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.          )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 14, 2018

 

Dear Shareholders:

 

You are invited to attend the 2018 Annual Meeting of Shareholders to be held at 9:00 a.m., Eastern Daylight Time, on Wednesday, September 12, 2018. The meeting will be held at the Columbia Conference Center, 169 Laurelhurst Avenue, Columbia, South Carolina 29210. Directions are on the back of the admission ticket and on page 72 of this Proxy Statement. An admission ticket is required and is enclosed as part of your proxy card if you were a shareholder of record on the record date, July 25, 2018. If you hold your shares through a broker or other nominee, you must provide proof of ownership on the record date in order to attend the meeting.

 

Our 2018 Proxy Statement includes a Board proposal for the declassification of our Board of Directors. Our Board is committed to strong corporate governance practices. In considering the prior shareholder proposals we have received, as well as the support of institutional investor groups for the annual election of directors, the Board has decided to once again propose an amendment to our Articles of Incorporation to declassify our Board of Directors and to submit it to our shareholders.

 

Enclosed are the Notice of Annual Meeting identifying the five proposals that will be presented at the meeting, and SCANA’s Proxy Statement and form of proxy for the meeting. We are including SCANA’s annual consolidated financial statements, management’s discussion and analysis of financial condition and results of operations and related annual report information as an appendix to the Proxy Statement.

 

Your vote is important. We encourage you to read the Proxy Statement and vote your shares as soon as possible. Please vote today either by telephone or Internet, or by signing, dating and mailing your proxy card or broker’s or other nominee’s voting instruction form in the envelope enclosed. Telephone and Internet voting permits you to vote at your convenience, 24 hours a day, seven days a week. Detailed voting instructions are included on the back of your proxy card or broker’s or other nominee’s voting instruction form.

 

Sincerely,

 

 

D. Maybank Hagood

Chairman of the Board

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder List

 

Upon written request by a shareholder, a list of shareholders entitled to vote at the meeting will be available for inspection at SCANA’s Corporate Headquarters, 100 SCANA Parkway, Cayce, South Carolina 29033, during business hours from August 14, 2018 through the date of the meeting.

 

Admission to the Meeting

 

An admission ticket or proof of share ownership as of the record date is required. If you plan to use the admission ticket, please remember to detach the admission ticket from your proxy card before mailing your proxy card. If you hold your shares through a broker or other nominee, you must provide proof of ownership by bringing either a copy of the voting instruction card provided by your broker or other nominee or a brokerage statement showing your share ownership as of July 25, 2018. Audio or visual recording, and related equipment, is strictly prohibited without SCANA’s prior written approval.

 

Meeting Attendance

 

If you vote by mail and plan to attend the meeting, please indicate your intention to do so on your proxy card. If you vote by telephone or Internet, please follow the instructions to indicate that you plan to attend the 2018 Annual Meeting. If you require handicap assistance to attend the meeting, please contact the Corporate Governance Office, at 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033, or call 803-217-7568 no later than Wednesday, September 5, 2018.

 

By Order of the Board of Directors,

 

Gina Champion

Vice President

Corporate Secretary

Deputy General Counsel

 

TABLE OF CONTENTS

 

 

 

 

 

 

SCANA Corporation

100 SCANA Parkway

Cayce, South Carolina 29033

PROXY STATEMENT

 

PROXY STATEMENT SUMMARY

 

This summary highlights information discussed in more detail elsewhere in this proxy statement, and does not include all the information you should consider in deciding how to vote. You should read the entire proxy statement carefully before voting. Page references are provided to help you locate the information in this proxy statement. These proxy materials are first being mailed to shareholders on or about August 14, 2018.  

 

Annual Meeting of Shareholders

 

Matters to be Voted on and Board Recommendations

Proposal 1 — Election of the following four Class I Directors, each to serve a three year term (with the exception of Mr. Sloan whose term will expire at the 2019 Annual Meeting as a result of his reaching our mandatory retirement age) (page 10):

— Election of the following two Class II Directors, each to serve until the 2019 Annual Meeting

Proposal 2 — Advisory (non-binding) vote to approve executive compensation (page 64)

 

Proposal 3 — Approval of the appointment of the independent registered public accounting firm (page 66) 

 

Proposal 4 —  Approval of Board-proposed amendments to Article 8 of our Articles of Incorporation to declassify the Board of Directors and provide for the annual election of all directors (page 67)

 

Proposal 5 — Vote on shareholder proposal for assessment of the impact of public policies and technological advances consistent with limiting global warming (page 69)

 

How to Cast Your Vote

If you hold your shares directly in your own name, you can vote by any of the following methods:

If you hold your shares in street name, follow the instructions provided by your broker or nominee to direct your vote.

Your Vote is Important

 

Whether or not you plan to attend the Annual Meeting, please vote your shares as soon as possible.

 

Nominees For Directors

 

Special Litigation Committee Board Nominees

 

Two of the nominees shown above, Dr. Galloway and Mr. Bachman, have been elected by the Board to serve until the 2018 Annual Meeting and are being submitted as Board nominees for election by shareholders at the 2018 Annual Meeting to serve until the 2019 Annual Meeting.  Both Dr. Galloway and Mr. Bachman have been appointed to serve on an independent Special Litigation Committee.  The Special Litigation Committee has been created by the Board to investigate, review, and analyze the facts and circumstances surrounding the claims and allegations made in shareholder derivative actions filed in state and federal courts and in shareholder litigation demand letters, and to determine whether it is in the best interests of the Company and its shareholders for the Company to pursue the claims asserted in the shareholder derivative actions or litigation demand letters or to take other remedial action concerning the matters raised by the shareholder derivative actions or litigation demand letters.

 

Governance Highlights

 

We are committed to high standards of corporate governance and our Governance Principles are intended to promote the long-term success of our Company. Some highlights of our corporate governance practices are listed below.

 

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Why am I receiving these proxy materials?

 

You are receiving these proxy materials in connection with the solicitation by the Board of Directors of SCANA Corporation (“SCANA,” the “Company,” “we” or “us”), a South Carolina corporation, of proxies to be voted at our 2018 Annual Meeting of Shareholders (the “Annual Meeting”), which will be held at 9:00 a.m., Eastern Daylight Time on Wednesday, September 12, 2018, and at any adjournment or postponement of the meeting. The meeting will be held at Columbia Conference Center, 169 Laurelhurst Avenue, Columbia, South Carolina 29210.  

 

These materials do not relate to the separate Special Meeting of Shareholders that was held on July 31, 2018, in connection with the proposed merger of Sedona Corp., a wholly-owned subsidiary of Dominion Energy, Inc. (“Dominion Energy”), into SCANA, for which a Proxy Statement/Prospectus, dated June 8, 2018, was previously sent to SCANA shareholders of record on May 31, 2018.

 

On what am I being asked to vote and what are the Board of Directors’ recommendations?

 

The following table lists the proposals scheduled to be voted on and the vote required for approval of each proposal:

*These votes are advisory and the results are not binding on the Board of Directors or the Company.

 

Who may vote?

 

You will only be entitled to vote at the Annual Meeting if our records show that you were a shareholder of record on July 25, 2018, the record date, or if you hold your shares in street name, you present proof of ownership and appropriate voting documents from the record shareholder.

 

How do I vote shares that I hold directly in my name?

 

If you hold your shares directly, you may vote by proxy or in person at the meeting. To vote by proxy, you may select one of the following options: telephone, Internet or mail.

Vote by Telephone:

 

You may vote your shares by telephone using the toll-free number shown on your proxy card. Telephone voting is available 24 hours a day, seven days a week. Clear and simple voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by telephone, please DO NOT return your proxy card.

 

Vote by Internet:

 

You may vote your shares by Internet. The website for Internet voting is shown on your proxy card. Internet voting is available 24 hours a day, seven days a week. When you vote by Internet, you will be given the opportunity to confirm that your instructions have been properly recorded. If you vote by Internet, please DO NOT return your proxy card.

 

Vote by Mail:

 

If you choose to vote by mail, please mark the enclosed proxy card, date and sign it, detach your meeting admission ticket, and return your proxy card in the enclosed postage-paid envelope.

 

If I hold my shares directly, what actions will the proxies take?

 

If you hold your shares directly and indicate your voting choices on your proxy card, the persons identified as proxies on the accompanying proxy card will vote your shares according to your instructions. If your proxy card is signed and returned without specifying choices, the proxies intend to vote your shares FOR all of the Board of Director nominees; FOR Proposal 2 relating to approval of executive compensation; FOR Proposal 3 relating to approval of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for 2018; FOR Proposal 4 relating to the Board-proposed amendments to Article 8 of our Articles of Incorporation to declassify the Board of Directors and provide for the annual election of all directors; and AGAINST Proposal 5 relating to the shareholder proposal for assessment of the impact of public policies and technological advances consistent with limiting global warming.

 

The Board knows of no other matters to be presented for shareholder action at the Annual Meeting. If other matters are properly brought before the Annual Meeting, the persons identified as proxies on the accompanying proxy card intend to vote the shares represented by proxies in accordance with their best judgment.

 

How do I direct the vote of shares I hold in street name?

 

If you hold shares in street name, you may direct your vote by submitting your voting instructions to your broker or nominee. Please refer to the voting instructions provided by your broker or nominee.    If you hold your shares in street name and return a signed voting instruction form that does not indicate your voting instructions, the broker or nominee is nonetheless permitted to vote your shares on Proposal 3, the approval of the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm, even though the broker or nominee has not received voting instructions from you. However, a broker or nominee is not permitted to vote your shares on the election of directors or on Proposals 2, 4, or 5 unless you provide signed voting instructions. Accordingly, if you do not return a broker or nominee voting instruction card, or if you return a broker or nominee voting instruction card that is not signed or does not indicate how you want your broker or nominee to vote on election of directors or on Proposals 2, 4, or 5 a broker “non-vote” will occur as to those matters.  A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee has not received instructions from the beneficial owner and either (i) does not have discretionary voting power for that particular proposal, or (ii) chooses not to vote the shares.  Therefore, it is very important that you provide your broker or nominee with signed voting instructions if your shares are held in street name. 

 

How do I vote shares I hold as a participant in the SCANA Corporation 401(k) Retirement Savings Plan (formerly named the SCANA Corporation Stock Purchase-Savings Plan)?

 

If you own shares of SCANA common stock as a participant in the SCANA Corporation 401(k) Retirement Savings Plan (formerly named the SCANA Corporation Stock Purchase-Savings Plan), you will receive a separate proxy card that covers only your Plan shares. Proxies executed by Plan participants will serve as instructions to the Plan’s trustee as to how Plan shares are to be voted. If you do not instruct the Plan’s trustee how your Plan shares are to be voted, the Plan trustee will instruct the proxy agents to vote your shares proportionally to the Plan shares voted. As a result of this proportional voting, if voting instructions are given for only a small percentage of participant shares, the wishes of those participants would determine the voting instructions by the Plan’s trustee. Accordingly, the greater the number of

participant shares for which participants complete and execute proxies, the more representative the Plan trustee’s voting instructions will be.

 

May I change or revoke my proxy instructions?

 

Yes, you may change or revoke your proxy instructions at any time prior to the vote at the Annual Meeting. If you hold your shares directly in your name, you may accomplish this by granting a new proxy (by telephone, Internet or mail) bearing a later date (which automatically revokes the earlier proxy) or by attending the Annual Meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request. If you hold your shares in street name, you may change or revoke your proxy instructions by properly submitting new voting instructions to your broker or nominee.

 

May I vote in person at the Annual Meeting?

 

The method by which you vote will not limit your right to vote at the Annual Meeting if you decide to attend in person. However, if you wish to vote at the meeting and your shares are held in the name of a broker or other nominee of record, you must obtain a proxy executed in your favor from the holder of record prior to the meeting. Directions to the location of the Annual Meeting are on the back of the proxy card included with this mailing and on page 72.  

 

What constitutes a quorum?

 

At the close of business on the record date, July 25, 2018, there were 142,916,917 shares of SCANA common stock outstanding and entitled to vote at the Annual Meeting. Each share is entitled to one vote on each proposal.

 

The presence, in person or by proxy, of the holders of a majority of the shares entitled to vote at the Annual Meeting is necessary to constitute a quorum. Abstentions, “withheld” votes and broker “non-votes” are counted as present and entitled to vote for purposes of determining a quorum.

 

What vote is needed to approve the matters submitted?

 

Proposal 1 — Election of Directors

 

The affirmative vote of a plurality of the votes cast is required for the election of directors. However, service on the Board following an uncontested election of directors is subject to the Board of Directors’ policy regarding resignations by directors for whom more voting instructions received by the Company withhold authority to vote than grant authority to vote “For” the director. (See “Governance Information – Majority Withheld Director Resignation Policy.”) “Plurality” means that if there were more nominees than positions to be filled, the individuals who received the largest number of votes cast for directors would be elected as directors. Because there are the same number of nominees as positions to be filled, we expect all nominees to be elected. Votes indicated as “withheld” and broker “non-votes” will not be deemed cast for nominees and will have no effect on the outcome of the election.  If you hold your shares in street name and fail to instruct your broker or nominee how to vote, a broker “non-vote” on election of directors will occur with respect to your shares.

 

The Board knows of no reason why any of the nominees for director named herein would at the time of election be unable to serve. In the event, however, that any nominee named should, prior to the election, become unable to serve as a director, your proxy will be voted for such other person or persons as the Board may recommend.

 

 

Proposal 2 — Advisory (non-binding) Vote to Approve Executive Compensation

 

This proposal will be approved if more shares vote in favor of the proposal than against.  However, this proposal is advisory and non-binding on us and on our Board of Directors. Marking the proxy card or your broker voting instructions “For” indicates support; marking the proxy card or your broker voting instructions “Against” indicates lack of support. You may also abstain by marking the “Abstain” box on the proxy card or your broker voting instructions. If you hold your shares in street name and fail to instruct your broker how to vote, a broker “non-vote” will occur with respect to your shares. Abstentions and broker non-votes will have no effect on the outcome.

 

 

Proposal 3 — Approval of the Appointment of Deloitte & Touche LLP as the Independent Registered Public Accounting Firm for 2018 

 

The appointment of Deloitte & Touche LLP as our independent registered public accounting firm will be approved if more shares are voted for approval than are voted against. Accordingly, abstentions and broker “non-votes” will have no effect on the results. If you hold your shares in street name and return signed voting instructions, but fail to instruct your broker or nominee how to vote, your broker or nominee will, nonetheless, have discretionary authority to vote your shares if it chooses to do so.

 

 

Proposal 4 — Approval of Board-Proposed Amendments to Article 8 of our Articles of Incorporation to Declassify the Board of Directors and Provide for the Annual Election of All Directors

 

The proposal to amend our Articles of Incorporation to declassify the Board of Directors and provide for the annual election of all directors requires the affirmative vote of at least 80% of all outstanding shares of our common stock. Votes indicated as “abstain” and broker “non-votes” will have the effect of votes against the proposal. If you hold your shares in street name and fail to instruct your broker or nominee how to vote, a broker “non-vote” will occur with respect to your shares.

 

 

Proposal 5 — Shareholder Proposal for Assessment of the Impact of Public Policies and Technological Advances Consistent with Limiting Global Warming

 

This proposal will be approved if more shares vote in favor of the proposal than against.  However, this shareholder proposal is simply a request that the Board take the action stated in the proposal and is not binding on the Board.  Furthermore, shareholder approval is not binding on the Board.  Nevertheless, the Board will review the results of the voting and determine what action, if any, is appropriate.  If you hold your shares in street name and fail to instruct your broker how to vote, a broker non-vote will occur with respect to your shares. Abstentions and broker non-votes will have no effect on the outcome.

QUESTIONS AND ANSWERS ABOUT EXECUTIVE COMPENSATION

Did the Company’s financial performance and shareholder return results in 2017 affect compensation paid to the Company’s Named Executive Officers for 2017?

 

Yes.    

 

No payouts were made for 2017 under the Short-Term Annual Incentive Plan.  We did not meet our 2017 earnings per share goals under the Short-Term Annual Incentive Plan. Therefore, no portion of the earnings per share component of the award was earned for 2017.  Although all of our Named Executive Officers achieved at least a portion of their individual and business unit performance objectives under the plan, the Board exercised its negative discretion under the plan and determined that no payouts would be made, even on these earned awards.  The Board also extended this negative discretion to all of our other officers and determined that no payouts would be made to any of them, even on earned awards.

 

Restricted Stock Unit awards granted under the Long-Term Equity Compensation Plan for the 2015-2017 performance period were forfeited.  We did not achieve 2017 year-end positive earnings per share as required for the 2015-2017 performance period under the Long-Term Equity Compensation Plan.  Therefore, the restricted stock units awarded to all of our officers, including our Named Executive Officers, for this performance period were forfeited. 

 

The portion of performance share awards granted under the Long-Term Equity Compensation Plan for the 2015-2017 performance period that were based on Total Shareholder Return were forfeited.  Our Total Shareholder Return for the 2015-2017 performance period was below the threshold level, and as a result, the portion of the 2015-2017 performance share awards based on this component of the award was forfeited for all of our officers, including our Named Executive Officers.

 

Was compensation paid to Messrs. Marsh and Byrne for 2017 further affected by their retirements at the end of 2017?

 

Yes.  As a result of their retirements, Mr. Marsh and Mr. Byrne forfeited performance share awards under the Long-Term Equity Compensation Plan with a total grant date fair value of $2,200,619 and $799,569, respectively.

INFORMATION ABOUT EXPERIENCE AND QUALIFICATION OF DIRECTORS AND NOMINEES

 

We believe the combined business and professional experience of our Directors, and their various areas of expertise, make them a useful resource to management and qualify them for service on our Board.  Additionally, the business and personal experience, gender, racial, cultural, and geographic diversity of our Directors affords a broad range of perspectives as they consider, discuss, and act on the issues and challenges that face our Company.

 

Varying Degrees of Director Tenure – Depth of Institutional Experience Augmented by New Ideas and Perspectives

 

Many of our Directors, including Ms. Miller and Messrs. Bennett, Hagood, and Sloan, have served on our Board for over fifteen years. During their tenures, they have gained considerable institutional knowledge about our Company, its operations, and its various regulators, which has made them effective Directors. Because our Company’s operations and business structure are extremely complex and highly regulated, continuity of service and the development and retention of institutional knowledge help make our Board more efficient and effective at advising us regarding our long-range strategic plans, goals and objectives, as well as any immediate issues, than would be the case if there were frequent turnover in Board membership.

 

Nonetheless, we also believe it is important to have varying degrees of tenure on our Board, and we currently have five Directors with less than five years’ experience serving on our Board. We believe a wide range of tenure, and periodically bringing new members onto the Board, allows our Board the opportunity to consider new ideas, perspectives and processes, while the experience of our more tenured Directors provides specific, historical perspective and context relating to our strengths and weaknesses. From time to time, we may also bring new directors onto the Board to help us with special projects, as is the case with Dr. Galloway and Mr. Bachman, who were elected by the Board and have been nominated for election by shareholders, and they both have been appointed to serve on the newly created Special Litigation Committee of the Board.

Long-Standing Commitment to Board Diversity

We have a long-standing commitment to board diversity and independence, and we are very intentional about maintaining them.  Our current Board has a diversity rate of over 50%.  We first elected a woman to our Board in 1994 and currently have three women on our Board.  We first elected an African American to our Board in 1983, and continuously since 1997, we have had at least two African Americans on our Board.  For decades, our Board has been comprised of women and minorities, and one of our most recently nominated and elected directors brings a unique cultural perspective with a Hispanic heritage.  In addition, we seek geographic diversity in our directors and we have several directors who reside outside of our business territory.  We also consider diversity of a potential director’s skill sets and business and personal experience, and we have historically selected directors with business backgrounds from global manufacturing, professional services such as accounting, financial, legal, agricultural, environmental and academia.  All of our directors are independent.       

Director Business Ownership, Financial, Operational and Regulatory Experience

In addition to their other qualifications, seven of our directors, Mrs. Decker, Dr. Galloway, Ms. Miller and Messrs. Cecil, Hagood, Roquemore and Sloan, are, have been or were prior to retirement, business owners with financial and operational experience on all levels of their businesses. Each of these directors brings a unique perspective to our Board.  Furthermore, four of our directors, Ms. Miller and Messrs. Bennett, Roquemore and Sloan, are, or have been, directors or executive officers of banks and/or bank holding companies. This service has provided them with meaningful experience in another highly regulated industry, which provides them with valuable instincts and insights that can be translated to our industry. Three of our directors, Ms. Miller, Mrs. Decker and Mr. Trujillo, have served on boards or as executives of businesses in multiple industries, which provides them with varied industry perspectives.  Dr. Galloway, one of our newest directors, is a licensed engineer in 15 states, as well as  Australia and Manitoba, Canada, and has experience with the regulated utility, energy and infrastructure industries.  She is also a licensed arbitrator.  Two of our directors are certified public accountants who practiced with global accounting firms – one, Mr. Aliff, focused his practice on energy and natural resources, and the other, Mr. Bachman, focused his practice on audit and risk management, all of which are areas important to our business.

 

 

 

Relatively Young Director Mandatory Retirement Age

For over two decades, we have also had a relatively young mandatory director retirement age of 69, and we have not moved to increase our mandatory retirement age even as other companies have increased their mandatory retirement age to 72 or older.  This relatively young mandatory retirement age has afforded us with ample opportunity to recruit new directors and thus seek new skills and expertise that closely align with our current needs and anticipated strategic initiatives.

When Directors reach mandatory retirement age or otherwise leave our Board, we seek replacements who we believe will make significant contributions to our Board for a variety of reasons, including among others, business and financial experience and expertise, business and government contacts, relationship skills and industry knowledge.

Special Litigation Committee Nominees

Two of the Board nominees for election at the Annual Meeting, Dr. Galloway and Mr. Bachman, were elected as directors by the Board in July, 2018, to serve until the Annual Meeting, and they have been nominated by the Board for election by shareholders at the Annual Meeting.  Dr. Galloway and Mr. Bachman also have been appointed to serve on an independent Special Litigation Committee created by the Board to investigate, review, and analyze the facts and circumstances surrounding the claims and allegations made in shareholder derivative actions filed in state and federal courts and in shareholder litigation demand letters, and to determine whether it is in the best interests of the Company and its shareholders for the Company to pursue the claims asserted in the shareholder derivative actions or litigation demand letters or to take other remedial action concerning the matters raised by the shareholder derivative actions or litigation demand letters.  Dr. Galloway and Mr. Bachman were recommended to the Board by an independent third party executive recruiting firm.

 

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

The Board has set the number of Directors at eleven. The Board is divided into three classes with the members of each class usually serving a three-year term. The terms of the Class I Directors will expire at the Annual Meeting. The Board has decided to nominate the existing Class I Directors, Ms. Miller and Messrs. Bennett, Roquemore and Sloan, for reelection at the 2018 Annual Meeting of Shareholders to serve until the 2021 Annual Meeting of Shareholders, and has nominated Dr. Galloway and Mr. Bachman as Class II Directors to serve until the 2019 Annual Meeting of Shareholders, or until their successors are elected and qualified to serve.  Because Mr. Sloan will reach the age of 70 in October 2019, his term as a director will expire in accordance with our Articles of Incorporation as of the Annual Meeting of Shareholders in 2019.

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL” OF ITS DIRECTOR NOMINEES.

 

 

Information about Directors and Nominees

 

The information set forth on the following pages about the nominees and continuing directors has been furnished to us by such persons. Each of the directors and director nominees is also a director of our subsidiary, South Carolina Electric & Gas Company. There are no family relationships among any of our directors, director nominees or executive officers. 

If we complete the merger transaction with Dominion Energy, the terms of all of our directors will terminate at the effective date of the merger.

NOMINEES FOR DIRECTOR

 

Class I Directors — Terms to Expire at the Annual Meeting in 2021 

 

 

 

 

 

NOMINEES FOR DIRECTOR

 

Class I Directors — Terms to Expire at the Annual Meeting in 2021 

 

*Mr. Sloan is currently a member of Class I, but because he will reach our mandatory retirement age, his term as director will expire in accordance with our Articles of Incorporation at the 2019 Annual Meeting. 

 

 

NOMINEES FOR DIRECTOR

 

Class II Directors — Terms to Expire at the Annual Meeting in 2019 

 

 

CONTINUING DIRECTORS

 

Class II Directors — Terms to Expire at the Annual Meeting in 2019

 

 

 

CONTINUING DIRECTORS

 

Class III Directors — Terms to Expire at the Annual Meeting in 2020

 

 

 

CONTINUING DIRECTORS

 

Class III Directors – Terms to Expire at the Annual Meeting in 2020

 

 

 

 

BOARD MEETINGS — COMMITTEES OF THE BOARD

 

The Board held four quarterly Board meetings, 17 additional Board meetings (both in-person and telephonic), one Code of Conduct and Ethics training session, one Federal Energy Regulatory Commission training session, and several strategy sessions in 2017. Each incumbent director attended at least 75% of all meetings of the Board and Committees of which he or she was a member during 2017. Our directors are expected to attend our Annual Meeting of Shareholders, and all of our directors attended the 2017 Annual Meeting of Shareholders.

 

Committees of the Board

 

The table below identifies the members of each of the Board’s Committees as of December 31, 2017. The information below the table identifies the current members of each Board Committee and briefly summarizes the principal functions of each Committee. The Charters of the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee, can be found on SCANA’s website at www.scana.com (which is not intended to be an active hyperlink; the information on SCANA’s website is not part of this proxy statement or any report filed with the Securities and Exchange Commission) under the caption, “About – Corporate Governance,” and copies are also available in print upon request to the Corporate Governance Office, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033.

 

 

 

 

In addition, the Audit Committee appoints (subject to ratification by the shareholders) the independent registered public accounting firm, approves and reviews the scope of each year’s audit, and exercises oversight of the firm’s work. The Committee also sets the compensation of the independent registered public accounting firm and pre-approves all services to be performed by the firm. Additionally, the Audit Committee evaluates the independent registered public accounting firm’s qualifications, performance and independence, including a review of the lead audit partner’s performance, taking

into account the opinions of the Company’s management and internal auditors, and assures regular rotation of the lead audit partner as required by law. Further discussion regarding the Audit Committee’s pre-approval of such audit services and associated fees can be found under “Pre-Approval of Auditing Services and Permitted Non-Audit Services” on page 66.  

 

The Audit Committee also reviews the scope and effectiveness of our risk management program which includes the review of quarterly reports pertaining to significant risks. The Committee’s role in risk oversight is discussed in more detail on page 21 under the heading “Board’s Role in Risk Oversight.” Additionally, the Audit Committee reviews, on a quarterly basis, the responsibilities and effectiveness of our internal auditing and corporate compliance departments, and reviews reports from those departments regarding the Company’s conformity with applicable legal requirements and with our Code of Conduct. The Committee reviews with management its assessment of internal controls over financial reporting and disclosure controls and procedures. The Audit Committee also reviews with the Board of Directors our compliance with legal, regulatory, and ethical requirements, and the performance and independence of our external auditors and the performance and independence from management of our internal auditors. Additionally, the Committee constitutes the Qualified Legal Compliance Committee.

 

On an annual basis, the Committee evaluates its own performance and the adequacy of its charter, and recommends to the Board of Directors any improvements to the charter that the Committee deems appropriate.

 

The Committee met five times during 2017. For a full list of responsibilities, see the Audit Committee’s Charter at www.scana.com (which is not intended to be an active hyperlink; the information on SCANA’s website is not part of this proxy statement or any report filed with the Securities and Exchange Commission) under the caption “About – Corporate Governance – Audit Committee.”

 

The Board has determined that Mr. Aliff is our “audit committee financial expert” as defined under Item 407(d)(5) of the Securities and Exchange Commission’s Regulation S-K. Mr. Aliff is independent as defined by the New York Stock Exchange Listing Standards.

 

 

Additionally the Committee reviews succession and continuity planning with the Chief Executive Officer, reviews operating performance relative to the Company’s bonus and incentive programs and reviews management’s Compensation Discussion and Analysis relating to executive compensation prior to its inclusion in our proxy statement. Further, the Committee approves the inclusion of a Compensation Committee Report in our proxy statement as well as reviews the level of SCANA stock ownership by senior executive officers to determine if each is in compliance with the Company’s minimum ownership requirement, and, as may be requested and appropriate, grants temporary waivers from such requirements.

 

The Committee met three times during 2017. For a full list of responsibilities, see the Compensation Committee’s Charter at www.scana.com (which is not intended to be an active hyperlink; the information on SCANA’s website is not part of this proxy statement or any report filed with the Securities and Exchange Commission) under the caption “About – Corporate Governance – Compensation Committee.”

 

 

 

 

 

 

 

increase in the size of the Board), recommends to the Board in accordance with the Director Qualification Criteria an individual to fill such vacancy either through appointment by the Board or through election by shareholders.

 

The Committee also reviews the independence of SCANA’s Directors as defined by the New York Stock Exchange and as set forth in SCANA’s Governance Principles and makes recommendations to the Board regarding director independence. The Committee reviews the level and form of director compensation and recommends changes to the Board for consideration and approval. At least annually, the Committee reviews the level of SCANA stock ownership by directors to determine if each director is in compliance with the Company’s minimum share ownership requirement. Additionally, the Committee reviews reports and disclosures of insider and affiliated party transactions and makes recommendations to the Board regarding such transactions.

 

The Committee periodically evaluates the desirability of, and recommends to the Board, any changes in the size, composition, organization and operational structure of the Board. The Committee, annually, or to fill vacancies, identifies Board members qualified to serve on committees of the Board in accordance with the Board Committee Member Qualifications, and recommends such persons to the Board for appointment to such committees, including a recommended Chairperson for each committee. Annually, or to fill vacancies, the Committee also recommends to the Board the appointment of a Lead Director (or, in the case of an independent Chairman of the Board being appointed, whether to eliminate the position of Lead Director). The Committee annually reviews the membership and responsibilities of Board committees and recommends to the Board any changes that may be appropriate, and reviews and revises as necessary, SCANA’s Governance Principles, taking into account provisions of the Securities Exchange Act of 1934, the listing standards of the New York Stock Exchange and any other source or sources the Committee deems appropriate. The Committee also provides guidance and assistance, as needed, to the Board in performing the Board’s annual self evaluation.

 

The Committee met four times during 2017. For a full list of responsibilities, see the Nominating and Governance Committee’s Charter at www.scana.com (which is not intended to be an active hyperlink; the information on SCANA’s website is not part of this proxy statement or any report filed with the Securities and Exchange Commission) under the caption “About – Corporate Governance – Nominating and Governance Committee.”

 

 

 

 

Special Litigation Committee

 

In addition to the Committees described above, in July 2018, the Board established a Special Litigation Committee as described on pages 2 and 10 of this Proxy Statement.  Our new directors, Mr. Bachman and Dr. Galloway, are the only directors serving on the Special Litigation Committee.  Dr. Galloway is Chair of the Committee.

 

GOVERNANCE INFORMATION

 

Governance Principles

 

Our Governance Principles can be found on our website at www.scana.com (which is not intended to be an active hyperlink; the information on SCANA’s website is not part of this proxy statement or any report filed with the Securities and Exchange Commission) under the “About – Corporate Governance – Governance Principles” caption, and are also available in print upon request to the Corporate Governance Office, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033.

 

Director Independence

 

Our Governance Principles require that a majority of our directors be independent under the New York Stock Exchange Listing Standards and under any Director Qualification Standards recommended by the Board of Directors. To be considered “independent” pursuant to the SCANA Director Qualification Standards, a director must be determined by resolution of the Board as a whole, following thorough deliberation and consideration of all relevant facts and circumstances, to have no material relationship with us except that of director and to satisfy the independence standards of the New York Stock Exchange. Under the SCANA Director Qualification Standards, a director is required to be unencumbered and unbiased and able to make business judgments in our long-term interests and those of our shareholders as a whole, to deal at arm’s length with us, and to disclose all circumstances material to the director that might be perceived as a conflict of interest. The Director Qualification Standards are set forth in our Governance Principles, which are available on our website as noted above and further described herein under “Director Qualification Criteria” on page 23.  

 

Our Governance Principles also prohibit Audit Committee members from having any direct or indirect financial relationship with us other than the ownership of our securities and compensation as directors and committee members.

 

The Board has determined that all of our current directors and director nominees are independent under the New York Stock Exchange Listing Standards and our Governance Principles. Mr. Micali, who served as a director until the 2017 Annual Meeting, was also independent under the New York Stock Exchange Listing Standards and our Governance Principles.  Mr. Marsh, who served as our Chairman and Chief Executive Officer until his retirement, was not independent. The Board has also determined that each member of the Audit Committee, Compensation Committee, and Nominating and Governance Committee is independent under the New York Stock Exchange Listing Standards and our Governance Principles.

 

Board Leadership Structure, Executive Sessions of Non-Management Directors and Lead Director

 

Our bylaws provide for a Chairman of the Board, to be chosen by the Board from among its members, who shall, if present, preside at meetings of the shareholders and Board of Directors, who may call special meetings of the shareholders and the Board of Directors, and who shall perform such other duties as may be assigned by the Board. The bylaws also permit the Chief Executive Officer, if he or she is a member of the Board, to be chosen as the Chairman. Our

Governance Principles historically provided for the positions of Chairman and Chief Executive Officer to be held by the same person, and for more than 20 years, until the retirement of Mr. Marsh as our Chief Executive Officer and Chairman of the Board, our Chief Executive Officer had been chosen as Chairman of the Board. This leadership structure served us well for over two decades.  

 

However, after Mr. Marsh’s retirement, in light of the novel and complex issues currently facing us, the Board determined that it would separate the roles of Chairman of the Board and Chief Executive Officer, and the Board elected Mr. Hagood, our Lead Director, to serve as Non-Executive Chairman.  The Board determined that this board structure would allow the Company’s new Chief Executive Officer, Mr. Addison, to focus on the day to day leadership of the Company and would also allow Mr. Hagood to provide Board leadership at such a critical time.  The Board’s determination to separate the roles was intended to direct specific focus on senior management and board leadership efforts to regain shareholder, customer, and community confidence. The Board also decided not to elect Mr. Addison to the Board when he became Chief Executive Officer, and has not nominated him for election by shareholders at the 2018 Annual Meeting.  Accordingly, all of our current directors are independent.  The Board will continue, from time to time, to assess which leadership structure is most appropriate for us in light of the current circumstances.

 

Many of our directors live and work, or have substantial business interests in our service areas; therefore, they have access to information about us and our operations from sources other than our management’s presentations to the Board. Further, South Carolina law and our bylaws make it clear that the business and affairs of the Company are managed under the direction of the Board of Directors, and that management control is subject to the authority of the Board of Directors to appoint and remove any of our officers at any time.

 

To promote open discussion among themselves, our independent directors meet regularly in executive session without members of management present. The Board annually elects an independent Lead Director to preside at all meetings at which the Chairman is not present, including executive sessions of the independent directors held at each regularly scheduled Board meeting. In 2017, Mr. Hagood was elected independent Lead Director to serve until the 2018 Annual Meeting of Shareholders and, as noted above, as of January 1, 2018, Mr. Hagood was elected Chairman of the Board. The independent Lead Director also has the authority to call meetings of the independent directors when necessary or appropriate. The Chairs of the Audit, Compensation, Nuclear Oversight, and Nominating and Governance Committees of the Board each preside as the Chair at meetings of independent directors at which the independent Lead Director or Chairman is not present when the principal items to be considered are within the scope of authority of his or her Committee. After the 2018 Annual Shareholders’ Meeting, at the Board’s annual meeting, the Board plans to discuss modifications to our Governance Principles, and will likely determine that, due to the transition to an Independent Chairman, there is no need to also have the position of Lead Director.

 

Board’s Role in Risk Oversight

 

As noted above, our business and affairs are managed under the direction of our Board of Directors. This includes the Board’s overseeing the types and amounts of risks undertaken. In discharging its oversight responsibilities, the Board relies on a combination of the business experience of members of the Board and the expertise and business experience of our officers and employees, as well as, from time to time, advice of various consultants and experts. An appropriate balancing of risks and potential rewards with the long-term goals of the Company is, and historically has been, implicit in the decisions and policies of the Board. Because risk oversight is so thoroughly interwoven into the direction of the Board, other than as set forth below, no special provision has been made for that oversight in the Board’s leadership structure.

 

The Board has established an executive senior officer-level Risk Management Committee which reports directly to the Audit Committee of the Board. The Risk Management Committee is comprised of the Company’s senior executive officers, with the exception of our General Counsel who serves as counsel to the Committee. One of our senior officers also serves as our Risk Management Officer, and the Company’s Chief Executive Officer serves as Chair of the Risk Management Committee. All of the Company senior executive officers participate in our Risk Management process in order to bring together expertise in general business and all operational areas, as well as finance, legal, administrative and regulatory areas. The Risk Management Officer oversees a staff of six employees with primary responsibilities in the area of risk management.

 

The Risk Management Committee conducts regularly scheduled meetings at which the Committee receives presentations from management representatives. The Committee also meets as needed between regularly scheduled meetings. Pursuant to authority granted by the Board of Directors, the Committee sets policies and guidelines for risk management. The Committee has also established sub-committees with expertise tailored to the review, discussion and monitoring of risks of a particular operation.

 

At each quarterly meeting of the Board, the Audit Committee receives a report from the Risk Management Officer. Several members of the Risk Management Committee are also present at the Audit Committee meetings to provide details of the Committee’s work and respond to questions raised by Audit Committee members. Also, at each quarterly meeting of the Board of Directors, the Board reviews and discusses a report prepared by the Company’s Risk Management Officer and approved by the Risk Management Committee, which sets forth certain high-level risks identified by the Company’s senior executive officers and others. The report also provides the current status of such high-level risks, and further identifies where the primary responsibility for risk oversight resides, including both at the Board and Committee level, and identifies the senior executive officer who has primary responsibility for oversight of the particular risk.

 

Director Nomination Process

 

The Nominating and Governance Committee recommended to the Board the individuals nominated for Director positions at the Annual Meeting.

 

Director Candidate Recommendations.  The Nominating and Governance Committee will consider for recommendation to the Board as Board of Directors’ nominees, candidates recommended by shareholders if the shareholders comply with the following requirements. If a shareholder wishes to recommend a candidate to the Nominating and Governance Committee for consideration as a Board of Directors’ nominee, such shareholder must confirm his or her share ownership and submit in writing to the Nominating and Governance Committee the recommended candidate’s name, a brief resume setting forth the recommended candidate’s business and educational background and qualifications for service, and a notarized consent signed by the recommended candidate stating the recommended candidate’s willingness to be nominated and to serve. This information must be delivered to the SCANA Nominating and Governance Committee, c/o the Corporate Governance Office at the Company’s address and must be received (except as otherwise provided in our bylaws with respect to a delayed or advanced annual meeting of shareholders, an expansion in the size of the Board, or a special meeting of shareholders) no later than 120 days prior to the first anniversary of the date of the proxy statement sent to shareholders in connection with the preceding year’s annual meeting for a potential candidate to be considered as a potential Board of Directors’ nominee. The Nominating and Governance Committee may request further information if it determines a potential candidate may be an appropriate nominee. Director candidates recommended by shareholders that comply with these requirements will be considered on the same basis as candidates otherwise chosen by the Nominating and Governance Committee.

 

Shareholder Director Nominees.  Director candidates recommended by shareholders will not be considered for recommendation by the Nominating and Governance Committee as potential Board of Directors’ nominees if the shareholder recommendations are received later than 120 days prior to the first anniversary of the date of the proxy statement sent to shareholders in connection with the preceding year’s annual meeting (except as otherwise provided in our bylaws with respect to a delayed or advanced annual meeting of shareholders, an expansion in the size of the Board, or a special meeting of shareholders). If the Nominating and Governance Committee chooses not to recommend a shareholder candidate as a Board of Directors’ nominee, or if a shareholder chooses to personally nominate a candidate, the shareholder may come to an annual meeting and nominate a director candidate for election at the annual meeting if the shareholder has given notice of his or her intention to do so in writing to the SCANA Corporate Secretary at least 120 days prior to the first anniversary of the date of the proxy statement sent to shareholders in connection with the preceding year’s annual meeting (except as otherwise provided in our bylaws with respect to a delayed or advanced annual meeting of shareholders, an expansion in the size of the Board, or a special meeting of shareholders). Such shareholder nominations must also comply with the other requirements in our bylaws. Any shareholder may request a copy of the relevant bylaw provision by writing to the Corporate Governance Office, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033. Nominations not made in accordance with these requirements may be disregarded by the presiding officer of the meeting, and upon his or her instructions, the voting inspectors shall disregard all votes cast for each such nominee.

 

Shareholder Proxy Access Director Nominees.    After reviewing the increasing support of institutional shareholders and others for proxy access, and determining the appropriate proxy access parameters for our Company, we amended our Bylaws on December 30, 2016 to allow any shareholder (or group of no more than 20 shareholders) owning 3% or more of the Company's common stock continuously for at least 3 years to nominate candidates for election for up to the greater of one director or 20% of the number of directors to be elected if the Board is classified, or the greater of two directors or 20% of the number of directors in office if the Board is not classified, and require the Company to include such nominees in our proxy statement and on our proxy card.  In order to nominate a director pursuant to our proxy access bylaw, shareholders who meet the eligibility and other requirements set forth in Article I, Section 7 of our Bylaws must send notice to our Corporate Secretary at our executive offices of intention to nominate a director pursuant to the proxy access bylaw.  The notice must provide the detailed information and meet the other requirements set forth in our proxy access bylaw, and be timely received by our Corporate Secretary as provided in our proxy access bylaw.  The shareholder also

must comply with the other requirements in the bylaws. Any shareholder may request a copy of the relevant bylaw provision by writing to the Corporate Governance Office, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033.

 

Director Qualification Criteria

 

In identifying and evaluating potential nominees, the Nominating and Governance Committee Charter directs the Committee to take into account applicable requirements for directors under the Securities Exchange Act of 1934, the Listing Standards of the New York Stock Exchange and the Director Qualification Standards in our Governance Principles, including our policy that a majority of our directors be independent.

 

The Nominating and Governance Committee may take into consideration such other factors and criteria as it deems appropriate in evaluating a candidate, including his or her knowledge, expertise, skills, integrity, judgment, business or other experience and reputation in the business community, the interplay of the candidate’s experience with the experience of other Board members, diversity, and the extent to which the candidate would be a desirable addition to the Board and any committees. Although the Nominating and Governance Committee does not have a specific policy with regard to the consideration of diversity in identifying director nominees, the Committee considers racial, cultural and gender diversity, as well as diversity in business and personal experience and skill sets among all of the directors as part of the total mix of information it takes into account in identifying nominees. Additionally, the Director Qualification Standards set forth in our Governance Principles include the following:

 

 

 

 

 

 

 

 

 

 

Our bylaws require that our independent directors hold SCANA common stock equal to the number of shares granted in the five most recent annual stock retainers, as such retainer may be adjusted from time to time.

 

Director Share Ownership Requirements

 

As noted in the Director Qualification Standards set forth in the preceding section, our bylaws require that our independent directors hold SCANA common stock equal to the number of shares granted in the five most recent annual stock retainers. Currently, a portion of the retainer fees paid to independent directors is required to be paid in shares of our common stock. For 2017, the number of shares issued to each independent director to satisfy the annual stock retainer was 2,150.  All independent directors whose terms will continue after the Annual Meeting, or who have been nominated for reelection, met this minimum stock ownership requirement, with the exception of our newest directors Mrs. Decker, Dr. Galloway and Messrs. Aliff, Bachman, Cecil and Trujillo who are all currently on track to meet the requirement. Mrs. Decker and Mr. Aliff have until October 2021, Messrs. Cecil and Trujillo have until October 2019, and Dr. Galloway and

Mr. Bachman have until July 2024 to acquire the required level of stock ownership. All subsequently elected independent directors will have six years from the date of their election to the Board to meet the requirement. The Nominating and Governance Committee conducts an annual review of the level of share ownership for each independent director to ensure compliance with the requirement. The Nominating and Governance Committee also has the discretion to grant a temporary waiver of the minimum share ownership requirement if an independent director demonstrates to the Nominating and Governance Committee that such a waiver is appropriate due to a financial hardship or for other good reason.

 

Under the Director Compensation and Deferral Plan, independent directors may make an annual irrevocable election to defer all or a portion of the annual stock retainer fee into a hypothetical investment in our common stock, with distribution from the Plan to be ultimately payable in shares of our common stock. Independent directors may also elect for other fees to be deferred into a hypothetical investment in our common stock under the Plan, with distribution from the Plan to be ultimately payable in shares of common stock. Shares held directly and amounts deferred pursuant to the Director Compensation and Deferral Plan and denominated in shares are taken into consideration in determining if our independent directors meet the minimum share ownership requirement under our bylaws. Eligible Directors may also defer all or a portion of their cash retainer fees and 100% (but not less than 100%) of their annual stock retainer fees into a hypothetical investment in our common stock under the Executive Deferred Compensation Plan, and those shares are also taken into consideration in determining if our Directors meet the minimum share ownership requirements. See “Executive Compensation — Executive Deferred Compensation Plan” beginning on page 49, and “Director Compensation — Director Compensation and Deferral Plan” on page 59.  

 

Majority Withheld Director Resignation Policy

 

Our Company and our Board are supportive of majority voting for Directors, and we continue to evaluate how we can further implement majority voting for directors. At present, our Governance Principles provide for a modified majority voting policy for the election of our directors, pursuant to which each director nominee agrees that, as a condition to being nominated, if, in an uncontested election of directors, such nominee receives a greater number of voting instructions designated as “withheld” from his or her election than votes cast as “for” his or her election, then such nominee will, within five days following the certification of the shareholder vote, tender his or her written resignation to the Chairman of the Board for consideration by the Nominating and Governance Committee. The Nominating and Governance Committee will consider such tendered resignation, and promptly following the date of the shareholders’ meeting at which the election occurred, will make a recommendation to the Board concerning the acceptance or rejection of such resignation. In determining its recommendation to the Board, the Nominating and Governance Committee will consider all factors deemed relevant by the members of the Committee including, without limitation, the stated reason or reasons why shareholders who cast “withhold” votes for the director did so, the qualifications of the director (including, for example, the impact that the director’s resignation would have on the Company’s compliance with the requirements of the Securities and Exchange Commission, the New York Stock Exchange and our Corporate Governance Principles), and whether the director’s resignation from the Board would be in the best interests of the Company and its shareholders.

 

The Nominating and Governance Committee also will consider a range of possible alternatives concerning the director’s tendered resignation as members of the Committee deem appropriate, including, without limitation, acceptance of the resignation, rejection of the resignation, or rejection of the resignation coupled with a commitment to seek to address and cure the underlying reasons reasonably believed by the Nominating and Governance Committee to have substantially resulted in the voting instructions designated as “withheld”. The Board will take formal action on the Nominating and Governance Committee’s recommendation no later than 90 days following the date of the shareholders’ meeting at which the election occurred. Following the Board’s decision on the Nominating and Governance Committee’s recommendation, the Company will promptly disclose, in a Form 8-K filed with the Securities and Exchange Commission, the Board’s decision, together with a full explanation of the process by which the decision was made and, if applicable, the Board’s reason or reasons for rejecting the tendered resignation.

 

Communications with the Board of Directors

 

Shareholders and other interested parties can communicate with the Board, with the independent directors as a group or with any director by writing to them, c/o Gina Champion, Deputy General Counsel and Corporate Secretary, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033, or by sending an e-mail to SCANAindependentdirectors18@scana.com (for correspondence to the independent directors), to SCANAchairman18@scana.com (for correspondence to the Chairman) or to gchampion@scana.com (for correspondence to a particular director). Interested parties also may communicate with the chair of the following Committees by sending an e-mail to: auditchair18@scana.com,  compensationchair18@scana.com, or nomandgovchair18@scana.com. The Corporate Secretary may initially review communications to Directors and send a

summary to the Directors, but has discretion to exclude from transmittal any communications that are commercial advertisements or other forms of solicitation or individual service or billing complaints (although all communications are available to the Directors at their request). The Corporate Secretary will forward to the Directors any communications raising substantive issues.

 

Prohibition on Hedging, Margining or Pledging of Shares

 

Our Insider Trading Policy prohibits officers, directors, employees and related persons from pledging, margining or engaging in hedging transactions with respect to shares of the Company’s common stock.

 

SCANA’s Code of Conduct & Ethics

 

All of our employees (including the Chief Executive Officer, Chief Financial Officer, President and Controller) and Directors are required to abide by the SCANA Code of Conduct & Ethics (the “Code of Conduct”) to ensure that our business is conducted in a consistently legal and ethical manner. The Code of Conduct forms the foundation of a comprehensive process that promotes compliance with corporate policies and procedures, an open relationship among colleagues that contributes to good business conduct, and a belief in the integrity of our employees. Our policies and procedures cover all areas of business conduct and require adherence to all laws and regulations applicable to the conduct of our business.

The full text of the Code of Conduct is published on our website, at www.scana.com (which is not intended to be an active hyperlink; the information on SCANA’s website is not part of this proxy statement or any report filed with the Securities and Exchange Commission) under the “About – Corporate Governance” caption, and a copy is also available in print upon request to the Corporate Governance Office, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033. We intend to disclose future amendments to, or waivers from, certain provisions of the Code of Conduct on our website within two business days following the date of such amendment or waiver. 

 

RELATED PARTY TRANSACTIONS

 

Our Governance Principles and Nominating and Governance Committee Charter address independence requirements for our Directors. As part of our independence analysis, our Nominating and Governance Committee must review and assess any related party transactions involving our Directors and their immediate family members and certain of their affiliates as required by the New York Stock Exchange Listing Standards. Our Governance Principles also address Director requirements for avoidance of conflicts of interest and disclosure of conflicts of interest or potential conflicts of interest, and prohibit loans or extensions of credit to directors. Our Code of Conduct addresses requirements for avoidance of conflicts of interest by all of our employees. Our Governance Principles, Nominating and Governance Committee Charter and Code of Conduct are all written documents. With the exception of annual director and officer questionnaires, our Governance Principles, our Code of Conduct, and our Nominating and Governance Committee Charter, there are no additional written policies and procedures relating to the review, approval or ratification of related party transactions by the Board.

 

To help us perform our independence and related party transaction analysis, we require that each senior executive officer, officer, director and director nominee complete an annual questionnaire and report all transactions with us in which such persons (or their immediate family members and certain of their affiliates) had or will have a direct or indirect material interest (except for salaries and other compensation and benefits, directors’ fees, and dividends on our stock). It is our general intention to avoid such transactions. Our General Counsel reviews responses to the questionnaires and any other information about related party transactions that may be brought to his attention. We use the questionnaires and the annual Code of Conduct training to help ensure the effective implementation and monitoring of compliance with such policies and procedures. If any such related party transactions are disclosed, they are reviewed by the Nominating and Governance Committee pursuant to the requirements of its Charter. If appropriate, any such transactions are submitted to the Board for approval.

 

The Nominating and Governance Committee does not use any formal written standards in determining whether to submit a related party transaction to the Board for approval. As noted above, we attempt to avoid such transactions altogether. On the rare occasions when such transactions have arisen, our Nominating and Governance Committee, which is comprised solely of independent Board members, reviewed the proposed or actual transactions and utilized their business judgment to determine which of them should be submitted for review to the full Board. In practice, all such transactions that have arisen in recent years have been reviewed by the full Board, even when they were well below the threshold for proxy statement disclosure and below the threshold at which director independence could be compromised.

The types of transactions that have been reviewed in the past include the purchase and sale of goods, services or property from companies for which our Directors serve as executive officers or directors, the purchase of financial services and access to lines of credit from banks for which our Directors serve as executive officers or directors, senior executive officer relocation and severance benefits, and requests by our Directors to serve on other boards. 

 

In connection with the departure of Mr. Lindsay, our former Senior Vice President and General Counsel, in 2017, we entered into a post-employment consulting agreement.  The amounts paid to Mr. Lindsay pursuant to this agreement are disclosed in a footnote to the “Summary Compensation Table” on page 44.  Upon his retirement from the Board of Directors in April, 2017, we entered into a post-retirement consulting agreement with Mr. Micali.  The amounts paid pursuant to this agreement are disclosed in a footnote to the “2017 Director Compensation Table” on page 62.  All other related party reviews by the Board or the Nominating and Governance Committee during 2017 were related to requests for directors to serve on boards of other companies and no related party transactions resulted from these reviews. 

 

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

SECURITY OWNERSHIP OF MANAGEMENT

 

The following table lists the amounts of our common stock beneficially owned on July 27, 2018, by each director, each nominee, each person named in the Summary Compensation Table on page 44, and all directors and executive officers as a group.

 

 

 

FIVE PERCENT BENEFICIAL OWNERSHIP OF SCANA COMMON STOCK

 

The following table provides information about persons known by us to be the beneficial owners of more than five percent of our common stock as of December 31, 2017. This information was obtained from Schedules 13G filed with the Securities and Exchange Commission and we have not independently verified it.

 

 

 

 

 

 

 

EXECUTIVE COMPENSATION

 

Compensation Committee Processes and Procedures

 

Our Compensation Committee, which is comprised entirely of independent directors, administers our senior executive compensation program. Compensation decisions for all senior executive officers are approved by the Compensation Committee and recommended by the Committee to the full Board for final approval. The Committee considers recommendations from our Chairman and Chief Executive Officer in setting compensation for senior executive officers.

 

In addition to attendance by members of the Compensation Committee, the Committee’s meetings are also regularly attended by our Chairman and Chief Executive Officer (and beginning in 2018, these are separate roles), our Senior Vice President of Administration and Human Resources Department employees, as well as management’s and the Board’s compensation consultants. At each meeting the Committee also meets in executive session without members of management present. The Chairman of the Committee reports the Committee’s recommendations on executive compensation to the Board of Directors. Our Human Resources, Tax and Finance Departments support the Compensation Committee in its duties, and the Committee may delegate authority to these departments to fulfill administrative duties relating to our compensation programs.

 

The Committee has the authority under its Charter to retain, approve fees for, and terminate advisors, consultants and others as it deems appropriate to assist in the fulfillment of its responsibilities. Pursuant to this authority, the Committee engages the services of its own independent compensation consultant, Pearl Meyer & Partners. Management engages the services of Willis Towers Watson as its executive officer and director compensation consultant. In consultation with Pearl Meyer & Partners, the Committee also uses relevant information provided by Willis Towers Watson to assist it in carrying out its responsibilities for overseeing matters relating to compensation plans and compensation of our senior executive officers. Using information provided by Willis Towers Watson, which is a national compensation consultant, helps assure the Committee that our policies for compensation and benefits are competitive and aligned with utility and general industry practices. However, the Committee believes that also engaging its own independent compensation consultant eliminates the appearance of any potential conflict of interest that might arise because management’s consultant also performs other services for the Company. Pearl Meyer & Partners does not perform any additional services for the Company.

 

The Compensation Committee has assessed the independence of Pearl Meyer & Partners pursuant to Securities and Exchange Commission rules and New York Stock Exchange Listing Standards and determined that Pearl Meyer & Partners’ work for the Compensation Committee does not raise any conflict of interest.

 

Compensation Committee Interlocks and Insider Participation

 

During 2017, decisions on various elements of executive compensation were made by the Compensation Committee. No officer, employee, former officer or any related person of SCANA or any of its subsidiaries served as a member of the Compensation Committee.

 

The directors who served on the Compensation Committee during 2017 were:

 

Mr. James A. Bennett, Chair 

Mr. John F. A. V. Cecil

Mrs. Sharon A. Decker

Mr. James M. Micali

Mr. James W. Roquemore

Mr. Maceo K. Sloan

 

Compensation Risk Assessment

Our Human Resources, Risk Management, and Legal Departments have jointly reviewed our compensation policies and procedures to determine whether they present a significant risk to the Company. Based on this review we have concluded that our compensation policies and procedures for all employees are not reasonably likely to have a material adverse effect on the Company. Our annual incentive compensation plans for all employees are structured such that appropriate limits are in place to discourage excessive risk taking. In addition, all leadership level employees who are in a position to effect significant policies or projects have compensation at risk on both a short- and long-term basis, which we believe discourages excessive risk taking and encourages supervision of any risk related activities by other employees. Our

compensation programs and policies, including our senior executive officer share ownership requirements, reward consistent, long-term performance by heavily weighting leadership level compensation to long-term incentives that reward stock, financial, and operating performance. All of our senior executive officers participate in our Risk Management process either by serving as a member of, or as counsel to,  the Risk Management Committee.  In addition, each senior executive officer also oversees and approves individual and business unit objectives for their areas of responsibility so they are positioned to report any risk associated with such individual or business unit objectives to the Risk Management Committee.

 

Compensation Discussion and Analysis

 

Objectives and Philosophy of Executive Compensation

 

Our senior executive compensation program is designed to support our overall objective of increasing shareholder value by: hiring and retaining premier executive talent; having a pay-for-performance philosophy that links total rewards to achievement of corporate, business unit and individual goals, and places a substantial portion of pay for senior executives at risk; aligning the interests of executives with the long-term interests of shareholders through long-term equity-based incentive compensation; and ensuring that the elements of the compensation program focus on and appropriately balance our financial, customer service, operational and strategic goals, all of which are crucial to achieving long-term results for our shareholders.

 

We have designed our compensation program to reward senior executive officers for their individual and collective performance and for our collective performance in achieving goals for growth in earnings per share and total shareholder return and other annual and long-term business objectives. We believe our program performs a vital role in keeping executives focused on improving our performance and enhancing shareholder value while rewarding successful individual executive performance in a way that helps to assure retention.

 

The following discussion provides an overview of our compensation program for all of our senior executive officers (for 2017,  a group of 10 people who are at the level of senior vice president and above), as well as a specific discussion of compensation for our Chief Executive Officer, our Chief Financial Officer and the other executive officers named in the Summary Compensation Table that follows this “Compensation Discussion and Analysis.” In this discussion, we refer to the executives named in the Summary Compensation Table as “Named Executive Officers.”

 

Principal Components of Executive Compensation

 

During 2017,  senior executive compensation consisted primarily of three key components: base salary, short-term cash incentive compensation, and long-term equity-based incentive compensation (under the shareholder-approved Long-Term Equity Compensation Plan). We also provide various additional benefits to senior executive officers, including health, life and disability insurance plans, retirement plans, change in control arrangements, limited perquisites, and, if appropriate, severance and termination benefits. The Compensation Committee makes its decisions about how to allocate senior executive officer compensation among base salary, short-term cash incentive compensation and long-term equity-based incentive compensation on the basis of market information and analysis provided by management’s compensation consultant, and our goals of remaining competitive with the compensation practices of a group of surveyed companies and of linking compensation to our corporate performance and individual senior executive officer performance. We also evaluate the market information for specific positions and consider internal equity issues when making pay adjustments. At the Committee’s discretion, information used or provided by management, or provided by management’s compensation consultant to assist the Committee in making its decisions, may be reviewed by the Committee’s independent compensation consultant, Pearl Meyer & Partners.

 

A more detailed discussion of each of these components of senior executive officer compensation, the reasons for awarding such types of compensation, the considerations in setting the amounts of each component of compensation, the amounts actually awarded for the periods indicated, and various other related matters are set forth in the sections below.

 

Factors Considered in Setting Senior Executive Officer Compensation

 

Use of Market Surveys and Peer Group Data

 

We believe it is important to consider comparative market information about compensation paid to executive officers of other companies in order to remain competitive in the executive workforce marketplace. We want to attract and retain highly skilled and talented senior executive officers who have the ability to carry out our short- and long-term goals. To do so, we must be able to compensate them at levels that are competitive with compensation offered by other companies in

our business or geographic marketplace that seek similarly skilled and talented executives. Accordingly, we consider market survey results in establishing all components of compensation. The market survey information is provided to us approximately every other year by management’s compensation consultant. In years in which management’s consultant does not provide us with market survey information, and when we require updated information, our process may be to apply an aging factor to the prior year’s information with assistance from management’s consultant, based on its experience in the marketplace. Compensation decisions for 2017 were based on a compensation survey performed in 2015 by management’s compensation consultant, Willis Towers Watson. Prior to management’s consultant conducting the market survey, we assist management’s consultant in understanding the key duties and responsibilities of our positions, which enables the consultant to match our positions with benchmark positions in its database. If management’s consultant is unable to find an exact match for one of our positions in the consultant’s database due to variances in duties and/or position level, we may assist management’s consultant in identifying the most similar position. The market survey information may then be adjusted upward or downward as necessary to match the position as closely as possible.

 

Our goal is to set base salary and short- and long-term incentive compensation for our senior executive officers at the median (50th percentile) of compensation paid for similar positions by the companies included in the market surveys. We generally set our target at the median because we believe this target will meet the requirements of most of the persons we seek to hire and retain in our geographic area, and because we believe it is fair both to us and to the executives. Variations to this objective may, however, occur as dictated by the experience level of the individual, internal equity, need for specialized talent, and market factors. We do not set a target level for broad-based benefits for our senior executive officers, but we believe our broad-based benefits are approximately at the median.

 

The companies included in the market survey are a group of utilities and general industry companies of various sizes in terms of revenue. Approximately half of the companies included in the 2015 market survey had substantially the same levels of annual revenues as we had, while the remainder had revenues ranging from one-third to not greater than 3.8 times our revenues with the exception of the inclusion of three utilities that are geographically close to us and have nuclear operations and are competitors for our talent. Market survey results for positions may be size-adjusted using regression analysis to account for these differences in company revenues, which in turn are viewed as a proxy for measuring the relative scope and complexity of the business operations.

 

The companies included in the 2015 market survey we used in connection with setting base salaries and short- and long-term incentive compensation for 2017, and the states in which they are headquartered are listed below:

 

Utility Industry: AGL Resources, Inc. (GA); Alliant Energy Corporation (WI); Ameren Corporation (MO); Avista Corp. (WA); CenterPoint Energy, Inc. (TX); CMS Energy Corporation (MI); Consolidated Edison, Inc. (NY); Dominion Resources, Inc. (VA); Duke Energy Corporation (NC); Edison International (CA); Entergy Corporation (LA); Eversource Energy (CT); MDU Resources Group, Inc. (ND); NextEra Energy, Inc. (FL); OGE Energy Corporation (OK); Pepco Holdings, Inc. (DC); Pinnacle West Capital Corporation (AZ); Portland General Electric Co. (OR); Public Service Enterprise Group, Inc. (NJ); Sempra Energy (CA); Southern Company (GA); TECO Energy, Inc. (FL); UIL Holdings Corporation (CT); Vectren Corporation (IN); WEC Energy Group (WI); Westar Energy, Inc. (KS); Xcel Energy, Inc. (MN).

 

General Industry: Armstrong World Industries, Inc. (PA); Ball Corporation (CO); Curtiss-Wright, (NC); Eastman Chemical Company (TN); Hanesbrands, Inc. (NC); The Hershey Company (PA); Level 3 Communications, Inc. (CO); Mattel, Inc. (CA); Pitney Bowes, Inc. (CT); PolyOne Corporation, (OH); Rockwell Automation, Inc. (WI); Rockwell Collins, Inc. (IA); Sealed Air Corporation (NJ); Snap-on, Inc. (WI); Steelcase Inc. (MI); Terex Corporation (CT); The Scotts Miracle-Gro Company (OH); Tupperware Brands, (FL); Unisys Corporation (PA); WestRock Company (VA).

 

We believe the utilities included in our market survey are an appropriate group to use for compensation comparisons because they align well with our revenues (other than three utilities included because they are geographically close to us, have nuclear operations and are competitors for our talent), the nature of our business and workforce, and the talent and skills required for safe and successful operations. We believe the additional non-utility companies included in our market survey are appropriate to include in our comparisons because they align well with our revenues, and are the types of companies that might be expected to seek executives with the same general skills and talents as the executives we are trying to attract and retain in our geographic area. The companies we use for comparisons may change from time to time based on the factors discussed above as well as their participation in the consultant’s executive compensation surveys.

 

To make comparisons with the market survey results, we generally divide all of our senior executive officers into utility and non-utility executive groups — that is, executive officers whose responsibilities are primarily related to utility businesses and require a high degree of technical or industry-specific knowledge (such as electrical engineering, nuclear engineering or gas pipeline transmission), and those whose responsibilities are more general and do not require such specialized

knowledge (such as business, finance, and other corporate support functions). We then attempt to match to the greatest degree possible our positions with similar positions in the survey results. We may blend the survey results to achieve what we believe is an appropriate comparison.

 

We also use performance data covering a larger peer group of utilities in determining long-term equity incentive compensation under our shareholder-approved Long-Term Equity Compensation Plan, as discussed under “Long-Term Equity Compensation Plan.”

 

Personal Qualifications

 

In addition to considering market survey comparisons, we consider each senior executive officer’s knowledge, skills, scope of authority and responsibilities, job performance and tenure with us as a senior executive officer.

 

Prior to his retirement, Mr. Marsh had served as our Chairman and Chief Executive Officer since December 2011, and also as our President and Chief Operating Officer since January 2011.  Prior to January 2011, he served as our Senior Vice President from 1998 to January 2011, and as our Chief Financial Officer from 1996 to April 2006.  He previously served as President of South Carolina Electric & Gas Company (“SCE&G”), our largest subsidiary from April 2006 to November 2011, and as SCE&G’s Chief Operating Officer from April 2006 to January 2011.  Mr. Marsh previously practiced as a certified public accountant and was with us for over 30 years. As our Chief Executive Officer, Mr. Marsh was responsible for strategic planning, development of our senior executive officers and oversight of our operations.

 

Mr. Addison was appointed President, Chief Executive Officer and Chief Operating Officer in January 2018.  Prior to these appointments, Mr. Addison had served as Executive Vice President of SCANA since January 2012, and had also served as our Chief Financial Officer since April 2006.  Additionally, from May 2014 to January 2018, Mr. Addison was President and Chief Operating Officer of our subsidiary, SCANA Energy Marketing, Inc.  Prior to January 2012, Mr. Addison had served as a Senior Vice President of SCANA since 2006 and Vice President of Finance from 2001 to 2006. As Chief Financial Officer, he was responsible for all of our financial operations, including accounting, treasury, shareholder and investor relations, taxation and financial planning, and until November of 2016, he was responsible for senior oversight of our information technology functions.    Mr. Addison is also a certified public accountant and has been with us for more than 25 years.

 

Mr. Byrne served as Executive Vice President of SCANA, as well as Chief Operating Officer and President of Generation and Transmission for SCE&G (from September 2009, January 2011, and December 2011 respectively) until his retirement.  In these positions he was responsible for overseeing a diversified fleet of coal, natural gas, hydro, nuclear and renewable generating facilities as well as the operation and planning of our high voltage transmission system.    His nuclear responsibilities included overseeing the construction of our new nuclear project.  He was previously our Chief Nuclear Officer.  He is a degreed engineer with over 30 years of utility experience and has held a Nuclear Regulatory Commission Senior Reactor Operator’s license.  Mr. Byrne was with us for over 20 years.

 

Mr. Kissam is a Senior Vice President of SCANA, and since January 2018 has served as the Chief Operating Officer and President of Generation, Transmission and Distribution for SCE&G. He was President of Retail Operations for SCE&G from December 2011 until January 2018.  He is responsible for providing leadership and strategic planning for the safe and reliable construction, maintenance, and operations of our electric transmission and distribution systems.  Since January 1, 2018, he has also been responsible for all of our electric generation systems.  He also oversees the Company’s renewable energy initiatives.    Mr. Kissam has been with us for 30 years.

 

Mr. Archie is a Senior Vice President of SCANA, and since May 2010 he has served as Chief Nuclear Officer for SCE&G.  In these positions, Mr. Archie is responsible for all nuclear matters, including the day-to-day management of our nuclear operations.  Mr. Archie has been with us for 39 years.    

 

Mr. Lindsay was a Senior Vice President and the General Counsel of SCANA and its subsidiaries prior to his departure during 2017. He was responsible for oversight of all legal, legal regulatory, environmental, and corporate governance functions. Mr. Lindsay was with us for over 8 years and has more than 40 years experience as an attorney, which includes more than 25 years serving in a General Counsel role.

 

 

Other Factors Considered

 

In addition to the foregoing information, we consider the fairness of the compensation paid to each senior executive officer in relation to what we pay our other senior executive officers. Our Compensation Committee also considers

recommendations from our Chairman and Chief Executive Officer (beginning in 2018 these positions are separate) in setting compensation for senior executive officers. We review our compensation program and levels of compensation paid to all of our senior executive officers, including the Named Executive Officers, annually and may make adjustments based on the foregoing factors as well as other subjective factors.

 

In 2017, our Compensation Committee reviewed summaries of compensation components (“tally sheets”) for all of our senior executive officers, including the Named Executive Officers. These tally sheets reflect changes in compensation during the prior year, if any, and affix dollar amounts to each component of compensation. Although the Committee did not make any adjustments to executive compensation in 2017 based solely on its review of the tally sheets, it intends to continue to use such tally sheets in the future to review each component of the total compensation package, including base salaries, short- and long-term incentives, severance plans, insurance, retirement and other benefits, as a factor in determining the total compensation package for each senior executive officer.

 

The Committee does not have a practice of adjusting the size of current and future compensation awards or compensation program components to reflect amounts realized or unrealized by an individual from prior equity grants. In other words, awards are not increased to compensate for prior performance below target, nor are they decreased because of prior performance above target. Likewise, since earnings on equity compensation are not included in any pension calculation formula, any gains, or lack thereof, from prior awards are not considered in setting or earning retirement benefits.

 

 

Timing of Senior Executive Officer Compensation Decisions

Annual salary reviews are routinely conducted and any adjustments are made, and short- and long-term incentive compensation awards are routinely granted in February of each year at the first regularly scheduled Compensation Committee and Board meetings. Determinations are also made at those meetings as to whether to pay out awards under the most recently completed cycles of short- and long-term incentive compensation plans (which include equity based incentive compensation). Compensation determinations also may be made by the Committee at its other quarterly meetings in the case of newly hired executives, employee promotions, or adjustments of existing employees’ compensation that could not be deferred until the February meeting. In prior years, we have routinely released our annual and quarterly earnings information to the public in conjunction with the quarterly meetings of our Board.

 

Base Salaries

 

Senior executive officer base salaries are divided into grade levels based on market data for similar positions, experience and certain internal equity considerations. The Compensation Committee believes it is appropriate to set base salaries at a reasonable level that will provide executives with a predictable income base. Accordingly, base salaries are targeted at the median (50th percentile) of the market survey data with the exception of Mr. Marsh’s salary, which was targeted at the 75th percentile. The Compensation Committee reviews base salaries annually and makes adjustments, if appropriate, on the basis of an assessment of individual performance, relative levels of accountability, prior experience, breadth and depth of knowledge, specialized talent required for new operational initiatives, changes in market compensation practices as reflected in market survey data, and relative compensation levels within our Company. In February 2017, the Named Executive Officers received base salary increases in the following percentages: Mr. Marsh, 4%; Mr. Addison, 4%; Mr. Byrne, 4%; Mr. Archie, 3.5%; Mr. Kissam, 4%; and Mr. Lindsay, 3%. Such increases were based on individual performance and the degree to which the Named Executive Officers’ base salaries were below the market rate for their positions and certain internal equity considerations.

 

Short-Term and Long-Term Incentive Compensation

 

Our senior executive officer compensation program provides for both short-term incentive compensation in the form of annual cash incentive compensation, and long-term equity-based incentive compensation payable at the end of periods which have historically lasted three years. Both our Short-Term Annual Incentive and Long-Term Equity Compensation Plans promote our pay-for-performance philosophy, as well as our goal of having a meaningful amount of pay at-risk, and we believe both plans provide us a competitive advantage in recruiting and retaining top quality talent.

 

We believe the Short-Term Annual Incentive Plan provides our senior executive officers with an annual stimulus to achieve short-term individual and business unit or departmental goals and short-term corporate earnings goals that ultimately help us achieve our long-term corporate goals. We believe the Long-Term Equity Compensation Plan counterbalances the emphasis of short-term incentive compensation on short-term results by focusing our senior executive officers on achievement of our long-term corporate goals, providing additional incentives for them to remain our employees by ensuring that they have a continuing stake in the long-term success of the Company, and significantly aligning the interests of senior executive officers with those of our shareholders.    

 

Our plan designs are summarized below, and discussed in greater detail in the sections that follow:

 

 

 

Short-Term Annual Incentive Plan

 

Our Short-Term Annual Incentive Plan provides financial incentives for performance in the form of opportunities for annual incentive cash payments. Participants in the Short-Term Annual Incentive Plan currently include not only our senior executive officers, but also approximately 240 additional employees, including other officers, senior management, division heads and other professionals whose positions or levels of responsibility make their participation in the Plan appropriate. Our Chief Executive Officer recommends, and the Compensation Committee approves, the performance measures, operational goals and other terms and conditions of incentive awards for senior executive officers, including the Named Executive Officers, except the Chief Executive Officer, for whom such determinations are made by the Committee along with the other independent directors.

The Compensation Committee reviews and approves target short-term incentive awards at its first regularly scheduled meeting each year based on percentages assigned to each executive salary grade. Payouts of actual short-term incentive awards are based both on the Company’s achieving pre-determined earnings per share goals in the coming year, and on each senior executive officer’s level of performance in achieving his or her individual and business unit financial and strategic objectives. The Committee selected these performance metrics because it believes they are key measures of financial and operational success, and that achieving our earnings and strategic goals supports the interests of our shareholders. In assessing accomplishment of objectives, the Committee considers the difficulty of achieving each objective, unforeseen obstacles or favorable circumstances that might have altered the level of difficulty in achieving the objective, overall importance of the objective to our long-term and short-term goals, and importance of achieving the objective to enhancing shareholder value. Changes in annual target short-term incentive awards can be made if there are changes in the senior executive officer’s salary grade level or a change in the competitive market target that warrant a target short-term incentive award change.

 

The Short-Term Annual Incentive Plan also allows the Committee (or the Board in the case of the Chief Executive Officer), in its sole discretion, to increase or decrease any award otherwise payable to any or all participants by an amount up to 20% of the award otherwise payable.  The Committee may also redefine for any performance period the levels of performance required, as well as the payout percentage of target incentive awards.

 

For 2017, the awards under the Short-Term Annual Incentive Plan provided that:

 

 

 

Payouts of awards would be scaled based on the levels at which these goals were met. The 2017 Short-Term Annual Incentive Plan further provided that, if we exceeded our earnings per share goals, payouts of up to 130% of the target awards could be earned, which would also be scaled based on the extent to which we exceeded such earnings per share goals.

 

The estimated possible payouts that could have been earned under the 2017 Short-Term Annual Incentive Plan if performance objectives were met at threshold, target and maximum levels are set forth in the “2017 Grants of Plan-Based Awards” table on page 45 under the columns beneath the caption “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards.”  

 

No payouts were made to our Named Executive Officers under the 2017 Short-Term

Annual Incentive Plan.

 

As reflected in the “Summary Compensation Table” on page 44 under the column “Non-Equity Incentive Plan Compensation,” our Named Executive Officers did not receive any payouts in 2017 under the Short-Term Annual Incentive Plan.  We did not meet our earnings per share goals under the Plan.  Although all of our Named Executive Officers achieved at least a portion of their individual and business unit performance objectives under the Plan, the Board exercised its negative discretion under the Plan and determined that no payouts would be made to any of them, even on these earned awards.  See “—Objectives on which the 2017 Annual Incentive Award were Based” below.

 

Objectives on Which the 2017 Annual Incentive Award Were Based

 

    Earnings Per Share Component of the 2017 Annual Incentive Award

 

Up to 50% of the total 2017 annual incentive award could be earned based on the extent to which we met our earnings per share goals.  For 2017, our earnings per share goals were $4.15 for a threshold payout, $4.25 for a target payout, and $4.35 for a maximum payout. 

 

No portion of the Earnings Per Share Award was earned for 2017.    

 

During 2017, we incurred a loss of $.83 per share due to, (i) the recording of a significant impairment loss arising from consideration under generally accepted accounting principles of negative developments in the legislative, political and regulatory environment following the Company’s decision to abandon the construction of Unit 2 and Unit 3 at the VC Summer Nuclear Station prior to their completion, (ii) the required remeasurement of deferred income taxes upon the enactment of the Tax Cuts and Jobs Act of 2017, and (iii) the effects of abnormally mild weather in the Company’s electric business. As a result, our senior executive officers, and the other participants in the Short-Term Annual Incentive Plan, did not earn a payout on the 50% portion of the earnings per share component of the 2017 annual incentive award.

 

 

Individual and Business Unit Strategic Objectives Component of 2017 Annual Incentive Award

 

The remaining 50% of the 2017 annual incentive award was based on our senior executive officers’ level of performance in helping us achieve our annual business objectives by achieving their individual and business unit performance objectives.

 

No payouts were made to Named Executive Officers for achievement of 

individual or business unit objectives for 2017, even for objectives that were met by the Executives.

 

Although all of our Named Executive Officers met certain of their 2017 Short-Term Annual Incentive Plan objectives, in the exercise of its negative discretion under the Plan, our Board determined that no payouts would be made to any of them on the earned awards. 

 

Discretionary Bonus Awards

 

Our Short-Term Annual Incentive Plan also allows for discretionary awards as may be recommended by our Compensation Committee and approved by our full Board (or all independent directors in the case of the Chief Executive Officer) up to 20% of target awards. The discretion may be applied for all or for individual participants, but no participant’s award may exceed 150% of the participant’s target award.

 

No Discretionary Bonus Awards were made to Named Executive Officers for 2017.

 

 

Long-Term Equity Compensation Plan

 

The potential value of long-term equity-based incentive compensation opportunities comprises a significant portion of the total compensation package for senior executive officers and key employees. The Compensation Committee believes that emphasizing this component of total compensation provides the appropriate long-range focus for senior executive officers and other key employees who are charged with responsibility for managing the Company and achieving success for our shareholders because it links the amount of their compensation to our long-term business and financial performance.

   

A portion of each senior executive officer’s potential compensation consists of awards under the Long-Term Equity Compensation Plan. The types of long-term equity-based compensation the Compensation Committee may award under the Plan include incentive and non-qualified stock options, stock appreciation rights (either alone or in tandem with a related stock option), restricted stock, restricted stock units, performance units and performance shares. In recent years, our long-term equity-based awards have been in the form of performance shares and restricted stock units. These long-term equity-based awards are granted subject to satisfaction of specific performance goals and vesting schedules. For each of the 2015-2017, 2016-2018 and 2017-2019 performance periods, awards under the Long-Term Equity Compensation Plan consisted of 70% performance shares and 30% restricted stock units. The Committee has not awarded stock options since 2002 and has no plans to do so in the foreseeable future, and the Committee has not awarded any stock appreciation rights under the Plan.

   

We believe awards of performance shares align the interests of our executives with those of shareholders because the value of such awards is tied to our achieving financial and business goals that would be expected to affect the value of our common stock. We believe awards of restricted stock units align the interests of our executives with those of shareholders in that they ensure a long-term view of success, and we believe the three-year vesting schedule aids in retention of executives. Although restricted stock unit awards may be subjected to certain performance criteria, they generally have a much lower risk of forfeiture for failure to meet performance thresholds than the risks associated with performance shares, and they have no upside potential for payout above target level.  Nonetheless, for the first time, as discussed under “2015-2017 Restricted Stock Unit Awards” on page 38, the 2015-2017 restricted stock units did not meet performance criteria and were forfeited.

   

Performance Share Awards

   

For several years prior to 2015, the Compensation Committee granted performance share awards that were earned, if at all, over a three-year period measured in three one-year cycles based on comparative Total Shareholder Return (“TSR”) and earnings per share growth components. Beginning with grants made in February 2015, however, the three-year periods are measured in a single three-year cycle. Performance share awards based on these components place a portion of executive compensation at risk because executives are compensated pursuant to the awards only when the objectives for TSR and earnings growth are met. Additionally, comparing our TSR to the TSR of a group of other utilities reflects our recognition that investors could have invested their funds in other entities and measures how well we performed over time when compared to others in the group.

   

Performance share awards are denominated in shares of our common stock. The number of target performance shares into which awards are denominated is calculated by multiplying the Named Executive Officer’s base salary by a target percentage based on positions cited in the market survey data and dividing the product by a valuation factor applied to our opening stock price on the date of grant. The target percentage is derived from market survey data of the peer companies listed above under “Factors Considered in Setting Senior Executive Officer Compensation — Use of Market Surveys and Peer Group Data” on page 29. The valuation factor is provided to us by management’s compensation consultant and is intended as a means to establish a grant date salary equivalent value that takes into consideration such factors as dividend treatment, and potential for maximum performance. Performance share awards may be paid in stock or cash or a combination of stock and cash at the Committee’s discretion, but are most frequently paid in cash. In recent years, all payouts have been in cash. Payouts are based on the closing market price of our stock on the last business day of the three-year performance period.  Performance share awards accrue dividend equivalents prior to vesting, which are paid at vesting based on the level at which the awards are earned.

   

2015-2017 Performance Share and Restricted Stock Unit Awards

   

For the 2015-2017 performance period, the awards granted under the Long-Term Equity Compensation Plan to each of the Named Executive Officers were comprised of a combination of 70% performance shares and 30% restricted stock units.  

 

Components of 2015-2017 Performance Share Awards

   

The components on which we based the 2015-2017 performance share awards were as follows: (1) one half to be earned based on our level of achieving TSR relative to the TSR of a peer group of companies; and (2) the remaining one half to be earned based on our level of achieving average growth in GAAP-adjusted weather-normalized net earnings per share1 targets. Using a 20 trading day average prior to the start and end of the performance period, the TSR over the performance period was equal to the change in our common stock price, plus cash dividends paid on our common stock during the period, divided by the common stock price as of the beginning of the period.  Performance measurement and award determination for the performance shares for the 2015-2017 performance period were made for the entire three-year cycle with vesting and payment of awards after the end of the three-year cycle. Vesting and payment were deferred until the end of the three-year period and were contingent upon the participant still being employed with us at the end of the three-year period, subject to certain exceptions in the event of retirement, death or disability.  Payouts would also have been accelerated in the event of certain change in control events. See “ — Potential Payments Upon Termination or Change in Control.”

   

1 GAAP-adjusted weather-normalized net earnings per share” as used throughout this proxy statement is a term that we have used over time in our periodic reports and external communications to refer to a non-GAAP financial measure. We believe that this non-GAAP financial measure provides a consistent basis upon which to measure performance from year to year. The measure has historically excluded from earnings such items as the effects arising from abnormal weather, the Company’s adoption of new accounting guidance, the favorable settlement of certain litigation, the gains on sales of certain investments, and certain other unusual items. Management uses this measure when determining earnings guidance and growth projections and uses the measure in part in making budgetary and operational decisions. During 2015, our GAAP-adjusted weather-normalized net earnings of $3.73 were lower than our GAAP net earnings per share of $5.22 due to the exclusion of $1.41 ($2.39 pre-tax less a tax effect of $0.98) attributable to gains on the sales of two subsidiaries and $0.08 ($0.12 pre-tax less a tax effect of $0.04) attributable to the effects of abnormally severe weather in the Company’s electric business.  During 2016, our GAAP-adjusted weather-normalized net earnings per share of $3.97 were lower than our GAAP net earnings per share of $4.16 due to the exclusion of $0.19 ($0.28 pre-tax less a tax effect of $0.09) attributable to the effects of abnormally severe weather in the Company’s electric business. During 2017, our GAAP-adjusted weather-normalized net earnings per share were $4.31 while our GAAP net loss per share incurred was $.83 due to, (i) the recording of a $4.83 per share impairment loss arising from consideration under generally accepted accounting principles of negative developments in the legislative, political and regulatory environment following the Company’s decision to abandon the construction of Unit 2 and Unit 3 at the VC Summer Nuclear Station prior to their completion ($7.82 pre-tax, less a tax benefit of $2.99),  (ii) the required remeasurement of deferred income taxes upon the enactment of the Tax Cuts and Jobs Act of 2017 ($.21 deferred tax cost), and (iii) the effects of abnormally mild weather in the Company’s electric business of $0.10 ($0.15 pre-tax less a tax effect of $0.05).

Performance Criteria for the 2015-2017 Performance Share Awards and Earned and Vested Awards for the 2015-2017 Performance Period

 

For the half of the 2015-2017 performance share awards based on the TSR component, payouts were scaled according to our ranking against a peer group of utilities.  Executives could earn threshold payouts (equal to 25% of target award) if our TSR for the entire three-year period ranked at the 25th percentile in relation to the peer group’s TSR performance for the three-year period. Target payouts (equal to 100% of target award) could be earned if our TSR for the entire three-year period ranked at the 50th percentile in relation to the peer group’s TSR performance for the three-year period. Maximum payouts (equal to 200% of target award) could be earned if our TSR for the entire three-year period ranked at or above the 90th percentile in relation to the peer group’s performance for the three-year period. Payouts were scaled between 25% and 200% based on the actual percentile achieved for the three-year period. No payout could be earned if our performance over the three-year period was less than the 25th percentile, and no payout could exceed 200% of the target award. Threshold, target and maximum payouts at the 25th, 50th and 90th percentiles were used because these generally matched the levels used by the companies in the market survey data.

 

The peer group of utilities with which we compared our TSR for the 2015-2017 period are set forth below:

Alliant Energy Corporation; Ameren Corporation; American Electric Power Company, Inc.; Avista Corporation; CenterPoint Energy Inc.; CMS Energy Corporation; Consolidated Edison, Inc.; Dominion Energy, Inc.; DTE Energy Company; Duke Energy Corporation; Edison International; Entergy Corporation; Eversource Energy; Exelon Corporation; FirstEnergy Corp.; Great Plains Energy, Inc.; Hawaiian Electric Industries, Inc.; NextEra, Inc.; NiSource Inc.; NorthWestern Corporation; OGE Energy Corp.; PG&E Corporation; Pinnacle West Capital Corporation; PNM Resources, Inc.; PPL Corporation; Public Service Enterprise Group, Inc.; Southern Company; Vectren Corporation; Westar Energy, Inc.; WEC Energy Group; XCEL Energy, Inc.

   

The number of utilities included in the peer group used for TSR comparisons is larger than the number included in the market survey utility peer group we use for purposes of setting base salary and short- and long-term incentive targets because information about TSR is publicly available for a larger number of utilities. We include only utilities in the TSR peer group because we have assumed that shareholders would measure our performance against performance of other utilities in which they might have invested.

 

For the 2015-2017 performance period, our TSR over the three-year period, calculated as described in the preceding section, was less than all of our peers, which resulted in 0% being earned on the TSR component. Accordingly, there was no payout on the TSR portion of the performance shares for the 2015-2017 performance period.

   

For the half of performance shares based on our level of achieving growth in GAAP-adjusted weather-normalized net earnings per share targets, we determined the growth achieved by calculating GAAP-adjusted weather-normalized net earnings per share for each year in the three-year period and averaging the amounts. Executives could earn threshold payouts (equal to 25% of target award) if for the three-year period, average annual growth in GAAP-adjusted weather-normalized net earnings per share equaled 1%. Executives could earn target payouts (equal to 100% of target award) if for the three-year period, such average annual growth equaled 4.5%, and maximum payouts (equal to 200% of target award) if for the three-year period, such average annual growth equaled or exceeded 8%. Potential payouts were scaled between 25% and 200% based on the actual average growth in GAAP-adjusted weather-normalized net earnings per share for the entire three-year period. No payouts could be earned if growth in GAAP-adjusted weather-normalized net earnings per share were less than 1% for the three-year period, and no payouts could exceed 200% of target award.

 

For the first, second and third years of the 2015-2017 period, our growth in GAAP-adjusted weather-normalized net earnings per share was 4.2%, 6.4% and 8.6%, respectively (37.7%, 20.3% and (119.9%), respectively, in GAAP net earnings per share (see footnote 1 on page 36 for a reconciliation of our GAAP-adjusted net earnings per share to our GAAP net earnings per share)), which resulted in a three-year average of 6.4% on the earnings per share component. Accordingly, the payout of the GAAP-adjusted net earnings per share portion of the performance shares, which occurred in March 2018, was 157.1%. 

   

The overall payout of the total TSR and GAAP-adjusted weather normalized net earnings per share components of the performance share awards for the 2015-2017 cycle, which occurred in March 2018, was 78.55%, and is reflected in the “2017 Option Exercises and Stock Vested” table on page 47.   

   

2015-2017 Restricted Stock Unit Awards

 

The 2015-2017 restricted stock unit awards were granted on February 19, 2015, and were based on the fair market value of our common stock on the date of grant.  The restricted stock units were subject to a three-year vesting period, did not have voting rights prior to vesting, and accrued dividend equivalents prior to vesting.  Vesting of the restricted stock units was subject to forfeiture:  (i) in the event of termination of employment prior to the end of the vesting period, subject to certain exceptions for retirement, death, disability, or change in control; or (ii) if the Company did not achieve 2017 year-end positive earnings per share, as determined in the sole discretion of the Compensation Committee.  The Compensation Committee also had sole discretion to adjust the number of restricted stock units downward, including to zero, if the participant’s individual performance during the three year period warranted reduction.  We did not achieve 2017 year-end positive earnings per share.  Accordingly, the restricted stock units did not vest and were forfeited.   See the “2017 Option Exercises and Stock Vested” table on page 47.

 

2015-2017 Restricted Stock Units did not vest and were forfeited.

 

 

2016-2018 Performance Share and Restricted Stock Unit Awards

   

For the 2016-2018 performance period, we again granted awards under the Long-Term Equity Compensation Plan to each of the Named Executive Officers comprised of a combination of 70% performance shares and 30% restricted stock units.

   

Components of 2016-2018 Performance Share Awards

  

The components on which we based the 2016-2018 performance share awards, and the TSR measurement for the 2016-2018 performance share awards, were the same as for the 2015-2017 awards. Like the 2015-2017 performance share awards, performance measurement and award determination for the performance shares for the 2016-2018 performance period will be made for the entire three-year cycle with vesting and payment of awards after the end of the three-year cycle. See “—Components of 2015-2017 Performance Share Awards” on page 36.

   

Performance Criteria for the 2016-2018 Performance Share Awards

   

Payouts based on the TSR component of the 2016-2018 performance share awards will be scaled according to our ranking against the same peer group of utilities used for the 2015-2017 performance period as discussed above under “Performance Criteria for the 2015-2017 Performance Share Awards and Earned and Vested Awards for the 2015-2017 Performance Period,” unless a company could no longer be included due to a merger, dissolution or other similar transaction.

   

For the half of performance shares based on our level of achieving growth in GAAP-adjusted weather-normalized net earnings per share targets, we will determine the growth achieved by calculating GAAP-adjusted weather-normalized net earnings per share for each year in the three-year period and averaging the amounts. Executives can earn threshold payouts (equal to 25% of target award) if for the three-year period, average annual growth in GAAP-adjusted weather-normalized net earnings per share equals 1%. Executives can earn target payouts (equal to 100% of target award) if for the three-year period, such average annual growth equals 5%, and maximum payouts (equal to 200% of target award) if for the three-year period, such average annual growth equals or exceeds 9%. Potential payouts will be scaled between 25% and 200% based on the actual average growth in GAAP-adjusted weather-normalized net earnings per share for the entire three-year period. No payouts can be earned if growth in GAAP-adjusted weather-normalized net earnings per share is less than 1% for the three-year period, and no payouts can exceed 200% of target award.

   

See the “Outstanding Equity Awards at 2017 Fiscal Year-End” table on page 46 for information about performance share awards outstanding at the end of 2017.

   

2016-2018 Restricted Stock Unit Awards

  

The 2016-2018 restricted stock unit awards were granted on February 18, 2016, and were based on the fair market value of our common stock on the date of grant. The restricted stock units have the same terms as the 2015-2017 restricted stock units as discussed above under “2015-2017 Restricted Stock Unit Awards.” See the “Outstanding Equity Awards at 2017 Fiscal Year-End” table on page 46 for information about restricted stock unit awards outstanding at the end of 2017.

 

2017-2019 Performance Share and Restricted Stock Unit Awards

   

For the 2017-2019 performance period, we again granted awards under the Long-Term Equity Compensation Plan to each of the Named Executive Officers comprised of a combination of 70% performance shares and 30% restricted stock units.

   

Components of 2017-2019 Performance Share Awards

  

The components on which we based the 2017-2019 performance share awards, and the TSR measurement for the 2017-2019 performance share awards, were the same as for the 2015-2017 and the 2016-2018 awards. Like the 2015-2017 and 2016-2018 performance share awards, performance measurement and award determination for the performance shares for the 2017-2019 performance period will be made for the entire three-year cycle with vesting and payment of awards after the end of the three-year cycle. See “—Components of 2015-2017 Performance Share Awards” on page 36 and “—Components of 2016-2018 Performance Share Awards” on page 38.

   

Performance Criteria for the 2017-2019 Performance Share Awards

   

Payouts based on the TSR component of the 2017-2019 performance share awards will be scaled according to our ranking against the same peer group of utilities used for the 2015-2017 and 2016-2018 periods as discussed above under “Performance Criteria for the 2015-2017 Performance Share Awards and Earned and Vested Awards for the 2015-2017 Performance Period,” and “Performance Criteria for the 2016-2018 Performance Share Awards,” unless a company could no longer be included due to a merger, dissolution or other similar transaction.

   

For the half of performance shares based on our level of achieving growth in GAAP-adjusted weather-normalized net earnings per share targets, the performance criteria for the 2017-2019 period are the same as those used for the 2016-2018 period, as discussed under “-Performance Criteria for the 2016-2018 Performance Share Awards” on page 38.

   

See the “2017 Grants of Plan-Based Awards” table on page 45 for information about 2017 grants of performance share awards, and “Outstanding Equity Awards at 2017 Fiscal Year-End” table on page 46 for information about performance share awards outstanding at the end of 2017.

   

2017-2019 Restricted Stock Unit Awards

  

The 2017-2019 restricted stock unit awards were granted on February 16, 2017, and were based on the fair market value of our common stock on the date of grant. The restricted stock units have the same terms as the 2015-2017 and 2016-2018 restricted stock units as discussed above under “2015-2017 Restricted Stock Unit Awards” and “2016-2018 Restricted Stock Unit Awards.” Information about the restricted stock unit awards granted for the 2017-2019 three-year period is provided in the “2017 Grants of Plan-Based Awards” table on page 45. See also the “Outstanding Equity Awards at 2017 Fiscal Year-End” table on page 46.

 

Other 2018 Compensation Decisions

 

At its February 2018 meeting, the Board, on recommendation of the Compensation Committee did not make any increases to base salaries of the Named Executive Officers. 

 

Retirement and Other Benefit Plans

 

We currently sponsor the following retirement benefit plans:

 

 

 

 

 

All employees who have met eligibility requirements may participate in the Retirement Plan and the 401(k) Plan.

 

The SERP and the EDCP are designed to provide a benefit to senior executive officers who participate in the Retirement Plan or 401(k) Plan (our tax qualified retirement plans) and whose participation in those tax qualified plans at the same percentage of salary as all other employees is otherwise limited by government regulation. The SERP and EDCP participants are provided with the benefits to which they would have been entitled under the Retirement Plan or 401(k) Plan had their participation not been limited. At present, certain senior executive officers, including the Named Executive Officers, are participants in the SERP and/or EDCP. The SERP is described under the caption “Potential Payments Upon Termination or Change in Control — Retirement Benefits — Supplemental Executive Retirement Plan” on page 54 and the EDCP is described under the caption “2017 Nonqualified Deferred Compensation — Executive Deferred Compensation Plan” on page 49. We provide the SERP and the EDCP benefits because they allow our senior executive officers the opportunity to defer the same percentage of their compensation as other employees. We also believe, based on market survey data, that these plans may be necessary to make our senior executive officer retirement benefits competitive.

 

As of December 31, 2013, the Retirement Plan and the SERP were both closed to new employees and rehired employees. Current participants in the Retirement Plan and the SERP who continue to meet eligibility requirements will continue to earn benefits until December 31, 2023. Effective January 1, 2024, participants will no longer earn any future benefit accruals under these plans except that participants under the cash balance formula will continue to earn interest credits.

 

We also provide other benefits such as medical, dental, life and disability insurance, which are available to all of our employees. In addition, we provide our executive officers with additional long-term disability insurance and retiree medical and term life insurance.

 

Termination, Severance and Change in Control Arrangements

 

Our retirement and benefit plans include provisions that provide for payments to our senior executive officers, including our Named Executive Officers, in the event of a change in control of our Company. These arrangements, including the triggering events for payments and possible payment amounts, are described under the caption “Potential Payments Upon Termination or Change in Control” on page 51.  We believe that these arrangements are not uncommon for executives at the level of our Named Executive Officers and senior executive officer participants, including executives of the companies included in our compensation market survey information. We believe these arrangements are important factors in attracting and retaining our senior executive officers by assuring them financial and employment status protections in the event control of our Company changes. We believe such assurances of financial and employment protections help free executives from personal concerns over their futures, and thereby, can help to align their interests more closely with those of shareholders in negotiating transactions that could result in a change in control.

 

Perquisites

 

We provide limited perquisites to senior executive officers as summarized below.

 

Company Aircraft

 

The Company leases two aircraft for the use of officers and managers in their travels to various operations throughout our service areas, as well as to meet with regulatory bodies, industry groups, financial groups, and to conduct other Company business. Our senior executive officers may use the aircraft for business purposes on a non-exclusive basis. The aircraft may also be used to transport directors to and from meetings and committee meetings of the Board of Directors. Spouses or close family members of directors and senior executive officers occasionally accompany a director or senior executive officer on the aircraft when the director or executive officer is flying for our business purposes. On rare occasions, a senior executive officer may use the aircraft for personal use that is not in connection with a business purpose. We impute income to the executive for certain expenses related to such use.

 

For purposes of determining total 2017 compensation, we valued the aggregate incremental cost of the personal use of our aircraft, if any, using a method that takes into account the variable expenses associated with operating the aircraft, which variable expenses are only incurred if the planes are flying. The following items are included in our aggregate

incremental cost: aircraft fuel and oil expenses per hour of flight; maintenance, parts and external labor (inspections and repairs) per hour of flight; landing/parking/flight planning services expenses; crew travel expenses; supplies and food.

 

Medical Examinations

 

We offer all employees who participate in our health plans a preventive annual medical examination at no cost. Additionally, in order that we might plan for any executive-level health related retirements or resignations, we also provide each of our senior executive officers the opportunity to have a comprehensive annual medical examination from Lexington Medical Center, or the physician of his or her choice.

 

Security Systems

 

We offer installation and monitoring of home security systems for our senior executive officers. Because we operate a nuclear facility and provide essential services to the public, we believe we have a duty to help assure uninterrupted and safe operations by protecting the safety and security of our senior executive officers. We provide such installation and monitoring at more than one home for some senior executive officers.

 

Other Perquisites

 

We provide a taxable allowance to our senior executive officers for financial counseling services, including tax preparation and estate planning services. We value this benefit based on the actual charges incurred. We also pay the fees and monthly dues for civic and lunch club memberships for senior executive officers which are used for business purposes. We sometimes invite spouses to accompany directors and senior executive officers to our quarterly Board meetings because we believe social gatherings of directors and senior executive officers in connection with these meetings increases collegiality.

 

Accounting and Tax Treatment of Compensation and Effect of Financial Restatement on Executive Compensation

 

Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code establishes a limit on the tax deductibility of annual compensation in excess of $1,000,000 for certain senior executive officers, including the Named Executive Officers. Certain performance-based compensation approved by shareholders is not subject to the tax deduction limit. Our Long-Term Equity Compensation Plan is currently qualified so that most performance-based awards under that Plan constitute compensation that is not subject to Section 162(m). Our Short-Term Annual Incentive Plan does not meet Section 162(m) tax deductibility requirements. To maintain flexibility in compensating senior executive officers in a manner designed to promote various corporate goals, the Compensation Committee has not adopted a policy that all compensation must be tax deductible. Because Mr. Marsh’s salary exceeded the $1,000,000 threshold, we may not deduct a portion of his compensation for tax purposes. The Compensation Committee considered these tax effects in connection with its deliberations on senior executive compensation. The tax reform legislation signed into law in December, 2017, made significant amendments to IRC Section 162(m), including, with limited exceptions, repeal of the exception to the $1,000,000 deductibility limit for performance-based compensation. A number of these amendments are ambiguous, and will likely be subject to corrective legislation or interpretive advice from the IRS. Accordingly, the impact of the amendments on deductibility of our performance-based compensation is unclear. The Compensation Committee will continue to monitor relevant developments in making its decisions about the structure of our compensation programs.

 

Accounting for Stock Based Compensation

 

We account for stock based compensation in accordance with the requirements of FASB ASC Topic 718. All stock based compensation awards since 2009 have been accounted for as liability awards.

 

Financial Restatement

 

Although we have never experienced such a situation, our Board of Directors’ policy would be to consider, on a case-by-case basis, a retroactive adjustment to any cash or equity-based incentive compensation paid to our senior executive officers where payment was conditioned on achievement of certain financial results that were subsequently restated or otherwise adjusted in a manner that would reduce the size of a prior award or payment.

 

Security Ownership Guidelines for Executive Officers

 

The Board has established minimum stock ownership guidelines for senior executive officers with a title of Senior Vice President and above. The Chief Executive Officer is required to hold a minimum of five times his or her annual base salary in the form of SCANA Corporation common stock and all other senior executive officers are required to hold a minimum of three times their annual base salary in the form of SCANA Corporation common stock. Any newly elected Chief Executive Officer or Senior Vice President will have a period of five years from their election to meet the required minimum ownership requirement. Once a senior executive officer complies with the minimum ownership guidelines, compliance will not be jeopardized by fluctuations in the price of the Company’s common stock as long as the senior executive officer has not sold shares of the Company’s common stock which were included to meet the minimum ownership requirements. The Compensation Committee of the Board monitors compliance with the policy, and also has the authority to grant a temporary waiver of the minimum share ownership requirement upon demonstration by the senior executive officer that, due to a financial hardship or other good reason, he or she cannot meet the requirement. For purposes of meeting the applicable guidelines, the following will be considered SCANA common stock: (i) shares held directly; (ii) shares held in any defined contribution, employee stock ownership plan or other stock-based plan; (iii) performance shares/units under an incentive or base salary deferral plan; (iv) performance shares/units earned and/or deferred in any long-term incentive plan account; and (v) vested and unvested restricted stock and restricted stock unit awards. The Board directed that the Company institute appropriate policies and administrative processes to ensure the minimums are effectively monitored and communicated with annual reports to the Compensation Committee. The Committee reviews security ownership at its third quarter meeting each year, and as of the measurement in August 2018, all executives were in compliance or newly appointed executives were expected to meet the ownership guidelines by their measurement dates. 

 

Non-binding Shareholder Advisory Vote on Executive Compensation and Frequency of Vote on Executive Compensation

 

Pursuant to the requirements of Section 14A of the Securities Exchange Act of 1934 and related Securities and Exchange Commission regulations, at our 2017 Annual Meeting of Shareholders, we submitted to our shareholders a non-binding advisory vote on approval of executive compensation. At its Committee meetings in July and October of 2017, the Compensation Committee took into consideration that 93% of the shares voting on the non-binding advisory vote on executive compensation had voted in favor of the proposal, and the Committee concluded that no material changes to executive compensation decisions and policies were necessary in 2017.   In February 2018, the Committee discussed the structure of executive compensation and noted that both the short- and long-term incentive plans were designed such that awards would fail to vest when performance measures were not met.  The Committee also noted that, under each of the short- and long-term incentive plans, one performance measure was not met and, as a result, one of the components of each of the plans failed to vest at the end of 2017, resulting in no payout under those components of the awards.  Additionally, in order to further maintain alignment of executive compensation with operational and financial results for 2017, the Committee, and the Board, also exercised negative discretion pursuant to the terms of the Short-Term Annual Incentive Plan, and determined that no payouts would be made to any officer under the plan, even on components of their awards that were earned.   See “—Short-Term Annual Incentive Plan – Individual and Business Unit Strategic Objectives Component of 2017 Annual Incentive Award,” beginning on page 35.

 

At our 2017 Annual Meeting, we submitted to our shareholders a non-binding advisory vote on whether to hold the non-binding advisory vote on executive compensation every year, every two years, or every three years. The Committee took into consideration that, of the shares voting on the non-binding advisory vote on frequency of the vote on executive compensation, more shares voted in favor of an every year frequency than on either of the other frequency alternatives, and, accordingly, has set the current frequency of the non-binding advisory vote on executive compensation at every year. The next vote on the frequency of the advisory (non-binding) vote relating to executive compensation will be held at the Annual Meeting in 2023.

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” included in this proxy statement. Based on that review and discussion, the Compensation Committee recommended to our Board of Directors that the “Compensation Discussion and Analysis” be included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2017 for filing with the Securities and Exchange Commission, and included in this proxy statement.

 

Mr. James A. Bennett, Chair

Mr. John F. A. V. Cecil

Mrs. Sharon A. Decker

Mr. James W. Roquemore

Mr. Maceo K. Sloan

 

 

SUMMARY COMPENSATION TABLE

 

The following table summarizes information about compensation paid or accrued during 2017, 2016 and 2015 to our Chief Executive Officer, our Chief Financial Officer and our three next most highly compensated executive officers. (As noted in the “Compensation Discussion and Analysis,” we refer to these persons as our Named Executive Officers.)  Mr. Archie was not a Named Executive Officer in 2015 or 2016.

 

 

 

Although the 2017 and 2016 Long-Term Equity Compensation awards in the table below are included in column (e) of the Summary Compensation Table at grant date fair value, a portion of these awards was forfeited as a result of Messrs. Marsh, Byrne, and Lindsay’s separations from service.  The amounts in the table below represent the forfeited awards under the 2017-2019 and 2016-2018 Long-Term Equity Compensation Plan performance periods: