, which the Board of Trustees does not currently
anticipate, the proxy may be voted for a substitute person or persons, but not
more than a total of 13 nominees. In accordance with the Northeast Utilities
Declaration of
Trust, the shareholders fixed the
number of Trustees at 14 in 2011, one more than the current number of nominees
due to Mr. Shivery stepping down from the Board.
Set forth below and on the following
pages is each nominees name, age, date first elected as a Trustee, and a brief
summary of the nominees business experience, including the nominees particular
experience, qualifications, attributes or skills that led the Board to conclude
that the nominee should continue to serve as a Trustee. See the Trustees
biographies below and the section captioned Selection of Trustees beginning on
page 20. Each nominee has indicated he or she will stand for election and will
serve as a Trustee if elected. An affirmative vote of a majority of the common
shares outstanding as of the record date will be required to elect each nominee.
Abstentions, broker non-votes and withheld votes will be counted in the
determination of a quorum and will have the same effect as a vote against a
nominee.
The Board of Trustees recommends
that
shareholders vote FOR the election of
the
nominees listed
below
|
Richard H.
Booth, 67
Trustee since 2001.
Mr. Booth serves as a senior advisor to Century Capital Management LLC,
an investment advisory firm located in Boston, Massachusetts. From July 2009
until his retirement on March 1, 2014, Mr. Booth served as Vice Chairman of Guy
Carpenter & Company, LLC, a global reinsurance intermediary and wholly owned
subsidiary of Marsh & McLennan Companies, Inc. From June 2008 to March 2009,
Mr. Booth served as a corporate officer, and from October 2008 to March 2009, as
Vice Chairman, Transition Planning and Chief Administrative Officer, of American
International Group, Inc. From January 2000 to March 2009, he served as Chairman
and a director of HSB Group, Inc. From January 2000 to March 2009, he served as
Chairman and a director of Hartford Steam Boiler Inspection and Insurance
Company. In addition to Northeast Utilities, Mr. Booth serves on the boards of
SunLife Financial Inc., The Hanover Insurance Group, Inc. and several private
and/or non-profit companies. He is a former member of the
Financial
Accounting Standards Advisory
Council and its Steering Committee and is a National Association of Corporate
Directors Board Leadership Fellow. Mr. Booth received B.S. and M.S. degrees from
the University of Hartford.
Mr. Booth has considerable senior
executive level experience in business and management, including in particular
strategic planning, capital and financial markets, accounting and financial
reporting, credit markets and risk assessment, both in his current position at
Century Capital Management LLC and as an executive officer of Guy Carpenter
& Company LLC, as well as in other prior positions, including Chairman of
HSB Group and Chairman of Hartford Steam Boiler. He has served on the boards of
directors of numerous companies. In addition, Mr. Booth is a member of the
American Institute of Certified Public Accountants and the Connecticut Society
of Certified Public Accountants. Based on these skills and qualifications,
coupled with his ties to the City of Hartford and the State of Connecticut, the
Board of Trustees determined that Mr. Booth should continue to serve as a
Trustee.
2014 Proxy Statement
9
PROPOSAL 1: ELECTION OF
TRUSTEES
John S.
Clarkeson, 71
Trustee since 2008.
Mr. Clarkeson has served as the Chairman Emeritus of The Boston
Consulting Group, Inc. since 2007. Previously, Mr. Clarkeson served as
Co-Chairman of the Board of The Boston Consulting Group, Inc. from 2004 to 2007.
He is a director of the Cabot Corporation, a director of the National Bureau of
Economic Research, a former trustee of the Educational Testing Service, a
trustee emeritus of the Massachusetts General Physicians Organization, Inc., and
a member of the INSEAD Advisory Council. Mr. Clarkeson received an A.B. degree
magna cum laude from Harvard College, where he was a Harvard National Scholar,
and an M.B.A. from Harvard Business School.
Mr. Clarkeson has significant senior
executive level experience in business and management through his service as
Chairman and Chief Executive Officer of The Boston Consulting Group, as well as
his service as a director of Cabot Corporation, where he chairs the Corporate
Governance and Nominating Committee and serves on the Compensation and Executive
Committees. He has served on the boards of directors of numerous companies. He
also has experience in budgeting, capital and financial markets, credit markets,
and risk assessment. Based on these skills and qualifications, the Board of
Trustees determined that Mr. Clarkeson should continue to serve as a
Trustee.
Cotton M.
Cleveland, 61
Trustee since 1992.
Ms. Cleveland has been President of Mather Associates, a firm
specializing in leadership and organizational development for business, public
and nonprofit organizations, since 1981. She is a director of The National
Grange Mutual Insurance Company and Ledyard National Bank, and was the founding
Executive Director of the state-wide Leadership New Hampshire program. She was
elected and served as the Moderator of the Town of New London, New Hampshire and
the New London/Springfield Water Precinct from 2000 to 2010. Ms. Cleveland has
also served as Chair, Vice Chair and member of the Board of Trustees of the
University System of New Hampshire, as Co-Chair of the Governors Commission on
New Hampshire in the 21st Century, and as an incorporator for the New Hampshire
Charitable Foundation. Ms. Cleveland received a B.S. magna cum laude from the
University of New Hampshire, Whittemore School of Business and Economics. She is
a certified and practicing Court Appointed Special Advocate/Guardian ad Litem
(casa/gal) volunteer for abused and neglected children.
Ms. Cleveland founded and serves as
President of her own consulting firm. She has experience serving on the boards
of directors of numerous companies. She also benefits from her policy-making
level experience in education at the university level as the Chair, Vice Chair
and member of the Board of Trustees of the University System of New Hampshire.
In addition, she has policy-making level experience in financial and capital
markets as a result of her service as a director of Ledyard National Bank and
Bank of Ireland. Based on her skills and experience, combined with her ties to
the State of New Hampshire, the Board of Trustees determined that Ms. Cleveland
should continue to serve as a Trustee.
10
2014
Proxy Statement
PROPOSAL 1: ELECTION OF
TRUSTEES
Sanford
Cloud, Jr., 69
Lead
Trustee since 2012;
Trustee since 2000.
Mr. Cloud has been Chairman and Chief Executive Officer of The Cloud
Company, LLC, a real estate development and business investment firm, since
2005. Mr. Cloud served as past President and Chief Executive Officer of the
National Conference for Community and Justice from 1994 to 2004, was a former
partner at the law firm of Robinson and Cole from 1993 to 1994, and served for
two terms as a state senator of Connecticut. Mr. Cloud has served as a director
of The Phoenix Companies, Inc. since 2001 and is currently a director of
Ironwood Mezzanine Fund, L.P. He is also a director of the MetroHartford
Alliance, Inc., and Chairman of The Connecticut Health Foundation and the
University of Connecticut Health Center. In addition, Mr. Cloud is a member of
the Board of Trustees of the University of Connecticut, serves as director of
its Thomas J. Dodd Center for Human Rights and is a director of Back 9 Network.
Mr. Cloud received a B.A. from Howard University, a J.D. cum laude from the
Howard University Law School, and an M.A. in Religious Studies from the Hartford
Seminary.
Mr. Cloud has significant policy-making
level experience in business and financial affairs as a director of several
publicly traded companies. He has served on the boards of directors of numerous
companies. Combined with his practice as a law firm partner, his experience as a
Connecticut state senator, and his significant ties to the City of Hartford and
the State of Connecticut, the Board of Trustees determined that Mr. Cloud should
continue to serve as a Trustee.
James S.
DiStasio, 66
Trustee since 2012.
Mr. DiStasio served as Senior Vice Chairman and Americas Chief Operating
Officer at Ernst & Young, a registered public accounting firm, from 2003
until his retirement in 2007. Mr. DiStasio joined Ernst & Young in 1969 and
became a partner in 1977. He has served as a director of EMC Corporation since
2010. He served as a trustee of NSTAR from 2009 until the closing of the NSTAR
merger. He previously served as a director of the United Way of Massachusetts
Bay and Merrimack Valley and as a trustee of each of Catholic Charities of
Boston, the Boston Public Library Foundation and the Wang Center for the
Performing Arts. Mr. DiStasio received a bachelors degree in Accounting from
the University of Illinois at Chicago.
Mr. DiStasio has significant experience
overseeing the accounting and financial reporting processes of major public
companies, derived from his service as a senior executive at one of the largest
public accounting firms in the world. In his position of Senior Vice Chairman
and Americas Chief Operating Officer, Mr. DiStasio also acquired important
management and leadership skills that provide additional value and support to
the Board. Based on his skills and experience, the Board of Trustees determined
that Mr. DiStasio should continue to serve as a Trustee.
2014 Proxy Statement
11
PROPOSAL 1: ELECTION OF
TRUSTEES
Francis A.
Doyle, 65
Trustee since 2012.
Since 2001, Mr. Doyle has served as President and Chief Executive Officer
of Connell Limited Partnership, whose businesses produce metal components and
related supplies for the automotive, power, mining, appliance, office and farm
equipment industries. From 1972 to 2001, he was Vice Chairman of
PricewaterhouseCoopers LLP, where he was Global Technology Leader and a member
of the firms Global Leadership Team. Mr. Doyle became a Trustee at the closing
of the NSTAR merger. He has served as a director and Chairman of the audit
committee and a member of the executive committee of each of Tempur Sealy
International, Inc. and Liberty Mutual Holding Company, Inc. since 2003. In the
past five years, Mr. Doyle has served as a director of Citizens Financial Group,
where he was a member of the executive committee and chaired the compensation
committee, as a trustee of the Joslin Diabetes Center, where he chaired the
finance committee, and as a trustee of Boston College. Mr. Doyle is a certified
public accountant and holds a B.S. degree and an M.B.A. degree from Boston
College.
Mr. Doyle has significant financial
accounting and financial reporting experience and an in-depth understanding of
finance and capital markets, through his years at PricewaterhouseCoopers. He
also has extensive senior management experience as the President and Chief
Executive Officer of a global manufacturer. Mr. Doyle has served on the boards
of directors of numerous companies. Based on his qualifications and experience,
the Board of Trustees determined that Mr. Doyle should continue to serve as a
Trustee.
Charles K.
Gifford, 71
Trustee since 2012.
Mr. Gifford has served as the Chairman Emeritus of Bank of America
Corporation, a bank holding company, since his retirement as Chairman in 2005.
He is also a Director of Bank of America Corporation. He has served as a
director of CBS Corporation since 2006. From 2007 through 2012, Mr. Gifford
served as a director of NYSE Group Trust I, established as part of the creation
of NYSE Euronext and charged with remedying certain significant and unforeseen
effects in the application of U.S. or European regulation and legislation on
markets operated by NYSE Euronext subsidiaries. He served as trustee of NSTAR
from 1999 until the closing of the NSTAR Merger. He is the chairman of the
Boston Plan for Excellence in the Public Schools and was the founding chairman
of the United Way of Massachusetts Bay's Success By 6 initiative. He serves on
the boards of several nonprofit organizations, including Massachusetts General
Hospital, Partners HealthCare System, Inc., Dana Farber/Partners Cancer Care,
Red Sox Foundation, Northeastern University, Nantucket Cottage Hospital and is
an Honorary Life Overseer at the Boston Childrens Hospital. He is an honorary
director of the Greater Boston Chamber of Commerce. Mr. Gifford received a B.A.
from Princeton University.
Mr. Gifford, through a career
overseeing large complex financial institutions in the banking industry, brings
important business and financial expertise to the Board in its deliberations on
complex transactions and other financial matters. In addition, his breadth of
director experience, which includes his service on executive, credit, governance
and nominating, compensation, and audit committees, as well as his previous
service as Lead Trustee of NSTAR, provides valuable contributions to the Board
in implementing good corporate governance. Based on his qualifications and
experience, the Board of Trustees determined that Mr. Gifford should continue to
serve as a Trustee.
12
2014
Proxy Statement
PROPOSAL 1: ELECTION OF
TRUSTEES
Paul A. La
Camera, 71
Trustee since 2012.
Mr. La Camera has served as the Administrator of Public Radio for WBUR,
the National Public Radio news station in Boston since 2011. Previously, Mr. La
Camera served as General Manager of WBUR from 2005 until 2010 and as the
President and General Manager of WCVB-TV Channel 5 Boston from 1993 to 2005. He
served as a trustee of NSTAR from 1999 until the closing of the NSTAR merger.
Mr. La Camera is a director of Blitz Media, Inc. He serves on the board of the
Boston Foundation and as a trustee of the Boston Public Library. Mr. La Camera
is a graduate of the College of Holy Cross, where he served as a trustee for
eight years. He received Masters Degrees in Journalism and Urban Studies from
Boston University and an M.B.A. from Boston College.
Mr. La Camera served for more than 30
years as an executive in the local television and radio broadcast industry. In
addition to his experience in operating regulated broadcast businesses and the
important perspective that his career in broadcast journalism provides, Mr. La
Camera brings extensive organizational and leadership skills to the Board, along
with his link to the NSTAR customer community through his substantial non-profit
board service. Based on his qualifications and experience, the Board of Trustees
determined that Mr. La Camera should continue to serve as a
Trustee.
Kenneth R.
Leibler, 65
Trustee since 2006.
Mr. Leibler has served as a Trustee of The Putnam Mutual Funds since 2006
and the Chair of the Audit and Compliance Committee since 2012. He has served as
a Trustee of Beth Israel Deaconess Medical Center since 2006, and as Vice
Chairman of Beth Israel Medical Center from 2009 to 2012. He is also a director
of Beth Israel Deaconess Care Organization, an accountable care group owned
jointly by Beth Israel Deaconess Medical Center and its affiliated physicians
network. He is a founding partner of the Boston Options Exchange and served as
its Chairman from 2004 to February 2007. He is a past Vice Chairman of the Board
of Directors of ISO New England, Inc., the independent operator of New Englands
bulk electric transmission system, where he served until 2006. He also served as
a director of The Ruder Finn Group from 2005 to 2010. Mr. Leibler received a
B.A. magna cum laude from Syracuse University.
Mr. Leibler has considerable senior
executive level experience in business and management, including experience in
financial markets and risk assessment, as the former Chairman of the Boston
Options Exchange, former Chairman and CEO of the Boston Stock Exchange, and
former President, Chief Operating Officer and Chief Financial Officer of the
American Stock Exchange, as well as through his current service as a Trustee of
The Putnam Mutual Funds, where he recently became chair of the Audit and
Compliance Committee and serves on the pricing, distributions, investment
oversight, and investment oversight coordinating committees. He also has
policy-making level experience in the electric utility industry through his
service as the Vice Chairman of ISO New England. Based on these qualifications,
the Board of Trustees determined that Mr. Leibler should continue to serve as a
Trustee.
2014 Proxy Statement
13
PROPOSAL 1: ELECTION OF
TRUSTEES
Thomas J.
May, 66
Trustee since 2012.
Mr. May has served as Chairman of the Board of Northeast Utilities since
October 10, 2013 and as President and Chief Executive Officer and a Trustee
since the closing of the NSTAR merger in April 2012. He has also served as the
Chairman and a director of each of The Connecticut Light and Power Company,
NSTAR Electric Company, NSTAR Gas Company, Public Service Company of New
Hampshire, Western Massachusetts Electric Company and Yankee Gas Services
Company since the closing of the merger. Previously, Mr. May served as Chairman,
President and Chief Executive Officer and a Trustee of NSTAR and its predecessor
Boston Edison Company from 1994 until the closing of the merger. Mr. May has
served as a director of Bank of America Corporation since 2004 and a director of
Liberty Mutual Holding Company, Inc. since 2002. He is Chair of the Board of
Trustees of Stonehill College, a member of the Executive Committee of the Board
of Directors of the Boston Chamber of Commerce, a member of the Board of
Trustees of Dana Farber Cancer Institute and a member of the Board of The John
F. Kennedy Library Foundation. Mr. May received a bachelors degree in business
administration From Stonehill College and a M.S. in Finance from Bentley
College. He is also a graduate of the Harvard Business Schools Advanced
Management Program.
Mr. May is the Chairman, President and
Chief Executive Officer of the Company. His extensive experience in the energy
industry and diverse financial, operations and management skills provide the
necessary background to lead the Company. Mr. May represents management on the
Board as the sole management Trustee. Based on these skills and experiences, the
Board of Trustees determined that Mr. May should continue to serve as a
Trustee.
William C.
Van Faasen, 65
Trustee since 2012.
Mr. Van Faasen served as Chief Executive Officer of Blue Cross Blue
Shield of Massachusetts, Inc. (BCBSMA), a health care services provider, from
1992 until his retirement in 2007. He is currently Chairman of BCBSMA and also
served as interim Chief Executive Officer in 2010. He has served as a director
of Liberty Mutual Holding Company, Inc. since 2002 and as Lead Director since
April 2012. He served as a director of IMS Health, Inc. from 1996 to 2010 and as
Lead Director from 2006 to 2010. He also served as a director of PolyMedica
Corporation from 2005 to 2008. Mr. Van Faasen served as a trustee of NSTAR from
2002 until the completion of the NSTAR merger. He is an honorary director of the
Greater Boston Chamber of Commerce and previously served as a director of the
United Way of Massachusetts Bay and Merrimack Valley. Mr. Van Faasen received a
B.A. from Hope College and an M.B.A. from Michigan State University.
Mr. Van Faasen brings to the Board
extensive management, leadership, and financial experience as a result of
leading a large company in a regulated industry. He also brings in-depth
experience and insight as a director of several public companies, including
service as a lead director. Based on his qualifications and experience, the
Board of Trustees determined that Mr. Van Faasen should continue to serve as a
Trustee.
14
2014
Proxy Statement
PROPOSAL 1: ELECTION OF
TRUSTEES
Frederica
M. Williams, 55
Trustee since 2012.
Ms. Williams has served as the President and Chief Executive Officer of
Whittier Street Health Center in Boston, an urban community health care facility
serving residents of Boston and surrounding communities, since 2002. Prior to
joining Whittier, she served as the Senior Vice President of Administration and
Finance and Chief Financial Officer of the Dimock Center, a large health care
and human services facility in Boston. She was elected as a trustee of NSTAR in
March 2012 and served as a trustee until the completion of the NSTAR merger. Ms.
Williams is a member of the Board of Trustees of Dana Farber Cancer Institute,
the Massachusetts League of Community Health Centers and Boston Health Net. Ms.
Williams attended the London School of Accountancy, passed the examinations of
the Institute of Chartered Secretaries and Financial Administrators, (United
Kingdom) (ICSA) and of the Institute of Administrative Management (United
Kingdom), with distinction, and was elected a Fellow of the ICSA in 2000. She
obtained a graduate certificate in Administration and Management from the
Harvard University Extension School and an M.B.A. with a concentration in
Finance from Anna Maria College in Paxton, Massachusetts.
Ms. Williams has more than 20 years of
experience in a heavily regulated industry and has served as the President and
Chief Executive Officer of Whittier Street Health Center, a national model for
providing equitable access to high quality and cost effective health care, for
more than ten years. She also has significant experience serving on numerous
boards and advisory boards. Based on her qualifications and experience, the
Board of Trustees determined that Ms. Williams should continue to serve as a
Trustee.
Dennis R.
Wraase, 70
Trustee since 2010.
Mr. Wraase served as Chairman of the Board, Chief Executive Officer and a
director of Pepco Holdings, Inc. (PHI) until his retirement in June 2009. PHI is
an energy delivery company in the mid Atlantic region. He was elected Chairman
of PHI in 2004, became Chief Executive Officer in 2003 and served as a director
since 1998. He previously served as the President of PHI from 2001 to 2008 and
Chief Operating Officer from 2002 to 2003. He is a member of the Financial
Executives Institute and the American Institute of Certified Public Accountants.
Mr. Wraase currently serves as the Executive-In-Residence at the Center for
Social Value Creation at the Robert H. Smith School of Business, University of
Maryland. He is also currently a director and Vice Chairman of the University of
Maryland System Foundation. Mr. Wraase previously served as a director of the
Edison Electric Institute, The Association of Edison Illuminating Companies and
the Institute for Electric Efficiency, and as the President of the Southeastern
Electric Exchange. Mr. Wraase received a B.S. in Accounting from the University
of Maryland and an M.S. in Business Financial Management from The George
Washington University.
Mr. Wraase brings to Northeast
Utilities considerable utility industry knowledge and experience gained through
his career of service at PHI. He has significant policy-making level experience
in the heavily regulated industry as well as in the capital and financial
markets, credit markets, financial reporting and accounting, and risk
assessment. He is also a certified public accountant. Based on his extensive
experience and qualifications, the Board of Trustees determined that Mr. Wraase
should continue to serve as a Trustee.
2014 Proxy
Statement
15
GOVERNANCE OF NORTHEAST
UTILITIES
Boards Leadership
Structure
|
Effective October 10, 2013, pursuant to
the terms of the Merger Agreement between NSTAR and the Company, Mr. May became
Chairman of the Board of Trustees. Our Board believes that it is in the best
interests of the Company to have Mr. May serve as both Chairman and Chief
Executive Officer and that combining the Chairman and Chief Executive Officer
positions under the strong leadership of Mr. May will serve to benefit all
stakeholders. Prior to the NSTAR Merger, Mr. May served as Chairman and Chief
Executive Officer of NSTAR and Boston Edison Company and successfully led those
companies to reach very high levels of financial and operational performance
during that time. Recombining the roles of Chairman and Chief Executive Officer
in Mr. May, with Mr. Cloud continuing to serve as Lead Trustee, creates
clear and unambiguous authority, which
the Board believes is essential to effective management, particularly during the
continued implementation of the merger. While the combined Chairman/Chief
Executive Officer model has proved to be an effective model under Mr. Mays
leadership, the Board will reassess this governance structure from time to time
as appropriate.
As Lead Trustee, Mr. Cloud presides at
executive sessions of the independent Trustees; facilitates communication
between the Chief Executive Officer and the Board members; participates with the
Compensation Committee in its evaluation of the Chief Executive Officer; and
provides ongoing information to the Chief Executive Officer about his or her
performance.
Boards Oversight of
Risk
|
The Board of Trustees, both as a whole
and through its Committees, is responsible for the oversight of the companys
risk management processes. The Board of Trustees administers its risk oversight
function primarily through its Finance Committee. Each year, the Board evaluates
its risk assessment function as part of its Board evaluation process. The Board
believes that this structure is appropriate to carry out its risk oversight
responsibilities.
The Board of Trustees and the Finance
Committee annually review the Companys comprehensive operating and strategic
plans. The operating plan consists of the goals and objectives for the year, key
performance indicators and financial forecasts. The strategic plan consists of
long-term corporate goals and objectives, specific strategies to achieve those
goals, and action plans designed to implement each strategy. The Enterprise Risk
Management (ERM) process is integrated with the annual operating and strategic
planning processes. The top enterprise-wide financial risks are identified
during the development of the annual operating plan, and are tracked throughout
the year. Enterprise strategic risks are identified and presented to the Board
of Trustees during development of the long-term strategic plans. Detailed risk
mitigation plans for the principal enterprise-wide risks are updated
periodically and presented to the Finance Committee.
The Finance Committee is responsible
for oversight of the Companys ERM program and enterprise-wide risks as well as
specific risks associated with insurance, credit, financing,
investments and pensions. Our ERM
program involves the application of a well-defined, enterprise-wide methodology
designed to allow our executives to identify, categorize, prioritize, and
mitigate the principal risks to the Company. In addition to known risks, ERM
identifies emerging risks to the Company. The ERM Group reports to the Finance
Committee on the results of the ERM program as well as the activities of the
Companys Risk Committee. The Risk Committee consists of senior officers and
directors of the Company, and is responsible for ensuring that the Company is
managing its principal enterprise wide risks, as well as other key risk areas
such as environmental, information technology, compliance and business
continuity.
In addition, each Board committee
oversees risks within its area of responsibility. For example, the Audit
Committee is responsible for the oversight of the integrity of the financial
statements, including oversight of the guidelines and policies that govern
managements processes for assessing, monitoring and mitigating major financial
risk exposures. Additionally, the Board of Trustees administers its compensation
risk oversight function primarily through its Compensation Committee. The
process by which the Board and the Compensation Committee oversee executive
compensation risk is described in greater detail within the Compensation and
Discussion Analysis.
16
2014 Proxy Statement
GOVERNANCE OF NORTHEAST
UTILITIES
Board Committees and
Responsibilities
|
The Board of Trustees has five standing
committees: Audit, Compensation, Corporate Governance, Executive and Finance.
The Corporate Governance Committee performs the functions of a nominating
committee. None of the committee members in 2013 was employed by Northeast
Utilities or its subsidiaries except for Mr. May, who is Chair of the Executive
Committee. The Board has adopted a written charter for each standing committee
as well as written Corporate Governance
Guidelines. The Corporate Governance
Guidelines and committee charters are available on our website at the Internet
addresses appearing in the committee descriptions below. Copies of these
documents are available to any shareholder upon written request to our Assistant
Secretary at the address set forth on page 8 of this proxy statement. The
functions of these committees are described in the paragraphs following the
table.
The table below shows the committee
membership:
|
|
|
|
|
|
Corporate
|
|
|
|
|
Trustee
|
|
Audit
|
|
Compensation
|
|
Governance
|
|
Executive
|
|
Finance
|
R. H. Booth
|
|
C
|
|
|
|
|
|
M
|
|
M
|
J. S. Clarkeson
|
|
M
|
|
M
|
|
|
|
|
|
|
C. M.
Cleveland
|
|
|
|
|
|
M
|
|
|
|
M
|
S. Cloud, Jr*
|
|
|
|
M
|
|
C
|
|
M
|
|
|
J. S.
DiStasio
|
|
|
|
M
|
|
|
|
M
|
|
C
|
F. A. Doyle
|
|
|
|
|
|
M
|
|
|
|
M
|
C. K.
Gifford
|
|
|
|
C
|
|
M
|
|
M
|
|
|
P. A. La Camera
|
|
M
|
|
|
|
M
|
|
|
|
|
K. R.
Leibler
|
|
M
|
|
|
|
|
|
|
|
M
|
T. J. May
|
|
|
|
|
|
|
|
C
|
|
|
C. W.
Shivery
|
|
|
|
|
|
|
|
|
|
M
|
W. C. Van Faasen
|
|
M
|
|
M
|
|
|
|
|
|
|
F. M.
Williams
|
|
M
|
|
|
|
|
|
|
|
M
|
D. R. Wraase
|
|
|
|
M
|
|
M
|
|
|
|
|
C:
|
|
Committee Chair
|
M:
|
|
Committee Member
|
*
|
|
Lead
Trustee
|
Set forth below is a brief summary of
the functions performed by the existing Board committees.
The Audit Committee consists of Mr.
Booth (Chair), Mr. Clarkeson, Mr. La Camera, Mr. Leibler, Mr. Van Faasen and Ms.
Williams. The Audit Committee meets independently with the internal and
independent registered public accounting firm of Northeast Utilities and its
subsidiaries and with management at least quarterly. Following each Committee
meeting, the Audit Committee reports to the full Board. The Audit Committee
reviews and evaluates the independent registered public accounting firms
activities, procedures and recommendations to assist the Board in monitoring the
integrity of our financial statements, the independent registered public
accounting firms qualifications and independence, the performance of our
internal audit function
and independent registered public
accounting firm, and our compliance with legal and regulatory requirements. The
Committee also discusses the guidelines and policies that govern managements
processes for assessing, monitoring and mitigating major financial risk
exposures. The Audit Committee has the sole authority to select and replace the
independent registered public accounting firm and is directly responsible for
their compensation and oversight of their work. Each member of the Audit
Committee meets the financial literacy requirements of the New York Stock
Exchange (NYSE) and the SEC. The Board has affirmatively determined that Mr.
Booth is an audit committee financial expert, as defined by the SEC. Each
2014 Proxy
Statement
17
GOVERNANCE OF NORTHEAST
UTILITIES
member of the Audit Committee meets the
independence requirements of the NYSE, SEC and our Corporate Governance
Guidelines. No member of the Audit Committee is employed by Northeast Utilities
or its subsidiaries. A copy
of the Committees charter is available
on our website at
www.nu.com/investors/corporate_gov/charter_audit.asp
. The Audit Committee met four times during
2013.
The Compensation Committee consists of
Mr. Clarkeson, Mr. Cloud, Mr. DiStasio, Mr. Gifford (Chair), Mr. Van Faasen and
Mr. Wraase. The Compensation Committee is responsible for the compensation and
benefits programs for all executive officers of Northeast Utilities and has
overall authority to establish and interpret our executive compensation
programs. The Committee reviews our executive compensation strategy, evaluates
components of total compensation and assesses performance against goals, market
competitive data and other appropriate factors, and makes compensation related
decisions based upon Company and executive performance. The Committee has the
sole authority to select and retain experts and consultants in the field of
executive compensation to provide advice to the Committee with respect to market
data, competitive information, and executive compensation trends. The
Compensation Committee also reviews and recommends to the Board of Trustees the
compensation of the non-employee members of the Board.
In carrying out its charter
responsibilities, the Compensation Committee reviews and approves corporate
goals and objectives relevant to the Chief Executive Officers compensation and,
with the participation of the Lead Trustee and subject to the further review and
approval of the independent Trustees, evaluates the performance of the Chief
Executive Officer in light of those goals and objectives. The Committee
establishes performance criteria for the Chief Executive Officer and approves
the Chief Executive Officers total compensation based on the annual evaluation,
subject to further approval by the independent Trustees. In addition, in
collaboration with the Chief Executive Officer,
the Committee oversees the evaluation
of those executive officers reporting directly to the Chief Executive Officer,
and it engages in the succession planning process for the Chief Executive
Officer and other officers.
The Compensation Committee has retained
Pay Governance LLC to provide compensation consulting services. Pay Governance
LLC has been engaged to perform work only for the Compensation Committee, and as
noted in the Compensation Discussion and Analysis section of this proxy
statement, the Compensation Committee has determined that Pay Governance LLC is
independent and that no conflict of interest exists that would prevent Pay
Governance LLC from independently advising the Committee.
The Compensation Committee has
delegated the negotiation of certain compensation arrangements and
administration of the Compensation Committees responsibilities to certain
executive officers. The Compensation Committee has not delegated any of its
responsibilities to any other persons. The Board has affirmatively determined
that each member of the Compensation Committee meets the independence
requirements of the NYSE and the SEC, and our Corporate Governance Guidelines.
No member of the Compensation Committee is employed by Northeast Utilities or
its subsidiaries. A copy of the Compensation Committees charter is available on
our website at
www.nu.com/investors/corporate_gov/charter_
compensation.asp
. The Compensation Committee
met six times during 2013. The Compensation Committee reports to the full Board
following each Committee meeting.
Corporate Governance
Committee
|
The Corporate Governance Committee
consists of Ms. Cleveland, Mr. Cloud (Chair), Mr. Doyle, Mr. Gifford, Mr. La
Camera and Mr. Wraase. The Corporate Governance Committee is responsible for
developing, overseeing and regularly reviewing our Corporate Governance
Guidelines and related policies. The Corporate Governance Committee also serves
as a nominating committee, establishing criteria for new Trustees and
identifying and recommending prospective Board candidates. The Corporate
Governance Committee annually reviews the qualifications of the Trustees,
recommends nominees for election to the Board and for appointment to Board
Committees, and annually recommends to the Board the Lead Trustee, Chairman of
the Board and individuals
for election as officers of the
Company. In addition, the Corporate Governance Committee evaluates the
performance of the Board and its committees. Following each meeting the
Corporate Governance Committee reports to the full Board. No member of the
Corporate Governance Committee is employed by Northeast Utilities or its
subsidiaries. The Board of Trustees has determined that each member of the
Corporate Governance Committee meets the independence requirements of the NYSE
and the SEC, and our Corporate Governance Guidelines. A copy of the Committees
charter is available on our website at
www.nu.com/investors/corporate_gov/charter_
corporate_gov.asp
. The Corporate Governance
Committee met four times during 2013.
18
2014 Proxy Statement
GOVERNANCE OF NORTHEAST
UTILITIES
The Executive Committee consists of Mr.
Booth, Mr. Cloud, Mr. DiStasio, Mr. Gifford and Mr. May (Chair). The Executive
Committee is empowered to exercise all the authority of the Board, subject to
certain limitations set forth in our Declaration of Trust, during the intervals
between meetings
of the Board. A copy of the Committees
charter is available on our website at
www.nu.com/investors/corporate_gov/
charter_corporate_exec.asp
. The Executive
Committee did not meet during 2013.
The Finance Committee consists of Mr.
Booth, Ms. Cleveland, Mr. DiStasio (Chair), Mr. Doyle, Mr. Leibler, Mr. Shivery
and Ms. Williams. The Finance Committee assists the Board in fulfilling its
fiduciary responsibilities relating to financial plans, policies and programs
for Northeast Utilities and its subsidiaries. The Finance Committee reviews the
Companys plans and actions to assure liquidity; proposed financing programs;
plans and recommendations regarding common share repurchase programs, early
extinguishment and refunding of debt and preferred stock obligations; and other
proposals that modify the Companys capital structure. The Finance Committee is
responsible for reviewing the Companys Enterprise Risk Program, including
practices to monitor and mitigate risk exposures, as further described
above under the caption Boards
Oversight of Risk. The Finance Committee is also responsible for reviewing the
Companys dividend policy and recommending to the Board the dividend on the
Companys common shares as well as for reviewing new business ventures and
initiatives which may result in substantial expenditures, commitments and
exposures. In addition, the Finance Committee conducts an annual review of
insurance coverages and trends. Following each meeting the Finance Committee
reports to the full Board. No member of the Finance Committee is employed by
Northeast Utilities or its subsidiaries. A copy of the Committees charter is
available on our website at
www.nu.com/investors/corporate_gov/charter_ finance.asp
. The Finance Committee met five times during
2013.
Meetings of the Board and its
Committees
|
In 2013, the Board of Trustees held
seven meetings, during which four executive sessions where only the independent
Trustees were in attendance were held, and the Board and the Committees of the
Board held a total of 26 meetings. In
2013, each Trustee attended at least
94% of the aggregate number of meetings of the Board of Trustees and meetings of
all Committees of the Board. Our Trustees are expected to attend our Annual
Meetings of Shareholders.
Environmental and
Sustainability
|
NU is committed to environmental
leadership by responsibly conducting business in a manner that protects and
enhances the environment and fosters environmental stewardship and sustainable
business practices. The Company maintains accountability for environmental
initiatives by setting measurable objectives and targets that promote continuous
improvement and transparency by reporting our environmental performance. We have
established a systematic approach that protects the environment and advances
clean energy solutions for our customers through energy efficiency and
conservation programs, efficient operating practices, renewable or low-emission
energy sources such as hydro, solar and wind, smart grid initiatives, and
consumer education. In
2013, NU operating companies invested
approximately $400 million in energy efficiency programs across three states,
and customer savings from energy efficiency programs exceeded aggressive 2013
internal and statewide savings targets. NU has been a member of Ceres since
1999, and continuously engages with industry groups, advocates and shareholders
on our environmental and sustainability efforts. For additional information on
these initiatives and our progress to date, you can access the Company's
comprehensive sustainability report,
Responsible Energy
, through the NU
corporate website at
www.nu.com/responsible_energy/
.
2014 Proxy
Statement
19
SELECTION OF TRUSTEES
As set forth in its charter, it is the
responsibility of the Corporate Governance Committee to identify individuals
qualified to become a Trustee and to recommend to the Board a slate of Trustee
candidates to be submitted to a vote of our shareholders at the Annual Meeting
of Shareholders. The Committee has from time to time retained the services of a
third party executive search firm to assist it in identifying and evaluating
such individuals.
As provided in our Corporate Governance
Guidelines, the Corporate Governance Committee seeks nominees with the following
qualifications:
Trustees should possess the highest
personal and professional ethics, integrity and values, and be committed to
representing the long-term interests of our shareholders. They must also have an
inquisitive and objective perspective, practical wisdom and mature judgment. The
Board should represent diverse experience at policy-making levels in business,
government, education, community and charitable organizations as well as areas
that are relevant to our business activities. The Corporate Governance Committee
also seeks diversity in gender, ethnicity and personal background when
considering Trustee candidates.
Applying these criteria, the Corporate
Governance Committee considers Trustee candidates suggested by its members as
well as by management and shareholders. As part of the annual nomination
process, the Corporate Governance Committee reviews the qualifications,
experience, attributes and skills of each nominee for Trustee, including
currently serving Trustees, under the Corporate Governance Guidelines and
reports its findings to the Board. At its February 4, 2014 meeting, the
Committee determined that each Trustee possesses the highest personal and
professional ethics, integrity and values, and each Trustee remains committed to
representing the long-term interests of our shareholders. The Committees review
also focused on each Trustees experience at policy-making levels in business,
government, education, community and charitable organizations, and other areas
relevant to our business activities, as described below. Based on this review,
the Committee advised the Board on February 4, 2014 that each of the Trustees
was qualified to serve on the Board under the Corporate Governance
Guidelines.
Business, Management and
Finance.
The Board values significant
business and management experience at the highest levels, including experience
in heavily regulated industries. Many of our Trustees have served as chief
executive officers and/or chief financial officers and have
served on the boards of directors of
numerous companies. In addition, the vast majority of our ongoing capital
program is expected to be funded through cash flows provided by operating
activities as well as new debt issuances and, less frequently, equity issuances.
As a result, the Board highly values policy-making level experience in, and
understanding of, capital and financial markets, accounting and financial
reporting, credit markets, and risk assessment.
Regulatory.
Each of our utility subsidiaries is regulated in virtually
all aspects of its business by various federal and state agencies, including the
SEC, the Federal Energy Regulatory Commission, and various state and/or local
regulatory authorities with jurisdiction over the industry and the service areas
in which each subsidiary operates. Accordingly, the Board considers
policy-making level experience in a heavily regulated industry to be
important.
Education/Community and
Charitable Organizations.
The Board also supports and encourages
educational opportunities, community involvement and development, and
philanthropic goals and activities. The Northeast Utilities Foundation, Inc. was
established in 1998 and the NSTAR Foundation in 1999 to focus on our community
investments and to provide grants to our nonprofit community partners.
Consistent with our business strategy and core values, the Foundations invest
primarily in projects that address issues of economic and community development
and the environment. Each Trustee has experience in one or more community or
charitable organizations.
Other Areas Relevant to Our
Business Activities.
We operate New
Englands largest energy delivery system in three different states. Because a
majority of our Trustees also reside in our service territory, they not only
have ties to local communities, but they understand our customers needs.
Diversity.
In accordance with our Corporate Governance Guidelines, in addition to
diverse business and other experience described above, the Corporate Governance
Committee seeks diversity in gender, ethnicity and personal background when
considering Trustee candidates. Diverse thoughts and views emanating from
different backgrounds, life experiences, career experiences and skills are
critical to a well-functioning Board and essential to embracing opportunities
and confronting challenges in the future. To ensure the success of our business
strategy, the Board of Trustees strives to identify and pursue Trustee
candidates with diverse skills, knowledge, background and experience that
complement the skills, knowledge and experience of our current
Trustees.
20
2014 Proxy Statement
SELECTION OF TRUSTEES
Shareholders wishing to suggest
potential candidates for membership on the Board of Trustees may address such
information, in writing, to our Assistant Secretary at the mailing address set
forth previously on page 8 of this proxy
statement. The communication must
identify the writer as a shareholder of Northeast Utilities and provide
sufficient detail for the Corporate Governance Committee to consider the
individuals qualifications.
TRUSTEE INDEPENDENCE
We have adopted Corporate Governance
Guidelines incorporating independence standards that meet the listing
standards of the NYSE. The Corporate Governance Guidelines are available on our website
at
www.nu.com/investors/
corporate_gov/guidelines.asp.
In addition, we
have adopted an additional standard under which a charitable relationship will
not be considered to be a material relationship that would impair a Trustees
independence if a Trustee serves as an officer or director of a charitable
organization, and our discretionary charitable contributions to the
organization, in the aggregate, do not exceed the greater of: (a) $200,000; or
(b) two percent of the organizations total annual charitable receipts or latest
publicly available operating budget. The Trustee Independence Guidelines are
available on our website at
www.nu.com/investors/corporate_gov/trustee_
independence.asp.
The Corporate Governance Committee
conducts an annual review of the independence of the members of the Board,
including all nominees, and reports its findings to the full Board. Applying the
Corporate Governance Guidelines, the Committee, assisted by legal counsel and
based on responses to questionnaires completed by the Trustees, reviewed and
considered relationships and transactions between Northeast Utilities, its
affiliates and subsidiaries, on the one hand, and each Trustee, entities
affiliated with him or her, and/or any member of his or her immediate family, on
the other hand. The Committee also reviewed Northeast Utilities charitable
donations to organizations where the Trustees or their immediate family members
serve as officers or directors. Similarly, the Committee examined relationships
and transactions between each Trustee and (a) our senior management and (b) our
independent registered public accounting firm. The Committee determined that
none of
these relationships was material to the
nominees for Trustee or likely to impair the independence of any of the nominees
for Trustee.
The Board of Trustees separately
considered that the utility operating company subsidiaries of Northeast
Utilities provide electric service or natural gas service to the residences of
Trustees and/or companies at which some of the Trustees were directors or
executive officers. These utility services are provided in the ordinary course
of business, on an arms length basis and pursuant to rates determined by the
applicable public utility commission and available to all similar customers of
the utility. The Board determined that relationships that exist solely due to an
individual or entity purchasing electric service or natural gas service from any
of the utility operating company subsidiaries of Northeast Utilities in the
ordinary course of business, on an arms length basis and pursuant to rates
determined by the applicable public utility commission, were not material to the
Trustees or likely to impair the independence of any of the Trustees.
On
February 4, 2014, based on the recommendation of the Corporate Governance
Committee following its review, the Board of Trustees affirmatively determined
that each of the Trustees, with the exception of Mr. Shivery, who has been an
employee of Northeast Utilities within the last three years and served as
Chairman, President and Chief Executive Officer until April 10, 2012, and Mr.
May, our Chairman of the Board, President and Chief Executive Officer, satisfied
the independence criteria (including the enhanced criteria with respect to
members of the Audit and Compensation Committees) set forth in the current
listing standards and rules of the NYSE and the SEC, and under our Corporate
Governance Guidelines.
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The following table provides
information as to persons who are known to us to beneficially own more than five
percent of the common shares of Northeast Utilities. We do not have any other
class of voting securities.
|
|
Amount and Nature
of
|
|
|
Name and Address of Beneficial Owner
|
|
Beneficial Ownership
|
|
Percent of Class
|
BlackRock
Inc.
|
|
24,201,594
(1)
|
|
7.7%
(1)
|
40 East 52nd
Street
|
|
|
|
|
New York, New York
10022
|
|
|
|
|
The Vanguard Group, Inc.
|
|
21,813,029
(2)
|
|
6.9%
(2)
|
100 Vanguard Blvd.
|
|
|
|
|
Malvern, Pennsylvania 19355
|
|
|
|
|
(1)
|
|
Based solely on a Schedule 13G/A
filed with the SEC on January 30, 2014, reporting that as of December 31,
2013, BlackRock, Inc. and certain subsidiaries beneficially owned and had
the sole power to dispose or direct the disposition of all of these common
shares, and the sole power to vote or direct the vote of 19,978,883 of
these common shares.
|
|
(2)
|
|
Based solely on a Schedule 13G/A
filed with the SEC on February 12, 2014, reporting that as of December 31,
2013, The Vanguard Group, Inc. had the sole power to vote or direct the
vote of 590,435 common shares, the sole power to dispose of or to direct
the disposition of 21,327,976 common shares, and the shared power to
dispose of or to direct the disposition of 485,053 common shares. Vanguard
Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group,
Inc., is the beneficial owner of 401,231 common shares as investment
manager of collective trust accounts, and directs the voting of these
shares. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of
The Vanguard Group, Inc., is the beneficial owner of 273,026 common shares
as investment manager of Australian investment offerings, and directs the
voting of these shares.
|
22
2014 Proxy Statement
COMMON SHARE OWNERSHIP OF TRUSTEES AND
MANAGEMENT
The table below shows the number of our
common shares beneficially owned as of March 5, 2014, by each of our Trustees
and each 2013 Named Executive Officer as well as the number of common shares
beneficially owned by all of our Trustees and executive officers as a group. The
table also includes information about options, restricted share units and
deferred shares credited to the accounts of our Trustees and executive officers
under certain compensation and benefit plans. The address for the shareholders
listed below is c/o Northeast Utilities, One Federal Street, Building 111-4,
Springfield, Massachusetts 01105.
|
|
Amount and Nature of
|
|
Percent of
|
Name of Beneficial Owner
|
|
Beneficial
Ownership
(1)(2)
|
|
Class
|
Richard H.
Booth
|
|
|
46,993
|
|
|
|
|
*
|
|
|
Gregory B. Butler
|
|
|
172,218
|
(3)(4)
|
|
|
|
*
|
|
|
John S.
Clarkeson
|
|
|
22,004
|
|
|
|
|
*
|
|
|
Cotton M. Cleveland
|
|
|
50,932
|
|
|
|
|
*
|
|
|
Sanford Cloud,
Jr.
|
|
|
39,532
|
|
|
|
|
*
|
|
|
James. S. DiStasio
|
|
|
14,777
|
|
|
|
|
*
|
|
|
Francis A.
Doyle
|
|
|
10,907
|
|
|
|
|
*
|
|
|
Charles K. Gifford
|
|
|
56,169
|
|
|
|
|
*
|
|
|
James J.
Judge
|
|
|
333,543
|
(4)
|
|
|
|
*
|
|
|
Paul A. La Camera
|
|
|
41,970
|
|
|
|
|
*
|
|
|
Kenneth R.
Leibler
|
|
|
25,247
|
|
|
|
|
*
|
|
|
Thomas J. May
|
|
|
1,728,618
|
(4)(5)
|
|
|
|
*
|
|
|
David R.
McHale
|
|
|
202,548
|
(4)(6)
|
|
|
|
*
|
|
|
Leon J. Olivier
|
|
|
185,234
|
(4)
|
|
|
|
*
|
|
|
Charles W.
Shivery
|
|
|
546,367
|
(4)(7)
|
|
|
|
*
|
|
|
William C. Van Faasen
|
|
|
34,208
|
|
|
|
|
*
|
|
|
Frederica M.
Williams
|
|
|
7,553
|
|
|
|
|
*
|
|
|
Dennis R. Wraase
|
|
|
18,953
|
(8)
|
|
|
|
*
|
|
|
All Trustees and Executive Officers as a group (21
persons)
|
|
|
3,817,292
|
(9)
|
|
|
|
1.2
|
%
|
|
*
|
|
Less than 1% of Northeast
Utilities common shares outstanding.
|
|
|
|
(1)
|
|
The persons named in
the table have sole voting and investment power with respect to all shares
beneficially owned by each of them, except as noted below.
|
|
(2)
|
|
Includes restricted
share units, deferred restricted share units and/or deferred shares,
including dividend equivalents, as to which none of the individuals has
voting or investment power, and phantom common shares, representing
employer matching contributions distributable only in cash, held by
executive officers who participate in our Deferred Compensation Plan for
Executives, as follows: Mr. Booth: 45,518 shares; Mr. Butler: 75,408
shares; Mr. Clarkeson: 5,016 shares; Ms. Cleveland: 42,327 shares; Mr.
Cloud: 22,266 shares; Mr. DiStasio: 13,318 shares; Mr. Doyle: 5,016
shares; Mr. Gifford: 48,517 shares; Mr. Judge: 181,479 (77,196 of which
are deferred shares held in a rabbi trust that are voted by the trustee);
Mr. La Camera: 41,970 shares; Mr. Leibler: 5,016 shares; Mr. May: 982,380
shares (855,725 of which are deferred shares held in a rabbi trust that
are voted by the trustee); Mr. McHale: 102,587 shares; Mr. Olivier: 88,838
shares; Mr. Shivery: 151,092 shares; Mr. Van Faasen: 32,749 shares; Ms.
Williams: 6,093 shares; and Mr. Wraase: 14,953 shares.
|
|
(3)
|
|
Includes 74,222 common
shares owned jointly by Mr. Butler and his spouse with whom he shares
voting and investment power.
|
|
(4)
|
|
Includes common shares
held as units in the 401k Plan invested in the NU Common Shares Fund over
which the holder has sole voting and investment power (Mr. Butler: 4,568
shares; Mr. Judge: 21,732 shares; Mr. May: 63,751 shares; Mr. McHale:
7,018 shares; Mr. Olivier: 3,079 shares; and Mr. Shivery: 2,411
shares).
|
|
(5)
|
|
Includes 383,104
common shares issuable upon exercise of outstanding stock options
exercisable within the 60-day period after March 5, 2014.
|
|
(6)
|
|
Includes 123 common
shares held by Mr. McHale in the 401k Plan TRASOP/PAYSOP account over
which Mr. McHale has sole voting and investment power.
|
|
(7)
|
|
Includes 1,500 common
shares owned jointly by Mr. Shivery and his spouse with whom he shares
voting and investment power.
|
|
(8)
|
|
Includes 4,000 common
shares owned jointly by Mr. Wraase and his spouse with whom he shares
voting and investment power.
|
|
(9)
|
|
Includes 417,556
common shares issuable upon exercise of outstanding stock options
exercisable within the 60-day period after March 5, 2014, and 2,256,283
unissued common shares. See note 2. Also includes 999,532 deferred shares
held in a rabbi trust that are voted by the
trustee.
|
2014 Proxy
Statement
23
COMPENSATION DISCUSSION AND
ANALYSIS
|
The purpose of this Compensation
Discussion and Analysis is to provide information about Northeast Utilities
(the Company or NU) compensation objectives and policies for our Named
Executive Officers. The discussion describes the specific components of the
compensation program, how the Company measures performance, and how compensation
awards and decisions were made by the Compensation
Committee (Committee) in 2013 for our
Named Executive Officers, as presented in the tables and narratives that follow.
While the following discussion focuses primarily on 2013 information, it also
addresses decisions that were made in other periods to the extent that these
decisions are relevant to the full understanding of our compensation program and
the specific awards that were made in 2013.
The Committee follows a philosophy of
linking our Named Executive Officers compensation to performance that will
ultimately benefit our customers and shareholders. The intent of our
compensation program is to attract and retain the best executive talent,
motivate our executives to meet or exceed specific stretch financial and
organizational goals set each year, and compensate our Named Executive
Officers in a manner that aligns
compensation directly with performance. We strive to provide executives with
base salary, performance-based annual incentive compensation and long-term
incentive compensation opportunities that are competitive with market practices
and that reward excellent performance.
Summary of 2013
Performance
|
In 2013, NU achieved excellent
financial and operational performance results as it completed its first full
year operating as a combined Company, following one of the most significant and
successful mergers in the utility industry. As a result of the merger, the
Company has become larger, more diverse and better positioned to provide value
to our customers and our shareholders. We met or exceeded many challenging
financial and operational goals established at the beginning of 2013. The
following is a summary of some of our most important accomplishments in 2013:
Financial Highlights
-
Our 2013 recurring earnings were $2.53 per share,
an 11% increase over 2012 results, excluding merger and related settlement
costs, exceeding our challenging earnings per share goal of
$2.50
-
We achieved operations and maintenance cost
reductions
through successful integration
activities, resulting in a
3.2% reduction in
operating expenses from 2012, while
continuing
excellent operating performance
-
We increased our dividend to $1.47 per share, a
7.1%
increase and nearly double the industry
average dividend
growth of
3.7%
-
For 2013, we delivered total shareholder return of
12.3%, the
fifth straight year of double-digit
total shareholder return
-
As set forth in the table below, our cumulative
total
shareholder returns of 47.0%, 110.3%,
194.5% and
313.8% over the past three-, five-,
10- and 15-year periods
outperformed the
utility industry over those same periods
|
|
Total Shareholder
Return
|
|
|
2013
|
|
3-Year
|
|
5-Year
|
|
10-Year
|
|
15-Year
|
NU
|
|
12.3%
|
|
47.0%
|
|
110.3%
|
|
194.5%
|
|
313.8%
|
EEI (Utility) Index
|
|
13.0%
|
|
38.4%
|
|
64.0%
|
|
143.9%
|
|
182.1%
|
S&P 500
|
|
32.4%
|
|
56.8%
|
|
128.2%
|
|
104.3%
|
|
98.5%
|
24
2014 Proxy
Statement
COMPENSATION DISCUSSION AND
ANALYSIS
Operational Highlights
-
NUs overall electric system performance in 2013
was its
best on record
-
NSTAR Electric Company, NSTAR Gas Company
and
Western Massachusetts Electric Company each
met or
exceeded Service Quality Index
performance targets
established by
Massachusetts, which is the only state we
serve
that has specific performance targets
-
We continued the process of streamlining and
fully
integrating business processes across the
Company,
including standardizing system design,
equipment and
operating and maintenance
practices
-
Performance relating to electric system
reliability,
restoration, calls answered
on-time, energy efficiency and
safety all
exceeded targets
Achievement of the 2013 performance
goals and the Compensation Committees assessment of Company and executive
performance are fully described in the section of this report titled 2013
Annual Incentive Program. Specific decisions regarding executive compensation
based upon the Committees assessment of Company and executive performance and
market data are described in this Compensation Discussion and Analysis as set
forth below.
The executive officers listed in the
Summary Compensation Table, whose compensation is discussed in this Compensation
Discussion and Analysis, are referred to as the Named Executive Officers under
SEC rules. For 2013, the Named Executive Officers are:
-
Thomas J. May
, President and Chief Executive Officer;
Chairman of the Board from October 10,
2013 to present
-
James J. Judge
, Executive Vice President and Chief
Financial Officer
-
Leon J. Olivier
, Executive Vice President and Chief
Operating Officer
-
David R. McHale
, Executive Vice President and Chief
Administrative Officer
-
Gregory B. Butler
, Senior Vice President, General Counsel
and Secretary
Overview of our Compensation
Program
|
The Role of the Compensation
Committee.
The Board of Trustees has
delegated to the Committee overall responsibility for establishing the
compensation program for all executive officers, including the Named Executive
Officers. In this role, the Committee sets compensation policy and compensation
levels, reviews and approves performance goals and evaluates executive
performance. Although this discussion and analysis refers principally to
compensation for the Named Executive Officers, the same compensation principles
and practices generally apply to all executive officers. The compensation of the
Chief Executive Officer is subject to the further review and approval of the
independent Trustees.
Elements of
Compensation
.
Total direct
compensation consists of three elements: base salary, annual cash incentive
awards and long-term equity-based incentive awards. Indirect compensation is
provided through certain retirement, perquisite, severance, and health and
welfare benefit programs.
Our Compensation
Objectives
.
The objectives of our compensation program are to attract and
retain superior executive talent, motivate our executives to achieve short-term
and long-term performance goals set each year, and provide total compensation
opportunities that are competitive with market practices. With respect to
incentive compensation, the Committee believes it is important to balance
short-term goals, such as producing earnings, with longer-term goals, such as
long-term value creation and maintaining a strong balance sheet. The Committee
also places great emphasis on system reliability and superior customer service.
Our compensation program utilizes performance-based compensation to reward
individual and corporate performance and to align the interests of executives
with the Companys customers and shareholders. The Committee continually
increases expectations to motivate our executives and employees to achieve
continuous improvement in discharging our responsibilities to our customers to
provide energy services
2014 Proxy Statement
25
COMPENSATION DISCUSSION AND
ANALYSIS
reliably, safely, with respect for the
environment and our employees, and at a reasonable cost, while providing an
above-average return to our shareholders.
Setting Compensation Levels.
In order to ensure that the Company
achieves its goal of providing market-based compensation levels to attract and
retain top quality management, the Committee provides our executive officers
with target compensation opportunities over time approximately equal to median
compensation levels for executive officers of companies comparable to us. To
achieve that goal, the Committee and our independent compensation consultant,
Pay Governance LLC (Pay Governance), work together to determine the market
values of executive officer direct compensation elements (base salaries, annual
incentives and long-term incentives) as well as total compensation, by using
competitive market compensation data. The Committee reviews compensation data
obtained from utility and general industry surveys and a specific group of peer
utility companies.
Role of the Compensation
Consultant.
The Committee has retained
Pay Governance as its independent compensation consultant. Pay Governance
reports directly to the Committee and does not provide any other services to the
Company. With the consent of the Committee, Pay Governance works cooperatively
with the Companys management to develop analyses and proposals for presentation
to the Committee. The Committee generally relies on Pay Governance for peer
group market data and information as to market practices and trends to assess
the competitiveness of the compensation we pay to our senior executive officers
and to review the Committees proposed compensation decisions.
For fiscal year 2013, the Committee
assessed the independence of Pay Governance pursuant to SEC and NYSE rules and
concluded that it is independent and that no conflict of interest exists that
would prevent Pay Governance from independently advising the Committee. In
making this assessment, the Committee considered the independence factors
enumerated in new Rule 10C-1(b) under the Securities Exchange Act of 1934,
including the fact that Pay Governance does not provide any other services to
the Company, the level of fees received from the Company as a percentage of Pay
Governance total revenue, policies and procedures employed by Pay Governance to
prevent conflicts of interest, and whether the individual advisers from Pay
Governance that the Committee consulted with owned any NU common shares or have
any business or personal relationships with members of the Committee or our
executive officers.
Role of Management.
Managements role and specifically the
role of the Chief Executive Officer and the Senior Vice President of Human
Resources is to provide current compensation information to the compensation
consultant and to provide analysis and recommendations on executive officer
compensation to the Committee based on the market value of the position,
individual performance, experience and internal pay equity. The Chief Executive
Officer also provides recommendations on the compensation for the other Named
Executive Officers. None of the executives makes recommendations that affect his
or her individual compensation.
The Compensation Committee strives to
provide our executive officers with target compensation opportunities using a
range that is approximately equal to the median compensation levels for
executive officers of companies comparable to NU. Set forth below is a
description of the sources of the compensation data used by the Committee when
reviewing 2013 compensation:
-
Utility and general industry survey
data
. The Committee
reviews compensation information obtained from surveys
of diverse groups of utility and general industry
companies
that represent our market for
executive officer talent. Utility industry
data are based on a defined peer set, as
discussed below. General industry data are
size-adjusted to ensure a close correlation
between the market data and
the Companys scope
of operations. The Committee used
this
information, which it obtained from Pay Governance,
to determine base salaries and incentive opportunities.
-
Peer group data.
In support of our executive pay
decisions during 2013, the Committee consulted with
Pay Governance, which provided the Committee with a
competitive assessment analysis of the Companys
executive
compensation levels, as compared to
the 20 peer group
companies listed in the table
below.
26
2014 Proxy
Statement
COMPENSATION DISCUSSION AND
ANALYSIS
Alliant Energy
Corporation
|
|
Edison
International
|
|
Public Service
Enterprise Group, Inc.
|
Ameren Corporation
|
|
Entergy Corporation
|
|
SCANA Corporation
|
CenterPoint
Energy, Inc.
|
|
Integrys Energy
Group, Inc.
|
|
Sempra
Energy
|
Consolidated Edison Inc.
|
|
OGE Energy Corp.
|
|
TECO Energy, Inc.
|
CMS Energy
Corp.
|
|
Pepco Holdings,
Inc.
|
|
Wisconsin Energy
Corp.
|
Dominion Resources, Inc.
|
|
PG&E Corp.
|
|
Xcel Energy Inc.
|
DTE Energy
Company
|
|
PPL
Corporation
|
|
|
The Committee periodically adjusts the
target percentages of annual and long-term incentives based on the survey data
after discussion with the compensation consultant to ensure that they are
approximately equal to competitive median levels.
The Committee also determines
perquisites to the extent they serve business purposes, and sets supplemental
benefits at levels that provide market-based compensation opportunities to the
executive officers. The Committee periodically reviews the general market for
supplemental benefits and perquisites using utility and general industry survey
data, including data obtained from companies in the peer group.
Mix of Compensation
Elements
.
We target the mix of compensation for our Chief Executive Officer and the
other Named Executive Officers so that the percentages of each compensation
element are approximately equal to the competitive median market mix. The mix is
heavily weighted toward incentive compensation, and incentive compensation is
heavily weighted toward long-term compensation. Since our most senior positions
have the greatest responsibility for implementing our long-term business plans
and strategies, a greater proportion of total compensation is based on
performance with a long-term focus.
The Committee determines the
compensation for each senior executive officer based on the relative authority,
duties and responsibilities of each officer. Our Chief Executive Officers
responsibilities for the strategic direction and daily operations and management
of the Company are greater than the duties and responsibilities of our other
executive officers. As a result, our Chief Executive Officers compensation is
higher than the compensation of our other executive officers. Assisted by the
compensation consultant, the Committee regularly reviews market compensation
data for executive officer positions similar to those held by our executive
officers, including our Chief Executive Officer, and this market data continues
to indicate that chief executive officers are typically paid significantly more
than other executive officers.
The following table sets forth the
contribution to 2013 Total Direct Compensation (TDC) of each element of
compensation, at target, reflected as a percentage of TDC, for the Named
Executive Officers. The amounts shown in this table are at target and therefore
will not match the amounts appearing in the Summary Compensation
Table.
|
|
Percentage of TDC at
Target
|
|
|
|
|
|
|
|
|
Long-Term Incentives
|
|
|
|
|
Base
|
|
Annual
|
|
Performance
|
|
|
|
|
Named Executive Officer
(NEO)
|
|
Salary
|
|
Incentive
(1)
|
|
Shares
(1)
|
|
RSUs
(2)
|
|
TDC
|
Thomas J. May
|
|
20%
|
|
20%
|
|
30%
|
|
30%
|
|
100%
|
James J.
Judge
|
|
30%
|
|
20%
|
|
25%
|
|
25%
|
|
100%
|
Leon J. Olivier
|
|
30%
|
|
20%
|
|
25%
|
|
25%
|
|
100%
|
David R.
McHale
|
|
30%
|
|
20%
|
|
25%
|
|
25%
|
|
100%
|
Gregory B. Butler
|
|
30%
|
|
20%
|
|
25%
|
|
25%
|
|
100%
|
NEO average, excluding CEO
|
|
30%
|
|
20%
|
|
25%
|
|
25%
|
|
100%
|
(1)
|
|
The annual incentive
compensation element and performance shares under the long-term incentive
compensation element are performance-based.
|
|
(2)
|
|
Restricted Share Units
(RSUs) vest over three years contingent upon continued
employment.
|
Risk Analysis of Executive
Compensation Program
.
The overall compensation program includes a mix of
compensation elements ranging from a fixed base salary that is risk-neutral to
annual and long-term incentive compensation programs intended to motivate
officers and eligible employees to achieve individual and corporate performance
goals that reflect an appropriate level of risk. The fundamental objective of
the compensation program is to foster the continued growth and
success of our business. The design and
implementation of the overall compensation program provide the Committee with
opportunities throughout the year to assess risks within the compensation
program that may have a material effect on the Company and our
shareholders.
In 2013, the Compensation Committee
assessed the risks associated with the executive compensation program by
reviewing the various elements of incentive compensation.
2014 Proxy Statement
27
COMPENSATION DISCUSSION AND
ANALYSIS
The annual incentive program was
designed to ensure an appropriate balance between the individual and corporate
goals, which were deemed appropriately and supportive of the Companys annual
business plan. Similarly, the long-term incentive program was designed to ensure
that the performance metrics were properly weighted and supportive of the
Companys strategic plan. The Committee reviewed the overall compensation
program in the context of the annual operating and strategic plans, which were
both previously subject to Enterprise Risk Management review. Both the annual
and long-term incentive programs were designed to ensure that mechanisms exist
to mitigate risk. These mechanisms include realistic goal setting and discretion
with respect to actual payments, the mix of financial, customer service,
operational and safety goals, executive share ownership guidelines linking their
interests to those
of shareholders, provisions for the
clawback of incentive compensation, prohibitions on hedging and pledging of NU
common shares, and providing limited perquisites. These mechanisms are intended
to ensure that there is not undue incentive to achieve any one goal without
considering the impact of achieving such goal on other aspects of our
business.
Results of Our 2012 Say-on-Pay
Proposal
.
Shareholders are requested to cast an annual advisory vote on executive
compensation (a Say-on-Pay proposal). At the Companys Annual Meeting of
Shareholders held in May 2013, 86.6% of the votes cast on the Say-on-Pay
proposal were voted to approve the compensation of the Named Executive Officers,
as described in our 2013 proxy statement. The Committee has and will continue to
consider the outcome of the Companys Say-on-Pay votes when making future
compensation decisions for the Named Executive Officers.
Elements of 2013
Compensation
|
BASE SALARY
Base salary is designed to attract and
retain key executives by providing an element of total compensation at levels
competitive with those of other executives employed by companies of similar size
and complexity in the utility and general industries. In establishing base
salary, the Compensation Committee relies on compensation data obtained from
independent third-party surveys of companies and from an industry peer group to
ensure that the compensation opportunities we offer are capable of attracting
and retaining executives with the experience and talent required to achieve our
strategic objectives.
When setting or adjusting base
salaries, the Committee considers annual individual performance appraisals;
market pay movement across industries (determined through market
analysis); targeted market pay
positioning for each executive officer; individual experience and years of
service; strategic importance of a position; and internal equity.
Individuals who are performing well in
strategic positions are likely to have their base salaries increased more
significantly than other individuals. From time-to-time, economic conditions and
corporate performance have caused salary increases to be postponed. The
Committee prefers to reflect sub-par corporate performance through the variable
pay components.
In February 2013, the Committee
adjusted the base salaries of the Named Executive Officers in a range of 3% to
3.2%. The Committee and independent Trustees also adjusted Mr. Mays base
salary by 3.1%.
INCENTIVE COMPENSATION
Annual incentive and the long-term
incentive compensation are provided under the Northeast Utilities Incentive
Plan, which was approved by our shareholders at the 2007 Annual Meeting of
Shareholders and, with respect to the material terms of performance goals, was
re-approved by our shareholders at the 2012 Annual Meeting of Shareholders. The
annual incentive program provides cash compensation intended to reward
performance under our annual operating
plan. The long-term incentive program
is designed to reward demonstrated performance and leadership, motivate future
performance, align the interests of the executive officers with those of our
shareholders and retain the executive officers during the term of grants. The
annual and long-term programs are designed to strike a balance between the
short- and long-term objectives so that the programs work in tandem.
28
2014 Proxy
Statement
COMPENSATION DISCUSSION AND
ANALYSIS
2013 Annual Incentive
Program
|
In January 2013, the Committee
established the terms of the 2013 Annual Incentive Program. As part of the
overall program, and after consulting with Pay Governance, the Committee set
target award levels for each of the Named Executive Officers that ranged from
65% to 100% of target. Target award levels under the Annual Incentive Program
are expressed as a percentage of base salary.
At the January 2013 meeting, the
Committee also determined that, for 2013, it would base 60% of the annual
incentive award level on its assessment of the Companys overall financial
performance and 40% of the annual award level on its assessment of the Companys
operational performance. The Committee also determined the specific goals to be
included to assess performance and that the individual goals would be assessed
using ratings ranging from 0% to 200%, with 100% representing target performance
deemed to be rigorous yet attainable. The Committee later assigned weightings to
each of these specific goals; for the financial component, the earnings per
share goal would be weighted at 60%, the reduction in operating expenses goal
would be weighted at 20%, and the remaining 20% weighting would be based on the
combined dividend growth, credit rating and total shareholder return goals. For
the operational component, the Committee determined that the combined service
reliability and responsiveness goals would be weighted at 60%, the combined
storm recovery performance and merger integration goals would be weighted at
25%, and the combined safety ratings, gas service response and call center
performance goals would be weighted at 15%.
With respect to 2013 performance,
management provided an initial review of the Companys performance for the year
at the December 2013 meeting of the Committee, followed by a full assessment of
the Companys performance at the February 2014 meeting of the Committee. The
Committee was also provided updates during the year on corporate performance. At
the February 2014 meeting, the Committee evaluated the Companys performance
using a matrix that considered actual performance against the preset goals as
well as industry average and top quartile performance. The Committee determined,
based on its assessment of the various financial and operational performance
results, to set the level of achievement of combined financial and operational
performance results at 175% of target, reflecting the overall superior
performance of the Company and the executive team. In arriving at this
determination, the Committee determined that the final financial performance
result was 182% of target and the operational performance result was 160% of
target. The individual financial and operational performance goals results are
as set forth below. The Chief Executive Officer recommended to the Committee
payout levels for the senior
executive officers based on the
Companys overall financial and operational performance, along with his
assessment of each executive officers individual performance.
Financial Performance Goals
Assessment
-
We achieved recurring earnings per share of $2.53
in 2013,
exceeding the challenging goal of
$2.50. This earnings result
was an 11% increase
over 2012 versus an average industry
increase
of approximately 4%. The Committee determined
this goal to have attained a 200% performance result.
-
We achieved operations and maintenance cost
reductions
through successful integration
initiatives, resulting in
a 3.2% reduction in
operating expenses in 2013. This
exceeded the
goal of a 3% reduction and compared with
an
expected average industry increase of 2-3%. The
Committee determined this goal to have attained a 175%
performance result.
-
Our dividend increased to $1.47 per share, a 7.1%
increase
from the prior year, and nearly double
the industry average
dividend growth of 3.7%.
The Committee determined this
goal to have
attained a 150% performance result.
-
The Companys credit rating at Standard &
Poors is A-,
among the highest in the
utility industry, providing the
foundation for
favorable financing opportunities during the
year and in the future. The industry average credit rating at
Standard & Poors is BBB. The Committee
determined
this goal to have attained a 150%
performance result.
-
We delivered total shareholder return of 12.3%,
the fifth
consecutive year of double-digit
total shareholder return.
The Committee
determined this goal to have attained a
100%
performance result.
The following results were also
considered by the Committee in making an assessment of overall financial
performance, but were not given specific weightings or assigned a performance
assessment result:
-
We implemented timely and effective financing
programs
resulting in significant annualized
interest cost savings of
approximately $6.0
million.
-
Capital project spending of $1.58 billion was
in-line with
budget.
-
In addition to our 2013 total shareholder return
noted
above, we have consistently achieved
outstanding financial
performance, with total
shareholder returns over the past
three-,
five-, 10- and 15-year periods of 47.0%, 110.3%,
194.5% and 313.8%, outperforming the EEI utility industry
over those same periods.
2014 Proxy Statement
29
COMPENSATION DISCUSSION AND
ANALYSIS
Operational Performance Goals
Assessment
-
The Companys total electric system
operating performance
was the best
on record. Average months between service
interruptions equaled 14.4 months, which was 15% better
than the target of 12.5 months, and electric
service outage
restoration time of
86.2 minutes was 20% better than the goal
of 108.3 minutes, representing top quartile performance.
The Committee determined this goal to have
attained a
175% performance
result.
-
On-time response to gas customer
emergency calls was
99.0%, which
was in line with the goal of 99.1%. The
Committee determined this goal to have attained a 100%
performance result.
-
85.8% of customer calls were answered
within 30 seconds,
which was in
line with the goal of 85.6%. The Committee
determined this goal to have attained a 100% performance
result.
-
We significantly improved our safety
performance in Days
Away &
Restricted Time (DART) compared to the goal:
-
DART for 2013 was 1.6 accidents per
100 employees,
which was 8.2%
better than the goal of 1.70. This represents
a significant improvement, although it is below
industry
average performance. The
Committee determined this
goal to
have attained a 125% performance result.
-
We continued our merger integration
and business
standardization
processes across the Company, further
executing on the One Company Model, which has
allowed us to lower operating costs while
improving
customer service. The
Committee determined this goal to
have attained a 150% performance result.
-
The Company significantly enhanced its
storm preparedness
and recovery
program, and the Public Utility Regulatory
Authority in Connecticut recognized our significantly
improved performance during Superstorm Sandy.
The
Committee determined this goal
to have attained a 150%
performance
result.
The following results were also
considered by the Committee in making an assessment of overall operational
performance, but were not given specific weightings or assigned a performance
assessment result:
-
Gas customer growth exceeded our goal, as
10,356
customers were connected to the system,
compared to the
goal of 9,100 customers.
-
Each of our operating companies exceeded its
challenging
Energy Efficiency goals.
-
We completed all major transmission reliability
projects on
or ahead of schedule and on or
under budget.
Individual Performance Factors Considered
by the Committee
The goal of the Committee for 2013 was
to continue to provide incentives for the Company executives to work together as
a highly effective, integrated team to achieve or exceed the recurring earnings
per share goal and other financial, operational and merger effectiveness goals
and objectives. While emphasizing the importance of the executives to work as a
team, the annual incentive award payments were also based on the Committees
assessment of each executives individual performance in supporting the
performance goals. The Committee assessed the performance of our Chief Executive
Officer and, based on the recommendations of the Chief Executive Officer, the
Named Executive Officers, to determine the individual incentive awards as
disclosed in the Summary Compensation Table. Based on the Committees review of
the Companys overall performance, considered by the Committee to have been
superior for the several reasons set forth above, the Committee approved annual
incentive program payouts for the Named Executive Officers at levels that ranged
from 170% to 182% of target. These awards reflected the individual and team
contributions of Mr. May, Mr. Judge, Mr. Olivier, Mr. McHale and Mr. Butler in
the overall performance of the Company.
In arriving at Mr. Mays annual
incentive payment of $2,125,000, which was 182% of target, and which reflects
his and the Companys excellent performance, the Committee and the Board
considered the totality of the Companys financial and operating/merger
effectiveness performance and Mr. Mays strategic leadership in enabling the
Company to achieve its excellent performance.
Long-Term Incentive
Program
|
General
Our long-term incentive program is
intended to focus on NUs longer-term strategic goals and to help retain our
executives. A new three-year program commences every
year. For the 2013 2015 Long-Term
Incentive Program, at target, each grant consisted of 50% Restricted Share Units
(RSUs) and 50% Performance Shares. RSUs are designed to provide executives with
an incentive to increase the value of NU common shares in alignment with
shareholder
30
2014 Proxy
Statement
COMPENSATION DISCUSSION AND
ANALYSIS
interests, while also acting as a
retention vehicle for executive talent and providing a means for holding NU
common shares in accordance with our executive share ownership guidelines.
Performance Shares are designed principally to reward achievement as measured
against pre-established performance measures. We believe these compensation
elements create a focus on continued growth in the Company and share price to
further align the interests of officers with the interests of our shareholders.
Restricted Share Units (RSUs)
General
Each RSU granted under the long-term
incentive program entitles the holder to receive one Northeast Utilities common
share at the time of vesting. All RSUs granted under the long-term incentive
program provide for vesting in equal annual installments over three years. RSU
holders are eligible to receive reinvested dividend units on outstanding RSUs
held by them to the same extent that dividends are declared and paid on our
common shares. Reinvested dividend units are accounted for as additional RSUs
that accrue and are distributed with the common shares issued upon vesting of
the underlying RSUs. Common shares, including any additional common shares in
respect of reinvested dividend units, are not issued for any RSUs that do not
vest.
The Committee determined RSU grants for
each officer participating in the long-term incentive program. RSU grants are
based on a percentage of base salary and measured in dollars. In 2013, the
percentage used for each officer was based on the executive officers position
in the Company and ranged from 160% to 350% of base salary. The Committee
reserves the right to increase or decrease the RSU grant from target for each
officer under special circumstances. Based on input from our Chief Executive
Officer, the Committee determined the final RSU grants for each of the other
executive officers, including the other Named Executive Officers.
All RSUs are granted on the date of the
Committee meeting at which they are approved. RSU grants are subsequently
converted from dollars into common share equivalents by dividing the value of
each grant by the average closing price for our common shares over the ten
trading days prior to the date of the grant.
RSU Grants under the 2013 2015 Program
Under the 2013 2015 Program, the
target RSU grant totaled approximately $7,057,084 for the 44 officers
participating in the program. Dividing the final total RSU grant by $39.36, the
average closing price of our common shares over the ten trading days prior to
the date of grant, resulted in an aggregate of 179,300 RSUs. The following RSU
grants at 100% of target were approved, reflected in RSUs: Mr. May: 52,000; Mr.
Judge: 13,100; Mr. Olivier: 13,800; Mr. McHale: 13,100; and Mr. Butler: 9,100.
Performance Shares
Performance shares are designed to
reward demonstrated future financial performance, defined by producing long-term
earnings growth and providing above-average total shareholder returns, therefore
aligning compensation with performance.
For the 2013 2015 Program, the
Committee determined to use: (i) average earnings per share growth adjusted for
certain non-recurring items (EPSG); and (ii) relative total shareholder return
(TSR) measured against the performance of companies that comprise the EEI
Utility Index. The Committee selected EPSG and TSR as performance measures
because the Committee believes that they are generally recognized as the best
indicators of overall corporate financial performance.
The number of performance shares
awarded at the end of the three-year period ranges from 0% to 200% of target,
depending on EPSG and relative TSR performance as set forth in the performance
matrix below. EPSG ranges from 0% to 10%, while TSR ranges from below the 10th
percentile to approximately the 90th percentile. No performance shares will be
awarded if the Companys EPSG is negative. The Committee has determined that
payout at 100% of target should be challenging but achievable. As a result,
vesting at 100% of target occurs at various combinations of EPSG and TSR
performance. For example, the performance matrix provides for vesting at 100% of
target if the Company achieves 5% EPSG and relative TSR at the 50th percentile.
In addition, the value of any performance shares that actually vest may increase
or decrease over the vesting period based on the Companys share price
performance.
2014 Proxy Statement
31
COMPENSATION DISCUSSION AND
ANALYSIS
The performance matrix set forth below
describes how the performance share payout is determined under the 2013 2015
Long-Term Incentive Program. Three-year average EPSG is cross-referenced with
the actual three-year TSR percentile to determine actual performance share
payout as a percentage of target:
|
Three-Year
|
|
|
|
Three-Year Relative Total Shareholder Return
Percentiles
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS Growth
|
|
|
|
Below 10th
|
|
10th
|
|
20th
|
|
30th
|
|
40th
|
|
50th
|
|
60th
|
|
70th
|
|
80th
|
|
90th
|
|
Above 90th
|
|
|
10%
|
|
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
150%
|
|
160%
|
|
170%
|
|
180%
|
|
190%
|
|
200%
|
|
|
9%
|
|
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
150%
|
|
160%
|
|
170%
|
|
180%
|
|
190%
|
|
|
8%
|
|
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
150%
|
|
160%
|
|
170%
|
|
180%
|
|
|
7%
|
|
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
150%
|
|
160%
|
|
170%
|
|
|
6%
|
|
|
|
60%
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
150%
|
|
160%
|
|
|
5%
|
|
|
|
50%
|
|
60%
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
150%
|
|
|
4%
|
|
|
|
40%
|
|
50%
|
|
60%
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
|
3%
|
|
|
|
30%
|
|
40%
|
|
50%
|
|
60%
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
|
2%
|
|
|
|
20%
|
|
30%
|
|
40%
|
|
50%
|
|
60%
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
120%
|
|
|
1%
|
|
|
|
0%
|
|
20%
|
|
30%
|
|
40%
|
|
50%
|
|
60%
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
110%
|
|
|
0%
|
|
|
|
0%
|
|
0%
|
|
20%
|
|
30%
|
|
40%
|
|
50%
|
|
60%
|
|
70%
|
|
80%
|
|
90%
|
|
100%
|
|
|
Below 0%
|
|
|
|
0%
|
|
0%
|
|
0%
|
|
0%
|
|
0%
|
|
10%
|
|
20%
|
|
30%
|
|
40%
|
|
50%
|
|
60%
|
|
Pre-Merger Long-Term Incentive
Programs
The 2011 2013 and the 2012 2014
Programs were approved prior to the merger. Grants under these programs
consisted of 50% RSUs and 50% Performance Shares. The RSU grants under these
three-year programs vest in equal annual installments and are otherwise subject
to the provisions set forth in the section above titled Restricted Share Units
(RSUs). Upon the closing of the merger in 2012, the Performance Share grants
under these programs converted to
RSUs assuming a target level of
performance, and the newly converted RSUs were made subject to the vesting
schedule for the original RSU grants under each program.
Under the 2011 2013 Program, the
newly converted RSUs vested in 2013. Under the 2012 2014 Program, half of the
newly converted RSUs vested in 2013 and the remaining half will vest in 2014.
The RSU grants outstanding at the end of 2013 are disclosed in the table below
titled Outstanding Equity Awards at Fiscal Year End.
If our earnings were to be restated as
a result of noncompliance with accounting rules caused by fraud or misconduct,
the Company would require our Chief Executive Officer and our Chief Financial
Officer to provide reimbursement for certain incentive compensation received by
each of them. To the extent that reimbursement were not required under SEC rules
or NYSE listing standards, our Incentive Plan would require any employee whose
misconduct or fraud caused such restatement, as determined by the Board of
Trustees, to reimburse us for any incentive compensation received by him or her.
In addition, once final rules are
adopted by the SEC regarding any additional clawback requirements under the
Dodd-Frank Wall Street Reform and Consumer Protection Act, we will review our
clawback policy and compensation plans and, if necessary, amend them to comply
with the new mandates.
NO HEDGING AND NO PLEDGING
POLICY
|
We have adopted a policy prohibiting
all hedging, pledging or derivative transactions or short sales involving
Company securities by our employees, including our executive officers. The
policy also prohibits executive officers from holding any Company securities in
a margin account and from pledging
their Company securities as collateral
for a loan. In addition, all equity compensation paid to our Trustees is
automatically deferred and not distributed until retirement.
32
2014
Proxy Statement
COMPENSATION DISCUSSION AND
ANALYSIS
SHARE OWNERSHIP GUIDELINES/HOLDING
PERIODS
|
The Committee has approved share
ownership guidelines to further emphasize the importance of share ownership by
our officers. As indicated in the table below, the guidelines call for the Chief
Executive Officer to own common shares equal
to six times base salary, the other
senior executive officers to own a number of common shares equal to three times
base salary and all other officers to own a number of common shares equal to one
to two times base salary.
Executive Officer
|
|
Base Salary
Multiple
|
Chief Executive
Officer
|
|
|
6
|
|
Executive Vice Presidents / Senior Vice
Presidents
|
|
|
3
|
|
Operating Company
Presidents
|
|
|
2
|
|
Vice Presidents
|
|
|
1-1.5
|
|
We require that our executive officers
attain these ownership levels within five years. All of our officers, including
our Named Executive Officers, have satisfied the share ownership guidelines or
are expected to satisfy them within the applicable timeframe. Common shares,
whether held of record, in street name, or in individual 401(k) accounts, and
RSUs satisfy the guidelines. Unexercised stock options
and unvested performance shares do not
count toward the ownership guidelines. In addition to the share ownership
guidelines requirements noted above, senior executive officers must hold all the
net shares awarded under the Companys stock compensation plan until the share
ownership guidelines requirements have been met.
Retirement Benefits
The Company provides a qualified
defined benefit pension program for certain senior executives, which is a final
average pay program subject to tax code limits. Because of such limits, we also
maintain a supplemental non-qualified pension program. Benefits are based on
base salary and certain incentive payments, which is consistent with the goal of
providing a retirement benefit that replaces a percentage of pre-retirement
income. The supplemental program makes up for benefits barred by tax code
limits, and generally provides (together with the qualified pension program)
benefits equal to approximately 60% of pre-retirement compensation (subject to
certain reductions) for Messrs. May, Judge and Butler, and approximately 50% of
such compensation for Mr. McHale.
Mr. Oliviers employment agreement provides
retirement benefits similar to those of a previous employer instead of the
supplemental program benefits described above. Under this agreement, he will
receive a pension based on a prescribed formula if he meets certain eligibility
requirements.
Also see the narrative accompanying the
Pension Benefits table and accompanying notes for more detail on the above
program.
401(k) Benefits
The Company offers a qualified 401(k)
program for all employees, including senior executives, subject to tax code
limits. After applying these limits, the program provides a
maximum match of up to $10,200 for
Messrs. May and Judge, which is equal to 50% of the first 8% of eligible base
salary and annual cash incentive. For Messrs. Olivier, McHale and Butler, we
provide a maximum match of up to $7,650, which is equal to 3% of eligible base
salary (plus, beginning in 2014, annual cash incentive).
Deferred Compensation
The Company offers a non-qualified
deferred compensation program for all senior executives. In 2013, the program
allowed deferral of up to 50% of base salary, annual incentives and stock
incentive awards for Messrs. May and Judge. Deferral of 100% of base salary and
annual incentives was permitted in 2013 for Messrs. Olivier, McHale and Butler,
and we matched up to 3% of deferred base salary in excess of the $255,000 tax
code limit with deemed NU common share investments generally vesting in three
years. The program allows participants to select investment measures for
deferrals based on an array of deemed investment options (including certain
mutual funds and publicly traded securities).
Effective in 2014, the program was
amended to permit all senior executives to defer 100% of base salary, annual
incentives and stock incentive awards, and the Company match was
eliminated.
See the Non-Qualified Deferred
Compensation Table and accompanying notes for additional details on the above
program.
2014 Proxy Statement
33
COMPENSATION DISCUSSION AND
ANALYSIS
Perquisites
The Company provides senior executives
with limited financial planning, health services, vehicle leasing and access to
tickets
to sporting events, perquisites that we
believe are consistent with peer companies. The current level of perquisites
does not factor into decisions on total compensation.
We maintain contractual agreements with
all of our Named Executive Officers that provide for potential compensation in
the event of certain terminations following a Change of Control. The agreements
are consistent with general industry practice, and we believe they are necessary
to attract and retain high quality executives and to ensure executive focus on
Company business during the period leading up to a potential Change of Control.
The agreements are double-trigger agreements that provide executives with
compensation in
the event of a Change of Control, while
still providing an incentive to remain employed with the Company for the
transition period that follows.
Under the agreements, certain
compensation is generally payable if, during the applicable change of control
period, the executive is involuntarily terminated (other than for cause) or
voluntarily terminates employment for good reason. These agreements are
described more fully below under Potential Payments upon Termination or Change
of Control.
TAX AND ACCOUNTING
CONSIDERATIONS
|
The Companys annual and long-term
incentive plans were approved by shareholders and permit annual incentive and
performance share awards intended to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code. However, the Company believes
that the availability of a tax deduction for forms of compensation is secondary
to the goal of providing market-based compensation to attract and retain highly
qualified executives. In addition, our compensation program
plans were amended in 2008 to comply
with Section 409A of the Internal Revenue Code.
The Company has adopted the provisions
of Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic 718,
Compensation-Stock
Compensation
. In general, the Company and the
Committee do not take accounting considerations into account in structuring
compensation arrangements.
Equity awards noted in the compensation
tables are made at the February meeting of the Compensation Committee (subject
to the further approval of the Board of Trustees of the Chief Executive
Officers award) when the Committee also determines base salary, annual and
long-term incentive
compensation targets and annual
incentive awards. The date of this meeting is chosen several months in advance,
and therefore awards are not coordinated with the release of material non-public
information.
COMPENSATION COMMITTEE
REPORT
The Compensation Committee of the Northeast Utilities Board of Trustees
has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with
Northeast Utilities management.
Based on this review and discussion,
the Compensation Committee has recommended to the Board of Trustees that the
Compensation Discussion and Analysis be included in the 2014 proxy statement and
our Annual Report on Form 10-K.
The Compensation Committee
Charles K. Gifford,
Chair
|
|
James S.
DiStasio
|
John S.
Clarkeson
|
|
William C. Van
Faasen
|
Sanford Cloud,
Jr.
|
|
Dennis R.
Wraase
|
February 4, 2014
34
2014 Proxy Statement
EXECUTIVE
COMPENSATION
SUMMARY COMPENSATION
TABLE
|
The table below summarizes the total
compensation paid or earned by our principal executive officer (Mr. May),
principal financial officer (Mr. Judge) and the three other most highly
compensated executive officers in 2013 (Messrs. Olivier, McHale and Butler),
determined in accordance with the applicable SEC disclosure rules (collectively,
the Named Executive Officers). As explained in the footnotes below, the amounts
reflect the economic benefit to each Named
Executive Officer of the compensation
item paid or accrued on his behalf for the fiscal year ended December 31, 2013.
The compensation shown for each Named Executive Officer was for all services in
all capacities to Northeast Utilities and its subsidiaries. All salaries, annual
incentive amounts and long-term incentive amounts shown for each Named Executive
Officer were paid for all services rendered to Northeast Utilities and its
subsidiaries in all capacities.
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal
Position
|
|
Year
|
|
($)
(2)
|
|
($)
(3)
|
|
($)
(4)
|
|
($)
(5)
|
|
($)
(6)
|
|
($)
|
Thomas J. May
(1)
|
|
2013
|
|
1,161,250
|
|
4,263,480
|
|
|
2,125,000
|
|
|
|
|
|
|
|
111,269
|
|
|
7,660,999
|
Chairman of the Board, President
|
|
2012
|
|
1,125,000
|
|
3,418,416
|
|
|
2,100,000
|
|
|
|
1,232,395
|
|
|
|
91,726
|
|
|
7,967,537
|
and Chief Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Judge
(1)
|
|
2013
|
|
570,750
|
|
1,074,069
|
|
|
650,000
|
|
|
|
111,279
|
|
|
|
20,886
|
|
|
2,426,984
|
Executive Vice President and
|
|
2012
|
|
535,667
|
|
793,045
|
|
|
640,000
|
|
|
|
1,097,100
|
|
|
|
21,085
|
|
|
3,086,897
|
Chief Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leon J. Olivier
|
|
2013
|
|
599,242
|
|
1,131,462
|
|
|
670,000
|
|
|
|
109,818
|
|
|
|
23,668
|
|
|
2,534,190
|
Executive Vice President and
|
|
2012
|
|
583,043
|
|
889,147
|
|
|
974,236
|
|
|
|
887,046
|
|
|
|
17,491
|
|
|
3,350,963
|
Chief Operating
Officer
|
|
2011
|
|
565,548
|
|
852,791
|
|
|
412,500
|
|
|
|
724,796
|
|
|
|
16,966
|
|
|
2,572,601
|
David R. McHale
|
|
2013
|
|
570,147
|
|
1,074,069
|
|
|
650,000
|
|
|
|
|
|
|
|
22,104
|
|
|
2,316,320
|
Executive Vice President and
|
|
2012
|
|
553,853
|
|
844,685
|
|
|
939,939
|
|
|
|
1,127,536
|
|
|
|
16,615
|
|
|
3,482,628
|
Chief Administrative
Officer
|
|
2011
|
|
537,721
|
|
810,080
|
|
|
393,750
|
|
|
|
798,025
|
|
|
|
16,132
|
|
|
2,555,708
|
Gregory B. Butler
|
|
2013
|
|
444,423
|
|
746,109
|
|
|
505,000
|
|
|
|
|
|
|
|
12,650
|
|
|
1,708,182
|
Senior Vice President,
|
|
2012
|
|
431,885
|
|
659,226
|
|
|
727,534
|
|
|
|
764,758
|
|
|
|
7,500
|
|
|
2,590,903
|
General Counsel and
Secretary
|
|
2011
|
|
417,508
|
|
629,234
|
|
|
305,241
|
|
|
|
553,436
|
|
|
|
7,350
|
|
|
1,912,769
|
(1)
|
Messrs. May and Judge became
Named Executive Officers upon the completion of the NSTAR merger on April
10, 2012. They were not executive officers of Northeast Utilities in
2011.
|
|
|
The 2012 compensation reported
for Messrs. May and Judge includes compensation paid by NSTAR during the
period from January 1, 2012 to April 9, 2012, prior to the closing of the
merger, plus compensation paid by Northeast Utilities for the remainder of
2012, following the closing of the merger. The 2012 compensation paid by
Northeast Utilities consisted of the following: for Mr. May, Salary:
$822,414; Non-Equity Incentive Plan Compensation: $2,100,000; Change in
Pension Value and Non-Qualified Deferred Compensation Earnings:
$1,232,395; All Other Compensation: $87,821; Total: $4,242,630 and for Mr.
Judge, Salary: $401,215; Non-Equity Incentive Plan Compensation: $640,000;
Change in Pension Value and Non-Qualified Deferred Compensation Earnings:
$1,097,100; All Other Compensation: $7,500; Total:
$2,145,815.
|
|
(2)
|
Includes amounts deferred in 2013
under the deferred compensation program for Mr. Olivier: $119,849; and Mr.
McHale: $9,693. For more information, see the Executive Contributions in
the Last Fiscal Year column of the Non-Qualified Deferred Compensation
Plans Table.
|
|
(3)
|
Reflects the aggregate grant date
fair value of restricted share units (RSUs) and performance shares granted
in each fiscal year, calculated in accordance with FASB ASC Topic
718.
|
|
|
In 2013 for each Named Executive
Officer, and in 2012 and 2011 for Messrs. Olivier, McHale and Butler, RSUs
were granted as long-term compensation that vest in equal annual
installments over three years. RSU holders are eligible to receive
dividend equivalent units on outstanding RSUs held by them to the same
extent that dividends are declared and paid on our common shares. Dividend
equivalent units are accounted for as additional common shares that accrue
and are distributed simultaneously with the common shares issued upon
vesting of the underlying RSUs. The 2012 amounts shown for Mr. May and Mr.
Judge represent the value of Deferred Shares granted by NSTAR. See
footnote (1).
|
|
|
In 2013, each of the Named
Executive Officers was granted performance shares as long-term incentive
compensation. These performance shares will vest on December 31, 2015
based on the extent to which the two performance conditions described in
the Compensation Discussion and Analysis are achieved. The grant date
values for the performance shares, assuming achievement of the highest
level of both performance conditions, are as follows: Mr. May: $3,200,080;
Mr. Judge: $806,174; Mr. Olivier: $849,252; Mr. McHale: $806,174; and Mr.
Butler: $560,014.
|
|
(4)
|
Includes payments to the Named
Executive Officers under the 2013 Annual Incentive Program (Mr. May:
$2,125,000; Mr. Judge: $650,000; Mr. Olivier: $670,000; Mr. McHale:
$650,000; and Mr. Butler: $505,000).
|
2014 Proxy Statement
35
EXECUTIVE
COMPENSATION
(5)
|
|
Includes the actuarial increase
in the present value from December 31, 2012 to December 31, 2013 of the
Named Executive Officers accumulated benefits under all of our defined
benefit pension program and agreements determined using interest rate and
mortality rate assumptions consistent with those appearing under the
caption entitled Managements Discussion and Analysis and Results of
Operations in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2013. The Named Executive Officer may not be fully vested in
such amounts. More information on this topic is set forth with respect to
the Pension Benefits table, appearing further below. There were no
above-market earnings on deferrals in 2013.
|
|
(6)
|
|
Includes matching contributions
allocated by us to the accounts of Named Executive Officers under the 401k
program as follows: $10,200 for Messrs. May and Judge, and $7,650 for
Messrs. Olivier, McHale and Butler. Also includes employer matching
contributions under the deferred compensation program for eligible Named
Executive Officers who made deferral elections in late 2012 for salary
earned in 2013 (Mr. McHale: $9,511 and Mr. Olivier: $10,391). Mr. Butler
did not participate in the deferred compensation program in 2013. For Mr.
May, the value shown includes $60,837 attributable to a previously granted
$6,155 million present value life insurance benefit; financial planning
services valued at $6,720; $7,042 paid by the Company for Company-leased
vehicles and $26,470 for a home security system. For Mr. Judge, the value
shown includes financial planning services valued at $6,800 and $3,886
paid by the Company for Company-leased vehicles. Some of these perquisites
are made available to senior executives; however, none of the other Named
Executive Officers received perquisites valued in the aggregate in excess
of $10,000.
|
|
GRANTS OF PLAN-BASED AWARDS DURING
2013
|
The Grants of Plan-Based Awards Table
provides information on the range of potential payouts under all incentive plan
awards during the fiscal year ended December 31, 2013. The table also discloses
the underlying stock awards and the grant date for equity-based awards. We have
not granted any stock options since 2002.
|
|
|
|
Estimated Future
Payouts Under
|
|
Estimated Future Payouts
|
|
All Other
Stock
|
|
Grant
Date
|
|
|
|
|
Non-Equity
Incentive Plan
|
|
Under Equity Incentive Plan
|
|
Awards:
Number
|
|
Fair
Value
|
|
|
|
|
Awards
|
|
Awards
(1)
|
|
of Shares
of
|
|
of Stock
and
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Stock or
Units
|
|
Option
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
(2)
|
|
($)
(3)
|
Thomas J. May
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
(4)
|
|
2/4/2013
|
|
|
585,000
|
|
|
|
1,170,000
|
|
|
|
2,340,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Incentive
(5)
|
|
2/5/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,000
|
|
|
|
104,000
|
|
|
|
52,000
|
|
|
|
4,263,480
|
|
James J.
Judge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentive
(4)
|
|
2/4/2013
|
|
|
187,000
|
|
|
|
374,000
|
|
|
|
748,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Incentive
(5)
|
|
2/5/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,100
|
|
|
|
26,200
|
|
|
|
13,100
|
|
|
|
1,074,069
|
|
Leon J. Olivier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
(4)
|
|
2/4/2013
|
|
|
196,500
|
|
|
|
393,000
|
|
|
|
786,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Incentive
(5)
|
|
2/5/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,800
|
|
|
|
27,600
|
|
|
|
13,800
|
|
|
|
1,131,462
|
|
David R.
McHale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentive
(4)
|
|
2/4/2013
|
|
|
187,000
|
|
|
|
374,000
|
|
|
|
748,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Incentive
(5)
|
|
2/5/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,100
|
|
|
|
26,200
|
|
|
|
13,100
|
|
|
|
1,074,069
|
|
Gregory B. Butler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
(4)
|
|
2/4/2013
|
|
|
145,500
|
|
|
|
291,000
|
|
|
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Incentive
(5)
|
|
2/5/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,100
|
|
|
|
18,200
|
|
|
|
9,100
|
|
|
|
746,109
|
|
(1)
|
Reflects the number of
performance shares granted to each of the Named Executive Officers on
February 5, 2013 under the 2013 2015 Long-Term Incentive Program.
Performance shares were granted subject to a three-year Performance Period
that ends on December 31, 2015. At the end of the Performance Period,
common shares will be awarded based on actual performance as a percentage
of target, subject to reduction for applicable withholding taxes. Holders
of performance shares are eligible to receive dividend equivalent units on
outstanding performance shares held by them to the same extent that
dividends are declared and paid on our common shares. Dividend equivalent
units are accounted for as additional common shares that accrue and are
distributed simultaneously with the common shares underlying the
performance shares. The Annual Incentive Plan does not include an equity
component.
|
|
(2)
|
Reflects the number of RSUs
granted to each of the Named Executive Officers on February 5, 2013 under
the 2013 2015 Long-Term Incentive Program. RSUs vest in equal
installments on February 4, 2014, 2015 and 2016. We will distribute common
shares with respect to vested RSUs on a one-for-one basis following
vesting, after reduction for applicable withholding taxes. Holders of RSUs
are eligible to receive dividend equivalent units on outstanding RSUs held
by them to the same extent that dividends are declared and paid on our
common shares. Dividend equivalent units are accounted for as additional
common shares that accrue and are distributed simultaneously with the
common shares distributed in respect of the underlying RSUs.
|
|
(3)
|
Reflects the grant-date fair
value, determined in accordance with FASB ASC Topic 718, of RSUs and
performance shares granted to the Named Executive Officers on February 5,
2013 under the 2013 2015 Long-Term Incentive Program.
|
|
(4)
|
Amounts reflect the range of
potential payouts, if any, under the 2013 Annual Incentive Program for
each Named Executive Officer, as described in the Compensation Discussion
and Analysis. The payment in 2014 for performance in 2013 is set forth in
the Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table. The threshold payment under the Annual Incentive
Program is 50% of target.
|
|
(5)
|
Reflects the range of potential
payouts, if any, pursuant to performance share awards under the 2013
2015 Long-Term Incentive Program, as described in the Compensation
Discussion and Analysis.
|
36
2014 Proxy Statement
EXECUTIVE COMPENSATION
EQUITY GRANTS OUTSTANDING AT DECEMBER 31,
2013
|
The following table sets forth option
and RSU grants outstanding at the end of our fiscal year ended December 31, 2013
for each of the Named Executive Officers. All outstanding options were fully
vested as of April 10, 2012.
|
|
Option
Awards
(1)
|
|
Stock
Awards
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Market or
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Number
|
|
Market Value
|
|
Number of
|
|
Payout Value
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
of Shares
|
|
Unearned
|
|
of Unearned
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
or Units of
|
|
or Units of
|
|
Shares, Units
|
|
Shares, Units
|
|
|
Unexercised
|
|
Option
|
|
|
|
|
|
Stock that
|
|
Stock that
|
|
or Other Rights
|
|
or Other Rights
|
|
|
Options
|
|
Exercise
|
|
Option
|
|
have not
|
|
have not
|
|
That Have Not
|
|
That Have Not
|
|
|
Exercisable
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
(3)
|
|
($)
(4)
|
|
(#)
(5)
|
|
($)
(6)
|
Thomas J. May
|
|
|
244,032
|
|
|
|
28.12
|
|
|
|
5/3/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,800
|
|
|
|
24.74
|
|
|
|
1/24/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208,608
|
|
|
|
25.93
|
|
|
|
1/22/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174,496
|
|
|
|
26.90
|
|
|
|
1/28/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,757
|
|
|
|
6,814,489
|
|
|
|
53,832
|
|
|
|
2,281,938
|
|
James J. Judge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,768
|
|
|
|
4,780,236
|
|
|
|
13,562
|
|
|
|
574,893
|
|
Leon J. Olivier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,685
|
|
|
|
4,056,087
|
|
|
|
14,286
|
|
|
|
605,584
|
|
David R. McHale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,430
|
|
|
|
4,723,518
|
|
|
|
13,562
|
|
|
|
574,893
|
|
Gregory B.
Butler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,592
|
|
|
|
3,543,465
|
|
|
|
9,421
|
|
|
|
399,356
|
|
(1)
|
Options held by Mr. May were
granted by NSTAR before the Merger and assumed by us upon completion of
the Merger.
|
|
(2)
|
Awards and market values of
awards appearing in the table and the accompanying notes have been rounded
to whole units.
|
|
(3)
|
A total of 173,648 unvested RSUs
vested after January 1 and on or before February 25, 2014 (Mr. May: 90,002
and Mr. Judge: 20,884; Mr. Olivier: 23,479; Mr. McHale: 22,300; and Mr.
Butler: 16,983). An additional 42,954 unvested RSUs will vest on January
26, 2015 (Mr. May: 34,866 and Mr. Judge: 8,088). An additional 34,888
unvested RSUs will vest on February 4, 2015 (Mr. May: 17,944; Mr. Judge:
4,521; Mr. Olivier: 4,762; Mr. McHale: 4,521; and Mr. Butler: 3,140). An
additional 24,489 unvested RSUs will vest on February 25, 2015 (Mr.
Olivier: 9,099; Mr. McHale: 8,644; and Mr. Butler: 6,746). An additional
34,890 unvested RSUs will vest on February 4, 2016 (Mr. May: 17,945; Mr.
Judge: 4,521; Mr. Olivier: 4,762; Mr. McHale: 4,521; and Mr. Butler:
3,141).
|
|
|
In connection with the Merger, in
November 2010, we and NSTAR each established retention pools in an
aggregate amount of $10 million to be allocated to key employees,
including some or all executive officers, to help ensure their continued
dedication to the Company both before and after completion of the Merger.
Awards were in the form of RSUs and generally vest subject to three years
of continuous service following completion of the Merger. Full payment
will also be made if an eligible executive dies, becomes disabled, or is
terminated by the Company without cause before the end of the retention
period, in which case the retention payment will be reduced by the amount
of any cash severance payable to the executive upon or during the year
following termination. Awards granted to former NSTAR executive officers
were assumed by us upon completion of the Merger. 253,365 unvested RSUs
granted pursuant to the retention pools will vest subject to three years
of continuous service following completion of the Merger (Mr. Judge:
74,755; Mr. Olivier: 53,583; Mr. McHale: 71,444; and Mr. Butler: 53,583).
Mr. May did not participate in this program.
|
|
(4)
|
The market value of RSUs is
determined by multiplying the number of RSUs by $42.39, the closing price
per share of common shares on December 31, 2013, the last trading day of
the year.
|
|
(5)
|
Reflects the target payout level
for 2013 performance shares. The payout for 2013 performance shares will
be based on actual performance as a percentage of target, subject to
reduction for applicable withholding taxes. As described more fully under
Performance Shares in the Compensation Discussion and Analysis and
footnote (1) to the Grants of Plan-Based Awards table, performance shares
will vest following a three-year performance period based on the extent to
which the two 2013 performance conditions are achieved. A total of 104,663
unearned performance shares (including accrued dividend equivalents) will
vest on December 31, 2015, assuming achievement of these conditions at a
target level of performance: (Mr. May: 53,832; Mr. Judge: 13,562; Mr.
Olivier: 14,286; Mr. McHale: 13,562; and Mr. Butler: 9,421).
|
|
(6)
|
The market value is determined by
multiplying the number of performance shares in the adjacent column by
$42.39, the closing price of NU common shares on December 31, 2013, the
last trading day of the year.
|
2014 Proxy Statement
37
EXECUTIVE
COMPENSATION
OPTIONS EXERCISED AND STOCK VESTED IN
2013
|
The following table reports amounts
realized on equity compensation during the fiscal year ended December 31, 2013.
The Stock Awards columns report the vesting of RSU grants to the Named Executive
Officers in 2013.
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
Acquired on
|
|
Value Realized
|
|
|
on Exercise
|
|
on Exercise
|
|
Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
(1)
|
|
(#)
(2)
|
|
($)
(3)
|
Thomas J. May
|
|
|
262,400
|
|
|
|
5,633,484
|
|
|
|
69,605
|
|
|
|
2,801,591
|
|
James J. Judge
|
|
|
|
|
|
|
|
|
|
|
15,807
|
|
|
|
636,221
|
|
Leon J. Olivier
|
|
|
|
|
|
|
|
|
|
|
26,331
|
|
|
|
1,080,088
|
|
David R. McHale
|
|
|
|
|
|
|
|
|
|
|
25,051
|
|
|
|
1,027,580
|
|
Gregory B.
Butler
|
|
|
|
|
|
|
|
|
|
|
19,478
|
|
|
|
798,971
|
|
(1)
|
Represents the amounts realized
upon option exercises, which is the difference between the option exercise
price and the market price at the time of exercise.
|
|
(2)
|
Includes RSUs granted to our
Named Executive Officers under our long-term incentive programs, including
dividend reinvestments, as follows:
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
Name
|
|
Program
|
|
Program
|
|
Program
|
|
Program
|
Thomas J.
May
|
|
|
|
35,925
|
|
33,680
|
|
|
James J. Judge
|
|
|
|
7,993
|
|
7,813
|
|
|
Leon J.
Olivier
|
|
8,251
|
|
9,291
|
|
8,789
|
|
|
David R. McHale
|
|
7,875
|
|
8,825
|
|
8,350
|
|
|
Gregory B. Butler
|
|
6,106
|
|
6,855
|
|
6,516
|
|
|
|
In all cases, we reduce the
distribution of common shares by that number of shares valued in an amount
sufficient to satisfy tax withholding obligations, which amount we
distribute in cash.
|
|
(3)
|
Values realized on vesting for
Messrs. May and Judge are based on $40.25 per share, the closing price of
NU common shares on January 28, 2013. Values realized on vesting for
Messrs. Olivier, McHale and Butler are based on $41.02 per share, the
closing price of NU common shares on February 25, 2013.
|
|
The Pension Benefits Table shows the
estimated present value of accumulated retirement benefits payable to each Named
Executive Officer upon retirement based on the assumptions described below. The
table distinguishes between benefits available under the qualified pension
program, the supplemental pension program, and any additional benefits available
under contractual agreements. See the narrative above in the Compensation
Discussion and Analysis under the heading OTHER- Retirement Benefits and
CONTRACTUAL AGREEMENTS for more detail on benefits under these plans and our
agreements.
The values shown in the Pension
Benefits Table for Messrs. May and Judge were calculated as of December 31, 2013
based on benefit payments in the form of a lump sum. For Messrs. McHale and
Butler, we assumed a payment of benefits in the form of a one-half spousal
contingent annuitant option. In recognition of Mr. Mays contribution to the
success of the Company and in order to incent Mr. May to postpone retirement,
continue to serve as Chairman,
President and Chief Executive Officer,
including, but not limited to, carrying out the critical task of completing the
integration of the legacy companies, the Compensation Committee and the Board of
Trustees approved a resolution in February of 2014 providing that the net
present value of Mr. Mays supplemental pension program benefit will be not less
than the amount that represents the value of his earned supplemental pension
program benefit as of December 31, 2012, the end of the year that Mr. May
reached retirement age. The supplemental retirement benefit equaled $23.05
million at that date. Such earned supplemental pension program benefit value
could otherwise change in the future because of the reduction in mortality
factors and the potentially rising interest rates. The Board believes that Mr.
Mays continuing employment is critical to the success of the Company, and that
establishing a minimum supplemental pension program value at the amount that was
previously earned is fair and desirable. The values shown in the Pension
Benefits Table for Mr. May reflect this. For Mr. Olivier, we assumed a lump
38
2014 Proxy Statement
EXECUTIVE COMPENSATION
sum payment of his special retirement
benefits under his agreement, and payment of his qualified pension program
benefit as a life annuity with a one-third spousal contingent annuitant option
(the typical payment form under that Plan).
The values shown in this Table for the
Named Executive Officers were based on benefit payments commencing at the
earliest possible ages for retirement with unreduced benefits: Mr. May: age 60,
Mr. Judge: age 60, Mr. Olivier: age 60, Mr. McHale: age 60, Mr. Butler: age
62.
In addition, we determined benefits
under the qualified pension program using tax code limits in effect on December
31, 2013. For Messrs. May and Judge, the values shown reflect actual 2013 salary
and annual incentives earned in 2012 but paid in 2013 (per applicable
supplemental program rules). For Messrs. McHale and Butler, the values shown
reflect actual 2013 salary and annual incentives
earned in 2013 but paid in 2014 (per
applicable supplemental program rules).
We determined the present value of
benefits at retirement age using the discount rate of 4.85% (5.03% for Messrs.
Olivier, McHale and Butler) under Statement of Financial Accounting Standards
No. 87 for the 2013 fiscal year end measurement (as of December 31, 2013). This
present value assumes no pre-retirement mortality, turnover or disability.
However, for the postretirement period beginning at retirement age, we used the
RP2000 Combined Healthy mortality table (the 1983 Group Annuity Mortality Table
for Mr. Olivier per his agreement) as published by the Society of Actuaries
projected to 2013 with projection scale AA, which is the same table used for
financial reporting under FAS 87. Additional assumptions appear under the
caption entitled Managements Discussion and Analysis and Results of
Operations in our Annual Report on Form 10-K for the fiscal year ended December
31, 2013.
Pension Benefits
|
|
|
|
Number
|
|
Present
|
|
Payments
|
|
|
|
|
of Years
|
|
Value of
|
|
During Last
|
|
|
|
|
Credited
|
|
Accumulated
|
|
Fiscal Year
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
Benefit ($)
|
|
($)
|
Thomas J. May
|
|
Pension Program
|
|
|
37.5
|
|
|
|
2,283,984
|
|
|
|
|
|
|
|
Supplemental Program
|
|
|
20.0
|
|
|
|
6,107,124
|
|
|
|
|
|
|
|
Supplemental Program
|
|
|
37.5
|
|
|
|
13,681,087
|
|
|
|
|
|
James J. Judge
|
|
Pension Program
|
|
|
36.33
|
|
|
|
2,264,922
|
|
|
|
|
|
|
|
Supplemental Program
|
|
|
20.0
|
|
|
|
3,598,556
|
|
|
|
|
|
|
|
Supplemental Program
|
|
|
36.33
|
|
|
|
2,349,639
|
|
|
|
|
|
Leon J. Olivier
(1)
|
|
Pension Program
|
|
|
14.8
|
|
|
|
616,794
|
|
|
|
|
|
|
|
Supplemental Program
|
|
|
12.3
|
|
|
|
4,062,892
|
|
|
|
|
|
|
|
Supplemental Benefit
|
|
|
31.2
|
|
|
|
1,216,389
|
|
|
|
105,966
|
|
David R. McHale
|
|
Pension Program
|
|
|
32.3
|
|
|
|
1,131,791
|
|
|
|
|
|
|
|
Supplemental Program
|
|
|
32.3
|
|
|
|
4,287,656
|
|
|
|
|
|
Gregory B. Butler
|
|
Pension Program
|
|
|
16.0
|
|
|
|
578,831
|
|
|
|
|
|
|
|
Supplemental
Program
|
|
|
16.0
|
|
|
|
1,611,333
|
|
|
|
|
|
(1)
|
Mr. Olivier was
employed with Northeast Nuclear Energy Company, one of our subsidiaries,
from October of 1998 through March of 2001. In connection with this
employment, he received a special retirement benefit that provided credit
for service with his previous employer, Boston Edison Company (BECO), when
calculating the value of his defined benefit pension, offset by the
pension benefit provided by BECO. The benefit, which commenced upon Mr.
Oliviers 55th birthday, provides an annuity of $105,966 per year in a
form that provides no contingent annuitant benefit. The present value of
future payments under this benefit was calculated using the actuarial
assumptions currently used by the pension program. Mr. Olivier was rehired
by us from Entergy in September 2001. Mr. Oliviers current employment
agreement provides for certain supplemental pension benefits in lieu of
benefits under the supplemental program, in order to provide a benefit
similar to that provided by Entergy. Under this arrangement, Mr. Olivier
is eligible to receive a supplemental benefit, consisting of three percent
of final average compensation for each of his first 15 years of service
since September 10, 2001, plus one percent of final average compensation
for each of the second 15 years of service. Alternatively, if Mr. Olivier
voluntarily terminates his employment with us, he is eligible to receive
upon retirement a lump sum payment of $2,050,000 in lieu of benefits under
the supplemental program and the benefit described in the preceding
sentence. These benefits will be offset by the value of any benefits he
receives from the pension program. Amounts reported in the table assume
the termination of his employment with our consent on December 31, 2013,
and payment of the lump sum benefit of $4,062,892 offset by pension
program benefits.
|
2014 Proxy Statement
39
EXECUTIVE
COMPENSATION
NONQUALIFIED DEFERRED COMPENSATION IN
2013
|
See the narrative above in the Compensation Discussion and Analysis under the heading ELEMENTS OF 2013 COMPENSATION
- OTHER- Deferred Compensation for more detail on our non-qualified deferred
compensation program.
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
Earnings in
|
|
Withdrawals/
|
|
Balance at
|
|
|
in Last FY
|
|
in Last FY
|
|
Last FY
|
|
Distributions
|
|
Last FYE
|
Name
|
|
($)
(1)
|
|
($)
(2)
|
|
($)
|
|
($)
|
|
($)
(3)
|
Thomas J. May
|
|
|
|
|
|
|
|
|
|
|
5,644,052
|
|
|
|
|
44,963,882
|
James J. Judge
|
|
|
|
|
|
|
|
|
|
|
385,048
|
|
|
|
|
3,372,253
|
Leon J. Olivier
|
|
|
119,849
|
|
|
|
10,391
|
|
|
|
650,128
|
|
|
|
|
2,581,912
|
David R. McHale
|
|
|
9,693
|
|
|
|
9,511
|
|
|
|
10,499
|
|
|
|
|
82,056
|
Gregory B.
Butler
|
|
|
|
|
|
|
|
|
|
|
1,492
|
|
|
|
|
13,261
|
(1)
|
Includes deferrals under our
deferred compensation program (Mr. Olivier: $119,849 and Mr. McHale:
$9,693). Named Executive Officers who participate in this program are
provided with a variety of investment opportunities, which the individual
can modify and reallocate under the program terms. Contributions by the
Named Executive Officer are vested at all times; however, the applicable
employer matching contribution vests after three years and will be
forfeited if the executives employment terminates, other than for
retirement, death or disability, prior to vesting, but will become fully
vested upon a change of control. The amounts reported in this column for
each Named Executive Officer are reflected as compensation to such Named
Executive Officer in the Summary Compensation Table.
|
|
(2)
|
Includes employer matching
contributions made under the deferred compensation program as of December
31, 2013 and posted on January 31, 2014, as reported in the All Other
Compensation column of the Summary Compensation Table: (Mr. Olivier:
$10,391 and Mr. McHale: $9,511). The employer matching contribution is
deemed to be invested in common shares but is paid in cash at the time of
distribution.
|
|
(3)
|
Includes the total market value
of deferred compensation program balances at December 31, 2013, plus the
value of vested RSUs or other awards for which the distribution of common
shares is currently deferred, based on $42.39, the closing price of NU
common shares on December 31, 2013, the last trading day of the year. The
aggregate balances reflect a significant level of earnings on previously
earned and deferred compensation.
|
40
2014 Proxy Statement
EXECUTIVE COMPENSATION
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF
CONTROL
|
Generally, a change of control means
a change in ownership or control effected through (i) the acquisition of 20% or
more of the combined voting power of common shares or other voting securities
(30% for Messrs. May and Judge, excluding certain defined transactions), (ii)
the acquisition of more than 50% of common shares excluding certain defined
transactions (for Messrs. May and Judge), (iii) a change in the majority of the
Board of Trustees, unless approved by a majority of the incumbent Trustees, (iv)
certain reorganizations, mergers or consolidations where substantially all of
the persons who were the beneficial owners of the outstanding common shares
immediately prior to such business combination do not beneficially own more than
50% (75% for Mr. Olivier) of the voting power of the resulting business entity
(excluding in certain cases defined transactions), and (v) complete liquidation
or dissolution of the Company, or a sale or disposition of all or substantially
all of the assets of the Company other than, for Messrs. McHale and Butler, to
an entity with respect to which following completion of the transaction more
than 50% (75% for Mr. Olivier) of common shares or other voting securities is
then owned by all or substantially all of the persons who were the beneficial
owners of common shares and other voting securities immediately prior to such
transaction.
In the event of a change of control,
the Named Executive Officers are generally entitled to receive compensation and
benefits following either involuntary termination of employment without cause
or voluntary termination of employment for good reason within the applicable
period (generally two years following change of control or shareholder approval
thereof). The Committee believes that termination for good reason is
conceptually the same as termination without cause and, in the absence of this
provision, potential acquirers would have an incentive to constructively
terminate executives to avoid paying severance. Termination for cause
generally means termination due to a felony or certain other convictions; fraud,
embezzlement, or theft in the course of employment; intentional, wrongful damage
to Company property; gross misconduct or gross negligence in the course of
employment or gross neglect of duties harmful to the Company; or a material
breach of obligations under the agreement. Good reason for termination
generally exists after assignment
of duties inconsistent with executives position, a material reduction in
compensation or benefits, a transfer more than 50 miles from the executives
pre-change of control principal business location (or for Messrs. May and Judge,
a transfer outside the Greater Boston Metropolitan Area), or requiring business
travel to a substantially greater extent than required pre-change of control
(for Messrs. May and Judge).
The discussion and tables below show
compensation payable to each Named Executive Officer, in the event of: (i)
termination for cause; (ii) voluntary termination; (iii) involuntary
not-for-cause termination; (iv) termination in the event of disability; (v)
death; and (vi) termination following change of control. The amounts shown
assume that each termination was effective as of December 31, 2013, the last
business day of the fiscal year as required under SEC reporting
requirements.
The summaries above do not purport to
be complete and are qualified in their entirety by the actual terms and
provisions of the agreements and plans, copies of which have been filed as
exhibits to our Annual Report on Form 10-K for the year ended December 31,
2013.
Payments Upon Termination
Regardless of the manner in which the
employment of a Named Executive Officer terminates, he is entitled to receive
certain amounts earned during his term of employment. Such amounts
include:
-
Vested RSUs and certain other vested
awards;
-
Amounts contributed and any vested matching
contributions
under the deferred compensation
program;
-
Pay for unused vacation; and
-
Amounts accrued and vested under the
pension/supplemental
and 401k programs (except
in the event of a termination for
cause under
the supplemental program).
As a result, we do not include these
amounts in the tables.
See the section above captioned
PENSION BENEFITS IN 2013 for information about the pension program,
supplemental program and other benefits, and the section captioned NONQUALIFIED
DEFERRED COMPENSATION IN 2013.
2014 Proxy Statement
41
EXECUTIVE
COMPENSATION
I. Post-Employment Compensation:
Termination for Cause
|
|
May
|
|
Judge
|
|
Olivier
|
|
McHale
|
|
Butler
|
Type of Payment
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Incentive Programs
|
|
|
|
|
|
|
|
|
|
|
Annual Incentives
|
|
|
|
|
|
|
|
|
|
|
Performance
Shares
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
|
|
|
|
|
|
|
|
Pension and Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
Supplemental Pension Program
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Benefit
(1)
|
|
|
|
|
|
1,216,389
|
|
|
|
|
Deferred Compensation Program
|
|
|
|
|
|
|
|
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare Cash Value
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
Separation
Payments
|
|
|
|
|
|
|
|
|
|
|
Excise Tax
& Gross-Up
|
|
|
|
|
|
|
|
|
|
|
Separation Payment for Non-Compete Agreement
|
|
|
|
|
|
|
|
|
|
|
Separation
Payment for Liquidated Damages
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
1,216,389
|
|
|
|
|
(1)
|
Represents actuarial
present values at year-end 2013 of amounts payable solely under Mr.
Oliviers employment agreement upon termination (which are in addition to
amounts due under the pension program). Under Mr. Oliviers agreement, he
would receive upon termination a lump sum payment of $2,050,000, offset by
the value of pension program benefits.
|
II. Post-Employment Compensation: Voluntary
Termination
|
|
May
|
|
Judge
|
|
Olivier
|
|
McHale
|
|
Butler
|
Type of Payment
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Incentive Programs
|
|
|
|
|
|
|
|
|
|
|
Annual Incentives
(1)
|
|
2,125,000
|
|
650,000
|
|
670,000
|
|
650,000
|
|
505,000
|
Performance
Shares
(2)
|
|
2,281,952
|
|
191,645
|
|
555,139
|
|
|
|
133,105
|
RSUs
(3)
|
|
2,091,777
|
|
175,664
|
|
1,734,238
|
|
|
|
659,970
|
Pension and Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
Supplemental Pension Program
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Benefit
(4)
|
|
|
|
|
|
1,216,389
|
|
|
|
|
Deferred Compensation Program
|
|
|
|
|
|
|
|
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
Separation
Payments
|
|
|
|
|
|
|
|
|
|
|
Excise Tax
& Gross-Up
|
|
|
|
|
|
|
|
|
|
|
Separation Payment for Non-Compete Agreement
|
|
|
|
|
|
|
|
|
|
|
Separation
Payment for Liquidated Damages
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
6,498,729
|
|
1,017,309
|
|
4,175,766
|
|
650,000
|
|
1,298,075
|
(1)
|
Represents actual 2013
annual incentive awards, determined as described in the Compensation
Discussion and Analysis.
|
|
(2)
|
Represents performance
share awards under the 2013 2015 Long-Term Incentive
Program.
|
|
(3)
|
Represents values of
RSUs granted to the Named Executive Officers under our long-term incentive
programs that, at year-end 2013, were unvested under applicable vesting
schedules. Under these programs, RSUs vest pro rata based on credited
service years and age at termination, and time worked during the vesting
period. The values were calculated by multiplying the number of RSUs by
$42.39, the closing price of our common shares on December 31, 2013, the
last trading day of the year. Excludes retention pool RSU grants, which
would not vest upon voluntary termination.
|
|
(4)
|
Represents actuarial
present values at year-end 2013 of amounts payable solely under employment
agreements (which are in addition to amounts due under the pension
program). Under Mr. Oliviers agreement, he would receive a lump sum
payment of $2,050,000, offset by the value of pension program benefits.
Amounts shown are year-end 2013 present values payable upon
termination.
|
42
2014 Proxy Statement
EXECUTIVE
COMPENSATION
III. Post-Employment
Compensation: Involuntary Termination, Not for Cause
|
|
May
|
|
Judge
|
|
Olivier
|
|
McHale
|
|
Butler
|
Type of
Payment
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Incentive Programs
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentives
(1)
|
|
2,125,000
|
|
650,000
|
|
670,000
|
|
650,000
|
|
505,000
|
Performance Shares
(2)
|
|
2,281,952
|
|
191,645
|
|
555,139
|
|
|
|
133,105
|
RSUs
(3)
|
|
2,091,777
|
|
3,344,473
|
|
4,005,621
|
|
1,131,026
|
|
1,452,953
|
Pension and Deferred
Compensation
|
|
|
|
|
|
|
|
|
|
|
Supplemental Pension
Program
|
|
|
|
|
|
|
|
|
|
|
Supplemental Benefit
(4)
|
|
|
|
|
|
1,216,389
|
|
3,324,554
|
|
2,231,789
|
Deferred Compensation
Program
(5)
|
|
|
|
|
|
|
|
9,511
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare
Benefits
(6)
|
|
|
|
|
|
|
|
78,326
|
|
76,985
|
Perquisites
(7)
|
|
|
|
|
|
|
|
10,000
|
|
10,000
|
Separation Payments
|
|
|
|
|
|
|
|
|
|
|
Excise
Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
|
Separation Payment for
Non-Compete Agreement
(8)
|
|
|
|
|
|
|
|
948,750
|
|
739,200
|
Separation Payment for Liquidated Damages
(9)
|
|
|
|
|
|
|
|
948,750
|
|
739,200
|
Total
|
|
6,498,729
|
|
4,186,118
|
|
6,447,149
|
|
7,100,917
|
|
5,888,232
|
(1)
|
|
Represents
actual 2013 Named Executive Officer annual incentive awards, determined as
described in the Compensation Discussion and Analysis.
|
|
(2)
|
|
Represents
performance share awards under the 2013 2015 Long-Term Incentive
Program.
|
|
(3)
|
|
Represents
values of RSUs under our long-term incentive programs that, at year-end
2013, were unvested under applicable vesting schedules. Under these
programs, RSUs vest pro rata based on credited service years and age at
termination, and time worked during the vesting period. Under the
retention program, RSUs vest fully upon termination without cause and the
value is reduced by separation payments. The values were calculated by
multiplying the number of RSUs by $42.39, the closing price of our common
shares on December 31, 2013, the last trading day of the
year.
|
|
(4)
|
|
Represents
actuarial present values at year-end 2013 of amounts payable solely under
employment agreements upon termination (which are in addition to amounts
due under the pension program). Mr. Oliviers agreement provides for a
lump sum payment of $3,271,654 offset by the value of pension program
benefits. Agreements with Messrs. McHale and Butler provide for two years
age and service credit under the supplemental program.
|
|
(5)
|
|
Represents
value of Company matching contributions under the deferred compensation
program that were unvested under applicable vesting schedules (other
amounts in this program represent previously vested Company matching
contributions, where applicable, and earned compensation contributed by
executives).
|
|
(6)
|
|
Represents
estimated Company cost at year-end 2013 of providing post-employment
welfare benefits beyond those available to non-executives upon involuntary
termination. The amount reported in the table for Messrs. McHale and
Butler represents (a) the value of two years employer contributions toward
active health, long-term disability, and life insurance benefits, plus (b)
a payment to offset any taxes thereon (gross-up).
|
|
(7)
|
|
Represents
Company cost of reimbursing Messrs. McHale and Butler for two years
financial planning and tax preparation fees.
|
|
(8)
|
|
Represents
consideration for agreements not to compete with the Company following
termination. Employment agreements with these executives provide for a
lump-sum payment equal to the sum of their base salary plus annual
incentive award. These payments do not replace, offset or otherwise affect
the calculation or payment of the annual incentive awards.
|
|
(9)
|
|
Represents
severance payments in addition to any non-compete agreement payments
described in the prior note.
|
2014 Proxy
Statement
43
EXECUTIVE
COMPENSATION
IV. Post-Employment
Compensation: Termination Upon Disability
|
May
|
|
Judge
|
|
Olivier
|
|
McHale
|
|
Butler
|
Type of
Payment
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Incentive Programs
|
|
|
|
|
|
|
|
|
|
Annual
Incentives
(1)
|
2,125,000
|
|
650,000
|
|
670,000
|
|
650,000
|
|
505,000
|
Performance Shares
(2)
|
760,646
|
|
191,645
|
|
555,139
|
|
191,645
|
|
133,105
|
RSUs and Other
Awards
(3)
|
5,229,782
|
|
4,381,049
|
|
2,473,244
|
|
3,895,105
|
|
2,931,353
|
Pension and Deferred
Compensation
|
|
|
|
|
|
|
|
|
|
Supplemental Pension
Program
|
|
|
|
|
|
|
|
|
|
Supplemental Benefit
(4)
|
|
|
|
|
1,216,389
|
|
|
|
|
Deferred Compensation
Program
(5)
|
|
|
|
|
|
|
9,511
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
Health and Welfare
Benefits
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
Separation Payments
|
|
|
|
|
|
|
|
|
|
Excise
Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
Separation Payment for
Non-Compete Agreement
|
|
|
|
|
|
|
|
|
|
Separation Payment for Liquidated Damages
|
|
|
|
|
|
|
|
|
|
Total
|
8,115,428
|
|
5,222,694
|
|
4,914,772
|
|
4,746,261
|
|
3,569,458
|
(1)
|
|
Represents
actual 2013 Named Executive Officer annual incentive awards, determined as
described in the Compensation Discussion and Analysis.
|
|
(2)
|
|
Represents
performance share awards under the 2013 2015 Long-Term Incentive
Program.
|
|
(3)
|
|
Represents
values of RSUs and other awards under our long-term incentive programs and
retention awards that, at year-end 2013, were unvested under applicable
vesting schedules. Under these programs and awards, upon termination due
to disability, awards vest in full or on a prorated basis based on
credited service years and age at termination, and time worked during the
vesting period. The values were calculated by multiplying the number of
RSUs by $42.39, the closing price of our common shares on December 31,
2013, the last trading day of the year.
|
|
(4)
|
|
Represents
the actuarial present values at the end of 2013 of the amounts payable
solely as the result of employment agreements upon termination (which are
in addition to amounts payable under the pension program). Under Mr.
Oliviers agreement, a disability termination results in a lump sum
payment of $3,271,654, offset by the value of pension program
benefits.
|
|
(5)
|
|
Represents
value of Company matching contributions under the deferred compensation
program that were unvested under applicable vesting schedules (other
amounts in this program represent previously vested Company matching
contributions, where applicable, and earned compensation contributed by
executives).
|
V. Post-Employment
Compensation: Death
|
May
|
|
Judge
|
|
Olivier
|
|
McHale
|
|
Butler
|
Type of
Payment
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Incentive Programs
|
|
|
|
|
|
|
|
|
|
Annual
Incentives
(1)
|
2,125,000
|
|
650,000
|
|
670,000
|
|
650,000
|
|
505,000
|
Performance Shares
(2)
|
760,646
|
|
191,645
|
|
555,139
|
|
191,645
|
|
133,105
|
RSUs and Other
Awards
(3)
|
5,229,782
|
|
4,381,049
|
|
2,473,244
|
|
3,895,105
|
|
2,931,353
|
Pension and Deferred
Compensation
|
|
|
|
|
|
|
|
|
|
Supplemental Pension
Program
|
|
|
|
|
|
|
|
|
|
Supplemental Benefit
(4)
|
|
|
|
|
1,216,389
|
|
|
|
|
Deferred Compensation
Program
(5)
|
|
|
|
|
|
|
9,511
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
Health and Welfare
Benefits
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
Separation Payments
|
|
|
|
|
|
|
|
|
|
Excise
Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
Separation Payment for
Non-Compete Agreement
|
|
|
|
|
|
|
|
|
|
Separation Payment for Liquidated Damages
|
|
|
|
|
|
|
|
|
|
Total
|
8,115,428
|
|
5,222,694
|
|
4,914,772
|
|
4,746,261
|
|
3,569,458
|
(1)
|
|
Represents
actual 2013 Named Executive Officer annual incentive awards, determined as
described in the Compensation Discussion and Analysis.
|
|
(2)
|
|
Represents
performance share awards under the 2013 2015 Long-Term Incentive
Program.
|
44
2014 Proxy
Statement
EXECUTIVE
COMPENSATION
(3)
|
|
Represents
values of RSUs and other awards under our long-term incentive programs and
retention awards that, at year-end 2013, were unvested under applicable
vesting schedules. Under these programs and awards, upon termination due
to death, awards vest in full or are prorated based on credited service
years and age at termination, and time worked during the vesting period.
The values were calculated by multiplying the number of RSUs by $42.39,
the closing price of our common shares on December 31, 2013, the last
trading day of the year.
|
|
(4)
|
|
Represents
the actuarial present values at the end of 2013 of the amounts payable to
a surviving spouse solely under agreements (which are in addition to
amounts due under the pension program). Under Mr. Oliviers agreement,
this benefit would be a lump sum payment of $3,271,654, offset by the
value of pension program benefits. Pension amounts shown in the table are
year-end 2013 present values of benefits immediately payable to the spouse
or estate.
|
|
(5)
|
|
Represents
value of Company matching contributions under the deferred compensation
program that were unvested under applicable vesting schedules (other
amounts in this program represent previously vested Company matching
contributions, where applicable, and earned compensation contributed by
executives).
|
Payments Made Upon a Change of
Control
The agreements with Messrs.
May, Judge, McHale, and Butler include change of control benefits. Mr. Olivier
participates in the Special Severance Program for Officers (SSP), which also
provides change of control benefits. The agreements and the SSP are binding on
us and on certain of our majority-owned subsidiaries.
Pursuant to the agreements
and the SSP, if an involuntary non-cause termination of employment occurs
following a change of control (see definition of cause above under the heading
of POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL), or in the event
of a voluntary termination for good reason (as described above under such
heading), then the Named Executive Officers generally will receive the benefits
listed below:
-
For Messrs. May and Judge, a lump sum
severance payment of three-times (two-times for Messrs. McHale and Butler, and
one-times for Mr. Olivier) the sum of the executives base salary plus annual
incentive award for the relevant year (Base Compensation), plus for Messrs.
McHale and Butler consideration for two year non-compete and non-solicitation
covenants (one year covenant for Mr. Olivier) in the form of a lump sum
payment equal to Base Compensation;
-
Three years health benefits
continuation (two years for
Mr.
Olivier);
-
For Messrs. McHale and Butler, three
years additional
age and service
credit under the applicable supplemental
pension program (or a lump sum payment equal to the value
of such credit under that program and the
pension program
for Messrs. May and
Judge);
-
Automatic vesting and distribution of
long-term performance
awards (with
performance shares vesting at target) and
certain other awards; and
-
A lump sum equal to any excise taxes
incurred under the
Internal Revenue
Code due to receipt of change of control
payments, plus an amount to offset any taxes incurred
on such payments (gross-up) except for Mr.
Olivier. (The
Company has
discontinued the practice of providing such
gross-up payments in contractual agreements for
newly
elected executives.)
For Messrs. McHale and
Butler, the Merger did not constitute a change of control under their
agreements. For Mr. Olivier, no compensation or benefits will be payable unless
employment terminates during the applicable change of control period in the
circumstances described below. For Messrs. May and Judge, in accordance with
terms established by the NSTAR Executive Personnel Committee subsequent to the
execution of the Merger Agreement between the Company and NSTAR, and
notwithstanding the terms of the NSTAR Long Term Incentive Plan, which called
for outstanding and unvested stock awards to vest upon a change of control, the
2011 and 2012 NSTAR performance awards did not vest upon the closing of the
Merger, but were instead converted to RSUs and were made subject to the same
vesting schedule as Company RSUs. No other benefits will be payable to these
executives unless employment terminates during the applicable period in the
circumstances described below.
The above summaries do not
purport to be complete and are qualified in their entirety by the actual terms
and provisions of the agreements and programs (including component plans),
copies of which have been filed as exhibits to our Annual Report on Form 10-K
for the year ended December 31, 2013 (where applicable).
2014 Proxy
Statement
45
EXECUTIVE
COMPENSATION
VI. Post-Employment
Compensation: Termination Following a Change of Control
|
|
May
|
|
Judge
|
|
Olivier
|
|
McHale
|
|
Butler
|
Type of
Payment
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Incentive Programs
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentives
(1)
|
|
2,125,000
|
|
650,000
|
|
670,000
|
|
650,000
|
|
505,000
|
Performance Shares
(2)
|
|
2,281,952
|
|
574,876
|
|
605,595
|
|
574,876
|
|
399,341
|
RSUs and Other
Awards
(3)
|
|
6,814,460
|
|
1,611,439
|
|
2,062,876
|
|
1,877,281
|
|
1,325,873
|
Pension and Deferred
Compensation
|
|
|
|
|
|
|
|
|
|
|
Supplemental Pension
Program
|
|
|
|
|
|
|
|
|
|
|
Supplemental Benefit
(4)
|
|
775,006
|
|
1,779,745
|
|
1,216,389
|
|
6,629,031
|
|
2,664,404
|
Deferred Compensation
Program
(5)
|
|
|
|
|
|
|
|
9,511
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare
Benefits
(6)
|
|
64,080
|
|
60,921
|
|
24,807
|
|
109,669
|
|
96,163
|
Perquisites
(7)
|
|
20,160
|
|
20,400
|
|
|
|
15,000
|
|
15,000
|
Separation Payments
|
|
|
|
|
|
|
|
|
|
|
Excise
Tax and Gross-Up
(8)
|
|
|
|
|
|
|
|
4,272,087
|
|
2,954,307
|
Separation Payment for
Non-Compete Agreement
(9)
|
|
|
|
|
|
996,600
|
|
948,750
|
|
739,200
|
Separation Payment for Liquidated Damages
(10)
|
|
9,810,000
|
|
3,645,000
|
|
996,600
|
|
1,897,500
|
|
1,478,400
|
Total
|
|
21,890,658
|
|
8,342,381
|
|
6,572,867
|
|
16,983,705
|
|
10,177,688
|
(1)
|
|
Represents
actual 2013 annual incentive awards, determined as described in the
Compensation Discussion and Analysis.
|
|
(2)
|
|
Represents
performance share awards under the 2013 2015 Long-Term Incentive
Program.
|
|
(3)
|
|
Represents
values of RSUs and other awards under our long-term incentive programs and
retention awards that, at year-end 2013, were unvested under applicable
vesting schedules. Under these programs, upon termination in certain cases
without cause or for good reason following a change of control, awards
generally vest in full. Retention awards vest in full in such
circumstances, and the payout value is reduced by any separation payments
as described above. The values were calculated by multiplying the number
of shares subject to awards by $42.39, the closing price of our common
shares on December 31, 2013, the last trading day of the
year.
|
|
(4)
|
|
Represents
actuarial present value at year-end 2013 of amounts payable solely as a
result of provisions in employment agreements (which are in addition to
amounts payable under the pension program). For Messrs. May, Judge, McHale
and Butler, pension benefits were calculated by adding three years of
service (and a lump sum of this benefit value is payable to Messrs. May,
Judge and Butler). Mr. Oliviers agreement provides for a lump sum payment
of $4,062,892, offset by his pension program benefit value. Pension
amounts shown in the table are present values at year-end 2013 of benefits
payable upon termination as described with respect to the Pension Benefits
Table above.
|
|
(5)
|
|
Represents
value of Company matching contributions under the deferred compensation
program that were unvested under applicable vesting schedules (other
amounts in this program represent previously vested Company matching
contributions, where applicable, and earned compensation contributed by
executives).
|
|
(6)
|
|
Represents
Company cost at year-end 2013 (estimated by our benefits consultants) of
providing post-employment welfare benefits to Named Executive Officers
beyond those benefits provided to non-executives upon involuntary
termination. The amounts shown in the table for Messrs. May and Judge
represent the value of three years continued welfare plan participation.
The amounts shown in the table for Messrs. McHale and Butler represent (a)
the value of three years employer contributions toward active health,
long-term disability, and life insurance benefits, plus (b) a payment to
offset any taxes on the value of these benefits (gross-up), less (c) the
value of one year retiree health coverage at retiree rates. The amounts
reported in the table for Mr. Olivier represent (a) the value of two years
employer contributions toward active health benefits, plus (b) a payment
to offset any taxes on the value of these benefits (gross-up), less (c)
the value of two years retiree health coverage at retiree
rates.
|
|
(7)
|
|
Represents
cost of reimbursing financial planning and tax preparation fees for three
years.
|
|
(8)
|
|
Represents
payments made to offset costs to Messrs. McHale and Butler associated with
certain excise taxes under Section 280G of the Internal Revenue Code.
Executives may be subject to certain excise taxes under Section 280G if
they receive payments and benefits related to a termination following a
Change of Control that exceed specified Internal Revenue Service limits.
Contractual agreements with the above executives provide for a grossed-up
reimbursement of these excise taxes. The amounts in the table are based on
the Section 280G excise tax rate of 20%, the statutory federal income tax
withholding rate of 35%, the applicable state income tax rate, and the
Medicare tax rate of 1.45%.
|
|
(9)
|
|
Represents
payments made under agreements or the SSP as consideration for agreement
not to compete with the Company following termination of employment equal
to the sum of base salary plus relevant annual incentive award. These
payments do not replace, offset or otherwise affect the calculation or
payment of the annual incentive awards.
|
|
|
|
(10)
|
|
Represents severance payments in addition to any non-compete
agreement payments described in the prior note. For Messrs. May and Judge,
this payment equals three-times the sum of base salary plus relevant
annual incentive award (two-times the sum for Messrs. McHale and Butler,
and one-times the sum for Mr. Olivier.) These payments do not replace,
offset or otherwise affect the calculation or payment of the annual
incentive awards.
|
46
2014 Proxy Statement
TRUSTEE COMPENSATION
The Compensation Committee
recommends to the Board of Trustees compensation for the Trustees based on
competitive market practices for both the total value of compensation and the
allocation of cash and equity. The Committee uses data obtained from similarly
sized utility and general industry companies as guidelines for setting Trustee
compensation. The level of Trustee compensation recommended by the Committee and
approved by the Board enables us to attract Trustees who have a broad range of
backgrounds and experiences. When last benchmarked in 2012, we found that our
Trustee compensation was between the median levels of the utility industry peer
group we use for executive compensation purposes and companies in the general
industry of similar size.
In 2013, we paid each of
our non-employee Trustees an annual cash retainer in the amount of $100,000 for
service on the Board during his or her term of office, including participation
in all Board and Committee meetings. In addition, Trustees holding the positions
of Non-Executive Chairman of the Board, Lead Trustee, Chair of the Audit
Committee, Chair of the Compensation Committee, Chair of the Corporate
Governance Committee, and Chair of the Finance Committee on January 1 received
additional annual cash retainers in the amounts set forth below. All cash
retainers are payable in equal installments on the first business day of each
calendar quarter.
Additional Cash
Retainer
|
Annual
Amount
|
Non-Executive Chairman of the Board
|
$
|
200,000
|
Lead Trustee
|
$
|
25,000
|
Audit Committee Chair
|
$
|
15,000
|
Compensation Committee Chair
|
$
|
10,000
|
Corporate Governance Committee Chair
|
$
|
10,000
|
Finance Committee
Chair
|
$
|
10,000
|
Each non-employee Trustee
serving on January 1 also receives a grant under the Northeast Utilities
Incentive Plan, effective on the 10th business day of each such year, of that
number of RSUs resulting from dividing $100,000 by the average closing price of
our common shares as reported on the NYSE for the 10 trading days immediately
preceding such date and rounding the resulting amount to the nearest whole RSU.
RSUs vest on the next business day following the grant, and distribution to the
Trustee in equivalent common shares is deferred until the tenth business day of
January of the year following retirement from Board service. Any individual who
is elected to serve as a Trustee after January 1 of any calendar year receives
an RSU grant prorated from the date of such election and granted on the first
business day of the month following such election.
Annual cash retainers,
additional cash retainers and annual RSU grants for service on the Board for
2013, based on the amounts described above, were paid in such amounts as noted
in the table below.
The share ownership
guidelines set forth in the Companys Corporate Governance Guidelines require
each Trustee to attain and hold 7,500 common shares and/or RSUs of the Company
within five years from January 1 of the year succeeding their date of election
to the Board. All of the current Trustees exceed the required share ownership
threshold or are expected to do so within the stated period.
Pursuant to the deferred
compensation program, prior to the year earned, each Trustee may irrevocably
elect to defer receipt of all or a portion of their cash compensation. Deferred
funds are credited with deemed earnings on various deemed investments as
permitted by the program. Deferred compensation is payable either in a lump sum
or in installments in accordance with the Trustees prior election.
In addition, we pay
travel-related expenses for spouses of Trustees who attend Board functions. The
Internal Revenue Service considers payment of travel expenses for a Trustees
spouse to be imputed income to the individual Trustee. Effective January 1,
2009, we discontinued tax gross-up payments in connection with spousal travel
expenses.
2014 Proxy
Statement
47
TRUSTEE COMPENSATION
The table below sets forth
all compensation paid to or accrued by each non-employee Trustee in
2013.
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
or Paid in
|
|
Stock
|
|
Compensation
|
|
All Other
|
|
|
|
|
Cash
|
|
Awards
|
|
Earnings
|
|
Compensation
|
|
Total
|
Trustee
|
|
($)
(1)
|
|
($)
(2)
|
|
($)
(3)
|
|
($)
|
|
($)
|
Richard H. Booth
|
|
|
115,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
214,204
|
John
S. Clarkeson
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
199,204
|
Cotton M. Cleveland
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
57,150
|
|
|
|
|
256,354
|
Sanford Cloud, Jr.
|
|
|
135,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
234,204
|
James S. DiStasio
|
|
|
110,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
209,204
|
Francis A. Doyle
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
199,204
|
Charles K. Gifford
|
|
|
110,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
209,204
|
Paul
A. La Camera
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
199,204
|
Kenneth R. Leibler
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
199,204
|
Charles W. Shivery
|
|
|
300,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
399,204
|
William C. Van Faasen
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
199,204
|
Frederica M. Williams
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
199,204
|
Dennis R.
Wraase
|
|
|
100,000
|
|
|
|
99,204
|
|
|
|
|
|
|
|
|
199,204
|
(1)
|
|
Represents
the aggregate dollar amount of all fees earned or paid in cash, including
annual retainer fees and committee chair fees. Also includes the amount of
cash compensation deferred at the election of the Trustee. For the fiscal
year ended December 31, 2013, Messrs. DiStasio and Doyle and Ms. Cleveland
deferred 100% of their cash compensation.
|
|
(2)
|
|
Includes
the grant date market value of $100,000 in value of RSU grants made on
January 15, 2013, which vested on January 16, 2013, and as determined in
accordance with the provisions set forth on the preceding page. Each
Trustee received 2,545 RSUs.
|
|
|
|
Outstanding RSU grants accrue corresponding dividend-equivalent
units that are subject to the same restrictions and vesting schedule as
the underlying RSUs. There were no outstanding option awards as of
December 31, 2013. Total RSU awards held by our non-employee Trustees as
of December 31, 2013 were as follows:
|
|
|
|
RSUs and Dividend
Equivalent
|
|
|
|
Units Outstanding on
|
|
Trustee
|
|
December 31,
2013
|
|
Richard H. Booth
|
|
|
35,846
|
|
|
John
S. Clarkeson
|
|
|
2,635
|
|
|
Cotton M. Cleveland
|
|
|
35,846
|
|
|
Sanford Cloud, Jr.
|
|
|
19,885
|
|
|
James S. DiStasio
|
|
|
2,635
|
|
|
Francis A. Doyle
|
|
|
2,635
|
|
|
Charles K. Gifford
|
|
|
2,635
|
|
|
Paul
A. La Camera
|
|
|
2,635
|
|
|
Kenneth R. Leibler
|
|
|
2,635
|
|
|
Charles W. Shivery
|
|
|
294,788
|
|
|
William C. Van Faasen
|
|
|
2,635
|
|
|
Frederica M. Williams
|
|
|
2,635
|
|
|
Dennis R.
Wraase
|
|
|
12,572
|
|
(3)
|
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Reflects
the difference between the interest earned on amounts deferred under the
deferred compensation program and interest calculated at 120% of the
Internal Revenue Service prescribed applicable monthly long-term federal
rate which represents a market rate of return. We do not provide pension
benefits to our non-employee Trustees.
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SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the
Securities Exchange Act of 1934 requires the Trustees and executive officers of
Northeast Utilities and persons who beneficially own more than ten percent of
the outstanding common shares of Northeast Utilities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. We assist our Trustees and executive officers
by
monitoring transactions and
completing and filing Section 16 reports on their behalf. Based on such reports
and the written representations of our Trustees and executive officers, we
believe that for the year ended December 31, 2013, all such reporting
requirements were compiled in a timely manner, except Mr. May reported a 2012
gift to a family trust on a Form 4 filed on March 7, 2013, instead of on a Form
5.
48
2014 Proxy
Statement
PROPOSAL 2: ADVISORY
VOTE ON EXECUTIVE COMPENSATION
Shareholders are being
asked to vote on an advisory proposal to approve the compensation of our Named
Executive Officers, as disclosed in the Compensation Discussion and Analysis
(CD&A), compensation tables and narrative discussion in this proxy
statement, commonly known as Say-on-Pay. The shareholder vote is advisory only
and is not binding on us or the Board of Trustees. The Board of Trustees,
however, has and will continue to take the results of the vote into
consideration when making future decisions regarding the compensation of our
Named Executive Officers.
The fundamental objective
of our Executive Compensation Program is to motivate executives and key
employees to support our strategy of investing in and operating businesses that
benefit customers, employees, our communities and shareholders. We strive to
provide executive officers with base salary, performance-based annual incentive
compensation opportunities, and long-term incentive compensation opportunities
that are competitive with the market and that align pay with performance. We
believe that based upon our excellent corporate and executive performance in
2013 that such alignment exists. Shareholders are encouraged to read the
CD&A, compensation tables and narrative discussion in this proxy
statement.
Our 2013 Executive
Compensation Program included the following material elements:
-
Base Salary
-
Annual Incentive
Program
-
Long-Term Incentives (consisting of
RSUs and performance
shares)
-
Nonqualified Deferred
Compensation
-
Supplemental Executive Retirement
Plan
-
Certain officer perquisites
and
-
Employment Agreements that provide
payments and
benefits upon
involuntary termination of employment
and termination of employment resulting from a change
of control.
The Executive Compensation
Program also features share ownership guidelines and a holding period
requirement to emphasize the importance of share ownership, along with policies
that call for the clawback of compensation under the circumstances described in
this proxy statement and that prohibit the pledging or hedging of our common
shares.
The compensation of our
Named Executive Officers during 2013 was consistent with the following
outstanding achievements and superior performance:
-
Our 2013 recurring earnings were $2.53
per share, an 11%
increase over
2012 results, excluding merger and related
settlement costs, exceeding our challenging earnings per
share goal of $2.50
-
We achieved operations and maintenance
cost reductions
through successful
integration activities, resulting in a
3.2% reduction in operating expenses from 2012, while
continuing excellent operating
performance
-
We increased our dividend to $1.47 per
share, a 7.1%
increase and nearly
double the industry average dividend
growth of 3.7%
-
For 2013, we delivered total
shareholder return of 12.3%, the
fifth straight year of double-digit total shareholder
return
-
Our cumulative total shareholder
returns of 47.0%, 110.3%,
194.5%
and 313.8% over the past three-, five-, 10- and 15-
year periods outperformed the utility industry
over those
same periods
We continue to believe that
the compensation of our Named Executive Officers is aligned with our financial
performance. We exceeded our financial and strategic objectives in 2013, and as
a result, the Compensation Committee provided base pay increases and annual
incentive awards to the executive officers, including the Named Executive
Officers, reflecting our excellent performance.
The Compensation Committee
and the Board of Trustees believe that our Executive Compensation Program is
effective in implementing our compensation philosophy and in achieving its
goals. We are requesting your non-binding vote on the following
resolution:
RESOLVED, that the compensation paid to the Companys Named Executive
Officers, as disclosed pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including the compensation discussion and
analysis, the compensation tables and related material disclosed in this proxy
statement, is hereby APPROVED.
The Board
of Trustees recommends that
shareholders vote FOR this
proposal.
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2014 Proxy
Statement
49