DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant                               Filed by a Party other than the Registrant  

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

Portland General Electric Company

(Name of registrant as specified in its charter)

(Name of person(s) filing proxy statement, if other than the registrant)

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Table of Contents

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To our shareholders,

2019 marked a year of focus

on strategic initiatives and transformation.

March 12, 2020

Portland, Oregon

Dear Shareholders,

On behalf of the Board of Directors, we are pleased to announce that Portland General Electric’s 2020 Annual Meeting of Shareholders will be held on Wednesday, April 22, 2020.

This year’s meeting will focus on our core business strategies to decarbonize, electrify and perform. We will discuss key initiatives, innovative partnerships, and capital investments focused on strengthening resiliency and building a clean, integrated grid. At the center of this work is the Integrated Operations Center, which we began constructing in late 2019; our first-of-its-kind Smart Grid Test Bed; and collaboration with TriMet, Oregon’s largest mass transit provider, on a bus line fully powered by wind energy.

The Annual Meeting also will be a chance for shareholders to learn more about our opportunities for the year ahead, including:

 

   

Investing in a clean energy future, as PGE continues to decarbonize and provide renewable and clean energy options in direct response to growing customer demand for green energy

 

   

Keeping customers first and maintaining affordability

 

   

Improving resiliency to strengthen PGE’s grid

 

   

Being active in our community through new partnerships, stakeholder engagement, and ongoing commitments to a sustainable Oregon

Your vote is important. Only holders of record of PGE common stock at the close of business on Friday, February 28, 2020 are entitled to vote at the meeting. It is advisable to vote your shares before the April 22 meeting date. For instructions on how to cast your vote, please refer to pages 66-69 of the Proxy Statement.

Thank you for your interest in PGE. We look forward to your participation in the 2020 Annual Meeting of Shareholders in Portland, Oregon.

Cordially,

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LOGO

Jack E. Davis

Chair

    LOGO   

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Maria M. Pope

President and Chief Executive Officer

 

                
   


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LOGO

Notice of 2020 Annual Meeting of Shareholders

 

LOGO

 

DATE & TIME

April 22, 2020

10:00 a.m., Pacific Time

  

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PLACE

Conference Center Auditorium

Two World Trade Center

25 SW Salmon Street

Portland, Oregon 97204

 

  

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RECORD DATE

February 28, 2020

 

You can vote if you were a shareholder of record on February 28, 2020

ITEMS OF BUSINESS

1. Election to our Board of Directors of the 12 nominees identified in the following Proxy Statement for a term of one year

2. Advisory vote on the compensation of our named executive officers

3. Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year 2020

4. Transaction of any other business that may properly come before our 2020 Annual Meeting of Shareholders

Your vote is important to us. Please exercise your shareholder right to vote as soon as possible, regardless of whether you plan to attend the meeting.

BY ORDER OF THE BOARD OF DIRECTORS

Nora Arkonovich

Corporate Secretary

 

 

Important notice regarding the availability of proxy materials for the

2020 Annual Meeting of Shareholders to be held on April 22, 2020

 

As permitted under SEC rules, we are mailing our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials and submit proxy votes online. Our Proxy Statement and 2019 Annual Report are available on our website at https://investors.portlandgeneral.com/annual.

 

You may also access our proxy materials at www.proxyvote.com.

 

We are making the Proxy Statement and the form of proxy first available on or about March 12, 2020.

 

 

                
   


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Table of Contents

 

PROXY STATEMENT SUMMARY     1  

Annual Meeting Information

    1  

How to Vote

    1  

Agenda and Voting Recommendations

    1  

Business Overview

    2  

Board and Governance Highlights

    3  

Executive Compensation Highlights

    4  
SUSTAINABILITY, ENVIRONMENTAL & SOCIAL     6  
CORPORATE GOVERNANCE     7  

Role of the Board of Directors

    7  

Corporate Governance Framework

    7  

Leadership Structure

    8  

Board Oversight of Strategy

    8  

Board Oversight of Risk Management

    8  

Board Succession Planning and Recruitment

    9  

Senior Management Succession Planning

    10  

Board Oversight of Human Capital Management and Culture

    11  

Board Committees

    12  

Other Governance Policies and Practices

    14  

Director Compensation

    17  

ITEM 1:  ELECTION OF DIRECTORS

    19  
COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT     26  

 

EXECUTIVE COMPENSATION TABLES     48  

Summary Compensation Table

    48  

Grants of Plan-Based Awards

    50  

Outstanding Equity Awards at December 31, 2019

    51  

Stock Units Vested

    52  

Pension Benefits

    52  

Non-Qualified Deferred Compensation

    53  

Termination and Change in Control Benefits

    54  
PAY RATIO DISCLOSURE     58  

ITEM  2:  ADVISORY VOTE ON EXECUTIVE COMPENSATION

    59  
AUDIT COMMITTEE MATTERS     60  

Audit Committee Report

    60  

Principal Accountant Fees and Services

    61  

Pre-Approval Policy for Independent Auditor Services

    61  

ITEM  3:  RATIFICATION OF THE APPOINTMENT OF DELOITTE AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    62  
STOCK OWNERSHIP INFORMATION     63  

Security Ownership of Certain Beneficial Owners, Directors and Executive Officers

    63  

Delinquent Section 16(a) Reports

    64  
ADDITIONAL INFORMATION     65  

Defined Terms and Acronyms

    65  

Find Information Online

    65  

Questions and Answers About the Annual Meeting

    66  

2021 Annual Meeting of Shareholders

    69  
 

 

Cautionary Note Regarding Forward-Looking Statements

This Proxy Statement contains forward-looking statements, including those regarding implementation of our business plans, industry outlooks, technology transitions, our business, strategies and financial performance, our offerings of new services, and other statements that are not historical fact, and actual results could differ materially from these forward-looking statements. Risk factors that could cause actual results to differ are set forth in the “Risk Factors” section, as well as other sections, of our 2019 Annual Report on Form 10-K, available on our website at https://investors.portlandgeneral.com/annual, and other filings with the SEC. All forward-looking statements are based on management’s estimates, projections, and assumptions as of the date of this Proxy Statement, and the Company undertakes no obligation to update any such statements.

 

                
   


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Proxy Statement Summary   

 

To assist you in reviewing the proposals to be acted upon at our Annual Meeting, we call your attention to the following information about the Company and our 2020 Annual Shareholders’ Meeting. You should read the entire Proxy Statement carefully before voting. Please refer to page 65 for definitions of certain terms and acronyms.

ANNUAL MEETING INFORMATION

 

 

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LOGO

 

    

 

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DATE & TIME

April 22, 2020

10:00 a.m., Pacific Time

 

PLACE

Conference Center Auditorium

Two World Trade Center

25 SW Salmon Street

Portland, Oregon 97204

 

    

RECORD DATE

February 28, 2020

  

ADMISSION

Photo identification and proof of share ownership as of the record date are required

Even if you plan to attend the Annual Meeting in person, we encourage you to cast your vote as soon as possible.

HOW TO VOTE

 

ONLINE

Vote online at

www.proxyvote.com

  

BY PHONE

Vote by phone from the US
or Canada:

1-800-690-6903

  

BY MAIL

If you have received a

printed version of these

proxy materials, you may

vote by mail

  

BY BALLOT

Attend our Annual Meeting and vote by ballot

For additional information about our Annual Meeting, see Questions and Answers About the Annual Meeting on pages 66 to 69.

AGENDA AND VOTING RECOMMENDATIONS

 

Voting Matter

   Vote the Board
Recommends
   Page Reference
(for more information)

 

Item 1: Election of 12 director nominees

  

 

FOR

 

   19

 

 

Item 2: Advisory vote on the compensation of our named executive officers

 

   FOR

 

   59

 

 

Item 3:  Ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm for fiscal year 2020

 

  

 

FOR

 

  

 

62

 

 

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BUSINESS OVERVIEW

OUR STRATEGY

At Portland General Electric, we are committed to being a clean energy leader and delivering steady growth and returns to shareholders. We are increasing opportunities for clean and renewable energy, reducing greenhouse gas emissions, and responding to evolving customer expectations. At the same time, we are building an increasingly smart, integrated, and interconnected grid that spans from residential customers to other utilities within the region. We are transforming all aspects of our business from our energy delivery systems and assets to ensuring our workforce becomes more results-oriented and purpose-driven.

From our founding, we’ve proudly delivered affordable, reliable electricity service to all. Our commitment to these values is unwavering. Today, we are doing our part to meet a global need while continuing to earn high marks for customer satisfaction.

Our strategy to be a clean energy leader that delivers shareholder value strives to balance interests, including business transformation, changing customer preferences and our commitment to delivering affordable, reliable electricity service. We will achieve our goal to deliver 100% clean energy to our customers by:

 

   

Decarbonizing the power we supply to our customers

 

   

Electrifying other areas of the economy, including transportation and buildings, where efforts to reduce greenhouse gas emissions are underway

 

   

Performing as a business by improving work efficiency, the safety of our coworkers, and the reliability of our systems and equipment while targeting our goal of 4-6% annual growth in earnings

Additional information about how we will execute this strategy can be found in a series of strategy papers at www.PortlandGeneral.com/CleanVision.

OUR FINANCIAL PERFORMANCE

In 2019 we delivered solid financial results while returning significant cash to our shareholders.

 

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(1)

Dollars in millions

 

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BOARD AND GOVERNANCE HIGHLIGHTS

 

We are committed to maintaining strong corporate governance that promotes the long-term interests of our shareholders, strengthens Board and management effectiveness and builds public trust in the Company. The Corporate Governance section of this Proxy Statement beginning on page 7 describes our key corporate governance policies and practices, which include the following highlights:

 

  Annual election of directors by majority vote

 

  11 of 12 directors are independent under NYSE listing standards and our Director Independence Standards

 

  Independent Board Chair and 100% independent standing Board committees
  Executive sessions of non-management directors at all regular Board meetings

 

  Shareholder right to act by written consent

 

  Robust director selection process, resulting in a seasoned Board that exhibits diversity in terms of gender, ethnicity, experience, skills and tenure

 

LOGO   The board unanimously recommends that shareholders vote “FOR” the election of each of our nominees listed below.
 

 

BOARD DIRECTORS AND NOMINEES

 

   

Age at
Record
Date

  Primary Occupation  

  Director  

Since

 

Committee Memberships

Name

        AC               FC               NC               CC      

 

John Ballantine

 

 

74

 

 

 

Former EVP and Chief Risk Management Officer,
First Chicago NBD Corporation

 

 

2004

 

   

 

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Rodney Brown

 

 

 

64

 

 

 

Founding partner, Cascadia Law Group PLLC

 

 

 

2007

 

   

 

 

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LOGO

 

Jack Davis, Chair

 

 

 

73

 

 

 

Former CEO, Arizona Public Service Company

 

 

 

2012

 

     

 

 

LOGO

 

 

Kirby Dyess

 

 

 

73

 

 

 

Founder, Austin Capital Management and former
Corporate VP, Intel

 

 

 

2009

 

     

 

 

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C

 

 

Mark Ganz

 

 

 

59

 

 

 

President and CEO, Cambia Health Solutions, Inc.

 

 

 

2006

 

 

 

 

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Marie Oh Huber

 

 

 

58

 

 

 

SVP, General Counsel, Corporate Secretary, eBay Inc.

 

 

 

2019

 

   

 

 

LOGO

   

 

 

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Kathryn Jackson

 

 

 

62

 

 

 

Former Chief Technology Officer and SVP, RTI
International Metals, Inc.

 

 

 

2014

 

   

 

 

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Michael Millegan

 

 

 

61

 

 

 

CEO, Millegan Advisory Group 3 and Former President,
Verizon Global Wholesale Group

 

 

 

2019

 

 

 

 

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Neil Nelson

 

 

 

61

 

 

 

President, Siltronic Corporation

 

 

 

2006

 

 

 

C

 

   

 

 

LOGO

 

 

Lee Pelton

 

 

 

69

 

 

 

President, Emerson College

 

 

 

2006

 

 

 

 

LOGO

   

 

C

 

 

 

Maria Pope

 

 

 

55

 

 

 

President and CEO, Portland General Electric Company

 

 

 

2018

 

       

 

Charles Shivery

 

 

 

74

 

 

 

Former Chairman, President and CEO, Northeast Utilities

 

 

 

 

2014

 

 

 

 

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C

 

       

AC = Audit Committee | FC = Finance Committee | NC = Nominating and Corporate Governance Committee | CC = Compensation and Human Resources Committee | C = Chair

 

 

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EXECUTIVE COMPENSATION HIGHLIGHTS

Our Compensation and Human Resources Committee oversees the design of our executive compensation program, the goal of which is to attract and retain highly qualified executives and to provide them with incentives to advance the interests of our stakeholders. Below are some of the highlights of our executive compensation policies and practices.

OUR COMPENSATION BEST PRACTICES

 

    

What we do

 

      

What we don’t do

 

LOGO    Performance-based compensation aligned with strategy   LOGO    No guaranteed tax gross-ups
LOGO    Appropriate compensation peer group   LOGO    No hedging or pledging Company stock
LOGO    Annual compensation program risk analysis   LOGO    No long-term employment contracts
LOGO    Independent compensation consultant   LOGO    No dividends on unvested equity
LOGO    Meaningful stock ownership guidelines   LOGO    No single-trigger change in control payouts
LOGO

 

  

Robust incentive compensation clawback policy

 

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No excessive dilution

 

PAY FOR PERFORMANCE

The structure of our annual target direct compensation for our executives reflects our commitment to align pay with performance and the long-term interests of our stakeholders.

Target Direct Compensation—CEO

 

 

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Target Direct Compensation—Average of Other Named Executive Officers*

 

 

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*Amounts do not include one-time awards of compensation in connection with Mr. McFarland’s commencement of employment.

 

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INCENTIVE AWARD PROGRAM ENHANCEMENTS

In 2019 we made significant enhancements to our Annual Cash Incentive (ACI) Award Program and our equity-based Long-Term Incentive (LTI) Award Program to strengthen their alignment with our strategic priorities.

 

 

   ACI Award Program—New Performance Metrics Tied to Strategic Imperatives

 

   Under our 2019 ACI Program, we tied 20% of our executives’ awards to three of our key Strategic Imperatives:

 

Customer Retention and Growth: retaining our existing customers, adding new customers, and expanding the use of electricity

 

Integrated Grid Initiative: building an integrated platform to ensure reliability and enable grid visibility, connectivity, and interoperability

 

Environmental Leadership: expanding our renewable energy offerings and reducing our carbon footprint

 

LTI Award Program—New Metric Tied to Decarbonization Strategy

For our 2019 LTI Award Program, we introduced a new performance metric specifically tied to our decarbonization strategy. Our Energy Supply Decarbonization metric focuses on achieving carbon reductions in our energy supply portfolio over a three-year period. Meeting this goal should put us on track to achieve our share of the total greenhouse gas emission reduction targets set by the state of Oregon. See page 39 in the Compensation Discussion Analysis section of this Proxy Statement for details.

2019 INCENTIVE AWARD METRICS AT A GLANCE

We have adopted a balanced incentive award program for our named executive officers, which is designed to incentivize the achievement of our short-term and longer-term financial, operating, and strategic goals.

 

2019 ACI PROGRAM

 

           

2019 LTI PROGRAM

 

             

Metric

 

  

 

Metric

Weight*

 

      

Metric

 

  

 

Metric

Weight

 

    

 

% of Target
Shares

 

 

Financial Performance (EPS)

   50%      ROE as % of Allowed ROE      33%          0 to 167%    

Operating Performance

   30%      EPS Growth      33%          0 to 167%    

Customer Satisfaction

        Carbon Potential Reduction      33%          0 to 167%    

Electric Service Power Quality

       

Subtotal

        0 to 167%    

Generation Plant Availability

        Relative TSR      Multiply Subtotal by        80 to 120%    

Strategic Imperatives

   20%           

Retain and Grow Customers

             

Integrated Grid Initiative

             

Environmental Leadership

             

 

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Sustainability, Environment & Social

At Portland General Electric, we are executing our strategy to achieve a clean and reliable energy future. We are taking a holistic approach that balances our commitment to reduce greenhouse gas emissions with core values that define our culture, and high standards of corporate governance to achieve our mission and create value for shareholders, customers and other stakeholders. The benefits of a future powered by clean electricity are real. Our actions in 2019 support our long-term goals, and include:

ADVANCING A SUSTAINABLE ENVIRONMENT

 

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Increasing reliance on clean technologies

 

       Executed contracts for the Wheatridge Renewable Energy Facility, which will combine 300 megawatts of wind generation, 50 megawatts of solar generation, and 30 megawatts of battery storage. PGE will own 100 megawatts of the wind project.
       Filed our 2019 Integrated Resource Plan to add 150 average megawatts of renewable resources; pursue a similar amount of energy efficiency; strengthen partnerships with customers to balance the grid through flexible load programs; and pursue new clean technologies, like energy storage, to support grid reliability

 

LOGO

    

 

Accelerating transportation electrification

 

       Partnered with the state’s largest transit provider to create an electric bus system, including charging infrastructure, an all-electric bus line and a 20-year fuel plan
       Completed our fleet decarbonization study and plan to electrify almost 1,100 vehicles, while sharing our learnings with customers
       Expanded our charging infrastructure network of Electric Avenues to seven in our service area
       Launched a new electric bus program to help school districts in Oregon electrify their buses

 

LOGO

    

 

Enhancing system-wide resilience

 

       Broke ground on the construction of our $200 million Integrated Operations Center with enhanced technology and resilience against seismic, cyber, and physical security risks, to centralize key operations and functions
       Launched a new microgrid composed of solar, battery storage and backup generation connected to our grid at the Beaverton Public Safety Center, supported by PGE funding of more than $1.5 million
       Achieved 99.98% system reliability and 92% generation plant availability

CARING FOR OUR COMMUNITIES

 

                   Donated $4.7 million to support local schools and nonprofits, together with PGE employees, retirees and the PGE Foundation
        Facilitated 60 scholarships and 55 summer internships for Oregon students
        Volunteered 32,900 hours, by PGE, employees and retirees
        Educated 71,779 students about electric safety and energy in classrooms and safety fairs

 

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Corporate Governance

ROLE OF THE BOARD OF DIRECTORS

Our Board of Directors is elected by our shareholders to oversee management in its operation of the Company. In exercising its fiduciary duties, the Board’s goal is to build long-term value for our shareholders and ensure the vitality of the Company for our customers, employees, and the other individuals, organizations and communities who depend on us.

Key responsibilities of our Board of Directors include:

 

   

Establishing a corporate governance framework;

 

   

Overseeing and advising management on Company strategy;

 

   

Overseeing the Company’s risk management programs;

 

   

Overseeing the Company’s human capital management and corporate culture; and

 

   

Conducting Board and executive succession planning.

In the pages that follow we provide information about how our Board fulfills these responsibilities, as well as other important policies and practices of our Board.

CORPORATE GOVERNANCE FRAMEWORK

We are committed to maintaining sound corporate governance policies and practices that promote the long-term interests of our stakeholders. Our Nominating and Corporate Governance Committee regularly reviews our key corporate governance policies to ensure that they reflect evolving best practices and comply with legal and regulatory requirements. The committee refers suggestions for how to improve our governance policies to the full Board for approval.

Highlights of our corporate governance program include:

Strong independent oversight of management

 

   

Independent Board Chair

 

   

Fully independent membership on all standing Board committees

 

   

All directors independent other than CEO

 

   

Executive sessions of non-management directors at all regularly scheduled Board meetings

Leadership accountability

 

   

Annual election of directors by majority vote of the shareholders

 

   

Shareholder right to act by written consent

 

   

No “poison pill” anti-takeover defenses

 

   

No supermajority voting requirements

 

   

Robust Board and executive stock ownership guidelines (see pages 15 and 47 for details)

Focus on leadership refreshment and quality

 

   

Active Board refreshment program (2 new directors in 2019)

 

   

Annual Board review of succession planning and talent development for senior leadership

 

   

Regular Board training focused on significant business risks and opportunities

 

   

Annual anonymous Board and committee self-evaluations

Engaged Board oversight of strategy and risk management

 

   

Annual offsite Board strategy session

 

   

Quarterly updates to Audit Committee on enterprise risk management program

 

   

Annual independent compensation program risk analysis

 

   

    Portland General Electric 2020 Proxy    

 

   
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    2020    

 

   

    

 

 

 

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FIND OUR CORPORATE GOVERNANCE GUIDELINES AND OTHER GOVERNANCE DOCUMENTS ONLINE

The Board has adopted Corporate Governance Guidelines, which, together with our articles of incorporation and bylaws, establish the governance framework for the management of the Company. Our Corporate Governance Guidelines address, among other matters, the role of our Board, Board membership criteria, director retirement policies, director independence criteria, director and officer stock ownership requirements, Board committees, and leadership development. Our Corporate Governance Guidelines, Board committee charters, and certain other corporate governance policies are available on our website at https://investors.portlandgeneral.com/corporate-governance. These documents are also available in print to shareholders, without charge, upon request to Portland General Electric Company at its offices at 121 SW Salmon Street, 1WTC1301, Portland, Oregon 97204, Attention: Corporate Secretary.

 

LEADERSHIP STRUCTURE

Our Board believes that the Company is best served by maintaining the flexibility to determine its leadership structure based on the evolving needs of the Company. Our Corporate Governance Guidelines call for the appointment of a Board Chair, but permit the Board to appoint any director to serve in this role. The duties of our Board Chair include:

 

   

Presiding over and managing meetings of the Board;

 

   

Approving agendas and materials for Board meetings;

 

   

Serving as the primary liaison between management and the other non-management directors;

 

   

Advising senior management on strategy and significant matters as appropriate; and

 

   

Representing the Board at the Company’s Annual Meeting of Shareholders.

We currently separate the roles of CEO and Board Chair. Jack Davis, our current Board Chair, is independent as defined in the NYSE listing standards and our own Director Independence Standards, which are contained in our Corporate Governance Guidelines. We believe our current leadership structure promotes strong independent Board oversight and management accountability and allows our CEO to focus her time and efforts on establishing our strategic direction and managing the affairs of the Company.

Our Board periodically reviews our leadership structure to determine whether it continues to serve the interests of the Company. Our Corporate Governance Guidelines require the independent directors to appoint a Lead Independent Director if the Board Chair is not independent. The Lead Independent Director’s duties would include coordinating the activities of the independent directors, coordinating the agenda for and moderating sessions of the non-management directors, and facilitating communications among the other members of the Board.

BOARD OVERSIGHT OF STRATEGY

The Board takes an active role in assisting management with the development of the Company’s long-term business strategy. In recent years, our Board has conducted annual offsite Board sessions focused on our strategy. During these sessions, the Board and management discuss the competitive landscape in our industry, emerging technologies, significant business risks and opportunities, and strategic priorities of the Company. These sessions have generally included training provided by outside experts and business leaders on matters of strategic significance to the Company.

Throughout the year, our management team regularly reports to the Board on the execution of our long-term strategic plans, the status of important projects and initiatives, and the key opportunities and risks facing the Company. For more information on our long-term strategy, see page 2 of this Proxy Statement and our 2019 Annual Report.

BOARD OVERSIGHT OF RISK MANAGEMENT

Identifying and managing material risks facing the Company is a core responsibility of our Board, the committees of the Board, and our senior management.

The Board of Directors is responsible for assessing whether management has put in place effective systems to identify, evaluate, and manage the material risks facing the Company. The Board satisfies its oversight function through reporting from management on areas of material risk, including strategic, operational, cybersecurity, environmental, financial, legal, and regulatory risks. In addition, management reports each quarter to the Audit Committee on activities and findings of the Company’s risk management program.

 

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CORPORATE GOVERNANCE

 

While the full Board of Directors has ultimate responsibility for oversight of risk management, particularly with regard to strategic risks, each of the standing committees of the Board has been assigned a role in assisting the Board with its oversight responsibilities. Key risk areas overseen by the Board’s committees are shown below:

 

Committee

 

  

Key Areas of Responsibility

 

Audit

  

 

   Activities of Executive Risk Committee (described below)

 

   Systems for risk identification and assessment

 

   Financial reporting and internal controls

 

   Compliance and litigation (including environmental)

 

   Cybersecurity and information technology

 

Compensation and Human Resources

  

   Compensation plans and programs

 

   Talent acquisition, management, and retention

 

   Succession planning for senior leaders (other than the CEO)

 

Finance

  

   Financial risks, including operations, energy trading, capital projects, cash flow, capital markets and insurance

 

Nominating and Corporate Governance

  

   Board organization, membership and structure

 

   CEO succession planning

 

   Corporate governance

 

Management is responsible for day-to-day identification and management of risk. To ensure consistency and comprehensiveness in its approach, the Company has established an Executive Risk Committee to oversee the Company’s risk management programs. One key function of the Executive Risk Committee is to sponsor an annual enterprise-wide risk assessment, the results of which are used to inform the Company’s goals and priorities for the next year. The Company has also established standing executive committees with responsibility for managing risks over defined areas and reporting as appropriate to the Executive Risk Committee or the Audit Committee. These include our Integrated Security, Operations, People, Strategy, and Customer Executive Committees.

BOARD SUCCESSION PLANNING AND RECRUITMENT

Identifying and recommending individuals for appointment or election to our Board is a core responsibility of the Nominating and Corporate Governance Committee (Governance Committee). The committee carries out this responsibility through a year-round process described below:

 

1      2      3      4

 

Evaluation of Board Composition

 

The Governance Committee evaluates the Board’s membership needs based
on a variety of factors.

 

ð

  

 

Candidate Recruitment

    

 

If the committee determines that there is a need for new candidates, individuals are identified through a variety of methods, including shareholder recommendations.

 

  ð   

 

Candidate Evaluation

    

 

Candidates are evaluated on whether they exhibit certain core attributes that our Governance Committee looks for in all candidates, as well as particular needs of the Board at the time.

 

  ð   

 

Recommendation
to Board

 

The Governance Committee recommends selected candidates to the full Board for nomination or appointment to the Board.

Evaluation of Board Composition. Each year the Governance Committee evaluates the size and composition of the Board to assess whether they are appropriate in light of the Company’s evolving needs. In making this evaluation, the committee considers the Company’s strategic direction, current director qualifications, the results of Board and committee self-assessments, and legal and

 

   

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regulatory requirements. The committee also considers whether there may be a need to fill a future Board vacancy in light of our director tenure policy or anticipated dates of retirement. Generally, under our director tenure policy, which is contained in our Corporate Governance Guidelines, candidates elected to the Board before July 25, 2018 will not be nominated for election after age 75, and candidates elected after July 25, 2018 will not be nominated to serve on the Board for more than 12 years.

If the Governance Committee identifies a need to fill a future Board vacancy or add to the mix of skills and qualifications represented on the Board, the committee oversees the director recruitment process described below.

Candidate Recruitment. The Governance Committee identifies new Board candidates through a variety of methods, including the use of third-party search firms, suggestions from current directors, shareholders, or employees, and self-nominations. Our most recently appointed director, Marie Oh Huber, was recommended by a third-party search firm.

Director candidates identified by shareholders are evaluated by the same criteria applied to other director nominees, which are described below. To have a candidate considered by the Governance Committee, a shareholder should submit the recommendation in writing and include the following information:

 

   

The shareholder’s name and evidence of ownership of the Company’s common stock, including the number of shares owned and the length of time of ownership; and

 

   

The candidate’s name, resume, or listing of qualifications to be a director and consent to be named as a director nominee if selected by the Governance Committee and nominated by the Board.

The recommendation and information described above should be sent to the Chair of the Governance Committee, in care of our Corporate Secretary, at Portland General Electric Company, 121 SW Salmon Street, 1WTC1301, Portland, Oregon 97204.

Candidate Evaluation. In evaluating director candidates, the Governance Committee seeks to identify individuals who, at a minimum, have the following characteristics:

 

   

A reputation for honesty, ethical conduct and sound business judgment;

 

   

Demonstration of significant accomplishment in a candidate’s field;

 

   

Experience and skills in the utility industry or other areas important to the strategic direction and operation of the Company;

 

   

Availability and willingness to be diligent in fulfilling the responsibilities of Board membership; and

 

   

Freedom from potential conflicts of interest.

In addition to evaluating a candidate’s individual qualifications, the Board and the Governance Committee consider how a candidate would contribute to the overall mix of experience, qualifications, skills and other attributes represented on our Board. While the Company has not adopted a formal diversity policy, we believe it is important that the Board exhibit diversity across a variety of parameters, including age, gender, and race.

Recommendation to the Board of Directors. Each year in advance of our Annual Meeting of Shareholders, the Governance Committee recommends a group of nominees to be presented to the shareholders for election to the Board. As appropriate, the committee also recommends candidates for appointment to the Board between annual meetings. Directors who are appointed by the Board between annual meetings stand for election at the next Annual Meeting of Shareholders.

For our 2020 Annual Meeting of Shareholders, the Board selected our 12 director nominees based on their demonstration of the core attributes described above, and the belief that each can make substantial contributions to our Board and Company. See pages 20 to 25 for more information about the backgrounds and qualifications of our nominees.

SENIOR MANAGEMENT SUCCESSION PLANNING

Our Board oversees senior management succession planning and talent development with the assistance of the Governance Committee and the Compensation Committee in an effort to maximize the pool of internal candidates who can assume executive officer positions without undue disruption of the business. In recent years, the full Board has conducted reviews of succession plans for senior management, including a review of the qualifications and development plans of potential internal candidates. Directors also regularly have an opportunity to meet and engage with potential internal senior management successors at Board and committee meetings. In addition, the Compensation Committee regularly conducts more in-depth reviews of development plans for promising management talent.

 

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CORPORATE GOVERNANCE

 

BOARD OVERSIGHT OF HUMAN CAPITAL MANAGEMENT AND CULTURE

Our Board understands that our people and our culture are critical to our continued success. We seek to attract and retain a talented, motivated, and diverse workforce and to maintain a culture that reflects our core values, our drive for performance, and our commitment to acting with the highest levels of honesty, integrity, and compliance.

 

  Our Values

 

    

 

HUMAN CAPITAL MANAGEMENT

Primary responsibility for overseeing the Company’s human capital management programs lies with our Compensation Committee. In addition to providing input on leadership succession planning and talent development, the Compensation Committee regularly engages with management on a broad range of human capital management topics, including health and safety, diversity and inclusion, pay equity, strategic workforce planning, employee engagement, and performance management.

 

ETHICS AND COMPLIANCE

To establish the foundation of our ethics and compliance culture, the Board has adopted a Code of Business Ethics and Conduct, which all directors, officers, and employees are expected to adhere to and affirm biannually. The code covers all areas of workplace conduct, including conflicts of interest, unfair or unethical use of corporate opportunities, protection of confidential information, and legal and regulatory compliance. In addition, our CEO, CFO, and Controller must abide by the Code of Ethics for Chief Executive and Senior Financial Officers. Employees are expected to report any violation of our ethics codes and may do so using a variety of methods, including an anonymous third-party hotline. The Audit Committee has also adopted procedures for receiving and addressing complaints regarding accounting, internal accounting controls, or auditing matters. The committee receives quarterly reports from our Ethics and Compliance department on key compliance metrics and employee conduct matters.

 

LOGO

 

 

CHAMPION

relentless safety

 

 

 

LOGO

 

 

SERVE

customers boldly

 

 

 

LOGO

 

 

EMBRACE

diversity & inclusion

 

 

 

LOGO

 

 

 

 

LISTEN

& lead the way

 

 

 

LOGO

 

 

 

BE

a great neighbor

 

 

 

     LOGO     

 

 

ACT with integrity

& live by our Guiding Behaviors

 

BE accountable

EARN trust

DIGNIFY others

TEAMWORK

POSITIVE attitude

MAKE the right thing happen

 

 

 

 

 

   LOGO

 

  

 

FIND OUR ETHICS CODES ONLINE

The texts of the Code of Business Ethics and Conduct and the Code of Ethics for Chief Executive and Senior Financial Officers are available on our website at https://investors.portlandgeneral.com/corporate-governance or in print to shareholders, without charge, upon request to Portland General Electric Company, 121 SW Salmon Street, 1WTC1301, Portland, Oregon 97204, Attention: Corporate Secretary. Any amendments to either of these codes, and any waiver of the Code of Ethics for Chief Executive and Senior Financial Officers, and of certain provisions of the Code of Business Ethics and Conduct for directors, executive officers or our Controller, will be disclosed to our shareholders to the extent required by law.

 

 

 

   

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BOARD COMMITTEES

Each year our Governance Committee reviews the composition and mandates of our standing committees to ensure that they continue to support the effective execution of the Board’s responsibilities. The Board approves committee and chair assignments at least annually.

The Board has established four standing committees: the Audit Committee, the Nominating and Corporate Governance Committee, the Compensation and Human Resources Committee, and the Finance Committee. Each standing committee has a Board-approved charter, which is reviewed annually by the respective committee and by our Governance Committee. The Board may also establish temporary committees as needed to address specific issues that arise from time to time.

Each Board committee may retain and compensate consultants or other advisors as necessary for it to carry out its duties. To the extent permitted by law and the NYSE listing standards, Board committees may form subcommittees and delegate authority to the subcommittees, or to a committee chair individually.

All of the current members of the Board’s standing committees have been determined by the Board to be independent for purposes of the NYSE corporate governance listing standards and our Director Independence Standards. Directors who serve on the Audit Committee and the Compensation and Human Resources Committee meet additional, heightened independence and qualification criteria applicable to directors serving on these committees under NYSE listing standards.    

Below are brief descriptions of each standing Board committee. For more detailed descriptions, please refer to the committee charters available on our website at https://investors.portlandgeneral.com/corporate-governance.

AUDIT COMMITTEE

 

 

  Chair

  Neil Nelson

 

  Other Members

  Mark Ganz

  Michael Millegan

  Lee Pelton

  Charles Shivery

 

  Meetings in 2019: 4

 

  Independence/Qualifications:

 

  All members are independent within the meaning of the NYSE listing standards and the Company’s Director Independence Standards.

 

  All members are “financially literate” within the meaning of the NYSE listing standards.

 

  Messrs. Ganz, Nelson and Shivery are “audit committee financial experts” within the meaning of applicable SEC rules.

 

 

 

 

Key Responsibilities

 

  Assists the Board in its oversight of our financial statements, independent auditors’ qualifications, independence and performance, and internal controls over financial reporting

 

 

  Appoints and oversees the work of our registered public accounting firm

 

 

  Reviews the annual audited financial statements and quarterly financial information with management and the independent registered public accounting firm

 

 

  Pre-approves all audit, audit-related, tax and other services, if any, provided by the registered public accounting firm

 

 

  Appoints and oversees the work of the Company’s Director of Internal Audit Services and approves the Company’s annual internal audit plan and budget

 

 

  Approves the Audit Committee Report for inclusion in the Company’s proxy statement

 

 

  Oversees the development and implementation of the Company’s ethics and compliance program

 

 

  Assists the Board with the oversight of the Company’s risk management program

 

 

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CORPORATE GOVERNANCE

 

COMPENSATION AND HUMAN RESOURCES COMMITTEE

 

 

  Chair:

  Kirby Dyess

 

  Other Members:

  John Ballantine

  Rodney Brown

  Mark Ganz

  Marie Oh Huber

  Kathryn Jackson

 

  Meetings in 2019: 5

 

  Independence/Qualifications:

 

  All members are independent within the meaning of the NYSE listing standards and the Company’s Director Independence Standards.

 

 

Key Responsibilities

 

  Evaluates the performance of the CEO and makes a recommendation regarding her compensation to the independent directors

 

 

  Approves the compensation of the executive officers other than the CEO

 

 

  Reviews the Company’s non-management director compensation program and recommends appropriate levels of compensation for non-management directors to the Board

 

 

  Advises on human capital management matters, including talent management and diversity and inclusion initiatives

 

 

  Reviews succession plans for executive officers other than the CEO, either as a committee or together with the full Board

 

 

  Reviews the Compensation Discussion and Analysis contained in the Company’s proxy statement and approves the Compensation and Human Resources Committee Report for inclusion in the proxy statement

 

 

  Together with the other independent directors, oversees the Company’s incentive compensation clawback policy and recovery of performance-based compensation awards

 

 

  Reviews and approves severance or termination payment arrangements for executive officers

 

No Compensation Committee Interlocks

The individuals who served on the Compensation Committee during 2019 were John Ballantine, Rodney Brown, Kirby Dyess, Mark Ganz, Marie Oh Huber, Kathryn Jackson, and Neil Nelson. All members of the committee during 2019 were independent directors and no member was an employee or former employee of the Company or any of its subsidiaries. During 2019, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Compensation Committee or Board, or had any relationship with the Company requiring disclosure under SEC regulations.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

 

 

  Chair:

  Lee Pelton

 

  Other Members:

  Jack Davis

  Kirby Dyess

  Neil Nelson

 

  Meetings in 2019: 2

 

  Independence/Qualifications:

 

  All members are independent within the meaning of the NYSE listing standards and the Company’s Director Independence Standards.

 

 

Key Responsibilities

 

 

  Reviews the size of the Board and recommends to the Board any appropriate changes

 

 

  Identifies and recommends to the Board individuals qualified to serve as directors and on committees of the Board

 

 

  Takes a leadership role in shaping our corporate governance, including the policies and practices described in our Corporate Governance Guidelines

 

 

  Reviews succession plans for the CEO, either as a committee or together with the full Board

 

 

  Oversees the self-assessment of the Board and its committees

 

 

  Reviews any Company transactions involving directors, nominees, executive officers and other “related persons” in accordance with the Company’s Related Person Transaction Policy

 

 

   

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FINANCE COMMITTEE

 

   

  Chair:

  Charles Shivery

 

  Other Members:

  John Ballantine

  Rodney Brown

  Marie Oh Huber

  Kathryn Jackson

  Michael Millegan

 

  Meetings in 2019: 4

 

  Independence/Qualifications:

 

  All members are independent within the meaning of the NYSE listing standards and the Company’s Director Independence Standards.

  Key Responsibilities
 

 

  Reviews and recommends to the Board annual financing plans and capital and operating budgets

 

 

  Reviews and approves or recommends to the Board certain costs for projects, initiatives, transactions and other activities within the ordinary business of the Company

 

 

  Reviews our capital and debt structure, approves or recommends to the Board the issuance of debt, and recommends to the Board the issuance of equity

 

 

  Reviews and recommends to the Board dividends, dividend payout goals and objectives

 

 

  Reviews earnings forecasts

 

 

  Assists the Board in overseeing the management of risks associated with the Company’s power operations, capital projects, finance activities, credit and liquidity

 

 

  Reviews and recommends to the Board investment policies and guidelines

 

 

  Oversees the management of benefit plan assets

 

OTHER GOVERNANCE POLICIES AND PRACTICES

STAKEHOLDER ENGAGEMENT

Executive management and members of our Investor Relations team engage regularly with our shareholders to seek their input on a variety of matters, including our strategy and value proposition, financial and operating performance, corporate governance, executive compensation, environmental sustainability and social policies and practices, and management’s perspective on regulatory and legislative developments. We also communicate with shareholders through a number of routine forums, including quarterly earnings presentations, SEC filings, our Annual Report, the Annual Meeting of Shareholders, and conferences. In addition, our management regularly engages with our other stakeholders, including representatives of local communities and organizations, political bodies, and our regulators. We relay feedback we obtain through these conversations to our Board and its committees and work to ensure that we adequately address the concerns of our stakeholders.

BOARD AND COMMITTEE SELF-ASSESSMENTS

Each year the Board conducts a self-assessment of its performance and effectiveness as well as that of its committees. The Chair of the Governance Committee leads the Board’s assessment process, which requires each director to complete a written evaluation of the performance of both the Board as a whole and, to the extent applicable, the committees on which the director serves. These evaluations are anonymous, except to the extent a director elects otherwise. In addition, at least every two years, the Governance Committee Chair conducts confidential interviews with each of the Board members to solicit additional feedback on Board and committee performance. The results of our directors’ feedback are summarized and provided to all of the Board members and the Chair of the Governance Committee leads a discussion regarding the results with the Governance Committee as well as the full Board.

BOARD MEETINGS

Directors are expected to attend all Board meetings and meetings of committees on which they serve, as well as the Company’s Annual Meeting of Shareholders. While the Board understands that circumstances may arise from time to time that prevent a director from attending a meeting, directors are expected to make these meetings a priority. During 2019, each director attended at least 75% of the meetings of the Board and meetings held by all committees on which the director served, and the directors collectively attended 99% of all Board and Board committee meetings. All of the directors also attended the Company’s 2019 Annual Meeting of Shareholders, with the exception of Dr. Pelton, who was unable to attend due to urgent and unexpected circumstances. There were five meetings of the Board of Directors in 2019.

 

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CORPORATE GOVERNANCE

 

Under our Corporate Governance Guidelines, the non-management directors must meet in executive session without management at least quarterly. The Chair of the Board presides over executive sessions of the non-management directors. In the event that the non-management directors include directors who are not independent under the NYSE listing standards, our Corporate Governance Guidelines require the independent directors to meet separately in executive session at least once a year. There were four executive sessions of the non-management directors in 2019. Throughout 2019, all of our non-management directors were independent under the NYSE listing standards and our Director Independence Standards. Accordingly, the four meetings of our non-management directors in 2019 also constituted meetings of our independent directors.

DETERMINATION OF DIRECTOR INDEPENDENCE

The NYSE corporate governance listing standards require a majority of our directors and each member of our Audit Committee, Compensation Committee, and Governance Committee to be independent. Our Corporate Governance Guidelines also require a majority of our directors to be independent. For a director to be considered independent under the NYSE listing standards, the Board must affirmatively determine that the director does not have any direct or indirect material relationship with the Company, including any of the relationships specifically proscribed by the NYSE independence standards.

To assist the Company in determining the independence of Board members and candidates, the Board has adopted Director Independence Standards, which identify types of relationships that could exist between the Company and a director that would prevent the director from being independent. Our Director Independence Standards are contained in our Corporate Governance Guidelines, published on our website at https://investors.portlandgeneral.com/corporate-governance. Our Board considers a director or director nominee independent if he or she meets the criteria for independence in both the NYSE listing standards and our Director Independence Standards. The Board considers all relevant facts and circumstances in making its independence determinations.

During its annual review of director independence in February of 2020, the Board considered whether there were any transactions or relationships between the Company and any director or any member of his or her immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder). As part of its review of director independence, the Board considered Mark Ganz’s position as President and CEO and a director of Cambia Health Solutions, Inc. (Cambia) and Cambia’s business relationship with the Company during the last three fiscal years. PGE and Local Union No. 125 of the International Brotherhood of Electrical Workers have established a trust that is partly funded by PGE to provide health and welfare benefits to employees and retirees who are covered by one of the collective bargaining agreements between PGE and the union. By action of the Board of Trustees that administers the trust, the trust engaged Regence BlueCross BlueShield of Oregon, a subsidiary of Cambia, to provide health products and services. The Board also considered whether there were charitable contributions to not-for-profit organizations for which a director or an immediate family member of a director serves as a board member or executive officer. In addition, the board considered that in the ordinary course of our business we provide electricity to some directors and entities with which they are affiliated on the same terms and conditions as provided to other customers of the Company.

As a result of this review, the Board affirmatively determined that the following directors nominated for election at the 2020 Annual Meeting of Shareholders are independent under the NYSE listing standards and our Director Independence Standards: John Ballantine, Rodney Brown, Jack Davis, Kirby Dyess, Mark Ganz, Marie Oh Huber, Kathryn Jackson, Michael Millegan, Neil Nelson, Lee Pelton and Charles Shivery. The Board determined that Maria Pope is not independent in light of her service as the Company’s President and CEO.

STOCK OWNERSHIP GUIDELINES FOR DIRECTORS

Our Corporate Governance Guidelines require each non-employee director to own shares of PGE common stock with a value equal to at least five times the value of the annual base cash retainer fee for non-employee directors. Non-employee directors must meet this requirement within five years following the first meeting at which they are elected. All of our directors either meet the stock ownership requirement or are on track to do so by the applicable target date. Our stock ownership policy for executive officers is described on page 47 of this Proxy Statement.

DIRECTOR RESIGNATION POLICY

The Company has adopted a director resignation policy, which is contained in our Corporate Governance Guidelines. Under the policy, any director nominee who fails to receive a majority vote in an uncontested election is expected to tender a resignation within five days following the certification of election results. The Governance Committee will consider the offer of resignation and, within 45 days following the date of the election of directors, recommend to the Board whether to accept or reject the offer of resignation. The

 

   

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committee will base its decision on factors the committee deems relevant, including the stated reason or reasons why shareholders voted against the director’s reelection and whether the director’s resignation from the Board would be in the best interests of the Company and its shareholders. The Board will act on the committee’s recommendation within 90 days after the date of the shareholders’ meeting at which the election of directors occurred. A director who is required to tender a resignation may not participate in the deliberations or decision regarding the offer of resignation. Within four business days after the Board’s decision with respect to an offer of resignation, the Company will publicly disclose the Board’s decision and, if applicable, reasons for rejecting the offer of resignation, in a Form 8-K filed with the SEC.

TRANSACTIONS WITH RELATED PERSONS

Our Board recognizes that transactions between the Company and certain individuals and entities, including the Company’s directors and officers, may raise questions as to whether those transactions are consistent with the best interests of the Company and its shareholders. Accordingly, the Board has adopted a written Related Person Transactions Policy, which addresses the Company’s policies regarding the review, approval, or ratification of certain transactions between the Company and certain “related persons,” including our directors, executive officers, director nominees, and owners of more than 5% of any class of our voting securities. Under the policy, transactions between the Company and a related person involving more than $120,000 in which the related person has a direct or indirect material interest are not permitted unless the Governance Committee determines that the transaction is not inconsistent with the best interests of the Company and its shareholders. Before entering into such a transaction with the Company, the related person or the business unit leader responsible for the potential transaction is required to provide notice to the General Counsel of the facts and circumstances of the proposed transaction. Certain types of transactions—including executive and director compensation that is required to be disclosed under SEC disclosure rules and the provision of tariff-based utility service—are exempt from the policy.

Our Related Person Transactions Policy supplements and does not supersede other policies that apply to transactions with related persons, such as our Code of Business Ethics and Conduct. Under our Code of Business Ethics and Conduct, our directors, officers, and employees must report any violation of the code or any situation or matters that may be considered to be unethical or a conflict of interest. Any potential conflict of interest under the code involving a director, an executive officer, or our Controller is reviewed by the Audit Committee. Only the Audit Committee may waive such a conflict, which will be promptly disclosed to our shareholders as required by law.

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

The Board and the Audit Committee have approved a process for handling communications to the Board and its committees. Shareholders and other interested parties may submit written communications to the Board (including the Chair), a Board committee, or the non-management directors as a group. Communications may include the reporting of concerns related to governance, corporate conduct, business ethics, financial practices, legal issues and accounting or audit matters. Communications should be in writing and addressed to the Board, or any individual director or group or committee of directors by either name or title, and should be sent in care of:

Portland General Electric Company

Attention: Corporate Secretary

121 SW Salmon Street, 1WTC1301

Portland, Oregon 97204

All appropriate communications received from shareholders and other interested parties will be forwarded to the Board, or the specified director, board committee or group of directors, as appropriate.

A full description of our process for handling communications with the Board is published on our website at https://investors.portlandgeneral.com/corporate-governance and is available in print to shareholders, without charge, upon request to Portland General Electric Company at its principal executive offices at 121 SW Salmon Street, 1WTC1301, Portland, Oregon 97204, Attention: Corporate Secretary.

 

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CORPORATE GOVERNANCE

 

DIRECTOR COMPENSATION

The compensation of our non-management directors is determined by the Board of Directors upon a recommendation from the Compensation and Human Resources Committee, which reviews our director compensation program annually, considering factors such as workload and market data. The Company does not pay its management directors for Board service in addition to their regular employee compensation.

The Company offers non-management directors both cash and equity compensation. Cash compensation is provided in the form of annual cash retainers for Board and committee service. Equity is provided in the form of an annual grant of restricted stock units with time-based vesting conditions (RSUs). The Company’s 2019 compensation arrangements, which have not been modified for 2020, are described below.

 

Annual Cash and Equity Compensation

 

  

Amount
($)

 

 

 

Annual Cash Retainer for Board Service

 

  

 

 

 

 

50,000

 

 

 

 

Annual Cash Retainer for Board Chair

 

  

 

 

100,000

 

 

 

Annual Cash Retainer for Audit Committee Chair

 

  

 

 

15,000

 

 

 

Annual Cash Retainer Fee for Other Standing Committee Chairs

 

  

 

 

12,500

 

 

 

Annual Cash Retainer for Committee Service (per committee)

 

  

 

 

18,000

 

 

Grant-Date Value of Annual RSU Award

 

  

 

 

110,000

 

 

CASH COMPENSATION

Directors’ cash retainers for Board and committee service are paid quarterly in arrears. We also reimburse certain expenses related to their Board service, including expenses related to attendance at Board and committee meetings.

RSU AWARDS

Under our current equity compensation arrangements, each non-management director receives an annual grant of a number of RSUs determined by dividing $110,000 by the closing price of the Company’s common stock on the grant date, rounding to the nearest whole share. These grants are typically made on or around the date of our Annual Meeting of Shareholders. Directors who join the Board during the year are awarded a pro rata portion of the annual award, based on the number of calendar quarters during which the director served on the Board that year.

Each RSU represents the right to receive one share of the Company’s common stock at a future date. Provided that the director continues to serve on the Board, all of the RSUs will vest on March 31 of the following year. If a director terminates his or her Board service before the normal vesting date for any reason other than for cause, a pro rata portion of the director’s RSUs will vest based on the percentage of the period from April 1, 2019 through March 31, 2020 that the director served on the Board. In addition, if the director experiences a termination effective upon consummation of a change in control of the Company, or experiences a termination following a change in control for any reason other than for cause or resignation, then any RSUs that have not previously vested will immediately vest in full.

Each non-management director is also granted one dividend equivalent right with respect to each RSU he or she is awarded. Each dividend equivalent right represents the right to receive an amount equal to the dividends that are paid on one share of common stock and that have a record date between the grant date and vesting date of the related RSU. The amount payable with respect to a dividend under a dividend equivalent right is paid in a number of shares of common stock determined by using the NYSE closing price of the Company’s common stock as of the payment date for such dividend (or in a case where the final vesting date of the related RSU falls between a dividend record date and the related payment date, the NYSE closing price of the Company’s common stock the last preceding trading day before the RSU vesting date). Dividend equivalent rights vest and become payable on the same terms as the related RSUs.

Awards of RSUs and dividend equivalent rights are made pursuant to the terms of the Portland General Electric Company Stock Incentive Plan and are subject to the terms and conditions of the plan and agreements between the Company and each director.

 

   

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DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS

Directors first appointed or elected to the Board before April 23, 2019 are eligible to participate in the Company’s 2006 Outside Directors’ Deferred Compensation Plan. The plan allows participants to defer the payment of Board retainers as well as any other form of cash compensation they may receive from the Company. Deferral elections must be made no later than December 15 of the taxable year preceding the year in which the compensation is earned. Deferrals accumulate in an account that earns interest at a rate that is one-half a percentage point higher than the Moody’s Average Corporate Bond rate. Directors may elect to receive payments under the plan in a lump sum or in monthly installments for a period of up to 180 months.

2019 DIRECTOR COMPENSATION TABLE

The table below shows the compensation earned by each individual who served as a director during the year ended December 31, 2019 (excluding Ms. Pope, whose compensation is described in the Summary Compensation Table and related tables and disclosure beginning on page 48).

 

Name

 

  

Fees Earned or

Paid in Cash

($)(1)

 

  

Stock Awards
($)(2)

 

  

All Other

Compensation
($)(3)

 

  

Total

($)

 

 

John Ballantine

  

  86,000

  

109,956

  

889

  

 

196,845

 

Rodney Brown

  

  86,000

  

109,956

  

889

  

 

196,845

Jack Davis

  

161,750

  

109,956

  

889

  

 

272,595

David Dietzler(4)

  

  43,000

  

         —

  

889

  

 

43,889

Kirby Dyess

  

  98,188

  

109,956

  

889

  

 

209,033

Mark Ganz

  

  86,000

  

109,956

  

889

  

 

196,845

Marie Oh Huber

  

  64,500

  

109,992

  

  —

  

 

174,492

Kathryn Jackson

  

  86,000

  

109,956

  

889

  

 

196,845

Michael Millegan(5)

  

  86,000

  

134,939

  

198

  

 

221,137

Neil Nelson

  

101,000

  

109,956

  

889

  

 

211,845

Lee Pelton

  

  97,250

  

109,956

  

889

  

 

208,095

Charles Shivery

  

  97,250

  

109,956

  

889

  

 

208,095

 

(1)

Amounts in this column include all fees earned for Board and committee service, regardless of whether such amounts were deferred under the Company’s 2006 Outside Directors’ Deferred Compensation Plan.

(2)

Amounts in this column represent the aggregate grant date fair value of RSU awards made in 2019, computed in accordance with FASB ASC Topic 718, without taking into account estimated forfeitures, based on the NYSE closing price of our common stock on the grant date. As of December 31, 2019, each non-employee director other than Mr. Dietzler and Ms. Huber held 2,148 outstanding RSUs. Mr. Dietzler’s RSUs vested effective with his retirement from the Board on April 24, 2019. As of December 31, 2019, Ms. Huber held 2,082 outstanding RSUs.

(3)

This column represents amounts earned in respect of dividend equivalent rights under RSU awards that vested in 2019. The value of the dividend equivalent rights was not reflected in the Stock Awards column for the year in which the related RSUs were awarded. No amount is shown for Ms. Huber in this column as none of the RSUs or related dividend equivalent rights granted to her after she joined the Board in 2019 had vested as of December 31, 2019.

(4)

Mr. Dieztler served as a director until his retirement from the Board on April 24, 2019.

(5)

Mr. Millegan joined the Board on January 1, 2019. He received an award of RSUs with a grant date value of $24,983 with respect to his service during the first quarter of 2019, in addition to the annual grant of RSUs made to the non-management directors in April 2019 in respect of their service for the period from April 1, 2019 through March 31, 2020.

 

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Item 1: Election of Directors

Under our bylaws, the Board of Directors has authority to determine the number of directors and to fill vacancies on the Board. Our Board currently has 12 members and there are no current vacancies on the Board.

Directors are elected by a majority of the votes cast at the Annual Meeting of Shareholders. Election by a majority means that a director nominee is elected if the number of votes cast “FOR” a director nominee exceeds the number of votes cast “AGAINST” that director nominee. A shareholder can vote to “ABSTAIN,” but that vote will not have any effect in determining the election results. In an uncontested election, a director who does not receive a majority of “FOR” votes cast must submit a letter of resignation to the Board. See page 15 for more information about our director independence policy.

On the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated all 12 of our current directors for election at our 2020 Annual Meeting of Shareholders. Ms. Huber was first appointed as a director by the Board effective May 24, 2019. All of our other directors were elected at our 2019 Annual Meeting of Shareholders. If elected, each of the 12 nominees would hold office until the next Annual Meeting of Shareholders and until his or her successor has been duly elected, or until his or her earlier death, resignation or retirement.

Each of the Board’s nominees has expressed a willingness to serve if elected. If a nominee becomes unwilling or unable to serve as a director, the Board may propose another person in place of that nominee, and the individuals designated as your proxies will vote to appoint that proposed person. Alternatively, the Board may decide to reduce the number of directors constituting the full Board.

In the following pages we provide biographical information about each of our nominees, which highlights the particular experience, qualifications, attributes and skills possessed by each director nominee that led the Board to determine that he or she should serve as a director. All director nominee biographical information is as of March 12, 2020.

We believe our slate of nominees brings to our Board a diverse range of skills, attributes and experience needed to provide effective oversight of the Company. As indicated in the following biographies, our nominees have held senior leadership roles at public companies or other large organizations and have extensive experience in a variety of fields, including utility operations and regulation, technology, health care, academia, finance and accounting, corporate governance, law, public policy, and consulting. All of our nominees have a reputation for integrity, honesty and adherence to high ethical standards.

 

 

LOGO

 

 

LOGO

 

   

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    2020    

 

   

    

 

 

 

The Board of Directors

unanimously recommends that you vote “FOR” each of the following nominees.

 

DIRECTOR NOMINEES

 

     LOGO

 

  

JOHN W. BALLANTINE

 

AGE: 74

 

DIRECTOR SINCE: 2004

 

COMMITTEES:

Compensation and Human Resources,

Finance

 

BACKGROUND:

Mr. Ballantine has been an active, self-employed private investor since 1998, when he retired from First Chicago NBD Corporation, where he had most recently served as Executive Vice President and Chief Risk Management Officer. During his 28-year career with First Chicago, Mr. Ballantine was responsible for international banking operations, New York operations, Latin American banking, corporate planning, U.S. financial institutions business, and a variety of trust operations. Mr. Ballantine also currently serves as a director of DWS Funds, where he is Vice Chair of the Nominating and Governance Committee and a member of the Audit Committee. He is a past director of other public companies, including Healthways Inc., where he served as board chair from May 2011 to June 2014.

QUALIFICATIONS:

Mr. Ballantine’s qualifications to serve on our Board include his extensive experience in finance and risk management, his experience in various executive and leadership roles for First Chicago NBD Corporation, as well as his experience on the boards of other companies. Mr. Ballantine’s expertise in finance and risk management is of great value to the Board, given our significant capital programs and focus on enterprise risk management.

     LOGO

 

  

RODNEY L. BROWN, JR.

 

AGE: 64

 

DIRECTOR SINCE: 2007

 

COMMITTEES:

Compensation and Human Resources,

Finance

 

BACKGROUND:

Mr. Brown is a founding partner of Cascadia Law Group PLLC, a Seattle, Washington law firm that specializes in environmental law in the Pacific Northwest. He is the principal author of Washington’s Superfund law, the Model Toxics Control Act, and has worked for years to reform and improve the environmental regulatory system. From 1992 to 1996, Mr. Brown was a Managing Partner at the Seattle office of Morrison & Foerster, LLP, a large international law firm. Mr. Brown serves on several non-profit boards, including the Bulitt Foundation and the Sightline Institute.

QUALIFICATIONS:

Mr. Brown’s qualifications to serve on our Board include his experience as an environmental lawyer, his extensive knowledge of environmental laws and regulations, his knowledge of government and public affairs, and his experience as a management consultant for organizations handling large infrastructure projects and projects with challenging environmental issues.

 

 

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ITEM 1: ELECTION OF DIRECTORS

 

     LOGO

 

  

JACK E. DAVIS

 

AGE: 73

 

DIRECTOR SINCE: 2012

 

COMMITTEES:

Nominating and Corporate Governance

 

 

BACKGROUND:

Mr. Davis served as Chief Executive Officer of Arizona Public Service Company (APS), Arizona’s largest electricity provider, from September 2002 until his retirement in March 2008, and as President of APS from October 1998 to October 2007. During his 35 years at APS, Mr. Davis held executive and management positions in various areas of the company, including commercial operations, generation and transmission, customer service, and power operations. Mr. Davis also served as President and Chief Operating Officer of Pinnacle West Capital Corporation (”Pinnacle West”), the parent company of APS, from September 2003 to March 2008. He served as a director of APS from October 1998 to May 2008, and a director of Pinnacle West from January 2001 to March 2008. Mr. Davis has also served on the boards of the Edison Electric Institute and the National Electric Reliability Council, and as Chair of the Western Systems Coordinating Council.

QUALIFICATIONS:

Mr. Davis’ qualifications to serve on our Board include his in-depth knowledge of the utility industry, including utility regulation, line and generation operations, and safety and environmental matters, his extensive leadership experience gained in senior executive positions at APS and Pinnacle West, and his knowledge and experience from serving on other public company boards.

     LOGO

 

  

KIRBY A. DYESS

 

AGE: 73

 

DIRECTOR SINCE: 2009

 

COMMITTEES:

Compensation and Human Resources (Chair), Nominating and Corporate Governance

 

BACKGROUND:

Ms. Dyess is a principal in Austin Capital Management LLC, where she evaluates, invests in, and assists early stage companies in the Pacific Northwest. Prior to forming Austin Capital Management LLC in 2003, Ms. Dyess spent 23 years in various executive and management positions at Intel Corporation, most recently serving as Corporate Vice President of Intel Corporation from 1993 to 2002. Her positions at Intel included Vice President and Director of Intel Capital Operations from June 2001 to December 2002, Vice President and Director of Strategic Acquisitions/New Business Development from November 1996 to June 2001, and Vice President and Director of Worldwide Human Resources from January 1993 to November 1996. She currently chairs the board of Prolifiq Software and recently chaired the Oregon Community Foundation board. She has previously served on the boards of directors of Itron, Inc., Compli, Menasha Corporation, Merix Corporation, and Viasystems Group, Inc. and has served on several statewide higher education boards.

QUALIFICATIONS:

Ms. Dyess’ qualifications to serve on our Board include the experience she acquired during her career at Intel Corporation and work with early stage companies in the areas of risk management, human resources, operations, government relations, mergers and acquisitions, sales and marketing, information technology, and the initiation of start-up businesses, and her extensive experience serving on boards of other companies.

 

 

   

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    2020    

 

   

    

 

 

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MARK B. GANZ

 

AGE: 59

 

DIRECTOR SINCE: 2006

 

COMMITTEES:

Audit, Compensation and Human Resources

 

BACKGROUND:

Mr. Ganz has served since 2003 as President and since 2004 as President and Chief Executive Officer of Cambia Health Solutions, Inc. (“Cambia”), a parent corporation of 22 companies offering products and services across the U.S. in the health care sector. Mr. Ganz has held various positions with Cambia, including chief legal officer, corporate secretary, and chief compliance officer. Mr. Ganz is a member of the boards of directors of Cambia; Echo Health Ventures, a joint venture between Cambia and BlueCross BlueShield of North Carolina; the Oregon Business Council; Greater Portland Inc, a regional economic development corporation; Blue Cross and Blue Shield Association; America’s Health Insurance Plans (where he previously served as board chair); the Western Conference of Prepaid Health Plans; and the University of Portland Board of Regents.

QUALIFICATIONS:

Mr. Ganz’s qualifications to serve on our Board include his experience overseeing multiple companies within a large diversified corporate group, his knowledge of health care as a regulated industry, his experience in various executive roles, his 29 years of experience in the practice of corporate and regulatory law, and his expertise in executive compensation and compensation structures, corporate governance, and ethics and compliance programs.

     LOGO

 

  

MARIE OH HUBER

 

AGE: 58

 

DIRECTOR SINCE: 2019

 

COMMITTEES:

Compensation and Human Resources,

Finance

 

BACKGROUND:

Ms. Huber has over 25 years of experience as a business, legal and public policy leader in global, public Fortune 500 technology, internet, e-commerce and life sciences companies. She currently serves as Senior Vice President, General Counsel and Secretary for eBay Inc., where she oversees the company’s global legal, government relations and public policy departments. Prior to joining eBay, she served as Senior Vice President and General Counsel for Agilent Technologies, a solution provider for the life sciences, chemical analysis, and diagnostic and clinical markets. Ms. Huber also currently serves on the boards of James Campbell Company LLC and the Silicon Valley Community Foundation.

QUALIFICATIONS:

Ms. Huber’s qualifications to serve on our Board include her 25 years of strategic business and legal experience in global Fortune 500 companies. She has an extensive track record as a business leader and advising boards of directors and executive leadership on global strategy, M&A transactions, customer strategy, corporate governance, legal and compliance, intellectual property, and operational matters.

 

 

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ITEM 1: ELECTION OF DIRECTORS

 

     LOGO

 

  

KATHRYN J. JACKSON, PH.D.

 

AGE: 62

 

DIRECTOR SINCE: 2014

 

COMMITTEES:

Compensation and Human Resources,

Finance

 

BACKGROUND:

Dr. Jackson has served since January 2016 as the Director of Energy and Technology Consulting at KeySource, Inc., where she provides consulting services to clients in business growth, technology development and energy services. Dr. Jackson previously served as Chief Technology Officer and Senior Vice President at RTI International Metals, Inc. from June 2014 to July 2015; as the Chief Technology Officer and Senior Vice President of Research & Technology at Westinghouse Electric Company, LLC from 2009 to 2014; and as the Vice President of Strategy, Research & Technology from 2008 to 2009. Prior to joining Westinghouse Electric Company, LLC, Dr. Jackson worked for 17 years at the Tennessee Valley Authority, where she held various executive positions. She is a current director of Cameco Corporation and EQT Corporation and has previously served as a director of Hydro One Inc., Rice Energy, Inc., and the Independent System Operator of New England. She also serves on advisory boards at Carnegie Mellon University and the University of Pittsburgh.

QUALIFICATIONS:

Dr. Jackson’s qualifications to serve on our board include her background in engineering, her experience in senior executive roles and as a member and chair of the board of the Independent System Operator of New England, and her knowledge and experience in the areas of technology, large capital projects, contracts and vendor negotiations, generation facilities and energy trading operations, research and development on utility assets and systems, and environmental health and safety.

     LOGO

 

  

MICHAEL H. MILLEGAN

 

AGE: 61

 

DIRECTOR SINCE: 2019

 

COMMITTEES:

Audit, Finance

 

BACKGROUND:

Mr. Millegan is the founder and Chief Executive Officer of Millegan Advisory Group-3, where he advises early-stage companies on strategy that drives technology innovation and shareholder value. Previously, he held a variety of executive leadership and management positions within Verizon, where he led large-scale and large-scope business units. As president of Verizon Global Wholesale Group, he was responsible for $11 billion in sales revenue, 13,000 employees and $1 billion in annual capital spending. He is a director of Wireless Technology Group and a strategic advisor and investor in Windpact, Inc. and Vettd, Inc.

QUALIFICATIONS:

Mr. Millegan’s qualifications to serve on our board include his experience overseeing significant business units within a large corporate group, his experience in various executive and management roles, and his background in operations in a regulated industry, global sales and marketing, digital media platforms, network infrastructure deployment, cloud computing, cybersecurity, and supply chain management and operations.

 

 

   

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    2020    

 

   

    

 

 

     LOGO

 

  

NEIL J. NELSON

 

AGE: 61

 

DIRECTOR SINCE: 2006

 

COMMITTEES:

Audit (Chair), Nominating and Corporate Governance

BACKGROUND:

Mr. Nelson has served as President of Siltronic Corporation, a global leader in the market for hyperpure silicon wafers and a partner to many top-tier chip manufacturers, since July 2003. He previously served as Vice President of Operations of Siltronic from 2000 to 2003. Mr. Nelson is a member of the board of directors of Siltronic Corporation. Mr. Nelson has also served as Chair and Vice Chair of Oregon Business and Industry (formerly Associated Oregon Industries).

QUALIFICATIONS:

Mr. Nelson’s qualifications to serve on our board include his experience in overseeing company-wide and divisional operations for Siltronic Corporation and divisional operations for Mitsubishi Silicon America, his experience in overseeing manufacturing operations at the department, division and company-wide levels, his experience in risk oversight and environmental issues, his experience overseeing safety systems and the financial reporting process for Siltronic Corporation, and his experience in developing and overseeing compensation programs.

     LOGO

 

  

M. LEE PELTON, PH.D.

 

AGE: 69

 

DIRECTOR SINCE: 2006

 

COMMITTEES:

Audit, Nominating and Corporate Governance (Chair)

 

BACKGROUND:

Dr. Pelton has served as President of Emerson College in Boston, Massachusetts since July 2011. Prior to joining Emerson College, Dr. Pelton served as President of Willamette University in Salem, Oregon from July 1999 to July 2011, and as Dean of Dartmouth College from 1991 until 1998. Prior to 1991, he held faculty and administrative posts at Colgate University and Harvard University. Dr. Pelton is a past director of PLATO Learning, Inc.

QUALIFICATIONS:

Dr. Pelton’s qualifications to serve on our board include his experience in leadership positions at several universities, his connections to the academic community, his knowledge in the area of university relations and collaborations, his experience serving on boards of other companies, and the unique perspective he brings to various issues considered by the board as a result of his academic background and accomplishments.

 

 

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ITEM 1: ELECTION OF DIRECTORS

 

     LOGO

 

  

MARIA M. POPE

 

AGE: 55

 

DIRECTOR SINCE: 2018

 

COMMITTEES:

None

BACKGROUND:

Ms. Pope is President and Chief Executive Officer of Portland General Electric Company. She was appointed President on October 1, 2017 and Chief Executive Officer on January 1, 2018. She previously served from March 2013 to October 2017 as Senior Vice President of Power Supply, Operations and Resource Strategy, overseeing PGE’s generation plants, energy supply portfolio, and long-term resource strategy. Ms. Pope joined PGE in 2009 as Senior Vice President of Finance, Chief Financial Officer and Treasurer. She served on PGE’s Board of Directors from 2006 to 2008. Prior to joining PGE, she served as Chief Financial Officer for Mentor Graphics Corporation and held senior operating and finance positions within the forest products and consumer products industries. She began her career in banking with Morgan Stanley. Ms. Pope also currently serves on the board of directors of Umpqua Holdings Corporation, and Pope Resources, LP, which announced its merger with Rayonier Inc. in January 2020. Ms. Pope is also a director of the Electric Power Research Institute, the Oregon Business Council, the Oregon Global Warming Commission, and the Federal Reserve of San Francisco, Portland, Oregon branch. She is a past director of TimberWest Forest Corp., Premera Blue Cross, the Oregon Health Science University governing board, the Oregon Symphony and the Council of Forest Industries.

QUALIFICATIONS:

Ms. Pope’s qualifications to serve on our board include her current role as President and Chief Executive Officer, her extensive knowledge of the company and the utility industry, her diverse leadership experience in business and financial roles, and her corporate and civic board experience.

     LOGO

 

  

CHARLES W. SHIVERY

 

AGE: 74

 

DIRECTOR SINCE: 2014

 

COMMITTEES:

Finance (Chair), Audit

 

BACKGROUND:

Mr. Shivery served as Chairman, President and Chief Executive Officer of Northeast Utilities, New England’s largest utility system, from March 2004 until his retirement in April 2012 following the completion of the merger between Northeast Utilities and NSTAR. Following his retirement, he served as chairman of the board of Northeast Utilities from April 2012 to October 2013, and as a member of the board from October 2013 to May 2014. From 2007 to 2012, Mr. Shivery also served as chairman of the boards of several wholly-owned subsidiaries of Northeast Utilities, including The Connecticut Light and Power Company, Public Service Company of New Hampshire, Western Massachusetts Electric Company, and Yankee Gas Services Company. Prior to joining Northeast Utilities in 2002, Mr. Shivery worked for 29 years at Constellation Energy Group, Inc. and its wholly-owned subsidiary, Baltimore Gas & Electric Company, where he served in various executive positions, including Co-President of Constellation Energy Group. From July 2009 to April 2018, Mr. Shivery served as a director of Webster Financial Corporation.

QUALIFICATIONS:

Mr. Shivery’s qualifications to serve on our board include his extensive knowledge of utility finance and operations, including safety and environmental programs, based on his nearly 40 years of experience in the utility industry, and his senior management level experience in capital, financial and credit markets throughout his career at Constellation Energy and Northeast Utilities.

 

 

   

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    2020    

 

   

    

 

 

Compensation and Human Resources Committee Report

The Compensation and Human Resources Committee has reviewed and discussed with management the following Compensation Discussion and Analysis and has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

MEMBERS OF THE COMPENSATION COMMITTEE

Kirby Dyess (Chair)

John Ballantine

Rodney Brown

Mark Ganz

Marie Oh Huber

Kathryn Jackson

 

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Compensation Discussion and Analysis

In this Compensation Discussion and Analysis, we discuss our executive compensation program and summarize the principal elements of the compensation awarded to our executives for 2019. The discussion is focused on the compensation of the following “named executive officers” for 2019:

 

2019 Named Executive Officers

Maria Pope

   President and Chief Executive Officer

James Lobdell

   Senior Vice President, Finance, Chief Financial Officer and Treasurer

Lisa Kaner

   Vice President, General Counsel and Corporate Compliance Officer

John McFarland

   Vice President, Customer Solutions and Chief Customer Officer

John Kochavatr

   Vice President, Information Technology and Chief Information Officer

 

Table of Contents

Executive Summary

     28  

Compensation Guiding Principles

     28  

Highlights of our Compensation Practices

     28  

2019 Company Performance Highlights

     29  

2019 Executive Compensation Decisions

     30  

2019 Executive Compensation

     32  

Overview of Compensation Elements

     32  

Base Salaries

     32  

Annual Cash Incentive Awards

     33  

Long-Term Incentive Awards

     37  

Benefits

     43  

New Hire Compensation

     43  

How We Set Executive Pay

     44  

Compensation Decision-Making Roles

     44  

Use of Compensation Market Data

     44  

Consideration of Say on Pay Vote

     45  

Other Compensation Policies and Practices

     46  

Use of Compensation Consultants

     46  

Annual Compensation Risk Assessment

     46  

Hedging Policy

     47  

Stock Ownership Policy

     47  

Equity Grant Practices

     47  

Incentive Compensation Clawback Policy

     47  
 

 

   

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EXECUTIVE SUMMARY

COMPENSATION GUIDING PRINCIPLES

The goals of our executive compensation program are to attract and retain highly qualified executives and to provide them with incentives to advance the interests of our stakeholders: our shareholders, our customers, our employees and the communities we serve. To accomplish these goals, we adhere to the following principles:

Reasonable, Competitive Pay

 

   

To attract and retain talented leaders, executive pay must be market-competitive.

 

   

The competitiveness of our executive pay should be measured relative to the 50th percentile of a group of companies that reflects the market for executive talent in which we compete.

 

   

In addition to market comparisons, other considerations, including Company performance, individual performance, and pay equity, should play a role in executive compensation decisions.

Performance-Based Pay, Aligned With our Stakeholders’ Interests

 

   

A significant portion of our executives’ pay should be “at risk” and based on Company performance relative to financial, operational and strategic goals that advance the interests of our stakeholders.

 

   

To ensure alignment with our shareholders, incentive compensation should emphasize equity-based awards.

Balanced, Risk-Calibrated Pay

 

   

Incentive awards should align executive pay with performance over both the short term and the long term.

 

   

Compensation programs should be designed to ensure that they do not incentivize imprudent risk-taking.

HIGHLIGHTS OF OUR COMPENSATION PRACTICES

We have adopted practices and policies that align with the guiding principles of our compensation program.

What we do

 

 

 

LOGO    Significant pay at risk. In 2019, awards with no guaranteed payouts constituted 43% to 64% of our named executive officers’ target direct compensation (base salary plus annual cash incentive award and equity awards).
LOGO    Balanced mix of incentive awards, aligned with our strategy. Payouts under our incentive awards are based on a balanced mix of short-term and long-term Company performance relative to operational, financial and strategic goals.
LOGO    Reasonable stock award program. Our three-year average burn rate (the total number of equity award shares granted over a three-year period divided by the weighted average of the shares outstanding) was 0.23% for 2017 through 2019.
LOGO    Meaningful stock ownership guidelines. Our stock ownership guidelines are three times base salary for our CEO and one times base salary for our other executive officers.
LOGO    Clawback of incentive pay. The Company is authorized to seek reimbursement of an executive officer’s incentive compensation if the officer engages in misconduct that leads to a material restatement of our financial results or causes significant reputational or financial harm to the Company.
LOGO    Double-trigger change in control protections. Following a change in control, our executives are entitled to accelerated vesting of long-term incentive awards and enhanced cash severance payments only if their employment is terminated within two years of the change in control.
LOGO    Reasonable use of compensation market data. We evaluate our executive pay by reference to the median of a group of comparable companies that reflect the market for executive talent in which we compete.
LOGO    Reasonable severance arrangements. The maximum amount payable under our severance plan is one year’s base salary absent a change in control, and one year’s base salary plus the target value of the executive’s annual cash incentive award in the case of a termination following a change in control.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

What we don’t do

 

 

LOGO    No hedging or pledging of Company stock. Our insider trading policy prohibits directors, officers, and employees from entering into hedging or pledging transactions or short sales of Company stock.
LOGO    No SERP benefits for current executives. None of the Company’s current executives participates in a supplemental executive retirement program.
LOGO    No guaranteed tax gross-ups. We have no arrangements that entitle our executives to tax gross-ups.
LOGO    No fixed term employment agreements with executives. We employ all of our executives at will.
LOGO    No dividends or dividend equivalents earned on unvested shares. Our long-term incentive awards provide dividend equivalent rights only on shares that vest.
LOGO

 

   No excessive perquisites. We do not provide our executives with significant perquisites.

2019 COMPANY PERFORMANCE HIGHLIGHTS

In 2019 we delivered solid financial results and strong operating performance, while executing on our long-term strategy.

Solid Financial Results

 

   

Our net income for 2019 was $214 million, resulting in earnings per diluted share (EPS) of $2.39. Return on equity (ROE) was 8.39%, or 88.32% of allowed ROE.

Strong Operating Performance

 

   

For the 13th year in a row, our residential customer satisfaction rankings were in the top quartile among large electric utilities in the Western region, according to a J.D. Power study.

 

   

We maintained a reliable power supply, demonstrating the value of our diverse generating portfolio and participation in the Western Energy Imbalance market.

 

   

We operated our generation plants effectively, achieving an average generation plant availability of over 92% for the year.

 

   

We made significant improvements to the reliability of our transmission and distribution system.

 

   

Through our continued focus on safety, we achieved a 21% decrease in workplace injuries for 2019.

Significant Progress on Strategic Priorities

 

   

We filed our 2019 Integrated Resource Plan with the OPUC, which outlines our plans for meeting the future needs of our customers while accelerating our reduction of carbon emissions. The plan calls for, among other things:

 

   

150 average megawatts of additional renewable resources by 2023, and

   

157 average megawatts of additional cost-effective energy efficiency measures.

 

   

We launched our Green Future Impact Program, which enables municipalities and large commercial and industrial customers to source 100% of their energy from new wind or solar energy facilities. Within minutes of the program’s launch, our customers committed to purchasing 160-megawatts of renewable energy.

 

   

We began construction on the Wheatridge Renewable Energy Facility in Eastern Oregon in collaboration with NextEra Energy Resources. Wheatridge will combine 300 megawatts of wind generation, 50 megawatts of solar generation and 30 megawatts of battery storage, the first project in North America to integrate these three technologies on this scale.

 

   

We broke ground on a new Integrated Operations Center that will centralize critical operations and functions in a facility designed for enhanced resilience against seismic, cyber, and physical security risks.

 

   

We launched our Smart Grid Test Bed, a first-of-its-kind project that will integrate smart grid technology on an unprecedented scale in the United States. The program will enable more than 20,000 customers to take advantage of special demand-response signals and incentives for using smart-home technologies.

 

   

We filed our Transportation Electrification Plan, which outlines the Company’s current and future activities in support of transportation electrification in our region, a critical component of Oregon’s plans to meet its carbon reduction goals. We also developed business plans for new transportation electrification programs, launched six new Electric Avenue charging locations, and collaborated with local transit authority, TriMet, for the launch of its 100% wind-powered electric bus line.

 

   

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2019 EXECUTIVE COMPENSATION DECISIONS

Our executive compensation decisions for 2019 reflect the guiding principles of our compensation program.

2019 CEO Pay Opportunity and Payouts

 

Base Salary          Annual Cash Incentive Award              Long-Term Incentive Awards

    

Our CEO’s 2018 base salary was below the 50th percentile, consistent with her recent transition to CEO. Based on solid Company performance and outstanding individual contributions in 2018, her 2019 base pay was increased to the competitive reference point (50th percentile of the utility comparison group).

   

    

Our CEO’s 2019 ACI target award opportunity aligned with market median. Her actual ACI award payout reflects below target financial performance, offset by strong operational performance and significant progress on strategic priorities.

   

    

Our CEO’s 2019 LTI award opportunity was increased to align with the market median, consistent with her strong individual performance in 2018. The payout under her 2017 LTI award reflects close to target level performance on our ROE goal and below target performance on our relative TSR goal. The 2017 LTI award covers the performance period from 2017 through 2019.

 

ò     ò     ò
13% base salary increase    

1x base salary award opportunity

(no change)

 

104% payout on 2019 ACI Award

   

2.5x base salary award opportunity

(increased from 2x base salary to

align with market median)

 

89% payout on 2017 LTI Award

Our CEO’s target total direct compensation* in 2019 is shown below:

 

LOGO

*Assumes target level performance under the incentive awards.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Incentive Award Program Redesign

In 2019, the Compensation Committee conducted a comprehensive review of PGE’s executive incentive award compensation programs to ensure that they:

 

   

Align with our strategic direction;

 

   

Effectively support the Company’s culture and efforts related to executive talent attraction, retention and motivation;

 

   

Are in line with our own compensation guiding principles and market best practices; and

 

   

Can be well understood by executives and other participants in the programs.

Our review led to significant enhancements to our ACI and LTI Programs.

Enhancements to the ACI Program

 

   

We added new metrics to our ACI Program that are tied to three of our key Strategic Imperatives: Customer Retention and Growth, Integrated Grid Initiative, and Environmental Leadership. Twenty percent of our executives’ 2019 ACI awards were measured by progress on goals that must be achieved to execute on our long-term strategy. See page 34 for details.

Enhancements to the LTI Program

 

   

This year we awarded restricted stock units with time-based vesting conditions (RSUs), as well as restricted stock units with performance-based vesting conditions (PSUs), which we have traditionally included as a part of our LTI Award Program: of our executives’ total LTI award opportunity for 2019, 75% were PSUs and 25% were RSUs. To offset the impact of this change on our executives’ maximum LTI award opportunity, we increased the maximum payout under our PSU awards from 175% to 200%. These changes enhance the balance, effectiveness and competitiveness of our executive pay.

 

   

For our 2019 PSU awards, we added a new Power Supply Decarbonization metric to incentivize progress toward our strategic decarbonization goal. We also added EPS growth as a third core metric. Each core PSU metric—decarbonization, EPS growth and actual ROE as a percentage of allowed ROE—carries a one-third weighting.

 

   

We redesigned our PSU awards so that our relative TSR performance serves as an award modifier. The TSR-modifier feature ensures that PSU payouts—while first driven by the three core metrics—are appropriately modified in support of our shareholders’ interests.

See pages 33-41 for additional details about these programs.

 

   

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    2020    

 

   

    

 

 

2019 EXECUTIVE COMPENSATION

OVERVIEW OF COMPENSATION ELEMENTS

Our executive compensation program is made up of the principal elements summarized below. Each element is designed to achieve the objectives of our executive compensation program, consistent with our compensation guiding principles. In addition to these standard elements, we occasionally make one-time awards of compensation, typically in the case of new hires or promotions or to ensure the market-competitiveness of an executive’s compensation. Each of these compensation elements is discussed in greater detail in the pages that follow.

 

Compensation

Element

   Form   Performance Metrics    Purpose

Base Salaries

   Cash   n/a   

 

Provide a market-competitive level of fixed income that reflects each officer’s experience, skills and performance

 

Annual Cash

Incentive Awards

   Cash  

 

50% EPS

 

30% Operations:

 

–  Customer Satisfaction

 

–  Generation Plant Availability

 

–  Electric Service Power Quality

 

20% Strategic Imperatives:

 

–  Customer Retention and Growth

 

–  Integrated Grid Initiative

 

–  Environmental Leadership

   Incentivize the achievement of relatively short-term financial, operating and strategic goals

Long-Term Equity-Based Incentive Awards

   75% PSUs  

 

ROE/Allowed ROE

 

EPS Growth

 

Energy Supply Decarbonization

 

TSR (used as a multiplier)

 

   Align executives’ interests with the long-term interests of the Company and its stakeholders
   25% RSUs   n/a    Align executives’ interests with shareholders’ interest in stock price appreciation

Benefits

  

 

Retirement,
severance and health
and welfare benefits

 

  n/a   

 

Provide a competitive benefits package that promotes retention and contributes to financial security and personal well-being

 

BASE SALARIES

 

   

The independent members of our Board approved our CEO’s 2019 base salary after receiving a recommendation from the Compensation Committee. This determination was based on a comprehensive review of Ms. Pope’s performance for 2018 as well as competitive market data.

 

   

The Compensation Committee considered the recommendations of our CEO and market data before setting the 2019 salaries of our other executive officers. Our CEO’s recommendations were based on a variety of considerations, including market competitiveness, individual performance and qualifications, internal pay equity and retention risk.

 

   

The table below shows the base salaries of our named executive officers for 2018 and 2019.

 

     

2018 Salary(1)

($)

  

2019 Salary(2)

($)

   Annual Increase

Maria Pope

       750,000        850,000        13%

James Lobdell

       445,582        500,000        12%

Lisa Kaner

       367,500        380,000        3%

John McFarland

       n/a        300,000        n/a

John Kochavatr

       330,000        340,000        3%

 

(1)

Effective March 12, 2018, except in the case of Ms. Pope, whose base salary was effective on her promotion date of January 1, 2018.

(2)

Effective March 11, 2019, except in the case of Mr. McFarland, whose base salary was effective on his hire date of April 19, 2019.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

ANNUAL CASH INCENTIVE AWARDS

OVERVIEW

 

   

PGE executives are eligible to earn annual cash incentive awards under our 2008 Master Annual Cash Incentive Plan (ACI Plan), based on the achievement of goals that are established each year by the Compensation Committee.

 

   

For 2019, we retained key quantitative financial and operating performance metrics from our 2018 ACI Program: EPS, Customer Satisfaction, Generation Plant Availability, Electric Service Power Quality, and Net Variable Power Cost Reduction. New for 2019, we introduced qualitative metrics directly tied to our strategy.

 

 

 

New Metrics Tied to Three of Our Strategic Imperatives

 

Customer Retention and Growth: retaining existing customers, adding new customers and expanding the use of electricity

 

Integrated Grid Initiative: building an integrated platform to ensure reliability and enable grid visibility, connectivity, and interoperability

 

Environmental Leadership: expanding our renewable energy offerings and reducing our overall carbon footprint

 

 

   

The formula for calculating awards under our 2019 ACI Program is shown below:

 

                                              
             

 

AWARD

EARNED

  =  

 

TARGET

AWARD

  X          

FINANCIAL PERFORMANCE %

X 50%

 

    

OPERATING

PERFORMANCE %

X 30%

 

    

STRATEGIC IMPERATIVE PERFORMANCE %

x 20%

 

    

                                              

 

   

Under the formula above, award payouts are determined by multiplying each officer’s target award by a “performance percentage” based on the achievement of financial, operating and strategic goals during the year.

 

   

Each of the performance percentages can range from 0% to 150%, with financial performance weighted 50%, operating performance weighted 30%, and progress on Strategic Imperatives weighted 20%. This results in a maximum ACI Award opportunity equal to 150% of the target award.

 

   

No payouts are earned under the program if the financial performance is less than 70% of target.

 

   

The performance metrics for the awards were established in the fourth quarter of 2018 and reflect the Company’s financial and business plans for 2019.

 

   

Vesting of an award generally requires continued employment until the date that payment is made under the award, but if an officer’s employment is terminated before that date due to retirement, death, or disability, the officer is entitled to a portion of the award, prorated based on the number of days served during the award year.

2019 ACI PROGRAM TARGET AWARDS

Target awards for the named executive officers were established by multiplying their base salary paid in 2019 by an award multiple established by the Compensation Committee. The target awards of each of our named executive officers were close to the market median for their positions. (See page 44 for a discussion of how we evaluate the market-competitiveness of our executives’ compensation.)

 

Name

  

Target Award

($)

   Target Award as % of
Base Salary

Maria Pope

       826,923        100 %

James Lobdell

       292,465        60 %

Lisa Kaner

       188,558        50 %

John McFarland

       88,788        45 %

John Kochavatr

       168,846        50 %

 

   

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    2020    

 

   

    

 

 

2019 ACI PROGRAM METRICS

The table below summarizes the performance metrics used for our named executive officers’ 2019 ACI Program awards.

 

      Metric    Measurement        Why We Use this Metric    
LOGO    EPS    Measured by the Company’s net income for the year divided by average shares outstanding during the year.    EPS is a driver of shareholder value creation in the regulated utility industry.
LOGO    Customer
Satisfaction
  

Average of the Company’s residential, general business and key customer satisfaction scores on three independent utility industry surveys, where satisfaction is defined as a rating of 9 or higher on a 10-point scale.

 

These ratings are weighted by the annual revenue from each customer group that produces the annual rating. Customer satisfaction goals are updated annually based on projections of ratings required to achieve 50th, 65th and 90th percentile rankings of the companies included in the relevant surveys.

 

   Customer satisfaction is a measure of our ability to run our business in a way that meets the needs of our customers.
   Generation Plant
Availability
  

Amount of time that a generating plant is able to produce electricity during the year (determined by subtracting from total hours in the period all maintenance outage hours, planned outage hours and forced outage hours), divided by the number of hours in the year. To set the maximum, target and threshold performance levels for this goal, we established individual plant goals, which were then weighted to produce overall performance targets.

 

   Our ability to achieve our financial objectives and serve our customers depends in part on our generation plants’ delivery of reliable and affordable power.
   Electric Service
Power Quality
  

Measured by annual results for two industry-standard electric service reliability metrics:

  SAIFI (outage frequency): the total number of customer outages over five minutes divided by total number of customers served

  CAIDI (outage duration): SAIDI (defined as the sum of customer outage durations divided by total number of customers served) divided by SAIFI

SAIFI was weighted 60% and CAIDI was weighted 40% to determine overall performance result.

 

   Delivering reliable electric service is our Company’s core business. Outage frequency and outage duration are fundamental measures of service reliability that our customers care about.
LOGO    Customer
Retention and
Growth
  

Measured by progress in the following areas:

  Customer digital solutions

  Brand strategy roll-out

  Green energy offering

   Our Company operates in an increasingly competitive business environment and we need to continue to earn the right to serve our customers.
   Integrated Grid
Initiative
  

Measured by progress in the following areas:

  Field area network and SCADA across network

  Advanced distribution management systems

  Construction of Integrated Operating Center

  Distribution automation

  Energy storage projects

  PGE Smart Grid Test Bed pilot project

  Smart cities

   Building an integrated grid promotes reliability and enables the visible and interoperable connection of customer technologies, a key component of our decarbonization and electrification strategies.
   Environmental
Leadership
  

Measured by progress in the following areas:

  New renewable energy procurement

  Transportation electrification plan

   Making progress toward a clean energy future is an essential part of serving as a trusted energy partner for our customers and our region.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

2019 ACI PROGRAM GOAL WEIGHTINGS

The weightings assigned to the 2019 ACI Program goals for each of the named executive officers are shown below.

 

Maria Pope, James Lobdell, Lisa Kaner and John Kochavatr:   John McFarland:
LOGO   LOGO

2019 ACI PROGRAM PERFORMANCE RESULTS

In February 2020, our Compensation Committee met to review the performance results for the awards. The committee approved payouts under the 2019 ACI Award Program between 100% and 104% of target, based on the following results:

Financial Performance. Our 2019 EPS was $2.39, or 98% of target. This result yielded a financial performance percentage of 92%.

Operating Performance. Operating performance resulted in performance percentages between 115% and 128% for the named executive officers. Generation Plant Availability and Customer Satisfaction results were near maximum levels. Performance with respect to SAIFI exceeded the maximum goal, while performance relative to CAIDI improved relative to 2018, but was still below target.

Progress on Strategic Imperatives. After reviewing detailed summaries of progress made on the three Strategic Imperatives included in the 2019 ACI Program, the Compensation Committee determined that results were generally on target, while progress on our green energy offering, energy storage and new clean energy procurement goals were above target and progress on our brand enhancement and transportation electrification goals were slightly below target. Below are some of the highlights of our progress toward these goals:

Customer Retention and Growth

 

   

We saw solid growth of 0.9% in our customer base, including the return of a number of commercial customers that had previously elected to purchase electricity from another electricity supplier.

 

   

We enhanced our customer digital solutions and online platforms, significantly improving our ease of doing business ratings and successfully launching a new Peak Time Rebate Program, which rewards customers for reducing their energy use during periods of high energy demand.

 

   

We launched our FullCleanAhead media campaign to educate the general public about our innovative energy solutions.

 

   

We introduced our Green Future Impact Program, which allows municipalities and large industrial and commercial customers to source 100% of their energy needs from wind and solar facilities. Within minutes of the program’s launch it was fully subscribed, with our customers committing to the purchase of renewable energy equivalent to the output of a 160-megawatt facility.

Integrated Grid Initiative

 

   

We obtained OPUC approval for our Smart Grid Test Bed and launched the program during the summer. The program has enrolled 14,500 customers in our demand response programs and enables more than 20,000 PGE customers to take advantage of demand-response signals and incentives for using smart-home technologies.

 

   

We completed the design and commenced construction on our new Integrated Operations Center, which will centralize some of our critical operations in a single secure, reliable and resilient facility.

 

   

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    2020    

 

   

    

 

 

   

We began engineering and construction on our new Field Area Network, a wireless communications network that will connect field sensors and control devices throughout our system to the Integrated Operating Center.

 

   

We completed the design for a new automated distribution management system, which will comprise operational technology systems capable of monitoring and controlling all elements within our distribution system.

Environmental Leadership

 

   

Construction began on the Wheatridge Energy Facility, which combines wind, solar and battery energy on a first-of-its-kind scale in North America.

 

   

We entered into a long-term agreement to purchase 160 megawatts of energy from a solar power facility in support of our Green Future Impact Program.

 

   

We began the development of a new transportation electrification business line and filed our new Transportation Electrification Plan with the OPUC. We also developed business plans for new transportation electrification programs, launched six new Electric Avenue charging locations, and collaborated with our local transit authority, TriMet, on the launch of its 100% wind-powered electric bus line, the first of its kind in the United States.

The table below shows the performance metrics and results for the 2019 ACI Program.

 

     Performance Levels                

Metrics

  

Threshold

50% Payout

    

Target

100% Payout

    

Maximum

150% Payout

    

Actual

    

Calculated

Performance %

 

Financial Goal

              

EPS*

  

 

$2.08

 

  

 

$2.45

 

  

 

$2.82

 

  

 

$2.39

 

  

 

91.83%

 

Operating Goals

              

Generation Plant Availability

  

 

87.00%

 

  

 

89.87%

 

  

 

91.31%

 

  

 

92.03%

 

  

 

150%

 

Customer Satisfaction

  

 

50.70%

 

  

 

57.70%

 

  

 

63.70%

 

  

 

59.22%

 

  

 

112.67%

 

Electric Service Power Quality

              

SAIFI (weighted 60%)

  

 

0.80

 

  

 

0.70

 

  

 

0.65

 

  

 

0.61

  

 

150%

 

CAIDI (weighted 40%)

  

 

170.00

 

  

 

150.00

 

  

 

127.00

 

  

 

160.11

  

 

74.73%

 

Strategic Imperatives*

              

Customer Retention & Growth

  

 

“1” rating

 

  

 

“2” rating

 

  

 

“3” rating

 

  

 

2

  

 

100%

 

Integrated Grid Initiative

  

 

“1” rating

 

  

 

“2” rating

 

  

 

“3” rating

 

  

 

2

  

 

100%

 

Environmental Leadership

  

 

“1” rating

 

  

 

“2” rating

 

  

 

“3” rating

 

  

 

2

  

 

100%

 

*Based on a qualitative assessment of progress on the specific projects identified for each Strategic Imperative. Performance results for each project were rated by the Compensation Committee on a 0 to 3 scale. A minimum rating of “1” was required to earn a 20% payout for each Strategic Imperative, and a score of “3” yielded a payout of 150%. These results were averaged, with each project weighted equally, to yield an overall payout percentage for each Strategic Imperative.

In light of these performance results, the Compensation Committee approved ACI Award payouts for the named executive officers that were 100.44% and 104.17% of their target awards.

NAMED EXECUTIVE OFFICER ANNUAL INCENTIVE AWARD PAYOUTS

 

Name

   Financial
Performance %
  Operating
Performance %
  Strategic
Imperative
Performance %
 

Award
Payout

($)

  

Award
Payout

(% of Target)

Maria Pope

    

 

91.83

%

   

 

127.52

%

   

 

100.00

%

   

 

863,406

    

 

104.17

%

James Lobdell

    

 

91.83

%

   

 

127.52

%

   

 

100.00

%

   

 

304,661

    

 

104.17

%

Lisa Kaner

    

 

91.83

%

   

 

127.52

%

   

 

100.00

%

   

 

196,421

    

 

104.17

%

John McFarland

    

 

91.83

%

   

 

115.07

%

   

 

100.00

%

   

 

89,179

    

 

100.44

%

John Kochavatr

    

 

91.83

%

   

 

127.52

%

   

 

100.00

%

   

 

175,887

    

 

104.17

%

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

LONG-TERM INCENTIVE AWARDS

OVERVIEW

 

   

We grant equity-based long-term incentive (LTI) awards to our executives and other key employees pursuant to our Stock Incentive Plan.

 

   

In 2019 we continued our practice of granting restricted stock units with performance-based vesting conditions (PSUs). New for 2019, we allocated 25% of our officers’ total LTI award opportunities to restricted stock units with time-based vesting conditions (RSUs). We generally did not increase the total amount of our executives’ LTI opportunity as a multiple of base salary, although Ms. Pope’s and Ms. Kaner’s target LTI award opportunities were increased to align with the market median. The inclusion of RSUs in the total LTI award mix is consistent with the practice of nearly all of our peers, and therefore enhances the competitiveness and retention effectiveness of our compensation program.

 

 

  Our 2019 LTI Award
  program is consistent
  with our
  compensation
  guiding principles

 

  

Compensation Guiding Principle

    

PSUs

    

RSUs      

  

Retention

    

    

   

  

Incentives to achieve specific Company objectives

    

    
  

Alignment with shareholders

    

    

   

  

Market-competitive pay

    

    

   

CALCULATION OF TOTAL LTI AWARD OPPORTUNITY

The aggregate number of PSUs and RSUs we granted to our executive officers was the product of their 2019 base salary and an award multiple, divided by the closing price of the Company’s common stock on the grant date:

 

   

# of PSUs and     RSUs Granted    

 

    =     

2019 Base Salary x Award Multiple

Grant Date Closing Common Stock Price

 

The table below shows the award multiples we used to calculate the awards for the named executive officers and the estimated value of the awards.

 

Name

     Award Multiple     

Target RSU
Value*

($)

    

Target PSU
Value*

($)

    

Total Target LTI Value*

($)

Maria Pope

      

 

2.50

      

 

531,250

      

 

1,593,750

      

 

2,125,000

James Lobdell

      

 

1.20

      

 

150,000

      

 

450,000

      

 

600,000

Lisa Kaner

      

 

1.00

      

 

95,000

      

 

285,000

      

 

380,000

John McFarland

      

 

0.70

      

 

52,500

      

 

157,500

      

 

210,000

John Kochavatr

      

 

0.70

      

 

59,500

      

 

178,500

      

 

238,000

*Assumes that the Company will perform at target levels over the PSU performance period. Values are based on the closing price of the Company’s common stock on the grant date. See “Grants of Plan-Based Awards” on page 50 for additional details.

 

   

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    2020    

 

   

    

 

 

2019 PSU AWARDS

Our 2019 PSU Award Program incorporates the following financial, strategic and market-based performance measures.

 

Metric

   Measurement    Why We Use this Metric

Return on Equity

  

The average of each of three consecutive years’ Accounting ROE as a percentage of Allowed ROE.

  “Accounting ROE” is defined as annual net income, as shown on the Company’s income statement, divided by the average of the current year’s and prior year’s shareholders’ equity, as shown on the balance sheet.

  “Allowed ROE” is the return on equity that the OPUC permits the Company to include in the rates it charges its customers.

   Reflects how successful the Company is at generating a return on dollars invested by its shareholders. Because the Company’s return on its investment can fluctuate based on OPUC rate case orders, we believe the appropriate measure of our ability to generate earnings on shareholder investments is Accounting ROE as a percentage of Allowed ROE

EPS Growth

   3-year average of the Company’s EPS growth rate, where EPS growth for a given fiscal year is defined as the percentage change in EPS over the previous fiscal year.    Provides a direct measure of the rate at which the Company has increased its profitability. EPS is a driver of shareholder value creation in the regulated electric utility industry.

Energy Supply Decarbonization

   Forecast total carbon emissions of available resources needed to serve the Company’s retail load, measured in metric tons of CO2 equivalent. The calculation is generally based on carbon emissions of available resources as reflected in the Company’s Annual Power Cost Update Tariff for Power Costs that we will file with the OPUC in 2020 (“2021 AUT”), except for specified items that will be based on forecast or normalized values. See page 39 for additional details.    Creates incentive to reduce carbon potential in the Company’s energy supply portfolio in support of Oregon’s greenhouse gas emission reduction goals.

Relative TSR

  

TSR over the 3-year performance period relative to the TSR achieved by a comparison group of companies over the same period.

  The comparison group consists of companies on the Edison Electric Institute regulated index on December 31, 2019, excluding those that have completed or announced a merger, acquisition, business combination, “going private” transaction or liquidation. Companies that are in bankruptcy will be assigned a negative one TSR.

  TSR measures the change in a company’s stock price for a given period, plus its dividends (or other earnings paid to investors) over the same period, as a percentage of the stock price at the beginning of the period.

  To calculate the value of stock at the beginning and end of the period, we use the average daily closing price for the 20-trading day period ending on the measurement date.

  Relative TSR is determined by ranking PGE and the comparison group companies from highest to lowest according to TSR. The percentile performance of PGE relative to the comparison group companies is determined based on this ranking.

  

TSR is a direct measure of value creation for shareholders.

 

Use of relative rather than absolute TSR helps ensure that payouts reflect the Company’s relative performance rather than general market conditions.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

OUR 2019 LTI PROGRAM DECARBONIZATION GOAL

We are committed to doing our part to achieve Oregon’s ambitious decarbonization goals, while meeting the needs of our customers for safe, reliable and affordable power. We recognize that in order to do this, it will be necessary to make significant changes to our energy supply portfolio. To drive progress toward our goal of a cleaner energy supply, for 2019 our Compensation Committee adopted a new decarbonization goal for all of our performance-based LTI awards.

Metric Overview—Energy Supply Decarbonization

Our new Energy Supply Decarbonization metric measures the carbon potential of our energy supply portfolio that is needed to serve our retail load. To measure the carbon potential of our portfolio, we rank all of our available resources according to their carbon emissions intensity, defined as total carbon dioxide emissions they produce per megawatt hour. Each resource is then assigned an “Available Energy” value, which is a measure of the amount of energy that a given resource can contribute to serve our customers. Using Available Energy values, we identify our energy supply resource “stack,” ranked from least carbon-intensive to most carbon-intensive. To measure our performance, we account for the potential emissions of the ranked resource stack, up to the level of our retail load.

 

LOGO

As shown in the graph above, when we increase the amount of non-carbon-emitting resources in our portfolio mix, clean resources displace emitting resources and total carbon potential needed to serve a given retail load falls.

The formula for this calculation is described below:

[Portfolio Carbon Potential, MMTCO2e] = [Available Energy, MWh]Plant A x [Emissions Rate, tCO2/MWh]Plant A + [Available Energy, MWh]Plant B x [Emissions Rate, tCO2/MWh]Plant B + …

Where:

 

   

MWh = megawatt hours;

 

   

[Available Energy, MWh]Plant A + [Available Energy, MWh]Plant B + [Available Energy, MWh]Plant C + … = Total Forecasted Retail Load, MWh; and

 

   

[Emissions Rate, MMTCO2e /MWh]A £ [Emissions Rate, tCO2/MWh]B £ [Emissions Rate, tCO2/MWh]C £ ....

How We Set Our Performance Targets

We believe that the OPUC’s integrated resource planning (IRP) process is the right forum to establish energy supply goals that implement the climate policies of our state, while ensuring that our customers’ energy needs are met. For our 2019 PSU Award Program, the target level performance for our decarbonization metric is consistent with the Company’s forecast energy supply portfolio and load, as described in our 2016 IRP Update, which was acknowledged by the OPUC in 2018.

 

   

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How We Measure Performance For Our Decarbonization Goal

Performance results for the awards will generally be based on retail load and Available Energy values as reflected in the 2021 AUT. However, in February 2020 we modified the awards to provide that results for certain items should be based instead on earlier forecasts or normalized values to ensure that payouts reflect actions management takes to increase our clean energy portfolio rather than factors beyond our control. These modifications are described in the table below:

 

Value

  Measurement before
Modification
   Measurement After
Modification
   Rationale

Retail load

  Based on 2021 AUT    Based on forecast in 2016 IRP Update   

Without this change, results under the awards could vary as a result of changes in customer growth in our service territory or the number of customers that choose to receive electricity service from us—with lower retail load being correlated with higher performance results. As we work to retain and grow our customer base, it is important that our LTI awards not reward outcomes that run counter to this strategic imperative.

 

Available Energy from Qualifying Facility Power Purchase Agreements

  Based on 2021 AUT    Based on forecast in 2016 IRP Update   

We are required by law to enter into these agreements and we believe that results under awards should not be a function of new agreements that we enter into during the performance period or the failure of counterparties to existing agreements to comply with their contractual commitments.

 

Available Energy from Wells Hydro Contract

  Based on 2021 AUT   

Available Energy from this contract will be adjusted to offset reduction in Available Energy resulting from the counterparty’s right to reduce the Company’s share of energy from the facility

 

   We believe that results under the awards should not be a function of discretion exercised by a counterparty and should instead to the extent practicable be based on factors that are within management’s control.

Available Energy from Wind Resources

  Assumed wind capacity factors based on 2021 AUT   

Assumed wind capacity factors based on 2016 IRP Update

 

   This modification likewise helps ensure that awards are not inappropriately based on factors outside of management’s control.

We believe that all of these modifications help ensure that the 2019 PSU awards will operate as originally intended—to incentivize management to add significantly to our clean energy portfolio—without rewarding, or penalizing, results that are not related to management’s actions in furtherance of this goal. Because of the substantial time remaining in the performance period and because achieving performance resulting in a payout under the modified award metric is by no means certain, we believe that the metric continues to represent a meaningful incentive to guide our management’s energy resource planning decisions. Notably, target performance levels were not modified. Our experience with the awards since their time of grant has taught us valuable lessons about how to most effectively measure progress toward our decarbonization goal. For 2020, we have introduced a more streamlined decarbonization metric, which measures the total clean energy resources that our management can add to our energy supply portfolio over the three-year performance period. Like our 2019 Energy Supply Decarbonization metric, our 2020 decarbonization metric is designed to align with our decarbonization strategy and the clean energy goals of our state.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

2019 PSU AWARD METRICS AND PAYOUT CALCULATION

 

   

In the first quarter of 2022, the Compensation Committee will determine the performance results for the 2019 PSU awards in accordance with the metrics and formula described in the table below.

 

   

The Compensation Committee has discretion under the terms of our Stock Incentive Plan to adjust award payouts, but generally only does so as necessary to offset the impact of extraordinary or non-recurring events.

 

Payout Metric(1)

   Threshold*
(50% Payout)
   Target
(100% Payout)
  

Maximum

(167% Payout)

   Metric
Weighting
   Percentage
of Target
Shares
Earned

Return on Equity

   75%
of Allowed ROE
   90%
of Allowed ROE
   100%
of Allowed ROE
   33%    0% to 55.67%

EPS Growth

   3.5%
   4.5%
   5.5%
   33%    0% to 55.67%

Energy Supply

Decarbonization

  

4.64

MMTCO2e

  

4.42

MMTCO2e

  

4.20

MMTCO2e

   33%    0% to 55.67%
            Payout %
Subtotal
   0% to 167%

Payout Multiplier

Metric(2)

   (80% multiplier)    (100%
multiplier)
   (120% multiplier)          

Relative TSR

  

£  20th Percentile

of EEI Regulated Index

  

50th Percentile

of EEI Regulated Index

  

³  75th Percentile

of EEI Regulated Index

   Payout
Multiplier
   80% to 120%
     Total Percentage of Target PSU Award Earned    0 to 200%

 

(1)

Calculation of Payout Percentage Subtotal. At the end of the performance period, performance results are interpolated between threshold, target and maximum payout levels to determine payout percentages for each goal based on the schedule above. Results below threshold for any goal result in zero payouts for that goal. These results are weighted equally and added to determine a payout percentage subtotal.

(2)

Application of Payout Multiplier Based on Relative TSR Results: Performance results for Relative TSR are interpolated between threshold, target and maximum levels to determine a multiplier between 80% and 120%, which is applied to the payout percentage subtotal to determine a total percentage of the target award earned.

OTHER TERMS OF THE 2019 PSU AWARDS

Dividend Equivalent Rights. Under the 2019 PSU Awards, each named executive officer will receive a number of dividend equivalent rights (DERs) equal to the number of vested PSUs. A DER represents the right to receive an amount equal to dividends paid on the number of shares of common stock equal to the number of the vested PSUs, which dividends have a record date between the date of the grant and the end of the performance period. DERs will be settled in shares of common stock after the related PSUs vest. The number of shares payable on the DERs will be calculated using the fair market value of PGE common stock as of the date the Compensation Committee determines the number of vested PSUs.

Service Requirement. Under our PSU awards in 2019 and prior years vesting of the PSUs and their related DERs generally requires that the award recipient continue to be employed by the Company during the performance period. However, if the officer’s employment is terminated due to retirement, death, or disability before the end of the three-year performance period, a portion of the award will vest at the end of the performance period. See the discussion of this issue on page 57 in the section below entitled “Termination and Change in Control Benefits.” Under the terms of our 2020 PSU awards, recipients who terminate employment without cause and who satisfy the “Rule of 75” are eligible for vesting of their PSU awards based on performance results, without regard to their termination before the end of the performance period. An individual satisfies the Rule of 75 if, on the date of his or her termination of employment, (i) the individual is at least age 55 and has no less than 5 years of service with the Company or its affiliates, and (ii) the individual’s age plus years of service equals at least 75.

 

   

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    2020    

 

   

    

 

 

2019 RSU AWARDS

Each of our executive officers was awarded RSUs representing 25% of their total LTI award opportunity. The RSU awards also include dividend equivalent rights on the same terms as the PSUs (see the description above). Vesting of the RSUs and their related DERs generally requires that the award recipient continue to be employed by the Company during the three-year vesting period. However, if the officer’s employment is terminated due to retirement, death, or disability before the normal vesting date, a pro rata portion of the RSUs will vest. See the discussion of the RSUs on page 57 in the section below entitled “Termination and Change in Control Benefits.”

2017 PSU AWARD PAYOUT

The payout under the PSU awards granted to our executive officers in 2017 was 89% of target, based on the following performance results:

 

Metric

 

Threshold

(50% Payout)

 

Target

(100% Payout)

   

Maximum

(150% Payout for ROE;

200% Payout for TSR)

   

Metric
Weight

 

    Actual     Percentage of
Target Award
Earned
 

ROE as a % of Allowed ROE

 

75%

 

 

90%

 

 

 

100%

 

 

 

50%

 

 

 

89.22%

 

 

 

48.69%

 

Relative TSR

 

 

30th

Percentile
EEI Regulated Index

 

 

 


 

 

50th
Percentile
EEI Regulated
Index

 

 

 

 
 

 

   
90th Percentile
EEI Regulated Index

 
    50%      
42nd
Percentile
 
 
    40.38%  
                           

 

Total

 

 

 

89.07%

 

These results yielded the award values set forth in the table below:

 

      Number of PSUs Vested(1)   

Award Payout Value(2)

($)

 

Maria Pope

    

 

12,156

    

 

678,183

James Lobdell

    

 

11,571

    

 

645,546

Lisa Kaner

    

 

6,340

    

 

353,709

John McFarland

    

 

    

 

John Kochavatr

    

 

    

 

 

(1)

Includes dividend equivalent rights settled in shares per the terms of the awards.

(2)

Based on a $55.79 share price, which was the closing stock price of the Company’s common stock on December 31, 2019, the vesting date for the awards.

The terms of our 2017 PSU awards are described more fully in the Company’s 2018 Proxy Statement under the heading “2017 Grants of Plan-Based Awards.”

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

BENEFITS

RETIREMENT BENEFITS

 

   

401(k) Plan. All of our employees are eligible to participate in the Company’s 401(k) Plan.

 

   

Pension Plan. Two of our named executive officers (Ms. Pope and Mr. Lobdell) participate in the PGE Pension Plan. The plan was closed to new participants before our other named executive officers joined the Company. See page 52 of this Proxy Statement for a description of the basic benefit available to non-union employees under the plan.

 

   

Deferred Compensation Benefits. Executives and other key employees are eligible to participate in our 2005 Management Deferred Compensation Plan, which permits participants to defer the payment of income as well as the value of up to 80 hours of paid time off. Participants also earn interest on their account balances. See page 53 for details.

SEVERANCE BENEFITS

 

   

Severance Pay. Executives who are involuntarily terminated without cause are eligible to receive severance pay. Absent a change in control, the maximum amount payable is 52 weeks of base salary. Executives who are terminated within 2 years following a change in control are eligible for enhanced severance benefits (52 weeks of base salary plus target ACI award).

 

   

Outplacement Assistance. Employees who are eligible for severance pay may also be reimbursed for up to 12 months of outplacement assistance.

 

   

Double Trigger Vesting of PSUs in Case of Change in Control. If an executive is terminated without cause within two years following a change in control, the vesting of the officer’s outstanding PSU awards is accelerated. See page 56 for details. Beginning in 2020, our executives’ RSU awards also provide for double-trigger vesting in the event of a change in control.

HEALTH AND WELFARE BENEFITS

 

   

Medical/Dental/Vision. Our executives are eligible to participate in our broad-based medical, dental and vision insurance programs. Non-union medical insurance is limited to high deductible health plans. For employees enrolled in our high deductible health plans, the Company also makes annual contributions to a health savings account.

 

   

Wellness Program. All employees are eligible to participate in the Company’s wellness program, which offers a variety of benefits, including mental health benefits, financial counseling and the opportunity to earn Company health savings account contributions.

NEW HIRE COMPENSATION

In April 2019, PGE hired John McFarland to serve as our new Chief Customer Officer. Before joining the Company, Mr. McFarland spent more than 16 years in general management, marketing, product innovation and digital transformation at General Motors and Procter & Gamble. Mr. McFarland’s depth of experience and proven track record of developing new strategies to meet the changing needs of customers make him an important addition to our team. In connection with Mr. McFarland’s hiring, the Compensation Committee approved awards of a cash signing bonus of $125,000 and RSUs with a grant-date value of $150,000 as well as reimbursement of $123,114 in moving expenses (grossed up for tax purposes). The Compensation Committee believes that finding the right executive for this position was crucial and that Mr. McFarland’s pay package is in keeping with the level of compensation required to attract a person with his experience and qualifications.

 

   

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    2020    

 

   

    

 

 

HOW WE SET EXECUTIVE PAY

COMPENSATION DECISION-MAKING ROLES

The Compensation Committee is primarily responsible for developing and overseeing the Company’s executive compensation program. The committee is aided in this work by FW Cook, the committee’s independent compensation consultant, the other independent members of the Board, who act as a committee of the board in determining our CEO’s pay, and the Company’s management, which provides input about Company business plans and performance. In developing its input and recommendations, our management team regularly consults with its own compensation consultant, Willis Towers Watson.

 

Compensation Committee

 

  

Independent Directors

 

  

Management

 

  

Independent Consultant

 

  Reviews the performance of the executive officers annually

  

  Discuss CEO performance and consider recommendation of Compensation Committee regarding CEO pay

  

  Makes recommendations on compensation plan design

  

  Advises the Compensation Committee on compensation plan design

  Establishes base salaries, annual cash incentive awards and equity awards for all of the executive officers other than the CEO

  

  Approve base salary, annual cash incentive award and equity awards for the CEO

  

  Provides input on individual performance of the executive officers

  

  Advises the Compensation Committee on appropriate compensation levels and compensation and governance trends

  Recommends a base salary, annual cash incentive awards and equity awards for the CEO

     

  Provides information about Company performance relative to incentive plan goals

  

  Performs annual compensation risk assessment for consideration by the Committee

         

  Seeks advice of its own compensation consultant in formulating input and recommendations to the Compensation Committee

 

    

USE OF COMPENSATION MARKET DATA

We consider compensation market comparisons to ensure the competitiveness of our executives’ pay. We evaluate compensation by reference to the 50th percentile of the market, but each executive’s compensation is based on a variety of factors, including experience, qualifications, performance, and considerations of internal equity.

To determine the relevant market reference point, we rely on benchmarking surveys, as well as publicly available information regarding the pay practices of a group of utility industry peer companies selected by our Compensation Committee each year. Although the benchmarking data on which we rely is generally based on utility industry surveys, we use general industry survey data as appropriate to reflect the realities of the competitive marketplace for the Company’s talent needs. The table below shows the most relevant benchmarking survey data for each of our 2019 named executive officers:

 

Named Executive Officer

        

Utility
Industry(1)

 

  

General
Industry(2)

 

Maria Pope

  

CEO

  

x

  

James Lobdell

  

SVP, Finance, CFO & Treasurer

  

x

  

Lisa Kaner

  

VP, General Counsel & Corporate Compliance Officer

  

x

  

John McFarland

  

VP, Customer Solutions & Chief Customer Officer

     

x

John Kochavatr

  

VP, Information Technology and Chief Information Officer

       

x

 

(1)

Data sources included Willis Towers Watson 2018 Energy Services Executive Compensation Survey – U.S.

(2)

Data source included the Willis Towers Watson 2018 General Industry Executive Compensation Survey – U.S.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

To select our utility industry peer group for our 2019 compensation decisions, we looked for companies that represented the best match with PGE based on the following criteria:

 

   

Vertically Integrated Utility. Our peer companies should be vertically integrated utilities, with a business mix focused on either regulated electric operations or a balance of regulated electric and regulated gas operations.

 

   

Minimal Non-Regulated Business Activities. Non-regulated businesses should not be key drivers of the financial performance and strategy of our peer companies.

 

   

Comparable Size. Our peer companies should be within a reasonable range relative to key financial measures, including revenues, market capitalization, and enterprise value.

 

   

Investment-Grade Credit Ratings. Our peer companies should have credit ratings that allow for financing at a reasonable cost in most market environments.

 

   

Balanced Customer Mix. Our peer companies should have a balanced retail, commercial and industrial mix and service territories not overly reliant on one key customer or industry sector.

 

   

Regulatory Environment. Our peer companies should have a comparable cost of service ratemaking process and allowed return on equity, as well as a history of allowed recovery on regulatory assets, fuel and power costs and legitimate deferred costs.

 

   

Capital Structure. Our peer companies should demonstrate moderate leverage (generally less than 60% debt to total capitalization ratio) and no significant liquidity concerns.

 

   

Growth Opportunities. The growth opportunities of our peer companies should be based primarily on regulated activities.

In the case of Northwest Natural Gas Company, we also considered geographic proximity, to the extent it could result in the company’s serving as a potential competitor for executive talent.

For 2019 the Compensation Committee selected the following companies to serve as our compensation peer group:

 

2019 PEER GROUP

               

ALLETE, Inc.

 

El Paso Electric Company

 

Northwest Natural Gas Company

  

PNM Resources, Inc.

Alliant Energy Corporation

 

Hawaiian Electric

 

NorthWestern Corporation

  

Puget Energy, Inc.

Avista Corporation

 

IDACORP, Inc.

 

OGE Energy Corp.

  

SCANA Corporation

Black Hills Corporation

 

Nisource Inc.

 

Pinnacle West Capital Corporation

  

Vectren Corporation

Based on data compiled by FW Cook at the time of our 2019 peer group review, PGE was positioned near the median of the peer group in terms of revenue and market capitalization:

PGE VS 2019 PEER GROUP

 

LOGO    LOGO

After our 2019 compensation decisions were made, SCANA Corporation and Vectren Corporation were both acquired in separate mergers and therefore no longer form part of our compensation peer group for our 2020 compensation decisions. In their place we added Evergy, Inc.

CONSIDERATION OF SAY ON PAY VOTE

We engage with our investors throughout the year and provide shareholders with an opportunity to cast an advisory “Say on Pay” vote on our executive compensation program annually. At our 2019 Annual Meeting of Shareholders, 96.6% of the votes cast were in favor of our Say on Pay proposal. We believe these results indicated strong support for our 2018 executive compensation program and, while we made modifications to our incentive award programs to improve alignment with our strategic focus and the competitiveness of our pay, we retained the core design of our program for 2019. We will continue to consider the results of annual shareholder advisory votes on executive compensation as well as any feedback we receive from shareholders and other stakeholders during the course of the year.

 

   

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    2020    

 

   

    

 

 

OTHER COMPENSATION POLICIES AND PRACTICES

USE OF COMPENSATION CONSULTANTS

To assist the Compensation Committee with its compensation decisions, the committee has retained FW Cook as its independent compensation consultant. For 2019, FW Cook’s assignments included the following:

 

   

Review of the Company’s executive compensation program, including compensation philosophy, compensation levels in relation to Company performance, pay opportunities relative to those at comparable companies, short- and long-term mix and metric selection, executive benefits and perquisites, stock ownership levels and wealth potential, and stock ownership guidelines;

 

   

Review of the Company’s director compensation program, including design considerations such as ownership guidelines and vesting terms;

 

   

Reporting on emerging trends, legislative developments and best practices in the area of executive and director compensation;

 

   

Preparation of a comprehensive compensation risk assessment study to evaluate whether the Company’s compensation programs are likely to create material risk for the Company; and

 

   

Attendance at Compensation Committee meetings.

Before engaging FW Cook, the Compensation Committee reviewed the firm’s qualifications, as well as its independence and the potential for conflicts of interest. The committee determined that FW Cook is independent and its services to the committee do not create any conflicts of interest. The committee has the sole authority to approve FW Cook’s compensation, determine the nature and scope of its services, and terminate the engagement. FW Cook does not perform other services for or receive other fees from the Company.

ANNUAL COMPENSATION RISK ASSESSMENT

In 2019, as in prior years, the Compensation Committee engaged FW Cook to perform an annual comprehensive risk assessment of our compensation policies and practices. The assessment covered executive and non-executive plan design and oversight as well as other aspects of our compensation practices, as summarized below:

 

Equity Award Program

   Cash Incentive Programs   Other Compensation Practices

  Equity grants

  

  Pay mix

 

  Incentive mix

  Payment timing and adjustments

  

  Performance metrics

 

  Succession planning

  Grant policies

  

  Performance goals and payout curves

 

  Severance

  Stock ownership guidelines and trading policies

 

  

  Payment timing and adjustments

 

 

  Role of the Board of Directors

 

The finding of the report was that our programs do not encourage excessive risk taking and are not reasonably likely to have a material adverse effect on the Company. The report noted the following risk-mitigating features of our program, among others:

 

   

Independent Board Oversight. The Compensation Committee oversees incentive pay programs at all levels of the organization. The CEO’s pay is set by all of the independent directors, acting as a group.

 

   

Balanced Pay Elements. Our compensation program includes an appropriate balance in fixed and variable pay, cash and equity, formulas and discretion, and short-term and long-term measurement periods.

 

   

Robust Governance Policies. Policies are in place to mitigate compensation risk such as ownership guidelines, insider-trading prohibitions, and compensation clawbacks.

 

   

Incentive Mix. Incentive awards cover multiple overlapping time frames, ranging from one-to-three years, dampening the impact of stock price and financial performance volatility in rewards. Multiple financial goals prevent an over-emphasis on any single metric.

 

   

Risk-Adjusted Incentive Targets. Incentive award targets encourage improvements but not at levels that would encourage imprudent risk-taking.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

HEDGING POLICY

Under our Insider Trading Policy, all of our officers, employees and directors are prohibited from trading in options, warrants, puts and calls, or similar instruments on Company securities, or selling Company securities “short.” In addition, employees and directors may not purchase Company securities on margin or pledge Company securities.

STOCK OWNERSHIP POLICY

The Company has adopted a stock ownership and holding policy for our executive officers. The primary objectives of the policy are to create financial incentives that align the interests of executive officers with strong operating and financial performance of the Company, and encourage executive officers to operate the business of the Company with a long-term perspective. Under the policy, our CEO is required to hold Company stock with a value equal to at least three times her annual base salary, while the other executive officers are required to hold Company stock with a value equal to at least one times their annual base salary. The policy does not require executive officers to immediately acquire shares in an amount sufficient to meet the holding requirement. However, until the holding requirement is met, executive officers are subject to certain restrictions on their ability to dispose of shares of Company stock. The CEO is required to retain 100% of her shares until the holding requirement is met. All other executive officers are required to retain an amount of shares equal to 50% of their net after-tax performance-based equity awards until the holding requirement is met. The number of shares required to satisfy the stock ownership requirements is re-calculated annually, based on the closing price of the Company’s common stock on the date of the calculation. The Compensation Committee also reviews each officer’s holdings annually to ensure that appropriate progress toward the ownership goals is being made. All of our officers either meet the stock ownership requirement or are on track to do so by the applicable target date. Our stock ownership policy for non-employee directors is described on page 15 of this Proxy Statement.

EQUITY GRANT PRACTICES

Under the terms of our Stock Incentive Plan, the Compensation Committee is authorized to make grants of equity awards, but may delegate this authority as it deems appropriate. The committee has delegated authority to our CEO to make annual discretionary grants of RSUs with performance-based or time-based vesting conditions to non-executive employees for the purposes of attracting and retaining qualified employees. For 2019, the maximum RSU value that the CEO was authorized to award was $580,000 in the aggregate and $100,000 per award. The Compensation Committee has not delegated the authority to make executive awards.

We expect that we will continue to grant equity awards to the executive officers and other key employees, and to delegate authority to our CEO to make limited discretionary equity awards for attraction and retention purposes. We also expect to continue to make annual grants of restricted stock units with time-based vesting conditions to the Company’s directors.

The committee has not adopted a formal policy governing the timing of equity awards. However, we have generally made awards to officers in the first quarter of the fiscal year, and we expect to continue this practice.

INCENTIVE COMPENSATION CLAWBACK POLICY

In 2017, our Board of Directors adopted a compensation clawback policy that allows the independent directors, acting as a group, to cancel unvested incentive compensation and recover previously paid incentive compensation in the event a current or former executive officer engages in misconduct that contributes to the need for a material restatement of our financial results. Compensation awarded or earned during the 3-year period preceding the date as of which the Company is required to prepare a restatement is subject to clawback, provided that the compensation was awarded on or after the date the policy was adopted. In February 2019, the board amended and restated our clawback policy to permit the Company also to recover compensation based on a current or former executive officer’s egregious misconduct that causes significant reputational or financial harm to the Company. In the event of such misconduct the independent directors are authorized to cancel all unvested incentive compensation awards and require the return of compensation earned during the one-year period preceding the Company’s discovery of the misconduct. In determining the amount of compensation to recover under the policy, the independent directors may take into account any considerations they deem appropriate, including events that led to a financial restatement, the conduct of the executive, the impact of the misconduct, the cost of the recovery process, and the likelihood of successful recovery under governing law.

 

   

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    2020    

 

   

    

 

 

Executive Compensation Tables

SUMMARY COMPENSATION TABLE

The table below shows the compensation earned by the Company’s named executive officers during the years ended December 31, 2017, 2018 and 2019. Only 2018 and 2019 compensation is shown for Mr. Kochavatr and Ms. Kaner, who joined the Company in 2018, and only 2019 compensation is shown for Mr. McFarland, who joined the Company in 2019.

 

Name and

Principal Position

  Year     Salary
($)(2)
    Bonus
($)(3)
   

Stock

Awards
($)(4)

   

Non-Equity

Incentive Plan
Compensation
($)(5)

   

Change in

Pension Value

and
Non-Qualified

Deferred

Compensation

Earnings ($)(6)

   

All Other
Compensation
($)(7)

   

Totals

($)

 

 

Maria Pope

President and CEO(1)

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

876,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,124,935

 

 

 

 

 

 

 

 

 

861,406

 

 

 

 

 

 

 

 

 

134,472

 

 

 

 

 

 

 

 

 

69,058

 

 

 

 

 

 

 

 

 

4,065,948

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

789,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,499,987

 

 

 

 

 

 

 

 

 

853,078

 

 

 

 

 

 

 

 

 

10,032

 

 

 

 

 

 

 

 

 

63,782

 

 

 

 

 

 

 

 

 

3,216,062

 

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

540,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

545,362

 

 

 

 

 

 

 

 

 

333,540

 

 

 

 

 

 

 

 

 

88,124

 

 

 

 

 

 

 

 

 

71,937

 

 

 

 

 

 

 

 

 

1,579,454

 

 

 

 

 

James Lobdell

Senior Vice President, Finance, CFO and Treasurer

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

507,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

599,952

 

 

 

 

 

 

 

 

 

304,661

 

 

 

 

 

 

 

 

 

263,703

 

 

 

 

 

 

 

 

 

67,440

 

 

 

 

 

 

 

 

 

1,743,648

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

459,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

534,677

 

 

 

 

 

 

 

 

 

303,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,222

 

 

 

 

 

 

 

 

 

1,358,689

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

457,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

519,114

 

 

 

 

 

 

 

 

 

264,111

 

 

 

 

 

 

 

 

 

190,458

 

 

 

 

 

 

 

 

 

63,100

 

 

 

 

 

 

 

 

 

1,494,145

 

 

 

 

 

Lisa Kaner

Vice President, General Counsel and Corporate Compliance Officer

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

377,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

379,957

 

 

 

 

 

 

 

 

 

196,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,615

 

 

 

 

 

 

 

 

 

990,589

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

363,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

430,743

 

 

 

 

 

 

 

 

 

207,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,250

 

 

 

 

 

 

 

 

 

1,031,227

 

 

 

 

 

John McFarland

Vice President, Customer Solutions, Chief Customer Officer

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

208,846

 

 

 

 

 

 

 

 

 

150,000

 

 

 

 

 

 

 

 

 

359,938

 

 

 

 

   

 

89,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

241,112

 

 

 

 

 

 

 

 

 

1,049,075

 

 

 

 

               
               

 

John Kochavatr

Vice President, Information

Technology and Chief

Information Officer

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

353,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

237,996

 

 

 

 

 

 

 

 

 

175,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,134

 

 

 

 

 

 

 

 

 

867,779

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

300,442

 

 

 

 

 

 

 

 

 

200,000

 

 

 

 

 

 

 

 

 

430,973

 

 

 

 

 

 

 

 

 

148,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

263,438

 

 

 

 

 

 

 

 

 

1,343,084

 

 

 

 

                                                               

 

(1)

Ms. Pope was appointed President effective October 1, 2017 and CEO effective January 1, 2018. She previously served as Senior Vice President, Power Supply, Operations and Resource Strategy.

(2)

Amounts in the Salary column include base salary earned and, where applicable, the value of paid time off deferred under the 2005 MDCP.

(3)

Amounts shown in the Bonus column relate to cash signing bonuses received in connection with the commencement of employment.

(4)

Amounts shown in the Stock Awards column represent the aggregate grant date fair value of PSU and RSU awards, computed in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, excluding the effect of estimated forfeitures related to service-based vesting. The grant date fair values reported above will likely vary from the actual amount realized by the named executive officer based on a number of factors, including the number of RSUs and PSUs that ultimately vest and the closing market price of our common stock on the vesting date. For RSUs, we calculate grant date fair value by multiplying the number of shares underlying the award by the NYSE closing price per share of our common stock on the grant date. For PSUs, we calculate grant date fair value by assuming the satisfaction of performance-based goals at the “target” level for all metrics other than TSR and multiplying the corresponding number of shares earned by the NYSE closing price per share of our common stock on the grant date. For the TSR portion of the PSUs, fair value is determined using a Monte Carlo simulation. See Note 14 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional details regarding the assumptions made in the valuations reflected in this column.

 

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Table of Contents

EXECUTIVE COMPENSATION TABLES

 

If the maximum number of shares issuable under the PSUs had been used to calculate the grant date fair value of the PSUs, the value of the PSUs and the aggregate grant-date fair value of all stock awards for 2019 would have been as follows:

 

Name

   Maximum
2019 PSU Value
($)
   Maximum Total 2019
Stock Award Value
($)

 

Maria Pope

 

    

 

 

 

 

3,187,451

 

 

 

    

 

 

3,718,660

 

 

 

James Lobdell

 

    

 

 

899,928

 

 

    

 

 

1,049,916

 

 

 

Lisa Kaner

 

    

 

 

569,983

 

 

    

 

 

664,948

 

 

 

John McFarland

 

    

 

 

314,997

 

 

    

 

 

517,437

 

 

 

John Kochavatr

 

    

 

 

356,994

 

 

    

 

 

416,493

 

 

 

(5)

Amounts in the Non-Equity Incentive Plan Compensation column represent cash incentive awards earned under the Company’s 2008 Annual Cash Incentive Master Plan for Executive Officers (ACI Plan). The terms of the 2019 awards are discussed on page 33 in the section entitled “Annual Cash Incentive Awards.”

(6)

Amounts in this column include the increase in the actuarial present value of the named executive officers’ accumulated benefits under the Portland General Electric Company Pension Plan.

(7)

The amounts in the All Other Compensation table for 2018 are described in the table below.

 

Name

  

Dividend
Equivalent
Rights

($)(a)

  

401(k)
Contributions

($)(b)

  

Contributions
to 2005
MDCP

($)(c)

  

HSA
Contributions

($)(d)

  

Relocation
Expenses and
Related Tax
Gross-Ups

($)(e)

  

Long-Term
Disability
Insurance

($)(f)

  

Other

($)(g)

  

Total

($)

 

Maria Pope

 

    

 

 

 

 

43,639

 

 

 

    

 

 

18,762

 

 

    

 

 

 

 

    

 

 

1,750

 

 

    

 

 

 

 

    

 

 

4,800

 

 

    

 

 

107

 

 

    

 

 

69,058

 

 

 

James Lobdell

 

    

 

 

40,720

 

 

    

 

 

17,723

 

 

    

 

 

2,194

 

 

    

 

 

1,750

 

 

    

 

 

 

 

    

 

 

4,700

 

 

    

 

 

353

 

 

    

 

 

67,440

 

 

 

Lisa Kaner

 

    

 

 

1,751

 

 

    

 

 

29,462

 

 

    

 

 

 

 

    

 

 

1,750

 

 

    

 

 

 

 

    

 

 

3,625

 

 

    

 

 

27

 

 

    

 

 

36,615

 

 

 

John McFarland

 

    

 

 

 

 

    

 

 

19,177

 

 

    

 

 

166

 

 

    

 

 

1,313

 

 

    

 

 

218,530

 

 

    

 

 

1,883

 

 

    

 

 

43

 

 

    

 

 

241,112

 

 

 

John Kochavatr

 

    

 

 

3,721

 

 

    

 

 

29,242

 

 

    

 

 

507

 

 

    

 

 

1,750

 

 

    

 

 

61,625

 

 

    

 

 

3,246

 

 

    

 

 

43

 

 

    

 

 

100,134

 

 

 

(a)

Represents the value of dividend equivalent rights earned under restricted stock unit awards, which is not included in the Stock Awards column in the Summary Compensation Table.

(b)

Represents Company contributions to the named executive officers’ accounts under the 401(k) Plan.

(c)

Represents Company contributions to the named executive officers’ accounts under the 2005 MDCP. See page 28 under the heading “Non-Qualified Deferred Compensation” for a discussion of the terms of the 2005 MDCP.

(d)

Represents Company contributions to named executive officers’ individual health savings accounts.

(e)

Represents (i) in the case of Mr. McFarland, reimbursement of $123,114 in relocation-related expenses and a $95,886 tax gross-up of that amount, and (ii) in the case of Mr. Kochavatr, a $61,625 tax gross-up of reimbursements for relocation expenses that were incurred in 2018.

(f)

Represents Company contributions for long-term disability insurance.

(g)

Includes the value of ID theft protection, wellness plan incentive rewards and miscellaneous tax gross-ups.

 

   

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Table of Contents

    

 

    2020    

 

   

    

 

 

GRANTS OF PLAN-BASED AWARDS

The following table summarizes grants of plan-based awards made to the named executive officers in 2019.

 

          Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
     Estimated Future Payouts Under
Equity Incentive Plan Awards(2)
    

All Other
Stock
Awards
(Number  of
Units)(3)

        

Name

   Grant Date   

Threshold

($)

    

Target

($)

    

Maximum

($)

    

Threshold

(Number of

Shares)

    

Target

(Number of

Shares)

     Max
(Number
of
Shares)
    

Grant Date

Fair Value

($)(4)

 

 

Maria Pope

  

 

2/12/2019

 

  

 

 

 

 

413,462

 

 

 

 

  

 

 

 

 

826,923

 

 

 

 

  

 

 

 

 

1,240,385

 

 

 

 

              
  

 

2/13/2019

 

           

 

 

 

 

16,380

 

 

 

 

  

 

 

 

 

32,759

 

 

 

 

  

 

 

 

 

65,518

 

 

 

 

     

 

 

 

 

1,593,725

 

 

 

 

  

 

2/13/2019

 

                    

 

 

 

 

10,919

 

 

 

  

 

 

 

 

531,209

 

 

 

 

 

James Lobdell

  

 

2/13/2019

 

  

 

 

 

 

146,233

 

 

 

 

  

 

 

 

 

292,465

 

 

 

 

  

 

 

 

 

438,698

 

 

 

 

              
  

 

2/13/2019

 

           

 

 

 

 

4,625

 

 

 

 

  

 

 

 

 

9,249

 

 

 

 

  

 

 

 

 

18,498

 

 

 

 

     

 

 

 

 

449,964

 

 

 

 

  

 

2/13/2019

 

                    

 

 

 

 

3,083

 

 

 

  

 

 

 

149,988

 

 

 

 

 

 

Lisa Kaner

  

 

2/12/2019

 

  

 

 

 

 

94,279

 

 

 

 

  

 

 

 

 

 

188,558

 

 

 

 

 

 

  

 

 

 

 

282,836

 

 

 

 

              
  

 

2/13/2019

 

           

 

 

 

 

2,929

 

 

 

 

  

 

 

 

 

5,858

 

 

 

 

  

 

 

 

 

11,716

 

 

 

 

     

 

 

 

 

284,992

 

 

 

 

  

 

2/13/2019

 

                    

 

 

 

 

1,952

 

 

 

 

  

 

 

 

 

94,965

 

 

 

 

 

John McFarland

  

 

2/12/2019

 

  

 

 

 

 

44,394

 

 

 

 

  

 

 

 

 

88,788

 

 

 

 

  

 

 

 

 

133,183

 

 

 

 

              
  

 

4/23/2019

 

           

 

 

 

 

1,556

 

 

 

 

  

 

 

 

 

3,112

 

 

 

 

  

 

 

 

 

6,224

 

 

 

 

     

 

 

 

 

157,498

 

 

 

 

  

 

4/23/2019

 

                    

 

 

 

 

1,037

 

 

 

 

  

 

 

 

 

52,483

 

 

 

 

  

4/23/2019

 

 

                    

 

 

 

 

2,963

 

 

 

 

  

 

 

 

 

149,957

 

 

 

 

 

John Kochavatr

  

 

2/12/2019

 

  

 

 

 

 

84,423

 

 

 

 

  

 

 

 

 

168,846

 

 

 

 

  

 

 

 

 

253,269

 

 

 

 

              
  

2/13/2019

 

 

           

 

 

 

 

1,835

 

 

 

 

  

 

 

 

 

3,669

 

 

 

 

  

 

 

 

 

7,338

 

 

 

 

     

 

 

 

 

178,497

 

 

 

 

    

 

2/13/2019

 

                                                        

 

 

 

 

1,223

 

 

 

 

  

 

 

 

 

59,499

 

 

 

 

 

(1)

These columns show the range of potential payouts for cash incentive awards granted in 2019 under our ACI Plan. The amounts shown in the Threshold column reflect payouts at threshold performance, which are 50% of target awards. The amounts in the Target column reflect payouts at target performance, which are 100% of the target awards. The amounts shown in the Maximum column reflect maximum payouts, which are 150% of the target awards. See the section of the Compensation Discussion and Analysis entitled “Annual Cash Incentive Awards” on pages 33 to 36 for a description of the awards.

(2)

These columns show the estimated range of potential payouts for awards of PSUs granted in 2019 under our Stock Incentive Plan. The amounts shown in the Threshold column reflect the minimum number of PSUs that could vest, which is 50% of the target amount shown in the Target column. The number of PSUs shown in the Maximum column is equal to 200% of the target amount. See the section of the Compensation Discussion and Analysis entitled “Long-Term Equity Incentive Awards” on pages 37 to 41 for a description of the awards.

(3)

This column shows the number of RSUs granted to the named executive officers in 2019.

(4)

The grant date fair values for the PSUs assume performance at target levels. The grant date fair values of the awards of PSUs and RSUs to Mr. McFarland are based on a stock price of $50.61 (the closing price of the Company’s common stock on the grant date of April 23, 2019). The grant date fair values of the awards of PSUs and RSUs to the other named executive officers are based on a stock price of $48.65 (the closing price of the Company’s common stock on the grant date of February 13, 2019).

 

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EXECUTIVE COMPENSATION TABLES

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019

The following table summarizes the unvested equity-based awards held by our named executive officers at December 31, 2019.

 

Name

   Grant Date   Number of
Units of Stock That
Have Not Vested
    

Market Value

of Units of Stock

That Have Not
Vested

($)(1)

    

Equity
Incentive Plan

Awards: Number of

Unearned Units
That

Have Not Vested

($)

    

Equity Incentive

Plan Awards:

Market Value of

Unearned Units

That Have Not

Vested

($)(1)

 

Maria Pope

  

02/14/2018(2)

       

 

37,556

  

 

2,095,249

  

02/13/2019(3)

       

 

32,759

  

 

1,827,625

  

02/13/2019(4)

 

 

10,919

  

 

609,171

     

James Lobdell

  

02/14/2018(2)

       

 

13,387

  

 

746,861

  

02/13/2019(3)

       

 

9,249

  

 

516,002

  

02/13/2019(4)

 

 

3,083

  

 

172,001

     

Lisa Kaner

  

02/14/2018(2)

       

 

8,281

  

 

461,997

  

02/13/2019(3)

       

 

5,858

  

 

326,818

  

02/13/2019(4)

 

 

1,952

  

 

108,902

     

John McFarland

  

04/23/2019(3)

       

 

3,112

  

 

173,618

  

04/23/2019(4)

 

 

1,037

  

 

57,854

     
  

04/23/2019(5)

 

 

2,963

  

 

165,306

     

John Kochavatr

  

02/14/2018(2)

       

 

5,783

  

 

322,634

  

02/13/2019(3)

       

 

3,669

  

 

204,694

  

02/01/2018(6)

 

 

2,399

  

 

133,840

     
    

02/13/2019(4)

 

 

1,223

  

 

68,231

 

                 

 

(1)

Market value is based on the NYSE closing price of our common stock on December 31, 2019, which was $55.79.

(2)

Amounts in these rows relate to awards of PSUs with a three-year performance period ending December 31, 2020 granted under the 2018 LTI Award Program. Pursuant to SEC rules, the PSUs are represented at the target amount of shares that may be earned under the awards. The actual number of shares that will vest under the PSUs (if any) will be determined based on the Company’s performance relative to the metrics for the awards (ROE as a percentage of allowed ROE and relative TSR), subject to the approval of the Compensation Committee. The amount shown does not represent our estimate of the actual achievement to date under the awards.

(3)

Amounts in these rows relate to awards of PSUs with a three-year performance period ending December 31, 2021 granted under the 2019 LTI Award Program. Pursuant to SEC rules, the PSUs are represented at the target amount of shares that may be earned under the awards. The actual number of shares that will vest under the PSUs