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.         )

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ý    Definitive Proxy Statement
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MDU Resources Group, Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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March 16, 201624, 2017
To Our
Fellow Stockholders:
Please
I invite you to join us for the 2016me, our board of directors, and members of our senior management team at our Annual Meeting of Stockholders. Stockholders at 11 a.m., Central Daylight Saving Time, on May 9, 2017, at 909 Airport Road in Bismarck, North Dakota.

In addition to the business that will be conducted at the meeting, I will explain some of the significant, positive changes we made at MDU Resources Group in 2016. During the year, we streamlined our operations into two lines of business: regulated energy delivery and construction materials and services. We reduced our exposure to commodity price volatility by completing the sale of our oil and natural gas exploration and production assets and by selling our interests in a diesel refinery and in a natural gas processing plant both located in North Dakota.

With a business presence in 48 states, we remain committed to Building a Strong America.® Our continuing businesses performed well in 2016, providing a 32 percent increase in earnings per share. We delivered a total stockholder return of 62 percent for the year, including increasing our dividend for the 26th consecutive year.

Another positive change we made this year is to our proxy statement. We simplified the proxy statement to what we believe is an easier-to-read format, while still adhering to regulations that outline what information we must provide to stockholders. Our goal is to make it easier for you to understand MDU Resources Group’s governance and how we tie the company’s results to executive compensation. We also hope the proxy statement more clearly describes the business we will conduct at our annual meeting.

We have streamlined our annual report and proxy statement delivery process this year as well, moving to a notice-and-access model of providing the report. You likely received notice in the mail that you can vote your shares and view our annual report and proxy statement online, along with instructions on how to request a printed copy if you would like one.

I look forward to you joining us on May 9. Even if you are not able to attend the annual meeting, your vote is important to us. Please follow the instructions on your proxy card to vote and make sure your shares are represented.

We appreciate your continued investment in MDU Resources Group.
Sincerely yours,
davidlgoodinblcka03.jpg
David L. Goodin
President and Chief Executive Officer

MDU Resources Group, Inc. Proxy Statement

Proxy Statement

MDU RESOURCES GROUP, INC.
1200 West Century Avenue
Mailing Address:
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(701) 530-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2017
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on May 9, 2017
The meeting2017 Notice of Annual Meeting and Proxy Statement and 2016 Annual Report
to Stockholders are available at www.mdu.com/proxymaterials.

March 24, 2017
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MDU Resources Group, Inc. will be held at 909 Airport Road, Bismarck, North Dakota, on Tuesday, April 26, 2016,May 9, 2017, at 11:00 a.m., Central Daylight Saving Time, at 909 Airport Road, Bismarck, North Dakota.for the following purposes:
(1)Election of directors;
(2)Advisory vote to approve the frequency of the vote to approve the compensation paid to the company’s named executive officers;
(3)Advisory vote to approve the compensation paid to the company’s named executive officers;
(4)Ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2017;
(5)Advisory vote to approve an amendment to the company’s bylaws to adopt an exclusive forum for internal corporate claims; and
(6)Transaction of any other business that may properly come before the meeting or any adjournment(s) thereof.
The formal matters are described inboard of directors has set the accompanying Noticeclose of Annual Meetingbusiness on March 10, 2017, as the record date for the determination of Stockholders and Proxy Statement. We also will have a brief report on current matters of interest. Lunchcommon stockholders who will be served following the meeting.
We were pleased with the stockholder response for the 2015 Annual Meeting at which 89.82 percententitled to notice of, the common stock was represented in person or by proxy. We hope for an even greater representation at the 2016 meeting.
You mayand to vote your shares by telephone, by the Internet, or by returning the enclosed proxy card. Representation of your shares at, the meeting is very important.and any adjournment(s) thereof. We urge youexpect to submit your proxy promptly.
Brokers may not vote your sharesbegin mailing the Notice of Availability of Proxy Materials (Notice) on three ofor about March 24, 2017. The Notice will contain basic information about the four matters to be presented if you have not given your broker specificannual meeting and instructions as toon how to vote. Pleaseview our proxy materials, and vote electronically, on the Internet. Stockholders who do not receive the Notice will receive a paper copy of our proxy materials, which will be sure to give specific voting instructions to your broker so your vote can be counted.sent on or about March 30, 2017.
All stockholders who find it convenient to do soas of the record date of March 10, 2017, are cordially invited and urged to attend the meeting in person. Registered stockholders who receive a full set of proxy materials will receive a request for admission ticket(s) with their proxy card that can be completed and returned to us postage-free. StockholdersRegistered stockholders who receive a notice regarding the availability of proxy materials and stockholders whose shares are held in the name of a bank or broker will not receive a request for admission ticket(s). They should, instead: (1) call (701) 530-1000 to request an admission ticket(s),; (2) if shares are held in the name of a bank or broker, obtain a statement from their bank or broker showing proof of stock ownership as of March 1, 2016,10, 2017; and (3) present their admission ticket(s), the stock ownership statement, and photo identification, such as a driver’s license, at the annual meeting. Directions to the meeting will be included with your admission ticket.
I hope you will find it possible to attend the meeting.
Sincerely yours,
David L. Goodin



MDU Resources Group, Inc. Proxy Statement

Proxy Statement

MDU RESOURCES GROUP, INC.
1200 West Century Avenue
Mailing Address:
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(701) 530-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 2016
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on April 26, 2016
The 2016 Notice of Annual Meeting and Proxy Statement and 2015 Annual Report
to Stockholders are available at www.mdu.com/proxymaterials.

March 16, 2016
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MDU Resources Group, Inc. will be held at 909 Airport Road, Bismarck, North Dakota, on Tuesday, April 26, 2016, at 11:00 a.m., Central Daylight Saving Time, for the following purposes:
(1)Election of ten directors nominated by the board of directors for one-year terms;
(2)Approval of the material terms of the performance goals under the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan for purposes of Internal Revenue Code Section 162(m);
(3)
Ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2016;
(4)Approval, on a non-binding advisory basis, of the compensation of the company’s named executive officers; and
(5)Transaction of any other business that may properly come before the meeting or any adjournment(s) thereof.
The board of directors has set the close of business on March 1, 2016, as the record date for the determination of common stockholders who will be entitled to notice of, and to vote at, the meeting and any adjournment(s) thereof.
All stockholders who find it convenient to do so are cordially invited and urged to attend the meeting in person. Registered stockholders will receive a request for admission ticket(s) with their proxy card that can be completed and returned to us postage-free. Stockholders whose shares are held in the name of a bank or broker will not receive a request for admission ticket(s). They should, instead: (1) call (701) 530-1000 to request an admission ticket(s), (2) obtain a statement from their bank or broker showing proof of stock ownership as of March 1, 2016, and (3) present their admission ticket(s), the stock ownership statement, and photo identification, such as a driver’s license, at the annual meeting. Directions to the meeting will be included with your admission ticket. We look forward to seeing you.
 By order of the Board of Directors,
  
 
dankuntzsig2a02.jpg
 Daniel S. Kuntz
 Secretary

 
MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

Page
Notice of Annual Meeting of Stockholders
Proxy Statement
1
Voting Information
1
Item 1. Election of Directors
3
Director Nominees
3
Item 2. Approval of the Material Terms of the Performance Goals under the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan for Purposes of Internal Revenue Code Section 162(m)
10
Item 3. Ratification of Independent Registered Public Accounting Firm
15
Accounting and Auditing Matters
16
Item 4. Approval, on a Non-Binding Advisory Basis, of the Compensation of the Company’s Named Executive Officers
17
Executive Compensation
18
Compensation Discussion and Analysis
18
Compensation Committee Report
37
Summary Compensation Table for 2015
38
Grants of Plan-Based Awards in 2015
39
Outstanding Equity Awards at Fiscal Year-End 2015
45
Pension Benefits for 2015
46
Nonqualified Deferred Compensation for 2015
49
Potential Payments upon Termination or Change of Control
50
Director Compensation for 2015
55
Information Concerning Executive Officers
58
Security Ownership
60
Related Person Transaction Disclosure
62
Corporate Governance
62
Section 16(a) Beneficial Ownership Reporting Compliance
69
Conduct of Meeting; Adjournment
69
Other Business
69
Shared Address Stockholders
69
2017 Annual Meeting of Stockholders
69
Exhibit A - MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan
A-1
Exhibit B - Companies that Participated in the Compensation Surveys used by Towers Watson
B-1
TABLE OF CONTENTS
  Page   Page 
 
PROXY STATEMENT SUMMARY
1
     
 
BOARD OF DIRECTORS
   EXECUTIVE COMPENSATION (continued)  
 
Item 1. Election of Directors
6
  
Executive Compensation Tables
38
 
 
Director Nominees
6
  
Summary Compensation Table
38
 
 
CORPORATE GOVERNANCE
   
Grants of Plan-Based Awards
39
 
 
Director Independence
12
  
Outstanding Equity Awards at Fiscal Year-End
41
 
 
Stockholder Engagement
12
  
Option Exercises and Stock Vested
41
 
 
Board Leadership Structure
12
  
Pension Benefits
42
 
 
Board’s Role in Risk Oversight
13
  
Nonqualified Deferred Compensation
44
 
 
Board Meetings and Committees
13
  
Potential Payments Upon Termination or
  
 
Narrative Disclosure of our Compensation 
   
   Change of Control
45
 
 
   Policies and Practices
16
  
AUDIT MATTERS
  
 
Stockholder Communications with the Board
17
  
Item 4. Ratification of the Appointment of
  
 
Additional Governance Features
17
  
   Deloitte & Touche LLP as the Company’s Independent
  
 
Corporate Governance Materials
18
  
   Registered Public Accounting Firm for 2017
48
 
 
Related Person Transaction Disclosure
18
  
       Annual Evaluation and Selection of Deloitte &
  
 
COMPENSATION OF NON-EMPLOYEE DIRECTORS
   
   Touche LLP
48
 
 
Director Compensation
19
  
Audit Fees and Non-Audit Fees
49
 
 
SECURITY OWNERSHIP
   
Policy on Audit Committee Pre-Approval of Audit
  
 
Security Ownership Table
20
  
   and Permissible Non-Audit Services of the
  
 
       Section 16 Compliance
21
  
   Independent Registered Public Accounting Firm
49
 
 
EXECUTIVE COMPENSATION
   
Audit Committee Report
50
 
 
Item 2. Advisory Vote to Approve the Frequency of the
   
OTHER MATTERS
  
 
   Vote to Approve the Compensation Paid to the
   
Item 5. Advisory Vote to Approve an Amendment to
  
 
   Company’s Named Executive Officers
22
  
   the Company’s Bylaws to Adopt an Exclusive Forum for
  
 
Item 3. Advisory Vote to Approve the Compensation
   
   Internal Corporate Claims
51
 
 
   Paid to the Company’s Named Executive Officers
23
  
INFORMATION ABOUT THE ANNUAL MEETING
  
 
Information Concerning Executive Officers
24
  
Who Can Vote
53
 
 
Compensation Discussion and Analysis
25
  
Notice and Access
53
 
 
Executive Summary
25
  
How to Vote
53
 
 
2016 Compensation Framework
29
  
Revoking Your Proxy
53
 
 
2016 Compensation for our Named
   
Discretionary Voting Authority
54
 
 
   Executive Officers
30
  
Voting Standards
54
 
 
Other Benefits
35
  
Proxy Solicitation
55
 
 
Compensation Governance
36
  
Electronic Delivery of Proxy Statement
55
 
 
Compensation Committee Report
37
  
Householding of Proxy Materials
55
 
     
MDU Resources Group, Inc. 401(k) Plan
55
 
     
Annual Meeting Admission
55
 
     
Conduct of the Meeting
56
 
     
Stockholder Proposals, Director Nominations, and
  
     
   Other Items of Business
56
 
     
EXHIBIT A
  
     
Amendment to the Bylaws
A-1
 
        
        



 
MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

PROXY STATEMENT
PROXY STATEMENT SUMMARY
To assist you in reviewing the company’s 2016 performance and voting your shares, we call your attention to key elements of our 2017 Proxy Statement and our 2016 Annual Report to Stockholders. The board of directors of MDU Resources Group, Inc.following is furnishing this proxy statement beginning March 16, 2016, to solicit your proxy for use at our annual meeting of stockholders on April 26, 2016, and any adjournment(s) thereof. We are soliciting proxies principally by mail, but directors, officers, and employees of MDU Resources Group, Inc. or its subsidiaries may solicit proxies personally, by telephone or by electronic media, without compensation other than their regular compensation. Okapi Partners LLC additionally will solicit proxies for approximately $8,000 plus out-of-pocket expenses. We will pay the cost of soliciting your proxy and reimburse brokers and others for forwarding proxy materials to you.
The Securities and Exchange Commission’s e-proxy rules allow companies to post their proxy materials on the Internet and provide only a Notice of Internet Availability of Proxy Materials to stockholders as an alternative to mailing full sets of proxy materials except upon request. For 2016, we have elected to use the Securitiessummary and Exchange Commission’s full set delivery option, which means that while we are posting our proxy materials online, we are also mailing a full set of our proxy materials to our stockholders. We believe that mailing a full set of proxy materials will help ensure that a majority of outstanding shares of our common stock are present in person or represented by proxy at our meeting. We also hope to help maximize stockholder participation. Therefore, even if you previously consented to receiving your proxy materials electronically, you will receive a full set of proxy materials in the mail for this year’s annual meeting. However, we will continue to evaluate the option of providing only a Notice of Internet Availability of Proxy Materials to some ordoes not contain all of the information you should consider. You should read the entire Proxy Statement carefully before voting. For more complete information about these topics, please review the complete Proxy Statement and our stockholders in the future.
VOTING INFORMATION
Who may vote? You may vote if you owned shares of our common stock at the close of business on March 1, 2016. You may vote each share that you owned on that date on each matter presented at the meeting and any adjournment(s) thereof. As of March 1, 2016 we had 195,304,376 shares of common stock outstanding entitledAnnual Report to one vote per share.
What am I voting on? You are voting on:
•election of ten directors nominated by the board of directors for one-year terms
approval of the material terms of the performance goals under the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan for purposes of Internal Revenue Code Section 162(m)Stockholders.
ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2016
•approval, on a non-binding advisory basis, of the compensation of the company’s named executive officers
Meeting InformationSummary of Stockholder Voting Matters
Board Vote Recommendation
Time and Date:Voting MattersSee Page
11:00 a.m.
Central Daylight Saving Time (CDT)Tuesday, May 9, 2017
Item 1 -
Election of DirectorsFOR each nominee
6
Item 2 -
Advisory Vote to Approve the Frequency of the Vote to Approve the Compensation Paid to the Company’s Named Executive OfficersFOR ONE YEAR
22
Place:
Item 3 -
Advisory Vote to Approve the Compensation Paid to the Company’s Named Executive OfficersFOR
23
MDU Service Center
909 Airport Road
Bismarck, ND
Item 4 -
Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for 2017FOR
48
Item 5 -
Advisory Vote to Approve an Amendment to the Company’s Bylaws to Adopt an Exclusive Forum for Internal Corporate ClaimsFOR
51
•any other business that is properly brought before the meeting or any adjournment(s) thereof.
What vote is required to pass an item of business? A majority of our outstanding shares of common stock entitled to vote must be present in person or represented by proxy to hold the meeting.
Corporate Governance Highlights
MDU Resources Group, Inc. is committed to strong corporate governance practices. The following highlights our corporate governance practices and policies. See the sections entitled “Corporate Governance” and “Executive Compensation” for more information on the following:
ü
Annual Election of All Directors

üAll Three Standing Committees Consist of Independent Directors
üMajority Voting for DirectorsüActive Investor Outreach Program
üSeparate Chairman and CEOüStock Ownership Requirements for Directors and Executives
üExecutive Sessions of Independent Directors at Every Regularly Scheduled MeetingüAnti-Hedging and Anti-Pledging Policies
üAnnual Board and Committee Self-EvaluationsüCompensation Recovery/Clawback Policy
üRisk Oversight by Full Board and CommitteesüCode of Business Conduct and Ethics for Directors, Officers, and Employees
üAll Directors are Independent Other Than our CEOüAnnual Advisory Approval on Executive Compensation
If you hold shares through an account with a bank or broker, the bank or broker may vote your shares on some matters even if you do not provide voting instructions. Brokerage firms have the authority under the New York Stock Exchange rules to vote shares on certain matters when their customers do not provide voting instructions. However, on other matters, when the brokerage firm has not received voting instructions from its customers, the brokerage firm cannot vote the shares on those matters and a “broker non-vote” occurs. This means that brokers may not vote your shares on items 1, 2, and 4 if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so your vote can be counted.
Item 1 – Election of Directors
A majority of votes cast is required to elect a director in an uncontested election. A majority of votes cast means the number of votes cast “for” a director’s election must exceed the number of votes cast “against” the director’s election. “Abstentions” and “broker non-votes” do not count as votes cast “for” or “against” the director’s election. In a contested election, which is an election in which the number of nominees for director exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast. If a nominee becomes unavailable for any reason or if a vacancy should occur before the election, which we do not anticipate, the proxies may vote your shares in their discretion for another person nominated by the board.

 
MDU Resources Group, Inc. Proxy Statement 1

Proxy Statement
 

Our policy on majority voting for directors contained in our corporate governance guidelines requires any proposed nominee for re-election as a director to tender to the board, prior to nomination, his or her irrevocable resignation from the board that will be effective, in an uncontested election of directors only, upon:
receipt of a greater number of votes “against” than votes “for” election at our annual meeting of stockholders and
acceptance of such resignation by the board of directors.
Business Performance Highlights
Our overall performance in 2016 was consistent with our long-term strategy as we executed on priorities to reduce our risk to oil and natural gas commodity price fluctuations and focus on our regulated energy delivery and construction materials and services business segments. In 2016, we accomplished:
●The sale of Dakota Prairie Refining, LLC in June, the completion of the sale of our oil and gas exploration and production business assets in April, and the sale of our interest in the Pronghorn natural gas processing plant in January 2017 reduced the company’s risk by decreasing its exposure to commodity price fluctuations.
●Our construction materials & contracting segment achieved record earnings, and its backlog at December 31, 2016, was $538 million compared to $491 million a year earlier.
●Earnings from our construction services segment were up 43%, to $33.9 million, on 16% revenue growth.
●We acquired the Thunder Spirit wind farm providing an additional 107.5 megawatts of renewable generation. We also signed an agreement in 2016 to purchase power from an expansion of the Thunder Spirit wind farm which includes an option to buy the expansion at the completion of construction. This will bring the total capacity of the Thunder Spirit wind farm to 150 megawatts which will increase the company’s nameplate electric renewable generation portfolio to 27%.
●Our electric & natural gas distribution segment achieved regulatory relief of an additional $32.7 million in final implemented rates in 2016 through February 2017.
●We, along with a partner, began construction of approximately 160-miles of 345 kilovolt electric transmission line which will facilitate delivery of renewable wind energy from North Dakota to eastern markets.
●Our pipeline & midstream segment secured sufficient capacity commitments and started survey work on a 38-mile transmission pipeline that will deliver natural gas supply to eastern North Dakota and far western Minnesota. Following receipt of necessary permits and regulatory approvals, construction is expected to start in early 2018 and be complete late that year. This segment also signed agreements for and completed construction of other natural gas transmission pipeline projects.
●Our construction services segment constructed and sold a large scale solar project in Nevada. This segment also completed a 135-mile 345-kilovolt electric transmission line project which was the largest transmission construction project ever completed by the construction services segment.
●Our pipeline & midstream segment experienced a 59% increase in natural gas storage levels.
With our accomplishments in 2016, we are optimistic about the company’s future financial performance. The charts below show our progress over the last five years.
Following certification of the stockholder vote, the nominating and governance committee will promptly recommend to the board whether or not to accept the tendered resignation. The board will act on the nominating and governance committee’s recommendation no later than 90 days following the date of the annual meeting.
Item 2 - Approval of the Material Terms of the Performance Goals under the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan for Purposes of Internal Revenue Code Section 162(m)
For purposes of Internal Revenue Code Section 162(m), approval of Item 2 requires a majority of votes cast to be in favor of approval. Broker non-vote shares and abstentions will not count as votes cast.
Item 3 – Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for 2016
Approval of Item 3 requires the affirmative vote of a majority of our common stock present in person or represented by proxy at the meeting and entitled to vote on the item. Abstentions will count as votes “against” the item.
Item 4 – Approval, on a Non-Binding Advisory Basis, of the Compensation of the Company’s Named Executive Officers
Approval of Item 4 requires the affirmative vote of a majority of our common stock present in person or represented by proxy at the meeting and entitled to vote on the item. Abstentions will count as votes “against” the item. Broker non-vote shares are not entitled to vote on the item and, therefore, are not counted in the vote.
Unless you specify otherwise when you submit your proxy, the proxies will vote your shares of common stock “for” all directors nominated by the board of directors and “for” items 2, 3, and 4.
How do I vote? If you are a stockholder of record, you may vote by:
calling the toll free telephone number on the enclosed proxy card
using the Internet as described on the enclosed proxy card or
returning the enclosed proxy card in the envelope provided.
If you are a beneficial owner, you must provide voting instructions to your bank, broker, or other nominee to ensure your shares are voted as you would like. You should follow their instructions.
You may also vote in person at the meeting. However, if you are the beneficial owner of the shares, you must obtain a legal proxy from your bank or broker and present it at the meeting. A legal proxy identifies you, states the number of shares you own, and gives you the right to vote those shares. Without a legal proxy we cannot identify you as the beneficial owner of the shares or know how many shares you have to vote.
Can I change my vote? Yes.
If you are a beneficial owner, such as where your shares are held of record by a bank, broker, or other nominee, you may change your vote by providing later dated voting instructions to your bank, broker, or other nominee in accordance with their procedures or by obtaining a legal proxy and voting in person at the meeting, as set forth above.
If you are a stockholder of record, you may revoke your proxy and change your vote by:
submitting a written revocation to the corporate secretary before the meeting
submitting a proxy bearing a later date to the corporate secretary before the meeting or
voting in person at the meeting.mdu2017prox_chart-39730a01.jpg



 
2 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

2016 Financial Performance Highlights
●Strong year-over-year performance from continuing operations resulted in an increase in earnings per share from continuing operations to $1.19 per share compared to $0.90 per share in 2015, an increase of 32%
○Electric & natural gas distribution segment earnings increased by 16%
○Pipeline & midstream segment earnings increased by 77%
○Construction materials & contracting segment earnings increased by 15%
○Construction services segment earnings increased by 43%
●Return of stockholder value through the dividend
○Increased dividend for 26th straight year
○Paid uninterrupted dividend for 79th straight year
●Improved credit rating outlook from Standard & Poor’s (S&P) from negative to stable
○BBB+ credit ratings with stable outlooks from both S&P and Fitch Ratings
●Stock price increased from $18.32 per share on December 31, 2015, to $28.77 per share on December 31, 2016, reflecting appreciation of 57%
●One year total stockholder return of 62% including our dividends
mdu2017prox_chart-41316a01.jpg
mdu2017prox_chart-42664a01.jpg
* The calculation of Total Annual Stockholder Return assumes the reinvestment of dividends in additional shares of common stock.

MDU Resources Group, Inc. Proxy Statement 3

Proxy Statement


26 YearsDividends Paid79 Years
$692 Million
of Consecutiveof Uninterrupted
Dividend IncreasesOver the Last 5 YearsDividend Payments
Compensation Highlights
Executive compensation at the company is focused on performance. Our compensation program is structured to strongly align compensation with the company’s performance with a substantial portion of our executive compensation based upon performance incentive awards.
●Over 76% of our chief executive officer’s target compensation and 61% of our other named executive officers’ target compensation is performance based.
●100% of annual incentive compensation and 100% of long-term incentive compensation are tied to performance against pre-established, specific, measurable financial and operational goals.
●We require all executive officers to own a significant amount of company stock based upon a multiple of their base salary.
2016 Named Executive Officer Target Pay Mix
mdu2017prox_chart-43928a01.jpgmdu2017prox_chart-45052a01.jpg
●With the exception of the president of our construction materials & contracting segment, which achieved record earnings in 2015, base salaries for our named executive officers were frozen in 2016 following a challenging year in 2015 as a result of impairments at our exploration & production segment, which has since been sold.
●Annual incentive award payout to our CEO for 2016, which was based upon the strong performance at all four of our business units, was 139.8% of his annual incentive target.
●Long-term incentive award payouts in 2017 for the 2014-2016 performance cycle were at 68% of target based upon total stockholder return at the 40th percentile of our peers over the performance cycle reflecting a challenging operating environment in 2014 and 2015.

4 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Key Features of our Executive Compensation Program
What We Do
þ
Pay for Performance - All annual and long-term incentives are performance-based and tied to performance measures set by the compensation committee.
þ
Independent Compensation Committee - All members of the compensation committee meet the independence standards under the New York Stock Exchange listing standards and the Securities and Exchange Commission rules.
þ
Independent Compensation Consultant - The compensation committee retains an independent compensation consultant to evaluate executive compensation plans and practices.
þ
Competitive Compensation - Executive compensation reflects the executive’s performance, experience, relative value compared to other positions within the company, relationship to competitive market value compensation, and the economic environment of the executive’s business segment.
þ
Annual Compensation Risk Analysis - We regularly analyze the risks related to our compensation programs and conduct a broad risk assessment annually.
þ
Stock Ownership & Retention Requirements - Executive officers are required to own, within five years of appointment or promotion, company common stock equal to a multiple of their base salary. The executive officers must retain at least 50% of the net after tax shares of stock vested through the long-term incentive plan for the earlier of two years or until termination of employment.
þ
Clawback Policy - If the company’s audited financial statements are restated, the compensation committee may, or shall if required, demand repayment of some or all incentives paid to company executive officers within the last three years.
What We Don’t Do
ý
Stock Options - The company does not use stock options as a form of incentive compensation.
ý
Perquisites - Executives do not receive perquisites which materially differ from those available to employees in general.
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Tax Gross-ups - Executive officers do not receive tax gross-ups on any compensation.
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Hedge or Pledge Stock - Executives and directors are not allowed to hedge or pledge company securities.
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No Time Based Awards - All long-term incentives are performance-based and vest only upon the achievement of specific performance measures.


MDU Resources Group, Inc. Proxy Statement 5

Proxy Statement

BOARD OF DIRECTORS
ITEM 1. ELECTION OF DIRECTORS
The nominating and governance committee of the board, reflecting the criteria for election to the board, identifies and reviews possible candidates for the board and recommends the nominees for directors to the board for approval. The committee considers and evaluates suggestions from many sources, including stockholders, regarding possible candidates for directors. Additional information on our board composition and director nomination process is further discussed in our Proxy Statement under “Nominating and Governance Committee” in the section entitled “Corporate Governance.”
All nominees for director are nominated to serve one-year terms until the annual meeting of stockholders in 20172018 and until their respective successors are elected and qualified, or until their earlier resignation, removal from office, or death.
We have provided information below about our nominees, all of whom are incumbent directors, including their ages, years of service as directors, business experience, and service on other boards of directors, including any other directorships held during the past five years.on boards of public companies. We have also included information about each nominee’s specific experience, qualifications, attributes, or skills that led the board to conclude that he or she should serve as a director of MDU Resources Group, Inc. at the time we file our proxy statement,Proxy Statement, in light of our business and structure. Unless we specifically note below, no corporation or organization referred to below is a subsidiary or other affiliate of MDU Resources Group, Inc.
Director Nominees
everistba03.jpg
Thomas Everist
Age 67
Independent Director Since 1995
66Compensation Committee
Mr. Everist has served as president and chairman of The Everist Company, Sioux Falls, South Dakota, an aggregate, concrete, and asphalt production company, since April 15, 2002. He has been a managing member of South Maryland Creek Ranch, LLC, a land development company, since June 2006, president of SMCR, Inc., an investment company, since June 2006, and a managing member of MCR Builders, LLC, which provides residential building services to South Maryland Creek Ranch, LLC, since November 2014. He was previously president and chairman of L.G. Everist, Inc., Sioux Falls, South Dakota, an aggregate production company, from 1987 to April 15, 2002. He held a number of positions in the aggregate and construction industries prior to assuming his current position with The Everist Company. He is a director of Showplace Wood Products, Sioux Falls, South Dakota, a custom cabinets manufacturer, and has been a director of publicly traded Raven Industries, Inc., Sioux Falls, South Dakota, a general manufacturer of electronics, flow controls, and engineered films since 1996, and its chairman of the board since April 1, 2009. Mr. Everist has served as a director and chairman of the board of Everist Genomics, Inc., Ann Arbor, Michigan, which provides solutions for personalized medicines since 2002. He served as Everist Genomics’ chief executive officer from August 2012 to December 2012. He was a director of Angiologix Inc., Mountain View, California, a medical diagnostic device company, from July 2010 through October 2011 when it was acquired by Everist Genomics, Inc. He has been a director of Bell, Inc., Sioux Falls, South Dakota, a manufacturer of folding cartons and packages, since April 2011.
Mr. Everist attended Stanford University where he received a bachelor’s degree in mechanical engineering and a master’s degree in construction management. He is active in the Sioux Falls community and currently serves as a director on the Sanford Health Foundation, a nonprofit charitable health services organization, and co-founder and chairman of the board of Searching for Solutions Institute, a nonprofit public foundation that provides leaders with resources to address critical social issues. From July 2001 to June 2006, he served on the South Dakota Investment Council, the state agency responsible for prudently investing state funds.
The board concluded that Mr. Everist should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. A significant portion of MDU Resources Group, Inc.’s earnings is derived from its construction services and aggregate mining businesses. Mr. Everist has considerable business experience in this area, with more than 42 years in the aggregate and construction materials industry. He has also demonstrated success in his business and leadership skills, serving as president and chairman of his companies for over 28 years. We value other public company board service. Mr. Everist has experience serving as a director and chairman of another public company, which enhances his contributions to our board. His leadership skills and experience with his own companies and on other boards enable him to be an effective board member and compensation committee chairman. Mr. Everist is our longest serving board member, providing 21 years of board experience as well as extensive knowledge of our business.

MDU Resources Group, Inc. Proxy Statement 3

Proxy Statement

Karen B. FaggDirector Since 2005
Age 62
Compensation Committee
Nominating and Governance CommitteeOther Current Public Boards:
--Raven Industries, Inc.
Ms. Fagg served as vice president of DOWL LLC, d/b/a DOWL HKM, an engineering and design firm, from April 2008 until her retirement on December 31, 2011. Ms. Fagg was president from April 1, 1995 to June 2000, and chairman, chief executive officer, and majority owner from June 2000 through March 2008 of HKM Engineering, Inc., Billings, Montana, an engineering and physical science services firm. HKM Engineering, Inc. merged with DOWL LLC on April 1, 2008. Ms. Fagg was employed with MSE, Inc., Butte, Montana, an energy research and development company, from 1976 through 1988, and from 1993 to April 1995 she served as vice president of operations and corporate development director. From 1989 through 1992, Ms. Fagg served a four-year term as director of the Montana Department of Natural Resources and Conservation, Helena, Montana, the state agency charged with promoting stewardship of Montana’s water, soil, energy, and rangeland resources; regulating oil and gas exploration and production; and administering several grant and loan programs.
Ms. Fagg has a bachelor’s degree in mathematics from Carroll College in Helena, Montana. In 2013, she served on a three-person selection committee appointed by the Attorney General to identify trustees for the Montana Healthcare Foundation Board. She is a board member of the First Interstate BancSystem Foundation, which has a strong commitment to community, and has been a member of the Billings Catholic Schools Board since December 2011, serving as its vice-chair and a member of its capital campaign committee. Ms. Fagg started a new term on the board for St. Vincent’s Healthcare in January 2016, having previously served from October 2003 until October 2009, including a term as board chair. She served on the Billings Chamber of Commerce from July 2009 to July 2015, including a term as its chair from July 2013 to July 2014, and on the Montana Justice Foundation, whose mission is to achieve equal access to justice for all Montanans through effective funding and leadership, from 2013 into 2015. She also served on the board of Deaconess Billings Clinic Health System from 1994 to 2002, as a member of the Board of Trustees of Carroll College from 2005 through 2010, and on the board of advisors of the Charles M. Bair Family Trust from 2008 to July 2011, including a term as board chair. From 2007 until December 31, 2011, she was a member of the Montana State University Engineering Advisory Council, whose responsibilities include evaluating the mission and goals of the College of Engineering and assisting in the development and implementation of the college’s strategic plan. From 2002 through 2006, she served on the Montana Board of Investments, the state agency responsible for prudently investing state funds. From 2001 to 2005, she served on the board of Montana State University’s Advanced Technology Park. From 1998 through 2006, she served on the ZooMontana Board and as vice chair from 2005 through 2006.
The board concluded that Ms. Fagg should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. Construction and engineering, energy, and the responsible development of natural resources are all important aspects of our business. Ms. Fagg has business experience in all these areas, including 17 years of construction and engineering experience at DOWL HKM and its predecessor, HKM Engineering, Inc., where she served as vice president, president, chief executive officer, and chairman. Ms. Fagg also has 14 years of experience in energy research and development at MSE, Inc., where she served as vice president of operations and corporate development director, and four years focusing on stewardship of natural resources as director of the Montana Department of Natural Resources and Conservation. In addition to her industry experience, Ms. Fagg brings to our board over 20 years of business leadership and management experience, including over 8 years as president, chief executive officer, and chairman of her own company, as well as knowledge and experience acquired through her service on a number of Montana state and community boards.
Mr. Everist has more than 43 years of business experience in the construction materials and aggregate mining industry. He has business leadership and management experience serving as president and chairman of his companies for over 29 years. Mr. Everist also has experience serving as a director and chairman of another public company, which enhances his contributions to our board.
Career Highlights
David L. GoodinDirector Since 2013
Age 54•President and Chief Executive Officerchairman of The Everist Company, Sioux Falls, South Dakota, an investment and land development company, since April 2002. Prior to January 2017, The Everist Company was engaged in aggregate, concrete, and asphalt production.
•Managing member of South Maryland Creek Ranch, LLC, a land development company; president of SMCR, Inc., an investment company, since June 2006; and managing member of MCR Builders, LLC, which provides residential building services to South Maryland Creek Ranch, LLC, since November 2014.
•Director and chairman of the board of Everist Health, Inc., Ann Arbor, Michigan, which provides solutions for personalized medicines, since 2002, and chief executive officer from August 2012 to December 2012.
•President and chairman of L.G. Everist, Inc., Sioux Falls, South Dakota, an aggregate production company, from 1987 to April 2002.
Other Leadership Experience
•Director of publicly traded Raven Industries, Inc., Sioux Falls, South Dakota, a general manufacturer of electronics, flow controls, and engineered films, since 1996, and chairman of the board since April 2009.
•Director of Showplace Wood Products, Sioux Falls, South Dakota, a custom cabinets manufacturer, since January 2000.
•Director of Bell, Inc., Sioux Falls, South Dakota, a manufacturer of folding cartons and packages, since April 2011.
•Director of Angiologix Inc., Mountain View, California, a medical diagnostic device company, from July 2010 through October 2011 when it was acquired by Everist Genomics, Inc.
•Member of the South Dakota Investment Council, the state agency responsible for prudently investing state funds, from July 2001 to June 2006.
Education
•Bachelor’s degree in mechanical engineering and a master’s degree in construction management from Stanford University.
Mr. Goodin was elected president and chief executive officer and a director of the company effective January 4, 2013. Prior to that, he served as chief executive officer and president of Intermountain Gas Company effective October 2008, chief executive officer of Cascade Natural Gas Corporation, Montana-Dakota Utilities Co., and Great Plains Natural Gas Co. effective June 2008, president of Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective March 2008, and president of Cascade Natural Gas Corporation effective July 2007. He began his career with the company in 1983 at Montana-Dakota Utilities Co., where he served as a division electrical engineer effective

4 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

May 1983, division electric superintendent effective February 1989, electric systems supervisor effective August 1993, electric systems manager effective April 1999, vice president-operations effective January 2000, and executive vice president-operations and acquisitions effective January 2007. He additionally serves as an executive officer and as chairman of the company’s principal subsidiaries, and of the managing committees of Montana-Dakota Utilities Co. and Great Plains Natural Gas Co.
Mr. Goodin has a bachelor of science degree in electrical and electronics engineering from North Dakota State University, a masters in business administration from the University of North Dakota, and has completed the Advanced Management Program at Harvard School of Business. Mr. Goodin is a registered professional engineer in North Dakota. He is a member of the U.S. Bancorp Western North Dakota Advisory Board. Mr. Goodin is involved in numerous civic organizations, including serving on the board of directors of Sanford Bismarck, an integrated health system dedicated to the work of health and healing, Sanford Living Center, and the North Dakota State University Alumni Association. He also serves on the Board of Trustees for the Missouri Valley YMCA, the Bismarck State College Foundation, and the University of Mary. He is a past board member of several industry associations, including the American Gas Association, the Edison Electric Institute, the North Central Electric Association, the Midwest ENERGY Association, and the North Dakota Lignite Council. Mr. Goodin received the University of Mary Entrepreneurship Award in 2009.
The board concluded that Mr. Goodin should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. As chief executive officer of MDU Resources Group, Inc., Mr. Goodin is the only officer of the company on our board. With over 32 years of significant, hands-on experience at our company, Mr. Goodin’s long history and deep knowledge and understanding of MDU Resources Group, Inc., its operating companies, and its lines of business bring continuity to the board. Mr. Goodin has demonstrated his leadership abilities and his commitment to our company through his long service to the company, including as chief executive officer and president of the four utility companies. He demonstrated strong leadership skills in integrating Cascade Natural Gas Corporation and Intermountain Gas Company while meeting and exceeding profitability goals. The board’s unanimous election of Mr. Goodin to serve as our president and chief executive officer in January 2013 was in recognition of the board’s belief that he has the strategic vision, operational experience, passion, and values to lead the future growth of the company. The board believes these characteristics make him well-suited to serve on our board, particularly in this challenging economic environment.
Mark A. HellersteinDirector Since 2013
Age 63Audit Committee
Mr. Hellerstein was chief executive officer of St. Mary Land & Exploration Company (now SM Energy Company), an energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids, from 1995 until February 2007; he was president from 1992 until June 2006 and executive vice president and chief financial officer from 1991 until 1992. He was first elected to the board of St. Mary in 1992 and served as chairman of the board from 2002 until May 2009. Prior to joining St. Mary, from 1980 to 1991 Mr. Hellerstein’s career included positions as chief financial officer of CoCa Mines Inc., which mined and extracted minerals from lands previously held by the public through the Bureau of Land Management; American Golf Corporation, which manages and owns golf courses in the United States; and Worldwide Energy Corporation, an oil and gas acquisition, exploration, development, and production company with operations in the United States and Canada. Mr. Hellerstein served on the board of directors of Transocean Inc., a leading provider of offshore drilling services for oil and gas wells, from December 2006 to November 2007.
Mr. Hellerstein’s leadership has been recognized with induction into the Rocky Mountain Oil and Gas Hall of Fame, and Ernst & Young named Mr. Hellerstein both Rocky Mountain and National Entrepreneur of the Year in 2005 and 2006, respectively. He graduated number one in his class with a bachelor’s degree in accounting from the University of Colorado. Mr. Hellerstein is a certified public accountant (CPA), on inactive status. He received the Elijah Watts Sells Gold Medal award for achieving the highest score in the United States on the November 1974 CPA exam out of 38,000 participants. Mr. Hellerstein has served on the board for Community Resources Inc. since September 2013, which is a nonprofit organization that brings programs into the Denver Public Schools to enhance education. He served as a board director on the Denver Children’s Advocacy Center (Center) from August 2006 until December 2011, including as chairman for the last three years, and continues to participate in and fund the Center’s Safe from the Start Program. The Center’s mission is to provide a continuum of care for traumatized children and their families.
The board concluded that Mr. Hellerstein should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. Mr. Hellerstein has extensive business experience, recognized excellence, and demonstrated success and leadership, including in the energy industry, as a result of his 17 years of senior management experience and

MDU Resources Group, Inc. Proxy Statement 5

Proxy Statement

service as board chairman of St. Mary. His skills and experience enable him to contribute independent insight into the company’s business and operations and the economic environment and long-term strategic issues the company faces. As a certified public accountant, on inactive status, with extensive financial experience as a result of his employment as chief financial officer with several companies, including public companies, Mr. Hellerstein contributes significant finance and accounting knowledge to our board and audit committee. His financial expertise assists the board in its oversight of the company’s financial reporting and financial risk management functions, and supports his service on the audit committee. His service on the board of two publicly traded companies has provided him substantial insight into governance matters, which enhances his contributions to our board. Mr. Hellerstein also brings to the board his knowledge of local, state, and regional issues involving the Rocky Mountain region where we have important operations.
A. Bart HoladayDirector Since 2008
Age 73
Audit Committee
Nominating and Governance Committee
Mr. Holaday headed the Private Markets Group of UBS Asset Management and its predecessor entities for 15 years prior to his retirement in 2001, during which time he managed more than $19 billion in investments. Prior to that he was vice president and principal of the InnoVen Venture Capital Group, a venture capital investment firm. He was founder and president of Tenax Oil and Gas Corporation, an onshore Gulf Coast exploration and production company, from 1980 through 1982. He has four years of senior management experience with Gulf Oil Corporation, a global energy and petrochemical company, and eight years of senior management experience with the federal government, including the Department of Defense, Department of the Interior, and the Federal Energy Administration. He is currently the president and owner of Dakota Renewable Energy Fund, LLC, which invests in small companies in North Dakota. He is a member of the investment advisory board of Commons Capital LLC, a venture capital firm; is a director of Hull Investments, LLC, a private entity that combines nonprofit activities and investments; serves on the Board of Trustees for the University of Jamestown; is a member of the board of directors of Adams Street Partners, LLC, a private equity investment firm, Alerus Financial, a financial services company, the United States Air Force Academy Endowment (former chairman), the Falcon Foundation (director and former vice president), which provides scholarships to Air Force Academy applicants, the Center for Innovation Foundation at the University of North Dakota (trustee and former chairman), and Discover Goodwill of southern and western Colorado, a nonprofit organization providing job training, placement, and retention programs for people transitioning from welfare to work; and is chairman and chief executive officer of the Dakota Foundation, a nonprofit foundation that fosters social entrepreneurship. He is a past member of the board of directors of the University of North Dakota Foundation, National Venture Capital Association, Walden University, and the U.S. Securities and Exchange Commission advisory committee on the regulation of capital markets, and is a past member of the board of trustees for The Colorado Springs Child Nursery Centers Foundation, a nonprofit organization that supports the operations of Early Connections Learning Centers, a nonprofit child care organization in Colorado.
Mr. Holaday has a bachelor’s degree in engineering sciences from the U.S. Air Force Academy. He was a Rhodes Scholar, earning a bachelor’s degree and a master’s degree in politics, philosophy, and economics from Oxford University. He also earned a law degree from George Washington Law School and is a Chartered Financial Analyst. In 2005, he was awarded an honorary Doctor of Letters from the University of North Dakota.
The board concluded that Mr. Holaday should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. Mr. Holaday has extensive business knowledge and experience and has demonstrated success and leadership, including in the energy and financial management industries. He founded and served as president of Tenax Oil and Gas Corporation. He has four years experience in senior management with Gulf Oil Corporation and 15 years of experience managing private equity investments, as the head of the Private Markets Group of UBS Asset Management and its predecessor organizations. Mr. Holaday brings to the board extensive finance and investment experience, as well as business development skills acquired through his work at UBS Asset Management, Tenax Oil and Gas Corporation, Gulf Oil Corporation, and several private equity investment firms. This enhances the knowledge of the board and provides useful insights and guidance to management in connection not only with our energy related businesses, but with all of our businesses. His significant experience in finance supports his service on the audit committee.

 
6 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

Dennis W. JohnsonDirector Since 2001
Age 66Audit Committee
Mr. Johnson is chairman, president, and chief executive officer of TMI Corporation, and chairman and chief executive officer of TMI Systems Design Corporation, TMI Transport Corporation, and TMI Storage Systems Corporation, all of Dickinson, North Dakota, manufacturers of casework and architectural woodwork. He has been employed at TMI since 1974 serving as president or chief executive officer since 1982. Mr. Johnson served as president of the Dickinson City Commission for fifteen years. He served as a director of the Federal Reserve Bank of Minneapolis from 1993 through 1998. He is a past member and chairman of the Theodore Roosevelt Medora Foundation.
Mr. Johnson has a bachelor of science degree in electrical and electronics engineering, as well as a master of science degree in industrial engineering from North Dakota State University. He has served on numerous industry, state, and community boards, including the North Dakota Workforce Development Council (chairperson), the Decorative Laminate Products Association, the North Dakota Technology Corporation, St. Joseph Hospital Life Care Foundation, St. John Evangelical Lutheran Church, Dickinson State University Foundation, the executive operations committee of the University of Mary Harold Schafer Leadership Center, the Dickinson United Way, and the business advisory council of the Steffes Corporation, a metal manufacturing and engineering firm. He also served on North Dakota Governor Sinner’s Education Action Commission, the North Dakota Job Service Advisory Council, the North Dakota State University President’s Advisory Council, North Dakota Governor Schafer’s Transition Team, and chaired North Dakota Governor Hoeven’s Transition Team. He has received numerous awards, including the 1991 Regional Small Business Person of the Year Award and the Greater North Dakotan Award.
The board concluded that Mr. Johnson should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. Mr. Johnson has over 41 years of experience in business management, manufacturing, and finance, and has demonstrated his success in these areas, holding positions as chairman, president, and chief executive officer of TMI for 34 years, as well as through his prior service as a director of the Federal Reserve Bank of Minneapolis. His finance experience and leadership skills enable him to make valuable contributions to our audit committee, which he has chaired for twelve years. As a result of his service on a number of state and local organizations in North Dakota, Mr. Johnson has significant knowledge of local, state, and regional issues involving North Dakota, a state where we have significant operations and assets.
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Karen B. Fagg
Age 63

William E. McCracken
Independent Director Since 2013
Age 732005
Compensation Committee
Nominating and Governance Committee
Ms. Fagg brings experience to our board in construction and engineering, energy, and the responsible development of natural resources, which are all important aspects of our business. In addition to her industry experience, Ms. Fagg has over 20 years of business leadership and management experience, including over eight years as president, chief executive officer, and chairman of her own company, as well as knowledge and experience acquired through her service on a number of Montana state and community boards.
Career Highlights
•Vice president of DOWL LLC, d/b/a DOWL HKM, an engineering and design firm, from April 2008 until her retirement on December 31, 2011.
•President of HKM Engineering, Inc., Billings, Montana, an engineering and physical science services firm, from April 1, 1995 to June 2000, and chairman, chief executive officer, and majority owner from June 2000 through March 2008. HKM Engineering, Inc. merged with DOWL LLC on April 1, 2008.
•Employed with MSE, Inc., Butte, Montana, an energy research and development company, from 1976 through 1988, and vice president of operations and corporate development director from 1993 to April 1995.
•Director of the Montana Department of Natural Resources and Conservation, Helena, Montana, the state agency charged with promoting stewardship of Montana’s water, soil, energy, and rangeland resources; regulating oil and gas exploration and production; and administering several grant and loan programs, for a four-year term from 1989 through 1992.
Other Leadership Experience
•Board member of St. Vincent’s Healthcare since January 2016 and previously from October 2003 until October 2009, including a term as chair.
•Former member of several state and community boards, including the First Interstate BancSystem Foundation, from June 2013 to 2016; the Montana Justice Foundation, whose mission is to achieve equal access to justice for all Montanans through effective funding and leadership, from 2013 into 2015; Board of Trustees of Carroll College from 2005 through 2010; Montana Board of Investments, the state agency responsible for prudently investing state funds, from 2002 through 2006; Montana State University’s Advanced Technology Park from 2001 to 2005; and Deaconess Billings Clinic Health System from 1994 to 2002.
Education
•Bachelor’s degree in mathematics from Carroll College in Helena, Montana.
Mr. McCracken served as chief executive officer of CA, Inc., one of the world’s largest information technology management software companies, from January 2010 until January 7, 2013, after which he served as executive adviser to the new chief executive officer until March 31, 2013, and after that as a consultant to the company until December 31, 2013. Mr. McCracken was a director of CA, Inc. from May 2005 until January 7, 2013, serving as non-executive chairman of the board from June 2007 to September 2009, interim executive chairman from September 2009 to January 2010, and executive chairman from January 2010 to May 2010. He is president of Executive Consulting Group, LLC, a general business consulting firm, since 2002. During his 36-year career with International Business Machines Corporation, a manufacturer of information processing products and a technology, software, and networking systems manufacturer and developer, Mr. McCracken held a number of executive positions, including general manager of IBM printing systems division from 1998 to 2001, general manager of marketing, sales, and distribution for IBM PC Company from 1994 to 1998, and president of IBM’s EMEA and Asia Pacific PC Company from 1993 to 1994. From 1995 to 2001, he served on IBM’s Chairman’s Worldwide Management Council, a group of the top 30 executives at IBM. Mr. McCracken was a director of IKON Office Solutions, Inc., a provider of document management systems and services, from 2003 to 2008, where he served on its audit committee, compensation committee, and strategy committee at various points in time during his tenure as a director.
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David L. Goodin
Age 55
Director Since 2013
President and Chief Executive Officer
As chief executive officer of MDU Resources Group, Inc., Mr. Goodin is the only officer of the company that serves on our board. With over 33 years of significant, hands-on experience at our company, Mr. Goodin’s long history and deep knowledge and understanding of MDU Resources Group, Inc., its operating companies, and its lines of business bring continuity to the board.
Career Highlights
•President and chief executive officer and a director of the company since January 4, 2013.
•Prior to January 4, 2013, served as chief executive officer and president of Intermountain Gas Company, Cascade Natural Gas Corporation, Montana-Dakota Utilities Co., and Great Plains Natural Gas Co.
•Began his career in 1983 at Montana-Dakota Utilities Co. as a division electrical engineer and served in positions of increasing responsibility until 2007 when he was named president of Cascade Natural Gas Corporation; positions included division electric superintendent, electric systems manager, vice president-operations, and executive vice president-operations and acquisitions.
Other Leadership Experience
•Member of the U.S. Bancorp Western North Dakota Advisory Board since January 2013.
•Director of Sanford Bismarck, an integrated health system dedicated to the work of health and healing, and Sanford Living Center, since January 2011.
•Former board member of several industry associations, including the American Gas Association, the Edison Electric Institute, the North Central Electric Association, the Midwest ENERGY Association, and the North Dakota Lignite Energy Council.
Education
•Bachelor of science degree in electrical and electronics engineering from North Dakota State University.
•Masters in business administration from the University of North Dakota.
•The Advanced Management Program at Harvard School of Business.
•Registered professional engineer in North Dakota.

 
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Proxy Statement
 

Mr. McCracken has a bachelor of science degree in physics and mathematics from Shippensburg University. He has served on the board of the National Association of Corporate Directors (NACD), a nonprofit membership organization for corporate board members, since 2010, and was named by the NACD as one of the top 100 most influential people in the boardroom in 2009. He served on that organization’s 2009 blue ribbon commission on risk governance, co-chaired its blue ribbon commission on board diversity in 2012, and co-chaired its blue ribbon commission on the board and long-term value creation in 2015. He is chair of the advisory board of the Millstein Center for Global Markets and Corporate Ownership at Columbia University where he has been a member since 2013 and has been the New York chairman of the Chairmen’s Forum since 2011. He is board chairman of Lutheran Social Ministries of New Jersey, a charitable organization that provides adoption, assisted living, counseling, and immigration and refugee services, and is a former board member of PENCIL, a nonprofit organization that partners businesses with public schools.
The board concluded that Mr. McCracken should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. Mr. McCracken has extensive executive leadership experience and significant experience in information technology and cybersecurity through his tenure at CA, Inc. and IBM. This experience coupled with his service as the chair or a member of the board of other public companies and the NACD will enable him to provide insight into the operations, challenges, and complex issues our company is facing in today’s environment and to make significant contributions to the board’s oversight of operational risk management functions and corporate governance.
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Mark A. Hellerstein
Age 64
Patricia L. Moss
Independent Director Since 2013
Audit Committee
Mr. Hellerstein has extensive business experience in the energy industry as a result of his 17 years of senior management experience and service as board chairman of St. Mary Land & Exploration Company (now SM Energy Company). As a certified public accountant, on inactive status, with extensive financial experience as a result of his employment as chief financial officer with several companies, including public companies, Mr. Hellerstein contributes significant finance and accounting knowledge to our board and audit committee.
Career Highlights
•Chief executive officer of St. Mary Land & Exploration Company (now SM Energy Company), an energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids, from 1995 until February 2007; president from 1992 until June 2006; and executive vice president and chief financial officer from 1991 until 1992. He was first elected to the board of St. Mary in 1992 and served as chairman of the board from 2002 until May 2009.
•Several positions prior to joining St. Mary in 1991, including chief financial officer of CoCa Mines Inc., which mined and extracted minerals from lands previously held by the public through the Bureau of Land Management; American Golf Corporation, which manages and owns golf courses in the United States; and Worldwide Energy Corporation, an oil and gas acquisition, exploration, development, and production company with operations in the United States and Canada.
Other Leadership Experience
•Director Since 2003of Transocean Inc., a leading provider of offshore drilling services for oil and gas wells, from December 2006 to November 2007.
•Age 62Director of the Denver Children’s Advocacy Center, whose mission is to provide a continuum of care for traumatized children and their families, from August 2006 until December 2011, including chairman for the last three years.
Education and Professional
•Bachelor’s degree in accounting from the University of Colorado.
•Certified public accountant, on inactive status.
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CompensationA. Bart Holaday
Age 74

Independent Director Since 2008
Audit Committee

Nominating and Governance Committee
Mr. Holaday has extensive business knowledge and experience in the energy and financial management industries. Mr. Holaday brings to the board extensive finance and investment experience, as well as business development skills, through his senior management experience with investment funds and energy companies. Mr. Holaday is also a chartered financial analyst.
Career Highlights
•President and owner of Dakota Renewable Energy Fund, LLC, which invests in small companies in North Dakota, since August 2007.
•Head of the Private Markets Group of UBS Asset Management and its predecessor entities, managing more than $19 billion in investments, from December 1985 until retirement in 2001.
•Vice president and principal of the InnoVen Venture Capital Group, a venture capital investment firm, from 1983 through 1985.
•Founder and president of Tenax Oil and Gas Corporation, an onshore Gulf Coast exploration and production company, from 1980 through 1982.
•Four years of senior management experience with Gulf Oil Corporation, a global energy and petrochemical company.
•Eight years of senior management experience with the federal government, including the Department of Defense, Department of the Interior, and the Federal Energy Administration.
Other Leadership Experience
•Member of the investment advisory board of Commons Capital LLC, a venture capital firm, since 1999.
•Director of Hull Investments, LLC, a private entity firm that combines nonprofit activities and investments, since August 2011; Alerus Financial, a financial services company, since September 2007; and Adams Street Partners, LLC, a private equity investment firm, from January 2001 to March 2017.
•Former member of the U.S. Securities and Exchange Commission advisory committee on the regulation of capital markets.
Education and Professional
•Bachelor’s degree in engineering sciences from the U.S. Air Force Academy.
•Rhodes Scholar, earning a bachelor’s degree and a master’s degree in politics, philosophy, and economics from Oxford University.
•Law degree from George Washington Law School.
•Honorary Doctor of Letters from the University of North Dakota.
•Chartered Financial Analyst.
Ms. Moss served as the president and chief executive officer of Cascade Bancorp, a financial holding company in Bend, Oregon, from 1998 to January 3, 2012. She served as the chief executive officer of Cascade Bancorp’s principal subsidiary, Bank of the Cascades, from 1998 to January 3, 2012, serving also as president from 1998 to 2003. From 1987 to 1998, Ms. Moss served as chief operating officer, chief financial officer, and corporate secretary of Cascade Bancorp. Ms. Moss has been a director of Cascade Bancorp and Bank of the Cascades since 1993 and was elected vice chair of both boards effective January 3, 2012. Ms. Moss also serves as chair of the Bank of the Cascades Foundation Inc., co-chairs the Oregon Growth Board, a state board created to improve access to capital and create private-public partnerships, and serves on the Board of Trustees for the Aquila Tax Free Trust of Oregon, a mutual fund created especially for the benefit of Oregon residents.
Ms. Moss graduated magna cum laude with a bachelor of science degree in business administration from Linfield College in Oregon and did master’s studies at Portland State University. She received commercial banking school certification at the ABA Commercial Banking School at the University of Oklahoma. She served as a director of the Oregon Investment Fund Advisory Council, a state-sponsored program to encourage the growth of small businesses within Oregon; Oregon Business Council, whose mission is to mobilize business leaders to contribute to Oregon’s quality of life and economic prosperity; the Cascades Campus Advisory Board of the Oregon State University; the North Pacific Group, Inc., a wholesale distributor of building materials, industrial and hardwood products, and other specialty products; Clear Choice Health Plans Inc., a multi-state insurance company; and the St. Charles Medical Center. She also served on the City of Bend’s Juniper Ridge management advisory board.
The board concluded that Ms. Moss should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. A significant portion of MDU Resources Group, Inc.’s utility, construction services, and contracting operations are located in the Pacific Northwest. Ms. Moss has first-hand business experience and knowledge of the Pacific Northwest economy and local, state, and regional issues through her executive positions at Cascade Bancorp and Bank of the Cascades, where she gained over 30 years of experience. Ms. Moss provides to our board her experience in finance and banking, as well as her experience in business development through her work at Cascade Bancorp and on the Oregon Investment Fund Advisory Council, the Oregon Business Council, and the Oregon Growth Board. This business experience demonstrates her leadership abilities and success in the finance and banking industry. Ms. Moss has 18 years of experience as a certified senior professional in human resources, which makes her well-suited for our compensation committee.

 
8 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

Harry J. PearceDirector Since 1997
Age 73Chairman of the Board
Mr. Pearce was elected chairman of the board of the company on August 17, 2006. Prior to that, he served as lead director effective February 15, 2001, and was vice chairman of the board from November 16, 2000 until February 15, 2001. Mr. Pearce was a director and served on the audit, finance, compensation, and excellence committees of Marriott International, Inc., a major hotel chain, from 1995 to May 2015. He also was a director of Nortel Networks Corporation, a global telecommunications company, from January 11, 2005 to August 10, 2009, serving as chairman of the board from June 29, 2005. He retired on December 19, 2003, as chairman of Hughes Electronics Corporation, a General Motors Corporation subsidiary and provider of digital television entertainment, broadband satellite network, and global video and data broadcasting. He had served as a director of Hughes Electronics since 1992. Mr. Pearce was vice chairman and a director of General Motors Corporation, one of the world’s largest automakers, from January 1, 1996 to May 31, 2001, and was general counsel from 1987 to 1994. He served on the President’s Council on Sustainable Development and co-chaired the President’s Commission on the United States Postal Service. Prior to joining General Motors, he was a senior partner in the Pearce & Durick law firm in Bismarck, North Dakota. Mr. Pearce is a director of the United States Air Force Academy Endowment and a trustee of Northwestern University. He is a Fellow of the American College of Trial Lawyers and a member of the International Society of Barristers. He has served as a chairman or director on the boards of numerous nonprofit organizations, including as chairman of the Board of Visitors of the U.S. Air Force Academy, chairman of the U.S. Air Force Academy Sabre Society, chairman of the National Defense University Foundation, and chairman of the Marrow Foundation. Mr. Pearce received a bachelor’s degree in engineering sciences from the U.S. Air Force Academy and a juris doctor degree from Northwestern University’s School of Law. He received an honorary degree of Doctor of Laws from Northwestern University and an honorary degree of Doctor of Engineering from Rose Hulman Institute of Technology.
The board concluded that Mr. Pearce should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. MDU Resources Group, Inc. values public company leadership and the experience directors gain through such leadership. Mr. Pearce is recognized nationally as a business leader and for his business acumen. He has multinational business management experience and proven leadership skills through his position as vice chairman at General Motors Corporation, as well as through his extensive service on the boards of large public companies, including Marriott International, Inc., Hughes Electronics Corporation, where he was chairman, and Nortel Networks Corporation, where he also was chairman. He also brings to our board his long experience as a practicing attorney. In addition, Mr. Pearce has focused on corporate governance issues and was the founding chair of Yale University’s Chairmen’s Forum, an organization comprised of non-executive chairmen of publicly traded companies. Participants in the Chairmen’s Forum discussed ways to enhance the accountability of corporations to owners and promote a deeper understanding of independent board leadership and effective practices of board chairmanship. The board also believes that Mr. Pearce’s values and commitment to excellence make him well-suited to serve as chairman of our board.
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Dennis W. Johnson
Age 67
John K. Wilson
Independent Director Since 2001
Audit Committee
Mr. Johnson brings to our board over 42 years of experience in business management, manufacturing, and finance, holding positions as chairman, president, and chief executive officer of TMI Corporation for 34 years, as well as through his prior service as a director of the Federal Reserve Bank of Minneapolis. As a result of his service on a number of state and local organizations in North Dakota, Mr. Johnson has significant knowledge of local, state, and regional issues involving North Dakota, a state where we have significant operations and assets.
Career Highlights
•Chairman, president, and chief executive officer of TMI Corporation and chairman and chief executive officer of TMI Transport Corporation (as well as TMI Systems Design Corporation and TMI Storage Systems Corporation before they merged into TMI Corporation the end of 2015), manufacturers of casework and architectural woodwork in Dickinson, North Dakota; employed since 1974 and serving as president or chief executive officer since 1982.
Other Leadership Experience
•President of the Dickinson City Commission from July 2000 through October 2015.
•Director Since 2003of the Federal Reserve Bank of Minneapolis for six years from 1993 through 1998.
•Age 61Audit CommitteeServed on numerous industry, state, and community boards, including the North Dakota Workforce Development Council (chair); the Decorative Laminate Products Association; the North Dakota Technology Corporation; and the business advisory council of the Steffes Corporation, a metal manufacturing and engineering firm.
•Served on North Dakota Governor Sinner’s Education Action Commission; the North Dakota Job Service Advisory Council; the North Dakota State University President’s Advisory Council; North Dakota Governor Schafer’s Transition Team; and chaired North Dakota Governor Hoeven’s Transition Team.
Education
•Bachelor of science in electrical and electronics engineering and master of science in industrial engineering from North Dakota State University.
Mr. Wilson was president of Durham Resources, LLC, a privately held financial management company, in Omaha, Nebraska, from 1994 to December 31, 2008. He previously was president of Great Plains Energy Corp., a public utility holding company and an affiliate of Durham Resources, LLC, from 1994 to July 1, 2000. He was vice president of Great Plains Natural Gas Co., an affiliate company of Durham Resources, LLC, until July 1, 2000. The company bought Great Plains Energy Corp. and Great Plains Natural Gas Co. on July 1, 2000. Mr. Wilson also served as president of the Durham Foundation. He is presently a director of HDR, Inc., an international architecture and engineering firm; a director of Tetrad Corporation, a privately held investment company; and an executive director of the Robert B. Daugherty Foundation, all located in Omaha, Nebraska. Mr. Wilson formerly served as a director of Bridges Investment Fund, a mutual fund; a director of the Greater Omaha Chamber of Commerce; on the advisory board of U.S. Bank NA Omaha; and on the advisory board of Duncan Aviation, an aircraft service provider, headquartered in Lincoln, Nebraska.
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William E. McCracken
Age 74

Independent Director Since 2013
Compensation Committee
Nominating and Governance Committee
Mr. McCracken is experienced in information technology and cybersecurity through his tenure at CA, Inc. and International Business Machines Corporation (IBM). This experience coupled with his service as the chair or a member of the board of other public companies and the National Association of Corporate Directors (NACD) enables him to provide insight into the operations, challenges, and complex issues our company is facing in today’s environment and to make significant contributions to the board’s oversight of operational risk management functions and corporate governance.
Career Highlights
•President of Executive Consulting Group, LLC, a general business consulting firm, from 2002 to present.
•Chief executive officer of CA, Inc., one of the world’s largest information technology management software companies, from January 2010 until January 7, 2013, after which he served as executive adviser to the new chief executive officer until March 31, 2013, and as a consultant to the company until December 31, 2013; also as director of CA, Inc. from May 2005 until January 7, 2013, serving as non-executive chairman of the board from June 2007 to September 2009, interim executive chairman from September 2009 to January 2010, and executive chairman from January 2010 to May 2010.
•Several executive positions during his 36-year career with IBM, including serving on its Chairman’s Worldwide Management Council, a group of the top 30 executives at IBM, from 1995 to 2001.
Other Leadership Experience
•Director of the NACD, a nonprofit membership organization for corporate board members, since 2010, and named by the NACD as one of the top 100 most influential people in the boardroom in 2009; served on that organization’s 2009 blue ribbon commission on risk governance, co-chaired its blue ribbon commission on board diversity in 2012, and co-chaired its blue ribbon commission on the board and long-term value creation in 2015.
•Director of IKON Office Solutions, Inc., a provider of document management systems and services, from 2003 to 2008, where he served on its audit committee, compensation committee, and strategy committee.
•Chair of the advisory board of the Millstein Center for Global Markets and Corporate Ownership at Columbia University and member since 2013, and the New York chairman of the Chairmen’s Forum since 2011.
Education
•Bachelor of science in physics and mathematics from Shippensburg University.

 
MDU Resources Group, Inc. Proxy Statement 9

Proxy Statement
 

Mr. Wilson is a certified public accountant, on inactive status. He received his bachelor’s degree in business administration, cum laude, from the University of Nebraska – Omaha. During his career, he was an audit manager at Peat, Marwick, Mitchell (now known as KPMG), controller for Great Plains Natural Gas Co., and chief financial officer and treasurer for all Durham Resources entities.
The board concluded that Mr. Wilson should serve
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Patricia L. Moss
Age 63

Independent Director Since 2003
Compensation Committee
Nominating and Governance Committee
Other Current Public Boards:
--Cascade Bancorp
--Aquila Tax Free Trust of Oregon

Ms. Moss has business experience and knowledge of the Pacific Northwest economy and state, local, and region issues where a significant portion of our operations are located. Ms. Moss provides our board with experience in finance and banking, as well as experience in business development through her work at Cascade Bancorp and Bank of the Cascades, and on the Oregon Investment Fund Advisory Council, the Oregon Business Council, and the Oregon Growth Board. Ms. Moss also has experience as a certified senior professional in human resources.
Career Highlights
•President and chief executive officer of Cascade Bancorp, a financial holding company, Bend, Oregon, from 1998 to January 3, 2012; chief executive officer of Cascade Bancorp’s principal subsidiary, Bank of the Cascades, from 1998 to January 3, 2012, serving also as president from 1998 to 2003; and chief operating officer, chief financial officer and secretary of Cascade Bancorp from 1987 to 1998.
Other Leadership Experience
•Director of Cascade Bancorp and Bank of the Cascades since 1993, and vice chair of both boards since January 3, 2012.
•Chair of the Bank of the Cascades Foundation Inc. since 2014; co-chair of the Oregon Growth Board, a state board created to improve access to capital and create private-public partnerships, since May 2012; and member of the Board of Trustees for the Aquila Tax Free Trust of Oregon, a mutual fund created especially for the benefit of Oregon residents, since June 2015 and January 2002 to May 2005.
•Former director of the Oregon Investment Fund Advisory Council, a state-sponsored program to encourage the growth of small businesses in Oregon; the Oregon Business Council, with a mission to mobilize business leaders to contribute to Oregon’s quality of life and economic prosperity; the North Pacific Group, Inc., a wholesale distributor of building materials, industrial, and hardwood products; Clear Choice Health Plans Inc., a multi-state insurance company; and City of Bend’s Juniper Ridge management advisory board.
Education
•Bachelor of science in business administration from Linfield College in Oregon and master’s studies at Portland State University.
•Commercial banking school certification at the ABA Commercial Banking School at the University of Oklahoma.
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Harry J. Pearce
Age 74
Independent Director Since 1997
Chairman of the Board
Mr. Pearce provides our board with public company leadership with his multinational business management experience and proven leadership skills through his position as vice chairman at General Motors Corporation, as well as through his extensive service on the boards of large public companies, including Marriott International, Inc., Hughes Electronics Corporation, where he was chairman, and Nortel Networks Corporation, where he also was chairman. He also brings to our board his long experience as a practicing attorney. In addition, Mr. Pearce has focused on corporate governance issues and was the founding chair of Yale University’s Chairmen’s Forum, an organization comprised of non-executive chairmen of publicly traded companies.
Career Highlights
•Chairman of the board of the company effective August 17, 2006; lead director from February 15, 2001 until August 17, 2006; and vice chairman of the board from November 16, 2000 until February 15, 2001.
•Vice chairman and director of General Motors Corporation from January 1, 1996 to May 31, 2001; general counsel from 1987 to 1994.
•Senior partner in the Pearce & Durick law firm in Bismarck, North Dakota, prior to joining General Motors in 1987.
Other Leadership Experience
•Director of Hughes Electronics Corporation, a General Motors Corporation subsidiary and provider of digital television entertainment, broadband satellite network, and global video and data broadcasting, from 1992 to December 2003, and retiring as chairman in 2003.
•Director of Marriott International, Inc., a major hotel chain, from 1995 to May 2015, and served on the audit, finance, compensation, and excellence committees.
•Director of Nortel Networks Corporation, a global telecommunications company, from January 2005 to August 2009, also served as chairman of the board from June 2005.
•Fellow of the American College of Trial Lawyers, and a member of the International Society of Barristers.
•Founding chair of the Yale University’s Chairmen’s Forum; former member of the President’s Council on Sustainable Development, and co-chair of the President’s Commission on the United States Postal Service.
Education
•Bachelor’s degree in engineering sciences from the U.S. Air Force Academy.
•Juris doctor degree from Northwestern University’s School of Law.

10 MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement for the following reasons. Mr. Wilson has an extensive background in finance and accounting, as well as extensive experience with mergers and acquisitions, through his education and work experience at a major accounting firm and his later positions as controller and vice president of Great Plains Natural Gas Co., president of Great Plains Energy Corp., and president, chief financial officer, and treasurer for Durham Resources, LLC and all Durham Resources entities. The electric and natural gas utility business was our core business when our company was founded in 1924. That business now operates through four utilities: Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company. Mr. Wilson is our only non-employee director with direct experience in this area through his prior positions at Great Plains Natural Gas Co. and Great Plains Energy Corp. In addition, Mr. Wilson’s extensive finance and accounting experience make him well-suited for our audit committee. Proxy Statement

Proxy Statement

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John K. Wilson
Age 62
Independent Director Since 2003
Audit Committee
Mr. Wilson has an extensive background in finance and accounting, as well as experience with mergers and acquisitions, through his education and work experience at a major accounting firm and his later public utility experience in his positions as controller and vice president of Great Plains Natural Gas Co., president of Great Plains Energy Corp., and president, chief financial officer, and treasurer for Durham Resources, LLC, and all Durham Resources entities.
Career Highlights
•President of Durham Resources, LLC, a privately held financial management company, in Omaha, Nebraska, from 1994 to December 31, 2008; president of Great Plains Energy Corp., a public utility holding company and an affiliate of Durham Resources, LLC, from 1994 to July 1, 2000; and vice president of Great Plains Natural Gas Co., an affiliate company of Durham Resources, LLC, until July 1, 2000.
•Executive director of the Robert B. Daugherty Foundation in Omaha, Nebraska, since January 2010.
•Held positions of audit manager at Peat, Marwick, Mitchell (now known as KPMG), controller for Great Plains Natural Gas Co., and chief financial officer and treasurer for all Durham Resources entities.
Other Leadership Experience
•Director of HDR, Inc., an international architecture and engineering firm, since December 2008, and director of Tetrad Corporation, a privately held investment company, since April 2010, both located in Omaha, Nebraska.
•Former director of Bridges Investment Fund, Inc., a mutual fund, from April 2003 to April 2008; director of the Greater Omaha Chamber of Commerce from January 2001 through December 2008; member of the advisory board of U.S. Bank NA Omaha from January 2000 to July 2010; and the advisory board of Duncan Aviation, an aircraft service provider, headquartered in Lincoln, Nebraska, from January 2010 to February 2016.
Education and Professional
•Bachelor’s degree in business administration, cum laude, from the University of Nebraska – Omaha.
•Certified public accountant, on inactive status.
The board of directors recommends a vote “for” each nominee.
A majority of votes cast is required to elect a director in an uncontested election. A majority of votes cast means the number of votes cast “for” a director’s election must exceed the number of votes cast “against” the director’s election. “Abstentions” and “broker non-votes” do not count as votes cast “for” or “against” the director’s election. In a contested election, which is an election in which the number of nominees for director exceeds the number of directors to be elected and which we do not anticipate, directors will be elected by a plurality of the votes cast.
Unless you specify otherwise when you submit your proxy, the proxies will vote your shares of common stock “for” all directors nominated by the board of directors. If a nominee becomes unavailable for any reason or if a vacancy should occur before the election, which we do not anticipate, the proxies will vote your shares in their discretion for another person nominated by the board.
Our policy on majority voting for directors contained in our corporate governance guidelines requires any proposed nominee for re-election as a director to tender to the board, prior to nomination, his or her irrevocable resignation from the board that will be effective, in an uncontested election of directors only, upon:
receipt of a greater number of votes “against” than votes “for” election at our annual meeting of stockholdersstockholders; and
acceptance of such resignation by the board of directors.
Following certification of the stockholder vote, the nominating and governance committee will promptly recommend to the board whether or not to accept the tendered resignation. The board will act on the nominating and governance committee’s recommendation no later than 90 days following the date of the annual meeting.
Brokers may not vote your shares on the election of directors if you have not given your broker specific instructions as toon how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted.

ITEM 2. APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER THE MDU RESOURCES GROUP, INC. LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN FOR PURPOSES OF INTERNAL REVENUE CODE SECTION 162(m)
The board of directors recommends that stockholders approve the material terms of the performance goals under the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan to preserve our ability to deduct compensation associated with future performance-based incentive awards to be made under the plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of $1,000,000 on the amount we may deduct in any one year for compensation paid to our “covered employees.” A covered employee means a person specified in Section 162(m), which generally includes our chief executive officer and each of our other three most highly-compensated executive officers other than our chief financial officer.
There is an exception to this limit for certain performance-based compensation, and awards made pursuant to the plan may constitute performance-based compensation not subject to the deductibility limitation of Internal Revenue Code Section 162(m). To qualify for this exception, the stockholders must approve, every five years, the material terms of the performance goals of the plan under which

10 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

compensation will be paid. Stockholders last approved the goals for the plan in 2011, and, therefore, the board is submitting the plan’s performance goals for approval at the 2016 annual meeting of stockholders.
The board of directors amended the plan on November 12, 2015 to:
include the following new performance goals: cash flow from operations (dollar target or as % of revenue), gross margin or gross profit (dollar target or as % of revenue), operations and maintenance expense (dollar target or as % of revenue), general and administrative expense (dollar target or as % of revenue), total operating expense (dollar target or as % of revenue), pretax income (dollar target or as % of revenue), earnings before interest, taxes, depreciation and amortization or “EBITDA” (dollar target or as % of revenue), earnings before interest and taxes or “EBIT” (dollar target or as % of revenue), earnings, return on invested capital, return on assets, return on net assets, working capital as percentage of revenue, days sales outstanding/accounts receivable turnover, and current ratio
modify the operating income goal to: operating income (dollar target or as % of revenue)
remove the following performance goals: oil and/or gas production (growth, value and costs) and oil and/or gas reserves (including proved, probable and possible reserves and growth, value and costs) and finding or development costs and
add that performance goals may be measured on an individual basis and reflect individual performance or a relative comparison of individual performance.
The board of directors further amended the plan on February 11, 2016 to provide that if the company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirements under the securities laws, the company or the compensation committee may, or shall if required, take action to recover incentive-based compensation from specific executive officers in accordance with our Guidelines for Repayment of Incentives Due to Accounting Restatements, as they may be amended or substituted from time to time, and in accordance with applicable law and applicable rules of the Securities and Exchange Commission and the New York Stock Exchange.
The material terms of the performance goals are (i) eligibility and participation, (ii) the business criteria on which the performance goals are based, and (iii) maximum awards under the plan, which we describe further below.
Eligibility and Participation
All officers and key employees of the company and its subsidiaries, including employees who are members of the board, as determined by the compensation committee, are eligible to participate in the plan. The approximate number of employees who are currently eligible to participate in the plan is 40.
Performance Goals
The compensation committee establishes the performance goals, which will be based on one or more of the following measures: sales or revenues, earnings per share, shareholder return and/or value, funds from operations, cash flow from operations (dollar target or as % of revenue), gross margin or gross profit (dollar target or as % of revenue), operations and maintenance expense (dollar target or as % of revenue), general and administrative expense (dollar target or as % of revenue), total operating expense (dollar target or as % of revenue), operating income (dollar target or as % of revenue), pretax income (dollar target or as % of revenue), earnings before interest, taxes, depreciation and amortization or “EBITDA” (dollar target or as % of revenue), earnings before interest and taxes or “EBIT” (dollar target or as % of revenue), gross income, net income, cash flow, earnings, return on equity, return on invested capital, return on assets, return on net assets, working capital as percentage of revenue, days sales outstanding/accounts receivable turnover, current ratio, capital efficiency, operating ratios, stock price, enterprise value, company value, asset value growth, net asset value, shareholders’ equity, dividends, customer satisfaction, accomplishment of mergers, acquisitions, dispositions or similar extraordinary business transactions, safety, sustainability, profit returns and margins, financial return ratios, and market performance. Performance goals may be measured solely on a corporate, subsidiary, business unit or individual basis, or a combination of the foregoing. Performance goals may reflect absolute entity or individual performance or a relative comparison of entity or individual performance to the performance of a peer group of entities or other external measure.
Maximum Awards under the Plan
Awards under the plan may be made in the form of restricted stock, performance units, performance shares, and any other type of award permitted under article 8 of the plan. The board of directors amended the plan on November 17, 2011 to remove stock options and stock appreciation grants from the types of awards that may be granted under the plan.

 
MDU Resources Group, Inc. Proxy Statement 11

Proxy Statement
 

Subject to adjustment pursuant to the anti-dilution provisions in the plan, (i) the total number of shares of restricted stock intended to qualify as performance-based compensation that may be granted in any calendar year to any covered employee shall not exceed 2,250,000 shares, (ii) the total number of performance shares or performance units that may be granted in any calendar year to any covered employee shall not exceed 2,250,000 performance shares or performance units, as the case may be, (iii) the total number of shares that are intended to qualify as performance-based compensation granted pursuant to article 8 of the plan in any calendar year to any covered employee shall not exceed 2,250,000 shares, (iv) the total cash award that is intended to qualify as performance-based compensation that may be paid pursuant to article 8 of the plan in any calendar year to any covered employee shall not exceed $6,000,000, and (v) the aggregate number of dividend equivalents that are intended to qualify as performance-based compensation that a covered employee may receive in any calendar year shall not exceed $6,000,000.
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
Director Independence
The otherboard of directors has adopted guidelines on director independence that are included in our corporate governance guidelines. The board of directors has determined that, except for Mr. Goodin, all current directors have no material features of the planrelationship with us and are described below,independent in accordance with our corporate governance guidelines and the complete text of the plan is attached to this proxy statement as Exhibit A.New York Stock Exchange listing standards.
Purpose of the Plan
The purpose of the plan is to promote the success and enhance the value of the company by linking the personal interests of officers and key employees to those of our stockholders and customers. The plan is further intended to provide flexibility in our ability to motivate, attract, and retain the services of participants upon whose judgment, interest, and special effort the successful conduct of our operations largely depends.
Effective Date and Duration
The plan was initially approved byIn determining director independence, the board of directors reviewed and considered information about any transactions, relationships, and arrangements between the non-employee directors and their immediate family members and affiliated entities on February 7, 1997,the one hand, and first became effective upon approvalthe company and its affiliates on the other, and in particular the following transactions, relationships, and arrangements:

Charitable contributions by stockholders at the annual meeting on April 22, 1997. The plan will remain in effect, subjectMDU Resources Foundation (Foundation) to the rightfollowing nonprofit organizations, where a director, or a director’s spouse, serves or has served as a director, chair, or vice chair of the board of trustees, trustee or member of the organization or related entity:Charitable contributions by the Foundation to Sanford Health Foundation, Billings Catholic Schools Foundation, Community Resources Inc., the University of North Dakota Foundation, and the University of Jamestown and its foundation. None of the contributions made to any of these nonprofit entities during the last three fiscal years exceeded in any single year the greater of $1 million or 2% of the relevant entity’s consolidated gross revenues.
Stockholder Engagement
The company has an active stockholder outreach program. We believe in providing transparent and timely information to our investors. Each year we routinely engage directly or indirectly with our stockholders, including our top institutional stockholders. During 2016, the company held meetings, conference calls, and webcasts with a diverse mix of stockholders. Throughout the year, we held meetings with nine of the actively managed institutional investors included in our year-end top 30 stockholders. We engage periodically with our index fund investors, however, no direct meetings were held with this investor class in 2016. In our meetings, we discussed a variety of topics with stockholders including longer-term company strategy and our capital expenditure forecast, shorter-term operational and financial updates, and previously announced strategic initiatives. The company also met with proxy advisory firms to discuss corporate governance and executive compensation practices.
Board Leadership Structure
The board separated the positions of chairman of the board and chief executive officer in 2006, and our bylaws and corporate governance guidelines currently require that our chairman be independent. The board believes this structure provides balance and is currently in the best interest of the company and its stockholders. Separating these positions allows the chief executive officer to focus on the full-time job of running our business, while allowing the chairman of the board to lead the board in its fundamental role of providing advice to and independent oversight of management. The chairman consults with the chief executive officer regarding the board meeting agendas, the quality and flow of information provided to the board, and the effectiveness of the board meeting process. The board believes this split structure recognizes the time, effort, and energy the chief executive officer is required to devote to the position in the current business environment, as well as the commitment required to serve as the chairman, particularly as the board’s oversight responsibilities continue to grow and demand more time and attention. The fundamental role of the board of directors is to terminateprovide oversight of the plan at any time, until all shares subject tomanagement of the plan have been issued.
Amendment, Modification,company in good faith and Termination
The board may, at any time and from time to time, alter, amend, suspend, or terminate the plan, in whole or in part, provided that no amendment will be made without stockholder approval if the amendment would (i) increase the total number of shares that may be issued under the plan, (ii) materially modify the requirements for participation in the plan, or (iii) materially increase the benefits accruing to participants under the plan.
Administrationbest interests of the Plan
The plancompany and its stockholders. Having an independent chairman is administered bya means to ensure the compensation committee or by any other committee appointed bychief executive officer is accountable for managing the boardcompany in close alignment with the interests of directors. Subject to the terms of the plan, the committee has full power under the plan to determine persons to receive awards, the size and type of awards, and their terms. The committee may amend outstanding awards subject to restrictions stated in the plan.
Shares Subject to the Plan
When it originally became effective in 1997, the plan authorized the issuance of up to 1,200,000 shares of MDU Resources Group, Inc. common stock. In 2001, the stockholders, approved an amendment to increase the number of shares that could be issued under the plan by 4,000,000 shares. On February 17, 2005, the Board of Directors amended the plan to reduce the number of shares that could be issued by 2,000,000 shares. As of February 11, 2016, after giving effect to stock splits and awards pursuant to the plan, 4,393,865 shares remain available for issuance under the plan, excluding 699,562 outstanding target level performance share awards granted in 2014, 2015, and 2016.
Shares underlying lapsed or forfeited restricted stock awards are not treated as having been issued under the plan. Shares withheld from an award to satisfy tax withholding obligations are counted as shares issued under the plan. Shares that are potentially deliverable under an award that expires or is canceled, forfeited, settled in cash, or otherwise settled without the delivery of shares are not treated as having been issued under the plan.
Shares issued under the plan may be authorized but unissued shares of common stock, treasury stock, or shares purchased on the open market.
In the event of any equity restructuring such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend, the committee will cause an equitable adjustment to be made (i) in the number and kind of shares that may be delivered under the plan, (ii) in the individual limitations set forth in the plan, and (iii)including with respect to outstanding awards,risk management as discussed below. An independent chairman is in a position to encourage frank and lively discussions and to assure that the numbercompany has adequately assessed all appropriate business risks before adopting its final business plans and strategies. The board believes that having separate positions and having an independent outside director serve as chairman is the appropriate leadership structure for the company at this time and demonstrates our commitment to good corporate governance.

 
12 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

Board’s Role in Risk Oversight
Risk is inherent with every business, and kindhow well a business manages risk can ultimately determine its success. We face a number of shares subjectrisks, including economic risks, environmental and regulatory risks, the impact of competition, weather conditions, limitations on our ability to outstanding awards, pricepay dividends, pension plan obligations, cyberattacks or acts of shares subjectterrorism, and third party liabilities. Management is responsible for the day-to-day management of risks the company faces, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to outstanding awards, any performance goals relating to shares,satisfy itself that the market pricerisk management processes designed and implemented by management are adequate and functioning as designed.
The board believes establishing the right “tone at the top” and full and open communication between management and the board of shares, or per-share results,directors are essential for effective risk management and oversight. Our chairman meets regularly with our president and chief executive officer and other termssenior officers to discuss strategy and conditionsrisks facing the company. Senior management attends the quarterly board meetings and is available to address any questions or concerns raised by the board on risk management-related and any other matters. Each quarter, the board of outstanding awards,directors receives presentations from senior management on strategic matters involving our operations. At least annually, the board holds strategic planning sessions with senior management to discuss strategies, key challenges, and risks and opportunities for the company.
While the board is ultimately responsible for risk oversight at our company, our three standing board committees assist the board in fulfilling its oversight responsibilities in certain areas of risk. The audit committee assists the board in fulfilling its oversight responsibilities with respect to risk management in a general manner and specifically in the caseareas of (i), (ii),financial reporting, internal controls and (iii)compliance with legal and regulatory requirements, and, in accordance with New York Stock Exchange requirements, discusses policies with respect to prevent dilutionrisk assessment and risk management and their adequacy and effectiveness. Risk assessment reports are regularly provided by management to the audit committee or enlargementthe full board. This opens the opportunity for discussions about areas where the company may have material risk exposure, steps taken to manage such exposure, and the company’s risk tolerance in relation to company strategy. The audit committee reports regularly to the board of rights. Indirectors on the eventcompany’s management of any other change in corporate capitalization, such as a merger, consolidation, or liquidation, the committee may, in its sole discretion, cause an equitable adjustment as describedrisks in the foregoing sentence to be made, to prevent dilution or enlargementaudit committee’s areas of rights. The number of shares subject to any award will always be rounded down to a whole number when adjustments are made pursuant to these provisions of the plan. Adjustments made by the committee pursuant to these provisions are final, binding, and conclusive.
Types of Awards under the Plan
Following is a general description of the types of awards that the compensation committee may make under the plan.responsibility. The compensation committee will determineassists the terms and conditions of awards on a grant-by-grant basis, subject to limitations containedboard in the plan.
Restricted Stock.Restricted stock may be granted in such amounts and subject to such terms and conditions as determined by the committee, including time-based or performance-based vesting restrictions. The committee may establish performance goals, as described above, for restricted stock.
Participants holding restricted stock may exercise full voting rights with respect to those shares during the restricted period and, subject to the committee’s right to determine otherwise at the time of grant, will receive regular cash dividends. All other distributions paidfulfilling its oversight responsibilities with respect to the restricted stock will be credited subject tomanagement of risks arising from our compensation policies and programs. The nominating and governance committee assists the same restrictions on transferability and forfeitability as the shares of restricted stockboard in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.
Board Meetings and Committees
During 2016, the board of directors held four regular meetings and three special meetings. Each director attended at least 75% of the combined total meetings of the board and the committees on which they were paid.the director served during 2016. Director attendance at our annual meeting of stockholders is encouraged. All directors attended our 2016 Annual Meeting of Stockholders.
Performance UnitsHarry J. Pearce was elected non-employee chairman of the board on August 17, 2006, and Performance Shares.Performance unitspreviously served as lead director from February 15, 2001 to August 17, 2006. He presides at the executive session of the non-employee directors held in connection with each regularly scheduled quarterly board of directors meeting. The non-employee directors also meet in executive session both with and performance shares may be grantedwithout the chief executive officer at each regularly scheduled quarterly board of directors meeting. All of our non-employee directors are independent, as defined in the amountsour corporate governance guidelines and subject to such termsNew York Stock Exchange listing standards.
The board has a standing audit committee, compensation committee, and conditions as determined by thenominating and governance committee. These committees are composed entirely of independent directors.
Nominating and Governance Committee
The nominating and governance committee met four times during 2016. The committee will set performance goals, which, depending on the extent to which theymembers are met during the performance periods established by theKaren B. Fagg, chair, A. Bart Holaday, William E. McCracken, and Patricia L. Moss.
The nominating and governance committee will determine the number and/or value of performance units/shares that will be paid out to participants. Dividend equivalents may also be granted.
Participants will receive payment of the value of performance units/shares earned after the end of the performance period. Payment of performance units/shares will be made in cash and/or shares of common stock which have an aggregate fair market value equalprovides recommendations to the value of the earned performance units/shares at the end of the applicable performance period, in such combination as the committee determines. Shares may be granted subject to any restrictions deemed appropriate by the committee.
Other Awards.The committee may make other awards which may include, without limitation, the grant of shares of common stock based upon attainment of performance goals established by the committee, the payment of shares in lieu of cash, the payment of cash based on attainment of performance goals, and the payment of shares in lieu of cash under our other incentive or bonus programs.
Minimum Vesting Requirements
Under the plan, the minimum vesting period for full value awards, which are awards pursuant to which shares may be issued that have no performance-based vesting characteristics, is three years. Vesting may occur ratably each month, quarter, or anniversary of the grant date. The minimum vesting period for full value awards with performance-based vesting characteristics is at least one year. The committee does not have discretion to accelerate vesting of full value awards except in the event of a change in control of the company or similar transaction, or the death, disability, or termination of employment of a participant. The committee may grant a “de minimis” number of full value awards that have a shorter vesting period. For this purpose, “de minimis” means 331,279 shares, subject to adjustment pursuant to the anti-dilution provisions in the plan.
Termination of Employment
Each award agreement will set forth the participant’s rightsboard with respect to each award following termination of employment.to:
Transferabilityboard organization, membership, and function;
Except as otherwise determined by the committee structure and set forth in the award agreementmembership;
succession planning for our executive management and subject to the provisions of the plan, awards of restricted stockdirectors; and performance units/performance shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, and a participant’s rights with respect to such shares or units shall be exercisable only by the participant or the participant’s legal representative during his or her lifetime.
our corporate governance guidelines.

 
MDU Resources Group, Inc. Proxy Statement 13

Proxy Statement
 

ChangeThe nominating and governance committee assists the board in Controloverseeing the management of risks in the committee’s areas of responsibility.
Upon a change in control, as defined below:
any restriction periodsThe committee identifies individuals qualified to become directors and restrictions imposed on restricted stock or awards granted pursuantrecommends to article 8 of the plan, if not performance-based, will be deemed to have expired, and such restricted stock or awards will become immediately vested in full and
board the target payout opportunity attainable under all outstanding awards of performance units, performance shares, and other awards granted pursuant to article 8 of the plan, if performance-based, will be deemed to have been fully earnednominees for director for the entire performance period(s) asnext annual meeting of the effective date of the change in controlstockholders. The committee also identifies and will be paid out promptly in shares or cash pursuantrecommends to the terms ofboard individuals qualified to become our principal officers and the award agreement, or innominees for membership on each board committee. The committee oversees the absence of such designation, as the committee shall determine.
The plan defines “change in control” as:
the acquisition by an individual, entity, or group of 20% or more of our outstanding common stock
a change in a majority of our board of directors since April 22, 1997 without the approval of a majorityevaluation of the board members as of April 22, 1997, or whose election was approved by suchand management.
In identifying nominees for director, the committee consults with board members,
consummation of a merger or similar transaction or sale of all or substantially all our management, consultants, and other individuals likely to possess an understanding of our assets, unlessbusiness and knowledge concerning suitable director candidates.
Our corporate governance guidelines include our policy on consideration of director candidates recommended to us. We will consider candidates that our stockholders immediately priorrecommend in the same manner we consider other nominees. Stockholders who wish to recommend a director candidate may submit recommendations, along with the information set forth in the guidelines, to the transaction beneficially own more than 60%nominating and governance committee chair in care of the outstanding common stock and voting powersecretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650.
Stockholders who wish to nominate persons for election to our board at an annual meeting of stockholders must follow the resulting corporationprocedures set forth in substantially the same proportions as before the merger, no person owns 20% or more of the resulting corporation’s outstanding common stock or voting power except for any such ownership that existed before the merger and at least a majority of the board of the resulting corporation is comprisedsection 2.08 of our directors orbylaws. Our bylaws are available on our website. See “Stockholder Proposals, Director Nominations, and Other Items of Business for 2018 Annual Meeting” in the section entitled “Information about the Annual Meeting” for further details.
stockholder approval of our liquidation or dissolution.
Accounting Restatements
The plan provides that ifIn evaluating director candidates, the company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirements under the securities laws, the company or the compensation committee, may, or shall if required, take action to recover incentive-based compensation from specific executive officers in accordance with our Guidelines for Repaymentcorporate governance guidelines, considers an individual’s:
background, character, and experience, including experience relative to our company’s lines of Incentives Due to Accounting Restatements,business;
skills and experience which complement the skills and experience of current board members;
success in the individual’s chosen field of endeavor;
skill in the areas of accounting and financial management, banking, business management, human resources, marketing, operations, public affairs, law, technology, risk management, governance, and operations abroad;
background in publicly traded companies including service on other public company boards of directors;
geographic area of residence;
diversity of business and professional experience, skills, gender, and ethnic background, as they may be amendedappropriate in light of the current composition and needs of the board;
independence, including any affiliation or substituted from time to time,relationship with other groups, organizations, or entities; and in accordance
compliance with applicable law and applicable rulescorporate governance, code of conduct and ethics, conflict of interest, corporate opportunities, confidentiality, stock ownership and trading policies, and our other policies and guidelines of the company.
In addition, our bylaws contain requirements that a person must meet to qualify for service as a director.
The nominating and governance committee assesses the effectiveness of this policy annually in connection with the nomination of directors for election at the annual meeting of stockholders. The composition of the current board reflects diversity in business and professional experience, skills, and gender.
Audit Committee
The audit committee is a separately-designated committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee met eight times during 2016. The audit committee members are Dennis W. Johnson, chair, Mark A. Hellerstein, A. Bart Holaday, and John K. Wilson. The board of directors has determined that Messrs. Johnson, Hellerstein, Holaday, and Wilson are “audit committee financial experts” as defined by Securities and Exchange Commission rules and are financially literate within meaning of the listing standards of the New York Stock Exchange. They also meet the independence standard for audit committee members under our director independence guidelines, the New York Stock Exchange listing standards, and Securities and Exchange Commission rules.
Section 409A
To the extent applicable, it is intended that the plan and any awards made under the plan comply with the requirements of Internal Revenue Code Section 409A. Any provision that would cause the plan or any award to fail to satisfy Section 409A will have no force or effect until amended to comply with Section 409A, which amendment may be retroactive to the extent permitted by Section 409A.
Award Information
It is not possible at this time to determine awards that will be made in the future pursuant to the plan.

 
14 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

Equity Compensation Plan Information
The following table includesaudit committee assists the board of directors in fulfilling its oversight responsibilities to the stockholders and serves as a communication link among the board, management, the independent registered public accounting firm, and the internal auditors. The audit committee:
assists the board’s oversight of
◦the integrity of our financial statements and system of internal controls;
◦the company’s compliance with legal and regulatory requirements;
◦the independent registered public accounting firm’s qualifications and independence;
◦the performance of our internal audit function and independent registered public accounting firm; and
◦management of risk in the audit committee’s areas of responsibility; and
•
arranges for the preparation of and approves the report that Securities and Exchange Commission rules require we include in our annual proxy statement. See the section entitled “Audit Committee Report” for further information.
Compensation Committee
During 2016, the compensation committee met five times. The compensation committee consists entirely of independent directors within the meaning of the company’s corporate governance guidelines and the New York Stock Exchange listing standards and who meet the definitions of outside or non-employee directors for purposes of Section 162(m) of the Internal Revenue Code and Rule 16-b under the Exchange Act. Members of the compensation committee are Thomas Everist, chair, Karen B. Fagg, William E. McCracken, and Patricia L. Moss.

The compensation committee assists the board of directors in fulfilling its responsibilities relating to the company’s compensation policy and programs. It has the direct responsibility for determining compensation for our Section 16 officers and for overseeing the company’s management of risk in its areas of responsibility. In addition, the compensation committee reviews and recommends any changes to director compensation policies to the board of directors. The authority and responsibility of the compensation committee is outlined in the compensation committee’s charter.
The compensation committee uses the analysis and recommendations from outside consultants, the chief executive officer, and the human resources department in making its compensation decisions. The chief executive officer, the vice president-human resources, and the general counsel regularly attend compensation committee meetings. The committee meets in executive session as needed. The processes and procedures for consideration and determination of compensation of the Section 16 officers, as well as the role of our executive officers, are discussed in the Compensation Discussion and Analysis.
The compensation committee has sole authority to retain compensation consultants, legal counsel, or other advisers to assist in consideration of the compensation of the chief executive officer, the other Section 16 officers, and the board of directors, and the committee is directly responsible for the appointment, compensation, and oversight of the work of such advisers. The committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on executive compensation. The competitive analysis is conducted internally by the human resources department in the other years. Prior to retaining an adviser, the committee will consider all factors relevant to ensure the adviser’s independence from management. Annually the compensation committee conducts a potential conflicts of interest assessment raised by the work of any compensation consultant and how such conflicts, if any, should be addressed. The compensation committee requested and received information asfrom its compensation consultant, Willis Towers Watson, to assist in its potential conflicts of December 31, 2015,interest assessment. Based on its review and analysis, the compensation committee did not identify any conflicts of interest with respect to our equity compensation plans:
Plan Category 
(a)
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
  
(b)
Weighted average
exercise price of
outstanding options,
warrants and rights
  
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
  
Equity compensation plans approved by stockholders 1
  565,896
2 
 —
3 
 5,018,178
4,5 
Equity compensation plans not approved by stockholders  N/A
  N/A
  N/A
 
1 
Consists of the Non-Employee Director Long-Term Incentive Compensation Plan, the Long-Term Performance-Based Incentive Plan, and the Non-Employee Director Stock Compensation Plan.
2 
Consists of performance shares.
3 
No weighted average exercise price is shown for the performance shares.
4 
357,757 shares remain available for future issuance under the Non-Employee Director Long-Term Incentive Compensation Plan in connection with grants of restricted stock, performance units, performance shares, or other equity-based awards. 4,585,932 shares remain available for future issuance under the Long-Term Performance-Based Incentive Plan in connection with grants of restricted stock, performance units, performance shares, or other equity-based awards.
5 
This amount also includes 74,489 shares available for issuance under the Non-Employee Director Stock Compensation Plan. Under this plan, in addition to a cash retainer, non-employee directors are awarded shares equal in value to $110,000 annually. A non-employee director may acquire additional shares under the plan in lieu of receiving the cash portion of the director’s retainer or fees.
Willis Towers Watson.
The board of directors believes that it isdetermines compensation for our non-employee directors based upon recommendations from the compensation committee. The compensation committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on director compensation. The compensation committee employed a compensation consultant for an analysis of director compensation in 2015 but not in 2016 as the best interests ofstudy was performed by the company and our stockholders to receive the full income tax deduction for performance-based compensation paid under the plan. The board is therefore asking the stockholders to approve, for purposes of Section 162(m), the material terms of the performance goals as set forth above. The plan will remain in effect if the stockholders do not approve the material terms of the performance goals, and failure to obtain stockholder approval will not affect the rights of participants under the plan or under any outstanding award agreements.
The board of directors recommends a vote “for” this proposal.
For purposes of Internal Revenue Code Section 162(m), approval requires a majority of the votes cast to be in favor of approval. Broker non-vote shares and abstentions will not count as votes cast.human resources department.

ITEM 3. RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee at its February 2016 meeting appointed Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2016. The board of directors concurred with the audit committee’s decision. Deloitte & Touche LLP has served as our independent registered public accounting firm since fiscal year 2002.
Although your ratification vote will not affect the appointment or retention of Deloitte & Touche LLP for 2016, the audit committee will consider your vote in determining its appointment of our independent registered public accounting firm for the next fiscal year. The audit committee, in appointing our independent registered public accounting firm, reserves the right, in its sole discretion, to change an appointment at any time during a fiscal year if it determines that such a change would be in our best interests.
A representative of Deloitte & Touche LLP will be present at the annual meeting and will be available to respond to appropriate questions. We do not anticipate that the representative will make a prepared statement at the meeting; however, he or she will be free to do so if he or she chooses.
The board of directors recommends a vote “for” the ratification of
Deloitte & Touche LLP as our independent registered public accounting firm for 2016.

 
MDU Resources Group, Inc. Proxy Statement 15

Proxy Statement
 

RatificationNarrative Disclosure of our Compensation Policies and Practices as They Relate to Risk Management
The human resources department has conducted an assessment of the appointmentrisks arising from our compensation policies and practices for all employees and concluded that none of Deloitte & Touche LLP as our independent registered public accounting firm for 2016 requires the affirmative vote ofthese risks is reasonably likely to have a majority of our common stock present in person or represented by proxy at the meeting and entitled to votematerial adverse effect on the proposal. Abstentions will count as votes againstcompany. Based on the human resources department’s assessment and taking into account information received from the risk identification process, senior management and our management policy committee concluded that risks arising from our compensation policies and practices for all employees are not reasonably likely to have a material adverse effect on the company. After review and discussion with senior management, the compensation committee concurred with this proposal.assessment.
AccountingAs part of its assessment of the risks arising from our compensation policies and Auditing Matterspractices for all employees, the human resources department identified the principal areas of risk faced by the company that may be affected by our compensation policies and practices for all employees, including any risks resulting from our operating businesses’ compensation policies and practices. In assessing the risks arising from our compensation policies and practices, the human resources department identified the following practices designed to prevent excessive risk taking:
Fees
The following table summarizes the aggregate fees that our independent registered public accounting firm, Deloitte & Touche LLP, billed or is expected to bill us for professional services rendered for 2015Business management and 2014:
  2015
  2014*
Audit Feesa
$2,755,400 $3,126,140 
Audit-Related Feesb
 437,979  45,925 
Tax Feesc
 36,400  24,300 
All Other Feesd
 47,569
  100,527 
Total Feese
$3,277,348 $3,296,892 
Ratio of Tax and All Other Fees to Audit and Audit-Related Fees 2.6
% 3.9%
*The 2014 amounts were adjusted from amounts shown in the 2015 proxy statement to reflect actual amounts. 
governance practices:
a
◦		Audit fees for 2015 and 2014 consisted of fees for services rendered for the audit of our annual financial statements, reviews of quarterly financial statements, subsidiary, statutory and regulatory audits, compliance with loan covenants, agreed upon procedures associated withrisk management is a specific performance competency included in the annual submissionperformance assessment of financial assurance to the North Dakota Department of Health, the issuance of comfort letters relating to a sales agency agreement and offering of common stock (2014 only), filing Form S-3 and S-8 registration statements (2014 only), and the audit of financial statements for Fidelity Exploration & Production Company (2014 only). Audit fees for 2014 include $31,280 for the financial statement audit of Dakota Prairie Refining, LLC. These fees are paid by Dakota Prairie Refining, but are included in this table because Dakota Prairie Refining is considered a variable interest entity with respect to MDU Resources and consolidated in its financial statements.Section 16 officers;
b
◦		Audit-related fees for 2015board oversight on capital expenditure and 2014 are associated with accounting research assistance, agreed upon procedures associated report for Knife River Corporation’s JTL Group, Inc. (Wyoming) (2015 only), due diligence work associated with a potential acquisition (2015 only), and technical accounting consultation regarding discontinued and continuing operations (2014 only).operating plans that promotes careful consideration of financial assumptions;
c
◦		Tax fees for 2015 and 2014 include the preparation of federal and state tax returns for Dakota Prairie Refining, LLC. The fees associated with Dakota Prairie Refining are paid by Dakota Prairie Refining, but are included in this table because Dakota Prairie Refining is considered a variable interest entity with respect to MDU Resources and is consolidated in its financial statements.limitation on business acquisitions without board approval;
d
◦		All other fees for 2015employee integrity training programs and 2014 are associated with a cost segregation study and research on R&D credits, in each case for Dakota Prairie Refining, LLC. The fees associated with Dakota Prairie Refining are paid by Dakota Prairie Refining, but are included in this table because Dakota Prairie Refining is considered a variable interest entity with respect to MDU Resources and consolidated in its financial statements.anonymous reporting systems;
e
◦		Total fees reported above include out-of-pocket expenses related to the services provided of $382,965 for 2015quarterly risk assessment reports at audit committee meetings; and $420,732 for 2014.
◦prohibitions on holding company stock in an account that is subject to a margin call, pledging company stock as collateral for a loan, and hedging of company stock by Section 16 officers and directors.
Executive compensation practices:
◦active compensation committee review of executive compensation, including comparison of executive compensation to total stockholder return ratio to the ratio for the company’s peer group;
◦the initial determination of a position’s salary grade to be at or near the 50th percentile of base salaries paid to similar positions at peer group companies and/or relevant industry companies;
◦consideration of peer group and/or relevant industry practices to establish appropriate compensation target amounts;
◦a balanced compensation mix of fixed salary and annual and long-term incentives tied to the company’s financial performance;
◦use of interpolation for annual and long-term incentive awards to avoid payout cliffs;
◦negative discretion to adjust any annual or long-term incentive award payment downward;
◦use of caps on annual incentive awards (maximum of 250% of target) and long-term incentive stock grant awards (200% target);
◦clawback availability on incentive payments in the event of a financial restatement;
◦use of performance shares, rather than stock options or stock appreciation rights, as the equity component of incentive compensation;
◦use of performance shares with a relative total stockholder return performance measure and mandatory reduction in award if total stockholder return over the performance period is negative;
◦use of three-year performance periods to discourage short-term risk-taking;
◦substantive incentive goals measured primarily by return on invested capital, earnings, and earnings per share criteria, which encourage balanced performance and are important to stockholders;
◦use of financial performance metrics that are readily monitored and reviewed;
Pre-Approval Policy
The audit committee pre-approved all services Deloitte & Touche LLP performed in 2015 in accordance with the pre-approval policy and procedures the audit committee adopted at its August 12, 2003 meeting. This policy is designed to achieve the continued independence of Deloitte & Touche LLP and to assist in our compliance with Sections 201 and 202 of the Sarbanes-Oxley Act of 2002 and related rules of the Securities and Exchange Commission.
The policy defines the permitted services in each of the audit, audit-related, tax, and all other services categories, as well as prohibited services. The pre-approval policy requires management to submit annually for approval to the audit committee a service plan describing the scope of work and anticipated cost associated with each category of service. At each regular audit committee meeting, management reports on services performed by Deloitte & Touche LLP and the fees paid or accrued through the end of the quarter preceding the meeting. Management may submit requests for additional permitted services before the next scheduled audit committee meeting to the designated member of the audit committee, Dennis W. Johnson, for approval. The designated member updates the audit committee at the next regularly scheduled meeting regarding any services that he approved during the interim period. At each regular audit committee meeting, management may submit to the audit committee for approval a supplement to the service plan containing any request for additional permitted services.

 
16 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

◦regular review of the appropriateness of the companies in the peer group;
◦stock ownership requirements for the board and for executives receiving long-term incentive awards under the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan;
◦mandatory holding periods for 50% of any net after-tax shares earned under long-term incentive awards; and
◦use of independent consultants in establishing pay targets at least biennially.
Stockholder Communications with the Board
Stockholders and other interested parties who wish to contact the board of directors or any individual director, including our non-employee chairman or non-employee directors as a group, should address a communication in care of the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650. The secretary will forward all communications.
Additional Governance Features
Board and Committee Evaluations
Our corporate governance guidelines provide that the board of directors, in coordination with the nominating and governance committee, will annually review and evaluate the performance and functioning of the board and its committees. The self-evaluations are intended to facilitate a candid assessment and discussion by the board and each committee of its effectiveness as a group in fulfilling its responsibilities, its performance as measured against the corporate governance guidelines, and areas for improvement. The board and committee members are provided with a questionnaire to facilitate discussion. The results of the evaluations are reviewed and discussed in executive sessions of the committees and the board of directors.
Director Resignation Upon Change of Job Responsibility
Our corporate governance guidelines require a director to tender his or her resignation after a material change in job responsibility. In 2017, Mr. Everist submitted his resignation in connection with the sale by The Everist Company of its aggregate, concrete, and asphalt production interests. After considering his background, experience on the board, skills and character, and contribution to the company in light of the company’s business and structure, the board determined Mr. Everist’s resignation should not be accepted.
Majority Voting in Uncontested Director Elections
Our corporate governance guidelines require that in uncontested elections (those where the number of nominees does not exceed the number of directors to be elected), director nominees must receive the affirmative vote of a majority of the votes cast to be elected to our board of directors. Contested director elections (those where the number of director nominees exceeds the number of directors to be elected) are governed by a plurality of the vote of shares present in person or represented by proxy at the meeting.
The board has adopted a director resignation policy for incumbent directors in uncontested elections. Any proposed nominee for re-election as a director shall, before he or she is nominated to serve on the board, tender to the board his or her irrevocable resignation that will be effective, in an uncontested election of directors only, upon (i) such nominee’s receipt of a greater number of votes “against” election than votes “for” election at our annual meeting of stockholders; and (ii) acceptance of such resignation by the board of directors.
Director Overboarding Policy
Our bylaws and corporate governance guidelines state that a director may not serve on more than three public company boards, including the company’s board. Currently, all of our directors are in compliance of this policy.
Board Refreshment
The company regularly evaluates the need for board refreshment. The nominating and governance committee and the board are focused on identifying individuals whose skills and experiences will enable them to make meaningful contributions to shaping the company’s business strategy. As part of its consideration of director succession, the nominating and governance committee from time to time reviews, including when considering potential candidates, the appropriate skills and characteristics required of board members. The board believes it is important to consider diversity of skills, expertise, race, ethnicity, gender, age, education, cultural background, and professional experiences in evaluating board candidates for expected contributions to an effective board. Independent directors may not serve on the board beyond the next annual meeting of stockholders after attaining the age of 76. In connection with our mandatory retirement for directors, three of our current directors are expected to retire within the next two years.

MDU Resources Group, Inc. Proxy Statement 17

Proxy Statement

Prohibitions on Hedging/Pledging Company Stock
The director compensation policy prohibits directors from hedging their ownership of common stock, pledging company stock as collateral for a loan, or holding company stock in an account that is subject to a margin call.
Code of Conduct
We have a code of conduct and ethics, which we refer to as the Leading With Integrity Guide. It applies to all directors, officers, and employees.
We intend to satisfy our disclosure obligations regarding amendments to, or waivers of, any provision of the code of conduct that applies to our principal executive officer, principal financial officer, and principal accounting officer and that relates to any element of the code of ethics definition in Regulation S-K, Item 406(b), and waivers of the code of conduct for our directors or executive officers, as required by New York Stock Exchange listing standards, by posting such information on our website.
Corporate Governance Materials
Stockholders can see our bylaws, corporate governance guidelines, board committee charters, and Leading With Integrity Guide on our website.
• Audit, compensation, and nominating and governance committees’ charters are available at http://www.mdu.com/integrity/governance/board-charters-and-committees.
• Bylaws and corporate governance guidelines are available at http://www.mdu.com/integrity/governance/guidelines-and-bylaws.
• Leading With Integrity Guide is available at http://www.mdu.com/docs/default-source/governance/leadingwithintegrity.pdf.
Related Person Transaction Disclosure
The board of directors’ policy for the review of related person transactions is contained in our corporate governance guidelines. The policy provides that the audit committee review any transaction, arrangement or relationship, or series thereof:
in which we are or will be a participant;
the amount involved exceeds $120,000; and
a related person has or will have a direct or indirect material interest.
The purpose of this review is to determine whether this transaction is in the best interests of the company.
Related persons are directors, director nominees, executive officers, holders of 5% or more of our voting stock, and their immediate family members. Related persons are required promptly to report to our general counsel all proposed or existing related person transactions in which they are involved.
If our general counsel determines that the transaction is required to be disclosed under the Securities and Exchange Commission’s rules, the general counsel furnishes the information to the chairman of the audit committee. After its review, the committee makes a determination or a recommendation to the board and officers of the company with respect to the related person transaction. Upon receipt of the committee’s recommendation, the board of directors or officers, as the case may be, take such action as they deem appropriate in light of their responsibilities under applicable laws and regulations.
We had no related person transactions in 2016.

18 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

COMPENSATION OF NON-EMPLOYEE DIRECTORS
Director Compensation for 2016
Name 
Fees Earned or Paid in Cash
($)

 
Stock
Awards
($)1

 
All Other
Compensation
($)2
 Total
($)
Thomas Everist 75,000
 110,000
 83 185,083
Karen B. Fagg 75,000
 110,000
 83 185,083
Mark A. Hellerstein 65,000
 110,000
 83 175,083
A. Bart Holaday 65,000
 110,000
 83 175,083
Dennis W. Johnson 80,000
 110,000
 83 190,083
William E. McCracken 65,000
 110,000
 83 175,083
Patricia L. Moss 65,000
 110,000
 83 175,083
Harry J. Pearce 155,000
 110,000
 83 265,083
John K. Wilson 65,000
3 
110,000
 83 175,083
  
1
The annual retainer of $110,000 in company common stock is awarded pursuant to the MDU Resources Group, Inc. Non-Employee Director Stock Compensation Plan. The amount shown for each director represents the aggregate grant date fair value of 3,886 shares of MDU Resources Group, Inc. common stock measured in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. The grant date fair value is based on the purchase price of our common stock on the grant date of November 21, 2016, which was $28.30 per share. The $10.66 in cash paid to each director in lieu of fractional shares is included in the amount reported in the stock awards column to this table. As of December 31, 2016, there are no outstanding stock awards or options associated with the Non-Employee Director Stock Compensation Plan. 
2
Group life insurance premium.
3
Mr. Wilson elected to receive shares of our common stock in lieu of his cash retainer pursuant to the Non-Employee Director Stock Compensation Plan.  The amount shown includes 2,244 shares of our common stock purchased on December 7, 2016, at $28.96 per share.
The following table shows the cash and stock retainers payable to our non-employee directors.
Base Retainer  $65,000
Additional Retainers:   
Non-Executive Chair  90,000
Lead Director, if any  33,000
Audit Committee Chair  15,000
Compensation Committee Chair  10,000
Nominating and Governance Committee Chair 10,000
Annual Stock Grant1
  110,000
  
1 
The annual stock grant is a grant of shares equal in value to $110,000.
There are no meeting fees paid to directors.
In addition prior to approvingliability insurance, we maintain group life insurance in the amount of $100,000 on each non-employee director for the benefit of each director’s beneficiaries during the time each director serves on the board. The annual cost per director is $82.80.
Directors may defer all or any requestportion of the annual cash retainer and any other cash compensation paid for audit-related, tax,service as a director pursuant to the Deferred Compensation Plan for Directors. Deferred amounts are held as phantom stock with dividend accruals and are paid out in cash over a five-year period after the director leaves the board.
Directors are reimbursed for all reasonable travel expenses, including spousal expenses in connection with attendance at meetings of the board and its committees. All reimbursable expense amounts, together with any other perquisites, were below the disclosure threshold for 2016.

MDU Resources Group, Inc. Proxy Statement 19

Proxy Statement

Our post-retirement income plan for directors was terminated in May 2001 for current and future directors. The net present value of each director’s benefit was calculated and converted into phantom stock. Payment is deferred pursuant to the Deferred Compensation Plan for Directors and will be made in cash over a five-year period after the director’s retirement from the board.
Our director stock ownership policy contained in our corporate governance guidelines requires each director to own our common stock equal in value to five times the director’s annual cash base retainer. Shares acquired through purchases on the open market and participation in our director stock plans are considered in ownership calculations as is ownership of our common stock by a spouse. A director is allowed five years commencing January 1 of the year following the year of that director’s initial election to the board to meet the requirements. The level of common stock ownership is monitored with an annual report made to the compensation committee of the board. All directors are in compliance with the stock ownership policy. For stock ownership, see the section below.
SECURITY OWNERSHIP
Security Ownership Table
The table below sets forth the number of shares of our capital stock that each director and each nominee for director, each named executive officer, and all directors and executive officers as a group owned beneficially as of February 28, 2017. Unless otherwise indicated, each person has sole investment and voting power (or share such power with his or all other servicesher spouse) of the shares noted.
Name
Common Shares
Beneficially
Owned

 
Percent
of Class

 
Deferred
Director Fees
Held as
Phantom
Stock1

  
  
  
  
David C. Barney12,055
2,3 
*
 
Thomas Everist853,458
 *
 32,977
Karen B. Fagg61,164
 *
 

Martin A. Fritz—
 *
 
David L. Goodin101,788
2 
*
 
Mark A. Hellerstein15,766
 *
 8,637
A. Bart Holaday60,911
 *
 8,637
Dennis W. Johnson80,330
4 
*
 
William E. McCracken15,766
 *
 
Patricia L. Moss75,418
 *
 
Harry J. Pearce235,885
 *
 54,221
Doran N. Schwartz54,897
2,5 
*
 

Jeffrey S. Thiede7,149
2 
*
 
John K. Wilson118,916
 *
 
All directors and executive officers as a group (20 in number)1,853,142
 0.95% 104,472
  
* 

Less than one percent of the class. Percent of class is calculated based on 195,304,376 outstanding shares as of February 28, 2017.
1 

These shares are not included in the “Common Shares Beneficially Owned” column. Directors may defer all or a portion of their cash compensation pursuant to the Deferred Compensation Plan for Directors. Deferred amounts are held as phantom stock with dividend accruals and are paid out in cash over a five-year period after the director leaves the board.
2 

Includes full shares allocated to the officer’s account in our 401(k) retirement plan.
3 

The total includes 687 shares owned by Mr. Barney’s spouse.
4 

Mr. Johnson disclaims all beneficial ownership of the 163 shares owned by his spouse.
5 

The total includes 1,300 shares owned by Mr. Schwartz’s spouse.
We prohibit our directors and executive officers from hedging their ownership of company common stock. They may not enter into transactions that allow them to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership.

20 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Directors, executive officers, and related persons are prohibited from holding our common stock in a margin account, with certain exceptions, or pledging company securities as collateral for a loan. Company common stock may be held in a margin brokerage account only if the stock is explicitly excluded from any margin, pledge, or security provisions of the customer agreement. Company common stock may be held in a cash account, which is a brokerage account that does not allow any extension of credit on securities. “Related person” means an executive officer’s or director’s spouse, minor child, and any person (other than a tenant or domestic employee) sharing the household of a director or executive officer, as well as any entities over which a director or executive officer exercises control.
The table below sets forth information with respect to any person we know to be the beneficial owner of more than $50,000, Deloitte & Touche LLPfive percent of any class of our voting securities.
Title of Class 
Name and Address
of Beneficial Owner
 
Amount and Nature
of Beneficial Ownership

 
Percent
of Class
 
   
Common Stock BlackRock, Inc. 15,934,262
1 
8.20%
  55 East 52nd Street     
  New York, NY 10055    
        
Common Stock State Street Corporation 13,420,759
2 
6.87%
  State Street Financial Center     
  One Lincoln Street     
  Boston, MA 02111    
        
Common Stock The Vanguard Group 20,142,541
3 
10.31%
  100 Vanguard Blvd.     
  Malvern, PA 19355    
        
Common Stock Parnassus Investments 13,875,527
4 
7.10%
  1 Market Street, Suite 1600     
  San Francisco, CA 94105    
        
  
1 
Based solely on the Schedule 13G, Amendment No. 7, filed on January 25, 2017, BlackRock, Inc. reported sole voting power with respect to 15,053,491 shares and sole dispositive power with respect to 15,934,262 shares as the parent holding company or control person of BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management North Asia Limited, BlackRock Asset Management Schweiz AG, BlackRock Capital Management, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Managers Ltd, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC, and BlackRock Life Limited.
2 
Based solely on the Schedule 13G, filed on February 9, 2017, State Street Corporation reported shared voting and dispositive power with respect to all shares as the parent holding company or control person of State Street Bank and Trust Company, SSGA Funds Management, Inc., State Street Global Advisors, Ltd, State Street Global Advisors, Australia, Limited, State Street Global Advisors (Asia) Limited, and State Street Global Advisors France, S.A.
3 
Based solely on the Schedule 13G, Amendment No. 5, filed on February 10, 2017, The Vanguard Group reported sole dispositive power with respect to 20,014,996 shares, shared dispositive power with respect to 127,545 shares, sole voting power with respect to 115,860 shares, and shared voting power with respect to 21,119 shares. These shares includes 106,426 shares beneficially owned by Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of collective trust accounts, and 30,553 shares beneficially owned by Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of Australian investment offerings.
4 
Based solely on the Schedule 13G, Amendment No. 2, filed on February 14, 2017, Parnassus Investments reported sole voting and dispositive power with respect to all shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange Act of 1934, as amended, requires that officers, directors, and holders of more than 10% of our common stock file reports of their trading in our equity securities with the Securities and Exchange Commission. Based solely on a review of Forms 3, 4, and 5 and any amendments to these forms furnished to us during and with respect to 2016 or written representations that no Forms 5 were required, we believe that all such reports were timely filed, except that in May 2016, Mr. Daniel S. Kuntz filed an amended Form 3 to report beneficial ownership of 631 additional shares that were omitted from his original Form 3 filed in January 2016. Mr. Kuntz disclaims beneficial ownership of these additional shares.

MDU Resources Group, Inc. Proxy Statement 21

Proxy Statement

EXECUTIVE COMPENSATION
ITEM 2. ADVISORY VOTE TO APPROVE THE FREQUENCY OF THE VOTE TO APPROVE THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Securities Exchange Act of 1934 and Rule 14a-21(b), we are asking our stockholders to indicate, on an advisory basis, whether future advisory votes to approve the compensation paid to our named executive officers should be held every year, every two years, or every three years.
Our board of directors has determined that our stockholders should have the opportunity to vote on the compensation of our named executive officers every year. The board of directors believes that giving our stockholders the right to cast an advisory vote every year on the compensation of our named executive officers is a good corporate governance practice and is in the best interests of our stockholders. Annual advisory votes provide the highest level of accountability and direct communication with our stockholders.
By voting on this Item 2, stockholders are not approving or disapproving the board of directors’ recommendation, but rather are indicating whether they prefer an advisory vote on named executive officer compensation be held every year, every two years, or every three years. Stockholders may also abstain from voting.
Although the board of directors intends to carefully consider the voting results of this proposal, it is an advisory vote and the results will not be binding on the board of directors or the company, and the board of directors may decide that it is in the best interests of our stockholders and the company to hold an advisory vote on executive compensation more or less frequently than the option selected by our stockholders. We will provide a statement setting forthour stockholders with the reasons why renderingopportunity to vote on the frequency of advisory votes on our named executive officer compensation at our annual meetings at least once every six calendar years.
The board of directors recommends that an advisory vote
 on compensation paid to our named executive officers be held every year.
The frequency of every year, every two years, or every three years that receives the proposed services doesmost votes of our common stock present in person or represented by proxy at the meeting and entitled to vote on the proposal will be the frequency for the advisory vote on executive compensation that has been recommended by our stockholders. Abstentions will not compromise Deloitte & Touche LLP’s independence. This descriptioncount as votes for or against any frequency. Broker non-votes are not counted as voting power present and, statement by Deloitte & Touche LLP may be incorporated intotherefore, are not counted in the service plan or included as an exhibit thereto or may be delivered in a separate written statement.vote.

22 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

ITEM 4. APPROVAL, ON A NON-BINDING3. ADVISORY BASIS, OFVOTE TO APPROVE THE COMPENSATION OFPAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Securities Exchange Act of 1934 and Rule 14a-21(a), we are asking our stockholders to approve, in a separate advisory vote, the compensation of our named executive officers as disclosed in this proxy statementProxy Statement pursuant to Item 402 of Regulation S-K. As discussed in the Compensation Discussion and Analysis, our compensation committee and board of directors believe that our current executive compensation program directly links compensation of our named executive officers to our financial performance and aligns the interests of our named executive officers with those of our stockholders. Our compensation committee and board of directors also believe that our executive compensation program provides our named executive officers with a balanced compensation package that includes an appropriate base salary along with competitive annual and long-term incentive compensation targets. These incentive programs are designed to reward our named executive officers on both an annual and long-term basis if they attain specified goals.
Our overall compensation program and philosophy is built on a foundation of these guiding principles:
we pay for performance, with over 50%60% of our 20152016 total target direct compensation for our named executive officers in the form of performance-based incentive compensation
we assess the relationship between our named executive officers’ pay and performance on key financial metrics - revenue, profit, return on invested capital, and stockholder return - in comparison to our performance graph peer groupcompensation;
we review competitive compensation data for our named executive officers, to the extent available, and incorporate internal equity in the final determination of target compensation levelslevels;
we determinealign executive compensation and performance by using annual performance incentives based on financial criteria that are important to stockholder value, including earnings, earnings per share, and return on invested capitalcapital; and
we determinealign executive compensation and performance by using long-term performance incentives based on total stockholder return relative to our performance graph peer group.
We are asking our stockholders to indicate their approval of our named executive officer compensation as disclosed in this proxy statement,Proxy Statement, including the Compensation Discussion and Analysis, the executive compensation tables, and narrative discussion. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers for 2015.2016. Accordingly, the following resolution is submitted for stockholder vote at the 20162017 annual meeting:
“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion of this proxy statement, is hereby approved.”
As this is an advisory vote, the results will not be binding on the company, the board of directors, or the compensation committee and will not require us to take any action. The final decision on the compensation of our named executive officers remains with our compensation committee and our board of directors, although our board and compensation committee will consider the outcome of this vote when making future compensation decisions. As the board of directors determined at its meeting in May 2011,In a separate vote, we will provideare also providing our stockholders with the opportunity to vote, on an advisory basis, on whether the vote on our named executive officer compensation atshould occur every annual meeting until the next required vote on the frequency of stockholder votes on named executive officer compensation. The next required vote on frequency will occur at the 2017 annual meeting of stockholders.year, every two years, or every three years.
The board of directors recommends a vote “for” the approval, on a non-binding advisory basis, of
the compensation of our named executive officers, as disclosed in this proxy statement.
The board of directors recommends a vote “for” the approval, on a non-binding
advisory basis, of the compensation of the company’s named executive officers,
as disclosed in this Proxy Statement.
Approval of the compensation of our named executive officers requires the affirmative vote of a majority of our common stock present in person or represented by proxy at the meeting and entitled to vote on the proposal. Abstentions will count as votes against this proposal. Broker non-vote shares are not entitled to vote on this proposal and, therefore, are not counted in the vote.

 
MDU Resources Group, Inc. Proxy Statement 1723

Proxy Statement
 

INFORMATION CONCERNING EXECUTIVE COMPENSATIONOFFICERS
At the first annual meeting of the board after the annual meeting of stockholders, our board of directors elects our executive officers, who serve until their successors are chosen and qualify. A majority of our board of directors may remove any executive officer at any time. Information concerning our executive officers, including their ages as of December 31, 2016, present corporate positions, and business experience during the past five years, is as follows:
NameAgePresent Corporate Position and Business Experience
David L. Goodin55
Mr. Goodin was elected president and chief executive officer of the company and a director effective January 4, 2013. For more information about Mr. Goodin, see the section entitled “Item 1. Election of Directors.”
David C. Barney61Mr. Barney was elected president and chief executive officer of Knife River Corporation effective April 30, 2013, and president effective January 1, 2012.
Martin A. Fritz52Mr. Fritz was elected president and chief executive officer of WBI Holdings, Inc. effective July 20, 2015. Prior to joining WBI Holdings, Inc., he had his own energy consulting firm, Fritz Consulting, from February 2014 to July 2015, where he provided strategy, operations, business development, and business brokerage services. Prior to that, Mr. Fritz was employed by EQT Corporation, a petroleum and natural gas exploration and pipeline company, in positions of increasing responsibility, most recently serving as its executive vice president midstream operations, land and construction from 2013 through January 2014 and vice president EQT and president EQT midstream operations from 2008 to 2013.
Dennis L. Haider64Mr. Haider was elected executive vice president-business development effective June 1, 2013. Prior to that, he was executive vice president-business development and gas supply of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company from January 1, 2012 to May 31, 2013.
Anne M. Jones53Ms. Jones was elected vice president-human resources effective January 1, 2016. Prior to that, she was vice president-human resources, customer service, and safety at Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company effective July 1, 2013, and director of human resources for Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective June 2008.
Nicole A. Kivisto43Ms. Kivisto was elected president and chief executive officer of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company effective January 9, 2015. Prior to that, she was vice president of operations for Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective January 3, 2014, and vice president, controller and chief accounting officer for the company effective February 17, 2010.
Daniel S. Kuntz63Mr. Kuntz was elected vice president, general counsel and secretary effective January 1, 2017. Prior to that, he was general counsel and secretary effective January 9, 2016, associate general counsel effective April 1, 2007, and assistant secretary effective August 17, 2007.
Margaret (Peggy) A. Link50Ms. Link was elected chief information officer effective January 1, 2016. Prior to that, she was assistant vice president-technology and cybersecurity officer effective January 1, 2015, and director shared IT services effective June 2, 2009.
Doran N. Schwartz47Mr. Schwartz was elected vice president and chief financial officer effective February 17, 2010.
Jeffrey S. Thiede54Mr. Thiede was elected president and chief executive officer of MDU Construction Services Group, Inc. effective April 30, 2013, and president effective January 1, 2012.
Jason L. Vollmer39Mr. Vollmer was elected vice president, chief accounting officer and treasurer effective March 19, 2016. Prior to that, he was treasurer and director of cash and risk management effective November 29, 2014, assistant treasurer of Centennial Energy Holdings, Inc. and manager of treasury services and risk management effective June 30, 2014, and manager of treasury services, cash and risk management effective April 11, 2011.


24 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis describes how our named executive officers were compensated for 2016 and how their 2016 compensation aligns with our pay for performance philosophy. It also describes the oversight of the compensation committee and the rationale and processes used to determine the 2016 compensation of our executive officers including the objectives and specific elements of our compensation program.
The following Compensation Discussion and Analysis may contain statements regarding corporate performance targets and goals. TheseThe targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.
Executive Summary
Our Named Executive Officers
Our named executive officers for 20152016 were:
David L. Goodin, president and chief executive officer of MDU Resources Group, Inc.
Doran N. Schwartz, vice president and chief financial officer
David C. Barney, president and chief executive officer of our construction materials and contracting segment, Knife River Corporation; Mr. Barney was not a named executive officer in 2014
Jeffrey S. Thiede, president and chief executive officer of our construction services business segment, MDU Construction Services Group, Inc.
Patrick L. O’Bryan, president and chief executive officer of our exploration and production business segment, Fidelity Exploration & Production Company; Mr. O’Bryan was not a named executive officer in 2014. Substantially all of the assets of Fidelity were sold during 2015, and it is no longer considered a business segment. Mr. O’Bryan resigned his position effective February 29, 2016, and
Steven L. Bietz, former president and chief executive officer of our pipeline and energy services segment, WBI Holdings, Inc., which is the parent company of WBI Energy, Inc. and WBI Energy Services, Inc.; Mr. Bietz retired effective July 17, 2015.
Key Financial Results for 2015
Consolidated GAAP earnings in 2015 were $(623.1) million, or $(3.20) per share, compared to earnings of $297.5 million, or $1.55 per share, in 2014.
Our total stockholder return for 2015 was (19.0)%, as compared to (21.2)% for 2014. Our average annual total stockholder return for the five-year period ended December 31, 2015 was 1.0%, compared to 2.8% for the five-year period ended December 31, 2014.
Total Realized Pay Compared to Total Compensation from the Summary Compensation Table
The compensation committee believes total realized pay, the actual remuneration received by the named executive, is equally as important as total compensation as presented in the Summary Compensation Table. Total realized pay reflects the compensation actually earned, which can differ substantially from total compensation as presented in the Summary Compensation Table.
Total compensation as presented in the Summary Compensation Table contains estimated values of grants of performance shares based on multiple assumptions that may or may not come to fruition. Total realized pay does not include the value of performance shares at grant but rather includes their value only if they vest and then at the level they are actually earned. The Summary Compensation Table also shows any increase in pension value, which may result in large part from changes in the valuation assumptions and discount rates used for calculation. Total realized pay excludes the change in pension value and above-market earnings on nonqualified deferred compensation because:
an increase in pension value can result in a much higher number reported as total compensation in the Summary Compensation Table
when pension value decreases, as it did for 2015 due to the use of a higher discount rate, the negative value does not reduce total compensation as reported in the Summary Compensation Table and
Supplemental Income Security Plan benefits depend partially on continued employment for some of the named executive officers.

18 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
David L. GoodinPresident and Chief Executive Officer (CEO)
Doran N. SchwartzVice President and Chief Financial Officer (CFO)
David C. BarneyPresident and Chief Executive Officer - Construction Materials & Contracting Segment
Jeffrey S. ThiedePresident and Chief Executive Officer - Construction Services Segment
Martin A. FritzPresident and Chief Executive Officer - Pipeline & Midstream Segment
Executive Summary
Pay for Performance

We define total realizedTo ensure management’s interests are aligned with those of our stockholders and the performance of the company, over 76% of the CEO’s target compensation and 61% of the other named executive officers’ target compensation is dependent on the achievement of company performance targets. The charts below show the target pay asmix for the sum of:
CEO and average target pay mix of the other named executive officers, including base salary and the annual and long-term at-risk performance incentives.
mdu2017prox_chart-40820a01.jpgmdu2017prox_chart-42098a01.jpg
Annual incentive opportunities for our executive officers are linked to performance by tying them to the achievement of specific business and financial goals. The 2016 annual incentive awards and bonus paid with respectopportunities for business segment executives are based on the achievement of specific performance measures selected by the compensation committee. The performance measures included targets specific to the yearbusiness segment and one performance measure tied to the success of the company as a whole. This incentivized our business segment executives to focus on the success and performance of their business segment while keeping the overall success of the company in mind.
For corporate executives (including our CEO and CFO), annual incentive opportunities are based on the value realized uponbusiness segments’ achievement of their performance measures. The business segment performance measures are then weighted by its average invested capital. The sum of the vesting of long-term incentive awards ofweighted business unit achieved performance shares during the year and
all other compensation as reportedmeasures results in the Summary Compensation Table.
The following table compares total realized pay for our named executives in 2015 to the total compensation as presented in the Summary Compensation Table. This table is not intended to be a substitute for the Summary Compensation Table.
Named Executive Officer
Base Salary
($)

Annual Incentive
Awards and Bonus
Paid
($)
Value
Realized
upon
Vesting of
Performance
Shares
($)1

All
Other
Compensation
($)
Total
Realized
Pay
($)

Total Compensation from the Summary Compensation Table
($)
David L. Goodin 755,000
376,745
—
39,4111,171,156
2,558,148
Doran N. Schwartz 380,000
123,253
—
35,571538,824
818,052
David C. Barney 395,000
637,588
—
22,5561,055,144
1,290,413
Jeffrey S. Thiede 425,000
161,857
—
172,506759,363
1,002,265
Patrick L. O’Bryan2
 441,918
1,359,425
—
21,3561,822,699
1,822,699
Steven L. Bietz3
 214,274
—
—
787,3511,001,625
1,307,120
1 
Performance shares and dividend equivalents for the 2012-2014 performance period did not vest and were forfeited because performance was below threshold.
2 
Promoted effective March 1, 2015; his base salary is prorated.
3 
Retired effective July 17, 2015; his base salary is prorated.
With respect to our chief executive officer, the following table demonstrates our pay for performance approach for 2011 through 2015 by comparing:
total realized pay, which is the sum of base salary, annual incentive awards paid, all other compensation,payout for corporate executives. This incentivizes the corporate executives to assist the business segments in their success and the value realized upon the vesting of performance shares during 2014 (for the 2011 through 2013 performance cycle). None vested during 2011, 2012, 2013, or 2015.performance.
total compensation as reported in the Summary Compensation Table and
one-year total stockholder returns for 2011 through 2015.

 
MDU Resources Group, Inc. Proxy Statement 1925

Proxy Statement
 

For years 2011 and 2012, the compensation information is for Mr. Hildestad, our chief executive officer for those years, and for 2013 through 2015, the compensation information is for Mr. Goodin. This table is not intended to be a substitute for the Summary Compensation Table.

    20112012201320142015
   Total Realized Pay$1,742,249$1,306,474$2,273,142$2,601,803$1,171,156
   
   
   Total Compensation from Summary Compensation Table$3,566,327$2,558,778$4,047,413$3,571,637$2,558,148
   
   
   
1 Year Total
Stockholder Return
9.1%2.1%47.5%(21.2)%(19.0)%
   
   
Construction Materials & Contracting SegmentConstruction Services SegmentPipeline & Midstream SegmentElectric & Natural Gas Distribution Segment
êêêê
Business Segment TargetsBusiness Segment TargetsBusiness Segment TargetsBusiness Segment Targets
Company TargetCompany TargetCompany TargetCompany Target
êêêê
MDU Resources Corporate Executives (including our CEO and CFO)
Achievement of Business Segment Measures x Business Segment Average Invested Capital
In 2015, when our total stockholder return was (19.0)%, our chief executive officer’s total realized pay decreased $1.4 million, or 55%, and his total compensation from the Summary Compensation Table decreased $1.0 million, or 28%.
The decrease in Mr. Goodin’s totalfollowing chart shows the annual incentive payout of target realized pay was due primarilyby our CEO with a comparison to the nonvesting of performance shares and dividend equivalentsearnings per share from continuing operations for the 2012-2014last five years and demonstrates the alignment between our financial performance cycle, where our total stockholder return was below threshold compared to our performance graph peer group. The decrease in Mr. Goodin’s total compensation from the Summary Compensation Table was due primarily to a decrease in the change in pension value and lower realized annual incentive compensation.
Processmdu2017prox_chart-43094a01.jpg
See “Annual Incentives” in this section for Determinationfurther details on our company’s annual incentive program.
Vesting of long-term incentives is based on our company’s total stockholder return in comparison to that of our peers measured over a three year period. The following chart depicts the actual vesting percentage for the last five performance cycles and demonstrates the alignment between total return to our stockholders and our realized long-term incentive compensation.






26 MDU Resources Group, Inc. Proxy Statement

Proxy Statement


mdu2017prox_chart-44763a01.jpg
See “Long-Term Incentives” in this section for further details on the company’s long-term incentive program.
With the majority of our executive officer’s compensation dependent on the achievement of performance measures set by the compensation committee, we believe there is substantial alignment between executive pay and the company’s performance.
Stockholder Advisory Vote (“Say on Pay”)
At our 2016 Annual Meeting of Stockholders, 85.2% of the votes cast on the “Say on Pay” proposal approved the compensation of our named executive officers. Although the compensation committee viewed the 2016 vote as a strong expression of the stockholders general satisfaction with the company’s executive compensation programs, the 85.2% approval is lower than the results of our 88.2% “Say on Pay” vote at the 2015 Annual Meeting of Stockholders. The compensation committee believes the lower approval vote was largely attributable to a negative recommendation of a proxy advisor largely caused by comparative analysis to a peer group that was not reflective of the company’s business mix and an analysis that gave inadequate recognition to the distinction between target incentive award opportunities and realized incentive compensation. The compensation committee reviewed and considered the 2016 vote on “Say on Pay” in setting compensation for 2017.
Total Realized Pay
Total Realized Pay reflects the compensation actually paid to our executive officers based on performance, which can differ substantially from compensation as presented in the Summary Compensation Table. For example, total compensation presented in the Summary Compensation Table contains estimated values of performance share grants based on multiple assumptions which may or may not be achieved and can only be realized at the end of a three-year performance period. In addition, the Summary Compensation Table may show an increase in pension value based on valuation assumptions and discount rates used to calculate present value; however, any change in the pension value is not realized until the future period when the executive actually retires. We believe presenting information on Total Realized Pay provides additional perspective on the renumeration actually received by an executive in a given year. We define 2016 Total Realized Pay to include:
Base salary for 2016;
Annual incentive earned for 2016;
Performance shares (long-term incentive) plus dividend equivalents vesting as of December 31, 2016 and paid in 2017; and
Other compensation which includes company contributions to the 401(k) plan and company paid life insurance premiums.

MDU Resources Group, Inc. Proxy Statement 27

Proxy Statement

Name
2016 Base Salary
($)

2016 Annual Incentive Earned
($)

Vested and Paid Performance Shares1
($)

2016 Other Compensation
($)

2016 Total
Realized Pay
($)

Summary Compensation Table Total Compensation
($)

David L. Goodin755,000
1,055,490
654,368
40,246
2,505,104
3,510,991
Doran N. Schwartz380,000
351,481
171,936
35,772
939,189
1,134,629
David C. Barney406,800
593,114
145,190
22,905
1,168,009
1,376,616
Jeffrey S. Thiede425,000
489,600
152,848
22,708
1,090,156
1,325,906
Martin A. Fritz400,000
416,000
—
21,670
837,670
1,243,248
1 
Performance shares and dividend equivalents for the 2014-2016 performance cycle vested on December 31, 2016 and were approved in February 2017. The performance share value is based on our stock price on February 16, 2017, which was $26.37 per share.
Compensation Practices
Our practices and policies ensure alignment between the interests of our stockholders and our executives as well as effective compensation governance.
What We Do
þ
Pay for Performance - All annual and long-term incentives are performance-based and tied to performance measures set by the compensation committee.
þ
Independent Compensation Committee - All members of the compensation committee meet the independence standards under the New York Stock Exchange listing standards and the Securities and Exchange Commission rules.
þ
Independent Compensation Consultant - The compensation committee retains an independent compensation consultant to evaluate executive compensation plans and practices.
þ
Competitive Compensation - Executive compensation reflects the executive’s performance, experience, relative value compared to other positions within the company, relationship to competitive market value compensation, and the economic environment of the executive’s business segment.
þ
Annual Compensation Risk Analysis - We regularly analyze the risks related to our compensation programs and conduct a broad risk assessment annually.
þ
Stock Ownership & Retention Requirements - Executive officers are required to own, within five years of appointment or promotion, company common stock equal to a multiple of their base salary. The executive officers must retain at least 50% of the net after tax shares of stock vested through the long-term incentive plan for the earlier of two years or until termination of employment.
þ
Clawback Policy - If the company’s audited financial statements are restated, the compensation committee may, or shall if required, demand repayment of some or all incentives paid to company executive officers within the last three years.
What We Don’t Do
ý
Stock Options - The company does not use stock options as a form of incentive compensation.
ý
Perquisites - Executives do not receive perquisites which materially differ from those available to employees in general.
ý
Tax Gross-ups - Executive officers do not receive tax gross-ups on any compensation.
ý
Hedge or Pledge Stock - Executives and directors are not allowed to hedge or pledge company securities.
ý
No Time Based Awards - All long-term incentives are performance-based and vest only upon the achievement of specific performance measures.

28 MDU Resources Group, Inc. Proxy Statement

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2016 Compensation Framework
Objectives of our Compensation Program
We have a written executive compensation policy for our Section 16executive officers, including all our named executive officers. Our policy’s stated objectives are to:
recruit, motivate, reward, and retain high performing executive talent required to create superior long-term total stockholder return in comparison to our peer groupgroup;
reward executives for short-term performance, as well as thefor growth in enterprise value over the long-termlong-term;
provide a competitive compensation package relative to industry-specific and general industry comparisons and internal equity, as appropriateequity;
ensure effective utilization and development of talent by working in concert with other management processes - for example, performance appraisal, succession planning, and management developmentdevelopment; and
help ensure that compensation programs do not encourage or reward excessive or imprudent risk taking.

Compensation Decision Process for 2016
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Role of Compensation Consultants
Our executive compensation policy calls for an assessment of the competitive pay levels for base salary and incentive compensation for each Section 16 officer position to be conducted at least every two years by an independent consulting firm. For 2015 compensation,2016, the compensation committee retained Towers Watson, a nationally recognized consulting firm,made recommendations to perform thisthe board of directors regarding compensation of all executive officers, and the board of directors then approved the recommendations. The CEO’s role in the process includes the assessment of executive officer performance and to assistrecommending base salaries for the executive officers other than himself. The CEO attended all the compensation committee in establishing competitive compensation targets for our Section 16 officers.

The compensation committee asked Towers Watson to prepare separate executive compensation reviews for the Section 16 officers and for the chief executive officer. In its review for the Section 16 officers, Towers Watson was asked to:
match the Section 16 officer positions to survey data to generate 2015 market estimates for base salaries and short-term and long-term incentives
address general trends in executive compensation
compare base salaries and target short-term and long-term incentives, by position, to market estimates and recommend salary grade changes as appropriate
compare Section 16 officer pay to the chief executive officer pay
construct a recommended 2015 salary grade structure and
verify the competitiveness of short-term and long-term incentive targets associated with salary grades and recommend modifications as appropriate.

In the chief executive officer review, Towers Watson was asked to use survey data and data from the company’s performance graph peer group to:
compare and develop competitive estimates for base salary and target short-term and long-term incentives
recommend changes in base salary and incentives targets based on competitive data and
address general trends in chief executive officer compensation.

Towers Watson also prepared pay equity competitive information, comparing the chief executive officer’s pay as a multiple of the company’s top executives to the performance graph peer group.

The compensation surveys used in the competitive assessment are listed on the following table:
Survey*
Number of
Companies
Participating
(#)

Median
Number of
Employees
(#)

Number of Publicly
Traded
Companies
(#)

Median
Revenue
(000s)
($)

Towers Watson 2013 CDB General Industry Executive Database442
18,400
376
6,376,000
Towers Watson 2013 CSR Report on Top Management Compensation480
4,550
178
1,396,700
Towers Watson 2013 CDB Energy Services Executive Database104
2,721
76
2,713,000
Mercer 2013 Total Compensation Survey for the Energy Sector352
Not Reported
273
957,000
*The information in the table is based solely upon information provided by the publishers of the surveys and is not deemed filed or a part of this Compensation Discussion and Analysis for certification purposes. For a list of companies that participated in the compensation surveys and databases, see Exhibit B.

In billions of dollars, our revenues from continuing operations for 2013, 2014, and 2015 were approximately $3.9, $4.1, and $4.2, respectively.


MDU Resources Group, Inc. Proxy Statement 21

Proxy Statement

Role of Management
Mr. Goodin played an important role in recommending 2015 compensation to the committee for the other named executive officers. Mr. Goodin assessed the performance of the named executive officers and considered the relative value of the named executive officers’ positions and their salary grade classifications. He then reviewed the competitive assessment prepared by Towers Watson to formulate 2015 compensation recommendations, other than for himself. He also recommended compensation for Mr. O’Bryan in connection with his promotion in 2015 and a sales bonus in connection with the sale of Fidelity, an additional incentive for Mr. Barney, and a severance payment for Mr. Bietz in connection with his retirement. Mr. Goodin attended compensation committee meetings; however, hemeetings but was not present during discussions regardingof his compensation.
Performance Assessment Program
Our performance assessment program rates performance of our executive officers, except for our chief executive officer, in the following areas, which help determine actual salaries within the range of salaries associated with the executive’s salary grade:
•leadership•mentoring
•leading with integrity•financial responsibility
•achievement focus•safety
•risk management
An executive’s overall performance in our performance assessment program is rated on a scale of one to five, with five as the highest rating denoting distinguished performance. An overall performance above 3.75 is considered commendable performance.
Peer Group
In addition to the survey data provided by the compensation consultant, the compensation committee reviews compensation data from our performance graph peer group in assessing the level of base salary and the target level of annual incentive awards and long-term incentive awards for some of our named executive officers. The companies comprising the 2014 performance graph peer group, which was used in assessing compensation for 2015, were:
•ALLETE, Inc.•EQT Corporation•SM Energy Company
•Alliant Energy Corporation•Granite Construction Incorporated•Sterling Construction Company, Inc.
•Atmos Energy Corporation•Martin Marietta Materials, Inc.•Swift Energy Company
•Avista Corporation•National Fuel Gas Company•Texas Industries
•Bill Barrett Corporation•Northwest Natural Gas Company•Vectren Corporation
•Black Hills Corporation•Pike Corporation•Vulcan Materials Company
•Comstock Resources, Inc.•Quanta Services, Inc.•Whiting Petroleum Corporation
•EMCOR Group, Inc.•Questar Corporation
The compensation committee also used the performance graph peer group companies in connection with performance share awards under the Long-Term Performance-Based Incentive Plan, where the company’s relative stockholder return is compared to the performance graph peer group. Please see the discussion under 2015 Long-Term Incentives, Performance Share Awards, for the names of the companies comprising the performance graph peer group when the committee granted performance share awards in February 2015.
Salary Grades for 2015
The compensation committee determines the named executive officers’established and approved base salaries and target annual and long-term incentives by reference to salary grades. Each salary grade has a minimum, midpoint, and maximum annual salary level with the midpoint targeted at approximately the 50th percentile of the competitive assessment data for positions in the salary grade. The compensation committee may adjust the salary grades away from the 50th percentile in order to balance the external market data with internal equity. The salary grades also have target annual and long-term incentive levels, which are expressed as a percentage of the individual’s base salary. We generally place named executive officers into a salary grade based on historical classification of their positions; however, the compensation committee reviews each classification and may place a position into a different salary grade if it determines that the targeted competitive compensationperformance measures for the position changes significantly or the executive’s responsibilities and/or performance warrants a different salary grade. Individual executives may be paid below, equal to, or above the salary grade midpoint.

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The salary grades give the compensation committee flexibility to assign different salaries to individual executives within a salary grade to reflect one or more of the following:
executive’s performance on financial goals and on non-financial goals, including the results of the performance assessment program
executive’s experience, tenure, and future potential
position’s relative value compared to other positions within the company
relationship of the salary to the competitive salary market value
internal equity with other executives and
economic environment of the corporation or executive’s business segment.
The committee increased the 2015 base salary grade midpoints for salary grades A through K by a total of 2.2% to more closely align with the 50th percentile of the competitive assessment data. The midpoint of salary grade L, which is Mr. Goodin’s salary grade, was increased by 2.6% from $780,000 to $800,000; and the midpoint of salary grade J, which is the salary grade for Messrs. Schwartz, Barney, Thiede, O’Bryan, and Bietz, was increased by 2.6% from $390,000 to $400,000.
The committee moved Mr. Schwartz from salary grade I to salary grade J to more closely align with the Towers Watson survey data and the performance graph peer group companies, which showed median base salaries for chief financial officers of $500,000 and $405,000, respectively. Mr. O’Bryan’s salary grade was changed from I to J, the salary grade for the business segment heads, in connection with his promotion to president and chief executive officer of Fidelity Exploration & Production Company, effective March 1, 2015.
For salary grade L, the committee decreased the target annual incentive from 150% to 100% of base salary, based on the competitive data which showed that 150% was at the high end of the range. The committee also increased the target long-term incentive for salary grade L from 150% to 225% of base salary, which is more in line with market norms. The committee kept the 2015 target annual and long-term incentive compensation guidelines for salary grade J at 65%2016. They also certified the achievement of performance measures associated with annual and 90%, respectively,long-term incentive compensation.
At least every two years, the compensation committee hires an independent consulting firm to assess competitive pay levels including base salaries and incentive compensation associated with executive officer positions. Typically the consulting firm conducts its analysis in even numbered years. In odd numbered years, the assessment is performed by the company’s human resources department using a variety of base salary.industry specific sources. In 2015, the human resources department prepared the analysis for 2016 compensation.
Our namedComponents of Compensation
The components of our executive officers’ 2015 salary grade classificationsofficer’s compensation are selected to drive financial and their respective midpoints are:operational results as well as align the executive officer’s interests with those of our stockholders. The components of our executive compensation include:
ComponentPaymentsPurpose 2015 Salary Grade Base Salary Midpoint ($000s)
PositionHow Determined GradeNameHow it Links to Performance
PresidentBase SalaryAssuredProvides executives with sufficient, regularly paid income to recruit and CEOLDavid L. Goodinretain executives with knowledge, skills, and abilities necessary to successfully execute their job responsibilities. 800
Vice PresidentCompared to peer company and CFOJDoran N. Schwartzindustry compensation information. 400
Base salary is a means to attract and retain talented executives capable of driving success and performance.
PresidentAnnual Cash Incentive
Performance Based

At Risk
Provides an opportunity to earn annual incentive compensation to be competitive from a total renumeration standpoint and CEO, Knife River CorporationJDavid C. Barneyto ensure focus on annual financial and operating results. 400
President and CEO, MDU Construction Services Group, Inc.JJeffrey S. ThiedeAnnual incentives calculated as a percentage of base salary based on the achievement of performance measures established by the compensation committee. 400
Annual incentive performance measures are tied to the achievement of financial and operational goals aimed to drive the success of the company.
PresidentPerformance Shares
Performance Based

At Risk
Provides an opportunity to earn long-term compensation to be competitive from a total renumeration standpoint and CEO, Fidelity Exploration & Production CompanyJPatrick L. O’Bryanto ensure focus on stockholder return. 400
PresidentPerformance share award opportunities are calculated as a percentage of base salary and CEO, WBI Holdings, Inc.JSteven L. Bietzpay out is based on the company’s total stockholder return over a three-year period in comparison to the company’s peer group. 400
Fosters ownership in company stock and aligns the executive’s interests with those of the stockholder in increasing stockholder value.
Timing of Compensation Decisions for 2015
The compensation committee, in conjunction with the board of directors, determined all compensation for each named executive officer for 2015. The compensation committee made recommendations to the board of directors regarding compensation of all Section 16 officers, and the board of directors then approved the recommendations.
The compensation committee reviewed the competitive assessment at its August 2014 and November 2014 meetings. At the November 2014 meeting, it established individual base salaries, target annual incentive award levels, and target long-term incentive award levels for 2015 for most of the named executive officers. Mr. Goodin’s target incentive target award levels were reviewed and established at the February 2015 meeting. In conjunction with his promotion, Mr. O’Bryan’s 2015 compensation was determined at the February and May 2015 meetings. At the February 2015 meeting, the compensation committee and the board of directors determined 2015 annual and long-term incentive awards, along with payments based on performance for the 2014 annual incentive awards. No payments were made for the 2012-2014 performance share awards. The February meeting occurred after the release of earnings for the prior year. Mr. Bietz’s additional payment in connection with his retirement was determined at the June 2015 compensation committee and board meetings.

MDU Resources Group, Inc. Proxy Statement 23

Proxy Statement

Stockholder Advisory Vote (“Say on Pay”)
Our stockholders had an advisory vote on our named executive officers’ 2014 compensation at the 2015 Annual Meeting of Stockholders. Approximately 88% of the shares present in person or represented by proxy and entitled to vote on the matter approved the named executive officers’ compensation. The 88% approval is lower than the results of our say on pay vote at the 2014 Annual Meeting, which was 97%. While the compensation committee did not change compensation for 2015 as a result of the vote, the committee considered the results of the vote at their May 2015, August 2015, and November 2015 meetings in connection with setting compensation for 2016, requesting the vice president-human resources to prepare an analysis of the industry competitiveness of the company’s annual and long-term incentive awards, including the degree of stretch in the goals, the mix of annual and long-term incentive compensation, and the use of total stockholder return as a single measure for the long-term incentive awards.
Allocation of Total Target Compensation for 20152016
IncentiveTotal target compensation which consists of base salary plus target annual cashand long-term incentive awards and three-year performance share awards under our Long-Term Performance-Based Incentive Plan, comprises a significant portioncompensation. Performance-based compensation accounts for over 76% of our CEO’s and on average approximately 61% of our other named executive officers’ total target compensation because:
our named executive officers are in positions to drive, and therefore bear high levels of responsibility for, our corporate performance
incentive compensation is more variable than base salary and dependent upon our performance
variable compensation helps ensure focus on the goals that are aligned with our overall strategy and
the interests of our named executive officers will be aligned with those of our stockholders by making a significant portion of their target compensation contingent upon results that are beneficial to stockholders.
The following table shows the allocation of total target compensation for 2015 among the individual components of base salary, annual incentive (including the additional annual incentives granted to Mr. Barney and Mr. O’Bryan), and long-term incentive:
Name
% of Total
Target
Compensation
Allocated to
Base Salary
(%)
 
% of Total Target Compensation
Allocated to Incentives
 Annual (%) Long-Term (%) 
Annual +
Long-Term (%)
David L. Goodin23.5 23.5 53.0 76.5
Doran N. Schwartz39.2 25.5 35.3 60.8
David C. Barney34.7 41.0 24.3 65.3
Jeffrey S. Thiede40.0 32.0 28.0 60.0
Patrick L. O’Bryan20.0 80.0 — 80.0
Steven L. Bietz39.2 25.5 35.3 60.8
In order to reward long-term growth, the compensation committee generally allocates a higher percentage of total target compensation to the long-term incentive than to the annual incentive for our higher level executives, since they are in a better position to influence our long-term performance. The long-term incentive, if earned, is paid in company common stock. These awards, combined with our stock retention requirements and stock ownership policy, discussed later, promote ownership of our stock by the named executive officers. The compensation committee believes that, as stockholders, the named executive officers will be motivated to deliver financial results that build wealth for all stockholders over the long-term.
Messrs. Barney’s and Thiede’s long-term incentive percentage continued to be lower than their annual incentive percentage, as they transition from all annual incentive to a combination of annual and long-term incentive in connection with their promotions in 2013. Mr. Barney also received an additional annual incentive award in February 2015, which further increased the annual incentive portion of his total target compensation. Mr. O’Bryan did not receive a long-term incentive award in 2015, reflecting the company’s potential marketing of Fidelity, with any sale likely to occur before the conclusion of the three-year performance period.
PEER Analysis: Comparison of Pay for Performance Ratios
Each year we compare our named executive officers’ pay for performance ratios to the pay for performance ratios of the named executive officers in the performance graph peer group. This analysis compares the relationship between our compensation levels and our average annual total stockholder return to the peer group over a specified period. In 2015 we looked at two separate five-year periods: 2009-2013 and 2010-2014 and two separate three-year periods: 2011-2013 and 2012-2014. All data used in the analysis, including the valuation of

24 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

long-term incentives and calculation of stockholder return, were compiled by Equilar, Inc., an independent service provider, based on each company’s annual filings for its data collection.
This analysis consisted of dividing what we paid our named executive officers for the period by our average annual total stockholder return for the same period to yield our pay ratio. For this comparison, we used the 2015 performance graph peer group companies. Our pay ratio was then compared to the pay ratio of the companies in the performance graph peer group, which was calculated by dividing total direct compensation for all the peer group executives by the sum of each company’s average annual total stockholder return for the same period. The average annual stockholder return is the geometric mean for the period.
For the five-year period 2009 through 2013, we paid our named executives approximately $4.9 million per point of shareholder return, while the peer group companies paid their named executives approximately $4.1 million per point of shareholder return. For the five-year period 2010 through 2014, we paid our named executives approximately $15.8 million per point of shareholder return, reflecting a large decrease in our total stockholder return, while the peer group companies paid their named executives approximately $5.6 million per point of shareholder return. The three-year periods resulted in a comparison of $1.7 million for the company versus $2.4 million for the peer group for 2011-2013 and a comparison of $4.8 million for the company versus $1.9 million for the peer group for 2012-2014. The compensation committee believes that the analysis continues to serve a useful purpose in its annual review of compensation for the named executives.
2015 Compensation for Our Named Executive Officers
Base Salaries, Total Annual Compensation, and Total Direct Compensation
David L. Goodin
For 2015, the compensation committee gave Mr. Goodin, our president and chief executive officer, a 10.2% increase, raising his salary from $685,000 to $755,000, or 94% of the midpoint of salary grade L. The committee noted that the $755,000 was above the median salary of $726,000 for the chief executive officers from the performance graph peer companies and below the market average salary of $910,000 for the chief executive officers from the salary survey data, both as noted in the competitive assessment. The committee believed the 10.2% increase was appropriate in recognition of favorable return on invested capital results compared to the performance graph peers for the twelve months ended June 30, 2014 and results on succession planning and leadership development. The committee also believed it was appropriate to move Mr. Goodin’s 2015 base salary closer to the competitive reference point. The committee established Mr. Goodin’s 2015 target total annual cash compensation at $1,510,000, a reduction from his 2014 target of $1,712,500. Mr. Goodin’s 2015 target total annual cash was above the median total cash compensation of $1,385,000 paid to chief executive officers from the performance graph peer companies and below the median total cash compensation of $1,865,000 paid to chief executive officers from the salary survey data, both as noted in the competitive assessment. From a total direct compensation perspective, the committee established a target of $3,208,750, which was aligned with the competitive reference point of $3,291,000 for the performance graph peer group and below the competitive reference point of $4,665,000 for the salary survey companies.
Doran N. Schwartz
As discussed above, the committee changed the salary grade of Mr. Schwartz, our vice president and chief financial officer, from I to J and increased his base salary 5.6%, from $360,000 to $380,000, or 95% of the midpoint of salary grade J. Combined with his target annual and long-term incentive, this would result in target total annual compensation of 70.1% and target total direct compensation of 60.4% of the competitive market data at the 50th percentile. The compensation committee’s rationale for the increase was in recognition of his:
leadership positions in the sale of company common stock under the at-the-market equity program, debt financings for the company and financings for the Dakota Prairie Refinery and
relatively low salary compared to the chief financial officers of performance graph peer companies.
David C. Barney
For 2015, the compensation committee gave Mr. Barney, president and chief executive officer of Knife River Corporation, a 3.9% increase in base salary, raising his salary from $380,000 to $395,000 or 99% of the midpoint of salary grade J. Combined with his target annual and long-term incentives, along with an additional annual incentive (cash flow), this would result in target total annual compensation of 121.3% and target total direct compensation of 93.2% of the competitive salary survey data at the 50th percentile. The compensation committee’s rationale for the increase was in recognition of:

MDU Resources Group, Inc. Proxy Statement 25

Proxy Statement

his results in managing Knife River Corporation, moving it closer to meeting or exceeding its weighted average cost of capital
his credible leadership and
his respect by Knife River Corporation employees.
Jeffrey S. Thiede
For 2015, the compensation committee gave Mr. Thiede, president and chief executive officer of MDU Construction Services Group, Inc., a 6.3% increase in base salary, raising his annual salary from $400,000 to $425,000, or 106% of the midpoint of salary grade J. Combined with his target annual and long-term incentives, this would result in target total annual compensation of 115.9% and target total direct compensation of 95.7% of the competitive salary survey data at the 50th percentile. The committee believed the 6.3% salary increase was appropriate in recognition of his strong leadership and continued delivery of outstanding results and the accomplishments in unifying MDU Construction Services Group, Inc. under his leadership.
Patrick L. O’Bryan
In establishing Mr. O’Bryan’s compensation, the committee reviewed the pay arrangements of chief operating officers of publicly traded companies with revenues of $250 million to $1.5 billion in four SIC codes in the oil and gas business, as compiled by Equilar. These companies are listed in Exhibit B. The committee changed Mr. O’Bryan’s salary grade from I to J and increased his salary from $400,000 to $450,000, effective March 1, 2015, in connection with his promotion to president and chief executive officer of Fidelity Exploration & Production Company. His salary was set at 112.5% of the midpoint of salary grade J. Combined with his target annual incentive and his two additional annual incentives (retention and sales bonus incentives), this would result in target total compensation of $2.24 million or 140.1% of total target direct compensation of $1.6 million as shown in the Equilar data. The committee believed that Mr. O’Bryan’s involvement in the Fidelity sales process would likely bring significant incremental value and recognized the importance of keeping Mr. O’Bryan incentivized to remain with the company and lead a successful sales effort.
Steven L. Bietz
For 2015, the compensation committee gave Mr. Bietz, president and chief executive officer of WBI Holdings, Inc. until his retirement in July 2015, a 3.9% increase, raising his salary from $380,000 to $395,000, or 99% of the midpoint of salary grade J. Combined with his target annual and long-term incentives, this would result in target total annual compensation of 100.3% and target total direct compensation of 91.6% of the competitive salary survey data at the 50th percentile. The compensation committee’s rationale for the increase was in recognition of the earnings growth at WBI Energy, Inc. under Mr. Bietz’s leadership.
Annual Incentives
2015 Annual Incentives
The committee granted regular annual incentives to the executive officers in February 2015, as it has in prior years, and also during 2015 granted or approved additional annual incentives for Mr. Barney and Mr. O’Bryan. In the following sections, we discuss the regular annual incentives, with the additional incentives discussed separately under “Additional Annual Incentives.”
What the Performance Measures Are and Why We Chose Them
The compensation committee develops and reviews financial and other corporate performance measures to help ensure that compensation to the executives reflects the success of their respective business segment and/or the corporation, as well as the value provided to our stockholders.
The compensation committee believes earnings, earnings per share, and return on invested capital are very good measurements in assessing a business segment’s performance and the company’s performance from a financial perspective, because:
earnings and earnings per share are generally accepted accounting principle measurements and are key drivers of stockholder return over the long-term and
return on invested capital measures how efficiently and effectively management deploys capital, where sustained returns on invested capital in excess of a business segment’s cost of capital create value for our stockholders.
As in prior years, the compensation committee selected allocated earnings per share and return on invested capital for the pipeline and energy services segment, the electric and natural gas distribution segments, and the construction materials and contracting segment to ensure those chief executive officers’ annual incentive payments are closely aligned to criteria promoting long-term growth in stockholder return. We establish these targets in connection with our annual financial planning process, where we assess the economic environment, competitive outlook, industry trends, and company specific conditions to set projections of results. The compensation committee evaluates the projected results and uses this evaluation to establish the incentive plan performance targets based upon recommendations of the chief

26 MDU Resources Group, Inc. Proxy Statement

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executive officer. Allocated earnings per share for a business segment is calculated by dividing that business segment’s earnings by the business segment’s portion of the total company weighted average shares outstanding. Return on invested capital for a business segment is calculated by dividing the business segment’s earnings, without regard to after tax interest expense and preferred stock dividends, by the business segment’s average capitalization for the calendar year. If the compensation committee utilizes a return on invested capital target for a business segment, it considers the business segment’s weighted average cost of capital. The weighted average cost of capital is a composite cost of equity and debt used to finance a company’s assets. It is calculated by averaging the cost of debt plus the cost of equity by the proportion each represents in the business segment’s capital structure.
The compensation committee continued to use earnings as the performance measure for the construction services segment, with selected earnings levels chosen to balance conservative financial planning, as well as earnings volatility for that segment. For the exploration and production segment, pretax operating income, excluding depletion, depreciation and amortization, and margin enhancement, defined as operations and maintenance expense, which the committee viewed as directly related to driving value at this segment, were used as performance measures.
For the named executive officers working at MDU Resources Group, Inc., who were Messrs. Goodin and Schwartz, the compensation committee continued to base annual incentives on the achievement of performance goals at the business segments: (i) the construction materials and contracting segment, (ii) the construction services segment, (iii) the pipeline and energy services segment, (iv) the exploration and production segment, and (v) the electric and natural gas distribution segments. The compensation committee’s rationale for this approach was to provide greater alignment between the MDU Resources Group, Inc. executives and business segment performance.
As established by the compensation committee in February 2015, the annual performance measures and goal weightings for the business segment leaders were:
PositionBusiness Segment
Business Segment
Goal Weighting
 
Company
Goal Weighting
Allocated EPS
(%)

ROIC
(%)

Earnings
(%)

 
Pretax Operating Income (%)1

Margin Enhancement
(%)2

 
EPS
(%)3

E&P Segment Pretax Operating Income (%)1

President and CEOConstruction Materials and Contracting37.5
37.5
—
 —
—
 20.0
5.0
President and CEOConstruction Services—
—
75.0
4 
—
—
 20.0
5.0
President and CEOExploration and Production—
—
—
 56.25
18.75
 20.0
5.0
President and CEOPipeline and Energy Services37.5
37.5
—
 —
—
 20.0
5.0
President and CEOElectric and Natural Gas Distribution37.5
37.5
—
 —
—
 20.0
5.0
1 
Pretax operating income excludes (i) depreciation, depletion, and amortization, with non-cash ceiling test charges treated as depreciation and (ii) the accounting effects of the segment being moved from continuing operations to discontinued operations.
2 
Margin enhancement is defined as operations and maintenance expense cost below a target of $102 million, excluding accounting changes due to the segment being moved from continuing operations to discontinued operations.
3 
Earnings per share are diluted and adjusted and exclude (i) Fidelity and (ii) the effect on earnings at the MDU Resources Group, Inc. level of intersegment eliminations.
4 
Earnings are defined as GAAP earnings.
Our Named Executive Officers’ Target Annual Incentive Compensation
The compensation committee established the named executive officers’ 2015 target annual incentive as a percentage of each officer’s base salary as follows:
Mr. Goodin’s 2015 target annual incentive was reduced from 150% to 100% of base salary, or $755,000, based on the competitive assessment, which showed median annual incentives of $955,000 for the salary survey companies and $659,000 for the performance graph peer group. The committee’s rationale was, in conjunction with an increase in target long-term incentive compensation, to bring Mr. Goodin’s total compensation in close alignment with the performance graph peer group, but below the survey data.
Mr. Schwartz’s 2015 target annual incentive was increased to 65% of base salary, which was the percent associated with his new salary grade J.

MDU Resources Group, Inc. Proxy Statement 27

Proxy Statement

Mr. Barney’s 2015 target annual incentive was set at 80% of base salary, a decrease from 85% of base salary in 2014. The decrease was part of the committee’s plan to reduce his annual target incentive to 65% of base salary, the target annual incentive associated with salary grade J, by 2017, while increasing his long-term incentive target to the guideline for his salary grade over the same time period.
Mr. Thiede’s 2015 target incentive was also decreased from 85% to 80% of base salary, continuing the transition of his incentive compensation from what it had been prior to his promotion in 2013 to having a target equal to those of other salary grade J participants by 2017.
Mr. O’Bryan’s 2015 target incentive was increased from 75% to 200% of base salary in order to compensate him for not receiving a long-term incentive award in 2015 and
Mr. Bietz’s 2015 target incentive was unchanged at 65% of base salary, which was consistent with the percent associated with his salary grade.
Company Goals Applicable to All Executives
As in prior years, the compensation committee established an MDU Resources Group, Inc. goal applicable to all executives that comprised 25% of the annual incentive award. However, for 2015, in light of the potential marketing of Fidelity, the compensation committee divided this goal into two components:
MDU Resources Group, Inc. Component
◦comprised of all business segments except Fidelity
◦constituted 20% of the annual incentive, reduced from 25% in prior years
◦based on diluted adjusted earnings per share, excluding Fidelity
◦excludes the effect on earnings at the company level of intersegment eliminations, the effect on other business segments and on MDU Resources Group, Inc. of Fidelity becoming a discontinued operation for accounting purposes for 2015, and the income statement impact of a loss on a board-approved asset sale or disposition other than Fidelity
◦payout could range from no payment if results were below 85% level of $0.95 to a 200% payout if results were $1.29 or higher
◦target set at $1.12, as adjusted, below 2014 target of $1.48 and below adjusted 2014 results of $1.50 to reflect continued solid execution in all business segments, significant investments in our electric and natural gas distribution, and the exclusion of Fidelity.
Earnings per share for 2015 were, on a GAAP basis, $(3.20) and, on an adjusted basis excluding Fidelity and as described above, were $0.85, which was below the threshold amount for payment. The payment on this component was 0.0% of target.
Fidelity Exploration & Production Company Component
◦comprised of Fidelity
◦constituted 5% of the annual incentive
◦based on pretax operating income excluding depreciation, depletion, and amortization
◦target set at $106 million for the year to reflect anticipated production, planned capital expenditures, and operations and maintenance expense
◦payout could range from no payment if results were below 80% of target or $84.8 million to a 200% payout if results were $127.2 million or higher for the year
◦a sale of Fidelity during 2015 would trigger a prorated payment on earned incentives measured in cumulative monthly results versus cumulative monthly goals.
Because over 75% of the assets of Fidelity were sold prior to December 31, 2015, the target of $106 million was adjusted, based on the cumulative monthly results, to $99.7 million. The 2015 results on the Fidelity goal were $96.5 million, equating to a 86.6% of target payment on this component.

28 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Construction Materials and Contracting Segment Earnings Per Share and Return on Invested Capital Goals
For Mr. Barney, 75% of the 2015 award opportunity was based on allocated earnings per share and return on invested capital, equally weighted. The committee set the 2015 allocated earnings per share target at $0.94, which was higher than the 2014 target of $0.83 and actual results of $0.79, to reflect anticipated higher margins, partially offset by reduced backlog and flat material sales. The committee set the 2015 return on invested capital target at 7.2%, higher than the 2014 target of 6.3% and the 2014 actual results of 6.2%, due to higher anticipated earnings. Payout could range from no payment if the results were below the 70% of target or $0.66 earnings per share and 5.0% return on invested capital to a 200% payout if:
2015 allocated earnings per share for the segment were at or above the 115% of target or $1.08 and
2015 return on invested capital was at or above 115% of target or 8.3%.
The construction materials and contracting segment’s 2015 earnings per share and return on invested capital were 150% and 144.4% of their respective 2015 targets, equating to 200% and 200%, respectively, of the target amount attributable to those components, which coupled with MDU Resources Group, Inc.’s component being 0.0% of target and the Fidelity component being 86.6% of target, resulted in a 2015 annual incentive payment for Mr. Barney of $487,588 or 154.3% of target.
Construction Services Segment Earnings Goal
For Mr. Thiede, the committee retained its approach from 2014, where 75% of his annual incentive award opportunity was based on the construction services segment’s 2015 GAAP earnings. Target earnings levels were selected to balance the difficulty in forecasting, as well as earnings volatility for that segment. Specifically, target earnings of $26 million would be needed to meet the weighted average cost of capital, and earnings of $54.5 million, the result necessary to trigger payment of the maximum award, would be needed to drive a return on invested capital of approximately 15%. The committee felt these increased earnings levels from the 2014 target were appropriate given that they were above the business segment’s 2015 projected weighted average cost of capital. Payout could range from no payment if the results were below the 85% of target earnings (increased from 70% in 2014 to be consistent with other business segment heads) or $22.1 million to 200% (reduced from 250% in 2014 to be consistent with other business segment heads) of the target amount if the results were at or above $54.5 million.
The construction services segment’s 2015 earnings were $23.8 million, equating to a 57.7% payment on the segment’s earnings component, which coupled with MDU Resources Group, Inc.’s earnings per share being 0.0% of target and the Fidelity component being 86.6% of target, resulted in a 2015 annual incentive payment for Mr. Thiede of $161,857 or 47.6% of target.
Exploration and Production Segment Pretax Operating Income and Margin Enhancement Goals
For 2015, the compensation committee changed the goal for the exploration and production segment from a single earnings as adjusted goal to two goals: pretax operating income and margin enhancement.

For Mr. O’Bryan, 56.25% of his 2015 award opportunity was based on the exploration and production segment’s pretax operating income, excluding (i) depreciation, depletion, and amortization, with non-cash ceiling test charges treated as depreciation and (ii) accounting effects of the segment being moved from continuing operations to discontinued operations. The committee set the exploration and production segment’s 2015 pretax operating income target at $106 million for the year reflecting anticipated production, operations and maintenance expense, and planned capital expenditures. Payout could range from no payment if 2015 pretax operating income was below the 80% level of target or $84.8 million to a 200% payout if the segment’s 2015 pretax operating income was at or above the 120% level or $127.2 million for the year.

Because over 75% of the assets of Fidelity were sold prior to December 31, 2015, the target of $106 million was adjusted, based on the cumulative monthly results, to $99.7 million. The segment’s 2015 pretax operating income was $96.5 million equating to a 86.6% payment on this component.
Margin enhancement was used for 18.75% of Mr. O’Bryan’s award opportunity, with margin enhancement defined as operations and maintenance expense below a target of $102 million for the year. Payout could range from no payment if 2015 margin enhancement was higher than the 100% level of $102 million to a 200% payout if 2015 margin enhancement was equal to or less than the 92.5% level of target or $94.4 million for the year.
Because over 75% of the assets of Fidelity were sold prior to December 31, 2015, the target of $102 million was adjusted, based on the cumulative monthly results, to $95.4 million. The segment’s 2015 operations and maintenance expense was $91.1 million equating to a 160.1% payment on this component.

 
MDU Resources Group, Inc. Proxy Statement 29

Proxy Statement
 

Mr. O’Bryan was requiredcompensation. Incentive compensation, which consists of annual cash incentive and three-year performance share award opportunities, comprises the largest portion of our named executive officers’ total target compensation because:
our named executive officers are in positions to remain employeddrive, and therefore bear high levels of responsibility for our corporate performance;
incentive compensation is dependent upon our performance;
incentive compensation helps ensure focus on performance measures that are aligned with our overall strategy; and
the interests of the named executive officers are aligned with those of stockholders by Fidelity untilmaking a significant portion of their target compensation contingent upon results beneficial to stockholders.
To foster and reward long-term growth, the timecompensation committee generally allocates a higher percentage of saletotal target compensation to the target long-term incentive than to the target annual incentive for our higher level executives because they are in ordera better position to receive payment. Since mostinfluence our long-term performance. The long-term incentive awards, if earned by achieving performance measures, are paid in company common stock. These awards, combined with our stock retention requirements and our stock ownership policy, promote ownership of Fidelity was sold priorour stock by the executive officers. The compensation committee believes, as stockholders, the executive officers will be motivated to December 31,deliver financial results that build value for all stockholders over the long term.
Peer Group
The compensation committee evaluates the company’s compensation plan and its performance relative to a group of peer companies in determining compensation and the vesting of long-term incentive compensation. The companies included in our peer group are evaluated every year and are selected to be representative of the industries in which we operate. During 2015, as we decided to exit the oil and Mr. O’Bryan remained employed through that date, when coupled with MDU Resourcesgas exploration and production business, we re-evaluated our peer group and removed the remaining exploration and production companies, which were Bill Barrett Corporation and SM Energy Company from the peer group. To more closely reflect our regulated energy delivery and construction materials and services businesses, we added IDACORP, Inc., NorthWestern Corporation, U.S. Concrete, Inc., IES Holdings, Inc., and MYR Group, Inc.’s earnings per share being 0.0% of target to our peer group. MarkWest Energy Partners L.P., which was added as a peer company in 2015, merged with another company and was removed from our 2015 peer group. Likewise, Questar Corporation merged with another company in 2016 and was removed from our 2016 peer group. The following chart depicts the Fidelity component being 86.6% of target, this resultedcompanies included in a 2015 annual incentive paymentour 2016 peer group.
2016 Peer Companies
êê
Regulated Energy DeliveryConstruction Materials and Services
êêêê
UtilityPipelineConstruction Materials & ContractingConstruction Services
ALLETE, Inc.Atmos Energy CorporationGranite Construction IncorporatedEMCOR Group, Inc.
Alliant Energy CorporationNational Fuel Gas CompanyMartin Marietta Materials, Inc.Quanta Services, Inc.
Avista CorporationSterling Construction Company, Inc.IES Holdings, Inc.
Black Hills CorporationVulcan Materials CompanyMYR Group, Inc.
Northwest Natural Gas CompanyU.S. Concrete, Inc.
Vectren Corporation
IDACORP, Inc.
NorthWestern Corporation
2016 Compensation for Mr. O’Bryan of $747,000 or 83.0% of target.Our Named Executive Officers
Pipeline2016 Salary and Energy Services Segment Earnings Per Share, Return on Invested Capital, and Safety GoalsIncentive Targets
For 2016, Mr. Bietz, 75%Goodin considered the 2015 financial results as well as the economic challenges facing the company and recommended a base salary freeze for the named executive officers during 2016, with the exception of his 2015 award opportunity wasMr. Barney where he recommended a 3% increase based on the pipeline and energy service segment’s allocated earnings per share and target return on invested capital, equally weighted. For 2015, the committee set the pipeline and energy service segment’s allocated earnings per share target at $1.64 and return on invested capital target at 5.6%. The 2015 earnings per share target was higher than the 2014 target of $0.98 and 2014 actual of $1.36, reflecting expected higher earnings due to the operationoutstanding performance of the Dakota Prairie Refineryconstruction materials & contracting segment in achieving record earnings and exceeding its risk adjusted capital cost in 2015. The compensation committee approved the full impactsalary recommendations of the 2014 rate case, partially offset by anticipated lower prices atCEO. The compensation committee reviewed and determined to freeze Mr. Goodin’s base salary for 2016 consistent with the Pronghorn facility and higher operations and maintenance expense. For the same reasons, the 2015 return on invested capital targetfreeze of 5.6% was set higher than the 2014 target of 3.9% and the 2014 actual results of 5.1%. Payout could range from no payment if the results were below the 85% of target or $1.39 earnings per share and 4.8% return on invested capital to a 200% payout if:other named executive officers.
the 2015 allocated earnings per share for the segment were at or above the 115% of target or $1.89 and
the 2015 return on invested capital was at or above the 115% of target or 6.4%.
Mr. Bietz also had five individual goals relating to safety results with each goal that was not met reducing the annual incentive award by 1%. The five individual goals were:
each established local safety committee will conduct eight meetings per year
each established local safety committee must conduct four site assessments per year
90% (increased from 85%) or more of motor vehicle accidents and personal injuries must be reported by the end of the next business day
achieve the targeted vehicle accident incident rate of 1.75 (decreased from 1.85) or less and
achieve the targeted personal injury incident rate of 1.85 (decreased from 2.1) or less.
Results at the pipeline and energy services segment (before adjustment for the five safety goals) were negative on 2015 allocated earnings per share and return on invested capital, equating to 0.0% and 0.0%, respectively, of the target amount attributable to those components. These results, coupled with MDU Resources Group, Inc.’s earnings per share being 0.0% of target, the Fidelity component being 86.6% of target, and four of the five safety goals being met, resulted in 4.3% of the total annual incentive award target being met. Because of his retirement in July 2015, Mr. Bietz did not receive payment of his annual incentive.
Electric and Natural Gas Distribution Segments Earnings Per Share and Return on Invested Capital Goals
For the electric and natural gas distribution segments, 75% of the 2015 award opportunity was based on allocated earnings per share and target return on invested capital, equally weighted. The committee set the 2015 target for allocated earnings per share at $1.26, which was below the 2014 target of $1.30 but higher than the 2014 actual results of $1.16, to reflect expected higher earnings, partially offset by expected higher operations and maintenance expense and higher depreciation costs. The committee set the 2015 return on invested capital target at 5.3%, which was lower than the 2014 target level of 5.7% and equal to the 2014 actual results, to reflect higher invested capital in 2015 with incremental earnings associated with these investments not being fully realized until after 2015. The 2015 return on invested capital target was above the segment’s projected 2015 weighted average cost of capital. Payout could range from no payment if the allocated earnings per share and return on invested capital results were below the 85% of target or $1.07 earnings per share and 4.5% return on invested capital, respectively, to a 200% payout if:
the 2015 allocated earnings per share for the segment were at or above the 115% of target or $1.45 and
the 2015 return on invested capital was at or above the 115% of target or 6.1%.
The electric and natural gas distribution segments’ 2015 earnings per share and return on invested capital were less than 85% of their respective 2015 targets, equating to 0.0% and 0.0%, respectively, of the target amount attributable to those components. These results, coupled with MDU Resources Group, Inc.’s earnings per share being 0.0% of target and the Fidelity component being 86.6% of target, led to overall results for these segments of 4.3% of the 2015 target annual incentive award.

 
30 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

The following four tables show the 2014is information related to each named executive officer’s base salary, target annual incentive, target long-term incentive, and 2015 incentive plan performance targets and results by business segment:
 2014 Incentive Plan Performance Targets
NameEPS
Business
Segment
($)		 ROIC Business Segment
(%)
Earnings
Business Segment
(millions)
 ($)

EPS
MDU
Resources
($)
Construction Materials and Contracting  0.83
6.3
—
1.48
Construction Services  —
—
20.9
1.48
Exploration and Production  —
—
95.5
1.48
Pipeline and Energy Services  0.98
3.9
—
1.48
Electric and Natural Gas Distribution  1.30
5.7
—
1.48
total direct compensation:
 2014 Incentive Plan Results
 
       EPS
Business
Segment
 
     ROIC
Business
Segment
 
 Earnings
 Business
 Segment
         EPS
MDU
Resources
Name
($)
(% of Target)
 (%)
(% of Target)
 (millions)
($)
(% of Target)
 
($)		(% of Target)
Construction Materials and Contracting0.79
88.0
 6.2
96.0
 —
—
 1.50109
Construction Services—
—
 —
—
 54.4
250.0
 1.50109
Exploration and Production—
—
 —
—
 82.0
29.3
 1.50109
Pipeline and Energy Services1.36
200.0
 5.1
200.0
 —
—
 1.50109
Electric and Natural Gas Distribution1.16
46.2
 5.3
64.9
 —
—
 1.50109
David L. Goodin
2016
($)
% Increase
 from Prior Year
Compensation Component
as a % of Base Salary
 
Base Salary755,0000%n/a
 
Target Annual Incentive Opportunity755,0000%100% 
Target Long-Term Incentive Opportunity1,698,7500%225% 
Target Total Potential Direct Compensation3,208,7500%425% 
 2015 Incentive Plan Performance Targets
Name
EPS
Business
Segment
($)
 
ROIC
Business Segment
(%)

Earnings Business Segment (millions)
($)

Margin
Enhancement
Business
Segment(millions)
($)

EPS
 MDU
Resources
($)

Pretax
Operating Income
E&P
Segment
 (millions)
($)

Construction Materials and Contracting0.94 7.2
—
—
1.12
106
Construction Services— —
26.0
—
1.12
106
Exploration and Production— —
—
102.0
1.12
106
Pipeline and Energy Services1.64 5.6
—
—
1.12
106
Electric and Natural Gas Distribution1.26 5.3
—
—
1.12
106
Doran N. Schwartz2016
($)
% Increase
 from Prior Year
Compensation Component
as a % of Base Salary

 
Base Salary380,0000%n/a
 
Target Annual Incentive Opportunity247,0000%65% 
Target Long-Term Incentive Opportunity342,0000%90% 
Target Total Potential Direct Compensation969,0000%255% 
  2015 Incentive Plan Results
          EPS
Business
Segment		       ROIC
Business
Segment		 
Earnings
Business
Segment
 
          Margin
Enhancement
       Business
        Segment¹
          EPS
MDU
Resources		 
     Pretax
Operating
   Income
       E&P
  Segment²
Name
($)
(% of Target)
 (%)
(% of Target)
 (millions)
($)
(% of Target)
 (millions)
($)
(% of Target)
 
($)
(% of Target)
 (millions)
($)
(% of Target)
Construction Materials and Contracting1.41
200.0
 10.4
200.0
 —
—
 —
—
 0.85
0
 96.5
86.6
Construction Services—
—
 —
—
 23.8
57.7
 —
—
 0.85
0
 96.5
86.6
Exploration and Production—
—
 —
—
 —
—
 91.1
160.1
 0.85
0
 96.5
86.6
Pipeline and Energy Services(0.5)0
 (0.3)0
 —
—
 —
—
 0.85
0
 96.5
86.6
Electric and Natural Gas Distribution0.97
0
 4.4
0
 —
—
 —
—
 0.85
0
 96.5
86.6
¹Because over 75% of the assets of Fidelity were sold prior to December 31, 2015, the target of $102 million was adjusted, based on the cumulative monthly results, to $95.4 million. The percent of target annual incentive compensation earned in the table reflects this adjustment.
²Because over 75% of the assets of Fidelity were sold prior to December 31, 2015, the target of $106 million was adjusted, based on the cumulative monthly results, to $99.7 million. The percent of target annual incentive compensation earned in the table reflects this adjustment.
David C. Barney2016
($)
% Increase
 from Prior Year

Compensation Component
as a % of Base Salary
 
Base Salary406,8003 %n/a
 
Target Annual Incentive Opportunity305,100(3)%75% 
Target Long-Term Incentive Opportunity325,44018 %80% 
Target Total Potential Direct Compensation1,037,3405 %255% 
Mr. Barney continues to transition from an all annual incentive target to a combination of annual and long-term incentive targets in connection with his promotion in 2013. Mr. Barney’s annual incentive target as a percent of base salary decreased from 80% in 2015 to 75% for 2016, while his long-term incentive target as a percent of base salary increased from 70% in 2015 to 80% for 2016. 
Jeffrey S. Thiede2016
($)
% Increase
 from Prior Year

Compensation Component
as a % of Base Salary
 
Base Salary425,0000 %n/a
 
Target Annual Incentive Opportunity318,750(6)%75% 
Target Long-Term Incentive Opportunity340,00014 %80% 
Target Total Potential Direct Compensation1,083,7502 %255% 
Mr. Thiede continues to transition from an all annual incentive target to a combination of annual and long-term incentive targets in connection with his promotion in 2013. Mr. Thiede’s annual incentive target as a percent of base salary decreased from 80% in 2015 to 75% for 2016, while his long-term incentive target as a percent of base salary increased from 70% in 2015 to 80% for 2016. 
Martin A. Fritz2016
($)
% Increase
 from Prior Year

Compensation Component
as a % of Base Salary
 
Base Salary400,0000%n/a
 
Target Annual Incentive Opportunity260,0000%65% 
Target Long-Term Incentive Opportunity360,0000%90% 
Target Total Potential Direct Compensation1,020,0000%255% 
Annual Incentives
Annual incentive opportunities are determined for business segment executives by the achievement of specific performance measures selected by the compensation committee. For corporate executives, annual incentive opportunities are determined by the average of the business segments’ achievement of their performance measures weighted by its average invested capital. Through this, our business segment executives are incentivized to primarily focus on the success and performance of their business segment while corporate executives focus on the success and performance of all lines of business.

 
MDU Resources Group, Inc. Proxy Statement 31

Proxy Statement
 

Messrs. Goodin’sThe compensation committee developed and Schwartz’s 2015 annual incentivesreviewed financial and other corporate performance measures to ensure compensation to the executives reflect the success of their respective business segments and the company, as well as the value provided to our stockholders. Each business segment’s performance measures are weighted with a corporate earnings per share performance measure representing 20% of the target award opportunity and the business segment specific performance measures representing 80% of the award opportunity. The following incentive plan performance measures for 2016 were earnedestablished by the compensation committee for the business segment presidents (exclusive of the MDU Resources corporate executive officers) at 49.9%the February 2016 meeting:
MeasureApplies toPurposeMeasurementTargetWeightWhy Measure Selected
MDU Resources Diluted Adjusted Earnings per Share (EPS)All the business segmentsEPS is a generally accepted accounting principle (GAAP) measurement and is a key driver of stockholder return. This goal applies to the presidents of all business segments to engage them in the earnings of the company as a whole.
GAAP EPS less discontinued operations (as reported as discontinued on or prior to December 31, 2015) and adjusted to exclude:
- effects of intersegment eliminations,
- noncash gains/losses resulting from hedge accounting,
- losses on asset sales/dispositions approved by the board, and
- assessed withdrawal liabilities relating to multiemployer pension plans.
$1.0220%Reflects anticipated EPS performance within the range of EPS guidance for 2016.
Return on Invested Capital (ROIC)Electric & Natural Gas Distribution SegmentProvides a measure of how effective the business segment uses its capital and generates a return from its capital. These segments are primarily regulated entities requiring significant capital investment. ROIC is important in providing a return to our stockholders.
Business segment earnings, without regard to after tax interest expense and preferred stock dividends divided by the business segment’s average capitalization for the calendar year.



4.4%40%Reflects anticipated returns considering additional capital investments made in 2015.
Pipeline & Midstream Segment5.9%28%Reflects anticipated returns considering additional capital investments made in 2015.
Business Segment EarningsElectric & Natural Gas Distribution SegmentProvides a measure of financial performance.
GAAP business segment earnings adjusted to exclude:
- effects of intersegment eliminations,
- noncash gains/losses resulting from hedge accounting,
- losses on asset sales/dispositions approved by the board, and
- assessed withdrawal liabilities relating to multiemployer pension plans.

$68.0 million40%Reflects anticipated earnings associated with the business segment.
Pipeline & Midstream Segment$18.5 million28%Reflects anticipated earnings associated with the business segment.
Construction Materials & Contracting Segment$62.8 million80%Reflects earnings necessary to meet or exceed the business segment’s risk adjusted capital cost.
Construction Services Segment$26.4 million80%Reflects earnings necessary to meet or exceed the business segment’s risk adjusted capital cost.
Optimum Refining ProductionRefining SegmentPromotes the achievement of plant reliability based on optimum production.Barrels of diesel produced in 2016.5,865 bbls24%Reflects plant production based on the plant design with consideration for planned maintenance outages.
Actual performance results are compared to the target performance measure to arrive at a percent of target based onachieved. The percent of target achieved is then translated into a payout percentage of the following:
  Column A
Percentage of
Annual Incentive
Target Achieved
Column B
Percentage of
Average Invested
Capital
Column A x Column B
 
 
 
 Construction Materials and Contracting154.3%19.6%30.2%
 Construction Services47.6%6.9%3.3%
 Exploration and Production83.0%16.8%13.9%
 Pipeline and Energy Services4.3%13.1%0.6%
 Electric and Natural Gas Distribution4.3%43.6%1.9%
 Total (Payout Percentage)  49.9%
Additional Annual Incentives
Mr. Barneytarget award opportunity. Generally, to receive a payout requires achievement of 85% of the target performance measure which results in a payout of 25% of the award opportunity. Maximum payouts vary by business segment. For the regulated energy delivery companies, maximum payout of 200% of the award opportunity is received an additional annual incentive opportunityif the percent of $150,000 tied totarget achieved is 115% or greater. For the construction materials and contracting segment’s operating cash flow. The committee granted thisservices companies, maximum payout is 250% of the award to provide an extra focus on cash flow management, where Mr. Barney’s success would help fund growth opportunities at other business segments. Payment would be made onlyopportunity if the goal was met or exceeded, without any scalingpercent of paymenttarget achieved is 167.2% of target for the construction materials & contracting segment and 210% of target for the construction services segment. Results achieved between the threshold, target, and maximum levels are calculated using linear interpolation. The following tables show the 2016 performance measure results above or belowand the target. The committee set operating cash flow of $109.2 million as the goal, excluding the effect of acquisitions or dispositions approved by the board of directors. The 2015 results were $154.1 million resulting in a payment of $150,000 to Mr. Barney.
Mr. O’Bryan had two additional annual incentive opportunities. He received a cash retentionrelative award opportunity in November 2014 before his promotion, where he would receive $150,000 if he remained an active full-time employee of Fidelity through December 31, 2015 and maintained a performance rating of “meets expectations” or higher during 2015. He also was granted in May 2015 a sales bonus incentive of 0.075% of the sale price of Fidelity, plus an award equal to six months’ salary of $225,000. The committee believed that Mr. O’Bryan’s involvement in the Fidelity sales process would likely bring significant incremental value and recognized the importance of keeping Mr. O’Bryan incentivized to remain with the company and lead a successful sales effort. Mr. O’Bryan received the cash retention award of $150,000 and the sales bonus incentive of $237,425, plus the six months’ salary.payout:
The table below lists each named executive officer’s 2015 base salary, target annual incentive percentage, and the annual (regular and additional) incentives earned.

Name
2015
Base
Salary
(000s)
($)
2015
Target
Annual
Incentive
(%)

 2015
Annual
Incentive
Earned
2015
Additional
Annual
Incentives
Earned
(000s)
($)

 
 
 (% of Target)
(000s)
($)
David L. Goodin755.0100.0
 49.9
376.7
  
Doran N. Schwartz380.065.0
 49.9
123.3
  
David C. Barney395.080.0
 154.3
487.6
150.0
 
Jeffrey S. Thiede425.080.0
 47.6
161.9
  
Patrick L. O’Bryan450.0200.0
 83.0
747.0
612.4
1 
Steven L. Bietz2
395.065.0
     
1 
Consists of $150,000 cash retention award, $237,425 sales bonus, and $225,000 salary. 
2 
Because of his retirement in July 2015, Mr. Bietz did not receive payment of his annual incentive. 
Deferral of Annual Incentive Compensation
We provide executives the opportunity to defer receipt of earned annual incentives. If an executive chooses to defer his or her annual incentive, we will credit the deferral with interest at a rate determined by the compensation committee. For 2015, the committee chose to use the average of (i) the number that results from adding the daily Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” rated companies as of the last day of each month for the 12-month period ending October 31 and dividing by 12, and (ii) the number that results from adding the daily Moody’s U.S. Long-Term Corporate Bond Yield Average for “Baa” rated companies as of the last day of each month for the 12-month period ending October 31 and dividing by 12. This resulted in an interest rate of 4.66%. The compensation committee’s reasons for using this approach recognized:

 
32 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

Business SegmentPerformance MeasureResult
Percent of
 Performance
 Measure
 Achieved

Percent
of Award
Opportunity
Payout

Weight
Weighted
Award
 Opportunity
 Payout %

All Business SegmentsEarnings per Share$1.08105.9%139.2%20%27.8%
Electric & Natural Gas Distribution SegmentEarnings$69.3 million101.9%112.7%40%45.1%
ROIC4.5%102.3%115.1%40%46.0%
Pipeline & Midstream and Refining SegmentsEarnings$24.9 million134.6%200.0%28%56.0%
ROIC7.5%127.1%200.0%28%56.0%
Optimum Refining Production 1
2,796 bbls82.9%84.0%24%20.2%
Construction Materials & Contracting SegmentEarnings$96.0 million152.9%208.3%80%166.6%
Construction Services SegmentEarnings$33.9 million128.6%157.2%80%125.8%
1
The compensation committee determined the economic conditions that led to the sale of Dakota Prairie Refining, LLC in June 2016, as well as the sale itself, were unforeseen changes and significant factors beyond the control of management that substantially affected the ability of the refining segment to achieve the specified annual production performance measure at Dakota Prairie Refining, LLC. Due to these unforeseen circumstances, the compensation committee determined the annual production performance measure at the refining segment was achieved for Mr. Fritz at the same percentage as the annual production rate at Dakota Prairie Refining, LLC was being achieved during 2016 prior to the sale.
For the MDU Resources Group, Inc. corporate named executive officers, namely Messrs. Goodin and Schwartz, the compensation committee continued to base the payment of the annual incentive deferrals are a low-cost sourceon the achievement of capitalperformance measures at the business segments weighted by each business segment’s weighted average invested capital. The compensation committee’s rationale for this approach was to provide alignment between the MDU Resources Group, Inc. executives and business segment performance. The compensation committee determined achievement of the optimum refining production performance measure for Mr. Schwartz’s award opportunity payout in the same manner as it determined the achievement of the performance measure for Mr. Fritz. The compensation committee did not modify Mr. Goodin’s award opportunity payout for the companyeffects of the optimum refining production performance measure. As a result, Messrs. Goodin’s and Schwartz’s 2016 annual incentives were earned at 139.8% and 142.3% of the target award opportunity, respectively, based on the following weighted average of annual business segment incentives achieved:
 Business SegmentColumn A
Business Segment Award Opportunity Payout
Column B
Percentage of
 Average Invested
 Capital

 Column A x Column B
 
 
 Mr. Goodin
Mr. Schwartz
 Mr. Goodin
Mr. Schwartz
 
Construction Materials & Contracting Segment 1
187.8%187.8%22.2% 41.7%41.7%
 Construction Services Segment153.6%153.6%8.8% 13.5%13.5%
 Pipeline & Midstream and Refining Segments139.8%160.0%12.4% 17.3%19.8%
 Electric & Natural Gas Distribution Segment118.9%118.9%56.6% 67.3%67.3%
 Total Payout Percentage 139.8%142.3%
1
For purposes of calculating the incentive award opportunities for Messrs. Goodin and Schwartz, the award opportunity payout associated with the earnings performance measure for the construction materials & contracting segment was limited to 200%, which resulted in a weighted construction materials & contracting segment award opportunity payout percentage of 187.8% versus the 194.4% for the business segment.
Based on the achievement of the performance targets, the named executive officers received the following annual incentive deferrals are unsecured obligations and, therefore, carry a higher risk to the executives.compensation:
2015
2016 Annual Incentives Earned
Name
Target Annual
Incentive
($)
 Annual Incentive Earned
 
Payout
(%)
Amount
($)
David L. Goodin755,000 139.81,055,490
Doran N. Schwartz247,000 142.3351,481
David C. Barney305,100 194.4593,114
Jeffrey S. Thiede318,750 153.6489,600
Martin A. Fritz260,000 160.0416,000

MDU Resources Group, Inc. Proxy Statement 33

Proxy Statement

Long-Term Incentives
Performance Share Awards
We use the Long-Term Performance-Based Incentive Plan, which has been approved by our stockholders, for long-term incentive compensation. As in the past, the compensation withcommittee used performance shares as the primary form of long-term incentive compensation. We have not granted stock options since 2001,compensation for 2016 and in 2011 we amendedestablished the plan to no longer permit the grant of stock options or stock appreciation rights; no stock options, stock appreciation rights, or restricted shares are outstanding.
The compensation committee has used relativecompany’s total stockholder return in comparison to the performance graphtotal stockholder return for the peer group companies over a three-year period as the performance measure for vesting of long-term incentive compensation for a number of years, including the 2015 performance share awards. Before it made the 2015 performance share awards, the committee revised the peer group as set forth below. The new peer group excluded some of the exploration and production companies and added other companies in the utility and pipeline business segments, as well as companies in the construction services and construction materials business segments to better reflect the company’s mix of business segments and reduction of capital committed to Fidelity. The committee also added provisions to the award agreement for removing the two remaining exploration and production companies from the peer group if Fidelity was sold during the performance period, with the company’s performance measured against the two peers groups on a prorated basis.compensation.
The revised performance graph peer group consisted of the following companies when the committee granted performance shares in February 2015.
•ALLETE, Inc.•IDACORP, Inc.•Quanta Services, Inc.
•Alliant Energy Corporation•Integrated Electrical Services, Inc.•Questar Corporation
•Atmos Energy Corporation•Markwest Energy Partners, L.P.•SM Energy Company
•Avista Corporation•Martin Marietta Materials, Inc.•Sterling Construction Company, Inc.
•Bill Barrett Corporation•MYR Group Inc.•U.S. Concrete, Inc.
•Black Hills Corporation•National Fuel Gas Company•Vectren Corporation
•EMCOR Group, Inc.•Northwest Natural Gas Company•Vulcan Materials Company
•Granite Construction Incorporated•NorthWestern Corporation
The performance measure is our total stockholder return over a three-year measurement period as compared to the total stockholder returns of the companies in our performance graph peer group over the same three-year period. The compensation committee selected the relative stockholder return performance measure because it believes executive pay under a long-term, capital accumulation incentive program such as this should align with our long-term performance in stockholder return as compared to other public companies in our industries. Payments are made in company stock; dividend equivalents are paid in cash. No dividend equivalents are paid on unvested performance shares.
Total stockholder return is the percentage change in the value of an investment in the common stock of a company from the closing price on the last trading day in the calendar year preceding the beginning of the performance period through the last trading day in the final year of the performance period. It is assumed that dividends are reinvested in additional shares of common stock at the frequency paid.paid during the performance period. The compensation committee selected total stockholder return as the performance measure because long-term executive incentive compensation should align with our long-term performance in stockholder return as compared to other public companies in our industries.
As with the target annual incentive, we determined the target long-term incentive for a given position in part from the competitive assessment and in part by the compensation committee’s judgment on the impact each position hasDepending on our total stockholder return. At the February 2015 meeting, the committee reviewed the target levels of annual and long-term incentive compensation for the chief executive officer included in a special report prepared by the vice president-human resources. Based on the competitive data, the committee increased the chief executive officer’s target long-term incentive for 2015 from 150% to 225% of base salary.
Mr. Schwartz’s target long-term incentive was increased from 75% to 90% of base salary, consistent with his move to salary grade J.
Messrs. Barney’s and Thiede’s target long-term incentive compensation increased from 60% to 70% of base salary for 2015, which was part of the committee’s plan to increase their long-term incentive target to 90% of base salary by 2017, while at the same time decreasing their annual incentive target to the guideline associated with salary grade J.

MDU Resources Group, Inc. Proxy Statement 33

Proxy Statement

Mr. O’Bryan did not receive a long-term incentive for 2015 because of the potential marketing of Fidelity, with any sale likely to occur before the conclusion of the three-year performance period.
Mr. Bietz’s 2015 target long-term incentive was 90% of base salary and was unchanged from 2014, consistent with his salary grade.
On February 12, 2015, the board of directors, upon recommendation of the compensation committee, made performance share grants to the named executive officers, except for Mr. O’Bryan. The compensation committee determined the target number of performance shares granted to each named executive officer by multiplying the named executive officer’s 2015 base salary by his target long-term incentive and then dividing this product by the average of the closing prices of our stock from January 1, 2015 through January 22, 2015, as shown in the following table:
Name
2015
Base
Salary to
Determine
Target
($)

2015
Target
Long-Term
Incentive
at Time of
Grant
(%)

2015
Target
Long-Term
Incentive
at Time of
Grant
($)

Average
Closing Price
of Our Stock
From January 1
Through
January 22
($)

Resulting
Number of
Performance
Shares
Granted on
February 12
(#)

David L. Goodin755,000
225
1,698,750
23.54
72,164
Doran N. Schwartz380,000
90
342,000
23.54
14,528
David C. Barney395,000
70
276,500
23.54
11,745
Jeffrey S. Thiede425,000
70
297,500
23.54
12,638
Patrick L. O’Bryan—
—
—
—
—
Steven L. Bietz395,000
90
355,500
23.54
15,101
Assuming our three-year (2015 through 2017) total stockholder return is positive, from 0% to 200% of the target grant will be paid out in February 2018 depending on our total stockholder return compared to the total three-year stockholder returns of our peer group companies, inperformance share award opportunities for our named executive officers may or may not vest. Vesting of performance graph peer group. The payout percentageshares can range from 0% to 200% of the target award. Vesting of the performance share opportunities will be a function of our rank over the performance period against our performance graph peer group companies as delineated in the following table:
Long-Term Incentive Payout Percentages
The Company’s
Peer TSR Percentile Rank
PayoutVesting Percentage of
February 12, 2015 GrantAward Target
75th or higher200%
50th100%
25th20%
Less than 25th0%
PayoutsVesting for percentile ranks falling between the intervals will be interpolated. We also will pay dividend equivalents in cash on the number of shares actually earned for the performance period. The dividend equivalents will be paid in 2018 at the same time as the performance share awards are paid.
As had been established for awards granted beginning in 2011, ifIf our total stockholder return is negative, the shares and dividend equivalents otherwise earned based on the payout percentages above, if any, will be reduced in accordance with the following table:
Total Stockholder ReturnReduction in AwardVesting
0% through -5%50%
-5.01% through -10%60%
-10.01% through -15%70%
-15.01% through -20%80%
-20.01% through -25%90%
-25.01% or below100%
The named executive officers must retain 50% of the net after-tax shares thatDividend equivalents are earned pursuant to this long-term incentive award until the earlier of (i) the end of the two-year period commencingpaid in cash based on the date anynumber of shares earnedactually vested for the performance period. No dividend equivalents are paid on unvested performance shares.
Actual vesting of performance share awards under the award are issued and (ii)plan have varied over the executive’s termination of employment.last five years as shown below:
Performance PeriodVesting Percentage
2014-201668%
2013-201531%
2012-20140%
2011-2013193%
2010-20120%

 
34 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

No Payment in February 2015 for 2012 Grants under the Long-Term Performance-Based Incentive PlanResults of 2014-2016 Performance Period
We grantedawarded performance sharesshare opportunities to our named executive officers under the Long-Term Performance-Based Incentive Plan on February 16, 2012,14, 2014 for the 2012 through 20142014-2016 performance period. Our total stockholder return for the 2012 through 2014three-year performance period was 18.7%,1.15% which corresponded to a percentile ranking of 40% with our 2014 peer group companies, and resulted in no68% vesting of performance shares orand dividend equivalents being paidequivalents. The named executive officers received the following for the 2014-2016 performance period:
Name
Target
Performance
Shares
(#)

Performance
Shares
Vested
(#)

Dividend
Equivalents
($)

Value of Vested Shares and Dividend
 Equivalents at 2/16/17
($)1

David L. Goodin33,677
22,900
50,495
654,368
Doran N. Schwartz8,849
6,017
13,267
171,936
David C. Barney7,472
5,081
11,204
145,190
Jeffrey S. Thiede7,866
5,349
11,795
152,848
Martin A. Fritz
None 2

—
—
—
1
Closing share price at February 16, 2017 was $26.37.
2
Mr. Fritz joined the company in 2015, therefore was not eligible for award for the 2014-2016 performance period.
2016-2018 Performance Period
On February 11, 2016, for the 2016-2018 performance period, the compensation committee determined the target number of performance shares for each named executive officer by multiplying the named executive officer’s base salary by his target long-term incentive percentage and then dividing by the average of the closing prices of our stock from January 1 through January 22, 2016, which was $17.20 per share. Based on this price, the board of directors, upon recommendation of the compensation committee, awarded the following performance share opportunities to the named executive officers. Messrs. Barney, Thiede, and O’Bryan did not participate inofficers:
Name
Base Salary to Determine Target
($)
Target Long-Term
Incentive %
(%)
Long-Term
Incentive Target
($)
Resulting Number of
Performance Share
Opportunities
(#)

David L. Goodin755,0002251,698,75098,764
Doran N. Schwartz380,00090342,00019,883
David C. Barney406,80080325,44018,920
Jeffrey S. Thiede425,00080340,00019,767
Martin A. Fritz400,00090360,00020,930
The named executive officers must retain 50% of the program in 2012.
Mr. Bietz Retirement Payment
In connection with Mr. Bietz’s retirement effective atnet after-tax performance shares vested pursuant to the closelong-term incentive award until the earlier of business on July 17, 2015,two years from the committee anddate the board approvedvested shares are issued or the entry into a waiver and voluntary release agreement.executive’s termination of employment. The agreement provided for a lump-sum payment of $750,000, less applicable tax withholding amounts, for the release and in recognition of his 34 years of service and in transforming WBI Holdings, Inc. from a dry gas storage and transmission company to a multi-faceted energy services business, including crude refining.
Clawback
In November 2005, we implemented a guideline for repayment of incentives due to accounting restatements, commonly referred to as a clawback policy, whereby the compensation committee may seek repaymentalso require the executive officer to retain performance shares net of annual and long-term incentives paid to executivestaxes if accounting restatements occur within three years after the payment of incentivesexecutive has not met the stock ownership requirements under the annual and long-term plans. Under our clawbackcompany’s stock ownership policy the compensation committee may require executives to forfeit awards and may rescind vesting, or the acceleration of vesting, of an award.for executives.
Post-Termination Compensation and
Other Benefits
Pension Plans
Effective in 2006, we no longer offer defined benefit pension plans to new non-bargaining unit employees. The definedcompany provides post employment benefit plans available to employees hired before 2006 were amended to cease benefit accruals as of December 31, 2009. The frozen benefit provided through our qualified defined benefit pension plans is determined by years of service and base salary. Effective 2010, for those employees who were participantsprograms in defined benefit pension plans and for executives and other non-bargaining unit employees hired after 2006, the company offers increased company contributions to our 401(k) plan. For non-bargaining unit employees hired after 2006, the retirement contribution is 5% of plan eligible compensation. For participants hired prior to 2006, retirement contributions are based on the participant’s age as of December 31, 2009. The retirement contribution is 11.5% for Messrs. Goodin and Bietz, 10.5% for Mr. Schwartz, and 5% for Messrs. Barney, Thiede, and O’Bryan, which amounts may be reduced in accordance with the provisions of the 401(k) plan.
Supplemental Income Security Plan
Benefits Offered
We offer certain key managers and executives, including all of our named executive officers except Mr. Thiede and Mr. O’Bryan, benefits under our nonqualified retirement plan, which we refer to as the Supplemental Income Security Plan or SISP. The SISP has a ten-year vesting schedule and was amended to add an additional vesting requirement for benefit level increases occurring on or after January 1, 2010. Effective February 11, 2016, the SISP was amended to freeze the plan to new participants and to current participants at their current benefit levels. The SISP provides participants with additional retirement income and death benefits.
may be participants. We believe the SISPit is effectiveimportant to provide post-employment benefits which approximate retirement benefits paid by other employers to executives in retaining the talent necessary to drive long-term stockholder value. In addition, we believe the ten-year vesting provision of the SISP, augmented by an additional three years of vesting for benefit level increases occurring on or after January 1, 2010, helps promote retention of key executive officers.
Benefit Levels
similar positions. The chief executive officer recommends benefit level increases to the compensation committee for participants except himself. The chiefperiodically reviews the benefits provided to maintain a market based benefits package. Our named executive officer considers, among other things,officers participated in the participant’s salary in relation to the salary ranges that correspond with the SISP benefit levels, the participant’s performance, the performance of the applicable business segment or the company, and the cost associated with the benefit level increase.following plans during 2016 which are described below:
PlansDavid L. GoodinDoran N. SchwartzDavid C. BarneyJeffrey S. ThiedeMartin A. Fritz
401(k)YesYesYesYesYes
PensionYesYesNoNoNo
Supplemental Income Security PlanYesYesYesNoNo
Non-Qualified Defined Contribution PlanNoNoNoYesYes

 
MDU Resources Group, Inc. Proxy Statement 35

Proxy Statement
 

401(k) Retirement Plan
The named executive officers did not receive anyas well as all employees working a minimum of 1,000 hours per year are eligible to participate in the 401(k) Plan and defer annual income up to the IRS limit. The company provides a match up to 3% of the employee’s elected deferral rate. Contributions and the company match are invested in various funds including company common stock.

In 2010, the company began offering increased company contributions to our 401(k) plan in lieu of pension plan contributions. For non-bargaining unit employees hired after 2006, the added retirement contribution is 5% of plan eligible compensation. For participants hired prior to 2006, the added retirement contributions are based on the participant’s age as of December 31, 2009. The retirement contribution is 11.5% for Mr. Goodin, 10.5% for Mr. Schwartz, and 5% for Messrs. Barney, Thiede, and Fritz. These amounts may be reduced in accordance with the provisions of the 401(k) plan to meet IRS limits.
Pension Plans
Effective in 2006, the defined benefit pension plans were closed to new non-bargaining unit employees and as of December 31, 2009, the defined benefit plans were frozen. For further details regarding the company’s pension plans, please refer to the section entitled “Pension Benefits for 2016.”
Supplemental Income Security Plan
We offer certain key managers and executives benefits under a nonqualified retirement plan, referred to as the Supplemental Income Security Plan (SISP). The SISP provides participants with additional retirement income and death benefits. Effective February 11, 2016, the SISP was amended so no new participants will be added to the plan and current benefit level increaseslevels are frozen for existing participants. For further details regarding the company’s SISP, please refer to the section entitled “Pension Benefits for 2016.” Named executive officers participating in 2015. the SISP are Messrs. Goodin, Schwartz, and Barney.
The following table reflects our named executive officers’ SISP levelsbenefits as of December 31, 2015:2016:
 December 31, 2015
 Annual SISP Benefits
Name 
Survivor
($)

 
Retirement
($)

 SISP Benefits
 
Annual Death Benefit
($)

Annual Retirement Benefit
($)

David L. Goodin 552,960
 276,480
 552,960276,480
Doran N. Schwartz 262,464
 131,232
 262,464131,232
David C. Barney 262,464
 131,232
 262,464131,232
Jeffrey S. Thiede N/A
 N/A
 —
—
Patrick L. O’Bryan N/A
 N/A
Steven L. Bietz 386,640
 193,320
Martin A. Fritz —
—
Nonqualified Defined Contribution Plan
The company adopted the Nonqualified Defined Contribution Plan or NQDCP,(NQDCP) effective January 1, 2012, to provide retirement and deferred compensation for a select group of management or highly compensated employees who do not participate in the SISP.employees. The compensation committee, upon recommendation from the chief executive officer,CEO, determines which employees will participate in the NQDCP and the amount of contributions for any year. The compensation committee determines the amount of employer contributions under the plan, which are credited to plan accounts and not funded. After satisfying a four-year vesting requirement for each contribution, the contributions and investment earningsdistributions will be distributedmade to the executive in a lump sum upon separation from serviceaccordance with the company or in annual installmentsterms of the plan commencing upon the later of (i) separation from service and (ii)or age 65. The four-year vesting requirement is waived ifFor further details regarding the participant dies while employed bycompany’s NQDCP, please refer to the company.section entitled “Nonqualified Deferred Compensation for 2016.”
TheFor 2016, the compensation committee upon recommendationselected and approved contributions of the chief executive officer, selected$100,000 each to Mr. Thiede as a participant for 2015 with an employerand Mr. Fritz. The contribution of $150,000 or 35.29%awarded to Mr. Thiede represents 23.5% of his base salary as of January 1, 2015. The contribution was awarded to recognizeat December 31, 2015 and recognized his strong leadership at the construction services segment, which delivered a twelve-monthfavorable return on invested capital measured at June 30, 2014, of 19.2% as comparedin comparison to athe median return on invested capital of 9.5% at the relevantsimilar companies in our performance graphthe peer group. We believe thatThe contribution awarded to Mr. Thiede’s participationFritz represents 25% of his base salary at December 31, 2015 and recognized his performance in this planrevitalizing the pipeline & midstream segment, pursuing new opportunities, and steps taken to control costs and align the four-year vesting requirement enhance retention since he cannot participateoperations of the refinery in any of our defined benefit retirement plans.2015.
Compensation Governance
Impact of Tax and Accounting Treatment
The compensation committee may consider the impact of tax and/or accounting treatment in determining compensation.

Section 162(m) of the Internal Revenue Code places a limitlimits the deductibility of certain compensation to $1 million on the amount of compensation paid to certain officers that we may deduct as a business expense in any tax year unless among other things, the compensation qualifies as performance-based compensation as that term is used inunder Section 162(m). Generally,

36 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

long-term incentive compensation and annual incentive awards for our chief executive officerCEO and those executive officers whose overall compensation is likely to exceed $1 million are structured to be deductible for purposes of Section 162(m) of the Internal Revenue Code, but we may pay compensation to an executive officer that is not deductible.. All incentive compensation in excess of $1 million paid to our named executive officers in 20152016 satisfied the requirements for deductibility.
Section 409A of the Internal Revenue Code imposes additional income taxes on executive officers for certain types of deferred compensation if the deferral does not comply with Section 409A. We have amended our compensation plans and arrangements affected by Section 409A with the objective of not triggering any additional income taxes under Section 409A.
Section 4999 of the Internal Revenue Code imposes an excise tax on payments to executives and others of amounts that are considered to be related to a change of control if they exceed levels specified in Section 280G of the Internal Revenue Code. To the extent a change of control triggers liability for an excise tax, payment of the excise tax will be made by the individual. The company will not pay the excise tax. We do not consider the potential impact of Section 4999 or 280G when designing our compensation programs.deductibility.
The compensation committee also considers the accounting and cash flow implications of various forms of executive compensation. In our financial statements, we recordWe expense salaries and annual incentive compensation as expenses in the amount paid, or to be paid, to the named executive officers.earned. For our equity awards, accounting rules also require that we record an expense in our financial statements. We calculate the accounting expense of equity awards to employees in accordance with Financial Accounting Standards Board 718, which is generally accepted accounting principles for stock-based compensation.expensed over the vesting period.

36 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Stock Ownership Requirements
We instituted stock ownership guidelines on May 5, 1993, which we revised in November 2010 to provide that executives who participateExecutives participating in our Long-Term Performance-Based Incentive Plan are required within five years of appointment or promotion into an executive level to own our common stock equal to a multiple of their base salaries.salary as outlined in the stock ownership policy. Stock owned through our 401(k) plan or by a spouse is considered in ownership calculations. Unvested performance shares and other unvested equity awards are not considered in ownership calculations. The level of stock ownership compared to the ownership requirements is determined based on the closing sale price of theour stock on the last trading day of the year and base salary at December 31 of eachthe same year. Each February the compensation committee receives a report on the status of stockholdings by executives. The committee may, in its sole discretion, grant an extension of time to meet the ownership requirements or take such other action as it deems appropriate to enable the executive to achieve compliance with the policy. The table shows the named executive officers’ holdings as a multiple of their base salary as of December 31, 2015:2016:
Name
Assigned
Guideline
Multiple of
Base Salary
 
Actual
Holdings as a
Multiple of
Base Salary

Number of
Years at
Guideline
Multiple
(#)

 
David L. Goodin 4X
1.78
3.00
1 
Doran N. Schwartz 3X
2.24
5.87
2 
David C. Barney 3X
0.39
2.00
3 
Jeffrey S. Thiede 3X
0.11
2.00
3 
Patrick L. O’Bryan4
 N/A
N/A
N/A
 
Steven L. Bietz5
 —
—
—
 
1 Participant must meet ownership requirement by January 1, 2018.
2 Participant should have met ownership requirement by February 17, 2015.
3 Participant must meet ownership requirement by January 1, 2019.
 
4 Participant is not subject to ownership requirement because he did not receive a long-term incentive award.
 
5 Mr. Bietz retired effective July 17, 2015.
 
NameOwnership Policy Multiple of Base Salary within 5 YearsActual Holdings as a Multiple of Base Salary as of 12/31/2016
Ownership requirement
must be met by:
David L. Goodin4X3.26
1/1/2018
Doran N. Schwartz3X3.81
Ownership requirement met
David C. Barney3X0.61
1/1/2019
Jeffrey S. Thiede3X0.20
1/1/2019
Martin A. Fritz3X—
1/1/2020
Deferral of Annual Incentive Compensation
We provide executives the opportunity to defer receipt of earned annual incentives. If an executive chooses to defer an annual incentive, we credit the deferral with interest at a rate determined by the compensation committee. For 2016, the committee chose to use an interest rate of 4.5% based on an average of the Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” and “Baa” rated companies. The compensation committee’s reasons for using this interest rate recognized incentive deferrals are a low-cost source of capital for the company and are unsecured obligations and, therefore, carry a higher risk to the executives.
Clawback
In February 2016, we amended our Long-Term Incentive Plan and Executive Incentive Compensation Plan sections regarding the repayment of incentive compensation due to accounting restatements, commonly referred to as a clawback policy. The compensation committee may, consideror shall if required, take action to recover incentive-based compensation from specific executives in the policy andevent the executive’s stock ownership in determining compensation. The committee, however, did not do socompany is required to restate its financial statements due to material noncompliance with respect to 2015 compensation.any financial reporting requirements under the securities laws.
Policy Regarding Hedging Stock Ownership
Our executive compensation policy prohibits Section 16executive officers, which includes our named executive officers, from hedging their ownership of company common stock. Executives may not enter into transactions that allow the executive to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership. See the section entitled “Security Ownership section of the proxy statement” for our policy on margin accounts and pledging of our stock.
Compensation Committee ReportCOMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Regulation S-K,
Item 402(b), with management. Based on the review and discussions referred to in the preceding sentence, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in our proxy statementProxy Statement on Schedule 14A.
Thomas Everist, Chairman
Karen B. Fagg
William E. McCracken
Patricia L. Moss

 
MDU Resources Group, Inc. Proxy Statement 37

Proxy Statement
 

EXECUTIVE COMPENSATION TABLES
Summary Compensation Table for 20152016
Name and
Principal Position
(a)		Name and
Principal Position
(a)		 Year
(b)		Salary
($)
(c)
 Bonus
($)
(d)
 
Stock
Awards
($)
(e)1

 Option
Awards
($)
(f)
 Non-Equity
Incentive Plan
Compensation
($)
(g)
 
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)2

 All Other
Compensation
($)
(i)
 Total
($)
(j)
Name and
Principal Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)1

 
Stock
Awards
($)
(e)2

 Option
Awards
($)
(f)
 Non-Equity
Incentive Plan
Compensation
($)
(g)
 Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
 All Other
Compensation
($)
(i)
 Total
($)
(j)
                               
David L. GoodinDavid L. Goodin 2015755,000
 —
 1,386,992
 —
 376,745
 —
 39,411
3 
2,558,148
David L. Goodin2016755,000
—
 1,441,954
 —
 1,055,490
 218,301
3 
40,246
4 
3,510,991
President and CEO President and CEO 2014685,000
 —
 1,385,135
 —
 830,915
 631,901
 38,686
 3,571,637
 President and CEO2015755,000
—
 1,386,992
 —
 376,745
 —
 39,411
 2,558,148
 2013625,000
 —
 1,241,280
 —
 1,610,625
 532,991
 37,517
 4,047,413
 2014685,000
—
 1,385,135
 —
 830,915
 631,901
 38,686
 3,571,637
                        

     

Doran N. SchwartzDoran N. Schwartz 2015380,000
 —
 279,228
 —
 123,253
 —
 35,571
3 
818,052
Doran N. Schwartz2016380,000
6,175
 290,292
 —
 345,306
 77,084
3 
35,772
4 
1,134,629
Vice President Vice President 2014360,000
 —
 363,959
 —
 163,080
 273,974
 34,956
 1,195,969
 Vice President2015380,000
—
 279,228
 —
 123,253
 —
 35,571
 818,052
and CFO and CFO 2013345,000
 —
 342,579
 —
 296,355
 28,459
 34,881
 1,047,274
 and CFO2014360,000
—
 363,959
 —
 163,080
 273,974
 34,956
 1,195,969
   
David C. BarneyDavid C. Barney 2015395,000
 —
 225,739
 —
 637,588
 9,530
 22,556
3 
1,290,413
David C. Barney2016406,800
—
 276,232
 —
 593,114
 77,565
3 
22,905
4 
1,376,616
President and CEO of President and CEO of 2014—
 —
 —
 —
 —
 —
 —
 —
 President and CEO of2015395,000
—
 225,739
 —
 637,588
 9,530
 22,556
 1,290,413
Knife River Knife River 2013—
 —
 —
 —
 —
 —
 —
 —
 Knife River2014—
—
 —
 —
 —
 —
 —
 —
Corporation Corporation                 Corporation              
   
Jeffrey S. ThiedeJeffrey S. Thiede 2015425,000
 —
 242,902
 —
 161,857
 —
 172,506
3 
1,002,265
Jeffrey S. Thiede2016425,000
—
 288,598
 —
 489,600
 —
 122,708
4 
1,325,906
President and CEO of President and CEO of 2014400,000
 —
 323,529
 —
 730,150
 —
 96,481
 1,550,160
 President and CEO of2015425,000
—
 242,902
 —
 161,857
 —
 172,506
 1,002,265
MDU Construction MDU Construction 2013367,068
 —
 —
 —
 825,000
 —
 66,282
 1,258,350
 MDU Construction2014400,000
—
 323,529
 —
 730,150
 —
 96,481
 1,550,160
Services Group, Inc. Services Group, Inc.                 Services Group, Inc.              
                               
Patrick L. O’Bryan 2015441,918
 —
 —
 —
 1,359,425
 —
 21,356
3 
1,822,699
President and CEO of 2014—
 —
 —
 —
 —
 —
 —
 —
Fidelity Exploration & 2013—
 —
 —
 —
 —
 —
 —
 —
Production Company                
                
Steven L. Bietz 2015214,274
 —
 290,241

—
 —
 15,254
 787,351
3 
1,307,120
Martin A. FritzMartin A. Fritz2016400,000
52,520
 305,578
 —
 363,480
 —
 121,670
4 
1,243,248
President and CEO of President and CEO of 2014380,000
 —
 461,026
 —
 333,552
 550,417
 39,771
 1,764,766
 President and CEO of2015—
—
 —
 —
 —
 —
 —
 —
WBI Energy, Inc. WBI Energy, Inc. 2013367,700
 —
 438,167
 —
 119,503
 —
 38,591
 963,961
 WBI Energy, Inc.2014—
—
 —
 —
 —
 —
 —
 —
 
1
Amounts in this column represent the aggregate grant date fair value of performance share awards calculated in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts for 2015 were calculated using a Monte Carlo simulation, as described in footnote 2 to the Grants of Plan-Based Awards table.
 
2
Amounts shown represent the change in the actuarial present value for years ended December 31, 2013, 2014, and 2015 for the named executive officers’ accumulated benefits under the pension plan, excess SISP, and SISP, collectively referred to as the “accumulated pension change,” plus above-market earnings on deferred annual incentives, if any. The amounts shown are based on accumulated pension change and above-market earnings as of December 31, 2013, 2014, and 2015, as follows:
1
Amounts shown represent the incentive compensation determined by the compensation committee for the optimum refining production performance measure for 2016 due to the unforeseen economic conditions which lead to the sale of Dakota Prairie Refining, LLC. See “Annual Incentives” in the section entitled “Compensation Discussion and Analysis” for further information.
2
Amounts in this column represent the aggregate grant date fair value of performance share award opportunities at target calculated in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts were calculated using the Monte Carlo simulation, as described in Note 10 of our audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. For 2016, the total aggregate grant date fair value of performance share award opportunities assuming the highest level of payout would be as follows:
Name
Aggregate grant date fair value at highest payout
($)

David L. Goodin2,883,909
Doran N. Schwartz580,584
David C. Barney552,464
Jeffrey S. Thiede577,196
Martin A. Fritz611,156
3
Amounts shown for 2016 represent the change in the actuarial present value for the named executive officers’ accumulated benefits under the pension plan, SISP, and Excess SISP, collectively referred to as the “accumulated pension change,” plus above-market earnings on deferred annual incentives as of December 31, 2016.
 
Accumulated
Pension Change
 Above-Market
Earnings
Name 
12/31/2013
($)

 
12/31/2014
($)

 12/31/2015
($)
 12/31/2013
($)
 
12/31/2014
($)

 12/31/2015
($)
 
Accumulated Pension Change
($)

 
Above Market Interest
($)

David L. Goodin 532,986
 631,901
 (64,074) 5
 —
 —
 215,917
 2,384
Doran N. Schwartz 28,459
 273,974
 (31,393) —
 —
 —
 77,084
 —
David C. Barney —
 —
 9,530
 —
 —
 —
 77,565
 —
Jeffrey S. Thiede —
 —
 —
 —
 —
 —
Patrick L. O'Bryan —
 —
 —
 —
 —
 —
Steven L. Bietz (261,546) 550,417
 15,254
 —
 —
 —
 


 
38 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 


34     All Other Compensation is comprised of:        
401(k)
($)a

Life
Insurance
Premium
($)
Matching
Charitable
Contribution
($)
Nonqualified
 Defined
Contribution
Plan
($)

Severance
Payments
($)

Total
($)
NameName
401(k)
($)a

Life Insurance Premium
($)
Matching Charitable Contributions
($)

Nonqualified Defined Contribution Plan
($)

Total
($)
David L. GoodinDavid L. Goodin38,425
156
830
—
—
39,411
David L. Goodin38,425
621
1,200
—
40,246
Doran N. SchwartzDoran N. Schwartz35,000
156
415
—
—
35,571
Doran N. Schwartz35,000
472
300
—
35,772
David C. BarneyDavid C. Barney21,200
156
1,200
—
—
22,556
David C. Barney21,200
505
1,200
—
22,905
Jeffrey S. ThiedeJeffrey S. Thiede21,200
156
1,150
150,000
—
172,506
Jeffrey S. Thiede21,200
528
980
100,000
122,708
Patrick L. O’Bryan21,200
156
—
—
—
21,356
Steven L. Bietz35,000
91
2,260
—
750,000
787,351
Martin A. FritzMartin A. Fritz21,173
497
—
100,000
121,670
a
Represents company contributions to 401(k) plan, which include matching contributions and contributions made in lieu of pension plan accruals after pension plans were frozen at December 31, 2009.Represents company contributions to the 401(k) plan, which includes matching contributions and retirement contributions made after the pension plans were frozen at December 31, 2009.
Grants of Plan-Based Awards in 20152016
    Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards		 Estimated Future
Payouts Under Equity
Incentive Plan Awards		 All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
(i)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(k)
Grant
Date Fair
Value of
Stock and
Option
Awards
($)
(l)
Name
(a)
Grant
Date
(b)
 Threshold
($)
(c)
 Target
($)
(d)
 Maximum
($)
(e)
 Threshold
(#)
(f)
 Target
(#)
(g)
 Maximum
(#)
(h)
 
David L. Goodin2/12/2015
1 
188,750
 755,000
 1,510,000
 —
 —
 —
 —
—
—
—
 2/12/2015
2 
—
 —
 —
 14,433
 72,164
 144,328
 —
—
—
1,386,992
Doran N. Schwartz2/12/2015
3 
61,750
 247,000
 494,000
 —
 —
 —
 —
—
—
—
 2/12/2015
2 
—
 —
 —
 2,906
 14,528
 29,056
 —
—
—
279,228
David C. Barney2/12/2015
1 
—
 150,000
 —
 —
 —
 —
 —
—
—
—
 2/12/2015
3 
79,000
 316,000
 632,000
 —
 —
 —
 —
—
—
—
 2/12/2015
2 
—
 —
 —
 2,349
 11,745
 23,490
 —
—
—
225,739
Jeffrey S. Thiede2/12/2015
1 
85,000
 340,000
 680,000
 —
 —
 —
 —
—
—
—
 2/12/2015
2 
—
 —
 —
 2,528
 12,638
 25,276
 —
—
—
242,902
Patrick L. O'Bryan2/12/2015
1 
225,000
 900,000
 1,800,000
 —
 —
 —
 —
—
—
—
 5/14/2015
4 
—
 462,425
 —
 —
 —
 —
 —
—
—
—
Steven L. Bietz2/12/2015
3 
64,188
 256,750
 513,500
 —
 —
 —
 —
—
—
—
 2/12/2015
2 
—
 —
 —
 3,020
 15,101
 30,202
 —
—
—
290,241
  
1 
Annual incentive for 2015 granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan.
2 
Performance shares for the 2015-2017 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan. The aggregate grant date fair value of the performance share awards as shown in column (l) was calculated in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts were calculated using a Monte Carlo simulation using blended volatility term structure ranges comprised of 50 percent historical volatility and 50 percent implied volatility. Risk free interest rates were based on U.S. Treasury security rates in effect as of the grant date. The assumptions used for the performance shares awards in 2015 were:
     2015          
 Grant date fair value $19.22          
 Blended volatility range 22.87% - 24.58%          
 Risk-free interest range 0.05% - 1.07%          
 Discounted dividends per share $1.60          
  
3 
Annual incentive for 2015 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan.
4 
Sales bonus incentive award granted in May 2015, with no threshold, target or maximum levels, plus an amount equal to six months salary of $225,000. The amount shown in the table is the actual amount earned for 2015 plus the $225,000.
    Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards		 Estimated Future
Payouts Under Equity
Incentive Plan Awards		 
Grant Date Fair Value of
Stock and Option Awards
($)
(l)

Name
(a)
Grant
Date
(b)
 Threshold
($)
(c)
 Target
($)
(d)
 Maximum
($)
(e)
 Threshold
(#)
(f)
 Target
(#)
(g)
 Maximum
(#)
(h)
 
David L. Goodin2/11/2016
1 
188,750
 755,000
 1,510,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 19,753
 98,764
 197,528
 1,441,954
Doran N. Schwartz2/11/2016
3 
61,750
 247,000
 494,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 3,977
 19,883
 39,766
 290,292
David C. Barney2/11/2016
1 
76,275
 305,100
 732,240
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 3,784
 18,920
 37,840
 276,232
Jeffrey S. Thiede2/11/2016
1 
79,688
 318,750
 765,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 3,953
 19,767
 39,534
 288,598
Martin A. Fritz2/11/2016
3 
65,000
 260,000
 520,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 4,186
 20,930
 41,860
 305,578
  
1
Annual incentive for 2016 granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan.
2
Performance shares for the 2016-2018 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan.
3
Annual incentive for 2016 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan.
Narrative Discussion Relating to the Summary Compensation Table
and Grants of Plan-Based Awards Table
Annual Incentive
The compensation committee recommended the 2016 annual incentive award opportunities for our named executive officers and the board approved these opportunities at its meeting on February 11, 2016. The award opportunities at threshold, target, and maximum are reflected in columns (c), (d), and (e), respectively, of the Grants of Plan-Based Awards table. The actual amount paid with respect to 2016 performance is reflected in column (g) of the Summary Compensation Table.
As described in “Annual Incentives” in the section entitled “Compensation Discussion and Analysis,” payment of annual award opportunities is dependent upon achievement of performance measures; actual payout may range from 0% to 200% of the target except for the construction materials & contracting and construction services segments which may range from 0% to 250% for achievement of certain performance measures.

 
MDU Resources Group, Inc. Proxy Statement 39

Proxy Statement
 

Narrative Discussion Relating to the Summary Compensation Table
Messrs. Goodin, Barney, and Grants of Plan-Based Awards Table
Incentive Awards
Annual Incentive
On February 11, 2015, the compensation committee recommended the 2015Thiede received their 2016 annual incentive award opportunities for our named executive officers andpursuant to the board approved these opportunities at its meeting on February 12, 2015. These award opportunities are reflected in the Grants of Plan-Based Awards table at grant on February 12, 2015, in columns (c), (d), and (e) and in the Summary Compensation Table as earned with respect to 2015 in column (g).
Executive officers may receive a payment of annual cash incentive awards based upon achievement of annual performance measures with a threshold, target, and maximum level. A target incentive award is established based on a percent of the executive’s base salary. Based upon achievement of goals, actual payment may range from 0% to 200% of the target.
In order toLong-Term Performance-Based Incentive Plan. To be eligible to receive a payment, of an annual incentive award under the Long-Term Performance-Based Incentive Plan, the executive officerthey must have remainedremain employed by the company through December 31, 2015,2016. The performance measures associated with their annual incentive may not be adjusted if the adjustment would increase their annual incentive award payment, unless the compensation committee determines otherwise. The committee has full discretion to determine the extent to which goals have been achieved, the payment level, whether any final payment will be made, and whether to adjust awards downward based upon individual performance. Unless otherwise determined and established the adjustment in writing by the compensation committee within 90 days of the beginning of the performance period, the performance goals may not be adjusted if the adjustment would increase the annual incentive award payment.period. The compensation committee may at its sole discretion use negative discretion based on subjective or objective measures and adjust any annual incentive award payment downward, using any subjective or objective measures as it shall determine. The application of any reduction,downward.
Messrs. Schwartz and the methodology used in determining any such reduction, is in the sole discretion of the compensation committee.
With respect toFritz were awarded their annual incentive awards grantedopportunities pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan. Under the Executive Incentive Compensation Plan, executives who retire during the year at age 65 pursuant to their employer’s bylaws remain eligible to receive an award. Subject to the compensation committee’s discretion,award, but executives who terminate employment for other reasons are not eligible for an award. The compensation committee has full discretion to determine the extent to which goals have been achieved, the payment level, and whether any final payment will be made. Once performance goals are approved by the committee for executive incentive compensation plan awards, the committee generally does not modify the goals. However,performance measures; however, if major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management substantially affected management’s ability to achieve the specified performance goals,measures, the committee, in consultation with the chief executive officer,CEO, may modify the performance goals. Such goal modifications will only be considered in years of unusually adverse or favorable external conditions.
Annual incentive awards earned for Messrs. Goodin and Schwartz were determined based on achievement of performance goals at the following business segments - (i) construction materials and contracting, (ii) construction services, (iii) exploration and production, (iv) pipeline and energy services, and (v) electric and natural gas distribution - and were calculated as follows:
 Column A
Percentage of
Annual Incentive
Target Achieved
Column B
Percentage of
Average Invested
Capital
Column A x Column B
Construction Materials and Contracting154.3%19.6%30.2%
Construction Services47.6%6.9%3.3%
Exploration and Production83.0%16.8%13.9%
Pipeline and Energy Services4.3%13.1%0.6%
Electric and Natural Gas Distribution4.3%43.6%1.9%
Total (Payout Percentage)  49.9%
Messrs. Barney, Thiede, O’Bryan, and Bietz had 2015 award opportunities based 75% on performance goals at their respective segments, 20% on MDU Resources Group, Inc.’s diluted earnings per share attributable to all business segments except the exploration and production segment, as adjusted, and 5% on the exploration and production segment pretax operating income, as adjusted.
measures. The 2015 target for the MDU Resources Group, Inc. 20% award opportunity was established based on MDU Resources Group, Inc.’s diluted earnings per share attributable to all business segments except the exploration and production segment, adjusted to exclude the effect on earnings at the company level of intersegment eliminations, the accounting effects on other business segments and on MDU Resources Group, Inc. of the exploration and production segment being moved from continuing operations to discontinued operations and the income statement impact of a loss on board approved asset sales or dispositions, other than the sale of the exploration and production segment.

40 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

The MDU Resources Group 20% award opportunity was:
MDU Resources Group, Inc.’s
diluted adjusted 2015 earnings
per share as a % of target
 Corresponding payment of
annual incentive target
Less than 85% 0%
85% 25%
90% 50%
95% 75%
100% 100%
103% 120%
106% 140%
109% 160%
112% 180%
115% 200%
The 2015 target for the exploration and production segment 5% award opportunity was established based on the segment’s pretax operating income, adjusted to exclude depreciation, depletion, and amortization and the accounting effects of the segment being moved from continuing operations to discontinued operations.
The exploration and production segment 5% award opportunity was:
Exploration and Production’s
2015 pretax operating income
excluding DD&A as a % of target
 
Corresponding payment of
annual incentive target
Less than 80% 0%
80% 25%
87% 50%
94% 75%
100% 100%
104% 120%
108% 140%
112% 160%
116% 180%
120% 200%
The 75% award opportunity available for Mr. Barney was:
Construction Materials & Contracting’s 2015 earnings per share as a % of target (weighted 37.5%)
Corresponding payment of
annual incentive target
Construction Materials & Contracting’s 2015 return on invested capital as a % of target (weighted 37.5%)
Corresponding payment of
annual incentive target
Less than 70%0%Less than 70%0%
70%25%70%25%
75%37.5%75%37.5%
80%50%80%50%
85%62.5%85%62.5%
90%75%90%75%
95%87.5%95%87.5%
100%100%100%100%
103%120%103%120%
106%140%106%140%
109%160%109%160%
112%180%112%180%
115%200%115%200%

MDU Resources Group, Inc. Proxy Statement 41

Proxy Statement

The 75% award opportunity available for Mr. Thiede was:
 Construction Services’ 2015
earnings* as a % of target		 Corresponding payment of
annual incentive target
 Less than 85% 0%
 85% 25%
 90% 50%
 95% 75%
 100% 100%
 122% 120%
 144% 140%
 166% 160%
 188% 180%
 209.5% 200%
*Earnings is defined as GAAP earnings reported for the construction services segment.

The 75% award opportunity available for Mr. O’Bryan was:
Exploration and Production’s 2015 pretax operating income excluding DD&A
as a % of target
(weighted 56.25%)
Corresponding payment of
annual incentive target
Exploration and Production’s
2015 operations and maintenance expense as a % of target
(weighted 18.75%)
Corresponding payment of
annual incentive target
Less than 80%0%Greater than 100%0%
80%25%100%100%
87%50%98.5%120%
94%75%97%140%
100%100%95.5%160%
104%120%94%180%
108%140%92.5%200%
112%160%——
116%180%——
120%200%——

The 75% award opportunity available for Mr. Bietz was:
Pipeline and Energy Services’
2015 earnings per share
as a % of target
(weighted 37.5%)
Corresponding payment of
annual incentive target
Pipeline and Energy Services’
2015 return on invested
capital as a % of target
(weighted 37.5%)		Corresponding payment of
annual incentive target
Less than 85%0%Less than 85%0%
85%25%85%25%
90%50%90%50%
95%75%95%75%
100%100%100%100%
103%120%103%120%
106%140%106%140%
109%160%109%160%
112%180%112%180%
115%200%115%200%
The pipeline and energy services segment also had five goals relating to the pipeline and energy services segment’s safety results, and each goal that was not met would reduce Mr. Bietz’s annual incentive award payment by 1%.

42 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Additional Annual Incentives
On February 11, 2015, the compensation committee recommended an additional annual incentive award opportunity for Mr. Barney underhas full discretion to determine the Long-Term Performance-Based Incentive Plan tiedextent to which goals have been achieved, the construction materialspayment level, and contracting segment’s operating cash flow, which would be measured without regardwhether to acquisitions or dispositions approved by the company’s boardadjust payment of directors. The board approved this opportunity at its meeting on February 12, 2015. This award opportunity is reflected in the Grants of Plan-Based Awards table at grant on February 12, 2015 in column (d) and in the Summary Compensation Table as earned with respect to 2015 in column (g).
The $150,000 award opportunity available for Mr. Barney was:
Construction Materials & Contracting’s 2015 operating cash flow
as a % of target
Corresponding payment of
incentive target
Less than 100%0%
100% or Greater100%
On May 13, 2015, the compensation committee recommended an additional annual incentive award opportunity for Mr. O’Bryan tied to the sale of Fidelity Exploration & Production Company. The board approved this opportunity at its meeting on May 14, 2015. Mr. O’Bryan would receive a sales bonus incentive of 0.075% of the sale price of Fidelity, plus an amount equal to six months’ salary of $225,000, if he remained employed by Fidelity through its sale. This award opportunity is reflected in the Grants of Plan-Based Awards table at grant on May 14, 2015 in column (d) and in the Summary Compensation Table as earned with respect to 2015 in column (g). Because there were no threshold, target, or maximum levels, the amount shown in the tables is the actual amount earned. Mr. O’Bryan received a cash retention award opportunity in November 2014 before his promotion, where he would receive $150,000 if he remained a full-time active employee of Fidelity through December 31, 2015, and maintained a performance rating of “meets expectations” or higher during 2015. The award opportunity is reflected in the Summary Compensation Table as earned with respect to 2015 in column (g).
awards downward based upon individual performance. For further discussion of the specific 2016 incentive plan performance targetsmeasures and results, please see “Annual Incentives” in the section entitled “Compensation Discussion and Analysis.Analysis.”
Deferral of Annual Incentive Compensation
We provide executives the opportunity to defer receipt of earned annual incentives. If an executive chooses to defer an annual incentive, we credit the deferral with interest at a rate determined by the compensation committee. For 2016, the committee chose to use an interest rate of 4.5% based on an average of the Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” and “Baa” rated companies. The compensation committee’s reasons for using this interest rate recognized incentive deferrals are a low-cost source of capital for the company and are unsecured obligations and, therefore, carry a higher risk to the executives.
Clawback
In February 2016, we amended our Long-Term Incentive Plan and Executive Incentive Compensation Plan sections regarding the repayment of incentive compensation due to accounting restatements, commonly referred to as a clawback policy. The compensation committee may, or shall if required, take action to recover incentive-based compensation from specific executives in the event the company is required to restate its financial statements due to material noncompliance with any financial reporting requirements under the securities laws.
On February 11, 2015,Policy Regarding Hedging Stock Ownership
Our executive compensation policy prohibits executive officers, which includes our named executive officers, from hedging their ownership of company common stock. Executives may not enter into transactions that allow the executive to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership. See the section entitled “Security Ownership” for our policy on margin accounts and pledging of our stock.
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Regulation S-K,
Item 402(b), with management. Based on the review and discussions referred to in the preceding sentence, the compensation committee recommended long-term incentive grants for the named executive officers in the form of performance shares, andto the board approved these grants at its meeting on February 12, 2015. These grants are reflected in columns (f), (g), (h),of directors that the Compensation Discussion and (l) of the Grants of Plan-Based Awards table and in column (e) of the Summary Compensation Table.
If the company’s 2015-2017 total stockholder return is positive, from 0% to 200% of the target grant willAnalysis be paid out in February 2018, depending on our 2015-2017 total stockholder return compared to the total three-year stockholder returns of companiesincluded in our performance graph peer group. The payout percentage is determined as follows:Proxy Statement on Schedule 14A.
Thomas Everist, Chairman
The Company’s Percentile RankPayout Percentage of
February 12, 2015 Grant
75th or higher200%
50th100%
25th20%
Less than 25th0%
Karen B. Fagg
Payouts for percentile ranks falling between the intervals will be interpolated. We also will pay dividend equivalents in cash on the number of shares actually earned for the performance period. The dividend equivalents will be paid in 2018 at the same time as the performance share awards are paid.William E. McCracken
If the common stock of a company in the peer group ceases to be traded at any time during the 2015-2017 performance period, the company will be deleted from the peer group. Percentile rank will be calculated without regard to the return of the deleted company. If MDU Resources Group, Inc. or a company in the peer group spins off a segment of its business, the shares of the spun-off entity will be treated as a cash dividend that is reinvested in MDU Resources Group, Inc. or the company in the peer group.Patricia L. Moss
If the company’s 2015-2017 total stockholder return is negative, the number of shares otherwise earned, if any, for the performance period will be reduced in accordance with the following table:

 
MDU Resources Group, Inc. Proxy Statement 4337

Proxy Statement
 

EXECUTIVE COMPENSATION TABLES
Summary Compensation Table for 2016
Name and
Principal Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)1

 
Stock
Awards
($)
(e)2

 Option
Awards
($)
(f)
 Non-Equity
Incentive Plan
Compensation
($)
(g)
 Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
 All Other
Compensation
($)
(i)
 Total
($)
(j)
                
David L. Goodin2016755,000
—
 1,441,954
 —
 1,055,490
 218,301
3 
40,246
4 
3,510,991
   President and CEO2015755,000
—
 1,386,992
 —
 376,745
 —
 39,411
 2,558,148
 2014685,000
—
 1,385,135
 —
 830,915
 631,901
 38,686
 3,571,637
         

     

Doran N. Schwartz2016380,000
6,175
 290,292
 —
 345,306
 77,084
3 
35,772
4 
1,134,629
   Vice President2015380,000
—
 279,228
 —
 123,253
 —
 35,571
 818,052
   and CFO2014360,000
—
 363,959
 —
 163,080
 273,974
 34,956
 1,195,969
  
David C. Barney2016406,800
—
 276,232
 —
 593,114
 77,565
3 
22,905
4 
1,376,616
   President and CEO of2015395,000
—
 225,739
 —
 637,588
 9,530
 22,556
 1,290,413
   Knife River2014—
—
 —
 —
 —
 —
 —
 —
   Corporation               
  
Jeffrey S. Thiede2016425,000
—
 288,598
 —
 489,600
 —
 122,708
4 
1,325,906
   President and CEO of2015425,000
—
 242,902
 —
 161,857
 —
 172,506
 1,002,265
   MDU Construction2014400,000
—
 323,529
 —
 730,150
 —
 96,481
 1,550,160
   Services Group, Inc.               
                
Martin A. Fritz2016400,000
52,520
 305,578
 —
 363,480
 —
 121,670
4 
1,243,248
   President and CEO of2015—
—
 —
 —
 —
 —
 —
 —
   WBI Energy, Inc.2014—
—
 —
 —
 —
 —
 —
 —
 
1
Amounts shown represent the incentive compensation determined by the compensation committee for the optimum refining production performance measure for 2016 due to the unforeseen economic conditions which lead to the sale of Dakota Prairie Refining, LLC. See “Annual Incentives” in the section entitled “Compensation Discussion and Analysis” for further information.
2
Amounts in this column represent the aggregate grant date fair value of performance share award opportunities at target calculated in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts were calculated using the Monte Carlo simulation, as described in Note 10 of our audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. For 2016, the total aggregate grant date fair value of performance share award opportunities assuming the highest level of payout would be as follows:
Total Stockholder ReturnName Reduction in Award
Aggregate grant date fair value at highest payout
($)

0% through -5%David L. Goodin 50%2,883,909
-5.01% through -10%Doran N. Schwartz 60%580,584
-10.01% through -15%David C. Barney 70%552,464
-15.01% through -20%Jeffrey S. Thiede 80%577,196
-20.01% through -25%Martin A. Fritz 90%611,156
-25.01% or below
3
100%Amounts shown for 2016 represent the change in the actuarial present value for the named executive officers’ accumulated benefits under the pension plan, SISP, and Excess SISP, collectively referred to as the “accumulated pension change,” plus above-market earnings on deferred annual incentives as of December 31, 2016.
Salary and Bonus in Proportion to Total Compensation
The following table shows the proportion of salary and bonus to total compensation:
Name 
Accumulated Pension Change
($)

 
Above Market Interest
($)

David L. Goodin 215,917
 2,384
Doran N. Schwartz 77,084
 —
David C. Barney 77,565
 —
Name Salary
($)		  Bonus
($)		  Total
Compensation
($)		  Salary and Bonus
as a % of
Total Compensation		 
David L. Goodin  755,000
  —
  2,558,148
  29.5%
Doran N. Schwartz  380,000
  —
  818,052
  46.5%
David C. Barney  395,000
  —
  1,290,413
  30.6%
Jeffrey S. Thiede  425,000
  —
  1,002,265
  42.4%
Patrick L. O’Bryan  441,918
  —
  1,822,699
  24.2%
Steven L. Bietz  214,274
  —
  1,307,120
  16.4%


 
4438 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 


Outstanding Equity4All Other Compensation is comprised of:
Name
401(k)
($)a

Life Insurance Premium
($)
Matching Charitable Contributions
($)

Nonqualified Defined Contribution Plan
($)

Total
($)
David L. Goodin38,425
621
1,200
—
40,246
Doran N. Schwartz35,000
472
300
—
35,772
David C. Barney21,200
505
1,200
—
22,905
Jeffrey S. Thiede21,200
528
980
100,000
122,708
Martin A. Fritz21,173
497
—
100,000
121,670
a 
Represents company contributions to the 401(k) plan, which includes matching contributions and retirement contributions made after the pension plans were frozen at December 31, 2009.
Grants of Plan-Based Awards at Fiscal Year-End 2015in 2016
 Option Awards Stock Awards Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards		 Estimated Future
Payouts Under Equity
Incentive Plan Awards		 
Grant Date Fair Value of
Stock and Option Awards
($)
(l)

Name
(a)		 Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)
 Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
 Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
 Option
Exercise
Price
($)
(e)
 Option
Expiration
Date
(f)
 Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
(g)
 Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)
(h)
 Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)
(i)
 
Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)
(j)1

Name
(a)
Grant
Date
(b)
 Threshold
($)
(c)
 Target
($)
(d)
 Maximum
($)
(e)
 Threshold
(#)
(f)
 Target
(#)
(g)
 Maximum
(#)
(h)
 
David L. Goodin —
 —
 —
 —
 —
 —
 —
 63,956
2 
1,171,674
David L. Goodin2/11/2016
1 
188,750
 755,000
 1,510,000
 —
 —
 —
 —
2/11/2016
2 
—
 —
 —
 19,753
 98,764
 197,528
 1,441,954
Doran N. Schwartz —
 —
 —
 —
 —
 —
 —
 16,485
2 
302,005
Doran N. Schwartz2/11/2016
3 
61,750
 247,000
 494,000
 —
 —
 —
 —
2/11/2016
2 
—
 —
 —
 3,977
 19,883
 39,766
 290,292
David C. Barney —
 —
 —
 —
 —
 —
 —
 3,843
2 
70,404
David C. Barney2/11/2016
1 
76,275
 305,100
 732,240
 —
 —
 —
 —
2/11/2016
2 
—
 —
 —
 3,784
 18,920
 37,840
 276,232
Jeffrey S. Thiede —
 —
 —
 —
 —
 —
 —
 4,101
2 
75,130
Jeffrey S. Thiede2/11/2016
1 
79,688
 318,750
 765,000
 —
 —
 —
 —
Patrick L. O'Bryan —
 —
 —
 —
 —
 —
 —
 —

—
Steven L. Bietz —
 —
 —
 —
 —
 —
 —
 16,287
2 
298,378
2/11/2016
2 
—
 —
 —
 3,953
 19,767
 39,534
 288,598
Martin A. FritzMartin A. Fritz2/11/2016
3 
65,000
 260,000
 520,000
 —
 —
 —
 —
2/11/2016
2 
—
 —
 —
 4,186
 20,930
 41,860
 305,578
 
1
Annual incentive for 2016 granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan.
2
Performance shares for the 2016-2018 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan.
3
Annual incentive for 2016 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan.
1   Value based
Narrative Discussion Relating to the Summary Compensation Table
and Grants of Plan-Based Awards Table
Annual Incentive
The compensation committee recommended the 2016 annual incentive award opportunities for our named executive officers and the board approved these opportunities at its meeting on February 11, 2016. The award opportunities at threshold, target, and maximum are reflected in columns (c), (d), and (e), respectively, of the numberGrants of Plan-Based Awards table. The actual amount paid with respect to 2016 performance sharesis reflected in column (i) multiplied by $18.32, the year-end closing price for 2015.
2   Below is a breakdown by year(g) of the plan awards:Summary Compensation Table.
Named Executive Officer Award Shares
 End of
Performance
Period
David L. Goodin 2013 42,788
 12/31/15
  2014 6,735
 12/31/16
  2015 14,433
 12/31/17
Doran N. Schwartz 2013 11,809
 12/31/15
  2014 1,770
 12/31/16
  2015 2,906
 12/31/17
David C. Barney 2013 —
 —
  2014 1,494
 12/31/16
  2015 2,349
 12/31/17
Jeffery S. Thiede 2013 —
 —
  2014 1,573
 12/31/16
  2015 2,528
 12/31/17
Patrick L. O'Bryan 2013 —
 —
  2014 —
 —
  2015 —
 —
Steven L. Bietz 2013 15,104
 12/31/15
  2014 1,183
 12/31/16
  2015 —
 —
SharesAs described in “Annual Incentives” in the section entitled “Compensation Discussion and Analysis,” payment of annual award opportunities is dependent upon achievement of performance measures; actual payout may range from 0% to 200% of the target except for the 2013 award are shown at the target level (100%) based on resultsconstruction materials & contracting and construction services segments which may range from 0% to 250% for the 2013-2015achievement of certain performance cycle between threshold and target.
Shares for the 2014 award are shown at the threshold level (20%) based on results for the first two years of the 2014-2016 performance cycle below threshold. Mr. Bietz’s shares are prorated to reflect his retirement effective July 17, 2015.
Shares for the 2015 award are shown at the threshold level (20%) based on results for the 2015-2017 performance cycle below threshold. Mr. Bietz’s shares were forfeited because of his retirement effective July 17, 2015.measures.


 
MDU Resources Group, Inc. Proxy Statement 4539

Proxy Statement
 

Pension Benefits for 2015
Name
(a)		 Plan Name
(b)		 Number of
Years Credited
Service
(#)
(c)		 Present Value
of Accumulated
Benefit
($)
(d)
 Payments
During Last
Fiscal Year
($)
(e)
 
David L. Goodin MDU Pension Plan 26 1,053,138
 —
 
  
SISP I1,3
 10 230,600
 —
 
  
SISP II2,3
 10 889,654
 —
 
  
    SISP II 2012 Upgrade4
 3 68,534
 —
 
  
    SISP II 2013 Upgrade4
 2 936,419
 —
 
  
SISP Excess5
 26 35,046
 —
 
Doran N. Schwartz MDU Pension Plan 4 103,247
 —
 
  
SISP II2,3
 8 501,190
 —
 
  
    SISP II 2013 Upgrade4
 2 165,873
 —
 
  
    SISP II 2014 Upgrade4
 1 83,760
 —
 
David C. Barney6
 
SISP II2,3
 10 1,089,837
 —
 
  
    SISP II 2014 Upgrade4
 1 216,295
 —
 
Jeffrey S. Thiede6
 — — —
 —
 
Patrick L. O’Bryan6
 — — —
 —
 
Steven L. Bietz WBI Pension Plan 28 1,299,883
 33,580
 
  
SISP I1,3
 10 846,479
 —
 
  
SISP II2,3
 10 813,506
 —
 
  
SISP Excess5
 28 169,124
 10,433
7 
   
1 
Grandfathered under Section 409A. 
   
2 
Not grandfathered under Section 409A. 
   
3 
Years of credited service only affects vesting under SISP I and SISP II. The number of years of credited service in the table reflects the years of vesting service completed in SISP I and SISP II as of December 31, 2015, rather than total years of service with the company. Ten years of vesting service is required to obtain the full benefit under these plans. The present value of accumulated benefits was calculated by assuming the named executive officer would have ten years of vesting service on the assumed benefit commencement date; therefore, no reduction was made to reflect actual vesting levels. 
   
4 
Benefit level increases granted under SISP II on or after January 1, 2010, require an additional three years of vesting service for the increase. Mr. Goodin received a benefit increase effective January 1, 2012, which has vested. Messrs. Goodin and Schwartz received benefit level increases effective January 1, 2013, and Messrs. Schwartz and Barney received a benefit level increase effective January 1, 2014; the present value of their accumulated benefits was calculated assuming that the additional vesting requirements would be met. 
   
5 
The number of years of credited service under the SISP excess reflects the years of credited benefit service in the appropriate pension plan as of December 31, 2009, when the MDU and WBI pension plans were frozen, rather than the years of participation in the SISP excess. We reflect years of credited benefit service in the appropriate pension plan because the SISP excess provides a benefit that is based on benefits that would have been payable under the MDU and WBI pension plans absent Internal Revenue Code limitations. 
   
6 
Messrs. Barney, Thiede, and O’Bryan are not eligible to participate in the pension plans. Messrs. Thiede and O’Bryan do not participate in the SISP. 
           
7 
Payable for 2015 but deferred pursuant to Section 409A. 
The amounts shown for the pension plan and SISP excess represent the actuarial present values of the executives’ accumulated benefits accrued as of December 31, 2015, calculated using a 3.76%, 3.96%, and 4.07% discount rate for the SISP excess, MDU pension plan, and WBI pension plan, respectively, the Society of Actuaries RP-2014 Adjusted to 2006 Total Dataset Mortality with Scale MP-2015 for post-retirement mortality, and no recognition of future salary increases or pre-retirement mortality. The assumed retirement age for these benefits was age 60 for Messrs. Goodin and Schwartz. This is the earliest age at which the executives could begin receiving unreduced benefits. Mr. Bietz’s benefits reflect his actual termination date of July 17, 2015. The amounts shown for the SISP I and SISP II were determined using a 3.76% discount rate and assume benefits commenced at age 65.

46 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Pension Plan
Messrs. Goodin, Barney, and Thiede received their 2016 annual incentive award opportunities pursuant to the Long-Term Performance-Based Incentive Plan. To be eligible to receive a payment, they must remain employed by the company through December 31, 2016. The performance measures associated with their annual incentive may not be adjusted if the adjustment would increase their annual incentive award payment, unless the compensation committee determined and established the adjustment in writing within 90 days of the beginning of the performance period. The compensation committee may at its sole discretion use negative discretion based on subjective or objective measures and adjust any annual incentive award payment downward.
Messrs. Schwartz participate inand Fritz were awarded their annual incentive opportunities pursuant to the MDU Resources Group, Inc. PensionExecutive Incentive Compensation Plan. Under the Executive Incentive Compensation Plan, for Non-Bargaining Unit Employees, which we refer to as the MDU pension plan. Mr. Bietz participates in the Williston Basin Interstate Pipeline Company Pension Plan, which we refer to as the WBI pension plan. Pension benefits under the pension plans are based on the participant’s average annual salary over the 60 consecutive month period in which the participant received the highest annual salaryexecutives who retire during the participant’s final 10 years of service. For this purpose, only a participant’s salary is considered; incentives and other forms of compensation are not included. Benefits are determined by multiplying (1) the participant’s years of credited service by (2) the sum of (a) the average annual salary upyear at age 65 remain eligible to the social security integration level times 1.1% and (b) the average annual salary over the social security integration level times 1.45%. The maximum years of service recognized when determining benefits under the pension plans is 35. Pension plan benefits are not reduced for social security benefits.
Both of the pension plans were amended to cease benefit accruals as of December 31, 2009, meaning the normal retirement benefit will not change. The years of credited service in the table reflect the named executive officers’ years of credited service as of December 31, 2009.
To receive unreduced retirement benefits under the pension plans, participants must either remain employed until age 60 or elect to defer commencement of benefits until age 60. Participants whose employment terminates between the ages of 55 and 60, with 5 years of service under the pension plans, are eligible for early retirement benefits. Early retirement benefits are determined by reducing the normal retirement benefit by 0.25% per month for each month before age 60. If a participant’s employment terminates before age 55, the same reduction applies for each month the termination occurs before age 62, with the reduction capped at 21%.
Benefits for single participants under the pension plans are paid as straight life annuities, and benefits for married participants are paid as actuarially reduced annuities with a survivor benefit for spouses, unless participants choose otherwise. Participants hired before January 1, 2004,an award, but executives who terminate employment before age 55,for other reasons are not eligible for an award. The committee generally does not modify the performance measures; however, if major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management substantially affected management’s ability to achieve the specified performance measures, the committee, in consultation with the CEO, may electmodify the performance measures. The compensation committee has full discretion to receive their benefits in a lump sum. Mr. Goodin woulddetermine the extent to which goals have been eligible for a lump sum if he had retired on December 31, 2015.
The Internal Revenue Code limitsachieved, the amounts paid under the pension planspayment level, and the amountwhether to adjust payment of compensation recognized when determining benefits. In 2009, when the pension plans were frozen, the maximum annual benefit payable under the pension plans was $195,000 and the maximum amount of compensation recognized when determining benefits was $245,000.
Supplemental Income Security Plan
We also offer select key managers and executives benefits under our defined benefit nonqualified retirement plan, which we refer to as the Supplemental Income Security Plan or SISP. Messrs. Goodin, Schwartz, Barney, and Bietz participate in the SISP. Benefits under the SISP consist of:
a supplemental retirement benefit intended to augment the retirement income provided under the pension plans – we refer to this benefit as the regular SISP benefit
an excess retirement benefit relating to Internal Revenue Code limitations on retirement benefits provided under the pension plans – we refer to this benefit as the SISP excess benefit and
death benefits – we refer to these benefits as the SISP death benefit.
SISP benefits are forfeited if the participant’s employment is terminated for cause.
Regular SISP Benefits and Death Benefits
Regular SISP benefits and death benefits are determined by reference to one of two schedules attached to the SISP – the original schedule or the amended schedule. Our compensation committee, after receiving recommendations from our chief executive officer, determines the level at which participants are placed in the schedules. A participant’s placement is generally, but not always, determined by reference to the participant’s annual base salary. Benefit levels in the amended schedule, which became effective on January 1, 2010, are 20% lower than the benefit levels in the original schedule. The amended schedule applies to new participants and participants who receive a benefit level increase on or after January 1, 2010. Noneawards downward based upon individual performance. For further discussion of the named executive officers received a benefit level increase on or after January 1, 2015. Effective February 11,specific 2016 the SISP was amended to freeze theincentive plan to new participantsperformance measures and to current participants at their current benefit levels.
Participants can elect to receive (1) the regular SISP benefit only, (2) the SISP death benefit only, or (3) a combination of both. Regardless of the participant’s election, if the participant dies before the regular SISP benefit would commence, only the SISP death benefit is

MDU Resources Group, Inc. Proxy Statement 47

Proxy Statement

provided. If the participant elects to receive both a regular SISP benefit and a SISP death benefit, each of the benefits is reduced proportionately.
The regular SISP benefits reflected in the table above are based on the assumption that the participant elects to receive only the regular SISP benefit. The present values of the SISP death benefits that would be provided if the named executive officers had died on December 31, 2015, prior to the commencement of regular SISP benefits, are reflected in the table that appearsresults, see “Annual Incentives” in the section entitled “Potential Payments upon Termination or Change of Control.”
Regular SISP benefits that were vested as of December 31, 2004,“Compensation Discussion and were grandfathered under Section 409A of the Internal Revenue Code remain subject to SISP provisions then in effect, which we refer to as SISP I benefits. Regular SISP benefits that are subject to Section 409A of the Internal Revenue Code, which we refer to as SISP II benefits, are governed by amended provisions intended to comply with Section 409A. Participants generally have more discretion with respect to the distributions of their SISP I benefits.
The time and manner in which the regular SISP benefits are paid depend on a variety of factors, including the time and form of benefit elected by the participant and whether the benefits are SISP I or SISP II benefits. Unless the participant elects otherwise, the SISP I benefits are paid over 180 months, with benefits commencing when the participant attains age 65 or, if later, when the participant retires. The SISP II benefits commence when the participant attains age 65 or, if later, when the participant retires, subject to a six-month delay if the participant is subject to the provisions of Section 409A of the Internal Revenue Code that require delayed commencement of these types of retirement benefits. The SISP II benefits are paid over 180 months or, if commencement of payments is delayed for six months, 173 months. If the commencement of benefits is delayed for six months, the first payment includes the payments that would have been paid during the six-month period plus interest equal to one-half of the annual prime interest rate on the participant’s last date of employment. If the participant dies after the regular SISP benefits have begun but before receipt of all of the regular SISP benefits, the remaining payments are made to the participant’s designated beneficiary.
Rather than receiving their regular SISP I benefits in equal monthly installments over 15 years commencing at age 65, participants can elect a different form and time of commencement of their SISP I benefits. Participants can elect to defer commencement of the regular SISP I benefits. If this is elected, the participant retains the right to receive a monthly SISP death benefit if death occurs prior to the commencement of the regular SISP I benefit.
Participants also can elect to receive their SISP I benefits in one of three actuarially equivalent forms – a life annuity, 100% joint and survivor annuity, or a joint and two-thirds joint and survivor annuity, provided that the cost of providing these actuarial equivalent forms of benefits does not exceed the cost of providing the normal form of benefit. Neither the election to receive an actuarially equivalent benefit nor the administrator’s right to pay the regular SISP benefit in the form of an actuarially equivalent lump sum are available with respect to SISP II benefits.
To promote retention, the regular SISP benefits are subject to the following 10-year vesting schedule:
0% vesting for less than 3 years of participation
20% vesting for 3 years of participation
40% vesting for 4 years of participation and
an additional 10% vesting for each additional year of participation up to 100% vesting for 10 years of participation.
There is an additional vesting requirement on benefit level increases for the regular SISP benefit granted on or after January 1, 2010. The requirement applies only to the increased benefit level. The increased benefit vests after the later of three additional years of participation in the SISP or the end of the regular vesting schedule described above. The additional three-year vesting requirement for benefit level increases is prorated for participants who are officers, attain age 65, and, pursuant to the company’s bylaws, are required to retire prior to the end of the additional vesting period as follows:
33% of the increase vests for participants required to retire at least one year but less than two years after the increase is granted and
66% of the increase vests for participants required to retire at least two years but less than three years after the increase is granted.
The benefit level increases of participants who attain age 65 and are required to retire pursuant to the company’s bylaws will be further reduced to the extent the participants are not fully vested in their regular SISP benefit under the 10-year vesting schedule described above. The additional vesting period associated with a benefit level increase may be waived by the compensation committee.

Analysis48 MDU Resources Group, Inc. Proxy Statement.”

Proxy Statement

SISP death benefits become fully vested if the participant dies while actively employed. Otherwise, the SISP death benefits are subject to the same vesting schedules as the regular SISP benefits.
The SISP also provides that if a participant becomes totally disabled, the participant will continue to receive service credit for up to two additional years under the SISP as long as the participant is totally disabled during such time. Since the named executive officers other than Messrs. Goodin and Barney, in their upgrades, and Mr. Schwartz, are fully vested in their SISP benefits, this would not result in any incremental benefit for the named executive officers other than Messrs. Goodin, Schwartz, and Barney. The present value of these additional years of service for Messrs. Goodin, Schwartz, and Barney is reflected in the table in “Potential Payments upon Termination or Change of Control” below.
SISP Excess Benefits
SISP excess benefits are equal to the difference between (1) the monthly retirement benefits that would have been payable to the participant under the pension plans absent the limitations under the Internal Revenue Code and (2) the actual benefits payable to the participant under the pension plans. Participants are only eligible for the SISP excess benefits if (1) the participant is fully vested under the pension plan, (2) the participant’s employment terminates prior to age 65, and (3) benefits under the pension plan are reduced due to limitations under the Internal Revenue Code on plan compensation. Effective January 1, 2005, participants who were not then vested in the SISP excess benefits were also required to remain actively employed by the company until age 60. In 2009, the plan was amended to limit eligibility for the SISP excess benefit to current SISP participants (1) who were already vested in the SISP excess benefit or (2) who would become vested in the SISP excess benefits if they remain employed with the company until age 60. The plan was further amended to freeze the SISP excess benefits to a maximum of the benefit level payable based on the participant’s years of service and compensation level as of December 31, 2009. Mr. Goodin must remain employed until age 60 to become entitled to his SISP excess benefit. Mr. Bietz is entitled to the SISP excess benefit even though he terminated employment prior to age 65. Messrs. Schwartz, Barney, Thiede, and O’Bryan are not eligible for this benefit.
Benefits generally commence six months after the participant’s employment terminates and continue to age 65 or until the death of the participant, if prior to age 65. If a participant who dies prior to age 65 elected a joint and survivor benefit, the survivor’s SISP excess benefit is paid until the date the participant would have attained age 65.

Nonqualified Deferred Compensation for 2015
Name
(a)
 
Executive
Contributions in
Last FY
($)
(b)

 
Registrant
Contributions in
Last FY
($)
(c)

 
Aggregate
Earnings in
Last FY
($)
(d)

 
Aggregate
Withdrawals/
Distributions
($)
(e)

 
Aggregate
Balance at
Last FYE
($)
(f)

 
      
      
      
David L. Goodin —
 —
 —
 —
 —
 
Doran N. Schwartz —
 —
 —
 —
 —
 
David C. Barney —
 —
 —
 —
 —
 
Jeffrey S. Thiede —
 150,000
 (955) —
 268,885
1 
Patrick L. O'Bryan —
 —
 —
 —
 —
 
Steven L. Bietz —
 —
 —
 —
 —
 
   
1 
Includes $150,000 which was awarded to Mr. Thiede under the Nonqualified Defined Contribution Plan for 2015, $75,000 for 2014, and $33,000 for 2013. Each of these amounts is reported in column (i) of the Summary Compensation Table in this proxy statement for its respective year.
Nonqualified Defined Contribution Plan
The company adopted the Nonqualified Defined Contribution Plan, effective January 1, 2012, to provide deferred compensation for a select group of management or highly compensated employees who do not participate in the SISP. The compensation committee determines the amount of employer contributions under the Nonqualified Defined Contribution Plan, which are credited to plan accounts and not funded. After satisfying a four-year vesting requirement for each contribution, the contributions and investment earnings will be distributed to the executive in a lump sum upon separation from service with the company or in annual installments commencing upon the later of (i) separation from service and (ii) age 65. Plan benefits become fully vested if the participant dies while actively employed. Benefits are forfeited if the participant’s employment is terminated for cause.
Deferral of Annual Incentive Compensation
ParticipantsWe provide executives the opportunity to defer receipt of earned annual incentives. If an executive chooses to defer an annual incentive, we credit the deferral with interest at a rate determined by the compensation committee. For 2016, the committee chose to use an interest rate of 4.5% based on an average of the Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” and “Baa” rated companies. The compensation committee’s reasons for using this interest rate recognized incentive deferrals are a low-cost source of capital for the company and are unsecured obligations and, therefore, carry a higher risk to the executives.
Clawback
In February 2016, we amended our Long-Term Incentive Plan and Executive Incentive Compensation Plan sections regarding the repayment of incentive compensation due to accounting restatements, commonly referred to as a clawback policy. The compensation committee may, or shall if required, take action to recover incentive-based compensation from specific executives in the event the company is required to restate its financial statements due to material noncompliance with any financial reporting requirements under the securities laws.
Policy Regarding Hedging Stock Ownership
Our executive compensation policy prohibits executive officers, which includes our named executive officers, from hedging their ownership of company common stock. Executives may not enter into transactions that allow the executive to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership. See the section entitled “Security Ownership” for our policy on margin accounts and pledging of our stock.
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Regulation S-K,
Item 402(b), with management. Based on the review and discussions referred to in the preceding sentence, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in our Proxy Statement on Schedule 14A.
Thomas Everist, Chairman
Karen B. Fagg
William E. McCracken
Patricia L. Moss

MDU Resources Group, Inc. Proxy Statement 37

Proxy Statement

EXECUTIVE COMPENSATION TABLES
Summary Compensation Table for 2016
Name and
Principal Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)1

 
Stock
Awards
($)
(e)2

 Option
Awards
($)
(f)
 Non-Equity
Incentive Plan
Compensation
($)
(g)
 Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
 All Other
Compensation
($)
(i)
 Total
($)
(j)
                
David L. Goodin2016755,000
—
 1,441,954
 —
 1,055,490
 218,301
3 
40,246
4 
3,510,991
   President and CEO2015755,000
—
 1,386,992
 —
 376,745
 —
 39,411
 2,558,148
 2014685,000
—
 1,385,135
 —
 830,915
 631,901
 38,686
 3,571,637
         

     

Doran N. Schwartz2016380,000
6,175
 290,292
 —
 345,306
 77,084
3 
35,772
4 
1,134,629
   Vice President2015380,000
—
 279,228
 —
 123,253
 —
 35,571
 818,052
   and CFO2014360,000
—
 363,959
 —
 163,080
 273,974
 34,956
 1,195,969
  
David C. Barney2016406,800
—
 276,232
 —
 593,114
 77,565
3 
22,905
4 
1,376,616
   President and CEO of2015395,000
—
 225,739
 —
 637,588
 9,530
 22,556
 1,290,413
   Knife River2014—
—
 —
 —
 —
 —
 —
 —
   Corporation               
  
Jeffrey S. Thiede2016425,000
—
 288,598
 —
 489,600
 —
 122,708
4 
1,325,906
   President and CEO of2015425,000
—
 242,902
 —
 161,857
 —
 172,506
 1,002,265
   MDU Construction2014400,000
—
 323,529
 —
 730,150
 —
 96,481
 1,550,160
   Services Group, Inc.               
                
Martin A. Fritz2016400,000
52,520
 305,578
 —
 363,480
 —
 121,670
4 
1,243,248
   President and CEO of2015—
—
 —
 —
 —
 —
 —
 —
   WBI Energy, Inc.2014—
—
 —
 —
 —
 —
 —
 —
 
1
Amounts shown represent the incentive compensation determined by the compensation committee for the optimum refining production performance measure for 2016 due to the unforeseen economic conditions which lead to the sale of Dakota Prairie Refining, LLC. See “Annual Incentives” in the section entitled “Compensation Discussion and Analysis” for further information.
2
Amounts in this column represent the aggregate grant date fair value of performance share award opportunities at target calculated in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts were calculated using the Monte Carlo simulation, as described in Note 10 of our audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. For 2016, the total aggregate grant date fair value of performance share award opportunities assuming the highest level of payout would be as follows:
Name
Aggregate grant date fair value at highest payout
($)

David L. Goodin2,883,909
Doran N. Schwartz580,584
David C. Barney552,464
Jeffrey S. Thiede577,196
Martin A. Fritz611,156
3
Amounts shown for 2016 represent the change in the actuarial present value for the named executive officers’ accumulated benefits under the pension plan, SISP, and Excess SISP, collectively referred to as the “accumulated pension change,” plus above-market earnings on deferred annual incentives as of December 31, 2016.
Name 
Accumulated Pension Change
($)

 
Above Market Interest
($)

David L. Goodin 215,917
 2,384
Doran N. Schwartz 77,084
 —
David C. Barney 77,565
 —

38 MDU Resources Group, Inc. Proxy Statement

Proxy Statement


4All Other Compensation is comprised of:
Name
401(k)
($)a

Life Insurance Premium
($)
Matching Charitable Contributions
($)

Nonqualified Defined Contribution Plan
($)

Total
($)
David L. Goodin38,425
621
1,200
—
40,246
Doran N. Schwartz35,000
472
300
—
35,772
David C. Barney21,200
505
1,200
—
22,905
Jeffrey S. Thiede21,200
528
980
100,000
122,708
Martin A. Fritz21,173
497
—
100,000
121,670
a 
Represents company contributions to the 401(k) plan, which includes matching contributions and retirement contributions made after the pension plans were frozen at December 31, 2009.
Grants of Plan-Based Awards in 2016
    Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards		 Estimated Future
Payouts Under Equity
Incentive Plan Awards		 
Grant Date Fair Value of
Stock and Option Awards
($)
(l)

Name
(a)
Grant
Date
(b)
 Threshold
($)
(c)
 Target
($)
(d)
 Maximum
($)
(e)
 Threshold
(#)
(f)
 Target
(#)
(g)
 Maximum
(#)
(h)
 
David L. Goodin2/11/2016
1 
188,750
 755,000
 1,510,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 19,753
 98,764
 197,528
 1,441,954
Doran N. Schwartz2/11/2016
3 
61,750
 247,000
 494,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 3,977
 19,883
 39,766
 290,292
David C. Barney2/11/2016
1 
76,275
 305,100
 732,240
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 3,784
 18,920
 37,840
 276,232
Jeffrey S. Thiede2/11/2016
1 
79,688
 318,750
 765,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 3,953
 19,767
 39,534
 288,598
Martin A. Fritz2/11/2016
3 
65,000
 260,000
 520,000
 —
 —
 —
 —
 2/11/2016
2 
—
 —
 —
 4,186
 20,930
 41,860
 305,578
  
1
Annual incentive for 2016 granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan.
2
Performance shares for the 2016-2018 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan.
3
Annual incentive for 2016 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan.
Narrative Discussion Relating to the Summary Compensation Table
and Grants of Plan-Based Awards Table
Annual Incentive
The compensation committee recommended the 2016 annual incentive award opportunities for our named executive officers and the board approved these opportunities at its meeting on February 11, 2016. The award opportunities at threshold, target, and maximum are reflected in columns (c), (d), and (e), respectively, of the Grants of Plan-Based Awards table. The actual amount paid with respect to 2016 performance is reflected in column (g) of the Summary Compensation Table.
As described in “Annual Incentives” in the section entitled “Compensation Discussion and Analysis,” payment of annual award opportunities is dependent upon achievement of performance measures; actual payout may range from 0% to 200% of the target except for the construction materials & contracting and construction services segments which may range from 0% to 250% for achievement of certain performance measures.

MDU Resources Group, Inc. Proxy Statement 39

Proxy Statement

Messrs. Goodin, Barney, and Thiede received their 2016 annual incentive award opportunities pursuant to the Long-Term Performance-Based Incentive Plan. To be eligible to receive a payment, they must remain employed by the company through December 31, 2016. The performance measures associated with their annual incentive may not be adjusted if the adjustment would increase their annual incentive award payment, unless the compensation committee determined and established the adjustment in writing within 90 days of the beginning of the performance period. The compensation committee may at its sole discretion use negative discretion based on subjective or objective measures and adjust any annual incentive award payment downward.
Messrs. Schwartz and Fritz were awarded their annual incentive opportunities pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan. Under the Executive Incentive Compensation Plan, executives who retire during the year at age 65 remain eligible to receive an award, but executives who terminate employment for other reasons are not eligible for an award. The committee generally does not modify the performance measures; however, if major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management substantially affected management’s ability to achieve the specified performance measures, the committee, in consultation with the CEO, may modify the performance measures. The compensation committee has full discretion to determine the extent to which goals have been achieved, the payment level, and whether to adjust payment of awards downward based upon individual performance. For further discussion of the specific 2016 incentive plan performance measures and results, see “Annual Incentives” in the section entitled “Compensation Discussion and Analysis.”
Long-Term Incentive
The compensation committee recommended long-term incentive award opportunities for the named executive officers in the form of performance shares, and the board approved the award opportunities at its meeting on February 11, 2016. The long-term incentive opportunities are presented as the number of performance shares at threshold, target, and maximum in columns (f), (g), and (h) of the Grants of Plan-Based Awards table. The value of the long-term performance-based incentive opportunities is based on the aggregate grant date fair value and is reflected in column (e) of the Summary Compensation Table and column (l) of the Grant of Plan-Based Awards table.
Depending on our 2016-2018 total stockholder return compared to the total three-year stockholder returns of our peer group companies, executives will receive from 0% to 200% of the target awards in February 2019. We also will pay dividend equivalents in cash on the number of shares actually vested for the performance period. The dividend equivalents will be paid in 2019 at the same time as the performance share awards vest. In the event the company’s 2016-2018 total stockholder return is negative, the number of shares that would otherwise vest for the performance period will be reduced from 50% to 100%. For further discussion of the specific long-term incentive plan, see “Long-Term Incentives” in the section entitled “Compensation Discussion and Analysis.”
Nonqualified Defined Contribution Plan
The compensation committee selects participants and approves contributions to the Nonqualified Defined Contribution Plan based on recommendations from the CEO. The purpose of the plan is to recognize outstanding performance coupled with enhanced retention as the Nonqualified Defined Contribution Plan requires a vesting period. The amount shown in column (i) - All Other Compensation of the Summary Compensation Table includes contributions of $100,000 each for Messrs. Thiede and Fritz. For further information, see the section entitled “Nonqualified Deferred Compensation for 2016.”
Salary and Bonus in Proportion to Total Compensation
The following table shows the proportion of salary and bonus to total compensation:
Name Salary
($)		 Bonus
($)		  Total
Compensation
($)		 Salary and Bonus
as a % of
Total Compensation		 
David L. Goodin  755,000  —
  3,510,991  21.5%
Doran N. Schwartz  380,000  6,175
  1,134,629  34.0%
David C. Barney  406,800  —
  1,376,616  29.6%
Jeffrey S. Thiede  425,000  —
  1,325,906  32.1%
Martin A. Fritz  400,000  52,520
  1,243,248  36.4%


40 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Outstanding Equity Awards at Fiscal Year-End 2016
  Stock Awards
Name
(a)		 
Number of Shares
or Units of Stock
That Have Not Vested
(#)
(g)

 
Market Value of Shares
or Units of Stock
That Have Not Vested
($)
(h)

 
Equity Incentive Plan Awards:
Number of Unearned Shares,
Units or Other Rights That
Have Not Vested
(#)
(i)1

 
Equity Incentive Plan Awards:
Market or Payout Value of
Unearned Shares, Units
or Other Rights That
Have Not Vested
($)
(j)2

David L. Goodin —
 —
 375,533
 10,804,084
Doran N. Schwartz —
 —
 77,671
 2,234,595
David C. Barney —
 —
 68,802
 1,979,434
Jeffrey S. Thiede —
 —
 72,676
 2,090,889
Martin A. Fritz —
 —
 70,742
 2,035,247
1Below is a breakdown by year of the outstanding performance share plan awards:

2014 Award
2015 Award
2016 Award
Total
Performance Period End12/31/2016
12/31/2017
12/31/2018
David L. Goodin33,677
144,328
197,528
375,533
Doran N. Schwartz8,849
29,056
39,766
77,671
David C. Barney7,472
23,490
37,840
68,802
Jeffrey S. Thiede7,866
25,276
39,534
72,676
Martin A. Fritz—
28,882
41,860
70,742
Shares for the 2014 award are shown at the target level (100%) based on results for the 2014-2016 performance cycle between threshold and target.
Shares for the 2015 award are shown at the maximum level (200%) based on results for the first two years of the 2015-2017 performance cycle above target.
Shares for the 2016 award are shown at the maximum level (200%) based on results for the first year of the 2016-2018 performance cycle above target.
2Value based on the number of performance shares reflected in column (i) multiplied by $28.77, the year-end per share closing stock price for 2016.
While for purposes of the Outstanding Equity Awards at Fiscal Year End 2016 table, the number of shares and value shown for the 2014-2016 performance cycle is at 100% of target, the actual results for the performance period certified by the compensation committee and approved by the board of directors on February 16, 2017 resulted in vesting at 68% of target. For further information, see “Long-Term Incentives” in the section entitled “Compensation Discussion and Analysis.”
Option Exercises and Stock Vested During 2016
  Stock Awards 
Name
(a)
Number of Shares
Acquired on Vesting
(#)
(d)1

 
Value Realized
on Vesting
($)
(e)2

 
David L. Goodin13,264
 244,787
 
Doran N. Schwartz3,661
 67,564
 
David C. Barney—
 —
 
Jeffrey S. Thiede—
 —
 
Martin A. Fritz—
 —
 
1 
Reflects performance shares for the 2013-2015 performance period that vested on December 31, 2015, and were approved February 11, 2016. 
2 
Reflects the value of vested performance shares based on the closing stock price of $16.31 per share on February 11, 2016, and the dividend equivalents paid on the vested shares. 

MDU Resources Group, Inc. Proxy Statement 41

Proxy Statement

Pension Benefits for 2016
Name
(a)		 Plan Name
(b)		 
Number of
Years Credited
Service
(#)
(c)1

 
Present Value
of Accumulated
Benefit
($)
(d)

 Payments
During Last
Fiscal Year
($)
(e)
 
David L. Goodin Pension 26
 1,107,307
 —
 

 
Basic SISP 2
 10
 2,285,113
 —
 

 
Excess SISP 3
 26
 36,888
 —
 

 
 

 

 

 
Doran N. Schwartz Pension 4
 110,012
 —
 

 
Basic SISP 2
 9
 821,142
 —
 

 
Excess SISP 3
 n/a
 —
 —
 

 
 

 

 

 
David C. Barney 
Pension 3
 n/a
 —
 —
 

 
Basic SISP 2
 10
 1,383,697
 —
 

 
Excess SISP 3
 n/a
 —
 —
 

 
 

 

 

 
Jeffrey S. Thiede 
Pension 3
 n/a
 —
 —
 

 
Basic SISP 3
 n/a
 —
 —
 

 
Excess SISP 3
 n/a
 —
 —
 

 
 

 

 

 
Martin A. Fritz 
Pension 3
 n/a
 —
 —
 

 
Basic SISP 3
 n/a
 —
 —
 

 
Excess SISP 3
 n/a
 —
 —
 
   
1 
Years of credited service related to the pension plan reflects the years of participation in the plan as of December 31, 2009, when the pension plan was frozen. Years of credited service related to the Basic SISP reflects the years toward full vesting of the benefit which is 10 years. Years of credited service related to Excess SISP reflects the same number of credited years of services as the pension plan. 
   
2 
The present value of accumulated benefits for the Basic SISP assumes the named executive officer would be fully vested in the benefit on the benefit commencement date; therefore, no reduction was made to reflect actual vesting levels. 
   
3 
Messrs. Barney, Thiede, and Fritz are not eligible to participate in the pension plans. Messrs. Thiede and Fritz do not participate in the SISP. Mr. Goodin is the only named executive officer eligible to participate in the Excess SISP 
           
The amounts shown for the pension plan, Basic SISP, and Excess SISP represent the actuarial present values of the executives’ accumulated benefits accrued as of December 31, 2016, calculated using:
a 3.54% discount rate for the Basic SISP and Excess SISP;
a 3.80% discount rate for the pension plan;
the Society of Actuaries RP-2014 Adjusted to 2006 Total Dataset Mortality with Scale MP-2016 for post-retirement mortality; and
no recognition of future salary increases or pre-retirement mortality.
The actuary assumed a retirement age of 60 for the pension, Basic SISP, and Excess SISP benefits and assumed retirement benefits commence at age 60 for the pension and 65 for Basic and Excess SISP benefits.
Pension Plan
The MDU Resources Group, Inc. Pension Plan for Non-Bargaining Unit Employees (pension plan) applies to employees hired before 2006 and was amended to cease benefit accruals as of December 31, 2009. The benefits under the pension plan are based on a participant’s average annual salary over the 60 consecutive month period where the participant received the highest annual salary between 1999 and 2009. Benefits are paid as straight life annuities for single participants and as actuarially reduced annuities with a survivor benefit for married participants unless they choose otherwise.
Supplemental Income Security Plan
The Supplemental Income Security Plan (SISP), a defined benefit nonqualified retirement plan, is offered to select key managers and executives. SISP benefits are determined by reference to levels defined within the plan. Our compensation committee, after receiving recommendations from our CEO, determined each participant’s level within the plan. On February 11, 2016, the SISP plan was amended so no new participants would be added to the plan and current benefit levels were frozen for existing participants.

42 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Basic SISP Benefits
Basic SISP is a supplemental retirement benefit intended to augment the retirement income provided under the pension plans. The Basic SISP benefits are subject to the following ten-year vesting schedule:
0% vesting for less than three years of participation;
20% vesting for three years of participation;
40% vesting for four years of participation; and
an additional 10% vesting for each additional year of participation up to 100% vesting for ten years of participation.
Participants can elect to receive the Basic SISP as:
monthly retirement benefits only;
monthly death benefits paid to a beneficiary only; or
a combination of retirement and death benefits, where each benefit is reduced proportionately.
Regardless of the election, if the participant dies before the SISP retirement benefit commences, only the SISP death benefit is provided.
Basic SISP benefits vested as of December 31, 2004, are grandfathered under Section 409A of the Internal Revenue Code (Section 409A) and are subject to the SISP provisions then in effect. Typically, the grandfathered Section 409A SISP benefits are paid over 15 years, with benefits commencing when the participant attains age 65 or when the participant retires if they work beyond age 65. Basic SISP benefits vesting after December 31, 2004 are governed by amended provisions in the plan intended to comply with Section 409A. The SISP benefits for key employees as defined by Section 409A commence six months after the participant attains age 65 or when the participant retires if they work beyond age 65. The benefits are paid over a 173 month period where the first payment includes the equivalent of six-months of payments plus interest equal to one-half of the annual prime interest rate on the participant’s last date of employment.
The following are Messrs. Goodin and Barney’s benefits under the grandfathered provision and those subject to Section 409A.
 
Grandfathered
($)

Subject to §409A
($)
Total
($)

David L. Goodin247,951
2,037,162
2,285,113
David C. Barney339,092
1,044,605
1,383,697
Excess SISP Benefits
Excess SISP is an excess retirement benefit relating to Internal Revenue Code limitations on retirement benefits provided under the pension plans. Excess SISP benefits are equal to the difference between the monthly retirement benefits that would have been payable to the participant under the pension plans absent the limitations under the Internal Revenue Code and the actual benefits payable to the participant under the pension plans. Participants are only eligible for the Excess SISP benefits if the participant is fully vested under the pension plan, their employment terminates prior to age 65, and benefits under the pension plan are reduced due to limitations under the Internal Revenue Code on plan compensation.

In 2009, the SISP was amended to limit eligibility for the Excess SISP benefit. Mr. Goodin is the only named executive officer eligible for the Excess SISP benefit and must remain employed with the company until age 60 in order to receive the benefit. Benefits generally commence six months after the participant’s employment terminates and continue to age 65 or until the death of the participant, if prior to age 65.
Both Basic and Excess SISP benefits are forfeited if the participant’s employment is terminated for cause.

MDU Resources Group, Inc. Proxy Statement 43

Proxy Statement

Nonqualified Deferred Compensation for 2016
Deferred Annual Incentive Compensation
Executives participating in the annual incentive compensation plans may elect to defer up to 100% of their annual incentive awards. Deferred amounts accrue interest at a rate determined annually by the compensation committee. The interest rate in effect for 20152016 was 4.66% or the “Moody’s Rate,” which is the4.5% based on an average of (i) the number that results from adding the daily Moody’s U.S. Long-Term Corporate Bond Yield

MDU Resources Group, Inc. Proxy Statement 49

Proxy Statement

Average for “A” rated companies as of the last day of each month for the 12-month period ending October 31 and dividing by 12 and (ii) the number that results from adding the daily Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” and “Baa” rated companies as of the last day of each month for the 12-month period ending October 31 and dividing by 12.companies. The deferred amount will be paid in accordance with the participant’s election, following termination of employment or beginning in the fifth year following the year the award was granted.earned. The amounts will beare paid in accordance with the participant’s election in either a lump sum or in monthly installments not to exceed 120 months. In the event of a change of control, all amounts deferred would immediately become immediately payable.
A For purposes of deferred annual incentive compensation, a change of control for purposes of Deferred Annual Incentive Compensation is defined as:
an acquisition during aan 12-month period of 30% or more of the total voting power of our stockstock;
an acquisition of our stock that, together with stock already held by the acquirer, constitutes more than 50% of the total fair market value or total voting power of our stockstock;
replacement of a majority of the members of our board of directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of our board of directorsdirectors; or
acquisition of our assets having a gross fair market value at least equal to 40% of the total gross fair market value of all of our assets.
Nonqualified Defined Contribution Plan
The company adopted the Nonqualified Defined Contribution Plan, effective January 1, 2012, to provide deferred compensation for a select group of employees. The compensation committee determines the amount of employer contributions under the Nonqualified Defined Contribution Plan and the obligations under the plan constitute an unsecured promise of the company to make such payments. The company credits contributions to plan accounts which capture the hypothetical investment experience based on the participant’s elections which individually vest four years after each contribution in accordance with the terms of the plan. Amounts shown as aggregate earnings in the table below for Messrs. Thiede and Fritz reflect the change in investment value at market rates. Participants may elect to receive their vested contributions and investment earnings either in a lump sum upon separation from service with the company or in annual installments over a period of years upon the later of (i) separation from service and (ii) age 65. Plan benefits become fully vested if the participant dies while actively employed. Benefits are forfeited if the participant’s employment is terminated for cause.
The table below includes individual contributions from deferrals of annual incentive compensation and company contributions under the Nonqualified Defined Contribution Plan:
Name
(a)
 
Executive
Contributions in
Last FY
($)
(b)

 
Registrant
Contributions in
Last FY
($)
(c)

 
Aggregate
Earnings in
Last FY
($)
(d)

 
Aggregate
Withdrawals/
Distributions
($)
(e)

 
Aggregate
Balance at
Last FYE
($)
(f)

 
      
      
      
David L. Goodin 188,373
 —
 7,305
 —
 195,677
1 
Doran N. Schwartz —
 —
 —
 —
 —
 
David C. Barney —
 —
 —
 —
 —
 
Jeffrey S. Thiede —
 100,000
 28,044
 —
 396,929
2 
Martin A. Fritz —
 100,000
 13,936
 —
 211,748
2 
   
1 
Mr. Goodin deferred 50% of his 2015 annual incentive compensation which was $376,745 as reported in the Summary Compensation Table for 2015.
2 
Messrs. Thiede and Fritz each received $100,000 under the Nonqualified Defined Contribution Plan for 2016. Mr. Thiede’s balance also includes contributions of $150,000 for 2015, $75,000 for 2014, and $33,000 for 2013. Mr. Fritz’s balance includes contributions of $100,000 for 2015. Each of these amounts is reported in column (i) of the Summary Compensation Table in the Proxy Statement for its respective year, where applicable.


44 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Potential Payments upon Termination or Change of Control
The following tables showPotential Payments upon Termination or Change of Control table shows the payments and benefits our named executive officers would receive in connection with a variety of employment termination scenarios andor upon a change of control. For the named executive officers, other than Mr. Bietz, the information assumes the terminations andor the change of control occurred on December 31, 2015. For Mr. Bietz, the information relates to his actual retirement on July 17, 2015,2016.
The table excludes compensation and assumesbenefits that our named executive officers would have already earned during their employment with us whether or not a termination or change of control event had occurred on December 31, 2015. All of the payments and benefits described below would be provided by the company or its subsidiaries.
The tables exclude compensation and benefits provided under plans or arrangements that do not discriminate in favor of the named executive officers and that are generally available to all salaried employees, such as benefits under our qualified defined benefit pension plan (for employees hired before 2006), accrued vacation pay, continuation of health care benefits, and life insurance benefits. The tables include amounts under the Nonqualified Defined Contribution Plan, butalso do not include the named executive officers’nonqualified defined contribution or deferred annual incentive compensation. See the Pension Benefits for 2015 tablecompensation amounts which are shown and explained in the Nonqualified Deferred Compensation for 2015 table, and accompanying narratives, for a description of the named executive officers’ accumulated benefits under our qualified defined benefit pension plans, the Nonqualified Defined Contribution Plan, and their deferred annual incentive compensation.
The calculation of the present value of excess SISP benefits our named executive officers would be entitled to upon termination of employment under the SISP was computed based on calculations assuming an age rounded to the nearest whole year of age. Actual payments may differ. The terms of the excess SISP benefit are described following the Pension Benefits for 20152016 table.
We provide disability benefits to some of our salaried employees equal to 60% of their base salary, subject to a cap on the amount of base salary taken into account when calculating benefits. For officers, the limit on base salary is $200,000. For other salaried employees, the limit is $100,000. For all salaried employees, disability payments continue until age 65 if disability occurs at or before age 60 and for 5 years if disability occurs between the ages of 60 and 65. Disability benefits are reduced for amounts paid as retirement benefits. The amounts in the tables reflect the present value of the disability benefits attributable to the additional $100,000 of base salary recognized for executives under our disability program, subject to the 60% limitation, after reduction for amounts that would be paid as retirement benefits.Compensation
Upon a change of control, share-based awardsannual incentives granted under our Long-Term Performance-Based Incentive Plan (LTIP) would vest at target and non-share-based awards arebe paid in cash. All performance share awards for Messrs. Goodin, Schwartz, Barney, and Thiede and Bietz and thewere awarded their annual incentives for 2016 under the LTIP and would receive the value of their annual incentive compensation at the target amount under the change of control scenarios. No amounts are shown for annual incentives in the tables for Messrs. Goodin, Barney, and Thiede under termination scenarios, as they would be eligible to receive their annual incentives at the level of performance measures were achieved for the performance period regardless of termination scenarios occurring on December 31, 2016.

Messrs. Schwartz and O’Bryan whichFritz were awardedgranted their annual incentive awards under the Long-Term Performance-BasedExecutive Incentive Compensation Plan (EICP) which has no change of control provision in regards to annual incentive compensation other than for deferred compensation and requires participants to remain employed with the company through the service year to be eligible for a payout. No amounts are shown for annual incentives in the tables for Messrs. Schwartz and Fritz, as they would be eligible to receive their annual incentive at the level performance measures were achieved for the performance period regardless of termination or change of control scenarios occurring on December 31, 2016.

Upon a change of control, performance share awards under the LTIP would be deemed fully earned and vest at their target levels.levels for all named executive officers. For this purpose, the term “change of control” is defined in the LTIP as:
the acquisition by an individual, entity, or group of 20% or more of our outstanding common stockstock;
a change in a majority of our board of directors since April 22, 1997, without the approval ofwhose election or nomination was not approved by a majority of the incumbent board members as of April 22, 1997, or whose election was approved by such board membersmembers;
consummation of a merger or similar transaction or sale of all or substantially all of our assets, unless our stockholders immediately prior to the transaction beneficially own more than 60% of the outstanding common stock and voting power of the resulting corporation in substantially the same proportions as before the merger, no person owns 20% or more of the resulting corporation’s outstanding common

50 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

stock or voting power except for any such ownership that existed before the merger and at least a majority of the board of the resulting corporation is comprised of our directorsdirectors; or
stockholder approval of our liquidation or dissolution.
PerformanceFor termination scenarios, performance share awards will beare forfeited if the participant’s employment terminates for any reason before the participant has reached age 55 and completed 10 years of service. Performance shares and related dividend equivalents for those participants whoseIf a participant’s employment is terminated other than for cause after the participant has reachedreaching age 55 and completedcompleting 10 years of service, will beperformance shares are prorated as follows:
if the termination of employment occurs during the first year of the performance period the= shares are forfeitedforfeited;
if the termination of employment occurs during the second year of the performance period the executive receives a prorated portion of any= performance shares earned are prorated based on the number of months employed during the performance periodperiod; and
if the termination of employment occurs during the third year of the performance period the executive receives the= full amount of any performance shares earned.
As of December 31, 2015, Messrs. Goodin, Schwartz, and Thiede had not satisfied this age and years of service requirement. Accordingly, if a December 31, 2015 termination other than for cause without a change of control is assumed, the named executive officers’ 2015-2017 performance share awards would be forfeited; any amounts earned under the 2014-2016 performance share award for Mr. Barney would be reduced by one-third and for Mr. Bietz by 17/36 and such awards for Messrs. Goodin, Schwartz, and Thiede would be forfeited; and any amounts earned under the 2013-2015 performance share award for Mr. Bietz would not be reduced and the awards for Messrs. Goodin and Schwartz would be forfeited. Messrs. Barney and Thiede had no 2013-2015 performance share awards, and Mr. O’Bryan had no 2015-2017, 2014-2016, or 2013-2015 performance share awards. The number of performance shares earned following a termination depends on actual performance through the full performance period. As actual performance for the 2013-2015 performance share awards has been determined, the amounts for these awards in the event of a termination without a change of control were based on actual performance, which resulted in vesting of 31% of the target award. For the 2014-2016 performance share awards, because we do not know what actual performance through the entire performance period will be, we have assumed target performance will be achieved and, therefore, show two-thirds of the target award, except for Mr. Bietz, which shows 19/36 of the target award. No amounts are shown for the 2015-2017 performance share awards because such awards would be forfeited. Although vesting would only occur after completion of the performance period, the amounts shown in the tables were not reduced to reflect the present value of the performance shares that could vest. Dividend equivalents attributable to earned performance shares would also be paid. Dividend equivalents accrued through December 31, 2015, are included in the amounts shown, except for Mr. Bietz which are accrued through his retirement date.
The value of the vesting of performance shares shown in the tables was determined by multiplying the number of performance shares that would vest due to termination or a change of control by the closing price of our stock on December 31, 2015.
The compensation committee may consider providing severance benefits on a case-by-case basis for employment terminations. The compensation committee adopted a checklist of factors in February 2005 to consider when determining whether any such severance benefits should be paid. Except for Mr. Bietz, the tables do not reflect any such severance benefits, as these benefits are made in the discretion of the committee on a case-by-case basis and it is not possible to estimate the severance benefits, if any, that would be paid.received.


 
MDU Resources Group, Inc. Proxy Statement 5145

Proxy Statement
 

David L. GoodinBased on the above criteria, the named executive officers would earn performance shares upon termination or a change of control as follows:
Executive Benefits and
Payments Upon
Termination or
Change of Control		 Voluntary
Termination
($)
 Not for
Cause
Termination
($)
 Death
($)
 Disability
($)
 
Change of
Control
(With Termination)
($)

 Change of
Control
(Without
Termination)
($)
Compensation:            
Short-term Incentive1
         755,000
 755,000
2013-2015 Performance Shares 

 

 

 

 875,656
 875,656
2014-2016 Performance Shares         665,794
 665,794
2015-2017 Performance Shares         1,375,085
 1,375,085
Benefits and Perquisites:            
Regular SISP2
 1,186,624
 1,186,624
   2,121,340
 1,186,624
  
SISP Death Benefits3
     6,351,958
      
Disability Benefits4
       13,821
    
Total 1,186,624
 1,186,624
 6,351,958
 2,135,161
 4,858,159
 3,671,535
  
1 
Represents the target 2015 annual incentive, which would be deemed earned upon change of control under the Long-Term Performance-Based Incentive Plan.
2 
Represents the present value of Mr. Goodin's vested regular SISP benefit as of December 31, 2015, which was $12,888 per month for 15 years, commencing at age 65. Present value was determined using a 3.76% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2015 table. The amount payable for a disability reflects a credit for one additional year of vesting, which would result in full vesting of the 2013 SISP upgrade.
3 
Represents the present value of 180 monthly payments of $46,080 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 3.76% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2015 table.
4 
Represents the present value of the disability benefit after reduction for amounts that would be paid as retirement benefits. Present value was determined using a 3.96% discount rate.
David L. GoodinDoran N. SchwartzDavid C. BarneyJeffrey S. ThiedeMartin A. Fritz
As of December 31, 2016, has the participant reached age 55 and have 10 years of service?YesNoYesNoNo
Performance Share Cycle 2014-2016Fully EarnedForfeitedFully EarnedForfeitedForfeited
Performance Share Cycle 2015-2017ProratedForfeitedProratedForfeitedForfeited
Performance Share Cycle 2016-2018ForfeitedForfeitedForfeitedForfeitedForfeited
For purposes of calculating the performance share value, the number of vesting shares was multiplied by the closing stock price for the last market day of the year, which was December 30, 2016. Dividend equivalents based on the number of vesting shares are also included in the amounts presented.
Benefits and Perquisites
Basic SISP benefits presented in the table represent the present value of vested Basic SISP as of December 31, 2016 commencing at age 65 and payable for 15 years. Only Messrs. Goodin, Schwartz, and Barney are eligible for Basic SISP benefits. Present value was determined using a 3.54% discount rate. The terms of the Basic SISP benefit are described following the Pension Benefits for 2016 table. In the event of death, Messrs. Goodin, Schwartz, and Barney’s beneficiaries would receive monthly death benefit payments for 15 years.
The monthly SISP retirement and death benefits used in the present value calculations were:
 
Monthly SISP Retirement Payment
($)

Monthly SISP Death Payment
($)

David L. Goodin23,040
46,080
Doran N. Schwartz8,744
21,872
David C. Barney9,125
21,872
The Basic SISP amounts under a disability scenario as shown for Messrs. Schwartz and Barney reflect credit for an additional year of vesting of their 2014 SISP upgrades which would result in full vesting of the upgrade.
We provide disability benefits to some of our salaried employees equal to 60% of their base salary, subject to a salary limit of $200,000 for officers and $100,000 for other salaried employees when calculating benefits. For all eligible employees, disability payments continue until age 65 if disability occurs at or before age 60 and for five years if disability occurs between the ages of 60 and 65. Disability benefits are reduced for amounts paid as retirement benefits. The disability amounts in the table reflect the present value of the disability benefits attributable to the additional $100,000 of base salary recognized for executives under our disability program, subject to the 60% limitation, after reduction for amounts that would be paid as retirement benefits. For Messrs. Goodin and Schwartz, who participate in the pension plan, the amount represents the present value of the disability benefit after reduction for retirement benefits using a discount rate of 3.8%. Because Mr. Goodin’s retirement benefit is greater than the disability benefit, the amount shown is zero. For Messrs. Barney, Thiede, and Fritz, who do not participate in the pension plan, the amount represents the present value of the disability benefit without reduction for retirement benefits using the discount rate of 3.54% which is associated with the SISP plan which is considered a reasonable rate for purposes of the calculation.
Severance
The compensation committee generally considers providing severance benefits on a case-by-case basis. Because severance payments are at the discretion of the compensation committee, no amounts are presented in the tables with the exception of Mr. Fritz. Mr. Fritz’s offer letter provided for a lump sum payment if his employment terminates during the two years after his date of hire as a result of: (1) a change of control of the company; (2) the company divests WBI Holdings, Inc. or a significant portion of its assets; (3) a material diminution of his authority or job duties and/or a change to whom he reports; or (4) a reduction in his base salary other than a reduction in base salary imposed on all senior officers.


Doran N. Schwartz
Executive Benefits and
Payments Upon
Termination or
Change of Control		 Voluntary
Termination
($)
 Not for
Cause
Termination
($)
 Death
($)
 Disability
($)
 
Change of
Control
(With Termination)
($)

 Change of
Control
(Without
Termination)
($)
Compensation:            
2013-2015 Performance Shares 











241,671

241,671
2014-2016 Performance Shares 











174,945

174,945
2015-2017 Performance Shares 











276,831

276,831
Benefits and Perquisites:            
Regular SISP1
 401,962

401,962




752,715

401,962



SISP Death Benefits2
 





3,014,975









Disability Benefits3
 








736,474






Total 401,962

401,962

3,014,975

1,489,189

1,095,409

693,447
              
1 
Represents the present value of Mr. Schwartz's vested regular SISP benefit as of December 31, 2015, which was $5,840 per month for 15 years, commencing at age 65. Present value was determined using a 3.76% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2015 table. The amount payable for a disability reflects a credit for two additional years of vesting, which would result in full vesting of the 2013 and 2014 SISP upgrades.
2 
Represents the present value of 180 monthly payments of $21,872 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 3.76% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2015 table.
3 
Represents the present value of the disability benefit after reduction for amounts that would be paid as retirement benefits. Present value was determined using a 3.96% discount rate.

 
5246 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

David C. BarneyPotential Payments upon Termination or Change of Control Table
Executive Benefits and
Payments Upon
Termination or
Change of Control		 Voluntary
Termination
($)
 Not for
Cause
Termination
($)
 Death
($)
 Disability
($)
 Change of
Control
(With
Termination)
($)
 Change of
Control
(Without
Termination)
($)
Compensation:            
Short-term Incentive1
 











150,000

150,000
2013-2015 Performance Shares 
















2014-2016 Performance Shares 98,474

98,474

98,474

98,474

147,721

147,721
2015-2017 Performance Shares         223,801
 223,801
Benefits and Perquisites:            
Regular SISP2
 1,075,709

1,075,709




1,289,201

1,075,709



SISP Death Benefits3
     3,014,975
      
Disability Benefits4
       273,954
    
Total 1,174,183

1,174,183

3,113,449

1,661,629

1,597,231

521,522
  
1 
Represents the target 2015 additional annual incentive, which would be deemed earned upon change of control under the Long-Term Performance-Based Incentive Plan.
2 
Represents the present value of Mr. Barney's vested regular SISP benefit as of December 31, 2015, which was $9,125 per month for 15 years, commencing at age 65. Present value was determined using a 3.76% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2015 table. The amount payable for a disability reflects a credit for two additional years of vesting, which would result in full vesting of the 2014 SISP upgrade.
3 
Represents the present value of 180 monthly payments of $21,872 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 3.76% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2015 table.
4 
Represents the present value of the disability benefit. Present value was determined using the 3.76% discount rate applied for purposes of the SISP calculations.
Executive Benefits and Payments Upon Termination or Change of Control Voluntary
Termination
($)
Not for
Cause
Termination
($)
Death
($)
Disability
($)
Change of
Control
(With
Termination)
($)

Change of
Control
 (Without
Termination)
($)

David L. Goodin       
 Compensation:       
  Annual Incentive —
—
—
—
755,000
755,000
  Performance Shares 2,498,923
2,498,923
2,498,923
2,498,923
6,142,835
6,142,835
 Benefits and Perquisites:       
  Basic SISP 2,283,801
2,283,801
—
2,283,801
2,283,801
—
  SISP Death Benefits —
—
6,447,100
—
—
—
  Disability Benefits —
—
—
—
—
—
 Total 4,782,724
4,782,724
8,946,023
4,782,724
9,181,636
6,897,835
Doran N. Schwartz       
 Compensation:       
  Annual Incentive —
—
—
—
—
—
  Performance Shares —
—
—
—
1,300,761
1,300,761
 Benefits and Perquisites:       
  Basic SISP 659,072
659,072
—
824,254
659,072
—
  SISP Death Benefits —
—
3,060,134
—
—
—
  Disability Benefits —
—
—
713,381
—
—
 Total 659,072
659,072
3,060,134
1,537,635
1,959,833
1,300,761
David C. Barney       
 Compensation:       
  Annual Incentive —
—
—
—
305,100
305,100
  Performance Shares 468,381
468,381
468,381
468,381
1,145,462
1,145,462
 Benefits and Perquisites:       
  Basic SISP 1,141,490
1,141,490
—
1,368,036
1,141,490
—
  SISP Death Benefits —
—
3,060,134
—
—
—
  Disability Benefits —
—
—
275,389
—
—
 Total 1,609,871
1,609,871
3,528,515
2,111,806
2,592,052
1,450,562
Jeffrey S. Thiede       
 Compensation:       
  Annual Incentive —
—
—
—
318,750
318,750
  Performance Shares —
—
—
—
1,209,696
1,209,696
 Benefits and Perquisites:       
  Disability Benefits —
—
—
506,165
—
—
 Total —
—
—
506,165
1,528,446
1,528,446
Martin A. Fritz       
 Compensation:       
  Annual Incentive —
—
—
—
—
—
  Performance Shares —
—
—
—
1,054,943
1,054,943
 Benefits and Perquisites:       
  Disability Benefits —
—
—
600,673
—
—
 Severance —
500,000
—
—
500,000
—
 Total —
500,000
—
600,673
1,554,943
1,054,943
   


Jeffrey S. Thiede
Executive Benefits and
Payments Upon
Termination or
Change of Control		 Voluntary
Termination
($)		 Not for
Cause
Termination
($)		 Death
($)
 Disability
($)
 
Change of
Control
(With Termination)
($)

 Change of
Control
(Without
Termination)
($)
Compensation:            
Short-term Incentive1
         340,000
 340,000
2013-2015 Performance Shares         
 
2014-2016 Performance Shares         155,511
 155,511
2015-2017 Performance Shares         240,817
 240,817
Benefits and Perquisites:            
Nonqualified Defined Contribution Plan Death Benefit2
 



268,885








Disability Benefits3
 






541,543




Total 



268,885

541,543

736,328

736,328
  
1 
Represents the target 2015 annual incentive, which would be deemed earned upon change of control under the Long-Term Performance-Based Incentive Plan.
2 
Represents the value of Mr. Thiede's unvested Nonqualified Defined Contribution Plan account at December 31, 2015, which would be paid upon death.
3 
Represents the present value of the disability benefit. Present value was determined using the 3.76% discount rate applied for purposes of the SISP calculations. Though Mr. Thiede is not a participant in the SISP, this rate is considered reasonable for purposes of this calculation as it would be applied if Mr. Thiede were a SISP participant.

 
MDU Resources Group, Inc. Proxy Statement 5347

Proxy Statement
 

Patrick L. O’Bryan
Executive Benefits and
Payments Upon
Termination or
Change of Control		 Voluntary
Termination
($)
 Not for
Cause
Termination
($)
 Death
($)
 Disability
($)
 Change of
Control
(With
Termination)
($)
 Change of
Control
(Without
Termination)
($)
Compensation:            
Short-term Incentive1
         900,000
 900,000
Retention Incentive 150,000
 150,000
 150,000
 150,000
 150,000
 150,000
Benefits and Perquisites:            
Disability Benefits2
       524,844
    
Total 150,000
 150,000
 150,000
 674,844
 1,050,000
 1,050,000
  
1 
Represents the target 2015 annual incentive, which would be deemed earned upon change of control under the Long-Term Performance-Based Incentive Plan.
2 
Represents the present value of the disability benefit. Present value was determined using the 3.76% discount rate applied for purposes of the SISP calculations. Though Mr. O'Bryan is not a participant in the SISP, this rate is considered reasonable for purposes of this calculation as it would be applied if Mr. O'Bryan were a SISP participant.


Steven L. Bietz
Executive Benefits and
Payments Upon
Termination or
Change of Control1
 Voluntary
Termination
($)
 Not for
Cause
Termination
($)		 Death
($)		 Disability
($)		 Change of
Control
($)

Compensation:           
2013-2015 Performance Shares 94,085
       309,103
 
2014-2016 Performance Shares 114,770
 
 
 
 221,602
 
2015-2017 Performance Shares         287,750
 
Total 208,855
       818,455
 
            
1 
Mr. Bietz retired on July 17, 2015. The information in this table relates to his actual retirement effective July 17, 2015, and assumes that a change of control occurred on December 31, 2015. The amount shown under Voluntary Termination for the 2013-2015 Performance Shares is based on actual performance, resulting in payment of 31% of the target award. The amount shown under Voluntary Termination for the 2014-2016 Performance Shares is the target award, prorated based on the number of months Mr. Bietz worked during the performance period. The amounts shown under Change of Control are the target awards for the entire performance period. His termination qualified as an early retirement under our qualified pension plan and our SISP. These plans and Mr. Bietz's benefits under them are described in the Pension Benefits for 2015 table and accompanying narratives. Mr. Bietz was paid a lump-sum payment of $750,000, less applicable tax withholding amounts, for the entry into a waiver and voluntary release agreement and in recognition of his 34 years of service.
AUDIT MATTERS
ITEM 4: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017
The audit committee at its February 2017 meeting appointed Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017. The board of directors concurred with the audit committee’s decision. Deloitte & Touche LLP has served as our independent registered public accounting firm since fiscal year 2002.
Although your ratification vote will not affect the appointment or retention of Deloitte & Touche LLP for 2017, the audit committee will consider your vote in determining its appointment of our independent registered public accounting firm for the next fiscal year. The audit committee, in appointing our independent registered public accounting firm, reserves the right, in its sole discretion, to change an appointment at any time during a fiscal year if it determines that such a change would be in our best interests.
A representative of Deloitte & Touche LLP will be present at the annual meeting and will be available to respond to appropriate questions. We do not anticipate that the representative will make a prepared statement at the annual meeting; however, he or she will be free to do so if he or she chooses.
The board of directors recommends a vote “for” the ratification of the appointment of
Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017.
Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2017 requires the affirmative vote of a majority of our common stock present in person or represented by proxy at the annual meeting and entitled to vote on the proposal. Abstentions will count as votes against this proposal.
Annual Evaluation and Selection of Deloitte & Touche LLP
The audit committee annually evaluates the performance of its independent registered public accounting firm, including the senior audit engagement team, and determines whether to re-engage the current independent accounting firm or consider other firms. Factors considered by the audit committee in deciding whether to retain the current independent accounting firm include:
Deloitte & Touche LLP’s capabilities considering the complexity of our business and the resulting demands placed on Deloitte & Touche LLP in terms of technical expertise and knowledge of our industry and business;
the quality and candor of Deloitte & Touche LLP’s communications with the audit committee and management;
Deloitte & Touche LLP’s independence;
the quality and efficiency of the services provided by Deloitte & Touche LLP, including input from management on Deloitte & Touche LLP’s performance and how effectively Deloitte & Touche LLP demonstrated its independent judgment, objectivity, and professional skepticism;
external data on audit quality and performance, including recent Public Company Accounting Oversight Board reports on Deloitte & Touche LLP and its peer firms; and
the appropriateness of Deloitte & Touche LLP’s fees, tenure as our independent auditor, including the benefits of a longer tenure, and the controls and processes in place that help ensure Deloitte & Touche LLP’s continued independence.
Based on this evaluation, the audit committee and the board believe that retaining Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2017, is in the best interests of our company and its stockholders.
The audit committee also oversees the process for, and ultimately approves, the selection of our independent registered public accounting firm’s lead engagement partner at the five-year mandatory rotation period. Prior to the mandatory rotation period in 2017, at the audit committee’s instruction, Deloitte & Touche LLP selected candidates to be considered for the lead engagement partner role, who were then interviewed by members of our company’s senior management. After considering the candidates recommended by Deloitte & Touche LLP,


 
54 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Director Compensation for 2015
Name1 
(a)
 
Fees Earned
or Paid
in Cash
($)
(b)

 
Stock
Awards
($)
(c)2

 
Option Awards
($)
(d)

 Non-Equity
Incentive Plan
Compensation
($)
(e)
 Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(f)
 
All Other
Compensation
($)
(g)3
 Total
($)
(h)
Thomas Everist 75,000
 110,000

—
 —
 —
 156 185,156
Karen B. Fagg 75,000
 110,000

—
 —
 —
 656 185,656
Mark A. Hellerstein 65,000
 110,000

—
 —
 —
 156 175,156
A. Bart Holaday 65,000

110,000

—
 —
 —
 156 175,156
Dennis W. Johnson 80,000
 110,000

—
 —
 —
 156 190,156
William E. McCracken 65,000
 110,000

—
 —
 —
 156 175,156
Patricia L. Moss 65,000
 110,000

—
 —
 —
 156 175,156
Harry J. Pearce 155,000
 110,000

—
 —
 —
 156 265,156
John K. Wilson 65,000
4 
110,000

—
 —
 —
 156 175,156
  
1 
J. Kent Wells, who resigned as vice chairman of MDU Resources Group, Inc., chief executive officer of Fidelity Exploration & Production Company and a director of MDU Resources Group, Inc. effective February 28, 2015, did not receive any additional compensation for services provided as a director.
2 
Reflects the aggregate grant date fair value of 6,039 shares of MDU Resources Group, Inc. stock purchased for our non-employee directors measured in accordance with Financial Accounting Standards Board generally accepted accounting principles for stock based compensation in FASB Accounting Standards Codification Topic 718. The grant date fair value is based on the purchase price of our common stock on the grant date on November 18, 2015, which was $18.212. The $17.73 in cash paid to each director for the fractional shares is included in the amounts reported in column (c) to this table.
3 
Group life insurance premium and a matching charitable contribution of $500 for Ms. Fagg.
4 
Includes $64,991 that Mr. Wilson received in our common stock in lieu of cash.
The following table shows the cash and stock retainers payable to our non-employee directors.
   
Base Retainer  $65,000
Additional Retainers:   
Non-Executive Chairman  90,000
Lead Director, if any  33,000
Audit Committee Chairman  15,000
Compensation Committee Chairman  10,000
Nominating and Governance Committee Chairman 10,000
Annual Stock Grant1
  110,000
  
1 
The annual stock grant is a grant of shares equal in value to $110,000.
There are no meeting fees.
In addition to liability insurance, we maintain group life insurance in the amount of $100,000 on each non-employee director for the benefit of each director’s beneficiaries during the time each director serves on the board. The annual cost per director is $156.
Directors may defer all or any portion of the annual cash retainer and any other cash compensation paid for service as a director pursuant to the Deferred Compensation Plan for Directors. Deferred amounts are held as phantom stock with dividend accruals and are paid out in cash over a five-year period after the director leaves the board.
Directors are reimbursed for all reasonable travel expenses including spousal expenses in connection with attendance at meetings of the board and its committees. All amounts together with any other perquisites were below the disclosure threshold for 2015.
Our post-retirement income plan for directors was terminated in May 2001 for current and future directors. The net present value of each director’s benefit was calculated and converted into phantom stock. Payment is deferred pursuant to the Deferred Compensation Plan for Directors and will be made in cash over a five-year period after the director’s retirement from the board.

MDU Resources Group, Inc. Proxy Statement 55

Proxy Statement

Our director stock ownership policy contained in our corporate governance guidelines requires each director to own our common stock equal in value to five times the director’s annual cash base retainer. Shares acquired through purchases on the open market and participation in our director stock plans will be considered in ownership calculations as will ownership of our common stock by a spouse. A director is allowed five years commencing January 1 of the year following the year of that director’s initial election to the board to meet the requirements. The level of common stock ownership is monitored with an annual report made to the compensation committee of the board. For stock ownership, please see “Security Ownership.”
Narrative Disclosure of our Compensation Policies and Practices
as They Relate to Risk Management
The human resources department has conducted an assessment of the risks arising from our compensation policies and practices for all employees and concluded that none of these risks is reasonably likely to have a material adverse effect on the company. Based on the human resources department’s assessment and taking into account information received from the risk identification process, senior management and our management policy committee concluded that risks arising from our compensation policies and practices for all employees are not reasonably likely to have a material adverse effect on the company. After review and discussion with senior management, the compensation committee concurred with this assessment.
As part of its assessment of the risks arising from our compensation policies and practices for all employees, the human resources department identified the principal areas of risk faced by the company that may be affected by our compensation policies and practices for all employees, including any risks resulting from our operating businesses’ compensation policies and practices. In assessing the risks arising from our compensation policies and practices, the human resources department identified the following practices designed to prevent excessive risk taking:
Business management and governance practices
risk management is a specific performance competency included in the annual performance assessment of Section 16 officers
board oversight on capital expenditure and operating plans that promotes careful consideration of financial assumptions
limitation on business acquisitions without board approval
employee integrity training programs and anonymous reporting systems
quarterly risk assessment reports at audit committee meetings and
prohibitions on holding company stock in an account that is subject to a margin call, pledging company stock as collateral for a loan, and hedging of company stock by Section 16 officers and directors.
Executive compensation practices
active compensation committee review of executive compensation, including comparison of executive compensation to total stockholder return ratio to the ratio for the performance graph peer group (PEER Analysis)
the initial determination of a position’s salary grade to be at or near the 50th percentile of base salaries paid to similar positions at peer group companies and/or relevant industry companies
consideration of peer group and/or relevant industry practices to establish appropriate compensation target amounts
a balanced compensation mix of fixed salary and annual and long-term incentives tied to the company’s financial performance
use of interpolation for annual and long-term incentive awards to avoid payout cliffs
negative discretion to adjust any annual or long-term incentive award payment downward
use of caps on annual incentive awards (maximum of 200% of target) and long-term incentive stock grant awards (200% target)
clawback availability on incentive payments in the event of a financial restatement
use of performance shares, rather than stock options or stock appreciation rights, as the equity component of incentive compensation

5648 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

use of performance shares withsenior management made a relative total stockholder return performance goal and mandatory reduction in award if total stockholder return is negative
use of three-year performance periodsrecommendation to discourage short-term risk-taking
substantive incentive goals measured primarily by return on invested capital, earnings, and earnings per share criteria, which encourage balanced performance and are important to stockholders
use of financial performance metrics that are readily monitored and reviewed
regular reviewthe audit committee regarding the new engagement partner. After discussing the qualifications of the appropriatenessproposed lead engagement partner with the current lead engagement partner, the audit committee chair interviewed the leading candidate, and the audit committee then considered the appointment and voted as an audit committee on the selection. The change in lead engagement partner after the current five-year rotation period occurred in February 2017.
Audit Fees and Non-Audit Fees
The following table summarizes the aggregate fees that our independent registered public accounting firm, Deloitte & Touche LLP, billed or is expected to bill us for professional services rendered for 2016 and 2015:
  2016
  2015 
Audit Fees a
$2,526,900 $2,755,400 
Audit-Related Fees b
 16,710  437,979 
Tax Fees c
 —
  36,400 
All Other Fees d
 3,087
  47,569 
Total Fees e
$2,546,697 $3,277,348 
Ratio of Tax and All Other Fees to Audit and Audit-Related Fees 0.1
% 2.6%
a
Audit fees for 2016 and 2015 consisted of fees for services rendered for the audit of our annual financial statements, reviews of quarterly financial statements, subsidiary, statutory and regulatory audits, filing a Form S-8 Registration Statement (2016), and discontinued operations for Dakota Prairie Refining, LLC (DPR) (2016).
b
Audit-related fees for 2016 and 2015 are associated with accounting research assistance, Intermountain Gas Company public utility review (2016), agreed upon procedures associated report for Knife River Corporation’s JTL Group, Inc. (Wyoming) (2015), and due diligence work associated with a potential acquisition (2015).
c
Tax fees for 2015 include the preparation of federal and state tax returns for DPR. The fees associated with DPR were paid by DPR, but are included in this table because DPR was considered a variable interest entity with respect to MDU Resources Group, Inc. and is consolidated in its financial statements.
d
All other fees for 2016 are associated with a pollution control project at Big Stone electric generating facility. All other fees for 2015 are associated with a cost segregation study and research on R&D credits, in each case for DPR. The fees associated with DPR were paid by DPR, but are included in this table because DPR was considered a variable interest entity with respect to MDU Resources Group, Inc. and consolidated in its financial statements.
e
Total fees reported above include out-of-pocket expenses related to the services provided of $350,000 for 2016 and $382,965 for 2015.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the companiesIndependent Registered Public Accounting Firm
The audit committee pre-approved all services Deloitte & Touche LLP performed in 2016 in accordance with the performance graph peer grouppre-approval policy and procedures the audit committee adopted in 2003. This policy is designed to achieve the continued independence of Deloitte & Touche LLP and to assist in our compliance with Sections 201 and 202 of the Sarbanes-Oxley Act of 2002 and related rules of the Securities and Exchange Commission.
stock ownership requirementsThe policy defines the permitted services in each of the audit, audit-related, tax, and all other services categories, as well as prohibited services. The pre-approval policy requires management to submit annually for approval to the boardaudit committee a service plan describing the scope of work and anticipated cost associated with each category of service. At each regular audit committee meeting, management reports on services performed by Deloitte & Touche LLP and the fees paid or accrued through the end of the quarter preceding the meeting. Management may submit requests for executives receiving long-term incentive awards underadditional permitted services before the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plannext scheduled audit committee meeting to the designated member of the audit committee, Dennis W. Johnson, for approval. The designated member updates the audit committee at the next regularly scheduled meeting regarding any services approved during the interim period. At each regular audit committee meeting, management may submit to the audit committee for approval a supplement to the service plan containing any request for additional permitted services.
mandatory holding periodsIn addition, prior to approving any request for 50%audit-related, tax, or all other services of any net after-tax shares earned under long-term incentive awards grantedmore than $50,000, Deloitte & Touche LLP will provide a statement setting forth the reasons why rendering of the proposed services does not compromise Deloitte & Touche LLP’s independence. This description and statement by Deloitte & Touche LLP may be incorporated into the service plan or included as an exhibit thereto or may be delivered in 2011 and thereafter and
use of independent consultants in establishing pay targets at least biennially.a separate written statement.


 
MDU Resources Group, Inc. Proxy Statement 5749

Proxy Statement
 

INFORMATION CONCERNING EXECUTIVE OFFICERS
At the first annual meeting of the board after the annual meeting of stockholders, our board of directors elects our executive officers, who serve until their successors are chosen and qualify. A majority of our board of directors may remove any executive officer at any time. Information concerning our executive officers, including their ages as of December 31, 2015, present corporate positions, and business experience, is as follows:
NameAgePresent Corporate Position and Business Experience
David L. Goodin54Mr. Goodin was elected president and chief executive officer of the company and a director effective January 4, 2013. For more information about Mr. Goodin, see “Item 1. Election of Directors.”
David C. Barney60Mr. Barney was elected president and chief executive officer of Knife River Corporation effective April 30, 2013; president effective January 1, 2012; and president of its western area operations effective October 2008. Prior to that, he was manager of its Northern California region effective July 2005 and became president of Concrete, Inc. in 1996. He joined Concrete, Inc. in 1986 and held numerous positions of increasing responsibility before it was acquired by Knife River Corporation in September 1993.
Martin A. Fritz51Mr. Fritz was elected president and chief executive officer of WBI Holdings, Inc. effective July 20, 2015. Prior to joining WBI Holdings, Inc., he had his own energy consulting firm, Fritz Consulting, from February 2014 to July 2015, where he provided strategy, operations, business development, and business brokerage services. Prior to that, Mr. Fritz was employed by EQT Corporation in positions of increasing responsibility, most recently serving as its executive vice president midstream operations, land and construction from 2013 through January 2014 and vice president EQT and president EQT midstream operations from 2008 to 2013.
Dennis L. Haider63Mr. Haider was elected executive vice president-business development effective June 1, 2013. Prior to that, he was executive vice president-business development and gas supply of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company from January 1, 2012 to May 31, 2013; executive vice president-regulatory, gas supply, and business development of Cascade Natural Gas Corporation and Intermountain Gas Company from October 1, 2010 to December 31, 2011, and of Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. from October 1, 2008 to December 31, 2011; and executive vice president-business development and gas supply of Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. from August 1, 2005 to September 30, 2008. He joined Montana-Dakota Utilities Co. in 1978 and held numerous positions of increasing responsibility.
Anne M. Jones52Ms. Jones was elected vice president-human resources effective January 1, 2016. Prior to that, she was vice president-human resources, customer service, and safety at Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company effective July 1, 2013; director of human resources for Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective June 2008; and manager of organizational learning and development effective February 2003. Ms. Jones joined Montana-Dakota Utilities Co. in 1982 and held numerous positions of increasing responsibility.
Nicole A. Kivisto42Ms. Kivisto was elected president and chief executive officer of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company effective January 9, 2015. Prior to that, she was vice president of operations for Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective January 3, 2014; vice president, controller and chief accounting officer for the company effective February 17, 2010; controller effective December 1, 2005; financial analyst IV in the Corporate Planning Department effective May 2003; financial and investor relations analyst in the Investor Relations Department effective May 2000; and financial analyst in the Corporate Accounting Department effective July 1995.
Daniel S. Kuntz62Mr. Kuntz was elected general counsel and secretary effective January 9, 2016. Mr. Kuntz joined the company in June 2004 as a senior attorney. He then became associate general counsel in April 2007 and added assistant secretary to his title in August 2007. Prior to joining the company, Mr. Kuntz was an associate and partner at Zuger, Kirmis & Smith Law firm.

58 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Cynthia J. Norland61Ms. Norland was elected vice president-administration effective July 16, 2007. Prior to that, she was the assistant vice president-administration effective January 17, 2007; associate general counsel in the Legal Department effective March 6, 2004; and senior attorney in the Legal Department effective June 1, 1995.
Nathan W. Ring40Mr. Ring was elected vice president, controller and chief accounting officer effective January 3, 2014. Prior to that, he was treasurer and controller for MDU Construction Services Group, Inc. since September 2012 and was its controller from June 2012 until September 2012. Prior to that, he served as assistant controller of D S S Company, a subsidiary of Knife River Corporation, from March 2009 to June 2012 and as controller of another Knife River Corporation subsidiary, Hap Taylor & Sons, Inc. doing business as Norm’s Utility Contractor, Inc., from March 2007 to March 2009. He joined MDU Resources Group, Inc. in 2001 as a tax analyst.
Doran N. Schwartz46Mr. Schwartz was elected vice president and chief financial officer effective February 17, 2010. Prior to that, he was vice president and chief accounting officer effective March 1, 2006; and assistant vice president-special projects effective September 6, 2005. He was director of membership rewards for American Express, a financial services company, from November 2004 to August 1, 2005; audit manager for Deloitte & Touche, an audit and professional services company, from June 2002 to November 2004; and audit manager/senior for Arthur Andersen, an audit and professional services company, from December 1997 to June 2002.
Jeffrey S. Thiede53Mr. Thiede was elected president and chief executive officer of MDU Construction Services Group, Inc. effective April 30, 2013, and president effective January 1, 2012. Prior to that, he was president of Capital Electric Construction Company, Inc. effective July 2006, and president of Oregon Electric Construction, Inc. effective October 2004. Prior to joining the company, Mr. Thiede was a project director for DPR Construction and worked in the field as an inside wireman.
Jason L. Vollmer38Mr. Vollmer was elected treasurer and director of cash and risk management effective November 29, 2014. Mr. Vollmer joined the company effective October 17, 2005, as a financial analyst II. He then became financial analyst III effective January 1, 2007, and financial analyst IV effective February 2, 2009. Effective April 11, 2011, he became manager of treasury services, cash and risk management until June 30, 2014 when he became assistant treasurer of Centennial Energy Holdings, Inc. and manager of treasury services and risk management.
































MDU Resources Group, Inc. Proxy Statement 59

Proxy Statement

SECURITY OWNERSHIP
The table below sets forth the number of shares of our capital stock that each director and each nominee for director, each named executive officer, and all directors and executive officers as a group owned beneficially as of December 31, 2015.
Name
Common Shares
Beneficially
Owned1

 
Shares
Held by Family
Members2

 
Percent
of Class
 
Deferred
Director Fees
Held as
Phantom
Stock3

   
   
   
   
David C. Barney8,338
4,5 
687
 *  
Steven L. Bietz73,849
5,6 
565
 *  
Thomas Everist1,149,572
7 
  * 31,952
Karen B. Fagg55,465
   *  
David L. Goodin73,462
5,8 
8,859
 *  
Mark A. Hellerstein11,880
   * 5,691
A. Bart Holaday57,025
   * 5,691
Dennis W. Johnson74,511
9 
163
 *  
William E. McCracken11,880
   *  
Patricia L. Moss75,957
   *  
Patrick O’Bryan—
      
Harry J. Pearce231,999
   * 52,536
Doran N. Schwartz46,496
5,10 
1,300
 *  
Jeffrey S. Thiede2,580
5 
  *  
John K. Wilson112,786
   *  
All directors and executive officers as a group (23 in number)2,186,977
 12,828
 1.1 95,870
  
* 

Less than one percent of the class.
1 

“Beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or investment power with respect to a security.
2 

These shares are included in the “Common Shares Beneficially Owned” column.
3 

These shares are not included in the “Common Shares Beneficially Owned” column. Directors may defer all or a portion of their cash compensation pursuant to the Deferred Compensation Plan for Directors. Deferred amounts are held as phantom stock with dividend accruals and are paid out in cash over a five-year period after the director leaves the board.
4 

The total includes 687 shares owned by Mr. Barney’s wife.
5 

Includes full shares allocated to the officer’s account in our 401(k) retirement plan.
6 

Mr. Bietz disclaims all beneficial ownership of the 565 shares owned by his father.
7 

Includes 1,070,000 shares of common stock acquired through the sale of Connolly-Pacific to us.
8 

The total includes 8,859 shares owned by Mr. Goodin’s wife.
9 

Mr. Johnson disclaims all beneficial ownership of the 163 shares owned by his wife.
10 

The total includes 1,300 shares owned by Mr. Schwartz’s wife.
We prohibit our directors and executive officers from hedging their ownership of company common stock. They may not enter into transactions that allow them to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership.
Directors, executive officers, and related persons are prohibited from holding our common stock in a margin account, with certain exceptions, or pledging company securities as collateral for a loan. Company common stock may be held in a margin brokerage account only if the stock is explicitly excluded from any margin, pledge, or security provisions of the customer agreement. Company common stock may be held in a cash account, which is a brokerage account that does not allow any extension of credit on securities. “Related person” means an executive officer’s or director’s spouse, minor child, and any person (other than a tenant or domestic employee) sharing the household of a director or executive officer, as well as any entities over which a director or executive officer exercises control.

60 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

The table below sets forth information with respect to any person we know to be the beneficial owner of more than five percent of any class of our voting securities.
Title of Class 
Name and Address
of Beneficial Owner
 
Amount and Nature
of Beneficial Ownership

 
Percent
of Class
 
   
Common Stock BlackRock, Inc.     
  55 East 52nd Street     
  New York, NY 10055 13,972,978
1 
7.20%
        
Common Stock State Street Corporation     
  State Street Financial Center     
  One Lincoln Street     
  Boston, MA 02111 13,969,067
2 
7.20%
        
Common Stock The Vanguard Group     
  100 Vanguard Blvd.     
  Malvern, PA 19355 13,816,559
3 
7.07%
        
Common Stock Parnassus Investments     
  1 Market Street, Suite 1600     
  San Francisco, CA 94105 13,664,457
4 
7.00%
        
  
1 
In a Schedule 13G, Amendment No. 6, filed on January 26, 2016, BlackRock, Inc. reported sole voting power with respect to 13,000,204 shares and sole dispositive power with respect to 13,972,978 shares as the parent holding company or control person of BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management North Asia Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Managers Ltd, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC, and BlackRock Life Limited.
2 
In a Schedule 13G, filed on February 16, 2016, State Street Corporation reported shared voting and dispositive power with respect to all shares as the parent holding company or control person of State Street Global Advisors France, S.A., State Street Bank and Trust Company, SSGA Funds Management, Inc., State Street Global Advisors Limited, State Street Global Advisors, Ltd., State Street Global Advisors, Australia, Limited, State Street Global Advisors (Japan) Co., Ltd., and State Street Global Advisors (Asia) Limited.
3 
In a Schedule 13G, Amendment No. 3, filed on February 10, 2016, The Vanguard Group reported sole dispositive power with respect to 13,678,506 shares, shared dispositive power with respect to 138,053 shares, sole voting power with respect to 138,853 shares, and shared voting power with respect to 10,000 shares. These shares include 128,053 shares beneficially owned by Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of collective trust accounts, and 20,800 shares beneficially owned by Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of Australian investment offerings.
4 
In a Schedule 13G, Amendment No. 1, filed on February 12, 2016, Parnassus Investments reported sole voting and dispositive power with respect to all shares.


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RELATED PERSON TRANSACTION DISCLOSURE
The board of directors has adopted a policy for the review of related person transactions. This policy is contained in our corporate governance guidelines, which are posted on our website at http://www.mdu.com/docs/default-source/governance/corporategovernanceguidelines.pdf. The audit committee reviews any transaction, arrangement or relationship, or series thereof:
in which we are or will be a participant
the amount involved exceeds $120,000 and
a related person has or will have a material interest.
The purpose of this review is to determine whether this transaction is in the best interests of the company.
Related persons are directors, director nominees, executive officers, holders of 5% or more of our voting stock, and their immediate family members. Related persons are required promptly to report to our general counsel all proposed or existing related person transactions in which they are involved.
If our general counsel determines that the transaction may be required to be disclosed under the Securities and Exchange Commission’s rules, the general counsel furnishes the information to the chairman of the audit committee. After its review, the committee makes a determination or a recommendation to the board and officers of the company with respect to the related person transaction. Upon receipt of the committee’s recommendation, the board of directors or officers, as the case may be, take such action as they deem appropriate in light of their responsibilities under applicable laws and regulations.
CORPORATE GOVERNANCE
Director Independence
The board of directors has adopted guidelines on director independence that are included in our corporate governance guidelines, which are available for review on our corporate website at http://www.mdu.com/docs/default-source/governance/corporategovernanceguidelines.pdf. The board of directors has determined that current directors Thomas Everist, Karen B. Fagg, Mark A. Hellerstein, A. Bart Holaday, Dennis W. Johnson, William E. McCracken, Patricia L. Moss, Harry J. Pearce, and John K. Wilson:
have no material relationship with us and
are independent in accordance with our director independence guidelines and the New York Stock Exchange listing standards.
In determining director independence, the board of directors reviewed and considered information about any transactions, relationships, and arrangements between the independent directors and their immediate family members and affiliated entities on the one hand, and the company and its affiliates on the other, and in particular the following transactions, relationships, and arrangements:
Business relationships with entities with which a director is affiliated:Agreements and/or payments between the City of Dickinson, North Dakota, where Dennis Johnson served as president of the city board of commissioners until his resignation effective October 31, 2015, and (i) Dakota Prairie Refining, LLC, a limited liability company jointly owned by WBI Energy, Inc., an indirect wholly-owned subsidiary of the company, and Calumet Specialty Products Partners, L.P., relating to the supply of industrial water and treatment of waste water, (ii) Montana-Dakota Utilities Co. for utility services, and (iii) Knife River Corporation for street improvements and underground utilities.
Charitable contributions by the MDU Resources Foundation (Foundation) to nonprofit organizations, where a director, or a director’s spouse, serves or has served as a director, chair, or vice chair of the board of trustees, trustee or member of the organization or related entity:Charitable contributions by the Foundation to Sanford Health Foundation, Billings Catholic Schools Foundation, the Denver Children’s Advocacy Center, Community Resources Inc., the University of North Dakota Foundation, the University of Jamestown and its foundation, and the St. Charles Foundation. None of the contributions made to any of these nonprofit entities during the last three fiscal years exceeded in any single year the greater of $1 million or 2% of the relevant entity’s consolidated gross revenues.


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Director Resignation Upon Change of Job Responsibility
Our corporate governance guidelines require a director to tender his or her resignation after a material change in job responsibility. In 2015, no directors submitted resignations under this requirement.
Board Evaluation
Our corporate governance guidelines provide that the board of directors, in coordination with the nominating and governance committee, will annually review and evaluate the performance and functioning of the board and its committees. In 2015, the board engaged an external consultant to conduct the annual evaluation which included interviews with individual board members and considered various topics relating to the board and committees, including board composition and culture, strategy and performance measures, risk monitoring and crisis control, succession planning, and stakeholder involvement. The results of the evaluations were reviewed and discussed in executive sessions of the committees and the board of directors.
Code of Conduct
We have a code of conduct and ethics, which we refer to as the Leading With Integrity Guide, which applies to all employees, directors, and officers.
We intend to satisfy our disclosure obligations regarding:
amendments to, or waivers of, any provision of the code of conduct that applies to our principal executive officer, principal financial officer, and principal accounting officer and that relates to any element of the code of ethics definition in Regulation S-K, Item 406(b) and
waivers of the code of conduct for our directors or executive officers, as required by New York Stock Exchange listing standards
by posting such information on our website at http://www.mdu.com/docs/default-source/governance/leadingwithintegrity.pdf.
Board Leadership Structure and Board’s Role in Risk Oversight
The board separated the positions of chairman of the board and chief executive officer in 2006 and elected Harry J. Pearce, a non-employee independent director, as its chairman. Separating these positions allows the chief executive officer to focus on the full-time job of running our business, while allowing the chairman of the board to lead the board in its fundamental role of providing advice to and independent oversight of management. The board believes this structure recognizes the time, effort, and energy the chief executive officer is required to devote to the position in the current business environment, as well as the commitment required to serve as the chairman, particularly as the board’s oversight responsibilities continue to grow and demand more time and attention. The fundamental role of the board of directors is to provide oversight of the management of the company in good faith and in the best interests of the company and its stockholders. Having an independent chairman is a means to ensure the chief executive officer is accountable for managing the company in close alignment with the interests of stockholders. An independent chairman avoids the conflicts of interest that arise when the chairman and chief executive officer positions are combined and more effectively manages relationships between the board and the chief executive officer. An independent chairman is in a better position to encourage frank and lively discussions and to assure that the company has adequately assessed all appropriate business risks before adopting its final business plans and strategies. Our bylaws and corporate governance guidelines require that our chairman be independent. The board believes that having separate positions and having an independent outside director serve as chairman is the appropriate leadership structure for the company and demonstrates our commitment to good corporate governance.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including economic risks, environmental and regulatory risks, and others, such as the impact of competition, weather conditions, limitations on our ability to pay dividends, pension plan obligations, cyber attacks or acts of terrorism, and our ability to sell all of the assets of our exploration and production business and potential liabilities relating to sold assets arising from events prior to sale. Management is responsible for the day-to-day management of risks the company faces, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
The board believes establishing the right “tone at the top” and full and open communication between management and the board of directors are essential for effective risk management and oversight. Our chairman meets regularly with our president and chief executive officer and other senior officers to discuss strategy and risks facing the company. Senior management attends the quarterly board meetings and is available to address any questions or concerns raised by the board on risk management-related and any other matters. Each quarter,

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the board of directors receives presentations from senior management on strategic matters involving our operations. The board holds strategic planning sessions with senior management to discuss strategies, key challenges, and risks and opportunities for the company.
While the board is ultimately responsible for risk oversight at our company, our three board committees assist the board in fulfilling its oversight responsibilities in certain areas of risk. The audit committee assists the board in fulfilling its oversight responsibilities with respect to risk management in a general manner and specifically in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements, and, in accordance with New York Stock Exchange requirements, discusses policies with respect to risk assessment and risk management and their adequacy and effectiveness. Risk assessment reports are regularly provided by management to the audit committee or the full board. This opens the opportunity for discussions about areas where the company may have material risk exposure, steps taken to manage such exposure, and the company’s risk tolerance in relation to company strategy. The audit committee reports regularly to the board of directors on the company’s management of risks in the audit committee’s areas of responsibility. The compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The nominating and governance committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.
Board Meetings and Committees
During 2015, the board of directors held 12 meetings. Each director attended at least 75% of the combined total meetings of the board and the committees on which the director served during 2015. Director attendance at our annual meeting of stockholders is left to the discretion of each director. Three directors attended our 2015 annual meeting of stockholders. In November 2015, the board of directors adopted a resolution that attendance at the annual meeting by each director is encouraged.
Harry J. Pearce was elected non-employee chairman of the board on August 17, 2006, and previously served as lead director from February 15, 2001 to August 17, 2006. He presides at the executive session of the non-employee directors held in connection with each regularly scheduled quarterly board of directors meeting. The non-employee directors also meet in executive session with the chief executive officer at each regularly scheduled quarterly board of directors meeting. All of our non-employee directors are independent directors.
The board has a standing audit committee, compensation committee, and nominating and governance committee. These committees are composed entirely of independent directors.
The audit, compensation, and nominating and governance committees have charters, which are available for review on our website at
http://www.mdu.com/integrity/governance/board-charters-and-committees. Our corporate governance guidelines are available at
http://www.mdu.com/docs/default-source/governance/corporategovernanceguidelines.pdf, and our Leading With Integrity Guide is also on our website at http://www.mdu.com/docs/default-source/governance/leadingwithintegrity.pdf.
Nominating and Governance Committee
The nominating and governance committee met three times during 2015. The committee members are Karen B. Fagg, chair, A. Bart Holaday, William E. McCracken, and Patricia L. Moss.
The nominating and governance committee provides recommendations to the board with respect to:
board organization, membership, and function
committee structure and membership
succession planning for our executive management and directors and
corporate governance guidelines applicable to us.
The nominating and governance committee assists the board in overseeing the management of risks in the committee’s areas of responsibility.
The committee identifies individuals qualified to become directors and recommends to the board the nominees for director for the next annual meeting of stockholders. The committee also identifies and recommends to the board individuals qualified to become our principal officers and the nominees for membership on each board committee. The committee oversees the evaluation of the board and management.

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In identifying nominees for director, the committee consults with board members, our management, consultants, and other individuals likely to possess an understanding of our business and knowledge concerning suitable director candidates.
Our corporate governance guidelines include our policy on consideration of director candidates recommended to us. We will consider candidates that our stockholders recommend. Stockholders may submit director candidate recommendations to the nominating and governance committee chairman in care of the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650. Please include the following information:
the candidate’s name, age, business address, residence address, and telephone number
the candidate’s principal occupation
the class and number of shares of our stock owned by the candidate
a description of the candidate’s qualifications to be a director
whether the candidate would be an independent director and
any other information you believe is relevant with respect to the recommendation.
These guidelines provide information to stockholders who wish to recommend candidates for director for consideration by the nominating and governance committee. Stockholders who wish to actually nominate persons for election to our board at an annual meeting of stockholders must follow the procedures set forth in section 2.08 of our bylaws. You may obtain a copy of the bylaws by writing to the secretary of MDU Resources Group, Inc. at the address above. Our bylaws are also available on our website at http://www.mdu.com/integrity/governance/guidelines-and-bylaws. See also the section entitled “2017 Annual Meeting of Stockholders” later in the proxy statement.
There are no differences in the manner by which the committee evaluates director candidates recommended by stockholders and those recommended by other sources.
In evaluating director candidates, the committee considers an individual’s:
background, character, and experience, including experience relative to our company’s lines of business
skills and experience which complement the skills and experience of current board members
success in the individual’s chosen field of endeavor
skill in the areas of accounting and financial management, banking, general management, human resources, marketing, operations, public affairs, law, technology, and operations abroad
background in publicly traded companies
geographic area of residence
diversity of business and professional experience, skills, gender, and ethnic background, as appropriate in light of the current composition and needs of the board
independence, including any affiliation or relationship with other groups, organizations, or entities and
prior and future compliance with applicable law and all applicable corporate governance, code of conduct and ethics, conflict of interest, corporate opportunities, confidentiality, stock ownership and trading policies, and our other policies and guidelines.
In addition, our bylaws contain requirements that a person must meet in order to qualify for service as a director.
As indicated above, when identifying nominees to serve as director, the nominating and governance committee will consider candidates with diverse business and professional experience, skills, gender, and ethnic background, as appropriate, in light of the current composition and needs of the board. The nominating and governance committee assesses the effectiveness of this policy annually in connection with the nomination of directors for election at the annual meeting of stockholders. The composition of the current board reflects diversity in business and professional experience, skills, and gender.

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The committee generally will hire an outside firm to perform a background check on potential nominees.
Audit Committee
The audit committee is a separately-designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee met eight times during 2015. The audit committee members are Dennis W. Johnson, chair, Mark A. Hellerstein, A. Bart Holaday, and John K. Wilson. The board of directors has determined that Messrs. Johnson, Hellerstein, Holaday, and Wilson are “audit committee financial experts” as defined by Securities and Exchange Commission regulations and meet the independence standard for audit committee members under our director independence guidelines, the New York Stock Exchange listing standards, and Securities and Exchange Commission rules.
The audit committee assists the board of directors in fulfilling its oversight responsibilities to the stockholders and serves as a communication link among the board, management, the independent registered public accounting firm, and the internal auditors. The audit committee:
assists the board’s oversight of
◦the integrity of our financial statements and system of internal controls
◦the company’s compliance with legal and regulatory requirements
◦the independent registered public accounting firm’s qualifications and independence
◦the performance of our internal audit function and independent registered public accounting firm and
◦management of risk in the audit committee’s areas of responsibility and
arranges for the preparation of and approves the report that Securities and Exchange Commission rules require we include in our annual proxy statement.
Audit Committee ReportAUDIT COMMITTEE REPORT
In connection with our financial statements for the year ended December 31, 2015,2016, the audit committee has (1) reviewed and discussed the audited financial statements with management; (2) discussed with the independent registered public accounting firm (the “Auditors”) the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16,1301, Communications with Audit Committees; and (3) received the written disclosures and the letter from the Auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the Auditors’ communications with the audit committee concerning independence, and has discussed with the Auditors their independence.
Based on the review and discussions referred to in items (1) through (3) of the above, paragraph, the audit committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2015,2016, for filing with the Securities and Exchange Commission.
Dennis W. Johnson, Chairman
Mark A. Hellerstein
A. Bart Holaday
John K. Wilson

 
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Compensation Committee
OTHER MATTERS
ITEM 5. ADVISORY VOTE TO APPROVE AN AMENDMENT TO THE COMPANY’S BYLAWS TO ADOPT AN EXCLUSIVE FORUM FOR INTERNAL CORPORATE CLAIMS
Description of the Amendment
On November 17, 2016, the board approved an amendment (the “Amendment”) to the company’s bylaws adding a new Section 7.09 which provides that Internal Corporate Claims (as defined in the Amendment) may only be brought in Delaware courts. Stockholder ratification of the Amendment is not required under Delaware law, our bylaws, or otherwise. The board believes, however, that a stockholder vote on this matter is appropriate because of the importance of this issue. For the reasons described below, the board recommends that stockholders vote in favor of the proposal to ratify the Amendment. Broker non-vote shares are not entitled to vote on this item and, therefore, are not counted in the vote. The full text of the Amendment is set forth below and on Exhibit A to this Proxy Statement.
7.09 Forum Selection.
(a) Forum Selection. Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, all Internal Corporate Claims shall be brought solely and exclusively in the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the United States District Court for the District of Delaware). “Internal Corporate Claims” means claims, including claims in the right of the Corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which the General Corporation Law of the State of Delaware confers jurisdiction upon the Court of Chancery of the State of Delaware.
(b) Personal Jurisdiction. If any action the subject matter of which is within the scope of Section 7.09(a) is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) by or in the name of any stockholder (including in the right of the Corporation), such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 7.09(a) and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Purposes of the Amendment
The compensation committee met six times during 2015.Amendment’s requirement to bring internal litigation claims in Delaware avoids the waste of corporate assets that would arise from litigation of the same claims in multiple jurisdictions.
Public companies, particularly if involved in merger and acquisition transactions, are often targeted in litigation brought purportedly on behalf of stockholders in multiple jurisdictions with respect to similar, if not identical, corporate claims. The compensation committee memberscompany has historically entered into a number of merger and acquisition transactions to foster growth at its business segments. Although the company has not yet faced internal corporate claims arising from these transactions, a forum selection bylaw would avoid such multi-jurisdiction litigation and the waste of corporate assets and diversion of management time that results from litigating essentially duplicative cases in multiple jurisdictions. By requiring internal corporate claims to be brought in a single jurisdiction, a forum selection bylaw serves the interests of stockholders in resolving claims efficiently and without the waste of financial and other resources that are Thomas Everist, chair, Karen B. Fagg, William E. McCracken, and Patricia L. Moss.better devoted to the company’s business.
The compensation committee’s responsibilities, as set forth in its charter, include:
review and recommend changes to the board regarding executive compensation policies for directors and executives
evaluate the chief executive officer’s performance and, either as a committee or together with other independent directors as directedDelaware Courts designated by the board, determine his or her compensationAmendment can provide the most authoritative and efficient resolution of internal corporate claims.
recommendBecause the company, like many public companies, is incorporated in Delaware, the law applicable to any internal corporate claims would be the board the compensation of our other Section 16 officers and directors
establish goals, make awards, review performance and determine, or recommend to the board, awards earned under our annual and long-term incentive compensation plans
review and discuss with management the Compensation Discussion and Analysis and based upon such review and discussion, determine whether to recommend to the board that the Compensation Discussion and Analysis be included in our proxy statement and/or our Annual Report on Form 10-K
arrange for the preparation of and approve the compensation committee reportDelaware General Corporation Law. By requiring corporate claims to be includedbrought in our proxy statement and/or Annual Report on Form 10-K
assistDelaware courts, a forum selection bylaw avoids the boardrisk that Delaware General Corporation Law will be misapplied by a court in overseeinganother jurisdiction, a risk that would be compounded if internal corporate claims were pending in multiple jurisdictions outside Delaware which could reach inconsistent interpretations. Additionally, Delaware offers a system of specialized chancery courts to deal with corporate law questions, with streamlined procedures and processes that help provide relatively quick decisions. This serves the management of risk in the committee’s areas of responsibility and
appoint, compensate, and oversee the work of any compensation consultant, legal counsel or other adviser retained by the compensation committee.
The compensation committee and the board of directors have sole and direct responsibility for determining compensation for our Section 16 officers and directors. The compensation committee makes recommendations to the board regarding compensationinterests of all Section 16 officers,stockholders in limiting the time, cost, and the board then acts on the recommendations. The compensation committee and the board may not delegate their authority. They may, however, use recommendations from outside consultants, the chief executive officer, and the human resources department. The chief executive officer, the vice president-human resources, and general counsel regularly attend compensation committee meetings. The committee meets in executive session as needed. The committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on executive compensation. The competitive analysis is conducted internally in the other years. The committee did not retain a compensation consultant in 2015 to prepare a competitive assessment for 2016 compensation for our Section 16 officers.uncertainty of protracted litigation.
The processes and procedures for consideration and determination of compensation of the Section 16 officers are discussed in the Compensation Discussion and Analysis. The role of our executive officers in determining or recommending compensation for our Section 16 officers is also discussed in the Compensation Discussion and Analysis.
During 2015, the vice president-human resources and the human resources department prepared the 2016 competitive assessment covering our Section 16 officers. The vice president-human resources and the human resources department also worked with the chief executive officer to:
recommend salary grade midpoints, base salaries, annual and long-term incentive targets, benefit level increases under our Supplemental Income Security Plan, and employer contributions under our Nonqualified Defined Contribution Plan for our executive officers other than the chief executive officer and the vice president-human resources
review recommended base salary grades, salary increases, and annual and long-term incentive targets submitted by executive officers for officers reporting to them for reasonableness and alignment with company or business segment objectives
review and update annual and long-term incentive programs
construct a recommended 2016 salary grade structure and
verify the competitiveness of short-term and long-term incentive targets associated with salary grades, the industry competitiveness of the incentive awards threshold, target and maximum award levels and the degree of stretch in the goals, the mix of annual and long-term

 
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compensation, andApproval of the use of total shareholder return as a single measure for long-term incentive and recommend modifications as appropriate.
Mr. Goodin recommended compensation for Patrick L. O’Bryan in connection with his promotion and Fidelity sales bonus incentive and for Steven L. Bietz in connection with his retirement. This is further discussedAmendment at this time will discourage potentially harmful litigation practices in the Compensation Discussion and Analysis contained herein.
The compensation committee has sole authority to retain or obtain the advice of compensation consultants, legal counsel or other advisers to assist in consideration of the compensation of the chief executive officer, the other Section 16 officers, and the board of directors. The committee is directly responsible for the appointment, compensation and oversight of the work of any adviser retained by the committee. Prior to retaining an adviser and annually, the committee will consider all factors relevant to the adviser’s independence from management. The compensation committee charter requires the committee’s pre-approval of the engagement of the committee’s compensation consultants by the company for any other purpose. The compensation committee authorized the company to participate in compensation and employee benefits surveys sponsored by Towers Watson in 2015.
Annually the compensation committee conducts an assessment of any potential conflicts of interest raised by the work of any compensation consultant to determine if any conflict exists and how such conflict should be addressed. The compensation committee requested and received information from its compensation consultant, Towers Watson, to assist the committee in determining whether Towers Watson’s work raised any conflict of interest. The compensation committee has reviewed Towers Watson’s responses to its request and determined that the work of Towers Watson did not raise any conflict of interest in 2015.future.
The board believes it is in the best interests of directors determines compensationthe company’s stockholders to approve the amendment at this time. Following a series of Delaware court decisions upholding similar corporate provisions, the Delaware legislature in June 2015 enacted a law explicitly authorizing Delaware corporations to adopt bylaw provisions designating Delaware courts as the exclusive forum for our non-employee directors based upon recommendations fromresolving internal corporate claims. By adopting the compensation committee. The compensation committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on director compensation.
In an engagement letter dated March 10, 2015, and signedforum selection bylaw at this time as authorized by the chairmanDelaware courts and the 2015 legislation, and subject to an advisory vote of the compensation committee,stockholders at the compensation committee retained Towers Watson to prepare2017 annual meeting, the 2015 compensation review for the board of directors. In its review of board of director compensation, Towers Watson was asked to:
identify market trends relative to director compensation
reportcompany can discourage future litigation that is brought in a particular jurisdiction on the competitive positionbasis of our director compensation program as compared to our performance graph peer grouptactical maneuvering rather than efficiency and predictable and authoritative outcomes.
recommend alternatives for our board of directors to consider and
reviewFor the performance graph peer group companies to identify practices relating to director recruitment.
At its May 2015 meeting, the committee reviewed the report by Towers Watson on director compensation competitiveness, considering both level and design. The Towers Watson report focused on broad-based Fortune 500 market trends and the then current peer group consisting of 23 companies. The report noted that for Fortune 500 companies, median total director compensation increased nine percent over the last two years. The report noted that the median total director compensation of the 23 peer group companies is $178,800 compared to the company’s typical director total compensation of $175,000. The company’s cash compensation approximates the 25th percentile, whereas the equity compensation is just above the median. Nonexecutive chairman of the board fees for the peer group range between $80,000 and $135,000. The company pays additional compensation of $90,000 for this position. The report indicated additional compensation for committee chairs is generally between $5,000 and $15,000 which varies by committee. The company’s additional retainers for committee chairs are $10,000 for the Compensation Committee and Nominating and Governance Committee, and $15,000 for the Audit Committee which aligned with market practices. The company’s vice president-human resources provided additional information at the meeting from the National Association of Corporate Directors 2014-2015 Director Compensation Report. The report noted that for 2014 the median direct compensation for all large companies (having revenues of $2.5 billion to $10 billion) was $214,283, for all size utilities was $165,907, for all size energy companies was $244,167, and for all size material companies was $170,249. After considering the reports, the compensation committee recommended, andforegoing reasons, the board of directors approved, no change tobelieves the current annual cash base retainer of $65,000, $110,000 equity grant, committee chair retainers, and additional retainer forAmendment is in the nonexecutive chairmanbest interests of the board.
Stockholder Communicationscompany and its stockholders and recommends that stockholders vote in favor of the proposal to ratify the Amendment.
Stockholders
The board of directors recommends a vote “for” the advisory vote to approve an amendment to
the company’s bylaws to adopt an exclusive forum for internal corporate claims.
If ratification of the bylaws is not approved by a majority of the shares of common stock represented at the annual meeting and other interested parties who wishentitled to contactvote on this item, the board of directors or an individual director, including our non-employee chairman or non-employee directorsintends to rescind the Amendment. Abstentions will count as a group, should address a communication in care ofvotes against the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650. The secretary will forward all communications.Amendment.

 
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires that officers, directors, and holders of more than 10% of our common stock file reports of their trading in our equity securities with the Securities and Exchange Commission. Based solely on a review of Forms 3, 4, and 5 and any amendments to these forms furnished to us during and with respect to 2015 or written representations that no Forms 5 were required, we believe that all such reports were timely filed.
CONDUCT OF MEETING; ADJOURNMENT
INFORMATION ABOUT THE ANNUAL MEETING
The chairman of the board has broad responsibility and authority to conduct the annual meeting in an orderly and timely manner. In addition, our bylaws provide that the meeting may be adjourned from time to time by the chairman of the meeting regardless of whether a quorum is present.
OTHER BUSINESS
Who can Vote?Stockholders of record at the close of business on March 10, 2017, are entitled to vote each share they owned on that date on each matter presented at the meeting and any adjournment(s) thereof. As of March 10, 2017, we had 195,304,376 shares of common stock outstanding entitled to one vote per share.
Distribution of our Proxy Materials using Notice and Access




We distributed proxy materials to certain of our stockholders via the Internet under the Securities and Exchange Commission’s “Notice and Access” rules to reduce our costs and decrease the environmental impact of our proxy materials. Using this method of distribution, on or about March 24, 2017, we mailed a Notice Regarding the Availability of Proxy Materials (Notice) that contains basic information about our 2017 annual meeting and instructions on how to view all proxy materials, and vote electronically, on the Internet. If you received the Notice and prefer to receive a paper copy of the proxy materials, follow the instructions in the Notice for making this request and the materials will be sent promptly to you via the preferred method. Stockholders who do not receive the Notice will receive a paper copy of our proxy materials, which will be sent on or about March 30, 2017.
How to VoteYou are encouraged to vote in advance of the meeting using one of the following voting methods, even if you are planning to attend the 2017 Annual Meeting of Stockholders.
Registered Stockholders: Stockholders of record who hold their shares directly with our stock registrar can vote any one of four ways:
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Via the Internet: Go to www.proxypush.com/mdu and follow the instructions on the website.
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By Telephone: Call 877-536-3553 and follow the instructions given by the voice prompts.
Voting via the Internet or by telephone authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated, and returned a Proxy Card by mail. Your voting instructions may be transmitted up until 11:59 p.m. CDT on May 8, 2017.
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By Mail: If you received paper copies of the Proxy Statement, Annual Report, and Proxy Card, mark, sign, date, and return the Proxy Card in the postage-paid envelope provided.
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In Person: Attend the annual meeting, or send a personal representative with an appropriate proxy, to vote by ballot at the meeting. (See “Notice of Annual Meeting” and “Annual Meeting Admission.”)
Beneficial Stockholders: Stockholders whose shares are held beneficially in the name of a bank, broker, or other holder of record (sometimes referred to as holding shares “in street name”), will receive voting instructions from said bank, broker, or other holder of record. If you wish to vote in person at the meeting, you must obtain a legal proxy from your bank, broker, or other holder of record of your shares and present it at the meeting.
See discussion below in the MDU Resources Group, Inc. 401(k) Plan for voting instructions for shares held under our 401(k) plans.
Revoking Your Proxy or Changing Your VoteYou may change your vote at any time before the proxy is exercised.
Registered Stockholders:
●If you voted by mail: you may revoke your proxy by executing and delivering a timely and valid later dated proxy, by voting by ballot at the meeting, or by giving written notice of revocation to the corporate secretary.
●If you voted via the Internet or by telephone: you may change your vote with a timely and valid later Internet or telephone vote, as the case may be, or by voting by ballot at the meeting.
●Attendance at the meeting will not have the effect of revoking a proxy unless (1) you give proper written notice of revocation to the corporate secretary before the proxy is exercised, or (2) you vote by ballot at the meeting.
Beneficial Stockholders: Follow the specific directions provided by your bank, broker, or other holder of record to change or revoke any voting instructions you have already provided. Alternatively, you may vote your shares by ballot at the meeting if you obtain a legal proxy from your bank, broker, or other holder of record and present it at the meeting.
Neither the board of directors nor management intends to bring before the meeting any business other than the matters referred to in the notice of annual meeting and this proxy statement. We have not been informed that any other matter will be presented at the meeting by others. However, if any other matters are properly brought before the annual meeting, or any adjournment(s) thereof, your proxies include discretionary authority for the persons named in the enclosed proxy to vote or act on such matters in their discretion.
SHARED ADDRESS STOCKHOLDERS
In accordance with a notice sent to eligible stockholders who share a single address, we are sending only one annual report to stockholders and one proxy statement to that address unless we received instructions to the contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if a stockholder of record wishes to receive a separate annual report to stockholders and proxy statement in the future, he or she may contact the office of the treasurer at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650, Telephone Number: (701) 530-1000. Eligible stockholders of record who receive multiple copies of our annual report to stockholders and proxy statement can request householding by contacting us in the same manner. Stockholders who own shares through a bank, broker, or other nominee can request householding by contacting the nominee.
We hereby undertake to deliver promptly, upon written or oral request, a separate copy of the annual report to stockholders and proxy statement to a stockholder at a shared address to which a single copy of the document was delivered.
2017 ANNUAL MEETING OF STOCKHOLDERS
Director Nominations:Our bylaws provide that director nominations may be made only (i) at any meeting of stockholders, by or at the direction of the board or (ii) at an annual meeting of stockholders, by a stockholder of record, as provided in the bylaws, who is entitled to vote upon the election of directors and who has complied with the procedures established by the bylaws. For a nomination to be properly brought before an annual meeting by a stockholder, the stockholder intending to make the nomination must have given timely and proper notice of the nomination in writing to the corporate secretary in accordance with and containing all information, including the completed questionnaire, provided for in the bylaws. To be timely, such notice must be delivered or mailed to the corporate secretary and received at our principal executive offices not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting of stockholders. For purposes of our annual meeting of stockholders expected to be held April 25, 2017, any stockholder who wishes to submit a nomination must submit the required notice to the corporate secretary not later than the close of business on January 26, 2017.
Other Meeting Business: Our bylaws also provide that business, other than director nominations, may be properly brought before (i) any meeting of stockholders, by or at the direction of the board or (ii) an annual meeting of stockholders, by a stockholder of record, as provided in the bylaws, who is entitled to vote upon the election of directors and the proposal and who has complied with the procedures established by the bylaws. For business to be properly brought before an annual meeting by a stockholder (other than director nominations which are described above), the stockholder must have given timely and proper notice of such business in writing to the corporate secretary, in accordance with and containing all information provided for in the bylaws and such business must be a proper matter for stockholder action under the General Corporation Law of Delaware. To be timely, such notice must be delivered or mailed to the corporate secretary and received at our principal executive offices not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting of stockholders. For purposes of our annual meeting of stockholders expected to be held April 25, 2017, any

 
MDU Resources Group, Inc. Proxy Statement 6953

Proxy Statement
 

stockholder who wishes to bring business before the meeting (other than director nominations which are described above) must submit the required notice to the corporate secretary not later than the close of business on January 26,
Discretionary Voting Authority

If you complete and submit your proxy voting instructions, the individuals named as proxies will follow your instructions. If you are a stockholder of record and you submit proxy voting instructions but do not direct how to vote on each item, the individuals named as proxies will vote as the board recommends on each proposal. The individuals named as proxies will vote on any other matters properly presented at the annual meeting in accordance with their discretion. Our bylaws set forth requirements for advance notice of any nominations or agenda items to be brought up for voting at the annual meeting, and we have not received timely notice of any such matters, other than the items from the board of directors described in this Proxy Statement.
Voting StandardsA majority of outstanding shares of stock entitled to vote must be present in person or represented by proxy to hold the meeting.
A majority of votes cast is required to elect a director in an uncontested election. A majority of votes cast means the number of votes cast “for” a director’s election must exceed the number of votes cast “against” the director’s election. “Abstentions” and “broker non-votes” do not count as votes cast “for” or “against” the director’s election. In a contested election, which is an election in which the number of nominees for director exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast.
Approval of each of the other matters on the agenda, other than Item 2, requires the affirmative vote of a majority of the shares of common stock present or represented by proxy during the meeting. For each of these proposals, abstentions have the same effect as “against” votes. For Item 2, the frequency that receives the most votes will be the frequency deemed recommended by our stockholders. Abstentions have no effect on Item 2. If you are a beneficial holder and do not provide specific voting instruction to your broker, the organization that holds your shares will not be authorized to vote your shares, which would result in “broker non-votes,” on proposals other than the ratification of the selection of our independent registered public accounting firm for 2017. Abstentions and broker non-votes are counted for purposes of determining whether a quorum is present at the annual meeting.
The following chart describes the proposals to be considered at the annual meeting, the vote required to elect directors and to adopt each other proposal, and the manner in which votes will be counted:
Item No.Proposal
Voting
Options
Vote Required to Adopt the ProposalEffect of AbstentionsEffect of “Broker Non-Votes”
1Election of DirectorsFor, against, or abstain on each nomineeA nominee for director will be elected if the votes cast for such nominee exceed the votes cast against such nomineeNo effectNo effect
2Advisory Vote To Approve the Frequency of the Vote to Approve the Compensation Paid to the Company’s Named Executive Officers
One year,
two years, three years,
or abstain
The frequency that receives the most votes will be deemed the frequency recommended by our stockholders

No effectNo effect
3Advisory Vote to Approve the Compensation Paid to the Company’s Named Executive OfficersFor, against, or abstainThe affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereonSame effect as votes againstNo effect
4Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for 2017For, against, or abstainThe affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereonSame effect as votes againstBrokers have discretion to vote
5Advisory Vote to Approve an Amendment to the Company’s Bylaws to Adopt an Exclusive Forum for Internal Corporate ClaimsFor, against, or abstainThe affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereonSame effect as votes againstNo effect

Discretionary Voting:54 MDU Resources Group, Inc.Rule 14a-4 of the Securities and Exchange Commission’s proxy rules allows us to use discretionary voting authority to vote on matters coming before an annual stockholders’ meeting if we do not have notice of the matter at least 45 days before the anniversary date on which we first mailed our proxy materials for the prior year’s annual stockholders’ meeting or the date specified by an advance notice provision in our bylaws. Our bylaws contain an advance notice provision that we have described above. For our annual meeting of stockholders expected to be held on April 25, 2017, stockholders must submit such written notice to the corporate secretary not later than the close of business on January 26, 2017. Proxy Statement

Proxy Statement

Proxy SolicitationThe board of directors is furnishing proxy materials to solicit proxies for use at the Annual Meeting of Stockholders on May 9, 2017 and any adjournment(s) thereof. Proxies are solicited principally by mail, but directors, officers, and employees of MDU Resources Group, Inc. or its subsidiaries may solicit proxies personally, by telephone, or by electronic media, without compensation other than their regular compensation. Okapi Partners, LLC additionally will solicit proxies for approximately $8,000 plus out-of-pocket expenses. We will pay the cost of soliciting proxies and will reimburse brokers and others for forwarding proxy materials to stockholders.
Electronic Delivery
of Proxy Statement and Annual Report Documents
For stockholders receiving proxy materials by mail, you can elect to receive an email in the future that will provide electronic links to these documents. Opting to receive your proxy materials online will save the company the cost of producing and mailing documents to your home or business and will also give you an electronic link to the proxy voting site.
●
Registered Stockholders: If you vote on the Internet at www.proxypush.com/mdu, simply follow the prompts for enrolling in the electronic proxy delivery service. You may enroll in the electronic proxy delivery service at any time in the future by going directly to www.shareowneronline.com or by calling Wells Fargo Stockholder Services at 877-536-3553 to request electronic delivery. You may also revoke an electronic delivery election at this site at any time.
●
Beneficial Stockholders: If you hold your shares in a brokerage account, you may also have the opportunity to receive copies of the proxy materials electronically. Please check the information provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service or contact your bank or broker to request electronic delivery.
Householding of Proxy MaterialsIn accordance with a Notice sent to eligible stockholders who share a single address, we are sending only one Annual Report to Stockholders and one Proxy Statement to that address unless we received instructions to the contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if a stockholder of record wishes to receive a separate Annual Report to Stockholders and Proxy Statement in the future, he or she may contact the Office of the Treasurer at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650, Telephone Number: (701) 530-1000. Eligible stockholders of record who receive multiple copies of our Annual Report to Stockholders and Proxy Statement can request householding by contacting us in the same manner. Stockholders who own shares through a bank, broker, or other nominee can request householding by contacting the nominee.
We will promptly deliver, upon written or oral request, a separate copy of the Annual Report to Stockholders and Proxy Statement to a stockholder at a shared address to which a single copy of the document was delivered.
MDU Resources Group, Inc. 401(k) PlanThis Proxy Statement is being used to solicit voting instructions from participants in the MDU Resources Group, Inc. 401(k) Plan with respect to shares of our common stock that are held by the trustee of the plan for the benefit of plan participants. If you are a plan participant and also own other shares as a registered stockholder or beneficial owner, you will separately receive a Notice or proxy materials to vote those other shares you hold outside of the MDU Resources Group, Inc. 401(k) Plan. If you are a plan participant, you must instruct the plan trustee to vote your shares by utilizing one of the methods described on the voting instruction form that you receive in connection with shares held in the plan. If you do not give voting instructions, the trustee generally will vote the shares allocated to your personal account in accordance with the recommendations of the board of directors.
Annual Meeting AdmissionAll stockholders as of the record date of March 10, 2017, are cordially invited and urged to attend the meeting in person. Registered stockholders who receive a full set of proxy materials will receive a request for admission ticket(s) with their proxy card that can be completed and returned to us postage-free. Registered stockholders who receive a Notice and stockholders whose shares are held in the name of a bank or broker will not receive a request for admission ticket(s). They should instead: (1) call (701) 530-1000 to request an admission ticket(s), (2) if shares are held in the name of a bank or broker, obtain a statement from their bank or broker showing proof of stock ownership as of March 10, 2017, and (3) present their admission tickets(s), the stock ownership statement, and photo identification, such as a driver’s license, at the annual meeting.


Stockholder Proposals:MDU Resources Group, Inc.The requirements we describe above are separate from and in addition to the Securities and Exchange Commission’s requirements that a stockholder must meet to have a stockholder proposal included in our proxy statement pursuant to Rule 14a-8 under the Exchange Act. For purposes of our annual meeting of stockholders expected to be held on April 25, 2017, any stockholder who wishes to submit a proposal for inclusion in our proxy materials must submit such proposal to the corporate secretary on or before November 16, 2016. Proxy Statement 55
Bylaw Copies:You may obtain a copy of the full text of the bylaw provisions discussed above by writing to the corporate secretary. Our bylaws are also available on our website at:

Proxy Statement

Conduct of the MeetingNeither the board of directors nor management intends to bring before the meeting any business other than the matters referred to in the Notice of Annual Meeting and this Proxy Statement. We have not been informed that any other matter will be presented at the meeting by others. However, if any other matters are properly brought before the annual meeting, or any adjournment(s) thereof, your proxies include discretionary authority for the persons named in the proxy to vote or act on such matters in their discretion.
Stockholder Proposals, Director Nominations, and Other Items of Business for 2018 Annual Meeting
Stockholder Proposals for Inclusion in Next Year’s Proxy Statement.  To be included in the proxy materials for our 2018 annual meeting, a stockholder proposal must be received by the corporate secretary no later than November 24, 2017, and must comply with all applicable requirements of Rule 14a-18 under the Securities and Exchange Act of 1934.
Director Nominations and Other Stockholder Proposals Raised From the Floor at the 2018 Annual Meeting of Stockholders.  Under our bylaws, if a stockholder intends to nominate a person as a director, or present other items of business at an annual meeting, the stockholder must provide written notice of the director nomination or stockholder proposal at least 90 days prior to the anniversary of the most recent annual meeting. Notice of director nominations or stockholder proposals for our 2018 annual meeting must be received by February 9, 2018, and meet all the requirements and contain all the information, including the completed questionnaire for director nominations, provided by our bylaws. The requirements for such notice can be found in our bylaws, a copy of which is on our website, at http://www.mdu.com/integrity/governance/guidelines-and-bylaws.
We will make available to our stockholders to whom we furnish this proxy statementProxy Statement a copy of our Annual Report on Form 10-K, excluding exhibits, for the year ended December 31, 2015,2016, which is required to be filed with the Securities and Exchange Commission. You may obtain a copy, without charge, upon written or oral request to the Office of the Treasurer of MDU Resources Group, Inc., 1200 West Century Avenue, Mailing Address: P.O. Box 5650, Bismarck, ND 58506-5650, Telephone Number: (701) 530-1000. You may also access our Annual Report on Form 10-K through our website at www.mdu.com.
 By order of the Board of Directors,
  
 
dankuntzsig2a02.jpg
 Daniel S. Kuntz
 Secretary
 March 16, 201624, 2017


 
7056 MDU Resources Group, Inc. Proxy Statement

Proxy Statement
 

EXHIBIT A

AMENDMENT TO THE BYLAWS
OF
MDU RESOURCES GROUP, INC. LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN
Article 1. Establishment, Purpose and Duration
1.1
Establishment of the Plan. MDU Resources Group, Inc., a Delaware corporation (hereinafter referred to as the “Company”), hereby establishes an incentive compensation plan to be known as the “MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan” (hereinafter referred to as the “Plan”), as set forth in this document. The Plan permits the grant of Restricted Stock, Performance Units, Performance Shares and other awards.
              The Plan first became effective when approved by7.09 Forum Selection.
(a) Forum Selection. Unless the stockholders at the annual meeting on April 22, 1997. The Plan, as amended, became effective on April 25, 2006 when approved by the stockholders at the 2006 annual meeting. The Plan shall remainCorporation consents in effect as provided in Section 1.3 herein.
1.2
Purpose of the Plan. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of Company stockholders and customers.
              The Plan is further intended to provide flexibilitywriting to the Company in its abilityselection of an alternative forum, to motivate, attractthe fullest extent permitted by law, all Internal Corporate Claims shall be brought solely and retain the services of Participants upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent.
1.3
Duration of the Plan.The Plan shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 13 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan’s provisions.
Article 2. Definitions
Whenever usedexclusively in the Plan, the following terms shall have the meanings set forth below and, when such meaning is intended, the initial letterCourt of Chancery of the wordState of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the United States District Court for the District of Delaware). “Internal Corporate Claims” means claims, including claims in the right of the Corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which the General Corporation Law of the State of Delaware confers jurisdiction upon the Court of Chancery of the State of Delaware.
(b) Personal Jurisdiction. If any action the subject matter of which is capitalized:
2.1
”Award” means, individually or collectively, a grant under the Plan of Restricted Stock, Performance Units, Performance Shares or any other type of award permitted under Article 8 of the Plan.
2.2
”Award Agreement” means an agreement entered into by each Participant and the Company, setting forth the terms and provisions applicable to an Award granted to a Participant under the Plan.
2.3
”Board” or “Board of Directors” means the Board of Directors of the Company.
2.4    A “Change in Control” shall mean:
(a)    The acquisition by any individual, entity or group (withinwithin the meaningscope of Section 13(d)(3)7.09(a) is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) by or 14(d)(2)in the name of any stockholder (including in the right of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of eitherCorporation), such stockholder shall be deemed to have consented to (i) the then outstanding shares of common stockpersonal jurisdiction of the Company (the “Outstanding Company Common Stock”) orstate and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 7.09(a) and (ii) the combined voting powerhaving service of the then outstanding voting securities of the Company entitled to vote generallyprocess made upon such stockholder in any such action by service upon such stockholder’s counsel in the election of directors (the “Outstanding Company Voting Securities”); provided, however, thatForeign Action as agent for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2.4; orsuch stockholder.
(b)    Individuals who, as of April 22, 1997, which is the effective date of the Plan, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

 
MDU Resources Group, Inc. Proxy Statement A-1

Proxy Statement

(c)    Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d)    Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
For avoidance of doubt, unless otherwise determined by the Board, the sale of a subsidiary, operating entity or business unit of the Company shall not constitute a Change in Control for purposes of this Agreement.
2.5
”Code” means the Internal Revenue Code of 1986, as amended from time to time.
2.6
”Committee” means the Committee, as specified in Article 3, appointed by the Board to administer the Plan with respect to Awards.
2.7
”Company” means MDU Resources Group, Inc., a Delaware corporation, or any successor thereto as provided in Article 16 herein.
2.8
”Covered Employee” means any Participant who would be considered a “Covered Employee” for purposes of Section 162(m) of the Code.
2.9
”Director” means any individual who is a member of the Board of Directors of the Company.
2.10
”Disability” means “permanent and total disability” as defined under Section 22(e)(3)of the Code.
2.11
”Dividend Equivalent” means, with respect to Shares subject to an Award, a right to be paid an amount equal to dividends declared on an equal number of outstanding Shares.
2.12
”Eligible Employee” means an Employee who is eligible to participate in the Plan, as set forth in Section 5.1 herein.
2.13
”Employee” means any full-time or regularly-scheduled part-time employee of the Company or of the Company’s Subsidiaries, who is not covered by any collective bargaining agreement to which the Company or any of its Subsidiaries is a party. Directors who are not otherwise employed by the Company shall not be considered Employees for purposes of the Plan. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of employment.
2.14
”Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.15
”Fair Market Value” shall mean the average of the high and low sale prices as reported in the consolidated transaction reporting system or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported.
2.16
”Full Value Award” means an Award pursuant to which Shares may be issued.
2.17
”Participant” means an Employee of the Company who has outstanding an Award granted under the Plan.

A-2 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

2.18
“Performance Goals” means the performance goals established by the Committee, which shall be based on one or more of the following measures: sales or revenues, earnings per share, shareholder return and/or value, funds from operations, cash flow from operations (dollar target or as % of revenue), gross margin or gross profit (dollar target or as % of revenue), operations and maintenance expense (dollar target or as % of revenue), general and administrative expense (dollar target or as % of revenue), total operating expense (dollar target or as % of revenue), operating income (dollar target or as % of revenue), pretax income (dollar target or as % of revenue), earnings before interest, taxes, depreciation and amortization or “EBITDA” (dollar target or as % of revenue), earnings before interest and taxes or “EBIT” (dollar target or as % of revenue), gross income, net income, cash flow, earnings, return on equity, return on invested capital, return on assets, return on net assets, working capital as percentage of revenue, days sales outstanding/accounts receivable turnover, current ratio, capital efficiency, operating ratios, stock price, enterprise value, company value, asset value growth, net asset value, shareholders’ equity, dividends, customer satisfaction, accomplishment of mergers, acquisitions, dispositions or similar extraordinary business transactions, safety, sustainability, profit returns and margins, financial return ratios, and market performance. Performance goals may be measured solely on a corporate, subsidiary, business unit or individual basis, or a combination thereof. Performance goals may reflect absolute entity or individual performance or a relative comparison of entity or individual performance to the performance of a peer group of entities or other external measure.
2.19
”Performance Unit” means an Award granted to an Employee, as described in Article 7 herein.
2.20
”Performance Share” means an Award granted to an Employee, as described in Article 7 herein.
2.21
”Period of Restriction” means the period during which the transfer of Restricted Stock is limited in some way, as provided in Article 6 herein.
2.22
”Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act, as used in Sections 13(d) and 14(d) thereof, including usage in the definition of a “group” in Section 13(d) thereof.
2.23
”Qualified Restricted Stock” means an Award of Restricted Stock designated as Qualified Restricted Stock by the Committee at the time of grant and intended to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C).
2.24
”Restricted Stock” means an Award of Shares granted to a Participant pursuant to Article 6 herein.
2.25
”Shares” means the shares of common stock of the Company.
2.26
”Subsidiary” means any corporation that is a “subsidiary corporation” of the Company as that term is defined in Section 424(f) of the Code.
Article 3. Administration

3.1
The Committee. The Plan shall be administered by the Compensation Committee of the Board, or by any other Committee appointed by the Board. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors.
3.2
Authority of the Committee. The Committee shall have full power except as limited by law, the Articles of Incorporation and the Bylaws of the Company, subject to such other restricting limitations or directions as may be imposed by the Board and subject to the provisions herein, to determine the size and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend or waive rules and regulations for the Plan’s administration; and (subject to the provisions of Article 13 herein) to amend the terms and conditions of any outstanding Award. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authorities as identified hereunder.
3.3
Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to Awards under the Plan as it may deem advisable, including, without limitation, restrictions to comply with applicable Federal securities laws, with the requirements of any stock exchange or market upon which such Shares are then listed and/or traded and with any blue sky or state securities laws applicable to such Shares.

MDU Resources Group, Inc. Proxy Statement A-3

Proxy Statement

3.4
Approval. The Board or the Committee shall approve all Awards made under the Plan and all elections made by Participants, prior to their effective date, to the extent necessary to comply with Rule 16b-3 under the Exchange Act.
3.5
Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board shall be final, conclusive and binding on all persons, including the Company, its stockholders, Employees, Participants and their estates and beneficiaries.
3.6
Costs. The Company shall pay all costs of administration of the Plan.
Article 4. Shares Subject to the Plan

4.1
Number of Shares. Subject to Section 4.2 herein, the maximum number of Shares that may be issued pursuant to Awards under the Plan shall be 9,242,806. Shares underlying lapsed or forfeited Awards of Restricted Stock shall not be treated as having been issued pursuant to an Award under the Plan. Shares withheld from an Award to satisfy tax withholding obligations shall be counted as Shares issued pursuant to an Award under the Plan. Shares that are potentially deliverable under an Award that expires or is canceled, forfeited, settled in cash or otherwise settled without the delivery of Shares shall not be treated as having been issued under the Plan.
              Shares issued pursuant to the Plan may be (i) authorized but unissued Shares of Common Stock, (ii) treasury shares, or (iii) shares purchased on the open market.
4.2
Adjustments in Authorized Shares. In the event of any equity restructuring such as a stock dividend, stock split, spinoff, rights offering or recapitalization through a large, nonrecurring cash dividend, the Committee shall cause an equitable adjustment to be made (i) in the number and kind of Shares that may be delivered under the Plan, (ii) in the individual limitations set forth in Section 4.3 and (iii) with respect to outstanding Awards, in the number and kind of Shares subject to outstanding Awards, price of Shares subject to outstanding Awards, any Performance Goals relating to Shares, the market price of Shares, or per-Share results, and other terms and conditions of outstanding Awards, in the case of (i), (ii) and (iii) to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the Committee may, in its sole discretion, cause an equitable adjustment as described in the foregoing sentence to be made to prevent dilution or enlargement of rights. The number of Shares subject to any Award shall always be rounded down to a whole number when adjustments are made pursuant to this Section 4.2. Adjustments made by the Committee pursuant to this Section 4.2 shall be final, binding and conclusive.
4.3
Individual Limitations. Subject to Section 4.2 herein, (i) the total number of shares of Qualified Restricted Stock that may be granted in any calendar year to any Covered Employee shall not exceed 2,250,000 Shares; (ii) the total number of Performance Shares or Performance Units that may be granted in any calendar year to any Covered Employee shall not exceed 2,250,000 Performance Shares or Performance Units, as the case may be; (iii) the total number of Shares that are intended to qualify for deduction under Section 162(m) of the Code granted pursuant to Article 8 herein in any calendar year to any Covered Employee shall not exceed 2,250,000 Shares; (iv) the total cash Award that is intended to qualify for deduction under Section 162(m) of the Code that may be paid pursuant to Article 8 herein in any calendar year to any Covered Employee shall not exceed $6,000,000; and (v) the aggregate number of Dividend Equivalents that are intended to qualify for deduction under Section 162(m) of the Code that a Covered Employee may receive in any calendar year shall not exceed $6,000,000.
Article 5. Eligibility and Participation
5.1
Eligibility. Persons eligible to participate in the Plan include all officers and key employees of the Company and its Subsidiaries, as determined by the Committee, including Employees who are members of the Board, but excluding Directors who are not Employees.
5.2
Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees those to whom Awards shall be granted and shall determine the nature and amount of each Award.
Article 6. Restricted Stock
6.1
Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Eligible Employees at any time and from time to time, as shall be determined by the Committee.

A-4 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

              The Committee shall have complete discretion in determining the number of shares of Restricted Stock granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such Restricted Stock.
              In addition, the Committee may, prior to or at the time of grant, designate an Award of Restricted Stock as Qualified Restricted Stock, in which event it will condition the grant or vesting, as applicable, of such Qualified Restricted Stock upon the attainment of the Performance Goals selected by the Committee.
6.2
Restricted Stock Award Agreement. Each Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement that shall specify the Period or Periods of Restriction, the number of Restricted Stock Shares granted and such other provisions as the Committee shall determine.
6.3
Transferability. Restricted Stock granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant or his or her legal representative.
6.4
Certificate Legend. Each certificate representing Restricted Stock granted pursuant to the Plan may bear a legend substantially as follows:
              ”The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer as set forth in MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan and in a Restricted Stock Award Agreement. A copy of such Plan and such Agreement may be obtained from MDU Resources Group, Inc.”
              The Company shall have the right to retain the certificates representing Restricted Stock in the Company’s possession until such time as all restrictions applicable to such Shares have been satisfied.
6.5
Removal of Restrictions. Restricted Stock shall become freely transferable by the Participant after the last day of the Period of Restriction applicable thereto. Once Restricted Stock is released from the restrictions, the Participant shall be entitled to have the legend referred to in Section 6.4 removed from his or her stock certificate.
6.6
Voting Rights. During the Period of Restriction, Participants holding Restricted Stock may exercise full voting rights with respect to those Shares.
6.7
Dividends and Other Distributions. Subject to the Committee’s right to determine otherwise at the time of grant, during the Period of Restriction, Participants holding Restricted Stock shall receive all regular cash dividends paid with respect to all Shares while they are so held. All other distributions paid with respect to such Restricted Stock shall be credited to Participants subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid and shall be paid to the Participant within forty-five (45) days following the full vesting of the Restricted Stock with respect to which such distributions were made.
6.8
Termination of Employment. Each Restricted Stock Award Agreement shall set forth the extent to which the Participant shall have the right to receive unvested Restricted Stock following termination of the Participant’s employment with the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Restricted Stock Award Agreement entered into with Participants, need not be uniform among all grants of Restricted Stock or among Participants and may reflect distinctions based on the reasons for termination of employment.
Article 7. Performance Units and Performance Shares
7.1
Grant of Performance Units and Performance Shares. Subject to the terms and conditions of the Plan, Performance Units and/or Performance Shares may be granted to an Eligible Employee at any time and from time to time, as shall be determined by the Committee.
              The Committee shall have complete discretion in determining the number of Performance Units and/or Performance Shares granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such Awards.

MDU Resources Group, Inc. Proxy Statement A-5

Proxy Statement

7.2
Performance Unit/Performance Share Award Agreement. Each grant of Performance Units and/or Performance Shares shall be evidenced by a Performance Unit and/or Performance Share Award Agreement that shall specify the number of Performance Units and/or Performance Shares granted, the initial value (if applicable), the Performance Period, the Performance Goals and such other provisions as the Committee shall determine, including but not limited to any rights to Dividend Equivalents.
7.3
Value of Performance Units/Performance Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The value of a Performance Share shall be equal to the Fair Market Value of a Share. The Committee shall set Performance Goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Performance Shares that will be paid out to the Participants. The time period during which the Performance Goals must be met shall be called a “Performance Period.”
7.4
Earning of Performance Units/Performance Shares. After the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive a payout with respect to the Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved.
7.5
Form and Timing of Payment of Performance Units/Performance Shares. Payment of earned Performance Units/Performance Shares shall be made following the close of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in cash or in Shares (or in a combination thereof), which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee.
7.6
Termination of Employment. Each Performance Unit/Performance Share Award Agreement shall set forth the extent to which the Participant shall have the right to receive a Performance Unit/Performance Share payment following termination of the Participant’s employment with the Company and its Subsidiaries during a Performance Period. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all grants of Performance Units/Performance Shares or among Participants and may reflect distinctions based on reasons for termination of employment.
7.7
Transferability. Except as otherwise determined by the Committee and set forth in the Performance Unit/Performance Share Award Agreement, Performance Units/Performance Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, and a Participant’s rights with respect to Performance Units/Performance Shares granted under the Plan shall be available during the Participant’s lifetime only to such Participant or the Participant’s legal representative.
Article 8. Other Awards
The Committee shall have the right to grant other Awards which may include, without limitation, the grant of Shares based on attainment of Performance Goals established by the Committee, the payment of Shares in lieu of cash, the payment of cash based on attainment of Performance Goals established by the Committee, and the payment of Shares in lieu of cash under other Company incentive or bonus programs. Payment under or settlement of any such Awards shall be made in such manner and at such times as the Committee may determine.
Article 9. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
The spouse of a married Participant domiciled in a community property jurisdiction shall join in any designation of beneficiary or beneficiaries other than the spouse.

A-6 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Article 10. Deferrals
The Committee may permit a Participant to defer the Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under the Plan. If any such deferral election is permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals.
Article 11. Rights of Employees
11.1
Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant’s employment at any time, for any reason or no reason in the Company’s sole discretion, nor confer upon any Participant any right to continue in the employ of the Company.
11.2
Participation. No Employee shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive a future Award.
Article 12. Change in Control
The terms of this Article 12 shall immediately become operative, without further action or consent by any person or entity, upon a Change in Control, and once operative shall supersede and take control over any other provisions of this Plan.
Upon a Change in Control

(a)    Any restriction periods and restrictions imposed on Restricted Stock, Qualified Restricted Stock or Awards granted pursuant to Article 8 (if not performance-based) shall be deemed to have expired and such Restricted Stock, Qualified Restricted Stock or Awards shall become immediately vested in full; and

(b)    The target payout opportunity attainable under all outstanding Awards of Performance Units, Performance Shares and Awards granted pursuant to Article 8 (if performance-based) shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control, and shall be paid out promptly in Shares or cash pursuant to the terms of the Award Agreement, or in the absence of such designation, as the Committee shall determine.
Article 13. Amendment, Modification and Termination

13.1
Amendment, Modification and Termination. The Board may, at any time and from time to time, alter, amend, suspend or terminate the Plan, in whole or in part, provided that no amendment shall be made which shall increase the total number of Shares that may be issued under the Plan, materially modify the requirements for participation in the Plan, or materially increase the benefits accruing to Participants under the Plan, in each case unless such amendment is approved by the stockholders.
13.2
Awards Previously Granted. No termination, amendment or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award, unless such termination, modification or amendment is required by applicable law and except as otherwise provided herein.
Article 14. Withholding
14.1
Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to an Award made under the Plan.
14.2
Share Withholding. With respect to withholding required upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising out of or as a result of Awards granted hereunder, Participants may elect to satisfy the withholding requirement, in whole or in part, by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing and signed by the Participant.

MDU Resources Group, Inc. Proxy Statement A-7

Proxy Statement

Article 15. Minimum Vesting
Notwithstanding any other provision of the Plan to the contrary, (a) the minimum vesting period for Full Value Awards with no performance-based vesting characteristics must be at least three years (vesting may occur ratably each month, quarter or anniversary of the grant date over such vesting period); (b) the minimum vesting period for Full Value Awards with performance-based vesting characteristics must be at least one year; and (c) the Committee shall not have discretion to accelerate vesting of Full Value Awards except in the event of a Change in Control or similar transaction, or the death, disability, or termination of employment of a Participant; provided, however, that the Committee may grant a “de minimis” number of Full Value Awards that do not comply with the foregoing minimum vesting standards. For this purpose “de minimis” means 331,279 Shares available for issuance as Full Value Awards under the Plan, subject to adjustment under Section 4.2 herein.
Article 16. Successors
All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 17. Legal Construction
17.1
Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural.
17.2
Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
17.3
Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
17.4
Governing Law. To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with, and governed by, the laws of the State of Delaware.
Article 18. Accounting Restatements
This Article 18 shall apply to Awards granted to all Participants in the Plan. Notwithstanding anything in the Plan or in any Award Agreement to the contrary, if the Company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirements under the securities laws, the Company or the Committee may, or shall if required, take action to recover incentive-based compensation from specific executive officers in accordance with the Company’s Guidelines for Repayment of Incentives Due to Accounting Restatements, as they may be amended or substituted from time to time, and in accordance with applicable law and applicable rules of the Securities and Exchange Commission and the New York Stock Exchange.

Article 19. Code Section 409A Compliance
To the extent applicable, it is intended that this Plan and any Awards granted hereunder comply with the requirements of Section 409A of the Code and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service (“Section 409A”). Any provision that would cause the Plan or any Award granted hereunder to fail to satisfy Section 409A shall have no force or effect until amended to comply with Section 409A, which amendment may be retroactive to the extent permitted by Section 409A.




A-8 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

EXHIBIT B
Towers Watson 2013 CDB General Industry Executive DatabaseBD (Becton Dickinson)Cooper Standard AutomotiveFreeport-McMoRan Copper & Gold
BeamCorningFrontier Communications
Bechtel Systems & InfrastructureCott CorporationFujitsu Limited
3MBenjamin MooreCovanceG&K Services
A.O. SmithBest BuyCovidienGAF Materials
AbbVieBig LotsCSXGap
AccentureBiogen IdecCumberland Gulf GroupGartner
ACH FoodBlack BoxCurtiss-WrightGates
AdeccoBoiseCVS CaremarkGavilon
AerojetBoise CascadeCytecGenCorp
AGCOBooz Allen HamiltonDaiichi SankyoGeneral Atomics
Agilent TechnologiesBorgWarnerDaimler Trucks North AmericaGeneral Dynamics
AgriumBoston ScientificDarden RestaurantsGeneral Mills
AimiaBradyDay & ZimmermannGeneral Motors
Air LiquideBristol-Myers SquibbDean FoodsGerdau Long Steel North America
Air Products and ChemicalsBungeDeere & CompanyGilead Sciences
AlcoaBurlington Northern Santa FeDellGlaxoSmithKline
Alexander & BaldwinBush BrothersDeluxeGoodman Manufacturing
Alliant TechsystemsCA TechnologiesDentsplyGoodyear Tire & Rubber
American Crystal SugarCaesar’s EntertainmentDiageo North AmericaGoogle
American Sugar RefiningCalgon CarbonDonaldson CompanyGraco
Americas StyrenicsCardinal HealthDow CorningGreen Mountain Coffee Roasters
AmerisourceBergenCargillDr Pepper SnappleGrupo Ferrovial
AMETEKCarlsonDSM Nutritional ProductsGTECH
AmgenCarMaxDuPontH.B. Fuller
AMRCarmeuse North America GroupE.W. ScrippsHanesbrands
AMSTED IndustriesCarnivalEastman ChemicalHarland Clarke
AmwayCarpenter TechnologyEatonHarman International Industries
AnsellCarriage ServiceseBayHarsco
AptarGroupCatalent Pharma SolutionsEcolabHasbro
ARAMARKCBSEli LillyHBO
Arby’s Restaurant GroupCelesticaEMCHD Supply
Archer Daniels MidlandCelgeneEMD MilliporeHenry Schein
ArkemaCEVA LogisticsEmerson ElectricHerman Miller
Armstrong World IndustriesCF IndustriesEnCana Oil & Gas USAHershey
Arrow ElectronicsCH2M HillEngility CorporationHertz
AshlandChemturaEnPro IndustriesHexcel
AstraZenecaChristensen FarmsEquifaxHilton Worldwide
AT&TChryslerEquity Office PropertiesHitachi Data Systems
Automatic Data ProcessingCHSEricssonHNI
AvayaCisco SystemsESRIHNTB
Avery DennisonClear Channel CommunicationsEstee LauderHoffmann-La Roche
Avis Budget GroupCliffs Natural ResourcesEsterline TechnologiesHome Depot
Avon ProductsCloud Peak EnergyExelHormel Foods
Axiall CorporationCNHExelisHost Hotels & Resorts
BAE SystemsCoachExpediaHoughton Mifflin Harcourt Publishing
BallCoca-ColaExperian AmericasHunt Consolidated
Barnes GroupCoinstarExpress ScriptsHusky Injection Molding Systems
Barrick Gold of North AmericaColgate-PalmoliveExterranIBM
Baxter InternationalColumbia SportswearFederal-MogulIDEXX Laboratories
BayerComcastFirst DataIllinois Tool Works
Bayer Business & TechnologyCommercial MetalsFiservIngersoll Rand
ServicesCompass GroupFlowserveIntel
Bayer CropScienceConAgra FoodsFordIntercontinental Hotels Group
Bayer HealthCareConvergysFortune Brands Home & SecurityInternational Automotive Components

MDU Resources Group, Inc. Proxy Statement B-1

Proxy Statement

International Flavors & FragrancesMerck & CoPPG IndustriesTE Connectivity
International Game TechnologyMicron TechnologyPraxairTeleTech Holdings
International PaperMicrosoftPulteGroupTeradata
Invensys ControlsMilacronPurdue PharmaTerex
ION GeophysicalMillerCoorsQualcommTetra Tech
IrvineMillicom International CellularQuest DiagnosticsTexas Instruments
ITT CorporationMine Safety AppliancesQuintilesTextron
J.M. SmuckerMolnlycke Health CareR.R. DonnelleyThermo Fisher Scientific
J.R. SimplotMolson Coors BrewingRayonierThomson Reuters
Jabil CircuitMolycorpRegal-BeloitTiffany & Co.
Jacobs EngineeringMomentive Specialty ChemicalsRegeneron PharmaceuticalsTime Warner
JetBlue AirwaysMosaicRevlonTime Warner Cable
Johns-ManvilleMTS SystemsReynolds PackagingT-Mobile
Johnson & JohnsonNash-FinchRicoh AmericasToro
Johnson ControlsNavigant ConsultingRoche DiagnosticsToshiba Medical Research Institute
KBRNavistar InternationalRockwell AutomationUSA
KelloggNBTYRockwell CollinsTotal System Service (TSYS)
Kelly ServicesNCRRolls-Royce North AmericaToyota Motor Engineering &
KennametalNeoris USARowan CompaniesManufacturing North America
Kewaunee Scientific CorporationNestle USARyder SystemTransocean
Keystone FoodsNewell RubbermaidS.C. Johnson & SonTrinity Industries
Kimberly-ClarkNewmont MiningSage SoftwareTronox
Kimco RealtyNewPageSAICTRW Automotive
Kinross GoldNissan North AmericaSanofiTupperware Brands
Koch IndustriesNokiaSAS InstituteUnderwriters Laboratories
KofaxNorfolk SouthernSchreiber FoodsUnilever United States
KohlerNOVA ChemicalsSchwan’sUnisys
Kyocera CorporationNovartisScotts Miracle-GroUnited Rentals
L-3 CommunicationsNovo Nordisk PharmaceuticalsSeagate TechnologyUnited States Cellular
Land O’LakesNyproSealed AirUnited States Steel
Leggett and PlattOccidental PetroleumSercoUnited Technologies
Lehigh HansonOffice DepotServiceMaster CompanyUPS
Lend LeaseOmgeoShawCorURS
Leprino FoodsOmnicareSherwin-WilliamsValero Energy
Level 3 CommunicationsOMNOVA SolutionsShireVentura Foods
Life TechnologiesOrange Business ServicesSigma-AldrichVerizon
LifetouchOshkoshSnap-onVertex Pharmaceuticals
Lincoln ElectricOwens CorningSodexoViacom
Lorillard TobaccoOwens-IllinoisSonoco ProductsViad
LyondellBasellOxford Instruments AmericaSony ElectronicsVisteon
Magellan Midstream PartnersPall CorporationSouthwest AirlinesVulcan Materials
MakinoPanasonic of North AmericaSpirit AeroSystemsVWR International
ManitowocParker HannifinSprint NextelW.R. Grace
Marriott InternationalParsons CorporationSPXW.W. Grainger
Martin Marietta MaterialsPepsiCoSSABWal-Mart Stores
Mary KayPerformance Food GroupSt. Jude MedicalWalt Disney
MascoPfizerStaplesWaste Management
MattelPGI (Polymer Group)Starbucks CoffeeWendy’s Group
Matthews InternationalPHHStarwood Hotels & ResortsWest Pharmaceutical Services
McDermott InternationalPHIStatoilWestinghouse Electric
McDonald’sPitney BowesSteelcaseWeyerhaeuser
McKessonPlexusStrykerWhirlpool
MeadWestvacoPlum Creek TimberSuburban PropaneWinnebago Industries
Media GeneralPolaris IndustriesSyngenta Crop ProtectionWorthington Industries
MedtronicPolyOneTargetWyndham Worldwide
Menasha CorporationPotashTaubman CentersXerium Technologies

B-2 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

XeroxISO New EnglandXcel EnergyBoy Scouts of America
XilinxITC HoldingsBradley
Yum! BrandsKinder MorganTowers Watson 2013 CSR Report on Top Management CompensationBrickman Group
ZimmerLG&E and KU EnergyBridgepoint Education
MDU ResourcesBriggs & Stratton
Towers Watson 2013 CDB Energy Services Executive DatabaseMidAmerican EnergyAAABristow Group
Midwest Independent TransmissionABX AirBrookdale Senior Living
System OperatorAcuityBryant University
AEI ServicesNew York Independent SystemAFLACBuild-A-Bear Workshop
AESOperatorAgFirstCACI International
AGL ResourcesNew York Power AuthorityAGL ResourcesCaelum Research Corporation
AlleteNextEra EnergyAIGCalifornia Casualty Management
Alliant EnergyNiSourceAlere Health LLCCalifornia Dental Association
AmerenNortheast UtilitiesAlfa Laval, Inc.California Institute of Technology
American Electric PowerNorthWestern EnergyAlpha PackagingCalpine
ArevaNV EnergyAlyeska Pipeline ServiceCambia Health Solutions
ATC ManagementNW NaturalAmerican Career CollegeCareFirst BlueCross BlueShield
Atmos EnergyOCI EnterprisesAmerican EnterpriseCarlson
AvistaOGE EnergyAmerican GreetingsCDM Smith
BG US ServicesOglethorpe PowerAmerican Heart AssociationCEMEX, Inc.
Black HillsOhio Valley ElectricAmerican Water WorksChelan County Public Utility District
CalpineOld Dominion ElectricAmerisourceBergenChicago Transit Authority
Capital Power CorporationOmaha Public PowerAmeristar CasinosChildren’s Healthcare of Atlanta
CenterPoint EnergyOtter TailAmes True TemperChoice Hotels International
CH Energy GroupPacific Gas & ElectricAmica Mutual InsuranceCHS
ClecoPeople’s Natural GasAOCChurch of Jesus Christ of Latter-day
CMS EnergyPepco HoldingsApplied Research AssociatesSaints
Colorado Springs UtilitiesPinnacle West CapitalAsahi Kasei Plastics N.A. Inc.Cigna
Consolidated EdisonPJM InterconnectionAscend Performance MaterialsCity of Chicago
CPS EnergyPNM ResourcesAuto Club GroupCity of Garland
Crosstex EnergyPortland General ElectricAutomobile Club of SouthernCity of Greensboro
Dominion ResourcesPPLCaliforniaCity of Houston
DTE EnergyProliance HoldingsAvis Budget GroupCity of Las Vegas
Duke EnergyPublic Service Enterprise GroupAvistaCity of Philadelphia
DynegyPuget EnergyBain & CompanyClubCorp Inc
Edison InternationalSalt River ProjectBaxterCNL Financial Group
Edison Mission EnergySCANABaylor College of MedicineCoca-Cola Bottling
ElectriCities of North CarolinaSempra EnergyBaylor Health Care SystemCoca-Cola Refreshments
EnergenSouthern Company ServicesB Braun MedicalCollege of Saint Benedict/Saint
Energy Future HoldingsSouthwest GasBeaulieuJohn’s University
Energy NorthwestSpectra EnergyBemis Manufacturing CompanyCollege of St Scholastica
Energy SolutionsSTP Nuclear OperatingBeneficial BankColsa
Energy TransferSunCoke EnergyThe Bergquist CompanyCommScope
EntergyTECO EnergyBerwick OffrayCommunity Coffee
EQT CorporationTennessee Valley AuthorityBlue Cross Blue Shield of LouisianaCommunity Health Network
ERCOTTransCanadaBlue Cross Blue Shield of SouthThe Community Preservation
ExelonUGICarolinaCorporation
FirstEnergyUIL HoldingsBlue Cross Blue Shield of TennesseeComputer Task Group
First SolarUnitilBlue Cross of IdahoConnectiCare Capital LLC
GDF SUEZ Energy North AmericaUNS EnergyBluestem BrandsCopper Point
Grand River Dam AuthorityURENCO USABMW Manufacturing CorporationCorinthian Colleges
Hunt ConsolidatedVectrenThe Board of PensionsCornell University
Iberdrola USAWestar EnergyBoddie-Noell EnterprisesThe Cosmopolitan of Las Vegas
Idaho PowerWilliams CompaniesBosch Packaging ServicesCountry Financial
Indianapolis Power & Light CompanyWisconsin EnergyBoston UniversityCox Enterprises
Integrys Energy GroupWolf Creek NuclearBoyd GamingCPS Energy

MDU Resources Group, Inc. Proxy Statement B-3

Proxy Statement

CTI BioPharmaFlowserveIngram IndustriesMaxwell Technologies
CTS CorporationFluor Federal Petroleum OperationsInsperityMayo Clinic
CUNA MutualFortune Brands Home & SecurityInstitute for Defense AnalysesMcCain Foods USA
David C. CookFranklin InternationalInstitute of Electrical & ElectronicMcGladrey LLP
DaVitaFreeman DallasEngineers (IEEE)Medical College of Wisconsin
DecurionFreeport-McMoRan Copper & GoldIntegra LifesciencesMEGTEC Systems
Delhaize AmericaFroedtert HealthIntertape Polymer CorpMerit Medical Systems
Department of DefenseGannettIron MountainMerrill
DePaul UniversityGENCOIrvineMetagenics
DeVry Education GroupGeneral Dynamics InformationIthaca CollegeThe Methodist Hospital System
Dickstein ShapiroTechnologyIthaka HarborsMFS Investment Management.
DieboldGenesis EnergyItochu InternationalMGM Resorts International
Doherty Employer ServicesGentiva Health ServicesJackson HewittMiami Children’s Hospital
Domino’s PizzaGeorg Fischer SignetJacobs TechnologyMichael Baker
DSC LogisticsGeorgia Health Sciences MedicalJardenMidAtlantic Employers Association
Duke RealtyCenterJefferson Science AssociatesMine Safety Appliances
Duke University & Health SystemGeorgia Institute of TechnologyJ&J Worldwide ServicesMiniature Precision Comps, Inc.
E A Sween CompanyG4S Secure Solutions (USA)Johnson OutdoorsMinneapolis School District
EcovaGibraltar Steel CorporationJoint CommissionMinnesota Management & Budget
Edison Mission EnergyG&K ServicesJ.R. SimplotMissouri Department of Conservation
Education ManagementGodiva ChocolatierJudicial Council of CaliforniaMissouri Department of
Edwards LifesciencesGOJO IndustriesKelsey-Seybold ClinicTransportation
EGS Global SolutionsGold EagleK. Hovnanian CompaniesMitsubishi International
Elizabeth ArdenGracoKI, IncMolex
EMCOR GroupGrande CheeseKIK Custom ProductsMorinda
Emerson ElectricGreat American InsuranceKingston TechnologyMTS Systems
Emory UniversityGreyhound LinesKnape & Vogt Mfg CompanyMultiPlan
Energy Future HoldingsGrinnell Mutual ReinsuranceLaboratory Corporation of AmericaMutual of Omaha
Energy SolutionsGuideStone Financial ResourcesLake Federal BankNational Academies
EntergyHarman International IndustriesLake Region MedicalNational Futures Association
Environmental Chemical CorpHarris Health SystemLantech.comNational Interstate
Erie InsuranceHarvard Vanguard Medical AssociatesLayne ChristensenNational Louis University
ESCO TechnologiesHaynes InternationalLBrandsNature’s Sunshine Products
Etnyre International LtdHazelden FoundationLegal & General AmericaNavy Exchange Enterprise
Farm Credit Bank of TexasHDR IncLeggett and PlattNBH Bank
Farm Credit FoundationsHD SupplyLG&E and KU EnergyNCCI Holdings
Federal Reserve Bank of AtlantaHealth NetLieberman ResearchNCMIC
Federal Reserve Bank of BostonH. E. Butt GroceryLighthouse InternationalNebraska Medical Center
Federal Reserve Bank of ChicagoHendrick Medical CenterLittelfuseNebraska Public Power District
Federal Reserve Bank of ClevelandHendricksonLittle Lady FoodsNew York Community Bank
Federal Reserve Bank of DallasHenry Ford Health SystemsL.L. BeanNiSource
Federal Reserve Bank of MinneapolisHighlights for ChildrenLower Colorado River AuthorityThe Nordam Group
Federal Reserve Bank of PhiladelphiaHighway Equipment CompanyLSG Sky ChefsNordson Corporation
Federal Reserve Bank of St. LouisHilti IncLuck CompaniesNorthwestern Memorial Hospital
Federal Reserve BoardHiltonLutron ElectronicsNorton Health Care
FedEx ExpressHitachi Computer ProductsMagellan Health ServicesNRG Energy
FedEx OfficeHNIMagna SeatingNYU Langone Medical Center
Ferguson EnterprisesHNTBMalco Products IncOerlikon Fairfield
Fermi National Accelerator LaboratoryHu-Friedy Manufacturing Company,ManpowerOglethorpe Power
FerroInc.ManTech InternationalOld Dominion Electric
First AmericanHunter IndustriesMAPFRE U.S.A.Orbital Science Corporation
First SolarHuntington Memorial HospitalMaricopa County Office of Mgmt &Oriental Trading Company
FiservICF InternationalBudgetPanduit
Fleetwood GroupIDEX CorporationMaricopa Integrated Health SystemPapa John’s
Flexcon Company IncIDEXX LaboratoriesMaritzParsons Child & Family Center
Flexible Steel LacingInformation Management ServiceMarshfield ClinicPatterson Companies

B-4 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

PattonairSmithfield FarmlandUniversity of MichiganXtek Inc
PaychexSMSC Gaming EnterpriseUniversity of Notre DameZimmer
PaycorSnyder’s LanceUniversity of Pennsylvania
PearsonSole Technology, Inc.University of RochesterMercer 2013 Total Compensation Survey for the Energy Sector
Pegasus SolutionsSoutheastern Freight LinesUniversity of Southern California
Penn State Hershey Medical CenterSouth Jersey GasUniversity of South Florida
PMSouthwest GasUniversity of St. ThomasA&A Tank Truck Co.
PMA CompaniesSpace Dynamics LaboratoryUniversity of Texas at AustinAGL Resources - AGL Services
Port of PortlandSpectrum Health - Grand RapidsUniversity of Texas Health ScienceCompany (Networks)
POWER EngineersHospitalsCenter at HoustonAccess Midstream Partners, L.P.
Premera Blue CrossStampin’ Up!University of Texas Health ScienceAddax Petroleum US
Principal Financial GroupStandard Motor ProductsCenter of San AntonioAfren Resources USA, Inc.
Project Management InstituteStaplesUniversity of Wisconsin MedicalAker Solutions
Property Casualty InsurersState Corporation CommissionFoundationAlliance Pipeline, Inc.
Association of AmericaSt. Cloud HospitalUniversity Physicians IncAlliant Energy Corporation
QBE the AmericasSterisUPSAlyeska Pipeline Service Company
Quality Bicycle ProductsStinger Ghaffarian TechnologiesURSAmeren Corporation
Rational EnergiesSt Louis County GovernmentUSG CorporationAmeren Corporation - Ameren Energy
RecologyStonyfield Farm IncUtah Transit AuthorityMarketing Co
Regency CentersSubaru of Indiana Automotive, Inc.UT Southwestern Medical CenterAmeren Corporation - Ameren Energy
Regions FinancialSyncadaVACCO IndustriesResources
Remedi SeniorCareTaubman CentersVail Resorts ManagementAmeren Corporation - Ameren Illinois
Renaissance LearningTaylorValero EnergyAmeren Corporation - Ameren
Rexnord CorporationTDS TelecomValsparMissouri
RiceTecTech DataVesuviusAmerican Transmission Company
Rice UniversityTecolote Research IncVia Christi HealthAnadarko Petroleum Corporation
Rich ProductsTele-ConsultantsViejas EnterprisesApache Corporation
Ricoh AmericasTexas Industries IncVi-JonAssociated Electric Cooperative, Inc.
Ricoh ElectronicsTIMETVita-Mix CorporationAtlantic Power Corporation - Atlantic
Rite-HiteTJX CompaniesWalgreen CoPower Holdings, Inc.
Riverside Research InstituteTotal System Service (TSYS)Walter EnergyAtlantic Power Corporation - Atlantic
RLITransdev NA, Inc.Washington University in St. LouisPower Services, LLC
RollinsTransitions OpticalWaste ManagementAtlantic Power Corporation -
RTCTravis CountyWawaRidgeline Energy, LLC
Salk InstituteTreasure Island Resort & CasinoWayne FarmsAtlas Energy, L.P.
Sally BeautyTribuneWayne Memorial HospitalAtlas Resource Partners, L.P.
Salt Lake CountyTri-MetW. C. BradleyAux Sable Liquid Products, Inc.
Salt River ProjectTrinity Consultants IncWellmark BlueCross BlueShieldBHP Billiton Petroleum
Samuel Roberts Noble FoundationTrinity HealthWells’ DairyBOS Solutions, Inc.
San JamarTrue Value CompanyWest Bend Mutual Insurance CoBaker Hughes, Inc.
Sazerac CompanyTufts Health PlanWestern University of HealthBasic Energy Services, LP
SCANATurner BroadcastingSciencesBaytex Energy USA, Ltd.
S&C ElectricUMDNJ-Univ of Medicine & DentistryWeston Solutions IncBoardwalk Pipeline Partners, LP
Schwan Food CompanyUnderwriters LaboratoriesWest Penn Allegheny Health SystemBreitBurn Energy Partners L.P.
SealyUnitedHealthCareWest Virginia University Hospitals,BreitBurn Energy Partners L.P. -
Seco Tools IncUnited States SteelInc.Breitburn Energy Company LP,
Securus Technologies IncUniversal Studios OrlandoWheaton Franciscan HealthcareOrcutt Facility
Seneca Gaming CorporationUniversity Health SystemWhole Foods MarketBreitBurn Energy Partners L.P. -
Sentara HealthcareUniversity of AkronWilmer Cutler Pickering Hale andBreitburn Energy Company LP, West
ServiceMaster CompanyUniversity of Alabama at BirminghamDorr LLPPico Facility
Shands HealthCareUniversity of Arkansas for MedicalWindstream CommunicationsBreitBurn Energy Partners L.P. -
Sharp ElectronicsScienceWinn-Dixie StoresEastern Division
Simon Property Group IncUniversity of California, BerkeleyWisconsin Physicians ServiceBreitBurn Energy Partners L.P. -
Simpson HousingUniversity of ChicagoInsurancePacific Coast Energy Company LP
SitelUniversity of GeorgiaThe Wornick Company
SJE-RhombusUniversity of HoustonWorthington Industries

MDU Resources Group, Inc. Proxy Statement B-5

Proxy Statement

BreitBurn Energy Partners L.P. -Citation Oil & Gas Corp.Energy Future Holdings Corporation -Hilcorp Energy Company - Harvest
Regional Operations-Bigler, TexasCobalt International EnergyLuminantPipeline Company
OperationsColonial Pipeline CompanyEnergy Future Holdings Corporation -Hunt Consolidated - Hunt Oil
BreitBurn Energy Partners L.P. -ConocoPhillipsTXU EnergyCompany
Western Division, CaliforniaCore LaboratoriesEnergySolutionsHusky Energy, Inc.
OperationsCrescent Point Energy US Corp.EnergySolutions - CommercialION Geophysical Corporation
BreitBurn Energy Partners L.P. -Crosstex Energy Services, LPServices GroupJ-W Energy Company
Western Division, FloridaCumberland Gulf GroupEnergySolutions - GovernmentJ-W Energy Company - J-W
OperationsDM Petroleum OperationsCustomer GroupManufacturing Company
BreitBurn Energy Partners L.P. -DTE EnergyEnerplus Resources (USA)J-W Energy Company - J-W
Western Division, WyomingDTE Energy Company - DTE ElectricCorporationMeasurement Company
OperationsDTE Energy Company - DTE GasEni US Operating Company, Inc.J-W Energy Company - J-W Midstream
Breitburn Energy Partners L.P. -Davis Petroleum Corp.Ensco plcCompany
Breitburn Energy Company LPDenbury Resources, Inc.Ensco plc - North & South AmericaJ-W Energy Company - J-W Operating
Brookfield Renewable EnergyDet Norske Veritas USABusiness UnitCompany
Partners, LP USADevon Energy CorporationEnsign United States Drilling, Inc.J-W Energy Company - J-W Power
Buckeye Partners, L.P.Dexco PolymersEnsign United States Drilling, Inc. -Company
CGGDiamond Offshore Drilling, Inc.CaliforniaJ-W Energy Company - J-W Wireline
CH2M HillDirect EnergyEnsign United States Drilling, Inc. -Company
CITGO Petroleum CorporationDominion Resources, Inc.Ensign Well Services, Inc.JX Nippon Oil Exploration (U.S.A.),
CNPC USADominion Resources, Inc. - DominionEntergyLtd.
COG Operating, LLCEnergyEntergy - Non-RegulatedKinder Morgan, Inc.
CPS EnergyDominion Resources, Inc. - DominionEntergy - RegulatedKosmos Energy, LLC
CVR Energy, Inc. - CVR Refining LPGenerationEqual Energy US, Inc.Laredo Petroleum Holdings, Inc.
CVR Energy, Inc. - CoffeyvilleDominion Resources, Inc. - DominionExplorer Pipeline CompanyLegacy Reserves, LP
Resources Nitrogen Fertilizers, LLCVirginia PowerExterran Holdings, Inc.Link Petroleum, Inc.
Calfrac Well Services CorporationDresser-Rand Group, Inc.FTS International, Inc.Linn Energy, LLC
Calpine CorporationDresser-Rand Group, Inc. - Dresser-FTS International, Inc. - FTSIMCX Exploration (USA), Ltd.
Cameron InternationalRand New EquipmentLogisticsMDU Resources Group, Inc.
Cameron International - Drilling andDresser-Rand Group, Inc. - Dresser-FTS International, Inc. - FTSIMDU Resources Group, Inc. - Fidelity
Production SystemsRand Product ServicesManufacturingExploration & Production Company
Cameron International - Process andDresser-Rand Group, Inc. - NAOFTS International, Inc. - FTSIMDU Resources Group, Inc. -
Compression SystemsEDF Trading Resources, LLCProppantsMontana Dakota Utilities
Cameron International - Valves &EOG Resources, Inc.Forest Oil CorporationMDU Resources Group, Inc. - WBI
MeasurementEP Energy, LLCForum Energy Technologies, Inc.Energy, Inc.
Carrizo Oil & Gas, Inc.EV Energy PartnersGDF SUEZ Energy Generation NA,Madison Gas And Electric Company
Castleton Commodities International,EXCO Resources, Inc.Inc.Magellan Midstream Holdings, LP
LLCEXCO Resources, Inc. - EXCOGDF SUEZ Energy North America,Magellan Midstream Holdings, LP -
CenterPoint EnergyAppalachiaInc.Pipeline/Terminal Division
Chesapeake Energy CorporationEXCO Resources, Inc. - EXCO EastGDF SUEZ Energy Resources NA,Magellan Midstream Holdings, LP -
Chesapeake Energy Corporation -TX/LAInc.Transportation
Chesapeake Oilfield Services, Inc.EXCO Resources, Inc. - EXCOGDF SUEZ Gas NA, LLCMarathon Oil Company
Chesapeake Energy Corporation -Permian/RockiesGenesis Energy, LPMarkWest Energy Partners LP
Hodges Trucking Company, L.L.C.EXCO Resources, Inc. - TGGTGibson Energy (U.S.), Inc.MarkWest Energy Partners LP - Gulf
Chesapeake Energy Corporation -Holdings, LLCGibson Energy, LLCCoast Business Unit
MidCon Compression, L.L.C.Ecova, Inc.Great River EnergyMarkWest Energy Partners LP -
Chesapeake Energy Corporation -Edison Mission EnergyHalcón Resources CorporationLiberty Business Unit
Nomac Drilling, L.L.C.ElectriCities of North Carolina, Inc.Halliburton CompanyMarkWest Energy Partners LP -
Chesapeake Energy Corporation -Enbridge Employee Services, Inc.Helix Energy Solutions GroupNortheast Business Unit
Oilfield Trucking Solutions, Inc.Encana Oil & Gas (USA), Inc.Helmerich & Payne, Inc.MarkWest Energy Partners LP -
Chesapeake Energy Corporation -EnerVest Operating, LLCHercules Offshore, Inc. - HerculesSouthwest Business Unit
Performance Technologies, LLCEnerVest, Ltd.Offshore Services, LLCMarquis Alliance Energy Group USA,
Chesapeake Energy Corporation -Energen CorporationHess CorporationInc.
Thunder Oilfield Services, L.L.C.Energen Corporation - EnergenHighMount Exploration & Production,McMoRan Exploration Co.
Chief Oil & Gas, LLCResources CorporationLLCMicroSeismic
Cimarex Energy Co.Energy Future Holdings CorporationHilcorp Energy CompanyMitsui E&P USA, LLC

B-6 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Murphy Oil CorporationOceaneering International, Inc.Samson ExplorationSprague Operating Resources, LLC
New York Power AuthorityOceaneering International, Inc. -Samson OffshoreStantec, Inc.
New York Power Authority - 500 MWAmericasSasol North America, Inc.Statoil
Combined Cycle PlantOceaneering International, Inc. -Saxon Drilling L.P.Superior Energy Services, Inc.
New York Power Authority -InspectionSchlumberger Limited -Superior Energy Services, Inc. -
Blenheim-Gilboa Power ProjectOceaneering International, Inc. -Schlumberger Oilfield ServicesCompletion Services
New York Power Authority - ClarkUmbilical SolutionsSeadrill Americas, Inc.Superior Energy Services, Inc. - Fluid
Energy CenterPDC EnergySemGroup CorporationManagement
New York Power Authority - NiagaraPJM InterconnectionSemGroup Corporation - Rose RockSuperior Energy Services, Inc. - Well
Power ProjectPPL Corporation - LG&E and KUMidstreamSolutions
New York Power Authority - RichardEnergy, LLCSemGroup Corporation - SemGasSuperior Energy Services, Inc. -
M. Flynn Power PlantPacifiCorpSempra Energy - Cameron LNGWorkstrings International
New York Power Authority - St.Parallel Petroleum, LLCSempra Energy - Mobile Gas ServiceSuperior Energy Services, Inc.- HB
Lawrence/FDR Power ProjectParker Drilling CompanyCorporationRentals
Newfield Exploration CompanyPasadena Refining System, Inc.Sempra Energy - Sempra GlobalT.D. Williamson, Inc.
Nexen Petroleum U.S.A. Inc.Petrofac Training ServicesSempra Energy - SempraTGS-NOPEC Geophysical Company
NiSource Inc.Piedmont Natural Gas Company, Inc.International, LLCTalisman Energy, Inc. US
NiSource Inc. - Columbia GasPioneer Natural Resources CompanySempra Energy - Sempra LNGTechnip USA, Inc.
Transmission L.L.C.Plains All American Pipeline, L.P.Sempra Energy - Sempra U.S. Gas &Tellus Operating Group, LLC
NiSource Inc. - Columbia Gas ofPlains All American Pipeline, L.P. -Power, LLCTenaris, Inc. USA
KentuckyPAA Natural Gas Storage, L.P.Sempra Energy - Willmut GasThe Keane Group
NiSource Inc. - Columbia Gas ofPlains Exploration & ProductionCompanyThe Keane Group - KS Drilling LP
MassachusettsCompanyShawCor, Ltd. - Bredero Shaw, LLCThe University of Texas System
NiSource Inc. - Columbia Gas of OhioPraxair, Inc.ShawCor, Ltd. - Canusa-CPSThe Williams Companies, Inc.
NiSource Inc. - Columbia Gas ofPraxair, Inc. - Hydrogen-carbonShawCor, Ltd. - DSG-CanusaThe Williams Companies, Inc. -
PennsylvaniaMonoxide (HyCO)ShawCor, Ltd. - Flexpipe SystemsNortheast Gathering & Processing
NiSource Inc. - Columbia Gas ofPraxair, Inc. - North AmericanShawCor, Ltd. - GuardianThe Williams Companies, Inc. -
VirginiaIndustrial GasesShawCor, Ltd. - Shaw PipelineNorthwest Pipeline
NiSource Inc. - NiSource GasPraxair, Inc. - Praxair Distribution,ServicesThe Williams Companies, Inc. -
Transmission & StorageInc.ShawCor, Ltd. - ShawFlexWilliams Gas Pipeline (WGP)
NiSource Inc. - NiSource MidstreamPraxair, Inc. - Praxair SurfaceSouthcross Energy Partners LPTomkins Corporation - Gates
Services, L.L.C.TechnologiesSouthern CompanyCorporation
NiSource Inc. - Northern IndianaPrecision Drilling CorporationSouthern Company - Alabama PowerTotal E&P USA, Inc.
Public Service CompanyPremier Natural Resources, LLCCompanyTransCanada Corporation
Noble CorporationPuget Sound EnergySouthern Company - Georgia PowerTransCanada Corporation - Energy
Noble Energy, Inc.QEP Resources, Inc.Southern Company - Gulf PowerGroup
NorthWestern EnergyR Lacy Services, Ltd.CompanyTransocean, Inc.
Northwest Natural GasRKI Exploration & Production, LLCSouthern Company - MississippiTurner & Townsend
OCI Enterprises, Inc.Range Resources Corp.Power CompanyUnit Corporation
OGE Energy Corp.Reef SubseaSouthern Ute Indian Tribe - SouthernUnit Corporation - Superior Pipeline
OGE Energy Corp. - EnogexRegency Energy Partners LPUte Indian Tribe Growth FundCompany, LLC
OMNI Energy Services Corp.Repsol Services CompanySouthern Ute Indian Tribe - AkaUnit Corporation - Unit Drilling
ONEOK, Inc.Resolute Energy CorporationEnergy Group, LLCCompany
ONEOK, Inc. - Kansas Gas ServicesRosewood Resources, Inc.Southern Ute Indian Tribe - RedUnit Corporation - Unit Petroleum
DivisionRosewood Resources, Inc. -Cedar Gathering CompanyCompany
ONEOK, Inc. - ONEOK EnergyRosewood Services CompanySouthern Ute Indian Tribe - RedVenari Resources, LLC
Services CompanyRowan Companies, Inc.Willow Production CompanyWGL Holdings, Inc. - Washington Gas
ONEOK, Inc. - ONEOK PartnersSCANA CorporationSouthern Ute Indian Tribe - SouthernWISCO, Inc.
ONEOK, Inc. - Oklahoma Natural GasSCANA Corporation - Carolina GasUte Alternative EnergyWPX Energy, Inc.
DivisionTransmission CorporationSouthern Ute Indian Tribe - SouthernWeatherford - US Region
ONEOK, Inc. - Texas Gas ServicesSCANA Corporation - PSNC EnergyUte Utilities DivisionWhiting Petroleum Corporation
DivisionSCANA Corporation - SC Electric &Southwest Gas CorporationWorleyParsons Canada, Inc.
Oasis Petroleum, Inc.GasSouthwest Gas Corporation-SouthernXcel Energy, Inc.
Occidental Petroleum CorporationSM Energy CompanyNevada DivisionZedi, Inc. - Southern Flow
Oceaneering International, Inc. -Saipem America, Inc.Southwestern Energy Company
Intervention EngineeringSamson Energy Company, LLCSpectra Energy Corp

MDU Resources Group, Inc. Proxy Statement B-7














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MDU RESOURCES GROUP, INC.

 ANNUAL MEETING OF STOCKHOLDERS

Tuesday, April 26, 2016May 9, 2017
11:00 a.m. Central Daylight Saving Time

909 Airport Road
Bismarck, ND
 
 














   
image-mdurlogoa03.jpg
 
 1200 West Century Avenue 
 
Mailing Address:
P. O. Box 5650
Bismarck, ND 58506-5650
(701) 530-1000
 
 proxy
 
   
This proxy is solicited on behalf of the Board of Directors for the
Annual Meeting of Stockholders on April 26, 2016.May 9, 2017.
This proxy will also be used to provide voting instructions to John Hancock Trust Company LLC, as Trustee of the MDU Resources Group, Inc. 401(k) Retirement Plan, for any shares of Company common stock held in the plan.
The undersigned hereby appoints Harry J. Pearce and Daniel S. Kuntz and each of them, proxies, with full power of substitution, to vote all Common Stock of the undersigned at the Annual Meeting of Stockholders to be held at 11:00 a.m., Central Daylight Saving Time, April 26, 2016,May 9, 2017, at the MDU Service Center, 909 Airport Road, Bismarck, ND, and at any adjournment(s) thereof, upon all subjects that may properly come before the meeting, including the matters described in the Proxy Statement furnished herewith, subject to any directions indicated on the reverse side. Your vote is important! Ensure that your shares are represented at the meeting. Either (1) submit your proxy by touch-tone telephone, (2) submit your proxy by Internet, or (3) mark, date, sign, and return this proxy card in the envelope provided (no postage is necessary if mailed in the United States). If no directions are given, the proxies will vote in accordance with the Directors’ recommendation on all matters listed on this proxy, and at their discretion on any other matters that may properly come before the meeting.
Vote by Internet, Telephone, or Mail
24 Hours a Day, 7 Days a Week

Your telephone or Internet vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, and returned your proxy card.
image_computera03.jpg
image-telephonea03.jpg
image-envelopea03.jpg
INTERNET/MOBILETELEPHONEMAIL
www.proxypush.com/mdu1-877-536-3553
Mark, sign, and date your
proxy card and return it in the
postage-paid envelope provided,
or return it to MDU Resources
Group, Inc., c/o Shareowner
Services, P.O. Box 64873,
St. Paul, MN 55164-0873.
Use the Internet to vote your proxy
 until 11:59 p.m. (CDT) on
 Monday, May 8, 2017.
Use a touch-tone telephone to
vote your proxy until 11:59 p.m. (CDT)
on Monday, May 8, 2017.
If you vote by telephone or internet, please do not mail your Proxy Card.


See reverse for voting instructions.



image-mdurlogoa03.jpg
Shareowner Services
P.O. Box 64945
St. Paul, MN 55164-0945
   
 
   
    
Address Change? Mark box, sign, and indicate changes below:   ☐
  Vote by Internet, Telephone, or Mail
24 Hours a Day, 7 Days a Week
      
  Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, and returned your proxy card.
   
TO VOTE BY INTERNET – www.proxypush.com/mdu OR
Use the Internet to vote your proxy untilTELEPHONE SEE REVERSE
11:59 p.m. (CDT) on Monday, April 25, 2016.SIDE OF THIS PROXY CARD.
      
  
TELEPHONE – 1-866-883-3382
Use a touch-tone telephone to vote your proxy until 11:59 p.m. (CDT) on Monday, April 25, 2016.
      
  
MAIL – Mark, sign, and date your proxy card
and return it in the postage-paid envelope
provided, or return it to MDU Resources Group, Inc., c/o Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-0873.

If you vote by Telephone or Internet, please do not mail your Proxy Card.

    Please detach here


The Board of Directors Recommends a Vote “FOR” all nominees and “FOR” Items 2, 3, and 4.All Nominees.
1.Election of Directors:FORAGAINSTABSTAIN   FORAGAINSTABSTAIN
           
01.Thomas Everist☐☐☐ 06.Dennis W. Johnson☐☐☐
02.Karen B. Fagg☐☐☐ 07.William E. McCracken☐☐☐
03.David L. Goodin☐☐☐ 08.Patricia L. Moss☐☐☐
04.Mark A. Hellerstein☐☐☐ 09.Harry J. Pearce☐☐☐
05.A. Bart Holaday☐☐☐ 10.John K. Wilson☐☐☐
1.Election of Directors:FORAGAINSTABSTAIN   FORAGAINSTABSTAIN
 01Thomas Everist☐☐☐ 06Dennis W. Johnson☐☐☐
 02Karen B. Fagg☐☐☐ 07William E. McCracken☐☐☐
 03David L. Goodin☐☐☐ 08Patricia L. Moss☐☐☐
 04Mark A. Hellerstein☐☐☐ 09Harry J. Pearce☐☐☐
 05A. Bart Holaday☐☐☐ 10John K. Wilson☐☐☐

image-arrowa03.jpgPlease fold here - Do not separate image-arrowa03.jpg

The Board of Directors Recommends a Vote “FOR 1 YEAR” in Item 2.
2.ApprovalAdvisory vote to approve the frequency of the material terms ofvote to approve the performance goals undercompensation paid to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan for purposes of Internal Revenue Service Code Section 162(m).company’s named executive officers.☐For1 Year☐Against2 Years☐3 Years☐Abstain
        
The Board of Directors Recommends a Vote “FOR” Items 3, 4, and 5.
3.Ratification of Deloitte & Touche LLP asAdvisory vote to approve the compensation paid to the company’s independent registered public accounting firm for 2016.named executive officers.☐For☐Against☐Abstain
        
4.Approval, on a non-binding advisory basis,Ratification of the compensationappointment of Deloitte & Touche LLP as the company’s named executive officers.independent registered public accounting firm for 2017.☐For☐Against☐Abstain
5.Advisory vote to approve an amendment to the company’s bylaws to adopt an exclusive forum for internal corporate claims.☐For☐Against☐Abstain
 
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ALL NOMINEES IN ITEM 1, FOR 1 YEAR IN ITEM 2, AND FOR ITEMS 2, 3, 4, AND 4.5.
Address Change? Mark box, sign, and indicate changes below:   ☐
Date 
  
  
Date Signature(s) in Box
 Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy.